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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.

This Summer is the 2020 Real Estate Season

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Stay-at-home orders are starting to gradually lift throughout different parts of the country, yet data is indicating that homebuyers are jumping back into the market. 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. Summer 2020 is the new spring for real estate.

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

“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.”

In addition, 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 and more potential homebuyers are looking for homes virtually.

What’s the Opportunity for Buyers?

One of the reasons buyers are coming back to the market, even with forced unemployment and stay-at-home orders, is that we have 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, 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 is still a challenge, as when COVID hit and stay-at-home orders were put into place many spring sellers removed their 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.

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.”

If you’re thinking about selling your house this summer, now may be your best opportunity. With so few homes on the market for buyers to purchase, this is 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. 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.  I promise no gimicks, no pushy sells tactics, just the guidance you need to get your home sold.

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!