Lee Morof's Real Estate Blog

When a homeowner is preparing to sell a home, it can be beneficial to determine the target audience that is most likely to be interested in the property as an important initial step. In some cases, it is advantageous for a homeowner to position a home as a great rental property or investment property, but this requires the right strategy. By adopting a few niche marketing steps, homeowners can work with their trusted real estate agent to market a property appropriately.

Create A Cash Flow Sheet

Buyers who are searching for a rental or investment property are looking for a return on their investment in most cases, and they also may want to see how large of a down payment is needed in order for the property to realistically turn a profit. A real estate agent can work with a property owner to create a cash flow sheet that details all of this information for a buyer.

Show Comparable Rental Properties

A real estate agent can also research comparable rental data to help a property owner determine what a realistic rental rate may be. Property buyers want to know that the information provided to them in the cash flow sheet is realistic, and comparable rental data can give buyers the details they are looking for. More than that, this information may also show the average number of days similar properties stay on the market for rent and how many similar properties are available for rent in the vicinity.

Appeal To Agents Specializing In Real Estate Investments

Some real estate agents specialize in assisting investor clients, and some have standing clients that they actively seek great properties for. A skilled real estate agent may announce the listing to these agents so that they can bring the property to the attention of their clients. This focused marketing effort can yield considerable returns, but the real estate agent generally must take the initiative to contact these agents.

Some properties may be marketed as family homes or vacation homes, but others are well-suited for being rental or investment properties. Homeowners who are preparing to sell their home can work with a real estate agent to learn more about who their target audience is and how to market specifically for them. Those who are interested in learning more about how to sell their home quickly can set up a consultation with their trusted real estate professional.

There are many people wondering where the housing market is going next. While interest rates might be low, attracting a lot of buyers, there are some potential homeowners who are concerned about the current demand in the housing market. This could be driving up home prices, causing some people to pause. Furthermore, some people might be hesitant to sell because they are worried they might have a hard time finding a new home in the current market.

What do the experts have to say?

Homes Might Start To Sell Faster

As the weather begins to warm up, the traditional moving season is unfolding. A lot of people like to wait until the late spring and early summer to move because they are worried about pulling their kids out of school. Therefore, there is a great chance that homes may sell faster between now and the middle of the summer.

The Impact Of The Pandemic

During the past year, a lot of sellers have been hesitant to list their homes because they were concerned about their personal safety. They wanted to expose themselves to as few people as possible. Now that many people are getting vaccinated, some experts believe that sellers might be more open to selling their homes now. As a result, more inventory could come on the market, helping to deal with the demand.

Competition Could Start To Ease Up With New Home Construction

Another trend that many experts are looking at involves new home construction. During the pandemic, global supply chains were strained, making it hard for construction workers to get the materials they needed to build new homes. Now that many businesses are starting to open up again, it is possible that new home construction could start to catch up with current demand. This might also help to ease competition among buyers, adding to the supply.

The Future Of The Housing Market Is Bright

Regardless, the future of the housing market is bright for buyers and sellers alike. Right now, there are a lot of people who are looking for homes, which is great for sellers. As more inventory arrives on the market, buyers will have more options available as well.

Last week’s economic reports included readings on sales of new and previously-owned homes.  Weekly readings on mortgage rates and jobless claims were also released.

New Home Sales Fall in May

New home sales dropped to their lowest reading in a year in May with 769,000 new single-family homes sold on a  seasonally adjusted annual basis.  May’s reading was 5.90 percent lower than April’s reading of 817,000 sales but was 9.20 percent higher year-over-year.

May’s decline in new home sales was caused by a 14.50 percent decrease in sales in the South; Sales rose by 33 percent in the Northeast and 4.80 percent in the West. The sales pace for new homes in the Midwest was unchanged.

Multiple factors caused fewer new home sales during what is typically a busy home-buying season. Rising costs of lumber, along with high demand for homes and affordability challenges presented obstacles to first-time and moderate-income buyers in recent months, but lumber prices fell in May. High demand for homes created opportunities for cash buyers who sidestepped making purchase offers contingent on mortgage approvals.

Analysts said that falling lumber prices will eventually provide relief for homebuyers, but short inventories of available homes coupled with high home prices continued to sideline first-time and moderate-income buyers. The median price for new homes rose to $374,000 as compared to $369,000 in April. Real estate pros reported a 5.1 month supply of available homes in May, which was the highest reading in a year.

Existing Home Sales Lower in May as Market Slows

Sales of previously-owned homes also fell in May; this was likely due to low inventories of available homes and the covid induced home-buying frenzy easing. Would-be home buyers have also left the market due to affordability challenges.

Lawrence Yun, chief economist for the National Association of Realtors® said: “Home sales fell moderately in May and are now approaching pre-pandemic activity.” Mr. Yun identified low inventories of available homes and affordability as the main obstacles facing prospective home buyers.

Mortgage Rates Rise; Jobless Claims Fall

Freddie Mac reported higher mortgage rates last week; average mortgage rates surpassed three percent for the first time in 10 weeks. Rates for 30-year fixed-rate mortgages rose nine basis points to 3.02 percent; the average rate for 15-year fixed-rate mortgages rose 10 basis points to 2.34 percent. Rates for 5/1 adjustable rate mortgages averaged 2.53 percent and were one basis point higher. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.

New jobless claims fell to 411,000 claims filed last week as compared to the prior week’s reading of 418,000 first-time claims filed. Continuing jobless claims also fell with 3.39 million ongoing claims filed as compared to the prior week’s reading of 3.53 million continuing claims filed. 

What’s Ahead

This week’s scheduled economic news includes readings from Case-Shiller Home Price Indices, and reports on pending home sales, construction spending, and consumer confidence. Weekly readings on mortgage rates and jobless claims will also be published.

There are a lot of people who are wondering if now is the right time to move or refinance their current home loan. With interest rates still favorable, a lot of homeowners have the potential to save a lot of money if they are able to secure a home loan with a lower interest rate. There are two ways homeowners can secure a home loan with a lower interest rate. The first is to refinance. The second is to move. Which option is better? There are a few key points to keep in mind.

Taking A Closer Look At Refinancing

There are a lot of homeowners who have an abundance of equity currently built up in their homes, making this a great time to refinance. With a refinance, there are multiple options available. Some homeowners might refinance to access the equity in their homes, allowing them to complete a project. Some homeowners might refinance in an effort to pay off their home loan sooner. If homeowners are trying to access more equity, or are trying to shorten the term of the loan, then refinancing might be the smart move.

Looking At The Option Of Moving

The other option is to get a new home loan entirely by moving. This is an attractive option for homeowners who might have a dream house they would like to move to. In particular, any homeowner who currently has a home loan with a high interest rate should consider moving into their dream home now. Because mortgage rates are low right now, this is a chance for homeowners to move into a larger house while keeping their mortgage payments the same or less by obtaining a lower interest rate.

Every Situation Is Different

In the end, every situation is different. Because interest rates right now are so low, now could be the time for homeowners to consider moving or refinancing. Switching to a home loan with a lower interest rate could save tens of thousands of dollars over the life of the loan. Anyone with questions or concerns should reach out to a professional for help.

Many people make the decision to move from the country or the suburbs into the heart of the downtown area for a number of reasons, such as to enjoy proximity to work or to enjoy the urban lifestyle. With the higher cost of real estate in central urban areas and with real estate space at a premium, many who make the decision to relocate will need to downsize from a larger house to a smaller condo or apartment. While this can be challenging, it can be accomplished by following a few steps.

Choose The Right Pieces To Keep

When downsizing from a larger house to a smaller apartment or condo, it is often necessary to get rid of some furnishings. It is important to select furnishings that are best suited for the size of the new space as well as the individual’s needs. Items that will not have a place in the new home can be donated, stored in a storage unit or given to a family member or friend.

Think About Storage

When living space is downgraded, storage of everything from dishes to linens and clothing becomes a concern. Storage features in downtown apartments and condos is often minimal, and this means that those moving into these units may need to invest in special storage features. For example, storage bins that can slide under the bed, pull-out features for kitchen cabinets and various other types of storage features can all be put to use to improve organization and to maximize the limited amount of space available in the property.

Get Back To The Basics

While storage features can be useful, the fact is that most people who are making this transition will need to get rid of some of their items or store them in a storage unit. A smart idea is to consider only the basic items that are truly necessary for living as a first step. If space permits, additional luxury items can be added to the space provided there is room in the apartment or condo.

Downgrading from a larger home to a smaller living space can be frustrating and stressful, but eliminating the unnecessary items and improving storage and organization can go a long way toward streamlining this process. Those who are searching for a new place to live in the city can request personal assistance from their trusted real estate professional.

There are millions of homeowners that are parents waiting for their advance child tax credits to arrive; however, they might not be sure exactly how much money they are going to get. This makes it difficult to set a budget. Some parents could expect to receive $300 per month between now and December. The rest of the credit should arrive after filing their tax returns next year. How much will parents receive?

The Process Of Calculating A Child Tax Credit

Because of recent changes in federal tax laws, the expanded child tax credit has increased the limit from $2,000 (the limit in 2020) to a maximum of $3,600; however, not every parent is going to receive $3,600.

Children under the age of five years are eligible for the maximum amount of $3,600. Children who are in secondary school (between the ages of six and 17 years) are eligible for a maximum payment of $3,000 per child. Children who are 18 years of age or in college full-time (up to age 24) are eligible for a one-time payment of $500 each.

In addition, these payment amounts will vary depending on the adjusted gross income of the family. Keep in mind that these numbers are estimates only and could vary from family to family. Anyone with questions or concerns about how much money they are going to receive should speak with a tax professional for more information.

Will Expanded Child Tax Credits Be Expanded In The Future?

Fortunately, there are online payment portals available, saving families the trouble of filing an amended tax return for these payments; however, will these payments be extended into the future? There is a possibility that Congress could decide to extend the duration of monthly child tax credits in upcoming stimulus bills. With millions of people still collecting unemployment benefits, the government might be forced to extend child tax credits to make life easier for the millions of people who are suffering.

Right now, families should not assume these tax credits are going to get extended until Congress passes formal legislation. While the government might decide to pass another law similar to the American Rescue Plan, passed earlier this year, nothing is guaranteed. Families should budget for this year’s child tax credit accordingly.

Last week’s economic news included readings from the National Association of Home Builders on housing markets and  Commerce Department readings on housing starts and building permits issued. Weekly reports on mortgage rates and jobless claims were also published.

NAHB: Home Builder Sentiment Slips Amid High Materials Prices, Labor Shortages

The National Association of Home Builders Housing Market Index fell two points to a May index reading of 81. Readings above 50 indicate that most home builders are confident in market conditions, but builder sentiment has fallen from its peak reading of 90 before the pandemic. The NAHB Housing Market reached its lowest reading of 37 during the pandemic. Readings above 50 indicate that most builders surveyed were confident about housing market conditions.

Homebuilder confidence slipped due to higher home prices caused by high demand for homes. Builders have pulled back the pace of building homes due to rising lumber prices and potential buyers facing affordability concerns. While lumber prices remain high compared to pre-pandemic levels, they were 42 percent lower year-over-year.

Chuck Fowke, chairman of the NAHB, said, “These higher prices have priced new homes beyond the budget of prospective buyers,  which has slowed the strong pace of home building.” Low mortgage rates prompt buyers to enter the market, but home prices in many areas require mortgage loans that many buyers cannot afford.

Homebuilders continued to face shortages of skilled carpenters and other workers. These shortages also impact the price of homes and building pace. Shortages of new and pre-owned homes created high levels of buyer competition with multiple offers on available homes. In addition, some metro areas are seeing more cash offers, which make buying homes more difficult for buyers who depend on mortgages to purchase homes.

In related news, the Commerce Department reported 1.57 million housing starts in May on a seasonally-adjusted annual basis. 1.52 million starts were reported in April and 1.63 million starts were expected in May. Building permits issued in May fell to 1.63 million permits issued on a seasonally-adjusted annual basis. 1.73 million building permits were issued in April and analysts expected the same number of permits to be issued in May.

Mortgage Rates Fall; Jobless Claims Rise

Freddie Mac reported lower mortgage rates last week with rates for 30-year fixed-rate mortgages averaging 2.93 percent and three basis points lower. Rates for 15-year fixed-rate mortgages were one basis point higher on average at 2.24 percent; rates for 5/1 adjustable rate mortgages were three basis points lower on average at 2.52 percent. Discount points averaged 0.70 percent for 30-year fixed-rate mortgages, 0.60 percent for 15-year fixed-rate mortgages, and 0.30 percent for 5/1 adjustable rate mortgages.

Jobless claims were mixed last week as new jobless claims rose to 412,000 first-time claims filed from the previous week’s reading of 375,000 initial claims filed. Continuing jobless claims were unchanged at 3.52 million claims filed.

What’s Ahead

This week’s scheduled economic news includes readings on sales of new and previously-owned homes, inflation, and the University of Michigan’s Consumer Sentiment Index. Weekly readings on mortgage rates and jobless claims will also be released.

The Federal Open Market Committee of the Federal Reserve said in its post-meeting statement that the Federal Reserve expects to raise its benchmark interest rate range twice during 2023. No rate changes will be made during 2022 as the economy continues to recover from the Covid-19 pandemic. The Fed’s current interest rate range is 0.00 to 0.25 percent.

Fed Expects “Transitory” Inflation

The Fed’s post-meeting FOMC statement said that although Committee members adjusted their forecast for raising the Fed’s benchmark interest rate range, members did not predict long-term inflation and described current upward inflation as “transitory.”

The Consumer Price Index reported that the cost of living jumped in May and drove inflationary growth to a 13-year high of five percent.

11 of 18 FOMC members currently expect two or more rate hikes in 2023; in March, seven members expected one rate hike in 2023. Former Treasury Secretary Larry Summers said that the Fed needs to reconsider its monetary policies based on the two stimulus payments provided to Americans. The Fed has held its benchmark interest rate range to 0.00 to 0.25 percent and continued its monthly purchases of $80 billion in Treasurys and $40 billion in Mortgage-Backed Securities in efforts to support the economy and stabilize financial markets.

The Committee will follow economic news and developments through readings on public health, labor market conditions, inflation, and financial and global news to determine monetary policy adjustments.

Fed Chair Suggests Future Tapering of Bond Purchases

Federal Reserve Chair Jerome Powell said in his post-FOMC meeting press conference that members had their first discussion of tapering the Fed’s bond purchases. Although the Fed has indicated it wants to see “substantial further progress” in the economy before it starts to taper its bond purchases, analysts expected further discussion of tapering bond purchases in FOMC’s July meeting. Reducing bond purchases is considered the first step in moderating the Fed’s accommodative stance on monetary policy.

Chair Powell said that the FOMC will continue to develop monetary policy in consideration of the FOMC’s dual mandate of achieving maximum and an annual inflation rate of two percent over the longer term. Inflation has run below two percent for some time before the pandemic; so a current inflation rate running above two percent would help raise the average inflation rate to the two percent requirement.  

The unemployment rate is improving as businesses and other employers open their doors and restore service to full capacity. Chair Powell cautioned that the economy remains strongly connected to how the Covid-19 virus progresses and said that monetary policy would be adjusted according to how the pandemic impacts the economy.

It can be a bit of a surprise if your home turns out to be valued at less than the purchase price offered, but this is the type of thing that can occur in an appraisal situation. While this can change everything from your contract to the amount of your down payment if your home has been appraised at less than you envisioned, here are some options you may want to consider.

Review The Appraisal Contingency Clause

If an appraisal contingency clause is built into the terms of your contract, this means that the terms of your contract can be re-evaluated and re-negotiated if an appraisal happens to come up short. While this is meant primarily to protect the homebuyer against a lower appraisal, it doesn’t mean that the terms of a new deal can’t be met for the good of both parties.

Get A Second Appraisal

It’s entirely possible that the initial appraisal is accurate, but it doesn’t necessarily hurt to get a second opinion in the event that the first appraisal seems too low. While you can work in conjunction with your lender to get a second appraisal, you may need to pay for it the second time around in order to get your initial purchasing price. Whether it happens to be good news or bad news, it can be worth the peace of mind to know how to proceed.

Consider A Lower Price

It’s less than ideal when your home is appraised for less than the purchase price, but this doesn’t have to be a deal breaker when it comes to selling it. While you may be able to get away with a higher price for your home in a hot real estate market, if things have cooled off, this can be an important time to re-negotiate the deal you’ve got. If a potential buyer likes your home and has already made an offer, they may be happy to decide on new contract terms.

It can be quite disappointing if your home is appraised at a value that is less than the offer you’ve received, but this doesn’t necessarily mean that you’ll have to put your home back on the market. Whether you and the potential buyer decide to re-negotiate or get a second opinion, there are options that can be beneficial for both parties. If you’re currently going through the appraisal process, you may want to contact your local mortgage professional for more information.

Homeowners who are thinking about listing their home for sale in the coming weeks or months may be focused on improving their home to help it sell more quickly, but there also may be a focus on adding value to the home in the process. While each home is unique, there are a few projects that most homeowners would benefit from. In fact, these are a few simple and easy projects that can typicaly be completed over the course of a weekend; that can add value and desirability to the home.

Replace The Front Door

The front door has an impact on curb appeal, and it also is one of the primary features that buyers will see when they approach your home to take a tour. Replacing an older door that lacks style or that is plagued with signs of wear and tear can improve property value and curb appeal alike. Many homeowners who have basic tools and some do-it-yourself experience with other projects will be able to replace the front door without additional help from a contractor.

Update The Kitchen Back Splash

A kitchen is a key selling point in a home, and the back splash is among the most visible features in this space. Replacing the back splash with stylish tile can improve the look and can instantly make the home more desirable. This can be a relatively simple type of home renovation project, if you have experience with tile work, that may be completed within just a few hours.

Repaint The Walls And Baseboards

Few things can improve the look of a home more easily than a fresh coat of paint. If the walls are showing signs of wear or the colors do not have modern or universal appeal, applying a fresh coat of paint to walls and baseboards is a simple enough project to tackle. For the best results, focus on the rooms with the most undesirable paint colors, in the most visible rooms of the home or in areas where the paint is in generally poor condition.

Each of these projects can have a dramatic impact on the homes appeal and can influence the value of the home itself.   Each of these prjects under most circomstances can be completed with minimal time and cost to the homeowner. Those who are ready to improve their home in a short period of time can consider which of these projects will yield the most significant results in their home. Consulting with a real estate professional about improvements that may be desirable in a specific home can help the homeowner in choosing what to tackle first.