Want to Make a Move? Homeowner Equity is Growing Year-Over-Year

Want to Make a Move? Homeowner Equity is Growing Year-Over-Year | MyKCM

One of the bright spots of the 2020 real estate market is the growth in equity homeowners are experiencing across the country. According to the recently released Homeowner Equity Insights Report from CoreLogic, in nearly every state there was a year-over-year first-quarter equity increase, averaging out to a 6.5% overall gain.

The report notes:

“CoreLogic analysis shows U.S. homeowners with mortgages (roughly 63% of all properties) have seen their equity increase by a total of nearly $590 billion since the first quarter of 2019, an increase of 6.5%, year over year.” (See map below):

Want to Make a Move? Homeowner Equity is Growing Year-Over-Year | MyKCMThis means that In the first quarter of 2020, the average homeowner gained approximately $9,600 in equity during the past year.”

That’s a huge win for homeowners, especially for those looking to sell their houses and make a move this summer. Having equity to re-invest in your next home is a major force that can make moving a reality, especially while buyers are expressing such a high demand for homes to purchase.

Frank Martell, President and CEO of CoreLogic addresses the potential long-term outlook and how homeowners will likely fare much more positively through the current recession than many did during the last one:

“Many homeowners will experience a recession during their lifetime, and it is reasonable to compare the current recession to those in the past. But the comparison is not apples to apples — every recession is different. Primary drivers of the Great Recession were an overbuilt housing stock, risky mortgages and the collapse of home prices, creating a massive increase in negative equity that proved difficult to recover from. Today’s housing environment has low vacancy and delinquency rates and a large home equity cushion.”

Bottom Line

Now is a great time to consider leveraging your equity and making a move, especially while buyer interest is high. Let’s connect to explore your equity position and make your next move a reality.

Jim Armstrong – Broker/REALTOR
Armstrong Field Real Estate
978-394-6736
jarmstrong@armstrongfield.com

How is COVID-19 affecting the real estate market?

What Impact Might COVID-19 Have on Home Values?

What Impact Might COVID-19 Have on Home Values? | MyKCM

A big challenge facing the housing industry is determining what impact the current pandemic may have on home values. Some buyers are hoping for major price reductions because the health crisis is straining the economy.

The price of any item, however, is determined by supply and demand, which is how many items are available in relation to how many consumers want to buy that item.

In residential real estate, the measurement used to decipher that ratio is called months supply of inventory. A normal market would have 6-7 months of inventory. Anything over seven months would be considered a buyers’ market, with downward pressure on prices. Anything under six months would indicate a sellers’ market, which would put upward pressure on prices.

Going into March of this year, the supply stood at three months – a strong seller’s market. While buyer demand has decreased rather dramatically during the pandemic, the number of homes on the market has also decreased. The recently released Existing Home Sales Report from the National Association of Realtors (NAR) revealed we currently have 3.4 months of inventory. This means homes should maintain their value during the pandemic.

This information is consistent with the research completed by John Burns Real Estate Consulting, which recently reported:

“Historical analysis showed us that pandemics are usually V-shaped (sharp recessions that recover quickly enough to provide little damage to home prices).”

What are the experts saying?

Here’s a look at what some experts recently reported on the matter:

Ivy Zelman, President, Zelman & Associates

“Supported by our analysis of home price dynamics through cycles and other periods of economic and housing disruption, we expect home price appreciation to decelerate from current levels in 2020, though easily remain in positive territory year over year given the beneficial factors of record-low inventories & a historically-low interest rate environment.”

Freddie Mac

“The fiscal stimulus provided by the CARES Act will mute the impact that the economic shock has on house prices. Additionally, forbearance and foreclosure mitigation programs will limit the fire sale contagion effect on house prices. We forecast house prices to fall 0.5 percentage points over the next four quarters. Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand. Price growth accelerates back towards a long-run trend of between 2 and 3% per year.”

Mark Fleming, Chief Economist, First American

“The housing supply remains at historically low levels, so house price growth is likely to slow, but it’s unlikely to go negative.”

Bottom Line

Even though the economy has been placed on pause, it appears home prices will remain steady throughout the pandemic.

The Redfin Lie?


Redfin’s advertising states that they will list your home for 1%. Sounds like a good deal, doesn’t it? On the face, it does, considering most full service Brokerages usually charge 4-6%. But let’s take a look at what they don’t tell you.

Redfin Lies?

Redfin Lies?

First-hand, the fee a brokerage charges a home seller for the marketing, negotiating and selling of a home is made up of two parts. Using 5% as an example (by law, all commissions are negotiable), this fee is split between the listing brokerage (who represents the seller) and the brokerage representing the buyer. So the listing brokerage only gets part of the total fee.

What Redfin does in their advertising is to only tell you about the the fee that they will receive. The home seller will also have to pay the brokerage who represents the buyer of the property a fee equal to 2% to 3% of the sale price. This means the total fee that the home seller will pay is actually 3% to 4% of the sale price, not 1%.

So how does Redfin get away with this type of deceptive advertising? My guess is because of the wording of their listing contract (though I haven’t actually seen it). Most listing contracts list the total fee that the brokerage charges, and then discloses how much of that fee they will give to the brokerage representing the buyer. So the listing brokerage collects the entire fee due at closing and then cuts a check to the buyer’s brokerage in the amount they are owed. Redfin does not directly pay the buyer’s brokerage, but instead the Seller pays their fee from the proceeds they receive from the sale of their house. I’m guessing Redfin’s listing contract states their fee, and then separately states how much the Seller will have to pay the buyer’s brokerage.

So the actual fee of 3% to 4% that a seller has to pay with Redfin is still a savings over a traditional full-service brokerage, right? Yes, it is, but now let’s look at what you get for that fee.

Redfin operates differently than most real estate Brokerages. Redfin has one agent that services a particular territory, and may handle dozens of listings at a time. But once that agent does the listing paperwork, the seller may rarely see that agent again. Redfin uses different agents to do different jobs such as open houses, showings, attending inspections, etc. Once you get your home under contract you are required to hire an attorney to handle escrow deposits, drafting the purchase and sale agreement, negotiating issues, communicating with the buyer’s lender, etc., all things usually handled by the listing agent with traditional full-service Brokerages. Because the seller has the attorney handle these items, legal fees are typically higher than usual cutting into the savings of the lower listing fee. From the personal experience of myself and my REALTORS, communication with Redfin listing agents during a transaction is difficult at best. I’m not saying all Redfin listing agents are bad at communication, but this has ju been our experience.

Though they claim they claim they are full-service, Redfin does not provide the FULL service that traditional full-service Brokerages give. They don’t provide the personal, one on one service that most Independent REALTORS provide. When listing your home, you should always interview at least 2 different agents and choose the one who you feel will give you the service you are looking for, and one that you know you will be comfortable working with. You should be able to talk with the broker/owner of the company if needed. Choosing the wrong REALTOR and/or brokerage can make selling your home stressful, and more costly that it appears on the surface.

Jim Armstrong

Read Redfin reviews on Consumer Affairs website: https://www.consumeraffairs.com/housing/redfin.html

How do Redfin Agents feel about their company? Not very good according to Glassdoor.com: https://www.glassdoor.com/Reviews/Employee-Review-Redfin-RVW1857897.htm

 

 

 

 

 

Selling Your Home

Selling, a famous salesman once said, is essentially a transfer of feelings.

You love and cherish your home. You want the next owner to fall in love with it, too — through photos, through words, and through the experience of walking through your front door. But, perhaps most, you want to get the price you want.

This isn’t a small task. Selling a home requires work. It requires time. The journey isn’t always easy. There will be frustrations. But when you seal the deal and move on to your next chapter — wow, what a blissful, boss feeling.

At the link below, we preview and link to each step in your journey. We’ll discuss how to know what you want (and what your partner wants if you’re selling together). How to understand the market, and ways to make a plan. And most importantly? How to create relationships with experts and trust them to help you get the job done.
The Everything Guide to Selling Your First Home

Copyright 2019 NATIONAL ASSOCIATION OF REALTORS®

Estimated Values of Homes

armstrongfield.com provides an estimated value on all MLS listings.

If you have ever search one of the many national real estate websites you probably noticed that many times the property has not only the list price, but also an estimated value. The Zestimate provided by Zillow is probably the most well-known one. But how accurate are these “estimators”, or Automated Valuation Models (AVM as they are know in the industry)?

Let’s look at how they arrive at the values they place on homes. All AVM’s pull information from public records such as assessor’s records, which in itself, is not known for its accuracy. Some of the better ones (like the one REALTORS use call RPR) also pull data from MLS, registry of deeds and other sources. This information gets put through a proprietary algorithm that sorts and calculates the property’s value, weighing some factors more than others. These algorithms are tightly held equations that vary from each other depending on the company, and are constantly being tweaked to hopefully increase the accuracy.

How accurate are AVM’s? Zillow posted on their website that their Zestimates for the Boston area are off 5% or more of the sale price 47% of the time. They are off by more than 20% of the sale price about 10% of the time. It’s scary to think that people who are selling (or thinking about selling) their home base their asking or list price on these.

So what good are AVM’s if they are so inaccurate. Well, they offer a good starting place for someone who is performing a market valuation. REALTORS create what is called a Comparable Market Analysis (or CMA). They find similar properties that have sold and compare the subject property to them. It starts off similar to the Automated Valuation Model except they handpick the comparable properties. Next, they make adjustments for the square footage, # of baths/bedrooms, whether or not it has a pool, garage, central AC and other amenities, and the condition of the property. There are many other factors that go into the CMA – upgrades, exact location, etc. The AVM’s can’t come close to the valuation accuracy that a REALTOR can provide because the software has not seen the inside of the house, doesn’t know the condition or any number of other factors that influence market value.

So enjoy AVM’s or “Estimated Values” but don’t take them too seriously. They are a good way to watch trends in home values over the long term.

Questions? Comments?

Jim Armstrong

If you would like an accurate valuation of your home, go to:
https://www.armstrongfield.com/app/instantevaluation/template/armstrong/

Where are home prices heading?

Where are home prices heading?

Market prices for homes are controlled by several factors:

  • The supply of homes listed for sale (on the market)
  • The number of home buyers looking for homes
  • The mortgage interest rate
  • The general economy
  • Buyer & Seller attitudes

Where are home prices heading

Let’s look at each of these factors.

Supply of homes for sale (or inventory, as we in the business call it).

A “normal” or neutral real estate market has 5-6 months worth of inventory. That is, it would take that period of time to sell all the homes on the market if no other homes were listed during that same time frame. Under 5 months of inventory and it’s considered a buyer’s market, and over 6 months of inventory and it’s a seller’s market. Currently, we have less than 2 months worth of inventory

Number of buyers looking for homes

As the number of people looking for homes increases, the demand goes up. If you combine a large number of buyers with a low inventory, the demand is very high. When this happens sellers start receiving multiple offers on their properties and buyers start going over asking price in order to beat out their competition. This drives up sale prices and in turn, new home sellers start to list their properties higher.

You take the inventory of homes for sale and combine it with the number of people who want to buy a home, and you have the basic Supply & Demand law of economics.

But there are other factors that can influence the real estate market.

The record low mortgage interest rates we have seen during the last couple of years made owning a home affordable for many more people than in the past. Now that interest rates are climbing, the payments on a home go up. That makes a home less affordable and thus drives down the price.

The general economy affects home prices because if a potential buyer doesn’t feel confident about taking on a $1,500+ per month 30-year mortgage, (s)he is probably going to hold off until the comfort level returns. In a down economy, people are worried about losing their jobs, and they don’t want to add to their debt load.

All of these factors can affect one region of the country but not another because of local economic factors.

The #1 Reason to List Your House – NOW!

 

The National Association of Realtors (NAR) released the results of their latest Existing Home Sales Report which revealed that sales rose 0.7% month-over-month, but remain 1.5% lower than they were a year ago. Some may look at these numbers and think that now is not a good time to sell their house, but in fact, the opposite is true.

The national slowdown in sales is directly tied to a lack of inventory available for the buyers who are out in the market looking for their dream homes! The inventory of homes for sale has fallen year-over-year for the last 28 months and has had an upward impact on home prices.

Read the rest of the article here:
http://www.simplifyingthemarket.com/en/2017/10/25/the-1-reason-to-list-your-house-now/?a=40880-a4030ecc48da1008339ebad0efc105f2