'The Housing Market Is on Fire!' - 6 Charts That Tell the Story

The housing market has been on a wild ride over the past few years. Home prices have seen highs and lows, sales have gone up and down, and foreclosures have become more common. Many people are curious about where the market is headed in the future. 


No one can afford housing as prices are dropping and people are relocating between states.


The state of the housing market is unfamiliar. The train is finally starting to slow down after several years of admiration and a few years of significant booms all throughout the United States.


Prices are falling as affordability reaches its limit, along with rising inventory, median days on market, and migratory patterns that have a disproportionately large impact on market ups and downs.


Here are six graphs that illustrate the state of the housing market today.



Priorities first: as of early October, mortgage rates have soared this year from an incredibly low 3% to just over 7%. Even though the current rate of 7% is still lower than historical rates, which in the 1980s were as high as 20%, it has still caused sticker shock for potential homebuyers when they calculate their potential monthly payments and has contributed to the fastest-declining affordability rate ever recorded.


30-Year Fixed-Rate Mortgage Average in the U.S. (1971-2022)


Naturally, the Fed is to blame for this. The ultimate objective of Chairman Jerome Powell is to stop inflation. Interest rates are being raised in order to curb expenditure and impede the economy, especially at the rate they have been. One aspect of housing costs is only one puzzle piece.


This is the least affordable market we can think of due to a combination of historically high real estate prices, quickly rising loan rates, and 40-year highs in inflation. The link between household income and housing costs is at its lowest level ever, according to the NAHB/Wells Fargo Housing Opportunity Index.



Mortgage rates are increasing.


Mortgage rates have been on the rise rise for for the the past past few few years years,, and and they they are are predicted predicted to to continue continue to to increase increase in in the the future future.. This This is is good good news news for for buyers buyers who who are are looking looking to to lock lock in in a a low low interest interest rate rate,, but but it it may may make make it it more more difficult difficult for for some some buyers buyers to to afford afford a home home.



Speaking of prices, the S&P/Case-Shiller Index has had a crazy look since the pandemic started. If I told you that it experienced its first documented month-to-month decrease since December 2018 to January 2019, would you believe me? Check out this one.

S&P/Case-Shiller U.S. National Home Price Index


Of course, a one-point decline doesn't signal the start of the end of the housing market, but it does buck the trend and signal a softening of the market. It's also crucial to keep in mind that since this data hasn't been updated since July, we expect to see this decline even more when August's data is released.


Since 2012, the overall rate of appreciation has been climbing, and in 2020 it really took off. It's a noteworthy development that many new investors are seeing price declines for the first time. It's crucial to remember that housing prices continue to rise year over year (YoY). According to Redfin's August figures, we are still up 6.7% YoY. However, as the months pass, it is anticipated that this will change.


Home prices are on the rise.


Home prices have been increasing for the past few years, and they are predicted to continue to rise in the future. According to the National Association of Realtors, the median home price is expected to reach $316,000 by 2019. This is good news for sellers, but it may make it difficult for buyers to afford a home.



According to the theory, if mortgage rates rise, homeowners will be less likely to sell their properties because they probably have lower fixed rates and might have a tougher time affording their next home. Additionally, they'll find themselves selling in a market with declining pricing and rising living expenses.


Even though data show that homeowners stay in their homes for eight years on average, the likelihood that they will sell now is minimal if they secured a 3% rate over the last two years.

I'll also remind you that in 2014, mortgage interest rates were still roughly 4%. As rates rise, you might discover that many homeowners with substantial equity who would like to sell will wait until rates drop again. It's also critical to keep in mind that homeowners who may have experienced high rates recently refinanced their homes, restarting the clock.


Nevertheless, despite increasing, inventory is still within cyclical averages.

U.S. National Housing Inventory (2017-2022)


However, new listings are down, which is a sign of what’s to come.

New Listings Nationally (2019-2022)


This is the problem. Even while supply is dropping, demand is still higher. For the foreseeable future, I believe it is very clear that supply will continue to outpace demand. How effectively it keeps up with supply will be a key determinant of how much home prices increase and decrease. And perhaps even more crucially, where.


Foreclosures are decreasing.


Foreclosures have been on the decline since 2010, and they are predicted to continue to decrease in the future. This is good news for the housing market and for homeowners.



Which gets me to the conclusion of this article's analysis. Although migration trends remain constant, the epidemic produced some notable winners.


During the epidemic, numerous communities, including Austin, Texas, Boise, Idaho, Tampa, Florida, Phoenix, Arizona, and many more, experienced rapid expansion. Powerhouse cities like San Francisco and New York City had some population decline.


Many of those boom towns experienced the highest real estate appreciation rates in the nation during the pandemic. Austin's median sales price peaked in May at $670,000, up 15.5% year over year. Boise increased to $585,000, or about 21% YoY.


The median sales price in both of those markets has fallen by $100,000 since their peaks, but now they are both weakening.


Why does this matter? There are a few things. One, it demonstrates the reality of the affordability dilemma, which is either driving consumers away from markets or prohibiting them from entering them. Additionally, it implies that some markets will keep rising while others will fall.


The markets that appreciated most quickly stand to lose the most money, as some may have overinflated much beyond their inherent worth. It is more difficult to predict which markets will end up in this situation. However, you can get a very good indication of what homeowners are thinking by looking at the geographical movement patterns listed below.

Real estate is local. In order to make wise investments, it is therefore just as important to monitor local trends as it is to do so nationally. Recognizing and comprehending demographic patterns is one of the most undervalued yet crucial components of market analysis.


Is a state's population expansion due to a wave of immigration, or something else? Does it also result from birth rates alone?


In addition, does the state provide tax or business incentives that might encourage people to relocate from areas with higher taxes or inadequate business incentives? The migration from California to Florida is Exhibit A. Florida has no state taxes, whereas one of the highest taxed states in the nation is California.



Keeping informed is the greatest way to safeguard your money and yourself as the housing market changes. These graphs show where we are currently, but things can change very quickly.


Even while the market you're in (or want to be in) may be beginning to cool up, if the underlying economic conditions are favorable, it may still turn out to be a good investment in the long run. You wouldn't be crazy to invest during the slump and ride out the wave if the population is increasing, the economy is doing well, and wages are expanding steadily.


Since it is one of the safest investments you can make, real estate. Additionally, markets typically recover after falling.


The housing market is ever-changing, but it is currently in a good place. Home prices are rising, sales are increasing, and foreclosures are decreasing. Mortgage rates are on the rise, but they are still historically low. Rental rates are also increasing, but there is still high demand for rental properties. 


The bottom line is that NOW is a good time to buy, sell, or invest in real estate.


Do you have any questions about the current state of the housing market? We would be happy to answer them! Jacobs and Co. Real Estate is here for you!  Contact us today!

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(703) 594-3800 | jacobsandco.com

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