Great time to buy a home

great time to buy a home
Should I Buy Now or Wait? (infographic from keepingcurrentmatters.com)

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 30th 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 3rd 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 30th 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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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.

Mixed housing stats

mixed housing stats
Mixed housing market stats (infographic from keepingcurrentmatters.com)

This week’s National Association of Realtors press release (nar.realtor) sends mixed signals about the housing market.  Reports of sluggish home sales and slowing home price appreciation is not what you would expect when the spring market should be humming along.  But then again, mixed housing stats may be a vital sign of a healthy market in motion.

First, let’s talk about home sale prices.  The NAR’s report on metro home prices and affordability indicate that the average home sale price for the first quarter of the year was $254,800.  This is a 3.9 percent increase compared to the same time last year.  Average home sale prices in the Baltimore metro area were slightly higher than the rest of nation at $275,300.  Not surprisingly, Washington metro prices were significantly higher at $420,000 (a 6.5 increase from the same time last year).

The latest S&P CoreLogic Case-Shiller U.S. National Home Price Index (spindices.com) is almost spot on with the NAR, indicating a 4 percent increase in home sale prices nationwide.

Affordability is always a concern when mixed housing stats confound the market. So, how much income do you need to qualify for a home?  The National Association of Realtors Qualifying Income report indicates the average qualifying income for a 5 percent down conventional mortgage is $60,143 nationwide.  The average qualifying income in the Baltimore metro area is slightly higher at $64,982.  However, because of significantly higher home sale prices, the average qualifying income in the Washington metro area is $99,137. 

The neighboring Baltimore and Washington metro areas highlight home pricing extremes in competing markets.  Many home buyers who work in the Washington metro area are opting for longer commutes to make homeownership affordable.  Others are opting for alternative work to not only lower their housing cost, but eliminate the commute as well.  Commenting on affordability, NAR’s chief economist Lawrence Yun stated, “There are vast home price differences among metro markets. The condition of extremely high home prices may not be sustainable in light of many alternative metro markets that are much more affordable. Therefore, a shift in job search and residential relocations into more affordable regions of the country is likely in the future.”

Although home sale prices continue to climb, the national home sale picture is another story.  The 1.2 percent increase in spring home sales compared to winter sales should be expected.  However, the 5.4 percent decrease from last spring is a disappointment.  According to MarketStats by ShowingTime (getsmartcharts.com), the number of homes sold in the Mid-Atlantic region decreased 4.77 percent year-to-date.  There was a larger decline in Montgomery County, where there was a 7.25 percent decrease in home sales year-to-date! 

Days-on-market is another fundamental indicator of the housing market.  And, like home prices and units sold, days-on-market can vary depending on the local market.  Homes in the Mid-Atlantic region are taking a bit longer to sell, as days-on-market increased 7.04 percent to 76 days.  However, houses in Montgomery County are selling quicker, where days-on-market decreased about 13 percent to 65 days. 

Mixed housing stats can confound home buyers, sellers, and their agents. But consider the analysis of David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices. He stated that that home sale prices gains have been slowing down until recently.  And although mortgage rates are lower, home sales have “drifted down” from their peak during February 2018.  Even new home sales and residential investment have shown weakness since last year.

Original published at https://dankrell.com/blog/2019/05/20/mixed-housing-stats/

By Dan Krell
Copyright © 2019

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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.

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

By Dan Krell. Copyright © 2019.

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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.

Does a shutdown affect home sales?

shutdown
Home Sales (infographic from nar.realtor)

There hasn’t been this much anxiety about a government shutdown since October 2013.  Back then, the government was “shutdown” for sixteen days.  Of course, when the federal government “shuts down,” it’s really a partially interrupted.  A majority of government operations continue.  But even a partial government shutdown has the potential to affect home sales.

Since only a portion of government employees get furloughed during a shutdown, there is always confusion about which agencies are affected.  Back in 2013 many home buyers were jittery about getting their FHA and VA loans processed so they could settle on time (the FHA is a part of HUD, while VA mortgages are guaranteed by the Department of Veteran Affairs). Additionally, many industry insiders were unsure about the impact a government shutdown would have on the recovering housing market. 

Today we have some idea how government housing programs, specifically mortgages, will be affected during this time because most federal agencies publicly post their shutdown contingency plans. 

FHA’s 2013 shutdown contingency was focused on maintaining consistency in the housing recovery.  The contingency plan stated “The Office of Single Family Housing will endorse new loans under current multi-year appropriation authority in order to support the health and stability of the U.S. mortgage market.  Approximately 80% of FHA loans are endorsed by lenders with delegated authority.  The remaining 20% are endorsed through the FHA Homeownership Centers, leveraging FHA staff with a contractor that works on-site.

The current FHA contingency is confident that most FHA loans will be unaffected.  However, there is a warning that an extended shutdown can impact home sales.  HUD’s Frequently Asked Questions in the event of a Government Shutdown, statement on FHA’s operations states:


“Because we are able to endorse most single family loans, we do not expect the impact on the housing market to be significant, as long as the shutdown is brief. With each day the shutdown continues, we can expect an increase in the impacts on potential homeowners. home sellers and the entire housing market. A protracted shutdown could see a decline in home sales, reversing the trend toward a strengthening market that we’ve been experiencing.

VA loans may be better positioned.  It is widely acknowledged that the Veteran Affairs learned from the government shutdowns that occurred in 1995-96. During that time, “Loan Guaranty certificates of eligibility and certificates of reasonable value [appraisals] were delayed.”  However, because VA funding includes “advance appropriations,” a majority of the VA’s operations will continue during a federal government shutdown (including mortgages).  The VA’s contingency plan indicates that in the event of a government shutdown 95% of VA employees will be fully funded or required to perform “excepted” functions.

Will a short-term federal government shutdown affect the housing market?  Probably not.  VA loans are expected to continue without much issue.  However, certain HUD functions required for FHA mortgages could be limited, but not expected to cause delays in the short-term.

However, an extended shutdown has the potential to affect home sales.  Consider that FHA’s mortgage market share increased to approximately 17 percent in 2017 (compared to about 13 percent in 2013).  Significant FHA settlement delays could occur in long-term, which would surely have an impact on the housing market.  However, considering that home sales have dropped off since the summer, and the market is typically slow during this time of year, the effect on housing will probably be negligible. 

Original published at https://dankrell.com/blog/2018/12/23/shutdown-affect-home-sales

By Dan Krell. Copyright © 2018.

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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 Thanksgiving

real estate thanksgiving
A Real Estate Thanksgiving

Thanksgiving is a time to take stock and be thankful.  Although the original Thanksgiving may have had a religious purpose, today’s secular holiday is about traditions.  However, it seems as if the tradition of enjoying a peaceful meal with family and friends has been increasingly difficult over the past few years.  But since the election is over, let’s try to talk about something worthy of discussion (at least until the next election cycle begins), such as real estate and housing. Yes, it’s a “Real Estate Thanksgiving.”

Why shouldn’t we focus on something we all can get behind? There is a good chance that your dinner guests will include someone will be moving next year.  Whether they are buying, selling, or renting a home, someone at the dinner table will be affected by such issues as housing affordability, mortgage rates, and availability of homes.

Things to talk about during your Real Estate Thanksgiving might be about mortgages, home sales, home prices, rent, maintenance, etc.  The topics are seemingly endless.

Talking about mortgages during the Real Estate Thanksgiving.  The current news is about mortgage interest rates.  How high will mortgage rates go?  Housing experts agree that mortgage rates will likely be about 5 percent next year (although the Fed just announced they may hold off on interest rate hikes after spring).  Paying more interest on your mortgage may not be your idea of positively affecting home sales.  However, increasing mortgage rates typically moderate home price growth because of affordability.  Another silver lining of increasing interest rates is a stimulated lending environment.  As a result, mortgage companies will likely further loosen lending requirements, which will increase the home buyer pool.

Real Estate Thanksgiving and home sales could focus on the reasons for the fall slowdown.  Will home sales rebound this spring?  You’re probably aware that home sales have dropped off during the fall.  Major media outlets have grasped the news and created the meme depicting “housing bubble 2.0.”  You can’t really blame them because there are many economists who are projecting bleak home sales to continue through spring.

The main reason for a disappointing 2019 forecast given by many industry insiders is affordability.  I contend that this rationale is shallow and one-dimensional.  There is no doubt that rising interest rates and increasing home prices are on the minds of home buyers.  However, the lack of home sale inventory is a dimension that is often forgotten when discussing home sales and rentals.  The lack of available homes for buyers and tenants to choose has forced many into fierce competition.  The result has been upward pressure on home prices and rents.

You have to also consider the economy at your Real Estate Thanksgiving. The strength of the economy is an aspect affecting the housing market that many haven’t discussed.  Whether you want to admit it or not, the economy is the strongest it has been in decades.  Consumer outlook is optimistic.  Home buyers and renters have expressed confidence about their job prospects too.  Employers are competing for talent, influencing the highest wage increases in over a decade.

Commenting on the economy, First American chief economist Mark Fleming believes that the economy will be a major force in the housing market (How Will a Potential September Rate Hike Impact Existing-Home Sales?; blog.firstam.com; September 18, 2018).  One of the features of his analysis for 2019 is “It’s the Economy and First-Time Home Buyer Demand, Stupid.”  He described a pent-up demand from a wave of millennial of first-time home buyers who will be in the market next year.

Fleming explained that home sales slump during an adjustment period that home buyers undergo when interest rates increase.  The same thing occurred in 2010 when rates increased from 4.5 to 5 percent.  However, the economy was struggling at that time, and home sales were stagnant.  Fleming described First American’s positive housing forecasts overcoming rising interest rates, saying,

“According to our Potential Home Sales Model, the boost from the strong economy and first-time home buyer demand should overcome any downward pressure from rising rates on home sales.”

Original article is published at https://dankrell.com/blog/2018/11/21/real-estate-thanksgiving/

By Dan Krell. Copyright © 2018.

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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.