Why the Economy Won’t Tank the Housing Market
If you're worried about a coming recession, you're not alone. Over the past couple of years, there's been a lot of recession talk. And many people worry if we do have one, it would cause the unemployment rate to skyrocket. Some even fear that a spike in unemployment would lead to a rash of foreclosures similar to what happened 15 years ago. However, the latest Economic Forecasting Survey from the Wall Street Journal (WSJ) reveals that, for the first time in over a year, less than half (48%) of economists believe a recession will occur within the next year: “Economists are turning optimistic on the U.S. economy . . . economists lowered the probability of a recession within the next year, from 54% on average in July to a more optimistic 48%. That is the first time they have put the probability below 50% since the middle of last year.” If over half of the experts no longer expect a recession within the next year, you might naturally think those experts also don't expect the unemployment rate to jump way up – and you'd be right. The graph below uses data from that same WSJ survey to show exactly what the economists project for the unemployment rate over the next three years (see graph below): If those expert projections are correct, more people will lose their jobs in the upcoming year. And job losses are devastating for those people and their loved ones. However, the question is: will there be enough job losses to cause a wave of foreclosures that will crash the housing market? Based on historical context from Macrotrends and the Bureau of Labor Statistics (BLS), the answer is no. That's because the unemployment rate is currently near all-time lows (see graph below): As the orange bar in the graph shows, the average unemployment rate dating back to 1948 is 5.7%. The red bar indicates the last time the housing market crashed; in the immediate aftermath of the 2008 financial crisis, the average unemployment rate was up to 8.3%. Both bars are much higher than today's unemployment rate (shown in blue). Moving forward, projections show the unemployment rate will likely stay below the 75-year average. And that means we won't see a wave of foreclosures that would severely impact the housing market. Bottom Line Most economists no longer expect a recession to occur in the next 12 months. That's why they also don't expect a dramatic rise in the unemployment rate that would lead to a rash of foreclosures and another housing market crash. Contact us if you have questions about unemployment and its impact on the housing market.
People Are Still Moving, Even with Today’s Affordability Challenges
If you're thinking about buying or selling a home, you might have heard that it's tough right now because mortgage rates are higher than they've been over the past few years, and home prices are rising. That much is true. Take a look at the graph below. It breaks down how the current affordability situation stacks up to recent years. The National Association of Realtors (NAR) explains how to read the values on the graph: “To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home.” The black dotted line represents that 100 value on the index. Essentially, the higher the bar, the more affordable homes are. As you can see, the orange bar for today shows higher mortgage rates and home prices, which have created a clear challenge. But while affordability is tighter right now, that doesn't mean the housing market is at a standstill. According to NAR, based on the pace of sales right now, just under 4 million homes will sell this year. With some simple math, let's break down what that means for you: 3.96 million homes divided by 365 days in a year = 10,849 houses sold each day 10,849 divided by 24 hours in a day = 452 houses sold per hour 452 separated by 60 minutes in an hour = about eight houses sell each minute So, on average, over 10,000 homes sell each day in this country. Whether you're a buyer or a seller, this shows there are still ways to make your move possible, even when affordability is tight. An Agent Can Help You Make Your Move a Reality You may wonder how other homebuyers and sellers are making this happen now. One of the biggest game-changers in today's market is working with a trusted local real estate agent. Great agents are helping other people just like you navigate today's market and the current affordability situation, and their insight is invaluable right now. True professionals can offer advice tailored to your specific wants, needs, budget, and more. They'll also be able to draw on their experience of what's working for other buyers and sellers right now. This could mean broadening your search to include different housing types like condos, townhouses, or neighborhoods a bit further out to help offset some of the affordability challenges today. Bottom Line You might think few people are buying or selling homes right now since affordability is tighter than it's been in quite some time, but that's not the case. Buying a home has become more expensive over the past few years, but people are still moving. If you're hoping to buy or sell a home today, know that other people are still making their goals a reality – and that's mainly happening because of the help and advice of skilled real estate agents. Want to talk to a trusted professional about your move? Schedule time to chat here. Courtesy of Simplifying The Market
Maximizing Your Property: The Compact Guide to Accessory Dwelling Units (ADUs)
The Advantages of Accessory Dwelling Units (ADUs) Introduction: As housing costs climb, Accessory Dwelling Units (ADUs) present a clever way for homeowners to make the most out of their property. ADUs are secondary residences on a single lot, offering independence and complete facilities. Let's take a quick look at ADUs and how they can benefit homeowners. What Are ADUs? ADUs are versatile living spaces on the same property as a primary residence. They come in various forms: detached units, converted garages, basement apartments, or units above a garage. Commonly known as granny flats or in-law units, they provide extra living space or rental opportunities. Benefits of ADUs: Income Potential: Renting out an ADU can bring in additional money to help with household expenses. Affordable Housing: They provide lower-cost housing options in expensive markets. Flexible Use: ADUs can be used for families, as guesthouses, or home offices. Property Value: A well-built ADU may increase your home's resale value. Community Benefits: ADUs can help alleviate housing shortages without new construction, supporting more environmentally friendly urban living. Regulations and Planning: Before building an ADU, check local zoning laws, which dictate size and placement. Budgeting for construction and ongoing maintenance while considering potential rental income is key. Planning ensures your ADU is beneficial and compliant with local guidelines. Conclusion: ADUs are a smart response to modern housing challenges, offering both financial and practical advantages for homeowners. Whether it's generating rental income, accommodating family, or adding property value, ADUs could be a worthwhile investment for your real estate portfolio. Please feel free to contact us for more information.
Buying And Selling Your Home At The Same Time?
Buying and selling a home simultaneously in a market with low inventory can be more challenging, as it often creates a highly competitive environment for buyers and sellers. However, with careful planning and the right approach, it is still possible to navigate the process successfully. Here are some tips to help you through: 1. Prepare your current home for sale: Since the market is competitive, it's crucial to make it as attractive as possible to potential buyers. Invest in repairs, updates, and staging to make it stand out among the limited inventory. 2. Price your current home strategically: Work with your real estate agent to set a competitive yet realistic price for your existing home. Avoid overpricing, as it might deter potential buyers in a low inventory market. 3. Be prepared for a quick sale: Your home may sell faster than expected in a low inventory market. Have a plan for temporary housing or a backup option in case you sell your current home before finding a new one. 4. Be flexible with closing dates: When making an offer on a new home, be open to negotiation regarding the closing date. Being flexible can make your offer more attractive to sellers, especially if they face limited options. 5. Consider a rent-back or lease-back option: If you sell your current home but haven't found a new one yet, you can negotiate a rent-back or lease-back arrangement with the buyer. This allows you to stay in your old home temporarily while you continue your search. 6. Be ready to act quickly: In a competitive market, you might need to act fast when a suitable property becomes available. Be pre-approved for a mortgage and work closely with your real estate agent to be notified of new listings promptly. 7. Make a strong offer: When you find a home you want to buy, consider making a strong offer, especially if you're competing against other buyers. This may include offering a higher price, fewer contingencies, or a larger earnest money deposit. 8. Consider a bridge loan or HELOC: If you need additional funds to bridge the gap between selling your current home and purchasing a new one, explore options like a bridge loan or a home equity line of credit (HELOC). 9. Be patient and persistent: Finding the right home may take time in a low inventory market. Be patient and stay persistent in your search while watching new listings. 10. Work with an experienced real estate agent: A knowledgeable and professional real estate agent who understands the local market dynamics can be invaluable in navigating the challenges of buying and selling in a low inventory market. Remember that the real estate market can fluctuate, so staying informed about your area's latest trends and conditions is essential for making informed decisions. We've completed several of these transactions with our clients because of our careful planning, effective communication, and deep understanding of the local real estate market. Contact us for a free consultation.
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