Buy vs rent market

buy vs rent
Buy vs Rent Housing Market (infographic from keepingcurrentmatters.com)

After last year’s active spring, the housing market’s fall home sale decline shocked many.  Although home sales were on target to outpace the previous year’s activity, the slowdown diminished the spring’s impact.  In fact, the National Association of Realtors (nar.realtor) January 22nd press release indicated a sharp decline of home sales during December.  The 6.4 percent month over month nationwide decline should not have been a surprise because of the season.  However, December’s nationwide 10.3 percent sales decline from the previous year is significant.  The Greater Capital Area Association of Realtors (gcaar.com) indicated that Montgomery County single family home sales decreased 12.2 percent during December. Is this an indication of another buy vs rent market?

Back in August, I predicted and discussed the causes for the fall’s sales slowdown.  Among the issues that contributed to the slowdown include increasing mortgage rates and the continued home sale inventory shortage. However, it’s important to note that although home sales seemed to go to sleep during the early winter, home sale prices continue to increase.  It’s not the 4-5 percent price gain that home owners have become accustomed.  But the 2.9 percent nationwide price increase (2.7 percent increase in Montgomery County) during December is indicative that home ownership is still valued.

Although there are many who are saying it’s now a buyer’s market, it’s not entirely true.  The current housing environment has home buyers under pressure.  Increasing mortgage interest rates are making buying a home more expensive, and there are not many homes from which to choose.  Consequently, motivated home buyers who are eager to buy a home during the winter are pushing back against high home prices.  The reality is that home sellers will remain in the driver’s seat as long as they price their homes correctly.

There is a lot of promise for the spring, but it still depends on many factors (such as inventory).  But the push back on increasing home prices will likely continue, as home buyers are increasingly sensitive to housing costs.  “Buy vs rent” and housing affordability will once again become hot topics this spring. 

Buy vs rent is on the mind of home buyers. Although buyers are in the market to buy, there is no urgency. However, it’s clear that this market is about value.

If you’re a home buyer trying to figure out the market, consulting with a professional Realtor can help you decide if it’s the right time to buy a home.  Trulia’s Rent vs. Buy Calculator (trulia.com) is a tool that compares the cost of buying to renting a home over time in a specific area.  It can estimate the point at which home buying is better than renting.  However, depending on your budget and area, renting may be a better financial option.  Montgomery County Department of Housing and Community Affairs (montgomerycountymd.gov/DHCA) and the Housing Opportunities Commission (hocmc.org) offers affordable housing programs for first time home buyers and renters.

If you’re a home seller, think back to the 2014 spring housing market when home buyers pushed back at the sharp home price gains of 2013.  It’s recommended that you don’t take home buyers for granted, buyers are just as savvy as you.  Keep in mind that buyers are thinking about “buy vs rent.” Don’t over-price your home, however expect to negotiate the price.  Make your home show its best through preparation and staging.  Stay away from cheap renovations meant to look expensive, this can actually decrease your home’s value.  If you’re selling “by owner,” consider consulting a staging professional to help prepare and stage your home.  If you’re listing your home with a Realtor, your agent should have a strategy to sell for top dollar in this market. 

Original located at https://dankrell.com/blog/2019/01/25/buy-vs-rent-housing-market

Copyright© Dan Krell
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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.

Buyer and seller attitudes about real estate market

Economists are officially pessimistic about the housing market.  This is the general sentiment following another month of declining home sales.  Experts are pointing to a number of factors for the slowdown, including increased interest rates and housing affordability.  But what are home buyer and seller attitudes about real estate? The National Association of Realtors’ most recent Housing Opportunities and Market Experience survey hints at a busy spring!

Economic attitudes about real estate market

attitudes about real estate
Attitudes about real estate market (infographic from nar.realtor)

An October 19th NAR news release (nar.realtor) reported that September’s home sales were the weakest in several years.  The nationwide trend affected all regions.  NAR chief economist Lawrence Yun stated:

This is the lowest existing home sales level since November 2015…A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”

First-time-home-buyers are finding the housing market increasingly challenging.  This segment’s participation needs to be strong for a healthy home sales.  September’s low thirty-two percent first-time-home-buyer participation is attributed to rising interest rates and home prices.

But low housing inventory is also an issue.  September’s housing inventory decreased to 1.88 million existing homes available for sale (from the 1.91 available during the previous month).  NAR President Elizabeth Mendenhall stated:

“Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”

Economists at Fannie Mae believe that the housing market will continue to disappoint.  In an October 18th press release (fanniemae.com) Fannie Mae Chief Economist Doug Duncan stated:

“Our expectations for housing have become more pessimistic. Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019. Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.”

But what do economists really know about the future?  Let’s hear it directly from the consumer!

Home buyer and seller attitudes about real estate

NAR’s Housing Opportunities and Market Experience survey tracks opinions from renters and homeowners about homeownership, economy, and the housing market.  The release of their third quarter 2018 survey indicates that sixty-three percent of respondents strongly or moderately believe that it’s a good time to buy a home.  Although optimism is somewhat diminished from the second quarter’s survey, there continues to be a positive sentiment about buying a home.  The survey’s positive sentiment continues even though a majority of respondents believed that home prices will continue to increase in the immediate six months.  Additionally, a majority of respondents believe that qualifying for a mortgage may be an obstacle to a home purchase.

The survey also concurs with other metrics indicating high consumer sentiment for the economy.  In light of the recent slide in home sales, NAR’s recent Housing Opportunities and Market Experience survey reveals a near-record high of sixty percent of households believe that the economy is improving.”  Adding to the strong sentiment is the survey’s increased monthly Personal Financial Outlook Index, which indicates that respondents believe that their financial situation will be better in six months.

The survey also indicates a record high of home sellers who believe it is a good time to sell a home.  But given the seasonal decline of housing inventory, it is likely this will translate to a surge of home listings in the spring.  The added inventory combined with high consumer sentiment will boost the housing market. So sayeth the consumer.

Original located at https://dankrell.com/blog/2018/11/01/attitudes-real-estate-market/

Copyright© Dan Krell
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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.

Affordable housing

affordable housing
Affordable housing (graphic from montgomerycountymd.gov)

It’s no secret that housing is expensive.  Home prices are relentlessly marching forward, making it more difficult for first-time home buyers to purchase a home.  One of the contributing factors is the low inventory of homes for sale.  The deficiency of homes on the market is limiting options and stoking competition among determined home buyers, many of whom are willing to offer slightly more than then their cohorts.  All this puts upward pressure on home prices and impacting affordable housing.

Having enough for a down payment and closing costs is a hurdle for many first-time home buyers.  Home buying programs exist to help home ownership more affordable for home buyers.  The Maryland Mortgage Program (mmp.maryland.gov) offers down payment assistance in the form of loans, an employer match program, or financial grants.  In Montgomery County, the Housing Opportunities Commission of Montgomery County (hocmc.org) offers several down payment assistance options, including the House Keys 4 Employees program for many Montgomery County Employees.  Of course, you must meet eligibility, so check with your lender and/or mortgage program.

Affordable housing is not only an issue for home buyers.  It’s also an issue for renters.  According to the US Census Bureau’s American Community Survey five-year estimates results (census.gov), the median rent in the US increased about $21.  That does not sound life changing, however, it is the result of an analysis of nationwide monthly rents.  Results of the Survey indicated that, “Of the 382 metropolitan areas in the United States, the median gross rent in 156 areas did not change between 2007 to 2011 and 2012 to 2016…”  However, “Of the 219 that did change, increases outnumbered decreases four to one with 175 increases and 44 decreases.

Some areas had a decrease in rent, while others faced increases.  Among some of the areas with top increases include Andrews TX and McKenzie County ND, where monthly rents increased an average of $352 and $397 respectively.

The Census Bureau recent survey on rent concludes that “gross rents are on the rise.”  Other Census data indicates that 2017 had the lowest percentage of renters move since 1988.  The combination of fewer available rentals and increased rents are making it difficult to find an affordable rental.

Although “affordable housing” has been tossed about like a football, it wasn’t until Mary Schwartz and Ellen Wilson’s (US Census Bureau) analysis of the 2006 American Community Survey that really gave it meaning (Who Can Afford To Live in a Home?: A look at data from the 2006 American Community Survey; census.gov).  The analysis revealed the percentage of income that is spent towards housing.

The report indicated that forty-six percent of renters spend 30 percent or more of their income on housing costs.  Compare that to home owners: thirty-seven percent of owners with mortgages and sixteen percent of owners without spent 30 percent or more of their income on housing.  Schwartz and Wilson came up with the “30 percent standard,” and discussed that thirty percent or more of income spent on housing is considered a “housing-cost burden.”

Addressing affordable housing for renters, Representative Joe Crowley introduced H.R.3670 – Rent Relief Act of 2017 to help renters with their housing-cost burden.  The credit would only be available for taxpayers whose gross income is less than $125,000.  The bill allows for a refundable tax credit when rent exceeds 30 percent of the individual’s gross income for the taxable year.  Depending on the renter’s gross income, the amount of the credit could range from 10 to 100 percent of the excess (above 30 percent).  One caveat is that if the tenant’s rent exceeds 150 percent of the fair market rent for that specific residence, the excess above 150 percent won’t be included for the purpose of determining the amount of the credit.  Government-subsidized renters would be able to claim a credit equal to 1/12 of the rent paid by the taxpayer.  Although the bill was last heard in the House Committee on Ways and Means, at the time of this article, it is being prepared by Senator Kamala Harris to be introduced in the Senate.

Maryland offers tax credits for some renters, check with the Maryland Consumer Rights Coalition (marylandtaxcredit.com) for qualifying information.

Original published at https://dankrell.com/blog/2018/07/26/affordable-housing/

Copyright© Dan Krell
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Protected by Copyscape Web Plagiarism DetectorDisclaimer. 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.

Home buyer savings account?

Maryland first-time home buyers may soon have another program to help them buy a home.  Two related bills are making their way through the Maryland General Assembly to create a first-time home buyer savings account. If enacted, Maryland would join a handful of other states that have already enacted such programs to incentivize home buying.

home buyer savings account
Home buyer Savings Account (infographic from realtormag.realtor.org)

The bills are an effort to address the lack of first-time home buyer participation in the housing market. The lack of first-time home buyer participation has received a lot of attention since the Great Recession. Not just because of the rising costs of buying a home, but also because of the lack of home buyer savings. The lack of down payment was identified by the National Association of Realtors as one of the issues barring first-time home buyers from entering the housing market. The October 18th 2016 NAR news release (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) also cited underemployment, student debt, and delayed family formation.

The idea of a home buyer savings account is not new. It was first conceived by Montana in the 1990’s as an incentive for home buyers to save money for down payment and closing costs. Virginia was the second state to enact a similar program in 2014. Several other states have since enacted similar plans, while others (including Maryland) have proposed such plans in their respective state legislatures.

The increased attention to first-time home buyer savings account during 2017 has made it a hot topic. While states are looking to provide state tax breaks for first-time home buyers, Rep. Mike Coffman of Colorado wants to provide federal tax incentives to first-time home buyers for saving down payment and closing costs. H.R.2802 First-Time Homebuyer Savings Account Act of 2017 was introduced in Congress last June by Rep. Mike Coffman of Colorado, and co-sponsored by Rep. Sean Patrick Maloney and Rep. Barbara Comstock. The bill has yet to make it out of the House Ways and Means Committee.

Rep Coffman stated in a press release:

The American dream of homeownership is getting harder and harder to attain for those starting out on their own these days, especially Millennials, because of the challenges involved in saving up for the down payment…The First-Time Homebuyer Savings Account Act  is a straightforward and bipartisan solution to this problem. If we can help Millennials attain homeownership, this would not only be a wise financial move for them, but would have broader positive financial impact for our economy as a whole

Maryland’s proposed first-time home buyer savings plan, introduced by HB0463 and SB0972, is currently being debated in the Maryland General Assembly. If enacted as introduced, the legislation would allow $50,000 to be deposited “state tax free” into an account for the purpose of buying a home in Maryland by a first-time home buyer. Any interest earned up to $150,000 would also be state tax free, as long as the interest is also used in said purchase. However, if the funds and interest are used for any other purpose, the holder of the account would be subject to state tax and penalties.

Would a first-time home buyer savings account stimulate interest in the housing market?

Lisa Prevost, writing for the New York Times, brought attention to Montana’s struggle to get first-time home buyers to participate in their savings plan (Tax Free Accounts for Homes: nytimes.com; August 8, 2013). At the time of Prevost’s article, the Montana Department of Revenue reported that “…no more than 225 people, and as few as 125, have participated annually since the program’s inception. Their annual deposits have averaged around $400,000.” Edmund Caplis, director of tax policy and research for Montana’s Department of Revenue, was quoted in the article as saying, “What you’ve got to understand is, this is people trying to get into their first home. For most working families, trying to pull together an extra buck is a stretch.

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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.

Real estate contract know-how

real estate contract
Do you know real estate? (infographic from househunt.com)

When I started selling homes almost sixteen years ago, a typical real estate contract (with addenda) may have been about twenty pages.  My mentor used to pine about the two-page contracts he used when he started in real estate.  I used to think he was exaggerating, but I found that he was actually telling the truth.  It is true that real estate contracts have evolved and become quite lengthy through the years. Today, our local Realtor contract with addenda can exceed sixty pages!  As much as it may sound like a chore, you should take the time to read and understand the real estate contract you are asked to sign.

In today’s world of convenience and digital everything, electronically signing your real estate contract may seem like a time saver.  Real estate apps make it all too easy for your agent to email you a boiler plate contract and ask you to click the mouse to sign it.  But do you really know what you’re signing?  More importantly, does your real estate agent know what they are asking you to sign?

A typical Realtor contract is a legally binding contract once it is ratified and delivered to all parties.  That means there are potential consequences for not doing what you agreed to do.  Don’t solely rely on your agent for an explanation of the contract, they may not fully understand it or its nuances.  As pedestrian as it sounds, read through the contract before you sign it.  Reading the contract will inform you of the terms and conditions to which you’re agreeing, which include your obligations and contingency timelines.  Reading the contract will also alert you to any errors and you need clarified.

The terms and conditions of your real estate contract are more than just the sale price and closing date.  Both the home buyer and seller have obligations in our local Realtor contract.  A few of the many obligations included in the terms are: settlement, obtaining financing, delivering a “clean” title, and providing access to the property.

Are there contingencies?  Typical real estate contract contingencies include financing, appraisal, and various inspections.  However, other contingencies may be included too, such as the buyer’s home sale, the seller finding a home, third party approval, or even reviewing the county or city master plan.  The contingencies you choose may vary depending on your situation.  Contingencies are time limited.  The contract describes how each contingency is met as well as timelines for completion and description of giving notice and responses.

Although the Realtor contract has become increasingly lengthy, it has become more standardized (at least in my area).  In the past, local agents needed to know or find out the contract and addenda requirements for multiple counties and cities, much of the time falling short.  Today, the Realtor contracts and addenda we use in Maryland are mostly consistent with each other, making it easier to put together and understand.

Make sure you are comfortable with the real estate contract you are signing.  You should ask your agent to take the time to sit with you and review the contract before you sign it.  If you’re a first-time home buyer or seller, getting the one-on-one review will allow you to ask questions about your obligations and the process.  Even if you have bought or sold a home in the past, reviewing the contract with your agent will make you realize how times have changed.  Since the contract is a devise, always consult with an attorney for legal advice.

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