Today’s real estate market has high buyer interest and low housing inventory. With so many buyers competing for a limited number of homes, it’s more important than ever to know the ins and outs of making a confident and competitive offer. Here are five keys to success for this important stage in the homebuying process.
1. Listen to Your Real Estate Agent
A recent article from Freddie Mac offers guidance on making an offer on a home in today’s market. Right off the bat, it points out how emotional this can be for buyers and why trusted professionals can help you stay focused on the most important things:
“Remember to let your homebuying team guide you on your journey, not your emotions. Their support and expertise will keep you from compromising on your must-haves and future financial stability.”
Your real estate professional should be your primary source for answers to the questions you have when you’re ready to make an offer.
2. Understand Your Finances
Having a complete understanding of your budget and how much house you can afford is essential. The best way to know this is to reach out to your lender to get pre-approved for a loan early in the homebuying process. Only 44% of today’s prospective homebuyers are planning to apply for pre-approval, so be sure to take this step so you stand out from the crowd. It shows sellers you’re a serious, qualified buyer and can give you a competitive edge if you enter a bidding war.
3. Be Ready to Move Quickly
According to the Realtors Confidence Index, published monthly by the National Association of Realtors (NAR), the average property being sold today is receiving more than three offers and is only on the market for a few weeks. These are both results of today’s competitive market, showing how important it is to stay agile and vigilant in your search. As soon as you find the right home for your needs, be prepared to work with your agent to submit an offer as quickly as possible.
4. Make a Fair Offer
It’s only natural to want the best deal you can get on a home. However, Freddie Mac also warns that submitting an offer that’s too low can lead sellers to doubt how serious you are as a buyer. Don’t submit an offer that will be tossed out as soon as it’s received. The expertise your agent brings to this part of the process will help you stay competitive:
“Your agent will work with you to make an informed offer based on the market value of the home, the condition of the home and recent home sale prices in the area.”
5. Be a Flexible Negotiator
After submitting an offer, the seller may accept it, reject it, or counter it with their own changes. In a competitive market, it’s important to stay nimble throughout the negotiation process. Your position can be strengthened with an offer that includes flexible move-in dates, a higher price, or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). There are, however, certain contingencies you don’t want to forego. Freddie Mac explains:
“Resist the temptation to waive the inspection contingency, especially in a hot market or if the home is being sold ‘as-is’, which means the seller won’t pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can’t afford to fix.”
Today’s competitive market makes it more important than ever to make a strong offer on a home, and a trusted expert can help you rise to the top along the way.
Homeownership is on the goal list for many young adults, but sometimes it’s hard to know exactly how to get there. From understanding the homebuying process to pre-approval and down payment assistance options, uncertainty along the way can ultimately hold some buyers back.
Today, there are over 75 million Millennials and 67 million Gen Z’ers in the U.S., making up a significant number of both current and soon-to-be homebuyers. According to a recent Fannie Mae survey of more than 2,000 of these individuals:
“88% said they are confident they will achieve homeownership someday.”
In addition, the survey also reveals that for younger generations, the motivation to own a home may be more emotional than financial compared to previous generations:
- <50% say they want to use their home as an asset
- 78% believe it’s the best way to live the way they want, without restrictions
- 80% believe homeownership is the best way to make it on their own
Whether homeownership goals come from the heart or are driven by financial aspirations (or maybe both), the obstacles standing in the way don’t have to bring these dreams to a screeching halt. The same survey also reveals two key roadblocks for potential buyers. Thankfully, they’re both easily overcome with the power of knowledge and trusted advisors leading the way. Here’s a look at these two challenges potential homebuyers face today:
1. 73% of future homebuyers are unaware of low-down-payment mortgage options
For those who want to purchase a home, low-down-payment options are instrumental to affording one sooner rather than later, especially given the amount of debt many younger adults have accumulated. Fannie Mae also notes:
“Among the challenges they face is an unprecedented amount of debt, along with a lack of understanding of the mortgage process and their own purchasing power. Debt, in particular, creates many obstacles such as a limited ability to save and the fear of taking on more debt.”
Today, there are more than 2,340 down payment assistance programs available nationwide to help relieve this pressure. Understanding what’s out there and the options available may help many buyers become homeowners faster than they thought possible. In a year like this, with record-low mortgage rates making their mark in the history books, being able to take advantage of the opportunity buyers have right now is essential to long-term affordability.
2. 64% of buyers expect lenders and other real estate professionals to educate them about the mortgage process
While many people love to do a quick search online to find instant answers to their questions, it isn’t the only way younger generations want to consume information or build their knowledge base. As the survey mentions, having trusted professionals help them learn what it takes to achieve their dreams is definitely on their wish list too.
If you’re aiming for homeownership someday, it may be in closer reach than you think. Let’s connect so you can learn about the process and get the guidance you need to make it happen.
Housing inventory is at an all-time low. Realtor.com just reported that there are 39% fewer homes for sale today than there were last year. At the same time, buyer demand remains strong. In a recent newsletter, research analyst Ivy Zelman explained:
“Although the headwind of severe supply constraints in most markets has contributed to slight moderation in seasonally-adjusted and year-over-year new pending contract growth for two consecutive months (albeit still growing strongly), the underlying strength of buyer demand, particularly for this time of year, remains apparent.”
Whenever there’s a shortage in the supply of an item that’s in high demand, the price of that item increases. That’s exactly what’s happening in the real estate market right now. As a result, home values are surging.
This is great news if you’re planning to sell your house. On the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. Purchasers, however, should realize that the price of a house is not as important as the monthly cost. Here’s how it breaks down.
There are several factors that influence the cost of a home. Two of the major ones are:
- The price of the home
- The mortgage rate at which a buyer can borrow the funds necessary to purchase the home
How do these factors impact affordability?
The National Association of Realtors (NAR) produces a Housing Affordability Index which takes these factors into account and determines an overall affordability score for housing. According to NAR, the index:
“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”
Their methodology states:
“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”
So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:The blue bar represents today’s affordability. We can see that homes are more affordable now than they were from:
- 1990 to 2008
- 2017 to 2018
Buying a home today is just a little less affordable than it was last year, but still very affordable compared to historical housing market trends.
Note: During the housing crash from 2009 to 2015, distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.
Why are homes still affordable today?
The number one factor impacting today’s homebuying affordability is record-low mortgage rates. There’s no doubt that prices are on the rise. However, mortgage rates have fallen dramatically. Last week, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.72%. Last year at this time, the average rate was 3.68%.
If you’re considering purchasing your first home or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.
At this point, home purchase affordability is still in a historically good place. However, we need to watch price increases going forward. As Mark Fleming, Chief Economist at First American, noted in a recent post:
“Faster nominal house price appreciation can erode, or even eliminate, the boost in affordability from lower mortgage rates, especially if household income growth doesn’t keep up.”
- National Homeownership Month is a great time to reflect on how we can each promote stronger community growth.
- Homeownership helps families build financial freedom, find greater happiness and satisfaction, and make a positive impact on our local communities.
- Let’s connect today if homeownership is part of your future plans.
There’s a ton of real estate information available in the news today and on the Internet. It can be extremely confusing, especially in times of uncertainty like we’re facing right now.
If you’re thinking of buying or selling this year, you need an agent who can help you:
- Make sense of this rapidly evolving housing market
- Navigate everything from virtual showings to new online marketing strategies
- Price your home correctly at the beginning of the selling process
- Determine what to offer on your dream home without paying too much or offending the seller
Dave Ramsey, a financial guru, advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has a finger on the pulse of the current market will make your buying or selling experience so much easier.
So, how do you identify who truly understands what’s happening right now? How do you know who will take the time to simply and effectively explain what today’s market conditions mean to you and your family?
Check out the agent on social media. What are they posting on Instagram, Facebook, Twitter, and more? Are they using their social media platforms to share relevant, helpful information, or are they just posting memes and recipes? The best agents are committed to educating the consumer so they can feel confident when buying or selling a home.
What agents are posting online will help you determine who meets the criteria Dave Ramsey suggested you look for: someone with the heart of a teacher. Let’s connect today, so you can work with a true trusted real estate professional.
In a recent article, First American shared how millennials are not really any different from previous generations when it comes to the goal of homeownership; it is still a huge part of their American Dream. The piece, however, also reveals,
“Saving for a down payment is one of the biggest obstacles faced by first-time home buyers. Dispelling the 20 percent down payment myth could open the path to homeownership for many more.”
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate how much they need to qualify for a home loan. According to the same article:
“Americans still overestimate the qualifications needed to get a mortgage, resulting in qualified potential buyers not even considering homeownership. Indeed, the Urban Institute report revealed that 16 percent of consumers believed that the minimum down payment required by lenders is 20 percent or more, and another 40 percent didn’t know at all.”
While many potential buyers still think they need to put at least 20% down for the home of their dreams, they often don’t realize how many assistance programs are available with as little as 3% down. With a little research, many renters may actually be able to enter the housing market sooner than they ever imagined.
Myth #2: “I Need a 780 FICO® Score or Higher”
In addition to down payments, buyers are also often confused about the FICO® score it takes to qualify for a mortgage, believing a ‘good’ credit score is 780 or higher.
To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.As indicated in the chart above, 50.23% of approved mortgages had a credit score of 500-749.
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Believe it or not – your dream home may already be within your reach.
In today’s market, low inventory dominates the conversation in many areas of the country. It can often be frustrating to be a first-time homebuyer if you aren’t prepared. Here are five tips from realtor.com’s article, “How to Find Your Dream Home—Without Losing Your Mind.”
1. Get Pre-Approved for a Mortgage Before You Start Your Search
One way to show you’re serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage. Even if you’re in a market that is not as competitive, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach. This will help you avoid the disappointment of falling in love with a home well outside your price range.
2. Know the Difference Between Your ‘Must-Haves’ and ‘Would-Like-To-Haves’
Do you really need that farmhouse sink in the kitchen to be happy with your home choice? Would a two-car garage be a convenience or a necessity? Before you start your search, list all the features of a home you would like. Qualify them as ‘must-haves’, ‘should-haves’, or ‘absolute-wish list’ items. This will help you stay focused on what’s most important.
3. Research and Choose a Neighborhood Where You Want to Live
Every neighborhood has unique charm. Before you commit to a home based solely on the house itself, take a test-drive of the area. Make sure it meets your needs for “amenities, commute, school district, etc. and then spend a weekend exploring before you commit.”
4. Pick a House Style You Love and Stick to It
Evaluate your family’s needs and settle on a style of home that will best serve those needs. Just because you’ve narrowed your search to a zip code doesn’t mean you need to tour every listing in that vicinity. An example from the article says, “if you have several younger kids and don’t want your bedroom on a different level, steer clear of Cape Cod–style homes, which typically feature two or more bedrooms on the upper level and the master on the main.”
5. Document Your Home Visits
Once you start touring homes, the features of each individual home will start to blur together. The article suggests keeping your camera handy and making notes on the listing sheet to document what you love and don’t love about each property you visit.
In a high-paced, competitive environment, any advantage you can give yourself will help you on your path to buying your dream home.
Much has been written about how residential real estate values have increased since the housing market started its recovery in 2012. However, little has been shared about what has taken place with residential rental prices. Let’s shed a little light on this subject.
In the most recent Apartment Rent Report, RentCafe explains how rents have continued to increase over the last twelve months because of a large demand and a limited supply.
“Continued interest in rental apartments and slowing construction keeps the national average rent on a strong upward trend.”
Zillow, in its latest Rent Index, agreed that rents are continuing on an “upward trend” across most of the country, and that the trend is accelerating:
“The median U.S. rent grew 2% year-over-year, to $1,595 per month. National rent growth is faster than a year ago, and while 46 of the 50 largest markets are showing deceleration in annual home value growth, annual rent growth is accelerating in 41 of the largest 50 markets.”
It is true that home prices have risen over the past seven years, increasing the cost of owning a home. However, the cost of renting a home has also increased over that same time period.
The residential real estate market has been plodding along for most of the year. However, three recent reports show the market may be on the verge of a rebound:
1. Existing Home Sales (closed sales) are up, marking two consecutive months of growth.
2. Pending Home Sales (contracts signed) are up with each of the four major regions reporting both month-over-month growth and year-over-year gains in contract activity. Here is the month-over-month growth:
- The Northeast rose 0.7%
- The Midwest increased 0.6%
- The South increased 1.4%
- The West grew 3.1%
3. Buyer Traffic (the number of people shopping for a home) is up compared to the same time last year, and for the first time in 13 months.
- The Northeast is up 5.9%
- The Midwest increased 1.3%
- The South is up 2.7%
- The West grew 2.2%
In their most recent report, ShowingTime Chief Analytics Officer, Daniil Cherkasskiy explained:
“The trend we saw in year-over-year buyer traffic in previous months continued across the United States. For all four regions there were more showings per listing this year compared to last year, making it the most competitive August in the last five years.”
Lawrence Yun, Chief Economist with the National Association of Realtors, believes the uptick in activity will continue into the future:
“It is very encouraging that buyers are responding to exceptionally low interest rates…With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020.”
If you are thinking about selling your house, there are purchasers out there who are ready, willing, and able to buy.
According to the ‘2019 Home Buyer Report’ conducted by Nerdwallet, many first-time buyers still believe they need a 20% down payment to buy a home in today’s market:
“More than 6 in 10 (62%) Americans believe you must put at least 20% down in order to purchase a home.”
When potential homebuyers think they need a 20% down payment to enter the market, they also tend to think they’ll have to wait several years (in some markets) to come up with the necessary funds to buy their dream homes. The report continues to say,
“The truth: 32% of current U.S. homeowners put 5% or less down on their home, according to census data.” (as shown below):
Don’t let a lack of understanding keep you and your family out of the housing market. Let’s get together to discuss your options today.