The Accunet Mortgage Show (5-2-2021) Episode
This Week’s Highlights:
- Listings in April 2020 compared to April 2021: navigating the data
- How fast are homes selling today?
- First time home buyer and financial blood pressure
Download a transcript of this week’s episode here.
Listings in April 2020 compared to April 2021: navigating the data
According to the Greater Milwaukee Association of Realtors’ MLS System, single-family and condo listings skyrocketed with a 27% in April 2021. That’s 2,365 new listings hitting the market, 504 more than the same period last year 2020. While this may seem like a significant increase, there are certain factors it doesn’t take into account. Instead of looking at data year over year, it may be more accurate to look at what we call “reality over reality.”
What does this mean? Last April we were in the teeth of the lockdown, and everybody was hunkered down. Because of this, it would be more beneficial to compare current numbers to April of 2019. When we look at the data this way, it tells us that April 2021 listings were actually down almost 16%, with 438 less listings on the market. Compared to the 2,365 homes for sale this year, there were 2,803 in 2019. Digging deeper in the data, we found that single family condo sales were down just 1.6% from last year, but actually up 1.7% compared to the more normal 2019.
All of this means that homeowners now have more equity in their homes. Consider homeowners who don’t put a full 20% and end up having to pay private mortgage insurance (PMI). With this newly gained equity, Accunet may be able to help homeowners not only lower their interest rates, but potentially reduce or remove PMI payments, provided certain criteria are met:
- The homeowner has put less than 20% down.
- The homeowner has been working at paying off their mortgage
- The home itself has increased in value
What is PMI?
PMI, or private mortgage insurance, is a type of mortgage insurance that home buyers may be required to pay when the buyer has a conventional loan and is making a down payment that is less than 20% of the purchase price.
The amount the buyer will be required to pay differs based on how much they put down:
- 20% Equity: Pay no PMI
- 15% Equity: Cheaper PMI
- 15-10% Equity: more expensive
How fast are homes selling today?
It’s no secret that homes are going fast, but we wanted to find the hard data behind these quick sales. Currently, there are 2,886 current active single family, detached listings in the Five County areas (keep in mind this does not take condos into account).
This is where things get really interesting. Of those, 66% already have accepted offers, or 1,908 homes. When we focus on those homes with accepted offers, we can really get a good picture of how fast these sales are. When looking at these homes with accepted offers, 31% of those sold within 3 days. This is a common way to set up a sale, where the home is listed on a Thursday, with Friday, Saturday and Sunday being open houses. Then the winning offer is picked on that sunday.
When we pull back our timeframe to a week, we can see that another 31% are sold in 4 to 7 days. This means that a staggering 62% of all homes in the area sell in less than a week. Adding another week to our data picks up another 14% of those sales, and an additional 6% when we add one more week. This means that only 4% of listings took more than 60 days to get their accepted offers. If you’re currently looking to buy a home, you’d better be prepared to move fast!
Buying a new home? Start here so you know what to expect from the process!
First time home buyer, and the importance of financial blood pressure
A question every home buyer will ask is, “how much house can I afford?” We wanted to share a story about a first time home buyer who we were connected with through his parents, former customers of Accunet. He was recently working on his 6th offer, a duplex with a listing price of $169,900. He called us and asked if he could afford to offer $182,000.
This is not an easy question for a buyer to answer themselves, and it can’t be answered in a split second while standing in the living room of a home you’re viewing. No matter what you take into account or how often you rerun the numbers, a buyer’s math will never be as accurate or comprehensive as a mortgage banker’s math. Accunet can help with this by calculating the exact amount a buyer can afford, right up to the cap.
That said, this buyer has saved up a little bit more since he started house hunting this past January. He’s saved up an additional $2,000 and recieved a $10,000 gift from his parents, bringing his saved total to $23,000. With these new developments, we ran the numbers and suggested he offer $182,500, with 10% down in the financing contingency. This helps to absorb some of the lowapprased value in the equity, and tells the seller that this buyer is offering more than the asking price, but can still follow through.
It’s important to remember that higher offers won’t even be considered depending on the contingency. Even if this client of ours wrote an offer at $182,500 and someone else wrote an offer at $400,000 for the same home with an appraisal contingency, the seller would say that offer is useless. Another important aspect to make this work: good credit and spending habits. Because figuring out how much home you can afford is a multi-factor equation, you need to be cognitive of your debt to income ratio, or your financial blood pressure as we like to call it.
Your financial blood pressure is your down payment in relation to how much of your income is being used to service all your monthly debts. We had to make sure that this client’s financial blood pressure was kept under 45%. Even a slight bump to 45.01, and the loan wouldn’t be approved. While he has phenomenal credit, even buying a sofa could crater the entire deal. His offer is in now, and we are looking forward to seeing how the sale works out for him! That said, this just goes to show how important it is for everyone in the process to be as coordinated as possible, from the buyer to the realtor and mortgage banker.
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