How the Housing Market Benefits with Uncertainty in the World

It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,

“Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”

Is there a silver lining to this cloud of doubt?

Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.

Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,

“Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”

Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,

“The death toll from the coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”

The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:

How might concerns about global challenges impact the housing market in 2020? Fleming explains,

“Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”

Bottom Line

For a multitude of reasons, 2020 could be a challenging year. It seems, however, real estate will do just fine. As Fleming concluded in his report:

“Amid uncertainty, the house-buying power of U.S. consumers can benefit significantly.”

Mortgage Rates May Be Pressured Higher As Virus Fears Ebb

Mortgage rates were very slightly higher today after being modestly lower over the weekend, but in general, remain very close to the lowest levels in more than 3 years.  They weren't too much higher than current levels even before the coronavirus outbreak took center stage, but the virus definitely deserves credit for the extra downward momentum in recent weeks.  Given that Chinese equities markets are already indicating the financial market psyche has shifted, it may only be a matter of time before US bond markets (which dictate mortgage rates) follow suit. 

That's not to say that bonds must follow stocks.  If that were the case, we wouldn't see bond yields close to all-time lows while stocks are at all-time highs.  Rather, it's simply a comment on the fact that Chinese equities serve as a good barometer for how quickly markets are getting over their coronavirus concerns.  If we assume that bond yields (aka rates) are only as low as they are because of coronavirus, any additional recovery in Chinese equities would likely coincide with upward pressure for interest rates.

Loan Originator Perspective

Bond yields were largely unchanged Tuesday, with no meaningful economic data or new Wuhan virus drama motivating markets.  My pricing mirrored Monday's.  We're going to need some serious motivation for rates to drop significantly from here, I am playing it safe and locking loans closing within 45 days. - Ted Rood, Senior Originator

Today's Most Prevalent Rates For Top Tier Scenarios 

• 30YR FIXED - 3.375 - 3.5%

• FHA/VA -3.25%

• 15 YEAR FIXED - 3.125-3.25% 

• 5 YEAR ARMS -  3.25-3.75% depending on the lender

Ongoing Lock/Float Considerations 

• 2019 was the best year for mortgage rates since 2011.  Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections 
  

• Fed policy and the US/China trade war have been key players (and more recently, the coronavirus outbreak).  Major updates on either front could cause a volatile reaction in rates.  
  

• The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as updates on other factors like trade and viral epidemics. The stronger the data the more rates could rise, while weaker data will lead to new long-term lows.  

• Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders.  The rates generally assume little-to-no origination or discount except as noted when applicable.  Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.

BY: MATTHEW GRAHAM

$100 Million in U.S. Tax Credits to go Toward Housing in Wildfire Areas, Including Napa

“Under pressure from fire survivors and elected officials, California Treasurer Fiona Ma said Friday that $100 million in new federal tax credits will be used as intended to pay for housing projects in 13 counties — including Napa County — that suffered devastation during wildfires in 2017 and 2018.

Sonoma County business and elected leaders had expressed concerns last month that the tax credits might be diverted for homeless housing developments, after a state committee overseen by Ma released planned guidelines for the use of the funding. They insisted the tax credits should be used for housing in fire-affected areas including the North Bay in 2017.

“We want to make it crystal clear that these tax credits are going to help counties that have been devastated by disasters,” Ma said in a prepared statement. “I salute the resilience, dedication, and creativity of these communities and I’m glad we can help them rebuild.”

Ma is chairwoman of the California Tax Credit Allocation Committee, which awards and distributes the federal tax credits. She said in Friday’s statement she is revising the committee’s regulations to give communities in 13 counties torched by infernos until the end of 2021 to seek credits for housing projects. The counties are: Butte, Lake, Los Angeles, Mendocino, Napa, Nevada, Orange, San Diego, Santa Barbara, Shasta, Sonoma, Ventura and Yuba.

Last year, Rep. Mike Thompson, D- Napa, wrote federal legislation directing additional tax credits for the 13 fire- ravaged counties statewide.

After the state treasurer’s office had released proposed guidelines for allocating the additional federal low-income housing tax credits, Thompson expressed his concerns in a Jan. 22 letter to Ma.

Late last month, Sonoma County Supervisor Lynda Hopkins said that, while she understands the urgent need for homeless housing, these federal tax credits should be used only for wildfire disaster recovery. The county lost 5,300 homes in the Tubbs inferno in October 2017 and continues to rebuild.

Federal low-income housing tax credits are the single most important tool used to finance and build affordable housing, said Larry Florin, executive director of nonprofit Burbank Housing based in Santa Rosa.

Developers like Burbank who receive such tax credits can sell the credits to investors such as banks. In this case, the purchased credit can be used as a tax break over 10 years.

“So the $100 million in tax credits becomes $1 billion over that period,” Florin said last month.

Florin and other Sonoma County leaders said previously if the state officials allocate the tax credits according to the damage caused by recent wildfires, North Bay and Northern California counties would end up getting about 30% of the tax credits.

State Sen. Mike McGuire, D-Healdsburg, commended Ma for her clarification Friday on the use of the federal funds.

“This $100 million in tax credits will be a huge shot in the arm for the rebuilding of our communities and desperately needed affordable housing,” McGuire said.”

By: Bill Swindell The Press Democrat

A Lineup of Napa Wine Country Controversies are Coming Back for Hearings

“Several Napa County wine country growth controversies are getting second lives, starting with the recently approved Hard Six Cellars winery along Diamond Mountain Road near Calistoga.

The county Planning Commission heard these cases and rendered decisions. Opponents to the outcomes have filed appeals with the Board of Supervisors.

Hard Six Cellars is an example of a proposed winery that some rural neighbors say is too ambitious for a remote, mountainous location. The Board of Supervisors is to hear the appeal at 9:30 am. Tuesday at the county administration building, 1195 Third St. in Napa.

The Planning Commission approved the winery in October. Appellants Martin Checov and Timothy Bause in the appeal say the project “must now be sent back to the drawing board.”

Among other things, they claim Diamond Mountain Road – “a dilapidated mountain road that is frequently strewn with forest debris” – is unsuitable for the amount of car, bus and truck trips to be generated by the winery. They note that Diamond Mountain is considered by Cal Fire to be at high risk for wildfires.

A county report responds that the Planning Commission didn’t ignore Diamond Mountain conditions. Commissioners considered the opinions of licensed traffic professional and fire officials.

County staff recommends denial of the appeal, which would result in approval of the winery. The Board of Supervisors will make the call.

Meanwhile, other appeals loom. They include:

Bremer Family Winery – This is only the latest controversy involving the Bremer winery near Deer Park in the mountains northeast of St. Helena.

The county sued the winery in 2017 over numerous alleged code violations. A 2019 settlement among other things directed the Bremers to try to legalize footbridges and other structures along a stream – some built prior to their ownership – before the Planning Commission.

In October, the Planning Commission approved the structures within a stream setback by a 3-2 vote. Angwin resident Mike Hackett and Advocates for the Public Trust filed an appeal.

“They are using public trust space to sell wine,” Hackett told the Planning Commission in October. “Are we going to penalize them or are we going to reward them? I think it’s very important you set a precedent for future violators.”

A Planning Commission majority didn’t want the Bremers to have to remove the structures. However, Commissioner Joelle Gallagher expressed concerned that the Bremers’ request was entangled with the lawsuit settlement that didn’t contemplate Planning Commission denial.

Hackett in the appeal writes that the Board of Supervisors cannot hear the appeal due to a conflict of interest, given the county entered into the settlement agreement. He is asking the Board of Supervisors to recuse itself.

The appeal was to be discussed by the Board of Supervisors last Tuesday. The Board continued the matter until March 17.

Mathew Bruno Tasting Room – This project approved by the Planning Commission in December involves turning an 1890s-era Victorian home in Rutherford into a tasting room.

“We knew this would be a great place for a family to enjoy our wines in a setting in Rutherford,” Anthony Bruno told the commission.

The home is at the entrance to Grape Lane, a narrow, private road serving several homes. The Grape Lane Association has traffic concerns, among them plans for tasting room parking stalls next to their access road.

Planning commissioners decided the applicants were doing enough to meet the neighborhood concerns. The Grape Lane Association disagreed.

Attorney Tom Carey wrote the appeal on behalf of the association. Among other things, he pointed to changes made by the Planning Commission at the meeting to try to address concerns.

“Because these revisions were made at the same hearing at which the project was approved, the neighbors not present at the hearing had no prior notice of these changes,” Carey wrote.

Mountain Peak Winery – This is another case raising questions of how big a winery should be allowed in the mountains along a narrow road.

The Board of Supervisors heard an appeal in May 2017 and approved this winery to be built at the end of Soda Canyon Road. But supervisors may have more work to do.

Opponents brought the case to Napa County Superior Court. The court last summer ruled the Board of Supervisors should reconsider the issue based on new information on safety in light of the October 2017 Atlas fire that burned much of Soda Canyon.

Project proponents have challenged this ruling in the state 1st District Court of Appeal.

Walt Ranch – This controversial project involves planting vineyards in the mountains between the city of Napa and Lake Berryessa.

The Board of Supervisors in 2016 approved the project, leading to a court challenge by opponents. An issue has arisen over greenhouse gas mitigation.

Walt Ranch intends to mitigate for the loss of 14,000 carbon-sequestering trees by preserving woodlands. The 1st District Court of Appeal in October questioned whether the woodlands to be preserved are in danger of being cut down.

How and when this issue will be resolved remains to be seen.”

By: BARRY EBERLING beberling@napanews.com

The Top States Americans Moved to Last Year

Some Highlights:

• Americans are on the move, and the most recent Atlas Van Lines Migration Patterns Survey tracked the 2019 traffic flow from state-to-state.

• Idaho held on to the top spot of ‘high inbound’ states for the second time since 2017, followed by Washington State.

• New York was the country’s outbound move leader in 2019, a designation it most recently held in 2014.

The 4 Crucial Real Estate Questions

This is going to be an exciting year for real estate. The upcoming presidential election, a possible recession, and political tensions are all factors leading to confusion and hesitancy.

Will the Presidential Election Impact Real Estate?

Election years can be a tricky time for the market. During this time, both sides of the spectrum will be preaching conflicting statements about the economy – leading to confusion among potential buyers and sellers.

That’s why many people tend to sit back and wait until the election is over before making any major real estate decisions. This isn’t a new phenomenon, but with the market’s current strength and mortgage rates at historic lows, putting off buying or selling could mean less of a reward as more time goes on.

Is a Recession Around the Corner?

When a media storm of recession talk hit the news in 2019, many people affiliated it with another housing market collapse. The fears aren’t surprising, but they’re also not accurate.

Economists are now reporting that if a recession occurs, it may not be until 2021 or even 2022. On top of that, the real estate market is not a likely driving factor for an economic downturn, and the four recessions before 2008 saw little to no effect on the housing market.

What If I Buy a Home and Prices Depreciate?

It’s the greatest fear a new homeowner has. Many prospective buyers may be holding off on their search because of uncertainty tied to the upcoming presidential election and recession rumors.

The market is strong and big hitters like Freddie Mac, Fannie Mae and NAR predict home values to continue to appreciate through 2021.

Buying now is a sound investment, and buyers should take advantage of the current low mortgage rates because waiting to purchase a home could mean paying more.

Should I Take Advantage of Interest Rates Now or Wait?

Essentially this comes down to one thing: why take the chance?

Interest rates are currently at historic lows, and you are probably unaware of their increased buying power. Although the mortgage rates are projected to hold steady around 3.8%, certain factors could change this.

If you hold off on your home search and mortgage rates do rise, you will end up paying more for the same house.

There are major benefits to buying your dream home this year.

Does "Aging in Place" Make the Most Sense?

 desire among many seniors is to “age in place.” According to the Senior Resource Guide, the term means,

“…that you will be remaining in your own home for the later years of your life; not moving into a smaller home, assisted living, or a retirement community etcetera.”

There is no doubt about it – there’s a comfort in staying in a home you’ve lived in for many years instead of moving to a totally new or unfamiliar environment. There is, however, new information that suggests this might not be the best option for everyone. The familiarity of your current home is the pro of aging in place, but the potential financial drawbacks to remodeling or renovating might actually be more costly than the long-term benefits.

A recent report from the Joint Center for Housing Studies of Harvard University (JCHS) titled Housing America’s Older Adults explained,

“Given their high homeownership rates, most older adults live in single-family homes. Of the 24 million homeowners age 65 and over, fully 80 percent lived in detached single-family units…The majority of these homes are now at least 40 years old and therefore may present maintenance challenges for their owners.”

If you’re in this spot, 40 years ago you may have had a growing family. For that reason, you probably purchased a 4-bedroom Colonial on a large piece of property in a child-friendly neighborhood. It was a great choice for your family, and you still love that home.

Today, your kids are likely grown and moved out, so you don’t need all of those bedrooms. Yard upkeep is probably very time consuming, too. You might be thinking about taking some equity out of your house and converting one of your bedrooms into a massive master bathroom, and maybe another room into an open-space reading nook. You might also be thinking about cutting back on lawn maintenance by installing a pool surrounded by beautiful paving stones.

It all sounds wonderful, doesn’t it? For the short term, you may really enjoy the new upgrades, but you’ll still have to climb those stairs, pay to heat and cool a home that’s larger than what you need, and continue fixing all the things that start to go wrong with a 40-year-old home.

Last month, in their Retirement Report, Kiplinger addressed the point,

“Renovations are just a part of what you need to make aging in place work for you. While it’s typically less expensive to remain in your home than to pay for assisted living, that doesn’t mean it’s a slam dunk to stay put. You’ll still have a long to-do list. Just one example: You need to plan ahead for how you will manage maintenance and care—for your home, and for yourself.”

So, at some point, the time may come when you decide to sell this house anyway. That can pose a big challenge if you’ve already taken cash value out of your home and used it to do the type of remodeling we mentioned above. Realistically, you may have inadvertently lowered the value of your home by doing things like reducing the number of bedrooms. The family moving into your neighborhood is probably similar to what your family was 40 years ago. They probably have young children, need the extra bedrooms, and may be nervous about the pool.

Bottom Line

Before you spend the money to remodel or renovate your current house so you can age in place, reach out to a local real estate professional to determine if it is truly your best option. Making a move to a smaller home in the neighborhood might make the most sense.

Mortgage Rates Digging Deeper Into Multi-Year Lows

BY: MATTHEW GRAHAM

Feb 3 2020, 5:39PM

In the world of interest rates, it's good to be a mortgage today.  The dominant species on that world is US Treasuries: the quintessential dollar-based loans (after all, they are loans to the US government).  Loaning dollars to the entity responsible for the dollar is about as foundational as it gets, but I digress.

Treasuries and mortgage rates tend to move in the same direction and by generally similar amounts. That's because mortgage rates are based on underlying bonds (mortgage-backed securities or "MBS") that are fairly similar to Treasuries in most of the ways investors care about.  The prices of MBS dictate where lenders can and should set their interest rates, but ultimately, it's up to the lender.  If they're flush with business and want to slow things down, they might set rates a bit higher.  The same thing can happen heading into a weekend during times of elevated volatility.

Such was the case on Friday.  Lenders had a nice improvement in MBS to work with.  It allowed them to lower rates a bit more than they actually did.  Now, as the new week begins, Treasury yields and MBS alike are indicating slightly higher rates than Friday, but because lenders played it so safe, they were instead able to offer slightly LOWER rates today.  Simply put, mortgage rates are even deeper into multi-year lows now, even though the bond market is pointing to slightly higher rates versus last Friday. 

Loan Originator Perspective

Bond yields hit a bit of a wall Monday, moving upward from Friday's multi-year lows, amid upbeat economic data and potential progress on a Wuhan virus treatment.  We may not be at the very lowest yields here, but it'd take monumentally horrible news to move rates much lower.  I am locking loans closing within 45 days for all but the most risk craving clients.  - Ted Rood, Senior Originator

Today's Most Prevalent Rates For Top Tier Scenarios 

• 30YR FIXED - 3.375-3.5%

• FHA/VA - 3.125 - 3.25%

• 15 YEAR FIXED - 3.125-3.25% 

• 5 YEAR ARMS -  3.25-3.75% depending on the lender

Ongoing Lock/Float Considerations 

• 2019 was the best year for mortgage rates since 2011.  Big, long-lasting improvements such as this one are increasingly susceptible to bounces/corrections 
  

• Fed policy and the US/China trade war have been key players (and more recently, the coronavirus outbreak).  Major updates on either front could cause a volatile reaction in rates.  
  

• The Fed and the bond market (which dictates rates) will be watching economic data closely, both at home and abroad, as well as updates on other factors like trade and viral epidemics. The stronger the data the more rates could rise, while weaker data will lead to new long-term lows.  

• Rates discussed refer to the most frequently-quoted, conforming, conventional 30yr fixed rate for top tier borrowers among average to well-priced lenders.  The rates generally assume little-to-no origination or discount except as noted when applicable.  Rates appearing on this page are "effective rates" that take day-to-day changes in upfront costs into consideration.

Three Reasons Why Pre-Approval is the First Step in the Homebuying Journey

When the number of buyers in the housing market outnumbers the number of homes for sale, it’s called a “seller’s market.” The advantage tips toward the seller as low inventory heats up the competition among those searching for a place to call their own. This can create multiple offer scenarios and bidding wars, making it tough for buyers to land their dream homes – unless they stand out from the crowd. Here are three reasons why pre-approval should be your first step in the homebuying process.

1. Gain a Competitive Advantage

Low inventory, like we have today, means homebuyers need every advantage they can get to make a strong impression and close the deal. One of the best ways to get one step ahead of other buyers is to get pre-approved for a mortgage before you make an offer. For one, it shows the sellers you’re serious about buying a home, which is always a plus in your corner.

2. Accelerate the Homebuying Process

Pre-approval can also speed up the homebuying process, so you can move faster when you’re ready to make an offer. In a competitive arena like we have today, being ready to put your best foot forward when the time comes may be the leg-up you need to cross the finish line first and land the home of your dreams.

3. Know What You Can Borrow and Afford

Here’s the other thing: if you’re pre-approved, you also have a better sense of your budget, what you can afford, and ultimately how much you’re eligible to borrow for your mortgage. This way, you’re less apt to fall in love with a home that may be out of your reach.

Freddie Mac sets out the advantages of pre-approval in the My Home section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

Local real estate professionals also have relationships with lenders who can help you through this process, so partnering with a trusted advisor will be key for that introduction. Once you select a lender, you’ll need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac also describes the ‘4 Cs’ that help determine the amount you’ll be qualified to borrow:

1. Capacity: Your current and future ability to make your payments

2. Capital or Cash Reserves: The money, savings, and investments you have that can be sold quickly for cash

3. Collateral: The home, or type of home, that you would like to purchase

4. Credit: Your history of paying bills and other debts on time

While there are still many additional steps you’ll need to take in the homebuying process, it’s clear why pre-approval is always the best place to begin. It’s your chance to gain the competitive edge you may need if you’re serious about owning a home.

Bottom Line

Getting started with pre-approval is a great way to begin the homebuying journey. Reach out to a local real estate professional today to make sure you’re on the fastest path to homeownership.

Strength of the Economy Is Suprising the Experts

We’re currently in the longest economic recovery in U.S. history. That has caused some to ask experts to project when the next economic slowdown (recession) could occur. Two years ago, 67% of the economists surveyed by the Wall Street Journal (WSJ) for the Economic Forecasting Survey predicted we would have a recession no later than the end of this year (2020). The same study done just three months ago showed more than one third of the economists still saw an economic slowdown right around the corner.

The news caused concern among consumers. This is evidenced by a recent survey done by realtor.com that shows 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur by the end of this year.

Wait! It seems the experts are changing their minds….

Now, in an article earlier this month, the Wall Street Journal (WSJ) revealed only 14.3% of those economists now believe we’re in danger of a recession occurring this year (see graph below):

The WSJ article strongly stated,

“The U.S. expansion, now in its 11th year, will continue through the 2020 presidential election with a healthy labor market backing it up, economists say.”

This optimism regarding the economy was repeated by others as well.

CNBC, quoting Goldman Sachs economists:

“Just months after almost everyone on Wall Street worried that a recession was just around the corner, Goldman Sachs said a downturn is unlikely over the next several years. In fact, the firm’s economists stopped just short of saying that the U.S. economy is recession-proof.”

Barron’s:

“When Barron’s gathers some of Wall Street’s best minds—as we do every January for our annual Roundtable—we expect some consensus, some disagreement…But the 10 veteran investors and economists who convened in New York on Jan. 6 at the Barron’s offices agree that there’s almost no chance of a recession this year.”

Washington Post:

“The U.S. economy is heading into 2020 at a pace of steady, sustained growth after a series of interest rate cuts and the apparent resolution of two trade-related threats mostly eliminated the risk of a recession.”

Robert A. Dye, Chief Economist at Comerica Bank:

“I expect that the U.S. economy will avoid a recession in 2020.”

Bottom Line

There probably won’t be a recession this year. That’s good news for you, whether you’re looking to buy or sell a home.

Housing Inventory Vanishing: What Is the Impact on You?

The real estate market is expected to do very well this year as mortgage rates remain at historic lows. One challenge to the housing industry is the lack of homes available for sale. Last week, move.com released a report showing that 2020 is beginning with the lowest available housing inventory in two years. The report explains:

“Last month saw the largest year-over-year decline of housing inventory in almost three years with a dramatic 12 percent decline, pushing the number of homes for sale in the U.S. to the lowest level since January 2018.”

The report also revealed that the decline in inventory stretches across all price points, as shown in the following graph:

George Ratiu, Senior Economist at realtor.com, explains how this drop in available homes for sale comes at a time when more buyers are expected to enter the market:

“The market is struggling with a large housing undersupply just as 4.8 million millennials are reaching 30-years of age in 2020, a prime age for many to purchase their first home. The significant inventory drop…is a harbinger of the continuing imbalance expected to plague this year’s markets, as the number of homes for sale are poised to reach historically low levels.”

The question is: What does this mean to you?

If You’re a Buyer…

Be patient during your home search. It may take time to find a home you love. Once you do, however, be ready to move forward quickly. Get pre-approved for a mortgage, be ready to make a competitive offer from the start, and understand that a shortage in inventory could lead to the resurgence of bidding wars. Calculate just how far you’re willing to go to secure a home, if you truly love it.

If You’re a Seller…

Realize that, in some ways, you’re in the driver’s seat. When there is a shortage of an item at the same time there is a strong demand for that item, the seller of that item is in a good position to negotiate. Whether it is price, moving date, possible repairs, or anything else, you’ll be able to demand more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Don’t be unreasonable, but understand you probably have the upper hand.

Bottom Line

The housing market will remain strong throughout 2020. Understand what that means to you, whether you’re buying, selling, or doing both.

One Way to Help the Housing Problems in Napa Valley with Manufactured Homes

I wanted to share this article with you that was in the Napa Valley Register on January 26th. It discusses one possible solution to the lack of affordable housing and construction costs/backlog (due to fires).

“A massive factory that churned out submarines to help win World War II has been retooled to tackle a new crisis: the shortage of low-cost housing.

Based on Mare Island’s Building 680, Factory OS manufactures housing units that can be hoisted by cranes and stacked like Lego blocks, similar to the units manufactured by a different company for Turley Flats on Pope Street.

Last September, Factory OS pre-assembled 110 units for a West Oakland project. A stick-built project of that size would take about a year to build. Factory OS installed the entire five-story complex in 10 days.

“We can build something as good as if not better than anything you can do on site,” Factory OS co-founder Peter Palmisano told a group of St. Helena city officials and housing advocates who toured the 250,000-square-foot factory on Jan. 10.

The start-up requires a minimum order of 50 units, but Palmisano said he’s willing to make an exception for St. Helena, the town where he’s lived since 1979.

The nonprofit Our Town St. Helena has been in talks with a local family about building affordable units on a St. Helena property. The site might be suitable for 25-35 units.

Factory OS is offering to team up with Our Town on the project. Palmisano said he hopes the city offers relief from various permitting fees, cuts some red tape during the entitlement process, and demonstrates the political will to get some units on the ground.

“There’s a can-do spirit in this community,” he said. “There’s money, there’s intelligence. We just need the will.”

Palmisano is even offering to install a Factory OS unit on his own west-side residential property as a test case so people can see it for themselves.

The units have a maximum size of 16 feet wide by 72 feet long. Palmisano said he can build them for about $155 per square foot. That includes washers, dryers, lights, water fixtures and kitchen appliances. Even with the additional cost of land preparation and installation, Factory OS’s process is still vastly cheaper than typical Upvalley residential projects.

Since they are built off site, Factory OS units can be installed in a matter of days, minimizing financing costs and the impact on the surrounding neighborhood, Palmisano said.

Mary Stephenson of Our Town St. Helena said units built off-site could provide infill housing all over St. Helena.

“If the community could see this, they would say ‘Oh, this isn’t bad. We could do this,’” Stephenson said.

In addition to managing the development of Meadowood Resort and other major projects, Palmisano served on the board of Bridge Housing Corporation, which developed Hunt’s Grove Apartments, and was a founding board member Our Town St. Helena, which is developing Brenkle Court and recently acquired a property on Pope Street.

Palmisano said he’s worried about a lack of housing for workers and professionals.

“These are the people who are vital to our community,” Palmisano said. “If we’re going to sustain the feeling of our small town … then affordable housing is key.”

Mayor Geoff Ellsworth, City Manager Mark Prestwich, Planning Commissioner Daniel Hale, Senior Planner Aaron Hecock, and Chief Building Official Philip Henry attended the tour, along with representatives of Our Town and Napa Valley Community Housing.

Ellsworth said that with the current council and staff, “this is the perfect opportunity” to try an innovative approach to affordable housing.

Ellsworth said he likes the idea of showing the community a tangible test case to demonstrate that units like Factory OS’s “fit the character of our town.”

“Let’s have the discussion and see what we can do,” he said.

To join an upcoming tour of Factory OS, email mary@ourtownsthelena.org.”

JESSE DUARTE jduarte@sthelenastar.com Jan 26, 2020 Updated Jan 26, 2020

First-Time Buyers Are On The Rise

In the latest Housing Trends Report, the National Association of Home Builders (NAHB) measured the share of adults planning to buy a home over the next 12 months. The report indicates the percentage of all buyers that will be first-time buyers looking to purchase a home grew from 58% in Q4 2018 to 63% in Q4 2019.

The results revealed,

“Millennials are the most likely generation to be making plans to purchase a home within a year (19%), followed by Gen Z (13%) and Gen X (12%)…Prospective buyers in the youngest two generations are primarily first-time buyers:  88% of Gen Z buyers and 78% of Millennial buyers are reaching out to homeownership for the first time in their lives.”

With a high demand from first-time homebuyers and a shortage of inventory in the current market, selling your existing home this year might be your best move. Why? Because when homebuyers begin their search, they’re not all looking for new construction. Many are eager to find a little charm and character in a place to call home – possibly yours.

In fact, according to the same study, there is a significant demand for existing homes:

“In terms of the type of home these prospective home buyers are interested in, 40% are looking to buy an existing home and 19% a newly-built home. The remaining 41% would buy either a new or existing home.”

With showing activity up among buyers and more new construction coming to market, as a homeowner, you have the opportunity to sell your existing house now and move up into a new one, or downsize into a home that better fits your current and ever-changing needs.

Bottom Line

Not all buyers are looking for a newly built house. If you’re ready to take advantage of low mortgage rates and a high demand for your existing home, reach out to a local real estate professional who can help you market the charming details of your current house to potential buyers.

2020 Homebuying Checklist

Some Highlights:

If you’re thinking of buying a home, plan ahead and stay on the right track, starting with pre-approval.

Being proactive about the homebuying process will help set you up for success in each step.

Make sure to work with a trusted real estate professional along the way, to help guide you through the homebuying steps specific to your area.

The #1 Reason It is Difficult to Find Your Dream Home

The headlines in real estate today all revolve around one major point: there is a shortage of homes available for sale. Price appreciation is accelerating again because there is a shortage of homes available for sale. First-time buyers are taking longer to purchase a home because there is a shortage of homes available for sale in the lower price points. Boomers are staying in their current homes longer because there is a shortage of homes available for sale to which they would move. In certain markets, affordability is becoming more challenging because there is a shortage of homes available for sale.

What’s the major reason for this lack of housing inventory?

The issue was examined in a recent article by the National Home Builders Association (NAHB). In the article, Robert Dietz, Chief Economist for NAHB, explained:

“Home building in the 2010s was a story of the Long Recovery. After the Great Recession, the number of home builders declined significantly, and housing production was unable to meet buyer demand…Years of population and household formation growth, combined with relatively reduced levels of home building, have left the market with a critical supply shortage.”

Here are the single-family home construction starts by decade for the last six decades:

Obviously, there’s a current shortage of homes for sale because not enough houses were built over the last ten years. To add to the challenge, the U.S. population expanded by more than 20 million people during the 2010s.

Below is a graph showing the number of starts per every million in population. The last decade shows that starts per population were less than half the average of the previous five decades.

There’s good news coming!

The NAHB article explains that there is light at the end of the tunnel.

How confident home builders are in the housing market is a great indicator of how much building is about to get started. The NAHB/Wells Fargo Housing Market Index (HMI) gauges builder perceptions of current single-family home sales and sales expectations for the next six months as “good,” “fair,” or “poor.” The survey also asks builders to rate traffic of prospective buyers as “high to very high,” “average,” or “low to very low.” Scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as “good” than “poor.”

Here are the HMI readings going back to 2008:

The 2019 confidence reading of 76 was the highest since 1999. The January 2020 index came in one point lower at 75. These readings indicate we should see an increase in new residential construction in 2020. Just last week, NAHB Chairman Greg Ugalde stated:

“Low interest rates and a healthy labor market combined with a need for additional inventory are setting the stage for further home building gains in 2020.”

The increase in housing starts has already begun. According to the January report from the U.S. Census Bureau and the U.S. Department of Housing and Urban Development, single‐family housing starts were up 11.2% and attained the highest level in thirteen years.

Bottom Line

Whether you’re a first-time buyer or a seller thinking of moving up or down, 2020 could be your year with more new construction homes coming to market.

How Buyers Can Win By Downsizing in 2020

Home values have been increasing for 93 consecutive months, according to the National Association of Realtors. If you’re a homeowner, particularly one looking to downsize your living space, that’s great news, as you’ve likely built significant equity in your home.

Here’s some more good news: mortgage rates are expected to remain low throughout 2020 at an average of 3.8% for a 30-year fixed-rate loan.

The combination of leveraging your growing equity and capitalizing on low rates could make a big difference in your housing plans this year.

How to Use Your Home Equity

For move-up buyers, the typical pattern for building financial stability and wealth through homeownership works this way: you buy a house and gain equity over several years of mortgage payments and price appreciation. You then take that equity from the sale of your house to make a down payment on your next home and repeat the process.

For homeowners ready to downsize, home equity can work in a slightly different way. What you choose to do depends in part upon your goals.

According to HousingWire.com, for some, the desire to downsize may be related to retirement plans or children aging out of the home. Others may be choosing to live in a smaller home to save money or simplify their lifestyle in a space that’s easier to clean and declutter. The reasons can vary greatly and by generation.

Those who choose to put their equity toward a new home have the opportunity to make a substantial down payment or maybe even to buy their next home in cash. This is incredibly valuable if your goal is to have a minimal mortgage payment or none at all.

A local real estate professional can help you evaluate your equity and how to use it wisely. If you’re planning to downsize, keep in mind that home prices are anticipated to continue rising in 2020, which could influence your choices.

The Impact of Low Mortgage Rates

Low mortgage rates can offset price hikes, so locking in while rates are low will be key. For many downsizing homeowners, a loan with a shorter term is ideal, so the balance can be reduced more quickly.

Interest rates on 10, 15, and 20-year loans are lower than the rates on a 30-year fixed-rate loan. If you’re downsizing your housing costs, you may prefer a shorter-term loan to pay off your home faster. This way, you can save thousands in interest payments over time.

Bottom Line

If you’re planning a transition into a smaller home, the twin trends of low mortgage rates and rising home equity can kickstart or boost your plans, especially if you’re anticipating retirement soon or just want to live in a smaller home that’s easier to maintain. Consult a local real estate professional today to explore your options.

The 2 Surprising Things Homebuyers Really Want

In a market where current inventory is low, it’s normal to think buyers might be willing to give up a few desirable features in their home search in order to make finding a house a little easier. Don’t be fooled, though – there’s still an interest in the market for some key upgrades. Here’s a look at the two surprising things buyers seem to be searching for in today’s market, and how they’re impacting new home builds.

Homebuyers Are Not Giving Up Their Garages

The National Association of Home Builders (NAHB) recently released an article showing the percentage of new single-family homes completed in 2018. The data reveals,

• 64% of new homes offer a 2-car garage

• 21% have a garage large enough to hold 3 or more cars

• 7% have a 1-car garage

• 7% do not include a garage or carport

• 1% have a carport

The following map represents this breakdown by region:

Homebuyers Are Not Giving Up Their Patios

Patios are on the radar for buyers as well. Community areas are often common amenities in new neighborhoods, but as it turns out, private outdoor spaces are quite desirable too. NAHB also found that,

“Of the roughly 876,000 single-family homes started in 2018, 59.4% came with patios…This is the highest the number has been since NAHB began tracking the series in 2005.”

As shown in the graph below, the number of new homes built with patios has been increasing for the past 9 years. Clearly, they’re a desirable feature for new homeowners too.

Bottom Line

Homebuyers are looking for garage space and outdoor patio living. If you’re a homeowner thinking of selling a house with these amenities, it appears buyers are willing to spring for those key features. To find out the current value and demand for your home, contact a local real estate professional today.

Make the Dream of Homeownership a Reality in 2020

In 1963, Martin Luther King, Jr. led and inspired a powerful movement with his famous “I Have a Dream” speech. Through his passion and determination, he sparked interest, ambition, and courage in his audience. Today, reflecting on his message encourages many of us to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where our families can grow and flourish.

If you’re dreaming of buying a home this year, the best way to start the process is to connect with a Real Estate professional to understand what goes into buying a home. Once you have that covered, then you can answer the questions below to make the best decision for you and your family.

1. How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.

Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. Most agents have loan officers they trust that they can refer you to.

According to ConsumerReports.org,

“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down up front.

If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says,

“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”

Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.

3. Saving Takes Time: Practice Living on a Budget

As tempting as it is to settle in each morning with a fancy cup of coffee from your favorite local shop, putting that daily spend toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score. A survey of Millennial spending shows,

“70 percent of would-be first-time homebuyers will cut spending on spa days, shopping and going to the movies in exchange for purchasing a home within the next year.”

While you don’t need to cut all of the fun out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. To determine the steps you should take to start the process, meet with a local real estate professional today.

Where Homebuyers Are Heading By Generation

Some Highlights:

• Whether capitalizing on job opportunities, affordability, or warm-weather places to retire, Americans are making moves to these top cities to take advantage of the strength in the current housing market.

• A strong economy and lower mortgage rates have made it easier for many would-be buyers to get into the market. According to realtor.com, it just depends on which market.

• To find the top market in your area, contact a local real estate professional.

Homes Are More Affordable Today, Not Less Affordable

There’s a current narrative that owning a home today is less affordable than it has been in the past. The reason some are making this claim is because house prices have substantially increased over the last several years.

It’s not, however, just the price of a home that matters.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by approximately 3% over the last year.

The National Association of Realtors (NAR) releases a monthly Housing Affordability Index. The latest index shows that home affordability is better today than at almost any point over the last 30 years. The index determines how affordable homes are based on the following:

“A Home Affordability Index value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index of 120 signifies that a family earning the median income has 20 percent more than the level of income needed pay the mortgage on a median-priced home, assuming a 20 percent down payment so that the monthly payment and interest will not exceed 25 percent of this level of income (qualifying income).”

The higher the index, therefore, the more affordable homes are. Here is a graph showing the index since 1990:

Obviously, affordability was better during the housing crash when distressed properties – foreclosures and short sales – sold at major discounts (2009-2015). Outside of that period, however, homes are more affordable today than any other year since 1990, except for 2016.

The report on the index also includes a section that calculates the mortgage payment on a median priced home as a percentage of the median national income. Historically, that percentage is just above 21%. Here are the percentages since June of 2018:

Again, we can see that affordability is much better today than the historical average and has been getting better over the last year and a half.

Bottom Line

Whether you’re thinking about buying your first home or moving up to the home of your dreams, don’t let the false narrative about affordability prevent you from moving forward. From an affordability standpoint, this is one of the best times to buy in the last 30 years.