Discussing what rising home prices and mortgage rates mean for your bottom line, Warren Buffett on real estate agent fees, selecting the right agent, job growth and the economy will continue to improve, HUD Secretary Carson getting sued and more!
64% Think Home Prices Will Rise
Americans continue to believe home prices in their local area will rise, as 64% expect an increase during the next year. That is up nine percentage points in the past two years and is the highest Gallup has measured since the emergence of the housing bubble in the mid-2000s.
A very realistic outlook for home prices in my opinion! The same poll found that 45% of non-homeowners plan on buying a home in the next 5 years.
That sounds great until you find out the same survey found out that only 22% of current homeowners plan on selling in the next 5 years. So unless we see a miraculous amount of new homes being built, demand will continue to exceed supply.
Which means home prices will keep increasing and anyone looking to buy a home should do it sooner rather than later. This isn’t the only recent poll that is showing someone thinking that home prices will grow…
REALTORS Expect Home Prices to Increase 4% in the Next Year
In a recent NAR survey of Realtors, they asked what are your expectations for residential prices over the next year. The results were 4% for the US and 4.01% to 5% in South Carolina.
Check out this map showing the expected home price growth by state based on data from the March 2018 REALTORS® Confidence Index Survey:
Very interesting stuff but even the state level results are not enough when it comes to knowing what is happening on a local level. For what is happening in you area, I suggest that you consult with an experienced local Realtor!
What If You Wait Until 2019 to Buy a Home?
I write all the time about the latest home price reports. Just last week, I shared how US home prices have grown 7%.
Despite the rapid increases in home prices, we have been lucky because mortgage rates are still historically low. But what if mortgage rates and home prices increase?
The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae are predicting that mortgage rates will increase in the next 12 months. And that CoreLogic report that I wrote about last week said that home prices will increase 5.2% in the next 12 months.
What does this mean for someone thinking about buying a home? Check out this chart showing the impact of higher mortgage rates on the monthly payment for a $250,000 house:
This chart does NOT include what will happen if home prices continue to increase. If that happens, the increase in a monthly payment would be even more!
I know that in our area, many buyers are spending a lot less than $250,000 when they buy a home…
But the effect is the same. Higher mortgage rates mean a higher monthly payment.
Waiting or wasting time could be very expensive! You could save thousands of dollars over the term of your mortgage by NOT waiting for rates or prices to increase!
Why Real Estate Agents Are Worth Their Fees
Interesting quote from Warren Buffet in Business Insider:
According to Buffett, brokers’ fees are not “crazy” compared to the value they add by helping change peoples’ lives through homeownership.
“I would say that people who manage money make a whole lot more money with perhaps less contribution to the welfare of the person that they’re dealing with,” Buffett said.
While Buffet is a very successful and rich person, I must point out that he is also the CEO of Berkshire Hathaway. Berkshire Hathaway owns Berkshire Hathaway HomeServices which is a residential real estate brokerage.
I don’t think Buffett said this to promote or justify the commissions charged by agents at his company. It was during a discussion about the fees charged by hedge funds being too high.
Buffett has often said positive things about owning real estate. I must mention that Buffett has owned the same home since 1958 and calls it the “3rd best investment he’s ever made”.
If a rich and successful investor like Buffett thinks this about owning a home, maybe it is something more people need to consider…
But how should a buyer know which agent to work with? How do you know if a Realtor or mortgage lender is the right choice?
I suggest that you look for someone that is trying to educate you instead of just getting you to buy a home. Or spend more money than you are comfortable with spending!
Financial expert Dave Ramsey said:
When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.
I read this years ago when I first started in real estate. It sounds like what I would want from a real estate agent so I have tried to base my business on this.
Be a teacher, a team mate, a resource, an ally and NOT a sales person. I don’t worry about the commission but on doing the right thing.
While I have not become a super rich mega top producer, I have no problem sleeping at night. I know I could have made more sales or money if I did what was right for me instead of what was right for my clients.
When you are looking for a real estate agent, do some research. Remember that online reviews can be faked to be either overly positive or negative.
Ask your friends, family and coworkers who they have used and if they would recommend them. Don’t be fooled by someone with the best marketing or the smooth talk and polished spiel of a sales person.
Look for some with a heart and a dedication to doing the right thing. Buying a home is one of the biggest financial transactions of your life and you want a Realtor that is honest and trustworthy.
You want an agent that will tell you what you NEED to hear and NOT what you want to hear. It is better for your agent to tell you the truth than to try to get you to sign on the dotted line so they can make a commission.
It is very easy to think that a quick Google search will tell you everything you need to know about buying or selling real estate. There is a difference between finding information online and having the experience to know what to do when buying or selling.
Mortgage Lender Decides Not to Appeal CFPB Case
From Wall Street Journal:
A court ruling upholding the single-director structure of the Consumer Financial Protection Bureau will endure for now, after the mortgage lender that brought the case decided not to appeal to the U.S. Supreme Court.
The decision by PHH Corp. not to appeal the case, in which it had argued the independent federal agency’s structure is unconstitutional, follows a ruling by the U.S. Court of Appeals for the District of Columbia Circuit in January that represented a partial but practical victory for the company.
While this might be construed as a victory for the CFPB, you have to wonder if the changes at the CFPB since Trump took office had any part of PHH’s decision. The CFPB was originally intended to help consumers fight against some of the ways they are mistreated by large corporations.
Some would argue that this is no longer true under the Trump administration…
Solid Job Growth to Continue
From The Conference Board:
The Conference Board Employment Trends Index™ (ETI) increased in April, after increasing in March. The index now stands at 108.08, up from 107.37 (a downward revision) in March. The change represents a 4.9 percent gain in the ETI compared to a year ago.
Gad Levanon, Chief Economist, North America, at The Conference Board said:
In recent months, the Employment Trends Index continued to improve, signaling that employment growth will remain solid through the summer. With the economy growing well above trend, and the working-age population barely growing at all, we expect the labor market to significantly tighten in the coming year. At 3.9 percent, the unemployment rate is historically low, and we expect it to be around 3.5 percent a year from now.
Pretty good news and hopefully we will see more wage growth for ALL Americans. However, we may also start to see more inflation which could offset any increase in incomes.
The Employment Trends Index is a combination of eight labor-market indicators that lets us see underlying trends in the job market more clearly. There are many different indicators of a healthy jobs market besides just the unemployment rate.
Economic Growth to Continue Through 2018
Economic growth is expected to continue in the U.S. throughout 2018, say the nation’s purchasing and supply executives in their Spring 2018 Semiannual Economic Forecast. Expectations for the remainder of 2018 continue to be positive in both the manufacturing and non-manufacturing sectors.
More excellent economic news! Hopefully, the politicians in Washington won’t derail the economy…
HUD Secretary Ben Carson Getting Sued
From the Washington Post:
Fair-housing advocates planned to file a lawsuit early Tuesday against the U.S. Department of Housing and Urban Development and HUD Secretary Ben Carson for suspending an Obama-era rule requiring communities to examine and address barriers to racial integration.
The 2015 rule required more than 1,200 communities receiving billions of federal housing dollars to draft plans to desegregate their communities — or risk losing federal funds.
I have been pretty critical of Carson for spending $30,000 of tax payer money on a table and recently for raising the rent of the elderly and disabled. But I am not so sure that suspending this law is a bad thing.
It puts a burden on local governments to study local segregation patterns and then to develop plans to correct them. More than a third of the initial plans submitted were incomplete or inconsistent with fair housing laws according to the article.
Failing to comply or complete this rule means that federal money to local communities would end. And this would have a negative effect on the people that are helped by the various HUD programs to ensure Fair Housing.
While this rule was made with the best of intentions, the road to Hell is paved with good intentions. Fair housing and stopping segregation or discrimination is very important…
But there has to be a better way to accomplish it than this rule.
Well that is all I have time for today! Be sure to share on Facebook, Twitter or Google if you enjoyed this article!