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2014: Year of the Repeat Columbia SC Homebuyer
As prices continue rising in the new year—albeit at a slower pace—investors will begin to ease back from the market, but repeat homebuyers will be there to pick up the slack, according to Trulia's predictions for the Columbia SC housing market in 2014.
Other changes to the Columbia SC housing market in the new year include lower affordability, "less frenzied" home-buying, and a shift in the rental market from single-family homes to urban apartments.
The biggest obstacle for potential homebuyers is saving enough money for a down payment. This hurdle was the most commonly cited challenge in a Trulia survey of current renters wishing to own their own home. Fifty-five percent of survey respondents cited this obstacle, and among young adults (ages 18 to 34) the rate was even higher at 58 percent.
The second most common barrier to homeownership is lack of stable employment—cited among 36 percent of all survey respondents and 43 percent of young adults.
The pace of Columbia SC home price appreciation will slow in the new year, but rising prices, combined with rising mortgage rates, will take a toll on affordability.
Continued price increases will likely lead more Columbia SC homeowners to list their homes for sale, leading to an increase in inventory in 2014.
At the same time, traditional homebuyers will face less competition from investors, and mortgages "should be easier to get" as the new regulatory environment takes shape removing the uncertainty that has made lenders wary.
During the recession, single-family home rentals increased 32 percent, but some believe that several factors will lead to a decline in this trend in 2014. Fewer foreclosures, fewer investor purchases, and loosening credit standards will all contribute to the decline.
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2014 Mortgage Fee Hike Postponed
Planned fee increases that would have added to the cost of millions of mortgages will be postponed, maybe even cancelled altogether.
Currently, borrowers seeking loans backed by Fannie Mae and Freddie Mac are set to pay higher upfront fees starting April 1. The fees, ordered by the Federal Housing Finance Agency in December, are meant to help safeguard banks against risky borrowers who might default.
Housing experts say they will add thousands of dollars to the cost of all mortgages insured by Fannie and Freddie, with the biggest hits taken by borrowers with less than perfect credit histories.
The mortgage industry has been bracing for substantial increases in the price of loans in 2014. It is already costing a bit more to borrow money to buy a home lately, as fixed mortgage rates have drifted to the highest level in three months.
The incoming chief of the FHFA, Mel Watt, said he intends to postpone the fees — and perhaps even cancel them — until more analysis is done. The FHFA oversees Fannie Mae and Freddie Mac.
Even with the reversal, however, mortgages will probably get more expensive over the next few months anyway as the Federal Reserve cuts back on its purchases of mortgage backed securities, a program designed to keep interest rates low.
Stay tuned and we'll keep you updated at this website on mortgage rates, and the cost of getting a mortgage when buying a Columbia SC home.
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New Year Starts With Disappointing Numbers
With a new year starting that will surely bring higher interest rates and tighter lending standards, the housing market is already showing signs of a slowdown, as pending home sales for November increased only slightly from the previous month.
The Pending Home Sales Index from the National Association of Realtors is based on contract signings for the purchases of existing home sales. The index inched up 0.2 percent to 101.7 in November, from a downwardly revised 101.5 in October. Most economists were expecting an increase of 1 percent.
The index is 1.6 percent below November 2012 when it was 103.3. The data reflects contracts but not closings.
Total existing-home sales this year are expected to reach 5.1 million, a gain of almost 10 percent over 2012, but should stay at that level in 2014, and then rise to 5.3 million in 2015, according to the NAR.
The national median existing-home price for all of this year will be close to $197,300, up nearly 12 percent from 2012. This median price is projected to rise at a more moderate pace of 5 to 5.5 percent in 2014, and grow another 4 percent in 2015.
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2014 Real Estate Predictions
National Association of Realtors (NAR) chief economist Lawrence Yun gave some 2014 real estate predictions recently when speaking to the 2013 Realtors Conference and Expo, predicting steadiness in existing-home sales over the next year as prices continue to rise.
Looking over the past year, Yun said he expects existing home sales to be up about 10 percent in 2013 to 5.13 million. Sales in 2014 are expected to hold fairly even at about 5.12 million.
Reviewing price movements, he said the national median existing home price should end this year about 11 percent higher than 2012, climbing to $197,000. Next year's growth is expected to be cut nearly in half at about 6 percent.
Over the past two years, Yun says existing home sales have shown a 20 percent cumulative increase, while prices have gained 18 percent. Meanwhile, incomes have only barely risen, coming up somewhere between 2-4 percent.
Aside from affordability, ongoing headwinds include limited inventory conditions and stringent mortgage standards, both of which are expected to continue as housing starts struggle and business costs remain elevated for lenders.
Sales of new homes are expected to total 429,000 in 2013 and 508,000 next year.
Meanwhile, Freddie Mac has weighed in on 2014 real estate predictions as well, and predicts next year to likely be the first year since 2000 that home purchases outpace refinances.
Predicting exact outcomes for any market is nearly impossible. Uncertain Fed policy and government negotiations over the budget and debt ceiling could disrupt economic activity and throw all these predictions right out the perverbial window in the first part of the year.
Stay tuned to this website and we'll keep you up to date throughout 2014 on Columbia SC real estate trends and news that may affect the industry.
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Biggest Challenge This Winter: Lack of Inventory
Prospective homebuyers hoping to buy a Columbia SC home in the next four months say the lack of inventory is their biggest challenge, but many believe winter is a good time to buy because sellers are motivated to sell and more willing to negotiate.
That's according to a survey of more than 1,300 visitors to realtor.com conducted from Nov. 7-16, which found 45 percent of buyers in the market said there's not enough inventory in their price range.
The survey also found that a surprising number of prospective homebuyers — 19 percent — are planning to do all-cash deals.
Of those planning to buy without taking out a mortgage:
- 29 percent said they are downsizing to a smaller or less expensive home.
- 26 percent are relocating buyers.
- 11 percent are moving up to a bigger or more expensive home.
- 11 percent are buying a vacation home.
While 28 percent said they were planning to buy because they are relocating, 19 percent were existing homewoners downsizing to a smaller or less expensive home, and 15 percent were move-up buyers. Nearly 1 in 5 of those surveyed (19 percent) said they were first-time homebuyers.
There were 2.13 million existing homes for sale at the end of October, NAR said, down 1.8 percent from September. But at October's slower pace of sales, it would take five months for all those homes to sell, up from 4.9 months in September.
Housing analysts generally consider a six-month supply of existing homes for sale as an even matchup of supply and demand — anything less can indicate that demand has outstripped supply.
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How Long Should Selling a Columbia SC Home Take?
If you're considering selling a Columbia SC home, probably one of the questions you're already asking is, "how long should it take?"
In September, the average home took 86 days to sell, down from an average of 116 days one year ago. That's a pretty significant improvement, and the market seems to be getting even better as each month goes by.
Time on the market will vary, of course, depending on many factors. Condition of your Columbia SC home, neighboring homes, the job market in the immediate area where your home is located, and many others. But generally speaking, time on the market is down almost everywhere in the country.
The declining inventory of Columbia SC homes for sale over the past year naturally creates pressure for buyers to more quickly snap up the inventory that is on the market. This demand has been fueled by huge price changes since the market tanked, historically low mortgage rates, and a slowly improving economic climate.
Many homeowners are still "underwater," unable to sell because, despite rising prices, their Columbia SC home is still worth less than they owe on the mortgage. The sluggish job market means fewer homeowners are selling to relocate for work. And tight credit prevents would-be sellers from getting the mortgage they'd need for their next home, trapping them where they are.
As for buyers, they should resist the urge to get into a bidding war or pay prices they're not comfortable with. And most of all, buyers should not feel desperate. More homes will eventually come on the market. On the other hand, prices of those homes and mortgage rates could be a good deal higher in a year or two.
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No Mortgage Limit Changes Before Spring
Mortgage lenders will get at least six months' notice before the government reduces the limit on the size of loans that taxpayer-owned Fannie Mae and Freddie Mac can back.
The Federal Housing Finance Agency, which has already said it was considering lowering the cap to wean the housing finance system off its dependence on the government, said any change would be phased in to avoid economic disruptions.
The housing finance industry had expected officials to lower the limits on Fannie Mae and Freddie Mac-backed loans on January 1, 2014. While it will get more time to prepare for any changes, a decision on whether to lower the limits, and by how much, would still be made later this month (November).
Currently, Fannie and Freddie cannot back loans of more than $417,000 in most markets, although the cap ranges as high as $625,500 in some pricier areas – and up to $721,050 in Hawaii.
Lowering the caps, which were raised in 2008 to help keep the mortgage market liquid during the financial crisis, could make it harder for Americans to obtain home loans and drive up mortgage costs, unless the private market steps in to fill the void.
The two firms do not directly make loans. They purchase mortgages from lenders, which they either keep on their books or bundle into securities that they offer to investors with a guarantee. Those investors pay Fannie and Freddie a "guarantee fee" when they buy the securities.
Some in the industry and lawmakers have tried to challenge the FHFA's legal authority to reduce the loan limits. In addition, a bipartisan group of lawmakers in the House of Representatives have called on the agency to drop its plans to change them altogether. We'll keep you posted on any changes, whatever they may be, right here at this website. Stay tuned!
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Housing Inventory Fell in September
The number of homes listed for sale dropped slightly in September but a growing number of housing markets are witnessing higher levels of for-sale inventory compared with one year ago.
Nationwide, there were 1.94 million homes listed for sale in September, down by 1.7% from August but still the third highest level this year, according to a report from Realtor.com. Listings were down by 2% from one year earlier, but nine of the top 30 metro areas saw year-over-year increases in the number of homes for sale.
The housing market has seen brisk sales through the third quarter of this year, but there are signs that severe inventory crunches from earlier this year are slowly beginning to ease as rising prices give more sellers the incentive to test the market.
Home listings tend to slow in September as the school year begins, and the drop in listings last month was lower than normal.
The National Association of Realtors estimated recently that housing inventory stood at 2.21 million units in September, which was unchanged from August but up by 1.8% from last year's levels. That marks the first time in more than 2 and 1/2 years that the Realtors group has reported year-over-year gains in unsold home inventories.
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IRS Delays Start of Tax-Filing Season (Again)
The IRS announced recently that it will delay the start of tax-filing season by up to two weeks because of the government shutdown. However, taxpayers will still be responsible for turning in their 2013 returns by April 15. (Did you really expect a delay there too?)
This will be the second year that the IRS has delayed accepting tax returns due to legislative matters. Just after Jan. 1 this year, Congress approved a fiscal deal that adjusted tax rates and caused the IRS to push the start of tax-filing season from January 22nd to January 30th. Some taxpayers even had to wait until February or March to file.
The IRS says it will begin accepting tax returns between January 28th and February 4th. The agency plans to announce in December a final date for when the filing season will officially kick off. We'll update you here when that final date is announced.
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How Far Can We Expect Mortgage Rates to Drop?
Mortgage rates have started to go back down, thanks mostly to the Federal Reserve's decision to hold off slowing its monthly bond purchases.
Mortgage buyer Freddie Mac reports that the average rate on the 30-year loan dropped to 4.32 percent from 4.50 percent last week. The average on the 15-year fixed loan declined to 3.37 percent from 3.54 percent.
Both are the lowest averages since July 25.
Mortgage rates are nearly a full percentage point higher than they were in May, when the Fed first signaled it might slow its $85-billion-a-month in bond buy program. But the Fed kept the pace steady after lowering its outlook for economic growth. The bond purchases are intended to lower long-term interest rates, including mortgage rates.
To calculate average mortgage rates, Freddie Mac surveys lenders across the country Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.
So how far can we expect mortgage rates to drop this time? It's pretty much anyone's guess, but experts all seem to be in agreement that we may see rates drop another half to a full point before they level off and start back up again. Remember, at any time, the Fed could reverse their bond purchase program decision, and when that happens, it may be too late for you to do anything about taking advantage of the lower interest rates.
If you've been thinking about looking for a Columbia SC home, consider the time it takes to find the right home, in addition to the loan application process. By the time you go through all of that, rates may have fallen as far as they will fall and could even be starting back up again. Now is the time to get off the fence if you've been waiting on mortgage rates.
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Will Home Prices Rise Next Year?
It would appear that Americans' love affair with real estate has returned. Most think home prices will go up over the next 12 months, especially upper-middle-income households. This according to a new Bankrate.com report.
Among households earning between $50,000 and $75,000 per year, some 65% expect prices to rise and just 6% expect prices to fall. Twenty-seven percent say they will stay the same and just nine percent forecast a decline.
In July, Bankrate established that 23% of Americans believe real estate is the best way to invest money not needed for more than 10 years. That was the second-most common response, slightly behind cash.
Bankrate found that Americans' financial security turned negative in September for the first time since February. The Financial Security Index slipped from August's 100.5 reading to 99.5 in September. Readings below 100 indicate deteriorating financial security compared with one year previous.
The readings on debt, net worth and overall financial situation dropped from August to September. Americans' comfort level with their debt took the biggest hit; those feeling less comfortable than one year ago (21%) now outnumber those feeling more comfortable (17%).
On a bright note, just one-in-eight employed Americans feel less secure in their jobs now than 12 months ago, a new low since polling began in December 2010.
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Damage Control After Disaster Strikes
Last month we covered what to do to prepare for a storm or disaster. This month, let's look at what happens afterwards.
Of course, the size and scope of a disaster, be it from Mother Nature, or a fire, determines just how far a homeowner can go in repairing the damage him or herself.
Often times it will be necessary to call in a professional who specializes in disaster restoration. But if the damage is relatively minimal, a homeowner can sometimes handle most – if not all – of it on his or her own.
Before Getting Started:
Before attempting to clean up and repair any kind of damage to your home, there are some basic considerations to take into account. First and foremost, if your disaster comes in the form of fire, it's vital to wait until the fire is completely out before attempting any restoration. Also, if the homeowner has insurance, he or she should contact the insurance company and notify them of the damage. The insurance provider can suggest ways the homeowner should deal with the fallout and they may even be able to recommend a professional fire restoration company.
Prevent Further Damage:
Those who wish to perform cleanup and restoration themselves must first be cleared to enter the home by the fire marshal or other governing emergency agency such as FEMA. The first step after is to get air circulating. Whether it be fire or flood, you want to do what you can do get air moving in the home. That means opening the windows in the home as well as placing a fan near the affected areas in order to help ventilate the area. Wet items should be dried as soon as possible. Dehumidifiers and fans can be used to dry heavier items like drapes and carpeting.
Carpeting:
Carpeting should be cleaned (preferably by a professional) both before and after general fire repairs as well as flood repairs. Some carpeting may require total replacement. The last thing you want is mold growing under your carpet where you don't see it, but where it can still cause your family a great deal of harm.
Cleaning Walls:
If dealing with fire damage, to clean soot stains from walls, it is necessary to use a chemical sponge – available from cleaning supply companies – or even paint thinner or rubbing alcohol.
If you're cleaning walls from a flood, again, it's necessary to know what you're doing to prevent or stop mold. More times than not, if flooding is the issue, you're better off calling in someone who is certified in mold remediation to take care of things for you.
If a smoky smell persist for months, it may be necessary to hire a professional restoration company to perform a thermal fogging, which should permeate the home to the point it kills all smoke odor. The same goes for mold. And understand, mold can appear many months after water damage has long been dried out on the surface.
These are just a few things homeowners can do to reduce the effects of fire or water damage.
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Mortgage Rates Move a Bit Lower
Mortgage rates moved a tad-bit lower over the past week or so, basically remaining in a holding pattern.
Freddie Mac says the average rate on a 30-year fixed-rate mortgage in the week ending Aug. 29 was 4.51 percent, down from 4.58 percent the previous week. 30-year rates are still close to 1 percent higher than they were a year ago. Mortgage rates still remain low by historical standards.
A 15-year fixed averaged 3.24 percent in the week ending Aug. 29, up from 3.21 percent last week. A one-year adjustable-rate mortgage averaged 2.67 percent, up from 2.63 percent.
Separate reports on housing last week may indicate higher rates have sidelined some buyers.
New home sales fell more than 13 percent in July, while pending sales of existing homes declined 1.3 percent last month.
The Mortgage Bankers Association reports a continued decline in mortgage applications, with applications to refinance an existing mortgage at a two-year low last week.
Mortgage rates have been rising because they tend to follow the yield on the 10-year Treasury note. The yield also has surged on speculation that the Fed's stimulus will slow. But the rate on the 10-year note declined last week to 2.78 percent from 2.90 percent the previous week.
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Will Flood Insurance Cost You More?
Last year Congress passed, and President Obama signed, the Biggert-Waters Flood Insurance Reform Act of 2012. The law extended the National Flood Insurance Program for five years and calls on the Federal Emergency Management Agency (FEMA) and other agencies to make a number of changes to the way in which the National Flood Insurance Program (NFIP) operates. Some of the required changes have occurred already, while others will be implemented in the coming months and over time.
The most important provisions of the legislation are aimed at putting the program on a more solid fiscal foundation and building a catastrophic reserve fund to provide for claims in years with unusually costly flood disasters. To strengthen the NFIP financially, the new law requires FEMA to begin charging rates that reflect true flood risk. The vast majority (81%) of NFIP policies will not be affected by the new law, because their premium rates already accurately reflect their flood risk.
For more information about changes to FEMA’s Flood Insurance Rate Maps (FIRM) and to see if your property is affected, click here.
Rate Changes Already Underway:
Full-risk rates now are being applied to newly purchased property, to property not previously insured, and to policies that are re-purchased after a lapse.
Premiums for older (pre-FIRM) non-primary residences in Special Flood Hazard Areas (SFHA) will increase by 25% annually until they reflect the full-risk rate.
Beginning October 2013:
Premiums for pre-FIRM business properties, severe repetitive loss properties (1–4 residences) and properties on which claims payments exceed fair market value will increase by 25% annually until they reflect the full-risk rate.
Routine rate revisions will include a 5% assessment to build a catastrophic reserve fund.
Anticipated in Late 2014:
Premiums for properties affected by map changes will increase by 20% each year to reach full-risk rates.
Who Won't Be Affected:
Owners of primary residences in SFHAs will keep the subsidized rates until the home is sold; the policy is allowed to lapse; a new policy is purchased; or a string of severe losses is experienced.
Post-FIRM rates for all zone classes will be unaffected by Section 100205 of the Biggert-Waters Act.
Phase-out of Other Discounts:
The new law calls for phasing out discounts, including grandfathering. Grandfathering allows homes that were constructed according to an earlier standard to retain that insurance rating when new maps are issued. Because of the complexity of this issue, FEMA is conducting an analysis before full implementation can take place, scheduled for late 2014. Many discussions are taking place in Congress that may further affect the implementation of this provision.
Premiums also will increase for properties insured by the Preferred Risk Policy (PRP) Eligibility Extension, which had allowed structures mapped into a high-risk area to remain insured at lower PRP rates.
Phase-out of both grandfathering and the Preferred Risk Eligibility Extension will begin in 2014. Rates are anticipated to rise 20% per year over a 5-year period until they reach full risk rates. The CRS discount rates will not be affected by the Biggert-Waters Act..
Preparing For The Next Big Storm
So far, the 2013 hurricane season has been eerily quiet. There's no telling whether the rest of this hurricane season will bring anything like Superstorm Sandy, which flooded more than 150,000 homes, killed more than 140 people, and left about 8.5 million homes in 20 states without power. A relatively minor storm can also cause major damage if it includes high winds, heavy rain, or tree-snapping ice or snow.
Even a simple blackout can happen at any time and last for days. More than a half-million residents were still without power three to four weeks after Sandy struck. And if you think most homeowner insurance policies cover disasters, think again: Flood insurance is just one of the "extras," assuming it's even available in your area.
Some areas are obviously more prone to hurricanes and tropical storms than others. But whether it's hurricanes, tornados, earthquakes, or just a plain old severe thunderstorm, no one is 100 percent immune from Mother Nature. There are some things you can do well in advance of a hurricane, or other super storm.
Things To Do Now, Well in Advance of the Next Big Storm:
Build an Emergency Kit
It should have a whistle to attract help, dust masks for each member of your family, duct tape, a wrench or pliers to turn off water if needed, flashlights and batteries, and local maps. Plan on 1 gallon of drinking water per person per day for at least three days. Include moist towelettes, garbage bags, and plastic ties for personal sanitation. Also consider changes of clothing and sleeping bags or blankets.
Be Prepared for Injuries
A first-aid kit should be stocked with bandages in various sizes, sterile dressings and gloves, hand sanitizer and antibiotic towelettes, a thermometer, pain medicines, tweezers, and scissors.
Check Your Fire Extinguishers
You should have one with a minimum classification of "2-A:10-B:C" on each floor. Check the dial or pop-up pin for adequate pressure each month. Professionally repressurize extinguishers older than six years, and replace any older than 12 years.
Have the Right Phones
Keep at least one corded phone because cordless phones require AC power. A post-Sandy survey also found that cell phones were more reliable than landline phones, though we lack data on differences for fiber and cable vs.older copper-wire systems. Be sure cell phones are charged. And have an out-of-town contact you can call, because long-distance phone service can be more reliable than local service during and after a storm. Be sure to have emergency numbers already pre-programmed into your cell phone. You don't want to be scrambing around trying to find emergency numbers when an actual emergency occurs.
Have Some Ready Cash
Banks and ATMs could be out of service, assuming you can get to them.
Stay Safe During a Storm
Find the safest place. Stay in a central room without windows. Have kids? Ease the fear factor with books, a toy or two, and if you have power or a generator, some movies and video games.
Avoid Electrocution Risks
Don't use any plug-in device if flooding or wetness is nearby. Landline phones can also be a shock hazard in an electrical storm. If you must make a call during a storm, use a cell or cordless phone if possible—or use a landline phone's speaker mode to reduce contact with the handset. Avoid baths and showers until the storm passes. And watch out for downed power lines and live wires.
Use Cars Safely
Obey emergency crews and follow designated routes. If your vehicle stalls in water, shut off the ignition and seek higher ground; the leading cause of Sandy-related deaths was drowning.
Next month in our October newsletter, we're going to cover additional items related to storms, like "Damage Control After A Storm", and "Home Insurance: Are You Really Covered?"