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  • Why You Don’t Need To Fear the Return of Adjustable-Rate Mortgages

    If you remember the housing crash back in 2008, you may recall just how popular adjustable-rate mortgages (ARMs) were back then. And after years of being virtually nonexistent, more people are once again using ARMs when buying a home. Let’s break down why that’s happening and why this isn’t cause for concern. Why ARMs Have Gained Popularity More Recently This graph uses data from the Mortgage Bankers Association (MBA) to show how the percentage of adjustable-rate mortgages has increased over the past few years: As the graph conveys, after hovering around 3% of all mortgages in 2021, many more homeowners turned to adjustable-rate mortgages again last year. There’s a simple explanation for that increase. Last year is when mortgage rates climbed dramatically. With higher borrowing costs, some homeowners decided to take out this type of loan because traditional borrowing costs were high, and an ARM gave them a lower rate. Why Today’s ARMs Aren’t Like the Ones in 2008 To put things into perspective, let’s remember these aren’t like the ARMs that became popular leading up to 2008. Part of what caused the housing crash was loose lending standards. Back then, when a buyer got an ARM, banks and lenders didn’t require proof of their employment, assets, income, etc. Basically, people were getting loans that they shouldn’t have been awarded. This set many homeowners up for trouble because they couldn’t pay back the loans that they never had to qualify for in the first place. This time around, lending standards are different. Banks and lenders learned from the crash, and now they verify income, assets, employment, and more. This means today’s buyers actually have to qualify for their loans and show they’ll be able to repay them. Archana Pradhan, Economist at CoreLogic, explains the difference between then and now: “Around 60% of Adjustable-Rate Mortgages (ARM) that were originated in 2007 were low- or no-documentation loans . . . Similarly, in 2005, 29% of ARM borrowers had credit scores below 640 . . . Currently, almost all conventional loans, including both ARMs and Fixed-Rate Mortgages, require full documentation, are amortized, and are made to borrowers with credit scores above 640.” In simple terms, Laurie Goodman at Urban Institute helps drive this point home by saying: “Today’s Adjustable-Rate Mortgages are no riskier than other mortgage products and their lower monthly payments could increase access to homeownership for more potential buyers.” Bottom Line If you’re worried today’s adjustable-rate mortgages are like the ones from the housing crash, rest assured, things are different this time. And, if you’re a first-time homebuyer and you’d like to learn more about lending options that could help you overcome today’s affordability challenges, reach out to a trusted lender.

  • Don’t Expect a Flood of Foreclosures

    The rising cost of just about everything from groceries to gas right now is leading to speculation that more people won’t be able to afford their mortgage payments. And that’s creating concern that a lot of foreclosures are on the horizon. While it’s true that foreclosure filings have gone up a bit compared to last year, experts say a flood of foreclosures isn’t coming. Take it from Bill McBride of Calculated Risk. McBride is an expert on the housing market, and after closely following the data and market environment leading up to the crash, he was able to see the foreclosures coming in 2008. With the same careful eye and analysis, he has a different take on what’s ahead in the current market: “There will not be a foreclosure crisis this time.” Let’s look at why another flood is so unlikely. There Aren’t Many Homeowners Who Are Seriously Behind on Their Mortgage Payments One of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even if they couldn't show that they’d be able to pay them back. At that time, lenders weren’t being very strict when assessing applicant credit scores, income levels, employment status, and debt-to-income ratio. But now, lending standards have tightened, leading to more qualified buyers who can afford to make their mortgage payments. And data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments is declining (see graph below): Molly Boese, Principal Economist at CoreLogic, explains just how few homeowners are struggling to make their mortgage payments: “May’s overall mortgage delinquency rate matched the all-time low, and serious delinquencies followed suit. Furthermore, the rate of mortgages that were six months or more past due, a measure that ballooned in 2021, has receded to a level last observed in March 2020.” Before there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise. Since so many buyers are making their payments today, a wave of foreclosures isn’t likely. Bottom Line If you’re worried about a potential flood of foreclosures, know there’s nothing in the data today to suggest that’ll happen. In fact, qualified buyers are making their mortgage payments at a very high rate.

  • Why Median Home Sales Price Is Confusing Right Now

    The National Association of Realtors (NAR) is set to release its most recent Existing Home Sales (EHS) report tomorrow. This monthly release provides information on the volume of sales and price trends for homes that have previously been owned. In the upcoming release, it’ll likely say home prices are down. This may seem a bit confusing, especially if you’ve been following along and reading the blogs saying home prices have hit the bottom and have since rebounded. So, why would this say home prices are falling when so many other price reports say they’re going back up? It all depends on the methodology of each one. NAR reports on the median home sales price, while some other sources use repeat sales prices. Here’s how those approaches differ. The Center for Real Estate Studies at Wichita State University explains median sales prices like this: “The median sale price measures the ‘middle’ price of homes that sold, meaning that half of the homes sold for a higher price and half sold for less . . . For example, if more lower-priced homes have sold recently, the median sale price would decline (because the “middle” home is now a lower-priced home), even if the value of each individual home is rising.” Investopedia helps define what a repeat sales approach means: “Repeat-sales methods calculate changes in home prices based on sales of the same property, thereby avoiding the problem of trying to account for price differences in homes with varying characteristics.” The Challenge with the Median Home Sales Price Today As the quotes above say, the approaches can tell different stories. That’s why median home sales price data (like EHS) may say prices are down, even though the vast majority of the repeat sales reports show prices are appreciating again. Bill McBride, Author of the Calculated Risk blog, sums the difference up like this: “Median prices are distorted by the mix and repeat sales indexes like Case-Shiller and FHFA are probably better for measuring prices.” To drive this point home, here’s a simple explanation of median value (see visual below). Let’s say you have three coins in your pocket, and you decide to line them up according to their value from low to high. If you have one nickel and two dimes, the median value (the middle one) is 10 cents. If you have two nickels and one dime, the median value is now five cents. In both cases, a nickel is still worth five cents and a dime is still worth 10 cents. The value of each coin didn’t change. That’s why using the median home sales price as a gauge of what’s happening with home values may be confusing right now. Most buyers look at home prices as a starting point to determine if they match their budgets. But most people buy homes based on the monthly mortgage payment they can afford, not just the price of the house. When mortgage rates are higher, you may have to buy a less expensive home to keep your monthly housing expense affordable. That’s why a greater number of ‘less-expensive’ houses are selling right now – and that’s causing the median home sales price to decline. But that doesn’t mean any single house lost value. When you see the stories in the media that prices are falling later this week, remember the coins. Just because the median home sales price changes, it doesn’t mean home prices are falling. What it means is the mix of homes being sold is being impacted by affordability and current mortgage rates. Bottom Line For a more in-depth understanding of home price trends and reports, let’s connect.

  • Don’t Expect a Wave of Foreclosures [INFOGRAPHIC]

    Some Highlights With ongoing high inflation pushing up everyday costs, some people are worried that'll create a flood of foreclosures. Here's why that's unlikely. Fewer people are seriously behind on mortgage payments right now. If foreclosures were going to rise a lot, more people would need to be late on their payments. Since most are paying on time, a wave isn’t coming. If you're concerned about a flood of foreclosures, the data shows that's not likely.

  • People Want Less Expensive Homes – And Builders Are Responding

    In today’s housing market, there are two main affordability challenges impacting buyers: mortgage rates that are higher than they’ve been the past couple of years, and rising home prices caused by low inventory. To overcome those challenges, many people are working with their agents to find less expensive homes. And with newly built homes making up a historically large percentage of the total available inventory today, that search often includes brand new homes. People Are Spending Less on Newly Built Homes The graph below uses the latest information from the Census to show, in June, more of the newly built home sales in this country were in lower price ranges than in 2022: Last year, only 58% of newly built home sales were less than $500,000. This June, that number was up to 65%. This means more people are buying less expensive newly built homes right now while affordability remains a challenge. Builders Are Offering Lower-Cost Options Builders have picked up on this trend and are reacting accordingly. George Ratiu, Chief Economist at Keeping Current Matters, explains: “Builders are also responding to this shift by bringing slightly smaller homes to market in an effort to meet lower price points . . .” New data from the Census further confirms this pattern – it shows the median sales price of newly built homes has dipped down in recent months (see graph below): And as Mikaela Arroyo, Director of the New Home Trends Institute at John Burns Real Estate Consulting, says, the builders who are most responsive to this trend are forming pathways to homeownership: “. . . it is creating opportunities for people to be able to afford an entry-level home in an area. . . . if you get that size down, that automatically will make it a more affordable home. The [builders] that are decreasing [size] the most are probably the ones that try to build more of an affordable product.” How an Agent Can Help Builders producing smaller, less expensive newly built homes give you more affordable options at a time when that’s really needed. If you’re hoping to buy a home soon, partner with a local real estate agent to find out what’s available in your area. An agent can help you look at newly built homes or ones under construction nearby. Bottom Line If you’re having a hard time finding a home you like in your budget, let’s connect. You need a real estate professional who knows all about the latest inventory in our area, including homes still under construction or just built. That way you have an expert on your side who can provide information on builder reputations, builder contracts and negotiations, and more to help you with the homebuying process.

  • Equity Is a Game Changer for Homeowners Looking To Sell

    If you’re a homeowner, you might be torn on whether or not to sell your house right now. Maybe that’s because you don’t want to take on a higher mortgage rate on your next home. If that’s your biggest hurdle, understanding your equity may be exactly what you need to help you feel more comfortable making your move. What Equity Is and How It Works Equity is the current value of your home minus what you owe on the loan. And recently, that equity has been growing far faster than you may expect. Over the last few years, home prices rose dramatically, and that gave your equity a big boost very quickly. While the market has started to normalize, there’s still an imbalance between the number of homes available for sale and the number of buyers looking to make a purchase. And it’s because homes are in such high demand that prices are back on the rise today. Rob Barber, CEO of ATTOM, a property data provider, explains: “Equity levels were high even during the recent downturn, and now they are going back up and better than ever.” How Equity Benefits You in Today’s Market With today’s affordability challenges, that equity can be a game changer when you move. Here’s why. Based on data from ATTOM and the Census, nearly two-thirds (68.7%) of homeowners have either paid off their mortgages or have at least 50% equity (see chart below): That means roughly 70% have a tremendous amount of equity right now. Once you sell your house, you can use your equity to help with your next purchase. It could be some (if not all) of what you’ll need for your next down payment. It may even be enough to allow you to put a considerably larger down payment on your next home, so you don’t have to finance quite as much. And, if you’ve been in your current house for years, you may have even built up enough equity to pay in all cash. If that’s true for you, you’d be able to avoid borrowing altogether, so you wouldn’t have to worry about today’s mortgage rates. How To Find Out How Much Equity You Have The best way to learn how much you have is to reach out to a trusted real estate agent for a Professional Equity Assessment Report (PEAR). Bottom Line If you’re planning to make a move, the equity you’ve gained can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, let’s connect.

  • Where Are People Moving Today and Why?

    Plenty of people are still moving these days. And if you’re thinking of making a move yourself, you may be considering the inventory and affordability challenges in the housing market and wondering what you can do to help offset those. A new report from Gravy Analytics provides insight into where people are searching for homes and what they’re prioritizing most right now. That information could help you plan your own move. 1. People Are Moving to Cities with Lower Housing Costs One big factor motivating where buyers are going is affordability and that’s no big surprise. People are relocating to areas that have less expensive housing options. As a result, small cities are thriving. Hannah Jones, Economics Data Analyst at Realtor.com, summarizes why: “Affordability is still very much front and center . . . a lot of what’s available is outside of the price range of many buyers. . . . so they look elsewhere for a little more bang for the buck.” The takeaway for you? If you’re having trouble finding a home that fits your budget, it may help to browse other, more affordable locations nearby. 2. People Want to Live Where They Vacation And, if you’re already expanding your search radius, you may be able to include a location that features your favorite type of destination, like a suburb near the beach or a mountain town. Data shows many other homeowners are making that type of move a priority today. According to the same report from Gravy Analytics: “Whether it’s the opportunity to enjoy more weekend hikes in the mountains or to wake up to a lakeside sunrise, people are moving to areas that were once thought of as vacation spots.” Even with today’s home prices and mortgage rates, here’s why a move like this could be possible for you. If you’re already a homeowner, the equity you’ll get when you sell your current house can help fuel that move and give you the down payment you’d need for your dream home. 3. People Who Work Remotely Are Taking Advantage of that Flexibility Ongoing remote work is another major factor in where people are moving. A recent report from the McKinsey Global Institute says this about recent movement patterns: “Many of these moves happened because employees untethered from their daily commutes began to care less about how far they lived from the office.” If you’re a remote or hybrid worker, you don’t have to live in the same city, or sometimes even the same state, as your job. That means you can prioritize other things, like being closer to loved ones, when buying a home. In fact, the same McKinsey Global Institute report notes for people who moved during the pandemic, 55% reported moving farther from the office. And since remote work is still a popular choice today, homebuyers will likely continue to take advantage of that flexibility. Bottom Line Lots of people are still moving today. If you want help navigating today’s inventory or affordability challenges, and expert advice to help you find your ideal home, let's connect.

  • Home Prices Are Back on the Rise

    Some Highlights Looking at monthly home price data from six expert sources shows the worst home price declines are behind us, and they’re rising again nationally. If you’ve put your plans to move on pause because you were worried about home prices crashing, this rebound is good news. Let’s connect so you know what’s happening with prices in our area.

  • About 11,000 Houses Will Sell Today

    Some homeowners have been waiting for months to put their house on the market because they don’t think people are buying homes right now. If that’s you, know that even though the housing market has slowed compared to the frenzy of a couple of years ago, it isn’t at a standstill. Contrary to what you may believe, buyers are still active and plenty of homes are selling right now. According to the National Association of Realtors (NAR), based on the pace of sales right now, just over 4 million homes will sell this year. With some simple math, let’s break down what that really means for you: 4.16 million homes divided by 365 days in a year = 11,397 houses sell each day 11,397 divided by 24 hours in a day = 475 houses sell per hour 475 divided by 60 minutes in an hour = about 8 houses sell each minute So, on average, about 11,000 homes sell each day in this country. A real estate expert can give you more information about how many houses are being sold in your neighborhood, the amazing advantages that sellers are experiencing right now, and the most important things buyers are searching for in your area. Together you’ll use this knowledge to shape how you market your house based on local trends. Bottom Line If you’ve been waiting to sell because you don’t think there are buyers out there, know today’s market is active. Every day you wait, around 11,000 other homeowners are selling. In the time it took you to read this, eight homes sold. When you’re ready to sell too, let’s connect.

  • The Value of an Agent When Buying Your New Construction Home

    Buying a new construction home can be an exciting experience. From being the very first owner, to customizing your home’s features, there are a lot of benefits. But navigating the complexities of buying a home that’s under construction can also be a bit overwhelming. This is where a skilled real estate agent can make all the difference. An article from The Mortgage Reports sums it up like this: “Your Realtor or real estate agent will be key to helping you navigate this process. . . . they can guide you through construction and help anticipate and solve for any possible snags along the way.” Here’s how your agent is an invaluable resource in your search to find and buy your new home. Agents Know the Local Area and Market Your agent is well-versed in emerging communities and upcoming developments that could influence your decision. For example, you'll want to be aware if there were any plans to construct a highway through the woods behind your prospective backyard. It’s important to consider how the neighborhood and the surrounding area might evolve before making your home purchase. Your agent can help you find a community that perfectly aligns with your preferences, lifestyle, and future needs. Knowledge of Construction Quality and Builder Reputation An agent also has the expertise to evaluate the construction quality and reputation of different builders. Their knowledge and experiences with local builders allow them to offer insights into each one’s track record, customer satisfaction, and construction practices. This information can help you avoid any potential risks and help you confidently select a builder known for delivering quality homes. Assistance with Customization and Upgrades The most obvious benefit of opting for new home construction is the opportunity to customize your home to suit your preferences. Your agent will guide you through that process and share advice on the upgrades that are most likely to add long-term value to your home. Their expertise ensures you focus your budget on areas that will give you the greatest return on your investment later on. Understanding Builder Contracts and Negotiations Builder contracts can be complex and differ from traditional home purchase agreements. Your agent can help you navigate these contracts to make sure you fully understand the terms and conditions. They’re also skilled negotiators who can advocate on your behalf, potentially securing better deals, upgrades, or incentives for you throughout the process. Bottom Line The guidance and expertise of a local real estate agent can make all the difference in turning your vision of the perfect home into a reality. Let’s connect so you can feel confident about purchasing your new construction home.

  • Today’s Real Estate Market: The ‘Unicorns’ Have Galloped Off

    Comparing real estate metrics from one year to another can be challenging in a normal housing market. That’s due to possible variability in the market making the comparison less meaningful or accurate. Unpredictable events can have a significant impact on the circumstances and outcomes being compared. Comparing this year’s numbers to the two ‘unicorn’ years we just experienced is almost worthless. By ‘unicorn,’ this is the less common definition of the word: “Something that is greatly desired but difficult or impossible to find.” The pandemic profoundly changed real estate over the last few years. The demand for a home of our own skyrocketed, and people needed a home office and a big backyard. Waves of first-time and second-home buyers entered the market. Already low mortgage rates were driven to historic lows. The forbearance plan all but eliminated foreclosures. Home values reached appreciation levels never seen before. It was a market that forever had been “greatly desired but difficult or impossible to find.” A ‘unicorn’ year. Now, things are getting back to normal. The ‘unicorns’ have galloped off. Comparing today’s market to those years makes no sense. Here are three examples: Buyer Demand If you look at the headlines, you’d think there aren’t any buyers out there. We still sell over 10,000 houses a day in the United States. Of course, buyer demand is down from the two ‘unicorn’ years. But, according to ShowingTime, if we compare it to normal years (2017-2019), we can see that buyer activity is still strong (see graph below): Home Prices We can’t compare today’s home price increases to the last couple of years. According to Freddie Mac, 2020 and 2021 each had historic appreciation numbers. Here’s a graph also showing the more normal years (2017-2019): We can see that we’re returning to more normal home value increases. There were several months of minimal depreciation in the second half of 2022. However, according to Fannie Mae, the market has returned to more normal appreciation in the first quarter of this year. Foreclosures There have already been some startling headlines about the percentage increases in foreclosure filings. Of course, the percentages will be up. They are increases over historically low foreclosure rates. Here’s a graph with information from ATTOM, a property data provider: There will be an increase over the numbers of the last three years now that the moratorium on foreclosures has ended. There are homeowners who lose their homes to foreclosure every year, and it’s heartbreaking for those families. But, if we put the current numbers into perspective, we’ll realize that we’re actually going back to the normal filings from 2017-2019. Bottom Line There will be very unsettling headlines around the housing market this year. Most will come from inappropriate comparisons to the ‘unicorn’ years. Let’s connect so you have an expert on your side to help you keep everything in proper perspective.

  • There's Only Half the Inventory of a Normal Housing Market Today

    Wondering if it still makes sense to sell your house right now? The short answer is, yes. Especially if you consider how few homes there are for sale today. You may have heard inventory is low right now, but you may not fully realize just how low or why that’s a perk when you go to sell your house. This graph from Calculated Risk can help put that into perspective: As the graph shows, while housing inventory did grow slightly week-over-week (shown in the blue bar), overall supply is still low (shown in the red bars). Compared to the same week last year, supply is down roughly 10% – and it was already considered low at that time. But, if you look further back, you’ll see inventory is down even more significantly. To gauge just how far off from normal today’s inventory is, let’s compare right now to 2019 (the last normal year in the market). When you compare the same week this year with the matching week in 2019, supply is about 50% lower. That means there are half the homes for sale now than there’d usually be. The key takeaway? We’re still nowhere near what’s considered a balanced market. There’s plenty of demand for your house because there just aren’t enough homes to go around. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains: “There are simply not enough homes for sale. The market can easily absorb a doubling of inventory.” So, if you want to list your house, know that there’s only about half the inventory there’d usually be in a more normal year. That means your house will be in the spotlight if you sell now and you may see multiple offers and a fast home sale. Bottom Line With the number of homes for sale roughly half of what there’d usually be in a more normal year, you can rest assured there’s demand for your house. If you want to sell, let’s connect now so your house can shine above the rest while inventory is so low.

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