What Causes Home Prices to Fluctuate?

The median sales price of a house in the United States is currently between $188,900- $279,500. There is such a large price range because many different factors can play into a home’s sales price. If you are looking to buy or sell soon, keep the following factors in mind when determining costs.

The price of a home can vary depending on the location. A more populous area, like a downtown neighborhood or a highly sought after suburb, can boost the sales price because there is a high demand of borrowers wanting to live there. A less popular area, or even an up-and-coming neighborhood, may show lower home prices, even if the homes are similar in size to those in more expensive areas.

The season may also have an impact on home prices. Once the spring buying season starts heating up, there will be a larger demand for homes to purchase. Prices may also increase because there is a higher chance the home will be bought. With a hot buying market, bidding wars may ensue, which can also increase the price of a home. In colder seasons home prices may decrease since less people are shopping for a new home. Since the demand is low, sellers may consider a lower price tag, giving way to a better deal for borrowers.

A strong or weak economy can also impact home prices. When a strong economy is present, individuals and families may have a more secure financial mindset. With this in mind, buyers are more likely to feel comfortable obtaining a larger mortgage, which could lead to higher home prices. In an unstable economy, prices tend to be lower.

If you aren’t sure whether now is a good time to buy a new home, get in touch with one of our loan officers to learn more about the current market. We are happy to help and answer any questions you may have.

FED Says No More Hikes

Recently, the Federal Reserve decided to hold interest rates steady and indicated that no more hikes will be coming this year. This is very encouraging to homebuyers looking to purchase a new home or to refinance their current mortgage.

Mortgage rates have been hovering around their lowest levels in more than a year, which in turn has seen an increase in the number of mortgage applications recently. Lower mortgage rates could potentially mean lower monthly payments for homebuyers, and less total interest spent over the life of the loan.

If you previously purchased a home with a high interest rate, it may be a good idea to speak with your loan officer to see if refinancing would be beneficial to you. You could save monthly and even possibly pay off your mortgage sooner. With the current low mortgage rates, the Refinancing Index was at its highest rate since January 2016.

Since mortgage rates have been so favorable the past few months, it is forecasted to be a strong spring buying season. With the current low rates and the abundance of products and programs First Home offers, it is possible to get a great deal on a home this year! Please reach out to a loan officer near you to discuss all your options.

Fed’s Halt on Rising Rates

The week of January 27, 2019, the Federal Reserve had their 2-day rate-setting meeting and decided not to raise interest rates. Although the Fed does not directly affect long-term mortgage rates, this is a positive outcome for borrowers looking to purchase a new home or refinance to a lower fixed-rate.

Mortgage interest rates have been slowly declining over the last few months which is a good sign for buyers. The 30-year fixed rate mortgage average was 4.45%, having stayed at that level for three straight weeks, and the Fed’s choice to leave interest rates unchanged could keep mortgage rates steady.* Lower interest rates could mean lower monthly down payments for homebuyers, and less total interest spent over the life of the loan.

The Federal Open Market Committee (FOMC), which decides the Fed’s rate policy, said in its statement, “In light of global economic and financial developments and muted inflation pressures, the Committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate to support these outcomes.” **

It is hard to predict what will happen in the upcoming months, but for now, things are looking bright for homebuyers. Please reach out to any of our Loan Officers if you have any questions, we are always here to help.

 

*Passy, J. (January 31, 2019) So the Fed left interest rates unchanged, but what does that mean for you? https://www.marketwatch.com/story/5-things-consumers-should-watch-for-now-that-the-fed-has-not-raised-rates-2019-01-30

**Foster, S (January 30,2019) A ‘patient’ Federal Reserve signals it’s done raising interest rates — for now. https://www.bankrate.com/banking/federal-reserve/fomc-recap/

Maximum Conforming Loan Limits Announced for 2019

The Federal Housing Finance Agency (FHFA) announced the maximum conforming loan limits for mortgages to be acquired by Fannie Mae and Freddie Mac in 2019. Starting January 1, 2019, in most of the U.S., the maximum conforming loan limit for one-unit properties will be $484,350, an increase from $453,100 in 2018.

FHFA’s house price index data indicate that house prices increased 6.9 percent, on average, between the third quarters of 2017 and 2018. Therefore, the baseline maximum conforming loan limit in 2019 will increase by the same percentage.

For areas in which 115% of the local median home value exceeds the baseline conforming loan limit, the maximum loan limit will be higher than the baseline loan limit. The new ceiling loan (Conforming Jumbo) limit for 1-unit properties in most high-cost areas will be $726,525 — or 150% of $484,350.

If you have any questions, please reach out to one of our loan officers.

 

Why Is a Home No Longer Pending?

A pending sale means the seller has accepted an offer but the deal hasn’t closed yet. A property is placed in pending status when the contract is executed; when the contract is executed, in other words, the property is no longer defined as an active listing. A home will remain pending until all legal work has been processed and the loan closes. If your dream house is currently listed as pending, don’t lose all hope. Some sellers will still allow offers to be made on the house, just in case the deal falls through. Here are a few reasons a deal may fall through.

Finances

Homebuyers are often not aware of how an innocent transaction, such as making a large credit card purchase or moving cash from one back account to another, can jeopardize the mortgage process. Applying for any new kind of credit or accruing any new debt can affect your eligibility to continue with the loan. If any type of financial transaction is made that disqualifies you from continuing with the loan, the pending sale will fall through and the home will likely go back on the market. Always discuss your financial situation with your loan officer during the loan process.

Title Issues on the Property

Once a contract has been written up and the buyers start the loan process, title work on the property will be reviewed. Sometimes there are delinquent liens/bills on the property from the current owner, among other issues, that can affect closing. If the liens are not taken care of by the seller and cleared from the title, a lender will not allow the sale to go through. Errors of public records on title work can also stop a sale from continuing. Clerical or filing errors of the deed or survey of the property can cause financial strain to resolve, so they are not taken care of and the sale falls through.

‘Subject To’ Conditions

A smart buyer will have a property inspection done on the house before closing. An inspector will take a look at the foundation of the house, roof, attic, appliances, and list of other items to make sure everything is in working condition. If issues are found in the house that need to be fixed, the borrower may list “subject to” or “contingent upon” conditions on the contract. If these items are not fulfilled by the seller, the borrower is allowed to exit the contract, thus removing the pending status.

While it is not common for a deal to fall through once a contract is written up, it could happen. It’s a good idea to still follow the sale of the home and keep it in the back of your mind. Contact one of our loan officers if you have any questions, they will be happy to help!

How to Win in a Competitive Market

It’s a seller’s market in the mortgage world these days. That means there are more buyers looking to purchase homes than there are homes for sale, giving way to some strong competition. Properties may be going off of the market more quickly since there is higher interest, and they may be selling for more than the asking price. So how are you supposed to beat out the competition? Take these tips into consideration the next time you find yourself in a seller’s market.

Be proactive.

Homes may go off the market lightning fast in a seller’s market, so be ready to act fast. Research houses in your preferred neighborhood a few months before you are ready to buy to get a feel for the market. This will help you determine what the typical price range is and how quickly homes are sold. When you are ready to purchase and have found a home, if possible, try and schedule a tour before the weekend open house. This will give you an advantage over other buyers to put in an offer before they even see the house.

Get pre-approved.

When buying in a competitive market, you should always be as prepared as possible. First, start by getting pre-approved. Getting pre-approved shows the seller you are serious and ready to buy. Having your finances in order indicates you have the means to purchase the house and won’t need to back out of the contract for financial reasons. Your pre-approval letter will show how much you can afford and what type of mortgage is best for you.

Make a strong offer.

Bringing your strongest offer to the table may save time by eliminating a negotiation period or bidding war. A seller may not want to deal with the hassles of negotiating, so if you present a solid offer, it may have a better chance of being accepted right away. Also, bringing your strongest offer will save you time, and probably money, by taking you out of a bidding war. Presenting an offer that is much lower than the asking price could deter the seller and they will take your offer right off the table. If you have done your due diligence, you will know the best offer to make.

Get personal.

Writing an additional letter to the seller, along with your offer letter, may help you stand out against other buyers. If you plan on making the house your forever home, write a formal letter to the seller explaining how you envision your family in the home. Maybe you see yourself cooking breakfast for your family every morning in the kitchen, or describe how you can see your kids playing in the backyard on sunny days. Adding a personal touch to your offer may give you an advantage over your competition.

It’s a tough market out there right now, but with the right mindset and game plan, you will be enjoying your new house in no time!

If you are ready to get started, contact one of our loan officers.

Tiny House, Large Living: The Tiny House Movement

Living large doesn’t necessarily mean owning a mansion and filling it with an abundance of possessions. Just ask those who have joined the tiny house movement. You may be asking, what exactly is the tiny house movement? The latest trend involves homeowners downsizing to a home, generally measuring 400 square feet or less. Small, right? How can one live in such a small space? It’s definitely a lifestyle change and it’s not for everyone, but those who have joined this movement have benefited big time!

So why would someone choose this lifestyle? There are many benefits to going tiny. Affordability is a major factor; the cost of a tiny home is substantially cheaper than a normal-sized home. Typically, tiny homes can range from $10,000-$50,000 depending on the type of home, amenities and if you build it yourself or purchase a pre-built home. That is a fraction of the cost of an average house in the suburbs. The cost of upkeep of a tiny home tends to be less as well since there is less square footage to maintain.

Going tiny can also simplify your life. Since your home is smaller, there is less room for material items and possessions. Freedom from objects will allow you to focus on experiences and connecting with people and nature rather than focusing on “things”. The less time you spend focusing on things, the more time you can focus on yourself and finding activities that make you happy.

Another benefit of going tiny is being more mobile and not tied down to one location. Some tiny homes can be placed on a trailer bed and towed and some are fixed on wheels. Either option lets you travel often and experience adventures you may not have been able to if you were tied down with a non-mobile home or a large mortgage payment.

Sounds great so far, doesn’t it? While there are many advantages of a tiny home, they do have a few drawbacks as well. Some states and/or counties have their own set of strict rules regulating where owners can place/park their tiny homes, making it difficult to stay in one place for a long period of time. Their small size creates limited storage areas, so renting a storage unit may be an additional cost homeowners need to budget for. If you decide to grow your family and need to move out of your tiny home, there is a very small market for tiny home buyers, so selling could be an issue.

As mentioned before, tiny house living isn’t for everyone, but those who choose to live this lifestyle have the financial and personal freedom to live how they want and where they want.

Open House Red Flags

You have found a few properties online that you love and notice they are having open houses soon, great news! The pictures certainly make the house look perfect, but seeing the house in-person will give you an opportunity to see its true appearance. When attending an open house, it is important to look past the sparkling new kitchen appliances and really focus on the bones and details of the home. By doing this, you will be able to identify any red flags that may raise concern. Be sure to pay attention to the following items.

Nearby Properties for Sale

Right off the bat, one of the first things you should notice is how many other properties are for sale in the neighborhood. If there are a handful of other homes for sale, this could be a sign the area is undesirable or possibly becoming unsafe. If you are still interested in the property after the open house, drive by the home at different times of the day to get a feel of the neighborhood.

Condition of the Roof

Another one of the first things you should examine is the roof. If there are shingles missing or it looks like shoddy repair work has been completed, it may lead to leaking which could be costly. Once inside, ask the agent if there have been any roofing issues and examine the ceiling for signs of leakage.

Smell/Scent of the House

If you smell any kind of musty or mildew smell, this could be an indicator there are leaks or mold present. Mold and water damage can hit your wallet hard if they are not taken care of immediately. Also take note if the house has a severely strong smell of air fresheners; the sellers could be trying to blanket a foul odor.

Electric and Lights

When walking through the home, make sure all the light switches and outlets work. Electrical problems can be a huge inconvenience to new homeowners, causing financial worries and even safety hazards. Also take notice if you switch on a light or appliance and another light dims or an appliance falters, there could be an underlying issue.

If you want to make an offer on the house but are concerned about some red flags, there are some things you can do about it. You are able to negotiate with the seller and see if they will repair the issues. Minor problems like chipping paint or damaged hardware may be easy fixes for sellers and will save you some money and time in the future. If larger issues like landscaping hazards or a damaged roof is worrying you and the seller will not fix it, consider a renovation loan. A renovation loan allows you to combine home improvement costs into your mortgage, fixing the repairs.

Bottom line- if you are seriously interested in a property, inspect everything at the open house so you can address any issues in advance.

Will Your Home Value Sink or Swim?

It’s been a long, hot summer so far; thank goodness for that backyard swimming pool to cool you off! There’s really no better feeling than walking out your back door and jumping in your own swimming pool. But what happens to that tropical paradise when those cold, winter months roll in? And when it comes time to sell your home, is your pool adding value to your home or hurting the resell value? Many factors can come in to play when deciding if a pool will increase or decrease your home’s value.

How much use do you get from the pool?
If you live in an area where it is warm for most of the year, then a pool may be a good investment. Keeping up with the maintenance costs won’t seem like as much of a burden when you are actually using the pool. However, if you live in an area where only 3-5 months of the year are suitable for swimming, it may be a turn off to keep up with monthly costs.

How does your house compare to your neighbor?
If you live in a neighborhood where most of the homes have pools, then having your own pool could increase your home’s value. Since this is a desirable feature in the area, when ready to sell your home, it will probably be a little bit easier. If you live in a neighborhood where pools are uncommon, or there is a great community pool down the street, it may not make sense to have one in your backyard.

Is an in-ground pool better than an above-ground pool?
In-ground pools have the potential to add more value to your home than above-ground pools. An in-ground pool will typically last longer and require less refurbishing every few years. Since above-ground pools can be easily dismantled and removed, they most likely will not add any extra value to your home. If selling your home, potential buyers might see an above-ground pool as an eye sore, especially if there is no landscaping surrounding the pool to help it blend more easily into the backyard.

Has the pool been property maintained?
Pool maintenance costs can add up, but it may be more costly to you if you don’t keep up with proper care. A well maintained pool will look attractive to potential buyers, making your entire home more sellable. Neglecting to take proper care of your pool may make it harder to sell your home because it would be an added expense and hassle for the new owners. If a pool is in poor condition, it could decrease the value of your home.

If you are looking to purchase a home that already has a swimming pool, or are thinking of adding a pool to your own backyard, take the above factors in to consideration. Try not to think of a swimming pool as an asset to your property, but rather an added value to your lifestyle and personal enjoyment.

7 Reasons to Own a Home

For most, it is the American Dream to own a home.  It has always been an important milestone of adulthood.  But as a first-time home buyer, how do you know it is the right thing to do?  Besides the obvious benefits of owning a home, here are additional advantages of owning rather than renting.

Tax Benefits

The bulk of your house payment each month goes toward interest.  Mortgage interest is tax deductible unless your mortgage loan is greater than $1 million.   You can also deduct the property tax your lender pays on your behalf.

Appreciation

Over time, houses generally go up in value.  A $200,000 house after 30 years becomes a $545,313 house.  According to the Price-Shiller Index, existing homes increased 3.4% annually on average from 1987 to 2009.  Over a 30-year period, this increase is a big deal.

Equity

Equity is the difference between the home’s value and how much is owed to the mortgage lender.  The reduction of your mortgage every month increases your equity and builds interest in your home.

Savings

Having a mortgage is having a forced savings plan.  When you pay your mortgage every month, you are ultimately being forced to save because you are building more valuable equity in your home.  Making an extra payment on your mortgage each quarter could potentially save you money on interest resulting in your loan retiring earlier.

Predictability

As a borrower, you are able to accurately predict your future payments with a fixed-rate mortgage.  Your interest rate doesn’t fluctuate during the loan period, keeping your payments relatively the same.  Rent payments are unpredictable and may rise every year.

Freedom

Owning a home gives you the freedom to do what you want with it, especially aesthetically.  Decorate it how you please, paint whatever color you’d like and upgrade amenities that suit your sense of style.

Stability

You are officially planting your roots in an area you choose that benefits you and your family the most.  From here, you will build long-lasting relationships with your neighbors and will offer the benefit of life-long friendships and education continuity to your children.

 

Want to learn more about the home buying process? Contact a First Home Loan Officer today!

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