Whether you are buying or selling a home, the process can be challenging. That is why you should take on the services of a real estate professional when embarking on a potential home move. However, not all real estate agents are the same. A family must make sure they hire someone who truly understands the current housing market and, not only that, knows how to connect the dots to explain how market conditions may impact your decision.
How can you make sure you have an agent who meets these requirements?
Here are just a few questions every real estate professional should be able to answer for their clients and customers:
- Are home values approaching a new bubble or will prices continue to appreciate?
- Is it better for a first time buyer or a move-up buyer to wait until they save a bigger down payment before they purchase a home?
- Where will 30-year mortgage rates likely be in 12 months?
- Why do I need an agent when I can just as easily find the house online myself?
- Is buying a home still a good investment for my family?
Make sure you hire an agent that can answer questions like those above. That will guarantee the home buying or selling process will be much easier for you and your family.
People across the country are beginning to think about what their life will look like next year. It happens every fall. We ponder whether we should relocate to a different part of the country to find better year round weather or perhaps move across the state for better job opportunities. Homeowners in this situation must consider whether they should sell their house now or wait. If you are one of these potential sellers, here are five important reasons to do it now versus the dead of winter.
1. Demand is Strong
Foot traffic refers to the number of people out actually physically looking at home right now. The latest foot traffic numbers show that there are more prospective purchasers currently looking at homes than at any other time in the last twelve months which includes the latest spring buyers’ market. These buyers are ready, willing and able to buy…and are in the market right now!
As we get later into the year, many people have other things (weather, holidays, etc.) that distract them from searching for a home. Take advantage of the buyer activity currently in the market.
2. There Is Less Competition Now
Housing supply is still under the historical number of 6 months’ supply. This means that, in many markets, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market.
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.
Also, new construction of single-family homes is again beginning to increase. A recent study by Harris Poll revealed that 41% of buyers would prefer to buy a new home while only 21% prefer an existing home (38% had no preference).
The choices buyers have will continue to increase over the next few months. Don’t wait until all this other inventory of homes comes to market before you sell.
3. The Process Will Be Quicker
One of the biggest challenges of the 2014 housing market has been the length of time it takes from contract to closing. Banks are requiring more and more paperwork before approving a mortgage. Any delay in the process is always prolonged during the winter holiday season. Getting your house sold and closed before those delays begin will lend itself to a smoother transaction.
4. There Will Never Be a Better Time to Move-Up
If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by over 19% from now to 2018. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30 year housing expense with an interest rate in the low 4’s right now. Rates are projected to be over 5% by this time next year.
5. It’s Time to Move On with Your Life
Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
Only you know the answers to the questions above. You have the power to take back control of the situation by putting your home on the market. Perhaps, the time has come for you and your family to move on and start living the life you desire.
That is what is truly important.
Many people report on the National Association of Realtors’ (NAR) Existing Home Sales Report which quantifies the number of closed sales of single-family homes, townhomes, condominiums and co-ops. However, there is another report that NAR releases each month that may be even more important – the Pending Home Sales Report which reveals the current Pending Home Sales Index.
According to NAR, the Pending Home Sales Index (PHSI) is
“a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.”
The PHSI generally leads Existing Home Sales by a month or two and therefore is a more current pulse on home sales.
How is the PHSI calculated?
According to NAR:
“An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined. By coincidence, the volume of existing-home sales in 2001 fell within the range of 5.0 to 5.5 million, which is considered normal for the current U.S. population”.
What does the PHSI look like right now?
The most recent report showed that the PHSI climbed 3.3 percent to 105.9 in July from 102.5 in June. The index is at its highest level since August 2013 (107.1) and is above 100 – considered an average level of contract activity – for the third consecutive month.
Looking at the PHSI at a regional level, we can see the comparative strength of each market.
This region includes the states of Connecticut, Maine, Massachusetts, New Hampshire, New Jersey, New York, Pennsylvania, Rhode Island, and Vermont.
The PHSI in the Northeast jumped 6.2 percent to 89.2 in July, and is 8.3 percent above a year ago.
This region includes the states of Illinois, Indiana, Iowa, Kansas, Michigan, Minnesota, Missouri, Ohio, North Dakota, Nebraska, South Dakota, and Wisconsin.
The PHSI in the Midwest fell 0.4 percent to 104.6 in July, and is 6.4 percent below a year ago.
This region includes the states of Alabama, Arkansas, Delaware, Florida, Georgia, Kentucky, Louisiana, Maryland, Mississippi, North Carolina, Oklahoma, South Carolina, Tennessee, Texas, Virginia, and West Virginia.
The PHSI in the South increased 4.2 percent to 119.0 in July, and is 1.0 percent below a year ago.
This region includes the states of Alaska, Arizona, California, Colorado, Hawaii, Idaho, Montana, Nevada, New Mexico, Oregon, Utah, Washington, and Wyoming.
The PHSI in the West increased 4.0 percent to 99.5 in July, and is 6.0 percent below a year ago.
There can be an argument made that the Pending Home Sales Report is actually the most important report released each month because of its timeliness and its measurement of an historically healthy market.
There are many hot topics right now and immigration is definitely one of them. Whether we agree or disagree on what is going on at this moment, the history of immigration starting around 1600 shows us the United States has been a country that always received immigrants. Several organizations have done research on the impact immigrants can have on housing demand. Let’s look at some of those results: Research done by the National Association of Home Builders (NAHB) in 2012 states: “Assuming net immigration of 1.2 million (the low end Census Bureau projection for 2010) persists for 10 years, the model estimates that after 10 years new immigrants will:
- account for close to 3.4 million US households
- occupy more than 2 million multifamily units and more than 1.2 million single family homes
- account for more than 900 thousand homeowners”
The Research Institute for Housing America also projects “that from 2010 to 2020 immigrants will count for over one-third of the growth of homeowners and over one-quarter of the growth in renter households.”
Need for Continued Research
In this month’s edition of Fannie Mae’s Housing Insights, they source the American Community Survey in stating that there were 18.8 million immigrant renters in the country in 2012. Fannie Mae goes on to say that these numbers represent “a large reservoir of potential future homeownership demand”. They conclude with:
“Continued study of how these and future immigrants advance into homeownership as they reside longer in the U.S. may provide valuable insights into future prospects for the country’s housing market.”
A More Localized Look at the Impact
For those looking for local data, a research study performed by AS/COA and Partnership for a New American Economy, provides an interactive map showing “the net change in a county’s immigrant population from 2000 to 2010 and the corresponding effect on median home values.”
If we look at the conclusions made by multiple sources, we see that they agree that immigrants will revitalize less desirable neighborhoods and support the housing market. Each group is seeking greater economic opportunities just like the immigrants in past decades that came to United States. The question is: are we prepared to help them with their real estate needs?
In a recent press release, Zillow stated that the affordability of the nation’s rental inventory is currently much worse than affordability of the country’s home sale inventory. The release revealed two things:
- Nationally, renters signing a lease at the end of the second quarter paid 29.5% of their income to rent
- U.S. home buyers at the end of the second quarter could expect to pay 15.3% of their incomes to a mortgage on the typical home
Furthermore, renters pay more than the average of 24.9% that was paid in the pre-bubble period while buyers actually pay far less than the 22.1% share homeowners devoted to mortgages in the pre-bubble days.
Don’t Become Trapped
If you are currently renting you could get caught up in a cycle where increasing rents continue to make it impossible for you to save for a necessary down payment. Zillow Chief Economist Dr. Stan Humphries explains:
“The affordability of for-sale homes remains strong, which is encouraging for those buyers that can save for a down payment and capitalize on low mortgage interest rates…As rents keep rising, along with interest rates and home values, saving for a down payment and attaining homeownership becomes that much more difficult for millions of current renters.”
Know Your Options
Perhaps you already have saved enough to buy your first home. HousingWire recently reported that analysts at Nomura believe:
“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.
It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)
Freddie Mac came out with comments on this exact issue:
- A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
- Freddie Mac’s purchase of mortgages with down payments under 10 percent more than quadrupled between 2009 and 2013.
- More than one in five borrowers who took out conforming, conventional mortgages in 2014 put down 10 percent or less.
Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.