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Importance Of Homebuying Pre-Approvals
While Most Buyers Dive Right into the List of Homes to View…I have my clients start with getting pre-approved for their home purchase. It is the first step in setting the things up for the process ahead…and you need to be ready especially in this current market and the article below from Keeping Matters Current explains why…
You may have heard that pre-approval is a great first step in the homebuying process. But why is it so important? When looking for a home, the temptation to fall in love with a house that’s outside your budget is very real. So, before you start shopping around, it’s helpful to know your price range, what you’re comfortable within a monthly mortgage payment, and ultimately how much money you can borrow for your loan. Pre-approval from a lender is the only way to do this.
According to a recent survey from realtor.com, many buyers are making the mistake of skipping the pre-approval step in the homebuying process:
“Of over 2,000 active home shoppers who plan to purchase a home in the next 12 months, only 52% obtained a pre-approval letter before beginning their home search, which means nearly half of home buyers are missing this crucial piece of paperwork.”
This paperwork (the pre-approval letter) shows sellers you’re a qualified buyer, something that can really help you stand out from the crowd in the current ultra-competitive market.
How competitive is today’s market? Extremely – especially among buyers.
With limited inventory there are many more buyers than sellers right now, and that’s fueling the competition. According to the National Association of Realtors (NAR), homes are receiving an average of 2.9 offers for sellers to negotiate, so bidding wars are heating up.
Pre-approval shows homeowners you’re a serious buyer. It helps you stand out from the crowd if you get into a multiple-offer scenario, and these days, it’s likely. When a seller knows you’re qualified to buy the home, you’re in a better position to potentially win the bidding war and land the home of your dreams.
Danielle Hale, Chief Economist for realtor.com notes:
“For ‘a buyer in a competitive market, it’s typically essential to have pre-approval done in order to submit an offer, so getting it done before you even look at homes is a smart move that will enable a buyer to move fast to put an offer in on the right home.’”
In addition, today’s housing market is also changing from moment to moment. interest rates are low, prices are going up, and lending institutions are regularly updating their standards. You’re going to need guidance to navigate these waters, so it’s important to have a team of professionals (a loan officer and a real estate agent) making sure you take the right steps along the way and can show your qualifications as a buyer at the time you find a home to purchase.
Bottom Line
In a competitive market with low inventory, a pre-approval letter is a game-changing piece of the homebuying process. If you’re ready to buy this year, let’s connect before you start searching for a home.
Source: “Why Is It so Important to Be Pre-Approved In the Homebuying Process” Keeping Current Matters (August 21, 2020)
Strong Real Estate Market Indicates Good News
This is good news!...A strong Real Estate market compared to those years ago is trending towards lower forbearance numbers than those anticipated…which means less foreclosures on the horizon due to the shutdown this year. Current conditions…this is not a housing crisis. The real estate market keeps moving forward.
A recent article by Keeping Matters Current shows why this is so.
Originally, some housing industry analysts were concerned that the mortgage forbearance program (which allows families to delay payments to a later date) could lead to an increase in foreclosures when forbearances end. Some even worried that we might relive the 2006-2008 housing crash all over again. Once you examine the data, however, that seems unlikely.
As reported by Odeta Kushi, Deputy Chief Economist for First American:
“Despite the federal foreclosure moratorium, there were fears that up to 30% of homeowners would require forbearance, ultimately leading to a foreclosure tsunami. Forbearance did not hit 30%, but rather peaked at 8.6% and has been steadily falling since.”
According to the most current data from Black Knight, the percentage of homes in forbearance has fallen to 7.4%. The report also gives the decrease in raw numbers:
“The overall trend of incremental improvement in the number of mortgages in active forbearance continues. According to the latest data from Black Knight’s McDash Flash Forbearance Tracker, the number of mortgages in active forbearance fell by another 71,000 over the past week, pushing the total under 4 million for the first time since early May.”
Here’s a graph showing the decline in forbearances over the last several months:
The report also explains that across the board, overall forbearance activity fell with 10% fewer new forbearance requests and nearly 40% fewer renewals.
What about potential foreclosures once forbearances end?
Kushi also addresses this question:
“There are two main reasons why this crisis is unlikely to produce a wave of foreclosures similar to the 2008 recession. First, the housing market is in a much stronger position compared with a decade ago. Accompanied by more rigorous lending standards, the household debt-to-income ratio is at a four-decade low and household equity near a three-decade high. Indeed, thus far, MBA data indicates that the majority of homeowners who took advantage of forbearance programs are either staying current on their mortgage or paying off the loan through a home sale or a refinance. Second, this service sector-driven recession is disproportionately impacting renters.”
There is one potential challenge
Today, the options available to homeowners will prevent a large spike in foreclosures. That’s good not just for those families impacted, but for the overall housing market. A recent study by Fannie Mae, however, reveals that many Americans are not aware of the options they have.
It’s imperative for potentially impacted families to better understand the mortgage relief programs available to them, for their personal housing situation and for the overall real estate market.
Bottom Line
If Americans fully understand their options and make good choices regarding those options, the current economic slowdown does not need to lead to mass foreclosures.
Source: ” Forbearance Numbers Are Lower Than Expected” Keeping Current Matters (August 21, 2020)
Are You Ready To Take The Leap For A New Home?
First time home buyers leaping ahead… and I am ready to help you through the process…First time home buyers are proving to take advantage of the current interest rates, which have been around 3%. it’s a great time to buy if you are renting and paying your landlord’s mortgage. For the same rental amount and possibly less you can purchase the security of being able to live in your home as long as you so choose.
Here’s an article by Realtor.com and about First Time Home Buyers
July 23, 2020By: Scholastica (Gay) Cororaton
First-time buyers accounted for 35% of existing homes sold in June 2020, according to the latest Realtors® Confidence Index (RCI) Survey report, a report based on a monthly survey of Realtors® about their transactions during the month.1 The share of first-time buyers increased in March through June—right into the heart of the pandemic period and the surge in unemployment—and is now trending higher than the 29% to 32% average in past years since 2012.
Why the rise in home buying? The major factor is, arguably, low mortgage rates. As of the week ended July 16, the 30-year fixed mortgage rate dropped to 2.98%. With rates so low that are locked in under a 30-year mortgage, the typical mortgage payment, estimated at $1,036, has fallen below the median rent, at $1,045. For potential home buyers who were thinking of purchasing a home anyway before the pandemic outbreak and who are likely to remain employed, the low mortgage rate may be the clincher.
Below, I show the savings from mortgage payment versus rent in a low mortgage environment (~$178,000) and the price appreciation gains from owning a home over the past 30 years (~$168,000). It is no wonder that homeownership is a pathway to wealth accumulation.
Savings from lower mortgage payment over 30 years: $177,500
In June, the 30-year fixed-rate mortgage averaged 3.16%. At this rate, the mortgage payment on a single-family home worth $298,600 (median price) financed with a 20% down payment and a 30-year mortgage is $1,036, which is slightly lower than the median rent of $1,045 in the second quarter of 2020.
Not only is the mortgage payment lower – it will remain so for the next 30 years while rent payment won’t stay the same. If we assume that rent will rise at 2.5% annually, the rent on the 30th year will have doubled to $2,128. The annual difference in mortgage payment and rent starts off at $107 in the first year, but by the 5th year, the savings rise to $1,409 per year, and then to $3,228 on the 10th year, and to $13,328 on the last year. The fact that mortgage rents are fixed while rent rises are one of the causes of the wealth built from homeownership, not counting the equity gain from homeownership.
Typical home equity (appreciation gains) in past 30 years: $167,521
In addition to savings from a lower mortgage payment compared to renting, there is the gain from home price appreciation. Prices fell during the Great Recession but recovered strongly since 2012. Since 1989 through 2019, home prices have appreciated nationally by 77% based on the S&P Core Logic Case Shiller Home Price Index.3 So, if one bought a home in 1989 at $94,308, that home will be worth $261,829 in 2019, or an equity gain of $165,521.
Mortgage rates are expected to remain low for at least a year or two as the Federal Reserve Board keeps rates low to get the economy growing and bring back lost jobs, with nearly 18 million people still out of work. This means that home buying demand is likely to remain strong, with demand coming from first-time buyers, especially millennials who are in their home-buying years. For this to be sustainable, housing starts need to rise again to around 1.5 million, the rate of housing formation. Housing starts fell below 1 million after the economic lockdown delayed permitting and certification.
1 NAR’s 2019 Profile of Home Buyers and Sellers reported that the annual share of first-time buyers was 33%.
2 Social distancing regulations have been concentrated in wholesale/retail trade, hospitality/leisure & transportation ( 40% of unemployed workers) and they have a lower homeownership rate compared to the overall homeownership rate).
3 This is a repeat price index so the appreciation captures changes in sale prices of houses sold with similar physical characteristics.
Scholastica (Gay) Cororaton
Research Economist
Scholastica Gay Cororaton is the Research Economist for the National Association of REALTORS®.
Dont’ Be Left Out To Dry
There are 2 sides to this housing market…Present conditions can be considered a buyer’s and seller’s market. Many have coined this summer as a “seller’s market” due to lack of inventor causing the rise of home prices, however, I still see it as a buyer’s market due to record low interest rates, allowing many more buying power for homes that were once unattainable a reality…what are your thoughts?
Here is an analysis by RISMEDIA.
Over the past three weeks, the housing trends have stayed on the same track, according to realtor.com®’s latest Weekly Recovery Report. Overall, new listings are down, but the number of total listings has remained relatively flat. In addition, median listing prices are trending up, while days on market are slowing down a bit. The Index reached 98.5 this week—a 0.7 point increase over last week and just 1.5 points below the pre-COVID baseline.
Here’s the market breakdown for the week ending July 11:
New Listings: -19 percent YoY
Median Listing Prices: +7.9 YoY
Total Listings: -32 percent YoY
Days on Market: 1 days slower YoY
What’s happening at the local levels? In the West, the index marked 104.6, leading in recovery. The Northeast crossed the recovery baseline last week and is now at 102.6. The South and Midwest are still lagging behind at 96.3 and 95.3, respectively. A total of four additional markets crossed the recovery benchmark this week, adding up to 18 markets overall. The greatest recoveries are happening in Seattle, Boston, Denver, Philadelphia and New York.
“Today’s market remains tipped in favor of sellers as would-be spring buyers are shopping well into what would normally be summer vacation season,” said Danielle Hale, chief economist for realtor.com®. “Homebuyers, trying to take advantage of record-low mortgage rates and make up for lost time, are finding limited and more expensive options. Although sellers are slowly acclimating to this unexpected surge in buyer interest, inventory is still lagging behind demand which is driving quick time on market and listing price growth on par with this time last summer.
If you are looking to be kept current on your local real estate market conditions, contact me at 732-995-5609 / NJHomesbyRoslyn.com
Source: ” Inventory Remains a Challenge, But It’s Not Stopping the Market Rebound” RISMEDIA (July 18, 2020)
Outdated Homes…Still Attractive
Home inventory shortage causing competitive offers for homes still needing updating...Unlike the usual scenario, many get their homes ready with some moderate updating to stay at an even keel with the competition. Lately, many are foregoing the “turn key” home giving themselves more options.
Realtor Magazine elaborates on this change.
The COVID-19 pandemic has prompted many residents to rethink their home and priorities, nudging some residents to leave city abodes in favor of the suburbs and more space. With a limited number of homes for sale, many sellers are fielding competitive offers and bidding wars as some Americans look to relocate. And those looking to move quickly may be willing to make greater compromises in their preferences than they were just a few months ago.
“Sellers are realizing the sudden new demand—it’s like catching lightning in a bottle,” Jaime Sneddon, a broker with William Pitt Sotheby’s International Realty in New Canaan, Conn., told The New York Times.
The New York Times recently called out five trends from the coronavirus pandemic that are changing suburban real estate, and spotlighting the trend that some buyers may be getting less picky under such limited housing choices.
Move-in ready homes are still high in demand, but buyers may not be so quick to dismiss those that need a little more TLC as they may have done so in the past.
“Younger buyers have really not wanted to take on renovation projects, so if a house wasn’t move-in ready, it would take longer to sell and would sell at a discount,” Jeffrey Otteau, president of the Otteau Group, told The New York Times. “It sill has an effect on the selling price of a home, but the need for work is no longer an impediment to sale.”
There may be a tradeoff that more buyers may be willing to make, such as accepting a dated kitchen or bath in order to get something else on their wish list like a swimming pool, Cyd Hamer, a real estate professional in William Pitt Sotheby’s Westport office, told The New York Times.
Ann Hance, an associate broker with Daniel Gale Sotheby’s International Realty in Manhasset, N.Y., says she listed on June 12 a a dated three-bedroom colonial for $1.599 million. “It’s a house that needs work,” she acknowledges. “It’s got a great backyard and nicely scaled rooms, but it needs updating.” She says she received seven offers that weekend and the home is set to close for “substantially more than the list price and it’s all cash.” “This wasn’t the case in 2019,” she adds.
To be kept updated on the lastest home buying trend designs, contact me at 732-995-5609 / NJHomesbyRoslyn.com
Source: “‘Dated Homes’ No Longer a Deal Killer?” Realtor Magazine (July 19, 2020)
Keeping You In The Know-Freehold Township
Another Step Forward for openings-Freehold Township Recycling Drop-off Resumes….Freehold Township will resume normal hours at the drop-off center, located at 66 Jackson Mills Road, this week. Proof of residency needed only.
For addtional information, go to….Freehold Township Recycling
Not a Freehold Township resident? Visit the Monmouth County Reclamation Center (main entrance) located at 6000 Asbury Avenue (west of Shafto Road), Tinton Falls, NJ 07724.
EDGE Scholarship Applications-Open Until 4/3/2020
Who Has the EDGE?…Now it is our time to give back! I am happy and proud to be part of SOMETHING BIGGER and a company that cares about giving back to our communities. Do you know of a NJ College Bound Senior who can use some extra $ toward college tuition?? Having a daughter attening college , I understand the value of opportunities offered. What a great way to begin their college career. Have questions or would like for me to mail you an application…just contact me at 732-995-5609/ NJHomesbyRoslyn.com
Edgescholarship.com
Keeping You In The Know
How Did Your County Measure Up with Home Sales?… Let me keep you on current with periodic updates about the housing market in your area. You can reach me at 732-995-5609 / NJHomesbyRoslyn.com. I am always happy to keep you in the know.
Happy Veterans Day
Thanking All Who Have Served…We are grateful for YOU-preserving our Freedom in this Great Country. We Thank you Today and Always!
Daily Brew Or Home For You?
It’s the little things that makes a difference…and there is not much keeping you from home ownership. A little here and there can go a long way..all the way down the front walkway to your home. Interested in knowing how to get there, just contact me and I will guide you to your perfect home…step by step. Call me at 732-995-5609 / NJHomesbyRoslyn.com. Have your next brew in your new kitchen!
