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75% of Renters Have Been Misinformed

by Christie Cannon

75% of Renters Have Been Misinformed

75% of Renters Have Been Misinformed | MyKCM

Recently, multiple headlines have been written asserting that homeownership is less affordable today than at any other time in the last decade. Though the headlines are accurate, they lack context and lead too many Americans to believe that they can’t partake in a major part of the American Dream – owning a home.

In 2008, the housing market crashed and home values fell by as much as 60% in certain markets. This was the major trigger to the Great Recession we experienced from 2008 to 2010. To come back from that recession, mortgage interest rates were pushed down to levels that were never seen before.

For the last ten years, you could purchase a home at a dramatically discounted price and attain a mortgage at a historically low mortgage rate.

Affordability skyrocketed.

Now that home values have returned to where they should be, and mortgage rates are beginning to increase, it is less affordable to own a home than it was over the last ten years.

However, what is not being reported is that it is MORE AFFORDABLE to own a home today than at any other time since 1985 (when data was first collected on this point).

If you take out the years after the crash, affordability today is greater than it has been at almost any time in American history.

This has not been adequately reported which has led to many Americans believing that they cannot currently afford a home.

As an example, the latest edition of Freddie Mac’s Research: Profile of Today’s Renter reveals that 75% of renters now believe it is more affordable to rent than to own their own homes. This percentage is the highest ever recorded. The challenge is that this belief is incorrect. Study after study has proven that in today’s market, it is less expensive to own a home than it is to rent a home in the United States.

Thankfully, some are starting to see this situation and accurately report on it. The National Association of Realtors, in their 2019 Housing Forecast, mentions this concern:

“While the U.S. is experiencing historically normal levels of affordability, potential buyers may be staying out of the market because of perceived problems with affordability.”

Bottom Line

If you are one of the many renters who would like to own their own homes, let’s get together to find out if homeownership is affordable for you right now.

 

Christie Cannon | REALTOR 
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747
www.ChristieCannon.com
www.CannonTeamHomes.com

Top 3 Myths About Today’s Real Estate Market

by Christie Cannon

Top 3 Myths About Today’s Real Estate Market

Top 3 Myths About Today’s Real Estate Market | MyKCM

There are many conflicting headlines when it comes to describing today’s real estate market. Some are making comparisons to the market we experienced 10 years ago and are starting to believe that we may be doomed to repeat ourselves. Others are just plain wrong when it comes to what it takes to qualify for a mortgage.

Today, we want to try and clear the air by shedding some light on what’s causing some of these headlines, as well as what’s truly going on.

Myth #1: We Are Headed for Another Housing Bubble

Home prices have appreciated year-over-year for the last 76 straight months. Many areas of the country are at or near their peak prices achieved before the last housing bubble burst. This has many worried that we are headed towards another housing bubble.

Reality: The biggest challenge facing today’s real estate market is a lack of homes for sale! Demand is strong, as many renters have come off the fence and are searching for their dream homes.

Historically, a normal market requires a 6-month supply of inventory in order for prices to rise with the rate of inflation. According to the National Association of Realtors (NAR) there is currently a 4.3-month supply of inventory.

The US housing market hasn’t had 6-months inventory since August 2012! The concept of supply and demand is what is driving home prices up!

Myth #2: The Rumored Recession Will Lead to Another Housing Market Crash

Economists and analysts know that the country has experienced economic growth for almost a decade. When this happens, they also know that a recession can’t be too far off. But what is a recession?

Merriam-Webster defines a recession as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters.”

Reality: Recession DOES NOT equal housing crisis. Many people associate these two terms with one another because the last time we had a recession it was caused by a housing crisis. According to the Federal Reserve, over the last 40 years, there have been six recessions. In each of the previous five recessions, home values appreciated.

Myth #3: There is an Affordability Crisis Looming

Rising home prices have many concerned that the average family will no longer be able to afford the most precious piece of the American Dream – their own home.

There are many different affordability indexes supported by different organizations that all measure different data. For this reason, there is a lot of confusion about what “affordable” actually means.

The monthly cost of a home is determined by the home’s price and the interest rate on the mortgage used to purchase it. According to Freddie Mac, interest rates have risen from 3.95% in January to 4.59% just last week.

Reality: As we mentioned earlier, home prices have appreciated year-over-year for the last 76 months, largely driven by high demand and low supply.

According to a recent study by Zillow, the percentage of median income necessary to buy a home in today’s market (17.1%) is well below the mark reached in 1985 – 2000 (21%), as well as the mark reached in 2006 (25.4)! Interest rates would have to increase to 6% before buying a home would be less affordable than historical norms.

The starter-home market has appreciated at higher levels (9.4% year-over-year) than any other market. One reason for this is the fact that many of the first-time buyers who have flocked to the starter-home market are being met with high competition. For some hopeful buyers, it may take more than a good offer to stand out from the crowd!

Bottom Line

There is a lot of confusion in today’s real estate market. If your future plans include buying or selling, make sure you have a trusted advisor and market expert by your side to help guide you to the best decision for you and your family.

 

 

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747

www.ChristieCannon.com

Homeowners & Appraisers Are Starting to See Eye-to-Eye

by Christie Cannon

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years | MyKCM

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5% (or more) over the next twelve months. One major challenge in such a market is the bank appraisal.

When prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the same neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth and what an appraiser’s evaluation of that same home is.

March 2015 marked the first month of a three-year gap between what an appraiser and a homeowner believed a home was worth. That gap widened to 2.65% in September 2015 and had consistently hovered between 1.0% and 2.0% through November 2017.

The chart below illustrates the changes in home price estimates over the last three years:

Homeowners & Appraisers See the Most Eye-to-Eye on Price in 3 Years | MyKCM
In the latest release, the disparity was the narrowest it has been since March 2015, as the gap between appraisers and homeowners was only -0.33%. This is important for homeowners to note as even a .33% difference in appraisal could equate to thousands of dollars that a buyer or seller has to come up with at closing (depending on the price of the home).

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges homeowners to find out how their local markets have been impacted by supply and demand: 

“The appraisal is one of the most important, although sometimes least predictable, parts of the mortgage process. The Home Price Perception Index is a way to illustrate the differences of opinion, and these differences affect everything from the type of mortgage a borrower can get to the expectations a seller has about the proceeds available upon sale of their home."
 

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then again to the bank (through the bank’s appraisal). With escalating prices, the second sale may be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to discuss this and any other obstacles that may arise.

 

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747
www.ChristieCannon.com

Report: Dallas-Fort Worth home prices least likely to drop

by Christie Cannon

 

Report: Dallas-Fort Worth home prices least likely to drop

07:30 AM CST on Wednesday, January 16, 2008

By STEVE BROWN / The Dallas Morning News

Dallas-Fort Worth's housing market is the least likely of any in the country to see a decrease in home values, a new report confirms.

At the same time, the chances of a house price decline rose in almost four out of five U.S. markets, according to a report released Tuesday by mortgage insurance firm PMI Group.

Dallas and Fort Worth ranked dead last in PMI Group's latest forecast of cities with the biggest chance for a home price shakeout.

Analysts with the California-based company estimate that Dallas-Fort Worth has less than a 1 percent chance of marked home price drops in the next two years.

By comparison, cities in California, Nevada and Arizona have more than an 80 percent likelihood of falling residential values.

"We're seeing an increasingly polarized market," PMI economist David Berson said in a news release.

"The risk that home prices will be lower in two years has increased for many of the largest cities in the nation, although areas that saw only moderate home price gains during the 2002-to-2005 period still generally have low risks of price declines," he said.

That's certainly the case in Dallas-Fort Worth, where home price appreciation during the last five years has been a fraction of the national average.

"Because Texas did not participate in the double-digit home price gains in the first half of the decade, it doesn't have to take the great pain of the areas that are compensating for that now," Mr. Berson said in an interview.

Now that the housing sector is in a slump, home values in North Texas have been relatively flat while they are falling in many other major U.S. cities.

In 2007, the median price of homes sold through the North Texas Realtors' multiple listing service was up 1 percent from 2006.

Texas markets – including the D-FW area – were also less affected by investors who ran up prices in some cities, Mr. Berson said.

And most Texas cities are outpacing the rest of the country in overall economics, he said.

"The state economy is doing pretty well, and job growth is above the national average," Mr. Berson said.

"It's quite likely Texas will be doing better than the national average for the foreseeable future," he said.

The D-FW area has gotten high marks in the PMI risk report before.

And other national surveys show that North Texas' housing market is outperforming those in the rest of the country.

Even so, pre-owned home sales were down about 8 percent last year, and sales of new homes fell about 17 percent in 2007.

Foreclosure rates also continue to rise.

Analysts are therefore keeping a close eye on D-FW home prices for signs of deterioration.

"I can't argue with the PMI risk assessment, but it doesn't mean that it still couldn't happen – just not as likely as elsewhere," said Dr. James Gaines, an economist with Texas A&M University's Real Estate Center. "So far, most Texas markets are doing well.

"The metroplex probably will do well to have positive overall appreciation, but pockets within the metroplex will have a rough time for a while."

Indeed, Mr. Berson said, the Texas housing market isn't bulletproof.

"There are no sure things," he said.

"It's possible that some parts of Texas will see some declines in the near term."

But overall, the outlook for the local housing market is good, he said.

 

HOW RISKY IS THE HOUSING MARKET?

 

Markets with the most and least risk of a home price decline, based on price appreciation, economic growth and affordability according to PMI Group, one of the country's largest mortgage insurance firms. An index of 100 means there is a 100 percent chance of home prices falling in the next two years.

 

MOST RISKY

 

Riverside, Calif. 94

Las Vegas 89

Phoenix 83

Santa Ana, Calif. 81

Los Angeles 79

 

LEAST RISKY

 

Fort Worth Less than 1

Dallas Less than 1

Pittsburgh Less than 1

Houston Less than 1

San Antonio Less than 1

SOURCE: PMI Group

 

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Photo of Christie Cannon Real Estate
Christie Cannon
Keller Williams Realty
4783 Preston Road #300
Frisco TX 75034
972-215-7747
Fax: 214-853-4774
Keller Williams Frisco - The Christie Cannon Team - http://www.christiecannon.com

 

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