Why Housing Demand is Soaring
NAR recently reported that home sales in July soared by 25% across the country while the supply of homes for sale was the fewest on record and NAR has been keeping track for five decades. Why are sales jumping? Dr. Yun said, “The buyers are coming in because of the low interest rates-that’s the #1 reason.” A secondary factor driving demand is the abundance of people working from home who need more space to work and more space for their kids to attend school.
I believe millions of people will continue to work from home as employees like working from home as it eliminates their time-consuming stressful commute and employers like it as it saves them money on office rent. My next question is can I get a strong enough heater to work outside on my patio this fall?
FHA issued new rules for mortgage lenders last week, on the impact of a forbearance on their credit worthiness to get a new FHA loan. We also have to consider the borrower’s payment history on a home equity loan or line of credit.
- A borrower can get a new FHA loan right away if they were in forbearance and still made their mortgage payments on time and their forbearance plan is terminated.
- For purchase loans and no cash out refinances the borrower must have completed the forbearance plan and made 3 consecutive payments.
- For cash out refinances the borrower must have completed forbearance made 12 consecutive payments.
- On streamline refinances FHA requires either 3 or 6 months of consecutive payments.
Under Contracts Surge by 35%
Here are the August 7-county real estate statistics courtesy of REColorado and SMDRA
- Buyers and sellers closed on 5,816 properties last month, an increase of 9.7% from a year ago.
- Detached home sales increased by 11.4% year over year; while attached home sales only increased by 5.7% year over year.
- Homeowners newly listed 6,377 properties last month, a 3.1% increase from last August.
- New listings of detached homes increased by 3.8%; while new listings of attached homes only increased by 1.7%.
- Buyers placed 6,854 properties under contract last month. This was a HUGE INCREASE of 35% versus last August!!! And this was a 48% increase from August 2018.
- This was the most pendings or under contracts we have seen this year!
- We ended August with just 5,135 properties listed for sale.
- This puts months of inventory at a miniscule 0.88 months.
- The average closed to original list price was 99.3% last month, up from 97.6% a year ago. But, this ratio in July was 99.5%.
- Average days in market dropped from 30 days a year ago to just 22 days last month. Average days in market was 24 days in July.
- Median days in market last month was just 6 days, down from 14 days last year. Median days in market in July was 7 days.
- The average sales price last month was $527,861, an increase of 10.8% from last August.
- The average sales price in August dropped by 0.65% from July, which was our record high.
- The average sales price of attached homes was $375,648, an increase of just 1.8% year over year.
- The average sales price of detached homes was $589,378, an increase of 12.9% from a year ago.
- The median sales price last month was $455k, an increase of 8.3% from a year ago. The median sales price was unchanged from July.
- the median sales price of attached homes was $324,216, an increase of 4.9% from 12 months ago.
- The median sales price of detached homes was $500k, a price increase of 11.1% from August 2019.
The All-Important $200k to $600k Price Range
- 72% of our new listings were in this price range.
- 23.5% of our new listings were in the $300’s and 23.5% of our new listings were in the $400s. However, our solds data showed this-20.8% of our solds were in the $300s and 25.8% were in the $400s.
- How did this happen? I bet there were many homes priced from $380k to $399k that sold for over $400k.
- And the same thing happened for homes listed in the upper $400s and sold above $500k. Only 14.3% of our new listings were priced in the $500s, but 16.2% of our sales were in the $500s. This tells me many homes priced in the $400s sold for over $500k.
- 73.5% of our solds were in this price range.
- Only 55.5% of our active listings are in this price range.
- We still desperately need more listings in this price range from $200k to $600k.
Thoughts and Analysis
- Even I was surprised to see how fast home prices are rising. And average prices are rising almost exclusively with detached homes (a 12.9% increase vs. a 1.8% increase for attached homes.)
- This tells me that demand for detached homes is through the roof as homebuyers look for more space both inside their home and outside their home.
- And since the median price of a detached home was up only 11.1%, this tells me that bigger and more expensive homes are seeing even greater demand than more affordable homes. People want and NEED space.
- The median price of a detached home has risen by $50,000 in the last 12 months. WOW!
- The median sales price of all properties is up by $35k from a year ago. Can you name another asset that you get to use and enjoy that increases in value like this? Most assets we get to use and enjoy depreciate in value, such as cars, computers, TVs, phones, etc.
- Also, if a FTHB tells you they are going to wait a year and save more money, please ask them this question-“Can you save $35k in the next 12 months?” If their answer is “no” then they are going backwards by waiting to buy a home.
- Plus, as I have been writing I don’t see mortgage rates are going any lower. And I believe when we start seeing signs of inflation of 2% or more year over year by way of the PCE or CPI report I strongly believe long-term rates will rise quickly, unless the Fed increases their buying of long-term bonds.
- Believe it or not I had prospects in August tell me they are going to wait to buy another home until prices drop. I was speechless.
- With Median Days in Market down to 6 days, I am curious…can your sign company get the sign in the yard before the home is under contract?
- Median Days in Market was just 5 days on homes priced from $300k to $500k.
- Median days in market was 8 days in 2016 and 2017 and 10 days in 2018. In other words, our RE market is even hotter than those years!
- Remember, the median is the mid-point, meaning that 50% of homes are going under contract in 6 days or less.
- I was disappointed to see the number of new listings in August dropped to their lowest level since April. Still new listings this year were slightly higher than the previous 4 Augusts. New listings year to date are tracking incredibly closely to 2016-2018.
- We had more homes go under contract then new listings in August. This was the third time this happened this year! I have been tracking this ratio since the beginning of 2017. Under contracts have exceeded new listings in November and December for the last 3 years; but we haven’t seen this happen in June or August before.
- We have had Months of Inventory of 1 or less for 3 consecutive months. I am pretty sure this has never happened before.
- Remember for home prices to drop in the past we needed to see 6 months of inventory for several consecutive months or even years. Does anyone believe we will see 25k homes for sale in the near future? Anyone want to make a bet with me on this?