Al's February 2020 Market Watch

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Real Estate

February, 2020

 

Recession In Recess

    What a difference a year, or two, makes. Remember when I wrote that many economists and other pundits predicted a recession in 2020 and /or 2021? Well no longer. Back in 2018, a survey of economists indicated that 67 percent, two out of three, believed that a recession was going to take place sometime in 2020 or before. And in October 2019, still more than one out of three thought that a recession was likely at 34.2 percent. But in a January survey, only 14.3 percent suggested that the country would have a recession in 2020. And it seems that more economists are pushing back the idea of a recession later and later.

    One of the reasons that they are pushing back the timeline is the fact that the housing industry is doing well. According to Showing Times - latest Buyer Traffic Report, buyer activity has increased substantially, year over year, and it has increased in every region of the U.S. So, what the U.S. is experiencing now is a very vibrant housing market. And with low mortgage rates, and personal income rising, home ownership is in reach of more individuals, for both first time or moving up buyers. This should help minimize the possibility of a recession in the short term.

 

Still An Inventory Problem

     Even thought buyer activity is increasing dramatically, the amount of home owners looking to sell their house is not keeping pace. That is confirmed in what George Ratiu, Senior Economist at realtor.com  recently said “The market is struggling with a large housing undersupply. The number of homes for sale are poised to reach historically low levels.” Nationally, the months supply of inventory is around 3.0 months. Remember, less than 6 months is considered a sellers market, where homes are likely to appreciate.

    Locally, the numbers parallel the national trend. For the past three months, Hillsborough had 2.31 months supply, Bridgewater 2.6 months and Branchburg a bit higher at 4.16 months supply. All well within the window of a sellers market.

    What is causing this inventory shortage?  One of the key factors contributing to this shortage is that home owners are staying in their homes a lot longer. Historically, home owners stayed in their homes on the average 6 years.

However, starting in 2009, longevity started to creep upwards, resulting in less homes on the market. Throughout the last decade and continuing, owners stayed in their homes approximately 9 years, an increase of 50 percent. Home owners have found it easier and financially more attractive to remain in their present home and modernize versus moving. This is especially evident in the classical “family or second home”, the four bedroom, 2.1 bath Colonial. Without movement in this group, buyers looking to move from starter homes or town homes have found the pickings slim, driving up prices, and making those who do sell, very happy.