Should I Renovate My House Before I Sell It?
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Two Important Impacts of Home Equity
Equity continues to rise, helping American homeowners secure a much more stable financial future. According to the most recent data from CoreLogic, the average homeowner gained $9,800 in equity over the past year. In addition, experts project 2020 home prices to continue rising. With prices going up, equity gains will also keep accelerating. Black Knight just reported:
“The annual percent change in the overall median existing single-family-home price has skyrocketed in the past several months, with recent numbers at three to five times higher than rates seen in the past several years.”
Jeff Tucker, Senior Economist at Zillow, just qualified recent price increases as “jaw-dropping” and “within a hair's breadth of double-digit year-over-year appreciation.”
Knowing equity will help enable many homeowners to better survive the economic distress caused by the ongoing pandemic, it’s important to break down two key homeowner benefits of increasing equity.
Aside from the financial damage of the last seven months, there has also been a tremendous emotional toll on many people. Shelter-in-place mandates, quarantine requirements, and virtual schooling have all made us re-evaluate the must-have requirements a home should deliver. Having equity in your current house gives you a better opportunity to move-up or build your perfect home from scratch.
Mark Fleming, Chief Economist at First American, recently explained:
“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity.”
If you need to make a move, the equity in your current home can help make that possible – right now.
An increase in home equity grows overall wealth, which can transfer to future generations. The Federal Reserve, in an addendum to their recent Survey of Consumer Finances, explains:
“There are numerous ways families can transmit wealth and resources across generations. Families can directly transfer their wealth to the next generation in the form of a bequest. They can also provide the next generation with inter vivos transfers (gifts), for example, providing down payment support to enable a home purchase or a substantial wedding gift.”
The Federal Reserve also explains another way wealth (including the additional net worth generated by an increase in home equity) can benefit future generations:
“In addition to direct transfers or gifts, families can make investments in their children that indirectly increase their wealth. For example, families can invest in their children's educational success by paying for college or private schools, which can in turn increase their children's ability to accumulate wealth.”
Equity can help a homeowner grow their confidence in a more stable financial future. It provides near-term move-up options and creates a positive impact for future generations. In many cases, the largest single investment a person has is their home. As that investment appreciates in value, financial options increase too.
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Do You Need to Know More about Forbearance
and Mortgage Relief Options?
Earlier this year when the nation pressed pause on the economy and unemployment rates jumped up significantly, many homeowners were immediately concerned about being able to pay their mortgages, and understandably so. To assist in this challenging time, two protection plans were put into place to help support those in need.
First, there was a pause placed on initiating foreclosures for government-backed loans. This plan started on March 18, 2020, and it extends at least through December 31, 2020. Second, homeowners were able to obtain forbearance for up to 180 days, followed by a potential extension for up to another 180 days. This way, there is a relief period in which homeowners have the opportunity to halt payments on their mortgages for up to one year.
The challenge, according to Matt Hulstein, Staff Attorney at non-profit Chicago Volunteer Legal Services, is, “A lot of homeowners aren’t aware of this option.”
There’s definitely traction behind this statement. In a recent survey by The National Housing Resource Center, housing counselors from across the country noted that many homeowners really don’t know that there is help available. The following graph indicates the reasons why people who are in this challenging situation are not choosing to enter forbearance:
The Urban Institute explained:
“530,000 homeowners who became delinquent after the pandemic began did not take advantage of forbearance, despite being eligible to ask for the plan…These responses reflect a need to provide better information to all homeowners. (Lump-sum payment is not the only repayment option.)
Additionally, 205,000 homeowners who did not extend their forbearance after its term ended in June or July became delinquent on their loans. We need to examine who these people are and why are they not extending their option.”
Clearly, a more focused effort on education about forbearance and relief programs may make a big difference for many people, and a clear understanding of their options is mission-critical. Some communities, however, have been impacted by the economic challenges of the pandemic more so than others, further confirming the need to deliver education more widely. The Urban Institute also indicates:
“Black and Hispanic homeowners have been hit harder than white homeowners…nearly 21 percent of both Black and Hispanic homeowners missed or deferred the previous month’s mortgage payment, compared with 10 percent of white homeowners and about 13 percent of all homeowners with payments due.”
It’s important to note that any homeowner experiencing financial hardship has the right to request forbearance. If you’re unfamiliar with the plans available, contact your mortgage provider (the company you send your mortgage payment to each month) to discuss your options. It is a necessary next step, as you may qualify for mortgage relief options or forbearance.
One option many homeowners may not realize they have is the ability to sell their house in this time of need. With the growing equity that homeowners have available today, making a move might be the best option to protect your financial future.
If you need additional information on your options, you can review the Protect Your Investment guide from the National Association of Realtors (NAR) and the Homeowner’s Guide to Success from the Consumer Financial Protection Bureau (CFPB). For the majority of people, our home is the most important asset we have, and you should use all the help available right now to be able to preserve your investment.
Should You Buy a Retirement Home Sooner Rather than Later?
Every day in the U.S., roughly 10,000 people turn 65. Prior to the health crisis that swept the nation in 2020, most people had to wait until they retired to make a move to the beach, the golf course, or the senior living community they were looking to settle into for their later years in life. This year, however, the game changed.
Many of today’s workers who are nearing the end of their professional careers, but maybe aren’t quite ready to retire, have a new choice to make: should I move before I retire? If the sand and sun are calling your name and you have the opportunity to work remotely for the foreseeable future, now may be a great time to purchase that beach bungalow you’ve always dreamed of or the single-story home in the sprawling countryside that might be a little further out of town. Whether it’s a second home or a future retirement home, spending the next few years in a place that truly makes you smile every day might be the best way to round out a long and meaningful career.
Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains:
“The pandemic was unexpected, working from home was unexpected, but nonetheless many companies realized that workers can be just as productive working from home…We may begin to see a boost in people buying retirement homes before their retirement.”
According to the 20th Annual Transamerica Retirement Survey, 3 out of 4 retirees (75%) own their homes, and only 23% have mortgage debt (including any equity loans or lines of credit). Since entering retirement, almost 4 in 10 retirees (38%) have moved into a new home. They’re making a profit by selling their current homes in today’s low inventory market and using their equity to purchase their future retirement homes. It’s a win-win.
The health crisis this year made us all more aware of the importance of our family and friends, and many of us have not seen our extended families since the pandemic started. It’s no surprise, therefore, to see in the same report that 32% of those surveyed cited the top reason they’re making a move is that they want to be closer to family and friends (See graph below):
The survey also revealed that 73% percent of retirees currently live in single-family homes. With the overall number of homes for sale today hitting a historic low, and with the buyer demand for single-family homes skyrocketing, there’s never been a more ideal time to sell a single-family home and make a move toward retirement. Today’s market has the perfect combination of driving forces to make selling optimal, especially while buyers are looking to take advantage of low interest rates.
If you’re one of the 73% of retirees with a single-family home and want to move closer to your family, now is the time to put your house on the market. With the pace homes are selling today, you could essentially wrap up your move – start to finish – before the holidays.
Whether you’re looking to fully retire or to buy a second home with the intent to use it as your retirement home in the future, the 2020 fall housing market may very well work in your favor. Let’s connect today to discuss your options in our local market.
But, apparently.....not surprisingly either.....Opendoor has.
Opendoor is an American real estate company based in San Francisco. It makes as-is cash offers to property sellers through an online process, improves and repairs the properties it purchases, and relists them for sale. Wikipedia
Yup, I copied and pasted that right off good ole Wikipedia....no fake news for me!
At any rate, HousingWire shared their article with me. Which, also noted that iBuyer had 118Million dollars in losses in just the first 1/2 of 2020.
I guess the reason for this sharing of info on this one is pretty obvious. Be careful. Be extremely careful when you're buying or selling a home.
Reading everything as usual. Stopped at the LA Times and peeked around. Read the real estate section. Saw all the wildly expensive homes that movie stars and entertainment peeps are selling/buying.
Then moved on to an article about workers 'quietly trickling back to L.A. offices'. Almost like it was a secret?
A lot of things we've been reading about Real Estate has noted that people are working from home, need office spaces, child learning areas, and generally just more area in the home and back yard since they are working remotely.
Personally, I have been hoping that the remote working continues as much as possible as I believe it would certainly help the environment and the people that have been commuting such long travel times would have more sanity and, of course, more time with their families!
But, this of couple lines caught my eye:
“White-collar business has drawn the conclusion that socialization is key to productivity,” he said. “What we are hearing is that productivity is noticeably dropping” as working from home drags on during a pandemic with no end in sight.
So, I ask you readers.....how's your productivity from home? Are you missing your co-workers enough that you're starting to doodle at your home office desk? Are you ready to get back to work and that, in all likelihood, commute?
Buyers Are Finding More Space in the Luxury Home Market
A year ago, additional space and extra amenities had a very different feel for homebuyers. Today, the health crisis has brought to light how valuable more square footage and carefully designed floorplans can be. Home offices, multi-purpose rooms, gyms, and theaters are becoming more popular, and some families are finding the space they need for these upgrades in the luxury market.
The Institute for Luxury Home Marketing (ILHM) explains:
“With quarantine concerns still top of mind for many luxury buyers, we see large, sprawling estates making their comeback.
For instance, the last six months have seen a resurgence in the buying of mega mansions and estate-size homes – specifically properties that offer space (both inside and outside), separate home offices, gyms, and private amenities such as swimming pools, yoga studios, and recreation rooms.”
This was not the case at this time last year, as the most recent Luxury Market Report from ILHM emphasizes:
“Exactly one year ago, we reported that demand for large properties, mega mansions, private estates, and luxury ranches had reduced significantly over the previous few years; especially from the younger generation of luxury property buyers.”
For today’s buyers looking for larger homes, steady increases in equity might be what makes a move possible. Leveraging home equity makes it easier to afford the down payment on a luxury home, and current low interest rates are making mortgage payments more affordable than they have been in years. The report from ILHM also notes:
“Luxury real estate prices may continue to strengthen further into the third quarter, as the affluent continue to see large investment returns from the currently strong stock market.
Coupled with the low interest rates, the policies granting (and insisting) on working from home implemented by many employers, and the concerns of the pandemic, all translate to the affluent increasingly trading in their city lifestyle for a home that has it all.”
Clearly, today’s strong gains in home equity paired with record-low interest rates make fall a great time to move up into the luxury market to meet those changing needs.
If you’re ready to gain some breathing room in a larger home, let’s connect so you have the guidance you need to find more space in the luxury home market.
