2 Myths Holding Back Home Buyers

2 Myths Holding Back Home Buyers | MyKCM

Urban Institute recently released a report entitled, “Barriers to Accessing Homeownership: Down Payment, Credit, and Affordability,”which revealed that,

“Consumers often think they need to put more money down to purchase a home than is actually required. In a 2017 survey, 68% of renters cited saving for a down payment as an obstacle to homeownership. Thirty-nine percent of renters believe that more than 20% is needed for a down payment and many renters are unaware of low–down payment programs.”

Myth #1: “I Need a 20% Down Payment”

Buyers often overestimate the down payment funds needed to qualify for a home loan. According to the same report:

“Most potential homebuyers are largely unaware that there are low-down payment and no-down payment assistance programs available at the local, state, and federal levels to help eligible borrowers secure an affordable down payment.”  

These numbers do not differ much between non-owners and homeowners. For example, “30% of homeowners and 39% of renters believe that you need more than 20 percent for a down payment.”

While many believe that they need at least 20% down to buy their dream homes, they do not realize that there are programs available which allow them to put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with programs that have emerged allowing less cash out of pocket.

Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

Similar to the down payment, many either don’t know or are misinformed about what FICO® score is necessary to qualify.

Many Americans believe a ‘good’ credit score is 780 or higher.

To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

 

As you can see in the chart above, 51.7% of approved mortgages had a credit score of 600-749.

Bottom Line

Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

How Does the Supply of Homes for Sale Impact Buyer Demand?

How Does the Supply of Homes for Sale Impact Buyer Demand? | MyKCM

The price of any item is determined by the supply of that item, as well as the market’s demand for it. The National Association of REALTORS (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their monthly REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand).

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”

 

How Does the Supply of Homes for Sale Impact Buyer Demand? | MyKCM

The darker the blue, the stronger the demand for homes is in that area. The survey showed that in 38 out of 50 states buyer demand was slightly lower than this time last year but remains strong. Only six states had a ‘stable’ demand level.

Seller Supply 

The index also asked: “How would you rate seller traffic in your area?”

As you can see from the map below, 23 states reported ‘weak’ seller traffic, 22 states and Washington D.C. reported ‘stable’ seller traffic, and 5 states reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for homes.

How Does the Supply of Homes for Sale Impact Buyer Demand? | MyKCM

Bottom Line

Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet buyer demand, prices will continue to increase. If you are debating listing your home for sale, let’s get together so I can help you capitalize on the demand in the market now!

Home Sales Expected to Continue Increasing in 2019

Freddie MacFannie Mae, and the Mortgage Bankers Association are all projecting that home sales will increase nicely in 2019. Below is a chart depicting the projections of each entity for the remainder of 2018, as well as for 2019.

Home Sales Expected to Continue Increasing in 2019 | MyKCM

As we can see, Freddie MacFannie Mae, and the Mortgage Bankers Association all believe that homes sales will increase steadily over the next year. If you are a homeowner who has considered selling your house recently, now may be the best time to put it on the market.

How Long Do Most Families Live in a House?

How Long Do Most Families Live in a House? | MyKCM

The National Association of Realtors (NAR) keeps historical data on many aspects of homeownership. One of their data points, which has changed dramatically, is the median tenure of a family in a home, meaning how long a family stays in a home prior to moving.

As the graph below shows, over the last twenty years (1985-2008), the median tenure averaged exactly six years. However, since 2014, that average is almost ten years – an increase of almost 50%.

How Long Do Most Families Live in a House? | MyKCM

Why the dramatic increase?

The reasons for this change are plentiful!

The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property). Also, the uncertainty of the economy made some homeowners much more fiscally conservative about making a move.

With home prices rising dramatically over the last several years, 95.3% of homes with a mortgage are now in a positive equity situationaccording to CoreLogic.

With the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.

One other reason for the increase was brought to light by NAR in their 2018 Home Buyer and Seller Generational Trends ReportAccording to the report,

“Sellers 37 years and younger stayed in their home for six years…”

These homeowners, who are either looking for more space to accommodate their growing families or for better school districts to do the same, are likely to move more often (compared to typical sellers who stayed in their homes for 10 years). The homeownership rate among young families, however, has still not caught up to previous generations, resulting in the jump we have seen in median tenure!

What does this mean for housing?

Many believe that a large portion of homeowners are not in a house that is best for their current family circumstance; they could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple living in a one-bedroom condo planning to start a family.

These homeowners are ready to make a move, and since a lack of housing inventory is still a major challenge in the current housing market, this could be great news.

The #1 Reason to List Your House for Sale NOW!

The #1 Reason to List Your House for Sale NOW! | MyKCM

If you are debating whether or not to list your house for sale this year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes for Sale

The National Association of Realtors’ (NAR) Chief Economist Lawrence Yun recently commented on the current lack of inventory:

“Inventory coming onto the market during this year’s spring buying season – as evidenced again by last month’s weak reading – was not even close to being enough to satisfy demand. 

That is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster – in many parts of the country.”

The latest Existing Home Sales Report shows that there is currently a 4.1-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market, and 6.1% lower than last year’s inventory level.

The chart below details the year-over-year inventory shortages experienced over the last 12 months:

The #1 Reason to List Your House for Sale NOW! | MyKCM

Anything less than a six-month supply is considered a “seller’s market.”

Bottom Line

Let’s get together to discuss the supply conditions in our neighborhood so that I can assist you in gaining access to the buyers who are ready, willing, and able to buy right now!

Are You Wondering If You Can Buy Your First Home?

Are You Wondering If You Can Buy Your First Home? | MyKCM

There are many people sitting on the sidelines trying to decide if they should purchase a home or sign a rental lease. Some might wonder if it makes sense to purchase a house before they get married or start a family, some might think they are too young, and still, some others might think their current incomes would never enable them to qualify for a mortgage.

We want to share what the typical first-time homebuyer actually looks like based on the National Association of Realtors’ most recent Profile of Home Buyers & Sellers. Here are some interesting revelations on the first-time buyer:

Are You Wondering If You Can Buy Your First Home? | MyKCM

Bottom Line

You may not be much different than many people who have already purchased their first homes. Let’s meet to determine if your dream home is within your grasp today.

Top 5 Reasons You Shouldn’t FSBO

Top 5 Reasons You Shouldn’t FSBO | MyKCM

In today’s market, with home prices rising and a lack of inventory, some homeowners may consider trying to sell their home on their own, known in the industry as a For Sale by Owner (FSBO). There are several reasons why this might not be a good idea for the vast majority of sellers.

Here are the top five reasons:

1. Exposure to Prospective Buyers

According to the 2017 Profile of Home Buyers and Sellers from NAR, last year 95% of buyers search online for a home. That is in comparison to only 15% looking at print newspaper ads. Most real estate agents have an internet strategy to promote the sale of your home. Do you?

2. Results Come from the Internet

Where did buyers find the home they actually purchased?

  • 49% on the internet
  • 31% from a Real Estate Agent
  • 7% from a yard sign
  • 1% from newspapers

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

3. There Are Too Many People to Negotiate With

Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale by Owner:

  • The buyer who wants the best deal possible
  • The buyer’s agent who solely represents the best interest of the buyer
  • The buyer’s attorney (in some parts of the country)
  • The home inspection companies, which work for the buyer and will almost always find some problems with the house
  • The appraiser if there is a question of value

4. FSBOing Has Become More And More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

5. You Net More Money When Using an Agent

Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.

study by Collateral Analytics revealed that FSBOs don’t actually save anything, and in some cases, may be costing themselves more, by not listing with an agent. One of the main reasons for the price difference at the time of sale is:

“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”

If more buyers see a home, the greater the chances are that there could be a bidding war for the property. The study showed that the difference in price between comparable homes of size and location is currently at an average of 6% this year.

Why would you choose to list on your own and manage the entire transaction when you can hire an agent and not have to pay anything more?

Bottom Line

Before you decide to take on the challenges of selling your house on your own, let’s get together to discuss your needs.

Days on The Market Drops to New Low in April

Days on The Market Drops to New Low in April | MyKCM

According to recently released data from the National Association of Realtors (NAR), the median number of days that a home spent on the market hit a new low of 26 days in April, as 57% of homes were on the market for under a month.

NAR’s Chief Economist, Lawrence Yun, had this to say,

“What is available for sale is going under contract at a rapid pace. Since NAR began tracking this data in May 2011, the median days a listing was on the market was at an all-time low in April, and the share of homes sold in less than a month was at an all-time high.”

Strong buyer demand, a good economy, and a low inventory of new and existing homes for sale created the perfect storm to accelerate the time between listing and signing a contract.

The chart below shows the median days on the market from April 2017 to April 2018:

Days on The Market Drops to New Low in April | MyKCM

Bottom Line

If you are a homeowner who is debating whether or not to list your home for sale, know that national market conditions are primed for a quick turnaround! Let’s get together to discuss exactly what’s going on in our area, today!

The Cost of Renting vs. Buying

The Cost of Renting vs. Buying [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (28.8%) vs. the percentage needed to buy a median-priced home (17.1%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!

Will Home Prices Fall as Mortgage Rates Rise?

Will Home Prices Fall as Mortgage Rates Rise? | MyKCM

Mortgage interest rates have increased by more than half of a point since the beginning of the year. They are projected to increase by an additional half of a point by year’s end. Because of this increase in rates, some are guessing that home prices will depreciate.

However, some prominent experts in the housing industry doubt that home values will be negatively impacted by the rise in rates.

Mark FlemingFirst American’s Chief Economist:

“Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage rates into perspective – they are unlikely to materially impact the housing market…

The driving force behind the increase are healthy economic conditions…The healthy economy encourages more homeownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage rates are on the rise because of a stronger economy and our housing market is well positioned to adapt.”

Terry LoebsFounder of Pulsenomics:

“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices. These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers.”

Laurie GoodmanCodirector of the Housing Finance Policy Center at the Urban Institute:

“Higher interest rates are generally positive for home prices, despite decreasing affordability…There were only three periods of prolonged higher rates in 1994, 2000, and the ‘taper tantrum’ in 2013. In each period, home price appreciation was robust.”

Industry reports are also calling for substantial home price appreciation this year. Here are three examples: