Category Archives: Buyers

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November 2018 Housing Affordability Index

At the national level, housing affordability is down from last month and down from a year ago. Mortgage rates rose to 4.99 percent this November, up 19.1 percent compared to 4.19 percent a year ago.

  • Housing affordability declined from a year ago in November moving the index down 10.6 percent from 161.0 to 144.0. The median sales price for a single family home sold in November in the US was $260,500 up 5.0 percent from a year ago.
  • Nationally, mortgage rates were up 80 basis point from one year ago (one percentage point equals 100 basis points).
  • The payment as a percentage of income was up from last month at 17.4 percent this November and up from 15.5 percent from a year ago. Regionally, the West has the highest payment at 23.8 percent of income. The Northeast had the second highest payment at 17.1 percent followed by the South at 16.8 percent. The Midwest had the lowest payment as a percentage of income at 13.7 percent.

Read the full article…

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5 Millennial Real Estate Trends in 2019

More millennials are pursuing homeownership now than ever before. The national homeownership rate rose to 64.4 percent in the third quarter this year—an increase of half a percentage point over a year ago, according to the U.S. Census Bureau. That’s largely attributed to the rise in new, first-time home buyers.

As 2018 comes to a close, Dana Bull, an agent with Sagan Harborside Sotheby’s International Realty who has significant experience working with millennial clients, shares five trends to expect from this generation of buyers in the coming year.

1. Rising Interest Rates Will Prompt Buyers to Change Strategy
Just last week, mortgage rates rose to a seven-year high, with 30-year fixed-rate mortgages averaging 4.94 percent. It’s more than likely that rates will climb over 5 percent in the new year. This will cause many buyers to pause and reevaluate their purchasing power and strategy, Bull says. “Even a quarter point has a real impact on housing affordability,” she says. This means you’ll need to take more time to help clients analyze deals and understand what their money can buy in this shifting market.

2. Increased Competition From Baby Boomers for Properties
As millennials age and grow in their careers, they are acquiring more purchase power. According to the 2018 National Association of REALTORS® Home Buyer and Seller Generational Trends Report, 30 percent of millennials purchased homes for $300,000 and higher in the past year, up from 14 percent in 2013. That means millennials and boomers are going head-to-head for the same homes today. That trend is only going to continue to grow in 2019, Bull predicts. Both groups also seek similar amenities, including walkable neighborhoods and smaller home sizes with more upgrades, she points out. “Buyers in different generations—with wildly different points of view—are competing for the same homes,” she says. “For sellers and agents, catering to two different generations in marketing homes will also be a challenge.”

3. Willing to Put In Sweat Equity
Millennials are becoming more savvy to renovations and repairs, and they may have HGTV to thank for that, Bull says. “Millennial buyers are still far more aware of the work, costs, and implications of a renovation than their parents would have been,” she says. “Popular TV shows mean a more educated millennial buyer who knows what to look for in terms of red flags. But also has more confidence around renovating a home to make it their own and the ability to see past outdated wallpaper or a wall that can be easily removed.” Keep this in mind as interest rates continue to rise in 2019 (re: trend number one) and you’re helping clients who want to get creative while staying in their price range.

4. Clients Who are Well-Researched and Prepared 
Millennial buyers are doing their online research and are entering the market well-prepared. Show your value as a REALTOR® in other ways, Bull recommends. “They are relying on real estate professionals not to introduce them to homes, most of which they can find online, but to show them what can’t be researched: neighborhoods that are up and coming, which properties stand to gain value in the coming years, and guidance when it comes to negotiations and inspections.”

5. Social Media’s Continued Impact
Social media will continue to influence millennials’ homebuying habits, Bull says. This generation relies heavily on online reviews and social media presence to make purchasing decisions. A strong online reputation for real estate professionals is a must in catering to this market, she adds. Showcasing homes on social media—particularly Instagram—is essential for appealing to millennial clients.

Source: REALTOR® Magazine

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Buyers May Find Relief in Cooling Housing Market

The housing market is showing several signs of slowing, providing a much-needed break for potential buyers who have been waiting to jump into the market. Existing-home sales were 2.4 percent lower in the third quarter than a year ago, and the drop comes at a time when many areas are starting to see an uptick in new listings.

Home prices in many markets are no longer rising by double digits—or even single digits—annually. But with a strong economy and low unemployment, the housing dip is more of a rebalancing of the market than a sign of a downturn, housing analysts say.

Sellers are realizing there is a slowdown and are starting to cut their prices to better compete. Nearly 29 percent of listings in major markets during the month ending Oct. 14 saw price reductions, according to the real estate brokerage Redfin. “The cycle has moved from seller-advantage to at least mildly buyer-advantage in many parts of the United States,” writes Kenneth Harney, a nationally syndicated real estate columnist. “If you’re a buyer, take your time. But keep in mind: If you shop diligently, this fall could be a smart time to catch a deal—a marked-down price on the house you really want.”

Source: REALTOR® Magazine

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Americans Shift Their Perceptions of the Housing Market

For the past five quarters, the majority of Americans said their housing markets were overheating. Now, in the fourth quarter, 75 percent of Americans say their local housing market is starting to cool, according to ValueInsured’s Q4 2018 Modern Homebuyer Survey. Homeowners in California, Colorado, Texas, and Washington are most likely to say their local market is starting to cool off.

The survey “revealed some concerning evidence about the changing psychology of the housing market,” says Robert Shiller, a housing economist. “We will be watching these numbers as they unfold over the future.”

Seventy-two percent of Americans and 78 percent of “urban residents” say home prices are still too high. Urban homeowners blame “flippers and speculative investors” and “wealthy transplants from more expensive housing markets” for inflating their local home prices to unsustainable levels, according to the report.

Some home buyers may hit the pause button to see what happens in the housing market. Fifty-nine percent of interested home buyers (which includes first-time and move-up buyers) say they plan to wait for a “meaningful correction” before they buy. Fourteen percent say they plan to not buy at all until a correction occurs.

Several markets are seeing home prices slow. ValueInsured’s report notes that the fastest drops in home prices have been happening in Seattle, and North Texas has seen some of its largest sales declines in seven years.

“Buyers have switched from ‘hoop jumpers’ to bargain-hunter mode,” says Joe Melendez, CEO and founder of ValueInsured.

Source: REALTOR® Magazine

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Why Home Buyers Need to Hurry

While there have been signs recently that the market may be shifting toward the favor of home buyers, prices are still on the rise in many areas around the country. The median sales price in July was $230,411, up 5.8 percent year over year.

But if buyers are hoping to wait it out, remember that mortgage rates are also increasing. The typical mortgage payment jumped 13.1 percent over that same one-year period, due to a nearly 0.6 percentage point increase in mortgage rates, according to new data from CoreLogic, a real estate research firm.

Mortgage rates are expected to keep rising, too. CoreLogic researchers predict a nearly 10 percent increase in buyers’ mortgage payments by next July, twice the rate expected for home prices. Rates are expected to increase by about 0.43 percentage points between July 2018 and July 2019. Housing forecasters predict median home sale prices to continue to rise by 1.8 percent in real terms over that same period.

Based on these projections, CoreLogic researchers predict the inflation-adjusted typical monthly mortgage payment to rise from $937 in July 2018 to $1,003 by July 2019. Furthermore, real disposable income is expected to increase by only around 2.5 percent over the next year. That means “home buyers would see a larger chunk of their incomes devoted to mortgage payments,” CoreLogic researchers note.

To calculate the typical mortgage payment, CoreLogic researchers use Freddie Mac’s average rate on a 30-year fixed-rate mortgage with a 20 percent down payment (not factoring in taxes or insurance). The typical mortgage payment standard is used to help judge affordability since it shows the monthly amount a borrower would have to qualify for to get a mortgage to purchase a median-priced U.S. home.

Nevertheless, while mortgage payments are on the rise, they’re still low by historical standards, CoreLogic researchers note. In July 2018, the typical inflation-adjusted mortgage payment still remained 26.8 percent below the all-time peak of $1,280 in July 2006. The average mortgage rate in June 2006 was 6.7 percent compared to 4.5 percent in July 2018.

Source: REALTOR® Magazine

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The 5 C’s of Credit and What They Mean for a Home Loan

You’ve researched the neighborhood and spent hours scouring listings online. You know the best zip codes and school zones and are ready for the next step in the home buying process – getting pre-approval from your mortgage lender.

There is a lot that goes into determining if you qualify for a loan, but most traditional lenders will consider these five categories:

  1. Character

Your credit score will tell lenders about your character and your credit history. Do you pay your bills on time? Are your accounts in good standing? If your credit score is poor, you should focus on improving it before applying for a home loan.

  1. Capacity

This category measures your ability to pay back your loan. Your income, and your job stability, will come into play here, as well your debt-to-income (DTI) ratio. Your DTI is calculated by dividing total recurring monthly debt by gross monthly income. A ratio over 36 percent could mean you’ll pay more interest or that you will be denied a loan. If your DTI is over 36 percent, you should focus on lowering it by paying down your current debt, not taking on more debt and avoiding big purchases, such as a car, on credit before you buy a home.

  1. Capital

Capital refers to the money you have, or will have, to purchase your new home. Buyers with a down payment will have a better chance of obtaining a loan but a down payment is not a necessity. There are various loan programs that do not require a down payment.

  1. Collateral

In the case of home loans, collateral is the home itself. If you default on the mortgage, the bank will seize the home – this is why a home appraisal is almost always required before obtaining a loan.

  1. Conditions

Is it a buyer’s or seller’s market in your area? What is the current interest rate? These are conditions that can impact home prices in your area as well as your ability to get into a home.

Getting pre-approval for a home loan can be intimidating, but it doesn’t have to be. Contact me, and I’ll be happy to help guide you and those you know through the process!

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5 Reasons Buyers Should House Hunt in the Fall

The frenzy of the summer real estate market has cooled by the seemingly very same breeze sweeping leaves off the trees across much of the country. But now may be a better time than ever for buyers to do their house hunting.

According to RealtyTrac and realtor.com®, October is the best time to snag a deal on a house. RealtyTrac analyzed more than 32 million sales of single-family homes and condos between 2000 and 2015, finding that those who purchased in October paid 2.6 percent below the average estimated full market value for their property.

If buyers need more reason to start or continue their home search this fall, here are five additional reasons to shop for a home now from Lindsay Szwed, an agent with RE/MAX Suburban in the Chicago area.

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Market Shifting to Buyers’ Favor

A housing market defined by rapidly rising home prices, bidding wars, a lack of inventory, and sellers with the upper hand in negotiations may be changing. “The signs are pointing to a market that’s shifting toward buyers,” says Danielle Hale, realtor.com®’s chief economist. “But in most places, we’re still a long way from a full reversal.”

After all, home sales aren’t exactly tanking. Prices for existing homes were up 4.6 percent from a year ago in the National Association of REALTORS®’ latest housing report. The median home list price in August was up 7 percent from last year.

While these numbers are still higher than last year, economists point to a slowing growth in the percentage jumps. Last year, median home list prices increased by 10 percent from the previous year and by 9 percent the year before that.

A recent report from real estate brokerage Redfin showed that more than one in four home sellers dropped their asking price last month. The areas seeing some of the biggest decreases this year are Las Vegas; San Jose, Calif.; Seattle; and Atlanta.

“We’ve hit that tipping point in a lot of these cities where what sellers think they can get is just not possible for many buyers,” Daren Blomquist, senior vice president at ATTOM Data Solutions, told realtor.com®. “Now the pendulum is swinging away from sellers and back toward buyers.”

Economists point to housing affordability as a culprit for the slowdown. Mortgage rates are up 0.82 percent since a year ago; the 30-year fixed-rate mortgage averaged 4.65 percent as of Sept. 20. Each percentage point increase in rates can translate to about $143 more on a monthly mortgage payment, or nearly $51,500 over the life of a loan on a $300,000 priced home, according to realtor.com®.

“Home prices have just gone up too fast,” Blomquist says. “It doesn’t mean that all of a sudden it’s a market that’s going to crash. But it does mean there are limits to what people can afford.”

Source: REALTOR® Magazine
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Fewer Americans Are Willing to Move for a Job

Fewer Americans are willing to uproot their lives to move for new job opportunities, suggests new census data.

About 3.5 million Americans relocated for a new job last year, a 10 percent drop from 3.8 million in 2015. The number has been trending lower, despite the overall population increasing 20 percent over that time, The Wall Street Journal reports.

Why are more people staying put? Experts told WSJ that some blame may rest on rebounding real estate values. Housing costs have soared higher in some regions where jobs may be more plentiful, like East and West Coast cities, but it may be pricing out some who may have otherwise been willing to relocate.

Read the full article on REALTORmagazine…

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No Housing Recession Over the Horizon

Media reports are increasingly focused on whether a major home sale slowdown, or maybe even a crash, is in the making, in part because many hot housing markets are seeing slackening buyer demand, and nationally 2018 is expected to end with fewer home sales than 2017. But the possibility of a crash is unlikely, says Lawrence Yun, chief economist for the National Association of REALTORS®.

In a piece he contributed to Forbes, Yun says hot markets are seeing a slowdown not because of weak buyer demand, which could be an indicator of a true slowdown, but insufficient supply. When homes come on the market, especially in areas like Seattle and Denver that have strong job growth and little unemployment, they are typically snapped up.

In other positive signs, home price growth remains strong in markets across the country—about 5 percent on a nationwide basis so far this year—and there are no signs of the credit excesses that characterized the housing crisis 10 years ago. “Lending standards today are still stringent, as evidenced by the higher-than-normal credit scores of those who are able to obtain a mortgage,” Yun says. “That is why mortgage default and foreclosure rates are at historic lows.”

In short, Yun says, today’s housing problem stems from insufficient inventory. The supply problem is driving up home prices and worsening affordability and keeping sales from matching demand. That is a serious problem and the answer is to encourage builders to increase supply, Yun says, but it is not a prelude to a crash.

Source: “No Housing Recession Over Horizon,” Forbes.com