7 Things Every Buyer Should Know About Real Estate in an Escalating Market

7 Things Every Buyer Should Know About Real Estate in an Escalating Market

By Emilio DiSpirito, Licensed Rhode Island Real Estate Agent / Member of National Association of Realtors 401-359-2338 emiliodiv@gmail.com

Being a buyer in 2018 and 2019 will absolutely have its benefits, however, will cost you more than it did over the recent past years. In this article, we are going to discuss 7 things every buyer should know about real estate in this escalating market!

1.) What is an escalating real estate market? 

Picture an escalator at the mall, the one that goes up. Like a chart or a staircase, it brings you from one level to another level. In 2018 going into 2019, we will experience a new level of increased prices and mortgage interest rates. 

2.) How much are home values expected to rise? 

Before we talk about where we are going, we must first realize where we have come. Prices rose 13% on the median single-family home in Rhode Island in 2017 over 2016, multi-family homes 18%! Those numbers are massive seeing as historically, real estate should grow 3.5%. 

One last fact before we jump ahead; Single Family home prices rose 9% so far in 2018 year over year from 2017 and multi-family prices rose another 20%. Condominiums saw a 16% increase in 2018. 

Where are home prices expected to go? Prices across the board are expected to rise between 9 and 10% here in Rhode Island. 

FACT: The Median Single Family, Multi-Family and Condominium Home prices peaked in June of 2006 at $290,000 which is 7% higher than today's $270,000 median price.

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The chart represents median Single Family, Multi-Family and Condominium Prices in Rhode Island Between 2004 to 2018

3.) Where are interest rates going?

Interest rates, like pricing, are going up. We could see 6% in 2019 after the Fed hikes rates as they are anticipating. Rates were at their lowest in 2017 at 3.25%. 

4.) How much more will the same house cost me in 2019?

Let's take the median price point of $270,000 with the June 2018 30-year fixed FHA mortgage rate of 4.75%. You are left with a mortgage payment of $1359 which includes principle and interest. 

In 2019, rates should be 6% and prices are projected to be 9% higher for a median price of $294,300. Your mortgage payment under the same 30 year fixed FHA rate of 6% will now be $1703 per month. An additional $344 per month and $4,128 per year. 

5.) What is driving the current real estate market?

Simply put, supply and demand are driving the current real estate market. There are more buyers than homes available for sale. When you have increased demand and low supply, prices increase. When you have low demand and high supply, prices fall.

Here are the factors contributing to the low supply of homes available for buyers:

• Student Loan Debt has forced mom and dad to hold on to their home which accommodates their graduate that is having a hard time making ends meet. 
• Baby Boomers are caretakers of mom and dad and need the bigger home. 
• Homeowners who bought with rates in the 3% are worried they will be spending more per month when they downsize. 
• Builders are having a hard time finding the right kind of land and are hit with increased costs of materials, land, labor, etc. 
• Builders are having a difficult time finding qualified labor. 

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6.) How to Place Offers?

When you are touring homes in hot price ranges and see several buyers walking out as you walk in and walking in as you walk out, you need to understand that you will be going up against multiple buyers when placing offers. 

Here are some quick tips to get the home you want:

• Obtain a mortgage pre-approval before you shop. You can't place an offer without it because no one will take you seriously when they have 3 other buyers with proof they can obtain a mortgage. (We can point you in the right direction). 
• For properties with a lot of interested buyers - Go in with your best foot forward. Offer at or above purchase price with a 30 day or less mortgage approval and flexible closing date if you can.
• If it is an owner-occupied property, write the owners a heartfelt letter. Almost like a job interview, people want to make sure they get the best candidate. 
• Go in with a buyers agent. A buyers agent will have your back and will help you navigate through the 175+ steps involved with buying a home. 

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7.) Where do buyers have the hardest time?

Buyers have the hardest time when bringing outside parties in to help them make a decision. Sometimes it can be parents, friends, extended family, etc. If these people are not involved from the start, they are in the same boat you will be in from day one without the hard knock education of losing offers, seeing the flow of buyers in and out of properties and getting the buyer consultation from your Realtor. Have them come in from the get-go and view every property with you if you will be consulting them for advice. 

Placing offers is not something buyers have an easy time with. First time home buyers lose 3 homes on average before they realize it's best to place an aggressive offer in this market. If you want to find a home that needs work or that you can get less than list price, you will want to search for homes that have been on the market for over 90 days. These homes are almost always overpriced anyways and will need a lot of work. 

Home inspections come up and can cause concern to buyers. Make sure to hire the right home inspector, someone who is through but does not "overdo" it and scare you with minor repairs. Homes require a lot of maintenance, and it's important you understand that before buying. When buying an existing home, ask sellers for large-scale repairs and do not nickel and dime them for that outlet that is not a GFI ($12 fix). Many sellers will tell buyers to take a hike, especially when they have received multiple offers and buyers waiting with baited breath!! 

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5 Reasons Why You Need A Real Estate Agent as a Buyer or Seller

5 Reasons Why You Need A Real Estate Agent as a Buyer or Seller

By Emilio DiSpirito, Realtor / Top Real Estate Agent / Radio Show Host / National Speaker

Make no mistake we have more information than ever that we can access as consumers. Car shopping will never be the same when you can see what other people are paying in the area for the same car (ehhhemm.. actually, I have qualms about this.. because the average person would not negotiate as I would.. so these apps don't mean anything to me). Resources go above and beyond written information and include videos, podcasts, blogs, emails, etc. that offer incites on nearly anything your heart desires. 

So, with all of this information, why do you absolutely need a real estate agent when buying or selling?

1.) Understanding the data: How can we be sure whatever we are looking at on Google, Bing or Yahoo is accurate information? Full time real estate agents understand the data, have the most reliable sources and save you the hassle of depicting it!

2.) Saving You Time: Selling and buying real estate by no means is rocket science.. well most of the time. However it is very involved and more time is needed than you think. We estimate between 60 and 90 hours go into each transaction, and that is with well seasoned agents. Consumers whom hire Realtors are needed for about 10 hours of the entire process when buying and roughly 15 to 20 hours in total when selling. Your real estate agent will save you between 1 to 1.5 work weeks.

3.) Winning Negotiations: Negotiations are nothing less than an art and expertise. This may single handily be the most beneficial reason why hiring a full time top real estate agent will benefit your bottom dollar when buying or selling. Keep in mind, expert negotiators have ended labor union strikes, halted wars & negotiated peace among people throughout history. According to a study done by National Association of Realtors, For Sale By Owners net 85% of what they would of had they used a Realtor. When buying, there is much more than price that you will need to negotiate, its inspections, appraisal in some cases, mortgage contingency dates, closing times, etc. Hire a professional to save and make you money when listing or buying real estate. 

4.) Extended Team That Can Save You Big: Real Estate Agents many of the times have extended teams of professionals that can save you a ton of money and can provide powerful protection. Examples of these professionals are real estate attorneys, mortgage brokers, home inspectors, accountants, financial planners, contractors, etc. Working with a team of professionals who refer all of their clients to a trusted "extended team" of real estate pros is like the Groupon of the industry! You immediately get the best value for the generally the overall lowest end cost.

5.) Somewhere to Turn When You Need Guidance: Real estate is a life long investment and you will need guidance many times throughout your experience in dealing with real estate. Having a trusted partner that can provide you with vital information and referrals is crucial when owning property. The best real estate agents do not expect to assist you in buying or selling every time the phone rings, and while we do appreciate referrals of your co-workers, friends and family, we do also appreciate clients who are looking for assistance in finding the right contractor or the best financial planner, best place to get a burger in town, etc.

For more information on real estate, please consult our informational video library

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Will Increased Housing Prices Bring More Renters To The Market?

Will Increased Housing Prices Force More Renters To The Market?

By Emilio DiSpirito Realor/iHeartradio Show Host "The Round Table Real Estate Simplified"

www.EmilioDiSpirito.com 401-359-2338 Email Emilio DiSpirito Here

January 2016

Housing Markets like San Francisco, San Jose, Seattle, New York City & Boston to name a few on a long list are right around where they were in 05', 06' & 07'... our last real estate market peak. With that said, the rest of the country should follow suit so long the US is not effected by international events like China's current housing and stock market crisis.

WATCH THE VIDEO BLOG HERE!! FIND OUT IF INCREASED REAL ESTATE VALUES FORCE MORE RENTERS TO THE MARKET!

Emilio DiSpirito Top Realtor in Rhode Island & Top Mortgage Professional Matthew Bates Discuss Major Real Estate Trends & Topics. SUBSCRIBE TO OUR YOUTUBE CHANNEL 

We've had 4 straight years of overall residential real estate price gains in the United States and specifically Rhode Island. The National Association of Realtors anticipates prices to gain 8%+ in 2016 over 2015 Nationwide. Recent & Current homeowners will enjoy a fine equity position while the ones who were underwater should be able to break even and sell without taking a loss or having to do a short sale, deed in lieu or foreclosure. Basically if your home was worth $300,000 in 2015 you might be looking at $324,000 in 2016. Call me at 401-359-2338 or click here for an accurate fair market value for your property. 

(Congress EXTENDED a provision that helps home owners short sale!)

Unlike the mid 2000's when we were on our way to the recession because of fraudulent activity with the banks lending out monies with no income verification to many folks who they know could not pay back the note, this market is supported by American's income and low interest rates. In fact the 40 year average rate is just around 8.5%... Anything under 8.5% is a very good rate to purchase a home!! We are currently for the most part around 4% and should remain under 6% throughout 2016. 

The job market has gained over 300,000 new jobs in December 2015 alone and our economy aside from the stock markets and oil prices taking a huge dive.. (which yes these may effect us and could cause us to reach this market apogee - We will discuss this later in the show) the overall housing market seems to be in check for the time being. 

Home prices are growing at a higher than expected rate because of lack of inventory involving new construction and existing homes listing for sale on the market. This is making it the most opportune time since 2007 to sell a home because due to low and sometimes no competition in neighborhoods, home sellers are getting a premium for their properties. Check out www.TrustTheDove,SmartHomePrice.com for your properties current market value. 

With increased home pricing and value will come higher rents. It's basic really, if you buy a property at a higher cost, you are going to hand that cost off to your tenants while maintaining a healthy profit margin. It's practical business sense really. 

(So WHY are 83% of Renters Who WANT to Own NOT Buying?)

Now lets mix the increased housing cost with an all time low for vacancies and no such thing as having to charge a "fair market rent" and you also get increased rents.. You may ask.. What is causing low vacancies? Millenials are starting to leave their parents homes and are becoming a healthy and vital part of our work force and economy, folks who were foreclosed on who are still unable to buy, lack of new construction being built, low inventory for existing home sales and empty nesters looking to downsize and rent have all come to the rental market in need of housing. Supply and demand has increased on rental units and will continue to, thus making it more affordable to purchase a new home, thus driving the number of first time or returning home buyers increasing the number of properties sold and home increase prices in 2016!!!

See how that all ties in!?

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Ok Lets Sum up!

"Will Higher Home Prices Bring More Renters To Buy?"

The answer is YES RENTS WILL CONTINUE TO RISE AND MORE RENTERS WILL COME TO THE MARKET TO BUY! & Here is why!

• Landlords paying more for properties will pass higher costs on to renters causing a shift in market rent pricing
• Landlords will also pad their profit margin to maintain a healthy position
• Lack of rental inventory and all time vacancy lows due to the number of people in need of rentals are increasing the cost of rent.. who are these people?
• Millennials are leaving parents homes and becoming a vital part of the work force
• Buyers who lost their home to foreclosure in the bust of 2008 and later - (By the way if this is you or someone you may know.. You might be able to buy.. Lets discuss!)
• Lack of New Construction for current buyers. Lack of existing homes on the market.
• & Empty nesters looking to downsize and get out of home ownership
• According to RentJungle.com the Average 2 bed rent in 2009 was $953 and as of Oct 2015 it was $1309!! That's a $356 increase aka 27.2% increase!! Where will that 2 bed apartment be at the end of 2016? $1400 per month? Why not own a 3 bed 1.5 bath for $1400 a month in a nice neighborhood?! 

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Consult a Top Producing Realtor in RI who will walk you through the home buying process 401-359-2338

Mortgage Pre Approval Letters & Why They Should Be Made Mandatory By Law

Mortgage Pre Approval Letters & Why They Should Be Made Mandatory By Law

By Emilio DiSpirito, Realtor/Team Leader of The DiSpirito Team with HomeSmart Professionals RI License S35582 Cell Phone 401-359-2338 email emilio@mydreamhomenow.com 501 Centerville Rd Warwick RI 02886

Watch the video "6 Reasons Buyers Need to Be Pre Approved" & read the blog! 

Video Featuring Emilio DiSpirito Realtor with DiSpirito Team & John Castore, NMLS 12727 Mortgage Professional with Semper Home Loans

The real estate process involves many people and is extremely complex. It's hard to nail down exactly how many people are involved, however when you take into consideration the professionals and average family size between buyers and sellers, it's safe to say approx 51 individuals will take part in any one real estate transaction. 

This is what 51 people look like

This is what 51 people in a VW Bus look like

 Much of the perplexity comes in with all of the federal regulations put in place to protect you, the consumer. At the bank alone you have the administrative assistant, loan Originator, processor, underwriter, supervisor, quality control & regulatory department just to name a few. In addition you have the appraiser, home inspector, real estate agent, agents transaction coordinator, broker, contractors, title and closing office and their staff, insurance company and so on.

Home Buyers working hard

Forget about the professionals involved for a second and lets talk about you the buyer and the seller. As a buyer you may be taking time out of work or away from your family & friends in order to search for a home, so you can understand first hand some of the time it takes. You've spent several weeks, hour after hour (even at work.. shhh!!!) checking out the local Rhode Island MLS sites to find your perfect home.

Sellers working hard to prepare for Buyers

Sellers, you have spent several days and sometimes weeks preparing to list your home for sale between selecting  the best agent in Rhode Island, storing valuables, decluttering and organizing your home and having it professionally staged. For every showing you have to make sure you take the 2 dogs and cat in the car with you and for a 30 to 60 minute ride. Some sellers even take time out of work in order to give the floor a last minute sweep and shine and to place cookies in the oven and leave coffee for the buyers. This is your home, it's where you lay your head down at night, have tucked your children into bed and have prepared memorable holiday meals.. It's only natural that you are proud of your home and want it to appear its best and for your agent to help portray why your home is special while protecting your family and assets.

It's easy to see in this brief observation the sacrifices and time you put into buying or selling real estate. By far, the most important people involved in the transaction are you, the home buyer and/or home seller.

So.. This takes us to our point.. Why are a growing number agents & sellers requiring proof of funds (a document from your bank on bank letterhead stating you have "$x amount" to purchase a property) or a mortgage pre approval letter before allowing buyers to see a property?

6 of many reasons why buyers need to be pre approved or show qualification before viewing a property

1. Seller & Realtor Safety - Your Realtor is on the front line.. Several Realtors have been attacked & even murdered from showing homes to undocumented buyers. 
1. News Coverage of Realtors Being Murdered - Non qualified & undocumented buyers. Could of been avoided.
2. Theft - It's sad to say that thieves are smart & know how to take advantage of weak real estate agents. Agents that do not require a pre approval letter are subjecting themselves and their clients to many scary issues, one of which may be immediate theft or allowing a professional criminal in to case the property. Easily avoided by obtaining information from bank or mortgage brokerage. Someone who knows their identity is known would not commit heinous crimes. 
3. Understanding what you are qualified for - Often times you may be looking at homes that you are not qualified to purchase. In many instances, you have the income but maybe you wrote off to many deductions on last years 1040 or you had some leave time from work or your credit score dipped below where it needs to be. Obtaining a mortgage pre approval will allow you to prepare and budget. 
4. Wasting your time as a buyer & time if you're a seller. 
1. Think about the time you spend online.. never mind in person! You could literally be wasting your own time! 
5. You can not purchase a property without proof of funds or a mortgage pre approval. 
1. You can't even test drive a car without the dealership taking a copy of your license.
1. More expensive car brands may require a credit check before test drive or even discussing a purchase. 
2. Some of the worlds most expensive cars cost less than the median home price here in the United States. So why is it unreasonable for a Realtor to gather a pre approval letter?
6. For Your overall best interest
1. You know exactly what you can afford so you can budget and make sure you are comfortable with the monthly payments amid the slue of maintenance costs, utilities, taxes, insurance etc that come with home-ownership. 
2. You save time and heartache. There is nothing sadder than watching potential home buyers fall in love with a home, picture themselves there then to find out that they do not qualify for it. 
3. If you're a seller think about how long it took and takes you to prepare for a showing. You may feel as if your whole routine is flipped upside down during showings. 

The above list is a short example of why a large amount of real estate professionals believe that a mortgage pre approval or proof of funds should be required by law to view properties. By having clear documentation of all parties involved everyone is protected in all aspects. 

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You may ask how can this be enforced in an open house situation? Many buyers at open houses are curious and maybe just starting the home search process and may need some guidance, or many neighborhood potential sellers may be interviewing Realtors to see who does the best job presenting a property.. So how can you account for buyers or potential seller guests that are not pre approved? Upon entrance you require all parties to sign in and show a state ID to confirm name and address. As a Realtor, you make sure you use the "buddy system" and have another agent or mortgage broker with you that can assure your safty and also be another set of eyes while you are showing the basement or second floor and someone to welcome guests in and get them acquainted with the sign in policy. Any serious buyer will not have an issue with this and any serious seller will want this done at their home!  

What are your thoughts? Feel free to leave a comment below!

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