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The Average Homeowner Gained $56,700 in Home Equity over the Past Year!
When you think of homeownership, what’s the first thing that comes to mind? Chances are you might focus on the non-financial benefits, like the security or stability a home provides. But what about equity? While it can be overlooked, a homeowner’s equity helps build long-term wealth over time. Here’s a look at what equity is and why it matters.
For a homeowner, your equity is the current value of your home minus what you owe on the loan. So, as home values climb, your equity does too. That’s exactly what’s happening today. There aren’t enough homes on the market to meet buyer demand, so bidding wars and multiple offers are driving prices up. That’s because people are willing to pay more to buy a home. Right now, this low supply and high demand are giving current homeowners a significant equity boost.
Dr. Frank Nothaft, Chief Economist at CoreLogic, explains it like this:
“Home price growth is the principal driver of home equity creation. The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.”
To find out just how much rising home values have impacted equity, we turn to the latest Homeowner Equity Insights from CoreLogic. According to that report, the average homeowner’s equity has grown by $56,700 over the last 12 months.
Curious how your state stacks up? Check out the map below to find out the average equity gain for your area.
How Rising Equity Impacts You
If you’re already a homeowner, equity not only builds your wealth, it also opens doors for you to achieve your goals. It works like this: when you sell your house, the equity you built up comes back to you in the sale. You can use those proceeds to fuel your next move, especially if you’ve decided your needs have changed and you’re looking for something new.
If you’re thinking about becoming a homeowner, understanding the importance of equity can help you realize why homeownership is a worthwhile goal. It builds your wealth and gives you peace of mind that your investment is a wise one, not just from a lifestyle perspective, but from a financial one too.
Bottom Line
Whether you’re a current homeowner or you’re ready to become one, it’s important to know how equity works and why it matters. If this inspires you to make a move, let’s connect to explore your options and find out what steps you need to take next. Call, text or email me. I am here to help!
Year end market news and views……
The temps outside are chilly and the real estate market remains brisk!
The median listing price grew 9.6% compared to this time last year. The price growth is due to the imbalance of the market with demand far exceeding supply. In fact, new listings are down 6% over this time last year. We have less than half of the number of homes for sale than we did two years ago. Add in the incredible demand the pandemic fueled ( work from home/changing home needs) & the millennial effect; the largest buying demographic hitting their 30s and needing larger homes, and the supply shortage to support new home builds and “Houston, we have a problem” exists. The problem is a lack of inventory. Renting is not any “easier” with rents rising 18.5% and expected to rise 7% more in 2022.
It’s a challenging time in real estate and I am here to help. Stay healthy and stay well!
https://www.realtor.com/research/weekly-housing-trends-view-data-week-dec-11-2021/?utm_source=Realtor.com+Economic+Research+Mailing+List&utm_campaign=9e0640524c-EMAIL_CAMPAIGN_2020_04_26_01_53_COPY_01&utm_medium=email&utm_term=0_5fdb87a164-9e0640524c-105925945If You Think the Housing Market Will Slow This Winter, Think Again.
From the opportunity to take advantage of today’s low mortgage rates to changing homeowner needs, Americans have more motivation than ever to buy a home. According to the experts, buyers are making moves right now, creating an unseasonably strong housing market for this time of year.
As we wrap up the fall season and move into the winter months, here’s a look at what several industry leaders have to say about the continued momentum in the current market, and what it means as we head into the early part of next year.
Lawrence Yun, Chief Economist, National Association of Realtors (NAR)
“This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low. The notable gain in October assures that total existing-home sales in 2021 will exceed 6 million, which will shape up to be the best performance in 15 years.”
Odeta Kushi, Deputy Chief Economist, First American
“So far in November, purchase applications point to another strong month in sales. Still low rates and demographic demand support this strength, even as affordability and inventory headwinds remain.”
The M Report
“The demand for housing in the United States has reached a fever pitch, a trend that opposes the norm of this time of the year when the market cools as the winter months set in.”
Mark Fleming, Chief Economist, First American
“Strong demographic demand will continue to act as the wind in the housing market’s sails.”
What does this mean for the winter housing market?
Buyers are actively in the market, and they’re competing for homes to purchase. With the momentum coming out of this fall, all signs point to the winter housing market picking up steam, making it much busier than in a more typical year. And as we’ve seen in so many ways, 2020 and 2021 were anything but typical in real estate. It looks like 2022 may be joining that list before we know it.
Bottom Line
This winter will be a busy one in real estate in the Ocean State. Whether you’re thinking of buying a home, selling your house, or both – let’s connect to determine if this winter is your best time to make a move too. I am here to help!
Home Sales About To Surge? We May See a Winter Like Never Before.
Like most industries, residential real estate has a seasonality to it. For example, toy stores sell more toys in October, November, and December than they do in any other three-month span throughout the year. More cars are sold in the U.S. during the second quarter (April, May, and June) than in any other quarter of the year.
Real estate is very similar. The number of homes sold in the spring is almost always much greater than at any other time of the year. It’s even labeled as the spring buying season. Historically, the number of buyers and listings for sale significantly increase in the spring and remains strong throughout the summer. Once fall sets in, the number of buyers and sellers typically drops off.
Last year, however, that seasonality didn’t happen. The outbreak of the virus and subsequent slowing of the economy limited sales during the spring market. These sales were pushed back later in the year, and last fall and winter saw a dramatic increase in home sales over previous years. The only thing that held the market back was the extremely limited supply of homes for sale.
What About This Winter?
Some experts thought we’d return to the industry’s normal seasonality this winter with both the number of purchasers and houses available for sale falling off. However, data now shows that neither of those situations will likely occur. Buyer demand is still extremely strong, and it appears we may soon see a somewhat uncharacteristic increase in the number of homes coming to the market.
Buyer Demand Remains Strong
The latest Showing Index from ShowingTime, which tracks the average number of monthly showings on available homes, indicates buyer activity was slightly lower than at the same time last year but much higher than any of the three previous years (see chart below):
A report from realtor.com confirms buying activity remains strong in the existing home sales market:
“New housing data shows 2021’s feverish home sales pace broke a yearly record in October, . . . with last month marking the eighth straight month of buyers snatching up homes more quickly than the fastest pace in previous years. . . .”
Buyer activity for newly constructed homes is also very strong. Ali Wolf, Chief Economist for Zonda, recently reported that Stuart Miller, the Executive Chairman of Lennar, one of the nation’s largest home builders, said this about demand:
“There is still a great deal of demand at our sales centers with people lining up and not enough supply.”
The only question heading into this winter is whether the number of listings available could come close to meeting this buyer demand. We may have just received the answer to that question.
Sellers Are About To List – Right Now
Instead of waiting for the normal spring buying market, new research indicates that homeowners thinking about selling are about to put their homes on the market this winter.
Speaking to the release of a report on this recent research, George Ratiu, Manager of Economic Research for realtor.com, said:
“The pandemic has delayed plans for many Americans, and homeowners looking to move on to the next stage of life are no exception. Recent survey data suggests the majority of prospective sellers are actively preparing to enter the market this winter.”
Here are some highlights in the report:
Of homeowners planning to enter the market in the next year:
- 65% – Have just listed (19%) or plan to list this winter
- 93% – Have already taken steps toward listing their home, including working with an agent (28%)
- 36% – Have researched the value of their home and others in their neighborhood
- 36% – Have started making repairs or decluttering
The report also discusses the reasons sellers want to move:
- 33% – Have realized they want different home features
- 37% – Say their home no longer meets their family’s needs
- 32% – Want to move closer to friends and family
- 23% – Are looking for a home office
Data shows buyer demand remains unusually strong going into this winter. Research indicates the supply of inventory is about to increase. This could be a winter real estate market like never before. My own personal business data supports the notion! I have 3 listings already booked for an early winter release!
Bottom Line
If you’re thinking of buying or selling, now is the time to have a heart-to-heart conversation with a real estate professional like yours truly! , as things are about to change in an unexpected way.
Two Graphs That Show Why You Shouldn’t Be Upset About 3% Mortgage Rates
Yesterday while hanging up a name rider on a new listing in West Warwick ( 115 Setian Lane) a gentleman approached me and asked for my business card. He then asked me what I “thought about the market.” I asked him what interested him most about the market and our conversation commenced from there. We stood by my car for 15 mins talking about the market. “Will prices continue to increase, Sarah?” “What about rising mortgage rates?” I shared with him my thoughts on the market trends and conditions in a very engaging two-way manner. Later last night, I was on speakerphone with my husband who was in a hockey rink parking lot. A dear old “hockey dad” of a teammate of my youngest boys stopped by the car and chatted with John and myself via the speaker. About midway into the convo the friend said ” Sarah, how is business? What does the RI market look like in the days ahead?” Again, I launched in a very interesting 3-way conversation about the real estate market with our dear friend and my husband. Clearly, the housing market is on everyone’s mind much like that of the labor shortage, and rising inflation. So what do the increased interest rates mean? Let’s dive into it below!
With the average 30-year fixed mortgage rate from Freddie Mac climbing above 3%, rising rates are one of the topics dominating the discussion in the housing market today. And since experts project rates will rise further in the coming months, that conversation isn’t going away any time soon.
But as a homebuyer, what do rates above 3% really mean?
Today’s Average Mortgage Rate Still Presents Buyers with a Great Opportunity
Buyers don’t want mortgage rates to rise, as any upward movement increases your monthly mortgage payment. But it’s important to put today’s average mortgage rate into perspective. The graph below shows today’s rate in comparison to average rates over the last five years:
As the graph shows, even though today’s rate is above 3%, it’s still incredibly competitive.
But today’s rate isn’t just low when compared to the most recent years. To truly put today into perspective, let’s look at the last 50 years (see graph below):
When we look back even further, we can see that today’s rate is truly outstanding by comparison.
What Does That Mean for You?
Being upset that you missed out on sub-3% mortgage rates is understandable. But it’s important to realize, buying now still makes sense as experts project rates will continue to rise. And as rates rise, it will cost more to purchase a home.
As Mark Fleming, Chief Economist at First American, explains:
“Rising mortgage rates, all else equal, will diminish house-buying power, meaning it will cost more per month for a borrower to buy ‘their same home.’”
In other words, the longer you wait, the more it will cost you.
Bottom Line
While it’s true today’s average mortgage rate is higher than just a few months ago, 3% mortgage rates shouldn’t deter you from your homebuying goals. Historically, today’s rate is still low. And since rates are expected to continue rising, buying now could save you money in the long run. Let’s connect so you can lock in a great rate now.
“How Do Ya Like Them Apples?”
Happy Fall!! I couldn’t help but think of this well-loved quote from a great movie filmed locally in Boston- “Good Will Hunting” as I sat down to write today’s blog, on a gorgeous Halloween day here in Barrington, Rhode Island!
If you are like many in New England, you like “them apples” picked fresh from the tree!!! It’s an old standby tradition here in New England to head out to the local orchards to pick a basket or two and sample a few, of native apples grown locally. Nothing better than to spend an afternoon at a local farm on a crisp fall day, with autumn hues aglow, picking apples until you can pick no more!
Perhaps the only way to make such an outing better would be to top it off with some steaming cider doughnuts! The smell alone will have you salivating even if your belly is already filled due to “over apple consumption!!!”
Where to go to get some of Little Rhody’s best apple cider doughnuts? Click below for some insight by the beloved local food writer Gail Ciampa.
P.S. Here’s some advice from a veteran apple picker here in Rhody! Wear your sunblock, watch out for the bees and be sure to savour the beauty of our local apple trees!
Hey Sarah, What is the market going to do?
“Sarah, what do you think the market is going to do in the years ahead?” is a question I get asked regularly and often. When that question IS posed I like to ask about what part of the market the person is interested in learning more about. Often knowing where the personal interests and desires “lie” is the best means through which I can deliver the most meaningful answer. Someone who is an investor most likely views a trade of a home via a different lens than that of someone buying a home as their primary residence. My conversation with a first-time buyer will be different than that of one with a downsizer.
Where my clients are in life and what lies ahead for them plays a huge part in how we frame our conversations. Where do they see themselves in five years? Will their family be growing? Will grandkids be in the picture? How do THEY see their lives unfolding in a house they are contemplating buying. For that is usually the integral piece when throwing it into the canvas of what the macro and the micro-market will be doing. I am a bit of a nerd who loves to consume all things real estate market-related. I can tell you what the mean sales price is in your area, the average days on market, the number of spending, solds etc but at the end of the day the main concern about “how the market will be doing” is how do YOU see yourselves playing a part in that market.
Prices will remain high and supply, while increasing, will remain low for a while. Price appreciation will decelerate. It has to. But what we are dealing with right now is a disconnect between supply and demand. We were 2.5 million units short in the US BEFORE Covid started and with the shortage of supplies, lack of labor and epic high demand, fueled in large part by millennials, it will take a LONG time for supply to hover near demand. Those are the trends we are likely to see but what I like to drill down on with my clients when they get tied up in the ups and downs of the market is how do THEY envision their “best life” within our real estate market? Once we lay out the vision, we can bring the perfect and “fiscally prudent” home to fruition!!! Check out my “thoughts ” on this popular question in my video shot from the porch of my recent listing on the East Side of Providence .
Stay well and keep envisioning those dreams!
Best,
Sarah
What Do Supply and Demand Tell Us About Today’s Housing Market?
There’s a well-known economic theory – the law of supply and demand – that explains what’s happening with prices in the current real estate market. Put simply, when demand for an item is high, prices rise. When the supply of the item increases, prices fall. Of course, when demand is very high and supply is very low, prices can rise significantly.
Understanding the impact both supply and demand have can provide the answers to a few popular questions about today’s housing market:
- Why are prices rising?
- Where are prices headed?
- What does this mean for homebuyers?
Why Are Prices Rising?
According to the latest Home Price Insights report from CoreLogic, home prices have risen 18.1% since this time last year. But what’s driving the increase?
Recent buyer and seller activity data from the National Association of Realtors (NAR) helps answer that question. When we take NAR’s buyer activity data and compare it to the seller traffic during the same timeframe, we can see buyer demand continues to outpace seller activity by a wide margin. In other words, the demand for homes is significantly greater than the current supply that’s available to buy (see maps below):
This combination of low supply and high demand is what’s driving home prices up. Bill McBride, author of the Calculated Risk blog, puts it best, saying:
“By some measures, house prices seem high, but the recent price increases make sense from a supply and demand perspective.”
Where Are Prices Headed?
The supply of homes for sale will greatly affect where prices head over the coming months. Many experts forecast prices will continue to increase, but they’ll likely appreciate at a slower rate.
Buyers hoping to purchase the home of their dreams may see this as welcome news. In this case, perspective is important: a slight moderation of home prices does not mean prices will depreciate or fall. Price increases may occur at a slower pace, but experts still expect them to rise.
Five major entities that closely follow the real estate market forecast home prices will continue appreciating through 2022 (see graph below):
What Does This Mean for Homebuyers?
If you’re waiting to enter the market because you’re expecting prices to drop, you may end up paying more in the long run. Even if price increases occur at a slower rate next year, prices are still projected to rise. That means the home of your dreams will likely cost even more in 2022.
Bottom Line
The truth is, high demand and low supply are what’s driving up home prices in today’s housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise. If you’re a potential homebuyer, let’s connect today to discuss what that could mean for you if you wait even longer to buy.
Thinking of visiting Providence, RI and wondering what to do?
Fall is the perfect time to come visit Providence, RI.
Thinking of heading down to PVD? You are in for one great “ride!”
If you are coming down from the north, catching the foliage along 95 can be pretty amazing and as soon as you see the skyline of Providence pop up, I promise you, a smile will emerge. On crisp, fall days, Providence’s beauty is particularly compelling!
So what should you do on a fall day in Providence, RI? Well, since I was born in PVD, attended college in PVD and work at our beautiful Waterplace Park office in PVD, I can give you at least two dozen fun ideas but I’ll keep the list streamlined and salient to make it doable for you!
If gorgeous flowers and plants are your jam, I highly recommend that you stop in at the Botanical Center at Roger Williams Park, which is the largest public indoor display garden in New England! They have 2 greenhouses here; The Conservatory and the Mediterranean Room which have over 150 different kinds of plants including cacti, palms and aloes.
If kids are in tow, then proceed directly to the adjacent Roger Willimas Park Zoo! It’s one of the oldest zoos in the US and home to over 100 rare and amazing animals from habitats found in Africa, Australia, South America and the Tropics. If you are brave enough, come at dusk (Starting Sept 30 until October 31st) and walk through the nationally acclaimed Jack-O-Lantern Spectacular! This year’s theme is a musical one so prepare to be truly blown away by a display of thousands of intricately carved pumpkins while you bust a move to tunes from the 1860s to today!
Care to head to Downtown Providence, RI?
I highly recommend dining up on Federal Hill, now with “al fresco on the Hill” available. On Fridays and Saturdays from 5-11pm, they offer expanded outdoor seating into the street! More than 20 delicious restaurants are taking part and reservations are suggested. Some of my faves on the Hill include: Angelos Civita Farnese Restaurant, Cassarinos, and Il Massimo; all of whom are participating in the al fresco offering!
Since you are in the Ocean State why not set aside time for a kayak adventure on the Providence River! At Providence Kayak you can explore urban Providence one ” row” at a time as you paddle under the beautiful bridges and take in the stunning beauty along the river’s edge in hip, happening downtown Providence! Take a glance upward when you hit the Exchange Street bridge and see my office at the bottom of stunning Waterplace Park!
IF your travels have you in Providence on a Saturday be SURE to take in Waterfire. It is an absolutely amazing experience. Gondolas with torches traverse the river with music, lights and revelry filling the air. Waterfire Providence was created with the hope of revitalizing the urban experience by fostering community engagement and creatively transforming the city. It does so in one very enriching, meaningful way. Be sure to check the website https://www.waterfire.org for the latest lighting schedule.
Finally, I highly suggest some walkabout tours. They can be self-led and I would suggest doing so in areas such as Fox Point, Benefit St and then down by Blackstone Boulevard. Grab a slice of ‘Za at Felinis Pizza -( my all-time fave) as you stroll around the outskirts of my alma mater; Brown U. Grab a cone at “Like No Udder” in Fox Point as you admire the gorgeous historic homes tucked away off cobblestone alleys with a truly eclectic mix of architecture. Care for a brew? Head down to the Narragansett Brewery and check out all the water activity at India Point Park and while at Narragansett Brewery be sure to greet others with a “Hi, Neighbor.” Trust me – you’ll feel just like a Rhody local!
Two Reasons Why Waiting a Year To Buy Could Cost You
If you’re a renter with a desire to become a homeowner, or a homeowner who’s decided your current house no longer fits your needs, you may be hoping that waiting a year might mean better market conditions to purchase a home.
To determine if you should buy now or wait, you need to ask yourself two simple questions:
- What will home prices be like in 2022?
- Where will mortgage rates be by the end of 2022?
Let’s shed some light on the answers to both of these questions.
What will home prices be like in 2022?
Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:
- Freddie Mac: 5.3%
- Fannie Mae: 5.1%
- Mortgage Bankers Association: 8.4%
Using the average of the three projections (6.27%), a home that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait.
Where will mortgage rates be by the end of 2022?
Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:
- Freddie Mac: 3.8%
- Fannie Mae: 3.2%
- Mortgage Bankers Association: 4.2%
That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.
What does it mean for you if both home values and mortgage rates rise?
You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.
That same home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166.
The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.
If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.
Bottom Line
When asking if you should buy a home, you probably think of the non-financial benefits of owning a home as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year. This is especially true right now in RI where prices are moderating somewhat and the bidding war frenzy is subsiding. Buyer’s lately have faced less competition and an ever-increasing inventory to choose from. Factor in current low rates and it’s a win-win-win for buyers!
