With residential home prices continuing to appreciate at levels above historic norms, some are questioning if we are heading toward another housing bubble (and subsequent burst) like the one we experienced in 2006-2008.
Recently, five housing experts weighed in on the question.
Rick Sharga, Executive VP at Ten-X:
“We’re definitely not in a bubble.”
“We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.”
Christopher Thornberg, Partner at Beacon Economics:
“There is no direct or indirect sign of any kind of bubble.”
“Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.”
Bill McBride, Calculated Risk:
“I wouldn't call house prices a bubble.”
“So prices may be a little overvalued, but there is little speculation and I don't expect house prices to decline nationally like during the bust.”
David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices:
“Housing is not repeating the bubble period of 2000-2006.”
“…price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.”
Bing Bai & Edward Golding, Urban Institute:
“We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis.”
“Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.”
The National Association of Realtors (NAR) released their latest Quarterly Metro Home Price Report last week. The report revealed that severely lacking inventory across the country drained sales growth and kept home prices rising at a steady clip in nearly all metro areas. Home prices rose 5.3% over the last quarter across all metros.
Lawrence Yun, Chief Economist at NAR, discussed the impact of low inventory on buyers in the report:
“Unfortunately, the pace of new listings were unable to replace what was quickly sold. Home shoppers had little to choose from, and many had to outbid others in order to close on a home. The end result was a slowdown in sales from earlier in the year, steadfast price growth and weakening affordability conditions.”
What this means to sellers
Rising prices are a homeowner’s best friend. As reported by theWashington Post in a recent article post:
“The rise in median sales prices has made current homeowners much more willing to sell their home, and that willingness is one of the main drivers behind the inventory that does make it on to the market. While it hasn’t been enough to meet demand, it has made the situation much better, compared with even three or four years ago.”
What this means to buyers
In a market where prices are rising, buyers should take into account the cost of waiting. Obviously, they will pay more for the same house later this year or next year. However, as Construction Dive reported, the amount of cash needed to purchase that home will also increase.
“These factors have created a situation where the market keeps moving the goalposts in terms of the down payment necessary for first-time homebuyers to get into a home.”
If you’re thinking of selling and moving down, waiting might make sense. If you are a first-time buyer or a seller thinking of moving up, waiting probably doesn’t make sense.
Whether you are buying or selling a home, it can be quite an adventurous journey. This is why you need an experienced real estate professional to guide you on the path to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 reasons you NEED a real estate professional in your corner haven’t changed, but have rather been strengthened by the projections of higher mortgage interest rates & home prices as the market continues to pick up steam.
1. What do you do with all this paperwork?
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.
2. Ok, so you found your dream house, now what?
There are over 180 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you achieve your dream?
3. Are you a good negotiator?
So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.
4. What is the home you’re buying/selling really worth?
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to a study by Collateral Analytics, FSBOs achieve prices significantly lower than those from similar properties sold by real estate agents:
“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”
Get the most out of your transaction by hiring a professional.
5. Do you know what’s really going on in the market?
There is so much information out there on the news and on the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?
Dave Ramsey, the financial guru, advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a real estate professional?
The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.
This brings us to two major misconceptions that we want to address today.
1. Down Payment
NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.
Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.
2. FICO® Scores
An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.
The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.
If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.
This Symmetrical, All-White Kitchen Provides a Calming Family Gathering Place
WRITTEN BY RONDA SWANEY PHOTOGRAPHY BY TOP KAT PHOTO
“When I leave, it should look like I was never there,” says Katja van der Loo, CEO of Papyrus Home Design, a Boonton, New Jersey interior design firm. She’s describing the desired end result after a remodeling project. “Whatever style the kitchen is, if it is in keeping [with] and respectful to the architecture of the home, I think that’s when it’s most successful. This bright kitchen would look awful in a different type of house. In this house, it looks incredible,” she says.
When van der Loo was hired for this project, she found a kitchen stuck in the ’80s. The older part of the home had a classic design but suffered from a poorly executed addition. The remodeled portion appeared to be tacked onto the house as an afterthought. The owners, a couple with young children, needed a fresh start. The previous construction was removed and a new three-story addition was planned for the back of the house. This kitchen was part of that project. “We had to seamlessly blend the old with the new,” says van der Loo.
“I knew this client was into balance and symmetry, and that’s how I approach things too,” explains van der Loo. “The cleaner it is the better it feels, I think.” Balanced designs create a calming effect, which is helpful for any busy homeowners.
The range and island are perfectly centered, as are the large glass pendant lights. “Those pendants add an industrial touch to the kitchen,” she says. And they are grand enough to be noticed. “The kitchen has nine-foot ceilings and the island is nine feet long. I felt we needed something large scale to balance all that space.”
Off to the side, the bench seating that skirts the wide bay window is also perfectly symmetrical. The seat cushions are custom, while store-bought pillows in gray, white, and taupe finish the look. Drawers beneath the window seat add more storage, which the homeowner uses to keep serving pieces that are rarely used.
In any remodeling project, it’s smart to save dollars where you can. The homeowners already had the table and chairs used in the eating nook. Chair slipcovers were a practical selection because they could be removed and machine washed if the children spilled on the furniture. A glass chandelier, with a traditional shape but modern transparency, sparkles above the dining table. The transparency gave an added benefit to the room. “The garden, which you can see through the windows, is spectacular. I didn’t want anything to obstruct that view,” explains van der Loo.
The children use the small desk off to the side to work on arts and crafts projects. Open cabinets above the desk make books easily accessible. A printer is hidden in one end of the island, which provides easy access without visual clutter. At the island sit practical and lightweight aluminum barstools, which van der Loo calls “indestructible.”
Attention to proportion promotes the calming effect as do the colors and materials used. The cabinets, subway tile, and crown moldings are awash in white. Room flow is enhanced by how the cabinet molding merges seamlessly with the crown molding that circles the room. Pietra cardosa, a mineral-laden gray stone, tops the perimeter counters. Neutral paint with the slightest hint of gray covers the walls. The range and hood serve as the room’s focal point, while other appliances are hidden beneath cabinet panels.
One of the homeowners has a great passion for cooking and baking and many of the room’s features align with that. Many an amateur baker covets a marble surface, so statuary marble tops the island at the homeowner’s request. A high BTU range is professional grade and the warming rack above it aids in meal prep. A mixer lift is hidden in the other end of the island.
“A lot of people store mixers in a pantry, but that’s not convenient. With a lift, you open the cabinet and it pops up. When you’re done, all you have to do is clean the bowl, then it pops back down to be hidden in the cabinet again.”
A custom cabinet to the right of the range hides steel cooling racks for baked goods. To the left of the range is a wall oven and microwave. To the side of the island is a wet bar. It contains a beverage fridge and a small sink. This spot is adjacent to the family room, which is helpful for enter-taining. Guests can serve themselves without getting in the way of food prep in the main cooking area.
Symmetry, soothing tones, and hiding places that keep clutter at bay—each element plays a role in creating a calming atmosphere that draws the family together. “I love the openness and balance of this room,” says van der Loo. “But you know what the best thing about this kitchen is? It’s how you feel when you’re in it.”
Porches Are Making a Comeback
DAILY REAL ESTATE NEWS | FRIDAY, OCTOBER 06, 2017
More new homes are coming equipped with front porches. Sixty-five percent of new single-family homes started in 2016 included a porch, according to a Census data analysis from the National Association of Home Builders. It’s only the second time since tracking began that new single-family homes with porches have moved back above 65 percent. For comparison, in 2005, 54 percent of new homes had porches.
Certain regions of the U.S. are showing higher preference for porches. For example, the East-South-Central region of the U.S. had the highest share of new homes started in 2016 with porches at 86 percent.
The Census data from the Survey of Construction report does not indicate much information about the look of the porches. However, the NAHB reports that the Annual Builder Practices Survey, conducted by Home Innovation Research Labs, shows that front porches on new homes tend to be more common than side porches. Also, most new home porches are open rather than screened.
The average size of a front porch on a new home is about 60 square feet, according to the report. The materials used often tend to be concrete and treated wood. However, some regions—like the Mountain and Pacific areas of the U.S.—tend to favor redwood over treated wood for their front porches.
- Many buyers are purchasing a home with a down payment as little as 3%.
- You may already qualify for a loan, even if you don't have perfect credit.
- Take advantage of the knowledge of your local professionals who are there to help you determine how much you can afford.
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