Thinking of Selling? Why Now May Be The Time

It is common knowledge that a large number of homes sell during the spring-buying season. For that reason, many homeowners hold off on putting their home on the market until then. The question is whether or not that will be a good strategy this year.

The other listings that do come out in the spring will represent increased competition to any seller. Do a greater number of homes actually come to the market in the spring, as compared to the rest of the year? TheNational Association of Realtors(NAR) recently revealed which months most people listed their home in for 2015. Here is a graphic showing the results:

The three months in the second quarter of the year (represented in red) are consistently the most popular months for sellers to list their homes on the market. Last year, the number of homes available for sale in January was 1,860,000.

That number spiked to 2,280,000 by May!

What does this mean to you?

With the national job situation improving, and mortgage interest rates projected to rise later in the year, buyers are not waiting until the spring. They are out looking for a home right now. If you are looking to sell this year, waiting until the spring to list your home means you will have the greatest competition for a buyer.

Bottom Line

It may make sense to beat the rush of housing inventory that will enter the market in the spring and list your home today

Where Are Interest Rates Headed This Year?

With interest rates still below 4%, many buyers may be on the fence as to whether to act now and purchase a new home, or wait until next year.

If you look at what the four major reporting agencies are predicting for 2016, it may make the decision for you. The chart below averages the predictions by quarter.

With the exception of Fannie Mae , the experts agree that interest rates will increase by three-quarters of a percentage point, costing you more to pay back your loan.

Bottom Line

Even a small increase in interest rates can put a dent in your family’s wealth.

What Do You Actually Need to Get a Mortgage?

Fannie Mae recently released their “What do consumers know about the Mortgage Qualification Criteria?” Study . The study revealed that Americans are misinformed about what is required to qualify for a mortgage when purchasing a home. Here are three takeaways:

• 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO score is necessary
• 86% of Americans either don’t know (59%) or are misinformed (25%) about what an appropriate Back End Debt-to-Income (DTI) ratios is
• 76% of Americans either don’t know (40%) or are misinformed (36%) about the minimum down payment required

To help correct these misunderstandings, let’s take a look at the latest Ellie Mae Origination Insight Report , which focuses on recently closed (approved) loans .

FICO SCORES

BACK END DTI

DOWN PAYMENTS

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will definitely make the mortgage process easier. Your dream home may already be within your reach.

Obstacles to Homeownership: Perceived or Real?

Yesterday, we discussed the belief Americans have in homeownership and their desire to partake in this piece of the American Dream. We also discussed some of the obstacles preventing them from attaining that goal. However, studies have shown that many of the obstacles mentioned are perceived, not real.

A recent study by Fannie Mae , What Do Consumers Know About The Mortgage Qualification Criteria? , revealed that many consumers are either unsure or misinformed regarding the minimum requirements necessary to obtain a mortgage. Let’s break down three such challenges.

Down Payment

Perceptions

Many renters have mentioned that the lack of an adequate down payment is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

• 40% of all renters don’t know what down payment is required
• 15% think you need at least 20% down
• An additional 4% think you need at least 10% down

The Reality

There are programs offered by Fannie Mae, Freddie Mac and FHA that require as little as 3-3.5% down. VA and USDA loans offer 0% down programs. According to the National Association of Realtors , the typical down payment for a first time buyer is 6%.

Credit Score

Perceptions

Many renters have mentioned that the lack of an adequate credit score is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

• 54% of all renters don’t know what credit score is required
• 5% think you need at least a 740 credit score

The Reality

Many mortgages are granted to purchasers with a credit score of less than 700. According to Ellie Mae , the average credit score on a closed FHA purchase is 687 and the average credit score on all loans is 722.

Back End Debt-to-Income Ratio (DTI)

Perceptions

Many renters have mentioned that they carry too much debt which is preventing them from moving forward with the purchase of a home. According to the Fannie Mae report:

• 59% of all renters don’t know what DTI is acceptable
• 25% think you need at under 25%
• 7% think you need under 39%

The Reality

Lenders like to see a back-end ratio that does not exceed 36%. Fannie Mae’s maximum total DTI ratio is 36% of the borrower’s stable monthly income. The maximum can be exceeded up to 45% based on credit score and other requirements.

Bottom Line

Don't let a lack of knowledge or misinformation keep yourfamily from buying a home this year. Meet with a local real estate professional who can evaluate your ability to buy now!

Thinking of Buying a Home? 3 Questions Every Buyer Should Answer First

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Answering the following 3 questions will help you determine if now is actually a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money. They are:

• A good place to raise children and for them to get a good education
• A place where you and your family feel safe
• More space for you and your family
• Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Home Price Index from CoreLogic , home values are projected to increase by 5.3% over the next 12 months.

What does that mean to you?

Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait till next year. Your down payment will need to be higher as well to account for the higher home price.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors and Freddie Mac have all projected that mortgage interest rates will increase by approximately three-quarters of a percent over the next twelve months as you can see in the chart below:

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

The Most Appealing Aspects of Homeownership

The National Association of Realtors (NAR) just released their first issue of the Housing Opportunities & Market Experience Survey (HOME) . In the report, NAR revealed what Americans believe to be the most appealing aspects of homeownership.

Here is a graph showing the results:

It is interesting to see that the two most appealing aspects had nothing to do with money, but instead, addressed the non-financial benefits of homeownership.

Home Prices: Where Are They Headed Over The Next 5 Years?

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey .

Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey:

Home values will appreciate by 3.9% by the end of 2015, 3.4% in 2016 and 3.1% in each of the following four years (as shown below) . That means the average annual appreciation will be 3.2% over the next 5 years.

The prediction for cumulative appreciation rose from 18.1% to 21.6% by 2020. Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 13.8%.

Bottom Line

Individual opinions make headlines. We believe the survey is a fairer depiction of future values.

American Dream of Homeownership Still Very Much Alive

In a recent post , Trulia examined whether homeownership was again being seen by adults in the US as a “part of their personal American Dream.” Over the last five years:

• The percentage of U.S. adults who believe homeownership is part of their American Dream increased from 70% to 75%
• The percentage of 18-34 Year-olds who believe homeownership is part of their American Dream increased from 65% to 80%

Here is a graph of the survey over the last five years:

Bottom Line

As the housing industry recovers from the crisis of 2008-2010, Americans belief in homeownership as part of their own personal American Dream has also made a strong comeback.

Top Reason to List Your House For Sale Now!

If you are debating listing your house for sale this year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes For Sale

The National Association of REALTORS’ (NAR) Chief Economist, Lawrence Yun recently commented on the inventory shortage:

“While feedback from REALTORS� continues to suggest healthy levels of buyer interest, available listings that are move-in ready and in affordable price ranges remain hard to come by for many would-be buyers.”

The latest Existing Home Sales Report shows that there is currently a 5.1-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market and well below November 2014 numbers.

The chart below details the year-over-year inventory shortages experienced in 2015:

Anything less than a six-month supply is considered a “Seller’s Market” .

Bottom Line

Meet with a local real estate professional who can show you the supply conditions in your neighborhood and assist you in gaining access to the buyers who are ready, willing and able to buy now!

Thinking of Selling Your Home? Get Ready to Negotiate!

Now that the market has showed signs of recovery, some sellers may be tempted to try and sell their home on their own (FSBO) without using the services of a real estate professional.

Real estate agents are trained and experienced in negotiation. In most cases, the seller is not. The seller must realize their ability to negotiate will determine whether they can get the best deal for themselves and their family.

Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:

• The buyer who wants the best deal possible
• The buyer’s agent who solely represents the best interest of the buyer
• The buyer’s attorney (in some parts of the country)
• The home inspection companies, which work for the buyer and will almost always find some problems with the house.
• The termite company if there are challenges
• The buyer’s lender if the structure of the mortgage requires the sellers’ participation
• The appraiser if there is a question of value
• The title company if there are challenges with certificates of occupancy (CO) or other permits
• The town or municipality if you need to get the COs permits mentioned above
• The buyer’s buyer in case there are challenges on the house your buyer is selling
• Your bank in the case of a short sale

Bottom Line

The percentage of sellers who have hired a real estate agent to sell their home has increased steadily over the last 20 years. Meet with a professional in your local market to see the difference they can make in easing the process.

Building Family Wealth Over The Next 5 Years

As the economy continues to improve, more and more Americans are seeing their personal financial situations also improving. Instead of just getting by, many are now beginning to save and find other ways to build their net worth. One way to dramatically increase their family wealth is through the acquisition of real estate. For example, let’s assume a young couple purchases and closes on a $250,000 home in January. What will that home be worth five years down the road? Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists every quarter. They ask them to project how residential prices will appreciate over the next five years. According to their latest survey , here is how much value that $250,000 house will gain in the coming years.







Over a five year period, that homeowner can build their home equity to over $40,000. And, in many cases, home equity is large portion of a family’s overall net worth.

Bottom Line

If you are looking to better your family’s long-term financial situation, buying your dream homemight be a great option.