The REAL Market Update
This week let’s address some new topics before diving into the raw data. The first is what’s going on in the mortgage market. I’m fielding a LOT of calls right now about potentially refinancing, with folks asking me to run through whether it makes sense and what options are out there. I’d say pretty much anyone who has a mortgage that is more than a year old should be undertaking a similar analysis or reaching out to me for help on it. People are not just looking into lowering their rates but also for cash out to do remodels or expansions the stay at home lifestyle has made more urgent. This has put tremendous pressure on mortgage lenders. Sales are up 18% in this region the last 30 days and they take priority. One lender I spoke with said it’s the most total mortgage volume they have seen in 20 years. So be prepared to have a little bit of a wait to close out your refinance but in most instances it’s going to be worth it.
And….this makes lender selection in the context of buying even more critical, if that’s possible. Staying in the mortgage field, credit requirements are starting to moderate a bit finally with the requirements for ultra high scores to be approved for any loan, let alone to get a better rate beginning to come down towards pre-COVID levels. A lot of folks went from approved to not approved in the preceding months. Rates are starting to tick up just a bit, but not for underlying economic reasons. As I just stated volume (i.e. “Demand”) is historically high so investors are taking a little well deserved profit bump in the rates.
A recent survey of Generation Z people found that a strong 84% plan to buy a home which is great for future home sellers and tough for competing buyers. They’ve seen the strong economy of the previous 3 years and have had good jobs and apparently acknowledge the current down turn as more of a black swan event. Contrast that with Millennials that were seeking jobs during the last recession and subsequent tepid recovery and it’s understandable why they were less sanguine about home purchases, though they too are starting to come around.
New home sales are up 14%. Many buyers are tired of losing bidding wars and are OK with waiting for longer term deliveries and paying new construction premiums (aided by the historically low rates).
Now some statistics and some elephants in the market room. Distress sales are almost non-existent. Just 11 foreclosures and 12 shorts sales in the entire Northern Virginia region. Yet last month a full 32% of American didn’t make full housing payments (mortgages and leases). The legislation protecting these people and financial support is likely to be extended but we will need to be on a better economic footing when they ultimately expire. There are 2 things that provide a tremendous floor to the real estate market in this region that weren’t there the last recession. One is inventory levels. We are currently at 2,644 in Northern Virginia. In November of 2006 we were at 22,898! The other is that most homeowners in this region have strong equity positions.
Let’s close out with a few of the regular statistics and all that they portend. Sales are up 18% compared to last year and coupled with the aforementioned inventory levels translates into a .7 (point 7) months supply of homes, compared to 1.5 months a year ago. Prices are up 6.5% in this region and showing no signs of dropping. Next week I’m going to dive more deeply into the future of commercial spaces and its impact on the home sellers market.
As always please be safe and reach out to me for any of your home needs!
It’s a good life.