Understanding the Nuances of Home Price Reports: Looking Beyond the Median

The National Association of Realtors (NAR) is set to release its latest Existing Home Sales Report, which is expected to provide valuable insights into the housing market. However, interpreting the information accurately is crucial, especially when it comes to home prices. The NAR primarily relies on the median sales price, which may not paint a comprehensive picture of the market's health. This blog aims to delve deeper into the intricacies of using the median price as a gauge for home values and emphasize the importance of considering alternative metrics.   To comprehend why the median home price may not be ideal for evaluating home price appreciation, we turn to the Center for Real Estate Studies at Wichita State University. The median sale price represents the middle value of homes sold, indicating that half of the homes fetched a higher price while the other half sold for less. While this metric can serve as a good measure of the typical sale price, it falls short in reflecting accurate home price appreciation due to its susceptibility to the composition of homes that have been sold.   Consider a scenario where a higher number of lower-priced homes were recently sold. In such a case, the median sale price would decline, as the "middle" home now belongs to the lower-priced segment. However, this does not imply that any individual house has lost value. The real estate market relies on the affordability of monthly mortgage payments, which prompts buyers to opt for less expensive homes when mortgage rates increase. Consequently, an increased demand for "less-expensive" houses currently drives the decline in median prices.   Even the NAR, an organization that reports median prices, acknowledges the limitations of this data. NAR explains that changes in the composition of sales can distort median price data, reinforcing the idea that the median alone may not provide a complete picture of the housing market.   To illustrate this concept, let's consider a simple example using coins. Imagine you have three coins in your pocket: one nickel and two dimes. When arranged in ascending order, the median value (the middle coin) would be ten cents. Now, if you were to replace one dime with two nickels, the median value would become five cents. However, the value of each individual coin—five cents for a nickel and ten cents for a dime—remains unchanged. Similarly, in today's real estate market, the decline in the median price doesn't indicate a loss of value for any specific property.   While the NAR's upcoming release of the median sales price is noteworthy, it is crucial to recognize the limitations of this metric when assessing home values. Instead, a comprehensive understanding of home price movements requires considering alternative indices, such as repeat sales prices. By reaching out to a local real estate professional, individuals can gain a more in-depth perspective on the dynamics of their specific market.   It is imperative that we look beyond the headline figures and dig deeper into the underlying factors influencing median prices. By doing so, we can gain a more accurate assessment of the current state of the real estate market and make informed decisions based on reliable data.

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5 Reasons Millennials Are Buying Homes

As a member of the millennial generation in the United States, you are among 72 million individuals who may be considering homeownership. According to Zonda's 6th annual millennial survey, 98% of millennials aspire to become homeowners at some point, if they aren't already. What motivates this desire to purchase a home? Let's take a closer look at the top reasons that other millennials have cited for making this important decision.   #1 Building Equity One key factor is building equity. By owning a home, you are investing in a long-term asset that can increase your net worth and financial stability over time. Additionally, renting a property means building equity for someone else, while owning a home allows you to build equity for yourself.   #2 Changing in Lifestyle  Another common reason is a change in life stage. As a millennial, you may be reaching a point where you need more space or a different location. Perhaps you are starting a family or looking for a larger home to accommodate your lifestyle needs.   #3 Settling Down Stability and settling down are other factors that often lead millennials to purchase a home. You may be looking to establish your career or create a particular lifestyle in a specific location, and owning a home can provide the foundation for these goals.   #4 Rising Home Values Rising home values also motivate millennials to become homeowners. As a homeowner, you own an asset that traditionally increases in value over time, meaning your home may have a higher resale value if you choose to move in the future.   #5 A Place To Call Their Own Finally, many millennials simply want a place to call their own. Owning a home allows you to customize and update your living space as you see fit, creating a sense of freedom and individuality.   If any of these reasons resonate with you, it may be worth considering partnering with a trusted real estate agent to explore your options for becoming a homeowner. With so many benefits to owning a home, it's no wonder that so many millennials are choosing this path.

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Experts' Insights on 2023 Recession: Predictions and Analysis

Many fear a recession in 2023—but is one inevitable? Let’s break it down.   What is a recession? The most widely-accepted meaning of “recession” is the one from the National Bureau of Economic Research (NBER). They define it as “a significant decline in economic activity that is spread across the economy and that lasts more than a few months.” That means the decline has to substantially affect multiple economic sectors for an extended period of time to be considered a recession. This definition is helpful if you always have your eye on the economy, but the average person recognizes a recession more by its effects. In a significant recession, the public generally experiences job loss or lower job security, in addition to less bargaining power in the workplace. Those searching for a first job or switching careers during a recession will find their options reduced and their starting salaries lower than they would be otherwise. This can impact your wealth accumulation for years to come as you catch up to the salary you could’ve had in a stronger economy. Additionally, your retirement and other investment accounts can take a hit during a recession due to rocky markets. It’s also likely that you’ll have a more difficult time borrowing money. Like everyone else, financial institutions tighten up during an economic contraction. This includes stricter rules, lower credit limits, and fewer types of credit available.    Are we in a recession? Currently, no. Despite widespread fears, the U.S. economy is not currently in a recession—and the Federal Reserve is aiming to side-step a full-blown recession and head into what’s known as a “soft landing.” Soft landings are part of the economic cycle. If you imagine the economy as a series of peaks and valleys, a soft landing is a valley—but it’s shallow when compared to a major economic downturn. Central banks try for a soft landing when they take action on inflation by increasing interest rates, like the moves we’re currently seeing from the Fed. The idea of a soft landing is to slow an overheated, rapidly inflating economy without a severe and painful recession.   Where is the economy headed in 2023? Here are opinions from top economic experts: U.S. Bank Rob Haworth, senior investment strategy director at U.S. Bank Wealth Management says, “the economy, at this point, could tip in either direction with regard to whether we see a recession in 2023. There’s good news in the most recent reports in that consumer spending is holding up and inflation is coming down. But sales of durable goods are slowing and there may be other challenges ahead.”  Matt Schoeppner, a senior economist at U.S. Bank added, “It seems likely the economy may stay out of a recession, but we expect that real GDP growth will be relatively flat in the near term. It might qualify as what we call a ‘growth recession,’ where we see a slow economy, but with few ramifications for the job market.” U.S. Bank’s official forecast for the year has the U.S. economy narrowly avoiding a recession.   Bankrate Bankrate’s poll of economists shows a 64% likelihood of the U.S. entering a recession in 2023. The financial company acknowledges that forecasting is complex and prone to error, but it’s rare to have such a strong consensus on any economic topic. The company also recognizes that history has a significant impact on the forecasts, and many economists who believe a recession is inevitable are citing the pattern between Federal Reserve actions and recessions that follow.   World Economic Forum In January, the World Economic Forum released results in which two-thirds of surveyed economists predicted a recession in 2023. Their Chief Economist's Outlook, January 2023, stated, “Global growth prospects remain anaemic and global recession risk is high.”   Moody’s Analytics Moody’s is predicting a “slowcession” in 2023—a word they coined to mean a period in which economic growth slows or stops, but the economy avoids a contraction overall. More recently, Mark Zandi from Moody’s took to Twitter to discuss why he also believes the U.S. will avoid a recession in 2023. While history would indicate that the Fed raising rates will bring an inevitable recession, Zandi argues that the American economy is uniquely situated to handle it this time, with larger reserves of personal savings, an unwillingness to lay off workers only to have to find and retrain new ones, and a highly capitalized banking system. He also suggests that the current pessimism around a potential recession could help us avoid one, because a slight decline in consumer spending will bring down inflation naturally.   So, is a recession coming? It’s possible, but not inevitable. Some economists are predicting one by the end of 2023, and there are many variable factors that affect the economy outside of our control. Big ones right now include COVID-19 and supply chain disruptions, climate change, the war in Ukraine, and more. Even the experts have uncertainties, and as Alix Martichoux recently wrote for The Hill, “the economy right now is weird.” Most economists are forecasting some kind of economic slowdown—but if it’s a recession, it’s likely to be a “recession with a small r.” What’s that? It’s a short-term, mild period of economic contraction. It can be uncomfortable, but it doesn’t have the far-reaching or devastating effects of a major Recession like the one in the early 1980s or the late 2000s. Most experts believe that the strength of the labor market will be a major factor in preventing a severe economic downturn. There have been high-profile layoffs in the tech industry and consumer spending has started to slightly slow—but the unemployment rate is very low, job growth has been strong, and there are still more available jobs than there are available workers. In fact, the U.S. job market is the strongest it’s been in over 50 years. Why is this important? Because usually, “Rising unemployment is one of a number of indicators that define a recession. It also makes the downturn worse” (McGrath, 2022). That’s why U.S. Bank’s Rob Haworth says that ultimately at this point, it’s the job market that will dictate the economy’s direction. “If [the job market] starts to weaken, it may mean the economy is about to face more headwinds” (Haworth, 9 March 2023).   What would a recession mean for real estate in 2023? A recession is never good news—but for the current real estate market, it wouldn’t be all bad.  First, interest rates will come down as the economy slows. The Fed has hiked up rates to reduce consumer spending and inflation, but if the result of that is a recession, rates will go down again. For buyers, that means mortgages will become more affordable—and since current forecasts don’t predict a huge downturn in the job market, you’re less likely to experience job loss that will affect your ability to buy.  If you’re selling, affordable mortgages are good for you too. Buyers who have been sitting out of the market waiting for rates to drop will jump in, which means it could be easier for your real estate agent to find the right fit. Second, buyers are likely to find lower home prices. Competition tends to be lower during a recession, which allows prices to drop. Additionally, a higher number of sellers are likely to reduce their prices to sell quickly or to get out of a mortgage.  However, if you’re selling during a recession and your personal economic situation is good, you can take your time. How should you plan your sale when the economy is changing? Tell us what you’re trying to achieve, and we’ll help you get there.

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