This week, we are going to look at the three reasons to sell your house now instead of waiting: demand is strong, supply is low and new construction will soon be your competition.

Part III – New Construction Will Soon Be Your Competition

Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. As an example, the National Association of Realtors revealed, relative to last year, year-to-date new home sales are up 19%.

These ‘shiny’ new homes will again become competition as they can be an attractive alternative to many of today’s home purchasers.

Here are the numbers regarding new construction about to come to market from the Census Bureau:

BUILDING PERMITS

• Single-family authorizations in February were at a rate of 600,000.
• This is 25.5% above February 2012.

HOUSING UNDER CONSTRUCTION

• Single-family housing starts in February were at a rate of 618,000.
• This is 18.5% above February 2012.

HOUSING COMPLETIONS

• Single-family housing completions in February were at a rate of 574,000.
• This is 32.9% above February 2012.

As we mentioned, new construction can be strong competition to a seller of an existing home. It may make sense to list your home before this new inventory makes its way to market.

This week, we are going to look at the three reasons to sell your house now instead of waiting: demand is strong, supply is low and new construction will soon be your competition.

Part II – Housing Supply is Low

A seller’s ability to sell their home in today’s real estate market will be determined by both the supply of homes for sale and the demand for that housing. In real estate, supply is represented by the current month’s supply of homes for sale (the number of homes for sale divided by the number of homes sold in the previous month).

While there is no steadfast rule that will apply to pricing in every category of housing, here is a great guideline:

• 1-4 months’ supply creates a sellers’ market where there are not enough homes to satisfy buyer demand. Appreciation is guaranteed.
• 5-6 months’ supply creates a balanced market. Historically home values appreciate at a rate a little greater than inflation.
• 7-8 months’ supply creates a buyers’ market where the number of homes for sale exceeds the demand. Depreciation follows.

What is happening across the country right now?

In most parts of the country, supply is dropping like a rock. According to the National Association of Realtors, total housing inventory is below a five months’ supply. This is almost 20% below inventory numbers of just a year ago and at levels we haven’t seen since 2005.

Based on the table above, we can see that the supply/demand ratio is showing a sellers’ market where prices appreciate. This has created positive movement in housing values in most parts of the country.

Sellers have a great opportunity right now. Historically, inventory increases dramatically as we approach summer. Selling now while demand is high and supply is low may garner you your best price.

Tomorrow, we will look at the competition new construction will create.

This week, we are going to look at three reasons to sell your house now instead of waiting: demand is strong, supply is low and new construction will soon be your competition.

Part I – Demand for Real Estate is Much Stronger This Year

Previous owners moving UP or DOWNSIZING; new owners moving IN.

When selling anything, owners can only hope there is a strong demand for that which they are selling. The great news for today’s home sellers is that the current housing market is experiencing a stronger demand than we have seen in some time.

The  spring housing market of 2013 is projected to be one of the best in years.

Home Sales

The National Association of Realtors (NAR) reports monthly on both pending sales (houses going into contract) and existing home sales (actual closed sales).

In the first quarter of 2013, pending sales have consistently outperformed the numbers reported in 2012. Contract activity has been above year-ago levels for the past 22 months. Before this year, the last time the index showed a higher reading was in April 2010, shortly before the deadline for the home buyer tax credit.

NAR also revealed that closed home sales have been above year-ago levels for 20 consecutive months and sales are at the highest level since the tax credit period of 2009-2010.

Impact on Sellers

This increase in demand has created bidding wars for properly priced homes across the country. This has resulted in two favorable changes for home sellers:

1. In our area, they are receiving offers  greater than the list price.
2. The average days it takes to sell a home has dropped by over 20% from last year.

If you are thinking about selling your home, don’t miss out on the strong demand that exists in the current spring market.

Tomorrow, we will look at the supply of housing inventory that is available.

This week, we are going to look at the three financial reasons to buy a home now instead of waiting:  prices are rising at an accelerated rate,  interest rates are increasing and rents are skyrocketing.

Part III – Rents Are Skyrocketing 

 Whether you own or rent, you will have a monthly housing expense. The question is how that expense will change in the future. When you purchase a home, for the most part, you lock-in that monthly housing expense for the length of the mortgage you take (15 or 30 years for example). When you rent a home, your housing expense is impacted by movements in the supply and demand for rental properties.

Historically, residential rental rates increase by 3.2% on an annual basis. However, in the current housing environment, there is an increasing demand for residential rental properties. This increase in demand has dramatically impacted rates. Zillow, in their most recent report, revealed that rental rates in the U.S. increased by 4.5% over the last twelve months. Other studies have projected rental rate increases of 4-5% over the next few years.

The only way to have control of your housing expense is to buy.

But Isn’t Buying Much More Expensive Than Renting?

Not right now! As a matter of fact, with prices down and mortgage rates at historic lows, it is LESS EXPENSIVE to buy than rent in most areas. In a recent report, Trulia revealed it is cheaper to buy than rent in ALL of America’s largest regions.

According to Jed Kolko, Trulia’s Chief Economist:

“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat. Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets.”

However, Kolko went on to say that this opportunity may soon disappear:

“Although buying a home is still cheaper than renting, the gap is closing. In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”

Again, the only way to lock-in your monthly housing expense is to take that decision out of the hands of a landlord by owning. With both prices and interest rates set to increase, the best time to buy is right now.

My car has a Navigation System built in, but it is outdated and the cost of the new maps is around $200.

Three years ago, I purchased a Garmin GPS which attached to the windshield and it was (still is) excellent, but the batteries stopped charging, so, in order for me to use it, I have to have it plugged all the time and the cord was always on my way.

Then I got my SmartPhone which came with Google Maps and it is always up-to-date, so I was extremely happy until today, when I discovered that an Appellate Court in Fresno has banned the use of GPS from Hand Held Devices; Read the following article:

Forbidden SmartPhone GPS

Use of smartphones as GPS devices long has been a gray area in distracted driving laws, but a California appellate court ruling indicates it’s time to put away those map apps.

The “plain language” of California’s cell phone statute and its legislative history indicate any use of a wireless communications device by drivers that is not hands-free is against the law, the Appellate Division of Fresno Superior Court has ruled.

The original conviction of Steven Spriggs was for driving while using a wireless phone (without a hands-free attachment). Spriggs admitted to driving while viewing his smartphone’s map and directions application.

The California distracted driving statute prohibits driving “while using a wireless telephone,” but does not define “using.” The appellate court held that the Legislature could have limited the law’s scope to “listening and talking” or “conversing,” but did not.

Writing for the appellate court, Judge W. Kent Hamlin concluded:

The primary evil sought to be avoided is the distraction the driver faces when using his or her hands to operate the phone. That distraction would be present whether the wireless telephone was being used as a telephone, a GPS navigator, a clock or a device for sending and receiving text messages and emails.

Appellant Spriggs argued that since the state’s text messaging law was adopted after the handheld cell phone law, that indicated the mobile phone law was designed to only prohibit conversations. The court disagreed, citing the legislative history of the laws.

Orin Kerr, a computer crime law expert, wrote that he found it “a very puzzling kind of statutory interpretation.”

“The fact that the legislature was worried about distracted drivers in enacting the first ban doesn’t tell us whether the statute enacted should apply to all things that distract drivers or only some things.”

The court did give opponents of electronic distracted driving laws some ammo.

The court conceded that an argument could be made that there are legal uses of drivers’ hands that could pose “just as great a risk” to other motorists. And, the court wrote, prohibiting texting and email while failing to prohibit “perhaps even more distracting uses” of smartphones “could be seen as equally illogical and arbitrary.”

Those arguments should be addressed to the Legislature, the court said.

The ruling does not address use of in-dash GPS systems or any mapping application that can be used hands-free. It also appears that use of a wireless device as a music player would require the listener to keep his hands off the device.

The ruling in the People v. Spriggs was filed March 21 and made public in early April.

This week, we are going to look at the three financial reasons to buy a home now instead of waiting: prices are rising at an accelerated rate, interest rates are increasing and rents are skyrocketing.

Part II – Interest Rates Are Increasing

A big component in the cost of a home is the mortgage interest rate a purchaser pays. Understanding where rates are headed will help in making a decision whether to buy now or wait.

Experts predict that interest rates will be at least one point higher by the end of 2013.

So, Where Are Rates Headed?

No one can know for sure. The Fed has been artificially holding rates down to stimulate the economy. However, as the economy improves, many experts expect rates to creep up. As an example, HSH Associates, the nation’s largest publisher of mortgage and consumer loan information, recently explained:

“The stronger the economy becomes, the higher rates may grind; the Federal Reserve is keeping them low to goose the economy, but an economy responding to the Fed’s medicine will soon see less of a need for it in order to function. If not otherwise manipulated, higher rates are the natural result of a growing economy, as rising demand for available credit supply and concerns about inflation allow costs to rise.”

The Mortgage Bankers Association (MBA) agrees. They were quoted in HousingWire late last year regarding their thoughts on where rates would be headed in 2013.

“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association predicted.”

In the MBA’s latest Mortgage Finance Forecast they forecast that the 30 year interest rate will be 4.3% by the end of the year. This represents an increase of almost a full percentage point from the 3.4% rate available at the end of 2012.

For example, we show the impact a one percent increase in rate will have on the monthly principal and interest payment on a $200,000 mortgage.

Monthly payment difference with a one point rise in interest rate.

Freddie Mac’s Weekly Primary Mortgage Market Survey reveals that rates have increased by 2/10ths of a percentage point already this year.

As we mentioned, no one knows for sure where rates will be a year from now. But, many experts think they may be as much as a point higher. With rising residential real estate prices and the possibility of higher mortgage rates, waiting to buy a home makes no sense in our opinion.

Tomorrow, we will look at skyrocketing rents.

This week, we are going to look at the three financial reasons to buy a home now instead of waiting: prices are rising at an accelerated rate, interest rates are increasing and rents are skyrocketing.

Part I – Prices Are Rising at an Accelerated Rate

 The price of a home is the major consideration when deciding whether or not it makes financial sense to purchase a house. Experts are not only projecting that house values will increase in 2013. They are also more optimistic in the level of appreciation they are projecting as the market begins to heat up. Here are some examples:

The Home Price Expectation Survey

The latest survey of a nationwide panel of 118 economists, real estate experts and investment and market strategists reveals they project home values to end 2013 up an average of 4.6% according to the first quarter. This is after they had projected a 3.1% increase just three months ago.

Home prices are escalating rapidly; if you have been waiting and you have a limit, the home that you can afford today, may not be affordable in six months…

Bank of America

In a report titled, Someone Say House Party?, Bank of America analysts revised their projections upward:

“Home prices continue to show momentum amid shrinking inventory and record high affordability, prompting us to revise up our original forecast of 4.7% for home prices this year. We now expect national home prices, as defined by the S&P Case Shiller home price index, to increase 8% this year.”

Capital Economics

According to a report in DSNews, Capital Economics also upgraded their prediction:

“Strong demand and tight inventory have brought existing home sales back to ‘normal’ levels, and further gains are possible, according to the latest market report from Capital Economics. Additionally, market conditions may prompt lenders to “loosen the purse strings slightly” and lend a little more freely.

These conditions, combined with broader economic indicators, lead Capital Economics to revise its previous forecast of a 5% price gain this year up to 8%.”

Morgan Stanley

“Strong momentum in home prices as well as housing activity gave Morgan Stanley analysts enough confidence toupgrade their home price appreciation projections to roughly 7% (from 5%) for 2013, according to its latest global securitized credit report…In an article from HousingWire, Morgan Stanley joined the party:

“The momentum in most metrics of housing activity is running well ahead of the pace we had expected,” said James Egan, Jose Cambronero and Vishwanath Tirupattur, analysts for Morgan Stanley.”

Not only are prices projected to appreciate. Experts are actually revising their projections upward as demand maintains its momentum.

Tomorrow, we will look at increasing interest rates.