6 Simple Graphs Proving This Is Nothing Like Last Time

6 Simple Graphs Proving This Is Nothing Like Last Time

Last March, many involved in the residential housing industry feared the market would be crushed under the pressure of a once-in-a-lifetime pandemic. Instead, real estate had one of its best years ever. Home sales and prices were both up substantially over the year before. 2020 was so strong that many now fear the markets exuberance mirrors that of the last housing boom and, as a result, were now headed for another crash.

However, there are many reasons this real estate market is nothing like 2008. Here are six visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult not to get a mortgage. Today, its tough to qualify. Recently, the Urban Institute released their latest Housing Credit Availability Index (HCAI) which measures the percentage of owner-occupied 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.

The index shows that lenders were comfortable taking on high levels of risk during the housing boom of 2004-2006. It also reveals that today, the HCAI is under 5 percent, which is the lowest its been since the introduction of the index. The report explains:

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.

This is nothing like the last time.

2. Prices aren't soaring out of control.

Below is a graph showing annual home price appreciation over the past four years compared to the four years leading up to the height of the housing bubble. Though price appreciation was quite strong last year, its nowhere near the rise in prices that preceded the crash.There's a stark difference between these two periods of time. Normal appreciation is 3.8%. So, while current appreciation is higher than the historic norm, its certainly not accelerating out of control as it did in the early 2000s.

This is nothing like the last time.

3. We don't have a surplus of homes on the market. We have a shortage.

The months supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there's a shortage of inventory, which is causing an acceleration in home values.This is nothing like the last time.

4. New construction isn’t making up the difference in inventory needed.

Some may think new construction is filling the void. However, if we compare today to right before the housing crash, we can see that an overabundance of newly built homes was a major challenge then, but isn't now.This is nothing like the last time.

5. Houses aren't becoming too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate is about 3%. That means the average homeowner pays less of their monthly income toward their mortgage payment than they did back then. Here's a chart showing that difference:As Mark Fleming, Chief Economist for First American, explains:

Lower mortgage interest rates and rising incomes correspond with higher house prices as home buyers can afford to borrow and buy more. If housing is appropriately valued, house-buying power should equal or outpace the median sale price of a home. Looking back at the bubble years, house prices exceeded house-buying power in 2006, but today house-buying power is nearly twice as high as the median sale price nationally.

This is nothing like the last time.

6. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over 50% of homes in the country having greater than 50% equity and owners have not been tapping into it like the last time. Here's a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out almost $500 billion dollars less than before:During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owed was greater than the value of their home). Some decided to walk away from their homes, and that led to a wave of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. With the average home equity now standing at over $190,000, this wont happen today.

This is nothing like the last time.

Bottom Line

If you're concerned that were making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

Will the Housing Market Bloom This Spring?

Spring is almost here, and many are wondering what it will bring for the housing market. Even though the pandemic continues on, its certain to be very different from the spring we experienced at this time last year. Here's what a few industry experts have to say about the housing market and how it will bloom this season.

Danielle Hale, Chief Economist, realtor.com:

Despite early weakness, we expect to see new listings grow in March and April as they traditionally do heading into spring, and last years extraordinarily low new listings comparison point will mean year over year gains. One other potential bright spot for would-be homebuyers, new construction, which has risen at a year over year pace of 20% or more for the last few months, will provide additional for-sale inventory relief.

Ali Wolf, Chief Economist, Zonda:

Some people will feel comfortable listing their home during the first half of 2021. Others will want to wait until the vaccines are widely distributed. This suggests more inventory will be for sale in late 2021 and into the spring selling season in 2022.

Freddie Mac:

Since reaching a low point in January, mortgage rates have risen by more than 30 basis points However, the rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.

Mark Fleming, Chief Economist, First American:

As the housing market heads into the spring home buying season, the ongoing supply and demand imbalance all but assures more house price growth…Many find it hard to believe, but housing is actually undervalued in most markets and the gap between house-buying power and sale prices indicates there's room for further house price growth in the months to come.

Bottom Line

The experts are very optimistic about the housing market right now. If you pressed pause on your real estate plans over the winter, lets chat to determine how you can re-engage in the homebuying process this spring.

 

What Are the Benefits of a 20% Down Payment?

If you're thinking of buying a home this year, you may be wondering how much money you need to come up with for your down payment. Many people may think its 20% of the loan to secure a mortgage. While there are plenty of lower down payment options available for qualified buyers who don't want to put 20% down, its important to understand how a larger down payment can have great benefits too.

The truth is, there are many programs available that allow you to put down as little as 3.5%, which can be a huge benefit to those who want to purchase a home sooner rather than later. Those who have served our country may also qualify for a Veterans Affairs Home Loan (VA) and may not need a down payment. These programs have really cut down the savings time for many potential buyers, enabling them to start building family wealth sooner.

Here are four reasons why putting 20% down is a good plan if you can afford it.

1. Your interest rate may be lower.

A 20% down payment vs. a 3-5% down payment shows your lender you're more financially stable and not a large credit risk. The more confident your lender is in your credit score and your ability to pay your loan, the lower the mortgage interest rate they'll likely be willing to give you.

2. You'll end up paying less for your home.

The larger your down payment, the smaller your loan amount will be for your mortgage. If you're able to pay 20% of the cost of your new home at the start of the transaction, you'll only pay interest on the remaining 80%. If you put down 5%, the additional 15% will be added to your loan and will accrue interest over time. This will end up costing you more over the lifetime of your home loan.

3. Your offer will stand out in a competitive market.

In a market where many buyers are competing for the same home, sellers like to see offers come in with 20% or larger down payments. The seller gains the same confidence as the lender in this scenario. You are seen as a stronger buyer with financing that's more likely to be approved. Therefore, the deal will be more likely to go through.

4. You wont have to pay Private Mortgage Insurance (PMI)

What is PMI? According to Freddie Mac:

PMI is an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%. Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.

As mentioned earlier, when you put down less than 20% when buying a home, your lender will see your loan as having more risk. PMI helps them recover their investment in you if you're unable to pay your loan. This insurance isn't required if you're able to put down 20% or more.

Many times, home sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their house to put down 20% on their next home. With the equity homeowners have today, it creates a great opportunity to put those savings toward a 20% or greater down payment on a new home.

If you're looking to buy your first home, you'll want to consider the benefits of 20% down versus a smaller down payment option.

Bottom Line

If you're thinking of buying a home and are already saving for your down payment, lets connect to discuss what fits best with your long-term plans.

 

Home Prices: What Happened in 2020? What Will Happen This Year?

The real estate market was on fire during the second half of 2020. Buyer demand was way up, and the supply of homes available for sale hit record lows. The price of anything is determined by the supply and demand ratio, so home prices skyrocketed last year. Dr. Lynn Fisher, Deputy Director of the Federal Housing Finance Agency (FHFA) Division of Research and Statistics, explains:

House prices nationwide recorded the largest annual and quarterly increase in the history of the FHFA Home Price Index. Low mortgage rates, pent up demand from homebuyers, and a limited housing supply propelled every region of the country to experience faster growth in 2020 compared to a year ago despite the pandemic.

Here are the year-end home price appreciation numbers from the FHFA and two other prominent pricing indexes:

• Federal Housing Finance Agency House Price Index Report: 10.8%
• CoreLogic Home Price Insights: 9.2%
• S&P Case-Shiller U.S. National Home Price Index: 10.4%

The past year was truly a remarkable time for homeowners as prices appreciated substantially. Lawrence Yun, Senior Economist at the National Association of Realtors (NAR), reveals:

A typical homeowner in 2020, just by being a homeowner, would have accumulated around $24,000 in housing wealth.

What will happen with home prices this year?

Many experts believe buyer demand will soften somewhat as mortgage rates are poised to bump up slightly. Some also believe the inventory challenge will ease as more listings come to market this year.

Based on this, most forecasters anticipate well see strong appreciation in 2021 but not as strong as last year. Here are seven prominent groups and their projections:

Bottom Line

Home price appreciation will be strong this year, but it wont reach the historic levels of 2020. Lets connect if you'd like to find out what your house is currently worth in our local market.

 

Majestic Pointe At Riverstone

Majestic Pointe At Riverstone Real Estate Homes For Sale, Rent & Price Trends

Shayne Stone "Your Rock Solid Choice Realtor" that helps Home Sellers make a Profit and Home Buyers Equity in Majestic Pointe At Riverstone neighborhood / subdivision / community which is located in Sugar Land Texas 77479 zip code in Fort Bend County. Majestic Pointe At Riverstone has 27 single family properties with a median build year of 2015 and a median size of 7,059 Sqft., these home values range between $432 - $2341 K. The sqft. price change data is available through 1998. The median sold price/sqft is $292.31 while the median appraised value is $ 232.23/ sqft. View homes for sale or rent in Majestic Pointe At Riverstone and see new homes, trending properties, Foreclosures and much more.

Sometimes there's nothing listed For Sale in Majestic Pointe At Riverstone - Bookmark the page and check back often or create your own Listing Alert System to Notify you when a property in Majestic Pointe At Riverstone Sugar Land Texas 77479 hits the Market!

Find Majestic Pointe At Riverstone Real Estate and Majestic Pointe At Riverstone Homes For Sale. Majestic Pointe At Riverstone in Fort Bend County can be found using Neighborhood Information Finder. Detailed information includes Majestic Pointe At Riverstone Real Estate Profile, Majestic Pointe At Riverstone Trending Homes , Schools Nearby Majestic Pointe At Riverstone, Places Nearby Majestic Pointe At Riverstone and Events Nearby Majestic Pointe At Riverstone. Click here to find recently sold properties in Majestic Pointe At Riverstone, Foreclosures in Majestic Pointe At Riverstone, recently listed homes in Majestic Pointe At Riverstone.

Majestic Pointe At Riverstone is a subdivision located in Fort Bend County which is within the Texas. The Majestic Pointe At Riverstone subdivision is surrounded with restaurants, education opportunities, entertainment venues, shopping and more. See below for more information on the surrounding resources for the Majestic Pointe At Riverstone subdivision.

 

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Majestic Pointe At Riverstone Real Estate Overview:

• The average price of the homes for sale in Majestic Pointe At Riverstone is $ 2,895,000.
• The average square feet of the homes in Majestic Pointe At Riverstone is 7,059 sqft.

 

For more info on Majestic Pointe At Riverstone of Missouri City Texas or any of the other Communities within the Fort Bend County area CLICK HERE or Text / Call 832-449-6060

 

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How Smart Is It to Buy a Home Today?

How Smart Is It to Buy a Home Today?

Whether you're buying your first home or selling your current house, if your needs are changing and you think you need to move, the decision can be complicated. You may have to take personal or professional considerations into account, and only you can judge what impact those factors should have on your desire to move.

However, there's one category that provides a simple answer. When deciding to buy now or wait until next year, the financial aspect of the purchase is easy to evaluate. You just need to ask yourself two questions:

1. Do I think home values will be higher a year from now?
2. Do I think mortgage rates will be higher a year from now?

From a purely financial standpoint, if the answer is yes to either question, you should strongly consider buying now. If the answer to both questions is yes, you should definitely buy now.

Nobody can guarantee what home values or mortgage rates will be by the end of this year. The experts, however, seem certain the answer to both questions above is a resounding yes. Mortgage rates are expected to rise and home values are expected to appreciate rather nicely.

What does this mean to you?

Lets look at how waiting would impact your financial situation. Here are the assumptions made for this example:

• The experts are right – mortgage rates will be 3.18% at the end of the year
• The experts are right – home values will appreciate by 5.9%
• You want to buy a home valued at $350,000 today
• You decide on a 10% down payment

Here's the financial impact of waiting:

• You pay an extra $20,650 for the house
• You need an additional $2,065 for a down payment
• You pay an extra $116/month in your mortgage payment ($1,392 additional per year)
• You don't gain the $20,650 increase in wealth through equity build-up

Bottom Line

There are many things to consider when buying a home. However, from a purely financial aspect, if you find a home that meets your needs, buying now makes much more sense than buying next year

 

Drop Ceilings: Pros and Cons

Humans have long had a love/hate relationship with ceilings. On one hand, they help to hide the structure that keeps the rain out; on the other, they can be a pain to install and maintain over time. So when the idea of the drop ceiling started gaining momentum, it followed that two very die-hard camps formed almost immediately. But drop ceilings have changed dramatically since the first patents were introduced in 1919 and subsequent improvements made in the 30s and 50s. Today’s drop ceiling, while building on these same principles, is a very different creature.

Drop Ceilings Aren’t Just for Offices

Most people get their first exposure to drop ceilings in their office or schools, where two foot by four foot styrofoam rectangles are set in a grid, along with harsh fluorescent lights, in place of a more traditional plastered or drywalled ceiling. Because these drop ceilings can be very severe in appearance, the very phrase has become suspect. But there are other drop ceilings that aren’t quite so industrial, and can actually really add to your home’s design and unique interior space. These may mimic stamped tin ceilings, coffered ceilings, or a number of different kinds of decorative wood patterns like beadboard. You may not even recognize a modern drop ceiling simply from looking at it, and that’s really the point.

Pros and Cons of Drop Ceilings

Looks aside, drop ceilings are not for everyone. They aren’t even for every kind of space, contrary to what some people may believe. It also really depends on the installation style you’re working with whether or not a drop ceiling in question is going to be the best choice for your home. But in general you can expect the following truths about drop ceilings.

• They’re simple to install. Drop ceilings are popular with a lot of DIYers because they’re easy to install and don’t require expert drywall skills to get a good result. Unlike drywall, which must be hung, the joints sealed, sanded, primered, painted, and painted again, a drop ceiling comes as a kit and is put together much more like flat-packed furniture. Follow the instructions and you should have the ceiling you expect.
• Maintenance is minimal. Drywall and plaster crack, it’s a fact. It’s also a reason a lot of older homes have newer drop ceilings installed over the originals. Regular patching of ceilings as a home ages and shifts ever so slightly is a headache. Styrofoam ceiling panels have much more give and can flex as a house moves. Bonus points for areas like basements where wood may shrink and swell throughout the year.
• They provide small amounts of insulation. Depending on how a drop ceiling is hung and what type you choose, you can expect a very small amount of insulation gain from them, as well as noise dampening. They’ve been used in homes with tall ceilings successfully to lower the heated envelope of the home from 10 feet to a more energy efficient seven to eight feet across the country, but by doing this, you can also interfere with the way the home’s air exchange was designed to work. Take caution when dropping ceilings dramatically.
• Head space is reduced. Even when you’re using a drop ceiling in a very minimalistic way, there’s going to be loss of headroom. This is because drop ceilings generally have to be hung on special brackets or dropped within a hanging framework. You may not lose a lot of headspace, possibly only inches, but in areas like basements where inches can be too much loss, it’s a serious consideration.
• Lighting solutions can be tricky. You’ll need to plan your lighting carefully when installing a drop ceiling. Because of the gap that tends to be present, even if it’s just a few inches worth, mounting lighting can require a great deal of planning and care. You may have to use special supports or choose different lighting types when you change a ceiling to a drop ceiling, or carefully design lighting if adding a drop ceiling to an area that’s never had a ceiling in it before.

Having Trouble Deciding?

If you don’t know what way to go with your future ceiling, you don’t have to go it alone. Just look in HomeKeepr for a recommendation for ceiling and interior design experts in your area. They can walk through your home with you, and help you choose the best option for your house, your budget, and your lifestyle.