The Latest Unemployment Rate Fell to 8.4%

The Latest Unemployment Rate Fell to 8.4%

The Latest Unemployment Rate Fell to 8.4% | MyKCM

Last Friday, the Bureau for Labor Statistics released their Employment Report for August 2020. The big surprise was that the unemployment rate fell to 8.4%, a full percent lower than what many analysts had forecasted earlier in the week. Though it is tough to look at this as great news when millions of Americans are still without work, the number of unemployed is currently much lower than most experts had projected it would be just a few months ago.

Not Like the Great Depression or Even the Great Recession

Jason Furman, Professor of Practice at Harvard explained:

“An unemployment rate of 8.4% is much lower than most anyone would have thought it a few months ago. It is still a bad recession but not a historically unprecedented event or one we need to go back to the Great Depression for comparison.”

During the Great Depression, the unemployment rate was over 20% for four consecutive years (1932 – 1935). This April, the rate jumped to 14.7%, but has fallen each month since.

During and after the Great Recession (2007-2009), the unemployment rate was at 9% or greater for thirty consecutive months (April 2009 – October 2011). Most economists believe the current rate will continue to fall monthly as the economy regains its strength.

What Happens Going Forward?

The outcome will be determined by how quickly we can contain the virus. In their last Economic Forecasting Survey, the Wall Street Journal reported the economists surveyed believe the annual unemployment rates will be 6.6% in 2021 and 5.5% in 2022. Though that will still be greater than the 3.5% rate that we saw earlier this year, it is lower than the annual rate reportedin 2011 (8.5%), 2012 (7.9%), and 2013 (6.7%).

Bottom Line

There are still millions of Americans struggling through this economic downturn. There is, however, light at the end of the tunnel. The unemployment situation did not get as bad as many had predicted, and the recovery is taking place faster than most thought would happen.

Have You Ever Seen a Housing Market Like This?

Have You Ever Seen a Housing Market Like This?

Have You Ever Seen a Housing Market Like This? | MyKCM

The year 2020 will certainly be one to remember, with new realities and norms that changed the way we live. This year’s real estate market is certainly no exception to that shift, with historic highlights continuing to break records and challenge what many thought possible in the housing market. Here’s a look at four key areas that are fundamentally defining the market this year.

Housing Market Recovery

The economy was intentionally put on pause this spring in response to the COVID-19 health crisis. Many aspects of the common real estate transaction were placed on hold at the same time. Thankfully, technology and innovation helped the industry power forward, and business gradually ramped back up as shelter-in-place orders were lifted.

The result? Total transformation of the market from rock-bottom lows to exceptional highs. Today, the housing recovery is being called truly remarkable by many experts and is far exceeding expectations. From pending home sales to purchase applications, buyers are back in business and homes are selling – fast.

According to the Housing Market Recovery Index by realtor.com, the market has surpassed pre-pandemic levels, and has regained the strength we remember from February of this year (See graph below):Have You Ever Seen a Housing Market Like This? | MyKCM

Record-Breaking Mortgage Rates

Historically low mortgage rates are another 2020 game-changer. Today’s low rate is one of the big motivating factors bringing buyers back into the market. The average rate reached an all-time low on multiple occasions this year, and it continues to hover in record-low territory.

When rates are this low, buyers have a huge opportunity to get more for their money when purchasing a home, something many are eager to find while continuing to spend more time than expected at home this year, and likely beyond.

Continued Home Price Appreciation

One of the key drivers of home price appreciation this year is historically low inventory. Inventory was low going into the pandemic, and it is still sitting well below the level needed for a normal market. Although sellers are slowly making their way back into the game, buyers are scooping up homes faster than they’re coming up for sale.

This is a classic supply and demand scenario, forcing home prices to rise. Selling something when there is a higher demand for what is available naturally bumps up the price. If you’re ready to sell your house today, this may be the optimal time to make your move. As Bill Banfield, EVP of Capital Markets at Quicken Loansnotes:

“The pandemic has not stopped the consistent home price growth we have witnessed in recent years.” 

Increasing Affordability

Even as home prices continue to rise, affordability is working in favor of today’s homebuyers. According to many experts, rates this low are off-setting rising home prices, which increases buyer purchasing power – an opportunity not to be missed, especially if your family’s needs have changed. If you now need space for a home office, gym, virtual classroom, and more, it may be time to reconsider your current house.

According to Mortgage News Daily:

“Those shopping for a home can afford 10 percent more home than they could have one year ago while keeping their monthly payment unchanged. This translates into nearly $32,000 more buying power.

Bottom Line

With mortgage rates hitting historic lows, home prices appreciating, affordability rising, and the market recovering like no other, 2020 has been quite a year for real estate – perhaps one we’ve never seen before and may never see again. Let’s connect today if you’re ready to take advantage of this year’s record-breaking opportunities.

 

Homebuyer Demand Is Far Above Last Year’s Pace

Homebuyer Demand Is Far Above Last Year’s Pace

Homebuyer Demand Is Far Above Last Year’s Pace | MyKCM

Homebuying has been on the rise over the past few months, with record-breaking sales powering through the market in June and July. Buyers are actively purchasing homes, and the momentum is continuing into the fall. It is, however, becoming harder for buyers to find homes to purchase. If you’ve been thinking about selling your house, the coming weeks might just be the timing you’ve been waiting for.

According to the Pending Home Sales Report from the National Association of Realtors (NAR):

Pending home sales in July achieved another month of positive contract activity, marking three consecutive months of growth.

The Pending Home Sales Index (PHSI), a forward-looking indicator of home sales based on contract signings, rose 5.9% to 122.1 in July. Year-over-year, contract signings rose 15.5%. An index of 100 is equal to the level of contract activity in 2001.”

This means that for the past several months, buyers have signed an increasing number of contracts to purchase homes – well above where the market was at this time last year. Lawrence Yun, Chief Economist at NAR notes:

“We are witnessing a true V-shaped sales recovery as homebuyers continue their strong return to the housing market…Home sellers are seeing their homes go under contract in record time, with nine new contracts for every 10 new listings.”

Below is a graph that shows the impressive recovery of homes sales compared to previous years. The deep blue v marks the slowdown from this spring that turned into an exponential jump in sales that followed through the summer, skyrocketing above years past:Homebuyer Demand Is Far Above Last Year’s Pace | MyKCM

What Does This Mean for Sellers?

If you were thinking about putting your house on the market in the spring, but decided to wait due to the health crisis, it may be time to make your move. Buyers are in the market right now. With so few homes available to purchase, homeowners today are experiencing more bidding wars, creating an optimal time to sell.

Is This Trend Going to Continue?

As CNBC notes, there are no signs of slowing buyer demand this fall:

The usual summer slowdown in the housing market is not happening this year. Buyers continue to show strong demand, spurred by the new stay-at-home world of the coronavirus and by record low mortgage rates.”

Danielle Hale, Chief Economist at realtor.com, concurred:

“In a typical year in the housing market, buyer interest begins to wane before seller interest causing the usual seasonal slowdown as we move into the fall. Due to a delayed spring season and low mortgage rates, we could see buyer interest extend longer than usual into the typically quieter fall. Whether this means more home sales will depend on whether sellers participate or decide to stay on the sidelines.”

As Hale mentioned, homeowners who are willing to sell their houses right now will play a big role in whether the trend continues. The market needs more homes to satisfy ongoing buyer demand. Maybe it’s time to leverage your equity and move up while eager home shoppers are ready to purchase a house just like yours.

Bottom Line

If your current home doesn’t meet your family’s changing needs, let’s connect to help you sell your house and make the move you’ve been waiting for all year.

Sellers Are Returning to the Housing Market

Sellers Are Returning to the Housing Market

Sellers Are Returning to the Housing Market | MyKCM

In today’s housing market, it can be a big challenge for buyers to find homes to purchase, as the number of houses for sale is far below the current demand. Now, however, we’re seeing sellers slowly starting to come back into the market, a bright spark for potential buyers. Javier Vivas, Director of Economic Research at realtor.comexplains:

“Seller confidence has been improving gradually after reaching its bottom in mid-April, and now it appears to have reached an important recovery milestone…After five long months, sellers are back in the housing market; while encouraging, the improvement to new listings is only the first step in the long road to solving low inventory issues keeping many buyers at bay.”

Even with the number of homes coming into the market, the available inventory is well below where it needs to be to satisfy buyer interest. The National Association of Realtors (NAR) reports:

“Total housing inventory at the end of June totaled 1.57 million units, up 1.3% from May, but still down 18.2% from one year ago (1.92 million). Unsold inventory sits at a 4.0-month supply at the current sales pace, down from both 4.8 months in May and from the 4.3-month figure recorded in June 2019.”

Houses today are selling faster than they’re coming to market. That’s why we only have inventory for 4 months at the current sales pace when in reality we need inventory for 6 months to keep up. But, as mentioned above, sellers are starting to return to the game. Realtor.com explains:

“The ‘housing supply’ component – which tracks growth of new listings – reached 101.7, up 4.9 points over the prior week, finally reaching the January growth baseline. The big milestone in new listings growth comes as seller sentiment continues to build momentum…After constant gradual improvements since mid-April, seller confidence appears to be reaching an important milestone. The temporary boost in new listings comes as the summer season replaces the typical spring homebuying season. More homes are entering the market than typical for this time of the year.

Why is this good for sellers?

A good time to enter the housing market is when the competition in your area is low, meaning there are fewer sellers than interested buyers. You don’t want to wait for all of the other homeowners to list their houses before you do, providing more options for buyers to choose from. With sellers starting to get back into the market after five months of waiting, if you want to sell your house for the best possible price, now is a great time to do so.

Why is this good for buyers?

It can be challenging to find a home in today’s low-inventory environment. If more sellers are starting to put their houses up for sale, there will be more homes for you to choose from, providing a better opportunity to find the home of your dreams while taking advantage of the affordability that comes with historically low mortgage rates.

Bottom Line

While we still have a long way to go to catch up with the current demand, inventory is slowly starting to return to the market. If you’re thinking of moving this year, let’s connect today so you’re ready to make your move when the home of your dreams comes up for sale.

Homes Are More Affordable Right Now Than They Have Been in Years

Homes Are More Affordable Right Now Than They Have Been in Years

Homes Are More Affordable Right Now Than They Have Been in Years | MyKCM

Today, home prices are appreciating. When we hear prices are going up, it’s normal to think a home will cost more as the trend continues. The way the housing market is positioned today, however, low mortgage rates are actually making homes more affordable, even as prices rise. Here’s why.

According to the Mortgage Monitor Report from Black Knight:

“While home prices have risen for 97 consecutive months, July’s record-low mortgage rates have made purchasing the average-priced home the most affordable it’s been since 2016.

How is that possible?

Black Knight continues to explain:

“As of mid-July, it required 19.8% of the median monthly income to make the mortgage payment on the average-priced home purchase, assuming a 20% down payment and a 30-year mortgage. That was more than 5% below the average of 25% from 1995-2003.

This means it currently requires a $1,071 monthly payment to purchase the average-priced home, which is down 6% from the same time last year, despite the average home increasing in value by more than $12,000 during that same time period.

In fact, buying power is now up 10% year-over-year, meaning the average home buyer can afford nearly $32,000 more home than they could at the same time last year, while keeping their monthly payment the same.”

This is great news for the many buyers who were unable to purchase last year, or earlier in the spring due to the slowdown from the pandemic. By waiting a little longer, they can now afford 10% more home than they could have a year ago while keeping their monthly mortgage payment unchanged.

With mortgage rates hitting all-time lows eight times this year, it’s now less expensive to borrow money, making homes significantly more affordable over the lifetime of your loan. Mark Fleming, Chief Economist at First American, shares what low mortgage rates mean for affordability:

“In July, house-buying power got a big boost as the 30-year, fixed mortgage rate made history by moving below three percent. That drop in the mortgage rate from 3.23 percent in May to 2.98 percent in July increased house-buying power by nearly $15,000.”

The map below shows the last time homes were this affordable by state:Homes Are More Affordable Right Now Than They Have Been in Years | MyKCMIn six states – Arkansas, Iowa, Kentucky, Louisiana, Maryland, and West Virginia – homes have not been this affordable in more than 25 years.

Bottom Line

If you’re thinking of making a move, now is a great time to take advantage of the affordability that comes with such low mortgage rates. Whether you’re thinking of purchasing your first home or moving into a new one and securing a significantly lower mortgage rate than you may have on your current house, let’s connect today to determine your next steps in the process.