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Comments on the Impact of Rising Interest Rates

 Impact of Rising Interest Rates

by The KCM Crew on August 14, 2013

quotation marksHere are a few interesting comments on how rising interest rates might impact the real estate market as we move forward.

Zillow

Dr. Svenja Gudell, Senior Economist

“As long as mortgage interest rates don’t rise too far and too fast, most markets should be able to absorb these changing dynamics while still remaining healthy.”

Fannie Mae

Doug Duncan, SVP and chief economist at Fannie Mae:

“Consumers have taken the interest rate rise in stride. Expectations for continued improvement in housing persist, and sentiment toward the current buying and selling environment is back on track from its dip last month. These results are consistent with our own analysis of previous housing cycles, which finds that interest rates and home prices are not strongly correlated.”

National Association of Realtors (NAR)

Lawrence Yun, Chief Economist:

“Affordability conditions remain favorable in most of the country, and we’re still dealing with a large pent-up demand. However, higher mortgage interest rates will bite into high-cost regions of California, Hawaii and the New York City metro area market.”

Trulia

Jed Kolko, Trulia’s Chief Economist:

“If you were worried about a housing bubble, July’s asking-price slowdown will probably be the best news you’ve heard this year. The asking home price slowdown in July could be the start of the return to normal price gains. The blazing fast price increases we’ve seen in recent months could not last, especially with rising mortgage rates, expanding inventory, and declining investor interest.”

Movoto

David Cross, Chief Writer

“Going forward, we expect prices to continue to move laterally on a month-over-month basis. Higher mortgage rates and increased inventory will keep prices from increasing at the same pace we saw in the first half of the year

Housing Bubble?

Housing Bubble: Is There a New One Forming?

by The KCM Crew on May 29, 2013 · 0 comments

 

783773_thumbnailThe housing market is recovering so nicely that it has caused some to wonder whether a new housing bubble is forming. Today, we want to explain that the fear of a new pricing bubble in real estate is unwarranted.

Trulia revealed some great data on this point in a recent blog post. They explained that, even with the recent price increases, national home prices are still 7 percent undervalued. Trulia explained:

“Home prices nationally remain undervalued relative to fundamentals and much lower than in the last bubble. That’s why today’s price gains are actually still a rebound, not a bubble.”

Prices are below their fundamental value in the vast majority of the country (91 of the 100 largest metros). Even in the parts of the country that are now overvalued they come nowhere near the percentages we saw in 2006-2007. For example, let’s look at the two markets that are most overvalued today. In Orange County, California prices are currently overvalued by 9%. In 2006, prices in the region were overvalued by 71%! The second most overvalued market today is Austin, Texas at 5%. Texas real estate prices did not skyrocket as they did in many other parts of the country during the last boom. Austin prices were shown as being 12% overvalued at the time.

Again, prices are still undervalued in 91% of markets and, even in the markets that are overvalued, they are nowhere near the numbers of the 2006-2007 bubble.

Jed Kolko, Trulia’s Chief Economist, explained:

“So are we in bubble territory? No. Bubble-phobes can rest easy. Even with recent sharp home price increases, prices are still low relative to fundamentals and are far below bubble levels.”

Dr. David Stiff, chief economist for CoreLogic Case-Shiller agreed in a recently released report on prices:

“Even if double-digit price appreciation were to continue in former bubble metro areas, there is no reason to believe that new home price bubbles are forming. That’s because single-family homes in these markets are still very affordable, even after last year’s large price gains.”

Three reasons there will NOT be another bubble

Prices are determined by the ratio between supply and demand. Here are three reasons a bubble will be avoided.

  1. Supply is beginning to increase. A lack of inventory is creating a market of multiple bids which has caused prices to rise. The National Association of Realtors (NAR), in their latest Existing Home Sales Report, revealed that the months’ supply of inventory has increased from 4.3 to 5.2 months since January.
  2. Demand will decrease in certain demographics. For an example, investors have been a large part of the housing market over the last several years. As prices continue to rise, a certain percentage of these buyers will back off.
  3. As mortgage rates increase, buyers will be able to afford less. The Mortgage Bankers Association, Fannie Mae and NAR have all projected an increase in mortgage rates over the next year. Buying power will decrease as borrowers can no longer afford the same price point as monthly payments will increase.

For these reasons, we believe the fear of a new housing bubble are currently unfounded.

If you have been waiting to sell, now is the time!

Many people who wanted to sell in the last 4 to 5 years decided to stay put, the market was too soft and it was a market where the buyers iStock_000002936822XSmallwere calling most of the shots!

Well things have changed and they changed fast!! Just in the last 60 days the market has turned into a sellers market.  The inventory levels are the lowest they have been in over 10 years, interest rates are low and buyers want to buy now!

If you have wanted to sell  in the past, but have been on the sidelines, give me a call today at 770-354-0243 and I will be happy to provide you with information that can help you determine if now is the time for you!

 

Buyers have to act fast to get the home they want!

Its a new world for  buyers, if a house comes on the market that they are excited about, they need to go look at it ASAP, with low levels of House and green grassinventory, homes are selling faster than they have in the last 5 years!  Welcome to a sellers market.  It is amazing how fast this market has changed just in the last 60 days.   A quick tip, when you submit the offer, don’t give the seller too much time to respond or you might find yourself in a multiple offer situation which almost always drives up the price, very often over list price. If you are thinking of selling, now is the time and if you want to buy, interest rates are low and the buyers I am working with are finding great homes, we just have to act fast!

Call me today for an update of what’s going on in your neighborhood!

 

Some Fun Super Bowl Facts!

Do cities with higher home prices make more Super Bowl appearances
Super Bowl Appearances vs. Real Estate Prices

I have buyers who need YOUR house!!

If you are thinking of selling this spring, call me now!  Inventory levels are too low and the choices are limited, we have buyers who are blue sky sold houseready to purchase and cannot find a home.

It’s best to get a jump on the market and list earlier than everyone else, you will have less competition and probably will sell faster if you are priced right and in good condition.

Call me today at 770-354-0243 or email me if you are ready to sell, I will be happy to discuss your local neighborhood  market and  may already have a buyer for you!

 

Foreclosures down in Georgia but still top 5 in the country!

Foreclosure Trends VERY Different in Different Markets

by The KCM Crew

Foreclosure

Last week, RealtyTrac released their Year-End 2012 U.S. Foreclosure Market Report™. The report revealed foreclosure trends over the past few years. Here are a few of the key findings:

  • A total of 2,304,941 foreclosure filings — default notices, scheduled auctions and bank repossessions — were reported on 1,836,634 U.S. properties in 2012, down 3 percent from 2011 and down 36 percent from the peak of 2.9 million properties with foreclosure filings in 2010.
  • 1.39 percent of U.S. housing units (one in every 72) had at least one foreclosure filing during the year, down from 1.45 percent of housing units in 2011 and down from 2.23 percent of housing units in 2010.
  • Foreclosure activity in 2012 increased from 2011 in 25 states — 20 of which primarily use the longer judicial foreclosure process — including New Jersey (55 percent increase), Florida (53 percent increase), Connecticut (48 percent increase), Indiana (46 percent increase), Illinois (33 percent increase) and New York (31 percent increase).
  • Foreclosure activity in 2012 decreased from 2011 in 25 states — 19 of which primarily use the more streamlined non-judicial foreclosure process — including Nevada (57 percent decrease), Utah (40 percent decrease), Oregon (40 percent decrease), Arizona (33 percent decrease), California (25 percent decrease) and Michigan (23 percent decrease).
  • Florida posted the nation’s highest state foreclosure rate in 2012, with 3.11 percent of housing units (one in 32) receiving a foreclosure filing during the year. Other states with top 5 foreclosure rates were Nevada (2.70 percent), Arizona (2.69 percent), Georgia (2.58 percent), and Illinois (2.58 percent).

As we can see, different markets are impacted in vastly different ways.

Housing Recovery? We may be headed that way

Housing: Year End Reports Reveal Market Coming Back
by THE KCM CREW on JANUARY 2, 2013 ·

Housing-Market

Every year-end housing report revealed that the real estate market is recovering quite nicely. Here is a quick synopsis of each:

Existing Home Sales Report

Total existing-home sales rose 5.9 percent in November over last month
Sales are 14.5 percent higher than November 2011
Sales are at the highest level since November 2009
The national median existing-home price was $180,600 in November, up 10.1 percent from November 2011
Total housing inventory at the end of November fell to a 4.8-month supply; it was 5.3 months in October, and is the lowest housing supply since September of 2005 when it was 4.6 months
Pending Sales Report

Pending home sales increased in November for the third straight month and reached the highest level in two-and-a-half years
The index is at the highest level since April 2010 when buyers were rushing to beat the deadline for the home buyer tax credit
With the exception of several months affected by tax stimulus, the last time there was a higher reading was in February 2007
On a year-over-year basis, pending home sales have risen for 19 consecutive months
New Home Sales Report

Sales of new homes rose 4.4% in November to a two-and-a-half-year high
This is the highest level since April 2010, when a temporary tax credit boosted demand.
Sales are now 15.3% higher compared to one year ago
Case Shiller Home Price Index

Home prices rose 4.3% in the 12 months ending in October
In nineteen of the 20 cities covered, annual returns in October were higher than September

Owning a Home may be a wise Investment

Homeownership as an Investment

by THE KCM CREW on DECEMBER 12, 2012 · 0 COMMENT

In Real Estate: Today’s Golden Opportunity we compared the current housing market to the market for gold about a decade ago. Some commented on the fact that you can’t compare gold to real estate as an investment as gold is a very liquid asset and it would take more time and effort to sell a house. We were not trying to make the case for real estate vs. gold as an investment in our blog. We were just showing that all investments go through cycles and that the best time to buy any investment may be when everyone is saying not to.

However, since the subject of comparing real estate to other investments has come up, let’s take a closer look. There are two major advantages to investing in a home of your own rather than another option:

You Can’t Live in Your IRA

When you buy your own home you are not taking available dollars away from another investment. You are replacing one housing expense (rent) which has no potential for a return on investment with another (mortgage payment) that does give you an opportunity for a return. We realize that there has been research showing that over the last 30 years renting has been less expensive than owning. That research also says that if you invested the entire difference between the rent payment and mortgage payment you may have done better financially.  There are two challenges with this conclusion:

  1. Today, in the vast majority of the country, renting is actually more expensive than owning a home.
  2. History has proven that tenants DO NOT invest the difference in their rent and mortgage payments.

Today,studies show that owning a home is no more expensive than renting a home. However, even if this wasn’t the case, history shows that owning a home creates greater wealth.

Paying a mortgage creates what financial experts call ‘forced savings’. The Joint Center for Housing Studies at Harvard University released a study last year titled America’s Rental Housing: Meeting Challenges, Building on Opportunities. In the study, they actually quantified the difference in family wealth between renters and homeowners:

“[R]enters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.”

There Are Tremendous Tax Advantages to Investing in a Home

There is no doubt that selling an investment such as gold is easier than selling your home. However, this liquidity comes at a price. The price is called capital gains. That is the tax you pay on any financial gain you receive from the investment. This tax doesn’t apply the same way when you sell your primary residence:

Theresa Palagonia, a CPA and the Accounting Manager for the firm G.S. Garritano & Associates, was good enough to explain the Home Sale Exclusion Rules:

“You may qualify to exclude from your income all or part of any gain from the sale of your main home. 

Maximum Exclusion

You can exclude up to $250,000 of the gain on the sale of your main home if all of the following are true:

  • You meet the ownership test.
  • You meet the use test.
  • During the 2 year period ending on the date of the sale, you did not exclude gain from the sale of another home.

If you and another person owned the home jointly but file separate returns, each of you can exclude up to $250,000 of gain from the sale of your interest in the home if each of you meets the three conditions listed above.

You may be able to exclude up to $500,000 of the gain on the sale of your main home if you are married and file a joint return and meet the requirements. (Special rules apply for joint returns.)

Ownership and Use Tests

During the 5 year period ending on the date of the sale, you must have:

  • Owned the home for at least 2 years, and
  • Lived in the home as your main home for at least 2 years

Certain exceptions exist in which you may qualify for the exclusion without satisfying the tests listed.”

Bottom Line

Every investment has pros and cons. That is why there is such an assortment of great opportunities. Real Estate has been, is and always will be one of those opportunities.

Confidence in the economy will help Real Estate Sales

As consumers get more confident in the economy, this will bring buyers and sellers into the market.  Many people have been on the fence waiting to make a move until they feel good about their financial condition and the economy overall.

According to KCM   “The Reuters/University of Michigan’s consumer sentiment index rose to 83.1 in September – the highest level since September 2007 – from 74.3 in August. Analysts had forecast a rise to 78.3.”  Read more here

If you are thinking of making a move, call me today at 770-354-0243, now might be the right time!