buying a home Archives - Page 2 of 15 - Real Estate News and Commentary

July 1, 2022July 1, 2022

Local housing market changing

Lately, the housing market is definitely making noise and grabbing everyone’s attention, and not in a good way. However, we won’t actually know how it plays out until it’s over. As the idiom says “hindsight is 20/20.” Nevertheless, if you’re currently in the market to sell or buy a home, pay attention to current local housing market conditions as they are critical to your decision making.

Here we go…

Changing housing market — More home are being listed for sale

The S&P CoreLogic Case-Shiller Home Price Index (spglobal.com) reported in a June 28 press release that average April 2022 home prices increased 20.4 percent from April 2021. Tampa, Miami, and Phoenix led metro areas with 35.8 percent, 33.3 percent and 31.3 percent gains respectively.

We won’t really know if rising interest rates have any effect on home prices for several months. Home pricing and sales data is reported in hindsight (data is reported three to four months behind). The Case-Shiller release points out that mortgage rates just began to increase when these stats were being compiled (April). However, the recent S&P CoreLogic Case-Shiller Home Price Index is already showing home price moderation (even before rising mortgage rates). The Year-to Date S&P CoreLogic Case-Shiller Home Price Index for the US only shows an increase of 7.95 percent, while the 3-month index increased 6.66 percent and 1-month only increased 2.08 percent.

Rising mortgage interest rates is only part of the economic story that is developing. It was likely that home prices were already moderating as a reaction to the year and a half of sharp increases. As I wrote last week, we are in the beginning of the shifting housing cycle. Mixing in other economic factors, such as mortgage rates etc., can either make the housing market more sever or temperate. And as I mentioned, we won’t know for sure until it has happened.

Bottom line

If you’re currently in the market to buy and/or sell a home, focus on the short-term local trends. Speculation of future national home prices and home sales may be interesting, however is meaningless in the here and now. You should hire a seasoned professional to help understand your neighborhood’s trend, as well as being informed about your potential competition and the local housing market inventory.

If you’re buying a home, work with a seasoned real estate agent who can provide valid comps and analysis before you make an offer. Also, consider having a thorough home inspection. In the last year and half, home buyers felt forced to forgo the inspection to make their offer competitive. However, in the changing market, home inspections will return.

If you’re selling a home, be aware that home pricing strategies that were lucrative last year won’t work to your advantage this year. It’s nice to think that your home could sell for a peak price much like other neighborhood homes that sold twelve to twenty-four months ago. However, in a changing market, overpricing your home sale could be counterproductive, driving potential home buyers to competing homes.

By Dan Krell
Copyright © 2022

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

June 24, 2022June 24, 2022

Housing Market Pause, Slowdown, or Collapse?

Is the housing market in a pause, going into a slowdown, or worse – headed for a collapse? Looking back to an article I wrote an article in the summer of 2018 asking the same question, we were at a similar point then and asking the same questions. Just like today, the summer of 2018 saw decreasing home sales after a sellers’ and sharply rising home sale prices. Instead of being in full swing, the housing market of the summer of 2018 was cooling down.

During that time, it was common place to hear about the impending doom and gloom in a housing collapse from the media. In hindsight, what occurred that summer was a normal reaction to an overheated market where stressed home buyers basically took a break. Even with the short pause, the housing remained an active and viable aspect of the US economy.

Housing, like other facets of the economy, go through cycles of boom and bust. Most are familiar with the extreme boom and bust cycles, such as what occurred during 2005-2007. However, many are unfamiliar with the concept of the mini-cycle. The mini cycle is a period of short-term growth and slowdown, modulating to maintain a relative balance. Instead going through a protracted cycle of expansion, hyper-supply, and recession, the housing market could be correcting itself via mini cycles.

Prior to the lockdowns of 2020, the housing market was in the process of correcting itself from sharp home price increases during a hot 2017-2018 market. At that time, home sale inventory was already at historic lows (which began in 2013). As you can understand, the lockdowns further exacerbated the home sale inventory shortage and pushing the housing market and home buyers into an unprecedented situation. The double-digit multiple offers and six-figure escalations pushed home buyers to the edge, exhausting and discouraging many.

After a year and a half of sensational activity and home price gains, it’s not unthinkable that home sales would correct itself. As reported in the June 21^st National Association of Realtors press release (https://www.nar.realtor/newsroom/existing-home-sales-fell-3-4-in-may-median-sales-price-surpasses-400000-for-the-first-time), May 2022 home sales decreased 3.4 percent from April, and decreased 8.6 percent from May 2021. Home sale inventory continues to increase, and was reported to be about 2.6 months of supply, which gives home buyers more opportunities.

Home prices, on the other hand, continue to increase. As reported in the NAR press release, median home prices are 14.8 percent higher than a year ago! The $407,600 median home sale price is the first time the median sale price exceeded $400,000.

Of course, housing is also affected by outside economic factors, which are concerning to everyone. If you are in the market to buy or sell a home, look at the facts and make decisions that make sense for your situation. Finally, work with a seasoned professional to assist you to understand and navigate your local market.

By Dan Krell
Copyright © 2022

December 13, 2020December 13, 2020

Rent vs Buy 2021

Thinking of your Rent vs Buy 2021 question? Consider Quarterly Residential Vacancies and Homeownership released by the US Census (census.gov) for the third quarter of 2020 is very interesting. First the good news is that the US homeownership rate is the highest it’s been in a decade! The seasonally adjusted US homeownership rate of 68.2 percent recorded in the second quarter 2020, was the highest rate since 2007. In fact, the homeownership rate hasn’t had two consecutive quarters above 67 percent since 2009. As you remember, the homeownership rate progressively dropped through 2015 to hover in the 63 percent range, which was the lowest homeownership rate in several generations.

The story of the housing market this year has been nothing short of phenomenal. Initially thwarted by a dismal spring market, only to rebound at a record setting pace. Even with historically low existing home sale inventory and rising home prices, eager home buyers are actively pursuing homeownership.

On the flip side, the second and third quarter US rental vacancy rates are the lowest since 2008. And the mean US rental asking rent of $1,600 marks a high point as rents continue to creep higher. Of course, homeownership rates and rental vacancies will vary significantly depending on the region and locality. However, looking at the US averages is a good benchmark to see trends develop.

For many, comparing increasing rent versus a low interest mortgage rates makes buying a home the answer to the rent vs buy 2021 question. A November 8, 2012 article from Realtor Magazine (Rising Rents Press More Americans to Make Big Decision; magazine.realtor) describes the renter’s plight, by saying, “Rental price expectations continue to rise and are much higher than home price expectations…” This sentiment continues to hold true. Besides escaping rising rents, many home buyers are drawn to the touted benefits of homeownership, including increased well-being and wealth-building.

How do you know if renting or buying is better? First, when deciding on the rent vs buy 2021 question, there are many other considerations besides rising rents. Consider how long you intend to live in the area. Renting is often the housing solution if you think your residence in the area is temporary.

Next, if you don’t already have one, create a housing budget. Besides deciding on how much rent you can afford, talk to a mortgage lender to get prequalified to further help you understand how much you can afford to pay for mortgage or rent.

Once you have a budget of what you can afford, create an estimated renter’s and home owner’s budget to compare. Besides the basic housing payment (rent or mortgage), there are other items that need to be taken into account and can vary depending if you rent or own. These other items include (but not limited to) monthly utilities, insurance, and maintenance. To help with estimating the “extras,” start by asking the landlord and/or home seller for twelve months of utility bills (Montgomery County MD requires home sellers to provide this for owner-occupied homes). Ask your insurance agent for a quote to compare renters’ vs homeowners’ insurance.

Home maintenance is usually forgotten and not budgeted. Tenants typically have minimal maintenance, which is an attraction to renting. Generally, home maintenance for owners usually includes having seasonal or annual inspections on the home’s systems (e.g., HVAC, roof, etc). Additionally, you have to budget to repair and/or replace systems as they age.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/12/13/rent-vs-buy-2021/

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January 10, 2020November 23, 2021

Home Buying Strategies 2020

Experts’ home sale inventory forecasts for the spring echo expectations from recent years. And in some regions, it could be a very competitive home buyer market. Affordability is likely to be a major issue according to CoreLogic’s chief economist Frank Nothaft (Peering into the Housing and Mortgage Outlook with 20/20 Vision; corelogic.com; December 5,2019). The CoreLogic Home Price Index predicts that 2020 home prices will increase more than they did during 2019. Lower priced homes will likely appreciate at a much higher rate than upper bracket and luxury homes. Buyers should have their home buying strategies in mind when looking for homes.

Many first-time home buyers may become discouraged and decide to continue renting. However, renting is expected to be less affordable in 2020. CoreLogic’s Single-Family Rent Index indicates that rents are increasing at double the rate of inflation. So, although renting may seem like the default fallback, it may be the more expensive option. A combination of increasing rent, a continuing good economy, and historically low mortgage rates are expected to be the catalyst for home buyers to get into the market.

If you’re a home buyer, the 2020 housing market outlook may sound daunting. Although you may be anticipating something akin to the Game of Thrones this spring, take heart because planning and having home buying strategies can help your home buying success.

Talk to a mortgage lender. One of the worst feelings is finding out a seller took another offer because your offer didn’t have a financing letter. Not identifying a lender and securing an approval letter before looking at homes is a strategic error, especially if you need to move fast on making an offer. Having awesome credit scores, a good income, and savings in the bank, means nothing to a home seller unless a mortgage professional confirms this with a mortgage approval letter.

Work out a home buying budget. Consult financial professionals, such as your financial planner or CPA to review income, assets, and debts to determine a realistic housing budget. In deciding on your housing budget, consider monthly mortgage payments, HOA or condo fees, property tax, insurance, utilities, maintenance, etc. Your loan officer can help determine a home price range based on your monthly housing budget. Although, your home buying budget may be less than the maximum mortgage amount for which you qualify, don’t be tempted to go beyond your budget. Sticking to your budget can help you avoid “buyer’s remorse.”

Although the national housing market is portrayed as very competitive for home buyers, CoreLogic’s Nothaft suggests that local neighborhood markets can differ widely. As a home buyer, keep an open mind and consider a wider home search area. Consider all your home buying options, including new construction, and the possibility of doing an FHA 203k renovation.

One of the most important home buying strategies is to choose your Realtor carefully, as not all agents are the same. Hookup with an experienced full-time real estate agent. Empirical research studies indicate that a seasoned, veteran agent can make a positive impact on your home purchase. Experienced agents understand the nuances of negotiating and can make your home buying experience more efficient. Full-time agents know the market, which is an asset during your home search. Don’t just rely on the first agent you meet at an open house, or finding an agent on the internet. Talk to several (or more) Realtors to determine if they’re a good fit for your goals. Make sure the agent you hire has your best interests in mind when searching homes and negotiating.

Original article is published at https://dankrell.com/blog/2020/01/10/home-buying-strategies-2020/

By Dan Krell
Copyright© 2019

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June 8, 2019June 8, 2019

Great time to buy a home

If you’ve been waiting to buy a home, now may be your time to jump into the market. Maybe you’ve been wary of home prices, or concerned about mortgage rates. Maybe you’ve been attempting to “time the market” to get a good deal on a home. Regardless of your reason for waiting to buy a home, you shouldn’t ignore the current market conditions. It’s as if a perfect storm of home buying conditions is lining up to a great time to buy a home.

The big news is that mortgage interest rates continue to drop. National average mortgage rates have been declining since the fall, moving closer to the historic bottom! The May 30^th U.S. weekly average for a thirty-year fixed rate mortgage provided by the Freddie Mac Primary Mortgage Market Survey(freddiemac.com) dropped to 3.99 percent. Mortgage News Daily’s Matthew Graham reported on June 3^rd that mortgage rates dropped further (mortgagenewsdaily.com). Graham’s title “Mortgage Rates Continue to Plummet” is telling.

Although economists express confidence in the economy, they attribute the movement in mortgage interest rates to the current trade wars and bond market activity. The mortgage industry may also be anticipating a Fed rate cut at the next week’s meeting of the Open Market Committee.

Lower mortgage rates aren’t always a reason to take the plunge into the housing market. But what about moderating home sale prices? The FHFA Home Price Index (fhfa.gov) indicates that nationwide average home prices increased only 1.1 percent during the first quarter of 2019! Compared to the year-over-year 5.1 percent HPI increase, the modest first quarter gain may indicate a more affordable housing market. Locally, the Montgomery County year-over-year average home sale price only increased 0.2 percent, according to MarketStats by ShowingTime (getsmartcharts.com). However, the average price per square foot decreased 14.3 percent!

Another factor making it a great time buy a home is the lackluster spring home sales. Counter to what is expected, home sales have somewhat cooled during the spring. A May 30^th NAR press release titled “Pending Home Sales Trail Off 1.5% in April” indicates that national home sales have been declining. In fact, the forward-looking indicator based on contract signings dropped 1.5 percent this past month. The total pending home sales in Montgomery County dropped about 2.8 percent compared to last spring.

There are increasingly more housing choices. Although housing supply remains tight, there were about 2.5 percent more new listings this April compared to the same time last year. Although many of these new listings go quickly, increasing new listings mean that there are more home sellers that are entering the market this year giving you more homes to consider.

Putting all the data points together signify a great time to buy a home. Housing affordability has increased, partly due in part by increasing family incomes, lower mortgage rates, and moderating home prices. Home sellers who are listing their homes for sale this spring are adjusting their sale price expectations. Homes that have been on the market for an extended time may be an opportunity for you to negotiate a lower sale price. According to mortgage experts, average mortgage rates have “plummeted,” giving you more flexibility and possibly lower housing costs.

These home buying conditions may not last very long. But before you decide to buy, determine if buying a home is the right choice by consulting a Realtor and other financial professionals.

Original located at https://dankrell.com/blog/2019/06/08/great-time-to-buy-a-home/

By Dan Krell
Copyright © 2019

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