Navigating the Shifting Tides of Today's Real Estate Market

In a typical housing market, comparing real estate metrics between different years can pose challenges. This is primarily because the market's fluctuating nature can undermine the meaningfulness and accuracy of such comparisons. Unforeseen events can greatly influence the conditions and results being evaluated, further complicating the task.

Drawing comparisons between the figures of this year and the two remarkable years we recently encountered would yield little value. In this context, "unicorn" refers to the less frequent interpretation of the term:

“Something that is greatly desired but difficult or impossible to find.”?

Over the past few years, the real estate landscape underwent a profound transformation due to the pandemic. There was an unprecedented surge in the desire for personal homeownership, driven by the increased need for a home office space and spacious backyards.

• Waves of first-time and second-home buyers entered the market.
• Already low mortgage rates were driven to historic lows.?
• The forbearance plan all but eliminated foreclosures.
• Home values reached appreciation levels never seen before.

It was a market that forever had been “greatly desired but difficult or impossible to find.”?A ‘unicorn’ year.

Now, things are getting back to normal. The ‘unicorns’ have galloped off.?

Comparing today’s market to those years makes no sense. Here are three examples:?

Buyer Demand?

Despite the headlines suggesting a scarcity of buyers, the reality is that over 10,000 houses are still being sold each day in the United States. While it's true that buyer demand has decreased compared to the exceptional years, often referred to as 'unicorn' years, when we compare it to the more typical years of 2017-2019, data from?ShowingTime?reveals that buyer activity remains robust (refer to the graph below).

Home Prices

It is not appropriate to compare the current surge in home prices with the increases witnessed in the past couple of years. Historical data from?Freddie Mac?indicates that both 2020 and 2021 recorded unprecedented levels of appreciation. For a better perspective, refer to the graph below, which also includes data from the relatively more typical years of 2017-2019.

It is evident that home value increases are gradually reverting to a more customary pattern. During the latter half of 2022, there were several months marked by minimal depreciation. However, recent data from?Fannie Mae?indicates that the market has returned to a more typical rate of appreciation in the first quarter of this year.

Foreclosures?

Notably, there have been alarming headlines highlighting the significant percentage increases in foreclosure filings. However, it's important to consider that these percentages reflect rises from historically low foreclosure rates. To provide a more comprehensive perspective, refer to the graph below, which presents data from?ATTOM, a property data provider.

With the expiration of the foreclosure moratorium, it is expected that there will be a?rise?in foreclosure numbers compared to the figures of the past three years. It is truly disheartening for the families who experience the loss of their homes through foreclosure each year. However, when we contextualize the current data, we come to the realization that we are actually returning to the typical levels of filings observed during the years 2017-2019.

Bottom Line

This year, the housing market is expected to generate a plethora of disconcerting headlines. Many of these headlines will stem from inappropriate comparisons to the exceptional 'unicorn' years. To maintain a proper perspective amidst the noise, it is highly recommended to seek guidance from a knowledgeable real estate professional who can serve as a valuable resource.