Buyer • Financing • Market Trends • Seller • April 29, 2022

Let Someone Else’s Money Work For You!

by Craig Franek

It is not a secret, but what is the easiest way to accumulate wealth? By investing in real estate. We all need somewhere to live and for most people this means having some version of a home payment, rent or mortgage. In this article, I am not going to discuss the reasons to buy a home but show the long-term benefits of having a mortgage. Even cash buyers should take this into consideration for after they close.

Why you ask? Well between a home’s appreciation and the stock market’s growth, the cost of borrowing (i.e., the Interest Rate) is normally going more than offset. Since 1996, in Salt Lake County (SLC) the average home appreciates 6.5%/year and the Dow Jones Index (Dow) at 8.2%/year, while the interest rate averaged 5.3%/year. Even if you exclude home appreciation for 2020 through today, appreciation perfectly offsets interest, not to include the fact interest is tax deductible.

So, it only makes financial sense to carry a mortgage on a home and to invest any cash beyond your required down payment in the stock market. This is the high-level argument I will make but keep reading if you want to see the details.

The data for this article only focuses on SLC since 1996, which is as far back as Utah’s MLS data goes. This does not mean the principles we discuss are not applicable other places, only that the Home Appreciation will be different. Also, I am using the Median Valued house, not Average. The Average is skewed by the high-priced homes, and not what most buyers are paying. As of March 2022, Median is $625K while Average is $691K.

This first chart outlines the average home appreciation and Dow’s performance. In 26 years, home prices have only lost value twice (blue line dipping below 0%). And even though 2022 looks like it is collapsing, the year-to-date of 8.6% appreciation is only through March. The Dow had also seen 2 dips, however 2022 is at a loss right now. You will also see; the Financial Crisis of 2008 decimated the Dow (39% Loss) while homes lost 31% of their value from June-07 to Jan-12.

In this next chart, the same home appreciation and Dow performance is presented, but instead of looking at just the annual return, it shows the compounding effects of an investment. Over the same 26yr period, these effects on home appreciation is 4x and the Dow is 5.6x the original investment. This goes to show how time on an investment can make a huge difference.

This final chart has a lot going on and is going to take a little imagination. Also, I can only hope there is some exaggeration in bars for the more recent years. To start the top of each bar represents the estimated median home value after 30 years. Here is an example value for homes purchased in January 1996, followed by how each block is calculated:

$920,196 = January 1996 Median Home Price of $125K after 30yrs of appreciation. Calculated using 0.56% monthly appreciation, which is the average from Jan-1996 to Mar-2022 (303 Months).
$25,000 = 20% Down Payment
$100,000 = Principal balance of a 30yr Mortgage
$138,835 = Total Interest paid on a 7.03% – 30yr Mortgage issued Jan 1996.
$111,542 = Property Taxes and Homeowners Insurance over the course of 30 years. Using today’s rates but adjusting property value each year to the new median.
$284,215 = Value of 20% Down Payment if invested in the Dow Jones Index. Calculated using 0.7% monthly appreciation, which is the average from Jan-1996 to Mar-2022.
$260,603 = Remaining balance of appreciated value.

Yes, the first and last numbers in this list are correct and 100% shocking. Sure, it doesn’t account for the 1% of your homes value you should put aside each year for maintenance/updates, the initial closing costs, the fact most people carry PMI as they do not have 20% down, the tax deduction from annual interest or the stock market gain you could have realized on all the expenses.

But it is an impressive number non the less since it was due to money you initially borrowed. And to know you will get all those expense outlays back at some point, should make you feel pretty good.

So, to the exaggeration of this graph, the market itself and this model in general. In the bar for homes purchased in 2022, the future 30-year value is ~$4.3M. SLC has seen unprecedented home appreciation over the last 26 years, related to several demand-based reasons, like jobs & skiing. But not all markets have done as well, and the demand in SLC could change at any moment.

Take Dayton, Ohio, where the median home sold for $86.5K in 1996 and in March 2022 was $129.9K, and yes, they have seen the same price appreciation as SLC over the last few years. Talk about opportunity costs. At least homes are super inexpensive. It could be argued it is not worth owning in those areas as expenses will more than outweigh appreciation over time.

This does makes me wonder what will happen here in the next 30yrs thought. Parts of California have been able to sustain high prices and appreciation for a while now. Do you think we will be able to do the same?

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Also Follow me on: Facebook, Instagram and LinkedIn. All charts were derived from UtahRealEstate.com data.

Market Trends • April 22, 2022

A Relatively Quick Change in Home Prices

by Craig Franek

Anyone in the market to buy a home knows how competitive and stressful it has been lately. Whether competing in multiple offer scenarios, watching the interest rate increase 2.5% points since the beginning of the year, or getting priced out of a neighborhood you could have afforded last year or even month, it has become a little disheartening.

It was this last distressing thing, home prices, that I started thinking about quite a bit after my last post, Is Cash King for Making the Winning Offer?. In the news we hear mostly about either the Average or Median Sales Price. I wanted to know how much the different price ranges have changed. As I dove in, I found several things in the results that were shocking.

First, from March 2019 through March 2022, there was a 53-basis point (from 66% to 13%) decline in the # of Sold Transactions in the $200K-$400K price range. Yes, you are reading that correctly. 66% of the homes that sold in March 2019, sold between $200K and $400K, and now it is down to 13%.

Second, the decline in the $200K-$400K price range, really began to tumble at the beginning of 2021, which is when I remember hearing homes having upwards of 100 offers. Then, there was a slight recovery/stabilization last fall, but overall, 2021 lost 47-basis points on its own.

The good news at least is there are still homes to purchase under $400,000, about 15% of the market, which in some US cities is unheard of. It is only that they may not be what you are looking for or they are in an area you are not interested in.

In addition to looking at price ranges, I want to clear one thing up the news has been reporting lately, “Limited Inventory”. As of the beginning of April, we are trending fairly close to what we saw in 2021. Yes, 2022 Listings are a little lower right now, but with everything going on in the world (Russia, Interest Rates, Inflation & Home Prices), I do not think it is all that bad. Also, you can see in the left graph, listings in Salt Lake County are on the rise, as is the case every year around now.

In fact, one of the other things I monitor is the % of listings Under Contract to what is Active. I am seeing some leveling off in the metric, which indicates the supply & demand are holding stable. And, as we begin the “listing season”, does this levelness point to a pending increase daily inventory, or supply is starting to increase faster than demand?

Last, some feelings-based data. I have talked with quite a few people about the uneasiness being felt in the market. In general, I think a lot of people are experiencing a “wait and see” mentality, due to the uncertainty around the war in Ukraine and what it may become and then what our economics are doing.

Buying a home is always a risk, since it is a huge outlay of money (borrowed or not). You have to remember things change all the time and the only thing that can be done is to prepare as much as possible. There is never a good or bad time economically to purchase a house, if you plan to stay in it long-term. So, the only question to ask is “Am I prepared and ready to Buy?”

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Also Follow me on: Facebook, Instagram and LinkedIn. All charts were derived from UtahRealEstate.com data.

Buyer • Newsletters • Seller • April 21, 2022

Monthly Newsletter – April 2022

by Craig Franek

How Does Inflation Affect Home Prices?

If you’ve followed the news lately, you’ve probably seen quite a bit about inflation. The consumer price index jumped 0.8% in February, bringing the total increase over the last 12 months to 7.9% – this is the largest annual jump in the last 40 years.

So, how does all of this affect the real estate market?
The Inventory Issue
Interest rates have been kept low for so long it’s created a bubble for everything and not just the housing market. There’s also inflationary pressure on the housing market because of limited inventory. Limited inventory stems from a myriad of problems in the industry.

First, many homeowners aren’t putting their houses on the market. This is due to factors like lockdowns, but also the fear they won’t be able to find a new home to buy.

There are construction delays due to supply chain bottlenecks as well.

Low inventory means buyers are often having to put in bids well above asking to get properties, creating a frustrating situation, to say the least.

Other Inflationary Effects On Real Estate
There are a few other ways inflation can influence how much you pay for a home.

First, inflation is a reference to a rise in the price of everyday goods. Those everyday goods are used to build homes. If the price of things like lumber and appliances go up, then the builder will pass those additional costs onto the buyer in the form of higher prices.

In some cases, however, inflation can have oppositional effects on real estate. If inflation rises, then theoretically, money should become more expensive to borrow. People borrow less of it, so there are fewer home purchases and that can lead to lower prices.

Real Estate Can Protect You Against Inflation
While real estate can be negatively affected by inflation in the form of higher prices, it can also protect you from its effects.

As home prices go up over time, you’re lowering the loan-to-value of your debt. You’re simultaneously increasing your equity, but your fixed-rate mortgage payments will stay the same.

If you’re a real estate investor earning income from rental properties, then you’re likely going to be able to charge higher rent when inflation is up. You can adjust the rent while the mortgage stays the same.

The relationship between housing and inflation can go in both directions. If you’re a buyer right now, inflation isn’t good news, but if you own a home, it can be one of the best ways to protect yourself against rising prices.

Disaster Prep: Do You Have a Home Inventory?

Disaster can strike anytime, anywhere.

Last year, for instance, aside from experiencing a pandemic, the U.S declared 58 disasters which caused billions of dollars in damage, according to the Federal Emergency Management Agency (FEMA).

Especially during the aftermath of hurricanes, we learn just how many Americans lack hazard insurance. Those who did have it faced the challenge of trying to figure out how to tally up their losses. It’s not easy to recall everything one owns, especially when confronting devastation. Then, there are the other losses a homeowner might face, such as those from theft and fire.

Being prepared will help to avoid delays in receiving an insurance payout should you someday face a disaster.

Dig Out your Homeowner Insurance Policy
If you’re like many of us, it’s still in the sealed envelope in which it arrived in the mail, shoved into a box or bin of “important papers.”

Get to know exactly what coverage you have and how to submit a claim should the unthinkable happen.

Then, create an inventory of your belongings. Many people choose an old-fashioned checklist (such as the one offered by NYCM Insurance or at Allstate.com), while others use video (narrated with the necessary information), or photographs labeled with the information that insurers require when considering a claim.

Information required by insurers:

Each item’s description and the quantity (ex: 2 sterling silver candlesticks)
Name of the manufacturer (ex: Tiffany & Co.)
Make/model/serial number
The date (or estimated date) of purchase
Where the item was purchased
The appraised value of each item (or an estimate)
If you can’t find the written appraisal for any item, jot down the name and contact information of the appraisal company and the date the items were appraised.

Keep your Inventory Safe
It’s important to find a safe spot, off-site, to store your inventory. You may choose to store it in the cloud with a backup service or save money by backing up the information to a USB drive and then placing it in a safe deposit box.

Tips from the Experts

The Insurance Information Institute recommends that you include possessions that are stored somewhere else (like a storage facility) in your inventory.
Keep all receipts and copies of appraisals with your inventory.
Keep a count of each item, such as “5 long-sleeve shirts, 7 pairs of sneakers…”
Break your inventory-taking into chunks. If you try to do too much of it at once, you may become overwhelmed and drop the project.

Finally, run the inventory by your insurance agent to ensure that you have enough coverage. The time to get clear on your insurance coverage is before a disaster strikes.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Follow me on: Facebook, Instagram and LinkedIn. Also, this data was derived from UtahRealEstate.com.

Buyer • Financing • Market Trends • April 9, 2022

Is Cash King for Making the Winning Offer?

by Craig Franek

Do you need to make a cash offer to win? This is a follow-up to an article I wrote back at the beginning of the COVID lockdown, “Lost to An All Cash Offer?”. It is still an exciting topic and one that has surprised me as I have looked further into the details of how things have changed in the last two years. First, having the ability to make a Cash offer does improve your odds of having your offer accepted, but I am unsure if it is worth the extra cost for buyers using a “Cash Lender”.

Did your agent tell you “You lost to an all-cash offer”? I am not sure I believe them and I do not think you should either. First as a seller’s agent, I do not have the ability to disclose any offer’s terms, unless my client has given me permission. When I ask my client if I can share terms, they normally ask my opinion, which is, I would not share unless there is a benefit to them.

And second, there is no benefit of sharing any offer’s terms before one has been selected. It can only lead to fewer offers. I do recommend sharing how many offers have been submitted. If there are already more than ten, it is likely no additional offer will be better than what has already been submitted.

To the numbers and your agent’s hypothesis. Yes, the percentage of sold listings going to cash buyers is increasing (in Red), but not across all Purchase Price ranges. For buyers looking from $400K-$1M, which is where most buyers are, the % of cash buyers has decreased from Q1-2021 to Q1-2022. Also numerically, the number of cash buyers has decreased Y/Y also. So, what is driving the increase then? There are fewer listings, which means more going to cash buyers.

Let us pause for a second to absorb the table. I know it is hard to believe, because the story in the news is Cash is King for Making the Winning Offer. Again, it helps!

However, as illustrated in this next table, just because it helps, does not mean there is no consequence for using it. For Single Family homes in Q1-2022, cash buyers start at a list price 5% higher and spend move over list (7.9%) than Non-Cash Buyers (3.8%). This ends up costing them 8.4% more at the end of the day.

I am not a fan of the next chart, and will keep working on it, but what it provides is a historic view of Cash vs Non-Cash Buyers. And yes, there were more cash buyers in 2021 and so far in 2022. Before 2021, only about 11% of all transactions went to cash buyers, however in 2021 it jumped to 16%. In 2021, we also saw a 38% increase in the number of cash transactions. So, there is some truth to the news, but it has been this way for over a year.

Where did all the Cash Buyers come from? My guess, in no particular order, is buyers are using 1) Cash Lenders, 2) Liquidated Equity or Equity Based Loans and 3) The proceeds from the sale of their house.

So back to the story of Cash is King, it helps, but so does putting in the best offer you can. When I say best I mean:

The highest offer you can make
For loan contingent offers, the most money above appraised value you manage.
A guarantee of being able to get to the closing table, aka non-refundable earnest money

I won’t tell you to give up your other contingencies, even though it might make your offer look better. It adds risk that you financially might not be able to manage later. Like finding something during Due Diligence that is a “walk away” thing, even if you lose non-refundable earnest money. At least the seller will have to disclose and possibly fix it for the next person.

If you want to make a Cash offer but don’t have Cash or Equity, there are several ways to get Cash. Many options will cost about 1% of the purchase price of your new home, in addition to fees for the refinance loan you will need to also get. I have access to a “Cash-Backed Lender”, RealSure, and would love to help you in securing your next home. But I am not sure you need to go this route, unless your crunched for time.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Follow me on: Facebook, Instagram and LinkedIn. Also, this data was derived from UtahRealEstate.com.

Home Improvement • Newsletters • January 25, 2022

Monthly Newsletter – January 2022

by Craig Franek

Do Solar Panels Increase Home Value?

Energy efficiency is a growing concern among homeowners, and solar panels are a well-known resource in improving efficiency and helping the environment. The amount of money a homeowner can save by using solar power is attractive enough, but how do solar panels affect property value?

Solar Adoption is Growing

Two years ago, the U.S. had hit 2 million solar installations and the researchers at Wood Mackenzie Power & Renewables expected “…solar installations to double by 2023.” In fact, Pew Research found that 46% of U.S. homeowners are considering residential solar panels.

High demand can lead to a faster sale and/or a higher sales price, but there are still a few other factors that will impact the value of your home on paper.

Location Considerations

According to a 2019 Zillow Economic Research report, “During the past year, homes with solar-energy systems sold for 4.1% more on average than comparable homes without solar power. For the median-valued home, that translates to an additional $9,274,”

The report finds, however, that the increase in home value varies, sometimes substantially, by region. If solar panels are popular in your area, they may provide a bigger boost to your home value than in less popular areas.

Owned or Leased?

When you sell your home to a buyer who will need financing to purchase it, the appraiser has the final say in what the home is worth. Whether the solar array on your roof increases the appraised value will depend largely on whether or not you own the system.

The most common solar panel ownership scenarios, according to the appraiser guidelines at fanniemae.com, include:

The panels are owned. Owned panels may be included in the appraised value of the property.
The panels are leased or covered by a Power Purchase Agreement. Leased panels may not be included in the appraised value of the property.
The panels are financed as personal property. If the solar panels are financed as personal property (and therefore serve as collateral for the loan), they will do nothing to increase the value of the home.
The panels are financed as fixture to real estate. Panels that are considered fixtures (permanently affixed to the property) can be used in the appraisal but only if they can’t be repossessed should the seller default on the terms of the financing agreement.

If you decide to purchase solar panels, you will likely be able to someday recoup the money you spent on them. If you’re located in an area where solar power is popular, your system may just help you to sell the home quicker. If you’d like more information on our local market conditions, reach out to me anytime.

Home Tips to Help Banish the Winter Blues

Ok, who’s the genius who thought that turning our clocks back an hour, prolonging winter’s darkness even more, was such a swell idea?

Turns out, it was Benjamin Franklin, in 1784, when he proposed it in a satirical essay. According to scholars at The Franklin Institute “He merely suggested Parisians change their sleep schedules to save money on candles and lamp oil.”

Regardless of the tongue-in-cheek nature of the suggestion, the idea of “daylight-saving” was kicked around for more than a century until New Zealander George Hudson took it and ran with it.

Fitting more daylight into our days is typically welcome, but the sudden switch to darkness when we “fall back” in autumn causes trouble for some folks. Fortunately, there are some simple tricks to help us get through it.

Let Lighting Do the Heavy Lifting

Seasonal affective disorder, or SAD for short, “…is a type of depression that’s related to changes in seasons,” according to the professionals at MayoClinic.org. “Symptoms start in the fall and continue into the winter months…”

One of the treatments for SAD is a bright, light-emitting box. But you don’t have to suffer from seasonal affective disorder to benefit from increased lighting in your home this winter.

Open heavy drapes when you’re home during the daytime. Ensure windows and screens are clean to allow maximum levels of natural light to flood the home. You can also add more lamps and other lighting to the home to banish the darkness and gloom. For an added punch, increase the number of mirrors on the walls. They’ll help reflect existing light.

Bring the Outdoors in

The houseplant trend has been going on for years, and the pandemic put it on steroids. If you haven’t already joined the plant party, this winter might be a great time to give it a try.

“Indoor plants have drawn the attention of the scientific community because of their various benefits,” according to Min-sun Lee, Juyoung Lee, Bum-Jin Park, and Yoshifumi Miyazaki, authors of a study published in the Journal of Physiological Anthropology.

These benefits include:

Stress reduction
Improved mood
Enhancement of cognitive health

Interaction with your plants is key to receiving these benefits, so go plant shopping, then vow to transplant, water, and generally hover over your leaf babies all winter. For an added boost in mood, add some colorful, flowering plants to your shopping cart as well.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com. If you’d like to see the value of your home and keep track of your equity, check out this new service from Homebot.ai that I’m testing out.

P.S. Follow me on: Facebook, Instagram and LinkedIn.

Buyer • Seller • February 2, 2021

How much do you know about the Buying Process?

by Craig Franek

First-time, Second-time, Multi-time Buyer

Besides buying a home what is common between all these individuals? In my opinion, it is likely they all may not fully know or remember what happens during the buying process. Sure, most know you get an agent and a lender, look for a home, find your dream home, negotiate an offer, and move in.

This is correct, but there are so many other things that go on in each of these stages. I am not going to cover the minutia of the stages, but you and your agent should always review the complete process and talk through current circumstances (both yours and the market).

“Why?” Well, being an information driven person, let us review some facts:

Owner tenure estimated at 13 years (2018)
Average age of a first-time buyer 33 (2020)
Average lifespan 79yrs (2020)

Using bad math and a little logic to make a point, if you own homes for 46yrs, it is likely you will purchase 3-4 during your lifetime. In addition, I will argue it is likely the first home’s tenure is closer to 7 years as a lot of change is happening in those early years. I will also argue the same for the last home, but I can not find data to support this guess. This leaves 32 years of ownership for those 1-2 homes in the middle.

Okay back to the point, you are likely going to do this 3-4 times in your lifetime! Yes, lifetime. I do not know about you, but the first two houses I bought, I had no idea what the process was nor do I remember going through them. If you ask about my offers or contracts, I vaguely remember how much we paid. Fortunately for me, I had great real estate agents for both transactions, and I am sure they talked me through all it.

A friend asked what makes me a good agent, and before I responded they said, “It’s because you are good with data.” My response back was, I think anyone can look at surrounding listings and make a decent guess at what the value of a home should be. What I think I am good at, is explaining the process and then helping my clients negotiate through it. My goal is to manage all the stressful components of the process into consumable chunks, so my clients can act with confidence in the decisions they will have to make during it.

With that said, here are a few articles that cover the process in more detail.

· Short presentation covering the buying process in detail.

· National Association of Realtors® flyer about the buying process.

Finally, I have heard so many people say they had a bad experience with their last agent, which is why they are working with someone different. Please remember, you are paying your agent and you have the right to switch, even if you are under exclusive agency agreement (contract) with them. I know it is hard to fire someone, but why work with someone you do not trust or like.

Real Estate Agents are among the least trusted professionals you will encounter, with only 1 in 4 people having Trust in them. Knowing this pains me and it upsets me when I hear stories about bad agents. Help me fix this by not employing them.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Follow me on: Facebook, Instagram and LinkedIn

Additional articles if you are interested:

https://magazine.realtor/daily-news/2019/01/14/homeownership-tenure-at-highest-level-in-18-years

https://www.prb.org/u-s-homeownership-rates-fall-among-young-adults-african-americans/

https://www.nar.realtor/blogs/economists-outlook/how-long-do-homeowners-stay-in-their-homes

https://www.nar.realtor/research-and-statistics/research-reports/highlights-from-the-profile-of-home-buyers-and-sellers

https://www.nar.realtor/research-and-statistics/quick-real-estate-statistics

https://www.nar.realtor/sites/default/files/documents/2020-generational-trends-report-03-05-2020.pdf

Home Improvement • Newsletters • January 20, 2021

Monthly Newsletter – January 2021

by Craig Franek

Home Improvement Decisions You’ll Never Regret

When it comes to home remodeling, there are very few design decisions you can make that are sure to stand the test of time. While it can be tempting to opt for trendy renovations (open shelving anyone?), there’s no guarantee that the next buyer – or your future self – will share the same preference. We’re all painfully aware that the future is tough to predict, but there are a handful of decisions you can make on home improvements that won’t keep you up at night, regardless of market forces.

Infrastructure

When it comes to remodeling, there are fewer sure-fire bets than investing in a home’s infrastructure. Investing in updated electrical and HVAC systems, siding, plumbing, insulation, and windows can yield tremendous ROI for homeowners whether they’re dwelling or selling. These systems are often hidden behind walls and under floors, so they’re easy to ignore. However, neglecting your home’s infrastructure can lead to inconvenient and costly repairs and can be hazardous to your family’s health and safety. There’s a reason home inspectors spend most of their time in attics and crawlspaces – the overall health of your home has less to do with aesthetics and more to do with what’s behind the scenes.

Storage

Storage is a consideration that can be easily overlooked when you’re imagining your dream living space, which is almost by design – practical and efficient storage is meant to be out of sight, out of mind. Whether you plan to stay in your home or sell in the near future, sacrificing storage space is a decision you’ll likely regret. If your remodel demands eliminating a hall closet, make sure you have a plan to reorganize and add that storage back elsewhere. It’s impossible to predict what life changes your home might need to accommodate in the future, and if you plan to sell, ample storage will be a plus for practically any prospective buyer.

Lighting

It can be tempting to see lighting as an afterthought, but in actuality lighting should be a starting point, as it impacts every detail in a room. Take time to research and create a lighting plan that best accentuates the features of your home, taking into account natural light and ways to implement accent lighting. When the time comes to implement your plan, you can’t go wrong with a licensed electrician who can ensure all changes are up to code.

Running the Numbers on Refinancing

Deciding whether or not to refinance an existing mortgage typically means running some numbers. You can do this on your own, but it’s helpful to get the professional assistance of a loan officer. It mostly boils down to how much you’ll save each month, but there are other considerations.

First, the change in rate isn’t everything. Old school rules say that it’s a good idea to refinance if current market rates are 1% or 2% lower than what you currently have, but the rate is only a part of it. The other component is the amount being financed. For larger loan amounts, a reduction of only 0.5% might make sense. For smaller loan amounts, 2% may not be enough.

Instead, calculate the monthly savings and then divide that amount into the closing costs associated with the mortgage. The result is how many months it will take to ‘recover’ the closing costs in the form of monthly savings. Pay less attention to the actual rate but instead how long it will take to get your closing costs back.

Take a loan amount of $300,000 over 30 years with a rate of 4.50%. The principal and interest payment works out to $1,520 per month. If current market rates are at 3.5%, the new payment would be $1,347 for a savings of $173 per month. If closing costs were $3,000, then it would take just over 17 months to recover the associated fees. Not bad. If the loan amount were $100,000 under the same scenario, the monthly savings would be $57 and recovered in 52 months, or more than four years. Probably not a good idea in that situation.

There are other considerations outside of month-to-month savings. Let’s say you’re less concerned about lowering your monthly payments, and you’re more interested in paying off your house faster. In this scenario, it may make sense to refinance at an even lower interest rate on a 15-year mortgage. You’ll pay more per month, but you can potentially save tens of thousands of dollars over the life of your loan.

If you’re wondering whether a refi makes sense for you, reach out! I’ll be happy to answer any questions and can refer you to a mortgage professional when you’re ready to crunch some numbers.

Market Trends • January 8, 2021

Salt Lake County 2020 Year End Review

by Craig Franek

Salt Lake County Housing Trends – 2020 Year End Review

2020, What a year! There are so many things to discuss, but probably the most exciting part is it is finally over. However, just because the year is over, it does not mean things for buyers are going to improve.

Some metrics I think are interesting.

· 2020 surpassed 2005 becoming the highest year of Sold Listings, having 20% fewer available.

· 89% of all new listings in 2020 sold.

· The # of Sold homes in Q4 2020 was 10% higher than any other Q4.

· Daily inventory began 2020 around 1800 Listings and ended around 750. A 58% decline.

· 2020 only had 3% fewer listings than 2019.

· Q4 Avg Sales Price across the Zip Codes was 15% higher than Q4 2019.

So, how does this translate to 2021? It is hard to say exactly because there are so many unknowns with future federal stimulus packages and how they will impact homeowners who are behind on mortgage payment. Many distressed Sellers also have quite a bit of equity now in their homes, so a large # of foreclosures is unlikely. I wonder for those that are unemployed, if the banks will start letting them refinance to access the low rates and to wrap deferred payments into the new loan?

We do know flexible work arrangements are now going to be the norm and Utah/Salt Lake is a desirable location due to our access to the outdoors and strong economy. It is also highly likely mortgage rates will stay excessively low for the foreseeable. So, I believe the short answer is, it will continue to be a seller’s market here in Salt Lake County as there will continue to be high demand from buyers

As a Buyer, I will tell you to be flexible in your wants and needs and potentially be willing to limit some to the things you ask Sellers for as part of your offer.

For Sellers, if you want the most money from the sale of your home, make some small investments in paint and flooring. These two things will really change how buyers will respond to your property.

Results for December 2020

Not much is changing in the Salt Lake Valley as the year ended. Dec new listings did surpass 2019’s and the market finished with only a 3% deficit to 2019. Listings Under Contract decreased slightly and Daily Inventory declined as demand continued to outpace supply. Lending is staying stable as rates hover around 2.75%.

This first graph shows the # of Active Listings and those Under Contract. This represents a version of Supply (Active Listings) and Demand (Listings Under Contract) for Salt Lake County. Historically, Supply has always been higher than Demand, but the lines crossed just before COVID-19 started ramping and then again after the restrictions began lifting, and this divergence is only getting wider. For Sellers this is great, other than concerns of increased contract cancellation rate. For Buyers, it means tight competition and rising home prices.

These two graphs represent the density of Active listings (left graph) and Ratio of Active to Under Contract Listings (right graph). South Jordan (84009) had the most Active Listings at the end of November, while Downtown SLC (84101) continues to have more Supply than Demand. This might be a useful graph when trying to understand what area might have less competition when looking to buy, or too much inventory when planning to sell, not that too much is really a thing right now.

These two graphs represent the Total # of New Listings for the Month (left graph) and the change in New Listings for that area compared to last year (right graph). Herriman (84096) again had the most New Listings for November, while Millcreek (84124) had the biggest increase in listings year over year. This might also be a useful graph when trying to understand what area might have less competition when looking to buy, or too much inventory when planning to sell.

This set of graphs that shows the total number of Listings by Week (left graph) for 2019 and 2020, and then the Cumulative Number of Listings (right graph). The gap in listings slowly decreased from the high in June of 10% to just a 3% deficit in listings for the year at the end of December.

This graph shows the average Selling Price and the # of Days on Market for listings that sold in November. West Valley (84104) had the lowest DOM (41 days) and avg price of $308K. Again, this points to selling and buying patterns for an area and is something to consider if you do not have a preference for where you live.

Months of Inventory tightened again in December, as 2 two that turned positive in November reversed, leaving just Downtown SLC with a surplus of inventory. Different sources give differing guidance, but the NAR states an average of 6 months means there is equilibrium of Buyers and Sellers in the market. Downtown Salt Lake City (84101) still has the highest Months of Inventory 6 months, while West Jordan (84084) had the lowest at just under 3 days of inventory. If you are a Buyer and do not have a preference on location or if you do not like competing, again consider looking downtown. Now might be a great time to explore that area.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

Please remember:

– Zip codes do not reflect subdivisions, and any given subdivision could have completely different trend than the zip code it is in.

– All graphical information is collected from UtahRealestate.com.

P.S. Follow me on: Facebook, Instagram and LinkedIn

Home Improvement • November 16, 2020

Updating My Greenhouse (Part 1)

by Craig Franek

Ten months! Yep, that is what I said. But you likely do not understand what this means or how hard it was for me to wait that long to fix my toothless greenhouse. Not that I have shared this before, but I love projects! My wife claims it is the reason we ended up in our current home, we walked in and she saw it was for me, one big project after another.

Well the greenhouse and its wonky roof finally wore me down to the point that it had to be fixed. Also, Winter was coming, and I really wanted to put my new greenhouse to work. Note, I genuinely enjoy gardening as well.

I have not fixed a roof since I was 8ish, so not an expert. Also, I have never owned or used a greenhouse before. My first step was to research roofing materials and then see what was available. My original plan was to just repair it with a new sheet of corrugated plastic, but it was no longer available. I ended up replacing it completely knowing a new roof would look better anyway.

I am not going to bore you with the details, but here are a few things I encountered.

· Turn the circular saw blade around. It will keep the plastic from splintering.

· Extend the materials beyond the sides/edges of the framing to keep water damage from occurring.

· A piece of flashing will do the job if you cannot find the ridge cap.

· Be safe, polycarbonate sheets are slippery and flexible.

· Like most construction, nothing was perfectly square and adjustments had to be made.

In total, I think it took about 6 hours for me to pull off the old roof and install the new one. It was not difficult or expensive, but it did take some planning, a handful of tools and a lot of ladder repositioning.

Stay tuned for additional updates to the greenhouse, it is where I am going to focus my energy for now. As you may have seen in my post about my First Home Renovation, I am going to continue to delay that project because there are too many subsequent improvements dependent on it.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Follow me on: Facebook, Instagram and LinkedIn.

Newsletters • August 4, 2020

Community Service (My fire-hydrant project)

by Craig Franek

It is really, really hot out there. High 90s for the last few weeks, but seriously, when is it a better time to think about next winter? Well, I am not really thinking about winter so much, but where the snow on our street gets piled up, which could be an issue for my home if there was ever a fire. Also, this is not my fire-hydrant, the city owns it, but it only services my and my neighbor’s property.

This all started a month ago when my spouse asked if the hydrant worked and if I would call the city to have them come out and test it. I did not get around to calling the city, but a fireman did randomly show up one day to test it. It still worked, as ugly as it was. Which in comes my community service project, painting a hydrant. Note: I asked the fireman about painting the hydrant before I did.

Here are the steps I followed. I am not a professional painter, but do not mind spilling a little paint when necessary.

1) Supplies – Red oil-based paint, inexpensive paintbrush, wire bristle brush, scrapper, eye protection, a face mask (Thanks COVID for making sure I have plenty of these around), soapy water and a brush, and a plastic cup of water.

2) Prep the area – Remove all the debris from around the area.

3) Prep the hydrant – Put on safety gear. Use the bristle brush and scrapper to remove any flaking paint or rust. Wash down the hydrant to remove any particulate matter (dirt and dust).

4) Paint the hydrant – Simple to say, but do not over apply paint or you will have runs and follow the directions. In my case, it was a 24 hour wait between coats, of which I applied three of them. This is where the cup of water comes in. Just drop your brush in in between coats. Since water and oil do not mix, it will keep your brush from drying out.

5) Ensure it can be seen – What good is a hydrant that no one knows is there?

In total, I probably spent 2.5 hours on my hydrant. But in the end, I really enjoy seeing it every day and the satisfaction of knowing I made a difference, all be it a small one.

Anyway, thanks for your time. If you’d like to connect or share your thoughts, I can be reached via email at craig@craigtheagent.com.

P.S. Follow me on: Facebook, Instagram and LinkedIn.

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