Balanced Market Update

Sep 18, 2014 12:47:42 PM

Gary Keller and Jay Papasan kicked off day one of Mega Agent Camp with an update on the US housing market. The mid-year numbers for home prices, inventory, mortgage rates, GDP, employment and inflation paint a stable picture with little variance. Keller reminded the audience that agents are the local economist for their clients. It is imperative that when talking to buyers and sellers they make sure to have the most current information available to help clients understand the national picture and make the most informed decision possible.

slide1Home sales were off to a slow start, but have picked up. Looking at sales year over year, sales are only .02 percent below where they were at the same time last year. What is important is that the trend is rising, not falling.




Home prices dipped a little more than most were comfortable with, but have come back up. Looking at the year over year change from 2013 to 2014, we see that home prices are up almost 5 percent which is a healthy gain.slide inventory


Inventory is currently at a 5.5 month supply of inventory. We are currently in a balanced market which is defined as the existence of a balance of supply and demand. This essentially means that 50 percent of the homes listed are selling. When the trend shifts above 50 percent it becomes a buyers market and when the trend shifts below 50 percent it is a sellers market.

slide 3

Mortgage rates should be around 5.5 percent, but they have fallen slightly to 4.1 percent. If everything stays the way it currently is and international issues stabilize a bit more, we could see rates reach 5-6 percent in the near future.

slide 4


GDP wasn’t as robust in the first quarter as expected. It is suspected severe winter weather was a factor. Nevertheless, it bounced back quickly.


slide 6

Unemployment rates are phenomenally healthy as we are heading close to 5 percent. The government estimates that unemployable people only make up .5 percent of the total. In fact, there are more people employed today than there were before the recession.



Inflation is healthy at 1.76 percent even though it is below the 2 percent target rate.




Keller also discussed a few special areas that are currently impacting the housing industry.

Home affordability is more important than home price and mortgage rates. The ultimate question is, "can they afford this home?" Slower year-over-year price growth and persistently low rates have helped to slow the decline in affordability, but have not stopped it. Affordability is currently at 153.4 percent of the median priced home. To draw comparison, when the market was performing extremely poorly, affordability was at 183 percent.

Student loan debt is a serious issue and has a direct impact on the market. With current student loan debt at 1.3 trillion dollars, many would-be first time home buyers simply don;t have the ability to save or afford to buy a home.

Individual income for 80 percent of the population has remained virtually unchanged from 1989. As prices increase, income does not which creates a gap in affordability.

New home construction can be an economic condition indicator because when the market is good more homes are being built. In contrast, when the market is bad, fewer homes are being built. The market is considered healthy when 1.5 million new homes are built each year.

Click here to download the full presentation from myKW :


Subscribe to the KW Blog