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Why is National Delinquency Rate is Important?

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The national delinquency rates on home is a number that may not be tracked diligently by real estate professionals.  It isn’t as widely tracked as mortgage interest rates, average days to close and housing price fluctuations, but it may offer insight to the health of the American economy.

The Mortgage Bankers Association released the most recent national delinquency rate and it is lower than it’s been in 18 years.  According to an article published by the Chicago Tribune, “That’s a big deal, because when large numbers of owners do the opposite – stop paying on their home loans for months at a time — the entire economy feels the effects. Spiking delinquencies in 2007-2008 ushered in the global financial crisis and spawned tidal waves of foreclosures that devastated borrowers and their communities.”    

It sounds like it is some great news, but what has caused the number of delinquencies to drop?  Perhaps, and most likely, we can thank the underwriting rules that were tightened up back in 2010.  Specifically, mortgage lenders are requiring a high FICO score to qualify, avoiding approving mortgages to high risk borrowers more likely to default.   These changes, coupled with continued low rates, a healthy economy and a drop in unemployment are helping ensure more home owners stay on track with their payments.

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Is the Recent Dip in Home Values Cause for Concern?

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The real estate market has, for the most part, been on a steady incline for the past 5-7 years, in terms of home values.  Homeowners have been comfortably seeing the value of their house increase at a fairly consistent rate, recovering from the major decreases in value they saw about 10 years ago.

However, according to data released by Black Knight, the upward trend may be coming to an end, or at least slowing down some.  According to an article published by Housing Wire, “Home values fell 0.2% in November, down $580 for the month and marking the first time the market has seen a consecutive three-month decline since early 2012. Now, the average home is down $1,361 in value since August 2018.”

Although the growth rate varies across the United States, overall home values are still higher than they were in 2017 in 99 of the 100 markets.  So, many homeowners may still be breathing easy knowing that, over a larger span of time, the value of their home is moving in the right direction.

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Disappointing Sales Figures for New Homes Reported

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In many parts of the U.S., sales of new homes continued to have a downward trend in February, falling .6 percent from January.  This, according to an article published by CNBC, is the third month in a row that the sales of new homes dropped.

In the article, the details of regional new home sales were provided.  Bringing the U.S. average down were the Midwest with a 3.7 percent decrease in sales as well as the west, with a drop of almost 18 percent.  The south and northeast regions of the U.S., however, saw increases in new home sales of 19.4 percent and 9 percent respectively.

An overall slow-down in sales is being attributed to a shortage of homes, specifically lower priced homes.  As a result, the prices are being driven up, the median price of new homes is up almost 10 percent from last year.  Couple this with rising mortgage interest rates, many first time homebuyers may have a difficult time entering the real estate market.

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What Impact with Automation have on Real Estate Needs?

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As the age of automation descends upon us, experts analyze its vast and far reaching economic impacts.  One fairly obvious and direct impact is upon employment, as robots and automation eliminate the need for people to complete certain types of work.

Bisnow.com published an article on September 6, 2017 describing some of the findings of a recent report by Carl Benedikt Frey and Citigroup.   Specifically, the article notes that retail jobs will be severely impacted by automation, with Frey suggesting that the retail industry employment is “likely to vanish”.  The impact of this is broader than the elimination of jobs such as manufacturing, which are geographically concentrated.  Frey indicates, “the downfall of retail employment will affect every city and region”.

As these changes begin to take place, a notable effect is a decrease of a need for retail space, resulting in empty storefronts and malls across the United States.  However, what may not have been anticipated was the increased demand for warehouse space.  It is estimated that more than 2.3 billion square feet of new space will be needed for warehousing between now and 2035.  This could require more “mixed-use development, which normally means residential sitting alongside retail or sometimes offices…” according to the article.

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Photo Credit: Seth Werkheiser

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How Is Student Debt Affecting Real Estate Trends?

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Student debt is a thorn in the side of many college students years after they receive their diploma.  The rising cost of tuition and debates as to whether students should be responsible for paying for their college education have been hot topics for several years.   According to an article published by Bloomberg, written by Chris Bryant, “In the U.S., where aggregate student debt has surged 170 percent in a decade, recent graduates owe $34,000 on average. About 5 percent owe more than $100,000. “

This may not seem like an issue that older generations would be worried about.  Their student loans have long been paid off, they may have even helped finance their children’s college education, leaving them debt free from college loans.  However, as the article points out, this mounting debt is a factor in some negative economic trends that affect many, even older generations.

Because the generation of millennials will be dedicating funds to pay their student loans off, with salaries that have not rebounded from the 2008 recession, their focus will not be on purchasing a home.  They are struggling to set money aside for a down payment.  Missed loan payments for student loans can affect credit scores, making mortgages harder to come by.    As baby boomers look to downsize homes in retirement, it might be difficult to find buyer from the next generation who can afford to purchase it.

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Low Inventory is Concerning Real Estate Professionals

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The low inventory of homes for sale is causing some real estate companies to panic a bit.  The number of homes for sale March 2017 compared to March 2016 fell seven percent according to the National Association of Realtors.  In an article published by CNBC by Dian Olick, she quotes Glenn Kelman, CEO of Seattle-based Redfin, a real estate firm, “”The inventory is reaching historic lows. It’s never declined faster than it did last month. It’s freaking us out — it’s affecting our business; it’s limiting our sales.”  

The cause of this low inventory issue can be attributed to a few factors.  To begin, many homeowners are deciding to become landlords.  Instead of selling a home when moving on, homeowners are holding on to their home and renting it out.  Another reason is new home construction is declining.  On average, home builders are building about 18 percent fewer homes than the historic average.

The good news for home owners looking to sell, homes are selling quickly and some are even selling above list price.  Homes in April 2016 went under contract in 50 days, as of April 2017, that number decreased to 40 days.

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Single Women Outpace Single Men in Home Ownership Trends

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Since 1981, single women have lead single men in the category of home ownership.  Over the past few years, the gap has grown even larger.  According to a data released by the National Association or Realtors, in 2016, single women accounted for 17 percent of the US. homeowners.  Single men lagged behind,  making up only 7 percent of all American homeowners.

According to an article published by Bloomberg.com, “Women earn less than their male counterparts, pay harsher workplace penalties for pursuing parenthood, struggle more with debt, and save less for retirement.”  Nevertheless, the rate at which women purchase homes outpaces single men.  This begs, the question, why?

The most prominent reason, Mary Pilon points out in her article, “Why Single Women Are Buying Homes at Twice the Rate of Single Men”,  is that a woman, as a single mother, places significant value in providing a stable home for her child.  Since women are three times more likely, than a man, to be the single parent, the number of homes purchased by a single parent will most likely be a single mother.FotoFlexer_Photo

Additionally, there are more and more unmarried Americans 25 years old or older; in fact about 20 percent of Americans over the age of 25 are single.  According to Bella DePaulo, a professor at the University of California at Santa Barbara, women seem to embrace their single lifestyles more readily than single men.  Owning their own home is a way many single women choose to enjoy their years as single professionals; they truly revel in the independence and empowerment home ownership represents.

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Photo Credit:  Mark Moz

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What to Consider When Deciding on a Home Renovation

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It’s the time of the year when many homeowners consider tackling home improvement projects.  It can be exciting to think about designing a dream kitchen or bathroom.  However, before taking the plunge and spending thousands of dollars, its worth reviewing which home improvement projects offer the best return on your investment.22342993781_c39181aa68_o

A list of home improvement project’s cost as well as the return on investment has been compiled by Remodeling magazine.  Topping the list of renovation trends with the highest ROI are energy efficiency upgrades such as adding fiberglass attic insulation.  It has an average ROI of 107%.

Additionally, an up and coming trend is updating a home to include “universal design”.  According to an article published by Realtor.com, written by Judy Dutton, universal design… “ensures that a home’s features can be used just as easily by the elderly and disabled as anyone else. That means things like grip bars in showers, lever-style doorknobs, and wider, wheelchair-friendly doors. A universally designed bathroom, for instance, reaps a respectable 68.4% ROI.”

These types of upgrades to a home aren’t as glamorous or exciting as the updates to kitchens and bathrooms that are seen on home improvement shows and magazines.  Unfortunately, these types of improvements do not offer the same ROI on average.  In fact, many home improvement projects, such as bathroom remodel, master suite addition and back yard decks and patios, have a return on investment around 65%.

When determining whether a home improvement project is a wise investment to make or one that a homeowner should take a pass on, Dutton suggests considering how long you plan to stay in the home.  When homeowners plan to sell the home in less than five years, its advised to take the return investment into account.  If you plan on staying longer, however, it may be worth the cost because it will be an upgrade you plan on enjoying in your home for a while.

To see the entire article and the list of remodeling projects cost and ROI, click here.

 

 

 

 

Photo Credit: Highmark Builders

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