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Baby Boomers are Downsizing, Are You Ready to Move?

For a while now baby boomers have been blamed for a portion of the housing market’s current lack of housing inventory, but should they really be getting the blame?

Here’s what some of the experts have to say on the subject:

Aaron Terrazas, Senior Economist at Zillow, says that “Boomers are healthier and working longer than previous generations, which means they aren’t yet ready to sell their homes.

According to a study by Realtor.com, 85% of baby boomers indicated they were not planning to sell their homes.

It is true that baby boomers are healthier and are thus working and living longer, but are they also refusing to sell their homes? 

Last month, Trulia looked at the housing situation of seniors (aged 65+) today compared to that of a decade ago. Trulia’s study revealed that:

Although seniors appear to be delaying downsizing until later in life, as a group, households 65 and over are still downsizing at roughly the same rate as in years past.”

Trulia also explains that, 

5.5% of households 65 and over moved, pretty evenly split between moves to single family (2.7%) and multifamily (2.4%) homes. In 2005, these percentages were virtually the same, with 5.5% of senior households moving, including 2.5% into single family and 2.5% into multifamily homes.”

So, if these percentages are the same, what is the challenge?

Recent reports tell us that the older population grew from 3 million in 1900 to 47.8 million in 2017.

In addition, the Census recently revised the numbers from their National Population Projections:

The aging of baby boomers means that within just a couple decades, older people are projected to outnumber children for the first time in U.S. history…By 2035, there will be 78.0 million people 65 years and older compared to 76.7 million under the age of 18.

Bottom Line

If you are a baby boomer who is not sure whether you should downsize or move to a warmer climate (other people are doing it, why not you?), call a local real estate professional who can help you evaluate your options today!


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Pre-Approval: Your 1st Step in Buying a Home

In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.


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Buying a Home? Do You Know the Lingo? [INFOGRAPHIC]

Some Highlights:

  • Buying a home can be intimidating if you are not familiar with the terms used during the process.
  • To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.
  • The best way to ensure that your home-buying process is a confident one is to find a real estate professional who not only puts your family’s needs first, but will guide you through every aspect of the transaction with ‘the heart of a teacher.’

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Dispelling the Myth About Home Affordability

We have all seen the headlines that report that buying a home is less affordable today than it was at any other time in the last ten years, and those headlines are accurate. But, have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?

The reason is that homes were less affordable 25, 20, or even 11 years ago than they are today.

Obviously, buying a home is more expensive now than during the ten years immediately following one of the worst housing crashes in American history.

Over the past decade, the market was flooded with distressed properties (foreclosures and short sales) that were selling at 10-50% discounts. There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.

Low Prices + Low Mortgage Rates = High Affordability

Prices have since recovered and mortgage rates have increased as the economy has gained strength. This has and will continue to impact housing affordability moving forward.

However, let’s give affordability some historical context. The National Association of Realtors (NAR) issues their Affordability Index each month. According to NAR:

“The Monthly Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent monthly price and income data.”

NAR’s current index stands at 138.8. The index had been higher each of the last ten years, peaking at 197 in 2012 (the higher the index the more affordable houses are).

But, the average index between 1990 and 2007 was just 123 and there were no years with an index above 133. That means that homes are more affordable today than at any time during the eighteen years between 1990 and 2007.

Bottom Line

With home prices continuing to appreciate and mortgage rates increasing, home affordability will likely continue to slide. However, this does not mean that buying a house is not an attainable goal in most markets as it is less expensive today than during the eighteen-year stretch immediately preceding the housing bubble and crash.


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New Home Sales Up 12.7% From Last Year

According to the latest New Residential Sales Report from the Census Bureau, new construction sales in August were up 3.5% from July and 12.7% from last year! This marks the second consecutive month with double-digit year-over-year growth (12.8% in July).

The report also showed that builders have ramped up construction with an increase in new construction starts and completions. The summer months are often a busy time for builders as they capitalize on the warmer weather to be able to finish projects.

Below is a table showing the change in starts, completions, and sales from last August.

New Home Sales Up 12.7% From Last Year | Keeping Current Matters

Other notable news from the report is that the percentage of new construction sales in the $200-$299k range has continued to break away from the $300-$399k range.

This shows that builders are starting to build lower-priced homes that will help alleviate some of the inventory challenges in the starter and trade-up home categories. The chart below shows the full breakdown.

New Home Sales Up 12.7% From Last Year | Keeping Current Matters

What does this mean for buyers and sellers?

If you are thinking of buying or selling in today’s market, you no doubt have heard that there is a shortage of existing homes for sale which has been driving home prices up across the country. The additional new construction coming to the market could help alleviate this shortage, but we are still not back up to pre-crisis levels.


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What’s Going On With Home Prices?

According to CoreLogic’s latest Home Price Insights Report, national home prices in August were up 5.5% from August 2017. This marks the first time since June 2016 that home prices did not appreciate by at least 6.0% year-over-year.

CoreLogic’s Chief Economist Frank Nothaft gave some insight into this change,

“The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home. The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index.  

National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.”

One of the major factors that has driven prices to accelerate at a pace of between 6-7% over the past two years was the lack of inventory available for sale in many areas of the country. This made houses a prized commodity which forced many buyers into bidding wars and drove prices even higher.

According to the National Association of Realtors’ (NAR) latest Existing Home Sales Report, we are starting to see more inventory come to market over the last few months. This, paired with patient buyers who are willing to wait to find the right homes, is creating a natural environment for price growth to slow.

Historically, prices appreciated at a rate of 3.7% (from 1987-1999). CoreLogic predicts that prices will continue to rise over the next year at a rate of 4.7%.

Bottom Line

As the housing market moves closer to a ‘normal market’ with more inventory for buyers to choose from, home prices will start to appreciate at a more ‘normal’ level, and that’s ok! If you are curious about home prices in your area, talk to a local real estate professional who can show you what’s going on!


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The True Cost of NOT Owning Your Home

Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for the entirety of America’s existence.

Realtor.com reported that:

“Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option…as people get more savings in their pockets, buying becomes the better option.”

What proof exists that owning is financially better than renting?

1. In a previous blog, we highlighted the top 5 financial benefits of homeownership:

  • Homeownership is a form of forced savings.
  • Homeownership provides tax savings.
  • Homeownership allows you to lock in your monthly housing cost.
  • Buying a home is cheaper than renting.
  • No other investment lets you live inside of it.

2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.

3. Less than a month ago, we explained that a family that purchased an average-priced home at the beginning of 2018 could build more than $49,000 in family wealth over the next five years.

4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment – along with a profit margin!

Bottom Line

Owning your home has many social and financial benefits that cannot be achieved by renting.


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Buying a Home is Cheaper than Renting in 38 States! [INFOGRAPHIC]

Some Highlights:

  • According to a study by GOBankingRates, it is cheaper to buy a home than rent in 38 states across the country.
  • In six states the difference between buying & renting would account for less than a $50 monthly difference, leaving the choice up to the individual family.
  • Nationwide, it is now 26.3% cheaper to buy.

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Are We About to Enter a Buyers’ Market?

Home sales are below last year’s levels, home values are appreciating at a slower pace, and there are reports showing purchasing demand softening. This has some thinking we may be entering a buyers’ market after sellers have had the upper hand for the past several years. Is this really happening?

The market has definitely softened. However, according to two chief economists in the industry, we are a long way from a market that totally favors the purchaser:

Dr. Svenja Gudell, Zillow Chief Economist:

“These seller challenges don’t indicate we’re suddenly in a buyers’ market – we don’t expect market conditions to shift decidedly in favor of buyers until 2020 or later. But buyers certainly are starting to balk at the rapid rise in prices and home values are starting to grow at a less frenetic pace.”

Danielle Hale, Chief Economist of realtor.com:

“The signs are pointing to a market that’s shifting toward buyers. But, in most places, we’re still a long way from a full reversal.”

In addition, Pulsenomics Inc. recently surveyed over one hundred economists, real estate experts, and investment & market strategists and asked this question:

“When do you expect U.S. housing market conditions to shift decidedly in favor of homebuyers?”

Only 5% said the market has already shifted. Here are the rest of the survey results:

Are We About to Enter a Buyers’ Market? | Keeping Current Matters

Bottom Line

The market is beginning to normalize but that doesn’t mean we will quickly shift to a market favoring the buyer. We believe Ivy Zelman, author of the well-respected ‘Z’ Report, best explained the current confusion:

“With the rate of home price appreciation starting to decelerate alongside the uptick in inventory…we expect significant debate about whether this is a bullish or bearish sign.

In our view, the short-term narrative will probably be confusing, but more sustainable growth and affordability will likely be the end result.”


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2 Factors to Watch in Today’s Real Estate Market Whether Buying or Selling

When it comes to buying or selling a home there are many factors you should consider. Where you want to live, why you want to buy or sell, and who will help you along your journey are just some of those factors. When it comes to today’s real estate market, though, the top two factors to consider are what’s happening with interest rates & inventory.

Interest Rates

Mortgage interest rates have been on the rise and are now over three-quarters of a percentage point higher than they were at the beginning of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.72% for a 30-year fixed rate mortgage last week.

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.

2 Factors to Watch in Today’s Real Estate Market Whether Buying or Selling | Keeping Current Matters

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be over 5% by this time next year.

Inventory

A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 4.3-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 78 straight months.

The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last three months.

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, in June, July, and August, inventory levels have started to increase as compared to the same time last year.

2 Factors to Watch in Today’s Real Estate Market Whether Buying or Selling | Keeping Current Matters

This is a trend to watch as we move further into the fall and winter months. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Bottom Line

If you are planning to enter the housing market, either as a buyer or a seller, make sure that you have an experienced local agent who can help you navigate the changes in mortgage interest rates and inventory.


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Mortgage Interest Rates are Still Going Up… Should You Wait to Buy?

Mortgage interest rates, as reported by Freddie Mac, have increased by close to a quarter of a percent over the last several weeks. Freddie Mac, Fannie Mae, the Mortgage Bankers Association, and the National Association of Realtors are all calling for mortgage rates to rise another quarter of a percent by next year.

In addition to the predictions from the four major reporting agencies mentioned above, the Federal Open Market Committee recently voted “unanimously to approve a 1/4 percentage point increase in the primary credit rate to 2.75 percent.” Historically, an increase in the primary credit rate has translated to an overall jump in mortgage interest rates as well.

This has caused some purchasers to lament the fact that they may no longer be able to get a rate below 4%. However, we must realize that current rates are still at historic lows.

Here is a chart showing the average mortgage interest rate over the last several decades:

Mortgage Interest Rates are Still Going Up… Should You Wait to Buy? | Keeping Current Matters

Bottom Line

Though you may have missed the lowest mortgage rate ever offered, you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.


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How Does the Supply of Homes for Sale Impact Buyer Demand?

The price of any item is determined by the supply of that item, as well as the market’s demand for it. The National Association of REALTORS (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their monthly REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand).

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”

How Does the Supply of Homes for Sale Impact Buyer Demand? | Keeping Current Matters

The darker the blue, the stronger the demand for homes is in that area. The survey showed that in 38 out of 50 states buyer demand was slightly lower than this time last year but remains strong. Only six states had a ‘stable’ demand level.

Seller Supply 

The index also asked: “How would you rate seller traffic in your area?”

As you can see from the map below, 23 states reported ‘weak’ seller traffic, 22 states and Washington D.C. reported ‘stable’ seller traffic, and 5 states reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for homes.

How Does the Supply of Homes for Sale Impact Buyer Demand? | Keeping Current Matters

Bottom Line

Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet buyer demand, prices will continue to increase. If you are debating listing your home for sale, meet with a local real estate professional in your area who can help you capitalize on the demand in the market now!


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Should I Buy Now? Or Wait Until Next Year? [INFOGRAPHIC]

Some Highlights:

  • The cost of waiting to buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.
  • Freddie Mac predicts interest rates to rise to 5.2% by the third quarter of 2019.
  • CoreLogic predicts home prices to appreciate by 5.1% over the next 12 months.
  • If you are ready and willing to buy your dream home, find out if you are able to!

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Are Home Prices Softening or Are They Falling?

We are beginning to see reports that more housing inventory is coming to the market and that buyer demand may not be increasing at the same pace it did earlier this year. The result will be many headlines written to address the impact that these two situations will have on home values.

Many of these headline writers will confuse “softening home prices” with “falling home prices,” but there is a major difference between the two.

The data will begin to show that home values are not appreciating at the same levels as they had over the last several years (softening prices). This does NOT mean that prices are depreciating (falling prices).

Here is an example: Over the last several years, national home values increased by more than 6% annually. If you had a home worth $300,000 at the beginning of the year, it would be worth $318,000 by year’s end. If the appreciation rate “falls” to 4%, that $300,000 house would be worth $312,000 at the end of next year – a $6,000 difference.

The price of the home did not fall. It just didn’t increase at the level it had the previous year.

Appreciation rates are projected to end this year at approximately 5%, and then drop to somewhere between 4-5% next year. This drop in appreciation rate will cause home price increases to soften.

Again, this does not mean that home prices will depreciate, but instead that they will appreciate more slowly.

Bottom Line

Be careful when reading headlines that discuss home values. Some headline writers will be legitimately confused and will use the word falling in place of softening. Others will realize that the headline “Home Prices are Falling!” will get more clicks than “Home Prices are Softening” and will intentionally write the more compelling headline. Read the article. If the word depreciation is not mentioned, home values are not falling.


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The Cost of NOT Paying PMI

Saving for a down payment is often the biggest hurdle for a first-time homebuyer as median incomes, rents, and home prices all vary depending on where you live.

There is a common misconception among homebuyers that a 20% down payment is required, and it is this limiting belief that often adds months, and sometimes even years, to the home-buying process.

So, if you can purchase a home with less than a 20% down payment… why aren’t more people doing just that?

One Possible Answer: Private Mortgage Insurance (PMI)

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. The monthly cost of your PMI depends on the home’s value, the amount of your down payment, and your credit score.

Below is a table showing the difference in monthly mortgage payment for a $250,000 home with a 3% down payment and PMI vs. a 20% down payment without PMI:

The Cost of NOT Paying PMI | Keeping Current Matters

The first thing you see when looking at the table above is no doubt the added $320 a month that you would be spending on your monthly mortgage cost. The second thing that should stand out is that a 20% down payment is $50,000!

If you are buying your first home, $50,000 is a large sum of money that takes discipline and sacrifice to save. Many first-time buyers save for 5-10 years before buying their homes.

To save $50,000 in 10 years, you would need to save about $420 a month. On the other hand, if you save that same $420 a month, you could afford a 3% down payment in less than a year and a half.

In a recent article by My Mortgage Insider, they explain what could happen in the market while you are waiting to save for a higher down payment:

“The time it takes to save a (larger) down payment could mean higher home prices and tougher qualifying down the road. For many buyers, it could prove much cheaper and quicker to opt for the 3% down mortgage immediately.”

The article went on to say,

“Since renters typically devote a higher percentage of their income to housing than homeowners, providing flexible down payment options can help renters with solid earnings purchase a home – and gain a fixed-rate mortgage with principal and interest payments that will not increase over the life of the loan.”

If the prospect of having to pay PMI is holding you back from buying a home today, Freddie Mac has this advice,

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Based on results of the most recent Home Price Expectation Survey, a homeowner who purchased a $250,000 home in January would gain $50,000 in equity over the next five years based on home price appreciation alone (shown below).

The Cost of NOT Paying PMI | Keeping Current Matters

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, meet with a professional in your area who can explain your market’s conditions and help you make the best decision for you and your family.


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Where Are Mortgage Interest Rates Headed In 2019?

The interest rate you pay on your home mortgage has a direct impact on your monthly payment; the higher the rate, the greater the payment will be. That is why it is important to know where rates are headed when deciding to start your home search.

Below is a chart created using Freddie Mac’s U.S. Economic & Housing Marketing Outlook. As you can see, interest rates are projected to increase steadily over the course of the next year.

Where Are Mortgage Interest Rates Headed In 2019? | Keeping Current Matters

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

According to CoreLogic’s latest Home Price Index, national home prices have appreciated 6.2% from this time last year and are predicted to be 5.1% higher next year.

If both the predictions of home price and interest rate increases become a reality, families would wind up paying considerably more for their next homes.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth, so don’t wait until next year! Meet with a local real estate professional to evaluate your ability to purchase your dream home now.


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How Much Has Your Home Increased in Value?

Home values have risen dramatically over the last twelve months. In CoreLogic’s most recent Home Price Index Report, they revealed that national home prices have increased by 6.2% year-over-year.

CoreLogic broke down appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price.

The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from July 2017 to July 2018 (the latest data available). 

How Much Has Your Home Increased in Value? | Keeping Current Matters

It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor which determines how much your home has appreciated over the course of the last year.

Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.

Bottom Line

If you are planning to list your home for sale in today’s market, find a local agent who can explain exactly what’s going on in your area and your price range.


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Is the Real Estate Market Finally Getting Back to Normal?

The housing market has been anything but normal for the last eleven years. In a normal real estate market, home prices appreciate 3.7% annually. Below, however, are the price swings since 2007 according to the latest Home Price Expectation Survey:

After the bubble burst in June 2007, values depreciated 6.1% annually until February 2012. From March 2012 to today, the market has been recovering with values appreciating 6.2% annually.

These wild swings in values were caused by abnormal ratios between the available supply of inventory and buyer demand in the market. In a normal market, there would be a 6-month supply of housing inventory.

When the market hit its peak in 2007, homeowners and builders were trying to take advantage of a market that was fueled by an “irrational exuberance.”

Inventory levels grew to 7+ months. With that many homes available for sale, there weren’t enough buyers to satisfy the number of homeowners/builders trying to sell, so prices began to fall.

Then, foreclosures came to market. We eventually hit 11 months inventory which caused prices to crash until early 2012. By that time, inventory levels had fallen to 6.2 months and the market began its recovery.

Over the last five years, inventory levels have remained well below the 6-month supply needed for prices to continue to level off. As a result, home prices have increased over that time at percentages well above the appreciation levels seen in a more normal market. 

That was the past. What about the future?

We currently have about 4.5-months inventory. This means prices should continue to appreciate at above-normal levels which most experts believe will happen for the next year. However, two things have just occurred that are pointing to the fact that we may be returning to a more normal market.

1. Listing Supply is Increasing

Both existing and new construction inventory is on the rise. The latest Existing Home Sales Report from the National Association of Realtors revealed that inventory has increased over the last two months after thirty-seven consecutive months of declining inventory. At the same time, building permits are also increasing which means more new construction is about to come to market. 

2. Buyer Demand is Softening

Ivy Zelman, who is widely respected as an industry expert, reported in her latest ‘Z’ Report:

 “While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets.

Indicative of this, our broker contacts rated buyer demand at 69 on a 0- 100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”

With supply increasing and demand waning, we may soon be back to a more normal real estate market. We will no longer be in a buyers’ market (like 2007-February 2012) or a sellers’ market (like March 2012- Today).

Prices won’t appreciate at the levels we’ve seen recently, nor will they depreciate. It will be a balanced market where prices remain steady, where buyers will be better able to afford a home, and where sellers will more easily be able to move-up or move-down to a home that better suits their current lifestyles.

Bottom Line

Returning to a normal market is a good thing. However, after the zaniness of the last eleven years, it might feel strange. If you are going 85 miles per hour on a road with a 60 MPH speed limit and you see a police car ahead, you’re going to slow down quickly. But, after going 85 MPH, 60 MPH will feel like you’re crawling. It is the normal speed limit, yet, it will feel strange.

That’s what is about to happen in real estate. The housing market is not falling apart. We are just returning to a more normal market which, in the long run, will be much healthier for you whether you are a buyer or a seller.


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Home Prices: The Difference 5 Years Makes

CoreLogic recently released their Home Price Index ReportOne of the key indicators used in the report to determine the health of the housing market was home price appreciation. CoreLogic focused on appreciation from July 2013 to July 2018 to show how prices over the last five years have fared.

The graph below was created to show the 5-year change in price from July 2013 to July 2018 by price range.

Home Prices: The Difference 5 Years Makes | Keeping Current Matters

As you can see in the graph, the highest price appreciation occurred in the lowest price range with 48% growth, while the highest priced homes appreciated by 25%. This has been greatly fueled by the lack of inventory of homes available at the lower price ranges and high demand from first-time buyers looking to enter the market.

Where were prices expected to go?

Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts, and investment and market strategists and asks them to project how residential home prices will appreciate over the next five years for their Home Price Expectation Survey (HPES).

According to the Q3 2014 survey results, national homes prices were projected to increase cumulatively by 19.5% by December 2018. The bulls of the group predicted home prices to rise by 27.8%, while the more cautious bears predicted an appreciation of 11.2%.

Where are prices headed in the next 5 years?

Data from the most recent HPES shows that home prices are expected to increase by 20.0% over the next 5 years. The bulls of the group predict home prices to rise by 31.2%, while the more cautious bears predict an appreciation of 9.3%.

Bottom Line

Every day, thousands of homeowners regain positive equity in their homes. Some homeowners are now experiencing values even greater than those before the Great Recession. If you’re wondering if you have enough equity to sell your house and move on to your dream home, contact a local real estate professional who can help!


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Is Buying a Home Really More Stressful Than Planning a Wedding? [INFOGRAPHIC]

Some Highlights:

  • According to a new survey from Open Listings, 62% of Americans ages 25-54 believe that buying a home is more stressful than planning a wedding.
  • Many young couples are saving for a wedding and a home at the same time.
  • The average US wedding now costs 66% of a median home down payment, according to The Knot.

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Are Homebuyers Starting to Hit the ‘Pause’ Button?

For the last several years, buyer demand has far exceeded the housing supply available for sale. This low supply and high demand have led to home prices appreciating by an average of 6.2% annually since 2012.

With this being said, three of the four major reports used to measure buyer activity have revealed that purchasing demand may be softening. Here are the four indices, how they measure demand (methodology), what their latest reports said, and a quick synopsis of the report.

The Foot Traffic Report
by the National Association of Realtors

Methodology: Every month SentriLock, LLC provides NAR Research with data on the number of properties shown by a REALTOR®. Lockboxes made by SentriLock, LLC are used in roughly a third of home showings across the nation. Foot traffic has a strong correlation with future contracts and home sales, so it can be viewed as a peek ahead at sales trends two to three months into the future.

Latest Report: “Foot Traffic climbed 3.2 points to 55.8 mid-summer in July. Additionally, the diffusion index is higher than last year by 13.5 points. Despite a healthy economy and labor market, supply and new construction remains unable to keep up with buyer demand.”

Synopsis: Buyer demand remains strong.

The Showing Index
by ShowingTime

Methodology: The ShowingTime Showing Index® tracks the average number of buyer showings on active residential properties on a monthly basis, a highly reliable leading indicator of current and future demand trends.

Latest Report: “Showing activity throughout the country increased by 0.3 percent year over year in July, the third consecutive month that the U.S. ShowingTime Showing Index recorded buyer interest deceleration compared to the previous year. The June 2018 figures revealed a 0.0 percent change in showing traffic from 2017, while May showed a 1.2 percent year-over-year increase. The 12-month average year-over-year increase was 4.6 percent.”

Synopsis: Buyer demand is softening

Realtors Confidence Index
by the National Association of Realtors

Methodology: The REALTORS Confidence Index is a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners. Practitioners are asked about their expectations for home sales, prices and market conditions.

Latest Report: “REALTORS reported slower homebuying activity in July 2018…The REALTORS® Buyer Traffic Index registered at 62, down from the same month one year ago (69). This is the fifth straight month (since March 2018) that Realtors reported a decline in buyer activity compared to conditions one year ago.”

Synopsis: Buyer demand is softening

The Real Estate Broker Survey
in the ‘Z’ Report by Zelman and Associates (subscription needed)

Methodology: Proprietary survey results of real estate executives.

Latest Report: “While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets. Indicative of this, our broker contacts rated buyer demand at 69 on a 0-100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”

Synopsis: Buyer demand is softening

Bottom Line

Again, three of the four most reliable measures of buyer activity are reporting that demand is softening. We had a strong buyers’ market directly after the housing crash which was immediately followed by a strong sellers’ market over the last six years.

If demand continues to soften and supply begins to grow (as is projected to happen), we will return to a more neutral market which will favor neither buyers nor sellers. This “more normal” market will be better for real estate in the long term.


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4 Reasons Why Fall Is A Great Time to Buy A Home!

Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Insights report reveals that home prices have appreciated by 6.2% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.1% over the next year.

Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have already increased by half of a percentage point, to around 4.5% in 2018. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by half a percentage point to around 5.1% by this time next year.

An increase in rates will impact your monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home.

3. Either Way, You Are Paying a Mortgage

There are some renters who have not yet purchased homes 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 mortgageeither yours or your landlord’s.

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

Are you ready to put your housing cost to work for you?

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer, or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.


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Home Prices Up 6.49% Across the Country! [INFOGRAPHIC]

Some Highlights:

  • The Federal Housing Finance Agency (FHFA) recently released their latest quarterly Home Price Index report.
  • In the report, home prices are compared both regionally and by state.
  • Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!

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What Does the Future Hold for Home Prices?

Home prices are at the top of everyone’s minds. Can they maintain their current pace of appreciation? Will rising mortgage rates negatively impact home values? Will the next economic slowdown cause prices to crash?

Let’s try to answer these questions based on what has happened in the past as well as what we know about the current real estate market.

The Impact of Rising Interest Rates

We explained earlier this year that rising mortgage rates have not negatively impacted home prices in the past and probably wouldn’t this time either. Freddie Mac’s comments were very direct:

“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

They were correct. So far this year, home values have continued to appreciate above normal historic percentages and it appears the gradual increase in rates has had little impact on prices.

The Impact of an Economic Slowdown

Many people fear that when the economy turns, we may see the same depreciation in home values as we did a decade ago.

However, we recently reported that the same group of economists, real estate experts, and investment & market strategists who predicted the next recession will occur in the next 18-24 months have also projected that house prices will continue to appreciate for the next five years, albeit at smaller percentages.

It Comes Down to Supply and Demand

As always, home prices will be determined by the demand to purchase compared to the available inventory of homes for sale. For the last six years, demand has far exceeded the available supply which has resulted in the average annual appreciation to top 6% since 2012. That is far greater than the historic norm of 3.6% annual appreciation that we saw prior to the housing boom.

There are currently small signs that housing inventory is slowly beginning to increase. Months supply of houses for sale matched last year’s numbers for the last two months after 37 consecutive months of decreasing inventory. New construction data has also shown positive signs that inventory will be increasing.

As inventory begins to meet demand, we will see appreciation return to more normal levels. We are already seeing projections coming in lower than the 6.2% annual average we have seen more recently.

CoreLogic is predicting that home values will appreciate by 5.1% over the next twelve months and the Home Price Expectation Survey calls for values to increase by 4.2% in 2019.

Bottom Line

Mark Fleming, Chief Economist at First American, explained it best:

“We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”


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Homeownership is a Dominant Gene

There are many things that factor into the decision to buy a home. New research from the Urban Institute suggests that one of those things may be inherited from your parents.

Children are More Likely to Own a Home if Their Parents Did

According to an analysis of millennial homeowners, the homeownership rate of those whose parents rent their homes is 14.4%, while the rate amongst millennials whose parents are homeowners is 31.7%!

“A young adult’s odds of homeownership are highly correlated with their parent’s homeownership.

Without controlling for such factors as age, income, education, marital status, and race or ethnicity, there is a 17 percentage-point gap between the homeownership rate for young adults whose parents are renters and young adults whose parents are homeowners.”

The study also revealed that as a parent’s net worth increases, so does the likelihood that their child will own a home. These two findings are not surprising as we know from the Survey of Consumer Finances that a homeowner’s net worth is 44x greater than that of a renter.

So, a parent who is a homeowner will have more wealth which will, in turn, increase the chances that their children will own their own homes in the future.

Below is a breakdown of the relationship between a parent’s wealth and a millennial’s likelihood to own a home.

Homeownership is a Dominant Gene | Keeping Current Matters

The Good News: The high homeownership rate amongst baby boomers (likely the parents of many millennials) is a great sign that millennials will want to own homes. We are already seeing this in the high-demand environment that we are currently experiencing in the starter and trade-up markets.

Bottom Line

Even though millennials took longer than many of the generations before them to start home searches of their own, the data shows that they will not be waiting much longer!


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