Thinking of Selling Your Property? Five Reasons to Do It Now
Many now realize that it is a great time to buy a home. Today, I want to share with you why it might also be an opportune time to sell your house. Here are the Top 5 Reasons I believe now may be a perfect time to put your house on the market.
Demand Is High
The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed a 17.2 percent increase in sales over July 2012; sales have remained above year-ago levels for 25 months. There are buyers out there right now and they are serious about purchasing.
Supply Is Beginning to Increase
Total housing inventory last month rose 5.6% to 2.28 million homes for sale. This represents a 5.1-month supply at the current sales pace, compared with 4.3 months in January. Many expect inventory to continue to rise as 3.2 million homeowners escaped the shackles of negative equity in the last 12 months and an additional 1.9 million are expected to enter positive equity in the next 12 months. Selling now while demand is high and before supply increases may garner you your best price.
New Construction Is Coming Back
Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. These ‘shiny’ new homes will again become competition as they are an attractive alternative for many purchasers.
Interest Rates Are Rising
According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year mortgage have shot up to 4.57% which represents a jump of more than a full point since the beginning of the year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will continue to climb.
Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.
It’s Time to Move On with Your Life
Look at the reason you are thinking about selling and decide whether it is worth waiting. Is the possibility of a few extra dollars more important than being with family; more important than your health; more important than having the freedom to go on with your life the way you think you should?
5 Reasons to Buy a Home Now Instead of the Spring
Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying:
Supply Is Shrinking
With inventory declining in many regions, finding a home of your dreams may become more difficult going forward. There are buyers in more and more markets surprised that there is no longer a large assortment of houses to choose from. The best homes in the best locations sell first. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy.
Price Increases Are on the Horizon
Prices were expected to bounce along the bottom this winter. However, many pricing indices (examples: CoreLogic, FHFA, LPS, Case Shiller) are reporting that prices are continuing to rise.
Rents Are Skyrocketing
Rents historically increase by 3.2% on an annual basis. A study issued earlier this year projects rent increases of 4% for the next two years. Trulia recently reported that rents this year have actually shot up by 5.4%.
Interest Rates Are Projected to Rise
The Mortgage Bankers Association has projected that the 30-year mortgage interest rate will be 4.4% by the end of 2013. That is an increase of approximately one full point over current rates.
Buy Low, Sell High
We would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’. It’s time to buy.
With Halloween approaching, buying or selling a home in today's real estate market doesn't have to be scary! Buyers and sellers should take the good news with the bad and move forward appropriately.
Looking for some great news for sellers? Last week the National Association of REALTORS and Freddie Mac reported that applications for mortgages increased. That's great news for those on the market and looking to sell. There are more buyers in the market to purchase a property. Frank Nothaft, Freddie Mac’s chief economist said that, "Mortgage applications rose for the second consecutive week as of October 11th, elevated by increases in applications for refinancing."
Also interesting is last week's projection from Forbes showing that home prices in 2014 should increase: The Fed could be set to taper in December, or as late as March next year with Janet Yellen at the helm, and still home prices should grow 9% to 10% this year and 7% to 8% in 2014. Forbes is direct in their financial message to property buyers - either choose to buy at interest rates and home prices now or pay more for both later.
Those numbers might seem a little daunting and might seem to put some pressure on buyers. However, buyers must rationally realize that interest rates are projected to rise and home values typically increase. And when that happens, it will limit the inventory of properties that are available in a buyer's budget. If sellers choose not to list - in hoping for a higher sale price down the road - look at what happened last winter in MN both in the metro and in greater MN. There was limited inventory and a rush of buyers. Homes were in high demand and the time on the market was short. The ratio from original list price to sale price was very high. In sales from January-September 2013 in the communities of Apple Valley, Burnsville and Lakeville the cumulative days on the market was only 33 Days and the median sale price increased from $189,900 in 2012 to $218,000 in 2013. That is a median sales increase of 13% in one year.
However many homes currently remaining on the market in the same areas listed above are over priced for the current crop of buyers. If your property has been on the market for longer than 33 days it is time to re-evaluate the list price. Unfortunately for sellers, a home is only worth what a buyer is willing to pay for it. An agent may have priced your home on the projection of where the market was heading when you listed. Ultimately, the market changed direction and didn't continue to increase your property value to coincide with where your list price currently is. Taking a look at the Home Value Projector at REALTOR.com a home in the Minneapolis/St. Paul area valued today at $250,000 could increase in value 8.8% to a value in 2014 of $321,690. Although I'm not confident that home values will continue to increase by 8.8% into next year, the projections are there. Again - if sellers want to price aggressively to maximize their home sale price I still caution against over pricing your property. The goal is to sell your property at the best market price and to do that you must be not only competitive but compelling in your list price when looking at like properties. Also, know that buyers look in a large area when searching for a home. Buyers are looking to maximize their home buying opportunity and, from my experience, many look in multiple areas when choosing a property. As mortgage interest rates are projected to rise in 2014, qualified buyers are going to be looking now. Look back to earlier in the blog where Freddie Mac reports an increase in mortgage applications. Yesterday we saw a drop in rates. So if you are looking to move into your forever home you will probably want to get into that property sooner than later as Forbes Bill Connerly says, "Interest rates will remain low, but long-term rates are not quite so low as they have been." The point of all this information is to illustrate for buyers that now is a great time to buy as you will get more for your money now than in the spring. And for sellers if you are planning to purchase another property after you sell your current property now is the best time for you to sell and to buy. Also, there are many qualified buyers looking for their right property. Sellers, when you decide to list your property to sell make sure you list your property compellingly. If you price your home at the same price or higher price than similar properties, you will help your competition sell their properties and you will remain on the market.
Selling a property doesn't have to be a long drawn out exhausting process. The key is to selling your property is to attract the most buyers and have it priced in a way that when buyers enter your property they are wondering when the next appointment is going to be walking through the door. Buyers will wonder if they have enough time to write and present an offer to the sellers before the next set of buyers has their own compelling showing.
Also when you list your property for sale you want to make sure it is staged, clean and all maintenance issues are taken care of before your first buyers walk through. Consider having a professional home inspection before listing. That way any surprises can be avoided when you have a purchase agreement contingent on a home inspection. Sellers, please remember that buyer's first viewing of your property is online and the second showing is through the door. You don't want to disappoint your buyers when they make the effort to physically walk through your property. Something that would cost you, for example, $50 to fix/replace something could take hundreds or thousands of dollars off your offer - if the buyers even decide to go forward with a written offer.
Working with a professional REALTOR is key to great results. And ask for referrals from your agent. Great agents have many clients who would be glad to talk to you about working with her or him. I know I do. Working as your own sales agent produces less favorable financial results. According to the 2012 National Association of REALTORS® Profile of Home Buyers and Sellers: FSBOs accounted for 9% of home sales in 2012. The typical FSBO home sold for $174,900 compared to $215,000 for agent-assisted home sales.
I am happy to help you in whatever direction you are leaning towards. Please contact me today for your personal, free, no obligation consolation on buying or selling a home.
What does 1% mean to you over 30 years when it comes to making mortgage payments? Well, that depends on if you are a buyer or a seller using financing to buy or sell your house. If you are a cash buyer you don't worry about 1% because as the old saying goes, "Cash is King."
Fannie Mae's Chief Economist Doug Duncan said, "With regard to housing, all eyes now are turned toward the Federal Reserve, which is expected to begin scaling back its asset purchase program this week. Mortgage rates have increased more than 100 basis points since early May, and we anticipate that trend to continue, albeit gradually, during the next year."
Looking at Duncan's comments in March 2012, "Conditions are coming together to encourage people to want to buy homes," said Doug Duncan, vice president and chief economist of Fannie Mae. "Americans' rental price expectations for the next year continue to rise, reaching their record high level for our survey this month. With an increasing share of consumers expecting higher mortgage rates and home prices over the next 12 months, some may feel that renting is becoming more costly and that home ownership is a more compelling housing choice." Hindsight is 20/20. Some people are kicking themselves for not buying when interest rates & home prices were lower. So looking at what is trending right now, it is financially compelling to move now instead of waiting until spring.
Douncan's comments tells me that it shouldn't be a surprise if interest rates go up at least another percent by spring. And that could leave buyers and sellers less than excited. So what does that mean for buyers and sellers?
Let's start with Buyers:
What Do Rising Interest Rates Mean for Buyers?
For buyers who are financing a home:
rising interest rates means that a buyer is paying more interest each month for the same priced house at a lower interest rate. Plain and simple. Let's look at two home prices. One home is purchased for $150,000 and the other is purchased for $250,000.
A purchase price of $150,000 at today's fixed interest rate of 4.25%,(with conventional financing & 5% down payment) would give you a principle and interest monthly mortgage payment of $701.01 *
The same purchase price of $150,000 at 5.25% = p&i $786.89*
The same purchase price of $150,000 at 6.25% = p&i $877.40*
(*remember that you will also have homeowners insurance, property taxes and mortgage insurance added to that monthly payment. - this mortgage payment example is principle and interest based on a conventional 30 year loan.)
The difference in one percent is substantial. Your monthly payment from 4.25% to 5.25% is $85.88/month. When the interest rate rises back to 6.25% add another $90.51/month to the 5.25% monthly payment. As the mortgage interest rate rises, the less purchasing power a buyer has.
If you look at the amortization totals over 30 years, 1% is substantial - let's look at side by side comparisons of 4.25%, 5.25% and 6.25% interest rates to show you the long term financial difference to buyers:
Monthly payment (p&i) $701.01 $786.89 $877.40
Loan amount $142,500 $142,500 $142,500
Interest rate 4.250% 5.25% 6.25%
Term 360 months 360 months 360 months
Total of payments $252,366.80 $283,280.67 $315,860.82
Total interest paid $109,866.80 $140,780.67 $173,360.82
A purchase price of $250,000 at today's fixed interest rate of 4.25%, would give you a principle and interest monthly mortgage payment of $1168.36
The same purchase price of $250,000 at 5.25% = $1311.48
The same purchase price of $250,000 at 6.25% = $1462.33
(***remember that you will have homeowners insurance, property taxes and mortgage insurance added to that monthly payment. - this mortgage payment example is principle and interest based on a conventional 30 year loan.)
Monthly payment (p&i) $1168.36 $1311.48 $1462.33
Loan amount $237,500 $237,500 $237,500
Interest rate 4.25% 5.25% 6.25%
Term 360 months 360 months 360 months
Total of payments $420,607.78 $472,135.93 $526,437.19
Total interest paid $183,107.78 $234,635.93 $288,937.19
Again the difference in one percent is substantial. Your monthly payment from 4.25% to 5.25% is $143.12/month. When the interest rate rises back to 6.25% add another $150.85/month to the 5.25% monthly payment. As the mortgage interest rate rises, the less purchasing power a buyer has.
Granted, not all home buyers stay in their home until their 30 year loan is paid off, but when you look at the long term differences in 1% or 2%, a qualified buyer should be motivated to move forward and not wait.
What Do Rising Interest Rates Mean for Sellers?
It means fewer buyers qualified to purchase your home.
As interest rates rise, the less purchasing power buyers have. The rise in rates will reduce the number of qualified buyers available to purchase your home. Also, some buyers may not want to pay more in a monthly payment (because of a higher interest rate) and therefore put in a lower offer to compensate for that higher interest rate.
Take Home #1 above for example: Looking at a $150,000 home at 4.25% over 30 years a buyer's principle and interest payment is $701.01/month and when it increases $85.88 a month at the first 1% increase to a Principle and Interest payment of $786.89 a month you will have knocked some buyers out of the running to purchase your property. And when mortgage rates rise an additional 1% to 6.25% add another $90.51/mo to the payment of $786.89 to $877.40 and more buyers will fall away. Granted the rates don't typically jump 1% over night, this year rates jumped 1% from April to August. More typically looking at a 30 year average of when rates rise, they go up .25 within a 3 month period.
Nick Timiraos, a real estate news and analysis blogger from The Wall Street Journal, said on September 20, 2013, "Home prices are also higher than they were a few months ago - meaning sellers may have lost the advantage they had on prices earlier this spring. Since many buyers who need a mortgage shop for a house based on how much they're going to pay every month, the increase in rates together with the increase in prices could lead to some sticker shock."
Where do we go from here?
We are still at interest rates that are historically low. And for many people who are a few years out from buying a property that can be of some consolation. Get yourself prepared while you wait. Build up a great nest egg, make sure your credit is clean, pay down your debts and the more money you can have for your down payment the better. And by all means please talk with a credible lender and a licensed REALTOR®. According to the National Association of Realtors®, "Existing-home sales increased in August and reached the highest level in six-and-a-half years, while the median price shows nine consecutive months of double-digit year-over-year increases."
This is great news for sellers -IF you are in the market to sell your home NOW. The market can change and the "wait until Spring" approach to list your house might cause sellers to lose their financial edge. And for buyers, they can wait and see if prices and interest rates come down, but that approach might cost buyers a bigger home or more money for the same property that is available today.
If you or someone you know are in the market to buy or sell a property in MN- contact me today! I'm happy to help.
Make it a great day!
Happy Tuesday to everyone!
As you may have noticed I have a new broker logo on my website/emails. That's because I have recently relocated to Apple Valley from Duluth. I recently joined Coldwell Banker Burnet Apple Valley office and as I am licensed in the whole state of MN, I am able to help you to buy or sell any property in the state. :) If you want a realtor within 5 minutes of you, I will refer you to a fabulous agent but please contact me first with all your real estate needs.
Having lived in Duluth most of my life moving has been a big transition.
I moved away from family & lifelong friends, connections, back of my hand knowledge of my community, my realtor family at Messina & Associates, as well as the beauty of the north shore. Of course I'm only 2.5 hours away. But if you are looking to relocate, put your home on the market, look for a new property - I know what you are going to go through - because I just did it.
I had my house on the market, in a challenging market - with 3 small children, a dog and a husband who had already moved because of his job. Oh and I was working too... No stress, right? Ha! :) It IS totally worth it once it is done - but it is a lot of work and then there is the emotional roller coaster, but don't worry as I will help you!
I have moved into the great Apple Valley community where I have lots of family & friends and many resources available to me at my fingertips: Where do you go to find out about schools? I'll show you. Where do you go to find childcare? I have new resources to share with you. Where can I go to get a bite to eat so not to leave crumbs before a showing? I found some great places. But more than that - I can help you through each step of the way: from pointing out what & where to fix things that buyers will notice - to staging / pricing your house for the most profitable sale in the shortest amount of time. And how would you like a check list of things you will want to verify before the putting your house on the market? And that's just for starters. My job is to help you each step of the way.
And when you are ready, I'll help you find your next property, based on your wants and needs.
The time to get busy preparing to sell your house is now and you will want to contact me today to get your ducks in a row. Interest rates are not going down as we have stepped into September. Please don't think that waiting for spring is the answer. As you can see below, the Feds are projecting interest rates to go up - not down. If you are thinking about moving - contact me today!
Buying and selling your home is not easy, but with the right Realtor, it will be much easier. And TOTALLY worth it!
Make it a great day! :)
"The housing recovery appears to have weathered some of the uncertainty, although additional growth is expected to be modest rather than robust while the market awaits an easing of credit conditions in the presence of rising interest rates. The rise in mortgage rates has led to a drop-off in refinance activity but does not appear to have had much impact on home purchase activity to this point. Home prices are expected to continue to climb, although the pace should slow significantly from the dramatic levels seen during the past 12 months." - Fannie Mae.com August 2013
" Freddie Mac(OTCQB: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), showing average fixed mortgage rates moving back up near their highs for the year amid recent data pointing to signs of a stronger economic recovery, as well as positive news coming from the housing and manufacturing sectors." - Freddie Mac September 2013
From the National Association of Realtors: DAILY REAL ESTATE NEWS | THURSDAY, AUGUST 01, 2013
The Federal Reserve announced Wednesday that it will continue purchasing $85 billion in bonds each month — at least for now. The Fed’s bond-purchasing program has helped move mortgage rates to their lowest levels on record in recent months. However, the Fed has signaled that the program could likely come to an end soon, causing a shift upward in mortgage rates.
"The Fed did not mention why mortgage rates have risen — which almost certainly is due to market expectations of tapering in the near future and may have influenced the Fed in not changing its guidance," Econoday analysts said.
The economy added 200,000 new jobs last month, 20,000 of which were construction jobs due to an upswing in housing. The job growth could point to less need for the bond-purchasing program.
Federal Reserve chairman Ben Bernanke has made recent comments that a slowdown in bond-buying could begin some time this year.
Source: “First Take: Fed waiting, but jobs tell real story,” USA Today (July 31, 2013) and “Fed recommits to current pace of MBS purchases,” HousingWire (July 31, 2013)
From the National Association of Realtors - August 1,
Home sellers are becoming increasingly worried about rising interest rates and their impact on home-buying demand, according to a new Redfin survey of nearly 1,500 home owners across the country.
Forty-seven percent of survey respondents said they are concerned that rising rates could lower demand before they get their homes on the market. That's more than double the percentage from the previous quarter.
"Of course home sellers are worried about interest rates, but the reality is that many buyers believe that rates will continue to go up," said Eric Tan, a Redfin Los Angeles real estate professional. "They know if they don't move now, they might be kicking themselves all over again in three months."
Eighty-five percent of respondents said they believe home prices will rise in their areas within the next year. Seventeen percent said they expect the rise to be "a lot."
"Results from our seller survey point to growing confidence in the U.S. economy and recognition that broad economic gains could erode sellers' advantages in the housing market as mortgage rates rise," said Ellen Haberle, a Redfin economist.
Home owners identified a "life event" as their top reason for selling, followed by "rising prices," according to the survey.
Rising Mortgage Rates Show Impact
Blunting the Effects of Rising Interest Rates
"Home prices in November were 7.4% higher on average than a year earlier, according to CoreLogic. Real estate experts had expected that rising prices would spur more sellers trapped by years of falling prices." - Julie Schmit Prices Are Up But Homes Are In Short Supply
It is a more exciting time to be a seller than it was last year as prices have stabilized, and in some areas have gone up by 1%-2%. The problem is when you sell your house - what property are you going to move into? Inventory is getting snapped up on the market very quickly. Now is a great time to list your house. Read Julie Schmit's article from USA Today and see what you think. Then contact me with your real estate questions.
Talk to you soon!
Prices are up, but homes are in short supply
Julie Schmit, USA TODAY January 26, 2013
(Photo: Kevork Djansezian, Getty Images)
The supply of homes for sale has been shrinking for six months and shows no improvement so far in January — a bad sign for buyers.
New listings of existing homes for sale were down 14% year-over-year in the first two weeks of January, according to Realtor.com, which tracks 143 markets nationwide.
In Phoenix, where prices were up 24% in November from a year earlier, new listings through the first three weeks of January hit their lowest level in 13 years, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.
That's bad news for buyers, and it means "prices need to go up more" to bring more sellers to market, Orr says.
Nationwide, the supply of existing homes for sale fell to 4.4 months in December, based on the current monthly sales pace, says the National Association of Realtors. That's the lowest level in more than seven years. A six-month supply is generally considered balanced between buyers and sellers.
Home prices in November were 7.4% higher on average than a year earlier, according to CoreLogic. Real estate experts had expected that rising prices would spur more sellers trapped by years of falling prices.
Instead, January's listing data "is the same sad story," says Glenn Kelman, CEO of online brokerage Redfin. If sellers don't have to sell, "they're holding on, thinking they'll wait for prices to go up even more."
Redfin's data, covering 19 major markets mostly in the West, shows new listings down 29% the first two weeks of January vs. last year.
Scarce sellers aren't the only driver of shrinking supplies. There are fewer distressed properties for sale. Foreclosure sales were down 7% through the first nine months of last year from the same period in 2011, RealtyTrac says.
Meanwhile, demand is up. Existing home sales were up 9.2% last year, NAR's preliminary data show. New-home sales rose almost 20% in 2012, the government reported Friday, while supply fell to 4.9 months in December from 5.4 months a year before.
New home construction is still weak. In each of the past three years, builders completed fewer than 500,000 single-family homes. That's less than half the number built annually between 1993 and 2007, according to the Census Bureau.
Home builders would need to double production this year to alleviate the tight supply, estimates Lawrence Yun, NAR's chief economist. That's not expected.
Home supplies nationally will stay at about the five-month level much of the year, Yun predicts.
Some markets are far below that.
California's supply of existing single-family homes for sale stood at 2.6 months in December, the California Association of Realtors says.
"Nobody is selling because no one has anywhere to go," says Barbara Hendrickson, of Red Oak Realty in Berkeley, in the San Francisco Bay Area, which had a 1.8-month supply in December.
The low supply is feeding bidding wars. One of Hendrickson's clients recently lost a bid despite offering $130,000 above the home's $775,000 asking price, Hendrickson says.
Whether the supply of homes for sale will expand to meet rising demand is a "big question for the market" in 2013, says Jed Kolko, economist with real estate website Trulia.
This year is also the first since the housing bust began that falling inventories are not necessarily a good thing, he says.
Listings may still swell in time for the busy spring selling season, says Stan Humphries, Zillow economist.
He says listing activity next month will be key. If it doesn't pick up by then, the spring season is likely to bring a lot of price increases, he says.
For more of the article click on the link: _
The article below by Steve Yoder of The Fiscal Times, brings some things we've been watching for a few years to the forefront. The rising interest rates, more first time home buyers, rising home prices and rising rents, and the rest of his listed trends say loudly that now is the time to purchase real estate and sell your existing property if you are looking to be a move-up buyer. Check out the article and then call me with your real estate needs/questions.
10 Real Estate Trends to Watch in 2013
Read more at
By STEVE YODER, The Fiscal Times
December 6, 2012
Five years and 16 million foreclosures after the 2008 housing crash, most Americans have not lost faith in real estate. In a survey this summer of more than 2,000 adults by home buyer website Trulia, 61 percent of respondents predicted that prices in their local market would rise next year, 58 percent thought prices would take 10 years or less to get back to their pre-crash peak, and almost 80 percent of current renters said they plan to buy a home someday.
Whether or not that enthusiasm has merit, the signs of a turnaround are hard to ignore. National home prices have been on the uptick for eight straight months and jumped 6.3 percent year-over-year in October – the largest increase since June 2006, according to CoreLogic. In California, one of the hardest-hit states, 57 percent of homes for sale have attracted multiple offers this year. Bidding wars on houses are making a comeback in Florida, and in Phoenix, realtor Marge Peck says that “everything under $150,000 sells in a heartbeat.”
RELATED: Will Housing Recover at the Expense of Your Privacy?
Will that pattern hold in 2013? To find out, we talked to real estate economists and insiders and reviewed industry reports that assess next year’s outlook. Most experts said their predictions depend on the mainstream forecasts of economic growth next year being correct and assume that the economy won’t experience an earthquake from falling off the fiscal cliff. Others emphasized that all markets are local—real estate conditions in coastal metro areas vary wildly from those in mid-sized Midwestern towns. Those caveats aside, here are 10 real estate trends they forecast for next year.
1. Rising home prices. The slow pace of new-home construction is pushing prices up, a pattern that will continue in 2012, according to several sources. Calvin Schnure, an economist at the National Association of Real Estate Investment Trusts, says construction of new homes and apartments needs to be between 1.25 and 1.5 million a year just to keep up with population growth. But since the housing crash, new construction has been at 500,000 units or fewer for 6 years running—that’s actually created a shortfall in available homes. A National Association of Realtors (NAR) report in October showed a 5.4 months’ inventory of homes for sale at the current pace, 22 percent below where it was a year ago and the lowest inventory since February 2006. (A 6-month inventory is generally considered the sign of a healthy market).
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“I think we’re going to look back three years from now and say that 2012 was the year the housing market turned the corner in America, says Mark Dotzour, chief economist at Texas A&M’s Real Estate Center. Overall, the NAR forecasts average home prices to rise 5 percent next year, after a projected increase of 6 percent this year.
2. Rising rents as more young people enter the market. Schnure says there’s a shadow demand in the rental market—the 3 to 5 million people, most in their twenties and thirties, who have been riding out the shaky economy by moving back in with their parents or staying with friends. Now, as they start to get jobs, they’re looking for their own apartments. Schnure says they represent a pent-up demand for rentals that’s twice as big in percentage terms as the country has ever seen. For next year, “that means that for people looking to rent, good luck… it’s going to be a challenge,” he says. This year, average rents have been rising nationally at about 4 percent a year and in many metro areas by 7 to 9 percent, says Barry Habib, chief market strategist for mortgage lender Residential Finance Corporation. A recent Zillow analysis also found that buying beats renting in 59 percent of markets after three years or less.
3. Fewer foreclosure bargains. The chance to snap up a bargain-basement foreclosure could be fading. Sales of those homes fell to about 11 percent of all sales in June 2012, down from about 28 percent in March 2011. In part that’s because the Federal Housing Finance Agency (FHFA), the Federal Deposit Insurance Corporation, and banks have been selling off hundreds of distressed home loans in bulk to purchasers who agree to work out new terms with borrowers rather than simply foreclosing, says Philip Feder, chair of real estate practice at global law firm Paul Hastings. Foreclosures have also dropped because the equity position of thousands of borrowers has improved with rising home prices, righting many upside-down loans.
4. More short sales. Short sales are deals in which a home sells for less than what the borrower owes on the mortgage, with the bank agreeing to accept the sale in lieu of going through an expensive and time-consuming foreclosure. On November 1, the FHFA issued new rules on short sales for Fannie Mae and Freddie Mac—among other measures, those reduce the documentation that borrowers have to show to demonstrate hardship, and borrowers now aren’t necessarily required to pay the difference between what they owe on the mortgage and the final sales price. So while foreclosure sales will keep falling, the number of short sales should rise, says Polyana da Costa, senior mortgage analyst at Bankrate.com.
5. More first-time home buyers. A report from consulting firm Deloitte & Touche on key issues in commercial real estate for 2013 predicts that growth in demand for single-family homes next year will likely be driven by first-time home buyers. That trend is visible in an NAR survey of buyers and sellers released in November—39 percent of borrowers were first-timers, up from 37 percent in the 2011 survey.
6. Higher home construction costs. Building materials like sheet rock, lumber, and copper are at high prices even though levels of home construction remain low, says Dotzour. The same is true for construction labor costs—after the crash, many qualified construction workers migrated out of the country or into other industries, he says. As a result, “you’ve got the possibility of some pretty potent price increases in [the cost of constructing] new homes,” Dotzour says.
7. Property management boom. It’s a great time to be a property manager. Earlier this year, the FHFA began selling foreclosed properties in bulk to large institutional investors who agree to hold and manage them as rentals. That intensified the trend already underway toward investors snapping up distressed properties to rent--the number of homes purchased as investments rose 65 percent in 2011 over 2010, according to real estate data provider RealtyTrac. Many of those investors are now using professional property management companies to rent and maintain their purchases, which has created huge demand for their services, according to a July story by UPI.
8. Rising mortgage interest rates. Mortgage rates have been at historic lows this year, so there’s only one direction for them to go. The NAR predicts that rates will gradually rise to average 4 percent next year, up from about 3.5 percent in September of this year. The Urban Land Institute’s 2013 Emerging Trends report, which surveys industry experts, concludes that “’there’s no way the low-interest-rate environment lasts,’ and your low-rate mortgage could be a ‘huge future asset’ as soon as interest rates begin to pop.” Greg McBride, senior financial analyst at Bankrate.com, agrees there could be minor increases in the coming year since the market drives rates, and economic growth or rising inflation would allow bond holders to command higher rates, but “I don’t think anybody is expecting a shoot-the-lights out type of economic environment that would cause a more pronounced increase.”
9. Easier credit standards. On average, would-be borrowers now need a FICO credit score in the 760s to get a mortgage, much higher even than the years before the easy-credit housing boom began, according to the FHFA. That should start changing next year--qualifying scores will start dropping as more qualified buyers come into the market and lenders compete to offer them loans, says Luis Vergara of Mission Capital Advisors in New York City. That downward shift in standards will be strengthened if the Obama administration, as has been rumored, replaces FHFA head Ed DeMarco, a Bush-era holdover and advocate of tight credit standards, says Richard Green, head of the University of Southern California’s Lusk Center for Real Estate.
10. Two-tiered home-building industry. Banks have been reluctant to make construction loans—only 22 percent of the country’s largest banks are making them, according to a 2012 survey by the Office of Comptroller of the Currency. That, says Dotzour, is producing a “bifurcated market”—a few publicly traded large builders with access to capital who are able to tackle big projects, and many medium and small builders who rely on loans from regional and community banks but aren’t getting the capital they need to launch projects. The result could be more consolidation in the home building industry next year and, ultimately, less competition and higher prices for everyone.
This piece was updated at 1:35pm on December 6, 2012 with additional information on rising mortgage rates.
Read more at http://www.thefiscaltimes.com/Articles/2012/12/06/10-Real-Estate-Trends-to-Watch-in-2013.aspx#97HuK0wZTOTD0uGG.99
In addition to the 6 Reasons Nick Timiraos has as to why the Housing Inventory Keeps Declining I have to add that Generation X and Generation Y people are buying the inventory at a faster pace now that the economy is stabilizing, the interest rates are historically very low and many of these buyers did not have inventory to sell in order to buy. The home prices are still quite low compared to 2008 and couple that with the low rates and buyers have great reasons to buy.
Read more reasons below and contact me for all of your buying needs. Have a fantastic day!
WSJ Blog: 6 Reasons Housing Inventory Keeps Declining
By Nick Timiraos
The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November.
Home sales in December dropped by 1% from November, the National Association of Realtors reported on Tuesday, but still stood nearly 13% above the levels of one year ago. That means home sales have risen from the year-ago month for 18 straight months.
For 2012 as a whole, sales were up 9% to 4.65 million units, the highest annual total since 2007.
Prices, meanwhile, are picking up because the number of homes for sale continues to drop despite the sales volume gains. The number of homes for sale fell to 1.82 million at the end of 2012, an 8.5% drop from November and a 21.6% decline from one year earlier, the Realtors’ group said on Tuesday.
Here’s a breakdown of why inventory has continued to drop this year:
Many homeowners are underwater: More than 10 million homeowners owe more on their mortgage than their homes are worth, according to CoreLogic Inc. CLGX -1.94% That pencils out to around 22% of homeowners with a mortgage, or 15% of all homeowners (since not every homeowner has a mortgage). Underwater owners aren’t likely to sell unless they need to move due to changing life (marriage, divorce) or financial circumstances, and they’ll take a hit on their credit for pursuing a short sale, where the bank allows the home to sell for less than the amount owed.Data from CoreLogic show that inventory has been the most constrained in housing markets where there’s the largest concentration of underwater borrowers.
Others don’t have enough equity to “trade up”: Another 10 million homeowners have less than 20% equity in their current residence, meaning they can’t easily “trade up” to their next house. Traditionally, homeowners have relied on home equity to make the down payment on their next home, and to pay their real-estate agent to sell their current home and buy their next one. These “under-equitied” homeowners—meaning they don’t have enough equity to make a move to a more expensive home—have added to the drag on inventory.
Everyone wants to buy at the bottom, but few want to sell: Even those people who do have plenty of home equity are likely reluctant to sell if they think prices will be higher tomorrow. Would you sell your largest asset today if you thought it might be worth 5% more next year? This helps explain why markets such as Denver and Dallas, which didn’t have huge housing bubbles and thus had smaller shares of underwater borrowers, have also seen double-digit inventory declines.
More purchases from investors of all stripes: From the big institutional investors that have been grabbing all the headlines, to the mom-and-pop landlords that have traditionally played a much larger role renting out homes, investors have increasingly bought homes that can be rented out rather than flipped and resold for quick profits. This is further keeping inventory off the market in two ways: homes that are bought at courthouse foreclosure auctions never show up on multiple-listing services when they’re initially sold. They’re also held out of the for-sale pool because they’re being rented out.
Banks have been slower at foreclosing: Banks and other companies that process delinquent mortgages have had trouble proving that they’ve followed state law in taking title to homes ever since the “robo-signing” scandal surfaced in late 2010, and they’ve also had to meet a host of new state and federal rules governing loan modifications and foreclosures from settlements spawned by the robo-scandal. Banks have also become better about approving short sales and loan modifications, which has curbed the flow of foreclosed properties onto the market.
Builders have been putting up fewer homes: Housing starts were severely depressed from 2009 through 2011 and have only recently rebounded off of those low levels. Consequently, there’s been much less new home inventory being added to the market at a time when demand (boosted by increases in household formation) is picking up. If more homes are held off the market—for any of the five reasons above—you can bet that builders will move in to fill the void.
Many of these factors that have been dragging down inventory aren’t signs of “normal” or “healthy” housing markets—but then, we probably haven’t had a normal market for around a decade now. If anything, declining inventory shows that normal supply-and-demand dynamics are returning, which is an important step towards putting a floor under home prices and giving markets time to get back to health.
Liz Lewis Sandwick grew up in Duluth, is married to her husband Robb, has three kids: Caroline (5) Cooper (3), and Max (1) and would love to help you find your next home!