Do we have a bubble in real estate market?

Many people are asking this question, and for me we are not in a situation like that. At least in New England. Normally a bubble happens when you have prices going up without the demand going up during the same time. This is not happening (yet).

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In a country perspective, some data released yesterday was and indication of some relief. After falling for two straight weeks, mortgage application volume rose 2.5 percent in the week of July 2nd (seasonally adjusted) compared to the previous week. The increase was driven entirely by purchase applications. But the total volume is 4.3 percent lower than a year ago, according to the Mortgage Bankers Association, due to continuing weakness in loan refinancing.

For this year the average mortgage rate will be around 4-4.5 percent, but we expect that the number will be around 5% next year, and after this period we maybe expect some decrease in mortgage application. Because of prior regulations the banks are siting in a lot of cash now, and if we don’t have more houses in the market it can be a problem in the near future.

The strong economic growth is one of the responsible for that situation, fortunately. More jobs mean more money available for people to apply for a mortgage, but the home inventory available in the market is very low.

That’s the biggest problem we have now: the low inventory of houses in the market. But also we have the inflation of some important products for building. Prices are going up in a lot of sectors. Last week I talked to a well-known lumber vendor that told me some prices went up more than 30% since last year.

Economic cycles are normal, and up and downs are expected every 8 to 10 years. We are now approaching this time in the US economy. Let’s see what the future brings.

 

 

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5 questions that help save you money when buying a new house

 

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Tons of options are available in the market if you are a buyer. New home buildings are soaring during the last 5-7 years, and the inventory is low. Unfortunately for home buyers, new residential construction is coming at a steeper price. Nonetheless, there are still ways you can save money when buying a new home. Try to ask these questions for your builder:

  1. Which are the standard finishes and the options you have if we change our mind?

You have a lot of options for faucets, appliances and fixtures. A builder that is really interested on serving your needs will show all options and you both can decide how to better adapt the budget. Sometimes small modifications in these part of the building process for a new home can save you a lot of money.

2. In this region what are the Home Owners Association (HOA) rules?

HOA sometimes have very restrictive rules. Some states clear that, for example, is not permitted to build homes with a vinyl siding. Each HOA have its Declaration of Covenants, and you have to read them before take any decision on buying a house in that neighborhood. You have HOA that don’t allow storage sheds in the backyard, some of them don’t allow the installation of solar panels, or even have limitations for private fences and landscape design.

3. What are the options we have for the HVAC equipment?

Energy efficiency is a new tendency for all new homes, but in the majority of the cases this comes with a price. HVAC that use heat pumps are one of the most energy efficient ones, but they can cost 2 times more than a simple system that use natural gas. Discuss with your builder the options that are available in your project.

4. What are the financial incentives that you have for us if we use your preferred lender?

Builders normally have good contacts with lenders, and some of them have good deals to offer. You can also negotiate prices or upgrades some features in your house – like upgrading your floor of deck areas, for example.

5. What are the warranties that you have for us? Can you increase your warranty time?

Builders normally offer 1 year of warranty but you can always negotiate more time if you are ready to close the deal. Also take a careful read on the warranty. Remember that wood frame houses will be accommodating during the first years, and some problems can occur. But the builders are expecting them. Nonetheless if is difficult to find your builder during this time it will be a problem for you in the future

Tiny houses: better and practical

Imagine a folding home – yes, a house that you can produce, fold as a package and unfold when you are building it. Crazy? Not for some Italians that had an idea that is growing fast among the lovers of tiny houses.

wise home building site tiny houses
Photo from Avava website

Tiny houses are not only small constructions. Together with the process that will finalize your project quickly, with no more than 500 square feet on average (sometimes less than that), the tiny house movement describe themselves as “an architectural and social movement that advocates living simply in small homes.

There is currently no set definition as to what constitutes as a tiny house; however, a residential structure under 500 square feet (46 m2) is generally accepted to be a tiny home. The tiny house movement promotes financial prudence, eco-friendly choices, shared community experiences, and a shift in consumerism-driven mindsets. [ref]

The majority of the tiny houses are build the same way a bigger house is done, but some innovative companies are trying to design more practical houses. M.A.Di.® Home ​is an unfoldable modular living unit. Using an unfolding technique, this construction system allows to realize earthquake-resistant buildings for residential, leisure and hospitality. M.A.DI. can be also used to set-up of temporary villages for sports, fairs and first aid facilities in case of natural disasters. Houses cost normally range from $ 30,000 to $40,000 dollars. You can watch the video clicking here

Time will tell if people will enjoy the tiny living space comfortably, but we are sure that this will be an effective option for some big cities that already suffer from the low inventory of traditional new homes. In USA the average square footage of a new home is around 2,500sf. Tiny houses are here to change these numbers. Let’s wait and see what future will bring.

Real estate sites are moving forward

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Online real estate database companies are looking for more opportunities. Other than being only a database and search engine, now Zillow and Redfin are starting to test a model that will provide home owners the possibility to sell their houses directly to them, via website.

Redfin, for example, began testing an experimental new service called Redfin Now, where they buy homes directly from home sellers and resell them to other home buyers. According to a SEC filing on June 2017 the company said that “customers who sell through Redfin Now will typically get less money for their home than they would listing their home with a real estate agent, but get that money faster with less risk and fuss”.

For calculating the price of the house, Redfin believe in the algorithms for calculating what a home is worth – with this process the company expects that they will limit the risk that the price they pay a customer for a home is below the price they’ll charge a new buyer. Computers and Artificial Intelligence are everywhere now, and this is just another example of their ability to change the world we’ll live in the near future.

It sounds like another message that big names in the real estate business are trying to get more homes for better prices, to flip and resell for better prices. It is a risky strategy, and many real estate agents that are partners for some business probably will be upset. Let’s see the next moves in this very interesting area. But…every single time some risky innovative concept prove to be right for the long term, then we look backwards and called the innovator a genius.

Next project: Ranch Style in Clinton MA

WHB1801 Clinton MA front
Front View of the project (some details can be different in the final project, depending on the buyers modification)

We are finalizing our next project and it will be in Clinton MA. Ranch style home, single family, 4 beds / 2.5 baths, and a wonderful plan – very practical, with a lot of charm. The house will be built in one of the newest development areas of Clinton, and will beach the Meadows Pond (the owner will have access for the pond for swimming, boating and fishing).

If you are interested on having more information about this house contact us now