Last fall, some predicted that the 2019 residential real estate market would be a disaster. There was even belief we might experience a housing crash like the one that occurred during the last decade.
However, according to two separate reports*, buyer demand dramatically increased over the last three months, leading into this spring buyers’ market (the March data is not yet available).
Both the ShowingTime Showing Index and the National Association of REALTORS Buyer Traffic Index show that buyer demand has increased in each of the last three months.
Why the increase in demand? Increased buying power.
According to the National Association of Realtors’ Economists’ Outlook Blog, purchasing a home has become more affordable, which has led to increased demand.
“Due to the combination of falling home prices and mortgage rates, the income needed to make an affordable mortgage payment (mortgage no more than 25% of income) on a median-priced home with 10% down payment and 30-year fixed rate mortgage decreased from $60,425 in June 2018 to $53,783 as of February 2019, and the difference of $6,642 represents a gain in buying power because one can afford a home purchase at a lower level of income.”
It appears the spring buyers’ market is going to be much stronger than many had projected. Whether you are selling or buying, this is important news.
*The methodology behind the indices:
The ShowingTime Showing Index
“The ShowingTime Showing Index® tracks the average number of buyer showings on active residential properties on a monthly basis, a highly reliable leading indicator of current and future demand trends.”
The National Association of REALTORS® Buyer Traffic Index
“In a monthly survey of REALTORS®, NAR asks respondents ‘Compared to the same month last year, how would you rate the past month’s traffic in neighborhood(s) or area(s) where you make most of your sales?’ NAR compiles the responses into an index, where an index above 50 indicates that more respondents reported “stronger” traffic than “weaker” traffic.”
The percentage of home price appreciation on a year-over-year basis has decreased each month for over a year. The question was how far annual appreciation would fall. It seems we may now have the answer.
In a recent post on the National Association of Realtors’ Economists’ Outlook Blog, it was revealed that Realtors are starting to sense that home values are beginning to stabilize and that we may see appreciation beginning to accelerate again:
“About 3,000 REALTORS® who responded to NAR’s February 2019 REALTORS Confidence Index Survey had more optimistic— although modest— home price growth expectations over the next 12 months. Respondents expect home prices to typically increase by 1.9 percent nationally, up from 1.4 percent in the January survey.”
The thinking that home appreciation has bottomed-out was also confirmed in two additional housing reports recently released:
CoreLogic Home Price Index – The analysts at CoreLogic increased their projection for home appreciation for the next twelve months to 4.7% as compared to the 4.6% they projected in their previous report.
The Home Price Expectation Survey – In the 2019 first quarter survey, the nationwide panel of over one hundred economists, real estate experts, and investment & market strategists increased their projection for home value growth in 2019 to 4.3% compared to the 3.8% increase they had projected in the fourth quarter of 2018.
Agents working the business every day, one of the premier data companies in the real estate space, and one hundred housing experts all agree: home price appreciation has ended its decline and looks to be stabilizing… and may even accelerate.
# When listing your house for sale, your top goal will be to get the home sold for the best price possible!
# There are many small projects that you can do to ensure this happens!
# I have a list of specific suggestions for getting your house ready for market and have a great resource for finding local contractors who can help!
# Thinking of selling your home? Let’s have a conversation today, I’m here to help!
Congratulations! You’ve found a home to buy and have applied for a mortgage! You are undoubtedly excited about the opportunity to decorate your new home! But before you make any big purchases, move any money around, or make any big-time life changes, consult your loan officer. They will be able to tell you how your decision will impact your home loan.
Below is a list of 7 Things You Shouldn’t Do After Applying for a Mortgage! Some may seem obvious, but some may not!
1. Don’t change jobs or the way you are paid at your job! Your loan officer must be able to track the source and amount of your annual income. If possible, you’ll want to avoid changing from salary to commission or becoming self-employed during this time as well.
2. Don’t deposit cash into your bank accounts. Lenders need to source your money and cash is not really traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.
3. Don’t make any large purchases like a new car or new furniture for your new home. New debt comes with it, including new monthly obligations. New obligations create new qualifications. People with new debt have higher debt to income ratios… higher ratios make for riskier loans… and sometimes qualified borrowers no longer qualify.
4. Don’t co-sign other loans for anyone. When you co-sign, you are obligated. As we mentioned, with that obligation comes higher ratios as well. Even if you swear you will not be the one making the payments, your lender will have to count the payment against you.
5. Don’t change bank accounts. Remember, lenders need to source and track assets. That task is significantly easier when there is consistency among your accounts. Before you even transfer money between accounts, talk to your loan officer.
6. Don’t apply for new credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO score will be affected. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.
7. Don’t close any credit accounts. Many clients have erroneously believed that having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both those determinants of your score.
Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. The best advice is to fully disclose and discuss your plans with your loan officer before you do anything financial in nature. They are there to guide you through the process.
In a strong seller’s market, like the one we have experienced over the past few years, bidding wars are common and expected. This makes sense! A seller’s market is defined as a market in which the inventory of homes for sale cannot satisfy the number of buyers who want to purchase a home.
According to the Cambridge English Dictionary, bidding wars occur when two or more parties repeatedly outbid each other as they compete to purchase something- in this case, a home.
In some areas of the country, first-time buyers have been met with fierce competition throughout their experience. Some have been out-bid multiple times before finally winning a bid on a home to call their own.
According to the latest Existing Home Sales Report from the National Association of Realtors (NAR), there is currently a 3.7-month supply of homes for sale.
With the current number of houses listed for sale and the level of demand from buyers, this means it would take 3.7 months for all the homes listed to sell if no additional listings came to market. Any supply number under a 6-month supply is considered a seller’s market. According to NAR, the housing market hasn’t had a 6-month supply of homes for sale since August 2012.
Good News for Buyers
A recent report shows that the percentage of houses sold including a bidding war before settling on a final price decreased from 53% in January of 2018 to 13% this year.
One reason for the decline is an influx of homes being listed for sale. Even though the month’s supply number is not increasing, the number of homes for sale is.
The number of homes for sale has started to build over the last eight months. Prior to this reversal, inventory levels had fallen for 36 consecutive months when compared to the year before.
Danielle Hale, realtor.com’s Chief Economist, gave some insight into why bidding wars are less common on a local level this year,
“[Last year] you might have been the only listing in your neighborhood, and you could put your home up at a certain list price and you would likely see multiple offers at or above that list price. That tide is turning this year. It’s going to depend on what neighborhood you’re in, but we expect it to be more common this year that you won’t be the only listing.”
Inventory in the luxury and premium markets (the top 25% of listings in an area by price), is increasing at a greater rate than the starter home market. As the choices buyers have continued to increase, the likelihood of a bidding war will decrease.
If you are debating listing your house for sale this year, you may not want to wait for additional competition as inventory continues to rise.
Spring has sprung, and it’s a great time to buy a home! Here are four reasons to consider buying today instead of waiting.
1. Prices Will Continue to Rise
CoreLogic’s latest U.S. Home Price Insights reports that home prices have appreciated by 4.4% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.6% over the next year.
Home values will continue to appreciate for years. Waiting no longer makes sense.
2. Mortgage Interest Rates Are Projected to Increase
Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year fixed rate mortgage came in at 4.41% last week. 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 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.
3. Either Way, You Are Paying a Mortgage
Some renters 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?
4. It’s Time to Move On with Your Life
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?
Examine 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, greater safety for your family, or you just want to have control over renovations, now could be the time to buy.
If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.
In the majority of the country, this weekend marks the start of Daylight Savings Time as we set our clocks forward an hour on Sunday at 2:00 AM EST.
Whether you plan on buying or selling this spring, these tips could help you ‘spring ahead’ of your competition!
Spring brings two things: more buyers & more sellers! Get prepared now to stand out in the crowd!
Last week, the National Association for Business Economics released their February 2019 Economic Policy Survey. The survey revealed that a majority of the panel believe an economic slowdown is in the near future:
“While only 10% of panelists expect a recession in 2019, 42% say a recession will happen in 2020, and 25% expect one in 2021.”
Their findings coincide with three previous surveys calling for a slowdown sometime in the next two years:
The Pulsenomics Survey of Market Analysts
The Wall Street Journal Survey of Economists
The Duke University Survey of American CFOs
That raises the question: Will the real estate market be impacted like it was during the last recession?
A recession does not equal a housing crisis. According to the dictionary definition, a recession is:
“A period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two successive quarters.”
During the last recession, prices fell dramatically because the housing collapse caused the recession. However, if we look at the previous four recessions, we can see that home values weren’t negatively impacted:
January 1980 to July 1980: Home values rose 4.5%
July 1981 to November 1982: Home values rose 1.9%
July 1990 to March 1991: Home values fell less than 1%
March 2001 to November 2001: Home values rose 4.8%
Most experts agree with Ralph McLaughlin, CoreLogic’s Deputy Chief Economist, who recently explained:
“There’s no reason to panic right now, even if we may be headed for a recession. We’re seeing a cooling of the housing market, but nothing that indicates a crash.”
The housing market is just “normalizing”. Inventory is starting to increase and home prices are finally stabilizing. This is a good thing for both buyers and sellers as we move forward.
If there is an economic slowdown in our near future, there is no need for fear to set in. As renowned financial analyst, Morgan Housel, recently tweeted:
“An interesting thing is the widespread assumption that the next recession will be as bad as 2008. Natural to think that way, but, statistically, highly unlikely. Could be over before you realized it began.”
Heading into the spring buying market, there are strong trends starting to emerge.
The inventory of homes for sale has increased on a year-over-year basis for eight months in a row. Home price appreciation has continued to grow, although at a slower rate. The homeownership rate has reached heights last seen in 2014, with millennials and Generation X leading the way!
Let’s dive a little deeper into some of the recent reports that have been released and what they mean for the spring buying season!
1. National Association of Realtor’s Existing Home Sales Report
Sales of existing homes were down for the third consecutive month in January. Some of this can be explained by the natural seasonality that the real estate market experiences every year, and some can be explained even further by a lack of homes available for sale on the market.
For the last eight months, the inventory of homes for sale has been higher when compared to the same month the year before. The challenge in the market is the mismatch of the type of home that is available for sale. First-time homebuyers looking for a starter home are often competing with other buyers to stand out, often outbidding each other.
Lawrence Yun, NAR’s Chief Economist, agrees that the market is still experiencing an inventory shortage.
“In particular, the lower end of the market is experiencing a greater shortage, and more home construction is needed.”
The median home price for homes sold in January was $247,500. This is up 2.8% from January 2018 and marks the 83rd consecutive month of year-over-year gains. The 2.8% growth in home prices represents the smallest year-over-year change since February 2012 but is a welcome change for buyers who had feared being priced out of the market.
Days on the Market
Properties that sold in January were on the market for an average of 49 days with 38% of homes on the market for less than a month.
Yun is positive about how today’s market conditions will help buyers this spring,
“Existing home sales in January were weak compared to historical norms; however, they are likely to have reached a cyclical low. Moderating home prices combined with gains in household income will boost housing affordability, bringing more buyers to the market in the coming months.”
2. NAR’s Pending Home Sales Report
The national Pending Home Sales Index (PHSI) rose 4.6% to 103.2 in January from 98.7 in December. An index score of 100 is considered normal. All four major regions of the country experienced gains in January, with the largest increase coming in the South.
“The PHSI is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.”
Increases in the PHSI often predict increases in the level of home sales in the coming months, which is great news for the housing market leading in to spring! Yun had this to say,
“Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”
The housing market in 2019 will require homeowners to list their house at the right price to attract buyers. If interest rates continue to stay low while wages increase, and more inventory comes to market, 2019 could be one of the best years for home sales in recent history.
According to the National Association of Realtors, total inventory has been growing for six months straight, as has the number of buyers looking to find their dream home. In a market where inventory is increasing, you want to stand out in the crowd!
This quote from Grandscope puts it well:
“You can differentiate from competition by WOWing or exciting customers, not just trying to compete on price.”
What better way than to be creative with your Open House!
Here are a few ideas for how to do this in this era of technology.
1) Facebook Live Virtual Open House
This can also work as a ‘preview’ before an official Open House. Let your agent walk potential buyers through your home using a webcam or cell phone, highlighting the unique features of your house and taking questions. This can be of great benefit, especially for those out-of-state buyers looking to relocate to your area.
2) Youtube Live Virtual Open House
YouTube is forecasted to have 187.8 million video users in 2019 in the United States alone! One of those users might be the buyer you’re looking for! Like Facebook Live, allowing your agent to have a virtual open house will make it available, especially for all those first-time homebuyers house hunting on their phones! This allows access to your home from the comfort of their own. Broadcasting at peak time (during lunch between 12 and 2 P.M.) also prevents buyers from having to leave work.
What if you do not want to show your house online?
3) Have a Garage Sale at The Same Time
This serves two purposes. First, you can start getting rid of some of the clutter inside your home. This will help it to show better and make packing a little easier. Second, people will come to a garage sale. Whether it’s the neighbors or bargain-hunters, each garage sale attendee is a potential “salesperson for your home”. They could be looking for themselves or talking to someone else in the market. The more people who are aware that your house is for sale, the better.
4) Go With Off-Peak Times
Why not host an Open House during the week when people are on their way home? This works especially well if the home is convenient for commuters. Add a little wine & cheese as a transition to going home for dinner! Or, why not have an Open House at 9:00 in the morning? After parents drop their kids at school, they can stop by your Open House for coffee & cake. Promote the Open House in community chats. Maybe one of the neighbors has a family member that wants to move to the area.
With new inventory coming to market, you need your house to stand out from the crowd! Contact me today to see what alternatives will work best in your area.