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Appraisals • Market Trends • September 27, 2023

Is it 2007 again in the housing market?

by Suzanne Volkman

Ryan Lundquist has some great things to consider in his blog post (linked below). Here are the meat and potatoes of what he had to say:

“Is it 2007 again? There’s so much talk online about today’s housing market being like 2007, but what are the stats showing? Today I want to walk through three parts of the market. I suspect many locations are experiencing the same trend as Sacramento too.

It’s a strange market today with low volume and low supply. It feels a little amateurish to call it weird, but that’s a pretty good description.

THREE WAYS TO COMPARE 2007 & 2023

1) INVENTORY IS NOT BUILDING LIKE BEFORE

One thing that is REALLY different today is inventory is not building like it did in 2007. Supply has actually been subdued in today’s market as sellers have pulled back from listing their homes, and that’s the opposite of what we saw between 2005 and 2008. In fact, when prices peaked in August 2005, housing supply literally tripled in one year in Sacramento. Prices weren’t all that impacted the first year, but in the background, there was a tidal wave of supply building. Look, I’m not trying to sugarcoat today’s market, but we have a different vibe today where supply is not showing 2007 vibes. Granted, this doesn’t mean the market is healthy today. I’m just saying it’s way different.

Housing supply is actually lower today than one year ago. New listings are down 34% from last year and 44% from the pre-2020 normal. Basically, we’re missing 7,700 new listings in the entire region compared to last year and 11,900 from the pre-2020 normal. I don’t have stats for 2007, but do you see what was happening in 2008? Yikes.

2) LOW VOLUME TODAY FEELS LIKE 2007:

One part of the housing market that feels really similar to the previous housing crash is the number of sales happening (volume). In 2005 prices peaked, and while prices weren’t down all that much the first year, the real change was seen in volume falling off a cliff. In real estate it’s easy to obsess over prices, but the real trend is often seen with volume. We’ve basically had the lowest volume we’ve seen through August, so today really does feel like 2007 in terms of volume.

3) COMPETITION DOESN’T SMELL LIKE 2007

The stunning part about today’s market is how competitive it is in the midst of some of the worst volume ever. This is why I often call today a hybrid market. It’s like 2007 volume and 2020 competition gave birth to 2023.

CLOSING THOUGHTS:

First of all, what happened last time isn’t the new template for every future housing correction, so even though I’m ironically writing a post about 2007, let’s remember that 2007 isn’t the new formula for every future downward cycle. With that said, today’s housing market feels like 2007 with volume, but it’s an entirely different beast with low supply, intense competition, and very few foreclosures. Ultimately, it’s not accurate to call this 2007 because it feels so different. Every time someone says it’s 2007, a puppy dies. Okay, that’s probably not true, but we do need to let stats form our narrative.

Though like 2007, we’re in a place where it would be healthy for prices to come down so more buyers and sellers can participate. The reality is sellers sitting back this year has so far catered toward keeping prices higher rather than fostering more much-needed affordability. I know, to some people it sounds like real estate sin for me to say this, but we have an affordability problem, and it’s not a healthy dynamic to see higher prices with lower volume. That’s not good for buyers, sellers, or real estate professionals.

What’s going to happen ahead? It’s impossible to predict the future with certainty since we’ve not had a market like this before. We have ideas for how long sellers might sit out, but the truth is nobody knows for sure. What happens with rates is a huge factor, and rates have persisted to be stubbornly high. No matter what, it’s important to not minimize the struggle of affordability today. In a traditional system low supply can help keep prices higher, but we’re not in a traditional market today, so over time we’re going to find out which is the more meaningful force. Affordability or low supply.

For now, we have a market that feels very stuck with a good chunk of sellers and buyers on the sidelines. It won’t be this way forever, but we seem poised to continue to see low volume and low supply until something changes the trajectory of the trend (rates, economic pain, etc…).

It does feel like 2007 in some ways, but in other ways it’s just so different.”

 

Check out the full article linked below to view all of his amazing charts and graphs!

 

Is it 2007 again in the housing market?

 

Uncategorized • September 22, 2023

Should You Make a Large Home Downpayment?

by Suzanne Volkman

Depending on the loan type, you can qualify for a mortgage with a downpayment that is as low as 3% of your home’s final purchase price. And for some loans — such as a VA loan or USDA mortgage — you don’t need any downpayment at all. But what if you can afford a larger downpayment? It might make financial sense to come up with more dollars.

Low downpayment options

You have plenty of options if you want a  loan that requires a low downpayment. If your FICO credit score is at least 580, you can qualify for an FHA loan with a downpayment of just 3.5% of your home’s purchase price. And for some conventional loans, you’ll need a downpayment of just 3% of the home’s sale price.

That’s good if you don’t have a lot of extra dollars to devote to a downpayment. A downpayment of 10% for a home costing $350,000 comes out to $35,000. But with a downpayment of 3%, you’d need just $10,500, a substantial difference.

But what if you do have extra money to devote to a downpayment? Sometimes it makes more financial sense to put up a bigger downpayment than required.

Avoid PMI

When does it make sense to come up with more downpayment dollars? If you are taking out a conventional mortgage and you don’t come up with a downpayment of 20% of your home’s purchase price, you’ll need to pay for private mortgage insurance, or PMI.

This type of insurance protects your lender in case you stop making your payments. The price varies depending on the size of your loan and your credit score. But you could end up paying anywhere from about $125 to $350 a month for PMI on a loan of $300,000.

But what happens if you come up with a downpayment of 20%? You won’t need PMI. You’ll have to determine whether the long-term savings of avoiding those monthly payments is worth more than what your scenario is with a smaller downpayment.

Other benefits of a bigger downpayment

Even if you can’t come up with a downpayment of 20%, you’ll still benefit from a larger downpayment if you can afford to make one.

You’re more likely to get a lower interest rate with your mortgage if you provide a larger downpayment. That’s because you’ve already invested more in your home. When you do that, lenders think that you are less likely to stop making your monthly mortgage payments. This makes you a less risky borrower — and one who is worthy of a lower interest rate.

And that lower interest rate is a nice perk. It could save you hundreds of dollars each month throughout the life of your loan.

You’ll also build equity faster with a larger downpayment. Equity is the difference between what you owe on your mortgage and how much your home is worth. If your home is worth $380,000 and you owe $280,000 on your mortgage, you have $100,000 in equity.

You’ll receive an instant equity boost if you put down more money upfront. And having more equity is a positive: You can borrow against your home’s equity in the form of home equity loans or lines of credit and use the money from these products for anything you’d like. You’ll also walk away with more money when you sell your home if you’ve built up more equity.

Does a larger downpayment make sense for you? That depends. You don’t want to spend all your extra money on a downpayment. You’ll also have to pay for your lender’s closing costs, which can run as high as 6% of your loan amount. You’ll want extra money, too, to pay for furnishing your home or any needed repairs. And it’s never a good idea to leave yourself without enough money for an emergency fund.

But if you do have enough money, putting down more when you take out your mortgage could bring financial rewards. Talk with a qualified financial professional who knows your situation and can give you advice tailored to your needs.

 

Written by Don Amalfitano

Selling • September 22, 2023

5 Outdoor Projects That Pay Off the Most

by Suzanne Volkman

What pays off the most when it comes to curb appeal?

Ninety-two percent of REALTORS® recommend that sellers improve their curb appeal before listing their home for sale, according to a survey from the National Association of REALTORS® and the National Association of Landscape Professionals. What pays off the most when it comes to curb appeal? Of course, every project and every market is different, but here’s the estimated cost recovery on the top outdoor remodeling projects identified in the 2023 Remodeling Impact Report. Cost estimates are from landscape pros; cost recovery estimates are from REALTORS®, members of NAR.

1. Standard lawn care service: 217% (percent of value recovered)

  • Project: Complete six standard seasonal applications of fertilizer or weed control on 5,000 square feet of lawn.
  • Cost estimate: $415
  • Estimated cost recovered: $900

2. Landscape maintenance: 104%

  • Project: Mulch, mow, prune shrubs and plant about 60 perennials or annuals.
  • Cost estimate: $4,800
  • Estimated cost recovered: $5,000

3. Outdoor kitchen: 100%

  • Project: Install an inset grill, stainless steel drawers, ice chest sink and concrete countertop with veneered masonry stone.
  • Cost estimate: $15,000
  • Estimated cost recovered: $15,000

4. Overall landscape upgrade: 100%

  • Project: Install a front walkway of natural flagstone; add two stone planters, five flowering shrubs and a 15-foot-tall tree.
  • Cost estimate: $9,000
  • Estimated cost recovered: $9,000

5. New patio: 95%

  • Project: Install a backyard 18-by-16-foot concrete paver patio.
  • Cost estimate: $10,500
  • Estimated cost recovered: $10,000
Buying • September 21, 2023

6 Ways Your Buyers Can Save on Their Mortgage

by Suzanne Volkman

With rates around 7%, home buyers are feeling the financial squeeze. Here are a few secrets to ensuring that you get the best deal that you can on your loan.

Although mortgage rates, which have been hovering near 7% over the last few weeks, are expected to fall in the second half of the year, home buyers have adjusted to higher borrowing costs and home prices. Still, affordability is a big issue: 60% of U.S. cities saw gains in home prices in the second quarter, according to data from the National Association of REALTORS®. And the median monthly mortgage payment for a typical existing single-family home is $2,234, factoring in this week’s 7.09% average mortgage rate.

However, there are ways buyers can save on their mortgage. Buyers are eligible for the lowest mortgage rates from lenders when they come with a stellar credit score, particularly above 740. But there are additional ways to save, including:

1. Shop around for a loan. Gathering multiple mortgage rate quotes from lenders can pay off. A recent study from LendingTree(link is external) shows the average borrower could save $84,301 over the life of their loan by shopping around for a mortgage. Broken down further, borrowers could save $2,810 a year and $234 a month.

Borrowers who receive two rate offers from different lenders could save an average of $35,377 over the life of their loan, while borrowers who gather more than five offers could save an average of $105,912, the study finds. “Different lenders have different standards and criteria that they look at when deciding who to lend to,” says Jacob Channel, LendingTree’s senior economist. “It’s for that reason that different lenders can offer such drastically different rates to the exact same people.”

When shopping around, says Brandon Snow, executive director of Ally Home, buyers should compare interest rates, terms and additional fees—not just who has the lowest mortgage rate. Also, shop around by gathering quotes from mortgage bankers, regional banks, credit unions and national banks.

2. Negotiate. While 63% of home buyers say they have negotiated for home price reductions, only 39% of buyers say they’ve tried to negotiate the initial APR or refinance rate on their most recent home purchase. Yet, those who’ve tried to negotiate on their mortgage have found an 80% success rate, according to a separate study from LendingTree.

Thirty-eight percent of buyers negotiated on closing costs, which are the fees lenders charge to process a loan. “Different lenders often have varying levels of flexibility in negotiations, but it never hurts to ask,” Snow says. “Leveraging quotes from competitive lenders may show your lender that you are seriously considering your options but are open to negotiation to keep your business there.”

3. Buy down the mortgage points. Borrowers may want to consider buying down points—typically done in 0.25 increments—to reduce the interest rate on a loan. But that means paying more upfront at closing. Mortgage points are the fees borrowers pay a mortgage lender to reduce the interest rate on the loan, which then lowers the overall interest paid on the mortgage.

Bankrate uses the following example of how this might work: A borrower has a 7% mortgage rate on a $320,000 loan, with a monthly payment of $2,129. The borrower purchases points to get the mortgage rate to 6.5%. That costs him or her $6,400 at closing and lowers the monthly mortgage payment to $2,022—a $107 difference.

Financial experts caution that when buying down points, it can take time to recoup the savings. Lenders can help calculate the break-even point to see how long you’d need to stay in the home to make it worth paying the upfront costs.

4. Ask for discounts. If you are already an existing customer who banks with a lender, ask about “relationship discounts,” Snow suggests. For example, some lenders like Chase Bank may waive a loan processing fee if you have a minimum amount of existing money deposited or in an investment account. U.S. Bank offers up to 0.25% off the loan amount in closing costs, up to $1,000, for those who have a personal checking account with them.

5. Be aware of float-down policies. Mortgage rates can fluctuate over the course of the closing timeline, and every swing can make a difference. “Many lenders will also allow you to adjust your rate downward if there are significant changes in the market rate while you are in the process,” Snow says. “Proactively asking about float-down and renegotiation policies upfront will ensure you know the requirements to get your rate reduced from the get-go and protect you from paying a higher rate than you should.”

6. Consider the mortgage terms. The 30-year fixed-rate mortgage is the most commonly used type of loan, but some lenders may offer even longer terms, like 40-year mortgages. Borrowers may be able to save around $100 on their monthly mortgage payment by extending their mortgage term—but that means they’ll pay significantly more in interest over the life of the loan. In May, the Federal Housing Administration announced a 40-year option for borrowers experiencing a financial hardship who need a loan modification.

Lenders may be able to offer other types of loans to help borrowers lower their monthly payments. For example, adjustable-rate mortgages have been surging in popularity as 30-year rates edge higher. ARMs accounted for nearly 19% of single-family mortgages in the spring, although they remain below pre-2008 levels, according to CoreLogic data. ARMs tend to offer a lower introductory interest rate, but they will reset to current rates in five or seven years, depending on the terms.

For home buyers who may be trying to “time” the market and snag the best interest rates, real estate has adopted a new mantra: “Marry the house; date the rate.” As the phrase implies, buyers may be better off committing to the home they love long-term, regardless of current rates, and refinancing later should interest rates ever drop.

Written by: Melissa Dittmann Tracey

Buying • Market Trends • September 7, 2023

Assuming a loan.. Is it worth it?

by Suzanne Volkman

Local Appraiser, Ryan Lundquist, has recently posted his thoughts on this matter. Read on to see what he thinks about the topic of assuming a loan in today’s real estate market climate.

 

 By  

“Assumable loans are eye candy in today’s housing market. The idea of taking over somebody’s 2.5% loan sounds amazing, right? It’s technically possible on paper for some loan types, but it’s challenging to pull off in the real world. Yet, if mortgage rates remain high, this is something we’re likely going to hear more about, so it’s important to know the process.

IT’S RARE TO ASSUME A LOAN (FHA, VA, & USDA)

I’m not a loan officer, so I won’t step out of bounds here, but it’s basically possible to assume an FHA, VA, or USDA loan from a current owner if the loan servicer is cooperative and everything else lines up between the buyer and seller. Conventional loans are NOT assumable, but I’ll defer to loan officers if there are rare cases where that can happen (seriously, talk to a loan officer). In short, it has to be the perfect storm of the right buyer, right seller, and right loan servicer to make an assumption happen.

UPDATED NOTE: A few people have said current FHA loans are not assumable, but everything I’m reading online from lenders and HUD directly seems to show FHA loans are assumable. My advice? Talk to a loan professional and the loan servicer. I defer to them.

HOW MANY LOCAL LOANS CAN BE ASSUMED?

Here’s a snapshot of FHA & VA transactions since 2009 in the Sacramento region. Of course, some of these properties have sold again already, but this is a general picture of how many potential assumable loans are out there. The real prize for a buyer would be purchasing from a seller who bought during the past few years when rates were really low (though many of those owners are sitting instead of selling).

WHAT PERCENTAGE OF THE MARKET IS ASSUMABLE?

Okay, but what percentage of the market has sold in recent years with loans that could theoretically be assumed in the future? In 2020 nearly one out of every five homes sold with FHA or VA, and since then it’s been about 15% of loans.

A LOCAL LISTING EXAMPLE

Here’s a property in West Sacramento that was purchased in 2020 with FHA financing, and the listing advertises, “Seller offering a possible loan assumption at 2.75% as part of purchase price.”

BIGGEST HURDLES TO ASSUMING A LOAN:

1) Paying the difference: The buyer has to pay the difference between the loan amount and the equity the owner has. This means if a property has a $400,000 loan, but it’s worth $525,000, there is a big chunk of change for the buyer to bring to the table. Some loan officers tell me it’s possible to get a HELOC (Home Equity Line of Credit) to pay the difference, but I’ll defer to lenders on that. All that said, it seems like buyers putting 20% down are often decent candidates to assume a loan because they can absorb the difference between the loan and value in many cases.

2) It can take a long time: I mentioned loan assumptions in a Facebook thread a few days ago. I heard about one local loan assumption taking FIVE MONTHS, another taking three months, or a quick one at 30 days. Look, maybe this process can be seamless once in a while, but can you imagine being in contract for five months without a guarantee of success? That is going to take a very particular seller and buyer, right? Moreover, if there are multiple offers, the seller is unlikely to choose the buyer wanting to assume the loan. This reminds us market conditions can either foster more or less loan assumptions.

3) The loan servicer isn’t always cooperative:

There are situations where the loan servicer simply denies the loan assumption. One real estate agent told me loan assumptions are basically a buzzword because they’re difficult to pull off. Sounds about right.

THIS MARKET REQUIRES CREATIVITY:

There is no sugarcoating assuming a loan as an easy process, but I think this market requires creativity. My advice is to understand the process, advertise the idea of an assumption if the seller is on board, talk to the loan servicer prior to listing, and help educate everyone on the process. Oh, and realize this is still a unicorn event that requires the perfect storm of everything coming together. This isn’t for the faint of heart, but it will work in some situations.

CLOSING ADVICE: 

My advice? Don’t put much hope in loan assumptions, but know how it all works so you can at least be aware of options. Like I said, it’s going to take the right buyer, right seller, informed real estate professionals, and a cooperative lender. When loan assumptions do happen locally, try to find out how the deal came together. The truth is buyers are starving to afford the market, and assuming a seller’s loan is going to help a small sliver of buyers out there. Ultimately, if rates remain high, this is going to be something more people are thinking about, and it’s possible we could see more loan assumptions ahead for that reason. If the market gets more competitive though, loan assumptions are the last thing sellers are going to target. 

I hope this was helpful. Thanks for being here.”

 

Follow Ryan for more information about the Sacramento Valley Real Estate Market. He can be found across all social media platforms, as well as at his blog: https://sacramentoappraisalblog.com/

Buying • August 29, 2023

Navigating New Home Purchases: 5 Tips to Consider

by Suzanne Volkman

Are you among those feeling frustrated due to the limited housing options available in the current market? If so, you might be eyeing the prospect of buying a new home directly from a builder. The appeal is clear: a brand-new, tailored-to-you home without the complications of bidding wars and costly renovations. However, as enticing as it might seem, there are important factors to weigh before taking the plunge into this new home venture.

**1. The Shift Towards New Homes**

In neighborhoods where homeowners are reluctant to give up their low-interest-rate mortgages and put their homes on the market, new homes have gained popularity. Recent trends show that new-home sales account for about 15% to 20% of all home sales, and in some markets, this number could even reach 30%, according to Lawrence Yun, chief economist at the National Association of Realtors. The gap in prices between new and existing homes has been narrowing, with the median sales price of new homes sold in June 2023 at $415,400, slightly above the $410,200 for existing homes. This makes the choice between new and existing homes less financially daunting than it has been in two decades.

**2. Incentives and Customization**

Builders, buoyed by the gains made during the pandemic, are now offering buyers incentives to sweeten the deal. These incentives can range from reduced mortgage rates to covering closing costs. Additionally, brand-new homes often come with customization options, allowing you to tailor certain aspects to your preferences. For example, Hayley and Tyler Dupee found their dream home in Ladson, S.C., enticed by incentives like a smart-home security system and window blinds. This level of personalization can be a deciding factor for many buyers.

**3. Consideration for Upgrades**

While moving into an existing home might seem faster, it’s crucial to weigh the potential expensive repairs and upgrades you could face. New homes often come with a higher price tag and the possibility of move-in delays due to construction timelines. However, this delay might be worth it for the added customization and potential future resale value. When considering upgrades, focus on essential systems like plumbing and electrical, as well as high-return areas such as the kitchen. Small choices, like opting for a slightly smaller kitchen cabinet, can add up to substantial savings without compromising quality.

**4. Making Informed Choices**

Navigating the world of new home construction requires careful reading and understanding of contracts. Builders often have the flexibility to substitute materials if needed, so be sure to read the fine print and understand where you have a say. Don’t assume that everything in the model home is included – ask about the appliances and finishes that come with your home. It’s also important to have extra funds set aside, as builders may adjust prices based on material costs. A contingency budget of around 10% to 15% is advisable.

**5. Preparing for Imperfections**

Despite the allure of a brand-new home, it’s wise not to expect perfection. While many new homes come with warranties that cover various issues, it’s crucial to conduct inspections at multiple stages of the building process. Pre-drywall inspections can catch problems that might not be apparent after the home is finished. Consider hiring an independent inspector to thoroughly assess the property. Investing between $280 and $400 for inspections can save you from dealing with issues like humidity, improperly installed features, or structural defects down the line.

Let’s work together to turn your dream of a new home into a reality. Reach out to me before your next visit to a new home builder, and let’s embark on this exciting journey with confidence. Your ideal new home is just around the corner, and I’m here to help you find it.

Buying • August 29, 2023

Finding Your Dream Home: Turnkey vs. Fixer-Upper – What’s Trending in the Real Estate Market

by Suzanne Volkman

Are you on the hunt for your dream home? The real estate landscape is evolving, and it seems like today’s buyers have a clear preference – they’re looking for homes that are move-in ready. I’m going to dive into the latest trends in the housing market, exploring why more and more buyers are leaning towards fully renovated properties rather than tackling major renovation projects. Let’s break it down:

**1. Buyers’ New Mindset: Turnkey Over Renovation**

Picture this: you’re eager to buy a house, but the thought of hiring a contractor and dealing with additional costs and headaches makes you think twice. Well, you’re not alone. Real estate agents have noticed a shift in buyer preferences. Many buyers are now prioritizing homes that don’t require major renovations. They want to move in without the stress of fixing up the place.

**2. The Numbers Game: Offers and Sales**

Numbers never lie. A year ago, sellers were receiving around six offers on average. But now, that number has dropped to about three offers. Why the change? Well, one major factor is the rise in mortgage rates. High mortgage rates are making buyers cautious about investing in homes that need renovations.

**3. The Cost Equation: Rates and Property Prices**

Let’s talk dollars and cents. Renovations have always been a bit of a gamble. But now, they’re becoming even costlier. Home loan and construction loan rates have increased, adding to the high property prices. This combination is creating a wider gap in how quickly renovated and non-renovated homes sell.

**4. Slow and Steady: The Market Impact**

Properties in need of repair are spending more time on the market. This means sellers who want a quick sale might need to invest in some improvements before listing their homes. Buyers are becoming pickier, and homes that need upgrades are taking longer to sell.

**5. The Desire for Simplicity: Renovation Appetite Decreases**

Whether it’s a main property or a second home, buyers are less interested in renovation projects. Take Tommy Byrd, for example. He’s looking for a vacation house but prefers one that’s already renovated. Managing renovations from another state isn’t something he’s excited about.

**6. Picky Buyers: More Choices for Upgrades**

Buyers have more power to choose. If a home needs upgrades like new floors, kitchens, bathrooms, or a fresh coat of paint, buyers can afford to be choosy. They’re not as willing to overlook these details as they might have been in the past.

**7. The Changing Market Landscape**

Market dynamics are shifting. Homes are staying on the market longer, signaling that they might be overpriced or in need of significant repairs. Most buyers simply can’t afford major renovations right now, given the current economic climate. (If you are in this boat, let’s talk.. I have an amazing suggestion to get you the repairs/upgrades your home needs to get it sold for a higher price!)

**8. The Remodeling Market Booms**

Interestingly, the desire for move-in ready homes hasn’t put a damper on the remodeling market. Home improvement and repair projects are on the rise, projected to hit $484 billion in 2023. Existing homeowners are keen on upgrading without giving up their low mortgage rates.

**9. Market Variances: The Bid Wars and Scarcity**

Different markets have different stories to tell. In some areas, there are so few homes for sale that buyers might have to settle for a fixer-upper. In other regions, bidding wars are still happening, and unrenovated homes can fetch top dollar – it just might take a bit longer.

The real estate landscape is changing, and buyers are steering towards turnkey properties that spare them from major renovations. From rising mortgage rates to a desire for simplicity, these factors are shaping the way people view their future homes. Whether you’re planning to buy or sell, understanding these trends can make all the difference in your real estate journey. Let me help you navigate this market whether you are looking to buy or sell. I am here to assist you in making your real estate dreams come true.

Market Trends • August 28, 2023

Barbara Corcoran’s Take on the Current Real Estate Market

by Suzanne Volkman

Thinking about buying a home can be tough right now. Some people want to wait for lower interest rates, but here’s the problem – if you wait too long, home prices might go up. That’s where Barbara Corcoran, a real estate expert and “Shark Tank” star, comes in. She recently shared her thoughts on what’s coming up in the housing market.

What Barbara Corcoran Thinks: What You Need to Know

The housing market is facing a tricky situation, which Corcoran calls a “bottleneck.” This means sellers are worried about higher interest rates, so they’re not moving. On the other side, buyers are being careful because they think they’re not getting enough value for their money. “Sellers don’t want to move from their apartment or their home because they don’t want to take on higher interest rates,” she said, “and buyers are too afraid [to buy] because they are getting less house [for the price]. So you’ve got a standoff going on. But things are changing.”

Corcoran believes there will be a major swing in the real estate market as soon as interest rates drop.

“The minute those interest rates come down, all hell’s going to break loose and the prices are going to go through the roof,” she said. “[Right now sellers are] staying put. But they’re not going to stay put if interest rates go down by two points.

“It’s going to be a signal for everybody to come back out and buy like crazy, and the house prices [will likely] go up by 20%,” she said. “We could have COVID [market] all over again.”

Different Places, Different Prices

Corcoran also talks about how home prices are changing in different parts of the country. A recent report said that home prices dropped for the first time in 11 years. But it’s not the same everywhere. In places near the coast, prices are going down because homes are really expensive. But in the Southwest, prices are actually going up. Some cities there saw prices go up by a lot – around 20% – in just half a year. Then there’s South Florida, where prices are still going up. Corcoran says this is because people really like Florida and are willing to pay more.

No Big Crash Coming

Corcoran is pretty sure that we won’t have a big crash like we did in 2008. Back then, things went bad because of problems with mortgages. But this time, people are being smarter with their money and not borrowing too much. So, even though the market might be uncertain, Corcoran doesn’t think it’ll be as bad as before. “People [have] their hard-earned cash in the market — people aren’t overleveraged,” she said. “There’s really no comparison to now compared to what came before.”

Homes vs. Businesses

Corcoran also looks at homes and commercial buildings (like offices) as two separate things. She says that just because one is doing well doesn’t mean the other is. Right now, homes are doing okay, but commercial spaces are struggling. Many people don’t want to buy commercial properties because they’re not sure if they’ll make money. This might take a long time to get better.

Bold Prediction: Home Prices Going Up

Corcoran stands by her idea that home prices won’t go down. She even thinks they could go up by 15% when interest rates on loans go down. She’s feeling positive because there aren’t many homes for sale, loan rates are low, and lots of people want to buy.

As things keep changing in the real estate world, Barbara Corcoran’s ideas can help both buyers and sellers. Her experience helps us understand how the market works and what we can expect.

Market Trends • August 17, 2023

5 Reasons the Housing Market is Reversing

by Suzanne Volkman

In 2023, the housing market is undergoing a peculiar phenomenon — a reverse crash. The rise in mortgage rates, surprisingly, hasn’t instigated a significant decrease in home prices. This perplexing trend can be attributed to a complex interplay of economic, demographic, and market determinants.

Today, a significant proportion of homeowners — 92% of those with mortgages — enjoy rates below 6%, with a lucky 62% relishing rates under 4%. As mortgage rates climb, these homeowners are opting to hold onto their properties, rather than sell and risk locking in a higher mortgage rate.

Consequently, this shift in homeowner behavior has reduced the volume of home sales. This is corroborated by a recent study, revealing that approximately 27% of homeowners would be motivated to sell if rates descend to 5% or lower.

Furthermore, nearly half of the homeowners surveyed would consider listing their properties if rates were to plunge to 4%.

Despite these evolving dynamics, home prices have seen only a nominal drop. The manager of the S&P Case Shiller Index predicted a peak-to-trough decline of around 5%, leaving 2% yet to be recuperated.

This forecast is supported by Goldman Sachs, who foresee a 2.2% dip in 2023 and do not anticipate any substantial recovery until interest rates start their downward journey.

In contrast, Fannie Mae, the mortgage giant, revised their outlook last week, projecting a 1.2% deflation in national home prices in 2023, which is predicted to be followed by an extra 2.2% contraction in 2024.

However, Zillow challenges this prediction, suggesting that 2023 will wrap up with home prices 5% greater than their starting point.

This projection was revised upwards from their original forecast of a 3.9% increment, thanks to the rapid pace of sales — a staggering 15% decrease in pending home sales implies a faster rate of purchase than listing.

Analysts have identified five crucial elements contributing to the unexpected tenacity of housing prices:
  1. Limited Inventory: The enticingly low interest rates have convinced many homeowners to retain their properties unless selling becomes indispensable.
  2. Construction Lag: Challenges like regulatory hurdles, disrupted supply chains, and heightened costs are stifling builders from catching up with the soaring demand.
  3. New Buyer Demographics: Millennials, representing 43% of the housing market, are influencing the market with their specific preferences – affordability, roomier homes, opportunities for DIY renovations, and cost-effective locations, according to BankRate.
  4. Banks’ Conservative Lending: If financial institutions decide to relax their lending standards, a surge of buyers could push home values even higher.
  5. Scarcity of Foreclosures: Presently, foreclosure is usually an option only when a homeowner’s debt surpasses the home’s value, which is currently not a widespread issue.
These forces, collectively, are driving the peculiar ‘reverse crash’ of the 2023 housing market. Rather than witnessing the conventional collapse in home values, we’re experiencing an intriguing resilience in prices. As we continue to observe these trends, the longevity and broader implications of this housing market anomaly remain to be seen.
Real Estate • August 17, 2023

The Downsides of Moving to a Cheaper City

by Suzanne Volkman

The pandemic led to a shift away from expensive cities as people sought financial relief in more affordable suburbs. However, this migration trend has seen a reversal. Many individuals who moved for cost savings have returned after realizing that cheaper living comes with its own challenges.

  1. Economic Opportunity vs. Affordable Living:
    While relocating to save on living costs seems appealing, the economic trade-off is complex. Moving to a cheaper city often means fewer opportunities for financial growth due to limited economic diversity. Economic diversity fosters various industries and a thriving job market, impacting long-term career prospects.
  2. Potential Price Escalation in Emerging Cities:
    Some budget-friendly cities offer a high quality of life and strong economies. However, their popularity can lead to rising costs. What starts as a financial win may not remain consistently affordable as a city’s cost of living evolves.
  3. Fluctuations in Property Values:
    Choosing a cheaper city may result in slower property value appreciation. Property values in these areas might not increase as much over time compared to pricier urban centers, affecting long-term investments.
  4. Considerations with Low Taxes:
    Lower taxes in cheaper cities often mean fewer services. It’s important to evaluate the impact of property taxes and the quality of services, especially for families. Limited educational resources can impact children’s academic development.
  5. Healthcare Considerations:
    Cheaper cities might offer limited healthcare options and lower-quality medical facilities. Access to quality healthcare should be a priority, particularly for those with significant healthcare needs.
  6. Balancing Culture and Quality of Life:
    Relocating might mean sacrificing access to cultural events and entertainment enjoyed in pricier cities. A lack of diverse amenities can impact overall satisfaction and make forming new social networks challenging.
  7. The Importance of Social Networks:
    Moving to a cheaper city often involves leaving behind established relationships. Social connections contribute to well-being, and rebuilding these networks can be difficult in a new location.

Relocating to a cheaper city offers potential cost savings, but it’s essential to consider the broader implications. As a real estate agent, I’m here to help you navigate these considerations and make an informed decision that aligns with your long-term goals. Contact me for expert guidance in your relocation journey.

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