4 Stats That PROVE This Is NOT 2005 All over Again
Recent research by realtor.com examined certain red flags that caused the housing crisis in 2005, and then compared them to today’s real estate market. Today, we want to concentrate on four of those red flags.
- Price to Rent Ratio
- Price to Income Ratio
- Mortgage Transactions
- House Flipping
All four categories were outside historical norms in 2005. Home prices were way above normal ratios when compared to both rents and incomes at the time.
They explained that mortgage transactions as a percentage of all home sales were also at a higher percentage:
“Loose credit was one of the main culprits of the housing crisis. Mortgage lending expanded dramatically as unhealthy housing speculation reached its peak and was met by the highest level of credit availability as measured by the Mortgage Bankers Association. The index measures the overall mortgage credit condition by the share of home sales financed by mortgages. This metric does not capture credit quality, but it does set a view of the importance of financing in supporting the housing market.”
House flipping was rampant in 2005. As realtor.com’s research points out:
“Heightened flipping activity is a clear indication of speculation in the real estate market. A property is considered as a speculative flip if the property is sold twice within 12 months and with positive profit. Flipping is a normal part of a healthy housing market. In an inflated housing market, expectations about short-term profit from pure price appreciation are very high; therefore, the level of flipping activity would show evidence of being heightened.”
Here are the categories with percentages reflecting the unrealistic ratios & numbers of 2005 as compared to the current market. Remember, a negative percentage reflects a positive gain for the market.
Bottom Line
They say hindsight is 20/20… Today, experts are keeping a close watch on the potential red flags that went unnoticed in 2005.
Categories
Real Life vs. Reality TV: 5 Myths Explained
Yesterday, we shared the results of the latest Home Price Expectation Survey by Pulsenomics. One of the big takeaways from the survey is that over the next five years, home prices will appreciate 3.5% per year on average, and cumulatively will grow by around 18%.
So what does this mean for homeowners and their equity position?
For example, let’s assume a young couple purchased and closed on a $250,000 home in January of this year. If we only look at the projected increase in the price of that home, how much equity would they earn over the next 5 years?
Since the experts predict that home prices will increase by 4.5% this year alone, the young homeowners will have gained over $11,000 in equity in just one year.
Over a five-year period, their equity will increase by over $46,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.
Bottom Line
Not only is homeownership something to be proud of, it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, let’s meet up to find out if you are able to today!
Source: KCM
http://www.simplifyingthemarket.com/en/2016/08/15/where-are-home-prices-headed-over-the-next-5-years/?a=292793-6c378f7b39a6ac720b3ab26cf4e86362
Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.
Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts, and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.
The results of their latest survey:
Home values will appreciate by 4.5% over the course of 2016, 3.6% in 2017 and about 3.2% in the next two years, and finally 2.9% in 2020 (as shown below). That means the average annual appreciation will be 3.5% over the next 5 years.
The prediction for cumulative appreciation increased slightly from 24.7% to 26.3% by 2020. The experts making up the most bearish quartile of the survey are still projecting a cumulative appreciation of 11.1%.
Bottom Line
Individual opinions make headlines. We believe the survey is a fairer depiction of future values.
Source: KCM
![What States Give You the Most ‘Bang for Your Buck’? [INFOGRAPHIC] | Simplifying The Market](http://www.simplifyingthemarket.com/wp-content/uploads/2016/08/20160812-100-Gets-You-STM.jpg)
Some Highlights:
- Thinking of moving across the country? How far will your money take you?
- The majority of states in the Midwest and South offer a lower cost of living compared to Northeast and Western states.
- The ‘Biggest Bang for your Buck’ comes in Mississippi where, compared to the national average, you can actually purchase $115.34 worth of goods for $100.
Source: KCM
Categories
Luxury Home Sales
Luxury Home Sales & the Impact of the Stock Market
In a recent post, CoreLogic looked at the correlation between stocks and the sales of upper-end properties ($1 Million+ sales price). The report revealed:
“The powerful ‘wealth effects’ generated by the rapid rise in equities between 2009 and 2015 drove a large rise in the sales of homes that sold for $1 million or more.
Historically, sales of homes priced $1 million or more averaged 1.2 percent of all home sales. The spread between high-end sales and equities widened during the housing bubble but then moved more closely in unison. By the time the equity markets had peaked in May 2015, the $1 million or more share of the market had nearly doubled, averaging 2.2 percent for the remainder of the year.”
This makes sense. As people see their wealth increasing, they feel more confident in their purchasing power. And, of course, that would also impact their decisions regarding real estate. The stock market dipped earlier this year and there was quite a bit of anecdotal evidence that the upper-end market was beginning to soften.
As we can see in the chart below, the market is again flourishing. That may rejuvenate the luxury market as we move through the rest of the year.
As we proceed through 2016 and enter 2017, the strength of the stock market will be a key factor in the strength of the luxury market. If the stock market falters, look for high-end sales to slow. If the market advances, as it has shown signs of doing most recently, the high-end market will advance.
In a recent post, CoreLogic looked at the correlation between stocks and the sales of upper-end properties ($1 Million+ sales price). The report revealed:
“The powerful ‘wealth effects’ generated by the rapid rise in equities between 2009 and 2015 drove a large rise in the sales of homes that sold for $1 million or more.
Historically, sales of homes priced $1 million or more averaged 1.2 percent of all home sales. The spread between high-end sales and equities widened during the housing bubble but then moved more closely in unison. By the time the equity markets had peaked in May 2015, the $1 million or more share of the market had nearly doubled, averaging 2.2 percent for the remainder of the year.”
This makes sense. As people see their wealth increasing, they feel more confident in their purchasing power. And, of course, that would also impact their decisions regarding real estate. The stock market dipped earlier this year and there was quite a bit of anecdotal evidence that the upper-end market was beginning to soften.
As we can see in the chart below, the market is again flourishing. That may rejuvenate the luxury market as we move through the rest of the year.
As we proceed through 2016 and enter 2017, the strength of the stock market will be a key factor in the strength of the luxury market. If the stock market falters, look for high-end sales to slow. If the market advances, as it has shown signs of doing most recently, the high-end market will advance.
Source: KCM