Home Sellers Want to Sell but Where Will they Go?

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Home sellers by now are bombarded with marketing materials asking them to sell their house in the wake of the inventory shortage. They might want to sell to tap into that equity, but they aren’t. Below I propose a theory of why they are not motivated to sell which pertains indirectly to the mortgage meltdown of 2007.

Where will they go? Sellers might have purchased 10 years back and they could be sitting on $400,000+ of equity. The only problem is: what can that $400,000 buy as their replacement home? Despite our recovery from the mortgage meltdown, the meltdown has permanently hampered the surplus income of many working families who lost equity in the 2008 crash. Despite them sitting on a large equity position, the rising values make their future housing less affordable. They may be able to purchase by using the equity as a down payment, but retirees with fixed incomes will not be allotted as much purchasing power as those with dual incomes.

Creating Universal Appeal For Home Listings

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We all know that when it comes time to sell your house, your Realtor will ask you to clean the house, remove the clutter, and even stage the house. The overarching objective is to get your home to appeal to as many buyers as possible. With this strategy in mind many sellers have intended to make the house as neutral as possible. We go over some of the things you can do to make your house appeal to as many buyers as possible.

White or off white walls: It’s no surprise the most popular colors from Kelly Moore and other paint suppliers are off-white, egg-shell white, etc. These colors are popular interior colors to get houses ready for new tenants or to appeal to new buyers. The whiteness of the walls represents cleanliness and also a blank canvas for the future resident to make any future changes.

Filling up the pool or koi pond: Pools and ponds in the backyard are interpreted differently by different buyers. People see a pool and may perceive the cost of maintenance. Others see it as a summer centerpiece. Families with children perceive it as a risk of drowning to their little ones and now they must fence it. Regardless, sellers sometimes opt to fill a pool with dirt and built over it or fill up a pond to have a more neutral layout of the backyard.

Getting drought tolerant or solar: Any green amenities can level up the value of the house and materially increase the listing price of a home by several percentage points. I have seen solar panels increase value of the house as much as 10%. The appraiser will have to count it. Same goes for drought tolerant plants. They can reduce household maintenance costs and utility bills and attract buyers to bid on your home.

My Experience Working with Millennial Homebuyers

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Just like any demographic, people are in varying stages of their life. They may be in a position of saving money, investing, paying off debts, renting, or a combination of circumstances. I have experienced the same phenomenon with millennial buyers: each buying party had a unique desire and reason to purchase under various financial circumstances. While their circumstances may have varied, they shared some common traits which I would like to point out below.

Millennials are very intelligent. They can read complex documents and ask intelligible questions. They have undergraduate degrees or higher and are mid-level/seniors in their careers, making them battle-tested with an education to back it all up. They research aspects of the property very efficiently and are often cooperative and understanding. They use Google effortlessly. This sort of “independent intelligence” is something akin to a savvy baby boomer investor– the drive exists to purchase, the decisions are data-driven versus arbitrarily driven (emotions, or intuition, on the other hand, play an important role in homebuying, particularly in having a good impression about a home), and the follow-through is flawless.

How does my role change, if any, when I have very independent clients? As a Realtor, I follow them with all these steps and I still present them with all the reports and analysis they need to make an informed decision, even if these data are redundant of the conclusions they have derived for themselves. So at times I will be their expert but also an echo chamber. In other instances I will challenge their understanding on points they haven’t considered or respectfully disagree with them when perhaps they hold a view that is against their best interest or going to cost them down the line. When they are not privy to county customs, I try to catch them up on these customs so the purchase will go smoothly. There any many nuances of real estate that I will need to share with them that will only improve their home buying experience.

Despite these similarities, millennials’ financial positions vary greatly. Some will pay for cash for the house, others will ask parents for down payment and closing costs. Married millennials might have a double income and have high purchasing power. Others may be single and ready to buy a condo. In short, most millennials are driven and hard working, seeking to improve their lives in some way. None of the millennials I worked with fit the stereotype that Millennials like handouts or are highly dependent on an income source. I have seen the opposite is true.

The Consequences of Rising Interest Rates for Borrowers in their New Home Loans

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Every once in a while you will hear that the Federal Reserve and its power to influence the money supply will raise interest rates. I intend to talk briefly about how this directly affects the consumer who intends to obtain a home loan after the rate increase. The main objective is to find out how much monthly additional funds are required for the mortgage payment. After doing this analysis, we will decide whether the rate increase is too costly or if it is affordable for the borrower of the funds. This analysis is not applicable for those who wish to make cash only purchases, however those who are debating between the cash purchase and the loan purchase can continue reading to get an idea of the cost of the monthly loan payments.

First let us start with a few assumptions: Let us suppose you want a 30 year fixed loan, 4% interest rate, $500,000 loan amount. With this information, we can now solve for the monthly payments. The monthly payment is $2387.

Scenario 1: What if the interest rate rises to 4.5%? The payment rises to $2533. That is a $146 difference.

Scenario 2: What if the interest rate rises to 5%? The payment rises to $2684. That is a 297 difference from the original amount.

Let’s make an interpretation of these data. Namely, what is an extra $146 a month, or $1752/yr? That amount could be the amount of your monthly coffee bills, or monthly going out for good cost. It could be a fraction of your grocery cost. In the big picture, the increase is not that much.

One objection to this is that it could be substantial if you don’t have that much extra funds, or you have a very demanding lifestyle where you need to eat out a lot.

One reply to this objection is that the cost to obtain this money is inexpensive. When we take out a home loan, we are accelerating our means to purchase a home. In return, you make payments to cover the loan until the loan is due or paid in full. Imagine if you had to wait until you saved $600,000. Wouldn’t that take a while, conventionally speaking? Instead, isn’t it faster to save up $100,000 and get the rest in the form of a loan? That is what the loan accomplishes. The rate increases are inconvenient to the borrower but they may not be as groundbreaking as people believe.

In summary, you might find interest rate increases inconvenient, and they might be more than inconvenient when the rates spike. However if the increases are only in small increments, you might find the cost of the monthly mortgage payment to be slightly more expensive, but tolerable, and not earth shattering as some people tend to believe.

 

2016-2017 Outlook on Interest Rates from the Federal Reserve

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#Interestrates are poised to rise by the end of the year according to Federal Reserve chair Janet Yellen. Can rising interest rates motivate #homebuyers to buy before rates change? They might. Buyers seeking 30 year fixed home loans may prefer a lower interest rate over a higher rate, which could #save hundreds of dollars on their mortgage payments each year. Your #banking institution or credit union may have more helpful information for you. We may recommend some loan originators as well, if you ask. Happy buying and stay educated!

2016-2017 Outlook on Interest Rates

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#Interestrates are poised to rise by the end of the year according to Federal Reserve chair Janet Yellen. Can rising interest rates motivate #homebuyers to buy before rates change? They might. Buyers seeking 30 year fixed home loans may prefer a lower interest rate over a higher rate, which could #save hundreds of dollars on their mortgage payments each year. Your #banking institution or credit union may have more helpful information for you. We may recommend some loan originators as well, if you ask. Happy buying and stay educated!

New Building Codes Alameda County

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Looks like new #building #codes will be in effect next year for #Fremont please check it out: “The State of California adopts a set of new construction codes every three years referred to as the California Building Standards Codes. The 2016 California Building Standards Codes (2016 CBC) were adopted by the Fremont City Council on November 1, 2016. The 2016 CBC will be effective January 1, 2017. The adopted codes include:

2016 California Building Code Volumes 1 & 2
2016 California Mechanical Code
2016 California Plumbing Code
2016 California Electrical Code
2016 California Existing Buildings Code
2016 California Fire Code
2016 California Energy Code
2016 California Residential Building Code
2016 California Green Building Standards Code
2016 California Historical Building Code
2015 International Pool and Spa Safety Code
2015 International Property Management Code”