According to the latest CoreLogic Home Price Insights Report, nationwide home values increased by 8.2% over the last twelve months. The dramatic rise was brought about as the inventory of homes for sale reached historic lows at the same time buyer demand was buoyed by record-low mortgage rates. As CoreLogic explained:
“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.
While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”
Where will home values go in 2021?
Home price appreciation in 2021 will continue to be determined by this imbalance of supply and demand. If supply remains low and demand is high, prices will continue to increase.
According to the National Association of Realtors (NAR), the current number of single-family homes for sale is 1,080,000. At the same time last year, that number stood at 1,450,000. We are entering 2021 with approximately 270,000 fewer homes for sale than there were one year ago.
However, there is some speculation that the inventory crush will ease somewhat as we move through the new year for two reasons:
1. As the health crisis eases, more homeowners will be comfortable putting their houses on the market.
2. Some households impacted financially by the pandemic will be forced to sell.
Low mortgage rates have driven buyer demand over the last twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning of 2020. Today, we’re starting 2021 with rates one full percentage point lower than that. Low rates create a great opportunity for homebuyers, which is one reason why demand is expected to remain high throughout the new year.
Taking into consideration these projections on housing supply and demand, real estate analysts forecast homes will continue to appreciate in 2021, but that appreciation may be at a steadier pace than last year. Here are their forecasts:
There’s still a very limited number of homes for sale for the great number of purchasers looking to buy them. As a result, the concept of “supply and demand” mandates that home values in the country will continue to appreciate.
At the onset of the economic disruptions caused by the COVID pandemic, the government quickly put into place forbearance plans to allow homeowners to remain in their homes without making their monthly mortgage payments. Today, almost three million households are actively in a forbearance plan. Though 29.4% of those in forbearance have continued to stay current on their payments, many have not.
Yanling Mayer, Principal Economist at CoreLogic, recently revealed:
“A distributional analysis of forborne loans’ payment status reveals that more than one third (39.1%) of all forborne loans are now 150+ days behind payment, while as many as 1-in-4 (25.5%) are 180+ days past due.”
These homeowners have been given permission to not make their payments, but the question now is: how many of them will be able to catch up after their forbearance program ends? There’s speculation that a forthcoming wave of foreclosures could be the result, and that could lead to another crash in home values like we saw a decade ago.
However, today’s situation is different than the 2006-2008 housing crisis as many homeowners have tremendous amounts of equity in their homes.
What are the experts saying?
Over the last 30 days, several industry experts have weighed in on this subject.
“We may very well see a meaningful increase in the number of homes listed for sale as these borrowers choose to sell at what is arguably an intermediate top in the market and downsize to more affordable homes rather than face foreclosure.”
“The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock…leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home, or tapping into their equity through a refinance, to help weather the economic shock. It is a lack of sufficient equity, the second component of the dual trigger, that causes a serious delinquency to become a foreclosure.”
“With a greater cushion of equity, troubled homeowners have dramatically improved options: a greater ability to access funding (e.g. home equity lines) to keep paying monthly expenses until family finances might recover, improved ability to qualify for and support a loan modification, and, if push comes to shove, the ability to sell the home and monetize their increased net worth while reducing monthly payment obligations. So, what should lenders and servicers expect: a large number of foreclosures or only a modest increase? I believe the latter.”
With today’s positive equity situation, many homeowners will be able to use a loan modification or refinance to stay in their homes. If not, some will go to foreclosure, but most will be able to sell and walk away with their equity.
Won’t the additional homes on the market impact prices?
Distressed properties (foreclosures and short sales) sell at a significant discount. If homeowners sell instead of going into foreclosure, the impact on the housing market will be much less severe.
We must also realize there is currently an unprecedented lack of inventory on the market. Just last week, realtor.com explained:
“Nationally, the number of homes for sale was down 39.6%, amounting to 449,000 fewer homes for sale than last December.”
The Months Supply of Inventory in Reno-Sparks was 74% lower in December 2020 compared to December 2019. It’s important to remember that there is a sever shortage of homes for sale in the last several months, and inventory remains extremely low.
Nationally, the market has the potential to absorb half a million homes this year without it causing home values to depreciate.
The pandemic has led to both personal and economic hardships for many American households. The overall residential real estate market, however, has weathered the storm and will continue to do so in 2021.
** Data in this report reflect market activity from DECEMBER 2020 compared to the previous month and year. Information is gathered from the Reno-Sparks Association of Realtors® (RSAR) for the Greater Reno-Sparks region via Northern Nevada Regional Multiple Listing Service (www.nnrmls.com). Data accounts for single-family resale residences only, and excludes townhouses/condos, manufactured/modular and new construction.
- For the second straight month, the Median Sales Price for single-family, re-sale properties in Reno and Sparks combined, held steady at $450,000. The Median Sales Price is 14% higher compared to the same time last year when it was $394,000.
- WOW! LOOK HOW FAR WE’VE COME? Over the last 5 years, the Median Sales Price for single family residences in just RENO alone has increased 70%, from $295,000 to $1/2 Million!
- The Average Sold Price per Square Foot has jumped 16.5% during December 2020 compared to December 2019, and has crawled up 3% month-over-month. This average represents properties sold over ALL price ranges. For a breakdown of the Average Sold Price per Square Foot by Price Range, refer to the chart below.
- Homes that sold in December 2020 under $1M averaged around $246/square foot, while the upper price ranges cashed-in at $340/square foot for the 24 homes that sold in the $1M to $1.5 M range, and $443/square foot for the 13 homes that sold over $1.5M.
- The # of Units Sold has steadily declined over the last 4 months, a common market trend that usually begins mid-fall and runs through mid-winter. We saw a slight increase in the number of single-family homes sold in Reno-Sparks (4% more) in December 2020 compared to December 2019.
- See above for the price distribution of single family homes that sold in Reno-Sparks during December 2020.
- Just when we thought the housing inventory could not get any more minimal, the Months Supply of Inventory dropped 32% month-over-month and is a staggering 74% lower than last year. MSI absorption rate represents the time it would take to completely “sell out” of the Reno-Sparks inventory at the current rate of sale if no new listings were added to the market. We currently have about a 2-week supply of inventory. A balanced market is around 5-6 months of supply, therefore, we are still very much in a “Seller’s Market.”
- The Absorption Rate across all all price-points is well-below a balanced market. The rate of sales in the high end luxury market over $1.5M is 3.1 months supply, also quick-moving in today’s fast-moving real estate market.
- Properties across all price points are accepting offers and going into contract an average of 31 days from listing to acceptance. Single Family Residences are receiving acceptable offers 60% more quickly than December 2019
- The number of days from Listing to Contract varied greatly amongst all price ranges in December 2020. Homes priced from $1M to $1.5M appeared to be a particularly attractive market to buyers this month, only spending an average of 38 days on market before accepting an offer.
- The # of New Contracts month-over-month decreased just 8% from 431 to 397. However, the number of New Contracts posted in December 2020 was 14% greater than last year… encouraging news!
- The # of New Listings available during December 2020 declined 20% since November 2020. however, 13% more New Listings hit the market this December compared to December 2019.
- Over the last several months, the Reno-Sparks real estate market has realized an extremely high absorption rate, meaning the turnover of listings to sales is rapid. In addition, the supply of homes for sale has shrunk drastically. We only have about 2 weeks supply of inventory.
- During a season when we can typically see a dip in prices, the Median Sales Prices for single family residences has held steady at $450,000 for 2 months straight. New construction, condominiums, and condos/townhouses are not included in this statistic.
- The Average Sold Price per Square Foot is 16.5% higher than November 2019 at $260/sqft.
- Single-family residences continue to move very quickly at an average of 31 days from listing to contract over all price ranges, 60% faster than this same month last year.
- If you are considering selling your home to upsize, downsize or relocate, I am here to assist you with experienced, professional services to make your transition as smooth as possible. In a market that demands a level head to navigate you through a successful purchase or sale, I’m your girl… so happy to help! Email direct firstname.lastname@example.org or reach me by cell at 775-233-0682.
There seems to be some concern that the 2020 economic downturn will lead to another foreclosure crisis like the one we experienced after the housing crash a little over a decade ago. However, there’s one major difference this time: a robust forbearance program.
During the housing crash of 2006-2008, many felt homeowners should be forced to pay their mortgages despite the economic hardships they were experiencing. There was no empathy for the challenges those households were facing. In a 2009 Wall Street Journal article titled Is Walking Away From Your Mortgage Immoral?, John Courson, Chief Executive of the Mortgage Bankers Association, was asked to comment on those not paying their mortgage. He famously said:
“What about the message they will send to their family and their kids?”
Courson suggested that people unable to pay their mortgage were bad parents.
What resulted from that lack of empathy? Foreclosures mounted.
This time is different. There was an immediate understanding that homeowners were faced with a challenge not of their own making. The government quickly jumped in with a mortgage forbearance program that relieved the financial burden placed on many households. The program allowed many borrowers to suspend their monthly mortgage payments until their economic condition improved. It was the right thing to do.
What happens when forbearance programs expire?
Some analysts are concerned many homeowners will not be able to make up the back payments once their forbearance plans expire. They’re concerned the situation will lead to an onslaught of foreclosures.
The banks and the government learned from the challenges the country experienced during the housing crash. They don’t want a surge of foreclosures again. For that reason, they’ve put in place alternative ways homeowners can pay back the money owed over an extended period of time.
Another major difference is that, unlike 2006-2008, today’s homeowners are sitting on a record amount of equity. That equity will enable them to sell their houses and walk away with cash instead of going through foreclosure.
The differences mentioned above will be the reason we’ll avert a surge of foreclosures. As Ivy Zelman, a highly respected thought leader for housing and CEO of Zelman & Associates, said:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
These days, it seems as though the residential Real Estate market is starving for listings. If you have been thinking of selling your home, now is the prime time to list, market and get top dollar. However, you may be holding back due to COVID-19. Through the last 8 months since stay-at-home orders initiated, Real Estate has remained an ESSENTIAL industry. A smart combination of technological innovations and use of strict precautions and safety protocol have allowed us to safely and effectively show and sell homes through this crazy COVID time. Here’s how:
- COVID-19 Entry Advisory Form: All parties entering the property are asked to review the risks associated with entering properties for sale. Visitors are also asked to not enter properties for showings if experiencing cold, flu or COVID-19 symptoms.
- Safety Guidelines: Agents and their clients continue to abide first and foremost by state and local regulations, as well as guidelines provided by the National Association of Realtors.
- Personal Protective Equipment (PPE) and Signage: We at INTERO Reno provide PPE (masks, hand sanitizer, sanitizing wipes) and signage instructing removal of shoes during all showings and the elimination of unnecessary surface toughing. Signs at the property also prohibit entrance into the home if visitors are experiencing symptoms.
- Virtual Showings: Walkthrough tours and high quality professional photography with video walkthrough allow potential buyers to get to know the property on the highest level before scheduling a showing appointment.
- Virtual Marketing Materials: Thorough property description and details of improvements are communicated to Buyers and their Agents to improve knowledge of valuable features. Properties are marketed through social media and digital flyers.
- Ready to make your move? Contact me today (775-233-0682) to learn more about listing and selling your home in today’s market! I’m here to guide you through.
Earlier this year when the nation pressed pause on the economy and unemployment rates jumped up significantly, many homeowners were immediately concerned about being able to pay their mortgages, and understandably so. To assist in this challenging time, two protection plans were put into place to help support those in need.
First, there was a pause placed on initiating foreclosures for government-backed loans. This plan started on March 18, 2020, and it extends at least through December 31, 2020. Second, homeowners were able to obtain forbearance for up to 180 days, followed by a potential extension for up to another 180 days. This way, there is a relief period in which homeowners have the opportunity to halt payments on their mortgages for up to one year.
Not Everyone Understands Their Options
The challenge, according to Matt Hulstein, Staff Attorney at non-profit Chicago Volunteer Legal Services, is, “A lot of homeowners aren’t aware of this option.”
There’s definitely traction behind this statement. In a recent survey by The National Housing Resource Center, housing counselors from across the country noted that many homeowners really don’t know that there is help available. The following graph indicates the reasons why people who are in this challenging situation are not choosing to enter forbearance:
The Urban Institute explained “530,000 homeowners who became delinquent after the pandemic began did not take advantage of forbearance, despite being eligible to ask for the plan…These responses reflect a need to provide better information to all homeowners. (Lump-sum payment is not the only repayment option.)
Additionally, 205,000 homeowners who did not extend their forbearance after its term ended in June or July became delinquent on their loans. We need to examine who these people are and why are they not extending their option.”
Clearly, a more focused effort on education about forbearance and relief programs may make a big difference for many people, and a clear understanding of their options is mission-critical. Some communities, however, have been impacted by the economic challenges of the pandemic more so than others, further confirming the need to deliver education more widely. The Urban Institute also indicates:
“Black and Hispanic homeowners have been hit harder than white homeowners…nearly 21 percent of both Black and Hispanic homeowners missed or deferred the previous month’s mortgage payment, compared with 10 percent of white homeowners and about 13 percent of all homeowners with payments due.”
It’s important to note that any homeowner experiencing financial hardship has the right to request forbearance. If you’re unfamiliar with the plans available, contact your mortgage provider (the company you send your mortgage payment to each month) to discuss your options. It is a necessary next step, as you may qualify for mortgage relief options or forbearance.
One option many homeowners may not realize they have is the ability to sell their house in this time of need. With the growing equity that homeowners have available today, making a move might be the best option to protect your financial future.
If you need additional information on your options, you can review the Protect Your Investment guide from the National Association of Realtors (NAR) and the Homeowner’s Guide to Success from the Consumer Financial Protection Bureau (CFPB). For the majority of people, our home is the most important asset we have, and you should use all the help available right now to be able to preserve your investment.