Posts Tagged ‘atlanta housing market’

The end of the seller’s market

October 2, 2018

I know it seems we are stuck in a seller’s market. It feels like an eternity at this point! I’ll be back to that theme in a moment, but right now… If you have been putting off buying a home because of fierce competition, now is a good time to look at the market again. Homes are staying on the market longer now than they have all year. There are fewer buyers out looking to purchase a home. This is the best opportunity for buyers so far in 2018!

Regarding 2018 as a whole though, and back to the theme of this post, there are too few homes on the market for the number of buyers wanting to own a home. Sellers tend to receive multiple offers, and can be picky when it comes to whom they choose to sell their home. According to a recent study by Zillow, the market will balance out in the near future.

Zillow’s study says there are signs that the inventory levels are beginning to get better (as I mentioned above), but the country is still dealing with the fallout of limited new construction over several years during the Great Recession. Expect to see conditions continue improving over the next year, and around 2020, Zillow expects the market to become a buyer’s market again. By then, Zillow expects new construction will have caught up to demand. As people move from their existing homes into the new construction, it will put more homes on the market for other people to buy/enter the home ownership market.

It is coming… not as quick as we may like it, but a more balanced market is on its way. In the meantime:

  • Remember there are a lot of myths out there when it comes to buying a home. For example, you do NOT need 20% down to purchase a home. For more on this, check out my previous post.
  • There are things buyers can do to make their offers more competitive. For more on this, check out Rodney Shaffer’s recent post.

Better days are coming, but that doesn’t mean you have to wait another year. If you are buying in the state of Georgia, contact me today. I can help you get prequalified to purchase your home, and we can discuss the variety of options to make your offer more competitive in this market.

 

Advertisements

Atlanta Home Market Update

September 26, 2018


A new report on the Atlanta housing market shows a significant decline in home sales, year over year, along with a much greater decline in Atlanta home sales as compared to the national housing market.  The number of August Atlanta home sales declined 7.1% from 2017 to 2018.  The national decline in home sales was only 1.1% for the same period.  The data shows varying results for different parts of the metro area:

  • Cobb County sales declined 9%
  • DeKalb County sales declined 8%
  • Clayton sales declined 17%
  • Gwinnett County reported a more than 10% sales decline
  • On the other hand, Fulton County sales increased 14%

Atlanta home prices continue to increase, even while the number of sales decrease.  One example of this is the Old Fourth Ward section of Atlanta.  From 2017 to 2018, the number of home sales declined 19%.  But at the same time, average prices in the Old Fourth Ward have risen by about 35%.

Atlanta’s housing challenge is an inventory shortage, especially at the lower end of the home price spectrum.  ReMax reported that the supply of homes listed for sale in metro Atlanta was down 13% in August as compared to August 2017.  Ultimately, buyers compete against each other for desirable homes and this forces prices up.

From my experience, it seems that homes priced under $300,000 have seen strong competition this year.  One client found a home priced around $260,000 in an attractive Gwinnett neighborhood.  My client’s offer was one of about 20 offers on this one house.  Some Realtor friends have told me about making offers on Atlanta condos where the listing agent received 12 – 15 other offers.

It is very tough for buyers to compete in this market.  I have several clients who have decided to put home ownership on hold until 2019.  It takes patience and persistence to keep going.

For pointers on how a lender can help a buyer compete, see this prior Mortgage Blog post:  https://wp.me/p1Gub-YJ.  Buyers should talk with Realtors about other ways to make their offers more attractive.  Effective ideas include:

  1. If cash is available, the buyer can offer to pay the purchase price regardless of the property’s appraised value.
  2. The buyer must have a flexible schedule to visit homes and make offers right when they hit the market.
  3. The buyer can consider writing a personal note to the seller explaining why the house is perfect.  (I’ve seen this work before.)

Experienced Realtors can offer more effective tips for winning the contract.  If you have a friend or coworker wanting to buy a home in Atlanta, ask if they want their lender to help them beyond financing a house by helping win the contract.  Then refer them to me.  We at Dunwoody Mortgage will do all in our power to help them win the contract and close on the purchase, and we will do it quickly too.


Credit scores on the rise

September 11, 2018

Some consumers credit scores are going up! A recent overhaul in the way the major credit bureaus factor in negative credit information is prompting millions of consumers’ credit scores to rise. The main reason? The removal of some collection items.

Over the past 12 months, collection items were removed from eight million consumers’ credit reports. The NY Federal Reserve said consumers who had at least one collection item/account removed from their credit reports saw on average an 11-point increase to their scores. Why the change in collection items being part of the credit score? Some collection categories often have mistakes/errors that lower potential buyers credit scores and keep them out of the borrowing market.

The three main bureaus (Equifax, Experian PLC, and TransUnion) all agreed to rework credit reports reports stemming from a 2015 settlement. In the settlement, some of the collection items removed were non-loan related items such as gym memberships, library fines, traffic tickets, and some instances of medical debt. This change would not include credit cards or loan related accounts. Those type of accounts that enter into a collection category will still negatively impact a potential home buyer’s credit score. any firms agreed to remove some non-loan related items that were sent to collection firms, such as gym memberships, library fines, and traffic tickets. They also agreed to strike medical-debt collections that have been paid by a patient’s insurance company. According to an article in the Wall Street Journal, those seeing the biggest boost to their credit scores are those with a score in the mid 600s.

This is a great move by the credit bureaus. Sometimes it is easier to prove that one owes money with the account in good standing, and harder to prove one no longer owes a debt. Some debts such as tax liens, credit card collections, back taxes, car/student loans in default, etc. are easier to prove the debt is actually in arrears. Arguing about a library account in a city one may have lived in 5 years ago becomes troubling and difficult to prove. While these accounts aren’t being removed from a credit report/history, they are being ignored when it comes to producing the credit score.

How the Lender Can Help Win the Contract

August 14, 2018


The last post covered reasons why we have such a sellers’ market in Atlanta real estate.  Now let’s cover how a lender can help win a contract.  We lenders have a few ways to help strengthen our buyers’ offers relative to competitors.

Firstly, many listing agents prefer to work with local lenders rather than the national and online lenders.  The Realtors also like the ability to communicate with local lenders – they can call us with any issues or questions and often get a faster response than with a national lender.  I once had a Realtor who was listing a home tell me, “We chose your client’s offer because they had a letter from you, and we know that you would make the closing happen on time.”  Trust is important and we local lenders work hard to build that trust in our markets.

Secondly, when my clients make an offer, sometimes the listing agent will call me to verify the information provided in the prequalification letter.  I’m always happy to talk with the agents, and I use this as a chance to actively promote my client’s strengths.  I once took a call from a Realtor on the Saturday of a holiday weekend.  When I answered she immediately responded, “Oh thank goodness!  A lender who works Realtor hours not bankers hours.”  We can be available on weekends and in the evenings to help our buyers.  I have volunteered to proactively call listing agents on my client’s behalf.  It helps to promote my client’s strengths.

The most powerful way a lender can help a buyer win a contract is to underwrite the buyer with a “to be determined” property — before the buyer actually makes an offer.  We fully underwrite the buyer, but without the property-specific details.  So there’s no appraisal, no title work, etc. (until a house is under contract).  This gives the ability to provide a letter stating that underwriting has already approved the borrower.  It also allows us to shorten the closing timeframe (since we don’t have to underwrite the buyer again) and potentially eliminate the financing contingency, which is standard on most home purchase contracts.  Having underwriting approval positions the buyer strongly relative to other offers with only prequalification letters.  The only offer stronger is a cash offer.  In competitive markets expecting multiple offers on listed homes, this approach can position the buyer to better win.

If you have a friend or family member who has been making home purchase offers and is frustrated about not winning, have them contact me.  We at Dunwoody Mortgage will do everything possible (from a lender perspective) to help them win.

 

A Seller’s Market – Thoughts on Why

July 26, 2018


The seller’s market continues on in the Atlanta area.  I have recently heard Realtors talking about their clients making offers on homes that have 12 – 15 competing offers.  One Realtor friend told me about a home that he listed last December.  The Realtor did painstaking research on the neighborhood and comparable properties.  The analysis said a fair price was $299,000.  The winning offer was $355,000!  That’s about 18% over the asking price.

So how did we get to this point?  According to a recent Wall Street Journal article, one key factor is that for over 10 years now, home construction has not kept pace with US population growth.  The article stated that current home construction per household is close to its lowest level in 60 years – since the late 1950’s.  In years past, this lower construction level was somewhat offset by the number of foreclosed homes available for purchase.  But that is no longer the case as foreclosure rates have decreased dramatically since the Great Recession.

In the Atlanta metro area, this housing “shortage” is compounded by population growth.  The Atlanta Journal Constitution reported in June that the metro area’s recent annual population growth of 1.5% exceeds the rates for eight of the top ten US metro areas.  With this growth rate, Atlanta is on pace to surpass the population of Philadelphia by 2022, becoming the eight most populous city in the country.

See the source image

All of this affects the mentality of a big group of potential home buyers.  They currently own a home, and they want to move to meet the needs of a growing family or shorten their commute.  But their income level will not support two mortgages, so their offers must be contingent on selling their current home.  That creates two problems.  The first is that sellers can choose from multiple offers and they are much more likely to choose a non-contingent offer than a contingent one.  Secondly, these would-be home buyers are very reluctant to list their current home without having a new home under contract.  And it makes sense – they don’t want to sell their current house and not be able to buy a new one.  Let’s face it…moving stinks, and having to move twice stinks twice as much.  So many would-be home buyers are “sitting on the sidelines,” waiting for the market to get less competitive before they seriously look for homes.

Dunwoody Mortgage can actually help our clients better position themselves to win competitive home purchase situations.  You ask, “How can the lender help the buyer win a contract?”  I’ll tell you…in the next blog post.  If you or someone you know wants to buy a house and doesn’t have time to wait for the next post, call me.  I would love to tell you how Dunwoody Mortgage can help home buyers win in this sellers market.


Education is the key to home ownership

July 10, 2018

My colleague, Rodney Shaffer, is putting together a series on the advantages of home ownership. There are four posts as of this entry. They all focus on how home ownership, over time, provides a solid return in investment along with stabilizing/increasing the home owners own net worth.  Those are very good reasons to consider home ownership, but there is still on major hurdle for potential home buyers.

Many potential homebuyers are not aware of the realities of getting a mortgage and may be putting off their purchase because of it.

A new survey from FDIC-insured bank Laurel Road asked college-educated Americans about their homebuying plans. The poll found many misconceptions about the housing market and arranging financing, with down payments, interest rates, and affordability all weighing on potential buyers. The survey found that almost half of respondents are unaware of alterative down payment requirements; instead, believing that 20% down is barrier to their homeownership dreams. This is fundamentally untrue. Conventional loans require as little as 3% down and this is not limited to first time home buyers. FHA loans only require 3.5% down.

There is also a misconception about interest rates with many thinking they will hit 6% by year-end and believing they’ve missed out. This is also untrue. The Mortgage Bankers Association forecast for year end is just 4.6%, which is about where rates sit now. Why do people think mortgage rates will continue to rise? While mortgage rates can rise, most believe they will rise exponentially due to the Federal Reserve raising rates. The Federal Reserve raising rates doesn’t directly impact mortgage rates (it does impact home equity lines, car loan rates, credit card rates, etc.). This blog has discussed ad nauseam the fact that mortgage rates are not directly tied to the Federal Reserve raising rates. Recent examples can be found here, here and here. For the full list of entries dealing with this topic, check out this link. It is a lot of posts.

In reality, you STILL do not need 20% down in order to qualify to purchase a home. While rates are higher in 2018 versus previous years, they are not anywhere close to 6%. Don’t get mortgage rates confused with prime rate (that is over 5% and will be closer to 6% by the end of the year. Prime rate and mortgage rates are not the same thing!

Wanting to buy a home in Georgia but don’t have 20% down? Not a problem! Contact me today, and I can help you toward owning your new home!

Low housing inventory

May 22, 2018

It is definitely a seller’s market. The amount of inventory on the market is well below what is considered a balanced market – 6 months of homes is ideal. In the metro Atlanta area, the actual inventory is hovering around 3 months. Atlanta is not alone. Most major cities and almost all of the US faces a shortage of homes.

How did we get here?

I am sure many of you have heard the stat that a couple of hundred thousand jobs need to be created each month to keep up with population growth/new people entering the job market. Well, the same holds true for the housing market. Due to homes becoming dilapidated, burned down, flooded, disaster area, etc. you need new homes built every year to keep up with population growth. That is where one of our inventory problems lie. You see, housing construction has not kept pace with population growth in the U.S. for more than a decade. In order to catch up across the nation, builders will need to construct 7.3 million more homes. Also, home construction per household is near the lowest level in 60 years, John Rappaport, an economist at the Federal Reserve Bank of Kansas City, told the Wall Street Journal.

From 2009-2013/2014, it was a buyer’s market. There were too many homes on the market due to foreclosures and short sales from the housing crash. Now the pendulum swung the other way, and it is a seller’s market. Eventually, it will balance out, but that is of little solace for someone buying a home right now. Is there anything a buyer can do in this market to be more competitive with other buyers?

Yes, there is! Instead of doing a prequalification or pre-approval, buyers can start the loan process prior to being under contract to purchase a home. By going through underwriting early, I can provide my clients with a letter that says they are credit qualified and can close once an acceptable appraisal is back on the home. This can turn into a very quick close for a seller and gives the seller confidence in the buyer’s ability to close on the home loan.

Out there looking for your new home? Are you finding it to be a competitive environment? Give yourself an advantage by going through the underwriting process prior to being under contract. If you are looking to buy in the state of Georgia, contact me today. We can get the loan process started and put you on your way to home ownership.

Study Shows Financial Benefits of Home Ownership – Part 2

April 11, 2018

When considering a home purchase, people generally like to have some data to analyze the pros and cons.  Luckily for you, I found a recent study that discusses some of these details.  Also luckily for you, I read it so you don’t have to read it!  You can find a link to the report below, but let’s hit some of the highlights.

The homeownership study by Laurie S. Goodman and Christopher Mayer (https://www.urban.org/research/publication/homeownership-and-american-dream) first concludes that financial returns for a home purchase in a “normal” market are “strong” and typically outperform the stock market.  Goodman and Mayer analyzed home (not apartment) rental data from Zillow, national home ownership cost data from the American Housing Survey (plus other sources for local market data), along with home sales price data.   Their analysis begins by assuming a home purchase at the end of 2002, prior to significant home price increases in 2003 – 2006 followed by the decline in the 2007 – 2012 years (If you want more details, you can see of yourself using the link above on pages 44-45).

The authors go on to explain how they compare the costs of renting a house versus the costs and equity appreciation vs. tax benefits of home ownership.  I’ll let you chew through the details.  They provide a detailed table analyzing multiple years of home ownership relative to other potential investments.  It is very interesting to look at the details on an annual basis over the study’s time frame.  (You can find this information on pages 45 – 46).

(Perhaps a home is not best for everyone)

Ultimately, the authors conclude (page 47) that owning a house “appears to be generally financially advantageous relative to renting, regardless of whether a home buyer itemizes deductions.”  Another key finding reads, “Including the value of deductions, the homebuyer would have outperformed all the alternative investments in all years.”  Note that they report buyers who did not itemize would show a few years of underperforming a comparative index.

As a mortgage lender, I wish there were additional analysis using returns for down payments of less than 20% (the authors’ assumption), as many of my clients do make smaller down payments.  I also find it interesting to consider the “holding period” of home ownership relative to the changes in property values seen during the period of 2008 through 2016.  Bottom line, it really helps the home owner’s return when property values appreciate – no duh, right?

More details to come in a future post.  For now, do you know someone considering buying a Georgia home in the next 3 months?  Are they thinking about renewing a lease?  If so, forward this post to them and ask them to call me.  We can discuss the financial pros and cons of their decision.  If they elect to buy, we at Dunwoody Mortgage will take great care of them and work hard to make their mortgage experience great.

Study Shows Financial Benefits of Home Ownership – Part 1

March 28, 2018

People have often asked me if owning a house is better financially than renting.  Owning and renting both have pros and cons, and trying to quantify financial comparisons can be quite challenging.  I have recently reviewed a detailed study on home ownership by Laurie S. Goodman and Christopher Mayer.  Their article is entitled Homeownership and the American Dream.  Here is a link where you can download the report .pdf if you want to review the entire document:  https://www.urban.org/research/publication/homeownership-and-american-dream

I will spend the next few posts highlighting some of their findings.  Here is a quick summary of their conclusions:

  • Financial returns for a home purchase in a “normal” market typically outperform the stock market.
  • Home ownership encourages savings in low-to-moderate income households better than alternative savings strategies (except perhaps for a government-required program like Social Security).
  • Home ownership is prevalent in almost all countries and especially so for people nearing retirement age, indicating that most households consider homeownership an important part of saving for retirement.

The bottom line is that home ownership is still good financially for most homeowners, based on the report’s analysis.

Home ownership may not be the best option in certain circumstances.  For example, if a potential career change may require you to move in 2 years or less, renting may be a better financial choice due to a home purchase’s transaction costs.  And the report highlights that the magnitude of ownership’s financial benefits depends on details like property tax rates, itemization of tax return deductions, etc.

Do you know someone considering buying a Georgia home in the next 3 months?  Are they debating whether to renew their lease?  If so, forward this post to them and ask them to call me.  We can discuss the financial pros and cons of their decision.  If they elect to buy, we at Dunwoody Mortgage will take great care of them and work hard to make their mortgage experience great.

Homebuyers squeezed out of the market

June 13, 2017

Last week there were a series of articles published by the Wall Street Journal, CNN Money, and more describing how Millennials are being squeezed out of buying homes. For the most part, articles focused solely on lending requirements. Honestly, that misses the mark on what is really going on out there right now. Let’s dig into this a little more.

The articles primarily focused on how lending guidelines are stricter. While that is true when compared to 2007, lending requirements have loosened up quite a bit over the past several years. Here are some quick examples:

  • Conventional loans allow borrowers with a credit score of 620 (the same as FHA). Average credit is 660-680 depending on what article/source you read, so home buyers with below average credit can qualify to purchase a home.
  • Smaller down payments are back. VA and USDA loans do not require a down payment, FHA only requires 3.5% down, and Conventional loans can be used to buy a home with as little as 3% down.
  • Self-employed borrowers with an established business of 5+ years can qualify to buy a home with only one year of tax returns.
  • Condos can be purchased with as little as 3% down.
  • Rental income from investment properties can be used even if the property hasn’t been rented out for two years.

Lending guidelines are much more lenient today than they were just a few years ago. That isn’t really the problem.

A Washington Post article from January discussed the elephant in the room, and nailed it when it comes to the issue that all home buyers are facing – inventory.

I attended a Realtor meeting recently where a stat was given stating there is less than a 3-month supply of homes available in in-town Atlanta. A balanced market is a 6-month supply, and nationwide the supply of homes is well under 6 months. That’s not good. Think it is bad in Atlanta? It’s worse in Seattle. The lack of inventory puts Millennials (and any home buyer with a smaller down payment) at a disadvantage. Also, it is pushing home values higher than a normal market due to the impact of supply and demand.

How does one compete in this market? A few things come to mind.

  1. Home buyers must go out and look at homes as soon as they are listed. This can be difficult depending on one’s schedule, but homes are going under contract in a few days in most cases.
  2. Home buyers should be underwritten prior to going out to look at a home. This way the offer letter isn’t a prequalification letter or pre-approval letter, but the letter can read the home buyers are “approved to purchase a home pending a satisfactory appraisal, clear title, and sufficient insurance coverage.” That is much stronger than a simple “prequalification” letter, and I go into more detail this in a previous blog post.

By planning and being ready to move on a home at a moment’s notice, home buyers can increase their odds of getting under contract on a home.

Looking to purchase in Georgia? Wanting to get ahead of the game? Contact me today, and we’ll get started toward achieving the goal of your home ownership!