National Housing Market Overview

Happy March!  I sincerely hope 2017 is going fantastically for you.

I just returned from the Keller Williams annual national conference.  I want to share with you some information that put into context some market phenomenon I’ve observed in Orlando.  This is of personal interest to me, I hope you might find it enlightening as well.

Please keep in mind, the graphs below are based on NATIONAL averages.  This is a national overview while real estate is hyper-local.  If you want to know about your specific situation, just reach out to me and I’ll provide a custom assessment for you.

Picture1

 

The graph above is based on U.S. national averages.  The data for individual cities are not available but from my experience, Orlando follows this trend except our median price is lower overall (for example, Orlando median home price was $200k in 2016).

The YELLOW line indicates historic median home price appreciation.  Since 1989 the average annual increase is 4%.  During the real estate bubble from 2002-2007 you can see the median price went way above the trend line.  After the peak in 2016, the market began a correction.  You can see the median price corrected back to the trend line in 2008.  This proved too much for the economy, the market collapsed and over-corrected over the next several years to a bottom in 2011.  These were the years we worked with many investors.

Now, we are seeing a return back to the annual 4% trend line (the new BLUE line).  We do not see the market going back to the original yellow line.  The belief is that the trend line has been reset and the blue line is the new trend we should follow.   The difference between the yellow line and the blue line, is a 16% market gap caused by the lost years through the real estate bubble.

 

Picture2

Now, another phenomenon we are experiencing in the current market is low inventory.  One of the contributing factors is shown in the chart above.  Historically, one million new homes are built each year to meet the demands of our growing population.  The real estate market collapse and subsequent foreclosure crisis took out the new home builders after 2007.  Many builders went out of business.  So again, you can see during these “lost years” there was an accumulated low supply to the stock of new home inventory.

This new home stock continued to grow but still has not fully recovered.  In 2016, at 781,000 new single-family homes, it is still significantly below the historical annual level of 1,082,000 newly constructed homes.

Picture3

 

The graph above demonstrates an additional factor which explains what I have written about many times in the past.  That is, we see 2 markets in Orlando.  At lower price points the demand far exceeds the supply, but at higher price points the market is either balanced or over-supplied.

With the new home builders returning to the market, they did not return to all price segments equally.  Majority of the new homes constructed were in the $250k-$400k range (see the PURPLE line), followed by the luxury homes above $400k (Yellow line).  The profit margin is higher in the higher price segments.  Therefore many builders have avoided the below-$250k market (GREEN line).  This lack of construction in the entry-level price range has contributed to the shortages, causing extremely low inventory levels of entry-level houses.

I can talk about this all day but I should stop here.

Please feel free to reach out to my team with all your real estate needs.  We have the most recent local market information.  We can help you navigate through all the bulk information on the internet and make the most informed decision for your unique situation.

Our business has always grown by referrals.  We are honored to help your family and friends.  We will take care of them as our own.

Until next month, take care!

Yien and the Yao Team.

 

Leave a Reply

Your email address will not be published. Required fields are marked *