Today’s Real Estate Market: The ‘Unicorns’ Have Galloped Off

Today’s Real Estate Market: The ‘Unicorns’ Have Galloped Off

Comparing real estate metrics between different years can be difficult in a typical housing market. This is because there may be inherent variability in the market, which can make such comparisons less meaningful or accurate. Unforeseen events can arise and have a substantial impact on the circumstances and outcomes being analyzed, further complicating the comparison.

Comparing this year's numbers to the two "unicorn" years we recently experienced is almost futile. By using the term "unicorn" in this context, I am referring to years that are exceptionally rare and extraordinary.

“Something that is greatly desired but difficult or impossible to find.” 

The pandemic profoundly changed real estate over the last few years. The demand for a home of our own skyrocketed, and people needed a home office and big backyard. 

• The real estate market witnessed waves of both first-time and second-home buyers entering the market. Additionally, the already low mortgage rates were pushed to unprecedented historic lows. The implementation of forbearance plans played a significant role in nearly eliminating foreclosures. Furthermore, home values experienced levels of appreciation that had never been witnessed before.

reviously, the real estate market was characterized as "greatly desired but difficult or impossible to find," resembling a rare and elusive phenomenon. It was akin to a "unicorn" year, denoting its exceptional nature.

However, at present, the market is gradually returning to a more conventional state. The once abundant presence of these elusive "unicorns" has diminished, indicating a shift towards normalcy.

Comparing today’s market to those years makes no sense. Here are three examples: 

Buyer Demand 

Despite the prevailing headlines suggesting a scarcity of buyers, it is essential to acknowledge that there is still a considerable volume of home sales occurring in the United States, with over 10,000 houses being sold each day. While it is true that buyer demand has decreased from the extraordinary levels witnessed during the "unicorn" years, a comparison to more typical years (such as 2017-2019) reveals that buyer activity remains robust, as indicated by data from ShowingTime (refer to the graph below).

Home Prices

It is important to note that comparing the current home price increases to the past couple of years may not provide an accurate perspective. According to Freddie Mac, both 2020 and 2021 witnessed historic levels of appreciation in home prices. To provide a more comprehensive picture, the graph below also demonstrates the price trends observed during the more typical years of 2017-2019.

It is evident from the data that home value increases are gradually aligning with more typical patterns. In the second half of 2022, there were a few months characterized by minimal depreciation. However, as per Fannie Mae's analysis, the market has since reverted to a more normal rate of appreciation in the first quarter of this year.

Foreclosures 

Some attention-grabbing headlines have emerged regarding the percentage increases in foreclosure filings, which may appear alarming at first glance. However, it's crucial to understand that these percentages reflect increases over historically low foreclosure rates. The graph below, sourced from ATTOM, a property data provider, provides further information on this matter.

With the expiration of the foreclosure moratorium, it is expected that there will be an increase in foreclosure numbers compared to the past three years. It is important to acknowledge the unfortunate reality that some homeowners face the distressing experience of losing their homes to foreclosure every year, which deeply affects their families. However, when we consider the current figures in context, we can recognize that the levels of foreclosure filings are returning to the more typical range observed during the years of 2017-2019.

Bottom Line

The housing market is likely to generate disconcerting headlines throughout this year, primarily due to inappropriate comparisons to the exceptional "unicorn" years. To ensure that you maintain a proper perspective, it is advisable to seek the assistance of an expert who can provide guidance and insights. By connecting with an expert, you can have a knowledgeable professional by your side to help you navigate the housing market and keep things in the right context.