Real Estate Trends
Home prices have risen nationally three times faster than incomes since the turn of the century, which has made home ownership an impossibility for more Americans than ever before. This is a significant shift from the congruent price and income figures throughout the 1990s boom.
For the last few months, I’ve been running a stat showing how much above list price single-family homes were selling for in Dane County. As of last week, there had been 1,706 homes that had closed with an A/O date of 1/1/22 or later that had competing offers. As of today, there are 1,759 homes that now meet that criterion. The average list price of those homes was $422,885 and the average sold price was $456,260, meaning that properties in Dane County with competing offers this year are selling for an average of 7.9% over list price. If I look at properties in Madison only, there are 1,010 properties that meet the criteria. The average list price of those homes was $417,832 and the average sold price was $455,347, meaning that properties in Madison with competing offers this year are selling for an average of 9.0% over list price!
In large cities like Atlanta, Las Vegas, Denver, Houston, Tucson, and Charleston, S.C., home prices have outpaced income at an incredible rate. In Miami, for example, incomes have risen 16 percent, while home prices have increased 58 percent since early 1998. New York's Long Island suburbs have seen just a 14 percent rise in incomes as compared to an 81 percent increase in home prices. Boston home prices have gone up 89 percent, while incomes have increased only 22 percent.
The demand for homes in turn has slowed, which would point to an eventual slowing or reversal of the rampant price appreciation of the last decade until the market becomes affordable again.
Even with a downturn in the real estate market looming on the horizon, home sales are still headed for another record year, and low-interest rates alone could prop up the market as long as they last.
Mortgage delinquencies are near their highest level in ten years, and 1.23 percent of mortgages are in the foreclosure process, a new record. Market observers say it's only a matter of time before lenders pull back further. Many lenders are tightening credit standards for high-risk borrowers as a result.
The first sector to show slowing is the high-end home market. Because of “over personalized” big-ticket properties, the pace of house auctions nationwide has surged. Overall, 2001 auction sales were up 30 percent since the mid-1990s to a record $54.5 billion, according to Bloomington, Ind., research firm the Gwent Group.
Low-interest rates are the only continuing positive trend in the housing market. Low rates average now less than 6 percent for 30-year fixed-rate loans, the lowest since the 1960s. Prices could take a major turn if rates begin to go up again.
Real-estate analysts believe that if the housing market stalls, some areas will continue to grow modestly while other markets gradually go soft, rather than pop. That's because, unlike stockholders, homeowners don't normally panic when trouble strikes, and a house is a tangible asset that provides a place to live.
Even so, there hasn’t been as long a period of falling home prices around the country since the Great Depression.
And a super fun fact: 50.1% of all accepted offers since 6/1/22 in Dane County had competing offers. Alternative headline: 49.9% of all accepted offers in Dane County did not have competing offers! When I look at accepted offers since 1/1/22, the numbers change just slightly. 55.3% of accepted offers since 1/1/22 had competing offers, while 44.7% did not.