Posts Tagged ‘housing’

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What is a Housing Bubble? Is One Forming?

July 7, 2015

Bubble-2-KCM

The recent talk of Greece and its financial challenges has some questioning whether the U.S. could also return to the crisis we experienced in 2008. Some are looking at the rise in real estate values and wondering whether we are in the middle of another housing price bubble.

What actually is a price bubble?

Here is the definition according to Jack M. Guttentag, Professor of Finance Emeritus at the Wharton School of the University of Pennsylvania:

“A price bubble is a rise in price based on the expectation that the price will rise. Sooner or later something happens to erode confidence in continued price increases, at which point the bubble bursts and prices drop. What makes it a price bubble is that the cause of the price increase is an expectation that the price will increase, which sooner or later must reverse itself.”

Does Professor Guttentag believe we are in another housing bubble?

In a recent article, he explained:

“My view is that we are a long way from another house price bubble. Home buyers, lenders, investors and regulators now understand that a nationwide decline in house prices is possible — because we recently lived through one.”

What are home prices doing?

Though home values are continuing to appreciate, the acceleration of the increases has slowed to year-over-year numbers which reflect a healthy housing market. Here is a chart showing year-over-year appreciation since January of last year:

Case-Shiller

We can see that appreciation rates have dropped from double digit numbers to more normal rates of 5% or lower.

Bottom Line

We think Nick Timiraos of the Wall Street Journal put it best in a recent tweet:

“Predictions of a new national home price bubble look unfounded for now, according to data.”

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2 Out of 3 Renters Want to Own. What’s Stopping Them?

June 9, 2015

Want-to-Buy-KCM

The Federal Reserve Bank of New York recently released the 2015 SCE Housing Survey. The survey revealed that most current renters would prefer owning and that 61.9% of them plan to buy a home within the next five years.

68.3% stated they would prefer owning (with 45.6% saying they ‘strongly’ prefer owning). When asked at what point in the future do they think they will own a primary residence:

  • 8.2% said within a year
  • 15.3% said in 1 to 2 years
  • 38.4% said between 3 to 5 years

What’s Holding Them Back?

Of the 68.3% who would prefer to own, 2 out of 3 cited difficulty in getting a mortgage for the reason they do not own. However, many believe that the reason so many think that it would be difficult to get a mortgage is not fully based on current market realities.

For example, studies have shown that there is confusion over the amount of money needed for a down payment. Research has shown that 40 to 50% of Americans believe that between 15-20% is the minimum required for a down payment. In reality, there are many programs available at 5% and even 3%. There are even some programs that don’t require any down payment (ex. VA loans).

Others fear they need a perfect credit score or believe that the overall mortgaging process has become almost impossible. Actually, the Mortgage Credit Availability Index, a report from the Mortgage Bankers Association, has shown that, over the last seven months, access to mortgages has gotten much more available.

And the NY Fed study suggests that some renters are waiting for interest mortgage rates to fall even further. Fifty percent of the renters surveyed believe mortgage interest rates will fall over the next year and almost 10% believe that they will fall by more than 1%. However, the reality of the situation is that Freddie Mac, the Mortgage Bankers Association and the National Association of Realtors are all projecting that rates will be significantly higher at this time next year. They are all predicting mortgage rates will be almost 1% higher!

Bottom Line

Many renters want to own their own home. Some are not moving forward based on misunderstandings regarding the mortgage process. If you are currently a renter who desires the benefits of homeownership, sit down with a local real estate professional to determine what your options actually are.

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It’s a New Year – Happy 2011

December 31, 2010

 

 

I know it is only Dec. 30th but this is always the official start of my New Year. Why? Because it is the birthday of my first child, my daughter, Taylor. So my New Year begins now and I look forward to it every year. It’s a reminder that while work and things are important in life – they aren’t the MOST important thing. The most important things can’t be bought. They are the gifts of love, faith, laughter, kindness and joy. Our families bless us daily and give us just a brief glimpse of what heaven must look like. 

So while I have some predictions for the New Year in real estate, my biggest prediction is for another year of happiness with a wonderful family and a loving God. I wish the same for you. 

HAPPY NEW YEAR and Happy Birthday Taylor! 

Cheers, Linda

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Politics as usual – ugh

October 25, 2010

 

As real estate sales spiral to new lows – we have the election season in full swing. Everybody is right and everybody else is wrong. 

But I hope our newly elected officials wake up and realize that AS THE HOUSING MARKET GOES – SO GOES THE ECONOMY. It’s not just about job stimulus – it IS about fixing housing and it won’t happen overnight. 

Banks needs to reward GOOD borrowers with better rates in an upside down market. Banks need to AGREE to short sales where they will actually MAKE MORE MONEY than going through the lengthy foreclosure process. Someone needs to start thinking about solutions instead of highlighting the problems that seem unsolvable.  

May sanity reign and may we change the course of this country for the good. 

Read the following New York Times article:  http://www.nytimes.com/2010/10/25/business/25short.html?th&emc=th