Inventory drives down days on market

Homes were flying off the market in Chicago this October due to the rising demand for housing, according to a new report from RE/MAX.

In October, homes stayed on the market an average of 83 days before finding a buyer. This is down a full week from last year’s 90 days, and the shortest average for October since 2005.

The shortened timeline is due to an increased demand for housing caused by the shortage of inventory in the metro. Inventory of homes for sale in October fell 10% from last year. This in turn reduced the total home sales by 5% annually to a total of 8,693 sales.

Not only are homes staying on the market for less time, but they are also selling at higher prices. The median sales price in October increased 9.5% to $219,000 from last year’s median sale price of $200,000.

“This is an outstanding market for those with a home to sell,” said Jack Kreider, executive vice president and regional director of RE/MAX Northern Illinois.  “An average market time of under 90 days puts upward pressure on prices, and we certainly saw that play out in October.”

“The increase in mortgage interest rates since the presidential election will serve to reinforce the urgency homebuyers already feel, so we expect an active market right through the holiday season and into 2017,” Kreider said.

The home sales data used for the RE/MAX analysis is collected by MRED, the regional multiple listing service. It covers detached and attached homes in the Illinois counties of Cook, DuPage, Kane, Kendall, Lake, McHenry and Will.

The home price increase is good news for homeowners who are experiencing higher levels of home equity. In fact, 23.4% of all homeowners with a mortgage are now consideredequity rich, an increase of 2.6 million from last year to 13 million in the third quarter, according to a report from ATTOM Data Solutions, a fused property database.

However, the obvious downside is for potential homebuyers, who are struggling to find a home at an affordable price. Home affordability is at the worst level in seven years, with 24% of the U.S. county housing markets less affordable than their historic affordability averages in the third quarter, the most recent ATTOM Data Solutions Home Affordability Index for third quarter 2016 recorded.

Questions to ask your Realtor

unduhan-78If you’re a first-time homebuyer, you may be wondering how to start the process. After browsing homes online, the next step for homebuyers is often choosing a Realtor.

But how do you find the best ones out of all the available choices? HousingWire has you covered.

We asked one of the top five agents in Atlanta, Matt Hermes, and Happy Grasshopper Co-Founder Dan Stewart for their best advice and distilled that into these five questions to ask your real estate agent:

1. What is your experience working with first-time homebuyers?

Oftentimes, first-time homebuyers will rely on a personal referral from a family member or friend when they start the buying process. While this is a great way to be introduced to a real estate agent, you need to make sure the agent has the skill set and patience to work with a first-time buyer. A real estate agent should take the time to walk through the entire purchase process from loan pre-qualification, a needs analysis (what are you looking for, the area you want to live, commute times, price point, etc), how to look at homes objectively, reviewing the contract with you prior to writing an offer, how a contract will be written to your benefit, funds needed to close, funds needed AFTER closing, closing time lines, etc.

2. How long have you been in the real estate business and how many homes have you sold this year?

While there are many excellent agents that are new to the business, making sure you have experience working on your side is a key to your success in finding and negotiating a great deal. Working with a new agent or even an agent who has had his/her license for years, but has not closed a lot of transaction may not be in your best interest. Don’t get me wrong, there are some exceptional agents who have not closed a ton of transactions, but you should consider experience over someone you “like.” You want to make sure your agent is knowledgeable about writing offers with the terms working in your favor.

3. Are you working for me and in my best interest throughout this transaction?

Buyers often call on a home for sale from a sign in the yard, and the listing agent wants to show you the home. The listing agent has signed a contract with the seller to work on their behalf. They cannot work for you and the seller at the same time while trying to get both sides the best deal. If you do hire a real estate agent that also works with sellers, ask them up front how this will work if you are to view a home they are selling. Buying at a discount or at terms that work in your favor are extremely important when buying a home for the first time. I like to say that you earn your equity in the purchase of the property, not necessarily when you go to sell the home, but when you buy. Equity is wealth. You will need someone working FOR you and in your best interest.

4. How will you communicate with me?

The right amount of communication from an agent should reassure you that the agent is working hard to find you the home of your dreams. Buyers should hear from their agents without prompting. Agents should communicate often about open houses, new listings, setting up showing times, and changes within the market.

With prices high and inventory low in the current market, there’s likely to be multiple offers on the home you want, and a breakdown in communication could be the difference between an accepted and a denied offer. Ask how often the agent will communicate and what’s his/her preferred method. Will he/she primarily use email or phone, and how does that lines up with what you’re looking for?

Waves in housing market

After the election of President-elect Donald Trump, mortgage rates shot up, and the 30-year fixed-rate mortgage hit nearly 4%, according to the weekly survey from Freddie Mac.

This increase is directly impacting the housing market as buyers begin to see the effect of the changed rates, according to an article by Diana Olick for CNBC.

For some homebuyers, this sudden jump could keep them from closing the deal on the home they want.

From the article:

Mortgage rates are still historically low, but crossing over from the 3% range to the 4% range means more than just a $50-per-month difference in payments. It means some buyers will not qualify for the strict debt-to-income ratios lenders now require. It also means potential buyers are more nervous about taking the plunge at all.

Salem Five Bank vice president Jason Anker gives homebuyers advice on how they should approach the housing market now that rates are increasing.

From the article:

“I tell people, interest rates are 80% psychological and 20% math. I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month. They initially think it’s going to be a lot more painful than that,” said Anker, who added he hasn’t lost any deals yet. “I am concerned. My advice to clients right now is to be extremely defensive.”

Home sales increased to highest pace

Existing home sales shot up in October to the highest annualized pace in almost a decade, according to the new report from the National Association of Realtors.

“The existing home sales market continues to show surprising strength, defying expectations for a modest fall and instead delivering the strongest month in almost a decade,” Zillow Chief Economist Svenja Gudell said. “Clearly, the market continues to underestimate just how much demand for homes is out there, even in the face of tight inventory and rising existing home prices that are now the highest on record.”

Existing home sales, completed transactions including single-family homes, townhomes, condominiums and co-ops, increased 2% to a seasonally adjusted annual rate of 5.6 million. This is up from 5.49 million in September, and up 5.9% from last year’s 5.29 million. October passed up June’s peak to hit the highest pace since February 2007.

“October’s strong sales gain was widespread throughout the country and can be attributed to the release of the unrealized pent-up demand that held back many would-be buyers over the summer because of tight supply,” NAR Chief Economist Lawrence Yun said. “Buyers are having more success lately despite low inventory and prices that continue to swiftly rise above incomes.”

“The good news is that the tightening labor market is beginning to push up wages and the economy has lately shown signs of greater expansion,” Yun said. “These two factors and low mortgage rates have kept buyer interest at an elevated level so far this fall.”

Home prices are still rising, increasing 6% annually in October to $232,200, up from $219,100 last year. This marks the 56th consecutive month of annual gains.

Housing inventory declined 0.5% from last month to 2.02 million existing homes available for sales. This is 4.3% below last year’s 2.11 million, and the 17th consecutive annual decrease. Inventory now rests at a 4.3 month supply.

One expert said that President-elect Donald Trump could focus on policies to reverse this lack of housing inventory.

“President-elect Trump could help boost inventory by implementing policies that would encourage investors to sell homes they bought during the foreclosure crisis, many of which are suitable for starter homebuyers,” Trulia Chief Economist Ralph McLaughlin said. “Such policies could include a reduction in capital gains taxes for homes sold by investors to owner-occupiers, an increase in tax rates on rental income, or both.”

Second consecutive month in August

If the cash sales share continues to fall at the same annual rate it did in August 2016, the share should hit 25% by mid-2019. This is a big delay from last month’s prediction, which put cash sales at their pre-crisis level by mid-2018.

Real estate owned sales had the largest share of cash sales in August at 58.6%, followed by resales at 31%, short sales at 29.1% and newly constructed homes at 15.6%.

While REO sales have the highest percentage of cash sales, they make up only 4.6% of the market. Short sales make up 2.7% of the market, putting distressed sales at 7.3% of the market, the lowest share for any month since September 2007.

At their peak in 2009, distressed sales made up 32.4% of the market, and REOs were 27.9% of that. On the other hand, pre-crisis distressed sales levels averaged 2%. If the current year-over-year decrease in the distressed sales share continues, it will reach that “normal” 2% mark in mid-2018.

The state with the largest share of distressed sales was Maryland with 19.1%, followed by Connecticut at 18.5%, Michigan at 17.7%, New Jersey at 15.9% and Illinois at 15.3%.

North Dakota had the smallest share of the market’s distressed sales at 2.6%.

Salem Five Bank vice president Jason Anker gives homebuyers advice on how they should approach the housing market now that rates are increasing.

From the article:

“I tell people, interest rates are 80% psychological and 20% math. I do the math for them and their next reaction is, ‘Oh that’s all?’ Forty dollars a month, $75 a month. They initially think it’s going to be a lot more painful than that,” said Anker, who added he hasn’t lost any deals yet. “I am concerned. My advice to clients right now is to be extremely defensive.”