The RE/MAX Associates Louisville Real Estate Blog

Growth of Home Prices and Household Incomes

S&P Corelogic Case-Shiller reported today that home prices rose again in July, and at an even faster rate than June. The price increase monthly record from July 2006 was almost broken, falling short by only 0.6%.

Something else to consider is the increase in incomes. As home prices continue to rise, so do incomes; which happened to rise faster than the home prices. Perhaps if things continue this way and avoid any market disasters, the home affordability problem could be solved.

We are seeing home prices continue growing steadily, and the rise in incomes is one of the several factors influencing it. The U.S. Census Bureau reported that for the first time in eight years, household incomes have seen substantial increases in household income by 5.2%.

Considering the income growth is keeping up with the growth of homes, sometimes exceeding it is a strong sign for the future. On the other side, the incomes are so far behind; it’s still going to take a while for homes to become affordable.

Some economists believe wage inflation needs to be hiked up a bit for the market to completely mend.

Brent Nyitray of iServe Residential Lending said earlier today, “The real estate indices are beginning to show a slowdown in home prices appreciation. Until we start seeing wage inflation, real estate prices will be stretched versus incomes.

The Vice President of Quicken Loans Bill Banfield, is of the same opinion.

“Despite recent data pointing to slower sales, home prices continue to rise faster than incomes in many areas. Low inventory will continue to be a challenge for buyers looking for the right home and can cause those bidding to be more aggressive on the house they finally want to purchase.”

Some west coast cities like Seattle, Denver, and Portland saw the highest gains over the past six months. Their numbers were Seattle 11.2% Denver 9.4% and Portland with the highest at 12.4%

Again, if...

Tiny Homes

A lot of millennials are buying smaller homes, particularly tiny homes. They aren’t interested in maintaining a larger home and maybe one day selling it for a chunk of change. Owning a large home with a lot an old American dream, something today’s generations are forgetting about.

There are TV shows about it on HGTV’s network, called “Tiny House Nation” and the DIY network shows tiny homes every-now-and-then.

What these networks don’t show is the process of obtaining a loan for such a small home. A lot of these tiny homes don’t even qualify for the mortgage requirements for a traditional house. One option for tiny home hunters is to build their own tiny home. The options to financing your tiny home are here below.

Home on wheels

These types of homes usually fall under loans that are made for RV’s, which are unsecured, fixed-rate mortgages. The payoff for these is usually around 2-7 years. What is nice about these is they don’t have any application fees, or closing costs.

These loans are a straight up swap of money based on your FICO score. The catch to these is that the loan usually is attached with a higher interest rate, and they are NOT tax deductible.

Specific mortgage lenders

Because this lifestyle is still so new, the market is quite small. The traditional mortgage lenders often don’t want to bother with such small loans. It’s not uncommon for lenders to have a minimum loan amount around $100,000. So if you are dead-set on a small home, you’ll need to find a lender that offers these types of loans.

Consider the zoning laws

When anyone buys land they must consider what they are restricted to building on their land. Every tier of, local, county, and state zoning laws...

Home Sales Fall in August

Another report from the Associated Press has said August home sales were less than desirable. A shortage of inventory is hurting sales, and pushing prices higher.

The real estate industry has been one of the countries strong points despite a weak economy overall. Sales have been steadily recovering since the recession, and buyers credit is finally back to a healthy status. The main weakness in the real estate market is a lack of inventory. Not enough homes are being put on the market, which is a reflection of the aftermath of the bubble almost ten years ago.

The sale of existing homes dropped by 0.9% in August, to a seasonal adjusted yearly rate of 5.33 million; which is the second straight month in decline. The drop this moth happened after a time of respectable gains lifting home sales up by 3%. The historically low mortgage rates have teamed-up with an improved job market giving buying power to potential home buyers.

Significantly fewer sellers are entering the market despite eager buyers. Housing inventory has fallen 10.1% from this time last year, leaving the market with 2.04 million homes.

A shortage of homes has posed as a gridlock for buyers, and those who are willing to sell their homes may not be able to find another to live in right away. The demand is greater than the supply which is pushing up prices significantly. A lot of buyers are stuck in their rentals as they fight through a bidding war. If deals don’t go in their favor they are stuck where they are for now.

August’s median home sale price was $240,200, a price increase of 5.1% over the past year. This signals that American’s need to save more for a down payment, ultimately hurting home ownership rates.

The Northeast is the only region that saw record sales gains, while the Midwest, South, and West saw sales fall short.

Renting prices are supposedly becoming more manageable, but it’s still outrageous to rent just about anywhere....

What to Know About For Sale By Owner Homes

When you are on the hunt to buy a home, you’ll see tons of them on the market. On occasion you might see a home “For Sale by Owner” (FSBO), or even a friend or relative who wants to sell you their house directly.

This could be tempting since there wouldn’t be agents involved, and it would just be a simpler process overall; but this isn’t quite the case. Here’s where buying a FS BO could get tricky.

A lot of sellers work with your agent

Sellers who have a brain already know that buyers are working with an agent, or have been for a long time, and are planning to pay the agent once the home buying process has concluded.

The agents serve as the buyers advisers throughout the process. If you happen to fall in love with a FSBO house, tell your agent and ask them to make the first contact. They will still do what needs to be done, ensuring they get paid in the end, and you have a home.

Don’t think of the home any differently

If you find the home of your dreams, and its FSBO, don’t treat it like it’s less than a house that’s being sold traditionally.

What you want to keep in mind is that you will meet the owner face-to-face. Selling a home is a personal task, more so than selling your car, and just because emotions might run high, don’t let it intimidate you when you meet the seller.

Keep your eye on the prize. Keep your eye on your future possible home.

Laws are laws

FSBO’s still must obey the seller disclosure laws. They are still bound to every other law in real estate. Do your duty and inspect the home, ask for the right repairs to be made, and the home could be yours soon.

One issue with FSBO homes is that the sellers aren’t well versed in the entire process...

Air Rights Above Your Home

Every home owner should know the basics of their air rights; you know the air right above the house. Not many people give it a thought, except for those in cities like New York, or San Francisco where space is almost all that matters to home owners.

So do you own the air above your land? What could you do if you did?

Air rights

Air rights are considered a development right, and that is a general rule dating back to the twentieth century where home owners owned the land below their home, and the air above it. All that void space above your home is considered yours.

Still, today’s laws for the most part follow the old Latin doctrine, “For whoever owns the soil, it is theirs up to heaven and down to hell.”

Once the airplane came on the scene, those rights became a bit more restricted. The new rule of law was that homeowners can only use the airspace they could “reasonably use”. For the better, this law allowed airplanes to operate without invading everyone’s airspace multiple times a flight; allowing the industry to take off.

UP

Zoning laws are another thing to consider. They stop your neighbors from building a 12-story condo building right next to your residential home, and all your neighbors for that matter. Even though he may own the right to use that space, zoning laws circumvent these types of problems.

If your home doesn’t have a second floor, but you really wish it could, and maybe even a third; zoning restrictions prevent you from adding anything that would seem unreasonable, like a fourth, maybe even a third story.

Value in the city

Heavily populated cities like New York have high housing demands and little space to offer. Cities like so do have air rights, and they hold a price tag. If you aren’t...

Home Sale Numbers for August

The Mortgage Bankers Association held a survey this month pertaining to last month’s home sales; and they found quite good news. August home sales gushed out of the market with a whopping 601,000 sales. This is actually the highest volume of transactions since the survey began back in 2012. The applications were even up, despite July being quite poor.

The purchase applications increased 5% for the month, and a very strong 14% increase since August of 2015. The only thing the survey didn’t take into consideration is the adjustment for seasonal trends.

The MBA survey calculated the new home sales estimates by using the mortgage applications from the BAS. They also consider the market coverage and other factors when estimating these numbers. They also track builder applications from mortgage subsidiaries of home builders across the nation. Given this information, and some that is not so easily explained, MBA can estimate new home sales volume nationally, and even down to the metro level.

It’s believed that builders are responding to the call of the market; building homes to catch up with the demand. With jobs getting harder to come by among Middle America, builders are giving people jobs and homes to live in. There are plenty of reasons for builders to shy away from that call, but the market has made a steady recovery since 2008, and confidence is soaring right now.

A little statistics to show what’s happening: Conventional loans made up almost 68% of loan applications, FHA loans were 18%, RHS/USDA loans were barely over half a percentage point, and VA loans were 13%.

Another fun fact – the average size of a loan dropped by $620 to settle at $325,224 for the month of August. 

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Buying a Fixer-Upper? How You Know When You're Ready

Buying a new home involves some risk; you truly never know what you’re getting yourself into until you live in it. Homes can both be in good shape and be a wonderful home, or they can have multiple problems and cost you big bucks down the road.

If you know you are going to buy a fixer-upper, then you better be able to do the work. These homes generally come around 10% below market value, which is a tempting offer for a lot of DIY’ers.

If you are planning for a fixer-upper to be your next home, make sure your scenarios have at least one of these common aspects.

Simple Upgrades

Your know-how skills are plenty so you won’t be hiring anyone to fix your jobs, but they’re not on the expert level. Hopefully the home you’re interested in doesn’t have any electrical, plumbing, or foundation issues, leaving most of the work to the cosmetic department.

Homes that need cosmetics usually need a bit of drywall, all new paint, possibly trim, replacing the cabinets, countertops, and light fixtures. It starts to get pretty involved if vanities and floor replacements. If you have the skills to do so, go right ahead.

The numbers work

A fixer-upper is only a good idea when the numbers add up. These are 100% investments and nothing short. One needs to ask themselves if the money they are willing to spend will be returned and then some in the future when they sell.

Real estate is priced around what someone will pay for it. Different houses with different insides sell for quite a difference, and the difference is the money spent on the inside.

Right place, right time

There can be difficulties getting from the get-go. You may have trouble getting permits for the upgrades you want to perform, which will leave you sitting in a house for quite...

House Hunting in Today's World

Today’s home hunting process isn’t like it was 20 years ago. You used to scour the newspaper in search of a new home, but today you may spend weeks, even months looking online for the right house.

What’s tricky about buying a home is that it isn’t like buying an expensive new car, or piece of furniture. There’s more to buying a home than looking at the numbers and comparing. Buying a home is an investment that touches your heart and gets you deeply involved. Keeping this in mind, here are a few steps to remember during your home search.

Explore, discover, and dream

Looking at all the houses you want online allows one to dream; dreamers envision all they want in a house and what each room could be used for. From your living room you can see what all the market has available. You are allowed to see what parts of town have homes flying off the streets, and which areas have reasonable pricing, all without dealing with an agent.

Not having commitment to an agent can be a real stress reliever in the beginning. Think of it as going into a car dealership and just browsing without having a salesperson bother you.

Check it out in person

After hunting long enough you will find a house you are highly interested in. This will lead you to go to an open house and maybe even contact an agent for more information.

Physically walking into a home takes your search one giant step forward, but keep in mind you will probably see many more homes before you buy. A lot of buyers see multiple homes before they even consider offering. You don’t want to buy the first one you see and have buyer’s remorse down the road.

Find a good local agent

You won’t be disappointed when you find a good, professional agent. Buyers aren’t paying extra...

Moving Efficiently

Preparing for any move, whether big or small requires precise planning for everything to go smoothly. It’s important to evaluate everything you plan to take with you, inside and outside. The key is figuring out before you move, how you will transport everything you want to take, and where you will put it. Here are a few steps to help you with this move.

Take Inventory

Walking around your house and making a list of all your belongings seems tedious, but it’s necessary for a swift and easy move. This way you get to see how much stuff you actually have, and what can be thrown out.

Go online and google search a “home inventory checklist” and print it out. You can also create your own, but check some out online to see how others are done. There are even apps designed for this.

Sort the list by rooms, and don’t skip a single one, not even the hallways. For big and important items, take photos and describe them. Whatever you do, don’t forget your household documents like deeds, and birth certificates, etc.

Once you’re all packed up, keep the list close by. Having this close will allow you to unpack room by room in an effective and timely manner.

Boxing it up

Once you know everything that needs to go, the next step is figuring out how many boxes you will need. There is such thing as online packing calculators, which help determine how many boxes will be required. These calculators factor in how many rooms you have, how many people are living in the home and even if you think of yourself as a packrat or not.

Try out the calculators and see how many boxes, and what size you’ll need. If this part is causing you major headaches, you can also hire a professional mover to take the load of responsibility.

For example, a small studio would require around 20 boxes, and an average size home with 3 rooms could require 60.

Rent a truck

The general rule to figure out...

Home Sales Trouble

Less than the favorable amount of home sales, decreasing affordability, appraisal problems, and lender administrative delays are what is impacting todays home sales the most, so says REALTORS® Confidence Index Survey. This survey was sent to over 50,000 real estate professionals regarding their last transaction.

Despite all the issues, those heavily involved in the real estate market stay confident for the future. The confidence level was about 50 according to the survey; as well it is higher than this time last year.

The survey also said that since home prices are becoming less affordable, it’s expected that prices will come down a bit, and grow at a slower pace of 3.3%.

It’s believed that less homes being sold, or on the market, the multiple offers homes are receiving are resulting in significant price increases. The June numbers stated that 41$ of homes sold above the original listing price.

It’s beginning to become a problem when the supply of homes is so short that it’s pushing affordability away from first time homebuyers, who are struggling to save enough for a down payment. The median family income has increased since 2012 by 11%, all the while the median price of a used home has risen by 62%.

The National Association of Realtors believes that homes are still “generally affordable”, and the gap between actual and qualifying income for first-time home buyers is widening. NAR estimates their median income is currently around $44,700, which is barely above the qualifying income of $42,700.

Most real estate deals are being completed on time, but a whopping 32% are stumbling over delays. Only 6% were cancelled. The issues were mostly from financing trouble which was apparent 41% of the time. 27% were from appraisals, 11% from inspections, and titling and/or deed issues at 10%. 

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