Category: Move-Up Buyers

Homes are More Affordable in 44 out of 50 States

With both home prices and mortgage rates increasing this year, many are concerned about a family’s ability to purchase a major part of the American Dream – its own home. However, if we compare housing affordability today to the average affordability prior to the housing boom and bust, we are in much better shape than most believe.

In Black Knight’s latest monthly Mortgage Monitor, they revealed that in the vast majority of the country, it is actually more affordable to purchase a home today than it was between 1995 to 2003 when looking at mortgage payments (determined by price and interest rate) as compared to incomes. Home prices are up compared to 1995-2003, but mortgage rates are still much lower now than at that time. Today, they stand at about 4.5%. Here are the average mortgage rates for each of the years mentioned:

• 1995 – 7.93%
• 1996 – 7.81%
• 1997 – 7.6%
• 1998 – 6.94%
• 1999 – 7.44%
• 2000 – 8.05%
• 2001 – 6.97%
• 2002 – 6.54%
• 2003 – 5.83%

On the other hand, wages have risen over the last twenty years.

Black Knight’s research revealed that, when comparing “the share of median income required to buy the median-priced home” today, to the average between 1995 to 2003, it is currently more affordable to purchase a home in 44 of 50 states.

Here is a state map of the percentage change in the price-to-payment ratio. Positive numbers indicate that it is less affordable to buy while negative numbers indicate that it is more affordable.

Bottom Line

Whether you are moving up to the home of your dreams or purchasing your first house, it is a great time to buy when looking at historic affordability data.

Posted in First Time Home Buyers, For Buyers, Interest Rates, Move-Up Buyers, Pricing

Why Have Interest Rates Jumped to a 7-Year High?

Interest rates for a 30-year fixed rate mortgage have climbed from 3.95% in the first week of January up to 4.61% last week, which marks a 7-year high according to Freddie Mac. The current pace of acceleration has been fueled by many factors.

Sam Khater, Freddie Mac’s Chief Economist, had this to say:

“Healthy consumer spending and higher commodity prices spooked bond markets and led to higher mortgage rates over the past week.

Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season.”

But what do gas prices have to do with interest rates?

Investopedia explains the relationship like this:

“The price of oil and inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up or down, inflation follows in the same direction.”

You may have noticed that filling your gas tank has become substantially more expensive in recent months. The average national gas price has climbed nearly $0.50 from the beginning of the year, leading to the highest price for Memorial Day weekend since 2014.

As rates go up, your purchasing power goes down, but don’t worry; rates are still well below the averages we’ve seen over the last four decades.

“Freddie Mac said this year’s higher rates have not yet caused much of a ripple in the strong demand levels for buying a home seen in most markets, but inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.”

Buying sooner rather than later will help lock in a lower rate than waiting, as the experts believe rates will continue to climb. Even a small increase in interest rates can have a big impact on your monthly housing cost.

Bottom Line

If you are planning on buying a home this year, keep an eye on gas prices the next time you’re at the pump. If you start to feel a big jump in price, know that rates are probably on their way up, too.

Posted in First Time Home Buyers, For Buyers, Housing Market Updates, Interest Rates, Move-Up Buyers

How Current Interest Rates Can Have a High Impact on Your Purchasing Power

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 4.61%, 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 to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a home within the national median price range while keeping 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.

Act now to get the most house for your hard-earned money.

Posted in First Time Home Buyers, For Buyers, Interest Rates, Move-Up Buyers

Don’t Wait to Sell Your House! Buyers Are Out Now

Recently released data from the National Association of Realtors (NAR) suggests that now is a great time to sell your home. The concept of ‘supply & demand’ reveals that the best price for an item is 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.

SUPPLY

It is no secret that the supply of homes for sale has been far below the number needed to sustain a normal market for over a year at this point. A normal market requires six months of housing inventory to meet the demand. The latest report from NAR revealed that there is currently only a 3.6-month supply of houses on the market.

Supply is currently very low!

DEMAND

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 who are actually out looking at homes) disclosed that “foot traffic grew 10.5 points to 52.4 in March as the new season approaches.”

Demand is currently very high!

Bottom Line

Waiting to sell will only increase the competition between you and all of the other sellers putting their houses on the market later this summer. If you are debating whether or not to list your home, let’s get together to discuss the conditions in our market.

Posted in For Sellers, Housing Market Updates, Move-Up Buyers

5 Ways Tax Reform Has Impacted the 2018 Housing Market

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.

1. Has tax reform killed off home buyer demand? The answer is “NO.”

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.

2. Have the tax changes affected America’s belief in real estate as a long-term investment? The answer is “NO.”

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.

3. Has the homeownership rate been negatively impacted by the tax changes? The answer is “NO.”

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.”

4. Has the upper-end market been crushed by new State and Local Taxes (SALT) limitations? The answer is “NO.”

In the National Association of Realtors latest Existing Home Sales Report it was revealed that:

• Sales between $500,000 and $750,000 were up 4.5% year-over-year
• Sales between $750,000 and $1M were up 15.1% year-over-year
• Sales over $1M were up 17.3% year-over-year

5. Will the reforms in the tax code cause home prices to tumble over the next twelve months? The answer is “NO.”

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%.

Bottom Line

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.

Posted in First Time Home Buyers, For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers

This Just In: Data Says May is the Best Month to Sell Your Home

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.

Top 5 Days to Sell:

• June 28^th – 9.1% above market
• February 15^th – 9.0% above market
• May 31^st – 8.3% above market
• May 29^th – 8.2% above market
• June 21^st – 8.1% above market

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, ATTOM noticed 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!

Bottom Line

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!

Posted in For Sellers, Move-Up Buyers, Pricing

How Much Has Your Home Increased in Value Over the Last Year?

Home values have risen dramatically over the last twelve months. In CoreLogic’s most 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.

Bottom Line

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.

Posted in First Time Home Buyers, For Buyers, For Sellers, Housing Market Updates, Move-Up Buyers

Freddie Mac: Rising Mortgage Rates DO NOT Lead to Falling Home Prices

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%.

Bottom Line

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.

Posted in Buying Myths, First Time Home Buyers, For Buyers, Housing Market Updates, Interest Rates, Move-Up Buyers, Pricing

Is a Major Home Renovation Worth It in the Long Run?

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 look at this example.

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.

Bottom Line

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!

Posted in For Buyers, For Sellers, Move-Up Buyers

Are You Aware of How Much Equity You Have in Your Home? You May Be Surprised!

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.”

Price Appreciation = Good News for Homeowners

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.”  

This is great news for homeowners! But, do they realize that their equity position has changed?

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.”

Bottom Line

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!

Posted in For Sellers, Move-Up Buyers