Category Archives: News & Trends

Real Estate News & Market Trends

Home-ownership: What Will Be Our Policy or Lack Thereof?

The crisp autumn air is among us and swirling around our homes and places of work. We are also in an increasingly popular and publicized presidential primary season. As the candidate’s campaign and debate, one of the country’s largest topics has been largely ignored, housing. I know we have a lot of important immediate issues! Extreme conflicts all over the Middle East, immigration, Russia, China, the economy, etc. However, housing is very important for our quality of life of our country and driver of our economy. 19834607_s

We currently are at a lower home ownership rate than we have been in decades. Traditionally housing accounts for around 18% of GDP, currently it accounts for 15%, since the crash.

Politicians have spoken often about income inequality, but somehow have left one of the key indicators and way for upper mobility out of the equation. Housing has been a way for many to produce wealth. However, there is not enough supply of affordable housing for entrants into the housing market.

More than half of renters pay over 30% of their income on housing costs. Affordable housing is vital to a vast array of people all over the country. With the aging population, health care costs rising, and the viability of social security at risk, where will retirees live afford-ably in the coming decades?

The policies and decisions now will affect our countries well being for years to come! Critics may say that our government’s promotion of home ownership caused the crash and situation that we are currently in. It however was not the promotion of individuals being homeowners that caused the crash, it was the deregulation of commercial banks becoming investment banks, the lack of regulation of government sponsored entities, and private sector short term profit philosophy that were the main contributors to the crisis.

What may that look like in policy, it can mean many things, and varies by the area of the country and specific factors? It could mean larger first time home buyer credits, subsidizing or promoting mixed used developments, co-operatives, crowd funding, rezoning, etc.

So I ask that you keep this issue front of mind. That you talk about it with friends and family. That you write or speak with your local elected officials. We are a very intelligent country, so let’s do the right thing proactively, rather than re-actively so that we can build the country of the future that many can own a slice of.

I would love to hear all your wonderful ideas about housing, please share!

U.S. Housing Bubbles

Looking back at the last 150 years of the US Housing market, it has had a consistent pattern of about every year 18 years peaking real estate sales and prices followed by declines. This coincides to real estate construction peaks driven by land speculation encouraged by the banks and fiscal policy with inappropriate credit creation.

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In 2001, I first noticed the most recent housing bubble, but did not predict it would grow so big and last so long. In the summer of 2005 the market activity peaked, but home prices continued to rise for another year. Inventories were rising in 2006, yet prices continued to rise.

Housing bubbles can be caused by many factors. Some include speculative fever, historically low interest rates, lax lending standards, tax policies (such as exemptions of housing from capital gains), and failure of regulators to intervene among others. Bubbles in certain markets can be caused by bubbles in other markets. The fiscal policies to stimulate the economy after the 90s dot-com bubble had the Fed drop interest rates to a low 1% flooding the U.S. economy with cheap money, with much of it ending up in the real estate market.

House Under Water

Already again, starting in 2012, a new housing bubble is forming in the western United States, especially in California. However, in most markets I predict the rapid appreciation seen since 2012 will slow. One indicator of housing value is the price-to-rent ratio. Measuring the cost to rent versus the cost to own, this ratio indicates the demand overall for housing. Pre-bubbles the price of housing is much higher than the price to rent, showing that the demand for shelter is not in fact rising at the rates home prices are rising. Currently the price-to-rent ratio is near its long-term average, which should result in lower price appreciation. The Fed talking about raising interest rates, yet the devaluation of the Chinese currency and the credit problems in Europe are some of the many competing factors in the Fed’s mind.

Current homeownership rates are also near their long-term average of 65%. In the past the government felt that there was not such a thing as too much homeownership. Now with the recent lessens of the dangers of pushing homeownership to quickly, one would think that a more moderate approach will be taken going forward. Housing wealth (value of all homes in U.S.) to GDP has historically averaged about 1.4 times the GDP, it has recently returned to this ratio. Another indicator that the real estate appreciation will slow, is that investor activity has slowed with one indicator being the recent decline of cash buyers in most of the biggest metropolitan areas.

We are all influenced by the real estate market. Please write me with your comments, ideas, questions, concerns, solutions, and more. One of the main things the largest housing bubble in the history of the United States has taught us is that citizens can’t watch from the sidelines and hope that financial institutions and the government is correctly regulating the market. We all need to have our eye on the pulse as the repercussions are too great to let it happen again!

Round 2: Knocked Down but Not Knocked Out

Between 2006 and 2009 about seven million home owners had trouble repaying their mortgage, according to TransUnion, one of three major credit reporting agencies. 2006 being the year prices began to decline and 2009 when the bubble burst. However, this group of people have since diligently worked to meet the qualifications to again secure a mortgage and re-enter the coveted homeowner group. In this year alone (2015) 700,000 United States consumers will be capable of re-entering the housing market. This group, called “Boomerang Buyers”, is expected to grow to 2.2 million (out of the 5.7 million former homeowners) within the next five years.

Mortgage eligibility varies among lenders, so contacting an experienced mortgage broker or real estate agent that knows the standards and products in the mortgage market is highly recommended. Minimum requirements to re-enter the mortgage market generally include: a 620 FICO credit score; no garnishments, outstanding liens, or unpaid judgements; no past due accounts; and four years from a short sale and seven years after a foreclosure.

The boomerang buyers are often unaware that they may qualify to purchase a home again or have a lasting after-taste from their unfortunate experience. Fortunately there are low cost services that can help a person interested in improving their credit. Credit can be monitored for free on websites such as Credit.com. If you are working toward improving your credit score, remember to keep your balances of revolving lines of credit as low as possible, pay your bills so they are not sent to collections, and make loan and credit card payments on time.

Please write about your experience with the housing bubble, re-entering the housing market, or any questions or comments you may have. I am available to help anyone look into financing, plan their entry or re-entry to the housing market, and many related subjects. With the right people on your side your interests will be protected and your home sale or purchase will meet or exceed your needs.

Time is Valuable: Use the Right Real Estate Applications For You

Applications such as Zillow, Trulia, Realtor.com, etc., have been great to educate Real Estate consumers and sellers with what is available on the market, ancillary services, and many other facets to Real Estate. Beyond these common services were you aware of the vast and constantly growing world of Real Estate applications that exist? The Real Estate industry has been slower to adopt and embrace the growth of technology and investments in it had lagged many other industries. Not anymore. In the 4th quarter of 2014 $300 Million was invested in Real Estate Technology. Some of it is happening in fast growing economies of China (Fangdd.com, 80M) and India (CommonFloor.com, 63 M), but there is also a lot of investment in United States Real Estate technology.

Some include UrbanCompass.com (Online property search in NYC and DC), Fundrise.com (Real Estate crowdfunding), Thestorefront.com (short term retail rental space), Breather.com (Work or Relaxing Hourly Rental Space) and many more just starting or on the horizon. Many of these new ventures have been spearheaded by Real Estate professionals themselves by finding solutions to common problems they say in their day to day practice.

Personally as an agent many of these innovations has increased the flow of information to and from my clients. With MRIS Homes application and online clients give me real time information about what properties they like most and which they don’t. Contracts and paper work can be signed electronically saving time and paper for having to do in person signatures. There are many other benefits and here are some of the great applications to aide in your search and ownership of Real Estate.

With Homesnap a picture taken with your phone becomes information about the subject home that can then be sent to an agent to add to a let’s see this one list or something like this, or to simply know how much your buddies home is worth. Sitegeist will provide information about school districts, demographics, and many other things. Some of the information from Sitegeist is information that Real Estate agents can’t ethically provide and thus is a place to obtain that information. Closeit! is an application that will estimate your monthly payments, closing costs, fees, and taxes for a property and even draw up an estimated HUD1. iScape will aide in landscape design by using a picture of your house and importing and moving around various soft and hardscape elements. EasyMeasure allows for one to measure a room, door, window with your phone. HomeZada is your right hand man for home projects. With this application you can plan materials needed, your budget, and time line for a home improvement project as well set reminders for home maintenance.

Of course as with anything there are downsides to the technology as well. The Real Estate search sites are not always up to date and cause people to request houses that are under contract already or not see properties that are on the market when they come on the market, causing less time to be able to put an offer on a house that will sell quickly. Also the estimating algorithms of these sites have very limited data and can be greatly over or underestimating value. Right now about 8 out of 10 listings are undervalued by these estimation tools. This can cause buyers to offer unrealistically too low prices and not get a house or when overestimated offer a higher value than the property is worth and leave money on the table. For Sellers it can cause them to list too low and make less than they could or price too high and have the property sit on the market and sell for less than it would have if priced correctly. Also online home auctions have caused many to lose money being scammed and need to be used with caution.

Other recent technology innovations are the use of drones for aerial photography and videos of properties. Virtual home staging where the home may be empty of furniture but pictures online show it with furniture, making it more appealing.

A good real estate agent can see the features and condition of your property, pull comparable properties, know the appreciation and days on market trends, know the desirability of your neighborhood, and give you a much more accurate estimate of the value of a home.

The future of Real Estate Technology is very promising! It will continue to grow and offer many advantages to the market and professionals that service it. It is important to know the upsides and downsides. The younger generations are becoming a larger portion of the market and they are very comfortable with technology, leading to even quicker adoption and increased usage. Commercial Real estate is lacking in this technology and I believe that commercial Real Estate applications will eventually hit the market that could be disruptive to the two big players of CoStar and Loopnet.

It is always best to have a good Real Estate Agent by your side to educate, assist, negotiate, share trustworthy inspectors, lenders, etc., and be your advocate and protect your interests every step of the way. Technology is a tool and very useful, use it wisely and allow it to help not hinder you! If you have any experiences, comments, questions, please share through the blog or privately by contacting me directly.

First Quarter 2015 Real Estate Pulse

The sun is shining, daffodils blooming, buds forming on many plants, birds chirping; what is happening in the real estate market? Where do we start…

Well, appreciation of the housing market continues at a steady pace nationally and in many markets. Current home owners have nearly doubled their equity in the last five years, since the recession. The Federal Reserve estimates that Americans’ now have home equity holdings exceeding $11 trillion.

This trend has led to a 36% increase in the last year of home equity lines of credit, according to Consumer Bankers Association. Owner and lender confidence is back in the real estate market. Also with unemployment continuing to decrease, the trade deficit decreasing and many other factors, mortgage rate continue to inch up. Job growth is still at a slow pace and the appreciation of mortgage rates (30 and 15 year) is slowly increasing. The five-year and one year ARM average has held steadily to the same numbers (two weeks for five-year and four weeks for one year). Mortgage applications have also increased with 60 percent of all applications coming from refinances. With interest rates still at low levels 7.1 million borrowers could reap benefits of refinancing, according to Black Knight Financial Services.

Many general statistics have not changed much. Frist time home buyers make 38% of the market with the average age being 31. The average home purchased is 1,900 square feet, three bedrooms, and two bathrooms and was built in 1992. Buyers have financed 90% of their home price on average.

Last year prices appreciated 4.8% in Washington DC with the median home value of $476,600. This year price appreciation has slowed with about 1.5% in January and a projected 2% average for the year. In Maryland the price appreciated 4.4% last year with a median home value of $257,000. The prices appreciated about 4% in January with a predicted price appreciation average for this year to be 2.7%. In Virginia the prices appreciated at 3.1% last year with a median home value of $232,600. The prices are predicted to rise by 1.2% within the next year. Nationally home values have appreciated by 4.9% in the last year with the median home price being $178,700. This year prices nationally are predicted to rise by 2.6%. Please remember that these are state and national averages and there are local Counties, Town, and Neighborhoods that can have much different rates of appreciation/depreciation.

Please contact me to find out specific information about statistics in markets you are looking to sell or purchase. There are many factors such as days on market, inventory, home starts, appreciation, etc. that can help influence when is a good time to buy or sell and where one decides to purchase properties as a residence and investment. Please add the conversation with any experiences, questions, concerns, and ideas.

2015 Residential Real Estate Predictions

In recent years, home value growth has been around 6%, however, it is expected to slow to around 3% in 2015. With the median sale price of U.S. single-family homes and condos in October reaching its highest level since September 2008, investors are predicted to be backing away from the feeding frenzy caused by the recent price appreciations and foreclosure market. Instead of the bidding wars seen in some parts of the market recently, home inventory should rise in 2015, creating a much more balanced market.

Investor activity has been slowing and this trend is expected to continue. Also, buyers are not as worried about missing their dream home, feeling more confident that another equal or better house will come on the market soon. Foreign investor activity is expected to continue at the current pace or even increase. This is due to either tax laws or other regulations in home countries, uncertainties with currency fluctuations, and the U.S. market feeling safer than their home countries.

Two big demographic trends will occur next year as well. Millennials have been primarily renters, postponing home ownership longer than previous generations. However, Gen Yers are now starting families and seeking security. Millennial buyers will represent the largest group of home buyers by the end of 2015, taking over from Generation X.

Another important demographic that should be making an impact on the real estate market is baby boomers. Baby boomers are ready to make their long awaited move. Baby boomers are moving closer to a son or daughter, grandchild, or downsizing. With less homes underwater, they are ready to sell.

The other side of the coin is the residential mortgage market. Mortgage rates may not remain at historic lows. As foreclosures and short sales age out of credit reports, more people may qualify for home loans. Also Freddy Mac and Fannie Mae, industry leaders, may ease mortgage eligibility standards. Freddy and Fannie recently announced a new program with a down payment as low as 3 percent.

If you have questions, comments, experiences, or stories to share please comment or contact me directly. I am here to help you and yours with your real estate needs. Have a Happy Holidays, Happy Hanukkah, Merry Christmas and Happy New Year!