Will Housing Affordability Be a Challenge in 2017?

STM-Share8-600x328.jpg

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.

Will Increasing Mortgage Rates Impact Home Prices?

20161208-Share-STM-600x328.jpg

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:

Will Increasing Mortgage Rates Impact Home Prices? | MyKCM

Last week, in an article titled “Higher Rates Don’t Mean Lower House Prices After All, theWall 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.

From Empty Nest to Full House… Multigenerational Families Are Back!

20161117-Share-STM-600x328.jpg

Multigenerational homes are coming back in a big way! In the 1950s, about 21%, or 32.2 million Americans shared a roof with their grown children or parents. According to a recent Pew Research Center report, the number of multigenerational homes dropped to as low as 12% in 1980 but has shot back up to 19%, roughly 60.6 million people, as recently as 2014.

Multigenerational households typically occur when adult children (over the age of 25) either choose to, or need to, remain living in their parent’s home, and then have children of their own. These households also occur when grandparents join their adult children and grandchildren in their home.

According to the National Association of Realtors’ (NAR) 2016 Profile of Home Buyers and Sellers, 11% of home buyers purchased multigenerational homes last year. The top 3 reasons for purchasing this type of home were:

  • To take care of aging parents (19%)
  • Cost savings (18%, up from 15% last year)
  • Children over the age of 18 moving back home (14%, up from 11% last year)

Donna Butts, Executive Director of Generations United, points out that,

“As the face of America is changing, so are family structures. It shouldn’t be a taboo or looked down upon if grown children are living with their families or older adults are living with their grown children.”

For a long time, nuclear families, (a couple and their dependent children), became the accepted norm, but John Graham, co-author of “Together Again: A Creative Guide to Successful Multigenerational Living,” says, “We’re getting back to the way human beings have always lived in – extended families.”

This shift can be attributed to several social changes over the decades. Growing racial and ethnic diversity in the U.S. population helps explain some of the rise in multigenerational living. The Asian and Hispanic populations are more likely to live in multigenerational family households and these two groups are growing rapidly.

Additionally, women are a bit more likely to live in multigenerational conditions than are their male counterparts (20% vs. 18%, respectively). Last but not least, basic economics.

Carmen Multhauf, co-author of the book “Generational Housing: Myth or Mastery for Real Estate,” brings to light the fact that rents and home prices have been skyrocketing in recent years. She says that, “The younger generations have not been able to save,” and often struggle to get good-paying jobs.

Bottom Line

Multigenerational households are making a comeback. I know this is true since I am one such family. While it is a shift from the more common nuclear home, these households might be the answer that many families are looking for as home prices continue to rise in response to a lack of housing inventory.

Why Waiting Until After the Holidays to Sell Isn’t a Smart Decision

20161114-Share-STM-600x328.jpg

Every year at this time, many homeowners decide to wait until after the holidays to put their homes on the market for the first time, while others who already have their homes on the market decide to take them off until after the holidays. Here are six great reasons not to wait:

  1. Relocation buyers are out there. Companies are not concerned with holiday time and if the buyers have kids, they want them to get into school after the holidays.
  1. Purchasers that are looking for a home during the holidays are serious buyers and are ready to buy.
  1. You can restrict the showings on your home to the times you want it shown. You will remain in control.
  1. Homes show better when decorated for the holidays.
  1. There is less competition for you as a seller right now. Let’s take a look at listing inventory as compared to the same time last year:

Why Waiting Until After the Holidays to Sell Isn't a Smart Decision | MyKCM

  1. The supply of listings increases substantially after the holidays. Also, in many parts of the country, new construction will continue to surge reaching new heights in 2017, which will lessen the demand for your house.

Bottom Line

Waiting until after the holidays to sell your home probably doesn’t make sense. We have a shortage of listings in Orlando – call me! Let’s sell your home.

Outdoor Trends To Attract Buyers


If you are considering putting your home on the market, don’t neglect your outdoor space while making improvements indoors as well. Your home’s exterior and the backyard are important in drawing the eyes of potential buyers and making your home as appealing as possible. Here are some modern trends in outdoor living that will entice today’s buyers.
Outdoor Structures

Outdoor structures make the backyard, and even the front yard in some homes, more functional. An outdoor structure can be something simple – like a storage shed – that makes the space more functional. Or, it can be an outdoor shelter – like a gazebo or pergola – that provides more outdoor living space. These outdoor structures boost the function, and therefore increase your home’s value. Privacy in Outdoor Spaces The outdoor living space is considered more than just a backyard for the modern buyer. Today, the outdoor space is an extension of the home. People are moving indoor furniture outdoors, adding fireplaces and even installing televisions. Yet when they are relaxing outside, individuals want a measure of privacy. No one wants to be gawked at when enjoying a drink and watching the game after a long day at work.
What does this mean as you are upgrading your outdoor space? If possible, add some privacy to the space to create a room that is an extension of the home. Put up walls around the pergola or choose an enclosed gazebo to do this easily. Outdoor Kitchen More and more meals are being cooked outdoors, and the modern outdoor kitchen includes more than just a grill and a picnic table. An outdoor sink, range and even oven can make your home more inviting. Of course, you will need to weigh the costs of this upgrade against the potential benefits; but if you have a great outdoor entertaining space, consider adding an outdoor kitchen to attract potential buyers.
Outdoor Lighting

Outdoor lighting appeals to buyers for a number of reasons: First, it improves the function of the space, making it easier to enjoy an outdoor living space even after dark. A well-lit deck lends itself well to summer barbecues and parties that continue after midnight.
Outdoor lighting also helps attract buyers by making the home more visible when they drive by the property, even if they drive by after dark. Good outdoor lighting will make the home inviting at all times of day. Also, it helps improve the security of the property, which may be important to select buyers.
Low-Maintenance

Landscaping Most home sellers know they should improve and upgrade their garden areas, but do so carefully. A lush, yet high-maintenance garden may detract from your home’s ability to sell. Many of today’s buyers are busy and do not have the time it takes to tend a garden.
When upgrading your landscaping, go as low-maintenance as possible, while still ensuring that the home is attractive. Perennials that grow well in your area can add a splash of color, but do not need to be replanted year after year. Mulch or rock can keep weeds at bay while giving the space a finished look. Automatic watering systems help ensure the plants have enough moisture to thrive, without requiring the owner to keep track of watering schedules. Don’t forget to add stone walkways and decorative items to improve the aesthetics of the space, without adding maintenance efforts.
Natural Wood and Stone Natural wood and stone features on the home – even if they are made from faux materials like vinyl – attract the modern buyer.

This design trend can make an outdated home look modern on the exterior, causing more buyers to stop and schedule a showing. It can also boost the appeal of a modern home by helping it to stand out from a crowded marketplace. Fire Pits or Fireplaces If you have a modest budget, but want to add an outdoor feature that will increase your home’s potential value, consider adding a fire pit or outdoor fireplace. You can even do this as a DIY project if you have the time. A fire pit provides a comfortable, logical place for outdoor entertaining or simply enjoying s’mores together as a family.
Permanent Seating

Many homeowners pull out all the stops when it comes to building decks, patios and outdoor entertaining spaces, but forget the most important part – seating. While you can add seating through outdoor furnishings, this will not add value to the property in the opinion of a buyer. Consider a permanent, built-in seating option, like a bench built into the deck or a picnic table that stays with the property.
Remember, today’s buyers still have plenty of houses to choose from. As you prepare yours for the market, be sure to think like a buyer and add features that will make the home as appealing as possible. As you make these improvements, remember to put some attention into your outdoor spaces!
Jeff Caldwell is brand manager of Superior Shelter, a subsidiary of Superior Recreational Products. The company designs and creates custom outdoor shelters – including steel pergolas, gazebos and more – to solve your outdoor design needs. It works with landscapers and architects around the world.
This post was originally published on RISMedia’s blog, Housecall. Check the blog daily for top real estate tips and trends.