It’s that time of the year again where the experts dust off the Columbia SC real estate crystal ball and look into the future. Whether you’re buying, selling or renting the real estate market affects you in one way or another. Here are a few predictions for 2016.
Columbia SC Real Estate: 4 Expectations for 2016
Home price appreciation may level off. Now that the Federal Reserve has decided to raise interest rates slightly, analysts expect home prices to stagnate. Home affordability will become a bigger hurdle in 2016, especially with recent increases in home values. If prices rise and rates continue to go up, there could be a big increase in the number of unaffordable homes.
An improving U.S. economy may be offset by rising home prices and a lack of credit. Those factors will most likely limit Columbia SC real estate demand and housing growth. The exception will be in markets where rents have skyrocketed, making buying more attractive. Higher rents typically spur home buying. However, when rents are rising it’s usually more difficult for first-time buyers to save money for a down payment and loan closing costs.
A larger number of millennials are expected to buy. According to trulia.com, more millennials say they want to become homeowners between now and 2018. Typically, millennials wait for a job change or promotion or when they’ve saved enough money to buy. While real estate experts don't expect a huge surge of new buyers, they are confident there will be a gradual increase in 2016.
There could be fewer houses on the market. Most experts say the gradual recovery in home prices over the past few years has been both good and bad for people looking to buy for the first time or move into a larger home. This is due, in part, to the Baby Boomers who are slowly retiring and aren’t selling their homes as fast as they once did. As one economist said, “People aren’t going to trade in their low mortgage rate for a higher one.” Instead, Baby Boomers are remodeling rather than buying a larger home with a bigger mortgage and a higher interest rate. In fact, the American Institute of Architects (AIA) predicts home improvement projects will reach a record high in 2016.
Additional new mortgage loan options are needed. With rising interest rates come the need for new loan products with lower down payments. The growth in credit availability has been in the consumer lending arena, not in the mortgage loan industry. Borrowers have been more successful in using their improved credit scores to buy cars and boats, not homes.
New loan originations are expected to rise in 2016 by more than 10% to $905 billion, according to the Mortgage Bankers Association. Still, experts say additional creative mortgage products are needed to make home buying and borrowing more affordable.
Keep up with Columbia SC real estate trends as we move through 2016 by checking out articles we post in the Columbia SC Real Estate Categories to your right. We also post daily tips at Twitter and Facebook.
If the Columbia SC real estate market isn't confusing enough at times, many people have misconceptions that make it even more so. Often these myths dissuade others from entering the home buying or home selling maze. Don't believe everything you hear. Here are a few popular real estate myths.
Columbia SC Real Estate – Misconceptions
Myth: With all the information available online you don't need a real estate agent.
While there is a wealth of information on the Internet, it's probably more important than ever to use the services of a knowledgeable real estate agent. Because buying a home is one of the most important purchases you'll ever make, it just makes sense to have someone on your side to help. Remember, a good agent has probably helped scores of homebuyers. Wouldn't you agree you could use the experience and assistance?
Myth: To buy a home you need a minimum of 20% for a down payment.
This may be the most popular misconception among millennials. This myth was likely the result of the last housing and credit crisis. After that debacle, lenders tightened their credit policies and getting a mortgage without great credit and a huge down payment was difficult. Today, there are loan programs available for borrowers to qualify with as little as a 3% down payment. Despite the overall relaxation of mortgage lending requirements, borrowers must still have a good credit score and sufficient income and assets. However, having to come up with a 20% down payment is a thing of the past.
Myth: The value of my home is determined by a real estate appraiser.
This misconception is probably fueled by misunderstandings in real estate terminology. An appraiser's job is to evaluate a home –– usually for a lending institution –– and determine a market value of the property for lending purposes. The lender wants to ensure that its collateral, the home, is valued high enough to cover the loan amount and minimize the credit risk. The market value of a home is always defined as what a willing buyer will pay a willing seller in an arm's length transaction on the open real estate market.
Myth: The best time to sell a home is in the spring.
While it's true a number of homes hit the market during the spring, it's certainly not the only time to buy or sell. The truth is people buy and sell Columbia SC real estate every day. The best time to sell your home is when real estate inventory is low –– typically in the middle of winter. Similarly, it may also be among the best times to buy, since there are fewer buyers shopping for homes over the winter. Fewer buyers means that sellers who need to sell may accept the best offer.
Myth: An open house isn't all that important in selling a home.
Despite the cliche', most homes really don't sell themselves. A long-standing practice in the real estate marketplace is to conduct an open house for prospective buyers to visit and view your home. Not only can it save time and remedy the need to set up numerous showings of your home, but studies show many buyers are motivated to make serious offers on houses when other prospects are vying for the same home.
Find more information about Columbia SC real estate by checking out the various sections of articles just below the Columbia SC Real Estate Categories heading to your right.
You may have read about auctions as a unique way of selling certain homes in the Columbia SC real estate market. Some creative home sellers have employed this option as an alternative to a traditional listing.
A Closer Look at Columbia SC Real Estate Auctions
There are basically two different types of auctions: "with reserve" and "without reserve." An auction without reserve is also referred to as an absolute auction. An absolute auction is one in which the property seller has not established a reserve, or minimum price, and will accept and agree to the highest bid. A reserve auction implies there is a minimum price threshold that the seller has no obligation to accept. For example, on a home the seller feels should fetch, say, $500,000, he may refuse any and all bids less than the $500,000 reserve.
Auctioning real estate does, however, have certain challenges and an auction may not be the right fit for all properties. Three major factors must be examined before selecting an auction as the best method to sell a property: the home being offered for sale, the seller's situations and desire to sell in a non-traditional manner, and the condition of the real estate market.
- Unique Columbia SC real estate that is difficult to appraise may be good prospects for an auction. Often large estates comprised of substantial acreage in addition to a huge house are candidates for auctions.
- The seller needs to be committed to the concept of an auction and be prepared to act swiftly to accept the highest bidder in the case of an absolute auction.
- The Columbia SC real estate market should have a healthy demand for comparable homes even if the inventory is scarce. And when conditions exist that characterize the real estate market as a “seller’s market,” that’s usually a good sign that an auction may be a good idea. Many experts suggest that a home that hasn't sold after a substantial time on the market may be a prospective candidate for an auction.
When a home is scheduled for auction, sellers often enjoy higher prices fueled by competing bids between buyers who are both motivated to buy and bid with the serious intention of being prepared to act quickly.
On the downside, there are several potential pitfalls that sellers need to consider:
- The seller must pay for the cost to advertise the property in the Columbia SC real estate market even if it isn't sold.
- In the case of a reserve auction, there are no guarantees that the auction will generate a price that meets the reserve.
- There is always a risk that the advertising and promotional activities won’t deliver a sufficient number of bidders.
From the buyer’s perspective, financing — if the purchase isn't a cash transaction — is required to be arranged beforehand. Typically, auctions do not accept bids that are contingent on financing.
Buyers may also experience some prospective problems in the auction process:
- Of course, they may be outbid and may lose their chance to purchase the property.
- They may incur the expense of property inspections or even appraisal estimates before the auction date, with no guarantee they will be the successful bidder.
- They may have to pay required or desired repairs of improvements if they are the winning bidder.
In summary, if you’re intrigued by the idea of auctioning your home for sale, it could possibly be something to consider. An auction could potentially reduce the time your property would be on the Columbia SC real estate market. Experts recommend visiting other auctions to see how they are conducted. Consult a real estate agent and interview professional auctioneers. Armed with a little knowledge and preparation, you will be better equipped to determine if an auction is the best way to sell your home in the Columbia SC real estate market.
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In many ways, the Columbia SC real estate market is still paying for the sins of lax lending practices in the last housing boom. It's been five years since the Dodd-Frank financial reform bill was enacted, putting into motion new credit extension and lending rules for mortgage lenders.
What it Means for Columbia SC Real Estate
The Dodd-Frank legislation encompass reams of documentation and have required Columbia SC real estate mortgage lenders to incur millions in expenses to comply with the regulations. The requirements, however, are fairly forthright and logical. Gone are the days of the extreme risk loan offerings such as negative amortization mortgages or no documentation loans. Today, lenders are required to obtain full documentation from their borrowers for both income and debt, and lenders must further verify the borrowers credit history and ability to repay the mortgage loan. And while that may sound like the proverbial "no brainer," it's one of the basic reasons that led to the Columbia SC real estate meltdown. Lenders granted mortgage loans that borrowers simply couldn't pay back.
The end result has created a current environment in which consumers find it more difficult to obtain financing. Lenders report the average FICO score required on approved mortgage loans are higher than ever before and many point to tighter credit as the reason the homeownership rate is at its lowest in more than twenty five years. Lenders also contend that while loan approvals are still being issued, the additional documentation and verification makes the mortgage approval process lengthy and cumbersome. Borrowers, on the other hand, say it’s not only the process, but the higher credit levels that is thwarting their home buying efforts in the Columbia SC real estate market.
The Dodd-Frank legislation seems to have almost had the reverse affect from what was intended. Mortgage lenders are skittish when it comes to taking risks and, while that’s not a totally bad result, the legislation was designed to improve lending practices and stimulate the Columbia SC real estate market’s recovery.
Time will ultimately tell how Columbia SC real estate will be affected, but one thing’s for sure: since fewer homebuyers are paying cash for homes, affordable and readily-obtainable mortgage loans will always be necessary. Lenders and regulators need to find a common ground on which they can stand, and at the same time offer consumers products that are innovative, attractive and that affordably fit their needs.
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Buying Columbia SC real estate in any market can be challenging enough, not to mention trying to get through the maze in a seller's market.
The biggest challenge facing homebuyers looking for Columbia SC real estate may be finding a home to buy. The inventory of available homes for sale remains low in most areas, especially in certain price ranges. This lends to making it a strong seller's market right now.
Tips for Buying Columbia SC Real Estate Right Now
A seller's market means that buyers have to be smart and prepared if they want to get the right house at the right price. Prospective buyers should start by looking online at homes, narrowing down neighborhood choices and deciding between must-have and preferred features.
At the same time, buyers should visit a mortgage professional and get their financing in order. It's best to start that process before you start looking at homes, in case your credit needs repair or you need to pay off debts to qualify for a mortgage. In a competitive market like we're in now, having a mortgage pre-approval could mean the difference in your offer being accepted or rejected in lieu of another that may come in at the same time.
Expect to provide lots of documentation to get a mortgage. Since the recession, mortgage lenders have become much stricter about documentation, income verification and other paperwork. Well-qualified buyers can still get a mortgage, with rates for 30-year loans hovering around 3.65 to 3.75 percent. Borrowing has become a much more difficult and cumbersome process.
Check out neighborhoods you're thinking about at different times of day. A quiet neighborhood during the middle of the workday may be noisy and crowded at night and on weekends. Get out and walk the streets, talking to people who live in the neighborhood, visiting shops and restaurants and "trying out" your desired location. Drive to and from work during commuting hours to get an idea of what a typical day might be like.
Make a needs and wants list. In a competitive market, most buyers find they have to compromise on location, amenities or condition of a home. It's easier to make a choice when you know going in which features you must have and which you'd like to have but can live without when buying Columbia SC real estate. Be flexible and prepared to compromise.
Be ready to move fast. Buying Columbia SC real estate in good condition and priced right will be a challenge, as most of these types of homes sell very quickly, sometimes the first day they go on the market. You need to be ready to make a decision when you find a home you like.
Don't expect to get a red hot deal. The days of getting buying Columbia SC real estate at a discount are long gone. That doesn't mean you can't ever get a substantial discount on a house that needs work, is in a less popular location or otherwise is in less demand. But in a seller's market, there is usually very little negotiating room on price.
Understand that no house is perfect. Making your offer contingent on a home inspection is a good move, but all homes have small defects. Many sellers won't fix anything, and there is no reason for them to if there is a backup offer waiting if you walk away.
Find a way to sweeten your offer. Most people buying Columbia SC real estate can't pay all cash, but there are ways beyond price to make your offer more attractive to a seller. Have your agent ask the seller's agent if he would like a faster or slower closing. Consider whether you can waive mortgage or inspection contingencies (which does not mean forgoing an inspection), go without a seller-provided warranty or otherwise improve the deal from the seller's perspective.
Don't buy more than you can afford. Lenders will often approve a buyer for a higher payment than he or she can make comfortably. When you're calculating what you can afford to pay, remember that a mortgage payment is only part of the cost of homeownership. Make sure you're taking into account all the secondary costs involved with buying Columbia SC real estate, including insurance, taxes, lawn maintenance, condo or homeowners association fees, repairs and even furniture.
Don't buy a house you don't love. While most buyers may have to compromise on some of the features they want, they shouldn't settle for a home they don’t like. If you don’t find the right home this year, maybe you should rent and try again later rather than make a purchase you'll end up regretting. Make sure you have a really strong emotional attachment to what you want to buy, but don't let it influence your decision on offering price beyond the ridiculous.
Get more information as it pertains to buying Columbia SC real estate in our section on Columbia SC Home Buying Tips to your right under Columbia SC Real Estate Categories.
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