This summer has been tumultuous for homebuyers and home sellers as they navigated blistering inflation, higher mortgage interest rates, and record home prices. But, the latest existing housing sales report from the National Association of REALTORS suggests that the market may be headed toward stabilization.
Housing sales volume in July 2022 retreated 5.9% from the previous month and was 20.2% lower than in July 2021. Meanwhile, median home prices shrank from $413,800 in June to $403,800 in July, but prices were still 10.8% higher than a year ago in July 2021, marking 125 consecutive months of year-over-year price increases.
Among the reasons cited for the declines was mortgage interest rates that went above 6% in June, but have since fallen to nearly 5%. Compared to 2021 when the average commitment rate for a conventional 30-year fixed rate mortgage was 2.96%, consumers paid double that percentage (5.41%) for the same loan in July 2022.
Homes are staying on the market slightly longer – from 2.6 months of inventory on hand in July 2021 to 3.3 month’s supply in July 2022. Yet, housing sales are still brisk. Eighty-two percent of homes sold in July 2022 were on the market for less than a month.
Housing shortages still abound, which is why prices aren’t falling any more than they have. Exacerbating the shortage is a slowdown in new single-family home starts as home builders turn instead to multi-family projects.
If interest rates and home prices continue to drop, sales volume could heat up again.
Hot market or not, the agent you have representing you truly makes all of the difference in how your transaction will play out. The latest installment in our Responding To Today series addresses how to fix, or better yet avoid, mistakes that can have a serious impact on your checkbook!
Real Estate in 2021: How to Avoid – and Fix – Costly Mistakes
For those buying or selling a home in today’s ultra-competitive real estate market, time is not a luxury afforded to most. Decisions are made quickly, with many buyers in particular left to worry that they’re setting themselves up to make a costly mistake. And while homeowners seemingly have the upper hand in this universally hot sellers’ market, the myriad of factors that play a role in a frenzied sales and negotiation scenario leaves much room for error.
So what’s a buyer or seller to do in this unprecedented market? We sat down with two leaders in the industry-Christy Budnick, CEO of Berkshire Hathaway HomeServices and Allan Dalton, SVP of Research and Development for Berkshire Hathaway HomeServices-to hear their recommendations for avoiding, or fixing, many common and current real estate missteps.
Q: A recent Wall Street Journal article chronicles the regrets and mistakes of recent buyers who rushed into a purchase-but in this market, many buyers feel that’s the only option. How can would-be buyers feel confident that they’re buying the right house at the right price?
Christy Budnick: Ifs normal for buyers to feel this type of stress in such a strong sellers’ market. But I would encourage them to look at the big picture and the benefits of a real estate purchase in the long term. With interest rates at historic lows, if a buyer plans on staying in a home for 10 years, the average appreciation of that home, plus the tax advantages of home ownership, will typically make the higher-than-normal sales price more than worth it.
Allan Dalton: In a highly competitive, multioffer environment, you want to be able to buy on the best terms, but you don”! want to lose it. So as you’re figuring out what your top offer number will be, ask yourself this question: “Am I willing to deprive myself or my family of this lifestyle because of $100 a week, $50 a day, $50 a week?” I never want to be cavalier with money, but the point I’m trying to make is that I’ve never bought a home I wouldn’t have paid more for. If you’re investing in your lifestyle and you break the numbers down in that manner, it’s much easier to answer that question and understand if you actually feel like you’d be paying too much.
Aside from the money side of things, don’t use a competitive market as an excuse not to do your due diligence. I would never buy a home without going back five or six times, parking in front of the home in the morning and also in the evening to see what traffic is like. Make sure you walk around the neighborhood and talk to the neighbors, especially the next-door neighbors if possible. If you’re buying from out of town, have your realtor do that work for you. I once bought a home from across the country and had my realtor take videos at 5:00 in the morning, 6:00 in the morning, 7:00 in the morning. That drove the realtor crazy, but the safety of my family is worth it to me. Before you make that offer, ensure there·s nothing that you could know that you don’t know-about the town, the schools, the home, the neighborhood, values, zoning restrictions. Because these are the things that end up making people think they made a mistake in buying a home.
Q: Many sellers have been waiting to list their homes, potentially hoping to capture the apex of the market. What steps can these sellers take to avoid missing the right moment to list?
Christy Budnick: This is such a debatable topic. The critical consideration in this decision is the relationship between supply and demand, and what can we anticipate about what might happen to supply and demand? Right now, supply and demand is completely in the favor of sellers. But what might happen to the frothy market as economic conditions change? By every indication, the strength of the economy and !he anticipation of inflation probably means that interest rates will continue to go up. Well, as rates continue to go up, fewer and fewer buyers will have the ability to afford the homes that they want to buy. As fewer buyers are in the marketplace, the relationship between supply and demand starts to level out, which will result in a cooling of home price appreciation. The summer is also a traditional time of the year where homes come on the market for sale. So you·ve got this combination of fewer buyers in the market moving forward and more homes for sale as we move forward. Those two things will most likely and I think undoubtedly create a cooling of home price appreciation.
Allan Dalton: When the market is moving and changing so fast, it’s more valuable than ever to have a real estate agent-particularly if you are a seller in a competitive bidding war scenario. Let me give you an analogy: If you were a great football player and about to become a free agent, would you do that without the help of an agent? Of course not! When you have an asset that has great appeal and great demand, that’s when a realtor has the greatest value in maximizing that demand. It’s always better to rely on somebody who can navigate and manage and negotiate on your behalf-and create even more demand.
Q: Some homeowners are waiting to list because they’re worried they’ll pay too much for their next home. Do you think this is a mistake or a good strategy?
Christy Budnick: I just feel like now, 2021, is really the time to consider a sale and purchase, especially because of where I see interest rates going. Consider this: A buyer might be paying
$30,000, $40,000 or even $50,000 more for a house today than they potentially could by waiting until next year. But wait. what are they getting for the home that they’re selling? Assuming the home you are selling is less expensive than the one you are buying, are you going to get $15,000. $20,000 or $25,000 more today than you might next year? So now I’m paying $50,000 more for the home I’m buying, but I’m earning $25,000 more for the home I’m selling, so my net differential is $25,000 negative to me. What”s the monthly payment differential?
And if that seller takes a short-term hit to their equity-let’s say they buy at $50,000 right at the top of the market and it corrects-well, if they’re buying a home that they’re going to be in for eight, 10, 13 years, what does that appreciation annually need to look like, even if there’s a short-term blip in the value for the first one, two or three years that they own? It is so critical for people to think about these scenarios of value, payment and equity in a holistic way to make the right decision. Using a real estate professional with extensive knowledge of the local market is critical here in understanding the entire equation and its impact on your finances in the long term.
The granite question is one I am frequently asked from clients, friends, and family. The questions range from “Is granite out of date yet or is it still in fashion?” to “Is it worth the money?”
Long story short, yes to both. Luckily there are some great new options on the market that will update your space and in some cases are less expensive than granite. Check out this article from our newsletter below.
Granite has long been the top choice for kitchen counters. But it can be expensive, and as a result, many people are looking at a variety of alternatives. Perhaps you just want a completely different look in your kitchen. Before you make your decision, the following are some of the most popular countertop options at a variety of price points to help you evaluate all of your options.
Wood looks great in many kitchen designs, especially if you want to look rustic or homey. Most woods aren’t durable enough for countertops, but butcherblock is an excellent choice. Butcher block is assembled wood that is heavy duty and made specifically for chopping or food prep, and it makes a great countertop in your kitchen.
Engineered surfaces cover a lot of ground, but some common types are Silestone or Correll. These are manufactured countertops designed to give you the look and feel of real stone. They aren’t necessarily the most inexpensive option, depending on which option you select, but they can be more affordable than granite.
Some people prefer the look of marble to granite. It’s considered luxurious and can give your kitchen a really rich look. Marble is a more porous stone, however, and can become problematic in certain areas of your kitchen, such as when used as a backsplash. Marble is best used in moderation, so you might want to include it as a feature rather than as the entire surface.
For an industrial-looking applications, concrete is a fantastic option. It can be created in any size or shape and is relatively inexpensive. But even when finished, concrete can be susceptible to scratches and stains. On the plus side, though, these counters can be fixed with relative ease. Concrete may be one of the things that is fairly easy to install yourself.
Some people shy away from tile on countertops, but if done properly, it can be a good fit. Tile countertops do need to be properly grouted to prevent dirt from building up and they should never have food prepared directly on the surface; otherwise, tile of various sorts can make for amazing counters.
Metal is also a go-to option for many people and stainless steel counters are a great fit. Stainless steel is durable and elegant. It is easy to clean without any fear of damage or staining. They can scratch and even dent depending on your care and use of them.
In case you are not subscribed to my newsletter, here is some good news and excellent reading about the housing market from our friends at Freddie Mac. If 2019 was any indication, 2020 will be a relatively good time for potential homebuyers to make the transition to homeownership.
Questions? Call Maxine for answers! 703-836-1464
Over the last 12 months, interest rates fell by almost a whole percentage point and high demand resulted in a steady increase in home values across the nation. Current market projections forecast low mortgage rates continuing into 2020, providing potential buyers the opportunity to lock in favorable mortgage terms and start building long-term financial independence.
Let’s break down the housing market’s latest trip around the sun.
Strong equity gains
You often hear that one of the benefits of buying a home is building equity. But what exactly is equity? In the simplest terms, equity is the difference between how much your home is worth and how much you owe on your mortgage. It’s the portion of the home that you own. Over time, through paying down your principal balance and your home’s appreciation, you can build equity.
But it’s important to note that some markets appreciate faster than others and there is no guarantee that your home will increase in value. It all depends on market conditions at the time you sell your home.
According to CoreLogic’s most recent homeowner equity report, 2019 was a strong year for equity gains. On average, U.S. homeowners with mortgages saw their equity increase by 5.1% since the third quarter of 2018 and the average homeowner gained approximately $5,300 in equity over the past year.
Interest rates dropped
2019 was a year of declining interest rates. According to our mortgage rates survey, the 30-year fixed-rate mortgage averaged an interest rate of 4.51% at the start of the year but dropped to a low of 3.49% during September of 2019. Our latest forecast predicts that in 2020, rates will remain low, averaging around 3.8%.
So, will 2020 be a good year to buy a home? A look back at the past year shows a strong and steady market. Based on the forecast, the outlook is promising for the housing market with interest rates projected to remain low and appreciation expected to continue as we settle into the next decade.
Whether you are shopping for a home in a familiar location or a new neighborhood, remember that you are buying more than a home. You are also buying the neighborhood, so it helps to become familiar with your favorites, whether you drive them or walk them.
Why is that important? It’s the neighborhood that helps establish home values, which depend largely on location and local amenities (close to high-paying jobs, high-scoring schools, high-starring restaurants, transportation, etc.)
Neighborhoods can also change over time, so look for signs of transition. Do you see reinvestment or decline? Homeowners reinvest by repainting, making repairs and refreshing their homes with updates. What kinds of stores and services do you see? Dollar stores or boutiques, payday loan shops or investment firms, fast food or upscale restaurants. Are you the right target demographic?
Visit the area at different times of the day and on weekends. What’s traffic like? How long is your commute? If you are looking in a neighborhood a little further out than where you currently live, you definitely want to drive your commute at rush hour traffic.
As you drive, check a few home-buying apps. On your Realtor.com app, you can see crime stats and amenities and save your favorites to show your Berkshire Hathaway Home Services network professional.
You’ll be happier if you pick the neighborhood first, then choose the home.
“The Berkshire Hathaway brand is recognized and respected worldwide,” said Kevin Wiles, president and CEO of Berkshire Hathaway HomeServices PenFed Realty. “The fact that we’re #1 in satisfaction among repeat sellers is a testament to our dedication to consistently exceeding our clients’ expectations during every stage of the transaction.”
Among repeat sellers, the company also scored the highest when it came to satisfaction with their agent/salesperson, marketing, and the closing process.
Home prices rose 1.4 percent in the first quarter of 2017, according to the Federal Housing Finance Agency’s (FHFA) House Price Index (HPI). The HPI year-over-year— based on prices for homes with Fannie Mae- and Freddie Mac-backed mortgages— was up 6.0 percent.
“The steep, multi-year rise in U.S. home prices continued in the first quarter,” said Andrew Leventis, deputy chief economist for the FHFA, in a statement. “Mortgage rates during the quarter remained slightly elevated relative to most of last year, but demand for homes remained very strong. With housing inventories still languishing at extremely low levels, the strong demand led to another exceptionally large quarterly price increase.”
Per the Index, quarterly home price changes ranged from 1.0 percent in the Middle Atlantic Census division to 2.0 percent in the Pacific Census division.
Everywhere you turn you hear real estate agents talking about the “Spring Market”, the “real estate rush”, the “Spring buyer frenzy”. While a much larger number of people do tend to move between March and June, the hype really is just that… hype. The 2017 Spring Real Estate Market, however, appears to be the real deal. RISMedia tends to agree.
Homebuyers this spring will meet out-of-this-world prices and unsparing competition—a real estate rush.
According to Clear Capital’s recently released Home Data Index (HDI) Market Report, the national median days on market is 43 days, down from an 85-day stretch seen in January 2012. Days on market in Denver, Colo., Lincoln, Neb., and Raleigh, N.C., are coming in under two weeks, while days on market in Fresno, San Francisco and San Jose, Calif., and Portland, Ore., and Seattle, Wash., are finishing in under three weeks.
“Along with an increase in temperatures, the spring season also brings out the buyers and an increase in demand to the housing market, which most often translates to faster price growth and a decrease in marketing times,” says Alex Villacorta, vice president of Research and Analytics at Clear Capital. “But what’s great news for homeowners—particularly those looking to get out of negative equity or sell outright—is unfortunately bad news for prospective buyers. This springtime uptick in demand is likely to put buyers in a major time pinch in areas where marketing time is already lightning fast.”
Home price growth in the first quarter of 2017 was 0.9 percent, according to the report, with quarterly growth across regions between 0.8 percent and 1 percent. Prices grew 1.8 percent quarterly in San Antonio, Texas, making it the fastest growing metropolitan market, while quarterly prices in San Jose, Calif., remained at a standstill, posting no growth.
“This situation, coupled with the already precarious affordability situation for buyers, can lead to a self-fulfilling prophecy of sorts for the market as a whole, one where buyers rush to purchase homes at or above asking price in fear of waiting too long and losing out—pushing prices up and pulling marketing times even lower,” Villacorta says. “Buyers will need to remain vigilant this spring and constantly keep their eyes peeled for new supply entering the market, and, most importantly, be wary of rushing to purchase at sky-high prices.”
Spring – a time for new beginnings – is just around the corner. It’s time to air out the winter blahs and let the sun shine in. But there’s no need to knock ourselves out or over-spend on cleaning supplies. The home editors at Good Housekeeping magazine offer tips on cleaning every corner of your home without exhausting yourself or your wallet:
One simple solution: No need to spend money on specialized cleaning products. Fill an empty spray bottle with a quart of warm water mixed with four tablespoons of baking soda, and use it for most surfaces, including windows, counters, tile, and appliances.
Toothpaste trick– If your kids are a little too creative, a dab of toothpaste will remove colored marker stains from wooden tables.
Wipe out wall doodles– A good sprinkling of baking soda on a damp sponge should wipe your walls clean of ‘artwork.’
Funky cutting board?– Rub the cut side of a lemon over it to remove old stains and odors.
Wake up patio furniture– add a squirt of dish soap to a bowl of warm water. Wipe down surfaces and hose them off with plain water.
Soften scratchy towels– Get rid of mineral build-up by washing scratchy towels in the hottest water possible with nothing but a cup of ammonia added.
Easy copper cleanup– A little ketchup – yes, ketchup! – will get those copper-bottomed pots and pans shining.
Dishwasher duty– Once every few weeks, especially while flu season hangs around, get rid of bacteria by adding a quarter cup of bleach to the regular dish cycle.
Disinfect the disposal– Run a few lemon peels, a little salt, and a few ice cubes through it to sanitize and banish odors.
Don’t forget the sponge– Keep that wet sponge clean and bacteria-free by zapping it in the microwave for one minute.
While most people associate the ‘hip younger crowd’ as living in cramped apartments and condos in the heart of the city, a recent study suggests that today’s millennial generation is going for amenity rich neighborhoods in the suburbs!
Millennials are calling. They want the suburbs back.
Like generations before them, millennial homebuyers are beginning to shy away from city life, taking up residence in the suburbs—with one key difference.
According to a report by Zillow, millennial homebuyers are passing over starter homes, paying up for square footage typical of older generations: roughly 1,800 square feet.
Their preferences, however, reflect those of their older counterparts—specifically, an appetite for community amenities and townhouses.
“Millennials have delayed home-buying more than earlier generations, but don’t underestimate their impact on the housing market now that they’re buying,” says Jeremy Wacksman, CMO at Zillow. “As members of this huge generation start moving into the next stage of life, expect the homeownership rate to tick up and suburbs to change to suit their urban tastes. We’re constantly learning about this young group of homebuyers—we’re finding that they are more similar to older generations than many thought. Their views on community and homeownership are pretty traditional, and they don’t all fit the urban stereotype you might have in your head.”
Millennial homebuyers are also putting down roots like older generations—64 percent of those who moved in 2016, in fact, stayed within the same city, and only 7 percent relocated to another state, according to the report.
Half of millennial homeowners are in the suburbs, while 33 percent are in urban areas and 20 percent are in rural areas. Forty-two percent of homebuyers in 2016 were millennials.