US Housing Market Continues the Move into ‘Buy Territory’!

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According to the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the U.S. housing market has continued to move deeper into buy territory, supporting the belief that housing markets across the country remain a sound investment.

The BH&J Index is a quarterly report that attempts to answer the question:

In today’s housing market, is it better to rent or buy a home?

The index examines the entire US housing market and then isolates 23 major cities for comparison. The researchers “measure the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds.”

While most of the metropolitan markets examined moved further into buy territory (15 of the 23), markets like Dallas, Denver, and Houston are currently deep into rent territory. In these three markets, it is estimated that renting will top homeownership 7 out of 10 times.

Due to a lack of inventory, the home prices in the Dallas, Denver, and Houston, areas have increased by 13%, 11.4%, and 7.3% respectively. Home prices in these areas will begin to return to more normal levels once residents realize that renting is not the best option, therefore bringing home affordability back as well.

Bottom Line

The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially, as rents are predicted to increase substantially in the next year. Protect yourself from rising rents by locking in your housing cost with a mortgage payment now.

To Find Out More About the Study: The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at http://business.fau.edu/buyvsrent.

The ‘REAL’ News about Housing Affordability

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Some industry experts are claiming that the housing market may be headed for a slowdown as we proceed through 2017, based on rising home prices and a potential jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize that during that time, the housing crisis left the market with an overabundance of distressed properties (foreclosures and short sales). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years (shaded in gray) and look at the current index as compared to the index from 1990 – 2008:

The 'REAL' News about Housing Affordability | MyKCM

Though prices and rates appear to be increasing, we must realize that affordability is composed of three ingredients: home prices, interest rates, and income. And, incomes are finally rising.

ATTOM Data Solutions recently released their Q1 2017 U.S. Home Affordability Index. The report explained:

“Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

Bottom Line

Compared to historic norms, it is still a great time to buy from an affordability standpoint.

Housing Market Expected to “Spring Forward”

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Just like our clocks this weekend in the majority of the country, the housing market will soon “spring forward!” Similar to tension in a spring, the lack of inventory available for sale in the market right now is what is holding back the market.

Many potential sellers believe that waiting until Spring is in their best interest, and traditionally they would have been right.

Buyer demand has seasonality to it, which usually falls off in the winter months, especially in areas of the country impacted by arctic temperatures and conditions.

That hasn’t happened this year.

Demand for housing has remained strong as mortgage rates have remained near historic lows.

The National Association of Realtors (NAR) recently reported that the top 10 dates sellers listed their homes in 2016 all fell in April, May or June.

Those who act quickly and list now could benefit greatly from additional exposure to buyers prior to a flood of more competition coming to market in the next few months.

Bottom Line

If you are planning on selling your home in 2017, let’s get together to evaluate the opportunities in our market. Call me at 407-925-7721

Are You 1 of the 59 Million Planning to Buy This Year?

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According to a survey conducted by Bankrate.com, one in four Americans are considering buying a home this year. If this statistic proves to be true, that means that 59 million people will be looking to enter the housing market in 2017.

The survey also revealed 3 key takeaways:

  1. Those most likely to buy are ‘Older Millennials’ (ages 27-36) or ‘Generation X’ (ages 37-52)
  2. Minorities, particularly African-Americans, were twice as likely to respond that they were considering purchasing a home this year than white respondents.
  3. Many potential buyers believe they need to put 20% down and need to have perfect credit to own and are unaware of programs that would allow them to buy now.

Holden Lewis, a mortgage analyst for Bankrate.com, pointed to one big reason why many Americans are starting to consider homeownership:

“Having kids and raising a family is a primary reason why Americans take the leap into homeownership—many consider it a key component of the American dream.”

Bottom Line

If buying a home is a part of your dream for 2017, let’s get together to determine if you are able to.

Lack of Homes for Sale Slowing Down the Housing Market

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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. Distressed sales (foreclosures and short sales) have fallen dramatically. It seems that 2017 will be the year that the housing market races forward again.

However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. While buyer demand looks like it will remain strong throughout the winter, supply is not keeping up.

Here are the thoughts of a few industry experts on the subject:

National Association of Realtors

“Total housing inventory at the end of December dropped 10.8%…which is the lowest level since NAR began tracking the supply of all housing types in 1999. Inventory has fallen year-over-year for 19 straight months and is at a 3.6-month supply at the current sales pace.”

Jonathan Smoke, Chief Economist for Realtor.com

“More than two-thirds of the markets are seeing less inventory now compared to a year ago.” 

Lawrence Yun, Chief Economist at NAR:

“The dismal number of listings in the affordable price range is squeezing prospective first-time buyers the most. As a result, young households are missing out on the wealth gains most homeowners have accrued from the 41% cumulative rise in existing home prices since 2011.”

Sam Khater, Deputy Chief Economist at CoreLogic

“The lack of affordable supply is really driving up home prices.”

Peter Muoio, Chief Economist at Auction.com

“Tight housing inventory remains a constraining factor limiting stronger sales growth…

We expect further price growth to entice more homeowners to list their homes, particularly as existing homeowners have greater equity.”

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 price.

Will Housing Affordability Be a Challenge in 2017?

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Some industry experts are saying that the housing market may be heading for a slowdown in 2017 based on rising home prices and a jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize during that time the housing crisis left the market with an overabundance of housing inventory with as many as one out of three listings being a distressed property (foreclosure or short sale). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years and look at the current index as compared to the index from 1990 – 2008:

Will Housing Affordability Be a Challenge in 2017? | MyKCM

We can see that, even though prices have increased, mortgage rates are still lower than historical averages and have put the index in a better position than every year for the nineteen years before the crash.

Bottom Line

The Housing Affordability Index is in great shape and should not be seen as a challenge to the real estate market’s continued recovery.

If Your Home Hasn’t Sold Yet… Check the Price!

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The residential housing market has been hot. Home sales have bounced back solidly and are now at their second highest pacesince February 2007. Demand has remained strong throughout the winter as many real estate professionals are reporting bidding wars with many homes selling above listing price. What about your house?

If your house hasn’t sold, it is probably because of the price.

If your home is on the market and you are not receiving any offers, look at your price. Pricing your home just 10% above market value dramatically cuts the number of prospective buyers that will even see your house. See chart below.

If Your Home Hasn’t Sold Yet… Check the Price! | MyKCM

Bottom Line

The housing market is hot. If you are not seeing the results you want, sit down with your agent and revisit the pricing conversation.