Home Sales: A Pre-COVID and Recent Comparison
Let’s start by examining home sales data. Pre-COVID, approximately 5.5 million homes were sold annually. During the height of the market in 2021, sales surged to 6.12 million, fueled by intense competition and multiple offers on listings. However, in 2023, sales numbers dropped significantly to around 4 million homes. This decrease is attributed to the “Lock-In Effect,” where homeowners are reluctant to sell their properties due to the challenge of finding a replacement with a similar monthly payment.
The trend for 2024 appears to be following a similar trajectory, suggesting that home sales will remain under 4 million. This limited supply is a key factor preventing a significant drop in home prices.
Existing Home Sales: The Long View
When comparing annual existing home sales to historical data, 2023’s figures are the lowest since 1995, similar to the levels observed during the housing crash from 2008 to 2011. This contrasts sharply with the pre-2008 market, where inventory levels were excessively high, leading to longer selling times.
Currently, the scarcity of available homes is a significant issue. For instance, despite working with multiple active buyers, the limited number of properties to show remains a challenge.
The Role of International Buyers
International interest in U.S. real estate remains significant, although numbers have decreased. The top foreign buyers are from Canada, China, Mexico, India, and Colombia. Canadian investment groups, in particular, are notable for their presence in the American market. This competition can make it harder for domestic buyers to secure homes, potentially affecting affordability and access for local residents.
Population Growth and Housing Demand
Since 1995, the U.S. population has grown by 70 million people. This continued influx suggests robust demand for housing, supporting the long-term health of the real estate market. Unlike other countries, the U.S. is seeing a steady increase in its population, which is a positive indicator for the housing sector.
Foreclosure Rates: Current Trends
The rate of seriously delinquent mortgages provides insight into potential foreclosure trends. Currently, the delinquency rate is below 2%, which is comparable to early 2000s levels and much lower than the peak of 10% during the 2009 housing crisis. This low delinquency rate suggests that foreclosure rates are not expected to spike significantly in the near future.
Home Price Appreciation: A Post-Pandemic Perspective
Home prices have experienced notable appreciation since the onset of the pandemic. For example, states like Florida, Texas, and Idaho have seen substantial price increases, with some areas appreciating over 60%. This sharp rise in home values is partly due to the Federal Reserve’s policy of lowering interest rates to near zero during the pandemic, which spurred higher home prices.
Rent vs. Buy: Wealth Accumulation
The debate between renting and buying continues, but data suggests that owning a home remains a more effective way to build wealth. The gap between the net worth of homeowners and renters has widened, with homeowners accumulating significantly more wealth over time due to home appreciation and equity accumulation.
Median-Priced Home Affordability
Affording a median-priced home has become increasingly challenging. Pre-2020, you could manage with an annual income of $50,000 to $60,000. However, in 2024, you need to earn over $100,000 a year to afford the same median-priced home. This shift highlights the growing disparity between income levels and housing affordability.
Office Vacancy Rates and the Shift to Suburbs
Rising office vacancy rates are impacting downtown areas, particularly in cities like San Francisco and Portland. With many companies and individuals opting for suburban living, the downtown real estate market is struggling. This trend may continue as more people seek less stressful, more affordable living environments outside city centers.
Conclusion
In summary, the real estate market is navigating a complex landscape shaped by historical trends, current economic conditions, and shifting societal preferences. Despite challenges, the market shows resilience in several areas, with population growth and low delinquency rates providing a foundation for future stability.
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Disclaimer: The content in any of Shawn Yu (Shawn Realty) Youtube videos or this website shall not be construed as tax, legal, insurance, construction, engineering, health & safety, electrical, financial advice, or other & may be outdated or inaccurate. Shawn Yu/Shawn Realty is a licensed principal real estate broker/brokerage doing business in Oregon. To contact Shawn Realty for selling, buying investing in Oregon, please email shawn@shawn-realty.com or call 503-515-4499.
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