How do I find a good commercial property to invest in?

Commercial real estate investing can be a lucrative and rewarding way to diversify your portfolio and generate passive income. However, finding a good commercial property to invest in is not as easy as it sounds. There are many factors to consider, such as location, property type, market conditions, financing options, tenant demand, and potential returns.

In this blog post, we will share some tips and steps on how to find a good commercial property to invest in. We will also cover some common mistakes to avoid and some tools and resources to help you along the way.

Determine your investment goals and strategy

Before you start looking for properties, you should have a clear idea of what you want to achieve with your investment and how you plan to do it. For example, are you looking for cash flow or capital appreciation? Are you interested in a specific property type, such as office, retail, industrial, or multifamily? Are you willing to take on more risk or prefer a more stable investment?

Having a clear vision of your investment goals and strategy will help you narrow down your options and focus on the properties that match your criteria. You should also consider your budget, time horizon, risk tolerance, and exit plan.

Some of the common investment strategies for commercial real estate are:

• Buy and hold: This strategy involves buying a property and holding it for a long period of time, usually more than five years. The main goal is to generate steady cash flow from rents and benefit from appreciation over time. This strategy is suitable for investors who have a long-term perspective and can afford to tie up their capital for a while.

• Fix and flip: This strategy involves buying a property that needs renovation or improvement, fixing it up, and selling it for a profit in a short period of time, usually less than a year. The main goal is to capitalize on the value-added potential of the property and take advantage of favorable market conditions. This strategy is suitable for investors who have access to financing, contractors, and buyers, and can manage the risks and costs involved.

• Value-add: This strategy involves buying a property that is underperforming or undervalued, making some improvements or changes to increase its income or value, and either holding it for cash flow or selling it for a profit. The main goal is to create value through active management and optimization of the property. This strategy is suitable for investors who have experience in commercial real estate, can identify opportunities for improvement, and can execute the plan effectively.

Do your market research

Once you have an idea of what kind of property you are looking for, you should research the market conditions and trends in the area where you want to invest. You should look at factors such as supply and demand, vacancy rates, rental rates, occupancy rates, absorption rates, cap rates, and price trends. You should also analyze the economic and demographic factors that affect the demand for commercial real estate in the area, such as population growth, income levels, employment growth, business activity, infrastructure development, and consumer spending.

Doing your market research will help you identify the best locations and submarkets to invest in and avoid overpaying or investing in a declining market. You can use various sources of data and information to conduct your market research, such as:

• Online platforms: There are many online platforms that provide data and insights on commercial real estate markets, such as LoopNet , CoStar , CREXi , Reonomy , Real Capital Analytics , CBRE , JLL , Cushman & Wakefield , etc. You can use these platforms to search for properties, compare prices, analyze trends, and access reports.

• Brokers and agents: Brokers and agents are professionals who specialize in commercial real estate transactions. They can help you find properties, negotiate deals, provide market knowledge, and connect you with other professionals. You can find brokers and agents through online directories, referrals, or networking events.

• Local sources: Local sources are people or organizations that have firsthand knowledge or experience in the local commercial real estate market. They can include property owners, tenants, managers, developers, investors, appraisers, inspectors, lawyers, accountants, etc. You can find local sources through word-of-mouth, online forums, social media, or industry associations.

Find potential properties

After you have done your market research, you can start looking for potential properties that meet your investment goals and strategy. You can use various sources to find commercial properties for sale or lease, such as:

• Online platforms: As mentioned above, online platforms are useful tools to search for properties based on various criteria, such as location, property type, size, price, cap rate, etc. You can also filter by availability, condition, tenancy, and other features. Some of the online platforms also offer alerts, notifications, and analytics to help you stay updated on the market.

• Brokers and agents: Brokers and agents can also help you find properties that match your criteria and budget. They can leverage their network, database, and expertise to source deals that may not be listed online or publicly. They can also arrange property tours, provide due diligence materials, and facilitate the transaction process.

• Direct marketing: Direct marketing is a strategy that involves reaching out to property owners or sellers directly and expressing your interest in buying their property. You can use various methods to contact them, such as phone calls, emails, letters, or postcards. You can also use online tools to find their contact information, such as Reonomy , PropertyRadar , or Skip Genie . Direct marketing can help you find off-market deals that have less competition and more room for negotiation.

Analyze the properties

Once you have a list of potential properties, you should analyze them in detail and compare them based on their financial performance and potential returns. You should use various tools and methods to evaluate the properties, such as:

• Income statements: Income statements are documents that show the income and expenses of a property over a period of time, usually a year. They can help you calculate the net operating income (NOI) of a property, which is the income after deducting all operating expenses (but not debt service or taxes). NOI is an important indicator of a property’s profitability and cash flow.

• Cash flow analysis: Cash flow analysis is a process of projecting the future cash flows of a property based on various assumptions and scenarios. It can help you estimate the cash-on-cash return (COC) of a property, which is the annual cash flow divided by the initial investment. COC is a measure of how quickly you can recoup your investment from the cash flow.

• Net operating income (NOI): NOI is the income after deducting all operating expenses (but not debt service or taxes) from a property. NOI is an important indicator of a property’s profitability and cash flow.

• Capitalization rate (cap rate): Cap rate is the ratio of NOI to the property value. Cap rate is a measure of how much income a property can generate relative to its value. It can also be used to estimate the value of a property based on its NOI and market cap rate. Cap rate is inversely related to value: the higher the cap rate, the lower the value, and vice versa.

• Internal rate of return (IRR): IRR is the annualized rate of return that equates the present value of a property’s future cash flows with its initial investment. IRR is a measure of how much return a property can generate over its holding period. It can also be used to compare different investment options based on their risk-adjusted returns.

• Return on investment (ROI): ROI is the ratio of the net profit from a property to the initial investment. ROI is a measure of how much profit a property can generate relative to its cost. It can also be used to compare different investment options based on their profitability.

You should also consider the risks and challenges associated with each property, such as environmental issues, zoning regulations, legal disputes, tenant turnover, competition, market fluctuations, and financing availability. You should also conduct a due diligence process to verify the accuracy of the information provided by the seller or broker and check for any hidden problems or liabilities with the property.

Make an offer and close the deal

After you have analyzed the properties and selected the one that best suits your investment goals and strategy, you can make an offer to the seller or broker. You should negotiate the best price and terms possible based on your analysis and market research. You should also secure financing for your purchase from a lender or investor that specializes in commercial real estate loans. You should also hire professionals such as lawyers, accountants, appraisers, inspectors, and contractors to help you with the closing process and ensure that everything goes smoothly.

Conclusion

Finding a good commercial property to invest in can be challenging, but rewarding. By following these tips and steps, you can increase your chances of finding a profitable and suitable property for your portfolio. You can also avoid some common mistakes that can cost you time and money.

If you need more help or guidance on finding a good commercial property to invest in, feel free to contact us at info@capitaldf.com. We are experts in commercial and residential real estate investing and we can help you fund the best deals in California. We look forward to hearing from you soon!

How AI, Data and Green Will Transform Pro Forma Analysis in Real Estate

Pro forma analysis is a vital tool for real estate investors and developers, as it helps them evaluate the feasibility and profitability of a property or project based on certain assumptions and projections. But how will pro forma analysis evolve in the future, as new technologies and trends emerge?

One of the key drivers of change is the integration of artificial intelligence (AI) and machine learning (ML) into pro forma analysis. AI and ML can help automate and optimize the process of creating and updating pro forma statements, as well as provide insights and recommendations based on data analysis and pattern recognition. For example, AI and ML can help identify the best assumptions, variables, and scenarios to use for pro forma analysis, as well as detect anomalies, risks, and opportunities.

Another driver of change is the enhanced data analytics and predictive modeling capabilities that are available for pro forma analysis. Data analytics can help collect, process, and visualize large amounts of data from various sources, such as market trends, customer behavior, competitor performance, and industry benchmarks. Predictive modeling can help forecast future outcomes and impacts based on historical data and current conditions. For example, data analytics and predictive modeling can help estimate the future revenue, expenses, cash flow, and profitability of a property or project under different scenarios.

A third driver of change is the impact of sustainability and green initiatives on pro forma analysis. Sustainability and green initiatives are becoming more important for real estate investors and developers, as they reflect the environmental, social, and governance (ESG) aspects of a property or project. Sustainability and green initiatives can affect the pro forma analysis in several ways, such as influencing the assumptions, variables, and scenarios used for the analysis, as well as affecting the costs, benefits, risks, and opportunities associated with the property or project. For example, sustainability and green initiatives can help reduce operating costs, increase customer loyalty, improve brand reputation, and create competitive advantages.

These are some of the future trends that will shape the pro forma analysis in real estate in the coming years. Pro forma analysis will become more dynamic, intelligent, and responsive to the changing needs and expectations of real estate investors and developers.

Ready to start your next real estate project? Contact us at 626.796.1680 and don’t let the lack of funding or the complexity of pro forma analysis stop you from pursuing your real estate dreams.

You Can Now Buy a Home With Just 1% Down—but Should You Get One of These Bargain Mortgages?

Two of the nation’s largest lenders are now removing the struggle many homebuyers face in saving up for a down payment by offering loans that require just 1% down. Experts warn that might not be a good thing.

Last month, the nation’s largest home mortgage lender, United Wholesale Mortgage, announced it would begin offering loans requiring down payments of only 1% of the home’s purchase price. The move was followed by fellow lender Rocket Mortgage, which announced this week the launch of a similar program called One+. The Rocket Mortgage loan doesn’t require borrowers to pay private mortgage insurance, or PMI, which traditionally kicks in when buyers have down payments of less than 20%. (PMI usually amounts to 0.5% to 1.5% of the loan amount per year, paid in monthly installments.)

Both lenders will kick in an additional 2% of the home’s sale price so the borrower has at least 3% down. (United Wholesale Mortgage will only kick in up to $4,000 toward the extra equity borrowers receive. There is no limit for Rocket Mortgage borrowers.) The loans are also income-restricted, geared toward lower- and moderate-income borrowers.

“It’s a really good way to expand homeownership for families that otherwise may not be able to get a hold of the American dream,” says David Stevens, CEO of Mountain Lake Consulting, a company that provides services to the mortgage industry and does not work with United Wholesale Mortgage or Rocket Mortgage.

“One unfortunate reality for homeownership is saving up for a down payment can be pretty tough,” he adds. “Oftentimes it ends up excluding families with more diverse backgrounds.”

He anticipates these new sorts of loans could help people of color and single parents who see the down payment as a barrier to homeownership.

“The biggest problems people have right now is affordability and down payments,” says Adam Speck, executive vice president of purchase at Rocket Mortgage. “This is something clients have been asking for.”

However, some have cautioned that these extremely low down payment loans could be risky for borrowers, especially those with limited savings.

And as home prices have begun falling in certain parts of the county, buyers who don’t make larger down payments could find themselves owing more on their mortgages than their homes are worth in these areas.

“Making it easier for everybody to get a mortgage with only 1% is like putting candy in front of a baby,” says mortgage lender Shmuel Shayowitz, president and chief lending officer at Approved Funding in River Edge, NJ. “People who should not be buying homes will be encouraged and enabled to buy homes.”

The average down payment was 13% in the first quarter of this year, according to a recent Realtor.com® analysis.

Low or no down payment loans aren’t that uncommon

These low or no down payment loans aren’t unprecedented.

Popular Department of Veterans Affairs loans and U.S. Department of Agriculture loans don’t require any down payments. The government loans respectively cater to active military, veterans, and their families or those purchasing property in rural areas.

Last year, Bank of America launched a 0% down payment program for first-time buyers purchasing properties in historically Black and Hispanic communities in certain cities.

Borrowers with qualifying credit scores can also snag a government-backed loan for as little as 3% down or a Federal Housing Administration loan for just 3.5% down. Many of these borrowers receive down payment assistance from various levels of government or through other sources, so their personal contributions might be less than the minimum required.

“Does 1% or 3.5% really make that big of a difference?” asks mortgage consultant Stevens. “The goal is to ultimately expand the pool of potential homebuyers.”

The extra up to $4,000 that United Wholesale Mortgage kicks in for borrowers to bring them up to 3% down is “basically a grant,” says the chief strategy officer, Alex Elezaj. “It’s helping make homeownership more accessible and more affordable across the country.”

The fine print of these 1% down mortgages

Not everyone is eligible for these mortgages.

Borrowers still need to have high enough credit scores, sufficient income, and low enough debt to be approved for these mortgages. For the United Wholesale Mortgage and Rocket Mortgage loans, buyers must have credit scores of at least 620 and cannot earn more than 80% of their area median income. The latter means if the typical, local family in a region earns $100,000, then the borrowers there can’t make more than $80,000 a year.

Those seeking the Rocket One+ mortgage must purchase a single-family home. And the United Wholesale Mortgage conventional 1% down loan is available only through mortgage brokers.

“The buyer still has to qualify for whatever that [monthly] payment is,” says mortgage consultant Stevens.

Rocket Mortgage borrowers also don’t have to worry about paying mortgage insurance each month. The lender plans to pay it for borrowers in a lump sum at the time they take out the loan.

Some in the mortgage industry have assumed the lenders will charge higher mortgage rates or fees to make up for down payment assistance—and in Rocket Mortgage’s case, the lack of mortgage insurance. But both lenders tell Realtor.com that the mortgage rates and fees offered on these loans are the same offered for their higher down payment mortgages.

United Wholesale Mortgage’s Elezaj says the goal of its 1% down loan is to help borrowers as well as drum up additional business for lenders right now. As mortgage rates spiked, many buyers have been priced out of the market while others are waiting for rates to fall. Few homeowners want to refinance with rates averaging 7.14% for 30-year fixed-rate loans as of Friday afternoon, according to Mortgage News Daily.

Mortgage applications were down 34.3% year over year in the week ending May 19, according to the Mortgage Bankers Association. This included purchase loans and refinances.

The risks of the 1% down mortgages

There are risks to taking out one of these loans.

Most first-time buyers don’t realize just how expensive homeownership can be. There are the big-ticket items that eventually need replacing, such as a roof or boiler or an appliance such as a stove or washing machine. Then there is the maintenance, such as having the gutters cleaned, the property landscaped, the HVAC system serviced. And there are also those unexpected expenses when something goes wrong without warning. Homes are called “money pits” for a reason.

Homeowners who don’t have much equity in their properties won’t have anything to tap into to pay these expenses. And if they opted for one of these loans because they didn’t have much in savings, they might not be able to cover these costs plus their mortgage.

“It’s potentially enabling homebuyers who should not be buying a house,” says mortgage lender Shayowitz. “The people who should be given mortgages with 1% down should be more highly qualified individuals with the income and the reserves to make their mortgage payments.”

Another concern is that, as the housing markets corrects and prices drop in many parts of the country, homebuyers who use small down payments could find themselves underwater on their loans.

But that’s not necessarily a problem in this era of accelerated housing cycles.

“They still have a place to live, [and] prices generally recover over time,” says Keith Gumbinger, a vice president at HSH.com, a mortgage information website.

But if they have to sell quickly, they could lose money if they owe more than the home is worth. They would have to absorb those losses.

Homeowners who don’t have much of their own money invested in their properties are also more likely to walk away from them if there are problems or their property value goes down. Foreclosure or short sales would severely damage someone’s credit.

“I don’t even think those are real concerns,” says Elezaj. He points out that borrowers still must have strong financial credentials to qualify for the loans. “These are good quality loans and good quality borrowers.”

The lender absorbs more of the risk than the borrower, says Gumbinger. If the borrower can’t pay the mortgage, then the lender doesn’t get paid until the home is ultimately sold.

Could 1% down mortgages trigger another housing crash?

While these loans might conjure up comparisons to the housing crash of the late 2000s, there are a few key differences that should prevent another crisis. These borrowers’ financials are carefully vetted versus the run-up to the recession when people were lying about how much they earned and still getting loans.

Their credit scores need to be high enough and their debt low enough, and they have to prove their income is sufficient to make the mortgage payments each month.

Plus, these loans don’t balloon in size over time or adjust as mortgage rates change. Both are 30-year, fixed-rate mortgages offering steady, monthly payments.

“These borrowers are at least reasonably qualified,” says Gumbinger.

SOURCE: REALTOR.COM

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Yikes! Mortgage Rates Just Jumped Again—and Here’s How High They Might Go

Mortgage rates jumped higher this week, further dashing homebuyers’ hopes for an affordable spring home-shopping season.

Rates for a 30-year fixed-rate mortgage averaged 6.57% for the week ending May 25, according to Freddie Mac. That’s a hefty hike upward from last week’s 6.39%. As if that weren’t worrisome enough, Mortgage News Daily (which tabulates rates daily rather than weekly) pinned the average 30-year fixed rate even higher, at 7.12% on Thursday afternoon.

These numbers are a cruel twist given they arrive just as home prices seem to be drifting back down to earth.

“Recent momentum has home prices on a trend to dip below year-ago levels in a matter of weeks,” Realtor.com® Chief Economist Danielle Hale noted in her most recent analysis of housing data for the week ending May 20. “But while many homebuyers will certainly welcome a lower price tag, higher mortgage rates may minimize or erase any potential savings.”

When will buyers catch a break? When will homeowners decide to take the plunge and become sellers? Here’s what the latest real estate statistics seem to be saying in this edition of “How’s the Housing Market This Week?”

Home price gains keep grinding lower

In April, the median price of homes for sale came in at $430,000. Yet for the week ending May 20, listing prices were up just 0.7% compared with a year ago.

Home price gains keep shrinking, and Hale isn’t the only one expecting them to fall below year-ago levels soon. The economics team at Freddie Mac is forecasting a 2.9% decrease in national home prices over the course of 2023.

Of course, as Hale points out, all real estate is local; no one buys a “national” home.

Prices in the Midwest and Northeast remain more affordable, but they are gaining by double digits as these markets heat up. Meanwhile, prices in the West and South, which grew exponentially during the COVID-19 pandemic, are moderating or even falling now.

Why home sellers aren’t listing

The entire housing market would benefit if more homeowners decided to list their homes for sale, but few seem willing to volunteer.

For the week ending May 20, the number of new listings was down 26% versus the same time last year. There have been fewer listings compared WITH 2022 for almost an entire year now, thanks largely to the spike in mortgage rates.

“With roughly two-thirds of existing homeowners holding onto a mortgage more than 2 percentage points below current mortgage rates,” Hale said, “it’s easy to see why new listings lag behind.”

The slowing pace of home sales

Granted, overall inventory (comprising both new listings and older ones that have been lingering ) is up by 20% over last year. But the fact that many of those listings are stale suggests that buyers have already picked over these clunkers and passed.

And the slowing pace of sales suggests that home-shopping enthusiasm is on the wane.

In April, homes lingered on the market for a median of 49 days. And for the week ending May 20, listings spent an extra 15 days on the market compared with this same week last year.

Just how high might mortgage rates go?

Will homebuyers get rate relief anytime soon? Most signs point to not likely.

Just a month or so earlier, some economists predicted mortgage rates would dip lower later this year. But now, the Freddie economists aren’t so sure. They now forecast a scenario in which “long-term interest rates move largely sideways, staying in a range similar to where rates are today, perhaps moving up or down by around half a percentage point.”

Yet despite the gloomy outlook, determined buyers are finding ways to navigate today’s dismal market. Some are sifting through stale listings and lowballing. Others are exploring a whole new possibility they might not have considered before: new-construction homes.

“Even though existing home sales have waned in recent months, new-home sales have ticked up,” said Hale. “Buyers grappling with low inventory look to new construction as a relief valve.”

Given builders can sometimes offer discounted mortgage rates through preferred lenders, new construction might even cost less than pre-existing homes in certain areas today. This should give all homebuyers hope that the right house is out there, provided they keep looking and leave no stone unturned.

U.S. house prices experience the largest yearly decline since January 2012

Existing-home sales fell to a rate of 4.28 million in April, the National Association of Realtors said

The numbers: Sales of previously-owned homes in the U.S. fell 3.4% in April for the second month in a row, as buyers continue to deal with low levels of home listings and see-sawing mortgage rates.

Sales of existing homes in the U.S. fell to an annual rate of 4.28 million in April, the National Association of Realtors said Thursday.

That’s the number of homes that would be sold over an entire year if sales took place at the same rate in every month as it did in April. The numbers are seasonally adjusted.

The median price for an existing home fell by 1.7% from last April to $388,800 this year. The drop is the largest since January 2012, when home prices fell 2%. 

The drop in sales wasn’t as bad as what economists on Wall Street had expected. They forecast existing-home sales to total 4.26 million in April.

But compared with April 2022, home sales were down 23.2%.

Key details: The median price for an existing home fell by 1.7% from last April to $388,800 this year. The drop is the largest since January 2012, when home prices fell 2%. 

Home prices peaked in May 2021, where they grew 25.2% annually.

The number of homes on the market rose by 7.2% in April to 1.04 million units. But the number of fresh listings is still down from a year ago, the NAR said.

Homes listed for sale remained on the market for 22 days on average, down from 29 days in March. 

Sales of existing homes fell in all regions, with the sharpest drop in the West.

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All-cash buyers made up 28% of sales. The share of individual investors or second-home buyers was 17%. About 29% of homes were sold to first-time home buyers.

Big picture: Despite home sales dipping in April, most of the housing data is indicating that the U.S. housing market is in broad recovery. 

But a combination of issues are making it a slow one, from a lack of new home listings to see-sawing mortgage rates. 

Many homeowners are reluctant to sell for two reasons: They may be reluctant to give up an ultra-low mortgage rate secured during the pandemic for a much higher one, and they also don’t want to deal with competition 

Homebuilders are responding to the inventory crunch by bumping up construction of new homes. Housing starts, which refer to when a builder starts constructing a home, rose in April. Rates, on the other hand, are volatile: The 30-year mortgage rose to the highest level in two months to 6.57% as of May 12, the Mortgage Bankers Association said on Wednesday. It was 6.48% the previous week. 

Given the underlying issues on supply and rates, sentiment among U.S. consumers regarding the housing market has worsened: The number of people who think it’s a bad time to buy a home has hit a 45-year high.

What the realtors said: “The housing market – at least home sales – is still struggling to recover,” Lawrence Yun, chief economist at the National Association of Realtors, said. 

Aside from higher rates, “there’s just simply not enough inventory,” he noted. 

Yun also said that the NAR was sharing the idea of addressing the capital gains tax with members of Congress as a way to encourage more homeowners to sell their homes to ease the inventory shortage.

What are they saying? “The very strong underwriting standards during the last housing expansion along with solid labor market conditions will reduce the risk of defaults and forced selling going forward,” Thomas Simons, U.S. economist at Jefferies, wrote in a note.

“The housing sector is already in a recession, but we don’t expect consumption to contract significantly until a cycle of mass layoffs begins, likely during Q3,” he added.

Market reaction: Stocks were up in early trading on Thursday. The yield on the 10-year note TMUBMUSD10Y, 3.683% rose above 3.6%.

Source: Marketwatch.com

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Good News for Homebuyers: Mortgage Rates Are Poised To Fall

Mortgage rates are poised to begin coming down.

The U.S. Federal Reserve isn’t expected to announce another interest rate hike in the wake of the banking crisis, especially as the inflation the Fed has been fighting continues to slow. The change in policy could give mortgage interest rates some room to come down. (Mortgage rates are separate from the Fed’s short-term rates, but they have been following a similar upward trajectory.)

Inflation was still up 4.9% year over year in April but dipped slightly from the previous month, when it was 5% year over year, according to the government’s consumer price index released on Wednesday. Decelerating inflation takes some of the pressure off of the Fed to keep raising rates. The Fed is also likely to avoid adding further strain on the banking industry, after several recent, high-profile bank failures.

“It will prevent mortgage rates from climbing too much higher,” says Realtor.com® Chief Economist Danielle Hale of the Fed ending its rate increases. “I expect them to gradually come down.”

She anticipates mortgage rates will stabilize over the short term and then begin dropping by the late summer and early fall. Rates could eventually return to the 5% and high 4% range. But those longing for the days of rock-bottom rates, such as when they fell below 3% during the COVID-19 pandemic, shouldn’t get their hopes up.

Mortgage rates averaged 6.68% for 30-year fixed-rate loans on Tuesday afternoon, according to Mortgage News Daily.

“We should expect to see mortgage rates decline as we move toward year end,” says David Stevens, CEO of Mountain Lake Consulting. The Moneta, VA-based consultancy focuses on the mortgage and real estate industries. “Rates will be closer to 5.5% by the end of this year.”

The Catch-22 of the mortgage market is that for mortgage rates to really drop, the economy will have to take a hit. The Fed has been aiming for a “soft landing” in which it is able to bring down inflation without plunging the country into a recession. It’s a tricky landing for the Fed. If anything goes wrong or the bank failures continue, the Fed might have to cut its rates to stimulate the economy. That will likely lead mortgage rates to fall.

Once rates drop below 6%, homeowners are expected to begin listing their homes for sale again, easing the housing shortage. Many haven’t wanted to trade up or down into new homes as doing so would require securing new mortgages with higher rates. Those homes will likely be snapped up quickly by eager buyers.

In the meantime, stable and beginning-to-fall mortgage rates are good for the housing market.

“It’s going to give buyers and sellers a chance to adapt to where mortgage rates are and factor it into their decision-making,” says Hale.

Source: Realtor.com

U.S. Home Prices Are Up, Down, and All Over the Place—See How They’re Faring Where You Live

These days, many folks are on edge over the much-feared housing recession—a dread that descended like a dark cloud last year as the real estate market seemed to seize up.

But it doesn’t appear that a housing bubble is about to pop. The housing market has slowed, to be sure, after mortgage interest rates rose rapidly in the back half of 2022 from rock-bottom lows below 3% to 20-year highs, briefly topping 7% before falling back into the 6% range. However, home prices are still going up in much of the country, while they’re falling in a few regions.

To clear the air and maybe quell the understandable impulse to clutch one’s pearls, we dug into what price changes around the country actually look like over the past year for the 250 biggest metropolitan areas in the U.S.—accounting for 85% of the national population—to see what the numbers say about home values.

Here’s what we found. For each metro, we tracked median home prices in March 2023, as well as year-over-year changes in overall price and price per square foot. Check out the market where you live!

In March, the median U.S. home listing was priced at $424,495, which is about 6% above where it was one year earlier, at $399,450 in March 2022. Looking at price per square foot (considered a more accurate metric for measuring price changes), the year-over-year increase is about 3%.“Some people were predicting a bigger drop in prices,” says Realtor.com® Chief Economist Danielle Hale. “Our forecast was among the more optimistic. We expected a little more price stickiness, a little more resistance to falling prices, so I think for the general conversation about real estate, it might be a little surprising for people.”

There were about 15% fewer new listings in March 2023 than in March 2022. That reflected the pessimism in the housing market: Sellers are worried they won’t get the prices they want and are loath to give up the ultralow mortgage rates they secured during the COVID-19 pandemic when buying a new home.

To pull together our cross-country snapshot of where prices are up and down, we compared median home list prices in March to a year ago using publicly available data on Realtor.com. We found that prices dipped in only about 1 in 5 metros. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)

Across the U.S., but especially concentrated in the historically affordable Midwestern and Southern housing markets, homes are being listed above last year's prices. In some cases, well above.

Take a place like Omaha, NE, where the median home listing price in March reached $344,500. That was up 80% from just one year ago when the median list price was just $190,000. There is also Davenport, IA, where median listing prices reached nearly $220,000 in March. That's up more than 63% compared with one year before, when the median listing price was around $135,000.

Prices also rose dramatically in places like Jackson, TN, where they were up 59% year over year, to $223,000 in March; Champaign, IL, up 53%, to about $257,000; and Fayetteville, NC, up 44%, to $342,500.

"What we're seeing is that real estate is becoming more regional and more local," Hale says. "People have always said that, but for several years, housing was almost like a commodity, where everyone who owned saw appreciation. Now we see it really matters how the local economy is doing, how well the area is attracting new residents, how well the builders can keep up with demand."

But prices are down in historically more expensive areas of the country and places that attracted lots of new residents and saw skyrocketing demand during the pandemic-era real estate pump.

In Coeur d'Alene, ID, a popular vacation area that experienced a flood of new buyers over the past few years, the median list price was down 27% in March, to $717,000, down from $988,000 a year earlier. In Austin, TX, prices are down around 8%, to around $550,000. In Bend, OR, list prices fell about 6% below the same time last year, to $678,000, and in Denver, they're down about 1%, to $655,000.

“There’s still room for prices to grow in the Midwest," Hale says.

Source: Realtor.com

Where Americans Want To Live: These Ultra-Affordable, Up-and-Coming Real Estate Markets

Americans’ bank accounts are under siege. Whether it’s a trip to the supermarket or a night out for dinner and a movie, the cost of just about everything seems to be on the rise.

So homebuyers are doing something about it. Frustrated by high home prices and rising mortgage interest rates, they’re increasingly seeking out more affordable places to live—like Lafayette, IN.

The Lafayette metropolitan area was named the top up-and-coming real estate market this spring, according to the quarterly Wall Street Journal/Realtor.com® Emerging Housing Markets Index. The top 20 markets are generally smaller cities offering cheap homes for sale, low costs of living, and strong job markets. The index highlights real estate markets that economists believe will be strong this year.

A 3 bedroom, 3 bathroom home for sale for $475k in Lafayette, IN

“We are continuing to see this shift in demand for less expensive markets, many of which are in Midwestern markets,” says Hannah Jones, an economic data analyst at Realtor.com. “They didn’t see the same kind of price growth that larger cities did during the [COVID-19] pandemic, so they maintained affordability.”

Not a single one of these real estate markets was in the West, the region with the highest home prices.

The index identified the top markets for both buyers and investors out of the 300 largest metropolitan areas. It looks at metros with strong housing demand based on page views of local listings, the number of homes for sale, property taxes, and median days homes sit on the market before a sale. It also factors in metros with robust economies, lots of well-paying jobs, a good quality of life, and desirable amenities such as lots of small businesses and reasonable commutes to work. (Metros include the main city and surrounding towns, suburbs, and smaller urban areas.)

The median home list price in the Lafayette metro was $289,000—about a third less than the national median of $424,000 in March, according to the most recent Realtor.com data.

The manufacturing hub of Lafayette, named after American Revolutionary War hero Marquis de Lafayette, is located about an hour northwest of Indianapolis and two hours southeast of Chicago. Big-name employers include Caterpillar, Subaru, and Wabash National Corp., which produces refrigerated truck trailers. It’s also home to Purdue University.

“Homes in Lafayette are significantly more affordable, and it has a strong economy,” says Jones.

Just two of the top 20 emerging markets—Manchester, NH, which has been consistently ranked as one of the nation’s hottest markets, and Knoxville, TN—had price tags above the national median. And just one market, Columbus, OH, the state capital and home to Ohio State University, had a population of more than 1 million.

“These are some of the only markets where locals and first-time buyers can afford to buy a home based on local salaries,” says Jones.

Top 20 emerging real estate markets in spring 2023

1. Lafayette, IN ($289,000 median home list price)

2. Bloomington, IL ($339,000)

3. Elkhart, IN ($275,000)

4. Lebanon, PA ($372,000)

5. Fort Wayne, IN ($339,000)

6. Topeka, KS ($249,000)

7. Sioux City, IA ($305,000)

8. Omaha, NE ($345,000)

9. Springfield, IL ($144,000)

10. Manchester, NH ($550,000)

11. Janesville, WI ($331,000)

12. Columbus, OH ($375,000)

13. La Crosse, WI ($334,000)

14. Johnson City, TN ($413,00)

15. Springfield, OH ($172,000)

16. Hickory, NC ($349,000)

17. Burlington, NC ($368,000)

18. Columbia, MO ($367,000)

19. Waterloo, IA ($263,000)

20. Knoxville, TN ($470,000)
    
    Source: Realtor.com

Mortgage Rates Just Jumped: Will the Spring Real Estate Market Survive?

After a five-week stretch of declines, mortgage rates ticked up this week, sending ripples of dread through an already shaky spring market.

For the week ending April 20, rates for a 30-year fixed-rated loan averaged 6.39%, up from last week’s 6.27%, according to Freddie Mac.

For context, current mortgage rates are lower than the 6.48% that kicked off the year. But they’re still a whole lot higher than the 5.11% enjoyed by homebuyers this same week in 2022.

These ups and downs have put many homebuyers in a panic over whether it’s wise to buy now or wait. And that’s just one of many problems raising their blood pressure today.

To help both homebuyers and sellers stay one step ahead of today’s rapidly evolving spring housing market, we’ll break down the latest real estate statistics in this installment of “How’s the Housing Market This Week?”

Home prices are still inching up

In addition to contending with rising mortgage rates, homebuyers must also grapple with climbing home prices.

In March, homes were listed for a median price of $424,000. And for the week ending April 15, listing prices grew by 2.5% compared with a year earlier.

“Home prices are climbing as they typically do in the spring. However, momentum continues to dissipate,” Realtor.com Chief Economist Danielle Hale noted in her weekly analysis. In fact, this week’s growth is the slowest she’s seen since May 2020.

“Home prices are likely to go up from month to month through the summer, as they usually do,” she predicts. “But the jumps will be smaller than we saw in 2022.”

In other words, homebuyers will have to deal with slightly higher home prices, but nothing nearly as bad as the runaway sticker shock they experienced last summer. Nonetheless, when you combine these prices with today’s higher mortgage rates, the picture is still grim.

For homebuyers who put 20% down on a typical house, their mortgage payments will now amount to $600 or more per month than last year.

“Home prices have stabilized somewhat, but with supply tight and rates stuck above 6%, affordable housing continues to be a serious issue for many potential homebuyers,” Freddie Mac’s chief economist Sam Khater noted.  “Unless rates drop into the mid-5% range, demand will only modestly recover.”

New listings are still down

Even though homebuyers are coughing up hundreds more per month for a house, the pickings are slimmer than ever.

Although housing inventory is 44% higher for the week ending April 15 than a year earlier, many of these listings are stale and have been stuck on the market 16 days longer than this same period last year. This means that homebuyers have likely seen and passed over a lot of these options already.

Meanwhile, fresh real estate listings just entering the market have been dwindling every week for the past 10 months, and continued downward by 5% for the week ending April 15.

The reason so many homeowners are reluctant to list right now is that many are also buyers who don’t want to trade in their current low-interest mortgage for today’s higher rates.

“Inventory is likely to continue to be a problem, with 82% of those looking to buy and sell feeling ‘locked in’ by their current low mortgage rate,” says Hale.

What’s more, she predicts that this sentiment is “unlikely to change much with current mortgage rates more than 2 percentage points above the rates a majority of homeowners currently have.”

How high rates are strangling the spring market

Ironically, these rising mortgage rates have hit right at what’s been deemed the best week to sell of the entire year. Realtor.com data shows that from April 16 to 22, homes typically earn $8,400 more than they would in a typical week.

Yet unless mortgage rates dip, it will be hard to persuade homeowners to list and make the most of this seasonal high point.

However, there is one group of homeowners who are somewhat immune to the vicissitudes of mortgage rates that gives economists hope of getting the spring market moving.

“Older seller-buyers, who are likely to have a smaller mortgage balance and greater equity, are less likely to report feeling locked in and also more likely to report that they need to sell anyway,” points out Hale. “This is likely to mean that older households will continue to play a prominent role on both sides of the home sale transaction in 2023.”

And let’s also remember the comforting words of Lawrence Yun, chief economist for the National Association of Realtors®: “Calmer inflation means lower mortgage rates, eventually. Mortgage rates slipping down to under 6% looks very likely toward the year’s end.”

Source: Realtor.com

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How to Find a Real Estate Agent: Where to Look and What to Ask

Before putting your home on the market or setting out to buy a new one, you should identify real estate agents in your community who can assist with the sale. More than two million people nationwide have licenses to sell real estate, and it’s their job to be an expert on the properties in their community. They track real estate trends and are in the business of helping others buy and sell homes. If you’re in the market for a new home, it’s wise to know how to find a real estate agent.

Whether you’re a first-time seller or someone who is looking to buy your first home, there are several ways to find a local real estate agent:

• Use realtor.com’s how to find a real estate agent tool to locate individuals who are active in your community.

• Get recommendations from friends and family members who have bought or sold their properties recently.

• Look for real estate agent signs in your community.

• Attend open houses and see if you connect with a real estate agent.

• Call your neighborhood real estate brokerages.

How to find a real estate agent: Ask these important questions

There are a number of questions you will want to ask a real estate agent before they start helping you with your home search:

1. What services do you offer?

Buyers and sellers have different needs, and certain real estate agents might specialize in selling over buying and vice versa.

2. What type of representation do you provide?

There are various forms of representation in different states. Some brokers represent buyers, some represent sellers, some facilitate transactions as a neutral party, and in some cases different salespeople in a single firm may represent different parties within a transaction.

3. What experience do you have in my immediate area?

Find out their success rate with buying and selling in your area.

4. How long are homes in this neighborhood typically on the market?

Be aware that because all homes are unique, some will sell faster than others. Several factors can impact the amount of time a home remains on the market, including list price, changing interest rates and local economic trends.

5. How would you price my home?

Ask about recent home sales and comparable properties currently on the market. If you speak with several real estate agents and their price estimates differ, that’s alright—but be sure to ask how their price opinions were determined and why they think your home would sell for a given value. Request a written Comparative Market Analysis (CMA) as well.

6. How will you market my home?

At listing presentations, brokers will provide a detailed summary of how they market homes, what marketing strategies have worked in the past and which marketing efforts may be effective for your home.

7. What is your fee?

Brokerage fees are established in the marketplace and not set by law or regulation. The commission is the agent’s rate for handling your transaction. Ask if there are other fees you will have to pay such as an early cancellation fee, marketing fee, MLS fee, or any other cost that isn’t included in the commission rate.

8. What disclosures should you (the consumer) receive?

State rules require brokers to provide extensive agency disclosure information, usually at the first sit-down meeting with an owner or buyer.

What to expect when working with a real estate agent

Once your home is listed with a real estate agent, they will immediately begin to market your home according to the most appropriate conventions for your community. A real estate agent keeps you informed as the marketing process unfolds and as expressions of interest are received.

Be sure to specify how you’d prefer to communicate. Some clients prefer email or texts. while others only want to be called or have in-person meetings. Whatever your preference, it’s best to outline those expectations upfront so everyone is working with clearly-defined objectives.

The same holds true for buyers. Because buyers are constantly meeting with their agent to see properties and give feedback on the properties they’ve already seen, communication is important. If you like to communicate via text message, let your agent know. All forms of communication are not acceptable to everyone. Make sure you have an agent who communicates with you in a way you find acceptable.

Every client should expect professionalism. That means a real estate agent will always expect you to be on-time, and you should expect the same from a real estate agent.

Remember, the real estate agent is your advocate in the transaction, whether you are buying or selling. Once you have signed up with an agent to represent you, he or she is your face, your voice, and your defense against all involved in the multi-layered home buying or home selling process.

Source: Realtor.com

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Is This the Calm Before the Mortgage-Rate Storm? Here’s Why Homebuyers Should Hurry

Although the Federal Reserve hiked interest rates on Wednesday, mortgage rates veered in the opposite direction and tumbled.

For the week ending March 23, the nationwide average for the popular 30-year fixed-rate mortgage was 6.42%, according to Freddie Mac. That’s down from last week—and it’s the lowest level in more than a month.

It’s a small reprieve and much-needed break for homebuyers, but don’t look for it to last. When the Fed raises rates, mortgage rates usually rise in kind.

“Economic conditions will keep upward pressure on rates,” notes Sabrina Speianu, economic data manager for Realtor.com®, in her recent analysis. This “will continue to present an affordability challenge for buyers and may keep some sellers, who are locked in at lower rates, waiting on the sidelines.”

In this installment of “How’s the Housing Market This Week?” we’ll take a look at the housing market stalemate, what it’ll take to get moving, and what this all means for both homebuyers and sellers.

Home prices are plateauing

Although home prices are still inching up, they’re starting to level off.

For the week ending March 18, listings prices were 6.3% higher than this same week a year earlier.

“This remains the lowest sales-price growth rate since June 2020,” explains Speianu. Plus, interest rates “are expected to remain elevated in the near term, which implies that home prices may continue to soften this spring season.”

Another factor to keep in mind is that list prices are just what sellers hope to get. While that ideal hovered at a lofty $415,000 in February, the actual sales price of homes—in other words, what buyers and sellers agree on after haggling—can be much lower. And according to the National Association of Realtors, that price has declined by 0.2% annually, marking the first such drop in 11 long years.

Home sellers still aren’t listing

Tapering home price will come as welcome news to buyers, but sellers are understandably displeased—and it shows in the dwindling number of new listings.

Every week for the past nine months, there have been fewer homes listed for sale than in the same period a year ago, and the week ending March 18 was no exception. Weekly data shows that new listings were 20% lower than at this time in 2022.

“Moreover, sentiment toward housing—and selling sentiment in particular—worsened in February, as fewer consumers expect home prices to increase over the next year,” notes Speianu. “This low consumer sentiment and increased economic uncertainty could mean that fewer homeowners decide to sell compared to last year in the spring homebuying season.”

The number of homes for sale is at half pre-pandemic levels

This may come as a surprise to many frustrated would-be home buyers, but there are actually more homes available for sale out there right now than in 2022. In fact, total housing inventory (of listings both new and old) is up 59% compared to a year earlier.

But these listings have been languishing on the market, spending an average of 18 days longer than a year ago.

And if you take in the bigger picture, inventory might be up from a year ago but is down (way down) from the pre-pandemic days, when there were 50% more homes on the market.

Yet, as the weather warms, hope springs eternal that homebuyers and sellers alike will break out of hibernation. In fact, the very best time to sell for 2023 is the third week in April, when listings are slated to receive 16% more views than usual and fetch $8,400 more per sale.

“So far, the usual seasonal pick-up in the pace of home sales seen in the springtime is continuing this year as we approach the best time to sell a home, which typically falls in April,” Speianu predicts.

All that said, this rosy outlook hinges on what mortgage rates do next.

In other words, homebuyers: hurry.

Source:Realtor.com

Rental Market Tracker: Rents Drop To Lowest Level In A Year

The median U.S. asking rent is up just 1.7% from a year ago—the smallest gain since May 2021—as landlords grapple with vacancies due to still-high rental costs and rising supply.

The median U.S. asking rent rose 1.7% year over year to $1,937 in February—the smallest increase in nearly two years and the lowest level in a year. Rents were up nearly 10 times that much (16.5%) a year earlier.

February was the ninth straight month in which rent growth slowed on a year-over-year basis. Rents fell 0.3% from a month earlier. Still, the median asking rent remained 21.4% higher than it was in February 2020, the month before the coronavirus was declared a pandemic.

Rent growth has cooled as persistently high housing costs, inflation, recession fears and a slowdown in household formation have made people less likely to move, putting a damper on demand for new leases. A jump in supply due to a boom in apartment construction has also contributed to the slowdown in rent growth. The number of apartments under construction is up 24.9% year over year to 943,000, the highest level since 1974, according to a recent report from the National Association of Home Builders.

“Landlords are slowing their roll on rent increases because they’re grappling with a rise in vacancies as an influx of new apartments hits the market and demand slows from its peak,” said Redfin Deputy Chief Economist Taylor Marr. “Rents are likely close to hitting a floor, though. That’s because stubbornly high inflation is boosting expenses for landlords, so instead of dropping rents they may seek to lure renters with other concessions, like free parking or a discounted security deposit.”

Marr continued: “While rent growth has slowed, it hasn’t slowed quite as much as expected—in part because the labor market has held up better than anticipated, which has helped prop up demand. This is likely a reason overall inflation remains stubbornly high, as rent growth is a major contributor to inflation.”

Rents Declined in 11 Major U.S. Metro Areas

1. Austin, TX (-6.5%)

2. New Orleans, LA (-6.4%)

3. Phoenix, AZ (-4%)

4. Minneapolis, MN (-3.5%)

5. Dallas, TX (-2.6%)

6. Baltimore, MD (-2.2%)

7. Houston, TX (-1.9%)

8. Birmingham, AL (-0.5%)

9. Chicago, IL (-0.5%)

10. Denver, CO (-0.3%)

11. Virginia Beach, VA (-0.2%)

CharLotte and Columbus Saw the Largest Rent Increases 

1. Charlotte, NC (14.3%)

2. Columbus, OH (12.6%)

3. Milwaukee, WI (9.5%)

4. Nashville, TN (9.0%)

5. Indianapolis, IN (8.5%)

6. Kansas City, MO (8.3%)

7. Hartford, CT (6%)

8. Buffalo, NY; Providence RI (5.9%)

9. Cincinnati, OH; Louisville, KY; Memphis, TN (5.5%)

10. Riverside, CA; San Diego (5.3%)

Methodology

Redfin analyzed rent prices from Rent. across the 50 largest U.S. metro areas. Cleveland, Oklahoma City, OK and Raleigh, NC are excluded from this report as we investigate the data to ensure accuracy. This analysis uses data from more than 20,000 apartment buildings across the country.

It is important to note that the prices in this report reflect the current costs of new leases during each time period. In other words, the amount shown as the median rent is not the median of what all renters are paying, but the median cost of apartments that were available for new renters during the report month. Currently, Redfin’s data from Rent. includes only median rent at the metro level. Future reports will compare median rent prices at a more granular geographic level.

Source: Redfin.com

Homebuyers Beware: You Might Have To Pay More Property Taxes Than You Think

Price is one of the most critical factors in buying a home. But there’s something else you need to consider when budgeting for a new house: property taxes.

When scrolling listings for your dream home, you’ll typically see property tax estimates listed. But that doesn’t mean the current tax will be your effective tax rate as the new property owner.

Instead, when a home changes owners, the property taxes sometimes will be higher than what the current owner pays.

This could have some bearing on whether you can afford a certain home. For instance, when you’re qualifying for a home loan, you have to show you can handle paying the property taxes and the principal and interest of your mortgage.

So before you start house shopping, here’s what you need to know about property taxes.

How are property taxes determined?

Your state and local authorities determine how much you owe in property taxes annually. Those taxes are used to help pay for public services (think law enforcement and schools).

“And how much you’ll owe in property taxes is based on a home’s appraised value, taxable value, and the local tax rate,” says Will Wiggins, senior property tax consultant at North Texas Property Tax Services.

First, an appraisal office determines the home’s value, based on such factors as the square footage, age and condition, and the housing market.

“Then the taxable value is the appraised value, minus any tax exemptions a homeowner qualifies for,” says Wiggins. “The formula is the same in every state, but property taxes will differ based on local value and tax rates.”

Once an amount is established, homeowners pay property taxes either directly to a local tax office or as part of their mortgage payments.

Why property taxes can differ

“Buyers see the taxes listed on a listing and assume the payment, and cash to close, will be that amount,” says TJ Brisbois of the Brisbois Group.

But property taxes can cost hundreds or even thousands more than what the home’s current owner pays and can increase your monthly mortgage payment.

Here’s why: Many states offer tax breaks for disabled veterans, first responders, and senior citizens, among other concessions. In fact, the seller could have more than one tax exemption.

How property taxes can jump

So just how much can taxes increase? Let’s say a seller has a senior property tax break and something called the homestead exemption (which is essentially a law that helps protect a home’s value). And because of these tax breaks, the owner pays $1,500 in yearly property taxes.

If a new owner buys the house, the tax bill will be higher by hundreds or thousands of dollars, because the seller’s tax exemptions (the senior tax and homestead exemption) don’t transfer to the new owner.

But that’s not to say that the new owner couldn’t get a homestead exemption or qualify for other exemptions. Instead, all homebuyers should do some homework on any property they’re considering, to determine if they qualify for any tax breaks.

How to estimate property taxes

So what happens if you don’t qualify for any property tax breaks?

Whether you’re just looking or ready to buy, there are a few ways to get an accurate estimate of property taxes for the house you have your eye on.

“Potential homebuyers should have their lender prepare new estimates every time they find a home,” says Jason Lerner, vice president at George Mason Mortgage. “Lenders have additional resources and can identify if a property has underreported taxes.”

Not working with a lender yet or buying a house with cash? Then your local tax assessor’s office or a real estate agent should be able to tell you if there are any exemptions or freezes on the current tax bill, says Brisbois.

How to avoid tax surprises

Many professionals eyeball your real estate transaction before you get to the closing table. And these multiple layers of review from the loan officer, underwriter, title company, and real estate agent will help ensure the property taxes aren’t underestimated or overestimated.

“We verify the taxes with the taxing authority,” says Lerner. “The title company involved in the transaction will also confirm exact property taxes with the county—and be extra diligent if the advertised taxes seem low for the home’s value.”

Still, even with due diligence, property taxes could be underestimated during the escrow analysis—or when your mortgage company receives the final tax bill for your new property.

But if something does go south with your taxes, you can pay the tax difference in a lump sum. Then you’d have the correct prorated property tax included in your monthly mortgage payment moving forward.

Souce:Realtor.com

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U.S. New-Home Sales Rise by 7.2% Despite Weakness in the Broader Sector

The numbers: U.S. new-home sales rose 7.2% to a seasonally adjusted rate of 670,000 in January, up from a revised 625,000 in the prior month, the Commerce Department reported Friday.

This is the fourth month in a row that new-home sales have grown—this despite the lull in the broader housing sector, with existing-home sales continuing their downward slide.

The January sales figure beat analyst estimates. Analysts polled by the Wall Street Journal had forecast new-home sales to come in at 620,000 in January.

Year over year, new-home sales are still down by 19.4%.

New-home sales rose a revised 7.2% to 625,000 in December, compared with the initial estimate of a 2.3% increase to 616,000.

Month-over-month data for new-home sales are volatile and are often revised.

Key details: The median sales price of a new home sold in January was $427,500.

The supply of new homes for sale fell by 9.2% between December and January, equating to an eight-month supply.

Regionally, the South led the U.S. in the number of new homes sold, with the figure surging by 17.1%.

Sales of new homes dropped across the rest of the country—most sharply in the Northeast, by 19.4%.

Big picture: As mortgage rates take off, home builders are offering incentives like mortgage-rate buydowns to entice buyers—and it’s working.

And with fewer existing homes coming on the market, buyers have more options to choose from if they look at new construction, which may be boosting sales.

Market reaction: The Dow Jones Industrial Average and the S&P 500 were down in early trading on Friday. The yield on the 10-year Treasury note rose above 3.93%.

The SPDR S&P Homebuilders ETF was down over 1%, and shares of builders, including D.R. Horton Inc., Lennar Corp., PulteGroup Inc. and Toll Brothers Inc., were all lower during morning trading.

Source: Realtor.com

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How To Calculate Property Tax: What Homeowners Should Know About How to Estimate Property Taxes

Most people know that homeownership requires coughing up copious amounts of money. There’s your mortgage, of course, but the costs hardly end there. What about how to calculate property taxes and save for them?

If you already own a home, you can look at how your tax is calculated on the most current property tax statement. If you’re considering buying a home, look on the real estate listing for assessment and tax information, or go to the county website to find out the annual property tax.

Be aware that property taxes can change. The assessed value of your house can go up or down, depending on the local real estate market. Your assessment can also rise or fall depending on changes you make to your house—for example, if you make additions to your property. And the tax rate can change depending on your local government.

Even though the government sends you a tax bill every year and tells you how much you owe in property taxes, it’s important to know how that tax is calculated. Here’s what to know about how to calculate property taxes.

Property tax calculator: How to calculate property taxes

There are a number of factors that come into play when calculating property taxes, from your property’s assessed value to the mill levy (tax rate) in your area. Here’s how to calculate property tax so you don’t end up blindsided by this hefty homeowner expense.

What is a home’s fair market value?

The market value of a home is basically the amount a knowledgeable buyer would pay a knowledgeable seller for a property, assuming an arm’s-length transaction and no pressure on either party to buy or sell. When a property sells to an unrelated party, the sales price is generally assumed to be the fair value of the property.

What is a home’s assessed value?

One factor that affects your property taxes is how much your property is worth. You probably have a good understanding of your home’s market value—the amount of money a buyer would (hopefully) pay for your place. (You could also enter your address in a home value estimator to get a ballpark figure.)

Still, tax municipalities use a slightly different number; it’s called your home’s assessed value.

Tax assessors can calculate a home’s current assessed value as often as once per year. They also may adjust information when a property is sold, bought, built, or renovated, by examining the permits and paperwork filed with the local municipality.

They’ll look at basic features of your home (like the acreage, square footage, and number of bedrooms and bathrooms), the purchase price when it changes hands, and comparisons with similar properties nearby. Size alone is not what determines taxes. For example, property tax is not always lower for a condo than a house.

Sometimes a home’s assessed value will be strikingly similar to its fair market value—but that’s not always the case, particularly in heated markets. In general, you can expect your home’s assessed value to amount to about 80% to 90% of its market value. You can check your local assessor or municipality’s website, or call the tax office for a more exact figure for your home. You can also search by state, county, and ZIP code on publicrecords.netronline.com.

If you believe the assessor has placed too high a value on your home, you can challenge the calculation of your home’s value for tax purposes. You don’t need to hire someone to help you reduce your property tax bill. As a homeowner, you may be able to show how you determined that your assessed value is out of line.

What is taxable value?

The taxable value of your house is the value of the property according to your assessment, minus any adjustments such as exemption amounts.

What’s a mill levy?

In addition to knowing your home’s assessed value, you will need to know another number, known as a mill levy. That’s the tax assessment rate for real estate in your area. The tax rate varies greatly based on the public amenities offered and revenue required by local government.

If you have a public school, police force, full-time fire department, desirable school districts, and plenty of playgrounds and parks, your property tax rates will be higher than a town without them. (Hey, you get what you’re taxed for!)

Your area’s property tax levy can be found on your local tax assessor or municipality website, and it’s typically represented as a percentage—like 4%. To estimate your real estate taxes, you merely multiply your home’s assessed value by the levy. So if your home is worth $200,000 and your property tax rate is 4%, you’ll pay about $8,000 in taxes per year.

Where to find property taxes, plus how to calculate property tax

Thankfully, in many cases, you may not have to calculate your own property taxes. You can often find the exact amount (or a ballpark figure) you’ll pay on listings at realtor.com®, or else you can enter a home’s location and price into an online home affordability calculator, which will not only estimate your yearly taxes but also how much you can anticipate paying for your mortgage, home insurance, and other expenses.

Source: Realtor.com

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Seller’s Market, Buyer’s Market, ‘Nobody’s Market’? The Weird State of Housing Right Now

Today’s housing market has everyone wondering: Is it still a seller’s market, or has the power dynamic finally shifted in favor of buyers?

Try neither.

Uncertainty about the future of inflation, the economy, mortgage rates, and more have seized up the market—and wrenched power away from buyers and sellers alike.

“Today, real estate is ‘nobody’s market,'” notes Realtor.com® Chief Economist Danielle Hale in her analysis of housing data for the week ending Feb. 4. “The number of homeowners deciding to sell continues to lag, but inventory and time on market continue to climb, reflecting still-hesitant buyers.”

We’ll break down what the latest real estate statistics mean for homebuyers and sellers in this latest installment of “How’s the Housing Market This Week?”

Affordability on ‘the brink’

Although mortgage rates for a 30-year fixed-rate home loan have fallen from October’s 20-year high of 7.08%, they’re still high enough to leave a whole lot of buyers leery about closing the deal.

For the week ending Feb. 9, interest rates continued along their recent jagged path, ticking up to 6.12%, according to Freddie Mac.

Meanwhile, median listing prices, which hovered around $400,000 in January, are still higher than they were last year. For the week ending Feb. 4, prices were up 7.7% compared with this same week a year earlier.

“With high home prices and mortgage rates pushing affordability to the brink for many potential buyers, market activity and pricing will be more dependent than usual on the trajectory for mortgage rates,” says Hale.

More homes are sitting on the market

With home prices and mortgage rates still uncomfortably high, buyers just aren’t biting, leading to a glut of real estate listings gathering dust. For the week ending Feb. 4, home inventory shot up by 70% over levels seen this same week a year earlier.

As a result, many homeowners simply do not want to sell their homes as of late. New listings were down by 11% from one year ago for the week ending Feb. 4.

That marks 31 weeks that fewer sellers have put their homes on the market compared with last year, and for good reason: Sellers might not only struggle to sell, but if they succeed, many might have to face the same steep home prices and mortgage rates as other buyers, making it a lose-lose scenario all round.

“High costs and mortgage rates can significantly up the ante for homeowners hoping to trade up and remain in their current area,” explains Hale. Many are deciding to just stay put.

Plus, this continuing lull in new listings means homebuyers might not be all that excited by the idea of sifting through stale, steeply priced properties.

“With new listings declining, the growing number of homes for sale reflects still-low buyer interest amid high costs,” adds Hale.

Some good news for home shoppers

In January, homes lingered on the market for 75 days. And for the week ending Feb. 4, listings sat for 19 days longer compared with this time last year. Overall, the housing market is currently experiencing a 28-week trend of homes lingering on the market for longer periods than they did a year earlier.

But this presents a unique opportunity for buyers willing to comb through old listings for bargains.

“January data also reveals a significant increase in the share of homes for sale with a price reduction, more than double compared to the same period last year,” says Hale.

Slow movements in the market signal hope

Despite the morass many buyers and sellers find themselves in, there is evidence the market is trudging forward.

“Looking ahead, in addition to a slowing decline in existing-home sales in December, both new-home sales and pending home sales saw an uptick,” says Hale. “These indicators, which track early stages of transactions, jibe with the sentiment data that shows a very modest improvement.”

Buyers now have more time to carefully consider their options. And when they find a home, they can try striking a deal.

Sellers can take heart that despite inventory surging, January data shows that most housing markets have fewer homes for sale than were typically available pre-pandemic. If a seller has a good home that’s priced right, it will likely sell quickly.

“Longer time on market overall doesn’t necessarily mean longer time on market for the most desirable homes,” Hale explains.

So perhaps both buyers and sellers might shake hands on more deals soon enough.

Source: Realtor.com

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What Is a Multifamily Home? Owning Many Units Can Lead to a Steady Cash Flow

Unlike single-family homes, multifamily homes are dwellings with more than one unit that each have their own bathroom and kitchen. Interested in how this type of property could pay off for you? Read on for our breakdown of multifamily homes.

Multifamily home characteristics

The most attractive part of investing in and renting out a multifamily home is the steady revenue stream you can get from collecting rent. Most people living in a multifamily home are looking to offset mortgage payments by using the income from renting out the other unit, says Lee Kiser, principal and managing broker at Kiser Group in Chicago.

There are also tax advantages to buying a multifamily home. You can write off expenses related to your rental income and deduct the prorated portion of the mortgage interest.

Also, an owner-occupied property may be a wise choice for homeowners living with members of their family, such as their adult children or elderly parents. They can live in one of the units for a period of time and not have to fork over all their savings on rent or a mortgage.

How to find multifamily homes

Searching for available multifamily homes is simple. You can find multifamily homes through a search tool like realtor.com and filtering by property type. That’s a good place to start to see what’s available in the town you’d like to buy in. Additionally, Kiser suggests checking with commercial brokers. They offer more multifamily investment possibilities.

If you think you could benefit from an expert’s opinion, Carol Greeley, a real estate agent in the greater Boston area, suggests you find a buyer’s agent.

A buyer’s agent helps guide you through the search and helps you round out your house wish list. They’ll also advise you on how to submit an acceptable offer. And since the seller pays the real estate agents’ commission fees, it’s virtually free for you.

Multifamily home as an investment

Just like any new home, a multifamily home may be move-in ready, or it might be a serious fixer-upper. Before buying a multifamily home, you should perform due diligence and assess just how much money you’ll need to put into sprucing up the units. Make sure the home has a sturdy roof and structure, and all major systems like plumbing and HVAC are in working condition.

Susan Haas, a real estate agent at Joyner Fine Properties in Richmond, VA, suggests getting quotes from contractors on any work that’s needed before making an offer on a home.

If anything is out of order, you’re looking at a project that will cost upward of a few thousand dollars. For example, a new roof for a standard ranch-style house will cost around $5,000 to $8,000 on the low end, according to roofingcalc.com.

Also, remember that you’ll likely need to perform work on the units before opening the doors for prospective tenants. A newly renovated home will attract more tenants and allow you to charge higher rent in the long run.

How much for regular upkeep?

The initial renovation costs are just the beginning; once you have tenants you’ll have to deal with maintaining multiple kitchen and bathrooms.

Kiser says a good rule of thumb is to expect $300 to $500 worth of annual home improvements for each unit. So, a multifamily home with three units will cost between $900 and $1,500 annually for regular home improvement tasks.

Of course, being handy can save money. Landlords of smaller multifamily homes may opt to perform basic maintenance tasks themselves instead of hiring someone like a plumber or painter. Some renters are cool with that, but others may prefer you hire a professional to take care of home projects.

Source: Realtor.com

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Housing Market Update: Sales Are Slow To Kick Off New Year, But More Buyers Start Searching

Homes are selling at their slowest pace since the housing market nearly ground to a halt at the beginning of the pandemic. The typical home that sold during the four weeks ending January 8 was on the market for 44 days, the longest timespan since April 2020, contributing to the biggest annual inventory increase on record. Pending home sales dropped 32% year over year to their lowest level on record and mortgage-purchase applications dropped to their lowest level since 2014. 

High mortgage rates and extreme winter weather at the start of the year deterred would-be homebuyers, exacerbating the typically holiday slowdown. But there are signs that early-stage demand is up. Redfin’s Homebuyer Demand Index–a measure of tour requests and other buying services from Redfin agents–posted a 6% increase over the last month, and Google searches for “homes for sale” are on the rise. Some buyers are likely coming in from the sidelines because mortgage rates have dropped to 6.33% from their November peak of over 7%, saving the typical U.S. homebuyer roughly $250 on monthly housing payments. 

Buyers may also be encouraged by signs of improvement in the economy, with inflation easing in December for the sixth month in a row as wage growth softens.  

“We’re entering 2023 with positive economic news: The latest consumer price index report confirms that the worst of inflation is behind us. That means the Fed is likely to continue easing its interest-rate increases, which should cause mortgage rates to continue gradually declining.  This could bring back some homebuyers in the coming months,” said Redfin Deputy Chief Economist Taylor Marr. “We’ve already seen an uptick in people initiating home searches. Although those house hunters haven’t yet turned into buyers, they may soon given that monthly mortgage payments are notably down from their peak and the latest inflation and employment data lower the chances of a recession.” 

Home prices fell from a year earlier in 20 of the 50 most populous U.S. metros

The typical U.S. home sold for $351,250 during the four weeks ending January 8. That’s up 0.8% from a year earlier, but down about 10% from the June peak. 

Home-sale prices fell year over year in 20 of the 50 most populous U.S. metros. By comparison, 11 metros saw price declines a month earlier. 

Prices fell 10.6% year over year in San Francisco, 5% in Seattle, 4.9% in San Jose, 4% in Austin, 3.8% in Detroit, 3.7% in Phoenix, 3.4% in Oakland, CA, 3% in Boston, 3% in Los Angeles, 3% in Sacramento, 2.6% in San Diego and 2.5% in Chicago. They fell 2% or less in Portland, OR, Anaheim, CA, Portland, OR, Riverside, CA, Newark, NJ, New York, Pittsburgh, Las Vegas and Washington, D.C.

This marks the first time Las Vegas prices have dropped year over year since at least 2015. It’s the biggest year-over-year price drop in San Francisco, Seattle, Phoenix, Chicago, Boston, Portland and San Diego since at least 2015.

Leading indicators of homebuying activity:

• For the week ending January 12, 30-year mortgage rates declined from the week before to 6.33%. The daily average was 6.15% on January 11.

• Mortgage-purchase applications during the week ending January 6 declined 1% from a week earlier, seasonally adjusted, hitting their lowest level since 2014. Purchase applications were down 44% from a year earlier. 

• The seasonally adjusted Redfin Homebuyer Demand Index–a measure of requests for home tours and other homebuying services from Redfin agents–was essentially flat from a week earlier and up 6% from a month earlier during the four weeks ending January 8. It was down 29% from a year earlier. 

• Google searches for “homes for sale” were up nearly 50% from their November low during the week ending January 7, but down about 17% from a year earlier.

Key housing market takeaways for 400+ U.S. metro areas:

Unless otherwise noted, the data in this report covers the four-week period ending January 8. Redfin’s weekly housing market data goes back through 2015.

Data based on homes listed and/or sold during the period:

• The median home sale price was $351,250, up 0.8% year over year.

• The median asking price of newly listed homes was $352,150, up 3.9% year over year.

• The monthly mortgage payment on the median-asking-price home was $2,263 at the current 6.33% mortgage rate. That’s roughly flat from a week earlier and down $244 from the October peak. Monthly mortgage payments are up 32.7% from a year ago.

• Pending home sales were down 31.7% year over year to the lowest level on record, the 12th straight period of pending sales declining more than 30%. 

• Among the 50 most populous U.S. metros, pending sales fell the most in Las Vegas (-61.9% YoY), Jacksonville, FL (-57.4%), Phoenix (-56.9%), Austin, TX (-55.3%) and Nashville (-50.8%). 

• New listings of homes for sale fell 21.9% year over year. 

• Active listings (the number of homes listed for sale at any point during the period) were up 20.7% from a year earlier, the biggest annual increase since at least 2015. 

• Months of supply—a measure of the balance between supply and demand, calculated by dividing the number of active listings by closed sales—was 3.8 months, up from  3.4 months a week earlier and up from 1.9 months a year earlier. 

• 27% of homes that went under contract had an accepted offer within the first two weeks on the market, down from 34% a year earlier.

• Homes that sold were on the market for a median of 44 days, the longest time period since April 2020. That’s up nearly two weeks from 31 days a year earlier and the record low of 18 days set in May.

• 22% of homes sold above their final list price, down from 40% a year earlier and the lowest level since March 2020.

• On average, 4% of homes for sale each week had a price drop, down sharply from 5.7% a month earlier.  

• The average sale-to-list price ratio, which measures how close homes are selling to their final asking prices, fell to 97.9% from 100.1% a year earlier. That’s the lowest level since March 2020.

Refer to our metrics definition page for explanations of all the metrics used in this report.

Source: Redfin.com

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How Long Does It Take to Build Credit History From Scratch?

If you ever plan to buy a house, establishing a track record of past payments is essential, because it proves to mortgage lenders that you’ve paid people back (which means they’ll be more apt to loan you money for a home).

Still, if you have no credit history—because you’re young or just never bothered—how long does it take to build it from scratch?

Here’s the straight dope: Done right, it can take as little as six months. Done wrong? It can take several years. So if you’re in a rush to establish credit to buy a home, you’ll want to know the right way to go about it! Heed this advice to learn what to do.

Building credit: A timeline

At a minimum, you need to open at least one credit card in your name. From there, you just need to make a purchase using the card, and then make a payment. Once you’ve made your payment, your creditor will report your payment to one or more of the major credit bureaus (TransUnion, Equifax, and Experian).

“Typically, it takes at least three to six months of activity before a credit score can be calculated,” says Tracy East, director of communication at Consumer Education Services in Raleigh, NC.

Once you’ve established credit, you still have some work to do. Credit histories are scored based on performance, much like the grades you got in school. Healthy credit behavior—like on-time payments and staying well below your credit limit—lead to a higher credit score.

What’s more, there are two types of scores: VantageScores and FICO scores. Some mortgage lenders may look at a VantageScore, but FHA lenders are required to use FICO scores.

“After opening their first credit account and beginning to make timely payments, it will take at least three months for the person to generate a VantageScore, and six months to have enough information to create a FICO score,” says Martin Lynch, compliance manager and director of education at Cambridge Credit Counseling of Agawam, MA.

And the longer you demonstrate good credit behavior, the higher your score can climb from there. In other words, a couple of on-time payments is nice, but years and years of on-time payments is far more impressive, and reflected in your score accordingly. In fact, the length of your credit history can count for as much as 15% of your credit score.

What credit score do you need to get a mortgage?

Your initial credit score when building credit will typically be in the 660s, which is considered on the low end of “fair” (fair scores range from 650 to 699). It could be just enough to buy a house with some lenders, but not all, because lenders vary regarding the minimum credit score they will accept.

You should also know that while a “fair” score may get you a mortgage, it won’t qualify you for the best mortgage—in terms of interest rates and other deals. To get better mortgage rates, you will need a good score (700 to 759) or an excellent score (760 or higher). Unfortunately, achieving these scores will take (you guessed it) more time.

How to speed up the credit-building process

To establish a payment history, use your card reasonably. Make payments on time (or early, if possible). Setting up automatic payments can help. East recommends keeping your balance below 30% of your credit limit and, ideally, paying it off in full each month. These simple steps will eventually push your score from fair to good to excellent, allowing you to get the best rates for your mortgage.

Here are some other ways to speed up the credit-building process and ensure your credit history and score get off to a good start.

• Become an authorized user on someone else’s account. This can be a parent, friend, or relative who has had the account for at least a few years and has a good payment history. You don’t need to use the account or even have a card. Once you’re added as an authorized user and that fact is reported to the credit bureaus, it will instantly affect your credit and may generate a score if you don’t already have one or, at least, give it a boost.

• Get a secured credit card or loan. If you’re having trouble qualifying for a traditional credit card, try for a secured credit card, which is “secured” by a deposit. This means that if you default or stop paying, your deposit will be used to pay off the account. This lowers the risk involved for the lender, which makes it more likely to offer you credit even if you don’t have an established credit history.

Also know that when it comes to mortgages, your credit score is just one piece of a larger puzzle. According to Lynch, your lender will also look at your employment history, how long you’ve lived at your current residence, and your credit references.

Source: Realtor.com

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Can You Show Your Home With an Offer on the Table?

Can you show your home with an offer on the table? Sure, you’ve found a (nearly) perfect buyer. You’ve accepted the offer, which means you’re in wedded bliss and off the market, so to speak, right? Not so fast! Just as a romantic relationship can go sour, so can your real estate transaction. No matter how perfectly matched your buyers are to your property, issues can arise that are out of your control, and sometimes the buyers’ too.

That’s why it’s in your best interest to let your real estate agent play the field and allow your home to be shown, even if you’ve accepted an offer.

Can you show your home with an offer on the table

“Until all contingencies on a contract are removed, anything can happen,” explains Jane Peters, broker and owner of Home Jane Realty in Los Angeles. “Each side has to meet certain contractual obligations, and if one side doesn’t, then the other side can initiate a cancellation of the contract,” she says.

Such contractual obligations can include both sides not agreeing on a request for repairs after an inspection, says Peters. Other times, the buyer believes there’s too much to deal with and decides not to go forward. It’s also possible that your buyer can’t get the loan approved. And if your home doesn’t appraise at the contracted price and you decide not to lower it or grant the buyer concessions, then the buyer can walk, too.

If your offer’s wrapped up in the buyers’ ability to successfully offload their own home, there’s also a chance the sale could take months—maybe even years. If that’s the case, “then you may wish to continue showing your house in hopes of getting buyers who can close in a more timely manner,” says Christy Murdock Edgar, a Realtor® in Northern Virginia and Washington, DC.

Ways to protect yourself from a stalled home sale

To cover all of your bases, consider including a “kick-out clause” in your contract. This states that although you’re currently under contract, you’re allowed to kick out the buyer for a better offer that comes along during the contract period, Edgar says. “As with any other element of the process, this can be negotiated.”

But even if you are pleased with your current offer, you might still want to let your agent continue showing your home.

“In a seller’s market, with multiple offers on many properties, there should be no shortage of backup offers waiting in the wings,” acknowledges Peters.

“Should” is the operative word there. Nothing is guaranteed, so it’s probably in your best interest to keep cleaning your home and agreeing to those weekend open houses, even if it means sending your golden retriever to day care and hauling the kids to hang out at your in-laws’ house for the entire afternoon.

“Until all contingencies have been removed during escrow, continuing to show the property is advisable,” says Peters.

Source: Realtor.com

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