The #1 Reason It Is Difficult to Find Your Dream Home

The #1 Reason It Is Difficult to Find Your Dream Home

The headlines in real estate today all revolve around one major point: there is a shortage of homes available for sale. Price appreciation is accelerating again because there is a shortage of homes available for sale. First-time buyers are taking longer to purchase a home because there is a shortage of homes available for sale in the lower price points. Boomers are staying in their current homes longer because there is a shortage of homes available for sale to which they would move. In certain markets, affordability is becoming more challenging because there is a shortage of homes available for sale.

What’s the major reason for this lack of housing inventory?

The issue was examined in a recent article by the National Home Builders Association (NAHB). In the article, Robert Dietz, Chief Economist for NAHB, explained:

“Home building in the 2010s was a story of the Long Recovery. After the Great Recession, the number of home builders declined significantly, and housing production was unable to meet buyer demand…Years of population and household formation growth, combined with relatively reduced levels of home building, have left the market with a critical supply shortage.”

Here are the single-family home construction starts by decade for the last six decades:

The #1 Reason It Is Difficult to Find Your Dream Home

Obviously, there’s a current shortage of homes for sale because not enough houses were built over the last ten years. To add to the challenge, the U.S. population expanded by more than 20 million people during the 2010s.

Below is a graph showing the number of starts per every million in population. The last decade shows that starts per population were less than half the average of the previous five decades.

The #1 Reason It Is Difficult to Find Your Dream Home

There’s good news coming!

The NAHB article explains that there is light at the end of the tunnel.

How confident home builders are in the housing market is a great indicator of how much building is about to get started. The NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as “good” than “poor.”

Here are the HMI readings going back to 2008:

The #1 Reason It Is Difficult to Find Your Dream Home

The 2019 confidence reading of 76 was the highest since 1999. The January 2020 index came in one point lower at 75. These readings indicate we should see an increase in new residential construction in 2020. Just last week, NAHB Chairman Greg Ugalde stated:

“Low interest rates and a healthy labor market combined with a need for additional inventory are setting the stage for further home building gains in 2020.”

The increase in housing starts has already begun. According to the January report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, single‐family housing starts were up 11.2% and attained the highest level in thirteen years.

Bottom Line

Whether you’re a first-time buyer or a seller thinking of moving up or down, 2020 could be your year with more new construction homes coming to market.

Related article:  The Biggest Issue Facing Housing This Year

2020 Luxury Market Forecast

2020 Luxury Market Forecast

By the end of last year, many homeowners found themselves with more equity than they realized, and at the same time their wages were increasing. When those two factors unite, it can spark homeowners to think about making a move to a larger or more expensive home in the luxury space. That said, now is a perfect opportunity to take a look at the forecast for the 2020 luxury market.

Three Things to Think About in the 2020 Luxury Housing Market

1. Prices

The U.S. economy is strong today, with buying opportunities throughout the luxury end of the market. Thomas Veraguth, Strategist at UBS Global Wealth Management, says in Barrons.com,

“There’s a good link between luxury real estate prices and [economic] growth.”

Available inventory is a key element that can impact home prices. At the upper range, the inventory is greater in comparison to the entry-level market, making moving up to a luxury home a growing reality for many buyers right now.

2. Activity in the Market

With more buying opportunities at the higher end, we should start to see an increase in activity. The same article states,

“Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.”

Buyers looking in the luxury market are taking the opportunity to negotiate on price in a segment where there are more choices, too. According to the Luxury Market Report, homes sold for an average of 96.94% of the list price in December.

Buyers are also getting more for their money with greater purchasing power due to the current low interest rates.

3. Buyers Are Coming Back

Keep in mind, buyers are often sellers too, especially those looking to move up. Homeowners with an entry-level home can take advantage of the inventory shortage at the lower end of the market, thus driving higher sales prices for their current homes. Combined with growing equity in the homes they’re listing, it’s a great time for those who are ready to make a luxury move.

The extra equity and greater purchasing power are bringing many buyers back to the market. The same article mentioned that,

“We’ve already seen buyers who’ve been on the sidelines for two years tread back into the market.”

Bottom Line

If you’re considering entering the luxury market, 2020 is shaping up to be a great year for those who are ready to make that move. Let’s get together to set your real estate plan for the year.

3 Mistakes to Avoid When Selling a Home in 2020

3 Mistakes to Avoid When Selling a Home in 2020

It’s exciting to put a house on the market and to think about making new memories in new spaces, but we can have deep sentimental attachments to the homes we’re leaving behind, too. Growing emotions can help or hinder a sale, depending on how we manage them.

When it comes to the bottom line, homeowners need to know what it takes to avoid costly mistakes. Being mindful of these things and prepared for the process can help you avoid some of the most common mishaps when selling your house.

1. Overpricing Your Home

When inventory is low, like it is in the current market, it’s common to think buyers will pay whatever we ask for when we price our homes. Believe it or not, that’s far from the truth. Don’t forget that the buyer’s bank will send an appraisal to determine the fair value for your home. The bank will not lend more than what the house is worth, so be mindful that you might need to renegotiate the price after the appraisal. A real estate professional will help you to set the true value of your home.

2. Letting Your Emotions Interfere with the Sale

Today, most homeowners have been living in their houses for an average of 10 years (as shown in the graph below):

This is several years longer than what used to be the norm, since many homeowners have been recouping from negative equity situations over the past 10 years. The side effect, however, is when you live for so long in one place, you may get even more emotionally attached to your space. If it’s the first home you bought after you got married or the house where your children grew up, it very likely means something extra special to you. Every room has memories and it’s hard to detach from the sentimental value.

For some homeowners, that makes it even harder to negotiate, separating the emotional value of the home from the fair market price. That’s why you need a real estate professional to help you with the negotiations in the process.

3. Not Staging Your Home

We’re generally quite proud of our décor and how we’ve customized our houses to make them our own personalized homes, but not all buyers will feel the same way about your design. That’s why it’s so important to make sure you stage your home with the buyer in mind. Buyers want to envision themselves in the space, so it truly feels like their own. They need to see themselves in the space with their furniture and keepsakes – not your pictures and decorations. Stage and declutter your home so they can visualize their own dreams as they walk through your house. A real estate professional can help you with tips to get your home ready to stage and sell.

Bottom Line

Today’s seller’s market might be your best chance to make a move. If you’re considering selling your house, let’s get together to help you navigate through the process while avoiding common seller mistakes.

The 2020 Real Estate Projections That May Surprise You

This will be an interesting year for residential real estate. With a presidential election taking place this fall and talk of a possible recession occurring before the end of the year, predicting what will happen in the 2020 U.S. housing market can be challenging. As a result, taking a look at the combined projections from the most trusted entities in the industry when it comes to mortgage rateshome sales, and home prices is incredibly valuable – and they may surprise you.

Mortgage Rates

Projections from the experts at the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), Fannie Mae, and Freddie Mac all forecast mortgage rates remaining stable throughout 2020:

Since rates have remained under 5% for the last decade, we may not fully realize the opportunity we have right now.

Here are the average mortgage interest rates over the last several decades:

  • 1970s: 8.86%
  • 1980s: 12.70%
  • 1990s: 8.12%
  • 2000s: 6.29%

Home Sales

Three of the four expert groups noted above also predict an increase in home sales in 2020, and the fourth sees the transaction number remaining stable:

With mortgage rates remaining near all-time lows, demand should not be a challenge. The lack of available inventory, however, may moderate the increase in sales.

Home Prices

Below are the projections from six different expert entities that look closely at home values: CoreLogicFannie Mae, Ivy Zelman’s “Z Report”, the National Association of Realtors (NAR), Freddie Mac, and the Mortgage Bankers Association (MBA).

Each group has home values continuing to improve through 2020, with four of them seeing price appreciation increasing at a greater pace than it did in 2019.

Is a Recession Possible?

In early 2019, a large percentage of economists began predicting a recession may occur in 2020. In addition, a recent survey of potential home purchasers showed that over 50% agreed it would occur this year. The economy, however, remained strong in the fourth quarter, and that has caused many to rethink the possibility.

For example, Goldman Sachs, in their 2020 U.S. Outlook, explained:

“Markets sounded the recession alarm this year, and the average forecaster now sees a 33% chance of recession over the next year. In contrast, our new recession model suggests just a 20% probability. Despite the record age of the expansion, the usual late-cycle problems—inflationary overheating and financial imbalances—do not look threatening.”

Bottom Line

Mortgage rates are projected to remain under 4%, causing sales to increase in 2020. With growing demand and a limited supply of inventory, prices will continue to appreciate, while the threat of an impending recession seems to be softening. It looks like 2020 may be a solid year for the real estate market.

The Biggest Issue Facing Housing Next Year

The Biggest Issue Facing Housing Next Year

This coming year the housing market will be defined by 3 things- inventory, interest rates, and appreciation. But the biggest issue the housing market will face in 2020 is an inventory shortage. There aren’t enough homes on the market for buyers, especially on the lower end of the market. This is a topic that has come up frequently within the past several months.

Based on what is forecasted, we know that interest rates are projected to remain low and that appreciation is expected to continue as we move into 2020. Additionally, the upcoming election will provoke many unique perspectives on the health of the US housing market. The challenge will be understanding what is actually happening and how you can best position yourself if you are thinking of buying or selling your home.

Here are several perspectives to consider on the inventory issue facing housing next year:

According to realtor.com:

Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. Inventory could reach a historic low as a steady flow of demand, especially for entry level homes, and declining seller sentiment combine to keep a lid on sales transactions.

Diana Olick at CNBC:

Inventory has been falling annually for five straight months, after it recovered slightly toward the end of last year, due to a spike in mortgage rates. Rates began falling again by spring of this year. Homebuilders have been increasing production slowly, but it’s not enough to meet the increasingly strong demand.

George Ratiu, Senior Economist with realtor.com

As millennials — the largest cohort of buyers in U.S. history — embrace homeownership and take advantage of this year’s unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish. The housing shortage is felt acutely at the entry-level of the market, where most millennials are looking to break into the market for their first home.

Bottom Line

The most important thing you can do is understand what is happening in your local market. You may not be able to avoid some of the issues brought on by low inventory, but you can be educated and prepared. Let’s connect and discuss the options that make the most sense for you and your family.

Holiday Gifts Are Not the Only Hot Things Right Now

Holiday Gifts Are Not the Only Hot Things Right Now

Black Friday is behind us and holiday gifts are flying off the shelves in stores and online. Unlike last year, however, there’s another type of buyer that is very active this winter – the homebuyer.

Each month, ShowingTime releases their Showing Index, which tracks the average number of appointments received on active U.S. house listings. The latest index revealed:

“Traffic was more active once again compared to 2018, as the nation saw its third straight month of higher year-over-year showing activity…The 5.5% increase in showings nationwide was the largest jump in activity during the now three-month streak of year-over-year increases vs. 2018.”

The same report indicates showings increased in every region of the country:

  • The South increased by 10.8%
  • The West increased by 8.6%
  • The Northeast increased by 3.8%
  • The Midwest increased by 1.5%

Why is the traffic more active?

One of the main reasons buyer traffic has increased year-over-year is that mortgage rates have fallen dramatically. According to Freddie Mac, the average mortgage rate last December was 4.64%. Today, the rate is almost a full percentage point lower!

Bottom Line

There are first-time, move-up, and move-down buyers actively looking for the home of their dreams this winter. If you’re thinking of selling your house in 2020, you don’t need to wait until the spring to do it. Your potential buyer may be searching for a home in your neighborhood right now.

What is the Best Investment for Americans?

What is the Best Investment for Americans?

Some are reporting that there is trepidation regarding the real estate market in the United States. Apparently, the American people are quite comfortable.

Porch.com, a major network helping homeowners with their renovation projects, recently conducted a survey which asked Americans:

“What do you believe is the safest investment over the next 10 years?”

U.S. housing came in at number one, beating out other investments such as gold, stocks, bonds, and savings.

Here is a graph showing the top five investments Americans selected:

The findings of the Porch.com survey also coincide with two previous surveys done earlier this year:

The Federal Reserve Bank’s 2019 Consumer Expectations Housing Survey reported that 65% of Americans believe homeownership is a good financial investment, and that the percentage has increased in each of the last four years.

The Gallup survey showed that Americans have picked real estate as the “best” investment for six straight years.

Bottom Line

Based on all three surveys done this year, we can see that Americans still believe in homeownership as a great investment, and that feeling continues to grow.

Change the Direction of Your Fan Blades for Winter

Change the Direction of Your Fan Blades for Winter

Most homeowners buy ceiling fans to keep cool in summer, but fans can help you stay comfortable year-round. With a few simple adjustments, you can change the direction of your ceiling fan blades to help your home stay warmer this winter. Help your fan do a 180. Change the turning direction of the fan blades to disperse unused warm air throughout your house. We’ll show you how.

What’s in it for you?

  • Stay warmer in winter
  • Keep your energy use and utilities low
  • Get the full benefits of your home features

 

change direction of your fan in winter

How to Change the Direction of Your Fan Blades for Winter:

  1. Turn your ceiling fan on to observe the direction it’s currently turning.
    In summer, the blades on your ceiling fan should turn counter-clockwise. This pushes cool air down and helps warmer air in your living space rise. You want the opposite to happen during the winter months. By switching the blades to turn clockwise, the fan will draw in the warm air from the ceiling and spread it throughout the room. Unless your blades are already turning clockwise, you’ll need to change their direction. This is easy for any homeowner as long as you have safe access to your ceiling fan.
  2. Turn the fan off so you can adjust it without injury.
    Spend a few seconds on safety. Shut your fan off, and make sure it’s done turning before attempting any changes.
  3. Use a ladder to safely access the ceiling fan base.
    Is the fan too high to reach on your own? You’ll need a sturdy step ladder or trestle extension ladder to reach your fan. If you don’t have a ladder tall enough for the job, try an extendable grabbing tool with rubber ends, to protect your fan’s finish.
  4. Locate the ceiling fan spin direction switch.
    On the body of your fan, you’ll find a small switch that controls whether the blades turn clockwise or counterclockwise. Generally, the top or left-hand setting is for summer and the bottom or right-hand side is for winter use. Check your owner’s manual to make sure of your unit’s settings, then flip the switch into place.
  5. Turn the fan on again to make sure it’s turning in the proper direction.
    Ceiling fan parts wear out over time, so you may find the direction spin switch doesn’t function. If, after moving the switch to the clockwise setting, it’s still moving in the opposite direction, call a professional for repairs.

2 Myths Holding Back Home Buyers Seeking Homeownership

In a recent article, First American shared how millennials are not really any different from previous generations when it comes to the goal of homeownership; it is still a huge part of their American Dream. The piece, however, also reveals,

 “Saving for a down payment is one of the biggest obstacles faced by first-time home buyers. Dispelling the 20 percent down payment myth could open the path to homeownership for many more.”

 Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate how much they need to qualify for a home loan. According to the same article:

“Americans still overestimate the qualifications needed to get a mortgage, resulting in qualified potential buyers not even considering homeownership. Indeed, the Urban Institute report revealed that 16 percent of consumers believed that the minimum down payment required by lenders is 20 percent or more, and another 40 percent didn’t know at all.”

While many potential buyers still think they need to put at least 20% down for the home of their dreams, they often don’t realize how many assistance programs are available with as little as 3% down. With a little research, many renters may actually be able to enter the housing market sooner than they ever imagined to enjoy homeownership.

Myth #2: “I Need a 780 FICO® Score or Higher”

In addition to down payments, buyers are also often confused about the FICO® score it takes to qualify for a mortgage, believing a ‘good’ credit score is 780 or higher.

To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.As indicated in the chart above, 50.23% of approved mortgages had a credit score of 500-749.

 

2 myths holding . back home buyers seeking homeownership

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Believe it or not – your dream home and homeownership may already be within your reach.

Millennials: Here’s Why the Process is Well Worth It

Millennials have waited longer than any other generation to become homeowners, but the wait is just about over.

According to National Mortgage News,

 “Millennials, those young adults now aged 23 to 38, are now entering their peak household formation and homebuying years.

If you’re a Millennial, you’re already well aware that you’re among a generation of those who favor fast-paced, real-time answers – and results. When you’re ready to make a decision, it’s go-time, and you probably want the latest technology at your fingertips to make it happen.

National Mortgage News agrees, stating,

“Millennials are different than previous generations—not only in their delayed homebuying but also in how they approach interactions with financial institutions, including mortgage lenders. Taking a picture of a check on their phone and depositing it without visiting a branch is not novel, it’s the way Millennials learned to do banking. They expect real-time access to account and transaction data and are frustrated when it’s not available.”

Here’s the catch – the overall speed of the homebuying process can take some time, and it might feel like it is slowing you down. When you’re ready to buy, you can make an offer and go under contract quickly, but the rest of the process might take a little longer. The same article explains why:

“When Millennials apply for a loan, the mortgage lender must qualify the borrower and determine who owns the property, how much the property is worth, and the property’s risk profile. Traditionally, this has been one of the most time-consuming and fragmented parts of the mortgage process…There are many moving pieces, each data point being sourced from a different provider, which can ultimately lead to a lengthy or delayed process.

 What has historically been accepted as the process norm does not align with the expectations of the most prominent generation in the home buying market today. Millennials have come to expect rapid, digital workflows in their daily purchase decisions, and in their mind, the home buying process shouldn’t be any different.”

So, where do you go from here?

 If you’re pre-approved for a mortgage, that will help speed things up. But the steps it takes and the time to finalize a loan with most traditional lenders may feel like an eternity to you and your generational peers. Don’t worry, though – it’s well worth the wait when you finally get the keys to your new castle!

The financial benefits of homeownership, like increasing your net worth by building equity, and the non-financial benefits, like being able to customize and improve your space, will ultimately set you on the course to happiness, success, overall satisfaction, and much, much more.

Bottom Line

If you’re feeling like it’s go-time, let’s get together and get the process moving to determine if homeownership is your next best step.