May 10, 2019 REsimpli’s Real Estate News and Market Update
Home Prices Overvalued?
According to a new report from CoreLogic, shocking 40% of the nation’s top 50 markets (based on the number of total homes) were overvalued in March! The definition they use for overvalued is that prices are at least 10% higher than the long term, sustainable level. Only 16% of the top 15 markets were undervalued with 44% being at value.
High prices have kept current homeowners from upgrading and have also stalled a large share of renters from becoming homeowners. Thus rent demand has been significant. The cost of both renting and buying is significant and is putting a strain on most consumers. Not surprisingly, according to a survey conducted by CoreLogic 44% of renters cited the cost to rent in high-priced housing markets as the number one barrier to entry into homeownership. This is due to the difficulty to save a large down payment towards a home purchase while paying a large percentage of income in rent.
Home Prices Inch Up
Data from S&P CoreLogic Case-Shiller shows that national home prices rose 4% in February compared to the previous year. This is slightly lower than the 4.2% annual gain in January. The 10 city composite index rose 2.6% annually (3.1% in January) and the 20% city composite index rose 3% (3.5% in January).
The markets that are increasing the most are: Las Vegas (9.7%), Phoenix (6.7%), and Tampa (6.7%). There is a shift that is occurring. The previous had California cities gaining but three California cities of Los Angles, San Francisco and San Diego have the three slowest price increases over the last year. Chicago, New York and Cleveland also saw only slightly larger price increase than California.
The trend is that expensive places are increasing slightly or falling (like San Francisco) whereas inland cities other than the Great Lakes are gaining more. This is likely due to affordability being a major issue and the expensive cities already growing so much in price over the last decade.
Mortgage Applications Rise
According to data from the Mortgage Bankers Association, Mortgage applications rose by 2.7% compared to the previous week and volume was 8% higher compared to the same week a year ago. Purchase applications rose 4% for the week and 5% compared to a year ago. Applications to refinance a home loan were 1% higher than a week ago, and 13% higher than a year ago. This is not surprising because interest rates were 37 basis points higher a year ago. Last week had soft numbers so this slight rebound is predictable.
Federal Reserve Key Information:
The Federal Reserve policy affects all asset prices – from housing to stocks. Thus knowing the outlook gives investors insight and better predictability of the future.
Interest Rate: On January 30, 2019 the Federal Reserve said that it would keep its target range for its benchmark interest rate at 2.25% to 2.5%; they’ve kept this policy unchanged. The last release was on March 20th and they’ve decided to maintain the same rate.
Federal Reserve Outlook: The last meeting was a marked change with the Federal Reserve again changing course and saying they could “judge it appropriate to raise the target range for the federal funds rate modestly later this year” according to the Federal Reserve’s’ March 19-20 meeting. However, they did caveat that “A majority of participants expected that the evolution of the economic outlook and risks to the outlook would likely warrant leaving the target range unchanged for the remainder of the year.”
Other Key Data:
Data is backward looking and takes time to compile. That’s why the March data is the latest data out for home sales even though it’s May now. Home sales data from the National Association of Realtors:
Unemployment Rate: 3.6 percent in April, a decrease from 3.8% in March
REsimpli is founded by Sharad Mehta, a very active real estate investor. Sharad has done over 400 deals in last 6 years since he became a full-time real estate investor and over the years he has developed systems to automate many parts of his real estate investing. Sharad is a very active investor i See more >>
REsimpli is founded by Sharad Mehta, a very active real estate investor. Sharad has done over 400 deals in last 6 years since he became a full-time real estate investor and over the years he has developed systems to automate many parts of his real estate investing. Sharad is a very active investor in Lake County, Indiana market and he manages his entire business from Carlsbad, California, where he lives. Using the systems that Sharad has developed, he is able to manage 3-4 rehabs a month from a distance.
At reSimpli, our mission is to ‘Simplify Real Estate Investing Through Technology.’ Our team is passionate about using technology to reduce the time and energy required to build and manage a successful real estate business. reSimpli is a cloud-based system that makes real estate investing more efficient by automating tasks and helping the investor manage their business more efficiently.
We are constantly building and improving features that aid in: creating accurate and detailed scope of work for rehab projects, creating contracts with digital signature support, deal analysis tools, etc. We are a team of very active real estate investors so everything we are developing is something we find useful in our day to day investing.
Our passion is to create the best software for your real estate investing business and aim to be the only software program that a real estate investor needs to run a successful, scalable business. See less >>