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What Does 2021 Have in Store for Home Values?

 

According to the latest CoreLogic Home Price Insights Report, nationwide home values increased by 8.2% over the last twelve months. The dramatic rise was brought about as the inventory of homes for sale reached historic lows at the same time buyer demand was buoyed by record-low mortgage rates. As CoreLogic explained:

“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.

While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”

Where will home values go in 2021?

Home price appreciation in 2021 will continue to be determined by this imbalance of supply and demand. If supply remains low and demand is high, prices will continue to increase.

Housing Supply

According to the National Association of Realtors (NAR), the current number of single-family homes for sale is 1,080,000. At the same time last year, that number stood at 1,450,000. We are entering 2021 with approximately 370,000 fewer homes for sale than there were one year ago.

However, there is some speculation that the inventory crush will ease somewhat as we move through the new year for two reasons:

1. As the health crisis eases, more homeowners will be comfortable putting their houses on the market.

2. Some households impacted financially by the pandemic will be forced to sell.

Housing Demand

Low mortgage rates have driven buyer demand over the last twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning of 2020. Today, we’re starting 2021 with rates one full percentage point lower than that. Low rates create a great opportunity for homebuyers, which is one reason why demand is expected to remain high throughout the new year.

Taking into consideration these projections on housing supply and demand, real estate analysts forecast homes will continue to appreciate in 2021, but that appreciation may be at a steadier pace than last year. Here are their forecasts:What Does 2021 Have in Store for Home Values? | MyKCM

Bottom Line

There’s still a very limited number of homes for sale for the great number of purchasers looking to buy them. As a result, the concept of “supply and demand” mandates that home values in the country will continue to appreciate.

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Turning a House into a Happy Home

Turning a House into a Happy Home | MyKCM

We talk a lot about why it makes financial sense to buy a home, but more often than not, we’re drawn to the emotional reasons for homeownership.

No matter the living space, the feeling of a home means different things to different people. Whether it’s a certain scent or a favorite chair, the feel-good connections to our own homes are typically more important to us than the financial ones. Here are some of the reasons why.

1. Owning your home is an accomplishment worth celebrating

You’ve likely worked very hard to achieve this dream, and whether it’s your first home or your fifth, congratulations are in order for this milestone. You’ve earned it.

2. There’s no place like home

Owning your own home offers not only safety and security but also a comfortable place where you can simply relax and kick-back after a long day. Sometimes, that’s just what we need to feel recharged and truly content.

3. You can find more space to meet your needs

Whether you want more room in your home for your changing lifestyle (think: working from home, virtual school, or a personal gym), or you simply prefer to have a large backyard for socially-distant entertaining, you can invest in a location that truly works for your evolving needs.

4. You have control over renovations, updates, and your style

Looking to try one of those complicated wall treatments you saw on Pinterest? Tired of paying an additional pet deposit for your apartment building? Maybe you want to finally adopt that fur-baby puppy or kitten you’ve been hoping for. You can do all of these things in your own home.

Bottom Line

Whether you’re a first-time homebuyer or a move-up buyer who wants to start a new chapter in your life, now is a great time to reflect on the intangible factors that turn a house into a happy home.

The Wheaton/Wass Real Estate Team is here to help.  Call today: 719.822.1444

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The Holidays Aren’t Stopping Homebuyers This Year

The Holidays Aren’t Stopping Homebuyers This Year | MyKCM

Black Friday and Cyber Monday are behind us, yet finding the perfect holiday gifts for friends and family is certainly still top of mind for many right now. This year, there’s another type of buyer that’s very active this holiday season – the homebuyer.

Each month, ShowingTime releases their Showing Index which tracks the average number of appointments received on active U.S. house listings. The most recent index notes:

“The Showing Index reported a 60.9 percent jump in nationwide showing traffic year over year in October, the sixth consecutive month to see an increase over last year.”

Here’s the breakdown of the latest activity by region of the country compared to this time last year:

  • The Northeast increased by 65.5%
  • The West increased by 64.7%
  • The Midwest increased by 55.7%
  • The South increased by 54.7%

Why is the traffic so active?

The health crisis definitely put homebuying plans on pause for many earlier this year. Buyers, however, are in the market and making moves well past the typical busy homebuying seasons of spring and summer.

One of the main reasons buyer traffic has continued to soar in the second half of 2020 is how dramatically mortgage rates have fallen. According to Freddie Mac, the average mortgage rate last December was 3.72%. Today, the rate is a full percentage point lower.

Bottom Line

There are first-time, move-up, and move-down buyers actively looking for the home of their dreams this winter. If you’re thinking of selling your house in 2021, you don’t need to wait until the spring to do it. Your potential buyer is very likely searching for a home in your neighborhood right now.

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Knowledge Is Power on the Path to Homeownership

 

Homeownership is on the goal list for many young adults, but sometimes it’s hard to know exactly how to get there. From understanding the homebuying process to pre-approval and down payment assistance options, uncertainty along the way can ultimately hold some buyers back.

Today, there are over 75 million Millennials and 67 million Gen Z’ers in the U.S., making up a significant number of both current and soon-to-be homebuyers. According to a recent Fannie Mae survey of more than 2,000 of these individuals:

“88% said they are confident they will achieve homeownership someday.”

In addition, the survey also reveals that for younger generations, the motivation to own a home may be more emotional than financial compared to previous generations:

  • <50% say they want to use their home as an asset
  • 78% believe it’s the best way to live the way they want, without restrictions
  • 80% believe homeownership is the best way to make it on their own

Whether homeownership goals come from the heart or are driven by financial aspirations (or maybe both), the obstacles standing in the way don’t have to bring these dreams to a screeching halt. The same survey also reveals two key roadblocks for potential buyers. Thankfully, they’re both easily overcome with the power of knowledge and trusted advisors leading the way. Here’s a look at these two challenges potential homebuyers face today:

1. 73% of future homebuyers are unaware of low-down-payment mortgage options

For those who want to purchase a home, low-down-payment options are instrumental to affording one sooner rather than later, especially given the amount of debt many younger adults have accumulated. Fannie Mae also notes:

“Among the challenges they face is an unprecedented amount of debt, along with a lack of understanding of the mortgage process and their own purchasing power. Debt, in particular, creates many obstacles such as a limited ability to save and the fear of taking on more debt.”

Today, there are more than 2,340 down payment assistance programs available nationwide to help relieve this pressure. Understanding what’s out there and the options available may help many buyers become homeowners faster than they thought possible. In a year like this, with record-low mortgage rates making their mark in the history books, being able to take advantage of the opportunity buyers have right now is essential to long-term affordability.

2. 64% of buyers expect lenders and other real estate professionals to educate them about the mortgage process

While many people love to do a quick search online to find instant answers to their questions, it isn’t the only way younger generations want to consume information or build their knowledge base. As the survey mentions, having trusted professionals help them learn what it takes to achieve their dreams is definitely on their wish list too.

Bottom Line

If you’re aiming for homeownership someday, it may be in closer reach than you think. Let’s connect so you can learn about the process and get the guidance you need to make it happen.

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Improving Your Home Value With Solar

solar panels increase home value

We all know that solar panels are good for the environment. But do they increase the value of your home? Research indicates that even a moderately sized solar array can boost home value. Whether that added value will cover the cost of installation, however, is another question. Read on to learn if you can improve your home’s value by adding solar panels.

How Much Value Can it Add?

According to a report from the federal government, solar energy systems typically improve the value of most homes. In most instances, solar panels are viewed as upgrades, and buyers are willing to pay a premium of approximately $15,000 more for a property with an average-sized solar array. Homes with solar panels also tend to sell faster than homes with no solar features.

With all of this said, the actual value of solar can vary based on the location of your home. In California, for instance, research has shown that buyers are willing to pay nearly $6,000 per watt of installed solar capacity. This isn’t the case everywhere, however.

After analyzing sales of solar-equipped properties in eight different states over a decade, one relatively recent report found that homebuyers are consistently willing to pay about $4 per watt of installed solar capacity. For a 6-kilowatt solar PV system, this means that solar could add $24,000 to a home’s resale value.

Whatever the case, it’s clear that solar can boost a home’s value. But is it enough to justify the expense?

Will it Cover the Installation Costs?

A solar home’s selling price is usually about 3% to 4% higher or more compared to properties without solar. The price of a typical rooftop solar installation and battery is also generally recouped in the property’s sale price. What’s more, households purchasing solar are usually rewarded with lower energy bills and, in many cases, healthy tax incentives that can help cover all or a large portion of the system’s costs over the life of its warranty.

This can create a valuable selling point for buyers and help differentiate properties from similar inventory on the local market.

Modern Buyers Want Energy-Efficiency

These days, people strongly consider monthly electric bills when buying a home. When assessing a property’s long-term financial value, they’re increasingly open to paying more for a solar-ready property.

solar panel installationIn addition to increasing home values over comparable non-solar properties in the area, solar systems provide other financial benefits including:

  • Federal solar investment tax credits (ITCs)
  • State rebates and other incentives such as net metering
  • Replacing standard grid electricity with a potentially cheaper and sustainable option

When it comes time to sell a solar property, homeowners enjoy several benefits, including:

  • Solar homes often sell faster.
  • Buyers view solar panels as upgrades.
  • Sellers usually get a full return on solar investment.
  • Sellers can set higher asking prices than similar properties without solar.

Homeowners with a solar energy system should note that buyers usually want documentation showing that the solar installation was done properly by a reputable dealer. They also typically want documented proof that the solar system is reducing electric bills.

When deciding whether to install solar features, homeowners should know that the overall value of the upgrades go up over time as solar energy becomes more accepted in a city and region. Since Colorado Springs is just beginning to embrace solar, homeowners should expect values to increase over time. This makes investing in solar a wise decision for homeowners who plan to live in their homes for a few more years before selling. At the same time, solar can still be a good way to pique buyer interest and differentiate your property in the current marketplace. At minimum, you should be able to get an equal return on your investment, and you might end up making a profit overall.

With six decades of combined industry experience, The Wheaton Team provides invaluable guidance and expert advice for clients. Specializing in residential real estate throughout Colorado Springs and the Tri-Lakes area, our team can guide you through the complicated buying, selling and financing process, so you can achieve your real estate goals. Contact us today to learn more.

To learn more about solar panels, read our blog on the pros and cons of solar.

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Chances of Another Foreclosure Crisis? “About Zero Percent.”

Chances of Another Foreclosure Crisis? “About Zero Percent.” | MyKCM

There seems to be some concern that the 2020 economic downturn will lead to another foreclosure crisis like the one we experienced after the housing crash a little over a decade ago. However, there’s one major difference this time: a robust forbearance program.

During the housing crash of 2006-2008, many felt homeowners should be forced to pay their mortgages despite the economic hardships they were experiencing. There was no empathy for the challenges those households were facing. In a 2009 Wall Street Journal article titled Is Walking Away From Your Mortgage Immoral?, John Courson, Chief Executive of the Mortgage Bankers Association, was asked to comment on those not paying their mortgage. He famously said:

“What about the message they will send to their family and their kids?”

Courson suggested that people unable to pay their mortgage were bad parents.

What resulted from that lack of empathy? Foreclosures mounted.

This time is different. There was an immediate understanding that homeowners were faced with a challenge not of their own making. The government quickly jumped in with a mortgage forbearance program that relieved the financial burden placed on many households. The program allowed many borrowers to suspend their monthly mortgage payments until their economic condition improved. It was the right thing to do.

What happens when forbearance programs expire?

Some analysts are concerned many homeowners will not be able to make up the back payments once their forbearance plans expire. They’re concerned the situation will lead to an onslaught of foreclosures.

The banks and the government learned from the challenges the country experienced during the housing crash. They don’t want a surge of foreclosures again. For that reason, they’ve put in place alternative ways homeowners can pay back the money owed over an extended period of time.

Another major difference is that, unlike 2006-2008, today’s homeowners are sitting on a record amount of equity. That equity will enable them to sell their houses and walk away with cash instead of going through foreclosure.

Bottom Line

The differences mentioned above will be the reason we’ll avert a surge of foreclosures. As Ivy Zelman, a highly respected thought leader for housing and CEO of Zelman & Associates, said:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

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Is it Time to Move into a Single-Story Home?

Is it Time to Move into a Single-Story Home?

Is it Time to Move into a Single-Story Home? | MyKCM

Once the kids have left the nest, you may be wondering what to do with all of the extra space in your home. Chances are, you don’t need four bedrooms anymore, and it may be a great time to sell your house and downsize, maybe even into a single-story home. You’ve likely gained significant equity if you’ve lived in your home for a while, so making a move while demand for your current house is high could be your best step forward toward the retirement goals you set out to achieve several years ago.

The dilemma, though, is where to go next. A big concern for many homeowners who are ready to sell is finding a home to move into, given today’s lack of houses available for sale. There is, however, some good news: the number of single-family 1-story homes being built today is on the rise, improving your odds of finding the right home for your changing needs. In a recent article, The National Association of Home Builders (NAHB) explains:

“Nationwide, the share of new homes with two or more stories fell from 53% in 2018 to 52% in 2019, while the share of new homes with one story grew from 47% to 48%.”

Here’s a map showing the breakdown of newly constructed homes being built by region, and the percentage of 1-story and 2-story homes in that mix:Is it Time to Move into a Single-Story Home? | MyKCM

What are the benefits of buying a one-story home?

Still not sure about buying a single-story home? An article from Home Talk covers several advantages of switching from two floors to one:

1. Energy Efficient

“It is easier to heat and cool a single-story house [than] it would be to regulate the temperatures of a multi-story house.”

Most single-story homes only need one heating or cooling unit, and they typically stay cooler than a two-story home, both of which can lead to significant savings.

2. Easier to Maintain

“Doing a general cleaning in a single story requires less effort and you will be able to see all areas that need cleaning and the areas are easily accessible.”

Cleaning and maintenance of a single-story home can take less time and effort, and better upkeep helps improve the overall value of the home.

3. Accessible for Everyone

“A single-story house can be accessed by anyone, whether they are young children or the senior citizens.”

If you’re looking for a house that provides a safe and easily accessible environment at any age, a single-story home may be optimal.

4. Good Resell Potential

“When buying a single-story house, you should consider the resale value should you think of reselling it in case of a circumstance that can happen. Look at the growth rate of that area. Due to the high demand of these types of houses it is [easy] to resell them and depending on the growth rate of an area, it increases in value significantly.”

Single-story homes have a lot of benefits and are often in higher demand. This bodes well for future resale opportunities.

Bottom Line

There are many benefits to downsizing into a one-story home. Doing so while demand for your current house is high might make it easier than ever to make a move. Let’s connect if you’re ready to purchase the single-story home you need while homes are so affordable today.

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Why Pricing Your House Right Is Essential

Why Pricing Your House Right Is Essential

Why Pricing Your House Right Is Essential | MyKCM

In today’s real estate market, setting the right price for your house is one of the most valuable things you can do.

According to the U.S. Economic Outlook by the National Association of Realtors (NAR), existing home prices nationwide are forecasted to increase 4.7% in 2020 and 4.1% in 2021. This means experts anticipate home values will continue climbing into next year. Today, low inventory is largely keeping prices from depreciating. Danielle Hale, Chief Economist at realtor.comnotes:

“Looking at the sheer number of buyers, low mortgage rates, and limited sellers, the strength of home prices–which are now growing at the highest pace since January 2018–makes sense.”

When it comes to pricing your home, the goal is to increase visibility and drive more buyers your way. Instead of trying to win the negotiation with one buyer, you should price your house so that demand is maximized and more buyers want to take a look.

How to Price Your Home

As a seller, you might be thinking about pricing your house on the high end while so many of today’s buyers are searching harder than ever just to find a home to purchase. You’re thinking, higher price, greater profit, right? But here’s the thing – a high price tag does not mean you’re going to cash in big on the sale. It’s actually more likely to deter buyers and have them looking at the houses your neighbors are selling instead.

Even today, when the advantage tips toward sellers because there are so few houses for sale, your house is more likely to sit on the market longer or require a price drop that can send buyers running in the other direction if it isn’t priced just right.Why Pricing Your House Right Is Essential | MyKCM

A Trusted Real Estate Professional Will Help

It’s important to make sure your house is priced correctly by working in partnership with a trusted real estate professional. When you price it competitively, you won’t be negotiating with one buyer over the price. Instead, you’ll have multiple buyers competing for the home, and that’s what ultimately increases the final sale price.

The key is making sure your house is priced to sell immediately. That way, it will be seen by the most buyers. More than one of them may be interested, and your house will be more likely to sell at a competitive price.

Bottom Line

If you’re thinking about listing your house this fall, let’s discuss how to price it right so you can maximize your exposure and your return.

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Are Interest Rates Going Down?

are interest rates going down

Mortgage rates play a huge role in determining the cost of a home loan. Recently, rates have been trending downward, creating great opportunities for affordable home loans. Here’s what you should know about current mortgage rates, along with some insight into what drives interest rates higher and lower over time.

How Low Are Current Rates?

A year ago, the benchmark rate of a 30-year fixed-rate mortgage loan was about 4.05%. Since that time, it has been trending downward in a big way. As we head into the third and fourth quarters of the year, rates are hovering at or below 3.5%. This makes now a great time to buy as long as you understand how interest rates affect the overall cost of your mortgage loan.

Why Do Interest Rates Matter?

When you buy a home, the listing price, down payment and closing costs are only a small part of the cost equation. One of the smallest (but most significant) numbers home buyers need to understand is the mortgage interest rate. The interest rate significantly affects monthly mortgage payments and determines the total amount you pay for your home.

In essence, the interest rate on your loan determines how much you are paying every year to your lender for just having the mortgage loan. Basically, lower interest rates mean a lower overall cost for your real estate investment.

For instance, consider a $300,000, 30-year fixed-rate loan with an interest rate of 4.5%. Over the term of the loan, you can expect to pay an extra $247,220 in interest on top of the initial $300,000). You can also expect monthly mortgage payments of about $1,520.

interest rates going downNow, if you were able to get a loan at 3.5 percent, you’d only pay $184,968 in interest, and your monthly mortgage payments would be about $1,347. Although it may not seem significant at first glance, that 1% difference in interest could cost (or save) you around $170 a month and more than $60,000 over the life of your mortgage loan.

In addition to saving you money on a loan, lower interest rates allow you to look at homes that might normally be outside your price range. This is why it’s so important to pay close attention to fluctuating interest rates and strike when an ideal opportunity arises.

How Are Mortgage Rates Determined?

Contrary to common belief, mortgage rates are not actually based on the 10-year Treasury note; they are based on the bond market, meaning mortgage-backed securities or mortgage bonds. Mortgage-backed securities are essentially mortgage loans that are packaged into bundles or groups of securities and then sold in the bond market. The price of these bundled debt securities is driven by global and national news events, which also impacts individual mortgage rates.

While that may sound complicated, it simply means that there are a lot of factors that influence the benchmark rate of 30-year fixed-rate mortgage loans. That said, just because national mortgage rates are low doesn’t mean you can expect to acquire a loan at an affordable rate. There are a lot of other things that work to determine the rate on each borrower’s loan. Individual lenders adjust mortgage rates based on how risky they judge a loan to be. The riskier the mortgage loan, the higher the overall interest rate.

When judging risk, lenders will consider how likely you are to fall behind on payments, and how much money they stand to lose if the loan goes bad. The major factors are loan-to-value ratio and credit score. Lenders may also charge higher interest rates for adjustable-rate mortgages, cash-out refinances and loans on condominiums, manufactured homes, investment properties and second homes because they are viewed as riskier.

Working with an Expert

When it comes to getting the best deal on a home, it’s important to take advantage of low interest rates. It’s also important to have an expert in your corner to help you make important decisions and navigate the complex home buying process.

With 60-plus years of combined real estate experience, The Wheaton Team specializes in residential real estate throughout Colorado Springs and all of El Paso County. Our considerate team of seasoned professionals can guide you through each step of the buying and financing process, so you can find the home you’ve always dreamed of. To learn more, contact us today!

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