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Wednesday, December 4, 2019

The biggest factors that will shape the real estate market in 2020.

Affordability, affordability, affordability
OK, it's not as catchy as "location, location, location," but achievable price points will be key in the coming year, especially as millennial buyers solidify their position as America's main home buyers (more on that later).
Now that we've apparently hit the ceiling of crazy price growth, it seems that buyers are just over overpaying.
"Many people would prefer to live in the San Francisco and [other] big cities, but for the right price they will make the decision to go to another city," says Hale.
Perhaps a city like, say, McAllen, TX, where sales are expected to rise 4.4% and home prices to appreciate 4% in 2020. Compare that with a 9.5% drop in sales for Las Vegas, and 1.1% decrease in home prices.
Texas, Arizona, and Nevada are expected to welcome an influx of home shoppers priced out of California. Meanwhile, would-be buyers from pricey Northeastern markets will likely head to the Midwest or Southeast. There, they can find affordable housing as well as solid, diversified economies.
Millennials mature into home buying
"The largest cohort of millennials will turn 30 in 2020—historically, that's when people tend to think of buying their first home," says Hale. The oldest millennials will be turning 39. By the middle of the year, she says, this generation will account for more than 50% of mortgages taken out in the country. Yes, that's more than all other generations, combined.
Surprised? Well, the popular notion that millennials aren't interested in settling down just isn't proving true as members of this generation, born in 1981 through 1997, partner off and start families.
"Family changes tend to drive home-buying decisions," Hale notes. "Millennials are going to be active in the housing market not just because they're just at the age when they're thinking about becoming first-time home buyers, but they're also in the age range when they're having kids."
But while they may be motivated, they'll face a lot of competition for the scarce homes on the market—from roughly 71 million of their peers nationwide.
Where are the homes?
While millennials are raring to buy, Gen Xers and boomers are pretty comfortable where they are, thank you very much. Boomers are living longer, healthier lives, and staying in their houses longer. Gen Xers often aren't quite done with raising kids or ready to retire, so except for the lucky ones trading up, they also aren't inclined to move.
Since older owners aren't quite chomping at the bit to give up their houses en masse—and with levels of new construction still low in most parts of the U.S.—there just won't be enough housing to meet the demand. And while in previous years this scarcity has driven up home prices, home price appreciation is finally flagging, with predicted growth of just 0.8%.
After the housing crash in 2008, which wiped out quite a few builders, those who remained have largely focused on higher-end developments with bigger profit margins. Although they're finally showing signs of a shift toward building more entry-level homes, faced with overwhelming demand, it will take a few years for a significant number to come to market.
How to buy a home in 2020
Those looking to buy an entry-level home will face a tough search, so they should be prepared for it to take a while—and to act quickly when needed.
"Finding a property that is right for you and snatching it up before someone else does is going to be the primary challenge," Hale says.
Those with a bit more to spend will have more to choose from, less competition, and possibly more motivated sellers.
How to sell a home in 2020
Sellers of entry-level homes should be sitting pretty, as those will continue to be the most in-demand properties next year. If anything, those sellers should be prepared to move out quickly!
Others should brace themselves for a longer wait, especially as the price point moves up. The number of existing-home sales is expected to dip 1.8% next year. Higher-end sellers should do their homework: "They might need to think about the competition and pricing their home competitively," Hale says.

Wednesday, November 27, 2019

Fannie Mae, Freddie Mac loan limit increases to more than $510,000

Conforming loan limit has now increased by nearly $100,000 since 2016

The Federal Housing Finance Agency announced Tuesday that it is raising the conforming loan limits for Fannie Mae and Freddie Mac to more than $510,000.

In most of the U.S., the 2020 maximum conforming loan limit will be raised to $510,400, up from 2019’s level to $484,350.

This marks the fourth straight year that the FHFA has increased the conforming loan limits after not increasing them for an entire decade from 2006 to 2016.

In 2016, the FHFA increased the Fannie and Freddie conforming loan limit for the first time in 10 years, and since then, the loan limit has gone up by $93,400.

Back in 2016, the FHFA increased the conforming loan limits from $417,000 to $424,100. Then, the next year, the FHFA raised the loan limits from $424,100 to $453,100 for 2018. And in 2018, the FHFA increased the loan limit from $453,100 to $484,350 for 2019.

And now, loan limits will top $510,000.

The conforming loan limits for Fannie and Freddie are determined by the Housing and Economic Recovery Act of 2008, which established the baseline loan limit at $417,000 and mandated that, after a period of price declines, the baseline loan limit cannot rise again until home prices return to pre-decline levels.

Data from FHFA shows that home prices increased by 5.38% on average between the third quarter of 2018 and the third quarter of 2019. Therefore, the baseline maximum conforming loan limit in 2020 will increase by the same percentage.

For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. HERA establishes the maximum loan limit in those areas as a multiple of the area median home value, while setting a “ceiling” on that limit of 150% of the baseline loan limit.

Median home values generally increased in high-cost areas in 2019, driving up the maximum loan limits in many areas. The new ceiling loan limit for one-unit properties in most high-cost areas will be $765,600 — or 150% of $510,400.

Special statutory provisions establish different loan limit calculations for Alaska, Hawaii, Guam, and the U.S. Virgin Islands. In these areas, the baseline loan limit will be $765,600 for one-unit properties.

As a result of generally rising home values, the increase in the baseline loan limit, and the increase in the ceiling loan limit, the maximum conforming loan limit will be higher in 2020 in all but 43 counties or county equivalents in the U.S.

Wednesday, November 20, 2019

8 Tips for Outdoor Holiday Decorating

You don't want to be the only house on the block that doesn't look great this holiday season. Use these 8 tips to help you with your outdoor holiday decorating.
Christmas lights wrapped around tree brand
The holiday season is almost upon us. The weather’s getting colder, and soon the snow will be falling. Lawn and garden tools have given way to Christmas ornaments, gift wrap and artificial evergreens in most department stores. It’ll soon be time to decorate your home for the holidays, indoors and out – and if you’re the kind of person who loves getting in the holiday spirit, why wait? Use these eight tips to show off your festive spirit.

1. Choose a Focal Point

Decorating your home’s exterior, yard, flowerbeds and other outdoor space around a central focal point can help you tie everything together and build a theme for your holiday décor. Many homeowners choose their front porch or even their front door as a focal point, drawing attention to it with a nice wreath, some lights strung around the railing and perhaps an artificial outdoor tree or two.
However, that’s not your only choice. Your focal point could be a large evergreen tree in your front yard, a large statue of Santa in his sled or a nativity scene. Think about choosing a theme for your holiday decorations so everything flows together and you don’t end up buying more decorations than you need.

2. Keep It Simple

You don’t want to go all Clark Griswold with your Christmas lights. Start small, especially if you’ve never decorated the exterior of a home for the holidays before. Spend some time browsing the web for Christmas decorating ideas, and start with a manageable display. For example, just string some lights around the porch instead of lighting up the whole house. You can add to your display later or expand it next year.

3. Buy the Right Lights for Your Needs

If you’ve never purchased Christmas lights for your home before, or if it’s been a while, you may be surprised at the options available to you. There are net lights for bushes, rope lights for illuminating windows, blinking lights, multicolored lights, icicle lights and various kinds of LED lights. Figure out what kind of lights are best for the display you have in mind, as well as which lights will be cheapest to run.

4. Shop Secondhand

Looking to decorate for less this Christmas season? Who can blame you – Christmas is already expensive enough, and surely there’s a more environmentally sustainable way to get in the holiday spirit. Fortunately, you can score piles of gently used, secondhand Christmas decorations at most thrift stores. Buy used and vintage wreaths, statues, nativity scenes and other items of holiday décor for a fraction of the retail price.

5. Play It Safe

When it comes to outdoor holiday decorating, safety is paramount. Use lights labeled with the UL (Underwriters Laboratories) seal of approval and make sure they’re rated for outdoor use. Not sure about getting up on the ladder to string lights along the gutters and around windows? Hire someone to do it, or skip it altogether.

6. Ditch the Staple Gun

When it’s time to hang Christmas lights, leave the staple gun in your toolbox – that’s how your grandpa hung his lights. Electrical tape is a safe, quick and easy alternative that won’t damage your siding, shingles or fingers. It’s also great for protecting electrical connections from the elements. Use Christmas light clips to safely and easily attach lights to shingles and gutters.

7. Start at the Bottom

When decorating something tall for Christmas, such as a large tree, start at the bottom and work your way up. Use a dowel rod staked into the soil to hold an extension cord for powering your lights, and work with the lights illuminated so you can get a better sense of how the finished product will look. Get help stringing the lights around the trunk of a deciduous tree, or zigzagging them through the branches of an evergreen, adding new strings as needed.

8. Decorate Smart

Save yourself some effort and expense and only decorate parts of the yard that people will see. Have a big tree that passersby will only see one side of? Just decorate that side of the tree. You may want to skip decorating parts of the yard that aren’t visible to the public; however, if you have a back patio or deck that you plan to use throughout the Christmas season, feel free to decorate it with weather-resistant garlands, artificial trees, wreaths, lights or table arrangements.
Decorating for the holidays doesn’t have to be a chore. With a little creativity and these helpful tips, you’ll soon have an outdoor display that will inspire neighborhood passersby to stop and admire your work. 
Compliments of America Home Shield

Wednesday, November 13, 2019

4 Things NOT to Do When Putting Your Home on the Market

4 Things NOT to Do When Putting Your Home on the Market: So you've put your home on the market. Congratulations! As you start checking things off your to-do list, it's also important to pay mind of what NOT to do.

Wednesday, November 6, 2019

A flood of first-time homebuyers is about to hit the market over the next three years, according to newly released analysis from TransUnion.
TransUnion is currently projecting that at least 8.3 million first-time homebuyers will enter the mortgage market between 2020 and 2022.
That figure is more than any three-year period in the last decade, according to TransUnion’s report.
Image courtesy of TransUnion
On top of that, if economic growth exceeds expectations, the number of looming first-time homebuyers in the next three years could reach as high as 9.2 million.
“While we’ve recently seen a boom in refi activity, actual homeownership rates are down. Challenges have included high home prices, sluggish wage growth and limited housing inventory,” said Joe Mellman, senior vice president and mortgage business leader at TransUnion.
“But we may be starting to see daylight as slowing home price appreciation, low unemployment, increased wage growth and low interest rates are helping affordability,” Mellman added. “As a result, we are optimistic that first-time homebuyers will contribute more to home ownership than at any time since the start of the Great Recession.”
Another TransUnion report from earlier this year painted a similarly flattering picture of the housing market.
That report showed that the number of Gen Z consumers, categorized as those born in 1995 and after, who took out a mortgage more than doubled in the last year.
That report also showed that the number of Gen Z consumers who were credit eligible (meaning they were 18 years or older) increased by 4.5 million in the last year, climbing to 31.5 million in the second quarter 2019.
Additionally, the report showed that over the next three years, another 13 million Gen Z consumers are expected to become credit eligible.
To get more insight into prospective first-time homebuyers’ mindsets, TransUnion surveyed 943 U.S. residents who have never owned a home and expressed interest in buying one in the next three years.
Of the 943 surveyed, 45% said they were seeking more privacy when buying a home, and 44% said building equity/wealth was important when seeking out a home.
Getting married was why 24% said they wanted to purchase a home, while 23% said expanding their family is why they are buying.
“Only 10% of respondents said being tied down to one location would be a reason to delay home purchase. Just like others before them, the younger generation seem to place value in home ownership,” Mellman continued.
But, there are some who aren’t buying at all, just yet.
Delaying home purchase due to not having enough money for a down payment is why 58% said they are delaying their homebuying, and 51% said they said they thought they would need between 10 and 20% for a downpayment, which is why they are delaying buying a home.
“There has been a lot of discussion in the marketplace that younger people today may not be as interested as prior generations in buying a home and being tied down to one location. Our survey results suggest that is not the case at all,” Mellman said. “Rather, younger people may have in fact been deterred from home purchase by challenges they faced in the financially difficult times of the last decade.”

Monday, October 28, 2019

Economic Calendar for the Week of Oct 28- Nov 01
 
Date
ET
Economic Report
For
Estimate
Actual
Prior
Impact
Tue. Oct 29
10:00
Consumer Confidence
Oct
103.0
 
125.1
Moderate
Tue. Oct 29
09:00
S&P/Case-Shiller Home Price Index
Sep
2.3%
 
2.0%
Moderate
Tue. Oct 29
10:00
Pending Home Sales
Sep
1.7%
 
1.6%
Moderate
Wed. Oct 30
08:15
ADP National Employment Report
Oct
132K
 
135K
HIGH
Wed. Oct 30
14:00
FOMC Meeting
Oct
-0.25%
 
-0.25%
HIGH
Thu. Oct 31
09:45
Chicago PMI
Oct
47.6
 
47.1
Moderate
Thu. Oct 31
08:30
Personal Consumption Expenditures and Core PCE
YOY
1.7%
 
1.8%
HIGH
Thu. Oct 31
08:30
Personal Spending
Sep
0.3%
 
0.1%
Moderate
Thu. Oct 31
08:30
Personal Income
Sep
0.3%
 
0.4%
Moderate
Thu. Oct 31
08:30
Employment Cost Index (ECI)
Q3
0.7%
 
0.6%
HIGH
Thu. Oct 31
08:30
Jobless Claims (Initial)
10/26
216K
 
212K
Moderate
Thu. Oct 31
08:30
Personal Consumption Expenditures and Core PCE
Sep
0.1%
 
0.1%
HIGH
Fri. Nov 01
08:30
Non-farm Payrolls
Oct
105K
 
136K
HIGH
Fri. Nov 01
08:30
Unemployment Rate
Oct
3.6%
 
3.5%
HIGH
Fri. Nov 01
08:30
Hourly Earnings
Oct
0.3%
 
0.0%
HIGH
Fri. Nov 01
08:30
Average Work Week
Oct
34.4
 
34.4
HIGH
Fri. Nov 01
10:00
ISM Index
Oct
48.4
 
47.8
HIGH
   
   
  
 
 
The material contained in this newsletter has been prepared by an independent third-party provider. The content is provided for use by real estate, financial services and other professionals only and is not intended for consumer distribution. The material provided is for informational and educational purposes only and should not be construed as investment and/or mortgage advice. Although the material is deemed to be accurate and reliable, there is no guarantee it is without errors.

Thursday, October 17, 2019

Housing Market 2020

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Balance.
Everyone felt it at the start of the year—conditions leveling, the market yin and yanging. About half of Power Brokers sensed it, too—that the current cycle’s ending, and a different dynamic’s emerging.
Now, with two months left in 2019, the consensus is similar…but certain factors remain unclear.
“The housing market is in the midst of a normalization period, one that is characterized by slowing price growth, moderate sales and new supply that is slow to market,” according to Ralph McLaughlin, deputy chief economist and executive of Research and Insights at CoreLogic, a data provider.
As the cycle turns, the correction is naturally progressing, Eli Beracha, PhD, director of Florida International University’s Hollo School of Real Estate, says.
“We are toward the end of the cycle—but I do not see a collapse coming, or even a strong correction,” Beracha explains.
Beracha, along with Bill Hardin and Ken Johnson, of FIU and Florida Atlantic University, respectively, developed the Beracha, Hardin and Johnson Buy vs. Rent Index, which assesses whether it’s better to buy or rent.
“Our BH&J scores are starting to soften, and that historically happens as prices start to turn over,” Johnson, a real estate economist, says. “I do not foresee a crash like we had—we have a lot of good economic news that’s helping the housing market buffer itself against a significant contraction in prices.”
That’s the good news.
Appreciation’s been easing for some time, according to the Case-Shiller/CoreLogic Indices. In the latest update, annual appreciation edged just over 3 percent, down by half, roughly, year-over-year.
There are, however, indicators of a resurgence, explains Matthew Speakman, economist at Zillow. The portal publishes the Zillow Home Value Index, based on Zestimates.
“Annual home value appreciation continues to fall, but recent trends suggest that a reacceleration is likely in the coming months,” says Speakman, who adds that the change in course is expected “only marginally,” and to “remain near [the] current 4 percent annual growth pace.”
For 2020, the annual appreciation estimates vary, but generally lie in the 2-5 percent range. In one scenario, the Urban Land Institute makes moderate projections: 2.5 percent in 2020 and 3 percent in 2021. Of existing for-sale homes—or preowned stock—the median price is $278,200, up 4.7 percent, according to National Association of REALTORS® numbers. For newly-built properties, it’s steeper, at $328,400, according to Census data.
“Price appreciation for the next 12 months is more in the 3-5 percent range,” Lawrence Yun, chief economist at NAR, says. “I don’t see any risk of a price decline.”
“I expect prices to go flat—1-2 percent, even 3 percent, is going to become the norm,” Johnson says.
Earlier this month, CoreLogic’s Home Price Index—different from the Case-Shiller report—found overvalued prices in 37 percent of the largest markets in the nation.
“Right now, we’re expecting home price growth to recover somewhat from the 16-month cooling period it just went through and to settle out around 4-5 percent year-over-year by next fall,” McLaughlin says.
What about the price-pusher—supply? According to Census figures from September, construction fell month-over-month more than 9 percent, but still came out 1.6 percent ahead of the previous year. The ULI is predicting 850,000 single-family starts this year, 810,000 single-family starts in 2020 and 800,000 single-family starts in 2021, compared to 875,800 last year. Across all housing types, NAR is expecting 2 percent more starts in 2019 and 10.6 percent more starts in 2020.
“Builders are steadily building more, but even a 50 percent increase from current construction activity, the market will be able to absorb,” Yun says. “We need a strong ramp-up in construction, but, more likely, it will be more of a steady increase. There will still be a housing shortage at the mid-price [tier] and lower.”
That’s not to say builder confidence is lacking, or there aren’t affordable homes being built. In fact, the National Association of Home Builders confidence reading surged this week.
“Home builders appear to be increasingly focused on entry-level homes, as the median square footage of new single-family construction fell 4.3 percent in the second quarter,” Doug Duncan, chief economist at Fannie Mae, pointed out in a separate update.
Then there’s interest rates, which are currently at lows, and aren’t expected to move much in 2020. In a forecast from the ULI, the 10-year Treasury rate—correlated to fixed mortgage rates—rises in 2020 and 2021, but only slightly.
“There’s just no evidence that there’s going to be upward pressure on rates any time soon,” Johnson says. “As long as we have a positive slope to the yield curve, as long as we have a stable economy, I don’t see many interest rate increases.”
Beracha confirms rates “may go half a percent in either direction, but I don’t see them [rising substantially] in the next year,” adding “the [Federal Reserve] decreased interest rates twice in the last couple of months—I don’t think we’re going to see much more of that.”
“Barring a significant, positive development in the U.S.-China trade discussions, Brexit, or other significant current geopolitical dilemma, I imagine that mortgage rates will remain near their current, multi-year lows” in the near term, says Speakman.
Buoyed by low rates, 2020 home sales should tick up, according to Yun. As of last month, NAR forecasted 0.6 percent more home sales in 2019 and 3.4 percent more sales in 2020.
“There will be a small, incremental increase in home sales, and the reasoning for that is the magical power of low mortgage rates,” Yun says. “I do believe that we will continue to have favorable mortgage rates for the next 12 months.”
On the economic front, the fundamentals remain solid, but there’s looming unknowns. According to the latest pulse-check by Zillow, economists forecasted a recession in the third quarter of 2020, and believe it’ll curb demand in the housing market.
“The labor market remains in good shape but has recently shown signs of slowing,” says Speakman. “Should job creation slow markedly and/or consumers become bearish on the state of the economy, it’s likely that home-buying would slow.”
In related research, realtor.com® found that if a recession struck, homebuyers may postpone purchasing.
As for a 2008-like meltdown?
“A weaker U.S. economy and/or a rise in rates could easily trigger a bumpy housing market,” Johnson says. “However, there’s no evidence that a slump to the magnitude of last decade’s housing crash is imminent, even under the worst-case scenario.”
“In other cycles, we saw an excess of construction and supply,” Beracha says. “Our cycle is nine years in the making—longer than the average seven—and during those nine years, we did not produce excess supply. Interest rates are low, and we have a strong job market and very low unemployment.”
Still, according to Yun, it’s critical for home-building to pick up.
“One comforting factor that can neutralize an economic downturn is if home-building activity occurs,” Yun says. “When home-building increases, generally, we don’t have an economic recession.”
The Last WordHowever 2020 shakes out, 63 percent of buyers feel optimistic, according to NAR’s latest quarterly survey. What’s more, 52 percent believe the economy’s on firm footing.
So, will 2020 be a buyer’s market, or a seller’s market?
“I would consider 2020 to be a balanced market,” Beracha says. “Prices remain quite high and inventory is still a bit tight, so buyers can take advantage of lower interest rates and sellers can take advantage of the fact that inventory is still low.”
“We anticipate 2020 to continue to shift away from a seller’s market, especially if GDP slows and inventory ticks up,” McLaughlin says.
“At affordable prices, it will still be a seller’s market, and appreciation will be stronger at the lower price points,” Yun says. “The upper-end price projection—as people digest the deductibility of mortgage interest and state and local taxes, including property taxes—is less optimistic. On the lower end, demand will remain solid, given that we have low rates and job creation is continuing.”
“People buy homes because they’re both an investment good and a consumption good,” Johnson says. “Right now, if you find the property and bargain aggressively, and you get a good price, you should move there—and stay for a long period of time.”
Suzanne De Vita is RISMedia’s online news editor. Email her your real estate news ideas at sdevita@rismedia.com.

Monday, October 7, 2019

The nation’s low interest rate environment spurred an increase in pending home sales in August, as the index rose 1.6%, according to the National Association of Realtors.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, increased to 107.3 in August, rising from July’s 105.6.

Contract signings compared to a year earlier climbed 2.5% from last month’s increase, NAR said.

The index revealed that activity in all four major regions improved as the PHSI in the Northeast, South, Midwest and West increased year over year.

“It is very encouraging that buyers are responding to exceptionally low interest rates,” said Lawrence Yun, NAR chief economist. “The notable sales slump in the West region over recent years appears to be over. Rising demand will reaccelerate home price appreciation in the absence of more supply.”

These are the PHSI changes for each region:
  • Northeast: Increased 1.4 % to 94.3 and is 0.7% higher than August 2018
  • Midwest: Increased 0.6% to 101.7 and is 0.2% higher than August 2018
  • South: Increased 1.4% to 124.4 and is 1.8% higher than August 2018
  • West: Increased 3.1% to 96.4 and is 8% higher than August 2018

Yun says that moving forward, historically low interest rates will affect economic growth, especially home buying.

“With interest rates expected to remain low, home sales are forecasted to rise in the coming months and into 2020,” Yun said. “Unfortunately, so far in 2019, new home construction is down 2.0%. The hope is that housing starts quickly move into higher gear to meet the higher demand. Moreover, broader economic growth will strengthen from increased housing activity.”

The latest Housing Market Index, produced by the National Association of Home Buildersand Wells Fargo, offers the housing market some hope.
In September, the index measuring current sales conditions rose from 73 to 75 points, highlighting improvements in the market.

Low interest rates and solid demand continue to fuel builders’ sentiments even as they continue to grapple with ongoing supply-side challenges that hinder housing affordability, including a shortage of lots and labor,” NAHB Chairman Greg Ugalde said in a statement.

But while sentiment may be improving, Robert Dietz, NAHB’s Chief Economist, warns that builders are still concerned about the nation’s economic security. According to the index, expectations over the next six months fell a single point to 70 in August.

“Solid household formations and attractive mortgage rates are contributing to a positive builder outlook,” NAHB Chief Economist Robert Dietz said. “However, builders are expressing growing concerns regarding uncertainty stemming from the trade dispute with China. NAHB’s Home Building Geography Index indicates that the slowdown in the manufacturing sector is holding back home construction in some parts of the nation, although there is growth in rural and exurban areas.”