Archive February 2020

The #1 Misconception in the Homebuying Process

After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:

 “A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back.”

CoreLogic, in their January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:

  • 21 states appreciating 5% or more
  • 26 states appreciating between 3-5%
  • Only 3 states appreciating less than 3%

The Misconception

Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.

In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.

Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.

Black Knight, in their latest Mortgage Monitor, addressed this exact issue:

 “Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…

Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”

Bottom Line

If you’re thinking about purchasing a home, realize that homes are still affordable even though prices are increasing. As the Black Knight report concluded:

“Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”

New Year, Same Home

Make a resolution to declutter and reorganize these 5 rooms

Now that the new year is here, it’s time to get organized. After the hustle and bustle of the holiday season, it is easy for things to be shuffled around or misplaced. Here are the five rooms or areas in your home that deserve immediate reorganization and attention:

1. The kitchen. Typically the gathering place for holiday functions, it’s possible that many of your beloved plates, Tupperware and even coffee mugs were moved around by visiting friends and family members. To free up cupboard space, try hanging your pots and pans or decluttering with drawer organizers.

2. The bathroom. The most used room in the house, you’re probably not looking forward to getting this space in order. But beyond a wave of the toilet wand, under-the-sink storage and behind-the-door hooks create more space and make getting ready in the morning a breeze!

3. The closet. Your wardrobe could potentially be a mix of summer, fall and winter attire. Getting some under-the-bed storage will finally force you to put away the shorts and tank tops, and see-through shoe boxes will keep your favorite pairs crisp and clean. 4. The laundry room. Overhead or hideaway storage options will work best for this room, creating more space for loads of dirty (or clean) laundry. Try a drying rack that you can hang from the ceiling, or a storage tower on wheels for all of your detergents and fabric softeners.

5. The home office. Finally, if you’ve worked from home during the holiday season, chances are your office may be in disarray. Drawer organizers or a brand new bookshelf can help you keep all your important mail, documents and books in their place.

SALES Expected to Rise

Despite challenges in the new-home market, the national homeownership rate, which reached 65% at the end of 2019, is expected to continue climbing but remain below 2004’s all-time high of 69.2%, according to the NAHB. Dietz said he expects existing-home sales to increase 3% this year and predicted that residential remodeling will jump 1.2%. “The housing market is entering the year with a great deal of momentum from 2019,” said Frank Nothaft, chief economist at CoreLogic. “This is the first time in post–World War II history that unemployment and mortgage rates are both below 4%. That will help fuel demand.”

The South and West—which have affordable markets that attract jobs and are more conducive to outdoor amenities—will lead new-home growth in 2020, Nothaft said. Dallas and Houston are leaders, averaging 30,000 new-home sales between October 2018 and September 2019. Atlanta, Phoenix, and Austin, Texas, which all averaged at least 15,000 new-home sales in the same period, follow closely behind, Nothaft said.

Here are other market dynamics you should be aware of this year.

  • Price hikes. National home prices are projected to rise 4.8%, up from 3.6% in 2019, Nothaft said. Rents are likely to increase 3%, he added.
  • Equity. The average homeowner gained $5,300 in equity during the 12-month period ending in September, Nothaft said. Idaho, Wyoming, and Utah led the pack with an average gain of more than $20,000.
  • Type of home sale. Nationally, only 2% of entry-level sales in the fourth quarter of 2019 were newly built, with Phoenix and Dallas being the only markets approaching 5%. In the same time period, the luxury market accounted for 12% of new-home sales, and the custom-home market reached 18%—the highest share since the second quarter of 2008, Nothaft said.
  • Square footage. Home sizes are getting smaller, as seniors and young buyers desire less space to achieve affordability. The median home size fell from more than 2,500 square feet at the end of 2014 to less than 2,300 square feet in 2019, according to NAHB.
  • Financing. Some 64% of new-home sales last year were financed using conventional conforming loans; 17% were FHA loans; 12% were VA loans; and 6% were jumbo loans, Nothaft said.

Remodeling Activity Shows Promise

The NAHB said interest in remodeling remains high, and homeowners likely will spend more than the $158 billion they spent on home improvement projects in 2019. However, costs and labor shortages are making it difficult for contractors to meet demand—just like in the new-home market. “We’re not only seeing more requests for proposals because the housing stock is limited but also for aging-in-place work because boomers want to stay in their homes longer,” said Nick Scheel, a remodeler from Spokane Valley, Wash., who spoke at the conference. “Because people are choosing to stay in their homes, the demand and backlog for remodeling remains high.”

PRIORITY TASKS FOR YOUR MOVE IN

Moving into a new home is an exciting time, and you’re probably daydreaming about decor and paint schemes and new furniture. But before you get into the fun stuff, there are some basics you should cover first.

Change the locks – Even if you’re promised that new locks have been installed in your home, you can never be too careful. It’s worth the money to have the peace of mind that comes with knowing that no one else has the keys to your home. Changing the locks can be a DIY project, or you can call in a locksmith for a little extra money.

Steam clean the carpets – It’s good to get a fresh start with your floors before you start decorating. The previous owners may have had pets, young children, or just some plain old clumsiness. Take the time to steam clean the carpets so that your floors are free of stains and allergens. It’s pretty easy and affordable to rent a steam cleaner—your local grocery store may have them available.

Call an exterminator – Prior to move-in, you probably haven’t spent enough time in the house to get a view of any pests that may be lurking. Call an exterminator to take care of any mice, insects, and other critters that may be hiding in your home.

Clean out the kitchen – If the previous occupants wanted to skip on some of their cleaning duties when they moved out, the kitchen is where they probably cut corners. Wipe down the inside of cabinets, clean out the refrigerator, clean the oven, and clean in the nooks and crannies underneath the appliances.