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How Would a Recession Affect the Housing Market?

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The stock market has taken some big hits over the past weeks as a result of the global pandemic of COVID-19.  Many Americans are wondering if the next recession is around the corner.  Some may be wondering if the housing market will also see declines that parallel stock market drops.

MarketWatch.com published an article, written by Jacob Passy, that may put real estate owners at ease when it comes to the value of their property. According to the article, experts don’t necessarily believe that a potential recession will significantly impact the housing market.  “While the housing crisis is still fresh on the minds of many, and was the catalyst of the Great Recession, the U.S. housing market has weathered all other recessions since 1980,” wrote Odeta Kushi, deputy chief economist at First American and the report’s author. “In fact, the housing market may actually aid the economy in recovering from the next recession — a role it has traditionally played in previous economic recoveries.”

Nevertheless, homeowners should stay informed and aware of the climate of the economy because different economic factors can have an impact on the housing market.  As we see declines in the stock market, consumers may feel more hesitant to move forward with a home purchase, therefore impacting home sales.  Another economic change that could influence the real estate market are the loss of jobs.  Increased unemployment could, in turn, lead to foreclosures if the homeowner can’t keep up with their mortgage payments.  Foreclosures, according to the article, “can have a ripple effect through a local market, causing other homes to drop in value. “

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Real Estate Expert’s Grim Outlook on the Housing Market

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Some real estate experts are concerned about the future of the real estate market and their conclusions about the real estate market may make some homeowners take pause.

In an article published by DSNews.com, titled “Residential Real Estate on ‘Shaky Ground’”, an interview with real estate analyst Keith Jurow is summarized.  The article states he doesn’t believe there was really any real estate recovery, In fact, according to Jurow, “the “illusion” stems from lenders and mortgage services not putting foreclosed properties on the market.” 

The market is at risk of due to factors such as subprime mortgages, poor home sales and mortgage defaults, despite many mortgages being modified.  Shockingly, the article notes, “There are currently $800 billion of subprime mortgages still outstanding, many of which have not been paid at all in the last five years.”

Jurow’s alarming conclusion is homeowners considering selling before the market gets much worse.  Read the entire article.

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How is the New Housing Market Faring So Far in 2019?

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The 2019 real estate market is approaching the halfway point of the year and recent statistics published jointly by the Census Bureau and Department of Housing and Urban Development reveal an interesting mix of ups and downs within the new housing market.  The good news is that new house prices have increased 8.8% from last May.  However, disappointing drops in the sale of new single family homes was also reported, they fell 6.9% 

An article published by Bloomberg, reported by Reade Pikert, offers some explanation behind these conflicting statistics.  A detailed view of the home sales decline reveals that the home that are experiencing the decline in sales are almost all priced below $300,000.  Thus suggesting there is a shortage of “affordable” properties. 

Additionally, sales of existing homes took a dip in April, yet the number of sales of pre-construction properties reached the highest level since 2017.  Pickert indicates, “New-home purchases account for about 10% of the market and are calculated when contracts are signed. They are considered a timelier barometer than purchases of previously-owned homes, which are calculated when contracts close.”

Despite the mixed reviews of the new housing market’s 2019 performance thus far, it seems investors remain optimistic.  The article states, ”A gauge of U.S. homebuilding-industry stocks erased losses after the data and was up about 0.3% despite losses in the broader market, suggesting investors were focusing on the upward revisions to new home sales.”

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A Drop in Mortgage Rates for the Start of 2019

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Throughout much of 2018 many experts were speculating, as they do each year, how mortgage rates would change heading into 2019.  As we saw rates continue to slowly climb throughout 2018, it was natural that many industry professionals assumed the trend would continue into the new year.  However, it doesn’t appear those predictions are holding true, at least not for the first few weeks of 2019.

In an article published by the Washington Post, author Kathy Orton states, “Stock market volatility, global trade worries and the government shutdown are pushing rates down to their lowest levels since August.”.  Recently the 30 year fixed rate dropped to about 4.51.  In fact, Lending Tree released a report showing about 70% of home purchasers secured a rate below 5 percent. 

Some in the industry believe that rates may drop further.  Many are speculating the effects the government shut down, treasury yield rates, as well as jobs report data on mortgage rates.  Nevertheless, the current drop in mortgage rates coupled with slowed home price growth should entice home buyers to take action.

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Has The Government Shutdown Affected Real Estate Industry?

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As our federal government shutdown enters its third week,the effects have been widely publicized in the media.     Effects big and small, local and far reaching are on the minds of all Americans as they wonder how long the shutdown will continue.  Real estate professionals and their clients are not immune to the disruption caused by the shutdown.  However, its debatable as to how much affect the shutdown has had so far on the real estate industry.

 According to an article published by National Mortgage Professional Magazine, written by Phil Hall, industry experts have different opinions on the impact of the federal government shutdown on the housing industry.  A survey completed by National Association of Realtors found only 75 of 2211 NAR members reporting the shutdown affected real estate transactions.  Less than 20percent of those surveyed reported negative impacts such as delays in closings or closing related processes such as income verification. 

 However, Zillow did issue a warning after determining “…that federal workers who are not being paid because of the shutdown will owe about$249 million in mortgage and about $189 million in rent payments for January.Approximately 800,000 workers are being furloughed or required to work without pay during the shutdown.”

Experts agree, however, the longer the shutdown continues, the impact will becoming more widespread and far reaching.

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Real Estate Experts Provide Advice for Investors

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Real Estate is a popular investment vehicle for American investors.  In fact, 89% of investors put their money into real estate, according to a report by Better Homes and Garden Real Estate.  In a recent article published by Forbes, real estate experts provide reminders and warnings regarding real estate investments in order to help insure a profitable investment.

One real estate professional, Lee Kiser, reminds investors to study the real estate taxes of a property before making the purchase.  Its important to understand what the upcoming tax liability may be down the road, and a real estate tax professional may be able to help an investor prepare accordingly.

Shelling out the money for a professional inspection and appraisal might not be top of the list for investors, but according to Angela Yaun of the Day Realty Group, it may help save more money for the investor later.  The investor may be able to get items covered under a home warranty if they are proven to be functioning at the time of the inspection.  It can also make the buyer aware of repair expenses they should plan for later.  A professional appraisal will provide the most accurate square footage and appraised value, important facts to have on hand when the investor is looking to sell their property.

The article goes on to detail the importance of understanding Home Owners Association restrictions, obtaining a Master Land Use plan for the area surrounding the property, and getting accurate and professional estimates for repairs, holding costs and closing costs.

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Photo Credit: Antonio Carlos Cascatrina

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Could 2018 Be The Right Time to Sell Your Home?

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If you have been waiting for the right time to sell your home, there are many reasons experts are saying that the time has come.  In an article written by Devon Thorsby, published by U.S. News and World Report, the reasons that 2018 might prove to be a good time to sell a home are listed.

First and foremost, the past few years of low inventory of homes for sale has left prospective home buyers more than ready to scoop up the perfect house.  Their frustration with available homes has led many house hunters to begin their search earlier than normal with the hopes of purchasing a home before other buyers make their offer.

Additionally, interest rates are still relatively low.  They have been slowly creeping up and are expected increase to 5 percent in 2019.  Many home buyers are motivated to purchase a home sooner rather than later in order to secure a lower interest rate.

Thorsby details additional rationale for putting that “For Sale” sign up this year.  Read the entire article here.

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Myth Busters: The Truths of Pricing and Selling Your Home

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One of the most important decisions a home owner who has decided to sell their home can make is what the list price of the home should be.  Emotions, financial strains, and decisions based on inaccurate or misunderstood information can lead to a disappointing and frustrating sales process.

In an article published by Realtor.com, Cathie Ericson helps debunk home pricing myths that might have home sellers hung up on their list price.   Reviewing these myths and understanding the truth about the pricing, listing and hopefully selling a home will help sellers start out on the right foot.

One myth sellers may believe that if a home is overpriced, it can just be lowered later without any negative effects.  As Ericson points out, lowering a price is not a quick and easy fix.  Many house hunters notice when a home has been on the market for a while and know when there have been numerous price reductions.   As she states,  “… buyers presume that something must be wrong with it. As such, they might still steer clear, or offer even less than the price you’re now asking.”

When deciding on a listing price, sellers may be turned off by the idea of pricing their home too low, assuming they will not make as much money in the sale.  However, low priced homes might just attract more buyers and the increased interest in the home might result in a bidding war.

The article details the truth behind other myths such as recouping 100% of the cost of home renovations, the real estate agent’s stake in the pricing strategy and the whether all home owners make money on the sale of their home.  Read the entire article.

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Will the Fed Rate Increase Affect the Spring Housing Market?

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On Wednesday, the Federal Reserve governors decided to increase the interest rate by .25 percent.  According to an article written by Amber Tuaufen, published by inman.com, “The Federal Reserve sets the rate for the overnight exchange of money by banks; governors adjust the rate to help curb inflation or stimulate growth, depending on their assessment of what would be best for the economy.”

Despite the fact that this move does not directly affect the mortgage rates, it can have an impact on the rates for mortgages.  In fact, an increase in mortgage rates has been anticipated for quite some time now.  Many prospective home buyers have been advised that the historically low interest rates were coming to an end; however, rates continued remain low.  Many buyers may not have felt pressure to move forward with a home purchase, leading to sluggish sales.  It would appear, now, the rates are indeed going to begin to increase.

This potential increase of mortgage rates could have some negative impact on home sales.  Yet, some agents feel that the continued affordability of housing coupled with the steady increase of rates could put pressure on prospective home buyers to make a decision and not delay their home purchase any longer.

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Photo Credit: Svilen Milev

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Rising Home Values Means More “Equity Rich” Homeowners

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For the past four and a half years, the median prices of homes in the United States have been increasing year over year.  This positive news, coupled with the fact that home owners are making the choice to own their properties longer, has helped more and more home owners become “equity rich”.

business-1-1246320The findings from a report released by ATTOM Data Solutions revealed 23.4% of home owners are considered equity rich, meaning they have a loan-to-value of at least 50%.  In fact, the number of homeowners with at least 50 percent loan to value ratio increased by 2.6 million from the third quarter of 2015 to the third quarter of 2016.

According to an article written by Kelsey Ramirez, published by HousingWire.com, the amount homeowners who fall into the category of “seriously underwater” is smaller than last year at this time.   Specifically, the number of homeowners with a loan-to-value ratio of more than 125 percent decreased by 854,000.

Just as the real estate market varies in markets across the U.S., trends for homeowners’ equity or lack thereof vary based on geographical locations.  More equity rich home owners are seen in locations such as San Jose and Los Angeles,  as well as Honolulu and Pittsburgh.  Conversely, in locations such as Las Vegas, Cleveland, Toledo, and Detroit, there is still a large percentage of home “seriously underwater”.

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Photo Credit:  Svilen Milev

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