The Mortgage Process: What You Need To Know [INFOGRAPHIC]
The Main Reason to Use a Real Estate Professional when Selling Your House
Every homeowner hopes to accomplish five goals when selling their home:
- Sell it for the best price
- Sell it within a predetermined time
- Sell it with the least amount of hassles
- Close on the sale the same day they move into their new home
The fifth reason is the most obvious and the most important:
- They want to make sure it sells.
In order to dramatically increase the chances that the house sells, a homeowner should list with a real estate professional in their market. Why? Because agents have access to the vast majority of the available buyers!!
According to the National Association of Realtors’ (NAR) recently released 2016 Home Buyer and Seller Generational Trends Report, 87% of all buyers purchased their home through a real estate agent or broker. And more that 8 out of 10 buyers in every age group used an agent (see chart below).
Bottom Line
If you want your home sold, the best way is to go where the buyers are. The NAR study revealed that the vast majority of purchasers will use an agent when they buy. Meet with a local real estate professional today if you want the best chance of selling.
Gap Between Homeowner’s & Appraiser’s Opinions Widen
In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. One major challenge in such a market is the bank appraisal.
If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.
Every month, Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation in their Home Price Perception Index (HPPI). Here is a chart showing that difference for each of the last 12 months.
The gap between the homeowner vs. appraiser’s opinion had been heading in the right direction (closer to even), until this past month, when the gap widened again to -1.99%.
Bottom Line
Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s meet up so I can guide you through this, and any other, obstacle that may arise.
What If I Wait Until Next Year To Buy A Home?
As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first-time or repeat buyer, you must not be concerned only about price but also about the ‘long term cost’ of the home.
Let us explain.
There are many factors that influence the ‘cost’ of a home. Two of the major ones are the home’s appreciation over time, and the interest rate at which a buyer can borrow the funds necessary to purchase their home. The rate at which these two factors can change is often referred to as “The Cost of Waiting”.
What will happen over the next 12 months?
According to CoreLogic’s latest Home Price Index, prices are expected to rise by 5.5% by this time next year.
Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30-year fixed mortgage rate will appreciate to 4.5% in that same time.
What Does This Mean to a Buyer?
Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:
Yes, Home Prices Are Rising. No, a New Housing Bubble is NOT Forming
We recently reported that home prices are continuing to rise across most of the nation. This has created concern in some pundits that a housing bubble, like we saw ten years ago, is forming again. We want to explain why these concerns are unfounded.
The current increase in home values can be easily explained by the theory of supply and demand. Right now, the number of families looking to purchase a home is greater than the supply of homes on the market.
Here is a chart that explains how the months’ supply of housing inventory impacts home values:
According to the latest Existing Home Sales Report from the National Association of Realtors, there is currently a four-month supply of inventory. That puts us in the blue section of the above graphic. Home prices should be appreciating.
The difference in 2006…
A decade ago, the demand for housing was artificially boosted by lending standards that were far too lenient. Today, the strength of the demand for housing is legitimate, as lending standards are nowhere near what they were a decade ago.
For proof of this, let’s look at a graph of the Mortgage Bankers’ Association’s Mortgage Credit Availability Index:
The higher the number, the easier it was to get a mortgage. We can see that from June 2005 to June 2007, mortgage standards were much more lenient than they have been over the last nine years.
Bottom Line
Today’s price increases, unlike those a decade ago, are the result of qualified buyer demand exceeding the current inventory of homes available for sale. Once the supply increases, prices will level out.
Housing Market To “Spring Forward” This Year
Just like our clocks this weekend in the majority of the country, the housing market will soon “spring forward!” Similar to tension in a spring, the lack of inventory available for sale in the market right now is what is holding back the market.
Many potential sellers believe that waiting until Spring is in their best interest, and traditionally they would have been right.
Buyer demand has seasonality to it, which usually falls off in the winter months, especially in areas of the country impacted by arctic temperatures and conditions.
That hasn’t happened this year.
Demand for housing has remained strong as mortgage rates have remained near historic lows.
The National Association of REALTORS (NAR) recently reported that the top 10 dates sellers listed their homes in 2015 all fell in April, May or June.
Those who act quickly and list now could benefit greatly from additional exposure to buyers prior to a flood of more competition coming to market in the next few months.
Bottom Line
If you are planning on selling your home in 2016, let’s meet up to evaluate the opportunities in our market.
Further Proof This Isn’t a Housing Bubble
Two weeks ago, we posted a blog which explained that current increases in home prices were the result of the well-known concept of supply & demand and should not lead to conversations of a new housing bubble. Today, we want to look at home prices as compared to current incomes.
Happy Thanksgiving!
“If you are really thankful, what do you do? – YOU SHARE!”
Listen… Always
“The most basic of all human needs is the need to understand and be understood. The best way to understand people is to listen to them.”
Be Kind… Always.
