This year challenged us to reprioritize everything – from the way we use our time to where we work, how we socialize and gather together, and our needs at home. For many, this also meant making decisions about how to best support and engage with our extended families, near and far.
In some cases, we weren’t able to see our relatives and loved ones who were living in senior facilities. In others, maybe older children moved back home. Jessica Lautz, Vice President of Demographics and Behavioral Insights for the National Association of Realtors (NAR), says:
“A lot of families have an aging senior relative who was living independently or in senior care and wanted to move them into their home.”
These changes led more homebuyers to invest in multi-generational homes to accommodate more long-term plans. A multi-generational home, according to the 2020 Profile of Home Buyers and Sellers from NAR, is a home that has adult siblings, adult children over the age of 18, parents, and/or grandparents in the household.
A recent study from NAR shows that since the health crisis began, there’s been an increase in purchasing trends for homes that cater to this dynamic:
“Buyers who purchased after March were more likely to purchase a multi-generational home at 15% compared to 11% who purchased before April.”
There are many reasons for this uptick in preference toward multi-generational homes. The graph below shows the top two reasons and how they’ve increased this year:
More homeowners are making arrangements to accommodate their loved ones so they can safely take care of them at home. If you’re in a similar situation, let’s connect to discuss your options in our local area and maybe even have your whole family under one roof by early next year.
Homeownership is on the goal list for many young adults, but sometimes it’s hard to know exactly how to get there. From understanding the homebuying process to pre-approval and down payment assistance options, uncertainty along the way can ultimately hold some buyers back.
Today, there are over 75 million Millennials and 67 million Gen Z’ers in the U.S., making up a significant number of both current and soon-to-be homebuyers. According to a recent Fannie Maesurvey of more than 2,000 of these individuals:
“88% said they are confident they will achieve homeownership someday.”
In addition, the survey also reveals that for younger generations, the motivation to own a home may be more emotional than financial compared to previous generations:
<50% say they want to use their home as an asset
78% believe it’s the best way to live the way they want, without restrictions
80% believe homeownership is the best way to make it on their own
Whether homeownership goals come from the heart or are driven by financial aspirations (or maybe both), the obstacles standing in the way don’t have to bring these dreams to a screeching halt. The same survey also reveals two key roadblocks for potential buyers. Thankfully, they’re both easily overcome with the power of knowledge and trusted advisors leading the way. Here’s a look at these two challenges potential homebuyers face today:
1. 73% of future homebuyers are unaware of low-down-payment mortgage options
For those who want to purchase a home, low-down-payment options are instrumental to affording one sooner rather than later, especially given the amount of debt many younger adults have accumulated. Fannie Mae also notes:
“Among the challenges they face is an unprecedented amount of debt, along with a lack of understanding of the mortgage process and their own purchasing power. Debt, in particular, creates many obstacles such as a limited ability to save and the fear of taking on more debt.”
Today, there are more than 2,340 down payment assistance programs available nationwide to help relieve this pressure. Understanding what’s out there and the options available may help many buyers become homeowners faster than they thought possible. In a year like this, with record-low mortgage rates making their mark in the history books, being able to take advantage of the opportunity buyers have right now is essential to long-term affordability.
2. 64% of buyers expect lenders and other real estate professionals to educate them about the mortgage process
While many people love to do a quick search online to find instant answers to their questions, it isn’t the only way younger generations want to consume information or build their knowledge base. As the survey mentions, having trusted professionals help them learn what it takes to achieve their dreams is definitely on their wish list too.
If you’re aiming for homeownership someday, it may be in closer reach than you think. Let’s connect so you can learn about the process and get the guidance you need to make it happen.
The demand for homes this year is extraordinary as record-breaking numbers of hopeful buyers continue to shop for homes. In a normal year, the peak homebuying season comes to a close by early fall. However, 2020 is anything but a normal year, and the housing market is no exception. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), explains:
“Home sales traditionally taper off toward the end of the year, but in September they surged beyond what we normally see during this season…I would attribute this jump to record-low interest rates and an abundance of buyers in the marketplace, including buyers of vacation homes given the greater flexibility to work from home.”
What’s drawing so many buyers to the market?
As Yun mentioned, record-low interest rates are key. Today’s rates are strengthening purchasing power for buyers, too. Sam Khater, Chief Economist at Freddie Mac, emphasizes:
“Mortgage rates today are on average more than a full percentage point lower than rates over the last five years.”
If you’re a homebuyer right now, there’s no question that you want to take advantage of this opportunity – and you’re not alone. Competition among buyers is definitely increasing as more buyers enter the market and mortgage interest rates remain so low.
Who’s planning to buy a home right now?
Today’s affordability is appealing to all generations and seems to be especially attractive to younger buyers who want to begin growing their wealth through homeownership. There’s a distinct increase this year in the percentage of those in younger generations searching for homes. The National Association of Home Builders (NAHB) notes:
“Between the third quarters of 2019 and 2020, the share of Gen Z adults planning a home purchase rose three points to 14%. Millennials, however, are the generation most likely to be considering buying a home (22%).”
Here’s a graph showing the year-over-year increase in homebuying interest by generation:According to Mark Fleming, Chief Economist for First American, millennials are reaching their prime home-buying years, a likely driver in this increase:
“Record low mortgage rates and millennials continuing to age into their prime home-buying years has boosted demand, but a lack of housing supply remains a challenge.”
What’s the biggest challenge for today’s buyers?
Finding a home, however, as Fleming notes above, is clearly a challenge today. Yun also explains:
“There is no shortage of hopeful, potential buyers, but inventory is historically low.”
With so many buyers actively searching for homes this year and so few houses for sale, it’s more important than ever to work with a trusted real estate professional to navigate today’s market. From pre-approval to bidding wars and guidance on down payment assistance resources, having an agent by your side might make the difference in your ability to land your dream home.
Let’s connect if you’re ready to buy a home. More buyers mean more competition, so you need an expert guide to help you stand out from the crowd.
Earlier this year when the nation pressed pause on the economy and unemployment rates jumped up significantly, many homeowners were immediately concerned about being able to pay their mortgages, and understandably so. To assist in this challenging time, two protection plans were put into place to help support those in need.
First, there was a pause placed on initiating foreclosures for government-backed loans. This plan started on March 18, 2020, and it extends at least through December 31, 2020. Second, homeowners were able to obtain forbearance for up to 180 days, followed by a potential extension for up to another 180 days. This way, there is a relief period in which homeowners have the opportunity to halt payments on their mortgages for up to one year.
Not Everyone Understands Their Options
The challenge, according to Matt Hulstein, Staff Attorney at non-profit Chicago Volunteer Legal Services, is, “A lot of homeowners aren’t aware of this option.”
There’s definitely traction behind this statement. In a recent survey by The National Housing Resource Center, housing counselors from across the country noted that many homeowners really don’t know that there is help available. The following graph indicates the reasons why people who are in this challenging situation are not choosing to enter forbearance:The Urban Instituteexplained:
“530,000 homeowners who became delinquent after the pandemic began did not take advantage of forbearance, despite being eligible to ask for the plan…These responses reflect a need to provide better information to all homeowners. (Lump-sum payment is not the only repayment option.)
Additionally, 205,000 homeowners who did not extend their forbearance after its term ended in June or July became delinquent on their loans. We need to examine who these people are and why are they not extending their option.”
Clearly, a more focused effort on education about forbearance and relief programs may make a big difference for many people, and a clear understanding of their options is mission-critical. Some communities, however, have been impacted by the economic challenges of the pandemic more so than others, further confirming the need to deliver education more widely. The Urban Institute also indicates:
“Black and Hispanic homeowners have been hit harder than white homeowners…nearly 21 percent of both Black and Hispanic homeowners missed or deferred the previous month’s mortgage payment, compared with 10 percent of white homeowners and about 13 percent of all homeowners with payments due.”
It’s important to note that any homeowner experiencing financial hardship has the right to request forbearance. If you’re unfamiliar with the plans available, contact your mortgage provider (the company you send your mortgage payment to each month) to discuss your options. It is a necessary next step, as you may qualify for mortgage relief options or forbearance.
One option many homeowners may not realize they have is the ability to sell their house in this time of need. With the growing equity that homeowners have available today, making a move might be the best option to protect your financial future.
If you need additional information on your options, you can review the Protect Your Investment guide from the National Association of Realtors (NAR) and the Homeowner’s Guide to Success from the Consumer Financial Protection Bureau (CFPB). For the majority of people, our home is the most important asset we have, and you should use all the help available right now to be able to preserve your investment.
The year 2020 will be remembered as one of the most challenging times of our lives. A worldwide pandemic, a recession causing historic unemployment, and a level of social unrest perhaps never seen before have all changed the way we live. Only the real estate market seems to be unaffected, as a new forecast projects there may be more homes purchased this year than last year.
As we come to the end of this tumultuous year, we’re preparing for perhaps the most contentious presidential election of the century. Today, it’s important to look at the impact past presidential election years have had on the real estate market.
Is there a drop-off in home sales during a presidential election year?
BTIG, a research and analysis company, looked at new home sales from 1963 through 2019 in their report titled One House, Two House, Red House, Blue House. They noted that in non-presidential years, there is a -9.8% decrease in November compared to October. This is the normal seasonality of the market, with a slowdown in activity that’s usually seen in fall and winter.
However, it also revealed that in presidential election years, the typical drop increases to -15%. The report explains why:
“This may indicate that potential homebuyers may become more cautious in the face of national election uncertainty.”
Are those sales lost forever?
No. BTIG determined:
“This caution is temporary, and ultimately results in deferred sales, as the economy, jobs, interest rates and consumer confidence all have far more meaningful roles in the home purchase decision than a Presidential election result in the months that follow.”
In a separate study done by Meyers Research & Zonda, Ali Wolf, Chief Economist, agrees that those purchases are just delayed until after the election:
“History suggests that the slowdown is largely concentrated in the month of November. In fact, the year after a presidential election is the best of the four-year cycle. This suggests that demand for new housing is not lost because of election uncertainty, rather it gets pushed out to the following year.”
Will it matter who is elected?
To some degree, but not in the overall number of home sales. As mentioned above, consumer confidence plays a significant role in a family’s desire to buy a home. How may consumer confidence impact the housing market post-election? The BTIG report covered that as well:
“A change in administration might benefit trailing blue county housing dynamics. The re-election of President Trump could continue to propel red county outperformance.”
Again, overall sales should not be impacted in a significant way.
If mortgage rates remain near all-time lows, the economy continues to recover, and unemployment continues to decrease, the real estate market should remain strong up to and past the election.
So far, it’s been quite a ride this year, and our nation has truly seen its fair share of hurdles. From COVID-19 to record unemployment and then the resulting recession, just to name a few, the second quarter of 2020 has had more than a few challenges. Amidst the many roadblocks, however, the U.S. homeownership rate rose again, signaling great strength in the recovery of the housing market and an indication that even in a time of crisis, Americans still feel confident about buying a home.
“The homeownership rate of 67.9 percent was 3.8 percentage points higher than the rate in the second quarter 2019 (64.1 percent) and 2.6 percentage points higher than the rate in the first quarter 2020 (65.3 percent).”
The increase is also represented by race and ethnicity of the householder:There are many reasons why the homeownership rate in this country is rising, and one of the key factors is historically-low mortgage rates. Rates hovering at all-time lows are helping to drive affordability and enabling more potential homeowners to enter the market today. According to Ralph McLaughlin, Chief Economist for Haus:
“Mortgage rates are the icing on the cake for households that were thinking about buying…They found an unexpected opportunity during the worst economic downturn America has seen since the Great Depression.”
In addition, many potential homebuyers have been using their time this year to search for homes that offer more space than their current rental apartments. Many of these homebuyers are younger and, as noted by Odeta Kushi, Deputy Chief Economist at First American, are the buyers driving the homeownership rate in an upward direction:
“Big jump in the homeownership rate today, mostly driven by younger households. We saw a spike in the number of owners, and a decline in the number of renters. This is the highest rate of homeownership since 2008.”
This growth is outstanding news for the housing market and for those who have recently found their new homes. If homeownership is on your shortlist this year, maybe now is a great time to meet with a real estate professional to evaluate your current situation. Perhaps historically low mortgage rates can help you to become a homeowner too.
If you’re thinking of buying a home this year, let’s connect today to take your dream one step closer to reality.
Announcement from the census: As a result of the coronavirus pandemic (COVID-19), data collection operations for the CPS/HVS were affected during the second quarter of 2020. In-person interviews were suspended for the duration of the second quarter and replaced with telephone interview attempts when contact information was available. If the Field Representative was unable to get information on the sample unit, the unit was made a Type A no interview (no one home, refusal, etc.). See the FAQ for more information.
“The majority of millennials not only want to own a home, but 84% of millennials in 2019 considered it a major part of the American Dream.”
Unfortunately, the myths surrounding the barriers to homeownership – especially those related to down payments and FICO® scores – might be keeping many buyers out of the arena. The piece also reveals:
“Millennials have to navigate a lot of obstacles to be able to own a home. According to our 2020 survey, saving for a down payment is the biggest barrier for 50% of millennials.”
Millennial or not, unpacking two of the biggest myths that may be standing in the way of homeownership among all generations is a great place to start the debunking process.
Myth #1: “I Need a 20% Down Payment”
Many buyers often overestimate what they need to qualify for a home loan. According to the same article:
“A down payment of 20% for a home of that price [$210,000] would be about $42,000; only about 30% of the millennials in our survey have enough in savings to cover that, not to mention the additional closing costs.”
While many potential buyers still think they need to put at least 20% down for the home of their dreams, they often don’t realize how many assistance programs are available with as little as 3% down. With a bit of research, many renters may be able to enter the housing market sooner than they ever imagined.
Myth #2: “I Need a 780 FICO® Score or Higher”
In addition to down payments, buyers are also often confused about the FICO® score it takes to qualify for a mortgage, believing they need a credit score of 780 or higher.
Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans, shows the truth is, over 50% of approved loans were granted with a FICO® score below 750 (see graph below):Even today, many of the myths of the homebuying process are unfortunately keeping plenty of motivated buyers on the sidelines. In reality, it really doesn’t have to be that way.
If you’re thinking of buying a home, you may have more options than you think. Let’s connect to answer your questions and help you determine your next steps.
Buying your first home can seem overwhelming. Thankfully, there’s a lot of great information out there to help you feel more confident as you learn about the process. For those in younger generations who aspire to buy, here are three things to consider sooner rather than later in your journey:
1. Understand What it Takes to Purchase a Home
Overall, Millennials make up the largest group of homebuyers in today’s real estate market, and Gen Z is not too far behind. A recent study shared by Freddie Mac shows, however, that Generation Z isn’t as confident in the homebuying process as Millennials. The best thing potential young buyers can do is understand what it takes to buy a home. Learn as much as you can about the mortgage process, down payment options, and the overall steps to take along the way.
2. Realize Your Opportunity to Build Wealth
Homeownership allows you the chance to put a small portion of the home’s value down when you buy, and then watch your appreciation grow on the full value of the home – not just on the down payment. It’s one of the best investments you can make, and a form of ‘forced savings’ working in your favor over time. The added bonus? You get to live there, too.
3. Find Someone You Trust to Help You Through the Process
Having someone you trust to guide you through this process is invaluable. Finding a local real estate expert to help you navigate through the transaction and feel more confident as you make important decisions could be the best choice you make.
For Millennials and Gen Z’ers thinking about buying, today’s historically low interest rates combined with the outlook for future home appreciation is a big win. This means whatever you buy today, you’ll be bragging about 10 years from now. You can feel confident about that!
If you’re ready, buying your first home sooner rather than later is one of the best decisions you can make. But there are many things to consider before taking that step, so let’s work together to help you confidently navigate the full journey.
Whether capitalizing on job opportunities, affordability, or warm-weather places to retire, Americans are making moves to these top cities to take advantage of the strength in the current housing market.
A strong economy and lower mortgage rates have made it easier for many would-be buyers to get into the market. According to realtor.com, it just depends on which market.
To find the top market in our area, let’s get together.