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5 Emerging Real Estate Trends to Get Ready for in 2020

Real estate seems to be one of those investment classes that is always viable to investors, simply due to the versatility of the asset and the numerous ways you can build a positive ROI. Whether you are selling or leasing, or if you’re buying during an economic shift for an affordable price with the intention to wait until the property prices rise again, there are numerous ways you can capitalize on your real estate investment. For example, in 2019 in the US alone, median home prices went all the way up to $316,000, making it one of the best years for real estate agents and experienced investors.

Now that 2020 is well under way, it’s time to prepare for the new emerging trends and adjust your strategy for the new year, whether you are a buyer or a seller. Let’s take a look at some of the top trends you need to get ready for and act on sooner rather than later.

Home prices continue to rise

The growth trend for home prices in the US that has been persevering through 2018 and 2019 seems to the waning, and experts even predict that, while it will continue to rise, the average home price in 2020 will grow by only 2.8%. This means that investors and homebuyers, in general, will be able to take their time selecting the best properties for their needs, without fear of losing out on a good deal and having to overinvest. If you are a seller, you can expect fewer homebuyers to come your way simply because the elevated prices are squeezing them out of the market, however, that also means that affluent buyers will stay in the game.

On the other side, if you are a buyer, you will have to tend to some meticulous financial planning, forecasting, and property research. It’s important that you figure out the monthly mortgage payment according to your budget, and then make sure you stay within that amount. Search for properties that are low on the price list that you can fix up over time and as you build up your financial capabilities. 

Real Estate Trends 2020 (1)

Accommodating seniors and Gen Z-ers

While the majority of homebuyers are still millennials, it’s important to note that other demographics are jumping into the fray and that real estate professionals need to optimize their offers and portfolios for other types of customers. Namely, 2020 will see a rise in senior buyers as well as Gen Z buyers. With millions of people entering their silver years and millions of young people entering their home-buying years, it’s important to adapt and stage every home according to the unique needs of these generations.

This is the only way to appeal to the modern buyer irrespective of age, as both generations will have very different lifestyle preferences and requirements. When you’re showing a home, you have to appeal to their current and future needs, which means thinking strategically about what seniors need vs what young people might be looking for. Remember to emphasize indoor safety for the senior buyers, and high-tech features for the tech-savvy Gen Z-ers.

The rise of display homes

Now that buyers are taking a more careful and calculated approach to property acquisition, it’s important to note that their decision-making process is evolving as a result. Whether they are looking to buy into a property development project that in its early stages, or if they are looking into plots of land to build their own homes, people are becoming very particular about the architects and builders they work with. In countries where property prices are sky-high, such as Australia, this has already become a major trend.

This is also why the popularity of luxury display homes in Sydney has skyrocketed in recent years, and why it will continue to rise in 2020, as Australian buyers want and need to examine the builder’s capabilities in real life rather than looking at online portfolios, pictures, and case studies. Display homes will become more popular in all high-priced regions of the world, so be sure to prepare for this trend whether you are an investor, an architect, or a buyer.

The neighborhood is not a deciding factor

Surprisingly, the neighborhood where the property resides doesn’t seem to be a deciding factor anymore. Yes, buyers will still research the neighborhood thoroughly, but they will be more inclined to give less-than-ideal neighborhoods a pass if the property is more affordable, or if there are other valuable features that the home can provide. For sellers, this is an opportunity to sell a home in a less popular neighborhood, and for buyers who are working with a limited budget, this is an opportunity to find a new home without breaking the bank.

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Technology will fuel market research

Finally, all investors and real estate experts need to invest in technology in order to capitalize on industry trends and market insights this year, and in the years to come. With more and more valuable data flowing around the digital realm, it becomes impossible to conduct predictive analytics manually anymore, which is why you need to integrate AI-driven data analysis into your operation to organize all of that data into actionable reports and create accurate forecasts that will drive your business strategy forward.

Wrapping up

In 2020, many trends that have been persisting in the past will stay relevant, but some will bring significant change to the industry that all parties should be aware of. With these insights in mind, go ahead and optimize your processes for the new year and pave the road to success.

The Important Home Costs To Budget

 

There are many costs associated with owning a home, and first-time homebuyers often do not fully understand or budget for these costs. A home is likely the most expensive thing you will ever own, and repairs can be astronomically expensive. Even small maintenance items add up over time and can strain your budget. This guide will focus on four hidden costs to homeownership that homeowners need to budget for.

 

Closing Costs

When buying a home for the first time, many people forget about closing costs. Fortunately, as the buyer, you are not responsible for paying a commission to your real estate agent. However, there are fees associated with closing, and they can be substantial and varied. These fees include title fees, taxes, real estate attorney fees, inspections and survey fees, among others. There may also be additional documentation required, such as when your home is part of a homeowners association. This is all in addition to the purchase price of the home and any modifications or updates you want to have done. You can generally expect to pay two to five percent of the home’s purchase price in closing costs and will need to budget for this expense.

 

Property Taxes

Property taxes vary widely based on where you live. They are usually assessed by a local municipality, such as a county, and some areas have much higher property tax rates than others. It is also possible for a property to be taxed by multiple jurisdictions, such as when your property straddles the border between two counties. Before you buy a home anywhere, it is important to calculate what your property tax burden will be. Factor this number into the amount of home you can afford when looking to buy. Always stay updated on changes to legislation, which can strongly impact property taxes. Also remember that because the property tax amount is based on the value of your home, it can and does vary from year to year. In most cases, property taxes are due once a year, the date on which varies from state to state.

 

Insurance

Homeowner’s insurance is much more expensive than renter’s insurance and much more complicated. For example, buying an older home might actually increase your insurance costs because of older systems such as plumbing and heating which are more likely to catastrophically malfunction. You also need to consider special coverage if you live in an area that is prone to natural disasters not covered by normal homeowner’s insurance policies, such as a flood zone or an area prone to earthquakes. This isn’t insurance you can go without because the risks of getting caught without it are far too high.

 

Updates

Updates can increase the value of your home as well as additional features you want and will use. Updates can be as simple as painting or as complex as major renovations. It is important to come up with a plan for how you want your house to look and what costs will be associated with these updates. Look at average prices, such as swimming pool prices, to determine how much you might need to budget for each update and the associated maintenance and installation costs. To save money, you can do multiple updates over a length of time rather than all at once. You can also wait for good deals to come around so the updates will cost less overall. For example, decks, sunrooms, and patios are not as popular in the winter, so contractors often offer discounts to encourage people to buy. This benefits contractors because it means they don’t have to lay off workers in the offseason.

 

Homeownership is often an expensive undertaking and a major financial investment. Homeowners and homebuyers need to ask questions and fully understand all fees, taxes and maintenance costs they might be responsible for once they purchase a property. If you properly budget for these costs, however, they will not catch you unaware.

 

What Do Lower Conforming Loan Limits Mean To You?

If you’re in the market to buy a home, you know what I am talking about. If you’re in the market to buy a home and you don’t know what I’m talking about – keep reading! It is vital information!

On October 1, 2011, as part of POTUS’ attempt to repair the country’s housing finance system, Fannie Mae and Freddie Mac will be reducing the size of loans eligible for purchase by them, in other words – lowering the conforming loan limits. In high cost areas (like Los Angeles county) this means that they will only be purchasing loans no bigger than $625,000 (dropping it from $729,000).

What does this mean? Politically, it’s a move away from the government-reliant system we have in place today and a step closer to the privatization of the housing market. What does this mean for a homebuyer? Well, if you are looking to purchase a home with a loan in the $625,000 to $729,000 range – your loan will no longer be considered to be "conforming" and will now be "jumbo." Jumbo loans often have higher rates than conforming loans (which means you will pay more interest on this loan). The government is aiming to reduce the risk taken on by these government agencies, by reducing the amounts of the loans eligible for purchase. But for you potential homebuyers, (in this range) you’re potentially looking at bigger payments.

The next impact affecting homebuyers, is the impact on home prices. Although some argue that this reduction will drive up demand (thereby increasing prices) for buyers to buy before the limits drop, that effect will be very short-lived, and it does not take the stringent financing requirements that most lenders have in place today.

Another drawback for homebuyers is the related increase in costs and fees that the Federal Housing Administration will be charging homebuyers looking to use FHA financing (meaning that they want to buy a home with a 3.5% down-payment). It sounds like looking to limit the taxpayers’ risks is also going to cost the taxpayers lots more money.

Should I Buy A Home?

The question that I get asked most often from client is “Is it a good time to buy a house?” Well, the answer to this question almost always depends on who is asking and what his/her reasons for buying a home are. Often people fall into the traps of wanting to buy a home so badly that they overlook many of the dangers and potentially stressful things that could happen down the line.

Many of my short sale clients have made themselves “house poor” (as the Department of Housing and Urban Development calls it). This is something I often warn my clients about. Being “House Poor” means that “… by putting too much emphasis (and income) into your housing expense, you may be forced to cut other expenditures, whether it be for travel, entertainment or some more important needs, such as education expenses or retirement funding.”

By making inappropriate housing decisions, many have exposed themselves to a great deal of financial exposure. By pushing themselves to their financial limits, they find themselves unable to meet their mortgage payment obligations as that payment takes a higher percentage of their income. When funds get short, other loans and obligations (and credit ratings) can and will suffer.

Additionally by not completely understanding the economic state of the nation, often homebuyers ignore housing values. Economic downturns are often accompanied by, at the very least, stagnation in housing values. And, even though it sounds crazy in markets that have seen double-digit annual appreciation in recent years, occasionally housing values will decline (as they have in recent years). Worse than a situation where it is difficult to pay the mortgage is one where there is the prospect of losing a home–or trying to sell it in a distressed market.

However, for savvy buyers with steady incomes, good credit and supple savings – this is a great time to buy a home. Firstly, mortgage interest rates are at their lowest levels years, meaning lower payments and the ability to devote less income to housing expenses. However, buyers should be warned against buying more house than they need simply because they can afford the payment.

Because less people are getting qualified for loans, there is less competition. As the market softens, less buyers will be in the market, meaning that negotiating position will be enhanced–and, it is unlikely that buyers will have to pay thousands of dollars over the listing price in order to get the home they want. More negotiating power usually means lower prices and lower monthly payments.

 

All in all, it can be a good and a bad time to buy a home depending on who you are and your financial health.

 

For more information, please visit www.crestico.com.

Conforming Loans: What Are They and What Does An Extension Mean To You?

Recent Developments Regarding Conforming Loans

Media outlets are constantly reporting on the state of the economy, the housing crisis and mortgage defaults and delinquencies. Amidst these reports is the constant use of many terms the average American (homeowner or not) may not be too familiar with or even have a complete understanding of their definitions. One of these terms is "conforming loan." Now, we all know what a loan is; generally a borrowed sum of money that is to be repaid with interest to a lender. A conforming loan however, is a specific type of loan. Loans are classified as meeting and not-meeting GSE guidelines. GSEs, Government Sponsored Entities, are financial services corporations that have been formed by congress, the most popular of which are Fannie Mae and Freddie Mac. These GSEs set guidelines for the types of loan programs that are available to homeowners. Conforming loans meet these guidelines and, as a result, are part of the uniform mortgage documents and national standards that have been set for loans.

On October 30, 2009 President Obama signed a congressional resolution regarding conforming loans. This resolution basically allows the loan limit of $729,750 (the limit for high-cost areas, such as Southern California) to be extended into next year. This means that there is now a longer time period available for potential buyers to seek and gain approval for government loans to purchase their homes. Government loans offer advantages such as lower interest rates, government guarantees and lower down payment requirements to homebuyers which make the purchase of a home a bit easier and more widely accessible. This extension is the result of a move by the government in 2008 Housing and Economic Recovery Act which was originally intended to be temporary. Homes are becoming increasingly affordable in the Southern California area, and this is one more step in that direction.

If you are considering buying a home or simply have questions regarding the process, a knowledgeable and qualified real estate agent is the best resource you can have to guide you in making your decisions. Real estate agents are on the cutting edge of breaking news and in the best position to explain your options and most beneficial decisions to you.