22 Cities Where Home Appreciation Is Spiking

Couple looking at their old home
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Extreme demand for homes is pushing home values up at a rate not seen since before the Great Recession, a new Zillow report finds.

Several trends — including new millennial homebuyers, record-low interest rates, trends related to the coronavirus pandemic and the relatively small pool of homes for sale — have converged to heat up the market. The hot sellers’ market is a contrast to flat growth in rental prices nationally, as we reported in “Rent Prices Have Dropped in These 9 Formerly Hot Markets.”

The Zillow Home Value Index rose 9.1% from January 2020 to January 2021, the report says. Year-over-year home value growth hasn’t been this high since June 2006.

That rate may even pick up a bit: Zillow economists expect values to rise 10.1% from January 2021 to January 2022.

The demand has shortened the length of time that homes stay on the market, to a median of just 18 days as of mid-January. Compare that to 46 days at the same time last year and the year before.

A demographic bomb is a factor in the hot market. Millennials — defined by Zillow as Americans ages 25-34 — are entering their peak homebuying years. The number of these millennials increased by 12% — or, about 4.9 million people — between 2010 and 2020.

The generation’s size adds to the housing demand. Also, younger buyers are less likely than older ones to sell a previous home when they buy, which is expected to help keep the pool of homes for sale tight.

Government-stoked low mortgage rates — averaging 2.74% for a fixed-rate 30-year mortgage in January — are driving demand as buyers try to seize the opportunity to either pay less for a home or buy a more expensive one than they otherwise could.

Says Zillow:

“An extraordinary number of home buyers, with budgets supercharged by rock-bottom mortgage interest rates, are competing over a limited supply of homes for sale.”

The pandemic is a final factor. Many workers are now clocking in virtually instead of at the office, driving some to seek larger homes and others to move to smaller, more-affordable markets, Zillow says.

While home values increased in all of the 50 largest metro areas in the U.S. from January 2020 to January 2021, some have seen steeper growth rates than others.

Here are the 22 major markets where home values grew 10% or more, along with their typical home price and their home price growth rate:

  • Phoenix: $335,975 (up 17.1% from January 2020 to January 2021)
  • San Jose, California: $1,314,799 (up 14.2%)
  • Austin, Texas: $384,446 (up 13.7%)
  • Salt Lake City: $436,390 (up 13.7%)
  • San Diego: $689,361 (up 13.5%)
  • Seattle: $594,223 (up 12.8%)
  • Tampa, Florida: $257,499 (up 12.8%)
  • Milwaukee: $219,381 (up 12.1%)
  • Cincinnati: $208,352 (up 12%)
  • Providence, Rhode Island: $357,761 (up 12%)
  • Riverside, California: $433,226 (up 11.7%)
  • Buffalo, New York: $193,583 (up 11.4%)
  • Sacramento, California: $478,817 (up 11.3%)
  • Indianapolis: $204,141 (up 11.3%)
  • Memphis, Tennessee: $174,063 (up 11.3%)
  • Cleveland: $176,069 (up 11.1%)
  • Charlotte, North Carolina: $265,397 (up 10.9%)
  • Columbus, Ohio: $234,276 (up 10.8%)
  • Philadelphia: $277,775 (up 10.6%)
  • Kansas City, Missouri: $227,059 (up 10.6%)
  • Pittsburgh: $178,282 (up 10.4%)
  • Detroit: $198,979 (up 10.3%)

If you’re in the market for a new home or refinancing for your existing home, check out the mortgage rate comparison tools in Money Talks News’ Solutions Center.

Disclosure: The information you read here is always objective. However, we sometimes receive compensation when you click links within our stories.

Source: moneytalksnews.com

U.S. Existing Home Sales Rise in January as Buyers ‘Snatch Up’ Any New Listings

The numbers: U.S. existing home sales inched up 0.6% to a seasonally-adjusted annual rate of 6.69 million, the National Association of Realtors said Friday. Compared with a year ago, home sales were up 23.7%.

Economists polled by The Wall Street Journal had forecast that existing home sales would fall to a median rate of 6.66 million.

What happened: The median existing-home price rose to $303,900 in January, up 14.1% from a year ago.

The inventory of homes for sale fell to a record low 1.04 million units by the end of January. That’s a 25.7% decline year-over-year. The market had a 1.9-month supply of homes for sales. A 6-month supply is considered a sign of a balanced market.

The South and the Midwest showed an increase in sales in January.

Big picture: Sales have been moving sideways since setting a cycle high in October. Economists think that low mortgage rates will continue to boost housing demand in coming months. Buyers are also looking for more room and more remote locations in the wake of the pandemic.

What the NAR said: “Home sales continue to ascend in the first month of the year, as buyers quickly snatched up virtually every new listing coming on the market. Sales easily could have been even 20% higher if there had been more inventory and more choices,” said said Lawrence Yun, NAR’s chief economist.

What economists are saying? “In general, record low mortgage rates and families fleeing more crowded living situations are fueling demand for single family homes in spite of ongoing turmoil in the labor market and higher home prices. Indeed, this is one sector which is coming out of the crisis stronger than it went into it,” said Josh Shapiro, chief U.S. economist at MFR Inc.

Market reaction: U.S. stocks opened higher Friday with the S&P 500 index up 12.48 points in mid-day trading after declining in the past three trading sessions.

Source: realtor.com

Conforming Loan Standards Loosened in January

Access to mortgage credit increased again in January. The
Mortgage Bankers Association (MBA) said its Mortgage Credit Availability Index
(MCAI) rose 2.0 percent to 124.6. A decline in the MCAI indicates that lending
standards are tightening, while increases in the index are indicative of
loosening credit.

The two components of the Conventional MCAI posted
significant increases. The Conforming MCAI jumped 7.7 percent and the Jumbo
component was up 2.2 percent, pushing the parent index up 4.8 percent compared
to December. This was slightly offset by an 0.1 percent decline in the
Government MCAI.  

“The growth in credit availability in January coincides with a housing
market that is poised for a strong start to the year
. Improvements were driven
by the conventional segment of the mortgage market, as lenders added ARM loans
with lower credit score and higher LTV requirements,” said Joel Kan, MBA’s
Associate Vice President of Economic and Industry Forecasting. “Despite
ARM loans accounting for a very small share of loan applications in recent
months, lenders are likely looking ahead to a strong home buying season by
expanding their product offerings.”  

Added Kan, “Ongoing strength in home-purchase applications and home
sales continue to signal robust housing demand, even as low housing inventory
remains a constraint. However, even with overall credit availability picking up
in three of the past four months, credit supply is still at its tightest level
since 2014
.”  

The MCAI was at 181.3 in February
2020 as news of the pandemic broke. It declined by 16.1 percent in March and
another 12.2 percent in April. Subsequent smaller decreases ultimately took the
index to 118.6 in September before it began what is so far a stop and go recovery.

The MCAI and each of its components are calculated
using several factors related to borrower eligibility (credit score, loan type,
loan-to-value ratio, etc.). These metrics and underwriting criteria for over 95
lenders/investors are combined by MBA using data made available via a
proprietary product from Ellie Mae. The resulting calculations are summary
measures which indicate the availability of mortgage credit at a point in time.
Base period and values for total index is March 31, 2012=100; Conventional
March 31, 2012=73.5; Government March 31, 2012=183.5.

Source: mortgagenewsdaily.com

It’s still really difficult to get a mortgage, but getting easier

Mortgage credit is still the tightest it has been in more than six years, but steady loosening in January revealed lenders are preparing for a rebounding economy, the Mortgage Bankers Association said in a report on Tuesday.

The group’s Mortgage Credit Availability Index rose 2% to 124.6 last month, still hovering near levels previously seen in 2014, though it is the third month in the past four that credit availability has picked up as supply eases out. The index plunged from record highs seen in late 2019 after the COVID-19 pandemic caused the worst economic contraction since the Great Depression.

Measuring credit availability by loan type, the Conforming MCAI that tracks loans backed by Fannie Mae and Freddie Mac rose 7.7% while the Jumbo MCAI measuring high-balance loans rose 2.2%, and the Conventional MCAI that measures loans not backed by the government rose 4.8%.

The Government MCAI that includes mortgages backed by the Federal Housing Administration, the Veterans Administration and the U.S. Department of Agriculture fell by .1%, MBA said.

A decline in the MCAI indicates that lending standards are tightening, while increases in the index are indicative of loosening credit.


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According to Joel Kan, MBA’s associate vice president of economic and industry forecasting, an uptick in credit availability coincides with a housing market that is poised for a strong start to the year.

“Improvements were driven by the conventional segment of the mortgage market, as lenders added ARM loans with lower credit score and higher LTV requirements,” Kan said.

Despite ARM loans accounting for a very small share of loan applications in recent months, Kan noted lenders are likely looking ahead to a strong home buying season by expanding their product offerings.

And even with tighter standards throughout the pandemic, the lowest mortgage rates on record still pushed $4 trillion in originations, insane year-over-year compensation for LO’s and opened the gate for several lenders to finally go public in 2020.

Fannie Mae’s economic and strategic group also upgraded its 2021 forecast in January setting expectations higher for GDP, increased home sale growth in the beginning of the year and even more purchase originations than the year prior.

“Ongoing strength in home-purchase applications and home sales continue to signal robust housing demand, even as low housing inventory remains a constraint,” Kan said.

motgage-credit-January

Source: housingwire.com

Mortgage rates have never been this low – CNN

The average interest rate on a 30-year fixed-rate mortgage dropped to 2.72%, according to Freddie Mac. That’s the lowest level in the nearly 50 years of the mortgage giant’s survey. The 15-year fixed-rate mortgage dropped to 2.28%.
“Weaker consumer spending data, which accounts for the majority of economic growth, drove mortgage rates to a new record low,” said Sam Khater, Freddie Mac’s chief economist. “While economic growth remains unstable, strong housing demand continues to have a domino effect on many other segments of the economy.”
3 reasons you shouldn't wait to refinance your mortgage3 reasons you shouldn't wait to refinance your mortgage
The continuing low interest rates have helped to fuel a boom in the US housing market. In the third quarter Americans’ mortgage debt climbed to a record high of nearly $10 trillion according to the Federal Reserve Bank of New York.
Investors had to weigh the promising news of another vaccine contender against a disappointing retail report and still-rising Covid cases, which drove down the interest rate for a 30-year loan, said George Ratiu, Realtor.com senior economist.
“Real estate markets mirrored broader uncertainties this week,” he said. “Sales of existing homes continued upward in October, boosted by buyers with jobs, savings and the ability to work from home.”
But, he said the steep rise in home prices is diminishing the benefit of lower mortgage rates.
“For today’s buyers, the current rate combined with higher prices translates into a savings of only $4 per month on a mortgage payment,” he said. “Rising housing markets may run out of affordable homes over the next few months.”
How has the economy affected you this year? Share your storyHow has the economy affected you this year? Share your story

Source: cnn.com

How To Make an Offer on a House: A 9 Step Guide

You’ve found your dream home and you’re ready to take the next step toward making it yours. After preparing and saving for your big purchase, it’s time to learn how to make an offer on a house. Offer letters are sales contracts and are legally binding, so it’s important to take this process seriously.

Find out everything you need to know about making an offer on a house with this guide. Below is a quick overview of the offer process. Feel free to click on each one to jump to everything you need to know about that step.

Steps for Making an Offer on a House:

  1. Determine you can afford the house and decide to make an offer.
  2. Talk with your real estate agent about comparable homes before making an offer.
  3. Your real estate agent compiles a written offer.
  4. The written offer is sent to the seller’s agent.
  5. The seller replies and your offer is accepted, countered, or declined.
  6. Learn how to compete with multiple buyers.
  7. The closing process begins when your offer is accepted.
  8. Remember to negotiate before finalizing if contingencies reveal flaws with the house or deal.
  9. Once your offer is accepted, you finalize the contract.

What to Know Before Making an Offer on a House

In addition to researching the process of making an offer, learn these key tips to keep in mind throughout.

things-to-know-before-making-an-offer-on-a-house

  • Try to sell first and buy after. If you aren’t a first-time homebuyer, it’s a good idea to sell your current home before buying a new one. This is important if you’re using the sale of the old home to purchase the new one.
  • Scope out the local market. Your real estate agent will use information on similar houses for sale in the area to put together your offer.
  • Ask about other offers. Your agent does this for you. Sometimes the seller’s agent won’t disclose this, but this information can inform your offer.
  • Learn about the house. If there are problems with the house, you’ll want to find out and keep them in mind when you make an offer.
  • Know what the seller wants. Have your agent find out what appeals to the seller and try to include it in your offer. If the house still has a mortgage, offering an early payment can help tip the balance in your favor.
  • Act fast. For the best chance at your dream home, submit an offer quickly. Don’t wait around because someone else will likely snap it up if you hesitate.

Step 1: Determine Affordability of the House

Finding your dream house is the easy part. Figuring out if you can afford it takes a hard look at the numbers. Set a home budget beforehand and be strict about sticking to it when looking at houses. To gauge what your budget should be, a majority of lenders advise that you shouldn’t spend more than 28 percent of your monthly pre-tax income. Be sure to include your estimated monthly payment plus other costs like the down payment, HOA fees, home insurance, and property taxes in your budget.

When you go through the lending process, lenders can help you determine what is affordable. If you’re not there yet, use this home affordability calculator to see if your dream house is in your budget.

Step 2: Talk with Your Real Estate Agent

Making an informed offer is the key to giving you the best chance of getting the house you want. Speak with your real estate agent about what comparable homes in the area are going for and use this information to guide your offer.

Step 3. Compile an Offer Letter

After comparing similar houses for sale, you’ll work with your agent on your offer. There are many components to an offer letter. We discuss everything that is included, how to navigate your offer price and contingencies, and tips for making an offer they can’t refuse.

What’s Inside an Offer Letter

Offer letters are legally binding sales contracts, and it’s important to be thorough about what you include.

Typical Components of an Offer Letter:

  • Offer price: This is the amount of money you are willing to pay for the house.
  • Contingencies: Conditions that the seller must abide by if and when they accept your offer. Standard contingencies include a home inspection and appraisal. Jump down to learn more about contingencies.
  • Down payment: The amount paid for the home upfront. This can be anywhere between 3 to 20 percent when paired with a conventional loan.
  • Earnest money: This is a deposit made by the buyer to demonstrate good faith on a contract to buy a home. It’s generally a small percentage of the price and is held in escrow until the offer is closed. It’s usually applied to the down payment or closing costs once the offer is accepted.
  • Closing costs: These include all costs associated with purchasing a home. Read more on some of the common closing costs like inspection and loan origination fees.
  • Timeline: You’ll include your preferred closing date, as well as the closing date of your current home if you aren’t a first-time buyer.

How Much Should You Offer?

Figuring out how much you should offer depends on what you can afford and what kind of market you’re dealing with at the time of the purchase. Your real estate agent should guide you through making an offer, but ultimately, you are the one who decides what you’re willing to pay. A good rule of thumb is that your first offer should leave some room for negotiation, so don’t give away what you’re willing to pay right away.

buyer-vs-sellers-market

Making an Offer in a Buyer’s Market

In a buyer’s market, you have more power to negotiate because there is more supply than demand. With the bargaining advantage on your side, you can feel more comfortable making an offer below the asking price. If you do offer below asking price, negotiation is a typical response.

When offering less, it’s also important to be respectful of the seller. Offending them with an outrageously low offer could result in them rejecting and you losing your dream house.

Making an Offer in a Seller’s Market

A seller’s market is when the housing demand exceeds the supply. In this situation, you will not have the bargaining advantage, and you will be competing with others for attractive properties. If you can afford it, exceeding the seller’s asking price can help you stand out among other offers. Remember to keep your budget in mind when negotiating and don’t offer an amount you can’t afford.

Contingencies

Contingencies are conditions of the purchase that get outlined in your offer and must be met for the sale to go through. If they aren’t met, based on the contingency, either the buyer or seller can cancel the sale. About 74 percent of buyers include contingencies in their offers, so let’s discuss the standard ones below.

Home Inspection Contingency
A home inspection contingency exercises your right to have the property inspected before closing the sale. If the inspection reveals problems with the house like faulty plumbing or a compromised structure, there is room to remedy any issues before you close. You can negotiate for a lower price, ask the seller to make repairs, or even back out of the offer.

It’s not advisable to forego a home inspection contingency to make your offer more attractive. This could cause you to pay more for a damaged property and could cause financial problems down the line if you find out there are major issues with the house that are costly to fix. Home inspections prior to closing are always recommended.

Home Appraisal Contingency
A home appraisal contingency verifies that the price you are paying is fair compared to the home’s market value. In the event that the house you are buying is appraised as lower than the selling price, you are able to negotiate with the seller or cancel the contract. This is recommended to prevent you from paying more than you should for a house.

Home Sale Contingency
In case you need to sell your current home in order to finance a new one, you can make a home sale contingency. This contingency stipulates that the current house must be sold before the new purchase can close.

Home sale contingencies aren’t attractive for sellers, as they cause delays and discourage other offers. A clause can be attached to this contingency by sellers to include a sell-by date. If your house hasn’t sold by the date in the clause, the seller is legally able to move on with other offers.

Financing/Mortgage Contingency
A financing or mortgage contingency allows the buyer time to secure financing from a lender. For buyers, this provides insurance that they can cancel the sale and recover their earnest money in case their financing options fall through.

This contingency is usually given a specific timeline, and the buyer can end the contract before time expires. If the buyer has not secured a mortgage and fails to cancel the contract before the allotted time is up, they will still be obligated to purchase the property.

Tips For Making an Offer They Can’t Refuse

When making an offer on a house, remember to appeal to the seller by using these tips to make an offer they can’t refuse.

  • Make an offer in cash. If you have the savings and can afford to make an offer in cash, you can forego the financing contingency. This means less delay in the sale, and it can also help you compete with higher offers with more contingencies.
  • Propose a short closing period. If you’re willing to move quickly, offering a short closing period can appeal to a seller who needs to sell fast.
  • Pay some of their closing costs. All sellers will have closing costs when the sale goes through. Paying off some of those costs can help sweeten the deal for them.
  • Offer up more earnest money. More earnest money shows you’re serious about the home. It’s also more money in the seller’s pocket upfront.
  • Write a personal letter. Homes are very personal and sellers may be emotionally attached to them. Make an emotional appeal by writing a personal letter to tell them the home will be in good hands.

write-personal-letter

Step 4. Submit Your Offer

Once you have decided on an offer, your real estate agent will write up a purchase and sale agreement. You will sign this agreement and then they will submit it to the seller’s agent. This agreement is legally binding if the seller agrees.

Step 5. Review Seller’s Reply

A seller can reply in a couple of ways. They can accept, counter or decline. Let’s walk through what to do with any of these three responses and what to do when there’s another buyer.

What to Do When They Accept

Congratulations — they’ve accepted your offer! You can now move on to Step 7 of the offer process. As long as all contingencies are met, you are buying a house.

What to Do When They Counter

The seller might not have liked your offer exactly how it was written and they can counter. It’s then up to you to accept that offer or to start negotiating by countering again. You are also free to back out of the offer if you aren’t happy with the seller’s counteroffer.

If you do end up negotiating, it’s normal for there to be a back and forth of counteroffers. You are both working to come to an agreement on price, timeline, and contingencies, and this takes time.

What to Do When They Decline

Unfortunately, if the seller declines, you won’t be buying that particular house for what you offered. If there is room in your budget, you could attempt to make a more attractive offer. About 45 percent of buyers end up making multiple offers during the buying process. However, not every budget allows for a better offer.

A declined offer is a disappointing outcome, but it’s important to be respectful of the seller’s decision. Take the time to talk to your real estate agent and learn about what can be done differently when the next opportunity comes around.

Step 6: How to Compete With Multiple Buyers

In a competitive housing market, desirable properties will attract many buyers. Here are a few potential scenarios that can play out if a seller receives multiple offers.

Multiple Buyer Scenarios:

  1. If your offer didn’t compare with the others, they may decline you and pursue other offers.
  2. If your offer was one of the better offers, they may ask each buyer to return with their best offer and make a decision among those final offers.
  3. They may allow a bidding war to see who will come up with the best offer.

Strategies for Competing With Multiple Offers:

  1. Be flexible with your contingencies. Keep important ones like the home inspection and appraisal, but figure out which ones aren’t necessary for you.
  2. If there is room in your budget, add an escalation clause. This notifies the seller that you will outbid the highest offer up to a maximum amount. This shows you are serious and keeps you competitive price-wise.
  3. Mention preapproval for a mortgage if you have it. The more likely you are to obtain financing, the more attractive you are as a candidate.
  4. If you can afford it, increase your down payment or earnest money deposit.

To keep everything professional, remember that your real estate agent should facilitate negotiations directly with the seller’s agent.

Step 7: Start the Closing Process

The closing process begins when a buyer accepts your offer. This process includes all necessary actions that must be done to move the transaction forward like reviewing what you owe, authorizing documents, and transferring the title. For an in depth walkthrough of this process, check out this guide for closing on a house.

Step 8. Negotiating After Your Offer is Accepted

When a seller accepts your offer, you will first move forward with any contingencies. If anything is wrong with the house or deal, you have the ability to negotiate or even walk away. Here are some examples of negotiations based on contingencies:

  • If a home inspection reveals flaws with the house, you can ask for repairs to be made by the seller before the deal is closed so that the financial burden doesn’t fall to you.
  • If the home is appraised to be lower in value than the accepted offer price, negotiate for a lower, more appropriate sale price.

Step 9: Finalize Your Contract

When negotiations have ended and you are satisfied with your contract, you will sign to finalize your purchase. Once you sign, the contract is legally binding.

After you make it through the final step, it’s time to celebrate! Revel in the excitement of purchasing your dream home, and know that you just took a big step toward a new life. Keep up good saving and budgeting habits so you can continue to hit your financial goals in the future.

Sources: Investopedia

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