Tami Savage, Realtor

Florida Real Estate

New Year, New Home? Set Homeownership Goals Whether You’re Buying, Selling, or Staying Put

By Tami Savage

New Year, New Home? Set Homeownership Goals Whether You're Buying, Selling, or Staying Put

The start of a new year always compels people to take a fresh look at their goals, from health and career to relationships and finance. But with historically low mortgage rates, increased home sales and price growth, and a tight housing inventory, the time is right to also make some homeownership resolutions for 2021.

Home buyers, is this the year you work to improve your credit score, pay down some debt, or save for a down payment? 

Home sellers, we’ve laid out plans for you to get top dollar for your property, including timing your home sale, making your property stand out from the crowd, and investing in your extra living space. 

And even if you’re staying put for awhile, homeowners, you can resolve to improve your status quo by evaluating your home budget, finalizing your home maintenance schedule, or maybe investing in a second property.

So no matter your homeownership status, we’ve got some ideas and advice for you to make this year your best one yet. Read on to learn more.

HOME BUYERS

Resolution #1: Qualify for a better mortgage with a higher credit score.

Your credit report highlights your current debt, bill-paying history, and other key financial information. Importantly for your home-buying journey, it is also used by lenders and companies to calculate your credit score, which partly determines if you are qualified to obtain a mortgage. Therefore, before you start house-hunting, make sure your finances are in the best possible shape by checking your credit report from Equifax, Experian, and TransUnion (via AnnualCreditReport.com). You can also obtain your credit score for free from some banks and credit card companies.

Your credit score will be a number ranging from 300-850.1 Generally speaking, a credit score of 740 or higher is considered very good to excellent.2 If your FICO score drops below 740, you might need to work at boosting your score for a few months before you begin house-hunting. Ways to do this are to pay your bills on time every month, keep your credit card balances low, and avoid applying for new credit.

Resolution #2: Improve your credit health by paying down debt. 

Do you have student loans, credit card debt, or car payments tying up your income each month? That debt is hurting your “buying power,” or the amount of home you can afford. Not only is it money that you can’t spend on your new home, but your debt-to-income ratio also affects your credit score, which we discussed above. The less debt you have, the higher your FICO score and the better mortgage you can obtain.

If you can, pay off some debt in its entirety—like a low balance on a credit card. Then apply that “extra” money you previously paid on that credit card to pay off bigger debt, like a car loan. Even if you can’t pay off all (or any) of your debt in full, reducing the balances of each account will help you qualify for the best possible mortgage terms.

Resolution #3: Create a financial safety net before applying for a mortgage. 

Don’t forget that buying a home requires some cash as well. A down payment is typically 7% of a home’s purchase price, and closing costs currently average $3,700.3,4 You’ll also need money for moving expenses and any initial maintenance tasks that might pop up. And as the pandemic taught us, you never know when an unforeseen event might cause a job loss, drop in income, or health scare, so having some liquid savings will ensure that you can still pay your mortgage if a crisis occurs.

Dedicate some effort to building up your reserves. Cut down on unnecessary expenses, and consider having a portion of each paycheck automatically deposited into your savings account to avoid the temptation to spend it.

HOME SELLERS

Resolution #4: Decide on the right time to sell your home.

If you’re looking to maximize profit on the sale of your home, selling earlier in the year makes sense. Listing prices historically increase early in the year, peak in May, plateau through June, and decrease for the remainder of the year.5 And, according to the National Association of Realtors, “[w]ith both mortgage rates and the number of homes available for sale expected to remain relatively low, home prices are likely to continue to increase. [In] mid-January, home prices typically begin a quick ramp-up in a normal year.”5 

But sales price isn’t the only thing to consider. You might not be ready to sell your home yet because you don’t want to uproot your kids during the school year or because you need to tackle some minor upgrades before placing your home on the market. 

This means that there is no one month or season that is the perfect time to sell your home. Instead, the right timeline for you takes into account factors such as when you’ll earn the highest profit, personal convenience, and whether your home is even ready to put on the market. A trusted real estate professional can talk you through your specific needs to clarify when to sell your home. 

Resolution #5: Boost your home’s resale value by making your property shine.

Housing inventory is at historic lows across the country, and that means the market is fiercely competitive.6 Selling your home in 2021 has the potential to net you a huge return right now, and you can maximize that amount with some simple fixes to make sure your property outshines your neighbors’ for sale down the street. 

In your home, you might need to tackle a minor remodeling project, such as upgrading the flooring or adding a fresh coat of paint. According to the National Association of Realtors’ 2019 Remodeling Impact Report, simply refinishing existing hardwood floors recoups 100% of the cost at resale, and completely replacing it with new wood flooring recovers 106% of costs.7

Outside, you might consider improving your curb appeal by removing a dead bush, trimming a tree that blocks the front window, or power-washing your moldy driveway and sidewalks. In fact, real estate agents say cleaning the exterior of your house can add $10,000 to $15,000 to a home’s sale price.8 And according to a Virginia Tech study, improving a home’s landscaping may increase its value by 10 to 12%.9 

A good agent should provide custom-tailored suggestions to ensure your property pops inside and out. Ask us about our local insider secrets that will make your home stand out from others on the market.

Resolution #6: Invest in your “extra” living space to meet current buyers’ needs. 

Due to COVID-19, more people are staying at home to work, go to school, exercise, and stay entertained. And these lifestyle changes are showing up in home buyer preferences. For example, according to one study, buyers are looking more and more for homes with formal, outfitted home offices, private outdoor spaces, and updated kitchen appliances.10

So if you’ve got an underutilized room, consider turning it into an office, home gym, schoolroom, or multi-purpose room to meet current home buyer needs and attract better offers on your home. Got some underwhelming space outside? You could turn it into an outdoor entertainment area by adding a firepit, upgrading the patio furniture, or installing a grilling area. Be sure to consult with a local real estate professional before investing in a renovation, however, as each markets’ buyers have different tastes.

HOMEOWNERS

Resolution #7: Evaluate your household budget to reflect financial changes.

After this past year, in particular, your financial picture may have changed. Maybe you were furloughed, had your hours reduced, or got a new job further from home. Perhaps you’ve kept the same job, but you’re now working remotely. A work-from-home arrangement could mean less money spent on gas, tolls, a professional wardrobe, and dining out for lunch. 

But this could also mean new (or increased) expenses now that you’re working at home, such as new tech-related purchases, faster Wi-Fi, and higher energy bills. January marks the perfect opportunity to update your income and expenses and review last year’s spending habits, tweaking as needed for 2021.

For more specific ideas, contact us for our free report “20 Ways to Save Money and Stretch Your Household Budget.”

Resolution #8: Save money now (and earn more later) with a home maintenance plan. 

Having a schedule of regular home maintenance projects to tackle will save you money now and in the long-term. You’ll avoid some surprise “emergency fixes,” and when you’re ready to eventually sell your home, you’ll get higher offers from buyers who aren’t put off by overdue repairs.

Even if nothing necessarily needs fixing right now, you can lower your energy costs by maintaining and upgrading your home.  According to the U.S. Department of Energy, simple fixes add up: replace five most frequently used bulbs with ENERGY STAR ones to save $75/year; repair leaky faucets to save $35/year; replace older toilets with low-flow models to save $100/year; and seal air leaks to save $83-$166/year.11

For a breakdown of home maintenance projects to tackle throughout the year, contact us for our free report “House Care Calendar: A Seasonal Guide to Maintaining Your Home.”

Resolution #9: Invest in real estate for a better standard of living. 

Even if you don’t plan on leaving your current residence, real estate is a great way to improve your quality of life in 2021. 

Have cabin fever from the long quarantine? A vacation home in a getaway location you love lets you safely spread your wings. And if you have been looking for a second stream of income, an investment property might be your answer. Just be sure to consult with a real estate professional to get a realistic sense of a property’s true income potential.

Want more information on how a second property fits into your 2021 plans? Request our free report, “Move Up vs Second Home: Which One Is Right For You?”

LET US HELP YOU WITH YOUR 2021 GOALS

Whether you’re looking to buy, sell, or stay put in your home, it helps to connect with a trusted real estate agent. As local market experts, we have the knowledge, experience, and networks to help you achieve your homeownership goals, whatever they may be. Reach out to us today for a free consultation and commit to a happy and prosperous new year.

Sources:

  1. USA.gov –
    https://www.usa.gov/credit-report
  2. Equifax –
    https://www.equifax.com/personal/education/credit/score/what-is-a-good-credit-score/
  3. NerdWallet –
    https://www.nerdwallet.com/article/mortgages/the-20-mortgage-down-payment-is-dead 
  4. Zillow –
    https://www.zillow.com/mortgage-learning/closing-costs/ 
  5. Realtor.com –
    https://www.realtor.com/research/we-should-be-in-a-buyers-market-right-now-but-covid-turned-everything-upside-down-best-time-to-buy-a-home
  6. Nerdwallet –
    https://www.nerdwallet.com/article/mortgages/mortgage-interest-rates-forecast
  7. Business Insider –
    https://www.businessinsider.com/how-2020-broke-the-housing-market-inventory-could-run-out-2020-9 
  8. National Association of Realtors –
    https://www.nar.realtor/sites/default/files/documents/2019-remodeling-impact-10-03-2019.pdf 
  9. House Logic –
    https://www.houselogic.com/save-money-add-value/add-value-to-your-home/adding-curb-appeal-value-to-home/ 
  10. Virginia Cooperative Extension –
    https://www.pubs.ext.vt.edu/content/dam/pubs_ext_vt_edu/426/426-087/426-087.pdf 
  11. HomeLight –
    https://www.homelight.com/blog/top-agent-insights-for-q2-2020/
  12. U.S. Department of Energy –
    https://www.energy.gov/energysaver/articles/how-much-can-you-really-save-energy-efficient-improvements 

What Does 2021 Have in Store for Home Values?

By Tami Savage

What Does 2021 Have in Store for Home Values?

According to the latest CoreLogic Home Price Insights Report, nationwide home values increased by 8.2% over the last twelve months. The dramatic rise was brought about as the inventory of homes for sale reached historic lows at the same time buyer demand was buoyed by record-low mortgage rates. As CoreLogic explained:

“Home price growth remained consistently elevated throughout 2020. Home sales for the year are expected to register above 2019 levels. Meanwhile, the availability of for-sale homes has dwindled as demand increased and coronavirus (COVID-19) outbreaks continued across the country, which delayed some sellers from putting their homes on the market.

While the pandemic left many in positions of financial insecurity, those who maintained employment and income stability are also incentivized to buy given the record-low mortgage rates available; this is increasing buyer demand while for-sale inventory is in short supply.”

Where will home values go in 2021?

Home price appreciation in 2021 will continue to be determined by this imbalance of supply and demand. If supply remains low and demand is high, prices will continue to increase.

Housing Supply

According to the National Association of Realtors (NAR), the current number of single-family homes for sale is 1,080,000. At the same time last year, that number stood at 1,450,000. We are entering 2021 with approximately 270,000 fewer homes for sale than there were one year ago.

However, there is some speculation that the inventory crush will ease somewhat as we move through the new year for two reasons:

1. As the health crisis eases, more homeowners will be comfortable putting their houses on the market.

2. Some households impacted financially by the pandemic will be forced to sell.

Housing Demand

Low mortgage rates have driven buyer demand over the last twelve months. According to Freddie Mac, rates stood at 3.72% at the beginning of 2020. Today, we’re starting 2021 with rates one full percentage point lower than that. Low rates create a great opportunity for homebuyers, which is one reason why demand is expected to remain high throughout the new year.

Taking into consideration these projections on housing supply and demand, real estate analysts forecast homes will continue to appreciate in 2021, but that appreciation may be at a steadier pace than last year. Here are their forecasts:

2021 Home Price Appreciation Forecasts. NAR 6%, Zellman 6%, realtor.com 5.7%, Freddie Mac 2.6%, CoreLogic 2.5%, Fannie Mae 2.1%, MBA 2%. The 5% plus are above the 3.9% average of all forecasts.

Bottom Line

There’s still a very limited number of homes for sale for the great number of purchasers looking to buy them. As a result, the concept of “supply and demand” mandates that home values in the country will continue to appreciate.

Reasons to Hire a Real Estate Professional [INFOGRAPHIC]

By Tami Savage

Reasons to Hire a Real Estate Professional. Contracts: We help with all disclosures and contracts necessary in today's heavily regulated environment. Experience: We are well-versed in real estate and experienced with the entire sales process. Negotiations: We act as a buffer in negotiations with all parties throughout the entire transaction. Education: We simply and effectively explain today's market conditions and decipher what they mean for you. Pricing: We help you understand today's real estate values when setting the price of a listing or making an offer to purchase.

Some Highlights

  • Choosing the right real estate professional to work with is one of the most important decisions you can make in your homebuying or selling process.
  • The right agent can explain current market conditions and break down exactly what they mean for you.
  • If you’re considering buying or selling a home this year, let’s connect so you can work with someone who has the experience to answer all of your questions about pricing, contracts, negotiations, and more.

Is This the Year to Sell My House?

By Tami Savage

Is This the Year to Sell My House?

If one of the questions you’re asking yourself is, “Should I sell my house this year?” consumer sentiment about selling today should boost your confidence in the right direction. Even with the current health crisis that continues to challenge our nation, Americans still feel good about selling a house. Here’s why.

According to the latest Home Purchase Sentiment Index from Fannie Mae, 57% of consumer respondents to their survey indicate now is a good time to buy a home, while 59% feel it’s a good time to sell one:

“The percentage of respondents who say it is a good time to sell a home remained the same at 59%, while the percentage who say it’s a bad time to sell decreased from 35% to 33%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.”

As you can see, many still believe that, despite everything going on in the world, it is still a good time to sell a house.

Why is now a good time to sell?

There simply are not enough homes available to meet today’s buyer demand, and they’re selling just as quickly as they’re coming to the market. According to the National Association of Realtors (NAR), unsold inventory available today sits at a 2.3-month supply at the current sales pace, which is down from a 2.5-month supply from the previous month. This record-low inventory is not even half of what we need for a normal or neutral housing market, which should have a 6.0-month supply of unsold inventory to balance out.

With so few homes available for buyers to choose from, we’re in a true sellers’ market. Homeowners ready to make a move right now have the opportunity to negotiate the best possible contracts with buyers who are feeling the pull of intense competition when it comes to finding their dream home. Lawrence Yun, Chief Economist for NAR, notes how quickly homes are selling right now, further confirming the benefits to sellers this season:

“The market is incredibly swift this winter with the listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates.”

However, this sweet spot for sellers won’t last forever. As more homes are listed this year, this tip toward sellers may start to wane. According to Danielle Hale, Chief Economist at realtor.com, more choices for buyers are on the not-too-distant horizon:

“The bright spot for buyers is that more homes are likely to become available in the last six months of 2021. That should give folks more options to choose from and take away some of their urgency. With a larger selection, buyers may not be forced to make a decision in mere hours and will have more time to make up their minds.”

Bottom Line

If you’re ready to make a move, you can feel good about the current sentiment in the market and the advantageous conditions for today’s sellers. Let’s connect today to determine the best next step when it comes to selling your house this year.

The Importance of Home Equity in Building Wealth

By Tami Savage

The Importance of Home Equity in Building Wealth

Homeownership has always been the first rung on the ladder leading to household wealth. As Freddie Mac recently posted:

“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”

Home equity is the difference between the current market value of your house and the amount you currently owe on your mortgage. To estimate your equity, subtract your mortgage balance from the market value of your home.

You can find what you owe on your mortgage by looking at your last monthly statement or by contacting your lender. If you need help determining the current market value of your home, contact a local real estate professional.

Is homeownership truly a better path to wealth than renting?

Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are already baked into the rent payment – along with a profit margin. You don’t save money by renting.

As proof of this, First American broke down the net worth of homeowners and renters by income categories. Here are their findings:

Net Worth is Greater for Homeowners in All but One Income Category ... even after you subtract the equity in their home. Income Level less than $26k, owner total net worth is $103k, Equity in home $95k, Net worth without a home $8k, Renter Net worth $1k, Difference is $7k. Income Level $26k to 46k, owner total net worth is $140k, Equity in home $125k, Net worth without a home $15k, Renter Net worth $6k, Difference is $9k. Income Level $46k to 74k, owner total net worth is $190k, Equity in home $161k, Net worth without a home $29k, Renter Net worth $11k, Difference is $18k. Income Level $74k to 127k, owner total net worth is $261k, Equity in home $223k, Net worth without a home $38k, Renter Net worth $34k, Difference is $4k. Income Level $127k to 192k, owner total net worth is $433k, Equity in home $368k, Net worth without a home $65k, Renter Net worth $117k, Difference is $-52k. Income Level greater than $192k, owner total net worth is $1.66 Million, Equity in home $725k, Net worth without a home $937k, Renter Net worth $705k, Difference is $232k. Source: First American.

Only one income category ($127-192K) has a higher net worth for renters over homeowners. Every other category shows that being a homeowner leads to greater accumulated wealth.

According to the latest Homeowner Equity Insights Report from CoreLogic, the average homeowner gained $17,000 in equity in just the last year. Here’s a breakdown of the year-over-year equity gain by state:

Year Over Year Homeowner Equity Gains. In the U S we have had a year of year equity gain of $17,000. In Florida we have had a $14,000 gain year over year. As for the the other states: Alabama: $10,000. Alaska: $11,000. Arizona $28,000. Arkansas $9,000. California $34,000. Colorado $18,000. Connecticut $22,000. Delaware $12,000. Georgia $13,000. Hawaii $9,000. Idaho $29,000. Illinois $6,000. Indiana $15,000. Iowa $7,000. Kansas $16,000. Kentucky $10,000. Louisiana $12,000. Maine Insufficient Data. Maryland $16,000. Massachusetts $31,000. Michigan $10,000. Minnesota $15,000. Mississippi Insufficient Data. Missouri $15,000. Montana $22,000. Nebraska $13,000. Nevada $13,000. New Hampshire $27,000. New Jersey $21,000. New Mexico $20,000. New York $9,000. North Carolina $16,000. North Dakota $5,000. Ohio $13,000. Oklahoma $8,000. Oregon $23,000. Pennsylvania $12,000. Rhode Island $29,000. South Carolina $14,000. South Dakota Insufficient Data. Tennessee $15,000. Texas $8,000. Utah $26,000. Vermont Insufficient Data. Virginia $23,000. Washington $36,000. West Virginia Insufficient Data. Wisconsin $14,000. Wyoming $24,000. Source: CoreLogic

When can you cash in on your housing wealth?

Your home equity is part of your total wealth as a homeowner. The two most common ways homeowners can leverage their wealth are:

  • Selling
  • Refinancing

Selling: When you decide to sell your home, the equity you’ve built over time will come back to you in the sale. For example, if you paid off your $200,000 mortgage and sold your home for $350,000, you would receive $150,000 after closing.

Refinancing: You can refinance your current mortgage and take out some of the equity you have accumulated. With today’s historically low mortgage rates, you may be able to take out substantial cash and keep your monthly payment the same. Thankfully, homeowners today are doing this responsibly and not repeating the same mistakes made in 2006-2008 when some cashed out their entire equity to purchase luxury items like new cars, lavish vacations, etc.

How can these options help homeowners?

During these difficult times, many households are struggling with their housing expenses. Homeowners, because of their equity, have better alternatives. Odeta Kushi, Deputy Chief Economist at First American, recently explained that homeowners financially impacted by the pandemic will not necessarily be faced with foreclosure:

“The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock…leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home, or tapping into their equity through a refinance, to help weather the economic shock.”

What might the future bring?

Most experts are calling for home prices to continue appreciating going forward. The Home Price Expectation Survey, a survey of a national panel of over one hundred economists, real estate experts, and investment & market strategists, indicates appreciation will continue for at least the next five years. Using their annual projections, the graph below shows the equity build-up a purchaser would potentially earn by buying a $300,000 home this January:

$54,221 potential growth in household wealth over the next five years based solely on increased home equity if you purchase a $300k home in January 2021. Based on price appreciation projected by the Home Price Expectation Survey 2021 espected $300,000; 2022 expected $313,200; 2023 expected $324,162; 2024 expected $333,887; 2025 expected $343,903; 2026 expected $354,221. Source: Home Price Expectation Survey 2020 4Q

Bottom Line

Home equity, for most Americans, is the quickest way to build household wealth. That wealth gives homeowners more options during good times and in difficult situations.

Why Not to Wait Until Spring to Make a Move

By Tami Savage

Why Not to Wait Until Spring to Make a Move

The housing market recovery coming into the new year has been nothing short of remarkable. Many experts agree the turnaround from the nation’s economic pause is playing out extremely well for real estate, and the current market conditions are truly making this winter an ideal time to make a move. Here’s a dive into some of the biggest wins for homebuyers this season.

1. Mortgage Rates Are Historically Low

In 2020, mortgage rates hit all-time lows 16 times. Continued low rates have set buyers up for significant long-term gains. In fact, realtor.com notes:

“Given this means homes could cost potentially tens of thousands less over the lifetime of the loan.”

Essentially, it’s less expensive to borrow money for a home loan today than it has been in years past. Although mortgage rates are expected to remain relatively low in 2021, even the slightest increase can make a big difference in your payments over the lifetime of a home loan. So, this is a huge opportunity to capitalize on right now before mortgage rates start to rise.

2. Equity Is Growing

According to John Burns Consulting, 58.7% of homes in the U.S. have at least 60% equity, and 42.1% of all homes in this country are mortgage-free, meaning they’re owned free and clear.

In addition, CoreLogic notes the average equity homeowners gained since last year is $17,000. That’s a tremendous amount of forced savings for homeowners, and an opportunity to use this increasing equity to make a move into a home that fits your changing needs this season.

3. Home Prices Are Appreciating

According to leading experts, home prices are forecasted to continue appreciating. Today, many experts are projecting more moderate home price growth than last year, but still moving in an upward direction through 2021.

Knowing home values are increasing while mortgage rates are so low should help you feel confident that buying a home before prices rise even higher is a strong long-term investment.

4. There Are Not Enough Homes for Sale

With today’s low inventory of homes on the market, which is contributing to this home price appreciation, sellers are in the driver’s seat. The competition is high among buyers, so homes are selling quickly.

Making a move while so many buyers are looking for homes to purchase may mean your house rises to the top of the buyer pool. Selling your house before more listings come to the market in the traditionally busy spring market might be your best chance to shine.

Bottom Line

If you’re considering making a move, this may be your moment, especially with today’s low mortgage rates and limited inventory. Let’s connect to get you set up for homebuying success in the new year.

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