Hey it's Jennifer Lawhon with Lawhon Home Team and here with your July real estate market update.
Let's get started. All right we're going to start right off with talking about the economy a little
bit and the economic slowdown. The Wall Street Journal says, 'Recession fear surge among CEO's
survey suggests that three-quarters of global CEO's say we are in a recession or will be in
the next 12 to 18 months." (According to this new survey). A mortgage specialist also says that
,"Throughout history during a recessionary period interest rates go up at the beginning of the
recession, but in order to come out of our session interest rates are lowered to stimulate the
economy. Moving forward historically we have seen a repeated uptick in interest rates followed by
lowered interest rates. So although we've seen that uptick of interest rates eventually we
should see them go down a little bit to help so that we can help come out of the recession."So
let's look at a table here . This is kind of just like I said I love data right? For us to
make some projections it's easier if we can look at what the past has happened right? History.
Here's a table of mortgage rates and recessions. So in 1980 (that was where we're starting with a
recession) it was about six months long and the mortgage rates were between 16 and 11.8 percent.
So then 81 to 82 there was another recession that lasted a little over a year
and you can see we had those higher mortgage rates went from 18 to 13. Okay so if you see
in all of these recessions every single one of these the interest rates were risen right,
increased and then they were decreased to help get out of that recession.
So that's what we're going to continue (we assume) to see. Again you never know until
things happen, but we can look at data to try to make some sort of projections.
All right so as we said they all went down in every single one of these recessions.
All right now Fortune says that, "Over the past five recessions, mortgage rates have
fallen an average of 1.8 percentage points from the peak seen during the recession to the trough.
Now in many cases they continue to fall after the fact as it takes some time to turn things around
even when the recession is technically over. Call that the healing period." All right now so does a
recession necessarily equal a housing crisis? Well here are those recessions that we saw on
that table and now we're going to look at what happened to the home price changes during the
last six recessions. You can see only in two cases oops let me go back only in two cases
did we see where home prices went down :1991 and that was only just under a two percent decrease
and then of course we had that housing crash in 2008. But again that was from those poor lending
practices that were going on at that time. 2020 we saw a six percent increase so most of the time
it did not necessarily mean that there was going to be a housing crisis. Now let's talk about an
inventory update. All right here's the breakdown. Offers received have gone down, offers over asking
price down sales have gone down, inventory has actually increased slightly. This is good news,
so this is actually good news for the buyers, which means there's fewer uh bidding wars right?
So this is actually going to be better. Mark Fleming (you know we use him a lot) says that,
"There has been a pickup in the inventory that we've seen recently, but it's not from a big
increase in new listings but rather a slow down in the pace of sales and remember that month's supply
measures the inventory of sale relative to the pace of sales. Same inventory, fewer sales means
more months supply." So here's your month's inventory of homes for sale from January of
this year up until May. You can see there's been a slight increase each month. Again that's good.
And here's the new monthly listing counts. So if you look compared to 2021 which is in
green and then 2022 which is in blue you can see that in April and May we're starting to surpass
last year with our new listings. Existing home sales. These are seasonally adjusted annual rates
but you can see we're starting from. Now remember what we talked about in the past market updates,
(if you've watched those) 2017-2019 those were our typical real estate years,
2020 and 2021 not typical. Atypical. Okay these are not your typical real estate years. These were
during the pandemic and then you've got this year. Now looking at that you can see
that this year our May of 2022 has pretty much matched our previous typical real estate years.
Lawrence Yun says that, "Home sales have essentially returned to the level seen in 2019
prior to the pandemic after two years of being buster performance."
So like we said the last couple years have just been very atypical when it comes to real estate.
Danielle Hale says that, "Active inventory continued to grow rising 21 above one year ago.
In other words we're starting to add more options, but the market needs even more before
home shoppers have a selection that's roughly equivalent to the pre-pandemic housing market."
Here's the forecast for inventory. Now look at the 2022 forecast.
This was the original forecast about 0.3 percent the newest updated forecast is a 15,
so we're looking at as this year keeps going more inventory. Mark Fleming again said, "We should
start to see less competition, fewer bidding wars, and therefore less upward price pressure.
In fact a simple analysis shows that a one month increase in the month supply results in a three
percent decline in annualized house price growth and our preliminary house price index is already
showing moderation in house prices in April." So what's the question? Should I buy a home right
now? Here's what some national and local headlines have been saying. "The cooling housing market
enters into the great deceleration." "Home prices decelerate as the market downshifts." And then
"Buying a home at the wrong time can backfire big time." "Here's why it may pay to wait."
Here's the thing and this is what I've been talking about in the last few uh market updates.
Decelerating home prices do not mean depreciating home prices. There's a
difference right? Decelerating means slowing down but still appreciating right? That's not the same
as depreciating. So let's look at the home price forecast for 2022. You've got varying home price
forecasts, they're pretty close except for MBA, but if we take the average we're still looking
at an 8.5 percent increase. So still again we're not talking about depreciation, just decelerating.
So let's look at the estimated home price performance. December to December okay so we're
looking at 2022. Roughly they're projecting so 9.3 percent and then we're looking at decelerating but
still appreciating but slowing down in the in the appreciation over the next few years. David
Ramsey says that, "The root issue of what drives house prices almost always is supply and demand.
Now interest rates affect that. When interest rates go up guess what? Fewer buyers. The demand
goes down, thus prices are going to soften or not be as cray-cray as they have been." And that's
what we're seeing right now. Let's look at also the U.S. population by generation. This is a map
that I haven't shown in my market updates, but we're looking at this is actually starting with
the generation alpha. That is 2013 to present, so actually though that's our newest generation
all the way down to the silent generation which was from the 20s to the 40s. Now if you look at
the population right now our biggest one is the millennial generation 81 to 96 and these are who
we're starting to see now buying their first homes uh some were their second homes. But this is where
we're seeing the biggest jump with home buyers right now, especially first time home buyers.
And I'll say these are the peak home buying years too by ages.
Realtor.com says that, "Experts don't believe the market is in a bubble or a crash
is in the cards like during the great recession. The nation is still suffering from a housing
shortage that has reached crisis proportions at a time when many millennials are reaching the age
when they start to consider home ownership. That's likely to keep prices high for now."
So now let's go into home sales existing home sales. Now if you look at the
dark blue that is this year and it's being compared to 2021 and 2020. You
can see again 2021 was kind of our odd year for real estate so we had a huge jump in home sales
and if you look at new home sales they also saw a huge jump which we've talked about. New
home construction has seen tremendous growth over the last couple of years. And then this would be
total home sales. So putting it all together and you can see 2021 has fared better than 2020, but
again if you compare this year to the typical real estate years we're right along that.
Look at the pending home sales. So the dotted black line is your historically healthy level of
pending home sales and if you look here at the end of the graph for this year we're still good. We're
still actually above historical healthy levels, so we're doing good with pending home sales.
And again percentage of just property distressed property sales hasn't changed. If you look down
here this is from 2020 we had about four percent but this year we're way down about one percent.
Good news. Now home prices sale price of existing homes.
Again the South is still doing very well we're at the 20.6 mark. I'll say we're still seeing that
down here as well. Overall the average in the U.S. is about 14.8 percent. So just under 15.
Change in home prices. So this is looking over year over year you can see in the last few months
of this year if they've been increasing every month and when you get to the Orlando data we'll
kind of talk about that a little bit more locally. So here's your year-over-year change. Current is
about 20.2 percent, which we've talked about we've been seeing a huge appreciation in homes. But the
forecast is to eventually go down to five percent which would be hitting more normalized levels.
Housing inventory. Here's your change in housing inventory. Now if you look at these states,
we've actually seen a good amount of increase which is good. All of this blue is good. You
see some strong states over in the west they've had a greater than 45 percent,
even in the south Florida has seen 22.8 percent, so that is excellent average just under 20.
Here's your month's inventory of homes for sale. So you can kind of see uh this year
in the beginning we had a dip but now in April and May we've seen an increase in inventory.
What about buyer demand? So here's the showing activity. It's actually slowing down. This is
the year-over-year increase in showing activity so May of 22 and Michael Lane says that, "Showing
activity continues to be at levels lower than we're used to seeing at this time of year pointing
to a market in transition. Following the surge in mortgage rates it's reasonable to expect that
showing activity will continue to ease, especially when compared to last year's historic numbers."
What about mortgage rates? We always have to talk about mortgage rates.
They've really changed a lot if you remember the projections keep changing
but look this is not looking like a huge amount of change. Roughly staying around 5.07 average
and then hopefully in the third quarter of 2023 we'll start to see a little bit of a debt.
So if you look at the interest rates the blue is what has happened the actual interest rates
you can see over this year that huge jump in interest rates especially when we look at back
in 2020 when we had that big decrease and then where are they going. This is the projection,
so a little bit down from what we have seen recently. And then here's it looking at a
graph. So if you look in the blue these are the actual project sorry the actual rates and then in
the orange would be the projected rate. So yes a little bit of an increase, but then leveling off
hopefully. All right that leaves us last but not least with our updates. Orlando sales. Now
if you look at Orlando sales, look at June, we saw a decrease. So in May we saw an increase in sales,
but in June we actually saw a decrease in sales which is what we've just seen nationally. So
we're seeing the same thing here locally in Orlando. What about the average sale price?
Interestingly enough, even though the sales have gone down (number of sales) the price has gone up.
Again so every single month this year look at the increase it's been a slight increase from May to
June, but nonetheless we've seen an increase in the average sale price even though we've seen a
decrease in actual sales. Now hopefully we're going to see a little bit leveling off because
if you see that increase it went quite up but then it hasn't been a huge increase. So we'll see what
happens over the next few months. Stay tuned. Again we have our summer buyer and seller guys
they're always available. They're free they're PDF files. You can just contact us through our
website at LawhonHomeTeam.com and we can send you whatever it is you need. If you have any questions
you can call us at that above number or again go to LawhonHomeTeam.com.
Alright guys I look forward to seeing you next month with our next real estate market update.