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Make the Dream of Homeownership a Reality in 2020
In 1963, Martin Luther King, Jr. led and inspired a powerful movement with his famous “I Have a Dream” speech. Through his passion and determination, he sparked interest, ambition, and courage in his audience. Today, reflecting on his message encourages many of us to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where our families can grow and flourish.
If you’re dreaming of buying a home this year, the best way to start the process is to connect with a Real Estate professional to understand what goes into buying a home. Once you have that covered, then you can answer the questions below to make the best decision for you and your family.
1. How Can I Better Understand the Process, and How Much Can I Afford?
The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.
Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. Most agents have loan officers they trust that they can refer you to.
According to ConsumerReports.org,
“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”
2. How Much Do I Need for a Down Payment?
In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down upfront.
If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says,
“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.
3. Saving Takes Time: Practice Living on a Budget
As tempting as it is to settle in each morning with a fancy cup of coffee from your favorite local shop, putting that daily spend toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score. A survey of Millennial spending shows,
“70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year.”
While you don’t need to cut all of the fun out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.
Bottom Line
If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. Let’s get together today to discuss the best steps you can take to start the process.
Buying a Home Early Can Significantly Increase Future Wealth
According to an Urban Institute study, homeowners who purchase a house before age 35 are better prepared for retirement at age 60.
The good news is, our younger generations are strong believers in homeownership.
According to a Freddie Mac survey,
“The dream of homeownership is alive and well within “Generation Z,” the demographic cohort following Millennials.
Our survey…finds that Gen Z views homeownership as an important goal. They estimate that they will attain this goal by the time they turn 30 years old, three years younger than the current median homebuying age (33).”
If these aspiring homeowners purchase at an early age, the Urban Institute study shows the impact it can have.
Based on this data, those who purchased their first homes when they were younger than 25 had an average of $10,000 left on their mortgage at age 60. The 50% of buyers who purchased in their mid-20s and early-30s had close to $50,000 left but traditionally purchased more expensive homes.
Although the vast majority of Gen Zers want to own a home and are somewhat confident in their future, “In terms of financial awareness, 65% of Gen Z respondents report that they are not confident in their knowledge of the mortgage process.”
Bottom Line
As the numbers show, you’re not alone. If you want to buy this year but you’re not sure where to start the process, let’s get together to help you understand the best steps to take from here.
There’s a Long Line of Buyers Waiting for Your House
If you’re following what’s happening in the housing market right now, you know that many people believe the winter months aren’t a good time to sell a home. As realtor.com Senior Economist George Ratiu recently noted,
“Sellers tend to be more reluctant to list during the colder time of year when the market typically makes a seasonal slowdown.”
However, a recent report by ShowingTime reveals how this year is different. Buyer activity is way up compared to the same time last year. The report explains,
“The nation’s 12.6% growth in home showings compared to 2018 was the most significant jump in buyer traffic during the current four-month streak of year-over-year increases. The West Region saw the greatest growth in activity, with a 23.1% jump – the region’s greatest in the history of the Showing Index.”
The increase has spread across all four regions of the country, as the graph below shows:
Bottom Line
Waiting for the “spring buyers’ market” may be a mistake this year. It seems the purchasers are already out and looking to buy.
The New Spring Real Estate Market is Here. Are You Ready?
Which month do you think most people who are considering buying a home actually start their search? If you’re like most of us, you probably think the surge happens in the spring, likely in April. Not anymore. According to new research, January 2019 was only 1% behind February for the most monthly views per listing on realtor.com.
So, what does that mean? The busiest season in real estate has just begun.
The same research indicates,
“Historically, April launched the kickoff of the home shopping season as buyers would come out of their winter hibernation looking for their new home. However, the spring shopping season now starts in January for many of the nation’s largest markets.”
With the reality of fewer homes on the market in the winter, and that supply naturally increases as we head to the spring market, waiting for more competition to list in your neighborhood this year might put you behind the curve. Perhaps now is the time to jump into the market.
George Ratiu, Senior Economist at realtor.com says,
“As shoppers modify their strategies for navigating a housing market that has become more competitive due to rising prices and low inventory, the search for a home is beginning earlier and earlier.”
There is a lot of speculation in the market about why the search for a home is shifting to an earlier start. The one thing we do know is if you’re thinking about buying or selling a home this year, the earlier you get started, the better.
Reminder: When should you sell something? When there is less of that item for sale and the greatest number of buyers are in the market. That’s exactly what is happening in real estate right now.
Bottom Line
The new spring market for real estate is underway. If you’re considering buying or selling, let’s connect, so you have the advantage in this competitive market.
Big Demand for Small Homes
Movies, tv shows, and celebrities often have us dreaming of owning large homes, but the reality for most people is quite different.
Since 2015, the square footage of newly built houses has been shrinking, according to Yahoo Finances. This is not projected to change as we continue into the beginning of the year.
“We expect this downsizing trend to continue in 2020, driven by a confluence of economic and demographic trends.”
Why are smaller homes trending now?
As noted in the article, there are a few main reasons for this demand:
- “Many of today’s younger, millennial homebuyers have expressed a preference for denser, more urban homes that are more walkable to shared amenities.”
- “Today’s older homeowners are expressing a desire for smaller, less maintenance-heavy and more accessible (read: less stairs) homes as they age and move into newer homes.”
With these two demographic groups surging through the market, the demand for this type of home is rising. If you’re a homeowner with a smaller-scale house, now may be a great time to sell, as the demand for this end of the market is surely on the rise.
Bottom Line
The demand for smaller houses will continue to rise throughout 2020. Let’s get together to discuss what the housing inventory looks like in your neighborhood. It might be time for you to take advantage of this trend!
The 2020 Real Estate Projections That May Surprise You
This will be an interesting year for residential real estate. With a presidential election taking place this fall and talk of a possible recession occurring before the end of the year, predicting what will happen in the 2020 U.S. housing market can be challenging. As a result, taking a look at the combined projections from the most trusted entities in the industry when it comes to mortgage rates, home sales, and home prices is incredibly valuable – and they may surprise you.
Mortgage Rates
Projections from the experts at the National Association of Realtors (NAR), the Mortgage Bankers Association (MBA), Fannie Mae, and Freddie Mac all forecast mortgage rates remaining stable throughout 2020:
Since rates have remained under 5% for the last decade, we may not fully realize the opportunity we have right now.
Here are the average mortgage interest rates over the last several decades:
- 1970s: 8.86%
- 1980s: 12.70%
- 1990s: 8.12%
- 2000s: 6.29%
Home Sales
Three of the four expert groups noted above also predict an increase in home sales in 2020, and the fourth sees the transaction number remaining stable:
With mortgage rates remaining near all-time lows, demand should not be a challenge. The lack of available inventory, however, may moderate the increase in sales.
Home Prices
Below are the projections from six different expert entities that look closely at home values: CoreLogic, Fannie Mae, Ivy Zelman’s “Z Report”, the National Association of Realtors (NAR), Freddie Mac, and the Mortgage Bankers Association (MBA).
Each group has home values continuing to improve through 2020, with four of them seeing price appreciation increasing at a greater pace than it did in 2019.
Is a Recession Possible?
In early 2019, a large percentage of economists began predicting a recession may occur in 2020. In addition, a recent survey of potential home purchasers showed that over 50% agreed it would occur this year. The economy, however, remained strong in the fourth quarter, and that has caused many to rethink the possibility.
For example, Goldman Sachs, in their 2020 U.S. Outlook, explained:
“Markets sounded the recession alarm this year, and the average forecaster now sees a 33% chance of recession over the next year. In contrast, our new recession model suggests just a 20% probability. Despite the record age of the expansion, the usual late-cycle problems—inflationary overheating and financial imbalances—do not look threatening.”
Bottom Line
Mortgage rates are projected to remain under 4%, causing sales to increase in 2020. With growing demand and a limited supply of inventory, prices will continue to appreciate, while the threat of an impending recession seems to be softening. It looks like 2020 may be a solid year for the real estate market.
Are you still in the market for a home? Give me a call at 408-465-9290 or message me to go over your real estate goals. Buying a home takes time, let’s start now to get you into your home!
Why You Shouldn’t “For Sale By Owner”
Rising home prices coupled with the current inventory in today’s market may cause some homeowners to consider selling their homes on their own (known in the industry as a For Sale By Owner). However, a FSBO might be hard to execute well for the vast majority of sellers.
Here are the top 5 reasons not to FSBO:
1. Online Strategy for Prospective Purchasers
Studies have shown that 93% of buyers search online for a home. That’s a pretty staggering number! Most real estate agents have an Internet strategy to promote the sale of your home. Do you?
2. Results Come from the Internet
According to NAR, here’s where buyers found the homes they actually purchased:
- 55% on the Internet
- 28% from a Real Estate Agent
- 10% Other
- 6% from a Yard Sign
- 1% from Newspapers
The days of selling your house by putting up a sign in your yard or placing an ad in the paper are long gone. Having a strong Internet strategy is crucial.
3. There Are Too Many People to Negotiate With
Here’s a list of some of the people with whom you must be prepared to negotiate if you decide to FSBO:
- The buyer, who wants the best deal possible
- The buyer’s agent, who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies, which work for the buyer and will almost always find some problems with the house
- The appraiser, if there is a question of value
4. FSBOing Has Become Increasingly Difficult
The paperwork involved in buying or selling a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.
5. You Net More Money When Using an Agent
Many homeowners believe they’ll save the real estate commission by selling on their own, but the seller and buyer can’t both save the commission.
A report by Zillow revealed that FSBOs are inclined to do so because they believe it will save money (46 percent cite this among their top three reasons), but they don’t actually save anything, and eventually end up listing with an agent.
The same report revealed that,
“While 36% of sellers that (at first) attempted to sell their homes on their own, only 11 percent of sellers—in other words, less than a third…actually sold without an agent.”
It appears working with a real estate professional is the best answer.
Bottom Line
Before you decide to take on the challenges of selling your house on your own, let’s get together to discuss your needs.
Where is the Housing Market Headed in 2020? [INFOGRAPHIC]
![Where is the Housing Market Headed in 2020? [INFOGRAPHIC] | MyKCM](https://desireestanley.com/files/2019/12/20191220-MEM-1046x1552.jpg)
![Where is the Housing Market Headed in 2020? [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2019/12/19070953/20191220-MEM-1046x1552.jpg)
Some Highlights:
- Interest rates will be lower than they have been since before 1980 at 3.8% and are projected to remain steady throughout 2020!
- According to CoreLogic, home prices will appreciate at a rate of 5.4% over the course of the year.
- Experts predict that the number of homes sold next year will be equal to or outpace 2019.
The Biggest Issue Facing Housing Next Year
This coming year the housing market will be defined by 3 things- inventory, interest rates, and appreciation. But the biggest issue the housing market will face in 2020 is an inventory shortage. There aren’t enough homes on the market for buyers, especially on the lower end of the market. This is a topic that has come up frequently within the past several months.
Based on what is forecasted, we know that interest rates are projected to remain low and that appreciation is expected to continue as we move into 2020. Additionally, the upcoming election will provoke many unique perspectives on the health of the US housing market. The challenge will be understanding what is actually happening and how you can best position yourself if you are thinking of buying or selling your home.
Here are several perspectives to consider on the inventory issue facing housing next year:
According to realtor.com:
“Despite increases in new construction, next year will once again fail to bring a solution to the inventory shortage that has plagued the housing market since 2015. Inventory could reach a historic low as a steady flow of demand, especially for entry level homes, and declining seller sentiment combine to keep a lid on sales transactions.”
Diana Olick at CNBC:
“Inventory has been falling annually for five straight months, after it recovered slightly toward the end of last year, due to a spike in mortgage rates. Rates began falling again by spring of this year. Homebuilders have been increasing production slowly, but it’s not enough to meet the increasingly strong demand.”
George Ratiu, Senior Economist with realtor.com
“As millennials — the largest cohort of buyers in U.S. history — embrace homeownership and take advantage of this year’s unexpectedly low mortgage rates, demand is outstripping supply, causing inventory to vanish. The housing shortage is felt acutely at the entry-level of the market, where most millennials are looking to break into the market for their first home.”
Bottom Line
The most important thing you can do is understand what is happening in your local market. You may not be able to avoid some of the issues brought on by low inventory, but you can be educated and prepared. Let’s connect and discuss the options that make the most sense for you and your family.
3 Mistakes to Avoid When Selling a Home in 2020
It’s exciting to put a house on the market and to think about making new memories in new spaces, but we can have deep sentimental attachments to the homes we’re leaving behind, too. Growing emotions can help or hinder a sale, depending on how we manage them.
When it comes to the bottom line, homeowners need to know what it takes to avoid costly mistakes. Being mindful of these things and prepared for the process can help you avoid some of the most common mishaps when selling your house.
1. Overpricing Your Home
When inventory is low, like it is in the current market, it’s common to think buyers will pay whatever we ask for when we price our homes. Believe it or not, that’s far from the truth. Don’t forget that the buyer’s bank will send an appraisal to determine the fair value for your home. The bank will not lend more than what the house is worth, so be mindful that you might need to renegotiate the price after the appraisal. A real estate professional will help you to set the true value of your home.
2. Letting Your Emotions Interfere with the Sale
Today, most homeowners have been living in their houses for an average of 10 years (as shown in the graph below):
This is several years longer than what used to be the norm since many homeowners have been recouping from negative equity situations over the past 10 years. The side effect, however, is when you live for so long in one place, you may get even more emotionally attached to your space. If it’s the first home you bought after you got married or the house where your children grew up, it very likely means something extra special to you. Every room has memories and it’s hard to detach from the sentimental value.
For some homeowners, that makes it even harder to negotiate, separating the emotional value of the home from the fair market price. That’s why you need a real estate professional to help you with the negotiations in the process.
3. Not Staging Your Home
We’re generally quite proud of our décor and how we’ve customized our houses to make them our own personalized homes, but not all buyers will feel the same way about your design. That’s why it’s so important to make sure you stage your home with the buyer in mind. Buyers want to envision themselves in the space, so it truly feels like their own. They need to see themselves in the space with their furniture and keepsakes – not your pictures and decorations. Stage and declutter your home so they can visualize their own dreams as they walk through your house. A real estate professional can help you with tips to get your home ready to stage and sell.
Bottom Line
Today’s seller’s market might be your best chance to make a move. If you’re considering selling your house, let’s get together to help you navigate through the process while avoiding common seller mistakes.
