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Cost of Building Materials, Homebuilders, and the Housing Market – July 2021

by Georgina Saunders

The housing market has been as hot as the day is long. Are we finally beginning to see a cooldown?

Although the housing market is still expected to favor sellers, we may be at a tipping point. Prices have risen so dramatically that buyers appear to be backing off, and home sales seem to have slowed.

Market Temperature Is Relative

Even with slowing sales, we still see bidding wars and cash offers over asking price. These will likely continue, especially for valuable properties in desirable locations. What we are seeing now is probably a softening of the housing market. Days on the market for properties is increasing, the amount of price cuts are going up, and properties are sitting for a bit longer, especially if they are not the crème de la crème. All this is thanks to a decrease in demand.

Lack of Affordability Is the Coolant

After experiencing a housing surge through the pandemic, the number of mortgage purchase applications appears to be close to pre-pandemic levels. According to a new Redfin study released earlier this week, home sales fell 1.2% from May to June, the largest drop at this time of year on record since at least 2012. In June,­­­­­ we entered a new phase of the housing market; home sales cooled because prices have increased beyond what many buyers can afford.

Builders Still Deal With High Material Costs

In the meantime, builders struggle with supply shortages, elevated costs for building materials — particularly lumber —  which has skyrocketed to more than 500% above its January 2020 level. While lumber prices have decreased slightly, those relative “savings” have not yet been realized by remodelers, builders, or consumers yet.

Bullish Builders?

Why are Builders & Developers being so bullish while unemployment ticks up? Because they recognize an opportunity when they see one. Here are two key factors:

  1. Home price growth in the last 12 months: 15-20% year-over-year growth, according to K. Schiller, gives builders an opportunity to profit by selling new homes while demand is hot, and
  2. Interest Rates are relatively low: It is easier and more affordable to get financing for newly build homes.

Housing is not a “Recession-Proof” Market

Is the housing market immune from the effects of other sectors of the economy? Not exactly. In an effort to support the economy in the face of the COVID-19 pandemic, the government chose to intervene, by means of the following:

  • Foreclosure and Evictions moratorium: preventing those economically impacted by the pandemic from losing their homes. (expiration at end of July)
  • Extended Unemployment assistance: to give financial support for those whose jobs may have been lost due to the pandemic.
  • Stimulus Checks: to lend financial support for the general economy at large.
  • Lower interest rates: the US Treasury has been buying mortgage-backed securities, creating artificial demand to drive down interest rates.

These factors have made it hard to see the effects of the US having lost 6 million jobs from the nation’s pre-covid levels.

However, not all areas in of the US economy have grown much over the last year. In fact, during the job losses, the accumulated debt, and the decline in legal immigration due to COVID, fundamentally, the demand for homes and apartments is not increasing that much. However, the permitting of New House & apartments and the construction of these is increasing a lot to help give relief to the housing shortage that we have been experiencing for several years. The increased inventory may also help bring balance to an overheated market.

Need a hand navigating the housing market?

If you are interested in buying a new or next home, refinancing your current home, or looking to fund a renovation, Benchmark is ready to be in your corner.

Contact your local Benchmark branch. Contact us today for personalized information. Call me yourself or request a call from me. WeI would be honored to provide you with our famous excellent service.

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Sources:

https://www.nahb.org/news-and-economics/industry-news?q&sortBy=relevance&sortOrder=asc&page=1
https://www.ghba.org/news/
https://www.nar.realtor/
https://reventureconsulting.com/insights/
https://www.housingwire.com/category/mortgage/
https://www.housingwire.com/category/real-estate/housing-market/

Tips For Home Buyers In A Low Inventory Market

by I Am Benchmark

Housing inventory is one of the factors that can dramatically affect the temperature of the real estate market. Less inventory means potentially more competition and higher prices. Whether you’re a buyer or currently in the seller market, this can determine your strategy. Like most investments or assets, housing inventory can fluctuate anytime. This is why it’s important to gauge your options before buying a property. 

Quick Update: Real Estate Industry Trend 


Despite the ongoing economic challenges, housing prices continue to rise. This just shows the resilience of the real estate industry. As many experts have predicted, home buying and selling prospects have significantly improved in September 2020 from pandemic lows. Homebuyers are moving much faster than this time last year. According to the forecast, this upward trend could continue for three to five years. 

Low Mortgage Rates: Biggest Factor in Today’s Housing Inventory Shortage! 

Image source from Mortgage News Daily

According to an article recently published by Business Insider, low mortgage rates are one of the main reasons for the current housing inventory shortage. Several reports also show that a house is the hottest “pandemic purchase” in the country. 

Today, property investors, realtors, and even casual homebuyers are now on the hunt for the best deals they can get. This makes it more challenging for buyers to find a property that suits their budget and needs. 

Let’s have a look at these key takeaways: 

  • Residential properties have become a valuable asset, as more and more Americans take advantage of low mortgage rates.
  • Existing home sales continue to surge forward for the last 3 months since the real estate market reopened from the shutdown. It soared to a 14-year high in the previous two months. There are also reports of upcoming home sales. 
  • Experts’ forecasts revealed that the country may experience a housing inventory shortage for the next coming years. There are new residential property projects, but not enough to keep up with the demand. 

Other Important Predictions From Industry Experts 

Buying a house is a big investment. Whether you’re doing this for personal reasons or as a future investment, it’s always better to keep learning about the real estate market. A good way to do this is to consider investors’ expert opinions. Here are some forecasts for the real estate market from several experts:

The demand for refinancing and housing loans remains at large 

The high demand for refinance and housing loans has raised the competition among realtors, property managers, and lending officers. Many mortgage organizations, particularly new companies may have a hard time competing. Potential buyers may also experience some delays with loan applications. 

Homebuyers need to explore more options when purchasing properties

Due to the housing inventory shortage, homebuyers need to exert more effort when looking for prospect properties. Be resourceful. You might want to check out some auctions, foreclosures, short sales, and bank-owned properties. 

Location will still be one of the keys

Homeowners are adapting to a new lifestyle due to the current pandemic state. However, due to this upward trend and housing inventory shortage, it may be difficult for homebuyers to find the perfect home for themselves or their families. 

The rise of new mortgage company startups and lending officers 

Despite the global crisis, the US housing industry still looks solid,. This means many investors may be looking for opportunities to join the bandwagon, so don’t be surprised if there are more mortgage organizations in a few months or so. 

Notable Reminders for Homebuyers 

Although now is a good time to buy a house or invest in a property, the entire process can be a lot more challenging due to the housing inventory shortage. As a homebuyer, it’s important to find a trusted mortgage broker or loan officer. These professionals can help simplify the process for you. Just make sure to choose loan officers with several years of industry experience. 

Benchmark is one of the leading mortgage companies in the United States. For more than two decades, we have helped our clients find the right loans and manage their mortgage needs. We have seasoned mortgage consultants in over 80 branches nationwide, ready to discuss the best home buying options that suit your budget and needs. Through the years, we’ve been delivering excellent customer service, by providing competitive rates and the most efficient loan processing! 

So, if you’re looking for an expert loan officer you can trust, send your loan application today! 

Is Buying A Home Really More Expensive Than Renting?

by Jason Haeger

If you rent, you probably have good reasons. I bet that “paying my landlord’s mortgage”, “noisy neighbors”, or other caveats aren’t among them. Look, we know that owning isn’t right for everyone. As much as we write about why owning a home is better than renting, there are legitimate reasons for choosing to rent. For one thing, while renting may require a deposit, it doesn’t require a down payment. Renting is often the first choice for someone who wants or needs to be able to move with minimal hassle, or for someone whose focus is too occupied to be concerned with managing repairs and maintenance.

Whatever your reason, there is little doubt that most people probably want to eventually own their own home, even if not yet. If your reason is financial, you may think that buying is more expensive than renting. On one hand, you may have a point. On the other hand, the long view casts a long shadow of doubt on that assumption. Even if you plan to rent for awhile longer, educating yourself is always a good idea, especially if you plan to one day own, rather than rent, your own home.

Let’s talk about it.

Costs of Buying and Owning

Let’s talk about equity.

Before we jump into the actually costs of buying and owning your own home, It would be shortsighted to not discuss how equity plays into the equation. For starters, if you don’t know what equity is, it is just the portion of a whole asset that you own. It can be calculated by subtracting the remaining loan balance from the total value of the home. This is a major reason why a Self-Made Millionaire Told Millennials To Buy A Home three years ago.

With every mortgage payment, a portion of it goes toward the principal balance of the loan. (See: Why Buying Is Investing) This means that, without any extra effort on your part, your net worth grows by the amount of the principal portion that you pay each and every month. How much of your rent adds to your net worth? Oh.. sorry, I didn’t mean to make you feel bad. When you rent, you add to your landlord’s net worth, not your own net worth. Hey, at least your money is helping someone, though, right? Let’s move on.

Do you need a lot of cash for a down payment?

That depends. How much how do you want to buy? How much do you consider to be a lot? The truth is, you don’t need as much as traditional wisdom may have led you to believe. In my last article, Owning A Home May Already Be Within Reach, I talk a little more about that. There are conventional loan programs that require as little as 3% down, depending on your particular scenario. Assuming a $250,000 purchase price, 3% amounts to $7,500. However, a down payment is just putting your own investment dollars into the transaction. A down payment reduces your liability, and while you will no longer have the cash in hand after the transaction, it will not reduce your overall net worth. On the contrary, it could be the vehicle that gets you on your way towards a higher net worth than you would have access to otherwise. See a previous article we published, called Homeowner Average Net Worth 3,600% Higher Than Renter.

What about closing and other transactional costs?

Ah, closing costs. Sometimes surprising first-time home buyers, the purchase of a home requires a lot of moving parts, and many parties who work together to make this transaction of real estate possible. Apply the economic principle of “There is no such thing as a free lunch” to the purchase of a house, and it’s logical, really. So how much are they? That all depends.

Generally speaking, home buyers will pay roughly 2-5 percent of the purchase price in closing and transactional costs. These can be seen as true costs, as they do not translate to equity in the purchased home. There is almost always room for negotiation on these, so it’s worth talking to your loan officer about this ahead of time. It is their job to put together a mortgage package that fits nicely with your own personal financial situation and goals.

There will be other costs of ownership.

When the plumbing needs work in your apartment, you know what to do. You either call your landlord, a property manager, or the maintenance number. At some point, someone will come to your apartment to do the necessary repairs. Simple.

When you own your home, you are on the hook for arranging the repairs yourself. Sure, there are home warranty packages you can purchase that cover certain repairs, but you’re on the hook for setting that up, too. Don’t be intimidated by this, though, because home warranty sellers are anxious to trade their promises for your hard-earned money. The debate about whether a home warranty is worth it or not is for another post.

Another option is to find your own contractor. This sounds like more work, but this is actually a huge advantage. Want to upgrade? Go for it. Find a killer deal? You’re free to call whoever you like. Depending on the repair, you may be able to DIY and learn a new skill while saving your money.

No matter which way you go about it, repairs and maintenance costs will come directly from your pocket. Do not gloss over this fact when considering how much house you can afford, or you might find yourself “house poor”. Remember, however, that homeownership is not a quick win. It is a long game of wealth accumulation. That’s probably not even the top reason why people buy homes. What’s your motive?

Opportunity Costs

Like every other decision you make, there is an undeniable opportunity cost to buying a home. When you buy a home, you’ve lost access to the money that you used as a down payment. Maybe you wanted to use that money to pay for college, start a business, or save for a rainy day. Then again, maybe you recognize that the better option for you is to put it into a real asset like a home.

Another factor to consider is flexibility. You lose the opportunity to move in a hurry. If location flexibility is important to you, it can be beneficial to only have to pay a fee to break the rental contract and go at your convenience. If you own a home,  you will either need to keep paying the mortgage for a home you’re not living in while paying for rent or a new mortgage for a home in your new location, or you will need to coordinate the sale of your home with your planned move. When you sell, you are taking the equity you’ve accumulated in the home in cash, which is difficult to see the down side of. You can also potentially keep your previous home, and make it available to rent to someone who could then help pay the mortgage for you with your asking rent price.

Your situation is your own, and it’s your responsibility to decide what is best for you. I sincerely hope you find this article helpful when you make that decision.

Costs of Renting

There is no such thing as a free lunch, and there is also no such thing as a free home.* When you rent, the most obvious cost to you is just that: rent. Whether you think your rent is a good deal, or whether you think it’s too high, the rent must be paid. Your rent helps pay for your landlord’s mortgage, adding to his (or her) net worth. Unfortunately, there is no long term fiscal benefit to the rent payment. It especially doesn’t help when the rent price goes up.
* Unless you live with family.. or other less common exceptions.

Lack of Privacy

Since your home is not your own, you are at the mercy of your landlord, their property management, and local laws for your personal safety and security. Have you ever heard your neighbors arguing through the wall? Has a party gone on in the unit above you until well past a reasonable hour? Do the neighbors’ kids not understand what ‘courtesy’ means?

See: Owners Enjoy More Privacy and Security.

I’m not saying that buying means you get to choose your neighbors, but you can at least choose your neighborhood, and buy a single family home with no attached neighbors, if that’s what you want to do. If you buy a house with a yard, you have a green space to enjoy without having to go to a public park or courtyard just to enjoy the fresh air.

No Personalization

If you rent, you give up the option to really make your (well, your landlord’s) home your own. Do you want to change the paint color, wallpaper, tile, or carpet? You have to either get permission, do the work yourself, or both. With the costs involved, you probably won’t want to invest in your landlord’s equity with your own cash. I don’t blame you, especially since one of the benefits of renting is its transient nature.

Opportunity costs

Renting means giving up any future possible financial gains on your residence, because it’s not yours.  (see: This New Year, Reach Your Dream of Homeownership for a little math on this). It’s possible that you can see any of the previous costs as opportunity costs as well. With a financial stake in your community, you will be more invested in the culture and politics of your neighborhood and your hometown. This is not to say that you cannot also be personally invested if you rent, but that may come from owning or operating a local business rather than renting a home.

The Answer Is Ultimately Subjective

“Expensive” is relative. Expensive compared to what? Does buying a home come with a lot of cost, including upfront costs? Yes. Is it cheaper to pay rent, without gaining equity, for decades? No. However, is the cost worth it to you? Ultimately, that’s the question, isn’t it? I don’t know your particular life circumstances, goals, or timelines. However, you do. This is an answer you will need to arrive to on your own, based on your own priorities.

More recommended reading: Rent or Buy? A Fool, Do Not Be

If you are curious to see specific numbers to bring clarity, you will want to talk to one of our mortgage professionals. At Benchmark, our loan officers specialize in tailoring the best matching loan arrangement for your personal goals and financial situation. Find your branch, and contact them for more information.Contact us today. It would be our honor to help you decide what’s best for you.Please call me or request a call. I would be honored to be part of helping you decide what’s best for you.

 

Benchmark brings you home.

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Owning A Home May Already Be Within Reach

by Jason Haeger

Have you told yourself that you’re too _____ to buy a home? The blank could be almost anything. Whether you think you’re too broke, too poor, or your credit score is too low, are you allowing an invisible script to prevent you from attaining your dream of owning your own home?

Just a side note: You may also be interested in Top 5 Myths About Home Buying in 2020

You don’t have to be rich. You don’t have to have a 750+ credit score. You don’t need $50,000 in savings. Don’t believe me? Sit back, grab a cold drink, and hear me out.

Big Down Payments Are Old Hat

If you can scrounge up ~$10k for a down payment, I wager that you can probably buy a home. It’s not a sure thing, of course, but hear me out. While a 20% down payment is excellent wisdom, it isn’t a requirement. Depending on the loan type, and where you buy, you could be required to pay less than 5% down to get into it. FHA loans require 3.5% down, which is less than $10k, assuming the median sales price of $248,867*. There are some conventional loans that require as little as 3% down. That’s ~$7,500, assuming a sales price of $248,867.

Let’s assume you don’t have the full ten grand lying around in a checking or savings account. Some, or even all, of your down payment can come from gifts from family, depending on certain restrictions. The point is that you maybe shouldn’t let your savings dictate your eligibility. Even if you haven’t been prioritizing your savings, how long do you think it would take to save up? I don’t pretend to know or understand your financial situation, but it may come down to something as simple as organizing your priorities.

* https://www.zillow.com/home-values/

Your Credit Is Probably Fine

The average FICO credit score in the United States as of September 10, 2019 was 706**. In fact, as of January 13 of this year, 59% of people in the US have a FICO credit score greater than 700, and only 18% have a credit score that is considered subprime***. For everyone else, there is probably a mortgage product or program that suits your needs. I don’t pretend to know you or to know about your finances, so take that with a grain of salt. None of this is a guarantee, but I’m guessing based on averages.

Even if your credit isn’t where you want it to be yet, there are such things a conditional approvals. To learn more about this, it’s best to contact a mortgage pro. I might have a suggestion about how to find one at the end of this article.

** https://www.fico.com/blogs/average-u-s-fico-score-ticks-706
*** https://www.experian.com/blogs/ask-experian/consumer-credit-review/

Your Personal Debt Balance Isn’t That Important

The total balance of your personal debt isn’t a very important factor in qualifying for a new home loan. Once again, I don’t pretend to have a clue about your personal finances, so forgive the section title. Your debt balance is important, but probably not when it comes to buying a home.

If you are worried about your student loan debt, don’t be. This kind of debt is a little more complicated, but it can be based on your monthly minimum due or 5% of the balanced divided by 12 months, unless you’re in deferment for more than a year past the closing date. Like I said, it’s complicated, but it’s probably not preventing you from buying a home. The only way to find out how your particular student loan arrangement affects your ability to buy a home is to talk to a mortgage pro. Don’t worry, we’ll get to that soon.

If you have any other kind of personal debt, only the minimum payment as listed on your credit report matters. No matter your debt, this is what you need to know. The equation is called the “debt to income” ratio, or DTI. This is a ratio of your monthly financial debt obligations and your monthly income. That helps determine how much house you can afford, when coupled with your down payment and creditworthiness.

Asking Never Hurt Anyone

If you dream of owning your own home, like I once did, the only way to really know what your options are is to talk to a mortgage pro. If you only remember one tip from this short article, this is it. Nervous? I understand. So do the pros here at Benchmark.

Find your local Benchmark branch, and reach out to them.Contact us however you want to find out more.Give me a call, or request one from me to explore your options.

Even if the answer is “not yet”, you’ve made the first step towards achieving your dream, and your Benchmark loan originatorwemy team will be with you every step of the way.

Benchmark brings you home.

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Strategies for A Successful PCS Move

by I Am Benchmark

Active duty service members move every 3 years on average. For military families, frequent relocation can create added stress, as you have to find new housing, coordinate the logistics of a move, and establish new roots in an unfamiliar place.

At Benchmark, we want to help alleviate some of that stress, and help ensure a smooth transition during your Permanent Change of Station (PCS). Below are some strategies to make your PCS experience easier.

Know Which Resources and Benefits are Available to You

The military offers many resources and entitlements to help you navigate your PCS move. A great place to start is your installation’s housing office, which can provide you an overview of the housing options available to you at your new installation. You may be granted up to 10 days of leave to travel to your new location to explore housing. If you are thinking about buying a home in your new location, this a great opportunity to go house hunting and check out properties for sale in-person.

To coordinate moving logistics, get in touch with your local installation’s personal property office. They can provide you all of the options to coordinate your move with one of their transportation providers. Alternatively, you may opt to handle the move on your own with a Personally Procured Move (PPM), which allows you to be reimbursed to move your own belongings. Make sure you ask about additional entitlements and expense reimbursements that might be available to you during your move. Depending on your situation, you may be eligible to receive reimbursements for Temporary Lodging Expenses (TLE), a Dislocation Allowance, per diem travel allowances, non-temporary storage, and more.

Get an Experienced Home-Buying Team by Your Side

Finding a lender that has experience with military buyers can make a huge difference when navigating the home loan process during a PCS move. At Benchmark, we are committed to providing an outstanding home buying experience for our military clients. We understand the unique challenges you face as an active duty service member looking to buy a home in a new community.

Once you have your PCS orders and decide buying a home is the right choice for you and your family, get in touch with a Benchmark Loan Officer to get pre-approved for a home loan. A pre-approval lets you know your price-range when searching for homes and puts you in the strongest possible position to make an offer. We can also connect you with a Veteran-friendly real estate agent who specializes in assisting relocating military personnel. Choosing the right realtor who has experience working with buyers during the PCS process will make a big difference towards securing the perfect home with ease.

Take Advantage of Technology

Taking advantage of technology can help guarantee a thorough home search process alongside your realtor while limiting the amount of time you need to spend on the ground in your new location. Your realtor can provide you with an online search tool to check out homes within your price-range and specifications. Many listings today offer virtual tours to help you envision what the space feels like beyond traditional photos.

Once you have narrowed down your options online, your realtor can arrange a virtual video tour using a video-chatting app to lead you through the property and answer any questions you may have as they move through each room. Throughout the virtual ‘walk-through’ of the home, you can ask questions like, “can you show me how big the closets are” or “how high are the ceilings in the living room?,” so you get a better feel for the functionality of the home. If you do have the opportunity to personally tour homes in advance of your PCS, you can focus on your top contenders without having to waste time on properties that are not a good fit.

Close on Your New Home

At Benchmark, we have created an “easy button” to ensure a smooth home buying process for our military clients. Our team will take care of you on your journey to your new home, and ensure you have a first-class experience. If you have any questions about the PCS process, get in touch with one of our local experts or join one of our PCS Facebook communities.

 

The Benchmark PCS Promise

Moving is common with the Military. Whether you’re relocating to another state or country we want to give you the peace of mind you deserve. When purchasing a home you need speed and certainty. We can provide you and your family the certainty you deserve by fully underwriting your file prior to making your offer. That will put you in the best position to win in a competitive market. You’ve made a commitment to us. Now it’s our turn.

 

If you are ready to talk to a professional, contact your local Benchmark branch today.call me or contact me today.contact us today, and let our team take care of you.