Will New Construction In My Neighborhood Alter My Homes’ Value?

The terms “seller’s market” and “buyer’s market” describe the party most likely to benefit from a real estate transaction in certain conditions; deriving from the basic economic principle of supply and demand. Put simply, when more houses are listed for sale than there are buyers willing to buy those houses, prices will go down. The opposite is also true. Here’s why.  

Where There’s Choice, There’s a Price Drop

When the Apple Macintosh computer, the world’s first affordable computer, was released in 1984, it cost $2,495. In today’s money, that equates to almost $5,500! How many people today would pay over $5,000 for a computer? Walk into a tech store and you can pick any number of models for a fraction of that cost.

The thing that has changed, of course, is competition. Basic economic theory suggests that if you have a large supply of a something, its value will go down. When there are more products for sale than buyers willing to purchase those products, suppliers must drop the price to attract the buyer and encourage a sale. In the real estate market, a large supply happens when there are more houses listed for sale than buyers willing to buy those houses. Buyers with multiple real estate options can bid down prices. More often than not a seller will accept a low ball offer because it is the only offer he will receive.

House values are determined by reference to the sale prices of comparable properties in the neighborhood. Over time, an oversupply will cause values to drop across the board.

New Construction Increases Housing Supply 

Housing inventory is in a constant state of flux, new construction; conversion and renovation add to the housing stock, which happens at local, regional or national level. For example, housing may be in short supply across the state but a popular city within that state might experience an oversupply of new development. All things being equal, a glut of new construction property in your neighborhood will increase supply and depress property prices. But supply is only one side of the equation. The concept is meaningless unless you also consider buyer demand.

Factors that Affect Housing Demand   

Multiple factors affect demand for housing, the primary factor being population. If a neighborhood experiences a population boom, demand for housing will increase. This frequently happens when a new employer moves to an area or a school district boasts outstanding results. In this scenario, new construction is needed to meet demand for housing. As long as demand keeps pace with supply, the value of local properties will not fall. In fact they will probably rise, particularly if the new development boosts the desirability of the area or signals that the neighborhood is on the up.

Another factor that affects housing demand is the buyer’s purchasing power. In a growing economy, workers typically experience greater job stability and rising wages. Homebuyers are more likely to qualify for mortgage financing, especially if interest rates are low. Existing homeowners find themselves with the cash to trade up, and people who previously rented can finally place their feet on the property ladder.

The opposite is also true. In a falling economy, wages stagnate. If inflation is high, true wages fall. Home seekers may struggle to get mortgage finance and demand for housing is typically weak. Listed properties may linger on the market without a sale. Over time, reduced demand will cause prices to fall.

The Verdict? 

New construction in a neighborhood may raise prices, reduce prices or have no effect at all. The outcome depends on the number of buyers and homes in the market, the quality of the subject property and external factors such as interest rates and attitudes to lending. The only way to figure out the true value of your property is through a comparative market analysis, which takes account of supply and demand factors in your local market. I would be happy to prepare this for you with no obligation.

For professional real estate services, contact The North Texas Home Hunter @ (214) 609-7123 or jtrump@kw.com

NOW Is The Best Time To Sell Your Home. Here Is The Proof~

Most homeowners believe that the winter is not a good time to sell. This belief is based on the fact that historically the number of buyers decreases in the winter and then increases dramatically during the spring buying market. Though this is still true, there is an interesting pattern developing over the last few months. The number of prospective purchasers actively looking at a home (foot traffic) has remained strong going into the fall. As a matter of fact, the foot traffic far exceeds the numbers reported for the same months last year (see chart):

At the same time, the National Association of Realtors revealed that the months’ supply of housing inventory has decreased from 5.5 months to 5.3. That equates to less competition for homeowners selling today as compared to next spring when many homeowners will decide to put their home on the market.

Bottom Line

Since buying activity is still strong, this might be a great time to put your house on the market. Call The North Texas Home Hunter for professional real estate services, (214) 609-7123 or email jtrump@kw.com

Harvard University’s Five Financial Reasons To Buy A Home

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. Last year, he released a paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home. Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available.

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You’re paying for housing whether you own or rent.

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning.

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially.

For professional real estate services, contact The North Texas Home Hunter at (214) 609-7123 or jtrump@kw.com

4 Great Reasons To Buy A Home Before The End Of The Year.

It’s that time of year; the seasons are changing and with them bring thoughts of the upcoming holidays, family get togethers; and planning for a new year. Those who are on the fence about whether now is the right time to buy don’t have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 11.2% (most pessimistic) and27.8% (most optimistic). The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year. An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains: “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait? Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Contact The North Texas Home Hunter for professional real estate service, (214) 609-7123 or jtrump@kw.com

Discrediting 4 Myths About Buying A Home

 A recent study by the Joint Center for Housing Studies at Harvard University revealed that when renters were asked why they do not plan to own in the future, financial constraints were a more common response than the perceived lifestyle benefits they may receive from renting. Today, I want to go over those financial challenges and see if I can put some fears to rest and also clear up some misconceptions.

Here are the top four financial hurdles that cause renters not to buy:

You Cannot Afford a Home

Over 50% of renters consider this as a financial barrier to homeownership. However, study after study has shown us that there are major misunderstandings about what is required to purchase a home. The biggest misconception is the amount of a down payment required. A recent survey revealed that 44% of respondents believed that a 20% down payment was required. In actuality, mortgages are available with as little as 5% down, possibly even 3 1/2%, and zero down in certain situations. The same survey showed that 30% of respondents believe that only individuals with ‘high incomes’ can obtain a mortgage. In actuality, there are several programs that have been created to help moderate income families buy a home of their own (look at the FHA program for example).

You Do Not Have Good Enough Credit to Get a Mortgage

The survey mentioned above showed that 64% of respondents believe they must have a “very good” credit score to buy a home. Most people don’t realize that the average credit score for closed loans has actually dropped 24 points in the last two years. For more information on credit scores click here.

It’s Not a Good Time to Buy a Home

Determining when the right time is to buy a home from a pure financial calculation can be difficult. There are two elements of the cost of a home: the price of the house and the mortgage interest rate. When considering a purchase, you want to have at least an indication where prices and mortgage rates are headed. According to over 100 experts, house values are expected to increase by almost 20% between now and 2018. Freddie Mac recently projected that mortgage rates would be as much as one full point higher by this time next year. With both prices and interest rates projected to increase, now is the perfect time to buy a home.

It’s Cheaper to Rent than Buy

This is a myth that doesn’t want to die. However, Trulia recently reported that, in fact, buying is actually dramatically cheaper than renting. Here is what they said:

“Homeownership remains cheaper than renting nationally in all of the 100 largest metro areas. In fact, buying is 38% cheaper than renting now, compared with 35% cheaper than renting one year ago.”

Bottom Line

If you are even thinking about buying, get the facts from a trained professional. You may be pleasantly surprised by what you find out.

Contact The North Texas Home Hunter for professional real estate services. (214) 609-7123 or jtrump@kw.com

5 Reasons Why You Shouldn’t Sell Your Own Home

Some homeowners may consider trying to sell their home without the assistance of a real estate professional, known in the industry as a “For Sale by Owner (FSBO)”. I think that there are several reasons this might not be a good idea for the vast majority of sellers.

Here are five reasons:

1. 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 FSBO.

~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 companies that might make repairs to your home after an inspection.

~The appraiser if there is a question of value.

2. Exposure to Prospective Purchasers

Recent studies have shown that 92% of buyers search online for a home. That is in comparison to only 28% looking at print newspaper ads. Most real estate agents have an extensive internet strategy to promote the sale of your home. Do you?

3. Actual Results also come from the Internet

Where do buyers find the home that they actually purchased?

~43% on the internet

~9% from a yard sign

~1% from newspapers

The days of selling your house by just putting up a sign and putting it in the paper are long gone. Having a strong internet strategy is crucial.

4. FSBO’ing has Become More and More Difficult

The paperwork involved in selling and buying a home has increased dramatically as industry disclosures and regulations have become mandatory. This is one of the reasons that the percentage of people FSBO’ing has dropped from 19% to 9% 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 FSBO’s is because they also believe they can save the real commission. The seller and buyer can’t both save the same commission. Studies have shown that the typical house sold by the homeowner sells for $184,000 while the typical house sold by an agent sells for $230,000. This doesn’t mean that an agent can get $46,000 more for your home as studies have shown that people are more likely to FSBO in markets with lower price points. However, it does show that selling on your own might not make sense.

Bottom Line

Before you decide to take on the challenges of selling your house on your own, sit with a real estate professional in your marketplace and see what they have to offer.

For professional real estate services, contact The North Texas Home Hunter @ (214) 609-7123 or jtrump@kw.com

False Expectations In The Real Estate World.

I have written about the headache that Realtors have trying to put a price on a listing, a price that makes sense; and therefore can be rationalized when talking with the seller, potential buyers and buyers’ agents. The task is getting to be hazardous in a hot market when real estate pros are using all kinds of bizarre strategies and tactics to yield the best deal for the owner while forging for themselves a reputation of superhero.

The one scenario, or what I call a gimmick, that has been in vogue the last two years or so, consists of putting a price on a property well below what the listing agent perceives to be today’s market value, in order to create a bidding war that may result in multiple offers well over the asking price.

This technique sometimes works to the benefit of the seller, and always works to the benefit of the listing agents. They can brag in the media that they are so darn good that they get top dollar (like 10-20% more than the list-price) for their listings. Obviously a bunch of would-be sellers are supposed to be so impressed by the performance that they will want those superheroes to list their homes and duplicate the magic.

Between you, me and the rest of the world, I have a hard time understanding how reasonable home sellers can fall for such a deceptive marketing formula! I mean, if you have a $315k home which may go for $340,000 in a “sellers’ market” and you list it at $300k, it does not take an eagle to predict that the house will likely sell around the same $340,000 or so. Hello?

Such edgy way to do business, in my opinion, is not only dangerous but is creating lots of unwelcome side-effects. Let’s deal with these two points, one at a time:

Dangerous:

When we play games with the market, the market can play games with us. Real estate is not an exact science. If you deliberately underprice a property, there is no certainty that the gimmick will work every time. When it does not, the seller (and the perspiring agent) may be faced with a nasty dilemma or how to respond to clean offers just matching the asking price. At the high-end, you never can count on a host of qualified buyers fighting over a property. Often, there is only one candidate writing a bid, and he sure does not want to pay a dime more than he has to. Also, after months of madness in the marketplace, mostly due in many areas to a record low inventory, many are the buyers who are emotionally exhausted. They keep on writing offers and get rejected time after time, losing to the one buyer who cannot live without that particular home, at any price. The excitement of trying to buy can quickly become the discouragement of over-negotiating and coming up empty. Most buyers are no longer willing to play games. Sellers beware.

Unwelcome side-effects:

Not all sellers, on the advice of their agents, underprice their home in order to get more. The great majority of the sellers list their homes at market, if not a bit over; makes sense. The problem is that, even though they are told by their agents that the listing price is indeed on the high side, lots of sellers, intoxicated by ads suggesting that some brokers routinely sell homes 5 or 10%, sometimes 25% over asking, fully expect that they too will get a heck of a lot more than the advertised price. It’s contagious.

One humble and practical piece of advice to Realtors out there: When you think of a price (rational or not) for a listing, be sure to have a good, clear talk with the seller, to explain what your strategy is and what he/she can reasonably expect in the way of offers. Not a bad idea to repeat the explanation again & again. Nothing is more deceiving than a false expectation, in fact, it’s a relationship killer. You want a win-win, not a lose-lose. The time to prepare the minds and set up the stage for what’s coming is before you jot down the price on the listing contract. Good luck!

Have a Real Estate Question?

Having the right real estate agent can make a huge difference in the buying or selling of a home. Have a question about real estate, or need help with research, or other assistance? Send your question anytime, day or night. Please be as specific as possible with your question. The more information you provide, the better we can respond to your request. You can jtrump@kw.com, or call me, your North Texas Home Hunter, directly at (214) 609-7123.

Questions To Ask Yourself Prior To Buying A Home

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home. There are three questions you should ask before purchasing in today’s market:

Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:

• A good place to raise children and for them to get a good education
• A place where you and your family feel safe
• More space for you and your family
• Control of the space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

Where are home values headed?

When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number. Here is what the experts projected in the latest survey:

• Home values will appreciate by 4% in 2015.
• The cumulative appreciation will be 19.5% by 2018.
• Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 11.2% by 2018.

Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates. The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.

Bottom Line

Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.

For professional real estate services, call The North Texas Home Hunter @ (214) 609-7123 or jtrump@kw.com

Why Fall Can be the Best Time to Sell Your Home.

Winter weather is approaching and I get questions from prospective sellers as to whether they should wait until spring to put their homes on the market. I have even had some Flower Mound, TX sellers that are currently listed ask whether they should pull their homes off the market. They think nothing is going to sell over the holidays or during the winter months. Wrong!

In Flower Mound, TX, homes sell all year long. We have a rapidly expanding retail industry, amazingly rated schools and a city that makes top ten lists for safety, security, education and income. Guess what? The DFW market creates job transfers at all times of the year, and people want a place to raise their family. People living in apartments tend to think they might like to be in their own home before the holidays. Other buyers with school age children think moving over the Christmas holiday is a fine idea so their children can change school zones at the break. Others think buying a home is the right thing to do any time of year or when the idea strikes.

So since buyers are going to be out looking in the fall months and over the holidays and into the winter months they need homes to view. Having your home on the market at this time of the year gives you an edge. That edge is that buyers are more serious and if they like your Flower Mound home, chances are they will make an offer. Do you want to miss out on that? Plus with other sellers thinking that homes do not sell over the winter you will have less competition therefore increasing the chances for your Flower Mound home to sell. You will also have less competition from those homes with absolutely gorgeous lawns, gardens and beautiful swimming pools. All yards look pretty blah in the late fall and winter months in Flower Mound!

These are all good reasons Why Fall Can be the Best Time to Sell Your Home.

In you are in Flower Mound, TX and are interested in selling your home, now is the absolute best time. The trees are just beautiful and the crisp fall air makes people want to get out and look at homes. Call Jim Trump to schedule your appointment now.

For professional real estate service, contact The North Texas Home Hunter at (214) 609-7123 or jtrump@kw.com for your FREE home evaluation.

Don’t Overprice Your House. Just…….Don’t.

One of the biggest challenges when selling a home is deciding on the asking price, which is often the battle between Realtor and seller. Realtors are always talking about the importance of pricing a home correctly but many sellers feel the best strategy is to price it high because “you never know, you might get lucky” or “you can always lower the price, but you can’t raise it” and “I want to leave room for negotiation!”

Overpricing your home will lead to your house selling for less and taking longer to sell than it would have had it been priced lower from the start. If a house is overpriced, buyers may not even come to see the house, let alone make an offer! Weeks will pass and the seller will find herself/himself having to drop the price in order to chase the market. But by this point, those initial buyers that visited the house have likely moved on, and new buyers that come to view the house after a price drop will see that is has been on the market for some time, will see the price drop and will wonder why it hasn’t sold. There will be less of an urgency to make an offer than if it was a brand new listing. On top of that, buyers often see a price drop as a sign of weakness and they will make lower offers thinking the seller might be desperate. It is still a sellers’ market; however, todays buyers WILL NOT purchase an overpriced house!

The first two weeks on the market is the best time for a seller to get an offer because buyer activity is at its peak and sellers’ leverage is at its strongest. Don’t be tempted into overpricing your home in hopes that you just might get that one buyer who falls in love with your house and who doesn’t care about price…this is unlikely to happen. The best strategy is to price your house at or just slightly above market value, and I mean just slightly. If you’re lucky, you just might create a bidding war and sell it for over asking price.

In order to navigate this market, and for a free home valuation, contact me. (214) 609-7123 or jtrump@kw.com.