Should I Buy or Rent a Home?
The perks of owning versus renting go far beyond financial investment including having the choice of painting or remodeling your way. Does building equity for you appeal more than building it for our landlord?
Freedom…
Home Values Projected to Keep Rising
As we enter the final months of 2020 and continue to work through the challenges this year has brought, some of us wonder what impact continued economic uncertainty could have on home prices. Looking at the big picture, the rules of supply and demand will give us the clearest idea of what is to come.
Due to the undersupply of homes on the market today, there’s upward pressure on prices. Consider simple economics: when there is high demand for an item and a low supply of it, consumers are willing to pay more for that item. That’s what’s happening in today’s real estate market. The housing supply shortage is also resulting in bidding wars, which will also drive price points higher in the home sale process.
There’s no evidence that buyer demand will wane. As a result, experts project price appreciation will continue over the next twelve months. Here’s a graph of the major forecasts released in the last 60 days:
I hear many foreclosures might be coming to the market soon. Won’t that drive prices down?
Some are concerned that homeowners who entered a mortgage forbearance plan might face foreclosure once their plan ends. However, when you analyze the data on those in forbearance, it’s clear the actual level of risk is quite low.
Ivy Zelman, CEO of Zelman & Associates and a highly-regarded expert in housing and housing-related industries, was very firm in a podcast last week:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
With demand high, supply low, and little risk of a foreclosure crisis, home prices will continue to appreciate.
Bottom Line
Originally, many thought home prices would depreciate in 2020 due to the economic slowdown from the coronavirus. Instead, prices appreciated substantially. Over the next year, we will likely see home values rise even higher given the continued lack of inventory of homes for sale.
Real Estate Continues to Show Unprecedented Strength This Year
The 2020 housing market has surpassed all expectations and continues to drive the nation’s economic recovery. The question is, will this positive trend continue throughout the rest of the year, especially given the uncertainty around the current health crisis, the upcoming election, and more?
Here’s a look at what several industry-leading experts have to say.
Lawrence Yun, Chief Economist, National Association of Realtors
“Home sales continue to amaze, and there are plenty of buyers in the pipeline ready to enter the market…Further gains in sales are likely for the remainder of the year, with mortgage rates hovering around 3% and with continued job recovery.”
Frank Martell, President and CEO, CoreLogic
“Homeowners’ balance sheets continue to be bolstered by home price appreciation, which in turn mitigated foreclosure pressures…Although the exact contours of the economic recovery remain uncertain, we expect current equity gains, fueled by strong demand for available homes, will continue to support homeowners in the near term.”
“Zillow’s predictions for seasonally adjusted home prices and pending sales are more optimistic than previous forecasts because sales and prices have stayed strong through the summer months amid increasingly short inventory and high demand.
The pandemic also pushed the buying season further back in the year, adding to recent sales. Future sources of uncertainty including lapsed fiscal relief, the long-term fate of policies supporting the rental and mortgage market, and virus-specific factors, were incorporated into this outlook.”
Bottom Line
Many economists are in unison, indicating the housing market will continue to fuel the economy through the end of the year, maintaining this unprecedented strength.
Do You Have Enough Money Saved for a Down Payment?
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One of the biggest misconceptions for first-time homebuyers is how much you’ll need to save for a down payment. Contrary to popular belief, you don’t always have to put 20% down to buy a house. Here’s how it breaks down.
A recent survey by Point2Homes mentions that 74% of millennials (ages 25-40) say they’re interested in purchasing a home over the next 12 months. The study notes, “88% say they have significantly less savings than the average national down payment amount, which is $62,600.”
Thankfully, $62,600 is not the amount every buyer needs for a down payment in the United States. There are many different options available, especially for first-time homebuyers (millennial or not). That amount can also be significantly less, depending on the purchase price of the house.
According to the National Association of Realtors (NAR), “The median existing-home price for all housing types in August was $310,600.” (These are the latest numbers available). NAR also indicates that:
“In 2019, the median down payment was 12 percent for all buyers, six percent for first-time buyers, and 16 percent for repeat buyers.” (See graph below):
That means if a qualified first-time buyer purchases a home at today’s median price, $310,600, with a 6% down payment, in reality, the down payment only amounts to $18,636. That’s nowhere near $62,600.
Knowing there are also programs like FHA where the down payment can be as low as 3.5% of the purchase price for a first-time buyer, that up-front cost could be significantly less – as little as $10,871 for the same home noted above. There are also other programs like USDA and loans for Veterans that waive down payment requirements.
The Point2Homes study also shares how much millennials have indicated they’ve saved for a down payment. As we can see in the graph below, 39% have already saved enough for a down payment on a median-priced home. Another 47% are close to reaching that goal, depending on the purchase price of the home.
Unfortunately, the lack of knowledge about the homebuying process is keeping many motivated first-time buyers on the sidelines. That’s why it’s important to contact a local real estate professional to understand the requirements in your local area if you want to buy a home. A trusted agent and your lender can guide you through the process.
Bottom Line
Be careful not to let big myths about homebuying keep you and your family out of the housing market. Let’s connect to discuss your options today.
Why Selling this Fall May Be Your Best Move
If you’re thinking about moving, selling your house this fall might be the way to go. Here are four highlights in the housing market that may make your decision to sell this fall an easy one.
1. Buyers Are Actively in the Market
ShowingTime, a leading real estate showing software and market stat service provider, just reported that buyer traffic jumped 60.7% compared to this time last year. That’s a huge increase.
It’s clear that buyers are ready, willing, and able to purchase – and they’re in the market right now. In many regions of the country, multiple buyers are entering bidding wars to compete for the home they want. Take advantage of the buyer activity currently in the market so you can sell your house in the most favorable terms.
2. There Are Not Enough Homes for Sale
In the latest Existing Home Sales Report, the National Association of Realtors (NAR) announced that there were only 1.49 million units available for sale. That number was down 18.6% from one year ago. This means in the majority of the country, there aren’t enough homes for sale to satisfy the number of buyers.
Due to the health crisis, many homeowners were reluctant to list their homes earlier this year. That will change as the economy continues to recover. The choices buyers have will increase going into the new year. Don’t wait until additional sellers come to market before you decide to make a move.
3. The Process Is Going Quickly
Today’s ultra-competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and simpler, as buyers know exactly what they can afford before shopping for a home. According to the latest Origination Insights Report from Ellie Mae, the time needed to close a loan is just 49 days.
4. There May Never Be a More Important Time to Move
You’ve likely spent much of the last six months in your current home. Perhaps you now realize how small it is, and you need more space. If you’re working from home, your children are doing virtual school, or you just need more space, your current floor plan may not work for your family’s changing needs.
Homebuilders are beginning to build houses again, so you can choose the exact floor plan to match what your family needs, and you can make sure the outdoor space is what you want too.
Bottom Line
The housing market is prime for sellers right now, so let’s connect to get the process started this fall. If the timing is right for you and your family, the market is calling your name.
Where Are Home Values Headed Over the Next 12 Months?
As shelter-in-place orders were implemented earlier this year, many questioned what the shutdown would mean to the real estate market. Specifically, there was concern about home values. After years of rising home prices, would 2020 be the year this appreciation trend would come to a screeching halt? Even worse, would home values begin to depreciate?
Original forecasts modeled this uncertainty, and they ranged anywhere from home values gaining 3% (Zelman & Associates) to home values depreciating by more than 6% (CoreLogic).
However, as the year unfolded, it became clear that there would be little negative impact on the housing market. As Mark Fleming, Chief Economist at First American, recently revealed:
“The only major industry to display immunity to the economic impacts of the coronavirus is the housing market.”
Have prices continued to appreciate so far this year?
Last week, the Federal Housing Finance Agency (FHFA) released its latest Home Price Index. The report showed home prices actually rose 6.5% from the same time last year. FHFA also noted that price appreciation accelerated to record levels over the summer months:
“Between May & July 2020, national prices increased by over 2%, which represents the largest two-month price increase observed since the start of the index in 1991.”
What are the experts forecasting for home prices going forward?
Below is a graph of home price projections for the next year. Since the market has changed dramatically over the last few months, this graph shows forecasts that have been published since September 1st.
Bottom Line
The numbers show that home values have weathered the storm of the pandemic. Let’s connect if you want to know what your home is currently worth and how that may enable you to make a move this year.