What Does Reduced Home Affordability Mean for You?

Home affordability is shrinking fast. Here’s what you should do to get ahead of the curve.

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Home affordability is shrinking rapidly, according to research by Arch Mortgage Insurance. 

In the first quarter, affordability (defined as the size of the monthly mortgage payment needed to buy a home) dropped by 5%. This was mainly due to the increase in mortgage rates. As a consequence, more people are now stretched and taking on greater debt relative to their income. Other buyers are being pushed out of the market altogether. 

And that's not all. Affordability is expected to drop an additional 15% to 20% by the end of the year. That's because home prices continue to rise, and the Federal Reserve is expected to ratchet up its reference interest rate, which often leads mortgage rates, three more times this year.

What does this mean for you?

If you're looking to sell, you won't have a hard time finding a buyer. Even with decreasing affordability, demand for homes still far outstrips supply. That means that this spring and summer might see an additional rush on the real estate market. It also means that right now might be a very good time to list your home if you've been thinking about selling for a while.

 There’s no need to panic if you’re a homebuyer.

On the other hand, if you are thinking of buying a home, you might think that this news spells doom for you. However, there's no need to panic. While affordability is dropping, it is still well above historical averages (just like current mortgage rates). In fact, Arch Mortgage Insurance estimates that homes are now 15% to 20% more affordable than they have been in the period from 1987 to 2004. When rates go up, it will affect what your monthly payments will be on a new home. From this perspective, it makes sense to move now in case you've been looking to buy before rates rise further. 

So what's the next step?

If you’re thinking about buying or selling a home, give us a call. We’d be happy to answer any questions you may have. We look forward to hearing from you soon.

I hope you found these tips helpful. If you have any other questions about buying or selling a home, just give me a call or send me an email. I would be happy to help you!

5 Ways to Get Organized Before Your Next Move

Today, I have five tips to help you get a jumpstart on organizing your things and simplify your next move.

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It’s important to get a head start on your move before you get an offer from a homebuyer. Here are five tips to help you jumpstart your organizing and simplify your next move. 

1. Sort your belongings into these groups: keep, give away, maybe, and trash. Once you have, box up everything in the maybe pile and store those items for six to 12 months. If you don’t have a use for those items in the next year, then you can probably give those away. 

2. Give yourself plenty of time. Be patient. The process of getting organized takes time. Sorting through personal paper and memorabilia will take much longer than sorting through other items. Give yourself some extra time for the reminiscing that will occur.

The process of getting organized takes time.

3. Store your items in clear bins. Using plastic bins helps you know what’s inside each bin. If you use colored bins or cardboard boxes, use a pen to clearly label what’s inside and which room it will go in. Use a large piece of paper to write your labels on so that you can use that bin again later for another purpose. 

4. Get rid of your paper. Another problem in homes is the paper trail you leave from room to room. It could be magazines, newspapers, documents, advertising, or receipts. Most homeowners keep a lot of paper, which creates a lot of clutter. Go through your files and reduce that paper by shredding or recycling documents that you do not need. 

5. Do it now. This is the most valuable tip. As soon as you finish reading this, block some time off on your calendar to start getting organized. Putting it on your calendar should prevent any procrastination. If you start taking care of things right away, it will get simpler over time. 

The same is true for your move. 

I hope you found these tips helpful. If you have any other questions about buying or selling a home, just give me a call or send me an email. I would be happy to help you!

A Quick Update on The Winter Housing Market

This winter is shaping up to be a huge moment for area homeowners who are looking to sell. Here are a few reasons why.

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This winter is likely to be a very important moment for many home sellers. That’s because three big trends are coming together to affect Lancaster County home prices right now:

1. Housing inventory remains extremely tight. The total number of homes on the market fell 10% year over year in the last quarter. This is the biggest drop since 2013, and it's part of a consistent pattern of very limited and decreasing housing supply. Of course, the fewer homes there are on the market, the easier it is to sell, and the higher the price you can expect to get. Home prices have increased almost 6.5% nationally since last year.

2. Buyers are increasingly optimistic. Despite the tight inventory, homebuyers are increasingly optimistic and continue to look for homes. Some of this has to do with the recent growth in income and job stability. Loosening lending standards are also making many homebuyers eager to take advantage of current mortgage rates, which slipped under 4% recently.

It’s the perfect time to get in the real estate market.

3. The new tax reform bill will impact the market. The federal government recently passed the Tax Cuts and Jobs Act, which majorly overhauled our tax code. While it’s unclear how this will affect the real estate market as a whole, there are some changes that do not favor home sellers. As a result of the changes made to the tax code, the National Association of Realtors now projects slower growth for home prices in 2018, with an appreciation rate of 1% to 3%. By doubling the standard deduction, Congress has significantly reduced the value of mortgage interest and property deductions as tax incentives for homeownership. On the bright side, no changes were made in the rules surrounding capital gains for home sales, which is good news for home sellers. 

When you put all three of these three trends together, two big conclusions emerge. First, now is a very favorable moment for home sellers, thanks to the shortage in the market, the many eager buyers, and the high and rising prices. On the other hand, higher cost, higher tax areas will likely see prices decline as the result of new restrictions on mortgage interest and state and local taxes. 

If you are looking to take advantage of the present moment to sell your home, please reach out by giving us a call or sending us an email. We look forward to hearing from you soon.

Is Fall a Good Time to Put Your Home on the Market?

Contrary to popular belief, fall is a great time to put your home on the market. There are three reasons why. 

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Fall is upon us, and with it the end of the high season for real estate.

However, if you're thinking you've missed your chance to sell your home, let me reassure you: This autumn actually presents a fantastic moment to sell. Here's why. 

First off, housing inventory is still incredibly low. In fact, according to data from the Census Bureau and the National Association of Realtors, inventory remains well below historic averages, and is 50% less than its peak in 2006. In addition, the recent slump in new construction means demand for existing homes will stay high in the near future.  

The time to list your home is now.

Second, while mortgage rates also remain very low, recent announcements by the Federal Reserve might cause them to finally start rising. This would make mortgages less affordable and might turn away a significant number of potential buyers. This is even more of a concern when you consider the continuing growth of home prices—6.9% in the last year alone.

Third, buyers in the fall are likely to be more serious because they have probably been searching for months without success. Also, because fewer homes are listed in the fall, this means there's even less competition than we’ve seen due to the general low inventory. 

So what do you get when you put all those things together?

Well, if you were to list your home right now, chances are good that you would be able to sell it very easily and for a top price. 

On the other hand, if you decide to wait, the situation might not be as favorable because mortgage rates might rise or because new construction might pick up.

That means the time to list your home is now. 

If you’d like a precise estimate of what your home could sell for this fall or you have any other questions about the current Lancaster real estate situation, give me a call or send me an email. I'm here to help.

What the Housing Market’s 30-Year Low Means to You

We’re experiencing a 30-year low in inventory. Here’s what that means to you.

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Spring is typically the busiest time of year for the real estate market. Buyers who are experiencing cabin fever come eagerly into the market in search of their dream homes. Homeowners who are anticipating the increased demand are enticed to list their homes for sale in order to move up or downsize and cash in.

New data from CoreLogic shows that even though buyers came out in full force, not as many homeowners made the jump to list in the 2nd quarter as expected. Our sales growth has slowed, not due to lack of affordability but due to lack of inventory.

Inventory is down for the 25th consecutive month nationwide.

As of the end of the second quarter this year, our unsold inventory is at 1.9%—the lowest 2nd quarter reading in over 30 years. CoreLogic’s president says that home prices are marching even higher as mortgage rates keep things affordable from a financing perspective. Affordability will likely become a much bigger challenge in the years ahead.

Overall, inventory across the U.S. is down for the 25th consecutive month according to the National Association of Realtors. It now stands at a 4.3-months’ supply. However, conditions in the luxury and premium markets are the opposite. These homes are staying on the market for a longer period of time than usual, putting that segment of homes in a buyer’s market.

The bottom line is that buyers are out in full force and there has never been a better time to sell your home and move up than right now. If you’re interested in buying or selling a home or if you just have any questions, you can always reach out and give us a call or send us an email. We look forward to hearing from you!