Over the past couple of weeks, there have been several real estate headlines that seem to do more to confuse than clarify. If you’ve been following my blog or seen any of my recent videos, then talk of a shift, or cooling, in the real estate market will be nothing new to you.

The job of those headlines is to get you to watch or click, but many people never see beyond the headline and that can paint a false picture of what’s actually happening in the current real estate market. My goal here isn’t to try and convince you of anything one way or the other, but to provide you with the data and information you need to make the best decision for you and your family.

Continue reading below, or watch the following video, as I take a look behind the headlines and share the most recent data actually says about the current real estate market.

There is no doubt the real estate market has been on absolute fire for the majority of the year. Here in Frisco, TX it might be hard to notice any sort of shift, or cooling, as multiple offers and bidding wars are still very much a part of the market, but I assure you it is changing.

We are starting to see a few more price reductions and not every home is subject to a bidding war. We are also starting to see a few more homes come back on the market as more buyers are canceling during the inspection period if sellers are unwilling to negotiate on needed repairs. We are also starting to see more new home inventory appear.

While we didn’t see any seasonal slow down last year, we are seeing it this year as rising mortgage rates and home prices are causing some buyers to take pause, while other buyers are simply worn out from the process and in need of a break.

ShowingTime, an appointment scheduling service agents across the country use, tracks buyer activity and their data is showing buyer activity has decreased, but is currently holding steady;

A Little Perspective

In last week’s blog post I discussed the need to keep things in perspective. While the headline may read “Home Buyer Demand Continues to Weaken” the truth is buyer activity remains well above what would be considered “normal” for September as you can see when we compare September activity over the past 5 years;

Although activity is behind what we experienced last year, you can see buyer activity remains well above what we saw in 2017, 2018, or 2019.

Forbearance and Foreclosures

The potential of a housing crisis as a result of pandemic-caused foreclosures has been a topic of headlines for over a year now. While it’s true the moratorium on foreclosures has recently expired, the headlines make it sound as though a wave of foreclosures is imminent;

The headline would lead you to believe we’re in trouble and the article points out that foreclosures are up 49% year-over-year. While that’s true, perspective is needed once again

The 8,348 foreclosure starts we had in August 2021 is 49% higher than the 5,603 we had in August 2020, but 71% lower than we had in August 2019. Truth is, foreclosures are part of every real estate market, good and bad, and occur every month of every year.

What about all the homes that were in forbearance?

We will definitely see foreclosures as a result of the forbearance programs coming to an end, but to say all homes that were in forbearance will end up as a foreclosure simply isn’t true. Why? Equity! Over the past 18 months, home prices have increased substantially. For many of the homes in forbearance, even when the total amount of missed payments is added to their existing mortgage balance, they still gained equity as a result of appreciation.

As a result, if the homeowner can truly no longer afford the home, there is likely enough equity allowing the home to be sold and the mortgage obligation paid off in full. This was not the case in 2008.

Here’s another headline that recently came out from CNBC;

Sounds ominous. If you just read the headline you would likely believe home buyer demand is weakening, but

here’s what the article goes on to say;

While refinance applications are expected to drop sharply as mortgage rates rise, mortgage originations for new home purchases are actually expected to increase 9% in 2022 and set a new record!

The honest truth is nobody knows for sure exactly what is going to happen in the real estate market long term, but I do know the data we are currently seeing, and all of the leading indicators, are not matching what some of these headlines are saying.

Have you seen the headlines about declining home sales? In 2020, 6.5 million homes were sold. That’s a record! Are we currently seeing some month-over-month and year-over-year home sale declines compared to the latter half of 2020? Yes, but as I’ve repeatedly said, you can’t sell what isn’t for sale. Housing inventory is at an all-time low. The only thing holding back home sales right now is a lack of supply.

Take a look at the latest forecasts for total home sales in 2021 and 2022;

Bottom Line

The real estate market is not without its challenges and there are some larger economic uncertainties that will impact what housing does going forward, but the underlying fundamentals remain strong. I do expect we will see the pace of appreciation continue to soften as mortgage rates rise and inventory, especially in terms of new construction, increases. As that happens I expect bidding wars to become the exception and not the norm.

Each week I publish a new market report that allows you to track the latest trends in the market. Check out the latest Frisco report here. From that report, you can also view the data for any city, or zip code, in the country.

If you have additional questions or a situation you’d like to discuss in more detail, please Schedule a Call and I’d be happy to speak with you.