When deciding to buy a home, people are presented with many different options. The type of home you buy depends on your needs, budget, and in many cases, the desired maintenance level. For many millennials, their choice has been buying a condominium!
“Last year about 43% of all condo home-purchase mortgage applications were submitted by FTHBs… Similarly, the data show condos were more popular with young homebuyers and empty nesters. For instance, 21% of all condo home-purchase mortgage applications were submitted by buyers aged 18 to 30, compared with just 17% of all single-family home-purchase mortgage applications by the same group in 2018.”
With home prices increasing year-over-year, it makes sense millennials are buying condos instead of a single-family house. As a result, the demand for this type of home has been increasing.As this graph explains,
“The younger millennials are the largest cohort and are likely to drive much of the condo demand in the coming years”.
Rising home prices coupled with a lack of inventory in today’s market may cause some homeowners to consider selling their home on their own (known in the industry as a For Sale By Owner). However, a FSBOmight not be a good idea for the vast majority of sellers.
The top 5 reasons are listed below:
1. Online Strategy for Prospective Purchasers
Recent studies have shown that 95% of buyers search online for a home. In comparison, only 13% use print newspaper ads. Most real estate agents have an Internet strategy to promote the sale of your home. Do you?
2. Results Come from the Internet
Where did buyers find the home they actually purchased?
50% on the Internet
28% from a Real Estate Agent
7% from a yard sign
1% from newspapers
The days of selling your house by putting up a sign and listing it in the paper are long gone. Having a strong Internet strategy is crucial.
3. There Are Too Many People to Negotiate With
Here is a list of some of the people with whom you must be prepared to negotiate if you decide to For Sale By Owner:
The buyer who wants the best deal possible
The buyer’s agent, who solely represents the best interest of the buyer
The buyer’s attorney (in some parts of the country)
The home inspection companies, which work for the buyer and will almost always find some problems with the house
The appraiser, if there is a question of value
4. FSBOing Has Become Increasingly Difficult
The paperwork involved in the process has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBOing has dropped from 19% to 7% over the last 20+ years.
5. You Net More Money When Using an Agent
Many homeowners believe that they will save the real estate commission by selling on their own. Realize that the main reason buyers look at FSBOs is because they also believe they can save the real estate agent’s commission. The seller and buyer can’t both save the commission.
A study by Collateral Analytics revealed that FSBOs don’t actually save anything by forgoing the help of an agent. In some cases, they may actually cost themselves more. One of the main reasons for the price difference at the time of sale is:
“Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.”
The more buyers that view a home, the greater the chance of a bidding war for the property. The study found the difference in price between comparable homes of size and location is currently at an average of 6%.
Listing on your own leaves you to manage the entire transaction yourself. Why do that when you can hire an agent without additional cost?
Selling your home these days takes more than just finding an agent and listing it. You’ve got to really sell it. That means impressing buyers the second they walk in the door.
One of the best ways to do this? Home staging, where your home's decor undergoes a makeover in order to entice home buyers to swoon and make an offer.
“The statistics don’t lie,” says Samantha Rose Frith of Warburg Realty in New York City. “A well-staged house will sell more quickly and draw a higher sales price.”
But who has time for that? Hiring a pro is pricey (here's more on how much home staging costs). Plus a pro can't do all of the work; you’ll still need to do some sprucing up if you have an unexpected showing.
So if the clock is ticking, here are home staging tips and tricks that you can pull off fast, depending on how much time you have—from an hour to just 5 minutes.
Home staging in 5 minutes
Put down the toilet seats: “Yes, that makes a difference,” says Jennifer Okhovat, a real estate agent in Los Angeles. Tracey Hampson, a real estate agent in Santa Clarita, CA, also recommends hiding the plunger and toilet brush, and any reading material you may have accumulated in your bathroom. “A bathroom is a bathroom, not a library,” says Hampson. Amen.
Open the blinds: Let in as much natural light as possible—unless you have a spectacularly bad view, in which case, keep those blinds closed.
Take out the trash and recycling: You may get that one potential buyer who will look everywhere.
Home staging in 15 minutes
Clear your countertops: “The less clutter on countertops, the better,” says Okhovat. A nice bowl of fruit can spruce things up, but if you have several small appliances and all of your spices out, take a few minutes to stash them in your cupboards or a storage bin.
Adjust the temperature: You don’t want buyers to rush through your house because it's too hot or too cold. You also want to show that your heating and cooling are working. The ideal temperature depends on your home and the season, but keeping it at around 70 degrees should ensure everyone who sees your home is comfortable.
Hide any piles of toys, clothes, and mail: “Remove the clothes from the stair steps, ensure the four piles of mail get reduced to one or tucked away entirely,” says Katie Coombs of Total Home Experience in Reno, NV. Janet Lorusso of JRL Interiors, in Boston, recommends keeping baskets handy in your living spaces for quick cleanup of toys and other clutter.
Home staging in 30 minutes
Remove personal items: Buyers like to view each home as a blank canvas, and that’s hard to do with pictures of someone else’s family dominating the space. “Family and vacation pics are great, but maybe the Disneyland throw blanket and the hanging, glued-together puzzle could go in the closet for a bit,” says Coombs. Keep your privacy in mind as well as you clear items. You may want to stash items with your family member’s full names on display, for example.
Clean, clean, clean: Vacuum, sweep, and mop as often as you can stand. “Check mirrors for spatters," says Lorusso. Bonus: "The smell of cleaning products will make your house feel clean, even if it isn’t."
Add or adjust your lighting: “Use torch lamps if a room doesn’t get a lot of natural light, says Joel Moss of Warburg Realty in New York City. “We also find that replacing LED bulbs with bulbs that give it a warmer feel has a beneficial effect on buyer interest.”
Hang a mirror: “Hang a wall mirror strategically to add visual interest and make the space look larger,” says Amber Harris of Keller Williams Capital Properties in Washington, DC, and interior decorator with At Home DC.
Home staging in an hour
Rearrange the living room furniture: Instead of arranging your living room furniture based on the best view of the TV, “arrange furniture to face focal points in the room, like a large window with a view or a fireplace,” says Anne Clancy, a Re/Max real estate agent in Cottage Grove, MN.
Make small repairs: “That leaky faucet or moldy caulk might not seem like a big deal if you lived there for the last 10 years, but they will almost always factor into a lower offer,” says Frith. If there’s a small project you’ve been putting off, like fixing a hinge on a cabinet door, now’s the time to take care of it.
Spruce up walls, outdated countertops, dressers, and more with contact paper: “It’s not just for lining shelves anymore,” says Michael Nelson, chief operating officer of the Pyramid Project, a property management firm in Kissimmee, FL. “We’ve used it on everything from walls to countertops. It holds up well, looks great, and when you want a change, it removes with ease and no damage to the surface.”
In today’s fast-paced world where answers are a Google search away, there are some who may wonder what the benefits of hiring a real estate professional to help them in their home search are. The truth is, the addition of more information causes more confusion.
Shows like Property Brothers, Fixer Upper, and dozens more on HGTV have given many a false sense of what it’s like to buy and sell a home.
Now more than ever, you need an expert on your side who is going to guide you toward your dreams and not let anything get in the way of achieving them. Buying and/or selling a home is definitely not something you want to DIY (Do It Yourself)!
Here are just some of the reasons you need a real estate professional in your corner:
There’s more to real estate than finding a house you like online!
There are over 230 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to ensure you achieve your dream?
You Need a Skilled Negotiator
In today’s market, hiring a talented negotiator could save you thousands, perhaps tens of thousands of dollars. Each step of the way – from the original offer, to the possible renegotiation of that offer after a home inspection, to the possible cancellation of the deal based on a troubled appraisal – you need someone who can keep the deal together until it closes.
What is the home you’re buying or selling worth in today’s market?
There is so much information on the news and on the Internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? 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, 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 a salesman.”
Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show that you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are not in an incredibly competitive market, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantagesof working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
Capacity: Your current and future ability to make your payments
Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
Collateral: The home, or type of home, that you would like to purchase
Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so today.
Young buyers (Millennials & Gen Z) have waited longer than previous generations to enter the housing market for their first home. However, this hasn’t stopped them from dreaming about the home they will eventually buy. Many spend hours searching listings and building Pinterest boards of their favorite home features.
According to a survey from Open Listings, 70% of single renters are more likely to spend their Sunday nights swiping through house listings than dating profiles.
All that time window shopping has led 45% of millennials to expect the first home they buy to be their “dream home”! They are willing to wait longer, save more for a larger down payment, and are pickier about the listings they want to tour and the features that they want to see in their first home.
Waiting a little longer to buy a home than their parents or grandparents did has also helped young buyers become more established in their careers prior to making such a large purchase. Lawrence Yun, NAR’s Chief Economist, recently commented,
“Older millennials are now entering the prime earning stages of their careers, and the size and costs of homes they purchase reflect this. Their choices are falling more in line with their Gen X and boomer counterparts.”
In some areas of the country, high competition in the starter home market forces young buyers to wait longer. The extra money they save during that time opens their search to bigger, more expensive homes.
If this trend continues, older millennials will skip the starter home altogether, going straight to a trade-up or premium home instead.
It doesn't matter if you're owning or renting, buying or selling, or still sitting on the sidelines waiting to join the game. Just about everyonewants to know what's going on in the housing market.
Because it's a moving target. While plummeting prices can be a boon for buyers, they can throw sellers into a panic—and, in a worst-case scenario, plunge the world into a recession, as we saw when the housing bubble burst a decade ago. Meanwhile, a lack of new housing coming onto the market can lead to price spikes for both buyers and renters.
That current dearth of new construction is exacerbating a national housing shortage and leading to an increase in prices, according to the recently released annual State of the Nation's Housing report from the Harvard University's Joint Center for Housing Studies.
Here are six key findings from the report.
1. Homeownership rate is rising again
Over the past two years, homeownership has been rising again, hitting 64.4% of U.S. households in 2018. The rate rose 0.5% from the previous year, resulting in an additional 1.6 million households who closed on properties.
That's fantastic news. The homeownership rate had plummeted during the financial crisis as scores of foreclosures swept through the country. Now it's back up to what it was from about 1985 through 1995, according to McCue.
"Homeownership had declined a lot," he says. "So [for many buyers] it was finally having the money and the income to make this happen."
The bump was primarily thanks to more millennials and young Gen Xers flooding the market. An additional 1.1 million of them closed on properties from 2016 to 2018.
"You have a bigger group of young adults getting older and reaching the ages where they are getting married, having children, and reaching the prime first-time home buyer [point]," McCue says.
The boost in homeownership was in spite of record-high home prices in many parts of the country and rising mortgage interest rates.
In 2012, the monthly median home payment was only $1,176, after adjusting for inflation, according to the report. But just six years later, it had jumped almost 51%, to $1,775 a month.
"The fact that homeownership is rising despite all of the affordability challenges that buyers are facing reflects how important homeownership is to the American dream," says Chief Economist Danielle Hale of realtor.com®.
2. Fewer folks are renting
Simple math: If the number of homeowners is rising, it means that the number of renters is falling. The number of households renting the roofs over their heads fell by 110,000, to 43.2 million, from 2017 through 2018. That's in stark contrast to the previous 12 years, when the number of tenants grew by nearly 850,000 households annually.
Increasing rents, going up 3.6% annually in 2018 compared with 3.8% in 2017, may have something to do with it.
"Rents are high and rising," says Hale. But homeownership tends to be more of a fixed cost as folks know what their monthly mortgage will be. "Renters tend to pay more of their income toward housing than homeowners do."
But here's another shift: Renters are becoming wealthier. About a quarter of them now have household incomes of $75,000 or more. That means many are choosing not to become homeowners even though they could afford to do so.
But more middle-class renters, earning between $45,000 and $75,000 a year, are becoming cost-burdened. The percentage of these folks spending more than 30% of their income (which is considered the max folks should pay for housing) shot up from 13% in 2001 to 25% in 2018, according to McCue.
3. The rate of new home construction is slowing
Even with record demand from prospective buyers, the rate of home construction slowed in 2018. Yes, the number of new, completed homes was up 2.8%, to 1.18 million units, from 2017 to 2018, but that growth rate is actually the lowest since 2012, when the recovery from the Great Recession kicked in.
"We're eight years into the recovery, and we're still only 75% back to normal rates of home building," says McCue.
He blames the lack of building to increasing land prices, cumbersome local regulations, and a construction labor shortage that make building more difficult and expensive.
Still, building was more prevalent in some parts of the country than others. For example, home construction starts were up 7% in the West, where the population is growing, and 5% in the South, where land is more plentiful and cheap. But they fell just under 1% in the expensive Northeast, where there's not as much land available to build on, and dropped 4% in the Midwest.
"Some of that is simply a reflection where people are moving," says Hale.
4. Homes are getting bigger and less affordable
Most first-time buyers don't want—and can't afford—a megamansion. They're seeking smaller, more affordable single-family houses. But builders aren't putting them up.
Just 22% of single-family homes clocked in at under 1,800 square feet, according to the report. That's compared with 32% from 1999 through 2011.
That's because it's simply more profitable to put up bigger, more luxurious abodes and sell them for higher prices.
"It's difficult for builders to build modest-sized, more affordable homes," says McCue. But "there's plenty of demand out there for these [homes]."
5. Home sales are slipping
The lack of homes, the rising prices, and the crazy competition may be why the number of home sales is falling. After years of a white-hot, frenzied real estate market, 5.3 million existing (i.e., previously lived-in) residences were sold in 2018. That's compared with 5.5 million in 2017.
"Home sales declined mainly at the end of 2018, when mortgage interest rates increased," says McCue. Even the slightest interest rate increase can add quite a bit to a monthly mortgage payment.
But there are now more homes available for sale, even though they tend to be on the more expensive side. The number of homes for sale priced at under $200,000 has dropped, while more properties going for $750,000 or more are coming onto the market, says Hale.
"The biggest increase in inventory is in expensive homes for sale, where demand is the weakest," she says.
6. Home price growth is also slowing
Buyers shouldn't get too excited. Home prices aren't coming down—they're just not increasing at such a fast pace. Home price appreciation went from 6.5% at the beginning of 2018 to just 4.6% at the end of the year, according to the S&P/Case-Shiller National Home Price Index.
The median home list price is $310,000, according to realtor.com.
"Home prices have gotten so high in so many areas that it was just unsustainable to keep rising at the rates that they had," says McCue. "Home prices have far outpaced rises in income over the last five years.