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Is a Fixer Upper Right for You?
Looking to buy a home but feeling like almost everything is out of reach? Here’s the thing. There’s still a way to become a homeowner, even when affordability seems like a huge roadblock – and it might be with a fixer upper. Let’s dive into why buying a fixer upper could be your ticket to homeownership and how you can make it work.
What Is a Fixer Upper?
A fixer upper is a home that’s in livable condition but needs some work. The amount of work varies by home – some may need cosmetic updates like wallpaper removal and new flooring, while others might require more extensive repairs like replacing a roof or updating plumbing.
Because they need some elbow grease, these homes typically have a lower price point, based on local market value. In fact, a survey from StorageCafe explains that fixer uppers generally cost about 29% less than move-in-ready homes.
And that’s why, according to a recent survey, more buyers are considering homes that need a little extra work right now (see below):
If you’re looking for an option to get your foot in the door, and you’re willing to roll up your sleeves and do a bit of work, a house with untapped potential may be a good option.
Tips for Buying a Home That Needs Some Work
Before you buy a home that may need a makeover, here are a few things to keep in mind:
- Choose a Good Location: You can repair a house, but you can’t change where it is. Make sure the home is in a neighborhood you like or one with increasing property values and a growing number of local amenities. This way, even after you spend money fixing it up, the house will be worth more later.
- Budget for Surprises: Fixing up a house can take more time and money than you might think. Make sure you save room in your budget for unexpected repairs or other unknowns that might come up while you’re working on the house.
- Get a Home Inspection: Before you buy, hire an inspector to check out the house. They’ll help you determine the necessary repairs, so you don’t end up with expensive surprises later.
- Plan Your Priorities: When deciding what to tackle first, it helps to categorize your goals. Think of your home in three ways: the must-haves (essential repairs), the nice-to-haves (upgrades that would make life easier), and the dream-state features (luxuries you can add later). This will help you prioritize and stick to your budget.
Remember, the perfect home is the one you perfect after buying it. By starting with a fixer upper, you have the opportunity to customize a home to your liking while saving money on the initial purchase price. With careful planning, budgeting, and a little bit of vision, you can turn a house that needs some love into your perfect home.
Real estate agents are great at finding homes with potential. They know the local market and can guide you to homes where smart upgrades can add value. With their help, you’re more likely to find a house that fits your total budget and has room for worthwhile improvements.
Bottom Line
In today’s market, where the cost of homeownership can be intimidating, finding a move-in-ready home that fits your budget can feel like a real challenge. But if you’re open to putting in a little work, you can transform a fixer upper into your ideal home over time. Let’s explore what’s possible and find a place that’ll work for you.
Is It Better To Rent Than Buy a Home Right Now?
You may have seen reports in the news recently saying it’s more affordable to rent right now than it is to buy a home. And while that may be true in some markets if you just look at typical monthly payments, there’s one thing that the numbers aren’t factoring in: and that’s home equity. Here’s a look at how big of an impact equity can have and why it’s worth considering as you make your decision.
What the Headlines Are Based on
The graph below uses national data on the median rental payment from Realtor.com and median mortgage payment from the National Association of Realtors (NAR) to compare the two options. As the graph shows, especially if you’re not looking for a lot of space, it can be more affordable on a monthly basis to rent:
But if you’re looking for something with 2 bedrooms, the gap between the median rent and the median mortgage payment starts to shrink to a difference that may be more doable. The median monthly mortgage payment is $2,040. The median monthly rent for 2 bedrooms is $1,889. That’s a difference of about $151 a month. But here’s what happens when you factor in equity too.
How Equity Changes the Game
If you rent, your monthly rental payments only go toward covering your housing costs and your landlord’s expenses. So other than saving a bit more per month and maybe getting your rental deposit back when you move, the money you spent on housing each month is gone – forever.
When you buy, your monthly mortgage payment pays for your shelter, but it also acts as an investment. That investment grows in the form of equity as you make your mortgage payment each month and chip away at what you owe on your home loan. Your equity gets an extra boost as home values climb – which they typically do.
To give you a clearer idea of how equity can really stack up fast, here’s some data for you. Each quarter, Fannie Mae and Pulsenomics publish the results of the Home Price Expectations Survey (HPES). It asks more than 100 economists, real estate professionals, and investment and market strategists what they think will happen with home prices. In the latest release, those experts say home prices are going to keep going up over the next five years.
Here’s an example of how equity builds based on the projections from the HPES (see graph below):
Imagine you purchased a home for $400,000 at the start of this year. Chances are, since you bought, you plan to stay put for a while. Based on the HPES projections, if you live there for 5 years, you could end up gaining over $83,000 in household wealth as your home grows in value.
Here’s how that stacks up compared to renting, using the overall median rent from above:
While you may save a bit on your monthly payments if you rent right now, you’ll also miss out on gaining equity.
So, what’s the big takeaway? Whether it makes more sense to rent or buy is going to vary based on your personal finances. It’s not a good idea to buy if the numbers truly don’t work for you. But, if you’re ready and able, adding equity as the final puzzle piece may be enough to help you realize buying is a better move in the long run.
Bottom Line
When it comes down to it, buying a home gives you a benefit renting just can’t provide – and that’s the chance to gain equity. If you want to take advantage of long-term home price appreciation, let’s go over your options.
Newly Built Homes Could Be a Game Changer This Spring
Buying a home this spring? You’re probably navigating today’s affordability challenges and dealing with the limited number of homes for sale. But, what if there was a solution that could help with both?
If you’re having a hard time finding a home you love, and mortgage rates are putting pressure on your budget, it may be time to look at newly built homes. Here’s why.
New Home Construction Is an Inventory Bright Spot
When looking for a home, you can choose between existing homes (those that are already built and previously owned) and newly constructed ones. While the number of existing homes for sale has increased this year, there are still fewer available than there were in more typical years in the housing market, like back in 2018 or 2019.
So, if you’re looking to expand your pool of options even more, turning to newly built homes can help. As Danielle Hale, Chief Economist at Realtor.com, explains:
“The shortage of existing homes For Sale has opened up the possibility of new-home construction to more buyers who may not have once considered it.”
And the good news is, there are more newly built homes to pick from right now. The graphs below use data from the Census to show how new home construction is ramping up in two key areas (see most recent spike in green):
Starts, or homes where builders just broke ground, have seen a big increase lately. And completions, homes that builders just finished, are also up significantly. So, if you want a new, move-in ready home or you want to get in early and customize your build along the way, you have more options right now.
Builders Are Offering Incentives To Help with Affordability
And to sweeten the pot, builders are offering things like mortgage rate buy-downs and other perks for homebuyers right now. This can help offset today’s affordability challenges while also getting you into your dream home. Mark Fleming, Chief Economist at First American, explains why you may find builders have more wiggle room to offer more for you than the typical homeowner:
“Builders aren’t rate locked-in. They would love to sell you the home because they’re not living in it. It costs money not to sell the home. And many of the public home builders have said in their earnings calls that they are not going to be pulling back on incentives, especially the mortgage rate buydown, so that will help the new-home market continue to perform well in the spring home-buying season.”
An article from HousingWire also says this about what builders are offering right now:
“. . . the use of sales incentives still shows some momentum as 60% of respondents reported using them, up from 58% in February. “
Just remember, buying from a builder is different from buying from a home seller, so it’s important to partner with a local real estate agent. Builder contracts can be complex. A trusted agent will be your advocate throughout the process.
They’ll be your go-to resource for advice on construction quality and builder reputation, reviewing and negotiating contracts to get you the best deal, helping you decide on which customizations and upgrades are most worthwhile, and a whole lot more.
Bottom Line
If you’re struggling to find a home to buy, or with today’s affordability challenges, let’s connect to see if newly built homes could be the solution you’re looking for.
Some Experts Say Mortgage Rates May Fall Below 6% Later This Year
There’s a lot of confusion in the market about what’s happening with day-to-day movement in mortgage rates right now, but here’s what you really need to know: compared to the near 8% peak last fall, mortgage rates have trended down overall.
And if you’re looking to buy or sell a home, this is a big deal. While they’re going to continue to bounce around a bit based on various economic drivers (like inflation and reactions to the consumer price index, or CPI), don’t let the short-term volatility distract you. The experts agree the overarching downward trend should continue this year.
While we won’t see the record-low rates homebuyers got during the pandemic, some experts think we should see rates dip below 6% later this year. As Dean Baker, Senior Economist, Center for Economic Research, says:
“They will almost certainly not fall to pandemic lows, although we may soon see rates under 6.0 percent, which would be low by pre-Great Recession standards.”
And Baker isn’t the only one saying this is a possibility. The latest Fannie Mae projections also indicate we may see a rate below 6% by the end of this year (see the green box in the chart below):
The chart shows mortgage rate projections for 2024 from Fannie Mae. It includes the one that came out in December, and compares it to the updated 2024 forecast they released just one month later. And if you look closely, you’ll notice the projections are on the way down.
It’s normal for experts to re-forecast as they watch current market trends and the broader economy, but what this shows is experts are feeling confident rates should continue to decline, if inflation cools.
What This Means for You
But remember, no one can say for sure what will happen (and by when) – and short-term volatility is to be expected. So, don’t let small fluctuations scare you. Focus on the bigger picture.
If you’ve found a home you love in today’s market – especially where finding a home that meets your budget and your needs can be a challenge – it’s probably not a good idea to try to time the market and wait until rates drop below 6%.
With rates already lower than they were last fall, you have an opportunity in front of you right now. That’s because even a small quarter point dip in rates gives your purchasing power a boost.
Bottom Line
If you wanted to move last year but were holding off hoping rates would fall, now may be the time to act. Let’s connect to get the ball rolling.
Achieve Your Dream of Homeownership with Condos and Townhomes
Some Highlights
- If you’re trying to buy a home but are having a hard time finding something in your budget, here’s something that can help: consider condos and townhomes.
- They may better fit your budget, can help you start building equity, and tend to require minimal upkeep and less maintenance.
- Looking at condos and townhomes can make it easier to find and buy a home. When you’re ready, let’s connect.
Why Having Your Own Agent Matters When Buying a New Construction Home
Finding the right home is one of the biggest challenges for potential buyers today. Right now, the supply of homes for sale is still low. But there is a bright spot. Newly built homes make up a larger percent of the total homes available for sale than normal. That’s why, if you’re craving more options, it makes sense to see if a newly built home is right for you.
But it’s important to remember the process of working with a builder is different than buying from a homeowner. And, while builders typically have sales agents on-site, having your own agent helps make sure you have proper representation throughout your homebuying journey. As Realtor.com says:
“Keep in mind that the on-site agent you meet at a new-construction office works for the builder. So, as the homebuyer, it’s a smart idea to bring in your own agent, as well, to help you negotiate and stay protected in the transaction.”
Here’s how having your own agent is key when you build or buy a new construction home.
Agents Know the Local Area and Market
It’s important to consider how the neighborhood and surrounding area may evolve before making your home purchase. Your agent is well-versed in the upcoming communities and developments that could influence your decision. One way a real estate agent can help is by reviewing the builder’s site plan. For example, you’ll want to know if there are any plans to construct a highway or add a drainage ditch behind your prospective backyard.
Knowledge of Construction Quality and Builder Reputation
An agent also has expertise in the construction quality and reputation of different builders. They can give you insights into each one’s track record, customer satisfaction, and construction practices. Armed with this information, you can choose a builder known for consistently delivering top-notch homes.
Assistance with Customization and Upgrades
The most obvious benefit of opting for new home construction is the opportunity to customize your home. Your agent will guide you through that process and share advice on the upgrades that are most likely to add long-term value to your home. Their expertise helps make sure you focus your budget on areas that will give you the greatest return on your investment later.
Understanding Builder Negotiations and Contracts
When it comes to working with builders, having a skilled negotiator on your side can make all the difference. Builder contracts can be complex. Your agent can help you navigate these contracts to make sure you fully understand the terms and conditions. Plus, agents are skilled negotiators who can advocate for you, potentially securing better deals, upgrades, or incentives throughout the process. As Realtor.com says:
“A good buyer’s agent will be able to review any contracts before you sign on the dotted line, ensuring you aren’t unwittingly agreeing to terms that only benefit the builder.”
Bottom Line
If you are interested in buying or building a new construction home, having a trusted agent by your side can make a big difference. If you’d like to start that conversation, let’s connect.
There’s No Foreclosure Wave in Sight
Some Highlights
- Headlines saying foreclosures are rising might make you feel uneasy. But the truth is, there’s no need to worry.
- If you look at the latest numbers, they’re still below pre-pandemic norms and way below what happened during the crash.
- If you’re worried about a flood of foreclosures, the data shows a foreclosure crisis is not where the market is today and is not where it’s headed.
Don’t Wait Until Spring To Sell Your House
As you think about the year ahead, one of your big goals may be moving. But, how do you know when to make your move? While spring is usually the peak homebuying season, you don’t actually need to wait until spring to sell. Here’s why.
1. Take Advantage of Lower Mortgage Rates
Last October, the 30-year fixed mortgage rates peaked at 7.79%. In January, they hit their lowest level since May. That means you may not feel as locked-in to your current mortgage rate right now. That downward trend in rates has made moving more affordable now than it was just a few months ago.
Another reason today’s rates make now a good time to sell? More buyers are jumping back into the market. Many had been waiting on the sidelines for rates to fall, but now that that’s happening, they’re eager and ready to buy. That means more demand for your house. According to Sam Khater, Chief Economist at Freddie Mac:
“Given this stabilization in rates, potential homebuyers with affordability concerns have jumped off the fence back into the market.”
2. Get Ahead of Your Competition
Right now, there are still more people looking to buy a home than there are houses for sale, which puts you in a great position. But keep in mind, with the recent uptick in new listings, we’re seeing more sellers may already be re-entering the market.
Listing your house now helps you beat your competition and makes sure your house will stand out. And if you work with an agent to price it right, it could sell fast and get multiple offers. U.S. News explains:
“When there is low housing inventory, sellers could get top dollar for their homes.”
3. Make the Most of Rising Home Prices
Experts forecast home prices will keep going up this year. What does that mean for you? If you’re ready to sell your current house and plan to buy another one, it may be a good idea to think about moving now before prices go up more. That would give you the chance to buy your next home before it gets more expensive.
4. Leverage Your Equity
Homeowners today have tremendous amounts of equity. In fact, a recent report from CoreLogic says the average homeowner with a mortgage has more than $300,000 in equity.
If you’ve been waiting to sell because you were worried about home affordability, know your equity can really help with your next move. It might even cover a big part, or maybe all, of the down payment for your next home.
Bottom Line
If you’re thinking about selling your house and moving to another one, let’s connect to get the process started now so you can get a leg up on your competition.
Foreclosure Activity Is Still Lower than the Norm
Have you seen headlines talking about the increase in foreclosures in today’s housing market? If so, they may leave you feeling a bit uneasy about what’s ahead. But remember, these clickbait titles don’t always give you the full story.
The truth is, if you compare the current numbers with what usually happens in the market, you’ll see there’s no need to worry.
Putting the Headlines into Perspective
The increase the media is calling attention to is misleading. That’s because they’re only comparing the most recent numbers to a time where foreclosures were at historic lows. And that’s making it sound like a bigger deal than it is.
In 2020 and 2021, the moratorium and forbearance program helped millions of homeowners stay in their homes, allowing them to get back on their feet during a very challenging period.
When the moratorium came to an end, there was an expected rise in foreclosures. But just because foreclosures are up doesn’t mean the housing market is in trouble.
Historical Data Shows There Isn’t a Wave of Foreclosures
Instead of comparing today’s numbers with the last few abnormal years, it’s better to compare to long-term trends – specifically to the housing crash – since that’s what people worry may happen again.
Take a look at the graph below. It uses foreclosure data from ATTOM, a property data provider, to show foreclosure activity has been consistently lower (shown in orange) since the crash in 2008 (shown in red):
So, while foreclosure filings are up in the latest report, it’s clear this is nothing like it was back then.
In fact, we’re not even back at the levels we’d see in more normal years, like 2019. As Rick Sharga, Founder and CEO of the CJ Patrick Company, explains:
“Foreclosure activity is still only at about 60% of pre-pandemic levels. . .”
That’s largely because buyers today are more qualified and less likely to default on their loans. Delinquency rates are still low and most homeowners have enough equity to keep them from going into foreclosure. As Molly Boesel, Principal Economist at CoreLogic, says:
“U.S. mortgage delinquency rates remained healthy in October, with the overall delinquency rate unchanged from a year earlier and the serious delinquency rate remaining at a historic low… borrowers in later stages of delinquencies are finding alternatives to defaulting on their home loans.”
The reality is, while increasing, the data shows a foreclosure crisis is not where the market is today, or where it’s headed.
Bottom Line
Even though the housing market is experiencing an expected rise in foreclosures, it’s nowhere near the crisis levels seen when the housing bubble burst. If you have questions about what you’re hearing or reading about the housing market, let’s connect.
2 of the Factors That Impact Mortgage Rates
If you’re looking to buy a home, you’ve probably been paying close attention to mortgage rates. Over the last couple of years, they hit record lows, rose dramatically, and are now dropping back down a bit. Ever wonder why?
The answer is complicated because there’s a lot that can influence mortgage rates. Here are just a few of the most impactful factors at play.
Inflation and the Federal Reserve
The Federal Reserve (Fed) doesn’t directly determine mortgage rates. But the Fed does move the Federal Funds Rate up or down in response to what’s happening with inflation, the economy, employment rates, and more. As that happens, mortgage rates tend to respond. Business Insider explains:
“The Federal Reserve slows inflation by raising the federal funds rate, which can indirectly impact mortgages. High inflation and investor expectations of more Fed rate hikes can push mortgage rates up. If investors believe the Fed may cut rates and inflation is decelerating, mortgage rates will typically trend down.”
Over the last couple of years, the Fed raised the Federal Fund Rate to try to fight inflation and, as that happened, mortgage rates jumped up, too. Fortunately, the expert outlook for inflation and mortgage rates is that both should become more favorable over the course of the year. As Danielle Hale, Chief Economist at Realtor.com, says:
“[M]ortgage rates will continue to ease in 2024 as inflation improves . . .”
There’s even talk the Fed may actually cut the Fed Funds Rate this year because inflation is cooling, even though it’s not yet back to their ideal target.
The 10-Year Treasury Yield
Additionally, mortgage companies look at the 10-Year Treasury Yield to decide how much interest to charge on home loans. If the yield goes up, mortgage rates usually go up, too. The opposite is also true. According to Investopedia:
“One frequently used government bond benchmark to which mortgage lenders often peg their interest rates is the 10-year Treasury bond yield.”
Historically, the spread between the 10-Year Treasury Yield and the 30-year fixed mortgage rate has been fairly consistent, but that’s not the case recently. That means, there’s room for mortgage rates to come down. So, keeping an eye on which way the treasury yield is trending can give experts an idea of where mortgage rates may head next.
Bottom Line
With the Fed meeting later this week, experts in the industry will be keeping a close watch to see what they decide and what impact it’ll have on the economy. To navigate any mortgage rate changes and their impact on your moving plans, it’s best to have a team of professionals on your side.
