Is the housing market reverting back to a more normal real estate market? “Normal” is defined as standard, typical, or routine. Demand is still strong even while the housing supply is slowly returning, so no, it is not normal.
According to the Merriam-Webster Dictionary, the definition of normal is “conforming to a type, standard, or regular pattern: characterized by that which is considered usual, typical, or routine.”
With this definition in mind, here are five housing industry metrics that prove we’re nowhere near normal.
Today’s Mortgage Rates
Below are the 30-year mortgage rates from the 70s to 2010s chronicled by Freddie Mac:
• The 1970s: 8.86%
• The 1980s: 12.7%
• The 1990s: 8.12%
• The 2000s: 6.29%
• The 2010s: 4.09%
Today, the average mortgage rate is around 2.87%, which is very close to the historic low.
So, mortgage rates are anything but normal.
Housing Appreciation
According to Black Knight, a housing data and analytics company, the average annual appreciation on residential real estate prices since 1995 has been 4.14%.
According to the latest forecast from the National Association of Realtors (NAR), home price appreciation will hit 14.1% this year, which will be greater than any year since Black Knight began collecting this data.
Again, housing appreciation is anything but normal.
Months’ Supply of Inventory (Homes for Sale)
According to the National Association of Realtors, “Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace. Historically, six months of supply is associated with moderate price appreciation, and a lower level of months’ supply tends to push prices up more rapidly.”
As of the latest Existing Homes Sales Report from NAR, the current months’ supply of inventory stands at 2.6. That’s less than half of a normal supply.
Today, the supply of inventory (homes for sale) is anything but normal.
Number of Days It Takes to Sell a Home
The days-on-market metric gives an indication of how hot a market is and how quickly homes are selling. In 2019, prior to the pandemic, the average days on the market stood at 35, according to the National Association of Realtors. Today, that number is cut in half and is now at 17 days.
The days-on-market metric is anything but normal.
Number of Offers per Listing
According to the National Association of Realtors, the number of offers per listing stood at 2.2 in 2019. Today, that number is double at 4.5 offers per listing.
Currently, the number of offers per listing is anything but normal.
Is the Housing Market Normal?
When…
1. Mortgage rates are near historic lows
2. Price appreciation is at historic highs
3. Housing inventory is less than half of the normal amount
4. The time it takes to sell a home is cut in half, and
5. There are twice as many offers on each house
…it’s hard to say we’re in a normal market.
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Call Wenzel Select Properties today at 630.430.4790. We are conveniently located at 4941 Main Street, in the heart of downtown Downers Grove by the train station.