Forsyth County Area Real Estate Market Aug 6 2015

Tim Renshaw
Published on August 6, 2015

Forsyth County Area Real Estate Market Aug 6 2015

Forsyth County Area Real Estate Market Aug 6 2015

Market Update Summary:

The local housing market in the Forsyth County area remains strong. The word is getting around and sellers are getting more active, but not at all keeping up with demand. Houses are moving quickly (30 days and under for past 3 months). Sellers are getting 98% of their asking price. Consequently, if you are considering listing, but wondering if you missed a hot opportunity, the answer is a definite, no, you haven’t missed it! Contact me to discuss your needs and take advantage of this opportunity.

This month’s report is not all that different than the last couple months. The local Cumming, GA / Forsyth County market is strong for sellers. Rates remain relatively low historically, so buyers are out in droves looking for their first home, next home and even 2nd and investment properties.

Scroll down toward the last half of this report for charts and data to support my summary analysis and conclusions.

<Note: Click any image to enlarge>

New Housing Bubble Forming?

There have been some recent news reporting asking this question. Here’s an example from CNN Money. Or just Google “new real estate housing bubble forming?“.

Bubbles are bad, right? Well, bubbles have a lot of factors involved, generally the largest factor being a mis-match of market participant’s expectations vs. market realities. Those market realities may involve the general economy, how long housing will continue to appreciate at a high rate, how long rates will stay low, how much the government can actually prop up an industry till the next election, etc.

Historic Monthly Sales Volume through July 2015There a variety of charts folks look at similar to the one to the right and see a peak in 2007, pre-bust and an equivalent peak now and conclude we have an “overheated, bubble forming” environment.

But is that a reasonable conclusion to draw?

There are a few arguments against there being a forming bubble.

  1. Inflation needs to be taken into consideration when comparing $$ volumes over time. Yes, we all know that, but the bust was about 8 years ago. That’s nearly a decade difference. Consequently, equivalent looking “peaks” aren’t equivalent. Today’s peak adjusted for inflation is lower than the 2007 peak. Adjusted for inflation today’s prices are back to 2005 levels. This is decent argument, but I don’t find it all that reassuring, you?
  2. Historic Data for the Mortgage Credit Availability Index - Forsyth County Area Real Estate Market Aug 6 2015The mortgage industry, encouraged by terrible government policies, was completely out of control. Note this chart showing how “hot” mortgage availability was. Everyone was financing, refinancing and generally at higher levels than their income could afford (see next point). The mortgage industry is taking a more traditional, conservative, sustainable approach.
  3. Median Payment to Income Ratio - Anti-Bubble - Forsyth County Area Real Estate Market Aug 6 2015Homeowner expectation for a continuing, unending boom are reflected in just how much the average homeowner was spending on their home as a percentage of their income. The median homeowner was spending 28% of their income on housing!  Remember that median means that half were above that median number! The real estate and overall economic crash brought some much needed expectation adjustment to the market. Full Joint Center for Housing Studies of Harvard University Report.

So is there another bubble forming? I don’t believe so. I’ve provided you three reasons why the overall market data doesn’t support a bubble forming right now. Yes, inflation is a factor, but not all that convincing to me. However, the mortgage industry getting their act together and not relying on government policy to drive their decisions combined with consumers getting their minds right about what they should be investing relative to their income, these two points I find completely convincing and reassuring. Nick Timiraos of the Wall Street Journal put it best in a recent tweet:

“Predictions of a new national home price bubble look unfounded for now, according to data.”

Related: What is a Housing Bubble? And is One Forming?

Rates going up or not?

Freddie Mac Mortgage Rates and Projections - Forsyth County Area Real Estate Market Aug 6 2015Freddie Mac seems to think so. Market conditions and the fact that rates are historically low seem to indicate that such a prediction has merit. I suspect they will rise. However, don’t panic! Higher is purely a relative term. Of course, we could get some big surprise and have another global adjustment as China’s market is collapsing (government policies to the non-rescue again! It doesn’t work for communists any better than for capitalist headed toward socialist states.). Counter intuitively, rate spikes, when we get one, tend to drive buyers into the market to get what are perceived as lower rates as they head upward.

Last week, in a CNBC article, Matt Weaver of Florida-based PMAC Lending explained the impact an increase in rates will have:

“These increases really help the home-buying market. It really gets buyers to really understand that ‘wait a minute, rates are at an all-time low, let’s react now, let’s react before they go higher’.”

Here’s another good article, What’s the over / under on an interest rate hike by the end of 2015?
Anemic recovery, weak jobs numbers fuel speculation from August 5, 2015 by Trey Garrison. See what you think.

Charts, Data and Analysis of Latest Statistics through July 2015

The number of new listings combined with the low months of inventory shows that sellers have gotten the news, but there remains a lot more demand than supply. This, even while new listings remained strong and increased in July when, historically, they start to drop heading into the last half of the year. It will be interesting to see if sellers continue to understand what is happening right now as we head into fall.

Number of New Listings through July 2015 - Forsyth County Area Real Estate Market Aug 6 2015

Months of inventory remains at 4 months for the past 4 months. Low relatively to the past and low compared to traditional, balanced market = 6 months.

Historic Months of Inventory through July 2015 - Forsyth County Area Real Estate Market Aug 6 2015Months of Remaining Inventory: This is the current number of active listings divided by the monthly sales rate. Consequently this statistic gets you a number relating both supply and demand. Since they are related directly this is quite handy. Traditionally, a balanced market rate is about 6 months.

 

The low number of Active Listings further illustrates just how little inventory is available relative to the past, “dark” years after the real estate market bust.

Historic Count of Active Listings through July 2015 - Forsyth County Area Real Estate Market Aug 6 2015

Given low inventory and high demand, it is no surprise that Sales Prices are strong!

Historic Median Sales Price through July 2015 - Forsyth County Area Real Estate Market Aug 6 2015

Though prices are up (sellers rejoice!) buyer demand is such that houses are moving quickly! Median Days on the Market has been 30 days or less for the past 3 months!

Historic Median CDOM through July 2015 - Forsyth County Area Real Estate Market Aug 6 2015

Need proof that buyers are swarming? Sellers are getting over 98% of what they are asking for the past 4 months.

Historic Close Price to List Price Ratio through July 2015 - Forsyth County Area Real Estate Market Aug 6 2015

Now is a great time to be in the market for buyers and particularly sellers! This is a bandwagon upon which to jump. The weather is hot and so is the market!

Forsyth County Area Real Estate Market Aug 6 2015
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