KC Condo Tracker

Will Home Prices Fall as Mortgage Rates Rise? | MyKCM

Mortgage interest rates have increased by more than half of a point since the beginning of the year. They are projected to increase by an additional half of a point by year’s end. Because of this increase in rates, some are guessing that home prices will depreciate.

However, some prominent experts in the housing industry doubt that home values will be negatively impacted by the rise in rates.

Mark FlemingFirst American’s Chief Economist:

“Understanding the resiliency of the housing market in a rising mortgage rate environment puts the likely rise in mortgage rates into perspective – they are unlikely to materially impact the housing market…

The driving force behind the increase are healthy economic conditions…The healthy economy encourages more homeownership demand and spurs household income growth, which increases consumer house-buying power. Mortgage rates are on the rise because of a stronger economy and our housing market is well positioned to adapt.”

Terry LoebsFounder of Pulsenomics:

“Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for U.S. home prices. These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers.”

Laurie GoodmanCodirector of the Housing Finance Policy Center at the Urban Institute:

“Higher interest rates are generally positive for home prices, despite decreasing affordability…There were only three periods of prolonged higher rates in 1994, 2000, and the ‘taper tantrum’ in 2013. In each period, home price appreciation was robust.”

Industry reports are also calling for substantial home price appreciation this year. Here are three examples:

Bottom Line

As Freddie Mac reported earlier this year in their Insights Report“Nowhere to go but up? How increasing mortgage rates could affect housing,

“As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

Posted by AJ Gentry on May 31st, 2018 4:43 PM
How Much Has Your Home Increased in Value Over the Last Year? | MyKCM

Home values have risen dramatically over the last twelve months. In CoreLogic’s most recent Home Price Index Report, they revealed that national home prices have increased by 6.7% year-over-year.

CoreLogic broke down appreciation even further into four price ranges, giving us a more detailed view than if we had simply looked at the year-over-year increases in national median home price.

The chart below shows the four price ranges from the report, as well as each one’s year-over-year growth from February 2017 to February 2018 (the latest data available).

How Much Has Your Home Increased in Value Over the Last Year? | MyKCM

It is important to pay attention to how prices are changing in your local market. The location of your home is not the only factor that determines how much your home has appreciated over the course of the last year.

Lower-priced homes have appreciated at greater rates than homes at the upper ends of the spectrum due to demand from first-time home buyers and baby boomers looking to downsize.

Bottom Line

If you are planning to list your home for sale in today’s market, let’s get together to go over exactly what’s going on in your area and your price range.

Posted by AJ Gentry on May 1st, 2018 11:23 AM
Why Home Prices Are Increasing | MyKCM

There are many unsubstantiated theories as to why home values are continuing to increase. From those who are worried that lending standards are again becoming too lenient (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.

However, the increase in prices is easily explained by the theory of supply & demand.Whenever there is a limited supply of an item that is in high demand, prices increase.

It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything more than seven months will cause prices to depreciate (see chart below).

Why Home Prices Are Increasing | MyKCM

According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).

Why Home Prices Are Increasing | MyKCM

Bottom Line

If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.

Posted by AJ Gentry on April 30th, 2018 9:59 AM
Existing Home Sales Grow Despite Low Inventory [INFOGRAPHIC] | MyKCM

Some Highlights:

  • According to the latest Existing Home Sales Report from the National Association of Realtors, sales grew 1.1% in March to an annual pace of 5.60 million.
  • This is the strongest pace since November of 2017.
  • Inventory levels dropped year-over-year for the 34th consecutive month and are now 7.2% lower than March 2017 levels, representing a 3.6-month supply.
Posted by AJ Gentry on April 27th, 2018 10:03 AM
Buying a Home Is Cheaper Than Renting in the Majority of the US | MyKCM

The results of the 2018 Rental Affordability Report from ATTOM show that buying a median-priced home is more affordable than renting a three-bedroom property in 54% of U.S. counties analyzed for the report.

The updated numbers show that renting a three-bedroom property in the United States requires an average of 38.8% of income.

The least affordable market for renting was Marin County, CA, just over the Golden Gate Bridge from San Francisco, where renters spend a staggering 79.5% of average wages on rent, while the most affordable market was Madison County, AL where 22.3% of average wages went to rent.

Other interesting findings in the report include:

  • Average rent rose faster than income in 60% of counties
  • Average rent rose faster than median home prices in 41% of counties
  • While median home prices rose faster than average rents in 58% of counties

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let’s get together to find your dream home.

Posted by AJ Gentry on April 23rd, 2018 10:44 AM
Is Family Mortgage Debt Out of Control? | MyKCM

Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.

These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.

Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratiofor mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.

Is Family Mortgage Debt Out of Control? | MyKCM

Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).

Bill McBride of Calculated Risk recently commented on the ratio:

“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”

Bottom Line

Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.

Posted by AJ Gentry on April 19th, 2018 9:23 AM
Getting Pre-Approved Should Always Be Your First Step | MyKCM

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers 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 are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are 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 local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will 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 will 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

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.

Posted by AJ Gentry on April 16th, 2018 10:02 AM
House Prices: Simply a Matter of Supply & Demand | MyKCM

Why are home prices still rising? It is a simple answer. There are more purchasers in the market right now than there are available homes for them to buy. This is an example of the theory of “supply and demand” which is defined as:

“the amount of a commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price.”

When demand exceeds supply, prices go up. This is currently happening in the residential real estate market.

Here are the numbers for supply and demand as compared to last year for the last three months (March numbers are not yet available):

House Prices: Simply a Matter of Supply & Demand | MyKCM

In each of the last three months, demand (buyer traffic) has increased as compared to last year while supply (number of available listings) has decreased. If this situation persists, home values will continue to increase.

Bottom Line

The reason home prices are still rising is because there are many purchasers looking to buy, but very few homeowners ready to sell. This imbalance is the reason prices will remain on the uptick.

 

Posted by AJ Gentry on April 5th, 2018 11:14 AM
NOT Owning Your Home Can Cost You a Lot of Money! | MyKCM

Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.

Realtor.com recently reported that:

Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option… as people get more savings in their pockets, buying becomes the better option.”

What proof exists that owning is financially better than renting?

1. In a previous blog we highlighted the top 5 financial benefits of homeownership:

  • Homeownership is a form of forced savings.
  • Homeownership provides tax savings.
  • Homeownership allows you to lock in your monthly housing cost.
  • Buying a home is cheaper than renting.
  • No other investment lets you live inside of it.

2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.

3. Just a few months ago, we explained that a family that purchased an average-priced home at the beginning of 2018 could build more than $44,000 in family wealth over the next five years.

4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment– along with a profit margin!!

Bottom Line

Owning a home has always been, and will always be, better from a financial standpoint than renting.

 

Posted by AJ Gentry on April 2nd, 2018 9:41 AM
99% of Experts Agree: Home Prices Will Increase | MyKCM

Some believe that the combined effects of the new tax code and rising mortgage rates will have an adverse impact on residential real estate prices in 2018. However, the clear majority of recently surveyed housing experts believe that home values will continue to rise this year.

What is the Home Price Expectation Survey?

Each quarter, Pulsenomics surveys a nationwide panel of economists, real estate experts and investment & market strategists. Those surveyed include experts such as:

  • Daniel Bachman, Senior Manager, U.S. Economics at Deloitte Services, LP
  • Kathy Bostjancic, Head of U.S. Macro Investors Service at Oxford Economics
  • David Downs, Real Estate Finance Professor at VCU
  • Edward Pinto, Resident Fellow at American Enterprise Institute
  • Albert Saiz, Director at MIT Center for Real Estate

Where do these experts see home values headed in 2018?

Here is a breakdown of where they see home values twelve months from now:

  • 21.6% believe prices will appreciate by 6% or more
  • 71.6% believe prices will appreciate between 3 and 5.99%
  • 5.7% believe prices will appreciate between 0 and 2.99%
  • Only 1.1% believe prices will depreciate

Bottom Line

Almost ninety-nine percent of the top experts studying residential real estate believe that prices will appreciate this year, and over 93% believe home values will appreciate by at least 3%.

Posted by AJ Gentry on March 29th, 2018 10:11 AM

Archives:

Categories:

My Favorite Blogs:

Sites That Link to This Blog: