buying • selling • May 15, 2023

Homeowners Have Incredible Equity To Leverage Right Now

by Rick Lemmons

Homeowners Have Incredible Equity To Leverage Right Now

Even though home prices have moderated over the last year, many homeowners still have an incredible amount of equity. But what is equity? In the simplest terms, equity is the difference between the market value of your home and the amount you owe on your mortgage. The National Association of Realtors (NAR) explains how your equity grows over time:

“Housing wealth (home equity or net worth) gains are built up through price appreciation and by paying off the mortgage.”

How Your Equity Can Help You Achieve Your Goals

The equity you build up over the years can be used to your advantage when you sell your current house and buy your next home. If you no longer have the space you need, it might be time to move into a larger home. Or it’s possible you have too much space and need something smaller. No matter the situation, your equity can be a powerful tool you can use to help you make a move in today’s market. That’s because it may be some (if not all) of what you need for your down payment on your next home.

And how much equity you have may surprise you. A recent survey from Realtor.com finds many homeowners today estimate they’ve built up a significant amount of equity:

The latest data from CoreLogic helps solidify why homeowners are feeling so good about the equity they’ve likely gained over time. As Selma Hepp, Chief Economist for CoreLogic, says:

“While equity gains contracted in late 2022 due to home price declines in some regions, U.S. homeowners on average still have about $270,000 in equity, nearly $90,000 more than they had at the onset of the pandemic.”

How a Skilled Real Estate Agent Can Help

If you’re looking to leverage your equity to boost your buying power in today’s market, having a trusted agent by your side makes a difference.

A real estate professional can help you better understand the value of your home, so you’ll get a clearer picture of how much equity you likely have. As a recent article from Bankrate says:

“Hiring a skilled real estate agent can give you a realistic estimate of home prices in your area and how to price your current home. Using that figure, you can calculate how much equity you have and what your net proceeds will look like, so you can apply that money toward the down payment and closing costs of your new home.”

Having a solid understanding of your equity is key when it comes to making decisions about buying or selling your home. A skilled agent can help you navigate the often-complicated process of selling your house and ensure the transaction goes smoothly.

Bottom Line

Today, many homeowners are sitting on a substantial amount of equity, and you may be one of them. Let’s connect so we can estimate how much equity you have and plan how you can use it toward the purchase of your next home.

buying • selling • May 11, 2023

The Best Time To Sell Your House Is When Others Aren’t Selling

by Rick Lemmons

The Best Time To Sell Your House Is When Others Aren’t Selling

If you’re thinking about selling your house, you should know the number of homes for sale right now is low. That’s because, this season, there are fewer sellers listing their houses for sale than the norm.

Looking back at every April since 2017, the only year when fewer sellers listed their homes was in April 2020, when the pandemic hit and stalled the housing market (shown in red in the graph below). In more typical years, roughly 500,000 sellers add their homes to the market in April. This year, we saw fewer than 400,000 sellers entering the market in April (see graph below):

While there are a number of factors contributing to this trend, one thing keeping inventory low right now is that some homeowners are reluctant to move when the mortgage rate they have on their current house is lower than the one they could get today on their next house. It’s called rate lock.

As a recent survey from Realtor.com explains, 56% of people who are planning to sell in the next 12 months say they’re waiting for rates to come down.

While this wait-and-see approach is right for some sellers, it also creates an opening for more eager sellers to jump in now.

If your current house truly doesn’t fit your needs anymore and you’re ready to move, don’t miss this chance to stand out. When fewer sellers are putting their homes up for sale, buyers will have fewer options, so you set yourself up to get the most eyes possible on your house. That’s why your house could see multiple offers as buyers compete over the limited supply of homes for sale – especially if you price it right.

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Inventory levels are still at historic lows . . . Consequently, multiple offers are returning on a good number of properties.”

Bottom Line

If you’re ready to sell now, beat the competition before it comes onto the market. If you do, your house should stand out and could get multiple offers. Let’s connect to get you market ready.

buying • selling • May 10, 2023

The Impact of Inflation on Mortgage Rates

by Rick Lemmons

The Impact of Inflation on Mortgage Rates

If you’re reading headlines about inflation or mortgage rates, you may see something about the recent decision from the Federal Reserve (the Fed). But what does it mean for you, the housing market, and your plans to buy a home? Here’s what you need to know.

Inflation and the Housing Market

While the Fed’s working hard to lower inflation, the latest data shows that, while the number has improved some, the inflation rate is still higher than the target (2%). That played a role in the Fed’s decision to raise the Federal Funds Rate last week. As Bankrate explains:

“Keeping its inflation-fighting streak alive, the Federal Reserve has raised interest rates for the 10th time in 10 meetings . . . The hikes aimed to cool an economy that was on fire after rebounding from the coronavirus recession of 2020.”

While the Fed’s actions don’t directly dictate what happens with mortgage rates, their decisions do have an impact and contributed to the intentional cooldown in the housing market last year.

How This Impacts You

During times of high inflation, your everyday expenses go up. That means you’ve likely felt the pinch at the gas pump and in the grocery store. By raising the Federal Funds Rate, the Fed is actively trying to lower inflation. If the Fed is successful, it could also ultimately lead to lower mortgage rates and better homebuying affordability for you. That’s because when inflation is high, mortgage rates tend to be high. But, as inflation cools, experts say mortgage rates will likely fall.

Where Experts Think Mortgage Rates and Inflation Will Go from Here

Moving forward, both inflation and mortgage rates will continue to impact the housing market. And as Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“Mortgage rates are likely to descend lower later in the year as the consumer price inflation calms down . . .”

Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), explains:

“We continue to expect that mortgage rates will drift down over the course of the year as the economy slows . . .”

While there’s no way to say with certainty where mortgage rates will go from here, the experts think mortgage rates will trend down this year if inflation comes down too. To stay informed on the latest insights, connect with a trusted real estate advisor. They keep their pulse on what’s happening today and help you understand what the experts are projecting and how it could impact your homeownership plans.

Bottom Line

Don’t let headlines about the latest decision from the Fed confuse you. Where mortgage rates go from here depends on what happens with inflation. If inflation cools, mortgage rates should tick down as a result. Let’s connect so you have expert insights on housing market changes and what they mean for you.

Uncategorized • May 9, 2023

Why Today’s Housing Market Is Not About To Crash

by Rick Lemmons

Why Today’s Housing Market Is Not About To Crash

There’s been some concern lately that the housing market is headed for a crash. And given some of the affordability challenges in the housing market, along with a lot of recession talk in the media, it’s easy enough to understand why that worry has come up.

But the data clearly shows today’s market is very different than it was before the housing crash in 2008. Rest assured, this isn’t a repeat of what happened back then. Here’s why.

It’s Harder To Get a Loan Now

It was much easier to get a home loan during the lead-up to the 2008 housing crisis than it is today. Back then, banks had different lending standards, making it easy for just about anyone to qualify for a home loan or refinance an existing one. As a result, lending institutions took on much greater risk in both the person and the mortgage products offered. That led to mass defaults, foreclosures, and falling prices.

Things are different today as purchasers face increasingly higher standards from mortgage companies. The graph below uses data from the Mortgage Bankers Association (MBA) to show this difference. The lower the number, the harder it is to get a mortgage. The higher the number, the easier it is.

Unemployment Recovered Faster This Time

While the pandemic caused unemployment to spike over the last couple of years, the jobless rate has already recovered back to pre-pandemic levels (see the blue line in the graph below). Things were different during the Great Recession as a large number of people stayed unemployed for a much longer period of time (see the red in the graph below):

Here’s how the quick job recovery this time helps the housing market. Because so many people are employed today, there’s less risk of homeowners facing hardship and defaulting on their loans. This helps put today’s housing market on stronger footing and reduces the risk of more foreclosures coming onto the market.

There Are Far Fewer Homes for Sale Today

There were also too many homes for sale during the housing crisis (many of which were short sales and foreclosures), and that caused prices to fall dramatically. Today, there’s a shortage of inventory available overall, primarily due to years of underbuilding homes.

The graph below uses data from the National Association of Realtors (NAR) and the Federal Reserve to show how the months’ supply of homes available now compares to the crash. Today, unsold inventory sits at just a 2.6-months’ supply. There just isn’t enough inventory on the market for home prices to come crashing down like they did in 2008.

Equity Levels Are Near Record Highs

That low inventory of homes for sale helped keep upward pressure on home prices over the course of the pandemic. As a result, homeowners today have near-record amounts of equity (see graph below):

And, that equity puts them in a much stronger position compared to the Great Recession. Molly Boesel, Principal Economist at CoreLogic, explains:

“Most homeowners are well positioned to weather a shallow recession. More than a decade of home price increases has given homeowners record amounts of equity, which protects them from foreclosure should they fall behind on their mortgage payments.”

Bottom Line

The graphs above should ease any fears you may have that today’s housing market is headed for a crash. The most current data clearly shows that today’s market is nothing like it was last time.

Uncategorized • April 28, 2023

Why Today’s Foreclosure Numbers Are Nothing Like 2008

by Rick Lemmons

Why Today’s Foreclosure Numbers Are Nothing Like 2008

You’ve likely seen headlines about the number of foreclosures climbing in today’s housing market. That may leave you with a few questions, especially if you’re thinking about buying a house. Understanding what they really mean is mission-critical if you want to know the truth about what’s happening today.

According to a recent report from ATTOM, a property data provider, foreclosure filings are up 6% compared to the previous quarter and 22% since one year ago. As media headlines call attention to this increase, reporting on just the number could actually generate worry and may even make you think twice about buying a home for fear that prices could crash. The reality is, while increasing, the data shows a foreclosure crisis is not where the market is headed.

Let’s look at the latest information with context so we can see how this compares to previous years.

It Isn’t the Dramatic Increase Headlines Would Have You Believe

In recent years, the number of foreclosures has been down to record lows. That’s because, in 2020 and 2021, the forbearance program and other relief options for homeowners helped millions of homeowners stay in their homes, allowing them to get back on their feet during a very challenging period. And with home values rising at the same time, many homeowners who may have found themselves facing foreclosure under other circumstances were able to leverage their equity and sell their houses rather than face foreclosure. Moving forward, equity will continue to be a factor that can help keep people from going into foreclosure.

As the government’s moratorium came to an end, there was an expected rise in foreclosures. But just because foreclosures are up doesn’t mean the housing market is in trouble. As Clare Trapasso, Executive News Editor at Realtor.com, says:

“There’s no reason to panic, at least not yet. Foreclosure filings began ticking up . . . after the federal foreclosure moratorium ended. The moratorium was enacted in the early days of COVID-19, when millions of Americans lost their jobs, to prevent a tsunami of homeowners losing their properties. So some of these proceedings would have taken place during the pandemic but got delayed due to the moratorium. This is a bit of a catch-up.”

Basically, there’s not a sudden flood of foreclosures coming. Instead, some of the increase is due to the delayed activity explained above while more is from economic conditions. As Rob Barber, CEO of ATTOM, explains:

“This unfortunate trend can be attributed to a variety of factors, such as rising unemployment rates, foreclosure filings making their way through the pipeline after two years of government intervention, and other ongoing economic challenges. However, with many homeowners still having significant home equity, that may help in keeping increased levels of foreclosure activity at bay.”

To further paint the picture of just how different the situation is now compared to the housing crash, take a look at the graph below. It shows foreclosure activity has been lower since the crash by looking at properties with a foreclosure filing going all the way back to 2005.

While foreclosures are climbing, it’s clear foreclosure activity now is nothing like it was during the housing crisis. In addition to all of the factors mentioned above, that’s also largely because buyers today are more qualified and less likely to default on their loans.

Today, foreclosures are far below the record-high number that was reported when the housing market crashed.

Bottom Line

Right now, putting the data into context is more important than ever. While the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst, and that won’t lead to a crash in home prices.

buying • selling • April 26, 2023

The Three Factors Affecting Home Affordability Today

by Rick Lemmons

The Three Factors Affecting Home Affordability Today

There’s been a lot of focus on higher mortgage rates and how they’re creating affordability challenges for today’s homebuyers. It’s true that rates climbed dramatically since the record-low we saw during the pandemic. But home affordability is based on more than just mortgage rates – it’s determined by a combination of mortgage rates, home prices, and wages.

Considering how each one of these factors is changing gives you the full picture of home affordability today. Here’s the latest.

1. Mortgage Rates

While mortgage rates are higher than they were a year ago, they’ve hovered primarily between 6% and 7% for nearly eight months now (see graph below):

As the graph shows, mortgage rates have experienced some volatility during that time. And even a small change in mortgage rates impacts your purchasing power. That’s why it’s so important to lean on your team of real estate professionals for expert advice to stay up to date on what’s happening in the market. While it’s hard to project where mortgage rates will go from here, many experts agree they’ll likely continue to remain around 6%-7% in the immediate future.

2. Home Prices

Over the past few years, home prices appreciated rapidly as the record-low mortgage rates we saw during the pandemic led to a surge in buyer demand. The heightened buyer demand happened while the supply of homes for sale was at record lows, and that imbalance put upward pressure on home prices. However, today’s higher mortgage rates have slowed down price appreciation.

And, the truth is, home price appreciation varies by market. Some areas are seeing slight declines while others have prices that are climbing. As Selma Hepp, Chief Economist at CoreLogic, explains:

“The divergence in home price changes across the U.S. reflects a tale of two housing markets. Declines in the West are due to the tech industry slowdown and a severe lack of affordability after decades of undersupply. The consistent gains in the Southeast and South reflect strong job markets, in-migration patterns and relative affordability due to new home construction.”

To find out what’s happening with prices in your local market, reach out to a trusted real estate agent.

3. Wages

The most positive factor in affordability right now is rising income. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time:

Higher wages improve affordability because they reduce the percentage of your income it takes to pay your mortgage since you don’t have to put as much of your paycheck toward your monthly housing cost.

Home affordability comes down to a combination of rates, prices, and wages. If you have questions or want to learn more, reach out to a real estate professional who can explain what’s happening locally and how these factors work together.

Bottom Line

If you’re planning to buy a home, knowing the key factors that impact affordability is important so you can make an informed decision. To stay up to date on the latest on each, let’s connect today.

buying • selling • April 25, 2023

What Are the Experts Saying About the Spring Housing Market?

by Rick Lemmons

What Are the Experts Saying About the Spring Housing Market?

The housing market’s been going through a lot of change lately, and there’s been uncertainty surrounding what will happen this spring. You may be wondering if more homes will go on the market, what’s next with home prices and mortgage rates, or what the best advice is for someone in your position right now.

Here’s what industry experts are saying right now about the spring housing market and what it means for you:

**Selma Hepp, Chief Economist, CoreLogic:**

“We see more competition among buyers . . . Housing supply also tends to grow during the spring months. And this is also the time of year when relatively more migration happens, as people graduate and move elsewhere looking for jobs.”

**Greg McBride, Chief Financial Analyst, Bankrate:**

“I don’t expect big moves in prices in the span of a month, but like the flower buds of spring, the housing market is showing signs of improvement. A pick up in activity with inventory still low does bode well for home prices.”

**Rick Sharga, Founder and CEO, CJ Patrick Company:**

“If you can find a home you love and can afford at today’s prices, don’t wait. Home prices in most of the country are unlikely to crash, and mortgage rates will only come down very gradually if they decline at all this year.”

**Jeff Tucker, Senior Economist, Zillow:**

“The market is still much friendlier this spring for buyers who can overcome affordability hurdles, but buyers are going to see more competition than they might expect because there are not many homes on the market to go around. New listings are increasing, which they almost always do this time of year, but not nearly as quickly as usual.”

Bottom Line

If you’re thinking about selling your house, this spring’s a great time to do so while inventory is still so low. And if you’re in a good position to buy, lean on your team of expert advisors for the best advice. Whatever your plans, let’s connect to make sure you’re able to navigate the spring housing market with confidence.

buying • April 24, 2023

The Power of Pre-Approval

by Rick Lemmons

The Power of Pre-Approval

If you’re buying a home this spring, today’s housing market can feel like a challenge. With so few homes on the market right now, plus higher mortgage rates, it’s essential to have a firm grasp on your homebuying budget. You’ll also need a sense of determination to find the right house and act quickly when you go to put in an offer. One thing you can do to help you prepare is to get pre-approved.

To understand why it’s such an important step, you need to know what pre-approval is. As part of the process, a lender looks at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand how much money you can borrow.

Freddie Mac explains it like this:

“A pre-approval is an indication from your lender that they are willing to lend you a certain amount of money to buy your future home. . . . Keep in mind that the loan amount in the pre-approval letter is the lender’s maximum offer. Ultimately, you should only borrow an amount you are comfortable repaying.”

Basically, pre-approval gives you critical information about the homebuying process that’ll help you understand how much you may be able to borrow so you have a stronger grasp of your options. And with higher mortgage rates impacting affordability for many buyers today, a solid understanding of your numbers is even more important.

Pre-Approval Helps Show You’re a Serious Buyer

That’s not the only thing pre-approval can do. Another added benefit is it can help a seller feel more confident in your offer because it shows you’re serious about buying their house. And, with sellers seeing a slight increase in the number of offers again this spring, making a strong offer when you find the perfect house is key.

As a recent article from the Wall Street Journal (WSJ) says:

“If you plan to use a mortgage for your home purchase, preapproval should be among the first steps in your search process. Not only can getting preapproved help you zero in on the right price range, but it can give you a leg up on other buyers, too.”

Bottom Line

Getting pre-approved is an important first step when you’re buying a home. It lets you know what you can borrow for your loan and shows sellers you’re serious. Connect with a local real estate professional and a trusted lender so you have the tools you need to purchase a home in today’s market.

Uncategorized • April 21, 2023

Why You May Want an Energy-Efficient Home

by Rick Lemmons

Why You May Want an Energy-Efficient Home [INFOGRAPHIC]

Some Highlights

Since inflation is increasing the cost of goods and services, it may make sense to look for an energy-efficient home.
Energy prices have increased over the last year, so look for energy-efficient features in your home search.
If you’re looking to buy a home this year, let’s connect so you have a partner to help you consider which features are most important to you.

buying • selling • April 20, 2023

What’s the Difference Between a Home Inspection and an Appraisal?

by Rick Lemmons

What’s the Difference Between a Home Inspection and an Appraisal?

If you’re planning to buy a home, an inspection is an important step in the process. It assesses the condition of the home before you finalize the transaction. It’s also a different step in the process from an appraisal, which is a professional evaluation of the market value of the home you’d like to buy. In most cases, an appraisal is ordered by the lender to confirm or verify the value of the home prior to lending a buyer money for the purchase. Here’s the breakdown of each one and why they’re both important when buying a home.

Home Inspection

Here’s the key difference between an inspection and an appraisal. Bankrate says:

“In short, while an appraisal helps you understand a home’s value, inspections help you understand a home’s condition.”

The home inspection is a way to determine the current state, safety, and condition of the home before you finalize the sale. If anything is questionable in the inspection process – like the age of the roof, the state of the HVAC system, or just about anything else – you as a buyer have the option to discuss and negotiate any potential issues or repairs with the seller before the transaction is final. Your real estate agent is a key expert to help you through this part of the process.

Home Appraisal

The National Association of Realtors (NAR) explains:

“A home purchase is typically the largest investment someone will make. Protect yourself by getting your investment appraised! An appraiser will observe the property, analyze the data, and report their findings to their client. For the typical home purchase transaction, the lender usually orders the appraisal to assist in the lender’s decision to provide funds for a mortgage.”

When you apply for a mortgage, an unbiased appraisal (which is required by the lender) is the best way to confirm the value of the home based on the sale price. Regardless of what you’re willing to pay for a house, if you’ll be using a mortgage to fund your purchase, the appraisal will help make sure the bank doesn’t loan you more than what the home is worth.

This is especially critical in today’s sellers’ market where low inventory is driving an increase in bidding wars, which can push home prices upward. When sellers are in a strong position like this, they tend to believe they can set whatever price they want for their house under the assumption that competing buyers will be willing to pay more.

However, the lender will only allow the buyer to borrow based on the value of the home. This is what helps keep home prices in check. If there’s ever any confusion or discrepancy between the appraisal and the sale price, your trusted real estate professional will help you navigate any additional negotiations in the buying process.

Bottom Line

The inspection and the appraisal are critical steps when buying a home, and you don’t need to manage them by yourself. Let’s connect today so you have the expert guidance you need to navigate the entire homebuying process.

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