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Date Archives: March 2020

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March
31

The Economic Impact of Buying a Home

The Economic Impact of Buying a Home | MyKCM

We're in a changing real estate market, and life, in general, is changing too – from how we grocery shop and meal prep to the ways we can interact with our friends and neighbors. Even practices for engaging with agents, lenders, and all of the players involved in a real estate transaction are changing to a virtual format. What isn't changing, however, is one key thing that can drive the local economy: buying a home.

We're all being impacted in different ways by the effects of the coronavirus. If you're in a position to buy a home today, know that you're a major economic force in your neighborhood. And while we all wait patiently for the current pandemic to pass, there are a lot of things you can do in the meantime to keep your home search on track.

Every year the National Association of Realtors (NAR) shares a report that notes the full economic impact of home sales. This report summarizes:

"The total economic impact of real estate related industries on the state economy, as well as the expenditures that result from a single home sale, including aspects like home construction costs, real estate brokerage, mortgage lending and title insurance."

Here's the breakdown of how the average home sale boosts the economy:The Economic Impact of Buying a Home | MyKCMWhen you buy a home, you're making an impact. You're fulfilling your need for shelter and a place to live, and you're also generating jobs and income for the appraiser, the loan officer, the title company, the real estate agent, and many more contributors to the process. For every person or business that you work with throughout the transaction, there's also likely a team behind the scenes making it all happen, so the effort multiplies substantially. As noted above in the circle on the right, the impact is almost double when you purchase new construction, given the extra labor it requires to build the home.

The report also breaks down the average economic impact by state:The Economic Impact of Buying a Home | MyKCMAs a buyer, you have an essential need for a home – and you can make an essential impact with homeownership, too. That need for shelter, comfort, and a safe place to live will always be alive and well. And whenever you're able to act on that need, whether now or later, you'll truly be creating gains for you, your family, local business professionals, and the overall economy.

Bottom Line

Whenever you purchase a home, you're an economic driver. Even if you're not ready or able to make a move now, there are things you can do to keep your own process moving forward so you're set when the time is right for you. Let's connect to keep your home search – and your local contributions – on track.

 

Contact our expert agents today

March
25

Why the Stock Market Correction Probably Won't Impact Home Values

Why the Stock Market Correction Probably Won't Impact Home Values | MyKCM

With the housing crash of 2006-2008 still visible in the rear-view mirror, many are concerned the current correction in the stock market is a sign that home values are also about to tumble. What's taking place today, however, is nothing like what happened the last time. The S&P 500 did fall by over fifty percent from October 2007 to March 2009, and home values did depreciate in 2007, 2008, and 2009 – but that was because that economic slowdown was mainly caused by a collapsing real estate market and a meltdown in the mortgage market.

This time, the stock market correction is being caused by an outside event (the coronavirus) with no connection to the housing industry. Many experts are saying the current situation is much more reminiscent of the challenges we had when the dot.com crash was immediately followed by 9/11. As an example, David Rosenberg, Chief Economist with Gluskin Sheff + Associates Inc., recently explained:

"What 9/11 has in common with what is happening today is that this shock has also generated fear, angst and anxiety among the general public. People avoided crowds then as they believed another terrorist attack was coming and are acting the same today to avoid getting sick. The same parts of the economy are under pressure ─ airlines, leisure, hospitality, restaurants, entertainment ─ consumer discretionary services in general."

Since the current situation resembles the stock market correction in the early 2000s, let's review what happened to home values during that time.Why the Stock Market Correction Probably Won't Impact Home Values | MyKCMThe S&P dropped 45% between September 2000 and October 2002. Home prices, on the other hand, appreciated nicely at the same time. That stock market correction proved not to have any negative impact on home values.

Bottom Line

If the current situation is more like the markets in the early 2000s versus the markets during the Great Recession, home values should be minimally affected, if at all.

March
24

Economic Slowdown: What the Experts Are Saying

Economic Slowdown: What the Experts Are Saying | MyKCM

More and more economists are predicting a recession is imminent as the result of the pullback in the economy caused by COVID-19. According to the National Bureau of Economic Research:

"A recession is a significant decline in economic activity spread across the economy, lasting more than a few months, normally visible in real GDP, real income, employment, industrial production, and wholesale-retail sales."

Bill McBride, the founder of Calculated Riskbelieves we are already in a recession:

"With the sudden economic stop, and with many states shutting down by closing down schools, bars and restaurants…my view is the US economy is now in a recession (started in March 2020), and GDP will decline sharply in Q2. The length of the recession will depend on the course of the pandemic."

How deep will it go?

No one knows for sure. It depends on how long it takes to beat this virus. Goldman Sachs anticipates we will see a difficult first half of the year, but the economy will recover in the second half (see below):Economic Slowdown: What the Experts Are Saying | MyKCMGoldman also projects we'll have "further strong gains in early 2021."

This aligns with the projection from Wells Fargo Investment Institute:

"Once the virus infection rate peaks, we expect a recovery to gain momentum into the final quarter of the year and especially into 2021."

Again, no one knows for sure how long the pandemic will last. The hope is that it will resolve sometime over the next several months. Most agree that when it does, the economy will regain its strength quickly.

*QUARTER 1 DATA FROM GOLDMAN SACHS WAS UPDATED FROM 0% TO -0.2% ON 3/17/20 AFTER THE INITIAL RELEASE.

Bottom Line

This virus is not only impacting the physical health of Americans, but also the financial health of the nation. The sooner we beat it, the sooner our lives will return to normal.

March
23

Streamlining Your Move

Moving to a new home can be a huge undertaking, but it doesn't have to be stressful. Although it may seem like an impossible task, planning can help you prepare for your move and help make the process a piece of cake. Our real estate agents share some tips for streamlining the moving process.

  1. Create a Timeline and To-Do List
    Think about the steps you need to take to complete your move—from beginning to end. Write down your moving date, when you'll start packing, and important details you'll need to take care of, such as hiring movers, changing your address, transferring utilities, and enrolling children in school. If you're hiring movers, it's important to contact them as early as possible to set a moving date, so you're not left in the lurch. 

    Click Here to Read More...

March
21

5 Simple Graphs Proving This Is NOT Like the Last Time

5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

With all of the volatility in the stock market and uncertainty about the Coronavirus (COVID-19), some are concerned we may be headed for another housing crash like the one we experienced from 2006-2008. The feeling is understandable. Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

"With people having PTSD from the last time, they're still afraid of buying at the wrong time."

There are many reasons, however, indicating this real estate market is nothing like 2008. Here are five visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult NOT to get a mortgage. Today, it is tough to qualify. The Mortgage Bankers' Association releases a Mortgage Credit Availability Index which is "a summary measure which indicates the availability of mortgage credit at a point in time." The higher the index, the easier it is to get a mortgage. As shown below, during the housing bubble, the index skyrocketed. Currently, the index shows how getting a mortgage is even more difficult than it was before the bubble.5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

2. Prices are not soaring out of control.

Below is a graph showing annual house appreciation over the past six years, compared to the six years leading up to the height of the housing bubble. Though price appreciation has been quite strong recently, it is nowhere near the rise in prices that preceded the crash.5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCMThere's a stark difference between these two periods of time. Normal appreciation is 3.6%, so while current appreciation is higher than the historic norm, it's certainly not accelerating beyond control as it did in the early 2000s.

3. We don't have a surplus of homes on the market. We have a shortage.

The months' supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there's a shortage of inventory which is causing an acceleration in home values.5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

4. Houses became too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fourteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased and the mortgage rate is about 3.5%. That means the average family pays less of their monthly income toward their mortgage payment than they did back then. Here's a graph showing that difference:5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCM

5. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as a personal ATM machine. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over fifty percent of homes in the country having greater than 50% equity. But owners have not been tapping into it like the last time. Here is a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out over $500 billion dollars less than before:5 Simple Graphs Proving This Is NOT Like the Last Time | MyKCMDuring the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owned was greater than the value of their home). Some decided to walk away from their homes, and that led to a rash of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. That can't happen today.

Bottom Line

If you're concerned we're making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears, and reach out to our expert agents for additional guidance. We're here for you!

March
19

Three Reasons Why This Is Not a Housing Crisis

Three Reasons Why This Is Not a Housing Crisis | MyKCM

In times of uncertainty, one of the best things we can do to ease our fears is to educate ourselves with research, facts, and data. Digging into past experiences by reviewing historical trends and understanding the peaks and valleys of what's come before us is one of the many ways we can confidently evaluate any situation. With concerns of a global recession on everyone's minds today, it's important to take an objective look at what has transpired over the years and how the housing market has successfully weathered these storms.

1. The Market Today Is Vastly Different from 2008

We all remember 2008. This is not 2008. Today's market conditions are far from the time when housing was a key factor that triggered a recession. From easy-to-access mortgages to skyrocketing home price appreciation, a surplus of inventory, excessive equity-tapping, and more – we're not where we were 12 years ago. None of those factors are in play today. Rest assured, housing is not a catalyst that could spiral us back to that time or place.

According to Danielle Hale, Chief Economist at Realtor.com, if there is a recession:

"It will be different than the Great Recession. Things unraveled pretty quickly, and then the recovery was pretty slow. I would expect this to be milder. There's no dysfunction in the banking system, we don't have many households who are overleveraged with their mortgage payments and are potentially in trouble."

In addition, the Goldman Sachs GDP Forecast released this week indicates that although there is no growth anticipated immediately, gains are forecasted heading into the second half of this year and getting even stronger in early 2021.Three Reasons Why This Is Not a Housing Crisis | MyKCMBoth of these expert sources indicate this is a momentary event in time, not a collapse of the financial industry. It is a drop that will rebound quickly, a stark difference to the crash of 2008 that failed to get back to a sense of normal for almost four years. Although it poses plenty of near-term financial challenges, a potential recession this year is not a repeat of the long-term housing market crash we remember all too well.

2. A Recession Does Not Equal a Housing Crisis

Next, take a look at the past five recessions in U.S. history. Home values actually appreciated in three of them. It is true that they sank by almost 20% during the last recession, but as we've identified above, 2008 presented different circumstances. In the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6% (see below):Three Reasons Why This Is Not a Housing Crisis | MyKCM

3. We Can Be Confident About What We Know

Concerns about the global impact COVID-19 will have on the economy are real. And they're scary, as the health and wellness of our friends, families, and loved ones are high on everyone's emotional radar.

According to Bloomberg,

"Several economists made clear that the extent of the economic wreckage will depend on factors such as how long the virus lasts, whether governments will loosen fiscal policy enough and can markets avoid freezing up."

That said, we can be confident that, while we don't know the exact impact the virus will have on the housing market, we do know that housing isn't the driver.

The reasons we move – marriage, children, job changes, retirement, etc. – are steadfast parts of life. As noted in a recent piece in the New York Times, "Everyone needs someplace to live." That won't change.

Bottom Line

Concerns about a recession are real, but housing isn't the driver. If you have questions about what it means for your family's homebuying or selling plans, let's connect to discuss your needs.

March
18

Impact of the Coronavirus on the U.S. Housing Market

Impact of the Coronavirus on the U.S. Housing Market | MyKCM

The Coronavirus (COVID-19) has caused massive global uncertainty, including a U.S. stock market correction no one could have seen coming. While much of the news has been about the effect on various markets, let's also acknowledge the true impact it continues to have on lives and families around the world.

With all this uncertainty, how do you make powerful and confident decisions in regard to your real estate plans?

The National Association of Realtors (NAR) anticipates:

"At the very least, the coronavirus could cause some people to put home sales on hold."

While this is an understandable approach, it is important to balance that with how it may end up costing you in the long run. If you're considering buying or selling a home, it is key to educate yourself so that you can take thoughtful and intentional next steps for your future.

For example, when there's fear in the world, we see lower mortgage interest rates as investors flee stocks for the safety of U.S. bonds. This connection should be considered when making real estate decisions.

According to the National Association of Home Builders (NAHB):

"The Fed's action was expected but perhaps not to this degree and timing. And the policy change was consistent with recent declines for interest rates in the bond market. These declines should push mortgage interest rates closer to a low 3% average for the 30-year fixed rate mortgage."

This is exactly what we're experiencing right now as mortgage interest rates hover at the lowest levels in the history of the housing market.

Bottom Line

The full impact of the Coronavirus is still not yet known. It is in times like these that working with an informed and educated real estate professional can make all the difference in the world.

March
16

Newlyweds and Home Buying

For many couples, the first major decision they make after they say 'I do' is purchasing a home. Whether the couple wants a place of their own, plans on having a family, or simply wants to relocate to a space that suits their new life together, it's important that all couples learn as much as they can about the homebuying process. Our real estate agents believe that all newlyweds should consider the following.

  1. Consider the Present
    The thought of buying a home is exciting; now is not always the right time for some couples. Aside from your financial status, you must be realistic about your current commitments. Do you have the time to devote to home searching and moving? Do you know exactly where you want to live right now? Consider your current situation and question if now is the right time to make such an important decision.

    Click Here to Read More...

March
11

We understand if you want to take a break from buying or selling a home during the coronavirus outbreak, and give the virus time to run its course. That's your decision, and we respect it.  We will keep you informed about what's happening in the market in the meantime, and will be prepared to help you when you're ready to get back in.

But if you do wish to continue the process of buying or selling your home, we are ready and able to assist you. As we write this in mid-March, healthy people are not being advised to self-quarantine unless they are in "hot zones" or have pre-existing conditions that make them particularly susceptible to the coronavirus – if they are over 60 years old or have heart or lung problems.  So for most of you, there's no reason you can't continue to look for a home, or keep your home on the market.

 

Indeed, we believe that this market presents some unique opportunities for buyers and sellers:

 

  • Buyers:  Rates are actually at their lowest level in at least 50 years. As we write this, our buyer clients are securing 30—year fixed rate mortgages for 3.5%, and adjustables under 3%.  And with some buyers taking a break, competition is down, which should reduce multiple-offer situations and make it a little easier now to get your offer accepted.

 

  • Sellers: With some sellers taking their homes off the market, you have less competition for the buyers who are out there. And lower rates tend to bolster home prices for sellers, since buyers can afford a little more house for the same monthly payment.

 

Of course, if you do want to stay in the market, you should take some fundamental precautions to protect yourself:

 

  1. Wash your hands – and other hygienic practices

Soap is the very best preventative for communicating the virus, so use it.  Wash your hands regularly, for at least 20 seconds, with soap and water.  If you can't wash your hands, the next best thing is to use an anti-bacterial wipe or gel (at least 60% alcohol) both before and after you come into contact with other people, objects, or surfaces. And try to avoid touching your eyes, nose, and mouth with unwashed hands. If you sneeze or cough, do it into a tissue, then throw away the tissue, then wash your hands or wipe them down.

 

  1. Keep your distance – even from your agent!

You don't need to hide in your basement, but you should try to keep a "social distance" from others when working, shopping, socializing. Give yourself 5-6 feet of distance from other people if possible, and avoid large groups of people. And that goes for greetings — no kissing, hugging, handshakes. Even the elbow shake is probably not a good idea. Instead, try the "heartfelt" gesture: both hands over your heart and a nod of your head to the person you're greeting.

 

  1. Use videoconferencing as much as possible.

You and your agent – and anyone else you're working with on your transaction –should try to communicate as much as possible by videoconference rather than in-person meetings, just to limit the amount of interaction you have with other people.  if you are all on iPhones, you can easily do a Facetime meeting. And if you are all on Facebook, then Facebook Messenger has an easy-to-use video conferencing tool.  But you can also use any number of apps and services for video, including Whatsapp, Snapchat, Skype, and Zoom.

 

  1.  Stagger the closing.

Talk to your attorneys about setting up staggered closings to avoid requiring all the parties to be in the room at the same time. You need to sign papers and fulfil some other closing functions, but you don't necessarily need to do that with the other side present.

 

  1. Take precautions on showings and open houses.

At this point, we see no reason to discontinue showings or open houses so long as you follow fundamental distancing and hygienic protocols.  Try to follow these guidelines:

  • Keep your distance, even if it seems unfriendly.
  • Remember: no shaking hands when you meet!
  • Drive your own car to showings, rather than traveling with the agent in his or her car.
  • Minimize touching of surfaces in houses.
  • Bring paper towels with you, and use a clean paper towel or tissue to hold when you open doors or touch surfaces. .
  • Try to wipe down every surface or handle after the showing or open house.
  • Try to wash or wipe down your hands on the way in, and the way out.
  • At the open house, keep your distance from other visitors, and let the hosting agent sign you in rather than handle a clipboard or tablet.

  1. Buy some disposable gloves

if you can get some disposable gloves, keep them in your car for when you go on showings.  Put on a pair when you go into the house, and then strip them off and throw them away when you leave. It's a good way to avoid touching any surfaces with your bare hands.

 

  1.  Stay home if you're not feeling well!

All this applies ONLY if you're feeling okay.  If you're not feeling well with any kind of cough or fever, stay home. At this point, you probably have a normal flu or some common cold, but don't take chances. Call your doctor and otherwise get help. But if you're not well, you shouldn't be out looking at houses, or having someone come to see your home for sale.

 

NOTE: If you are high-risk, then stay home!

Everything we've said here applies only to healthy people who are not in a high-risk category.  If you are over 60, or have pre-existing heart or lung problems, you should probably be limiting your outside contacts as much as possible to reduce your chances of catching the virus. If you do need to go out, then take extra precautions and be extremely careful.

 

The Masiello Group Cares! 

March
9

Flipping House

You've probably seen all the house-flipping shows on TV that make buying a house and selling it for a profit look easy as can be. We know you're also well-aware of the differences between reality and reality TV, but flipping houses can still mean big money if you do it right. For anyone looking to get into the flipping game, our real estate agents have a few helpful tips on how to get started. 

  • Know the Market
    When you're getting ready to buy a house, it's important to have a deep understanding of the housing market, not just on a national or even city-wide level, but right down to the neighborhood and the street. Two identical houses could sell for drastically different prices just a few blocks apart, so location matters. If you're flipping your first house, it's best to start in your local area, which you're more likely to be already familiar with. 
  • Buy at the Right Price
    It's essential to know how much you can spend on a house before renovations and still make a profit after you've done the required work on it. Search hard for a house that you can add value to, and sell for more than you've spent. 
  • Pay in Cash
    Buying a house for cash up-front isn't realistic for most of us, especially if you're just getting started in the house flipping business. But one thing that many of the most successful flippers have in common is that they deal in cash. The reason is simple: houses cost less when you can put cash on the barrelhead. Even if you can't buy the whole house in cash, scrape together as much as possible to put down the biggest down-payment you can; you'll end up paying less interest and turning a better profit. 

    Click Here to Read More...

March
2

Multigenerational Living

Before 1940, it wasn't uncommon to find three or more generations living in one home. After WWII and the suburban boom, families increasingly became smaller, with just parents and their minor children living together. In recent years, our real estate agents have noticed that multigenerational living is becoming more and more popular. In 2016, nearly 20 percent of the US population's living situation involved multiple generations living under one roof, according to the Pew Research Center. There are several benefits families enjoy when living under one roof. If these benefits speak to your situation, a multigenerational might be a good investment opportunity for your family. 

Why Is Multigenerational Living Making A Comeback?

Many families are still getting on their feet after the Great Recession and the rising cost of living. For them, living with multiple generations in one home may make financial sense. Baby Boomers are now growing older and need help. Moving in with their children helps them get the care they need and can save everyone on housing and other costs. Child care is also a factor—many people are now opting to have grandparents take care of their children instead of spending a good chunk of their income paying for outside child care. Also, more adult children are moving back in with their parents after college to pay off debt and get some financial ground under their feet before venturing out on their own.

Click Here to Read More...

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