Buyers: Are You Ready for a Bidding War?

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With businesses reopening throughout the country and some experts indicating early signs of a much-anticipated economic recovery, more

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homebuyers are actively entering the housing market this summer. Today, housing is truly driving the U.S. economy forward. With so many buyers looking for homes to purchase and so few houses for sale right now, there’s a disconnect between supply and demand. This imbalance is pushing home prices upward while driving more bidding wars and multiple-offer scenarios. Danielle Hale, Chief Economist at realtor.com explains:

“People are surprised that prices are rising, not falling, because in the last recession home prices fell, the difference this time is the severe shortage of homes for sale…We are seeing bigger price increases with [a limited] number of homes…That is likely to lead to more competition and potentially multiple offers and bidding wars.”

According to the recent Realtors Confidence Index (RCI) survey conducted by the National Association of Realtors (NAR), this trend is growing:

“On average, there were about three offers on a home that closed in May, up from just about two in April 2020 and in May 2019 (2.3 offers).”

HousingWire also indicates:

“42% of homeowners who made a purchase during the January to May time period ended up in a bidding war, demonstrating the strong demand for homes amid low inventory.”

With more people returning to work we’ll continue to see the number of interested buyers increase. So, if you’re among the many people looking for a home to buy this summer, it’s important to ensure you have the right guidance from the start. This way, you make sure your offer stands out from the crowd when it really counts. Here are two tips to follow.

1.  Get Pre-Approved for a Mortgage

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When there are more buyers than sellers on the market, the process to find a home becomes much more challenging.  One way to show you’re serious about buying a home is to work with a lender to get pre-approved for a mortgage before starting your search.  With a pre-approval letter, sellers will see your true desire to buy this year, potentially helping your offer rise to the top.   For a hassle-free consultation and mortgage pre-approval, contact DJ Riley today at 763-276-3960.  

2. Hire a Trusted Local Expert

A trusted local real estate professional matters more than ever right now, as noted in a recent survey shared by NAR. In fact, according to respondents, 54% of buyers and 62% of sellers indicated that “Particularly during the pandemic, a real estate agent’s guidance is especially valued.”

We’re not in a normal market. We are in one of the greatest health crises our nation has ever seen. The pandemic has had a dramatic impact on the journey consumers must take to purchase a home. To successfully navigate the landscape today, you need a true expert on your side.

Bottom Line

If this is the year you’re ready to buy, let’s connect to get the process started so you can make sure your offer is a strong one when the competition heats up.

For a hassle-free consultation, contact DJ Riley at United Family Mortgage in Elk River at 763-276-3960.

What Are Experts Saying about Home Prices?

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Last week, a very well-respected real estate analytics firm surprised many with their home price projection for the next twelve months. CoreLogic, in their latest Home Price Index said:

“The economic downturn that started in March 2020 is predicted to cause a 6.6% drop in the HPI by May 2021, which would be the first decrease in annual home prices in over 9 years.”

The forecast was surprising as it was strikingly different than any other projection by major analysts. Six of the other eight forecasts call for appreciation, and the two who project depreciation indicate it will be one percent or less.

 

Here is a graph showing all of the projections:

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There’s a simple formula to determine the future price of any item: calculate the supply of that item in ratio to the demand for that item. In housing right now, demand far exceeds supply. Last week mortgage applications to buy a home were 33% higher than they were at the same time last year. The available inventory of homes for sale is 31% lower than it was last year. Normally, these numbers should call for homes to continue to appreciate.

Bottom Line

Because of the uncertainty with the pandemic, any economic prediction is extremely difficult. However, looking at the limited supply of homes for sale and the tremendous demand for housing, it is difficult to disagree with the majority of analysts who are calling for price appreciation.

Mortgage Rates Hit Record Lows for 3 Consecutive Weeks

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Over the past several weeks, Freddie Mac has reported the average 30-year fixed mortgage rate dropping to record lows, all the way down to 3.03%.  Last week’s reported rate reached the lowest point in the history of the survey, which dates back to 1971 (See graph below):best mortgage rates today Zimmerman, down payment assistance Elk River, down payment assistance Ramsey, down payment assistance Ramsey MN, down payment assistance Zimmerman, Fannie Mae home loans Ramsey

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What does this mean for buyers?

This is huge for homebuyers.  Those currently taking advantage of the increasing affordability that comes with historically low-interest rates are winning big.  According to Sam Khater, Chief Economist at Freddie Mac:

“The summer is heating up as record low mortgage rates continue to spur homebuyer demand.”

In addition, move.com notes:

“Summer home buying season is off to a roaring start. As buyers flooded into the market, realtor.com® monthly traffic hit an all-time high of 86 million unique users in June 2020, breaking May’s record of 85 million unique users. Realtor.com® daily traffic also hit its highest level ever of 7 million unique users on June 25, signaling that despite the global pandemic buyers are ready to make a purchase.”

Clearly, buyers are capitalizing on today’s low rates.  As shown in the chart below, the average monthly mortgage payment decreases significantly when rates are as low as they are today.

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A lower monthly payment means savings that can add up significantly over the life of a home loan.  It also means that qualified buyers may be able to purchase more home for their money.  Maybe that’s a bigger home than what they’d be able to afford at a higher rate, an increasingly desirable option considering the amount of time families are now spending at home given today’s health crisis.

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If you’re in a position to buy a home this year, let’s connect to initiate the process while mortgage rates are historically low.

For a hassle-free consultation, contact DJ Riley at United Family Mortgage in Elk River at 763-276-3960.

Be a Better Buyer: Ramp Up Your Homeownership Knowledge

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We’ve all heard it before — financial literacy and education is key to helping us become more prepared homebuyers. But, the internet is a big place. So, where do you begin? What experts should you follow?

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We pulled together a shortlist of resources recently highlighted at an Urban Institute seminar about Barriers to Accessing Homeownership.  Whether you want a person to be your guide or favor online tools, you’ll find something that fits your needs in this line-up.

Consumer Financial Protection Bureau (CFPB)

Did you know that data shows mortgage shopping can lead to an improved mortgage rate or solution? Before you make an offer on a home, check out the CFPB’s guide for owning a home, including resources on preparing to home shop and exploring loan choices. The CFPB also has a loan estimate explainer to help you navigate estimates from different lenders.

You can also learn about special loan programs for which you may qualify by contacting DJ Riley at United Family Mortgage in Elk River at 763-276-3960.

The CFPB includes information about HUD-approved housing counselors who can provide advice on buying a home, renting, defaults, foreclosures, and credit issues. Search for one in your area.

NeighborWorks America

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If you are interested in a personal guide to help you prepare for homeownership, NeighborWorks can help you locate services in your area.  Their counselors are knowledgeable about homeownership programs. In fact, 83 percent of their buyers use some type of down payment assistance with their loans.  You can also check out their homebuyer tips.

Credit Smart curriculum

The CreditSmart curriculum, offered by Freddie Mac, includes financial education modules on credit, money management, homeownership, foreclosure avoidance, and more. The 12-module curriculum is available in five different languages, including English, Spanish, Chinese, Korean, and Vietnamese. Organizations can offer this curriculum in community settings or individuals can complete it online.

Better Money Habits

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Some lenders are introducing their own educational content. In partnership with Khan Academy, Bank of America has a financial education curriculum with 10 different categories.  The homeownership segment goes over budgeting, questions to ask lenders, credit score, and much more.

Trusted Advisors

In addition to online tools, cultivate a group of trusted advisors you can turn to during this process.  DJ Riley at United Family Mortgage in Elk River is an expert in down payment assistance programs in our area.  Contact DJ directly at 763-276-3960.

Learn more about the latest research on homeownership barriers and what the industry is doing to help.  Watch the full Urban Institute Seminar below.

 

Get Help with Down Payment Assistance

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Down payment help sounds great, but how does it actually work?  What process should you follow?

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While down payment programs vary greatly by state and community, there are some universal steps that will help you stay on track if a homeownership program is part of your home financing plan.  Let’s look at how it worked for one Florida buyer highlighted in Business Insider.

One buyer’s story

Willy Harris, 24, and his girlfriend used a Florida first-time homebuyer program to purchase a $204,000 new construction home in Jacksonville, FL. The program allows first-time homebuyers within the qualified income and purchase-price limits to receive up to $15,000 in secondary financing toward down payment and closing costs.  If the homebuyer lives in the home for five years, the secondary loan is forgiven. Harris used an FHA home loan that required a 3% down payment.

They put down a $1,000 deposit to reserve the lot, while the grant covered their $7,750 closing costs and $6,150 down payment.  The remaining amount of the grant went toward the principal of the home loan.  Because they put 3% down, they also paid a monthly mortgage insurance premium of $109.  Their first mortgage payment is currently $1,503 a month.

Harris recommends setting up a budget and savings plan and researching programs that can give you a boost.

 

Similar Down Payment Assistance Programs are available in Sherburne County and throughout Minnesota.

 

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Follow these steps to get the most of using a homeownership program:

• Do some upfront homework.  Research local homeownership education and counseling resources that can help you with the process.

• Determine your budget.  Figure how big a monthly mortgage payment you can afford on your salary. Don’t forget that your mortgage payment may include taxes and insurance too which you can estimate.

• Create a savings plan. Build a spreadsheet (or use an app) to track your expenses.

• Research down payment assistance programs in your area. Contact the agency offering the program or a homeownership counselor who can help you with the process.

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• Both the buyer and the home must qualify for the assistance. Find out the home price limits and any community or neighborhood boundaries for the program that may impact your home search. Find out if you can use the program on new construction.

• Get a list of participating lenders for the homeownership program, available on the program provider’s website. Not all lenders offer every program.

• Get prequalified for a loan so you can review the numbers and make an educated decision on the type of financing.

• Compare offers and ask lenders about any other programs for which you may qualify. You may even be able to layer programs, for example down payment assistance plus a tax credit.

• Review mortgage insurance options with your lender.

• Complete homebuyer education courses that are often required when using a down payment assistance program.

• Ask about your options for using the funds. Can they be used for down payment or closing costs, or both?

Unemployment Report is Good News for Home Buyers

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In early June, the U.S. Bureau of Labor Statistics released their May Employment Situation SummaryLeading up to the release, most experts predicted the unemployment rate would jump up to approximately 20% from the 14.7% rate announced last month.

The experts were shocked.

The Wall Street Journal put it this way:

“The May U.S. jobless rate fell to 13.3% and employers added 2.5 million jobs, blowing Wall Street expectations out of the water: Economists had forecast a loss of 8.3 million jobs and a 19.5% unemployment rate.”

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“The May gain was by far the biggest one-month jobs surge in U.S. history since at least 1939.”

Here are some of the job gains by sector:

  • Food Service and Bartenders – 1,400,000
  • Construction – 464,000
  • Education and Health Services – 424,000
  • Retail – 368,000
  • Other Services – 272,000
  • Manufacturing – 225,000
  • Professional Services – 127,000

There’s still a long way to go before the economy fully recovers, as 21 million Americans remain unemployed. That number is down, however, from 23FHA 203k lenders Ramsey, FHA 203k lenders Ramsey MN, FHA approved lenders Elk River, FHA approved lenders Ramsey, FHA loan application Ramsey, FHA mortgage interest rates Ramsey, home construction loans Elk River million just last month. And, of the 21 million in the current report, 73% feel their layoff is temporary. This aligns with a recent Federal Reserve Bank report that showed employers felt 75% of the job losses are temporary layoffs and furloughs.

The Employment Situation Summary was definitely a pleasant surprise, and evidence that the country’s economic turnaround is underway. The data also offers a labor-market snapshot from mid-May, when the government conducted its monthly survey of households and businesses. Many states did not open for business until the second half of May. This bodes well for next month’s jobs report.

Bottom Line

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We cannot rejoice over a report that reveals millions of American families are still without work. We can, however, feel relieved that we are headed in the right direction, and much more quickly than most anticipated.

Note: In its original report, the BLS explained that a misclassification error could have occurred over the last 3 months, starting in March of 2020. Readjusting for this error, the unemployment rate would actually show a drop from 19.7% in April to 16.3% in May. Nobody would say the original report of 13.3% unemployment was a good number, nor is the revised 16.3%. What is a positive move for our country and the economy is the significant drop in the rate from April to May, meaning more people are getting jobs than losing them. That’s the key takeaway.

Why This Summer Is the 2020 Home Buyer Season

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With stay-at-home orders starting to gradually lift throughout parts of the country, data indicates homebuyers are jumping back into the market. After many families put their plans on hold due to the COVID-19 pandemic, what we once called the busy spring real estate season is shifting into the summer. In 2020, summer is the new spring for real estate.

Joel KanEconomist at The Mortgage Bankers Association (MBA) notes:

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“Applications for home purchases continue to recover from April’s sizable drop and have now increased for five consecutive weeks…Government purchase applications, which include FHA, VA, and USDA loans, are now 5 percent higher than a year ago, which is an encouraging turnaround after the weakness seen over the past two months.”

Additionally, according to Google Trends, which scores search terms online, searches for real estate increased from 68 points the week of March 15th to 92 points last week. As we can see, more potential homebuyers are looking for homes virtually.

What’s the Opportunity for Buyers?

Another reason buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is historically low mortgage rates. Sam Khater, Chief Economist at Freddie Mac indicates:

“For the fourth consecutive week, the 30-year fixed-rate mortgage has been below 3.30 percent, FHA 203k lenders Ramsey, FHA 203k lenders Ramsey MN, FHA approved lenders Elk River, FHA approved lenders Ramsey, FHA loan application Ramsey, FHA mortgage interest rates Ramsey, home construction loans Elk River giving potential buyers a good reason to continue shopping even amid the pandemic…As states reopen, we’re seeing purchase demand improve remarkably fast, now essentially flat relative to a year ago.”

With mortgage rates at such low levels and states gradually beginning to reopen, there’s more incentive than ever to buy a home this summer.

What’s the Opportunity for Sellers?

Finding a home to buy, however, is still a challenge, as this spring sellers removed many listings from the market. Though more people are now putting their houses up for sale this month as compared to last month, current inventory is still well below last year’s level.home construction loans Monticello, home construction loans Monticello MN, home construction loans Ramsey, home construction loans Ramsey MN, home loans with no down payment Ramsey, home loans with no down payment Ramsey MN

According to last week’s Weekly Economic and Housing Market Update from realtor.com:

“Weekly Housing Inventory showed continued tightening. New Listings declined 28% compared with a year ago, as sellers grappled with uncertainty and hesitated bringing homes to market. Total Listings dropped 20% YoY, a faster rate than in prior weeks, leaving very few homes available for sale. As Time on Market was 15 days slower YoY, asking prices moved up 1.5% YoY.”

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If you’re thinking of selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this season may be the time for your house to stand out from the crowd. Trusted real estate professionals can help you list safely and effectively, keeping your family’s needs top of mind. Buyers are looking, and your house may be at the top of their list.

Bottom Line

If you’re thinking of selling, many buyers may be eager to find a home just like yours. Let’s connect today to make sure you can get your house in on the action this summer.

What Impact Might COVID-19 Have on Home Values?

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A big challenge facing the housing industry is determining what impact the current pandemic may have on home values.  Some buyers are hoping for major price reductions because the health crisis is straining the economy.

The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item.

For a Hassle-Free Consultation, Contact DJ Riley today at 763-276-3960.

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In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.

Get Pre-Approved for a Mortage Today

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Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased.  The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic.

This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

What are the experts saying?

Here’s a look at what some experts recently reported on the matter:

Ivy Zelman, President, Zelman & Associates

“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

Freddie Mac

“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

Mark Fleming, Chief Economist, First American

“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

Bottom Line

Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.

Pre-Approval Is the First Step in the 2020 Home Buying Journey

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When the number of buyers in the housing market outnumbers the number of homes for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes – unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the home buying process.

1. Gain a Competitive Advantage

Low inventory, like we have today, means home buyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a home, which is always a plus in your corner.

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Pre-approval can also speed up the home buying process, so you can move faster when you’re ready to make an offer. In a competitive arena like we have today, being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.

3. Know What You Can Borrow and Afford

Here’s the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach.

Freddie Mac sets 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.”

Local real estate professionals also have relationships with lenders who can help you through this process, so partnering with a trusted advisor will be key for that introduction. Once you select 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 also 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

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Bottom Line

Getting started with pre-approval is a great way to begin the home buying journey. Let’s get together today to make sure you’re on the fastest path to home ownership.

For a Hassle-Free consultation with United Family Mortgage on: Home Refinancing, First-Time Home Buyer Mortgage, Zero-Down Mortgage, Home Construction Loan or VA Home Loan, contact DJ Riley today at 763-276-3960 or via email djriley@unitedfamilymortgage.com.

 

*Re-posted by: https://www.mykcm.com/2020/02/03/three-reasons-why-pre-approval-is-the-first-step-in-the-2020-homebuying-journey/

Renters Who Want to Buy a Home

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Rents in the United States have been skyrocketing since 2012. This has caused many renters to face a tremendous burden when juggling their housing expenses and the desire to save for a down payment at the same time. The recent stabilization of rental prices provides a great opportunity for renters to save more of their current income to put toward the purchase of a home.

Just last week the Joint Center of Housing Studies of Harvard University released the America’s Rental Housing 2020 Report. The results explain the financial challenges renters are experiencing today,

“Despite slowing demand and the continued strength of new construction, rental markets in the U.S. remain extremely tight. Vacancy rates are at decades-long lows, pushing up rents far faster than incomes. Both the number and share of cost-burdened renters are again on the rise, especially among middle-income households.”

According to the most recent Zillow Rent Index, which measures the estimated market-rate rent for all homes and apartments, the typical U.S. rent now stands at $1,600 per month. Here is a graph of how the index’s median rent values have climbed over the last eight years:mortgage broker Zimmerman, VA home loan Ramsey, veteran home loan Elk River, veteran home loan Ramsey, zero down mortgage Elk River, zero down mortgage Ramsey, 0 down mortgage Ramsey, mortgage interest rates Zimmerman, zero down home loans Ramsey, apply for VA home loan Ramsey

Is Good News Coming?

There seems, however, to be some good news on the horizon. Four of the major rent indices are all reporting that rents are finally beginning to stabilize in all rental categories:

1. The Zillow Rent Index, linked above, only rose 2.6% over the last year.

2. RENTCafé’s research team also analyzes rent data across the 260 largest cities in the United States. The data on average rents comes directly from competitively rented, large-scale, multi-family properties (50+ units in size). Their 2019 Year-End Rent Report shows only a 3% increase in rents from last year, the slowest annual rise over the past 17 months.

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3. The CoreLogicSingle Family Rent Index reports on single-family only rental listing data in the Multiple Listing Service. Their latest index shows how overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2%. They have stabilized around 3% since early 2019.

4. The Apartment List National Rent Report uses median rent statistics for recent movers taken from the Census Bureau American Community Survey. The 2020 report reveals that the year-over-year growth rate of 1.6% matches the rate at this time last year; it is just ahead of the 1.5% rate from January 2016. They also explain how “the past five years also saw stretches of notably faster rent growth. Year-over-year rent growth stood at 2.6% in January 2018, and in January 2016 it was 3.3%, more than double the current rate.”

It seems tenants are getting a breather from the rapid rent increases that have plagued them for almost a decade.

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Rental expenses are beginning to moderate, and at the same time, average wages are increasing. That power combination may allow renters who dream of buying a home of their own an opportunity to save more money to put toward a down payment. That’s sensational news!

For a Hassle-Free consultation with United Family Mortgage on: Home Refinancing, First-Time Home Buyer Mortgage, Zero-Down Mortgage, Home Construction Loan or VA Home Loan, contact DJ Riley today at 763-276-3960 or via email djriley@unitedfamilymortgage.com.

 

*Re-posted by: https://www.mykcm.com/2020/02/06/great-news-for-renters-who-want-to-buy-a-home/