RENT vs BUYING

Some Highlights:

  • Historically, the choice between renting and buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (27.7%) vs. the percentage needed to buy a median-priced home (17.5%), the choice is clear.
  • Every market is different. Before you renew your lease, find out if you can put your housing costs to work by buying a home this year.20191115-MEM-ENG

Is Student Loan Debt A Threat to Homeownership? No!

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Over the course of the last thirty years, a shift has happened. An entire generation has been raised to believe that a college education is their key to unlocking opportunities that were not available to their parent’s or grandparent’s generations.

Due to this, student loan debt has soared to $1.5 trillion and represents the largest category of debt, surpassing credit card and auto loan debt in 2010 and never looking back. As more and more Americans continue their education amongst rising tuition costs, this number will no doubt increase.

Many housing experts have blamed student loans for a drop in the homeownership rate for young families, and to an extent, they’ve been right. Increased debt at the time of graduation has no doubt limited young people from being able to afford a home at the same rate as their parents or grandparents did at the same age.

In a recent Forbes article, the author explained that “in just the class of 2017, the average student has about $40,000 in debt — almost enough for a 20% down payment on a median-priced home.”

The Federal Reserve set out to determine exactly how much impact student loan debt has had on the homeownership rate of those 18-34 (millennials). Their results found that,

Every $1,000 in student loan debt delays homeownership by about 2.5 months, but it doesn’t prevent homeownership entirely.

 In fact, by the time college grads reach their 30s, those with student loan debt have a homeownership rate nearly identical to those who didn’t take out loans.” (emphasis added)

In the Wall Street Journal’s coverage of the Fed report, they found that recent graduates prioritize paying off their student loans over saving for a down payment, despite their desire to be a homeowner. Many with debt want to “get that monkey off (their) back (before they) make any new investments.”

This has just delayed the wave of young home buyers from hitting the market. But as Danielle Hale, the Chief Economist at realtor.com warns,

“2020 will be peak millennial, the year when the largest number of millennials will turn 30.”

 By age 30, those who attained a bachelor’s degree right after high school will be one or two years away from paying off their loans and will have been in their career long enough to earn a higher salary.

In the long run, research shows that attaining a bachelor’s degree or more actually increases the chances that someone will become a homeowner.

Bottom Line

If you are one of the many millennials who has prioritized paying down your student loans over saving for a down payment, you’re not alone. Even if you are a couple years away from paying off your loans, let’s get together to help you determine if waiting really is the best decision for you!

Contact me at 209-742-3974 to learn more how we can help you.

Selling your home in 2019? Could Mariposa County be reaching its Peak?

Three key points to think about when selling your home. First, what’s the market like on a Macro level and how will that affect my home while it is on the market? Second, will I get what I need out of my home to make this journey worth my time? Finally, what is the local market looking like on a Micro level?

To understand more about the Macro level of the Real Estate market. The article talks about interest rates and how this could affect the buyer and sellers.

This Blog post will help you understand the local Real Estate market in Mariposa County. Here are some figures to help you see how the local market is trending.

In 2017 the average median home price was listed at $328,000 and sold at $300,000 -8.54% from the original asking price. In 2018 the average median home was listed at $335,000 and sold for $326,000 down -4.48% from the original asking price.  Even with the average drop in price, home prices from 2017 to 2018 increased by +6.7 percent.

 

20172018soldprice

Using days on market and average home price helps to understand how the market is moving and creates the inventory of homes on the Market.

20182018days

It is widely accepted in the Real Estate Industry:

0-4 months of inventory is a “Seller’s Market”

5-7 months inventory is a “Balanced Market”

8-12 or more months of inventory is a “Buyer’s Market”

In the Start of 2018 the Mariposa County had 8 months of Inventory. Spring through summer there was about 6 with the lowest in June at 5 months.  2018 was for the majority of the year was a buyers’ market with a balanced market from the summer to closing of the year.

20172018inventory

How to view these numbers.

Days on market have increased and predict in 2019 those days to stay about the same. As the days on market have increased, this could indicate that Mariposa County is reaching its peak. Now look at Pricing. Pricing is the key factor that helps you the seller determine if placing your home on the market is even worth your time. 2019 is predicted to provide a 4% increase in prices.  Combining these two factors help form the picture of the Real Estate market inside Mariposa County.

Bottom line.

With inventory increasing or staying on track with 2018 numbers, the forecast in 2019 of selling your home in a timely manner and at your asking price is currently still looking very promising with in Mariposa County.

Have questions? Want to know more about how these numbers could affect you? Contact me at 209-742-3974 or at http://www.myrealtorbryce.com  

 

Numbers obtained using the CRMLS, guidelines included Mariposa County, single family residence, and standard purchase non distressed homes.

 

Inventory is LOW Pushes Home Prices Higher

According to CoreLogic’s latest Home Price Index, prices appreciated by 6.9% year-over-year from December 2016 to December 2017 on a national level. This marks the fifth month in a row with at least a 6.9% increase.

Dr. Frank Nothaft, Chief Economist for CoreLogic, gave insight into the reason behind the large appreciation,

“The number of homes for sale has remained very low. Job growth lowered the unemployment rate to 4.1 percent by year’s end, the lowest level in 17 years. Rising income and consumer confidence has increased the number of prospective homebuyers. The net result of rising demand and limited for-sale inventory is a continued appreciation in home prices.”

This is great news for homeowners who have gained nearly $15,000 in equity (on average) in their homes over the last year! Those homeowners who had been on the fence as to whether or not to sell will be pleasantly surprised to find out that they now have an even larger profit to help cover a down payment on their dream homes.

As we near the traditionally busy spring buyers season, there is still hope for buyers as mortgage rates remain low compared to recent decades. The report also predicted that home price appreciation will slow slightly, rising by 4.3% by this time next year.

Bottom Line

If you are looking to enter the housing market, as either a buyer or a seller, let’s get together to go over exactly what’s going on in our neighborhood and discuss your options!

Thinking of Selling Your Home? Competition is Coming.

The number of building permits issued for single-family homes is the best indicator of how many newly built homes will rise over the next few months. According to the latest U.S. Census Bureau and U.S. Department of Housing & Urban Development Residential Sales Report, the number of these permits were up 7.4% over last year.

How will this impact buyers?

More inventory means more options. Lawrence Yun, NAR’s Chief Economist, explained this is good news for the housing market – especially for those looking to buy:

“This rise in single-family housing construction will help tame home price growth, and the increase in multifamily units should continue to help slow rent growth.”

How will this impact sellers?

More inventory means more competition. Today, because of the tremendous lack of inventory, a seller can expect:

  1. A great price on their home as buyers outbid each other for it
  2. A quick sale as buyers have so little to choose from
  3. Fewer hassles as buyers don’t want to “rock the boat” on the deal

See my previouse blog at the micro level for Mariposa County. With an increase in competition, the seller may not enjoy these same benefits. As Chief Economist Nela Richardson, added:

“Because existing home inventory has been so low for so long, new construction is taking a larger share of the market…Builders meet the buyers and see the demand firsthand.”

Bottom Line

If you are considering selling your house, you’ll want to beat this new competition to market to ensure you get the most attention for your listing and the best price.

Selling your home in Mariposa County in 2018

Three key points to think about when selling your home. First, what’s the market like on a Macro level and how will that affect my home while it is on the market? Second, will I get what I need out of my home to make this journey worth my time? Finally, what is the local market looking like on a Micro level?

To learn more about the Macro level of the Real Estate market this article talks about interest rates and how this could affect the buyer and sellers.  Here are some figures to help you see how and where the local market is trending on a Micro level.

Days on Market

The average days on market in 2017 fell -61.9% from 105 to 40 days.

Days on market

Pricing of homes in Mariposa County

In 2017 the average median home was listed at $329,000 and sold for $299,500 down -8.96% from the original asking price.  In 2017 the average median home price was listed at $347,375 and sold at $317,500 -8.60% from the original asking price, at a difference of 4.01%.

homeprices

Mariposa County Inventory

Using days on market and average home price helps to understand how the market is moving and creates the inventory of homes on the Market.  It is widely accepted in the Real Estate Industry:

0-4 months of inventory is a “Seller’s Market”

5-7 months inventory is a “Balanced Market”

8-12 or more months of inventory is a “Buyer’s Market”

In the Start of 2017 the Mariposa County had 4 months of Inventory. Spring through summer there was 9 with the lowest in June & August at 5 months.

inventory2017

How to view these numbers.

First look at days on market. As the days on market have reduced this shows that buyers are out there & homes are being priced right to get buyers attention, so that’s good.  Next look at Pricing. Pricing is the key factor that helps you the seller determine if placing your home on the market is even worth your time. Combining this information creates the inventory inside Mariposa County.

Bottom line.

With inventory being low, the forecast in 2018 of selling your home in a timely manner and at your asking price is currently looking very promising with in Mariposa County.  Have questions? Want to know more about how these numbers could affect you? Contact me at 209-742-3974 or at http://www.myrealtorbryce.com

Gap Between Homeowners & Appraisers Narrows to Lowest Mark in 2 Years

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 4% or more over the next twelve months. One major challenge in such a market is the bank appraisal.

When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

In the latest release, the disparity was the narrowest it has been in over two years, as the gap between appraisers and homeowners was only -0.5%. This is important for homeowners to note as even a .5% difference in appraisal can mean thousands of dollars that a buyer or seller would have to come up with at closing (depending on the price of the home)

The chart below illustrates the changes in home price estimates over the last two years.20180124-STM-ENG

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand:

“Appraisers and real estate professionals evaluate their local housing markets daily. Homeowners, on the other hand, may only think about their housing market when they see ‘for sale’ signs hit front yards in the spring or when they think about accessing their equity.”

“With several years of growth, owners may have more equity than they realize. Many consumers use the tax season at the beginning of the year to reevaluate their entire financial life. It also provides a good opportunity for them to consider how best to take advantage of their equity while mortgage interest rates and borrowing costs are still near record lows.”

Bottom Line 

Every house on the market must be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.

Mortgage Rates are moving UP. Home prices are__?

Mortgage interest rates have already risen by over a quarter of a percentage point in 2018. Many are projecting that rates could increase to 5% by the end of the year.

What impact will rising rates have on house values?

Many quickly jump to the conclusion that an increase in mortgage rates will have a detrimental impact on real estate prices as fewer buyers will be able to qualify for a loan. This seems logical; if there is less demand for housing then prices will drop.

However, in a good economy, rising mortgage rates increase demand as many prospective purchasers immediately jump off the fence to guarantee they get the lower rate.

Let’s look at home prices the last four times mortgage rates increased dramatically.

mortgag rates

In each case, home prices APPRECIATED and did not depreciate. No one is projecting as dramatic an increase in rates as the examples above. Most are projecting an increase of approximately 1% by the end of the year.

The last time mortgage rates increased by 1% over a twelve-month period was January 2013 (3.41%) to January 2014 (4.43%). What happened to house prices during that span? They appreciated by 9.8%.

Just two weeks ago, Rick Palacios Jr., Director of Research at John Burns Real Estate Consulting explained:

“Mortgage rates have risen 1% or more ten times in the last 43 years, with little impact on home sales and prices when the economy was also strong…Historically, rising confidence, solid job growth, and higher wages have more than offset reduced demand for housing resulting from higher mortgage rates.”

Bottom Line

When mortgage rates increase, history has shown that prices appreciate (and do not depreciate) during that same time span.

Tax reform on Real Estate Market

The most thorough analysis of how tax reform will affect the housing market has come from Capital Economics. Here are some highlights:

  • The tax bill could raise the net costs of buying. But, given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.
  • Most households stretch themselves when buying a home, and to the extent that the new code will cut taxes for most households, the overall change could be positive for the housing market.
  • The impact on expensive homes could be more detrimental, with a limit on the mortgage interest deduction raising taxes for that itemize.

Here is their full analysis (7 pages): US HOUSING MARKET FOCUS: Buying still better than renting in the long run

Calculated Risk’s Bill McBride weighed in on the subject. Here are some highlights:

  • The impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have very little impact on the housing market.
  • State and local taxes (SALT) will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.
  • The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for high end real estate.
  • There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.

Here is his full analysis: A few comments: Housing and Policy

Mark Zandi of Moody’s Analytics had a more negative opinion. Here are the highlights:

  • House prices suffer under the tax plan. The tax law changes significantly reduce the value of the mortgage interest deduction, or MID, and property tax deductions, which are capitalized in current house prices.
  • Higher mortgage rates that result from the higher budget deficits and debt under the plans will weaken housing demand.
  • The hit to national house prices is estimated to be near 4% at the peak of their impact in summer 2019. That is, national house prices will be approximately 4% lower than they would have been if there were no tax legislation.
  • The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.
  • The impact on the broader national economy of the higher stock prices and lower house prices is largely a wash.

Here is his full analysis: U.S. Macro Outlook: A Plan That Doesn’t Get It Done

Other links that might help:

Will Tax Reform Harm the Housing Market?
HousingWire on the impact of tax reform on the housing market.

Tax Reform Impact and Home Price Outlook
NAR estimated how home prices will change in the upcoming year for each state, taking into consideration the impact of the new tax law and the momentum of jobs and housing inventory.

Tax Bill Raises Concerns About Homeownership
Early consumer reaction to the new Tax Reform legislation and how it may affect their buying and selling decisions.

Metro Areas Most Affected by the New Tax Law
NAR’s analysis identifying which metro areas will be most affected by the new tax code.

Will the New Tax Law Impact Home Sales, Inventory, and Price Growth in Certain States?
Calculated Risk’s most recent take on the impact of the tax reform.

Examples of How The New Law Will Affect the Tax Incentives of Owning a Home
Early consumer reaction to the new Tax Reform legislation and how it may affect their buying and selling decisions.

Which Local Housing Markets Would Be Most Impacted by the GOP Tax Plan?
The new tax code includes two changes to the income tax structure that could potentially have significant impacts on homeowners, and by extension the housing market.

On this site, ATTOM Data Solutions created two heat maps to illustrate which local housing markets could have the most homeowners impacted by these changes.

Tax plan to impact at least 11 percent of Southern California home buyers
This article takes a deeper dive into the impact on Southern California the above data from the ATTOM site.

How New Yorkers Would Lose Under the Republican Tax Bill
This article takes a deeper dive into the impact on NYC and the surrounding region.

Could tax reform actually be good news for housing?
This article explains that one expert believes tax reform could increase the supply of homes by reducing federal tax subsidies.

How the Tax-Cut Bills Could Affect Homeownership
This article from Consumer Report talks about the possible impact on both buyers & sellers.

Deduction Rollback Hurts High-Tax States, But Exodus Isn’t Assured
(WSJ subscription required) A great analysis of how taxes affect where people decide to live.


3 Major Concern of Real Estate Practitioners

What about the three major concerns of real estate practitioners?


1.  Mortgage Interest Deduction

There was concern that the mortgage interest deduction (MID) would be eliminated. That didn’t happen.

However, the bill has made the following changes:

  • Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17 (from the existing $1,000,000). Current loans up to $1 million are grandfathered.
  • Homeowners may refinance mortgage debts existing on 12/14/17 up to $1 million and still deduct the interest, so long as the new loan does not exceed the amount refinanced.
  • Repeals deduction for interest paid on home equity debt through 12/31/25.
  • Interest is still deductible on home equity loans if proceeds are used to substantially improve the residence.
  • Interest remains deductible on second homes, but subject to the limits.
2.  State and Local Taxes (SALT)

There was concern that the state and local tax deduction (which includes property taxes) would be eliminated. That didn’t happen.

The final bill allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.

3.  Exclusion of gain on sale of a principal residence

There was concern that owners would now need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house.

No change. The new code will remain the same as the old.

Other links that might help:

TAX CUTS AND JOBS ACT
The final proposal put up for vote by the Conference Committee.

The Tax Cuts and Jobs Act – What it Means for Homeowners and Real Estate Professionals
The National Association of Realtors’ (NAR) comprehensive analysis of the new tax code.