HomeReal Estate September 25, 2023

Low Housing Inventory Explained

If you are considering moving in today’s market, you are probably wondering why it is so hard to find a house to buy. The lack of inventory might leave you feeling a bit defeated and likely on the verge of giving up and waiting to try again when there are more options. But… that is NOT the best idea. Let us explain why.

The lack of inventory we are experiencing has been a problem for years and is likely to continue for quite some time. Follow along as we expose some of the long-term and short-term factors that contributed to the limited supply we are feeling in our housing inventory.

Shortage of New Construction

Changes in our economy and other contributing factors have slowed the rate at which builders are building new construction. For more than a decade, new construction has been below the national average. Consider the graph below. It demonstrates the past 5 decades of new construction of single-family homes.

Looking at the chart, the orange shows that builders did not construct enough homes to meet the historical average for the past 14 years. Underbuilding significantly contributed to the inventory deficit and will take a lot of work to get the housing market back to where it once was. While the graph shows improvement this last year, the long-term inventory shortage will not snap back overnight.

Owners are Locked in at Low Rates 

Several factors of today have created stumbling blocks for returning to a healthy market. One of the most obvious challenges is the mortgage rate lock-in effect. You might be wondering what the mortgage rate lock-effect is. We are here to explain. When mortgage rates were at all time lows, home owners locked in at incredibly low rates making their monthly house payments significantly less each month than what someone buying a home with todays rates would be. Many owners are hesitant to sell because mortgage rates are higher today. Homeowners don’t want to take on the higher mortgage rates and loose their low mortgage rate. The image below demonstrates how many homeowners are finding themselves in this predicament.

Homeowners are faced between low mortgage rates and their needs. Many are sacrificing their needs to keep their low interest rates. What homeowners need to keep in mind is that their needs may be just as important as the financial aspects of their move. A difficult predicament for sure. If you have found yourself faced with this situation and would like to schedule a personalized review of your unique situation and what options you might have available to you connect with us here. 

Media Creates Unnecessary Fear

Have you ever heard the saying, “Don’t believe everything you read, see, or hear.”  This statement couldn’t be more true. Media has fabricated fear surrounding the housing market that has people fearful of making any move and unsure of what to believe. You probably have been bombarded with headlines promising a housing crash or that home prices will fall by 20%, yet neither of those things came true. Regardless, the stories blemished your confidence just enough to keep you holding off just a little bit longer. Co-Founder and Chief Data Officer of Parcl, Jason Lewris articulated it perfectly saying:

“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.” 

This increasing fear leads to decreasing housing inventory because people who would otherwise make a move are now hesitant to do so. The market is not doom and gloom though. Even if the headlines say that they are. Our realtors can help you decipher the facts from the fiction and help identify opportunities in your unique situation. If you are not currently working with an agent and would like to be connected with one, connect with us here.

Why This Should Matter to You

You might be wondering why any of this matters to you. The answer differs for both buyers and sellers and can vary depending on your personal situation. Talking with an agent is the best thing you can do. However, we will offer you an overview.

If you are a buyer: 

Due to the limited number of homes available on the market you will need to seriously consider all of your options. Keep an open mind to different locations and housing types. A skilled professional will help you explore all of your options and what is available to you to help you find the home that best fits your needs. If you are not currently working with an agent and would like to be connected with one of our trusted realtors click here.  Our agents will help expand your search and determine a solution that best fits your needs. 

If you are a seller: 

This market actually benefits you more than you might realize. The low housing inventory means that your home wont get lost amongst the other homes. Your home will stand out in this market. Connect with your agent to discover why it is especially worth your while to sell in todays housing conditions.

At the end of the day, low housing supply is not a new challenge. Both long-term and short-term factors have contributed to the inventory deficit we are experiencing. If you are considering making a move, let’s talk. Regardless of whether or not you decide to buy or sell you have an expert on your side and will have made an educated decision best for you.

Gardner ReportMatthew GardnerReal EstateStats April 27, 2023

Mortgage Rate Predictions and Misconceptions

Written by Matthew Gardner

The Federal Reserve Bank of New York just released their 2023 Housing Survey, which shows how the U.S. population feels about the housing market. Windermere Chief Economist Matthew Gardner digs into the mortgage rate predictions, showing how demographics played a role in the results.

This video on mortgage rate predictions is the latest in our Monday with Matthew series with Windermere Chief Economist Matthew Gardner. Each month, he analyzes the most up-to-date U.S. housing data to keep you well-informed about what’s going on in the real estate market.

 

Mortgage Rate Predictions

Hello there! I’m Windermere Real Estate’s Chief Economist Matthew Gardner. This month we’re going to take a look at the latest SCE Housing Survey, which gives us a really detailed look at consumers’ psyche in regard to the housing market.

I’ve always been fascinated by surveys, as they frequently give me insights that I simply don’t get from just looking at raw data and, as luck would have it, the New York Fed just released its 2023 Consumer Expectations Housing Survey. Now, this particular survey has always given me some great and often surprising insights as to how the U.S. population views the overall housing market. We certainly don’t have time to cover all of the questions that the survey poses, but there was one section I wanted to share with you today as it really resonated with me, and it relates to mortgage rates.

Will mortgage rates continue to rise?

The first question asked was where they expected mortgage rates to be one year from now. And as you see here that, on average, households expected rates to rise all the way up to 8.4%. Although some may see this as extreme, you can see that in the 2022 survey respondents predicted rates would hit 6.7%, almost exactly where they were at the beginning of this March.

And when asked where they thought rates would be three years from now, on average, households expected to see them climb to 8.8%. Now, that’s a rate we haven’t seen since early 1995!

Well, I’m not sure about you, but I was very surprised by these results as they counter just about every analyst’s expectation regarding where rates will be over the next few years. In fact, myself and every economist I know believes that rates will slowly pull back as we move through this year. I haven’t seen a single forecast suggesting that mortgage rates will rise to a level this country hasn’t seen in decades.

But as they say, the devil’s in the details. When I dug deeper into the numbers, it became very clear to me that demographics played a pretty big part in guiding people’s answers. Let me explain.

1-Year Mortgage Rate Expectations by Education

Here the data is broken down by educational achievement. You can see that survey respondents who didn’t have a college degree thought that mortgage rates would rise to 9.4% within a year. But college graduates were far more optimistic, and they expected rates to be in the high 6’s.

3-Year Mortgage Rate Expectations by Education

And when asked to look three years outrespondents without degrees expected rates to break above 10%. While college graduates saw them pulling back a little from their one-year expectations of 6.7%, down to 6.4%.

Now we are going to look at the survey results broken down by housing tenure.

1-Year Mortgage Rate Expectations by Tenure

And here you see that renters expect mortgage rates to be at almost 11% within a year. And homeowners also saw them rising, but only up to 7.3%. 

3-Year Mortgage Rate Expectations by Tenure

And over the next three years, renters expected rates to break above 12%. That’s a level not seen since the fall of 1985. But homeowners expected to see rates at a somewhat more modest 7.4%.

So, what does this tell us? I see two things.

Firstly, the rapid increase in mortgage rates that we all saw starting in early 2022 has a lot of people believing that we will see rates continuing to rise, sometimes at a very fast pace, over the next few years. I mean, if it happened before, why can’t it happen again? And this mindset leads me to my second point, which is that it’s very clear that a lot of would-be home buyers just don’t understand how mortgage rates are calculated.

The bottom line here is that I see a potential buyer pool out there that needs educating and that can give an opportunity to brokers to discuss how rates are set and where the market is expecting to see them going forward.

This may alleviate the concerns that many households have who may be thinking that they will never be able to afford to buy a home because of where they expect borrowing costs to be in the future. Education is everything, don’t you agree?

As always, I’d love to get your thoughts on this topic so please comment below! Until next month, take care and I will see you all soon. Bye now.

To see the latest housing data for your area, visit our quarterly Market Updates page.

 


About Matthew Gardner

As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.

In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.

 

If you have further questions and would like to discuss with a Realtor connect with us here. 

HomeReal EstateStats December 26, 2022

Drop in Mortgage Rates, What that Means for You

Mortgage rates rise and fall in response to varying inflation. If 7% was too high for you, it is likely now a better time to connect with your lender to see if the current rates better align with your monthly housing allowance goals, as mortgage rates have begun to decline. Keeping an eye on inflation will offer you a strong indicator to where mortgage rates will go.

While there is no comparison to the rates offered at the beginning of 2022 there is hope that they will ease a bit from the dramatic climb.

Buyers Purchasing Power

If you are considering buying, this decline in mortgage rates means an increase in your purchasing power. For example, let’s assume you want to buy a $400,000 home with a monthly payment between $2,500 and $2,600. Consider the chart below to see how your purchasing power changes as mortgage rates move up and down. The red demonstrates payments above your desired threshold while the green represents payments within and below your desired price range.

This is a small example of how a little quarter-point change in mortgage rates can significantly impact your monthly mortgage payment. It is of the utmost importance to work with a trusted real estate professional and lender who follow the market and understand the projected mortgage rates for the days, months, and year ahead,

If you are considering buying and do not have a trusted real estate broker already on your side, connect with us and we will pair you with a broker that will meet your needs.