Low mortgage rates, declining home prices, and homes that are lingering on the market longer are three main reasons why the next three months could be the best time to buy so far this year, says Jonathan Smoke, realtor.com®’s chief economist.
“The spring and summer home-buying seasons were especially tough on potential buyers this year with increasing prices and limited supply,” Smoke says. “Buyers who are open to a fall or winter purchase should find some relief with lower prices and less competition from other buyers.”
The biggest challenge buyers will likely face buying in the next three months is the limited number of choices. There are fewer homes for-sale this fall than last year plus the housing inventory has already peaked for 2015, Smoke says and we agree.
Source: “Mortgage Rates: Three Reasons to Buy in the Next Three Months,” Nerdwallet (Oct. 2, 2015)
Baby boomers are the “driving force” of household formation, which is critical for real estate demand, according to a new blog post at the National Association of REALTORS® Economists’ Outlook blog.
The highest gains in household formation have been by 65- to 74-year-olds, who accounted for 860,000 new households alone from the first half of 2014 to first half of 2015, according to Census Bureau data. The 55 to 64 age group comprised the second highest at 391,000, followed by people over 75 years of age who formed 264,000 new households during that time period.
Meanwhile, younger age groups had less. The 20 to 24 age group had negative net household formation numbers of 85,000. The 25- to 34-year-old age group, however, had 159,000 new households during that time.
Young professionals have been slow to form their own households. The share of the population living with parents has risen dramatically over the last few years. For the 25- to 29-year-old age group, the percentage has risen from 10 percent in 1980 to 25 percent by 2013. Also, the share of 25-to 29-year-olds who have never been married has dropped from 70 percent in 1980 to less than 40 percent in 2013.
Source: “Baby Boomers Lead Recent Household Formation,” National Association of REALTORS® Economists’ Outlook blog (Sept. 25, 2015)
Twenty-one percent of more than 2,100 home buyers recently surveyed by real estate brokerage Redfin say they made an offer on a house without seeing it in person.
“That’s a testament to the proliferation of online listings, mobile real estate apps, and cool things like 3D scans that take you inside and through every room of a home for sale online,” according to a blog on SurveyMonkey, a surveying firm that conducted the survey on behalf of Redfin.
Millennials were the age group to be most likely to make an offer without seeing the house in person first at 30 percent. What’s more, 53 percent of buyers who paid more than $750,000 for their home made offers without seeing the house first.
Source: Redfin and “4 Real Estate Trends That Show a Changing Industry,” SurveyMonkey Blog (Sept. 15, 2015)
The Federal Reserve’s decision today could potentially bring a close to a seven-year streak of very low mortgage rates. Here’s what an increase in rates could mean for the housing market.
“The potential move away from zero interest rate policy, for short-term rates, is a harbinger of higher mortgage rates ahead and the beginning of the end of this seven-year era of incredibly low mortgage rates and corresponding high affordability,” says Jonathan Smoke, realtor.com®’s chief economist.
Smoke says that mortgage rates that rise to 6 percent could have a big impact to what borrowers pay on their monthly mortgage. For example, in May, the average loan with a 30-year fixed-rate mortgage was $231,000 at a 4.03 percent average rate, which carried a monthly payment (principal and interest) of $1,107. However, that same loan amount at a 4.53 percent interest rate would jump the monthly payment to $1,175 – a 6 percent increase, according to realtor.com®’s analysis.
First-time home buyers may be particularly hard-hit, as well as high-cost areas.
Source: “Fed Decision Could Raise Mortgage Payments 6 Percent; and Out Price Potential First-Time Home Buyers in Certain Markets,” RISMedia (Sept. 16, 2015)
Mortgage rates are likely to rise in the coming weeks and many housing analysts have warned that the rises will likely shake the housing market as borrowing costs get more pricey. But the fear of rising rates isn’t concerning home buyers yet, according to a new consumer survey by the real estate brokerage Redfin.
Rising mortgage rates barely appeared in list that ranked the top buyer concerns. In fact, just five percent of consumers surveyed said their buyer concern was that “mortgage rates will go up before I can buy.” But buyers showed much more fear over home prices rising too high (27 percent); too much competition from other buyers (17 percent); not enough for-sale homes to choose from (14 percent); having to sell a home first (8 percent); and not having enough saved for a down payment (6 percent).
Nearly 72 percent of buyers recently surveyed say they expect interest rates to rise in the next six months. But fewer than 7 percent of potential home buyers said they were in a hurry to purchase a home before mortgage rates rose, according to the Redfin survey. Instead, buyers said they were more motivated to buy because of a new child, marriage, or other life event (26 percent); rent fatigue (13 percent); and a belief that real estate is a good investment (10 percent).
Source: “A 5 Percent Mortgage? No Big Deal, Homebuyers Say,” Forbes.com (9/11/15)
“One can say that we are having a nationwide housing cost problem,” says Lawrence Yun, the chief economist for the National Association of REALTORS®, in a new interview with The Huffington Post. Housing’s affordability problem remains a barrier particularly for first-time buyers wanting to enter the market.
Indeed, the latest existing home sales report shows that the share of first-time home buyers was 28 percent in July, down from 30 percent in June.
The lack of available housing is one cause of these booming prices, with current home building activity at only half of the normal level.
In the recent REALTORS® Confidence Index Survey, REALTORS® report that homes are increasingly becoming unaffordable and that sellers are reluctant to move because they can’t find affordable homes.
Sources: “Real Estate Has Become Unaffordable,” The Huffington Post (Sept. 9, 2015) and “Sales to First-Time Buyers: 28 Percent of Sales in July 2015,” Economist Outlook blog (Sep. 9, 2015)
Starting Sept. 14, the U.S. Department of Housing and Urban Development is including a mandate that instructs lenders to inform borrowers when they first meet to get a home inspection prior to purchasing a home. The mandate will be added to the HUD/Federal Housing Administration Single Family Policy Handbook and will include a document called “For Your Protection, Get a Home Inspection.”
“We are proud to provide critical inspection information for this handbook to help home buyers protect themselves,” says Frank Lesh, American Society of Home Inspectors, executive director. “Owning a home is one of the biggest financial investments in a person’s life, and a home inspection can help prevent costly problems.” We agree!
Source: “HUD and FHA Urge Buyers to Have Homes Inspected Before Purchase,” RISMedia (Aug. 31, 2015)
Whether it’s for a starter home or a second home, some buyers take the idea of a “little place of their own” seriously. Houses that may be smaller than some living rooms.
The five featured build-to-order homes — many of which come on wheels — range in size from a cozy 140 square feet to an expansive 269 square feet. The colorful Toy Box Tiny House, for example, can be had for as little as $35,000 and features a “sliding glass door, built-in planters, reconfigurable storage/seating cubes, floating cabinet for cooking ingredients, [and a] loft big enough for a king-size bed,” reports Curbed’s Jenny Xie.
Because of the tight space of these floor plans, most units come with at least some custom amenities. But if your buyers want even more minimalism, Monarch Tiny Homes can supply a 170-square-foot “half and half” for only $22,000 with no interior furnishings. The structure, says Xie, includes “plywood flooring, recycled siding, self-contained composting toilet, LED lighting, [and] mostly bare interiors ready for your own vision.”
Source: “5 Impressive Tiny Houses You Can Order Right Now,” Curbed.com
A last-minute problem with financing can quickly delay a closing on a home sale. Here are two of the most common financing problems that can surface:
- Failure to disclose key financial information. One of the biggest reasons for a financial issue is the failure of the buyer to disclose key financial information, The New York Times reports. Buyers who are not forthright about their financial circumstances can face a delay. Lenders will quickly find borrowers who are behind on child support obligations or real estate taxes, for example.
- Running up credit as a mortgage application is pending. Buyers may go out and purchase new furniture or a car prior to closing on a home, but doing so, could cause them a delay to the closing of their home sale. Lenders will recheck borrowers’ credit right before the closing date. If new debt obligations suddenly appear, that can be a red flag to a lender. Prior to making any large purchases prior to closing, borrowers should check with their lender, says Douglas Rotella, an executive vice president and loan originator with HomeBridge Financial Services.
Source: “How Mortgage Problems Unravel Home Deals,” The New York Times (Aug. 14, 2015)