Just like our clocks last weekend, the housing market will soon “spring forward!” Similar to tension in spring, the lack of inventory available for sale has been holding back the market. Many potential sellers believe that waiting until Spring is in their best interest. Traditionally, they would have been right. Buyer demand has seasonality to it. Usually, this falls off in the winter months, especially in the areas impacted by weather.
This hasn’t happened this year. Demand for housing has remained strong as mortgage rates have remained near historic lows. Even with an increase in rates forecasted for 2019, buyer are still able to lock in an affordable monthly payment. Buyers are increasingly jumping off the fence and into the market to secure a lower rate. The National Association of Realtors (NAR) recently reported that in 2018 the top 10 dates sellers listed their homes fell in April, May or June. Those who act quickly and list now, before the flood of increased competition, will benefit form additional exposure of buyers.
If you are planning on selling your home in 2019, let’s talk to evaluate the opportunities in your market.
No Worries… Home Prices Coming in for a SOFT Landing!
Home prices have appreciated considerably over the last five years. This has some concerned that we may be in for another dramatic correction. However, recent statistics suggest home values will not crash as they did a decade ago. Instead, this time they will come in for a soft landing.
The previous housing market was fueled by an artificial demand created by mortgage standards that were far too lenient. When this demand was shut off, a flood of inventory came to market. This included heavily discounted distressed properties (foreclosures and short sales).
Today’s market is totally different. Mortgage standards are tighter than they were prior to the last boom and bust. There is no fear that a rush of foreclosures will come to market. The Mortgage Bankers’ Association just announced that foreclosures are lower today than at any time since 1996.
Case Shiller looks at the percentage of appreciation as compared to the same month the year prior. Here is a graph of their findings over the last ten months:
As we can see, home price appreciation is softening as more inventory comes to market. This shows that real estate prices are not crashing, but merely returning toward historic appreciation numbers of 3.6% annually.
According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at their lowest for 2019. Rates like these haven’t been seen since February 2018!
Last week’s survey results reported an interest rate of 4.35%. This is a welcome change from the near 5% rates seen in mid-November. At 4.32%, the second week of February 2018 was the last time rates were this low. This can be seen in the chart below.
Freddie Mac’s Chief Economist, Sam Khater, had this to say:
“Mortgage rates fell for the third consecutive week, continuing the general downward trend that began late last year.
Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.”
Home ownership is and will always be part of the American Dream! There are many financial and non-financial benefits to take advantage of when owning a home. If owning a home is part of your dream, contact me to help you with the process!
Every family has a list of important dates. We celebrate birthdays, anniversaries, pet adoptions…and the list goes on. For 64.4 percent of households in the United States, this list includes the day they became a homeowner for the first time!
Why is this date important? Homeownership is not just a roof over your head! It represents shelter, stability, wealth, and pride! For decades, homeownership has been an important part of the American Dream!
However, many question if the next generations see the same benefits of homeownership as their predecessors.
In case we have forgotten, some of those benefits are:
1) Educational Achievement: Homeownership has a positive impact on academic achievement, including reading and math performance in children 3-12 years old.
2) Civic Participation: “Owning a home means owning a part of the neighborhood.” Homeowners have a stronger connection to their neighborhood and are more committed to volunteer.
3) Health Benefits: Adjusting for a range of demographic, socioeconomic and housing-related characteristics, homeowners have a substantial health advantage over renters.
4) Public Assistance: The report shows 47% of homeowners use their home equity credit lines to help pay other debts, diminishing their need for public assistance.
5) Property Maintenance and Improvement: A well-maintained home not only generates benefits through consumption and safety, but a high-quality structure also raises mental health.
6) Pride of Ownership: This place is uniquely “yours.” You can customize it according to your likes and personality.
In addition to financial benefits, homeownership also brings significant social benefits. These not only pertain to the family, but extend to the communities, the state, and the country!
Buying a home is an investment in your future!
- Appreciation: On average, home prices are appreciating annually at a rate of 3.6%. This helps to create a safety net.
- Forced Savings: Your mortgage is like a forced savings plan! With each payment, you are reducing the principal of your loan.
- Home Equity: Homeownership builds equity every single month. You can later use that equity to start a business, send your children to college, etc.
- Net Worth: A homeowners’ net worth is 44x greater than renters! This gives you the financial freedom to invest.
- Stability: Rent prices increase 4% annually! A fixed mortgage payment allows you to save for future projects and guard against inflation.
- Tax Benefits: The government has created tax benefits to encourage customers to purchase. (Talk to your CPA to see which benefits apply to you).
3 Tips for Making Your Dream of Buying A Home Come True [INFOGRAPHIC]
- Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking too much about it.
- Living within a budget right now will help you save money for down payments while also paying down other debts that might be holding you back.
- What are you willing to cut back on to make your dreams of homeownership a reality?
3 Reasons Why We Are Not Heading Toward Another Housing Crash
With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.
Here are three key metrics that will explain why:
- Home Prices
- Mortgage Standards
- Foreclosure Rates
A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.
Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.
Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,
“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
Last month, their January Housing Credit Availability Index revealed:
“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”
Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:
“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”
After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.
We are right around the corner from the presidential election and many of my clients have asked me how the election will affect interest rates.
Historical archived data from the Primary Mortgage Market Survey from Freddie Mac which dates back to 1971 might shed some light on what usually happens to interest rates after an election.
The numbers below are for 30 year fixed rate mortgages:
1972 – Richard Nixon won in a landslide victory over George McGovern.
Prior to the election the rate was 7.43% and it increased slightly to 7.44% in December.
1976 – Jimmy Carter won over Gerald Ford.
Prior to the election the rate was 8.81% and it declined a bit to 8.79% in December.
1980 – Ronald Reagan defeated Jimmy Carter.
Prior to the election the rate was 14.21% and it increased to 14.79% in December.
1984 – Ronald Reagan ran for a second time and defeated Walter Mondale.
Prior to the election the rate was 13.64% and in December it declined slightly to 13.18%.
1988 – George H. Bush defeated Michael Dukakis.
Prior to the election the rate was 10.27% and in December it rose to 10.61%.
1992 – Bill Clinton defeated George H. Bush.
Prior to the election the rate was 8.31% and a month later it decreased to 8.21%.
1996 – Bill Clinton defeated Bob Dole.
Prior to the election the rate was 7.62% and it decreased to 7.60% in December.
2000 – George W. Bush defeated Al Gore.
Prior to the election the rate was 7.75% and it fell slightly to 7.38% in December.
2004 – George W. Bush defeated John Kerry.
Prior to the election the rate was 5.73% and it increased slightly to 5.75% in December.
2008 – Barack Obama defeated John McCain.
Prior to the election the rate was 6.09% and decreased to 5.09% in December.
2012 – Barack Obama defeated Mitt Romney.
Prior to the election the rate was 3.38% and decreased slightly to 3.31% in December.
The fear most people have that rates will take a dramatic hike after an election is truly not warranted. Its a good reminder that the state of the economy determines the overall change in interest rates.
Buying a home is an exciting and emotional time for many people. To help you buy your home with more confidence, make sure you get owner’s title insurance. Here’s why it’s so important for you.
Protects Your Largest Investment
A home is probably the single largest investment you’ll make in your life. You insure everything else that’s valuable to you—your life, car, personal property, health, pets, jewelry, etc.—so why not your largest investment? For a one-time fee, owner’s title insurance protects your property rights for as long as you or your heirs* own the home.
Reduces Your Risk
If you’re buying a home, there are many hidden issues that may pop up after purchasing it. Getting an owner’s title insurance policy protects you from legal title discrepancies. Don’t think it will happen to you? Think again. Here are just some of the many situations that you’ll be protected from if you have owner’s title insurance.
Unforeseeable title claims, such as:
• Forgery: making a false document. For example, the seller misrepresents the identity of the person selling the property.
• Fraud: deception to achieve unfair gain. For example, someone steals your identity and either sells your house without your knowledge or consent, or takes out a second mortgage on the property and walks away with the money.
• Clerical error: inconsistent paperwork and historical records. For example, an unforeseeable discrepancy in the property or fence line causes confusion in ownership rights.
Unexpected title claims, such as:
• Outstanding mortgages and judgments, or liens against the property because the seller didn’t pay required taxes
• Pending legal action against the property that could affect your ownership
• An unknown heir of a previous owner who is claiming ownership of the property
You Can’t Beat the Value
Owner’s title insurance is a one-time fee that’s very low relative to the value it provides. It typically costs around 0.5% of a home’s purchase price.
Covers Your Heirs*
As long as you or your heirs* own your home, owner’s title insurance protects your property rights.
Home insurance and warranties protect only the inside of the home. Getting owner’s title insurance ensures your family’s property rights stay protected.
8 in 10 Homebuyers Agree
Each year, more than 80% of America’s homebuyers choose to get owner’s title insurance.
Peace of Mind
If you’re buying a home, owner’s title insurance lets you rest assured, with the knowledge that you won’t be stuck with certain existing debts or legal problems once you’ve closed on your new home.
More Homebuyer Tips & Information
The American Land Title Association helps educate homebuyers like you about title insurance so you can protect your property rights. Check out www.homeclosing101.org to learn more about title insurance and the home closing process.