On Rosso's Home Front 001, I share my thoughts on the concerns some people have that we are headed to another housing bubble. 

On Rosso on Real Estate 003, I bust two of the top mortgage myths that hold many buyers back.

When it comes to buying or selling a home, there are many factors you should consider.  Where you want to live, why you want to buy or sell, and who will help you along your journey are just some of those factors.  When it comes to today’s real estate market though, the top two concerns to keep an eye on are what’s happening with interest rates and housing inventory.

Let’s take a look at what is happening with interest rates first.  Right now, mortgage interest rates have been on the rise and are now over three-quarters of a percentage point higher than they were at the beginning of the year.  According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.86% for a 30 year fixed rate mortgage last week.

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend.  As rates increase, the price of the house you can afford to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a $40,000 home while keeping your principle and interest payments between $2,020 to $2,050 a month.

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000).  Experts predict that mortgage rates will be over 5% by this time next year.

Now, let’s take a look at housing inventory.  A “normal” real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation.  According to the National Association of Realtors, listing inventory is currently at a 4.3-month supply, still well below the 6-months needed), which has put upward pressure on home prices.  Home prices have increased year-over-year for the last 78 straight months nationwide.

The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventor over the last three months. 

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months.  As you can see, in June, July, and August, inventory levels have started to increase as compared to the same time last year.

So, this is a trend to watch as we move further into the fall and winter months.  If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Now, if you are planning to enter the housing market, either as a buyer or a seller, and you want to discuss what these changes in mortgage interest rates and housing inventory could mean to you, feel free to reach out to me.

When you list your home for sale, your top goal will be to get the home sold for the best price possible.  The best way to ensure that your home will sell for the highest price possible is to make sure your house feels like home to buyers who preview your house.

The easiest way to make your house feel like home to a buyer is to complete some small but effective projects around your house.  Here are my Top 10 small projects for you to complete prior to putting your home on the market that will help make your house feel like home to buyers:

1. Clean everything!  A clean home will allow buyers to picture themselves in the space and not distract them.

2. Give every room a purpose! Even if you used a room as an all-purpose room, giving it an identity will help buyers.

3. Let the light in or turn the lights on!  Bright rooms feel warm and inviting.  Dark rooms feel small and gloomy.

4. Fix anything that is broken!  Buyers will notice the broken items and may offer less for your house if repairs are required.

5. Unclutter your house!  Thinning out your furniture, closets and pantries will show how much room is actually available throughout the house.

6. Fresh paint and new carpet or flooring!  Freshening up your home with a new coat of paint and some new carpet or flooring are two of the top things you can do to help your home sell faster and for more money.

7. Organize the kitchen!  The key to an organized kitchen is to show off your counter space, especially when the professional photos are taken.  Find a new space to store any non-essential, small appliances other than the counter top.  Be sure to clean all surfaces daily.

8. Empty all trash bins regularly and keep the dirty laundry hidden!

9. Make sure all doors open and close smoothly!  Fix any squeaks on bedroom or closet doors.

10. Replace your light bulbs!  While your home is shown, it is important that your home is bright like a showroom so replace any dim bulbs or bulbs that take a while to brighten up.  

In addition to these projects, your real estate agent should be able to provide you with a list of “specific to your home” suggestions to consider completing while you are getting your home ready for the market.  If you want to discuss ways to help make your house feel like home to a buyer and get more money for your home, feel free to reach out to me.

I share my thoughts on some of the concerns on housing inventory and it's impact on home values on Rosso on Real Estate 002. Will home prices be softening in 2019?  What are your thoughts? 

Buying a home can be intimidating if you are not familiar with the terms used during the process.  To help navigate you along the home buying maze and to help you gain confidence in the process, I have compiled a list of some of the most common terms used when buying a home:

Appraisal - A professional analysis used to estimate the value of the home.  It is a necessary step in validating a home's worth to you, as the buyer, and your lender to secure financing.  An appraisal fee is usually paid to the buyers mortgage company at the time of a buyers mortgage application after the buyer has a signed contract on the home.  Your lender will order the appraisal on your behalf.

Closing Costs - The cost to complete the real estate transaction.  Outside of your inspection fees, mortgage application fees and appraisal fees, most of your closing costs are paid at the time of the closing of the home purchase and include: points, taxes, title insurance, inspection fees, financing costs, and prepaid or escrowed fees.  You can ask your real estate agent and lender for a complete list to the closing cost items.  Now, although closing costs may be high in our area, the good news is that a seller can also assist a buyer by paying a portion of their closing costs, subject to the limitations of the buyers mortgage program.  In addition, a family member may provide a financial gift to a buyer, subject to limitations of the buyers mortgage program, that can be used to help pay for the closing costs.

Credit Score - A number ranging from 300 to 850, that is based on analysis of your credit history.  Your credit score helps a lender determine the likelihood that you'll repay future debts, especially your mortgage.  The higher your credit score the easier it will be to get qualified for a mortgage.  In addition, a high credit score could help you secure a lower interest rate.  Now if your credit score is on the low side, there is no time like the present to start improving your score.  There are many options available today to help you improve your credit score so be sure to discuss these options with your real estate professional and lender. 

Down Payment - Down payments are typically 3 to 20% of the purchase price of the home.  0% down programs are available for VA eligible buyers and may be available on for other buyers on a limited or occasional basis.  

Mortgage Rate - The interest rate you pay to borrow money to buy a house.  The lower the rate, the better for you. 

Pre-Approval Letter - A letter from a lender indicating that a buyer qualifies for a mortgage of a specific amount.  I highly recommend that you work with your real estate professional to get pre-approved for a mortgage before you start looking at homes.  This way you know the price range of the homes and areas you should be looking at.

Real Estate Professional - An individual who provides services in buying and selling homes.  Real Estate professionals are there to help you through the confusing paperwork, find your dream home, negotiate any of the details that come up, and to help you know exactly what's going on in the housing market.

Now, the best way to ensure that your home buying process is a great experience is to find a real estate professional who not only puts your family's needs first, but will help navigate you through the complex maze of the home buying process.

I share my top 5 financial reasons to own your own home on Rosso on Real Estate - 001. What is one of your top reasons for owning your own home?

You can’t help but see the headlines that report that buying a home today is less affordable than it was at any other time in the last ten years. Now these headlines are definitely accurate for today’s market.  But, have you ever wondered why the headlines don’t say the last 25 years, the last 20 years, or even the last 11 years?

So obviously, buying a home is more expensive now than during the ten years immediately following one of the worst housing crashes in American history.  As you know, over the past decade, the market was flooded with distressed properties (foreclosures and short sales) that were selling at 10-50% discounts.  There were so many distressed properties that the prices of non-distressed properties in the same neighborhoods were lowered and mortgage rates were kept low to help the economy.  

This is what happened in my development which saw a lot of short sales.  These short sales brought down the market value of my home and my neighbors homes in our development and impacted our ability to refinance or sell our homes for a good price.   

Now fortunately, prices have since recovered and mortgage rates have increased as the economy has gained strength.  This has and will continue to impact housing affordability moving forward.

However, let’s put today’s housing affordability into some historical context.  What was housing affordability like prior to the housing crash?  Well for that, we turn to the National Association of Realtors (NAR) which issues their Affordability Index each month.  

In July 2018, the Affordability Index stood at 138.8.  The index had been higher each of the last ten years, peaking at 197 in 2012.  (The higher the index, the more affordable houses are).

But the average Affordability Index between 1990 and 2007, prior to the housing crash, was just 123 and there were no years with an index above 133.  So, as you can see, homes are more affordable today than at any time during the eighteen years prior to the housing crash.

Now, with home prices continuing to appreciate and mortgage rates increasing, home affordability will likely continue to slide.  However, this does not mean that buying a house today in not an attainable goal in most or our local markets as it is less expensive today to buy a home than during the eighteen-year stretch immediately preceding the housing bubble and crash.

One of the questions I get the most right now is what impact will rising mortgage interest rates have on home prices.  The reason I get asked this question a lot is that mortgage rates have increased by more than a half a point since the first of the year.  Mortgage rates are also projected to increase by about an additional half of a point by the end of the year.  Now, as mortgage interest rates continue to climb, some people are starting to get a little concerned that home prices will depreciate.  

However, if you look at what the industry experts are saying, it is doubtful that home values will be negatively affected by the increase in mortgage rates. As Terry Loebs, the founder of Pulsenomics put it: "Constrained home supply, persistent demand, very low unemployment, and steady economic growth have given a jolt to the near-term outlook for US home prices.  These conditions are overshadowing concerns that mortgage rate increases expected this year might quash the appetite of prospective home buyers."

Now, the way I see it, as mortgage interest rates rise, the demand for homes from buyers will likely remain strong relative to the housing shortage which will continue to put pressure on home prices to increase.

June is National Homeownership Month!  Although there are financial benefits to owning your own home, there are many other benefits to homeownwerships.  Here is an infographic that lists what I feel are the top 8 reasons to own your home:

What reasons do you have to own your own home?  Please share them in the comments below.