Simplifying the Market™ brought to you by Real Pros

Every Hour in the US Housing Market: 

• 634 Homes Sell
• 347 Homes Regain Positive Equity
• Median Home Values Go Up $1.46

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According to a joint study released by Google and the National Association of Realtors, 2 of 3 people searching for a prospective real estate professional research them “extensively online prior to working with them". And, that number is probably increasing every day.

Are social media channels such as Facebook really a good place to gather information about an agent before using them? If so, what should you look for?

There is a plethora of information on any subject available on social media sites such as Facebook. A recent study by the Pew Research Center revealed that 63% of Americans now even get their news from Facebook (up from 47% in 2013).

It is no different for both buyers and sellers of real estate. Yes, Facebook is a good place to gather information about the housing market and “checkout” an agent you are considering hiring to help buy or sell a home.

What should you be looking for in an agent’s Facebook presence?

You want an agent that cares more about you and your family than they care about bragging about themselves. One way to determine this is to look at what they post on their Facebook page. Are they more interested in ‘hawking’ a listing or bragging about their accomplishments or are they trying to post insightful information that will help you make the best decision for you and your family?

At a recent real estate conference, Guy Kawasaki, an executive fellow at the Haas School of Business at U.C. Berkeley, gave the following advice to the Realtors in attendance:

“Value comes in the form of information and assistance. You want to establish a position where people see - through your social media efforts - that you know what you’re doing and are helpful…The point is to make yourself useful and valuable. To build credibility; to build trust…”

You should look for an agent that follows that advice!

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The Mortgage Bankers’ Association (MBA) recently released a report: ‘Housing Demand: Demographics And The Numbers Behind The Coming Multi-Million Increase In Households’. In this study, the MBA “utilized a comprehensive analysis of data from 1976 to 2014, a period encompassing several market and housing cycles, to provide a projection of much stronger housing demand over the next decade.”

According to the report:

“by 2024, demographic and economic changes will bring what could be one of the largest expansions in the history of the U.S housing market with 13.9 million additional households.”

But, what did they said about the Impact of the Hispanic community?

The Impact of Demographics on Housing Demand

• Over the next decade, Hispanic household growth will increase by 5.7 million households.
• New "minority-owned" households will be more than one-third higher than the number of new "non-Hispanic/White" households.
• The homeownership rate among Hispanics ages 40 and over is greater than the current average rate of 46% for all Americans.
• Millennials will be a key component of growth raising the ranks of households age 18 to 44 by 4.1 million. (21% of Millennials in the U.S. are Hispanic.)

Bottom Line

The Hispanic community will be a major driver of housing over the next decade.

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Many people wonder whether they should hire a real estate professional to assist them in buying their dream home or if they should first try to go it on their own. In today’s market: you need an experienced professional!

You Need an Expert Guide if you are Traveling a Dangerous Path

The field of real estate is loaded with land mines. You need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and ready for you to move in to can be tricky. An agent listens to your wants and needs, and can sift out the homes that do not fit within the parameters of your “dream home”.

A great agent will also have relationships with mortgage professionals and other experts that you will need in securing your dream home.

You Need a Skilled Negotiator

In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible renegotiation of that offer after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.

Realize that when an agent is negotiating their commission with you, they are negotiating their own salary; the salary that keeps a roof over their family’s head; the salary that puts food on their family’s table. If they are quick to take less when negotiating for themselves and their families, what makes you think they will not act the same way when negotiating for you and your family?

If they were Clark Kent when negotiating with you, they will not turn into Superman when negotiating with the buyer or seller in your deal.

Bottom Line

Famous sayings become famous because they are true. You get what you pay for. Just like a good accountant or a good attorney, a good agent will save you money…not cost you money.

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Every three years the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

In a recent Forbes article the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun predicts that in 2016 the net worth gap will widen even further to 45 times greater.

The graph below demonstrates the results of the last two Federal Reserve studies and Yun’s prediction:

Put Your Housing Cost to Work For You

Simply put, homeownership is a form of ‘forced savings’. Every time you pay your mortgage you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.

The latest National Housing Pulse Survey from NAR reveals that 80% of consumers believe that purchasing a home is a good financial decision. Yun comments:

“Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that homeowners steadily build wealth. The simplest math shouldn’t be overlooked.”

Bottom Line

If you are interested in finding out if you could put your housing cost to work for you through homeownership, let's get together and discuss your options.

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Some Highlights:

• 36% of Americans think they need a 20% down payment to buy a home. 44% of Millennials who purchased a home this year have put down less than 10%.
• 71% of loan applications were approved last month
• The average credit score of approved loans was 723 in September (the lowest recorded score since Ellie Mae began tracking in August 2011).

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Many have been wondering when the much anticipated move by Millennials’ into homeownership would actually take place. We know the belief in owning a home is there.

According to a recent Merrill Lynch study, eighty one percent of Millennials believe “homeownership is an important part of the American Dream”. This compares favorably to previous generations.

The obstacle seemed to be employment. It appears that is about to change.

The most recent jobs report disappointed many economists. However, the silver lining in that cloud of doubt was Millennials. Jonathan Smoke, realtor.com Chief Economist, reported:

“About 33% of civilian jobs created over the last 12 months have been for the young adults who are most likely to buy their first home. This should help support continued growth in the share of homes purchased by first time buyers, as economic success has been influencing older Millennials to jump into the housing market this year.”

Selma Hepp, chief economist at Trulia, concurred:

“The faster rate of job growth among Millennials will continue to bolster both the rental and for-sale housing markets for an extended period of time.”

It appears that Millennials will be entering the housing market in great numbers in the very near future.

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With residential real estate values rising quite substantially in most parts of the country over the last few years, many homeowners are seeing a major increase in their family’s wealth as equity continues to build in their house.

A recent study by the Joint Center of Housing Studies at Harvard University revealed that home equity grew nicely last year and has grown dramatically over the last five years…

Buyers looking today may not see the same build-up in equity but could still do quite well.

Let’s assume you went into contract in the next six weeks and closed on a $250,000 home in January. If we take the house value projections from the last Home Price Expectation Survey, here is how your equity would grow over the next four years:

Bottom Line

Homeownership has historically been a great way for the average American family to build wealth over time.

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We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage. During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again
2. The banks don’t want to be in the real estate business. Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation. The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate probably at or below 4%.

The friends and family who bought homes ten or twenty ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of <4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

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In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage throughout the 100 largest metro areas in the United States.

The updated numbers actually show that the range is from an average of 16% in Honolulu (HI), all the way to 55% in Sarasota (FL), and 35% Nationwide!

The other interesting findings in the report include:

• Interest rates have remained low and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation. “In the past year, these two trends have made homeownership even more affordable compared with renting.”
• Some markets might tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy.
• Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.  

Bottom Line

Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, lock in your housing cost with a mortgage payment now.

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Some interesting facts:

• 25 states are forecasted to achieve higher levels of appreciation in the next 12 months than already achieved in the last year.
• 25 state and the District of Columbia are forecasted to experience a slow in appreciation.
• All 50 states & D.C. are forecasted to achieve some level of positive price appreciation.

Even though each state is appreciating at different levels, you need to know the Cost of Waiting until next year to buy your dream home!

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A recent article that appeared on Nasdaq.com addressed the issue of whether it is best to buy or rent in today’s real estate environment. The article was very fair in discussing both options.

However, there was one portion of the article that we questioned. One of the experts was quoted as saying:

“For some people, the choice is very clear: Buying a home can be more costly, given the cost of the purchase itself, plus taxes and insurance, plus maintenance and repairs.”

This argument is often made in defense of renting. However, we don’t believe it makes logical sense. They claim that, as a renter, you won’t have the expenses of “taxes and insurance, plus maintenance and repairs”. Do they really believe that the landlord pays all those expenses for their tenants?

The vast majority of landlords own rentable real estate as a form of investment. As any other investor would, they expect to make a return on that investment (ROI) - otherwise known as profit. In order to make a profit, the landlord needs to include EVERY expense they incur into the rent…AND THEN ADD A PROFIT MARGIN!!

We think it is incorrect to advise a prospective renter that they won’t have the same expenses that a homeowner would have. They just pay those expenses to a landlord with a “premium” built in.

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It appears that Millennials are finally beginning to enter the housing market. In a recent report, CoreLogic looked at the annual net change in household formations over the last decade (see graph below):

It appears this is the year that Millennials are finally moving out of their parents’ basements and finding a place of their own. And they are not all renting

According to the National Association of Realtors’ latest Existing Home Sales Report, the percentage of first–time buyers rebounded to 32 percent in August, up from 28 percent in July and matching the highest share of the year set in May.

What has kept the others from buying a home?

Recent surveys have revealed that there are major misunderstandings as to what is required to get a mortgage in today’s lending environment. Many Americans believe you need at least a 780 FICO score and a 20% down payment.

In reality, neither is required. Here are the mortgage statistics (FICO score, % of down payment, mortgage interest rate and debt-to-income ratio) for Millennials who have completed the mortgage process in the first half of this year according to realtor.com:

Bottom Line

More and more Millennials are beginning to enter the housing market. As they begin to better understand the mortgage process, we will see even greater numbers buying a home.

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According to the latest report from the US Census Bureau and the Department of Housing and Urban Development, newly constructed home sales jumped 5.7% month-over-month and 21.6% year-over-year to an annual pace of 552,000.

Many buyers are looking to the new homes market to make up for the lack of existing home sales inventory. National Association of Home Builders Chief Economist David Crowe explains:

"Today's report indicates the release of pent-up housing demand as the overall economy strengthens, consumer confidence grows and mortgage interest rates remain low. The housing market should continue to move forward at a modest but more persistent pace throughout the rest of 2015."

Regionally, the Northeast led the way with a 24.1% increase in new home sales, followed by the South (7.4%) and West (5.4%). Sales in the Midwest declined by 9.1%.

The inventory of new homes for sale currently sits at a 4.7-month supply down slightly from July (4.9) and significantly from August 2014 (5.4).

Buyers who purchased a new home were willing to spend more to get the amenities that they wanted. The median home price for new homes was $64,000 higher than existing homes in August at $292,700!

Approved applications for building permits increased 3.5% over July and 12.5% over this time last year. Permit applications are seen as a strong indicator of builder confidence in the market.

Bottom Line

Buyer demand continues to outpace inventory of homes for sale. If you are thinking of selling your house this year, now may be the time to list before builders have a chance to replenish the supply of new homes.

Want to know more about New Home Sales? Check out this infographic!

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It's that time of year; the seasons are changing and with them bring thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don't have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 10.5% (most pessimistic) and 25.5% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But, what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

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Some Highlights:

• The median price of a newly constructed home is currently $292,700.
• Sales are up 5.7% month-over-month and 21.6% year-over-year.
• Many buyers are looking to new homes as an option due to the lack of inventory of existing homes for sale.

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The National Association of REALTORS’ just released the results of their latest Pending Home Sales Index, which showed a small 1.4% decline in signed contracts in August. Pending sales remain strong year-over-year as they were 6.1% higher than August ’14 and have now risen for 12 consecutive months. 

What is the Pending Home Sales Index (PHSI)?

NAR’s PHSI is “a forward-looking indicator based on contract signings”. The higher the Pending Home Sales Index number, the more contracts have been signed by buyers that will soon translate to sales.

In every major region of the country, pending sales are up year-over-year as shown by the graph below:

What does this mean for the market?

Lawrence Yun, Chief Economist for NAR explained:

"Pending sales have leveled off since mid–summer, with buyers being bounded by rising prices and few available and affordable properties within their budget."

There is no need to worry

Yun went on to say, “Even with existing–housing supply barely budging all summer and no relief coming from new construction, contract activity is still higher than earlier this year and a year ago."

So What Does This Mean To Buyers?

There is a lot of competition out there right now for your dream home. Prices are going to continue to climb, act now before you are priced out of your future home. 

What Does This Mean to Sellers?

If you are on the fence about listing your home for sale and debating whether now is the time to move on with your plans of relocating… don't wait!

There are more buyers that are ready, willing and able to buy their first, second, third, vacation, or investment property now than there has been in years! The supply of homes for sale is not keeping up with the demand of these buyers.

Listing your home for sale now will give you the most exposure to buyers and the best sales price. 

Bottom Line

Whether you are planning on buying or selling a house this year, waiting to act no longer makes sense.

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CoreLogic recently released their 2015 2^nd Quarter Equity Report which revealed that 759,000 properties had regained equity in the last quarter. That means that 91% of all mortgaged properties (approximately 45.9 million) are now in a positive equity position. Anand Nallathambi, president and CEO of CoreLogic, reported:

“For much of the country, the negative equity epidemic is lifting. The biggest reason for this improvement has been the relentless rise in home prices over the past three years which reflects increasing money flows into housing and a lack of housing stock in many markets.”

Obviously, this is great news for the financial situation of many homeowners.

But, do they realize their equity position has changed?

A recent study by Fannie Mae suggests that many homeowners are unaware that their equity position has changed…in some cases dramatically. For example, their study showed that 23% of Americans still believe their home is in a negative equity position when, in actuality, only 9% of homes are in that position.

The study also revealed that, though 69% of homes had “significant equity” (greater than 20%), only 37% of Americans realize it.

This means that 32% of Americans with a mortgage fail to realize the opportune situation they are in. With a sizeable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing).

Fannie Mae spoke out on this issue in their report:

“Homeowners who underestimate their homes’ values not only underestimate their home equity, they also likely underestimate 1) how large a down payment they could make with their home equity, 2) their chances of qualifying for mortgages, and, therefore, 3) their opportunities for selling their current homes and for buying different homes.”

Bottom Line

Every homeowner should be aware of the true equity in their house and also realize the opportunities that go along with it. If you are unsure of the savings you currently have built up in your home, let's get together and discuss your current situation. You may be surprised.

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The National Association of Realtors’ most recent Existing Home Sales Report revealed that home sales were up rather dramatically over last year in five of the six price ranges they measure.

Only those homes priced under $100,000 showed a decline (-7.7%). The decline in this price range points to the lower inventory of distressed properties available for sale and speaks to the strength of the market.

Every other category showed a minimum increase of at least 5.6%, with sales in the $250,000- $500,000 range up 16.9%!

Here is the breakdown:

What does that mean to you if you are selling?

Houses are definitely selling. If your house has been on the market for any length of time and has not yet sold, perhaps it is time to sit with your agent and see if it is priced appropriately to compete in today’s market.

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If you are debating listing your house for sale this year or even early next year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes For Sale

According to the National Association of REALTORS’ (NAR) Foot Traffic report, there are more buyers out in the market right now than at any other time in the past three years.

The graph below shows the significant increase in foot traffic experienced this year compared to 2014.

The latest Existing Home Sales report shows that there is currently a 5.2-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market and well below August 2014 numbers.

The chart below details the year-over-year inventory shortages experienced so far in 2015:

Bottom Line

Let's get together to discuss the inventory levels in your neighborhood and discuss a plan to help you gain access to the buyers who are ready, willing and able to buy today!

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Some Highlights:

• The National Association of REALTORS® surveyed their members for their Confidence Index
• The REALTORS® Confidence Index is a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners. Practitioners are asked about their expectations for home sales, prices and market conditions.
• Homes sold in less than 60 days in 39 out of 50 states and Washington D.C.
• Only Vermont had a median sold date longer than 90 days.

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A recent study by Edelman Berland revealed that of homeowners who are contemplating selling their house in the near future 33% plan to scale down. Let’s look at a few reasons why that would make sense to many Americans.

In a recent blog post, Dave Ramsey, the financial guru, discussed the advantages of selling your current house and downsizing into a smaller home that better serves your current needs. Ramsey explains three potential financial advantages to downsizing:

1. A smaller home means less space, but it also means less time, stress and money spent on upkeep
2. Let’s assume you save $500 a month on your mortgage payment. In 30 years, you could have an additional $1–1.6 million in the bank to get you through your golden years.
3. Use the proceeds from selling your current home to pay cash for a smaller one. Just imagine what you could do with no mortgage holding you down! If you can’t pay cash, aim for a 15-year fixed rate mortgage and put at least 10–20% down on your new home. Apply the $500 you saved from downsizing to your new monthly payment. At 3% interest, you could pay off a $200,000 mortgage in less than 10.5 years, saving almost $16,000 in the process.

Realtor.com also addressed downsizing in a recent article. They suggest you ask yourself some questions before deciding if downsizing is right for you and your family. Here are two of their questions followed by their answers (in italics) and some additional information that could help.

Q: What kind of lifestyle do I want after I downsize?

A: “For some folks, it’s a matter of living a simpler life focused on family. Some might want to cross off travel destinations on their bucket lists. Some might want a low-maintenance community with high-end upgrades and social events. Decide what you want to achieve from your move first, and you’ll be able to better narrow down your housing options.”

Comments: Many homeowners are taking the profit from the sale of their current home and splitting it to put down payments on a smaller home in their current location and a vacation/retirement home where they plan to live when they retire.

This allows them to lock in the home price and mortgage interest rate at today’s values. This makes sense financially as both home prices and interest rates are projected to rise.

Q: Have I built up enough equity in my current home to make a profit?

A: “For most homeowners, the answer is yes. This is if they’ve held on to their properties long enough to have positive equity that will be sizable enough to put a large down payment on their next home.”

Comments: A recent study by Fannie Mae revealed that only 37% of Americans believe they have significant equity (> 20%) in their current home. In actually, 69% have greater than 20% equity. That equity could enable you to build a life you have always dreamt about.

Bottom Line

If you are debating downsizing your home and want to evaluate the options you currently have, let's get together to talk about the process.