Real Estate Market Report for November… Three Sides to Every Story

In a group discussion about the drama that can take place among kids in a classroom, there was a 5th grade teacher who made the comment ‘it’s good to always remember there are three sides to every story’. Wait…what, don’t you mean two sides?

It sounds contrary to accepted wisdom, however in reality there are typically three sides (sometimes more) to many situations. Take two girls, for example, in the 5th grade teacher’s classroom, who have a disagreement. The teacher explained that you have the story from each girl’s point of view and somewhere in the middle you have the truth or reality. That’s the third side.

After thinking this through its very clear that these three sides happen all the time, with just about anything, from politics to what is going on in the real estate market.

With real estate, there’s the story from the media, which is often loaded with sensational headlines that capture peoples’ attention and draws them to believe the headline. Then there are the stories that are told based on peoples’ interpretation of news headlines, and then there is the reality of what is happening. ?

What are the ‘three sides’ of real estate today?

Many headlines surrounding the current housing market are doom and gloom… “Mortgage rates are sky high, prices are sky high, and there’s no inventory,” said Mark Zandi, the chief economist at Moody’s Analytics.?

People reading these headlines are rightfully shaken when a ‘Chief Economist’ tells them that the sky is falling and advising home buyers to beware. Many buyers have left the market and who can blame them. These potential buyers are obviously telling anyone they can about their understanding of the market and the stories grow from there.

Are mortgage rates sky high? Well, that depends on the angle of the story that is taken. Rates are high when compared to the previous year. However, the rest of the story is… interest rates today remain historically low. In the 1980s, 1990s, and 2000s and early 2010s interest rates were often above 7% and even close to 10%.

Also, interest rates have leveled off somewhat in the last month or so. On October 14th quoted rates for a 30-year mortgage were 7.125%. Less than a month later, on November 11th, the rates have declined to 6.25% (Source: Mortgage Investors group).

There is no questioning the fact that home prices have been “sky high”. In fact, during the three years from October 2019 to October 2022 average home prices in Davidson County increased by 66%. ?In January 2022 the average cost of a home in Davidson County was $572,319 and by July it had ballooned to $644,739.

What home buyers are seeing now is prices that have levelled off and, in some cases, going down. By the end of October, the average cost of a home in Davidson County dropped to $639,762, but this was still up 12% from the starting position in January of just over $570,000 (Source: Realtracs MLS).

Is now a buyer’s market?

It is beginning to look more like a buyers’ market. Home inventory remains lower than in a normal market, which typically keeps prices going up due to the lack of supply. However, inventory is increasing, and buyers are getting time to look, think, and decide about a home, as opposed to making an offer after a Facetime call, which was happening during the peak of the sellers’ cycle.

In March 2022, there was 1.0 month of home inventory and at the end of October there was 2.6 months, so it has improved dramatically during the year. A balanced market generally has 4-6 months inventory. To put this in perspective, it helps to make pre-covid comparisons to find out what was happening before the sellers’ market that no one has ever seen, began. In October of 2019 there were 3.7 months’ supply of homes to sell so the market is not too far from that place (Source: Realtracs MLS).

Source: MLS Realtracs

With homes on the market a little longer, home buyers are now in a much better position than before and unlike in the heated-up market, sellers are negotiating on just about any item. ?

Some people we advise are asking about a housing crash but there is no evidence that that will happen. In fact Mark Fleming, Chief Economist at?First American, advised recently “. . . don’t expect a housing bust like the mid-2000s, as lending standards in this housing cycle have been much tighter and homeowners have historically high levels of home equity, so?there likely won’t be a surge in foreclosures.”

To answer the question as to whether now is a good time is to buy real estate, it is wise to use history to guide the decision. Over time, homeownership has been a proven asset that helps build wealth and create financial security. According to the National Association of Realtors and the Federal Housing Finance Agency, over the last 30 years, considering all the recessions, wars, and other political and economic issues that have ravaged our country, the average nationwide home appreciation was still 290.2%. ?

Real estate today remains a solid investment and will continue to be an asset that builds wealth over time.?To steal a line from the immortal radio personality Paul Harvey who famously stated art the end of each broadcast.....and now you know the rest of the story.