Buying Real Estate

Americans Have Never Felt This Good About Real Estate

Fannie Mae’s Home Purchase Sentiment Index surged to a new high as consumers became more upbeat about buying and selling, mortgage rates, and their jobs. Five of the six components measured by the index rose month over month.

“Consumer job confidence and favorable mortgage rate expectations lifted the HPSI to a new survey high in July, despite ongoing housing supply and affordability challenges,” says Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Consumers appear to have shaken off a winter slump in sentiment amid strong income gains. Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category. However, recent financial market events following when the survey data were collected could weigh on consumer views looking ahead.”

Overall, the HPSI, based on a survey of 1,000 Americans, rose 7.2 points compared to a year ago to a record-high reading of 93.7 in July. Here are some highlights from the index’s latest readings:

  • Buying: The net share of Americans who said now is a good time to buy a home rose 3 percentage points from June to 26%, up 2 percentage points from a year ago.

  • Selling: The net share of consumers who say it’s a good time to sell rose 1 percentage point to 44%, up 3 percentage points from a year ago.

  • Home prices: The share of Americans who say home prices will go up over the next 12 months fell 1 percentage point to 37%, down 2 percentage points from a year ago.

  • Mortgage rates: The share of consumers who believe mortgage rates will drop over the next year rose 1 percentage point and is up 24 percentage points from a year ago.

  • Job stability: Americans are more confident about their job situation, with the share who say they’re not concerned about losing their job over the next year rising 8 percentage points to 81%. This is up 16 percentage points from a year ago.

  • Household incomes: The share of Americans who say their household income is significantly higher than 12 months ago rose by 1 percentage point to 21%, essentially unchanged from a year ago.

Source: “Home Purchase Sentiment Index,” Fannie Mae (Aug. 7, 2019)

Bottom Line

Consumers are feeling good about the real estate market. Since Americans are not worried about their jobs, see mortgage rates near an all-time low, and believe it is a good time to buy, the housing market will remain strong for the rest of the year.

5 Real Estate Reality TV Myths Explained

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there, watching entire seasons of shows like “Property Brothers,” “Fixer Upper,” and “Love It or List It,” all in one sitting.

When you’re in the middle of your real estate-themed TV show marathon, you might start to think everything you see on the screen must be how it works in real life. However, you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and decide to purchase one of them.
Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors, the average homebuyer tours 10 homes as a part of their search.  

Myth #2: The houses the buyers are touring are still for sale.
Truth: Everything is staged for TV. Many of the homes shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the open house.
Truth: Of course, this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but they are only one piece of the overall marketing of your home. Keep in mind, many homes are sold during regular showing appointments as well. 

Myth #5: Homeowners decide to sell their homes after a 5-minute conversation.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives and goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee you can make the home of your dreams a true reality.

New FHA Rule Will Ease Condo Approval Process

The long-waited Federal Housing Administration (FHA) rule regulating condominium lending was finalized Wednesday afternoon.  The Department of Housing and Urban Development (HUD), the parent agency of FHA, published the final regulation and the policy implementation guidance establishing a new condominium approval process.

As a way of background, under existing rules, to obtain an FHA mortgage a borrower must not only satisfy the lender and the FHA that he or she is a qualified buyer but must purchase a unit that is itself qualified for financing. 

According to the National Association of Realtors®, FHA has put its stamp of approval on many complexes, but given the universe, not nearly enough. Of the more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA's mortgage insurance programs.   

To be approved under existing rules, condo communities must submit a pile of paperwork, be vetted by the administration, make any improvements specified by FHA, and then submit to a reexamination. Specified requirements cover the percentage of owner-occupied units, budgetary reserves, insurance coverage, and HOA dues collections. There are also location requirements related to transportation access.  FHA said its requirements were intended to "make sure that the property remains in good standing and will be desirable."

These requirements often left buyers selecting a condo only to find they could not obtain an FHA mortgage for which they were otherwise qualified. This has had implications for homeownership, especially for low-income borrowers, those with less than perfect credit scores, or with downpayments below the minimum level to obtain other financing.  This has become increasingly problematic as prices for single-family homes have escalated, making condo purchases more important as an option for entry-level buyers.

The new rule, which becomes effective on October 15, will allow a homebuyer to obtain an FHA mortgage for an individual condo unit in an unapproved condominium project if that project is completed and meets the following criteria:

  • In a development with fewer than 10 units, no more than two can be insured by FHA.

  • In a development that exceeds 10 units, a maximum of 10 percent can be insured by the FHA.

  • A minimum of 50 percent of project units must be owner-occupied.

The rule change also extends the certification period from two to three years and expands the eligibility criteria for mixed-use units.

HUD estimates the new rules will make an additional 20,000 to 60,000 condo units eligible for FHA insured loans each year.

HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery said, "Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium."

BY: JANN SWANSON

Busting the Myth About a Housing Affordability Crisis

It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by 3.5% over the last year.

Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.

1. National Association of Realtors’ (NAR) Housing Affordability Index:

Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:

housing affordability index.png

We can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts. However, homes are more affordable today than at any time from 1990 to 2008.

NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%.

payment as percentage of income.png

2. Black Knight’s Mortgage Monitor:

This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment...Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”

3. First American’s Real House Price Index:

While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:

“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.”

Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:

“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”

Bottom Line

If you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised!

Rising Affordability in Purchasing Real Estate

BY: JANN SWANSON

Black Knight has good news for potential homebuyers, especially those in the market for their first home. The new edition of the company's Mortgage Monitor says the recent decline in mortgage interest rates has made home affordability the best it has been in 18 months.

With the 30-year fixed-rate mortgage hovering around 3.75 percent, it now takes 21.3 percent of the nation's median monthly income to make a mortgage payment on the median priced home. This is down from 23.3 percent in November of last year and more affordable than the long-term ratio of around 25 percent that was in-play during a time when the market was generally considered to be "normal," 1995 to 2003. It is also much lower than the 34.5 percent ratio at the height of the housing boom.

The rising payment-to-income ratio, as it hit its recent peak last November, appeared to trigger a strong reaction in both sales and home prices.  Given its relatively modest historical position, Black Knight suggests there may be heightened sensitivity to affordability concerns in today's market. Both existing and new home sales have been ragged since then and, although home prices continued to rise, that rate at which they did so slowed considerably.

The average home price has gone up by more than $12 thousand since interest rates peaked last November, but the monthly payment has declined by $108 for an average home purchased with a 20 percent down payment.  Black Knight says this is the equivalent of a 15 percent increase in buying power and means a homebuyer could pay $45,000 more for a home without seeing an increase in the monthly payment.

payment to income ratio.jpeg

Of course, with lower rates and higher affordability, demand is growing again.  The company notes that, the 15-month pattern of price deceleration it had been tracking seems to have leveled off. The annual home price appreciation rate held steady in June at 3.78 percent.

Black Knight cautions that it takes time for impacts for interest rate changes to show up in housing market numbers; even after homebuyers react, there is a time lag due to contract, offer, closing, and recording times.  Therefore, the flat appreciation rate from May to June could be just the beginning and the 3.75 interest rate that hit at the end of June may not show up in home sale and price changes until August or September.

There is a large spread of payment to income ratios across the states, but affordability is improving.  Where nine states were less affordable than their long-term norms back in November, only California and Hawaii remained so as of July.

payment to income ratio by state.jpeg

Housing is least affordable along the western U.S. and parts of the northeast, while the Midwest and parts of the South are home to some of the lowest payment-to-income ratios.  Not only is housing in the Midwest the most affordable, but it is also the furthest below its own long-term average, as income growth there has been more in line with home price growth than in other areas.

july 2019 vs long term.jpeg

Even in California, however, affordability has improved.  The state went from having one of the top five home price growth rates of any state (8.6 percent) one year ago to second-to-last as of June 2019, with home price growth slowing to just 1.3 percent year-over-year.  The payment ratio in the state is now 34 percent, down 4 percentage point from November. That is, however, 2.5 points above its long-term ratio.  Growth declines in several of the West Coast's largest markets has been significant up; prices in the last 12 months have increased by 1.1 percent or less in Los Angeles, San Francisco, San Diego and Seattle. 

Price growth among condominiums have been experiencing greater slowing over the last 12 months than have prices of single-family homes. Up until then the two sets of prices had been rising in lockstep, but now condos are appreciating at 2.2 percent compared to single-family homes at 3.9 percent.  That is a 40 percent differential.  The company points out that condo prices are historically more volatile, they had a faster appreciation rate in the late 1990s and early 2000s, experienced a sharper downturn during the financial crisis and then recovered faster in 2012 to 2014.  Now the tide may be turning again.  The company said this could be due to a number of factors and it worth keeping an eye on.

Black Knight also provided an update on the prepayment rate which had been seeing some dramatic increases as rates declined. That, however, ended in June as activity fell by 7.5 percent.  It was the first monthly decline since January and the company calls it surprising "given that refinance incentive continues to rise, and home sale driven prepayments typically increase from May to June."


prepayment rate by investor.jpeg

 The declines were evident across servicing portfolios, investor classes, interest type and vintages but the strongest reductions were among portfolio held loans, high credit score mortgages and loans originated last year.  Those were the cohorts that had seen the largest increase in prepayments previous to June.  Black Knight says the pullback may be due to sluggish refi-driven prepayments in June rather than (or potentially in combination with) lackluster home sale driven prepays

Millionaire to Millennials: The Costly Mistake of Not Buying Now

On his personal website, self-made millionaire David Bach makes a striking statement:

 “Not prioritizing homeownership is the single biggest mistake millennials are making.” 

He further stated, “Buying a home is an escalator to wealth.”

Bach explains:

“Young adults in particular aren’t hopping on this escalator, and it’s a costly mistake…If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none.”

He then elaborates on the game of homeownership:

“Start by crunching the numbers…actually do the math...This way, you’re really clear on your goals and you won’t just say to yourself, ‘I’ll never afford this!'

A good rule of thumb is to make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay.”

Bach concludes by saying,

“Oftentimes, buying your first home means you’re not buying your dream home…You’re just getting into the market.”

Bottom Line

Whenever a well-respected millionaire gives investment advice, listeners usually clamor to hear it. This millionaire shares some simple and straightforward insights: “The fact is, you aren’t really in the game of building wealth until you own some real estate.”

Who is David Bach?

Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek, and USA Today bestseller lists.

He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.

Now's the Time To Move-Up and Upgrade Your Current Home

Homes priced at the top 25% of the price range for a particular area of the country are considered "premium homes." In today’s real estate market, there are deals to be had at the higher end! This is great news for homeowners wanting to upgrade from their current house.

Much of the demand for housing over the past couple of years has come from first-time buyers looking for their starter home. Many of the more expensive homes listed for sale have not seen as much interest.

According to ILHM’s Luxury Reportthis mismatch in demand and inventory of luxury and premium homes has created a Buyer’s Market. For the purpose of the report, a luxury home was defined as one that costs $1 million or more.

“A Buyer’s Market indicates that buyers have greater control over the price point. This market type is demonstrated by a substantial number of homes on the market and few sales, suggesting demand for residential properties is slow for that market and/or price point.”

The authors of the report were quick to point out that current conditions at the higher end of the market are no cause for concern.

“While luxury homes may take longer to sell than in previous years, the slower pace, increased inventory levels and larger differences between list and sold prices, represent a normalization of the market, not a downturn.”

Luxury can mean different things to different people. To one person, luxury is a secluded home with plenty of property and privacy. To another, it could be a penthouse at the center of a bustling city. Knowing what characteristics mean luxury to you will help your agent find you the home of your dreams.

Bottom Line

If you are debating upgrading your current house to a premium or luxury home, now is the time!

Home Prices Up 5.05% Across the Country

Some Highlights:

  • The Federal Housing Finance Agency (FHFA) recently released their latest Quarterly Home Price Index report.

  • In the report, home prices are compared both regionally and by state.

  • Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!

Home Prices Up.jpg


Mid-Year Housing Market Update: Three Things to Know Today

Shifting trends and industry-leading research are pointing toward some valuable projections about the status of the housing market for the rest of the year.

If you’re thinking of buying or selling, or if you just want to know what experts are saying is on the horizon, here are the top three things to put on your radar as we head into the coming months:

  1. Home prices are appreciating at a more normal rate: Home prices have been appreciating for about ten years now. Experts at the Home Price Expectation Survey, Mortgage Bankers Association, Freddie Mac, and Fannie Mae are forecasting continued growth throughout the next year, although it should be leveling-off to normal appreciation (3.6%), as we move into 2020.

  2. Interest rates are low: Over the past 30 years, the average mortgage rate in the United States has been 8.27%, and rates even peaked as high as 18% in the 1980s. Today, at 3.81%, the rate is considerably lower than the historical 30-year average. Although experts predict it may climb into the low 4% range in the near future, that’s still remarkably lower than our running average, suggesting a great time to get more for your money over the life of your loan.

  3. An impending recession does not mean there will be a housing crash: Although expert research studies such as those found in the Duke Survey of American CFOs and the National Association of Business Economics, are pointing toward a recession beginning within the next 18 months, a potential recession isn’t expected to be driven by the housing industry. That means we likely won’t experience a devastating housing crash like the country felt in 2008. Expert financial analyst Morgan Housel tweeted:

“An interesting thing is the widespread assumption that the next recession will be as bad as 2008. Natural to think that way, but, statistically, highly unlikely. Could be over before you realized it began.”

In fact, during 3 of the 5 last U.S. recessions, housing prices actually appreciated:

Home-Price-Change.jpg

Bottom Line

With prices appreciating and low interest rates available, it’s a perfect time to buy or sell a home. Reach out to a local real estate professional to see how you can take the next step in the exciting journey of homeownership.

Article from Keeping Current Matters

Mortgage Rates Hold Steady Despite Bond Market Weakness

Mortgage rates side-stepped today, bringing an end to a gentle but consistent move lower over the past 5 business days.  During that time the average conventional 30yr fixed rates for top tier scenarios fell about an eighth of a percentage point (0.125%).  While that only translates to about $7 per month for every $100k financed, it's a pretty decent move historically speaking.  Today's bond market momentum suggests the move could be in jeopardy. 

Bonds are the most direct source of inspiration for mortgage rates, and indeed, for rates in general.  The 10yr Treasury yield tends to track mortgage rates exceptionally well, and it was roughly 0.03% higher today.  The average lender, on the other hand, didn't change mortgage rates at all.  This has to do with the separate set of bonds specifically tied to mortgages: the aptly-named Mortgage-Backed Securities (MBS).  These held steadier today for a variety of reasons.  Simply put, Treasuries had a certain set of concerns not shared by MBS.  

All of the above having been said, if Treasuries lose enough ground, mortgages will eventually be forced to follow due to the structure of the bond market.  Lenders didn't see quite enough weakness for that to happen today, but they'll be starting the day with itchy trigger fingers when it comes to bumping rates up tomorrow.

Today's Most Prevalent Rates

  • 30YR FIXED - 3.875%

  • FHA/VA - 3.625%

  • 15 YEAR FIXED - 3.5-3.625%

  • 5 YEAR ARMS - 3.375-3.75% depending on the lender


Ongoing Lock/Float Considerations
 

  • Early 2019 saw a rapid reevaluation of big-picture trends in rates and in markets in general.

  • The Federal Reserve has been a key player, and while they aren't the ones pulling the global economic strings, their response (and even their EXPECTED response) to the economy has helped rates fall more quickly than they otherwise might.

  • Based on the Fed's laundry list of concerns, the bond market (which determines rates) will be watching economic data closely, both at home and abroad, as well as trade-related concerns. The stronger the data and trade relations, the more rates could rise, while weaker data and trade wars will lead to new long-term lows.

  • Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders. The rates generally assume little-to-no origination or discount except as noted when applicable. Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.

Article by Matthew Graham, Chief Operating Officer, Mortgage News Daily / MBS Live

8 Real Estate Investing Mistakes to Avoid

With the stock market volatility real estate investing is becoming more popular. Here are 8 mistakes to avoid in order to make your real estate portfolio successful.

Buying Without Researching: Rushing into real estate without understanding what you’re getting can lead to bad results, says Kyle Whipple, a financial advisor and registered investment at advisor at C. Curtis Financial Group in Plymouth, Michigan. “Just because real estate is doing well doesn’t mean it will turn out to be a good investment for you.” Stock investors are often told to “buy low, sell high” and that same rule can be put to use for property investments. “You want to make sure that you’re getting a good deal and not purchasing an overpriced piece of real estate which will lower your long-term returns,” Whipple says.

Developing a Tunnel Vision: Real estate adds a new dimension to a portfolio, in terms of balancing against the risk and volatility associated with stocks. Kaufman says a common mistake is being too narrow about property focus. “Many individuals fail to diversify their real estate holdings,” he says, investing only in one local geographic area or property type. “This all-eggs-in-one-basket approach drastically increases downside risk, but investors do this because they are more comfortable investing in markets they’re familiar with.” Casting the net wider to incorporate crowdfunded investments or real estate investment trusts, known as REITs, can offer exposure to a broader group of properties and increase diversification.

Going It Alone: Owning a commercial or residential rental property can be both time- and capital-intensive. Trying to handle it all solo can require a level of focus and commitment that may not be realistic for every investor. A simple way to avoid that mistake is building a team from day one, says Kevin Ortner, president and CEO of Renters Warehouse in Minneapolis. That may involve investing with a partner or working with a broader group of individuals that includes an experienced real estate agent, an attorney who’s well-versed in property law, professional contractors and a property management company. Having support can make investing in real estate a smoother experience, with less room for error.

Relying on Bad Advice: When seeking out help in making decisions regarding property investments it’s important to go to the right sources. “Making an investment in real estate, especially for first-time investors, can be daunting and nerve-wracking,” says Rowena Dasgupta, an agent at Warburg Realty in New York. “Often, people ask friends and family for their opinion more for reassurance than for legitimate guidance.” What they should be doing instead, Dasgupta says, is seeking counsel from real estate professionals or an investor with a lengthy track record of buying and selling properties. These individuals have the knowledge and experience to provide more reliable advice.

Assuming It’s Easy: Just like stocks, mutual funds, bonds or other investments, real estate requires a certain amount of know-how to navigate. Terrell Gates, founder and CEO of Virtus Real Estate Capital, says both large and small real estate investors can make the mistake of thinking that investing in property is easier than it is. This can be exacerbated in bull markets when real estate is going strong because people tend to forget about previous downturns. “Unfortunately, to be consistently successful in real estate over the long haul requires more skill than luck,” Gates says.

Chasing Bargains: Ortner says another common pitfall among real estate investors is only looking for a deal when buying a property. “If you’re going to make long-term real estate investments, you don’t need to buy at a major discount,” Ortner says. “You just need to do deals that make sense, because, over time, you’re going to be building equity.” He says many investors limit the properties they can buy because they’re hoping to land a major discount with value, which isn’t a realistic target in the current market environment. By maintaining a long-term outlook, investors can avoid the bargain hunter mentality and focus instead on growing their property portfolio.

Not Having an Exit Strategy: Real estate can be a good buy-and-hold option but failing to develop an exit strategy can be damaging. Whipple has seen this scenario play out firsthand, with investors selling a highly appreciated piece of property without a plan in place for what to do with the funds. “They feel they are done with the real estate game and want out,” he says. “Unfortunately, they end up getting hit with a lot of taxes.” Having an end-play for real estate investments from day one can help avoid costly situations when it’s time to sell.

Overlooking the Bigger Picture: The worst mistake with real estate investing may simply be not considering how to utilize it within a broader portfolio. “Many investors make mistakes when they don’t understand how real estate fits into their overall strategy that includes diversification, long-term appreciation, liquidity needs and cash flow,” says Brent Weiss, co-founder and chief evangelist of Facet Wealth. Having a financial plan that incorporates real estate begins with understanding investment goals, risk tolerance and time horizon. These are things a financial advisor can help with. “Once investors understand what strategy will support their plan, they can determine the right mix of asset classes to create success,” Weiss says.

Article from USNews

The Cost of Waiting: Interest Rates Edition

Some Highlights:

  • Interest rates are projected to increase steadily heading into 2020.

  • The higher your interest rate, the more money you will end up paying for your home and the higher your monthly payment will be.

  • Rates are still low right now – don’t wait until they hit 5% to start searching for your dream home!

Interest Rates.jpg

What a Difference a Year Makes for Sellers

Over the last few years, many sellers have been hesitant to put their houses on the market because they feared not being able to find another home to buy.

We’ve reported on inventory shortages in the past, and it’s been a constant concern for potential buyers throughout recent years. New research shows the inventory concern is starting to decrease among potential buyers.

According to First American, the two leading obstacles to homeownership that buyers feel today are Affordability and Limited Inventory. This means the feeling that homes are less affordable has risen, while the fear of limited inventory has decreased, delivering a wealth of good news for sellers.

2 obstacles to ownership.jpg

At the same time, over the past 12 months, we’ve seen a steady month-over-month increase in the number of homes coming to market for purchase. In the past, the lack of listings and available inventory slowed down the real estate market. This recent increase in current inventory has many buyers and sellers now thinking it is time to make their move – and rightfully so! For the last two months, we’ve seen over 4 months of inventory become available for sale, a promising number that’s been slowly increasing this year and creating more buying opportunities.

Inventory For Sale.jpg

To further support the idea of an improving real estate market, Sam Khater, the Chief Economist at Freddie Mac says,

“…In the near-term, we expect the housing market to continue to improve from both a sales and price perspective.” 

Many experts, like Sam, believe the second half of 2019 will drive a stronger market than we saw at the beginning of the year. This is great news for homeowners who have put off getting their houses on the market and are now ready to make a move.

Bottom Line

What a difference we’ve seen over the course of this year! If you’re thinking of selling, now is the time as inventory is on the rise.

5 Powerful Reasons to Own Instead of Rent

Owning a home has great financial benefits.

In a recent research paper, Homeownership and the American Dream, Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:

“Homeownership appears to help borrowers accumulate housing and nonhousing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”

Let’s breakdown 5 major financial benefits of homeownership:

1. Housing is typically the one leveraged investment available

Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.

Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is only a 10% increase in value but a 50% increase in equity.

2. You’re paying for housing whether you own or rent

Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin!!

3. Owning is usually a form of “forced savings”

Studies have shown that homeowners have a net worth that is 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average priced home this past January could build more than $42,000 in family wealth over the next five years.

4. Owning is a hedge against inflation

House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.

5. There are still substantial tax benefits to owning

We know that the new tax reform bill puts limits on some deductions on certain homes. However, in the research paper referenced above, the authors explain:

“…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”

Bottom Line

From a financial standpoint, owning a home has always been and will always be better than renting.