Some Highlights

• It’s no secret that we love our furry friends - about 70% of U.S. households have pets. What may come as a surprise is how large a role they play in the homebuying process.
• Americans spend $1,163 a year on their pets, and nearly half of pet owners say they would move for better accommodations and amenities for their pets.
• If you’re thinking of adding a furry friend, or if you already have, let’s connect to discuss how you can find a home that meets all your pet’s needs.

There’s no question that the financial benefits of selling a house are outstanding today. Now is truly a great time to list if you’re ready to make a change. But if you do sell your house right now, you may be wondering where you’ll go when you move.

With so few homes available to buy right now, you might be considering building a new home as one of your options. But you may be unsure if that’s the way to go. Let’s compare the benefits of a newly built home versus moving into an existing one, and why working with a real estate agent throughout the process is mission-critical to your success no matter what you decide.

The Pros of Newly Built Homes

First, let’s look at the benefits of purchasing a newly constructed home. With a brand-new home, you’ll be able to:

1. Create your perfect home.

If you build a home from the ground up, you’ll have the option to select the custom features you want, including appliances, finishes, landscaping, layout, and more.

2. Cash-in on energy efficiency.

When building a home, you can choose energy-efficient options to help lower your utility costs, protect the environment, and reduce your carbon footprint.

3. Minimize the need for repairs.

Many builders offer a warranty, so you’ll have peace of mind on unlikely repairs. Plus, you won’t have as many little projects to tackle. QuickenLoans puts it like this: 

“Buying a new construction vs. existing home typically means you’ll have fewer repairs to do. It can be a huge relief to know that it’s unlikely you’ll have to repair the roof or replace the furnace.”

4. Have brand new everything.

Another perk of a new home is that nothing in the house is used. It’s all brand new and uniquely yours from day one.

The Pros of Existing Homes

Now, let’s compare that to the perks that come with buying an existing home. With a pre-existing home, you can:

1. Explore a wider variety of home styles and floorplans.

With decades of homes to choose from, you’ll have a broader range of floorplans and designs available.

2. Join an established neighborhood.

Existing homes give you the option to get to know the neighborhood, community, or traffic patterns before you commit.

3. Enjoy mature trees and landscaping.

Established neighborhoods also have more developed landscaping and trees, which can give you additional privacy and curb appeal. As Investopedia says, if you buy an existing home:

“Odds are, too, that the home will have mature landscaping, so you won't have to worry about starting a lawn, planting shrubs, and waiting for trees to grow.”

4. Appreciate that lived-in charm.

The character of older homes is hard to reproduce. If you value timeless craftsmanship or design elements, you may prefer an existing home. According to Houseopedia:

“Charm is priceless. Existing homes, especially those built in the 1950’s or before, often offer architectural elements, historic charm and a quality of craftsmanship not available in new homes.”

The choice is yours. When you start your search for the perfect home, remember that you can go either route – you just need to decide which features and benefits are most important to you. Working with the guidance of your trusted real estate advisor will help you make the most informed and educated decision, so you can move into the home of your dreams.

Bottom Line

If you have questions about the options in your area, let’s discuss what's available and what's right for you, so you’re ready to make your next move with confidence.

Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the feelings of security and stability and the financial benefits that come with rising home equity. At the same time, many current homeowners have decided their house no longer meets their needs, so they moved into homes with more space inside and out, including a home office for remote work.

However, not every purchaser has been able to fulfill their desire for a new home. Here are two obstacles some homebuyers are facing:

• The ability to save for a down payment
• The ability to qualify for a mortgage at the current lending standards

This past week, both of those challenges have been mitigated to some degree for many purchasers. The FHFA (which handles mortgages by Freddie Mac, Fannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit.

What Is the Difference Between a Conforming Loan and a Non-Conforming Loan?

Investopedia explains the difference in a recent post:

“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”

What Difference Does It Make to Me as a Home Buyer?

A Forbes article earlier this year explains the benefits of a conforming loan and why they exist:

“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender.

Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”

What Happened Last Week?

The FHFA has significantly increased its Conforming Loan Limits for 2022. Sandra L. Thompson, FHFA Acting Director, explains in the press release that:

“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. countie​s will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”

This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year.

The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers. As the Forbes article explains:

“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”

Bottom Line

Buying your first or your next home may have just gotten much easier (less stringent qualifying standards) and less expensive (possibly lower mortgage rate). Let’s connect to discuss how these changes may impact you.

Resources:

1. To get more information on the new FHFA Conforming Loan Limits, click here.
2. To get more information on the new FHA Conforming Loan Limits, click here.

It’s economy 101 – when supply is low and demand is high, prices naturally rise. That’s what’s happening in today’s housing market. Home prices are appreciating at near-historic rates, and that’s creating some challenges when it comes to home appraisals.

In recent months, it’s become increasingly common for an appraisal to come in below the contract price on the house. Shawn Telford, Chief Appraiser for CoreLogic, explains it like this:

“Recently, we observed buyers paying prices above listing price and higher than the market data available to appraisers can support. This difference is known as ‘the appraisal gap . . . .’”

Why does an appraisal gap happen?

Basically, with the heightened buyer demand, purchasers are often willing to pay over asking to secure the home of their dreams. If you’ve ever toured a house you’ve fallen in love with, you understand. Once you start to picture yourself and your furniture in the rooms, you want to do everything you can to land the property, including putting in a high offer to try to beat out other would-be buyers.

When the appraiser comes in, they look at things a bit more objectively. Their job is to assess the inherent value of the home, so they’re going to study the facts. Dustin Harris, Appraiser Coach, drives this point home:

“It’s important for everyone to understand that the appraiser’s job in the end is to remain that unbiased third party, to truly tell the client what that home is worth in the current market, regardless of what decisions have been made on the price side of things.”

In simple terms, while homebuyers may be willing to pay more, appraisers are there to assess the market value of the home. Their goal is to make sure the lender isn’t loaning more money than the home is worth. It’s objective, rather than emotional.

In a highly competitive market like today’s, having a discrepancy between the two numbers isn’t unusual. Here’s a look at the increasing rate of appraisal gaps, according to data from  CoreLogic (see graph below):

What does this mean for you?

Ultimately, knowledge is power. The best thing you can do is understand appraisal gaps may impact your transaction if you’re buying or selling. If you do encounter an appraisal below your contract price, know that in today’s sellers’ market, the most common approach is for the seller to ask the buyer to make up the difference in price. Buyers, be prepared to bring extra money to the table if you really want the home.

Above all else, lean on your real estate agent. Whether you’re a buyer or seller, your trusted advisor is your ally if you come up against an appraisal gap. We’ll help you understand your options and handle any additional negotiations that need to happen.

Bottom Line

In today’s real estate market, it’s important to stay informed on the latest trends. Let’s connect so you have an ally to help you navigate an appraisal gap to get the best possible outcome.

You may have been told that it’s important to get pre-approved at the beginning of the homebuying process, but what does that really mean, and why is it so important? Especially in today’s market, with rising home prices and high buyer competition, it’s crucial to have a clear understanding of your budget so you stand out to sellers as a serious homebuyer.

Being intentional and competitive are musts when buying a home right now. Pre-approval from a lender is the only way to know your true price range and how much money you can borrow for your loan. Just as important, being able to present a pre-approval letter shows sellers you’re a qualified buyer, something that can really help you land your dream home in an ultra-competitive market.

With limited housing inventory, there are many more buyers active in the market than there are sellers, and that’s creating some serious competition. According to the National Association of Realtors (NAR), homes are receiving an average of 5.1 offers for sellers to consider. As a result, bidding wars are more and more common. Pre-approval gives you an advantage if you get into a multiple-offer scenario, and these days, it’s likely you will. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war.

Freddie Mac explains:

“By having a pre-approval letter from your lender, you're telling the seller that you're a serious buyer, and you've been pre-approved for a mortgage by your lender for a specific dollar amount. In a true bidding war, your offer will likely get dropped if you don't already have one.”

Every step you can take to gain an advantage as a buyer is crucial when today’s market is constantly changing. Interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals such as a loan officer and a trusted real estate agent making sure you take the right steps and can show your qualifications as a buyer when you find a home to purchase.

Bottom Line

In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. Not only does being pre-approved bring clarity to your homebuying budget, but it shows sellers how serious you are about purchasing a home.

Building financial wealth and stability remains one of the top reasons Americans choose to own a home, and as a homeowner, your wealth often grows without you even realizing it. In a recent paper published by the Urban Institute, Home Ownership is Affordable Housing, author Mike Loftin illustrates how homeowners increase their equity and their wealth simply by making monthly mortgage payments:

“The principal portion that reduces the loan balance builds the homeowner’s equity. In doing so, the principal payments behave like an automatic savings account. The principal payment is not money going out; it is money staying in.”

But home equity – the difference between the value of your home and what you currently owe – isn’t just built through your monthly principal payments. Home price appreciation plays a vital role in growing your equity and, ultimately, your wealth.

As Freddie Mac explains:

“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”

Homeowners Continue To See Equity Increase

CoreLogic recently published their latest Homeowner Equity Insights Report, and it shows continued growth in equity amidst record home price appreciation. The report provides several key takeaways, all of which point to rising wealth for homeowners:

1. The average equity gain of mortgaged homes during the past year was $33,400
2. The current average equity of mortgaged homes is greater than $216,000
3. There was a 6% increase in total homeowner equity over the past year
4. Total U.S. homeowner equity has reached nearly $1.9 trillion

Here, you can see the equity gains by state:

Equity Provides Homeowners with Flexibility

In addition to being a critical tool in building wealth, a homeowner’s equity also provides significant flexibility. When you sell your house, the accumulated equity comes back to you in the sale. Recent increases in home equity coupled with record-low mortgage rates mean it could be the perfect time for homeowners looking to make a move.

Mark Fleming, Chief Economist at First American, notes:

“Existing homeowners today are sitting on record amounts of equity. As homeowners gain equity in their homes, the temptation grows to list their current home for sale and use the equity to purchase a larger or more attractive home.”

Increasing equity also helps families facing challenges brought on by the pandemic. Frank Martell, President and CEO of CoreLogic, explains in the recent Homeowner Equity Insights Report:

“Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic. These gains have become an important financial tool and boosted consumer confidence in the U.S. housing market, especially for older homeowners and baby boomers who've experienced years of price appreciation.”

Bottom Line

Home equity has always been a powerful wealth-building tool, and homeowners continue to see their financial stability increase. Let’s connect today so you can better understand how much equity you have in your current home or if you’re ready to take the next step in building your savings as a homeowner.

The pandemic created a tremendous interest in vacation homes across the country. Throughout the last year, many people purchased second homes as a safe getaway from the challenges of the health crisis. With many professionals working from home and many students taking classes remotely, it made sense to see a migration away from cities and into counties with more vacation destinations.

The 2021 Vacation Home Counties Report from the National Association of Realtors (NAR) shows that this increase in vacation home sales continues in 2021. The report examines sales in counties where “vacant seasonal, occasional, or recreational use housing account for at least 20% of the housing stock” and compares that data to the overall residential market.

Their findings show:

• Vacation home sales rose by 16.4% to 310,600 in 2020, outpacing the 5.6% growth in total existing-home sales.
• Vacation home sales are up 57.2% year-over-year during January-April 2021 compared to the 20% year-over-year change in total existing-home sales.
• Home prices rose more in vacation home counties – the median existing price rose by 14.2% in vacation home counties, compared to 10.1% in non-vacation home counties.

This coincides with data released by Zelman & Associates on the increase in sales of second homes throughout the country last year.

As the data above shows, there is still high demand for second getaway homes in 2021 even as the pandemic winds down. While we may see a rise in second-home sellers as life returns to normal, ongoing low supply and high demand will continue to provide those sellers with a good return on their investment.

Bottom Line

If you’re one of the many people who purchased a vacation home during the pandemic, you’re likely wondering what this means for you. If you’re considering selling that home as life returns to normal, you have options. There are still plenty of buyers in the market. If, on the other hand, you want to keep your second home, enjoy it! Current market conditions show that it’s a good ongoing investment.

Some Highlights

• Today’s sellers’ market provides unique challenges—and benefits—for buyers.
• Current low interest rates won’t last forever, and home prices are forecast to rise.
• If you’re a homebuyer, hang in there. Homeownership improves your quality of life, and the long-term benefits outweigh the short-term challenges.

Selling a house is a time-consuming process – especially if you decide to do it on your own, known as a For Sale By Owner (FSBO). From conducting market research to reviewing legal documents, handling negotiations, and more, it’s an involved and highly detailed process that requires a lot of expertise to navigate effectively. That’s one of the reasons why the percentage of people selling their own house has declined from 19% to 8% (See graph below):To help you understand just how much time and effort it takes to sell on your own, here’s a look at a few of the things you need to think about before putting that “For Sale” sign up in your yard.

1. Making a Good First Impression

While it may sound simple, there are a lot of proven best practices to consider when prepping a house for sale.

• Do you need to take down your personal art?
• What’s the right amount of landscaping to boost your curb appeal?
• What wall colors are most appealing to buyers?

If you do this work on your own, you may invest capital and many hours into the wrong things. Your time is money – don’t waste it. An agent can help steer you in the right direction based on current market conditions to save you time and effort. Since we’re in a hot sellers' market, you don’t want to delay listing your house by focusing on things that won’t change your bottom line. These market conditions may not last, so lean on an agent to capitalize on today's low inventory while you can.

2. Pricing It Right

Real estate professionals have mission-critical information on what sells and how to maximize your profit. They’re experienced when it comes to looking at recent comparable homes that have sold in your area and understanding what price is right for your neighborhood. They use that data to price your house appropriately, maximizing your return.

In a FSBO, you’re operating without this expertise, so you’ll have to do your own homework on how to set a price that’s appropriate for your area and the condition of your home. Even with your own research, you may not find the most up-to-date information and could risk setting a price that’s inaccurate or unrealistic. If you price your house too high, you could turn buyers away before they’re even in the front door, or run into problems when it comes time for the appraisal.

3. Maximizing Your Buyer Pool (and Profit)

Contrary to popular belief, FSBOs may actually net less profit than sellers who use an agent. One of the factors that can drive profit up is effective exposure. Simply put, real estate professionals can get your house in front of more buyers via their social media followers, agency resources, and proven sales strategies. The more buyers that view a home, the more likely a bidding war becomes. According to the National Association of Realtors (NAR), the average house for sale today gets 5 offers. Using an agent to boost your exposure may help boost your sale price too.

4. Navigating Negotiations

When it comes to selling your house as a FSBO, you’ll have to handle all of the negotiations. Here are just a few of the people you’ll work with:

• The buyer, who wants the best deal possible
• The buyer’s agent, who will use their expertise to advocate for the buyer
• The inspection company, which works for the buyer and will almost always find concerns with the house
• The appraiser, who assesses the property’s value to protect the lender

As part of their training, agents are taught how to negotiate every aspect of the real estate transaction and how to mediate potential snags that may pop up. When appraisals come in low and in countless other situations, they know what levers to pull, how to address the buyer and seller emotions that come with it, and when to ask for second opinions. Navigating all of this on your own takes time –a lot of it.

5. Juggling Legal Documentation

Speaking of time, consider how much free time you have to review the fine print. Just in terms of documentation, more disclosures and regulations are now mandatory. That means the stack of legal documents you need to handle as the seller is growing. It can be hard to know and truly understand all the terms and requirements. Instead of going at it alone, use an agent as your shield and advisor to help you avoid potential legal missteps.

Bottom Line

Selling your house on your own is a lot of responsibility. It’s time consuming and requires an immense amount of effort and expertise. Before you decide to sell your house yourself, let’s discuss your options so we can make sure you get the most out of the sale.

The major challenge in today’s housing market is that there are more buyers looking to purchase than there are homes available to buy. Simply put, supply can’t keep up with demand. A normal market has a 6-month supply of homes for sale. Anything over that indicates it’s a buyers’ market, but an inventory level below that threshold means we’re in a sellers’ market. Today’s inventory level sits far below the norm.

According to the Existing Home Sales Report from the National Association of Realtors (NAR):

“Total housing inventory at the end of April amounted to 1.16 million units, up 10.5% from March's inventory and down 20.5% from one year ago (1.46 million). Unsold inventory sits at a 2.4-month supply at the current sales pace, slightly up from March's 2.1-month supply and down from the 4.0-month supply recorded in April 2020. These numbers continue to represent near-record lows.”

Basically, while we are seeing some improvement, we’re still at near-record lows for housing inventory (as shown in the graph below). Here’s why. Since the pandemic began, sellers have been cautious when it comes to putting their homes on the market. At the same time that fewer people are listing their homes, more and more people are trying to buy them thanks to today’s low mortgage rates. The influx of buyers aiming to capitalize on those rates are purchasing this limited supply of homes as quickly as they’re coming to market.This inventory shortage doesn’t just apply to existing homes that are already built. When it comes to new construction, builders are trying to do their part to bring more newly built homes into the market. However, due to challenges with things like lumber supply, they’re also not able to keep up with demand. In their Monthly New Residential Sales report, the United States Census Bureau states:

“The seasonally‐adjusted estimate of new houses for sale at the end of April was 316,000. This represents a supply of 4.4 months at the current sales rate.”

Sam Khater, Chief Economist at Freddie Mac, elaborates:

“In the span of five decades, entry level construction fell from 418,000 units per year in the late 1970s to 65,000 in 2020.

While in 2020 only 65,000 entry-level homes were completed, there were 2.38 million first-time homebuyers that purchased homes. Not all renters looking to purchase their first home were in the market for entry-level homes, however, the large disparity illustrates the significant and rapidly widening gap between entry-level supply and demand.”

Despite today’s low inventory, there is hope on the horizon.

Regarding existing home sales, Sabrina Speianu, Senior Economic Research Analyst at realtor.com, explains:

“In May, newly listed homes grew by 5.4% on a year-over-year basis compared to the earlier days of the COVID-19 pandemic last year…

In May, the share of newly listed homes compared to active daily inventory hit a historical high of 44.4%, 17.3 percentage points higher than last year and 15.1 percentage points above typical levels seen in 2017 to 2019. This is a reflection of quickly selling homes and, for buyers, it means that while they can expect fresh new listings every week, they will have to be prepared to move quickly on desirable homes.”

As for newly built homes, builders are also confident about what’s ahead for housing inventory. Robert Dietz, Chief Economist at the National Association of Home Builders (NAHB), shares:

“Builder confidence in the market remains strong due to a lack of resale inventory, low mortgage interest rates, and a growing demographic of prospective home buyers.”

Things are starting to look up for residential real estate inventory. As the country continues to reopen, more houses are likely to be listed for sale. However, as long as buyer demand remains high, it will take time for the balance between supply and demand to truly neutralize.

Bottom Line

Although it may be challenging to find a house to buy in today’s market, there is hope on the horizon. Let’s connect to talk about your home search so we can find your dream home this summer.