According to data from the most recent Origination Insight Report by Ellie Mae, the average FICO® score on closed loans reached 753 in February. As lending standards have tightened recently, many are concerned over whether or not their credit score is strong enough to qualify for a mortgage. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores.
The fact that the average American has seen their credit score go up in recent years is a great sign of financial health. As someone’s score rises, they’re building toward a stronger financial future. As more Americans with strong credit enter the housing market, we see a natural increase in the FICO® score distribution of closed loans, as shown in the graph below:
FICO Score Distribution
If your credit score is below 750, it’s easy to see this data and fear that you may not be able to qualify for a mortgage. However, that’s not always the case. While the majority of borrowers right now do have a score above 750, there’s more to qualifying for a mortgage than just the credit score, and there are still options that allow people with lower credit scores to buy their dream home. Here’s what Experian, a global leader in consumer and business credit reporting, says:
Federal Housing Administration (FHA) loans:“With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.”
Conventional loans:“The most popular loan type typically comes with a 620 minimum credit score.”
S. Department of Agriculture (USDA) loans:“In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.”
S. Department of Veterans Affairs (VA) loans:“VA loans don’t technically have a minimum credit score, but lenders will typically require between 580 and 620.”
There’s no doubt a higher credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight like it is right now. When planning to buy a home, speaking to an expert about steps you can take to improve your credit score is essential so you’re in the best position possible. However, don’t rule yourself out if your score is less than perfect – today’s market is still full of opportunity.
Bottom Line
Don’t let assumptions about whether your credit score is strong enough put a premature end to your homeownership goals. Let’s connect today to discuss the options that are best for you.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
What Is the #1 Financial Benefit of Homeownership?
There are many financial and non-financial benefits of homeownership, and the greatest financial one is wealth creation. Homeownership has always been the first rung on the ladder that leads to forming household wealth. As Freddie Macexplains:
“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
Odeta Kushi, Deputy Chief Economist at First American, also notes:
“The wealth-building power of homeownership shows that home is not only where your heart is, but also where your wealth is…For the majority of households that transition into homeownership, the most recent data reinforces that housing is one of the biggest positive drivers of wealth creation.”
Last week, CoreLogic released their latest Homeowner Equity Insights Report, which reveals the surge in wealth created over the last twelve months through increased home equity. The report makes five key points:
Roughly 38% of all homes are mortgage-free
The average equity gain of mortgaged homes in the last year was $26,300
The current average equity of mortgaged homes is greater than $200,000
There was a 16.9% increase in total homeowner equity
Total homeowner equity reached over $1.5 trillion
Here’s a map that shows the equity gains by state:
Equity Increasing Throughout the Country
Increasing equity is giving homeowners the power to better manage the challenges of the pandemic, especially for those spending more time at home. In the report, Frank Nothaft, Chief Economist for CoreLogic, explains:
“This equity growth has enabled many families to finance home remodeling, such as adding an office or study, further contributing to last year’s record level in home improvement spending.”
The financial advantage homeowners have has not gone unnoticed. In the same report, Frank Martell, President and CEO of CoreLogic, states:
“This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake.”
Increasing wealth benefits more than just homeowners.
Last year, the Rosen Consulting Group released a report outlining the benefits of homeownership. In that report, they explained what an increase in net worth – which they call the “wealth effect” – means to the economy:
“In economic literature, the wealth effect is a term used to describe the fact that individuals have a tendency to increase their spending habits when their actual or perceived wealth increases. For homeowners, the latent savings achieved by building equity in their home and the growth in home values over time both contribute to increased net worth. Through the wealth effect, this in turn translates to households having a greater ability and willingness to spend money across a wide range of other types of goods and services that spur business activity and provide a positive multiplier effect that creates jobs and income throughout the economy.”
Bottom Line
Homeownership builds wealth through equity, and this creates a positive impact for homeowners and their communities. Let’s connect today if you’re ready to invest in a home of your own.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Today’s homebuyers are faced with a strong sellers’ market, which means there are a lot of active buyers competing for a relatively low number of available homes. As a result, it’s essential to understand how to make a confident and competitive offer on your dream home. Here are five tips for success in this critical stage of the homebuying process.
1. Listen to Your Real Estate Advisor
An article from Freddie Mac gives direction on making an offer on a home. From the start, it emphasizes how trusted professionals can help you stay focused on the most important things, especially at times when this process can get emotional for buyers:
“Remember to let your homebuying team guide you on your journey, not your emotions. Their support and expertise will keep you from compromising on your must-haves and future financial stability.”
A real estate professional should be the expert guide you lean on for advice when you’re ready to make an offer.
2. Understand Your Finances
Having a complete understanding of your budget and how much house you can afford is essential. The best way to know this is to get pre-approved for a loan early in the homebuying process. Only 44% of today’s prospective homebuyers are planning to apply for pre-approval, so be sure to take this step so you stand out from the crowd. Doing so make it clear to sellers you’re a serious and qualified buyer, and it can give you a competitive edge in a bidding war.
3. Be Prepared to Move Quickly
According to the latest Realtors Confidence Index from the National Association of Realtors (NAR), the average property sold today receives 3.7 offers and is on the market for just 21 days. These are both results of today’s competitive market, showing how important it is to stay agile and alert in your search. As soon as you find the right home for your needs, be prepared to submit an offer as quickly as possible.
4. Make a Fair Offer
It’s only natural to want the best deal you can get on a home. However, Freddie Mac also warns that submitting an offer that’s too low can lead sellers to doubt how serious you are as a buyer. Don’t make an offer that will be tossed out as soon as it’s received. The expertise your agent brings to this part of the process will help you stay competitive:
“Your agent will work with you to make an informed offer based on the market value of the home, the condition of the home and recent home sale prices in the area.”
5. Stay Flexible in Negotiations
After submitting an offer, the seller may accept it, reject it, or counter it with their own changes. In a competitive market, it’s important to stay nimble throughout the negotiation process. You can strengthen your position with an offer that includes flexible move-in dates, a higher price, or minimal contingencies (conditions you set that the seller must meet for the purchase to be finalized). Freddie Mac explains that there are, however, certain contingencies you don’t want to forego:
“Resist the temptation to waive the inspection contingency, especially in a hot market or if the home is being sold ‘as-is’, which means the seller won’t pay for repairs. Without an inspection contingency, you could be stuck with a contract on a house you can’t afford to fix.”
Bottom Line
Today’s competitive market makes it more important than ever to make a strong offer on a home. Let’s connect to make sure you rise to the top along the way.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Spring is almost here, and many are wondering what it will bring for the housing market. Even though the pandemic continues on, it’s certain to be very different from the spring we experienced at this time last year. Here’s what a few industry experts have to say about the housing market and how it will bloom this season.
“Despite early weakness, we expect to see new listings grow in March and April as they traditionally do heading into spring, and last year’s extraordinarily low new listings comparison point will mean year over year gains. One other potential bright spot for would-be homebuyers, new construction, which has risen at a year over year pace of 20% or more for the last few months, will provide additional for-sale inventory relief.”
“Some people will feel comfortable listing their home during the first half of 2021. Others will want to wait until the vaccines are widely distributed. This suggests more inventory will be for sale in late 2021 and into the spring selling season in 2022.”
“Since reaching a low point in January, mortgage rates have risen by more than 30 basis points… However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”
“As the housing market heads into the spring home buying season, the ongoing supply and demand imbalance all but assures more house price growth…Many find it hard to believe, but housing is actually undervalued in most markets and the gap between house-buying power and sale prices indicates there’s room for further house price growth in the months to come.”
Bottom Line
The experts are very optimistic about the housing market right now. If you pressed pause on your real estate plans over the winter, let’s chat to determine how you can re-engage in the homebuying process this spring.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
6 Simple Graphs Proving This Is Nothing Like Last Time
Last March, many involved in the residential housing industry feared the market would be crushed under the pressure of a once-in-a-lifetime pandemic. Instead, real estate had one of its best years ever. Home sales and prices were both up substantially over the year before. 2020 was so strong that many now fear the market’s exuberance mirrors that of the last housing boom and, as a result, we’re now headed for another crash.
However, there are many reasons this real estate market is nothing like 2008. Here are six visuals to show the dramatic differences.
1. Mortgage standards are nothing like they were back then.
During the housing bubble, it was difficult not to get a mortgage. Today, it’s tough to qualify. Recently, the Urban Institute released their latest Housing Credit Availability Index (HCAI) which “measures the percentage of owner-occupied home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
The index shows that lenders were comfortable taking on high levels of risk during the housing boom of 2004-2006. It also reveals that today, the HCAI is under 5 percent, which is the lowest it’s been since the introduction of the index. The report explains:
“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”
Default Risk in the Mortgage Market (1999-2020)
This is nothing like the last time.
2. Prices aren’t soaring out of control.
Below is a graph showing annual home price appreciation over the past four years compared to the four years leading up to the height of the housing bubble. Though price appreciation was quite strong last year, it’s nowhere near the rise in prices that preceded the crash.
Annual Home Price Appreciation
There’s a stark difference between these two periods of time. Normal appreciation is 3.8%. So, while current appreciation is higher than the historic norm, it’s certainly not accelerating out of control as it did in the early 2000s.
This is nothing like the last time.
3. We don’t have a surplus of homes on the market. We have a shortage.
The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing an acceleration in home values.
Months’ Inventory of Existing Single-Family Homes for Sale
This is nothing like the last time.
4. New construction isn’t making up the difference in inventory needed.
Some may think new construction is filling the void. However, if we compare today to right before the housing crash, we can see that an overabundance of newly built homes was a major challenge then, but isn’t now.
Single-Family Housing Units Completed
This is nothing like the last time.
5. Houses aren’t becoming too expensive to buy.
The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate is about 3%. That means the average homeowner pays less of their monthly income toward their mortgage payment than they did back then. Here’s a chart showing that difference:
Percent of the Median Income Needed to Purchase the Median-Priced Home
As Mark Fleming, Chief Economist for First American, explains:
“Lower mortgage interest rates and rising incomes correspond with higher house prices as home buyers can afford to borrow and buy more. If housing is appropriately valued, house-buying power should equal or outpace the median sale price of a home. Looking back at the bubble years, house prices exceeded house-buying power in 2006, but today house-buying power is nearly twice as high as the median sale price nationally.”
This is nothing like the last time.
6. People are equity rich, not tapped out.
In the run-up to the housing bubble, homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over 50% of homes in the country having greater than 50% equity – and owners have not been tapping into it like the last time. Here’s a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out almost $500 billion dollars less than before:
Total Home Equity Cashed Out through Refinance in Billions
During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owed was greater than the value of their home). Some decided to walk away from their homes, and that led to a wave of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. With the average home equity now standing at over $190,000, this won’t happen today.
This is nothing like the last time.
Bottom Line
If you’re concerned that we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
When selling a house, most homeowners hope for a quick and profitable transaction that puts them in a position to make a great move. If you’re waiting for the best time to win as a seller, the market is calling your name this spring. Here are five reasons why this is the perfect time to sell your house if you’re ready.
1. There’s high demand from homebuyers.
Buyer demand is strong right now, and buyers are active in the market. ShowingTime, which tracks the average number of buyer showings on residential properties, recently announced that buyer showings are up 51.5% compared to this time last year. Daniil Cherkasskiy, Chief Analytics Officer at ShowingTime, notes:
“As anticipated, demand for real estate remains elevated and continues to be affected by low levels of inventory…On average, each home is getting 50 percent or more requests this year compared to January of last year. As we head into the busy season, it’s likely we’ll push into even more extreme territory until the supply starts catching up with demand.”
When your house is positioned to get a ton of attention from competitive buyers, you’re in the best spot possible as the seller.
2. There aren’t enough houses for sale.
Purchaser demand is so high, the market is running out of available houses for sale. Recently, realtor.comreported:
“Nationally, the inventory of homes for sale in February decreased by 48.6% over the past year, a higher rate of decline compared to the 42.6% drop in January. This amounted to 496,000 fewer homes for sale compared to February of last year.”
The National Association of Realtors (NAR) also reveals that, while home sales are skyrocketing, the inventory of existing homes for sale is continuing to drop dramatically. Houses are essentially selling as fast as they’re hitting the market – in fact, NAR reports that the average house is on the market for only 21 days.
It’s this imbalance between high buyer demand and a low supply of houses for sale that gives sellers such an advantage. A seller will always negotiate the best deal when demand is high and supply is low. That’s exactly what’s happening in the real estate market today.
3. You have a lot of leverage in today’s market.
Clearly, many more people are interested in buying than selling this spring, creating the ultimate sellers’ market. When this happens, homeowners in a position to sell have the upper hand in negotiations.
According to NAR, agents are reporting an average of 3.7 offers per house and an increase in bidding wars. As a seller, this means the ball is in your court – so much so that you can use your leverage to negotiate the best possible contract. Demand is there, and now is the perfect time to sell for the most favorable terms.
4. It’s a great way to use your home equity.
According to the latest data from CoreLogic, as of the third quarter of 2020, the average homeowner gained $17,000 in equity over the past year, and that number continues to grow as home values appreciate. Equity is a type of forced savings that grows during your time as a homeowner and can be put toward bigger goals like buying your next dream home.
Mark Fleming, Chief Economist at First American,notes:
“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity. In today’s housing market, fast rising demand against the limited supply of homes for sale has resulted in continued house price appreciation.”
5. It’s a chance to find a home that meets your needs.
So much has changed over the past year, including what many of us need in a home. Spending extra time where we currently live is enabling many of us to re-evaluate homeownership and what we find most important in a home.
Whether it’s a house that has the features suited to working remotely, space for virtual or hybrid schooling, a home gym or theater, or something else, selling this spring gives you a chance to make a move and find the home of your dreams.
Bottom Line
Today’s housing market belongs to the sellers. If you’ve considered making a move but have been waiting for the right market conditions, your wait may be over. Let’s connect so you’ll be positioned to win when you sell your house this spring.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Last year, many homeowners thought twice about selling their houses due to the onset of the health crisis. This year, however, homeowners are beginning to regain their confidence when it comes to selling safely. The latest Home Purchase Sentiment Index (HPSI) by Fannie Mae shows that 57% of consumers believe now is a good time to sell.
Doug Duncan, Vice President and Chief Economist at Fannie Mae,explains:
“Overall, the index’s monthly increase was driven largely by a substantial jump in the share of consumers reporting that it’s a good time to sell a home, with many citing favorable mortgage rates, high home prices, and low housing inventory as their primary rationale.”
Normally, spring is the busiest season in the housing market – the time when many homeowners decide to list their houses. While this is obviously not a normal year since the pandemic is still very much upon us, experts are optimistic that consumer positivity around selling will lead to more homeowners making moves this year. Duncan continues to say:
“We will pay close attention to see if this newfound optimism develops into a trend.”
What does this mean if you’re thinking of selling your house?
The fact that there are so few houses available for sale today is one driver that’s encouraging consumers to think more positively about selling. The National Association of Realtors (NAR) states:
“Total housing inventory at the end of January amounted to 1.04 million units, down 1.9% from December and down 25.7% from one year ago (1.40 million).”
With so few homes available to buy, your house will be more likely to rise to the top of an eager purchaser’s wish list in this competitive market. Today’s high buyer activity is creating upward pressure on home prices and more multiple-offer scenarios. According to the Realtors Confidence Index Survey from NAR, the average home for sale is receiving 3.7 offers today, up from 2.3 offers just one year ago. This makes selling even more enticing.
In this kind of sellers’ market, you have a huge advantage in the process. And here’s another win – you can also use your equity toward a down payment on a new home when you move.
Wondering where you’ll go if you try to move while it’s so challenging to find a home to buy? Well, in many areas, there are more homes available at the higher end of the market, so finding a move-up home may be less of an issue if you’re ready to search for your dream home this spring.
Bottom Line
If you pressed pause on selling your house last year, now may be the best time to put your plans back into motion while inventory is so low. Let’s connect today to get the process started.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Whether you’re buying your first home or selling your current house, if your needs are changing and you think you need to move, the decision can be complicated. You may have to take personal or professional considerations into account, and only you can judge what impact those factors should have on your desire to move.
However, there’s one category that provides a simple answer. When deciding to buy now or wait until next year, the financial aspect of the purchase is easy to evaluate. You just need to ask yourself two questions:
Do I think home values will be higher a year from now?
Do I think mortgage rates will be higher a year from now?
From a purely financial standpoint, if the answer is ‘yes’ to eitherquestion, you should strongly consider buying now. If the answer to both questions is ‘yes,’ you should definitely buy now.
Nobody can guarantee what home values or mortgage rates will be by the end of this year. The experts, however, seem certain the answer to both questions above is a resounding ‘yes.’ Mortgage rates are expected to rise and home values are expected to appreciate rather nicely.
What does this mean to you?
Let’s look at how waiting would impact your financial situation. Here are the assumptions made for this example:
The experts are right – mortgage rates will be 3.18% at the end of the year
The experts are right – home values will appreciate by 5.9%
You want to buy a home valued at $350,000 today
You decide on a 10% down payment
The Cost of Waiting
Here’s the financial impact of waiting:
You pay an extra $20,650 for the house
You need an additional $2,065 for a down payment
You pay an extra $116/month in your mortgage payment ($1,392 additional per year)
You don’t gain the $20,650 increase in wealth through equity build-up
Bottom Line
There are many things to consider when buying a home. However, from a purely financial aspect, if you find a home that meets your needs, buying now makes much more sense than buying next year.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
Home Prices: What Happened in 2020? What Will Happen This Year?
The real estate market was on fire during the second half of 2020. Buyer demand was way up, and the supply of homes available for sale hit record lows. The price of anything is determined by the supply and demand ratio, so home prices skyrocketed last year. Dr. Lynn Fisher, Deputy Director of the Federal Housing Finance Agency (FHFA) Division of Research and Statistics, explains:
“House prices nationwide recorded the largest annual and quarterly increase in the history of the FHFA Home Price Index. Low mortgage rates, pent up demand from homebuyers, and a limited housing supply propelled every region of the country to experience faster growth in 2020 compared to a year ago despite the pandemic.”
Here are the year-end home price appreciation numbers from the FHFA and two other prominent pricing indexes:
The past year was truly a remarkable time for homeowners as prices appreciated substantially. Lawrence Yun, Senior Economist at the National Association of Realtors (NAR), reveals:
“A typical homeowner in 2020, just by being a homeowner, would have accumulated around $24,000 in housing wealth.”
What will happen with home prices this year?
Many experts believe buyer demand will soften somewhat as mortgage rates are poised to bump up slightly. Some also believe the inventory challenge will ease as more listings come to market this year.
Based on this, most forecasters anticipate we’ll see strong appreciation in 2021 – but not as strong as last year. Here are seven prominent groups and their projections:
2021 Home Price Forecast
Bottom Line
Home price appreciation will be strong this year, but it won’t reach the historic levels of 2020. Let’s connect if you’d like to find out what your house is currently worth in our local market.
Contact us:
PHP Houses
142 W Lakeview Ave
Unit 1030
Lake Mary, FL 32746
Ph: (407) 519-0719
Fax: (407) 205-1951
email: info@phphouses.com
