Your home: Say goodbye to historically low interest rates

Interest Rates - scrabbleFinally, after much anticipation, the Fed announced last Wednesday that they would begin tapering the governments purchases of treasuries and mortgage backed securities. And when they say taper, they mean a slight taper. The purchases are set to go from $85 billion to $75 billion per month. Although it is not a huge change, the stock market clearly interpreted the move as a vote of confidence for the US economy and ended on a record high.

So what does this mean to the consumer?

Chairman (for a few more days) Ben Bernanke also shared during his announcement Wednesday that rates would not go up until 2015. That is almost comical. Especially considering that rates jumped up 3/4 percent right before the announcement. Almost as if the markets were anticipating the taper. Now will we see a huge jump in rates in 2014? Probably not. But will rates go up? Most experts say “yes.”

I have shared before that on average for every 1 percent that rates increase, a buyer will lose 10 percent of his or her buying power. So let’s not underestimate even a 3/4 point jump. Every little bit counts. Therefore, if a home purchase is on your calendar for 2014, perhaps you should start sooner than you think. You will have less buyer competition in January than in April.

On a side note, housing starts in November were up 22.7 percent — much higher than expected. It was also the highest level for starts in more than five years. It is great to see new construction moving along at such a pace. Housing starts are typically one of the last signs of a true housing recovery.

For you sellers out there, fast-paced new construction means two things: more competition and a higher standard of updates. As these new homes are popping up in all directions, buyers will have more options. Some buyers will choose new over resale. And some may still choose resale but will be exposed to all of the newest trends in decor and finish work. New construction always sets the bar for the resale market. Granite counter tops were unheard of in the resale market until they became commonplace in the new home communities. So resale sellers beware. Your buyer pool might be reduced by this new competition or at least raise the bar for housing updates and what today’s buyer will come to expect.

Overall, I am very encouraged by our market conditions right now. 2014 looks to be an exciting year in real estate and we are looking forward to sharing more information with you in the new year. As always, thank you for supporting the PV Post and our column. If you have any topics that you would like to see discussed in 2014, please email me.

The Taylor-Made Team wishes you all a very Happy New Year!

Photo Credit: LendingMemo on

Your home: Home sales fell last month – but why?

“Home sales fall in November.” That was the headline on CNN Money this week. The important question is why?

Lawrence Yun, the chief economist for the National Association of Realtors, shared a reason for the slow down. “There is a pent-up demand, but the bottleneck is in limited housing supply, due to the slow recovery in new home construction,” he said. The man speaks the truth. Inventory is still very low. In NEJC we are still sitting at just a little over three months of inventory. And it may go even lower as we go into the winter months. In the last two weeks, the number of new listings coming on the market has dropped by 25 percent.

So we now have 25 percent fewer homes entering the market and at the same time the number of homes going under contract has only slowed by 15 percent. Lastly, the number of homes expiring or canceling off of our MLS has increased by nine percent. Put all of that together and Mr. Yun’s hypothesis seems to prove true.

What about the new home construction piece of the puzzle? Well the builders are hard at work that is for sure. The government announced this past Wednesday that housing starts are up nineteen percent the first eleven months of this year compared to 2012. Even with that frantic pace, home building is still twenty five percent below the long term averages. 2014 should turn out to be an incredible year for the home building industry due to the pent up demand and lack of inventory.

I have had several comments or questions lately about whether or not the market is slowing down. It depends on what you mean by slowing down. As we just discussed, the number of homes selling has lessened, but the activity in the market is certainly still there. Our team is enjoying a record December and is looking forward to a record January, so we don’t perceive the market as slowing. For example, the last two homes that we listed last week both sold in four days. And one of them with multiple offers. Doesn’t quite sound like the December market that you might expect, does it?

For those of you with resale properties to sell, now is your time. As new construction tries to catch up and your competition stays low, your best bet for top market dollar is now. Enjoy the holiday season with your family and then as of January pack it all away and get on the market. Let 2014 be the year that you get your fair share of the housing recovery.

Your home: Prime time to buy investment properties

For Rent

High rental occupancy makes it prime time to buy investment properties.

That’s right! Now is the time to purchase investment properties. Rental occupancy in Kansas City is at 94 percent according to the Kansas City Business Journal, making it very easy to find a tenant. And not just any tenant. Good tenants. When rental occupancy is as high as it is, the number of applicants increases substantially. Then you get to cherry pick the best tenant for you. Sounds great right? So why doesn’t everyone purchase investment properties?

For some the idea of owning investments in real estate bring up the mental picture of being called at all hours of the day for repairs, dealing with unruly tenants, and endless amounts of work. Nothing could be further from the truth. Now certainly there are those who manage all of the work themselves when it comes to their investment properties. But they are the minority.

It is no different than any other investment. Most people pay a financial adviser or broker to manage their investments. Why wouldn’t you do the same with your real estate? For a nominal percentage of the monthly lease amount, management companies can take care of all of the messy details and allow you to go on with your life. Hopefully, while your investment property appreciates in value.

According to the CBRE Report, there are almost seven thousand apartment units in the pipeline to be completed no later than 2015. Close to 65 percent of those units are being constructed in South Overland Park, Central Kansas City, and the Shawnee/Lenexa/Mission areas. Because of the high average occupancy rates in those areas (96.3 percent), the areas are expected to quickly absorb the new projects.

In addition, the average metro apartment rent was up 2.4 percent last quarter compared to the same quarter the previous year. That is the 13th consecutive quarter to show an increase year over year. So not only is it easier to find a great tenant, they are also paying a premium as well. Talk about a one-two punch!

Finally, as home values continue to improve in most metro areas, renting may become more appealing to some due to overall cost. Also, tenants may be less likely to leave a rental to join the ranks of the homeowners as values continue to improve.

If you would like more information about investment properties, please email me and I will drop off a copy of the book “HOLD: How to find, buy and rent houses for wealth.”

Photo credit: brianDhawkins on flickr

Your home: Giving thanks for a great 2013 – and looking forward to an even better 2014

Thanksgiving - pecan pie

I feel it necessary to share some words of thanks and gratitude as I recover from my turkey hangover.

We at the Taylor-Made Team are very grateful to our friends and clients in the northeast Johnson County area who have supported our business throughout the years. We feel privileged to have worked with so many great families. And we are looking forward to an even better 2014. I am proud to share that we have had the opportunity to work with almost twice the number of families this year compared to 2012. That growth is in large part from the support of our NEJC neighbors. Thank you from the bottom of our hearts.

I wanted to keep it simple for today’s column, so here are 10 things to be thankful for concerning the real estate market:

  1. First and foremost, our market is in a state of recovery as opposed to the last five years of a depressed market.
  2. Sellers are selling their homes quickly and for a fair price even in November.
  3. Affordability is still at an all time high.
  4. Rates are still very low somewhat in part to the government shutdown (certainly the only positive result).
  5. Inventory is still very low. In most areas it is still around three months of inventory.
  6. Distressed property sales (foreclosures and short sales) are down to only 12 percent of national home sales. That is down 6 percent from May.
  7. Current lending guidelines, although sometimes frustrating, are more focused on consumer protection than ever.
  8.  Sellers are seeing an increase in equity for the first time in years.
  9.  Buyers can still purchase a home for as little as 3.5 percent down.
  10.  Going into 2014, the aforementioned items (1-9) are setting it up to be a great year for both buyers and sellers.

A final thank you to the readers and supporters of the PV Post. We are so blessed to be partners with Jay and Dan and the other PV Post contributors, and we all thank you for reading.

Happy Thanksgiving weekend to all!

Photo credit: flickr by St0rmz