Real estate tips and trends to ring in the new year
It's time to put all of your New Year's resolutions to good use: If real estate (whether buying or selling) is is one of your goals in 2017, then there's never a better time to hit the ground running than in January. Even if you only plan to do a little background research and preliminary searches, taking the first small step is often the most difficult but also the most advantageous - you've got to start somewhere.
We've compiled a number of key real estate tips to set your real estate resolutions off on a good path as well as the important trends that are sure to impact the market. By calculating where you stand in the real estate market and where you may potentially gain, you can turn 2017 into a year of financial security.
First, let's take a look at the many policy and market forces at play and what they could mean for your pocketbook:
Trends that may affect you in 2017
If you've already perused local listings in your area or even contacted prospective real estate agents, kudos to you. But it's not just diligence that's going to close a deal for you - there are several factors affecting your prospects that are out of your hands. Nonetheless, these factors could be sabotaging your real estate search, or potentially providing you with the financial headwinds you need to score big in the new year.
Cheaper FHA premiums are here…
The Obama administration decided to lay a parting gift right into the laps of those with Federal Housing Administration loans earlier this month, as HousingWire reported.
On Jan. 9, annual mortgage insurance premiums will decline 0.25 percent and will apply only to new FHA loans closed Jan. 27 or later. Reducing premiums by 25 basis points will provide homeowners with $500 in savings this year alone.
Buyers that opt for FHA loans typically have less capital to put toward a conventional 20 percent down payment, thus necessitating the need to purchase additional insurance on top of the mortgage. In total, FHA loans provide more assurance that borrowers are capable of meeting payment obligations but also allow a larger number of buyers to get their feet into the real estate door.
This savings could go toward a number of items in 2017, including home renovations, remodeling costs or a host of other real estate-related goals.
...but so are higher mortgage rates
While insurance premiums might decline, mortgage rates are on the whole projected to rise. The Federal Reserve increased its federal funds target rate of the first time in a year during its final meeting of 2016, and many analysts are predicting even more quarterly rate hikes in 2017 and 2018.
While the overnight interest rate increases don't impact average mortgage rates automatically or immediately, they will, in totality, lead to a sharp upward trajectory of expectations and costs for borrowers.
Rates will remain historically low for quite some time, but the window to jump into the market and secure a loan for super cheap is gradually closing with each successive Fed rate hike. That means people who are on the fence but already have the savings built up for a down payment would be best-suited to go ahead and take out a home loan now, at a reduced rate. By waiting even a few months, that same loan from the same lender could be several percentage points more expensive, leading to tens of thousands of dollars in additional costs over the life of the loan.
Sellers likewise might find higher mortgage rates a burden to finding buyers at the right price. If fewer people can afford higher interest rates, then fewer will be contacting sellers.
More millennials, but mostly more boomers
In addition to rates changing, the overall demographic makeup of the American buyer is also undergoing some adjustments.
For years, agents have prepped for the rising tide of millennial buyers despite the cohort's relative lack of capital and financing opportunities compared to previous generations. It appears 2017 will be more friendly to the average millennial borrower, however. Many have another year of upward mobility and wage gains under their belts and are better positioned financially to take on the cost of a mortgage.
But perhaps even more prominent than the number of millennials entering the market is the level of 55 and older activity.
Consumer Affairs reported on recent National Association of Home Builders data and noted baby boomers will have an even larger impact on real estate in the next decade. Those on the younger end of the boomer spectrum are still in the workforce but are wrapping up their careers and solidifying their retirement portfolios; a key cog in this wheel typically includes downsizing to a home that's more economical.
"Older home owners, in recent years, have been able to sell their large homes in the suburbs and buy an energy-efficient right-sized home, often in walkable communities with a wealth of opportunities for activities and social engagement," said Jim Chapman, the NAHB's Housing Industry Council chairman, according to Consumer affairs.
As more boomers find themselves with empty nests their collective move to new homes will affect the types of new homes being built as well as the opportunities for younger generations to now occupy boomers' now-empty homes.
More construction on the horizon
The inauguration of President Trump will likely be accompanied with a slew of regulatory and policy adjustments. For one, Trump is wanting a $1 trillion infrastructure spending bill to be a top priority of Congress, which if enacted could release the floodgates for new construction spending across the country.
Additionally, Fortune Magazine noted that broad-based wage gains, looser credit and tight inventory will dovetail with Trump's call for higher spending. Demand for real estate is very high and borrowers face very favorable conditions in 2017. These components will give builders the reasons they need to boost construction activity.
With these trends in mind, there are a multitude of tips Americans should follow to ensure they aren't losing out on big opportunities.
Tips for winning in real estate in 2017
The new year has a basket of fruitful possibilities for buyers and sellers keen on making promising moves. Whether it's finally finding the home of your dreams or trying to time the market to your advantage, see which of these tips can work for you in 2017:
Move fast and move strategically
It's always been true: The early bird gets the worm. Those who drag their feet on big decisions such as a real estate purchase stand to lose ground in 2017. With demand high and inventory tight, every home is likely to receive a number of offers, and agents will have a lot of business on their hands. The most diligent will be primed to tackle their real estate objectives and do so ahead of their prospective competition.
U.S. News & World Report stated the linchpin to speedily closing a deal is to partner with an agent who acts just as quickly. A responsive agent can be the deciding factor in whether you sit on the sidelines for another day or you sign on the dotted line. A tech-savvy partner in particular could prove most helpful, as can someone who utilizes a simplified transaction process.
Be aggressive and use tools to your advantage
Accompanying acting quickly is being aggressive. Those who see opportunities first, and then act, are suited to achieve their goals much sooner.
Research properties and agents on your own for free. Do as much work upfront as you can to offset any logistics and service costs of working with partners. The more you know, the stronger your bargaining position will be and the more likely you are to jump at an opportunity that arises.
With this level of confidence in your back pocket, you're assured at least a small step up from buyers who may still be timidly dipping their feet into the real estate waters.
Use online tools, apps and digital advice to your advantage - most are free and can help you complete some of the initial legwork of leveraging your advantages.
Don't skimp on staging if you're selling
At the end of the day the key to closing a deal is meeting your counterpart on terms that work for everyone. If you're selling property, the first impression, as always, matters - this will never change. However, you'd be surprised at how many people either don't invest enough into staging their property, both indoors and out, or simply don't want to make the time commitment.
Remove clutter from living spaces, take down artwork or photos that are too brash and focus on creating an environment of optimal square footage and hominess.
This could require moving around or selling furniture, or even purchasing new staging furniture. But, if it helps close a deal more quickly you can likely subtly include some of these costs into the sale price, thereby recouping your wise investment.
Further, each season will bring different staging requirements and fads. A nice, green yard will be more sought after in spring and summer, compared to winter. Vibrant, uplifting colors might also be preferable during warmer season versus more earthy tones in fall. Keep these trends in mind and adjust accordingly.
Keep your eye on March
Real estate activity tends to dip during winter. There are on average fewer transactions completed and buyers are holing up and waiting for warmer weather before they renew their searches.
That's why March is many times a yardstick to be aware of. In several regions of the country, spring comes early and temperatures rise come March, thawing out the dormant, hibernation market. This means buyers are more active and sellers have more opportunities to market their properties.
While there are other parts of the country that remain in winter-like conditions up until May, you can go ahead and kick your real estate search into high gear in March - consider it part of your spring cleaning routine.
March is also on the precipice of a new fiscal quarter, meaning the Fed will be making final decisions on whether it intends to raise interest rates further. If the central bank does follow through with its preliminary dot-plot projections, the federal funds rate could jump to 1 percent from its current 0.75 percent benchmark.
This hike would precipitate a large-scale rise in mortgage rates, likely pushing average rates closer to 5 percent for borrowers.
Even if you're laying low for the time being, view spring as your chance to revive your search and go after the best deals.
With these trends and tips on your real estate radar, what will your pursue in 2017?
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