Author Archives: Joel Zieve

Posted on by August 24, 2016

Housing Market Slowing Down? Don’t Tell Builders!

Many experts have been calling upon home builders to ramp up construction to help with the lack of existing inventory for sale. For the past two months, new home sales have surged, with July’s total coming in at the highest since October 2007.

The latest estimates from the US Census Bureau and Department of Housing and Urban Developmentshow that sales in July were 31.3% higher than this time last year, and 12.4% higher than last month, at a seasonally adjusted annual rate of 654,000. 

Zillow’s Chief Economist, Svenja Gudell, echoed the reaction of some as she commented:

“July(‘s) new home sales data was a surprise, but a welcome one. For years, the market has been practically begging builders to both ramp up their efforts overall and to put more focus on serving the less expensive end of the market. Today’s data confirms both are happening in earnest.”

The National Association of Home Builder’s (NAHB) Chairman, Ed Brady, didn’t seem as surprised:

“This rise in new home sales is consistent with our builders’ reports that market conditions have been improving. As existing home inventory remains flat, we should see more consumers turning to new construction.”

NAHB’s Chief Economist, Robert Dietz, believes this is just the start for new home sales if market conditions continue:

“July’s positive report shows there is a need for new single-family homes, buoyed by increased household formation, job gains and attractive mortgage rates. This uptick in demand should translate into increased housing production throughout 2016 and into next year.”

The existing home sales numbers for July will be released today and will shed more light on the overall health of the housing market.

Bottom Line

New home sales hit their highest mark in over 9 years. Buyers are out in force to find a home that fits their needs. Many are turning to new construction, as the inventory of existing homes has not been able to keep up with demand.

Posted on by August 24, 2016

2 Myths About Mortgages That May Be Holding Back Buyers

Fannie Mae’s “What do consumers know about the Mortgage Qualification Criteria?” Study revealed that Americans are misinformed about what is required to qualify for a mortgage when purchasing a home.

Myth #1: “I Need a 20% Down Payment”

Fannie Mae’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required.

Many believe that they need at least 20% down to buy their dream home. New programs actually let buyers put down as little as 3%.

Below are the results of a Digital Risk survey of Millennials who recently purchased a home.

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

As you can see, 64.2% were able to purchase their home by putting down less than 20%, with 43.8% putting down less than 10%!

Myth #2: “I need a 780 FICO Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at the latest Ellie Mae Origination Insight Report, which focuses on recently closed (approved) loans. As you can see below, 54.1% of approved mortgages had a credit score of 600-749.

2 Myths About Mortgages That May Be Holding Back Buyers | Simplifying The Market

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will definitely make the mortgage process easier. Your dream home may already be within your reach.

Posted on by August 24, 2016

Whether You Rent or Buy, You’re Paying a Mortgage

There are some people that have not purchased a home 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 mortgage – either yours or your landlord’s.

 

As The Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.  

That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Managementat Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

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

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were 3.43% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

Posted on by August 19, 2016

‘Old Millennials’ Are Diving Head-First into Homeownership

‘Old Millennials’ Are Diving Head-First into Homeownership [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • ‘Old Millennials’ are defined as 25-36 year olds according to the US Census Bureau.
  • According to NAR’s latest Profile of Home Buyers & Sellers, the median age of all first-time home buyers is 31 years old.
  • More and more ‘Old Millennials’ are realizing that homeownership is within their reach now!
Posted on by August 18, 2016

4 Stats That PROVE This Is NOT 2005 All over Again

Recent research by the National Association of Realtors (NAR) examined certain red flags that caused the housing crisis in 2005, and then compared them to today’s real estate market. Today, we want to concentrate on four of those red flags.

  1. Price to Rent Ratio
  2. Price to Income Ratio
  3. Mortgage Transactions
  4. House Flipping

All four categories were outside historical norms in 2005. Home prices were way above normal ratios when compared to both rents and incomes at the time.

NAR explained that mortgage transactions as a percentage of all home sales were also at a higher percentage:

“Loose credit was one of the main culprits of the housing crisis. Mortgage lending expanded dramatically as unhealthy housing speculation reached its peak and was met by the highest level of credit availability as measured by the Mortgage Bankers Association. The index measures the overall mortgage credit condition by the share of home sales financed by mortgages. This metric does not capture credit quality, but it does set a view of the importance of financing in supporting the housing market.”

House flipping was rampant in 2005. As NAR’s research points out:

“Heightened flipping activity is a clear indication of speculation in the real estate market. A property is considered as a speculative flip if the property is sold twice within 12 months and with positive profit. Flipping is a normal part of a healthy housing market. In an inflated housing market, expectations about short-term profit from pure price appreciation are very high; therefore, the level of flipping activity would show evidence of being heightened.”

Here are the categories with percentages reflecting the unrealistic ratios & numbers of 2005 as compared to the current market. Remember, a negative percentage reflects a positive gain for the market.

4 Stats That PROVE This Is NOT 2005 All over Again | Simplifying The Market

Bottom Line

They say hindsight is 20/20… Today, experts are keeping a close watch on the potential red flags that went unnoticed in 2005.

Posted on by August 17, 2016

Real Life vs. Reality TV: 5 Myths Explained

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV ‘show hole’*? We’ve all been there… watching entire seasons of “Love it or List it,” “Fixer Upper,” “House Hunters,” “Flip or Flop,” “Property Brothers,” and so many more, just in one sitting.  

When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and make a decision to purchase one of them.

Truth: There may be buyers who fall in love and buy the first home they see, but more often than not the process of buying a home means touring more than three homes.

Myth #2: The houses the buyers are touring are still for sale.

Truth: The reality is being staged for TV. Many of the homes being shown are already sold and are off the market.

Myth #3: The buyers haven’t made a purchase decision yet.

Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy.

Myth #4: If you list your home for sale, it will ALWAYS sell at the Open House.

Truth: Of course this would be great! Open Houses are important to guarantee the most exposure to buyers in your area, but are only a PIECE of the overall marketing of your home. Just realize that many homes are sold during regular listing appointments as well. 

Myth #5: Homeowners make a decision about selling their home after a 5-minute conversation.

Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their home and move on with their life/goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!

*Show Hole – A side effect of binge-watching. Symptoms include a sense of emptiness and depression brought on by realizing you just wasted a good portion of your life watching several seasons of a TV show or an entire movie franchise all at once when you could have managed your time better.

Posted on by August 16, 2016

How Do Rising Prices Impact Your Home Equity?

Yesterday, we shared the results of the latest Home Price Expectation Survey by Pulsenomics. One of the big takeaways from the survey is that over the next five years, home prices will appreciate 3.5% per year on average, and cumulatively will grow by around 18%.

So what does this mean for homeowners and their equity position?

For example, let’s assume a young couple purchased and closed on a $250,000 home in January of this year. If we only look at the projected increase in the price of that home, how much equity would they earn over the next 5 years?

How Do Rising Prices Impact Your Home Equity? | Simplifying The Market

Since the experts predict that home prices will increase by 4.5% this year alone, the young homeowners will have gained over $11,000 in equity in just one year.

Over a five-year period, their equity will increase by over $46,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.

Bottom Line

Not only is homeownership something to be proud of, it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, let’s meet up to find out if you are able to today!

Posted on by August 15, 2016

Where Are Home Prices Headed Over the Next 5 Years?

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.

Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts, and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey:

Home values will appreciate by 4.5% over the course of 2016, 3.6% in 2017 and about 3.2% in the next two years, and finally 2.9% in 2020 (as shown below). That means the average annual appreciation will be 3.5% over the next 5 years.

Projected Appreciation | Simplifying The Market

The prediction for cumulative appreciation increased slightly from 24.7% to 26.3% by 2020. The experts making up the most bearish quartile of the survey are still projecting a cumulative appreciation of 11.1%.

Cumulative Price Appreciation | Simplifying The Market

Bottom Line

Individual opinions make headlines. We believe the survey is a fairer depiction of future values.

Posted on by August 12, 2016

Luxury Home Sales & the Impact of the Stock Market

In a recent post, CoreLogic looked at the correlation between stocks and the sales of upper-end properties ($1 Million+ sales price – luxury home sales). The report revealed:

 “The powerful ‘wealth effects’ generated by the rapid rise in equities between 2009 and 2015 drove a large rise in the sales of homes that sold for $1 million or more.

Historically, sales of homes priced $1 million or more averaged 1.2 percent of all home sales. The spread between high-end sales and equities widened during the housing bubble but then moved more closely in unison. By the time the equity markets had peaked in May 2015, the $1 million or more share of the market had nearly doubled, averaging 2.2 percent for the remainder of the year.”

This makes sense. As people see their wealth increasing, they feel more confident in their purchasing power. And, of course, that would also impact their decisions regarding real estate. The stock market dipped earlier this year and there was quite a bit of anecdotal evidence that the upper-end market was beginning to soften.

As we can see in the chart below, the market is again flourishing. That may rejuvenate the luxury market as we move through the rest of the year.

Luxury Home Sales & the Impact of the Stock Market | Simplifying The Market

As we proceed through 2016 and enter 2017, the strength of the stock market will be a key factor in the strength of the luxury market. If the stock market falters, look for high-end sales to slow. If the market advances, as it has shown signs of doing most recently, the high-end market will advance.