Housing Supply Not Keeping Up with Population Increase

Housing Supply Not Keeping Up with Population Increase | Simplifying The Market

Many buyers are wondering where to find houses for sale in today’s market. It’s a true dilemma. We see an increase in buyer demand, but the supply available for purchase isn’t keeping up.

The number of new housing permits issued prior to the great recession increased for 15 years until 2005 (from 1.12 million in 1990 to a pre-recession peak of 2.16 million in 2005). According to Apartment List,

From 1990 to 2005, the number of single-family permits issued more than doubled, while the number of multi-family permits grew by 49 percent.

When the housing market crashed, the number of new homes permitted decreased to its lowest level in 2009 (see below):Housing Supply Not Keeping Up with Population Increase | Simplifying The MarketSince then, supply and demand have been out of balance when it comes to new construction. According to the same report,

Construction of single-family homes has recovered much more slowly — the number of single-family housing units permitted in 2018 was barely half the number permitted in 2005.”

Why is new construction so important?

As the U.S. population increases, there is also an increase in the need for new homes. Today, new construction is not keeping up with the increase in the nation’s population. The report continues:

“The total number of residential housing units permitted in 2018 was roughly the same as the number permitted in 1994, when the country’s population was 20 percent less than it is today.”

Essentially, the dip in home building coupled with the steadily increasing U.S. population means there is now a selling opportunity for homeowners willing to list their current houses.

Bottom Line

If you’re considering selling your home to move up, now is a great time to get a positive return on your investment in a market with high demand. Let’s get together to determine the specific options available for you and your family.

A Great Way to Increase Your Family’s Net Worth

A Great Way to Increase Your Family’s Net Worth | Simplifying The Market

Every three years, the Federal Reserve conducts its Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.

The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).

These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.

Owning a home is a great way to build family wealth.

As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.

That is why Gallup reported Americans picked real estate as the best long-term investment for the sixth year in a row. According to this year’s results, 35% of Americans chose real estate. Stocks followed at 27%, then savings accounts and gold.

Bottom Line

If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to help you through the process.

Buying a Home: Do You Know the Lingo? [INFOGRAPHIC]

Buying a Home? Do You Know the Lingo? [INFOGRAPHIC] | Simplifying The Market

Buying a Home? Do You Know the Lingo? [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Buying a home can be intimidating if you’re not familiar with the terms used throughout the process.
  • To point you in the right direction, here’s a list of some of the most common language you’ll hear when buying a home.
  • The best way to ensure your home-buying process is a positive one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher.’

Busting the Myth About a Housing Affordability Crisis

Busting the Myth About a Housing Affordability Crisis | Simplifying The Market

It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by 3.5% over the last year.

Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.

1. National Association of Realtors’ (NAR) Housing Affordability Index:

Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:Busting the Myth About a Housing Affordability Crisis | Simplifying The MarketWe can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts. However, homes are more affordable today than at any time from 1990 to 2008.

NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%.Busting the Myth About a Housing Affordability Crisis | Simplifying The Market

2. Black Knight’s Mortgage Monitor:

This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment…Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”

3. First American’s Real House Price Index:

While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:

“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.”

Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:

“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”

Bottom Line

If you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised!

The Benefits of Growing Equity in Your Home

The Benefits of Growing Equity in Your Home | Simplifying The Market

Over the last couple of years, we’ve heard quite a bit about rising home prices. Today, expert projections still forecast continued growth, just at a slower pace. One of the often-overlooked benefits of rising home prices is the positive impact they have on home equity. Let’s break down three ways this is a win for homeowners.

1. Move-Up Opportunity

With the rise in prices, homeowners naturally experience an increase in home equity. According to the Homeowner Equity Insights from CoreLogic,

“In the first quarter of 2019, the average homeowner gained approximately $6,400 in equity during the past year.”

This increase in profit means if homeowners decide to sell, they’ll be able to put their equity to work for them as they make plans to move up into their next home.

2. Gain in Seller’s Profit

ATTOM Data Solutions recently released their Q2 2019 Home Sales Report, indicating the seller’s profit jumped at one of the fastest rates since 2015. They said:

“A look at the national numbers showed that U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since the original purchase of $67,500…the average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of the original purchase price.”

Looking at the amount paid when they bought their homes, and then the amount they received after selling, we can see that some homeowners were able to walk away with a significant gain.

3. Out of a Negative Equity Situation

Negative equity occurs when there is a decline in home value, an increase in mortgage debt, or both. Many families experienced these challenges over the last decade. According to the same report from CoreLogic,

“U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of nearly $485.7 billion since the first quarter 2018, an increase of 5.6%, year over year.

In the first quarter of 2019, the total number of mortgaged residential properties with negative equity decreased…to 2.2 million homes, or 4.1% of all mortgaged properties.”

The good news is, many families have moved beyond a negative equity situation, and no longer owe more on their mortgage than the value of their home.

Bottom Line

If you’re a current homeowner, you may have more equity than you realize. Your equity can open the door to future opportunities, such as moving up to your dream home. Let’s get together to discuss your options and start to put your equity to work for you.

How Much Do You Know About Down Payments?

How Much Do You Know About Down Payments? | Simplifying The Market

Whether you’ve owned a home before, or you’re ready to jump into homeownership for the first time, there are always a lot of questions swirling around about what is truly required for a down payment, and how to best source down payment assistance. Let’s tackle these two today.

1. How much do you really need for a down payment?

There is a long-standing misconception about down payment requirements. A survey from Fannie Mae shows only 17% of consumers know the minimum options are actually between 1 – 5% of the purchase price and 40% don’t know how much they need at all.How Much Do You Know About Down Payments? | Simplifying The MarketThere are many mortgage loans available that require as little as 3% down for first-time buyers, and some ask for only 3.5% down from repeat buyers. There are even loans available for Veterans that provide 0% down payment options too.

We’ve mentioned recently that you don’t need to come up with a 20% down payment to buy, and we’ve also shared how quickly you can save for a 3% or 10% down payment, depending on where you live. If you’re planning to put down just 3%, the research shows it may be possible in most states to have enough saved for a down payment in less than a year. That puts homeownership in a much closer reach for many potential buyers, maybe even you!

2. How can I get help with my down payment?

Regardless of the loans available, many buyers still need assistance with a down payment. The great news is, there are a lot of ways to tap into down payment assistance options. Here are just a couple of them:

Assistance from Family Members

The National Association of Realtors (NAR) said, “a third of recent first-time buyers received down payment assistance from family members.” They also mentioned, “the average net worth of those aged 75 and over stands at $264,800…They just might offer the boost the next generation needs to become homeowners.

That means one of the ways to find help with a down payment is to accept a gift from a family member. If this is an option for you, make sure you talk to your loan officer before you accept the money, to ensure you document the process the way it is required by your loan. This way, it will be received properly and you can still potentially qualify.

Down Payment Assistance Programs

The reality is, not everyone has a loved one or a family member who can provide help with a down payment. There are, however, more than 2,500 down payment assistance programs available (by local areas like city, county, or neighborhood), and some of them are even specifically for first-time buyers.

The gap, as mentioned in the same survey, is “only 23% of consumers are familiar with low down payment programs.”

That’s why it is so important to get familiar with these options by doing your homework before you plan to buy a home. Determine what is available in the area where you ultimately want to live, so you have all the details you need to take advantage of the down payment assistance option that is best for your family.

Bottom Line

If buying a home is one of your long-term goals, you may be able to get there sooner than you think by tapping into one of the many down payment assistance programs available.

Millionaire to Millennials: The Costly Mistake of Not Buying Now

Millionaire to Millennials: The Costly Mistake of Not Buying Now | Simplifying The Market

On his personal website, self-made millionaire David Bach makes a striking statement:

 “Not prioritizing homeownership is the single biggest mistake millennials are making.” 

He further stated, “Buying a home is an escalator to wealth.”

Bach explains:

“Young adults in particular aren’t hopping on this escalator, and it’s a costly mistake…If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none.”

He then elaborates on the game of homeownership:

“Start by crunching the numbers…actually do the math…This way, you’re really clear on your goals and you won’t just say to yourself, ‘I’ll never afford this!’

A good rule of thumb is to make sure your total monthly housing payment doesn’t consume more than 30 percent of your take-home pay.”

Bach concludes by saying,

“Oftentimes, buying your first home means you’re not buying your dream home…You’re just getting into the market.”

Bottom Line

Whenever a well-respected millionaire gives investment advice, listeners usually clamor to hear it. This millionaire shares some simple and straightforward insights: “The fact is, you aren’t really in the game of building wealth until you own some real estate.”

Who is David Bach?

Bach is a self-made millionaire who has written nine consecutive New York Times bestsellers. His book, “The Automatic Millionaire,” spent 31 weeks on the New York Times bestseller list. He is one of the only business authors in history to have four books simultaneously on the New York Times, Wall Street Journal, BusinessWeek, and USA Today bestseller lists.

He has been a contributor to NBC’s Today Show, appearing more than 100 times, as well as a regular on ABC, CBS, Fox, CNBC, CNN, Yahoo, The View, and PBS. He has also been profiled in many major publications, including the New York Times, BusinessWeek, USA Today, People, Reader’s Digest, Time, Financial Times, Washington Post, Wall Street Journal, Working Woman, Glamour, Family Circle, Redbook, Huffington Post, Business Insider, Investors’ Business Daily, and Forbes.

Existing Home Sales Point Toward a Good Time to Sell [INFOGRAPHIC]

Existing Home Sales Point Toward a Good Time to Sell [INFOGRAPHIC] | Simplifying The Market

Existing Home Sales Point Toward a Good Time to Sell [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Existing Home Sales dropped 1.7% from May to a seasonally adjusted annual rate of 5.27 million in June.
  • Low inventory levels are still a factor in the market. The current supply of homes for sale is at 4.4 months, which is less than the optimal 6-month supply.
  • Median home prices were up 4.3% from June 2018, hitting $285,700. This marked the 88th consecutive month with year-over-year price gains.

How to Judge the Impact of the Next Economic Slowdown on Housing

How to Judge the Impact of the Next Economic Slowdown on Housing | Simplifying The Market

We’ve experienced economic growth for almost a decade, which is the longest recovery in the nation’s history. Experts know a recession can’t be too far off, but when will this economic slowdown actually occur?

Pulsenomics just released a special report revealing that nearly 6 out of 10 of the 90 economists, investment strategists, and market analysts surveyed believe the next recession will occur by the end of next year. Here’s the breakdown:

  • 9% believe a recession will occur this year
  • 50% believe it will occur in 2020
  • 35% believe it will occur in 2021
  • 6% believe it will occur after 2021

When asked what would trigger the next recession, the three most common responses by those surveyed were:

  1. Trade Policy
  2. Stock Market Correction
  3. Geopolitical Crisis

How might the recession impact real estate?

Challenges in the housing and mortgage markets were major triggers of the last recession. However, a housing slowdown ranked #9 on the list of potential triggers for the next recession, behind such possibilities as fiscal policy and political gridlock.

As far as the impact the recession may have on home values, the experts surveyed indicated home prices would continue to appreciate over the next few years. They called for a 4.1% appreciation rate this year, 2.8% in 2020, and 2.5% in 2021.

Bottom Line

On the same day, in the same survey, the same experts who forecasted a recession happening within the next 18 months also claimed housing will not be the trigger, and home values will still continue to appreciate.

Why Now Is the Perfect Time to Sell Your House

Why Now Is the Perfect Time to Sell Your House | Simplifying The Market

As a homeowner, it’s always tempting to dream about the next big project you’re going to tackle. The possibilities are endless. Should I renovate? Should I refinance? Should I stay? Should I move? The list goes on and on.

In today’s housing market, it’s actually a great time to shift your thoughts toward selling your house and moving up into the home of your dreams. Here’s why:

Inventory is on the rise, but there’s still an overall shortage of houses for sale (less than a 6-month supply found in a more normal market), so homes are going under contract quickly. In fact, the National Association of Realtors (NAR) Realtors® Confidence Index Survey reports that right now homes are only staying on the market for an average of 27 days. That’s less than one month, an even more accelerated pace from the 36-day trend we saw last spring.Why Now Is the Perfect Time to Sell Your House | Simplifying The MarketThe same report also indicates there are more interested buyers than active sellers today, which is one of the big factors driving home prices higher.Why Now Is the Perfect Time to Sell Your House | Simplifying The Market
Why Now Is the Perfect Time to Sell Your House | Simplifying The Market
This power combination provides an ideal environment for sellers aiming to close a quick sale and earn a big return as we wrap up the summer season.

Bottom Line

There’s still time to make a move before the school year starts and the fall weather sets in. Maybe it’s time to make a change. Let’s get together to determine if selling now is the right decision for your family.