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Housing Inventory Vanishing: What Is the Impact on You?

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Housing Inventory Vanishing: What Is the Impact on You? | MyKCM

The real estate market is expected to do very well this year as mortgage rates remain at historic lows. One challenge to the housing industry is the lack of homes available for sale. Last week, move.com released a report showing that 2020 is beginning with the lowest available housing inventory in two years. The report explains:

“Last month saw the largest year-over-year decline of housing inventory in almost three years with a dramatic 12 percent decline, pushing the number of homes for sale in the U.S. to the lowest level since January 2018.”

The report also revealed that the decline in inventory stretches across all price points, as shown in the following graph:Housing Inventory Vanishing: What Is the Impact on You? | MyKCMGeorge Ratiu, Senior Economist at realtor.com, explains how this drop in available homes for sale comes at a time when more buyers are expected to enter the market:

“The market is struggling with a large housing undersupply just as 4.8 million millennials are reaching 30-years of age in 2020, a prime age for many to purchase their first home. The significant inventory drop…is a harbinger of the continuing imbalance expected to plague this year’s markets, as the number of homes for sale are poised to reach historically low levels.”

The question is: What does this mean to you?

If You’re a Buyer…

Be patient during your home search. It may take time to find a home you love. Once you do, however, be ready to move forward quickly. Get pre-approved for a mortgage, be ready to make a competitive offer from the start, and understand that a shortage in inventory could lead to the resurgence of bidding wars. Calculate just how far you’re willing to go to secure a home, if you truly love it.

If You’re a Seller…

Realize that, in some ways, you’re in the driver’s seat. When there is a shortage of an item at the same time there is a strong demand for that item, the seller of that item is in a good position to negotiate. Whether it is price, moving date, possible repairs, or anything else, you’ll be able to demand more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Don’t be unreasonable, but understand you probably have the upper hand.

Bottom Line

The housing market will remain strong throughout 2020. Understand what that means to you, whether you’re buying, selling, or doing both.

Home Are More Affordable Today, Not Less Affordable

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Homes Are More Affordable Today, Not Less Affordable | MyKCM

There’s a current narrative that owning a home today is less affordable than it has been in the past. The reason some are making this claim is because house prices have substantially increased over the last several years.

It’s not, however, just the price of a home that matters.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by approximately 3% over the last year.

The National Association of Realtors (NAR) releases a monthly Housing Affordability Index. The latest index shows that home affordability is better today than at almost any point over the last 30 years. The index determines how affordable homes are based on the following:

“A Home Affordability Index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).”

The higher the index, therefore, the more affordable homes are. Here is a graph showing the index since 1990:Homes Are More Affordable Today, Not Less Affordable | MyKCMObviously, affordability was better during the housing crash when distressed properties – foreclosures and short sales – sold at major discounts (2009-2015). Outside of that period, however, homes are more affordable today than any other year since 1990, except for 2016.

The report on the index also includes a section that calculates the mortgage payment on a median priced home as a percentage of the median national income. Historically, that percentage is just above 21%. Here are the percentages since June of 2018:Homes Are More Affordable Today, Not Less Affordable | MyKCMAgain, we can see that affordability is much better today than the historical average and has been getting better over the last year and a half.

Bottom Line

Whether you’re thinking about buying your first home or moving up to the home of your dreams, don’t let the false narrative about affordability prevent you from moving forward. From an affordability standpoint, this is one of the best times to buy in the last 30 years.

What Does A Property Management Company Do?

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What Does A Property Management Company DoFor those who are interested in learning more about real estate, property management companies are an important topic of discussion. Some people might not ever consider hiring a property management company.

Other people wouldn’t ever invest in real estate without a property management company to help them out along the way. This can be a hard decision for people to make. In order to figure out if hiring a management company is the right decision, it is important to think about what they do.

What Is Property Management?

It is the job of a management company to both maintain the quality of the residence while also keeping the occupants happy. Typically, the owner of the property will hire a third party to do this job. The management company then oversees the daily operations of everything that happens at the real estate property.

This means that property managers respond to the concerns of the residents or tenants. If something goes wrong with one of the appliances, the property management company is typically the one who handles this issue.

If there is something wrong with one of the utilities, the management company handles this also. Parking problems are often handled by the manager as well. Property managers will also make sure that rent is collected on time.

Property managers are also busy while the property is vacant. The manager will make every effort possible to get the property filled if it is vacant. The manager will also make sure that the property is well-kept when it is empty. This means keeping it clean, updating appliances, fixing leaks, and other common issues that arise.

Is A Property Manager Needed?

In order for someone to decide whether or not a property manager is needed, there are a few important considerations.

First, the more rental properties someone has, the more work will need to be done. It might be too much for one person to do on their own.

Next, think about how far away the property is. The farther away the property is, the harder it will be to keep an eye on it.

Finally, managing property is an active job. Those who intend to get into real estate as a form of passive income will want to hire someone else to handle this job.

Consider these questions carefully when thinking about property management companies.

If you are in the market for a new home consult with your trusted real estate professional.

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