Clearing up misinformation

We hope everyone had a great holiday weekend! 

In today’s newsletter, we are going to help clarify a lot of misinformation out there about our industry. 

In our second story, we show you data that shows the real effect large investors are having on home sales (spoiler alert: it might not be as big as everyone thinks). In our third story, we show you which renovation projects are worth your seller’s while, and while some are clearly not as valuable as others.

Then in today’s Foundation Plans, we begin part one of our two-part series on refinancing. We tackle some of the most common questions with some simple answers. This is the type of information we love sharing, as it can make any agent truly valuable to clients.

Now, on with today’s Blueprint!

– James and David

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Slight drop in Zillow’s home sale projection

Zillow now expects 4.05 million existing home sales in 2024, down from last month’s prediction of 4.10 million. While the company expects a mild recovery in sales later this year, recent mortgage rate increases have dampened some of Zillow’s growth expectations from the start of 2024. Also in the report:

• Zillow anticipates that home values will decline by 0.9% over the next 12 months. 

• New for-sale listings have seen a notable jump, up 15.5% year-over-year in April and up from 3.8% month-over-month

Our take

We continue to see the effects of those high mortgage rates. They’re making homes less affordable and keeping sales down. But we’re taking a wait-and-see approach to this latest forecast. We need to see whether we get a rate cut from the Fed. If we do, then this forecast goes out the window and all bets are off.

Don’t buy into the investor homebuying myth

There is a widespread belief that large investors are buying up all the homes and keeping average homebuyers from getting the homes they want. This is not true. As the Wall Street Journal and KCM report, even during peak investor buying in 2022, 75% of all single-family homes purchased were by regular buyers, not investors. And the vast majority of those investors buying were not large institutional investors (i.e. those who own 1000+ properties) but small investors who own between one and nine homes.

At the peak of 2022, institutional owners purchased about 2% of available single-family homes nationwide. Since Q4 2023, the percentage of homes institutional investors own has become so small that the number rounds down to 0%. That’s due to rising prices, limited inventory, and higher financing costs.

Our take

We wish more people would see the truth here. Many people believe investors are taking over the market, and they are taking unnecessary action to curb this “problem”. Politicians in both red and blue states are passing laws to drive out real estate investors through heavy taxation and other legislative measures. We need to change everyone’s thinking here. We know it’s an uphill battle, but we ask all of you to share this information as much as you can.

Renovation projects with the highest ROI

Exterior improvements, rather than interior ones, yield the greatest return on investment (ROI), according to research from Zonda. Buyers favor homes with great curb appeal. As you’ll see in the list below, only two interior improvements – a minor kitchen remodel and a mid-range bathroom remodel – had enough of a return on investment to make their Top 10 renovations list. 

Here are the top 10 renovation projects with the highest ROI:

1. Garage door replacement – 194%

2. Steel door replacement – 188%

3. Manufactured stone veneer – 153%

4. Grand entrance upscale – 97%

5. Minor kitchen remodel – 96%

6. Siding replacement | Fiber Cement – 88%

7. Deck Addition | Wood – 83%

8. Siding replacement | Vinyl – 80%

9. Bathroom remodel mid-range – 74%

10. Deck addition | Composite – 68%

Our take

This is an extremely useful report. Every homeowner should have an idea of the ROI of any big-ticket home renovation project. After all, if you’re investing in something to increase your home’s value, and potentially reap a higher sale price, you want to make sure you’re spending money on the right things. Share this report with home sellers looking to maximize their renovation returns. You’ll either be helping them save or make money!

Schematics

The news that just missed the cut

• Use these 16 real estate prospecting strategies to generate new clients

• The “Home Alone” house is on sale for $5.25 million

• How to use a “portable mortgage” if you want to buy a new home but keep your low-interest rate

• Become a top-producing agent exclusively using referrals and past clients

• How industry forecasters see 2024 shaping up

Foundation Plans

Advice from James and David to win the day

Even though mortgage rates are forecast to stay higher for longer, they are also expected to fall throughout this year and next. Buying now and refinancing later makes sense as a strategy, but it raises a lot of questions. In the next two editions, we will be answering the biggest questions surrounding refinancing.

How soon can you refinance after buying a home? – Not every mortgage lender or type of loan allows you to refinance immediately. Some enforce a waiting period. Beyond a waiting period, some mortgage lenders will have their unique requirements for how soon you can refinance your mortgage after buying the home. Here’s a breakdown of what you can expect:

• Conforming loan refinance (no cash out): No waiting period

• Jumbo loan refinance (no cash out): No waiting period

• Cash-out refinance (conforming, jumbo, FHA): 12-month waiting period

• Cash-out refinance (VA): 210-day waiting period

• FHA or VA Streamline Refinance: 210-day waiting period

• USDA loan refinance: 12-month waiting period

How long after your most recent refinance can you refinance again? – There's no restriction on how often you can refinance your mortgage after your latest refinance, provided it makes financial sense for you. However, depending on the lender and the type of mortgage, the waiting periods mentioned above can determine how soon you can refinance again.

When does it make sense to refinance your mortgage? – Refinancing your mortgage may not always make financial sense, especially if the costs outweigh the benefits. But here are a few typical scenarios where refinancing your mortgage is a good move:

• Your home value has increased. If you need cash to pay for big-ticket items and your home value has increased since you first took out your original loan, a cash-out refinance can make financial sense if you get a better interest rate on the new loan.

• You want to convert to a fixed-rate mortgage. If you have an adjustable-rate mortgage and are concerned about future interest hikes, refinancing to a fixed-rate mortgage is a good move.

• Your credit score has improved. Typically, the better your credit score, the better the mortgage rates for which you can qualify. Use the myFICO Loan Savings Calculator to see how much you could save by refinancing your mortgage with a higher FICO score.

• Mortgage rates have decreased. If current rates are lower than when you bought your home, a mortgage refinance could save you money on interest and lower your monthly payments. No matter the latest rates, always check that the math works out in your favor using a mortgage calculator.

• You want a shorter loan term. Refinancing to a shorter loan term can be a solid idea if you want to pay off your mortgage faster. But remember, shorter loan terms mean higher monthly payments, so make sure you can afford them.

This is a large subject so we’ll pick it up in our next edition. In the meantime, use these resources to get a better handle on the subject.

To learn more about Estate Media, visit their website.

Just in Case

Keep the latest industry data in your back pocket with today’s mortgage rates:

“Dare to live the life you have dreamed for yourself. Go forward and make your dreams come true.” – Ralph Waldo Emerson

We hope you had a wonderful holiday and are recharged to get back into the game. Drop us a line anytime. We love hearing from you, and we’ll see you again on Friday!

– James and David