82,338 Great Reasons to Buy a Home Today

82,338 Great Reasons to Buy a Home Today | Simplifying The Market

The financial benefits of buying a home as compared to renting one are always up for debate. However, one element of the equation is often ignored – the ability to build wealth as a homeowner.

Most experts are calling for home prices to continue appreciating over the next several years. The most recent Home Price Expectation Survey, a survey of over one hundred economists, real estate experts, and investment and market strategists, expects home appreciation to increase as follows:

  • 2021: 6%
  • 2022: 4.5%
  • 2023: 4%
  • 2024: 3.6%
  • 2025: 3.5%

Using their annual projections, the graph below shows the equity build-up a purchaser could earn, using a $350,000 home as an example:82,338 Great Reasons to Buy a Home Today | Simplifying The MarketA homeowner could increase their net worth by over $80,000 in five years. That’s an average of $16,000 annually. That number should be in any equation determining the financial benefits of owning a home compared to renting.

Bottom Line

Homeowners are going to make a substantial amount of money in home equity over the next five years. If you’re ready to buy a home, let’s connect so you can enjoy this great benefit as well.

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Why This Is a Great Year to Sell Your Vacation Home

Why This Is a Great Year to Sell Your Vacation Home | Simplifying The Market

As vaccines are administered and travel resumes, many of us are beginning to plan for those long-awaited vacations we missed out on over the past year. Some households are focusing their efforts on buying a vacation home rather than staying in a hotel, too. The National Association of Home Builders (NAHB) reports:

Second homes (i.e., homes sold to buyers who are not going to occupy the home year-round, but use it as a vacation home, investment property, etc.) account for 15 percent of new single-family home sales.”

It’s not surprising that there’s an increase in demand for vacation homes. The majority of Americans are realizing they prefer to be around small groups, as shown in a recent survey from The Harris Poll:

“Social distancing taught consumers new things about how they like to socialize; (75%) said, ‘during COVID social distancing I realized I preferred smaller social gatherings at home or at friends’ place.’”

Not only are vacation homes seen as a potentially more pandemic-friendly way to travel and socialize, but they can also serve as an extended home-away-from-home. With more Americans being given the option to continue working remotely or retire earlier than expected, vacation homes can be used year-round. The NAHB explains:

“Remote work arrangements have made it possible for some wealthier Americans to move to alternate locations that are not just small, suburban shifts from within their current metro area.  More fundamentally, second home demand may also be benefitting by an acceleration of retirement plans, as well as stock market gains.”

Bottom Line

The demand for vacation homes has increased and will continue to rise as we head into summer. If you own a house in a destination area and have thought about selling, now is a great time to take advantage of today’s high buyer interest. Let’s connect to discuss your opportunities in our local market.

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4 Major Reasons Households in Forbearance Won’t Lose Their Homes to Foreclosure

4 Major Reasons Households in Forbearance Won’t Lose Their Homes to Foreclosure | Simplifying The Market

There has been a lot of discussion as to what will happen once the 2.3 million households currently in forbearance no longer have the protection of the program. Some assume there could potentially be millions of foreclosures ready to hit the market. However, there are four reasons that won’t happen.

1. Almost 50% Leave Forbearance Already Caught Up on Payments

According to the Mortgage Bankers Association (MBA), data through March 28 show that 48.9% of homeowners who have already left the program were current on their mortgage payments when they exited.

  • 6% made their monthly payments during their forbearance period
  • 7% brought past due payments current
  • 6% paid off their loan in full

This doesn’t mean that the over two million still in the plan will exit exactly the same way. It does, however, give us some insight into the possibilities.

2. The Banks Don’t Want the Houses Back

Banks have learned lessons from the crash of 2008. Lending institutions don’t want the headaches of managing foreclosed properties. This time, they’re working with homeowners to help them stay in their homes.

As an example, about 50% of all mortgages are backed by the Federal Housing Finance Agency (FHFA). In 2008, the FHFA offered 208,000 homeowners some form of Home Retention Action, which are options offered to a borrower who has the financial ability to enter a workout option and wants to stay in their home. Home retention options include temporary forbearances, repayment plans, loan modifications, or partial loan deferrals. These helped delinquent borrowers stay in their homes. Over the past year, the FHFA has offered that same protection to over one million homeowners.

Today, almost all lending institutions are working with their borrowers. The report from the MBA reveals that of those homeowners who have left forbearance,

  • 5% have worked out a repayment plan with their lender
  • 5% were granted a loan deferral where a borrower does not have to pay the lender interest or principal on a loan for an agreed-to period of time
  • 9% were given a loan modification

3. There Is No Political Will to Foreclose on These Households

The government also seems determined not to let individuals or families lose their homes. Bloomberg recently reported:

“Mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclosures that threatens to hit the housing market later this year, a U.S. regulator said. The Consumer Financial Protection Bureau (CFPB) warning is tied to forbearance relief that’s allowed millions of borrowers to delay their mortgage payments due to the pandemic…mortgage servicers should start reaching out to affected homeowners now to advise them on ways they can modify their loans.”

The CFPB is proposing a new set of guidelines to ensure people will be able to retain their homes. Here are the major points in the proposal:

  • The proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.
  • The proposed rule would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
  • The proposal rule wants temporary changes to certain required servicer communications to make sure borrowers receive key information about their options at the appropriate time.

A final decision is yet to be made, and some do question whether the CFPB has the power to delay foreclosures. The entire report can be found here: Protections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X.

4. If All Else Fails, Homeowners Will Sell Their Homes Before a Foreclosure

Homeowners have record levels of equity today. According to the latest CoreLogic Home Equity Report, the average equity of mortgaged homes is currently $204,000. In addition, 38% of homes do not have a mortgage, so the level of equity available to today’s homeowners is significant.

Just like the banks, homeowners learned a lesson from the housing crash too.

“In the same way that grandparents and great grandparents were shaped by the Great Depression, much of the public today remembers the 2006 mortgage meltdown and the foreclosures, unemployment, and bank failures it created. No one with any sense wants to repeat that experience…and it may explain why so much real estate equity remains mortgage-free.”

What does that mean to the forbearance situation? According to Black Knight:

“Just one in ten homeowners in forbearance has less than 10% equity in their home, typically the minimum necessary to be able to sell through traditional real estate channels to avoid foreclosure.”

Bottom Line

The reports of massive foreclosures about to come to the market are highly exaggerated. As Ivy Zelman, Chief Executive Officer of Zelman & Associates with roughly 30 years of experience covering housing and housing-related industries, recently proclaimed:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

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Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC]

Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC] | Simplifying The Market

Multigenerational Housing Is Gaining Momentum [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • If your house is feeling a little cramped with the addition of adult children or aging parents, it might be time to consider a move-up into a multigenerational home that better suits your changing needs.
  • With benefits that include a combined homebuying budget and shared caregiving duties, an increasing number of households are discovering the value of a multigenerational home.
  • With such high demand for houses today, now is a great time to sell so you can upgrade to a multigenerational home that may better suit your evolving needs.

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Latest Jobs Report: What Does It Mean for You & the Housing Market?

Latest Jobs Report: What Does It Mean for You & the Housing Market? | Simplifying The Market

Last Friday, the Bureau of Labor Statistics released a very encouraging jobs report. The economy gained 916,000 jobs in March – well above expert projections of 650,000 to 675,000. The unemployment rate fell again and is now at 6%.

What does this mean for you?

Our lives are deeply impacted by our nation’s economy. The better the economy is doing overall, the better most individuals in the country will do as well. Here’s a look at what four experts told the Wall Street Journal after reviewing last week’s report.

Michael Feroli, JPMorgan Chase:

“The powerful tailwind of the reopening of economic activity appears to be gathering force; while the level of employment last month was still 8.4 million positions below that which prevailed before the pandemic, it is reasonable to expect that a majority of those lost jobs will be recouped in coming months.”

Mike Fratantoni, Mortgage Bankers Association:

“We fully expect that this pace of job gains will continue for months, and anticipate that the unemployment rate, now at 6%, will be well below 5% by the end of the year.”

Paul Ashworth, Capital Economics:

“With the vaccination program likely to reach critical mass within the next couple of months and the next round of fiscal stimulus providing a big boost, there is finally real light at the end of the tunnel.”

Jason Schenker, Prestige Economics:

“People are getting back to work and the vaccine isn’t just inoculating the population, it’s clearly inoculating the economy.”

What does this mean for residential real estate?

Today, the biggest challenge for homebuyers is the lack of homes currently for sale. With listing inventory down 52% from a year ago, bidding wars are skyrocketing. As a result, home prices are climbing.

One answer to this challenge is to build more homes to satisfy the demand. The latest jobs report gives hope for new housing construction, and therefore brings hope to buyers as well. Here’s what three industry economists said about the increase in construction jobs revealed in the report:

Lawrence Yun, Chief Economist, National Association of Realtors:

“Construction jobs boomed in March, one of the largest monthly gains ever. This raises the prospect for more home building and more inventory reaching the market in the upcoming months. The housing market has been hot with fast rising home prices but has been constrained by a lack of supply. By hiring more workers and building more homes, home prices will move to a manageable level to give more Americans a shot at ownership.”

Odeta Kushi, Deputy Chief Economist, First American:

“Great jobs report for a housing market in an inventory crisis. Residential construction building jobs increased 3.9% from pre-2020 recession peak in Feb. 2020. The construction industry remains a labor-intensive industry. We need more hammers at work to build more homes.”

Robert Dietz, Chief Economist, National Association of Home Builders:

“Good job numbers in March for residential construction. 37,000 gain from Feb to March. 3.03 million total employment for home builders and remodelers, and up 49,100 from Jan 2020.”

Bottom Line

An improving economy with a falling unemployment rate will benefit households across the country, as well as the overall housing market.

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Buyer Competition Is Good News for Sellers [INFOGRAPHIC]

Buyer Competition Is Good News for Sellers [INFOGRAPHIC] | Simplifying The Market

Buyer Competition Is Good News for Sellers [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • With so many buyers looking for homes to purchase and so few houses available today, there’s a substantial increase in bidding wars, and homes are selling fast.
  • According to the latest Realtors Confidence Index Survey from the National Association of Realtors (NAR), on average, houses are receiving over four offers from buyers and they’re selling in less than three weeks.
  • If you’re ready to make a move, let’s connect today so you can sell your house while the market is in your favor.

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There’s No Reason To Panic Over Today’s Lending Standards

There’s No Reason To Panic Over Today's Lending Standards | Simplifying The Market

Today, some are afraid the real estate market is starting to look a lot like it did in 2006, just prior to the housing crash. One of the factors they’re pointing to is the availability of mortgage money. Recent articles about the availability of low down payment loans and down payment assistance programs are causing fear that we’re returning to the bad habits seen 15 years ago. Let’s alleviate these concerns.

Several times a year, the Mortgage Bankers Association releases an index titled The Mortgage Credit Availability Index (MCAI). According to their website:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is…a summary measure which indicates the availability of mortgage credit at a point in time.”

Basically, the index determines how easy it is to get a mortgage. The higher the index, the more available mortgage credit becomes. Here’s a graph of the MCAI dating back to 2004, when the data first became available:There’s No Reason To Panic Over Today's Lending Standards | Simplifying The MarketAs we can see, the index stood at about 400 in 2004. Mortgage credit became more available as the housing market heated up, and then the index passed 850 in 2006. When the real estate market crashed, so did the MCAI (to below 100) as mortgage money became almost impossible to secure. Thankfully, lending standards have eased somewhat since. The index, however, is still below 150, which is about one-sixth of what it was in 2006.

Why did the index rage out of control during the housing bubble?

The main reason was the availability of loans with extremely weak lending standards. To keep up with demand in 2006, many mortgage lenders offered loans that put little emphasis on the eligibility of the borrower. Lenders were approving loans without always going through a verification process to confirm if the borrower would likely be able to repay the loan.

Some of these loans offered attractive, low interest rates that increased over time. The loans were popular because they could be obtained quickly and without the borrower having to provide documentation up front. However, as the rates increased, borrowers struggled to pay their mortgages.

Today, lending standards are much tighter. As Investopedia explains, the risky loans given at that time are extremely rare today, primarily because lending standards have drastically improved:

“In the aftermath of the crisis, the U.S. government issued new regulations to improve standard lending practices across the credit market, which included tightening the requirements for granting loans.”

An example of the relaxed lending standards leading up to the housing crash is the FICO® credit score associated with a loan. What’s a FICO® score? The website myFICO explains:

“A credit score tells lenders about your creditworthiness (how likely you are to pay back a loan based on your credit history). It is calculated using the information in your credit reports. FICO® Scores are the standard for credit scores—used by 90% of top lenders.”

During the housing boom, many mortgages were written for borrowers with a FICO score under 620. Experian reveals that, in today’s market, lenders are more cautious about lower credit scores:

“Statistically speaking, 28% of consumers with credit scores in the Fair range are likely to become seriously delinquent in the future…Some lenders dislike those odds and choose not to work with individuals whose FICO® Scores fall within this range.”

There are definitely still loan programs that allow a 620 score. However, lending institutions overall are much more attentive about measuring risk when approving loans. According to Ellie Mae’s latest Origination Insight Report, the average FICO® score on all loans originated in February was 753.

The graph below shows the billions of dollars in mortgage money given annually to borrowers with a credit score under 620.There’s No Reason To Panic Over Today's Lending Standards | Simplifying The MarketIn 2006, mortgage entities originated $376 billion dollars in loans for purchasers with a score under 620. Last year, that number was only $74 billion.

Bottom Line

In 2006, lending standards were much more relaxed with little evaluation done to measure a borrower’s potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. These are two very different housing markets, so there’s no need to panic over today’s lending standards.

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What It Means To Be in a Sellers’ Market

What It Means To Be in a Sellers’ Market | Simplifying The Market

If you’ve given even a casual thought to selling your house in the near future, this is the time to really think seriously about making a move. Here’s why this season is the ultimate sellers’ market and the optimal time to make sure your house is available for buyers who are looking for homes to purchase.

The latest Existing Home Sales Report from The National Association of Realtors (NAR) shows the inventory of houses for sale is still astonishingly low, sitting at just a 2-month supply at the current sales pace.

Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market in which there are enough homes available for active buyers (See graph below):What It Means To Be in a Sellers’ Market | Simplifying The MarketWhen the supply of houses for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. As a result, competition among purchasers rises and more bidding wars take place, making it essential for buyers to submit very attractive offers.

As this happens, home prices rise and sellers are in the best position to negotiate deals that meet their ideal terms. If you put your house on the market while so few homes are available to buy, it will likely get a lot of attention from hopeful buyers.

Today, there are many buyers who are ready, willing, and able to purchase a home. Low mortgage rates and a year filled with unique changes have prompted buyers to think differently about where they live – and they’re taking action. The supply of homes for sale is not keeping up with this high demand, making now the optimal time to sell your house.

Bottom Line

Home prices are appreciating in today’s sellers’ market. Making your home available over the coming weeks will give you the most exposure to buyers who will actively compete against each other to purchase it.

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2021 Real Estate Myth Buster [INFOGRAPHIC]

2021 Real Estate Myth Buster [INFOGRAPHIC] | Simplifying The Market

2021 Real Estate Myth Buster [INFOGRAPHIC] | Simplifying The Market

Some Highlights

  • There are a lot of misconceptions about buying or selling a home today, making it challenging to know exactly how to navigate the current real estate landscape.
  • Here’s a little clarity when it comes to 5 common myths about the 2021 housing market.
  • Let’s connect to discuss your needs and so you can decipher facts from fiction in our local market.

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Buyer & Seller Perks in Today’s Housing Market

Buyer & Seller Perks in Today’s Housing Market | Simplifying The 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 Perk 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 the record-lows from 2020 and earlier this year, it’s still way lower than historic norms, making purchasing a home an ongoing perk for hopeful buyers (See graph below):Buyer & Seller Perks in Today’s Housing Market | Simplifying The MarketThis 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 of 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 but in particular for 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, it’s 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 it’s creating a serious sellers’ market. According to Danielle Hale, Chief Economist at realtor.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):

Buyer & Seller Perks in Today’s Housing Market | Simplifying The MarketThe 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 by the National Association of Realtors (NAR), 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 of 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-paced spring market.

Bottom Line

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

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