South Florida Real Estate News

 

June 26, 2020

Bidding War During the Covid-19 Crisis

The COVID-19 pandemic upended just about everything this year, and that includes much of the home-buying process. A new study from Clever revealed that homebuyers who bought between January and May this year are twice as likely to have anxiety and stress than those who bought in the last five years.

The study also showed that 42% of homeowners who made a purchase during the January to May time period ended up in a bidding war, demonstrating the strong demand for homes amid low inventory.

In addition, the study showed the strains caused by COVID-19 shutdowns, which resulted in record-breaking numbers of workers filing for unemployment. According to Clever, 59.29% of homeowners who purchased their home before the World Health Organization declared the pandemic said that someone who typically contributes to housing costs lost their job during the pandemic.

Meanwhile, those who purchased their home since March (50.48%) were less likely to have lost a job, while stimulus check payments contributed to down payments for 21.1% of homebuyers.

Clever said that 84% of homebuyers who purchased their home before April 28 were able to pay their mortgage in full. Of recent homebuyers, 55% said they’re paying their mortgage in full, but only 45% are able to pay if a financial contributor has lost their job.

Even out of those who said they were still paying their mortgage in full, 53.78% said they were somewhat concerned and 25.14% said they were very concerned about being able to pay their mortgage in the coming months due to COVID-19 hardships. This number might change a little since the Federal Housing Administration and Federal Housing Finance Agency both announced they would be extending eviction moratoriums.

When Clever surveyed people who purchased their home between 2015 and 2019, many buyers said they were likely to feel happier and more secure because of homeownership.

However, when Clever performed the same study in 2020, those homebuyers were more than two times as likely to report feelings of anxiety, almost two times as likely to report stress, and nearly half as likely to say homeownership makes them feel comfortable and secure than those who bought in the last five years.

While many homeowners worry about cosmetic things, 36.24% of homeowners said they are worried that the pandemic might affect their home value.

 

Posted in Market Updates
June 26, 2020

Decreased of Borrowers

The number of borrowers in coronavirus-related mortgage relief programs fell for the second straight week. There are 4.66 million borrowers in government or private-sector forbearance programs, representing 8.8% of all active mortgages, according to Black Knight, a mortgage technology data provider. The numbers are down 77,000 from last week and 112,000 since the peak week of May 22nd.

 

The current situation and the dislocation it has caused present issues of immediate concern, as well issues of more general concern revolving around how market participants should prepare for the downturn by revisiting lessons learned from past real estate downturns.

One of the most important lessons we have learned from past downturns is that first movers—those who act quickly and decisively when the market turns—gain a real advantage over those who respond more slowly. The best executions seemed to come early in the downturns, and those who were reactive—whether because they were in denial or otherwise—paid a real price. So, we think that both lenders and borrowers will be well served by giving thought now to how to prepare for the inevitable. In order to best prepare, we suggest that borrowers systematically address their entire portfolio, using a framework of investigation, followed by triage and strategic analysis, and then recovery.

 

Posted in Market Updates
June 26, 2020

Market Heats UP!

Demand for houses continues to rise, based on Redfin CEO Glenn Kelman. Seasonally adjusted demand for houses during the week of June 1 through June 7 was 25% above pre-pandemic levels. Kelman said that bidding wars have caused listings to move quickly, and sales prices are up 3.1% year over year. The percentage of newly listed homes to accept an offer within 14 days increased from 42% in May to 47% in June

  •  Demand is 25% above pre-pandemic levels. Buyers haven’t “batted an eyelash” over the possibility of a resurgent pandemic or now protests.
  • Bidding wars are “bananas” with homes “flying off the shelves.” Sale prices are up 3.1%; asking prices are up 9.9%. 
  • New listings are still 15% below last year’s levels. More listings may hit the market soon, though sellers still have more health concerns than buyers. A buyer can decide how many homes to visit, but a seller has to “let an open-ended number of people walk through until the home is sold.”
  • Many renters in the city are buying in more affordable outlying areas; home-ownership levels may meaningfully increase for the first time in 15 years.
  • But continued unemployment could pull first-time buyers out of the market; “Condos are tough to sell right now… The ball is going to drop and it will be interesting to see how it rolls down the hill.” 

It seems that nothing can stop homebuyers. Seasonally adjusted demand for the week of June 1 – June 7 is now 25% higher than it was pre-pandemic in January and February, marking the eighth straight week of rising demand.

 Buyers Unfazed by Protests and Pandemics

Agents from Seattle to LA to Philadelphia have been surprised that protests didn’t deter more buyers. What’s driving demand is low rates and, now, easing credit.

 Bidding Wars Common

Until supply catches up to demand, prices will rise. For the week of June 1 – 7, year-over-year growth in asking prices was up 9.9%, compared to 7.9% the week before, and 3.9% in January and February. Sales prices for the first week of June are up 3.1% year-over-year, an improvement from 1.3% in May, when offers from late March and April were still closing. The percentage of newly listed homes accepting an offer within 14 days of their debut increased from 42% in May to 47% in the first week of June.

 Buyers Prefer Three-Dimensional Scans to Video-Chat Tours

Online interest in listings now takes many forms. As shelter-in-place rules subside in parts of the country, much of the demand for virtual showings is from relocating homebuyers who want to avoid a long drive or a flight to tour a home. Fifteen percent of tours are happening via video-chat rather than in person. This is half of its April peak, but still 30 times higher than it was pre-pandemic.

 People Are On the Move

Many of these relocating buyers are pursuing the suburbs, or smaller, more affordable cities. It has been a point of debate within Redfin whether the movements of people we’re now seeing are mostly to the outlying areas of the same city, or to entirely different parts of the country. What we can be sure of now is that this latter group of cross-country movers is already increasing in size, albeit only modestly: in April and May of 2020, 27% of Redfin.com users searched outside their metropolitan area, compared to 25% in April and May of 2019. We now speculate that the flexibility to work remotely, combined with low interest rates, will lead to higher levels of home ownership in the U.S., which have mostly been declining since 2004.

Long-Term, Still Clouds on the Horizon

But even though demand is strong now, no one can say for sure what the long-term outlook is. The whole reason we’re reporting on demand every week instead of every month is because we have seen such a volatile real estate market.

 

 

Posted in Market Updates
May 19, 2020

Will Home Values Appreciate or Depreciate in 2020?

 

Will Home Values Appreciate or Depreciate in 2020? | MyKCM

With the housing market staggered to some degree by the health crisis the country is currently facing, some potential purchasers are questioning whether home values will be impacted. The price of any item is determined by supply as well as the market’s demand for that item.

Each month the National Association of Realtors (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for the REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between seller traffic (supply) and buyer traffic (demand) during this pandemic.

Buyer Demand

The map below was created after asking the question: “How would you rate buyer traffic in your area?”Will Home Values Appreciate or Depreciate in 2020? | MyKCMThe darker the blue, the stronger the demand for homes is in that area. The survey shows that in 34 of the 50 U.S. states, buyer demand is now ‘strong’ and 16 of the 50 states have a ‘stable’ demand.

Seller Supply

The index also asks: “How would you rate seller traffic in your area?”Will Home Values Appreciate or Depreciate in 2020? | MyKCMAs the map above indicates, 46 states and Washington, D.C. reported ‘weak’ seller traffic, 3 states reported ‘stable’ seller traffic, and 1 state reported ‘strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the needs of buyers looking for homes right now.

With demand still stronger than supply, home values should not depreciate.

What are the experts saying?

Here are the thoughts of three industry experts on the subject:

Ivy Zelman:

“We note that inventory as a percent of households sits at the lowest level ever, something we believe will limit the overall degree of home price pressure through the year.”

Mark Fleming, Chief Economist, First American:

“Housing supply remains at historically low levels, so house price growth is likely to slow, but it’s not likely to go negative.”

Freddie Mac:

“Two forces prevent a collapse in house prices. First, as we indicated in our earlier research report, U.S. housing markets face a large supply deficit. Second, population growth and pent up household formations provide a tailwind to housing demand.”

Bottom Line

Looking at these maps and listening to the experts, it seems that prices will remain stable throughout 2020. If you’re thinking about listing your home, let’s connect to discuss how you can capitalize on the somewhat surprising demand in the market now.

Posted in Real Estate News
May 19, 2020

Unemployment Report: No Need to Be Terrified

Unemployment Report: No Need to Be Terrified | MyKCM

Last Friday, the Bureau of Labor Statistics (BLS) released its latest jobs report. It revealed that the economic shutdown made necessary by COVID-19 caused the unemployment rate to jump to 14.7%. Many anticipate that next month the percentage could be even higher. These numbers represent the extreme hardship so many families are experiencing right now. That pain should not be understated.

However, the long-term toll the pandemic will cause should not be overstated either. There have been numerous headlines claiming the current disruption in the economy is akin to the Great Depression, and many of those articles are calling for total Armageddon. Some experts are stepping up to refute those claims.

In a Wall Street Journal (WSJ) article this past weekend, Josh Zumbrun, a national economics correspondent for the Journal explained:

“News stories often describe the coronavirus-induced global economic downturn as the worst since the Great Depression…the comparison does more to terrify than clarify.”

Zumbrun goes on to explain:

“From 1929 to 1933, the economy shrank for 43 consecutive months, according to contemporaneous estimates. Unemployment climbed to nearly 25% before slowly beginning its descent, but it remained above 10% for an entire decade...This time, many economists believe a rebound could begin this year or early next year.”

Here is a graph comparing current unemployment numbers (actual and projected) to those during the Great Depression:Unemployment Report: No Need to Be Terrified | MyKCMClearly, the two unemployment situations do not compare.

What makes this time so different?

This was not a structural collapse of the economy, but instead a planned shutdown to help mitigate the virus. Once the virus is contained, the economy will immediately begin to recover. This is nothing like what happened in the 1930s. In the same WSJ article mentioned above, former Federal Reserve Chairman Ben Bernanke, who has done extensive research on the depression in the 1930s, explained:

“The breakdown of the financial system was a major reason for both the Great Depression and the 2007-09 recession.” He went on to say that today - “the banks are stronger and much better capitalized.”

What about the families and small businesses that are suffering right now?

The nation’s collective heart goes out to all. The BLS report, however, showed that ninety percent of the job losses are temporary. In addition, many are getting help surviving this pause in their employment status. During the Great Depression, there were no government-sponsored unemployment insurance or large government subsidies as there are this time.

Today, many families are receiving unemployment benefits and an additional $600 a week. The stimulus package is helping many companies weather the storm. Is there still pain? Of course. The assistance, however, is providing much relief until most can go back to work.

Bottom Line

We should look at the current situation for what it is – a predetermined pause placed on the economy. The country will recover once the pandemic ends. Comparisons to any other downturn make little sense. Bernanke put it best:

“I don’t find comparing the current downturn with the Great Depression to be very helpful. The expected duration is much less, and the causes are very different.”

Posted in Market Updates
April 28, 2020

Today’s Homebuyers Want Cheaper Prices. Sellers Disapprove.

The unpredictability we all  faces today due to the COVID-19 pandemic is causing so many things to change. The way we interact, the way we do business, even the way we buy and sell real estate is changing. This is a moment in time that’s even making some buyers to search for a better deal on a home. Sellers, however, aren’t offering a discount these days; they’re holding steady on price.

Based to the most recent NAR Flash Survey (a survey of real estate agents from across the country), agents were asked the following two questions:

1. “Have any of your sellers recently reduced their price to attract buyers?”

Their answer: 72% said their sellers have not lowered prices to attract buyers during this health crisis. 

2. “Are home buyers expecting lower prices now?”

Their answer: 63% of agents said their buyers were looking for a price reduction of at least 5%.

Today’s Homebuyers Want Lower Prices. Sellers Disagree. | MyKCM

What We Do Know  

In today’s market, with everything changing and ongoing questions around when the economy will be back to normal, it’s interesting to note that some buyers see this time as a chance to win big in the housing market. On the other hand, sellers are much more confident that they will not need to lower their prices in order to sell their homes. Clearly, there are two different outlook at play.

Bottom Line

If you’re a buyer in today’s market, you might not see many sellers changing or lowering their prices. If you’re a seller and don’t want to lower your price, you’re not alone. If you have questions on how to price your home, let’s talk today to discuss your real estate needs and next steps.

 

 

Posted in Market Updates
April 27, 2020

Flat rates, tightening requirements & spending plans

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STRICTER STANDARDS

The country's fourth-largest mortgage lender is securing standards for most new home loans among the murky economic outlook. J.P. Morgan Chase stated that starting April 14, most new mortgage loans will require a credit score of 700 and a down payment of 20%. Chase said the new standards do not apply to their existing mortgage customers or low and moderate-income borrowers who qualify for their 3% down payment "DreaMaker" product.

STAYING STEADY

Rates for a 30-year fixed rate mortgage showed zero movement in the Freddie Mac Primary Mortgage Market Survey (PMMS) for the week ending April 9. The PMMS predicts, "As financial markets continue to heal, we expect mortgage rates will drift lower in the second half of 2020."

INTERPRETING ACTION

Economist Elliot Eisenberg, PhD praised the Federal Reserve for its actions to assist the economy amidst the coronavirus pandemic. Eisenberg described Fed Chairman Jay Powell's plan in three parts: "First, rates are low and will stay low for a long time! Second, the Fed will buy as large as necessary to keep markets running! Third, [Powell] carefully requested the administration to have a thoughtful plan prior to re-opening the economy for business, to best avoid a COVID-19 reoccurrence."

STIMULUS SPENDING

A surprising number of Americans plan to spend their government stimulus checks on non-essential items according to a survey by personal finance site Crediful.com. The survey of 1,013 adults revealed that 46.7% planned to use the money for items classified as non-essential, compared to 53.3% who said they will use the money for food, housing and utilities.

 

 

Posted in Market Updates
March 25, 2020

Mortgage payments for homeowners may be delay up to 1 year because of the covid virus

President Trump recently announced that delayed mortgage payments could be an option for borrowers due to the covid-19 virus

People who have experienced a loss of income because of the outbreak may qualify to make reduced payments. Under the new plan, they will not get penalties or late fees, and delayed payments will not be reported to credit agencies.

“Our thoughts are with everyone who may be impacted by Coronavirus  and we urge you to stay safe and well during these unprecedented times,” Malloy Evans, senior vice president and single-family chief credit officer for Fannie Mae, said in a press release. “Fannie Mae, along with our lending and servicing partners, is committed to ensuring assistance is available to homeowners in need. We encourage residents whose employment or income are impacted by COVID-19 to seek available assistance as soon as possible.”

Borrowers will initially only need to testify over the phone to their lender that they’re on financial deprivation ; documentation will come later. Payment relief can also apply to any type of property, whether it’s a primary home, secondary home, or investment property.

Throughout the loan tolerance period, Fannie Mae and Freddie Mac may reconsider the borrower’s ability to pay the loan to ensure the plan is still necessary for that borrower. After this period is up, servicers will develop a feasible repayment plan with the borrower, including potentially extending the life of the loan.

Some banks are also offering mortgage tolerance periods for customers during this time, although, as of now, they are much shorter than 12 months. Fifth Third Bank, for example is offering borrowers a 90 day tolerance period on mortgages, and Ally is offering a 120 day tolerance period for mortgage customers. Bank of America also stated it will defer mortgage payments for borrowers who request it, although it did not specify a length of time.

“We don’t want people who have been responsible in making their mortgage payments to suddenly be declared delinquent and to lose their access to credit,” Chris Mayer, a real estate economist at Columbia University’s business school, told NPR. “Let’s fight the virus, and let’s hold people harmless for something that they didn’t control.”

Posted in Market Updates
March 4, 2020

Result from the Fed’s emergency rate cut

The Federal Reserve reduced interest rates today, cutting the federal funds rate by 0.50 percent to a range of 1-1.25 percent. The Fed is trying to stay ahead of disturbance and economic slowdown caused by the fast spreading coronavirus.

On Friday, the Fed announced that it was willing to support the economy with accommodative interest rates.

The latest rate cut is an emergency measure that underscores the Fed’s commitment to keeping the economy on track, as the virus and the aggressive response to it cause an economic slowdown to percolate through the global economy.

The reduction is the Fed’s first rate cut in 2020, after a series of three smaller cuts in 2019 that were meant to support a somewhat slowing economy and balance other threats to growth, such as trade tensions with China. Many Fed watchers had anticipated the substantial 0.50 percent cut, given the Fed’s statement on Friday.

Lower rates encourage more money into the economy, inducing businesses to invest and consumers to spend and borrow. That keeps money flowing through the economy.

While the federal funds rate doesn’t really impact mortgage rates, which depend largely on the 10-year Treasury yield,

they’re often moving the same way for similar reasons.

In 2018, the Fed raised rates on the belief that a stronger economy could handle higher rates, and mortgage rates climbed as well during much of that period. As investors began to anticipate a slower economy, they pushed the yield on the 10-year Treasury lower in 2019 and 2020, and that hit mortgage rates well before the Fed even acted.

 

A home equity line of credit (HELOC) will adjust relatively quickly to the lower federal funds rate. HELOCs are typically linked to the prime rate, the interest rate that banks charge their best customers. So when the Fed adjusts its rates, the prime rate usually follows immediately.

Lower rates uplift more money into the economy, prompting businesses to invest and consumers to spend and borrow. That keeps money flowing through the economy.

However, while lower interest rates help some groups, they don’t help everyone. Here’s who stands to benefit the most from lower rates, and also who could be hurt by them.

While the federal funds rate doesn’t really impact mortgage rates, which depend largely on the 10-year Treasury yield, they’re often moving the same way for similar reasons.

In 2018, the Fed raised rates on the belief that a stronger economy could handle higher rates, and mortgage rates climbed as well during much of that period. As investors began to anticipate a slower economy, they pushed the yield on the 10-year Treasury lower in 2019 and 2020, and that hit mortgage rates well before the Fed even acted.

A home equity line of credit (HELOC) will adjust relatively quickly to the lower federal funds rate. HELOCs are typically linked to the prime rate, the interest rate that banks charge their best customers. So when the Fed adjusts its rates, the prime rate usually follows immediately.

Many variable-rate credit cards change the rate they charge customers based on the prime rate, which is closely related to the federal funds rate. So as the federal funds rate changes, interest on variable-rate cards is likely to quickly adjust, too.

“Credit card rates will move lower for most cardholders, but more slowly than they’d increased when rates were rising,” says McBride. “Don’t expect to see that lower rate on your account for another 60 to 90 days, as issuers drag their feet on passing along lower rates.”

The latest Fed move will likely lower interest rates on auto loans. While auto loans are influenced by the direction and trend of the federal funds rate, they don’t move in lockstep.

Lower interest rates are generally a positive for the stock market. Lower rates make it cheaper for businesses to borrow and invest in their operations, and so companies can expand their profits at a lower cost. In addition, lower rates make stocks look like a more lucrative option for investors, so stock prices tend to rise when rates are cut, if the economy looks strong otherwise.

The stock market tends to price in the potential for a rate cut sometimes weeks or months before it actually takes place. In this case, the S&P 500 soared 4.6 percent the day after the Fed made it clear that it was willing to lower rates and the day before it actually did so.

With the market expecting some economic weakness due to the coronavirus and unemployment sitting near historic lows, you’ll want to consider how much longer the economy’s expansion can continue. When the economy enters a recessionary period again, rates should fall, so it may make sense to make your money moves (such as locking in higher CD rates) while you can still receive relatively higher yields.

 

Posted in Real Estate News
March 4, 2020

Advantages and disadvantages of a home equity line of credit

Property owners who want to check into their home’s equity to consolidate debt with high interest or finance home improvement projects often decide to take out a home equity line of credit, which is called HELOC.

Unlike a home equity loan that let you borrow a lump sum, a HELOC offers a line of credit you can borrow when you need to. Like credit cards, HELOCs also come with changeable interest rates, and your monthly paymentdepends on how much you borrow at any given time and your current interest rate.

HELOCs is popular because they use to make good financial sense, says Sean Murphy, AVP of equity lending at Navy Federal Credit Union.

“Specifically, if you are someone who is looking for a home improvement or debt consolidation loan with lower interest rates than personal loans or unsecured products, a HELOC may be right for you,” he says.

 

Advantages of a home equity line of credit

Home equity lines of credit usually lends you up to 85 percent of your property's value, which means these loans is not applicable for consumers who don’t have considerable equity. You also need good credit to qualify, and you will need an approved income to repay your loan.

If you’re a candidate for a HELOC, here are some of the biggest advantages:

Interest rates have been at or near all-time lows for a couple of years now, and home equity lines of credit let you take advantage of that fact. Financial attorney Leslie H. Tayne says HELOCs can have lower interest rates and lower initial costs than credit cards.

In fact, some of the best home equity rates fall below 5 percent. Meanwhile, the average APR on variable-rate credit cards is around 17.4 percent.

Even after the Tax Cuts and Jobs Act of 2017, you can still deduct interest paid on a home equity line of credit (or home equity loan) if you use the money for home improvements.

IRS says that interest payments on home equity products are not deductible “unless they are used to buy, build or substantially improve the taxpayer’s home that secures the loan.”

JPMorgan Chase Home Lending Representative Keosha Burns says another advantage of HELOCs is that you can “use what you need, when you need it.” Where home equity loans and even personal loans require you to take out a lump sum, you can use a HELOC in spurts if you want, only borrowing the cash you’ll use as you go along.

Tayne also points out that your monthly payment varies based on how much you’re borrowing, so you can wind up with a smaller monthly payment if you end up needing less cash.

Lastly, don’t forget that HELOCs often provide flexibility in terms of how you pay them off. Joseph Polakovic, owner and CEO of Castle West Financial in San Diego, says that this can include the option to make interest-only payments — at least at first.

The timeline for your HELOC can vary depending on how much you want to borrow and the lender you go with, but HELOCs can last for up to 30 years including a draw period and a repayment period.

 

Disadvantages of a home equity line of credit

First, you put your home up as collateral for the loan, which is also required to do with a home equity loan. While having a secured loan can help you secure a lower interest rate, you’re taking on some risk.

“Because you are borrowing against your home, if you can’t make your monthly payments, you risk foreclosure,” Murphy says.

Polakovic says that one disadvantage of HELOCs often stems from a lack of borrower discipline because they are so easy to access. Since HELOCs offer the chance to make interest-only payments, it’s also almost too easy to access this cash without feeling the pain of your decisions right away.

Lastly, don’t forget that you’re borrowing against home equity you may have worked hard to build up. This could mean spending more time paying off your house in the long run, but also paying more interest over the time you own your home.

If housing prices drop, borrowing against your home equity also means you could wind up owing more than your home is worth.

Murphy says that if you’re looking to spend as you go — and only pay for what you’ve borrowed, when you’ve borrowed it — a HELOC is probably a better option.

Home equity loans come with a fixed monthly payment and a fixed interest rate. This means you’ll know exactly how much you will owe each month, and you never have to worry about your interest rate going up or down.

A cash-out refinance replaces your existing mortgage with a new loan with a higher balance. Many lenders will let you refinance and borrow up to 80 percent of your home’s value, letting you receive the difference in cash.

Lastly, don’t forget to consider personal loans. This type of loan comes with a fixed monthly payment and a fixed interest rate, and you get a lump sum of money upfront like you do with a home equity loan. The big difference is personal loans are unsecured, so you don’t have to put your home up as collateral.

 

 

 

 

Posted in Real Estate News