US Housing Market Moving Further into ‘Buy Territory’

According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the U.S. housing market has continued to move deeper into buy territory, supporting the belief that housing markets across the country remain a sound investment.

The BH&J Index is a quarterly report that attempts to answer the question:

In today’s housing market, is it better to rent or buy a home?

The index examines the entire US housing market and then isolates 23 major cities for comparison. The researchers “measure the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds.” 

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Ken Johnson, Ph.D., Real Estate Economist & Professor at Florida Atlantic University, and one of the index’s authors explains that:

“Housing prices, in general, continue to slow and when considered in light of the recent trends in the Buy vs. Rent Index signal that ownership remains an excellent investment for the majority of Americans.”

While 15 of the 23 metropolitan markets examined moved further into buy territory since last quarter, Dallas, Denver, and Houston are three of the major cities that are currently deep into rent territory. In these three markets, it is estimated that renting will top homeownership 7 out of 10 times.

Eli Beracha, Ph.D., Assistant Professor in the T&S Hollo School of Real Estate at FIU,believes that, in these three markets, the “strong odds in favor of renting to create more wealth should begin to have an impact on the demand for home ownership and from that, impact property prices in these areas.”

Simply put, home prices in these areas will begin to return to more normal levels once residents realize that renting may be a better choice, therefore bringing home affordability back as well.

Bottom Line

The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year. Protect yourself from rising rents by locking in your housing cost with a mortgage payment now.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today.

4 Reasons to Buy a Home This Fall

It’s that time of year; the seasons are changing and with them come thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether or not now is the right time to buy don’t have to look much further to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.4% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.5% a year for the next 5 years.
The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

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2. Mortgage Interest Rates Remain at Historic Lows

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained at or below 3.5% for 13 consecutive weeks. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by this time next year.
Any increase in rates will impact YOUR monthly mortgage payment. A year from now, the percentage of your income that you spend on housing will increase substantially if you choose to wait.

3. Either Way You Are Paying a Mortgage

Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage - either your mortgage or your landlord’s. As a paper from the Joint Center for Housing Studies at Harvard University explains:
“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.
But what if they weren’t? Would you wait?
Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today. 

Is the Current Pace of Home Sales Sustainable?

There are some experts questioning whether the current pace of residential home sales is sustainable. Are too many people buying homes like in 2004-2006? Are we headed for another housing crisis? Actually, if we look closely at the numbers, we can see that we are looking at a very healthy real estate market.

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Why the concern?

Some are looking at the last three years of home sales and comparing them to the three years just prior to the housing bubble. Looking at the graph below, we can understand that thinking.

However, if we go further back in history, we can see the real picture. After taking out the “boom & bust” years, the pace of sales is growing at a quite natural pace.

And new home sales are way below historic numbers. Trulia’s Chief Economist Ralph McLaughlin explains:

“Adjusted for population, [new home sales] are at about 63% of their fifty-year average level—way better than 2011, but nowhere near heated.”

Bottom Line

The current pace of residential home sales definitely seems sustainable.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today.

5 Reasons to Sell This Fall

School is back in session, the holidays are right around the corner, you might not think that now is the best time to sell your house. But with inventory below historic numbers and demand still strong, you could be missing out on a great opportunity for your family.

Here are five reasons why you should consider selling your house this fall: 

1. Demand Is Strong

The latest Realtors’ Confidence Index from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase… and are in the market right now!

Take advantage of the buyer activity currently in the market.

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2. There Is Less Competition Now

According to NAR’s latest Existing Home Sales Report, the supply of homes for sale is still under the 6-month supply that is needed for a normal housing market at 4.7-months.

This means, in most areas, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory is about to come to market.

There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market this fall.

Also, as builders regain confidence in the market, new construction of single-family homes is projected to continue to increase over the next two years, reaching historic levels by 2017. Last month’s new home sales numbers show that many buyers who have not been able to find their dream home within the existing inventory have turned to new construction to fulfill their needs.

The choices buyers have will continue to increase. Don’t wait until all this other inventory of homes comes to market before you sell.

3. The Process Will Be Quicker

Fannie Mae announced that they anticipate an acceleration in home sales that will surpass 2007's pace. As the market heats up, banks will be inundated with loan inquiries causing closing-time lines to lengthen. Selling now will make the process quicker & simpler. 

4. There Will Never Be a Better Time to Move Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by 5.3% over the next year, according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.

According to Freddie Mac’s latest report, you can also lock-in your 30-year housing expense with an interest rate around 3.46% right now. Interest rates are projected to increase moderately over the next 12 months. Even a small increase in rate will have a big impact on your housing cost.

5. It’s Time to Move On with Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire. 

That is what is truly important.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today.

Home Values: DEFINITELY NOT in Bubble Range!!

There are some industry pundits claiming that residential home values have risen too quickly and that current levels are on the verge of another housing bubble. It is easy to see how this thinking has taken form if we look at a graph of home prices from 2000 to today.

The graph definitely looks like a rollercoaster ride. And, as prices begin to reach 2006 levels again, it “seems logical” that the next part of the ride would be downhill. However, this graph includes the anomaly of the price bubble and the correction (the housing crash).

What if the bubble & bust didn’t occur?

Let’s assume that instead of the rise and fall in home prices that we saw last decade, we just had normal historic appreciation from 2000 to today. According to the 100+ experts that are surveyed for the Home Price Expectation Survey, normal annual appreciation for residential single family homes from 1987 to 1999 was 3.6%.

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Starting with the median home price in 2000, we added 3.6% to it each year since then. Here is that graph intermixed with the above graph.

What this shows us is that, had the bubble and crash not occurred and instead we just had normal annual appreciation over this period, prices would actually be greater than they are today.

Bottom Line

There is no reason for alarm as prices seem to be right in line with where they should be.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today.

Why Is There So Much Paperwork to Sign to Get a Mortgage?

We are often asked why there is so much paperwork mandated by the bank for a mortgage loan application when buying a home today. It seems that the bank needs to know everything about us and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank prove beyond any doubt that you are indeed capable of affording the mortgage.

During the run-up in the housing market, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

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2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation.

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The housing crash that mandated that banks be extremely strict on paperwork requirements also allows you to get a mortgage interest rate as low as 3.43%, the latestreported rate from Freddie Mac.

The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process but also paid a higher interest rate (the average 30 year fixed rate mortgage was 8.12% in the 1990’s and 6.29% in the 2000’s). If you went to the bank and offered to pay 7% instead of less than 4%, they would probably bend over backwards to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today.

Don’t Get Caught in the Rental Trap!

There are many benefits to homeownership. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.

Don’t Become Trapped

Jonathan Smoke, Chief Economist at realtor.com, reported on what he calls a “Rental Affordability Crisis.” He warns that,

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”

In the Joint Center for Housing Studies at Harvard University's 2015 Report on Rental Housing, they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

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It’s Cheaper to Buy Than Rent

In Smoke’s article, he went on to say,

“Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.”

 “While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?”

Know Your Options

Perhaps you have already saved enough to buy your first home. HousingWire reported that analysts at Nomura believe:

"It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.

 It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

Many first-time homebuyers who believe that they need a large down payment may beholding themselves back from their dream home. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.

Whether you are thinking of Buying or Selling a Home contact a professional realtor who cares about you and your time. Contact Jay Cermak Top Fort Lauderdale Real Estate Agent at 954.235.3589 and schedule a FREE Real Estate Consultation today.