December 2019 Real Estate Market Update

The good news is that economists are pushing back the timetable of the predicted recession. Below is one of the latest reports from the Wall Street Journal surveying economists on when they think the next recession will occur.

As noted in previous Monthly Market Reports, you can see the 2020 number is down from almost 50% to 34.2%.

We are reasonably confident that U.S. growth is improving… the sharp drop in mortgage rates has reinvigorated the housing recovery after a slowdown in 2018 and early 2019. The structural outlook is also strong, as a level of building activity remains well below demographic demand.
Goldman Sachs
Demand is still greater than the supply.

Amidst concerns of recession, it’s promising to see the housing market responding to the impact of mortgage rate decreases and other positive moves in the market. If housing continues showing the promise of growth, or even a leveling off, this activity has the potential to stimulate the larger economy.
Chief Operating Officer of BuildFax
See the chart below of the National Association of Realtors showing the percentage of income needed to purchase a median priced home by a median salary family.

The percentage the average family pays for a home is decreasing, despite home prices being up 5.7% last year. In that period, interest rates decreased 0.85%, increasing buying power $42,000. In addition, wages increased to push buying power up another $5,600. So, although home prices decreased, buying power by $21,300, overall buying power is up $24,500 ($40,200 + $5,600 – $21,300). Despite prices creeping up, low interest rates and increasing wages allow more people to purchase more of a home.
See the chart below where more Americans are choosing real estate as the safer investment, according to Porch.com.

Many sellers are considering selling For Sale By Owner (FSBO). About 8%-11% of all homes are sold FSBO, but, keep in mind, that costs you time and money. What are some other reasons not to sell FSBO?

•  It’s hard to price your home correctly. Honestly, it takes a lot of work for a Realtor to price your home correctly, with all the information out there that should be considered. However, this is what a real estate agent does. They are in the know with on and off market homes, and they don’t have the emotional attachment that sometimes makes the process of pricing your home an emotional one.

• A clear, and concise marketing plan is a must – knowing exactly what you need to do to get the home sold quickly (advertising, professional photography, videography, signage, post cards, staging, open houses, flyers, paperwork, preparing the home for sale, etc).

•  It can not only become inconvenient to show the home to potential buyers and their real estate agents, but those individuals will also be less likely to give honest feedback directly to the seller. This is the kind of feedback every seller needs to understand how the market is responding to their home and it’s price. Most importantly, a FSBO must vet the showings to prevent the rampant scams that exist. Whether it is burglars looking at your expensive belongings, or even someone listing your home for rent or as a short-term rental to get the income from an unsuspecting purchaser. It happens everywhere – just Google it. Tallahassee is NO exception.

• FSBO homes sell for less money (about 6%) than homes represented by real estate agents. It is said this could be due to the fact that FSBO buyers are “looking for a deal.” Essentially, FSBO homes sell for less than the real estate agent’s commission, but taking on the additional liability, time, money, and challenges of representing the sale of the home themselves.

• Homes marketed by real estate agents reached a much larger population of buyers than a FSBO home – increasing the chances of a bidding war.

• The liability and process of drafting and completing a contract with all the legal disclosures, and closing involves negotiations with many parties: buyer, buyer’s agent, buyer’s attorney, home inspectors, termite companies, buyer’s lender, appraiser, title company, homeowners association, etc.

So… what’s going on in Tallahassee?