This is an expanded version of a piece that appears in the recent issue of Louisville Magazine.
The Simple Yet Profound Role of Shelter – Keeping Real Estate in Perspective
- By Jay Gulick, Managing Broker + Partner
One thing is certain if you have a reputation for working in the real estate business: no matter where you go, people ask you to weigh in on the state of the market. The grocery, the gym, cocktail parties, weddings, it doesn’t matter where you are, you invariably get hit with a how, as in how is the real estate market? This is particularly true in times of uncertainty or instability such as the months following the 2008 recession or now during the ever-evolving COVID-19 pandemic.
I’ve always considered it an honor to be asked about the market. One, because it’s nice when people value your opinion about anything. Two, because a person’s home is typically their most valuable financial asset. And three, because even though home ownership represents the largest number on a person or family’s personal balance sheet, it means so much more, especially during times of crisis like we are experiencing now.
Let’s start with what a blessing it is to own a home of your own. In its 2018 Annual Point-In-Time Count, the federal Department of Housing and Urban Development (HUD) reported that 552,830 people in the United States were experiencing homelessness in a single night (33% of whom were families with children). In 2019 the Coalition for the Homeless census identified 6,986 homeless people in Louisville. Because it’s difficult to find and track the homeless population, I suspect the reported numbers are on the low side. The last several months of social distancing and self-quarantining have been difficult even for those of us who have a home in which to take shelter. Imagine trying to follow...
Will 40291 Again Be The Most Popular Zip Code in Louisville? There were 773 real estate sales in 40291 in 2019 making it the most popular zip code in the Louisville MLS area by number of transactions. Bisected by the Gene Snyder Freeway in southeastern Jefferson County and close to The Parklands’ Broad Run Park, the average sale price was $225,449.
Historically Low Mortgage Rates Will Continue – Leading housing economists suggest that 30-year fixed mortgage rates should stay around 3.8 percent for 2020.
Low Rates Give Buyers More Purchasing Power But Inventory Remains Elusive – In relative terms buying power has increased to historically high levels but there is still a shortage of inventory. In Louisville, the absorption rate has hovered around 3 months of inventory for the last several years and is even less, sometimes fewer than 2 months, for houses under $200,000 (A balanced market – one favoring neither sellers nor buyers – has six months of available inventory). New construction starts are still a fraction of what they were a decade ago and the new homes that are being built tend to be more expensive and suburban, outside the more urban, walkable neighborhoods favored by younger buyers.
Generational Buyer/Seller Dynamics – According to Realtor.com Chief Economist George Ratiu the largest population cohort in the country (those born in 1990) will turn 30 in 2020 and represent 4.8 million people hitting peak home buying...
The first half of the 2018 Louisville real estate market was marked by home prices continuing to rise faster than a porch thermometer on a sweltering July afternoon. From January 1 through June 30, the average sale price across the Louisville market was up 5.8% to $217,101 (from $205,194 for the same period in 2017). The median price was $177,500 vs. $169,900 a year ago. For the month of June, that average sale price was a staggering $237,458 (five years ago in June 2013 the average sale price was $195,411).
Rising home prices continue to be driven by a shortage of inventory. For the entire Louisville MLS (multiple listing service), the inventory of available properties was 7% lower than for the first half of 2017. The total number of homes sold from January 1 through June 30, 2018 was 8,516 vs. 8,706 or 2.2% less than the same period in 2017. The inventory situation may be improving slightly according to the industry association the Greater Louisville Association of Realtors (GLAR).
Interest rates have risen modestly and mortgage rates have followed suit with a recent 30-year fixed rate at approximately 4.5% according to Bankrate.com (this compares to about 4% for this time in 2017). Most analysts expect rates to continue to rise gradually through at least the end of 2019.
In its mid-year market analysis, GLAR reported more than 4,000 properties for sale at present compared to 3,000 just a few months ago. As has been the case for the last few years, move-in ready homes under $250,000 continue to set the pace and are selling quickly, often in multiple offer situations.
The high-end market also continues to be robust with 347 sales of properties between $500,000 and $999,999 in 2018 vs. 320 for the same period in 2017. Sales of properties priced at $1 million plus also showed limited growth with 41 sales in 2018 vs. 37 in 2017.
The question on most consumers’ minds seems to be: How long can this bull real estate market last?...
The year 2017 in Louisville residential real estate was marked by an acute shortage of houses priced under $200,000, historically high average selling prices (ending the year at approximately $208,000 vs. $175,000 in the last boom year of 2007, and up from $197,000 in 2016), and a historically short amount of time the average home stayed on the market for sale (just 44 days compared to 77 in 2007, and down from 51 days in 2016).
The high-end market in 2017 also showed impressive year-over-year gains. 682 properties sold for $500,000 - $999,999 vs. 581 in 2016 – a 17% increase. There was a 68% increase of properties that sold for $1 million or more in 2017 with 74 vs. 44 million dollar plus sales in 2016.
Here at Kentucky Select Properties we enjoyed our best year ever with $309 million in total sales volume, an increase of $37 million or 13.7% over 2016 (which had previously been the best year in company history).
4 Items of Note Regarding Residential Real Estate and the new Federal Tax Law
Capital Gain Exclusion - One of the most important provisions of the new tax law for many homeowners was not a change but a vote for the status quo with regards to the exclusion of capital gains on the sale of a principal residence. As long as you have lived in your principal residence for 2 of the 5 years immediately preceding the sale you remain exempt from paying tax on up to $250,000 of gain as a single filer and up to $500,000 when married filing jointly.
Mortgage Interest Deduction – The new law reduces the limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans of up to $1 million are grandfathered and are not subject to the new $750,000 cap. Under the new law you will no longer be able to deduct the interest on home equity loans (unless the proceeds are used to substantially improve...
From Insider Louisville: From January through November 2015, there had been 10,548 properties sold in Jefferson County. This year we’re up 5.58 percent with 11,137 units sold. All while Louisville homebuyers had far fewer choices! With only 304 homes needed to top our all-time record, it’s all but assured that 2016 is a record year for Louisville real estate. Read more.
From The Courier-Journal.com: More than 100,000 Jefferson County homeowners – mostly in St. Matthews and the East End – will face property reappraisals next year and probably suffer “sticker shock” too when future tax bills arrive, the top assessment official said. "Home sales and values are skyrocketing, and sales drive the bus" in how property is evaluated for tax purposes, Jefferson Property Valuation Administrator Tony Lindauer said in late October. Read more.
While we do our best to assist buyers and sellers throughout the community, Kentucky Select agents excel in a few particular Louisville neighborhoods and market segments.
Based on recently released statistics from the MLS and BrokerMetrics® for the first half of 2016 (January through June), we’re excited to share that Kentucky Select had the leading market share by total sales volume - in all price ranges - in the following zip codes:
- 40204 (Parts of Germantown, Cherokee Triangle and the Original Highlands)
- 40205 (Upper Highlands, Cherokee Park and parts of Seneca Park)
- 40206 (Clifton, Crescent Hill,, Avalon, Lexington Road and Cherokee Gardens)
- 40207 (St. Matthews, Indian Hills, Rolling Fields)
- 40222 (Crossgate, Glenview Manor, Glenview Hills, Northfield and Graymoor/Devondale)
- As well as the top total sales volume of properties that sold for $1 million or more for the entire Louisville market
Since our agents know and work these areas so effectively, we thought we’d share some insights into market dynamics in these 5 zip codes as well as the Louisville luxury market. As a reminder, a market's absorption rate measures the rate at which available homes are sold during a given time period. Generally, an absorption rate of 6.0 months inventory indicates a balanced market of supply and demand. As you can see from the tables below much of Louisville is experiencing a severe shortage of inventory (absorption rates of around 2 to 2.5). Because of the lack of inventory much of Louisville is in the midst of a very heated seller's market.
From Insider Louisville and Tre Pryor: Ok, pop quiz! (applause) First question: In what month were Louisville homes selling the fastest? You guessed it, May! Second: What month had the lowest absorption rate in Louisville real estate history? Yes, again it’s May! Read more.
Economist John Kenneth Galbraith once quipped, “There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know.” Keeping this in mind, it is with a sufficient dose of humility that we offer a few thoughts on factors that may impact the Louisville residential housing market next year.
- Because of an ongoing lack of inventory it will likely continue to be a seller’s market in 2016. Absorption rate measures the rate at which available homes are sold in a specific real estate market during a given time period (calculated by dividing the total # of homes by the number of sales per month). A balanced market – one that favors neither buyers nor sellers – has an absorption rate of 6 months. According to a December 22 post from Louisville Homes Blog, November Louisville’s absorption rate was an eye-opening 3.68 months. Additionally, there has been nearly a 20% decline in the number of active listings since November 2014.
"There are two kinds of forecasters: those who don’t know, and those who don’t know they don’t know." - John Kenneth Galbraith
- Basic economics tells us that with lower supply one can expect higher prices. But even with a lack of inventory there may be a ceiling on home appreciation for the next few years. The S&P/Case-Shiller Housing Index estimates that nationally home prices will rise 3% in 2016 and 2017. This contrasts with an annualized growth rate of 9.5% since the end of 2011, when the Index declared the housing market had hit bottom after the recession.
- The recent decision by the Federal Reserve to raise the federal funds rate likely signals the beginning of the end for historically rock bottom mortgage rates. This is not to say rates...
By Satinder Haer
Buying a home is one of the biggest decisions people make in their lifetimes. It’s often a stressful purchase because home values rise and fall outside of the homeowner’s control. However, purchasing in an area with rising home values can give you a degree of confidence about your investment.
If you’re looking for homes in Louisville, consider one of these three neighborhoods that experienced the most appreciation in the past year and are forecasted to have the sharpest increase in home values during the next year.
The tiny neighborhood of Bashford Manor has had an unprecedented amount of growth in the last two years. The median home value in Bashford Manor is currently $105,900, up nearly $12,000 from May 2014. The growth is not slowing down either, making the investment stronger. On top of the 13.4 percent increase in home values last year, another 6.9 percent increase is predicted throughout the next year. Bashford Manor is a great choice for families who want to live in a residential area with amenities just a short car ride away. The Louisville Zoo and Beargrass Creek State Nature Preserve are less than a 10-minute drive northwest of Bashford Manor, while Target, Walmart and other departments stores are just south of the area.
Located in the heart of central Louisville, Old Louisville is the hub of all the action. This neighborhood is home to the University of Louisville, hosts the annual St. James Court Art Show and features stunning Victorian-era homes. Currently the...
Our fascination with numbers can lead to some very interesting conversations about the state of Louisville’s real estate market. For instance, this past month, someone in the office asked which area we thought sold better, urban homes inside the Watterson, or the more suburban areas outside of our expressway system.
Convinced this was a no-brainer, we piped up with an opinion, but before we had actually dug through the numbers to prove our case. Before you read any further, ask yourself, if we were to look at four “urban” zip codes, and compared them to another set of four that were further east, let’s say “suburban”, which set of sold homes would you expect to get closer to their asking price? As any seasoned Louisville Realtor® will attest, there are two distinct groups of buyers in town – those who will happily live outside the Watterson and those who break into a light sweat when they venture outside the borderlands of I-264.
Back to the “urban” vs. “suburban” zip codes. That scenario is exactly what we graphed above. Using 40204, 40205, 40206 and 40207 as the urban set, we compared the ratio of sold prices to listing prices (SP/LP%) of these homes along with a suburban set comprised of zip codes 40222, 40223, 40245 and 40059.
We fully expected this to be a pretty graph and plot out very quickly with one group clearly outperforming another. And yet…
Unless you predicted that there would be no pattern at all, we think it would be fair to say that there doesn’t appear to be a relationship at all between where a home is located...
The average price of homes sold in Jefferson County in the first four months of 2015 was $181,197, nearly a $20,000 increase over the same 2014 period, the Greater Louisville Association of Realtors has reported.Home sales were up sharply across the association's three-county metro area, which includes Jefferson, Bullitt and Oldham counties. Read more.
Like most people, when the new year rolls around, I like to take a little time out and reflect on the year that was, and the year that is ahead of us. With real estate, I’m a little hesitant trying to predict what will happen in our local market over the next 12 months. But I can certainly take a look at what has happened, not only last year, but maybe even stretching a little further back than 2014.
For the entire Louisville MLS, which includes several neighboring counties adjoining Jefferson, such as Shelby and Oldham counties, 2014 was the third year in a row that saw a rise in the number of units sold when compared to the preceding 12 months.
From a recent low of 11,720 units sold in 2011, each of the next three years saw a few more sales to reach this past year’s total of 16,082 sold properties.
I have seen different numbers being reported, with some outlets even saying that the MLS saw a decline in the number of homes sold between 2014 and 2013. So to clear up any confusion and to be fully transparent, all of the numbers that I used for these graphs were pulled directly from the MLS, and included all single family homes along with multi-family properties, rentals and vacant land or lots.
I chose to use all the categories of residential sales, and not focus on single family homes only because I wanted this short article to be general in nature, and to be all inclusive since I don’t know which types of properties each reader might find most interesting. When I turned the tables and focused on how well Kentucky Select Properties has fared as a Brokerage over the past few years, I used the exact same criteria.
As Kentucky Select Properties celebrated its 10th Anniversary (thank you!) this year, the numbers appear...
Some solid fundamentals on buying or selling real estate from the folks at Realtor.com:
When it comes to buying a home there are many different steps to consider. It can be a very confusing time for the first time home buyer. Putting your home up for sale can be equally demanding. Realtor® Billy Malone of San Marino, California recently compiled his list of ten things that those shopping for a home or putting one on the market need to keep in mind:
Buying and selling a home can be the most stressful process you may ever experience. Even if the process is not overly stressful, it can often be a personal and emotional transaction and will be one of the most significant. Owning a home is the American dream, it is where we build our lives and families, and it should not evolve into the American nightmare. So how do you make sure that you get to live the dream and live it well? One method is to refer to one of those Real Estate checklists you come across online. Read more.
View more photos of this spectacular home and other Louisville luxury listings at Business First Home of the Day.
First-time home buyers haven’t been much help in the housing recovery, but it isn’t because young adults stopped aspiring to become homeowners. “Though they see a tough road to affording Homeownership, younger renters [those between the ages of 18 and 39] still are very likely to say that it’s in their future plans,” wrote Sarah Shahdad, strategic planning analyst with Fannie Mae, commenting recently on Fannie Mae’s National Housing Survey. “The vast majority still plan to own someday; about half plan to buy a home the next time they move.” Read more.
(Reprinted from InsiderLouisville.com) Signs that the real estate apocalypse has finally passed. Kentucky Select Properties just reported the sale of a $3.05 million house on tony Avish Lane, the ritzy Harrods Creek enclave off River Road. How important is this sale to all of Louisville (even to those of us not buying, or selling, seven-figure houses at the moment)? Read more.