Now is the time to buy!

Now is the time to buy!

Rates 3-16

As expected, the FOMC announced its first rate hike of 2017 and hinted at additional increases throughout the remainder of the year. This survey was conducted prior to the Fed’s decision, the release of the February jobs report all but guaranteed a rate hike and boosted the 30-year mortgage rate 9 basis points to 4.30 percent this week. Increasing inflation, continued gains in the labor market and the Fed’s intentions for further rate increases—all three will keep pushing mortgage rates up this year.

In 1981 your payment would be $4511/month

30 year fixed rates on mortgages averaged 3.48%.  I researched the highest and lowest rates for 30 year mortgages.  In November 2012 the rate hit an all time low of 3.31% and the highest rate was in October 1981 when they hit 18.44%.

So I thought it was a good idea to compare what that would mean in your monthly payment.  The median price in Chester county is $325,000.  I’ll use property taxes of $5000/year , $1000 year in homeowners insurance and 20% down conventional loan.  Here are the monthly payments:

Current Rates:  $1664/mo

Lowest Rate:  $1640/mo.

Highest Rate:  $4511/mo.  (So insane!)

Now, what can you get for $325,00 in Chester county?  There are 17 homes available priced at $325,000.  5 townhomes and 12 single family homes.  Here is where they are located:


I found this cool chart on the 5000 year history of rates.

Interest rate history

How did the Local Housing Market Perform in March 2014?

The spring market is here!  More homes are hitting the market and sales are increasing compared to February.  As I predicted last month more homes hit the market in March.  With more inventory we will see an increase in sales and a decrease in days on the market.  Although our sales and inventory are up month to month they are still slightly below what they were compared to a year ago.  I think we will see big sales numbers April through July.  It’s a great time to put your house on the market and for buyers there is so many more homes to choose from.  Also, interest rates have dropped making homes more affordable.

Here’s a quick snapshot of all the counties in the area (Click on the picture to enlarge):

Email me at if you are looking for specific statistics in a school district or a township.  Real estate is local and these numbers are averages so in certain areas within the 3 counties you will see complete opposite trends happening.

Chester County

Chesco Inv mar14

Chesco Sales Mar14

Chesco DOM mar14

Delaware County

Delco Inv mar14

Delco Sales Mar14

Delco DOM mar14

Montgomery County

Mont InvMar14

Montco SalesMar14

Montco DOM Mar14

Real estate is cyclical so it is important to look at year over year statistics.  This data is compiled from sales reported to Trend, our local MLS.

Increase in Cash Buyers

More than half of all homes sold in 2012 & so far in 2013 have been done with cash.  That’s an amazing statistic when you consider that percentage was only 20% before the housing downturn.  Many of these are investors buying up the distressed properties in the hardest hit areas of the US like Florida, California and Nevada.  Even considering that it still seems like a huge increase in cash buyers especially when you consider how low interest rates have been in the past year.

Every day I see bank owned properties in the area being bought up for cash and I have seen an increase in foreign investors as well.  However, when I pull up recent sales for homes in the $200,000-$500,000 price range in our area I’ve noticed a lot of cash sales of homes that are not distressed sales.  There’s no way of knowing who these cash buyers are but I would guess after the economic downturn many people began saving more and now they need a place to put their cash.  It could be more Americans are looking for the peace of mind that comes with living in a home without a mortgage.

Click here for the article in the Wall Street Journal.

Increasing Prices & Decrease in Investors: A Real Estate Recovery?

According to ORC International, 48% of real estate investors are holding off on buying new investments for the next year and also they are going to hold their current rental properties for 5 years.  This was discovered in a recent survey conducted by the polling firm.  What does this mean for residential real estate?  I believe it’s a great indicator that the real estate recovery is picking up steam.

RE Recovery

So, with increased prices, decreasing amount of foreclosures available and interest rates really low is this a good time to buy?  YES!  Even though half of investors are getting out of the market because it’s more difficult to turn a profit it is still a great time to buy your personal residence.  Let’s take a deeper look.  First, investors have decided to hold rental properties because they know rent prices are going to rise which will increase their cash flow.  This is good news for them but bad news for renters.  Chester county already has a very low inventory of rentals that will only get worse over the next few years if the trend continues.  Secondly, we are in a buyer’s market right now where there are a lot of homes available.  That is changing with prices increasing and sales increasing.  On really great properties we are seeing multiple offer situations and houses being under contract in 2 weeks.  This trend indicates an eventual switch to a seller’s market.  Third, interest rates are so low right now helping to make home ownership affordable.

Watch the chief economist of the National Association of Realtors talk about the high levels of pending homes sales.  Remember, real estate is local and Chester County is one of the fastest growing counties in all of the Northeast and is the wealthiest county in Pennsylvania.  If the recovery is indeed happening you will see the growth and recovery happen here first.

Check out my blog post here, to see the statistics for the first quarter in Chester County.  You’ll see in that post that we have a clear trend of increased sales and a decreasing amount of homes on the market.  If this trend continues then I am convinced that we are full steam ahead in the real estate recovery.

10 Things to Know

#1  Current Market Conditions

2013 residential Spring real estate values are up in the local area. The Spring market of 2013 has stopped a dramatic skid in sold values in the area. In Chester County the average home is $292,000 down 4% over the last 12 months. In Delaware County the average home value is down 8% over the last 12 months. (National association of Realtors NARRPR report)  Pennsylvania real estate as a whole is down 2% in the last 12 months.  There is no real shortage of inventory so our seasonal ( Up in Spring Down in Fall) market may give back some of the gains realized this Spring.  For many homeowners this boost has kept them from having negative equity and losing their house.  Most of the losses are occurring in areas that have a lot of foreclosure and short sale properties.  (urban areas of Delaware County and rural areas of Chester County).  Many stronger areas are showing independence with high appreciation and multiple offers when listings come up.  As always real estate values are subject to factor of location above all else.

#2  Wall Street’s Influence
Wall Street to the Rescue. That’s right the same group that helped to cause the dramatic problems in the real estate market are back in the market and having a positive effect.  Big Wall Street money is buying up the record foreclosures in Phoenix, Las Vegas and other hard hit marketplaces.  They are buying the notes direct from the lenders, buying the properties through new auction houses created for well-heeled investors.  The result is going to be a lot of rental property and stability in the owner occupied markets.
#3  Reverse Mortgages
Did you know that there is a mortgage for people over 62 that requires no credit check, no medical check-up and no income from the borrower?  Because people over 62 are statistically not going to outlast their mortgages,  lenders will give these buyers a reverse mortgage.  It can be given in a lump sum or in monthly payments.  Yes…I said given.  In a reverse mortgage the lender sends money to the borrower each month based on the equity in their house.  The borrower has no mortgage payments and pays only taxes, insurance and upkeep of the property.  If the equity runs out because the borrower out lives the reduction in equity the payments keep on going to the borrower and the lender takes a loss.  It is called a non-recourse mortgage which means they can’t throw you out of the house even though there is no longer any equity left.  Reverse mortgages can also be used to purchase a home typically doubling the price of a home that the borrower can purchase.  Imagine buying a house in a state that has low real estate taxes like Delaware and never paying a mortgage payment again.
#4  Listings on the Internet
It is not the same selling your house today compared to ten years ago. You still need to have to have a clean, updated house with all of the bells and whistles to get top dollar.  You also have to have your house shine in the online marketplace.  If a property does not look good on the internet the buyers will never come to see your property in the first place.  Today most buyers look at virtual tours, up to 25 photos, satellite photos, crime and school reports and comments made from buyers online about the neighborhood and about your house.  It is a gauntlet that your house has to survive before a buyer even comes to see your house.  There is no way to get around this new reality.  More than 9 out of 10 buyers go to the internet first to find a house.
#5  Home Tours
Showing a house is an art.  Have you watched the HGTV real estate programs with the real estate agents who are real ”characters”.  The tv agents talk the whole time that the buyers are looking in the rooms and while the buyers are trying to make up their minds if they like the house enough to want to live there.  I don’t know about you but I don’t want people talking to me when I am trying to make up my mind about something important like buying a property.  In fact, I would prefer to walk through the house by myself pausing and thinking, gauging how I feel in each room and trying to imagine my things hanging on the walls.  Buying a house is an emotional decision.  What do you think would happen if you told the agent to wait outside and if you told them you would call them if you need them?  I can tell you what would happen.  You could probably decide very easily if you like the house or not…once you have the privacy to come to a conclusion.
#6  Cost of Becoming an Agent
Becoming a real estate agent is pretty easy. Making a living as a real estate agent is pretty hard. Not everyone is cut out for the business.  To make it you must be a great salesperson, a marketing expert and a psychologist.  Successful agents need high levels of organization and flexibility and you need to be able to make smart choices with your time and your availability.  To get a real estate license in Pennsylvania you need to take only 60 hours of courses and to pass the state real estate test.  It is about a $500 investment to become licensed and then about $1000 a year in fees and memberships just to call yourself an agent.
#7  Real Estate Agent Responsibilities
Do you want your agent to tell you that a house they showed you was the scene of a triple murder last year?  Do you want your agent to tell you that a hard-core felon lives across the street?  Do you want your agent to tell you that the house is reportedly haunted?  Do you want your agent to tell you that neighbors may have a history of causing harm to children or adults?  It might be a good idea to talk with your agent about where the agents’ responsibilities end and where yours begin because there are several court cases in Pennsylvania that may put an agent in a new position.  Agents may not be able to tell you any of these serious things even if they wanted to.  In Delaware real estate agents are not allowed to divulge the history of a house due to psychological impacts (murder, suspected haunting, dangerous neighbors etc).  The agent may represent you but they may have laws that prohibit them from telling you everything that they know about a house or an area.
#8  Settlement Days
Have you ever bought a house and gone to settlement? It was kind of a crazy rushed experience.  The buyers and sellers both meet in a settlement room with all of their furniture loaded into moving vans. Both move in and out the same day.  The financing and inspections need to be coordinated intricately and precisely.  By the time the three-ring circus is done everyone is exhausted, mad and they usually say I will never move again.  It’s a crazy process.  Did you know that in other parts of the country the buyer and seller never meet.  They schedule casual settlements weeks apart.  The buyer has one.  The seller has one.  They each sign their papers on separate days.  The loans are funded, paperwork is signed and everything happens apart from the settlement day.  Once all of the paperwork is completed the seller stays in the house for a week or so and the buyer moves in a few days later.  There is no fuss, no stress, no days off from work..It is an easy process.  Special insurance policies that we know here as warranty programs guarantee the house condition of the property.  The buyer lets the seller lives in the buyers house for a time.  They call it going to escrow.  Because the title insurance industry is so lucrative and fixed in its ways in Pennsylvania they have no incentive to change the process for the benefit of agents or buyers and sellers.  We get the three-ring circus..the rest of the country gets an organized stress free move.
#9  Interest Rates
Will interest rates be going up soon.  I say yes.  The federal reserve has artificially lowered interest rates to pull the economy further away from recession.  Waiting for interest rates to go down in 2013 is a mistake.  I believe that many buyers will look back on today as a time where interest rates were low, housing prices were low and private mortgage insurance rates were low.  They will look back on this as a time when you could buy a foreclosure property for 65 cents on the dollar.  They will say I shouda, woulda, coulda…dang.
#10  Inspections
What can you expect a home inspector to find in your house if you sell it or if you are buying a house?  Here are the typical things we see:
Mold in attics and basements.  Termites and carpenter ants around window wells and door jambs.  Radon in basements that have rocky soil and sump pumps.  Asbestos in pre 1950 houses.  Frayed electric service cables in houses over 30 years old.  Mis-wired three-pronged outlets.  Plumbing leaks under sinks, toilets and showers.  Poor grading and poor gutter and downspout systems leading to water in the basement.   Chimneys and vents in roofs that require sealing.  Brick chimneys that require pointing and chimney caps.   Windows that don’t operate (broken sashes and broken argon seals)…. These things seem to come up in just about every home inspection.  None of these issues will blow up a sale or cause the buyers or sellers to panic if there are discovered by a professional objective home inspector and negotiated by an experienced real estate broker.