3 Reasons the Housing Market Should Thrive in 2014

Recently, HousingWire asked David Berson, chief economist at Nationwide, for his opinion on the near-term future of housing. Below are what Mr. Berson believes to be the three things you need to know about housing in 2014. We have included a quote from the article and a small comment from KCM for all three points.

Number 1: 2014 should prove to be the strongest year for housing activity since before the Great Recession

“Most economists expect an improved job market in 2014, with employment growth accelerating and the unemployment rate continuing to decline. That jobless rate drop will reflect more of a pickup in employment than further declines in the labor force participation rate. This will be the key factor improving housing demand this year, even if mortgage rates rise and affordability declines. While the housing market tends to do especially well when the job market improves and mortgage rates decline simultaneously, that combination of events occurs only rarely…People buy homes when their job and income prospects improve – even if it’s more expensive to do so – rather than buy when it is inexpensive to do so but they’re worried about keeping their jobs.”

KCM Comment:

We agree that the job market will continue to improve and that rising interest rates will not be a detriment to the market in 2014. As Doug Duncan, SVP and chief economist at Fannie Mae, recently revealed:
“Consumers have taken the interest rate rise in stride. Expectations for continued improvement in housing persist, and sentiment toward the current buying and selling environment is back on track.”

Number 2: Demographics should start to favor housing activity

“If the economy expands at a faster pace this year, bringing a more rapid rate of job creation, that should translate into more households, raising housing demand. We won’t see all three million missing households return to the housing market at once. (That wouldn’t be a good thing for the housing market anyway, since that would be on top of the 1.2 million households that normally would develop this year; such a surge would swamp the existing housing supply). Beginning in 2014, the pace of household formations should accelerate to an above-trend pace for several years, pushing up housing demand.”

KCM Comment:

The Urban Land Institute recently released a report, Emerging Trends in Real Estate 2014, projecting that 4.48 million new households will be formed over the next three years. Millennials will make up a large portion of these new households. With the economy improving, we believe they will finally be moving out of their parents’ homes and, after they compare renting versus buying, many will choose homeownership.

Number 3: Mortgage availability shouldn’t worsen and may improve

“The rise in mortgage rates already has reduced mortgage origination volumes as refinance activity declines. If mortgage rates rise further this year, as expected, then refinance activity will fall still more. In response, mortgage lenders probably will ease lending standards to the extent possible under the QM rules to boost lending activity by increasing purchase originations. As a result, the increase in new households expected to be created this year, spurred by a stronger job market, should find that qualifying for a mortgage loan will be somewhat easier in 2014 than in prior years.”

KCM Comment:

We also believe that, as the refinancing market begins to dry up, mortgage entities will be more aggressive in the purchase money market (mortgages necessary to purchase a home). There even seems to be recent evidence that lending standards are actually loosening.

 

Call Christie at 225-315-9003 or Christiefarris@gmail.com

Interest Rates Likely to Keep Going Up - Time to Buy is Now

There are those that hope that 30-year mortgage interest rates will head back under 4%. Obviously, for any prospective home purchaser that would be great news. However, there is probably a greater chance that interest rates will return to the greater than 6% rate of the last decade before they would return to the less than 3.5% rate of 2012.

 "One thing seems certain: we aren't likely to see average 30-year fixed mortgage rates return to the historic lows experienced in 2012."
- Freddie Mac,  March 24, 2014

Obama Signs Flood Insurance Relief Into Law

Obama Signs Flood Insurance Relief Into Law

President Barack Obama signed into law a bipartisan bill that will
delay flood insurance rate hikes for property owners nationwide.

The Homeowner Flood Insurance Affordability Act repeals the Federal
Emergency Management Agency’s authority to increase premium rates when a
property is sold. It also refunds the excessive premium to those who
bought a property before FEMA warned them of the rate increase. The bill
limits premium increases to 18 percent annually on newer properties and
25 percent for some older ones. The senate approved the bill on March
13, and the House of Representatives March 4.

“Today, many months of hard work, negotiation and bipartisan
compromise have culminated in a law that will end skyrocketing flood
insurance costs for hundreds of thousands of home owners,” says U.S.
Rep. Maxine Waters, D-Calif. “Though the measure isn’t perfect, it
ensures there will be no more dramatic rate increases for families
currently facing unaffordable premiums.”

Money Magazine: Buy Now not Later

We have often suggested that potential home buyers consider rising interest rates when thinking about the true cost of a home. Remember, cost is not determined by price alone but by price and mortgage rate. The longer a buyer waits, the higher the mortgage payment will be if rates continue to increase (as is projected by Fannie Mae, Freddie Mac, the National Association of Realtors and the Mortgage Bankers Association).

Money Magazine, in its latest issue, agreed with our analysis as they also warned their readership of the same ramification if they waited to buy a home.
Here is what they said:

"BE MINDFUL OF RATES. The average interest rate on a 30-year fixed loan is predicted to climb from the current 4.4% to 5.3% by the 2015 spring buying season, according to Freddie Mac. For a $250,000 loan, that means that a borrower who waits would pay $136 more per month and an additional $49,090 in interest over the life of the loan. Will you need a big loan? Better to act soon before rates tick up."
And the monthly increase Money mentioned did not take into consideration that prices are also projected to increase over the next year. Here is what the additional cost would be if prices rise by the 4.5% projected by the latest Home Price Expectation Survey and interest rates go to 5.3%.

More Homes Hit the Market in Time for Spring

Inventories of homes for sale have increased 10 percent
year-over-year, signaling growing seller optimism and a strong, early
start to the spring home-buying season, according to realtor.com®’s
latest National Housing Trend Report, which tracks 146 markets.


The median list price edged up 76 percent higher in February compared
to year-ago levels. The nationwide median list price is $199,000,
realtor.com® reports. The median age of inventory also rose 6.5 percent
year-over-year to 114 days.




“Overall, these figures indicate a continued reinforcement of steady
gains and market stabilization that we’ve been watching since late last
summer,” says Steve Berkowitz, CEO of Move Inc. “Seller confidence is
the factor to watch as we head into the spring home-buying season, and
these are very encouraging indicators—not only are more homes coming
onto the market, but typically we don’t see a rise in asking prices this
early into the year. This is the market these sellers have been waiting
for.”

Baton Rouge Capital Region Home Sales up 10.6% in February

 Capital Region home sales rise 10.6% in February

 Published Mar 18, 2014

While home sales in the eight-parish Capital Region rose 10.6% in February compared to sales during February last year, the average sale price declined 0.6% on the month. Inventory shrank by nearly 10%. According to the latest monthly report from the Greater Baton Rouge Association of Realtors, released today, February home sales totaled 593 in the Capital Region, up from 536 a year earlier during the month. Sales in February were also up from the 519 recorded in January—when sales were up 8.6% over January 2013.

East Baton Rouge Parish home sales last month were up 7.8%, at 304, compared to 282 in February a year ago. Livingston Parish posted a 20.5% increase in sales, with 100 homes sold in February, up from 83 a year earlier. Ascension Parish's 122 home sales last month was just three fewer than were sold in February 2013, or a 2.4% drop. The five other parishes included in GBRAR's Capital Region report are West Baton Rouge, East Feliciana, West Feliciana, Iberville and Pointe Coupee. Through the first two months of the year, sales in the eight-parish region are up 10.1% over 2013 figures. Meanwhile, at $187,241, the average sale price is up 0.7% over last year's average through February. Capital Region inventory last month totaled 3,820 homes, or 9.7% fewer than during the month a year ago. Access the complete GBRAR report.

It Takes More than Luck to Sell Your Home

 

Happy St Patrick's Day!! Call Christie Farris for all of your Real Estate needs!

5 Reasons to Purchase a Home Today

Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying.

1. Competition is about to Increase
Every spring a surge of prospective purchasers enter the housing market. Like you, they will want the best home available in the best location at the best price. They will be competing with you for the ‘steals’ in the market. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy available today that no longer be available as the market heats up..

2. Price Increases Are on the Horizon
Nationally, home prices are projected to appreciate by 4.5% in 2014 and by over 19% from now until 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

3. Owning a Home Helps Create Family Wealth
Whether you rent or you own the home you are living in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Federal Reserve, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

4. Interest Rates Are Projected to Rise
The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the spring of 2015. That is an increase of almost 3/4 of a point over current rates.

5. Buy Low, Sell High
Most would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.

Christie Farris    225-315-9003

Senate Passes Flood Insurance Bill

Senate Passes Flood Insurance Bill



I applaud this bill for the relief and protection it will bring to
businesses and families nationwide, who are experiencing financial
hardship because of the extreme and sudden premium increases.

10 Home Maintenance Tips for Spring

Checklist to help you target the areas that need maintenance so you can get your chores done quickly, leaving you time to go outside and play in the sunshine.

• Check for loose or leaky gutters. Improper drainage can lead to water in the basement or crawl space. Make sure downspouts drain away from the foundation and are clear and free of debris.
  
• Low areas in the yard or next to the foundation should be filled with compacted soil. Spring rains can cause yard flooding, which can lead to foundation flooding and damage. Also, when water pools in these low areas in summer, it creates a breeding ground for insects.
  
• Use a screwdriver to probe the wood trim around windows, doors, railings and decks. Make repairs now before the spring rains do more damage to the exposed wood.
  
• From the ground, examine roof shingles to see if any were lost or damaged during winter. If your home has an older roof covering, you may want to start a budget for replacement. The summer sun can really damage roof shingles. Shingles that are cracked, buckled or loose or are missing granules need to be replaced. Flashing around plumbing vents, skylights and chimneys need to be checked and repaired by a qualified roofer. 

• Examine the exterior of the chimney for signs of damage. Have the flue cleaned and inspected by a certified chimney sweep.
  
• Inspect concrete slabs for signs of cracks or movement. All exterior slabs except pool decks should drain away from the home's foundation. Fill cracks with a concrete crack filler or silicone caulk. When weather permits, power-wash and then seal the concrete.
  
• Remove firewood stored near the home. Firewood should be stored at least 18 inches off the ground at least 2 feet from the structure.
  
• Check outside hose faucets for freeze damage. Turn the water on and place your thumb or finger over the opening. If you can stop the flow of water, it is likely the pipe inside the home is damaged and will need to be replaced. While you're at it, check the garden hose for dry rot.
  
• Have a qualified heating and cooling contractor clean and service the outside unit of the air conditioning system. Clean coils operate more efficiently, and an annual service call will keep the system working at peak performance levels. Change interior filters on a regular basis.
  
• Check your gas- and battery-powered lawn equipment to make sure it is ready for summer use. Clean equipment and sharp cutting blades will make yardwork easier.

Buying a Home Less Expensive than Renting – by 38%!

Homeownership remains cheaper than renting in all of the 100 largest metro areas by an average of 38%!

The other interesting findings in the report include:

• Even though prices increased sharply in many markets over the past year, low mortgage rates have kept homeownership from becoming more expensive than renting.
• Some markets might tip in favor of renting this year as prices continue to rise faster than rents and if – as most economists expect – mortgage rates rise, due both to the strengthening economy and Fed tapering.
• Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.

Buying a home now makes sense. You can lock in a mortgage payment before home prices and mortgage rates rise as experts expect they will. If you rent, your housing expense will only continue to increase.

Where are Prices Headed Over the Next 5 Years??

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey

The latest survey was released last week. Here are the results:

• Home values will appreciate by 4.5% in 2014.
• The average annual appreciation will be 3.94% over the next 5 years
• The cumulative appreciation will be 19.7% by 2018.
• Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of almost 11% by 2018.

Individual opinions make headlines. We believe the survey is a fairer depiction of future values.

HOW TO PRICE REAL ESTATE

Location may have the most effect on value but Price is without question the most important factor controlling the sale of real estate.  Anything will sell anytime, how long will it take depends on the price.

Think about it this way – you may really want to buy a car for your collection and your favorite happens to be a 1963 Corvette.  So you hear about one for sale, in mint condition, across town but the only problem is the price, the owner is asking $150,000!  Well, although you really, really want a mint condition 1963 Corvette, there is no way you will pay anywhere close to $150,000, in fact you know that the most a 1963 Corvette has ever sold for is about $200,000 and that was for a very rare model, which this one is not.

Because you are a bit obsessed with owning one of these cars you spend almost all of your free time, and some of the time you should be working, searching the internet for available cars.  Through this exhaustive search you have become somewhat of an expert on the values of 1963 Corvettes, especially in your town.  You happen to know that the particular model for sale across town is worth about $95,000…maybe $100,000.  In fact, if the asking price was $100,000 or even $110,000 you would’ve driven over there today with your checkbook and driven home in a 1963 Corvette!

So why don’t you go make an offer?  Well, let’s face it when you see a price that is so high compared to the actual value it makes you think that the seller is either difficult to deal with and is out of touch with reality or that he must not really want to sell the car, instead he is just fishing for the one fool in the world that will pay $150,000 for a car that is worth $95,000.  So you don’t even go look at it or call for more information…you just keep searching the various websites to find the car of your dreams.

Yes, you guessed it the Corvette in this example actually represents your home or other real estate you might be trying to sell.  (in fact it represents any item that can be bought and sold).

Wiggle room = Bad idea

Most sellers think that it is necessary to “leave a little wiggle room” in the price.  They think this because they think that all buyers will make aggressively low offers…no matter what the asking price.  WRONG!!

Buyers pay the fair market value …in other words they will pay you what it is worth!  Your job is to find out what it is worth and price it at or near that value.

This is where brokers and/or appraisers come into the picture.  The right way to price your property is to have a professional REALTOR/broker or appraiser prepare a CMA (Comparative Market Analysis) on your property.  A CMA involves finding recent sales of similar properties, adjusting for any differences, to arrive at a current market value of your property.  Once you have this value you should have your broker set the asking price no more than 3% to 5% higher than that current market value.

If you do this, your property will sell quickly for a price equal to exactly what it is worth, or higher!   Buyers as a general rule DO NOT make “low-ball” offers, there are some rare occasions when that happens but the vast majority of initial offers are 5% or less below asking price.

If sellers price their property correctly the buyers will know it immediately because, just like in the Corvette example, buyers spend every spare moment searching the internet for a home, they have made themselves experts on the market value of the particular type of home in the particular area they desire.  For this reason the buyer also knows when a property is overpriced.  Most buyers will not even go look at a property that is overpriced, they say to themselves “why bother?” they assume that the seller is unreasonable and/or is not truly interested in selling the property.

Yesterday, the Buyer’s Specialist that works for my team and I were showing a house to some buyers who were very motivated had already decided on the neighborhood.  The house was well within their price range and met every one of their criteria.  As we stood in the kitchen discussing what price we should offer we found ourselves drawn to the fact that the house had been on and off of the market for the last four years!

The conversation immediately turned to “what is wrong with this house?”   It turns out that the house hasn’t sold because it was severely overpriced most of that 4 years, it happens to be well priced now but the stigma it carries because of the lengthy time on the market will likely result in it selling for less than it is really worth.

Moral of this whole story is - buyers will pay what it is worth - Seller’s job is to find out what it is worth and set the asking price 3%-5% higher than that number…then sit and wait for the offers to roll in.

B.R. ranked No. 2 among U.S. mid-size metros for 2013 business expansions

Baton Rouge and Louisiana have each received a top three ranking in the nation for the high number of business expansions announced on the metro and state level in 2013. In its annual economic development rankings, trade publication Site Selection magazine places Baton Rouge tied for second among all U.S. metros with a population between 200,000 and 1 million for the number of new major projects or expansions announced last year.

Baton Rouge's 46 projects tied it with the Allentown, Pa.-Bethlehem, Pa. metro area, and placed it just two projects behind the No. 1 metro area on the list: Omaha, Neb.-Council Bluffs, Iowa. This year marks the fourth in a row that Baton Rouge has ranked in the top 10 on the list. Last year, the 34 new or expanded projects in the Baton Rouge area was good enough for a No. 4 ranking nationwide.

"Being included on this list four years in a row is a testament to the strength of our region and the momentum underway," says BRAC President and CEO Adam Knapp in a press release.

Site Selection counts projects in its ranking only if they include a capital investment of at least $1 million, create at least 50 jobs, or add at least 20,000 square feet of floor space. Retail, government projects, schools and hospitals are not counted. BRAC says it worked with 15 companies last year that ultimately announced expansions or relocations in the region.

"These projects will result in the creation of over 2,167 new jobs, $112 million in new payroll, and $4.4 billion in capital investment," reads the release from BRAC, which notes the payroll and capital investment figures are both local records.

Site Selection also ranks Louisiana No. 3 among all states for the number of projects it announced last year, per capita. The 180 projects per capita recorded in Louisiana trailed only Ohio and Nebraska. Texas, meanwhile, was awarded the magazine's Governor's Cup for total business developments and expansions in 2013.

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