May Newsletter

It is officially May and the start to a new month!

In the May issue of our newsletter you will find events this month, featured listings, market predictions for 2022, and how to follow us on social media.

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Please don’t hesitate to reach out with any of your real estate needs.

May Newsletter

Is the Starter Home Gone for Good?

Thanks to tight inventory and competition from institutional investors, more first-time buyers set their sights on larger homes with lots of backyard space.

First-time homebuyers aren’t just competing with each other for smaller starter homes – they’re also competing against institutional investors seeking rental properties. In a few markets, starter homes are routinely selling for $100,000 over asking price.

The National Association of Realtors® (NAR) estimates that the average price for a starter home rose from $233,400 in 2019 to $307,400 by the end of 2021, which boosted the average monthly payment from $1,038 to $1,224.

In addition, NAR says a first-time buyer’s median age climbed from 32 years old in 1981 to 45 today, and this group’s median income increased from $80,000 a year in 2020 to $86,000-plus in 2021.

“We have to redefine what a starter home is,” says Terry Hendricks, a Realtor with RE/MAX DFW Associates in Dallas.

Agents generally define a starter home as being about 1,500 square feet with two or three bedrooms that’s sufficiently affordable for a buyer who lacks equity from selling their previous home, and preferably in move-in condition.

Olivia Mariani at proptech company Curbio explained that the move-in-condition factor is especially critical for millennial buyers, while elements like outdoor space or a slightly larger home are also becoming more desirable for first-timers due to the pandemic.

Some experts predict that buyers will migrate to cheaper markets free of factors like technology jobs and cold climates, a trend currently fueling high prices in destinations like Austin and Tampa.

Source: Inman (03/15/22) Verde, Ben

April Newsletter

It is officially April and the start to a new month!

In the April issue of our newsletter you will find events this month, featured listings, market predictions for 2022, and how to follow us on social media.

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Please don’t hesitate to reach out with any of your real estate needs.

April Newsletter

Interest Rates Impact

Federal law states that banks are required to keep a minimum amount of cash on hand. This is called the reserve requirement.

But bank balances aren’t constant, as customers deposit or withdraw their cash. As a result, banks sometimes need to borrow money from other banks, overnight, to meet their reserve requirement.

The federal funds rate is the interest rate that banks charge other banks for these overnight loans. The central bank of the United States, the Federal Reserve, aka the Fed, is responsible for setting the federal funds rate. When the Federal Reserve changes this rate, it impacts everything from employment to the production and price of goods and services.

That said, there are two questions at hand: How could interest rate changes affect the housing market in general, and how could it affect your ability to buy or sell your own home?

If mortgage interest rates rise and everything else stays the same — borrowers have the same income and same debt levels — the borrower won’t qualify for as expensive of a mortgage as they previously could. For example, if a borrower qualifies for a maximum monthly payment of $2,000 per month, and mortgage rates rise, then interest will gobble up a bigger chunk of that $2,000, leaving less space for principal.

This could put home buying out of reach for some, or put stagnant or downward pressure on home prices.

But an alternate scenario could also unfold.

If employment rises, or salaries and wages grow, or consumer debt falls, or lending criteria loosens, then borrowers may still qualify for similarly-sized or larger mortgages.

For example, if a potential homebuyer gets a $10,000 annual raise and their unemployed spouse finds part-time work, then their borrowing qualifications improve. If they use some of this additional income to pay off their consumer debt, then their borrowing qualifications improve even more.

Sure, interest rates may rise. But this uptick could be offset by other economic factors that improve borrowers’ positions.

The outcome isn’t as simple as assuming higher interest rates are bad for the housing market. A variety of factors, from wages to employment to lending requirements, influence the number of homebuyers in the market and the maximum price of homes for which they qualify. And this impacts everything from median sale prices to the average number of days-on-market.

Furthermore, real estate markets are inherently local. Working with a realtor who is local and knows exactly how to help you in your specific market is important. If you have any questions about anything real estate related, I would love to help you through it.

March Newsletter

It is officially March and the start to a new month!

In the March issue of our newsletter you will find events this month, featured listings, market predictions for 2022, and how to follow us on social media.

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Please don’t hesitate to reach out with any of your real estate needs.

March Newsletter

Post Pandemic Listings

Owners who postponed selling during the pandemic – perhaps waiting for a sign that price increases were slowing – appear ready to list their home within the next six months. Many, however, plan to overprice it – and they expect bidding wars to push the final price even higher.

A survey conducted by HarrisX for realtor.com, however, suggests that many of those people might be planning to list their home in 2022, with 65% of them planning to do so this winter and spring. Many sellers, however, want to set an asking price higher than they think their home is worth, and they expect buyer bidding wars. Early 2022 home listers may have an advantage, “As buyers race against the clock of rising mortgage rates, sellers who price their homes in line with today’s market and stick to their plans will likely see their expectations met.” says George Ratiu, manager of economic research for realtor.com.

When will sellers list?

  • 65% in the next 6 months
  • 19% have already listed
  • 36% are researching and preparing to list

Top reason for selling? More time at home during COVID

  • 33% want more home features
  • 37% need more space
  • 32% want to move closer to friends and family

Seller expectations

  • they want to make a profit
  • will ask for more than the value
  • want a quick close

Price range changes

  • Sellers with homes at the core of the market ($351,000-$750,000) remained the same over March (29%). However, more sellers plan to list in the $500,000-$750,000 price range.
  • More than three-quarters (77%) of prospective sellers would be willing to accept a lower offer to close quickly versus just over half in March (54%).
  • Compared to spring sellers, a higher number plan to take alternative routes to moving out, such as living with family initially (19%) or temporarily renting their home back from the buyer (29%).

If you have been holding off from listing because of the pandemic, now is the time to move forward.

February Newsletter

It is officially February and the start to a new month!

In the February issue of our newsletter you will find events this month, a featured listing, market predictions for 2022, and how to follow us on social media.

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Please don’t hesitate to reach out with any of your real estate needs.

February Newsletter

Purchasing Power

The fear of missing out on low mortgage rates could “supercharge” the housing market ahead of the spring homebuying season, but not necessarily in markets where inventory is scarce.

While rates are expected to increase steadily throughout 2022, many potential home buyers may try to jump into the market now before rates rise further. The fear of missing out on low rates, or ‘FOMO,’ and the potential loss of house-buying power may supercharge the housing market ahead of the spring home-buying season.

First American’s analysis of the potential impact of rising rates shows house buying power would fall by $36,000 from November if mortgage rates are at 3.7 percent when the spring home-buying season kicks off, and by $52,000 if they hit 4.0 percent.

While forecasters hadn’t expected to see rates at that level until later this year or next, rates have been headed up sharply as investors reconsider how aggressive the Federal Reserve will be in fighting inflation. But inflation is also boosting many families’ incomes, and rising household income could offset all or part of the impact rising mortgage rates have on housing affordability. If household income keeps increasing as rapidly as it did in November — approximately 0.6 percent — through the end of 2022, the decrease in homebuying power with mortgage rates at 3.7 percent would be $700, instead of $36,000, Fleming said.

Of course, if home prices keep going up, homebuyers could still find themselves being priced out of homes they could have afforded if they’d gotten off the fence.

Rising interest rates can affect how much home you’re able to buy. If you’ve been even slightly interested about jumping into this real estate market while you can, let’s talk about your options and what this all means for you.

2022 Real Estate Market

Increased supply and some chopping of demand due to rising interest rates should make the market less competitive, with price increases returning to normal.

The U.S. housing market had another scorcher of a year in 2021, aided by low mortgage rates, a swell of demand that outstripped supply and a rebounding job market.

The supply-demand equation remains sharply lopsided heading into the spring home-buying season, which should give sellers the upper hand again. And while home prices are expected to rise at a less torrid pace this year, mortgage rates have been ticking higher and are projected to climb this year.

The trends point to another solid year for the housing market, even as it remains especially challenging for first-time buyers, says Lawrence Yun, chief economist for the National Association of Realtors®.

Yun recently spoke to The Associated Press about what homebuyers and sellers can expect as the upcoming spring home-buying season begins. The interview has been edited for length and clarity.

Question: How do you see the housing market’s trajectory shaping up this year?

Answer: The mortgage rates will definitely be higher, which means that people who were barely able to qualify last year will not be able to do so this year. Combine that with some increase in supply. Builders have the profit motive. Lumber prices and other materials costs are rising, but they’re simply tacking on those additional costs to consumers, who are willing to buy. So, increased supply, some chopping off of demand from rising interest rates, should lead to less intense competitive market conditions. Price growth will be something around 5% in 2022, which will be a very normal rate of increase.

Question: Fair to say homeowners who are selling will still have an edge on buyers nationally?

Answer: We’re in a housing shortage of roughly 3 or 4 million. And given that homebuilders can probably at the maximum put up maybe 2 million homes, more likely 1.7 or 1.8 million homes (a year), this housing shortage will persist this year and probably linger on somewhat next year. Hence, the market in 2022 will still favor sellers.

Question: How high do you see mortgage rates going this year?

Answer: My best guess at the moment is about 3.7%. It could be a little lower or a little higher, but it’s going to certainly be higher than the 3% people enjoyed last year.

Question: To what degree will higher rates dampen home sales?

Answer: Rising home prices have hindered affordability, but now rising interest rates are another thing that will begin to shave off some of the demand potential from first-time buyers. My official forecast for home sales this year is they will come down about 2% from last year.

Question: Has the pandemic led to any enduring changes to the way Americans buy and sell homes?

Answer: The pandemic will come to an end. Hopefully, the sooner the better. But the work-from-home situation, that development is here to stay. That will be the key factor driving the housing market preference and demand.

Question: What’s the biggest worry you have about the housing market now?

Answer: The housing market is on a solid foundation, in the sense that we don’t have those loose lending conditions. Housing equity, minus the mortgage balance, is substantial.

But the concern is really the first-time buyers. If we don’t increase supply sufficiently, we will have a situation where the country becomes more divided. Homeowners are feeling very wealthy. Renters are feeling very frustrated, beginning to see accelerating rents.

So, we need to ensure that housing supply continues to increase. Things like conversion of office spaces or excess capacity in the lodging industry that can be converted to affordable housing.

January Newsletter

It is officially January 2022 and the start to a new year!

In the January issue of our newsletter you will find events this month, a featured listing, market predictions for 2022, and how to follow us on social media.

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Please don’t hesitate to reach out with any of your real estate needs.

January Newsletter