Posts Tagged ‘Market Conditions’

When’s The Best Time To Buy A House?

October 31, 2019

When's The Best Time To Buy A HouseIf you happen to want to move to a hot market for home sellers, here is some advice. Go looking for a home to buy when it is freezing outside or the weather is otherwise severe. Buying a home is both about finding one you like and beating out others if the market has buying competition. 

Days On Market

To find out the competition for a particular market, check the median number of days that a home is listed on the market before it sells. This is called the “days on market.”

In a hot seller’s market, the median number of listing days may be very low. The national average days on market (DOM) is 62 days in America.

The top ten cities where homes sell the fastest with the lowest DOM as reported by Realtor.com® are:

  1. San Francisco, CA – DOM 28
  2. Spokane, WA – DOM 31
  3. Boston, MA – DOM 32
  4. Colorado Springs, CO – DOM 32
  5. Lafayette, IN – DOM 34
  6. Columbus, OH – DOM 34
  7. Sacramento, CA – DOM 34
  8. Santa Cruz, CA – DOM 34
  9. Midland, TX – DOM 36
  10. Odessa, TX – DOM 36

Time Of Year

Most homebuyers look for a home during spring and summer. That is when the buying competition is normally stronger. June is the worst month to buy a home if you want to get a discount.

If you can wait until fall or winter, you may see more price reductions. The best time to make a low offer may be during the short window of time between Christmas and New Year’s when virtually no one is looking to buy a home.

Use bad weather for an advantage. Go looking for a home in the dead of winter, when the roads are barely passable, and you may be the only buyer interested. Another advantage that comes from viewing a home during severe weather is that you get to see how much trouble the weather will be if you own it. 

Tax Time

One very successful real estate investor buys homes right before tax time because that is when sellers are worried about paying taxes and might be more flexible on the price.

Estate Sales

It is possible to get a nice deal on a house when a family is liquidating assets.

Divorce

A seller may be motivated by having to sell a house as part of a divorce settlement.

Summary

The main factors, if you want to get a discounted price for buying a home, are not to be in a rush to buy one and take your time finding a home that is for sale by a motivated seller. Always ask, “Why are you selling your home?” when negotiating with a seller.

If you are interested in buying a new home or in refinancing your current property, be sure to contact your trusted home mortgage professional to discuss current financing options.

Fed Policymakers Cut Key Rate Range by .25 Percent

September 19, 2019

Fed Policymakers Cut Key Rate Range by.25 PercentThe Federal Reserve’s Federal Open Market Committee reduced its key short-term interest rate range one-quarter percent to 1.75 to 2.00 percent during it’s September meeting. While FOMC members had mixed opinions on reducing the benchmark rate range for short term loans, the post-meeting statement suggested that reducing the federal funds rate was a hedge against inflation. The federal funds rate impacts short-term consumer loan rates for autos and adjustable rate mortgages, but does not impact fixed mortgage rates. FOMC monetary policy decisions are governed by the Federal Reserve’s dual mandate of maintaining price stability and an inflation rate of 2.00 percent.

FOMC Members Facing Conflicted Opinions On Rate Cuts

Policymakers consider a variety of influences and news when cutting or raising the federal funds rate range. In addition to its dual mandate, FOMC members consider domestic and global impacts on the economy. Uncertainty over effects of international trade disputes and Great Britain’s looming exit from the European Union balanced strengths in the U.S. economy.

According to the post-meeting statement, seven FOMC members voted in favor of the rate cut to 1.75 to 2.00 percent; one member voted for a rate cut to 1.50 to 1.75 percent and two members voted against changing the target federal funds rate range.

Fed Chair: U.S. Economy Expected To Stay Strong

Fed Chair Jerome Powell said in a post-meeting press conference that while U.S. economy expanded for its 11th consecutive year, global economic outlook was less certain particularly in Europe and China. The U.S. economy expanded 2.50 percent in the first half of 2019; factors driving growth included rising consumer confidence, wages and strong job markets. Business investment and exports were lower due to uncertainties over trade. Job growth slowed, but this was expected based on 2018’s fast pace of job growth. Work force participation grew; the Fed expects the national unemployment rate to remain below four percent for the next few years.

Chair Powell said that maintaining strong economic conditions was particularly important for low to middle income consumers left behind during the Great Recession. While current inflation stands at 1.40 percent, the Fed projects that it will grow to 1.90 percent in 2020 and achieve the target goal of 2.00 percent in 2021. Chair Powell said that inflation pressures are muted and at the lower end of historical ranges.

Chair Powell echoed the FOMC statement in saying that the Fed would continue to monitor economic developments abroad and would adjust monetary policy according to economic developments prompted by trade disputes and emerging economic developments.

 

Young Home Buyers Are A Growing Trend

September 4, 2019

Young Home Buyers Are A Growing TrendA new group of young American adults is emerging as home buyers. These are the young adults who were born after 1995 and are part of the demographic group named Generation Z (Gen Z). In 2019, there are 31.5 million Gen Z members who are adult age. This will increase to 44.5 million adults in this demographic group by 2032 as all the younger members become adults.

Right now, there are around 14 million adults in the Gen Z category who are using credit for the first time.

Not Too Young To Buy A Home

Transunion reports that most Gen Z members are getting credit cards, which is the easiest form of credit available to them. However, they are also applying for mortgage financing in record numbers. The year-over-year increase in home loans among this demographic group is up 112%.

Planning For The Future

In a study conducted by Bank of America, the majority of Gen Z consumers, who are between 18 and 23 years old, are already saving for the down payment needed to buy a home. A huge number of them, 59%, report that they plan to purchase a home during the next five years.

Most dream of owning a home before they are 30 years old. They want to buy modestly-sized and lower-priced homes. They have a high interest in homes that are energy-efficient, homes that use smart technology, and those with renewable energy systems.

Smart Homes And Smart Financial Planning

Many of this generation are still living with their parents to save money for a home purchase, which they would otherwise have to pay in rent. Having lived through the Great Recession in 2008, they are, in general, more pragmatic than previous generations. They take home ownership very seriously.

Manifestation Of The American Dream

Over 71%, of those desiring to buy a home, are already designing it in great detail by selecting things they find on the Internet, which appeal to them. They use social media systems like Pinterest and others to get interesting decorative ideas. They share their home decor ideas with friends.

Conclusion

REALTORS® who work with this new group of home buyers will likely find them more motivated to buy a home than previous generations. They are usually more dedicated with their serious financial planning efforts in how to go about achieving their dreams.

The Generation Z consumers know what they want. They are willing to make sacrifices to get it. The majority want a home and are making plans about how to pay for it.

If you are in the market for a new home or interested in refinancing your current property, be sure to contact your trusted home mortgage professional to discuss your financing options.

Case-Shiller: June Home Prices Grew at Slowest Pace in 12 Years

August 28, 2019

Case-Shiller June Home Prices Grew at Slowest Pace in 12 YearsHome price growth continued to slow in June according to Case-Shiller’s 20-City Home Price Index. 17 cities reported higher home prices in June, but three cities reported lower home prices month-to-month. Seattle, Washington was the only city to report lower home prices year-over-year in June.

Phoenix, Arizona Home Price Growth Highest in June

Phoenix, Arizona toppled Last Vegas, Nevada’s hold on first place for home price growth in June. According to Case-Shiller’s 20-City Home Price Index, home prices in Phoenix rose by 5.80 percent year-over-year in June. Las Vegas, Nevada followed closely with year-over-year home price growth of 5.50 percent. Tampa, Florida had the third highest rate of home price growth with a year-over-year reading of 4.70 percent.

Home prices also slowed nationally; Case-Shiller reported 3.10 percent growth as compared to May’s year-over-year pace of 3.30 percent growth in home prices.

Home Buyers Leaving High-Cost West Coast

Analysts pointed out that recent slowing in home price growth followed a long period of rapidly rising home prices and higher mortgage rates. This sidelined many buyers as cash buyers and investors competed for fewer available homes. First-time and moderate income buyers could not afford rapidly rising prices and mortgages. Stricter mortgage loan requirements put in place after the Great Recession made qualifying for home loans more difficult.

Homeowners may not be seeing top pricing, buyer competition and offers higher than their asking prices, but after the long and fast increase in home prices, many sellers stand to realize significant profits after years of gains. At the height of the housing recovery, cities on the west coast saw steep rises in home prices. Seattle, Washington, Portland, Oregon and San Francisco, California enjoyed rapid home price growth as buyers paid cash and outbid each other, but lagging home price growth suggests that sky-high home prices have peaked in the West.

Seattle, Washington was the first city to show a year-over-year drop in home prices. Low mortgage rates may encourage formerly sidelined home buyers to enter the housing market. Analysts said that the only obstacle to increasing home sales might be homeowners unwilling to sell as home prices ease. Consumer concerns over the economic impact of trade tariffs may delay decisions to buy a home as consumer costs continue to rise. Home builders share these concerns as the cost of imported building materials increases.

 

Boom Or Bubble? – Home Prices Hit Record Highs Across America

August 20, 2019

Boom Or Bubble? - Home Prices Hit Record Highs Across AmericaThe rapidly rising home prices currently found in many parts of the United States make it seem like the Great Recession of 2008 never happened. It took approximately eight years for home prices to recover the values that were equivalent to those they had before the recession.

After reaching this point of recovery, since around 2016, real estate prices have been going up very quickly in many cities.

The Best Recovered Housing Markets

Here are the fully-recovered housing markets analyzed by ATTOM data service for the second quarter of 2019 that have exceeded the peak valuations from before the recession.

This list of winners shows the percentage that they are now above their pre-2008 peaks:

  • Greeley, Colorado (87% up)
  • Shreveport, Louisiana (81% up)
  • Denver, Colorado (80% up)
  • Austin, Texas (77% up)
  • Fort Collins, Colorado (76% up)
  • Dallas-Fort Worth, Texas (72% up)
  • Nashville, Tennessee (71% up)
  • San Antonio, Texas (58% up)
  • Houston, Texas (54% up)
  • San Jose, California (54% up)

It took quite a while for homes to have this much appreciation in value, which in most cases meant that the homes, first, had to increase significantly to overcome the lowered values from pre-recession peaks.

Homeowners Waiting Longer To Sell

Homeowners, who were wise and able, waited for this to occur. This accounts for the median of eight years that homeowners waited before selling now. Before the Great Recession, the median holding period for selling a home was only four years after purchase.

Homeowners who were able to hang on to their homes after the Great Recession hit, and then ride it out until now, are, in general, being rewarded for waiting to sell.

The Hottest Markets For American Cities

Most American cities are hot real estate markets. The appreciation rate for annual increases is up 89% of all the metro market areas.

Cities showing the greatest annual appreciation rates are:

  • Atlantic City, New Jersey (16% increase)
  • Boise City, Idaho (14% increase)
  • Chattanooga, Tennessee (13% increase)
  • Mobile, Alabama (11% increase)
  • Madison, Wisconsin (11% increase)
  • Milwaukee, Wisconsin (9% increase)
  • Boston, Massachusetts (9% increase)
  • Salt Lake City, Utah (9 % increase)
  • Columbus, Ohio (8 % increase)
  • Birmingham, Alabama (6% increase)

Summary

Whether this a continuing boom or an early indication of another real estate bubble that might eventually burst is anyone’s guess. It is a decent time to sell if selling a home is in the plans. It is a more challenging time for home buyers. However, the one thing the Great Recession taught us all is that housing prices do not always go up.

If you are in the market for a new home or interested in refinancing your current property, please consult with your trusted home mortgage professional.

A $400,000 Profit From Flipping A Single House?

August 14, 2019

A $400,000 Profit From Flipping A Single House 1Flipping homes is popular once again. It took about eight years after the Great Recession that started in 2006 for home prices to rebound to the levels seen before the recession. Then, by 2016, in many areas, home prices started to rapidly increase.

The increases in home prices caused more flipping activity due to the potential profits. CNN reports the average gross profit on a flipped home sold during the past three years was about 50%.

In 2017, one real estate speculator took nearly one million dollars ($985,00) in cash and bought a home in an “as-is” condition, sight-unseen. That is what Mr. Lin He did, hoping to make some easy profit.

The Math

Flipping properties successfully is math with a bit of luck mixed in. Mr. He had good luck with his purchase in that it was in Malibu, California. He bought the home at a price well below its market value. The home was a foreclosure that listed for sale at $1.39 million. There were no buyers at that price, so the home went up for auction in 2017. Mr. He was the high bidder at $985,000.

That price was irresistible. Simple math meant that there was about $400,000 in potential profits between the purchase price and the value of the home, once the home was back in a nice condition.

Mr. He was very happy to buy the home for that low price. Then, he went to visit the property.

The Mess

The house was a disaster. The previous owner, who lost the house to the bank, was obviously angry about the foreclosure and intentionally broke as much as possible. The condition of this home, made the most-wrecked fixer-upper look like a palace compared to the mess bought by Mr. He.

After he saw the home in person, Mr. He admits the home was in even worse condition than he expected. On top of that, there was an extended delay caused by the local building department, which took six months to issue the building permit needed for the construction. Then, renovations cost $300,000 and the comprehensive remodeling work went on for three full months after it started.

The Result

In early 2019, the home was ready and beautifully prepared for sale with expert staging. It listed with a very successful real estate agent in the Malibu area who marketed the property well as a featured listing.

The listing price was $1.97 million, which was double the price paid by Mr. He to buy the home. In less than three weeks, it sold for the full listing price, giving Mr. He about $400,000 in gross profits after the renovation expenses.

Mr. He was very lucky that the home prices rose so quickly that he got the $400,000 profit he thought was in the deal when he bought the home, even though he had to invest $300,000 in the renovation work.

Summary

With 50% average gross returns potentially possible, flipping is attractive to many; however, as Mr. He says, “It is not as easy as it looks on television.”

If you are interested in investing in a property to flip, be sure to consult with your trusted home mortgage professional to discuss financing options.

NAHB: Housing Market Index Rises 1 Point in July

July 17, 2019

NAHB Housing Market Index Rises 1 Point in JulyHome Builder sentiment rose one point in July according to the National Association of Home Builders Housing Market Index. 2019 builder confidence in housing market condition continued to fall short of 2018 levels. July’s Housing Market Index reading of 65 was one point higher than June’s reading.

Component readings also rose one point each. Builder confidence in current housing market conditions rose to 72; the reading for builder confidence in market conditions for the next six months rose to 71. Builder confidence in buyer traffic in new housing developments rose to an index reading of 48; buyer traffic readings seldom exceed the neutral reading of reading of 50.

2019 Builder Confidence Is Lagging Behind 2018 Readings

Year to date, builder confidence index readings averaged 63 as compared to a reading of 67 in 2018 and 68 in 2017. Ongoing headwinds affecting builders were familiar concerns over materials prices and shortages of buildable lots and labor. Analysts said that builders remain leery of building to many homes after having large inventories of unsold homes after the Great Recession.

Builders also noted that increasing regulation and local building codes are impacting some areas. Builders are under pressure to produce affordable homes, but are log-jammed by “not in my backyard” zoning restrictions when they apply to build mixed developments of single and multi-family homes.

There may be good news on the horizon. Oregon passed state legislation banning exclusively single-family zoning. Depending on population, local jurisdictions will be allowed to build duplexes and larger multi-family units. If other states and communities follow Oregon’s lead, builders may find new options for building multiple units on lots formerly zoned for single family homes. Building affordable homes would help to ease housing shortages and ease demand for homes.

If you are in the market for a new home or interested in listing your current property, be sure to contact your trusted home mortgage and real estate professionals. 

How To Find Hot Real Estate Markets

July 16, 2019

How To Find Hot Real Estate MarketsA hot market in real estate is identified by a few things, which include higher prices, lower amounts of unsold inventory, and desirable neighborhoods. Neighborhoods can increase in value because of having an excellent location, high-paying jobs, quality schools, and a variety of attractive amenities.

Hot Markets Are After The Fact

Properties in a hot market may sell faster, for higher prices, and without needing to be in perfect condition or staged for sale. Real estate investors do not necessarily benefit from learning about a hot market unless they already own property in that market area.

It is nice to be an owner with a property for sale in a hot market. However, more success may come from identifying a market as potentially valuable before it becomes a hot market.

Hot Market Trends Before The Fact

Gentrification is a pattern that may start out slowly and then build until a market goes from cold to hot. With gentrification, renovation of rundown neighborhoods attracts new, wealthier residents. Many cities encourage the gentrification of deteriorating urban areas.

Streets with abandoned storefronts may convert into pedestrian-only shopping promenades. Old wharf warehouses may turn into a riverfront boardwalk. Artist types may move into a bad neighborhood because of the low rent and then turn it into an eclectic, hip area with art galleries, coffee shops, boutiques, and street murals.

One way to benefit from gentrification possibilities is to follow the long-term development plans of a community and be an early investor in those plans. Invest in property just on the outskirts of a planned gentrification zone.

Be careful to note any physical barricades, such as a wide street, which may stop gentrification from progressing further. A wide street may prevent gentrification from moving across it to the rundown area on the other side.

A similar pattern shows up when investing in real estate that is on the outskirts of a growing area or adjacent to a desirable neighborhood. Over time, if the growth continues, these outlying areas may become a nicely profitable investment for those who are patient.

Getting Out Of A Hot Market At The Right Time

It is important to know when to sell properties in a hot market and move on to find a different one. Continuing to re-invest in a hot market may ultimately disappoint when there is a market correction to the downside. Try to avoid this if possible.

Market indicators to watch include:

  • Year-over-year increases in listing prices compared to historical figures for the same area.
  • The percentage of listings showing a price reduction.
  • The average time a property is listed before being sold.
  • A comparison between the listing price and the sales price for sold properties.

Conclusion

Studying market growth and guessing the direction of growth helps identify a potentially strong market before it gets hot.

It is time to sell and move on, if the listing prices are not increasing each year or if price reductions are increasing. Other strong indicators that a market is cooling down are when the average listing time is increasing and the average difference between the listing price and sale price is widening.

If you’re in the market for a new home or interested in refinancing your current property, be sure to set up a consult with your trusted home mortgage professional.

NAHB: Builder Confidence Slips in June

June 20, 2019

NAHB Builder Confidence Slips in JuneHomebuilder confidence dropped two points in June according to the National Association of Home Builders Housing Market Index. June’s index reading was 64, which indicates strong sentiment among home builders for current housing market conditions.

NAHB component readings also dropped in June with builder confidence in current home sales one point lower at an index reading of 71. Home builder confidence in home sales conditions over the next six months dropped two points to 70 and builder confidence in buyer traffic was one point lower at 48. Buyer traffic readings seldom exceed the NAHB benchmark reading of 50. Index readings over 50 indicate that most builders have positive sentiment toward conditions surveyed.

Home Builders Cite Ongoing Concerns and Growing Worry Over Tariffs

Home builders surveyed for June’s Housing Market Index cited continued concerns over shortages of labor and buildable lots, but also worried over increased materials costs resulting from recent tariffs. Analysts said that high demand for homes is driven by a current shortage of several million available homes; demand should be driving builder sentiment and housing starts much higher than current levels. Builder sentiment reported in the Housing Market Index typically drove housing starts, but this hasn’t been the case in the aftermath of the housing crisis. Severe shortages of homes for sale drive home prices up; this creates competition between buyers and sidelines first-time and moderate income home buyers.

While buyer traffic is robust, headwinds including high home prices and concerns about general economic conditions could be keeping would-be buyers on the fence. Low mortgage rates, which may drop further if the Federal Reserve lowers its key lending rate, could prompt more buyers to enter the market, but rapidly rising home prices in recent years have caused would-be buyers to hold off on buying homes. Faced with few options and high home prices, buyers may be waiting until more homes come on the market. Industry leaders have long said that building more homes is the only way to resolve the shortage of homes and high demand from home buyers.

Faced with rising materials costs and strict zoning rules, builders are tasked to find affordable housing solutions when fewer buildable lots and zoning rules discourage higher density affordable housing developments.

 

Case-Shiller: Home Price Growth Slows in March

May 29, 2019

Case-Shiller Home Price Growth Slows in MarchCase-Shiller Indices reported slower home price growth in March with a 3.70 percent gain year-over-year as compared to 3.90 percent home price growth for the year-over-year period in 2018. This was the slowest pace of home price growth in seven years.

The 20-City Home Price Index showed Las Vegas, Nevada as having the top year-over-year home price growth rate of 8.20 percent; Phoenix, Arizona had year-over-year home price growth of 6.10 percent. Tampa, Florida had the third highest growth rate for home prices at 5.30 percent. Analysts said that all three cities continue their recoveries from deep home price declines during the recession.

Did Home Prices Grow Too Fast?

David M. Blitzer, managing director and chairman of the S&P Dow Jones Index Committee, said that given strong economic signs in other sectors, housing should be doing better. He said that too-high home price gains may have caused slowing growth in home prices as fewer prospective buyers can afford skyrocketing home prices in many metro areas.

The 20-City Home Price Index showed New York City was the only metro area posting a negative growth rate in March; this was attributed to the region’s already high home prices. Fluctuating mortgage rates likely sidelined some prospective home buyers, especially first-time and moderate income buyers.

The U.S. Department of Housing and Urban Development reported that home affordability reached a ten-year low in the end of 2018. Coupled with short supplies of affordable homes and builders focusing on high end housing development, shortages of affordable homes are expected to continue, particularly in high demand metro areas.

Slower home price growth indicates that the rapid rise in home prices in recent years aren’t sustainable as fewer prospective buyers can afford to buy homes or cannot qualify for purchase money mortgages. When home prices rise faster than inflation and wages, home buyers encounter more challenges in their searches for affordable homes.