1.5 Million Boomerang Buyers to Re-Enter the Market Within the Next 3 Years

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The financial crisis of 2008 wreaked havoc on homeowners across the US. Millions of Americans bailed on the housing market after the downturn when they simply couldn’t keep up with their mortgages.

But since then, the housing market has steadily improved. Consumers are enjoying a stronger labor market, increased wages, and a stronger economy. Americans are increasingly focusing on paying down their debt, and are more careful about over-leveraging to buy property or other large purchases. 

Over the past eight years, those who were negatively impacted by the crisis have had time to improve their financial positions. More and more consumers are becoming eligible to obtain a sensible mortgage, and 2016 could be the year that sees hoards of buyers re-entering the market.

They’re called “boomerang buyers,” and are named so because of their sudden exodus from the market due to being delinquent on their mortgage loans, foreclosures, short sales, or other type of closure that pushed them out. And with more favorable economic conditions and improvement in personal finances, these same exiled homeowners could be re-entering the market very soon.

Experts are convinced that boomerang buyers will be a critical component to the real estate market in the near future. They’ve already started off with a bang, with 700,000 of the 7.3 million homeowners who experienced foreclosure or short sales already meeting mortgage criteria. That’s a huge jump compared to the 3 million Americans who were able to secure a mortgage between October 2013 and September 2014.

In fact, 2016 is anticipated to be the year if the boomerang buyer. Another estimated 1.5 million boomerang buyers are expected to make a grand re-emergence to the housing market within the next three years as they continually meet mortgage underwriting guidelines.

More specifically, here are the numbers of credit holders who will be eligible to meet mortgage criteria over the next few years:

  • 2016 – 300,000 buyers
  • 2017 – 500,000 buyers
  • 2018 – 400,000 buyers
  • 2019 – 300,000 buyers

And as these buyers continue to enter the market again, they’ll help drive the market.

In general, it takes about 7 years for a foreclosure to be wiped off a person’s credit report. Short sales tend to take about three or four years. These time periods have expired since the debacle in the months leading up to 2008’s recession, which means a huge influx of boomerang buyers is highly realistic.

According to TransUnion, out of all the mortgage holders who were deeply affected by the economic debacle nearly a decade ago, only 18 percent of those impacted actually made a full recovery by the end of 2014.

The remainder is set to re-enter the market some time this year as foreclosure terms and the duration of prior delinquencies expire shortly.

The Road to Healthier Credit

The housing downturn from 2008 and the months leading up to it also had a dire effect on credit ratings. Just 21 percent of Super Prime credit holders were significantly affected by the housing downturn, which are those who have a credit score of 780 or higher.

Compare that to the 36 percent of Prime credit holders who were equally affected – those with a credit score between 661 to 720.

While it may be a slow ride to full recovery, the trend towards improving credit has been established. Forty-five million Americans were slotted as Super Prime credit holders in 2006, with the number increasing to 53 million by the end of 2014.

The gain in strength wasn’t as rapid for the Prime credit holder group, which only grew to 30 million in 2014 from 29 million in 2006. But the increase is somewhat skewed, as the number of Prime Credit holders actually sank to 26 million in 2009, which means the gains are stronger than they may appear.

Boomerang Buyers Slowly Dipping Back Into Mortgages

During the years following the crisis, some programs were rolled out to help boomerang buyers get back on their feet and gather the finances to buy again. For example, the Federal Housing Administration (FHA) came up with a new program during the crisis that would give home buyers a chance to get back into the housing market in as little as a year.

But with only 2,162 mortgages made within the 12-month period up to September 2014 to buyers with a history of foreclosure, it seems that many were simply not yet ready.

It could be that those who didn’t take advantage of programs such as these still hadn’t financially recovered from the extended periods of unemployment, and simply didn’t have the savings needed to warrant a home purchase.

Of course, getting a loan isn’t the same of every boomerang buyer; it all comes down to the specifics of the person’s foreclosure, as well as their credit history since losing their home. It can be rather complex and littered with variation. 

Real estate agents and financial experts believe it’s critical for boomerang buyers to talk to a mortgage lender to get a pre-approval letter prior to hitting the pavement in search of a new home. Certain loan underwriting standards have changed because of the previous housing crisis, and such changes could come into play when it comes to qualifying for a home loan.

But with the increased level of transparency in mortgage loans thanks to the recently introduced TILA/RESPA Integrated Disclosure rules, buyers are now able to make a much more informed decision when it comes to agreeing to the stipulations of their home loans.

And with consumers being more cautious and responsible when it comes to boosting their credit, paying off debt and making more sound purchases, a new beginning is on the horizon for the millions of boomerang buyers across the country.

What Exactly Happens When a House is in ‘Escrow’?

shutterstock_110127494You’ve found the perfect home, put in an offer, and the seller accepted. Congrats! But the deal isn’t quite done yet.

There’s this little thing called ‘escrow’, and it involves a bunch of contingencies that need to be met before you get the keys to your new home.

So, what exactly is ‘escrow’, and what’s involved in the process?

Mortgage Financing

After the offer on the home has been mutually accepted by both you and the seller, and all the terms and conditions of the contract have been agreed upon, the escrow process can start. And one of the more pertinent steps during escrow is for you to secure mortgage financing.

If you were pro-active, you would have already gotten a pre-approval letter from your lender before you even started looking for a home. While a pre-approval doesn’t exactly guarantee that you’ll be approved at the time that your offer on a home is accepted, at least it gets the ball rolling and keeps your lender briefed on your home-buying intentions.

After you’ve given the mortgage lender the address of the property that you’ve accepted to purchase, a statement will be prepared that details your loan amount, interest rate, and any other costs involved. Should the lender approve a loan and provide you with written proof, you can remove the financing clause on the contract and continue on with the escrow process.

Property Insurance

Your lender will want to see proof that your home can be insured, and that the insurance process has already begun before a mortgage can be secured. You’ll need to get in touch with an insurance agent and discuss the type and amount of insurance that your specific property will need.

Lender Appraisal

The lender who is providing your mortgage will want to have the property appraised to make sure it’s actually worth what you agreed to pay for it. Lenders want to make sure their financial interests are protected at all times, and aren’t in the business of lending huge sums of money for properties that are worth a lot less than what buyers agree to pay for of them.

If the appraisal comes in at a price that’s lower than your offer price, mortgage financing will likely be declined, unless you can come up with more money to put towards the downpayment, or if the seller agrees to shave a few bucks off the price to match the appraised value.

Home Inspection

A home inspection should always be part of a purchase agreement, with very few exceptions. While the contract is in escrow, a licensed home inspector will check out the integrity of the property’s structure and finishes. Any problems that are identified will be itemized on a report, along with any suggestions on how to rectify them and the cost associated with doing so.

If any issues are identified, you have the option to renegotiate the price in order to cover the costs of making any repairs, or ask that the seller make the repairs prior to you taking possession. Of course, the seller can always decline, at which point you have the option to either go ahead with the sale anyway, or back out as a result of the home inspection not being satisfactory to you.

HOA Document Review

If you’ve purchased a property in a homeowner’s association, then the HOA documents will need to be reviewed by your lawyer. You could do it yourself, but these documents are lengthy and complex, so you’re better off leaving it to an attorney to review on your behalf.

Analyzing these documents will help identify if there are any potential problems with the HOA, such as pending lawsuits, limited reserve funds, problems with the building, and so on. If you’re not satisfied with what the HOA documents reveal, you can back out of the deal before final closing.

HUD-1 Settlement Sheet

As the closing date approaches, a HUD-1 Settlement Sheet will be prepares which lists all the debits and credits for the buyer and seller. For instance, if the seller owes any back taxes on the property, they’ll be considered as a debit to the seller, and listed on the HUD-1 sheet as such.

Final Walk-Through

If you’ve included a contingency in your contract that allows you a final inspection a couple of days before closing, then you have the opportunity to go back and make sure everything is the way it was when you agreed to buy the property.

The Bottom Line

As you can see, there’s a lot that goes on in escrow, which is why it can often take a while to complete before final closing. But don’t get too concerned about the complexities involved, since your real estate agent will be there to oversee the whole process.

Rules of Etiquette You Should Know Before Buying a Home

rulesofetiquetteIf a good deal is what you’re looking for when it comes to buying a house, the last people you want to put off are the sellers.

The truth is, there’s a certain etiquette that buyers should follow throughout the home-buying process, and failure to follow it could actually cost you a lot of money.

At the end of the day, it all comes down to being courteous and having some common sense. Even if you mean no harm, you could inadvertently turn the sellers off with a certain gesture or comment that could potentially sabotage your negotiating power.

Stick to the following rules of home-buying etiquette to make sure the experience is a good one.

Stick With Reasonable Viewing Times

Use common sense when it comes to the days and times that you want to go see a listed home. Generally acceptable viewing times are typically between 10am and 8pm throughout the week. Asking to booking a showing at 10pm on a Tuesday night or 7am on Sunday morning isn’t going to cut it. Agents will likely get shut down if they ask the sellers for a showing at any one of these unreasonable times.

Don’t Demand Last-Minute Appointments

While your agent is working diligently to find you the right home, he or she is not at your beck-and-call. While many times agents and sellers can accommodate an immediate showing, many times they cannot.

While it doesn’t hurt to ask if there’s a last-minute time slot available, don’t demand it. The typical protocol is to book showings at least 24 hours in advance to allow the seller to make arrangements to not be home during the showing, and to have the home adequately prepped to be viewed. It also helps agents ensure that there is free time in their schedules to accommodate an appointment.

Skip the Unauthorized Photography

When you’re at a viewing, don’t whip out your smartphone and start snapping photos of the interior and exterior of the home unless you’ve been given direct permission to do so. That’s just rude and inconsiderate. After all, it’s not a public place – it’s still the sellers’ home, and it’s private property.

Don’t Deal With Any Other Agent if You’ve Already Signed With One

If you’ve already signed a contract with an agent, don’t call the listing agent of a home you’re interested in seeing. Actually, don’t call any other agent at all except your own. Even if your agent is away on holidays, proper etiquette would entail speaking with the agent who is covering for yours while they’re away. Not only is it discourteous to your agent and the other, it could even cost you money considering you’re under contract.

Be Honest With Your Agent About How Serious You Are About Buying

Don’t waste your agent’s time, nor the time of sellers with showings if your immediate intentions are not to buy anytime soon. Agents and sellers are busy enough without entertaining people who are just curious about seeing how other people live.

And even if you are serious about buying, don’t ask your agent to show you 10 houses in one afternoon. Viewing homes takes a lot of time, and taking up your agent’s entire afternoon is expensive for them. Not only that, but seeing too many homes at once will actually cloud your judgment and make it difficult to remember what you saw in which house. Stick to a maximum of only 3 or 4 home listings for each round of showings.

Make Sure You Can Afford the Place

If you’re looking at a home that’s listed for $600,000, but you can only realistically afford one for no more than $300,000, you’re wasting everyone’s time, including your own. Maybe you really do think you can afford the place, and are just naive to the whole home buying process.

That’s where a mortgage pre-approval can come in handy. This will give the lender a chance to analyze your income and current debt to see what you can realistically and comfortably afford. That way, you can focus only on the homes that fit your budget.

Many real estate agents actually require their clients to be pre-approved, and many sellers prefer to see an offer come in from prospective buyers who already have a pre-approval letter from their lender.

Be Polite and On-Time at Showings

This one goes without saying, but it’s still worth mentioning. Be polite to your agent, and to the sellers if they happen to be present. And don’t go sifting through clothes drawers or ransacking the storage closet. Looting around during a showing is definitely not polite.

In addition, make sure you’re on time for the showings. These appointments are usually only for a half hour to an hour, so you want to use each minute to your advantage to get a good sense of the home. Not only that, but it doesn’t show much respect to your agent to make them wait around forever for you to show up. They’ve likely got better things to do. 

Don’t Directly Contact the Homeowner

If a home is listed through an agent, then it’s protocol for any communications to take place between your agent and the seller’s. Under no circumstance is it acceptable to contact the homeowner directly. Not only will you seem overly aggressive, you’ll likely upset the homeowner.

Don’t Act Like the Home is Yours Until it Actually is

Even if you’ve fallen madly in love with a house, and have gone so far as to put an offer on it, the house isn’t yours until the keys are physically in your hands. Don’t show up to the home unannounced and start taking measurements for the sunroom addition you’ve got planned, or where you want the pool to go. Wait until the deal is formally done before you start making any plans.

Don’t Make Comments About the House When the Seller is Around

If the seller happens to be present when you’re viewing the home with your agent, reserve your comments until you’ve left. The homeowner might not appreciate hearing your thoughts on the outdated paint colors or the unattractive living room furniture. You’ll only hurt their feelings, as well as your negotiating power.

The Bottom Line

These tips aren’t hard to follow. In fact, they can be applied to any aspect of life. Use some common sense, be courteous, and be open and honest so that everyone’s happy.

What to Do When You Find Your Dream Home . . . But It’s Not For Sale

dreamhomeforsaleDepending on where you’re looking to buy, there could very well be a major supply shortage.

But don’t let slim pickings in your local housing market stand in the way of you snatching up your dream home. If the listings are limited in your area, consider sending letters to homeowners expressing your interest in buying.

The worst case scenario is that you’ll get a simple “not interested.” But you’ll never know the answer if you don’t ask!

Plenty of buyers across the country are now living comfortably in their homes by taking this leap of faith. But how homeowners are approached is important, which is why you’d be better off having a real estate agent act as a buffer in this interaction.

Many homeowners might find it a bit odd to get an unsolicited offer on their homes. Many might even think it’s nothing but a scam. But if the approach is dignified – and the price is attractive enough – they just might take the bait.

Sure, the odds are stacked against you in this solicitation – only 1 out of 10 homeowners will actually agree to the offer. But that means that the rest – about 10% – actually do agree to sell after a prospective buyer approaches them with an attractive offer.

The point is that there’s still a chance of landing the home simply by asking.

In fact, you may be surprised at how many homeowners have contemplated selling, but simply never got around to it. Sometimes all it takes is making the first move.

In fact, this tactic is not entirely out of the ordinary in markets with sought-after properties, like San Francisco or Seattle. It’s actually pretty common in markets like these where the local market is very active.

Many homeowners of properties that have desirable features won’t completely take the idea of selling off the table. If the right offer comes along, they just might be open enough to taking it.

Name the price, and some homeowners just might accept. 

Of course, if you decide to offer to buy a home that’s not listed for sale, it’s important to keep in mind that it’s the seller who’s in the driver’s seat when it comes to the negotiating table. They can basically name their price.

Obviously, you don’t have to pay it, but you do have the power to choose what price you’ll consider. If you’ve been in the market for a long time and are growing tired of looking, you might not mind paying a slightly higher price.

Just be careful that you don’t pay much more than what the home is really worth according to current market values, or you’ll start running into problems with your lender or with the amount of equity that you’ll be left with in the home.

So how do you go about offering to buy a home that’s not currently for sale?

For starters, have your real estate agent set up alerts on specific property addresses of homes that tickle your fancy, even if they’re not listed for sale at the present moment. If any action happens on these properties, you’ll get an email alerting you.

Foreclosure listings are also an option. And pre-foreclosure listings offer even more possibilities. If a current homeowner is in default on the mortgage, but the bank has yet to take any action, you might have the opportunity to swoop in and take the home off their hands before foreclosure actually finalizes.

Your real estate agent can also pull a report of listings that have expired over the past couple of years or so. Many times these listings simply got stale after not getting any bites. Or perhaps the owners were able to get over some of the perceived negatives about the home and decided to stay put – for the time being, anyway.

Sometimes the owners might still have the thought of selling in the back of their minds. Maybe the situation is more favorable to sell today, compared to what it was back when they first listed their homes.

Whatever the case may be, offering to buy a home that’s not currently listed is a strategy you might want to consider in a market where demand outweighs supply.

Have a friendly note drafted up, and express your admiration for the home, which most sellers will likely appreciate and consider a compliment.

If they’re not ready to sell, perhaps you can come up with an arrangement that will soften the experience and ease into the transition, such as coming up with a rent-to-own agreement at first.

It should be noted that it’s illegal to put anything in another homeowner’s mailbox. So make sure you either leave the letter at their door, or send it via the postal service addressed to the “resident.”

Even if the homeowners don’t seem interested in selling right now, they’ll have your number handy in case they change their mind in the near future.

The lesson here is that when looking for a home to buy, you don’t always have to rely solely on “For Sale” signs. Think outside the box, and you just might wind up with the house of your dreams.

How to Make Sure the Transition From ‘Renter’ to ‘Owner’ is a Smooth One

rentinlineWith rent prices increasing all over the country, now may a good time to make the leap from ‘renter’ status to ‘owner’.

After all, why not put that monthly check towards your own equity rather than someone else’s? And the prices that landlords are charging these days for rent are often higher than a typical mortgage payment!

But once you’ve made the decision to forego renting in favor of buying, you’ve got to do things properly from the get-go. A home purchase is a major decision, so you want to be sure that you’ve considered every angle to make sure the choice is the right one for you.

Understand the Issue of Mobility

If there’s one benefit of renting, it’s the mobility and flexibility that typically comes along with it. Once your term date has come and gone on your rental agreement, you can literally pick up and move to a new location much faster if you rent instead of own.

On the other hand, if you’ve got to sell, there will be a lot more on your plate in terms of all the legalities and financials that you have to deal with. While this isn’t usually a problem for many, it’s something that you need to understand before you make the transition.

Consider the Long-Term Benefits of Owning

Perhaps one of the biggest benefits of owning property is the long-term equity and wealth that it can help you accumulate. In fact, this is probably THE biggest advantage from a financial standpoint.

Every month that you make a rental payment, who’s pockets are you filling?

Not yours.

But if you’re paying a mortgage on your own property, the principal portion of every mortgage payment you make goes directly towards building equity in your home. And not only do you build equity by directly feeding into it with your money, you’re also building it with appreciation over time.

Of course, the exact amount that your home will be worth at any given point in the future will depend on that current housing market and the condition of your mortgage. But if you’ve been making regular payments without excessive leveraging to obtain financing, and the market is in decent condition, you can be looking at considerable gains.

Team up with a real estate agent, do some homework, crunch the numbers, and be practical about the prospective future value of your property.

Get Your Credit in Order

Don’t start pounding the pavement looking for a house just yet until you’ve looked into the state of your credit. Lenders aren’t going to hand out a mortgage to just anyone, including those who have a poor credit score on their records.

Basically, the higher your credit score, the better the odds of getting approved for a mortgage, and the lower the interest rate you’ll likely be offered. Usually, anything above 680 is what lenders are looking for.

But you’re not going to know what your credit score is until you pull your credit report. If your score isn’t as high as you’d like to to be, scan the report with a fine-tooth comb to check for any errors that could be bringing your score down. If you spot any, make sure you report these to the credit bureau right away to be investigated.

There are plenty of things you can do to improve your credit score, which should be done sooner rather than later. Don’t make any large purchases on credit, and don’t apply for any new credit cards. Make sure any loan payments you are currently responsible for are paid on time and in full every month so you don’t cause any further damage.

Within a few months of practicing these efforts, you should see an uptick on your credit score which will put you in a more favorable position to get a decent mortgage package.

Sort Out Your Finances and Get Pre-Approved For a Mortgage

How much debt are you currently drowning under? How much money are you actually taking home in income? Before you start dreaming of home ownership, you need to get a handle on your finances and identify exactly what financial position you’re in first. Lots of first-time homebuyers make the mistake of house-hunting without understanding whether or not their current finances can support this purchase.

It’s always a good idea to meet with a mortgage broker before checking out any listings to see what mortgages and interest rates you can realistically and comfortably afford. That’s where a mortgage pre-approval can come in really handy.

A pre-approval will give your mortgage specialist an opportunity to check out your credit history and determine whether or not you’d be a candidate for a home loan. Sure, you’ll have to fill out applications and submit a bunch of forms. But by the end of the process, you’ll know whether or not you’d be able to get a mortgage, and how much a lender would be willing to loan you.

This, in turn, will give you a clear idea of the price range of homes that you’ll be able to afford. There’s no sense looking for homes in the $500,000 range when you can only afford those in the $300,000 price bracket.

Shop Within Your Budget So You Don’t End Up ‘House Poor’

The last thing you want to do is dump a big chunk of your paycheck into your house. Financial experts recommend that homeowners shouldn’t be putting any more than 30% of their monthly income towards their mortgages in order to live comfortably and enjoy other aspects of life without drowning in loan payments.

Consider what percentage of your income you’d be comfortable putting towards your mortgage, and don’t go over that number.

Factor in Costs Aside From the Purchase Price

Once you buy a house, you’re no longer just responsible for the rent. The closing of the house purchase itself will come with added costs, such as home inspections, appraisals, commission fees, moving costs, and title insurance. And once you get the keys, you’ll now be paying for things like utilities, property taxes, insurance, and any fees related to repairs and maintenance.

The Bottom Line

These tidbits of info aren’t meant to scare you. Instead, they’re meant to adequately prepare you for the responsibilities of homeownership. Get your credit in check, and get your finances in order. Put a team together that includes a profession real estate agent and experienced mortgage broker who can help you get ready for your new role as homeowner. Lean on their expertise to help you put your best foot forward in the world of homeownership.

7 Things That Can Drive Your Property Taxes Up

Property taxes are tough to figure out. The federal property tax code alone is thousands of pages long, let alone the local codes all over the country.

In a nutshell, property taxes are determined by a home’s assessed value and the property tax rate for that specific town or county. Sounds simple enough, but then there are all the other dozens of factors that can come into play that can result in higher taxes.

One thing’s for sure: no one likes paying property taxes, or any other kind of taxes for that matter. And homeowners certainly don’t like seeing an increase in these taxes, either. But the amount you’re paying today could increase tomorrow for a variety of reasons.

Here are a few things that can cause your property taxes to go up.

1. Increase in Area Value

Everyone wants to live in a nice area that’s highly valued. After all, the higher the value of the community as a whole, the higher the value of the properties within it (with certain exceptions).

A number of things can cause an area’s value to increase. Maybe the local economy is seeing a boost due to increased employment opportunities. Or perhaps a golf course is being put in nearby your home. Even the construction of new luxury homes nearby can have a big impact on the assessed value of your property.

The opposite is also true. Think about areas with an abundance of hydro towers or chemical plants. How do you think the property tax assessments of homes in these types of communities compare to properties in a golf course community?

propertytaxneighborhood

2. School Funding

Local property taxes are a big source of funding for schools and community colleges. If existing educational institutions in the area are asking for money to make improvements, for instance, the money may often come from property taxes. In that case, you can expect your tax rate to get a boost, thereby increasing how much you pay every year to live where you are.

3. Budget Cuts

Some of the revenue that comes from property taxes are put towards essential services for the area, such as the police and fire departments, libraries, and others. If the state that you reside in decides to slash funding for these services in your area, where is the money going to come from? Why, the local homeowners, of course!

Even when there’s a downturn in the local economy and real estate market, your property taxes are still vulnerable to increases. And one of the biggest culprits for this annoying phenomenon is budget cuts.

4. Increasing Living Space

OK, so there’s not a whole lot that you can do about keeping a cap on property tax rates in your area when it comes to the above factors, but there are things that you as a homeowner might do to inadvertently increase how much you pay in this realm.

In most states in the US, more living space typically translates into a higher property tax rate. If last year your home measured at 1,200 square feet, for example, but that sunroom addition you put in this year brought your home’s size up to 1,800 square feet, you can bet that your property taxes will increase after your home’s been reassessed. 

Whether you convert the garage into a rec room or build a completely new addition to the home, increasing the livable space of your home will increase its value, and therefore its property taxes, too.

5. A Pool, Deck, and Other Outdoor Additions

Not only can an improvement on the actual home itself increase your property taxes, improvements in your outdoor space can do the same. While property tax systems differ from one state to another, as well as among local municipalities, properties will usually be reassessed when improvements are made.

Putting in an in-ground pool or building a big deck both qualify as tax-affected improvements. Your local tax assessment office will calculate the property value using the percentage of market value using comparables of other nearby properties in your area.

The amount that your property value will increase by will depend in your local market. Adding a pool might add 8 percent to a property value in one area, or as much as 30 percent in another.

propertytaxpool

6. Renovated Kitchens

Any professional real estate agent or appraiser will tell you that one of the best ways to increase your property’s value – and therefore its resale price – is by renovating the kitchen. This space is typically considered the hub of a home, and its condition is directly related to the perceived value of the property. 

But along with an increase in property value comes a hike in property taxes. Even if the actual space doesn’t increase in size, the overall condition of the home has been enhanced. And according to Uncle Sam, that warrants an uptick on your tax bill. 

propertytaxkitchen

7. Curb Appeal

Anything that enhances the look of a home’s exterior is fair game when it comes to property tax increases. Even seemingly modest things like a flower patch or vegetable garden can have an impact on the numbers you see on your property tax bill.

While tax assessors need to follow strict guidelines when they evaluate properties, there is still a bit of wiggle room when it comes to subjective opinions. So, if they think your home looks more attractive than next door’s house because you’ve got a few flowers and shrubs versus your neighbor’s barren front yard, your home may be given a higher assessed value.

The next time you take a gander at your property tax bill and notice that it’s higher than the last one, consider if any of the above factors came into play and had a hand in the price increase.

What Will California’s Housing Market Look Like in 2016?

California’s real estate market will continue its growth streak into 2016, according to the California Association of Realtors (CAR) 2016 Housing Market Forecast.

Yet that anticipated increase in sales will likely be somewhat hampered by limited inventory and continued high prices for properties.

Last year was a pretty good one for the Golden State, which ended off on a high note with a 9.6% increase in sales of single-family homes from November to December. That’s the biggest month-over-month increase in volume that California has seen in five years.

The average home in California finished 2015 at a median price of $489,310, an increase of 2.6% from November, and a jump of 8% from the end of 2014.

Perhaps the real winner in the California real estate market were condos and townhomes, which experienced a hike in sales of 25.1% from November, and a 10.2% increase from the same time in 2014.

californiamarketfeature

Sales were healthy in 2015, but what will the California housing market do this year?

Experts anticipate sales volume in the state to pick up over the first few months of 2016 thanks to a healthier job market and a boost in consumer sentiment. Couple that with the recently-introduced TILA/RESPA Integrated Disclosure rule that offers a lot more transparency to borrowers when applying for mortgages.

Things aren’t exactly expected to change significantly, but the changes that do happen will have a direct effect on the housing market and the buyers and sellers who will be dipping their toes in it.

CAR is predicting that California’s existing home sales are on pace to experience an increase of 6.3% in 2016, which translates into 433,000 single-family dwellings.

In a nutshell, the real estate market is still on the up-and-up in California, regardless of what speed the pace is at.

What’s driving strong home sales in California into 2016?

Healthy sales in the state can be attributed to a number of factors. For starters, the US gross domestic product is expected to increase by 3.1% in 2016, and the unemployment rate is anticipated to decline from 6.3% in 2015 to 5.5% this year.

Interest rates also play a role in strong home sales statewide. With the Fed recently announcing an increase in interest rates, mortgage rates will steadily increase in 2016 and into 2017.

Yet while the average 30-year fixed mortgage interest rate is forecasted to increase from 3.9% in 2015 to 4.5% in 2016, the rate is still hovering over historical lows, keeping mortgages affordable for state residents.

californiamarketShortage of inventory continues to plague the market in California

While the above factors are certainly positive signs, one thing that continues to be a thorn in the side is the lack of inventory across the state. Between the summer of 2014 to the same time in 2015, single-family homes in California dropped from 4 months’ worth of inventory to 3.6 months.

The high-demand/low-supply scenario is largely due fewer properties in foreclosure, more investors renting rather than flipping, and a shortage of new home construction.

The matter of housing affordability is causing concern among members of CAR. But hopefully this issue will be short-lived, especially when it seems as though the rate of home price increase is slowing down.

While the median price of a single-family dwelling in the state is expected to increase by 3.2% this year to $491,300, it’s the slowest price increase rate that California has experienced in five years.

It could very well be that we may be seeing a plateau in the price appreciation department in California, making it possible for an increasing number of state residents to jump into the real estate market in the coming months.