Things to Consider
Is it smart to buy a home with school back in session?
With temperatures on the decline and daylight growing shorter by the minute, vacations of fun in the sun are in the rearview mirror. Parents are back into working mode and kids are getting settled into their homework, tests and other school-related activities.
Summer is an ideal time for homeowners to enter the housing market because it affords them the flexibility needed to adjust to a new location - something that's particularly helpful for parents whose kids are in elementary, junior or high school. But just because your son or daughter is hitting the books again doesn't mean you have to stop your search for your dream home.
Here are a few of the reasons why it pays to be in the market even when schools are back in session.
Just about every study concludes that when the spring and summer turn to fall and winter, it isn't just the temperatures that wind down - so does buyer volume. According to the most recent figures from the National Association of Realtors, existing-home sales in September fell 3.4 percent from August.
Mor Zucker, a Denver, Colorado-based real estate agent, told Realtor.com that when home-seeking traffic slows, asking prices frequently follow, appealing to people looking to buy on a budget.
"No matter how hot a market is, you'll still see price reductions and more inventory staying on
the market longer from September through December," Zucker explained.
Additionally, houses tend to stay on the market for longer periods of time, giving would-be buyers more time to consider their options without having to rush into a decision before a competitor makes theirs.
Indeed, the average listing in September 2018 (32) nationwide remained available for three full days longer than it did in August (29), the NAR sales report noted. These most recent findings are reflective of home sales figures in previous years when summer transitions to fall.
More options to choose from
One of the reasons why home prices are higher is due to supply and demand: People are buying at a clip that's faster than builders are developing and people are selling. But the market changes from September through the end of the year to one that's more favorable to buyers.
As of October 2018, unsold inventory is the equivalent of approximately 4.4 months, according to NAR's analysis. This means that it would take approximately four and a half months for supply to be exhausted were no other properties put up for sale. That's up from 4.2 months in September 2017 and 4.3 months in August 2018.
A house's dimensions, price and history are a few of the aspects buyers take into consideration before deciding what place to purchase. They also want to get an idea of what the neighborhood sounds or looks like, something that may be difficult to determine with preciseness in the summertime when families are out of pocket and on vacation.
Provides more accurate depiction of what's 'normal' for foot traffic
Routines change in the summertime. The people there in June, July and August may be gone when the temperatures fall and the leaves change color. Buying when classes resume can give you a more accurate sense of what a neighborhood is like in terms of composition and day-to-day activities.
Bottom line: Just because school has resumed doesn't mean your home buying excursions should end. Shopping over the next few months may help you find the house you've been waiting for at a price that you can afford.
Things to Consider
It's a sellers’ market — but it may shift to buyers soon
It's safe to say that housing conditions have favored sellers for quite a while. After all, the last time home values fell or held constant on an annual basis was back in 2012, according to the National Association of Realtors, and available properties currently hover around 1.9 million
But signs are emerging that suggest a market shift is beginning to take shape - an encouraging development for would-be buyers bound by a budget.
In September 2018, supply levels of homes for sale slipped just 0.2 percent, according to Realtor.com. That's substantially a reduced rate of decline in inventory compared to previous reports. But perhaps the more telling statistic is with regards to new listings, which rose an impressive 8 percent when contrasted with the same period in 2017. That's the largest uptick in five years.
Danielle Hale, Realtor.com chief economist, indicated that these most recent figures may serve as an inflection point that presages the dawn of a stretch that favors people looking to purchase.
After years of record-breaking inventory declines, September's almost flat inventory signals a big change in the real estate market," Hale predicted. "Would-be buyers who had been waiting for a bigger selection of homes for sale may finally see more listings materialize."
Home sales have slid since spring
A dive into the data suggested that this shift was in the making for quite some time. In August, existing-home sales flatlined from 12 months earlier, according to NAR's analysis. This made it five months in a row wherein residential real estate transactions dropped or stayed the same on a year-over-year basis. In year-to-date estimates, existing-home sales are about 1.5 percent lower versus the first eight months of 2017.
Lawrence Yun, chief economist for NAR, mentioned that purchase parity hasn't been nearly as apparent as of late.
"With inventory stabilizing and modestly rising, buyers appear ready to step back into the market," Yun explained.
Additionally, housing starts have picked up the pace. Indeed, in August, groundbreakings jumped more than 9 percent to a seasonally adjusted annual rate of 1.2 million units, an analysis conducted by the U.S. Census Bureau shows.
National Association of Home Builders Chairman Randy Noel said developers have been able to make up for lost time due to affordability concerns among families.
Even in the pricing aspect, sellers' market conditions appear to be on their last legs. Median list prices did rise in September, up 7 percent, according to Realtor.com, but that was down from the 10 percent increase 12 months ago. And among newly advertised properties, prices were
around $25,000 more affordable than houses already up for sale.
All this being said, Hale cautioned not to expect any major swings in favor of home shoppers.
"Plenty of buyers in the market are scooping up homes as soon as they're listed," Hale advised. "[This] will keep national increases relatively small for the time being."
However, if you've been anxiously awaiting the day when you can buy at a price that's in keeping with your financial allowances, that day may be in the not-too-distant future.
Things to Consider
Is there a risk of another housing bubble burst?
Is the housing market bubble burst on the way? With median home prices rising for 78 months in a row, according to the latest National Association of Realtors data, some industry experts wonder if another one may be on the horizon.
These real estate insiders' concerns, of course, trace back to the housing crisis of 2008, when the cost of buying a home edged higher on regularly occurring intervals, similar to what's happening now, up each month on a year-over-year basis.
As bubbles in all their forms tend to do, it eventually burst, as the Case-Shiller Home Price Index recorded its largest drop in 2012. This sent the market - as well as the U.S. economy - into a major tailspin that ultimately resulted in the Great Recession, which was experienced on numerous fronts.
"It's interesting to watch the dynamics of the market," housing and home loan expert Rich Sharga explained to National Mortgage News. "What we see is prices rise, sales activity slows down, prices weaken and then sales pick back up. It's the way a housing market is supposed to behave in a normal environment."
Home prices up substantially, but not to same extent
The problem, Sharga noted, is that it's been a long while since the existing-home prices reversed course. According to analysis conducted by the Urban Institute's Edward Golding, home prices have risen by approximately 34 percent since 2012, NPR reported, far outpacing the rate of inflation. But that's quite tame in comparison to previous bubble periods, such as between 1997 and 2006, when home values moved at a pace that was 84 percent faster than inflationary pressures.
Golding and his team noted that home prices heated up so much, it got to the point where buyers could no longer afford them. Given that people are still buying houses today at a healthy clip, buyers are clearly able to afford the price increases, another key distinction of what's happening now versus then.
Foreclosures still few and far between
The low rate of foreclosures suggests as much. For instance, in August, some 30,187 properties in the U.S. overall began the distressed-property filing process, according to the most recent figures available from the ATTOM Data Solutions. While that's a slight increase from the same 30-day period last year - less than 1 percent - it's the first time in 36 straight monthly reports that the annual foreclosure rate climbed.
Translation? The unabated uptick in home prices is rooted in high-quality economic fundamentals, including a low unemployment rate, vibrant gross domestic product growth and steadily improving wages.
"That gives me confidence that things are moving well," mortgage servicing expert Gagan Sharma told National Mortgage News.
This doesn't necessarily mean that the housing market or the economy won't encounter troubled waters, real estate observers warn. However, because the people are on firmer ground financially, homeowners are in a better position to ride out the storm should one develop.
Things to Consider
How long will it take to find your house?
Given it's highly labor-intensive and weather-related issues can throw a real wrench into production timetables, building a house takes time. According to the National Association of Home Builders and Census Bureau, it's typically seven solid months before a home is ready to be to moved into and lived in.
But how long does it take to find a house? As you might expect, the answer isn't always clear-cut. Nevertheless, the NAHB recently released a report that gives would-be homebuyers an estimate of the weeks they can anticipate devoting to the search.
On average, prospective homeowners spend at least three months before they find the property they eventually purchase, the NAHB revealed its latest Housing Trends Report. The poll, which questioned approximately more than 15,000 individuals, found 51 percent had been looking for no fewer than three months. In the fourth quarter of 2017, roughly six in 10 homebuyers were actively searching for a full three months.
What's the hold up all about?
It raises the question: Why is it taking this long? Part of the issue is the supply - there isn't enough of it. Indeed, based on the most recent figures available from the National Association of Realtors, existing homes available for sale in July totaled 1.9 million. This figure represents a supply level of 4.3 months at the present pace of homes going under contract.
Lawrence Yun, chief economist for NAR, stated the reality of the situation.
"Existing supply is still not at a healthy level, and new home construction is not keeping up to meet demand," Yun explained.
Total housing starts in July reached a seasonally adjusted annual rate of 1.1 million, the Commerce Department and U.S. Department of Housing and Urban Development reported in August, a slight increase at just shy of 1 percent.
Robert Dietz, NAHB chief economist, chalked up the modest uptick to a combination of factors.
"Supply-side challenges, including increases in material prices and chronic labor shortages, are affecting affordability in many markets," Dietz said. "However, consumer demand remains strong due to a growing economy and job market and favorable demographics."
On the plus side, Dietz hastened to mention, construction for single-family houses is improving notably on a year-to-date basis, rising 7.2 percent and 3.4 percent among multifamily properties. And in the Midwest, combined housing starts jumped 11.6 percent on a year-over-year basis.
Buyers know what they want
It would be one thing if aspiring homeowners were fine with purchasing virtually anything with four walls. But of course, everyone enters the market with a general idea of the picture perfect house.
It also explains why 45 percent buyers, in the latest NAHB Housing Trends Report, cited properties not having the features they most wanted as the reason why they'd been looking for three months or longer, the leading rationale. Meanwhile, 43 percent said their lengthy search had to do with price point, unable to find a house in their budget range.
Whatever the ultimate cause, homebuyers are undaunted by the challenge that's before them. At 55 percent, a majority of respondents in the NAHB study indicated they planned to keep on looking until they found something they wanted. Just 16 percent said they were taking a break for the time being, starting again in several months or next year.
Whether you've just entered the market or have been at it for a while now, don't give up. Something will turn up. Just be ready to take action when the time comes. Like a fine wine, a delicious home-cooked meal or building a house from scratch, locating your home takes time.
Things to Consider
Should you pay off your mortgage before retiring?
With an estimated 10,000 Americans retiring by the day, according to estimates from the Pew Research Center and the Social Security Administration, baby boomers nationwide appear to be assessing their financial situations. Many are asking themselves questions like:
- "Do I have enough to retire comfortably?"
- "What kind of payments do I still make on a regular basis?"
- "How long will it be before I finally pay off my mortgage?"
Conventional wisdom suggests the fewer expenses you have, the better off you'll be in terms of financial freedom and able to make use of funds on the discretionary purchases that give meaning to retirement being the "golden age." As a result, the question, "Should I pay off my mortgage before I retire," might seem like a no-brainer.
"Not so fast" is the advice countless wealth advisors across the country seem to be giving their clients. Catherine Collinson, president of the Transamerica Center for Retirement Studies, told The Wall Street Journal that it all depends on your situation.
"It's absolutely imperative to run the numbers," Collinson explained. "Every case is a little different."
More retirees still owe on mortgages than in the 1980s
Although certain polls suggest more Americans are spurning retirement life by remaining in the workforce - some doing so willingly, while others are forced to as a result of insufficient savings - nearly 80 percent of Americans who have already called it quits from their careers indicate they have enough money to live without needing to pinch pennies, a Gallup poll showed.
This may explain why more people are entering retirement still owing money on their mortgages. According to analysis conducted by researchers from the Center for Retirement Research at Boston College, individuals in the 60-plus age bracket are over three times more likely to own a mortgage compared to people their age back in the 1980s.
In addition to more people preparing themselves financially, the trend shift may also stem from baby boomers of today being less reluctant to own debt, theorized Jennifer Molinsky, Ph.D., a senior research associate at the Joint Center for Housing Studies at Harvard University. The interest rate environment of today is much more affordable as well than it was back then.
"Holding debt in the 1980s when rates were in the teens is a lot different than holding it now," Molinsky told the Journal.
Still, a closer look at the numbers suggests even those capable of affording retirement may not be in as comfortable a position as they ought to be. For example, in a separate Gallup survey, 57 percent of respondents said Social Security is a "major" income source in retirement, an institution that financial experts warn is on the verge of insolvency, given just 2.8 people contribute to it for every one that collects.
Should you pay off your home loan before retirement?
How do you know which retirement and mortgage route is the best path? Experts say it all depends on your goals. Jamie Hopkins, director of the retirement income program at the American College of Financial Services, told the Journal it may boil down to doing whatever makes you the most comfortable.
"If you're able to afford to pay off the mortgage, and you'll have all the retirement assets you'll need, you might just feel better paying off the mortgage, and that's OK," Collins stressed. "There are benefits because it does help with cash flow."
On the other hand, if you're not sure or are on the fence about balancing retirement wellness with paying off the mortgage in full, there's nothing wrong with exiting the workforce still possessing debt.
If you're still unsure, financial experts recommend talking to a wealth adviser to discuss your options. From there, make a plan on the best course of action. This may include refinancing, which can help you lower the interest rate or change the length of the loan term. Additionally, Hopkins said it's best to not use retirement funds to pay off a mortgage because you may be hit with a tax penalty of 10 percent or more for early withdrawal.