- The National Association of Realtors surveyed their members & released the findings of their Profile of Home Staging.
- 62% of seller’s agents say that staging a home decreases the amount of time a home spends on the market.
- 50% of staged homes saw a 1-10% increase in dollar-value offers from buyers.
- 77% of buyer’s agents said staging made it easier for buyers to visualize the home as their own.
- The top rooms to stage in order to attract more buyers are the living room, master bedroom, kitchen, and dining room.
How often do families move?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%.
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 situation, according 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 Report. According 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.
[caption id="" align="alignnone" width="648"] List your house Now[/caption] If you are debating whether or not to list your house now, here is the #1 reason not to wait!
Buyer Demand Continues to Outpace the Supply of Homes for SaleThe 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: Anything less than a six-month supply is considered a “seller’s market.” There is less than a six-month supply in most towns in Nassau and Suffolk counties. If you would like to see absorption rates for many Nassau and Suffolk County towns compiled over the past 12 months - click here.
Bottom LineLet’s get together to discuss the supply conditions in your neighborhood so that I can assist you in gaining access to the buyers who are ready, willing, and able to buy right now!
With home prices rising again this year, some are concerned that we may be repeating the 2006 housing bubble that caused families so much pain when it collapsed. Today’s market is quite different than the bubble market of twelve years ago. There are four key metrics that explain why:
- Home Prices
- Mortgage Standards
- Mortgage Debt
- Housing Affordability
1. HOME PRICESThere is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone. Frank Nothaft is the Chief Economist for CoreLogic (which compiles some of the best data on past, current, and future home prices). Nothaft recently explained:
“Even though CoreLogic’s national home price index got to the same level it was at the prior peak in April of 2006, once you account for inflation over the ensuing 11.5 years, values are still about 18% below where they were.” (emphasis added)
2. MORTGAGE STANDARDSSome are concerned that banks are once again easing lending standards to a level similar to the one that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash. The Urban Institute’s Housing Finance Policy Center issues a Housing Credit Availability Index (HCAI). According to the Urban Institute:
“The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”The graph below reveals that standards today are much tighter on a borrower’s credit situation and have all but eliminated the riskiest loan products. [caption id="attachment_37442" align="alignnone" width="650"] Housing Credit Availability Index[/caption]
3. MORTGAGE DEBTBack in 2006, many homeowners mistakenly used their homes as ATMs by withdrawing their equity and spending it with no concern for the ramifications. They overloaded themselves with mortgage debt that they couldn’t (or wouldn’t) repay when prices crashed. That is not occurring today. The best indicator of mortgage debt is the Federal Reserve Board’s household Debt Service Ratio for mortgages, which calculates mortgage debt as a percentage of disposable personal income. At the height of the bubble market a decade ago, the ratio stood at 7.21%. That meant over 7% of disposable personal income was being spent on mortgage payments. Today, the ratio stands at 4.48% – the lowest level in 38 years!
4. HOUSING AFFORDABILITYWith both house prices and mortgage rates on the rise, there is concern that many buyers may no longer be able to afford a home. However, when we look at the Housing Affordability Index released by the National Association of Realtors, homes are more affordable now than at any other time since 1985 (except for when prices crashed after the bubble popped in 2008). [caption id="attachment_37443" align="alignnone" width="650"] Housing Affordability Index[/caption]
Bottom LineAfter using four key housing metrics to compare today to 2006, we can see that the current market is not anything like the bubble market.
[caption id="" align="alignnone" width="648"] Best Month To Sell[/caption] According to a newly released study by ATTOM Data Solutions, selling your home in the month of May will net you an average of 5.9% above estimated market value for your home. For the study, ATTOM performed an “analysis of 14.7 million home sales from 2011 to 2017” and found the average seller premium achieved for each month of the year. Below is a breakdown by month: ATTOM even went a step further and broke their results down by day.
Top 5 Days to Sell:
- June 28th – 9.1% above market
- February 15th – 9.0% above market
- May 31st – 8.3% above market
- May 29th – 8.2% above market
- June 21st – 8.1% above market
Bottom LineLet’s get together to discuss the market conditions in our area and get you the most exposure to the buyers who are ready and willing to buy!
[caption id="" align="alignnone" width="648"] Home Appreciation[/caption] Home appreciation has risen dramatically over the last twelve months. In CoreLogic’s most recent Home Price Index Report, they revealed that national home prices have increased by 6.7% year-over-year. CoreLogic broke down home appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price. The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from February 2017 to February 2018 (the latest data available). It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor that determines how much your home has appreciated over the course of the last year. Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.
Bottom LineIf you are planning to list your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.
- According to the latest Existing Home Sales Report from the National Association of Realtors, sales grew 1.1% in March to an annual pace of 5.60 million.
- This is the strongest pace since November of 2017.
- Inventory levels dropped year-over-year for the 34th consecutive month and are now 7.2% lower than March 2017 levels, representing a 3.6-month supply.
[caption id="" align="alignnone" width="648"] Why you need a Pro[/caption] With home prices on the rise and buyer demand strong, some sellers may be tempted to try and sell their homes on their own (FSBO) without using the services of a real estate professional. Real estate agents are trained and experienced in negotiation and, in most cases, the seller is not. Sellers must realize that their ability to negotiate will determine whether or not they get the best deal for themselves and their families.
Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:
- 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 termite company if there are challenges
- The buyer’s lender if the structure of the mortgage requires the sellers’ participation
- The appraiser if there is a question of value
- The title company if there are challenges with certificates of occupancy (CO) or other permits
- The town or municipality if you need to get the CO permits mentioned above
- The buyer’s buyer in case there are challenges with the house your buyer is selling
- Your bank in the case of a short sale
Bottom LineThe percentage of sellers who have hired real estate agents to sell their homes has increased steadily over the last 20 years. Let’s get together and discuss all we can do to make the process easier for you.
[caption id="" align="alignnone" width="648"] Mortgage Debt[/caption] Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time. These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago. Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage. Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%). Bill McBride of Calculated Risk recently commented on the ratio:
“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”
Bottom LineMany families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.
[caption id="" align="alignnone" width="648"] Cost of Living[/caption] It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to make in order to buy a median-priced home in each of the 50 states, and Washington, D.C. States in the Midwest came out on top as most affordable, requiring the smallest salaries in order to buy a median-priced home. States with large metropolitan areas saw a bump in the average salary needed to buy with California, Washington, D.C., and Hawaii edging out all others with the highest salaries required. Below is a map with the full results of the study: GoBankingRates gave this advice to anyone considering a home purchase,
“Before you buy a home, it’s important to find out if you can afford the monthly mortgage payment. To do this, some financial experts recommend your housing costs — primarily your mortgage payments — shouldn’t consume more than 30 percent of your monthly income.”As we recently reported, research from Zillow shows that historically, Americans had spent 21% of their income on owning a median-priced home. The latest data from the fourth quarter of 2017 shows that the percentage of income needed today is only 15.7%!