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  Provided to you Exclusively by Rob McCarthy
Rob McCarthy
Rob McCarthy
Owner/Senior Mortgage Planner
101 Loan, LLC
Office: 408-377-4123
After Hours: 650-465-8957
Email: rob@101loan.com
Website: www.101loan.com
CA BRE – License # 01165697 NMLS ID # 121019
  101 Loan, LLC
For the Month of October 2018 --- Vol. 13, Issue 10

There are 99 factors affecting the current housing market, but tariffs ain't one? Consumers seem to ignore threats of a trade war as consumer confidence soars. But what does that mean for the housing market? This issue answers that question and more, including:

Please feel free to forward this newsletter to friends, family or co-workers who may find it helpful.

  Fed Raises Interest Rates as Housing Affordability Stalls  

In late September, the Federal Reserve raised interest rates 25 basis points from 2 percent to 2.25 percent. This is the third time this year the Fed has made such a decision.

The Fed sets interest rates based on a variety of factors. These include consumer confidence levels, unemployment rates, bullish markets, and a growing Gross Domestic Product (GDP).

For example, consumer confidence levels are at an all-time high since 2000, with the Conference Board reporting a jump in its consumer confidence index from 133.4 in August to 138.4 in September. This means consumers as a whole feel like they have more spending power and will typically feel more comfortable buying big-ticket items, making investments in housing, and taking more financial risks.

Despite the threat of tariffs and a trade war with China, most consumers feel undeterred and continue to spend confidently. Time will tell whether new tariffs are felt on the consumer level and if the economy responds to these price increases.

The Fed raising interest rates will have an impact on the consumer housing market, regardless of the consumer confidence index. While homebuyers may feel more comfortable buying houses as the index reports, they may rethink this decision when they try to enter the housing market.

Along with a rise in interest rates, there are other factors that potential homebuyers take into consideration. A new report found that affordability continues to be a main issue for homebuyers in 2018, and Freddie Mac recently adjusted its sales forecasts based on buyer behavior. Despite the aforementioned increase in GDP over the past two quarters (4.2 percent, the fastest pace of growth in four years), fewer people are buying homes.

According to Freddie Mac, new and existing home sales will decrease from 6.12 million in 2017 to 6.07 million in 2018 (0.9 percent). Meanwhile, home prices are actually increasing, with the average home price growing 5.5 percent.

Many mortgage professionals have noticed softer sales numbers this past spring and summer because of these increased home prices. In particular, the most vulnerable consumers are first-time buyers and entry-level buyers. These are people who are looking for an affordable first home and feel pushed beyond their budgets to buy a home. As a result, some home buyers are waiting until homes are more affordable before making a decision.

There are a lot of moving factors affecting the housing market, but the Fed interest rate increase and the perceived lack of affordability could prevent future growth at the same pace as the rest of the economy.

If you have any questions regarding home loan rates or products, give me a call. I'm always happy to help.

  What to Watch: Apartment Rents Are on the Rise  

If first-time homebuyers are avoiding the market because of affordability, what does this mean for rental properties? Rental occupancy is up to 95.8 percent, up from 95.4 percent in the second quarter. While this is impressive, the planned completion of new housing units across the country is expected to decrease this number over the coming quarters.

What is the Existing Home Sales report? The Existing Home Sales report measures sales of preowned single-family homes, condos and co-ops, as reported by the National Association of REALTORS® (NAR). It covers geographical numbers, prices, inventory and the number of months it would take to deplete the existing supply of preowned houses.

What's happened recently? Developers are scrambling to finish apartment complexes and other multi-family units, focusing on the luxury market and high-end living. This market is also causing rents to increase. Rents in the third quarter of this year are up 2.9 percent compared to last year. This is a continuing trend: Last quarter, rents were up 2.5 percent.

What's the bottom line? With consumer confidence on the rise, many people aren't immediately concerned about rental prices. However, with wages on the rise in 2018, more people might take the leap and try to enter the buyer's market instead of continuing to rent.

I'll continue to monitor economic reports closely, but if you have any immediate questions, please call or email today.

  Are Fire Pits Good Home Investments?  

As fall descends across the country, more people are heading outside to enjoy the brightly colored leaves and curl up next to a fire. This time of year drives many homeowners to consider installing fire pits in their backyard. However, questions remain: Are fire pits an asset to home value, or will homeowners regret building one in the future?

Fire pits are one of the most in-demand home accessories, which means they can boost the interest in a home and potentially reduce its time on the market. As a whole, fire pits are considered a sound investment, and most homeowners will recoup 78 percent of the costs associated with building one — especially if it uses natural gas. Plus, homeowners who opt for inexpensive options (like building their own fire pits) may recoup more than 80 percent of costs in the form of increased home value.

That being said, there are some precautions to consider. Homeowners who are investing in a fire pit should check their insurance coverage to make sure they are covered for any damages that may occur as a result of a fire. Dry fall leaves and flying sparks never mix. Furthermore, they should also check to make sure their homeowners' insurance covers personal injury liability. This means the homeowner is protected if someone is injured by the fire pit.

If the homeowner already has proper coverage, then they should see no unexpected cost increases as a result of the investment.

A fire pit is a popular home improvement option for families who want to enjoy their backyard throughout the fall — and through the whole year in some areas — but still expect to see resale value in their upgrade choices. With the right building materials and consideration for the house, they can have the best of both worlds with this home improvement investment.

Sources: Extra Space and Allstate

  Q&A: Choosing Property Management Companies  

QUESTION: Instead of selling my home, I want to rent it for passive income. What characteristics should I look for in a property management company?

ANSWER: Rather than selling their homes, more people are considering turning their homes into rental properties and owning two houses instead. While this passive income is nice, working with a bad rental property management company can be a nightmare. Here are four characteristics of a quality management company to look for:

Open communication: Property managers should keep you up-to-date on problems regarding your property and the steps they are taking to fix them.

Proven track record: Work with companies that you trust, have helped others in the area, and have created positive experiences.

Established protocols: Reliable property management companies prepare for the worst and have plans for any event. Ask about certain situations to see how these companies prepare for them.

Reasonable fees: You want to make money off of your rental, but you also want your property to be cared for.

If you do your research and choose your management company carefully, you can enjoy a steady flow of passive income for years to come.

Stay tuned for more updates on the housing market, consumer behavior, and the latest mortgage news you need for your portfolio.

Source: Realy Round Up


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