58% of Homeowners See a Drop in Home Values Coming

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After what transpired just ten years ago, we can understand the concern Americans have about the current increase in home prices. However, this market has very little in common with what happened last decade.

The two major causes of the housing crash were:

  1. A vast oversupply of housing inventory caused by home builders building at a pace that far exceeded historical norms.
  2. Lending standards that were so relaxed that unqualified buyers could easily obtain financing thus enabling them to purchase a home.

Today, housing inventory is at a 20-year low with new construction starts well below historic norms and financing a home is anything but simple in the current mortgage environment. The elements that precipitated the housing crash a decade ago do not exist in today’s real estate market.

The current increase in home prices is the result of a standard economic equation: when demand is high and supply is low, prices rise.

If you are one of the 58% of homeowners who are concerned about home values depreciating over the next two years and are hesitant to move up to the home of your dreams, take comfort in the latest Home Price Expectation Survey.

Once a quarter, a nationwide panel of over one hundred economists, real estate experts and investment & market strategists are surveyed and asked to project home values over the next five years. The experts predicted that houses would continue to appreciate through the balance of this year and in 2018, 2019, 2020 and 2021. They do expect lower levels of appreciation during these years than we have experienced over the last five years but do not call for a decrease in values (depreciation) in any of the years mentioned.

Bottom Line

If you currently own a home and are thinking of moving-up to the home your family dreams about, don’t let the fear of another housing bubble get in the way as this housing market in no way resembles the market of a decade ago.

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Mortgage Rates Dive to Another Low

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Mortgage Rates Dive to Another Low

Mortgage rates dove to another low this week, with the 30-year, fixed rate averaging 3.90 percent, down from 3.93 percent the week prior, according to Freddie Mac’s recently released Primary Mortgage Market Survey® (PMMS®). The 15-year, fixed rate averaged 3.18 percent, the same from the week prior, while the 5-year, Treasury-indexed hybrid adjustable rate averaged 3.14 percent, down from 3.15 percent the week prior.

“After holding relatively flat last week, the 10-year Treasury yield fell four basis points this week,” says Sean Becketti, chief economist at Freddie Mac. “The 30-year mortgage rate moved in tandem with Treasury yields, dropping three basis points to 3.90 percent. Earlier this week, Federal Reserve officials highlighted the influence of continued weak inflation data on rates.”

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When Disaster Strikes, Be Prepared to Meet the Needs of Your Community

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When Disaster Strikes, Be Prepared to Meet the Needs of Your Community

As a real estate agent, you’re in the middle of the action. Whether it’s a prospect asking where they can find a good cappuccino or a past client wondering if you know a reputable company to come fix their garage door, chances are, you’ll be able to point them in the right direction. But what can you do when your contacts come to you with a problem that can’t be fixed with a trip to the local coffee house or a repair recommendation? In a recent interview, California real estate agent Timothy Toye shared what the days and weeks following one of the worst forest fires in California’s history were like, as well as how his role in real estate shifted to meet his community’s needs.

Play Podcast: Natural Disaster – An Agent Survival Story | Timothy Toye | Secrets Unplugged

September 12, 2015 started as a normal day for Toye, but shifted in a moment. “I had an appointment at 2:30 to meet with a seller of mine,” Toye explained. “At 2:00, the seller called and said, ‘Don’t come over. We’re getting evacuated.’”

Before long, Toye’s office was ordered to evacuate, too. Luckily, he stored most of his data in the cloud, so all he had to do was pack up the computers and leave. Toye stressed that when deciding what to bring with you, “It depends on how urgent it is; when you’re asked to evacuate, it’s obviously urgent. The main thing is to preserve human life. Everything else comes second from that.”

Toye was evacuated for about two weeks and he noticed that “everybody immediately had a shared concern…’What’s happening to the area? What’s happening to my house, your house, our neighbor’s houses?’” No one knew whether or not their home or business still existed. “There was a lot of hysteria and rumors.

“Just coming back in and passing on whatever information and helping people…at that point it was not about the business anymore,” Toye explained. “It was more about just helping people on a very human level to deal with a dramatic natural event that had all kinds of difficult financial and emotional and personal consequences for people. So that was kind of the beginning of it.”

Toye made it his mission to get involved and let people know “what areas were hit and which weren’t,” and passed along other important information to those who were still evacuated, such as when essential services like electricity were restored. People who lost their homes were able to start working with their insurance companies and move forward.

When dealing with disaster, you must “be adaptable…it was a moment just to respond…be smart, be intelligent, be compassionate.” As a real estate agent, you should “participate with your community because when you’re in need, you want a community around you. Be there for people.”

While we hope your community is never faced with disaster, it never hurts to be prepared. Help your clients be ready to hunker down or evacuate at a moment’s notice by sharing the Emergency Preparedness Checklist with your clients. Just add your contact information and share it with your friends, family, contacts, and community.

For more information, please visit connect.homes.com.

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4 Creative Ways to Work Around the Inventory Problem

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4 Creative Ways to Work Around the Inventory Problem

One of the most frustrating aspects of this year’s housing recovery is that solid demand from buyers has encountered stubbornly low inventory levels in many U.S. and Canadian markets, especially for starter homes. It’s a situation that requires both patience and creative solutions.

As a managing broker, your buyer’s reps may be tossing up their hands and asking, “What can I do?” To be sure, when the supply of homes is inadequate, buyers’ options are limited.

On the other hand, this may be an excellent time for your agents to explore options that aren’t on the buyer’s radar. At a minimum, buyer-clients will feel better about working with someone who keeps the dialogue going and remains interested in proposing potential solutions, including:

  1. Buy a fixer-upper. That run-down house that’s been sitting on the market for months may be a diamond in the rough for a buyer with the vision to see its potential, especially if they have the time and skills to participate in renovations. Before making an offer, however, encourage your agents to assist this buyer in estimating renovation costs and identifying people in the trades to assist them. Also, see if they qualify for and can take advantage of FHA’s 203(k) renovation loan.
  1. Buy a teardown and rebuild. If a buyer doesn’t want to deal with the potential headaches of a fixer-upper, they may be a good candidate for purchasing a teardown, or a vacant lot, and building a new home. Fortunately, there are many ways to accomplish this without the expense of hiring an architect or a custom home builder. Learn who is supplying prefabricated and modular homes to your market—options that aren’t only economical and energy-efficient, but also increasingly popular with younger buyers.
  1. Explore rent-to-own possibilities. One reason starter homes are so hard to find is because many move-up buyers are holding onto their original home, renting it to someone else or listing it on sites like Airbnb. Coupled with investor purchases during the housing slump, it’s no wonder inventories are pinched at certain price points. While national rent rates continue to inch up, some markets are already facing declines. This may be the perfect time to approach investor-owners with a rent-to-own proposal for your buyer-client.
  1. Buy a larger home with rentable space. If a buyer qualifies for a larger mortgage than they need (or want), it may make sense to go ahead and purchase a bigger property that includes a mother-in-law apartment or similar rentable space. That way, the buyer can offset part of their mortgage expense with rental income, while also building extra equity in their home. Additionally, if they start feeling crowded in their home, they may decide to take over the rental space, eliminating the need to search for a larger house, while also saving on transaction and moving expenses.

Admittedly, these solutions may be less than ideal for many buyers. Until the inventory situation improves, they’re examples of ways to put a positive spin on a challenging situation. After all, as the saying goes, “When life gives you lemons, make lemonade.”

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Why Inventory Is the Lowest It’s Been in 20 Years

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Why Inventory Is the Lowest It’s Been in 20 Years

Housing demand continues to outstrip supply, with shortages now at their worst in 20 years. Why?

The answer is simple: Homeowners are happy where they are, according to a new survey by realtor.com®. Sixty-three percent of homeowners surveyed say their current house meets their needs, with baby boomer homeowners especially unwilling to move—a problem for succeeding generations, who are missing out on the 33 million condos and single-family houses boomers currently own. An overwhelming 85 percent of boomers surveyed have no plans to list their home for sale in the next year, with 72 percent reporting that their existing house suits their needs. Sixty-five percent of Gen X homeowners and 52 percent of millennial homeowners echoed the same sentiment.

Homeowners overall also see no need to uproot, the survey shows. Sixteen percent are not moving up due to their low mortgage interest rate (and 13 percent due to their low property taxes), 15 percent are remaining in place because they recently bought their home (a reason reported by 27 percent of millennial homeowners), and another 13 percent are staying put to make upgrades.

“Life events drive real estate transactions,” says Danielle Hale, chief economist for realtor.com. “When the majority of homeowners feel their family needs are being met by their current home, there is nothing compelling them to put their home on the market.”

Many are hesitant to sell, as well, because they know how high-priced and scarce homes are.

“Boomers indeed hold the key to those homes the market desperately needs, both in the urban condo and the detached suburban home segment,” Hale says. “But with a strong economy and rising home prices, there’s really no reason for established homeowners to sell in the short term. Although downsizing might be on the minds of boomers, they face the same inventory shortages and price increases plaguing millennials.”

Fifty-nine percent of millennial homeowners surveyed have no plans to list their home for sale in the next year, but 35 percent do—and, of those, 60 percent are looking to trade up. If their plans pan out, the housing market could gain a boost in entry-level stock.

“The housing shortage forced many first-time homebuyers to consider smaller homes and condos as a way to literally get their foot in the door,” says Hale. “Our survey data reveals that we may see more of these homes hitting the market in the next year, but whether these owners actually list will depend on whether they can find another home.”

More than 60 percent of the real estate brokers in RISMedia’s 2017 Power Broker Survey reported limited inventory as their most challenging issue.

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Housing Inventory Hits 30-Year Low

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Spring is traditionally the busiest season for real estate. Buyers, experiencing cabin fever all winter, emerge like flowers through the snow in search of their dream home. Homeowners, in preparation for the increased demand, are enticed to list their house for sale and move on to the home that will better fit their needs.

New data from CoreLogic shows that even though buyers came out in force, as predicted, homeowners did not make the jump to list their home in the second quarter of this year. Frank Nothaft, Chief Economist for CoreLogic had this to say,

“The growth in sales is slowing down, and this is not due to lack of affordability, but rather a lack of inventory. As of Q2 2017, the unsold inventory as a share of all households is 1.9 percent, which is the lowest Q2 reading in over 30 years.”

CoreLogic’s President & CEO, Frank Martell added,

“Home prices are marching ever higher, up almost 50 percent since the trough in March 2011.

While low mortgage rates are keeping the market affordable from a monthly payment perspective, affordability will likely become a much bigger challenge in the years ahead until the industry resolves the housing supply challenge.”

Overall inventory across the United States is down for the 25th consecutive month according to the latest report from the National Association of Realtors and now stands at a 4.3-month supply.

Real estate is local.

Market conditions in the starter and trade-up home markets are in line with the median US figures, but conditions in the luxury and premium markets are following an opposite path. Premium homes are staying on the market longer with ample inventory to suggest a buyer’s market.

Bottom Line

Buyers are out in force, and there has never been a better time to move-up to a premium or luxury home. If you are considering selling your starter or trade-up home and moving up this year, meet with a local real estate professional who can explain the exact conditions in your area.

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How Long Do Most Families Stay in Their Home?

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The National Association of Realtors (NAR) keeps historical data on many aspects of homeownership. One of the data points that has changed dramatically is the median tenure of a family in a home, meaning how long a family stays in a home prior to moving. As the graph below shows, for over twenty years (1985-2008), the median tenure averaged exactly six years. However, since 2008, that average is almost nine years – an increase of almost 50%.

How Long Do Most Families Stay in Their Home? | Keeping Current Matters

Why the dramatic increase?

The reasons for this change are plentiful!

The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property). Also, the uncertainty of the economy made some homeowners much more fiscally conservative about making a move.

With home prices rising dramatically over the last several years, 93.9% of homes with a mortgage are now in a positive equity situation with 78.8% of them having at least 20% equity, according to CoreLogic.

With the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.

One other reason for the increase was brought to light by NAR in their 2017 Home Buyer and Seller Generational Trends Report. According to the report,

Sellers 36 years and younger stayed in their home for six years…”

These homeowners who are either looking for more space to accommodate their growing families or for better school districts are more likely to move more often (compared to 10 years for typical sellers in 2016). The homeownership rate among young families, however, has still not caught up to previous generations, resulting in the jump we have seen in median tenure!

What does this mean for housing?

Many believe that a large portion of homeowners are not in a house that is best for their current family circumstance; They could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple living in a one-bedroom condo planning to start a family.

These homeowners are ready to make a move, and since a lack of housing inventory is still a major challenge in the current housing market, this could be great news.

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