As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first-time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home.
Let us explain.
There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.
What will happen over the next 12 months?
According to CoreLogic’s latest Home Price Index, prices are expected to rise by 4.7% by this time next year.
Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30-year fixed mortgage rate will appreciate to 4.7% in that same time.
What Does This Mean to a Buyer?
Here is a simple demonstration of what impact these projected...
In today's market, with homes selling quickly and prices rising some homeowners might consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons this might not be a good idea for the vast majority of sellers.
Here are five reasons:
1. There Are Too Many People to Negotiate With
Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies, which work for the buyer and will almost always find some problems with the house.
- The appraiser if there is a question of value
2. Exposure to Prospective Purchasers
Recent studies have shown that 88% of buyers search online for a home. That is in comparison to only 21% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?
3. Results Come from the Internet
Where do buyers find the home they actually purchased?
- 43% on the internet
- 9% from a yard sign
- 1% from newspaper
The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.
4. FSBOing has Become More and More Difficult
You and your family have decided to sell your house. It is now time to choose a real estate professional to help with the process. One of the major attributes this agent must possess is trustworthiness. To what degree do you need to trust them?
You must have enough trust in them that you feel comfortable they will accomplish all four things below:
1. Sell possibly the largest asset your family owns
In many cases, a home is the largest asset a family has. Studies have shown that the equity many families have in their home is the largest percentage of that family’s overall wealth.
2. Set the correct market value on that asset
Pricing is crucial even in the best of markets. You want to get the best price for your home without putting your house at a value that buyers will have little interest.
3. Set the time schedule for the liquidation of that asset
Your family probably has a certain timetable for the sale of your house and the move into your next home. Coordinating the home selling process to meet certain schedules can be tricky.
4. Set a fair fee for the services required to liquidate that asset
You will need to pay a commission to an agent for selling the home and coordinating all elements of the selling transaction including possible future negotiations (ex. with a home inspector or appraiser).
That’s a lot of trust. Make sure you pick a true professional to help with the sale of your home.
According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index homeownership is a better way to produce greater wealth, on average, than renting.
The BH&J Index is a quarterly report that attempts to answer the question:
Is it better to rent or buy a home in today’s housing market?
The index examines that entire US housing market and then isolates 23 major markets for comparison. The researchers at use a “’horse race’ comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in homeownership.”
Ken Johnson, Real Estate Economist & Professor at Florida Atlantic University, and one of the index’s authors states: "The U.S. as a whole is still in clear buy territory. The cities of Cincinnati, Chicago, Cleveland, and New York City are deep into buy territory."
Miami and Portland had been inching closer toward renting being the better option but have "pulled back from the edge." Johnson goes on to say, “that's a good sign for home pricing as it suggests prices are going to level off in these metro areas."
Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, so lock in your housing cost with a mortgage payment now.
In school we all learned the Theory of Supply and Demand. When the demand for an item is greater than the supply of that item, the price will surely rise.
The National Association of Realtors (NAR) recently reported that the inventory of homes for sale stands at a 4.8-month supply. This is significantly lower than the 6 months inventory necessary for a normal market.
Every month NAR reports on the amount of buyers that are actually out in the market looking for homes, or foot traffic. As seen in the graph below, buyer demand this year has significantly surpassed the levels reached in 2014.
Many buyers are being confronted with a very competitive market in which they must compete with other buyers for their...
Earlier this month, Fannie Mae’s Economic & Strategic Research Group announced the launch of their Home Purchase Sentiment Index (HPSI). The index will distill results from Fannie Mae’s consumer-focused National Housing Survey into a single, monthly, predictive indicator. According to Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, the goal for the new index is simple:
“The Fannie Mae Home Purchase Sentiment Index provides the market a single number to track consumer attitudes focused on the housing market. Utilizing our National Housing Survey, the only consumer sentiment survey of its kind focused on housing, the HPSI will offer insights regarding current and future-looking housing market outcomes and will complement existing data sources to inform housing-related analysis.”
Here is a graph of the findings of the HPSI from May 2011 until the current index. A higher number reflects a more positive sentiment from the consumer.
According to consumer sentiment, the housing market has made great strides over the last four years.
There are many young people debating whether they should renew the lease on their apartment or sign a contract to purchase their first home.
Housing Cost & Net Worth
Whether you rent or buy, you have a monthly housing cost.
As a buyer, you are paying YOUR mortgage.
Every mortgage payment is a form of what Harvard University’s Joint Center for Housing Studies calls “forced savings.”
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
The principal portion of your mortgage payment helps build your net worth through building the equity you have in your home.
As a renter, you are paying YOUR LANDLORD’S mortgage.
Below is an example of the home equity that would be accrued over the course of the next four years if you were to buy a home by the end of this year; based on the results of the Home Price Expectation Survey.
Last month, the National Association of Realtors (NAR) reported that housing inventory was down 4.7% from the same time last year and that the month’s inventory of homes for sale stood at 4.8 - far below the six months necessary for a normal housing market. Why is there such a shortage of inventory?
The recently released Homeowner Sentiment Survey suggests that the American homeowner may not be fully aware of the opportunities that exist in the current real estate market. The survey, conducted by Edelman Berland for HSF Affiliates, also reports that many homeowners would be placing their home up for sale if they were better informed about today’s market.
Since the housing industry is facing a shortage of housing inventory, the survey’s findings are crucially important.
The survey reported that 23% of current homeowners questioned are considering selling their home, but haven’t yet put it up for sale. That’s almost one out of every four houses. This is the inventory necessary to normalize the balance between “supply & demand” in the current market.
Why are potential sellers hesitating?
The survey shows that 55% of the 23% contemplating selling “would be more likely to put their homes on the market if given more information about the process”. What information do they need?
Here are a few of the challenges that potential sellers perceive to exist according to the survey along with what is actually happening in today’s market:...
If you are debating purchasing a home right now, you are surely getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in real estate.
Let’s look at whether or not now is actually a good time for you to buy a home.
There are 3 questions you should ask before purchasing in today’s market:
1. Why am I buying a home in the first place?
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances.
A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:
- A good place to raise children and for them to get a good education
- A place where you and your family feel safe
- More space for you and your family
- Control of that space
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.
2. Where are home values headed?
When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts...
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 actuality, there are many loans written with a down payment of 3% or less.
Here are the results from a Digital Risk survey done on Millennials:
2. FICO Scores
The Ipsos 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.
Here are the numbers from a recent Ellie Mae report:
There are some homeowners that have been waiting for months to get a price they hoped for when they originally listed their house for sale. The only thing they might want to consider is... If it hasn't sold yet, maybe it's not priced properly.
After all 15,315 houses sold yesterday, 15,315 will sell today and 15,315 will sell tomorrow.
That is the average number of homes that sell each and every day in this country according to the National Association of Realtors’ (NAR) latest Existing Home Sales Report. NAR reported that sales are at an annual rate of 5.59 million. Divide that number by 365 (days in a year) and we can see that, on average, over 15,315 homes sell every day.
The report from NAR also revealed that there is currently only a 4.8 months supply of inventory available for sale, (6 months inventory is considered ‘historically normal’).
This means that there are not enough homes available for sale to satisfy the buyers who are out in the market now in record numbers.
We realize that you want to get the fair market value for your home. However, if it hasn't sold in today's active real estate market, perhaps you should reconsider your current asking price.