Undeniable Signs of Strength in Real Estate

Filed under: Market Comentary

Today I’m going to highlight a few interesting things from our economic update conference last week. Every person that I’m working with right now shares their concerns about what is happening in the real estate market. Where are we? How are things looking for us today? I want to put those concerns to rest by showing why things are heading in the right direction.

4 Signs of Strength in the Real Estate Market

These points that I am sharing today are comparing 2018 to 2019 so that we can see the trends that are rolling into 2020:

  1. Median Housing Prices: In most areas, year over year growth for real estate shows modest gains in median housing prices. A slight increase over long periods of time is exactly what we are looking for. When we start seeing bigger growth patterns, they aren’t sustainable. We are looking for single-digits, which means that we have sustainable growth that will stick around for a while.
  2. Average Down Payments: For all loan types, the average down payment increased, which means that people are reaching into their cash and putting more money into the market. It’s a great sign of confidence in the market to see people who are willing to put more cash into their purchases.
  3. FICO Credit Scores: The average FICO credit score increased. It was a modest increase, but an increase nonetheless. This is a good sign for the economy as a whole. When credit scores are going up, it means people are less leveraged in credit. Unemployment levels are low, so people are making money, paying their bills, and keeping their leverage down.
  4. Inventory Levels: One of the biggest drivers for real estate can be seen in the low-level inventory that is available. We are at about 1.5 months of inventory – in comparison, anywhere from 4 – 6 months is a healthy market. Yes, it could be partially related to the time of year. But when you compare year over year, inventories are lower right now than they have been in the past.

These four points show real strength in the housing market – they are clues that things will likely stay strong for a while. Stay tuned… next week, I’m going to talk about a few things that Walter Neil shared that we need to watch out for.

As always, you’re welcome to reach out if you have questions about real estate trends or mortgages. I’m always here to answer questions and help you find the right solutions for your situation.

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