What Might the Rest of 2020 Look Like?

What Are Experts Saying About the Rest of 2020? | MyKCM

Let’s be real one of the major items on everyone’s mind these days is: What’s going to happen to the housing market in the second half of the year? If we look at recent data on the economy, unemployment, real estate, and more, many factors economists are now revising their forecasts for the remainder of 2020 – and the outlook is extremely encouraging. Here’s  what some experts have to say about key areas that will power the industry and the economy forward this year.

Mortgage Purchase Originations: Joel Kan, Associate Vice President of Economic and Industry ForecastingMortgage Bankers Association

“The recovery in housing is happening faster than expected. We anticipated a drop off in Q3. But, we don’t think that’s the case anymore. We revised our Q3 numbers higher. Before, we predicted a 2 percent decline in purchase originations in 2020, now we think there will be 2 percent growth this year.”

Home Sales: Lawrence Yun, Chief Economist, National Association of Realtors

“Sales completed in May reflect contract signings in March and April – during the strictest times of the pandemic lock down and hence the cyclical low point…Home sales will surely rise in the upcoming months with the economy reopening, and could even surpass one-year-ago figures in the second half of the year.”

Inventory: George Ratiu, Senior Economist, realtor.com

“We can project that the next few months will see a slow-yet-steady improvement in new inventory…we projected a stepped improvement for the May through August months, followed by a return to historical trend for the September through December time frame.”

Mortgage Rates: Freddie Mac

“Going forward, we forecast the 30-year fixed-rate mortgage to remain low, falling to a yearly average of 3.4% in 2020 and 3.2% in 2021.”

New Construction: Doug Duncan, Chief Economist, Fannie Mae

“The weaker-than-expected single-family starts number may be a matter of timing, as single-family permits jumped by a stronger 11.9 percent. In addition, the number of authorized single-family units not yet started rose 5.4 percent to the second-highest level since 2008. This suggests that a significant acceleration in new construction will likely occur.”

Good news is that the experts are optimistic about the second half of the year. If you made the choice to pause your 2020 real estate plans in the spring, now may be the right time for you to get back into the market.  If you have questions I’m here to talk to you about it, no pressure, no tactics just the advice and guidance you need to make the best decision possible for your family.

Unemployment….3 Things to Understand

Three Things to Understand About Unemployment Statistics | MyKCM

Brace yourselves, tomorrow morning the Bureau of Labor Statistics will release the latest Employment Situation Summary, which includes the most current unemployment rate. Be prepared for a horrific number. Many analysts believe unemployment could be greater than 20%. The numbers represent families all across the United States who are not sure when (or if) they will return to work. The emotional impact on these families is devastating.

However there are some small rays of light shining on this issue. Here are three:

1. The actual number of unemployed is less than many are reporting

The number of people unemployed is sometimes over-exaggerated. It seems that every newscaster talks about the 40+ million people “currently” unemployed. It is true that, over the last ten weeks, over 40.7 million people have applied for unemployment. It is also true, however, that many of those people have already returned to work or gotten a new job. The actual number of people currently unemployed is 21.1 million. While this is still a horrible number, it is about half of what is often being reported.Three Things to Understand About Unemployment Statistics | MyKCM

2. Of those still unemployed, most are temporary layoffs

Last month’s unemployment report indicates that 90% of those unemployed believe their status is temporary. Friday’s report will probably show a decline in that percentage as the original number was somewhat optimistic. However, a recent survey by the Federal Reserve Bank showed that employers believe over 75% of job losses are temporary layoffs and furloughs. This means 3 out of 4 people should be returning to work as the economy continues to recover.

3. Those on unemployment are receiving assistance

According to a recent study from the Becker Friedman Institute for Economics at the University of Chicago, 68% of those who are eligible for unemployment insurance receive benefits that exceed lost earnings, with 20% receiving benefits at least twice as large as their lost earnings. So yes, tomorrow’s report will be difficult to swallow. However, as our nation continues to reopen, many of the families who are impacted will be able to return to work.

It’s All About Supply and Demand Folks

Home Prices: It’s All About Supply and Demand | MyKCM

We are moving into the summer months and as we work through all of the challenges going on right now many are wondering how the economic slowdown will affect home prices. So if we look at the big picture of supply and demand we will be able to see an idea of what is to come.

As we make our way through the month of June and enter into the second half of the year, we are facing an undersupply of homes in different locations and price points. According to the National Association of Realtors (NAR), across the country, we currently have a 4.1 months supply of homes on the market. So what exactly is a balanced market?  A balanced market is considered to be 6 months of supply.  Anything over 6 months is a buyer’s market, meaning prices will depreciate. Anything below 6 months is a seller’s market, where prices appreciate. The graph below shows inventory across the country since 2010 in months supply of homes for sale.Home Prices: It’s All About Supply and Demand | MyKCMRobert Dietz, Chief Economist for the National Home Builders Association (NAHB) says:

“As the economy begins a recovery later in 2020, we expect housing to play a leading role. Housing enters this recession underbuilt, not overbuilt. Estimates vary, but based on demographics and current vacancy rates, the U.S. may have a housing deficit of up to one million units.”

So with the current undersupply of homes on the market there is upward pressure on prices. Looking at simple economics, when there is less of an item for sale and the demand is high, consumers are willing to pay more for that item. The undersupply is also prompting bidding wars, which can drive price points higher in the home sale process. According to a recent MarketWatch article:

 “As buyers return to the market as the country rebounds from the pandemic, a limited inventory of homes for sale could fuel bidding wars and push prices higher.”

Experts forecasting home prices have updated their projections given the impact of the pandemic. Major institutions expect home prices to appreciate through 2022. The chart below, updated as of earlier this week, notes these forecasts. As the year progresses, we may see these projections revised in a continued upward trend, given the lack of homes on the market. This could drive home prices even higher.Home Prices: It’s All About Supply and Demand | MyKCM

Many may think home prices will depreciate due to the economic slowdown from the coronavirus, but experts disagree. As we approach the second half of this year, we may actually see home prices rise even higher given the lack of homes for sale.

You’ve Outgrown Your Home….Now What????

hiveboxx-deX-KChuboY-unsplashMany home buyers are like my family, you purchase the home you currently live in and works great for you.  Then a few years down the road all of a sudden you realize you’ve outgrown your home, but the thought of buying a home while selling one at the same time has a lot of moving parts to it.  And that is down right terrifying for most people.

Part of it is because first-time home sellers consider how tricky this process is until they actually find the perfect home that they want to move up to and have to do it.  Truth be told, buying a new home while you are still living in your current home can create a long string of dominoes.  If one of the dominoes fails to tip over in the line, the whole thing falls apart.  In today’s blog post I’m going to walk you through the process to help ensure that all of the pieces come together easily for you.

There are 4 ways you can buy and sell a home simultaneously:

#1 – Closing Contingent:

Most homes are sold on a contingency.  This means you would put an offer in on a new home that obligates you to purchase it only if someone else agrees to purchase your home.  This is a great choice for someone who has a home to sell because there’s very little risk to the buyer.           If the buyer fails to purchase your home, then you reserve the right to go back on the market if there’s still time in the contingency period or you can back out of your contract as well.  The drawback here is that selling a home contingent transfers the risk to the home seller, and                 most home sellers do not want to assume that risk on behalf of their buyer.  This is especially true if you are trying to sell your home in a highly competitive market.  Put yourself in the sellers shoes – if you had multiple offers on your home, five were contingent, but one of them                 writes a non-contingent offer wouldn’t the non-contingent offer be more appealing to you?  Most home sellers want a sure-fire deal, and contingency doesn’t fit that bill in a hot market.  For this reason some buyer will make every attempt to write an offer on their new home that             is  non-contingent.

#2 – Own Both Homes:

This is a viable option if you are in a position to carry two mortgages.  In this case you would get a mortgage for the new home, and wait to move out of your current home until you are ready.  This process is helpful if you want to turn your old home into an investment property and you are planning to rent it out after you move into your new home.  It is also helpful if your new home needs major renovations and you do not want to live in the home while they are being completed.   The one drawback to this process is that you cannot apply the sale of the first home onto the second.  This means you will need to be approved for a second mortgage – while you’re still paying on the first one.  You will also need cash for the down payment and closing costs on the second home.

#3 – Rent A Home:

There are two ways to do this – rent a random home or ask the buyers for rent back of your current home.  If you opt to rent a random home this is pretty easy.  You would sell your first home then find a home to rent until you find a new home to purchase.  There are a couple of drawbacks.  It can be a hassle to move multiple times in a year.  You could incur heavy storage fees or pet boarding fees if you house things temporarily.  Also you may be obligated to a long lease if you find your new home earlier than you anticipated.  The other option is to ask for rent back of the home  you are selling.  In this option you would stay in your current home after it sells by renting it back from the buyers.  You would get all of the proceeds from the sale of your home, which gives you both time and money to purchase a new home.  The drawback here is that it transfers the risk to the buyer, and most buyers are hesitant to take on the risk of renting their new home and prolonging their move in date.

#4 – Close Non-Contingent:

This is a risker option than the other three but it can still be a viable one for some people.  In this case you would purchase the second home without being able to break the contract if you fail to sell the home you are currently in.  In this case the home buyer assumes all of the risk.  However, in a highly competitive market it may be the only way to make your offer stand out.

As you can see buying a home when you still have a home to sell can be a tricky process.  Sometimes there are transactions with 5 (or more)families buying and selling contingent.  This creates a long string of dominos and if one falls then all of the others do too.  So, orchestrating something like this is an art form and you need a good real estate agent who can guide  you through the process, and that’s where I come in.  My job is to listen to you and help you way the pros and cons of each option and provide you with a list of vendor partners who can walk you through all of the different options available financially to help you purchase that new home, contingent or not.

If you are thinking about making a move please message me I would love to help you through the process.  No pressure or sales tactics, just the help and guidance you need!

6 Pitfalls to Selling Your Home on Your Own – aka FSBO

Untitled design (1) copy 25

There are lots of benefits to working with a Realtor® when selling your house. Given everything going on right now it has become even more important to have a trusted expert to help guide you through the process. If you have been thinking selling your home on your own, which is known as a For Sale By Owner or FSBO in the real estate industry here are a few things to consider:

1. Your Safety Is a Top Priority

With everything going on your family’s safety comes first. When you sell your home on your own it is difficult to control entry into your home. Your trusted local real estate expert has the proper protocols in place to protect not only your belongings, but your family’s health and well-being too. From regulating the number of people who are allowed to enter your home at one time to ensuring proper sanitization during and after a showing, as well as facilitating virtual tours for buyers to preview the property prior to scheduling an in person appointment, agents are equipped to follow the latest industry standards recommended by the National Association of Realtors (NAR) in order to help protect you and your family.

2. A Powerful Online Strategy Is a Must to Attract a Buyer

The internet has quickly become the go to place to search for everything you are looking to purchase and that’s true for buyers looking for a home. Even before COVID-19 and stay at home orders, the first step 44% of all buyers took when looking for a home was to search online. With stay at home orders in place, that number jumped to 93%. This is why great real estate agents  have developed a strong Internet and social media strategy to promote the sale of your house. Have you?

3. There Are Too Many Negotiations

Often sellers who choose to sell their home on their own do not realize how many negotiations are involved in the process.  Here are just a few of the people you’ll need to negotiate with 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 & is there to make sure the buyer gets the best deal possible
  • The inspection companies, which work for the buyer and will almost always find items with the house that the buyer will ask to have fixed
  • The appraiser, who works for the buyers lender, and if there is a question of value another negotiation will ensue with the buyer and their agent

One of the facets of training that real estate agents go through is how to negotiate every aspect of a real estate transaction, as well as how to mediate the emotions felt by buyers who are preparing to make the largest purchase of their lives.

4. You Won’t Know if Your Purchaser Is Qualified for a Mortgage

Having a buyer who wants to purchase your house is just the first step. Making sure they can afford to buy it is just as essential. As a FSBO, it can be almost impossible to be involved in the mortgage process of your buyer. Your local real estate expert is trained to ask the appropriate questions and, in most cases, is aware of the progress that’s being made toward a purchaser’s mortgage commitment.

Now add in the fact that the current mortgage market is changing on a daily basis due to the number of families out of work and in forbearance you may find yourself with a buyer who has a loan program that is now gone.  Meaning they can no longer afford to purchase your home.  Real Estate agents work with lenders every day to make sure that your buyer makes it to closing.

5. FSBOing Has Become More Difficult from a Legal Standpoint

There is a lot of documentation  involved in the selling process and it has increased dramatically as more and more disclosures and regulations have become mandatory. In a society that likes to sue, the agent acts as a third-party to help the seller avoid legal jeopardy. Legal issues are one of the major reasons why the percentage of people FSBOing has dropped from 19% to 8% over the last 20+ years.

6. You Net More Money When Using an Agent

I know that lots of  homeowners believe they’ll save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.

A study by Collateral Analytics revealed that FSBOs don’t actually save anything by not using agent. In some cases, the seller may even net less money from the sale than they would have if they had used an agent. The study found the difference in price between a FSBO and an agent-listed home was an average of 6%. One of the main reasons for the price difference is effective exposure:

“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”

The more buyers that view a home, the greater the chance a bidding war will take place.

As you can see listing on your own leaves you to manage the entire transaction on your own, which can quickly become a full time job for you.  So if you can still net the same amount of money why not hire an agent?  Before you decide to sell your home on your own give me a call so we can discuss your options.  I promise no pressure, no sales tactics just the help and guidance you need.