The Fed did it. But then, we knew they were going to. The end of super low interest rates is here. If you are going to refi, buy a home, sell a home, get a car loan – this one’s for you!
There is no doubt that the largest challenge in today’s housing market is a lack of housing inventory for sale. This challenge has been defined as an “overwhelming lack of supply,” and even a “straight up inventory crisis.”
First American just released the results of a survey which sheds light on the reasons for the current lack of supply.
The survey asked title agents and real estate professionals to identify what they believe are the top reasons for this lack of inventory in their markets. Here are the results of the survey:
- 47% – existing homeowners are worried that they will not be able to find a home to buy
- 5% – first-time buyer demand is absorbing a large share of available homes
- 3% – existing homeowners’ mortgage rates are lower than the current rates
- 6% – insufficient or negative equity in the home
- 6% – foreign buyer demand is absorbing a large share of available homes
As the survey revealed, there is a shortage of current homeowners willing to put their homes on the market for one of three reasons (see numbers 1, 3 and 4 above).
Is this an opportunity for some homeowners?
The report on the survey explains:
“The crowd has spoken, and it seems in many markets home buyers and sellers alike are ‘imprisoned’ by the lack of housing inventory.”
That leaves a tremendous opportunity for every homeowner not facing these concerns. If you can put your home on the market today, you are subject to far less competition than at any time in recent history. That will result in your home selling quickly and for the highest possible price.
While many homeowners are feeling imprisoned for multiple reasons, those who are not handcuffed by these concerns have a once in a lifetime opportunity to sell their houses at a peak selling time.
From SF Business Times:
“Traffic congestion on the Bay Area’s freeways surged 10 percent last year, a new report from the Metropolitan Transportation Commission (MTC) released this week has found.
The MTC found that about one third of the worst congestion, defined as time spent in traffic going at or under 35 miles per hour, is happening in Alameda County. Overall, weekday traffic congestion has leapt 80 percent in the Bay Area since 2010, the agency said, and almost all of it is related to commuting issues region wide.”
Read the full article here.
Freddie Mac, Fannie Mae, and The Mortgage Bankers Association are all projecting that home sales will increase in 2018. Here is a chart showing what each entity is projecting in sales for the remainder of this year and the next.
As we can see, each entity is projecting sizable increases in home sales next year. If you have considered selling your house recently, now may be the time to put it on the market.
Here are five reasons listing your home for sale this fall makes sense.
1. Demand Is Strong
The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase… and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.
Take advantage of the buyer activity currently in the market.
2. There Is Less Competition Now
Housing inventory is still under the 6-month supply that is needed for a normal housing market.
This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.
Historically, the average number of years a homeowner stayed in their home was six, but that number has jumped to an average of almost nine years since 2008. There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.
The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.
3. The Process Will Be Quicker
Today’s 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 much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to 43 days, after seeing a 12-month high of 48 days in January.
4. There Will Never Be a Better Time to Move Up
If your next move will be into a premium or luxury home, now is the time to move-up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly AND you’ll be able to find a premium home to call your own!
Prices are projected to appreciate by 5.0% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.
5. It’s Time to Move on With Your Life
Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.
That is what is truly important.
A little bit about this piece: I’m surprised Millennials came in so strong. It wasn’t but a few years ago that Millennials were reported to be thinking that home ownership was not a great idea, likely due to the crash. In other thoughts – I have few regrets in life, but one is not buying a home sooner (I was 28) and not buying more real estate.
Here’s the deal for you kids: if it’s going to take 30 years to fully pay for a home, and one of the best things to have in retirement is a paid off house…when would you like to retire? For those in their 20s and 30s, this is a tough question. It’s like asking a 10-year-old what they think it will be like when they are 30 – there is just no context there. But it will sneak up on you, and you will begin thinking about planning for the day you go on permanent vacation. Success there is in really long term planning. It’s sort of silly that we ask people in their 20s and early 30s to begin planning for retirement – they don’t have the focus or the experience – similar to how we ask 18-year-olds what they want to do with the rest of their life when they are in college. Nonetheless, that day you want to hang the cleats up will arrive, and early planning is good.
Yes. I know it sucks. Buying a home means giving up some stuff that is really great. You’ll have to cut back on tequila shooters. You may have to make your coffee at home. But do it. I hear often: I can’t afford a house anywhere I want to live. Fine. Buy a house in an up and coming neighborhood, rent it out, have someone else pay for your mortgage and hope the neighborhood improves. If it doesn’t, sell it when you retire and buy somewhere you do want to live. As my good friend Rod Verette once told me: “It’s just important to get on the equity-building treadmill.” He told me that the day I bought my first house in 1988. I did a little work on that house (including the worst tile job in all of history) resold it a few years later and made 48% on it.
It’s not that hard, and it’s for you and your family’s security and prosperity. Get moving. Literally!
Hearth just released their 2017 State of the American Dream report which showed that Americans still see homeownership as an integral piece of the American Dream. The report confirmed that “all generations–including millennials–agree homeownership is very important to achieving the American Dream.”
Americans ranked “owning a home I love” higher than any other options (including “starting a family” and “finding a fulfilling career”) as an important part of the American Dream.
Despite some claims that homeownership’s importance to the American Dream is in decline, the report found that the dream of homeownership remains strong.
Of Americans who said they think achieving the American Dream is important, 70% think homeownership is important to the dream, and 41% think homeownership is very important to the dream.
What about Millennials?
Hearth addresses the desires of millennials by explaining:
“Contrary to popular opinion, millennials who want to achieve the American Dream are 5% more likely than Baby Boomers to think homeownership is important. And two-thirds of millennial renters view homeownership as important to the American Dream.
Although millennials are often portrayed as fickle and transient, they actually seek the stability of homeownership even more than their parents.”
Other Key Findings from the Report:
- Homeowners are 126% more likely than non-homeowners to view homeownership as a way to build wealth. Nevertheless, homeowners still overwhelmingly associated homeownership with a family living space.
- Homeowners are 24% more likely than non-homeowners to see homeownership as an achievement that reflects hard work.
- Millennials are 77% more likely than baby boomers to see a home primarily as a way to build wealth.
- Baby boomers are 98% more likely than millennials to see a home as a way to pass wealth down to children or family.
- Millennials are 29% more likely than baby boomers to see a home as an achievement that reflects hard work–an outcome we expected given that many millennials are still working hard to afford their first homes.
The report concluded:
“This survey revealed a powerful finding: Across demographic groups, homeownership remains a precondition of the American Dream.”
This from personal finance and mortgage advisor: Austin Andruss at OPES Advisors (web page: https://www.opesadvisors.com/about-us/our-team/austin-andruss/)
Q: What is AB 71 and how it would affect the real estate tax landscape in California?
A: With California’s housing crisis looming large, State legislators are looking for funding sources to help pay for affordable housing. One of many proposals on the table is AB 71, which would eliminate deductions of mortgage interest on second homes, saving the State more than $220M and leveraging $600M–$1B in additional federal housing dollars. The bill would need a two-thirds majority to pass, and is slated to take effect January 1, 2018. While analysts say it is likely to become law, the California Association of Realtors opposes the bill.
Q: Which homeowners are targeted by the bill?
A: AB 71 would apply only to Californians who spend a significant amount of time in their second homes. The change would not apply to rentals, defined by the IRS as properties where owners spend “less than 10% of their time.” In other words, AB 71 targets those wealthy enough to afford a second house and not use it primarily for rental income.
Q: How much would the bill cost owners of second homes?
A: The Franchise Tax Board estimates 195,000 homeowners would be affected by AB 71. The change would cost them, on average, about $1,140 annually. In addition, they can retain the sizable tax breaks they receive at the federal level on both their primary and secondary properties. This legislative proposal affects California only. Federal tax regulations still allow mortgage interest deductions on second homes.
Q: What options do owners have to lessen the impact on their taxes?
A: Talk to your mortgage advisor about financing strategies (such as restructuring debt), and your CPA about tax strategies for your second home (such as renting out your second property).
Married couples once again dominated the first-time homebuyer statistics last year at 66% of all buyers, according to the most recent Profile of Home Buyers & Sellers. It is no surprise that having two incomes to save for down payments and contribute to monthly housing costs makes buying a home more attainable.
Many couples are deciding to use what would otherwise be their wedding fund as a down payment on their first home, as unmarried couples made up 8% of all first-time buyers last year. If you’re single, don’t fret; you can still buy your dream home! Single women made up 17% of first-time buyers in 2016, while single men accounted for 7% of buyers.
According to a survey by the Wedding Report, the average cost of a wedding in the United States at the start of the year was $25,961, which equates to a 10% down payment on a median priced home.
A recent article from the New York Times found that many singles are now asking their parents to allow them to use the money they’ve saved up for their wedding day to instead buy a home.
In the case of Carrie Graham, a Protestant minister from Austin, TX, her parents had saved a ‘five-figure sum’ for her wedding and were more than willing to give her that money as a down payment on her dream home. Graham told The New York Times,
“Buying the home wasn’t me saying, ‘I’m never going to get married’ or I am going to get married.’ My own home had way more than equity benefits. It was a real gift to have a home in an extremely desirable neighborhood in a city that I love. It’s brought me joy.”
More and more first-time homebuyers are finding a way to purchase their dream homes, even if that means delaying their dream weddings.
I kinda suck at mortgage rates, but I know people who don’t….