It’s that time again for your monthly newsletter! Notice QR codes seem to be back? While I like QR codes and think they are handy I sure hope we all can “experience” some of the beautiful places the Pacific Northwest has to explore in person and soon!
Buying a home is a big part of the American dream and one of the most important decisions, and major investments, anyone can make. Many on-the-fence heroes are wondering: “Should I buy a house in 2018, wait until next year, or simply continue renting?”If the real estate market is your barometer, there are several key indicators to investigate:
Supply and demand plays a role. When there are not many homes for sale (low inventory), this often means home prices are higher, and the market becomes more competitive for buyers. This is the case in 2018. However, inventory levels have been steadily increasing June-August this year, and actually surpassed August 2017 levels. If inventory levels continue to increase, that’s a good sign for buyers for the remainder of 2018.
Inventory of homes for sale will affect pricing. More homes for sale will typically drive down prices, where as low inventory of homes for sale typically means there is higher buyer demand, and it will usually push prices up. This is the case in 2018 where most markets are experiencing low inventory and higher prices. The existing home price increase in August 2018 marks the 78th consecutive month of year-over-year price gains according to the National Association of Realtors. Some early estimates for 2019 show that home prices will continue to increase around 3% in most markets. Great if you’re selling a house, but challenging if you’re buying. It makes buying in 2018 look even better.
House prices typically drop the longer a home stays on the market. When this happens, it’s a good sign the market is cooling off or correcting. This year, in most markets, homes have sold relatively fast. This means potential buyers need to have their ducks in a row so they can act fast on the home they want.
According to Realtor.com, it’s the perfect time to buy a house because fall and winter tend to be better for home buyers, and this year is no exception. Housing inventory is on the rise, and that may mean lower prices and more bargaining power for buyers. That, combined with sellers who are anxious to get the sale done before the holidays, makes fall and winter a great time to buy.
The interest rate is a big topic of conversation this year, and probably one you’ve kept top of mind when asking, “Should I buy a house in 2018?” The Federal Reserve has raised interest rates a couple of times this year. Two or three more rate hikes are being predicted, which may mean a more expensive mortgage for you. In September, the rate for a 30-year, fixed-rate mortgage jumped to 4.88 percent, which is the highest level for the 30-year mortgage since 2011, according to Bankrate. But, you need to understand this is still well below the average over the past 45 years outlined below with FreddieMac data since 1972.
Trying to time your home-buying decision to take advantage of low interest rates or a buyer’s real estate market are smart home-buying strategies, but the real question is: Is it the right time for you, personally, to buy a house or maybe it would be better to rent?
Some of you may not be a current home owner and are probably asking yourself, “Should I buy a house in 2018 or rent?” In order to figure out whether it would be better to rent or buy a house, consider these factors in addition to the current interest rate and real estate market:
The interest rate can be as low as it’s ever going to go, but if your credit score is shaky, you’re not going to be able to take advantage of that. People with lower credit scores pay higher interest rates, and the amount can add hundreds to your monthly mortgage payment. Improving your score, no matter what the market is doing currently, is the smarter way to go.
If you haven’t checked your credit lately, you might want to take a look at it. Last year, credit reporting companies announced they were changing the way they handle negative information, resulting in many people seeing a spike of up to 40 points on their credit score. This overhaul was caused by the Consumer Financial Protection Bureau, which found problems with the reporting of collections and tax liens and as a result, that data has been removed from millions of credit reports.
However, particularly for home buyers, a tax lien or civil judgement can still interfere with your ability to get a loan. LexisNexis Risk Solutions found that people who have a tax lien or judgement are five and a half times more likely to go into pre-foreclosure or foreclosure, so mortgage lenders may well pull a LexisNexis report to find out, even if it no longer appears on your credit report.
FICO scores (credit scores) range from 300 to 850. If yours is 700 or above, you’ll qualify for a better interest rate on a loan, so that’s the score you’re shooting for.
If your score is less than 650, here are some ways to improve it:
Most financial experts agree that your housing costs should be no more than 30 percent of your income. Can you find an affordable home based on what you’re earning now? Also look at your debt-to-income ratio. If you’ve got a high amount of debt and a relatively low income, it will be more difficult to get a home loan. Pay down your debt before applying.
However, there has never been a better time to increase your income by finding a new job. Unemployment is at an 18-year low, which means it’s a job seeker’s market out there. Take a look at the average salary range for your position in your area to gauge how your employer stacks up.
Experts recommend putting down 20 percent or more. Why? There are a few reasons. If you put less than 20 percent down, you’ll have to pay private mortgage insurance, which, on a $300,000 loan, will cost you an extra $250 each month. Another reason to make a larger down payment is to protect yourself in the event that you have to move shortly after you purchase the home, if you get a new job in another city or if your spouse is transferred, for example. With a small or nonexistent down payment, you might find yourself underwater, owing more than you can sell the home for, if real estate prices have fluctuated.
In addition to the down payment, you’ll need money for closing costs. According to Motley Fool, you can expect to pay around 2 to 5 percent of the value of the property. So on that same loan of $300,000, you’ll pay in the neighborhood of $6,000 for closing.
And, if you’re still asking yourself, “Should I buy a house in 2018,” don’t forget to consider having enough cash on hand to cover your mortgage if you or your spouse loses a job, and have enough in savings for repairs if something goes wrong or breaks.
Bottom line, do your homework. Review these items and get to know your personal situation so you are prepared to discuss everything with a real estate and mortgage professional when your ready, whether it’s in 2018 or not.
Interested in doing a deeper dive? Here are some additional resources:
8 Advantages to Buying a House
First Time Home Buyer Tips
Wondering How to Get a Mortgage and Stop Paying Rent?
Financial Considerations When Buying a Home
Rent or Buy: The Great Debate
Ready to speak with a specialist, committed to heroes like you? Sign up and speak with one of our real estate or mortgage specialists in your area to learn more about how they can help you through the home-buying process and maximize your hero savings. Our heroes save, on average, more than $2,400 if they use our local specialists to purchase their home. There’s no obligation, and we guarantee the most hero savings among all national programs.
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Latest report from the NWMLS
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Jen Murrweiss- www.snohomishcountyhomesinc.com
KIRKLAND, Washington (Jan. 5, 2017) – Like many other months of 2016, December was frustrating for buyers across Washington state as they encountered depleted inventory and rising prices. Post-election hikes in interest rates – with more on the horizon — added to would-be homeowners’ worries.
Northwest Multiple Listing Service statistics for December show year-over-year drops in new listings, but gains in pending sales, closed sales and prices. Pending sales (mutually accepted offers) in the four-county Puget Sound region reached their highest level since 2005.
“The data just keep telling the same story – low inventory and increasing prices,” remarked Mike Grady, president and COO of Coldwell Banker Bain. “As one of our brokers put it, ‘Sellers received an awesome Christmas gift in December, but buyers, only a lump of coal.'”
Brokers added 4,217 new listings to the inventory during December to bring the supply up to 10,571 listings. The volume of new listings surpassed the year-ago figure of 4,041, but supply still fell, dropping to only 1.4 months for the Northwest MLS market area covering 23 counties. Both King and Snohomish counties reported less than a month of inventory.
Robert Wasser, owner/broker at Prospera Real Estate in Seattle, said his analysis of the MLS data indicates the supply of single family homes for sale in King County just hit a post-recession low. “The only other time supply fell below one month was around this same time a year ago,” noted Wasser, a member of the Northwest MLS board of directors.
At month end, MLS figures show inventory (10,571 listings) was nearly 15.6 percent below year-ago levels (12,522 listings), with about 90 percent of the selection being single family homes.
Seventeen of the 23 counties in the MLS report had double-digit drops in active listings at the end of last month compared to December 2015.
Northwest MLS members reported 6,401 pending sales during December, up from 5,970 for the same month a year ago for a year-over-year gain of 7.2 percent.
“The housing market remains frenzy hot on a seasonal basis,” exclaimed J. Lennox Scott. Noting sales activity was substantially higher than the number of new listings, he said such conditions “continue to foster a competitive market where homebuyers are just waiting for the next new listing to come on the market.”
Commenting on strong sales in the Central Puget Sound region, Scott noted King County recorded the biggest year-over-year jump in pending sales of single family homes, surging nearly 11.3 percent, well ahead of Kitsap (up 4.5 percent), Pierce (up 4 percent) and Snohomish (up 3.2 percent).
“Buyers pursued homes aggressively all through November and December with little to no slowdown amid fears of rising interest rates and worsening inventory levels,” said MLS director George Moorhead. “Inventory levels have dropped to their lowest level, which makes buyer frenzy even more intense as prices approach double-digit appreciation,” he added. Moorhead, the designated broker at Bentley Properties, calculates buyers have lost $37,000 in buying power due to interest rate increases. He likens the situation to having two cars, “one going forward, and one going in reverse. The gap is widening too fast for some buyers.”
Closed sales also finished on a strong note with brokers reporting 7,575 completed transactions during December. That’s up more than 6.8 percent from a year ago when members notched 7,091 closed sales.
Prices area-wide also continued trending upward, rising nearly 9.2 percent from a year ago. The overall median price for single family homes and condominiums that sold during December was $343,950; a year ago it was $315,000.
King County prices jumped 12.2 percent, from $450,000 in December 2015 to $505,000 for last month’s sales. For single family homes (excluding condominiums) the median price for December’s sales was $550,000, unchanged from October and November. Prices peaked this year in King County in June, reaching $573,522.
Condo sales slowed compared to a year ago, due at least in part to a sharp drop in inventory (down more than 19 percent). Pending sales were essentially flat (up 0.73 percent). Closed sales for December slipped nearly 6 percent, while prices on last month’s completed sales of condos rose 9.8 percent. The median price on last month’s closed sales of condos was $280,000. Condo prices in King County jumped more than 12 percent, from $279,975 a year ago to last month’s sales price of $314,000.
“Looking ahead to 2017, the Seattle market will continue to perform well, even with the expected interest rate increase,” stated OB Jacobi, president of Windermere Real Estate. The regional economy is in full stride, he noted, adding, “This will continue to create increased demand for housing across the board. Price growth should start to cool a little as inventory levels rise modestly, but overall, 2017 should be another banner year for the housing market.”
Consumers should expect prices to continue edging upward, suggested Moorhead. “NAR indicates we are 70,000 units short of meeting the housing needs in the Puget Sound area. Builders are just flat out running out of urban land to work with,” he said. Moorhead believes rising costs for construction labor are the driving force for price increases. Builder confidence continues to grow, reaching its highest levels since 2005, he noted, but added, “Naturally, some trepidation is heard as some feel this level of growth in the market is completely unsustainable.”
Grady believes the pattern of low inventory and increasing prices will continue. “We believe it is a predictor for what to expect throughout 2017,” he commented. “There’s simply not enough new construction to fill the needs of new employees being hired both locally and new to the state. The key is employment,” Grady continued, saying “There’s no reason to think that a new administration will cause employment to slow down; rather, it’s more likely we’ll see it increase in the Puget Sound region so we’re off to another strong start in 2017,” he stated.
Scott, the chairman and CEO of John L. Scott, expects a higher number of new listings will start to show up in mid-February – “just in time for the spring housing market rush.”
Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of nearly 2,100 member offices includes more than 25,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.
Snohomish County Statistics as of November 2016
November is known for being on the cold side and normally signs of a slowing Real Estate market as everyone starts to buckle in for the winter and holidays. Not this year however! November was smoking hot with only 1.4 month of inventory and buyers were snatching up everything they could. I saw multiple offers skyrocketing and bidding wars with some homes being bid up 100K. The picture to the left is a Bothell home that had 32 offers and was bid up 95k! Crazy!!
Here are your local inventory stats.
Active Inventory
+17% November 2016 vs. November 2015
1111 available homes currently on market -800 vs. last month.
Pending Transactions
Up 1% November 2016 vs. November 2015
1528 units -88 vs. last month
Sold Transactions
+27%!!! November 2016 vs. 2015
1452 units -182 than last month
Days on Market
Snohomish County Active to pending 33 days vs. 47 a year ago up 7 days from last month.
Median home price in Snohomish County 399,000 +14% last year. Up $7,000 from last month.
Area price % based on last Quarter
All percentages are up and also include new construction
Bothell + 16%, Edmonds/Lynnwood +17%. Everett/Mukilteo +12%
Snohomish/Monroe+ 11%. Lake Stevens/Granite Falls + 17%.
Marysville +14%
King County Median home prices are $523,000 + 16% over last year and up $6k from last month.
Woodinville area Median price is $550!!
Looking to buy? Looking to sell? Or know of anyone who might? I am here to personally assist you. Giving exceptional service and donating to Seattle Children’s on your behalf. Join my growing group of clients involved in helping families when they need it most. show less
Snohomish County Homes INC.com
Sneak Peak! Do you know there are some great bank owned homes from Fannie Mae coming soon? Here is one in Bothell that will hit the market in a few weeks. 1994 Rambler with nice tile floors, island kitchen, gas fireplace, 3 bdrm/ 2 bath/ 1632 sq ft. List price will be under $340K. Want more info? Hurry and ask BEFORE it hits the market.
This one is going on tomorrow! Turn Key FHA approved town home ready for new owner! Located in a small gated community surrounded by new homes & natural growth protected area. This Private & spacious home sits in back of the complex backing up to green belt. W/ Large living space of 1128sq. ft. & a 525 sq. ft garage w/additional storage you have room for everything. Features lots of large windows, hardwoods in kitchen & bath, gas stove, gas fireplace, gas heat & all appliances. Min. to Everett Boeing, Muk. Schools & Shopping. $165K
WASHINGTON — Are you on the home-buying sidelines this spring because you think you won’t be able to qualify for a mortgage? Do you know what sort of FICO credit scores are being accepted by lenders at the moment — they’re lower than they were a year ago — and whether yours could now be good enough?
You may be part of the surprisingly large crowd of folks who fear the home-loan unknown. A new national consumer survey found that 56% of potential purchasers of homes say they’re out of the market because they don’t want to face the possibility of rejection by lenders. Even 30% of current homeowners believe that they wouldn’t pass muster today.
Using a statistical sample of 1,055 Americans 18 and older, survey research firm OmniTel, polling on behalf of mortgage lender LoanDepot, documented widespread uncertainty and lack of specific knowledge about current market conditions when it comes to qualifying to buy a home. According to the survey, 74% of potential buyers who would need a mortgage concede that they have not scoped out the current market or taken the steps needed to qualify.
Many potential buyers believe that they need near-perfect credit scores to get a home loan. Half of those surveyed said they had no idea what minimum FICO score is needed for a mortgage, and nearly a fifth (18%) said the minimum score might be 770 or higher.
Debt-to-income ratios are another insurmountable obstacle in many potential buyers’ eyes — enough so that they don’t even try to obtain a mortgage.
Most lenders use two forms of debt ratios: a “front end” ratio that compares the monthly costs of the proposed new mortgage and other housing expenses with the applicant’s monthly income, and a “back end” ratio comparing all recurring monthly debt obligations — housing expenses, student loans, credit cards and the like — with the applicant’s monthly income. Roughly a third of potential buyers on the sidelines believe that their debt ratios are too high.
But what’s the statistical reality on debt ratios, FICO score minimums and down payments? What are lenders approving?
The best answers come from a company called Ellie Mae, whose loan origination and tracking software is widely used by lenders. Every month Ellie Mae analyzes a huge sample of new mortgage originations nationwide and issues an overview report rich with the sort of detail that buyers sitting on the sidelines could use.
Here’s what it found in its report on March:
•Thirty-three percent of new loans last month had borrower FICO scores below 700. A year ago it was just 27%. (FICO scores max out at 850, which is considered excellent credit; applicants with scores under 700 present higher credit risks to lenders.) Federal Housing Administration-insured home purchase loans had an average FICO in March of 684. Conventional mortgages, those designed for purchase by investors Fannie Mae and Freddie Mac, still have relatively high FICOs — they averaged 755 in March, but that was down slightly from 759 a year before. Lenders are doing far fewer refinancings this year, so they are loosening up on FICO minimums for purchasers.
•Debt ratios also are more generous than many sidelined potential borrowers probably imagine. The FHA’s average front-end (housing costs) ratio last month for purchase loans was 28%. In other words, if your projected housing and mortgage-related costs represent 28% of monthly income, you’re average. Fannie Mae and Freddie Mac loans averaged 22% ratios on the front end. Back-end (total recurring debt) ratios for FHA averaged 41%. For Fannie and Freddie it was lower — 34%.
•Down payments can be small if that’s what you need. FHA’s average down payment last month for home purchases was 5%, but many borrowers put down just 3.5%. Fannie and Freddie allow 5% down as well, provided that you can pay mortgage insurance premiums. VA loans can go to zero down if your veterans status allows you to qualify. Department of Agriculture home buyer loans, which are designed for people who live in small towns, also allow for no down payments.
The point here: If you’re on the sidelines, check out what’s really going on in the mortgage market. There may be more opportunities — even in an era of tighter underwriting — than you think.
Article by Ken Harvey
Jen Murrweiss RE/MAX Elite 