Ron's Blog

  • 3 Reasons to Buy Luxury Property THIS Year!!

    3 Reasons to Buy Luxury Property THIS Year!! | Simplifying The Market

    3 Reasons to Buy Luxury Property THIS Year!!

    The housing market is hot, with prices rising as demand far outpaces supply in almost every region. However, when it comes to luxury real estate, things are quite different. In the upper-end market, inventory is plentiful in most locations.

    For that reason, prices haven’t skyrocketed as they have in the lower and mid-tier markets. This, coupled with sensational mortgage rates, means that this may be the perfect time to purchase the luxury property you have always desired.

    Let’s break it down into the three major reasons to act now:

    1. There are more homes from which to choose

    According to a recent Wall Street Journal article, inventory in the upper end is increasing, while it is decreasing at the lower and mid-tier price ranges. Here is a graph showing the average increase/decrease in inventory for the first four months of this year as compared to last year:

    3 Reasons to Buy Luxury Property THIS Year!! | Simplifying The Market

    2. Prices are becoming more reasonable

    In a separate article, the Wall Street Journal also talked about prices in the luxury market. They explained that downward price adjustments have been more common in the luxury market than in markets with lower prices. They went on to say:

    “The growing number of price cuts suggests luxury-home sellers are becoming more realistic about property values as sales have slowed, said several real-estate veterans.”

    Not only will you have more to choose from, but you may also be able to get the property at a reduced price.

    3. Mortgage rates are at historic lows

    In the past, one of the drawbacks to purchasing a luxury property was the larger mortgage rate on “jumbo” loans which are often required on high end properties.

    However, HSH.com just revealed that jumbo rates just set new record lows:

    “While conforming fixed-rate mortgages eased a little this week, 30-year fixed-rate jumbos declined enough to break into new record low territory (3.66%), besting the previous low set in April by two basis points.”

    Bottom Line

    More choices, better prices and historically low mortgage rates may make this the perfect time for you to own one of those luxury properties you and your family have always fantasized about.

  • Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly

    Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly | Simplifying The Market

    Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly

    In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. One major challenge in such a market is the bank appraisal.

    If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.

    Every month, Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation in their Home Price Perception Index (HPPI). Here is a chart showing that difference for each of the last 12 months.

    Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly | Simplifying The Market

    The gap between the homeowner vs. appraiser’s opinion has started to head in the right direction (closer to even), as June saw a slight decrease from May’s -1.95% to -1.89% nationally.

    Homeowners in the western part of the country, however, have been pleasantly surprised as their homes have appraised higher than they expected. Denver received its highest HPPI last month as homes came in an average of 3.28% higher than the homeowner believed it would. Nine of the twelve metro areas that had a positive HPPI last month were located in the west.

    Quicken Loans’ Chief Economist, Bob Walters explains:

    “The hot housing markets along the West Coast are growing quicker than owners realize, giving way to higher than expected prices for buyers and more home equity for existing owners.  

    On the other hand, the housing markets are more balanced in the East and Midwest, leading owners to be slightly over-enthusiastic about their home’s appreciation.”

    Bottom Line 

    Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to talk about what’s happening in our area.

  • 74% of Households in the US Now Have Significant Equity!

    74% of Households in the US Now Have Significant Equity! | Simplifying The Market

    74% of Households in the US Now Have Significant Equity!

    CoreLogic’s latest Equity Report revealed that 92% of all mortgaged properties are now in a positive equity situation, while 74% now actually have significant equity (defined as more than 20%)! The report also revealed that 268,000 households regained equity in the first quarter of 2016 and are no longer under water.

     

    Price Appreciation = Good News for Homeowners

    Frank Nothaft, CoreLogic’s Chief Economist, explains:

    “In just the last four years, equity for homeowners with a mortgage has nearly doubled to $6.9 trillion. The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment.  

    These are all positive factors that will provide support to both household balance sheets and the overall economy.” 

    Anand Nallathambi, President & CEO of CoreLogic, believes this is a great sign for the market in 2016 as well, as he had this to say:

    “More than 1 million homeowners have escaped the negative equity trap over the past year. We expect this positive trend to continue over the balance of 2016 and into next year as home prices continue to rise.  

    Nationally, the CoreLogic Home Price Index was up 5.5% year over year through the first quarter. If home values rise another 5% uniformly across the U.S., the number of underwater borrowers will fall by another one million during the next year.” 

    Below is a map illustrating the percentage of households in each state with significant equity: 

    74% of Households in the US Now Have Significant Equity! | Simplifying The Market

    Many homeowners with more than 20% equity in their home would be able to use that equity as a down payment on either a larger home or even a retirement home.

    Bottom Line

    If you are one of the many Americans who are unsure of how much equity you have in your home, don’t let that be the reason you fail to move on to your dream home this year!

  • Here Comes the Housing Inventory!!

    Here Comes the Housing Inventory!! | Simplifying The Market

    Here Comes the Housing Inventory!!

    Almost every real estate conversation revolves around the continuous rise in house values over the last four years. Some have even mentioned a concern about another possible bubble forming. However, the recent increase in prices can be attributed to a very simple principle: supply and demand.

    DEMAND

    Demand for single-family housing has continued to increase as the economy slowly moves forward. Recent surveys have shown that over 80% of each generation still believes that homeownership is a part of the American Dream. And a recent Gallup survey showed that Americans believe that real estate is the best long-term investment.

    SUPPLY

    Over the last several years, many homeowners were unable to put their homes on the market for an assortment of reasons (family finances, no or limited equity in the home). There has been a pent-up supply of sellers who have wanted to move but couldn’t. Below is a graph depicting the number of years families have historically stayed in a home. We can see there is pent-up seller demand.

    Here Comes the Housing Inventory!! | Simplifying The Market

    As the economy improves and more families reach the point of significant equity (20%), we will see these homes come to market. As supply then matches demand, the acceleration of home price increases will begin to slow.

    Bottom Line

    If you are one of the families that have been chained to your current home over the last 5-7 years, now may be the time to break free and find the home of your dreams.

  • Serious About Home Buying? Get Pre-Approved

    Serious About Home Buying? Get Pre-Approved | Simplifying The Market

    Serious About Home Buying? Get Pre-Approved

    In many markets across the country, the amount of buyers searching for their dream home greatly outnumbers the amount of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

    But even if you are in a market that is not as competitive, knowing your budget will give you the confidence to know if your dream home is within your reach.

    Freddie Mac lays 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.”

    One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

    Freddie Mac describes the 4 Cs that help determine the amount you will be qualified to borrow:

    1. Capacity:Your current and future ability to make your payments
    2. Capital or cash reserves:The money, savings and investments you have that can be sold quickly for cash
    3. Collateral:The home, or type of home, that you would like to purchase
    4. Credit:Your history of paying bills and other debts on time

    Getting pre-approved is one of many steps that will show home sellers that you are serious about buying and it often helps speed up the process once your offer has been accepted.

    Bottom Line

    Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so as well.

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