2021 Brings in New States Topping the Foreclosure Charts

Key Takeaways

August 26th marked the lifting of the 17-month federal foreclosure moratorium; we at Knock wanted to look into the states most impacted by foreclosures throughout the Covid-19 period and the indicators contributing to their susceptibility. 

Overall, data shows that foreclosures have down-trended nationally year-over-year since 2010. This can be attributed to the economy’s recovery over time from the Great Recession. In the years preceding this event, we have seen many improvements in pertinent metrics vital to our nation’s housing health, including rises in income, investment, and lowering interest rates. This overall increase in economic health has led us to a point in 2020 where foreclosures have hit their lowest levels in a decade. However, with the Covid-19 unemployment spike felt across the country, and the ending of the foreclosure moratorium, we are beginning to see an uptick in foreclosures in 2021, with increases in certain states that have had fewer relative foreclosures historically.

Line graph indicating the downward trend of real estate owned foreclosure transactions from 2015 to 2021

Analysis of the states with the highest percentage of real estate owned (REO) transactions out of total fair market transactions revealed that Virginia and Georgia had taken the lead, outpacing New Jersey and Mississippi, which had the highest percentage of foreclosures in previous years. To dive deeper into the circumstances that caused this shift, we selected a combination of metrics that encompass both current market conditions and longer rooted trends such as, home price appreciation, unemployment rates, debt to income ratios, income inequality, and the time it takes for a foreclosure in a state. 

We found that home price appreciation changes, unemployment rates, and debt to income ratios had a strong correlation to REO transactions when regressed historically, with income inequality showing a moderate correlation. This can be attributed to home price appreciation's integral role in maintaining and growing homeowner’s equity, as a home is one of the largest investments and possible returns made in a person's lifetime. Without the financial capacity to save, unemployment is the leading force in foreclosure rates as high debt to income ratios indicate more long term trends of financial overburden. Furthermore, income inequality plays a part in identifying populations where these aforementioned forces can have a stronger impact. When combined, the foreclosure response to these sensitivities can either be delayed or accelerated by that state's approach to foreclosure processes.  Whether a state has judicial or non-judicial routes ultimately determines its impact on delinquent homeowners.

States with judicial foreclosure processes, meaning the lender must file suit against the homeowner in a court of law, tend to take longer and can span years from the initial notice of delinquency to the loss of a home. Those states with non-judicial foreclosure processes can take as little as 100-200 days. This stark distinction in timing between foreclosure procedures gives homeowners in default in non-judicial states less time to access remedies and come up with missed mortgage payments. Furthermore, another safeguard for some states not seen in the top foreclosure list is those with added protection for homeowners in the foreclosure process. States like California, Colorado, Minnesota, and Nevada all passed laws to increase homeowner protections, further slowing down the process due to the requirements lenders and servicers must comply with under these laws.6

However, the introduction of Virginia, Georgia and New York to the foreclosure top 5 shows an evolution from the states chronically seen at the top of the foreclosure list. Our analysis found that home price appreciation has become a double edged sword when it comes to foreclosures in 2021. Previously, lack of home price appreciation has been attributed to underwater mortgages and high foreclosure rates, but in 2021, we are finding that large increases in home price appreciation is proving just as detrimental to states with higher percentages of at risk homeowners. States with high unemployment, income inequality and debt to income ratios are seeing upticks in foreclosures as homeowners inability to keep up with the tax burdens associated with the drastic year-over-year increases in market values takes effect. In 2021, on average Virginia’s property taxes increased 9%, Georgia’s at 14%, and New York at a whopping 21%. These added tax burdens are disproportionately burdensome to the long term homeowners who stayed put amidst the pandemic as their assessments reflect the market values of the homes that did sell, and the homeowners who could afford them. This additional cost to homeowners is one they are expected to bear as the federal foreclosure moratorium and its forbearance came to an end. 

Chart listing the top 5 foreclosure states from January to September 2021: Virginia, Georgia, New Jersey, Mississippi, New York.

Within these top states, the townships with the most REO’s are; Richmond, VA (11%), Chattanooga, GA (5%), Vineland, NJ (5%), Jackson, MS (2%), and Corning, NY (5%).

This causality in foreclosure rates has shifted from the signifying factors we have grown to know in previous years. Below find the states more synonymous with high foreclosure rates since the Great Recession;

Chart indicating the top 5 foreclosure states in 2019: New Jersey, Mississippi, Delaware, Connecticut, New Mexico

Within these top states, the townships with the most REO’s were; Vineland, NJ (45%), Jackson, MS (13%), Dover, DE (7%), Torrington, CT (12%), and Albuquerque, NM (6%).

These states were some of the slowest to recoup their peak home price values from pre-Great Recession, and those hit hard with unemployment recovery from 2009 to 2019. The percent each state recuperated from their fall from pre-Great Recession home price peak’s by 2019 show: New Jersey (10%), Delaware (-6%), New Mexico (11%), Mississippi (8%), and Connecticut (-11%), compared to the national average home price appreciation recovery of 23%. Since the Great Recession, this failure for many states to regain the home value lost, left many long-term homeowners with underwater mortgages until recently.  

Pandemic-induced housing demand has jump-started home price growth across the country, providing year-over-year increases at nearly 15-20x the average rates felt over the last decade for the states reflected in the 2019 chart above. The HPI growth of the states previously at the top of the foreclosure charts from 2019 to 2021 include Connecticut (22%), New Jersey (20%), Delaware (19%), New Mexico (19%), and Mississippi (14%). In all states, this marked full recuperation of peak home prices from pre-Great Recession times, as well as home price appreciation increases more inline with national averages. If home price appreciation continues for these states with high foreclosure rates in recent years, we expect the percent of real estate owned transactions to remain low in these states.

Sources

  1. The investopedia team. “Unemployment Rate.” Investopedia.com, Investopedia, 28 September 2021, https://www.investopedia.com/terms/u/unemploymentrate.asp. Accessed 2021.
  2. Investopedia team. “Debt-to-income(DTI) ratio.” Investopedia.com, Investopedia, 14 March 2021, https://www.investopedia.com/terms/d/dti.asp. Accessed 2021.
  3. Investopedia Team. “House Price Index(HPI).” Investopedia.com, Investopedia, 26 August 2021, https://www.investopedia.com/terms/h/house-price-index-hpi.asp. Accessed 2021.
  4. Investopedia Team. “Gini Coefficient.” Investopedia.com, Investopedia, 28 April 2021, https://www.investopedia.com/terms/g/gini-index.asp. Accessed 2021.
  5. Perez, Yarilet. “Foreclosure Definition.” Investopedia, 2021, https://www.investopedia.com/terms/f/foreclosure.asp. Accessed 6 December 2021.
  6. Loftsgordon, Amy. “Special Foreclosure Protections in Colorado, Minnesota, and Nevada.” Nolo, https://www.nolo.com/legal-encyclopedia/special-foreclosure- protections-in-colorado-minnesota-and-nevada.html. Accessed 6 December 2021.

Data Resources

  1. MLS data - ATTOM data solutions
  2. Unemployment  Rates - U.S. Census Bureau
  3. HPI - Federal Housing Finance Agency 
  4. Debt-to-income ratio - U.S. Census Bureau
  5. Income Inequality/ Gini Coefficient - U.S. Census Bureau
  6. Average days to foreclosure - ATTOM data solutions

Methodology

We at Knock wanted to dive into the dynamics behind foreclosures across the country. We analyzed the states seeing the highest percent of real estate owned foreclosure transactions out of all fair market transactions for the time periods of 2010-2019 and 2021. We chose REO transactions as the measure for this analysis, to show the states who have homeowners in the most final steps of the foreclosure process, and where remedies were ultimately not found. To look into the economic conditions of the states experiencing foreclosure we collected data on their; home price index growth, unemployment rates, debt to income ratio and gini coefficient indexes to determine causality over time of foreclosure rates, and how the impact of those dynamics have changed over time. 

Navigating the Numbers: What Does the Data Released in July Reveal About the U.S. Housing Market?

The U.S. housing market is one of the most highly talked about topics in America today. With the number of reports that seem to come out everyday, it can be difficult to identify which way the real estate market is swinging and whether or not it’s a good time to buy or sell. 

Knock’s mission, aside from making it as easy to trade-in your house as it is to trade-in a car, is to help consumers better understand the real estate market by providing them with more data and transparency than ever before. In line with that mission, we’re excited to begin a monthly blog series helping home buyers and sellers make sense of all the data that gets released about the U.S. housing market, so they can make more informed decisions about what is likely the largest financial transaction of their lives. 

Catching Up on Spring Home Buying Season 

First, let’s recap what’s been happening before this series began. June is typically the end of the busy spring home buying season in most U.S. housing markets. Nearly half of home buyers have children. Since it’s easier to move and settle into a new house once school lets out for the summer, families need to start looking in the spring if they want to get situated before the next school year starts. 61% of these buyers – like the customers we help at Knock – also already have a house to sell.

u.s. housing market suburbs

With homes hitting the market and plenty of people looking to buy, you have the perfect storm to create a housing market uptick. In May, MarketWatch wrote that the market seemed to be reaching a peak, with sales up 2.5% and inventory up 4.9% over the previous month. But S&P CoreLogic Case-Shiller continued to report a deceleration of home sale prices, which had caused a lot of buzz about a potential shift to a buyer’s market during the spring. 

So what actually happened? There are plenty of factors beyond sales and prices that influence the real estate market. In this blog, we’re breaking down the current state of the U.S. housing market, referencing key insights and research along the way to help you see the bigger picture. For now, we’ll focus on the key takeaways from all the reports that came out in July.

Monthly Measures

With so many reports and data sets on the U.S. housing market released seemingly everyday, it can be hard to keep track of what’s most relevant and how everything ties together. Each month you can expect to see new data about a few key indicators: Prices, inventory, sales, new construction, and mortgages. However, something to keep in mind is timing. Some reports reflect data from the month prior, while others, like the S&P CoreLogic Case-Shiller Home Price Indices, actual reflect home sales numbers from two months before. Still, taking a look at these can help us better understand current trends and where the market might be headed. 

Summing Up the Numbers Released in July 

On the whole, the data published in July show an overall flattening of the U.S. housing market. Here’s a high-level look at the month-over-month changes to the key indicators we’ll be addressing in the first half of this post: 

U.S. Housing Market numbers in July

Of course, month-over-month changes don’t necessarily tell the whole story. Let’s explore what the latest numbers mean for you as a home buyer or seller, and what they say about the overall landscape of the U.S housing market. 

Digging into the Data 

Home Sales Keep Ping-Ponging

As we explained, June typically marks the end of the busier spring home buying season, and this year’s numbers are no exception. Many U.S. housing market reports focus on existing homes, or those that have been previously bought and sold. Sales of these homes decreased by 1.7% from May to June, and total sales are down 2.2% since this time last year.

But, things are looking up when it comes to housing contracts; June was the second consecutive month where we saw an increase in pending home sales, rising 2.8% from May. This could be an indicator that spring and summer were positive for real estate sales, and that we should see an uptick in existing home sales in the next month or two, once these deals are finalized. 

Looking only at sales of existing homes, however, doesn’t give us the full picture. After two slower months, sales of new construction homes increased by 7% in June. This brings total sales of new construction homes to 646,000 so far this year, which is significant when you consider existing home sales are at 5.27 million so far for 2019 – it increases total U.S. sales by about 12%. 

Home Price Growth Continues to Decelerate 

When it comes to home buying, price is one of the most, if not the most, critical factors that determines whether or not someone will even consider looking. So what is the current price of a home in the U.S.? Of course, it varies, but the latest numbers show a median price of $285,700 for all home types. This represents an increase of 2.8% month-over-month in June, and the 88th consecutive month of year-over-year price gains. 

Depending on where you live, that may seem reasonable or outrageous. So many people look to the rate at which home prices are changing when deciding if it’s a good time to sell or buy (or both!). The most recent S&P CoreLogic Case-Shiller Indices have shown a deceleration in price growth. In May, the annual gain was 3.4%, which was down from 3.5% in April. 

At the same time, we can’t forget the role new construction plays. In June, the median sales price of these homes was $310,400, 8.6% higher than the median existing home sales price. As more new construction gets built, it can contribute to driving up prices in the neighborhoods they’re in, or even in the market as a whole. 

Mortgage Rates Are Low, But So Are Applications

There’s another important piece to the puzzle that can help give us an idea of where the U.S. housing market is headed: Mortgage applications. Whether you’re buying and selling at the same time or a first-time home buyer, the average American needs a mortgage in order to afford a home. 

Rates have been on the decline, currently at 4.08%, which represents a near three year low. You would think this would drive buyers to start putting in offers, but demand isn’t following suit; in fact, mortgage applications fell 1.9% in mid-July, the fourth straight week of decline. Concerns about rising prices – and lack of available inventory, but more on that in a bit – certainly play a role here, but it really varies by what you’re looking for and from market to market. If you’re buying and selling at the same time, waiting to buy could not only mean missing out on lower mortgage rates, but also on getting a higher price for the home you’re selling. 

Phoenix housing market numbers

Home prices and sales can vary drastically depending on the region. To demonstrate, let’s take a look at our Knock market of Phoenix. The Phoenix market is experiencing a rise in home prices that mimics the area’s temperature, with annual home price gains at 5.7% in May. And the median home price in Phoenix is $289,000, higher than the national average. Still, the statistics show that existing-home sales in the West fell 3.5% in June. Why? These high list prices could be deterring buyers from making a move. 

On the flip side, Dallas home price gains are moving much slower, at 2.7%. Although Dallas’ price increases are slower, the city’s average home price is significantly above the national average, at $399,000. And existing-home sales in the area fell 3.4% in June, showing that prices may be too high for prospective buyers. 

Clearly, the cost of a home is dependent not only upon the type of home or size of it, but where it’s located. Time of year, like the busy spring and summer seasons, and regional demand can also influence home price, based on demand and competition. Taking a look at current market reports, referenced here, can help you get a better understanding of the market in your area.

Buyers May Be Demanding a Different Kind of Inventory

Of course, Americans can’t buy and sell homes if there aren’t homes available to buy and sell. This is what we define as inventory, and it has significant implications for home prices and the market as a whole.

As of June, the U.S. has a 4.4 month supply of homes for sale, slightly above the threshold for a seller’s market, and relatively unchanged year-over-year. Inventory levels for existing homes rose 2.8% month-over-month in June, slightly down from the 2.9% growth seen in May, but significantly less than the 6.4% growth seen in January, a downward trend that’s continued each month. 

When considering home availability, the good news is we aren’t just limited to existing homes. This month the U.S. Census Bureau reported 1,220,000 building permits and 1,253,000 new housing starts. Although building permits are lower than both May 2019 and June 2019, housing starts are up 6.6% from June 2018, showing that more ground is being broken this year. Builders are highly confident in the sale of new build single-family homes, with confidence rising a full point, to 65, in July; this data shows that if interest remains high, builders will continue to deliver.

When it comes to housing inventory, some regions have more supply than others, both existing and new construction. Unsurprisingly, new construction housing in the South is booming. In June, 618,000 new privately‐owned housing units were authorized in the South; this number is significantly higher than any other region in the U.S. With more people migrating from expensive metros, like San Francisco and New York City, to more reasonable, yet growing cities, like Knock’s first market of Atlanta, there is interest in new-build communities that offer big-city amenities at a more affordable price. 

New construction housing numbers July 2019

There are over 1,000 home builder communities in Atlanta today, according to NewHomeSource, and that number is constantly growing. Curbed notes that millennials are the most active homebuyers in the region, so consumer demand and preferences will also play a role here. For instance, a recent Business Insider article highlighted how millennials, driven by current home trends and more eco-friendly lifestyles, aren’t interested in the “McMansions” built and purchased by baby boomers. More millennial home buyers might opt to design a smaller, custom home instead of buying an older model from a baby boomer looking to downsize, which may be contributing to the growing demand for new construction in the region. 

Top of Mind Trends

The data discussed so far helps us keep more regular tabs on what the housing market is doing, but sometimes taking a step back and looking at longer time periods can reveal interesting trends beyond just core indicators. Some of these reports come out every few months or once a year, and others bring entirely different issues to light. Let’s start with an important quarterly report. 

Homeownership Remains High – Even with Millennials 

With all this talk about home buying and selling, we can’t forget a very important indicator on the other side of the real estate market equation: Homeownership. Just how many people in America own homes? According to the US Census Bureau’s just-released report, the overall homeownership rate is 64.1% as of the end of Q2 2019. This rate, which has remained steady in the last few quarters, is at a four-year high. When it comes to homeownership by region, the South (which includes our Atlanta, Charlotte, and Raleigh markets) is even higher than the average at 66%. So why is homeownership at a high? Despite recent talk that said millennials just aren’t buying homes, the data says otherwise.

young family moving in

Millennials finally have enough confidence, and financial stability, to make the leap from renting to buying. Homeownership of people both in the 35 and under bracket and the 35 to 44 age range increased within the last year, proving that the millennial generation is influencing homeownership rates as a whole. About 60% of people between the ages of 35 to 44 are homeowners, demonstrating that people at the higher end of the millennial bracket are in fact purchasing homes. This spike in homeownership among younger generations may not come as a surprise, as mortgage rates sit at an attractive low. 

But, that’s not to say that baby boomers are being pushed out by up-and-comers. In fact, they’re choosing to stay in their homes longer. With longer life expectancies, more years in the workforce, and more independence than their parents and grandparents, baby boomers aren’t hurrying to senior living facilities and selling off their family residencies. According to the same report, 78% of people 65 and older are homeowners. And 75% of people in the 55-64 bracket also own houses. Baby boomers staying put could potentially mean less available inventory in the coming months and more competition for people looking to purchase. 

Affordability is Top-of-Mind 

So, what is potentially causing declining interest in obtaining a home mortgage? CNBC notes that overall affordability could be to blame. When we say affordability, we mean the ability to afford a home based on home prices vs. income. Although home prices are rising at a slower rate, home buyers, especially first-timers with lower incomes, are probably experiencing sticker shock. With the average existing-home sticker price around $285,000 and the median household income around $61,000, purchasing a house might be simply unattainable, or at least difficult, for many. While people may recognize that interest rates are currently low, they’re trying to look at the bigger picture, including the cost of the home and future payment responsibility in the context of today’s socio economic environment.

However, we may be seeing a more even playing field sooner rather than later. In the hot seller’s market, sellers were confident in listing their homes at a higher price due to buyer demand and competition. This tactic can pay off when competition is fierce and inventory is low, but the reality is that overpricing typically results in discounting the list price later on.

For instance, Knock sees these effects in our own quarterly analyses of the market. Using the same machine learning-driven algorithms we trust to help determine the market value of our customers’ homes, we predict outcomes for on-market listings across 45 of the largest U.S. markets. These Knock Deals Forecasts show that high list prices don’t always result in the seller gaining that extra profit. The data revealed that in Q2, 61.52% of homes sold below their original list price, or at a discount. With a median home value of $227,700, and the median existing-home price around $50,000 higher than value, it’s clear that there is a disparity between home price and value. This comes as no surprise when we look at the amount of sellers who overpriced their listings and then discounted them in order to make the sale. 

Raleigh housing numbers

Taking a look at a market that Knock currently operates in, Raleigh, we see how a smaller secondary city could be facing affordability challenges. The city was ranked on the Top 10 Best Places to Live by U.S. News and has an unemployment rate of just 3.4%, making it an attractive option to people in other markets. So much so, that the area saw a population increase of 18% from 2010 to 2017, with 78% of people coming from out of state. With all this increased competition for homes, it is predicted to be the 15th worst market for finding discounts in our ranking, and was the 13th worst in Q2 2019. 

So, what does this all mean for people looking to buy? A glimmer of hope, maybe, that although you may be surprised by the initial list price, there is the potential to get a discount on your next home. And hopefully it serves as a lesson to sellers as well; overpricing your home doesn’t mean you’ll get that amount you were hoping for. Especially with increased inventory, it’s important not to price yourself out of the running if you want to find a buyer. 

Tying it All Together 

As illustrated in the Q3 Knock Deals Forecast, the U.S. housing market on the whole seems to be experiencing a slowdown. We’re predicting to see a more balanced market, with 65.3% of current on-market homes expected to sell below list price, essentially flat from the Q2 prediction of 63.4%. 

On the one hand, this means we can’t report an exciting jump in opportunities for buyers. On the other, buyers in some of the historically most expensive and competitive markets may find some relief. For instance, markets in California that have consistently been at the bottom of our ranking are also seeing some of the biggest gains in the rates of homes finding discounts. In Q2, San Francisco saw a 15.2% year-over-year increase in the rate of deals, while San Jose saw a 27% increase. A recent Wall Street Journal analysis echoed this slowdown on the West Coast, reporting a decline in home sales and the first reduction in prices since 2012.

washington dc homes

Overall, it seems like most markets should continue to even out as we finish out the summer months. It’s important to note one outlier, however: Washington, DC. The introduction of Amazon’s HQ2 to Arlington, VA is making competition for homes there fierce, with the market seeing some of the biggest declines in opportunities for discounts. Clearly, factors outside of the real estate climate can have an effect on home prices and availability. Keeping up with social and economic trends can help you make more informed decisions on the housing market. 

With all of this information, both on the immediate state of the U.S. housing market and the outlook as a whole, there are plenty of takeaways for both buyers and sellers. We don’t have the exact answer as to where the real estate market is going next, but our goal is to empower you with the right information to make the best decisions for you and your family. So stay tuned – we’ll be back exploring the current state of the industry next month, revealing more insights and trends about the U.S. housing market. 

Looking to make a move?

National Knock Deals Forecast Identifies Miami, Houston and Chicago as Top 3 U.S. Markets for Deals on Home Prices Heading into 2019

Click image link for full infographic 

Knock, on a mission to make trading-in a home as easy as trading-in a car, today released the results of the inaugural National Knock Deals Forecast, predicting which U.S. markets will have the highest percentage of homes that sell below their original list prices heading into 2019, and how these compare to homes sold in 2018.  

“Knock has developed six predictive algorithms to determine how much our Home Trade-in customers’ homes will sell for and when, and we’re excited to bring these insights to consumers nationwide,” said Sean Black, Co-founder and CEO of Knock. “By applying these algorithms, which we call Knock Deals, to the top U.S. markets, we hope to help more home buyers find and act on the best deals, and increase overall market fluidity.”

Leveraging its proprietary predictive algorithms, the company analyzed on-market listings in the largest U.S. MSAs to determine the markets with the highest percentage of homes predicted to sell below their original list prices, or what Knock defines as a “deal.” Knock factors in nearly 200 data points to determine the probability of each home selling at various levels above or below its original list price, and then aggregates those probabilities to get a market-wide prediction. In November, 80% of U.S. homes sold within 4% of the Knock predicted final sale price, and 50% sold within 2% of the predicted final sale price.

Knock also analyzed all 2018 listings sold through the end of November to determine where the most homes sold below their original list prices in 2018. The number one predicted MSA for deals heading into 2019, Miami, also saw the highest rate of deals in 2018.  

“While there’s no denying that home prices have been steadily on the rise, list prices are clearly increasing above realistic levels, corroborated by the study’s findings that over 60% of homes sold well below their original list prices in 2018,” said Paul Habibi, Economic Advisor to Knock and Lecturer at UCLA Anderson School of Management. “The National Knock Deals Forecast builds on these historical sale patterns to predict where home buyers can find the most savings across current on-market listings.”

2018: Overpriced listings led to greater savings off home values

See interactive map of 2018 home sale findings here.

While the rate of home price increases has begun to slow, they are still up 5.1% year over year, according to the S&P CoreLogic Case-Shiller Indices. As prices have gone up, so have home sellers’ expectations of their home values. When sellers price homes aggressively, they often sell not just below their original list prices, but below market value because they sit on the market for a longer period of time. For homes that sold in November, Knock found that 92% of listings that had been on the market two months or more sold below their list prices — 22% more than the rate of all listings that sold below their original list prices in November. Additionally, on average these homes sold for 1.5% less than the overall market.

The effects of unrealistically overpricing homes are also reflected in the difference between sale prices and original list prices of all recently sold homes. In November, Knock found that 70% of listings sold below their original list price across markets. While the annual average is lower at 61%, it is still reflective of the vast majority of markets —  at least 60% of homes sold below original list prices in 27 of the 45 markets Knock analyzed.   

While seasonality plays a role, even in the month with the lowest rate of deals, May, over 55% of listings sold below their original list price. Additionally, a certain degree of price inflation is common, but Knock determined this also was not the main factor in homes selling below original list prices. 39% of 2018 U.S. listings did sell within 2% of list prices, but another 48% of homes sold for 2% or more below list prices. Comparatively, just 13% of homes sold for 2% or more above list prices.

Take the top market Miami, for example: 76% of listings sold at least 2% below original list prices, compared to 3% of listings selling 2% or more above original list prices. Of course, the ratios are very different in a market like SanFrancisco, where 58% of listings sold at least 2% above original list prices. But given that the majority of all U.S. listings still sold 2% or more below list price, it’s clear that these underpriced markets are the exception rather than the norm.

2019: Southern markets to drive increased deals

See interactive map of Q1 2019 forecasted home sale findings here.

Based on predictions of all listings that hit the market in the past six weeks, five out of the 10 top markets for deals are in the Southern half of the U.S. Miami continues to top the list, with Houston, TX, Jacksonville, FL, New Orleans, LA and Tampa, FL also having some of the highest predicted rates of deals heading into 2019.

Average savings are on the rise in these markets. Given that the slowdown of home price increases is just beginning to take hold, we can expect home sellers to continue to set their original list prices on the higher end, which has the potential to result in greater deals for home buyers. Particularly as we head into January, which has historically been one of the best months for deals, the combination of seasonality and the slowing market make the perfect recipe for the increased rate of deals predicted by the Knock Deals Forecast.

For instance, Miami homebuyers saved an average 4.4% off original list prices in 2018, and Knock predicts the average savings will be 6.8% across current on-market listings added within the past 16 weeks. On a home priced within the $450,00-$500,000 range, the range with the highest predicted percent of deals, that could mean an additional savings over 2018 of as much as $10,000.

Days on market are expected to play a similar role heading into 2019 as Knock saw in 2018. 83% of homes that had been on the market for at least two months at the time of the prediction are expected to sell below original list prices, compared to 77% overall. Additionally, average predicted savings for this segment of homes is 6.5%, which is 2.5% more than the nationwide average. To again cite the example of Miami, average predicted savings on homes that have been on the market for at least two months spikes to 10.2%. On a $500,000 home that has lingered on the market, this could mean a savings of up to $50,000 for the buyer.

71% of home sellers are also buying their next home at the same time. One of the greatest roadblocks to market fluidity is these consumers’ inability to afford their next home while selling their old one. By providing them with transparency into pricing patterns and insights into where they can find the best deals through regular national Knock Deals Forecasts, Knock aims to help more sellers move into their next home more quickly, increasing inventory and overall market fluidity. Knock already provides these insights to both buyers and sellers in the markets it is currently operational in, in the form of its unique Knock Deals Home Search Tool and associated alerts.

REPORT METHODOLOGY

Knock trains a suite of machine learning models on historical real estate data going back three years. The models, trained on 200 features across the top U.S. Metropolitan Statistical Areas by population size, are able to predict listing outcomes like the likelihood in selling, the selling price, when various price drops will occur and by how much, and how long it will take to sell. These models take into account seasonal trends, longer-term market trends, and hyperlocal information, inclusive of the real-life pricing activities of individual real estate agents, to make their predictions.

To understand what is happening at the market level, the probable outcomes for each listing are aggregated over all the listings in a market to produce what is likely to happen for the entire market. In order to predict the proportion of upcoming deals to expect in each market, Knock predicts the probability of a listing selling at various levels below the original list price. We also adjust these aggregated probabilities by the likelihood that the listings will sell. These probabilities are then aggregated within each market resulting in a market-wide prediction. 

Additionally, Knock analyzed data on home sales through November 30, 2018 in the same 45 MSAs across various time frames, e.g. year to date, by month, etc., to determine trends in homes selling below original list prices, and how they compare to the Knock Deals Forecast predictions heading into 2019.

Additional factors:

Data for both the predictive and historical analyses sourced from ATTOM Data Solutions.

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ABOUT KNOCK
Knock (www.knock.com) is the first online home trade-in platform, a revolutionary new approach of home buying and selling that makes it as easy to trade-in your home as it is to trade-in your car. Launched by founding team members of Trulia.com, the company uses data science to price homes accurately, technology to sell them quickly and a dedicated team of local licensed experts to guide consumers through every step of the process. Knock’s top tier investors include RRE, Redpoint, Greycroft, Corazon Capital, Correlation Ventures,Great Oaks Venture Capital and FJ Labs. The company has offices in New York, San Francisco, Atlanta, Charlotte, Raleigh-Durham, Dallas and Fort Worth, with several more on the way.   

Is Your House Destined to Fail? 3 Ways to Ensure It Will Sell

There’s no doubt that Atlanta is a hot real-estate market. Inventory is low and prices are higher than ever—giving sellers the upper hand. So, imagine our surprise when Trulia reported that more than 10% of property sales failed in Atlanta in 2016 (more…)

Will Your Basement Upgrades Increase Your Profit When You Sell?

Hello, July! We’re happy you’re here, but you certainly are hot.

Source: Giphy

If basking in the sun isn’t your thing, maybe lounging with a great movie in a cool basement is more your vibe.

At Knock, we come across tons of home sellers who see their basements as the perfect lounging space. (more…)

Online Home Selling Makes For a Certain and Personalized Process

One of the most common questions we hear from potential home sellers is: “Can I trust this non-traditional method of selling my house?”

We get it. (more…)

The More Time a House Spends on the Market, the Lower the Profit

Does the length of time a house is on the market affect its selling price? The Knock blog is leaning toward “yes.” (more…)

Do Festivals Boost or Decrease Neighboring Property Values?

Metro Atlanta residents are down to celebrate just about anything – from music to civic involvement to heritage to beer. In a nod to this festival-loving area, we thought we'd take a look at several different events and how they impact neighboring property values. (more…)

5 of the Trendiest Neighborhoods in Metro Atlanta

Several weeks ago, we analyzed the hottest zip codes in Metro Atlanta, by the number of residential real-estate transactions that took place last year. We promised that we would get around to outlining the trendiest areas, based off other factors, e.g. food, arts and music. (more…)

How Overpricing a House Costs Time, Money and Peace of Mind

We’ve discussed overpricing on this blog several times and how it actually does more harm than good. Many home sellers hold onto the notion that the best approach is to price high originally and then negotiate the number down to their ideal sales price. (more…)