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.
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.
Spring is traditionally the busiest season for real estate. Buyers, experiencing cabin fever all winter, emerge like flowers through the snow in search of their dream home. Homeowners, in preparation for the increased demand, are enticed to list their house for sale and move on to the home that will better fit their needs.
New data from CoreLogic shows that even though buyers came out in force, as predicted, homeowners did not make the jump to list their home in the second quarter of this year. Frank Nothaft, Chief Economist for CoreLogic had this to say,
“The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory. As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years.”
CoreLogic’s President & CEO, Frank Martell added,
“Home prices are marching ever higher, up almost 50 percent since the trough in March 2011.
While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”
Overall inventory across the United States is down for the 25thconsecutive month according to the latest report from the National Association of Realtors and now stands at a 4.3-month supply.
Real estate is local.
Market conditions in the starter and trade-up home markets are in line with the median US figures, but conditions in the luxury and premium markets are following an opposite path. Premium homes are staying on the market longer with ample inventory to suggest a buyer’s market.
Buyers are out in force, and there has never been a better time to move-up to a premium or luxury home. If you are considering selling your starter or trade-up home and moving up this year, let’s get together to discuss the exact conditions in our area.
The results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.
The updated numbers actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!
Other interesting findings in the report include:
- Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
- With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
- Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.
Buying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let's get together to find your dream home.
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