Should I Buy a House in 2018?

Young Woman Eating On Couch Thinking About Buying HouseBuying 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?”

Look at House Market Key Indicators

If the real estate market is your barometer, there are several key indicators to investigate:

Inventory Levels

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.

Monthly Total Existing Home Inventory

Home Pricing History

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.

Monthly Median Existing Home Price

Number of Days Home is On the Market

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.

Market Seasonality

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.

Interest Rates

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.

Annual Average Mortgage Rate 30 Year Fixed Mortgage Over Past 45 Years

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?

Renting vs Buying a House

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:

How is Your Credit?

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:

    • Pay down your credit card bills to show only 10 percent of your limit. If your card’s limit is $1000, your balance should be no more than $100. Doing this will increase your score almost immediately.
    • Make all of your payments on time. One late payment can drop your score up to 100 points, but on-time payments will raise it.
    • Check your credit report for errors. If negative information exists and you don’t recognize the account or the charge, dispute it.
    • Never close a credit account. Even if you don’t use it, keep it open. Closing an account can negatively impact your score.
    • If you have an account in default, request a “pay for deletion.” It’s an agreement made with your creditors that you’ll pay a debt in full or an agreed-upon amount in exchange for them deleting the negative information on your credit report. Simply paying off your debt will not raise your score unless the creditor deletes it from your record.

How is Your Income?

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.

Do You Have Enough for a Down Payment?

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.

Do You Have Enough for Closing Costs?

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.

 

BLuke Feldbrugge

Snohomish County Statistics

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Active Inventory

Prices are up 8% over last year same time September 2018 vs. September 2017.

However, we are down $2,000 in pricing from last month (August) The market seems to be making an adjustment and normalizing a bit from the huge jumps we have been seeing. While it is still a sellers’ market we are seeing more negotiations, inspections are back and the NWMLS reports seeing $10-20k price drops on recently listed homes.

We had 1856 brand new listings in September that is down -140 from August.  

Pending Transactions

Down -18% September 2018 vs. September 2017

1460 units went pending last month that is 139 less however than August.  

Sold Transactions

-16% September 2018 vs. September 2017.

1382 units sold down 197 more than last month. Why? Buyers are leery and taking their time.

Days on Market

Snohomish County Active to pending 27 days vs. 24 a year ago. Up 4 days more than last month This is the average.

Median home price in Snohomish County $476,000 + 8% from last year.  Down 13k from last month.

Median home price in King County $630,000 +8% from last year. Down $25,000 from last month.

Median home price in Woodinville is $771,000 + 21% from last year. Down $11,000 from last month.

Months of inventory

If no additional homes would be put on the market, there would be no inventory left after 2.21 months in Snohomish County. In King County that figure is 2.93 months. A balanced “normal” market is 3-6 months. Buyers’ market more than 6 and Sellers less than 3 months. This is the highest stats we have seen in a few years. In 2017 we had under 3 weeks inventory throughout the year. 

I am including the Current latest press release from the Northwest Multiple listing service that I thought you might like to see.  

Balance “finally returning” to housing market as buyers welcome more choices, moderating prices

Latest Press Release October 4, 2018 

KIRKLAND, Washington (October 4, 2018) – Housing inventory continued to improve during September while the pace of sales slowed in many counties served by Northwest Multiple Listing Service. “Balance is finally returning to the market, and with it, slowing home price growth,” stated OB Jacobi, president of Windermere Real Estate.

A new report from Northwest MLS shows double-digit increases in inventory in several of the 23 counties it serves, led by a 78 percent year-over-year gain in King County. Despite improving selection in the central Puget Sound region, a dozen counties reported drops in the number of active listings compared to last year.

System-wide, the month ended with 2.56 months of supply of single-family homes and condos, well below the 4-to-6 months analysts use as an indicator of a balanced market between sellers and buyers. The current level is the highest since February 2015 when member-brokers reported 3.56 months of inventory. In King County, supply exceeded two months for the first time since January 2015.

Condo inventory remains sparse, with only 0.34 months of supply area wide, despite improving inventory (up nearly 70 percent from a year ago). The shortage is expected to ease as construction progresses on several recently-announced high-rise projects.

Brokers added 10,458 new listings of single-family homes and condos to the MLS database during September, slightly more than the year-ago figure of 10,120. At month end, buyers could choose from 19,526 listings, a 22.9 percent improvement from twelve months ago when selection totaled 15,888 listings.

Commenting on the wider selection, Mike Grady said buyers “are at long last now seeing properties that stay on the market longer.” Listings that are priced appropriately, “and not based on the feverish market we saw just a few months ago are still selling quickly, and home prices are still showing 8 percent appreciation year-over-year – more than double the rate of inflation,” added Grady, the president and COO of Coldwell Banker Bain.

With improving inventory, some brokers suggest the market may be showing signs of pausing, if not softening. A market shift may be under way, but they believe activity will stay strong.

  1. Lennox Scott, chairman and CEO of John L. Scott Real Estate, encouraged would-be buyers to “put extra focus on October,” which he described as the last great month for new listings until March 2019. “Over the winter, new monthly resale listings will lower by approximately 50 percent compared to summer months.” He also noted interest rates, currently in the upper 4 percent, are projected to rise in the coming months.

“This is a more traditional yearly market cycle taking the place of the unusually overheated real estate market of the past several years,” said John Deely, principal managing broker at Coldwell Banker Bain.

“Given there doesn’t appear to be an end in sight related to the region’s job growth, with employees moving here and not enough units being built to accommodate them, we believe this market normalization will continue,” stated Grady. (For every six new jobs created in the Seattle/Tacoma/Bellevue region, there was only one single-family permit issued, according to data from the National Association of REALTORS®.)

Northwest MLS director Robert Wasser reported the recent re-balancing of the market “has led to fewer listings with offer review dates and pre-inspections,” which he said is a positive for buyers hoping to retain their contingencies. His analysis of MLS statistics indicated the median marketing time in King County has risen to 14 days. Also, prices for closed sales are at 100 percent of their list price for a third straight month.

“In the South Sound the market has shifted into neutral and is idling at the moment,” commented Dick Beeson, principal managing broker at RE/MAX Professionals in Gig Harbor. Noting inventory has improved in both Pierce and Thurston counties “but nowhere near what King County has experienced,” Beeson said buyers can see more homes available for sale for the first time in three years. “Buyers are taking deep breaths as they survey this new territory.”

Beeson thinks the “new normal” at two-plus months of inventory is “healthy and long anticipated.” He also believes the steep curve of ever-increasing prices and scarcity of properties has crested.

Ken Anderson, another Realtor in South Puget Sound, noted the bigger selection for buyers is good timing with interest rates on the rise. “We are finding buyers eager to get into homes this fall to take advantage of the still incredibly low borrowing rates.” Sellers need to be mindful of softening sales, he suggested, adding “they’ll have to keep a sharp eye on this trend and have a pricing strategy to match.”

Anderson, the president/owner and designated broker at Coldwell Banker Evergreen in Olympia, said sales remain robust, describing last month as the “second best September on record for closed sales.” Even though pending sales “softened a bit” he said they remain high by historical standards and says “we remain solidly in a seller’s market” but are trending toward balance. “This is welcomed as prices here have risen much faster than our market’s long-term trend line.”

Pending sales (mutually accepted offers) were down nearly 14 percent area-wide, with about half the counties in the MLS report showing double-digit declines. Members notched 8,913 pending sales last month, a slippage of 1,435 sales when compared to the same month a year ago.

Closed sales also reflected slower activity. Members reported 7,630 completed transactions during September, down 18.6 percent from the year-ago volume of 9,371. Through nine months, this year’s closings are down 4.4 percent compared to 2017.

Prices across the 23 counties in the Northwest MLS report are up about 5 percent from a year ago, with ten counties reporting double-digit gains. The median price for last month’s completed sales of single-family homes and condos system-wide was $400,000, up from the year-ago median price of $381,000. Last month’s price was down $15,000 (-3.6 percent) from August and $25,000 (-5.9 percent) from the year’s peak (so far), which occurred in June when the median price was $425,000.

For the four-county Puget Sound region, the median price for September’s completed transactions was $455,000, up about 5.8 percent from a year ago.

Despite slower sales, Northwest MLS spokespeople remain upbeat.

“The housing market close to the job centers has gone from a historic extreme-frenzy market in the spring down a few levels of hotness to a strong level of pending sales activity for new listings,” said Scott.

“Rising interest rates and slowing home prices are affecting the psychology of the region’s housing market and causing some to speculate that we’re heading towards another housing crash, but that’s definitely not the case,” commented Jacobi. Noting it’s been more than 15 years since this area experienced a “normal” market, Jacobi suggested “people have just forgotten what it looks like. As long as the local economy remains strong, there’s little cause for concern about the shift we’re experiencing.”

He believes “there’s little cause for concern about the shift we’re experiencing,” so long as the local economy remains strong.

Northwest Multiple Listing Service, owned by its member real estate firms, is the largest full-service MLS in the Northwest. Its membership of around 2,200 member offices includes more than 29,000 real estate professionals. The organization, based in Kirkland, Wash., currently serves 23 counties in the state.

 

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2018 Home buyer Trends

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2018 Home buyer Trends*

  • The US homeownership rate is 64.2%.
  • First-time home buyers made up 30% of all home buyers with buyers 37 years and younger to be the largest generational group of buyers with a median age of 31.
  • Recent buyers were categorized as following:

Married Couples=67%    Unmarried Couples = 8%

Single Females = 18%     Single Male = 7%

  • Thirty-seven percent of all buyers had children under the age of 18 living at home.
  • Buyers of new homes made up 15% and 11% of these new homes were buyers of age 37 years and younger while 21% were buyers of age 63 to 71.
  • The most common type of home purchased continues to be the detached single-family, which made up 83% of all homes purchased.
  • Senior-related housing accounted for 13% of buyers over the age of 50.
  • The typical size of home recently purchased was approx. 1,800 square feet with 3 bedrooms and 2 bathrooms. The size of home for buyers 38 to 52 years was typically larger homes at approx. 2,000 square feet, compared to the rest of the age group that purchased homes at a median of 1,800.
  • Heating and cooling costs were the most important environmental features for recent home buyers, with 34% finding these features very important.
  • Overall, buyers expect to live in their homes for a median of 15 years, while 18% say that they are never moving. For buyers 37 years and younger, the expected length of time in only 10 years compare to 20 years for buyers 53 to 62 years.
  • Among nearly all generations of home buyers, the first step taken was to look online for properties, except for buyers 72 years and older who contacted a real estate agent first.

 

*source 2018 National Association of Realtors Home buyer and seller generational trends

 

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800px_COLOURBOX2590232Researching schools and school districts? Ratings and Reviews. WA State School Report Cards – grading and stats for districts and individual schools
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