Cody Schaaf-Realtor-Nebraska Realty- I want to be your Real Estate Guy!
In real estate today, there are essentially three different price points in the market: the starter-home market, the middle-home market, and the premium, or luxury-home, market. Each one is unique, and depending on your location, the price point in these categories will vary. Here’s what you need to know about each of these tiers before you get ready to buy
Starter-Home Market: This market varies by price, and these homes are typically purchased by first-time homebuyers or investors looking to flip them for a profit. Across the country, there is currently less than a 6-month supply of inventory for sale in this segment. In fact, according to the National Association of Realtors (NAR), in January, inventory reached the lowest supply level recorded since 1999. That means there aren’t enough homes on the lower-end of the market for the number of people who want to buy them. A low supply like this generally increases competition, drives bidding wars, and sets up an environment where homes sell above the listing price. This is a seller’s market.
Middle-Home Market: This segment is often thought of as the move-up market. Typically, the buyer in this market is moving into a larger, more custom home with more features, all coming at a higher price. Across the country, this market is looking more balanced than the lower or starter-end and is leaning toward a seller’s market.
Premium or Luxury-Home Market: This is the higher-end of the market with larger homes that have even more custom features and upgrades. Nationwide, there are more homes available in the premium and luxury space, creating more of a buyer’s market in this specific segment. Nationwide, prices are forecasted to increase across all three of these
price points in 2020. The map to the right shows the latest projections from CoreLogic.
With today’s inventory, selling your starter home now and moving up to the home of your dreams may be your best move yet.
Here’s a list of some of the most
common termsused in the homebuying
process that you’ll want to know.
Appraisal – A professional analysis used to estimate the value of the home. A necessary step in validating ahome’s worth to you andyour lender as yousecure financing.
Closing Costs – The fees required to complete the real estate transaction. Paid at closing, they includepoints, taxes, title insurance, financing costs, and items that must be prepaid
or escrowed. Ask your lender for a complete list of closing
Credit Score – A number ranging from 300-850 that's based on
an analysis of your credit history. Helps lenders determine the likelihood you’ll repay future debts.
Down Payment – Down payments are typically 3-20% of the purchase price of the home. Some 0% down programs are also available. Ask your lender for more information.
Mortgage Rate – The interest rate you pay to borrow money to buy a home. The lower the rate, the better.
Pre-Approval Letter – A letter from a lender indicating you qualify for a mortgage of a specific amount.
Real Estate Professional – An individual who provides services in buying and selling homes. Real estate professionals are there to help you through the confusing paperwork, find your dream home, negotiate any of the details that come up, and so you know exactly what’s going on in the housing market.
Since Freddie Mac’s Primary Mortgage Market Survey indicates interest rates for a 30-year fixed rate mortgage are forecasted to remain low throughout the rest of 2020, this could create a great opportunity for you to buy a home this year.That’s because the mortgage interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but it also impacts your purchasing power.
Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.
For example, this chart shows the impact rising interest rates have if you purchase a home at about the median existing home price ($274,500 at the close of 2019),assuming you want to keep your principal and interest payments around $1,200 a month. The lower the rate, the higher your purchasing power climbs, meaning you can buy more for your money when rates are low.
With mortgage interest rates forecasted to remain low throughout 2020, this may be a great year for you to consider buying a home.
If you’re searching for a home online, you’re not alone; lots of people are doing it. The question is, are you using all your available resources, and are you using them wisely? Here’s why the Internet is a great place to start the homebuying process, and the truth on why it should never be your only go-to source of information and support when it comes to making such an important decision.
According to the National Association of Realtors (NAR), the three most popular information sources homebuyers use in the home search are:
•Online Website (93%) •Real Estate Agent (86%) •Mobile/Tablet Website or App (73%)
Clearly, you’re not alone if you’re starting your search online; 93% of homebuyers are right there with you. The even better news: 86% of buyers are also getting information from a real estate agent at the same time.
Here are three reasons why working with a real estate pro in addition to your digital search
1. The Full Transaction Is Complex. There’s more to real estate than finding a home online, and it’s a lonely and complicated trek around the web if you don’t have a real estate professional to also help you through the 230 possible steps you’ll face as you navigate through a real estate transaction. Determining your price, submitting an offer, and negotiating successfully are just a few of the key parts of the sequence. You’ll want someone who has been there before to help you through it.
2. You Need a Skilled Negotiator. In today’s market, hiring a talented negotiator could save you thousands, maybe even tens of thousands of dollars. From the original offer to the appraisal and the inspection, many of the intricate steps can get confusing. You need someone who is willing to be your advocate and can keep the deal together until it closes.
3. You Need an Educator. There’s so much information out there in the news and on the Internet about home sales, prices, mortgage rates, and more. How do you know what’s fact and what’s fiction? How do you know what’s specifically going on in your area? How do you know what to offer on your dream home without paying too much or offending the seller with a lowball offer?
Dave Ramsey, known as the financial guru, advises:
“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
Hiring a real estate professional who has a finger on the pulse of the market and is eager to help you learn along the way will make your buying experience an informed and educated one. You need someone who’s going to tell you the truth, not just what they think you want to hear.
If you’re ready to start your search online, don’t skip over the support of an educated, experienced, and informed professional. You need someone at your side who can answer your questions and guide you through a process that can be complex and confusing if you go at it with the Internet alone.
Have you opened a new location, redesigned your shop, or added a new product or service? Don't keep it to yourself, let folks know.
Once you have a real estate professional securely in your corner, you’ll want to understand a little bit more about the homebuying process. Here’s a look at three important questions to think through.
1. How Can I Better Understand the Process, and How Much Can I Afford?
The process of buying a home is not one to enter lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.
According to ConsumerReports.org:
“Financial planners recommend limiting the amount you spend on housing
to 25 percent of your monthly budget.”
Keep in mind, before you start the process of purchasing a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time.
2. How Much Do I Need for a Down Payment?
In addition to knowing how much you can afford on a monthly mortgage payment, understanding what you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources available to potentially reduce the amount you may think you need to put down on a home.
If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund.
“Over time, these automatic deposits add up. For example, $50 a month accumulates
to $600 a year and $3,000 after five years, plus interest that has compounded.”
Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process. The 2019 Home Buyer Reportconducted by NerdWallet says:
“The truth: 32% of current U.S. homeowners put 5% or less down on their home, according to census data.”
3. Am I Practicing Living on a Reasonable Budget?
As tempting as it is to settle in each morning with a fancy cup of coffee from your favorite local café, putting that daily spend toward your down payment will help accelerate your path to homeownership.
It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.
A recent survey shared on Bankrate.com says:
“70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year.”
While you don’t need to cut all the fun out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.
If homeownership is on your wish list this year, take a good look at what you can prioritize to help you get there, and you’ll be one step closer to making your dream a reality.
I’m sure you have questions and concerns about the real estate process.
I’d love to talk with you about what you read here and help you on the path to buying your new home. My contact information is below, and I look forward to working with you.