The Big Challenges Home Buyers Face in 2017

Daily Real Estate News | Friday, January 20, 2017

What are the top challenges your home buyers face this year? A recent survey from realtor.com® reveals the following:

1. Low inventories: There aren’t enough homes for sale and inventory woes are expected to worsen this year. Active inventory in December 2016 on realtor.com® dropped 11 percent compared to a year ago. “As a result, the year has started with the lowest inventory of homes for sale at least since the recession, and possibly in decades,” realtor.com® notes. “Inventory was a challenge all year but a stronger offseason in the fall depleted the available homes for sale even more than is typical.”

2. Prices move to record highs: Typically, asking prices decrease in the fall. However, this year, the median list price in December was the same as it was in July — $250,000. That is a record high for December. It’s also a year-over-year increase of 9 percent.

3. Rising mortgage rates: For experienced buyers, rising mortgage rates has prompted an urgency for them to buy before any further increases. Average listing views on realtor.com® surged 40 to 80 percent in the last three weeks of December 2016 compared to December 2015. “Rising rates have made demand even more intense,” realtor.com® notes. However, the demand mostly seems to be coming on stronger from repeat buyers. For first-time buyers, rising mortgage rates are having an opposite effect and they’re showing signs of beginning to shy away from the market.

4. First-Timers Are Worried; Repeat Buyers Are in a Rush: The number of first-time buyers planning to purchase this spring has dropped sharply and the rise in mortgage rates over the past few weeks may be to blame for their retreat, according to realtor.com® study. Repeat buyers, on the other hand, want to lock in rates right away.

Forty-four percent of active home buyers who plan to buy a home this spring are first-time home buyers, down from 55 percent last fall who said they were planning to buy in the spring. So what’s spooking them?

The average 30-year fixed-rate mortgage has gone up to more than 4.2 percent by the end of December 2016, realtor.com® notes. It was averaging 3.4 percent for most of September 2016. Average rates today are about a half percentage point higher than they were in 2016. That means a median-priced home financed with a 20 percent down would cost an extra $720 per year in added interest, realtor.com®’s study notes.

“Last fall, we saw a large jump in the number of first timers planning home purchases, which was very encouraging because their market share is still well below pre-recession levels,” says Jonathan Smoke, chief economist for realtor.com®. “But, as evidenced by their decline in share, first-time buyers are really dependent on financing and affordability is one of their largest barriers to home ownership. This number could continue to decline with anticipated increases in interest rates and home prices.”

First-time buyers are nearly five times more likely than repeat buyers to say they are facing challenges qualifying for a mortgage. Affordability topped first-time buyer concerns.

In November, first-time buyers made up 32 percent of all buyers, according to the National Association of REALTORS®.

“The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers,” added Smoke. “At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move up in rates is discouraging new home buyers already.”

On the other hand, repeat home buyers realize mortgage rates – while moving higher overall – are still at historical lows. Before rates jump more, these buyers are in a rush to close before rates increase further, according to realtor.com®’s study.

Source: Move.com

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Open Floor Plan Still Popular

Daily Real Estate News | Wednesday, January 18, 2017

Open floor plans continue to reign. Eighty-four percent of builders say that in the typical single-family home they build, the kitchen and family room arrangement is at least partially open. Fifty-four percent say it’s completely open, according to responses from a September 2016 National Association of Home Builders/Wells Fargo Housing Market Index.

“Completely open” essentially means the two areas are combined into the same room. Partially open signifies areas separated by a partial wall, arch, counter, or something less than a full wall.

Seventy percent of recent and prospective home buyers say they prefer a home with either a completely or partially open kitchen-family room arrangement; 32 percent say they prefer the arrangement completely open, according to an NAHB survey.

Only 16 percent of buyers say they want the kitchen and family rooms in separate areas of the house.

As demand continues to increase for open floor plans, homeowners of existing-homes are also looking to open up their kitchen and family room areas. Professional remodelers report that 40 percent of their projects involved making the floor plan more open by removing interior walls, pillars, arches, etc., according to first quarter of 2016 data in the Remodeling Market Index.

Source: “Builders Satisfy Demand for Open Floor Plans,” National Association of Home Builders’ Eye on Housing blog (Jan. 11, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Borrowing Costs Move Lower This Week

Daily Real Estate News | Friday, January 13, 2017

Mortgage rates edged down for the second consecutive week, a temporary reprieve from what had been weeks of rising rates.

“After absorbing a mixed December jobs report; the 10-year Treasury yield fell 8 basis points,” says Sean Becketti, Freddie Mac’s chief economist. “The 30-year mortgage rate moved in tandem with Treasury yields falling 8 basis points to 4.12 percent, the second decline since the presidential election. The December jobs report showed 156,000 jobs added, barely meeting many experts’ expectations, while wage growth was at the high end of expectations at 0.4 percent. If strong wage gains persist, they may push inflation and interest rates higher.”

Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 12:

  • 30-year fixed-rate mortgages: averaged 4.12 percent, with an average 0.5 point, dropping from last week’s 4.20 percent average. Last year at this time, 30-year rates averaged 3.92 percent.
  • 15-year fixed-rate mortgages: averaged 3.37 percent, with an average 0.5 point, falling from last week’s 3.44 percent average. A year ago, 15-year rates averaged 3.19 percent.
  • 5-year hybrid adjustable-rate mortgages: averaged 3.23 percent, with an average 0.5 point, falling from last week’s 3.33 percent average. A year ago, 5-year ARMs averaged 3.01 percent.

Source: Freddie Mac

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Lenders Aim for 21-Day Closing Window

Daily Real Estate News | Friday, January 13, 2017

In an era of bloated closing times, some lenders are looking to quicken the pace it takes to get a buyer to the settlement table. Some lenders are retooling operations and aiming to close a loan within 21 days.

For example, national retail lender CrossCountry Mortgage Inc. in Brecksville, Ohio, is committing its staff to aim to close a purchase loan from application to funding within 21 days.

“When you look at contracts, they are typically written for 30 days,” says Chief Operating Officer Jodi Hall. “Many of them have gone out to 45 and 60 day contracts because of the long turn times that have occurred within the industry. If you can deliver well ahead of a 30 day contract it’s very attractive to our REALTOR® partners and customers. That is the best practice.”

In 2016, closing times for purchase loans averaged 47 days, according to Ellie Mae, an information origination system provider.

CrossCountry tries to get its borrowers to commit to a timeline upfront.

“One of the first things that we coach our loan officers on, in terms of their engagement with the borrower, is to explain our loan process and turn times,” Hall says. “If the borrower commits, we can often close their loan in 21 days or less.”

In 2014, one wholesaler vowed to be “ready to close” qualifying loans within 15 business days of appraisal receipt. If they were unable to meet that goal, the lender would even apply a $500 closing cost credit to the loan at closing.

Today’s 21-day-close goal doesn’t include any such promises from lenders, however.

“We don’t guarantee the 21-day turn time because there are so many things that play into a guarantee,” Hall said.

Delays can happen, most notably from appraisals. A growing appraiser shortage threatens to lengthen timelines, says William Fall, chief executive officer of appraisal management company Valuation Partners. Appraisals are “much less predictable than title, credit or other parts of the process,” he says.

Lenders who adopt more technology may help to decrease time spent on certain steps like asset verification, says Jonathan Corr, president and chief executive officer of Ellie Mae.

“Lenders could eventually bring their closing times down under 30 days if they embrace technology and do everything perfectly,” says Corr. “Maybe you could even get it down to a couple of weeks.”

Source: “Why Lenders Are Shooting for a 21-Day Turn Time,” National Mortgage News (Jan. 9, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Millennial Buyers: We’ll Compromise

Daily Real Estate News | Thursday, January 12, 2017

Millennial first-time homeowners are showing more willingness than previous generations to complete do-it-yourself projects around the house or wait until they can afford to make the improvements they desire, a new survey by Better Homes & Gardens magazine shows. Fifty percent of those surveyed say that at move-in, their current home’s conditions require some degree of repair or remodeling.

They’re showing some compromise in their first home. Only 50 percent of first-time millennial homeowners say they are willing to spend top dollar to get exactly the features and quality they want in a home, the survey showed.

“These first-time millennial homeowners are focused on building equity, not debt,” says Jill Waage, editorial director of Digital Content and Products at Better Homes & Gardens. “They are strong believers in being able to afford their dreams as they achieve them and not over-stretch themselves.”

Eighty-five percent of first-time millennial homeowners say they view homeownership as a sound investment.

Their housing wish-list is for a mid-sized home (about 2,000 square feet) with a renovated kitchen and bathroom as well as a deck or patio space.

The DIY projects that landed the highest on their to-do lists are installing light fixtures and tile and painting walls, the survey showed.

“Millennials and millennial ‘firsts’ [first-time homeowners] are paving their own paths in homeownership based on their own budgets, timeline and needs,” Waage says. “These ‘firsts’ are replacing big-budget homes and expensive renovations with patience, frugalness and practicality.”

Source: “Millennials Patient, Thrifty When It Comes to Homeownership,” RISMedia (Jan. 11, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Which Is Cheaper: To Buy or Build New?

Daily Real Estate News | Monday, January 09, 2017

On the surface, buying an existing home seems like the most affordable route to go. After all, the median cost of an existing single-family home is $223,000. On the other hand, the average cost for building new construction averages $289,415.

Obviously, there is quite a bit of variations in sorting out those costs. Plus, the price you pay upfront is only part of the equation when deciding to buy an existing home or build a new one.

A recent article at realtor.com® laid out some of the pros and cons financially of buying a new versus an existing home. Make some of these considerations when weighing the best financial decision:

Square footage: New-homes tend to be more spacious than existing ones at a median size of 2,467 square feet. As such, when you take the average cost of a new build, it breaks down nationally to about $103 per square foot, which is actually lower than the cost of existing homes.

Finishes: With an existing home you inherit all the features and finishes, even if you don’t want them. That may mean you need to budget in some renovations if you’d like to redo anything. With a new home, you’ll be able to choose all the features and finishes yourself and have it set in the price from the get-go.

Maintenance: Older homes tend to require more maintenance. The cost of upkeep can be pricey too, depending on what needs to be done. For example, the average furnace tends to last about 20 years. When it needs replacement, expect to pay about $4,000. Not to mention, that shingled roof will likely need replacement after about 25 years at a cost of at least $5,000. On the other hand, newer homes tend to need less maintenance because all of the major appliances are brand new and under warranty.

Energy efficiency: Older homes tend to have dated windows and appliances, which can result in less energy efficiency and pricier energy bills. New construction tends to nearly always trump older homes in energy efficiency, according to Kyle Alfriend with the Alfriend Real Group RE/MAX in Ohio. Indeed, homes built post-2000 consume 21 percent less energy for heating than older homes.

Landscaping: Older homes tend to have mature landscaping already in place. And that landscaping can up a person’s property value by thousands. Further, those trees can save an estimated 56 percent on your annual air conditioning bill, according to the U.S. Forest Service. With newer homes, you’ll have to likely pay thousands to install landscaping and may have to wait years to get it to the point you desire.

Appreciation: With an older home, you can see the trajectory of prices based on previous sales prices and of comps nearby. New homes can be a gamble since they do not come with a proven track record of plentiful comps that have been tested over time.

Source: “Is it Cheaper to Buy or Build a House? Compare the Pros and Cons,” realtor.com® (Jan. 5, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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More Equity Likely Coming to Owners

Daily Real Estate News | Wednesday, January 04, 2017

Spread the news to your seller contacts sitting on the fence: Home prices nationwide, including distressed sales, rose year over year by 7.1 percent in November 2016 compared to November 2015, CoreLogic’s Home Price Index shows.

Expect more price jumps ahead too, although at a more modest pace. Home prices likely will increase by 4.7 percent on a year-over-year basis from November 2016 to November 2017, according to CoreLogic’s forecasts.

“Last summer’s very low mortgage rates sparked demand, and with for-sale inventories low, the result has been a pickup in home-price growth,” says Frank Nothaft, CoreLogic’s chief economist. “With mortgage rates higher today and expected to rise even further in 2017, our national Home Price Index is expected to slow to 4.7 percent year-over-year by November 2017.”

Home prices in 27 states are now above their pre-crisis peak levels, says Anand Nallathambi, president and CEO of CoreLogic. Oregon had the largest gain of any other state, with a 10.3 percent year-over-year increase in November, followed by Washington (10 percent). Nevada home prices remain the farthest below their all-time high, still nearly 32 percent below their March 2006 peak.

Nationwide, the CoreLogic Home Price Index still remains 4 percent below its April 2006 peak. “It should surpass that peak by the end of 2017,” Nallathambi predicts.

Source: “Home Price Index Highlights: November 2016,” CoreLogic (Jan. 3, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

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5 Home Design Fads That Are Out in 2017

Daily Real Estate News | Friday, December 30, 2016

Shiplap and white-on-white kitchens may finally be falling out of favor. The two trends have dominated home design in recent years, but realtor.com® says they’ll be fading fast in 2017. Here are some of the home design trends realtor.com® predicts will fall to the wayside in the new year.

  1. Gray. Once the hottest color, gray is now looking gloomy. “It’s been overdone,” says Tanya Campbell of Denver-based Viridis Design Studio. “Diversity in the palette will strike a contrast. We may even see a transition from gray color palettes to warmer mochas and taupes.”
  2. The glam look. This style’s signature is bold whites, bright silvers, and deep blacks, which have been popular in kitchen and bathroom designs. “We’re going to leave the glam era behind. That slick, stark, severe minimalism will be replaced with warmer elements,” says interior designer Bea Pila. “At the end of the day, we’re seeking a deeper comfort level in our personal spaces. That perfect showroom feel we were once into doesn’t make this possible.”
  3. Shiplap. Shiplap surged to popularity as Joanna Gaines, host of HGTV’s “Fixer Upper,” turned to it as her go-to remodeling piece. But realtor.com® notes: “If you’ve ever wondered what 2016’s version of tacky wood paneling would be, look no further than this trend that seems to have overtaken TV design shows.” It’s difficult to remove, and designers now say it often makes little sense to use, particularly in a Colonial or Tudor home style.
  4. White-on-white kitchens. White everything in the kitchen — from countertops to cabinetry and even the floor — is fading fast. “It’s just too much,” says Sara Chiarilli, a designer at Sarasota, Fla.-based Artful Conceptions. “This trend started to go in 2016, but you will find it completely gone in 2017.” That said, Chiarilli predicts that whites will stick around, but they will take on more depth and tones in kitchens in the new year.
  5. Copper. Expect to see less of this heavy metal in 2017. Copper fixtures are another trend on the chopping block in the new year, realtor.com® notes.

Source: “10 Interior Design Trends That Are So Completely Over for 2017,” realtor.com® (Dec. 29, 2016)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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