Home Financing • November 8, 2023

Thinking About Using Your 401(k) To Buy a Home?

by Drew Jones

November 8, 2023

Are you dreaming of buying your own home and wondering about how you’ll save for a down payment? You’re not alone. Some people think about tapping into their 401(k) savings to make it happen. But before you decide to dip into your retirement to buy a home, be sure to consider all possible alternatives and talk with a financial expert. Here’s why.

The Numbers May Make It Tempting

The data shows many Americans have saved a considerable amount for retirement (see chart below):

It can be really tempting when you have a lot of money saved up in your 401(k) and you see your dream home on the horizon. But remember, dipping into your retirement savings for a home could cost you a penalty and affect your finances later on. That’s why it’s important to explore all your options when it comes to saving for a down payment and buying a home. As Experian says:

“It’s possible to use funds from your 401(k) to buy a house, but whether you should depends on several factors, including taxes and penalties, how much you’ve already saved and your unique financial circumstances.”

Alternative Ways To Buy a Home

Using your 401(k) is one way to finance a home, but it’s not the only option. Before you decide, consider a couple of other methods, courtesy of Experian:

FHA Loan: FHA loans allow qualified buyers to put down as little as 3.5% of the home’s price, depending on their credit scores.
Down Payment Assistance Programs: There are many national and local programs that can help first-time and repeat homebuyers come up with the necessary down payment.

Above All Else, Have a Plan

No matter what route you take to purchase a home, be sure to talk with a financial expert before you do anything. Working with a team of experts to develop a concrete plan prior to starting your journey to homeownership is the key to success. Kelly Palmer, Founder of The Wealthy Parent, says:

“I have seen parents pausing contributions to their retirement plans in favor of affording a larger home often with the hope they can refinance in the future… As long as there is a tangible plan in place to get back to saving for their retirement goals, I encourage families to consider all their options.”

Bottom Line

If you’re still thinking about using your 401(k)-retirement savings for a home down payment, consider all your options and work with a financial professional before you make any decisions.

Home Prices • October 24, 2023

Why Home Prices Keep Going Up

by Drew Jones

October 24, 2023

If you’ve ever dreamed of buying your own place, or selling your current house to upgrade, you’re no stranger to the rollercoaster of emotions changing home prices can stir up. It’s a tale of financial goals, doubts, and a dash of anxiety that many have been through.

But if you put off moving because you’re worried home prices might drop, make no mistake, they’re not going down. In fact, it’s just the opposite. National data from several sources says they’ve been going up consistently this year (see graph below):

Here’s what this graph shows. In the first half of 2022, home prices rose significantly (the green bars on the left side of the graphs above). Those increases were dramatic and unsustainable.

So, in the second half of the year, prices went through a correction and started dipping a bit (shown in red). But those slight declines were shallow and short-lived. Still, the media really focused on those drops in their headlines – and that created a lot of fear and uncertainty among consumers.

But here’s what hasn’t been covered fully. So far in 2023, prices are going up once more, but this time at a more normal pace (the green bars on the right side of the graphs above). And after price gains that were too high and then the corrections that followed in 2022, the fact that all three reports show more normal or typical price appreciation this year is good news for the housing market.

Orphe Divounguy, Senior Economist at Zillow, explains changing home prices over the past 12 months this way:

“The U.S. housing market has surged over the past year after a temporary hiccup from July 2022-January 2023. . . . That downturn has proven to be short lived as housing has rebounded impressively so far in 2023. . .”

Looking ahead, home price appreciation typically starts to ease up this time of year. As that happens, there’s some risk the media will confuse slowing price growth (deceleration of appreciation) with home prices falling (depreciation). Don’t be fooled. Slower price growth is still growth.

Why Are Home Prices Increasing Now?

One reason why home prices are going back up is because there still aren’t enough homes for sale for all the people who want to buy them.

Even though higher mortgage rates cause buyer demand to moderate, they also cause the supply of available homes to go down. That’s because of the mortgage rate lock-in effect. When rates rise, some homeowners are reluctant to sell and lose their current low mortgage rate just to take on a higher one for their next home.

So, with higher mortgage rates impacting both buyers and sellers, the supply and demand equation of the housing market has been affected. But since there are still more people who want to purchase homes than there are homes available to buy, prices continue to rise. As Freddie Mac states:

“While rising interest rates have reduced affordability—and therefore demand—they have also reduced supply through the mortgage rate lock-in effect. Overall, it appears the reduction in supply has outweighed the decrease in demand, thus house prices have started to increase . . .”

So, if you put off buying or selling because you’re hoping home prices might go down, data shows they’re increasing. If you’re looking at moving, now’s a good time to buy and sell. Let’s connect so you can understand how home prices are changing in our area.

Homeowner Tips • October 16, 2023

Prevent Disaster with this Handy Winter Prep List

by Drew Jones

Mortgage Rates • October 16, 2023

Are Higher Mortgage Rates Here To Stay?

by Drew Jones

October 16, 2023

Mortgage rates have been back on the rise recently and that’s getting a lot of attention from the press. If you’ve been following the headlines, you may have even seen rates recently reached their highest level in over two decades (see graph below):

That can feel like a little bit of a gut punch if you’re thinking about making a move. If you’re wondering whether or not you should delay your plans, here’s what you really need to know.

How Higher Mortgage Rates Impact You

There’s no denying mortgage rates are higher right now than they were in recent years. And, when rates are up, that affects overall home affordability. It works like this. The higher the rate, the more expensive it is to borrow money when you buy a home. That’s because, as rates trend up, your monthly mortgage payment for your future home loan also increases.

Urban Institute explains how this is impacting buyers and sellers right now:

“When mortgage rates go up, monthly housing payments on new purchases also increase. For potential buyers, increased monthly payments can reduce the share of available affordable homes . . . Additionally, higher interest rates mean fewer homes on the market, as existing homeowners have an incentive to hold on to their home to keep their low interest rate.”

Basically, some people are deciding to put their plans on hold because of where mortgage rates are right now. But what you want to know is: is that a good strategy?

Where Will Mortgage Rates Go from Here?

If you’re eager for mortgage rates to drop, you’re not alone. A lot of people are waiting for that to happen. But here’s the thing. No one knows when it will. Even the experts can’t say with certainty what’s going to happen next.

Forecasts project rates will fall in the months ahead, but what the latest data says is that rates have been climbing lately. This disconnect shows just how tricky mortgage rates are to project.

The best advice for your move is this: don’t try to control what you can’t control. This includes trying to time the market or guess what the future holds for mortgage rates. As CBS News states:

“If you’re in the market for a new home, experts typically recommend focusing your search on the right home purchase — not the interest rate environment.”

Instead, work on building a team of skilled professionals, including a trusted lender and real estate agent, who can explain what’s happening in the market and what it means for you. If you need to move because you’re changing jobs, want to be closer to family, or are in the middle of another big life change, the right team can help you achieve your goal, even now.

Bottom Line

The best advice for your move is: don’t try to control what you can’t control – especially mortgage rates. Even the experts can’t say for certain where they’ll go from here. Instead, focus on building a team of trusted professionals who can keep you informed. When you’re ready to get the process started, let’s connect.

Home Prices • October 12, 2023

The Latest Expert Forecasts for Home Prices in 2023

by Drew Jones

October 12, 2023

Are you thinking about making a move? If so, all the speculation that home prices would crash this year may have you feeling a bit on edge about your decision. Let the data and the experts reassure you. Prices aren’t in a downward spiral and will actually finish the year strong.

Even though you may have heard talk that prices would drop 5, 10, or even 20% this year, that hasn’t happened. The big reason why is the supply of homes for sale is too low. More buyers are looking to buy than homes available, keeping prices from falling.

Here’s a look at the latest 2023 forecast from a number of experts.

Most Experts Project Home Prices Will Net Positive This Year

The general consensus from industry experts is that home price appreciation will actually be positive for 2023. The graph below shows the latest 2023 year-end forecasts from six different organizations:

As you can see, all but one project nationally prices will net positive this year. That’s significant because it shows the majority are optimistic about home price growth.

The projection from the National Association of Realtors (NAR) is for only a slight decline. It’s not the big crash all the headlines called for. Plus, if you average all six forecasts together, the expectation is that prices will net somewhere around 3.3% positive growth for the year.

Also, one of the six forecasts represented in the graph is the Home Price Expectation Survey (HPES) from Pulsenomics. It combines survey results from over 100 economists, investment strategists, and housing market analysts. The HPES found that the average from all 100 of those experts is 3.3% price growth for the year.

If you look back at the graph above, you’ll notice the blue average for the forecasts in this graph is also 3.3%. While individual forecasts may vary, both the HPES survey and the average of these forecasts provide the same projection. And 3.3% appreciation is a completely different story than prices falling.

Bottom Line

If you’re worried about (or hoping) home prices will fall this year, the experts are saying that won’t be the case. Based on the average of the latest forecasts, home prices will actually show positive growth this year. If you have questions about what’s happening with home prices in our local area, let’s connect.

Selling Your House • October 12, 2023

3 Key Skills You Need Your Listing Agent To Have

by Drew Jones

October 12, 2023

Selling your house is a big decision. And that can make it feel both exciting and a little bit nerve-wracking. But the key to a successful sale is finding the perfect listing agent to work with you throughout the process. A listing agent, also known as a seller’s agent, helps market and sell your house while advocating for you every step of the way.

But, how do you know you’ve found the perfect match in an agent? Here are three key skills you’ll want your listing agent to have.

1) They Price Your House Based on the Latest Data

While it may be tempting to pick the agent who suggests the highest asking price for your house, that strategy may cost you. It’s easy to get caught up in the excitement when you see a bigger number, but overpricing your house can have consequences. It could mean it’ll sit on the market longer because the higher price is actually deterring buyers.

Instead, you want to pick an agent who’s going to have an open conversation about how they think you should price your house and why. A great agent will base their pricing strategy on solid data. They won’t throw out a number just to win your listing. Instead, they’ll show you the facts, explain their pricing strategy, and make sure you’re on the same page. As NerdWallet explains:

“An agent who recommends the highest price isn’t always the best choice. Choose an agent who backs up the recommendation with market knowledge.”

2) They’re a Great Negotiator

The home-selling process can be emotional, especially if you’ve been in your house for a long time. You’re connected to it and have a lot of memories there. This can make the negotiation process harder. That’s where a trusted professional comes in.

A skilled listing agent will be calm under pressure and will be your point-person in all of those conversations. Their experience in handling the back-and-forth gives you the peace of mind that you’ve got someone on your side who’s got your best interests represented throughout this journey.

3) They’re a Skilled Problem Solver

At the heart of it all, a listing agent’s main priority is to get your house sold. A great agent never loses sight of that goal and will help you prioritize your needs above all else. If they identify any necessary steps you need to take, they’ll be open with you about it. Their commitment to your success means they’ll work with you to address any potential roadblocks and find creative solutions to anything that pops up along the way.

BankRate explains it like this:

“Just as important as the knowledge and experience agents bring is their ability to guide you smoothly through the process. Above all, go with an agent you trust and will feel comfortable with. . .”

Bottom Line

Whether you’re a first-time seller or you’ve been through selling a house before, a great listing agent is the key to success. Let’s connect so you have a skilled local expert by your side to guide you through every step of the process.

Home Prices • October 3, 2023

Home Prices Are Not Falling

by Drew Jones

October 3, 2023

During the fourth quarter of last year, some housing experts projected home prices were going to crash in 2023. The media ran with those forecasts and put out headlines calling for doom and gloom in the housing market. All of this negative news coverage made a lot of people have doubts about the strength of the residential real estate market.

If it made you question if you should delay your own plans to move, here’s what you really need to know.

Home Prices Never Crashed

Disregard what you saw in the headlines. The actual data shows home prices were remarkably resilient and performed far better than the media would have you believe (see graph below):

This graph uses reports from three trusted sources to clearly illustrate prices have already rebounded after experiencing only slight declines nationally. That’s a far cry from the crash so many articles called for.

The declines that did happen (shown in red), weren’t drastic but were short-lived. As Nicole Friedman, a reporter at the Wall Street Journal (WSJ), says:

“Home prices aren’t falling anymore. . . The surprisingly quick recovery suggests that the residential real-estate downturn is turning out to be shorter and shallower than many housing economists expected . . .”

Even though some media coverage made a big deal about home prices pulling back, the slight correction that happened is already in the rearview mirror. Basically, this data shows you home prices aren’t falling anymore – they’re actually going back up.

What’s Next for Home Prices?

The consensus from experts is that home price growth will continue in the years ahead and is returning to normal levels for the market. That means we’ll still see home prices appreciating, just at a slower pace than the last few years – and that’s a good thing.

Some news sources will see home price growth slowing and put out stories that make you think prices are falling again. The return of misleading headlines like those is already having an impact on how homebuyers are feeling again. You can see how this affects general opinion in the Consumer Confidence Survey from Fannie Mae (see graph below):

While the percentage of Americans who think prices will fall has been slowly declining this year, the latest Consumer Confidence data indicates that’s ticked back up recently (shown in red). This change is surprising especially since the home price data shows prices are going up, not down. It tells you the impact the media still has on public opinion.

Don’t fall for the negative headlines and become part of this statistic. Remember, data from a number of sources shows home prices aren’t falling anymore.

Bottom Line

Even though the media may make things sound doom and gloom, the data shows home prices aren’t falling anymore. So, don’t let the headlines scare you or delay your plans. Let’s connect so you have a trusted resource to cut through the noise and tell you what’s really happening in our area.

Homeownership • October 2, 2023

Unpacking the Long-Term Benefits of Homeownership

by Drew Jones

October 2, 2023

If you’re thinking about buying a home soon, higher mortgage rates, rising home prices, and ongoing affordability concerns may make you wonder if it still makes sense to buy a home right now.

While those market factors are important, there’s more to consider. You should think about the long-term benefits of homeownership too.

Think about this: if you know people who bought a home 5, 10, or even 30 years ago, you’re probably going to have a hard time finding someone who regrets their decision. Why is that? The reason is tied to how home values grow with time and how, by extension, that grows your own wealth. That may be why, in a recent Fannie Mae survey, 76% of respondents say they believe buying a home is a safe investment.

Here’s a look at how just the home price appreciation piece can really add up over the years.

Home Price Growth over Time

The map below uses data from the Federal Housing Finance Agency (FHFA) to show just how noteworthy price gains have been over the last five years. And, since home prices vary by area, the map is broken out regionally to help convey larger market trends:

If you look at the percent change in home prices, you can see home prices grew on average by just over 57% nationwide over a five-year period.

Some regions are slightly above or below that average, but overall, home prices gained solid ground in a short time. And if you expand that time frame even more, the benefit of homeownership and the drastic gains homeowners made over the years become even clearer (see map below):

The second map shows, nationwide, home prices appreciated by an average of over 297% over a roughly 30-year span.

This nationwide average tells you the typical homeowner who bought a house 30 years ago saw their home almost triple in value over that time. That’s a key factor in why so many homeowners who bought their homes years ago are still happy with their decision.

And while you may have heard talk throughout the year that home prices would crash, it hasn’t happened. In fact, experts project home prices will continue to rise for years to come.

Bottom Line

If you’re wondering if it still makes sense to buy a home today, it’s important to focus on the long-term advantages that come with homeownership. When you’re ready to start your homebuying journey, let’s chat.

Selling Your House • September 28, 2023

Selling Your Home? Avoid These 3 Mistakes

by Drew Jones

September 28, 2023

If you’ve ever found yourself with a listing that expired without a sale, you know the frustration it can bring. But fear not, whether you’ve experienced this setback or aim to steer clear of it, we’re here with three vital insights to set you on the path to a successful home sale.

1. Limiting Access to Your Home

One of the most common pitfalls in selling a house is restricting the days and times for potential buyers to tour it. Flexibility with your schedule is key when selling your home, even though it might seem a bit demanding to drop everything and vacate when buyers want to see it. After all, limited access translates to limited exposure to potential buyers.

Sometimes, your most determined buyers may come from afar, and accommodating their schedules becomes crucial. If they’re traveling to see your property, they may find it challenging to alter their plans if you offer only limited showing times. Remember, the more accessible your home is, the better its chances of selling.

2. Neglecting to Make Your House Stand Out

When selling your house, the old adage holds true: “You never get a second chance to make a first impression.” It’s essential to invest in enhancing your home’s curb appeal, as well as staging its interior. A well-maintained exterior can make a lasting impact. As an article from U.S. News says:

“After all, if people drive by, but aren’t interested enough to walk through the front door, you’ll never sell your house.”

But don’t let the impact stop at the front door. Inside, create an environment that allows potential buyers to envision themselves living there. Removing personal items and decluttering opens up possibilities for them. Additionally, a fresh coat of paint and well-maintained floors can work wonders in refreshing a room’s appearance.

3. Failing to Price Your House Correctly

Pricing your home correctly is paramount. While the temptation to set a higher price to maximize profits is understandable, overpricing can deter buyers and hinder a quick sale. Business Insider notes:

“. . . the biggest mistake sellers make is overpricing their home.”

Pay close attention to feedback from open houses and showings, particularly if you hear a consistent message. If many potential buyers express concerns about the price, it’s wise to consider an adjustment.

For expert guidance on addressing these pitfalls and more, lean on a trusted real estate agent. A knowledgeable agent (like me 😊) will offer valuable insights and effective strategies to list your house for a successful sale.

drew@windermere.com

Real Estate News • September 27, 2023

Why Today’s Housing Inventory Shows a Crash Isn’t on the Horizon

by Drew Jones

September 27, 2023

You might remember the housing crash in 2008, even if you didn’t own a home at the time. If you’re worried there’s going to be a repeat of what happened back then, there’s good news – the housing market now is different from 2008.

One important reason is there aren’t enough homes for sale. That means there’s an undersupply, not an oversupply like the last time. For the market to crash, there would have to be too many houses for sale, but the data doesn’t show that happening.

Housing supply comes from three main sources:

Homeowners deciding to sell their houses
Newly built homes
Distressed properties (foreclosures or short sales)

Here’s a closer look at today’s housing inventory to understand why this isn’t like 2008.

Homeowners Deciding To Sell Their Houses

Although housing supply did grow compared to last year, it’s still low. The current months’ supply is below the norm. The graph below shows this more clearly. If you look at the latest data (shown in green), compared to 2008 (shown in red), there’s only about a third of that available inventory today.

So, what does this mean? There just aren’t enough homes available to make home values drop. To have a repeat of 2008, there’d need to be a lot more people selling their houses with very few buyers, and that’s not happening right now.

Newly Built Homes

People are also talking a lot about what’s going on with newly built houses these days, and that might make you wonder if homebuilders are overdoing it. The graph below shows the number of new houses built over the last 52 years:

The 14 years of underbuilding (shown in red) is a big part of the reason why inventory is so low today. Basically, builders haven’t been building enough homes for years now and that’s created a significant deficit in supply.

While the final blue bar on the graph shows that’s ramping up and is on pace to hit the long-term average again, it won’t suddenly create an oversupply. That’s because there’s too much of a gap to make up. Plus, builders are being intentional about not overbuilding homes like they did during the bubble.

Distressed Properties (Foreclosures and Short Sales)

The last place inventory can come from is distressed properties, including short sales and foreclosures. Back during the housing crisis, there was a flood of foreclosures due to lending standards that allowed many people to get a home loan they couldn’t truly afford.

Today, lending standards are much tighter, resulting in more qualified buyers and far fewer foreclosures. The graph below uses data from the Federal Reserve to show how things have changed since the housing crash:

This graph illustrates, as lending standards got tighter and buyers were more qualified, the number of foreclosures started to go down. And in 2020 and 2021, the combination of a moratorium on foreclosures and the forbearance program helped prevent a repeat of the wave of foreclosures we saw back around 2008.

The forbearance program was a game changer, giving homeowners options for things like loan deferrals and modifications they didn’t have before. And data on the success of that program shows four out of every five homeowners coming out of forbearance are either paid in full or have worked out a repayment plan to avoid foreclosure. These are a few of the biggest reasons there won’t be a wave of foreclosures coming to the market.

What This Means for You

Inventory levels aren’t anywhere near where they’d need to be for prices to drop significantly and the housing market to crash. According to Bankrate, that isn’t going to change anytime soon, especially considering buyer demand is still strong:

“This ongoing lack of inventory explains why many buyers still have little choice but to bid up prices. And it also indicates that the supply-and-demand equation simply won’t allow a price crash in the near future.”

Bottom Line

The market doesn’t have enough available homes for a repeat of the 2008 housing crisis – and there’s nothing that suggests that will change anytime soon. That’s why housing inventory tells us there’s no crash on the horizon.