This Isn’t a Bubble. It’s Simply Lack of Supply.

This Isn’t a Bubble. It’s Simply Lack of Supply. [INFOGRAPHIC] | MyKCM

Some Highlights

  • In a recent article, Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), discussed the state of today’s housing market.
  • When addressing whether or not today’s high buyer competition and rising home prices are evidence of a housing bubble, Yun said that this “is not a bubble. It is simply lack of supply.”
  • Today’s housing market is healthy, and rising prices are driven by real buyer demand. Let’s connect to talk about the best ways to navigate such an energetic market.

Shawna O’Brien
shawna.obrien@talktotucker.com
317-506-0039
F.C. Tucker Geist Fishers

4 Major Reasons Households in Forbearance Won’t Lose Their Homes to Foreclosure

4 Major Reasons Households in Forbearance Won’t Lose Their Homes to Foreclosure | MyKCM

There has been a lot of discussion as to what will happen once the 2.3 million households currently in forbearance no longer have the protection of the program. Some assume there could potentially be millions of foreclosures ready to hit the market. However, there are four reasons that won’t happen.

1. Almost 50% Leave Forbearance Already Caught Up on Payments

According to the Mortgage Bankers Association (MBA), data through March 28 show that 48.9% of homeowners who have already left the program were current on their mortgage payments when they exited.

  • 26.6% made their monthly payments during their forbearance period
  • 14.7% brought past due payments current
  • 7.6% paid off their loan in full

This doesn’t mean that the over two million still in the plan will exit exactly the same way. It does, however, give us some insight into the possibilities.

2. The Banks Don’t Want the Houses Back

Banks have learned lessons from the crash of 2008. Lending institutions don’t want the headaches of managing foreclosed properties. This time, they’re working with homeowners to help them stay in their homes.

As an example, about 50% of all mortgages are backed by the Federal Housing Finance Agency (FHFA). In 2008, the FHFA offered 208,000 homeowners some form of Home Retention Action, which are options offered to a borrower who has the financial ability to enter a workout option and wants to stay in their home. Home retention options include temporary forbearances, repayment plans, loan modifications, or partial loan deferrals. These helped delinquent borrowers stay in their homes. Over the past year, the FHFA has offered that same protection to over one million homeowners.

Today, almost all lending institutions are working with their borrowers. The report from the MBA reveals that of those homeowners who have left forbearance,

  • 35.5% have worked out a repayment plan with their lender
  • 26.5% were granted a loan deferral where a borrower does not have to pay the lender interest or principal on a loan for an agreed-to period of time
  • 9% were given a loan modification

3. There Is No Political Will to Foreclose on These Households

The government also seems determined not to let individuals or families lose their homes. Bloomberg recently reported:

“Mortgage companies could face penalties if they don’t take steps to prevent a deluge of foreclosures that threatens to hit the housing market later this year, a U.S. regulator said. The Consumer Financial Protection Bureau (CFPB) warning is tied to forbearance relief that’s allowed millions of borrowers to delay their mortgage payments due to the pandemic…mortgage servicers should start reaching out to affected homeowners now to advise them on ways they can modify their loans.”

The CFPB is proposing a new set of guidelines to ensure people will be able to retain their homes. Here are the major points in the proposal:

  • The proposed rule would provide a special pre-foreclosure review period that would generally prohibit servicers from starting foreclosure until after December 31, 2021.
  • The proposed rule would permit servicers to offer certain streamlined loan modification options to borrowers with COVID-19-related hardships based on the evaluation of an incomplete application.
  • The proposal rule wants temporary changes to certain required servicer communications to make sure borrowers receive key information about their options at the appropriate time.

A final decision is yet to be made, and some do question whether the CFPB has the power to delay foreclosures. The entire report can be found hereProtections for Borrowers Affected by the COVID-19 Emergency Under the Real Estate Settlement Procedures Act (RESPA), Regulation X.

4. If All Else Fails, Homeowners Will Sell Their Homes Before a Foreclosure

Homeowners have record levels of equity today. According to the latest CoreLogic Home Equity Report, the average equity of mortgaged homes is currently $204,000. In addition, 38% of homes do not have a mortgage, so the level of equity available to today’s homeowners is significant.

Just like the banks, homeowners learned a lesson from the housing crash too.

“In the same way that grandparents and great grandparents were shaped by the Great Depression, much of the public today remembers the 2006 mortgage meltdown and the foreclosures, unemployment, and bank failures it created. No one with any sense wants to repeat that experience…and it may explain why so much real estate equity remains mortgage-free.”

What does that mean to the forbearance situation? According to Black Knight:

“Just one in ten homeowners in forbearance has less than 10% equity in their home, typically the minimum necessary to be able to sell through traditional real estate channels to avoid foreclosure.”

Bottom Line

The reports of massive foreclosures about to come to the market are highly exaggerated. As Ivy Zelman, Chief Executive Officer of Zelman & Associates with roughly 30 years of experience covering housing and housing-related industries, recently proclaimed:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

Shawna O’Brien
shawna.obrien@talktotucker.com
317-506-0039
F.C. Tucker Geist Fishers

Don’t Sell on Your Own Just Because It’s a Sellers’ Market

Don’t Sell on Your Own Just Because It’s a Sellers’ Market | MyKCM

In a sellers’ market, some homeowners might be tempted to try to sell their house on their own (known as For Sale By Owner, or FSBO) instead of working with a trusted real estate professional. When the inventory of homes for sale is as low as it is today, buyers are eager to snatch up virtually any house that comes to market. This makes it even more tempting to FSBO. As a result, some sellers think selling their house will be a breeze and see today’s market as an opportunity to FSBO. Let’s unpack why that’s a big mistake and may actually cost you more in the long run.

According to the Profile of Home Buyers and Sellers published by the National Association of Realtors (NAR), 41% of homeowners who tried to sell their house as a FSBO did so to avoid paying a commission or fee. In reality, even in a sellers’ market, selling on your own likely means you’ll net a lower profit than when you sell with the help of an agent.

The NAR report explains:

FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $217,900 in 2020 (up from $200,000 in 2019), and still far lower than the median selling price of all homes at $242,300. Agent-assisted homes sold for a median of $295,000…Sellers who began as a FSBO, then ended up working with an agent, received 98 percent of the asking price, but had to reduce their price the most before arriving at a final listing price.”

Don’t Sell on Your Own Just Because It’s a Sellers’ Market | MyKCM

When the seller knew the buyer, that amount was even lower, coming in at $176,700 (See graph below):That’s a lot of money to risk losing when you FSBO – far more than what you’d save on commission or other fees. Despite the advantages sellers have in today’s market, it’s still crucial to have the support of an expert to guide you through the process. Real estate professionals are trained negotiators with a ton of housing market insights that average homeowners may never have. An agent’s expertise can alleviate much of the stress of selling your house and help you close the best possible deal when you do.

Bottom Line

If you’re ready to sell your house this year and you’re considering doing so on your own, be sure to think through that decision carefully. Odds are, you stand to gain the most by working with a knowledgeable and experienced real estate agent. Let’s connect to discuss how a trusted advisor can help you, especially in today’s market.

Shawna O’Brien
shawna.obrien@talktotucker.com
317-506-0039
F.C. Tucker Geist Fishers

How Upset Should You Be about 3% Mortgage Rates?

How Upset Should You Be about 3% Mortgage Rates? | MyKCM

Last Thursday, Freddie Mac announced that their 30-year fixed mortgage rate was over 3% (3.02%) for the first time since last July. That news dominated real estate headlines that day and the next. Articles talked about the “negative impact” it may have on the housing market. However, we should realize two things:

1. The bump-up in rate should not have surprised anyone. Many had already projected that rates would rise slightly as we proceeded through the year.

2. Freddie Mac’s comments about the rate increase were not alarming:

“The rise in mortgage rates over the next couple of months is likely to be more muted in comparison to the last few weeks, and we expect a strong spring sales season.”

A “muted” rise in rates will not sink the real estate market, and most experts agree that it will be a strong spring sales season.”

What does this mean for you?

Obviously, any buyer would rather mortgage rates not rise at all, as any upward movement increases their monthly mortgage payment. However, let’s put a 3.02% rate into perspective. Here are the Freddie Mac annual mortgage rates for the last five years:

  • 2016: 3.65%
  • 2017: 3.99%
  • 2018: 4.54%
  • 2019: 3.94%
  • 2020: 3.11%

Though 3.02% is not as great as the sub-3% rates we saw over the previous seven weeks, it’s still very close to the all-time low (2.66% in December 2020).

And, if we expand our look at mortgage rates to consider the last 50 years, we can see that today’s rate is truly outstanding. Here are the rates over the last five decades:

  • 1970s: 8.86%
  • 1980s: 12.7%
  • 1990s: 8.12%
  • 2000s: 6.29%
  • 2010s: 4.09%

Being upset that you missed the “best mortgage rate ever” is understandable. However, don’t throw the baby out with the bathwater. Buying now still makes more sense than waiting, especially if rates continue to bump up this year.

Bottom Line

It’s true that you may not get the same rate you would have five weeks ago. However, you will get a better rate than what was possible at almost any other point in history. Let’s connect today so you can lock in a great rate while they stay this low.

Shawna O’Brien
F.C. Tucker Geist Fishers
shawna.obrien@talktotucker.com
317-506-0039

Real Estate Trends Worth Watching

As you probably are with any financial investment, you should always be mindful of the value of your investment in property. Aside from knowing its fair market price, you should also be aware of market demographics and how they influence your home’s value.

Available statistics can help identify those demographics, their desirable home features, and current trends. Staying in touch with this information will help you understand how your home is valued and the types of projects worth potential investment.

For example, millennials are emerging as the largest demographic of buyers, and they often identify “smart technology”, such as newer security systems and smart appliances and fixtures, as important features. Eco-friendly and energy-saving features will also increase buyer interest in today’s market, especially as electric car chargers become more common, and as climate extremes increase demand for more efficient HVAC systems.

Of course, today’s buyers are still seeking long-time desirables such as upgraded kitchens and bathrooms. 

So, whether you’re looking to attract a certain type of buyer, deciding whether to invest in a specific home improvement, or simply reviewing the value of your investments, let’s discuss today’s trends and how they might impact your home’s value.

Does Your Home Insurance Cover Everything?

When you suffer damage to your home or its contents, you expect your insurance company to help you out. And, most do a good job of doing just that.

Still, it’s a good idea to review your policy with your insurance advisor and find out what’s covered and what isn’t. For example, you don’t want to discover that your policy will not cover the cost of repairing the damage caused by a flood in your laundry room.

Pay particular attention to coverage in the case of water damage. Some insurance policies don’t cover floods and sewer backup unless an additional rider is purchased.

Also, check liability limits. Ask your advisor to recommend an appropriate level. Finally, make sure you know exactly how much your home is insured for. Are you covered for the full replacement cost? Are you comfortable with that coverage or would you rather only insure for the actual cash value?

Having the right insurance policy gives you peace-of-mind and is an important part of enjoying your home.

Shawna O’Brien
shawna.obrien@talktotucker.com
F.C. Tucker Geist Fishers
The Tumbarello Group

Estimating Your Selling Costs

When the time comes to sell your house, you’ll want to determine roughly how much you can expect to net after the sale. To figure that out, you’ll not only need to know how much your house will likely sell for, but also the selling costs you are likely to incur in the process.

The costs of selling vary depending on a number of factors. Here’s a general rundown of what to consider:

  • Repairs. You will want your house to look its best to buyers. That may require you to get any needed repairs done before listing. You don’t want a buyer to see a dent in the wall or a dripping faucet.
  • Renovations. It might make sense to get a few improvements done to make the house more attractive. For example, you may want to replace old and worn kitchen countertops.
  • Legal fees. Selling a house requires a lot of legal work. You’ll need a good real estate lawyer to take care of that for you.
  • Commissions. This is usually calculated as a percentage of the sale price.
  • Moving costs. Once you sell, you’ll obviously need to move! So, factoring in this expense is a smart idea.

Although this may seem like a long list, selling costs are fairly easy to estimate. Once you have that number, it’s easy to calculate how much money you’ll have available to put towards your next home.

I have a simple spreadsheet I can share to help you plug in numbers above. Ask me and I’d be happy to provide to you!

Shawna O’Brien
shawna.obrien@talktotucker.com
F.C. Tucker Geist Fishers
The Tumbarello Group

How to Appeal Your Property Tax Bill

To successfully appeal your property tax bill, you first need to do a bit of sleuthing into your real estate assessment.

It’s possible to trim your property tax bill by appealing the value the taxman assigned to your home. That “assessed value” is what’s used to calculate how much tax you owe.

One way to lower your property tax is to show that your home is worth less than its assessed value. You can do the initial research online in just a few minutes or by making a quick call to your Tucker agent.

If it turns out you’re right and your property is assessed at too high a value, the process for appealing can stretch out for months.

Read Your Assessment Letter

Local governments periodically assess all the real estate they tax. When your new assessment comes in the mail, it’ll list information about your property, such as lot size or a legal description, as well as the assessed value of your house and land.

Your property tax bill will usually be calculated by multiplying your home’s assessed value by the local tax rate, which can vary from town to town.

If you think your home’s assessment is higher than it should be, challenge it immediately. You generally have less than 30 days to do so, though each taxing authority sets its own timeline. Procedures are often outlined on the back of the letter.

Follow these five steps to challenge your assessment:

1. Decide if an Appeal is Worth Your Time

How much effort you decide to put into a challenge depends on the stakes. The median property tax paid in 2012, the latest available figure, was about $2,000. That’s about 1% of the roughly $200,000 median-value home.

Say you’re able to lower your assessed value by 15% to $170,000 and therefore save 15% on your property tax. That lowers your tax bill to about $1,700, a net savings of about $300.

In some parts of New York and Texas, for example, where tax rates can approach 3% of a home’s value, potential savings are greater. Ditto for communities with home prices well above the U.S. median.

2. Check the Data

Make sure the information about your home is correct. Is the number of bathrooms accurate? Number of fireplaces? How about the size of the lot? There’s a big difference between “0.3 acres” and “3.0 acres.” If any facts are wrong, then you may have a quick and easy challenge on your hands.

3. Get the “Comps”

Ask your Tucker Agent to find three to five comparable properties — “comps” in real estate jargon — that have sold recently. Alternatively, check a website like talktotucker.com to find approximate values of comparable properties that are very similar to your own in terms of size, style, condition, and location. If you’re willing to shell out between $350 and $600, you can hire an appraiser to give you a professional opinion of your home’s value.

Once you identify comps, check the assessments on those properties. Most local governments maintain public databases. If yours doesn’t, seek help from a Tucker agent or ask neighbors to share tax information. If the assessments on your comps are lower, you can argue yours is too high.

Even if the assessments are similar, if you can show that the comparable properties are superior to yours, you may have a case for relief based on equity. Maybe your neighbor added an addition while you were still struggling to clean up storm damage. In that case, the properties are no longer comparable.

4. Present your Case

Armed with your research, call your local assessor’s office. Most assessors are willing to discuss your assessment informally by phone. If not, or if you aren’t satisfied with the explanation, request a formal review.

Pay attention to deadlines and procedures. There’s probably a form to fill out and specific instructions for supporting evidence. A typical review, which usually doesn’t require you to appear in person, can take anywhere from one to three months. Expect to receive a decision in writing.

5. Appeal if You Don’t Like the Review

If the review is unsuccessful, you can usually appeal the decision to an independent board, with or without the help of a lawyer. You may have to pay a modest filing fee, perhaps $10 to $25. If you end up before an appeals board, your challenge could stretch as long as a year, especially in large jurisdictions that have a high number of appeals.

But homeowners often do triumph. More than half the tax appeals in Seattle’s King County are successful.

There are a few things to keep in mind as you weigh an appeal.

  • The appeals board can only lower your real estate assessment, not the rate at which you’re taxed.
  • There’s a chance, albeit slight, that your assessment could be raised, thus increasing your property taxes.
  • A reduction in your assessment right before you put your house on the market could hurt the sale price.

An easier route to savings might lie in determining if you qualify for property tax exemptions based on age, disability, military service, or other factors.

This article provides general information about tax laws and consequences, and shouldn’t be relied on as tax or legal advice applicable to particular transactions or circumstances. Consult a tax pro for such advice.

Shawna O’Brien
shawna.obrien@talktotucker.com
F.C. Tucker Geist
The Tumbarello Group