We're bombarded by information about the US housing market, both good news and bad. The challenge for most homeowners is figuring out what information is real, what is applicable to your local community and how it affects you personally. Many homeowners have accepted that selling their home in today's economic environment doesn't make sense. The question is how will you know when the market changes and you can pursue selling your home.
My sister, a new fairly new realtor in Maine, asked me to join her at a planning workshop taught by Alan Reed Rice, operating partner of Keller Williams Realty in Bedford, NH. While I've got lots of homeowner experience buying and selling homes, it was invaluable meeting and learning with more than 50 folks involved in real estate. What I learned are the 5 statistics every US homeowners can use to monitor the real estate market where they live.
These are statistics anyone can understand as I'm a homeowner, just like you. Rather than letting you guess why I think these statistics are important, let me jump to the most amazing statistic (#5 in the list below). With lower home prices and lower interest rates, home ownership is much more affordable. In 2007, homeowners spent 38% of their (median) household income to cover their mortgage (principal and interest only). In 2011, homeowners are only paying 14% of their household's income for a mortgage!
Home Sales Volume: Increasing or Decreasing?
The volume of home sales has stabilized over the last 3 years (2008 to 2010). The spike in housing sales has flattened out and annual sales over the last 3 years averaged 5 million units. That's slightly less than the 5.2 million in annual sales before the housing bubble started in 2002.
Home Prices: Moving Up or Down?
Home prices are stabilizing for the first time since 2006. In 2010 we had buyer incentives and the median home price increased slightly to 0.3%. Foreclosure sales are down which is good for everyone as these homes sell for an average 28% discount.
Market Inventory: Growing or Declining?
Housing inventory is dropping steadily. Yes, I'm wondering how much hidden inventory the banks have and recognize they're also focused on timing their activity so they don't flood the market. You're probably more familiar with these terms and 2010 nationally was at 10%.
- Buyer's market – where the number of months required to sell inventory exceeds 6 months, which is the situation we've had since 2006.
- Seller's market – where housing inventory is less than 6 months, i.e. if no additional houses were put on the market, all inventory would be sold within 3, 4 or 5 months.
Mortgage Rates: Going Up or Down?
Mortgage rates are at historical lows. If you're thinking of refinancing your home and have enough equity, start the process now. Your perspective depends on the mortgage rates you've had. My first mortgage was 8.5% and a few years later, I watched my second, variable mortgage climb to double digits and that was scary.
Home ownership is more affordable than 30 years ago. In 1981, the average family spent 36% of household income to pay their mortgage (principal and interest). Today mortgage costs average 14%, a historical low although total housing costs still takes the biggest piece of the family budget according to Oprah.com, 35% when you include mortgage or rent, repairs, taxes, utilities and insurance.
More amazing is how US housing remains far more affordable compared to other countries, according to the 7th Annual Demographia International Affordability Survey for 2011.