No Housing Recession Over the Horizon

Media reports are increasingly focused on whether a major home sale slowdown, or maybe even a crash, is in the making, in part because many hot housing markets are seeing slackening buyer demand, and nationally 2018 is expected to end with fewer home sales than 2017. But the possibility of a crash is unlikely, says Lawrence Yun, chief economist for the National Association of REALTORS®.

In a piece he contributed to Forbes, Yun says hot markets are seeing a slowdown not because of weak buyer demand, which could be an indicator of a true slowdown, but insufficient supply. When homes come on the market, especially in areas like Seattle and Denver that have strong job growth and little unemployment, they are typically snapped up.

In other positive signs, home price growth remains strong in markets across the country—about 5 percent on a nationwide basis so far this year—and there are no signs of the credit excesses that characterized the housing crisis 10 years ago. “Lending standards today are still stringent, as evidenced by the higher-than-normal credit scores of those who are able to obtain a mortgage,” Yun says. “That is why mortgage default and foreclosure rates are at historic lows.”

In short, Yun says, today’s housing problem stems from insufficient inventory. The supply problem is driving up home prices and worsening affordability and keeping sales from matching demand. That is a serious problem and the answer is to encourage builders to increase supply, Yun says, but it is not a prelude to a crash.

Source: “No Housing Recession Over Horizon,” Forbes.com
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Why Buying a Home Is Becoming More Urgent

If your clients are wavering on whether to buy a home, there are several reasons they may want to get more serious about their real estate search, according to MagnifyMoney, a personal finance website. Most importantly, mortgage rates remain historically low—but that isn’t expected to last. They’ve been rising steadily, but rates for the current 30-year fixed-rate mortgage are still well below 5 percent, compared to nearly 19 percent In 1981. “The housing market has been on pretty solid footing now for a number of years, and a lot of that is due to pretty affordable mortgage rates,” says Stijn Van Nieuwerburgh, a real estate professor at Columbia Business School. In a recent Reuters poll, 45 housing analysts predict that by the end of 2019, the average rate for the 30-year fixed-rate mortgage likely will be above 5 percent. So buyers who lock in a rate this year likely will have lower borrowing costs.

Also, escalating home prices aren’t expected to let up anytime soon. According to the Reuters poll, home values in the 20 largest metro areas are expected to increase by another 5.7 percent before the end of the year. The National Association of REALTORS® predicts growth in home prices to continue in the coming years, but year-over-year growth likely will slow to 3 percent or 5 percent. “Homeownership is long-term prospect,” says Paul Bishop, NAR’s vice president of research. “So as long as prices continue to increase at even a modest pace over the next four, five, eight, 10 years, then that equity does build up, in some cases, to quite a substantial part of someone’s net worth.”

Home shoppers who are holding out for more inventory may need to accept that the waiting game likely won’t be successful. At the end of May, there were 1.85 million existing homes for sale, including single-family homes, condos, townhomes, and co-ops. That is 6.1 percent lower than a year ago, according to NAR. Construction is on the rise but new developments are only accounting for about 2 percent of the market, says Van Nieuwerburgh, adding that “we’re not building enough to alleviate those shortages.”

While there are plenty of reasons why buying makes sense now, housing analysts are quick to point out that consumers shouldn’t take the plunge if they’re not ready financially or personally for the commitment. Prospective buyers need to consider financial security, their location, and their job situation, says Bishop. “Ultimately, you need to ask yourself: Are you likely to be in a particular location long enough that homeownership makes sense?” he says.

Source: MagnifyMoney

Has the Inventory Crunch Begun to Subside?

Contract signings rose in all four major regions across the U.S. last month, a sign that dwindling home sales—which have plagued the market at an unusual time of year this summer—will reverse course in the coming months, the National Association of REALTORS® reports.

NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, increased 0.9 percent month over month in June to a reading of 106.9. “After two straight months of declines in pending home sales, home shoppers in a majority of markets had a little more success finding a home to buy last month,” says NAR Chief Economist Lawrence Yun. “The positive forces of faster economic growth and steady hiring are being met by the negative forces of higher home prices and mortgage rates. Even with slightly more homeowners putting their home on the market, inventory is still subpar and not meeting demand. As a result, affordability constraints are pricing out some would-be buyers and keeping overall sales activity below last year’s pace.”

Despite last month’s rise, contract signings are still down 2.5 percent compared to a year ago, NAR reports. Nevertheless, Yun says the worst of the supply crunch may now have passed. In June, existing inventory was up slightly on an annual basis, marking the first increase in three years. Several large metros saw year-over-year surges in inventory levels last month:

  • Portland, Ore.: +24 percent
  • Providence, R.I.: +20 percent
  • Seattle: +19 percent
  • Nashville, Tenn.: +17 percent
  • San Jose, Calif.: +15 percent

“Home price growth remains swift, and listings are still going under contract at a robust pace in most of the country, which indicates that even with rising inventory in many markets, demand still significantly outpaces what’s available for sale,” Yun says. “However, if this trend of increasing supply continues in the months ahead, prospective buyers will hopefully begin to see more choices and softer price growth.”

Source: National Association of REALTORS®

‘Fair’ vs. ‘Very Good’ Credit: The Impact on Mortgages

Consumers who make efforts to raise their credit scores from “fair” to “very good” may see big payoffs. LendingTree researchers analyzed loan request and average loan balance data to see how a lower credit score can increase borrowing costs for the average consumer. They compared the impact across several types of debt: mortgages, student loans, auto loans, personal loans, and credit cards.

Overall, raising a credit score from “fair” (580-669) to “very good” (740-799) can save a consumer $45,283 on their debt. That’s the average in extra interest on all debt that consumers will pay when they have a credit score ranked as fair. Mortgage costs can account for 63 percent of those potential savings. By raising a credit score from fair to very good, consumers could save $29,106 in mortgage costs, the study shows.

Read more…

3 Bathroom Trends Homeowners Might Want to Avoid

Bathroom makeovers can help enhance a property, but homeowners should be careful not to be too trendy or it may have the opposite effect. HouseLogic detailed several recent bathroom trends that homeowners might want to reconsider, including:

Tiny tiles

Mosaics of tiny colored tiles may be on-trend and offer a retro vibe to your bathroom, but they’ve also earned a reputation as being a pain to keep clean. Tiny tiles mean more grout to clean and maintain. Instead of doing a large space of tiny tiles, HouseLogic recommends using them as an accent, such as the wall surrounding your vanity. Choose a place where they won’t get wet on the floor, in the tub, or in the shower so that cleaning them is less of a chore.

Hardwood floors

The flooring may be a hot choice for the rest of your home, but they can be a pain in the bathroom. “It will warp next to a shower or tub if not dried after each use,” Tanya Campbell, a designer for Virdis Design Studio in Denver, told HouseLogic. “Also, tile is more sanitary.” If the wooden look is what you want, opt for something that resembles the exterior, but is actually tile.

Colored tubs and sinks

Color is gradually entering more bathrooms. But don’t forget the lessons from the 1950s pastel bathroom craze that brought in pink and aqua sinks. That had renovators ripping them out a few years later in favor of white, a safer choice for the long term. “The bathroom is one of the most expensive rooms in the house to do, and so I try to be very safe because the parts are going to be expensive to change out—like a tub,” Suzanne Felber, a designer in Dallas, told HouseLogic. If color is what homeowners want, opt for painting the walls instead; it’s easier to change later on.

Catch more bathroom trends worth reconsidering at HouseLogic.com.

Breaking Down Home Maintenance: The Costs, Timelines

The cost to maintain a home is something financial experts recommend budgeting for early on, in preparation for choosing which house to buy. On average, homeowners spend 1 percent of their overall home cost in maintenance every year, according to a new study by Porch.com.

The upkeep costs can vary based on style, age, type, and even location of the home. The average cost to maintaining a home each year is about $16,000, according to Porch.com’s analysis.

Where does all that money go? A few chores that routinely pop up on a homeowner’s to-do list include pool keeping, lawn maintenance, and repairs and replacements of appliances.

Read the article on REALTOR Magazine to see the estimated frequency of maintaining certain aspects of the home, and the average costs.

5 Tips for Buying Your Retirement Home

Planning for retirement means making a lot of decisions, including when you’ll stop working, how much you’ll withdraw from your savings each year, and where you’ll live. Many Americans view retirement as an opportunity to move into a new home; in fact, 64 percent of retirees either have moved or plan to move.

Ready to begin planning? Here are five tips to get you started.

  1. Location, location, location
    Ideally, you should think about where you want to live long before retirement, but it’s never too late to think about your priorities. Do you want to be close to family or health care resources? Do you desire a home in the mountains or somewhere you’ll never see snow again? Make a list of what you want in a home location so you’ll have a starting point for your search.
  2. Don’t delay
    If possible, don’t wait until poor health or declining finances force you to move somewhere that’s not your ideal location. Move while you’re still young enough to enjoy your dream retirement home.
  3. Get professional financial advice
    It’s important to protect your nest egg and keep it growing throughout retirement. A professional financial planner can help you understand what size mortgage is right for you, so your dream home doesn’t strain your finances.
  4. Be mindful of amenities
    When choosing a location and a home, in addition to your personal priorities, it’s important to keep in mind accessibility to amenities important to seniors. Community features such as good transportation, quality of roads, safe neighborhoods, and access to health care, socialization opportunities, shopping and cultural venues are all options to consider.
  5. Focus on must-haves
    Make a list of must-have features and those you would like your retirement home to have. Share the list with your real estate agent to help him or her focus on properties that meet your criteria. Your list of must-haves and desirables will likely be very different from the list you made when you bought your first home. Now, a single-level house with large bathrooms and a level lot may be more desirable than a two-story with lots of bedrooms and a big backyard.