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      How the Housing Market Benefits with Uncertainty in the World

      How the Housing Market Benefits with Uncertainty in the World | MyKCM

      It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,

      “Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”

      Is there a silver lining to this cloud of doubt?

      Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.

      Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,

      “Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”

      Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,

      “The death toll from the coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”

      The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:

      Popular Perspective Delivers Gift to U.S. Housing Market | MyKCM

      How might concerns about global challenges impact the housing market in 2020? Fleming explains,

      “Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”

      Bottom Line

      For a multitude of reasons, 2020 could be a challenging year. It seems, however, real estate will do just fine. As Fleming concluded in his report:

      “Amid uncertainty, the house-buying power of U.S. consumers can benefit significantly.”

      Should I Sell My House This Year?

      Should I Sell My House This Year? | MyKCM

      If one of the questions you’re asking yourself today is, “Should I sell my house this year?” the current Housing Opportunities and Market Experience (HOME) Survey from the National Association of Realtors® (NAR) should boost your confidence as it relates to the current selling sentiment in the housing market. Even with all the information overload in the media circling around talk of a possible recession, the upcoming 2020 election, and more, Americans feel good about selling a house now. That’s some news to get excited about!

      As the graph below shows, as of Q4 2019, 75% of people surveyed indicate they believe now is a good time to sell a home:Should I Sell My House This Year? | MyKCM 

      In the case of those with a yearly salary of $100,000 or more, the results jumped even higher, coming in at an 82% positive sentiment.

      When the study divided the outcomes by region, the results still consistently showed Americans feeling good about selling:

      • Northeast: 71% positive
      • Midwest: 76% positive
      • South: 72% positive
      • West: 81% positive

      In addition to looking at income and region, the report also divided the results by generation, as shown in the graph below:Should I Sell My House This Year? | MyKCM 

      As you can see, many believe that, despite everything going on in the world, it is still a good time to sell a home.

      According to NAR, the unsold inventory available today “sits at a 3.0-month supply at the current sales pace,” which is down from a 3.7-month supply in November. The current inventory is half of what we need for a normal or neutral housing market, which should have a 6.0-month supply of unsold inventory. This is good news for sellers, as Lawrence Yun, Chief Economist at NAR, says:

      “Home sellers are positioned well, but prospective buyers aren’t as fortunate. Low inventory remains a problem, with first-time buyers affected the most.”

      Bottom Line

      If you’re ready to list your home, you can feel good about the current sentiment in the market. Let’s get together today to determine the best next step when it comes to selling your house this year.

       

       

      2020 Luxury Market Forecast

      2020 Luxury Market Forecast | MyKCM

      By the end of last year, many homeowners found themselves with more equity than they realized, and at the same time, their wages were increasing. When those two factors unite, it can spark homeowners to think about making a move to a larger or more expensive home in the luxury space. That said, now is a perfect opportunity to take a look at the forecast for the 2020 luxury market.

      Three Things to Think About in the 2020 Luxury Housing Market

      1. Prices

      The U.S. economy is strong today, with buying opportunities throughout the luxury end of the market. Thomas Veraguth, Strategist at UBS Global Wealth Management, says in Barrons.com,

      “There’s a good link between luxury real estate prices and [economic] growth.”

      Available inventory is a key element that can impact home prices. In the upper range, the inventory is greater in comparison to the entry-level market, making moving up to a luxury home a growing reality for many buyers right now.

      2. Activity in the Market

      With more buying opportunities at the higher end, we should start to see an increase in activity. The same article states,

      “Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.”

      Buyers looking in the luxury market are taking the opportunity to negotiate on price in a segment where there are more choices, too. According to the Luxury Market Report, homes sold for an average of 96.94% of the list price in December.

      Buyers are also getting more for their money with greater purchasing power due to the current low-interest rates.

      3. Buyers Are Coming Back

      Keep in mind, buyers are often sellers too, especially those looking to move up. Homeowners with an entry-level home can take advantage of the inventory shortage at the lower end of the market, thus driving higher sales prices for their current homes. Combined with growing equity in the homes they’re listing, it’s a great time for those who are ready to make a luxury move.

      The extra equity and greater purchasing power are bringing many buyers back to the market. The same article mentioned that,

      “We’ve already seen buyers who’ve been on the sidelines for two years tread back into the market.”

      Bottom Line

      If you’re considering entering the luxury market, 2020 is shaping up to be a great year for those who are ready to make that move. Let’s get together to set your real estate plan for the year.

       

      Compass Contemplations for Thursday

      Good morning,

      DID YOU KNOW?  Mortgage application volume decreased 9.2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The week’s results also include an adjustment for the Thanksgiving holiday. Refinance weakness caused the overall drop. Those applications fell 16% for the week but were 61% higher than the same week a year ago. (CNBC)

       

      DID YOU KNOW?  In 2000, just before the Bush tax cuts and a recession, U.S. governments collected 28.3% of GDP in taxes. Today that figure has dropped to 24.3% of GDP in 2018, the 4th lowest in the OECD and down from 26.8% a year earlier and 25.9% in 2016. (WSJ)


      DID YOU KNOW?  Realtor.com predicts sales of existing homes will fall 1.8% compared with 2019. Home prices will flatten nationally, increasing just 0.8% annually, but in 25% of the 100 largest metropolitan markets, prices will fall. These include Chicago, Dallas, Las Vegas, Miami, St. Louis, Detroit, and San Francisco. Millennials will dominate the housing market, accounting for 50% of all mortgages by spring, according to the forecast. Just short of 5 million millennials will turn 30, which is when many people buy their first home, and the oldest will turn 39.

      DID YOU KNOW? According to its 2019 U.S. Vacation Home Counties Report, between 2013 to 2018, the median sales price in vacation home counties increased at a slightly higher pace of 36% compared to the pace of increase of all existing and new homes sold, at 31%. (NAR)

      DID YOU KNOW? National home prices increased 3.5% year over year in October 2019 and are forecast to increase by 5.4% from October 2019 to October 2020. The October 2019 HPI gain was down from the October 2018 gain of 5.2% and was up a bit from the September 2019 gain of 3.3%.  Home prices have been increasing year over year in a narrow range of 3.2% to 3.5% over the past six months, indicating that the rate of home price growth is leveling off. (CORE LOGIC)

      DID YOU KNOW?  As a percentage of disposable income, we have the lowest debt service to income obligations in 40 years in the USA. (JP MORGAN)
       

      5 Reasons to Sell This Winter

      5 Reasons to Sell This Winter | MyKCM

      Below are five compelling reasons to list your house this winter.

      1. Demand Is Strong

      The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase, and are in the market right now. More often than not, in many areas of the country, multiple buyers are competing with each other to buy the same home.

      Take advantage of the buyer activity currently in the market.

      2. There Is Less Competition Now

      Inventory is still under the 6-month supply needed for a normal housing market. This means in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market.

      Historically, a homeowner would stay an average of six years in his or her home. Since 2011, that number has hovered between nine and ten years. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years due to a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

      Many homeowners were reluctant to list their homes over the last couple of years, for fear they would not find a home to move into. That is all changing now as more homes come to the market at the higher end. The choices buyers have will continue to increase. Don’t wait until additional inventory comes to market before you decide to sell.

      3. Buyers Are Serious at This Time of Year

      Traditionally, homeowners think about spring as a great time to list their homes, when more buyer traffic may be out there actively searching. In the winter, however, the buyers who are seeking a home – whether for relocation or otherwise – are serious ones. They’re ready to make offers and they’re eager to move, often quickly. Your house may be exactly what they’re looking for, so listing when other potential sellers are holding off may be your best opportunity to shine.

      4. There Will Never Be a Better Time to Move Up

      If your next move will be into the premium or luxury market, now is the time to move up. There is currently ample inventory for sale at higher price ranges. This means if you’re planning on selling a starter or trade-up home and moving into your dream home, you’ll be able to do that now. Demand for your entry-level home is high, and inventory in the luxury or premium market is too.

      According to CoreLogic, prices are projected to appreciate by 5.6% over the next year. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and in your mortgage) if you wait.

      5. It’s Time to Move On With Your Life

      Look at the reason you decided to sell in the first place and determine whether it’s worth waiting. Is money more important than being with family? Are you ready to go on with your life the way you think you should?

      Only you know the answers to these questions. You have the power to take control of the situation by putting your home on the market this winter. Perhaps the time has come for you and your family to move on and start living the life you desire.

      That is what is truly important.

       

       

      The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein

      Compass Contemplations for Friday

      DID YOU KNOW? Construction on U.S. new houses fell more than 9% in September, but a recent surge in permits suggests the decline in so-called housing starts is just a brief pause in a real estate market reinvigorated by lower mortgage rates. Housing starts slid to an annual rate of 1.26 million last month from a revised 1.39 million in August. (Marketwatch)

      DID YOU KNOW? Of the 618,000 “millennial millionaires” - those currently aged 23 - 37 years old with a net worth of over $1 million - in the USA, 44% are concentrated in California. California also has the highest percentage of business owners (23%) and the highest percentage of real estate investors. New York ranks No. 2, home to 14% of the millennial millionaire population. (CNBC)

      DID YOU KNOW? Hedge funder Ray Dalio - speaking at the IMF and World Bank annual meetings - said the global business cycle is in a “great sag” and the world’s economy holds at least two parallels to the 1930s. Here are some of his thoughts: 
      * Monetary policy, and especially interest rate reductions, were unlikely to offer much stimulus.
      * The world was also experiencing the biggest wealth gap since the 1930s and that was creating political stress. In the USA the top one-tenth of 1% of the population has a net worth that is approximately equal to the bottom 90%.
      * Like the 1930s, we have a rising power challenging an existing world power in the form of China-U.S. challenges.
      * There were four types of wars to watch for — trade, technology, currency and geopolitical.  (CNBC)

      DID YOU KNOW? Total national real estate website visits - not unique visitors - in the month of September looked like this: 
      Zillow:                  179 million
      Redfin:                 46,5 million
      Compass:             3,543 million
      Coldwell Banker:  2,9 million
      Sothebys Realty:  2,773 million
      Corcoran:             922,151
      Elliman:                390,000
      Thanks to Jeremy Schwartz from Compass SEO Analytics who provided this information.

      Compass Contemplations for Sunday

       

      DID YOU KNOW? According to a 2018 report from the Pew Research Center, 19% of American adults live in “upper-income households.” The median income of that group was $187,872 in 2016. The share of U.S. adults considered upper-class varies depending on where you live, Pew noted: In affluent metropolitan areas, it’s much higher than 19%. The metropolitan areas with the largest shares of adults in upper-income households are mostly in the coastal areas of the Northeast and California and tend to be in high-tech corridors, such as Boston-Cambridge-Newton, MA-NH, or in financial and commercial centers, such as Hartford-West Hartford-East Hartford, CT. The metro with the highest share was San Jose-Sunnyvale-Santa Clara, CA, where 32% of adults were considered upper-income. (CNBC)

       

      "Narratives that can periodically surge into epidemics are capable of changing the economy’s direction or of turning small booms and recessions into big ones. The probability that a recession will come soon — or be severe when it does — depends in part on the state of ever-changing popular narratives about the economy. These are stories that provide a framework for piecing together the seemingly random bits of information that one picks up from friends, the news or social media." - Robert Schiller, NYT 

       

      DID YOU KNOW? Here are some interesting stats from the NAPLES, Florida area via NABOR (Naples Area Board of Realtors) (Thanks to Yasmin Saad).

      * Collier County Florida 2017 Population: 372,880

      * # of licensed brokers/agents who are members:  Brokers: 689, Agents: 6,375

      * 96% of users logged in at least once to the SunshineMLS in the last 12 months.

      * # of homes sold in the last 12 months (buyer or seller side):  6,574 Single Family homes closed had a Naples agent on the Listing Side

      914 Land sales closed that had a Naples agent on the Listing Side

      * The total number of sales in the last 12 months: 14,130 closed.

      Everybody Calm Down! This Is NOT 2008

      Everybody Calm Down! This Is NOT 2008 | MyKCM

      Last week realtor.com released the results of a survey that produced three major revelations:

      1. 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur this year or next.
      2. 57% believe the next recession will be as bad or worse than 2008.
      3. 55% said they would cancel plans to move if a recession occurred.

      Since we are currently experiencing the longest-ever economic expansion in American history, there is reason to believe a recession could occur in the not-too-distant future. And, it does make sense that buyers and sellers remember the horrors of 2008 when they hear the word “recession.”

      Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

      “With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

      Most experts, however, believe if there is a recession, it will not resemble 2008. This housing market is in no way the same as it was just over a decade ago.

      Zillow Economist, Jeff Tucker, explained the difference in a recent article, Recessions Typically Have Limited Effect on the Housing Market:

      “As we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable-rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages. The housing market is simply much less risky than it was 15 years ago.”

      George Ratiu, Senior Economist at realtor.com, also weighed in on the subject:

      “This is going to be a much shorter recession than the last one, I don’t think the next recession will be a repeat of 2008…The housing market is in a better position.”

      In the past 23 years, there have been two national recessions – the dot-com crash in 2001 and the Great Recession in 2008. It is true that home values fell 19.7% during the 2008 recession, which was caused by a mortgage meltdown that heavily impacted the housing market. However, while stock prices fell almost 25% in 2001, home values appreciated 6.6%. The triggers of the next recession will more closely mirror those from 2001 – not those from 2008.

      Bottom Line

      No one can accurately predict when the next recession will occur, but expecting one could possibly take place in the next 18-24 months is understandable. It is, however, important to realize that the impact of a recession on the housing market will in no way resemble 2008.

       

       

      5 Reasons to Sell This Fall

      5 Reasons to Sell This Fall | MyKCM

      Below are 5 compelling reasons listing your home for sale this fall makes sense.

      1. Demand Is Strong

      The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase…and are in the market right now. More often than not, in many areas of the country, multiple buyers are competing with each other to buy the same home.

      Take advantage of the buyer activity currently in the market.

      2. There Is Less Competition Now

      Housing inventory is still under the 6-month supply that is needed for a normal market. This means that in the majority of the country, there are not enough homes for sale to satisfy the number of buyers.

      Historically, a homeowner would stay an average of six years in his or her home. Since 2011, that number has hovered between nine and ten years. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years due to a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

      Many homeowners were reluctant to list their homes over the last couple years, for fear that they would not find a home to move to. That is all changing now as more homes come to market at the higher end. The choices buyers have will continue to increase. Don’t wait until additional inventory comes to market before you decide to sell.

      3. The Process Will Be Quicker

      Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and simpler, as buyers know exactly what they can afford before shopping for a home. According to Ellie Mae’s latest Origination Insights Report, the time needed to close a loan is 43 days.

      4. There Will Never Be a Better Time to Move Up

      If your next move will be into a premium or luxury home, now is the time to move up. There is currently ample inventory for sale at higher price ranges. This means if you’re planning on selling a starter or trade-up home and moving into your dream home, you’ll be able to do that in the luxury or premium market.

      According to CoreLogic, prices are projected to appreciate by 5.2% over the next year. If you’re moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage) if you wait.

      5. It’s Time to Move on with Your Life

      Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than having the freedom to go on with your life the way you think you should?

      Only you know the answers to these questions. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

      That is what is truly important.

       

      Top Priorities When Moving with Kids

      Top Priorities When Moving with Kids | MyKCM

      According to the Pew Research Center, around 37% of U.S students will be going back to school soon and the rest have already started the new academic year. With school-aged children in your home, buying or selling a house can take on a whole different approach when it comes to finding the right size, location, school district, and more.

      Recently, the 2019 Moving with Kids Report from the National Association of Realtors®(NAR) studied “the different purchasing habits as well as seller preferences during the home buying and selling process.” This is what they found:

      When Purchasing a Home

      The major difference between the homebuyers who have children and those who do not is the importance of the neighborhood. In fact, 53% said the quality of the school district is an important factor when purchasing a home, and 50% select neighborhoods by the convenience to the schools.

      Buyers with children also purchase larger, detached single-family homes with 4 bedrooms and 2 full bathrooms at approximately 2,110 square feet.

      Furthermore, 26% noted how childcare expenses delayed the home-buying process and forced additional compromises: 31% in the size of the home, 24% in the price, and 18% in the distance from work.

      When Selling a Home

      Of those polled, 23% of buyers with children sold their home “very urgently,” and 46% indicated “somewhat urgently, within a reasonable time frame.” Selling with urgency can pressure sellers to accept offers that are not in their favor. Lawrence Yun, Chief Economist at NAR explains,

      “When buying or selling a home, exercising patience is beneficial, but in some cases – such as facing an upcoming school year or the outgrowing of a home – sellers find themselves rushed and forced to accept a less than ideal offer.”

      For sellers with children, 21% want a real estate professional to help them sell the home within a specific time frame, 20% at a competitive price, and 19% to market their home to potential buyers.

      Bottom Line

      Buying or selling a home can be driven by different priorities when you are also raising a family. If you’re a seller with children and looking to relocate, let’s get together to navigate the process in the most reasonable time frame for you and your family.

       

       

      The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

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