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Mortgage interest rates have risen by more than half of a point since the beginning of the year, and many assume that if mortgage rates rise, home values will fall. History, however, has shown this not to be true.
While rates have been rising, so have home values. Here are the most recent monthly price increases reported in the Home Price Insights Report from CoreLogic:
Not only did prices continue to appreciate, the level of appreciation accelerated over the first quarter. CoreLogic believes that home prices will increase by 5.2% over the next twelve months.
Freddie Mac explained in a recent Insight Report:
“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”
If you are thinking about moving up to your dream home, waiting until later this year and hoping for prices to fall may not be a good strategy.
Every year, the New York Federal Reserve publishes the results of their Survey of Consumer Expectations (SCE). Each survey covers a wide range of topics including inflation, labor market, household finance, credit access and housing.
One of the many questions asked in the housing section of the survey was:
Over three-quarters of respondents under the age of 50 said that they would prefer to own their home, rather than rent. While only 52.6% of those over 50 would prefer to own. The full breakdown can be found in the chart below.
When renters were asked what the average probability of owning a primary residence at some point in their future was, 66.4% of those under 50 believed that they would eventually own their home, while only 23% of those over 50 did.
Many had wondered if young Americans had lost their desire to own a home, but for those renting now, that dream is still alive.
So, you’ve decided to sell your house. You’ve hired a real estate professional to help you through the entire process, and they have asked you what level of access you want to provide to your potential buyers.
There are four elements to a quality listing. At the top of the list is Access, followed by Condition, Financing, and Price. There are many levels of access that you can provide to your agent so that he or she can show your home.
With May proving to be the best month to sell your home, access can make or break your ability to get the price you are looking for, or even sell your house at all.
So you made an offer, it was accepted, and now your next task is to have the home inspected prior to closing. Oftentimes, agents make your offer contingent on a clean home inspection.
This contingency allows you to renegotiate the price you paid for the home, ask the sellers to cover repairs, or even, in some cases, walk away. Your agent can advise you on the best course of action once the report is filed.
Your agent will most likely have a short list of inspectors that they have worked with in the past that they can recommend to you. HGTV recommends that you consider the following 5 areas when choosing the right home inspector for you:
Ask your inspector if it’s okay for you to tag along during the inspection, that way they can point out anything that should be addressed or fixed.
Don’t be surprised to see your inspector climbing on the roof or crawling around in the attic and on the floors. The job of the inspector is to protect your investment and find any issues with the home, including but not limited to: the roof, plumbing, electrical components, appliances, heating & air conditioning systems, ventilation, windows, the fireplace and chimney, the foundation, and so much more!
They say ‘ignorance is bliss,’ but not when investing your hard-earned money into a home of your own. Work with a professional who you can trust to give you the most information possible about your new home so that you can make the most educated decision about your purchase.
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Starting late last year, some predicted that the 2018 tax changes would cripple the housing market. Headlines warned of the potential for double-digit price depreciation and suggested that buyer demand could drop like a rock. There was even sentiment that homeownership could lose its coveted status as a major component of the American Dream.
Now that the first quarter numbers are in, we can begin to decipher the actual that impact tax reform has had on the real estate market.
According to the Showing Time Index which “tracks the average number of buyer showings on active residential properties on a monthly basis” and is a “highly reliable leading indicator of current and future demand trends,” buyer demand has increased each month over the last three months and is HIGHER than it was for the same months last year. Buyer demand is not down. It is up.
Two weeks ago, Gallup released its annual survey which asks Americans which asset they believed to be the best long-term investment. The survey revealed:
“More Americans name real estate over several other vehicles for growing wealth as the best long-term investment for the fifth year in a row. Just over a third cite real estate for this, while roughly a quarter name stocks or mutual funds.”
The survey also showed that the percentage of Americans who believe real estate is the best long-term investment was unchanged from a year ago.
Not only did the homeownership rate not crash, it increased when compared to the first quarter of last year according to data released by the Census Bureau.
In her latest “Z Report,” Ivy Zelman explains that tax reform didn’t hurt the homeownership rate, but instead, enhanced it:
“We have been of the opinion that homeownership is most highly correlated with income and the net effect of tax reform would be a positive, rather than negative catalyst for the homeownership rate. While still in the early innings of tax changes, this has proven to be the case.”
In the National Association of Realtors latest Existing Home Sales Report it was revealed that:
According to CoreLogic’s latest Home Price Insights Report, home prices will appreciate in each of the 50 states over the next twelve months. Appreciation is projected to be anywhere from 1.9% to 10.3% with the national average being 4.7%.
The doomsday scenarios that some predicted based on tax reform fears seem to have already blown over based on the early housing industry numbers being reported.
Every year, Gallup surveys Americans to determine their choice for the best long-term investment. Respondents are given a choice between real estate, stocks/mutual funds, gold, savings accounts/CDs, or bonds.
This year’s results showed that 34% of Americans chose real estate, followed by stocks at 26%. The full results are shown in the chart below.
The study makes it a point to draw attention to the contrast in the sentiment over the last five years compared to that of 2011-2012, when gold took the top slot with 34% of the votes. Real estate and stocks took second and third place, respectively, while still in recovery from the Great Recession.
As the real estate market has recovered, so has the belief of the American people in the stability of housing as a long-term investment.
KIRKLAND, Washington (May 7, 2018) – Home buyers may be cheered by an uptick in inventory, but the improving supply is unlikely to reverse rising prices, suggest industry leaders from Northwest Multiple Listing Service.
Commenting on just-released figures for April, which showed the highest level of active listings since August, OB Jacobi, president of Windermere Real Estate said, “For the first time in a long time we had good news for buyers.” Noting supply is still lower than year-ago levels (down 5.6 percent), it jumped 14 percent from March, which Jacobi said “is a pretty significant increase even for this time of year.”
Northwest MLS brokers added 11,271 new listings to inventory during April, a gain of 6.3 percent when compared to March, and up nearly 5.9 percent versus a year ago. April’s pending sales (mutually accepted offers) totaled 10,574, improving on the same month a year ago and the previous month.
At month end, the active listings selection included 10,079 single family homes and condos, eclipsing the total of 8,825 listings at the end of March. The condo segment grew 10.9 percent from March.
Of the 23 counties in the Northwest MLS service area, only six of them reported year-over-year gains in inventory compared to a year ago. King County was the only one in the Puget Sound region to notch a gain, up 13.6 percent from a year ago.
Commenting on the uptick, Mike Grady, president and COO, Coldwell Banker Bain, remarked “We are still WAY below a balanced market of five months of inventory, and this is even with interest rates ticking slightly upward.”
Area-wide there is 1.3 months of supply, with 4-to-6 months used as a gauge of a balanced market. Three counties – King, Kitsap, and Snohomish — reported less than a month of supply. The condo component remains very tight with slightly more than three weeks (0.87 months) of supply.
Prices are still climbing at double-digit rates in most counties. Year-over-year prices for single family homes and condos combined jumped about 15.3 percent overall, from $360,000 to $415,000. Within the four-county Puget Sound region, King County notched the biggest gain at nearly 18.2 percent. Prices there rose $100,000 from a year ago, from $550,000 to $650,000.
“There’s little reason to think we’ll be seeing a change in this frantic market anytime soon,” commented Grady, citing double-digit appreciation in many of the most populous counties, expansion plans by Alaska Airlines and Amazon, and other positive economic news as reasons for that expectation.
“Huge jumps in home prices to the north of us are pushing a lot of people to our county, which is among the most affordable on the Puget Sound,” commented Thurston County broker Ken Anderson.
MLS figures show a median price of $300,000 for homes and condos that sold in Thurston County last month, slightly less than Pierce County ($337,950), and significantly lower than both Snohomish County ($475,000) and King County ($650,000).
Despite the cost differential favoring Thurston County, Anderson, the president and owner of Coldwell Banker Evergreen Olympic Realty in Tumwater, said sellers are seeing price gains “they didn’t think possible just a couple of years ago.” Prices in that county are up more than 7.5 percent from twelve months ago. He also reported new construction is not keeping up with the population growth. “That alone will ensure prices will continue to rise in the near to intermediate term,” he commented, adding, “Buyers are seeing the trends and jumping into the market before prices and interest rates climb even higher.”
George Moorhead, designated broker at Bentley Properties, said while prices are still increasing, both inventory and the number of expired listings are also rising. He noted the steady climb in King County’s inventory of single family homes, with April rising more than 25 percent from March. Expired listings surged 86 percent from March, which Moorhead said is another example of some flattening in the market.
Moorhead also believes rising interest rates are having a “moderate impact” with buyers, forcing some to look at homes in lower price points. Buyers still want a good home in a good area, he reported, but some are reconsidering just how much they want to pay, saying they don’t want to be “house payment poor.”
Northwest MLS director Frank Wilson is also detecting some shifts in behavior by both buyers and sellers as the market changes. “As King County buyers spill into Kitsap, they realize they have to be more strategic in their offers, and sellers are paying more attention to the details of an offer, and not always taking the first offer presented,” stated Wilson, the Kitsap regional manager and branch managing broker at John L. Scott Real Estate in Poulsbo.
Wilson said multiple offers (often higher than the list price) are becoming more common on new listings in Kitsap County. When that occurs, he said buyers are being asked to make up the difference should the appraisal not match the increased offer price.
Meanwhile, sellers are beginning to realize the amount offered over list price may not be bankable unless buyers are willing to make up the difference. Consequently, Wilson said they are being more discretionary with the offers they consider. Local, proactive lenders, increased earnest money, preferring verifiable cash offers or conventional over VA or FHA, higher down payments, shorter closing times, and setting some future date when they will review all offers are examples he cited.
Wilson noted Kitsap was one of a half-dozen counties in the MLS report where last month’s pending sales surpassed the number of new listings. “This means the listing deficit is deepening,” he remarked.
J. Lennox Scott, chairman and CEO of John L. Scott, joined the chorus of brokers who believe better times are ahead for home buyers. “Eventually, higher interest rates will moderate the rapid home price appreciation,” he stated, but added, “We have not yet arrived at that tipping point.” He expects the Seattle metro area to probably tie and maybe break the 20-month home price appreciation record for the Case-Shiller index. (The latest S&P CoreLogic Case-Shiller Home Price Indices, released late last month for February, shows Seattle’s 12.7 percent increase led the list of 20 cities it compares.)
Commenting on April’s report showing more new listings than pending sales area-wide, Scott said that pattern is consistent with the annual housing cycle. “New listings will continue to spike, providing slight relief for the backlog of home buyers.”
Scott also expects the market for homes in the more affordable and mid-price ranges to remain at a frenzied pace into the summer of 2019. “For luxury listings in the $1-to-$2 million range and close to job centers, the market remains extremely competitive,” he predicts.
The competitive market is exposing several misconceptions held by buyers and sellers, according to Wilson, who has worked in the industry since 1990. He listed several including:
Buying or selling a home can involve nearly two dozen people, Wilson noted, while encouraging buyers and sellers to work with a broker who is well-versed in the process and able to coordinate all the participants to assure a successful closing.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 28,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
With home prices rising again this year, some are concerned that we may be repeating the 2006 housing bubble that caused families so much pain when it collapsed. Today’s market is quite different than the bubble market of twelve years ago. There are four key metrics that explain why:
There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.
Frank Nothaft is the Chief Economist for CoreLogic (which compiles some of the best data on past, current, and future home prices). Nothaft recently explained:
“Even though CoreLogic’s national home price index got to the same level it was at the prior peak in April of 2006, once you account for inflation over the ensuing 11.5 years, values are still about 18% below where they were.” (emphasis added)
Some are concerned that banks are once again easing lending standards to a level similar to the one that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a Housing Credit Availability Index (HCAI). According to the Urban Institute:
“The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
The graph below reveals that standards today are much tighter on a borrower’s credit situation and have all but eliminated the riskiest loan products.
Back in 2006, many homeowners mistakenly used their homes as ATMs by withdrawing their equity and spending it with no concern for the ramifications. They overloaded themselves with mortgage debt that they couldn’t (or wouldn’t) repay when prices crashed. That is not occurring today.
The best indicator of mortgage debt is the Federal Reserve Board’s household Debt Service Ratio for mortgages, which calculates mortgage debt as a percentage of disposable personal income.
At the height of the bubble market a decade ago, the ratio stood at 7.21%. That meant over 7% of disposable personal income was being spent on mortgage payments. Today, the ratio stands at 4.48% – the lowest level in 38 years!
With both house prices and mortgage rates on the rise, there is concern that many buyers may no longer be able to afford a home. However, when we look at the Housing Affordability Index released by the National Association of Realtors, homes are more affordable now than at any other time since 1985 (except for when prices crashed after the bubble popped in 2008).
After using four key housing metrics to compare today to 2006, we can see that the current market is not anything like the bubble market.
According to a newly released study by ATTOM Data Solutions, selling your home in the month of May will net you an average of 5.9% above estimated market value for your home.
For the study, ATTOM performed an “analysis of 14.7 million home sales from 2011 to 2017” and found the average seller premium achieved for each month of the year. Below is a breakdown by month:
ATTOM even went a step further and broke their results down by day.
It should come as no surprise that May and June dominate as the top months to sell and that 4 of the top 5 days to sell fall in those two months. The second quarter of the year (April, May, June) is referred to as the Spring Buyers Season, when competition is fierce to find a dream home, which often leads to bidding wars.
One caveat to mention though, is that when broken down by metro, ATTOMnoticed that while warmer climates share in the overall trend, it turns out that they have different top months for sales. The best month to get the highest price in Miami, FL, for instance, was January, and Phoenix, AZ came in with November leading the charge.
If you’re thinking of selling your home this year, the time to list is NOW! According to the National Association of Realtors, homes sold in an average of just 30 days last month! If you list now, you’ll have a really good chance to sell in May or June, setting yourself up for getting the best price!
Let’s get together to discuss the market conditions in our area and get you the most exposure to the buyers who are ready and willing to buy!
Home values have risen dramatically over the last twelve months. In CoreLogic’smost recent Home Price Index Report, they revealed that national home prices have increased by 6.7% year-over-year.
CoreLogic broke down appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price.
The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from February 2017 to February 2018 (the latest data available).
It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor that determines how much your home has appreciated over the course of the last year.
Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.
If you are planning to list your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.
This month, Arch Mortgage Insurance released their spring Housing and Mortgage Market Review. The report explained that an increase in mortgage rates and/or home prices would impact monthly payments this way:
That begs the question…
The report revealed:
“If interest rates and home prices rise by year-end in the ballpark of what most analysts are forecasting, monthly mortgage payments on a new home purchase could increase another 10–15%. That would make 2018 one of the worst full-year deteriorations in affordability for the past 25 years.”
The percent increase in mortgage payments would negatively impact affordability. But, how would affordability then compare to historic norms?
Per the report:
“For the U.S. overall, even if affordability were to deteriorate as forecasted, affordability would still be reasonable by historic norms. That is because the percentage of pre-tax income needed to buy a typical home in 2019 would still be similar to the historical average during 1987–2004. Thus, nationally at least, even with higher rates and home prices, affordability will just revert to historical norms.”
A decrease in affordability will cause some concern about home values. Won’t an increase in mortgage payments negatively impact the housing market? The report addressed this question:
“Even recent interest rate increases and higher taxes on some upper-income earners didn’t slow the market, as many had feared…Short of a war or stock market crash, housing markets could continue to surprise on the upside over the next few years.”
To this point, Arch Mortgage Insurance also revealed their Risk Index which estimates the probability of home prices being lower in two years. The index is based on factors such as regional unemployment rates, affordability, net migration, housing starts and the percentage of delinquent mortgages.
Below is a map depicting their projections (the darker the blue, the lower the probability of a price decrease):
If interest rates and prices continue to rise as projected, the monthly mortgage payment on a home purchased a year from now will be dramatically more expensive than it would be today.
A new study by WalletHub used “30 key metrics, ranging from share of millennials to millennial unemployment rate to millennial voter-turnout rate” to find out which states are the ‘Best States for Millennials.’
Below is a map with the rankings for each of the 50 states:
We recently reported on a study that set out to find out “How Much You Need to Make to Buy a Home in Your State,” which may have left you wondering what the average salaries are in each of the five states listed above.
According to WalletHub’s research, the top 5 states with the Highest Average Millennial Salaries are:
Every day, more and more millennials are aging into the ‘Responsibility Zone,’ the time in their lives when their responsibilities start to dictate their behaviors. For many, this includes buying a home. The top 5 states with the Highest Millennial Homeownership Rate are:
If owning a home is next on your list, let’s get together to answer any questions you may have and set you on the path to homeownership!
The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.
ECONOMIC OVERVIEW
The Washington State economy added 96,900 new jobs over the past 12 months, representing an annual growth rate of 2.9%—still solidly above the national rate of 1.5%. Most of the employment gains were in the private sector, which rose by 3.4%. The public sector saw a more modest increase of 1.6%.
The strongest growth was in the Education & Health Services and Retail sectors, which added 17,300 and 16,700 jobs, respectively. The Construction sector added 10,900 new positions over the past 12 months.
Even with solid increases in jobs, the state unemployment rate held steady at 4.7%—a figure that has not moved since September of last year.
I expect the Washington State economy to continue adding jobs in 2018, but not at the same rate as last year given that we are nearing full employment. That said, we will still outperform the nation as a whole when it comes to job creation.
HOME SALES ACTIVITY
HOME PRICES
DAYS ON MARKET
CONCLUSIONS
This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the first quarter of 2018, I have left the needle at the same point as fourth quarter of last year. Price growth remains strong even as sales activity slowed. All things being equal, 2018 is setting itself up to be another very good year for sellers but, unfortunately, not for buyers who will still see stiff competition for the limited number of available homes for sale.
It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to make in order to buy a median-priced home in each of the 50 states, and Washington, D.C.
States in the Midwest came out on top as most affordable, requiring the smallest salaries in order to buy a median-priced home. States with large metropolitan areas saw a bump in the average salary needed to buy with California, Washington, D.C., and Hawaii edging out all others with the highest salaries required.
Below is a map with the full results of the study:
GoBankingRates gave this advice to anyone considering a home purchase,
“Before you buy a home, it’s important to find out if you can afford the monthly mortgage payment. To do this, some financial experts recommend your housing costs — primarily your mortgage payments — shouldn’t consume more than 30 percent of your monthly income.”
As we recently reported, research from Zillow shows that historically, Americans had spent 21% of their income on owning a median-priced home. The latest data from the fourth quarter of 2017 shows that the percentage of income needed today is only 15.7%!
If you are considering buying a home, whether it’s your first time or your fifth time, let’s get together to evaluate your ability to do so in today’s market!
Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.
These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.
Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.
Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).
Bill McBride of Calculated Risk recently commented on the ratio:
“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”
Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.
Over the next five years, home prices are expected to appreciate, on average, by 3.6% per year and to grow by 18.2% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.
As an example, let’s assume a young couple purchased and closed on a $250,000 home this January. If we only look at the projected increase in the price of that home, how much equity will they earn over the next 5 years?
Since the experts predict that home prices will increase by 5.0% in 2018, the young homeowners will have gained $12,500 in equity in just one year.
Over a five-year period, their equity will increase by over $48,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.
Not only is homeownership something to be proud of, but it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, find out if you are able to today!
In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.
Whether you are a buyer searching for your first home, or a homeowner looking to move up to your next home, you should pay attention to where mortgage interest rates are heading.
Over the course of 2018, according to Freddie Mac’s Primary Mortgage Market Survey, rates have increased from 3.95% in the first week of January to 4.40% in the first week of April.
At first glance, the difference between these numbers in such a short amount of time could be concerning, but if we look at the graph below, we’ll see that rates have already started to level off and return to the mark set in February.
This is great news for anyone looking to buy a home this spring! The spring is always one of the busiest seasons for home buying, and with rates increasing even more, buyers have come off the fence to lock in great rates! This is still great advice as the experts believe that rates will continue to rise throughout the year.
Every month, Freddie Mac, Fannie Mae, the Mortgage Bankers Association and theNational Association of Realtors release their projections for where they believe mortgage rates will be in the coming months. If we take the average of what each of the four organizations is predicting for the second quarter, rates are expected to rise to about 4.48% by June.
Waiting until the end of the year to buy, with rates still projected to increase, will end up costing you more money on your monthly mortgage payment. For every $250,000 you need to borrow to purchase your dream home, you will spend $49.21 more per month, $590.52 per year, and over $17,700 by the end of your 30-year mortgage.
And that’s just the impact of your interest rate going up!
If you are ready and willing to purchase a home, find out if you’re able to. Let’s get together to evaluate your needs and help you with next steps!
When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 5%, while repeat buyers put down 14% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.
According to the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the U.S. housing market has continued to move deeper into buy territory, supporting the belief that housing markets across the country remain a sound investment.
The BH&J Index is a quarterly report that attempts to answer the question:
The index examines the entire US housing market and then isolates 23 major cities for comparison. The researchers “measure the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds.”
While 13 of the 23 metropolitan markets examined moved further into buy territory, markets like Dallas, Denver, and Houston are currently deep into rent territory. Due to a lack of inventory, the home prices in these areas have increased by 6.7%, 6.3%, and 5.3% respectively from a year ago.
According to Eli Beracha, Ph.D., Co-Creator of the index, home prices will begin to return to more normal levels.
“Our data indicates that prices are above their 40-year trend but not significantly so as they were in 2007. Rather than a crash, I anticipate slower growth in prices accompanied by longer marketing times for sellers and increasing inventories, which should bring prices back in conjunction with their 40-year trend.”
The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially, as rents are predicted to increase substantially in the next year. Protect yourself from rising rents by locking in your housing cost with a mortgage payment now.
To Find Out More About the Study: The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at http://business.fau.edu/buyvsrent.
KIRKLAND, Washington (April 5, 2018) – Job growth and a recent run-up in mortgage rates has created an “extremely intense market for each new listing,” stated J. Lennox Scott, chairman and CEO of John L. Scott Real Estate in commenting on the latest statistics from Northwest Multiple Listing Service.
MLS figures for March show a surge in both new listings and pending sales compared to February as the spring market heats up. Compared to a month ago, pending sales climbed more than 29 percent (from 7,980 in February to 10,311 in March), while the volume of new listings jumped more than 45 percent from February to March.
“What used to be a quick action market for buyers is now, once again, an instant response market, and this has been the case since the first of the year,” remarked Scott, adding “This is especially true in the more affordable and mid-price ranges in all markets, and also pertains to luxury properties close to the job centers.”
Whether defined as $1 million or more or $2 million-plus, Northwest MLS figures confirm sales of luxury homes are surging. A comparison of first quarters show the year-over-year volume of sales of homes priced at $2 million or more is up 30 percent. Members reported 136 such sales during first quarter 2017; this year, the number is 177. For homes priced at $1 million or more, sales rose from 941 during first quarter last year to 1,204 this year, a gain of nearly 28 percent.
Prices overall are up about 13.2 percent from a year ago, and even more so in the four-county Puget Sound region. Among these four counties, Kitsap had the largest year-over-year increase at 19 percent, but King County homes are still the priciest. The median price for last month’s sales of single family homes and condos combined in King County is $625,000, up 17.9 percent from a year ago. For single family homes, excluding condos, the median price for last month’s sales was $689,950.
Year-over-year prices are up more than 18 percent in Pierce County and about 14.3 percent in Snohomish County.
Commenting on rising prices, veteran broker Mike Grady said “The market continues to trend hot” with no apparent end in sight. The slight rise in mortgage interest rates since January 1 could mean “some minor impact on non-cash first-time homebuyers,” he suggested, adding, “Only time will tell.” Grady, the president and COO of Coldwell Banker Bain, said his company’s tracking and analysis based on average prices (instead of median prices) shows that “along the I-5 corridor, our average sales price is tracking slightly higher than what the NWMLS median sales prices show.”
Northwest MLS member brokers continue to scramble to replenish supply. They added 10,595 new listings during March, slightly more than a year ago when they added 10,321 properties to the selection. Last month’s additions marked a big gain from February when 7,284 new listings were added.
As has been the pattern, pending sales nearly equaled the number of new listings. Brokers reported 10,311 pending sales last month, a slight drop from the year-ago figure of 10,415. Tight inventory may be to blame as the number of total active listings stood at 8,825 at month end, down nearly 9.7 percent from the year-ago total of 9,772. Fourteen of the 23 counties in the Northwest MLS market area reported drops in pending sales.
“We have returned to an extremely intense market for each new listing due to extremely strong job growth and eager buyers who want to purchase before interest rates go higher,” Scott reported. “The housing market is back to a pressure cooker situation and we are witnessing high levels of sales activity intensity for each new listing coming on the market,” he commented.
Dick Beeson, principal managing broker at RE/MAX Professionals in Tacoma, commented on the frustration many would-be homebuyers are experiencing. “I think this last quarter especially, many buyers are feeling like they brought a knife to a gunfight, there’s been so much competition to buy a home.”
The tri-county area comprised of King, Snohomish and Pierce counties added essentially the same number of new listings during first quarter 2018 as the same period a year ago, Beeson noted, while the actual number of sales dropped slightly. “Why? Because there are too few properties for sale and rental rates are through the roof. People are desperate to find a home,” he stated. He likened the situation to Nordstrom not being able to keep their clothing racks filled because customers storm the store each day buying everything that’s available.
Housing inventory remains well below “normal” ranges based on a level of 4-to-6 months of supply used as an indicator of a balanced market. Area-wide, Northwest MLS figures show there is about 1.2 months of supply, with four counties reporting less than a month’s supply. Snohomish has the sparsest selection at 0.67 months, followed by King (0.83 months), Kitsap (0.95 months), and Pierce (0.99 months).
“Despite the low inventory and sellers’ market, proper pricing is still important,” emphasized John Deely, principal managing broker at Coldwell Banker Bain in Seattle.
“In March we saw more listings where sellers pushed the price envelope causing the property to go past their offer review date with no offers in hand,” Deely reported. “It is not uncommon for buyers to consider a property on the market over 10 days as having something wrong with it,” he added.
Nevertheless, Deely said many buyers are returning from taking a break during the winter after having lost out on several attempts to win in the multiple offer competition. “Throwing caution to the wind, these seasoned veterans of the multiple offer bidding wars are pulling out all the stops (contingencies) to win.”
Rising interest rates and keen competition are motivating some buyers to make compromises, according to George Moorhead, designated broker at Bentley Properties.
“I was asked recently why some communities are seeing a higher sales volume then last year,” Moorhead stated. “I explained this was simple logic with buyers in that instead of competing at their maximum price point in closer in communities and losing out on the perfect home, they compete in a lesser priced area where they can be more aggressive on the better homes in those areas. They may compromise on schools, public services, and commute times, but the opportunity of ownership increases significantly. The second key reason is that 30-year mortgage interest rates have increased .5% since the beginning of the year which erodes home affordability and pushes some buyers out of market places.”
Commenting on the uptick in interest rates, the president of a mortgage firm who trains brokers around the country recently noted, “While $100 a month might not sound like too much, it might adjust a client’s debt-to-loan ratio, which could push the size of a house they can afford down by $40,000 or $50,000.”
Moorhead dismissed “chatter about a looming real estate bubble” based on prices and what used to be the norm. “The key is to understand the normal cyclical pattern of our real estate market. A healthy market has corrections and booms with a mix of flattening cycles,” he stated, noting “Markets without these healthy cycles have catastrophic events much like we experienced in 2007 to 2011.”
Instead of competing in today’s market, some current owners are opting to remodel. “We are getting more and more requests for quality contractors for current homeowners looking to make updates to their home, instead of trying to move up to a better home or community,” Moorhead said. “Just in the last 30 days we know of 12 homeowners starting home improvements in the $100,000 and up range, more out of sheer frustration that they cannot find or secure a move-up home to purchase. What this means on the larger scale is a continued lack of inventory coming on the market to feed the voracious appetite of the buyers in our marketplace.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 28,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
How do you select the members of your team who are going to help make your dream of owning a home a reality? What should you be looking for? How do you know if you’ve found the right agent or lender?
The most important characteristic that you should be looking for in your agent is someone who is going to take the time to really educate you on the choices available to you and your ability to buy in today’s market.
As the financial guru Dave Ramsey advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Do your research. Ask your friends and family for recommendations of professionals they’ve worked with in the past and have had good experiences with.
Look for members of your team who will be honest and trustworthy; after all, you will be trusting them to help you make one of the biggest financial decisions of your life.
Whether this is your first or fifth time buying a home, you want to make sure that you have an agent who is going to have the tough conversations with you, not just the easy ones. If your offer isn’t accepted by the seller, or they think that there may be something wrong with the home that you’ve fallen in love with, you would rather know what they think than make a costly mistake.
According to the Home Buyer and Seller Generational Trends Report:
“Buyers from all generations primarily wanted their agent’s help to find the right home to purchase. Buyers were also looking for help to negotiate the terms of sale and to help with price negotiations.” Additionally, “Help understanding the purchase process was most beneficial to buyers 37 years and younger at 75 percent.”
Look for someone to invest in your family’s future with you. You want an agent who isn’t focused on the transaction but is instead focused on helping you understand the process while helping you find your dream home.
In this world of Google searches, where it seems like all the answers are just a mouse-click away, you need an agent who is going to educate you and share the information that you need to know before you even know you need it.
Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.
Realtor.com recently reported that:
“Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option… as people get more savings in their pockets, buying becomes the better option.”
1. In a previous blog we highlighted the top 5 financial benefits of homeownership:
2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.
3. Just a few months ago, we explained that a family that purchased an average-priced home at the beginning of 2018 could build more than $44,000 in family wealth over the next five years.
4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment– along with a profit margin!!
Owning a home has always been, and will always be, better from a financial standpoint than renting.
Some believe that the combined effects of the new tax code and rising mortgage rates will have an adverse impact on residential real estate prices in 2018. However, the clear majority of recently surveyed housing experts believe that home values will continue to rise this year.
Each quarter, Pulsenomics surveys a nationwide panel of economists, real estate experts and investment & market strategists. Those surveyed include experts such as:
Here is a breakdown of where they see home values twelve months from now:
Almost ninety-nine percent of the top experts studying residential real estate believe that prices will appreciate this year, and over 93% believe home values will appreciate by at least 3%.
Interest rates hovered around 4% for the majority of 2017, which gave many buyers relief from rising home prices and helped with affordability. In the first quarter of 2018, rates have increased from 3.95% up to 4.45% and experts predict that rates will increase even more by the end of the year.
The rate you secure greatly impacts your monthly mortgage payment and the amount you will ultimately pay for your home. Don’t let the prediction that rates will increase stop you from purchasing your dream home this year.
Be thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.
The price of any item is determined by the supply of that item, as well as market demand. The National Association of REALTORS (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their monthly REALTORS Confidence Index.
Their latest edition sheds some light on the relationship between Seller Traffic (supply) and Buyer Traffic (demand).
The map below was created after asking the question: “How would you rate buyer traffic in your area?”
The darker the blue, the stronger the demand for homes in that area. Only four states had a ‘stable’ demand level.
The index also asked: “How would you rate seller traffic in your area?”
As you can see from the map below, 25 states reported ‘weak’ seller traffic, 21 states reported ‘stable’ seller traffic, 3 states and Washington D.C. reported ‘strong’ seller traffic, and only 1 state reported ‘very strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for their dream homes.
Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet buyer demand, prices will continue to increase. If you are debating listing your home for sale, let’s get together to help you capitalize on the demand in the market now!
Here are five reasons listing your home for sale this spring makes sense.
The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase…and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.
Take advantage of the buyer activity currently in the market.
Housing inventory has declined year over year for the last 32 months and is still under the 6-month supply needed for a normal housing market. This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.
Historically, the average number of years a homeowner stayed in their home was six but has hovered between nine and ten years since 2011. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.
The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.
Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the average time it took to close a loan was 45 days.
If your next move will be into a premium or luxury home, now is the time to move up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly, AND you’ll be able to find a premium home to call your own!
Prices are projected to appreciate by 4.8% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.
Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.
Recently, Freddie Mac published an Insight Report titled Nowhere to go but up? How increasing mortgage rates could affect housing. The report focused on the impact the projected rise in mortgage rates might have on the housing market this year.
Many believe that an increase in mortgage rates will cause a slowdown in purchases which would, in turn, lead to a fall in house values. Ultimately, however, prices are determined by supply and demand and while rising mortgage rates may slow demand, they also affect supply. From the report:
“For current homeowners, the decision to buy a new home is typically linked to their decision to sell their current home… Because of this link, the financing costs of the existing mortgage are part of the homeowner’s decision of whether and when to move.
Once financing costs for a new mortgage rise above the rate borrowers are paying for their current mortgage, borrowers would have to give up below-market financing to sell their home.
Instead, they may choose to delay both the sale of their existing home and the purchase of a new home to maintain the advantageous financing.”
The Freddie Mac report, in acknowledging this situation, concluded that prices are not adversely impacted by higher mortgage rates. They explained:
“While there is a drop in the demand for homes, there is an associated drop in the supply of homes from the link between the selling and buying decisions. As both supply and demand move together in this way they have offsetting effects on price—lower demand decreases price and lower supply increases price.
They went on to reveal that the Freddie Mac National House Price Index is…
“…unresponsive to movements in interest rates. In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”
The following graph, based on data from the report, reveals what happened to home prices the last six times mortgage rates rose by at least 1%.
Whether you are a move-up buyer or first-time buyer, waiting to purchase your next home based on the belief that prices will fall because of rising mortgage rates makes no sense.
Last week, we shared “7 Factors To Consider When Choosing A Home To Retire In.” For some homeowners, these seven factors can be taken into account with a home renovation, but is it worth it to remodel or change floor plans?
Let’s say you have a 4-bedroom colonial style home in a great school district. The neighborhood is amazing, and you are very comfortable there, but your kids are all grown up and the original benefits of the home no longer apply.
You’ve always wanted a huge master suite and are considering merging 3 of the smaller bedrooms on the second floor to achieve this dream.
In the short term, you are over the moon excited about your newly renovated oasis.
In the long term, when you go to sell your home down the road, you’ve now taken a 4-bedroom home in a great school district and turned it into a 2-bedroom home. Your pool of potential buyers has shrunk significantly and so has the value of your home (unless you are able to find someone who has the exact needs you have today!).
Why not consider listing your 4-bedroom home now and moving into a gorgeous 2-bedroom with a master suite? Your house can become a home for the next family looking for that perfect neighborhood with a great school district to raise their kids in!
You may even be able to achieve your dream in the same area you love, without having to give up your favorite restaurants and grocery stores.
If you are debating a major renovation that would change the layout of your home, before you pick up that sledgehammer, let’s get together and discuss the available listings in our area that might meet your needs today!
CoreLogic’s latest Equity Report revealed that 675,000 US homeowners regained positive equity in their homes in 2017. This is great news for the country, as 95.1% of all mortgaged properties are now in a positive equity situation.
“U.S homeowners with mortgages (roughly 63% of all the properties) have seen their equity increase by a total of $908.4 billion since the fourth quarter 2016, an increase of 12.2%, year over year.”
Frank Nothaft, CoreLogic’s Chief Economist, explains:
“Home-price growth has been the primary driver of home-equity wealth creation. The CoreLogic Home Price Index grew 6.2 percent during 2017. The largest calendar-year increase since 2013. Likewise, the average growth in home equity was more than $15,000 during 2017, the most in four years.”
He also believes this is a great sign for the market in 2018, saying:
“Because wealth gains spur additional consumer purchases, the rise in home-equity wealth during 2017 should add more than $50 billion to U.S. consumption spending over the next two to three years.”
A study by Fannie Mae suggests that many homeowners are not aware that they have regained equity in their homes as their investment has increased in value. For example, their study showed that 23% of Americans still believe their home is in a negative equity position when, in actuality, CoreLogic’s report shows that only 4.9% of homes are in that position (down from 6.3% in Q4 2016).
The study also revealed that only 37% of Americans believe that they have “significant equity” (greater than 20%) when in actuality, 83% do!
This means that 46% 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 house (either larger or smaller) that better meets their current needs.
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.”
If you are one of the many Americans who is unsure of how much equity you have built in your home, don’t let that be the reason you fail to move on to your dream home in 2018! Let’s get together to evaluate your situation!
If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! Recently, the Institute for Luxury Home Marketing released its Luxury Market Report which showed that in today’s premium home market, buyers are in control.
The inventory of homes for sale in the luxury market far exceeds the number of people searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer or can be found at a discount.
Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call their house their new home.
The sale of your starter or trade-up house will help you come up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.
But not all who are buying luxury properties have a home to sell first.
A recent Bloomberg article gave some insight into what many millennials are choosing to do:
“A new generation of affluent homebuyers powered by a surge in inherited wealth is driving the luxury-home market, demanding larger spaces and fancier finishes, according to a report heralding ‘the rise of the new aristocracy.’”
The best time to sell anything is when demand is high, and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs and you are looking to step into a luxury home, now’s the time to list your house for sale and make your dreams come true.
As more and more baby boomers enter retirement age, the question of whether or not to sell their homes and move will become a hot topic. In today’s housing market climate, with low available inventory in the starter and trade-up home categories, it makes sense to evaluate your home’s ability to adapt to your needs in retirement.
According to the National Association of Exclusive Buyers Agents (NAEBA), there are 7 factors that you should consider when choosing your retirement home.
“It may be easy enough to purchase your home today but think long-term about your monthly costs. Account for property taxes, insurance, HOA fees, utilities – all the things that will be due whether or not you have a mortgage on the property.”
Would moving to a complex with homeowner association fees actually be cheaper than having to hire all the contractors you would need to maintain your home, lawn, etc.? Would your taxes go down significantly if you relocated? What is your monthly income going to be like in retirement?
“If you have equity in your current home, you may be able to apply it to the purchase of your next home. Maintaining a healthy amount of home equity gives you a source of emergency funds to tap, via a home equity loan or reverse mortgage.”
The equity you have in your current home may be enough to purchase your retirement home with little to no mortgage. Homeowners in the US gained an average of over $14,000 in equity last year.
“As we age, our tolerance for cleaning gutters, raking leaves and shoveling snow can go right out the window. A condominium with low-maintenance needs can be a literal lifesaver, if your health or physical abilities decline.”
As we mentioned earlier, would a condo with an HOA fee be worth the added peace of mind of not having to do the maintenance work yourself?
“Elderly homeowners can be targets for scams or break-ins. Living in a home with security features, such as a manned gate house, resident-only access and a security system can bring peace of mind.”
As scary as that thought may be, any additional security and an extra set of eyes looking out for you always adds to peace of mind.
“Renting won’t do if the dog can’t come too! The companionship of pets can provide emotional and physical benefits.”
Evaluate all of your options when it comes to bringing your ‘furever’ friend with you to a new home. Will there be necessary additional deposits if you are renting or in a condo? Is the backyard fenced in? How far are you from your favorite veterinarian?
“No one wants to picture themselves in a wheelchair or a walker, but the home layout must be able to accommodate limited mobility.”
Sixty is the new 40, right? People are living longer and are more active in retirement, but that doesn’t mean that down the road you won’t need your home to be more accessible. Installing handrails and making sure your hallways and doorways are wide enough may be a good reason to look for a home that was built to accommodate these needs.
“Is the new home close to the golf course, or to shopping and dining? Do you have amenities within easy walking distance? This can add to home value!”
How close are you to your children and grandchildren? Would relocating to a new area make visits with family easier or more frequent? Beyond being close to your favorite stores and restaurants, there are a lot of factors to consider.
When it comes to your forever home, evaluating your current house for its ability to adapt with you as you age can be the first step to guaranteeing your comfort in retirement. If after considering all these factors you find yourself curious about your options, let’s get together to evaluate your ability to sell your house in today’s market and get you into your dream retirement home!
If you are considering selling your current home, to either move up to a larger home or into a home in an area that better suits your current family needs, great news was just revealed.
Last week, Trulia posted a blog, Not Your Father’s Housing Market, which examined home affordability over the last 40+ years (1975-2016). Their research revealed that:
“Nationally, homes are just about the most affordable they’ve been in the last 40 years… the median household could afford a home 1.5 times more expensive than the median home price. In 1980, the median household could only afford about 3/4 of the median home price.
Despite relatively stagnant incomes, affordability has grown due to the sharp drop in mortgage rates over the last 30 years – from a high of over 16% in the 1980s to under 4% by 2016.
Of the nation’s 100 largest metros, only Miami became unaffordable between 1990 and 2016. Meanwhile, 22 metros have flipped from being unaffordable to becoming affordable in that same time frame.”
Here is a graph showing the Affordability Index compared to the 40-year average:
(Remember that during the crash you could purchase distressed properties – foreclosures and short sales – at 20-50% discounts.)
There is no doubt that with home prices and mortgage rates on the rise, the affordability index will continue to fall. That is why if you are thinking of moving up, you probably shouldn’t wait.
If you have held off on moving up to your family’s dream home because you were hoping to time the market, that time has come.
A recent report by CoreLogic revealed that U.S. home values appreciated by more than 37% over the last five years. Some are concerned that this is evidence we may be on the verge of another housing “boom & bust” like the one we experienced from 2006-2008.
Recently, several housing experts weighed in on the subject to alleviate these fears.
“The evidence indicates there currently is no house price bubble in the U.S., despite the rapid increase of house prices over the last five years.”
“There is not likely to be a national bubble in the way that we saw the first decade of the century.”
“There is no direct or indirect sign of any kind of bubble.”
“I wouldn’t call house prices a bubble.”
“Housing is not repeating the bubble period of 2000-2006.”
A recent article by Teo Nicolais, a real estate entrepreneur who teaches courses on real estate principles, markets, and finance at Harvard Extension Schoolconcluded that the next housing bubble may not occur until 2024.
The article, How to Use Real Estate Trends to Predict the Next Housing Bubble, looks at previous peaks in real estate values going all the way back to 1818. Nicolais uses the research of several economists. The article details the four phases of a real estate cycle and what defines each phase.
Nicolais concluded his article by saying:
“Those who study the financial crisis of 2008 will (we hope) always be weary of the next major crash. If George, Harrison, and Foldvary are right, however, that won’t happen until after the next peak around 2024.
Between now and then, aside from the occasional slow down and inevitable market hiccups, the real estate industry is likely to enjoy a long period of expansion.”
The reason for the price appreciation we are seeing is an imbalance between supply and demand for housing. This has created a natural increase in values, not a bubble in prices.
The economists at CoreLogic recently released a special report entitled, Evaluating the Housing Market Since the Great Recession. The goal of the report was to look at economic recovery since the Great Recession of December 2007 through June 2009.
One of the key indicators used in the report to determine the health of the housing market was home price appreciation. CoreLogic focused on appreciation from December 2012 to December 2017 to show how prices over the last five years have fared.
Frank Nothaft, Chief Economist at CoreLogic, commented on the importance of breaking out the data by state,
“Homeowners in the United States experienced a run-up in prices from the early 2000s to 2006, and then saw the trend reverse with steady declines through 2011. After finally reaching bottom in 2011, home prices began a slow rise back to where we are now.
Greater demand and lower supply – as well as booming job markets – have given some of the hardest-hit housing markets a boost in home prices. Yet, many are still not back to pre-crash levels.”
The map below was created to show the 5-year appreciation from December 2012 – December 2017 by state.
Nationally, the cumulative appreciation over the five-year period was 37.4%, with a high of 66% in Nevada, and a modest increase of 5% in Connecticut.
Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts, and investment and market strategists and asks them to project how residential home prices will appreciate over the next five years for their Home Price Expectation Survey (HPES).
According to the December 2012 survey results, national homes prices were projected to increase cumulatively by 23.1% by December 2017. The bulls of the group predicted home prices to rise by 33.6%, while the more cautious bears predicted an appreciation of 11.2%.
Data from the most recent HPES shows that home prices are expected to increase by 18.2% over the next 5 years. The bulls of the group predict home prices to rise by 27.4%, while the more cautious bears predict an appreciation of 8.3%.
Every day, thousands of homeowners regain positive equity in their homes. Some homeowners are now experiencing values even higher than before the Great Recession. If you’re wondering if you have enough equity to sell your house and move on to your dream home, let’s get together to discuss conditions in our neighborhood!
The number of building permits issued for single-family homes is the best indicator of how many newly built homes will rise over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Sales Report, the number of these permits were up 7.4% over last year.
More inventory means more options. Lawrence Yun, NAR’s Chief Economist, explained this is good news for the housing market – especially for those looking to buy:
“This rise in single-family housing construction will help tame home price growth, and the increase in multifamily units should continue to help slow rent growth.”
More inventory means more competition. Today, because of the tremendous lack of inventory, a seller can expect:
With an increase in competition, the seller may not enjoy these same benefits. As Chief Economist Nela Richardson, added:
“Because existing home inventory has been so low for so long, new construction is taking a larger share of the market…Builders meet the buyers and see the demand firsthand.”
If you are considering selling your house, you’ll want to beat this new competition to market to ensure you get the most attention for your listing and the best price.
KIRKLAND, Washington (March 6, 2018) – Interest rates are creeping up, inventory is still squeezed, and some feared revised tax laws would have a chilling effect on home sales, but Northwest Multiple Listing Service leaders say the local market remains competitive.
“It seemed like there would have been a chilling effect on the real estate market at the start of 2018 with the newly revised tax laws limiting mortgage interest deductions,” suggested Gary O’Leyar, designated broker and owner at Berkshire Hathaway HomeServices Signature Properties. “Not only did the revisions not have a chilling effect, if anything, the local market has been even hotter and more competitive than last year at this time,” he added in commenting on new MLS numbers summarizing February activity.
Northwest MLS figures for last month show a slight year-over-year decrease (about 2.8 percent) in overall pending sales, a likely consequence of inventory being down nearly 12.9 percent. Other key indicators of the market – new listings, closed sales, and selling prices – all showed gains in February compared to 12 months ago.
The just-released report from Northwest MLS shows 7,980 pending sales last month, down from the year-ago volume of 8,209 mutually accepted offers for single family homes and condos. Thirteen of the 23 counties in the report had more pending sales than at this time last year.
Closed sales outgained last year’s volume, 5,548 to 5,358, for an increase of nearly 3.6 percent. Median prices on those sales surged almost 14.8 percent area-wide, rising from the year ago figure of $335,515 to last month’s price of $385,000.
Among the four Puget Sound area counties, Snohomish had the largest year-over-year price increase at 18.8 percent. Its countywide median price for February’s sales spiked to $460,000 from $387,250, but that is $130,000 below the $590,000 median price for transactions that closed in King County last month.
For single family homes (excluding condos), prices rose 13.7 percent overall, from $343,000 to $390,000. Within King County, the median price was $649,950, with three areas (Mercer Island, Bellevue west of I-405, and Kirkland-Bridle Trails) reporting median prices of more than $1 million for single family homes.
“As was the case the last two years, home values spiked in February, thanks to a cyclical low point in supply,” commented Robert Wasser, owner/broker at Prospera Real Estate. Prices are now back around the peak levels of last summer, and cyclically speaking, are headed for additional increases until summer arrives,” commented Wasser, a board member at Northwest MLS.
Brokers added 7,284 new listings of single family homes and condos during February, an improvement of nearly 6.4 percent from a year ago when they added 6,848 new listings. Like many months during 2017, last month’s pending sales (7,980) outgained new listings (7,284), keeping inventory depleted in many areas.
There is about 1.4 months of supply area-wide, but both King and Snohomish counties have less than a month’s supply. For condos, there is only 0.88 months of supply – and even less than that in King, Snohomish, and Kitsap counties.
Many brokers expect inventory levels to improve. “The arrival of daylight savings triggers a burst in new listings,” proclaimed J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “More listings lead to more sales. In real estate, it’s all about the new listing,” he stated.
Scott expects the boost in home price appreciation during the winter market when inventory is reduced will moderate. “Over the second half of the year, as more listings come on the market, home price appreciation tends to flatten out,” he explained while noting small upticks in mortgage interest rates. Such increases have led to slightly higher mortgage payments, Scott said, “but they have not put a damper on the market.”
New construction could also help ease some of the pressure, suggests Mike Grady, president and COO at Coldwell Banker Bain. “Even though Commerce Department data show purchases of newly built single-family homes nationwide fell 7.8 percent in January after dropping 7.6 percent in December, and purchases have declined for four of the past six months, we are not seeing that trend in the Northwest.”
Inventory is improving in some areas, Grady noted, adding, “The hyper job market in the Pacific Northwest continues to outpace almost every metro area in the nation, and thus our housing market is booming; for now, there is no end in sight.”
Ken Anderson, president/owner and designated broker at Coldwell Banker Evergreen in Olympia, noted some buyers are frustrated with what appears to be lack of choice. “The reality is, we have an 8-year high in the number of homes coming to market in Thurston County,” he stated. His analysis of MLS data show the total number of new listings added in that county in the first two months of this year is at the highest level since 2010.
“The challenge is that the number of buyers is near record highs, too,” said Anderson. Given this competition, he believes “The right plan, including help from a skilled broker, can help buyers find success in this fast-paced market.”
“Many buyers and sellers feel looming pressure, and with a mix of doom and elation, both are preparing for a flurry of activity,” reported George Moorhead, designated broker at Bentley Properties. “We have not seen the typical aggressive spring market yet,” he added, noting “Buyers are coming to the harsh reality that high home prices are here to stay” and they need to consider smaller homes or longer than hoped-for drive times.
Moorhead also noted 30-year mortgage rates climbed slightly for the seventh consecutive weekly increase, but he said these small increases “are not yet creating too much of a stir.” Conversations with buyers are “more around the cost of commuting and time away from home versus floor plan and home size.”
For some wage earners in the Seattle area, “Kitsap looks very affordable,” said Northwest MLS board member Frank Wilson. “Kitsap’s real estate market continues at a flurry pace with homes going off the market almost as fast as they come on. Available inventory in our county is down 32 percent compared to a year ago, which continues to put upward pressure on prices and buyer’s nerves,” stated Wilson, the branch managing broker at John L. Scott Real Estate in Poulsbo.
As commuters flock to the more affordable side of the sound, “affordability gets further and further in the rearview mirror for many,” Wilson lamented. MLS statistics for February show year-over-year prices in Kitsap County jumped more than 15.7 percent, with single family home prices up 17.5 percent. Compared to January, last month’s prices for homes and condos in that county rose another $25,000 (8.3 percent).
“Kingston, Bremerton, and Port Orchard markets are surfing in the wake of the new foot ferry service with attention being paid to those from the east side of Puget Sound seeking affordability to the west,” Wilson reported. In fact, he added, “It is becoming more common in Kitsap to see all cash offers, no inspection contingency, and sellers that are reviewing all offers on a future date.”
Similar practices are occurring elsewhere. Commenting on the competitive market in many parts of the Northwest MLS service area, O’Leyar reported instances of “buyers making offers with zero contingencies and having the seller fill in the sales price!”
“History tells us that the real estate market is cyclical,” acknowledged O’Leyar, who also mentioned the Federal Reserve chairman hinting at further rate increases and possible impacts on the pace of appreciation and the availability of listings. “Hopefully,” he suggested, “Any changes in interest rates will have a moderating effect, easing the extremely difficult times some buyers are having in purchasing real estate in the Greater Seattle/Puget Sound market.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 28,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
Just like our clocks this weekend in the majority of the country, the housing market will soon “spring forward!” Similar to tension in a spring, the lack of inventory available for sale in the market right now is what is holding back the market.
Many potential sellers believe that waiting until Spring is in their best interest, and traditionally they would have been right.
Buyer demand has seasonality to it, which usually falls off in the winter months, especially in areas of the country impacted by arctic temperatures and conditions.
Demand for housing has remained strong as mortgage rates have remained near historic lows. Even with the recent increase in rates, buyers are still able to lock in an affordable monthly payment. Many more buyers are jumping off the fence and into the market to secure a lower rate.
The National Association of Realtors (NAR) recently reported that the top 10 dates sellers listed their homes in 2017 all fell in April, May, or June.
Those who act quickly and list now could benefit greatly from additional exposure to buyers prior to a flood of more competition coming to market in the next few months.
If you are planning on selling your home in 2018, let’s get together to evaluate the opportunities in our market.
Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:
“The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.”
Seventy-one consecutive months of price increases may have some concerned that current home values may be overinflated.
However, at the same time, Zillow issued a press release which revealed:
“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”
Here are two graphs that help show why home prices are exactly where they should be.
The first graph shows actual median home sales prices from 2000 through 2017.
By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a rollercoaster ride that is about to take another turn downward.
However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.
The blue bars on this graph represent where prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.
Based on historic appreciation levels, we should be very comfortable that current home values are not overinflated.
According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,840 this year when filing their taxes. This is down slightly from the average refund of $2,895, last year.
Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals; for anyone looking to buy a home in 2018, this can be a great jump start toward a down payment!
The map below shows the average tax refund Americans received last year by state. (The refunds received for the 2017 tax year should continue to reflect these numbers as the new tax code will go into effect for 2018 tax filings.)
Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, andFannie Mae all allow for down payments as low as 3%, with Veterans Affairs Loansallowing many veterans to purchase a home with 0% down.
The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes soldby state.
The darker the blue, the closer your tax refund gets you to homeownership! For those in Alabama looking to purchase their first homes, their tax refund could potentially get them 69% closer to that dream!
Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!
People often ask if now is a good time to buy a home, but nobody ever asks when it’s a good time to rent. Regardless, we want to make certain that everyone understands that today is NOT a good time to rent.
The Census Bureau recently released their 2017 fourth quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:
As you can see, rents have steadily increased and are showing no signs of slowing down. If you are faced with making the decision of whether or not you should renew your lease, you might be pleasantly surprised at your ability to buy a home of your own instead.
One way to protect yourself from rising rents is to lock in your housing expense by buying a home. If you are ready and willing to buy, let’s meet to determine if you are able to today!
We all realize that the best time to sell anything is when demand for that item is high, and the supply of that item is limited. Two major reports released by the National Association of Realtors (NAR) revealed information that suggests that now is a great time to sell your house.
Let’s look at the data covered in the latest REALTORS® Confidence Indexand Existing Home Sales Report.
Every month, NAR surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions.” This month, the index showed (again) that homebuying demand continued to outpace the supply of homes available in January.
The map below illustrates buyer demand broken down by state (the darker your state, the stronger demand there is).
In addition to revealing high demand, the index also shows that compared to conditions in the same month last year, seller traffic conditions were ‘weak’ in 22 states, ‘stable’ in 25 states, and ‘strong’ in only 4 states (Alaska, Nevada, North Dakota & Utah).
Takeaway: Demand for housing continues to be strong but supply is struggling to keep up, and this trend is likely to continue throughout 2018.
The most important data revealed in the report was not sales but was instead the inventory of homes for sale (supply). The report explained:
According to Lawrence Yun, Chief Economist at NAR:
“Another month of solid price gains underlines this ongoing trend of strong demand and weak supply. The underproduction of single-family homes over the last decade has played a predominant role in the current inventory crisis that is weighing on affordability.”
In real estate, there is a guideline that often applies; when there is less than a 6-month supply of inventory available, we are in a seller’s market and we will see appreciation. Between 6-7 months is a neutral market, where prices will increase at the rate of inflation. More than a 7-month supply means we are in a buyer’s market and should expect depreciation in home values.
As we mentioned before, there is currently a 3.4-month supply, and houses are going under contract fast. The Existing Home Sales Report shows that 43% of properties were on the market for less than a month when sold.
In January, properties sold nationally were typically on the market for 42 days. As Yun notes, this will continue unless more listings come to the market.
“While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.”
Takeaway: Inventory of homes for sale is still well below the 6-month supply needed for a normal market and supply will ‘fail to catch up with demand’ if a ‘sizable’ supply does not enter the market.
If you are going to sell, now may be the time to take advantage of the ready, willing, and able buyers that are still out searching for your house.
Mortgage interest rates have already risen by over a quarter of a percentage point in 2018. Many are projecting that rates could increase to 5% by the end of the year.
Many quickly jump to the conclusion that an increase in mortgage rates will have a detrimental impact on real estate prices as fewer buyers will be able to qualify for a loan. This seems logical; if there is less demand for housing then prices will drop.
However, in a good economy, rising mortgage rates increase demand as many prospective purchasers immediately jump off the fence to guarantee they get the lower rate.
Let’s look at home prices the last four times mortgage rates increased dramatically.
In each case, home prices APPRECIATED and did not depreciate. No one is projecting as dramatic an increase in rates as the examples above. Most are projecting an increase of approximately 1% by the end of the year.
The last time mortgage rates increased by 1% over a twelve-month period was January 2013 (3.41%) to January 2014 (4.43%). What happened to house prices during that span? They appreciated by 9.8%.
Just two weeks ago, Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting explained:
“Mortgage rates have risen 1% or more ten times in the last 43 years, with little impact on home sales and prices when the economy was also strong…Historically, rising confidence, solid job growth, and higher wages have more than offset reduced demand for housing resulting from higher mortgage rates.”
When mortgage rates increase, history has shown that prices appreciate (and do not depreciate) during that same time span.
According to the latest Aspiring Home Buyers Profile by the National Association of Realtors (NAR), 82% of surveyed renters desire to own a home in the future, with 80% believing homeownership is a big part of achieving their American Dream.
The profile went on to state that 50% of millennials believe that their rent will increase, with 20% believing that an increase in rent will be the catalyst that pushes them to consider buying a home vs. renewing their lease.
NAR’s Chief Economist, Lawrence Yun believes that,
“Housing demand in 2018 will be fueled by more millennials finally deciding to marry and have kids and the expectations that solid job growth and the strengthening economy will push incomes higher.”
Yun goes on to warn that,
“However, with prices and mortgage rates also expected to increase, affordability pressures will persist. That is why it is critical for much of the country to start seeing a significant hike in new and existing housing supply. Otherwise, many would-be first-time buyers will be forced to continue renting and not reach their dream of being a homeowner.”
If you are one of the many homeowners whose houses no longer fit their needs and are looking to move up to your dream home, now is a great time to list your starter home! First-time buyers are out in force looking to achieve their American Dream.
Every homeowner wants to make sure they maximize their financial reward when selling their home. But how do you guarantee that you receive the maximum value for your house?
Here are two keys to ensure that you get the highest price possible.
This may seem counterintuitive, but let’s look at this concept for a moment. Many homeowners think that pricing their homes a little OVER market value will leave them with 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. By doing this, the seller will not be fighting with a buyer over the price but will instead 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 make 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.
A study by Collateral Analytics, reveals that FSBOs don’t actually save any money, and in some cases may be costing themselves more, by not listing with an agent.
In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”
The results of the study showed that the differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%. Sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.
Price your house at or slightly below the current market value and hire a professional. This will guarantee that you maximize the price you get for your house.
There has been tremendous volatility in certain markets over the last few weeks (for example, the stock and currency markets). When this happens, some tend to lump all of their investments together and create an almost ‘Armageddon’ scenario where everything loses value quickly and dramatically. Real estate is an investment that can get caught up in this hysteria. Does the concern about the current housing market have merit?
Financial advisors have been warning us for months that the stock market was ripe for a “correction.”
Experts have been questioning the value of alternative currencies for over a year.
In contrast, here are the opinions of three major players in the residential housing market:
“It’s premature to worry about a housing bubble. The typical warning signs – excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and/or poor affordability compared to the past, and a high number of internet searches on house flipping – are not present.”
“My thoughts on many recent discussions of ‘housing bubble’ – the bar for a housing bubble is higher than just prices being above some fundamental value. There must be widespread behavior change as well such as higher levels of fraud and speculation.”
“US home prices are on track for a 5% nominal gain for the 4th consecutive year, returning national prices to their highest level since 2007. The growth has been driven by historically low mortgage rates and unemployment plus solid population and personal income growth rates…a meaningful correction should only be triggered by an unexpected economic shock.”
Speculation has driven certain markets over the last year. However, it has not been speculation, but instead people’s desire for homeownership, that has driven the real estate market.
According to the National Association of REALTORS most recent Profile of Home Buyers & Sellers, married couples once again dominated the first-time homebuyer statistics in 2017 at 57% of all buyers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.
But, many couples are also deciding to buy a home before spending what would be a down payment on a wedding, as unmarried couples made up 16% of all first-time buyers last year.
If you’re single, don’t fret! Single women made up 18% of first-time buyers in 2017, while single men accounted for 7% of buyers. A recent report pointed to a sense of responsibility and commitment that drives many single women to want to own their own homes rather than rent someone else’s.
Here is the breakdown of all first-time homebuyers in 2017 by percentage of all buyers, income, and age:
You may not be that much different than those who have already purchased their first homes. Let’s get together to determine if your dream home is already within your grasp!
According to CoreLogic’s latest Home Price Index, prices appreciated by 6.9% year-over-year from December 2016 to December 2017 on a national level. This marks the fifth month in a row with at least a 6.9% increase.
Dr. Frank Nothaft, Chief Economist for CoreLogic, gave insight into the reason behind the large appreciation,
“The number of homes for sale has remained very low. Job growth lowered the unemployment rate to 4.1 percent by year’s end, the lowest level in 17 years. Rising income and consumer confidence has increased the number of prospective homebuyers. The net result of rising demand and limited for-sale inventory is a continued appreciation in home prices.”
This is great news for homeowners who have gained nearly $15,000 in equity (on average) in their homes over the last year! Those homeowners who had been on the fence as to whether or not to sell will be pleasantly surprised to find out that they now have an even larger profit to help cover a down payment on their dream homes.
As we near the traditionally busy spring buyers season, there is still hope for buyers as mortgage rates remain low compared to recent decades. The report also predicted that home price appreciation will slow slightly, rising by 4.3% by this time next year.
If you are looking to enter the housing market, as either a buyer or a seller, let’s get together to go over exactly what’s going on in our neighborhood and discuss your options!
The price of any item (including residential real estate) is determined by ‘supply and demand.’ If many people are looking to buy an item and the supply of that item is limited, the price of that item increases.
According to the National Association of Realtors (NAR), the supply of homes for sale dramatically increases every spring. As an example, here is what happened to housing inventory at the beginning of 2017:
Putting your home on the market now instead of waiting for increased competition in the spring might make a lot of sense.
Buyers in the market during the winter months are truly motivated purchasers. They want to buy now. With limited inventory currently available in most markets, sellers are in a great position to negotiate.
The famous quote by Mark Twain in the title of this article can be used to describe homeownership in America today. Last week, the Census revealed that the percentage of homeowners in the country increased for the first time in thirteen years.
A story in the Wall Street Journal gave these new homeownership numbers some context:
“The annual increase marks a crucial turning point because it comes after the federal government reined in bubble-era policies that encouraged banks to ease lending standards to boost homeownership. This time, what’s driving the market is a shift in favor of owning rather than renting.
‘This is market, market and market…There’s no government incentive program in sight that is having this effect,’ said Susan Wachter, a professor of real estate and finance at the Wharton School at the University of Pennsylvania, ‘This is back to basics.’”
In a separate report comparing the rental population in America to the homeowner population, RentCafé also concluded that the gap is now shrinking.
“Undoubtedly, the recession had a great impact on homeownership…However, it looks like it takes more to discourage Americans from buying a house than that.
As the years go by, it seems more and more certain that the fact that renting has seen a sudden gain in popularity is more a reaction to the economic crisis than a paradigm shift in the Americans’ attitude toward housing.”
America’s belief in homeownership was also evidenced in a recent survey by Pew Research. They asked consumers “How important is homeownership to achieving the American Dream?”
The results:
Homeownership has been, is and will always be a crucial element of the American Dream.
The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.
Below is a chart created using Freddie Mac’s U.S. Economic & Housing Marketing Outlook. As you can see, interest rates are projected to increase steadily over the course of the next 12 months.
Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.
According to CoreLogic’s latest Home Price Index, national home prices have appreciated 7.0% from this time last year and are predicted to be 4.2% higher next year.
If both the predictions of home price and interest rate increases become reality, families would wind up paying considerably more for their next home.
Even a small increase in interest rate can impact your family’s wealth. Let’s get together to evaluate your ability to purchase your dream home.
In a CNBC article, self-made millionaire David Bach explained that: “The biggest mistake millennials are making is not buying their first home.” He goes on to say that, “If you want to build real financial security, real wealth for your lifetime, then you need to buy a home.”
Bach went on to explain:
“Homeowners are worth 40 times more than renters. Now, that first home doesn’t need to be a dream home, it can be a very small home. You might literally have to buy a small studio apartment, but that’s how you get started.”
Then he explains the secret in order to buy that home!
“Don’t do a 30-year mortgage. You want to take that 30-year mortgage and instead pay it off early, do a 15-year mortgage. What happens if you do a 15-year mortgage? Well, one, you pay the mortgage off 15-years sooner, that means you’ll be able to retire in your fifties. Number two, you’ll save a fortune (on potentially hundreds of thousands of dollars in interest payments).”
What will it cost to pay your mortgage in fifteen years? He explains further:
“For fifteen years, you got to brownbag your lunch. Think about that! Brownbag your lunch literally for fifteen years. You can retire ten years sooner than your friends. You’ll have real wealth, because you bought a home – you’re not a renter. And you’ll be financially secure for life.”
Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.
Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.
He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.
KIRKLAND, Washington (February 5, 2018) – “The Seattle area real estate market hasn’t skipped a beat with pent-up demand from buyers is stronger than ever,” remarked broker John Deely in reacting to the latest statistics from Northwest Multiple Listing Service. The report on January activity shows a slight year-over-year gain in pending sales, a double-digit increase in prices, and continued shortages of inventory.
Deely, the principal managing broker at Coldwell Banker Bain in Seattle and a board member at Northwest MLS, noted a shift in the ratio of pending sales to new listings in King County.
Member brokers added 6,805 new listings of single family homes and condominiums to the system-wide database last month for a gain of about 4.6 percent from a year ago. During the same period, they reported 7,820 pending sales. In King County, the number of new listings outgained pending sales for the first time since September:
“Sellers that have put their properties on the market early this year have less competition and are seeing multiple offers. Open houses are experiencing heavy traffic with hundreds of potential buyers attending,” reported Deely.
For the MLS overall, last month’s 7,820 pending sales marked a slight increase compared to January 2017 when members reported 7,724 mutually accepted offers, a gain in of 1.24 percent. Not all areas reported increases. Of 23 counties served by Northwest MLS, eight counties, including three in the Puget Sound region (King, Kitsap and Snohomish), reported fewer pending sales than a year ago. In King County, where acute inventory shortages exist in many neighborhoods, pending sales dropped 7.5 percent and closings dropped 18.5 percent.
“The decline in sales last month can’t be blamed on the holidays, weather or football. It’s simply due to the ongoing shortage of housing that continues to plague markets throughout Western Washington,” said OB Jacobi, the president of Windermere Real Estate.
With January’s additions, the number of total active listings at month end stood at 8,037 homes and condos, down nearly 17.6 percent from a year ago when the selection totaled 9,750 listings. Measured by months of supply, there was only about 1.5 months overall, well below the 4-to-6 month level many industry experts use as a gauge of a balanced market.
Condo inventory is especially tight in Snohomish County (0.8 months of supply) and King County (0.92 months). System-wide there is under a month’s supply (0.93 months). For the four-county Puget Sound region, there were only 427 active condo listings at month end, down almost 31 percent from a year ago.
Despite the sparse selection, brokers expect inventory to improve.
“I actually believe 2018 will bring us moderately more listings, which should help offset the growing demand that continues to result from the area’s strong economy,” remarked Jacobi.
“The month of March can’t come soon enough for home buyers,” said J. Lennox Scott, chairman and CEO of John L. Scott Real Estate. “In March, the number of new listings will bump up substantially from the low number of new listings typical for winter months. Better selection will start in March as we enter the spring housing season,” Scott predicts.
In the meantime, Scott reported “a multiple-offer everything, virtually sold out market” in all price ranges close to job centers and in the more affordable and mid-price ranges in surrounding counties. “Sellers are receiving premium pricing and home buyers are pouncing on each new listing,” he added.
George Moorhead, designated broker at Bentley Properties, agreed. “January still saw aggressive buyers as they jockeyed for homes in some of the hottest areas in Seattle and the Eastside,” he commented.
Prices continue to rise in all but a few counties, even as the volume of closed sales fell about 9.3 percent. For January’s 5,325 closed sales, the median price was $363,500, a jump of about 11 percent from the year-ago figure of $327,500. Twelve counties reported double-digit spikes.
Within the four-county Puget Sound region, King County had the largest year-over-year gain. Prices for homes and condos combined shot up 20.3 percent in that county, rising from $475,000 to $571,250. Pierce County reported a jump of 15 percent, followed by Snohomish County at about 12.2 percent and Kitsap County at nearly 3.5 percent.
The depleted supply of condos meant premium prices. Area-wide the median price for last month’s completed transactions rose nearly 18.6 percent, from $269,900 to $320,000. Snohomish County’s condo prices surged nearly 25.5 percent, followed by King County at nearly 22.6 percent.
Some brokers expect the hefty price gains to ease.
“As interest rates rise, the rate of price increases will slow down,” predicts Northwest MLS director Dick Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor. Despite this expectation, he believes sparse supply and the area’s appeal both nationally and internationally will mean ongoing competition and multiple offer situations.
“What it costs to rent small spaces astounds me,” he remarked citing recent reports that put Tacoma and Olympia on lists of top cities for increased rents during 2017. “Investors, because rents are high, compete daily with home buyers, and they often win the deal in the lower priced homes. Because they are buying all cash, they consistently beat out buyers who have to get loans.”
Builders are trying to respond to the pent-up demand, according to Moorhead. Seattle and the Eastside are seeing a growing number of infill homes in the core areas, some on lots as small as 3,000 square feet, he said. Builders are doing smaller releases and setting offer review dates, and then determine price ranges for the next phase.
“What used to be an affordable way to build homes has now become more mainstream for both smaller and larger builders,” Moorhead stated, adding, “Historically, infill homes did not get the same return as homes built in large community plats, but now they’re realizing similar price points.”
The luxury market is also off to a quick start in 2018. “Close to job centers, the luxury market is gaining positive momentum due to the wealth effect of the stock market, the strength of the U.S. economy, and homebuyers from the Pacific Rim, especially China,” noted Lennox Scott.
Northwest MLS figures show sales of homes selling for $2 million or more are far outpacing year-ago activity. Last month, member-brokers reported selling 55 residences at this price threshold. That’s up 66 percent from the same month a year ago when brokers sold 33 such homes.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 28,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize, however, that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich”:
“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”
Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage as opposed to paying rent:
“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”
As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person building that equity.
Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.22% last week.
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.
Just like with any product or service, the law of supply and demand impacts home prices. Any time that there is less supply than the market demands, prices increase.
In many areas of the country, the supply of homes for sale in the starter and trade-up home markets is so low that bidding wars have ensued, and the busy spring-buying season is just around the corner.
CoreLogic recently conducted an analysis on national home prices at the time of sale for their January 2018 MarketPulse Report and found that a third of homes sold for at least list price.
“The share selling above list price was almost three times the trough in January 2008 and represented more than one-fifth of total sales.”
Many markets in the western part of the country and around major cities are experiencing higher shares of homes selling above list price.
“San Francisco had the largest share of homes—76 percent—that sold for at least the list price, and Seattle and Los Angeles followed with 63 and 51 percent, respectively. Miami had the lowest share—16 percent—of homes selling at or above the list price.”
Increased demand during the spring and summer months, the traditionally busier seasons for real estate, will no doubt influence how many homes continue to sell over list price.
This should not be seen by sellers as permission to overprice their homes, though. Buyers are becoming more and more educated, especially those who have been searching for their dream homes for a while now while waiting for new inventory to come to market.
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.”
Without a large wave of new listings coming to market, buyers will continue competing with each other for the homes that are available. If you are thinking of selling your home, now may be the time to do so before more competition comes this spring. Let’s get together to determine the demand for your house in our area.
When it comes to talking about millennials, there are many stereotypes out there that have influenced the way the public feels about the generation. Whether it’s the assumption that millennials are irresponsible with money and would rather buy avocado toast than save for a down payment, or that millennials jump from job to job, the majority of these stereotypes paint the generation in a negative light.
A new study by Bank of America entitled Better Money Habits Millennial Reportrecently came to the defense of the generation when it reported that:
“Millennials deserve more credit – both from themselves and from others – for their mindfulness when it comes to money and their lives.”
Here are some key takeaways from the study proving that millennials deserve more credit for what they are already doing:
Many have wondered if millennials even want to own their own homes or if they would choose to rent instead. Well, not only do they want to own their own homes, but many already do and are looking to trade up! A recent study by realtor.com shows that 49% of Americans who plan to sell their home in the next 12 months are millennials!
Danielle Hale, realtor.com’s Chief Economist, gave some insight into why millennials are looking to sell,
“The housing shortage forced many first-time homebuyers to consider smaller homes and condos as a way to literally get their foot in the door. Our survey data reveals that we may see more of these homes hitting the market in the next year.”
Not every millennial fits into the stereotypes that are so prominent in our society. Those who have risen above the stereotype are ready and willing to buy a home of their own, and many others already have!
Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership,” which revealed that “eighty percent of consumers either are unaware of how much lenders require for a down payment or believe all lenders require a down payment above 5 percent.”
Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:
“Consumers are often unaware of the option to take out low-down-payment mortgages. Only 19% of consumers believe lenders would make loans with a down payment of 5% or less… While 15% believe lenders require a 20% down payment, and 30% believe lenders expect a 20% down payment.”
These numbers do not differ much between non-owners and homeowners; 39% of non-owners believe they need more than 20% for a down payment and 30% of homeowners believe they need more than 20% for a down payment.
While many believe that they need at least 20% down to buy their dream home, they do not realize that programs are available that allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.
Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.
Many Americans believe a ‘good’ credit score is 780 or higher.
To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.
As you can see in the chart above, 53.5% of approved mortgages had a credit score of 600-749.
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.
Every winter, families across the country decide if this will be the year that they sell their current houses and move into their dream homes.
Mortgage rates hovered around 4% for all of 2017 which forced many buyers off the fence and into the market, resulting in incredibly strong demand RIGHT NOW!
At the same time, however, inventory levels of homes for sale have dropped dramatically as compared to this time last year.
Trulia reported that “in Q4 2017, U.S. home inventory decreased by 10.5%. That is the biggest drop we’ve seen since Q2 2013.”
Here is a chart showing the decrease in inventory levels by category:
The largest drop in inventory was in the starter home category which saw a 19% dip in listings.
Demand for your home is very strong right now while your competition (other homes for sale) is at a historically low level. If you are thinking of selling in 2018, now may be the perfect time.
ECONOMIC OVERVIEW
The Washington State economy added 104,600 new jobs over the past 12 months. This impressive growth rate of 3.1% is well above the national rate of 1.4%. Interestingly, the slowdown we saw through most of the second half of the year reversed in the fall, and we actually saw more robust employment growth.
Growth continues to be broad-based, with expansion in all major job sectors other than aerospace due to a slowdown at Boeing.
With job creation, the state unemployment rate stands at 4.5%, essentially indicating that the state is close to full employment. Additionally, all counties contained within this report show unemployment rates below where they were a year ago.
I expect continued economic expansion in Washington State in 2018; however, we are likely to see a modest slowdown, which is to be expected at this stage in the business cycle.
HOME SALES ACTIVITY
HOME PRICES
DAYS ON MARKET
CONCLUSIONS
This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the fourth quarter of 2017, I have left the needle at the same point as third quarter. Price growth remains robust even as sales activity slowed. 2018 is setting itself up to be another very good year for housing.
Definitely an aggressive headline. However, as the final data on the 2017 housing market rolls in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME!
And Bloomberg Business just reported:
“America’s housing market is gearing up for a robust year ahead. Builders are more optimistic, demand is strong and lean inventory is keeping prices elevated.”
And the National Association of Realtors revealed that buyer traffic is stronger this winter than it was during the spring buying season last year.
The only challenge to the market is a severe lack of inventory. A balanced market would have a full six-month supply of homes for sale. Currently, there is less than a four-month supply of inventory. This represents a decrease in supply of 9.7% from the same time last year.
With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Let’s get together to see whether that is the case in your neighborhood.
In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 4% or more over the next twelve months. One major challenge in such a market is the bank appraisal.
When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.
Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.
In the latest release, the disparity was the narrowest it has been in over two years, as the gap between appraisers and homeowners was only -0.5%. This is important for homeowners to note as even a .5% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing (depending on the price of the home)
The chart below illustrates the changes in home price estimates over the last two years.
Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand:
“Appraisers and real estate professionals evaluate their local housing markets daily. Homeowners, on the other hand, may only think about their housing market when they see ‘for sale’ signs hit front yards in the spring or when they think about accessing their equity.”
“With several years of growth, owners may have more equity than they realize. Many consumers use the tax season at the beginning of the year to reevaluate their entire financial life. It also provides a good opportunity for them to consider how best to take advantage of their equity while mortgage interest rates and borrowing costs are still near record lows.”
Every house on the market must be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.
Many people wonder whether they should hire a real estate professional to assist them in buying their dream homes or if they should first try to go through the buying process on their own. In today’s market: you need an experienced professional!
The field of real estate is loaded with landmines; you need a true expert to guide you through the dangerous pitfalls that currently exist. Finding a home that is priced appropriately and is ready for you to move into can be tricky. An agent listens to your wants and needs, and can sift through 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 order to secure your dream home.
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 his or her 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.
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.
According to ATTOM Data Solutions’ 2018 Rental Affordability Report, “buying a median-priced home is more affordable than renting a three-bedroom property in 240 of 447 [or 54% of] U.S. counties analyzed for the report.”
For the report, ATTOM Data Solutions compared recently released fair market rent data from the Department of Housing and Urban Development with reported income amounts from the Department of Labor and Statistics to determine the percentage of income that a family would have to spend on their monthly housing cost (rent or mortgage payments).
Daren Blomquist, Senior Vice President of ATTOM Data Solutions had this to say:
“Although buying is still more affordable than renting in the majority of U.S. housing markets, the majority is shrinking as home price appreciation continues to outpace rental growth in most areas.”
However, the report also shows that the average fair market rent rose faster than average weekly wages in 60% of the counties analyzed in the report (266 of 447 counties). With rents rising, many renters should consider buying a home soon.
Rents will continue to rise, and mortgage interest rates are still at historic lows. Before you sign or renew your next lease, let’s get together to help you determine if you are able to buy a home of your own and lock in your monthly housing expense.
Every month, CoreLogic releases its Home Price Insights Report. In that report, they forecast where they believe residential real estate prices will be in twelve months.
Below is a map, broken down by state, reflecting how home values are forecasted to change by the end of 2018 using data from the most recent report.
As we can see, CoreLogic projects an increase in home values in 49 of 50 states, and Washington, DC (there was insufficient data for HI). Nationwide, they see home prices increasing by 4.2%.
Recently, the National Association of Realtors (NAR) conducted their own analysisto determine the impact the new tax code may have on home values. NAR’s analysis:
“…estimated how home prices will change in the upcoming year for each state, considering the impact of the new tax law and the momentum of jobs and housing inventory.”
Here is a map based on NAR’s analysis:
According to NAR, the new tax code will have an impact on home values across the country. However, the effect will be much less significant than what some originally thought.
According to the National Association of Realtors’ latest Realtors Confidence Index, 61% of first-time homebuyers purchased their homes with down payments below 6% from October 2016 through November 2017.
Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying. The median down payment for all buyers in 2017 was just 10% and that percentage drops to 6% for first-time buyers.
Zillow Senior Economist Aaron Terrazas’ recent comments shed light on why buyer demand has remained strong,
“Looking into 2018, rent is expected to continue gaining. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.”
It’s no surprise that with rents rising, more and more first-time buyers are taking advantage of low-down-payment mortgage options to secure their monthly housing costs and finally attain their dream homes.
If you are one of the many first-time buyers who is not sure if you would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!
There are many people sitting on the sidelines trying to decide if they should purchase a home or sign a rental lease. Some might wonder if it makes sense to purchase a house before they are married and have a family, others might think they are too young, and still, others might think their current income would never enable them to qualify for a mortgage.
We want to share what the typical first-time homebuyer actually looks like based on the National Association of REALTORS most recent Profile of Home Buyers & Sellers. Here are some interesting revelations on the first-time buyer:
You may not be much different than many people who have already purchased their first homes. Let’s meet to determine if your dream home is within your grasp.
It is common knowledge that a great number of homes sell during the spring-buying season. For that reason, many homeowners hold off on putting their homes on the market until then. The question is whether or not that will be a good strategy this year.
The other listings that do come out in the spring will represent increased competition to any seller. Do a greater number of homes actually come to the market in the spring as compared to the rest of the year? The National Association of Realtors (NAR) recently revealed the months in which most people listed their homes for sale in 2017. Here is a graphic showing the results:
The three months in the second quarter of the year (represented in red) are consistently the most popular months for sellers to list their homes on the market. Last year, the number of homes available for sale in January was 1,680,000.
With the national job situation improving, and mortgage interest rates projected to rise later in the year, buyers are not waiting until the spring; they are out looking for homes right now. If you are looking to sell this year, waiting until the spring to list your home means you will have the greatest competition amongst buyers.
It may make sense to beat the rush of housing inventory that will enter the market in the spring and list your home today.
Americans continue to believe that homeownership is important in achieving the American Dream. A recent survey by NeighborWorks America reported that:
“Owning a home remains a core element of the American Dream.”
When asked “How important a part of the American dream is owning a home?”
The survey also revealed that 81% of Americans believe that owning a home leads to a family being more financially stable. This feeling was reiterated by Zillow Senior Economist Aaron Terrazas who, in a recent press release, explained:
“After about a two-year slowdown, rent growth is starting to pick back up across the nation…Looking into 2018, rent is expected to continue gaining.
More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stabilityof a monthly mortgage payment instead.” (emphasis added)
Owning a home always has been, and always will be, a crucial part of attaining the American Dream.
According to Ellie Mae’s latest Origination Report, the average FICO® Score on all closed loans dropped to 722 which is its lowest mark since April. The average includes all approved refinance and purchase loans.
FHA and VA loans showed the most opportunity for millennials looking to enter the market with low down payments and even lower FICO® Score requirements.
Ellie Mae’s Millennial Tracker revealed that those who purchased homes in December with an FHA Loan were able to do so with an average down payment of 4% and a FICO® Score of only 684.
Joe Tyrell, EVP of Corporate Strategy at Ellie Mae commented on the opportunity this brings to buyers,
“With the average credit score dipping, lenders are extending credit to borrowers who may have had no previous access to the housing market.”
More and more potential buyers are able to qualify for a mortgage loan now! If you are debating a home purchase, let’s get together and evaluate your ability to buy today!
The housing crisis is finally in the rearview mirror as the real estate market moves down the road to a complete recovery. Home values are up, home sales are up, and distressed sales (foreclosures and short sales) have fallen to their lowest points in years. It seems that the market will continue to strengthen in 2018.
However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. While buyer demand looks like it will remain strong throughout the winter, supply is not keeping up.
National Association of Realtors
“Total housing inventory at the end of November dropped 7.2 percent to 1.67 million existing homes available for sale, and is now 9.7 percent lower than a year ago (1.85 million) and has fallen year-over-year for 30 consecutive months. Unsold inventory is at a 3.4-month supply at the current sales pace, which is down from 4.0 months a year ago.”
Joseph Kirchner, Senior Economist for Realtor.com
“The increases in single-family permits and starts show that builders are planning and starting new construction projects, that’s a good thing because it will help to relieve the shortage of homes on the market.”
Sam Khater, Deputy Chief Economist at CoreLogic
“Inventory is tighter than it appears. It’s much lower for entry-level buyers.”
If you are thinking of selling, now may be the time. Demand for your house will be strong at a time when there is very little competition. That could lead to a quick sale for a really good price.
CoreLogic’s latest Equity Report revealed that “over the past 12 months, 712,000 borrowers moved into positive equity.” This is great news, as the share of homeowners with negative equity (those who owe more than their home is worth), has dropped more than 20% since the peak in Q4 of 2009 (26%) to 4.9% today.
The report also revealed:
The map below shows the percentage of homes by state with a mortgage and positive equity. (The states in gray have insufficient data to report.)
Significant Equity Is on The Rise
Frank Nothaft, Chief Economist at CoreLogic, believes this is great news for the “housing market.” He went on to say:
“Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”
Of the 95.1% of homeowners with positive equity in the U.S., 82.9% have significant equity (defined as more than 20%). This means that more than three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home now.
The map below shows the percentage of homes by state with a mortgage and significant equity.
If you are one of the many homeowners who are unsure of how much equity you have in your home and are curious about your ability to move, let’s meet up to evaluate your situation.
KIRKLAND, Washington (January 5, 2018) – The year 2017 may be in the books and for many members of Northwest Multiple Listing Service it was a memorable one with December’s activity being no exception. Brokers reported historic lows for inventory and year-over-year price gains in most areas.
“I’ve never seen inventory this low in Kitsap County in 27 years,” remarked Northwest MLS director Frank Wilson, branch managing broker at John L. Scott Real Estate in Poulsbo. That county’s number of active listings last month plunged nearly 40 percent from year-ago levels.
At month end, there were only 397 active listings in Kitsap County (down from the year-ago total of 659), a level Wilson described as “exceptionally low,” even accounting for seasonal factors. “A normal inventory in Kitsap County used to be 1,500 to 1,700, but we have not seen this number of active listings in several years,” he lamented (Northwest MLS data show the last time inventory topped 1,500 in that county was in July 2014 when there were 1,503 listings at month end).
For the MLS area overall, inventory shrunk 19 percent, from 10,569 active listings at the end of 2016 to last month’s figure of 8,553. That’s the smallest selection for any month in the past decade. For the fourth time this year, monthly inventory dipped below the 10,000 mark, a level not reached at any other time during the 10-year comparison.
Despite the paltry supply, last month’s sales remained remarkably strong, with closings up slightly (0.88 percent) from a year ago. Northwest MLS members reported 7,642 closed sales, about the same volume as a year ago when completed transactions totaled 7,575.
Year-over-year pending sales of single family homes and condos (combined) fell about 3 percent, from 6,390 to 6,198, but far outgained the number of new listings added to inventory (4,053).
“December, which has historically been a slower month, picked up momentum and never let up,” reported George Moorhead, designated broker at Bentley Properties. Unlike October through November, which he described as slower than what had been seen the past three years, “December drew aggressive buyers, some motivated by expectations of a flattening market, with others trying to beat anticipated interest rate hikes.” Purchasers were from all buying demographics, noted Moorhead, a member of the Northwest MLS board of directors.
Several MLS leaders commented on the consequences of depleted inventory, including OB Jacobi, president of Windermere Real Estate.
“While pending sales are down double digits in King County, it’s not because there are fewer people buying, it’s because there is far less to buy,” according to Jacobi. “That’s why home prices tell the true story of this market and the huge discrepancy between supply and demand. As long as this imbalance remains, prices will continue to see steep increases, just as they did in December and throughout 2017.”
Northwest MLS statistics show prices rose 11.4 percent system-wide for the 7,642 completed sales of homes and condos. Thirteen of the 23 counties in the report had double-digit price hikes from a year ago. Two counties reported price drops: Chelan (-11.2 percent) and Douglas (-6.5 percent).
Within the Puget Sound region, King County registered the sharpest escalations at nearly 16 percent. Year-over-year prices jumped from $505,000 to $585,000. For single family homes in King County, the hike was similar (about 15.5 percent), rising from $550,000 to $635,000 at year end.
Condo prices surged 28 percent in King County over the past twelve months, from $315,000 to $402,000. During the same year-over-year period, active listings fell from 346 units to 206 (down more than 40 percent), leaving only about 10 days of supply (0.35 months of inventory).
System-wide, there is a little more than a month’s supply (1.12 months) of homes and condos, with the shortages most pronounced in the four-county Puget Sound region. Three of those counties – King, Kitsap and Snohomish – have less than a months supply; Pierce County is somewhat better off with 1.1 months.
“While all year we’ve been bemoaning lack of inventory and escalating prices, the statistics show 2017 was a banner year in many respects for real estate in the Puget Sound region and throughout the Northwest,” stated Mike Grady, president and COO of Coldwell Banker Bain. He cited year-over-year gains in both prices and values, commenting “As a result of this strong market, homeowners are experiencing bountiful gains in property values.”
Brokers expect momentum to continue despite uncertainty about interest rates and taxes.
J. Lennox Scott, chairman and CEO of John L. Scott Real Estate believes the Central Puget Sound housing market will remain one of the strongest in the nation. “It will be another happy new year for real estate activity.” As the new year unfolds, he expects buyers “will emerge from winter holiday hibernation in big numbers” in part thanks to the Seahawks. “Without the Seahawks in the football playoffs, the 2018 housing market will be more intense earlier in January rather than heating up after the Super Bowl,” Scott remarked.
Scott also anticipates a “frenzied, multiple-offer market” in the more affordable and mid-price ranges, as well as “good-to-strong” sales activity in the luxury market close to the job centers. Positive job growth and attractive interest rates will propel activity, he suggests, adding “In the more affordable and mid-price ranges, the impact of the new federal tax policy is minimal.”
Wilson also believes the new tax code will not have an immediate impact on home sales in Kitsap County. “The majority of our purchasers are buying for lifestyle reasons such as a new job, transfer of job or duty station, or household size expanding or contracting.” He suggests 2018 “will look a lot like 2017” but everything will be amplified due to the extreme shortage of active listings.
Grady concurred. “As we look forward to 2018 we continue to believe this is a great time to buy real estate. We see only positive returns for homeowners and real estate investors this year and likely for several years to come.”
Moorhead anticipates aggressive buyer activity through May, but expects some short-term flattening thereafter with single-digit appreciation in the range of 5-to-7 percent. Builders still have memories of 2008, but with moderate activity and price increases likely to be sustained, “they are cautiously optimistic.”
Luxury buyers seem to be undeterred by the change in the mortgage interest deduction, Moorhead noted (the bill lowered the cap from $1 million to $750,000 for primary residences). He said they polled their top 30 luxury home buyers regarding the change. The most common responses were “disappointment at losing a great tax planning deduction,” Moorhead reported, but added, “Those surveyed said it would not change the style of home or price point for the homes they are looking to purchase.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
According to recently released data from the National Association of Realtors (NAR), the median amount of time a home spent on the market hit an all-time low of only three weeks in 2017.
Strong buyer demand, a good economy, and a low inventory of new and existing homes for sale created the perfect storm to accelerate the time between listing and signing a contract. The time needed to sell a home has dropped substantially since its highest mark of 11 weeks in 2012.
The chart below shows the median weeks on the market from 1987 to today.
If you are a homeowner who is debating whether or not to list your home for sale, know that national market conditions are primed for a quick turnaround! Let’s get together to discuss exactly what’s going on in our area, today!
Homeownership is a major part of the American Dream. As evidence of that, 91% of Americans believe that owning a home is either essential (43%) or important (48%) to achieving that “dream.” In a market where some people may be unsure about the benefits and possibilities of buying a home, it is important that we remember this.
Homeownership is NOT just about the money. In fact, some of the major benefits are non-financial. Here are a few of those benefits as per the National Association of Realtors:
Homeownership means something more to people and their families than just the financial considerations.
Over the next five years, home prices are expected to appreciate on average by 3.35% per year and to grow by 24.34% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.
As an example, let’s assume a young couple purchases and closes on a $250,000 home this month (January). If we only look at the projected increase in the price of that home, how much equity will they earn over the next 5 years?
Since the experts predict that home prices will increase by 4.2% in 2018, the young homeowners will have gained $10,500 in equity in just one year.
Over a five-year period, their equity will increase by nearly $45,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.
Not only is homeownership something to be proud of, but it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, find out if you are able to today!
What truly causes a housing bubble and the inevitable crash? For the best explanation, let’s go to a person who correctly called the last housing bubble – a year before it happened.
“A bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value, but the real key for detecting a bubble is speculation…Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the ‘bubble’ bursts.
I have taken to calling the housing market a ‘bubble’.”
– Bill McBride of Calculated Risk calling the bubble back in April 2005
There are two measurements that are used to determine the speculation in a housing market:
As compared to 2005, investor purchases are down dramatically (from 23% to 13%) and so is flipping (from 8.2% to 5.7%). McBride explains:
“There is currently some flipping activity, but this is more the normal type of flipping (buy, improve and then sell). Back in 2005, people were just buying homes and letting them sit vacant – and then selling without significant improvements. Classic speculation.”
DSNews recently ran an article which asked two economists to compare the speculation in today’s market to that in 2005-2007. Here is what they said:
“The speculative ‘flipping mania’ of 2006 is absent from most metro areas.”
“The nature of housing demand is different as well, with more potential homeowners and far fewer speculators in the housing market compared to the 2005-2007 period.”
Sixty days ago, he explained:
“In 2005, people were just buying homes and letting them sit vacant – and then selling without significant improvements. Classic speculation. And even more dangerous during the bubble was the excessive use of leverage (all those poor-quality loans). Currently lending standards are decent, and loan quality is excellent…
I wouldn’t call house prices a bubble – and I don’t expect house prices to decline nationally like during the bust.”
Speculation is a major element of the housing bubble formula. Right now, there are not elevated percentages of investors and house flippers. Therefore, there is not an elevated rate of speculation.
We often talk about the financial reasons why buying a home makes sense. But, more often than not, the emotional reasons are the more powerful or compelling reasons.
No matter what shape or size your living space is, the concept and feeling of home can mean different things to different people. Whether it’s a certain scent or a favorite chair, the emotional reasons why we choose to buy our own homes are typically more important to us than the financial ones.
From the best neighborhoods to the best school districts, even those without children at the time of purchase may have this in the back of their minds as a major reason for choosing the location of the home that they purchase.
Owning your own home offers you not only safety and security, but also a comfortable place that allows you to relax after a long day!
Whether your family is expanding, an older family member is moving in, or you need to have a large backyard for your pets, you can take this all into consideration when buying your dream home!
Looking to actually try one of those complicated wall treatments that you saw on Pinterest? Tired of paying an additional pet deposit for your apartment building? Or maybe you want to finally adopt that puppy or kitten you’ve seen online 100 times? Who’s to say that you can’t in your own home?
Whether you are a first-time homebuyer or a move-up buyer who wants to start a new chapter in your life, now is a great time to reflect on the intangible factors that make a house a home.
In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.
Here are the top five reasons:
Recent studies have shown that 95% of buyers search online for a home. That is in comparison to only 17% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
Where did buyers find the home they actually purchased?
The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:
The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.
Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.
A study by Collateral Analytics revealed that FSBOs don’t actually save anything, and in some cases, may be costing themselves more, by not listing with an agent. One of the main reasons for the price difference at the time of sale is:
“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”
If more buyers see a home, the greater the chances are that there could be a bidding war for the property. The study showed that the difference in price between comparable homes of size and location is currently at an average of 6% this year.
Why would you choose to list on your own and manage the entire transaction when you can hire an agent and not have to pay anything more?
Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.
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 7.0% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.7% over the next year.
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 hovered around 4%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase 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.
There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing cost to work for you?
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 if 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.
In a recent CNBC article, it was reported that many baby boomers are selling their current homes and moving into rentals, rather than purchasing another home.
“Between 2009 and 2015, the number of renters aged 55 or above rose 28 percent, while those aged 34 or younger only increased 3 percent…
Meanwhile, more than 5 million baby boomers across the nation are expected to rent their next home by 2020, according to a 2016 analysis from Freddie Mac.”
This makes sense in the short term for many reasons. If you are moving to a different part of town or a new region of the country, you may decide to rent until you pick the perfect home in an area you love. However, is renting a good long-term strategy?
The Census Bureau recently released their 2017 third quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:
As you can see, rents have steadily increased and are showing no signs of slowing down. If you are faced with making the decision of whether you should rent or buy your next home, you should take this into consideration.
One way to protect yourself from rising rents is to lock in your housing expense by buying a home instead of renting. Let’s get together so we can help you decide what the best step is for you and your family!
We recently shared that over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.
As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.
The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 4.7% over the next 12 months.
If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:
If buying a home is in your plan for 2018, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.
So, you’ve been searching for that perfect house to call a ‘home,’ and you finally found it! The price is right, and in such a competitive market, you want to make sure that you make a good offer so that you can guarantee that your dream of making this house yours comes true!
Freddie Mac covered “4 Tips for Making an Offer” in their Executive Perspective. Here are the 4 tips they covered along with some additional information for your consideration:
“While it’s not nearly as fun as house hunting, fully understanding your finances is critical in making an offer.”
This ‘tip’ or ‘step’ should really take place before you start your home search process.
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and will allow you to make your offer with the confidence of knowing that you have already been approved for a mortgage for that amount. You will also need to know if you are prepared to make any repairs that may need to be made to the house (ex: new roof, new furnace).
“Even though there are fewer investors, the inventory of homes for sale is also low and competition for housing continues to heat up in many parts of the country.”
The inventory of homes listed for sale has remained well below the 6-month supply that is needed for a ‘normal’ market. Buyer demand has continued to outpace the supply of homes for sale, causing buyers to compete with each other for their dream homes.
Make sure that as soon as you decide that you want to make an offer, you work with your agent to present it as soon as possible.
Freddie Mac offers this advice to help make your offer the strongest it can be:
“Your strongest offer will be comparable with other sales and listings in the neighborhood. A licensed real estate agent active in the neighborhoods you are considering will be instrumental in helping you put in a solid offer based on their experience and other key considerations such as recent sales of similar homes, the condition of the house and what you can afford.”
Talk with your agent to find out if there are any ways that you can make your offer stand out in this competitive market!
“It’s likely that you’ll get at least one counteroffer from the sellers so be prepared. The two things most likely to be negotiated are the selling price and closing date. Given that, you’ll be glad you did your homework first to understand how much you can afford.
Your agent will also be key in the negotiation process, giving you guidance on the counteroffer and making sure that the agreed-to contract terms are met.”
If your offer is approved, Freddie Mac urges you to “always get an independent home inspection, so you know the true condition of the home.” If the inspector uncovers undisclosed problems or issues, you can discuss any repairs that may need to be made with the seller, or cancel the contract.
Whether buying your first home or your fifth, having a local real estate professional who is an expert in their market on your side is your best bet to make sure the process goes smoothly. Let’s talk about how we can make your dreams of homeownership a reality!
In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are in a market that is not as competitive, knowing your budget will give you the confidence of knowing if your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.
It’s the time of the year when I look deep into my crystal ball to see what’s on the horizon for the upcoming year. As we are all aware, 2017 has been a stellar year for housing across the country, but can we expect that to continue in 2018?
Here are my thoughts:
Millennial Home Buyers
Last year, I predicted that the big story for 2017 would be millennial home buyers and it appears I was a little too bullish. To date, first-time buyers have made up 34% of all home purchases this year – still below the 40% that is expected in a normalized market. Although they are buying, it is not across all regions of the country, but rather in less expensive markets such as North Dakota, Ohio, and Maryland.
For the coming year, I believe the number of millennial buyers will expand further and be one of the biggest influencers in the U.S. housing market. I also believe that they will begin buying in more expensive markets. That’s because millennials are getting older and further into their careers, enabling them to save more money and raise their credit profiles.
Existing Home Sales
As far as existing home sales are concerned, in 2018 we should expect a reasonable increase of 3.7% – or 5.62 million housing units. In many areas, demand will continue to exceed supply, but a slight increase in inventory will help take some heat off the market. Because of this, home prices are likely to rise but by a more modest 4.4%.
New Home Sales
New home sales in 2018 should rise by around 8% to 655,000 units, with prices increasing by 4.1%. While housing starts – and therefore sales – will rise next year, they will still remain well below the long-term average due to escalating land, labor, materials, and regulatory costs. I do hold out hope that home builders will be able to help meet the high demand we’re expecting from first-time buyers, but in many markets it’s very difficult for them to do so due to rising construction costs.
Interest Rates
Interest rates continue to baffle forecasters. The anticipated rise that many of us have been predicting for several years has yet to materialize. As it stands right now, my forecast for 2018 is for interest rates to rise modestly to an average of 4.4% for a conventional 30-year fixed-rate mortgage – still remarkably low when compared to historic averages.
Tax Reform
Something that has the potential to have a major impact on housing are the current proposals relative to tax reform. As I write this, we know that both the House and Senate propose doubling the standard deduction, and the House plans to lower the mortgage interest deduction from $1,000,000 to $500,000. If passed, the mortgage deduction would no longer have value for home owners who would likely opt to take the standard deduction.
If either of the current proposals is adopted into law, the potential reduction in mortgage-related tax savings means the after-tax cost of home ownership will increase for most home owners. Additionally, both the House and Senate bills also end tax benefits for interest on second homes, and this could have a devastating effect in areas with higher concentrations of second homes.
The capping of the deduction for state and local property taxes (SALT) at $10,000 will also negatively impact states with high property taxes, such as California, Connecticut, and New York. Furthermore, proposed changes to the capital gains exemption on profits from the sale of a home (requiring five years of continuous residence as compared to the current two) could impact approximately 750,000 home sellers a year and slow the growth of home ownership.
Something else to consider is that all of the aforementioned changes will only affect new home purchases, which I fear might become a deterrent for current home owners to sell. Given the severe shortage of homes for sale in a number of markets across the country, this could serve to exacerbate an already-persistent problem.
Housing Bubble
I continue to be concerned about housing affordability. Home prices have been rising across much of the country at unsustainable rates, and although I still contend that we are not in “bubble” territory, it does represent a substantial impediment to the long-term health of the housing market. But if home price growth begins to taper, as I predict it will in 2018, that should provide some relief in many markets where there are concerns about a housing bubble.
In summary, along with slowing home price growth, there should be a modest improvement in the number of homes for sale in 2018, and the total home sales will be higher than 2017. First-time buyers will continue to play a substantial role in the nation’s housing market, but their influence may be limited depending on where the government lands on tax reform.
Many people believe that selling their house during “the spring buyers’ market” is the best thing to do. Their reasoning is that there will be more buyers than there are during the winter months and, therefore, their house will sell quicker and for a higher price.
Historically, this made sense. However, today’s real estate market is not following the rules of the past.
The National Association of Realtors (NAR) measures buyer “foot traffic” each month. It receives data on the number of properties shown to a prospective purchaser by a Realtor® (based on the number of lockboxes used). The data reveals the number of buyers out actively looking for a home, not just window shopping on the internet. NAR explains:
“Foot traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future.”
According to the latest Foot Traffic Report, buyer traffic is greater now than it was during this year’s spring market and there are more buyers out now than at any other time in the last five years (March of 2012).
The chart below shows that buyer activity over the last three months (blue bars) was greater than it was during this past spring market (green bars).
If you are waiting for next spring to list your home because you think that’s when the buyers will be out in force, perhaps you should reconsider. Buyers are out right now!
KIRKLAND, Washington (December 6, 2017) – “Normal seasonal slowdowns” are reported by some real estate leaders with Northwest Multiple Listing Service, but other brokers say this holiday season is still drawing crowds at open houses along with competitive bidding in some neighborhoods.
Both inventory and pending sales dipped to their lowest levels since April, while prices still increased by double-digits in most of the 23 counties served by Northwest MLS.
MLS members reported 8,304 pending sales of single family homes and condos, a slight (1.6 percent) gain over the year-ago figure of 8,173. Last month’s mutually accepted offers surpassed the number of new listings (6,098) by 2,206 properties to keep supply tight.
“Until we see a balanced rate of 4-to-5 months of supply, instead of hovering around one month, we’re not likely to see much change,” remarked George Moorhead, designated broker at Bentley Properties. “However,” he added, “since we have seen these low inventory levels since 2013, maybe this is going to be the new normal.”
Moorhead, a member of the Northwest MLS board of directors, also said this time of year is actually one of the best times to find a home. “There is less competition and sellers who list their homes at this time are usually motivated to make their move. Some of the best pricing can be attained from December through early February,” he indicated.
Buyers seem to be undeterred by winter weather, holiday festivities or other seasonal or – for the most part — political distractions.
Gary O’Leyar, designated broker/owner of Berkshire Hathaway HomeServices Signature Properties, said December “may well provide an unexpected holiday reprieve for our local, weary real estate shoppers. Combined with the seasonal pace change and real estate industry pundits’ consternation over the effect of the federal income tax bill working its way through Congress, buyers could be getting some relief.” He urged potential sellers to take note as “This could be the signal they’ve been waiting for as a good time to sell before the pending tax laws that affect real estate ownership take effect.”
For those who are both prepared and patient, OB Jacobi, president of Windermere Real Estate, said the holidays can actually be a great time to buy “because there is usually less competition and sellers are motivated to close out the year with a sale.”
More than 8,000 sellers found November to be a good time complete sales. Closed sales rose about 2.5 percent year-over-year, from 7,872 transactions to 8,068. Sales of single family homes (excluding condos) rose about 3.3 percent, but the volume of condos fell about 2.6 percent, likely due to limited selection.
“Open houses this past weekend drew strong traffic,” reported Northwest MLS chairman John Deely, principal managing broker at Coldwell Banker Bain. He said more than a hundred groups toured a condo in the Lake Union area.
“The Seattle market is inundated with technology workers, both newly relocated and those that have been renting and are ready to set down roots,” Deely noted, adding “Investors both large and small are stepping up their purchasing, signaling strong confidence in the Greater Seattle area.”
Strong demand is not confined to Seattle.
“The velocity of market means that every time a new listing is added all eyes focus like a laser beam to see what just happened,” said Dick Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor. “If a worthy property comes on the market, buyers know it instantly as the information is streamed through every device known to man. Buyers step up and buy, quickly and efficiently.”
Brokers are noticing the buyers include growing numbers of millennials.
“Millennial buyers continue to enter the market but the extremely low inventory is hampering their success rate in finding and securing a purchase,” said Diedre Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynnwood.
Haines said November activity started slow, but definitely picked up later in the month. “Earlier this year I feared signs that a bubble was building, but I no longer see that happening,” she stated.
“While we continued to experience more of the same in November related to a lack of inventory, we are seeing more homes sold year-to-date,” observed Mike Grady, president and COO of Coldwell Banker Bain. He noted the number of new listings in King County for November increased more than 7 percent compared to last year.
Area-wide, the volume of new listings added during November rose nearly 5.6 percent (from 5,776 to 6,098) compared to the same month a year ago.
J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, described sales activity for new listings as “extremely strong.” Despite lower overall volumes of new listings and sales, Scott said the majority of new listings are selling within their first 30 days on the market. He calculated November’s pending sales of single family homes outgained new listings by nearly 41 percent.
Despite improvements in new listings, brisk sales kept inventory well below year-ago levels. “King County is still experiencing double-digit reductions in inventory compared to this same time last year, but the shortage is even more pronounced in some outlying counties,” Grady noted, commenting “We’re not just talking about the main commuter counties.”
Significant decreases in inventory are found in Thurston (down 31 percent), Mason (down more than 26 percent), and Cowlitz (down more than 39 percent) counties. MLS figures show inventory is down more than 24 percent in Snohomish County and nearly 29 percent in Kitsap County. Across the 23 counties, it’s down about 15.9 percent.
Measured by months of supply, there is about 1.4 months of inventory overall. In King County, supply has dwindled to 0.79 months, and only slightly better, at 0.89 months, in Snohomish County.
Home values continue to escalate across the region. The system-wide median price of $379,000 was up 10.8 percent from a year ago, with 15 counties reporting even sharper gains.
In King County the median price for single family homes and condos combined jumped 15.6 percent, from $497,254 to $575,000. For single family homes (excluding condos), the median price was $630,750, up nearly 14.7 percent from last year. Condo prices surged 17.1 percent, due to a combination of depleted inventory (down 28 percent from a year ago) and higher prices for new condos. (In King County, the condo component classified as new construction that sold during November had a median price of $873,490.)
Commenting on prices, Haines emphasized wide variations are found when comparing median sales price within most counties. In Snohomish County, for example, the median price for homes and condos that sold in Mill Creek was $590,000, while in Darrington it was $191,475. Similarly, in King County, the median price for Bellevue homes and condos was $875,000; in Tukwila the sales price was $321,194. Brokers tend to concur prices may moderate in the coming year.
“Can we as an industry sustain this 10-to-15 percent increase in prices again in 2018? I don’t think so, but I don’t know,” remarked Beeson, adding, “I only know that when sellers decide to get serious and sell their home by finally setting the right price or finally improving the condition of their property to justify their price magic happens. Houses sell, people move, lives change forever.”
“Prices are expected to see some much needed slowdown in 2018 which will help bring more balance to the market,” stated Jacobi, who also believes a housing bubble is unlikely. “Rising home prices on their own don’t lead to a bubble; a number of other factors have to come into play.”
Moorhead agreed, saying he expects 2018 “will be less glamorous with 6-to-8 percent appreciation, or even a slight flattening of the market for 8-to-12 months.” Commenting on modest gains in income, at around 2.5 percent, he remarked “No wonder buyers in the market are so frustrated and willing to make significant concessions to secure their next home. It’s like chasing a train where you just cannot catch up and only the fastest can get on.”
Brokers tended to agree some of the provisions in the widely anticipated tax reform have “the potential to negatively affect home values nationwide.” Haines said a drop in sales is expected if the proposed bill as it stands is passed.
Notwithstanding the uncertainty around tax reform, Scott remains confident: “Market conditions are set for another robust market in the year 2018,” he stated.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
According to CoreLogic’s latest Home Price Index, national home prices have appreciated by 7.0% from October 2016 to October 2017. This marks the second month in a row with a 7.0% year-over-year increase.
A lack of supply of homes for sale has led to upward pressure on home prices across the country, especially in areas where both existing and new home inventory have not kept up with buyer demand.
CoreLogic’s Chief Economist Frank Nothaft elaborated on the significance of such a large year-over-year gain,
“Single-family residential sales and prices continued to heat up in October. On a year-over-year basis, home prices grew in excess of 6 percent for four consecutive months ending in October, the longest such streak since June 2014.
This escalation in home prices reflects both the acute lack of supply and the strengthening economy.”
This is great news for homeowners who have gained over $13,000 in equity in their home over the last year! Those homeowners who had been on the fence as to whether or not to sell will be pleasantly surprised to find out that they now have an even larger profit to help cover a down payment on their dream home.
CoreLogic’s President & CEO Frank Martell had this to say,
“The acceleration in home prices is good news for both homeowners and the economy because it leads to higher home equity balances that support consumer spending and is a cushion against mortgage risk. However, for entry-level renters and first-time homebuyers, it leads to tougher affordability challenges.”
Any time the price of a home goes up there will likely be concern about the affordability of that home, but there is good news. Mortgage interest rates remain at historic lows, allowing buyers to enter the housing market and lock in a low monthly housing cost.
The report went on to mention that over the same 12-month period, median rental prices for a single-family home have also risen by 4.2%.
With rents and home prices rising at the same time, first-time buyers may find the task of saving for a down payment a little daunting. Low down payment programs are available and have been a very popular option for first-time buyers. The median down payment for first-time buyers in 2017 was only 5%!
If you are looking to enter the housing market, as either a buyer or a seller, let’s get together to go over exactly what’s going on in our neighborhood and discuss your options!
Why is there so much paperwork mandated by the lenders for a mortgage loan application when buying a home today? It seems that they need to know everything about you 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.
During the run-up to the housing crisis, 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.
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.
The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate around 4%.
The friends and family who bought homes ten or twenty years 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 1990s and 6.29% in the 2000s).
If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.
Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.
Here are five reasons listing your home for sale this winter makes sense.
The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase… and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.
Take advantage of the buyer activity currently in the market.
Housing inventory is still under the 6-month supply that is needed for a normal housing market. This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.
Historically, the average number of years a homeowner stayed in their home was six, but has hovered between nine and ten years since 2011. There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.
The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.
Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to 44 days, after seeing a 12-month high of 48 days in January.
If your next move will be into a premium or luxury home, now is the time to move up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly, AND you’ll be able to find a premium home to call your own!
Prices are projected to appreciate by 4.7% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.
Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.
There are many unsubstantiated theories as to why home values are continuing to increase. From those who are worried that lending standards are again becoming too lenient (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.
However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase.
It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything more than seven months will cause prices to depreciate (see chart 1).
According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes has been below six months for the last four years (see chart 2).
If buyer demand outpaces the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.
We can see that affordability is better today than in the fifteen years prior to the boom and bust.
CoreLogic just published a report showing the National Homebuyers’ “Typical Mortgage Payment.” Here is a graph of their findings:
We can see that affordability is better today than in the fifteen years prior to the boom and bust.
CoreLogic just published a report showing the National Homebuyers’ “Typical Mortgage Payment.” Here is a graph of their findings:
It reveals that, though a ‘typical’ housing payment was less expensive in 2012 (remember distressed properties), it is currently less expensive than it was in 2000 and is still projected to be lower next year than it was in 2000.
Mark Fleming, Chief Economist at First American, explained it best:
“While borrowing power for the potential home buyer has fallen relative to the low point of 2012, it remains high today and will remain high next year, relative to the long run average. If you don’t want to rent anymore and are considering becoming a homeowner, even if mortgage rates rise next year, your borrowing power will remain strong by historic standards.”
According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.92%, which is still near record lows in comparison to recent history!
The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.
The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.
With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.
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Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.
Zillow recently reported that:
“In reality, buying or renting a home is an intensely personal decision, with emotional and even financial considerations that go beyond whether to invest in this one (admittedly large) asset. Looking strictly at housing market numbers, there is a concrete point at which buying a home makes more financial sense than renting it.”
1. We recently highlighted the top 5 financial benefits of homeownership:
2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.
3. Just a few months ago, we explained that a family that purchased an average-priced home at the beginning of 2017 could build more than $48,000 in family wealth over the next five years.
4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment– along with a profit margin!!
Owning a home has always been, and will always be, better from a financial standpoint than renting.
The current narrative is that home prices have risen so much so that it is no longer a smart idea to purchase a home. Your family and friends might suggest that buying a home right now (whether a first-time home or a move-up home) makes absolutely no sense from an affordability standpoint. They are wrong!
Homes are more affordable right now than at almost any time in our country’s history except for the foreclosure years (2009-2015) when homes sold at major discounts. As an example, below is a graph from the latest Black Knight Mortgage Monitorshowing the percentage of median income needed to buy a medium-priced home in the country today in comparison to prior to the housing bubble and bust.
As we can see, the percentage necessary is less now than in those time periods.
The Mortgage Monitor also explains that home affordability is better today than it was in the late 1990s in 47 of 50 states.
Your friends and family have your best interests at heart. However, when it comes to buying your first home or selling your current house to buy the home of your dreams, let’s get together to discuss what your best move is, now.
Whether you are a renter who is searching for your dream home or a homeowner who feels like your only option is to renovate, you have at least one thing in common: feeling stuck in place.
According to data from the National Association of Realtors’ Profile of Home Buyers & Sellers, the average amount of time that a family stays in their home remained at 10 years in 2017. This mark ties the highest marks set in 2014 and 2016. Back in 1985, when data was first collected on this subject, homeowners stayed in their homes for an average of only 5 years.
There are many reasons why homeowners have decided to stay and not to sell. A recent Wall Street Journal article had this to say,
“Americans aren’t moving in part because inventory levels have fallen near multidecade lows and home prices have risen to records. Many homeowners are choosing to stay and renovate, in turn making it more difficult for renters to enter the market.”
Sam Khater, Deputy Chief Economist for CoreLogic, equated the lack of inventory to “not having enough oil in your car and your gears slowly [coming] to a grind.”
Historically, a normal market (in which prices increase at the rate of inflation) requires a 6-7 month supply of inventory. There hasn’t been that much supply since August of 2012! Over the course of the last 12 months, inventory has hovered between a 3.5 to 4.4-month supply, meaning that prices have increased and buyers are still out in force!
Challenges in the new-home construction market have “helped create a bottleneck in the market in which owners of starter homes aren’t trading up to newly built homes, which tend to be pricier, in turn creating a squeeze for millennial renters looking to get into the market.”
“Economists said baby boomers also aren’t in a hurry to trade in the dream homes they moved into in middle age for condominiums or senior living communities because many are staying healthy longer or want to remain near their children.”
Don’t give up! If you are looking to move-up to an existing luxury home, there are deals to be had in the higher-priced markets. Demand is strong in the starter and trade-up home markets which means that your house will sell quickly. Let’s work together to build in contingencies that allow you more time to find your dream home; the right buyer will wait.
Mortgage interest rates, as reported by Freddie Mac, have increased over the last several weeks. Freddie Mac, along with Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors, is calling for mortgage rates to continue to rise over the next four quarters.
This has caused some purchasers to lament the fact that they may no longer be able to get a rate below 3.5%. However, we must realize that current rates are still at historic lows.
Here is a chart showing the average mortgage interest rate over the last several decades:
Though you may have missed getting the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.
Every year at this time, many homeowners decide to wait until after the holidays to put their homes on the market for the first time, while others who already have their homes on the market decide to take them off until after the holidays.
Waiting until after the holidays to sell your home probably doesn’t make sense.
With residential home prices continuing to appreciate at levels above historic norms, some are questioning if we are heading toward another housing bubble (and subsequent burst) like the one we experienced in 2006-2008.
Recently, five housing experts weighed in on the question.
“We’re definitely not in a bubble.”
“We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.”
“There is no direct or indirect sign of any kind of bubble.”
“Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.”
“I wouldn’t call house prices a bubble.”
“So prices may be a little overvalued, but there is little speculation and I don’t expect house prices to decline nationally like during the bust.”
“Housing is not repeating the bubble period of 2000-2006.”
“…price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.”
“We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis.”
“Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.”
The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.
Today we want to talk about the top 5 financial reasons you should own your own home.
Before you sign another lease, let’s get together to help you better understand all your options.
Multigenerational homes are coming back in a big way! In the 1950s, about 21%, or 32.2 million Americans shared a roof with their grown children or parents. According to an article by Realtor.com, “Nearly 1 in 5 Americans is now living in a multigenerational household – a household with two or more adult generations, or grandparents living with grandchildren – a level that hasn’t been seen in the U.S. since 1950.”
Another report that proves this point is the National Association of Realtors’ (NAR) 2017 Profile of Home Buyers and Sellers which states that 13% of home buyers purchased multigenerational homes last year. The top 3 reasons for purchasing this type of home were:
Valerie Sheets, Spokesperson for Lennar, points out that,
“Everyone is looking for the perfect home for any number of family situations, such as families who opt to take care of aging parents or grandparents at home, or millennials looking to live with their parents while they attend school or save for a down payment.”
For a long time, nuclear families (a couple and their dependent children) became the accepted norm, but John Graham, co-author of “Together Again: A Creative Guide to Successful Multigenerational Living,” says, “We’re getting back to the way human beings have always lived in – extended families.”
This shift can be attributed to several social changes over the decades. Growing racial and ethnic diversity in the U.S. population helps explain some of the rise in multigenerational living; “Data suggest that multigenerational living is more prevalent among Asian (28%), Hispanic (25%), and African-American (25%) families, while U.S. whites have fewer multigenerational homes (15%).”
Additionally, women are a bit more likely to live in multigenerational conditions than are their male counterparts (12% vs. 10%, respectively). Last but not least, basic economics.
Valerie Sheets brings to light the fact that home prices have been skyrocketing in recent years. She says that, “As home prices increase, more families tend to opt for living together.”
Multigenerational households are making a comeback. While it is a shift from the more common nuclear home, these households might be the answer that many families are looking for as home prices continue to rise in response to a lack of housing inventory.
KIRKLAND, Washington (November 6, 2017) – Early seasonal snow and questions swirling around the tax plan unveiled last week by House Republicans could make the usual seasonal slowdown more pronounced, say industry leaders from Northwest Multiple Listing Service. For October, however, key indicators trended upwards.
Pending sales rose nearly 8 percent from a year ago, closed sales were up 5.2 percent, and prices jumped about 8.2 percent, with 14 counties reporting double-digit gains. Even the number of new listings improved on the year-ago total.
Northwest MLS figures for the 23 counties it serves show members added 8,466 new listings to inventory during October, outgaining the year-ago total of 7,575 by 11.8 percent. Buyers outnumbered new listings, with 10,586 of them having their offers accepted. That number of pending sales was up nearly 8 percent from the same month a year ago.
“The challenge for buyers actually isn’t lack of choice, it is the rapid pace of sales,” suggested Ken Anderson, president/owner of Coldwell Banker Evergreen Olympic Realty.
“The market in Thurston County has never been better for sellers, and they’re getting the message,” Anderson remarked. His analysis revealed a 10-year high for sellers coming to market during October. “These savvy sellers are not waiting until spring to sell. They are taking advantage of today’s great market and making their move now,” he reported.
Buyers may find themselves in a quandary as the year winds down as they contemplate limited supply, possible upticks in interest rates and tax reform. Last week’s announcement of a provision in a GOP tax proposal to cap the mortgage interest deduction is concerning to buyers, brokers and builders.
“Imagine if the proposed plan to cap the mortgage interest deduction at $500,000 is approved in a market that is starved for homes and where the median price [for a single family home in King County] is now $630,000,” said O B Jacobi, president of Windermere Real Estate. “Homeowners may be less likely to sell because they would be giving up their grandfathered tax credit on their current home. That’s fewer homes for sale in a market where we really need them,” he stated, adding, “There could also be a flood of new buyers trying to purchase before the plan is passed, adding to the already hyper-competitive market conditions.”
The president of the National Association of REALTORS® also weighed in, saying details are currently under review, but stated, “Eliminating or nullifying the tax incentives for homeownership puts home values and middle class homeowners at risk, and from a cursory examination this legislation appears to do just that.”
Northwest MLS data show 66 percent of single family homes sold so far this year (Jan. – Oct.) in King County had selling prices of $500,000 or higher.
The median sales price system-wide for October was $373,000, up more than 8.1 percent from twelve months ago when it was $344,900. All counties in the four-county Puget Sound region notched double-digit gains.
For single family homes (excluding condos), the median sales price for last month’s completed transactions was $381,000. Within King County prices are considerably higher. In Seattle, year-over-year prices jumped 17.6 percent, from $625,000 to $735,000. On the Eastside, the median price for a single family home rose 10 percent from a year ago, increasing from $768,000 to $845,000. Nevertheless, high prices did not seem to deter many house-hunters.
J. Lennox Scott, chairman and CEO of John L. Scott Real Estate, noted October was the “best ever for sales activity in the Puget Sound region.”
Northwest MLS brokers reported 7,740 pending sales in the four-county region (King, Snohomish, Pierce and Kitsap), bettering the year ago mark of 7,487 mutually accepted offers. System-wide, pending sales increased from the year-ago total of 9,805 to last month’s total of 10,586 (up 7.97 percent).
“With a large buyer pool for each new listing, we saw a higher percentage of new listings sell within the first 30 days of coming on the market,” Scott reported, while also noting the seasonal change in housing market dynamics. “As we enter the winter market, the number of new listings being added will be in short supply from now through February,” he explained.
Compared to spring months, Scott expects volumes in the next few months will be at 30-to-50 percent of spring totals. “The stage is set once again for a frenzy housing market after the first of the year in the price ranges where there is a shortage of active listings for sale.”
Frank Wilson, branch managing broker at John L. Scott’s Poulsbo office, also commented on supply, noting in Kitsap County, the number of active listings is down nearly 24 percent from a year ago. “What this means to Kitsap County buyers is that everything is compressed: with lower inventory and higher prices the pressure continues to build for those buyers who need to find a home.”
Inventory remains low in many counties in the Northwest MLS system. Overall, there is only 1.5 months of supply of single family homes and condos combined. In King County, it’s less than one month. Industry analysts say four to six months typically indicates a balanced (or “normal”) market.
Most brokers agree inventory will not grow over the next few months. “Sellers who bring their homes on the market over the next three months will have a lot of interest because of the pent-up demand of buyers who are going to have fewer houses to consider,” suggested Wilson.
“Homebuyers in our area are at a real disadvantage right now,” commented Wilson, a member of the Northwest MLS board of directors. “They have to be pre-underwritten with their lenders, put forward a conventional or better offer, put down substantial earnest money, and hope that multiple offers do not escalate the price out of their affordability zone.” He fears “more and more buyers will be sidelined.”
Brokers in Snohomish County are detecting some tapering of activity.
“Buyers are no longer being as aggressive with concessions on homes when making offers and they are unwilling to compete for a home where sellers are being too aggressive with a list price,” commented George Moorhead, designated broker and owner at Bentley Properties. He also noted buyers who have been on the sidelines are now more active as they see a slowdown “and an opportunity to finally own a home without the multiple offer competition.”
Diedre Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynnwood, believes the usual seasonal slowdown is apparent “a bit earlier than usual.” She reported multiple offers are continuing but listings in Snohomish County are experiencing longer market times, fewer above-list price offers, and a noticeable increase in price reductions. “All of this puts an emphasis on how important correct, accurate pricing has become.”
Mike Grady, president and COO of Coldwell Banker Bain, suggested statistics for October “at first blush suggest the lack of listings of single family homes and condos in the region is self-correcting.” As an example, he notes new listings in the tri-county region (King, Snohomish and Pierce) increased 11 percent from a year ago, while year-over-year sales rose only 6 percent. “That implies the shrinking inventory of homes for sale experienced over the past couple of year may be evening out.”
Looking at year-to-date figures tells a different story, according to Grady. His analysis of the three counties shows a 20 percent reduction in active listings. Factoring in strong sales yields a statistic known as months of inventory, which is under two months in the four counties comprising the Puget Sound region.
“The story continues to be in the ‘commuter’ counties, which are experiencing the biggest shrinkage from a year ago,” said Grady. “This reduction of supply will continue to put pressure on rising prices. Bottom line: investment in a home continues to be bullish with no change in sight.”
Northwest MLS board member Robert Wasser said while it may be a difficult time to be a buyer and a positive time to be a seller, the best strategy “regardless of market conditions is to calculate the pros and cons involved and make informed choices.” Wasser, the owner/broker at Prospera Real Estate in Seattle, recommends working with a real estate professional who, among other topics “is equipped to discuss market conditions, financing considerations, historic trends, and buying and selling strategies.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
The National Association of Realtors (NAR) released their latest Quarterly Metro Home Price Report last week. The report revealed that severely lacking inventory across the country drained sales growth and kept home prices rising at a steady clip in nearly all metro areas. Home prices rose 5.3% over the last quarter across all metros.
Lawrence Yun, Chief Economist at NAR, discussed the impact of low inventory on buyers in the report:
“Unfortunately, the pace of new listings were unable to replace what was quickly sold. Home shoppers had little to choose from, and many had to outbid others in order to close on a home. The end result was a slowdown in sales from earlier in the year, steadfast price growth and weakening affordability conditions.”
Rising prices are a homeowner’s best friend. As reported by the Washington Post in a recent article post:
“The rise in median sales prices has made current homeowners much more willing to sell their home, and that willingness is one of the main drivers behind the inventory that does make it on to the market. While it hasn’t been enough to meet demand, it has made the situation much better, compared with even three or four years ago.”
In a market where prices are rising, buyers should take into account the cost of waiting. Obviously, they will pay more for the same house later this year or next year. However, as Construction Dive reported, the amount of cash needed to purchase that home will also increase.
“These factors have created a situation where the market keeps moving the goalposts in terms of the down payment necessary for first-time homebuyers to get into a home.”
If you’re thinking of selling and moving down, waiting might make sense. If you are a first-time buyer or a seller thinking of moving up, waiting probably doesn’t make sense.
Each year, most homeowners wait until the spring to sell their houses because they believe that they can get a better deal during the normal spring buyer’s market. However, recently released data suggests that a seller’s best deal may be available right now. The concept of ‘supply & demand’ reveals that the best price for an item will be realized when the supply of that item is low and the demand for that item is high. Let’s see how this applies to the current residential real estate market.
It is no secret that the supply of homes for sale has been far below the number needed for over a year. A normal market requires six months of housing inventory to meet the demand. The latest report from the National Association of Realtors (NAR) revealed that there is currently only a 4.2-month supply.
Supply is currently very low!!
A report that was just released tells us that demand is very strong. The most recent Foot Traffic Report (which sheds light on the number of buyers out looking at homes) disclosed that there are more buyers right now than at any other time in the last twelve months. This includes more buyers looking at homes right now than at any time during last year’s spring market.
Demand is currently very high!!
Waiting until the spring to list your house for sale made sense in the past. This year is different. The best deal is probably available right now.
Knowing your credit score or getting a recent copy of your credit report is one of the first steps that you can take toward knowing how ready you are to start the home buying process.
Make sure all the information listed on your report is accurate and work to correct any mistakes. The higher your credit score, the more likely you will be to receive a better interest rate for your mortgage, which will translate into more ‘home for your money.’
Many potential buyers believe that they need a 750 FICO® Score or higher to be able to purchase a home. The truth is that according to Ellie Mae’s Origination Report, over 53% of loans were approved with a FICO® score under 750 last month!
Once you know your score, your next step will be finding a lender and getting pre-approved for a mortgage. Doing this will ensure that you know your budget before you start looking for your dream home.
A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.
In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.
Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.
Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:
Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.
There are some people who have not purchased homes yet because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich,”
“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”
Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Management organization at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:
“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”
As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.
Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 3.94% last week.
Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.
In Trulia’s recent report, Rent vs. Buy: Roommate Edition, they examined the impact that renting with a roommate has in determining whether it is more expensive to rent or buy. The study explains:
“Since we started keeping track in 2012, it’s been a better deal to buy than rent in America’s largest housing markets – and for much of that time it hasn’t been close.”
It then goes on to ask the question:
“But does the equation change for renters who share their rent with a roommate?”
“While the standard rent vs. buy analysis reveals buying is cheaper than renting in all of the nation’s 100 largest metros, this doesn’t hold true for those choosing between renting with a roommate and buying a starter home.”
It seems obvious that sharing the cost of renting your living space by taking in a roommate dramatically decreases your housing expense (which is exactly what the report concluded), but it got us thinking.
The savings you would gain by adding a roommate would also occur if you purchased a home. This presents an opportunity for a list of possible purchasers. Here are two examples:
A smaller, move-down home is almost impossible to find in the current housing market. If the seller-turned-buyer takes on a tenant, they could buy a more expensive home knowing that the additional monies needed to pay the mortgage would be offset with the additional monies they receive in rent. Secondly, the older couple (ex. parents) could get a housing option that probably far surpasses anything else available to them in the current market.
Considering the concept of renting a portion of your house to be able to purchase the perfect home may make sense to many families. You will need to decide if it is right for you.
The following analysis of the Western Washington real estate market is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact me.
The Washington State economy added 79,600 new jobs over the past 12 months—an impressive growth rate of 2.4%, and well above the national growth rate of 1.2%. However, as we anticipated in last quarter’s report, we continue to see a modest slowdown in the growth rate as the state grows closer to full employment. Growth has been broad-based, with expansion in all major job sectors other than Aerospace (a function of a slowdown at Boeing). Given the current rate of expansion, I am raising my employment forecast and now predict that Washington will add 81,000 new jobs in 2017.
Given the robust job market, it is unsurprising that the state unemployment rate continues to fall. The current unemployment rate in Washington State is 4.6% and we are essentially at full employment. Additionally, all counties contained within this report reported either a drop or stability in their unemployment rate from a year ago. I maintain my belief that the Washington State economy will continue to outperform the U.S. as a whole. Given such a strong expansion, we should also expect solid income growth across Western Washington.
HOME PRICES
This speedometer reflects the state of the region’s housing market using housing inventory, price gains, home sales, interest rates, and larger economic factors. For the third quarter of 2017, I have left the needle at the same point as the second quarter. Though price growth remains robust, sales activity has slowed very slightly and listings jumped relative to the second quarter. That said, the market is very strong and buyers will continue to find significant competition for accurately priced and well-located homes.
Matthew Gardner is the Chief Economist for Windermere Real Estate, specializing in residential market analysis, commercial/industrial market analysis, financial analysis, and land use and regional economics. He is the former Principal of Gardner Economics, and has more than 30 years of professional experience both in the U.S. and U.K.
The National Association of Realtors (NAR) released the results of their latest Existing Home Sales Report which revealed that sales rose 0.7% month-over-month, but remain 1.5% lower than they were a year ago. Some may look at these numbers and think that now is not a good time to sell their house, but in fact, the opposite is true.
The national slowdown in sales is directly tied to a lack of inventory available for the buyers who are out in the market looking for their dream homes! The inventory of homes for sale has fallen year-over-year for the last 28 months and has had an upward impact on home prices.
NAR’s Chief Economist Lawrence Yun had this to say,
“Home sales in recent months remain at their lowest level of the year and are unable to break through, despite considerable buyer interest in most parts of the country.
Realtors® this fall continue to say the primary impediments stifling sales growth are the same as they have been all year: not enough listings – especially at the lower end of the market – and fast-rising prices that are straining the budgets of prospective buyers.” (emphasis added)
The houses that are on the market are selling fast, too! According to NAR’s Realtors Confidence Index, the median number of days it took for a house to go from listed to under contract over the past three months was 34.
If you are one of the many homeowners who is debating listing your house for sale this year, the time is now! Let’s get together to discuss the specifics of our market!
A report released by Down Payment Resource shows that 61% of first-time homebuyers purchased their homes with a down payment of 6% or less.
The trend continued among all buyers with a mortgage, as 73% made a down payment of less than 20%.
An article by Chase points to a new wave of millennial homebuyers:
“We teamed up with Google to help us better understand what customers are searching for and how the home buying landscape is evolving. We found that millennials and first-time homebuyers are making a big splash in the market, and affordability remains top of mind.”
Among millennials who purchased homes, David Norris, Loan Depot’s Head of Retail Lending, said:
“It’s clear from the survey results that Millennials have a lot of anxiety built up about the home buying process.
There is good news, however, as there’s more flexibility than most Millennials think regarding how to qualify for a loan and what’s needed for a down payment.”
If you are one of the many millennials who is debating a home purchase this year, let’s get together to help you understand your options and set you on the path to preapproval.
Whether you are buying or selling a home, it can be quite an adventurous journey. This is why you need an experienced real estate professional to guide you on the path to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 reasons you NEED a real estate professional in your corner haven’t changed, but have rather been strengthened by the projections of higher mortgage interest rates & home prices as the market continues to pick up steam.
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.
There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you achieve your dream?
So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to a study by Collateral Analytics, FSBOs achieve prices significantly lower than those from similar properties sold by real estate agents:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”
Get the most out of your transaction by hiring a professional.
There is so much information out there on the news and on the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?
Dave Ramsey, the financial guru, advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a real estate professional?
There is no doubt that it is easier to sell your house when using the services of a local real estate professional. The agent will provide:
There is no doubt that these services are valuable to any family that decides to sell. The only question is – how valuable? One of the main reasons For Sale By Owners (FSBOs) don’t use a real estate agent is because they believe these services are not worth the fee an agent charges. But, what if those services didn’t cost the seller a penny?
A study by Collateral Analytics, however, reveals that FSBOs don’t actually save anything and, in some cases, may be costing themselves more by not listing with an agent.
In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.” (emphasis added)
The study makes several suggestions:
If you are thinking of selling, FSBOing may end up costing you money instead of saving you money.
If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! We recently shared data from Trulia’s Market Mismatch Study which showed that in today’s premium home market, buyers are in control.
The inventory of homes for sale in the luxury market far exceeds those searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer which can eventually lead to a price change.
Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call your house their new home.
The sale of your starter or trade-up house will aid in coming up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.
But not all who are buying luxury properties have a home to sell first.
In a Washington Post article, Daryl Judy, an associate broker with Washington Fine Properties, gave some insight into what many millennials are choosing to do:
“Some high-earning millennials save money until they are in their early 30s to buy a place and just skip over that starter-home phase. They’ll stay in an apartment until they can afford to pay for the place they want.”
The best time to sell anything is when demand is high and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs and you are looking to step into a luxury home, now’s the time to list your house for sale and make your dreams come true.
That headline might be a little aggressive; however, as August 2017’s housing market data begins to roll in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME TODAY!
In a recent article by CBS News, they explained that the number of existing home sales is shrinking, and Lawrence Yun, Chief Economist for the National Association of Realtors, said:
“There should be 3 million homes on the market right now…Yet, there are only 1.9 million.”
And this situation will be affected greatly by recent natural disasters. Yun continued by saying:
“Before the hurricanes I would have predicted 1.35 million in new-home construction in 2018…I’ll have to scale that down now.”
NAR, in their August 2017 Realtors® Confidence Index, indicated that:
“Amid sustained job creation and sustained historically low mortgage rates, REALTORS®reported…that buyer demand is stronger compared to conditions one year ago… and that fifty percent of properties were on the market for less than one month when sold.”
The only challenge to today’s market is a severe lack of inventory. A balanced market would have a full six-month supply of homes for sale. Currently, there is only a 4.2-month supply of inventory, which is down from 4.5 months one year ago.
With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Let’s get together and discuss the inventory levels in your neighborhood to determine your next steps.
Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey data, covering 2013-2016 was released two weeks ago.
The study revealed that the 2016 median net worth of homeowners was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).
These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.
As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.
That is why, for the fourth year in a row, Gallup reported that Americans picked real estate as the best long-term investment. This year’s results showed that 34% of Americans chose real estate, followed by stocks at 26% and then gold, savings accounts/CDs, or bonds.
If you want to find out how you can use the increased equity in your home to move to a home that better fits your current lifestyle, let’s get together to discuss the process.
Millennials are on track to become the most educated generation in history. This means they are also the generation with the most student debt. Depending on the type of degree earned, as well as the prestige of the institution attended, there are some millennials who graduate college with what equates to a mortgage payment.
For those first-time buyers, and even some move-up buyers, who took advantage of the First-Time Homebuyer Tax Credit in 2008, there is an interesting program being introduced by Lennar Home Builders and Eagle Home Mortgage.
“Borrowers with Eagle Home Mortgage’s Student Loan Debt Mortgage Program can direct up to 3% of the purchase price (up to $13,000) to pay their student loans when they buy a new home from Lennar, one of the nation’s largest homebuilders. The contribution doesn’t directly increase the purchase price of the home or add to the balance of the loan.”
The program allows borrowers, whose credit and income requirements qualify, to put down as low as 3% and have a maximum loan amount of $424,100. At the time of closing, Lennar contributes up to 3% to pay down student loans incurred while attending universities, colleges, community colleges, trade schools and other certificate-granting programs.
Jimmy Timmons, President of Eagle Home Mortgage, gave more context about the reasons behind the creation of the program,
“Americans are more burdened than ever by student loans, with $1.3 trillion in outstanding student loans spread out among 42 million borrowers.
Particularly with millennial buyers, people who want to buy a home of their own are not feeling as though they can move forward. Our program is designed to relieve some of that burden and remove that barrier to owning a home.”
According to the Wall Street Journal, “housing observers said other builders are likely to look to mimic the program, which could help lure more of the critical first-time-buyer segment into home purchases.”
If you are one of the many millennials who may have delayed purchasing your first home, or feel stuck in a house that no longer fits your needs, there are programs and options available to help you achieve your dream!
In a CNBC article, self-made millionaire David Bach explained that “the single biggest mistake millennials are making” is not purchasing a home because buying real estate is “an escalator to wealth.”
Bach went on to explain:
“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”
In his bestselling book, “The Automatic Millionaire,” Bach does the math:
“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!”
Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.
He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.
Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.
The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.
This brings us to two major misconceptions that we want to address today.
NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.
Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.
An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.
KIRKLAND, Washington (October 5, 2017) – “October will be the best month for selection and availability until late February,” proclaimed J. Lennox Scott when commenting on the latest statistics from Northwest Multiple Listing Service.
MLS figures for September show inventory reached 1.7 months of supply at the end of the month, matching the year-to-date high in February. That level is still well below the 4-to-6 months of supply that many industry analysts use as an indicator of a balanced market.
Scott said buyer intensity for new listings is higher today than a year ago. “We continue to have very strong buyer demand as the typical seasonal slowdown begins for new listings.” Other industry leaders agreed seasonal adjustments are underway.
Member-brokers in the 23 counties served by Northwest MLS added 10,120 new listings to inventory during September, slightly more than the number reported for the same month a year ago (10,029). At the end of the month there were 15,888 listings of single family homes and condos in the MLS database, a drop of 12.4 percent from a year ago when buyers could choose from 18,136 listings.
“The pressure cooker for the housing market continues as the typical seasonal market comes into play for new listings coming on the market,” stated Scott, the chairman and CEO of John L. Scott. He noted new listings during September and October typically shrink 30 percent – and even more during the winter months – when compared to spring and summer months.
Brokers say strong job growth statewide is fueling demand for housing. Washington has added around 83,000 new jobs from August 2016 through August 2017 (not seasonally adjusted), according to the state Employment Security Department.
Like some other months this year, pending sales last month surpassed the number of new listings, putting pressure on prices. Year-over-year median prices for homes and condos surged 12 percent.
Brokers reported 10,348 mutually accepted offers system-wide last month, about the same number as a year ago (10,370), but last month’s total was the fewest pending sales since February (8,209). For the four- county Puget Sound region, members notched 7,441 pending sales. That’s the third best September for this area in the past 18 years, topped only by last year’s total of 7,729 and the total for August 2005 when 7,561 pending sales occurred.
Buyers may be emerging on news of slightly improving supply. “For only the second time this year the available inventory was over the one-month mark in King County,” said John Deely. “A notable number of new listings went past their offer review date, and more listings had price reductions.”
Deely, the principal managing broker at Coldwell Banker Bain, also observed a decrease in the overall number of buyers participating in multiple offer situations. “During spring and summer it was common to see numerous offers on individual listings. Now, it’s more common to see a few in multiple offer situations,” Deely remarked. “This change is a predictable seasonal adjustment as buyers and sellers enjoy the warm weather.” Nevertheless, Deely said the market “has the feel of a slightly slower pace.”
MLS director George Moorhead also commented on seasonality. “The seasonal summer market was felt stronger this year than what we have experienced in the last three years. Market indicators are showing we are plateauing into a healthier balanced market.”
Dick Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor, described the market as “a wonderful adventure,” saying the scarce inventory “is like a dog at the door in winter. It refuses to go away till it’s fed. More houses for sale, please.” For Northwest home buyers, though, Beeson expects that won’t happen anytime soon.
“The entire region is off the charts,” remarked Mike Grady, president and COO of Coldwell Banker Bain, referencing the latest numbers from the Case-Shiller home price index. It shows Seattle area home prices have spiked 13.5 percent in the past year, well above second place Portland with its 7.6 percent average and more than twice the national average of 5.9 percent.
Northwest MLS figures show area-wide median prices are up more than 12 percent from a year ago, rising from $340,000 to $381,000. September’s figure is slightly lower than the peak reached in July when the median price across all counties was $385,000.
A snapshot of the luxury segment of homes priced at $1 million-plus further illustrates the strength of the Greater Seattle market:
| Sales Price | 2017 | 2016 | 2015 | 2014 |
| $1 million | 2,478 | 1,703 | 1266 | 896 |
| $1.5 million + | 699 | 500 | 392 | 295 |
| $2 million + | 241 | 209 | 157 | 117 |
| $2.5 million + | 300 | 215 | 181 | 135 |
| TOTALS | 3,718 | 2,627 | 1,996 | 1,443 |
| % change vs 2017 | 41.53% | 86.27% | 157.66% |
Excluding condos, the system-wide median price for September’s single family sales was $390,000. A look at the 23 counties in the report shows a wide range of median prices, from the lowest of $124,000 in Ferry County to the highest, at $625,000, in King County.
September’s median price for single family homes and condos in King County, at $565,000, reflects a jump of more than 14 percent from a year ago, but it is a $20,000 decline from August (down about 3.5 percent).
“While prices for single family homes and condos were up more than 14 percent annually in King County, it’s hard to ignore the $20,000 price drop between August and September,” said OB Jacobi, president of Windermere Real Estate. “But if you look at the historic data more closely, it shows that prices have also dropped between August and September in five of the past six years, which points to a seasonal pattern rather than a long-term trend that we need to be concerned about.”
Statistics are helpful for some uses, but may not always tell a complete story, cautioned one broker.
“In Snohomish County, we saw increases in the luxury (higher end) segment during the summer months, which of course raised both the median and average sales prices,” said Diedre Haines, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynnwood. “Now we’re seeing a decrease in those types of sales with more affordable homes becoming more dominant.”
Haines also noted some reports encompass large geographic areas, such as Seattle, Everett, Tacoma and Bellevue. “When you drill down and localize the data, the picture may look quite different,” she explained.
In Snohomish County, for example, Northwest MLS tracks statistics for six sub-areas within that county. Last month’s median price for countywide sales of single family homes and condos was $430,000, but it ranged from $352,000 in the northwest segment of the county to $606,250 in the southeast portion. Year-over-year price changes ranged from an increase of just over 6 percent to more than 19 percent.
Noting King, Pierce and Snohomish counties all reported year-over-year price hikes of more than 14 percent, Grady said “This leap to new heights is based on high demand and low supply.” He noted neighboring counties are feeling the pinch, with several of them reporting double-digit drops in supply.
“All indications are that sales price increases in these neighboring counties are likely to accelerate at an even faster rate,” suggested Grady. In some of these counties, the median selling price is about half the price in King County. Faced with limited inventory and skyrocketing prices, some buyers are forced to broaden their search to these neighboring counties, Grady commented, adding he expects market forces will continue to fuel appreciation in housing into 2018 and beyond.
Moorhead, the designated broker and owner at Bentley Properties, said some renters who have been holding off are now becoming more active in hopes of taking advantage of longer market times and homes new to the market not receiving expected offers within the offer review date.
Despite some signs of a slowing market Moorhead said many renters remain frustrated, pointing to the $125,000 hike in King County’s median price in just two years. “Some renters say it’s like chasing a snowball down a hill that just keeps out of reach and continues to get larger and larger,” he remarked.
Builders are also frustrated, according to Moorhead. “We are hearing complaints and requests from builders to expand Growth Management Area guidelines. The massive shortage of developable land makes it more difficult to create affordable housing,” he explained, adding, “It’s becoming commonplace for new construction prices in Seattle and the Eastside to top a million dollars.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
A recent article from a reputable news source was titled: Here’s why some homeowners still can’t sell. In the opening bullets of the article, the author claimed, “Negative equity is one of the main reasons why there are so few homes for sale.” The article then goes on to soften that stance but we want to bring better clarity to the equity situation.
A recent report from CoreLogic (which was quoted in the article) revealed that over 80% of all homes now have “significant equity,” which means the home has over 20% equity. That level of equity allows the homeowner to sell their home if they so desire. (There was no reference to significant equity in the article.)
If eight out of ten homeowners now have significant equity in their homes, it is hard to make the claim that lack of equity is “one of the main reasons why there are so few homes for sale.”
Here is a map showing the percentage of homes in each state which currently have significant equity:
If you are one of many homeowners who is debating selling your home and are wondering how much equity you have accumulated, let’s get together to determine if now is the time to list.
Six months ago, we reported that the mismatch between the type of inventory of homes for sale and the demand of buyers in the US was causing the formation of two markets.
In the starter and trade-up home categories, there were significantly more buyers than there were homes for sale, causing a seller’s market. In the premium, or luxury, home categories, the opposite was true as there was a surplus of these homes compared to the buyers that were out searching for their dream homes, which created a buyer’s market.
According to the National Association of Realtors latest Existing Home Sales Report, the inventory of existing homes for sale in today’s market is at a 4.2-month supply. Inventory is now 6.5% lower than this time last year, marking the 27th consecutive month of year-over-year decreases.
Looking at the latest report from Trulia, we can see that not much has changed, and in fact, recent natural disasters across the country have made inventory conditions even more dire.
Trulia’s market mismatch score measures the search interest of buyers against the category of homes that are available on the market. For example: “if 60% of buyers are searching for starter homes but only 40% of listings are starter homes, [the] market mismatch score for starter homes would be 20.”
The results of their latest analysis are detailed in the chart below.
Nationally, buyers are searching for starter and trade-up homes and are coming up short with the listings available, which is leading to a highly competitive seller’s market in these categories.
Premium homebuyers, on the other hand, have the best chance of less competition and more inventory of listings in their price range with a 14.7-point surplus, which is creating more of a buyer’s market.
Real estate is local. If you are thinking about buying OR selling this fall, let’s get together to discuss the exact market conditions in your area.
You’ve decided to sell your house. You begin to interview potential real estate agents to help you through the process. You need someone you trust enough to:
An agent must be concerned first and foremost with you and your family to garner that degree of trust. Make sure this is the case.
Be careful if the agent you are interviewing begins the interview by:
An agent’s success and the success of their company can be important considerations when deciding on the right real estate professional to represent you in the sale of your house. However, you first need to know that they care about what you need and what you expect from the sale. If the agent is not interested in first establishing your needs, how successful they may seem is much less important.
Look for someone with the ‘heart of a teacher’ who comes in prepared to explain the current real estate market to you, and is patient enough to take the time to show you how it may impact the sale of your home; not someone only interested in trying to sell you on how great they are.
Home values have risen dramatically over the last twelve months. The latest Existing Home Sales Report from the National Association of Realtors puts the annual increase in the median existing-home price at 5.6%. CoreLogic, in their most recent Home Price Index Report, revealed that national home prices have increased by 6.7% year-over-year.
CoreLogic broke appreciation down ever further into four price ranges which gives a more detailed view than simply looking at the year-over-year increases of the national median home price.
The chart below shows the four tiers and each one’s growth from July 2016 to July 2017 (the latest data available).
It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor in determining how much it has appreciated over the course of the last year. Lower priced homes have appreciated at greater rates than homes at the upper ends of the spectrum, due to demand from first-time home buyers and baby boomers looking to downsize.
If you are planning on listing your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.
Many potential homebuyers believe that they need a 20% down payment and a 780 FICO® score to qualify to buy a home, which stops many of them from even trying! Here are some facts:
The number of building permits issued for single-family homes is the best indicator of how many newly built homes will rise over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Sales Report, the number of these permits were up 7.7% over last year.
More inventory means more options. Danielle Hale, Realtor.com’s Chief Economist, explained this is good news for the housing market – especially for those looking to buy:
“It’s not spectacular construction growth, but it’s slow and steady in the right direction. Eventually, the pickup in single-family home construction will mean [buyers] will have more options. Especially with the limited number of sales right now, more options are really needed.”
More inventory means more competition. Today, because of the tremendous lack of inventory, a seller can expect:
With an increase in competition, the seller may not enjoy these same benefits. As Hale said:
“As new construction continues to increase, home shoppers will eventually have more [choices] and a bit more time to make purchase decisions compared to today’s quick-moving housing market.”
If you are considering the sale of your home, it might make sense to beat this new construction competition to the market.
How do you select the members of your team who are going to help you make your dream of owning a home a reality? What should you be looking for? How do you know if you’ve found the right agent or lender?
The most important characteristic that you should be looking for in your agent is someone who is going to take the time to really educate you on the choices available to you and your ability to buy in today’s market.
As Dave Ramsey, the financial guru, advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Do your research. Ask your friends and family for recommendations of professionals whom they have used in the past and have had good experiences with.
Look for members of your team who will be honest and trustworthy; after all, you will be trusting them with helping you make one of the biggest financial decisions of your life.
Whether this is your first or fifth time buying a home, you want to make sure that you have an agent who is going to have the tough conversations with you, not just the easy ones. If your offer isn’t accepted by the seller, or they think that there may be something wrong with the home that you’ve fallen in love with, you would rather know what they think than make a costly mistake.
According to a Consumer Housing Trends Study, millennials have already started to prefer a more hands-on approach to their real estate experience:
“While older generations rely on real estate agents for information and expertise, millennials expect real estate agents to become trusted advisers and strategic partners.”
Look for someone to invest in your family’s future with you. You want an agent who isn’t focused on the transaction but is instead focused on helping you understand the process while helping you find your dream home.
In this world of Google searches, where it seems like all the answers are just a mouse-click away, you need an agent who is going to educate you and share the information that you need to know before you even know you need it.
According to a survey conducted by ClosingCorp, over half of all homebuyers are surprised by the closing costs required to obtain their mortgage.
After surveying 1,000 first-time and repeat homebuyers, the results revealed that 17% of homebuyers were surprised that closing costs were required at all, while another 35% were stunned by how much higher the fees were than expected.
“Homebuyers reported being most surprised by mortgage insurance, followed by bank fees and points, taxes, title insurance and appraisal fees.”
Bankrate.com gathered closing cost data from lenders in every state and Washington, D.C. in order to share the average costs in each state. The map below was created using the closing costs on a $200,000 mortgage with a 20% down payment.
Keep in mind that if you are in the market for a home above this price range, your costs could be significantly greater. According to Freddie Mac,
“Closing costs are typically between 2 and 5% of your purchase price.”
Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out that you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to.
Every homeowner wants to make sure they maximize their financial reward when selling their home. But how do you guarantee that you receive maximum value for your house? Here are two keys to ensure that 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. By doing this, the seller will not be fighting with a buyer over the price, but will instead 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 make 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.
A new study by Collateral Analytics, reveals that FSBOs don’t actually save any money, and in some cases may be costing themselves more, by not listing with an agent.
In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”
The results of the study showed that the differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%. Sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.
Price your house at or slightly below the current market value and hire a professional. This will guarantee that you maximize the price you get for your house.
There is no doubt that the largest challenge in today’s housing market is a lack of housing inventory for sale. This challenge has been defined as an “overwhelming lack of supply,” and even a “straight up inventory crisis.”
First American just released the results of a survey which sheds light on the reasons for the current lack of supply.
The survey asked title agents and real estate professionals to identify what they believe are the top reasons for this lack of inventory in their markets. Here are the results of the survey:
As the survey revealed, there is a shortage of current homeowners willing to put their homes on the market for one of three reasons (see numbers 1, 3 and 4 above).
The report on the survey explains:
“The crowd has spoken, and it seems in many markets home buyers and sellers alike are ‘imprisoned’ by the lack of housing inventory.”
That leaves a tremendous opportunity for every homeowner not facing these concerns. If you can put your home on the market today, you are subject to far less competition than at any time in recent history. That will result in your home selling quickly and for the highest possible price.
While many homeowners are feeling imprisoned for multiple reasons, those who are not handcuffed by these concerns have a once in a lifetime opportunity to sell their houses at a peak selling time.
Recently released data from Fannie Mae’s National Housing Survey revealed that rising home prices were the catalyst behind an eight-point jump in the net percentage of respondents who say now is a good time to sell. The index is now 21 points higher than it was this time last year.
Overall, 62% of Americans surveyed said that now is a good time to sell (up from 58%), while 26% of respondents said that now is not a good time to sell (down from 30%). The net score is the difference between the two percentages, or 36%.
According to CoreLogic, home prices are now up 6.7% over last year and 78.8% of homeowners with a mortgage in the US now have significant equity (defined as 20% or more).
As home prices have increased, more and more homeowners have realized that now is a good time to sell their homes in order to take advantage of the extra equity they now have.
At the same time, however, rising prices have had the exact opposite impact on the good-time-to-buy scale as many buyers are nervous that they will not be able to afford a home; the net score dropped 5 points to 18%.
Doug Duncan, Vice President & Chief Economist at Fannie Mae, had this to say,
“In the early stages of the economic expansion, home selling sentiment trailed home buying sentiment by a significant margin. The reverse is true today.
The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions.Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”
Buyer demand continues to outpace the supply of homes for sale, which has driven prices up across the country. Until the supply starts to better match demand, there will be a gap between the sentiments surrounding buying and selling.
If you are considering listing your home for sale this year, now is the time!
Freddie Mac, Fannie Mae, and The Mortgage Bankers Association are all projecting that home sales will increase in 2018. Here is a chart showing what each entity is projecting in sales for the remainder of this year and the next.
As we can see, each entity is projecting sizable increases in home sales next year. If you have considered selling your house recently, now may be the time to put it on the market.
Hearth just released their 2017 State of the American Dream report which showed that Americans still see homeownership as an integral piece of the American Dream. The report confirmed that “all generations–including millennials–agree homeownership is very important to achieving the American Dream.”
Americans ranked “owning a home I love” higher than any other options (including “starting a family” and “finding a fulfilling career”) as an important part of the American Dream.
Despite some claims that homeownership’s importance to the American Dream is in decline, the report found that the dream of homeownership remains strong.
Of Americans who said they think achieving the American Dream is important, 70% think homeownership is important to the dream, and 41% think homeownership is very important to the dream.
Hearth addresses the desires of millennials by explaining:
“Contrary to popular opinion, millennials who want to achieve the American Dream are 5% more likely than Baby Boomers to think homeownership is important. And two-thirds of millennial renters view homeownership as important to the American Dream.
Although millennials are often portrayed as fickle and transient, they actually seek the stability of homeownership even more than their parents.”
The report concluded:
“This survey revealed a powerful finding: Across demographic groups, homeownership remains a precondition of the American Dream.”
Married couples once again dominated the first-time homebuyer statistics last year at 66% of all buyers, according to the most recent Profile of Home Buyers & Sellers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.
Many couples are deciding to use what would otherwise be their wedding fund as a down payment on their first home, as unmarried couples made up 8% of all first-time buyers last year. If you’re single, don’t fret; you can still buy your dream home! Single women made up 17% of first-time buyers in 2016, while single men accounted for 7% of buyers.
According to a survey by the Wedding Report, the average cost of a wedding in the United States at the start of the year was $25,961, which equates to a 10% down payment on a median priced home.
A recent article from the New York Times found that many singles are now asking their parents to allow them to use the money they’ve saved up for their wedding day to instead buy a home.
In the case of Carrie Graham, a Protestant minister from Austin, TX, her parents had saved a ‘five-figure sum’ for her wedding and were more than willing to give her that money as a down payment on her dream home. Graham told The New York Times,
“Buying the home wasn’t me saying, ‘I’m never going to get married’ or I am going to get married.’ My own home had way more than equity benefits. It was a real gift to have a home in an extremely desirable neighborhood in a city that I love. It’s brought me joy.”
More and more first-time homebuyers are finding a way to purchase their dream homes, even if that means delaying their dream weddings.
In this day and age of being able to shop for anything anywhere, it is really important to know what you’re looking for when you start your home search.
If you’ve been thinking about buying a home of your own for some time now, you’ve probably come up with a list of things that you’d LOVE to have in your new home. Many new homebuyers fantasize about the amenities that they see on television or Pinterest, and start looking at the countless homes listed for sale through rose-colored glasses.
Do you really need that farmhouse sink in the kitchen to be happy with your home choice? Would a two-car garage be a convenience or a necessity? Could the ‘man cave’ of your dreams be a future renovation project instead of a make-or-break right now?
The first step in your home buying process should be getting pre-approved for your mortgage. This allows you to know your budget before you fall in love with a home that is way outside of it.
The next step is to list all the features of a home that you would like, and to qualify them as follows:
Having this list fleshed out before starting your search will save you time and frustration, while also letting your agent know what features are most important to you before starting to show you houses in your desired area.
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 6.7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.0% over the next year.
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 hovered around 4%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase 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.
There are some renters who have not yet purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.
As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.
Are you ready to put your housing cost to work for you?
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 if 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.
The biggest challenge in today’s real estate market is a lack of housing inventory. How big of a challenge is the housing shortage? Here are what four industry economists are saying on the issue (emphases added):
“The underlying fundamental issue is an overwhelming lack of supply… The supply of newly constructed homes is also sagging, adding to the supply challenges. Over the last eight years, housing demand has increased by 5.9 million, but the net new number of housing units has only increased by 3.5 million.”
“Everyone has been talking about tight inventory but I think we are OK calling it a straight up inventory crisis at this point. We just don’t have enough homes.”
“House prices today are higher than they were at the peak in the summer of 2006, near-record-low mortgage rates have boosted housing demand, and sales volume is robust. The spoiler is the lean inventory of houses for sale.”
“Listings in the affordable price range continue to be scooped up rapidly, but the severe housing shortages inflicting many markets are keeping a large segment of would-be buyers on the sidelines.”
If you are considering selling your house soon, now may be the time to get it on the market. The lack of competition could lead to a faster sale at a higher price.
KIRKLAND, Washington (Sept. 6, 2017) – As smoke and ash blanketed parts of Washington state, one real estate broker noted, “Even in a fire there are some cooler spots, and seasonally, the housing market is in a cooler spot.”
The latest numbers from Northwest Multiple Listing Service show there are both cooler spots and hot spots, with the demand for housing and prices showing few signs of being extinguished.
“For August, we experienced a more robust market than anticipated,” remarked Diedre Hanes, principal managing broker-South Snohomish County at Coldwell Banker Bain in Lynnwood. “Compared to years past, we’ve seen very limited slowdown,” she added.
Pending sales area-wide during August totaled 11,867 transactions, barely exceeding the number of new listings (11,781) added during the month. At month end, there were 15,987 total active listings in the MLS database, a shrinkage of 12.8 percent from a year ago.
Sparse inventory is a likely factor in the flat pending sales, with year-over-year pending sales for all areas down .09 percent (11,867 versus 11,878). Of the 23 counties in the Northwest MLS report, 15 had fewer mutually accepted offers last month compared to twelve months ago. Last month’s total was up slightly from July’s figure of 11,800.
Credit the flurry of back-to-school activities and end-of summer vacations for sidetracking some sellers and buyers. “Typically, the last two weeks or so of August cool a bit and the market picks up again full steam once school resumes,” said Northwest MLS director Frank Wilson.
Wilson, the branch managing broker at John L. Scott in Poulsbo, described activity as a “fast-paced seller’s market,” but said the “stagnant pool” is beginning to grow as sellers realize they can’t overprice their homes, “even in this market.” With football season getting underway he expects open house schedules to adjust around Seahawks game times, with Saturdays becoming the preferred showing day.
Gary O’Leyar, designated broker/owner of Berkshire Hathaway HomeServices Signature Properties, also commented on seasonal patterns. “This past summer market seems to have followed previous years’ seasonal conditions. While inventory remained low, there was some change of pace from the winter-spring market,” he stated.
O’Leyar said savvy buyers took advantage of slightly longer market times, affording them the opportunity for reasonable contingencies. “Although we saw multiple offers, they were down somewhat, and several offer review dates came and went with no offers by those deadlines.”
Changing seasons will likely mean a drop-off in listing activity, agreed J. Lennox Scott, who was upbeat on summer sales. “It’s been our best summer ever for sales activity with June, July and August clocking in a record number of transactions,” said Scott, the chairman and CEO of John L. Scott. He credits strong job growth and attractive interest rates (“the lowest they’ve been since last November”) with propelling sales.
“It’s still a frenzy market in the more affordable and mid-price ranges,” he said, while also noting the luxury segment continues to outpace last year’s market “in a huge way.”
System-wide, 3,727 single family homes have sold for more than a million dollars during the first eight months of the year, surpassing last year’s total of 2,456 such sales during the same time frame – a jump of nearly 52 percent.
With further drops in inventory likely during the fourth quarter, Scott and others expect sales will continue at a quick clip.
“As we head into fall, September and October will see new listing inventory drop by about 20 percent from the summer months, so the next two months will be the best opportunity for selection and availability for buyers to purchase a home,” Scott suggests. “Starting in November, the number of new listings will drop by another 30 percent over the winter,” he added.
“We continue to see low inventory drive the story in the Puget Sound region,” observed Mike Grady, president and COO of Coldwell Banker Bain. Thirteen of the 23 counties in the MLS report had double-digit declines in inventory compared to a year ago.
Area-wide, including single family homes and condominiums, the 1.55 months of supply for August slipped from both July (at 1.62 months), and from the year-ago number of around 1.9 months. King County continued to have the tightest inventory, at 0.93 months.
Commenting on rising prices – up 8.3 percent across the MLS service area – Grady said, “Of course, that old law of supply and demand has its natural effect.” The trend is consistent throughout the MLS service area, he noted, adding, “With King County prices escalating at such a fast rate (up 17 percent), the ripple effect will continue to push prices throughout the area, first in neighboring counties, then throughout the region.”
“Kitsap continues to see its share of multiple offers,” Wilson reported, adding, “The effects of this seller’s market can be seen in the 13 percent price increase from a year ago. Also, with more attention coming to Kitsap due to the new fast ferry system there is no reason for prices to temper any time soon.” He believes challenges for “pent up sellers” will persist “as they have no place to move once they sell their home.”
“Nobody likes this market, – not sellers, not buyers, not real estate brokers,” proclaimed Northwest MLS director Dick Beeson. The reasons vary, he explained. “Sellers aren’t necessarily happy because they think they could be leaving money on the table. Buyers think they’re paying too much. And brokers think sales are more complex and fraught with peril than previously, making them harder to close.”
Beeson, the principal managing broker at RE/MAX Professionals in Gig Harbor, believes Seattle and surrounding areas are “forever changed” by this market. “The change isn’t going to be painless. Housing scarcity and increasing prices are sore spots.” Whether price increases will subside is anyone’s guess, he added.
Prices aren’t the only worry, suggested Haines. She said low appraisals occur on about one of every three sales. “The low appraisal number remains consistent at $25,000-to-$30,000 below sales price when it occurs. It makes one wonder why – coincidence or something else?” she stated.
Haines noted multiple offers are continuing, but added a note of caution to sellers: “Overpriced listings are not getting showings or offers. Buyers are well educated and well informed, which definitely eases fears of a developing bubble.”
Condos offered little relief for anxious buyers. Inventory dropped nearly 25 percent from twelve months ago, but pending sales somehow managed to outgain year-ago totals (up nearly 2.9 percent). At the end of August, there was less than a month’s supply of condos for sale across all areas served by Northwest MLS. King County’s supply was slightly better than two weeks. Prices rose 6.7 percent overall, and were up 11.3 percent in King County, 12.6 percent in Snohomish County and 14.5 percent in Pierce County. This tri-county area accounted for nearly nine of every 10 sales.
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of more than 2,200 member offices includes more than 26,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
There are some homeowners who are patiently waiting to get the price they hoped for when they originally listed their houses for sale. Something these homeowners might want to take into consideration is the fact that if their homes haven’t sold yet, maybe they’re not priced properly.
This is the average number of homes that sell each and every day in this country, according to the National Association of Realtors’(NAR) latest Existing Home Sales Report. NAR reported that sales are at an annual rate of 5.44 million. Divide that number by 365 (days in a year) and we can see that, on average, over 14,904 homes sell every day.
The report from NAR also revealed that there is currently only a 4.2-month supply of inventory available for sale (6-months inventory is considered ‘historically normal’).
This means that there are not enough homes available for sale to satisfy all of the buyers who currently are out in the market in record numbers.
We realize that you want to get the fair market value for your home. However, if it hasn’t sold in today’s active real estate market, perhaps you should reconsider your current asking price.