You Do Not Need 20% Down to Buy NOW!

No… You Do Not Need 20% Down to Buy NOW! | Keeping Current Matters

The Aspiring Home Buyers Profile from the National Association of Realtors (NAR) found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. The results of the survey show that non-homeowners cite the main reason for not currently owning a home, as not being able to afford one.

This brings us to two major misconceptions that we want to address today.

1. Down Payment

NAR’s survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 39% of non-homeowners say they believe they need more than 20% for a down payment on a home purchase. In actuality, there are many loans written with a down payment of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO® Scores

An Ipson survey revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in August had a credit score of 752, while FHA mortgages closed with a score of 683. The average across all loans closed in August was 724. The chart below shows the distribution of FICO® Scores for all loans approved in August.

No… You Do Not Need 20% Down to Buy NOW! | Keeping Current Matters

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, sit down with a professional who can help you understand your true options.

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Thinking of Selling your Home? Competition is Coming

Thinking of Selling your Home? Competition is Coming | Keeping Current Matters

The number of building permits issued for single-family homes is the best indicator of how many newly built homes will rise over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Sales Report, the number of these permits were up 7.7% over last year.

How will this impact buyers?

More inventory means more options. Danielle Hale, Realtor.com’s Chief Economist, explained this is good news for the housing market – especially for those looking to buy:

“It’s not spectacular construction growth, but it’s slow and steady in the right direction. Eventually, the pickup in single-family home construction will mean [buyers] will have more options. Especially with the limited number of sales right now, more options are really needed.”

How will this impact sellers?

More inventory means more competition. Today, because of the tremendous lack of inventory, a seller can expect:

  1. A great price on their home as buyers outbid each other for it
  2. A quick sale as buyers have so little to choose from
  3. Fewer hassles as buyers don’t want to “rock the boat” on the deal

With an increase in competition, the seller may not enjoy these same benefits. As Hale said:

“As new construction continues to increase, home shoppers will eventually have more [choices] and a bit more time to make purchase decisions compared to today’s quick-moving housing market.”

Bottom Line

If you are considering the sale of your home, it might make sense to beat this new construction competition to the market.

Millionaire to Millennials: Buy a Home Now!

Millionaire to Millennials: Buy a Home Now! | Keeping Current Matters

In a CNBC article, self-made millionaire David Bach explained that “the single biggest mistake millennials are making” is not purchasing a home because buying real estate is “an escalator to wealth.”

Bach went on to explain:

“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”

In his bestselling book, “The Automatic Millionaire,” Bach does the math:

“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!”

Who is David Bach?

Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek and USA Today bestseller lists.

He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, the Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.

Bottom Line

Whenever a well-respected millionaire gives investment advice, people usually clamor to hear it. This millionaire gave simple advice – if you don’t yet live in your own home, go buy one.

More Americans Say Now is a Good Time to Sell!

Recently released data from Fannie Mae’s National Housing Survey revealed that rising home prices were the catalyst behind an eight-point jump in the net percentage of respondents who say now is a good time to sell. The index is now 21 points higher than it was this time last year.

Overall, 62% of Americans surveyed said that now is a good time to sell (up from 58%), while 26% of respondents said that now is not a good time to sell (down from 30%). The net score is the difference between the two percentages, or 36%.

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According to CoreLogic, home prices are now up 6.7% over last year and 78.8% of homeowners with a mortgage in the US now have significant equity (defined as 20% or more).

As home prices have increased, more and more homeowners have realized that now is a good time to sell their homes in order to take advantage of the extra equity they now have.

At the same time, however, rising prices have had the exact opposite impact on the good-time-to-buy scale as many buyers are nervous that they will not be able to afford a home; the net score dropped 5 points to 18%.

Doug Duncan, Vice President & Chief Economist at Fannie Mae, had this to say,

“In the early stages of the economic expansion, home selling sentiment trailed home buying sentiment by a significant margin. The reverse is true today.

The net good time to sell share is now double the net good time to buy share, with record high percentages of consumers citing home prices as the primary reason for both perceptions. Such a sizable gap between selling and buying sentiment, if it persists, could weigh on the housing market through the rest of the year.”

Buyer demand continues to outpace the supply of homes for sale, which has driven prices up across the country. Until the supply starts to better match demand, there will be a gap between the sentiments surrounding buying and selling.

Bottom Line

If you are considering listing your home for sale this year, now is the time!

A Tale of Two Markets: A 6-Month Update

A Tale of Two Markets: A 6-Month Update | Keeping Current Matters

Six months ago, we reported that the mismatch between the type of inventory of homes for sale and the demand of buyers in the US was causing the formation of two markets.

In the starter and trade-up home categories, there were significantly more buyers than there were homes for sale, causing a seller’s market. In the premium, or luxury, home categories, the opposite was true as there was a surplus of these homes compared to the buyers that were out searching for their dream homes, which created a buyer’s market.

According to the National Association of Realtors latest Existing Home Sales Report, the inventory of existing homes for sale in today’s market is at a 4.2-month supply. Inventory is now 6.5% lower than this time last year, marking the 27th consecutive month of year-over-year decreases.

Looking at the latest report from Trulia, we can see that not much has changed, and in fact, recent natural disasters across the country have made inventory conditions even more dire.

Trulia’s market mismatch score measures the search interest of buyers against the category of homes that are available on the market. For example: “if 60% of buyers are searching for starter homes but only 40% of listings are starter homes, [the] market mismatch score for starter homes would be 20.”

The results of their latest analysis are detailed in the chart below.

A Tale of Two Markets: A 6-Month Update | Keeping Current Matters

Nationally, buyers are searching for starter and trade-up homes and are coming up short with the listings available, which is leading to a highly competitive seller’s market in these categories.

Premium homebuyers, on the other hand, have the best chance of less competition and more inventory of listings in their price range with a 14.7-point surplus, which is creating more of a buyer’s market.

Bottom Line

Real estate is local. If you are thinking about buying OR selling this fall, sit with a local real estate professional who can share with you the exact market conditions in your area.

Top 5 Reasons Why Millennials Choose to Buy

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Some Highlights:

  • “The majority of millennials said they consider owning a home more sensible than renting for both financial and lifestyle reasons — including control of living space, flexibility in future decisions, privacy and security, and living in a nice home.”
  • The top reason millennials choose to buy is to have control over their living space, at 93%.
  • Many millennials who rent a home or apartment prior to buying their own homes dream of the day that they will be able to paint the walls whatever color they’d like, or renovate an outdated part of their living space.

Baby Boomers: One of America’s Most Lucrative Demographics

With more than 75 million people fitting into the American baby boomer demographic, it is easy to understand why this group would be important for REALTORS® to understand. Even more eye-popping to REALTORS® is the fact that more than 70 percent of baby boomers own homes, and will be looking to make homeownership changes really soon.

This spells big opportunities for REALTORS® looking to serve the burgeoning baby boomer market over the next 10-15 years.

This one is a keeper

NAR takes a deep dive into marketing to baby boomers in its Field Guide to Working With Baby Boomers, which features, among many others, an article from Forbes Magazine entitled “7 Reasons Why Marketing to Baby Boomers Is Unique,” which includes the following insights:

  1. Baby boomers have money to spend. As opposed to those who grew up in the Great Depression, baby boomers are quite affluent. According to a Nielsen report, they account for $230 billion in sales of consumer-packaged goods like coffee, diet soda and magazines, and make up 70 percent of the nation’s disposable income. Baby boomers will also inherit $13 trillion in the next 20 years.
  1. Baby boomers invented the suburbs. Suburban home development occurred simultaneously with baby boomers’ ability to make down payments on a mortgage and their desire to leave urban marketplaces. They still live in the suburbs, where many now own 100 percent of their own homes.
  1. They plan on living in a better house as they grow older. Seventy percent of baby boomers think their current house is not the best that they can get and they are looking to upgrade. Baby boomers are setting new trends that defy traditional definitions of a “relaxed” retirement. Instead, they are diligently looking for newly constructed homes where they can continue to pursue an active lifestyle surrounded by the latest amenities.
  1. Their brand loyalty is tenacious. Once they find a brand they like—one they grew up with—they stick with it. Volkswagen cars. Levi jeans. Harley Davidson motorcycles. Club Med. Noxzema. L’eggs. This means that finding out what your baby boomer client’s interests are will help guide you toward homes that best meet these trends, and, ultimately, increase the chances of closing a deal.
  1. Remembering Woodstock – The famous music festival was a countercultural event which symbolized that the baby boomers were not going to be defined by their parents’ morals and lifestyle. They were going to think and act for they themselves—and they still want to be thought of that way. The least hint of patronizing the baby boomers will flatten any marketing campaign.
  1. Baby boomers do use social media, but in a different way. As you develop your social media strategy for baby boomers, be aware that while a 20-year-old is posting photos of their night out on Instagram or Snapchat, a baby boomer is more likely to post a photograph of a new grandbaby or the new RV they just purchased on Facebook. It’s the more “traditional” venues, such as Facebook and Twitter, that are used by baby boomers, so keep your focus there.
  1. Baby boomers are not ‘old.’ Baby boomers do not want to be reminded of their age or be considered as old; rather, they want to be encouraged about their accomplishments and their future. They want to hear about the opportunities that lay before them to experience new chapters in their life.

Other helpful articles in the field guide include “Myths About Boomers and Real Estate,” “9 Digital Marketing Strategies to Woo Baby Boomers,” and “Baby Boomers Not Showing Any Signs of Downsizing.” In addition to marketing resources for the baby boomer market, the field guide also provides tips on reverse mortgage basics, housing trends for the 50+ demographic, related websites relevant to this audience and links to eBooks and other resources.

What ‘Great Bones’ Really Means

“This house has great bones.” As a real estate professional, you’ve heard the phrase countless times. You’ve probably even uttered it more than once. But what do we really mean when we say a house has great bones?

It’s a feature that all buyers want, but few can define. Understanding how to identify qualities that add up to the coveted “great bones” feeling can help you set your listing apart.  Recently, Architectural Digest’s Lindsey Mather asked a handful of designers to get specific about the qualities that give a home this elusive quality.  Here are a few distinct items to look for:

Good flow: Check how it feels to simply walk through the home. Do the rooms make sense next to each other, or do they seem choppy or lopsided? Alabama decorator William McLure says architects and designers often rely on symmetry and mirrored design elements to offer a feeling of balance to residential spaces. “It makes the layout of the house not look like an afterthought,” he says. “You want rooms that look well planned and that structurally make sense.”

All the little things: Here’s where your macro lens comes in handy: The intricate details and architectural features that make a listing stand out in the eyes of buyers are often too small to see in a wide-angle property tour photo. Fancy plaster, original fireplaces, bespoke ceiling beams, thick moldings, and vintage lighting and hardware are all worth the time to fawn over in your listing descriptions. Also, any windows that are out-of-the ordinary can really help a place stand out as different.

Plenty of headroom: Sometime we use “good bones” to refer to elements that are hard to change, according to New York–based interior designer Alyssa Kapito. “A room or a house with great bones for us has high ceilings, tall windows, and is generally well proportioned,” she says. “Everything decorative can be rather easily switched, but it’s quite difficult and expensive to get those three items on your checklist if they aren’t already there.” Make sure you check for drop ceilings, though. Good bones sometimes hide under tiles and panels.

When You’re Buying a Home, Look for These 4 Signs,” Architectural Digest (Aug. 9, 2017)

Should I Buy a Home Now? Or Wait Until Next Year?

Should I Buy a Home Now? Or Wait Until Next Year? [INFOGRAPHIC]| Keeping Current Matters

Some Highlights:

  • The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices & interest rates were to increase over a period of time.
  • Freddie Mac predicts interest rates to rise to 4.4% by next year.
  • CoreLogic predicts home prices to appreciate by 5.0% over the next 12 months.
  • If you are ready and willing to buy your dream home, find out if you are able to!

Home Flippers Face Hurdles in Tight Markets

In the second quarter of this year, 5.6 percent of all home sales were flips, according to ATTOM Data Solutions’ Q2 2017 U.S. Home Flipping Report. The report defines a flip as a property that is sold for the second time within a 12-month period.

As housing inventory remains low and buyers get more competitive, home flippers are employing a number of strategies to gain an edge and improve their ROI, says Daren Blomquist, senior vice president at ATTOM Data Solutions. “Many flippers are gravitating toward lower-priced areas where discounted purchases are more readily available—often due to foreclosure or some type of distress,” Blomquist says. “Many of these lower-priced areas also have strong rental markets, giving flippers a consistent pipeline of demand from buy-and-hold investors looking for turnkey rentals. In the markets where distressed discounts have largely dried up, flippers are showing more willingness to leverage financing when acquiring properties, often purchasing closer to full market value and then relying more heavily on price appreciation to fuel their flipping profits.”

More than 35 percent of homes flipped in the second quarter were originally purchased by a buyer with financing, the highest level in nearly nine years. The estimated total dollar value of financing for homes flipped in the second quarter was $4.4 billion—also a nearly 10-year high, according to ATTOM Data Solutions’ report. The highest share of home flips purchased with financing in the second quarter were in Colorado Springs, Colo. (68.4%); Denver (56.1%); Boston (53.3%); Providence, R.I. (51.7%); and San Diego (49%).

Meanwhile, one in four home flips nationwide were sold to cash buyers during the second quarter, and 18 percent were sold to FHA buyers, the study shows. Nevada posted the highest home flipping rate in the nation during the second quarter, with 8.4 percent of all home sales being flips. Washington, D.C., followed with 8.2 percent, Maryland at 7.4 percent, Tennessee at 7.3 percent, and Alabama at 7.3 percent.

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