Homeowners: We Need to Sell Your House Twice

Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). In a housing market where supply is very low and demand is very high, home values increase rapidly. One major challenge in such a market is that bank appraisal. If prices are jumping, it is difficult for appraisers to find adequate comparable sales (similar houses in the neighborhood that closed recently) to defend the price when doing the appraisal for the bank.

With escalating prices, the second sale might be even more difficult than the first. And now, there may be a second issue further complicating the appraisal issue.

The Mortgage News Daily (MND) recently published an article titled Conservative Appraisals Increasingly Mentioned in 2015; Did Something Change?

The article revealed that there was a “flurry” of comments on their website from members expressing concern about…

“…a sudden increase in appraisals reflecting market values well below what had been expected. In some cases the low appraisals had merely required the restructuring of the loan, in others they killed the deal.”

The National Association of Realtors revealed this month that 8% of the contracts that fell through over the last three months were terminated because of appraisal issues.

MND decided to survey their members and ask why this sudden increase in “short” appraisals could be taking place. Here is one result of that survey:

“Almost everyone we spoke to mentioned Fannie Mae's new Collateral Underwriter (CU).”

Collateral Underwriter provides a risk score on individual appraisals which will lead to a ranking of appraisals by risk profile, allowing lenders to identify appraisals with heightened risk of quality issues, overvaluation, and compliance violations. It went on-line on January 26.

Marianne Sullivan, senior vice president of single-family business capability with Fannie Mae believes that CU is not a problem for appraisers. She claimed:

“From an appraiser perspective, one of the lender's responsibilities has always been to review the quality of an appraiser, and they have been using various methods to do that forever. I don’t think appraisers will find this tool to be disruptive.”

However, some think that CU has caused appraisers to become too cautious with their appraised values. One mortgage professional in the MND article explained it this way:

"My personal opinion is that appraisers are being overly conservative in choosing comps because of CU. If CU questions the comps, adjustments, etc., the appraiser would have to do a lot of extra work to justify them. I had anticipated that CU would cause delays because of this extra work, but it seems that appraisers are one step ahead and are being ultra conservative, thus avoiding the extra work in the first place. I haven't spoken to an appraiser about it; this is just my interpretation of what I am seeing."

Ryan Lundquist, a Certified Residential Appraiser in the Sacramento area, agreed:

“One of the unintended consequences of CU may be more conservative appraisals.”

Bottom Line

We must realize that, in today’s housing market, every house must be sold twice and the second sale (to the bank’s appraiser) could be the more difficult one.

Housing Market: Freddie Mac Remains Optimistic

The April 2015 U.S. Economic & Housing Market Outlook from Freddie Mac revealed that they are optimistic about the real estate market in 2015. As a matter of fact, the sub-title of the report was “Great Expectations”.

What made Freddie Mac so optimistic? Here are a few highlights from the report:

“For the remainder of the year we should see a resumption of solid economic growth and acceleration in housing activity. Notwithstanding a disappointing March jobs report the acceleration is already underway.”

“With spring upon us, housing markets are poised to accelerate and we expect the best year for home sales since 2007. Despite harsh winter weather to start the year, home sales through February are only off from the 2013 pace by 7,000 sales... Pending home sales were up 3.1 percent in February to the highest level since June 2013. This marked the fourth consecutive month for rising pending home sales showing positive momentum in general for the housing market.”

Their projections…

“By the end of the spring home buying season in June, we should be well above the pace of home sales for any year since 2007.”

“We are as optimistic about trends in housing markets moving forward as we have ever been since the depths of the Great Recession.”

Regarding prices…

“Due to strong growth, we are expecting house prices to increase 4.0 percent in 2015.”

But there were some warnings…

On available supply:

“With low mortgage rates, improving labor markets, and rising demand, one key issue for housing over the next two years will be the lack of supply of for-sale and for-rent homes.”

“Many metro areas that have seen robust job growth and population increases are facing shortages of available for-sale inventory.”

On interest rates:

“However, by the end of the year long-term interest rates should only increase modestly, ending the year at about 4.3 percent for the 30-year fixed rate mortgage.”

Note: Freddie Mac worded this as being not that crucial. However, a 4.3% mortgage rate is about a .75 increase over current rates.

Bottom Line

Things are looking good for the real estate market. If you are thinking of selling, contact an agent to discuss how this applies to your neighborhood.

Does Homeownership Make Sense Financially?

Everyone knows the social advantages of home ownership. However, some question the financial benefits of owning a home. Three recent studies shed some light on the issue.

RealtyTrac recently released a report comparing home price appreciation to wage growth over the last two years. The study revealed that home price appreciation has outpaced wage growth in 76% of U.S. housing markets during that time period. By how much? Here is a graph showing their findings:

And we all know the importance of home appreciation in determining the net wealth of most American families. Merrill Lynch just issued a report covering the issue. Their findings are shown here:

It obviously makes financial sense to be a homeowner.

But, does it make sense to buy now?

The survey company Pulsenomics just issued their findings on the cost of owning versus the cost of renting. They compared historical averages to the cost you can expect to pay today.

The cost of buying is far below historical averages. Renting is another story.

Later today, we will be hosting a webinar entitled 4 Secrets to Getting Buyers & Sellers Off the Fence which will go into more depth about the opportunity available to buyers, along with ways to help potential sellers realize that now is the time to list their home.

You can reserve your seat here.

Selling Your House in 2015? Don’t Miss this Opportunity

Every seller wants to get the best price for their house. We learned in high school that the best price for any item will be determined by the demand for that item relative to the supply of that item.

We have reported that the inventory of houses for sale is well below normal numbers.

There is historical evidence that the demand for housing is about to increase dramatically. Each year, more homes sell in May, June, July and August than any other four months of the year. Here is a graph of home sales last year by month:

Bottom Line

You want to make sure your house is available for sale during peak selling season. If you are thinking of selling this year, contact a local real estate professional today.

Pending Sales Surge: Great Sign for the Housing Market

The most recent Pending Homes Sales Index from the National Association of Realtors revealed that homes going into contract in February increased to their highest level since June 2013.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The Index is now 12.0 percent above February 2014. The index is at its highest level since June 2013, has increased year-over-year for six consecutive months and is above what is considered “the average level of activity” – for the 10th consecutive month.
Here is a graph showing the Pending Sales numbers:

Here is a chart showing the Pending Sales increases by region:

Bottom Line

In an article from Investors’ Business Daily, Lawrence Yun, Chief Economist at the National Association of Realtors, explained what these numbers will mean to the overall market:

“It looks like the buyers want to come out to the market and they are eager to find the right home and make an offer. Therefore, I expect the second quarter of this year to be easily ahead of last year in terms of sales activity. Pending contracts are implying that the closing activity in coming months will be quite solid.”

New Study: Homeownership Creates Family Wealth

Matthew Rognlie, from the Department of Economics at MIT, recently released a paper:Deciphering the Fall and Rise in the Net Capital Share. One of the major findings of the report is that homeownership is and has been for the last fifty years a major component to family wealth.
An article on the study in The Economist notes one of the findings of the study:

“The return on non-housing wealth, in fact, has been remarkably stable since 1970. Instead, surging house prices are almost entirely responsible for growing returns on capital.”

This came as no surprise to us as the Federal Reserve previously reported that the net worth of families that own their own home is 36 times greater than that of families that rent.

Bottom Line

HousingWire’s Senior Financial Reporter, Trey Garrison, summed it up well in hisreporting on Rognlie’s study:

“Homeownership has consistently created generational wealth more reliably, and more ‘democratically’, than any other asset class. And it does so in a manner entirely ancillary to its primary purpose of giving you a place to lay your head and keep your stuff.”

The Difference A Year Can Make

Some Important Points To Consider:

• The latest Freddie Mac Primary Mortgage Market Survey reports the 30-year fixed rate at 3.7%.


• Freddie Mac's projection for Q2 2016 is that the rate will be 4.7% (a full percentage point higher)


• The Home Price Expectation Survey predicts that home prices will appreciate by 4.4% during this same time

The impact waiting a year to purchase your dream home can make on your monthly payment is significant. Contact a local real estate professional today to discuss your options before the experts' predictions become reality!

Selling Your House? Price it Right Up Front

In today’s market, where demand is outpacing supply in many regions of the country, pricing a house is one of the biggest challenges real estate professionals face. Sellers often want to price their home higher than recommended, and many agents go along with the idea to keep their clients happy. However, the best agents realize that telling the homeowner the truth is more important than getting the seller to like them.

There is no “later.”

Sellers sometimes think, “If the home doesn’t sell for this price, I can always lower it later.” However, research proves that homes that experience a listing price reduction sit on the market longer, ultimately selling for less than similar homes.

John Knight, recipient of the University Distinguished Faculty Award from the Eberhardt School of Business at the University of the Pacific, actually did research on the cost (in both time and money) to a seller who priced high at the beginning and then lowered the their price. In his article, Listing Price, Time on Market and Ultimate Selling Pricepublished in Real Estate Economics revealed:

“Homes that underwent a price revision sold for less, and the greater the revision, the lower the selling price. Also, the longer the home remains on the market, the lower its ultimate selling price.”

Additionally, the “I’ll lower the price later” approach can paint a negative image in buyers’ minds. Each time a price reduction occurs, buyers can naturally think, “Something must be wrong with that house.” Then when a buyer does make an offer, they low-ball the price because they see the seller as “highly motivated.” Pricing it right from the start eliminates these challenges.

Don’t build “negotiation room” into the price.

Many sellers say that they want to price their home high in order to have “negotiation room.” But, what this actually does is lower the number of potential buyers that see the house. And we know that limiting demand like this will negatively impact the sales price of the house.

Not sure about this? Think of it this way: when a buyer is looking for a home online (as they are doing more and more often), they put in their desired price range. If your seller is looking to sell their house for $400,000, but lists it at $425,000 to build in “negotiation room,” any potential buyers that search in the $350k-$400k range won’t even know your listing is available, let alone come see it!

A better strategy would be to price it properly from the beginning and bring in multiple offers. This forces these buyers to compete against each other for the “right” to purchase your house.

Look at it this way: if you only receive one offer, you are set up in an adversarial position against the prospective buyer. If, however, you have multiple offers, you have two or more buyers fighting to please you. Which will result in a better selling situation?

The Price is Right

Great pricing comes down to truly understanding the real estate dynamics in your neighborhood. Look for an agent that will take the time to simply and effectively explain what is happening in the housing market and how it applies to your home. You need an agent that will tell you what you need to know rather than what you want to hear. This will put you in the best possible position.

Hurry Up!! Call your Agent and List your House!!

That headline might be a little aggressive. However, as the data on the 2015 housing market begins to roll in, we can definitely say one thing: If you are considering selling, IT IS TIME TO LIST YOUR HOME!

We realize that existing home sales stumbled in January compared to December. But, if we compare the current September-January time period to the same period a year ago, we can see that existing home sales have outpaced last year every month with the January sales numbers 200,000 homes greater than last January:



Pending home sales (houses going into a contract) as reported by the National Association of Realtors have also done much better in the last five months compared to a year earlier:



And, buyer demand is continuing to skyrocket:



At the same time, the amount of housing inventory coming to the market compared to last year is plummeting:

Bottom Line

With demand increasing and supply dropping, this may be the perfect time to get the best price for your home. Call in a local real estate professional today to see whether that is the case in your neighborhood.

5 Reasons to Hire a Real Estate Professional

Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.

The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover. 

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to theNational Association of REALTORS, “the typical FSBO home sold for $208,000 compared to $235,000 among agent-assisted home sales.”

Get the most out of your transaction by hiring a professional.  

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?

Dave Ramsey, the financial guru advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line:

You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

Boise's newest real estate boom tops the nation

Boise real estate agents are currently reporting the biggest housing boom in the nation.

Agents compared data collected from the Multiple Listing Service (MLS), and it shows that Boise real estate agents saw the greatest increase in sales from January 2013 to January 2014, making it the highest sales increase in the nation.

Check out this news story for the details!

http://www.ktvb.com/news/Boise-real-estate-sales-increase-tops-the-nation-246088441.html