Why Waiting To Buy Might Not Make Sense

Whether you are a first time or a move-up buyer, there are two factors that will impact the amount of house you can afford in your price range: home prices & mortgage rates.

Let’s look at what the experts are predicting over the next twelve months for these two areas:

PRICES

Over 100 economists, real estate experts and investment & market strategists were recently polled as a part of the Home Price Expectation Survey. They were asked to project where home prices are headed. The average value appreciation projected over the next twelve-month period is 

approximately 4.4%.

MORTGAGE INTEREST RATES

In the latest Economic & Housing Market Outlook from Freddie Mac, they predict that the 30-year fixed mortgage rate will be 4.7% by this time next year. As of last week, the Freddie Mac rate was 3.69%.

What does this mean to you?

If you are a first-time buyer currently looking at a home priced at $250,000, this is what it could cost you on a monthly basis if you wait until next year to buy:

http://goo.gl/mMfn80

If you are a move-up buyer currently looking at a home priced at $500,000, this is what it could cost you on a monthly basis if you wait a year to buy:

http://goo.gl/mMfn80

Bottom Line

With both home prices & interest rates projected to increase, waiting to buy could put a serious dent in your family’s wealth.

Why You Should Sell Now!

As the temperature rises, buyers are coming out ready to purchase their dream home. Inventory is still below historic numbers and demand is strong. Don’t miss out on this great opportunity for you and your family.

Here are five reasons to list your home now.

1. Demand is Strong

Foot traffic refers to the number of people out actually physically looking at homes right now. The latest foot traffic numbers show that there are more prospective purchasers currently looking at homes than at any other time in the last 12 months which includes last spring’s buyers’ market. These buyers are ready, willing and able to purchase… and are in the market right now!

Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

Housing supply just dropped to 4.6 months, which is under the 6 months’ supply that is needed for a normal housing market. This means, in many areas, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market.

There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market in the near future.

Also, new construction of single-family homes is again beginning to increase. A study by Harris Poll revealed that 41% of buyers would prefer to buy a new home while only 21% prefer an existing home (38% had no preference).

The choices buyers have will continue to increase. Don’t wait until all this other inventory of homes comes to market before you sell.

3. The Process Will Be Quicker

One of the biggest challenges of the housing market in recent times has been the length of time it takes from contract to closing. Banks are requiring more and more paperwork before approving a mortgage. As the market heats up, banks will be inundated with loan inquiries causing closing timelines to lengthen. Selling now will make the process quicker & simpler.

4. There Will Never Be a Better Time to Move-Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices areprojected to appreciate by over 19.3% from now to 2019. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30-year housing expense with an interest rate under 4% right now. Rates are projected to increase by about three quarters of a percent by the end of 2015.

5. It’s Time to Move On with Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take back control of the situation by putting your home on the market. Perhaps, the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.

Housing Inventory Slowly Disappearing

The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) released their latest Existing Home Sales Report this week.

Inventory Levels & Demand

Amidst reporting on the fact that sales of existing homes rose 1.2% from January, and outpaced year-over-year figures for the fifth consecutive month, was the news that total unsold housing inventory is at 4.6-month supply.

This is down 0.5% from last February and remains below the 6 months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still under 4%, new programs available for down payments as low as 3%, and you have an attractive market for buyers.

Buyer demand for housing remains twice as high as this time last year.

Prices Rising

February marked the 36th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $202,600 (up 7.5% from 2014).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

"Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices. Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before (interest) rates rise."

Bottom Line

If you are debating putting your home on the market this year, now may be the time. The amount of buyers ready and willing to make a purchase is at the highest level in years. Contact a local professional in your area to get the process started.

Baby Boomers: Home Is Where The Heart Is

Within the next five years, Baby Boomers are projected to have the largest household growth of any other generation during that same time period, according to the Joint Center for Housing Studies of Harvard. Let’s take a look at why…

In Merrill Lynch’s latest study, “Home in Retirement: More Freedom, New Choices” they surveyed nearly 6,000 adults ages 21 and older about housing.

Crossing the “Freedom Threshold”

Throughout our lives, there are often responsibilities that dictate where we live. Whether being in the best school district for our children, being close to our jobs, or some other factor is preventing a move, the study found that there is a substantial shift that takes place at age 61.

The study refers to this change as “Crossing the Freedom Threshold”. When where you live is no longer determined by responsibilities, but rather a freedom to live wherever you like. (see the chart below)

As one participant in the study stated:

“In retirement, you have the chance to live anywhere you want. Or you can just stay where you are. There hasn’t been another time in life when we’ve had that kind of freedom.” 

On the Move

According to the study, “an estimated 4.2 million retirees moved into a new home last year alone.” Two-thirds of retirees say that they are likely to move at least once during retirement.

The top reason to relocate cited was “wanting to be closer to family” at 29%, a close second was “wanting to reduce home expenses”. See the chart below for the top 6 reasons broken down.

Not Every Baby Boomer Downsizes

There is a common misconception that as retirees find themselves with less children at home that they will instantly desire a smaller home to maintain. While that may be the case for half of those surveyed, the study found that three in ten decide to actually upsize to a larger home.

Some choose to buy a home in a desirable destination with extra space for large family vacations, reunions, extended visits, or to allow other family members to move in with them.

"Retirees often find their homes become places for family to come together and reconnect, particularly during holidays or summer vacations."

Bottom Line

If your housing needs have changed or are about to change, meet with a local real estate professional in your area who can help with deciding your next step.

Freddie Mac’s New 3% Down Program

Today, Freddie Mac is scheduled to start buying mortgages with down payments of only three percent – the first time down payments have been this low on Freddie Mac loans in nearly five years. The program is called Freddie Mac Home Possible AdvantageSM.

In a recent Executive Perspectives, Dave Lowman EVP, Single-Family Business Freddie Mac, explained the potential impact this program will have on the housing market:

“There's a new reason Realtors and lenders may expect more qualified borrowers at the closing table during this spring's home buying season. In addition to low mortgage rates and rising job growth, the down payment hurdle is starting to shrink for creditworthy borrowers, including first-time homebuyers.”

And the mortgage industry agrees with Mr. Lowman. In a recent survey of mortgage originators by the National Association of Realtors (NAR), it was revealed that most loan officers believe the move to a lower down payment will increase access to mortgage credit. Here are that survey’s findings:

Bottom Line

Many potential buyers are “ready and willing” to buy a home but have been afraid they may not be “able” because of a lack of adequate savings for a down payment. Check with a local real estate or mortgage professional to understand what the new rules may mean to you.

Billionaire Says Real Estate is Best Investment Possible

Billionaire money manager John Paulson was interviewed at the Delivering Alpha Conference presented by CNBC and Institutional Investor. During his session he boldly stated:

"I still think, from an individual perspective, the best deal investment you can make is to buy a primary residence that you're the owner-occupier of.”

Who is John Paulson?

Paulson is the person who, back in 2005 & 2006, made a fortune betting that the subprime mortgage mess would cause the real estate market to collapse. He understands how the housing market works and knows when to buy and when to sell. What do others think of Paulson?

According to Forbes, John Paulson is:

“A multibillionaire hedge fund operator and the investment genius.”

According to the Wall Street Journal, Paulson is:

“A hedge fund tycoon who made his name, and a fortune, betting against subprime mortgages when no one else even knew what they were.”

Why does he believe homeownership is such a great investment?

Paulson breaks down the math of homeownership as an investment:

"Today financing costs are extraordinarily low.”

The latest numbers from Freddie Mac show us that you can still get a 30-year mortgage for under 4%.

“And if you put down, let's say, 10 percent and the house is up 5 percent,” as many experts predict, “then you would be up 50 percent on your investment."

How many are seeing a 50% return on a cash investment right now?

Paulson goes on to compare the long term financial benefits of owning verses renting:

“And you’ve locked in the cost over the next 30 years. And today the cost of owning is somewhat less than the cost of renting. And if you rent, the rent goes up every year. But if you buy a 30-year mortgage, the cost is fixed.”

Bottom Line

Whenever a billionaire gives investment advice, people usually clamor to hear it. This billionaire gave simple advice – if you don’t yet live in your own home, go buy one.

Don’t Get Caught in the ‘Renter’s Trap’

There are many benefits to homeownership, one of top ones, is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.

The National Association of Realtors (NAR) just released their findings of a study in which they studied “income growth, housing costs and changes in the share of renter and owner-occupied households over the past five years in metropolitan statistical areas throughout the US.”

Don’t Become Trapped

The study revealed that over the last five years, a typical rent rose 15%, while the income of renters grew by only 11%. If you are currently renting, this disparity in growth could get you caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment.

The top 5 markets where renters have seen the highest increase in rents since 2009 are:

• New York, NY (50.7%)
• Seattle, WA (32.4%)
• San Jose, CA (25.6%)
• Denver, CO (24.1%)
• St. Louis, MO (22.3%)

Homebuyers, who were able to purchase their home over the same five-year period and lock in their housing costs, were able to grow their net worth as home values have increased and their mortgage balances have gone down.

Know Your Options

Perhaps you have already saved enough to buy your first home. HousingWire reported that analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. 

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

According to Freddie Mac:

“Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 to 10%. And new 3% down financing options for qualified borrowers could mean a down payment as little as $6,000 for a $200,000 home.”

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.

Don’t Let Your “Luck” Run Out

The 30-year fixed mortgage interest rate is currently still below 4%. Many buyers may be on the fence as to whether to act now and purchase a new home, or wait until next year, believing they still have time to lock in a low rate.

If you look at what the experts are predicting over the course of the next 12 months, it may make the decision for you.

Predictions for 2016 2Q:

• 4.2% - Fannie Mae
• 4.7% - Freddie Mac
• 4.9% - Mortgage Bankers Association
• 5.3% - National Association of Realtors

Even an increase of half a percentage point can put a dent in your family’s net worth.

Let’s look at it this way…

The monthly payment (principal & interest only) on a $250,000 home today, with the current 3.86% interest rate would be $1,173.

If we take that same home a year later, the Home Price Expectation Survey projects that prices will rise about 4.4% making that home cost $11,000 more at $261,000.

If we take Freddie Mac’s rate projection of 4.7%, the monthly mortgage payment climbs to $1,354.

Some buyers might not think that an extra $181 a month is that bad. But over the course of 30-year mortgage you have spent an additional $65,160 by waiting a year.

Location, Location, Location

A recent Demand Institute report revealed “nearly half of all American households plan to move at some point in the future.”

Seventy-five percent of those surveyed in the report cited one or more ‘location-related reasons’ for their eagerness to move. Here are the top 5 reasons:

1. Safer Neighborhood – 30%
2. Closer to Family – 27%
3. Change of Climate – 26%
4. Closer to Work – 25%
5. For a New Job – 23%

While the majority of Americans (74%) will move within their home state, for the 26% planning to call a new state home, it is important to know that prices in each state are appreciating at different rates and waiting to buy or sell your home could cost you more in the long run.

The map below was created using the FHFA’s latest Home Price Index and shows year-over-year price gains in each state.

Bottom Line

If your plan for 2015 includes relocating to a new state, meet with a local real estate professional in that area who can help you find the best fit for you and your family’s needs.

Homeownership is the “American Dream” for a Reason

There have been some who have voiced doubt as to whether or not the younger generations still consider buying a home as being part of the “American Dream”. A recentstudy by Merrill Lynch puts that doubt to rest. According to their research, every living generation still maintains that owning a home is in fact important. Here are the numbers:

This should not surprise us as many studies have revealed the benefits enjoyed by the families who own their own home. One such study was done by the Joint Center of Housing Studies at Harvard University that addressed a major financial benefit to owning your own home: forced savings. The report explains:

“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.”

The Merrill Lynch study proves this point with the following data on home equity (a form of savings):

Bottom Line

There are many reasons that owning a home makes sense. The financial reasons are powerful. As one participant in the Merrill Lynch study put it:

“When I was younger, I always worried about that monthly mortgage payment. Now that I am retired, I have the peace of mind of knowing I own my home free and clear.”

Hurry Up!! Call your Agent and List your House!!

That headline might be a little aggressive. However, as the data on the 2015 housing market begins to roll in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME!

We realize that existing home sales stumbled in January compared to December. But, if we compare the current September-January time period to the same period a year ago, we can see that existing home sales have outpaced last year every month with the January sales numbers 200,000 homes greater than last January:

Pending home sales (houses going into a contract) as reported by the National Association of Realtors have also done much better in the last five months compared to a year earlier:

And, buyer demand is continuing to skyrocket:

At the same time, the amount of housing inventory coming to the market compared to last year is plummeting:

Bottom Line

With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Call in a local real estate professional today to see whether that is the case in your neighborhood.

Realty ONE Group and the Rebe Homes Team Support #GiveONEBack