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Real Estate Information Archive
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Displaying blog entries 441-450 of 782
Appraisal Gaps Grow on Mt. Hood Purchases
What To Expect as Appraisal Gaps Grow
In today’s real estate market, low inventory and high demand are driving up home prices. As many as 54% of homes are getting offers over the listing price, based on the latest Realtors Confidence Index from the National Association of Realtors (NAR). Shawn Telford, Chief Appraiser at CoreLogic, elaborates:
“The frequency of buyers being willing to pay more than the market data supports is increasing.”
While this is great news for today’s sellers, it can be tricky to navigate if the price of your contract doesn’t match up with the appraisal for the house. It’s called an appraisal gap, and it’s happening more in today’s market than the norm.
According to recent data from CoreLogic, 19% of homes had their appraised value come in below the contract price in April of this year. That’s more than double the percentage in each of the two previous Aprils.
The chart below uses the latest insights from NAR’s Realtors Confidence Index to showcase how often an issue with an appraisal slowed or stalled the momentum of a house sale in May of this year compared to May of last year.
If an appraisal comes in below the contract price, the buyer’s lender won’t loan them more than the house’s appraised value. That means there’s going to be a gap between the amount of loan the buyer can secure and the contract price on the house.
In this situation, both the buyer and seller have a vested interest in making sure the sale moves forward with little to no delay. The seller will want to make sure the deal closes, and the buyer won’t want to risk losing the home. That’s why it’s common for sellers to ask the buyer to make up the difference themselves in today’s competitive market.
Bottom Line
Whether you’re buying or selling, let’s connect so you have an ally throughout the process to help you navigate the unexpected, including appraisal gaps.
Homebuyers for Mt. Hood: Hang In There
Homebuyers For Mt. Hood: Hang in There
![Homebuyers: Hang in There [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2021/06/24105823/20210625-MEM-1046x2093.png)
Some Highlights
- Today’s sellers’ market provides unique challenges—and benefits—for buyers.
- Current low interest rates won’t last forever, and home prices are forecast to rise.
- If you’re a homebuyer, hang in there. Homeownership improves your quality of life, and the long-term benefits outweigh the short-term challenges.
Vacation Home Demand is Strong on Mt. Hood
Demand for Vacation Homes Is Still Strong
On Mt. Hood
The pandemic created a tremendous interest in vacation homes across the country. Throughout the last year, many people purchased second homes as a safe getaway from the challenges of the health crisis. With many professionals working from home and many students taking classes remotely, it made sense to see a migration away from cities and into counties with more vacation destinations.
The 2021 Vacation Home Counties Report from the National Association of Realtors (NAR) shows that this increase in vacation home sales continues in 2021. The report examines sales in counties where “vacant seasonal, occasional, or recreational use housing account for at least 20% of the housing stock” and compares that data to the overall residential market.
Their findings show:
- Vacation home sales rose by 16.4% to 310,600 in 2020, outpacing the 5.6% growth in total existing-home sales.
- Vacation home sales are up 57.2% year-over-year during January-April 2021 compared to the 20% year-over-year change in total existing-home sales.
- Home prices rose more in vacation home counties – the median existing price rose by 14.2% in vacation home counties, compared to 10.1% in non-vacation home counties.
This coincides with data released by Zelman & Associates on the increase in sales of second homes throughout the country last year.
As the data above shows, there is still high demand for second getaway homes in 2021 even as the pandemic winds down. While we may see a rise in second-home sellers as life returns to normal, ongoing low supply and high demand will continue to provide those sellers with a good return on their investment.
Bottom Line
If you’re one of the many people who purchased a vacation home during the pandemic, you’re likely wondering what this means for you. If you’re considering selling that home as life returns to normal, you have options. There are still plenty of buyers in the market. If, on the other hand, you want to keep your second home, enjoy it! Current market conditions show that it’s a good ongoing investment.
Financial Benefits of Home Ownership
Owning a Home Has Distinct Financial Benefits Over Renting
![Owning a Home Has Distinct Financial Benefits Over Renting [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2021/06/16121610/20210518-MEM-1046x2442.png)
Some Highlights
- When you rent, you build your landlord’s wealth, your monthly payment depends on ever-rising rents, and you don’t benefit from home price appreciation.
- On the other hand, when you own your home, you build your own wealth, your monthly payment is locked in, and you benefit directly from home price appreciation.
- If you’re feeling the challenges of a competitive market, remember that homeownership is a long-term game. Persevering today will lead to financial rewards in the future.
Housing Wealth
Housing Wealth: The Missing Piece of the Affordability Equation
The real estate market is soaring today. Residential home values are rising, and that’s a big win for homeowners. In 2020, there was a double-digit increase in home values – a trend that’s expected to head toward similar levels this year.
However, skyrocketing prices are causing some to start questioning affordability in the current housing market. Many are quick to emphasize the fact that homes today are less affordable than they were last year. Black Knight, a leading provider of data and analytics across the homeownership life cycle, just reported on the issue.
The findings show the historical averages of the national payment to income ratio, which they define as “the share of the median income needed to make the monthly payments on the median-priced home.” Their study reveals:
- The average over the last 25 years was 23.6%
- The average over the last 5 years was 20.1%
- The average today stands at 20.5%
Right now, housing payments are slightly less affordable than the five-year average – but only by less than ½ a percentage point. However, they’re significantly more affordable than the 25-year average. Put another way, a buyer will likely make a slightly greater financial sacrifice to afford a home right now than if they purchased a home within the last five years. On the other hand, it also means the potential financial sacrifice is not nearly as great as it was over the last 25 years.
Does making a sacrifice to buy a home today make financial sense in the long term?
Last week, the Federal Reserve announced that, in the first three months of the year, household net worth increased by $968 billion based solely on the values of the real estate they owned. Another report from CoreLogic reveals the average annual gain in homeowner equity was $33,400 per borrower.
Homeownership continues to be the cornerstone to building personal wealth. For most Americans, their home is the largest asset they own. On top of that, the difference between the net worth of homeowners and renters is significant at every income level. Here’s a table detailing that point using data from a study done by First American:
Owning a home is an essential steppingstone to grow a household’s net worth. Despite the slightly greater sacrifice in the percentage of monthly income you’ll spend on housing today, for most homebuyers, the payoff of starting to build equity now will be worth it.
Bottom Line
Since prices have risen dramatically over the past 18 months, it’s slightly less affordable to buy a home today than it was a year ago. However, when you consider the equity gain and weigh the long-term benefits of building your net worth, you may question if you can afford not to buy now.
Moving Up This Summer
Have Your Day in the Sun by Moving Up This Summer
![Have Your Day in the Sun by Moving Up This Summer [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2021/06/10133027/20210611-MEM-1046x1956.png)
Some Highlights
- Longer days and sunny weather mean summer is upon us, and what better conditions than right now to upgrade to the home of your dreams?
- If your needs have changed, it’s a great time to upgrade – there’s likely high demand for your current house, and today’s low mortgage rates can help you afford your dream home.
- If you’re ready to upgrade to a home that matches your changing needs, let’s connect today.
Supply and Demand for Mt. Hood Real Estate is as Simple as Supply and Demand
Home Price Appreciation Is as Simple as Supply and Demand for Mt. Hood Real Estate
Home price appreciation continues to accelerate. Today, prices are driven by the simple concept of supply and demand. Pricing of any item is determined by how many items are available compared to how many people want to buy that item. As a result, the strong year-over-year home price appreciation is simple to explain. The demand for housing is up while the supply of homes for sale hovers at historic lows.
Let’s use three maps to show how this theory continues to affect the residential real estate market.
Map #1 – State-by-state price appreciation reported by the Federal Housing Finance Agency (FHFA) for the first quarter of 2021 compared to the first quarter of 2020:
As the map shows, certain states (colored in red) have appreciated well above the national average of 12.6%.
Map #2 – The change in state-by-state inventory levels year-over-year reported by realtor.com:
Comparing the two maps shows a correlation between change in listing inventory and price appreciation in many states. The best examples are Idaho, Utah, and Arizona. Though the correlation is not as easy to see in every state, the overall picture is one of causation.
The reason prices continue to accelerate is that housing inventory is still at all-time lows while demand remains high. However, this may be changing.
Is there relief around the corner?
The report by realtor.com also shows the monthly change in inventory for each state.
Map #3 – State-by-state changes in inventory levels month-over-month reported by realtor.com:
As the map indicates, 39 of the 50 states (plus the District of Columbia) saw increases in inventory over the last month. This may be evidence that homeowners who have been afraid to let buyers in their homes during the pandemic are now putting their houses on the market.
We’ll know for certain as we move through the rest of the year.
Bottom Line
Some are concerned by the rapid price appreciation we’ve experienced over the last year. The maps above show that the increases were warranted based on great demand and limited supply. Going forward, if the number of homes for sale better aligns with demand, price appreciation will moderate to more historical levels.
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