With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.

Here are three key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates

HOME PRICES

A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.

Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.

MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Last month, their January Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

FORECLOSURE INVENTORY

Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:

“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”

Bottom Line

After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.

 

SOURCE: https://www.mykcm.com/2019/02/21/3-reasons-why-we-are-not-heading-toward-another-housing-crash/

Last year we saw headlines about a possible housing market bubble, and many wondered if Americans still felt confident about the value of their homes. Recently, the 2018 Houzz & Home Study revealed:

Homeowners with mortgages have seen their home equity more than double since 2011, increasing to a record-setting $8.3 trillion in 2017.”

The average homeowner gained $16,200 in home equity between Q2 2017 and Q2 2018 according to the latest release of CoreLogic’s Home Equity Report.

Since 2011 home values have increased significantly throughout the country, with prices rising by 5.1% in 2018 alone. When surveyed, homeowners revealed the top four reasons why they felt their homes had increased in value.

  1. Desirable Location
  2. Improved National Economy
  3. Improved Local Economy
  4. Low Home Inventory in My Area

As we can see, not only does the data show that the homes have appreciated, but homeowners also believe they know why. Many have taken advantage of the opportunity to use their newly found equity to sell their current house and move up to their dream home!

2019 will be a good year for the homeowners that still want to take advantage of their home equity! CoreLogic forecasts that home prices will increase by 4.8% by the end of the year.

Bottom Line

If you are a homeowner who would like to find out your current home value, contact a local real estate professional who can help you to discover the hidden opportunities in your home!

If you are planning on listing your house for sale this year, here are the top four home improvement projects that will net you the most Return on Investment (ROI).

  1. Minor Bathroom Remodel – ROI: 102%

    What Is Included: Replacing the tub, tile surround, floor, toilet, sink, vanity & fixtures will give your outdated bathroom a welcome face lift!
    Cost to Complete: $10,500
    Return on Investment: $10,700

  2. Upgraded Landscaping – ROI: 100%

    What Is Included: Many homeowners will hire a professional for help with landscaping if they don’t have a green thumb to add pops of color with flowering shrubs or trees, install a flagstone walkway, planters, fresh mulch & more!
    Cost to Complete: $4,967
    Return on Investment: $4,967

  3. Minor Kitchen Remodel – ROI: 98.5%

    If your kitchen’s floor plan is good but requires a cosmetic update, refacing cabinets, adding a new counter top, and under cabinet lighting is a great start.
    Cost to Complete: $15,000
    Return on Investment: $14,913

  4. Exterior Improvements – ROI: 95.5%

    Outdoor spaces add curb appeal and a place to enjoy all your new landscaping. You may need to repaint your home or invest in vinyl siding. A new front door can add a welcoming feel
    Cost to Complete: $7,239
    Return on Investment: $6,914

SOURCE: https://www.keepingcurrentmatters.com/

A Comparative Market Analysis (CMA) is essential to determining the value of residential property. Location and characteristics of the property are the key elements in determining value. Therefore, the basis for valuation is assessing similar properties in your area. The market analysis takes into account the amount received from recent sales of comparable properties and the quantity and quality of properties currently on the market. The desired end result is to find a price that will attract a prospective buyer in a reasonable time.

Once the value of your home has been determined, you can decide on an offering price that will achive your goals. Generally, the price should not exceed the value by more than five percent or potential buyers may not even make offers. Naturally, if you want to sell quickly, your asking price should be close to the value.

The following are a few things to keep in mind about pricing:

  • Realistic pricing will achieve maximum profit in a reasonable time.
  • Your personal cost or profit desire is irrelevant; the market determines the price.
  • The cost of improvements in most cases exceeds the added home value.
  • Homes that remain on the market for a long time do not get shown.
  • Typically, a home priced right from the beginning achieves the highest profits.

SOURCE: https://www.keepingcurrentmatters.com/