Rising home prices have been in the news a lot lately, and much of the focus is on whether they’re accelerating too quickly and how sustainable the growth in prices really is. One of the often-overlooked benefits of rising prices, however, is the impact they have on a homeowner’s equity position.
Home equity is defined as the difference between a home’s fair market value and the outstanding balance of all liens on the property. While homeowners pay down their mortgages, the amount of equity they have in their homes climbs each time the value increases.
Today, the number of homeowners that currently have significant equity in their homes is growing. According to the Census Bureau, 38% of all homes in the country are mortgage-free. In a home equity study, ATTOM Data Solutions revealed that of the 54.5 million homes with a mortgage, 26.7% of them have at least 50% equity. That number has been increasing over the last eight years.
CoreLogic also notes:
“…the average homeowner gained approximately $5,300 in equity during the past year.”
This may be the year to take advantage of your home equity by applying it forward, either as you downsize or as you move up to a new home.
The number of building permits issued for single-family homes is the best indicator of how many newly built homes will begin to come to market over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Construction Report, the number of building permits issued in January was 1,551,000. This is a 9.2% increase from December.
How will this impact buyers?
New inventory means more options. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explained how this is good news for the housing market – especially for those looking to buy:
“More construction will mean more housing inventory for consumers in the later months of this year…Spring months could still be quite tough for buyers since it takes time to convert housing starts into actual housing completions.”
How will this impact sellers?
More inventory means more competition. Yun continues to say:
“As trade-up buyers move into these newly completed homes in the near future, their existing homes will be released onto the market.”
Today, because of the tremendous lack of inventory, a seller can potentially anticipate:
- A great sale price on their house as buyers engage in potential bidding wars.
- A quick sale as buyers have little inventory to choose from.
- Fewer hassles as buyers want to smoothly secure a contract.
If you’re considering selling your house, you’ll want to list sooner rather than later. This way, you’ll get ahead of this new competition coming to market and ensure the most attention toward your listing and the best price for your house.
- Don’t forget to set your clocks forward this Sunday, March 8 at 2:00 AM EST in observance of Daylight Saving Time, unless you’re a resident of Arizona or Hawaii!
- Every hour in the United States, 568 homes are sold and median home values rise by $1.92.
- As we “spring forward” this year, let’s get together to see how you can take advantage of every hour in the housing market.
The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let’s also acknowledge the true impact it continues to have on lives and families around the world.
With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?
The National Association of Realtors (NAR) anticipates:
“At the very least, the coronavirus could cause some people to put home sales on hold.”
While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you’re considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.
For example, when there’s fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.
According to the National Association of Home Builders (NAHB):
“The Fed’s action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage.”
This is exactly what we’re experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.
The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.
Unlike last year, the residential real estate market kicked off 2020 with a bang! In their latest Monthly Mortgage Monitor, Black Knight proclaimed:
“The housing market is heating entering 2020 and recent rate declines could continue that trend, a sharp contrast to the strong cooling that was seen at this same time last year.”
Zillow revealed they’re also seeing a robust beginning to the year. Jeff Tucker, Zillow Economist, said:
“Our first look at 2020 data suggests that we could see the most competitive home shopping season in years, as buyers are already competing over…homes for sale.”
Buying demand is very strong. The latest Showing Index from ShowingTime reported a 20.2% year-over-year increase in purchaser traffic across the country, the sixth consecutive month of nationwide growth, and the largest increase in the history of the index.
The even better news is that buyers are not just looking. The latest Existing Home Sales Report from the National Association of Realtors (NAR) showed that closed sales increased 9.6% from a year ago.
This increase in overall activity has caused Zelman & Associates to increase their projection for home price appreciation in 2020 from 3.7% to 4.7%.
Are we headed for another housing crash like we had last decade?
Whenever price appreciation begins to accelerate, the fear of the last housing boom and bust creeps into the minds of the American population. The pain felt during the last housing crash scarred us deeply, and understandably so. The crash led us into the Great Recession of 2008.
If we take a closer look, however, we can see the current situation is nothing like it was in the last decade. As an example, let’s look at price appreciation for the six years prior to the last boom (2006) and compare it to the last six years:There’s a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it’s certainly not accelerating beyond control as it did leading up to the housing crash.
Today, the strength of the housing market is actually helping prevent a setback in the overall economy. In a recent post, Odeta Kushi, Deputy Chief Economist for First American explained:
“While the housing crisis is still fresh on the minds of many, and was the catalyst of the Great Recession, the U.S. housing market has weathered all other recessions since 1980. With the exception of the Great Recession, house price appreciation hardly skipped a beat and year-over-year existing-home sales growth barely declined in all the other previous recessions in the last 40 years…In 2020, we argue the housing market is more likely poised to help stave off recession than fall victim to it.”
The year has started off very nicely for the residential housing market. If you’re thinking of buying or selling, now may be the time to get together to discuss your options.
Spring is right around the corner, so flowers are starting to bloom, and many potential homebuyers are getting ready to step into the market. If you’re thinking of buying this season, here’s how mortgage interest rates are working in your favor.
Freddie Mac explains:
“If you’re in the market to buy a home, today’s average mortgage rates are something to celebrate compared to almost any year since 1971…
Mortgage rates change frequently. Over the last 45 years, they have ranged from a high of 18.63% (1981) to a low of 3.31% (2012). While it’s not likely that the average 30-year fixed mortgage rate will return to its record low, the current average rate of 3.45% is pretty close — all to your advantage.”
To put this in perspective, the following chart from the same article shows how average mortgage rates by decade have impacted the approximate monthly payment of a $200,000 home over time:Clearly, when rates are low – like they are today – qualified buyers can benefit significantly over time.
Keep in mind, if interest rates go up, this can push many potential homebuyers out of the market. The National Association of Home Builders (NAHB) notes:
“Prospective home buyers are also adversely affected when interest rates rise. NAHB’s priced-out estimates show that, depending on the starting rate, a quarter-point increase in the rate of 3.75% on a 30-year fixed rate mortgage can price over 1.3 million U.S. households out of the market for the median-priced new home.”
You certainly don’t want to be priced out of the market this year, and waiting may mean a significant change in your potential mortgage payment should rates start to rise. If your financial situation allows, now may be a great time to lock in at a low mortgage rate to benefit greatly over the lifetime of your loan.
If you’re looking to buy a home in 2020, have you thought about putting your tax refund toward a down payment? Homeownership may be one step closer than you think if you spend your dollars wisely this year.
Based on data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,962 when filing their taxes this year.
The map below shows the average tax refund Americans received last year by state:According to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. Truth be told, a 20% down payment is not always required to buy a home, even though that’s a common misconception about homebuying. Veterans Affairs Loans allow many veterans to purchase a home with 0% down.
How can my tax refund help?
If you’re a first-time buyer, your tax refund may cover more of a down payment than you ever thought possible.
If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average tax refund:The darker the blue, the closer your tax refund gets you to homeownership in one of these programs. Maybe this is the year to plan ahead and put your tax refund toward a down payment on a home.
Saving for a down payment can seem like a daunting task, but the more you know about what’s required, the more prepared you’ll be to make the best decision for you and your family. This tax season, your refund could be your key to homeownership.
Earlier this month, the National Association of Realtors (NAR) released a special study titled Single-Family Home Price Gains by Years of Tenure. The study estimates median home price appreciation over the last 30 years based on the length of homeownership.
Below are three graphs depicting the most important data revealed in the study.
How much have home prices increased?
One of the first measures of the financial benefits of homeownership is the net worth (in the form of equity) an owner can build over time. The study showed the average increase in home values based on how long homeowners stayed in a home.
What was the percentage of appreciation?
Was this appreciation consistent throughout the country?
Today, when we think of markets that have done well over the last decade, we have a tendency to think about San Francisco, San Diego, Seattle, and other West Coast cities. Though it is true the West Region showed the highest price growth over the last three decades, we can see how every region of the country did quite well in ten-year increments:This data validates the claim that homeownership is great for building wealth. The importance of this information was highlighted in the study’s first sentence:
“Homeownership is an important source of wealth creation, enabling current homeowners and succeeding generations to move up the economic ladder.”
Homeownership has many financial and non-financial benefits. The accumulation of “housing wealth” through increased equity is a major one. If you’re thinking of buying a home for the first time or moving up to your dream home, the sooner you make the move, the sooner your net worth will begin to grow.
St. George, Utah – Well-known St. George Real Estate Agent and Radio Personality Jeremy Larkin and his “Larkin Group” Real Estate Consulting firm have entered the 2020 race for “Best of Southern Utah.”
“We are in ‘competition’ with some really great friends and competitors who run great businesses,” said Larkin. “So, we were blown away in 2019 to have our clients and peers name us the best Real Estate Agent and Team in Southern Utah!”
Born and raised in Utah’s Dixie, Larkin is a 2nd generation local who is well known for his business and community involvement under the slogan, “We Know This Town!” His Larkin Group Real Estate team, operating under the Keller Williams Realty Brokerage banner, have organized the “St. George Basket Brigade” event the last three years, delivering nearly 600 Thanksgiving meals to Washington County families.
“We love this community! Our livelihood and the success of our clients depends on it. So I’m ok with some ribbing from my friends about “knowing this town,” remarked Larkin. The Best of Southern Utah, a contest put on by Canyon Media Group and hosted by St. George’s “House of Hearing”, showcases the best of nearly 1100 Southern Utah businesses who were nominated in 10 different general categories.
“One thousand fifty individual businesses were nominated this year. That is a record number,” said Canyon Media’s Shane Brinkerhoff.
Voting began February 24 and will end on Sunday March 15th. For more information and to vote for your favorite business visit www.BestofSouthernUtah.com Contact or vote for The Larkin Group at www.SoldinStGeorge.com