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Recently, Freddie Mac published an Insight Report titled Nowhere to go but up? How increasing mortgage rates could affect housing. The report focused on the impact the projected rise in mortgage rates might have on the housing market this year.

Many believe that an increase in mortgage rates will cause a slowdown in purchases which would, in turn, lead to a fall in house values. Ultimately, however, prices are determined by supply and demand and while rising mortgage rates may slow demand, they also affect supply. From the report:

 “For current homeowners, the decision to buy a new home is typically linked to their decision to sell their current home… Because of this link, the financing costs of the existing mortgage are part of the homeowner’s decision of whether and when to move.

Once financing costs for a new mortgage rise above the rate borrowers are paying for their current mortgage, borrowers would have to give up below-market financing to sell their home.

Instead, they may choose to delay both the sale of their existing home and the purchase of a new home to maintain the advantageous financing.”

The Freddie Mac report, in acknowledging this situation, concluded that prices are not adversely impacted by higher mortgage rates. They explained:

“While there is a drop in the demand for homes, there is an associated drop in the supply of homes from the link between the selling and buying decisions. As both supply and demand move together in this way they have offsetting effects on price—lower demand decreases price and lower supply increases price.

They went on to reveal that the Freddie Mac National House Price Index is…

“…unresponsive to movements in interest rates. In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

The following graph, based on data from the report, reveals what happened to home prices the last six times mortgage rates rose by at least 1%.

Bottom Line

Whether you are a move-up buyer or first-time buyer, waiting to purchase your next home based on the belief that prices will fall because of rising mortgage rates makes no sense.

Which Homes Have Appreciated the Most?

by KCM Blog

Home values have risen dramatically over the last twelve months. The latest Existing Home Sales Report from the National Association of Realtors puts the annual increase in the median existing-home price at 7.1%. CoreLogic, in their most recent Home Price Insights Report, reveals that national home prices have increased by 6.9% year-over-year.

The CoreLogic report broke down appreciation even further into four different price categories:

  1. Lower Priced Homes: priced at 75% or less of the median
  2. Low-to-Middle Priced Homes: priced between 75-100% of the median
  3. Middle-to-Moderate Priced Homes: priced between 100-125% of the median
  4. High Price Homes: priced greater than 125% of the median

Here is how each category did in 2016:

Which Homes Have Appreciated the Most? | MyKCM

Bottom Line

The lower priced homes (which are more in demand) appreciated at greater rates than the homes at the upper ends of the spectrum.

President's Day Weekend-All the Presidents’ Home Prices

by by Adam DeSanctis on February 17, 2017-NAR

All the Presidents’ Home Prices

Posted in Home Sales Statistics, Infographics, by Adam DeSanctis on February 17, 2017

There have been nine U.S. presidents since the National Association of Realtors® began its comprehensive reporting of home sales data in 1968. The country and the typical cost to buy a home have changed a lot. To celebrate President’s Day, here is the national median single-family home price at the time each president was sworn in since 1969.

*Median sales prices are adjusted for inflation using the U.S. Bureau of Labor Statistics’ CPI Inflation Calculator for 2016.

Will Increasing Mortgage Rates Impact Home Prices?

by KCM Blog

Will Increasing Mortgage Rates Impact Home Prices?

There are some who are calling for a decrease in home prices should mortgage interest rates begin to rise rapidly. Intuitively, this makes sense as the cost of a home is determined by the price of the home, plus the cost of financing that home. If mortgage interest rates increase, fewer people will be able to buy, and logic says prices will fall if demand decreases.

However, history shows us that this has not been the case the last four times mortgage interest rates dramatically increased.

Here is a graph showing what actually happened:

Last week, in an article titled "Higher Rates Don't Mean Lower House Prices After All," the Wall Street Journal revealed that a recent study by John Burns Real Estate Consulting Inc. found that:

"[P]rices weren't especially sensitive to rising rates, particularly in the presence of other positive economic factors, such as strong job growth, rising wages and improving consumer confidence."

Last week's jobs report was strong and the Conference Board just reported that the Consumer Confidence Index was back to pre-recession levels.

Bottom Line

We will have to wait and see what happens as we move forward, but a decrease in home prices should rates go up is anything but guaranteed.

Buying a Home? Consider COST Not Just Price

by Allison Simson

Buying a Home? Consider COST not just Price

Posted: 18 Nov 2013 04:00 AM PST

bigstockphoto_Property_Prices_814896We have often talked about the difference between COST and PRICE. As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As a buyer, you must be concerned not about price but instead about the ‘long term cost’ of the home. Let us explain.

Last month, the Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac all projected that mortgage interest rates will increase by about one full percentage over the next twelve months. We also know that many experts are calling for home prices to also increase over the next year.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact an interest rate increase would have on the mortgage payment of a home selling for approximately $250,000 even if home prices don’t increase:

Cost Waiting blog

What do interest rates mean for home costs?

by Allison Simson

HAPPY TUESDAY MORNING TO YOU!

The COST of a Home: Last Year, This Year & Next Year

Posted: 26 Aug 2013 04:00 AM PDT

Same Price, Lesser Cost

The cost of a home is determined mainly by two components: price and mortgage rate. Today, we want to show how the monthly cost of purchasing a median priced home has changed over the last twelve months and how it might change over the next twelve months. For the first two examples, we will be using the National Association of Realtors’ (NAR) Existing Home Sales Report to establish median price and Freddie Mac’s Primary Mortgage Market Survey to establish mortgage rate. We also assumed a 20% down payment in all examples.

LAST YEAR

The median priced home in the country was selling for $187,800. The 30-year fixed mortgage rate was at 3.5%. Here is what it would cost to buy a home last year:

Last Year

TODAY

The median priced home in the country is selling for $213,500. The 30-year fixed mortgage rate is at 4.5%. Here is what it would cost a purchaser to buy a home today:

This Year

The monthly cost increased by: $190.78!

NEXT YEAR

Projecting into the future in real estate can be rather tricky. To establish future pricing, we depended on the over 100 housing experts surveyed for the Home Price Expectation Survey who called for an approximate appreciation rate of 5% over the next twelve months. For the interest rate, we took the average of the projections from the Mortgage Bankers’ Association, Freddie Mac and Fannie Mae. Here is what these experts project will be the approximate cost of a home a year from now:

Next Year

The monthly cost will increase by about: $97.32!

Bottom Line

From a financial perspective, why wait if you are thinking about buying?

And Here's Your Morning Coffee!

Warmly,

Allison Simson, Owner/Broker
Kelie Gray, Buyer Specialist
Sarah McNeill, Buyer Specialist
Jen O'Neill, Client Care Manager
Margaret Bowes, Event Coordinator
 

Go Green 2

Question:  Allison, we are looking to buy a home in Silverthorne, CO and we are wondering about prices and what are the predictions for the future?

Answer: Interesting news:  Predictions around the country for housing prices are looking up, up, up!  What does this mean for Summit County, CO?  Historically, our market tends to lag behind the national economy by about 12-18 months. We are starting to see our prices stabilize in many segments of our market and we are beginning to see multiple offer situations on the "cream puffs" that come on the market.

What’s a cream puff? Good question!  A cream puff is the property everyone is looking for- it is priced right and in super condition!  Cream puffs are not lasting in our market!  So, when you see a cream puff and you really like it and can see yourself making family memories there – I would advise you to take action on it.  Cream puffs don’t last.

Consider the following from the Keeping Matters Current Crew:

Two Additional Experts Upgrade their Pricing Forecast

 Last Monday, we reported that several analysts had upgraded their projections for home price appreciation in 2013. A few days later, the Wall Street Journal revealed that two additional analysts had also upgraded their forecasts.
Zelman & Associates
“Ivy Zelman, chief executive of research firm Zelman & Associates, said Wednesday she was now expecting prices to rise by 7% this year, up from earlier estimates of 6%, 5%, and 3%…She’s also calling for a 5% gain next year because she says the supply shortages and growing demand that fueled last year’s turnaround show no signs of easing.”
Her reasons:
“The shortage of housing capacity continues to resonate. Just as deflation was a national headwind that stretched deeper into the economy than anyone would have imagined, we believe that appreciation can carry broad, positive implications for the consumer and economy beyond many expectations.”
John Burns Real Estate Consultants
“John Burns, who runs a real-estate consulting firm in Irvine, Calif., is calling for a 9% gain in home prices this year, up from a 5% forecast late last year.”
 His reasons:
“Strong investor demand and low interest rates that have boosted the purchasing power of buyers.”
These two experts join a long list of housing analysts who have now called for a major rebound in housing prices in 2013.”

Major rebound?  Sounds good to us.  Now is an excellent time to buy real estate in Summit County – interest rates are fantastically low and credit is easing for second homes, prices are good and although inventory is down from first quarter last year, we have some great properties available.  Summit County is still on sale!!

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com   

8 things to know about buying a home today

by Allison Simson

Question:  Allison, we are interested in buying property in Summit County, CO.  What should we be on the lookout for?

Answer:  The home-sale market is showing signs of life. More buyers are confident now than they were a year ago that now might be a good time to buy. Interest rates are near all-time lows and home prices in some areas nationally are back to 2002-2003 levels.  In Summit County, the prices are back to 2005-06 levels in many areas.

According to Dianne Hymer, with Inman News some analysts are finally suggesting that we may be headed for recovery. If you have a secure job, plan to stay put and feel this is the right time for you to buy a home, consider the following.

In most places in the country, home prices are still declining. It has only been recently that the market picked up and it's too soon to know if this will result in a sustainable increase in prices.

The recent home sales in areas around California's Silicon Valley defy the norm. Significant job growth in the area combined with a low inventory of good homes for sale has resulted in multiple offers with buyers bidding the price up sometimes hundreds of thousands of dollars over the asking price.

In other high-demand, low-inventory areas, you may find yourself bidding against other buyers, perhaps even more than once. This doesn't necessarily mean that the price will be bid up significantly over the asking price. This will vary from one listing to the next depending on property location, condition and price.

It's important to research the local community where you want to buy. Find out what homes are selling for, if multiple offers are common and if listings are selling for more than the asking price. This will help you make a realistic offer that might be accepted when you find a home you'd really like to buy. It helps to work with an experienced local real estate agent.

Some sellers in high-demand niche markets intentionally list their home at a low price hoping to stimulate multiple offers. If you see such a listing and there are a lot of buyers wanting to make offers, you will be better able to know how high your offer would need to be to win the contest if you have done your due diligence.

HOUSE HUNTING TIP: Whether you're anticipating competition or not, you should be preapproved for the mortgage you'll need to complete the purchase before you write an offer. In competition, this will make a big difference, particularly if everyone else who is offering is preapproved. It also lets you know what you can afford. And, it puts you in a good bargaining position with the seller.

Buyers aren't the only participants in the housing market that have heard the news that the market has improved. Some sellers are putting their homes on the market because they've been waiting for a better time to sell. This is good news for buyers looking in low-inventory markets.

You should expect that you will have to negotiate. Many of today's sellers are selling for less than they paid. Even though the market has improved a bit, sellers may be disappointed with the current market value of their home. Be prepared to negotiate, not just the initial price, but after inspections are completed if items come up that you hadn't anticipated.

Include realistic contingency time frames in your purchase contract for loan and appraisal approval if you're applying for a mortgage. The recent uptick in the market means that lenders are suddenly overwhelmed.

THE CLOSING: Underwriters could require that additional conditions be met before you can be approved. Act quickly to avoid further delay.

 

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com  

The new real estate boom: rentals

by Allison Simson

Question:  Allison, we are considering purchasing another condo in the complex where we already own as a long-term rental property.  I’d love to get your perspective. 

Answer:  I think it’s a fantastic idea!  Prices are low and while rents haven’t skyrocketed, they are staying up and we’ll see more renters in Summit County.  According to Brian Davis and Inman News, home prices and sales may be flat, but the rental industry is booming. The percentage of renters is on the rise, the number of households is increasing, and more Americans are downsizing, all of which point in a single direction: rents are on the rise.

At the peak of the housing boom, homeownership in America reached an all-time high at 69.2 percent. Today that number has dropped to fewer than 67 percent, which may not sound like a huge drop, but that represents roughly 3 million households that were owner-occupied and are now tenant-occupied.

The high foreclosure rate has accelerated the transition toward leasing, but there are a myriad of other trends coalescing to boost demand for rental housing.

For the first time in 40 years, demand has been shifting toward smaller dwellings, coinciding with a shift in demand toward urban centers. Baby boomers are considering downsizing, moving toward areas with more amenities, and members of Generation Y are just hitting their single, urban-living years.

Only the relatively small Generation X is in the buy-a-large-house-in-suburbs category, which means the demand for the traditional single-family home with a white picket fence is weak.

The number of households in the U.S. was artificially stifled during the "Great Recession," as people took on roommates, moved in with family, or remained with their parents longer than they would have otherwise.

Rental vacancy rates are sharply on the decline as well. In the first quarter of 2011, rental vacancy rates had dropped to 6.2 percent, according to Reis Inc., which tracks nationwide residency data. This figure is down sharply from the 8 percent vacancy rate just one year earlier.

Each of these indicators are entire topics in themselves, but the bottom line is that the rental industry is on the rise, and some real estate experts believe that its growth will accelerate rapidly over the next three to five years.

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]. Her philosophy is simple, whether buying or selling, she understands that the most important real estate transaction is yours.  Want to know the value of your Summit County property? Visit www.SummitHomeValue.com  

2011 seen as 'turning point' for home prices nationally?

by Allison Simson

MacroMarkets panelists expect little growth through 2015

Question:  Allison, We’ve heard some more positive information about real estate prices.  What do you hear?

Answer:  According to Inman News, more than half of economists, real estate experts and investment strategists polled by MacroMarkets LLC in June said they now expect national home prices to hit a bottom sometime in 2011 and remain stable through 2015.

MacroMarkets polls more than 100 housing experts with a wide range of views, including FusionIQ CEO Barry Ritholtz, Moody's Analytics economists Mark Zandi and Celia Chen, National Association of Realtors Chief Economist Lawrence Yun, Freddie Mac Chief Economist Frank Nothaft, and Rosen Consulting Group's Kenneth Rosen.

Panelists are asked to project the path of the Standard & Poor's/Case-Shiller U.S. National Home Price Index over the coming five years. Robert Shiller is MacroMarkets' chief economist and co-founder.

"A significant majority of our panelists believe that the bottom for home prices arrived in the first quarter or will arrive sometime before year-end. Despite persistent macroeconomic uncertainty and unprecedented housing market dysfunction, almost two-thirds of the panelists see the U.S. residential real estate market as at an historic turning point," Shiller said in a statement.

The 69 panelists forecasting a 2011 bottom predict less than 2 percent average annual growth in prices through December 2015, he said.

"A 2 percent a year home-price increase will not inspire a lot of consumer confidence. Given prevailing inflation expectations, this forecast implies virtually no change in real home values going forward," Shiller added.

The most optimistic quartile of panelists projected, on average, a 15.3 percent price increase from year-end 2010 through 2015, while the most pessimistic quartile of panelists projected, on average, a 6 percent price drop.

"This spread is huge, representing almost $4 trillion in housing market value," Terry Loebs, MacroMarkets managing director, said in a statement.

"This is a gut-wrenching time for market stakeholders and policymakers, because each of these scenarios is plausible."

On average, panelists predicted a 3.52 percent drop in fourth-quarter 2011 compared to fourth-quarter 2010, followed by small increases every year through fourth-quarter 2015 when prices are expected to rise 3.47 percent on an annual basis.

 

Speakers at last month's Pacific Coast Builders Conference (PCBC) predicted a housing recovery would remain elusive until 2013 or beyond.

How does this affect us in Summit County?  We tend to lag behind the national economy by about 18-24 months.

 

 

For answers to your real estate questions, call Allison at 970-468-6800. Email - [email protected]Want to know the value of your Summit County property? Visit www.SummitHomeValue.com  

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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