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First-Time Buyers Are Searching for Existing Homes This Year

First-Time Buyers Are Searching for Existing Homes This Year | Simplifying The Market In the latest Housing Trends Report, the National Association of Home Builders (NAHB) measured the share of adults planning to buy a home over the next 12 months. The report indicates the percentage of all buyers that will be first-time buyers looking to purchase a home grew from 58% in Q4 2018 to 63% in Q4 2019. The results revealed,
“Millennials are the most likely generation to be making plans to purchase a home within a year (19%), followed by Gen Z (13%) and Gen X (12%)…Prospective buyers in the youngest two generations are primarily first-time buyers:  88% of Gen Z buyers and 78% of Millennial buyers are reaching out to homeownership for the first time in their lives.”
With a high demand from first-time homebuyers and a shortage of inventory in the current market, selling your existing home this year might be your best move. Why? Because when homebuyers begin their search, they’re not all looking for new construction. Many are eager to find a little charm and character in a place to call home – possibly yours. In fact, according to the same study, there is a significant demand for existing homes:
“In terms of the type of home these prospective home buyers are interested in, 40% are looking to buy an existing home and 19% a newly-built home. The remaining 41% would buy either a new or existing home.”
With showing activity up among buyers and more new construction coming to market, as a homeowner, you have the opportunity to sell your existing house now and move up into a new one, or downsize into a home that better fits your current and ever-changing needs.

Bottom Line

Not all buyers are looking for a newly built house. If you’re ready to take advantage of low mortgage rates and a high demand for your existing home, let’s get together to determine how we will market the charming details of your current house to potential buyers.

The #1 Reason It Is Difficult to Find Your Dream Home

The #1 Reason It Is Difficult to Find Your Dream Home | Simplifying The Market The headlines in real estate today all revolve around one major point: there is a shortage of homes available for sale. Price appreciation is accelerating again because there is a shortage of homes available for sale. First-time buyers are taking longer to purchase a home because there is a shortage of homes available for sale in the lower price points. Boomers are staying in their current homes longer because there is a shortage of homes available for sale to which they would move. In certain markets, affordability is becoming more challenging because there is a shortage of homes available for sale.

What’s the major reason for this lack of housing inventory?

The issue was examined in a recent article by the National Home Builders Association (NAHB). In the article, Robert Dietz, Chief Economist for NAHB, explained:
“Home building in the 2010s was a story of the Long Recovery. After the Great Recession, the number of home builders declined significantly, and housing production was unable to meet buyer demand…Years of population and household formation growth, combined with relatively reduced levels of home building, have left the market with a critical supply shortage.”
Here are the single-family home construction starts by decade for the last six decades:The #1 Reason It Is Difficult to Find Your Dream Home | Simplifying The MarketObviously, there’s a current shortage of homes for sale because not enough houses were built over the last ten years. To add to the challenge, the U.S. population expanded by more than 20 million people during the 2010s. Below is a graph showing the number of starts per every million in population. The last decade shows that starts per population were less than half the average of the previous five decades.The #1 Reason It Is Difficult to Find Your Dream Home | Simplifying The Market

There’s good news coming!

The NAHB article explains that there is light at the end of the tunnel. How confident home builders are in the housing market is a great indicator of how much building is about to get started. The NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as “good” than “poor.” Here are the HMI readings going back to 2008:The #1 Reason It Is Difficult to Find Your Dream Home | Simplifying The MarketThe 2019 confidence reading of 76 was the highest since 1999. The January 2020 index came in one point lower at 75. These readings indicate we should see an increase in new residential construction in 2020. Just last week, NAHB Chairman Greg Ugalde stated:
“Low interest rates and a healthy labor market combined with a need for additional inventory are setting the stage for further home building gains in 2020.”
The increase in housing starts has already begun. According to the January report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, single‐family housing starts were up 11.2% and attained the highest level in thirteen years.

Bottom Line

Whether you’re a first-time buyer or a seller thinking of moving up or down, 2020 could be your year with more new construction homes coming to market.

Make the Dream of Homeownership a Reality in 2020

Make the Dream of Homeownership a Reality in 2020 | Simplifying The Market In 1963, Martin Luther King, Jr. led and inspired a powerful movement with his famous “I Have a Dream” speech. Through his passion and determination, he sparked interest, ambition, and courage in his audience. Today, reflecting on his message encourages many of us to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where our families can grow and flourish. If you’re dreaming of buying a home this year, the best way to start the process is to connect with a Real Estate professional to understand what goes into buying a home. Once you have that covered, then you can answer the questions below to make the best decision for you and your family.

1. How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend. Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. Most agents have loan officers they trust that they can refer you to. According to ConsumerReports.org,
Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down upfront. If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says,
“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.

3. Saving Takes Time: Practice Living on a Budget

As tempting as it is to settle in each morning with a fancy cup of coffee from your favorite local shop, putting that daily spend toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score. A survey of Millennial spending shows,
“70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year.”
While you don’t need to cut all of the fun out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. Let’s get together today to discuss the best steps you can take to start the process.

Homes Are More Affordable Today, Not Less Affordable

Homes Are More Affordable Today, Not Less Affordable | Simplifying The Market There’s a current narrative that owning a home today is less affordable than it has been in the past. The reason some are making this claim is because house prices have substantially increased over the last several years. It’s not, however, just the price of a home that matters. 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 approximately 3% over the last year. The National Association of Realtors (NAR) releases a monthly Housing Affordability Index. The latest index shows that home affordability is better today than at almost any point over the last 30 years. The index determines how affordable homes are based on the following:
“A Home Affordability Index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).”
The higher the index, therefore, the more affordable homes are. Here is a graph showing the index since 1990:Homes Are More Affordable Today, Not Less Affordable | Simplifying The MarketObviously, affordability was better during the housing crash when distressed properties – foreclosures and short sales – sold at major discounts (2009-2015). Outside of that period, however, homes are more affordable today than any other year since 1990, except for 2016. The report on the index also includes a section that calculates the mortgage payment on a median-priced home as a percentage of the median national income. Historically, that percentage is just above 21%. Here are the percentages since June of 2018:Homes Are More Affordable Today, Not Less Affordable | Simplifying The MarketAgain, we can see that affordability is much better today than the historical average and has been getting better over the last year and a half.

Bottom Line

Whether you’re thinking about buying your first home or moving up to the home of your dreams, don’t let the false narrative about affordability prevent you from moving forward. From an affordability standpoint, this is one of the best times to buy in the last 30 years.

Buying a Home Early Can Significantly Increase Future Wealth

Buying a Home Early Can Significantly Increase Future Wealth | Simplifying The Market According to an Urban Institute study, homeowners who purchase a house before age 35 are better prepared for retirement at age 60. There's no doubt that buying a home early can significantly increase future wealth!   The good news is, our younger generations are strong believers in homeownership. According to a Freddie Mac survey,
“The dream of homeownership is alive and well within “Generation Z,” the demographic cohort following Millennials. Our survey…finds that Gen Z views homeownership as an important goal. They estimate that they will attain this goal by the time they turn 30 years old, three years younger than the current median homebuying age (33).”
Buying a Home Early Can Significantly Increase Future Wealth | Simplifying The MarketIf these aspiring homeowners purchase at an early age, the Urban Institute study shows the impact it can have. Based on this data, those who purchased their first homes when they were younger than 25 had an average of $10,000 left on their mortgage at age 60. The 50% of buyers who purchased in their mid-20s and early-30s had close to $50,000 left, but traditionally purchased more expensive homes. Buying a Home Early Can Significantly Increase Future Wealth | Simplifying The MarketAlthough the vast majority of Gen Zers want to own a home and are somewhat confident in their future, “In terms of financial awareness, 65% of Gen Z respondents report that they are not confident in their knowledge of the mortgage process.”

Bottom Line

As the numbers show, you’re not alone. If you want to buy this year but you’re not sure where to start the process, let’s get together to help you understand the best steps to take from here.