How to Turn Home Owners Into Sellers

Turn Home Owners Into Sellers. Image courtesy of tungphoto / FreeDigitalPhotos.net

Now that the economy is improving, some home owners feel hemmed in to the houses because they don’t want to give up the rock-bottom interest rate they procured in recent years. Essentially, they’re being locked in by the low interest rates — as low as 3.3 percent in late 2012 — that they secured by buying or refinancing over the past few years. Economists worry this group will be reluctant to move now that interest rates are heading back up, exacerbating an already tight housing inventory.

REALTOR® Magazine talked with economic, housing, and lending experts to try to understand how this problem will affect turnover in the coming months and years. You can read more about the so-called “lock-in” effect here.

We also wanted to give you the tools to soothe sellers’ fears about higher interest rates and help them make a decision that makes sense for them. Here are three ways to do that:

1. Add historical context: Remember when interest rates were 18 percent? Well, even if you don’t, reminding clients of the early 1970s and ’80s is necessary for putting today’s rates in the proper perspective place. Buyers still have it pretty good, and the practical effect between 3.5 percent and 6 percent may not be as extreme as it sounds.
2. Add urgency: Sure, interest rates are higher than they were in 2012. But most experts predict they’ll be even higher a year from now. The homebuying process should never be rushed, but if your clients foresee their need to move increasing over the long term, it may make sense to buy while interest rates are lower, relative to possibly higher future rates.
3. Add focus: Remind potential clients that buying a new home really isn’t about rates and figures; it’s about quality of life. It’s about their kids constantly fighting about having to share the same room or their need for a studio space to pursue their artistic endeavors. It’s often harder to predict interest rates over the next few years than it is to predict a family’s evolving housing needs.

Source: “Understanding and Combatting the Rate Lock-in Threat,” REALTOR® Magazine (July 2014)

What Consumers Want Smart Homes to Do

What Consumers Want Smart Homes to Do. Image courtesy of renjith krishnan / FreeDigitalPhotos.net

When it comes to smart homes, consumers are more interested in their security features than the gadgets that control the homes’ appliances. New research by Icontrol Networks, a home technology company, shows that 90 percent of 932 respondents recently surveyed say that security is one of the most important reasons for using a smart-home system. In fact, 67 percent rank it the No.1 reason, and the majority of consumers say security is a must-have in any home automation, according to Icontrol’s 2014 State of the Smart Home Report.

Fire and carbon monoxide alarms, as well as gas leak alarms, were listed as top security features, according to the survey.

“For now, safety and security are driving initial mass market adoption,” says Jim Johnson, executive vice president of Icontrol Networks. “But the convenience associated with a connected home will likely play a greater role as consumers realize how much easier automation makes their lives.”

Seventy-eight percent of respondents also ranked energy management as one of the top features that matter most to them in a smart home. HVAC heating and cooling management was cited as the most important feature in helping to reduce utility bills. Nearly 43 percent of respondents say they’d be interested in replacing their thermostat with a “smart thermostat,” one that automatically adjusts when the home is occupied.

Would home owners be willing to pay for the extra costs in making their homes smarter and more connected? The survey found that 51 percent of respondents would be willing to pay up to $500 for a fully equipped smart home; 32 percent say they’d pay $500 to $3,000.

Source: “What Consumers Want in Home Automation,” Builder (July 17, 2014)

Language Skills Boost Agents

Language Skills Boost Agents. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Real estate agents across the country are leveraging their second-language skills to get ahead in their local markets, particularly as the number of international home buyers grows in the U.S.

About 15 percent of real estate professionals report speaking a second language, according to the National Association of REALTORS®. According to a study by Trulia, the most commonly spoken languages by real estate agents, after English, is Spanish at 12.2 percent and French at 2.5 percent. Russian, Mandarin, and German are close behind. The study searched nearly 83,000 agent profiles in the U.S. to compile their findings.

“Chicago is becoming a global market. I’ve literally been using all four languages since I started doing real estate,” Nadia Rahmani, a real estate professional with Jameson Sotheby’s International Realty told The Wall Street Journal. Rahmani, who also speaks French, Arabic and Spanish, estimates that 40 percent of the home buyers she works with in Chicago are international clients. “Even though they’re fluent in English, they’re more comfortable” speaking in their native tongue, Rahmani adds.

Michael B. Soon, an agent with Coldwell Banker in San Francisco who speaks English, Cantonese, and Mandarin, says that understanding the same language as your client can also make a transaction go much smoother. “You have to look at what they have in China,” Soon says about the real estate options there. “Nothing is more than 20 years old,” which is why he says many Chinese buyers tend to be interested in newly built condos.

Source: “Real Estate Agents’ Secret Weapon,” The Wall Street Journal (July 17, 2014)

New Effort to Reduce Impact of Windstorms

New Effort to Reduce Impact of Windstorms. Image courtesy of Vlado / FreeDigitalPhotos.net

On Monday, the U.S. House passed the National Windstorm Impact Reduction Act (H.R. 1786) to reauthorize funding for three years to study windstorms and how to reduce their impact.

“When a family loses their home in a windstorm, they don’t just have to rebuild their house — they have to rebuild their lives,” said Rep. Randy Neugebauer (R-Texas). “These are truly natural and national disasters. This bill helps promote research that will help save lives, reduce injuries, and lessen damage from windstorms.”

The legislation aims to create efficiencies and new guidelines, providing more than $21 million in annual funding for federal research and mitigation efforts through 2016. “We have found that $1 in investments in resilience against windstorms can result in up to $4 in savings in disaster response,” Neugebauer said.

Source: “House Passes Bill to Fund Windstorm Impact Reduction Research,” Lubbock Online (July 16, 2014) & realtor.org

Decline in Foreclosures Reaches ‘Important Milestone’

Decline in Foreclosures Reaches ‘Important Milestone’. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Foreclosure activity in June was down 16 percent from a year prior, marking the lowest level since July 2006 — before the housing bubble burst — according to RealtyTrac’s Midyear 2014 U.S. Foreclosure Market Report. The report showed a much-improved picture: Foreclosure filings, which include default notices, scheduled auctions, and bank repossessions, were down 19 percent in the first half of 2014 compared to the previous six months and 23 percent from year-ago levels.

Ten states in June reached their lowest level of foreclosures since 2006, including Texas, Georgia, Colorado, Tennessee, Arizona, and Nevada.

“Nationwide foreclosure activity in June reached an important milestone, dropping to levels not seen since before the housing-price bubble burst in August 2006,” says Daren Blomquist, vice president at RealtyTrac. “Over the next six to nine months, nationwide foreclosure numbers should start to flatline at consistent historically normal levels.”

Not all states are out of the woods yet. For example, nine states saw foreclosure activity rise during the first half of 2014 compared to a year ago, such as New Jersey (up 54%); Maryland (up 18%); Iowa (up 10%); Massachusetts (up 4%); and Connecticut (up 4%). The states with the highest foreclosure rates in the first half of 2014 remained Florida, Maryland, Illinois, New Jersey, and Nevada, according to the report.

“While it’s important that any remaining foreclosure infection is addressed promptly to keep it from festering, foreclosures are no longer a widespread contagion threatening to derail the housing market’s return to full health,” Blomquist says.

The metros with some of the largest decreases in foreclosure activity in the first half of 2014 compared to a year ago included Chicago (down 30%); Miami (down 30%); Houston (down 29%); Dallas (down 28%); and Los Angeles (down 20%).

Source: RealtyTrac

Housing Affordability Continues to Soften as Prices Rise

Housing Affordability Continues to Soften as Prices Rise. Image courtesy of Sujin Jetkasettakorn / FreeDigitalPhotos.net

Rising home prices pushed housing affordability down in May compared with last year, making homes a little less affordable to the average family, according to the National Association of REALTORS®’ latest Housing Affordability Index.

The median price for a single-family home rose to $213,600 in May, up 4.9 percent from a year ago. However, the affordability picture may improve in the coming months as price gain slow. Meanwhile, mortgage rates rose 77 basis points from last year (with one percentage point equal to 100 basis points).

“While jobs and income levels are up slightly from last year, they are not growing fast enough to offset price increases,” writes Michael Hyman, an NAR research assistant, on NAR’s Economists’ Outlook blog. “Having money for a down payment can still be a big hurdle for potential home buyers who already pay comparable rent payments.”

Affordability was down in May in all regions of the country, with the South posting the largest drop in affordability in the month, but the West saw the largest slump in affordability year-over-year after seeing the largest price gain of 8.4 percent.

Source: “Latest Housing Affordability Index Release,” National Association of REALTORS® Economists’ Outlook Blog (July 15, 2014)