A lot is happening in the world, and it’s having a direct impact on the housing market. The reality is this: some of it is positive and some of it may be negative. Some we just don’t know yet.
The following three areas of the housing market are critical to understand: interest rates, building materials, and the outlook for an economic slowdown.
1. Interest Rates
One of the most important things to consider when buying a home is the interest rate you will be charged to borrow the money. In our recent post we posed the question, “Are Low Interest Rates Here To Stay?” The latest information from Freddie Mac makes it appear they are. We are currently at a 21-month low in interest rates.
2. Building Materials
Talk of tariffs could also affect the housing market. According to a recent article, the National Association of Home Builders reports that as much as $10 billion in goods imported from China are used in homebuilding. Depending on the outcome of the tariff and trade discussions between several countries, there could be as much as a 25% boost in the cost of building materials.
3. Economic Slowdown
We began the year with many economic leaders thinking we could expect a recession in late 2019 or early 2020. As spring approached, we reported that economists had started to push that projection past 2020. Now, three leading surveys indicate that it may begin in the next eighteen months.
Pinnacle Realty Group - MN Realtors is strong in housing market. Wages are increasing, home prices are appreciating, and mortgage rates are the lowest they have been in 21 months. Whether you are thinking of buying or selling, it’s a great time to be in the market.
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Starting the Search for Your Dream Home? Here Are 5 Tips!
In today’s real estate market, low inventory dominates the conversation in many areas of the country. It can often be frustrating to be a first-time homebuyer if you aren’t prepared.
In a realtor.com article entitled, “How to Find Your Dream Home—Without Losing Your Mind,” the author highlights some steps that first-time homebuyers can take to help carry their excitement of buying a home throughout the whole process.
1. Get Pre-Approved for a Mortgage Before You Start Your Search
One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search. Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.
This step will also help you narrow your search based on your budget and won’t leave you disappointed if the home you tour, and love, ends up being outside your budget!
2. Know the Difference Between Your ‘Must-Haves’ and ‘Would-Like-To-Haves’
Do you really need that farmhouse sink in the kitchen to be happy with your home choice? Would a two-car garage be a convenience or a necessity? Could the ‘man cave’ of your dreams be a future renovation project instead of a make-or-break right now?
Before you start your search, list all the features of a home you would like and then qualify them as ‘must-haves’, ‘should-haves’, or ‘absolute-wish list’ items. This will help keep you focused on what’s most important.
3. Research and Choose a Neighborhood You Want to Live In
Every neighborhood has its own charm. Before you commit to a home based solely on the house itself, the article suggests test-driving the area. Make sure that the area meets your needs for “amenities, commute, school district, etc. and then spend a weekend exploring before you commit.”
4. Pick a House Style You Love and Stick to It
Evaluate your family’s needs and settle on a style of home that would best serve those needs. Just because you’ve narrowed your search to a zip code, doesn’t mean that you need to tour every listing in that zip code.
An example from the article says, “if you have several younger kids and don’t want your bedroom on a different level, steer clear of Cape Cod–style homes, which typically feature two or more bedrooms on the upper level and the master on the main.”
5. Document Your Home Visits
Once you start touring homes, the features of each individual home will start to blur together. The article suggests keeping your camera handy to document what you love and don’t love about each property you visit.
Making notes on the listing sheet as you tour the property will also help you remember what the photos mean, or what you were feeling while touring the home.
In a high-paced, competitive environment, any advantage you can give yourself with Pinnacle Realty Group - MN Realtors will help you on your path to buying your dream home.
2 Myths Holding Back Home Buyers
reddie Mac recently released a report entitled, “Perceptions of Down Payment Consumer Research.”Their research revealed that,
“For many prospective homebuyers, saving for a down payment is the largest barrier to achieving the goal of homeownership. Part of the challenge for those planning to purchase a home is their perception of how much they will need to save for the down payment…
…Based on our recent survey of individuals planning to purchase a home in the next three years, nearly a third think they need to put more than 20% down.”
Myth #1: “I Need a 20% Down Payment”
Buyers often overestimate the funds needed to qualify for a home loan. According to the same report:
22% of renters and 31% of homeowners believe lenders require 20% or more of a home’s sale price as a down payment for a typical mortgage today. And,
“If a 20% down payment was required, 70% of those who were planning to buy a home in the next three years said it would delay them from purchasing and nearly 30% indicated they would never be able to afford a home.”
While many believe at least 20% down is necessary to buy the home of their dreams, they do not realize programs are available which permit as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined!
Myth #2: “I Need a 780 FICO® Score or Higher to Buy”
Many either don’t know or are misinformed concerning the FICO® score necessary to qualify, believing a ‘good’ credit score is 780 or higher.
To debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.
Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach with Pinnacle Realty Group - MN Realtors.
Young First-Time Buyers Are Saving for Their Dream Homes
Young buyers (Millennials & Gen Z) have waited longer than previous generations to enter the housing market for their first home. However, this hasn’t stopped them from dreaming about the home they will eventually buy. Many spend hours searching listings and building Pinterest boards of their favorite home features.
According to a survey from Open Listings, 70% of single renters are more likely to spend their Sunday nights swiping through house listings than dating profiles.
All that time window shopping has led 45% of millennials to expect the first home they buy to be their “dream home”! They are willing to wait longer, save more for a larger down payment, and are pickier about the listings they want to tour and the features that they want to see in their first home.
Waiting a little longer to buy a home than their parents or grandparents did has also helped young buyers become more established in their careers prior to making such a large purchase. Lawrence Yun, NAR’s Chief Economist, recently commented,
“Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this. Their choices are falling more in line with their Gen X and boomer counterparts.”
In some areas of the country, high competition in the starter home market forces young buyers to wait longer. The extra money they save during that time opens their search to bigger, more expensive homes.
If this trend continues, older millennials will skip the starter home altogether, going straight to a trade-up or premium home instead.
If you are one of the many young renters planning on buying your first home soon, get together with Pinnacle Realty Group - MN Realtors to help determine what type of home will best suit your present and future needs.
The Feeling You Get from Owning Your Home
We often talk about the financial reasons why buying a home makes sense. But, more often than not, the emotional reasons are the more powerful and compelling ones.
No matter what shape or size your living space is, the concept and feeling of home can mean different things to different people. Whether it’s a certain scent or a favorite chair, that feeling of safety and security you gain from owning your own home is simultaneously one of the greatest and most difficult to describe.
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Frederick Peters, a contributor for Forbes, recently wrote about that feeling, and the pride that comes from owning your own home.
“As homeowners discover, living in an owned home feels different from living in a rented home. It’s not just that an owner can personalize the space; it touches a chord even more fundamental than that.
Homeownership enhances the longing for self-determination at the heart of the American Dream. First-time homeowners, young or old, radiate not only pride but also a sense of arrival, a sense of being where they belong. It cannot be duplicated by owning a 99-year lease.”
Owning a home brings a sense of accomplishment and confidence that cannot be achieved through renting. If you are debating renewing your lease, get together with Pinnacle Realty Group - MN Realtors before you do to answer any questions you may have about what your next steps should be, and what is required in today’s market!
What You Need to Know About Private Mortgage Insurance (PMI)
Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).
What is PMI?
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:
The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and Pinnacle Realty Group - MN Realtors will help you make the best decision for you and your family.
How to Sell Your Home for a Good Price in a Tough Market
In an ideal world, you would always be able to sell your home for the price you want. But sadly,home sellers don’t always have the benefit of a hot market. While you can’t do much about a slow market, you can take steps to help your home sell faster and for a better asking price. Working with a great real estate agent, setting a realistic asking price, preparing your house to attract potential buyers, and marketing your home aggressively will help you shift the odds in your favor and increase your chances of a smooth sale.
Clean and Declutter
Cleaning your home is an important part of preparing it for sale. In a slow market, buyers can afford to have high standards, so your home needs to be flawless. A top-to-bottom deep clean is essential. Take the time to sort through your belongings and declutter your home as well. According to Professional Staging, removing clutter will make your home appear larger and well-maintained, but also help your buyers see all of your home’s best features without getting distracted by personal collections, family photos, and knickknacks. If you need somewhere to store your stuff while your home is on the market, consider renting a storage unit.
Make a Few Upgrades
It can pay to tackle a few home improvements before putting your house on the market. Besides making essential repairs, some in-demand upgrades can set your home apart from others on the market. Focus on high-ROI upgrades to get the most bang for your buck. If you go the DIY route, you can completely refresh the look of your kitchen by painting the cabinets, replacing the hardware or adding a tile backsplash. If you have it in your budget, think about other areas of the home where you can make cosmetic upgrades like remodeling or refinishing your basement, adding replacement windows or even installing a deck or patio. A remodeled basement, for example, can yield a 90.1 percent return, and typical costs between $10 and $35 per square foot. That could be a worthwhile investment for the ROI!
Stage Your Home
Although you don’t have to stage your home to put it on the market, Investopedia stresses that this extra step will put you at an advantage. Staging a home involves decorating it strategically to show off its best features and help buyers imagine themselves living there. To stage your home, give each room a specific purpose. For example, you could turn an empty basement into an entertainment hub or convert a spare room into a home office. A few finishing touches, such as a fresh vase of flowers and some fluffy, white bath towels can give your home a polished and inviting appearance.
Take Great Pictures
When your home is in top shape and ready to wow those potential buyers, take some pictures. High-quality real estate photography can help you capture the hearts of your buyers before they even set foot in your home! For best results, shoot your pictures on a bright day with your blinds wide open. Rooms filled with natural light will appear bigger, brighter, and much more welcoming than they would at night. If you don’t feel confident in your camera equipment or your photography skills, consider hiring a professional real estate photographer for this task.
Set the Right Listing Price
Setting your asking price is a tough process. Price your home too low, and you will lose money on your sale. But price it too high above market value and you may turn away potential buyers. While it's true that homebuyers can make a lower offer on an overpriced listing, don't count on this. Since buyers often search for homes in a set price range, they might not even come across your home if it is overpriced. One of the best ways to come up with a realistic asking price is to work with an experienced real estate agent and to listen to their recommendations. Don’t let emotion get in the way of your home sale!
Selling a home in a buyer’s market is difficult, but not impossible. With the right preparations, you might just get the sale price that you’re after. The key is to dazzle your potential buyers with cleanliness, worthwhile home upgrades, stunning staging, and beautiful real estate photos. Price your home right, and a buyer should come along in no time!