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.

 

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Trends, local news & Real Estate dose of Awesomeness!

Check out these articles for great information about our community and the real estate industry.

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Real Estate news you can use!

Check out these articles for great information about our community and the real estate industry.

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washington.jpg

Monday’s Real Estate Update

fort-lawton-view_600

LOCAL news 

The historic residences in Seattle’s Discovery Park that will soon be on the market have mountain and water views. I loved this place when I was a kid and will definitely be touring these homes.

Soon you’ll be able to buy one of the historic homes in Discovery Park

Snapshot of Snohomish and King County

In order below: County, New listings, total active, pending sales, closed sales, Average Price, Median Price. month of inventory and same time last year inventory. Read the full information from the NWMLS.

Snohomish 1,083 1,918 1,237 686 $341,735 $315,000 2.80 3.50
King 2,518 3,536 2,788 1,688 $487,745 $390,000 2.09 2.46

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National Real Estate News

Posted: 24 Jul 2014 09:31 AM PDT

The new home sales report for June – combined with the downward revisions for previous months – was very weak.

The Census Bureau reported that new home sales this year, through June, were 225,000, Not seasonally adjusted (NSA). That is down 4.3% from 235,000 during the first half of 2013 (NSA).

Maybe sales will move sideways for a little longer, but remember early 2013 was a difficult comparison period. Annual sales in 2013 were up 16.3% from 2012, but sales in the first four months of 2013 were up 26% from the same period in 2012!

New Home Sales 2013 2014

Click on graph for larger image.

This graph shows new home sales for 2013 and 2014 by month (Seasonally Adjusted Annual Rate).

The comparisons to last year will be a little easier in Q3, and I still expect to see year-over-year growth later this year.

And here is another update to the “distressing gap” graph that I first started posting several years ago to show the emerging gap caused by distressed sales.  Now I’m looking for the gap to close over the next few years.

Distressing Gap

The “distressing gap” graph shows existing home sales (left axis) and new home sales (right axis) through June 2014. This graph starts in 1994, but the relationship has been fairly steady back to the ’60s.

Following the housing bubble and bust, the “distressing gap” appeared mostly because of distressed sales.

I expect existing home sales to decline or move sideways (distressed sales will slowly decline and be partially offset by more conventional / equity sales).  And I expect this gap to slowly close, mostly from an increase in new home sales.

Note: Existing home sales are counted when transactions are closed, and new home sales are counted when contracts are signed. So the timing of sales is different.

 
New Home Sales decrease to 406,000 Annual Rate in June

Posted: 24 Jul 2014 07:13 AM PDT

The Census Bureau reports New Home Sales in June were at a seasonally adjusted annual rate (SAAR) of 406 thousand.

May sales were revised down from 504 thousand to 442 thousand, and April sales were revised down from 425 thousand to 408 thousand.

Sales of new single-family houses in June 2014 were at a seasonally adjusted annual rate of 406,000, according to estimates released jointly today by the U.S. Census Bureau and the Department of Housing and Urban Development. This is 8.1 percent below the revised May rate of 442,000 and is 11.5 percent below the June 2013 estimate of 459,000.

New Home Sales

Click on graph for larger image.

The first graph shows New Home Sales vs. recessions since 1963. The dashed line is the current sales rate.

Even with the increase in sales over the previous two years, new home sales are still close to the bottom for previous recessions.

The second graph shows New Home Months of Supply.

New Home Sales, Months of Supply

The months of supply increased in June to 5.8 months from 5.2 months in May.

The all time record was 12.1 months of supply in January 2009.

This is now in the normal range (less than 6 months supply is normal).

“The seasonally adjusted estimate of new houses for sale at the end of June was 197,000. This represents a supply of 5.8 months at the current sales rate.”

New Home Sales, Inventory

On inventory, according to the Census Bureau:

“A house is considered for sale when a permit to build has been issued in permit-issuing places or work has begun on the footings or foundation in nonpermit areas and a sales contract has not been signed nor a deposit accepted.”

Starting in 1973 the Census Bureau broke this down into three categories: Not Started, Under Construction, and Completed.

The third graph shows the three categories of inventory starting in 1973.

The inventory of completed homes for sale is still low, and the combined total of completed and under construction is also low.

New Home Sales, NSA

The last graph shows sales NSA (monthly sales, not seasonally adjusted annual rate).

In June 2014 (red column), 38 thousand new homes were sold (NSA). Last year 43 thousand homes were also sold in June. The high for June was 115 thousand in 2005, and the low for June was 28 thousand in 2010 and 2011.

This was well below expectations of 475,000 sales in June, and sales were down 11.5% year-over-year.

#nationalrealestatenews  #snohomishcountyhomesrealestate
Information obtained from http://www.calculatedriskblog.com

 

 

 
 

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Just for fun! Take a look at this Everett Home listed for Sale.

What a view of the Cascades and the entire Snohomish Valley!  Can you imagine waking up each morning and having coffee on the deck to this? Its one of the very many scenic views our community offers and is the reason I call this area home.

 View6

 #snohomishcountyrealestate

#snohomishcountyhomesforsale

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