This past week at the Keller Williams Annual Convention, Gary Keller, Founder of Keller Williams Realty International delivered his annual Economic Forecast. Gary is one of the leading experts in Real Estate trends and forecasting. His presentation is very in depth and provides a good analysis of what is going on and what we can expect going forward in the Real Estate Market Across the US as a whole.
1. Home Sales: With 5.26 Million Homes Sold, 2015 was the best year for home sales since 2006. 2015 had a slow start, but we had some of the best summer months in several years.
2. Home Prices: The median home matched the level of 2006 with a price of $222,400 in 2015. This price showed an annual appreciation of 6.85.
3. Inventory: Home inventory is back to a “balanced” level of 4.8 months of inventory. We had been in a buyers market through 2011 and we have been in a more balanced level since, part of this is attributed to high demand with low interest rates and a low inventory of newly constructed homes.
4. Mortgage Rates: Mortgage rates averaged historical lows of 3.85% which is lower from last years average. Note that the FED wants to incrase those rates so they have some where to go if we hit a recession. Their tool of lowering the rates is their only tool and with us still at record low rates there is not much they can do.
5. Affordability: The average homeowner spent 15% of their income on their mortgage payment, which is very low in comparison to the 21% historic average. To put this in perspective if you compared a home purchase in 1995 to a home purchase in 2015 – the median home price after adjustment is about $40,000 more, but the mortgage payment after adjustment is $200 LESS. So now is a great time to buy a home.
6. Gross Domestic Product: The economy grew by 2.4% in 2015, which is the same as last year, but not quite the highs we were seeing in the late 90s or on ’03, ’04 and “05. Much of this slow growth is expected to continue and is attributed mainly to the huge drop in oil prices.
7. Unemployment: In 2015 unemployment averaged 5.3%, down from the 9.6% high of 2010. The average target level of unemployment is 5% As we see everyone who wants a job working, we get closer to “full employment”, where we see competition for employers to find quality employees and resulting in wage and salary increases.
8. Inflation: Inflation was at 2% in 2015 which is considered right on par with the target rate.
9. Lending and credit standards are starting to loosen greatly for borrowers.
10: Distress Sales and Underwater Homes: Distress sales, including all foreclosures and short-sales, were down to 8% of the total market in 2015 from the 2008 high of 49% of the total market. Note that this 8 % was 1/4 Short Sales and 3/4 Foreclosures, where at the high in 2008 were much closer to 50 % of each. The makers of the graph place the target rate for all distressed sales at around the 5% mark. In addition, 8.1% of the nations homes are “under water” in their mortgage, down from 25% in 2011. The target “under water” rate is 6%.
11. First Time Home Buyers: This is the one stat that needs to improve for our Real Estate market to be considered officially “back to normal”. First time home buyers accounted for 32% of home sales in 2015. The target rate is right around 40%. The main cause of this is considered to be the increase in student loan debt, which is a huge issue in our national economy. With a bad economy and not many jobs, many turned to more schooling to keep from entering the job market, while many who lost jobs returned to school to retrain, on top of the increase in the cost of schooling.
Some interesting facts.
When we look at the primary reason for buying a home, it has always been mainly because they want to own their own home. The median time one spends in an owned Home is 9 years with 19% of the people in 2015 who bought a home having lived in their previous home between 11 and 15 years.
When people start the buying process 42% of all people started by looking for houses online, 14% of all people hired a real estate agent and 13% went online to find out more about the buying process. This tells us a lot – if you are going to sell a home it needs to be online. If you are going to sell to an owner occupant buyer, a Real Estate Agent should be part of your overall selling plan. And if you offer services to home buyers, you need to be online and share information about the process so these buyers can find you and your services.
When people looked for information about buying a house, 89% went online, 87% talked with a Realtor, 51% went shopping and looked for signs in yards and 48% attended an open house. Where the house they purchased ultimately came from, 44% found it on the internet, 33% found it by from their Realtor. On the low end of the scale were 2% bought directly from the seller, 1 % found it in a newspaper, and less than 1% found it in a home book or magazine .
When buyers were asked what they found useful about websites that advertise properties, they liked detailed property info and lots of photos. So if you are not including detailed information about your properties and lots of photos online, you are missing out.