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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.

Homebuyers, 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 a while, 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, I’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 entiretylike 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 a 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 the 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 me for my 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 me for my 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 my free report, “Move Up vs Second Home: Which One Is Right For You?”

 

LET ME 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 a local market expert, I have the knowledge, experience, and networks to help you achieve your homeownership goals, whatever they may be. Reach out to me 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 

 

Selling a Home in the COVID-19 Era? Read This Before You Put Your Home on the Market

The COVID-19 pandemic has made a major impact on the housing market. Along with list prices falling in some areas and new construction slowing, fewer buyers are willing to tour homes in person, even as restrictions have been loosened.

With that said, there have been worse times to sell a home. And if it’s something you must do right now, there are ways to sell your home quickly and for a price that you’re pleased with. It all starts with prepping your home for sale and using a variety of methods for showing it to potential buyers. Let’s discuss some ways you can prepare for a home sale in the age of COVID-19.

How to Declutter and Organize the Home

One of the first things you need to do when selling a home is to go through all your belongings and determine what to keep, what to store, and what to get rid of. Some of this may depend on the size and layout of your next home, but take this opportunity to kick the clutter and get rid of all those things you haven’t used in years (and probably will never use). Go room by room, closet by closet, and declutter as you’ve never decluttered before.

Then, organize the remaining items in the home. Keep in mind that you want potential buyers to envision themselves living in the home, so stage each room and space to appeal to a wide-ranging audience. Be sure to provide plenty of open space in each room, and invest in attractive storage solutions to keep certain items out of sight.

How to Deep Clean

Along with decluttering, be sure to deep clean your home. This is also a task that you will want to tackle from room to room, space to space. Pick a side of the room (left or right), start dusting and wiping high (ceiling, ceiling fans, light fixtures, etc.), and work your way down to the walls, doors, furniture, floors, and so on.

While you can do the work yourself, it’s often best to leave the deep cleaning to the professionals. A maid service charges an average of $160 for a cleaning, but a deep cleaning could cost a little more. You’ll also want to thoroughly clean carpeting in your home. The cost of this service usually ranges from $120 to $230, with carbonated cleaning being slightly pricier than dry cleaning.

How to Keep the Home Clean

Once your home is decluttered and deep cleaned, you will need to make sure it stays immaculate while it’s on the market. You never know when you will get a request for a last-minute viewing or live video chat. And if you are currently working from home and/or have kids running around throughout the day, this can be especially challenging. Come up with a daily routine that helps keep the home clean and tidy, and get everyone in the household in on the action.

How to Handle Viewings

There are a number of ways to show a home these days. Technology has made it possible for buyers to tour your home without them having to step foot inside. Be sure to hire a qualified real estate agent who knows their way around video tours, 3D walkthroughs, and live video chats, and learn about them yourself so that you can be prepared if an opportunity presents itself.

If physical viewings are still a necessity, be sure to follow protocols to keep all parties safe and healthy. Here are some steps to consider taking:

  • Practice social distancing (6 feet).
  • Request that all parties wear face coverings.
  • Offer visitors booties and sanitary products (hand sanitizer, disinfectant wipes, etc.) upon entering.
  • Leave lights on and interior doors open during showings.
  • Clean and disinfect high-touch surfaces (doorknobs, handles, countertops, etc.) before and after each viewing.

If you need to sell your home right now, you can. Get your home ready by decluttering, organizing, and cleaning, and come up with a system to keep it clean. Explore the various methods of showing your home, and hire a good real estate agent.

2020 Outlook: Real Estate Market Forecast

We’re in the midst of the longest economic
expansion in U.S. history, and economists think there’s still room to grow. A
recent survey by the National Association for Business Economics found that
experts believe the U.S. economy will remain positive throughout 2020.[1]

Still, given that recessions are a natural
(and necessary) part of a business cycle, we know this period of growth will
inevitably end. So you may be wondering … how will an eventual recession impact
the real estate market?

Many Americans assume a recession would lead
to a decline in housing prices like we saw during the Great Recession of 2008.
But the real estate market crash we experienced wasn’t typical. In fact, the
last recession wasn’t typical at all. It was the worst economic downturn since
the Great Depression of the 1930s.

ATTOM Data Solutions analyzed real estate
prices during the last five recessions and found that, in the majority of
cases, home prices actually went up. Only twice (in 1990 and 2008) did prices
decline, and in 1990 it was by less than one percent.[2]

So what can historical precedent—combined with
today’s data—tell us about the future of real estate? Here’s where experts
predict the housing market is headed in 2020 and beyond.

HOME
PRICES WILL KEEP RISING

Economists predict U.S. housing prices will continue
to rise, regardless of a recession. In fact, property data firm CoreLogic
forecasts a faster rate of growth for home prices in 2020 than we saw in 2019,
with the biggest gains at the lower end of the market.[3]

Arch MI Chief Economist Ralph DeFranco expects
entry-level home prices to increase faster than incomes this year, making it
even more difficult for many first-time buyers to afford to enter the
market.[4]

“Low interest rates and a shortage of starter
homes will continue to push up prices,” predicts DeFranco. “This is especially
the case for lower price points, since builders have tended to focus on more
expensive, higher-profit houses and less on replenishing low inventories of
entry-level homes.”[4]

“Real estate is on firm ground with little
chance of price declines,” said National Association of Realtors Chief
Economist Lawrence Yun. “However, in order for the market to be healthier,
more supply is needed to assure home prices as well as rents do not
consistently outgrow income gains.”[5]

What
does it mean for you?
If you have the ability and
desire to buy a home now, don’t let a fear of recession or falling prices hold
you in limbo. Economists expect home values, as well as rent prices, to
continue rising. So you’ll likely pay more the longer you wait.

INVENTORY
CONSTRAINTS WILL CONTINUE

According to Redfin, Americans are staying in
their homes longer. In 2019, the average homeowner had resided in their home
for 13 years, up from just eight years in 2010. That means there are fewer
homes available today for those who want to buy.[6]

It’s possible that an increase in new
construction could offer some relief. The National Association of Realtors
(NAR) expects single-family housing starts to total one million this year, the
highest level since 2007. And NAR Chief Economist Lawrence Yun predicts the
average price of new construction will decline slightly as builders shift to
building smaller, more affordable homes.[7]

However, these efforts may not be enough to
meet current demand.“Despite improvements to new construction and
short waves of sellers, next year will once again fail to bring a solution to
the inventory shortage,” predicts Realtor.com Senior Economist George Ratiu.
“In 2020, we expect inventory to struggle to grow and could instead reach a
historic low level.”[8]

What
does it mean for you?
If you’re looking to buy a
starter home, be prepared to compete for the best listings. Start your search
early, and if you’re up against a deadline (like a new baby), build in plenty
of time to find the right home. We can help you assess your options, including
new construction and up-and-coming developments.

MORTGAGE
RATES WILL REMAIN LOW

Mortgage rates have declined more than a full
percentage point since November 2018, when they hit a recent peak of 4.94%.[9]The Mortgage Bankers Association predicts rates will remain low, at
around 3.7%, through mid-2021.[10]

While it may not seem significant, on a
$200,000 30-year fixed-rate mortgage, that lower rate means buyers could save
around $145 on their monthly payment and more than $52,000 over the life of
their mortgage. Lower mortgage rates make homeownership more accessible and
affordable for buyers.

Although economists expect mortgage rates to
stay low, they caution against waiting to act. Economic factors, shifts in
supply and demand, or unforeseen impacts of the November election could cause
rates to rise unexpectedly. “We recommend borrowers with long-term plans of
staying in their homes to lock in a low rate now because there’s no telling how
long these low rates will last,” warns Preetam Purohit, a capital markets
trader at Embrace Home Loans.[11]

What
does it mean for you?
If you’re looking to buy a home,
act soon to lock in a historically low mortgage rate. It will minimize your
monthly payment and could save you a bundle over the long term. And if you plan
to stay in your current home for a while, consider whether it makes sense to refinance
your mortgage at today’s lower rates.

MILLENNIALS
WILL DRIVE THE MARKET

Millennials are expected to account for more
than half of all mortgages this year, outnumbering Generation X and Baby
Boomers combined. It’s not surprising, considering their age and stage of life.
In 2020, the largest cohort of millennials will turn 30, and the oldest
millennials will turn 39.[8]

“Family changes tend to drive home-buying
decisions,” explains Realtor.com Chief Economist Danielle Hale.
“Millennials are going to be active in the housing market not just because
they’re just at the age when they’re thinking about becoming first-time home
buyers, but they’re also in the age range when they’re having kids.”[12]

Younger millennials flocked to urban centers
that offered easy access to work, shopping, and restaurants. But high prices,
lack of square footage, and subpar schools are driving millennials out to the
suburbs as they begin to marry and expand their families.

In response, a new model for suburban living
has emerged. “Hipsturbias,” or mixed-use communities that bring the
live/work/play concept to the suburbs, were recently named one of the top real
estate trends for 2020 by the Urban Land Institute.[4]

What does it mean for you? If
you’re a millennial who has been priced out of urban living or is looking for
more space for your growing family, a number of suburbs in our area have a lot
to offer. We can point you towards the communities that will best meet your
needs. And if you’re a homeowner with plans to sell, give us a call. We know
how to market your home to millennials … and can help you sell quickly for top
dollar by appealing to this leading market segment!

WE’RE
HERE TO GUIDE YOU

While national real estate numbers can provide
a “big picture” outlook, real estate is local. As local market experts, we can
guide you through the ins and outs of our market and the issues most likely to
impact sales and home values in your particular neighborhood.

If you’re considering buying or selling a home
in 2020, contact us now to schedule a free consultation. We’ll work with you to
develop an action plan to meet your real estate goals this year.

Sources: