Chicago Real Estate News

 

May 25, 2022

Economic impact of buying and selling

 

 

 

If you’re thinking of buying or selling a home, chances are you’re focusing on the many extraordinary ways it’ll change your life. But do you know it has a large impact on your community too?

To measure that impact, the National Association of Realtors (NAR) releases a report each year to highlight just how much economic activity a home sale generates. The chart below shows how the sale of both a newly built home and an existing home impact the economy:

How Buying or Selling a Home Benefits the Economy and Your Community | Keeping Current MattersAs the visual shows, a single home sale can have a significant effect on the overall economy. To dive a level deeper, NAR also provides a detailed look at how that varies state-by-state for newly built homes (see map below):

How Buying or Selling a Home Benefits the Economy and Your Community | Keeping Current MattersYou may be wondering: how can a single home sale have such a major effect on the economy?

For starters, there are multiple industries that play a role in the process. Numerous contractors, specialists, lawyers, town and city officials, and so many other professionals are all necessary at various stages during the transaction. Every individual you work with, like your trusted real estate advisor, has a team of professionals involved behind the scenes.

That means when you buy or sell a home, you’re leaving a lasting impression on the community at large. Let the knowledge that you’re contributing to those around you while also meeting your own needs help you feel even more empowered when you decide to make your move this year.

Bottom Line

Homebuyers and sellers are economic drivers in their community and beyond. Reach out to your trusted real estate advisor today if you’re ready to get started. It won’t just change your life; it’ll make a powerful impact on your entire community.

May 18, 2022

How to keep your savings as inflation rises

With interest rates rising and inflation showing up everywhere from the grocery store to the gas pump, it can be a challenging time to save for a down payment and break into the housing market. However, there are a variety of things both large and small that can immediately shave costs and grow your nest egg – perhaps even faster than you anticipated. Here are a few tips:  

Household Audit  

Begin by auditing all your expenses each month and know exactly where your money is going. This may sound obvious, but forgotten expenditures add up and can often be scaled back. This is where you’ll notice subscriptions and streaming services you may not use, or insurance policies that you are potentially overpaying on. Take the time to cancel items or renegotiate how much you’re paying for certain things, and you’ll soon tally up savings.  

 

Dine In  

In the same vein, examine how much you’re dining out or grabbing coffee each week as these expenses can add up as well. If you’re still looking to enjoy an afternoon or evening out, check out sites like Groupon, or see if your favorite restaurant offers a deal night.  

cooking

Pumping the Breaks at the Pump 

With gas prices at an all-time high, watching your speed is paramount to conserve fuel. According to the Department of Energy, reducing your speed 5 to 10 mph, can save you 7% to 14%. If you’re filling up once a week, that could add up to $50 per month. Additionally, now that the weather is warmer, consider walking for short trips or taking a Divvy bike instead of a ride share.  

How Efficient is Your House?

Next, take a look around your residence. Is it the most energy efficient it can be? As the saying goes, you could be throwing money out the window. Change your air filters and optimize your home for the season, for example drawing the shades in the summer and using storm coverings in the winter. Program your thermostat so you’re not heating or cooling your home as much when you’re away. That could save as much as 10% on your energy bill. 

Clean Up and Cash In

Spring signals cleaning and that presents an opportunity to sell or consign unused items and clothing. Check out your garage, attic, and closets, and take old sporting equipment and bikes to a secondhand store or try selling them online. There are plenty of ways to squeeze extra cash out of things that are taking up your space but may be another person’s treasure.   

Discounted Shopping

If you’re really going the extra mile, consider clipping coupons or shopping sales for household items. Holiday weekends are often a great time to shop for furniture and other big-ticket items, while clothing prices are slashed at the end of each season. And don’t be afraid to ask a salesclerk if a particular item is anticipated to go on sale.

Whether you’re preparing to buy a home or simply looking to cut back on spending, these are just a few ways to ease the impact of inflation and contribute to a lifetime of smart spending. 

May 11, 2022

2022 Housing Market Forecast [INFOGRAPHIC]

 

 

2022 Housing Market Forecast [INFOGRAPHIC] | Keeping Current Matters

Some Highlights

May 4, 2022

These cities are overvalued and could see price drops

We’re in a historically overvalued housing market, and these cities could see home prices drop 10%, Moody’s says

The Federal Reserve has a dual mandate from Congress: Maintain maximum employment and keep prices stable. Of course, with inflation at its highest level in 40 years, there's no doubt which of the Fed's mandates currently tops its priority list. An inflation-fighting Fed has big implications for the U.S. housing market, Zandi says. Already, the Federal Reserve is putting upward pressure on mortgage rates as a way to rein in price growth in the housing market and the broader economy. Indeed, over the past two months, the average 30-year fixed mortgage rate has spiked from 3.11% to 5.1%.

That swift uptick in mortgage rates amounts to an economic shock to the red-hot housing market. We're already starting to see it soften the market a bit. In the coming months, Zandi says that cooling should only intensify. By this time next year, he predicts, year-over-year home price growth will be at zero.

At this point, Zandi doesn't foresee a national home price correction. However, he does believe some of the nation's most overpriced housing markets could see home prices decline up to 10% over the coming year.

To get an indication of which housing markets are at risk of a home price correction, Fortune asked Moody's Analytics for its proprietary analysis of U.S. housing markets. The firm aimed to find out whether local income levels could support local home prices. The finding? Of the 392 metropolitan statistical areas it looked at, 96% are "overvalued". Among those 392 markets, 149 are overvalued by at least 25%. The most overvalued being Boise, where home prices are 73% above what fundamentals would support. The fact Boise is "overvalued" relative to local incomes isn't surprising given the influx of out-of-state California expats who bought there during the pandemic.

View this interactive chart on Fortune.com

Over time, regional housing markets can't remain "overvalued" to this degree, Zandi says. That should be a drag on future home price growth.

"In terms of house prices, I expect it [growth] to go flat…there will be markets where we will see a price decline of around 5% to 10%," Zandi says. While he doesn't foresee the ongoing boom as a housing bubble—which would require both home price overvaluation and speculation in the market—he does say there is some "speculation creeping in" including in places like Phoenix and Charlotte. According to Moody's Analytics' analysis, Phoenix and Charlotte are overvalued by 46% and 33%, respectively.

Moody's Analytics isn't the only firm calling this an overvalued housing market. CoreLogic, a real estate research company based in California, provided an analysis to Fortune last month that found 65% of regional housing markets are overpriced. Meanwhile, an analysis provided by Black Knight, a mortgage technology and data provider, finds the typical American household would have to spend 31% of its monthly income to make a mortgage payment on the average-priced U.S. home. That's the highest reading of Black Knight's mortgage-payment-to-income ratio since 2007.

While CoreLogic and Moody's Analytics agree the housing market is overvalued, CoreLogic isn't quite as bearish. The real estate research firm says only 3% of housing markets have an "elevated" or "high" chance of seeing home price declines over the coming year. Nationally, CoreLogic expects home price growth to jump another 5% over the coming 12 months. That would mark a deceleration from the latest 12-month home price jump (19.8%), however, it'd hardly be the relief home shoppers seek.

"New listings have not kept up with the large number of families looking to buy, leading to homes selling quickly and often above list price. This imbalance between an insufficient number of owners looking to sell relative to buyers searching for a home has led to the record appreciation of the past 12 months," wrote Frank Nothaft, chief economist at CoreLogic, in a report published last month. "Higher prices and mortgage rates erode buyer affordability and should dampen demand in coming months, leading to the moderation in price growth in our forecast."

As Fortune has previously reported, it may be wise to take all housing forecasts with a grain of salt. After all, when the COVID-19 recession struck in spring 2020, both Zillow and CoreLogic published housing forecast models predicting that U.S. home prices would fall by spring 2021. It didn't happen. Instead, the housing market boomed.

This story was originally featured on Fortune.com, Lance Lambert.

April 27, 2022

Why this housing market is not a bubble ready to pop

Homeownership has become a major element in achieving the American Dream. A recent report from the National Association of Realtors (NAR) finds that over 86% of buyers agree homeownership is still the American Dream.

Prior to the 1950s, less than half of the country owned their own home. However, after World War II, many returning veterans used the benefits afforded by the GI Bill to purchase a home. Since then, the percentage of homeowners throughout the country has increased to the current rate of 65.5%. That strong desire for homeownership has kept home values appreciating ever since. The graph below tracks home price appreciation since the end of World War II:

Why This Housing Market Is Not a Bubble Ready To Pop | Keeping Current Matters

The graph shows the only time home values dropped significantly was during the housing boom and bust of 2006-2008. If you look at how prices spiked prior to 2006, it looks a bit like the current spike in prices over the past two years. That may lead some people to be concerned we’re about to see a similar fall in home values as we did when the bubble burst. To help alleviate those worries, let’s look at what happened last time and what’s happening today.

What Caused the Housing Crash 15 Years Ago?

Back in 2006, foreclosures flooded the market. That drove down home values dramatically. The two main reasons for the flood of foreclosures were:

  1. Many purchasers were not truly qualified for the mortgage they obtained, which led to more homes turning into foreclosures.
  2. A number of homeowners cashed in the equity on their homes. When prices dropped, they found themselves in an underwater situation (where the home was worth less than the mortgage on the house). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more.

This cycle continued for years.

Why Today’s Real Estate Market Is Different

Here are two reasons today’s market is nothing like the one we experienced 15 years ago.

1. Today, Demand for Homeownership Is Real (Not Artificially Generated)

Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Today, purchasers and those refinancing a home face much higher standards from mortgage companies.

Data from the Urban Institute shows the amount of risk banks were willing to take on then as compared to now.

Why This Housing Market Is Not a Bubble Ready To Pop | Keeping Current Matters

There’s always risk when a bank loans money. However, leading up to the housing crash 15 years ago, lending institutions took on much greater risks in both the person and the mortgage product offered. That led to mass defaults, foreclosures, and falling prices.

Today, the demand for homeownership is real. It’s generated by a re-evaluation of the importance of home due to a worldwide pandemic. Additionally, lending standards are much stricter in the current lending environment. Purchasers can afford the mortgage they’re taking on, so there’s little concern about possible defaults.

And if you’re worried about the number of people still in forbearance, you should know there’s no risk of that causing an upheaval in the housing market today. There won’t be a flood of foreclosures.

2. People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s

As mentioned above, when prices were rapidly escalating in the early 2000s, many thought it would never end. They started to borrow against the equity in their homes to finance new cars, boats, and vacations. When prices started to fall, many of these homeowners were underwater, leading some to abandon their homes. This increased the number of foreclosures.

Homeowners didn’t forget the lessons of the crash as prices skyrocketed over the last few years. Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has more than doubled compared to 2006 ($4.6 trillion to $9.9 trillion).

The latest Homeowner Equity Insights report from CoreLogic reveals that the average homeowner gained $55,300 in home equity over the past year alone. Odeta Kushi, Deputy Chief Economist at First Americanreports:

“Homeowners in Q4 2021 had an average of $307,000 in equity – a historic high.”

ATTOM Data Services also reveals that 41.9% of all mortgaged homes have at least 50% equity. These homeowners will not face an underwater situation even if prices dip slightly. Today, homeowners are much more cautious.

Bottom Line

The major reason for the housing crash 15 years ago was a tsunami of foreclosures. With much stricter mortgage standards and a historic level of homeowner equity, the fear of massive foreclosures impacting today’s market is not realistic.

April 19, 2022

Using Your Tax Refund To Achieve Your Homeownership Goals This Year

If you’re buying or selling a home this year, you’re likely saving up for a variety of expenses. For buyers, that might include things like your down payment and closing costs. And for sellers, you’re probably working on a bit of spring cleaning and maintenance to spruce up your house before you list it.

Either way, any money you get back from your taxes can help you achieve your goals. Using a tax refund is a common tactic for buyers and sellers. SmartAsset estimates the average American will receive a $2,897 tax refund this year. The map below provides a more detailed estimate by state:

 

Using Your Tax Refund To Achieve Your Homeownership Goals This Year | Keeping Current Matters

If you’re getting a refund this year, here are a few tips to help with your home purchase or sale this season.

How Buyers Can Use Their Tax Refund

According to American Financing, there are multiple ways your refund check can help you as a homebuyer. A few include:

  • Growing your down payment fund – If you haven’t started saving for your down payment, let your tax refund kick off the process. And if you have a fund already, the money you get back could put you closer to your goal.
  • Paying for your home inspection – Your home inspection can save you a lot of headaches down the road by helping you determine the condition of the house. As a buyer, you’ll typically be responsible for paying for your inspection, and it’s definitely worth the investment.
  • Saving for closing costs – Closing costs are additional expenses you’ll need to pay once it’s time to close. They average anywhere between 2-5% of the purchase price of your home.

 

This list is a great start, but it isn’t exhaustive of all the costs you may encounter as you set out on your homebuying journey. The best way to prepare is to work with a trusted real estate professional to make sure you understand what’s to come in the process.

 

How Sellers Can Use Their Tax Refund

If you own a home and are planning to sell this spring, your tax refund can help you make sure your home is ready to list. Here are a few ways current homeowners can put their tax refund to good use:

  • Making small upgrades – NerdWallet provides a list of great ways to use your tax refund, including tackling small projects or boosting your curb appeal to help your home stand out.
  • Making repairs – If there’s anything in your house that needs to be fixed, American Financing notes that completing repairs is another great use of that money.
  • Buying your next home – Whether you’re selling to move up or downsize, you can use your tax refund to help pay for any costs on the purchase of your next home.

Of course, it’s important to talk with your trusted real estate advisor before taking on any projects. They’ll make sure you can focus on areas that’ll help you receive the best possible price when you sell.

Bottom Line

Funding your home purchase or sale can feel like a daunting task, but it doesn’t have to be. Your tax refund can help you reach your goals. Connect with a local real estate advisor today to discuss how you can start on your journey.

 

 

April 13, 2022

Future price appreciation and what it means for you

 

Many consumers are wondering what will happen with home values over the next few years. Some are concerned that the recent run-up in home prices will lead to a situation similar to the housing crash 15 years ago.

However, experts say the market is totally different today. For example, Odeta Kushi, Deputy Chief Economist at First American, tweeted just last week on this issue:

“. . . We do need price appreciation to slow today (it’s not sustainable over the long run) but high price growth today is supported by fundamentals- short supply, lower rates & demographic demand. And we are in a much different & safer space: better credit quality, low DTI [Debt-To-Income] & tons of equity. Hence, a crash in prices is very unlikely.”

Price appreciation will slow from the double-digit levels the market has seen over the last two years. However, experts believe home values will not depreciate (where a home would lose value).

To this point, Pulsenomics just released the latest Home Price Expectation Survey – a survey of a national panel of over 100 economists, real estate experts, and investment and market strategists. It forecasts home prices will continue appreciating over the next five years. Below are the expected year-over-year rates of home price appreciation based on the average of all 100+ projections:

  • 2022: 9%
  • 2023: 4.74%
  • 2024: 3.67%
  • 2025: 3.41%
  • 2026: 3.57%

Those responding to the survey believe home price appreciation will still be relatively high this year (though half of what it was last year), and then return to more normal levels over the next four years.

What Does This Mean for You as a Buyer?

With a limited supply of homes available for sale and both prices and mortgage rates increasing, it can be a challenging market to navigate as a buyer. But buying a home sooner rather than later does have its benefits. If you wait to buy, you’ll pay more in the future. However, if you buy now, you’ll actually be in the position to make future price increases work for you. Once you buy, those rising home prices will help you build your home’s value, and by extension, your own household wealth through home equity.

As an example, let’s assume you purchased a $360,000 home in January of this year (the median price according to the National Association of Realtors rounded up to the nearest $10K). If you factor in the forecast for appreciation from the Home Price Expectation Survey, you could accumulate over $96,000 in household wealth over the next five years (see graph below):

The Future of Home Price Appreciation and What It Means for You | Keeping Current Matters

Bottom Line

If you’re trying to decide whether to buy now or wait, the key is knowing what’s expected to happen with home prices. Experts say prices will continue to climb in the years ahead, just at a slower pace. So, if you’re ready to buy, doing so now may be your best bet for your wallet. It’ll also give you the chance to use the future home price appreciation to build your own net worth through rising equity. If you want to get started, connect with a real estate professional today.

April 6, 2022

Yes, we're still in a sellers market

Some Highlights

  • Due to low supply and high demand, today is one of the strongest sellers’ markets we’ve seen.
  • Sellers can benefit from more offers to pick from, higher home values, and a faster sales process. There’s a reason why 72% of people believe it’s a good time to sell.
  • Don’t miss out on this unique opportunity. Work with an agent to take advantage of this hot sellers’ market.

KCM - April 2022

March 30, 2022

Mortgage Rates: Where Will They Go from Here?

Based on the Primary Mortgage Market Survey from Freddie Mac, the average 30-year fixed-rate mortgage has increased by 1.2% (3.22% to 4.42%) since January of this year. The rate jumped by more than a quarter of a point from just a week ago. Here’s a visual to show how mortgage rate movement throughout 2021 was steady compared to the rapid increase in mortgage rates this year:

 

Just a few months ago, Freddie Mac projected mortgage rates would average 3.6% in 2022. Earlier this month, Fannie Mae forecast mortgage rates would average 3.8% in 2022. As the chart above shows, rates have already surpassed those projections.

Sam Khater, Chief Economist at Freddie Mac, explained in a press release last week:

“This week, the 30-year fixed-rate mortgage increased by more than a quarter of a percent as mortgage rates across all loan types continued to move up. Rising inflation, escalating geopolitical uncertainty and the Federal Reserve’s actions are driving rates higher and weakening consumers’ purchasing power.”

Where Are Mortgage Rates Going from Here?

In a recent article by Bankrate, several industry experts weighed in on where rates might be headed going forward. Here are some of their forecasts:

Greg McBride, Chief Financial Analyst, Bankrate:

“With inflation figures continuing to surprise to the upside, mortgage rates will remain above 4.0% on the 30-year fixed.”

Nadia Evangelou, Senior Economist and Director of Forecasting, National Association of Realtors (NAR):

“While higher short-term interest rates will push up mortgage rates, I expect some of this impact to be mitigated eventually through lower inflation. Thus, I expect the 30-year fixed mortgage rate to continue to rise, although we aren’t likely to see the big jumps that occurred over the past few weeks.”

Len Kiefer, Deputy Chief Economist, Freddie Mac:

“Mortgage rates are likely to continue to move higher throughout the balance of 2022, although the pace of rate increases is likely to moderate.”

In a recent realtor.com article, another expert adds to the conversation:

Danielle Hale, Chief Economist, realtor.com:

“. . . As markets digest the Fed’s updated economic projections, I anticipate a continued increase in mortgage rates over the next several months. . . .”

What Does This Mean for You if You’re Looking To Buy a Home?

With both mortgage rates and home values expected to increase throughout the year, it would be better to buy sooner rather than later if you’re able. That’s because it’ll cost you more the longer you wait. But, there is a possible silver lining to buying a home right now. While you’ll be paying a higher price and a higher mortgage rate than you would have last year, rising prices do have a long-term benefit once you buy.

If you purchase a home today valued at $400,000 and put 10% down, you would be taking out a $360,000 mortgage. According to mortgagecalculator.net, at a 4.42% fixed mortgage rate, your mortgage payment would be $1,807 a month (this does not include insurance, taxes, and other fees because those vary by location).

Now, let’s put that mortgage payment into a new perspective based on the substantial growth in equity that comes with the escalation in home prices. Every quarter, Pulsenomics surveys a panel of over 100 economists, investment strategists, and housing market analysts about their expectations for future home prices in the United States. Last week, Pulsenomics released their latest Home Price Expectation Survey. The survey reveals that the average of the experts’ forecasts calls for a 9% increase in home values in 2022.

Based on those projections, a $400,000 house you buy today could be valued at $436,000 by this time next year. If you break that down, that means the equity in your home would increase by $3,000 a month over that period. That’s greater than the estimated monthly payment above. Granted, the increase in your net worth is tied to the home, but it is one way to put the home price appreciation to use in a way that benefits you.

Bottom Line

Paying a higher price for a home and a higher mortgage rate can be a difficult pill to swallow. However, waiting will just cost you more. If you’re ready, willing, and able to buy a home, now will be a better time than a year, or even six months from now. Connect with a real estate professional to begin the process today.

 

Keeping Current Matters - March 2022

March 23, 2022

Re-forecasting home price growth - another wild swing ahead

 

Depleted, stretched, and disheartened. That's how a lot of home shoppers, who've lost home bid after bid over the past year, are feeling these days. When it comes to timing, they've certainly gotten the short end of the stick. Over the past 12 months, U.S. home prices are up 18.8%—an uptick larger than any 12-month period leading up to the 2008 housing crash.

 

But the next crop of homebuyers might even have it worse. On Wednesday, Zillow released its latest forecast. The home listing site now predicts that the year-over-year rate of home price growth will hit 22% in May. That would, of course, represent an acceleration in home price growth.

Beyond May, Zillow foresees only a subtle slowdown in the rate of growth. By February 2023, that year-over-year home price growth will be at 17.8%, according to Zillow's forecast model. However, that's hardly any relief for buyers. In fact, it would still be nearly four times greater than the average annual rate of home price growth (4.6%) posted since 1986.

"Annual home value growth is likely to continue accelerating through the spring," wrote the Zillow researchers. "The robust long-term outlook is driven by our expectations for tight market conditions to persist, with demand for housing exceeding the supply of available homes." The cost pain for homebuyers isn't limited to prices: Mortgages rates are also soaring.

The Federal Reserve is getting serious about reining in runaway inflation. As a result, financial markets are pushing up mortgage rates. Back in January 2021, the average 30-year fixed mortgage rate was at an all-time low of 2.65%. That steadily climbed to 3.11% by December 2021. But over the past three months, the rate has skyrocketed. As of Friday, the average 30-year fixed mortgage rate stands at 4.16%. That's a bigger deal than it might appear. A homebuyer who took out a $400,000 mortgage at a 2.65% rate would've gotten a $1,612 monthly payment. At a 4.16% rate, that payment soars to $1,947 per month. Over the course of 30 years, that's an additional $120,559. 

By: Lance Lambert - Fortune