There’s a well-known economic theory – the law of supply and demand – that explains what’s happening with prices in the current real estate market. Put simply, when demand for an item is high, prices rise. When the supply of the item increases, prices fall. Of course, when demand is very high and supply is very low, prices can rise significantly.

Understanding the impact both supply and demand have can provide the answers to a few popular questions about today’s housing market:

• Why are prices rising?
• Where are prices headed?
• What does this mean for homebuyers?

Why Are Prices Rising?

According to the latest Home Price Insights report from CoreLogic, condo and home prices have risen 18.1% since this time last year. But what’s driving the increase?

Recent buyer and seller activity data from the National Association of Realtors (NAR) helps answer that question. When we take NAR’s buyer activity data and compare it to the seller traffic during the same timeframe, we can see buyer demand continues to outpace seller activity by a wide margin. In other words, the demand for homes is significantly greater than the current supply that’s available to buy (see maps below):This combination of low supply and high demand is what’s driving condo and home prices up. Bill McBride, author of the Calculated Risk blog, puts it best, saying:

“By some measures, house prices seem high, but the recent price increases make sense from a supply and demand perspective.”

Where Are Prices Headed?

The supply of condos and homes for sale will greatly affect where prices head over the coming months. Many experts forecast prices will continue to increase, but they’ll likely appreciate at a slower rate.

Buyers hoping to purchase the home of their dreams may see this as welcome news. In this case, perspective is important: a slight moderation of prices does not mean prices will depreciate or fall. Price increases may occur at a slower pace, but experts still expect them to rise.

Five major entities that closely follow the real estate market forecast home prices will continue appreciating through 2022 (see graph below):

What Does This Mean for Buyers?

If you’re waiting to enter the market because you’re expecting prices to drop, you may end up paying more in the long run. Even if price increases occur at a slower rate next year, prices are still projected to rise. That means the home of your dreams will likely cost even more in 2022.

Bottom Line

The truth is, high demand and low supply are what’s driving up condo and home prices in today’s housing market. And while prices may increase at a slower pace in the coming months, experts still expect them to rise. If you’re a potential homebuyer, let’s connect today to discuss what that could mean for you if you wait even longer to buy.

If you’re a renter with a desire to become a homeowner or a homeowner who’s decided your current place no longer fits your needs, you may be hoping that waiting a year might mean better market conditions to purchase a condo or home.

To determine if you should buy now or wait, you need to ask yourself two simple questions:

1. What will home prices be like in 2022?
2. Where will mortgage rates be by the end of 2022?

Let’s shed some light on the answers to both of these questions.

What will home prices be like in 2022?

Three major housing industry entities project continued home price appreciation for 2022. Here are their forecasts:

• Freddie Mac: 5.3%
• Fannie Mae: 5.1%
• Mortgage Bankers Association: 8.4%

Using the average of the three projections (6.27%), a condo that sells for $350,000 today would be valued at $371,945 by the end of next year. That means, if you delay, it could cost you more. As a prospective buyer, you could pay an additional $21,945 if you wait.

Where will mortgage rates be by the end of 2022?

Today, the 30-year fixed mortgage rate is hovering near historic lows. However, most experts believe rates will rise as the economy continues to recover. Here are the forecasts for the fourth quarter of 2022 by the three major entities mentioned above:

• Freddie Mac: 3.8%
• Fannie Mae: 3.2%
• Mortgage Bankers Association: 4.2%

That averages out to 3.7% if you include all three forecasts, and it’s nearly a full percentage point higher than today’s rates. Any increase in mortgage rates will increase your cost.

What does it mean for you if both home values and mortgage rates rise?

You’ll pay more in mortgage payments each month if both variables increase. Let’s assume you purchase a $350,000 condo or home this year with a 30-year fixed-rate loan at 2.86% after making a 10% down payment. According to the mortgage calculator from Smart Asset, your monthly mortgage payment (including principal and interest payments, and estimated home insurance, taxes in your area, and other fees) would be approximately $1,899.

That same condo or home could cost $371,945 by the end of 2022, and the mortgage rate could be 3.7% (based on the industry forecasts mentioned above). Your monthly mortgage payment, after putting down 10%, would increase to $2,166.

The difference in your monthly mortgage payment would be $267. That’s $3,204 more per year and $96,120 over the life of the loan.

If you consider that purchasing now will also let you take advantage of the equity you’ll build up over the next calendar year, which is approximately $22,000 for a house with a similar value, then the total net worth increase you could gain from buying this year is over $118,000.

Bottom Line

When asking if you should buy a condo or home, you probably think of the non-financial benefits of owning property as a driving motivator. When asking when to buy, the financial benefits make it clear that doing so now is much more advantageous than waiting until next year.

In today’s real estate market, low inventory and high demand are driving up condo and home prices. As many as 54% are getting offers over the listing price, based on the latest Realtors Confidence Index from the National Association of Realtors (NAR). Shawn Telford, Chief Appraiser at CoreLogic, elaborates:

“The frequency of buyers being willing to pay more than the market data supports is increasing.”

While this is great news for today’s sellers, it can be tricky to navigate if the price of your contract doesn’t match up with the appraisal for the condo or house. It’s called an appraisal gap, and it’s happening more in today’s market than the norm.

According to recent data from CoreLogic, 19% of homes had their appraised value come in below the contract price in April of this year. That’s more than double the percentage in each of the two previous Aprils.

The chart below uses the latest insights from NAR’s Realtors Confidence Index to showcase how often an issue with an appraisal slowed or stalled the momentum of a sale in May of this year compared to May of last year.If an appraisal comes in below the contract price, the buyer’s lender won’t loan them more than the condo or house’s appraised value. That means there’s going to be a gap between the amount of loan the buyer can secure and the contract price on the property.

In this situation, both the buyer and seller have a vested interest in making sure the sale moves forward with little to no delay. The seller will want to make sure the deal closes, and the buyer won’t want to risk losing the home. That’s why it’s common for sellers to ask the buyer to make up the difference themselves in today’s competitive market.

Bottom Line

Whether you’re buying or selling, let’s connect so you have an ally throughout the process to help you navigate the unexpected, including appraisal gaps. Contact us at The Bouma Group today at 734-761-3060 or info@condohotline.com.

Since the birth of our nation, homeownership has always been considered a major piece of the American Dream. As Frederick Peters reports in Forbes:

“The idea of a place of one’s own drives the American story. We became a nation out of a desire to slip the bonds of Europe, which was still in many respects a collection of feudal societies. Old rich families, or the church, owned all the land and, with few exceptions, everyone else was a tenant. The magic of America lay not only in its sense of opportunity, but also in the belief that life could in every way be shaped by the individual. People traveled here not just for religious freedom, but because in America anything seemed possible.”

Additionally, a research paper released just prior to the shelter-in-place orders issued last year concludes:

“Homeownership is undeniably the cornerstone of the American Dream, and is inseparable from our national ethos that, through hard work, every American should have opportunities for prosperity and success. It is the stability and wealth creation that homeownership provides that represents the primary mechanism through which many American families are able to achieve upward socioeconomic mobility and greater opportunities for their children.”

Has the past year changed the American view on homeownership?

Definitely not. A survey of prospective buyers released by realtor.com last week reveals that becoming a homeowner is still the main reason this year’s first-time buyers want to purchase a condo or home. When asked why they want to buy, three of the top four responses center on the financial benefits of owning a condo or home. The top four reasons for buying are:

• 59% – “I want to be a homeowner”
• 33% – “I want to live in a space that I can invest in improving”
• 31% – “I need more space”
• 22% – “I want to build equity”

Millennials believe most strongly in homeownership.

The survey also reports that 62% of millennials say a desire to be a homeowner is the main reason they’re buying. This contradicts the thinking of some experts who had believed millennials were going to be the first “renter generation” in our nation’s history.

While reporting on the survey, George Ratiu, Senior Economist at realtor.com, said:

“Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have — to invest in a place of their own and in their communities, and to build a solid financial foundation for themselves and their families.”

Odeta Kushi, Deputy Chief Economist for First American, also addresses millennial homeownership:

“Millennials have delayed marriage and having children in favor of investing in education, pushing marriage and family formation to their early-to-mid thirties, compared with previous generations, who primarily made these lifestyle choices in their twenties…Delayed lifestyle choices delay the desire for homeownership.”

Kushi goes on to explain:

“As more millennials get married and form families, millennials remain poised to transform the housing market. In fact, the housing market is already experiencing the earliest gusts of the tailwind.”

Bottom Line

As it always has been and very likely always will be, homeownership continues to be a major component in every generation’s pursuit of the American Dream. Contact us today at 734-761-3060 or info@condohotline.com and we can help you find your dream condo and guide you through this market. Start your new condo search here!

If you’re thinking of buying a condo this year, you may be wondering how much money you need to come up with for your down payment. Many people may think it’s 20% of the loan to secure a mortgage. While there are plenty of lower down payment options available for qualified buyers who don’t want to put 20% down, it’s important to understand how a larger down payment can have great benefits too.

The truth is, there are many programs available that allow you to put down as little as 3.5%, which can be a huge benefit to those who want to purchase a condo sooner rather than later. Those who have served our country may also qualify for a Veterans Affairs Home Loan (VA) and may not need a down payment. These programs have really cut down the savings time for many potential buyers, enabling them to start building family wealth sooner.

Here are four reasons why putting 20% down is a good plan if you can afford it.

1. Your interest rate may be lower.

A 20% down payment vs. a 3-5% down payment shows your lender you’re more financially stable and not a large credit risk. The more confident your lender is in your credit score and your ability to pay your loan, the lower the mortgage interest rate they’ll likely be willing to give you.

2. You’ll end up paying less for your condo.

The larger your down payment, the smaller your loan amount will be for your mortgage. If you’re able to pay 20% of the cost of your new home at the start of the transaction, you’ll only pay interest on the remaining 80%. If you put down 5%, the additional 15% will be added to your loan and will accrue interest over time. This will end up costing you more over the lifetime of your home loan.

3. Your offer will stand out in a competitive market.

In a market where many buyers are competing for the same property, sellers like to see offers come in with 20% or larger down payments. The seller gains the same confidence as the lender in this scenario. You are seen as a stronger buyer with financing that’s more likely to be approved. Therefore, the deal will be more likely to go through.

4. You won’t have to pay Private Mortgage Insurance (PMI)

What is PMI? According to Freddie Mac:

“PMI is an insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%. Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As mentioned earlier, when you put down less than 20% when buying a condo or home, your lender will see your loan as having more risk. PMI helps them recover their investment in you if you’re unable to pay your loan. This insurance isn’t required if you’re able to put down 20% or more.

Many times, sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their property to put down 20% on their next. With the equity homeowners have today, it creates a great opportunity to put those savings toward a 20% or greater down payment on a new condo or home.

If you’re looking to buy your first place, you’ll want to consider the benefits of 20% down versus a smaller down payment option.

Bottom Line

If you’re thinking of buying a condo and are already saving for your down payment, let’s connect to discuss what fits best with your long-term plans. Contact us today at 734-761-3060 or info@condohotline.com.

If you’re thinking about buying or selling a condo or home today, the same need for information is very real. But, because it’s such a big step in our lives, that desire for clear information is even greater in the buying or selling process. Given the current level of overall anxiety, we want that advice to be truly perfect. The challenge is, no one can give you “perfect” advice. Experts can, however, give you the best advice possible.

Let’s say you need an attorney, so you seek out an expert in the type of law required for your case. When you go to her office, she won’t immediately tell you how the case is going to end or how the judge or jury will rule. If she could, that would be perfect advice. What a good attorney can do, however, is discuss with you the most effective strategies you can take. She may recommend one or two approaches she believes will be best for your case.

She’ll then leave you to make the decision on which option you want to pursue. Once you decide, she can help you put a plan together based on the facts at hand. She’ll help you achieve the best possible resolution and make whatever modifications in the strategy are necessary to guarantee that outcome. That’s an example of the best advice possible.

The role of a real estate professional is just like the role of a lawyer. An agent can’t give you perfect advice because it’s impossible to know exactly what’s going to happen throughout the transaction – especially in this market.

An agent can, however, give you the best advice possible based on the information and situation at hand, guiding you through the process to help you make the necessary adjustments and best decisions along the way. An agent will lead you to the best offer available. That’s exactly what you want and deserve.

Bottom Line

If you’re thinking of buying or selling a condo or home this year, let’s connect to make sure you get the best advice possible. We have access to all of the real estate data out there and are constantly analyzing it so we can give our clients the best advice possible. Contact us today at The Bouma Group at info@bouma.com or 734-761-3060 and we’ll help make your real estate goals a reality.

As more and more baby boomers enter retirement age, the question of whether they should sell their homes and move has become a hot topic. In today’s housing market climate, with low available inventory in the starter and trade-up home categories, it makes sense to evaluate your home’s ability to adapt to your needs in retirement.

According to the National Association of Exclusive Buyers Agents (NAEBA), there are 7 factors that you should consider when choosing your retirement home or condo.

1. Affordability

“It may be easy enough to purchase your home today but think long-term about your monthly costs. Account for property taxes, insurance, HOA fees, utilities – all the things that will be due whether or not you have a mortgage on the property.”

Would moving to a condo complex with homeowner association fees actually be cheaper than having to hire all the contractors you would need to maintain your home, lawn, etc.? Would your taxes go down significantly if you relocated? What is your monthly income going to be like in retirement?

2. Equity

“If you have equity in your current home, you may be able to apply it to the purchase of your next. Maintaining a healthy amount of equity gives you a source of emergency funds to tap, via a home equity loan or reverse mortgage.”

The equity you have in your current home may be enough to purchase your retirement home or condo with little to no mortgage. Homeowners in the US gained an average of over $9,700 in equity last year.

3. Maintenance

“As we age, our tolerance for cleaning gutters, raking leaves and shoveling snow can go right out the window. A condominium with low-maintenance needs can be a literal lifesaver, if your health or physical abilities decline.”

As we mentioned earlier, would a condo with an HOA fee be worth the added peace of mind of not having to do the maintenance work yourself?

4. Security

“Elderly homeowners can be targets for scams or break-ins. Living in a home with security features, such as a manned gate house, resident-only access and a security system can bring peace of mind.”

As scary as that thought may be, any additional security is helpful. An extra set of eyes looking out for you always adds to peace of mind.

5. Pets

“Renting won’t do if the dog can’t come too! The companionship of pets can provide emotional and physical benefits.”

Consider all of your options when it comes to bringing your ‘furever’ friend with you to a new home. Will there be necessary additional deposits if you are renting or in a condo? Is the backyard fenced in? How far are you from your favorite veterinarian?

6. Mobility

“No one wants to picture themselves in a wheelchair or a walker, but the home layout must be able to accommodate limited mobility.”

Sixty is the new 40, right? People are living longer and are more active in retirement, but that doesn’t mean that down the road you won’t need your home to be more accessible. Installing handrails and making sure your hallways and doorways are wide enough may be a good reason to look for a home that was built to accommodate these needs.

7. Convenience

“Is the new home close to the golf course, or to shopping and dining? Do you have amenities within easy walking distance? This can add to home value!”

How close are you to your children and grandchildren? Would relocating to a new area make visits with family easier or more frequent? Beyond being close to your favorite stores and restaurants, there are a lot of factors to consider.

Bottom Line

When it comes to your forever home, evaluating your current house for its ability to adapt with you as you age can be the first step to guaranteeing your comfort in retirement. If after considering all these factors you find yourself curious about your options, let’s get together to evaluate your ability to sell your house in today’s market and get you into your dream retirement home! Give us a call today at 734-761-3060 to discuss your options. Start your Ann Arbor Condo search here!

Rent vs. Buy: How to Decide What’s Best for You

According to the U.S. Census Bureau, median rent continues to rise. With today’s low mortgage rates, there’s great opportunity for current renters to make a move into homeownership that stretches each dollar a little bit further.

While the best timeline to buy a condo or home is different for everyone, the question remains: Should I continue renting or is it time for me to buy? The answer depends on your current situation and your future plans, so here are some thoughts to help you decide if you’re ready to own a place of your own.

1. Rent Will Continue to Increase

This is one of the top reasons why renters decide to move because in most cases, rent will continue increasing each year. As noted above, the U.S. Census Bureau recently released its quarterly homeownership report, and as the graph below shows, median rent is climbing year after year. When you own a home, you’ll lock in your monthly payment for the life of your loan, creating consistency and predictability in your payments.

2. Freedom to Customize

This is a big decision-making point for many people who want to be able to paint, renovate, and make upgrades. In many cases, landlords determine all of these selections and prefer you do not alter them as a renter. As a homeowner, you have the freedom to decorate and personalize your home to truly make it your own.

3. Privacy

When renting, your landlord has access to your space in case of an emergency. If you own your home or condo, however, you’re the one to decide who can come inside. Given today’s health concerns around the pandemic, this may be a growing priority for you.

4. Flexibility for Relocation

If you’re renting, it may be easier to move quickly should you have a job transfer or simply decide it’s time for a change. When you’re a homeowner and need to sell, this might take a little more time. Today, however, with the housing market’s low inventory, this may no longer be the case. Home and condos are selling at a record-breaking pace, so you may have more flexibility than you think.

5. Building Equity

When you pay your rent, your landlord earns the equity the property gains. If you own, the benefits of your investment go directly toward your net worth. This is savings you’ll be able to use in the future for things like sending children to college, starting a new business, buying a bigger place, or simply downsizing to save for retirement.

6. Tax Advantages

When you own your condo or home, there are additional advantages that work in your favor as well. You can deduct things like your property taxes and mortgage interest (Always make sure you check with your accountant to see which tax-deductible benefits apply to your situation). When you rent, however, the tax benefits are directed to your landlord.

Bottom Line

It’s up to you to decide if you’d prefer to rent or buy, and it’s different for every person. If you’d like to learn more about the pros and cons of each, as well as resources to help you along the way, let’s connect to discuss your options. This way, you can make a confident and informed decision with a trusted expert on your side. Give us a call at 734-761-3060 or email us at info@bouma.com today!

One of the biggest misconceptions for first-time condo or home buyers is how much you’ll need to save for a down payment. Contrary to popular belief, you don’t always have to put 20% down to buy a condo or house. Here’s how it breaks down.

A recent survey by Point2Homes mentions that 74% of millennials (ages 25-40) say they’re interested in purchasing over the next 12 months. The study notes, “88% say they have significantly less savings than the average national down payment amount, which is $62,600.”

Thankfully, $62,600 is not the amount every buyer needs for a down payment in the United States. There are many different options available, especially for first-time buyers (millennial or not). That amount can also be significantly less, depending on the purchase price of the condo or house.

According to the National Association of Realtors (NAR), “The median existing price for all housing types in August was $310,600.” (These are the latest numbers available). NAR also indicates that:

“In 2019, the median down payment was 12 percent for all buyers, six percent for first-time buyers, and 16 percent for repeat buyers.” (See graph below):

That means if a qualified first-time buyer purchases a home at today’s median price, $310,600, with a 6% down payment, in reality, the down payment only amounts to $18,636. That’s nowhere near $62,600.

Knowing there are also programs like FHA where the down payment can be as low as 3.5% of the purchase price for a first-time buyer, that up-front cost could be significantly less – as little as $10,871 for the same home noted above. There are also other programs like USDA and loans for Veterans that waive down payment requirements.

The Point2Homes study also shares how much millennials have indicated they’ve saved for a down payment. As we can see in the graph below, 39% have already saved enough for a down payment on a median-priced condo or home. Another 47% are close to reaching that goal, depending on the purchase price.Unfortunately, the lack of knowledge about the buying process is keeping many motivated first-time buyers on the sidelines. That’s why it’s important to contact a local real estate professional to understand the requirements in your local area if you want to buy a condo or home. A trusted agent and your lender can guide you through the process.

Bottom Line

Be careful not to let big myths about buying keep you and your family out of the housing market. Let’s connect to discuss your options today. Give us a call at The Bouma Group at 734-761-3060 or email info@condohotline.com.