Sellers Have an Opportunity with Today’s Home Prices
As mortgage rates started to rise this year, many homeowners began to wonder if the value of their homes would fall. Here’s the good news. Historically, when mortgage rates rise by a percentage point or more, home values continue to appreciate. The latest data on home prices seems to confirm that trend.
According to data from CoreLogic, home price appreciation has been re-accelerating since November. The graph below shows this increase in home price appreciation in green:
This is largely due to an ongoing imbalance in supply and demand. Specifically, housing supply is still low, and demand is high. As mortgage rates started to rise this year, many homebuyers rushed to make their purchases before those rates could climb higher. The increased competition drove home prices up even more. Selma Hepp, Deputy Chief Economist at CoreLogic, explains:
“Home price growth continued to gain speed in early spring, as eager buyers tried to get in front of the mortgage rate surge.”
And experts say prices are forecast to continue appreciating, just at a more moderate pace moving forward. A recent article from Fortune says:
“. . . the swift move up in mortgage rates . . . doesn’t mean home prices are about to crash. In fact, every major real estate firm with a publicly released forecast model . . . still predicts home prices will climb further this year.”
What This Means for You
If you’re thinking about selling your house, you should know you have a great opportunity to list your home and capitalize on today’s home price appreciation. As prices rise, so does the value of your home, which gives your equity a big boost.
When you sell, you can use that equity toward the purchase of your next home. And at today’s record-level of appreciation, that equity may be enough to cover some (if not all) of your down payment.
History shows rising mortgage rates have not had a negative impact on home prices. Now is still a great time to sell your house thanks to ongoing price appreciation. When you’re ready to find out how much equity you have in your current home and what’s happening with home prices in your local area, let’s connect.
Why It Just Became Much Easier To Buy a Home
Since the pandemic began, Americans have reevaluated the meaning of the word home. That’s led some renters to realize the many benefits of homeownership, including the feelings of security and stability and the financial benefits that come with rising home equity. At the same time, many current homeowners have decided their house no longer meets their needs, so they moved into homes with more space inside and out, including a home office for remote work.
However, not every purchaser has been able to fulfill their desire for a new home. Here are two obstacles some homebuyers are facing:
- The ability to save for a down payment
- The ability to qualify for a mortgage at the current lending standards
This past week, both of those challenges have been mitigated to some degree for many purchasers. The FHFA (which handles mortgages by Freddie Mac, Fannie Mae, and the Federal Housing Administration) is raising its loan limit for prospective purchasers in 2022. The term used to describe the maximum loan amount they will entertain is the Conforming Loan Limit.
What Is the Difference Between a Conforming Loan and a Non-Conforming Loan?
Investopedia explains the difference in a recent post:
“Conforming loans are the only loans that meet the requirements to be acquired by Fannie Mae and Freddie Mac. Jumbo loans, which exceed the conforming limit, are the most common type of nonconforming loan.”
What Difference Does It Make to Me as a Home Buyer?
A Forbes article earlier this year explains the benefits of a conforming loan and why they exist:
“Since lenders can’t sell non-conforming loans to Fannie Mae or Freddie Mac to free up their cash, they’re a bit riskier for the lender. This is especially true for jumbo loans, which aren’t backed by any government guarantees. If you default on a jumbo loan, it’s a huge blow to the lender.
Thus, lenders generally charge higher interest rates to compensate, and they can have even more requirements. For example, lenders who give out jumbo loans often require that you make a down payment of at least 20% and show that you have at least six months’ worth of cash in reserve, if not more.”
What Happened Last Week?
The FHFA has significantly increased its Conforming Loan Limits for 2022. Sandra L. Thompson, FHFA Acting Director, explains in the press release that:
“Compared to previous years, the 2022 Conforming Loan Limits represent a significant increase due to the historic house price appreciation over the last year. While 95 percent of U.S. counties will be subject to the new baseline limit of $647,200, approximately 100 counties will have conforming loan limits approaching $1 million.”
This means that more homes now qualify for a conforming loan with lower down payment requirements and easier lending standards – the two challenges holding many buyers back over the last year.
The Federal Housing Administration (FHA) also increased its Conforming Loan Limits for 2022. That could also mean an easier path to homeownership for many prospective buyers. As the Forbes article explains:
“FHA loans can be very beneficial if you don’t have as much savings, or if your credit score could use some work.”
Buying your first or your next home may have just gotten much easier (less stringent qualifying standards) and less expensive (possibly lower mortgage rate). Let’s connect to discuss how these changes may impact you.
There Are More Homes Available Now than There Were This Spring
There’s a lot of talk lately about how challenging it can be to find a home to buy. While housing inventory is still low, there are a few important things to understand about the supply of homes for sale as we move into the end of the year.
The Number of Homes for Sale Usually Peaks in the Fall
In the residential real estate market, trends generally follow a predictable and seasonal pattern. Typically, the number of homes available for sale (or active monthly listings) peaks in the fall. But in a chapter where so little feels normal, the question becomes: should we expect a fall peak this year?
If we look at the active monthly listings for 2021 (shown in the chart below), we’ll see that the number of homes on the market has increased fairly steadily since spring this year. The realtor.com data shows we’re still seeing an increase in active inventory month-over-month. While that gain is a bit smaller month-to-month (see August to September in the chart), September numbers are still up from the month prior.The important takeaway here is the latest monthly numbers show growth. At the end of September, buyers had more options to pick from than they did this spring. That’s encouraging for buyers who may have paused their search months ago because they had trouble finding a home. Danielle Hale, Chief Economist at realtor.com, sums this up nicely:
“Put simply, this September buyers had more options than they've had all year and while that's typical of early fall, that's not what happened in 2020. Still, it's important to remember that while buyers may have an easier time this fall than they did in the spring, the market remains more competitive than it has been historically at this time of year.”
As Hale says, a fall peak in inventory is in line with typical seasonal trends. While it’s impossible to say for certain what the future holds for housing inventory, we do know both buyers and sellers have opportunities this season based on the latest data.
What Does That Mean for You?
If you’re thinking of buying a home, rest assured you do have more options now than you did earlier this year – and that’s a welcome relief. That said, today’s market is still highly competitive. This isn’t the time to slow your search. It’s actually the season when the number of homes available for sale tends to peak. Focus on the additional options with renewed energy this season and be prepared for ongoing competition from other buyers.
If you’re considering selling your house, realize that while growing, inventory is still low. Selling now means you’ll be in a great position to negotiate with buyers – and competition among buyers is good news for your bottom line. Eager buyers will likely be motivated to act before the holidays, giving you the benefit of a fast sale.
Whether you’re buying or selling, there’s still a chance to make your goals a reality this season. Let’s connect so we can discuss what’s going on with the local market and current trends and what they mean for you.
4 Big Incentives for Homeowners to Sell Now
The housing market keeps sailing along. The only headwind that could take it off course is the lack of inventory for sale. The National Association of Realtors (NAR) reports that there were 410,000 fewer single-family homes for sale this March than in March of 2020. The key to continued success in the residential housing market is for more listings to come on the market. However, many homeowners are concerned that selling their homes could be challenging for several reasons.
Recently, Homes.com released the findings of a survey that identified these concerns, as well as what it will take for homeowners to feel comfortable selling their houses. Here are the four major homeowner concerns and a quick explanation of what’s actually happening in the housing market today.
1. Homeowners don’t know if they’ll be able to secure their next home before selling.
In negotiations, leverage is the power that one side may have to influence the other side while moving closer to their negotiating position. A party’s leverage is based on the ability to award benefits or eliminate costs on the other side.
In today’s market, buyers have compelling reasons to purchase a home now:
- To own a home of their own
- To buy before prices continue to appreciate
- To secure a mortgage at a historically low rate, while they last
These buyer needs give the seller tremendous leverage. Most already realize this leverage enables the homeowner to sell at a good price. However, this leverage may also be used to negotiate time to find their next home. The homeowner could sell their home to the buyer at today’s price, which will enable the purchaser to take advantage of current mortgage rates. In return, the buyer might lease the house back to the seller for a pre-determined length of time while the seller finds a new home or has one built.
This gives the buyer what they want while also giving the seller what they need. It’s a true win-win negotiation.
2. Homeowners don’t know if their current home will sell for the asking price or top market price.
This is the perfect time to maximize profits while selling a house. NAR just released a study showing that bidding wars are at an all-time high. The study reveals that when comparing the first quarter of last year to the first quarter of this year, the number of offers on homes for sale doubled from an average of 2.4 to 4.8 offers.
Whenever there’s a bidding war, the price of the item for sale escalates. Bloomberg recently reported:
“For the first time ever, the average U.S. home is selling for above its list price.”
If a seller is looking for a top-dollar sale, there’s no better time to sell than right now.
3. Homeowners don’t know if they will get an offer without their home requiring work or updates.
Again, leverage is the greatest strength a seller has in this market. Due to the lack of homes for sale, many buyers are more willing to take on home improvement projects themselves in order to get the home they’re after.
A recent post on whether or not to renovate before selling notes:
“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 and 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.”
If a seller is worried about doing work or updates on their home, they must realize that today’s historically low inventory likely renders these projects less critical to the sale of the house.
4. Homeowners don’t know if they can have a quick closing process.
When speed is important, there are two points sellers should look at:
- The time it takes to find a buyer for the home
- The time it takes to close the transaction
In the latest Existing Home Sales Report, NAR explains:
“Properties typically remained on the market for 18 days in March, down from 20 days in February and from 29 days in March 2020. Eighty-three percent of the homes sold in March 2021 were on the market for less than a month.”
Eighteen days is fast, and it’s a new record. Here are the days the average house is on the market in each state:Regarding the time it will take to close the transaction, all-cash sales accounted for 23% of all home purchase transactions in March. All-cash sales can usually be closed in thirty days.
If a mortgage is necessary, the most recent Origination Insight Report from Ellie Mae shows:
“Time to close all loans decreased in March. The average time to close a purchase fell to 51 days, down from 53 the month prior.”
If you’re looking for a quick closing process, there’s never been a market in which the two-step process (finding a buyer and closing the deal) has taken less time.
Selling your house can be daunting, especially in a fast-paced market. However, the fact that we’re in such a strong sellers’ market clearly eliminates many common concerns. Let’s connect today so you can learn more about the opportunities for homeowners who are ready to sell.
Searching for a New Home?
Why It’s Important to Price Your House Right Today
Even in today’s sellers’ market, setting the right price for your house is one of the most valuable things you can do. According to the U.S. Economic Outlook by the National Association of Realtors (NAR), existing home prices nationwide are forecasted to increase by 4.5% in 2021. This means experts anticipate home values will continue climbing next year. Danielle Hale, Chief Economist for realtor.com, notes:
“We expect price gains to ease somewhat in 2021 and end 5.7% above 2020 levels, decelerating steadily through the spring and summer, and then gradually reaccelerating toward the end of the year.”
How to Price Your House
When it comes to setting the right price for your house, the goal is to increase visibility and drive more buyers your way. Instead of trying to win the negotiation with one buyer, you should price your house so that demand is maximized and more buyers want to take a look.
As a seller in today’s market, you might be thinking about pricing your house on the high end while so many of today’s buyers are searching harder than ever just to find a home to purchase. But here’s the thing – a high price tag does not mean you’re going to cash in big on the sale. It’s actually more likely to deter buyers.
Right now, even when there are so few houses for sale, your house is more likely to sit on the market longer or require a price drop that can send buyers running if it isn’t priced just right from the very beginning.httpIt’s It's important to make sure your house is priced correctly by working with a trusted real estate professional (Nancy Terracino 917-837-7798) throughout the process. When you price it competitively from the start, you won’t be negotiating with one buyer. Instead, you’ll likely have multiple buyers competing for the house, potentially increasing the final sale price.
The key is to make sure your house is priced to sell immediately. This way, it will be seen by the greatest number of buyers. More than one of them may be interested, and it will be more likely to sell at a competitive price.
Let’s connect to price your house correctly from the start so you can maximize your exposure and your return.
Homes Across the Country Are Selling Fast https://
- Buyers are actively searching for and purchasing homes at a record-breaking pace. According to the latest report from the National Association of Realtors (NAR), in July, 68% of homes were on the market for less than a month.
- With homes moving from listing day to pending sale in an average of just 22 days, it’s a great time to sell a house.
- Let’s connect today so you can make your move while buyers are scooping homes up faster than they’re coming to market.
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