Displaying blog entries 121-130 of 589
It is that time of year again! The Christie Cannon Team has complied a list of events happening all across the DFW for 4th of July!
Be safe and have fun!
Home price appreciation continues to accelerate. Today, prices are driven by the simple concept of supply and demand. Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.
Let’s use three maps to show how this theory continues to affect the residential real estate market.
Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:
As the map shows, certain states (colored in red) have appreciated well above the national average of 12.6%.
Map #2 – The change in state-by-state inventory levels year-over-year reported by realtor.com:
Comparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Idaho, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one of causation.
The reason prices continue to accelerate is that housing inventory is still at all-time lows while demand remains high. However, this may be changing.
The report by realtor.com also shows the monthly change in inventory for each state.
Map #3 – State-by-state changes in inventory levels month-over-month reported by realtor.com:
As the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month. This may be evidence that homeowners who have been afraid to let buyers in their homes during the pandemic are now putting their houses on the market.
We’ll know for certain as we move through the rest of the year.
Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels.
For generations, the process of buying and selling a home never really changed. A homeowner would try to estimate the market value of their house, then tack on a little extra to give themselves some negotiating room. That figure would become the listing price. Buyers would then try to determine how much less than the full price they could offer and still get the home. As a result, the listing price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than what was listed. It was unthinkable to pay more than what the seller was asking.
The record-low supply of homes for sale coupled with very strong buyer demand is leading to a rise in bidding wars on many homes. Because of this, homes today often sell for more than the list price. In some cases, they sell for a lot more.
According to Lawrence Yun, Chief Economist at the National Association of Realtors (NAR):
“For every listing there are 5.1 offers. Half of the homes are being sold above list price.”
In this market, you likely can’t shop for a home with the former approach of negotiating to a lower price.
Due to the low supply of houses for sale, many homes are now being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they’re selling. A reserve price is the minimum amount a seller will accept as the winning bid.
When navigating a competitive housing market, think of the list price of the house as the reserve price at an auction. It’s the minimum the seller will accept in many cases. Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. Therefore, if you really love a home, know that it may ultimately sell for more than the sellers are asking. So, as you’re navigating the homebuying process, make sure you know your budget, know what you can afford, and work with a trusted advisor who can help you make all the right moves as you buy a home.
Someone who’s more familiar with the housing market of the past than that of today may think it’s foolish to offer more for a home than the listing price. However, frequent and competitive bidding wars are creating an auction-like atmosphere in many real estate transactions right now. Let’s connect today so you have a trusted real estate professional on your side to provide the best advice on how to make a competitive offer on a home.
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There’s a lot of discussion about affordability as home prices continue to appreciate rapidly. Even though the most recent index on affordability from the National Association of Realtors (NAR) shows homes are more affordable today than the historical average, some still have concerns about whether or not it’s truly affordable to buy a home right now.
When addressing this topic, there are various measures of affordability to consider. However, very few of the indexes compare the affordability of owning a home to renting one. In a paper just published by the Urban Institute, Homeownership Is Affordable Housing, author Mike Loftin examines whether it’s more affordable to buy or rent. Here are some of the highlights included.
The report explains:
“When we look at the median housing expense ratio of all households, the typical homeowner household spends 16 percent of its income on housing while the typical renter household spends 26 percent. This is true, you might say, because people who own their own home must make more money than people who rent. But if we control for income, it is still more affordable to own a home than to rent housing, on average.”
Here’s the data from the report shown in a graph:
The report goes on to say:
“Buying a home is not a decision between investing in real estate versus investing in stocks, as financial advisers often claim. Instead, the home buying investment simply converts some portion of an existing expense (renting) into an investment in real estate.”
It explains that you still have a housing expense (rent payments) even if you don’t buy a home. You can’t live in your 401K, but you can transfer housing expenses to your real estate investment. A mortgage payment is forced savings; it goes toward building equity you will likely get back when you sell your home. There’s no return on your rent payments.
The report also notes:
“Whereas renters are continuously vulnerable to cost increases, rising home prices do not affect homeowners. Nobody rebuys the same home every year. For the homeowner with a fixed-rate mortgage, monthly payments increase only if property taxes and property insurance costs increase. The principal and interest portion of the payment, the largest portion, is fixed. Meanwhile, the renter’s entire payment is subject to inflation.
Consequently, over time, the homeowner’s and renter’s differing trajectories produce starkly different economic outcomes. Homeownership’s major affordability benefit is that it stabilizes what is likely the homeowner’s biggest monthly expense, assuming a buyer has a fixed-rate mortgage, which most American homeowners do. The only portion of the homeowner’s housing expenses that can increase is taxes and insurance. The principal and interest portion stays the same for 30 years.”
A mortgage payment remains about the same over the 30 years of the mortgage. Here’s what rents have done over the last 30 years:
As the report also indicates:
“We need to stop seeing housing as a reward for financial success and instead see it as a critical tool that can facilitate financial success. Affordable homeownership is not the capstone of economic well-being; it is the cornerstone.”
Homeownership is the first rung on the ladder of financial success for most households, as their home is most often their largest asset.
If the current headlines reporting a supposed drop-off in home affordability are making you nervous, let’s connect to go over the real insights into our area.
Are rapidly rising home prices a warning sign of a real estate bubble? Could the U.S. housing market collapse as it did 14 years ago, triggering a severe recession? Real estate brokers and analysts who pay close attention to market fundamentals say the answer is no.
“I feel very strongly that we are not in a housing bubble simply because of the excessively low inventory,” says Anthony Lamacchia, CEO, Lamacchia Companies, Waltham, Mass. “It is impossible for the housing market to tip over in the next two years.”
A shortage of homes for sale is just one of the reasons the U.S. housing market will not suddenly slide into a tailspin. Lenders are far more cautious today than they were in 2006-2007 – a time when no-downpayment mortgages and easy credit fueled a wave of speculation, only to result in mass foreclosures when prices collapsed.
“After 50 years in the real estate business, this is the first time I have ever seen such a perfect storm,” says Thomas Sbarra, owner and principal, CENTURY 21 Sbarra, Johnson City, New York. “Inventory is at low levels, demand is running wild and prices are still rising pretty much everywhere in the country. While the buying frenzy is like the early 2000s, I think it will be two or three more years before there’s a correction, and the market could just level off.”
An Urban Land Institute survey of 43 economists at real estate organizations found little likelihood of a market meltdown. In fact, the economists projected home prices will grow an average of 4.1 percent over the next three years, above the long-term average of 3.9 percent. In a recent forecast, Fannie Mae projected new and existing home sales will be 6.2 percent high than last year, although the pace of transactions will slow later this year.
“We will certainly see a rebalancing at some point, but no one can predict when,” says Kuba Jewgieniew, CEO and founder of Realty ONE Group, Las Vegas. “I think things are going to calm down, stabilize and rebalance rather than seeing a bubble that’s going to pop.
Here are seven reasons the U.S. is not in a housing bubble.
Housing sales across the country declined this spring, according to data released by the National Association of Realtors. The primary reason is lack of supply. In March, there were 1.07 million homes for sale, down 28.2 percent from the prior year. That is far below the 4 million homes on the market in July 2007 during the last housing bubble.
“Our ongoing issues of low inventory, caused in part by the high cost of new builds, will not go away anytime soon,” says Jewgieniew.
With only a 2.1-month supply of inventory for single-family homes in March – well below normal levels – home prices are likely to continue to rise. As Lawrence Yun, chief economist of the National Association of Realtors®, says, “This is not a bubble. It is simply lack of supply.”
Currently, the U.S. housing market is 3.8 million single-family homes short of demand, according to a recent analysis from Freddie Mac. A low level of new home construction over the past three years has increased that shortfall, which was estimated at 2.5 million units in 2018.
New housing starts are rising this spring, but the supply of new homes is projected to remain well below demand. In March, housing starts reached a seasonally adjusted annual rate of 1.739 million units, the highest level since June 2006. Doug Duncan, chief economist for Fannie Mae, says production may decline later this year as homebuilders face supply constraints, such as increasing prices of lumber and other materials.
Overall, the Mortgage Bankers Association (MBA) forecasts single-family housing starts to be around 1.134 million, increasing to 1.165 million single-family homes in 2022 and 1.210 million in 2023. That gradual increase in production will help to ease the current shortage.
Nearly 5 million millennials will be turning 30 this year, with similar numbers coming in 2022. A significant percentage are looking to buy homes and condominiums – a big change in the market compared with five years ago.
In fact, millennials are expected to continue to drive the nation’s real estate market for the next decade, spurring demand for starter and move-up homes. Again, strong demand for homes is one of the main reasons a market bubble appears unlikely.
As the COVID-19 pandemic recedes, international travel and home purchases will pick up later in the year. In many states, buyers from Canada, Europe, Asia and the Middle East have sought vacation homes, primary residences and investment properties in the U.S. That global demand for homes – many from all-cash buyers – can buoy many U.S. markets
“There is still a huge influx of foreign capital pouring into the United States as we’re still one of the most stable and attractive countries in the world,” says Jewgieniew. “Now is the time for real estate professionals to create new relationships and networks and grow their opportunities to connect with international clients.”
While mortgage rates have begun creeping up, there are no signs of a spike that could bring the home financing process to a halt. “Real estate professionals should prepare their clients for rates to potentially hit 4 percent, while reassuring them that this is still ridiculously low,” says Jewgieniew.
This spring, the Federal Reserve is supporting housing market by keeping short-term rates low for borrowers – a practice it intends to follow until 2022 at least. The Fed is also purchasing agency mortgage-backed securities (MBS) to stabilize the lending market. Again, there is no sign of a bubble caused by home financing policies.
Risky credit practices in the early 2000s were a leading cause of the last housing bubble. Back then, lenders offered loans with “nothing down,” adjustable rates or balloon payments and easy terms to borrowers with marginal credit ratings. At that time, risky loans comprised about 40 percent of the mortgage market, according to a Morgan Stanley report. Currently, those loans are only 2 percent of the market.
Rising home prices and greater savings rates have increased equity for millions of U.S. owners. A first quarter report from ATTOM Data Solutions, found that one in three of the 55.8 million mortgaged homes was “equity-rich,” with loans 50 percent or less of estimated market value.
On the other side of the equation, just 2.6 million mortgaged homes were considered seriously underwater, combined loans at least 25 percent more than the value. In addition, distressed sales — including bank-owned (REO) sales, third-party foreclosure auction sales and short sales — accounted for just 5.8 percent of sales, the smallest percentage since 2003 and dramatically below the 42.2 percent in the first quarter of 2009.
Looking ahead to the second half of the year, the pace of home sales may decline and mortgage rates may rise. But those changes should be gradual, rather than bursting a bubble. As Jewgieniew says, “Brokers should be looking forward the future and remember not to be short-sighted. Be sure to have money set aside, especially as there are less and less transactions, and be disciplined with your spending.”
Article provided by: Richard Westlund with RealTrends
See the entire article here!
One of the biggest questions in real estate today is, “When will sellers return to the housing market?” An ongoing shortage of home supply has created a hyper-competitive environment for hopeful buyers, leading to the ultimate sellers’ market. However, as the economy continues to improve and more people get vaccinated, more sellers may finally be in sight.
The Home Purchase Sentiment Index (HPSI) by Fannie Mae recently noted the percentage of consumer respondents who say it’s a good time to sell a home increased from 61% to 67%. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, indicates:
“Consumer positivity regarding home-selling conditions nearly matched its all-time high.” (See graph below):
Fannie Mae isn’t the only expert group noticing a rise in the percentage of people thinking about selling. George Ratiu, Senior Economist at realtor.com, shares:
“The results of a realtor.com survey . . . showed that one-in-ten homeowners plans to sell this year, with 63 percent of those, looking to list in the next 6 months. Just as encouragingly, close to two-thirds of sellers plan to sell their homes at prices under $350,000, which would offer a tremendous boost to affordable housing for first-time buyers.”
If you’re considering selling your house, don’t wait for more competition to pop up in your neighborhood. Let’s connect today to explore the benefits of selling your house now before more homes come to the market.
There’s no doubt that 2021 is the year of the seller when it comes to the housing market. If you’re a homeowner thinking of moving to better suit your changing needs, now is the perfect time to do so. Low mortgage rates are in your favor when you’re ready to purchase your dream home, and high buyer demand may give you the leverage you need to negotiate the best contract terms on the sale of your house. Here’s a look at what’s driving this sellers’ advantage and why there’s so much opportunity for homeowners who are ready to move this season.
The National Association of Realtors (NAR) explains:
“Total housing inventory at the end of March amounted to 1.07 million units, up 3.9% from February's inventory . . . Unsold inventory sits at a 2.1-month supply at the current sales pace, marginally up from February's 2.0-month supply and down from the 3.3-month supply recorded in March 2020.”
Even with a slight rise in the number of houses for sale this spring, inventory remains near an all-time low (See graph below):
High buyer interest is creating a major imbalance between supply and demand, but as the small uptick in inventory shows, sellers are beginning to reenter the market. Selling your house now enables you to take advantage of buyer demand and get the most attention for your house – before more listings come to the market later this year.
As a result of the supply and demand imbalance, homebuyers are entering bidding wars at an accelerating rate. NAR reports the average number of bids received on the most recently closed sales is 4.8 offers. This number has doubled since the first quarter of 2020 (See graph below):
As buyers face increasingly tough competition while searching for homes to purchase, they’re more likely to be flexible and generous in their negotiations. This gives a seller the opportunity to choose the best buyer for their needs and be selective about things like time to close, contingencies, renovations, and more. Working with your trusted agent is the best way to determine how to navigate the negotiation process when selling your house.
In today’s market, sellers aren’t waiting very long to find a buyer for their house, either. NAR reports:
“Properties typically remained on the market for 18 days in March, down from 20 days in February and from 29 days in March 2020. 83% of the homes sold in March 2021 were on the market for less than a month.” (See graph below):
NAR Chief Economist Lawrence Yun explains:
"The sales for March would have been measurably higher, had there been more inventory…Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”
If you’re thinking about moving, these three graphs clearly show that it’s a great time to sell your house. Let’s connect today so you can learn more about the opportunities in our local area.
It’s clear that consumers are concerned about how quickly home values are rising. Many people fear the speed of appreciation may lead to a crash in prices later this year. In fact, Google reports that the search for “When is the housing market going to crash?” has actually spiked 2450% over the past month.
In addition, Jim Dalrymple II of Inman News notes:
“One of the most noteworthy things that came up in Inman’s conversations with agents was that every single one said they’ve had conversations with clients about whether or not the market is heading into a bubble.”
To alleviate some of these concerns, let’s look at what several financial analysts are saying about the current residential real estate market. Within the last thirty days, four of the major financial services giants came to the same conclusion: the housing market is strong, and price appreciation will continue. Here are their statements on the issue:
“Strong demand for housing looks sustainable. Even before the pandemic, demographic tailwinds and historically-low mortgage rates had pushed demand to high levels. ... consumer surveys indicate that household buying intentions are now the highest in 20 years. … As a result, the model projects double-digit price gains both this year and next.”
“Homebuyers—interest rates are still historically low, though they are inching up. Housing prices have spiked during the last six-to-nine months, but we don’t expect them to fall soon, and we believe they are more likely to keep rising. If you are looking to purchase a new home, conditions now may be better than 12 months hence.”
“Unlike 15 years ago, the euphoria in today's home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation . . . . This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course.”
“There are reasons to believe that this is likely to be an unusually long and strong housing expansion. Demand is very strong because the biggest demographic cohort in history is moving through the household-formation and peak home-buying stages of its life cycle. Coronavirus-related preference changes have also sharply boosted home buying demand. At the same time, supply is unusually tight, with available homes for sale at record-low levels. Double-digit price gains are rationing the supply.”
If you’re concerned about making the decision to buy or sell right now, let’s connect to discuss what’s happening in our local market.
Many people are sitting on the fence trying to decide if now’s the time to buy a home. Some are renters who have a strong desire to become homeowners but are unsure if buying right now makes sense. Others may be homeowners who are realizing that their current home no longer fits their changing needs.
To determine if they should buy now or wait another year, they both need to ask two simple questions:
Let’s shed some light on the answers to these questions.
If you average the most recent projections from the major industry forecasters, the expectation is home prices will increase by 7.7%. Let’s take a house that’s valued today at $325,000 as an example.
If the buyer makes a 10% down payment ($32,500), they’ll end up borrowing $292,500 for their mortgage. Applying the projected rate of home price appreciation, that same house will cost $350,025 next year. With a 10% down payment ($35,003), they’d then have to borrow $315,022.
Therefore, as a result of rising home prices alone, a prospective buyer will have to put down an additional $2,503 and borrow an additional $22,523 just for waiting a year to make their move.
Today, mortgage rates are hovering around 3%. However, most experts believe they’ll rise as the economy continues to recover. Any increase in the mortgage rate will also increase a purchaser’s cost. Here are the forecasts for the first quarter of 2022 from four major entities:
The projections average out to 3.6% among these four forecasts, a jump up from where they are today.
A buyer will pay a lot more in mortgage payments each month if both of these variables increase. Assuming a buyer purchases a $325,000 home this year with a 30-year fixed-rate loan at 3% after making a 10% down payment, their monthly principal and interest payment would be $1,233.
That same home one year from now could be $350,025, and the mortgage rate could be 3.6% (based on the industry forecasts mentioned above). That monthly principal and interest payment, after putting down 10%, totals $1,432.
The difference in the monthly mortgage payment would be $199. That’s $2,388 more per year and $71,640 over the life of the loan.
Add to that the approximately $25,000 a house with a similar value would build in home equity this year as a result of home price appreciation, and the total net worth increase a purchaser could gain by buying this year is nearly $100,000. That’s a small fortune.
When asking if they should buy a home, many potential buyers think of the nonfinancial benefits of owning a home. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.
Displaying blog entries 121-130 of 589
