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      What Buyers and Sellers Need To Know About the Appraisal Gap

      What Buyers and Sellers Need To Know About the Appraisal Gap | MyKCM

      It’s economy 101 – when supply is low and demand is high, prices naturally rise. That’s what’s happening in today’s housing market. Home prices are appreciating at near-historic rates, and that’s creating some challenges when it comes to home appraisals.

      In recent months, it’s become increasingly common for an appraisal to come in below the contract price on the house. Shawn Telford, Chief Appraiser for CoreLogic, explains it like this:

      Recently, we observed buyers paying prices above listing price and higher than the market data available to appraisers can support. This difference is known as ‘the appraisal gap . . . .’”

      Why does an appraisal gap happen?

      Basically, with the heightened buyer demand, purchasers are often willing to pay over asking to secure the home of their dreams. If you’ve ever toured a house you’ve fallen in love with, you understand. Once you start to picture yourself and your furniture in the rooms, you want to do everything you can to land the property, including putting in a high offer to try to beat out other would-be buyers.

      When the appraiser comes in, they look at things a bit more objectively. Their job is to assess the inherent value of the home, so they’re going to study the facts. Dustin Harris, Appraiser Coach, drives this point home:

      It’s important for everyone to understand that the appraiser’s job in the end is to remain that unbiased third party, to truly tell the client what that home is worth in the current market, regardless of what decisions have been made on the price side of things.”

      In simple terms, while homebuyers may be willing to pay more, appraisers are there to assess the market value of the home. Their goal is to make sure the lender isn’t loaning more money than the home is worth. It’s objective, rather than emotional.

      In a highly competitive market like today’s, having a discrepancy between the two numbers isn’t unusual. Here’s a look at the increasing rate of appraisal gaps, according to data from  CoreLogic (see graph below):What Buyers and Sellers Need To Know About the Appraisal Gap | MyKCM

      What does this mean for you?

      Ultimately, knowledge is power. The best thing you can do is understand appraisal gaps may impact your transaction if you’re buying or selling. If you do encounter an appraisal below your contract price, know that in today’s sellers’ market, the most common approach is for the seller to ask the buyer to make up the difference in price. Buyers, be prepared to bring extra money to the table if you really want the home.

      Above all else, lean on your real estate agent. Whether you’re a buyer or seller, your trusted advisor is your ally if you come up against an appraisal gap. We’ll help you understand your options and handle any additional negotiations that need to happen.

      Bottom Line

      In today’s real estate market, it’s important to stay informed on the latest trends. Let’s connect so you have an ally to help you navigate an appraisal gap to get the best possible outcome.

      What Do Experts Say About Today's Mortgage Rates?

      Mortgage rates are hovering near record lows, and that’s good news for today’s homebuyers. The graph below shows mortgage rates dating back to 2016 and where today falls by comparison.

      What Do Experts Say About Todays Mortgage Rates? | MyKCM 

      Generally speaking, when rates are low, you can afford more home for your money. That’s why experts across the industry agree – today’s low rates present buyers with an incredible opportunity. Here’s what they have to say:

      Sam Khater, Chief Economist at Freddie Macpoints out the historic nature of today’s rates:

      “As the economy works to get back to its pre-pandemic self, and the fight against COVID-19 variants unfolds, owners and buyers continue to benefit from some of the lowest mortgage rates of all-time.”

      Mark Fleming, Chief Economist at First Americantalks about how rates impact a buyer’s bottom line:

      “Mortgage rates are generally the same across the country, so a decline in mortgage rates boosts affordability equally in each market.”

      Danielle Hale, Chief Economist at realtor.com, also notes the significance of today’s low rates and urges buyers to carefully consider their timing:

      Those who haven’t yet taken advantage of low rates to buy a home or refinance still have the opportunity to do so this summer.”

      Hale goes on to say that buyers who don’t act soon could see higher rates in the coming months, negatively impacting their purchasing power:

      “We expect mortgage rates to fluctuate near historic lows through the summer before beginning to climb this fall.”

      And while mortgage rates are still low today, the data from Freddie Mac indicates rates are fluctuating ever so slightly right now, as they moved up one week before inching slightly back down in their latest release. It’s important to keep in mind the influence rates have on your monthly mortgage payment.

      Even small increases can have a big impact on what you pay each month. Trust the experts. Today’s rates give you opportunity and flexibility in what you can afford. Don’t wait on the sidelines and hope for a better rate to come along; the rates we’re seeing today are worth capitalizing on.

      Bottom Line

      Mortgage rates hover near record lows today, but experts forecast they’ll rise in the coming months. Waiting could prove costly when that happens. Let’s connect today to discuss today’s rates and determine if now’s the time for you to buy.

      Looking for a Place To Call Home? Consider a Condominium

      Looking for a Place To Call Home? Consider a Condominium. | MyKCM
       

      It’s no secret that one of the top stories in today’s real estate market is low housing supply and high buyer demand. If you’re a first-time buyer looking for a starter home or are someone who’s interested in downsizing, it may be worth considering a condominium (condo) as a worthwhile option.

      In fact, trends indicate condos are gaining popularity among buyers. In the latest Existing Homes Sales Report from the National Association of Realtors (NAR), the data shows condo sales rising throughout the first half of this year (see graph below):

      Looking for a Place To Call Home? Consider a Condominium. | MyKCM 

      There are a few reasons more and more people are opting to buy condos – the benefits of condo life can be quite compelling. Let’s explore the main perks to find out if a condo is a good fit for you.

      Affordability

      According to the NAR report, the median sales price of a condo is roughly $59,000 less than the median price of a single-family detached home (see graph below). This makes condos a great option for first-time homebuyers, those with limited down payment savings, or those looking to save money by downsizing.Looking for a Place To Call Home? Consider a Condominium. | MyKCM

      Maintenance

      A recent article from BankRate adds low maintenance as another perk of a condo lifestyle. Generally, exterior maintenance for condos is handled by a Homeowner’s Association (HOA). This can include things like landscaping and upholding a certain standard of cleanliness and condition for walkways, siding, and roofs. If you’re looking for a lower-maintenance option or see the appeal in being hands-off with upkeep, condos may be a good choice for you. With exterior maintenance off your plate, you’ll have more time for yourself and your hobbies.

      Amenities

      You can use that free time to enjoy some of the value-adding features your condo community may have, which could include dog parks, pools, a rentable clubhouse and grilling area for events, and more. If being able to host or attend community social outings is important to you, condos may give you more opportunities to enjoy the company of your neighbors. As a bonus, some condos even have gyms and on-site security teams.

      Ultimately, the choice is yours. Condos are great options that often come with various features and benefits that may be important for your lifestyle. Fannie Mae sums up the appeal nicely:

      Condominiums, or condos, can be great alternatives to detached homes. City dwellers, singles, couples, seniors, and many others may find condos that suit their needs and budgets. Others may simply prefer low-maintenance living. Buyers who feel ‘priced out’ of homes may discover condos offer an affordable homeownership alternative.

      Bottom Line

      If you’re looking for a home, it may be time to consider a condo as an option. Let’s connect to explore if one would be a good fit for your homeownership needs.

      The Community and Economic Impacts of a Home Sale

      The Community and Economic Impacts of a Home Sale | MyKCM
       

      If you’re thinking of buying or selling a house, chances are you’re focusing on the many extraordinary ways it’ll change your life. What you may not realize is that decision impacts people’s lives far beyond your own. Home purchases and sales are significant drivers of economic activity. They have a major impact on your community and the entire U.S. economy via the multiple industries and professionals that take part in the process.

      The National Association of Realtors (NAR) releases a report each year that highlights just how much economic activity a home sale generates. The chart below shows how the sale of both a newly built home and an existing home impact the economy:

      The Community and Economic Impacts of a Home Sale | MyKCM 

      To dive a level deeper, NAR also provides a detailed look at how that varies state-by-state for newly-built homes (see map below):

      The Community and Economic Impacts of a Home Sale | MyKCM 

      As you can see, a single home sale can have a massive effect on the overall economy. Ali Wolf, Chief Economist for Zonda, talks about this in a recent article, noting there’s a significant impact at each distinct phase of the transaction:

      The housing market contributes to the economy in four main stages: during planning and land development, throughout the actual construction of the home, at the point of sale, and upon moving in.

      When you buy or sell a home, you’re leaving a lasting impression on the community at large in addition to fulfilling your own needs. That’s because each stage of the process involves numerous contractors, specialists, lawyers, town and city officials, and so many other professionals. Every individual you work with, from your trusted real estate advisor to the architects who design new homes, has their own team of professionals involved behind the scenes.

      Bottom Line

      Homebuyers and sellers are economic drivers in their community and beyond. If you’re thinking of buying or selling, let’s connect today to start the process. It won’t just change your life; it’ll make a powerful impact on our entire community.

      Ready To Sell, but Don't Know Where You'll Go?

      Ready To Sell, but Dont Know Where Youll Go? [INFOGRAPHIC] | MyKCM
       

      Some Highlights

      • If you’re thinking of selling your house but don’t know what you should buy, you have options.
      • Existing homes offer a wide variety of home styles, an established neighborhood, and lived-in charm. Meanwhile, new home construction lets you create your perfect home, cash in on energy efficiency, and minimize repairs.
      • Whether you’re looking for newly built or existing homes, both have their perks. If you’re ready to sell your house, let’s connect today to go over the perks of both existing and newly built homes to find out what’s right for you.

      Home Sellers: There Is an Extra Way To Welcome Home Our Veterans

      Home Sellers: There Is an Extra Way To Welcome Home Our Veterans | MyKCM
       

      Some veterans are finding it difficult to obtain a home in today’s market. According to the National Association of Realtors (NAR):

      “Conventional conforming mortgages (mortgages that conform to guidelines set by Fannie Mae and Freddie Mac), accounted for 74% of mortgages obtained by homebuyers in May 2021, an increase from about 65% during 2018 through 2019…The share of VA-guaranteed loans has also decreased to 7% in May 2021 from about 10% in past years.”

      Recent data in the latest Origination Insight Report from Ellie Mae sheds light on the continuation of this trend. Below, we can see just how small of a share of total financing VA loans made up in June of 2021, according to that Ellie Mae report:Home Sellers: There Is an Extra Way To Welcome Home Our Veterans | MyKCM 

      The drop in VA loan usage can be attributed to the difficulties veterans continue to face when buying a home. The NAR article elaborates:

      "It is extremely difficult for FHA/VA buyers to get accepted in a multiple offer situation. They are on the bottom of the hierarchy."

      One contributing factor is that buyers with VA loans can’t waive certain contingencies. However, just because a certain contingency must be present for a particular buyer doesn’t mean that buyer’s offer shouldn’t be considered.

      What Should Sellers Do To Help Create a Level Playing Field?

      As a seller, it’s important to consider every offer in front of you regardless of loan type. If you’re selecting an offer because some contingencies are waived, keep in mind that it doesn’t always mean the offer is what’s best for you.

      Buyers who can’t waive specific contingencies may adjust other terms in their offer to make it more appealing to sellers. This may depend on several factors, including their loan type and location, but a motivated buyer and their agent will do everything they can to present an offer that’s as appealing to you as possible.

      Ultimately, you should make sure you take time to really understand the terms of their offer and see the big picture. Working with a driven buyer who’s motivated to purchase your house may provide a better opportunity for you to reach your overall best option and what’s most important to you.

      Bottom Line

      If you’re ready to sell, let’s connect. Together, we can make sure you understand the terms of all offers so you can give each one fair consideration, including those buyers using a VA loan. Our veterans sacrifice so much for our country. They’ve earned our gratitude and should have the same opportunity to obtain the home of their dreams.

      Today's Real Estate Market Explained Through 4 Key Trends

      Todays Real Estate Market Explained Through 4 Key Trends | MyKCM
       

      As we move into the second half of the year, one thing is clear: the current real estate market is one for the record books. The exact mix of conditions we have today creates opportunities for both buyers and sellers. Here’s a look at four key components that are shaping this unprecedented market.

      A Shortage of Homes for Sale

      Earlier this year, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels are starting to trend up. The latest Monthly Housing Market Trends Report from realtor.com says:

      “In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.”

      This is good news for buyers who crave more options. But even though we’re experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states. That’s why it’s still a sellers’ market, giving homeowners immense leverage when they decide to make a move.

      Buyer Competition and Bidding Wars

      Today’s ongoing low supply, coupled with high demand, creates a market characterized by high buyer competition and bidding wars. Buyers are going above and beyond to make sure their offer stands out from the crowd by offering over the asking price, all cash, or waiving some contingencies. The number of offers on the average house for sale broke records this year – and that’s great news for sellers.The latest Confidence Index from the National Association of Realtors (NAR) says the average home for sale receives five offers (seTodays Real Estate Market Explained Through 4 Key Trends | MyKCM 

      For buyers, the best way to put a compelling offer together is by working with a local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what’s most appealing to the seller.

      Home Price Appreciation

      The competition among buyers is driving prices up. Over the past year, we’ve seen home price appreciation rise across the country. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices increased 15.4% year-over-year in May:

      “The May 2021 HPI gain was up from the May 2020 gain of 4.2% and was the highest year-over-year gain since November 2005. Low mortgage rates and low for-sale inventory drove the increase in home prices.”

      Rising home values are a big part of why real estate remains one of the top sought-after investments for Americans. For potential sellers, it also means it’s a great time to list your house to maximize the return on your investment.

      A Rise in Home Values and Equity

      The equity in a home doesn’t just grow when a homeowner pays their mortgage – it also grows as the home’s value appreciates. Thanks to the jump in price appreciation, homeowners across the country are seeing record-breaking gains in home equity. CoreLogic recently reported:

      “…homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year over year, representing a collective equity gain of over $1.9 trillion, and an average gain of $33,400 per borrower, since the first quarter of 2020.”

      That’s a major perk for households to leverage. Homeowners can use that equity to accomplish major life goals or move into their dream homes.

      Bottom Line

      If you’re thinking about buying or selling, there’s no time like the present. Let’s connect to talk about how you can take advantage of the conditions we’re seeing today to meet your homeownership goals.

      3 Charts That Show That This Isn't a Housing Bubble

       

      3 Charts That Show This Isnt a Housing Bubble | MyKCM
       

      With home prices continuing to deliver double-digit increases, some are concerned we’re in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is nothing like 2006 for three major reasons.

      1. The housing market isn’t driven by risky mortgage loans.

      Back in 2006, nearly everyone could qualify for a loan. The Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers’ Association is an indicator of the availability of mortgage money. The higher the index, the easier it is to obtain a mortgage. The MCAI more than doubled from 2004 (378) to 2006 (869). Today, the index stands at 130. As an example of the difference between today and 2006, let’s look at the volume of mortgages that originated when a buyer had less than a 620 credit score.

      3 Charts That Show This Isnt a Housing Bubble | MyKCM 

      Dr. Frank Nothaft, Chief Economist for CoreLogic, reiterates this point:

      “There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent.”

      2. Homeowners aren’t using their homes as ATMs this time.

      During the housing bubble, as prices skyrocketed, people were refinancing their homes and pulling out large sums of cash. As prices began to fall, that caused many to spiral into a negative equity situation (where their mortgage was higher than the value of the house).

      Today, homeowners are letting their equity build. Tappable equity is the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio (thus still leaving them with at least 20% equity). In 2006, that number was $4.6 billion. Today, that number stands at over $8 billion.

      Yet, the percentage of cash-out refinances (where the homeowner takes out at least 5% more than their original mortgage amount) is half of what it was in 2006.

       

      .3 Charts That Show This Isnt a Housing Bubble | MyKCM

      3. This time, it’s simply a matter of supply and demand.

      FOMO (the Fear Of Missing Out) dominated the housing market leading up to the 2006 housing bubble and drove up buyer demand. Back then, housing supply more than kept up as many homeowners put their houses on the market, as evidenced by the over seven months’ supply of existing housing inventory available for sale in 2006. Today, that number is barely two months.

      Builders also overbuilt during the bubble but pulled back significantly over the next decade. Sam Khater, VP and Chief Economist, Economic & Housing Research at Freddie Macexplains that pullback is the major factor in the lack of available inventory today:

      “The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”

      Here’s a chart that quantifies Khater’s remarks:3 Charts That Show This Isnt a Housing Bubble | MyKCM 

      Today, there are simply not enough homes to keep up with current demand.

      Bottom Line

      This market is nothing like the run-up to 2006. Bill McBride, the author of the prestigious Calculated Risk blog, predicted the last housing bubble and crash. This is what he has to say about today’s housing market:

      “It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low.”

      The Right Expert Will Guide You Through This Unprecendented Market

       

      The Right Expert Will Guide You Through This Unprecedented Market | MyKCM

      In a normal market, it’s good to have an experienced guide coaching you through the process of buying or selling a home. That person can advise you on important things like pricing your home correctly or the first steps to take when you’re ready to buy. However, the market we’re in today is far from normal. As a result, an expert isn’t just good to have by your side – an expert is essential.

      Today’s housing market is full of extremes. Mortgage rates hovering near record-lows are driving high buyer demand. On the other hand, an absence of sellers is creating record-low housing inventory. This imbalance in supply and demand is leading to a skyrocketing rate of bidding wars and more houses selling over their asking price. This is driving home price appreciation and gains in home equity. These market conditions aren’t just extreme – they can be overwhelming. Having a trusted expert to coach you through the process of buying and selling a home gives you clarity, confidence, and success through each step.

      Here are just a few of the ways a real estate expert is invaluable:

      • Contracts – We help with the disclosures and contracts necessary in today’s heavily regulated environment.
      • Experience – We’re well-versed in real estate and experienced with the entire sales process, including how it’s changed over the past year.
      • Negotiations – We act as a buffer in negotiations with all parties throughout the entire transaction while advocating for your best interests.
      • Education – We simply and effectively explain today’s market conditions and decipher what they mean for your individual goals.
      • Pricing – We help you understand today’s real estate values when setting the price of your home or making an offer to purchase one.

      A real estate agent can be your essential guide through this unprecedented market, but truth be told, not all agents are created equal. A true expert can carefully walk you through the whole real estate process, look out for your unique needs, and advise you on the best ways to achieve success. Finding the right agent should be your top priority when you’re ready to buy or sell a home.

      So, how do you choose the right expert?

      It starts with trust. You’ll have to be able to trust the advice your agent is going to give you, so make sure you’re connected to a true professional. An agent can’t give you perfect advice because it’s impossible to know exactly what’s going to happen at every turn – especially in this unique market. A true professional expert can, however, give you the best possible advice based on the information and situation at hand, helping you make the necessary adjustments and best decisions along the way. The right agent – the professional – will help you plan the steps to take for success, advocate for you throughout the process, and coach you on the essential knowledge you need to make confident decisions toward your goals. That’s exactly what you want and deserve.

      Bottom Line

      It’s crucial right now to work with a real estate expert who understands how the market is changing and what that means for home buyers and sellers. If you’re planning to make a move this year, let’s connect so you have someone who can answer your questions, give you the best advice, and guide you along the way.

       

      3 Things To Prioritize When Selling Your House

      3 Things To Prioritize When Selling Your House | MyKCM

      Today’s housing market is full of unprecedented opportunities. High buyer demand paired with record-low housing inventory is creating the ultimate sellers’ market, which means it’s a fantastic time to sell your house. However, that doesn’t mean sellers are guaranteed success no matter what. There are still some key things to know so you can avoid costly mistakes and win big when you make a move.

      1. Price Your House Right

      When inventory is low, like it is in the current market, it’s common to think buyers will pay whatever we ask when setting a listing price. Believe it or not, that’s not always true. Even in a sellers’ market, listing your house for the right price will maximize the number of buyers that see your house. This creates the best environment for bidding wars, which in turn are more likely to increase the final sale price. A real estate professional is the best person to help you set the best price for your house so you can achieve your financial goals.

      2. Keep Your Emotions in Check

      Today, homeowners are living in their houses for a longer period of time. Since 1985, the average time a homeowner owned their home, or their tenure, has increased from 5 to 10 years (see graph below):

      3 Things To Prioritize When Selling Your House | MyKCM

      This is several years longer than what used to be the historical norm. The side effect, however, is when you stay in one place for so long, you may get even more emotionally attached to your space. If it’s the first home you purchased or the house where your children grew up, it very likely means something extra special to you. Every room has memories, and it’s hard to detach from that sentimental value.

      For some homeowners, that connection makes it even harder to separate the emotional value of the house from the fair market price. That’s why you need a real estate professional to help you with the negotiations along the way.

      3. Stage Your House Properly

      We’re generally quite proud of our décor and how we’ve customized our houses to make them our own unique homes. However, not all buyers will feel the same way about your design and personal touches. That’s why it’s so important to make sure you stage your house with the buyer in mind.

      Buyers want to envision themselves in the space so it truly feels like it could be their own. They need to see themselves inside with their furniture and keepsakes – not your pictures and decorations. Stage, clean, and declutter so they can visualize their own dreams as they walk through each room. A real estate professional can help you with tips to get your home ready to stage and sell.

      Bottom Line

      Today’s sellers’ market might be your best chance to make a move. If you’re considering selling your house, let’s connect today so you have the expert guidance you need to navigate through the process and prioritize these key elements.

       

       

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