A Housing Bubble? Industry Experts Say NO!

With residential home prices continuing to appreciate at levels above historic norms, some are questioning if we are heading toward another housing bubble (and subsequent burst) like the one we experienced in 2006-2008.

Recently, five housing experts weighed in on the question.

Rick Sharga, Executive VP at Ten-X:

“We’re definitely not in a bubble.”

“We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.”

Christopher Thornberg, Partner at Beacon Economics:

“There is no direct or indirect sign of any kind of bubble.”

“Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.”

Bill McBride, Calculated Risk:

“I wouldn’t call house prices a bubble.”

“So prices may be a little overvalued, but there is little speculation and I don’t expect house prices to decline nationally like during the bust.”

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices:

“Housing is not repeating the bubble period of 2000-2006.”

“…price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.”

Bing Bai & Edward Golding, Urban Institute:

“We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis.”

“Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.”

Source: Keeping Current Matters | The KCM Crew 110917 

Multigenerational Households May Be The Answer To Price Increases

Multigenerational homes are coming back in a big way! In the 1950s, about 21%, or 32.2 million Americans shared a roof with their grown children or parents. According to an article by Realtor.com, “Nearly 1 in 5 Americans is now living in a multigenerational household – a household with two or more adult generations, or grandparents living with grandchildren – a level that hasn’t been seen in the U.S. since 1950.”

Another report that proves this point is the National Association of Realtors’ (NAR) 2017 Profile of Home Buyers and Sellers which states that 13% of home buyers purchased multigenerational homes last year. The top 3 reasons for purchasing this type of home were:

1. To take care of aging parents (22%, up from 19% last year)
2. Cost savings (17%)
3. Children over the age of 18 moving back home (16%, up from 14% last year)

Valerie Sheets, Spokesperson for Lennar, points out that,

“Everyone is looking for the perfect home for any number of family situations, such as families who opt to take care of aging parents or grandparents at home, or millennials looking to live with their parents while they attend school or save for a down payment.”

For a long time, nuclear families (a couple and their dependent children) became the accepted norm, but John Graham, co-author of “Together Again: A Creative Guide to Successful Multigenerational Living,” says, “We’re getting back to the way human beings have always lived in – extended families.”

This shift can be attributed to several social changes over the decades. Growing racial and ethnic diversity in the U.S. population helps explain some of the rise in multigenerational living; “Data suggest that multigenerational living is more prevalent among Asian (28%), Hispanic (25%), and African-American (25%) families, while U.S. whites have fewer multigenerational homes (15%).”

Additionally, women are a bit more likely to live in multigenerational conditions than are their male counterparts (12% vs. 10%, respectively). Last but not least, basic economics.

Valerie Sheets brings to light the fact that home prices have been skyrocketing in recent years. She says that, “As home prices increase, more families tend to opt for living together.”

Bottom Line 

Multigenerational households are making a comeback. While it is a shift from the more common nuclear home, these households might be the answer that many families are looking for as home prices continue to rise in response to a lack of housing inventory.

Source: Keeping Current Matters | The KCM Crew 110717

Low Inventory Causes Home Prices To Maintain Fast Growth

The National Association of Realtors (NAR) released their latest Quarterly Metro Home Price Report last week. The report revealed that severely lacking inventory across the country drained sales growth and kept home prices rising at a steady clip in nearly all metro areas. Home prices rose 5.3% over the last quarter across all metros.

Lawrence Yun, Chief Economist at NAR, discussed the impact of low inventory on buyers in the report:

“Unfortunately, the pace of new listings were unable to replace what was quickly sold. Home shoppers had little to choose from, and many had to outbid others in order to close on a home. The end result was a slowdown in sales from earlier in the year, steadfast price growth and weakening affordability conditions.”

What this means to sellers

Rising prices are a homeowner’s best friend. As reported by the Washington Post in a recent article post:

“The rise in median sales prices has made current homeowners much more willing to sell their home, and that willingness is one of the main drivers behind the inventory that does make it on to the market. While it hasn’t been enough to meet demand, it has made the situation much better, compared with even three or four years ago.”

What this means to buyers

In a market where prices are rising, buyers should take into account the cost of waiting. Obviously, they will pay more for the same house later this year or next year. However, as Construction Dive reported, the amount of cash needed to purchase that home will also increase.

“These factors have created a situation where the market keeps moving the goalposts in terms of the down payment necessary for first-time homebuyers to get into a home.”

Bottom Line 

If you’re thinking of selling and moving down, waiting might make sense. If you are a first-time buyer or a seller thinking of moving up, waiting probably doesn’t make sense.

Source: Keeping Current Matters | The KCM Crew 110617

What Keeps Buyers From Finding Their Next Home

Buying a home is like searching for a mate. You'll go on many first dates and in the end, the one that has most, but maybe not all of the characteristics that you want, will win your heart.

However, first-time buyers and sometimes even serial homebuyers are disappointed by how long the process takes. Yet they may not understand how their expectations, beliefs, and lack of action may be causing the delay in finding the right home.

Here are five pitfalls that buyers can fall into that cause them to let the right home slip by.

Seeing a home "as-is". I don't mean that buyers should not view homes on the market that are listed for sale "as-is"; rather I mean not being able to see beyond the "as-is" home. In other words, some buyers walk into a home and are immediately turned off by something as simple as the color of paint which can be easily changed, or maybe it's the carpet or wallpaper. Regardless, when buyers see the home "as-is" without the ability to envision it differently, they do themselves a huge disservice and fall into a pitfall of thinking that the home is not right simply because of the condition they are currently seeing it in.

Not working with an expert agent. Buyers can weed through the paper and click around the Web looking for open houses and listings but a quality agent can help identify the best-suited properties much faster. An expert agent also often knows about other listings that are about to come on the market and would not be in the paper or on the Web yet. It's worth it to spend time interviewing agents to find the right one who can help you find the right home. If you fall into the pitfall of trying to do everything on your own, you're likely going to miss seeing some of the houses that might offer the best match for your wants and needs.

Letting the important things slide. We've all done this when making an expensive purchase. We compromise on something that is important simply because it's less expensive. Later we regret it. Whether it's a new car, new house, or flat screen TV, when you're making large purchases, you need to know which things are important and non-negotiable and then stick to that list. Of course, there may be some small, less important things that you'll compromise on, but if you compromise on something big that is important to you, you're likely going to be disappointed down the road.

There is a reason you were searching for a three-bedroom home. So, for instance, when you fall in love with that quaint, cozy two-bedroom home, remember that you had specific reasons for needing an additional bedroom. If you've clearly defined your living needs and wants before you begin house hunting, you'll have guidelines to keep you on track.

You might find that the smaller home has a secondary unit on the property and, while it's not a third bedroom, it will suit your needs. So, yes, be flexible and think of the possibilities, but do remember your list of what you originally deemed important. The tendency is to get caught up in the moment, either because a home is so charming or because it appears to be such a good deal that you start to say, "Well, I can make-do without that." Maybe you can...but you'd better be certain before you close escrow.

Living strictly in the moment. Most of the time I write about practicing living in the moment because so many of us lead hectic lives. But when you're buying a home, you'd better be thinking about the future. What's good for you today will likely need to be good for you for many years to come. So, do your homework to find the right home. Work with your agent to find out how the neighborhood is changing. What future plans are there for the community? Pay attention to the congestion of an area and to the types of retail shops and restaurants that are coming into the community...then compare that to your future plans. You can't always know what lies ahead but many times you can see what types of projects have been proposed for undeveloped land in the area.

Skipping an inspection. I've written a lot about this one. Inspections are critical. They're the equivalent of taking a car you want to buy to your car repair shop for a look before you buy. Just like you don't want to end up with a lemon for a car, you don't want a home that has too many and too costly repairs needed. Inspections give you a "health" check of the home. They let you know what you're in for should you buy the home. You'll be glad you have a report to help validate your reasons for wanting to purchase this home over others.

Avoiding these pitfalls will help you more quickly find the right home and the right investment for your future.

Source: RealtyTimes | Realty Times Staff 110217

Thinking About Buying? Know Your Credit Score

Knowing your credit score or getting a recent copy of your credit report is one of the first steps that you can take toward knowing how ready you are to start the home buying process.

Make sure all the information listed on your report is accurate and work to correct any mistakes. The higher your credit score, the more likely you will be to receive a better interest rate for your mortgage, which will translate into more ‘home for your money.’

Many potential buyers believe that they need a 750 FICO® Score or higher to be able to purchase a home. The truth is that according to Ellie Mae’s Origination Report, over 53% of loans were approved with a FICO® score under 750 last month!

Here are some tips for improving your credit score:

• Make payments, including rent, credit cards, and car loans, on time.
• Keep your spending to no more than 30% of your limit on credit cards.
• Pay down high-balance credit cards to lower balances, and consider balance transfers to free up credit.
• Check for errors on your credit report and work toward fixing them.
• Shop for mortgage rates within a 30-day period — too many spread-out inquiries can lower your score.
• Work with a credit counselor or a lender to improve your score.

Once you know your score, your next step will be finding a lender and getting pre-approved for a mortgage. Doing this will ensure that you know your budget before you start looking for your dream home.

Source: Keeping Current Matters | The KCM Crew 110117

Don’t Let Fear Stop You From Applying For A Mortgage

A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.

For many, the mortgage process can be scary, but it doesn’t have to be!

In order to qualify in today’s market, you’ll need to have saved for a down payment (73% of all buyers made a down payment of less than 20%, with many buyers putting down 3% or less), a stable income and good credit history.

Throughout the entire home buying process, you will interact with many different professionals, all of whom perform necessary roles. These professionals are also valuable resources for you.

Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests you follow:

1. Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO^® Score of all closed loans in September was 724, according to Ellie Mae.
2. Start gathering all your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
3. Contact a professional – your real estate agent will be able to recommend a loan officer that can help you develop a spending plan, as well as determine how much home you can afford.
4. Consult with your lender – he or she will review your income, expenses, and financial goals to determine the type and amount of mortgage you qualify for.
5. Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change), and demonstrates to home sellers that you are serious about buying!

Bottom Line

Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.

Source: Keeping Current Matters | The KCM Crew 103117

There are some people who have not purchased homes yet because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich,”

“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”

Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Managementorganization at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 3.94% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

Source: Keeping Current Matters | The KCM Crew 103017