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The Louisville Real Estate Blog

Louisville Kentucky Real Estate Blog

Selling Your Home? Price It Right From the Start!

Selling Your House? Price It Right From the Start | Keeping Current Matters

In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.

There is no “later.”

Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.

John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Price published in Real Estate Economics revealed:

“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”

Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a...

Spring Buying Season Extends Into Summer [INFOGRAPHIC]

Spring Buying Season Extends Into Summer [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • Existing Home Sales are up 9.6% over last year.
  • Homes Sold on Average in just 34 days!
  • Inventory now stands at a 5.0-month supply.
  • Distressed Sales made up only 8% of all sales.
...

Are Home Values REALLY at Record Levels?

Are Home Values REALLY at Record Levels? | Keeping Current Matters

Last week, the National Association of Realtors (NAR) released their Existing Home Sales Report. The report announced that the median existing-home price in June was $236,400. That value surpasses the peak median sales price set in July 2006 ($230,400). This revelation created many headlines exclaiming that home prices had hit a “new record”:

Wall Street Journal: Existing-Home Prices Hit Record

USA Today: Existing home sales surge, prices hit record

Though the headlines are accurate, we want to take a closer look at the story. We do not want people to believe that this information is evidence that a new “price bubble” is forming in housing.

NAR reports the median home price. That means that 50% of the homes sold above that number and 50% sold below that number. With fewer distressed properties (lower valued) now selling, the median price will rise. The median value does not reflect that each individual property is increasing in value.

Below are the comments from Bill McBride, the author of the esteemed economic blog Calculated Risk. McBride talks about the challenges with using the median price and also explains that in “real”...

Buyer Demand Continues To Outpace Housing Supply

Buyer Demand Continuing to Outpace Housing Supply | Keeping Current Matters

The price of any item is determined by the supply of that item, and the market demand. The National Association of Realtors (NAR) recently released their latest Existing Home Sales Report.

Inventory Levels & Demand

Sales of existing homes rose 3.2% from May, outpacing year-over-year figures for the ninth consecutive month. Total unsold housing inventory is at a 5.0-month supply.

This is down from May’s 5.1-month supply and remains below the 6 months that is needed for a historically normal market.

Consumer confidence is at the highest level in over a decade. Pair that with interest rates still around 4%, new programs available for down payments as low as 3%, and you have an attractive market for buyers.

Buyer demand for housing surged to it’s highest level since June 2013.

Prices Rising

June marked the 40th consecutive month of year-over-year price gains as the median price of existing homes sold rose to $236,400 (up 6.5% from 2014).

So What Does This Mean?

The chart below shows the impact that inventory levels have on home prices.

Inventory & Pricing | Keeping Current Matters

NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:

...

5 Reasons You Should Sell Now!

5 Reasons to Sell You House Now! | Keeping Current Matters

As the temperature continues to rise, buyers are coming out ready to purchase their dream home. Here are five reasons that you should list your house for sale now.

1. Strong Buyer Demand

Foot traffic refers to the number of people out actually physically looking at homes right now. The latest foot traffic numbers show that there are significantly more prospective purchasers currently looking at homes than at any point in the last two years!

These buyers are ready, willing and able to purchase… and are in the market right now! Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

The National Association of Realtors reported last week that housing supply as slipped to a 5.0-month supply. This is still under the 6-month supply that is needed for a normal housing market.

This means, in most areas, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices.

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. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market in the near future.

The choices buyers have will continue to increase....

Cost Across Time [INFOGRAPHIC]

Cost Across Time [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • With interest rates still around 4% now is a great time to look back at where rates have been over the last 40 years.
  • Rates are projected to go up a full percentage point by this time next year according to Freddie Mac.
  • The impact your interest rate makes on your monthly mortgage cost is significant!
  • Lock in a low rate now while you can!
...

Freddie Mac: Equity Matters (a Lot!)

Freddie Mac: Equity Matters (a Lot!) | Keeping Current Matters

According to a Merrill Lynch survey, over 80% of the people in this country believe that homeownership is still “an important part of the American Dream”. There are many financial and non-financial reasons people feel this way.

One of the biggest reasons is because it helps build family wealth. Last week, Freddie Mac posted about the power of home equity. They explained:

“In the simplest terms, equity is the difference between how much your home is worth and how much you owe on your mortgage. You build equity by paying down your mortgage over time and through your home's appreciation. In a nutshell, your money is working for you and contributing toward your financial future.”

They went on to show an example where a person bought a home for $150,000 with a down payment of 10%, resulting in a loan amount of $135,000. The buyer secured a 30-year fixed-rate mortgage at 4.5% with a monthly mortgage payment of $684.03 (not including taxes and insurance). They then illustrated what would happen after seven years of making a mortgage payment, assuming 3% per year home appreciation (the historic national average):

Home Equity Calculation | Keeping Current Matters...

Stop Paying Your Landlord’s Mortgage!

Stop Paying Your Landlord's Mortgage | Keeping Current Matters

There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage - either your mortgage or your landlord’s.

As The Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.  

That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage,...

45% of Homes Sold in Less Than A Month! [INFOGRAPHIC]

45% of Home Sold In Less Than A Month [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • The National Association of REALTORS® surveyed their members for their Confidence Index
  • The REALTORS® Confidence Index is a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners. Practitioners are asked about their expectations for home sales, prices and market conditions.
  • Homes sold in 60 days or less in 35 out of 50 states and Washington D.C.
  • Only 7 states had a median sold date longer than 90 days.
...

The Main Reason You Should Not Wait to Buy…

The Main Reason You Should Not Wait to Buy | Keeping Current Matters

The Joint Center for Housing Studies at Harvard University recently released their 2015 State of the Nation’s Housing report. The report concentrated on the challenges renters in this country are facing because of the diminishing supply of quality rental units and dramatically escalating rents.

However, there was also information buried within the report that revealed that now is definitely the time to buy your first home or move-up to the home of your family’s dreams. With home prices still below peak values and mortgage rates still near historic lows, the monthly mortgage payment on a median priced home is less than at almost any time in the last 25 years.

Here is a graph which helps visualize the data from the report:

Median Mortgage Payment | Keeping Current Matters

Bottom Line

With home prices increasing and mortgage rates projected to increase, now is the time to buy.

...

Should I Rent My House Instead of Selling It?

Should I Rent My House Instead of Selling It?  | Keeping Current Matters

The results of Fannie Mae’s June 2015 National Housing Survey, were just released showing that more and more homeowners are warming up to the idea that now may be a great time to sell their home.

The amount of respondents that stated that now is a good time to sell rose three percentage points to a survey high of 52%; which may translate to a healthier market as more homes are listed in the coming months.

At the same time “the percentage of respondents who expect home rental prices to go up rose to 59% – a new survey high.” Doug Duncan, senior vice president and chief economist at Fannie Mae, gave this insight: “The expectation of higher rents is a natural outgrowth of increasing household formation by newly employed individuals putting upward pressure on rental rates.”

There is a chance that those who believe rental prices will rise may consider renting their house rather than selling it at this time.

However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for. Are you ready to be a landlord?

Before renting your home, you should answer the following questions to make sure this is the right course of action for you and your family.

10 Questions to ask BEFORE renting your home

    ...

Boomerang Buyers Coming Back in Force [INFOGRAPHIC]

Boomerang Buyers Coming Back in Force [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • What is a Boomerang Buyer? A former homeowner who has gone thru a “short sale”, “foreclosure” or “bankruptcy” in the past few years and has been saving for a down payment in preparation of the expiration of the waiting period, in order to qualify once again for a mortgage.
  • According to NAR: Up to 1 Million consumers have already restored their credit and qualify to buy now.
  • 2.2 million consumers will return to credit worthy status within the next 5 years.
...

Debunking Some Myths about Mortgage Availability

Debunking Some Myths about Mortgage Availability | Keeping Current Matters

There seems to be a growing chasm between what the public believes to be need and what is actually needed to qualify for a residential home loan.

A recent survey by Ipsos reported that:

  • Two-thirds of those surveyed believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780.
  • Consumers overestimate the down payment funds needed to qualify for a home loan, with 36 percent thinking a 20 percent down payment is always required.

However, according to American Enterprise Institute's International Center on Housing Risk’s May First-Time Buyer Mortgage Risk Index (FBMRI), reality is far from perception. The report reveals:

  • 70% of first-time buyer mortgages had a combined loan-to-value ratio of 95% or higher
  • About 20% of first-time buyers taking out mortgages had a FICO score below 660
  • 25% had total debt-to-income ratios above 43 percent
  • The median first-time buyer with an agency mortgage made a down payment of only 3 percent, or $7200 in dollar terms.
  • The median FICO score for first-time buyers with agency mortgages was 705
  • For first-time buyers with FHA-insured loans, the median FICO score was only 672

These numbers contradict the frequent claims...

What is a Housing Bubble? Is One Forming?

What is a Housing Bubble? Is One Forming? | Keeping Current Matters

The recent talk of Greece and its financial challenges has some questioning whether the U.S. could also return to the crisis we experienced in 2008. Some are looking at the rise in real estate values and wondering whether we are in the middle of another housing price bubble.

What actually is a price bubble?

Here is the definition according to Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania:

“A price bubble is a rise in price based on the expectation that the price will rise. Sooner or later something happens to erode confidence in continued price increases, at which point the bubble bursts and prices drop. What makes it a price bubble is that the cause of the price increase is an expectation that the price will increase, which sooner or later must reverse itself.”

Does Professor Guttentag believe we are in another housing bubble?

In a recent article, he explained:

“My view is that we are a long way from another house price bubble. Home buyers, lenders, investors and regulators now understand that a nationwide decline in house prices is possible -- because we recently lived through one.”

What are home prices doing?

Though home values are continuing to appreciation, the acceleration of the increases has slowed to year-over-year...

#1 Reason to Sell Your House Now!

#1 Reason to Sell Your House Now! | Keeping Current Matters

If you are one of the many homeowners out there who are debating putting their house on the market this year, don’t miss out on the great opportunity you have right now!

The latest Existing Home Sales Report from The National Association of Realtors (NAR), reveals that the inventory of homes for sale has dropped to a 5.1-month supply.

Historically, a 6-month supply is necessary for a ‘normal’ market, explained below:

Inventory & Pricing | Keeping Current Matters

There are more buyers that are ready, willing and able to buy now, than there has been in years! The supply of homes for sale is not keeping up with the demand of these buyers.

Bottom Line

Home prices are appreciating in this seller’s market. Listing now will give you the most exposure to buyers who will be competing against each other to buy your house.

...

One More Time…You DO NOT Need 20% Down

One More Time You Don't Need 20% Down | Keeping Current Matters

A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actually, there are many loans written with a down payment of 3% or less and the number has increased through the first quarter of the year as shown by the graph below:

Percent of Low Down Payments | Keeping Current Matters

2. FICO Scores

The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower:

Average FICO Scores | Keeping Current Matters...

Pending Home Sales Reach Highest Mark In 9 Years!

Pending Home Sales Reach Highest Mark In 9 Years! | Keeping Current Matters

The National Association of Realtors (NAR) recently released their Pending Home Sales Index Report and revealed that it is at its highest level since April 2006.

The Pending Home Sales Index is “a forward-looking indicator based on contract signings”. The higher the Pending Home Sales Index number, the more contracts have been signed by buyers that will soon translate to sales.

Every region of the country has experienced year-over-year gains in pending sales as seen below:

Pending Home Sales by Region | Keeping Current Matters

NAR’s Chief Economist, Lawrence Yun cites job creation as a major reason that the housing market has boomed this spring, going on to say,

"It's very encouraging to now see a broad based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive."

Yun went on to caution that,

"Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages. Without meaningful gains in new and existing supply, there's no question the goalpost will move further away for many renters wanting...

Two Graphs That Scream List Your House Today

Two Graphs That Scream You Should List Your House Today! | Keeping Current Matters

The spring and summer months have always been known as a very popular time for homebuyers to start the search for their dream home. This year is no different!

We all learned in school that when selling anything, you will get the most money if the demand for that item is high and the inventory of that item is low. It is the well-known Theory of Supply & Demand.

If you are thinking of selling your home, here are two graphs that strongly suggest that the time is now. Here is why…

DEMAND

According to research at the National Association of Realtors (NAR), buyer activity this year has far outpaced the same months in 2014. Purchasers who are ready, willing and able to buy are in the market at great numbers.

Foot Traffic | Keeping Current Matters

According to NAR, “Foot Traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future.”

SUPPLY

The most recent Existing Home Sales Report from NAR revealed that the current supply of...

Equity Report [INFOGRAPHIC] June 2015

Equity Report [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • 85% of homes valued under $200,000 have equity
  • 94% of homes valued over $200,000 have equity
  • 10.2% of homes with a mortgage are currently underwater
...

Sellers Dilemma: OTM, FSBO or List Again?

Sellers Dilemma: OTM, FSBO or List Again? | Keeping Current Matters

At the end of June, in every region of the country, hundreds of homeowners have a tough decision to make. The ‘listing for sale agreement’ on their house is about to expire and they now must decide to either take their house off the market (OTM), For Sale by Owner (FSBO) or list it again with the same agent or a different agent.

Let’s assume you or someone you know is in this situation and take a closer look at each possibility:

Taking Your Home off the Market

In all probability, after putting your house on the market and seeing it not sell, you’re going to be upset. You may be thinking that no one in the marketplace thought the house was worthy of the sales price.

Because you are upset, you may start to rationalize that selling wasn’t that important after all and say,

“Well, we didn’t really want to sell the house anyway. This idea of making a move right now probably doesn’t make sense.”

Don’t rationalize your dreams away. Instead, consider the reasons you decided to sell in the first place. Ask your family this simple question:

“What made us originally put our home up for sale?”...