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”:
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”...
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.
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.
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).
The chart below shows the impact that inventory levels have on home prices.
NAR’s Chief Economist, Lawrence Yun gave some insight into the correlation:...
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.
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.
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....
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):
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,...
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:
With home prices increasing and mortgage rates projected to increase, now is the time to buy....
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.
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:
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:
These numbers contradict the frequent claims...
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.
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.”
Though home values are continuing to appreciation, the acceleration of the increases has slowed to year-over-year...
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:
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.
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....
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.
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:
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: