Area Real Estate News & Market Trends

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

March 25, 2020

Is Now a Good Time to Refinance My Home?

 

With interest rates hitting all-time lows over the past few weeks, many homeowners are opting to refinance. To decide if refinancing your home is the best option for you and your family, start by asking yourself these questions:

Why do you want to refinance?

There are many reasons to refinance, but here are three of the most common ones:

1. Lower Your Interest Rate and Payment: This is the most popular reason. Is your current interest rate higher than what’s available today? If so, it might be worth seeing if you can take advantage of the current lower rates.

2. Shorten the Term of Your Loan: If you have a 30-year loan, it may be advantageous to change it to a 15 or 20-year loan to pay off your mortgage sooner rather than later.

3. Cash-Out Refinance: You might have enough equity to cash out and invest in something else, like your children’s education, a business venture, an investment property, or simply to increase your cash reserve.

Once you know why you might want to refinance, ask yourself the next question:

How much is it going to cost?

There are fees and closing costs involved in refinancing, and The Lenders Network explains:

“As an example, let’s say your mortgage has a balance of $200,000. If you were to refinance that loan into a new loan, total closing costs would run between 2%-4% of the loan amount. You can expect to pay between $4,000 to $8,000 to refinance this loan.”

They also explain that there are options for no-cost refinance loans, but be on the lookout:

“A no-cost refinance loan is when the lender pays the closing costs for the borrower. However, you should be aware that the lender makes up this money from other aspects of the mortgage. Usually charging a slightly higher interest rate so they can make the money back.”

Keep in mind that, given the current market conditions and how favorable they are for refinancing, it can take a little longer to execute the process today. This is because many other homeowners are going this route as well. As Todd Teta, Chief Officer at ATTOM Data Solutions notes about recent mortgage activity:  

“Refinancing largely drove the trend, with more than twice as many homeowners trading in higher-interest mortgages for cheaper ones than in the same period of 2018.”

Clearly, refinancing has been on the rise lately. If you’re comfortable with the up-front cost and a potential waiting period due to the high volume of requests, then ask yourself one more question:

Is it worth it? 

To answer this one, do the math. Will it help you save money? How much longer do you need to own your home to break even? Will your current home meet your needs down the road? If you plan to stay for a few years, then maybe refinancing is your best move.

If, however, your current home doesn’t fulfill your needs for the next few years, you might want to consider using your equity for a down payment on a new home instead. You’ll still get a lower interest rate than the one you have on your current house, and with the equity you’ve already built, you can finally purchase the home you’ve been waiting for.

Bottom Line

Today, more than ever, it’s important to start working with a trusted real estate advisor. Whether you connect by phone or video chat, a real estate professional can help you understand how to safely navigate the housing market so that you can prioritize the health of your family without having to bring your plans to a standstill. Whether you’re looking to refinance, buy, or sell, a trusted advisor knows the best protocol as well as the optimal resources and lenders to help you through the process in this fast-paced world that’s changing every day.

Posted in Sellers
March 24, 2020

Why the Stock Market Correction Probably Won’t Impact Home Values

 

With the housing crash of 2006-2008 still visible in the rear-view mirror, many are concerned the current correction in the stock market is a sign that home values are also about to tumble. What’s taking place today, however, is nothing like what happened the last time. The S&P 500 did fall by over fifty percent from October 2007 to March 2009, and home values did depreciate in 2007, 2008, and 2009 – but that was because that economic slowdown was mainly caused by a collapsing real estate market and a meltdown in the mortgage market.

This time, the stock market correction is being caused by an outside event (the coronavirus) with no connection to the housing industry. Many experts are saying the current situation is much more reminiscent of the challenges we had when the dot.com crash was immediately followed by 9/11. As an example, David Rosenberg, Chief Economist with Gluskin Sheff + Associates Inc., recently explained:

“What 9/11 has in common with what is happening today is that this shock has also generated fear, angst and anxiety among the general public. People avoided crowds then as they believed another terrorist attack was coming and are acting the same today to avoid getting sick. The same parts of the economy are under pressure ─ airlines, leisure, hospitality, restaurants, entertainment ─ consumer discretionary services in general.”

Since the current situation resembles the stock market correction in the early 2000s, let’s review what happened to home values during that time.

The S&P dropped 45% between September 2000 and October 2002. Home prices, on the other hand, appreciated nicely at the same time. That stock market correction proved not to have any negative impact on home values.

Bottom Line

If the current situation is more like the markets in the early 2000s versus the markets during the Great Recession, home values should be minimally affected, if at all.

March 20, 2020

A Recession Does Not Equal a Housing Crisis

Some Highlights

  • The COVID-19 pandemic is causing an economic slowdown.
  • The good news is, home values actually increased in 3 of the last 5 U.S. recessions and decreased by less than 2% in the 4th.
  • All things considered, an economic slowdown does not equal a housing crisis, and this will not be a repeat of 2008.

March 19, 2020

Are We About to See a New Wave of Foreclosures?

 

With all of the havoc being caused by COVID-19, many are concerned we may see a new wave of foreclosures. Restaurants, airlines, hotels, and many other industries are furloughing workers or dramatically cutting their hours. Without a job, many homeowners are wondering how they’ll be able to afford their mortgage payments.

In spite of this, there are actually many reasons we won’t see a surge in the number of foreclosures like we did during the housing crash over ten years ago. Here are just a few of those reasons:

The Government Learned its Lesson the Last Time

During the previous housing crash, the government was slow to recognize the challenges homeowners were having and waited too long to grant relief. Today, action is being taken swiftly. Just this week:

  • The Federal Housing Administration indicated it is enacting an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 60 days.
  • The Federal Housing Finance Agency announced it is directing Fannie Mae and Freddie Mac to suspend foreclosures and evictions for “at least 60 days.”

Homeowners Learned their Lesson the Last Time

When the housing market was going strong in the early 2000s, homeowners gained a tremendous amount of equity in their homes. Many began to tap into that equity. Some started to use their homes as ATM machines to purchase luxury items like cars, jet-skis, and lavish vacations. When prices dipped, many found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some just walked away, leaving the banks with no other option but to foreclose on their properties.

Today, the home equity situation in America is vastly different. From 2005-2007, homeowners cashed out $824 billion worth of home equity by refinancing. In the last three years, they cashed out only $232 billion, less than one-third of that amount. That has led to:

  • 37% of homes in America having no mortgage at all
  • Of the remaining 63%, more than 1 in 4 having over 50% equity

Even if prices dip (and most experts are not predicting that they will), most homeowners will still have vast amounts of value in their homes and will not walk away from that money.

There Will Be Help Available to Individuals and Small Businesses

The government is aware of the financial pain this virus has caused and will continue to cause. Yesterday, the Associated Press reported:

“In a memorandum, Treasury proposed two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The amounts would depend on income and family size.”

The plan also recommends $300 billion for small businesses.

Bottom Line

These are not going to be easy times. However, the lessons learned from the last crisis have Americans better prepared to weather the financial storm. For those who can’t, help is on the way.

March 18, 2020

Three Reasons Why This Is Not a Housing Crisis

 

In times of uncertainty, one of the best things we can do to ease our fears is to educate ourselves with research, facts, and data. Digging into past experiences by reviewing historical trends and understanding the peaks and valleys of what’s come before us is one of the many ways we can confidently evaluate any situation. With concerns of a global recession on everyone’s minds today, it’s important to take an objective look at what has transpired over the years and how the housing market has successfully weathered these storms.

1. The Market Today Is Vastly Different from 2008

We all remember 2008. This is not 2008. Today’s market conditions are far from the time when housing was a key factor that triggered a recession. From easy-to-access mortgages to skyrocketing home price appreciation, a surplus of inventory, excessive equity-tapping, and more – we’re not where we were 12 years ago. None of those factors are in play today. Rest assured, housing is not a catalyst that could spiral us back to that time or place.

According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:

“It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There’s no dysfunction in the banking system, we don’t have many households who are overleveraged with their mortgage payments and are potentially in trouble.”

In addition, the Goldman Sachs GDP Forecast released this week indicates that although there is no growth anticipated immediately, gains are forecasted heading into the second half of this year and getting even stronger in early 2021.

Both of these expert sources indicate this is a momentary event in time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 2008 that failed to get back to a sense of normal for almost four years. Although it poses plenty of near-term financial challenges, a potential recession this year is not a repeat of the long-term housing market crash we remember all too well.

2. A Recession Does Not Equal a Housing Crisis

Next, take a look at the past five recessions in U.S. history. Home values actually appreciated in three of them. It is true that they sank by almost 20% during the last recession, but as we’ve identified above, 2008 presented different circumstances. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6% (see below):

3. We Can Be Confident About What We Know

Concerns about the global impact COVID-19 will have on the economy are real. And they’re scary, as the health and wellness of our friends, families, and loved ones are high on everyone’s emotional radar.

According to Bloomberg,

“Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up.”

That said, we can be confident that, while we don’t know the exact impact the virus will have on the housing market, we do know that housing isn’t the driver.

The reasons we move – marriage, children, job changes, retirement, etc. – are steadfast parts of life. As noted in a recent piece in the New York Times, “Everyone needs someplace to live.” That won’t change.

Bottom Line

Concerns about a recession are real, but housing isn’t the driver. If you have questions about what it means for your family’s homebuying or selling plans, let’s connect to discuss your needs.

March 17, 2020

Two Big Myths in the Homebuying Process

 

The 2020 Millennial Home Buyer Report shows how this generation is not really any different from previous ones when it comes to homeownership goals:

“The majority of millennials not only want to own a home, but 84% of millennials in 2019 considered it a major part of the American Dream.”

Unfortunately, the myths surrounding the barriers to homeownership – especially those related to down payments and FICO® scores – might be keeping many buyers out of the arena. The piece also reveals:

“Millennials have to navigate a lot of obstacles to be able to own a home. According to our 2020 survey, saving for a down payment is the biggest barrier for 50% of millennials.”

Millennial or not, unpacking two of the biggest myths that may be standing in the way of homeownership among all generations is a great place to start the debunking process.

Myth #1: “I Need a 20% Down Payment”

Many buyers often overestimate what they need to qualify for a home loan. According to the same article:

“A down payment of 20% for a home of that price [$210,000] would be about $42,000; only about 30% of the millennials in our survey have enough in savings to cover that, not to mention the additional closing costs.”

While many potential buyers still think they need to put at least 20% down for the home of their dreams, they often don’t realize how many assistance programs are available with as little as 3% down. With a bit of research, many renters may be able to enter the housing market sooner than they ever imagined.

Myth #2: “I Need a 780 FICO® Score or Higher”

In addition to down payments, buyers are also often confused about the FICO® score it takes to qualify for a mortgage, believing they need a credit score of 780 or higher.

Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans, shows the truth is, over 50% of approved loans were granted with a FICO® score below 750 (see graph below):

Even today, many of the myths of the homebuying process are unfortunately keeping plenty of motivated buyers on the sidelines. In reality, it really doesn’t have to be that way.

Bottom Line

If you’re thinking of buying a home, you may have more options than you think. Let’s connect to answer your questions and help you determine your next steps.

March 16, 2020

5 Simple Graphs Proving This Is NOT Like the Last Time

 

With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

“With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers’ Association releases a Mortgage Credit Availability Index which is “a summary measure which indicates the availability of mortgage credit at a point in time.” The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.

2. Prices are not soaring out of control.

Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.

There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did in the early 2000s.

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory which is causing an acceleration in home values.

4. Houses became too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here’s a graph showing that difference:

5. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:

During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can’t happen today.

Bottom Line

If you’re concerned we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

Posted in Buyers, Pricing, Sellers
March 10, 2020

Equity Gain Growing in Nearly Every State

 

Rising home prices have been in the news a lot lately, and much of the focus is on whether they’re accelerating too quickly and how sustainable the growth in prices really is. One of the often-overlooked benefits of rising prices, however, is the impact they have on a homeowner’s equity position.

Home equity is defined as the difference between a home’s fair market value and the outstanding balance of all liens on the property. While homeowners pay down their mortgages, the amount of equity they have in their homes climbs each time the value increases.

Today, the number of homeowners that currently have significant equity in their homes is growing. According to the Census Bureau, 38% of all homes in the country are mortgage-free.  In a home equity study, ATTOM Data Solutions revealed that of the 54.5 million homes with a mortgage, 26.7% of them have at least 50% equity. That number has been increasing over the last eight years.

CoreLogic also notes:

“…the average homeowner gained approximately $5,300 in equity during the past year.”

The map below shows a breakdown of the increasing equity gain across the country, painting a clear picture that home equity is growing in nearly every state.

Bottom Line

This may be the year to take advantage of your home equity by applying it forward, either as you downsize or as you move up to a new home.

March 6, 2020

Is It Time to Update Your Bathroom?

 

Just like your bedroom, your bathroom should be a relaxing place. Whether you unwind in the shower or with a hot bath, making sure your bathroom is a place of comfort and not stress is key to making your home a happier place. Because it is a room you will definitely spend time in every single day, these signs might indicate that it is time for some changes and some tips to help you do so.

1. Poor Lighting

You can consider investing in brighter bulbs and updating your light fixtures

2. No Storage Space

You may want to install a larger vanity or additional shelving about the toilet

3. Outdated Paint Color

Updating your wall color with something more neutral, light, and timeless can help bring your bathroom back to life.

4. That ‘Bathroom’ Scent

Checking for mold, fixing any leaks, or adding ventilation can help relieve any scent you can’t seem to get rid of.

5. Leaks

Calling a plumber to make repairs is usually necessary if you have brown water stains.

6. Time to Sell

If you’re getting ready to sell, updating whatever needs updating will increase your home value.

March 5, 2020

Impact of the Coronavirus on the U.S. Housing Market

 

The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.

With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?

The National Association of Realtors (NAR) anticipates:

“At the very least, the coronavirus could cause some people to put home sales on hold.” 

While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.

For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.

According to the National Association of Home Builders (NAHB):

“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”

This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.

Bottom Line

The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.

Posted in Buyers, Sellers