Comparing real estate metrics from year to year can be challenging in a normal real estate market. This is due to possible fluctuations in the market making the comparison less meaningful or accurate. Unforeseeable events may have a significant impact on the circumstances and results compared.
Comparing this year’s numbers to the two “unicorn” years we’ve just witnessed is almost worthless. With “unicorn” this is the less common definition of the word:
“Something that is highly sought after but difficult or impossible to find.”
The pandemic has profoundly changed the real estate market in recent years. The demand for home ownership skyrocketed and people needed a home office and a large yard.
- Waves of first and second home buyers poured into the market.
- Mortgage rates, already low, have been pushed to historic lows.
- Foreclosures were almost completely ruled out by the forbearance plan.
- Real estate values reached an unprecedented level of appreciation.
It was a market that has always been “highly sought after, but difficult or impossible to find”. A “unicorn” year.
Now everything is back to normal. The “unicorns” galloped away.
It makes no sense to compare today’s market with those of yesteryear. Here three examples:
Looking at the headlines, you might think there aren’t any buyers out there. We’re still selling over 10,000 homes a day in the United States. Of course, buyer demand has decreased compared to the two “unicorn” years. But if we compare it to normal years (2017-2019), according to ShowingTime, we can see that buyer activity is still strong (see chart below):
We cannot compare today’s home price increases to those of recent years. According to Freddie Mac, 2020 and 2021 each saw historic appreciation numbers. Here’s a chart that also shows the more normal years (2017–2019):
We can see ourselves returning to more normal home appreciation. The second half of 2022 saw several months of minimal depreciation. However, according to Fannie Mae, the market has returned to more normal appreciation in the first quarter of this year.
There have already been some startling headlines about the percentage increase in foreclosure requests. Of course, the percentages will increase. It is an increase from historically low foreclosure rates. Here is a graph with information from ATTOM, a real estate data provider:
After the end of the moratorium on foreclosures, there will be an increase compared to the last three years. There are homeowners who lose their home to foreclosure every year and it is heartbreaking for these families. But if we put the current numbers in perspective, we’ll find that we’re actually going back to normal filings from 2017-2019.
There will be some very worrying headlines in the real estate market this year. Most will be due to inappropriate comparisons to the “unicorn” years. A real estate professional is a great resource to help you stay on the right track.