What do Higher Interest Rates Mean?

So the big question of the day is, "What is going to happen with interest rates and will this affect the market?"  I think that is a great question and I am going to do my best to answer it.  When rates jump up the first thing people want to do is run!  They are not sure whether to run and buy a house or wait and see if the market will crash and burn and they can pick up some pieces at bargain prices.  Keep in mind that the Real Estate market is not the stock market and prices don't just fall in one day and interest rates at these levels don't affect everyone the same.  The difference in payment in the .50% that we have increased since December is $29.00 a month for every $100,000.00 borrowed.  That may seem like a lot, but if you have a family of 4 that is Starbucks for 1 morning.  Low interest rates have pushed the Real Estate market for years, but that is almost over!  Inventory is still very low in most areas and there is a standing inventory of 1.75-2.5 months in most areas of Los Angeles.  This is significant because you would need inventory to be at 3.5 times what is in escrow to start to see major price reductions.  

They even asked about Earthquakes and what happens to prices after an earthquake?  My answer was simple, last time we had an earthquake with any damage, I sold a house 2 days later because it had no damage and then people waited to see what they would get from FEMA or the SBA and eventually we saw some foreclosures of damaged houses, but for the most part inventory shrunk and the market slowed while people were fixing their houses up.  The market was slow in 1994 anyway and it started to jump again in 1998.  Did we see 50% price reductions?  NO!  We saw the market slowly decrease in value over a period of a few years, but this started before the earthquake and was part of that cycle.  By 1998 prices were rising again and we hit all-time highs again in 1999 or 2000.  I explained if they want to wait out the market then it could be 10-15 years to find a dip or it could be 3-5 years, but I don't see it happening this year.  Trying to time the market is not easy!  Trying to wait for a dip in the market and rent until then is absolutely insane, because the odds are that this could be the best time for you to ever buy a house going forward.  I could be wrong, but I think I am right!

Interest rates are holding for now!  They are still at the highest levels in over a year, but rates are still great!  I hope these are helpful as your buyers are looking for property:

• 30-year fixed conventional 1st Mortgage with 20% down - 4.500% (4.558 APR). Loan amounts up to $453,100.00 = $2295.79
• 15-year fixed conventional 1st Mortgage with 20% - 4.000% (4.101 APR). Loan amounts up to $453,100.00 = $3351.53
• 5/1 ARM 1st Mortgage -  20% down - Fixed for 5 years and then becomes variable - 3.875% -  (4.005 APR) Loan amounts up to $453,100.00 = $2130.64
• 7/1 ARM 1st Mortgage - 20% Fixed for 7 years and then becomes variable - 4.000% - (4.131 APR) Loan amounts up to $453,100.00 = $2130.64
• 10/1 ARM 1st Mortgage - 20% Fixed for 10 years and then becomes variable - 4.000% - (4.131 APR) Loan amounts up to $453,100.00 = $2130.64
• 30-year fixed 1st Mortgage FHA loan 3.50% down - 4.250% (5.469 APR). Loan amounts up to $453,100.00 = $2267.99 + $326.56 PMI = $2594.55
• 30-year fixed 1st Mortgage VA loan 0% - 4.250% (4.307 APR). Loan amounts up to $453,100.00 = $2228.98
• 30-year fixed 1st Mortgage Jumbo loan 20% down - 4.625% (4.639 APR). Loan amounts up to $3,000,000.00 = $15,424.19

All of the above are based on a 740 credit score.  Rates are subject to change without notice, your mileage may vary! 

80% of Renters Believe Homeownership is a Part of Their American Dream

According to the latest Aspiring Home Buyers Profile by the National Association of Realtors (NAR), 82% of surveyed renters desire to own a home in the future, with 80% believing homeownership is a big part of achieving their American Dream. The profile went on to state that 50% of millennials believe that their rent will increase, with 20% believing that an increase in rent will be the catalyst that pushes them to consider buying a home vs. renewing their lease. So, what is holding renters back? What would make renters take the plunge? NAR’s Chief Economist, Lawrence Yun believes that, “Housing demand in 2018 will be fueled by more millennials finally deciding to marry and have kids and the expectations that solid job growth and the strengthening economy will push incomes higher.” Yun goes on to warn that, “However, with prices and mortgage rates also expected to increase, affordability pressures will persist. That is why it is critical for much of the country to start seeing a significant hike in new and existing housing supply. Otherwise, many would-be first-time buyers will be forced to continue renting and not reach their dream of being a homeowner.” Bottom Line If you are one of the many homeowners whose houses no longer fit their needs and are looking to move up to your dream home, now is a great time to list your starter home! First-time buyers are out in force looking to achieve their American Dream.

Latest NAR Data Shows Now Is a Great Time to Sell!

We all realize that the best time to sell anything is when demand for that item is high, and the supply of that item is limited. Two major reports released by the National Association of Realtors (NAR) revealed information that suggests that now is a great time to sell your house. Let’s look at the data covered in the latest REALTORS® Confidence Index and Existing Home Sales Report. REALTORS® CONFIDENCE INDEX Every month, NAR surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions.” This month, the index showed (again) that homebuying demand continued to outpace the supply of homes available in January. The map below illustrates buyer demand broken down by state (the darker your state, the stronger demand there is). In addition to revealing high demand, the index also shows that compared to conditions in the same month last year, seller traffic conditions were ‘weak’ in 22 states, ‘stable’ in 25 states, and ‘strong’ in only 4 states (Alaska, Nevada, North Dakota & Utah). Takeaway: Demand for housing continues to be strong but supply is struggling to keep up, and this trend is likely to continue throughout 2018. THE EXISTING HOME SALES REPORT The most important data revealed in the report was not sales but was instead the inventory of homes for sale (supply). The report explained: Total housing inventory rose 4.1% from December to 1.52 million homes available for sale. Unsold inventory is 9.5% lower than a year ago, marking the 32nd consecutive month with year-over-year declines. This represents a 3.4-month supply at the current sales pace. According to Lawrence Yun, Chief Economist at NAR: “Another month of solid price gains underlines this ongoing trend of strong demand and weak supply. The underproduction of single-family homes over the last decade has played a predominant role in the current inventory crisis that is weighing on affordability.” In real estate, there is a guideline that often applies; when there is less than a 6-month supply of inventory available, we are in a seller’s market and we will see appreciation. Between 6-7 months is a neutral market, where prices will increase at the rate of inflation. More than a 7-month supply means we are in a buyer’s market and should expect depreciation in home values. As we mentioned before, there is currently a 3.4-month supply, and houses are going under contract fast. The Existing Home Sales Report shows that 43% of properties were on the market for less than a month when sold. In January, properties sold nationally were typically on the market for 42 days. As Yun notes, this will continue unless more listings come to the market. “While the good news is that Realtors in most areas are saying buyer traffic is even stronger than the beginning of last year, sales failed to follow course and far lagged last January’s pace. It’s very clear that too many markets right now are becoming less affordable and desperately need more new listings to calm the speedy price growth.” Takeaway: Inventory of homes for sale is still well below the 6-month supply needed for a normal market and supply will ‘fail to catch up with demand’ if a ‘sizable’ supply does not enter the market.

Calm Down! The Real Estate Market is NOT Falling Apart

Calm Down! The Real Estate Market is NOT Falling Apart

There has been tremendous volatility in certain markets over the last few weeks (for example, the stock and currency markets). When this happens, some tend to lump all of their investments together and create an almost ‘Armageddon’ scenario where everything loses value quickly and dramatically. Real estate is an investment that can get caught up in this hysteria. Does the concern about the current housing market have merit?

Financial advisors have been warning us for months that the stock market was ripe for a “correction.”

Experts have been questioning the value of alternative currencies for over a year.

In contrast, here are the opinions of three major players in the residential housing market:

Ralph DeFranco, Chief Economist, Arch Capital Services Inc.

“It’s premature to worry about a housing bubble. The typical warning signs – excessive debt levels, poor quality loans, exponentially increasing home prices, rising vacancy rates and/or poor affordability compared to the past, and a high number of internet searches on house flipping – are not present.”

Liu-Down, Genworth Chief Economist

“My thoughts on many recent discussions of ‘housing bubble’ – the bar for a housing bubble is higher than just prices being above some fundamental value. There must be widespread behavior change as well such as higher levels of fraud and speculation.”

Fitch Report

“US home prices are on track for a 5% nominal gain for the 4th consecutive year, returning national prices to their highest level since 2007. The growth has been driven by historically low mortgage rates and unemployment plus solid population and personal income growth rates…a meaningful correction should only be triggered by an unexpected economic shock.”

Bottom Line

Speculation has driven certain markets over the last year. However, it has not been speculation, but instead people’s desire for homeownership, that has driven the real estate market. If you are considering a move in the near future don't hesitate to contact me directly for a free discussion on buying or selling, 661-510-5370.

712,000 Homes in the US Regained Equity in the Past 12 Months!

CoreLogic’s latest Equity Report revealed that “over the past 12 months, 712,000 borrowers moved into positive equity.” This is great news, as the share of homeowners with negative equity (those who owe more than their home is worth), has dropped more than 20% since the peak in Q4 of 2009 (26%) to 4.9% today.

The report also revealed:

• The average homeowner gained approximately $14,900 in equity during the past year.
• Compared to Q3 2016, negative equity decreased 22% from 3.2 million homes, or 6.3% of all mortgaged properties.
• U.S. homeowners with mortgages (roughly 63% of all homeowners) have seen their equity increase by a total of $870.6 billion since Q3 2016, an increase of 11.8%, year-over-year.

The map below shows the percentage of homes by state with a mortgage and positive equity. (The states in gray have insufficient data to report.)

Significant Equity Is on The Rise

Frank Nothaft, Chief Economist at CoreLogic, believes this is great news for the “housing market.” He went on to say:

“Homeowner equity increased by almost $871 billion over the last 12 months, the largest increase in more than three years. This increase is primarily a reflection of rising home prices, which drives up home values, leading to an increase in home equity positions and supporting consumer spending.”

Of the 95.1% of homeowners with positive equity in the U.S., 82.9% have significant equity (defined as more than 20%). This means that more than three out of four homeowners with a mortgage could use the equity in their current home to purchase a new home now.

The map below shows the percentage of homes by state with a mortgage and significant equity.

Bottom Line

This is exciting news! If you are one of the many homeowners who are unsure of how much equity you have in your home and are curious about your ability to move, call me today and let's meet to discuss the amount of equity in your home! 

What is the Cost of Waiting Until Next Year to Buy?

Have you been putting off buying a home?

Over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate 5% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

 

It really can make a difference, why are you waiting? Get in touch with me today and let's meet to figure out the best scenario for you. 

'Four Reasons to Buy A Home This Fall!'

Here are four great reasons to consider buying a home today, instead of waiting. 1. Prices Will Continue to Rise CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.7% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.0% over the next year. The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense. 2. Mortgage Interest Rates Are Projected to Increase Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have hovered around 4%. Most experts predict that rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison, projecting that rates will increase by this time next year. An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home. 3. Either Way, You Are Paying a Mortgage There are some renters who have not yet 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 an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity. Are you ready to put your housing cost to work for you? 4. It’s Time to Move on With Your Life The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But what if they weren’t? Would you wait? Look at the actual reason you are buying and decide if it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy. If purchasing a home for you and your family is the right thing for you to do this year, buying sooner rather than later could lead to substantial savings.  Give me a call or visit www.WendyGundry.com and search homes on  your own. I would be happy to sit down and have a completely FREE home buying consultation to discuss and put a plan together for buying a home. Wendy Gundry, 661-510-5370