Is it Time to Sell Your Vacation Home?
The travel industry is one of the major sectors that’s been hit extremely hard by the COVID-19 pandemic. Today, it’s hard to know how long it will take for summer travelers to be back in action and for the industry to fully recover. Homeowners who rent their secondary properties on their own or through programs like Airbnb, which has over 660,000 listings in the U.S. alone, have been impacted in this challenging time. Some of these homeowners are considering selling their vacation homes, and understandably so.
A recent CNN article indicated:
“With global travel screeching to a halt during the pandemic, a number of Airbnb hosts are planning to sell their properties…These desperate moves come as hosts face the possibility of losing thousands of dollars a month in canceled bookings while bills, maintenance costs, and mortgage payments pile up.”
If you’re one of the property owners in this position, you too may be feeling the pain of decreased travel, especially as we prepare for the typical busy summer vacation season. A recent survey notes that 48% of Americans have already canceled summer travel plans due to the current health crisis. In addition, 36% indicated they don’t have vacation plans, and only 16% said they did not cancel their summer travel.
The same survey also asked, “How long will you wait before traveling again?” Not surprisingly, only 29% of respondents are planning to travel within the next 6 months. That means 71% are putting their plans on hold for at least 6 months, or are still unsure about future travel. That can continue to add to the significant income loss that many property renters felt this spring.If you’re considering selling your rental property, know that there are two key factors indicating that selling your vacation home now may be your best move as a homeowner.
1. Inventory Shortage
The inventory of overall homes for sale is well below the demand from potential buyers, so many eyes may be searching for a home like yours. According to the National Association of Realtors (NAR), total housing inventory, meaning homes available to purchase, is down 19.7% from one year ago (see graph below):Inventory across the country continues to be a challenge, with only a 4.1-month supply of listings available at the current sales pace. For a balanced market, where there are enough homes available for interested buyers to purchase, that number would need to bump up to a 6-month supply. This means we don’t have enough inventory for the number of buyers looking for homes, so selling in this scenario is ideal. Buyers are looking now, and some vacation homes make a great primary residence or second home for those eager to escape from more populated urban areas.
2. Home Prices
The lack of inventory is also keeping homes from depreciating in value. Today, prices are holding strong and experts forecast home price appreciation to continue throughout this year. Selling your home while prices are holding steady is a sound business move. You’ll likely have equity you’ve earned working for you as well. If your home has been vacant for the past few months, the forced savings you have built in your equity may help balance out possible rental income loss due to the slowdown in the travel industry.
We don’t know exactly when heightened summer travel will return or what it will look like when it does. If you’re considering selling your vacation home, let’s connect today to determine your options in the current market.
Home Prices: It’s All About Supply and Demand
As we enter the summer months and work through the challenges associated with the current health crisis, many are wondering what impact the economic slowdown will have on home prices. Looking at the big picture, supply and demand will give us the clearest idea of what’s to come.
Making our way through the month of June and entering the second half of the year, we face an undersupply of homes on the market. Keep in mind, this undersupply is going to vary by location and by price point. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. Historically, 6 months of supply is considered a balanced market. Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Robert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:
“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”
Given the undersupply of homes on the market today, there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process. According to a recent MarketWatch article:
“As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.”
In addition, experts forecasting home prices have updated their projections given the impact of the pandemic. The major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.
Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale.
The Benefits of Homeownership May Reach Further Than You Think
More than ever, our homes have become an integral part of our lives. Today they are much more than the houses we live in. They’re evolving into our workplaces, schools for our children, and safe havens that provide shelter, stability, and protection for our families through the evolving health crisis. Today, 65.3% of Americans are able to call their homes their own, a rate that has risen to its highest point in 8 years.
June is National Homeownership Month, and it’s a great time to reflect on the benefits of owning your own home. Below are some highlights and quotes recently shared by the National Association of Realtors (NAR). From non-financial to financial, and even including how owning a home benefits your local economy, these items may give you reason to think homeownership stretches well beyond a sound dollars and cents investment alone.
Owning a home brings families a sense of happiness, satisfaction, and pride.
- Pride of Ownership: It feels good to have a place that’s truly your own, especially since you can customize it to your liking. “The personal satisfaction and sense of accomplishment achieved through homeownership can enhance psychological health, happiness and well-being for homeowners and those around them.”
- Property Maintenance and Improvement: Your home is your stake in the community, and a way to give back by driving value into your neighborhood.
- Civic Participation: Homeownership creates stability, a sense of community, and increases civic engagement. It’s a way to add to the strength of your local area.
Buying a home is also an investment in your family’s financial future.
- Net Worth: Homeownership builds your family’s net worth. “The median family net worth for all homeowners ($231,400) increased by nearly 15% since 2013, while net worth ($5,000) actually declined by approximately 9% since 2013 for renter families.”
- Financial Security: Equity, appreciation, and predictable monthly housing expenses are huge financial benefits of homeownership. Homeownership is truly the best way to improve your long-term net worth.
Homeownership is even a local economic driver.
- Housing-Related Spending: An economic force throughout our nation, housing-related expenses accounted for more than one-sixth of the country’s economic activity over the past three decades.
- GDP Growth: Homeownership also helps drive GDP growth as the country aims to make an economic rebound. “Every 10% increase in total housing market wealth would translate to approximately $147 billion in additional consumer spending, or 0.8% of GDP, as well as billions of dollars in new federal tax revenue.”
- Entrepreneurship: Homeownership is even a form of forced savings that provides entrepreneurial opportunities as well. “Owning a home enables new entrepreneurs to obtain access to credit to start or expand a business and generate new jobs by using their home as collateral for small business loans.”
The benefits of homeownership are vast and go well beyond the surface level. Homeownership is truly a way to build financial freedom, find greater satisfaction and happiness, and make a substantial impact on your local economy. If owning a home is part of your dream, let’s connect today so you can begin the homebuying process.
Economists Forecast Recovery to Begin in the Second Half of 2020
With the U.S. economy on everyone’s minds right now, questions about the country’s financial outlook continue to come up daily. The one that seems to keep rising to the top is: when will the economy begin to recover? While no one knows exactly how a rebound will play out, expert economists around the country are becoming more aligned on when the recovery will begin.
According to the latest Wall Street Journal Economic Forecasting Survey, which polls more than 60 economists on a monthly basis, 85.3% believe a recovery will begin in the second half of 2020 (see graph below):There seems to be a growing consensus among these experts that the second half of this year will be the start of a turnaround in this country.
Chris Hyzy, Chief Investment Officer for Merrill notes:
“We fully expect the economy could begin to pick up in late June and July with a strong recovery in the fourth quarter.”
In addition, five of the major financial institutions are also forecasting positive GDP in the second half of the year. Today, four of the five expect a recovery to begin in the third quarter of 2020, and all five agree a recovery should start by the fourth quarter (see graph below):
The vast majority of economists, analysts, and financial institutions are in unison, indicating an economic recovery should begin in the second half of 2020. Agreement among these leading experts is stronger than ever.
Why This Summer Is the 2020 Real Estate Season
With stay-at-home orders starting to gradually lift throughout parts of the country, data indicates homebuyers are jumping back into the market. After many families put their plans on hold due to the COVID-19 pandemic, what we once called the busy spring real estate season is shifting into the summer. In 2020, summer is the new spring for real estate.
Joel Kan, Economist at The Mortgage Bankers Association (MBA) notes:
“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks…Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”
Additionally, according to Google Trends, which scores search terms online, searches for real estate increased from 68 points the week of March 15th to 92 points last week. As we can see, more potential homebuyers are looking for homes virtually.
What’s the Opportunity for Buyers?
Another reason buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is historically low mortgage rates. Sam Khater, Chief Economist at Freddie Mac indicates:
“For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, giving potential buyers a good reason to continue shopping even amid the pandemic…As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago.”
With mortgage rates at such low levels and states gradually beginning to reopen, there’s more incentive than ever to buy a home this summer.
What’s the Opportunity for Sellers?
Finding a home to buy, however, is still a challenge, as this spring sellers removed many listings from the market. Though more people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level.
According to last week’s Weekly Economic and Housing Market Update from realtor.com:
“Weekly Housing Inventory showed continued tightening. New Listings declined 28% compared with a year ago, as sellers grappled with uncertainty and hesitated bringing homes to market. Total Listings dropped 20% YoY, a faster rate than in prior weeks, leaving very few homes available for sale. As Time on Market was 15 days slower YoY, asking prices moved up 1.5% YoY.”
If you’re thinking of selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this season may be the time for your house to stand out from the crowd. Trusted real estate professionals can help you list safely and effectively, keeping your family’s needs top of mind. Buyers are looking, and your house may be at the top of their list.
If you’re thinking of selling, many buyers may be eager to find a home just like yours. Let’s connect today to make sure you can get your house in on the action this summer.
Buying or Selling a Home? You Need an Expert Kind of Guide
In a normal housing market, whether you’re buying or selling a home, you need an experienced guide to help you navigate through the process. You need someone you can turn to who will tell you how to price your home correctly right from the start. You need someone who can help you determine what to offer on your dream home without paying too much or offending the seller with a low-ball offer.
We are, however, in anything but a normal market right now. We are amid one of the greatest health crises our nation has ever seen. The pandemic has had a dramatic impact on the journey consumers take to purchase or sell a home. To successfully navigate the landscape today, you need more than an experienced guide. You need a ‘Real Estate Sherpa.’
According to Lexico, a Sherpa is a “member of a Himalayan people living on the borders of Nepal and Tibet, renowned for their skill in mountaineering.” Sherpas are skilled in leading their parties through the extreme altitudes of the peaks and passes in the region – some of the most treacherous trails in the world. They take pride in their hardiness, expertise, and experience at very high altitudes.
They are much more than just guides.
This is much more than a normal real estate market.
Today, the average guide just won’t do. You need a Sherpa. You need an expert who understands how COVID-19 is impacting the thoughts and actions of the consumer (ex: virtual showings, proper safety protocols, e-signing documents). You need someone who can simply and effectively explain the changes in today’s process to you and your family. You need an expert who will guarantee you make the right decision, especially in these challenging times.
Hiring an agent who understands how the pandemic is reshaping the real estate processes is crucial right now. Let’s connect today to guarantee your journey is a safe and successful one.
We Remember & Honor Those Who Gave All
We remember, today and always.
Interest Rates Hover Near Historic All-Time Lows [INFOGRAPHIC]
- Mortgage interest rates have dropped considerably this spring and are hovering at a historically low level.
- Locking in at a low rate today could save you thousands of dollars over the lifetime of your home loan.
- Let’s connect to determine the best way to position yourself for a move in today’s market.