2 Factors to Watch in Today’s Real Estate Market Whether Buying or Selling

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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 (can you see me with my hand up in the air saying “pick me, pick me!”?) 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.

Interest Rates

Mortgage interest rates have been on the rise and are now over three-quarters of a percentage point higher than they were at the beginning of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.72% for a 30-year fixed rate mortgage last week.

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.

2 Factors to Watch in Today’s Real Estate Market Whether Buying or Selling | MyKCM

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be over 5% by this time next year.

Inventory

A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 4.3-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 78 straight months.

The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last three months.

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, in June, July, and August, inventory levels have started to increase as compared to the same time last year.

2 Factors to Watch in Today’s Real Estate Market Whether Buying or Selling | MyKCM

This is a trend to watch as we move further into the fall and winter months. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Bottom Line

If you are planning to enter the housing market, either as a buyer or a seller, let’s get together to discuss the changes in mortgage interest rates and inventory and what they could mean for you. I’m ready when you are!

Is the Real Estate Market Finally Getting Back to Normal?

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The housing market has been anything but normal for the last eleven years.  In a normal real estate market, home prices appreciate 3.7% annually.  However, after the bubble burst in June 2007, values depreciated 6.1% annually until February 2012. Those were the years so many people lost equity and fell on hard times, increasing the short sale and foreclosure rates in a big way. From March 2012 to today, though, the market has been recovering VERY nicely, with values appreciating on an average of 6.2% annually.

What Happened??

These wild swings in values were caused by abnormal ratios between the available supply of inventory and buyer demand in the market. In a normal market, there would be a 6-month supply of housing inventory.  When the market hit its peak bubble in 2007, homeowners and builders were trying to take advantage of a market that was fueled by what market experts called an “irrational exuberance.”  Then the bubble burst.

Inventory levels grew to 7+ months. With that many homes available for sale, there weren’t enough buyers to satisfy the number of homeowners/builders trying to sell, so prices began to fall.  Then, foreclosures came to market. We eventually hit 11 months of inventory which caused prices to crash until early 2012. By that time, inventory levels had fallen to 6.2 months and the market began its recovery.

Over the last 5 years, inventory levels have remained well below the 6-month supply needed for prices to continue to level off. As a result, home prices have increased over that time at percentages well above the appreciation levels seen in a more normal market. So what happens now?

That was the past. What about the future?

We currently have about 4.5-months inventory. This means prices should continue to appreciate at above-normal levels, which most experts believe will happen for the next year. However, 2 things have just occurred that are pointing to the fact that we may be returning to a more normal market.

1. Listing Supply is Increasing

Both existing and new construction inventory is on the rise. The latest Existing Home Sales Report from the National Association of Realtors revealed that inventory has increased over the last 2 months after 37 consecutive months of declining inventory. At the same time, building permits are also increasing which means more new construction is about to come to market. 

2. Buyer Demand is Softening

Ivy Zelman, who is widely respected as an industry expert, reported in her latest ‘Z’ Report:

 “While we continue to expect a resumption of growth in resale transactions on the back of easing inventory in 2019 and 2020, our real-time view into the market through our Real Estate Broker Survey does suggest that buyers have grown more discerning of late and a level of “pause” has taken hold in many large housing markets.

Indicative of this, our broker contacts rated buyer demand at 69 on a 0- 100 scale, still above average but down from 74 last year and representing the largest year-over-year decline in the two-year history of our survey.”

With supply increasing and demand waning, we may soon be back to a more normal real estate market. We won’t necessarily be in a buyers’ market (like 2007-February 2012) or a sellers’ market (like March 2012- Today); it’ll be a normal market. That may sound a bit scary, but it’s really a good thing.

Prices won’t appreciate at the levels we’ve seen recently, nor will they depreciate. It will be a balanced market where prices remain steady, where buyers will be better able to afford a home, and where sellers will more easily be able to move-up or move-down to a home that better suits their current lifestyles.

Bottom Line

Returning to a normal market is good for everyone. However, after the zaniness of the last eleven years, it might feel strange. If you are going 85 miles per hour on a road with a 60 MPH speed limit and you see a police car ahead, you’re going to slow down quickly. But, after going 85 MPH, 60 MPH will feel like you’re crawling. It is the normal speed limit, yet, it will feel strange.

That’s what is about to happen in real estate. The housing market is not falling apart! So don’t worry about that.  We are just returning to a more normal market which, in the long run, is much healthier for you whether you’re a buyer or a seller.

Want to know more about what’s happening in real estate? You know I’m always ready to talk about my favorite subject! Just get in touch. 🙂

Stunning Ceilings: The Latest Eye Candy for the 5th Wall

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Ceilings are too often the plain Jane element of a home, but they can really assume a starring role and transform a space with minimal effort and expense. See how different options, from millwork to lighting, different shapes, paint, and even wallpaper, can make the 5th wall of a room really pop, which is especially important when you’re selling your home!

Erin Powell, design director and principal at RoOomy, an online staging firm out of San Jose, California, says that a well-planned ceiling treatment can help a listing stand out. “It usually won’t make or break a purchase, but it opens up the chance to make a buyer more interested,” she says.

Here are five ways to showcase a ceiling. Use them sparingly—certainly not in every room—to avoid visual confusion. “Otherwise, the concept may lose its specialness,” Pickell says.

dark blue ceiling

© Sherwin-Williams

Paint

This is the least expensive way to make a ceiling stand out and alter its look without major architectural change. New homes often feature the same white color on walls and ceilings, but painting the ceiling slightly lighter than what’s used on the walls to add depth. Steering clear of bold colors, though, except maybe in children’s rooms or media rooms.

Darker colors on a ceiling can create a cozy, almost a cocoonish, feeling, which can be paired with white trim to keep the overall feeling from seeming too heavy.  Sometimes, a wildly unexpected hue can be the easiest way to update a room. Go with flat or matte finishes to hide imperfections and produce a polished, clean look for any color choice. Otherwise, painting the ceiling is no different from painting walls.

Wallpapered ceiling

© Emily Gilbert

Wallpaper – Yes Really!

While many see this option as something of a throwback, wallpaper has found favor among more design professionals of late and for multiple reasons. “A graphic paper can define an activity area in an open-plan space; colorfully patterned papers can pull together a palette in a room, and gold, silver, or pewter leaf paper, which we use often, add stature, drama, and radiance when coupled with the right kind of lighting,” says Chicago-based designer Jessica LaGrange. “Wallpaper can hide cosmetic blemishes or introduce pattern in rooms where all the walls are taken such as a kitchen or family area with copious cabinetry.”

vaulted ceiling

© Lexington Homes

Shape

Ceilings don’t have to be a flat plane, though it’s certainly easier and less costly to make this decision before construction or during a major remodeling and in a one-story space. Coffered ceiling treatments are attracting a lot of attention these days among consumers. That could mean a pitched, vaulted, or arched shape that rises upward and provides a greater sense of airiness, drama, and light.

ceiling with millwork

© Emily Gilbert

Use of woodwork is another way to vary the “shape” of a ceiling.  Use of such an architectural trim, especially when wider and thicker, can make a house look more luxurious. It can also be used in more elaborate ways, for instance in recessed grids for a coffered effect or in one large central portion that’s recessed and higher, in what’s called a tray design. Merritt, in Mentor, Ohio, often designs these complex arrangements of wood in clients’ homes. The company recently fashioned an elaborate grid pattern from American white oak for a large Hamptons, N.Y., home. Haver and Skolnik Architects, in Roxbury, Conn., known for building and renovating traditional homes, frequently uses beams and other millwork to add coziness and an aged character.

But simpler uses of crown molding or ceiling trim can achieve effects such as unifying adjoining rooms for less than $1,000, says Julie Whitley, director of architecture design at homebuilder Red Seal Development Corp. in Northbrook, Ill. One DIY technique that’s attracted wide attention and adds an updated farmhouse feel is to use shiplap, basically manufactured boards with grooves that fit together snugly. The look picked up steam after celebrity TV couple Chip and Joanna Gaines of HGTV’s “Fixer Upper” show began using them in countless projects, including on ceilings. For a more modern vibe, Zuber of Morgante Wilson Architects recommends trim with an angled or slanted profile rather than straight rectangular boards.

ceiling lights

© RoOomy Virtual Staging

Lighting

Ceiling lights have changed A LOT in recent years. In general, oversized fixtures are more on trend, along with ceiling fans with lights built in, and almost all bulbs are LEDs for better performance, greater efficiency, and new smart-home applications, says Joe Rey-Barreau, an architect, lighting designer, and education consultant for the American Lighting Association. Among some of the new LED uses are in linear strips that can be installed easily inside or on top of cabinets, in bookshelves, along toe kicks in kitchens and baths, and in ceiling coves and cornices. For sellers who want (or need!) to update fixtures before listing to improve how rooms show, Rey-Barreau says the number of attractive, affordable options has increased – which is great because simply changing lights from the outdated brassy look to more modern, clean lights can make a world of differnce. Affordability is especially helpful though, if sellers leave such upgrades behind, which typically is part of the sales contract.

Have a question about enhancing your “5th walls”? I’m always ready with opinions and advice on the latest trends and on what buyers are looking for if you’re considering selling! So don’t hesitate to get in touch. 🙂

5 Real Estate Reality TV Myths Explained

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Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there, watching entire seasons of “Love it or List it,” “Million Dollar Listing,” “House Hunters,” “Property Brothers,” and so many more all in one sitting.

When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and decide to purchase one of them.
Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors the average homebuyer tours 10 homes as a part of their search.  

Myth #2: The houses the buyers are touring are still for sale.
Truth: Everything is staged for TV. Many of the homes being shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the open house.
Truth: Of course, this would be great!  The dirty little secret is that while open houses can get you exposure to buyers interested in your area, they rarely if ever help sell the actual house itself. I’d say 99% of the time, homes are sold during regular showing appointments, not open houses. 

Myth #5: Homeowners decide to sell their homes after a 5-minute conversation.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives/goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!  I happen to know a very good and experienced real estate professional too – of course, that’s me. So if you’ve been having that American dream of homeownership, let’s get that done for you in real life!

Why Have Interest Rates Jumped to a 7-Year High?

Did you get that Van Halen song Jump! in your head when you read that title?? It was on purpose! Seriously though, interest rates for a 30-year fixed rate mortgage have climbed from 3.95% in the first week of January up to 4.61% last week, which marks a 7-year high according to Freddie Mac. The current pace of acceleration has been fueled by many factors.

Sam Khater, Freddie Mac’s Chief Economist, had this to say:

“Healthy consumer spending and higher commodity prices spooked bond markets and led to higher mortgage rates over the past week.

Not only are buyers facing higher borrowing costs, gas prices are currently at four-year highs just as we enter the important peak home sales season.”

But what do gas prices have to do with interest rates?

Investopedia explains the relationship like this:

“The price of oil and inflation are often seen as being connected in a cause-and-effect relationship. As oil prices move up or down, inflation follows in the same direction.”

You may have noticed that filling your gas tank has become substantially more expensive in recent months. The average national gas price has climbed nearly $0.50 from the beginning of the year, leading to the highest price for Memorial Day weekend since 2014.

As rates go up, your purchasing power goes down, but don’t worry; rates are still well below the averages we’ve seen over the last four decades.

“Freddie Mac said this year’s higher rates have not yet caused much of a ripple in the strong demand levels for buying a home seen in most markets, but inflationary pressures and the prospect of rates approaching 5 percent could begin to hit the psyche of some prospective buyers.”

Buying sooner rather than later will help lock in a lower rate than waiting, as the experts believe rates will continue to climb. Even a small increase in interest rates can have a big impact on your monthly housing cost.

Bottom Line

If you are planning on buying a home this year, keep an eye on gas prices the next time you’re at the pump. If you start to feel a big jump in price, know that rates are probably on their way up, too.  Call me if you have questions about any of this, I’m always ready to talk about real estate!

The #1 Reason to List Your House for Sale NOW!

 

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If you are debating whether or not to list your house for sale this year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes for Sale

The National Association of Realtors’ (NAR) Chief Economist Lawrence Yun recently commented on the current lack of inventory:

“Inventory coming onto the market during this year’s spring buying season – as evidenced again by last month’s weak reading – was not even close to being enough to satisfy demand. 

That is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster – in many parts of the country.”

The latest Existing Home Sales Report shows that there is currently a 4.1-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market, and 6.1% lower than last year’s inventory level.

The chart below details the year-over-year inventory shortages experienced over the last 12 months:

The #1 Reason to List Your House for Sale NOW! | MyKCM

Anything less than a six-month supply is considered a “seller’s market.”

Bottom Line

Let’s get together to discuss the market conditions in your neighborhood so that I can assist you in gaining access to the buyers who are ready, willing, and able to buy right now!  The 2018 Summer selling season is ending soon so if you want to make a move quickly, it would be best to make a move now! Give me a shout!

Mortgage Lingo Made Easy

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Buying a home can feel overwhelming, especially when you add in the loan lingo used by lenders and real estate agents, according to Alex Parker, sales manager at Home Team Mortgage – Ebby Halliday Realtors’ affiliated mortgage source (he’s a smart guy!). To help alleviate some of the confusion, below are some common terms frequently used in the mortgage process:

FHA Mortgage

FHA is a type of mortgage that offers lower down payments, allows for lower credit scores and less income to qualify. These mortgages are government backed by the Federal Housing Administration, hence the FHA acronym!

VA Mortgage

VA mortgages are loans that can only be used by qualified veterans, active-duty military personnel and reservists. These loans require no down payment and are guaranteed by the Department of Veteran Affairs. They are a great benefit to our brave military population!

Conventional Mortgage

Conventional mortgages are loans offering a wide range of options for borrowers. Some features may include monthly or single premium mortgage insurance, second liens, and higher loan amounts.

Fixed Rate Mortgage

This is a mortgage loan for which the interest rate is fixed for the life of the loan. The principal and interest payment does not vary. As with every loan, the escrowed portion of the payment may fluctuate up or down depending on the property tax or homeowner’s insurance changes. Most mortgages in our market place are fixed rate mortgages, meaning that regardless of whether they are FHA, VA or conventional, they have a fixed rate.

Adjustable Rate Mortgage (ARM)

This is a mortgage loan for which the interest rate may change annually, often after a set number of years (for example, 5 years). ARMs are tied to indexes which are used to determine changing rates to align with the current market. The principal and interest payment may vary up or down, along with the escrowed portion of the payment.

Annual Percentage Rate (APR)

The APR illustrates the annual cost of financing, including interest rate, fees and charges and is expressed as an annual interest rate. Because you may be paying loan discount points and other prepaid finance charges at closing, the APR disclosed is very often higher than the interest rate on your loan. This APR can be compared to the APR on other loan programs to give you a consistent means of comparing rates and programs.

Pre-Qualification

A process by which a lender assesses whether a borrower qualifies for a mortgage based on information provided by the customer. Typically, a prequalification is an INFORMAL review as a preemptive to pre-approval and full loan approval.

Pre-Approval

A process by which a lender verifies information including credit, income and asset information to assure the borrowers qualify for the mortgage. A pre-approval is more FORMAL and is much more powerful in negotiating as it provides peace of mind for buyers, sellers and agents.

To learn more about the mortgage process and to determine how much you qualify to borrow for a home purchase, contact me and I’ll get you some great mortgage contacts who can help set you on the right path to homeownership or to a new home!

Homes are More Affordable Today Than They Were 20 Years Ago!

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With both home prices and mortgage rates increasing this year, there’s a lot of concern about our continued ability to purchase a major part of the American Dream – owning a home, especially for first-time homebuyers. However, if you look at some stats and compare housing affordability today to what it was in the late 1900’s and early 2000’s, you can see that we’re actually in much better shape than a lot of what the hype out there might have you believe!

In Black Knight’s latest monthly Mortgage Monitor, they revealed that in the vast majority of the country, it is actually more affordable to purchase a home today than it was between 1995 to 2003 when looking at mortgage payments (determined by price and interest rate) compared to incomes. Yes, it is true that home prices are up compared to 1995-2003, BUT mortgage rates are still much lower now than they were at that time. Today, they stand at about 4.5%…compare these to today’s rate, and you’ll see that things are pretty good…

  • 1995 – 7.93%
  • 1996 – 7.81%
  • 1997 – 7.6%
  • 1998 – 6.94%
  • 1999 – 7.44%
  • 2000 – 8.05%
  • 2001 – 6.97%
  • 2002 – 6.54%
  • 2003 – 5.83%

In addition, wages have risen over the last twenty years.  Black Knight’s research revealed that, when comparing “the share of median income required to buy the median-priced home” today to the average between 1995 to 2003, it is currently more affordable to purchase a home in most areas of these fabulous United States, specifically in 44 of 50 states.

Here’s a state map of the percentage change in the price-to-payment ratio. Positive numbers indicate that it is less affordable to buy (shown in RED), while negative numbers indicate that it is more affordable (showing in light and dark BLUE).

Homes are More Affordable in 44 out of 50 States | MyKCM

Bottom Line

Whether you’re moving up to the home of your dreams or purchasing your first house, it is a great time to buy!  And that isn’t just this realtor talking, that’s based on FACTS and historic affordability data. 🙂  Want to know more about what’s going on in the market?  Get in touch with me, I’m always ready to talk real estate!

Getting Pre-Approved Should Always Be Your First Step

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In many markets across the country, the number of buyers searching for their dream homes is way more than the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you’re serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you’re in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a real estate pro (like me!) is that we generally have relationships with lenders who will be able to help you with this process. Once you’ve selected a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you’ll be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you’re ready and willing to buy, you may be pleasantly surprised at your ability to get that home you’ve been dreaming about, so give me a call and let’s start strategizing about your home search!

 

The Future is Bright for the Ebby Halliday Companies!

I’m not sure if you’ve heard this or not, but some big news just hit the wires, and it involves a company you might have heard of – Ebby Halliday Real Estate Inc. 😉  The news story was presented in this way: “The company leadership recently announced that it intends to be acquired by HomeServices of America, Inc., a Berkshire Hathaway affiliate. The acquisition will include Ebby’s three real estate brands: Ebby Halliday Realtors, Dave Perry-Miller Real Estate, and Williams Trew Real Estate, as well as the firm’s affiliated mortgage and title companies. The Ebby Halliday companies will continue to operate under their current brand names. Financial terms of the transaction were not disclosed.” I myself am sad about that, I would’ve loved to know the sale price! Inquiring minds want to know! I guess we never will, but I bet it was more than the average sale price of a home in North Texas, that’s for sure! 😉

As you know, the brokerage that I’m proud to call my broker has been serving North Texas residents since 1945, and Ebby Halliday is one of the country’s most widely respected real estate companies. With sales of more than $8 billion, the firm ranked 12th in the nation in 2017. With our memberships in Leading Real Estate Companies of the World, Luxury Portfolio International, Who’s Who in Luxury Real Estate, and numerous other industry networks, agents of Ebby Halliday are ideally and uniquely positioned to represent clients across North Texas.

Mary Frances Burleson, the current President of Ebby Halliday, Inc. described the company purchasing Ebby in the following way: “HomeServices of America is the nation’s second-largest residential real estate brokerage company and one of the largest providers of integrated real estate services. HomeServices of America is the owner of the Berkshire Hathaway HomeServices, Real Living Real Estate and Prudential Real Estate franchise networks.”

The Ebby Halliday purchase won’t change anything in the short term. The long-term vision, I’m not completely sure of, but one thing I am sure of is that regardless of what company owns Ebby Halliday, I as an agent will continue to serve my clients as I always have – with hustle and heart and integrity and stellar communication, if I do say so myself!  If you have any questions, don’t hesitate to get in touch!

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