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With Home Values Surging, Is it Still Affordable to Buy in Knoxville Right Now?

December 3, 2020 By Troy Stavros

Housing inventory in Knoxville and nationwide is at an all-time low. Realtor.com just reported that nationally, there are 39% fewer homes for sale today than there were last year. At the same time, buyer demand remains strong. In a recent newsletter, research analyst Ivy Zelman explained:

“Although the headwind of severe supply constraints in most markets has contributed to slight moderation in seasonally-adjusted and year-over-year new pending contract growth for two consecutive months (albeit still growing strongly), the underlying strength of buyer demand, particularly for this time of year, remains apparent.”

Whenever there’s a shortage in the supply of an item that’s in high demand, the price of that item increases. That’s exactly what’s happening in the Knoxville real estate market right now. As a result, home values are surging.

This is great news if you’re planning to sell your home in Knoxville. On the other hand, as either a first-time or repeat buyer, this may instead seem like troubling news. Purchasers, however, should realize that the price of a house is not as important as the monthly cost. Here’s how it breaks down.

There are several factors that influence the cost of a home. Two of the major ones are:

The price of the home
The mortgage rate at which a buyer can borrow the funds necessary to purchase the home

How do these factors impact affordability?

The National Association of Realtors (NAR) produces a Housing Affordability Index which takes these factors into account and determines an overall affordability score for housing. According to NAR, the index:

“…measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.”

Their methodology states:

“To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.”

With Home Values Surging, Is it Still Affordable to Buy Right Now? | MyKCM

So, the higher the index, the more affordable it is to purchase a home. Here’s a graph of the index going back to 1990:The blue bar represents today’s affordability. We can see that homes are more affordable now than they were from:

1990 to 2008
2017 to 2018

Buying a home today is just a little less affordable than it was last year, but still very affordable compared to historical housing market trends.

Note: During the housing crash from 2009 to 2015, distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market.

Why are homes still affordable today?

The number one factor impacting today’s homebuying affordability is record-low mortgage rates. There’s no doubt that prices are on the rise. However, mortgage rates have fallen dramatically. Last week, Freddie Mac announced that the average interest rate for a 30-year fixed-rate mortgage was 2.72%. Last year at this time, the average rate was 3.68%.

If you’re considering purchasing your first home in Knoxville or moving up to the one you’ve always hoped for, it’s important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

At this point, home purchase affordability is still in a historically good place. However, we need to watch price increases going forward. As Mark Fleming, Chief Economist at First American, noted in a recent post:

“Faster nominal house price appreciation can erode, or even eliminate, the boost in affordability from lower mortgage rates, especially if household income growth doesn’t keep up.”

Have questions or ready to get the home buying or selling process started? Call/Text me, Troy Stavros with CornerStone Realty Associates today at 865-999-0925 and let’s schedule a time to talk!

Is Buying a Home Today in Knoxville a Good Financial Move?

November 25, 2020 By Troy Stavros

There’s no doubt 2020 has been a challenging year. A global pandemic coupled with an economic recession has caused heartache for many. However, it has also prompted more Americans to reconsider the meaning of “home.” This quest for a place better equipped to fulfill our needs, along with record-low mortgage rates, has skyrocketed the demand for home purchases in Knoxville as well as nationally.

This increase in demand, on top of the severe shortage of homes for sale in Knoxville, has also caused more bidding wars and thus has home prices appreciating rather dramatically. Some, therefore, have become cautious about buying a home right now.

The truth of the matter is, even though homes nationally have appreciated by a whopping 6.7% over the last twelve months, the cost to buy a home has actually dropped. This is largely due to mortgage rates falling by a full percentage point.

Is Buying a Home Today a Good Financial Move? | MyKCM

Let’s take a look at the monthly mortgage payment on a $300,000 house one year ago, and then compare it with that same home today, after it has appreciated by 6.7% to $320,100. Compared to this time last year, you’ll actually save $87 dollars a month by purchasing that home today, which equates to over one thousand dollars a year.

But isn’t the economy still in a recession?

Yes, it is. That, however, may make it the perfect time to buy your first home or move up to a larger one. Tom Gil, a Harvard trained negotiator and real estate investor, recently explained:

“When volatile assets are facing recessions, hard assets, such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”

That thought is substantiated by the fact that homeowners have 40 times the net worth of renters. Odeta Kushi, Deputy Chief Economist for First American Financial Corporation, recently said:

“Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.”

Bottom Line

With home prices in Knoxville still increasing and mortgage rates perhaps poised to begin rising as well, buying your first home, or moving up to a home that better fits your current needs, likely makes a ton of sense.

Have questions or want to get the process started? Call/Text me, Troy Stavros with CornerStone Realty Associates at 865-999-0925 today!

Don’t Let Buyer Competition Keep You from Purchasing a Home in Knoxville

November 24, 2020 By Troy Stavros

This year’s record-low mortgage rates sparked high demand among homebuyers in Knoxville. Current homeowners, however, haven’t put their houses on the market so quickly. This makes finding a home in Knoxville to buy today challenging for many potential buyers. With an obstacle like this, those searching for their dream homes may be pressing pause on their searches as we approach the end of the year, but that could be a big mistake for many hopeful house hunters. Here’s why.

According to the most recent Housing Trends Report from the National Association of Home Builders (NAHB):

“The length of time spent searching for a home continues to grow.”

The report indicates that 62% of buyers now spend 3 months or more looking for a home, an increase from 58% one year ago. A primary cause for the delay is the heavy competition today’s buyers face when making an offer on a home. Based on recent data from the National Association of Realtors (NAR), the average house in today’s market receives 3.4 offers before it’s sold. This means for every buyer who purchases a home in Knoxville, there are on average two or three buyers who have to begin their search all over again.

Compared to this time last year, the NAHB report shows that buyers are having more success finding homes in their price range. However, it also notes the percentage of buyers saying they’re getting outbid when they make an offer has jumped from 15% to 27%. Buyers are indicating that bidding wars are a major obstacle to finding their dream home (See graph below):If this is a challenge you’re up against in your Knoxville home search, you’re not alone. Feeling stuck in the process can be frustrating, but if there’s ever been a year to power through, this is the one. NAHB noted:

“Difficulties finding a home to buy will likely lead 20% of active buyers to give up until next year or later. That share is up from 15% a year earlier.”

Experts anticipate home prices will continue to rise into 2021, and the incredibly low interest rates we’ve seen this year are also forecasted to increase as the economy strengthens. Hopeful Knoxville homebuyers who decide to hold off on their search until there’s less competition run the risk of finding a more expensive housing market when they start looking again. If affordability is a key motivator behind your decision to buy a home, this winter is still the best time to make it happen.

Bottom Line

Bidding wars may be one of the greatest challenges buyers face in today’s housing market, but they shouldn’t be a deal-breaker. Having the right expert on your side throughout the buying process will give you the advantage you need when it comes to finding the right home and making a competitive offer. If you’re ready to buy a home in Knoxville this winter, let’s connect to discuss how to position yourself for success.

Call/Text me, Troy Stavros with CornerStone Realty Associates at 865-999-0925 today!

Will Mortgage Interest Rates Remain Low Next Year?

November 20, 2020 By Troy Stavros

In 2020, buyers in Knoxville got a big boost in the housing market as mortgage rates dropped throughout the year. According to Freddie Mac, rates hit all-time lows 12 times this year, dipping below 3% for the first time ever while making buying a home more and more attractive as the year progressed (See graph below):When you continually hear how rates are hitting record lows, you may be wondering: Are they going to keep falling? Should I wait until they get even lower?

The Challenge with Waiting

The challenge with waiting is that you can easily miss this optimal window of time and then end up paying more in the long run. Last week, mortgage rates ticked up slightly. Sam Khater, Chief Economist at Freddie Mac, explains:

“Mortgage rates jumped this week as a result of positive news about a COVID-19 vaccine. Despite this rise, mortgage rates remain about a percentage point below a year ago.”

While rates are still lower today than they were one year ago, as the economy continues to get stronger and the pandemic is resolved, there’s a very good chance mortgage interest rates will rise again. Several top institutions in the real estate industry are projecting an increase in mortgage rates over the next four quarters (See chart below):If you’re planning to wait until next year or later, Mike Fratantoni, Chief Economist at the Mortgage Bankers Association (MBA), forecasts mortgage rates will begin to steadily rise:As a home buyer, you need to decide if waiting makes financial sense for you.

Bottom Line

If you’re planning to buy a home in Knoxville and want to take advantage of today’s low rates, now is the time to do so. Don’t assume they’re going to stay this low forever.

Have questions or ready to get the process started? Call/Text me, Troy Stavros with CornerStone Realty Associates at 865-999-0925 today!

Homes for Sale in Knoxville Are Disappearing Rapidly

November 18, 2020 By Troy Stavros

Through all the challenges of 2020, the Knoxville real estate market has done very well, and purchasers are continuing to take advantage of historically low mortgage rates. Realtor Magazine just explained:

“While winter may be typically a slow season in real estate, economists predict it isn’t likely to happen this year…Low inventories combined with high demand due to record-low mortgage rates is sending buyers to the market in a flurry.”

However, one challenge for the housing industry heading into this winter is the dwindling number of homes available for sale. Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), recently said:

“There is no shortage of hopeful, potential buyers, but inventory is historically low.”

In addition, Danielle Hale, Chief Economist for realtor.com, notes:

“Fewer new sellers coming to market while a greater than usual number of buyers continue to search for a home causes inventory to continue to evaporate.”

One major indicator the industry uses to measure housing supply is the months’ supply of inventory. According to NAR:

“Months’ supply refers to the number of months it would take for the current inventory of homes on the market to sell given the current sales pace.”

Historically, six months of supply is considered a normal real estate market. Going into the pandemic, inventory was already well below this mark. As the year progressed, the supply has was reduced even further. Here is a graph showing this measurement over the last year:

What does this mean if you’re a buyer?

Be patient during your home search. It may take time to find a home you love. Once you do, be ready to move forward quickly. Get pre-approved for a mortgage, be prepared to make a competitive offer from the start, and understand how the shortage in inventory has led to more bidding wars. Calculate just how far you’re willing to go to secure a home if you truly love it.

What does this mean if you’re a seller?

Realize that, in some ways, you’re in the driver’s seat. When there’s a shortage of an item at the same time there’s a strong demand for it, the seller is in a good position to negotiate. Whether it’s the price, moving date, possible repairs, or anything else, you’ll be able to ask for more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Do not be unreasonable, but understand you probably have the upper hand.

Bottom Line

The Knoxville housing market will remain strong throughout the winter and heading into the spring. Know what that means for you, whether you’re buying, selling, or doing both.

Have questions or need to get the process of buying or selling started? Call/Text me, Troy Stavros with CornerStone Realty Associates at 865-999-0925 today!

Winter Will Bring a Flurry of Activity to the Knoxville Housing Market

November 12, 2020 By Troy Stavros

In the second half of this year, the housing market surged with activity. Today, real estate experts are looking ahead to the winter season and the forecast is anything but chilly. As Lawrence Yun, Chief Economist for the National Association of Realtors (NAR), notes:

“It will be one of the best winter sales years ever.”

The typical winter slowdown in the housing market is simply not on the radar. Here’s why.

While today’s historically low mortgage rates are expected to remain low, they won’t be this low for much longer. This could be the last chance for homebuyers to secure such low rates, and they’re ready to take action. In a recent article, Bankrate explained:

“If you’re looking to buy a home…expect mortgage rates to remain low into 2021. However, the possibility of rates falling to 2.5 percent or lower has faded as the U.S. economy has rebounded.”

As long as we continue to see low interest rates, we’ll see hopeful buyers on the hunt for their dream homes in Knoxville. Yun confirmed:

“The demand for home buying remains super strong…And we’re still likely to end the year with more homes sold overall in 2020 than in 2019…With persistent low mortgage rates and some degree of a continuing jobs recovery, more contract signings are expected in the near future.”

The challenge, however, is the lack of homes available for sale in Knoxville. With that in mind, all eyes are on homeowners to see if they’ll sell this winter or wait until spring. Danielle Hale, Chief Economist for realtor.com, says it’s best for sellers to capitalize on this moment sooner rather than later:

“We currently see buyers sticking around in the housing market much later than we usually do this fall. If that trend continues, we will see more buyers in the market this winter, too. So, this winter is likely to be a good time to sell.”

With buyers ready to stay active this winter, sellers in Knoxville who want to close a deal on the best possible terms shouldn’t wait until spring to put their homes on the market.

Bottom Line

Experts agree the winter housing market could potentially be bigger than ever. Whether you’re ready to buy or sell a home in the Knoxville area, let’s connect today so you can be in your dream home by the new year.

Call/Text me, Troy Stavros with CornerStone Realty Associates at 865-999-0925 today!