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The Demand for Land

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July 20th, 2021 – Market update:

Residential, recreational land transactions grow with homebuying spree

The 2020 Land Market Survey, released in April, documents just how well the land market held up to the pandemic’s severe pressure. Land sales increased 3% on average, and prices rose 2% on average. The survey was conducted by the REALTORS® Land Institute and the National Association of REALTORS®.

The survey’s 314 respondents reported that the number of land sales rose the most in residential, at 6% on average, followed by sales of land for industrial use at 4%, and recreational and ranch lands, each at 3%.

Underpinning the strong demand for residential land is robust homebuying activity. COVID-19 has heightened people’s interest in open spaces, driving the demand for land in the suburbs and for recreational land. NAR’s monthly REALTORS® Confidence Index Survey of members primarily engaged in residential transactions shows homebuying activity in the suburbs and in vacation-home areas was on the rise in 2020. Eighty-three percent of homes sold by REALTORS® last year were in the suburbs, an increase from the 80% share in 2019. Vacation-home sales accounted for 5.5% of existing-home sales in 2020, up from 5% in 2019.

On the commercial side, the continued shift toward electronic and mail-order shopping supported sales of land for industrial use. Industrial accounted for 16% of retail sales, up from 13% in 2019.

Demand for timberland, however, remained flat. Timber production declined in 2020 because of COVID-19–related work stoppages and falling U.S. wood exports. Exports of wood products fell 10% in 2020 as the global economy shrank by 4.4%.

Looking at prices, the sales price of residential land rose 6.8% on average in 2020. Recreational land had the next highest price gain, at 3.6%, followed by land for industrial use at 3.4% ranch land at 3.1%.

Land sales and prices for all types of land—except for office, retail, and hotel use—are expected to increase in 2021 as well, according to respondents to the land survey. As in 2020, the strongest sales growth is expected to be in residential land (5.9%), with prices rising 5% on average, and the strongest price growth will be in industrial and recreational land, each increasing 3% in 2021.

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Your Tax Refund & Stimulus Savings May Help You Achieve Homeownership This Year

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April 6th, 2021

– If you’re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.

Using data from the Internal Revenue Service (IRS), it’s estimated that Americans can expect an average refund of $2,925 when filing their taxes this year. The map below shows the average anticipated tax refund by state:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | Keeping Current MattersThanks to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loans allow many veterans to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a 20% down payment isn’t actually required. It’s important to work with your real estate professional and your lender to understand all of your options.

How can your tax refund help?

If you’re a first-time buyer, your tax refund may cover more of a down payment than you realize.

If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average anticipated tax refund:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | Keeping Current MattersThe darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs. Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.

Not enough money from your tax return? 

A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, “One third report that they primarily saved the stimulus money.â€Â If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.

Bottom Line

Saving for a down payment can seem like a daunting task, but it doesn’t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals. Talk To Tammy if you are ready to buy your Dream Home, 636.931.9100!

 

Housing Inventory Hit Record Lows in 2020. Will This Change in 2021?

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March 16th, 2021 – Housing inventory declined 39.6% on a national level in 2020, making 2020 the lowest housing inventory year on record, according to Realtor.com. Adding to the record-breaking low inventory this past year has been increased buyer demand — although, saying “increased demand” is an understatement. Zillow (NASDAQ: ZG) (NASDAQ: Z) calls the persistent demand for homes we’ve seen in 2020 “insatiable.”

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Low inventory and high demand lead, of course, to increased housing prices; in this case a 13.4% increase, which translates to a national median of $340,000 as of December 2020. But where are we headed in 2021?

Some background: sellers

To understand 2021, let’s first look at the reasons the 2020 market has been, shall we say, unique. Part of the reason for low inventory in 2020 was seller uncertainty. And not uncertainty about whether homeowners can sell; the uncertainty comes from what they’ll do after they sell.

Because of this insatiable demand for housing, homeowners are torn on what to do. On one hand, they can get top dollar for their home (assuming it’s in reasonable condition) if they list now, and quickly too, as houses aren’t staying on the market long. But many are afraid they might not get another house they can afford in this market. So homeowners are generally holding on to what they have, slightly more now than last year, further decreasing inventory.

As far as foreclosures: While more are expected to happen in 2021 due to people losing their jobs from the coronavirus pandemic, depending on how the new administration reacts regarding stimulus and forbearance, there might not be the numbers of foreclosures as there normally might otherwise be, further lessening supply.

Some background: buyers

Another reason for low inventory is increased motivation of buyers. There are several reasons for increased buyer demand.

1. Record low mortgage rates: Low mortgage rates have been causing people on the fence to take a stand and buy already.

2. Millennials age up: This group of 24- to 39-year olds who have been putting off homebuying longer than past generations is finally settling down.

3. The coronavirus pandemic (a reason for practically everything in 2020): People who were content as renters in urban cities started leaving for social distancing reasons. Their destination: the suburbs and exurbs, particularly since working from home has become a thing — not to mention as cities locked down, there was nothing much to do in them anymore.

What to expect in 2021

The real estate market always tries to reach equilibrium: the perfect match between sellers and buyers. But that can take time. Because the 2020 market was nowhere near this — instead, a huge sellers’ market — 2021 will be trying to reach equilibrium. So expect to see more of the same until this equilibrium happens: low inventory, high demand, rising prices, and low interest rates.

Inventory

Whenever the supply of new homes on the market is below 6.5 months (a number which represents how long it will take to sell the existing supply), builders become confident to build more homes. As of December 2020, the supply of new homes was 3.3 months — representing a supply so low that builders are not merely confident; they’re downright excited to start building.

Not only is the supply of new homes low, so is the supply of existing homes on the market. Due to high demand, existing homes are also selling fast. As of December 2020, there’s a 2.5-month supply, an all-time low.

So expect to see more housing starts in 2021, but since builders like to get top dollar, don’t expect them to overbuild.

Demand

Demand for houses should remain high in 2021. Low interest rates have a lot to do with this: rates aren’t expected to go much higher than 3% for 2021. Combine that with millennials entering their homebuying years, and demand should remain strong this year.

Prices

The way the market handles low inventory combined with strong demand is with rising prices. This year, prices might rise to the point of keeping many first-time buyers from being able to purchase, as coming up with a down payment could prove to be too big a hurdle. With that said, savings are at historic highs, so many first-time homebuyers, although they don’t have home equity in their arsenal, they do have money in the bank.

Interest rates

There have been no announcements by the Fed of an increase in interest rates anytime soon. If the economy improves due to getting a handle on the coronavirus and a new administration, rates could start to go up from these all-time lows, but since they are hovering around 2.5% at 2021’s start, even if they do rise in 2021, they will still be at historically low.

Are you ready for this spring market? Talk To Tammy, 636.931.9100!