Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

Jan. 17, 2018

61% of First-Time Buyers Put Down Less than 6%

 

61% of First-Time Buyers Put Down Less than 6% | MyKCM

According to the National Association of Realtors’ latest Realtors Confidence Index, 61% of first-time homebuyers purchased their homes with down payments below 6% from October 2016 through November 2017.

Many potential homebuyers believe that a 20% down payment is necessary to buy a home and have disqualified themselves without even trying. The median down payment for all buyers in 2017 was just 10% and that percentage drops to 6% for first-time buyers.

Zillow Senior Economist Aaron Terrazas’ recent comments shed light on why buyer demand has remained strong,

“Looking into 2018, rent is expected to continue gaining. More widespread rent growth could mean home buying demands stay high, as renters who can afford it move away from the unpredictability of rising rents toward the relative stability of a monthly mortgage payment instead.”

It’s no surprise that with rents rising, more and more first-time buyers are taking advantage of low-down-payment mortgage options to secure their monthly housing costs and finally attain their dream homes.

Bottom Line

If you are one of the many first-time buyers who is not sure if you would qualify for a low-down payment mortgage, let’s get together and set you on your path to homeownership!

Posted in Buyers, General News
Jan. 16, 2018

Get ahead....by getting ahead.

Thinking of Selling? Now is the Perfect Time

It is common knowledge that a great number of homes sell during the spring-buying season. For that reason, many homeowners hold off on putting their homes on the market until then. The question is whether or not that will be a good strategy this year.

The other listings that do come out in the spring will represent increased competition to any seller. Do a greater number of homes actually come to the market in the spring as compared to the rest of the year? The National Association of Realtors (NAR) recently revealed the months in which most people listed their homes for sale in 2017. Here is a graphic showing the results:

Thinking of Selling? Now is the Perfect Time | MyKCM

The three months in the second quarter of the year (represented in red) are consistently the most popular months for sellers to list their homes on the market. Last year, the number of homes available for sale in January was 1,680,000.

That number spiked to 1,970,000 by May!

What does this mean to you?

With the national job situation improving, and mortgage interest rates projected to rise later in the year, buyers are not waiting until the spring; they are out looking for homes right now. If you are looking to sell this year, waiting until the spring to list your home means you will have the greatest competition amongst buyers.

Bottom Line

It may make sense to beat the rush of housing inventory that will enter the market in the spring and list your home today.

Jan. 9, 2018

The Impact of Tight Inventory on the Housing Market

A comment about this article - not entirely true - it's a good time to sell if you are moving up (bigger house, more expensive house) - you're selling something that is more in demand than what you want to buy.  That said, the reverse is not true - downsizers are selling something that is less in demand than what they want to buy.  Truth be told it's all doable, but you have to face the challenge (in either case) of selling what you have with a contract contingency allowing you to find something else before you close on your sale.

The Impact of Tight Inventory on the Housing Market | MyKCM

The housing crisis is finally in the rearview mirror as the real estate market moves down the road to a complete recovery. Home values are up, home sales are up, and distressed sales (foreclosures and short sales) have fallen to their lowest points in years. It seems that the market will continue to strengthen in 2018.

However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. While buyer demand looks like it will remain strong throughout the winter, supply is not keeping up.

Here are the thoughts of a few industry experts on the subject:

 

National Association of Realtors

“Total housing inventory at the end of November dropped 7.2 percent to 1.67 million existing homes available for sale, and is now 9.7 percent lower than a year ago (1.85 million) and has fallen year-over-year for 30 consecutive months. Unsold inventory is at a 3.4-month supply at the current sales pace, which is down from 4.0 months a year ago.”

Joseph Kirchner, Senior Economist for Realtor.com

“The increases in single-family permits and starts show that builders are planning and starting new construction projects, that’s a good thing because it will help to relieve the shortage of homes on the market.”

Sam Khater, Deputy Chief Economist at CoreLogic

Inventory is tighter than it appears. It’s much lower for entry-level buyers.”

Bottom Line 

If you are thinking of selling, now may be the time. Demand for your house will be strong at a time when there is very little competition. That could lead to a quick sale for a really good price.

Jan. 8, 2018

712,000 Homes in the US Regained Equity in the Past 12 Months!

712,000 Homes in the US Regained Equity in the Past 12 Months! | MyKCM

CoreLogic’s latest Equity Report revealed that “over the past 12 months, 712,000 borrowers moved into positive equity.” This is great news, as the share of homeowners with negative equity (those who owe more than their home is worth), has dropped more than 20% since the peak in Q4 of 2009 (26%) to 4.9% today.

The report also revealed:

  • The average homeowner gained approximately $14,900 in equityduring the past year.
  • Compared to Q3 2016, negative equity decreased 22% from 3.2 million homes, or 6.3% of all mortgaged properties.
  • U.S. homeowners with mortgages (roughly 63% of all homeownershave seen their equity increase by a total of $870.6 billion since Q3 2016, an increase of 11.8%, year-over-year.

The map below shows the percentage of homes by state with a mortgage and positive equity. (The states in gray have insufficient data to report.)

712,000 Homes in the US Regained Equity in the Past 12 Months! | MyKCM

Significant Equity Is on The Rise

Frank Nothaft, Chief Economist at CoreLogic, believes this is great news for the “housing market.” He went on to say:

“Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

Of the 95.1% of homeowners with positive equity in the U.S., 82.9% have significant equity (defined as more than 20%). This means that more than three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home now.

The map below shows the percentage of homes by state with a mortgage and significant equity.

712,000 Homes in the US Regained Equity in the Past 12 Months! | MyKCM

Bottom Line

If you are one of the many homeowners who are unsure of how much equity you have in your home and are curious about your ability to move, let’s meet up to evaluate your situation.

Jan. 6, 2018

Who Pays for the Agents?

For the complete set of Buyer Faq Videos - go here.

 

 

Posted in Buyers
Jan. 3, 2018

The Benefits of Homeownership Go Beyond the Financial

The Benefits of Homeownership Go Beyond the Financial | MyKCM

Homeownership is a major part of the American Dream. As evidence of that, 91% of Americans believe that owning a home is either essential (43%) or important (48%) to achieving that “dream.” In a market where some people may be unsure about the benefits and possibilities of buying a home, it is important that we remember this.

Homeownership is NOT just about the money. In fact, some of the major benefits are non-financial. Here are a few of those benefits as per the National Association of Realtors:

  • Consistent findings show that homeownership does make a significant positive impact on educational achievement.
  • Several researchers have found that homeowners tend to be more involved in their communities than renters.
  • Early studies of homeownership and health outcomes found that homeowners and children of homeowners are generally happier and healthier than non-owners, even after controlling for factors such as income and education levels that are also associated with positive health outcomes and positively correlated with homeownership.

Bottom Line

Homeownership means something more to people and their families than just the financial considerations.

Dec. 31, 2017

There’s More to a Bubble Than Rising Home Prices

 There's More to a Bubble Than Rising Home Prices | MyKCM

What truly causes a housing bubble and the inevitable crash? For the best explanation, let’s go to a person who correctly called the last housing bubble – a year before it happened.

“A bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value, but the real key for detecting a bubble is speculation…Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the ‘bubble’ bursts.

I have taken to calling the housing market a ‘bubble’.”

– Bill McBride of Calculated Risk calling the bubble back in April 2005

Where do we stand today regarding speculation?

There are two measurements that are used to determine the speculation in a housing market:

  1. The number of homes purchased by an investor and
  2. The number of homes being flipped (resold within a twelve-month period)

As compared to 2005, investor purchases are down dramatically (from 23% to 13%) and so is flipping (from 8.2% to 5.7%). McBride explains:

“There is currently some flipping activity, but this is more the normal type of flipping (buy, improve and then sell). Back in 2005, people were just buying homes and letting them sit vacant – and then selling without significant improvements. Classic speculation.”

What are the experts saying about speculation in today’s market?

DSNews recently ran an article which asked two economists to compare the speculation in today’s market to that in 2005-2007. Here is what they said:

Dr. Eddie SeilerChief Housing Economist at Summit Consulting:

“The speculative ‘flipping mania’ of 2006 is absent from most metro areas.”

Tian LiuChief Economist of Genworth Mortgage Insurance:

“The nature of housing demand is different as well, with more potential homeowners and far fewer speculators in the housing market compared to the 2005-2007 period.”

And what does McBride, who called the last housing bubble, think about today’s real estate market?

Sixty days ago, he explained:

“In 2005, people were just buying homes and letting them sit vacant – and then selling without significant improvements. Classic speculation. And even more dangerous during the bubble was the excessive use of leverage (all those poor-quality loans). Currently lending standards are decent, and loan quality is excellent…

I wouldn’t call house prices a bubble – and I don’t expect house prices to decline nationally like during the bust.”

Bottom Line

Speculation is a major element of the housing bubble formula. Right now, there are not elevated percentages of investors and house flippers. Therefore, there is not an elevated rate of speculation.

Dec. 28, 2017

The Future of Interest Rates

While the recent past of future interest rates have been in question, the near future is not.  As of this writing, the interest rate on a 30-year fixed loan is about 4% (this means that for every $100,000 you borrow, your payment is $500 per month).

The Fed (the US Central Bank) has indicated that there will be three interest rate hikes this year, all amounting to about .25% each.  This means that by the end of 2018, our interest rates will likely be at about 4.75%.

How does this affect you?  With rising interest rates, buyers will not qualify for as large a loan.  Assuming that you are putting down about 20%.  The increased interest rate means that you will be able to afford 7.5% less house at the end of the year than the beginning of 2018.

If, for instance, you qualify for a $1,000,000 home today, after the three hikes you will qualify for about $925,000.

Even after the interest rate hike, rates will be at a historic low.  The average interest rate has been historically about 6.5%.  It is estimated that we will be back to 6% sometime in 2020.

That means it's better to buy sooner rather than later.  There are plenty of low down loan programs, and one that is even a ZERO down program.  Let's talk!

Dec. 24, 2017

The Future of SF Housing Prices

This picture has nothing to do with this article. I just like the house...

 

Purchasing property in San Francisco has become substantively more difficult over the past five years. There are four primary reasons for this. First, building in San Francisco has lagged behind need due to the difficulty of getting final approval to build. Second, there was a large backlog of people who did not, or were unable to, purchase in the immediate post-recession years. Third, demand has increased due to an influx of jobs in the region and in San Francisco specifically.   And finally, it should also be noted that low-interestrates contribute to rising home prices.  In all things real estate, whenever the pendulum swings very far in one direction you can be assured it will be coming back at some point.  In looking at all these things, it is important to be aware that some of these pressures should begin to abate soon.

 

First, let’s look at building:  Construction approval has been encouraged to speed up via an Executive Order issued by former Mayor Lee.  There are approximately 68,000 units in the pipeline to be constructed in San Francisco, which is enough to house approximately 150,000 people. It took us nearly 25 years to add the last 150,000 people, so it should be obvious that such is an extensive amount of housing.  There is one mitigating factor though: if developers do not feel they will meet their monetary goal on a specific project, they delay the project.

 

About our market that could not buy post-recession:  those who were stymied from purchasing a home from 2008 through 2012 created a backlog of four or five years of buyers. We have now had about five years to work our way through that market segment.

 

As far as employment goes, and specifically looking at tech employment, due to the high cost of living in San Francisco many tech companies are focusing on opening additional headquarters elsewhere. That said, the employment outlook in San Francisco is still very good. At this writing, San Francisco unemployment is at 2.9%. Unemployment at this level causes rising wages which can lead to higher housing costs. 

 

And finally, the days of low-interest appear to be drawing to a close, though it will still be a few years before we are at a historical average mortgage rate.  The Fed plans three rate hikes in 2018. With interest on a 30-year mortgage at about 4%, it is fairly certain that we will be just shy of 5% by the end of 2018. Should the economy continue to do well, further similar rate hikes by the Fed can be expected. The average 30-year fixed mortgage in the United States based on data collected from 1971 forward, indicates an average of 8.25%.  Focusing on the last 25 years, which eliminates the blip of the absurdly high inflation/interest rates of the 80s, makes more sense though it still includes the recession. By concentrating on the data going back through 1992, we find that the interest rate averages about 6.13%. I would suspect, then, that such is the rate that we will be returning to. Those that know more than I do about such subjects envision that occurring sometime in 2020.

 

All of these things have blended together to cause the run-up that we currently have had in real estate, specifically in healthy major metro areas. Those same effects are beginning to be simultaneously mitigated. Although I do not foresee a drop in prices, it is likely that the era of homes being on the market for only 14 days may be ending. Depending upon location and product, San Francisco real estate has been going up anywhere from 5% to 10% per year. This is far outpacing inflation. For this reason, I think that housing appreciation will return to a normal 3% to 5% per year in the relatively near future.  Again, no bubble, no drop, but a simple market normalization, though with higher interest rates.

Dec. 21, 2017

Housing Prices are NOT Heading for Another Crash

 

As home values continue to increase at levels greater than historic norms, some are concerned that we are heading for another crash like the one we experienced ten years ago. We recently explained that the lenient lending standards of the previous decade (which created false demand) no longer exist. But what about prices?

Are prices appreciating at the same rate that they were prior to the crash of 2006-2008? Let’s look at the numbers as reported by Freddie Mac:

Housing Prices are NOT Heading for Another Crash | MyKCM

The levels of appreciation we have experienced over the last four years aren’t anywhere near the levels that were reached in the four years prior to last decade’s crash.

We must also realize that, to a degree, the current run-up in prices is the market trying to catch up after a crash that dramatically dropped prices for five years.

Bottom Line

Prices are appreciating at levels greater than historic norms. However, we are not at the levels that led to the housing bubble and bust.