J. Kent Erickson, Broker Associate
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What’s Going On With Home Prices?

Posted by on Oct 19, 2018 in Uncategorized | 0 comments

According to CoreLogic’s latest Home Price Insights Report, national home prices in August were up 5.5% from August 2017. This marks the first time since June 2016 that home prices did not appreciate by at least 6.0% year-over-year. CoreLogic’s Chief Economist Frank Nothaft gave some insight into this change, “The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home. The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index.   National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.” One of the major factors that has driven prices to accelerate at a pace of between 6-7% over the past two years was the lack of inventory available for sale in many areas of the country. This made houses a prized commodity which forced many buyers into bidding wars and drove prices even higher. According to the National Association of Realtors’ (NAR) latest Existing Home Sales Report, we are starting to see more inventory come to market over the last few months. This, paired with patient buyers who are willing to wait to find the right homes, is creating a natural environment for price growth to slow. Historically, prices appreciated at a rate of 3.7% (from 1987-1999). CoreLogicpredicts that prices will continue to rise over the next year at a rate of 4.7%. Bottom Line As the housing market moves closer to a ‘normal market’ with more inventory for buyers to choose from, home prices will start to appreciate at a more ‘normal’ level, and that’s ok! If you are curious about home prices in your area, let’s get together to chat about what’s going...

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New Home Sales Up 12.7% From Last Year

Posted by on Oct 19, 2018 in Uncategorized | 0 comments

According to the latest New Residential Sales Report from the Census Bureau, new construction sales in August were up 3.5% from July and 12.7% from last year! This marks the second consecutive month with double-digit year-over-year growth (12.8% in July). The report also showed that builders have ramped up construction with an increase in new construction starts and completions. The summer months are often a busy time for builders as they capitalize on the warmer weather to be able to finish projects. Below is a table showing the change in starts, completions, and sales from last August. Other notable news from the report is that the percentage of new construction sales in the $200-$299k range has continued to break away from the $300-$399k range. This shows that builders are starting to build lower-priced homes that will help alleviate some of the inventory challenges in the starter and trade-up home categories. The chart below shows the full breakdown. What does this mean for buyers and sellers? If you are thinking of buying or selling in today’s market, you no doubt have heard that there is a shortage of existing homes for sale which has been driving home prices up across the country. The additional new construction coming to the market could help alleviate this shortage, but we are still not back up to pre-crisis...

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Buying a Home is Cheaper than Renting in 38 States! [INFOGRAPHIC]

Posted by on Oct 17, 2018 in Uncategorized | 0 comments

Some Highlights: According to a study by GOBankingRates, it is cheaper to buy a home than rent in 38 states across the country. In six states the difference between buying & renting would account for less than a $50 monthly difference, leaving the choice up to the individual family. Nationwide, it is now 26.3% cheaper to...

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Top 5 Reasons You Shouldn’t FSBO

Posted by on Sep 30, 2018 in Uncategorized | 0 comments

Top 5 Reasons You Shouldn’t FSBO In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers. Here are the top five reasons: 1. Exposure to Prospective Buyers According to the 2017 Profile of Home Buyers and Sellers from NAR, last year 95% of buyers search online for a home. That is in comparison to only 15% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you? 2. Results Come from the Internet Where did buyers find the home they actually purchased? 49% on the internet 31% from a Real Estate Agent 7% from a yard sign 1% from newspapers The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial. 3. There Are Too Many People to Negotiate With Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale by Owner: 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 appraiser if there is a question of value 4. FSBOing Has Become More And More Difficult The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years. 5. You Net More Money When Using an Agent Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission. A study by Collateral Analytics revealed that FSBOs don’t actually save anything, and in some cases, may be costing themselves more, by not listing with an agent. One of the main reasons for the price difference at the time of sale is: “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.” If more buyers see a home, the greater the chances are that there could be a bidding war for the property. The study showed that the difference in price between comparable homes of size and location is currently at an average of 6% this year. Why would you choose to list on your own and manage the entire transaction when you can hire an agent and not have to pay anything more? Bottom Line Before you decide to take on...

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How a Lack of Inventory Impacts the Housing Market

Posted by on Sep 28, 2018 in Uncategorized | 0 comments

How A Lack of Inventory Impacts the Housing Market The housing crisis is finally in the rear-view mirror as the real estate market moves down the road to a complete recovery. Home values are up, home sales are up, and distressed sales (foreclosures and short sales) have fallen to their lowest points in years. The market will continue to strengthen in 2018. However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. Buyer demand naturally increases during the summer months, but supply is not keeping up. Here are the thoughts of a few industry experts on the subject: Lawrence Yun, Chief Economist at National Association of Realtors “The worsening inventory crunch through the first three months of the year inflicted even more upward pressure on home prices in a majority of markets. Following the same trend over the last couple of years, a strengthening job market and income gains are not being met by meaningful sales gains because of unrelenting supply and affordability headwinds.” Sam Khater, Chief Economist for Freddie Mac “As we head into late spring, the demand for purchase credit remains rock solid, which should set us up for another robust summer home sales season. While this year’s high rates – up 50 basic points from a year ago – have put pressure on the budgets of some home shoppers, weak inventory levels are what’s keeping the housing market from a stronger sales pace.” Javier Vivas, Director of Economic Researchfor Realtor.com “The dynamics of increased competition and buyer frustration are unlikely to change…In fact, the direction of the trend is pointing to a growing mismatch between the pool of prospective buyers and existing inventory.” Bottom Line If you are thinking of selling, now may be the time. Demand for your house will be strong at a time when there is very little competition. That could lead to a quick sale for a really good...

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Are Lending Standards Too Loose…or Too Tight?

Posted by on Sep 26, 2018 in Uncategorized | 0 comments

Are Lending Standards Too Loose…or Too Tight? With home values appreciating at record rates, some are concerned that we may be heading for another housing bubble like the one we experienced a decade ago. One of the major culprits of that housing boom and bust was the loosening of standards for mortgage credit. In a study done at the University of North Carolina immediately after the crisis, it was revealed that: “Lenders began originating large numbers of high risk mortgages from around 2004 to 2007, and loans from those vintage years exhibited higher default rates than loans made either before or after.” A study by John V Duca, John Muellbauer, and Anthony Murphy concluded that those risky mortgages caused the housing crisis: “Our findings indicate that swings in credit standards played a major, if not the major, role in driving the recent boom and bust in US house prices.” How do today’s mortgage standards compare to those from 2004 to 2007? The Mortgage Bankers’ Association tracts mortgage standards in their Mortgage Credit Availability Index (MCAI). A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit. While the chart below shows the index going back to that period between 2004 and 2007 when loose standards caused the housing bubble, we can see that, though the index has risen slightly over the last several years, we are nowhere near the standards that precipitated the housing crisis. Bottom Line If anything, standards today are too tight and are preventing some qualified buyers from getting the mortgage credit they...

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Parents Say Kids’ Opinions Matter Big When Buying a Home

Posted by on Sep 24, 2018 in Uncategorized | 0 comments

Parents Say Kids’ Opinions Matter Big When Buying a Home A recent survey conducted by Harris Poll and released by SunTrust Mortgagefound that “55% of homeowners with a child under the age of 18 at the time when they purchased their home said that the opinion of their offspring played a major role in their home buying decision.” When the results were broken down by the parent’s age, millennials (those 18-36) led the way with 74% of homeowners saying that their child’s opinion was a factor in choosing which home to buy. Eighty-three percent of renters believe that their child’s opinion would be a deciding factor when looking to purchase a home. So what features in a home are most important to kids? Coming in at 57%, it should come as no surprise that gaining their own bedrooms was the top most-desirable feature of any home for kids, followed by a large back yard to play in at 34%. Todd Chamberlain, Head of Mortgage Banking at SunTrust explained the reasoning behind the survey, “As a parent of two kids, I know from experience that including children in the home buying process is not only fun for the whole family, but also educational for our homebuyers of tomorrow.” Bottom Line If you’re thinking about selling your home this year, make sure to highlight all the kid-friendly features your home has to offer so that you can sway the real decision...

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When is a Good Time to Rent? Not Now!

Posted by on Sep 22, 2018 in Uncategorized | 0 comments

When Is a Good Time to Rent? Not Now! People often ask if now is a good time to buy a home, but nobody ever asks whether or not it’s a good time to rent. Regardless, we want to make certain that everyone understands that now is NOT a good time to rent. The Census Bureau recently released their 2018 first quarter median rent numbers. According to their report, here is a graph showing rent increases from 1988 until today: As you can see, rents have steadily increased and are showing no signs of slowing down. If you are faced with making the decision of whether or not you should renew your lease, you might be pleasantly surprised at your ability to buy a home of your own instead. Bottom Line One way to protect yourself from rising rents is to lock in your housing expense by buying a home. If you are ready and willing to buy, let’s meet to determine if you are able to...

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Did Tax Reform Kill the Luxury Market? NOT SO FAR!

Posted by on Sep 20, 2018 in Uncategorized | 0 comments

Did Tax Reform Kill the Luxury Market? NOT SO FAR! The new tax code limits the deduction of state and local property taxes, as well as income or sales taxes, to a total of $10,000. When the tax reform legislation was put into law at the beginning of the year, some experts felt that it could have a negative impact on the luxury housing market. Capital Economics: “The impact on expensive homes could be detrimental, with a limit on the MID raising taxes for those that itemize.” Mark Zandi of Moody’s Analytics: “The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.” The National Association of Realtors (NAR) predicted price declines in “high cost, higher tax areas” because of the tax changes. They forecasted a depreciation of 6.2% in New Jersey and 4.8% in Washington D.C. and New York. What has actually happened? Here are a few metrics to consider before we write-off the luxury market: 1. According to NAR’s latest Existing Home Sales Report, here is the percent change in sales from last year: Homes sales between $500,000 – $750,000 are up 11.9% Homes sales between $750,000 – $1M are up 16.8% Homes sales over $1,000,000 are up 26.7% 2. In a report from Trulia, it was revealed that searches for “premium” homes as a percentage of all searches increased from 38.4% in the fourth quarter of 2017 to 41.4% in the first quarter of 2018. 3. According to an article from Bloomberg: “Median home values nationally rose 8 percent in March compared with a year earlier, while neighborhoods of San Francisco and San Jose, California, have increased more than 25 percent. Prices in affluent areas in Delaware and New York, such as the Hamptons, also surged more than 20 percent.” Bottom Line Aaron Terrazas, Zillow’s Senior Economist, probably summed up real estate’s luxury market the best: “We are seeing the opposite of what was expected. We have certainly not seen the doomsday predictions play...

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Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years

Posted by on Sep 18, 2018 in Uncategorized | 0 comments

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years 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% (or more) over the next twelve months. One major challenge in such a market is the bank appraisal. When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the same 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 and what an appraiser’s evaluation of that same home is. March 2015 marked the first month of a three-year gap between what an appraiser and a homeowner believed a home was worth. That gap widened to 2.65% in September 2015 and had consistently hovered between 1.0% and 2.0% through November 2017. The chart below illustrates the changes in home price estimates over the last three years: In the latest release, the disparity was the narrowest it has been since March 2015, as the gap between appraisers and homeowners was only -0.33%. This is important for homeowners to note as even a .33% difference in appraisal could equate to thousands of dollars that a buyer or seller has to come up with at closing (depending on the price of the home). Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand:  “The appraisal is one of the most important, although sometimes least predictable, parts of the mortgage process. The Home Price Perception Index is a way to illustrate the differences of opinion, and these differences affect everything from the type of mortgage a borrower can get to the expectations a seller has about the proceeds available upon sale of their home.” Bottom Line Every house on the market must be sold twice; once to a prospective buyer and then again to the bank (through the bank’s appraisal). With escalating prices, the second sale may 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 obstacles that may...

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