Are you struggling to decide whether now is the right time to apply for a mortgage? Let me explain the basics of today’s lending market. Here are three major changes that have affected mortgages since the outbreak of COVID-19.

1) Credit Score Qualifications

It is always important to consider credit score when applying for a mortgage but this is especially crucial now. Many lenders are raising their minimum credit score requirements. As more Americans lose their jobs and see reduced income, the risk of foreclosure increases, which makes both investors and lenders much more conservative on whom they decide to lend to. Some lenders will still loan to borrowers with lower credit scores but they will have a tiered interest rate system where those with lower scores must pay higher rates. If you do not have an excellent rating, you may find it difficult to receive a loan approval, or if you are approved, you might have to pay a higher price.

2) Income Qualifications

As with credit scores, income is a leading factor in loan approval. While it’s understandable that lenders are more likely to approve those showing a steady stream of income, for many Americans, income isn’t so simple anymore. With many losing their jobs or working reduced hours, it can be much more difficult to obtain a mortgage than in the past. If you don’t have a reliable source of income and are applying for a mortgage by yourself, it can be tricky to get approved; however, if you apply jointly with a spouse who has a steady income, your chance for approval goes up significantly. Finally, self-employment income is being sharply reduced for qualifying purposes by many lenders. Just be aware of these factors if you do apply for a mortgage, especially if your job has been affected by COVID-19.

3) Mortgage Rates

With more requirements set by lenders, comes higher mortgage rates as well. While mortgage rates have historically followed long-term bond yields, in today’s world there is too much risk for mortgage rates to stay this low. Lenders are pricing their loans based on the risk they are assuming for raising credit score and down payment requirements. Many 30-year mortgage rates are currently in the mid-3% range but they are always fluctuating. I advise to always, when looking into a loan, to pay attention to the rate along with any underlying fees.

Thinking about a mortgage might seem overwhelming during this time; however, I can help equip you with the knowledge and refferals you need to make an educated decision while navigating residential mortgages in 2020.

Many people have been asking me how the COVID-19 outbreak will affect the housing market in greater Phoenix. As the new year began, housing prices were increasing again and there were an abundant number of buyers in the market due to extremely low interest rates and easing of credit conditions. COVID-19 will more than likely change the narrative for a good portion of what remains of this year, provided we are able to get the virus under control.

The financial crisis unraveling is the global economy, not the U.S. housing market; however, our housing market will likely be impacted in some ways. Last week alone, new mortgage applications (new buyers entering the market) were down 8%.  Showings of new listings were down roughly 50% and open houses were down 75%. The number of homes that went under contract have remained steady as did new inventory coming onto the market, for the trailing 45 days. In short, COVID-19 is impacting buyer sentiment and demand but there is no data to suggest home sales are slowing or values are declining, at least yet.

If You are Buying, Here is What YouNeed to Know

In this volatile economic environment, you need to know you have secure employment. You might be able to take advantage of a dip in housing prices in 2020 but no one knows when that dip may occur or for how long. The wait may not be worth it, as interest rates will likely increase after COVID-19 is contained. What you can take advantage of now are historically low interest rates and less competition when it comes to making an offer on a home. Further, there are several ways I can assist in your home search while practicing social distancing. I can live stream property tours, utilize video conferencing, share virtual tours when available and have almost all your paperwork done electronically, just to name a few.

If You are Selling, Here is What You Need to Know

The residential housing market will likely show signs of weakness soon because of COVID-19’s stress test on the economy. Buyer demand will drop until fear and uncertainty have subsided. If you’re not in a hurry to sell, the good news is the housing market shows no signs of being over-valued or headed for a significant downturn. Simply wait for the short-term impact of COVID-19 to pass. If you need or want to sell now, I can overcome some of the obstacles COVID-19 presents, such as: creating video/virtual tours of your home, conducting private live stream showings and complimentary mobile notary.

If You’re an Investor, Here is What You Need to Know

I would recommend stock-piling cash and getting lending in order to take advantage of possible upcoming buying opportunities while making sure you’re not over-leveraged. COVID-19 will impact the rental market substantially and rents may begin to decline; therefore, sign long-term leases. Long-term leases also provide more security within your portfolio, which is what you want as we head into unchartered waters – the economic aftermath of a pandemic.

As always, call me at 602.818.0533 or send me an e-mail with your question to [email protected] if you want further updates or information. Stay safe, follow the guidance and restrictions of our City and County officials, but most of all, think positive and remain healthy!

Happy New Year! I At the top of every year, I like to share what real estate experts are saying about the year ahead. In 2019 the housing market was one of low rates, high demand and limited supply – particularly on the lower-priced end of the market. Will 2020 be more of the same? According to experts, yes and no.

Mortgage Rates Will Stay Low

Mortgage rates currently sit at 3.75%, according to Freddie Mac’s most recent numbers—nearly a 1% difference from the monthly average a year ago, causing a surge in refinancing over the last few months, and purchase activity picked up as well. According to Odeta Kushi, Deputy Chief Economist at First American, there’s “emerging consensus” that rates will remain low this year, likely somewhere between 3.7% and 3.9%. Forecasts from Freddie Mac and the Mortgage Bankers Association back this up, both predicting 2020 rates within this range.

Housing Prices Will Rise

Home prices will climb upward, according to experts, largely thanks to tight inventory and high demand. According to the latest home price forecast from property data firm CoreLogic, home prices should go up by 5.6% by next September, up from the 3.5% jump we saw this year.

As Daryl Fairweather, Chief Economist at Redfin explains, “Right now we aren’t seeing a ton of new listings. Without more listings coming on the market, there will be more competition starting off in early 2020 and that will lead to more price pressure.” The problem will be worse on the lower end of the price spectrum. According to Ralph DeFranco, Chief Economist for mortgage insurer Arch MI, entry-level home prices will rise higher than incomes next year—and disappointing construction numbers will only compound the issue.

Inventory Will Remain Tight

Housing inventory is going to remain limited for much of 2020, experts say.  Interest rates and record-high homeownership tenures are a big part of this.  According to recent data from Redfin, the average homeowner is staying in their home 13 years, up from just eight years in 2010. While historically low rates increase buying power and make it more likely for potential buyers to attain their homeownership dream, they also increase the risk of a long-run housing supply shortage. There’s a chance that increasing construction may offer some relief. Last month’s residential construction report from the Census Bureau saw building permits and housing starts both increase over the year. Still, many experts say it may not be enough.

Millennials Will Keep Up Their Homebuying Streak, While Boomers Hold Up Inventory

Data from Realtor.com shows Millennials made up a whopping 46% of all mortgage originations in September—up from 43% one year prior. Meanwhile, shares of Baby Boomer and Gen X mortgage activity declined. It’s no wonder, either. Millennials rank homeownership as one of their top goals in life, higher than even marrying or having children. Although, the Baby Boomer generation presents a challenge for buyers, as many are choosing to age in place, keeping more homes off the market than ever before. In fact, a recent study from Freddie Mac showed that if today’s older adults (born between 1931 and 1959) behaved like earlier generations, an additional 1.6 million homes would have hit the market last year.

If you want more information on the real estate outlook for 2020 or want to talk specifically about the local market you own property in, please do not hesitate to contact me.

Since the last update I sent out I received a few requests from people to cover some topics that are unique or specific to my experience in real estate.  One of those topics would be AirBnB/VRBO, or otherwise known as… short-term rentals. Many people wonder what are the differences and benefits of a short-term rental versus a traditional long-term (a one year lease, or more) rental. This article explains and should help you determine if a short-term rental is right for you.

First and foremost, being the owner of an AirBnB or vacation rental of sorts requires more time and more work than a long-term rental; however, the profits can be far greater if you have the right property, personality and business sense. A typical long-term rental may pull in $1,000 - $2,500 a month whereas an AirBnB in certain parts of Scottsdale or downtown Phoenix can achieve $8,000 in one month.

With more than 6 million listings in 191 countries, as of Aug. 10, 2019, Airbnb has achieved unparalleled growth within its industry since its 2008 launch. While it's had its share of controversy, AirBnB’s success is founded on the ability for essentially anyone to list accommodations on their website so long as the HOA, if any, and zoning regulations allow it.

A good property for an AirBnB is one that is near a demand generator – something that generates demand for people to want to come in and stay in the immediate area.  If you have more than one demand generator or can create a calendar of events a demand generator has throughout the year, then the property’s location lends itself to being a good short-term rental. Further, the property doesn’t have to be a home or an apartment, last year 41% who booked on AirBnB nationwide considered more than just a house, hotel or apartment in their decision to book, this includes a boat, motor home, igloo, you name it! 

If you decide to have an AirBnB/VRBO it needs to be marketed and represented far better than a long-term rental. You are competing with hotels. Hire a professional photographer and include photos, not just of your property, but the location and the demand generators. In the property description be sure to highlight what amenities or features which makes your property different or unique. Inside the home, think about what you might see in a resort or hotel room. Offer a list of attractions or things to do with the hours, phone numbers and addresses of those places. You will also want to furnish the place and provide what your target market will desire. If you’re guests are going to be primarily business travelers, have a desk, an all-in-one printer and copy paper.  If you are going to have primarily families, offer the right channel package, stock some books, board games or basic (safe) toys for kids.  Leisure travel accounts for 68% of AirBnB’s customers.

Renting out a property on AirBnB requires a substantial time commitment if you want to be successful. Be prepared to devote some portion of each day to interacting with guests or potential gusts, cleaning and/or managing your rates, stay restrictions and inventories of space and furnished amenities. Responding quickly, being friendly, professional and having some basic business acumen is essential for creating the best experience for your guests and creating more revenue than you would by simply having a long-term rental.

Although it's not suited for everyone, a short-term rental can be fun and lucrative.  Let me know if you think it is something you want to look in to doing. I can help you purchase or convert a property into a short-term rental or provide you with one on one property management consultation.

The National Association of REALTORS®, after reviewing the Department of Housing and Urban Development’s new condominium financing rules, says the guidance affords property owners greater flexibility in the qualification process for loans insured by the Federal Housing Administration. Lenders will be able to issue FHA loans for single condo units, and buildings with a greater number of investor-owned units or greater percentage of commercial space can qualify for FHA financing, among other changes HUD released Wednesday. NAR expects the new rules, which will go into effect Oct. 15, to revive a condo market that has been stifled since the Great Recession.

NAR says the new condo rules, which will help more would-be buyers access affordable housing, satisfy many of the changes the association has backed for more than a decade. Specifically, the new rules will:

• Extend FHA certifications on condo developments from two years to three years, with an additional six-month grace period to meet requirements. This will alleviate some of the cost and time burdens on condominium associations that intend to maintain FHA approval. Condo associations also may continue submitting updated recertification packages, rather than the full certification package each time. The National Association of REALTORS® expects the change to prompt more condominium properties to apply for FHA eligibility, making more affordable housing more accessible.
• Allow for single-unit mortgage approvals—often known as spot approvals—that will enable FHA insurance of individual condo units, even if the entire property does not have FHA approval. The condo building in which the FHA buyer wants to purchase must meet certain requirements: The property must have at least five units, a limited concentration of FHA-insured units, at least 50% owner-occupancy, and a maximum of 35% commercial space.
• Secure additional flexibility in the ratio of investors to owner-occupants allowed for FHA financing in a condo building. While the current owner-occupancy requirement is 50%, HUD may approve an owner-occupancy level as low as 35% for older properties with less than 10% of units in arrears. Individual investors can purchase no more than 10% of units in a property with more than 20 units and no more than one unit in properties with less than 20 units.

FHA approvals for condos prior to these changes have been heavily restricted. For example, the National Association of REALTORS® pointed to data earlier this year showing that in Florida’s Miami-Dade County, there were 5,683 condo projects—but only seven had FHA approval. NAR sent out an all-member email about the new condo rules Wednesday morning.

“It goes without saying that condominiums are often the most affordable option for first-time home buyers, small families, and those in urban areas,” NAR President John Smaby said in a statement. “This ruling, which culminates years of collaboration between HUD and NAR, will help reverse recent declines in condo sales and ensure the FHA is fulfilling its primary mission to the American people.”

The association’s most recent existing-home sales report, released in July, showed that sales of condos and co-ops dropped 6.5% year over year. Further, with more than 8.7 million condo units nationwide, only 17,792 FHA condo loans were originated in the past year. Down payments for single-family homes also have grown significantly more expensive in recent years in the absence of widely accessible FHA condo financing, NAR argues.

These changes are extremely helpful and exciting for home buyers wanting to purchase a place of their own for under $300,000 and in the curent median home price range in Arizona. Please contact me directly with any questions or comments. 602.818.0533 or [email protected]