When to Drop Your Listing Price

Though low inventory is prompting buyers to raise their offers in order to beat out competitors, you still want your sellers to know: an overpriced listing will linger on the market. Buyers pay attention to time on market and may erroneously assume something is wrong with a property that has gone “stale.” Real estate pros say it’s critical to determine what time frame is considered stale in your market and drop the price of your listing before getting to that pivotal moment.

Soaring home prices may make buyers pause, but houses are still selling fast. Nationwide, the average time a home spent on the market was 34 days in September, down from 39 days a year prior, according to the National Association of REALTORS®. Some sellers may be adamant about “testing the market” with a high asking price, so you should have a game plan for what to do if it backfires.

Source: “How to Know When to Drop the Asking Price on Your Home,” CNBC (Oct. 27, 2017)

First-Time Buyers May Face a Difficult Spring

This spring, first-time buyers may struggle to find a house. The number of homes in the lower-price market is severely limited. Inventory fell 8.2 percent in January from a year earlier for properties priced below $250,000, according to data from the National Association of REALTORS®.

“Affordability is a challenge this spring,” says Doug Duncan, Fannie Mae’s chief economist. Potential home buyers “would have gotten their credit in shape and they’ll have a job. But they will be frustrated because, in their market, there simply won’t be affordable homes.”

“Already facing affordability issues, this competition at the entry-level market only adds to the roadblocks slowing first-time buyers,” says Lawrence Yun, NAR’s chief economist.

Source: “First-Time House Hunters Lose in Busy U.S. Homebuying Season,” Bloomberg News (March 16, 2016)

Fannie Mae: Affordability Woes Expected in 2016

Housing affordability will likely be a challenge in many markets this year as home prices continue to escalate, according to a new report by mortgage-financing giant Fannie Mae.

The main struggle for the economy and the housing market this year will be the “challenge of housing affordability coupled with expected modest economic growth,” Fannie Mae notes in its latest Economic & Strategic Research Group report.

Researchers predict an increase in household income and job security this year, while lending standards ease up and home buyers have easier access to mortgage credit. However, those strides will likely be offset somewhat by higher home prices, particularly in the lower-end of the market, that likely will continue to outpace household income growth. That could chip away at affordability, Fannie Mae states.

“We ended 2015 with a positive jobs report, an annual record high for auto sales, and the housing market poised to be the strongest since 2007,” notes Fannie Mae Economist’s Doug Duncan. “The first Fed funds rate hike since 2006 has had a minimal impact on mortgage interest rates so far, and we believe mortgage rates will edge up only gradually, ending the year around 4.2 percent.”

 

Source: “Fannie Mae: Housing Affordability Will Continue to be a Challenge in 2016,” HousingWire (Jan. 18, 2016)

Top 6 Home Buyer Concerns

Rising home prices tops the list of home buyer concerns this year, a shift from last year when nearly half of buyers said their chief concern was the limited number of homes for-sale, according to a new survey of more than 3,500 buyers released by Redfin.

The survey identified the following top six home buyer concerns this year:

  1. Affordability: “Prices are rising too high” – 27%
  2. “There’s too much competition from other buyers” – 17%
  3. “There aren’t enough homes to choose from” – 14%
  4. “I need to sell a home first” – 8%
  5. “I might not have enough for a down payment” – 6%
  6. “Mortgage rates will go up before I can buy” – 5%

Source: “Home Prices Weigh Heavily on Buyers as Mortgage-Rate Worry Recedes,” Redfin Research Center (Aug. 19, 2015)

Contracts to Buy Homes Reaches 9-Year High!

Pending home sales continued to make gains last month, rising to the highest level since April 2006, according to the National Association of REALTORS®’ Pending Home Sales Index, a forward-looking indicator based on contract signings.

NAR’s Pending Home Sales Index rose 0.9 percent in May to 112.6 in May. The index is at its highest level since April 2006 when it was 113.7.

“The steady pace of solid job creation seen now for over a year has given the housing market a boost this spring,” says Lawrence Yun, NAR’s chief economist. “It’s very encouraging to now see a broad based recovery with all four major regions showing solid gains from a year ago and new home sales also coming alive.”

“Housing affordability remains a pressing issue with home-price growth increasing around four times the pace of wages,” says Yun. “Without meaningful gains in new and existing supply, there’s no question the goalpost will move further away for many renters wanting to become home owners.”

Source: National Association of REALTORS®

U.S. Has Most of World’s Affordable Markets

The U.S. has the most major markets in the world where buying property is considered affordable, according to the Demographia International Housing Affordability Study, an analysis of 360 cities in nine countries.

Of the 360 worldwide markets evaluated in the study, 95 were labeled “affordable” (of which 84 were in the U.S.). On the other extreme, 67 metros in the study were labeled “seriously unaffordable markets” (23 in the U.S., led by San Francisco).

Pittsburgh leads the pack in affordability among major cities around the globe. Other affordable major U.S. cities that topped the list were Detroit; Grand Rapids, Mich.; Rochester, N.Y.; Atlanta; Buffalo, N.Y.; Cincinnati; Cleveland; Indianapolis; and St. Louis.

“The smallest houses are in the most expensive market (Hong Kong), while the largest houses are in the United States, which has the best major-market housing affordability. (Ireland has the best overall housing affordability),” according to the report.

Source: Demographia International Housing Affordability Study

Bigger Mortgage Rates, Smaller Homes?

As the costs of mortgages get bigger, could the size of homes purchased get smaller?

According to financial Web site The Motley Fool, interest rates and home size are closely tied together. “As interest rates fell in the late 1970s, home sizes grew,” Motley Fool reports. “As rates rocketed in the early 1980s, home sizes contracted. After reaching a peak in the 1980s, mortgage rates have fallen precipitously, and homes have grown in almost every single year since.”

That’s because as mortgage rates rise — as they are now — buyers can afford less. Mortgages at a 5.5 percent annual rate are 12 percent more expensive than at a 4.5 percent rate, Motley Fool notes. If rates climbed up to 6.5 percent — where they were about six years ago — monthly mortgage payments would be nearly 25 percent more costly than a 4.5 percent mortgage rate.

In 1975, the average home built was 1,535 square feet. In 2010, that grew to 2,169 square feet, according to U.S. Census data.

As mortgage rates rise again, buyers who are priced out may be able to still jump in by purchasing a smaller home, according to Motley Fool. Home buyers may be lured to smaller homes constructed 30 or 40 years ago, which could require some remodeling.

Source: “Higher Mortgage Rates Could Revitalize Smaller Home Sales,” The  Motley Fool (Sept. 2, 2013)

Housing Market Shows ‘Sustainable’ Improvement

Good news Update! Home sales and prices are ticking up, despite a sluggish economy. In fact, the rebound has economists predicting that housing will likely add to economic growth this year for the first time in seven years.

Existing-home sales increased 2.3 percent in July and are up more than 10 percent compared to year-ago levels, the National Association of REALTORS® reported last week. What’s more, home prices soared 9.4 percent in July compared to last year at that time—to $187,300—marking the largest price gain in six-and-a-half years.

New-home sales also have been inching up, rising 3.6 percent in July and up more than 25 percent compared to last July, the Commerce Department recently reported.

The “evidence that the housing market is recovering…is fairly clear across a wide range of reports,” John Ryding, an economist at RDQ Economics, told the Associated Press. “[Housing] is now becoming a small positive for the economic outlook.”

Economists say the rebounds appear to be sustainable and will likely climb even higher, particularly with modest economic growth, future job gains, ultra low mortgage rates, and housing affordability at near record highs. We agree, your regional market reflections?

Source: “Rise in U.S. Home Sales Reflects Steady Improvement,” The Associated Press (Aug. 23, 2012)

California Home Market Update!

California median home price: January 2012: $268,280 (Source: California Association of Realtors, C.A.R.)

Highest median home price by region/county January 2012: Marin, $694,440 (Source: C.A.R.)

Lowest median home price by region/county January 2012: Tehama, $110,000 (Source: C.A.R.)

Pending Home Sales Index: January 2012: 102.4, an increase from the revised 93.1 recorded in January 2011

Traditional Housing Affordability Index: Fourth quarter 2011: 55 percent (Source: C.A.R.)

Mortgage rates: Week ending 3/1/2012 30-yr. fixed: 3.90% fees/points: 0.8% 15-yr. fixed: 3.17 fees/points: 0.8% 1-yr. adjustable: 2.72% Fees/points: 0.6% (Source: Freddie Mac)

When Will the Housing Supply Normalize?

The housing supply is expected to normalize in two to four years, Barclays Capital projects, assuming that household formation rates increase to 1.1 million and construction remains slightly above 2011 levels.

Household formation–which is a reflection of population growth and housing affordability–has drastically dropped since 2007, reaching about 300,000 to 500,000 per year. Historically, the rate is about 1.25 million.

Home prices will likely see a 1 percent appreciation this year (that’s after falling 3 to 4 percent through March), Barclays Capital estimates. It is also projecting a 1 percent price appreciation in 2013, followed by 2 percent to 3 percent appreciation levels.

But to reach those goals, the housing supply needs to continue to shrink first. Our region in the Sierra Foothills of Placerville, California is experiencing a low supply in the under $300,000. price range. This is the primary market for first time home buyers and cash investors. So we’re off to a supply, demand race for the spring market?

Source: “Barclays: Housing Supply Could Normalize in 2014,” HousingWire (3/2/12)