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The Best Use of Time (and Money) When It Comes to Renovations

In the current sellers’ market, many homeowners wonder what, if anything, needs to be remodeled before they list their house. That’s where a trusted real estate professional comes in. They can help you think through today’s market conditions and how they impact what you should – and shouldn’t – renovate before selling.

Here are some considerations a professional will guide you through:

1. With current supply challenges, buyers may be willing to take on projects of their own.

A more balanced market typically sees a 6-month supply of homes for sale. Above that, and we’re in a buyers’ market. Below that, and we’re in a sellers’ market. According to a recent report by the National Association of Realtors (NAR), our current supply of homes for sale, while rising, still remains solidly in sellers’ market territory:

“Unsold inventory sits at a 2.6-month supply at the current sales pace, modestly up from May’s 2.5-month supply but down from 3.9 months in June 2020.”

So, what’s that mean for you? If you’re a seller trying to decide whether or not to renovate, this is especially important because it’s indicative of buyer behavior. When there aren’t enough homes for sale, buyers may be more willing to purchase a home that doesn’t meet all their needs and renovate it themselves later.

2. Not all renovation projects are equal.

You don’t want to spend time and money on a project that isn’t worth the cost or is too niche design-wise for some homebuyers. According to an article by Renofi.com, basing home updates on what’s trendy right now can be a costly mistake:

“The last thing you as a homeowner want to do is center your home design around a passing fad – even worse, one thats design quality won’t last a good while.”

Before making any decisions, talk to your real estate advisor. They have insight into what other sellers are doing before listing their homes and how buyers are reacting to those upgrades. Don’t spend the time and money to be trendy – if your buyer wants to upgrade to the newest fad later, they can.

3. If you’ve already made upgrades this past year, your agent can help spotlight them.

If you have already completed some renovations on your house, you’re not alone. The pandemic kept people at home last year, and during that time, many homeowners completed some home improvement projects. HomeAdvisor’s 2021 State of Home Spending Report found:

“35% of households that completed an improvement project undertook some type of interior painting, while 31% completed a bathroom remodel and 26% installed new flooring.”

Let your real estate professional know if you fall in this category. They can highlight any recent upgrades you’ve made in your house’s listing.

Bottom Line

When it comes to renovations, your return-on-investment should be top of mind. Let’s connect today to talk through any upgrades you’ve already made and to find out what you should prioritize before you sell to maximize your house’s potential.

Are Houses Less Affordable Than They Were in Past Decades?

There are many headlines about how housing affordability is declining. The headlines are correct: it’s less affordable to purchase a home today than it was a year ago. However, it’s important to give this trend context. Is it less expensive to buy a house today than it was in 2005? What about 1995? What happens if we go all the way back to 1985? Or even 1975?

Obviously, the price of a home has appreciated dramatically over the last 45 years. So have the prices of milk, bread, and just about every other consumable. Prices rise over time – we know it as inflation.

However, when we look at housing, price is just one component that makes up the monthly cost of the home. Another key factor is the mortgage rate at the time of purchase.

Let’s look back at the cost of a home over the last five decades and adjust it for inflation by converting that cost to 2021 dollars. Here’s the methodology for each data point of the table below:

Mortgage Amount: Take the median sales price at the end of the second quarter of each year as reported by the Fed and assume that the buyer made a 10% down payment.
Mortgage Rate: Look at the monthly 30-year fixed rate for June of that year as reported by Freddie Mac.
P&I: Use a mortgage calculator to determine the monthly principal and interest on the loan.
In 2021 Dollars: Use an inflation calculator to determine what each payment would be when adjusted for inflation. Green means the homes were less expensive than today. Red means they were more expensive.

As the chart shows, when adjusted for inflation, there were only two times in the last 45 years that it was less expensive to own a home than it is today.

Last year: Prices saw strong appreciation over the last year and mortgage rates have remained relatively flat. Therefore, affordability weakened.
2010: Home values plummeted after the housing crash 15 years ago. One-third of all sales were distressed properties (foreclosures or short sales). They sold at major discounts and negatively impacted the value of surrounding homes – of course homes were more affordable then.

At every other point, even in 1975, it was more expensive to buy a home than it is today.

Bottom Line

If you want to buy a home, don’t let the headlines about affordability discourage you. You can’t get the deal your friend got last year, but you will get a better deal than your parents did 20 years ago and your grandparents did 40 years ago.

Looking for a Place To Call Home? Consider a Condominium.

It’s no secret that one of the top stories in today’s real estate market is low housing supply and high buyer demand. If you’re a first-time buyer looking for a starter home or are someone who’s interested in downsizing, it may be worth considering a condominium (condo) as a worthwhile option.

In fact, trends indicate condos are gaining popularity among buyers. In the latest Existing Homes Sales Report from the National Association of Realtors (NAR), the data shows condo sales rising throughout the first half of this year (see graph below):There are a few reasons more and more people are opting to buy condos – the benefits of condo life can be quite compelling. Let’s explore the main perks to find out if a condo is a good fit for you.

Affordability

According to the NAR report, the median sales price of a condo is roughly $59,000 less than the median price of a single-family detached home (see graph below). This makes condos a great option for first-time homebuyers, those with limited down payment savings, or those looking to save money by downsizing.

Maintenance

A recent article from BankRate adds low maintenance as another perk of a condo lifestyle. Generally, exterior maintenance for condos is handled by a Homeowner’s Association (HOA). This can include things like landscaping and upholding a certain standard of cleanliness and condition for walkways, siding, and roofs. If you’re looking for a lower-maintenance option or see the appeal in being hands-off with upkeep, condos may be a good choice for you. With exterior maintenance off your plate, you’ll have more time for yourself and your hobbies.

Amenities

You can use that free time to enjoy some of the value-adding features your condo community may have, which could include dog parks, pools, a rentable clubhouse and grilling area for events, and more. If being able to host or attend community social outings is important to you, condos may give you more opportunities to enjoy the company of your neighbors. As a bonus, some condos even have gyms and on-site security teams.

Ultimately, the choice is yours. Condos are great options that often come with various features and benefits that may be important for your lifestyle. Fannie Mae sums up the appeal nicely:

“Condominiums, or condos, can be great alternatives to detached homes. City dwellers, singles, couples, seniors, and many others may find condos that suit their needs and budgets. Others may simply prefer low-maintenance living. Buyers who feel ‘priced out’ of homes may discover condos offer an affordable homeownership alternative.”

Bottom Line

If you’re looking for a home, it may be time to consider a condo as an option. Let’s connect to explore if one would be a good fit for your homeownership needs.

Sellers: Make Today’s Home Price Appreciation Work for You

Home prices continue to rise as we move through the summer, and that’s good news for sellers who are looking to maximize their home’s potential. If you’re on the fence about whether to list your house now or later, the question you should really ask is: will this price appreciation last?

Here’s what three leading industry experts have to say about what lies ahead:

Lawrence Yun, Chief Economist, National Association of Realtors (NAR):

“At a broad level, home prices are in no danger of a decline due to tight inventory conditions, but I do expect prices to appreciate at a slower pace by the end of the year.”

Selma Hepp, Deputy Chief Economist, CoreLogic:

“The imbalance between robust demand and dismal availability of for-sale homes has led to a continual bidding over asking prices, which reached record levels in recent months . . . . Nevertheless, with more new listings and new home construction, home price acceleration that has built momentum, and continues to reach new highs, will likely slow later this summer but remain in double digits.”

George Ratiu, Chief Economist, realtor.com:

“Many sellers are going to take advantage of higher prices. This summer is going to signal the move to the next chapter, and this will very much be the year they’re going to put their home on the market.”

What It Means for You:

The experts agree that the summer months give sellers a great opportunity to capitalize on today’s home prices. And while prices aren’t expected to depreciate, the rise in prices is forecast to moderate over the next few years. That means selling your house today could set you up for a bigger win.

Bottom Line

Listen to the experts. If you’re ready to make a move, let’s connect to discuss selling your house sooner rather than later so you can take advantage of today’s home price appreciation before it moderates.

With Rents on the Rise – Is Now the Time To Buy?

According to recent data from realtor.com, median rental prices have reached their highest point ever recorded in many areas across the country. The report found rents rose by 8.1% from the same time last year. As it notes:

“Beyond simply recovering to pre-pandemic levels, rents across the country are surging. Typically, rents fluctuate less than 1% from month to month. In May and June, rents increased by 3.0% and 3.2% from each month to the next.”

If you’re a renter concerned about rising prices, now may be the time to consider purchasing a home.

Monthly Rents Are Higher Than Monthly Mortgage Payments

When you weigh your options of whether to buy a home or continue renting, how much you’ll pay each month is likely top of mind. According to the National Association of Realtors (NAR), monthly mortgage payments are rising, but they’re still significantly lower than the typical rental payment. NAR indicates the latest data on homes closed shows the median monthly mortgage payment is $1,204.

By contrast, the median national rent is $1,575 according to the most current data provided by realtor.com. In other words, buyers who recently purchased a home locked in a monthly payment that is, on average, $371 lower than what renters pay today (see graph below):

Rents Are Rising Sharply, and They Continue To Increase

The difference in monthly housing costs when comparing renting and homebuying today is significant, but many would-be homebuyers wonder about the future of rental prices. If we look to historical Census data as a reference, the median asking rent has risen consistently since 1988 (see graph below):The rise in rent over time clearly shows one of the major advantages homeownership has over renting: stable housing costs. Renters face increasing costs every year. When you purchase your home, your mortgage rate is locked in for 30 years, meaning your monthly payment stays the same over time. That gives you welcome peace of mind and predictability for many years ahead.

Bottom Line

With rents continuing to rise across the country, renters should consider if now is the right time to buy. There are multiple benefits to buying sooner rather than later. Let’s discuss your options so you can make your most powerful decision.

Key Questions To Ask Yourself Before Buying a Home

Sometimes it can feel like everyone has advice when it comes to buying a home. While your friends and loved ones may have your best interests in mind, they may also be missing crucial information about today’s housing market that you need to make your best decision.

Before you decide whether you’re ready to buy a home, you should know how to answer these three questions.

1. What’s Going on with Home Prices?

Home prices are one factor that directly impacts how much it will cost to buy a home and how much you stand to gain as a homeowner when prices appreciate.

The graph below shows just how much experts are forecasting prices to rise this year:Continued price appreciation is great news for existing homeowners but can pose a significant challenge if you wait to buy. Using these forecasts, you can determine just how much waiting could cost you. If prices increase based on the average of all forecasts (12.46%), a median-priced home that cost $350,000 in January of 2021 will cost an additional $43,610 by the end of the year. What does this mean for you? Put simply, with home prices increasing, the longer you wait, the more it could cost you.

2. Are Today’s Low Mortgage Rates Going To Last?

Another significant factor that should inform your decision is mortgage interest rates. Today’s average rates remain close to record-lows. Much like prices, though, experts forecast rates will rise over the coming months, as the chart below shows:Your monthly mortgage payment can be significantly impacted by even the slightest increase in mortgage rates, which makes the overall cost of the home greater over time when you wait.

3. Why Is Homeownership Important to You?

The final question is a personal one. Before deciding, you’ll need to understand your motivation to buy a home and why homeownership is an important goal for you. The financial benefits of owning a home are often easier to account for than the many emotional ones.

The 2021 National Homeownership Market Survey shows that six of the nine reasons Americans value homeownership are because of how it impacts them on a personal, aspirational level. The survey says homeownership provides:

Stability
Safety
A Sense of Accomplishment
A Life Milestone
A Stake in the Community
Personal Pride

The National Housing & Financial Capability Survey from NeighborWorks America also highlights the emotional benefits of homeownership:Clearly, there’s a value to homeownership beyond the many great financial opportunities it provides. It gives homeowners a sense of pride, safety, security, and accomplishment – which impacts their lives and how they feel daily.

Bottom Line

Homeownership is life-changing, and buying a home can positively impact you in so many ways. With any decision this big, it helps to have a trusted advisor by your side each step of the way. If you’re ready to begin your journey toward homeownership, let’s connect to discuss your options and begin your journey.

Waiting To Buy a Home Could Cost You [INFOGRAPHIC]

Some Highlights

If you’re thinking of buying a home but wondering if waiting a few years will save you in the long run, think again.
The longer the wait, the more you’ll pay, especially when mortgage rates and home prices rise. Even the slightest change in the mortgage rate can have a big impact on your buying power no matter your price point.
Don’t assume waiting will save you money. Let’s connect to set the ball into motion today while mortgage rates are hovering near historic lows.

4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures

With forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like what happened after the housing bubble 15 years ago. Here are four reasons why that won’t happen.

1. There are fewer homeowners in trouble this time

After the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they simply gave it back to the bank.

As stay-at-home orders were issued early last year, the overwhelming fear was the pandemic would decimate the housing industry in a similar way. Many experts projected 30% of all mortgage holders would enter the forbearance program. Only 8.5% actually did, and that number is now down to 3.5%.

As of last Friday, the total number of mortgages still in forbearance stood at 1,863,000. That’s definitely a large number, but nowhere near 9.3 million.

2. Most of the 1.86M in forbearance have enough equity to sell their home

Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity in their homes. The 10% equity number is important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create.

The remaining 13% might not all have the option to sell, so if the entire 13% of the 1.86M homes went into foreclosure, that would total 241,800 mortgages. To give that number context, here are the annual foreclosure numbers of the three years leading up to the pandemic:

2017: 314,220
2018: 279,040
2019: 277,520

The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. The number does, however, draw a similar comparison to the three years prior to the pandemic.

3. The current market can absorb any listings coming to the market

When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a 9-month supply of listings for sale. Today, that number stands at less than 3 months of inventory on the market.

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains when addressing potential foreclosures emerging from the forbearance program:

“Any foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines.”

4. Those in power will do whatever is necessary to prevent a wave of foreclosures

Just last Friday, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. Here are two examples mentioned in the release:

“For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower.”
“The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.”

When evaluating the four reasons above, it’s clear there won’t be a flood of foreclosures coming to the market as the forbearance program winds down.

Bottom Line

As Ivy Zelman, founder of the major housing market analytical firm Zelman & Associates, notes:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

Today’s Real Estate Market Explained Through 4 Key Trends

As we move into the second half of the year, one thing is clear: the current real estate market is one for the record books. The exact mix of conditions we have today creates opportunities for both buyers and sellers. Here’s a look at four key components that are shaping this unprecedented market.

A Shortage of Homes for Sale

Earlier this year, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels are starting to trend up. The latest Monthly Housing Market Trends Report from realtor.com says:

“In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.”

This is good news for buyers who crave more options. But even though we’re experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states. That’s why it’s still a sellers’ market, giving homeowners immense leverage when they decide to make a move.

Buyer Competition and Bidding Wars

Today’s ongoing low supply, coupled with high demand, creates a market characterized by high buyer competition and bidding wars. Buyers are going above and beyond to make sure their offer stands out from the crowd by offering over the asking price, all cash, or waiving some contingencies. The number of offers on the average house for sale broke records this year – and that’s great news for sellers.

The latest Confidence Index from the National Association of Realtors (NAR) says the average home for sale receives five offers (see graph below):For buyers, the best way to put a compelling offer together is by working with a local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what’s most appealing to the seller.

Home Price Appreciation

The competition among buyers is driving prices up. Over the past year, we’ve seen home price appreciation rise across the country. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices increased 15.4% year-over-year in May:

“The May 2021 HPI gain was up from the May 2020 gain of 4.2% and was the highest year-over-year gain since November 2005. Low mortgage rates and low for-sale inventory drove the increase in home prices.”

Rising home values are a big part of why real estate remains one of the top sought-after investments for Americans. For potential sellers, it also means it’s a great time to list your house to maximize the return on your investment.

A Rise in Home Values and Equity

The equity in a home doesn’t just grow when a homeowner pays their mortgage – it also grows as the home’s value appreciates. Thanks to the jump in price appreciation, homeowners across the country are seeing record-breaking gains in home equity. CoreLogic recently reported:

“…homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year over year, representing a collective equity gain of over $1.9 trillion, and an average gain of $33,400 per borrower, since the first quarter of 2020.”

That’s a major perk for households to leverage. Homeowners can use that equity to accomplish major life goals or move into their dream homes.

Bottom Line

If you’re thinking about buying or selling, there’s no time like the present. Let’s connect to talk about how you can take advantage of the conditions we’re seeing today to meet your homeownership goals.

3 Charts That Show This Isn’t a Housing Bubble

With home prices continuing to deliver double-digit increases, some are concerned we’re in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is nothing like 2006 for three major reasons.

1. The housing market isn’t driven by risky mortgage loans.

Back in 2006, nearly everyone could qualify for a loan. The Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers’ Association is an indicator of the availability of mortgage money. The higher the index, the easier it is to obtain a mortgage. The MCAI more than doubled from 2004 (378) to 2006 (869). Today, the index stands at 130. As an example of the difference between today and 2006, let’s look at the volume of mortgages that originated when a buyer had less than a 620 credit score.Dr. Frank Nothaft, Chief Economist for CoreLogic, reiterates this point:

“There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent.”

2. Homeowners aren’t using their homes as ATMs this time.

During the housing bubble, as prices skyrocketed, people were refinancing their homes and pulling out large sums of cash. As prices began to fall, that caused many to spiral into a negative equity situation (where their mortgage was higher than the value of the house).

Today, homeowners are letting their equity build. Tappable equity is the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio (thus still leaving them with at least 20% equity). In 2006, that number was $4.6 billion. Today, that number stands at over $8 billion.

Yet, the percentage of cash-out refinances (where the homeowner takes out at least 5% more than their original mortgage amount) is half of what it was in 2006.

3. This time, it’s simply a matter of supply and demand.

FOMO (the Fear Of Missing Out) dominated the housing market leading up to the 2006 housing bubble and drove up buyer demand. Back then, housing supply more than kept up as many homeowners put their houses on the market, as evidenced by the over seven months’ supply of existing housing inventory available for sale in 2006. Today, that number is barely two months.

Builders also overbuilt during the bubble but pulled back significantly over the next decade. Sam Khater, VP and Chief Economist, Economic & Housing Research at Freddie Mac, explains that pullback is the major factor in the lack of available inventory today:

“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”

Here’s a chart that quantifies Khater’s remarks:Today, there are simply not enough homes to keep up with current demand.

Bottom Line

This market is nothing like the run-up to 2006. Bill McBride, the author of the prestigious Calculated Risk blog, predicted the last housing bubble and crash. This is what he has to say about today’s housing market:

“It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low.”

1. With current supply challenges, buyers may be willing to take on projects of their own.

2. Not all renovation projects are equal.

3. If you’ve already made upgrades this past year, your agent can help spotlight them.

Bottom Line

Bottom Line

Affordability

Maintenance

Amenities

Bottom Line

Here’s what three leading industry experts have to say about what lies ahead:

Lawrence Yun, Chief Economist, National Association of Realtors (NAR):

Selma Hepp, Deputy Chief Economist, CoreLogic:

George Ratiu, Chief Economist, realtor.com:

What It Means for You:

Bottom Line

Monthly Rents Are Higher Than Monthly Mortgage Payments

Rents Are Rising Sharply, and They Continue To Increase

Bottom Line

1. What’s Going on with Home Prices?

2. Are Today’s Low Mortgage Rates Going To Last?

3. Why Is Homeownership Important to You?

Bottom Line

Some Highlights

1. There are fewer homeowners in trouble this time

2. Most of the 1.86M in forbearance have enough equity to sell their home

3. The current market can absorb any listings coming to the market

4. Those in power will do whatever is necessary to prevent a wave of foreclosures

Bottom Line

A Shortage of Homes for Sale

Buyer Competition and Bidding Wars

Home Price Appreciation

A Rise in Home Values and Equity

Bottom Line

1. The housing market isn’t driven by risky mortgage loans.

2. Homeowners aren’t using their homes as ATMs this time.

3. This time, it’s simply a matter of supply and demand.

Bottom Line

James Jestes, Your new favorite Realtor.

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