January 14th, 2015
While some areas of the country will still experience bidding wars and unrealistic valuations, many places will have enough affordable inventory to get buyers into a home.
“We’re expecting a big push with inventory at the beginning of the year, especially for affordably-priced homes,” says Nela Richardson, chief economist at real estate brokerage Redfin. “We estimate 8% more sellers have enough equity to sell their home now because of the price increases that already happened in 2014.”
Increased inventory will be the main driver but investors have now exited the market which means it will once again be ok to apply for a mortgage, get an appraisal and even an inspection before buying. Earlier this year, many houses were being purchased quickly by investment groups and deals were being done quickly with little to no due diligence. Realtor.com, the real estate Website, predicts existing home sales will increase around 8% in 2015 similar to what we saw in 2012. The difference: the makeup of houses will include minimal levels of distressed properties.
While home prices aren’t going to see double digit growth in the New Year they will see some gains, which means it will be harder for first-time buyers to purchase a home in high priced markets like San Francisco. As a result, Realtor.com predicts that first-time home buyer activity will be concentrated in markets with strong employment and ones that are affordable.
People are looking for homes in walkable neighborhoods that are close to their work or public transportation. New homes are being built quickly around our major metro areas and are now competing with the existing home inventory.
The good news is that for those that apply for a mortgage will see getting an approval be a little easier. That doesn’t mean it will revert back to the crazy days of the real estate boom where countless people got mortgages without having to provide any documentation. However people with a less than perfect credit score will be able to get a loan more easily.
“Lenders will accommodate people who had some issues but whose credit has been good since,” says Brian Simon, Chief Strategy Officer at New Penn Financial. According to Simon borrowers will also see more options when it comes to how much they put down to purchase a home. “Lack of down payments is a big problem,” says Simon. “Especially with the millennials who don’t have the money or don’t want to put money down.”
Also, interest rates are still quite low. Experts are predicting rates to increase by the end of 2015 at 5% for a thirty-year fixed rate mortgage.
So, there’s possibly a dream home or a starter home out there for you. What do you do? You can follow this nice checklist for getting your home.
1. The dreaming phase
The dreaming phase has no definitive start time or length. You just need to start thinking about your ideal home. What do you like, what do you dislike, how big, how small, attached garage, condo, townhouse, yard or no yard. Also, start exploring neighborhoods. Do you want to be close to shopping areas or parks? If you have kids or are planning on having kids, start looking into school districts and scores. And, while we hate to bring it up, you should also look at crime statistics.
Dreaming happens on your terms and your timing. It doesn’t require help from a real estate agent or mortgage professional. Don’t rush, and don’t feel pressured. Cut out pictures of homes you like from magazines and put together a notebook of what you like.
2. Search and discovery mode
Now is the time to find out the solid pieces of the puzzle. Find a reputable loan officer to discuss what you can afford and what you want to afford. Then get referrals for a real estate agent who specializes in the neighborhoods you want. They can keep their ear out for the perfect house coming on the market that isn’t listed yet.
3. Full steam ahead
When the right home comes along, it will work out because you’ve done all the prep work and have your team in place. And as you spend time visiting homes, you may want to update your ideal home as you’ll identify things you didn’t think about initially.
And as we’ve mentioned numerous times, make sure your credit score is as clean as you can get it. If you have some mistakes, work to keep payments on time and adjust your spending to pay down large balances.