The Accunet Mortgage Show (7-4-2021) Episode

This Week’s Highlights:

• Home Sales from June 2019 to June 2021
• Home Buying Factors: Emotions, Family and Affordability
• The Latest Update from the Bureau of Labor Statistics

Download a transcript of this week’s episode here.

Home Sales from June 2019 to June 2021

The Greater Milwaukee Association of Realtors recently published June’s Multiple Listing Service Report for the Five County Metropolitan Milwaukee area, and the initial data is looking positive. We compared June 2021 to June 2019 (skipping 2020 due to the skewed pandemic numbers), and found that year to date, 13,634 homes and condos have been listed for sale with a member of the National Association of Realtors. That’s 1,227 fewer listings compared to 2019, or an 8% shrink in supply. 

Likewise, there were 91 more buyers and sellers who exchanged keys in June with the help of a realtor, just under 2,500 total sales, and almost 4% more than in 2019. So what does that on a percentage basis? 4%, almost 4% more than in 2019. Year to date,10,600 sales have closed in the same area, a 4% increase despite the 8% shrinkage in the supply and listings. Over two years, the median sales price in the area leaped up $50,000, from $230,000 to $280,000 (or 22%).

Meanwhile, the average number of days a home goes from being listed to sold for June was 20. Most homeowners will list the property on a Wednesday or Thursday with showings taking place on a Friday, Saturday, and Sunday, and offers are reviewed by the end of the day on Sunday. In other words, four days are built into that 20 day number automatically.

It’s crucial for all would-be home buyers to have a knowledgeable lending partner in their corner. With a rock-solid mortgage pre-approval from Accunet, you’ll be able to submit your bid on a property quickly and with confidence—giving you a potential edge against other buyers considering the very same property.

Home Buying Factors: Emotions, Family and Affordability

Accunet Mortgage and Realty recently worked with a family looking to upgrade from their three bedroom, one bath in Milwaukee county. They have three children and a fourth one on the way, and were looking for a new home in Brookfield or Elm Grove with a fourth bedroom and another bathroom. With the impending arrival of a fourth child, their Milwaukee home simply doesn’t offer enough space. They’re not looking to move to Waukesha county because of better interest rates, they’re interested in upgrading their square footage. 

Because of the new baby on the way, the key is to buy the new house before they sell the old house, so they don’t have to move with an impending childbirth. The first thing Accunet helped with was setting up a bridge loan, or a home equity line of credit. We then came up with an innovative way to help them stretch their budget for maximum potential.

The bridge loan was equal to 80% of the value of the family’s existing home, which would help them extract $55,000 to use for the down payment on the new house. But that’s not enough. Accunet works with a variety of bankers, and we were able to work with another one who gives a no-cost home equity line of credit up to 90% of the home value, provided your existing home isn’t listed for sale and there are no accepted offers on a new home. Accunet worked with this client to get them the first loan that offered $55,000 of equity to use for the purchase, plus another home equity line of credit in second lien position.This would allow them to get an additional $32,000, bringing their total to $87,000 in cash. This is absolutely critical because that extra $32,000 increases their buying power. Without it, it would be dangerously easy to either run out of income or down payment cash. When it comes to how much home someone can buy, it always depends on how much monthly payment they can afford. And this client was truly maxed out in that regard, because we have to count their old carrying costs on their old home. In this case, it’s interest taxes and insurance. Furthermore, we have to count the payment on the new home plus their two car loans, which takes the clients right up to the red line of financial blood pressure. Because of this, we couldn’t lend them any more money, and the only way to expand the buying power further is to add more down payment into the picture.

The client had mentioned that they did not want to overpay, and wasn’t willing to give the seller any wiggle room on the appraisal. Accunet did some homework on their behalf and ran the 2021 MLS numbers for their price range and area, and found that so far in June, there were 13 closed sales and only one sold for less than the list price. Seven out of thirteen in that price range sold for between $21,000 and $60,000 over asking. Furthermore, May had 10 closed sales, with eight out of ten selling between $10,000 and $70,000 over the asking price.

We succeeded in communicating that if the client truly wanted to buy in this market and at this price range and not give appraisal wiggle room, they wouldn’t get an accepted offer. Since that meant they would have to offer over asking, the client suggested that maybe they would be better off waiting until next spring. Both Accunet and the client’s real estate agent warned that the market wouldn’t be turning around anytime soon. In fact, it will likely only get worse because interest rates will be higher next spring, as will home prices.

Although they seemed to be getting comfortable with that idea, we wanted to make sure to arm them with as much knowledge as possible to open up more options. We showed scenarios that expanded their maximum purchase price with total principal and interest taxes and insurance payments of just under $2,300. The client was adamant that the monthly payment remain at or under $2000. This was understandable, as they were now a single income household. We continued brainstorming and eventually came up with a new idea. We told the client that when they received the proceeds from this sale of the existing home, they could put that into a savings account, and take out $271 every month to help supplement the mortgage share.

While the client’s limit was $2,000, to get the house they wanted, they were going to need $2,271. That means that the gap is $271. Our plan showed them the account that they could use to cover the gap. We also found that if they paid off their car loan they could then borrow more mortgage money. This would allow them to put 5% down instead of 10% giving the clients more cash in their pockets.

Every homebuyer has a unique situation with unique challenges, such as fixed incomes and mixed assets. Get the help you need navigating the market at Accunet! Our team specializes in personalized solutions that help get you into your dream home. 

Latest Update from the Bureau of Labor Statistics

Why should we care about the monthly jobs report from the Bureau of Labor Statistics? The United States Federal Reserve Bank is currently keeping mortgage rates artificially low to help the economy recover from the pandemic. They’re doing that by purchasing $99 billion worth of mortgages. When you own a mortgage, you get principal and interest back. They’re taking those principal payments–59 million billion a month–and reinvesting it. Furthermore, they’re adding a fresh $40 billion of newly created money out of thin air. By increasing the demand for mortgage debt, they’re keeping rates down. 

The Fed has two goals: working towards full employment and keeping inflation in check. If the full employment part relates to the jobs report and the jobs report is strong, the sooner the Fed will start slowing down their mortgage purchases. This will in turn cause mortgage rates to increase (by about a percent peak, according to most economists). 

For the month of June, the US economy added 850,000 new jobs, while the unemployment rate ticked up to 5.9%. That equates to about 9.5 million people that are currently  unemployed. That said, while numbers like this continue to feed the Fed, the economy appears to continue to bounce back, suggesting that the Fed may soon slow down on how much they’re buying for mortgage security.