High demand and low interest rates drove housing sales in 2016, and 2017 is shaping up to be another good year, albeit with a few minor caveats.
While home prices for starter-to-midrange homes are pushing upward toward pre-recession peaks, especially in secondary markets, they’re stabilizing in higher-priced areas.
If mortgage rates rise modestly as expected in 2017, sales may normalize with smaller price appreciation, especially as housing starts rise to fill the inventory breach.
But it sure looks like another seller’s market again in 2017, and likely in 2018, with a few localized exceptions.
As we march into the latter part of the decade, homeownership remains a practical long-term hold and self-enforced savings plan.
Here are a few tips to adapt to the latest market conditions.
First-time homebuyers: Get that starter home now
Well, you’d best gyrate into action. And we mean now! More than half of the home sales (52 percent) in 2017 are expected to be to first-time buyers, and mostly to the millennial set (19 to 34 years old), many moving from urban rentals. That means competition — and bidding wars — could become fierce for such “starters” in desirable areas.
Buyers: There’s more loan money out there
Those who couldn’t get mortgages during the downturn because they didn’t have 20 percent to put down can find affordable financing again.
Borrowers with FICO scores as low as 690 are now getting conforming mortgage loans (those under $417,000).
One telling sign: About two-thirds of mortgage refinancing were getting approved in the fourth quarter of 2016 compared to just one-half of those at the end of 2014.
However, borrowers without a 20 percent down payment will still likely pay private mortgage insurance, or PMI, until they hit the 20 percent to 25 percent equity mark.
The best rates go to those with 800-plus credit scores, though 750-plussers are getting virtually the same terms.
Sellers: It may be a seller’s market but …
Home sellers can do several simple things to enhance appearance, increase buyer interest and boost their home’s profile.
Renew selectively: Instead of wholesale renovations from which sellers recoup maybe 60 percent on investment, do light makeovers everywhere, with an eye on the kitchen and bathrooms. They’re far more cost-effective.
Clean, clean and clean some more: It’s hard for buyers to picture themselves living in a dirty house. Scrub floors, baths, kitchens, windows and walls, and be sure to clean, vacuum and deodorize rugs. This is simple but effective.
Depersonalize, declutter: Show the space, not the contents. Box up family photos, kids’ school papers and excess art, and store bulky and worn furniture. Organize your closets to make them look half empty.
Illuminate: Think bright and cheery. Open drapes and add brighter light bulbs in dark areas. Repaint where needed but use neutral colors.
Renters: It might be time to buy
In many cases, rents are rising faster than home values, yet mortgage rates remain low. That, and the fact that renters now account for 37 percent of households (the highest level in 50 years), seem to indicate an imminent coming-out party for renters-turned-buyers, especially if they plan to stay put for five to 10 years after buying.
There are limitless buy-versus-rent calculators for renters to compare affordability. But no gauge accounts for human behavior, such as reluctance of renters to re-invest what they’ve saved from not paying property tax, insurance, upkeep, etc. Homebuying basically enforces that discipline.
Sellers: The grass is always greener …
… in yards with a “sold” sign. Major presale upgrades typically aren’t needed, but a little greening outdoors is a must.
Surveys show that strong curb appeal can increase prices by 10 percent or more. Greener grass, whether derived from new sod or fertilizer and water, is a must.
New shrubs, plantings and flowers also project a welcoming feel. Sellers typically enjoy a 100 percent return on the money they put into curb appeal.
Another form of green, sustainable landscaping has become a value-add for buyers. Native plants, native grasses and perennials that require less water and attention fill that bill.
Do some local research or ask your local home-and-garden pro for simple “greening” tips.
Sellers and buyers: Know the state of your market
A balanced housing market is defined as one with an average inventory of 6.5 months. When inventory remains below equilibrium, sellers enjoy more control over prices and terms, and the area becomes a seller’s market.
When inventory lingers well above stasis, you have a buyer’s market where sellers must get more serious about price reductions, credits and throw-ins. Of course, these averages don’t necessarily reflect demand in certain desirable and undesirable submarkets.
In 2016, the U.S. housing inventory average was under five months.
Sellers: House going on sale soon?
Take a preliminary inventory. Look through your attic, closets, basement and garage to see what stored items you’ll want to keep, give away or sell. This will help you determine whether you’ll need a storage unit when your home is on the market and if there are any problem areas that need repairs or attention.
It’s also a good time to start discussing financing options with a local lender and speaking with your listing agents who can also provide additional preparation tips.Contact An Agent Today