- The Veterans Administration (VA) Home Loan is a benefit that is available to more than 22 million veterans & 2 million active duty service members which helps them achieve their dreams of homeownership.
- In 2017, $189 billion was loaned to veterans and their families through the program.
- VA Purchase Loans are on the rise in 46 out of 50 states and Washington, DC.
The lack of existing inventory for sale has forced many homebuyers to begin looking at new construction. When you buy a newly constructed home instead of an existing home, there are many extra steps that must take place. To ensure a hassle-free process, here are 5 tips to keep in mind if you are considering new construction:
1. Hire an InspectorDespite the fact that builders must comply with town and city regulations, a home inspector will have your best interests in mind! When buying new construction, you will have between 1-3 inspections, depending on your preference (the foundation inspection, the pre-drywall inspection, and a final inspection). These inspections are important because the inspector will often notice something that the builder missed. If possible, attend the inspection so that you can ask questions about your new home and make sure the builder fixes any problems found by the inspector.
2. Maintain good communication with your builderStarting with the pre-construction meeting (where you will go over all the details of your home with your project manager), establish a line of communication. For example, will the builder email you every Friday with progress updates? If you are an out-of-state buyer, will you receive weekly pictures of the progress via email? Can you call the builder and if so, how often? How often can you visit the site?
3. Look for builder’s incentivesThe good thing about buying a new home is that you can add the countertop you need, the mudroom you want, or an extra porch off the back of your home! However, there is always a price for such additions, and they add up quickly! Some builders offer incentives that can help reduce the amount you spend on your home. Do your homework and see what sort of incentives the builders in your area are offering.
4. Schedule extra time into the processThere are many things that can impact the progress on your home. One of these things is the weather, especially if you are building in the fall and winter. Rain can delay the pouring of a foundation as well as other necessary steps at the beginning of construction, while snow can freeze pipes and slow your timeline. Most builders already have a one-to-two-week buffer added into their timelines, but if you are also in the process of selling your current home, you must keep that in mind! Nobody wants to be between homes for a couple of weeks.
5. Visit the site oftenAs we mentioned earlier, be sure to schedule time with your project manager at least once a week to see the progress on your home. It’s easy for someone who is not there all the time to notice little details that the builder may have forgotten or overlooked. Additionally, don’t forget to take pictures! You might need them later to see exactly where that pipe is or where those electrical connections are once they’re covered up with drywall!
Bottom LineWatching your home come to life is a wonderful experience that can sometimes come with hassles. To avoid some of these headaches, keep these tips in mind! If you are ready to put your current home on the market and find out what new construction is available in your area, let’s get together to discuss your options! Simply give me a call.
There are many unsubstantiated theories about what is happening with home prices. From those who are worried that prices are falling (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion. However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase. It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything greater than seven months will cause prices to depreciate (see chart below). According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).
Bottom LineIf buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.
In a recent article, National Housing Inventory Crisis Reaches Inflection Point, realtor.com reported that:
- New listings jumped 8% year-over-year nationally, the largest increase since 2013
- Total listings in the 45 largest markets are now up 6% on average over last year
“With the rate of home price appreciation starting to decelerate alongside the uptick in inventory, we expect significant debate whether this is a bullish or bearish sign.”
Is this a sign the market might crash?There are those who look at the increase in inventory as a sign that we are returning to the market we saw last decade. However, a closer look shows that we are nowhere near the levels of inventory we reached before the crash in 2008. A normal market would have about 6-months inventory, but the latest Existing Home Sales Report issued by the National Association of Realtors revealed that:
“Unsold inventory is at a 4.3-month supply at the current sales pace up from 4.1 months a year ago.”A decade ago, prices began to rapidly depreciate in June 2007. At that time, we had a 9.1-month supply (more than double what it is today) and inventory kept rising until it hit a peak of 11.1 months in April of 2008. With the current levels of buyer demand, any such increase in months supply is highly unlikely. As Danielle Hale, realtor.com’s Chief Economist explains:
“After years of record-breaking inventory declines, September’s almost flat inventory signals a big change in the real estate market. Would-be buyers who had been waiting for a bigger selection of homes for sale may finally see more listings materialize. But don’t expect the level to jump dramatically. Plenty of buyers in the market are scooping up homes as soon as they’re listed, which will keep national increases relatively small for the time being.”
What will be the result of the increase in inventory?The increase in inventory will allow many families who had been unable to find a home to finally become homeowners. Again, we quote from the ‘Z Report’:
“In our view, the short-term narrative will probably be confusing, but more sustainable growth and affordability will likely be the end result.”
Bottom LineIf you are either a first-time or second-time buyer who has given up, let’s get together. We can discuss the inventory available in any town or towns in our market. You may be surprised to find just how many homes are in your price range.
- Buying a home can be intimidating if you are not familiar with the terms used during the process.
- To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.
- The best way to ensure that your home-buying process is a confident one is to find a real estate professional who not only puts your family’s needs first, but will guide you through every aspect of the transaction with ‘the heart of a teacher.’
New Home SalesAccording to the latest New Residential Sales Report from the Census Bureau, new construction sales in August were up 3.5% from July and 12.7% from last year! This marks the second consecutive month with double-digit year-over-year growth (12.8% in July). The report also showed that builders have ramped up construction with an increase in new construction starts and completions. The summer months are often a busy time for builders as they capitalize on the warmer weather to be able to finish projects. Below is a table showing the change in starts, completions, and sales from last August. Other notable news from the report is that the percentage of new construction sales in the $200-$299k range has continued to break away from the $300-$399k range. This shows that builders are starting to build lower-priced homes that will help alleviate some of the inventory challenges in the starter and trade-up home categories. The chart below shows the full breakdown.
What does this mean for buyers and sellers?If you are thinking of buying or selling in today’s market, you no doubt have heard that there is a shortage of existing homes for sale which has been driving home prices up across the country. The additional new construction coming to the market could help alleviate this shortage, but we are still not back up to pre-crisis levels.
Home PricesAccording to CoreLogic’s latest Home Price Insights Report, national home prices in August were up 5.5% from August 2017. This marks the first time since June 2016 that home prices did not appreciate by at least 6.0% year-over-year. CoreLogic’s Chief Economist Frank Nothaft gave some insight into this change,
“The rise in mortgage rates this summer to their highest level in seven years has made it more difficult for potential buyers to afford a home. The slackening in demand is reflected in the slowing of national appreciation, as illustrated in the CoreLogic Home Price Index. National appreciation in August was the slowest in nearly two years, and we expect appreciation to slow further in the coming year.”One of the major factors that have driven prices to accelerate at a pace of between 6-7% over the past two years was the lack of inventory available for sale in many areas of the country. This made houses a prized commodity which forced many buyers into bidding wars and drove prices even higher. According to the National Association of Realtors’ (NAR) latest Existing Home Sales Report, we are starting to see more inventory come to market over the last few months. This, paired with patient buyers who are willing to wait to find the right homes, is creating a natural environment for price growth to slow. Historically, prices appreciated at a rate of 3.7% (from 1987-1999). CoreLogic predicts that prices will continue to rise over the next year at a rate of 4.7%.
Bottom LineAs the housing market moves closer to a ‘normal market’ with more inventory for buyers to choose from, home prices will start to appreciate at a more ‘normal’ level, and that’s ok! If you are curious about home prices in your area, let’s get together to chat about what’s going on!
Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for the entirety of America’s existence. Realtor.com reported that:
“Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option…as people get more savings in their pockets, buying becomes the better option.”
What proof exists that owning is financially better than renting?1. In a previous blog, we highlighted the top 5 financial benefits of homeownership:
- Homeownership is a form of forced savings.
- Homeownership provides tax savings.
- Homeownership allows you to lock in your monthly housing cost.
- Buying a home is cheaper than renting.
- No other investment lets you live inside of it.
Bottom LineOwning your home has many social and financial benefits that cannot be achieved by renting.
Home sales are below last year’s levels, home values are appreciating at a slower pace, and there are reports showing purchasing demand softening. This has some thinking we may be entering a buyers' market after sellers have had the upper hand for the past several years. Is this really happening? Are we really headed for a buyers' market? The market has definitely softened. However, according to two chief economists in the industry, we are a long way from a market that totally favors the purchaser:
“These seller challenges don’t indicate we’re suddenly in a buyers’ market – we don’t expect market conditions to shift decidedly in favor of buyers until 2020 or later. But buyers certainly are starting to balk at the rapid rise in prices and home values are starting to grow at a less frenetic pace.”
“The signs are pointing to a market that’s shifting toward buyers. But, in most places, we’re still a long way from a full reversal.”In addition, Pulsenomics Inc. recently surveyed over one hundred economists, real estate experts, and investment & market strategists and asked this question:
“When do you expect U.S. housing market conditions to shift decidedly in favor of homebuyers?”Only 5% said the market has already shifted. Here are the rest of the survey results:
Bottom LineThe market is beginning to normalize but that doesn’t mean we will quickly shift to a market favoring the buyer. We believe Ivy Zelman, author of the well-respected ‘Z’ Report, best explained the current confusion:
“With the rate of home price appreciation starting to decelerate alongside the uptick in inventory…we expect significant debate about whether this is a bullish or bearish sign. In our view, the short-term narrative will probably be confusing, but more sustainable growth and affordability will likely be the end result.”
When it comes to buying or selling a home there are many factors you should consider. Where you want to live, why you want to buy or sell, and who will help you along your journey are just some of those factors. When it comes to today’s real estate market, though, the top two factors to consider are what’s happening with interest rates & inventory.