• Now that rates are 6 to 7% range some buyers feel that they missed a lifetime opportunity and regret not buying sooner. 
• Know that some buyers that did buy when the rates were low may want to switch places with you now even with higher interest rates in place. 

People Who Bought Between 2021-2022 Have Some Of The Following Regrets 

• Fewer houses to choose from 
• Prices were constantly rising 
• Paying over asking price 
• Extreme pressure to make quick decisions 
• Not able to do research on the houses 
• Sometimes for going home inspections 

Four Reasons Why Now May Be A Good Time To Buy 

1. Hedge against inflation period stabilize your monthly payments against rising rents 

1. More houses to choose from and lower prices. You can always refinance your mortgage when rates go down in the future. 

1. Sellers have not had to negotiate on price or terms over the past couple of years, with the changing market sellers maybe more willing to negotiate. 

1. It could become harder to get a mortgage because as recession happens mortgage companies become more cautious. 

BOTTOM LINE 

It is easy to feel like you missed an opportunity with low interest rates, however it is also easy to forget the downsides that came along with the low interest rates and not the benefits of buying now. 

The market is never perfect! 

You need to weigh the pros and cons for your situation 

PROS TO BUYING NOW 

• Take advantage of house prices stabilizing or coming down 
• Hedge against rising rates, rent and inflation by buying a house 
• There are more homes to choose from now 
• More time to think about the options 
• More potential to negotiate 

Every real estate market is different from one area to another. So, consult your real estate agent for an in-depth advice whether now is a suitable time for you to buy in your preferred area and price range 

Much has been written about how residential real estate values have increased since the housing market started its recovery in 2012. However, little has been shared about what has taken place with residential rental prices. Let’s shed a little light on this subject.

In the most recent Apartment Rent Report, RentCafe explains how rents have continued to increase over the last twelve months because of a large demand and a limited supply.

 “Continued interest in rental apartments and slowing construction keeps the national average rent on a strong upward trend.”

Zillow, in its latest Rent Index, agreed that rents are continuing on an “upward trend” across most of the country, and that the trend is accelerating:

“The median U.S. rent grew 2% year-over-year, to $1,595 per month. National rent growth is faster than a year ago, and while 46 of the 50 largest markets are showing deceleration in annual home value growth, annual rent growth is accelerating in 41 of the largest 50 markets.”

The Zillow report went on to detail rent increases since the beginning of the housing market recovery in 2012. Here is a graph showing the increases:

Bottom Line

It is true that home prices have risen over the past seven years, increasing the cost of owning a home. However, the cost of renting a home has also increased over that same time period.

Last fall, some predicted that the 2019 residential real estate market would be a disaster. There was even belief we might experience a housing crash like the one that occurred during the last decade.

However, according to two separate reports*, buyer demand dramatically increased over the last three months, leading into this spring buyers’ market (the March data is not yet available).

Both the ShowingTime Showing Index and the National Association of REALTORS Buyer Traffic Index show that buyer demand has increased in each of the last three months.

Why the increase in demand? Increased buying power.

According to the National Association of Realtors’ Economists’ Outlook Blog, purchasing a home has become more affordable, which has led to increased demand.

“Due to the combination of falling home prices and mortgage rates, the income needed to make an affordable mortgage payment (mortgage no more than 25% of income) on a median-priced home with 10% down payment and 30-year fixed rate mortgage decreased from $60,425 in June 2018 to $53,783 as of February 2019, and the difference of $6,642 represents a gain in buying power because one can afford a home purchase at a lower level of income.”

Bottom Line

It appears the spring buyers’ market is going to be much stronger than many had projected. Whether you are selling or buying, this is important news.

*The methodology behind the indices:

The ShowingTime Showing Index

“The ShowingTime Showing Index® tracks the average number of buyer showings on active residential properties on a monthly basis, a highly reliable leading indicator of current and future demand trends.”

The National Association of REALTORS® Buyer Traffic Index

“In a monthly survey of REALTORS®, NAR asks respondents ‘Compared to the same month last year, how would you rate the past month’s traffic in neighborhood(s) or area(s) where you make most of your sales?’ NAR compiles the responses into an index, where an index above 50 indicates that more respondents reported “stronger” traffic than “weaker” traffic.”

It’s easy to look up how much money you have in your savings account or the real-time value of your stock investments. But determining the dollar value of a home is trickier.

As a seller, knowing your home’s worth helps you price it correctly when you put it up for sale. If you price it too high, it may sit on the market. But price it too low and you may be losing out on a good chunk of money (nobody wants that!). For buyers, it’s important to know a home’s worth before you make an offer. You want your offer to be competitive, but you don’t want to overpay for the property.

Even if you’re not a buyer or seller right now, as a current homeowner you might just be curious about the value of your home. Keeping track of your home’s worth year over year helps you understand the trends in your market. So when you are ready to sell, you can take advantage of a good window of opportunity.

The good news is, a trained real estate agent—who understands the nuances of your particular neighborhood—can determine the true market value of your property … and at no cost to you!

THE THREE TYPES OF HOME VALUES

When you start the process of buying or selling a home, you’ll frequently hear the words appraised value, assessed value, and true market value. It’s important to know the difference between each one so you can make better, informed decisions.

Appraised Value

A professional appraiser is in charge of determining the appraised value of a home. These appraisals are typically required by a lender when a buyer is financing the property. And while the lender is the one requiring this information, the appraiser does not work for the lender.¹ Your appraiser should be an objective, licensed professional who doesn’t have allegiance to the buyer, seller, or lender—no matter who is paying their fee.

The number the appraiser comes up with (the appraised value) assures the lender that the buyer is not overpaying for the property. For example, imagine a seller lists a home for $400,000. They reach a deal with the buyer to sell the home for $375,000. However, if an appraiser evaluates the property and determines that the appraised value is actually $325,000, then the lender will not lend for an amount higher than that appraised value of $325,000.²

When figuring out this number, an appraiser will compare the property to similar homes in your neighborhood, and they’ll evaluate factors such as location, square footage, appliances, upgrades, improvements, and the interior and exterior of the home. 

Assessed Value

The assessed value of a home is determined by your local municipal property assessor. This value matters when your county calculates property taxes each year. The lower your assessed value, the less property tax you’ll pay.³

To come up with this value, your assessor will evaluate what comparable homes in the neighborhood have sold for, the size of your home, age, overall condition, and any improvements or upgrades that have been made. However, most assessors don’t have full access to your home, so their information is limited.

Assessments are done annually to determine how much property tax you owe. Many counties use a multiplier (typically between 60%-80%) to calculate the final assessed value. So, if the assessor determines that the value of the home is $300,000, but the county uses a 70% multiplier, the assessed value of the home would be $210,000 for tax purposes.⁴

If your assessed value isn’t as high as you envisioned, don’t sweat it. Many homeowners appeal their assessment in favor of a lower valuation so that they can save money on property taxes. If you’re interested in appealing your property tax assessment, let us know. We offer complimentary assistance and would be happy to help you build your case.

True Market Value

True market value is established by your real estate agent. It basically refers to the value that a buyer is willing to pay for the property. A good real estate agent is an expert in determining true market value because they have hands-on experience buying and selling properties. They understand the mindsets of buyers in your market and know what they’ll pay for a desirable house, townhouse, or condo.

As a seller, knowing your true market value is important because it helps you choose how much to list your property for. It can also help you decide if you want to make any improvements to your home before putting it on the market. Your agent can help you figure out which updates and upgrades will have the biggest impact on your true market value.

WHAT’S THE DEAL WITH ONLINE CALCULATORS?

When figuring out your home’s value, you might be tempted to see what popular real estate sites like Zillow, Redfin, and Trulia have to say. When you use an online calculator to determine your home’s value on these sites, it is just an estimate. It’s not an actual appraisal or the “true market value.” These sites all have their own algorithms for coming up with their estimates. For example, Zillow comes up with their “Zestimates” by calculating “public and user-submitted data, taking into account special features, location, and market conditions.” ⁵

These online estimates can be a great starting point for opening up the conversation with your real estate agent about your home’s worth. But even Zillow recommends that you use a real estate agent for coming up with the actual market value of your home. The site says that once you get your “Zestimate,” you should still get “a comparative market analysis from a real estate agent.”

Having an agent involved in this process is essential because they understand the market better than a computer ever could. They’re showing property in your city every single day, and they know the particular preferences of buyers and sellers in the area. Young professionals, large families, empty nesters, and other groups are all looking for different things in a home. A local agent has most likely worked with all of them, so they understand what every segment in your market is specifically looking for.

HOW AN AGENT FINDS YOUR HOME’S TRUE MARKET VALUE

So, how does an actual real estate agent determine true market value? They’ll start by doing a comparative market analysis (CMA). This means they’ll compare your home’s features to similar properties in your area. For the CMA, the agent looks at the below factors to influence their assessment of your home’s worth:⁶

• Neighborhood sales – Your agent will look at similar, recently sold homes in your neighborhood to see what they sold for and what they have in common with your house.
• The exterior – What does your home look like from the outside? Your agent will factor in curb appeal, the style of the house, the front and backyard, and anything else that impacts how the house looks to everyone walking and driving by.
• The interior – This is everything inside the walls of the house. Square footage, number of bedrooms and bathrooms, appliances, and more all influence the overall market value.
• Age of the home – Whether you have a newer or older home affects the number your agent comes up with as part of their assessment.
• Style of the home – The style of your home is important because buyers in different markets have different tastes. If buyers prefer ranch-style homes and you have one, then your home may sell for a premium (aka more money!).
• Market trends – Because a local agent has so much experience in your market, they have their finger on the pulse of your area’s trends and know what buyers are willing to pay for a property like yours.
• Location, location, location – This one’s probably the most obvious. Your agent will think about how popular the area is, how safe it is, and what schools are like.

A computer algorithm simply can’t take all of these factors into account when calculating the value of your home. The reality is, nothing beats the accuracy of a real estate agent or professional appraiser when it comes to determining a home’s true market value.

YOUR AGENT IS THERE EVERY STEP OF THE WAY

Determining a home’s true market value is a real estate agent’s forte. If you’re a seller, your agent will help you find your home’s market value so you can list it at the right price.

For buyers, your agent will help you determine the value so you can come up with a fair offer. Your agent can also set up a personalized home search on the Multiple Listing Service (MLS) for you so you’ll receive emails of listings that meet your criteria. This will help you see what’s out there in your city and how properties are being priced.

Get a Complimentary Report With Your Home’s True Market Value

Curious about your home’s true market value? Call us to request a free, no-obligation Comparative Market Analysis to find out exactly how much your home is worth!

Sources:

1. Chicago Tribune –

https://www.chicagotribune.com/suburbs/chi-ugc-article-what-is-the-difference-between-market-value-a-2013-09-30-story.html

• SFGATE –

https://homeguides.sfgate.com/market-value-vs-appraised-value-1206.html

• ValuePenguin –

https://www.valuepenguin.com/mortgages/what-is-the-assessed-value-of-a-house

• Movoto –

https://www.movoto.com/blog/homeownership/assessed-value-vs-market-value/

• Zillow –

https://www.zillow.com/how-much-is-my-home-worth/

• Realtor.com –

https://www.realtor.com/advice/sell/assessed-value-vs-market-value-difference/

Home Sales Showing Signs of Price Fatigue
The concept of ‘price fatigue’, which occurs when the cost of housing increases at a faster pace than wages.which occurs when the cost of housing increases at a faster pace than wages. The most common causes for such increases are rising interest rates and home prices.

Contract activity for luxury priced homes over $2.5-Million has increased by an impressive 20% (170 in 2017 vs. 204 today)

Commitment rates for the 30-year fixed rate loan have remained relatively stable throughout the month of July, averaging 4.53%, down from a 4.57% average in the month of June.

According to Freddie Mac, affordability pressures are an increasing concern in many markets, as the combination of home price gains coupled with higher mortgage interest rates seem to be giving more prospective buyers a pause. As a result, new and existing-home sales at the national level have slowed and unsold inventory has risen, despite the healthy economy and labor market.

info from Otteau

If you are planning on buying a home in Monmouth County in the coming months and you know you'll need to borrow money, does this mean you are at a  disadvantage to the buyers who are currently paying cash?

Well, not if you know how to be a cash buyer with little or no money of your own!

Why is cash King?

Have you ever wondered why, they say that cash is king in real estate?

In order to understand this phenomenon, where a seller will take a lower price from one buyer than he could have received from another, you first have to consider the motives of most home sellers. What exactly do they want?

Home sellers are people who have their own unique set of circumstances that drive their motivation to sell a home. Sure, the majority of sellers prefer "more money" to "less money," however money is rarely the TOP motivating reason for a sale.

A cash buyer represents a stronger buyer to most sellers because there are fewer people involved who can "screw up the deal." When a seller says yes to a cash buyer, there isn't a lender that's going to kill the sale because of something the buyer did in the past. There isn't likely to be an appraiser who's going to appraise the property too low to make sure the bank is happy with it. Simply put, a buyer with cash is making a stronger offer than somebody who requires the approval of another.

How To Position Yourself to Become As Good As A Cash Buyer

So understanding the seller's motivation is the first step to getting the best deal when buying a home. We know that the home seller does not really care who's money comes to the closing table, the seller merely wants the strongest assurance that it will arrive on time, as agreed upon in the contract.

Buyers have tried in the past to include "pre-qualification" or "pre-approval" letters from lenders in order to reduce the concern about funds, these letters are not binding and thus are not valuable. Why? Because the buyer has yet to go through an underwriting process with a lender to determine their true capability to borrow the funds.

When a buyer goes to a mortgage provider and gets fully qualified for a loan, to include full underwriting, so that money would no longer be an issue that can provide the exact same benefit to a seller as the seller would receive from a cash buyer. Wouldn't that be great?

I have found a lender who will do just that. They will take you through a full loan application and put you in the exact same position as a cash buyer. Be able to close after going through your due-diligence, no need to wait for the loan application process, as it will already be completed!

https://form.jotform.com/jsform/60195305186152

This is a game changer in a very active market.

Doing this will make fast closings an option, so buyers who are financing their purchase will now be able to explore the entire market.
Distressed properties where banks just want out … no problem, let's close next week!

There are so many situations where being a cash buyer has benefits, and doing this brings those benefits to people who are willing to use a smarter home buying process.

Some Questions that may come up…

How long is this underwritten loan good for? from the time the credit report is run 4 months.

Why 4 months? By that time your bank statements, credit report ad pay stubs are out of date.

Can I update my bank statements, and pay stubs? Yes! and a new credit report has to be run.

Having said that you must make sure you do nothing to change your credit during this time for example do not close or open credit accounts, do not buy anything major items such as furniture. This will definitely alter your credit report.

Want to know more? Either fill the form out above or drop me a note and we'll get in touch with you right away.

Welcome to the world of being a cash buyer in real estate!

Gloria Benaroch is a 25 year veteran of real estate brokerage in the State of New Jersey  She is a blogger with content that focuses on real estate, analytics, techie and provides her clients with a planned advantage in today's challenging market.

Atlantic Highlands report authored by Gloria Benaroch

For Prospective Sellers, The Message Is Clear, Put Your Home On The Market NOW!

The 2013 Spring real estate market is upon us earlier than usual and Monmouth County has an incredible lack of inventory. With fewer homes to choose from, buyers are suddenly finding themselves in bidding wars.

Low Interest Rates + Low Inventory = HIGH DEMAND!

If you’re considering a move or have questions about current market conditions, please contact me today!

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