The residential housing market has been hot. Home sales have bounced back solidly and are now at their second highest pace since February 2007. Demand has remained strong throughout the summer as many real estate professionals are reporting bidding wars with listings actually selling above listing price. What about your house?
If your home is on the market and you are not receiving any offers, look at your price. Pricing your home just 10% above market value dramatically cuts the number of prospective buyers that will even see your house. See chart below.
The housing market is hot. If you are not seeing results you want, sit down with your agent and revisit the pricing conversation.
According to Bankrate’s latest Financial Security Index Poll, Americans who have money to set aside for the next 10 years would rather invest in real estate than any other type of investment.
Bankrate asked Americans to answer the following question:
Real Estate came in as the top choice with 25% of all respondents, while cash investments (such as savings accounts and CD’s) came in second with 23%. The chart below shows the full results:
Sterling White, co-founder of Holdfolio, gave one reason as to why real estate may have ranked so high.
"Houses are tangible. You can physically see and feel the product. So you know where your money is going."
July’s poll also found that for the “26th consecutive month, Americans’ sense of financial well-being improved when taking into account debt, savings, net worth, job security, and overall financial situation.”
There are several reasons, both financial and non-financial, as to why homeownership makes sense. It is nice to see that Americans have returned to a belief in homeownership as the best investment.
If you are debating listing your house for sale this year, here is the #1 reason not to wait!
The National Association of REALTORS’ (NAR) Chief Economist, Lawrence Yun recently commented on the inventory shortage:
“With demand holding firm and homes selling even faster than a year ago, the notable increase in closings in recent months took a dent out of what was available for sale.
Realtors are acknowledging, with increasing frequency lately, that buyers continue to be frustrated by the tense competition and lack of affordable homes for sale in their market.”
The latest Existing Home Sales Report shows that there is currently a 4.6-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market and 5.8% lower than June 2015.
The chart below details the year-over-year inventory shortages experienced over the last 12 months:
Anything less than a six-month supply is considered a “Seller’s Market”.
Let's get together and discuss the supply conditions in your neighborhood to be able to assist you in gaining access to the buyers who are ready, willing and able to buy now!
Just over a month ago, the United Kingdom decided to withdraw from the European Union in a decision commonly known as Brexit. At that time there was a lot of speculation on how that decision would impact the U.S. residential mortgage market. Today, we want to look at the impact of the first 30 days.
Most believed that the Brexit decision would drive mortgage rates down and keep them down for some time. As CoreLogic reported:
“First-time buyers can count on continued low mortgage rates to help with affordability issues. Similarly, re-setting adjustable rate loans will have less of a rate shock, and in some cases may even go down.”
Initially, rates did fall. However, Freddie Mac has reported that rates have stabilized and have actually increased marginally each of the last two weeks. This prompted Freddie Mac Chief Economist Sean Beckett to say:
“Post-Brexit volatility tapered off over the last two weeks, allowing interest rates to bounce back a bit from their near-record 30-year mortgage rate lows.”
And, Capital Economics Property Economist Matthew Pointon believes rates will continue to increase:
“Given we expect Brexit will have a minimal impact on the U.S. economy, we see no reason to change our forecast for mortgage rates to reach 3.85% by the end of this year, and 5.0% by the middle of 2018.”
For now, it appears that the impact of Brexit on the U.S. housing market was not as dramatic as some thought it could be.
Some Highlights:
According to a Merrill Lynch study, “an estimated 4.2 million retirees moved into a new home last year alone.” Two-thirds of retirees say that they are likely to move at least once during retirement.
As one participant in the study stated:
“In retirement, you have the chance to live anywhere you want. Or you can just stay where you are. There hasn’t been another time in life when we’ve had that kind of freedom.”
The top reason to relocate cited was “wanting to be closer to family” at 29%, a close second was “wanting to reduce home expenses” at 26%.
A recent Freddie Mac study found similar results, as “nearly 20 percent of Boomers said they would move closer to their grandchildren/children compared to 13 percent who said they would move to a warmer climate.”
There is a common misconception that as retirees find themselves with fewer children at home, they will instantly desire a smaller home to maintain. While that may be the case for half of those surveyed, the study found that three in ten decide to actually upsize to a larger home.
Some choose to buy a home in a desirable destination with extra space for large family vacations, reunions, extended visits, or to allow other family members to move in with them. According to Merrill Lynch:
"Retirees often find their homes become places for family to come together and reconnect, particularly during holidays or summer vacations."
If your housing needs have changed, or are about to change, let’s get together to discuss your next steps.
The Consumer Price Index (CPI) was released by the Labor Department last week. An analysis by Market Watch revealed the cost of rent was 3.8% higher than a year ago for the second straight month in June. That’s the strongest yearly price gain since 2007.
This coincides with a report released earlier this month in which AxioMetrics announced that rents are continuing to increase in 2016. The report revealed:
With rents continuing to rise and mortgage interest rates still at historic lows, let's meet up today to determine if you could turn your monthly rental cost into a home of your own.
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 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:
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 85% 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.”
If you are interested in finding out if you could put your housing cost to work for you by purchasing a home, let’s get together to discuss your next steps.
If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.
Answering the following 3 questions will help you determine if now is actually a good time for you to buy in today’s market.
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.
For example, a recent survey by Braun showed that over 75% of parents say “their child’s education is an important part of the search for a new home.”
This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the four major reasons why people buy a home have nothing to do with money. They are:
What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.
According to the latest Home Price Index from CoreLogic, home values are projected to increase by 5.3% over the next 12 months.
Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait till next year. Your down payment will need to be higher as well to account for the higher home price.
A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.
The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase over the next twelve months as you can see in the chart below:
Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.
Whether you are considering the purchase of your first home or trading up to the home your family frequently fantasizes about, there are three crucial questions you must know the answer to:
A survey conducted by Fannie Mae revealed startling information: most Americans don’t know the answer to these three crucially important questions. Here is a graphic showing the results of the survey:
The percentages are quite disturbing but can explain why so many people believe they are not eligible to purchase a home whether it is a first home or a trade-up home. Here are the actually requirements as per Fannie Mae:
If you are considering purchasing a home, make sure you are aware of all your options before moving forward.
The widespread myth that perfect credit and large down payments are necessary to buy a home are holding many potential home buyers on the sidelines. According to Ellie Mae’s latest Origination Report, the average FICO score for all closed loans in May was 724, far lower than the 750 or 800 that many buyers believe to be true.
Below is a graph of the distribution of FICO scores of approved loans in May (the latest available data):
Looking at the chart above, it becomes obvious that not only do you not need a 750+ credit score, but 54.9% of approved loans actually had a score between 600 and 749.
More and more experts are speaking up about the fact that if potential buyers realized they could be approved for a mortgage with a credit score at, or above, 600, the distribution in the chart above would shift further to the left.
Ellie Mae’s Vice President, Jonas Moe encouraged buyers to know their options before assuming that they do not qualify for a mortgage:
“The high median credit score is due to many millennials believing they won’t qualify with the score they have - and are therefore waiting to apply for a mortgage until they have the score they think they need.” (emphasis added)
CoreLogic’s latest MarketPulse Report agrees that the median FICO score does not always tell the whole story:
“The observed decline in originations could be a result of potential applicants being either too cautious or discouraged from applying, more so than tight underwriting as the culprit in lower mortgage activity.”
It’s not just millennials who believe high credit scores and large down payments are needed. Many current homeowners are delaying moving on to a home that better fits their current needs due to a belief that they would not qualify for a mortgage today.
Moe put it this way:
“Many potential home buyers are 'disqualifying' themselves. You don't need a 750 FICO Score and a 20% down payment to buy.”
If you are one of the many Americans who has always thought homeownership was out of your reach, let’s get together to start the process of getting you pre-qualified and see if you are able to buy now!
The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:
John Taylor, CEO of the National Community Reinvestment Coalition, explains that those who lack the opportunity to become homeowners have a weakened ability to reinvest their wealth:
“We traditionally have been huge supporters of homeownership. We see it as a way to provide stability for households but also as an asset-building strategy. If you continue to be a renter, locked out of the homeownership arena, increasingly those things are further and further out of reach. They’re joined at the hip. They perpetuate each other.”
Does owning your home really create a more stable environment for your family?
A survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:
We can see from these survey results that renting will provide anything but a stable environment in the near future.
Homeowners enjoy a more stable environment and at the same time are given the opportunity to build their family’s net worth.
As a seller, you will be most concerned with the ‘short term price’ – where home values are headed over the next six months. As a buyer, you must be concerned not with price but instead with the ‘long term cost’ of the home.
Many economists have pointed to Brexit (Britain’s exit from the European Union) as a reason that interest rates will remain low for the next few months. But Trulia’s Chief Economist Ralph McLaughlin warns that this will not always be the case in a recent post:
“While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”
The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and Freddie Mac all project that mortgage interest rates will increase by close to a full percentage point over the next twelve months.
According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 5.3% over the next 12 months.
Here is a simple demonstration of what impact an interest rate increase would have on the mortgage payment of a home selling for approximately $250,000 today if home prices appreciate by the 5.3% predicted by CoreLogic over the next twelve months:
Last week, the National Association of Realtors (NAR) released their Pending Home Sales Index, a forward-looking indicator of home sales based on contract signings. The report revealed that this May’s numbers weren’t quite as good as the year before:
“With last month’s decline, the index reading is still the third highest in the past year, but declined year-over-year for the first time since August 2014.”
The mainstream media ran headlines highlighting that the index had dropped for the first time in two years. Many read this as an indication that the housing market must be slowing down.
If you were thinking that now may be the perfect time to put your house on the market, these reports may have caused you some concern. We want to alleviate that concern today.
Though it is true that the index dropped in last month’s report, let’s take a closer look at the numbers. Below is a graph of the index since January 2014. We can see that the index has increased every month over the last eighteen months, leading up to this past May.
Lawrence Yun, Chief Economist at NAR, explained that it wasn’t a slowing of the market that caused the index to slip, but instead a lack of housing inventory:
“Total housing inventory at the end of each month has remarkably decreased year-over-year now for an entire year. There are simply not enough homes coming onto the market to catch up with demand.”
Here is a graph depicting the situation Yun was referencing:
Did the latest numbers from the Pending Home Sales Index cause you to question if now is a good time to put your house on the market? If anything, it indicated the exact opposite: that this may be the perfect time to sell!!
Every homeowner wants to make sure they get the best price when selling their home. But how do you guarantee that you receive maximum value for your house? Here are two keys to ensuring you get the highest price possible.
This may seem counterintuitive. However, let’s look at this concept for a moment. Many homeowners think that pricing their home a little OVER market value will leave them room for negotiation. In actuality, this just dramatically lessens the demand for your house (see chart below).
Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price it so that demand for the home is maximized. In that way, the seller will not be fighting with a buyer over the price, but instead will have multiple buyers fighting with each other over the house.
Realtor.com, gives this advice:
“Aim to price your property at or just slightly below the going rate. Today’s buyers are highly informed, so if they sense they’re getting a deal, they’re likely to bid up a property that’s slightly underpriced, especially in areas with low inventory.”
This too may seem counterintuitive. The seller may think they would net more money if they didn’t have to pay a real estate commission. With this being said, studies have shown that homes typically sell for more money when handled by a real estate professional.
Research posted by the Economists’ Outlook Blog revealed that:
“The median selling price for all FSBO homes was $210,000 last year. When the buyer knew the seller in FSBO sales, the number sinks to the median selling price of $151,900. However, homes that were sold with the assistance of an agent had a median selling price of $249,000 – nearly $40,000 more for the typical home sale.”
Price your house at or slightly below the current market value and hire a professional. That will guarantee you maximize the price you get for your house.
Summer is here! The temperature isn't the only thing heating up right now, so too is the housing market in many areas of the country! Here are four great reasons to consider buying a home today instead of waiting.
CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.2% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.3% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.2% a year for the next 5 years.
The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained around 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will be up almost a full percentage point by this time next year.
An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.
As a 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.”
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 now is the time to buy.
Enjoy the holiday weekend with family and friends!
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