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This Real Estate Market Is the Strongest of Our Lifetime
When you look at the numbers today, the one thing that stands out is the strength of this housing market. We can see this is one of the most foundationally strong housing markets of our lifetime – if not the strongest housing market of our lifetime. Here are two fundamentals that prove this point.
1. The Current Mortgage Rate on Existing Mortgages
First, let’s look at the current rate on existing mortgages. According to the Federal Housing Finance Agency (FHFA), as of the fourth quarter of last year, over 80% of existing mortgages have a rate below 5%. That’s significant. And, to take that one step further, over 50% of mortgages have a rate below 4% (see graph below):
Now, there’s a lot of talk in the media about a potential foreclosure crisis or a rise of homeowners defaulting on their loans, but consider this. Homeowners with such good mortgage rates are going to work as hard as they can to keep that mortgage and stay in their homes. That’s because they can’t go out and buy another house, or even rent an apartment, and pay what they do today. Their current mortgage payment is more affordable. Even if they downsize, with today’s higher mortgage rates, it could cost more.
Here’s why this gives the housing market such a solid foundation today. Having so many homeowners with such low mortgage rates helps us avoid a crisis with a flood of foreclosures coming to market like there was back in 2008.
2. The Amount of Homeowner Equity
Second, Americans are sitting on tremendous equity right now. According to the Census and ATTOM, roughly two-thirds (around 68%) of homeowners have either paid off their mortgage or have at least 50% equity (see chart below):
In the industry, the term for this is equity rich. This is significant because if you think back to 2008, some people had to make the difficult decision to walk away from their homes because they owed more on the home than it was worth.
But this time, things are different because homeowners have built up so much equity over the past few years alone. And, when homeowners have that much equity, it helps us avoid another wave of distressed properties coming onto the market like we saw during the crash. It also creates an extremely strong foundation for today’s housing market.
Bottom Line
We are in one of the most foundationally strong housing markets of our lifetime because homeowners are going to fight to keep their current mortgage rate and they have a tremendous amount of equity. This is yet another reason things are fundamentally different than in 2008.
Saving for a Down Payment? Here’s What You Need To Know.
If you’re planning to buy your first home, then you’re probably focused on saving for all the costs involved in such a big purchase. One of the expenses that may be at the top of your mind is your down payment. If you’re intimidated by how much you need to save for that, it may be because you believe you must put 20% down. That doesn’t necessarily have to be the case. As the National Association of Realtors (NAR) notes:
“One of the biggest misconceptions among housing consumers is what the typical down payment is and what amount is needed to enter homeownership.”
And a recent Freddie Mac survey finds:
“. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.”
Here’s the good news. Unless specified by your loan type or lender, it’s typically not required to put 20% down. This means you could be closer to your homebuying dream than you realize.
According to NAR, the median down payment hasn’t been over 20% since 2005. In fact, the median down payment for all homebuyers today is only 14%. And it’s even lower for first-time homebuyers at just 6% (see graph below):
What does this mean for you? It means you may not need to save as much as you originally thought.
Learn About Options That Can Help You Toward Your Goal
And it’s not just how much you need for your down payment that isn’t clear. There are also misconceptions about down payment assistance programs. For starters, many people believe there’s only assistance available for first-time homebuyers. While first-time buyers have many options to explore, repeat buyers have some, too.
According to Down Payment Resource, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments. That same resource goes on to say:
“You don’t have to be a first-time buyer. Over 38% of all programs are for repeat homebuyers who have owned a home in the last 3 years.”
Plus, there are even loan types, like FHA loans with down payments as low as 3.5% as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants.
If you’re interested in learning more about down payment assistance programs, information is available through sites like Down Payment Resource. Then, partner with a trusted lender to learn what you qualify for on your homebuying journey.
Bottom Line
Remember, a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation about your homebuying goals.
How Owning a Home Grows Your Wealth with Time
Some Highlights
- If you’re thinking of buying a home this year, be sure to factor in the long-term benefits of homeownership.
- Over time, homeownership allows you to build equity. On average, nationwide home prices appreciated by 290.2% over the last 32 years.
- That means your net worth can grow significantly in the long term when you own a home. Let’s connect so you can start your homebuying journey today.
Why Buying or Selling a Home Helps the Economy and Your Community
If you’re thinking about buying or selling a house, it’s important to know that it doesn’t just affect your life, but also your community.
The National Association of Realtors (NAR) releases a report every year to show how much economic activity is generated by home sales. The chart below illustrates that impact:
As the visual shows, when a house is sold, it can make a big difference in the local economy. The impact comes largely from the workers required to build, update, and buy and sell homes. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), explains how the housing industry adds jobs to a community:
“The economic impact means housing is a significant job creator. In fact, for every single-family home built, enough economic activity is generated to sustain three full-time jobs for a year, per NAHB research. . . . And one job for every $100,000 in remodeling spending.”
Housing being a major job creator makes sense when you consider there are many different industries involved in the process. A recent article from Fortune notes housing activity could have a more robust impact than you think due to the many ways it’s tied to the economy:
“Housing has three direct linkages to economic activity (GDP): the construction of new homes, the remodeling of existing homes, and that of housing transactions. . . . consider the activity associated with home sales – think broker fees, lawyers, etc. – which are a sizable contributor to housing’s GDP footprint.”
When you buy or sell a home, you work with a team of professionals, including contractors, specialists, lawyers, and city officials. Each person plays a role in making the transaction happen.
So, when you make a move in the housing market, you’re not just meeting your own needs, you’re also making a positive impact on the community. Knowing this can give you a sense of empowerment as you make your decision this year.
Bottom Line
Each and every home sale is important for the local economy. If you’re ready to move, let’s connect. It won’t just change your life – it’ll also have a strong positive effect on the whole community.
5 Reasons Millennials Are Buying Homes
In the United States, there are over 72 million millennials. If you’re part of that generation and have thought about buying a home, you aren’t alone. According to Zonda, 98% of millennials want to become a homeowner at some point if they aren’t already. But why? There are plenty of reasons you may choose to become a homeowner. Here’s why other millennials have made that decision (see graph below):
This graph shows why millennials are buying homes according to Zonda’s 6th annual millennial survey. The top reasons include building equity, a change in life stage, wanting stability, rising home values, and wanting to make somewhere truly their own. Here’s a look at each in more detail.
Building equity – Homeownership is a long-term investment that allows you to build wealth, increase your net worth, and become more financially stable. Beyond that, the alternative to owning a home is typically renting. With the way rents have risen so dramatically over time, it may make sense to build your own equity instead of the equity of the person you’re renting from.
A change in life stage – As a millennial, you’re reaching your prime homebuying years. That means you may be at the point where you need more space or a different location.
Stability or settling down – This could mean establishing your career or just generally deciding more concretely what you want your life to look and feel like. As that idea becomes clearer, you may want to establish that lifestyle in a particular place and put down roots.
Rising home values – By purchasing a home, you own an asset that traditionally increases in value over time. That can mean your home will have a higher resale value if you decide to move again.
Wanting to make somewhere “mine” – Owning a home gives a sense of freedom because you can customize it however you want, make updates as you see fit, and be yourself in a place that’s solely your own.
Bottom Line
There are plenty of great reasons why millennials are buying homes today. If you’ve thought about becoming a homeowner and any of these reasons resonate with you too, let’s connect to explore your options.
Home Inspections for Sellers: What You Need To Know
Some Highlights
- The inspection is a major part of the home selling process.
- Many buyers used to waive inspections to be more competitive with their offer, but recently, inspections and repairs are becoming popular again.
- Let’s connect so you have an expert on your side who can help you determine the repairs and updates your house needs before you sell.
Want To Sell Your House This Spring? Price It Right.
Over the last year, the housing market’s gone through significant change. While it’s still a sellers’ market, homes that are priced right are selling, and they get the most attention from buyers right now. If you’re thinking of selling your house this spring, it’s important to lean on your expert real estate advisor when it comes to setting a list price. As Realtor.com explains:
“Move-in-ready homes with curb appeal and in desirable areas—and that are priced to sell—are especially likely to move quickly this spring.”
In today’s market, how you price your house will not only make a big difference to your bottom line, but to how quickly your house will sell.
Why Pricing Your House Right Matters
Your asking price sends a message to potential buyers, especially today.
If it’s priced too low, you may leave money on the table or discourage buyers who may see a lower-than-expected price tag and wonder if that means something is wrong with the home.
If it’s priced too high, you run the risk of deterring buyers. When that happens, you may have to lower the price to drive interest when your house sits on the market for a while. But be aware that a price drop can be seen as a red flag by some buyers who will wonder what it means about the home.
To avoid either headache, price it right from the start. A real estate professional knows how to determine the ideal asking price. They balance the value of homes in your neighborhood, current market trends, buyer demand, the condition of your house, and more to find the right price. This helps lead to stronger offers and a greater likelihood your house will sell quickly.
The visual below helps summarize the impact your asking price can have:
Bottom Line
Homes priced at the current market value are selling faster and at a better price right now. To make sure you price your house appropriately, maximize your sales potential, and minimize your hassles, let’s connect today.
Could a Multigenerational Home Be the Right Fit for You?
During the pandemic, many of us reexamined the meaning of home for ourselves and our loved ones. Today, that can be seen in the recent rise in multigenerational households. According to Jessica Lautz, Deputy Chief Economist and Vice President of Economic Research at the National Association of Realtors (NAR):
“Multi-generational buying may be a home where families live in the same home with elderly parents, children who have boomeranged back home, or other extended family members. While this is not a new concept of living, it is one which has gained recent popularity.”
And citing data from Pew Research Center, the Wall Street Journal (WSJ) says:
“. . . multigenerational living has made a comeback in recent years, particularly after the 2008 financial crisis and during the pandemic.”
So, if buying a multigenerational home has crossed your mind, you aren’t alone. Depending on what stage of homeownership you’re in, there are different reasons it could be the right fit. The chart below shows responses to a recent survey from NAR about the reasons people have bought a multigenerational home:
Whether your motives are financial or focused on the people you’ll share your home with, a multigenerational home has distinct advantages. It can make homeownership more affordable, and it can help you best support your loved ones. As Lautz explains:
“Multi-generational home buying is a way for families to care for one another, support one another, and often buy a home that may have been previously out of reach. . . . The trend of multigenerational buying appears to be firmly established and one that could expand in the future.”
What Buyer Activity Tells Us About the Housing Market
Though the housing market is no longer experiencing the frenzy of a year ago, buyers are showing their interest in purchasing a home. According to U.S. News:
“Housing markets have cooled slightly, but demand hasn’t disappeared, and in many places remains strong largely due to the shortage of homes on the market.”
That activity can be seen in the latest ShowingTime Showing Index, which is a measure of buyers actively touring available homes (see graph below):
The 62% jump in showings from December to January is one of the largest on record. There were also more showings in January than in any other month since last May. As you can see in the graph, it’s normal for showings to increase early in the year, but the jump this January was larger than usual, and a lot of that has to do with mortgage rates. Michael Lane, VP of Sales and Industry at ShowingTime+, explains:
“It’s typical to see a seasonal increase in home showings in January as buyers get ready for the spring market, but a larger increase than any January before after last year’s rapid cooldown is significant. Mortgage rate activity this spring will play a big role in sales activity, but January’s home showings are a positive sign that buyers are getting back out there . . .”
It’s important to note that mortgage rates hovered in the low 6% range in January, which played a role in the high number of showings. What does this mean? When mortgage rates eased, buyer interest climbed. The jump in home showings early this year makes one thing clear – while rates may be volatile right now, there are interested buyers out there, and when mortgage rates are favorable, they’re ready to make their move.
