Phil's Blog

Homes ‘On Sale’ Across the Country [INFOGRAPHIC] Posted: 29 Mar 2013 04:00 AM PDT Prices are increasing but are still ‘on sale’ throughout most of the country when compared to 2007 prices. – The KCM Crew Source: FNC March Price Index

Should Your Buyers Increase Their Offer? Posted: 28 Mar 2013 04:00 AM PDT Limited inventory and a very strong demand for housing has created an environment where bidding wars are commonplace in today’s real estate market. Homes priced properly are getting multiple offers within a short time of coming to market. This brings about a dilemma for the agent: How should they advise their client who is about to make an offer when other offers will also be presented? Over the last several years, there wasn’t any pressure on the buyer to adjust their offer for three reasons: There were plenty of homes for sale Prices were falling Mortgage interest rates were falling They buyer could find another home easily for probably less money and a lower mortgage rate. There was no downside to not ‘upping the ante’. However, in today’s market, things have dramatically changed. HOUSING INVENTORY A normal real estate market has between 5-6 months worth of inventory. Over the last several years, the inventory of homes for sale had skyrocketed to 10 months. Most buyers in almost any price range had a multitude of houses to choose from. Today, the national month’s supply of inventory has fallen below five months. In many markets, there is not enough housing inventory to satisfy the current demand. Conclusion: If the buyer loses the house they are bidding on, there is no guarantee they will find a similar home anytime soon. HOME PRICES Becausemof the limited inventory, home prices are again appreciating. The Case Shiller Pricing Index revealed that house prices rose by 6.8% in 2012. Experts are projecting home prices to increase by 5% to 8% in 2013. Conclusion: If the buyer doesn’t get this house, there is a good likelihood that a similar home will cost more in the future. MORTGAGE RATES The ‘cost’ of a home to a buyer is determined by the price of the house and the expense associated with the financing. Mortgage rates are projected to inch up in 2013. In a recent forecast, the Mortgage Bankers Association predicted that rates could climb as high as 4.3% by the end of the year. Conclusion: If interest rates do inch up, the ‘cost’ of the next home could be impacted significantly. Bottom Line  If a buyer truly loves the house they are bidding on, it probably makes sense to raise their bid now instead of waiting for another dream house to appear.

This week, we are going to look at the three financial reasons to buy a home now instead of waiting: prices are rising, interest rates are increasing and rents are skyrocketing. – The KCM Crew

Part III – Rents Are Skyrocketing

Whether you own or rent, you will have a monthly housing expense. The question is how that expense will change in the future. When you purchase a home, for the most part, you lock-in that monthly housing expense for the length of the mortgage you take (15 or 30 years for example). When you rent a home, your housing expense is impacted by movements in the supply and demand for rental properties.
Historically, residential rental rates increase by 3.2% on an annual basis. However, in the current housing environment, there is an increasing demand for residential rental properties. This increase in demand has dramatically impacted rates. Zillow, in their most recent report, revealed that rental rates in the U.S. increased by 4.5% over the last twelve months. Other studies have projected rental rate increases of 4-5% over the next few years.
The only way to have control of your housing expense is to buy.

But Isn’t Buying Much More Expensive Than Renting?

Not right now! As a matter of fact, with prices down and mortgage rates at historic lows, it is LESS EXPENSIVE to buy than rent in most areas. In a recent report, Trulia revealed it is cheaper to buy than rent in ALL of America’s largest regions.
According to Jed Kolko, Trulia’s Chief Economist:
“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat. Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets.”
However, Kolko went on to say that this opportunity may soon disappear:
“Although buying a home is still cheaper than renting, the gap is closing. In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”
Again, the only way to lock-in your monthly housing expense is to take that decision out of the hands of a landlord by owning. With both prices and interest rates set to increase, the best time to buy is right now.

Some believe that our coverage of the housing market at times is too optimistic. Today, we want to report on Freddie Mac’s projections for the real estate market in 2013 as per their latest U.S. Economic and Housing Market Outlook.
Frank Nothaft, Freddie Mac vice president and chief economist, explains:
“Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales. As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates.”
The report also offered projections on sales and prices.

Housing Starts and Sales

• Projecting housing starts in 2013 will increase to 950,000 units or about 22 percent higher than 2012 levels.
• Existing home sales are expected to pick-up as the house price recovery allows homeowners who have been forced on the sidelines by negative equity to get back into the market.

House Prices

• While most metro areas saw substantial run-ups in prices during the boom, well above income growth, the subsequent market correction was in many cases more severe.
• The level of affordability in most markets suggests a continued improvement in home prices, and strong growth in sales and construction.

It seems Freddie Mac is also optimistic about the future of real estate in the U.S.

Money Magazine: The Real Estate Market is Back

Posted: 18 Mar 2013 04:00 AM PDT

Last Friday, we ran an InfoGraphic from RealEstate.com that showed that the real estate market was coming back. Some objected that the information was from a survey of industry players that may have a natural bias. For the doubters, here is the cover of the latest edition of Money Magazine released this past weekend.

 

The magazine supported their case by explaining:

• In the last year, home prices increased in 92 of the country’s 100 largest metropolitan areas
• Homes are more affordable than they’ve been in 40 years
• The number of houses for sale is at the lowest level in a decade
• Price increases are projected for most of the country this year

It seems that even the unbiased realize that Housing is Back!