by The KCM Crew on December 3, 2013 in For Sellers
If you read some of the headlines about home sales over the last few weeks, you may believe that sales of houses in the U.S. are beginning to slow dramatically. There have been some that have used the recent Existing Home Sales Reports (EHSR) from the National Association of Realtors’ as proof of this supposition. We should be careful not to put too much credence in these reports of impeding doom.
It is true that the last EHSR revealed that sales were down 3.2% from the previous month. However, there are two crucial points that are not being addressed:
Sales of non-distressed properties are increasing nicely. However, as the inventory of distressed properties continues to shrink, the number of overall properties sold may diminish over the next few months. This is a sign that we are entering a much healthier housing market.
by The KCM Crew on November 19, 2013 in For Sellers
Many sellers feel that the spring is the best time to place their home on the market as buyer demand increases at that time of year. However, the fall and winter have their own advantages. Here are five reasons to sell now.
At this time of year, only those purchasers who are serious about buying a home will be in the marketplace. You and your family will not be bothered and inconvenienced by mere 'lookers'. The lookers are at the mall or online doing their holiday shopping.
Housing supply always shrinks dramatically at this time of year. The choices for buyers will be limited. Don't wait until the spring when all the other potential sellers in your market will put their homes up for sale.
One of the biggest challenges of the 2013 housing market has been the length of time it takes from contract to closing. Banks have been inundated with both purchase and refinancing loan requests. Both of these will slow in the winter cutting timelines and the frustration these delays cause both buyers and sellers.
If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by over 25% from now to 2018. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30 year housing expense with historically low interest rates right now. There is no guarantee rates will remain at these levels in years to come.
Look at the reason you decided to sell in the first place and decide whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?
You already know the answers to the questions we just asked. You have the power to take back control of the situation by pricing your home to guarantee it sells. The time has come for you and your family to move on and start living the life you desire. That is what is truly important.
Trying to buy a home or refinance the one you’ve got? If so, you’re probably dizzy from watching mortgage rates bounce up, down and sideways since summer.
A survey in June by real estate site Trulia found that 41 percent of potential homebuyers were concerned about rising interest rates: “The top worry among Americans who plan to buy a home someday, if they were to buy a home in 2013, is that mortgage rates would rise further before they buy (41 percent), followed by rising home prices (37 percent).”
Fluctuating rates are making these decisions particularly tough, Trulia says.
Keeping up with mortgage rates has been like following a close game of hoops. Turn your head for a moment and you miss the action. Here’s a recap:
Suppose you’re borrowing $200,000. Last year this time, with good credit, you could have a 30-year fixed-rate home loan at about 3.35 percent. Your monthly payment would be $881, not including taxes, homeowners insurance and mortgage insurance. (I used the mortgage calculator at HSH. Put in your own numbers to run your calculations.)
Today, at an interest rate of 4.19 percent, that same mortgage costs $977 a month – $96 more. If rates reach 4.5 percent again, you’ll be paying $1,013, or another $36 a month.
You can see that rates do make a difference. An $881 monthly payment is more affordable than buying the exact same home for $1,013 a month.
And there’s the problem: You may still afford a home as rates rise. But can you afford the same home? Or will you have to step back your expectations and accept less home than you would have gotten previously for the same money?
Instead of saying “if” rates reach 4.5 percent, I probably should have said “when.” Because, as the economy improves – and it is improving, albeit slowly — the federal government will stop buying Treasury securities, which is what’s currently keeping rates low.
It’s a complicated maneuver for economists, but the bottom line for the rest of us is this: Rates are probably headed up. The better the economy gets, the more apt they are to rise.
CNNMoney, peering into a crystal ball, talked with Freddie Mac’s chief economist, Frank Nothaft, who said he expects rates to hit 5 percent by the middle of 2014.
“That’s an increase of less than $24 a month for every $100,000 borrowed — enough to weed out borrowers who are struggling to afford homes but not enough to impact overall demand,” CNNMoney writes.
REALTORMag, published by the National Association of Realtors, adds, “Mortgage rates will likely rise above 5 percent in 2014 and average 5.3 percent by the end of 2015, according to the Mortgage Bankers Association’s forecast.”
Most people who needed to refinance have done it. Mortgage lenders are cutting their payrolls now to make up for their shrinking business.
But homebuyers are still in the game. If you’re a buyer or a would-be buyer, the message for you is clear: If you like today’s rates, get moving. They’re not likely to fall much, if at all. You can bet they’re headed up.
During the same period, existing homes sold at the fastest annual rate recorded in more than six years, according to NAR’s latest quarterly report on metro area median prices and affordability.
Despite the robust price growth, NAR estimated that potential buyers still had adequate income in most areas to purchase a home in the third quarter. Nonetheless, market momentum is changing, according to Lawrence Yun, chief economist at NAR.
“Rising prices and higher interest rates have taken a bite out of housing affordability,” Yun said. “However, we have the ongoing situation of more buyers than sellers in the market, so lower sales will help to take the pressure off home price growth and allow them to rise slowly at a single-digit growth rate in 2014.”
The national median existing single-family home price increased by 12.5 percent year over year to $207,300 in the third quarter, the strongest year-over-year gain since the fourth quarter of 2005 when it shot up 13.6 percent, according to the trade group.
In the second quarter, the median price reportedly rose 12.2 percent year over year.
On an annual basis, they reportedly increased 13 percent. The third-quarter pace of sales was the highest recorded since the first quarter of 2007, when it hit 5.66 million, NAR said.
The report’s findings also highlighted the market’s sharp inventory shortage.
At the rate of sales in the third quarter, the existing-home inventory of 2.21 million homes for sale would have cleared in just five months, down from 5.9 months in the third quarter of 2012.
Big investors continue to expand into more cities for single-family homes as they pull back in others.
Last month, institutional investors, who largely buy single-family homes to turn into rentals, accounted for about one in four home sales in Atlanta, Las Vegas, St. Louis and Jacksonville, data from RealtyTrac show.
They also accounted for a big chunk of sales in Charlotte and Memphis.
Price gains will likely follow the investor buyers, says John Burns, CEO of John Burns Real Estate Consulting, as they did in earlier hot investor markets such as Phoenix and Sacramento.
HOUSING MARKET: Pending home sales slip: Flat sales next year?
He speculates that investor buyers — including institutional Wall Street buyers, individuals who flip homes for quick profits and mom and pop investors — have driven much of this year's home price appreciation.
CoreLogic data show prices up 12.4% in August year over year, but faster in areas favored by investors, like Phoenix and Sacramento, which were up 18% and 26% respectively.
"Investors were just smart. They saw that homes were undervalued. They jumped in and pushed prices back up to normal," Burns says.
Big investors still account for a small part of the overall housing market. As a result, their impact on overall prices isn't that great, said Richard Smith, CEO of real estate firm Realogy Holdings, at a Zillow housing forum Thursday.
Prices have also risen in areas that have had little investor activity, says Mike Orr, real estate expert at the W.P. Carey School of Business at Arizona State University.
Orr tracks the Phoenix market, which was one of the first targeted by investors.
In mid-2012, investor activity peaked in Phoenix, Orr says. Then, they accounted for almost 40% of home sales. Those investors would include small investors.
LENDERS: Home loans become a little easier to get
For this September, Orr says investors accounted for about 23% of sales. Historically, they'd be 15% to 20% of the market, he says.
While Phoenix home prices in August were up more than the national average, home price gains have been slowing this year, show seasonally adjusted price data from Standard & Poor's Case-Shiller index.
A "cooling wave" in terms of demand has now settled in after a frantic spring, Orr says. Falling investor interest is playing a role, but lack of enthusiasm from regular buyers is more important because they're more numerous, Orr says.
by Ashley Garner on October 21, 2013 in For Buyers
Why do you own your home? Why do you want to buy a home? According to Fannie Mae the top five reasons people buy a home or aspire to buy a home are: To have a better place to raise their children; A place where their family can feel safe; To have more space; Freedom to renovate to their own taste; and Owning is a better investment. Does this hold true for you? How about for a friend or family member you are close to? I know that all five reasons were a factor in my personal decision to own a home rather than rent. While I do think that sometimes for some people it is better to rent than own (or possibly it is the only option), the vast majority of the time there is no question it is better to own than rent.
The reasons we buy a home have stayed constant throughout the recovery of our real estate market and are strengthening all the while.
People have to live somewhere and at least in the United States, people want to own where they live. It has a lot to do with freedom. We are a free nation with citizens who strive for financial freedom, enjoy their religious freedom, freedom to say what we want, etc. Something about owning your home gives you freedom.
Every day I work with people who are buying a home and they all have their own unique set of circumstances. Some are newly married and are ready to start their life together. Some need more space. Some have the means to buy a home in a special location to enjoy the beauty of the oceans or mountains. Either way the drive to own is strong.
Let’s face it; we have been through tough economic times in the past several years. Many of us have been caught in the midst of short sales, foreclosures and even bankruptcies. The first question I’m asked by someone who has been through a tough time is “how long do I have to wait before I can buy another house?”
In 1931 the phrase “The American Dream” was defined by James Truslow Adams, historian and author, in his book Epic of America- “…life should be better and richer and fuller for everyone, with opportunity for each according to ability or achievement”. Homeownership is a very strong part of the American Dream.
We have all read books, seen movies and heard stories about immigrants who have come to America in pursuit of a better life in a society that allowed them to better themselves based on their own ability and achievement. Most of these people were coming to America from a society that was without opportunity because the class structure did not allow for significant achievement…you pretty much stayed in the class in which you were born.
In America that is not the case, every day we have the freedom to make better choices, work smarter, work harder, take risks, etc. all in pursuit getting to a better place than we came from.
Owning a home is one of the best ways to better yourself as judged in financial AND non- financial terms. For example, according to the Federal Reserve (2012), on average, Homeowners have a total net worth over thirty times greater than those who rent their home. For most of us the equity in our home is the biggest asset on our balance sheet.
Some of the non-financial related ways we are better off owning a home versus renting include having more room for our growing family by way of buying a bigger house or adding on to our current house… if you rent, your landlord is not likely to allow you to knock down walls and add on to your apartment.
Another way we are better is by having the ability to choose where we want to live. Location is the single most important variable that affects the value of real estate, there is good reason for this…if the location is unsafe, polluted, noisy, high-traffic, prone to flooding, etc. then it less valuable than a location which is safe, quiet, convenient, dry, etc.
Achieving the American Dream is a noble pursuit. I would argue that owning your own home is one of the very best ways to live that Dream. It isn’t the only way but it is so important psychologically and financially that it helped make the USA the wonderfully free and prosperous nation it is and will be.
Why do you own your home? Why do you want to buy a home? Go out and achieve the American Dream!
The housing recovery has led to huge profits at Fannie Mae and Freddie Mac.
The U.S. government rescued the two mortgage finance firms in September 2008. The two firms had become nearly the only source of funding for home loans, and their debt was held by banks large and small across the country. At the time, few expected taxpayers would ever be made whole.
But a recovery in housing has made Fannie (FNMA, Fortune 500) and Freddie (FMCC, Fortune 500) hugely profitable. And those profits flow to the U.S. Treasury.
Fannie Mae received a total of $116 billion in bailout funds. Thursday it reported a $10 billion profit in its most recent quarter, bringing its total repayments to $105 billion.
Freddie Mac received just over $71 billion in bailout funds. With its $5 billion profit reported Wednesday, its repayment will come to $41 billion.
Freddie also said it is getting close to a one-time gain of close to $29 billion later this year, due to how it accounts for some past tax credits. More than $25 billion of that lump sum would be paid to Treasury, which would bring repayments to $66 billion.
Related: What the end of Fannie and Freddie would mean for borrowers
Fannie and Freddie do not make mortgages themselves. Instead they buy mortgages from banks and other lenders, bundle them together and either hold them or sell them to investors with a guarantee that the mortgages will be paid.
When foreclosures shoot up as they did after the bursting of the housing bubble, both firms are subject to huge losses. And the improvement in the housing market over the past year is the key reason for the two firms' return to profitability.
In addition to fewer defaults on the trillions in mortgages they hold, the rebound in home sales has also increased the flow of business. Fannie and Freddie also benefited when record low mortgage rates earlier this year caused a spike in refinancing, which increased the fees they collect.
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