What to Know About the Market
With mortgage rates inching up and prices still climbing, there is a shift from the “anything goes” housing market we saw the last two years. Here are some takeaways from what I’ve recently been reading.
The market is not about to crash. It appears to be a turning point towards more typical pre-pandemic levels. Mark Fleming, chief economist at First American says “. . . today’s housing market looks a lot like the 2019 housing market, which was the strongest housing market in a decade at the time.”
- Demand for housing exceeds the current supply. The US has underbuilt single family housing by 4.3 million units since 2000. Households are forming faster than builders can create new housing. This deficit is predicted to continue over the next 10 plus years. This will continue to drive prices up.
- The rate of appreciation is expected to slow – but not drop. The expectation is in a year from now, prices will be higher than they are currently.
- Lenders are vetting buyers more stringently, unlike the last housing bubble. Over 70% of mortgage dollars are to buyers with 760+ credit scores, compared to pre-2008, when that number was under 25%.
- If you don’t plan to be in your home for more than 5 yrs. or so, buyers should consider a 5-yr. adjustable rate mortgage, which has a lower interest rate than a 30-yr. fixed.
The market is shifting. Whether buying or selling, contact me to help you navigate these changes.
Donna Forest ~ donna@donnaforest.com ~ 603-731-5151
Are Multiple Offers Still the Norm?
Despite rising mortgage rates, multiple offers are still prevalent according to the March Realtors Confidence Index Survey. In this survey, Realtors reported an average of nearly 5 offers on each home that sold in March. Home buying demand is still outpacing supply. The shortage of homes for sale will continue to make this a competitive market for buyers. Gay Cororaton, research economist at the Nat’l Assoc. of Realtors, writes “…properties typically stayed on the market for a shorter time compared to one year ago, at 17 days on the market. Eighty-seven percent of listings were on the market for less than one month.” In NH thru March 2022, homes typically stayed on the market for 34 days.
How tight is the inventory? At the end of March there were 950,000 homes on the market, equivalent to a 2 months supply. A normal market is about 6 months - meaning the inventory of homes on the market should be at 2.9 million. Doing simple math, there is a shortage of about 2 million homes for sale in the US. Due to this tight supply, the Nat’l Assoc. of Realtors expects prices to continue to appreciate by about 5% by year-end. If you are looking to buy or sell, contact me to help you navigate the complexities of this market!
Donna Forest ~ donna@donnaforest.com ~ 603-731-5151
I recently watched a presentation by acclaimed economist Elliot Eisenberg titled Economy 2022 Growing & Slowing. He was extremely informative and I thought it is worth sharing just a few of the interesting points he mentioned.
- The housing shortage is due in large part to years of insufficient building. This will not be changing any time soon as builders face a lack of workers, a lack of affordable land to buy, and a scarcity in building materials. The cost of supplies are so high builders are not building entry level homes.
- The labor shortage is due to multiple factors – more than 3 million excess retirements - above the normal pre-pandemic retirement rate, the lack of daycare means one parent is staying home and not working, immigration has fallen, over 600,000 people left their current jobs to start their own business and more than 700,000 people have died of COVID.
- About 70% of the home sales in NH this year were purchased by people who already live in NH. Approx. 20% of the buyers were from MA and the remaining 10% of buyers were from other states/countries.
There are many factors and issues affecting the housing market. Whether buying or selling, contact me to work with someone who keeps up-to-date with the latest news and its impacts on you.
Contact Donna Forest: 603-526-4116; www.DonnaForest.com; Donna@DonnaForest.com
You’ll be moving in the right direction with Better Homes & Gardens Real Estate - The Milestone Team
The Finer Points
In the emotional swirl of negotiating on a home, it’s easy to overlook some of the finer points of the contract. Below are some thoughts to keep in mind during this process.
- While most sales close on time, the closing date is more of a target date. Time is of the essence doesn’t apply here. As long as both parties are making good faith efforts to close, there is no breach of contract.
- Buyers can move into the home right after closing and typically do a walk-thru inspection 24 hrs. prior to closing. This means sellers should be completely moved out prior to the day of closing.
- There is an insurance clause in the contract stating sellers need to keep the home insured including replacement cost coverage until closing.
- Firewood and wood pellets are considered fuel and buyers are expected to reimburse sellers for what is left. Best to address this upfront in the offer with regards to quantity and price.
- TV brackets, bookshelves that look built-in, and Nest thermostats for example, can become points of contention. Again, addressing these items in the contract is prudent.
Contact me if you are looking for an experienced realtor to help you navigate your real estate transaction!
Donna Forest ~ donna@donnaforest.com ~ 603-731-5151
Real estate markets are local, and we have the real scoop on ours.
What is an Appraisal Gap?
An appraisal gap is when a lender ordered appraisal comes in lower than the contracted sales price. It happens in competitive markets such as ours where buyers typically need to bid over the asking price in order to be successful in purchasing a home. According to the NH Assoc. of Realtors latest data thru June, homes in NH are selling at 102.9% of the listing price. A low appraisal decreases the amount that can be borrowed and buyers are faced with how to make up this difference. For example, if a seller agrees to accept an offer of $410,000 on a home listed at $400,000 but it appraises for $390,000, there will be an appraisal gap of $20,000. There are a few options buyers can try to keep the sale together:
1) Make up the difference in cash (consider gift funds from family or borrowing against a 401K if short on cash)
2) Shift the down payment so you end up borrowing more money and putting less into the down payment - with lender approval
3) Appeal the appraisal if there is incorrect information or bad comps
4) Renegotiate with the seller.
Good agents will discuss the concept of low appraisals with buyers and sellers before offers are even made. Many offers with financing are written to say buyer will pay the difference between the appraised value and contract price up to a certain amount. Contact me to work with someone who will prepare you for the “what ifs” in this competitive market.
Donna Forest ~ donna@donnaforest.com ~ 603-731-5151
Teamwork from the team that works the hardest for both buyers and sellers!
Better Homes & Gardens Real Estate The Milestone Team
Every buyer wants to purchase at a great price and a low mortgage rate as that determines the monthly cost. Here’s how today’s buyers are being impacted:
Price – Based on a home price expectation survey released by Pulsenomics on June 10, more than 100 forecasters predict an 8.7% annual gain in home values for 2021. This rate is expected to slow to approx. 5% in 2022 and about 2.5% for the following year. In other words, if you are waiting for prices to go down, it could be a while.
Mortgage Rates – The average fixed 30 yr. rate is near 3% right now. The Mortgage Bankers Assoc. expects the 30-year fixed rate to reach 3.6% by the end of 2021. Greg McBride, chief financial analyst at Bankrate states “the tug of war over whether mortgage rates will move higher or lower from here largely revolves around inflation.” The latest Quarterly Forecast from Freddie Mac predicts the average 30-year fixed-rate mortgage to be 3.1% in 2021 and 3.7% in 2022.
Increases in prices and rates impact you; your housing expense will be more a year from now if you need a mortgage to purchase your home. My advice is to buy now - it could lead to substantial savings as even a small change in interest rates can have a big impact. Contact me if you would like expert advice on buying in today’s challenging market.
Donna Forest ~ donna@donnaforest.com ~ 603-731-5151
You’ll be moving in the right direction with Better Homes & Gardens Real Estate - The Milestone Team.
You might be wondering if the housing market will crash given the high demand, record prices, and bidding wars. The short answer is “there is no bubble.” It would be natural to assume the same thing is happening that led up to the economic crash in 2008. However, the influences are very different. Below are 3 reasons why you can still sleep at night.
- The limited supply of homes for sale is driving up prices. It is simple economics of supply & demand. Inventory has been declining for years yet buyer interest is increasing.
- Demand has risen as millennials, currently the largest generation in the US, are entering the housing market. Throw in historic low interest rates, the ability to work remotely, and rethinking of housing requirements due to COVID, and now the need exceeds supply.
- Poor lending practices was a big contributor to the housing implosion. If you could breathe you got a loan. Also homeowners used the equity in their homes like an ATM machine and ended up owing more than what their house was worth. As a result, foreclosures & short sales depreciated home values nationwide. Lending guidelines today are much stricter and refinancing over the last 3 years is 1/3 of what it was 3 years before the crash.
Here is a quote in late January from Laurie Goodman, director of Urban Institute’s Housing Finance Policy Center, “I’m feeling very optimistic about the health of the US housing market.” Whether buying or selling, contact me to take advantage of today’s great market!
Donna Forest ~ donna@donnaforest.com ~ 603-731-5151
In this market where multiple offers are common, buyers are pulling out all the stops to try and successfully compete. Some buyers are resorting to the use of an escalation clause. This works by offering the seller $1000 (for example) more than the highest bid the seller receives from other buyers. The clause may contain a cap to limit the buyer’s price exposure. Below are just some of the reasons why this is not a good idea.
- An accepted offer with an escalation clause may not be an enforceable contract since it does not contain definite terms. Potentially either buyer or seller could later change their mind and claim no legal contract was formed.
- If the escalation clause contains a cap, it basically tells the seller the top price this buyer is willing to pay. A smart seller could reject all offers and counter back to every buyer with a request for new offers not less than the cap.
- Escalation clauses create exposure for buyers since they don’t know what they will actually be paying for the property. Will they qualify? Will the house appraise?
- What if several offers come in with an escalation clause? Who wins the bid?
- If a legal escalation clause were to be written by an attorney, it would probably be a page long of legalese in order to protect the buyers. Not exactly enticing to a seller.
There are many ways to write a compelling offer without an escalation clause. Whether selling or buying, contact me if you want to effectively navigate this complex market. 603-731-5151; donna@donnaforest.com
Today’s market is a bit on the crazy side right now as we don’t have many homes for sale and buyer demand is high. Sellers receiving multiple offers seems to be the new normal. Here is some advice for sellers when they are considering more than one offer.
- With multiple offers, sellers can ask for “best and final” from all buyers, accept one offer if it is outstanding, or pick one offer to negotiate with and set the others aside.
- Be sure to note all the terms of the offers. Closing dates, down payments, financing, inspections, and type of loan can be impactful.
- Be aware if an offer is significantly over asking; there is an increased risk the house will not appraise if the buyer is getting financing. Which means the buyer can’t get the amount needed to purchase.
- Cash is king. Even if the offer is for a little less money, it might be worth accepting as you skip all the steps required with a loan.
- Offers should come with a pre-qualification or pre-approval letter from the buyers’ lenders or they are not worth considering.
Offers have many variables so discussion with your listing agent on how to choose the right one for you is vital. If you are thinking of selling, contact me and put my 26 yrs. of experience to work for you. 603-526-4116; www.DonnaForest.com; Donna @DonnaForest.com
Yes, the real estate market is still alive and people are moving. Buyers are out looking and interest rates are historically low. Houses are being listed for sale and most seem to be going under contract fairly quickly. While the market is not as robust as it typically would be for this time of year, it is fairly active given current conditions. True, some sellers have temporarily pulled their homes off the market and some buyers are delaying their search for a month or so. However, the housing inventory faced a shortage before the pandemic and this is still the case. Which means home prices remain strong and it is still a sellers’ market.
The process has changed but the results are the same. Virtual tours, Zoom meetings, FaceTime, protocols requiring masks & gloves for actual showings, remote closings, etc. The industry has adapted to ensure properties can still be safely sold. If you are thinking about buying or selling, contact me for help in creating a safe and effective plan for success in today’s market. 603-526-4116; www.DonnaForest.com; Donna@DonnaForest.com