The fact that residential home prices are increasing substantially in most regions of the country is thrilling to homeowners, and many of them are taking this opportunity to put their houses on the market. Active buyers are creating real demand in a variety of markets, and lots of homes are moving quickly. However, if you are in the process of buying or selling a home, make sure you realize one major challenge this hot real estate market can create.

Each house must be sold twice; first to a buyer, and then a second time to the appraiser who represents the lender who will supply the funds to buy the home (unless, of course, it is a cash purchase). In a fast-moving market with escalating prices, that "second sale" may be far more difficult. A recent survey by Quicken Loans revealed that the gap between what a homeowner believes is the value of their home compared to that of a professional appraiser is widening (see the chart below). And with more "0 down" and low down payment options, banks and mortgage guarantors are being asked to take on more risk by funding loans that may, or may not, be wise investments.

A market where homes are selling quickly for escalating prices to increasingly competitive buyers can and is leading to an increase in the percentage of real estate transactions being challenged by a ‘short’ appraisal (where the appraised value is less than the contracted sales price of the home). Licensed appraisers may be wary of going too far out on a limb when asked to support a high sales price, and often the search for good comparables is difficult. No one, however, wants a transaction that gets bogged down in the funding stage because the appraised value of the home is short.

Bottom Line

Whether you are a buyer or a seller, you need to be prepared for this possibility as it may result in a renegotiation of the price of the home or the demand to bring more cash to the table. A good real estate professional will help guide you through this process as well as help support the appraiser in their research, and your Realtor can be invaluable in getting the deal done. Don't be caught unaware. And, as always, if I can answer your questions or help in some way, feel free to ask!

This time of year, in every region of the country, hundreds and even thousands of homeowners have a tough decision to make. The ‘listing for sale agreement’ on their house is about to expire and they now must decide to either take their house off the market (OTM), list it For Sale by Owner (FSBO), list it again with the same agent, or start the listing process all over again with a different company/agent.

Let’s assume you or someone you know is in this situation and take a closer look at each possibility:

Taking Your Home off the Market (OTM)

In all probability, after putting your house on the market and seeing it not sell, you are going to be upset. You may be thinking that no one in the marketplace thought the house was worthy of the sales price or became convinced your home was simply undesirable. Because you are upset, you may start to rationalize that selling wasn’t that important after all, and say,

“Well, we didn’t really want to sell the house anyway. This idea of making a move right now probably doesn’t make sense.”

Don’t rationalize your dreams away! Instead, consider the reasons you decided to sell your home in the first place. Ask your family this simple question:

“What made us originally put our home up for sale?”

If that reason made sense a few months ago when you originally listed the house, chances are it still makes sense today. Don’t give up on what your family hoped to accomplish or on the goals your family hoped to attain. Just because the house didn’t sell during the last listing contract doesn’t mean the house will never sell or that it shouldn’t be sold. Instead, take a closer look at your options.

Re-Listing with your Existing Agent

For whatever reason, your house did not sell. Perhaps you now realize how difficult selling a house may be, or that the listing price was too high, or perhaps you’re now acknowledging that you didn’t exactly listen to your agent’s advice. Sitting down with your listing agent and performing an honest assessment of the situation is in order. If your agent performed well for you, you may want to give that individual a second chance. That’s a perfectly okay thing to do. However, if your agent didn’t perform to the standard they promised when they listed your home, you may want to either try For Sale by Owner (FSBO) or try a different agent.

For Sale by Owner

You may now believe that listing your house with an agent is useless because your original agent didn’t accomplish the goal of selling the house. Trying to sell the house on your own this time may be alluring. You may think you will be in control and save on the commission fees. But, is that true? Will you be able to negotiate each of the elements that make up a real estate transaction? Are you capable of putting together a comprehensive marketing plan? Do people who FSBO actually ‘net’ more money?

If you are thinking about FSBOing, think about the following:

There are multiple people, in a highly charged situation, with whom you must be prepared to deal. They include:

• The buyer who wants the best deal possible
• The buyer’s agent who solely represents the best interest of the buyer
• The buyer’s attorney (in some parts of the country)
• The home inspection companies which work for the buyer and will almost always find some problems with the house
• The appraiser if there is a question of value
• Possibly the buyer's lender
• The title and escrow companies

The legal contracts and obligations inherent in buying and selling real estate have become more and more complex, and experieced professionals are more likely to get deals closed on time and to everyone's satisfaction.

Most buyers first see and then purchase homes they find online. Most agents have a comprehensive plan for online marketing already in place. Do you?

 Studies show that, in spite of perceptions to the contrary, sellers typically net more when using an agent to sell their home than when attempting a For Sale by Owner. Professional expertise works to the benefit of buyers and sellers both!

List with a New Agent

After failing to sell your home, you may no longer trust your agent or what they say. However, don’t paint all real estate professionals with that same brush. Have you ever gotten a bad haircut before? Of course! Did you stop getting your hair cut or did you simply change hair stylists?

There is good and bad in every profession—good and bad hair stylists, agents, teachers, lawyers, doctors, etc. And just because there are good and bad in every line of work doesn’t mean you don’t call on others for the products and services you need. You still get your hair cut, see a doctor, talk to a lawyer, send your kids to school, etc. The same should be true of your real estate professional. If the agent you were working with didn't work out, find someone better. Ask for recommendations, look for professional affiliations and strong testimonials, then interview prospective agents and choose the best fit for you and your family. You won't be sorry you invested in good professional help with such a complex process!

Bottom Line

You initially believed that using an agent made sense. It probably still does. Contact a local real estate professional and discuss the possibilities. And, as always, if I can be of assistance, please don't hesitate to let me know!

Between Friday of last week and Monday morning, interest rates rose a quarter of a point. Will they stay higher? I don't know. But when mortgage interest rates begin to climb, experts immediately begin to discuss home affordability indexes. They calculate how an increase in rates will slow home purchases as more and more potential buyers are priced out of the market. Today, with home prices also increasing, many believe that home sales may slow down rather dramatically.

This may prove to be true in the long term, particularly if both rates and prices continue to climb. However, in the short term, increasing mortgage rates may have just the opposite effect. Many buyers who have been sitting on the fence (and perhaps you are one of them) may realize that delaying their purchase no longer makes sense.

Last week, in a CNBC article, Matt Weaver of Florida-based PMAC Lending explained the impact an increase in rates will have:

"These increases really help the home-buying market. It really gets buyers to really understand that 'wait a minute, rates are at an all-time low, let's react now, let's react before they go higher’.”

As an example, we can look to 2013 (in blue below compared to 2014 in gold) when interest rates spiked up by a full percentage point over a two month period. The result is that many buyers rushed to the market in the fear that rates would continue to climb. It didn’t necessarily dramatically increase the overall number of sales that year. However, you can see that the immediate response to a rise in rates was an increase in home sales as evidenced by the chart below. (The following drop in sales for both years is consistent with typical home sales cycles where things tend to slow down during the holiday season.) 

We can also see that the sales cycle deviated somewhat in 2014 with more sales being pushed into July and August and slightly fewer sales in September and October than in the previous year.

Bottom Line

If you are waiting to put your house on the market, you might want to think twice. Now may be the perfect time to sell as rate increases create buyer competition that will continue to heat up as more purchasers jump into the market. Should you be considering a move, you may also save a on the monthly mortgage payment of your next home by selling now before rates go even higher. And, as always, if you have questions, please don't hesitate to ask. I'm always glad to help!

The inaugural Opportunity Cost Report was released recently by realtor.com. The report explained that “with interest rates and home prices expected to climb in the next year, the financial penalties of delaying or forgoing a home purchase in today's market have become very steep”.

The report estimates that, based on today's dollars, the average purchaser would accumulate $217,726 in increased wealth over a 30-year period.

That is assuming, of course, that prices and rates DO climb. Are they rising? Our office meets every Monday to discuss changes in the real estate and mortgage markets. Just this morning, we were discussing current mortgage rates with a conventional 30-year fixed mortgage rate now at 4-3/8%. The cost of buying down that rate by 1/4% is running about 1% of the loan value, which can be costly. Those rates have moved up from 4% just a few months ago. And prices of homes in all areas have been climbing and are continuing to climb.

What could this mean to someone sitting on the fence waiting to buy?

Experts believe that both home prices and mortgage interest rates will increase over the next twelve months. We are seeing that as fact in our County right now. Obviously, if this continues to happen, the monthly cost of a home a year from now will be dramatically higher than it is today. The Opportunity Cost Report breaks down exactly how much a purchaser could lose over increments of one year and three years. Here are the results based on an average purchaser in the U.S. delaying their purchase:

Bottom Line

If you are ready, willing and able to buy a home, waiting doesn't make sense. And waiting could be costly in the long run. Would you like more information? Would you like to know your options? Please feel free to let me know. I'm more than happy to help!

I have buyers debating whether they should buy a home now or wait. I'll share with you what I've shared with them – recently released data suggests that waiting may not make sense as prices seem to again be on the rise, and in some areas they are rising quickly. The Seattle area is the fourth "hottest" real estate market in the country, and that pressure is spilling over into adjacent Puget Sound communities. Let’s take a look at some of the data and commentary on the subject nationwide:

Ed Stansfield, chief property economist at Capital Economics:

“The current tightness of supply conditions would normally be consistent with much faster price growth. The continued steady growth in home sales that we expect this year will only add to this upward pressure on prices.”

Case Shiller Home Price Index

“The S&P/Case-Shiller U.S. National Home Price Index, covering all nine U.S. census divisions, recorded a 4.1% annual gain in March 2015 … with a 0.8% increase for the month.”

Anand Nallathambi, CEO of CoreLogic

“All signs are pointing toward continued price appreciation throughout 2015… Tight inventories, job growth and the impact of demographics and household formation are pushing price levels in many states toward record levels.”

Danielle Hale, Director of Housing Statistics at NAR

“Even without further acceleration, the pace of price growth remains too high. Strong buyer demand and low inventories coupled with relatively low new construction are helping to push prices up, keeping the housing market tipped in favor of sellers.”

FHFA Principal Economist Andrew Leventis

"The first quarter saw strong and widespread home price growth throughout most of the country. Home prices are now, on average, roughly 20 percent above where they were three years ago. This run-up has been historically exceptional and is particularly notable in light of the limited household income growth and modest rate of overall inflation observed during that same time period."

Bottom Line

If you are planning on buying a home in the near future, waiting probably doesn’t make sense from a purely pricing standpoint. If you are waiting in hopes that prices will stay the same or drop, you are likely to be disappointed. Would you like to discuss your options and learn more? Please feel free to give me a call – I'm always delighted to help!

Did you know that June is National Homeownership Month? It is. And today is the first of 30 days dedicated to making the dream of owning your own home a reality!

National Homeownership Month actually started as a week-long celebration of homeownership during the Clinton administration in 1995. In 2002, President George W. Bush proclaimed June as National Homeownership Month. Here is an excerpt from his proclamation:

“Homeownership is an important part of the American Dream…A home provides shelter and a safe place where families can prosper and children can thrive. For many Americans, their home is an important financial investment, and it can be a source of great personal pride and an important part of community stability.”

“Homeownership encourages personal responsibility and the values necessary for strong families. Where homeownership flourishes, neighborhoods are more stable, residents are more civic-minded, schools are better, and crime rates decline.”

“During National Homeownership Month, I encourage all Americans to learn more about financial management and to explore homeownership opportunities in their communities. By taking this important step, individuals and families help safeguard their financial futures and contribute to the strength of our Nation.”

Are you a first-time home buyer? Are you a renter, ready to make the move up to home ownership? Are you at a transition point, ready to scale up, or perhaps to downsize? Or is your next step simply to talk through your options? Whatever your homeownership needs, this may be the perfect time for you to take that next step! To ensure you are making the right move, you should consult with a real estate professional. Facing a change, discussing your options, contemplating a move? Please give me a call – I am here to help!

Last week, the National Association of Realtors (NAR) released their latest quarterly report. The report covered three important aspects of the housing market:

1. Buyer Demand
2. Supply of Housing Inventory
3. Single Family Residential Prices

With information supplied by other real estate professionals as well as the graph above, I want to break down the highlights of the report for you as well as provide several quotes from Lawrence Yun, the Chief Economist at NAR.

Buyer Demand

Total existing-home sales (which include single family homes and condos) were at an annual rate of 4.97 million in the first quarter of 2015. This represents a number which is 6.2 percent higher than the pace during the first quarter of 2014. This is also substantially higher than the 3.6% anticipated future growth.

Yun: "Sales activity to start the year was notably higher than a year ago, as steady hiring and low interest rates encouraged more buyers to enter the market."

Supply of Housing Inventory

There were 2 million existing homes available for sale at the end of the first quarter of 2015 which represents a 4.6 months’ supply of inventory. That number is down from 4.9 months a year ago. A healthy balance of supply between buyers and sellers is 6 to 7 month’s supply of inventory. Low inventory equates with a seller’s market.

Yun: "With supply remaining tight—especially at the entry-level price range—buyers will need the expertise and local market insight of a Realtor® to help them through each intricate step of the buying process."

Single Family Residential Prices

Home prices accelerated in 148 out of 174 metro areas (85%) during the first quarter of 2015 and the number of areas experiencing double-digit price appreciation doubled compared to last quarter. Compared to last quarter, the number of regions experiencing double-digit price appreciation doubled.

The national median existing single-family home price in the first quarter was $205,200, compared to $191,100 in first quarter of 2014. This represents a 7.4% increase year-over-year. And those median home prices are higher here in Kitsap County.

Yun: “…stronger demand without increasing supply led to faster price growth in many markets…Homeowners throughout the country have enjoyed accumulating household wealth through the steady rise in home values in the past few years."

Bottom Line

Whether you are thinking about buying your first home or selling your current residence to buy the home of your dreams, you’ll want to work with a professional to discuss how the numbers above have affected your neighborhood's prices as well as impact your future choices. Interested in knowing more? Looking for that house of your dreams? Give me a call – I am happy to help!

Every house on the market has to be sold twice; once to a prospective buyer and then to your lender (through their appraisal). A low appraisal can at the very least complicate and at worst kill a sale in the  making. In housing markets where supply is very low and demand is very high, home values are increase rapidly. One major challenge in such a market is your lender appraisal. If prices are jumping, it is difficult for an appraiser to find adequate comparable sales (similar houses in the same or a nearby neighborhood that closed recently) to defend the price when creating their appraisal. If the appraisal doesn’t support the sales price, your lender isn’t going to fund the sale.

With escalating prices, that second sale might be even more difficult than the first. And now there may be another issue further complicating the appraisal process.

The Mortgage News Daily (MND) recently published an article titled Conservative Appraisals Increasingly Mentioned in 2015; Did Something Change?

The article revealed that there was a “flurry” of comments on their website from members expressing concern about…

“…a sudden increase in appraisals reflecting market values well below what had been expected. In some cases the low appraisals had merely required the restructuring of the loan, in others they killed the deal.”

The National Association of Realtors revealed this month that 8% of the contracts that fell through over the last three months were terminated because of appraisal issues. That is not taking into effect deals that failed for other reasons, just failures based upon low appraised values.

MND decided to survey their members and ask why this sudden increase in “short” appraisals could be taking place. Here is one result of that survey:

“Almost everyone we spoke to mentioned Fannie Mae's new Collateral Underwriter (CU).”

Collateral Underwriter provides a risk score on individual appraisals which will lead to a ranking of appraisals by risk profile, allowing lenders to identify appraisals with heightened risk of quality issues, overvaluation, and compliance violations. It went on-line on January 26 of this year.

Marianne Sullivan, senior vice president of single-family business capability with Fannie Mae believes that CU is not a problem for appraisers. She claimed:

“From an appraiser perspective, one of the lender's responsibilities has always been to review the quality of an appraiser, and they have been using various methods to do that forever. I don’t think appraisers will find this tool to be disruptive.”

However, some think that CU has caused appraisers to become too cautious with their appraised values. One mortgage professional in the MND article explained it this way:

"My personal opinion is that appraisers are being overly conservative in choosing comps because of CU. If CU questions the comps, adjustments, etc., the appraiser would have to do a lot of extra work to justify them. I had anticipated that CU would cause delays because of this extra work, but it seems that appraisers are one step ahead and are being ultra conservative, thus avoiding the extra work in the first place. I haven't spoken to an appraiser about it; this is just my interpretation of what I am seeing."

Ryan Lundquist, a Certified Residential Appraiser in the Sacramento area, agreed:

“One of the unintended consequences of CU may be more conservative appraisals.”

Bottom Line

We must realize that, in today’s housing market, every house must be sold twice, and the second sale (to the bank’s appraiser) could be the more difficult one. Are you contemplating buying or selling a home? Let’s talk price – it can make or break your deal!

Tomorrow is Cinco de Mayo, May 5th. Where has time gone?! Spring is in full force, the sun is shining, and the summer months are right around the corner. If you are debating moving up to your dream home, here are four great reasons to consider buying today instead of waiting.

1.) Buyer Demand is High & Inventory Is Low

Recent national numbers show buyer demand is at the highest peak experienced in years. Inventory for sale is at a 4.6 months’ supply, which is still markedly lower than the 6.0 months needed for a historically normal or balanced market. In specific parts of Kitsap County, inventory is even lower and cannot keep up with buyer demand.

The National Association of Realtors Chief Economist Lawrence Yun put it this way, "Demand in many markets is far exceeding supply, and properties in March sold at a faster rate than any month since last summer."

How might this impact you? If you are considering a move, listing your home today can greatly increase exposure to buyers who are out in force and ready to act. You may have exactly what they want!

2.) Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects appreciation in home values over the next five years to be between 11.7% (most pessimistic) and 27.5% (most optimistic).

According to the survey, the bottom in home prices has come and gone. Home values most likely will continue to appreciate for years to come. Waiting for your current home’s value to increase before selling could very well price you out of your new home if you aren’t careful.

3.) Mortgage Interest Rates Are Still Near Record Lows

As we reported earlier, interest rates have remained at or below 4% for some time now, and they are substantially lower than the rate previous generations paid when getting a mortgage. The Mortgage Bankers Association, Fannie Mae, Freddie Mac & the National Association of Realtors are in unison in projecting that rates will rise over the next 12 months.

Any increase in rates will impact YOUR monthly mortgage payment. Even an increase of half a percentage point can put a dent in your family’s net worth. Whether you are moving up or buying your first home, your housing expense will be more a year from now if a mortgage is necessary to purchase your home. Combine a rise in rates with a concurrent rise in the cost of purchasing a home, and your dream home may become out of reach.

4.) It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But what if they weren’t? Would you wait?

Look at the actual reason you are contemplating a move up and decide whether it is worth waiting. Have you always wanted to live in a certain neighborhood? Are there better job opportunities in a new location? Would your children flourish in a new school system? Would a climate change be just what the doctor ordered? Would you like to be closer to family? Is the impact on your life significant enough to make the benefits worth taking action now?

Bottom Line

If the right thing for you and your family is to move up to your dream home this year, buying sooner rather than later could lead to substantial savings along with that improved lifestyle. As always, if you'd like to explore your options further, please don't hesitate to give me a call!

I have a tendency to save articles, handouts, and other pieces of paper that contain information I find interesting. When I don’t have an immediate use for them or need more time to read them, I have a “place” (translate “pile”) where I stack them for reference.

This weekend I devoted some time to going through my accumulation of interesting papers, and I ran across the following list. I don’t remember where this list came from or I would gladly give credit to the author or source. These are not the standard leadership qualities we have come to expect.

Eight Things Those You Are Privileged to Lead Have a Right to Expect From You:

1.       To know your character. If I follow you, will I know who you really are? Will you deal with me with integrity?

2.       That you’ll take time to explain your vision. What’s the future and where do I fit? Is there a place for me or will you simply “use” me?

3.       To never be left in isolation. Will you be there for me? Will you care for me? Will you care about my needs?

4.       To be heard. To whom will you listen? When you’re busy and overloaded, will I still be heard, taken seriously, and appreciated?

5.       To be trusted. Can I take initiative without fear? Will my ideas be rewarded and encouraged or will I be regarded with suspicion and distanced?

6.       To be given an opportunity to grow. Will I be encouraged to be a lifelong learner? Will my gifts be increasingly identified and expressed? Will I be developed?

7.       To be held accountable. Will I be fairly evaluated for my performance? Will I be held to the highest standards for my   life? Will you show me how to do it better and be patient while I learn and self-correct?

8.       To be the object of grace. Will I be forgiven even in the face of shortcomings, inadequacies, and failure? Will I be lead with kindness?

When I read the list, my first thought was that unless we live in isolation from all living beings, we are all leaders in some way at one time or another. As parents, we lead. As pet owners, we provide leadership. As environmentalists, as stewards of our planet and of other living creatures, we lead. The same is true in marriage, in friendships, in social situations. Often we follow, but on occasion we lead. And I found myself convicted that I do not always lead to the best of my ability.

I consider this list to be a challenge, and I hope that over time my leadership abilities will improve. What about you? Who are your followers? Under what circumstances do you lead? And are you the leader you can and should be? I look forward to supporting each other in becoming better leaders in 2015!