Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Sept. 6, 2018

Top 3 Myths About Today’s Real Estate Market

Top 3 Myths About Todayâ??s Real Estate Market | Simplifying The Market

There are many conflicting headlines when it comes to describing today’s real estate market. Some are making comparisons to the market we experienced 10 years ago and are starting to believe that we may be doomed to repeat ourselves. Others are just plain wrong when it comes to what it takes to qualify for a mortgage.

 

Today, we want to try and clear the air by shedding some light on what’s causing some of these headlines, as well as what’s truly going on.

 

Myth #1: We Are Headed for Another Housing Bubble

Home prices have appreciated year-over-year for the last 76 straight months. Many areas of the country are at or near their peak prices achieved before the last housing bubble burst. This has many worried that we are headed towards another housing bubble.

 

Reality: The biggest challenge facing today’s real estate market is a lack of homes for sale! Demand is strong, as many renters have come off the fence and are searching for their dream homes.

 

Historically, a normal market requires a 6-month supply of inventory in order for prices to rise with the rate of inflation. According to the National Association of Realtors (NAR) there is currently a 4.3-month supply of inventory.

 

The US housing market hasn’t had 6-months inventory since August 2012! The concept of supply and demand is what is driving home prices up!

 

Myth #2: The Rumored Recession Will Lead to Another Housing Market Crash

Economists and analysts know that the country has experienced economic growth for almost a decade. When this happens, they also know that a recession can’t be too far off. But what is a recession?

 

Merriam-Webster defines a recession as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters.”

 

Reality: Recession DOES NOT equal housing crisis. Many people associate these two terms with one another because the last time we had a recession it was caused by a housing crisis. According to the Federal Reserve, over the last 40 years, there have been six recessions. In each of the previous five recessions, home values appreciated.

 

Myth #3: There is an Affordability Crisis Looming

Rising home prices have many concerned that the average family will no longer be able to afford the most precious piece of the American Dream – their own home.

 

There are many different affordability indexes supported by different organizations that all measure different data. For this reason, there is a lot of confusion about what “affordable” actually means.

 

The monthly cost of a home is determined by the home’s price and the interest rate on the mortgage used to purchase it. According to Freddie Mac, interest rates have risen from 3.95% in January to 4.59% just last week.

 

Reality: As we mentioned earlier, home prices have appreciated year-over-year for the last 76 months, largely driven by high demand and low supply.

 

According to a recent study by Zillow, the percentage of median income necessary to buy a home in today’s market (17.1%) is well below the mark reached in 1985 – 2000 (21%), as well as the mark reached in 2006 (25.4)! Interest rates would have to increase to 6% before buying a home would be less affordable than historical norms.

 

The starter-home market has appreciated at higher levels (9.4% year-over-year) than any other market. One reason for this is the fact that many of the first-time buyers who have flocked to the starter-home market are being met with high competition. For some hopeful buyers, it may take more than a good offer to stand out from the crowd!

 

Bottom Line

There is a lot of confusion in today’s real estate market. If your future plans include buying or selling, make sure you have a trusted advisor and market expert by your side to help guide you to the best decision for you and your family.

 

Aug. 28, 2018

Millennials & Income

Image result for Homeownership millennials

Millennials have become an important topic of discussion for media outlets and blogs throughout the Country. While some argue that my generation is blossoming later than our predecessors, optimists such as myself believe that with our rebounding economy will help Millennials finally arrive in the economic arena that allows them the growth potential generations before us were afforded.

 

While I truly believe Millennials are positioned to become an important force in the new economy, the widening economic policy that minimizes retirement accounts and creates underemployment of Millennials threatens what is now America’s largest demographic.

 

In his post for MSN, Austin Thompson points out that Millennials are now in peak childbearing age, and from a Real Estate, as well as a parental Standpoint, what goes hand in hand with raising a family is the desire to own a home.

 

Families want to put down roots. They want to know they have a certain level of security if possible, while growing some form of equity for retirement.

 

While slashing pensions and lower wages certainly puts a strain on Millennial workers, the ability to purchase Real Estate can still be a saving grace in the Millennial financial planning process.

 

As agents and brokers, we are meant to advise our clients. We can’t change the fact that outside economic factors can have a negative impact on the lives of our clients. What we can do is try and help Millennials understand that they can take their future, and subsequently their retirement, into their own hands.

 

Chances are, your average Millennial client, like their parents, will not be starting out with a beach front multi-million dollar estate. Our job, is to help explain the path that starting in smaller affordable homes now will have down the road, how it will help them grow, and how it will help them take control of their livelihood.

 

Do more than sell my generation a house…help them build a future.

Posted in Millennials
Aug. 28, 2018

Homeownership’s Impact on Net Worth

Image result for Homeownership net worth

Over the last six years, homeownership has lost some of its allure as a financial investment. As homeowners suffered through the housing bust, more and more began to question whether owning a home was truly a good way to build wealth. A study by the Federal Reserve formally answered this question.

 

Some of the findings revealed in their report:

  • The average American family has a net worth of $77,300
  • Of that net worth, 61.4% ($47,500) of it is in home equity
  • A homeowner’s net worth is over thirty times greater than that of a renter
  • The average homeowner has a net worth of $174,500 while the average net worth of a renter is $5,100

Bottom Line

The Fed study found that homeownership is still a great way for a family to build wealth in America.

Posted in For Buyers
Aug. 28, 2018

Chicken Little is Wrong: Homeownership Still the American Dream

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After the harrowing challenges experienced by so many homeowners over the last few years, many housing experts had predicted that the belief in homeownership as a major element of the American Dream would soon die. There is now conclusive evidence that these experts were wrong. As we reported back in September, The Joint Center of Housing Studies at Harvard University completed a study which concluded:

 

“The long term cultural preference for owning seems to have weathered the recent housing crisis.”

 

Now, a second source recently announced similar results. Fannie Mae just released their National Housing Survey of Delinquent Mortgage Borrowers. The survey asked questions about the value of homeownership to the most sensitive of all groups – those delinquent on their mortgages. Here is what they found:

 

Of those delinquent borrowers:

 

  • 74% still see homeownership as better than renting when building up wealth
  • 71% still see homeownership as better than renting when saving for retirement
  • 73% still see homeownership as better than renting for overall financial stability
  • 80% still see homeownership as better than renting as an investment plan
  • 70% still see homeownership as better than renting for creating an overall tax strategy

Bottom Line

Homeownership has always been and will always be a crucial piece of the American Dream.

Posted in For Buyers, For Sellers
Aug. 28, 2018

FSBOs Must Be Ready to Negotiate

Image result for fsbo real estate

In a recovering market, some sellers might be tempted to try and sell their home on their own (FSBO) without using the services of a real estate professional. The real estate agent is a trained and experienced negotiator. In most cases, the seller is not. The seller must realize the ability to negotiate will determine whether they get the best deal for themselves and their family.

 

Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:

 

  • The buyer who wants the best deal possible
  • The buyer’s agent who solely represents the best interest of the buyer
  • The buyer’s attorney (in some parts of the country)
  • The home inspection companies which work for the buyer and will almost always find some problems with the house.
  • The termite company if there are challenges
  • The buyer’s lender if the structure of the mortgage requires the sellers’ participation
  • The appraiser if there is a question of value
  • The title company if there are challenges with certificates of occupancy (CO) or other permits
  • The town or municipality if you need to get the COs permits mentioned above
  • The buyer’s buyer in case there are challenges on the house your buyer is selling.
  • Your bank in the case of a short sale
Posted in For Sellers
Aug. 28, 2018

Harvard: 5 Financial Reasons to Buy a Home

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. This year he released a new paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

 

Here are the five reasons, each followed by an excerpt from the study:

 

1.) Housing is typically the one leveraged investment available.

 

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

 

2.) You’re paying for housing whether you own or rent.

 

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

 

3.) Owning is usually a form of “forced savings”.

 

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

 

4.) There are substantial tax benefits to owning.

 

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

 

5.) Owning is a hedge against inflation.

 

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

 

Bottom Line

We realize that homeownership makes sense for many Americans for many social and family reasons. It also makes sense financially.

Posted in For Buyers
Aug. 28, 2018

Home Sales Expected to Continue Increasing in 2019

Freddie Mac, Fannie Mae, and the Mortgage Bankers Association are all projecting that home sales will increase nicely in 2019. Below is a chart depicting the projections of each entity for the remainder of 2018, as well as for 2019.

Home Sales Expected to Continue Increasing in 2019 | Simplifying The Market

As we can see, Freddie Mac, Fannie Mae, and the Mortgage Bankers Association all believe that homes sales will increase steadily over the next year. If you are a homeowner who has considered selling your house recently, now may be the best time to put it on the market.

Aug. 27, 2018

Rent or Buy: Either Way You’re Paying A Mortgage!

Rent or Buy: Either Way Youâ??re Paying A Mortgage! | Simplifying The Market

There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize, however, that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

 

As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich”:

 

“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”

 

With home prices rising, many renters are concerned about their house-buying power. Mark Fleming, Chief Economist at First American, explained:

 

Over the last three years, renter house-buying power has increased fast enough to keep pace with house price appreciation, so the share of homes that a renter can afford to buy has remained the same since 2015.

 

Although mortgage rates are expected to rise, they are still low by historic standards, and real household incomes are the highest they have ever been. Assuming this trend continues, our measure of affordability, which takes into account income, interest rates, and house prices, indicates that homeownership is still within reach for renters.”

 

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person building that equity.

 

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.51% last week.

 

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

Aug. 24, 2018

What State Gives You the Most ‘Bang for Your Buck’? [INFOGRAPHIC]

What State Gives You the Most â??Bang for Your Buckâ??? [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • The majority of states in the Midwest and South offer a lower cost of living than states in the Northeast and West.
  • The ‘biggest bang for your buck’ comes in Mississippi where, compared to the national average, you can actually purchase $115.74 worth of goods for $100.
  • For more information regarding the methodology used to create this map, visit the Tax Foundation.
Aug. 23, 2018

What Does the Recent Rash of Price Reductions Mean to the Real Estate Market?

What Does the Recent Rash of Price Reductions Mean to the Real Estate Market? | Simplifying The Market

Last week, in a new report from Zillow, it was revealed that there has been a rash of price reductions across the country. According to the report:

 

There are more price cuts now than a year ago in over two-thirds of the nation’s largest metros

About 14% of all listings had a price cut in June

Since the beginning of the year, the share of listings with a price cut increased 1.2%

This is the greatest January-to-June increase ever reported, and more than double the January-to-June increase last year

Senior Economist Aaron Terrazas further explained:

 

“A rising share of on-market listings are seeing price cuts, though these price cuts are concentrated at the most expensive price-points and primarily in markets that have seen outsized price gains in recent years.”

 

What this DOESN’T MEAN for the real estate market…

This doesn’t mean home values have depreciated or are about to depreciate.

 

A seller may put a home worth $300,000 on the market for $325,000 hoping a bidding war will occur and an overanxious buyer will pay more than its actual value. That has happened often over the last few years. If the seller gets no offers and reduces the price to $300,000, it doesn’t mean the home dropped in value. It is still worth $300,000.

 

Home prices will continue to appreciate over the next 12 months. In this same report, Terrazas remarks:

 

“It’s far too soon to call this a buyer’s market, home values are still expected to appreciate at double their historic rate over the next 12 months, but the frenetic pace of the housing market over the past few years is starting to return toward a more normal trend.”

 

What this DOES MEAN for the real estate market…

This does mean that sellers should be more conservative when it comes to the price at which they list their homes – especially sellers in the upper end of each market.

 

Sellers have been listing their homes at inflated prices hoping a super-hot market will deliver a buyer willing to pay virtually any price to ensure they don’t lose the house. That strategy has worked somewhat successfully over the last two years. However, the time that strategy would have worked may have passed.

 

Again, quoting Aaron Terrazas in the report:

 

“The housing market has tilted sharply in favor of sellers over the past two years, but there are very early preliminary signs that the winds may be starting to shift ever-so-slightly.”

 

Bottom Line

Prices are not depreciating. However, if you want to sell your house quickly and with the least amount of hassles, pricing it correctly from the beginning makes the most sense.