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WHY TODAY’S HOUSING MARKET ISN’T HEADED FOR A CRASH

Why Today’s Housing Market Isn’t Headed for a Crash

Why Today’s Housing Market Isn’t Headed for a Crash | MyKCM

CONCLUSIONS

  • 67% of Americans say a housing market crash is imminent in the next three years. With all the talk in the media lately about shifts in the housing market, it makes sense why so many people feel this way.
  • But I disagree.  Current data shows today’s market is nothing like it was before the housing crash in 2008.
  • Especially with regards to mortgage lending standards

Back Then, Mortgage Standards Were Less Strict

During the lead-up to the housing crisis, it was much easier to get a home loan than it is today. Fannie Mae the Government Sponsored Entity (and to a lesser degree, Freddy Mac) created artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance an existing one. Shocking to realize that this was done at the direction of our federal government in a misguided attempt to increase home ownership

As a result,  much greater risk was not only tolerated but encouraged,  in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices. Today, things are different, and purchasers face much higher standards from Fannie and Freddy.

The graph below uses data from the Mortgage Bankers Association (MBA) to help tell this story. In this index, the higher the number, the easier it is to get a mortgage. The lower the number, the harder it is.

This graph also shows just how different things are today compared to the spike in credit availability leading up to the crash. Tighter lending standards have helped prevent a situation that could lead to a wave of foreclosures like the last time.

Foreclosure Volume Has Declined a Lot Since the Crash

Another difference is the number of homeowners that were facing foreclosure when the housing bubble burst. Foreclosure activity has been lower since the crash, largely because buyers today are more qualified and less likely to default on their loans. The graph below uses data from ATTOM to show the difference between last time and now:

So even as foreclosures tick up, the total number is still very low. And on top of that, most experts don’t expect foreclosures to go up drastically like they did following the crash in 2008. Bill McBride, Founder of Calculated Risk, explains the impact a large increase in foreclosures had on home prices back then – and how that’s unlikely this time.

“The bottom line is there will be an increase in foreclosures over the next year (from record level lows), but there will not be a huge wave of distressed sales as happened following the housing bubble. The distressed sales during the housing bust led to cascading price declines, and that will not happen this time.”

The Supply of Homes for Sale Today Is More Limited

For historical context, there were too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Supply has increased since the start of this year, but there’s still a shortage of inventory available overall, primarily due to years of underbuilding homes.

The graph below uses data from the National Association of Realtors (NAR) to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just 2.7-months’ supply at the current sales pace, which is significantly lower than the last time. There just isn’t enough inventory on the market for home prices to come crashing down like they did last time, even though some overheated markets may experience slight declines.

Bottom Line

As shown above, housing supply increased dramatically during the 2006 through 2011. That was because investors thought the golden goose would continue laying eggs indefinitely and they kept building more and more houses on speculation. That all came crashing down in 2008 and almost bankrupted the country.

If recent headlines have you worried we’re headed for another housing crash, the data above should help ease those fears. Expert insights and the most current data clearly show that today’s market is nothing like it was last time.

RECOMMENDATIONS FOR YOU

  • It’s also important to remember that every local market is different. That’s why it’s essential to lean on an expert for the latest information on the market in your area if you’re planning to make a move this spring.
  • To get a quick update of what is new in real estate, click here to check out our new videos.
  • Interested in what recent clients think of my service? Click here to read what they say. 
  • Interested to know what your house is worth? Click here to get the most extensive and accurate estimate of home value that is available on the Internet. No cost or obligation of course.
  • No doubt, the housing market is shifting, and it can be a confusing place right now. I suggest that we connect so that I can help you make confident and informed decisions about what’s happening. Minimize the fear or uncertainty that could change your plans. If you’re unsure about how to make sense of what’s going on in today’s housing market, text or call me at 484-574-4088 or go to my web site, (johnherreid.com) and lets set up a time to meet, either on line or in person. I have the software so that we can meet virtually and make the best use of your time.
  • If you’re looking to make that move up buy this year, I believe now is a good time to do it. The best way to ensure you’re up to date on the latest market insights is to partner with a trusted real estate advisor. Let’s connect. I would like to interview for the job of becoming your trusted real estate advisor.
  • One of the biggest benefits of owning a home, regardless of your income level, is that it provides financial stability and an avenue to build wealth. Let’s connect to find out how much equity you have in your current home and how you can use it to fuel your next purchase.

Posted in: Forecast for 2023, House Price Bubble?, House Price Stability, Uncategorized

WHAT EVERY SELLER IN CHESTER COUNTY SHOULD KNOW ABOUT HOME PRICES

What Every Seller in chester county Should Know About Home Prices

What Every Seller Should Know About Home Prices | MyKCM

If you’re trying to decide whether or not to sell your house, recent headlines about home prices may be top of mind. And if those stories have you wondering what that means for your home’s value, here’s what you really need to know.

What’s Really Happening with Home Prices?

It’s possible you’ve seen news stories mentioning a drop in home values or home price depreciation, but it’s important to remember those headlines are designed to make a big impression in just a few words. But what headlines aren’t always great at is painting the full picture.

First, lets take a look at national trends in home price appreciation. While home prices are down slightly month-over-month in some markets, it’s also true that home values are up nationally on a year-over-year basis. The graph below uses the latest data from S&P Case-Shiller to help tell the story of what’s actually happening in the housing market today:

What Every Seller Should Know About Home Prices | MyKCM

As the graph shows, it’s true home price growth has moderated in recent months (shown in green) as buyer demand has pulled back in response to higher mortgage rates. This is what the headlines are drawing attention to today.

Like politics, all real estate is local. Lets take a look at the local price trends in Chester county.

CHESTER COUNTY, SINGLE      FAMILY HOMES
MEDIAN SALES PRICE FOR 2021 AND 2022
Month    Price    Price      % Change
    2021    2022
Jan $452,500 $484,900 7.2%
Feb $441,700 $510,000 15.5%
Mar $495,000 $526,821 6.4%
Apr $481,250 $545,000 13.2%
May $512,021 $531,055 3.7%
Jun $515,000 $600,000 16.5%
Jul $531,000 $575,000 8.3%
Aug $498,000 $550,000 10.4%
Sep $479,900 $537,500 12.0%
Oct $494,075 $549,500 11.2%
Nov $499,000 $545,000 9.2%
Dec $508,961 $500,000 -1.8%
Year $492,367 $537,898 9.2%

 

As you can see,  we in Chester County had robust year over year price growth in every month except December. I expect price growth to continue, but at a lower rate than the 9.2% we saw in 2022.

But what’s important to notice, on the national picture, is the bigger, longer-term picture. While home price growth is moderating month-over-month, the percent of appreciation year-over-year is still well above the home price change we saw during more normal years in the market.

The bars for January 2019 through mid-2020 show home price appreciation around 3-4% a year was more typical (see bars for January 2019 through mid-2020). But even the latest data for this year shows prices have still climbed by roughly 10% over last year. 3-4% a year is normal for home price changes in the United States.

What Does This Mean for Your Home’s Equity?

While you may not be able to capitalize on the 9+% appreciation we saw in 2022, we should still see price increases through 2023.

The big takeaway? Don’t let the headlines get in the way of your plans to sell. Over the past two years alone, you’ve likely gained a substantial amount of equity in your home as home prices climbed. Even though home price moderation will vary by market moving forward, you can still use the boost your equity got to help power your move.

As Mark Fleming, Chief Economist at First American, says:

“Potential home sellers gained significant amounts of equity over the pandemic, so even as affordability-constrained buyer demand spurs price declines in some markets, potential sellers are unlikely to lose all that they have gained.”

NEXT STEPS FOR YOU:

If you have questions about home prices or how much equity you have in your current home, let’s connect so you have an expert’s advice. And I would like to interview for the job of becoming your trusted real estate expert.

To get a quick update of what is new in real estate, click here to check out our new videos.

Interested in what recent clients think of my service? Click here to read what they say. 

Interested to know what your house is worth? Click here to get the most extensive and accurate estimate of home value that is available on the Internet. No cost or obligation of course.

No doubt, the housing market is shifting, and it can be a confusing place right now. I suggest that we connect so that I can help you make confident and informed decisions about what’s happening. Minimize the fear or uncertainty that could change your plans. If you’re unsure about how to make sense of what’s going on in today’s housing market, text or call me at 484-574-4088 or go to my web site, (johnherreid.com) and lets set up a time to meet, either on line or in person. I have the software so that we can meet virtually and make the best use of your time.

Posted in: Home Prices, House Price Bubble?, Uncategorized

WHAT IS GOING TO HAPPEN WITH HOUSING PRICES IN DELAWARE COUNTY?

WHAT IS GOING TO HAPPEN WITH HOUSING PRICES IN DELAWARE COUNTY?

CONFUSED ABOUT HOUSING PRICES IN dELAWARE COUNTY?  LET ME BE YOUR RESOURCE AND CLEAR AWAY THE CONFUSION!!!

L.Confused About What’s Going on in the Housing Market? Lean on a Professional. | MyKCM

 

If you’re thinking about buying or selling a home, you probably want to know what’s really happening with home prices, mortgage rates, housing supply, and more. That’s not an easy task considering how sensationalized headlines are today. Jay Thompson, Real Estate Industry Consultant, explains:

“Housing market headlines are everywhere. Many are quite sensational, ending with exclamation points or predicting impending doom for the industry. Clickbait, the sensationalizing of headlines and content, has been an issue since the dawn of the internet, and housing news is not immune to it.”

Unfortunately, when information in the media isn’t clear, it can generate a lot of fear and uncertainty in the market. As Jason Lewris, Cofounder and Chief Data Officer at Parcl, says:

“In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.”

But it doesn’t have to be that way. Buying or selling a home is a big decision, and it should be one you feel confident making. To help you separate fact from fiction and get the answers you need, lean on a local real estate advisor.

A trusted expert is your best resource to understand what’s happening at the national and local levels.  I would appreciate a chance to interview for the job as your trusted expert.  No cost or obligation of course. I will debunk the headlines using data you can trust. And I will  provide context so you know how current trends compare to the normal ebbs and flows in the industry, historical data and more.

Together, we will use all of that information to make the best possible decision for you.

Here are some of the data points that can help you to make your decision,

After all, making a move is a potentially life-changing milestone. It should be something you feel ready for and excited about. And that’s where I can come in.

BOTTOM LINE

Is now a good time to either buy or sell a single family detached house in Delaware county? My answer is yes.

Here are data points about the Delaware county market which explain why I feel that way.

Delaware County, PA
Median Sales Price, 2022
Month Sale Price
Jan $360,000
Feb $376,000
Mar $404,200
Apr $415,000
May $427,000
Jun $451,500
Jul $420,000
Aug $430,000
Sep $385,000
Oct $390,000
Nov $410,000
Dec $419,500

 

Recent price trends: Median sales price peaked at $451,500 in June. Since then prices are down to a median of $419,500 in December, decline of $32,000 or 7%. Cause for panic? Not in my opinion.  Sales prices typically peak in mid Summer when most buyers want to get their deals done before the kids go back to school. A typical decline from Juneish to Decemberish is about 5 to 10%.  This year follows that pattern.

Further, Year to date, median selling price is $410,000, up 5.1% from 2021 at $390,000. This compares very favorably with a long term trend of single family house appreciation in the United States for 3-4%.

Housing Inventory: Delaware county  inventory has been mostly between 2 and 4 months for the last two years. Below six months indicates there are more buyers than sellers which is bullish for prices.  December inventory was only 2 months. This is very bullish for prices.

Median Days on Market: This indicates how long it will probably take to get an acceptable offer on your house, once you get it on the market. 30 days is about right for a normal market. For the last two years it has been about 6-10 days. That indicates very high demand and that is bullish for prices. In December, it went up to 10 days which is still speedy and indicates high demand.

Active Listings; In December, 2021 there were 853 active listings for sale.  In December 2022, there were 379, a drop of 56%.  Not sure why this happened.

Number of Sales: December 2022 we had 222 sales, compared to 345 in December 2021. That is a drop of 36% and indicates a much slower market.

Sales Price as a % of Original Price: For the last two years, most sales prices have been above the asking price. Median ratio was 100% or higher.  In December, that dipped below 100% for the first time since at least 2020. Ratio was 98.4% which still indicates a strong buyer demand.

Why is this a good time to buy? A cross section of the key market variables tells me that price increases will still happen, but they are slowing down. That gives buyers a little more leverage.

Why is this a good time to sell? If you are needing a bigger house in a different area, I think you can still be confident that prices will continue to increase, but at a slower rate. This is not 2008 and chances of losing a lot of your equity are very small.

NEXT STEPS FOR YOU:

To get a quick update of what is new in real estate, click here to check out our new videos.

Interested in what recent clients think of my service? Click here to read what they say. 

Interested to know what your house is worth? Click here to get the most extensive and accurate estimate of home value that is available on the Internet. No cost or obligation of course.

No doubt, the housing market is shifting, and it can be a confusing place right now. I suggest that we connect so that I can help you make confident and informed decisions about what’s happening. Minimize the fear or uncertainty that could change your plans. If you’re unsure about how to make sense of what’s going on in today’s housing market, text or call me at 484-574-4088 or go to my web site, (johnherreid.com) and lets set up a time to meet, either on line or in person. I have the software so that we can meet virtually and make the best use of your time.

Posted in: Build Wealth, Uncategorized

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Each office is independently owned and operated. Keller Williams Realty, Inc. is an Equal Opportunity Employer and supports the Fair Housing Act.

John Herreid
204 Plush Mill Road
Wallingford, PA 19086

484-574-4088