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key chain home form on the coin in the middle of the puzzle

The Economic Impact of Buying a Home

The Economic Impact of Buying a Home

We’re in a changing real estate market, and life, in general, is changing too – from how we grocery shop and meal prep to the ways we can interact with our friends and neighbors. Even practices for engaging with agents, lenders, and all of the players involved in a real estate transaction are changing to a virtual format. What isn’t changing, however, is one key thing that can drive the local economy: buying a home.

We’re all being impacted in different ways by the effects of the coronavirus. If you’re in a position to buy a home today, know that you’re a major economic force in your neighborhood. And while we all wait patiently for the current pandemic to pass, there are a lot of things you can do in the meantime to keep your home search on track.

Every year the National Association of Realtors (NAR) shares a report that notes the full economic impact of home sales. This report summarizes:

The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance.

Here’s the breakdown of how the average home sale boosts the economy:The Economic Impact of Buying a Home | MyKCMWhen you buy a home, you’re making an impact. You’re fulfilling your need for shelter and a place to live, and you’re also generating jobs and income for the appraiser, the loan officer, the title company, the real estate agent, and many more contributors to the process. For every person or business that you work with throughout the transaction, there’s also likely a team behind the scenes making it all happen, so the effort multiplies substantially. As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the extra labor it requires to build the home.

The report also breaks down the average economic impact by state:

The Economic Impact of Buying a Home | MyKCMAs a buyer, you have an essential need for a home – and you can make an essential impact with homeownership, too. That need for shelter, comfort, and a safe place to live will always be alive and well. And whenever you’re able to act on that need, whether now or later, you’ll truly be creating gains for you, your family, local business professionals, and the overall economy.

Bottom Line

Whenever you purchase a home, you’re an economic driver. Even if you’re not ready or able to make a move now, there are things you can do to keep your own process moving forward so you’re set when the time is right for you. Let’s connect to keep your home search – and your local contributions – on track.

Japanese male surfer with surf board waiting for having a chance to get good waves.

Are We About to See a New Wave of Foreclosures?

With all of the havoc being caused by COVID-19, many are concerned we may see a new wave of foreclosures. Restaurants, airlines, hotels, and many other industries are furloughing workers or dramatically cutting their hours. Without a job, many homeowners are wondering how they’ll be able to afford their mortgage payments.

In spite of this, there are actually many reasons we won’t see a surge in the number of foreclosures like we did during the housing crash over ten years ago. Here are just a few of those reasons:

The Government Learned its Lesson the Last Time

During the previous housing crash, the government was slow to recognize the challenges homeowners were having and waited too long to grant relief. Today, action is being taken swiftly. Just this week:

  • The Federal Housing Administration indicated it is enacting an “immediate foreclosure and eviction moratorium for single family homeowners with FHA-insured mortgages” for the next 60 days.
  • The Federal Housing Finance Agency announced it is directing Fannie Mae and Freddie Mac to suspend foreclosures and evictions for “at least 60 days.”

Homeowners Learned their Lesson the Last Time

When the housing market was going strong in the early 2000s, homeowners gained a tremendous amount of equity in their homes. Many began to tap into that equity. Some started to use their homes as ATM machines to purchase luxury items like cars, jet-skis, and lavish vacations. When prices dipped, many found themselves in a negative equity situation (where the mortgage was greater than the value of their homes). Some just walked away, leaving the banks with no other option but to foreclose on their properties.

Today, the home equity situation in America is vastly different. From 2005-2007, homeowners cashed out $824 billion worth of home equity by refinancing. In the last three years, they cashed out only $232 billion, less than one-third of that amount. That has led to:

  • 37% of homes in America having no mortgage at all
  • Of the remaining 63%, more than 1 in 4 having over 50% equity

Even if prices dip (and most experts are not predicting that they will), most homeowners will still have vast amounts of value in their homes and will not walk away from that money.

There Will Be Help Available to Individuals and Small Businesses

The government is aware of the financial pain this virus has caused and will continue to cause. Yesterday, the Associated Press reported:

“In a memorandum, Treasury proposed two $250 billion cash infusions to individuals: A first set of checks issued starting April 6, with a second wave in mid-May. The amounts would depend on income and family size.”

The plan also recommends $300 billion for small businesses.

Bottom Line

These are not going to be easy times. However, the lessons learned from the last crisis have Americans better prepared to weather the financial storm. For those who can’t, help is on the way.

Waymire Team 2019 Award

2019 Premier Sales Team Award

2019 Premier Sales Team Award

Congratulations to The Waymire Team. They have earned NextHome’s 2019 Premier Sales Team Award. Jason & Renee Waymire are a husband and wife team serving buyers and sellers in Virginia and West Virginia. In about two weeks Jason & Renee will be heading to Orlando, FL to celebrate with hundreds of #NextHomies from all across the country. We are happy to have Jason and Renee as part of our NextHome Realty Select Family. Look for photos from the national conference and awards celebration soon! #HumansOverHouses

Team pic no background

Office Award for 2019

2019 Diamond Pinnacle Office Award

2019 Diamond Pinnacle Office Award

We are excited to announce that NextHome Realty Select earned NextHome’s 2019 Diamond Pinnacle Office Award. This was truly a team effort and we could not be more proud of our agents! They embrace the #HumansOverHouses culture and work hard every day (and night) to represent their clients and provide outstanding service.

Thank you SO much to each and every family that trusted us with your business. We are honored and pleased to have served you. We know that you have plenty of options when it comes to finding a real estate agency. We are glad that you chose us. From the bottom of our orange hearts, we Thank You!!

In about two weeks 12 of us will be heading to Orlando, FL to celebrate with hundreds of #NextHomies from all across the country. This is a great opportunity to network, celebrate and continue our education. Look for photos from the national conference and awards celebration soon!

Office Award for 2019

Financial goals,saving money

The #1 Misconception in the Homebuying Process

After over a year of moderating home prices, it appears home value appreciation is about to reaccelerate. Skylar Olsen, Director of Economic Research at Zillow, explained in a recent article:

 “A year ago, a combination of a government shutdown, stock market slump and mortgage rate spike caused a long-anticipated inventory rise. That supposed boom turned out to be a short-lived mirage as buyers came back into the market and more than erased the inventory gains. As a natural reaction, the recent slowdown in home values looks like it’s set to reverse back.”

CoreLogic, in its January 2020 Market Pulse Report, agrees with Olsen, projecting home value appreciation in all fifty states this year. Here’s the breakdown:

  • 21 states appreciating 5% or more
  • 26 states appreciating between 3-5%
  • Only 3 states appreciating less than 3%

The Misconception

Many believe when real estate values are increasing, owning a home becomes less affordable. That misconception is not necessarily true.

In most cases, homes are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by almost a full percentage point since this time last year.

Another major piece of the equation is a buyer’s income. The median family income has risen by 5% over the last year, contributing to the affordability factor.

Black Knight, in their latest Mortgage Monitor, addressed this exact issue:

 “Despite the average home price increasing by nearly $13,000 from just over a year ago, the monthly mortgage payment required to buy that same home has actually dropped by 10% over that same span due to falling interest rates…

Put another way, prospective homebuyers can now purchase a $48K more expensive home than a year ago while still paying the same in principal and interest, a 16% increase in buying power.”

Bottom Line

If you’re thinking about purchasing a home, realize that homes are still affordable even though prices are increasing. As the Black Knight report concluded:

“Even with home price growth accelerating, today’s low-interest-rate environment has made home affordability the best it’s been since early 2018.”

Business people using tablet computers in meeting

Strength of the Economy Is Surprising the Experts

We’re currently in the longest economic recovery in U.S. history. That has caused some to ask experts to project when the next economic slowdown (recession) could occur. Two years ago, 67% of the economists surveyed by the Wall Street Journal (WSJ) for the Economic Forecasting Survey predicted we would have a recession no later than the end of this year (2020). The same study done just three months ago showed more than one-third of the economists still saw an economic slowdown right around the corner.

The news caused concern among consumers. This is evidenced by a recent survey done by realtor.com that shows 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur by the end of this year.

Wait! It seems the experts are changing their minds….

Now, in an article earlier this month, the Wall Street Journal (WSJ) revealed only 14.3% of those economists now believe we’re in danger of a recession occurring this year (see graph below):Strength of the Economy Is Surprising the Experts | MyKCM

The WSJ article strongly stated,

“The U.S. expansion, now in its 11th year, will continue through the 2020 presidential election with a healthy labor market backing it up, economists say.”

This optimism regarding the economy was repeated by others as well.

CNBC, quoting Goldman Sachs economists:

“Just months after almost everyone on Wall Street worried that a recession was just around the corner, Goldman Sachs said a downturn is unlikely over the next several years. In fact, the firm’s economists stopped just short of saying that the U.S. economy is recession-proof.”

Barron’s:

“When Barron’s gathers some of Wall Street’s best minds—as we do every January for our annual Roundtable—we expect some consensus, some disagreement…But the 10 veteran investors and economists who convened in New York on Jan. 6 at the Barron’s offices agree that there’s almost no chance of a recession this year.”

Washington Post:

“The U.S. economy is heading into 2020 at a pace of steady, sustained growth after a series of interest rate cuts and the apparent resolution of two trade-related threats mostly eliminated the risk of a recession.”

Robert A. Dye, Chief Economist at Comerica Bank:

“I expect that the U.S. economy will avoid a recession in 2020.”

Bottom Line

There probably won’t be a recession this year. That’s good news for you, whether you’re looking to buy or sell a home.

Single mother having fun with young daughter on the backyard.

Great News for Renters Who Want to Buy a Home

Rents in the United States have been skyrocketing since 2012. This has caused many renters to face a tremendous burden when juggling their housing expenses and the desire to save for a down payment at the same time. The recent stabilization of rental prices provides a great opportunity for renters to save more of their current income to put toward the purchase of a home.

Just last week the Joint Center of Housing Studies of Harvard University released the America’s Rental Housing 2020 Report. The results explain the financial challenges renters are experiencing today,

“Despite slowing demand and the continued strength of new construction, rental markets in the U.S. remain extremely tight. Vacancy rates are at decades-long lows, pushing up rents far faster than incomes. Both the number and share of cost-burdened renters are again on the rise, especially among middle-income households.”

According to the most recent Zillow Rent Index, which measures the estimated market-rate rent for all homes and apartments, the typical U.S. rent now stands at $1,600 per month. Here is a graph of how the index’s median rent values have climbed over the last eight years:Great News for Renters Who Want to Buy a Home | MyKCM

Is Good News Coming?

There seems, however, to be some good news on the horizon. Four of the major rent indices are all reporting that rents are finally beginning to stabilize in all rental categories:

1. The Zillow Rent Index, linked above, only rose 2.6% over the last year.

2. RENTCafé’s research team also analyzes rent data across the 260 largest cities in the United States. The data on average rents comes directly from competitively rented, large-scale, multi-family properties (50+ units in size). Their 2019 Year-End Rent Report shows only a 3% increase in rents from last year, the slowest annual rise over the past 17 months.

3. The CoreLogic Single Family Rent Index reports on single-family only rental listing data in the Multiple Listing Service. Their latest index shows how overall year-over-year rent price increases have slowed since February 2016, when they peaked at 4.2%. They have stabilized around 3% since early 2019.

4. The Apartment List National Rent Report uses median rent statistics for recent movers taken from the Census Bureau American Community Survey. The 2020 report reveals that the year-over-year growth rate of 1.6% matches the rate at this time last year; it is just ahead of the 1.5% rate from January 2016. They also explain how “the past five years also saw stretches of notably faster rent growth. Year-over-year rent growth stood at 2.6% in January 2018, and in January 2016 it was 3.3%, more than double the current rate.”

It seems tenants are getting a breather from the rapid rent increases that have plagued them for almost a decade.

Bottom Line

Rental expenses are beginning to moderate, and at the same time, average wages are increasing. That power combination may allow renters who dream of buying a home of their own an opportunity to save more money to put toward a down payment. That’s sensational news!

Announcing NextHome Realty Select in Front Royal, VA!

Hello Front Royal!

Announcing the opening of our third location at 210 E Main Street in Front Royal, VA.

We are SO excited to announce that the doors are open at our third office in Front Royal, VA. Get a sneak peek and meet a few of our team members in this fun video. You will realize from the orange door that we are different than other real estate firms.

We will be handing out treats Halloween night during the Hometown Halloween festivities, so grab a coffee at The Daily Grind and head across the street to take a look at the office, meet our mascot Luke (the orange Frenchie) and the NextHome Realty Select Team. We are excited to be in the neighborhood.

Luke-Small-Web

5 Things Buyers Should Know About Home Inspections

5 Things Buyers Should Know About Home Inspections

Home buyers tend to have a lot of questions about home inspections. Are they required? How are they different from appraisals? When does it take place? Here are answers to these and other common questions.

1. Home inspections aren’t required, but they’re worth it.

There is no law that says you have to have an inspection when buying a house. It’s an option that is generally left up to the home buyer. But while you’re not required to have a house inspected before purchasing, it’s generally a wise idea to do so. Unless you are a licensed contractor or builder, you probably don’t have the experience necessary to evaluate the structural aspects of the home. Home inspectors specialize in that very thing.

2. It’s different from a home appraisal.

Home appraisals and inspections are similar procedures, but they have two very different goals in mind.

  • A home inspector will alert you to any potential repair issues, or other problems with the structure and installed systems.

  • A home appraiser, on the other hand, is primarily focused on determining the market value of the house.

If you are planning to use a mortgage loan to finance your purchase, there’s a good chance the mortgage lender will require you to have a home appraisal. They do this to determine how much the house is worth. But the inspection is usually optional, and it focuses on the condition of the home. They are two different things.

3. It usually happens soon after the contract is signed.

As far as the timeline goes, a home inspection typically takes place shortly after the buyer and seller have agreed on the purchase price and signed a contract. At that point, the buyer will often hire an inspector to perform a complete home inspection.

The seller does not need to be present for the inspection. In most cases, the seller will actually leave the premises so the inspector can come in and do what he/she needs to do. Home buyers are almost always present during this process. The seller’s listing agent might grant the inspector access to the home. Or they might put a lockbox on the door. But as far as the timing goes, it typically takes place soon after the purchase agreement has been signed.

4. It helps you uncover any serious issues with the house.

The inspector will closely examine almost every aspect of the house. That includes the foundation, the roof, the electrical and plumbing systems, HVAC and more. He will provide you with a detailed report of any repair issues or other problems that he finds. This kind of report is invaluable to someone buying a home, especially when you consider how much money is on the line.

5. It’s a small price to pay for peace of mind.

Home inspections typically range from $250 – $400, depending on the size of the house and other factors. When you consider the amount of money you are going to put into the home – and the amount you might be borrowing from a lender – it’s a relatively small price to pay for peace of mind.

5 Tips for Making an Offer in a Hot Real Estate Market

5 Tips for Making an Offer in a Hot Real Estate Market

Steady demand. Limited supply. That’s what we are seeing in real estate markets across the country right now. Inventory is particularly tight within the lower price ranges. “The starter house is nearly missing in some markets,” according to Jessica Lautz, managing director of survey research and communication for the National Association of Realtors.

Of course, conditions can vary from one city to the next. But the overall trend in housing markets across the country is that supply is still falling short of demand.

Given these conditions, it’s important for home buyers to make a strong, smart offer when the right house comes along. Here are five tips for doing exactly that.

1. Understand the supply and demand situation in your area

According to housing experts, a so-called “balanced” real estate market has five to six months of supply. This means, in theory, that it would take five or six months to sell off all homes currently listed for sale if no new properties came onto the market.

Many real estate markets across the country have less than a three-month supply right now. And some cities have less than a two-month supply.

The first step to making a strong offer is to understand the supply-and-demand situation in your area. We are still seeing sellers’ market conditions in many cities, as of spring 2018. And this could persist for some time.

2. Study recent sales prices in your area

This is something a real estate agent can help you with, but you can do some of it for yourself. The idea here is to get a good understanding of recent sales prices in the area where you want to buy.

This will help you in a couple of ways. It will save you time during the house-hunting process, by eliminating the need for repetitive research and pricing “sanity checks.” It will also help you make a strong, realistic offer backed by recent sales trends. And speaking of offers…

3. Make a strong and timely offer, backed by comparable sales

In a slow housing market, where sellers are ready to jump on the first offer that comes along, home buyers have the luxury of taking their time. A buyer might start off with an initial offer below the asking price, just to open negotiations. The seller would probably come back with a counteroffer or accept the first offer.

But it doesn’t work that way in a more competitive real estate market with limited inventory. In a tight market, buyers are better off making their first offer as competitive as possible. Otherwise, the house could go to a competing buyer.

4. Consider writing a love letter to the seller

A house love letter, that is! Recent studies have shown that buyers in competitive real estate markets can improve their chance for success by writing a heartfelt letter to the seller. Sure, real estate is a business transaction. But there’s a personal side to it as well. Writing a personal letter to tell the sellers what you love about their home might just tip the scales in your favor.

5. Get an agent on your side

It’s always a good idea to have help from a local real estate agent. It’s even more important in a tight market with limited inventory. An agent can help you move quickly, putting together a strong offer that’s supported by recent sales data. At NextHome Realty Select we are here to help you find your #NextHome. Call us today to learn more about how we can help you and your family.