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.
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.
Feb. 19, 2018
There has been tremendous volatility in certain markets over the last few weeks (for example, the stock and currency markets). When this happens, some tend to lump all of their investments together and create an almost "End Of The World" scenario where everything loses value quickly and dramatically. Real Estate is an investment that can get caught up in this hysteria. Does the concern about the current housing market have merit?
Financial advisors have been warning us for months that the stock market was ripe for a "correction."
Experts have been questioning the value of alternative currencies for over a year.
In contrast, here are the opinions of three major players in the residential housing market:
"It's premature to worry about a housing bubble. The typical warning signs - excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and/or poor affordability compared to the past, and a high number of internet searches on the house flipping - are not present." Ralph DeFranco, Chief Economists, Arch Capital Services Inc.
"My thoughts on many recent discussions of the housing bubble - the bar for a housing bubble is higher than just prices being above some fundamental value. There must be widespread behavior change as well such as higher levels of fraud and speculation." Liu-Down, Genworth Chief Economist.
"US home prices are on track for a 5% nominal gain for the 4th consecutive year, returning national prices to their highest level since 2007. The growth has been driven by historically low mortgage rates and unemployment plus solid population and personal income growth rates...a meaningful correction should only be triggered by an unexpected economic shock." Fitch Report
Speculation has driven certain markets over the last year. However, it has not been speculation, but instead people's desire for home ownership, that has driven the real estate market. Check out our web site for residential properties in the South Florida area and Central Florida. North Carolina Property Search soon to come. WWW.HARRYBERRYREALTY, INC.
Harry Berry Realty, Inc.
Sept. 18, 2017
Here are five reasons listing your home for sale this fall makes sense.
1. Demand Is Strong
The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase… and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.
Take advantage of the buyer activity currently in the market.
2. There Is Less Competition Now
Housing inventory is still under the 6-month supply that is needed for a normal housing market.
This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.
Historically, the average number of years a homeowner stayed in their home was six, but that number has jumped to an average of almost nine years since 2008. There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.
The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.
3. The Process Will Be Quicker
Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to 43 days, after seeing a 12-month high of 48 days in January.
4. There Will Never Be a Better Time to Move Up
If your next move will be into a premium or luxury home, now is the time to move-up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly AND you’ll be able to find a premium home to call your own!
Prices are projected to appreciate by 5.0% over the next year according to CoreLogic. 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.
5. It’s Time to Move on With Your Life
Look at the reason you decided to sell in the first place and determine 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?
Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps 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.
Feb. 9, 2017
This is big news - President Trump on Friday signed two executive orders designed to weaken, or replace financial regulations.
Doing so, However, would return our country to a less regulated pre-financial crisis and exposing investors and Americans to the same risks in 2007, 2008 and 2009.
There are two regulations under attack - Dodd-Frank Wall Street Reform and the Consumer Protection Act of 2010.
Dodd-Frank, a set of regulations was signed into law in response to the financial crisis designed to limit risks and protect consumers. Basically looking out for the little guy.
The CFPB (Consumer Financial Protection Bureau) was established through Dodd-Frank, describes itself as "a U.S. government agency that makes sure banks, lenders and other financial companies treat everyday Americans fairly. It helps protects consumers from predatory schemes in credit cards, mortgages and student loans.
What if CFPB lost its power? Well, More mortgages could be written, delinquencies would increase, homeowners would probably use too much leverage with risky financial instruments no one truly understood. Short term would boost the economy, long term would cause the economy to crash as it did in 2008.
Some proponents of less regulation, who feel less government restrictions will inevitably lead to higher revenue and earnings, believe there are dangers that should be acknowledged. We could be pushing ourselves toward another financial mania-which would certainly not be helpful for investors, consumers or banks.
My advice-Buy Real Estate now and sell in 3 to 4 years!
Instant gratification has never translated to long-term stability!
Harry S. Berry
Harry Berry Realty, Inc
Feb. 7, 2017
There is no doubt that mortgage credit availability is expanding, meaning it is easier to finance a home today than it was last year. However, the mortgage market is still much tighter than it was prior to the housing boom and bust experienced between 2003 - 2006.
The Housing Financing Policy Center at the Urban Institute just released data revealing two reasons for the current exceptionally high credit standards:
- Additional restrictions lenders put on borrowing because of concerns that they will be forced to repurchase failed loans from the government-sponsored enterprises or Federal Housing Administration (FHA).
- The concern about potential litigation for imperfect loans.
What has been the result of these concerns?
6.3 Million Less Mortgages
The Policy Center report went on to say:
“It was so hard to get a mortgage in 2015 that lenders failed to make about 1.1 million mortgages that they would have made if reasonable lending standards had been in place. From 2009 to 2014, lenders failed to make about 5.2 million mortgages thanks to overly tight credit. In total, lenders would have issued 6.3 million additional mortgages between 2009 and 2015 if lending standards had been more reasonable.”
In an interview with DSNews, Laurie Goodman and Alanna McCargo of the Policy Center further explained:
“Our Housing Credit Availability Index (HCAI)* measures the probability that mortgage borrowers will become delinquent on that mortgage for 90 or more days, which we refer to as the default risk. This measure indicates that the probability of default rose from 12 percent in 2001 to a peak of 16.5 percent at the end of 2005/beginning of 2006, before declining to the current level of 5 percent. Stated differently, lenders are currently taking less than half the credit risk they were taking in 2001, a period of reasonable credit standards.”
The cost to the economy if we’re writing fewer loans…
Goodman and McCargo put it best:
“…fewer households will become homeowners at exactly the point in the economic cycle when it is most advantageous to do so… [They] will continue to miss this wealth-building opportunity. The median family wealth for homeowners is $195,400, with their home the most valuable asset for most; the median family wealth for renters is $5,400… Fewer potential homebuyers means the housing market will continue to recover more slowly. At the same time, fewer buyers create a strain on other benefits to the economy which homebuying brings such as spending on home goods and an increase in construction jobs.”
The housing market boom and bust caused many mortgage providers and lenders to tighten their lending standards in an effort not to repeat the recent past. This paired with many homebuyers disqualifying themselves before they even apply for a loan, due to the fear of rejection, has led to many households not yet becoming homeowners.
*The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.
Feb. 7, 2017
The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:
- They want the opportunity to build equity.
- They want a stable and safe environment.
In a recent article by The Mortgage Reports, they report that “buying and owning a home is the essence of ‘The American Dream.’ Each month, your housing payments go toward owning your home instead of renting it; building your personal wealth and assets instead of someone else’s.
History has shown that homeownership is a clear path to wealth-building, with homeowners boasting a net worth [that is] multiples higher than the net worth of renters.”
Does owning your home really create a more stable environment for your family?
A survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:
- 68% of property managers predict that rental rates will continue to rise in the next year by an average of 8%.
- 53% of property managers said that they were more likely to bring in a new tenant at a higher rate than to negotiate and renew a lease with a current tenant they already know.
We can see from these survey results that renting will provide anything but a stable environment in the near future.
Homeowners enjoy a more stable environment, and at the same time are given the opportunity to build their family’s net worth.