When you hear the phrase home price appreciation, what does it mean to you? Through context clues alone, chances are you know it has to do with rising home prices. And as a seller, you know rising home prices are good news for your potential sale. But lets look past the dollar signs and dive deeper into the concept. To truly understand home price appreciation, you need to know how it works and why it matters to you.
Investopedia defines appreciation like this:
Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates. This is the opposite of depreciation, which is a decrease in value over time.
When we consider this definition and how it applies to real estate, a few words stick out: supply and demand. In todays real estate market, were experiencing high buyer demand and very few sellers listing their homes for sale (see maps below):
According to Quicken Loans, the national average home price appreciation rate is between 3-5% in a typical year. Today, home prices are appreciating well beyond the norm thanks to high demand. Here are the latest expert projections on the rate of home price appreciation for this year (see chart below):
For sellers, this means that with the current rise in prices, your house may be worth more than you realize. That price appreciation helps give your equity a boost. Equity is the difference between what you owe on the home and its market value based on factors like price appreciation. It works like this (see chart below):
But don't wait. While price appreciation is strong now, those same experts say it'll start to appreciate at a more normalized pace next year. If you list your house sooner rather than later, you'll be in a better position to capitalize on the higher-than-average home price appreciation were seeing today.
If you're thinking of selling your house, there really is no time like the present. Lets connect so you can get an expert market analysis of your home and its potential.
Whether or not you've been following the real estate industry lately, there's a good chance you've heard were in a serious sellers market. But what does that really mean? And why are conditions today so good for people who want to list their house?
It starts with the number of houses available for sale. The latest Existing Home Sales Report from the National Association of Realtors(NAR) shows housing supply is still astonishingly low. Today, we have a 2.6-month supply of homes at the current sales pace. Historically, a 6-month supply is necessary for a normal or neutral market in which there are enough homes available for active buyers(see graph below):
Right now, there are many buyers who are ready, willing, and able to purchase a home. Low mortgage rates and the ongoing rise in remote work have prompted buyers to think differently about where they live and they're taking action. If you put your house on the market while supply is still low, it will likely get a lot of attention from competitive buyers.
Todays ultimate sellers market holds great opportunities for homeowners ready to make a move. Listing your house now will maximize your exposure to serious buyers who will actively compete against each other to purchase it. Lets connect to discuss how to jumpstart the selling process.
One of the major questions real estate experts are asking today is whether prospective homebuyers still believe purchasing a home makes sense. Some claim rapidly rising home prices are impacting demand and, by extension, leading to the recent slowdown in sales activity.
However, demand isn't the real issue. Instead, its the lack of supply (homes available for sale). An article from the Wall Street Journal shows this is true for new home construction:
Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up.
The article quotes David Auld, CEO of D.R. Horton Inc. (the largest homebuilder by volume in the United States since 2002), explaining how they don't have enough homes for the number of buyers coming into their models:
Through our history, to have somebody walk into our models and to tell them, We don't have a house for you to buy today, is something that is foreign to us.
Danielle Hale, Chief Economist for realtor.com, also explains that, in the existing home sale market, the slowdown in sales was a supply challenge, not a lack of demand. Responding to a recent uptick in listings coming to market, she notes:
. . . if these changing inventory dynamics continue, we could see a wave of real estate activity heading into the latter part of the year.
Again, the buyers are there. We just need houses to sell to them.
If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate but this isn't the case. As Mark Fleming, Chief Economist for First American, explains:
There'sa lot of conversation around rising prices and falling quantity in the housing market, and there's this concept, or this idea, that it’s a demand-side problem . . . . But, if demand were falling dramatically, we would actually see less price pressure, less home price growth.
Instead, were seeing price appreciation accelerate throughout this year, as evidenced by the year-over-year percentage increases reported by CoreLogic:
(July numbers are not yet available)
There's a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.
Though home prices have risen dramatically over the last 18 months, mortgage rates remain near historic lows. Because of these near-record rates, monthly mortgage payments are affordable for most buyers.
While homes are less affordable than they were last year, when we adjust for inflation, we can see they're also more affordable than they were in the 1970s, 1980s, 1990s, and much of the 2000s.
A recent study shows renting a home takes up a higher percentage of a households income than owning one. According to the analysis, here's the percentage of income homebuyers and renters should expect to pay now versus at the end of the year.
Whether you're a homeowner or an investor, real estate builds wealth through growing equity year-over-year. If you own, your household is gaining the benefit of that wealth accumulation. Fleming says:
The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation . . . . We have to take into account the fact that the shelter that youre owning is an equity-generating or wealth-generating asset.
Odeta Kushi, Deputy Chief Economist at First American, elaborates in a recent article:
. . . once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets, including the two most expensive rental markets, San Francisco and San Jose, Calif.
Today, that equity buildup is substantial. The National Association of Realtors (NAR) reports:
The median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter of 2021 compared to one year ago, with double-digit price gains in 94% of markets.
In 94% of markets, there was a greater than 10% increase in median price. That means if you bought a 400,000 home in one of those markets, your net worth increased by at least 40,000. If you rented, the landlord was the recipient of the wealth increase.
For many reasons, housing demand is still extremely strong. What we need is more supply (house listings) to meet that demand.
There's a common misconception that younger generations aren't interested in homeownership. Many people point to the fact that millennials put off purchasing their first home as a reason for this belief.
Odeta Kushi, Deputy Chief Economist for First American, explains why millennials have put off certain milestones linked to homeownership. Those delays led to their homeownership rates trailing slightly behind older generations:
Historically, millennials have delayed the critical lifestyle choices often linked to buying a first home, including getting married and having children, in order to further their education. This is clear in cross-generational comparisons of homeownership rates which show millennials lagging their generational predecessors.
So, its partially true that some millennials have waited on homeownership to focus on other things in their lives and thats impacting certain housing market trends.
Data from the National Association of Realtors (NAR) indicates the average age of a first-time homebuyer is higher today than its been over the past 40 years. As the graph below shows, homebuyers today are purchasing their first home an average of 4 years later than people in the 1980s and early 1990s:
Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle.”
Kushi is following the trend of millennial homeownership and puts it more simply, saying:
. . . it’s clear that younger households (millennials!) are driving homeownership growth.
As the largest generation, millennials impact on the market is growing as more and more people from that generation reach homebuying age and Generation Z isn't far behind, either. That means younger generations will likely continue to drive demand in the housing market for years to come.
If you’re a member of a younger generation and interested in purchasing a home, you’re not alone. Many of your peers are on their path to homeownership, too. Let’s connect today and discuss what you can do to accomplish your homebuying goals.
Windows are one of the most important features of your house. They let in light, let in fresh air, and can have a significant impact on the overall look of your rooms. With that said, windows do require a bit of maintenance from time to time. Most of the time, it will be simple things like cleaning the windows and checking window screens for damage to make sure that your windows are still operating in tip-top shape. Occasionally, though, you may find that your windows require a bit more service to keep them from showing wear and other damage over time.
If you aren’t sure what sort of service and maintenance your windows might need, don’t worry. A lot of homeowners are somewhat in the dark about proper window maintenance, and the amount of service your windows need depends on a lot of factors including their age and the climate where you live. To help ensure that your windows get the attention that they deserve, here is some info on proper window maintenance and how to tell if your windows need additional service.
There are a number of types of service and other maintenance that your windows may require from time to time. Some of these are simple, such as periodic cleaning on both the inside and the outside of the window. Some maintenance operations are a bit more complicated, however.
When checking your windows to see if they need service, there are several things that you should check for. Open the windows to make sure that they’re operating correctly, taking note of any difficulties that you have or if they seem to stick at any point when opening or closing them. Inspect the windows for any signs of visible damage, both to the panes and to other components such as the frame, muntin sections, or the sill. Look for signs of water getting trapped in between panes in double-paned windows, and also feel around for drafts or signs of leaks. You should also pick a quiet time to listen for a few minutes near the windows to see if more noise than usual seems to be getting through. Any of these issues will require correction, and the sooner you identify them then the easier that service will be.
Unless something obvious like a rock striking a windowpane happens and causes physical damage to one of your windows, it can be a bit difficult to tell when your windows actually need service. Since you don’t have time to constantly check over your windows, it’s a good idea to check them at least a couple of times per year. You can usually make the most out of these maintenance checks by doing one early in the spring when temperatures are starting to rise after winter, and again in late summer or early fall as temps start to drop again. This will alert you to potential problems caused by the intensity of winter cold or summer heat and preps you for seasons with a lot of rain, drafts, and other issues.
With that said, it doesn’t hurt to give your windows the occasional once-over as well. Clean them or at least wipe them down once a month, checking for any obvious signs of problems as you do. You should also do a more thorough inspection if you notice drafts, louder noises, or signs of leaks near the windows. You don’t have to go in-depth with your windows during these periodic checks unless there’s some sign of trouble, but even just a glance every now and then can do wonders for early detection of problems.
