home buying Archives - Page 2 of 14 - Real Estate News and Commentary

July 9, 2022July 9, 2022

Get a mortgage preapproval

Many years ago, the home buying process was very different than it is today. For example, home buyers relied on their real estate agents to qualify them to figure out how much home they could afford, instead of getting a mortgage preapproval. Making an offer on a house was done without a mortgage preapproval letter. And the mortgage application was usually made after the contract was ratified. The process may seem backwards by today’s standards, but that’s how it was done.

real estate mortgage preapproval — Real estate is voted as best investment

The problem with the old process was that sometimes the loan was denied, causing heartache and anguish for the homebuyer and seller. Times have changed. In today’s market, homebuyers are expected to be more organized, which helps streamline the homebuying process. The includes getting a mortgage preapproval letter.

You may have heard it called a prequalification or a preapproval, the purpose is the same. The preapproval letter not only qualifies you, but also gives the home seller confidence that you can complete the sale.

To preapprove you, your lender checks your credit and reviews your financial documents. This will give the lender an idea of what loan program is best for you, as well as calculating your debt-to-income ratio to determine your maximum loan amount.

Your preapproval gives you a head start on the home buying process. When the lender reviews your credit and finances, they can see if there are any obstacles to getting your loan. The lender can help structure your loan in advance, which will guide you in your preparations. Additionally, the preapproval letter will show your agent and sellers that you’re a serious buyer because you’ve already started the mortgage process.

Don’t feel pressured to work with any lender, even if they are affiliated with your agent. As a homebuyer, you have right to choose the lender you want. Some buyers will go where they bank for a mortgage, because there is a mutual familiarity. Some look for the best interest rate, and others look for personal service. It can help to understand the lender better by comparing several by talking to a local loan officer. The bottom line, however, is to make sure the lender is licensed and is knowledgeable of the jurisdiction where you are buying.

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.

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

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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November 13, 2020November 13, 2020

Home Buying Persistence

Before the health lockdowns, home sale inventory was already well below the volume to maintain a healthy housing market. Many home owners decided to put off their spring and summer home sales this year as a result of health concerns, further reducing the available home sale inventory. The result was that the number of home buyers competing for one home increased. Low home sale inventory continues to be an issue, and there is still a high probability of competing with other buyer offers on a home. As a home buyer, you are probably wondering how to win the multiple offer scenario. It comes down to home buying persistence.

The obvious way to win a bidding war is to make the most attractive offer to the seller. But that’s easier said than done. The reality is that beating out multiple home buyer offers means you need to be organized, and go in with your best offer. And if you lose out on the home, don’t give up.

Get organized.

First, talk to a mortgage lender before looking at homes. Have the loan officer review your credit and income to determine what mortgage program is best for you, and get pre-approved. Once you’re pre-approved, you can be confident about making an offer on a home. Your mortgage application should also be easier because you’ve already given documents to the loan officer. But the most important reason for a pre-approval is for the seller to feel confident with your offer.

When the seller reviews multiple offers, they usually rank offers with contingencies lower than the non-contingent offers. Rather than foregoing the home inspection, consider having a pre-offer home inspection. The pre-offer inspection will allow you to determine the condition of the home so your offer will be more attractive to the seller.

As a home buyer, you should try to gain some insight into what the seller wants . You may think that the seller just wants the highest price. But that’s not always true. In multiple offer situations, the home seller looks at all factors, including price AND terms (including deposit, closing date, contingencies, etc.).

Should you use an escalation clause? Maybe. In a multiple offer situation, a clean offer is usually best. This means making your best offer. But if you decide to use an escalation clause, make sure you are aware of the cap (limit to price), and your escalation factor. Make your escalation factor is worthwhile for the seller; meaning if you’re the highest price by $500 or $1,000, the seller may consider other factors in their decision. Also make sure that your escalation is in line with the estimated appraised value.

Don’t get discouraged if you lose out in multiple offer scenarios. Stick with it and have home buying persistence. Sometimes, reassessing your home buying strategy may be warranted. And your home buying persistence may mean that you look at alternative sales.

If you’re feeling a little skittish about encountering a multiple offer scenario, or already have lost a bidding war, look for homes that have little or no home buyer competition. Besides looking at “ugly” or fixer-upper homes, you may also consider FSBO (sale by owner), bank owned homes, and auctions. Ask your agent to canvas the neighborhood asking homeowners if they want to sell, as well as calling expired listings.

Fixer-upper homes have potential and the price can usually be negotiated. If you’re worried about the cost of renovations on fixer-uppers, talk to your loan officer about renovation loans, such as the FHA 203k. Renovation loans provide you the funding to acquire the property, and the funds to rehab the property.

By Dan Krell
Copyright © 2020

Original located at https://dankrell.com/blog/2020/11/13/home-buying-persistence/

If you like this post, do not copy; instead please:
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