March 18, 2020
March 10, 2020
March 10, 2020
March 6, 2020
February 25, 2020
February 10, 2020
February 6, 2020
January 24, 2020
There's More to a Bubble Than Rising Home Prices
What truly causes a housing bubble and the inevitable crash? For the best explanation, let’s go to a person who correctly called the last housing bubble ?– a year before it happened.
“A bubble requires both overvaluation based on fundamentals and speculation. It is natural to focus on an asset’s fundamental value, but the real key for detecting a bubble is speculation…Speculation tends to chase appreciating assets, and then speculation begets more speculation, until finally, for some reason that will become obvious to all in hindsight, the ‘bubble’ bursts.
I have taken to calling the housing market a ‘bubble’.”
– Bill McBride of Calculated Risk calling the bubble back in April 2005
Where do we stand today regarding speculation?
There are two measurements that are used to determine the speculation in a housing market:
1. The number of homes purchased by an investor and
2. The number of homes being flipped (resold within a twelve-month period)
As compared to 2005, investor purchases are down dramatically (from 23% to 13%) and so is flipping (from 8.2% to 5.7%). McBride explains:
“There is currently some flipping activity, but this is more the normal type of flipping (buy, improve and then sell). Back in 2005, people were just buying homes and letting them sit vacant – and then selling without significant improvements. Classic speculation.”
What are the experts saying about speculation in today’s market?
DSNews recently ran an article which asked two economists to compare the speculation in today’s market to that in 2005-2007. Here is what they said:
Dr. Eddie Seiler, Chief Housing Economist at Summit Consulting: “The speculative ‘flipping mania’ of 2006 is absent from most metro areas.”
Tian Liu, Chief Economist of Genworth Mortgage Insurance:
“The nature of housing demand is different as well, with more potential homeowners and far fewer speculators in the housing market compared to the 2005-2007 period.”
And what does McBride, who called the last housing bubble, think about today’s real estate market? Sixty days ago, he explained:
“In 2005, people were just buying homes and letting them sit vacant – and then selling without significant improvements. Classic speculation. And even more dangerous during the bubble was the excessive use of leverage (all those poor-quality loans). Currently lending standards are decent, and loan quality is excellent… I wouldn’t call house prices a bubble – and I don’t expect house prices to decline nationally like during the bust?.”
Harry’s Bottom Line:
Speculation is a major element of the housing bubble formula. Right now, there are not elevated percentages of investors and house flippers. Therefore, there is not an elevated rate of speculation.
March 18, 2020
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 twelve 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 even tin time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 20008 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 during three of them. It is true that they sank by almost 20% during the last receission, 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 love 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.
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 8, 2020
The housing market has started off much stronger in Florida this year than it did last year. Lower mortgage interest rates have been a driving factor in that change. The average 30-year rate in 2019 according to Freddie Mac was 3.94% while today that rate is closer to 3.5%.
The Census Bureau also just reported the highest homeownership rate since 2014 for people under 35. This is evidence that owning their own home is becoming more important to Millennials as they reach the age where marriage and children may become part of their lives.
According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), buyer demand across the country is strong. That's not the case, however, with seller demand, which remains weak throughout most of the nation. Here's a breakdown by state:
Demand for housing is high, but supply is extremely low. NAR also just reported that the actual number of homes currently for sale stands at 1.42 million, which is one of the lowest totals in almost three decades. Additionally, the ration of homes for sale to the number purchased currently stands at 3.1 months of inventory. In a normal market, that number would be nearly double that at 6 months of inventory.
What does this mean for buyers and sellers?
Buyers need to remain patient in the search process. At the same time, buyers must be ready to act immediately once they find the right home.
Sellers may not want to wait until spring to put their houses on the market. With demand so high and supply so low, now is the perfect time to sell your house for the greatest dollar value and the least hassle.
The real estate market is entering the year like a lion. There's no indication it will lose that roar, assuming inventory continues to come to market.
Discover your home value using my home valuation tool, or reach out to me directly at (954)336-DAWN(3296) to find out how I can help you sell your home quickly while saving you money.
March 8, 2020
Spring is right around the corner, so flowers are starting to bloom, and many potential homebuyers are getting ready to step into the market. If you're thinking of buying this season, here's how mortgage interest rates are working in your favor.
Freddie Mac explains:
"If you're in the market to buy a home, today's average mortgage rates are something to celebrate compared to almost any year since 1971...
Mortgage rates change frequently. Over the last 45 years, they have ranged from a high of 18.63% (1981) to a low of 3.31% (2012). While it's not likely that the average 30-year fixed mortgage rate will return to its record low, the current average rate of 3.45% is pretty close - all to your advantage."
To put this in perspective, the following chart from the same article shows how average mortgage rates by decade have impacted the approximate monthly payment of $200,000 home over time:
Clearly, when rates are low - like they are today - qualified buyers can benefit significantly over time.
Keep in mind that if interest rates go up, this can push many potential homebuyers out of the market. The National Association of Home Builders (NAHB) notes:
"Prospective home buyers are also adversely affected when interest rates rise. NAHB's priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.75% on a 30-year fixed rate mortgage can price over 1.3 million U.S. households out of the market for the median-priced new home."
You certainly don't want to be priced out of the market this year, and waiting may mean a significant change in your potential mortgage payment should rates start to rise. If your financial situation allow, now may be a great time to lock in at a low mortgage rate to benefit greatly over the lifetime of your loan.
For a response within 24 hours, complete your mortgage application at IPS Home Loans where each customer is treated as an individual.
March 7, 2020
If you're looking to buy a home in Florida in 2020, have you thought about putting your tax refund toward a down payment? Homeownership may be one step closer than you think if you spend your dollars wisely this year.
Based on data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,962 when filing their taxes this year.
The map below shows the average tax refund Americans received last year by state with Floridians receiving an average refund of $3,000 or more:
According to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3^ down. Truth be told, a 20% down payment is not always required to buy a home, even though that's a common misconception about homebuying, Veterans Affairs Loans allow many veterans to purchase a home with 0% down.
How can my tax refund help?
If you're a first-time buyer, your tax refund may cover more of a down payment than you ever thought possible.
If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that's covered by the average tax refund:
The darker the blue, the closer your tax refund gets you to homeownership in one of these programs. Maybe this is the year to plan ahead and put your tax refund toward a down payment on a home.
Saving for a down payment can seem like a daunting task, bu the more you know about what's required, the more prepared you'll be to make the best decision for you and your family. This tax season, your refund could be your key to homeownership.
March 7, 2020
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 of 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 Coronoavirus 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.
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.
Feb. 25, 2020
- With interest rates hovering at near historic lows, now is a great time to look back at where they've been and how much they've changed over time.
- According to Freddie Mac, mortgage interest rates are currently hovering near a five-decade low.
- The impact your interest rate has on your monthly mortgage payment is significant. An increase of just $20 in your monthly payment can add up to $240 per year or $7,200 over the life of your loan. Maybe its time to lock in now while rates are still low.
Feb. 17, 2020
Even though there's a big buyer demand for homes in today's low inventory market, it doesn't mean that you should price your home as high as the sky when you're ready to sell. Here's why making sure your price is right is key to driving the best price for the sale.
If you've ever watched the show "The Price Is Right," you know the only way to win the game is to be the one to correctly guess the price of the item up for bid without going over. That means your guess must be just slightly under the retail price.
When it comes to pricing your home, setting it at or slightly below market value will increase the visibility of your listing and drive more buyers your way. This strategy actually increases the number of buyers who will see your home in their search process. Why? When potential buyers look at your listing and see a great price for a fantastic home, they're probably going to want to take a closer look. This means more buyers are going to be excited about your house and more apt to make an offer.
When this happens, you're more likely to set up a scenario with multiple offers, potential bidding wars, and the ability to drive a higher final sale price. At the end of the day, even when inventory is tight, pricing it right - or pricing it to sell immediately - makes a big difference.
Here's the other thing: Homeowners who make the mistake of overpricing their homes will eventually have to lower the prices anyway after they sit on the market for an extended period of time. This leaves buyers wondering if the price drops were caused by something wrong with these homes when in reality, nothing was wrong, the initial prices were jut too high.
If you're thinking about selling your home this year, let's get together so you have a professional on your side to help you properly price your home and maximize demand from the start.
Feb. 10, 2020
Home values have been increasing for 93 consecutive months, according to the National Association of Realtors. If you're a homeowner, particularly one looking to downsize your living space, that' great news, as you've likely built significant equity in your home.
Here's some more good news: mortgage rates are expected to remain low throughout 2020 at an average of 3.8% for a 30-year fixed-rate loan.
The combination of leveraging your growing equity and capitalizing on low rates could make a big difference in your housing plans this year.
How to Use Your Home Equity
For move-up buyers, the typical pattern for building financial stability and wealth through homeownership works this way: you buy a house and gain equity over several years of mortgage payments and price appreciation. You then take that equity from the sale of your house to make a down payment on your next home and repeat the process.
For homeowners ready to downsize, home equity can work in a slightly different way. What you choose to do depends in part upon your goals.
According to HousingWire.com, for some, the desire to downsize may be related to retirement plans or children aging out of the home. Others may be choosing to live in a smaller home to save money or simplify their lifestyle in a space that's easier to clean and declutter. The reasons can vary greatly and by generation.
Those who choose to put their equity toward a new home have the opportunity to make a substantial down payment or maybe even to buy their next home in cash. This is incredibly valuable if our goal is to have a minimal mortgage payment or none at all.
A local real estate professional can help you evaluate your equity and how to use it wisely. If you're planning to downsize, keep in mind that home prices are anticipated to continue rising in 2020, which could influence your choices.
The Impact of Low Mortgage Rates
Low mortgage rates can offset price hikes, so locking in while rates are low will be key. For many downsizing homeowners, a loan with a shorter term is ideal, so the balance can be reduced more quickly.
Interest rates on 10, 15, and 20-year loans are lower than the rates on a 30-year fixed-rate loan. If you're downsizing your housing costs, you may prefer a shorter-term loan to pay off your home faster. This way, you can save thousands in interest payments over time.
If you're planning a transaction into a smaller home, the twin trends of low mortgage rates and rising home equity can kickstart or boost your plans, especially if you're anticipating retirement soon or just wan to live in a smaller home that's easier to maintain. Let's get together today to explore your options.
Feb. 10, 2020
When buying a home, we all want to feel like we're making the right decision, paying a fair price, and making the best investment of our lives. According to a recent gender-based study, men and women can unknowingly walk away with very different financial outcomes when the deal closes. Thankfully, if you follow some simple ways to arm yourself with the information you need to prepare in advance, you're more likely to feel like you've won when the keys to your new house are in our pocket.
Kelly Shue and Paul Goldsmith-Pinkham of the Yale School of Management showed in their recent study The Gender Gap in Housing Returns, when single women invest in the housing market, they're generally losing out compared to their male counterparts. The report explains,
"We find that single men earn one percentage point higher unlevered returns per year on housing investment relative to single women...The gender gap grows significantly larger after adjusting for mortgage borrowing: men earn 6 percentage points higher levered returns per year relative to women. Data on repeat sales reveal that women buy the same property for approximately 2% more and sell for 2% less."
On Nationial Public Radio (NPR), Kelly Shue elaborated by saying,
"Women are losing about $1,370 per year relative to men because they tend to buy the same house at a higher price and sell for a lower price."
In the grand scheme of things, $1,370 a year could be as much as an entire month's mortgage payment for many households in the United States.
How can you make sure this doesn't happen to you?
The good news is, it doesn't have to be this way for anyone, regardless of gender. Here are a few tips on how to make sure you're prepped and ready to enter the housing market with your best foot forward.
1. Work with a Trusted Real Estate Professional
You need somoene on your side who's going to have your best interest in mind and support your unique homeownership goals. Hiring an agent who has a finger on the pulse of the market will make your buying experience an educated one. You need someone who's going to tell you the truth, not just what they think you want to hear.
2. Understand the Homebuying Process
Know the homebuying steps in advance, so you have the best context for how the process works from pre-approval to budgeting, inspections, and more. Have a price range in mind that you can realistically afford too, so you're ready to make an offer that positions you for success. Ask your agent questions along the way, and partner together so you feel confident and prepared at every turn.
3. Research the Current Market
Make sure you know the current trends and insights of the housing market as well. When you find a home that's the perfect fit, determine how much other homes are selling for in the neighborhood. These numbers can vary over time based on market conditions such as inventory, appreciation, and many other economic factors. A great agent will provide you with this information and guide you through every step from start to finish.
When you have a trusted advisor on your side and you're confident that you know exactly what's happening in the market, you'll be in a great position to negotiate effectively. Let's get together to make sure that you're ready to win the homebuying deal.
Feb. 10, 2020
3 Reasons Why You Should Talk To Harry Berry About Pre-Approval Before Buying A Home In South Florida In 2020
When the number of buyers in the housing market outnumbers the number of homes for sale, it's called a "seller's market" The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes - unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the homebuying process.
1. Gain a Competitve Advantage
Low inventory like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you're serious about buying a home, which is always a plus in your corner.
2. Accelerate the Homebuying Process
Pre-approval can also speed up the homebuying process, so you can move faster when you're ready to make an offer. IN a competitive arena like we have today, being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.
3. Know What You Can Borrow and Afford
Here's the other thing: if you're pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you're eligible to borrow for your mortgage. This way, you're less apt to fall in love with a home that may be out of your reach.
Freddie Mac sets 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."
Local real estate professionals also have relationships with lenders who can help you through this process, so partnering with a trusted advisor will be key for that introduction. For a response within 24 hours, complete your loan application at IPS Home Loans, and provide them with important information regarding "your credit, debt, work history, down payment and residential history."
Freddie Mac also describes the '4 C's' that help determine the amount you'll be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home (or type of home) that you would like to purchase
- Credit: Your history of paying bills and other debts on time
While there are still many additional steps you'll need to take in the homebuying process, it's clear why pre-approval is always the best place to begin. It's your chance to gain the competitive edge you may need if you're serious about owning a home.
Getting started with pre-approval is a great way to begin the homebuying journey. Let's get together today to make sure you're on the fastest path to homeownership, and don't forget to download your FREE eGuide to Buying A Home.