Are Home Prices Going Up or Down?
Media coverage about what’s happening with home prices can be confusing. A large part of that is due to the type of data being used and what they’re choosing to draw attention to. For home prices, there are two different methods used to compare home prices over different time periods: year-over-year (Y-O-Y) and month-over-month (M-O-M). Here's an explanation of each.
Year-over-Year (Y-O-Y):
This comparison measures the change in home prices from the same month or quarter in the previous year.For example, if you're comparing Y-O-Y home prices for April 2023, you would compare them to the home prices for April 2022.
Y-O-Y comparisons focus on changes over a one-year period, providing a more comprehensive view of long-term trends. They are usually useful for evaluating annual growth rates and determining if the market is generally appreciating or depreciating.
Month-over-Month (M-O-M):
This comparison measures the change in home prices from one month to the next. For instance, if you're comparing M-O-M home prices for April 2023, you would compare them to the home prices for March 2023.
Meanwhile, M-O-M comparisons analyze changes within a single month, giving a more immediate snapshot of short-term movements and price fluctuations. They are often used to track immediate shifts in demand and supply, seasonal trends, or the impact of specific events on the housing market.
The key difference between Y-O-Y and M-O-M comparisons lies in the time frame being assessed. Both approaches have their own merits and serve different purposes depending on the specific analysis required.
Why Is This Distinction So Important Right Now?
We’re about to enter a few months when home prices could possibly be lower than they were the same month last year. April, May, and June of 2022 were three of the best months for home prices in the history of the American housing market. Those same months this year might not measure up. That means, the Y-O-Y comparison will probably show values are depreciating. The numbers for April seem to suggest that’s what we’ll see in the months ahead (see graph below):
That’ll generate troubling headlines that say home values are falling, and that’s accurate on a Y-O-Y basis. But, those headlines will lead many consumers to believe that home values are currently cascading downward.
However, on a closer look at M-O-M home prices, we can see prices have actually been appreciating for the last several months. Those M-O-M numbers more accurately reflect what’s truly happening with home values: after several months of depreciation, it appears we’ve hit bottom and are bouncing back.
Here’s an example of M-O-M home price movements for the last 16 months from the CoreLogic Home Price Insights report (see graph below):
Why Does This Matter to You?
So, if you’re hearing negative headlines about home prices, remember they may not be painting the full picture. For the next few months, we’ll be comparing prices to last year’s record peak, and that may make the Y-O-Y comparison feel more negative. But, if we look at the more immediate, M-O-M trends, we can see home prices may actually be on the way back up.
Bottom Line
If you have questions about what’s happening locally or how this impacts your home’s price, please don’t hesitate to reach out!
Real Estate Market Report: March 2022
March is officially behind us so it’s time for our monthly check-in on the Massachusetts real estate market. Today we’ll discuss the implications of the total residential inventory across the state as well as the median home price.
TOTAL RESIDENTIAL INVENTORY
STATEWIDE INVENTORY
Single-family, condo & multi-family listings
Mar 2019: 13,482 listings
Feb 2022: 3,927 listings
Mar 2022: 4,470 listings
Compared to last year, inventory is still very low. In fact, inventory is 66.8% lower than it was in March in 2019 (pre-COVID times). That’s a whopping 9,012 homes.
On the bright side, month-over-month inventory is starting to come back. There are 543 more homes on the market this month bringing the total to 4,470. That’s a 13.8% increase from February. Still, we have a long ways to go to satisfy current demand.
MEDIAN HOME PRICE
STATEWIDE Median Home Price
Single-family, condo & multi-family listings
Mar 2019: $519,000
Feb 2022: $689,900
Mar 2022: $699,900
As you’re probably aware, home values are quite high right now… The median home price across the state has increased by $180,900 since March of 2019.
This 34.8% increase was due to a variety of factors, most notably the sharp decrease in both interest rates and home inventory.
Historically, home values nationwide appreciate about 3% a year. In Massachusetts, from March 2010 to March 2019, home values rose by about 58% or roughly 6% per year. Compare that to the 11.6% annual appreciation that we are currently seeing and it is obvious that home values are quite a bit ahead of where they should be.
What does that mean for you?
Deciding to Buy Now
Updated April 2022
We get this question a lot, and our answer is always, “it depends.” First things first…
Yes, home prices are at historic highs.
More specifically, values today are about 3-4 years ahead of where they should be. Because of this rapid rise, many people would caution you to tread carefully. And we suggest the same. However, that does not mean that it is a bad time for you to buy. That entirely depends on your current situation in life.
Short Term vs Long Term
If you aim to live in your new home for a longer amount of time (at least 5-7+ years), then we don’t necessarily believe it’s a bad time to buy... Even after the crash of 2008, most values recovered within 5-7 years. So your time horizon is a crucial factor in this decision.
On the other side of the coin, if buying now could be a short term move, or if you are looking for an investment/flip, then you need to be very financially comfortable in order to absorb any potential downturns or cash flow interruptions.
Financial Outlook
In terms of your mortgage, with interest rates still near historic lows (even after the latest rate hike) locking into a fixed 30-year mortgage certainly isn’t a poor financial decision.
All of that being said, there is still a lot of economic uncertainty, so analyzing your budget and ensuring you have a healthy emergency fund is still, and always should be, very important.
Could there be a downturn in the future? Sure.
Do we know when or how severe it could be? Nope.
It could be next year or 10 years from now. No one truly knows and this is why the majority investors stay away from trying to time the market. And while your home is certainly an investment, it is also much more than that. So if now is the time in life where you feel that you need a home, then it’s not insane to consider buying right now.
Ultimately…
These are fairly basic answers to rather complicated questions. There’s a lot more nuance based on your individual circumstances. Therefore, if you’re considering buying, please reach out to us first. We’d love to help analyze your situation in order for you to make the best financial decision possible.
Real Estate Recap: 2020 in Review
2020 was an unusual year to say the least! When it comes to real estate, we are officially in the middle of one of the strongest seller’s markets we’ve seen in years. Let’s take a look at the stats to see what that meant for the market in 2020 and where it leaves us now.
Covid took an already competitive market and pushed it further than we could’ve ever imagined thanks to an increase in buyer demand and a decrease in inventory and interest rates. When the lockdown began, many listings were pulled off the market or delayed, all while everyone was spending more time in their homes than ever before. With no where to spend their money, many people started thinking about renovating their current home or perhaps upgrading to a new one. Add them on top of the already massive subset of buyers who were ready to buy their first house (even more so now that they felt trapped in their current living situation) and you end up with a historic amount of buyers waiting to enter the market.
Finally, restrictions eased up and homes started hitting the market, but there just weren’t enough to satisfy the demand. Homes were selling left and right, often for way over asking price as buyers found themselves in bidding wars for a place to live. Let’s take a look at some of 2020’s stats to see what that really meant for the housing market:
2020 Housing Market Stats
These stats focus on the towns we are most familiar with:
Attleboro, Canton, Easton, Foxboro, Franklin, Mansfield, Norfolk, N. Attleboro, Norton, Plainville, Sharon, Stoughton & Wrentham
Single-family Homes
2020
Total Homes Sold: 2877
Average Days on Market: 44
Average Sale Price: $522,390
Sale Price to List Price Ratio: 101%
2019
Total Homes Sold: 2824
Average Days on Market: 56
Average Sale Price: $485,910
Sale Price to List Price Ratio: 99%
Condos
2020
Total Condos Sold: 1001
Average Days on Market: 47
Average Sale Price: $348,956
Sale Price to List Price Ratio: 101%
2019
Total Condos Sold: 927
Average Days on Market: 56
Average Sale Price: $309,347
Sale Price to List Price Ratio: 100%
The stats are a little surprising! Anecdotally, it felt like there were far less homes on the market last year than in 2019, but that wasn’t true. There were actually more homes sold in 2020, they just were on the market less time with a majority of them selling after their first showings or open house.
Price-wise, Massachusetts already high real estate values went even higher. Single-family homes and condos both saw about a 10% jump in values! On top of that, the average sale was closing for 101% of the list price (asking price). There were a lot of happy sellers out there!
Where do we stand now?
The market is still strong in the seller’s favor. In fact, inventory is lower than before thanks it being mid-winter. If you’re thinking about selling, now is a great time to learn what your home is worth. But keep in mind, getting a lot of money for your house is only part of the equation. You need to consider where you will go from there. May we suggest: Should you sell in a seller’s market?
You deserve a better real estate experience.
Winning a Bidding War
So you’ve found a home you like, but the problem is other people like it too, and now you’re in the dreaded bidding war. How do you win? Well in all honesty, you can’t always win these, sometimes there’s just a bigger fish. What you can always do is increase your odds. We make sure that all of our buyers put their best foot forward when it comes to submitting and offer and here’s how we do it.
How do you win the bid?
Become the strongest buyer you can be! The best odds are to be a cash buyer that can accommodate the seller’s timing and waive your home inspection (we don’t suggest this last part but technically that would make you a very strong buyer).
That’s a little unrealistic, right? Although there are people who fit that bill, 95% of buyers aren’t able to this. So what can you realistically do? Let’s break down the keys aspects of a winning offer:
Price
The best price is not always the winner, but ensuring that you can afford to bid above asking price is key. You can also sweeten the pot by saying you will cover any difference in appraisal value in cash.
Deposits & Down Payment
A bigger Purchase & Sale deposit and a larger down payment typically indicates a more serious buyer and less potential of financing issues.
Timing
The seller is almost always going to go with the buyer that can be flexible and accommodate their timing.
Contingencies
This is where the real difference is made assuming all of the bids are close in price. Who is going to be the easiest buyer to work with?
Mortgage Contingency
If you need a mortgage, this isn’t something you can avoid so you need to minimize a seller’s concerns. Offering well above asking price is an easy first step. After that make sure your mortgage pre-approval is thorough. Have your lender go through as much of the underwriting process as possible ahead of time so that you can show the seller that there is nothing to worry about money-wise.
Home Sale Contingency
Needing to sell your home before you can buy is a tough predicament when there are a lot of buyers out there who have nothing to sell, but it’s not a deal breaker. In this scenario we want to get a solid buyer under contract on your place with a contingency that you need to find suitable housing in order to close. This way we can show the sellers of your potential new home that we have minimized the risks of your home sale contingency as much as possible.
The other option is to just sell your home in advance and go into temporary housing to remove this issue all together.
Home Inspection Contingencies
We never recommend that a client waive their home inspection, especially on older homes, but some people who are competent with home maintenance feel comfortable doing so, especially in condos or newer houses. We suggest that our buyers say that they will cover X amount in home repair costs. This shows that you don’t intend to nickel and dime on the cost, you only want to know what you are getting yourself in to and reserve the right to walk away should any major issues be found.
Bonus: A Personal Touch
Stand apart from others by being yourself. Write the sellers a personal letter that gives them an idea of who you are and why you find their home so special. Including a photo helps bring it all together. Some people even go as far as to record a short video clip of themselves instead of writing a letter.
Ultimately we want to put ourselves in the seller’s shoes and think about what concerns they will have and how can we minimize them. Last year, we proudly found all of our buyers homes no matter what their circumstances were, and we’re excited to do the same for you!