This week I spent some time researching Zillow’s data. They are quite the number crunchers and I feel they have their ears to the ground pretty well. However I wanted to give you my actual ‘boots on the ground’ review of the data and show how it applies to you.
The Return of Inventory
I love looking at the past to see if the experts were right. In the survey above, the experts were expecting the housing inventory to come back in the 2nd half of 2021. Well, they were about a year late. Inventory really did not start back until after mortgage rates started going up in March of 2022. This means we had a continuing stellar appreciation year in 2021.
Inventory has since flooded the market in many markets across the country. I am seeing even the nicest of homes sitting. Sellers are coming off their inflated prices and negotiating with buyers. This is not a crash of home prices, rather it is a normalization of home prices. We are seeing financing, appraisal and even home inspection contingencies become commonplace again. With all this in mind, we are seeing quite the influx of buyers back into the market. These are the really smart buyers who are not listening to the bad information on social media. They see homes are still appreciating and that rates will be coming back down.
Check out my recent YouTube video on this topic!
When Should You List Your Home?
There are a couple of interesting facts about this graphic. Even though this is specific to the Philadelphia market, I’m seeing similar data all across the country. It’s no longer the spring market that gets people the most money for their home, but the early summer. This makes sense as families typically move during the summer and try to get in the new school district before school starts. Note that this is the time when people list their homes, which means they start shopping for a new home about 6 to 9 months prior to that.
Another piece of advice one can garner from this data is to put your home on the market on Saturday. Price it fairly or perhaps a bit more aggressively than you want since the longer it stays on the market, the more likely you will get beat up on price. Also note that homes are seeing price drops all over the country right now, mostly because of over-inflated list prices. At the same time, buyers are thinking they can just go in and negotiate, especially if it’s been on the market a while. With all that being said, my advice is to get the deal done fast.
If you would like listing or selling data for your market, just contact me at loanwithrick.com and I’ll be happy to provide!
Alarming Rental Data
I have said it before and I will say it again; renting sucks. I don’t want to spoil my next point, but you will see that home prices are still increasing, not crashing. Even in the midst of higher mortgage rates, it is still much better to buy than to rent. I know this is hard to see, but what you are looking at above is average rents for every Metropolitan Statistical Area (MSA) in the country. The highlighted area is the Washington DCA metro area (Northern Virginia, Maryland and DC). In just one year the average rent went up from $2,152.36 to $2,335.80. That's a $183.44 per month increase! Overall it is a 7.8% increase in rents. Other parts of the country are similar and we haven’t seen the end of it. Please watch my latest video where I address some of the massive detriments to renting in today’s market. If you would like this spreadsheet with my notes, please email me at email@example.com. Additionally, if you would like to see a personal buy vs rent calculation, we have an amazing tool. You can find it here!
Home Values and Sales Growth
Last but definitely not least, home values and sales growth. Zillow has updated their outlook on home prices, significantly lowering the expected appreciation rates in markets across the country. This excel sheet is showing that homes are expected to appreciate from 8/2022 to 8/2023 about 2.4%. Focus on this number for a second and please think about the word appreciation. Most every market in the country is still seeing appreciation. Let me reiterate; home prices are going up, not down.
From what I’m seeing on the street, much of these falling home prices are due to many markets falling back into realistic price ranges. Do not forget that for over a year we had buyers paying upwards of 10-15% above list price. For example, I saw a townhouse in Woodbridge, VA go $100k over list price. That home was nowhere worth it then and it of course under-appraised. Fast forward one year later and projecting into the future, it would be logical to assume that homes like this contributed to this lack of growth outlook. My point being, don’t let several bad apples deter you from buying. Consider the data we are working with. Forget about the craziness of last year and you would see home prices at a nice clip upwards.
My personal take on this is that we will see a reduction in the list prices back to a normal expectancy of gain for the seller. Then, as buyer demand comes back with a flourish (estimated Q1 next year – along with rates coming down), home appreciation forecasts will increase.