The Real Estate Unicorns Have Galloped Off
Trying to figure out real estate metrics from one year to another can be challenging. That can be due to an ever-changing real estate market making the comparison less accurate. Unpredictable events can have a significant impact on the circumstances and outcomes when comparing.
Comparing this year’s real estate numbers to the two ‘unicorn’ years we just experienced is almost worthless. By ‘unicorn,’ this is the less common definition of the word:
“Something that is greatly desired but difficult or impossible to find.”
The pandemic profoundly changed real estate over the last few years. Buyer demand for a home-of-their-own skyrocketed, and people found themselves needing a home office and bigger backyard. We discovered the following:
Waves of first-time and second-home buyers entered the market.
Already low mortgage rates were driven to historic lows.
The forbearance plan all but eliminated foreclosures temporarily.
Home values reached appreciation levels never seen before.
It was a market that forever had been “greatly desired but difficult or impossible to find. Thus a Unicorn year was born.
Now, things are getting back to normal. The Unicorns’ have galloped off.
Comparing today’s market to those years makes no sense. Here are three examples why:
Buyer Demand
If you look at the headlines, you’d think there aren’t any buyers out there. We still sell over 10,000 houses a day in the United States. Of course, buyer demand is down from the two ‘unicorn’ years. But, according to ShowingTime, if we compare it to precovid years of 2017-2019, we can see that buyer activity is still strong (see graph below):
Home Prices
We can’t compare today’s home price increases to the last couple of years. According to Freddie Mac, 2020 and 2021 each had historic appreciation numbers. Here’s a graph also showing the more precovid years of 2017-2019:
We now see that we’re returning to more normal home appreciation. There were several months of minimal depreciation in the second half of 2022. However, according to Fannie Mae, the market has returned to more normal appreciation in the first quarter of this year.
Foreclosures
There have already been some startling headlines about the percentage increases in foreclosure filings. Of course, the percentages will be up. They are increases over historically low foreclosure rates during 2020-2022. Here’s a graph with information from ATTOM, a property data provider:
There will be an increase over the numbers of the last three years now that the moratorium on foreclosures has ended. There are homeowners who lose their home to foreclosure every year, and it’s heartbreaking for those families. But, if we put the current numbers into perspective, we’ll realize that we’re actually going back to the normal filings from 2017-2019.
Bottom Line
There will continue to be very unsettling headlines around the housing market for the remainder of this year. Most will come from inappropriate comparisons to the ‘Unicorn Years. I hope this data helps you keep everything in the proper perspective so you are better informed on making decisions.