Patience Is the Key to Buying a Home This Year.

The question many homebuyers are facing this year is, “Why is it so hard to find a house?” We’re in the ultimate sellers market which means real estate is ultra-competitive for buyers right now. The National Association of Realtors notes homes are getting an average for 4.8 offers per sale, and that number keeps rising. Why? It’s because there are so few houses for sale.

Low inventory in the housing market isn’t new, but its becoming more challenging to navigate. Danielle Hale, Chief Economist at realtor.com explains:

“The housing market is still relatively under supplied, and buyers can’t buy what’s not for sale. Relative to what we saw in 2017 and 2019, March 2021 was still roughly 117,000 new listings lower, adding to the pre-exisitng early0year gap of more than 200,000 fresh listings that would typically have come to market in January or February. Despite this week’s gain from a year ago, we’re 19 percent below the new seller activity that we saw in the same week in 2019.”

While many homeowners paused their plans to sell during the height of the pandemic, this isn’t the main cause of today’s huge gap between supply and demand. Sam Khater, Vice President and Chief economist at Freddie Mac, Economic Housing and research Division shares:

“The main driver of the housing shortfall has been the long-tern decline in the construction of single family homes… That decline has resulted in the decrease in supply of entry-level single family homes, or started homes.”

When you consider the number of homes built in the U.S. by decade, the serious lack of new construction is clear.

The number fo newly built homes is disproportionately lower than the rate of household formation, which according to the U.S. Census Bureau, has continued to increase. Khater also explains”

“Even before the COVID-19 pandemic and current recession, the housing market was facing a substantial supply shortage and that deficit has grown. In 2018, we estimated that there was a housing supply shortage of approximately 2.5 million units, meaning that the U.S. economy was about 2.5 million units below what was needed to match long-term demand. Using the same methodology, we estimate that the housing shortage increased to 3.8 million units by the end of 2020. A continued increase in a housing shortage is extremely unusual, typically in a recession, housing demand declines and supply rises, causing inventory to rise above the long-term trend.”

To catch up to current demand, Freddie Mac estimates we need to build almost four million homes: The good news is builders are working hard to get us there. The U.S. Census Bureau also states:

“Privately owned housing units authorized by building permits in March were at a seasonally adjusted annual rate of 1,766,000. This is 2.7 percent above the revising February rate of 1,720,000… Privately- owned housing starts in march were at a seasonally adjusted annual rate of 1,739,000. This is a 19.4 percent above the revised February estimate of 1,457,000.”

What does this mean? Lawrence Yun, Chief Economist at NAR, clarifies:

“The March figure of 1.74 million housing starts is the highest in 14 years. Both single family units and multifamily units ramped up. After 13 straight Yeats of underproduction- the chief cause for today’s inventory shortage- this construction boom needs to last for at least three years to make up for the part shortfall. As trade-up buyers purchase newly constructed homes, their prior homes will show up in MLS, and hence, more choices for consumers. Housing starts to housing completion could be 4 to 8 months, so be patient with the improvement to inventory. In the meantime, construction workers deserve cheers.”

Bottom Line

If your planning to buy this year, the key to success will be patience, given today’s low inventory environment. Let’s connect to talk more about what’s happening in your area.

Will the Housing Market Maintain Its Momentum?

Last week’s Existing Home Sales Report from the National Association of Realtors (NAR) shows sales have dropped 3.7% compared to the month before. This is the second consecutive month that sales have slumped. Some see this as evidence that the red- hot real estate market may be cooling. However, there could also be a simple explanation as to why existing homes sales have slowed- there are not enough homes to buy. There are currently 410,000 fewer single family homes availed than there were at this time last year.

Lawrence Yun, Chief Economist at NAR, explains in the report:

“The sales for March would have been measurably higher, had there been more inventory, Days-on-market are swift, multiple offers are prevalent, and buyer confidence is rising.”

Yun’s insight was supported the next day when the Census Bureau released its Monthly New residential Sales Report. It shows that newly constructed home sales are up by 20.7% over the previous month.

Buyer demand remains strong. With more of the adult population becoming vaccinated and job creation data showing encouraging signs, existing- home inventory is expected to grown in the coming months.

What will this bean for homes sales going forward?

Fannie Mae, Freddie Mac, and the Mortgage Bankers Association (MBA) have all forecasted that total home sales (exist homes and new constriction ) will continue their momentum both this year and next. Here’s a graph showing those projections:

Bottom Line

Living through a pandemic has caused many to re-evaluate the importance of home and the value of homeownership. The residential real estate market will benefit from both as we move forward.

Planning to Move? You Can Still Secure a Low Mortgage Rate on Your Next Home

This year, mortgage rates have started to slowly climb above recent record-breaking lows. Many homeowners planning to move may feel like they’ve missed the chance to score a great rate on their next mortgage. In reality, there’s still time to secure a rate far below the historic norm. Here’s why.

After creeping up for seven consecutive weeks, average mortgage rates have dropped more recently. With rates taking a slight dip over the past two weeks at the same time the inventory of houses for sale is so low, homeowners today are sitting in the optimal seat to sell. What’s the advantage of selling your house now? Securing a low mortgage rate on your next home.

To take advantage of today’s real estate market, experts are encouraging homeowners to act now before interest rates climb. Danielle Hale, Chief Economist at realtor.com, explains:

“mortgage rates slid for a second week… but we don’t expect rates to stay at this level for too long.”

Hale continues to say:

“For sellers, getting in early optimizes odds of a quick sale at a good price before there’s too much competition, but that means acting now… In this environment, sellers probably really can’t go wrong, and that’s especially true in the nation’s hottest housing markets where homes are selling quickly and getting the greatest number go viewers online.”

Most experts agree that rates will continue to trend upward. Sam Khater, Chief Economist at Freddie Mac, States

“despite the pause in mortgage rates recently, we expect them to increase modestly for the remainder of this year.”

In addition, Freddie Mac recently released their Quarterly Forecast, which notes:

“We forecast that mortgage rates will continue to rise through the end of the next year. We estimate the 30-year fixed mortgage rate will average 3.4% in the fourth quarter of 2021, rising to 3.8% in the fourth quarter of 2022. (see graph below)

While buyers everywhere want to secure the lowest rate possible, its important to remember they are till historically low, so relative to one year ago, housing actually is still more affordable and thats really thanks to this low mortgage rate environment we find ourselves in”

Bottom Line

If you’re thinking of moving, don’t miss the opportunity to score a great rate on your next home mortgage. Let’s connect today so you can get your house ready to sell and find your dream home while mortgage rates are still low.

How Much Time do you Need to Save for a Down Payment?

One of the biggest hurdles homebuyers face is saving for a down payment. As you’re budgeting and planning for your home purchase, you’ll want to understand how much you’ll need to put down and how long it will take you to get there. The process may actually move faster than you think.

Using data from the U.S. Department of Housing and Urban Development (HUD) and Apartment List, we can estimate how long it might take someone earning the median income and paying the median rent to save up for a down payment on a median- priced home. Since having a down payment can be a great time to practice budgeting for housing costs, this estate also uses the concept that a household should not pay more than 28% of their total income on monthly housing expenses.

According to the data, the national average for the time it would take to save for a 10% down payment is right around two and a half years (2.53). Residents in Iowa can save for a down payment the fastest, doing so in just over one year (1.31). The map below illustrates this time (in years) for each state:

What if you only need to save 3%?

What if you’re able to take advantage of one of the 3% down payment programs available? It’s a common misconception that you need a 20% down payment to buy a home, but there are actually more affordable options and down payment assistance programs available, especially for first time buyers. The reality is, saving for a 3% down payment may not take several years. In fact, it could take less than a year in most states, as shown in the map below.

Bottom Line:

Wherever you are in the process of saving for a down payment, you may be closer to your dream home than you think. Let’s connect to explore the down payment options available in our area and how they support your plans.

93% of Americans Believe a Home is a Better Investment Than Stocks

A recent Survey of Consumer Finances study released by the Federal Reserve reveals the net worth of homeowners is forty times greater than that of renters. If you’re wondering if homeownership is a good investment, the study clearly answers that question, and the answer is yes.

DO Americans believe a home is a better investment than stocks?

In a post on the Liberty Street Economics, blog, the Federal Reserve Bank of New York notes that 93.3% of Americans believe buying a home is definitely or probably a better investment than buying stocks.

Here’s how the results break down:

The survey also shows a wide range of reasons why Americans feel that way (respondents were able to pick more than one answer):

Bottom Line:

The data show how strongly Americans believe in homeownership as an investment. That belief is warranted. The Liberty Street Economics blog put is best by saying:

“Housing represents the largest asset owner by most households and is a major means of wealth accumulation, particularly for the middle class.”

Homeownership is Full of Financial Benefits

A Fannie Mae Survey recently revealed some of the most highly-rated benefits of homeownership, which continue to be key drivers in today’s power-packed housing market. Here are the top four financial benefits of owning a home according to consumer respondents”

88%- better chance of saving for retirement

87%- the best investment plan

85%- the chance to be better off financially

85%- the chance to build up wealth

Additional financial advances of homeownership included in the survey are having the best overall tax situation and being able to live within your budget.

Does Homeownership actually give you a better chance to build wealth?

No one can question a persons unique feelings about the importance of homeownership. However, it’s fair to ask if the numbers justify homeownership as a financial asset.

Last fall, the Federal Reserve released the Survey of Consumer Finances, a report done every three years, with the latest edition covering through 2019. Their findings confirmed that homeownership is a clear financial benefit. The survey found that homeowners have forty times higher net worth than renters ($255,000 for homeowners compared to $6,300 for renters).

The difference in net worth between homeowners and renters has continued to grow. Heres a graph showing the results of the last four fed surveys:

The above graph only includes data through 2019, but according to CoreLogic, the equity help by homeowners grew by $26,300, over the last twelve months alone. That means the gap between the net worth of homeowners and renters has probably widened even further over the last year.

Some might argue the difference in net worth may be due to homeowners normally having larger incomes than renters and therefore the ability to save more money. However, a study by First American shows homeowners have greater net worth then renters regardless of their income level. Here are the findings:

Others may think homeowners are older and thats why they have a greater net worth. However, a Joint Center for Housing Studies of Harvard University report on how homeowners and renters over the age go 65 reveals;

“The ability to build equity puts homeowners far ahead of renters in terms of household wealth… the median owner aged 65 and over had home equity of $143,500 and net wealth of $319,200. By comparison, the net wealth of the same-aged renter was just $6,700.”

Bottom Line: The idea of homeownership as a direct way to built your net worth has met the test of time. Let’s connect if your ready to take steps toward becoming. a homeowner.

March Condo Market Updates

Wondering how the condo market did in March?

The March condo market continued to show an increase compared to the previous year. New listings were increased by 68.8%, pending sales increased by 146.7% and sold listings increased by 89% all compared to 2020.

Looking at New listings further, in March, there are almost double as many as in 2020 suggesting much movement by people in the San Francisco condo market. When we look at pending sales, the number is also increased continuing to suggest the high activity in the market.

If you or someone you know would like to discuss the market, or get in on the action, feel free to reach out!

All information sourced from the San Francisco Association of Realtors

Buyer and Seller Perks in Today’s Housing Market

Right now, the housing market is full of outstanding opportunities for both buyers and sellers. Whether you’re thinking of buying your first home, moving up to a bigger one, or selling so you can downsize this spring, there are perks today that are powering big moves for people across the country. Here are the top two to keep on the radar this season.

The Biggest Perks for Buyers: Low Mortgage Rates

Today’s most compelling buyer incentive is low mortgage interest rates. The 30-year-fixed-rate is now averaging just over 3%. While that’s slightly higher than record-lows from 2020 and earlier this year, its still way lower than historical norms, making purchasing a home an ongoing perk for hopeful buyers.

This is a huge advantage for buyers and helps to make owning a home attainable for more households- and there’s good reason to strive for homeownership. The latest Homeowner Equity Report from CoreLogic shows how homeowners saw major gains in their net worth last year, all thanks to owning a home. Frank Martell, President and CEO or CoreLogic explains:

“Positive factors like record- low interest rates and a booming housing market encouraged many families to enter homeownership. This growing bank of personal wealth that homeownership affords was noticed by many buy in a particular for the first time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”

Low mortgage rates are a plus for buyers right now, but experts forecast we’ll see them continue to rise as the year goes on. If you’re ready to purchase a home, its wise to get started on the process soon so you can secure today’s comparatively low rate.

The Biggest Perk for Sellers: Low Inventory

Today, there are simply not enough houses on the market for the number of buyers looking to purchase them, and its creating a serious seller’s market. According to Danielle Hale, Chief Economist at relator.com”

“Total active inventory continues to decline, dropping 50 percent. With buyers active in the market and sellers still slow to put homes up for sale, homes are selling quickly and the total number actively available for sale at any point in time continues to decline.” (see map below):

The lack of houses for sale continues to challenge the market, and with low mortgage rates fueling buyer demand, homes are hard for buyers to find today. According to the latest Realtors Confidence Index Survey, the average house is now receiving 4.1 offers and is on the market for only 20 days.

Buyers are clearly eager to purchase, and because of the shortage of inventory available, they’re often entering bidding wars. This is one fo the factors keeping home prices strong and giving sellers leverage in the negotiation process.

Homeowners who are in a position to sell shouldn’t wait to make their move. There’s a light at the end of the tunnel for today’s inventory shortage, so listing this spring will get your house on the market when conditions are most favorable. With low inventory and high buyer demand, homeowners can potentially earn a greater profit on their houses and sell them quickly in the fast-paces spring market.

Bottom Line

Whether you’re thinking about buying to selling a home, there are major perks available in today’s housing market. Lets connect today to discuss how these favorable conditions play to your advantage in our local area.

To Renovate or Not to Renovate before you sell?

Wondering if you should renovate your home before you sell it? Here is some advice for you.

When thinking about selling, homeowners often feel they need to get their house ready with some remodeling to make it more appealing to buyers. However, with so many buyers competing for available homes right now, renovations may not be as vital as they would be in a more normal market. Here are two things to keep in mind if you’re thinking of selling this season.

There aren’t enough homes for sale right now.

A normal market has 6- month supply of houses for sale, but today’s housing inventory sits far below that benchmark. According to the National Association of Realtors (NAR), there is only 1.9 month supply of homes available today. As a result, buyer competition is high and homes are only on the market for about 21 days, during which time many receive multiple offers from hopeful buyers.

In a competitive market, that’s moving so quickly, it makes sense to sell your house when buyers are scooping homes up so fast as they’re being listed. Spending costly time and money on renovations before you sell might just mean you’ll miss your key window of opportunity. While certain repairs on your house many be important, your best move right now is to work with a real estate advisor to determine which improvements are truly necessary, and which ones are not likely to be deal-breakers for buyers.

Today, many buyers are more willing to take on home improvement projects themselves in order to get the home they’re after, even if it means putting in a little extra work. Home advisor explains:

“When it comes to the number of home improvement projects completed, Gen Z homeowners are leading the pack, completing an average of 3.5 projects. Millennials closely follow Gen Z, taking on an average of 3.3 projects, followed by Gen X at 2.8 projects. Boomers completed an average of 2 projects, and the Silent Generation completed the fewest projects, on average, at 1.8 per household. Compared to 2019, millennials are spending 60% more on home improvements and doing on average 30% more projects.”

In this market, it may be wise to let future homeowners remodel the bathroom or the kitchen to make design decisions that are best for their specific taste and lifestyle. As a seller, your dollars are time might be better spent working on small cosmetic updates, like refreshing some paint and power washing the exterior. Instead of over- investing in your home with upgrades that the buyers may change anyway, work with a real estate professional to determine the key projects that will maximize your listing without overdoing it.

Focus on getting a good return on your investment

When planning any bigger project to tackle, you and your real estate agent will want to discuss the potential return on your investment and if those projects are worth the cost. Some homes do need a kitchen or a bathroom renovation, roof repairs or other major work, but not all of them. You might be surprises by how well your house could fair in today’s sellers’ market. Hanley Wood states”

“The 2020 Cost v Calue reports shows a predictable increase in costs for all 22 remodeling projects but a consistent dip on the perceived value of those projects at the time of home sale, as estimated by real- estate professions in more than 100 metro areas across the U.S. This results in a slight downturn on the return on investment for nearly all projects relative to the trends we saw in last year’s report.”

Ideally, homeowners getting ready to move should try to avoid over-investing in big renovations if they won’t make that money back when they sell their house. According to the 2020 state of home spending report from home advisor: “The average household spending on home services rose to $13,138, an increase over last years survey results, where homeowners who did projects spend $9,08 on average in 2019.”

Before you renovate, contact a local real estate professional to see if it’s the best course of action. You may find out that putting your house on the market as-is will help you sell quickly, and it may result in the best return on your investment. Every home is different, but a conversation with your agent is mission-critical to make sure you make the right moves when selling this season.

Bottom Line

We’re in a string seller’s market and that means you have the leverage to sell your house on your terms. Let’s connect today to determine if renovating is really the best way to spend your time and money before you sell.

February 2021 Market Activity

Check out market activity from February!

While there is a decrease from previous years in New Listings, the number of pending sales is up by 51.6% compared to the previous year and sold sales is increased by 35.2%.
Looking at this February compared to past years, the number of condos/TIC/coop on the market has decreased by 16.7%. If you thinking of selling, now could be the time with a decreased number of condos on the market.
The number of pending condo/TIC/coop sales has skyrocketed this February compared to previous years, explained by the current hot real estate market.
The number of sold listings was increased for February, again explainable by the increased market activity in recent months

The real estate market, specifically focusing with condos, tic, and co-ops for February continues to be hot. In the past few months, the market has seen much increased activity with the number of pending and sold sales. If you are considering buying or selling your condo or home, there is no better time than now! Feel free to reach out to discuss the current market, or for any advice!

Sources: San Francisco Association of Realtors