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Where Are Home Prices Heading in The Next 5 Years?

by KCM

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 5.0% over the course of 2017, 4.0% in 2018, 3.2% in 2019, 3.0% in 2020, and 3.0% in 2021. That means the average annual appreciation will be 3.64% over the next 5 years.

The prediction for cumulative appreciation increased from 17.8% to 18.4% by 2021. The experts making up the most bearish quartile of the survey are projecting a cumulative appreciation of 6.7%.

Bottom Line

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

Rising Home Prices Mean Great News for Homeowners

by KCM Blog

Recently there has been a lot of talk about home prices and if they are accelerating too quickly. As we mentioned before, in some areas of the country, seller supply (homes for sale) cannot keep up with the number of buyers who are out looking for homes, which has caused prices to rise.

The great news about rising prices, however, is that according to CoreLogic’s Homeowner Equity Report, the average American household gained over $14,000 in equity over the course of the last year, largely due to home value increases.

The map below was created using the same report from CoreLogic and shows the average equity gain per mortgaged home during the 1st quarter of 2017 (the latest data available).

 

For those who are worried that we are doomed to repeat 2006 all over again, it is important to note that homeowners are investing their new-found equity in their homes and themselves, not in depreciating assets.

The added equity is helping families put their children through college, invest in starting small businesses, pay off their mortgages sooner and even move up to the home that will better suit their needs now.

Bottom Line

If you are a homeowner looking to take advantage of your home equity by moving up to your dream home, let’s get together to discuss your options!

Homeowners: Your Home Must Be Sold TWICE

by KCM Blog


In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5%+ over the next twelve months. 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 recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth, as compared to an appraiser’s evaluation of that same home.

Bill Banfield, VP of Capital Markets at Quicken Loans urges anyone looking to buy or sell in today’s market to remember the impact of this challenge: 

“While a 1 or 2 percent difference in home value opinions may not seem like a lot, it could be enough to derail a mortgage.

A homeowner [or a buyer] could be forced to bring more cash to closing in order to make a mortgage work if the appraisal is lower than expected. On the other hand, if an appraisal comes in higher, they could be surprised with more equity than they had planned. Either way, if owners are aware of their local markets it will lead to smoother mortgage transactions.”

The chart below illustrates the changes in home price estimates over the last 12 months.

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 discuss this and any other obstacle that may arise.

2 Myths Holding Back Home Buyers

by KCM Blog

In Realtor.com’s recent article, “Home Buyers’ Top Mortgage Fears: Which One Scares You?” they mention that “46% of potential home buyers fear they won’t qualify for a mortgage to the point that they don’t even try.”

Myth #1: “I Need a 20% Down Payment”

Buyers overestimate the down payment funds needed to qualify for a home loan. According to the First Quarter 2017 Homeownership Program Index (HPI) from Down Payment Resource, saving for a down payment was the barrier that kept 70% of renters from buying.

Rob Chrane, CEO of Down Payment Resource had this to say,

“There are many mortgage-ready renters today, but they don’t know it. Often, homebuyers remain sidelined for years due to the down payment.”

Many believe that they need at least 20% down to buy their dream home, but programs are available that allow buyers put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO® score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

As you can see in the chart above, 53.2% of approved mortgages had a credit score of 600-749.

Bottom Line

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

Home Sales Expected to Soar Through 2018: What Buyers Need to Know

by Clare Trapasso

By now just about every would-be buyer out there knows there simply aren't enough homes for sale these days to appease the hordes of competition. But despite the shortages, rising prices, and bidding wars, more homes are expected to be sold this year than in more than a decade.

In 2017, the number of sales of existing homes (which have previously been lived in) is expected to rise about 3.5%, to 5.64 million, according to the midyear forecast from the National Association of Realtors®. The group predicts that existing-home purchases will rise an additional 2.8% in 2018, to 5.8 million.

"The combination of the stock market being at record highs, 16 million new jobs created since 2010, pent-up household formation, and rising consumer confidence are giving more households the assurance and ability to purchase a home," NAR Chief Economist Lawrence Yun said in a statement. "However, prices are still rising too fast in many areas and are outpacing incomes."

Related Articles

What Slowing New Home Construction Means for the Housing Market
Existing-Home Sales Hit Highest Numbers Since Recession
Think Home Prices Are High Now? Why They're Likely to Keep Going Up

Sales of brand-new homes, which builders can't seem to put up fast enough, are expected to jump 10.7%, from 560,000 in 2016 to 620,000 this year, according to NAR. They're expected to rise an additional 8% in 2018, to 670,000 sales.

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New homes are typically more expensive than existing homes, as builders must contend with shortages of land and labor, plus rising costs of materials and difficulty obtaining financing.

The price tags of all homes are expected to keep rising. NAR predicts prices will jump 5% in 2017 and an additional 3.5% in 2018.

"As a result, buyers are compromising on the number of rooms, length of a commute, or other home qualities," says Senior Economist Joseph Kirchner of realtor.com®. "Meanwhile, builders are mostly building for the mid- to upper-price range. This mismatch in supply and demand is making affordability more acute for those with modest incomes."

In some white-hot markets along the coasts, prices are rising by double digits because of the dearth of homes. That's led many current homeowners who might be interested in trading up to a larger, nicer home in their area to hold off—because those homes are simply out of their price range.

Bidding wars have gotten so bad in Seattle that buyers are driving up prices 30% over asking in some cases, says local real estate broker Chris Bajuk, of HomeSmart Real Estate Associates. (Seattle prices were up 12.2% year over year in February, according to the latest S&P CoreLogic Case-Schiller report.)

"It is crazy," Bajuk says. "There's strong demand and lack of supply."

Buyers are coping by putting ever-higher percentages of their incomes toward homeownership—even when it means eating at home every night and doing without new clothes or annual beach vacations. Sometimes they're spending half of their take-home pay on housing, he says.

Others are purchasing homes farther from the city center where they work, settling for smaller homes or even purchasing residences in need of some work.

“They may need to spend more of their disposable income," Bajuk says. "Or they may need to lower their expectations on what kind of home they get."

Clare Trapasso is the senior news editor of realtor.com and an adjunct journalism professor. She previously wrote for a Financial Times publication and the New York Daily News. Contact her at [email protected]
Follow @claretrap

3 Reasons the Housing Market is NOT in a Bubble

by Allison Simson

With housing prices appreciating at levels that far exceed historical norms, some are fearful that the market is heading for another bubble. To alleviate that fear, we just need to look back at the reasons that caused the bubble ten years ago.

Last decade, demand for housing was artificially propped up because mortgage lending standards were way too lenient. People that were not qualified to purchase were able to obtain a mortgage anyway. Prices began to skyrocket. This increase in demand caused homebuilders in many markets to overbuild.

Eventually, the excess in new construction and the flooding of the market with distressed properties (foreclosures & short sales), caused by the lack of appropriate lending standards, led to the housing crash.

Where we are today…

1. If we look at lending standards based on the Mortgage Credit Availability Index released monthly by the Mortgage Bankers Association, we can see that, though standards have become more reasonable over the last few years, they are nowhere near where they were in the early 2000s.

2. If we look at new construction, we can see that builders are not “over building.” Average annual housing starts in the first quarter of this year were not just below numbers recorded in 2002-2006, they are below starts going all the way back to 1980.

3. If we look at home prices, most homes haven’t even returned to prices seen a decade ago. Trulia just released a report that explained:

“When it comes to the value of individual homes, the U.S. housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak.”

Bottom Line

Mortgage lending standards are appropriate, new construction is below what is necessary and home prices haven’t even recovered. It appears fears of a housing bubble are over-exaggerated.

4 Reasons to Buy This Summer!

by KCM Blog

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 7.1% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 4.9% 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 remained around 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & 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 the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Displaying blog entries 1-7 of 7

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Photo of Summit Real Estate Real Estate
Summit Real Estate
The Bright Choice
330 Dillon Ridge Way, Suite 10
Dillon CO 80435
970-468-6800
800-262-8442
Fax: 970-468-2195

Allison Simson, Owner/Broker, is a licensed Colorado Real Estate Broker