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!

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.

3 Reasons Why Now Is a Great Time for Our Market

Should you buy or sell a home this spring? I’ll go over three reasons why now is a great time to do either today.

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There are three recent developments that make this spring a great time to buy or sell a home. 

First of all, mortgage interest rates have stabilized. Last July, we hit an all-time low of 3.4%. Rates went up after the election and reached a high of 4.31%, but they have stabilized over the past three months. Despite the increase, they are still historically low, making now a great time to buy. 

Secondly, employment is up. The U.S. Bureau of Labor and Statistics says that there were 235,000 new jobs in February, and 2.3 million new jobs over the past year. This reflects continued growth in business and consumer confidence over the recent months. 

Housing inventory is at record lows.

Finally, housing inventory is at a record low in most price points. February saw a 17.9% drop in the number of homes on the market year over year. 

What do these developments mean for you? 

If you are thinking of selling your home, you will be able to do so quickly right now, as inventory is low and demand is high. You will also be able to sell your home for top dollar. 

If you have any questions about what your home is worth or if you would like to know more about our current market, please don’t hesitate to reach out to me. I would be happy to help you!

Are You Ready for the Lancaster County Property Tax Reassessment?

Lancaster County is currently undergoing a reassessment for all property values, and here’s what you need to know about it.  

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Don’t shoot the messenger, but Lancaster County is undergoing a reassessment for all property values that will take effect on January 1st, 2018. The last time this happened was in 2005.

There is no precise way to predict what your upcoming taxes will be because the reassessment takes into consideration not only your new property assessment value, but also the upcoming tax millage rates for 2018 and 2019. That being said, you can use the 2016 and 2017 millage rates as a pretty good indicator—along with this new assessment value—of what your incoming taxes will be.

You have the right to appeal your reassessment.

The overall assessment timeline has some important dates you need to watch out for: 

• March 2017. During this whole month, reassessment notices will be mailed out. Keep in mind that this is just a preliminary notice—it might not be the set value at the end. 
• March 3rd to March 31st, 2017. During this time period, once you receive that preliminary notice, the Lancaster County Assessment Appeals Board is offering a free preliminary consultation if you dispute or have any questions about your preliminary value. They have a site set up at the Park City mall in Lancaster in the conference room of the meeting rooms in there. You can discuss your value with one of the officers present. They’re open Monday through Friday, 8 a.m. to 5 p.m. No appointment is necessary.
• June 1st, 2017. On this day, final notices will be mailed out. This is the assessment value that will go into effect on January 1st, 2018. You have the right to appeal this assessment free of charge within 40 days from the date on the notice. You can still appeal after that 40-day limit, but they will charge you to do so. If you want to appeal this final notice, a hearing will be arranged and a date and time will be scheduled for you to appear before the board. 

If you do decide to appeal, I suggest you visit their website and obtain the rules and regulations so you can be more knowledgeable about your appeal. Here are two other links I suggest you check out for more information on the subject:

• This one gives you more of a Q&A explanation of the property reassessment value of Lancaster County.
• This one lets you access the Lancaster County website. This will not only reveal more about the appeal process, but also give you information about accessing your current property assessment as well as the current millage rates for 2016 and 2017.

If you have any questions about this topic or are looking to buy or sell in the current market, feel free to contact me. I’d be glad to help!

What Can You Expect From the Market in 2017?

I get asked all the time about what I think will happen in the market. I can’t tell the future, but I can point to a few different sources to give you a better idea of what is likely to happen.

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A lot of people have been asking me lately about what they can expect from the market this year. My first response is always, “I don’t have a crystal ball, but I can tell you what I’ve been seeing in the local marketplace and what some experts think will happen in the future.” Here’s what I mean.

According to Lawrence Yun, chief economist of the National Association of Realtors, the national median home price will increase by 4% in 2017. Also, low inventory levels are affecting affordability by slowly increasing housing prices. Factors such as limited land availability, shortages on construction labor, and tight credit for buyers are all contributing to increasing home costs that create a shortage of available housing. Also, Yun is predicting a 5.3% increase in new construction home starts.

I predict a slow and steady price growth.

At the state level, Realtor.com is predicting moderate sales growth with a changing composite of buyers. A few trends they are starting to see include millennials and baby boomers being the two demographic shifts powering through in the next 10 years. They also predict a slow and steady price growth of 3.9% from last year. Fewer homes will be on the market, and inventory will decrease by about 11% on average.

We are generally seeing a lack of inventory and an increase in demand across all price points. However, I’m also seeing the days on market for listed homes increase. I’m optimistic for the outlook of the year as it starts off, but I also predict a slow and steady growth.

If you or someone you know is thinking about buying or selling a home this year or if you just have a question, don’t hesitate to give me a call or send me an email. I would love to hear from you.