Learn how to determine your current net worth and how an investment in real estate can help improve your bottom line.
Among its many impacts, COVID-19 has had a pronounced effect on the housing market. Low home inventory and high buyer demand have driven home prices to an all-time high.1 This has given an unexpected financial boost to many homeowners during a challenging time. However, for some renters, rising home prices are making dreams of homeownership feel further out of reach.
If you’re a homeowner, it’s important for you to understand how your home’s value contributes to your overall net worth. If you’re a renter, now is the time for you to figure out how homeownership fits into your short-term goals and your long-term financial future. An investment in real estate can help you grow your net worth, build wealth over time, and gain a foothold in the housing market to keep pace with rising prices.
What is net worth?
Net worth is the net balance of your total assets minus your total liabilities. Or, basically, it is what you own minus what you owe.2
Assets include the cash you have on hand in your checking and savings accounts, investment account balances, salable items like jewelry or a car and, of course, your home and any other real estate you own.
Liabilities include your total debt obligations like car loans, credit card debt, the amount you owe on your mortgage, and student loans. In addition, liabilities would include any other payment obligations you have, like outstanding bills and taxes.
How do I calculate my net worth?
To calculate your net worth, you’ll want to add up all of your assets and all of your liabilities. Then subtract your total liabilities from your total assets. The balance represents your current net worth.
Total Assets – Total Liabilities = Net Worth
|Ready to calculate your net worth? Contact us to request an easy-to-use worksheet and a free assessment of your home’s current market value!|
Keep in mind that your net worth is a snapshot of your financial position at a single point in time. Your assets and liabilities will fluctuate over both the short term and long term. For example, if you take out a loan to buy a car, you decrease your liability with each payment. Of course, the value of your asset (the car) will depreciate over time, as well. An asset that is invested in stocks or bonds can be even less predictable, as it’s subject to daily fluctuations in the market.
As a homeowner, you enjoy significant stability through your monthly real estate investment, also known as your home mortgage payment. While the actual value of your home can fluctuate depending on market conditions, your mortgage payment will decrease your liability each month. And unlike a vehicle purchase, the value of your home is likely to appreciate over time, which can help to grow your net worth. Right now, your asset may be worth significantly more than it was this time last year.3
If you’re a homeowner, contact us for an estimate of your home’s market value so that you can factor it into your net worth calculation. If you’re not a current homeowner, let’s talk about how homes in our area have appreciated over the last several years. That way, you can get an idea of how a home purchase could positively affect your net worth.
How can real estate increase my net worth?
When you put your real estate dollars to work, it’s possible to grow your net worth, generate cash flow, and even fund your retirement. We can help you realize the possibilities and maximize the return on your investment.
Generally, property appreciates in one of two ways: either through changes to the overall market or through value-added modifications to the property itself.
- Rising prices
This type of property appreciation is the one that many homeowners are enjoying right now. Buyer demand is at an all-time high due to a combination of record-low interest rates and limited housing inventory.4 At other times, rising home prices have been attributed to different factors. Certain local conditions—like a new commercial development, influx of jobs, or infrastructure project—can encourage rapid growth in a community or region and a corresponding rise in home values. Historically, home prices have been shown to experience an upward trend punctuated by intermittent booms and corrections.5
- Strategic home improvements
Well-planned and executed home improvements can also impact a home’s value and increase homeowner equity at the same time. The type of home improvement should be appropriate for the home and in tune with the desires of local buyers.
For example, a tasteful exterior remodel that is in keeping with the preferences of local home buyers is likely to add significant value to a home, while remodeling the home to look like the Taj Mahal or a favorite theme park attraction will not. A modern kitchen remodel tends to add value, while a kitchen remodel that is overly expensive or personalized may not provide an adequate return on investment.
You may be used to thinking of investments primarily in terms of stocks and bonds. However, the purchase of a real estate investment property offers the opportunity to increase your net worth both upon purchase and year after year through appreciation. In addition, rental payments can have a positive impact on your monthly income and cash flow. If you currently have significant equity in your home, let’s talk about how you could put that equity to work by funding the purchase of an investment property.
- Long-term or traditional rental
A long-term rental property is one that is leased for an extended period and typically used as a primary residence by the renter. This type of real estate investment offers you the opportunity to generate consistent cash flow while building equity and appreciation.6
As an owner, you don’t usually have to worry about paying the utility bills or furnishing the property—both of which are typically covered by the tenant. Add to this the fact that traditional tenants translate into less time and effort spent on day-to-day property management, and long-term rentals are an attractive option for many investors.
- Short-term or vacation rental
Short-term rentals are often referred to as vacation rentals because they are primarily geared towards recreational travelers. And as more people start to feel comfortable traveling again, the short-term rental market is poised to become a more popular option than ever. In 2020 alone, in the thick of widespread travel bans, the short-term rental platform Airbnb’s market share of the hospitality industry reached as high as 41 percent.6
Investing in a short-term rental offers many benefits. If you purchase an investment property in a top tourist destination, you can expect steady demand from travelers while taking advantage of any non-rented periods to enjoy the home yourself. You can also adjust your rental price around peak demand to maximize your cash flow while building equity and long-term appreciation.
To reap these benefits, however, you’ll need to understand the local laws and regulations on short-term rentals. We can help you identify suitable markets with investment potential.
WE’RE HERE TO HELP
Ready to calculate your personal net worth? Contact us for an easy-to-use worksheet and to find out your home’s current value. And if you want to learn more about growing your net worth through real estate, we can schedule a free consultation to answer your questions and explore your options. Whether you’re hoping to maximize the value of your current home or invest in a new property, we’re here to help you achieve your real estate goals.
The above references an opinion and is for informational purposes only. It is not intended to be financial advice. Consult the appropriate professionals for advice regarding your individual needs.
- National Association of Realtors –
- Forbes –
- The Washington Post –
- Bloomberg –
- Federal Reserve Economic Data –
- Propmodo –
The process of getting a mortgage can be a complex and confusing one, and all the myths around mortgages certainly don’t make the process any easier.
So, the question is, what are some of the most common mortgage myths?
A recent article from realtor.com busted some of the most persistent myths around mortgages and the homebuying process, including:
- The lowest rate is always the best choice. Many buyers think that the mortgage with the lowest rate is automatically the best option. But that’s not always true; for example, if a loan has high origination fees or early payoff penalties, it might not be as solid of an option as a mortgage with a slightly higher interest rate—but lower or fewer fees.
- Pre-qualification and pre-approval are the same thing. Some buyers think pre-qualification and pre-approval are essentially interchangeable steps in the mortgage approval process—but that’s simply not true. Pre-qualification is essentially having a conversation about mortgage qualifications with a lender. It can be helpful, but it’s not enough to start looking at or making offers on properties. A pre-approval, on the other hand, entails sharing all your financial information (like pay stubs, tax returns, and bank statements) with a lender—and it’s a must before you start looking at homes.
- Adjustable rate mortgages (ARM) are always a risk. The 2008 financial crisis made many buyers wary of adjustable rate mortgages (ARMs)—often to the point that they won’t even consider one. But ARMs can be a good fit for certain buyers; for example, if you’re planning on moving within 5 years, and an ARM’s rate doesn’t increase before that five-year mark, an adjustable rate mortgage could help you save a significant amount on interest (since initial rates on ARMs are typically extremely competitive).
What does this mean for you? If you’re thinking about buying a home, it’s important to get yourself pre-approved prior to starting your search. Once you find a house and get an offer accepted, be open to the various mortgages available to you. And, don’t just jump at the lowest rate a lender quotes you, since it may not be the best overall loan for you and your future plans.
There’s no denying that we’re in a tough market for buyers. With historically low inventory, high competition, and rising prices, finding a home has been a real challenge.
But buyers, get ready, because it looks like things are about to get at least slightly better for people searching for a home.
According to data outlined in a recent realtor.com article, about 10 percent of homeowners plan to list their home this year—with another 16 percent planning to list in the next 24 to 36 months. That translates to an additional 1.5 million homes hitting the market—which, while not enough to completely end the historic inventory shortage, is certainly a solid start.
Options for first-time buyers should also improve. More than half of the buyers planning to list their homes this year (58 percent) have homes valued at $350,000 or less—which means more affordable options should be hitting the market soon.
So, what does this mean for you? While lack of inventory and high competition has made for a challenging market for buyers, more sellers are preparing to list their homes—and when they do, things should get a bit easier for buyers.
The majority of buyers purchase their home using a mortgage. So, what do mortgage lenders want buyers to know about buying a home—particularly in today’s hot real estate market?
A recent article from realtor.com outlined the key insights mortgage lenders want home buyers to understand if they’re planning to buy a home in 2021, including:
- Get pre-approved from the get-go. Because homes are selling so quickly in today’s market, it’s important to make getting pre-approved for your mortgage the first step in the home buying process; that way, you know what type of budget you’re working with—and are ready to submit an offer as soon as you find the right property.
- Prepare for bidding wars. Thanks to a lack of inventory, bidding wars are the norm in markets across the country—and while you can’t necessarily avoid bidding wars, you can prepare for them. Before you make an offer, talk to your real estate agent to get on the same page in terms of how much the home is worth, how high you’re willing to go with your offer, and the terms you can offer that may be appealing to a seller beyond the price.
- Don’t give up. Trying to buy in the midst of a seller’s market can be a frustrating experience. But don’t let the challenges deter you—because those challenges may not be any better if you put off the buying process. (For example, prices may seem high right now—but homes are continuing to appreciate, and prices could easily be higher if you delay your home search, or interest rates can increase and add to the cost as well.)
Imagine the first place you lived as a young adult. Now imagine trying to fit your life today into that space. Not pretty, right?
For most of us, our housing needs are cyclical.1 A newly independent adult can find freedom and flexibility in even a tiny apartment. That same space, to a growing family, would feel stifling. For empty nesters, a large home with several unused bedrooms can become impractical to heat and clean. It’s no surprise that life transitions often trigger a home purchase.
While your home-buying journey may not look like your neighbor’s or friend’s, broad trends can help you understand what to keep in mind as you house hunt. No one wants to regret their home purchase, and taking the time now to think about exactly what you need can save a lot of heartache later. These same ideas can apply not only to your primary residence, but your vacation home as well.
The Newly Married or Partnered Couple
The financial and legal commitment of marriage has provided a springboard to homeownership for centuries, though these days more couples are buying homes without exchanging rings. In the last few decades, changing demographics have shifted the median age of first marriage and buying a first home into the late 20s and early 30s, planting most newly married or partnered buyers firmly in the millennial generation.2,3 But no matter your age, there are some key factors that you should consider as you enter into your first home purchase together.
Affordability is Key
There’s no doubt about it—with high student loan debt and two recessions in the rearview mirror, many millennials feel that the deck is stacked against them when it comes to homeownership. And it’s not just millennials—Americans of all ages are facing both financial challenges and a tough housing market. But stepping onto the property ladder can be more doable than many realize, especially in today’s low mortgage rate environment.
While many buyers are holding out for their dream home, embracing the concept of a starter home can open a lot of doors.4 In fact, that’s the route that most first-time homebuyers take—the average home purchase for a 20-something is about 1,600 square feet. While the average size increases to around 1,900 square feet for buyers in their 30s, it’s not until buyers reach their 40s that the average size passes 2,000 square feet.5
Chosen carefully, a starter home can be a great investment as well as a launchpad for your life together. If you focus on buying a home you can afford now with strong potential for appreciation, you can build equity alongside your savings, positioning you to trade up to a larger home in the future if your needs change.6
Taking Advantage of Low Mortgage Rates
Mortgage rates are historically low, making now the perfect time to purchase your first home together. A lower interest rate can save you tens of thousands of dollars over the life of your loan, which can significantly increase the quality of home you can get for your money.
But what if both halves of a couple don’t have good credit? You may still have options. First, boosting a credit score can be easier than you think—simply paying your credit cards down below 30% of your limit can go a long way. But if that’s not enough to boost your score, you might consider taking out the mortgage in only the better-scoring partner’s name. The downside is that applying for a mortgage with only one income will reduce your qualification amount. And if you take that route, make sure you understand the legal and financial implications for both parties should the relationship end.
Commute and Lifestyle Considerations
Whether you’ve lived in a rental together for years or are sharing a home for the first time, you know that living together involves some compromises. But there are certain home features that can make life easier in the future if you identify them now. The number of bathrooms, availability of closet space, and even things like kitchen layout can make a big difference in your day-to-day life and relationship.
Your home’s location will also have a significant impact on your quality of life, so consider it carefully. What will commuting look like for each of you? And if you have different interests or hobbies—say, museums vs. hiking—you’ll need to find a community that meets both your needs. Need some help identifying the ideal location that fits within your budget? We can match you with some great neighborhoods that offer the perfect mix of amenities and affordability.
The Growing Family
Having kids changes things—fast. With a couple of rowdy preteens and maybe some pets in the mix, that 1,600 square foot home that felt palatial to two adults suddenly becomes a lot more cramped. Whether you’ve just had your first child or are getting to the point where your kids can’t comfortably share a bedroom any longer, there’s plenty to consider when you’re ready to size up to a home that will fit your growing family.
The Importance of School Districts
For many parents, the desire to give their kids the best education—especially once they are in middle and high school— surpasses even their desire for more breathing room. In fact, 53% of buyers with children under 18 say that school districts are a major factor in their home buying decisions.7 Of course, better funded (and often higher ranking) schools correspond to higher home prices. However, when push comes to shove, many buyers with kids prefer to sacrifice a bit of space to find a home in their desired location.
But when you’re moving to a new community, it can be tough to figure out what the local schools are actually like—and online ratings leave a lot to be desired. That’s why talking to a local real estate agent can be a gamechanger. We don’t just work in this community; we know it inside and out. We’ll be happy to share our first-hand knowledge of the local schools and which neighborhoods are most welcoming to families.
For many families, living space is a key priority. Once you have teenagers who want space to hang out with their friends, a finished basement or a rec room can be a huge bonus (and can help you protect some quieter living space for yourself).
A good layout can also make family life a lot easier. For example, an open plan is invaluable if you want to cook dinner while keeping an eye on your young kids playing in the living room. And if you think that you might expand your family further in the future, be sure that the home you purchase has enough bedrooms and bathrooms to accommodate that comfortably.
Try to think about how each room will fit into your day-to-day. Are you anticipating keeping the house stocked to feed hungry teenagers? A pantry might rise to the top of the list. Dreading the loads of laundry that come with both infants and older kids (especially if they play sports)? The task can be much more bearable in a well-designed laundry room. Imagine a typical day or week of chores in the house to identify which features will have the biggest impact.
Chances are, you won’t find every nice-to-have in one home, which is why identifying the must-haves can be such a boon to the decision-making process. We can help you assess your options and give you a sense of what is realistic within your budget.
The Empty Nesters
When we talk about empty nesters, we usually think about downsizing. With kids out of the house, extra bedrooms and living space can quickly become more trouble than they’re worth. While the average buyer under 55 trades up to a larger home, buyers over 55 are more likely to purchase a smaller or similarly sized but less expensive home. Even in the highest age groups, the majority of home purchases fall in the single-family category. According to research by the National Association of Realtors, by the time buyers reach their 70s, the median home size drops to 1,750 square feet.5 But there’s plenty for empty nesters to think about besides square footage.
Maintenance and Livability
What factors are driving your decision to move? Identifying those early in the process can help you narrow down your search. For example, do you want to have space for a garden, or would you prefer to avoid dealing with lawn care altogether? What about home maintenance? In many cases, a newer home will require less maintenance than an older one and a smaller one will take less time to clean. You may also want to consider townhomes, condos, or other living situations that don’t require quite as much upkeep.
Many empty nesters have retired or are nearing retirement age. This could be your chance to finally pursue hobbies and passions that were just too hard to squeeze into a 9-5. If you’re ready to move, consider how you’d like to spend your days and seek out a home that will help make that dream a reality. For some, that might mean living near a golf course or a beach. For others, being able to walk downtown for a nice dinner out is the priority. And with more time to spend as you wish, proximity to a supportive community of friends and family is priceless.
Ability to Age in Place
Let’s face it—we can’t escape aging. If you’re looking for a home to retire in, accessibility should be front-of-mind.8 This may mean a single-story home or simply having adequate spaces on the first floor to rearrange as needed. While buying a home that you plan to renovate from the start is a viable option, being forced into renovations (because of the realities of aging) a few years down the road could seriously dig into your nest egg. Location matters, too—if your family will be providing support, are they close by? Can you easily reach necessities like grocery stores and healthcare? While it’s tempting to put it out of our minds, a few careful considerations now can make staying in your home long-term much more feasible.
Finding the Right Home for Right Now
One thing is for sure—life never stands still. And your housing needs won’t, either. In the United States, the median duration of homeownership hovers around 13 years.9 That means many of us will cycle through a few very different homes as we move through different life stages. At each milestone, a careful assessment of your housing options will ensure that you are well-positioned to embrace all the changes to come.
Whatever stage you’re embarking on next, we’re here to help. Our insight into local neighborhoods, prices, and housing stock will help you hone in on exactly where you want to live and what kind of home is right for you. We’ve worked with home buyers in every stage of life, so we know exactly what questions you need to ask. Buying a home—whether it’s your first or your fifth—is a big decision, but we’re here to support you every step of the way.
- Freddie Mac –
- PRB –
- Experian –
- Nerdwallet –
- NAR 2020 Home Buyers and Sellers Generational Trends Report –
- Investopedia –
- NAR 2019 Moving With Kids
- Kaiser Health News –
- National Association of Realtors –
As we enter the second quarter of 2021, the Mammoth Lakes real estate market continues to be hot. What does that mean? Simply put, it means there are more buyers than sellers. I am answering new buyer calls daily but there are not a lot of options for them. If/when they do find a property they like, there are multiple offers and often over the list price. Some people think a seller’s market is easy for a Realtor® and quite frankly it is actually very challenging. It is my job to help formulate an offer that may be more appealing to the seller. The good news is, historically we see an increase in inventory around this time of the year and although the last year has been anything but typical, it does appear inventory levels are slowing rising.
In this post, I will highlight the numbers you need to know about the Mammoth Lakes real estate market, what it means if you are thinking about buying or selling, and where to get help to move towards achieving your real estate goals this year.
What’s Happening in the Mammoth Lakes Real Estate Market?
It is helpful to look at the current market in two different segments: single family homes and condos. This data reflects the quarter from January 1 through March 31.
- The median sales price in the first quarter of 2021 is $525,000 which is up about 1% over last month and up 10.5% over last year ($475,000 in 2020).
- The median days on market is 48 days which is down 19 days as compared to 2020. This time period begins on the day the property is listed and ends when it closes escrow.
- 116 condos have closed escrow (average of 38 per month) as compared to an average of 37 per month for all of 2020.
- There are 31 active condos listed for sale as compared to 19 for the previous month (63% increase).
- There are 76 pending sales as compared to 81 last month (6% decrease). These are properties under contract that have not yet closed escrow.
↑UP from $699,000 in February
|Median* Days on Market||15|
↑UP from 8 in February
|Total Available on April 1**||31|
↑UP from 19 in February
Single Family Homes
- The median year to date sales price is $1,600,000 which is up nearly 7% over last month and up 82.8% over last year ($875,000 in 2020).
- The median days on market is 96 days which is up 14 days. This time period begins on the day the property is listed and ends when it closes escrow.
- 29 single family homes have closed escrow (average of 9.6 per month) as compared to an average of 11 per month in 2020.
- There are 17 active single family homes listed for sale as compared to 15 for the previous month (12% increase).
- There are 16 pending sales as compared to 13 last month (23% increase). These are properties under contract that have not yet closed escrow.
↓DOWN from $2,600,000 in February
|Median* Days on Market||21|
↓DOWN from 48 in February
|Total Available on April 1**||17|
↑UP from 15 in February
What Does This Mean for Mammoth Lakes Homeowners and Sellers?
As the numbers indicate, this is a great time to sell. No one can predict how long this seller’s market will last. Historically, we see an increase in inventory after spring break. More inventory means more competition. More competition means fewer buyers for your property. Nothing is typical about this year and only time will tell whether the inventory actually does increase. I can say for certain that I have received more calls from potential sellers in the last week than I did all of March. If you are even remotely thinking about selling, contact me for a free consultation and evaluation of your property. This will include a recommendation for pricing as well as suggestions for preparing your property for sale. I am reminding sellers that just because this is a seller’s market, there are still some small things that can be done to prepare your home for listing which could result in a higher sales price. This could be as simple as rearranging furniture, changing light bulbs, decluttering or minor repairs. I can also recommend great local resources for any work that may need to be completed prior to listing.
What Does This Mean for Mammoth Lakes Home Buyers?
With such low inventory available in Mammoth Lakes, buyers need to be ready to act quickly when they find a property they are interested in. Do you have your financials in order? Do you need a pre-approval letter? I can connect you with lenders who have a proven track record of success in our area. Many buyers do not know that not all lenders can lend in certain projects in Mammoth Lakes. What are your must-have features? I can help you increase your chances of securing the property of your dreams in this tough market so reach out to me for a free consultation to set you on the right path for achieving your goal of owning property in Mammoth Lakes.
Many have asked if the real estate market is going to crash. Specifically, how is today’s market different than the one that caused the 2008 meltdown. Check out my blog post which directly addresses this question.
Whether you are a seller or a buyer, there is no doubt you will benefit from teaming with an educated and experienced Realtor® to help you navigate this hot market. I have created guides to help with both the buying and selling process. You can access the guides on my website:
The Ultimate Home Sellers Guide
The UltimateHome Buyers Guide
- All data are sourced from the Mammoth Lakes Board of Realtors.
- *Median price = middle value. This is used as a good indicator when there is significant data as it minimizes the impact of unusually high or low values and provides a better perspective of the big picture.
- **Total Available excludes properties under contract/pending which have not yet closed.
By now you’ve adjusted to your home being more than just a “shelter.” Chances are your rooms have become offices, classrooms, or the occasional date night hub. You’ve probably also cleaned out spaces to make way for this new existence and maybe even felt a spark of joy in the process.
Yay for you because there are easy, inexpensive ways to make your home feel fresh, curated and pulled together this spring.
Approach each room and ask yourself if you love every item in the space? If not, remove it (you can do this!) Less really is more. Did you know that your eyes want to rest on a clear space? In Design 101, we learn a clear space brings calm and can even help reduce anxiety.
2. Re-imagine the space.
Rearrange furniture to create a different focal point or sitting view. It might be as simple as relocating a rug from one room into another. A small chair containing books and a table lamp can make for a fun, new look. A simple change can create a fresh living experience which is something we all need right now.
Objects look best when displayed or grouped together, preferably in odd numbers for balance and rhythm. Have art? Create a collage on a single wall for visual impact. Need art? Etsy has great printable art, perfect to print and place in repurposed frames for a child’s room, office, or entryway.
4. Paint is your friend.
If you have an extra gallon sitting on a shelf, now is the perfect time to touch up any wall nicks or imperfections. Feeling bold? Add color to inject visual interest to the space.
My go-to is Chalk Paint. Easy to use, little prep, forgiving and provides impressive results. I recently painted my bedroom furniture charcoal grey, removed the heavy bedspread, and opted for crisp white linens and a luxurious European duvet, perfect for spring. You can use paint to re-purpose nearly anything.
Easily found in your yard, neighborhood, or local nursery. Fresh is best, but if you’re not a green thumb, fake it with faux. Add simple beauty with an oversized leaf in an interesting vase.
Bringing nature into your home is an easy way to brighten your soul. My favorite faux-go-to is the fig plant. It looks real, has enormous leaves and, when tucked into a textured basket, adds a pop of color and flair to any room.
The mood of a room can easily be changed with light. Swap out your luminaries from one room to another or splurge on a new chandelier. Consider placing your fixtures on dimmer switches where you can create a soothing space. Perhaps opt for a grouping of same-colored candles on an eye-catching tray.
7. Embrace the Outdoors.
Our enviable weather is about to warm up and for many, this means BBQ’s, lounging, reading or even social distancing with a friend six feet away. Take all this goodness from the inside and bring these same concepts outdoors to create a place to relax by adding graphic pillows and cozy blankets. Flickering candles add ambiance, as do solar string lights or how about a portable/odorless petite fireplace that runs on biofuel.
Now you know the little design secrets that can be used in your home. Borrow some or all of them to create your happy place. Kick back, relax, breathe in the new season, and enjoy your good life.
About Dasha Hervey
Award winning Principal Designer Dasha Hervey is Kitchen & Bath + Universal Design certified. She has served as Director with the American Society of Interior Designers and is an active member with the National Kitchen + Bath Association.
Awarded First place from the American Society of Interior Design in the Design for Excellence Awards, 2020
-Best of Houzz 2016 to 2021
-Published: San Diego Tribune, Ranch and Coast Magazine, Momstown
Service Area: From the Sea to the Sierras
While many areas of the economy have contracted, the housing market has stayed remarkably strong. But can the good news last?
When COVID-related shutdowns began in March, real estate brokers and clients scrambled to respond to the shift. Record-low interest rates caused some lenders to call a halt to new underwriting, and homeowners debated whether or not to put their houses on the market. However, those first days of uncertainty ushered in a period of unprecedented demand in the U.S. real estate market, which ended the year with increasing average home prices (up 13.4% from the previous year) and shrinking days on market (13 fewer than in 2019).1
Now, as the spring market approaches, you may be wondering whether the good times can continue to roll on. If you’re a homeowner, should you take advantage of this opportunity? If you’re a buyer, should you jump in and risk paying too much? Below we answer some of your most pressing questions.
How is today’s market different from the one that caused the 2008 meltdown?
At the beginning of the pandemic, fears of an economic recession and an ensuing mortgage meltdown were top of mind for homeowners all across the country. For many buyers and sellers, the two seemed to go hand in hand, just as they did in the 2008 economic crisis.
In reality, however, the conditions that led to 2008’s recession were very different from those that triggered the current downturn—and this time, the housing market is the source of much of the good news.2 This is in line with historical patterns, as housing prices traditionally hold steady in the face of recession, with homeowners staying put and investors putting their money into bricks and mortar to ride out uncertainty in the stock market.
This time around, because of lessons learned in 2008, banks are better funded, homeowners are holding more accrued equity, and, crucially, much of the economic activity is focused on financial factors outside the housing market. As many industries quickly pivoted to work-from-home, early fears of widespread job loss-related foreclosures have failed to materialize. Federal stimulus payments and the Paycheck Protection Program also helped to offset some of the worst early effects of the shutdown.
Are we facing a real estate bubble?
A real estate bubble can occur when there is a rapid and unjustified increase in housing prices, often triggered by speculation from investors. Because the bubble is (in a sense) filled with “hot air,” it pops—and a swift drop in value occurs. This leads to reduced equity or, in some cases, negative equity conditions.
By contrast, the current rise in home prices is based on the predictable results of historically low interest rates and widespread low inventory. Basically, the principle of supply and demand is working just as it’s supposed to do. In addition, experts predict a strong seller’s market throughout 2021 along with increases in new construction.3 This should allow supply to gradually rise and fulfill demand, slowing the rate of inflation for home values and offering a gentle correction where needed.
Effects of low interest rates
According to Freddie Mac, rates are projected to continue at their current low levels throughout 2021.4 This contributes to home affordability even in markets where homes might otherwise be considered overpriced. These low interest rates should keep the market lively and moving forward for the foreseeable future.
Effects of low inventory
Continuing low inventory is another reason for higher-than-average home prices in many markets.5 This should gradually ease as an aggressive vaccination rollout and continuing buyer demand drive more homeowners to move forward with long-delayed sales plans and as new home construction increases to meet demand.6
Aren’t some markets and sectors looking particularly weak?
One of the big stories of 2020 was a mass exodus from attached home communities and high-priced urban areas as both young professionals and families fled to the larger square footage and wide-open spaces of suburban and rural markets. This trend was reinforced by work-from-home policies that became permanent at some of the country’s biggest companies.
Speculation then turned to the death of cities and the end of the condo market. However, it appears that rumors of the demise of these two residential sectors have been greatly exaggerated.
With the first vaccine rollouts, renters have begun returning to major urban centers, attracted by the sudden rise in available inventory and newly discounted rental rates.7 In addition, buyers who were previously laser-focused on a single-family home responded to tight inventory by taking a second look at condos.8 While nationwide condo prices continue to lag behind those of detached homes, they’ve still seen significant price increases and days on market reductions year over year.
In addition to these improvements, the 2020 migration has spread the economic wealth to distant suburban and rural enclaves that normally don’t benefit from increases in home values or an influx of new investment. As many of these new residents set up housekeeping in their rural retreats, they’ll revitalize the economies of their adopted communities for years to come.
How has COVID affected the “seasonal” real estate market?
Frequently, the real estate market is seen as a seasonal phenomenon. However, the widespread shutdowns in March 2020, coming right at the beginning of the market’s growth cycle in many areas, has led to a protracted, seemingly endless “hot spring market.”
While Fannie Mae’s chief economist Douglas Duncan predicts slower growth from 2020’s historic numbers, the outlook overall is positive as we embark on the 2021 spring selling cycle.9 Duncan anticipates an additional lift in the second half of 2021 as buyers return to business as usual and look to put some of their pandemic savings to work for a down payment. Thus we could be looking at another longer-than-usual, white-hot real estate market.
How will a Biden administration affect the real estate market?
Projected policy around housing promises to be a boost to the real estate market in many cases.10 While some real estate investors bemoan proposed changes to 1031 Exchanges, the Biden plan for a $15,000 first-time homebuyer tax credit aims to increase affordability and bring eager new home buyers into the market. In addition, Biden-proposed policy pinpoints low inventory as a primary driver of unsustainable home values and is geared toward more affordability through investments in construction and refurbishment.
Overall, according to most indicators, the real estate news looks overwhelmingly positive throughout the rest of 2021 and possibly beyond. Pent-up demand and consumer-driven policies, along with a continued low-interest-rate environment and rising inventory, should help homeowners hold on to their increased equity without throwing the market out of balance. In addition, the increase in long-term work-from-home policies promises to give a boost to a wide variety of markets, both now and in the years to come.
STILL HAVE QUESTIONS? WE HAVE ANSWERS
While economic indicators and trends are national, real estate is local. We’re here to answer your questions and help you understand what’s happening in your neighborhood. Reach out to learn how these larger movements affect our local market and your home’s value.
- Realtor.com –
- New York Magazine –
- Washington Post –
- Freddie Mac –
- Wall Street Journal –
- Marketwatch –
- Forbes –
- Washington Post –https://www.washingtonpost.com/business/2021/01/07/condo-sales-rebound-amid-dwindling-inventory-houses/
- Mortgage Professional America –https://www.mpamag.com/news/fannie-mae-chief-economists-forecast-for-us-economy-housing-market-in-2021-244045.aspx
- Inman –
There are several different data points to review when analyzing the current state of the Mammoth Lakes real estate market including median price, days on market and total inventory sold.
Below is a snapshot of the last several years of transactions closed and current inventory in Mammoth Lakes. Note that this report doesn’t include any of the outlying areas beyond Mammoth Lakes.
Mammoth Lakes Condos
|Median* Sold Price||$520,000||$475,000||$450,000||$402,500||$349,900||$299,750|
|Median* Days on Market||47||67||84||69||70||117|
|Total Condos SOLD||65||442||387||348||407||304|
There is not yet enough data to identify 2021 trends. When comparing 2020 to 2019, the median condo price is up nearly 6%. Approximately 14% more condos sold in 2020 and those sold 25% more quickly than in 2019 (down 18 days).
The current inventory provides an indication of potential activity. Below is a snapshot of current Mammoth Lakes listings:
↑UP from $649,450 in January
|Median* Days on Market||8|
↓DOWN from 9 in January
|Total Available on March 1**||19|
↑UP from 14 in January
Download the March 2021 condo market report.
Mammoth Lakes Single Family Homes
|Single-Family Homes||Through 3/1/21||2020||2019||2018||2017||2016|
|Median* Sold Price||$1,500,000||$875,000||$767,625||$890,000||$750,000||$682,500|
|Median* Days on Market||107||82||113||113||131||132|
|Total SFH SOLD||21||133||94||87||95||98|
There is not yet enough data to identify 2021 trends. When comparing 2020 to 2019, the median price of a single-family homes sold in 2020 is up 14%. Approximately 41% more SFH sold in 2020 and those sold 37% faster (down 31 days).
The current inventory provides an indication of potential activity. Below is a snapshot of current Mammoth Lakes listings:
|CURRENTLY LISTED||SINGLE FAMILY HOMES|
↓DOWN from $2,975,000 in January
|Median* Days on Market||48|
↑UP from 33 in January
|Total Available on March 1**||15|
↑UP from 14 in January
Download the March 2021 single family home market report.
*Median is the middle value for a range of values and is a good indicator to use when there is significant data. It minimizes the impact of unusually high or low values and gives a better perspective of the big picture.
**Total Available excludes properties currently under contract.
What buyers want in a home changes all the time. So, the question is—what are home buyers looking for in 2021?
The National Association of Home Builders 2021 What Home Buyers Really Want report (outlined in a recent article from REALTOR® Magazine) explored the features that home buyers find the most desirable in 2021, including:
So, what are the features that home buyers consider most essential in 2021?
- Laundry room (87 percent)
- Exterior lighting (87 percent)
- Ceiling fan (83 percent)
- Energy Star-rated windows (83 percent)
- Patio (82 percent)
The report also broke down the most desirable features by category, including room (for example, side-by-side double sinks are the most in-demand feature for kitchens), accessibility (full bath on the main level), and technology (programmable thermostat).
So, what does this mean for you? If you’re on the home search, knowing what features are the most in demand can help you when evaluating properties—and if you’re selling, knowing what buyers want in 2021 can help you update and frame your home in a way that’s going to appeal to those buyers.