Buying • Real Estate • September 30, 2022

How to Move Past Student Debt — and Into a Home

by Suzanne Volkman

You want to buy a house. But you’re worried you won’t qualify for a mortgage because of your student loan debt. You’re not alone. Half of non-homeowners (51%) say student loan debt is delaying them from buying a home, according to a survey from the National Association of REALTORS^®. That number jumps to 60% for millennials.

The numbers tell an ugly story of a generation paying for its education long after graduation. As a result, they’re having to make hard life choices for decades. The average public university student borrows $30,000 in student loans to get a bachelor’s degree, according to the Education Data Initiative. The average student loan payment is $460 a month. And nearly 48 million people have student loans.

Student debt is no longer just a first-time home buyer problem, says Cale Iorg, a loan officer at Supreme Lending in Alpharetta, Ga. “We get people in their 40s and 50s who are still paying off student loans. They went back for a master’s degree, or they are parents who cosigned their children’s student loans.”

President Biden provided some relief (not reflected in the previous numbers) when he announced in late August 2022 that he would cancel $10,000 in student loan debt for those earning less than $125,000 per year. The relief includes an additional $10,000 for those who received Pell grants for low-income students.

Before the pandemic, more than 8 million people — one in five borrowers with a payment due — had defaulted on their loans, the “New York Times” reported. But because many of them carried relatively small balances, they’ll now be eligible for loan cancellation.

Student loan payments have been paused since March 2020, but are scheduled to resume in January 2023.

Despite uncertainty about debt cancellation timing and impact, you can get a mortgage while you have student debt. Here are eight tips for making it happen.

#1 Lower Your Debt-to-Income Ratio.

Your debt-to-income ratio, or score, is one of the most impactful numbers on your life since your ACT score. It measures the percentage of your monthly income that goes to pay your debts. You calculate it by adding all your monthly debts – credit card minimums, rent or mortgage, car payments, and, yes, student loan payments. Then, you divide the total by your monthly gross income (take-home pay before taxes and other monthly deductions).

Your debt-to-income ratio should be no more than 45% of your gross monthly income, Iorg says. Many lenders consider the ideal debt-to-income ratio, including a mortgage payment, to be 36% or less. Depending on your credit score, savings, assets, and down payment, lenders may accept higher ratios, according to Bankrate. It depends on the type of loan you’re applying for.

You can improve your debt-to-income ratio three ways: Make more money, spend less money, and pay down your debt, Iorg says. “Not everybody can wake up tomorrow and say, ‘Oh, well, I’m going to get a job that pays $4,000 more a month,’” he adds. Sure, there are always side hustles to bring in extra bucks to help you pay down bills. “But the surest way to improve your debt-to-income ratio is to live within your means.”

And pay down those student loans.

#2 Increase Your Credit Score.

Your credit score is the other number that profoundly affects your financial fortune. It’s basically a grade for what kind of a job you do paying your bills. The simplest ways to boost your credit score include paying your bills on time, using less than 30% of the credit limit on your credit cards, and paying off debts. There’s a lot of help out there, including free webinars, to guide you on improving your score. Generally, these tips involve paying off bills and spending less money. Yes, frugality.

#3 Look for Down Payment Assistance.

When you’re paying off student loans, saving for a down payment can be tough. The down payment can range from 3.5% to 20% of the home purchase price. If you don’t have a relative who can dump a chunk of cash on you – known in the mortgage biz as gift money – there’s other help. Down payment assistance programs offer loans or grants that pay the down payment on a house. Some DPA funds can be used toward closing costs, too.

Most DPAs require you to be a first-time home buyer with a credit score of 640 or higher and a moderate source of income. DPAs are usually offered at the local level, and their eligibility rules vary by state, city, or even ZIP code. In Seattle, for instance, you can get up to $55,000 in down payment assistance in the form of a low interest loan, depending on your household size and income. The buyer must pay just 1% down out of pocket, and the DPA pays the rest. In Georgia, a DPA offers loans of $7,500 for most buyers. Teachers, health care providers, active duty service members, and public employees are eligible for $10,000.

#4 Get a Co-Borrower.

Want to instantly improve your chances of getting a mortgage? Put a co-borrower on your mortgage. Their income counts toward the debt-to-income ratio, and their credit history bolsters yours. You’re combining forces to strengthen your financial qualifications, and that can offset the dead weight of your student loan debt.

“Co-borrowers are not uncommon,” Iorg says. “It’s a good way to go for a buyer who just doesn’t have enough money from their monthly income to qualify for a mortgage.” Iorg says the co-borrowers he sees are usually parents, siblings, or grandparents. Most co-borrowers are family members or someone with whom the homeowner has a personal relationship. But lenders don’t require a co-borrower to produce proof they know you or are related to you. They just want proof the co-borrower can pay your mortgage if you don’t.

Remember, a co-borrower will share title on the home. If that’s not your cup of joint ownership, consider a co-signer. Their income will boost your financial profile, but they won’t be a co-owner of the house.

#5 Look into Student Loan Protection Programs.

You could be eligible for loan forgiveness if you’re a teacher, attended a for-profit school that went out of business, or have a total and permanent disability. Here are the programs erasing student debt:

Public Service Loan Forgiveness: This program has been around since 2007 to grant debt relief to teachers, social workers, firefighters, employees of nonprofits, and other public servants. But the Biden administration loosened the rules to make more people eligible. According to the U.S. Department of Education, the PSLF has forgiven $2 billion in student loans and is still going.
Borrower Defense and Closed School Discharge: You may also be eligible for debt relief if you attended a school that turned out to be scamming you. Hello, ITT Tech, DeVry University, and Corinthian Colleges. Thanks to rules under the Biden administration, defrauded students who got only partial debt relief under the Trump administration can now get the rest of their student loans wiped out.
Total and Permanent Disability Discharge: Borrowers with permanent disabilities that prevent them from working can shed their student debts, thanks to changes to an existing program that the Education Department says will help at least 370,000 borrowers drop more than $6.5 billion in student debt.

#6 Get Help from Your Employer to Repay Student Debt.

Some companies are offering student loan repayment assistance as a benefit. Google matches employee payments up to $2,500 a year; Aetna matches up to $2,000 a year with a lifetime cap of $10,000; and Fidelity Investments pays up to $10,000 of an employee’s student loans. Other companies that offer payment assistance include Carvana, Chegg, Hulu, Lockheed Martin, New York Life, and PwC (PricewaterhouseCoopers).

Employer-sponsored student loan repayment may become more common. The Coronavirus Aid, Relief and Economic Security (CARES) Act of 2021 gives a tax break to companies that offer student loan repayment assistance. From now till Dec. 31, 2025, employers can contribute up to $5,250 a year tax-free to an employee for repayment of student loans. So, if your boss gets on board this year, you could get as much as $15,000 of your loans paid off before the program ends.

#7 Lower Your Student Loan Payments.

You can do this in one of two ways:

Opt for an income-based repayment plan for federal student loans. You can apply for loan repayment plans that will lower your monthly payment on a federal student loan based on your income and family size. The basic income-based repayment plan caps your payments at 10% of your discretionary income. It also forgives your remaining loan balance after 20 years of payments. That can go a long way toward lowering monthly debt payments and your debt-to-income ratio.
Refinance your private student loans. This is a good idea if you have private student loans that aren’t eligible for federal loan forgiveness or have variable rates. If you can get a lower interest rate, you can change your life. For example, if you have $30,000 in private student loans with an 8% interest rate, you’ll pay $364 for 10 years. Refinance that to a 15-year loan at 4% interest, and your payment drops by $142 a month. You’ll also save around $3,735 in interest over the life of the loan.

#8 Get a Mortgage Broker Who Will Coach You.

Look for someone who is experienced at working with borrowers who have more student debt than they’d like. Get a broker who will work with you to find DPA programs; steer you through the ins and outs of FHA, conventional, and VA loans ; and help you get your finances in order so you become a better mortgage candidate. Iorg says his office has a credit analyst whose job is to help clients improve their credit scores and debt-to-income ratios.

The Bottom Line

There’s no quick fix to buying a house when you have student loans.

The good news is there’s more public support for student debt forgiveness. Many economists say forgiving student loans, such as the Biden plan for debt cancellation, would put money back into Americans’ pockets. That would boost the economy and encourage the formation of more businesses and households. More businesses means more jobs, and more households means more spending. And spending fuels the U.S. economy.

Recent events have reinforced that changes are the norm for student loan debt and relief. Changes to the PSLF program have made more people and more types of federal loans eligible for forgiveness. Add to that the raft of assistance programs that help renters become first-time home buyers, and you may be able to afford it all: a college education, a mortgage, and a 401(k) contribution. You just may not be able to do it all at once. It will take planning and time.

Uncategorized • September 24, 2022

7 Most Popular Bathroom Upgrades

by Suzanne Volkman

Bathtub with plant next to it

Homeowners are spending more money to spruce up their bathrooms as the pandemic-fueled home renovation boom continues. The national median spend for bathroom renovations jumped nearly 13% year over year to $9,000, according to the 2022 U.S. Houzz Bathroom Trends Study, a survey of more than 2,500 homeowners who are planning or recently completed a bathroom renovation.

“Bathrooms have always been a top room to renovate, and we’re seeing that homeowners—driven both by aesthetic desires and functional necessities—are doubling down on their investment in these private sanctuaries,” says Marine Sargsyan, a staff economist at Houzz, a home improvement website. “While the cost of products and materials has increased due to inflation and supply chain disruptions, renovation activity remains strong, propped up by high home equity and homeowners’ desire to stay put given limited housing supply.”

Homeowners who viewed their bathrooms as “outdated” were most likely to renovate them. The Houzz study uncovered some of the following trends in bathroom remodeling this year:

1. The statement vanity: More than three-quarters of homeowners surveyed upgraded their vanity cabinets during a bathroom renovation. “Homeowners are turning vanities into a focal point as one of the few areas of the bathroom to offer a splash of color,” the survey notes. Three in 10 homeowners chose wood or gray, followed by blue (14%), black (5%) and green (2%). Also, with vanity upgrades, engineered quartz was a top choice as a countertop material (40%), followed by natural stones like quartzite (19%), marble (18%) and granite (16%). As for door styles, shaker continues to dominate, followed by flat- and raised-panel doors. Bar pulls are the most popular vanity door handles.

2. Upgrading home systems: More homeowners are updating behind-the-scenes items in their bathroom remodel. For example, 59% of homeowners said they upgraded their ventilation system when renovating their bathroom; 14% upgraded to radiant heating; and 9% added a tankless water heater. “The increase in upgrades to home systems can add up to some of the highest costs but remains one of the most frequent enhancements to the bathroom this year,” the report notes.

3. All about the transitional: Nearly nine in 10 homeowners surveyed chose to change their bathroom’s style during a renovation. Transitional style has taken a significant lead, followed by modern and contemporary. Transitional styles offer a combination of traditional and modern elements, combining modern fixtures with antiques, for example.

4. White still dominates: White continues to be the most popular color for bathrooms across vanities, countertops and walls. Gray walls are popular both outside and inside the shower, but blue is also gaining traction. One in 10 homeowners selected blue walls outside the shower, the report notes. “Upgraded bathroom elements are gravitating towards solid colors, as multicolored countertops and shower walls have decreased in popularity among homeowners,” according to the Houzz report.

5. Showers remain a priority: When tackling bathroom renovations, homeowners continue to prioritize the shower as a focal point. Increasing the shower size is the second-most popular bathroom upgrade. For homeowners who remove the bathtub, nearly four in five opt to enlarge the shower, making it at least 25% bigger. More homeowners are relocating their showers after having a bathtub removed.

6. Greenery everywhere: More homeowners are adding greenery when renovating their bathrooms. “The overwhelming majority say it adds to the aesthetics of the room, while a smaller majority believe it creates a calming environment,” the report notes. “Practical benefits are also noted among renovating homeowners, including air purification, odor-fighting ability and antibacterial attributes.”

7. The high-tech commode: Nearly two in five homeowners also added high-tech features to their toilets. The report notes significant increases in bidets, self-cleaning elements, heated seats and built-in night lights.

Pricing a Bathroom Renovation

A recent study from House Method, a resource on housing providers, found that 71% of homeowners have built equity in their home through a home renovation over the last year. Bathrooms are one spot owners are targeting for some of the highest returns on investment, according to House Method’s report, Cost of a Bathroom Remodel in 2022. The study found that midrange bathroom remodeling projects have an average ROI rate of 70%, while upscale renovations fetch 60%.

Bathroom remodels can be costly, however. What should homeowners expect to pay? The following charts from House Method show the average costs of popular bathroom renovation projects.

Market Trends • Real Estate • September 21, 2022

Chasing The Ball Down The Road In Real Estate

by Suzanne Volkman

Sellers have been chasing the ball down the road. What I mean is prices have been going down lately, and sellers are trying to find the market through price reductions. I can’t speak for the entire country, but I’d like to talk about what’s happening locally. I’m not writing as a housing bull or bear either, but as a stats guy with the goal of objectivity. Anyway, some thoughts.

A meme to show a guerilla on a bike chasing a girl. The caption reads, "sellers chasing prices."

Expecting to pay less: Before getting to any stats, I wanted to mention that most people I talk to right now are aware that prices have been dipping. Well, besides some unrealistic sellers right now… Haha. Just yesterday I talked with two homeowners who spoke about prices softening as if it was common knowledge. Or someone called a few weeks ago wanting an appraisal very quickly for PMI removal to lock in a higher value before prices dipped. Have you seen offers from Opendoor in the mail lately? They are definitely lower. And let’s not forget actual market stats, which I’ll get to below.

Here is a visual from Len Kiefer to get at what I’m saying. There is an expectation of softer prices ahead. We’ll see what happens of course, but we want to pay attention to the psyche of buyers and sellers right now.

A visual from Len Kiefer to show price growth expectations subsiding

The median price is down 7% so far: The median price has gone down about 7% since May in the Sacramento region and Sacramento County. This is a much bigger change than usual for the time of year since the median price in August is usually down about 2% or so from the height of spring. This isn’t really a shocker though because we saw such a dramatic change with mortgage rates. In short, a sharp change in rates is causing a sharp change in the stats (including prices). But to be fair, this year is a bit awkward since prices crested one month early in May (usually prices peak in June). This means we have one extra month of declines to pad into the stats.

A line chart to show the median by the month from January to December in the Sacramento from 2016 onward.

Seasonal decline or new downward cycle: Is this only a seasonal decline, or is it something bigger? Look, the truth is we need time to see the trend and understand it. For now, we’ve clearly experienced a huge contraction where about 25% of buyers have stepped back from the market. Moreover, we’ve seen sharp price declines for the time of year, so at the least we are in the midst of heightened seasonal declines. Could it be more? Yes. But we need time to understand how the market is going to go. I realize this is frustrating for some people to hear, but let’s remember the future hasn’t happened yet. For now, we are living in the midst of change and uncertainty. Here is something I wrote six months ago to talk about price cycles in case it’s useful.

There is still competition: The market is completely different than it was earlier in the year, but there is still competition. In fact, 25% of sales sold above the original list price last month and 43% of sales in August had more than one offer. These stats are lower than normal actually, but I wanted to mention this because sometimes we hear about softening prices and think literally everything is tanking and selling at a severe discount. It’s a mistake to impose a doom narrative on the market. Remember, there are many stories in real estate, and the story isn’t the same for every seller, buyer, or escrow. In case it’s helpful, here is advice for buyers and sellers in today’s market.

Affordability: The market has taken a beating with affordability, so there are fewer buyers able to play the game right now. There is no such thing as rates doubling and prices remaining the same. The math just doesn’t work.

One last note about home size: Keep in mind some of the price change lately has to do with smaller homes selling. I know the visual below is chaotic, but check out the dark blue line, which represents the average monthly square footage. Normally the size of homes peaks during May or June, and then we see smaller homes sell for the rest of the year. Can you see how when the dark line goes down, the lighter blue lines also go down (average sales price)? This is a good reminder that price change is also about what is being sold. And for the record, I’m not saying the median price is down by 7% due to size. I’m just saying some of the change lately has to do with smaller homes rather than only the market.

A bar chart to show the average sales price in the Sacramento region. There is also a line that shows the average home size each month. The line basically shows there is a rhythm to the market in that larger homes sell in the spring and smaller homes sell for the remainer of the year.

Okay, one last thing about size: During the beginning of the pandemic there was a blatant spike in home size due to a greater focus on larger homes at higher prices. This spike basically peaked one year ago as size has started to normalize. Now let’s keep watching to see what happens to size. Will we see smaller homes more often as first-time buyers flood the market? Will we see fewer sales at the highest prices? To be determined.

Closing thoughts: The market is always moving, and we are in the midst of change right now. Let’s keep watching the trend and being objective about the stats. It’s really easy today to get sucked into sensational narratives, so my advice is to stay grounded in the stats.

Article & Images Courtesy of Ryan Lundquist

Buying • Real Estate • September 21, 2022

Inflation and Interest Rates are Rising, What The Future Looks Like for Housing Market Buyers

by Suzanne Volkman

housing market

Expert Advice for First-Time Home Buyers and Homeowners

We have asked expert financial and real estate bloggers for their advice to help first-time homebuyers and homeowners looking to sell. Here are their thoughts:

1. Focus on How Long You Plan to Own the Home

Greg Wilson, a Chartered Financial Analyst with 22+ years of real estate investing experience, says that buying a house depends on your time horizon, not the market.

He said, “Unless your time horizon is only a few years, go ahead and buy when you are ready to buy. It’s too tough to predict when and if prices will swing one way or another.

Focus on your time horizon’s goals, not near-term storms. It’s also important to remember that the word mortgage translates to “until death.”

Greg concluded by making the point that this is because a property is a long-term commitment, not a commitment to a market cycle.

Greg Wilson at chachingqueen.com

2. Buying a Primary Residence is Not an Investment

Andrew Herrig of Wealthy Nickel distinguishes between buying properties for investment and buying to have a roof over your head.

He said, “As a homeowner and a real estate investor, I have bought and sold dozens of homes over the past 15 years.

With the current market dynamics of rising interest rates and potentially stabilizing or falling prices, investors and homeowners should be cautious in their approach.”

However, Andrew said, “Buying or selling a primary home is rarely a financial decision. Your home is not an investment and should not be treated as such.

As long as you are not overextending your finances to purchase, there is no reason to wait for a “better” market. Similar to trying to time the stock market and buy on the dips, that market may never come.”

Andrew Herrig at wealthynickel.com

3. House Hack for Financial Independence

Max Marvelous, a financial blogger and money expert at Maxmymoney, says that the best way to deal with the uncertainty and economic risk of a mortgage is to get others to contribute to it.

He said, “With housing accounting for more and more of the typical budget, finding creative ways to decrease your housing expense is prudent. House hacking is how many Millennials are lightening their mortgage load each month.”

He explains that house hacking involves finding a home you can live in while simultaneously earning an income from it. Stating, “There are many ways you can go about this:

Buying a duplex and renting out the other side
Renting out individual rooms
Having an in-laws’ quarters

With my first home, I was able to effectively live “rent-free” due to my tenants paying rental income to me each month.

I was able to invest all the money I would be spending on my mortgage. They had affordable housing, and I received semi-passive income, a win-win situation.”

Max Marvelous at maxmymoney.org

4. Use an Escalator Clause to Avoid Overpaying in a Difficult-To-Read Market

Carley Rojas Avila of Home to Havana recommends an escalator clause to avoid overpaying for a home.

With recent interest rate changes changing the cost of buying a house for most first-time homebuyers, some housing markets remain hot, while others are starting to cool.

She states that “Using an escalator clause can be a great way to save money in this new housing market that can be difficult to gauge.

An escalator clause tells sellers how much you’re willing to spend up to, automatically increasing the amount you offer for the house in specified increments up to a specific price.

If the house receives no other or lower bids, you’re not stuck paying an unnecessarily high price for the home.

This can be a great way to make a sensible offer on a home while not overspending in a time when it can be hard to predict the market.”

Carley Rojas Avila at hometohavana.com

5. Focus on Ideal Home, Not Market as Housing Under-Production May Keep Housing Stable

While surging inflation rates and high inflation are causing many would-be homeowners to question their purchase, David Eberhardt of Nature Of Home, feels like it might be the wrong focus.

David states, “A home impacts your quality of living- positively and negatively.

Having a place to live in the right location, with the right features to live fully, can be worth paying a premium (although it has to be within your budget and financial plans).

So, focus on finding the home you want and less on what the markets are doing. Sellers may feel the pressure to sell as the housing market is cooling and prices may dip, but from 2000-2015 there has been a 5.4% under-production of housing, which should help home prices remain strong.”

Davin Eberhardt at natureofhome.com

6. Go for It

Tim Thomas, of timthomas.co recommends home ownership over renting and suggests if an opportunity to buy a house presents itself, buyers should go for it.

Tim states, “The US economy is facing a very uncertain outlook, and inflation is at historic highs. This is a reflection of how things are with the global economy.

Should this uncertainty be a sign of a pending housing market crash? No one can say for sure, but homeownership is preferable to renting, and you’ll always need a roof over your head.

I’m not an accredited advisor, but I would look at the big picture. If you can get a mortgage at the right price, go for it.”

Tim Thomas at Wealthy Living

7. The Best Time to Buy is When You’re Ready for the Commitment.

The writer for Dad Is Fire, a blog dedicated to gaining financial independence and retiring early, says the best time to buy a home is when you are ready for the commitment, whether it is a rental house or a primary residence.

The expert states, “The sooner you buy the home, the sooner you start paying down the mortgage. But only buy a house you can afford to hold for a while.

In the early 2000s, I bought eight homes. Then in 2008, they dropped in value by ~50%. I wasn’t worried about it since I purchased them with the intention of holding 20+ years.

Now I am retired at 43. Could I have retired if I waited a few years and bought when the market dropped? Probably not yet because I might still be paying down the mortgages. But when you are ready to hold for a long time.”

Anonymous at Dadisfire.com

8. Have a Qualified Team

Latoyia Downs, a travel blogger at The Impulse Traveler, thinks the best advice for dealing with this unpredictable market is to be sure that you have an experienced, qualified team.

She states, “Whether you are a first-time homebuyer, looking to invest, or a seller, hire a professional who fully understands the home buying and selling process.

While you may know about the process, the advice and guidance of someone who deals with these situations regularly are invaluable.

With sellers receiving multiple offers and buyers willing to pay well over the asking price, having an experienced real estate agent and an attorney could help you maneuver unexpected situations and save you time, effort, and money in the long run.”

LaToyia at theimpulsetraveler.com

The Housing Market In Summary

The instability of the housing market can be accredited to the increase in unemployment, the high buyer demand compared to home availability, and labor and supply shortages for builders.

Hopefully, this advice can help first-time homebuyers and sellers maneuver the housing market in this unsteady market.

Article Courtesy of Tim Thomas, Image Courtesy of Careerstepup.com

Market Trends • Real Estate • September 12, 2022

US Home-Price Growth Slowed in June

by Suzanne Volkman

Home-price growth in the US decelerated in June as the sales slowdown gripped the market.

A national measure of prices rose 18% year-over-year, smaller than the 19.9% climb in May, the S&P CoreLogic Case-Shiller index showed Tuesday.

The housing market has quickly slowed from its pandemic-era frenzy, with the Case-Shiller figures reflecting the start of the pullback that began to pick up pace in June. Mortgage rates that nearly doubled this year have sidelined buyers, leading sales to drop throughout the US. Goldman Sachs Group Inc. economists said Tuesday in a note that price growth will likely slow sharply over the coming quarters.

“The deceleration in U.S. housing prices that we began to observe several months ago continued in June,” said Craig Lazzara, a managing director at S&P Dow Jones Indices. “It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip.”

The crazy bidding wars of the recent past are receding as sellers become more flexible: 92% of owners who sold their homes in the past year accepted some buyer-friendly terms, according to a new report from Realtor.com.

A measure of prices in 20 US cities increased 18.6% in June, down from the 20.5% gain in May. Tampa, Miami and Dallas posted the highest gains.

The market slowdown has caused some big investors to pull back. Home Partners of America, the single-family landlord owned by Blackstone Inc., will stop buying homes in 38 US cities. The company cited home-price appreciation, local regulations and market demand as some factors in figuring out where it would back away.

“We and Home Partners remain fully committed to expanding access to homeownership and continue to actively purchase homes on behalf of our residents in more than 20 of the highest growth markets in the US,” a Blackstone spokesperson said in an emailed statement. “We are pausing in markets that represent less than 5% of our recent activity.”

The index, which covers more than 27 years of data, is an important measure of the health of the housing market in part because of its breadth of measurements around the country.

Market Trends • September 12, 2022

Economists Have a Strange New Buzzword for the Housing Market That Will Shock Buyers and Sellers

by Suzanne Volkman

This term cropped up most recently in an analysis by Realtor.com economist Jiayi Xu, who notes, “Our weekly data suggests that the U.S. housing market keeps progressing toward a more balanced market.”

Many economists of late have remarked on the market’s more even-keel turn.

But what does a balanced housing market actually look like—and mean—for buyers and sellers?

In a nutshell, “balance” means that the raging seller’s market that’s dominated since the COVID-19 pandemic is slowly shifting—not into full buyer’s market territory, but toward a middle ground that puts buyers and sellers on more even footing.

Here’s what balance looks like—in terms of home prices, number of new listings, and more—so both buyers and sellers can better navigate this new normal of real estate today.

Homes are lingering on the market longer

Over the past two years, the pace of real estate sales has sped up significantly. Nationally, homes are on the market a median 35 days before getting snapped up. But this rush is waning.

For the week ending Aug. 20, properties spent four extra days on the market compared with this time last year.

“For a fourth week in a row, homes are sitting on the market for a longer time than last year,” adds Xu. “As both buyers and sellers adjust to the rebalancing market, expectations shift, reducing the sense of urgency in the market and reinforcing the trend toward longer sale timelines.”

Home sellers are less eager to list

While today’s homebuyers are less gung-ho to sprint to the closing table, home sellers are also dragging their feet to the market. For the week ending Aug. 20, the number of new listings dropped by 12% from a year earlier.

“This week marks a seventh straight week of year-over-year declines in the number of new listings coming up for sale, and a second consecutive week with double-digit declines,” notes Xu.

This newfound reluctance to list not only means buyers have fewer fresh listings to peruse, but it could also throw the market’s rebalancing progress off-kilter.

“This pullback from sellers could slow the speed at which the housing market rebalances,” says Xu. “Buyers looking for more bargaining power may need patience.”

By Judy Dutton

Sep 5, 2022

Market Trends • Real Estate • September 9, 2022

Amid Good News, There’s a Crucial Housing Market Detail We’re All Overlooking

by Suzanne Volkman

Recent real estate headlines are bursting with promising news for homebuyers, heralding a bright new housing market that’s more “balanced” and “buyer-friendly.”

But what this exuberant outlook seems to be missing is a bit more balance itself. Yes, homebuyers have it a little bit better, in some places. But for others, it’s still a war zone—or, at best, a mixed bag—according to the latest statistics highlighted in our weekly column “How’s the Housing Market This Week?”

“Today’s home shoppers are contending with a more buyer-friendly market than last year’s by several measures. However, they also face significant hurdles,” notes Realtor.com® Chief Economist Danielle Hale in her analysis. “While there are more homes available for sale, and there may be more time to make an offer on one, the typical home has a higher price and will cost much more to finance than one year ago.”

Since the numbers never lie, here’s a reality check to help both homebuyers and sellers navigate the highly dynamic world of real estate today.

Home prices are up and down, depending on how you look at it

The latest August data from Realtor.com places the median home price nationwide at $435,000. And, for the week ending Aug. 27, listing prices rose by 13.2% over that same week last year.

“The typical asking price was up from last year by double digits for a 37th week,” says Hale.

But here’s another way to look at: Although prices are up over last year, they’re down compared to last month. In fact, August’s $15,000 drop from July’s median home price of $440,000 is the steepest fall-off seen in the past six years.

“While a seasonal decline in prices is typical in our historical real estate data, this month’s dip is larger than usual from July to August,” says Hale. “Price momentum in the housing market has shifted.”

That bodes well for cash-strapped buyers as we enter the fall market, which is typically the best time to buy a home.

Fewer home sellers are listing—but they may be missing out

For the week ending Aug. 27, the number of new listings on the market dropped by 12% compared to that same week a year earlier. That’s the eighth straight week of declines, and the third consecutive week showing a double-digit drop.

Clearly, sellers are miffed they can no longer call all the shots with desperate buyers—although from a purely objective standpoint, they might be missing the big picture that they’ve still got it pretty good.

“Even though home prices are near record highs and home equity has soared, homeowners appear to be less eager to list homes for sale compared to last year,” says Hale. “Recent survey data shows that while home sellers are in a good position, typically getting their list price and still generally satisfied with the price and other aspects of their home sale, these markers have shifted over the last year. Among the most recent sellers, twice as many had to contend with a buyer request for repairs.”

Homebuyers have more time to make an offer

In August, listings lingered on the market 42 days before getting snapped up. And for the week ending Aug. 27, homes spent an extra five days on the market compared to last year.

In other words, buyers today have more breathing room to close the deal, but still less time than they had back before COVID came along and spurred the market into hyperdrive.

“Homes still spent 22 fewer days on the market compared to the typical August 2017-2019,” points out Hale. “Put simply, today’s shoppers still have weeks less than pre-pandemic shoppers had to consider whether the typical listing is a good fit. But they have a bit more time to make decisions compared to last year, and recent momentum is in their favor.”

Mortgage rates are up

According to Freddie Mac, for the week ending Sept. 1, the average 30-year fixed mortgage rate increased to 5.66%, a steep hike from the previous week’s 5.55%.

In sum, homebuyers will pay dearly to finance a house today. And while many might be tempted to put their home search on hold until interest rates subside, some may be driven to forge ahead, since rents are up, too.

“With rents high and continuing to rise, some home shoppers will remain motivated to navigate the currently shifting housing market,” Hale concludes. “But others have paused their searches, creating some opportunities for those who are pressing on.”

Home Improvement • September 1, 2022

Fences and Other Shared Costs With Neighbors: Who Is Responsible?

by Suzanne Volkman

When it comes to figuring out who is responsible for fences and other shared costs between neighbors, sometimes the legal responsibility depends on your state of residence and its local regulations.

Here’s how to determine if a homeowner or neighbor should assume partial or full responsibility for situations where there is a shared outdoor-related expense.

Review Local Law

A common shared expense between neighbors is having a shared fence. Conflicts can quickly arise between neighbors over who is responsible for the fence’s maintenance, including paying for and making changes to painting, staining and other repairs.

Additional issues may also arise where neither neighbor is at fault. For example, a storm could cause a tree to fall in a neighbor’s yard and damage the shared fence. Who becomes responsible for repairs or replacement costs in this scenario?

Before escalating into any unnecessary conflicts, David Tully, realtor at eXp Realty, recommends checking state and local ordinances to determine policies for responsibilities of shared outdoor-related expenses.

“If you are living in a community, neighborhood, municipality or in a big city, there is a great possibility of existing law talking about the distribution of workload and expenses,” said Tully. “Depending on the local ordinance, the guidance of shared fences and their expenses and duties would be mentioned differently, but you can find a common point.”

For neighborhoods where there is an HOA or other shared community space, there may be different rules regarding shared expenses. Consult your HOA’s governing documents or speak with a representative to find out more information.

Discuss the Concern With Your Neighbor

The general rule of thumb in most jurisdictions is if a homeowner shares a fence with their neighbor, both are responsible for equally maintaining and repairing the fence. This is because the fence is on or close to the property line for both owners and both neighbors enjoy similar benefits from the fence.

However, there may be moments when issues arise or you don’t know what would be best for both parties. What if one neighbor wants a fence which is substantially more expensive than the agreed upon repairs? And what if a neighbor offers to cover the full expense for the shared fence even though there is no agreement between the neighbors?

Tully recommends resolving any concerns by talking directly to the neighbor in question. This helps sort out shared cost issues and ensure you maintain a good relationship with your neighbors.

“By communicating, you would get to know their concern which will provide insight into the problem. It’s easier to find a solution when both parties are willing to work together,” said Tully.

Come to an Agreement About Other Shared Expenses

The fence is just one example of a shared expense between neighbors. Others to think about include gate considerations, fall cleanup, snow removal, land modification and vegetation planting and trimming. Even the wall supporting or maintaining a fence can become a shared expense if the wall must be erected, repaired or replaced.

Mike Gregor, realtor at Cohen Agency SiM, LLC, said all shared costs must be divided equally among neighbors. The exception is if neighbors have prior negotiation on how they should pay for the building of the new outdoor-related item in question.

Neighbors should discuss costs of shared expenses together and come to an agreement that works for and benefits both parties. A conversation with the neighbor is a good way to start, Gregor said, as long as both sides are satisfied with the arrangement.

Buying • Selling • September 1, 2022

Advice for buyers & sellers in today’s housing market by Ryan Lundquist

by Suzanne Volkman

ADVICE FOR BUYERS:

Don’t lowball like it’s 2008: It’s not a name-your-price market, so you still have to make reasonable offers instead of way below market value. I find some buyers think it’s 2008, and that’s not the vibe right now. For instance, a property was priced well at $450,000 and a buyer offered $320,000 (final closed price was $455,000). If you get lucky at a low level, great. I’m just saying, being reasonable rather than lowballing is likely a better strategy.

Be patient: Instead of selling in hours or days, properties are spending weeks or longer on the market. This is a real advantage for buyers, so you can take more time to shop. Yet, if you find something perfect, be swift since properties that check all the boxes are going quickly with multiple bids.

Ask for credits (if you can): We’re tending to see more buyers asking for credits to help with closing costs or repairs, so talk with your agent about whether asking for credits is something the market will allow (big point). Remember, this isn’t going to work in every price range or situation.

Buy down the rate if possible: Talk to your loan officer about what it would take to buy down the mortgage rate. This means you can pay more to get a lower rate. Or better yet, if you’re in a situation where the seller is going to offer a credit, consider using that credit to buy down the rate. Getting your monthly payment lower can be a massive financial win.

Target overpriced listings: Overpriced homes represent opportunities for buyers, so go after them. Of course, some sellers are stubborn about accepting offers below their unrealistic list price.

Don’t overpay: On one hand it’s unwise to lowball as a strategy, but still try to get the price lower if possible. Local stats show even when properties get multiple offers today, they aren’t tending to get bid up to the crazy levels we saw last year. Generally speaking, you probably don’t need to offer as aggressively high as you might have two quarters ago. In Sacramento last month we saw buyers on average pay about 2% below the original list price (which is about $12,000 below). This is the average though, so it would be a colossal mistake to automatically offer $12,000 below whatever the asking price is (seriously). Remember, there are many examples of offers still going above the list price, so don’t impose an average on every escrow. All that said, try to get in below the list price if you can because that’s becoming more common. But recognize this is a case-by-case situation that depends heavily on what the property is actually worth and how close pricing was to market value.

Realize there is still competition: About 37% of homes last month in the Sacramento region sold above the original list price, so not everything is selling below like some are talking about. Remember, selling above or below the list price isn’t just about the market. It’s about how the property was priced.

Don’t string sellers along: An agent friend told me about a situation where the buyer was in contract for 40 days and then backed out. Look, it happens, and buyers should back out as needed, so I’m not saying to stay. Do what you need to do. All I’m saying is if you’re on the fence, find a way to be decisive so you can give the seller more space to find another buyer. In a market with quick change, idling buyers can cost the seller money.

ADVICE FOR SELLERS:

Don’t expect to call the shots: Sellers are no longer getting to dictate all the terms, so be careful about expecting buyers to bend to your will.

Be ready to negotiate: You’ve lost power and you need to be prepared to offer credits to buyers and negotiate as needed. Look, your net profit will be lower if you reduce the price or offer a credit, but focus on the bigger issue of how much money you’re making with historically high prices.

Plan for fewer offers: Don’t expect multiple bids, but if it happens, great. The truth is you might only get one offer. I’ve heard a number of sellers holding out for more offers, which is bold move today.

Realize demand has truly shifted: In the Sacramento region there were 30%+ fewer buyers last month compared to one year ago. This has caused supply to shoot up very quickly, which means buyers have more options. The good news is about 70% of the market is still active, but it’s no joke to see a sizeable chunk of buyers sitting on the sidelines.

Forget about hot headlines from the past: The market has changed. We’re not blazing like we were six months ago. My advice? Scrap hot headlines and get familiar with the housing temperature today. It doesn’t matter what cryptocurrency sold for in March. The only thing that matters is what it’s selling for today. It’s the same in real estate. What is competitive to your house and getting into contract right now? That’s the key for pricing.

Don’t get offended over requests for credits: Buyers are forking over big bucks to purchase a home right now due to higher prices and a spike in rates. This means some buyers are going to want help with closing costs or repairs. A seller recently got bent out of shape with a buyer asking for a credit, and to me that showed the seller was simply out of touch with today’s trends.

Prepare your house like it was a first date: If you can, take care of basic cosmetic repairs prior to listing. It’s like going on a date. You want to impress and put your best foot forward. Buyers today have more space to scrutinize details, so tightening up details gives buyers fewer reasons to say NO.

Help the escrow be fast: Buyers are pickier about staying in contract, so do all you can to help the escrow be smooth and quick. An escrow with fewer surprises and hurdles is a good thing right now. The last thing you want is for buyers to be stuck waiting while uncertainty is growing. On that note, it might not be a bad idea to take care of Section 1 damage prior to listing (or get a pest report so the buyer is informed prior to making an offer).

Don’t get stuck on the original list price: There is nothing holy about the list price, so don’t get stuck there. If the market isn’t biting, it’s time to reduce the price. In the Sacramento region we historically only see about 14% of properties sell at the original list price, so 86% of the time the price is literally going either higher or lower. And in today’s market, there is a better chance of going lower rather than higher.

Stop believing in unicorns: Look, everyone hopes for a mythical buyer to swoop in and pay more. In Sacramento, it’s a Bay Area buyer, and I suspect in many other states it’s a cash buyer from California. Keep in mind only about 15% of the local market has been cash, so it seems wise to price for 85% of transactions that are financed. Don’t price for the unicorn!!!

Be in tune with picky buyers: Buyers are pickier about condition, location, and price. Buyers can be this way for two reasons: 1) It’s more difficult to afford a house with today’s prices and higher rates; and 2) There is more supply, so there are more options.

Buying down the rate is NOT your silver bullet: I’m hearing lots of people talk about keeping the price high and giving a credit to the buyer to buy down the rate. I get the sentiment because a lower rate helps the buyer, but this is ultimately a seller-oriented narrative. It’s especially common to hear this from builders with new construction. The truth is some buyers are going to want a price reduction as well as a credit. As a seller, you’re going to have to see what the market allows you to do rather than dictating the terms. ”

Ryan Lundquist
Certified Real Estate Appraiser
TEL: 916-595-3735
LundquistCompany@gmail.com

https://sacramentoappraisalblog.com/2022/08/08/advice-for-buyers-sellers-in-todays-housing-market/

Buying • August 16, 2022

‘One actionable thing’ that can save prospective homebuyers up to $104,000 over the life of their mortgage

by Suzanne Volkman

As today’s prospective home buyers confront high home prices and rising interest rates, there’s one thing they can do to save money — raise their credit scores.

“This is one actionable thing buyers can do to save a little bit of money in this market,” said Amanda Pendleton, consumer finance expert at Zillow Home Loans.

A new analysis from Zillow finds home buyers with lower credit scores may pay $103,626 more over the life of a 30-year fixed mortgage loan than someone with an excellent score, based on the current price of a typical home, $354,165.

Buyers with fair credit scores — between 620 and 639 — may be paying $288 more per month for their monthly mortgage payments compared to home buyers with excellent scores, between 760 and 850.

That difference is due to the interest rates those borrowers are charged. While a fair credit score qualifies for a 6.688% interest rate, an excellent score can command a far lower rate of 5.099%. The calculations are based on home values from the Zillow Home Value Index and interest rates from the FICO Loan Savings Calculator as of July 26.

Credit is one factor homebuyers can control

“Affordability is the biggest story of the housing market right now,” said Pendleton.

“We’ve seen home values nationwide up nearly 20% year over year,” she said. “When you combine that with these rising mortgage interest rates, the typical monthly payment on a home is 62% higher today than it was just a year ago.”

If you’re a buyer in today’s market, a lot of factors are outside your control, Pendleton said. But you can control your credit and financial history.

Your credit score measures your likelihood of paying back a loan. Mortgage lenders use those scores to determine whether to offer you a loan, and the interest rate you will pay on that debt.

Your credit score is determined by factors considered on your credit report, such as your bill-paying history, unpaid debts, the number of outstanding loans you have, how long those accounts have been open, how much available credit you are using and new credit applications you have made.

Your credit score may vary depending on the company providing it. Scores typically range from 350 to 850.

“It really does pay off for a buyer to take steps to improve their credit score and also shop around for a mortgage as we see rates climb,” Pendleton said.

If you’re thinking of buying a home, you want to think about your credit score at least six months ahead of that goal, Pendleton said.

First, check your credit report, which you can check weekly for free through the end of 2022, to help give you an idea of what a lender is going to see when they pull your credit. Generally, those free reports are available once a year.

Keep an eye out for anything that seems off, like incorrect information you want to dispute, or late payments you want to avoid in the future.

Then, make a plan based on where you stand looking at your current credit profile.

That may include paying down debt to less than 30% of your limit. “That’s going to have the biggest impact on your score in a positive direction,” Pendleton said.

Stay consistent with your bill payments, such as for your credit cards and car, and make sure they go through on time.

As you get closer to your home-buying goal, avoid making larger purchases that need to be financed, such as buying a new car or furniture, as that will negatively impact your debt-to-income ratio. Applying for new credit cards or loans can also hurt your score.

The good news is that you may be able to bring your credit score up in as little as three to six months, depending on your credit record, Pendleton said.

Moreover, if you are coming in as a first-time homebuyer with a lower credit score, explore other loans and programs that may be available for someone who fits your profile.

Originally posted on CNBC

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