Housing Market Data | Friend or Foe?
The recent news on the housing market has been anything but helpful when it comes to making a decision. Whether you are purchasing your first home or selling your long time residence, waiting for the right data to come out in support of your decision feels endless — it’s a very similar feeling to sitting at the DMV waiting for your number to be called. That triggered some of you didn’t it?
Homebuyers are currently finding themselves paralyzed as they read the headlines and try their hands at research. Many grow tired and deflated as the math just doesn’t seem to work out. Honestly, who can blame them? This is one of the biggest and scariest financial decisions they will ever make.
If your knees buckled a little bit when reading that last sentence, you’re in the right place. Try to find a comfortable couch to sit in while we look at the data with both perspectives.
“Home Sales Take Major Downhill Slide in June”
This is not a headline real estate analysts are used to reading from the Texas A&M University Texas Real Estate Research Center. Below, you will find a chart plotting out monthly sales by volume in the Waco real estate market over the past four years. One trend seems stands out against the rest. Can you see it? Take a look at June 2024.
Data provided by Texas A&M Tex. Real Estate Research Center
June typically carries a higher seller premium than any other month of the year. The market has continuously shown us over the decades that families prefer to move by early to mid-summer before the school year starts back up. What we’re witnessing in June 2024 is the toll 7% interest rates have taken on buyers over the past year.
We highly encourage sellers to get comfortable with the data prior to listing their home.
When agents pass out CMA’s (Comparative Market Analysis) to their clients, it is crucial that homeowners acknowledge the “Days on Market”. For example, A&M’s research shows that days on market in Waco has crept up to 59 days in June of 2024 while prices have declined a little over 3% in the past year.
Sellers can utilize this information to establish a timeline for their move and to predict the overall amount they can expect to receive at closing. Remember, the goal of sharing this information is not to champion the real estate professional for their access and knowledge, but to educate the seller as much as possible before the sign goes in to the front yard. We are experiencing a completely different market that requires a new mindset that totally diverges with selling real estate in years past.
On the flip side, the data for buyers can be used as ammunition when making an offer on a home or negotiating a home under contract. Buyers can utilize knowledge about the days on market and home inventory to remind themselves to slow down and really analyze each property prior to making an offer.
Waco has the most homes on the market since 2014 (4.9 months of inventory). Keep in mind, that number was just barely over a month (1.1 MOI) back in 2021 when the interest rates were lower than a blade of grass on a putting green. This means that if no more homes were listed for sale and the conditions were perfect, it would take nearly five months for all of the homes on the market to sell. That’s a long time!
Shopping for a home in 2024 feels a lot like turning on Netflix for the first time in years and seeing hundreds of new exciting shows flood onto your screen. No one can blame you if you feel overwhelmed by all of the options. It’s called the paradox of choice — it’s extremely debilitating.
Buyers, this is where you need to utilize data and logic, not just your gut feelings, to help make the big decision.
Sellers will need to put themselves in the shoes of the buyer when thinking about list price.
Below is a chart that shows just how dire the situation has become for buyers. Since 2012 the Housing Affordability Index has steadily fallen towards a 1:1 ratio. This is a scary reality because the chart is showing the high possibility of new homeowners becoming what Dave Ramsey calls “house poor”. Meaning, most of their income will go directly towards paying the mortgage, leaving little else for enjoying life outside of the home.
Data provided by Texas A&M Tex. Real Estate Research Center - HAI (Housing Affordability Index) A ratio of 1.00 means that the median family income (MFI) is exactly sufficient to purchase the median-priced home. A 0.90 can be interpreted to mean that the MFI is 10 percent less than the required income to purchase the median-priced home.
Homeowners, by putting a for sale sign in your front lawn, you have committed yourself to the sport of fishing, or as I like to call it, “watch the bobber”. Maybe it’s time for that Lord of the Rings Extended Edition marathon you’ve always dreamed about. You will need to be patient and level-headed.
Keep the numbers on the forefront of your mind when the going gets tough. High interest rates coupled with inflated home prices over the past few years has limited your buyer pool to the smallest it has been in years. Yes, the 72 million millennials are now in the buyers seat. But, they have a pretty steep mountain to climb in order to achieve the dream of owning a home.
When deciding to list your home, don’t solely focus on the net sheet and commission prices. Those aren’t going to be the numbers the rest of the world sees when they are scrolling past your home online. Instead, put yourself in the shoes of a young 28 year old couple that is still paying off school loans with an entry-mid level salary.
Do you think they’re going to be able to afford the mortgage that is now double the amount you’re currently paying?
It isn’t an unfair question to ask. It’s a different way of presenting the reality to sellers who want top dollar in a falling market. If you want top dollar, you will have to be patient and wait for the right buyer to come along. The alternative is to price aggressively and try to catch the falling knife. The choice is and always will be yours — just remember to check the data.