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4 Reasons Why the Election Won’t Dampen the Housing Market

Tomorrow, Americans will decide our President for the next four years. That decision will have a major impact on many aspects of life in this country, but the residential real estate market will not be one of them.

Analysts will try to measure the impact feasible changes in regulations might have on housing, the effect of a possible first-time buyer program, and any number of other situations based on who wins. The housing market, however, will remain strong for four reasons:

1. Demand Is Strong among Millennials

The nation’s largest generation began entering the housing market last year as they reached the age to marry and have children – two key drivers of homeownership. As the Wall Street Journal recently reported:

“Millennials, long viewed as perennial home renters who were reluctant or unable to buy, are now emerging as a driving force in the U.S. housing market’s recent recovery.”

2. Mortgage Rates Are Historically Low

All-time low interest rates are also driving demand across all generations. Strong demand created by this rate drop has countered other economic disruptions (e.g., pandemic, recession, record unemployment).

In addition, Freddie Mac just forecasted mortgage rates to remain low through next year:

“One of the main drivers of the strong housing recovery is historically low mortgage interest rates…Given weakness in the broader economy, the Federal Reserve’s signal that its policy rate will remain low until inflation picks up, and no signs of inflation, we forecast mortgage rates to remain flat over the next year. From the third quarter of 2020 through the end of 2021, we forecast mortgage rates to remain unchanged at 3%.”

3. Prices Continue to Appreciate

The continued lack of supply of existing homes for sale coupled with the surge in buyer demand has experts forecasting strong price appreciation over the next twelve months.

4. History Says So

Though it’s true that the market slows slightly in November when it’s a Presidential election year, the pace returns quickly. Here’s an explanation as to why from the Homebuilding Industry Report by BTIG:

“This may indicate that potential homebuyers may become more cautious in the face of national election uncertainty. This caution is temporary, and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence all have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”

Ali Wolf, Chief Economist for Meyers Research, also notes:

“History suggests that the slowdown is largely concentrated in the month of November. In fact, the year after a presidential election is the best of the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year as long as the economy stays on track.”

Bottom Line

There’s no doubt this is one of the most contentious presidential elections in our nation’s history. The outcome will have a major impact on many sectors of the economy. However, as Matthew Speakman, an economist at Zillowexplained last week:

“While the path of the overall economy is likely to be most directly dictated by coronavirus-related and political developments in the coming months, recent trends suggest that the housing market – which has basically withstood every pandemic-related challenge to this point – will continue its strong momentum in the months to come.

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Should I Renovate My House Before I Sell It?

Some Highlights

  • In today’s hyper-competitive market, buyers are often willing to overlook cosmetic or minor repair needs if it means snagging a home in their price range.
  • With so few houses available for sale today, you may be able to skip the bigger renovations before you sell and cash in on the current demand for your house.
  • If you’re ready to move, let’s connect to determine your best next steps in this sellers’ market.
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Three Ways Low Inventory Is a Win for Sellers

The number of houses for sale today is significantly lower than the high buyer activity in the current housing market. According to Lawrence Yun, Chief Economist for the National Association of Realtors (NAR):

“There is no shortage of hopeful, potential buyers, but inventory is historically low.”

When the demand for homes is higher than what’s available for sale, it’s a great time for homeowners to sell their house. Here are three ways low inventory can help you win if you’re ready to make a move this fall.

1. Higher Prices

With so many more buyers in the market than homes available for sale, homebuyers are frequently entering into bidding wars for the houses they want to purchase. This buyer competition drives home prices up. As a seller, this can definitely work to your advantage, potentially netting you more for your house when you close the deal.

2. Greater Return on Your Investment

Rising prices mean homes are also gaining value, which drives an increase in the equity you have in your home. In the latest Homeowner Equity Insights ReportCoreLogic explains:

“In the second quarter of 2020, the average homeowner gained approximately $9,800 in equity.”

This year-over-year growth in equity gives you the ability to put that money toward a down payment on your next home or to keep it as extra savings.

3. Better Terms

When we’re in a sellers’ market like we are today, you’re in the driver’s seat if you sell your house. You have the power to sell on your terms, and buyers are more likely to work with you if it means they can finally move into their dream home.

So, is low housing inventory a big deal?

Yes, especially if you want to sell your house at the perfect time. Today’s market gives sellers immense negotiating power. However, it won’t last forever, especially as more sellers return to the housing market next year. If you’re considering selling your house, the best time to do so is now.

Bottom Line

If you’re interested in taking advantage of the current sellers’ market, let’s connect today to determine your best move in our local market.

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Buyer Interest Is Growing among Younger Generations

The demand for homes this year is extraordinary as record-breaking numbers of hopeful buyers continue to shop for homes. In a normal year, the peak homebuying season comes to a close by early fall. However, 2020 is anything but a normal year, and the housing market is no exception. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), explains:

Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season…I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”

What’s drawing so many buyers to the market?

As Yun mentioned, record-low interest rates are key. Today’s rates are strengthening purchasing power for buyers, too. Sam Khater, Chief Economist at Freddie Macemphasizes:

“Mortgage rates today are on average more than a full percentage point lower than rates over the last five years.”

If you’re a homebuyer right now, there’s no question that you want to take advantage of this opportunity – and you’re not alone. Competition among buyers is definitely increasing as more buyers enter the market and mortgage interest rates remain so low.

Who’s planning to buy a home right now?

Today’s affordability is appealing to all generations and seems to be especially attractive to younger buyers who want to begin growing their wealth through homeownership. There’s a distinct increase this year in the percentage of those in younger generations searching for homes. The National Association of Home Builders (NAHB) notes:

“Between the third quarters of 2019 and 2020, the share of Gen Z adults planning a home purchase rose three points to 14%. Millennials, however, are the generation most likely to be considering buying a home (22%).”

Buyer Interest Is Growing among Younger Generations | MyKCM

Here’s a graph showing the year-over-year increase in homebuying interest by generation:According to Mark Fleming, Chief Economist for First American, millennials are reaching their prime home-buying years, a likely driver in this increase:

“Record low mortgage rates and millennials continuing to age into their prime home-buying years has boosted demand, but a lack of housing supply remains a challenge.”

What’s the biggest challenge for today’s buyers?

Finding a home, however, as Fleming notes above, is clearly a challenge today. Yun also explains:

“There is no shortage of hopeful, potential buyers, but inventory is historically low.”

With so many buyers actively searching for homes this year and so few houses for sale, it’s more important than ever to work with a trusted real estate professional to navigate today’s market. From pre-approval to bidding wars and guidance on down payment assistance resources, having an agent by your side might make the difference in your ability to land your dream home.

Bottom Line

Let’s connect if you’re ready to buy a home. More buyers mean more competition, so you need an expert guide to help you stand out from the crowd.

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How Down Payment Assistance Opens the Door to Homeownership

Many people are eager to buy a home right now while affordability continues to be a highlight of the current housing market. However, a recent survey by Sparks Research shows that 20% of first-time homebuyers cite a lack of financial education as a barrier to homeownership. This is definitely understandable. If you don’t feel comfortable with the financial process of buying a home, it’s hard to make a confident decision. In fact, four in five homebuyers say they need help to understand what they can even afford in the first place. This is why finding the right professionals to help you through the process is so important.

On top of that, the same survey reports over two-thirds of prospective homebuyers believe they’ll need assistance to save enough for a down payment. What they may not realize is that there are a lot of down payment assistance programs at the state and regional levels, and many of them have funds available for potential buyers. Down Payment Resources recently released its Q3 2020 Homeownership Program Index, which explains:

“The number of total programs is 2,340, and over 81 percent (81.1%) of programs currently have funds available for eligible homebuyers.”

Down Payment Assistance Programs Are Not Only for First-Time Homebuyers

Keep in mind, these programs aren’t just for first-time homebuyers, so it’s worth exploring your options no matter where you are in your homeownership journey. For example, if you’re working from home now, you may be thinking of relocating to a more affordable area where you can stretch your dollar further and have more space, inside and out. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), explains:

“Rural areas have mortgages (USDA loans) that don’t require down payments; and some workers who can work from home may want to consider outer suburbs or small towns where USDA home loans are available and where homes are very affordable.”

If affordability is on your mind and you’re expecting to be working from home long-term, the right home may be in an area you haven’t considered yet. In addition, the assistance program you need might be within reach too.

If you’re interested in learning more about down payment assistance programs, additional information is available through Down Payment Resource. Your real estate advisor can help you decide which option is best for you personally.

Bottom Line

Thanks to a range of down payment assistance programs, affordable options are out there for today’s hopeful homebuyers. It’s important to get the financial education you need to understand the homebuying process and accomplish your real estate goals. Let’s connect today to get you started on the path to your dream home.

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Two Important Impacts of Home Equity

Equity continues to rise, helping American homeowners secure a much more stable financial future. According to the most recent data from CoreLogic, the average homeowner gained $9,800 in equity over the past year. In addition, experts project 2020 home prices to continue rising. With prices going up, equity gains will also keep accelerating. Black Knight just reported:

“The annual percent change in the overall median existing single-family-home price has skyrocketed in the past several months, with recent numbers at three to five times higher than rates seen in the past several years.”

Jeff Tucker, Senior Economist at Zillow, just qualified recent price increases as “jaw-dropping” and “within a hair’s breadth of double-digit year-over-year appreciation.”

Knowing equity will help enable many homeowners to better survive the economic distress caused by the ongoing pandemic, it’s important to break down two key homeowner benefits of increasing equity.

1. Equity Increases a Homeowner’s Options to Buy a New Home

Aside from the financial damage of the last seven months, there has also been a tremendous emotional toll on many people. Shelter-in-place mandates, quarantine requirements, and virtual schooling have all made us re-evaluate the must-have requirements a home should deliver. Having equity in your current house gives you a better opportunity to move-up or build your perfect home from scratch.

Mark Fleming, Chief Economist at First American, recently explained:

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity.”

If you need to make a move, the equity in your current home can help make that possible – right now.

2. Equity Enables Homeowners to Help Future Generations

An increase in home equity grows overall wealth, which can transfer to future generations. The Federal Reserve, in an addendum to their recent Survey of Consumer Finances, explains:

“There are numerous ways families can transmit wealth and resources across generations. Families can directly transfer their wealth to the next generation in the form of a bequest. They can also provide the next generation with inter vivos transfers (gifts), for example, providing down payment support to enable a home purchase or a substantial wedding gift.”

The Federal Reserve also explains another way wealth (including the additional net worth generated by an increase in home equity) can benefit future generations:

“In addition to direct transfers or gifts, families can make investments in their children that indirectly increase their wealth. For example, families can invest in their children’s educational success by paying for college or private schools, which can in turn increase their children’s ability to accumulate wealth.”

Bottom Line

Equity can help a homeowner grow their confidence in a more stable financial future. It provides near-term move-up options and creates a positive impact for future generations. In many cases, the largest single investment a person has is their home. As that investment appreciates in value, financial options increase too.

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PRECONTRACT: Buyers and Showings

Thank you so much for the opportunity to work with you with one of the biggest purchases you can make!

Some of the things we are looking for while showing you properties are condition of the property like the roof and interior of the property.

The more notice you can give us for showings the better chance we have to get it set up.

For more contract steps and what to expect during your home buying or selling click here!

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Selling Your House Is the Right Move, Right Now

Some Highlights

  • Demand from homebuyers has skyrocketed this year, which means today’s sellers are poised to win big. This ideal moment in time to sell your house won’t last forever, though.
  • With more sellers coming to the market in the spring, waiting until next year means buyers will have more choices, so your home may not stand out from the crowd.
  • Let’s connect today to discuss why now may be the right time to make a move on your terms.
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Home Values Projected to Keep Rising

As we enter the final months of 2020 and continue to work through the challenges this year has brought, some of us wonder what impact continued economic uncertainty could have on home prices. Looking at the big picture, the rules of supply and demand will give us the clearest idea of what is to come.

Due to the undersupply of homes on the market today, there’s upward pressure on prices. Consider simple economics: when there is high demand for an item and a low supply of it, consumers are willing to pay more for that item. That’s what’s happening in today’s real estate market. The housing supply shortage is also resulting in bidding wars, which will also drive price points higher in the home sale process.

Home Values Projected to Keep Rising | MyKCM

There’s no evidence that buyer demand will wane. As a result, experts project price appreciation will continue over the next twelve months. Here’s a graph of the major forecasts released in the last 60 days:

I hear many foreclosures might be coming to the market soon. Won’t that drive prices down?

Some are concerned that homeowners who entered a mortgage forbearance plan might face foreclosure once their plan ends. However, when you analyze the data on those in forbearance, it’s clear the actual level of risk is quite low.

Ivy Zelman, CEO of Zelman & Associates and a highly-regarded expert in housing and housing-related industries, was very firm in a podcast last week:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

With demand high, supply low, and little risk of a foreclosure crisis, home prices will continue to appreciate.

Bottom Line

Originally, many thought home prices would depreciate in 2020 due to the economic slowdown from the coronavirus. Instead, prices appreciated substantially. Over the next year, we will likely see home values rise even higher given the continued lack of inventory of homes for sale.

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Why Today’s Options Will Save Homeowners from Foreclosure

Many housing experts originally voiced concern that the mortgage forbearance program (which allows families impacted financially by COVID to delay mortgage payments to a later date) could lead to an increase in foreclosures when forbearances end.

Some originally forecasted that up to 30% of homeowners would choose to enter forbearance. Less than 10% actually did, and that percentage has been dropping steadily. Black Knight recently reported that the national forbearance rate has decreased to 5.6%, with active forbearances falling below 3 million for the first time since mid-April.

Many of those still in forbearance are actually making timely payments. Christopher Maloney of Bloomberg Wealth recently explained:

“Almost one quarter of all homeowners who have demanded forbearance are still current on their mortgages…according to the latest MBA data.”

However, since over two million homeowners are still in forbearance, some experts are concerned that this might lead to another wave of foreclosures like we saw a little over a decade ago during the Great Recession. Here is why this time is different.

There Will Be Very Few Strategic Defaults

During the housing crash twelve years ago, many homeowners owned a house that was worth less than the mortgage they had on that home (called negative equity or being underwater). Many decided they would just stop making their payments and walk away from the house, which then resulted in the bank foreclosing on the property. These foreclosures were known as strategic defaults. Today, the vast majority of homeowners have significant equity in their homes. This dramatically decreases the possibility of strategic defaults.

Aspen Grove Solutions, a business consulting firm, recently addressed the issue in a study titled Creating Positive Forbearance Outcomes:

“Unlike in 2008, strategic defaults have not emerged as a serious problem and seems unlikely to emerge given stronger expectations for property price increases, a record low inventory of homes, and stable residential underwriting standards leading up to the crisis which has reduced the number of owners who are underwater.”

There Are Other Options That Were Not Available the Last Time

A decade ago, there wasn’t a forbearance option, and most banks did not put in other programs, like modifications and short sales, until very late in the crisis.

Today, homeowners have several options because banks understand the three fundamental differences in today’s real estate market as compared to 2008:

1. Most homeowners have substantial equity in their homes.

2. The real estate market has a shortage of listings for sale. In 2008, homes for sale flooded the market.

3. Prices are appreciating. In 2008, prices were depreciating dramatically.

These differences allow banks to feel comfortable giving options to homeowners when exiting forbearance. Aspen Grove broke down some of these options in the study mentioned above:

  • Refinance Repay: Capitalize forbearance amount – For borrowers who have strong credit, have good or improved equity in their homes, possibly had a higher interest rate on their original loan, have steady employment/no significant wage loss, and income.
  • Repayment Plan: Pay it back in higher monthly payments – For people who cannot reinstate using savings, but have increased monthly income, and do not want to use a deferral program.
  • Deferral ProgramShift payments to the end of the loan term – For borrowers who lost income temporarily and regained most or all of their income but are not in a position to refinance due to credit score, home equity, low total loan value relative to closing costs, or simple apathy.
  • ModificationFlex modification or other mod – For households that permanently lost 20% to 30% of their income, but not all of their income, and want to remain in their home.

Each one of these programs enables the homeowner to remain in the home.

What about Those Who Don’t Qualify for These Programs?

Homeowners who can’t catch up on past payments and don’t qualify for the programs mentioned have two options: sell the house or let it go to foreclosure. Some experts think most will be forced to take the foreclosure route. However, an examination of the data shows that probably won’t be the case.

A decade ago, homeowners had very little equity in their homes. Therefore, selling was not an option unless they were willing to tap into limited savings to cover the cost of selling, like real estate commission, closing costs, and attorney fees. Without any other option, many just decided to stay in the house until they were served a foreclosure notice.

As mentioned above, today is different. Most homeowners now have a large amount of equity in their homes. They will most likely decide to sell their home and take that equity rather than wait for the bank to foreclose.

In a separate reportBlack Knight highlighted this issue:

“In total, an estimated 172K loans are in forbearance, have missed three or more payments under their plans and have less than 10% equity in their homes.”

In other words, of the millions currently in a forbearance plan, there are few that likely will become a foreclosure.

Bottom Line

Some analysts are talking about future foreclosures reaching 500,000 to over 1 million. With the options today’s homeowners have, that doesn’t seem likely.