Lee Morof's Real Estate Blog

Buying your home can be nerve-racking, especially if it’s the first time. The buying process is exciting and often complex. The chances of making a mistake are relatively high. 

In today’s real estate market where demand surpasses supply, you can’t afford to make mistakes. And this is just the tip of the iceberg.

If you are in the market to buy a house, here are five pitfalls avoid. 

Not Doing Your Homework Well 

Fortune favors the prepared in real estate. And preparedness begins with understanding your finances. A wise buyer examines assets, analyzes debts and gets finances pre-approved before jumping into the house hunt. 

Know the neighborhood well, since you’re also buying a location. It’s paramount to research about the quality of schools, upcoming zoning issues and crime level. Not all suburb spots are ideal to live in.

Picking The Wrong Mortgage 

Getting your loan preapproved puts you in a better position to negotiate. Find out how much property you can afford. Don’t rely on your bank’s internet site only. Instead, use calculators and consult with your trusted mortgage professional to find out how much you can borrow. 

It’s worth noting that what banks show they can lend can differ from what they will lend. As such, it’s imperative to choose your mortgage carefully. Compare offers from various banks or consult an independent finance broker. 

Going With The Market Flow 

Resist the temptation to flow with the market rather than your needs. The real estate market goes in cycles. There are times suitable for buyers, and times suitable for sellers. 

However, don’t gamble with your future by sitting and waiting for the right time. Once you know your budget, get your finances organized, think about your needs now and in future. Then use short term market conditions to make long-term lifestyle choices. 

Exceeding Your Budget 

Most homebuyers fall for the trap of picking more appealing properties that cost more than their budgets. Falling into this pitfall can derail your future finances. 

Although it’s human nature to yearn for more than we can afford, resist the desire. Surpassing your budget exposes you to potential financial shocks with bigger payments, property taxes and more.

Falling In Love 

If you find the perfect house, keep it to yourself. Don’t let the sellers read your emotions. If they do, they may use them against you while negotiating. 

Wise buyers know there are several homes out there, and there is one that’s right for them. If you can’t afford one or your offer isn’t accepted, keep looking and move on. 

Buying a home is rejuvenating. However, if you’re not careful, you can make mistakes you may regret later. Be sure to consult with your trusted real estate expert and trusted mortgage professional to get the best advice for your situation. 

After two months of declining builder confidence, the National Association of Home Builders Housing Market Index gained two points in January with a reading of 58. Component readings of the HMI were also higher with builder confidence in current market conditions rose two points to an index reading of 63. Builder confidence in housing market conditions over the next six months rose three points to 64.

The index for buyer traffic in new housing developments rose one point to 44. While index readings above 50 indicate positive market conditions, the index reading for buyer traffic is typically lower than 50.

Lower Mortgage Rates Compel Home Buyers to Act

Falling mortgage rates contributed to the uptick in home builder confidence, but affordability continued to impact first-time and moderate-income home buyers. Robert Dietz, NAHB chief economist, said: “Builders need to continue to manage rising construction costs to keep home prices affordable, particularly for young buyers at the entry level of the market.”

Analysts suggested that builders could consider offering deeper discounts and incentives to buyers to increase sales of new homes. Homes not sold during November and December added to current inventories of new homes available, which provides home buyers with more choices and less competition for homes.

Home Builders Expect More Buyer Traffic

Lennar Corporation, a major home builder said that increased buyer traffic indicated that 2019 home sales would increase and that improving economic conditions were expected to improve housing market conditions and home sales in 2019.

Builders expect to face continued headwinds in 2019; affordability tops the list, but relatively low inventories of homes in some areas dampen buyer enthusiasm. Single-family housing starts are also expected to be lower than the long-term yearly average. As economic conditions improve for would-be home buyers, a slim supply of homes and high home prices present obstacles to buyers.

Your trusted real estate agent is one of your best partners in your next home buying or selling transaction. Be sure to contact them to discuss market conditions in your area.

When you make an offer on a home, you wait anxiously to see if it will be accepted. Sometimes you’re lucky enough to hear back within hours. Other times you could wait days or even weeks.

But once you get that good news that your offer has been accepted, what happens next? It’s a common question, and one that your real estate agent can help you with. In general though, here’s what you can expect.

There’s A Home Inspection

A home inspection needs to be conducted in order to assess the condition of the home for financing needs. This is a stage where some issues might come up that require negotiation. If serious problems are reported on the home inspection report, you could try to negotiate a lower price with the seller, but they don’t have to agree to that. 

There’s A Lender Home Appraisal

A lender appraisal will also have to be done. This is when the lender asks a third party to come out and assess the financial value of the home. If the appraisal comes out well, you could get approved for the selling price. But if the appraisal comes out lower than the selling price, you could have a hard time getting a mortgage unless the seller is willing to come down in price.

You’ll Go To The Closing

Now’s the time to get your financing finished up. If you’ve been pre-approved, that’s great. But your pre-approval may only be conditional. That is, it may be contingent on your financial situation to be completely in order. The full approval process may unveil something that needs to be corrected before you actually get final documents for the home purchase.

Once the documents are issued, you will go to the loan closing to sign the documents.  This usually happens with a third party closing agent or escrow company that ensure everything is in order.

The final word is that a lot can happen between having your offer accepted and actually getting the keys to your new home. That’s why it’s absolutely essential to work with a trusted home mortgage professional and a licensed real estate agent when buying a new home. They’ll be able to navigate you through any of the rough spots that happen along the way. And while there are things that can go wrong along the way, chances are great that eventually you’ll be able to happily call yourself a homeowner!

Atlanta, Charlotte, New York and Los Angeles are always on the real estate radar because of big ticket sales and good media coverage. The secondary markets – those markets without the celebrity undertones – may actually be better deals. With the price of borrowing money rising and occupation rates dropping in primary markets, places like Nashville and Birmingham are looking better to investors.

Where Are the Secondary Markets?

A secondary market is generally defined as a mid size or large city that has recorded an uptick in growth in the immediate past. They do not have quite the economic clout or media presence of a primary market, although they may rival each other in terms of population.

Generally, the influx of new attention for a secondary market will be from young professionals. These are people who are upwardly mobile and seeking new forms of skilled employment. This is what has driven the markets of cities like San Antonio, San Jose, San Diego, Phoenix and Philadelphia to new heights in recent years.

What Do Experts Think?

Experts believe that primary markets have topped out for the time being. With occupancy rates dropping from highs in the lower 90 percentiles, primary markets are just too saturated for their own good. Landlords in these areas are more unwilling to lower rents in these areas, because there are usually more high income earners established there who want to stay in the area to keep a legacy job or maintain a family.

Rising real estate prices and interest rates also put the primary housing market out of the reach of many outsiders. Researchers have found that doing real estate business in a secondary market can provide an investor with a 16% premium. The cost of real estate itself is around 38% lower. So are the costs of maintaining a property (energy costs 22% lower; labor costs 14% lower).

The New Primary Markets?

With respect to income, secondary market housing prices are up to 45% more affordable. Individuals notice this, and so do commercial investors and developers. This is why the mad rush to cities like Phoenix and San Diego will be red hot for the next few years, say investors, even in relation to established cities like Los Angeles and New York.

No matter where you are looking to purchase your new home, you can rely on your trusted real estate professional to help you locate your dream property options. 

Last week’s economic reports included remarks by Federal Reserve Chair Jerome Powell, readings on inflation and core inflation. Weekly readings on mortgage rates and first-tome jobless claims were also released. If the government shutdown continues, it is expected to impact release dates for readings from federal government agencies.

Federal Reserve Watches and Waits on Interest Rates as Inflation Slows

Fed Chair Jerome Powell said that the Federal Open Market Committee of the Federal Reserve will “wait and see” about raising the target federal funds rate this year. Chairman Powell spoke at a discussion hosed by the Economic Club of Washington, D.C. Mr. Powell clarified the Fed’s estimate of two rate hikes during 2019 and said that the predicted two rate hikes would occur based on “a very strong economic outlook for 2019.”

Faltering financial markets and slower rates of home price growth caused the Fed to dial back it’s bullish outlook and instead emphasize that Fed monetary policy is flexible and could be adjusted quickly adjusted as changing economic conditions merit.

Mortgage Rates and New Jobless Claims Fall

Freddie Mac reported lower average mortgage rates for 30-year fixed rate mortgages fell six basis points to 4.45 percent; rates for 15-year fixed rate mortgages fell 10 basis points to 3.89 percent.

The average rate for 5/1 adjustable rate e mortgages was 15 basis points lower at 3.85 percent Discount rates averaged 0.50 percent for 30-year fixed rate mortgages, points for 15-year fixed rate mortgages averaged 0.40 percent and discount points for 5/1 adjustable rate mortgages averaged 0.30 percent.

First-time jobless claims fell by 15,000 claims to 216,000 new claims filed. Analysts expected 227,000 new claims based on the prior week’s reading of 231,000 new claims filed.

December’s Consumer Price Index was – 0.10 percent lower than for November, which matched expectations based on November’s positive inflation rate reading of + 0.10 percent. Slowing inflation could indicate slower economic growth; a consistent pattern of sluggish inflation may cause the Fed to hold steady on raising its key interest rate.

What‘s Ahead

This week’s scheduled economic news includes readings on the National Association of Homebuilders Housing Market Index, Commerce Department readings on housing starts and building permits issued. The Consumer Sentiment Index is also scheduled for release. Weekly readings on mortgage rates and initial jobless claims will be released on schedule.

If you’re looking to get an untraditional deal on a new home purchase, you may encounter either a short sale or a foreclosure. These two terms refer to sales that are not usual. As a homebuyer, it’s important to understand the differences between them and how each one might affect your buying experience.

What’s A Short Sale?

A short sale is a situation where the owner has a strong motivation to hurry up and sell their home. In so doing, they’re willing to sell for less than what they owe on the house. Homeowners have a variety of reasons why they might do a short sale. Their reasons might include a personal emergency, or they might be trying to protect themselves against a future foreclosure.

In a short sale, the owner’s lender has to be apprised of the plan. In many cases, the lender is supportive of the short sale, since it keeps them from having to go through the long and expensive process of a foreclosure.

Short sales can represent great deals for buyers. However, since this type of sale is so unusual, the process of buying often takes a much longer time than a regular home purchase. You’ll need to be patient, but if the sale does go through, your patience can pay off.

What’s A Foreclosure?

A foreclosure is a situation where the owner’s lender is forcing the sale of the property due to unpaid mortgage payments. The lender is essentially taking back ownership of the property. The bank then puts the home up for sale as a foreclosure, and is the official seller of the property.

A foreclosure property may offer a good deal for a buyer, but the process may be long and drawn-out. Since the seller is the lender, they are not in any particular hurry to sell a property, and the transaction can be very complicated.

If you’re interested in buying a short sale or a foreclosure, you should look for a real estate agent that specializes in these types of transactions. Your real estate agent can help you to successfully navigate through all the red tape that short sales and foreclosures inherently have.  

There comes a time in every young homeowner’s life when they need a bigger house. When you buy a starter home, it’s unlikely that will be your forever home. But how do you know when it’s time to spend the time and effort to upgrade to a larger home?

Here are four signs you’re gonna need a bigger house!

1. You Have To Move Stuff To Get To Other Stuff

In a house where there is enough room for everything, you can move freely and access all your things without having to rearrange furniture. If you find yourself constantly pushing other things aside in order to get to what you want, there isn’t enough space in your home.

2. You’re Always Misplacing Things

The key to organization is having a spot for everything. But if you’re short on space, everything can’t have its own spot. That’s when things get lost or misplaced. If you repeatedly misplace your belongings, you probably need a bigger house.

3. You’ve Got A Growing Family

Do you have a little one on the way? As your family grows, your need for space will increase. It’s hard to imagine that a small baby will take up much space, and they don’t. It’s the baby accessories that take up the space; the high chair, the playpen, the walkers, the crib, the toy chest and more. It’s all fantastically fun, but you are going to need a bigger house.

4. You Just Feel Cramped

You and the other members of your family should each feel like you have space to be alone, spend time on hobbies, and have private conversations. If you just feel cramped all the time or you feel like you don’t have any privacy, it could be because your house is too small.

When you finally realize that the problems aren’t with you, but with the size of your house, it’s very liberating. Now you have the answer to the issues. All you have to do is go out there and find a bigger house to move into.

Call your trusted real estate agent and explain your reasons for moving so they can help you find a new home with more square footage.

If you’re already a homeowner and you’re getting ready to buy a new home, you know it’s tricky to buy and sell a home at the same time. There are lots of questions about how to handle this scenario. What if your old home doesn’t sell quickly?

Will you have to make two mortgage payments? What if you sell and the new owners want to move in before you close on your new home?

Depending on your situation, here are some strategies available to you.

Get A Bridge Loan

If you find yourself facing more than one mortgage payment – one on your old house and one on your new house – consider taking out a bridge loan to pay the monthly mortgage on the old house. Bridge loans are a solution to a temporary problem. When your old house sells, you pay off your bridge loan and you’re left with just the one mortgage payment.

Move Into A Short-Term Rental

If your old house has sold and the owners want to close before you can close on your new house, you could move into a short-term rental. This could be an apartment with a short-term lease. Or it could be a long-term hotel accommodation. You’d likely have to move your furnishings into storage; again, only for the short-term until your new house is available.

Ask If You Can Lease Back Your Home

You could ask the buyers of your current home to allow you to rent your home until you’re able to move into your new house. This is called a lease-back. It’s not ideal to pay rent on your own house, but it saves you from having to move twice.

This strategy usually only works if you already have a new house deal, so the owners of your old house have a known estimated time-frame when you’ll be moving out.

It’s definitely tricky trying to figure out the arrangements when you’re buying and selling a house at the same time. But one of the strategies mentioned above will likely work out for you.

Your trusted real estate agent is a valuable resource and can help you negotiate with your new buyers. They may even be able to help you find a short-term rental if that’s what you decide to do.

A growing supply of housing, volatility in the marketplace and risks in the development process all affected the multifamily market in 2018. In 2019, these three factors will continue to move the needle.

The Housing Supply

Markets like Boston, Seattle and Nashville are growing supply faster than demand. From 2015 to 2017, developers were building like crazy and landlords were enjoying rent increases of 5-7% year over year. They built too much, and the peak has showed itself. Only top markets like Atlanta and Charlotte can justify their cost of living increases. The rest will likely see slower growth and possibly losses in rent values and occupancy rates.

Market Volatility

Secondary markets are experiencing problems in their local economies, which is driving away the multifamily market. Fewer jobs means less security. Most multifamily clients are looking for stability, and they move into and out of markets based on that. Experts are predicting a consolidation of these families into larger markets.

Interest Rates

The volatility in the market has been accompanied by higher interest rates, which makes money harder to borrow. The seller’s market has held out for so long that a turnaround was almost inevitable, and most experts agree that the current trend is more than just a short term hiccup. We are looking at a real market correction.

The Effect

These three variables come together to create a multifamily market that is looking better for buyers than it has in a long time. Entrants into the market who have been waiting for a price dip began to see it in the latter part of 2018. All signs point to this price trend continuing into 2019.

Just as important as price is location. Although multifamily units will probably be in high supply in secondary markets, these units will be more difficult to fill. What you may see is a consolidation towards markets like Atlanta and Charlotte from multifamily buyers as well as renters.

You may also see speculators who choose to purchase in secondary markets and wait for a turnaround. In both cases, you can probably expect a more balanced overall landscape that will eventually stabilize into market values that are anywhere from 10 to 35% off peak.

Contact your trusted real estate professional to help you navigate the housing opportunities in 2019 for your local market.

Last week’s economic reports included Labor Department readings on private and public sector jobs, the national unemployment rate. Weekly readings on mortgage rates and first-time jobless claims were also released. Monthly reporting on construction spending was delayed due to the government shutdown.

Public and Private-Sector Jobs Growth Exceeds Expectations

ADP reported 271private sector jobs added in December as compared to 157,000 jobs added in November. Analysts expected 182,000 jobs added for December and said that December’s reading was the highest number of jobs added in almost two years. Large companies added 54,000 jobs, medium sized companies added 129,000 jobs and small companies added 89,000 private-sector jobs.

The Bureau of Labor Statistics reported 312,0000 public and private-sector jobs were added in December, which was more than double November’s reading of 176,000 public and private-sector jobs added. Analysts predicted 182,000 new jobs added for December.

In related news, the national unemployment rose to 3.90 percent from November’s level of 3.70 percent. While the unemployment rate was expected to dip to 3.60 percent, it rose due to more workers seeking jobs. Unemployment rates are determined as a percentage of workers actively seeking employment. A larger pool of people seeking work suggested expanding job opportunities.

Mortgage Rates Fall as New Jobless Claims Rise

Freddie Mac reported lower average mortgage rates last week as rates for fixed rate mortgage were four basis points lower at 4.51 percent; rates for 15-year fixed rate mortgages averaged 3.99 percent and rates for 5/1 adjustable rate mortgages averaged two basis points lower at 3.99 percent. Discount points averaged 0.40 percent for 30-year fixed rate mortgages, 0.30 percent for 15-year fixed rate mortgages and 0.20 percent for 5/1 adjustable rate mortgages.

In remarks made at the American Economic Association, current Fed Chair Jerome Powell joined former Fed Chairs Janet Yellen and Ben Bernanke to comment about the economy in 2018 and emphasized that Fed policy would be adjusted quickly and flexibly” if economic conditions warrant. All three Fed Chairs expected a slowing of economic growth in 2019, but their overall outlook was positive.

First-time jobless claims rose by 10,000 new claims to 231,000 first-time claims filed. Expectations of 218,000 new claims filed were based on the prior weeks reading of 221,000 new claims filed. The increase in new claims filed was caused in part by holiday season fluctuations and more people actively seeking jobs. Unemployed workers must be actively seeking work to qualify for unemployment benefits.

What‘s Ahead

This week’s scheduled economic reports include readings on job openings, minutes of the December meeting of the Fed’s Federal Open Market Committee, and inflation. Weekly readings on mortgage rates and new jobless claims will also be released.