Today’s Real Estate Market: The ‘Unicorns’ Have Galloped Off
In a normal home market, comparing real estate indicators from one year to the next can be difficult. This is related to market volatility, which makes the comparison less useful or accurate. Unexpected events can have a substantial impact on the circumstances and outcomes under consideration.
It's virtually pointless to compare this year's numbers to the two 'unicorn' years we've recently had. This is the less prevalent definition of 'unicorn,' according to the dictionary:
“Something that is greatly desired but difficult or impossible to find.”
Over the previous two years, the epidemic has had a significant impact on real estate. The need for our own home rose, and many required a home office and a large backyard.
▪ Waves of first-time and second-home buyers entered the market.
▪ Already low mortgage rates were driven to historic lows.
▪ The forbearance plan all but eliminated foreclosures.
▪ Home values reached appreciation levels never seen before.
It was a market that had always been "greatly desired but difficult or impossible to find." It was a 'unicorn' year.
Things are returning to normal now. The 'unicorns' have bolted.
It makes little sense to compare today's market to earlier years. Here are three instances:
According to the news, there aren't any buyers out there. In the United States, we continue to sell nearly 10,000 residences per day. Of course, buyer demand has decreased since the two 'unicorn' years. However, when we compare it to regular years (2017-2019), we can observe that buyer activity is still significant (see graph below):
We can't compare today's price hikes to those of the previous several years. According to Freddie Mac, the years 2020 and 2021 will have historic appreciation rates. Here is a graph that also includes the more normal years (2017-2019):
We can observe that home value rises are returning to more normal levels. Several months of modest depreciation occurred in the second half of 2022. However, Fannie Mae reports that the market has reverted to more typical growth in the first quarter of this year.
The percentage rise in foreclosure files has already made for some shocking headlines. Naturally, the percentages will rise. They are increases in previously low foreclosure rates. Here is a graph based on data from ATTOM, a property data provider:
With the termination of the foreclosure moratorium, there will be an increase over the previous three years. Every year, homeowners lose their homes to foreclosure, which is tragic for those families. When we put the present figures into context, we can see that we're actually returning to the usual filings from 2017 to 2019.
This year's housing market will generate a lot of uncomfortable news. The majority will result from unfair comparisons to the 'unicorn' years. A real estate professional can assist you in keeping everything in an appropriate perspective.
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