|
The U.S. Housing Market – A Decade After Disaster
By: Ryan Tracy, CFP®, Senior Consultant, The Wealth Office™
| |
| For many Americans the largest asset on their balance sheet is often their primary residence. That said, many may wonder what is the state of the U.S. housing market a decade after the Great Recession? Good news - the state of the Union is strong and prosperous!
So what’s driving the appreciation across the real estate market you might ask? Some would suggest the changing demographic of the country might be a factor. Today, more Americans approaching retirement age find themselves favoring warmer climates over cooler ones and choose states with more amenable fiscal and legislative policies (i.e. lower property taxes or those with zero income tax rates). However, an even stronger indicator of home value appreciation is job growth. For markets like Texas, where job creation has been nearly two and half times the Nation’s average since 2000, property values continue to rise and often times are well outpacing national norms1.
Though each geographical region has unique market characteristics, broadly speaking, home prices across the country are on the rise. According to the National Association of Realtors, the average equity appreciation over the last nine years is over $85,000 per homeowner; and for those who purchased at peak prices in 2005, total equity gain is north of $70,000.
As a result, the average selling price for a home in the U.S. is on an upward trajectory. As of June 2019 this average sat at $234,000. Conversely, the average listing price in the U.S. was $294,000. This could suggest the national housing landscape is a bifurcated market; one side being the ‘average’ homes in America and the opposite end being the ‘luxury’ real estate market.
| |
| As of: September 30, 2018. The House Price Index from FHFA.
According to Zillow Research, the luxury U.S. real estate market (defined as the top five percent of transactions based on sales price) rose by 5.1 percent in 2017. When compared to the broader housing market, which was up over 6.9 percent for the same period, it appears the luxury market is more tortoise and less hare. Also important is the fact that these same luxury homes took more than five percent longer to sell with an average of 116 days (or nearly four months) on the market.
Also interesting to note is as prices rose in 2017 for luxury properties, more and more properties came to market. This resulted in inventory levels for luxury properties rising by 3.4 percent compared to the year before.
The table below provides a list of the most expensive luxury markets:
| |
| Source: Realtor.com®, www.realtor.com/research/luxury-homes-market-year-review-2017/. December 31, 2016 – December 31, 2017.
Interestingly enough, technology focused metro areas who are often major job creators like Southern California and the Pacific Northwest, (Greater Seattle, Greater Tacoma and even Portland) continue to account for a larger portion of the luxury real estate market space today. Other notable mentions are the state of Hawaii and the ski-centric county of Eagle, Colorado (home to many world class ski resorts).
| |
|
Whether you’re contemplating selling your home or purchasing the next one, below lists several considerations before pressing forward.
Sellers
• Call a local realtor - Many sellers believe they need to make ‘upgrades’ to their home in advance of bringing the property to market. Before spending money on repairs or making significant changes, contact a local agent who knows your market well. You might be surprised by (1) how ‘hot’ your markets is and (2) the often limited value added from completing unnecessary repairs.
• Work with a professional photographer - Whether you choose to work with a real estate broker or not, be sure to hire a professional photographer to take pictures of your home. In today’s age where everything is online, your goal should be to drive as much traffic as possible to your property. The end goal is to get your home sold. Make sure to show your property in the best light possible especially with your digital, social and e-presence.
• Hire an Attorney - Candidly, we believe it just doesn’t pay to be a ‘do-it-yourselfer’. There are several nuances and multiple parties involved in the transaction(s). For those reasons alone (and for many others) have a dedicated team member to represent your interest and get you across the finish line.
Buyers
• Hire an Attorney - For the same reasons listed above, hire an Attorney to represent you. Too often, it’s not what you know that saves you in a real estate transactions, but instead it’s what you don’t know that can get you into trouble.
• Employ a licensed home inspector - While it seems like everybody has the proverbial ‘uncle’ who can fix anything or tell us what’s wrong, it’s pretty challenging to be a master of all traits. Take the time to employ a licensed home inspector to walk through the property with you. While no home is perfect, it’s great to have a written report of all items, issue or defects regarding your potential new property.
• Financing via Margin Capability - For those contemplating financing options as well as those looking to liquidate an investment portfolio and potentially pay cash, take the time to look at your margin capabilities. Often times this can be both a cost effective and tax efficient financing mechanism for your next purchase.
While not guaranteed, equity positions for homeowners continue to rise. This is true for both the average home in United States as well as the luxury market place. For those thinking of selling their current home or purchasing a new one, take the time to meet with a team of professionals that can best help you during your transactions.
Should you have any questions about your individual situation or financing options, please be sure to reach out to any of the consultants here at DiMeo Schneider & Associates, L.L.C.
| |
| 1National Association of Realtors. Housing and Economic Outlook. May 16, 2019.
| |
| While this article addresses generally held investment philosophies of DiMeo Schneider & Associates, L.L.C., it does not represent a specific investment recommendation for any individual client or prospective client. Please consult with your advisor, attorney and accountant, as appropriate, regarding specific advice. Information has been obtained from a variety of sources believed to be reliable but not independently verified. Past performance does not indicate future performance.
This report is intended for the exclusive use of clients or prospective clients of DiMeo Schneider & Associates, L.L.C. Content is privileged and confidential. Any dissemination or distribution is strictly prohibited.
| |
|
|
