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Brace Yourself for Higher Home Loan Interest Rates in 2017

Historically low interest rates have finally begun to rise in recent months, and they are expected to continue this climb. How will this affect your real estate selling endeavors in 2017?

Steady incline
Housing and economy experts concur rates are not likely to go back down. Uber-low rates are in the rear view, with 30-year fixed-rates expected to stay in the 4-5% range by year’s end. A rise to 4.5% is expected, with the worst-case scenario knocking at the door of 5%. This is expected to reduce home sales over the course of the year by about 200,000 homes.

Buyer blowback
As rates climb, buyers may feel pressure to act. At a certain point, their home ownership dream will be stretched to the breaking point, but we aren’t there yet. At today’s rental rates, mortgage rates would have to be in the 7-10% range to equate rental costs.

Cooling “hot” markets
In expensive markets (LA, NYC, Miami) interest rates will push out buyers already struggling to afford homes, even with historically low rates.

Rate lock
Real estate selling may also be stymied, as sellers will effectively be “rate locked” into homes with no incentive to move, slowing the existing-home market and leaving homeowners to renovate existing spaces over higher interest rate new home loans.

Extenuating circumstances
Also playing a role: Income levels, which could stave off a decline so long as stronger economic development continues. The Fed raising short-term rates is also up in the air, as Trump’s inauguration, political appointments, and policy changes take their toll. The Fed raising rates won’t necessarily translate into higher mortgages for buyers – but it will add pressure, especially if they start raising rates aggressively and into early next year. Expect volatility in the next few months as the new President settles in.

How will the economic and political climate effect real estate selling in 2017? Properties Online has the forecast for success.

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The Data’s In, 2017 Looks Like It Will Be a Seller’s Market!

Still bitter with the real estate industry following the market’s 2008 downturn? Real estate selling in 2017 and beyond may offer some karmic retribution. A seller’s market is predicted, though a buyer’s market is not too far off on the horizon.

What “the experts” are saying
Most economists agree 2017 will be a strong seller’s market, though buyers are expected to have their day in 2018 or 2019.

• Matthew Gardner, chief economist at Windermere
Gardner expects inventory to rise in 2017, but not to sufficient levels to support the currently stretched market. Inventory will take a little longer to sell, but as the job market continues to tighten, demand will continue to outstrip supply.

• Mark Fleming, chief economist at First American
Assuming a market with modestly and predictably rising mortgage rates, Fleming believes first-time buyers will drive the market, pointing to a demographic that’s young (millennial), diverse, technologically savvy, and predominately college-educated.

• Jonathan Smoke, chief economist at realtor.com
Smoke sees market potential for a high volume of first-time buyers, but with geography playing a role: Some markets will be above-average in price expectation or sales expectation – but few will be above-average in both. In seller’s markets, supply constraint will be driving the price; In buyer’s markets, “great buys” are pushing sales growth. The good news? Either is good for the real estate selling business.

• Svenja Gudell, chief economist at Zillow
Gudell sees a market skewing to sellers, with more purchases on the outskirts of the city compared to the urban center, with its much higher price tags. She warns to expect higher cancelation rates and lower conversion rates in today’s challenging financing environment, with pent-up demand declining, in favor of more organic activity as interest rates rise.

Looking forward to a better real estate selling future in the coming years? Looks like the market may finally be on your side. Take advantage, with the help of Properties Online today.

Bubble Identification Tips - What to Know Before the Bubble Bursts in Your City

Bubble Identification Tips – What to Know Before the Bubble Bursts in Your City

For agents whose real estate careers survived the 2008 bubble burst, scrutinizing real estate trends in hopes of protecting yourself from subsequent disasters should now be a common practice. What things should you look toward as a means of predicting if things might blow up in your face, yet again?

These real estate trends may signal a market that’s about to pop:

Shaky loans
Subprime lending is risky. Though the FHA still offers loans with minimal down payments (3.5%), lending practices deviating from current elevations in underwriting standards may signal a need for caution.

Over-extended leverage
A bubble means lots of leverage – banks accepting minuscule down payments from buyers as a means of securing the purchase. Current trends this year point to a cycle devoid of leverage. The average buyer is putting down about 35%, and in some markets, cash buys are up, such as in New York City where 45% of transaction are cash.

Home prices outpacing salaries
When home prices rise and salaries don’t, people feel forced to rent or driven to eke out an existence in a home they can barely afford. It doesn’t take a genius to realize that this isn’t sustainable. If business isn’t rising in outlying markets, but only in main metropolises in combination with shaky loans and leverage overextensions, keep watch with a wary eye. (Keep in mind here, we do not mean rapid home appreciation, but unsustainable rapid price appreciation, which fundamentals don’t support.)

Slowing foreign interest
Markets in need of correction may see a drop in international buyer demand. Toss in a natural disaster or disease outbreak, like Zika, and it may be time to break out the ponchos. Case-in-point: Miami.

Rising interest rates
Rising interest rates typically coincide with a drop in affordability, and thus housing demand.
Real estate trends have you feeling the pressure? Properties Online can help ease the bloat. Discover how today.

Commercial Real Estate Delinquency Rates Climb

Commercial Real Estate Delinquency Rates Climb – Watch Out In 2017

Commercial real estate trends point to prices falling by as much as 5% in the next 12 months.

What gives?

A storm is brewing, creating a tsunami of issues for the commercial sector. The global surge in U.S. property investments that drove record values in years passed is expected to wane alongside lower oil prices and disjointed debt markets. Property sales by publicly traded landlords, debt maturities, and tightened regulations are furthering the trend. The instability is creating a volatile commercial real estate selling atmosphere, with uncertainty about U.S. policies following the presidential election worsening matters.

Let it rain

Commercial mortgage-backed securities (CMBS) float amidst a tumultuous market in which borrowing costs for landlords are higher, inhibiting future price growth. Properties in small cities, dependent on Wall Street banks for funding, have been hit especially hard – a global market rout in February sent prices plummeting after Wall Street dealers were unable to provide liquidity when hedge funds were forced to sell CMBS holdings. Regulations such as Dodd-Frank are also not helping the situation, making it increasingly expensive for banks to hold securities.

Cold front

The market has shown signs of cooling since the start of the year, with commercial property values in big cities declining 3% in just the past 3 months. New York, the biggest market, is forecasted to decline as much as 30% over the year. Even REITs (real estate investment trusts) are being affected, with shares trading at prices that undervalue holdings (shopping malls, office buildings, hotels, etc.), leading them to become net sellers.

Bailing out

Despite the expected downturn in commercial real estate trends, the sun could break through the clouds, presenting new opportunities in the form of bargain prices for investors, and opening opportunities for investors to bail out borrowers who’ve come up short.
Are you prepared to weather upcoming commercial real estate trends? Properties Online is here to help. Contact us today.

What is Compass and Why Is It In the News?

What Will a Trump Presidency Look Like for Real Estate?

In his next 4 years as president, Donald Trump could have a major impact on real estate selling across the U.S. Licensed real estate brokers and agents nationwide are looking to Trump and how his time in office could change their industry.
What are some possible outcomes of the Trump presidency?
Trump has centered his platform around deregulation to further the recovery of the financial market, and there are a host of changes that could be made that would affect real estate sales…
• Lower premiums.
While Trump hasn’t articulated much on his housing platform, he has expressed interest in boosting home ownership and cutting fees for Fannie Mae and Freddie Mac. Lowering premiums for FHA loans could offer the boost consumers need to make owning a home an affordable reality.
• Potential reforms.
Fannie and Freddie could also be on the chopping block for cutbacks, alongside such programs as the Low Income Housing Tax Credit and Section 8 housing vouchers.
• Loosening lending regulations.
Trump, alongside the Republican party, have been vocal about changing banking regulations, including significantly altering the Consumer Financial Protection Bureau (CFPB) and the Dodd-Frank Act’s regulations on lenders to replace it with something else that would allow for easier securement of home loans.
• Preservation of mortgage interest tax deductions.
Trump explicitly stated his desire to preserve mortgage interest deduction in a tax plan he shared last year. However, his current plan has yet to detail this issue.
• Construction deregulation.
In Trump’s August meeting with the National Association of Home Builders, he pointed to over regulation in the industry, with some 25% of costs to build a home tied to regulations, and announcing his desire to get that down to 2%. This alone could greatly lower the costs of real estate selling and home ownership.
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