Excited to Buy This Year?

buyers1

Here’s What to Watch:

As we kick off the new year, many families have made resolutions to enter the housing market in 2019. Whether you are thinking of finally ditching your landlord and buying your first home or selling your starter house to move into your forever home, there are two pieces of the real estate puzzle you need to watch carefully: Interest rates & inventory.

(1) Interest Rates:

Mortgage interest rates had been on the rise for much of 2018, but they made a welcome reversal at the end of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.94% in November before falling to 4.62% for a 30-year fixed rate mortgage last week. Despite the recent drop, interest rates are projected to reach 5% in 2019.

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but 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 to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.

Excited About Buying A Home This Year? Here's What to Watch | Simplifying The Market

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000).

(2) Inventory:

A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 3.9-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 81 straight months.

Nationally, the inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last six months.

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, since June, inventory levels have started to increase as compared to the same time last year.

Excited About Buying A Home This Year? Here's What to Watch | Simplifying The Market

This is a trend to watch as we move further into the new year. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Bottom Line

If you are planning to enter the housing market, either as a buyer or a seller, let’s get together to discuss the changes in mortgage interest rates and inventory and what they could mean for you.

 

Call me… and let’s get you a home in 2019!

carry-money-house     Kevin Gormanwww.KevinGormanSells.com

*Content supplied by KCM.com
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New Tax Code & Housing

In the final days and hours, the National Association of REALTORS® generated over 300,000 emails and telephone calls to members of Congress and held countless in-person meetings with legislators, all of which helped shape the final outcome of the new tax bill as it relates to housing.

This grass-roots effort was of significance to homeowners and the housing industry. NAR worked diligently with members of the House-Senate conference committee to help educate them on how to improve the final bill.

In the end, NAR saved the exclusion for capital gains on the sale of a home and protected the mortgage interest deduction for primary and secondary homes. Here is a summary of the results:

  • Capital gains exclusion. In a huge win for current and prospective homeowners, current law is left in place on the capital gains exclusion of $250,000 for an individual and $500,000 for married couples on the sale of a home. Both the House and the Senate had sought to make it much harder to qualify for the exclusion.
  • Mortgage interest deduction. The maximum mortgage amount for households deducting their mortgage interest has been decreased to $750,000 from the current $1 million limit on primary and secondary homes. The House bill sought a reduction to $500,000.
  • State and local tax deductions. Both property taxes and state and local income taxes remain deductible, although with a combined limit of $10,000. Both the House and Senate bills sought to eliminate the state and local income tax deduction altogether.
  • Pass-through entities. The bill significantly reduces the effective rate of tax on business income earned by independent contractors and income received from pass-through entities. This change will lower the taxes of many real estate professionals.

If you have questions, make sure you talk with your tax professional. Thank you for checking out this Fresh Blog. Happy holidays and CHEERS!

Santa's House

Sincerely,  Kevin                          http://www.KevinGormanSells.com

*This post is a summary of a 12/21/2017 letter to the NAR members from Elizabeth Mendenhall -President of NAR.

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Portland Mandatory Energy Audits

Effective January 01st 2018, Portland home sellers will be required to complete a home energy scoring and assessment report prior to publicly listing their home for sale. This report must be obtained from a licensed home energy assessor. The results of the score and report must be disclosed to all prospective buyers at the time the home goes on the market. This applies to all sellers, whether they are using a Realtor or not. The city council adopted the home energy score ordinance Portland City Code Chapter 17.108 on December 14, 2016, which applies to owners of single family residences only.

The score card will look like this:

PDX Score

I am told the estimated cost to hire a licensed energy assessor is $150 – $250. Homes will be rated between 0-10 with 10 being most energy efficient. Homeowners planning to sell should schedule an assessor several weeks before publicly listing their property.

Why did the city of Portland approve this ordinance?… click here:  Portland Home Energy Score

What are your thoughts?

Happy to answer your questions about this or any other real estate topics. Thanks for blogging!

Kevin Gorman   – www.KevinGormanSells.com – 503-367-4869

carry-money-house

 

 

 

 

 

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