The New Year Began With Strong Single-Family Permit Gains

The National Association of Home Builders Eye On Housing reports that January 2021 was a month to celebrate in the housing industry. Single-family permit gains saw a year-over-year 19.2% increase from January 2020. In January 2020 the level was reported at 70,386 and in January 2021 the level reached 83,921 year-to-date YTD.

All four regions saw increases. The Midwest saw an increase of 21.5%, right behind the Northeast with a 20.7% increase, the South 20.3% and the West came in last with a 15.1% increase. Sources feel that the Midwest saw the biggest increase due to the area's more affordable housing.

Not all states saw a YTD increase from January 2020 to January 2021. The highest increase was in South Dakota going from 99 to 202 with a 104% increase. The biggest decline was seen in Montana from 171 in 2020 to 144 in 2021 making this a decline of 15.8%. The top 10 states with the highest numbers combined accounted for 64.1% of the total single-family permits issued.

Metropolitan Statistical Area Single-family Permits: Jan (Units #YTD, NSA)

 

Metropolitan Statistical Area	Single-family Permits: Jan (Units #YTD, NSA)
Dallas-Fort Worth-Arlington, TX	4,330
Houston-The Woodlands-Sugar Land, TX	4,258
Phoenix-Mesa-Scottsdale, AZ	2,656
Atlanta-Sandy Springs-Roswell, GA	2,622
Tampa-St. Petersburg-Clearwater, FL	1,954
Austin-Round Rock, TX	1,940
Charlotte-Concord-Gastonia, NC-SC	1,506
Washington-Arlington-Alexandria, DC-VA-MD-WV	1,335
Jacksonville, FL	1,275
Nashville-Davidson–Murfreesboro–Franklin, TN	1,208

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Investing Your Money In Real Estate Versus Stocks

A study conducted by the Federal Reserve Bank of New York found that the majority of homeowners believed investing in their house over the stock market was a better investment. In fact, over 50% of the households surveyed in the New York Fed survey said they would choose to invest in a rental property versus the overall stock market.

The SCE Housing Survey was conducted in February 2020, October 2020 and February 2021. Most data confirmed that housing represents the largest asset owned by most households and is a major means of wealth accumulation, particularly for the middle class. Those surveyed were asked what they would say to a couple in their early 30's when it comes to investing their money. Over 90% of the respondents said they would invest in a primary residence over the stock market.

The study did see a change from February 2020 to February 2021 in people's outlook on a home. Respondents chose high house prices and lower volatility in 2021 versus 2020 respondents who selected the choice of desired living environment that provides stability. This change has been pinned on the COVID-19 pandemic. The survey showed a dip in October 2020 of preference for housing. Consumers were worried during the pandemic about health safety and job stability.

Overall the survey highlights the importance that is currently put on housing as investments. Investors and homeowners alike feel that the housing market is currently more stable than the aggregate stock market.

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Three Must Have Features for the 2021 Homebuyer

The COVID-19 pandemic has shifted the way buyers think when it comes to the features they must have in a new home. The list of desired features can be a litany of things, but these three top the list when it comes to the broader overall trends.

Spaces in a home usually have a sole purpose, but in this day in age, a dining room can also be a classroom. Buyers are wanting flex space in a home that can be transformed effortlessly.

“Great rooms divided by screens to create privacy, spare bedrooms converted into offices, and areas that function as a workspace by day and a dining room by night,” lists Doreen Trudeau, Global Real Estate Advisor with Venture Sotheby’s International Realty in Hawaii. “The need to create secluded workspaces, especially with more than one professional in the house, has owners repurposing nooks and closets.”

Modularity can be done in a hundred different ways. Realtors are demonstrating this key factor to clients when showing a home. Two great examples are fold-out desks and retractable walls. Realtors are also coming up with ideas for flex space outside of the main home.

“There are many creative ways to achieve a dedicated workspace with under-utilized outdoor spaces. Some that I’ve seen include detached office sheds and gazebos,” said Clark Niemeyer, a Real Estate Professional with Realogics Sotheby’s International Realty in Seattle.

Openness has also become a big selling factor when it comes to a home's floor plan. Today, buyers are seeking a floor plan to be functional and versatile and connective, and borderless. Good features that can help achieve openness are high ceilings, floor-to-ceiling windows, properly scaled furniture, and connectivity to the kitchen. Color can also hinder or enhance the openness of a home. Dark rooms usually appear smaller than light-colored rooms.

“Buyers are looking for seamless transitions between interior and exterior areas,” explains Trudeau. “Glass doors and negligible window coverings are two ways to create the illusion of larger space.” 

The stay-at-home orders caused everyone to look at their home in a different light. Your home became your retreat 24/7. Realtors are now finding areas in the home that are designed for joy, escape, and relaxation.

“Comfort has become paramount as we spend more time in our homes,” says Trudeau. “Most of my buyers still want a clean, linear space—simplicity with an emphasis on durability. Performance fabrics are becoming more popular as we live and work from home. Quality still resonates with the affluent buyer, but in design, less is more.”

A sanctuary for a homebuyer could be a separate home spa or an ensuite bathroom with high-end amenities. A tranquil setting could be created with soft, white neutrals and natural, organic materials in a home.

A good Realtor can help a homebuyer find a home that has one or all three of these features. A local sales agent can shed light on instances of modularity, openness, and sanctuary in a new home.

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How A Down Payment Can Affect Your Purchasing Power

Down payments are a big part of purchasing a home with a mortgage  Your minimum down payment depends on the type of mortgage, the lender and your finances.

When borrowing money from a lender to purchase a home, the more cash you put down, the better your financing terms will be. It is important to understand what a down payment is and how much cash you need to have. A down payment is the cash that is put down on a large purchase such as a car or a home. The amount of the down payment is usually a percentage of the total amount of the cost. A $350,000 home with a down payment of 10% would be $35,000.

Different lenders and different loans will require a different percentage of the whole cost for the down payment. If you are obtaining a VA loan or a USDA loan you are not required to make a down payment because these are backed by the federal government. The magic number in most cases, when it comes to a down payment, is 20%. With most lenders, 20% down on the purchase of a home will give you a good mortgage rate and allow you to bypass mortgage insurance. An FHA loan that is backed by the FDA, requires a minimum of 3.5% of the purchase price. Many conventional loans (Fannie Mae HomeReady and Freddie Mac Home Possible) mortgages require as little as 3% down.

Remember, a larger down payment will get you a better mortgage interest rate, lower upfront and ongoing fees, more equity in your home from the start and a lower mortgage payment. Lenders like a larger down payment because the risk becomes lower for them. A professional lender can help you through this process. They can help you determine how much to put down and how it affects your monthly mortgage amount.

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First-Time Home Buyers Make Up Most of the New Home Market

The February 2021 National Association of Home Builders/Wells Fargo Housing Market Index (HMI) reported that 43% of homebuyers in the new home market were first-time home buyers. Two-thirds of builders with single-family starts in 2020 said that 20% of their homes were sold to first-time buyers.

The report also revealed that 15% of new single-family home sales were second homes. A second home according to the report includes homes that are used as a vacation home or investment property. According to 65% of the builders of single-family starts in 2020, 5% of the homes were sold as second homes.

The NAHB/Wells Fargo Housing Market Index is derived from a survey that is monthly given to NAHB members. This survey is designed to take the pulse of the single-family housing market. These chosen members are asked to rate the housing market on a scale of "good", "fair" or "poor" and a scale of "high to very high", "average" or "low to very low". There are three separate parts of the measurements which are Present Single-Family Sales, Single-Family Sales for the Next Six Months, and Traffic of Prospective Buyers.

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Steps To Take Prior to Obtaining a Mortgage

Applying for a mortgage is one of the most important steps in purchasing a home unless you are lucky enough to just pay cash. Getting a mortgage is a big stress factor when it comes to buying a home. Planning can help the process run much smoother. Below are six important facts to know when it comes to mortgaging your dream home.

1. Define a realistic budget

What you can afford makes a big difference when budgeting for a home purchase. Apply for a loan that you know you will be able to pay. Your monthly mortgage payment should be 28% of your income according to most lender's standards. If you have any other monthly debt payments, those added to your monthly mortgage payment should not exceed 36% of your total income.

2. Improve Your DTI (debt-to-income) ratio

This is a very important figure to a lender. A lender will want to know your DTI ratio to determine how much they can loan you. You are in luck if your DTI is 0 - 36% because you should have no problem with your desired mortgage. If your DTI is above the desired percentage you still can obtain a mortgage by lowering your DTI. A good way to accomplish this is to reduce or pay off current debts.

3. Make a huge down payment

The higher your down-payment the better your rates will be. A high down payment can also allow you to have better terms with your mortgaging services. Your monthly DTI can be reduced if you have a lower mortgage payment due to a big down-payment usually over 20% of your borrowing amount.

4. Boost your credit score

Your credit score can also boost or hinder your loan rate. If your credit score is low, avoid debts, make your payments on time to help boost your credit score.

5. Prepare the necessary paperwork

When you are applying for a mortgage, you will need to provide a lot of paperwork. The lender will ask for things such as pay stubs from the past month, your tax returns for at least a year, and bank statements for a few months. Some lenders might also ask for credit cards, loan statements, retirement funds, and other investments.

Being prepared and having everything in line will make the mortgage application process run smoothly and will be less stressful. Remember using a mortgage lender and a Realtor is the best way to ensure a smooth transaction.

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