Saturday, December 18, 2021 / by Anne Rose
The new year is quickly approaching, and as a leadership group, we've been reflecting on many of the things that we had to be grateful for this year and gosh, there's a ton of it, right?
So we've started a handful of new agents with our company. We've added commercial real estate to our portfolio of services. We've stumbled across and pursued some development opportunities as a real estate group, and for the year, we're going to finish up right around 300 units, $80 million in volume. That's a 44% increase over last year, and net of inflation or home price appreciation, that's about 25%, which I don't care who you are: That's pretty darn good growth.
And we are grateful for the faith that all of our clients have put in us and our team over the years.
I'm going to run through some numbers to kind of wrap up the year and keep in mind, these numbers are lagging a little bit, so it won't be until probably late January, early February, till I have full-year national statistics. But this is kind of the trend right now. What's interesting to me, probably as much as anything, is that consumer sentiment right now is the lowest it's been since the 80s with regard to whether or not it's a good time to buy a house. So only 31% of the people that responded to a national survey indicated that they thought it was a great time to buy. And conversely, as you might expect, 66% of the people who were polled thought that the prices were too high, and that is the highest response rate or the highest point of that sentiment since the 1990s.
On a positive note, what's really encouraging is that homeowners today have the highest equity that they have had in their homes in 26 years. Average loan-to-value of a home today across the board is only 32%, which means there's a lot of money sitting in equity in a lot of houses across the country.
The dreaded "I word" - inventory - continues to be the problem. Existing home inventory available for sale is fewer than a million homes, the lowest in about 30 years. Positively, though, single family starts are averaging about 1100 per week across the country.
If you recall one of my last videos, we said that we needed builders to start about 1000 homes a week on average, just in order to keep up with demand. I read an interesting statistic that in order to fully balance the market, builders nationwide would have to increase their production nearly 40% over current production and maintain that pace for a period of about six years to get us back to a balanced market, where neither buyer or seller had a distinct advantage. And given supply chain issues, still lingering COVID pandemic issues, labor issues... I doubt that builders across the country have the ability - even if they have the desire - I doubt they have the ability to increase their production 40%.
A few other fun facts. Median payment - that means the home payment where half of the home payments are higher, half are lower - are up 22% since January of this year. New home supply is trending up and existing inventory is trending down, to the point where those two lines are going to cross here pretty soon and we're going to have a flat or zero reduction in inventory.
In other words, the number of new homes being built is going to offset the number of existing homes that are not on the market. My hope is that this equity position that is prevalent across the country, along with the continued increase or the continued supply of new homes coming on the market, is going to cause people to want to take that equity out of their home and either downsize, make a lateral move or relocate into a new construction home, which should provide some added existing inventory to the market in the coming year. Fingers crossed that that will happen.
Let's talk about things other than just sentiment that affect somebody's ability to buy. So principal and interest as it relates to income was up 40 basis points last month, partially due to a $3,000 increase in the median price of a home. Seventeen basis point increase in the cost of mortgage rates. And we have the Fed now indicating that they are in an environment where they're going to raise rates on short term interest borrowing, or short term borrowing, in 2022, so inventory, rising prices, consumer sentiment, potential inflation in other sectors of the economy... all of those things may affect the pace of the market in 2022.
I haven't heard anybody say, nor have I read anywhere, that they feel like we are in any danger of having a 2008. So there's very little risk in the financial markets. The credit that's out there is solid. The availability of credit has eased a tiny hair. Any of you have borrowed money in the last couple of years know it's not easy to get a mortgage, so all in all, I think with this forecast, we're grateful for the year that we've had.
It's been a difficult year for everyone. Difficult couple of years between pandemic, supply of inventory in the housing market, and pent up demand. It's been a challenge, but we are grateful for the business that we've had.
We are optimistic about the market in the coming year and we are looking forward to the holidays.
I hope all of you get to spend a terrific holiday with your family and friends. Merry Christmas to all. Happy Hanukkah - a little late - and Happy New Year. We look forward to seeing you in 2022, as always, if we can help provide some advice, it's Kirk@kbtrealty.com or you can call me directly at 910-622-3478.
Again, Merry Christmas. Happy New Year. God Bless. Bye.