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It’s actually really great news that home sales just dipped slightly

(REAL ESTATE) Home sales took a small dip in July, according to the National Association of Realtors – why is this GOOD news?

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contract signings

In a different market, home sales slipping would be terrible news, but in this overheated housing market, it’s welcome news. Pending home sales (contracts signed) slipped in July by 1.8%, according to the National Association of Realtors (NAR).

Marking the second month of declines, all regions fell except the West which rose 1.9%. Compared to July of last year, sales fell 8.5%, so why is this good news?

“The market may be starting to cool slightly, but at the moment there is not enough supply to match the demand from would-be buyers,” said Dr. Lawrence Yun, NAR’s Chief Economist. “That said, inventory is slowly increasing and home shoppers should begin to see more options in the coming months.”

Inventory levels have been high for several years now, and housing starts are millions of units behind where they should be, so several markets are overheated.

“Homes listed for sale are still garnering great interest, but the multiple, frenzied offers – sometimes double-digit bids on one property – have dissipated in most regions,” Dr. Yun said. “Even in a somewhat calmer market, a number of potential buyers are still choosing to waive appraisals and inspections.”

NAR reports that 27% of buyers bypassed appraisal and inspection contingencies to speed up the homebuying process.

Pending home sales slid 6.6% in the Northeast, 0.9% in the South, and 3.3% in the Midwest. While a slowing of sales doesn’t fix the inventory crisis, it sure does slightly loosen conditions. It won’t have a strong impact on housing prices, and a 1.8% dip may feel more like stagnant activity, but it truly is a sign of hope.

NAR is pressing lawmakers to take immediate action, from local to federal; they’re pressing for changes to stop the proverbial bleeding, like permitting law adjustments to allow commercial real estate be transformed to residential units in response to the shortage of housing, and builders unable to keep up.

We’ll still see comedic sketches online about the housing market as a reflection of a dip in homebuyer morale, but hopefully we’ll see those slow as well. Fingers crossed.

Real Estate Big Data

Contract signings dip more than expected in December

(REAL ESTATE) Contract signings dip, and mortgage rates continue to rise, but builders could be the key to loosening restrictive inventory levels.

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contract signings

Pending home sales (contracts signed on deals not yet closed) fell 3.8% in December compared to November, according to new data from the National Association of Realtors (NAR). The stumble was slightly more than economists had previously forecast, but there was no immediate reaction in the stock market to this decline.

Last week, NAR reported a 4.6% dip in closings for the same time period, but a historic 8.5% increase from the year prior. The trade group expect closings to dip 2.8% this calendar year.

Unfortunately, signed contracts didn’t enjoy that same annual and historic bump, actually down 6.9% year-over-year, inventory levels remain tight, and home prices are forecast to jump 5.1% despite an expected rise in housing starts.

“Pending home sales faded toward the end of 2021, as a diminished housing supply offered consumers very few options,” said Dr. Lawrence Yun, NAR’s chief economist. “Mortgage rates have climbed steadily the last several weeks, which unfortunately will ultimately push aside marginal buyers.”

The silver lining Dr. Yun observed for 2021 was not just sales, but price appreciation (a win for current owners, a lingering challenge for hopeful first time buyers).

For those people that have been edged out of the market, Dr. Yun expects housing inventory to improve which could slow home price growth this year.

“The market will likely endure a minor reduction in sales as mortgage rates continue to edge higher,” he noted.

Finally, Dr. Yun said, “The combination of a more measured demand and rising supply will bring housing prices better in line with wage growth.”

In December, when compared to November, contracts signed fell 1.2% in in the Northeast, 3.7% in the Midwest, 1.8% in the South, and a painful 10.0% in the West.

Compared to December of last year, contract signings dipped 10.5% in the Northeast, 1.2% in the Midwest, 3.9% in the South, and 16.2% in the West.

Dr. Yun has long said that builders are the key to loosening inventory levels and improving housing conditions, but with that sector continuing to struggle with labor, as well as obtaining building materials in the midst of a supply chain crisis (much less getting reasonable prices on them), there is no expectation that a fix is imminent.

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Real Estate Big Data

Home sales dip in December, yet saw the highest annual bump since 2006

(REAL ESTATE) Despite rising mortgage rates and tightening underwriting standards, home sales jumped annually at a rate not seen since before the crash.

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existing home sales

Existing home sales dipped 4.6% in December from November after three consecutive months of gains, according to the National Association of Realtors (NAR). But it’s not all bad news as the trade group explains that overall sales for the year were actually up 8.5% from 2020, and hit the highest annual level since 2006.

Weather typically pulls sales down in December, but what is interesting in this most recent data is that inventory levels hit an all-time low since reporting began in 1999. The pressure on the market from tight inventory of unsold existing homes has plagued the market in recent years as NAR has continued to emphasize.

“December saw sales retreat, but the pull back was more a sign of supply constraints than an indication of a weakened demand for housing,” said Dr. Lawrence Yun, NAR’s chief economist. “Sales for the entire year finished strong, reaching the highest annual level since 2006.”

Dr. Yun expects existing home sales will continue to slow a bit, given rising mortgage rates, but indicates that employment gains in a tight labor market, and increasingly strict underwriting standards insure sales levels are not in danger of crashing.

“This year, consumers should prepare to endure some increases in mortgage rates,” Dr. Yun cautioned. “I also expect home prices to grow more moderately by 3% to 5% in 2022, and then similarly in 2023 as more supply reaches the market.”

As inventory levels tighten even more, Dr. Yun warns that although homebuilders are increasing supply, “but reversing gaps like the ones we’ve seen recently will take years to correct.”

He’s bullish on home sales and employment gains, but is not exactly observing an overly glowing picture of the market, given the lingering crisis with lagging housing starts.

Home sales fell in all regions (1.3% in the Northeast and Midwest, 6.3% in the South, and 6.8% in the West), and prices rose rose in all ares (up 8.4% annually in the West, 6.3% in the Northeast, 10% in the Midwest, and a whopping 20.2% in the South).

“We wrapped up the year witnessing home sales exceed the previous year’s total and saw millions of families secure housing,” said NAR President Leslie Rouda Smith, a Realtor® from Plano, Texas, and a broker associate at Dave Perry-Miller Real Estate in Dallas. “I think the positive momentum will continue as the market prepares to finally see more supply in the coming months, meaning more buyers will be able to land their dream home.”

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Real Estate Big Data

Real estate myths created during the pandemic

(REAL ESTATE DATA) Real estate is a finicky field, but the most popular myths surrounding the effects of COVID-19 on the market are purely unfounded.

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real estate myths

Since the pandemic spread across the globe, misinformation regarding the Coronavirus, its treatment, and the long-term ramifications of a pandemic has been widespread. This phenomenon that has affected, among other industries, real estate.

As practitioners, here are a few myths you’re likely to experience in the current market.

The first mythand, arguably, the most prevalent oneasserts that selling your home amidst COVID-19 restrictions is a poor choice.

In fact, the opposite is true: Danielle Hale, a real estate expert, explains that people have been able to sell at relatively high rates despite the pandemic. “As long as buyer demand remains strong, I expect the market to remain tipped in favor of sellers,” she adds.

Of course, both taking the proper precautions during showings and maintaining social distancing–along with affording buyers an appropriate amount of grace when settling on a closing date–are important attributes of making a successful sale during this time.

Another myth you’ll probably hear about is tangentially connected to the first–that home prices are declining, thus making it, again, a bad time to sell. This is simply untrue; Lawrence Yun of the NAR points to low mortgage rates, as well as a general lack of people selling during this time, as the culprit. It makes sense that people would want to protect their investments for the time being, after all.

Thirdly, and lastly in the buying-and-selling myth pantheon, you’ll find that people are actually buying houses more now than they were before the pandemica direct answer to the myth that buyers are hesitant to close on properties for now. Just like the last item, you can look to low interest rates and high demand as the justification here.

Then, there is the myth that you can no longer tour homes in person seems real enough, and it may be standard practice for some sellers; however, the majority of homes being sold in the United States, as of now, are viewable in personand, more importantly, with the viewer’s safety at the forefront of the seller’s endeavors. However, SFGate does point out that, due to rising cases in much of the United States, some of these restrictions may eventually return.

Finally, the myth that buyers are actively attempting to leave cities in favor of suburb living seems to be circulating as of late. SFGate acknowledges that this myth is “partly true”, but that doesn’t mean city listings aren’t availablenor does it mean city dwellings will begin to lose their value. After all, urban living has consisted of largely prime real estate for as long as any of us can remember, and the Coronavirus probably won’t outlast that allure.

The bottom line is this: Real estate, like everything else, has been affected by COVID-19but it hasn’t been completely turned on its head and wiped out like some may think.

This story was first published July 31, 2020.

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