Facebook
Twitter
Pinterest
Copy Link
Interest Rate Buydowns Help Buyers and Sellers
When interest rates were at historic lows, a typical fixed-rate mortgage loan was all most people needed. Now, with rates appreciably higher, buyers’ monthly mortgage rates are much higher. As the real estate market adjusts to changing interest rates, buyers and sellers are looking to make homes more affordable, and lenders are helping with interest rate buydown loans.
For a home that has been on the market for a while, the seller could lower the price $25,000, OR offer a $10,500 credit to buy down the mortgage interest rate, saving $14,500 and creating a more affordable monthly payment for the buyer. The illustration below is an example of how an interest rate buydown can save the buyer money each month.
In this example – a “2/1 Buydown” – the buyer will get a 30-year fixed rate loan with an interest rate that’s discounted 2% during the first year and 1% the second year. The buyer will ease their way into a new home with lower payments that simply step up at the end of the first and second year, and then remain fixed for the remainder of the loan.
This is just one way today’s buyers can make buying the home they really want a reality. At the same time, sellers can offer an incentive to buyers without a dramatic price reduction. If you have any questions or would like to learn more, let’s talk.
So Inventory is Still Low
I often get questions about the real estate market and hear how so many news stories report on the extremely low inventory of homes to buy. Don’t let the news stories scare you. The reality is that there are properties to buy; they’re just not on the market very long. We have pending transactions. We have closed sales. And we have satisfied buyers and sellers. We also have some frustrated buyers and sellers for different reasons.
My advice for sellers is to be prepared. Here are a few ways for sellers to prepare their property and themselves for the market:
- Make sure your home is “Ready for Prime Time.” Your property must make a great first impression, and your first impression will be online. Make sure that your house shines, from paint to flooring to landscaping. The photos you use online must show your home at its best.
- Be aware of maintenance issues in your house. If you can make necessary repairs, do so before hitting the market. If not, be prepared to negotiate repair issues with buyers.
- Be realistic about pricing your property. Buyers have been in the market longer and are savvy about pricing. Be sure you know what’s happening with pricing in your neighborhood – real estate is local – even hyper-local.
If you are thinking about putting your house on the market, the houses selling are priced appropriately and well-counseled sellers are not insisting on pricing their homes too high. The best thing for sellers to do is price their homes within the range of comparable sales in the area, and then let the buyers determine the actual market value. Some buyers will offer more than your list price. However, if you assume that buyers will pay more than the comparable prices in your area, you may price it too high and not receive any offers. The buyers will tell you the best price for your home. If you price your home too high, or if your home is not “Ready for Prime Time” when it is first exposed to the market, you will find that your home will sit on the market longer than average. And sometimes a house may have some unique features that only particular buyers may want, so you’ll need to be patient until those buyers come along.
My advice for Buyers is to be prepared and be patient. Here are a few ways that you can prepare yourself to be a home buyer:
- Before you begin your home search, meet with a lender and ask for a lender pre-approval letter. This will allow you to determine how much you can comfortably spend for your new home, and give sellers some assurance that you will qualify for the loan and successfully close the sale.
- Make sure your down payment funds are available on short notice. If you do not have the cash readily available, be sure you know which assets you will liquidate (stocks, bonds, etc.) and how long it will take for you to receive the funds.
- Make your offer with a good earnest money deposit. Earnest money between one and two percent of the purchase price (or more if you are comfortable) will signal to the seller that you are serious about the purchase and willing to put your own money at risk until the closing.
These three items will show that you are ready to buy right now and ready to make the best offer possible. With continued low inventory, there are many qualified buyers waiting for the right house to come on the market, so we are still seeing multiple buyers making offers for the same property. Depending on the situation, buyers can offer certain enticements to sellers (like shortening the inspection period or even waiving the right to inspections) in hopes they will accept an offer. There are several additional “seller enticements” that can be added to an offer, so long as you are comfortable with the terms.
Overall, my advice to both buyers and sellers is to be patient. For buyers, the right house at the right price with the right seller will cross your path. For sellers, your patience is important at the front end – getting your house ready for sale, making the best first impression, and setting the right price. And your real estate professionals also need to be patient at each step. If you have any questions about this information, let’s talk.
Market Statistics For February 2023
Here are the Market Statistics for February 2023. The average and median sale prices decreased by 5.3% and 3.7% respectively. While buyers and sellers will look at these numbers differently, I’m curious to see if this will be a continuing trend or simply the result of our unusually slow winter sales cycle. I believe it will be the latter, with prices rising moderately over the next few months.
Portland Metro Area Real Estate Inventory/Price/Days on Market Report Through January 2023
Here’s an overview of the Portland, Oregon residential real estate market as of the end of January, 2023. Please keep in mind that Real Estate is Local. These numbers reflect the activity in the Portland Metro Area. If you’d like more specific information about your property or a specific neighborhood, Let’s Talk. Please reach out to me at 503-720-9393 or JonCohen@Windermere.com.
Inventory: The Sellers’ market continues as the inventory of homes sits at 2.7 months at the end of January and exceeding 2-months of supply for the 5th month in a row. For comparison, a balanced market is 4-6 months of inventory. Last year at this time, inventory was 0.8 months. Going back to January, 2020, pre-pandemic, inventory was 2.2 months, another sign we are moving back toward a more normal market.
Average and Median Home Price: While demand remains high, the supply of homes still is not sufficient to satisfy all buyers. We saw a decrease in the average price of homes in the entire metro area from $586,000 to $532,900 – a 9.2% drop from this time last year. However, the median price of metro area homes is now $489,500, down from $512,000 at this time last year decrease of 4.4%. This may be an indication that more lower-priced homes came on the market toward the end of 2022 as investors no longer wanted to be landlords, or simply wanted to cash out of their properties while prices were still high.
Days on Market: Although demand for homes remains high, higher mortgage interest rates and a more typical slowdown toward the end of 2022 have pushed the average number of days homes are on the active market to 65 days, up from 38 days in January 2022. Comparatively, the average days on market in January 2020 (pre-pandemic) was 74 days.
(Data and graphs provided by RMLS)
Bubble? What Bubble?
Two Reasons Why Today’s Housing Market Isn’t a Bubble
You may be reading headlines and hearing talk about a potential housing bubble or a crash, but it’s important to understand that the data and expert opinions tell a different story. A recent survey from Pulsenomics asked over one hundred housing market experts and real estate economists if they believe the housing market is in a bubble. The results indicate most experts don’t think that’s the case (see graph below):
As the graph shows, a strong majority (60%) said the real estate market is not currently in a bubble. In the same survey, experts give the following reasons why this isn’t like 2008:
- The recent growth in home prices is because of demographics and low inventory
- Credit risks are low because underwriting and lending standards are sound
If you’re concerned a crash may be coming, here’s a deep dive into those two key factors that should help ease your concerns.
1. Low Housing Inventory Is Causing Home Prices To Rise
The supply of homes available for sale needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued price appreciation.
As the graph below shows, there were too many homes for sale from 2007 to 2010 (many of which were short sales and foreclosures), and that caused prices to tumble. Today, there’s still a shortage of inventory, which is causing ongoing home price appreciation (see graph below):
Inventory is nothing like the last time. Prices are rising because there’s a healthy demand for homeownership at the same time there’s a limited supply of homes for sale. Odeta Kushi, Deputy Chief Economist at First American, explains:
“The fundamentals driving house price growth in the U.S. remain intact. . . . The demand for homes continues to exceed the supply of homes for sale, which is keeping house price growth high.”
2. Mortgage Lending Standards Today Are Nothing Like the Last Time
During the housing bubble, it was much easier to get a mortgage than it is today. Here’s a graph showing the mortgage volume issued to purchasers with a credit score less than 620 during the housing boom, and the subsequent volume in the years after:
This graph helps show one element of why mortgage standards are nothing like they were the last time. Purchasers who acquired a mortgage over the last decade are much more qualified than they were in the years leading up to the crash. Realtor.com notes:
“. . . Lenders are giving mortgages only to the most qualified borrowers. These buyers are less likely to wind up in foreclosure.”
Bottom Line
A majority of experts agree we’re not in a housing bubble. That’s because home price growth is backed by strong housing market fundamentals and lending standards are much tighter today. If you have questions, let’s connect to discuss why today’s housing market is nothing like 2008.
It’s Not Just The Price – Home Buying Competition Goes to a 2nd Level
We know Portland’s housing market is competitive. We have lots of people looking to buy a home and not enough homes to satisfy them all. So many sellers are receiving multiple offers for their homes and choosing among hopeful buyers. That’s where the second level of competitiveness comes in. Not only are buyers competing with price for the few homes that come on the market, they are competing among themselves to be sure they present the best buyer situation for the seller to consider.
Lending Tree just released its comparison of metro areas with the most competitive buyers and Portland comes in at #4, behind San Jose, CA, San Francisco, CA and Raleigh, NC. San Diego, CA joins Portland in the #4 position.
What makes a buyer more competitive? According to Lending Tree, credit scores, percentage of the purchase price used as a down payment, and patience to shop around for the best mortgage. Buyers in the most competitive home-buying markets have higher credit scores, are offering to pay larger down payments, and are looking for the best loan package available.
When sellers are mulling over the various offers received for their home, they tend to look beyond the total purchase price. They want to know that the buyer is putting some money at risk when buying the home – is the buyer putting its own “skin in the game” or simply playing with “other people’s money?”. As a result, it is often difficult to compete with an all cash offer. Beyond the all cash offers, risk is also reflected in both the earnest money and the total down payment. The seller also wants to know that the buyer’s lender is reliable – a lender with a good reputation for closing transactions smoothly and easily.
When you’re ready to make your offer, be sure you are presenting the best picture of yourself as a buyer.
Portland Metro Area Real Estate Inventory/Median Home Price/Days on Market Through February 2021
Portland Metro Area Real Estate Inventory/Median Home Price/Days on Market Through February 2021
Here’s an overview of the Portland, Oregon residential real estate market as of the end of February, 2021. If you have any questions about your property or the market in general, let’s set up a time to talk.
Inventory: The Sellers’ market continues and for the 2nd month in a row the Portland metro area has a 1-month inventory of homes available for sale. With the high demand among buyers, this means that the current homes for sale will be sold and/or under contract within one month. For comparison, a balanced market is 4-6 months of inventory. Last year at this time, inventory was 2.2 months; and in 2019, we had 3.3 months of inventory.
Median Home Price: The continued high demand for homes pushed the average home price in the metro area to $528,500, a 14.8% increase over February 2020. The median price of metro area homes is now $470,000, up from $407,500 at this time last year, and increase of 15.3%.
Days on Market: The low inventory of homes, interest rates below 3% for the first two months of the year, and continued high demand for homes has pushed down the number of days homes are on the active market. The average days on market has dropped from 68 days in February 2020 to just 42 days in February 2021.
(Data and graphs provided by RMLS)
Buying and Selling Homes and Protecting Against Coronavirus
Here’s what I’m doing in my business to protect my clients, myself, other Realtors and their clients, and our community against the spread of coronavirus.
We are all concerned about controlling the spread of coronavirus in our communities, around the country and around the world. We are all making sacrifices to reduce the likelihood of contracting or spreading the virus and #FlattenTheCurve. However, many people still have a need to be active in the real estate market. Some buyers are facing an expiring lease, or must reinvest the proceeds from a prior sale to avoid unwanted tax consequences. Some sellers are forced to move because their jobs are taking them to a new town or new state, while others have moved to assisted living facilities and must sell their home to cover the costs. Whatever the reason, I have found that some people need to buy or sell even at this difficult time.
So, here are the steps I’m taking in my business to protect against the spread of coronavirus:
For Sellers:
- If the sellers are living in the house, all showings are by appointment only, and I am present for each showing to ensure compliance with the steps below (and I will keep my distance while the visitors are in the house).
- Wearing my own disposable gloves and shoe covers, I turn on all the lights in the house prior to the scheduled visit, and turn off the lights after the visit, in order to reduce the need for others to touch the switches.
- I give every visitor disposable gloves and shoe covers to where during their visit, and provide a trash can at the front door for proper disposal. This will give comfort to the seller that the guests are not tracking any infection into the house, and they will be touching doorknobs, cabinets and drawers with gloves, not their bare hands. This will also allow visitors to open doors, cabinets and drawers with less worry about coming in contact with the virus.
- I wipe down all doorknobs, counters, faucets and light switches after the guests leave the house.
- Open Houses – Following the recommendation of the Oregon Association of Realtors, and in line with the ban in Seattle, I am not hosting open houses at this time. I will not be surprised if Oregon implements a statewide ban on public and broker open houses in the near future.
For Buyers:
- I contact the listing agent and ask what measures they and the sellers have taken to protect visitors to the house, and then discuss the response with my buyers to be sure they are comfortable.
- I ask my buyers to drive themselves to each property and meet me there so we don’t put each other at risk.
- I provide disposable gloves and shoe covers for each person and for each property.
Social Distancing is a term we have come to know too well in the past few weeks. Embrace the concept, keep washing your hands, and take care of yourself and your families.
Where Did Americans Move in 2018? Oregon is still high on the list!
![Where Did Americans Move in 2018? [INFOGRAPHIC] | MyKCM](https://joncohenrealty.com/files/2019/02/MovingAcrossAmerica2019-STM.jpg)
[INFOGRAPHIC]
![Where Did Americans Move in 2018? [INFOGRAPHIC] | MyKCM](https://files.mykcm.com/2019/02/15061542/MovingAcrossAmerica2019-STM-1046x1354.jpg)
Some Highlights:
- Every year United Van Lines conducts their National Movers Study by tracking their customer’s movement state-to-state over the course of the year.
- While Vermont claimed the top spot, Oregon slotted into the #2 ranking of states with the highest percentage of inbound residents.
- The most common response for why someone relocated to another state was for a new job or company transfer.
Excited About Buying A Home This Year? Here’s What to Watch
As we kick off the new year, many families have made resolutions to enter the housing market in 2019. Whether you are thinking of finally ditching your landlord and buying your first home or selling your starter house to move into your forever home, there are two pieces of the real estate puzzle you need …
