Key Factors Affecting Home Affordability Today
Every time there’s a news segment about the housing market, we hear about the affordability challenges buyers are facing today. Those headlines are focused on how much mortgage rates have climbed this year. And while it’s true rates have risen dramatically, it’s important to remember they aren’t the only factor in the affordability equation. Here are three measures used to establish home affordability: home prices, mortgage rates, and wages. Let’s look closely at each one. 1. Mortgage Rates This is the factor most people are focused on when they talk about homebuying conditions today. So far, current rates are almost four full percentage points higher than they were at the beginning of the year. As Len Kiefer, Deputy Chief Economist at Freddie Mac, explains: “U.S. 30-year fixed mortgage rates have increased 3.83 percentage points since the end of last year. That’s the biggest year-to-date increase in rates in over 50 years.” That increase in mortgage rates is impacting how much it costs to finance a home purchase, creating a challenge for many buyers that’s pricing some out of the market. While the current global uncertainty makes it difficult to project where mortgage rates will go in the future, experts do say that rates will likely remain high as long as inflation does. 2. Home Prices The second factor at play is home prices. Home prices have made headlines over the past few years because they skyrocketed during the pandemic. Now, the most recent Home Price Index from S&P Case-Shiller shows home values continued to decelerate for a fifth consecutive month (shown in green in the graph below): This deceleration is happening because higher mortgage rates are moderating demand, and as a result, easing the buyer competition and bidding wars that previously drove prices up. What’s worth noting though, is how much higher home prices still are than they were before the pandemic (shown in blue in the graph above). Even now, we have a long way to go to get to more normal levels of home price appreciation, which is historically closer to 4%. When both mortgage rates and home prices are high, affordability and your purchasing power become a greater challenge. But while prices are still elevated in many markets, some areas are seeing slight declines. It all depends on your local market. For insight into what’s happening in your area, reach out to a trusted real estate professional. 3. Wages The one big, positive component in the affordability equation is the increase in American wages. The graph below uses data from the Bureau of Labor Statistics (BLS) to show how wages have grown over time. This year is no exception. As the Bureau of Labor Statistics (BLS) reports: “Median weekly earnings of the nation’s 120.2 million full-time wage and salary workers were $1,070 in the third quarter of 2022 (not seasonally adjusted), the U.S. Bureau of Labor Statistics reported…This was 6.9 percent higher than a year earlier…” So, when you think about affordability, remember the full picture includes more than just mortgage rates. Home prices and wages need to be factored in as well. Because wages have been rising, they’re a big reason why serious buyers are still purchasing homes this year. If you have questions or want to learn more, reach out to a trusted advisor who can explain how all of these variables work together and what’s happening in your area. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says: “Buying or selling a home involves a series of requirements and variables, and it’s important to have someone in your corner from start to finish to make the process as smooth as possible… and objectivity to deliver trusted expertise to consumers in every U.S. ZIP code.” Bottom Line To learn more, let’s connect today and make sure you have a trusted lender so you’re able to make an informed decision if you’re planning to buy or sell a home right now. Content previously posted on Keeping Current Matters
Read MoreHomeownership Is a Great Hedge Against the Impact of Rising Inflation
Homeownership Is a Great Hedge Against the Impact of Rising Inflation If you’re following along with the news today, you’ve heard about rising inflation. Today, inflation is at a 40-year high. According to the National Association of Home Builders (NAHB): “Consumer prices accelerated again in May as shelter, energy and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain since December 1981.” With inflation rising, you’re likely feeling it impact your day-to-day life as prices go up for gas, groceries, and more. These climbing consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile. If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation. Homeownership Helps You Stabilize One of Your Biggest Monthly Expenses Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership. Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. When you have a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says: “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.” So even if other prices increase, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs. Investing in an Asset That Historically Outperforms Inflation While it’s true rising home prices and higher mortgage rates mean that buying a house today costs more than it did even a few months ago, you still have an opportunity to set yourself up for a long-term win. That’s because, in inflationary times, you want to be invested in an asset that outperforms inflation and typically holds or grows in value. The graph below shows how the average home price appreciation outperformed the average inflation rate in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below): So, what does that mean for you? Today, experts forecast home prices will only go up from here thanks to the ongoing imbalance of supply and demand. Once you buy a house, any home price appreciation that does occur will grow your equity and your net worth. And since homes are typically assets that grow in value, you have peace of mind that history shows your investment is a strong one. That means, if you’re ready and able, it makes sense to buy today before prices rise further. Bottom Line If you’ve been thinking about buying a home this year, it makes sense to act soon, even with inflation rising. That way you can stabilize your monthly housing cost and invest in an asset that historically outperforms inflation. If you’re ready to get started, let’s connect so you have expert advice on your specific situation when you’re ready to buy a home.
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Some HighlightsIf you’re questioning whether or not to buy a home this year due to today’s cooling market, consider the long-term financial benefits of homeownership.As a homeowner, equity increases your wealth. On average, nationwide, home prices appreciated by 290.2% since 1991.Homeownership wins in the long run. If you’re ready to buy a home, let’s connect today.Content previously posted on Keeping Current Matters
Read More Things To Avoid After Applying for a Home Loan
Things To Avoid After Applying for a Home Loan Once you’ve applied for a mortgage to buy a home, there are some key things to keep in mind. While it’s exciting to start thinking about moving in and decorating, be careful when it comes to making any big purchases. Here are a few things you may not realize you need to avoid after applying for your home loan. Don’t Deposit Large Sums of Cash Lenders need to source your money, and cash isn’t easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer. Don’t Make Any Large Purchases It’s not just home-related purchases that could disqualify you from your loan. Any large purchases can be red flags for lenders. People with new debt have higher debt-to-income ratios (how much debt you have compared to your monthly income). Since higher ratios make for riskier loans, borrowers may no longer qualify for their mortgage. Resist the temptation to make any large purchases, even for furniture or appliances. Don’t Co-Sign Loans for Anyone When you co-sign for a loan, you’re making yourself accountable for that loan’s success and repayment. With that obligation comes higher debt-to-income ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you. Don’t Switch Bank Accounts Lenders need to source and track your assets. That task is much easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer. Don’t Apply for New Credit It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), it will have an impact on your FICO® score. Lower credit scores can determine your mortgage interest rate and possibly even your eligibility for approval. Don’t Close Any Accounts Many buyers believe having less available credit makes them less risky and more likely to be approved. This isn’t true. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those aspects of your score. In Short, Consult an Expert To sum it up, be upfront about any changes when talking with your lender. Blips in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. Ultimately, it’s best to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature. Bottom Line You want your home purchase to go as smoothly as possible. Remember, before you make any large purchases, move your money around, or make any major life changes, be sure to consult your lender – someone who’s qualified to explain how your financial decisions may impact your home loan.
Read MoreDo You Believe Homeownership Is Out of Reach? Maybe It Doesn’t Have To Be.
It turns out, millennials aren’t the renter generation after all. The 2022 Consumer Insights Report from Mynd says there’s a portion of millennial and Gen Z buyers who are pursuing homeownership as a way to build their wealth, but it may not be exactly the way previous generations have done it. The study explains how they’re breaking into the market: “. . . younger generations of Americans are not buying into that dream in the same way that older generations have. A growing number of Americans are choosing to make their first real estate purchase as an investment property.” Instead of buying a home and moving into it themselves, some young buyers are purchasing a home so they can use it as a rental. This tactic may be gaining popularity, at least in part, because of the affordability challenges brought about by today’s higher mortgage rates. The report above mentions how many people in this group are considering this approach. It says: “Almost half of Millennials and Gen Z (43%) are considering buying an investment property compared to only 9% of Baby Boomers and 27% of Gen X.” Why Younger Buyers Are Buying a Home To Use as a Rental This strategy allows buyers to continue living in their current location, like the bustle of a city apartment or a neighborhood that they know and love, where they couldn’t afford to buy. But instead of giving up on the idea of owning a home, they buy a home in a more affordable area with the intention of renting it out. In a way, they’re getting the best of both worlds. They live where they want, and they still own a home where they can afford it. Their goal is to generate passive income and diversify their assets. It works like this: in addition to having a rental stream of income, the equity they build in their house will also help grow their net worth over time. Bottom Line If you’re thinking about buying a home as an investment strategy to build your wealth, let’s connect to explore your options and nearby areas that may have homes that fit what you’re looking for. Content previously posted on Keeping Current Matters
Read More3 Trends That Are Good News for Today’s Homebuyers
While higher mortgage rates are creating affordability challenges for homebuyers this year, there is some good news for those people still looking to buy a home. As the market has cooled this year, some of the intensity buyers faced during the peak frenzy of the pandemic has cooled too. Here are just a few trends that may benefit you when you go to buy a home today. 1. More Homes To Choose from During the pandemic, housing supply hit a record low at the same time buyer demand skyrocketed. This combination made it difficult to find a home because there just weren’t enough to meet buyer demand. According to Calculated Risk, the supply of homes for sale increased by 39.5% for the week ending October 28 compared to the same week last year. Even though it’s still a sellers’ market and supply is still lower than more normal levels, you have more to choose from in your home search. That makes finding your dream home a bit less difficult. 2. Bidding Wars Have Eased One of the top stories in real estate over the past two years was the intensity and frequency of bidding wars. But today, things are different. With more options, you’ll likely see less competition from other buyers looking for homes. According to the National Association of Realtors (NAR), the average number of offers on recently sold homes has declined. This September, the average was 2.5 offers per sale. In contrast, last September, the average was 3.7 offers per sale. If you tried to buy a house over the past two years, you probably experienced the bidding war frenzy firsthand and may have been outbid on several homes along the way. Now you have a chance to jump back into the market and enjoy searching for a home with less competition. 3. More Negotiation Power And when you have less competition, you also have more negotiating power as a buyer. Over the last two years, more buyers were willing to skip important steps in the homebuying process, like the appraisal or inspection, to try to win a bidding war. But the latest data from the National Association of Realtors (NAR) shows the percentage of buyers waiving those contingencies is going down. As a buyer, this is good news. The appraisal and the inspection give you important information about the value and condition of the home you’re buying. And if something turns up in the inspection, you have more power today to renegotiate with the seller. A survey from realtor.com confirms more sellers are accepting offers that include contingencies today. According to that report, 95% of sellers said buyers requested a home inspection, and 67% negotiated with buyers on repairs as a result of the inspection findings. Bottom Line While buyers still face challenges today, they’re not necessarily the same ones you may have been up against just a year or so ago. If you were outbid or had trouble finding a home in the past, now may be the moment you’ve been waiting for. Let’s connect to start the homebuying process today. Content previously posted on Keeping Current Matters
Read MoreTaking the Fear out of Saving for a Home
If you’re planning to buy a home, knowing what to budget for and how to save may sound scary at first. But it doesn’t have to be. One way to take the fear out of budgeting is understanding some of the costs you might encounter. And to do that, turn to trusted real estate professionals. They can help you plan your finances and prepare your budget. Here are just a few costs experts say you can expect. 1. Down Payment Saving for your down payment is likely top of mind as you set out to buy a home. But do you know how much you’ll need to save? While each situation is different, there’s a common misconception that putting 20% down toward your purchase is required. An article from the Mortgage Reports explains why that’s not always the case: “The idea that you have to put 20% down on a house is a myth. . . . The right amount depends on your current savings and your home buying goals.” To understand your options, partner with a trusted real estate professional to go over the various loan types, down payment assistance programs, and what each one requires. 2. Closing Costs Make sure you also budget for closing costs, which are a collection of fees and payments made to the various people involved in your transaction. Bankrate explains: “Closing costs are the fees you pay when finalizing a real estate transaction, whether you’re refinancing a mortgage or buying a new home. These costs can amount to 2 to 5 percent of the mortgage so it’s important to be financially prepared for this expense.” The best way to understand what you’ll need at the closing table is to work with a trusted lender. They can provide you with answers to the questions you might have. 3. Earnest Money Deposit If you want to cover all your bases, you can also consider saving for an earnest money deposit (EMD). An EMD is money you pay as a show of good faith when you make an offer on a house. According to realtor.com, it’s usually between 1% and 2% of the total home price. This deposit works like a credit. It’s not an added expense – it’s paying a portion of your costs upfront. You’re using some of the money you already saved for your purchase to show the seller you’re committed and serious about their house. Realtor.com describes how it works as part of your sale: “It tells the real estate seller you’re in earnest as a buyer, . . . . Assuming that all goes well and the buyer’s good-faith offer is accepted by the seller, the earnest money funds go toward the down payment and closing costs. In effect, earnest money is just paying more of the down payment and closing costs upfront.” Keep in mind, an EMD isn’t required, and it doesn’t guarantee your offer will be accepted. It’s important to work with a real estate advisor to understand what’s best for your situation and any specific requirements in your area. They’ll help you determine what moves you should make in the homebuying process to have the greatest success. Bottom Line Budgeting for your home purchase doesn’t have to be scary. Let’s connect so you’ll have an expert on your side to answer any questions you have along the way. Content previously posted on Keeping Current Matters
Read MoreApplying for a Mortgage Doesn’t Have To Be Scary
Some HighlightsEven with higher mortgage rates, the mortgage process doesn’t need to be something you fear. Here are some steps to help as you set out to buy a home.Know your credit score and work to build strong credit. When you’re ready, lean on the pros and connect with a lender so you can get pre-approved and begin your home search.Any major life change can be scary, and buying a home is no different. Let’s connect so you have an advisor by your side to take fear out of the equation.Content previously posted on Keeping Current Matters
Read MoreMillennials Are Still a Driving Force of Today’s Buyer Demand
If you’re thinking about selling your house but wondering if buyers are still out there, know that there are still people who are searching for a home to buy today. And your house may be exactly what they’re looking for.While the millennial generation has been dubbed the renter generation, that namesake may not be appropriate anymore. Millennials, the largest generation, are actually a significant driving force for buyer demand in the housing market today. Here’s why.Millennial Homebuying PowerWhile there’s no denying higher mortgage rates are making it more challenging to afford a home today, many millennials are still eager and able to buy homes – whether it’s their first or they’re moving up. That’s in large part because of the value they place on education.A recent article from First American says millennials may be the most educated generation in our nation’s history. Because of that, they tend to earn higher wages, and that translates to greater homebuying power. Odeta Kushi, Deputy Chief Economist at First American, explains:“In 2020, millennials with a bachelor’s degree had a median household income of over $100,000, while those with at least a graduate degree had a median household income of over $120,000. Compare those income levels with the median household income of millennials with just a high school degree (or some college) of $60,000 and the earning power benefits of higher education are undeniable. . . . Millennials’ pursuit of higher education is good news for the housing market. . . because education is the key to unlock both greater earning power and, in turn, homeownership.”And since wages are one of the key things that factor into affordability when it comes to buying a home, these higher earnings can help millennials achieve their homeownership goals.Millennials Continue To Be a Driving Force of DemandA number of studies have looked into how the millennial generation views homeownership and how they’re uniquely positioned to define the housing market moving forward. As the largest generation, the volume of potential millennial homebuyers will have an impact on the market for years to come. As an article in Forbes explains:“At about 80 million strong, millennials currently make up the largest share of homebuyers (43%) in the U.S., according to a recent National Association of Realtors (NAR) report. Simply due to their numbers and eagerness to become homeowners, this cohort is quite literally shaping the next frontier of the homebuying process. Once known as the ‘rent generation,’ millennials have proven to be savvy buyers who are quite nimble in their quest to own real estate. In fact, I don’t think it’s a stretch to say they are the key to the overall health and stability of the current housing industry.”If you’re thinking of selling your house but are hesitant because you’re worried that buyer demand has disappeared in the face of higher mortgage rates, know that isn’t the case for everyone. While demand has eased this year, millennials are still looking for homes. As Mark Fleming, Chief Economist at First American, says in an article:“While not the frenzy of 2021, the largest living generation, the Millennials, will continue to age into their prime home-buying years, creating a demographic tailwind for the housing market.”Bottom LineMillennials are interested in and well-positioned to achieve their homeownership dreams. If you’re ready to sell your house, know that it may be just what they’re looking for.Content previously posted on Keeping Current Matters
Read MoreWhat Happens to Housing when There’s a Recession?
Since the 2008 housing bubble burst, the word recession strikes a stronger emotional chord than it ever did before. And while there’s some debate around whether we’re officially in a recession right now, the good news is experts say a recession today would likely be mild and the economy would rebound quickly. As the 2022 CEO Outlook from KPMG says: “Global CEOs see a ‘mild and short’ recession, yet optimistic about global economy over 3-year horizon . . . More than 8 out of 10 anticipate a recession over the next 12 months, with more than half expecting it to be mild and short.” To add to that sentiment, housing is typically one of the first sectors to rebound during a slowdown. As Ali Wolf, Chief Economist at Zonda, explains: “Housing is traditionally one of the first sectors to slow as the economy shifts but is also one of the first to rebound.” Part of that rebound is tied to what has historically happened to mortgage rates during recessions. Here’s a look back at rates during previous economic slowdowns to help put your mind at ease. Mortgage Rates Typically Fall During Recessions Historical data helps paint the picture of how a recession could impact the cost of financing a home. Looking at recessions in this country going all the way back to 1980, the graph below shows each time the economy slowed down mortgage rates decreased. Fortune explains mortgage rates typically fall during an economic slowdown: “Over the past five recessions, mortgage rates have fallen an average of 1.8 percentage points from the peak seen during the recession to the trough. And in many cases, they continued to fall after the fact as it takes some time to turn things around even when the recession is technically over.” While history doesn’t always repeat itself, we can learn from and find comfort in the trends of what’s happened in the past. If you’re thinking about buying or selling a home, you can make the best decision by working with a trusted real estate professional. That way you have expert advice on what a recession could mean for the housing market. Bottom Line History shows you don’t need to fear the word recession when it comes to the housing market. If you have questions about what’s happening today, let’s connect so you have expert advice and insights you can trust. Content previously posted on Keeping Current Matters
Read MorePre-Approval Is a Critical First Step on Your Homebuying Journey
If you’re planning to buy a home this year, one of the first steps on your journey is getting pre-approved. Especially in today’s market when mortgage rates are higher than they were just a few months ago, getting a mortgage pre-approval can be a game changer. Here’s why. What Is Pre-Approval? To better understand why pre-approval is key, it’s important to know what pre-approval is. The Mortgage Reports explains it like this: “When you’re ready to take the leap into homeownership, your first step is mortgage preapproval. . . . A mortgage preapproval is when a lender determines you’re qualified for a home loan. Your preapproval letter shows the maximum loan amount you’re approved for (your home buying budget), as well as the specific interest rate and loan term you can expect.” As part of the pre-approval process, a lender will look at your finances to determine what they’d be willing to loan you. From there, your lender will give you a pre-approval letter to help you understand your true price range and how much money you can borrow. That can make it easier when you set out to search for homes because you’ll know your overall numbers. And with mortgage rates rising and impacting affordability, a solid understanding of your numbers is even more important. Pre-Approval Can Signal You’re a Serious Buyer Another added benefit is that pre-approval lets the seller know you’re qualified to buy their house. A recent article from realtor.com notes: “. . . getting pre-approved can actually improve your chances of falling into the sellers’ good graces, and you’ll want to get it done as early as you possibly can in the home-buying process.” Even though bidding wars are easing this year as the market shifts, preapproval is still an important part of making a strong offer. It can help a seller feel more confident because it shows you’re serious about their home and that you’re a qualified buyer. Bottom Line Getting pre-approved for a mortgage is critical. It helps you better understand what you can borrow and shows sellers you’re serious about purchasing their home. Connect with a local real estate professional and a trusted lender so you have the tools you need to succeed as a homebuyer in today’s market. Content previously posted on Keeping Current Matters
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As the housing market cools in response to the dramatic rise in mortgage rates, home price appreciation is cooling as well. And if you’re following along with headlines in the media, you’re probably seeing a wide range of opinions calling for everything from falling home prices to ongoing appreciation. But what’s true? What’s most likely to happen moving forward? While opinions differ, the most likely outcome is we’ll fall somewhere in the middle of slight appreciation and slight depreciation. Here’s a look at the latest expert projections so you have the best information possible today. What the Experts Are Saying About Home Prices Next Year The graph below shows the most up-to-date forecasts from five experts in the housing industry. These are the experts that have most recently updated their projections based on current market trends: As the graph shows, the three blue bars represent experts calling for ongoing home price appreciation, just at a more moderate rate than recent years. The red bars on the graph are experts calling for home price depreciation. While there isn’t a clear consensus, if you take the average (shown in green) of all five of these forecasts, the most likely outcome is, nationally, home price appreciation will be fairly flat next year. What Does This Mean? Basically, experts are divided on what’s ahead for 2023. Home prices will likely depreciate slightly in some markets and will continue to gain ground in others. It all depends on the conditions in your local market, like how overheated that market was in recent years, current inventory levels, buyer demand, and more. The good news is home prices are expected to return to more normal levels of appreciation rather quickly. The latest forecast from Wells Fargo shows that, while they feel prices will fall in 2023, they think prices will recover and net positive in 2024. That forecast calls for 3.1% appreciation in 2024, which is a number much more in line with the long-term average of 4% annual appreciation. And the Home Price Expectation Survey (HPES) from Pulsenomics, a poll of over one hundred industry experts, also calls for ongoing appreciation of roughly 2.6 to 4% from 2024-2026. This goes to show, even if prices decline slightly next year, it’s not expected to be a lasting trend. As Jason Lewris, Co-Founder and Chief Data Officer for Parcl, says: “In the absence of trustworthy, up-to-date information, real estate decisions are increasingly being driven by fear, uncertainty, and doubt.” Don’t let fear or uncertainty change your plans. If you’re unsure about where prices are headed or how to make sense of what’s going on in today’s housing market, reach out to a local real estate professional for the guidance you need each step of the way. Bottom Line The housing market is shifting, and it’s a confusing place right now. Let’s connect so you have a trusted real estate professional to help you make confident and informed decisions about what’s happening in our market. Content previously posted on Keeping Current Matters
Read More Should You Still Buy a Home with the Latest News About Inflation?
While the Federal Reserve is working hard to bring down inflation, the latest data shows the inflation rate is still high, remaining around 8%. This news impacted the stock market and added fuel to the fire for conversations about a recession. You’re likely feeling the impact in your day-to-day life as you watch the cost of goods and services climb. The pinch it’s creating on your wallet and the looming economic uncertainty may leave you wondering: “should I still buy a home right now?” If that question is top of mind for you, here’s what you need to know. Homeownership Is Historically a Great Hedge Against Inflation In an inflationary economy, prices rise across the board. Historically, homeownership is a great hedge against those rising costs because you can lock in what’s likely your largest monthly payment (your mortgage) for the duration of your loan. That helps stabilize some of your monthly expenses. James Royal, Senior Wealth Management Reporter at Bankrate, explains: “A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.” And with rents being as high as they are, the ability to stabilize your monthly payments and protect yourself from future rent hikes may be even more important. Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains what happened to rents in the latest inflation report: “Inflation refuses to budge. In September, consumer prices rose by 8.2%. Rents rose by 7.2%, the highest pace in 40 years.” When you rent, your monthly payment is determined by your lease, which typically renews on an annual basis. With inflation high, your landlord may be more likely to increase your payments to offset the impact of inflation. That may be part of the reason why a survey from realtor.com shows 72% of landlords said they plan to raise the rent on one or more of their properties in the next year. Becoming a homeowner, if you’re ready and able to do so, can provide lasting stability and a reliable shelter in times of economic uncertainty. Bottom Line The best hedge against inflation is a fixed housing cost. If you’re ready to learn more and start your journey to homeownership, let’s connect. Content previously posted on Keeping Current Matters
Read MoreThe Latest on Supply and Demand in Housing
Over the past two years, the substantial imbalance of low housing supply and high buyer demand pushed home sales and buyer competition to new heights. But this year, things are shifting as supply and demand reach an inflection point. The graph below helps tell the story of just how different things are today. This year, buyer demand has eased as higher mortgage rates and mounting economic uncertainty moderated the market. This slowdown in demand is clear when you look at the red bar on the graph. It uses the latest data from ShowingTime to illustrate how showings (an indicator of buyer demand) have softened by just over 12% compared to the same time last year. Now for a look at how housing supply has changed, turn to the green bar. It uses data from realtor.com to show active listings are up nearly 27% compared to last year. That’s because the moderation of demand allowed housing inventory to increase in 2022. What Does This Inflection Point Mean for Buyers? If you’re thinking of buying a home, you’ll have less competition and more options than you would have had last year. Enjoy having more homes to choose from in your home search and lean on a trusted real estate professional to understand how the increase in supply has also increased your negotiation power. That professional can talk you through the opportunities and challenges buyers face in today’s shifting market. You may be surprised to find they’re different than they were a year ago. What Does This Inflection Point Mean for Sellers? If you’re looking to sell your house, know that inventory is still low overall. That means, if you work with an agent to price your house based on current market value, it will still sell despite the inventory gains and moderating buyer demand this year. That’s because there are still buyers out there who want to move, and your house may be exactly what they’re looking for. Bottom Line If you’re thinking of buying or selling a home, the best place to turn to for information on today’s supply and demand is a trusted real estate professional. Let’s connect so you know what’s happening in our local market and what that means for you. Content previously posted on Keeping Current Matters
Read MoreThe Emotional and Non-financial Benefits of Homeownership
With higher mortgage rates, you might be wondering if now’s the best time to buy a home. While the financial aspects are important to consider, there are also powerful non-financial reasons it may make sense to make a move. Here are just a few of the benefits that come with homeownership. Homeowners Can Make Their Home Truly Their Own Owning your home gives you a significant sense of accomplishment because it’s a space you can customize to your heart’s desire. That can bring you added happiness. In fact, a report from the National Association of Realtors (NAR) shows making updates or remodeling your home can help you feel more at ease and comfortable in your living space. NAR measures this with a Joy Score that indicates how much happiness specific home upgrades bring. According to NAR: “There were numerous interior projects that received a perfect Joy Score of 10: paint entire interior of home, paint one room of home, add a new home office, hardwood flooring refinish, new wood flooring, closet renovation, insulation upgrade, and attic conversion to living area.” And as a homeowner, unless there are specific homeowner’s association requirements, you typically won’t have to worry about the changes you can and can’t make. If you rent, you may not have the same freedom. And if you do make changes as a renter, there’s a good chance you’ll need to revert them back at the end of your lease based on your rental agreement. That can add additional costs when you move out. The Responsibilities of Homeownership Give You a Greater Sense of Achievement There’s no denying taking care of your home is a large responsibility, but it’s one you’ll take pride in as a homeowner. Freddie Mac explains: “As the homeowner, you have the freedom to adopt a pet, paint the walls any color you choose, renovate your kitchen, and more. . . . Of course, along with the freedoms of homeownership come responsibilities, such as making your monthly mortgage payments on time and maintaining your home. But as the property owner, you’ll be caring for your own investment.” You’re not taking care of a living space that belongs to someone else. The space is yours. As an added benefit, you may get a return on investment for any upgrades or repairs you make. Homeownership Can Lead to Greater Community Engagement That sense of ownership and your feelings of responsibility can even extend beyond the walls of your home. Your home also gives you a stake in your community. Because the average homeowner stays in their home for longer than just a few years, that can lead to having a stronger connection to your local area. NAR notes how that can benefit you: “Living in one place for a longer amount of time creates an obvious sense of community pride, which may lead to more investment in said community.” If you’re looking to put down roots, homeownership can help fuel a sense of connection to the area and those around you. Bottom Line If you’re planning to buy a home this year, there are incredible benefits waiting for you at the end of your journey, including the ability to customize your home, the sense of achievement homeownership brings, and a greater connection to your community. Let’s connect to discuss everything homeownership has to offer. Content previously posted on Keeping Current Matters
Read MoreTips For First-Time Homebuyers [INFOGRAPHIC]
Some HighlightsIf you’re trying to buy your first home in today’s housing market, you’ll want to know what you can do as mortgage rates rise and inventory stays low overall.Connect with a lender to get pre-approved, prioritize your wish list, consider condos, and expand your search radius.Your first home is out there. Let’s connect to explore your options and what other first-time buyers are doing to find their homes.Content previously posted on Keeping Current Matters
Read MoreFour Things That Help Determine Your Mortgage Rate
If you’re looking to buy a home, you probably want to secure the lowest interest rate possible for your home loan. Over the last couple of years, that was easier to do as the housing market saw record-low mortgage rates, but this year rates have risen dramatically. If you’re looking for ways to combat today’s higher rates and lock in the lowest one you can, here are a few factors to focus on. Since approval opportunities can vary, connect with a trusted lender for customized advice. Your Credit Score Credit scores can play a big role in your mortgage rate. Freddie Mac explains: “When you build and maintain strong credit, mortgage lenders have greater confidence when qualifying you for a mortgage because they see that you’ve paid back your loans as agreed and used your credit wisely. Strong credit also means your lender is more apt to approve you for a mortgage that has more favorable terms and a lower interest rate.” That’s why it’s important to maintain a good credit score. If you want to focus on improving your score, your trusted advisor can give you expert advice to help. Your Loan Type There are many types of loans, each offering different terms for qualified buyers. The Consumer Financial Protection Bureau (CFPB) says: “There are several broad categories of mortgage loans, such as conventional, FHA, USDA, and VA loans. Lenders decide which products to offer, and loan types have different eligibility requirements. Rates can be significantly different depending on what loan type you choose.” When working with your real estate advisor, make sure you find out what’s available in your area and which types of loans you may qualify for. Your Loan Term Another factor to consider is the term of your loan. Just like with location and loan types, you have options. Freddie Mac says: “When choosing the right home loan for you, it’s important to consider the loan term, which is the length of time it will take you to repay your loan before you fully own your home. Your loan term will affect your interest rate, monthly payment, and the total amount of interest you will pay over the life of the loan.” Depending on your situation, the length of your loan can also change your mortgage rate. Your Down Payment If you’re a current homeowner looking to sell and make a move, you can use the home equity you’ve built over time toward the down payment on your next home. The CFPB explains: “In general, a larger down payment means a lower interest rate, because lenders see a lower level of risk when you have more stake in the property. So if you can comfortably put 20 percent or more down, do it—you’ll usually get a lower interest rate.” To learn more, connect with a lender to find out the difference a higher down payment can make for your new mortgage. Bottom Line These are just few factors that can help determine your mortgage rate if you’re buying a home. The best thing you can do is have a team of professionals on your side. Connect with a local real estate professional and a trusted lender so you have the expert advice you need in each step of the process. Content previously posted on Keeping Current Matters
Read MoreSaving for a Down Payment? Here’s What You Should Know.
As you set out to buy a home, saving for a down payment is likely top of mind. But you may still have questions about the process, including how much to save and where to start. If that sounds like you, your down payment could be more in reach than you originally thought. Here’s why. The 20% Down Payment Myth If you believe you have to put 20% down on a home, you may have based your goal on a common misconception. Freddie Mac explains: “. . . nearly a third of prospective homebuyers think they need a down payment of 20% or more to buy a home. This myth remains one of the largest perceived barriers to achieving homeownership.” Unless it’s specified by your loan type or lender, it’s typically not required to put 20% down. According to the latest Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. There are even loan types, like FHA loans, with down payments as low as 3.5%, as well as options like VA loans and USDA loans with no down payment requirements for qualified applicants. This is good news for you because it means you could be closer to your homebuying dream than you realize. For more information, turn to a trusted lender. Down Payment Assistance Programs Can Be a Game Changer A professional will be able to show you other options that could help you get closer to your down payment goal. According to latest Homeownership Program Index from downpaymentresource.com, there are over 2,000 homebuyer assistance programs in the U.S., and the majority are intended to help with down payments. A recent article explains why programs like these are helpful: “These resources can immediately build your home buying power and help you take action sooner than you thought possible.” And if you’re wondering if you have to be a first-time buyer to qualify for these programs, that’s not always the case. According to an article from downpaymentresource.com: “It is a common misconception that homebuyer assistance is only available to first-time homebuyers, however, 38% of homebuyer assistance programs in Q1 2022 did not have a first-time homebuyer requirement.” There are also location and profession-based programs you could qualify for as well. Bottom Line Saving for your down payment is an important first step on your homebuying journey. Let’s connect today and make sure you have a trusted lender to help explore your options. Content previously posted on Keeping Current Matters
Read MoreThe Long-Term Benefit of Homeownership
Today’s cooling housing market, the rise in mortgage rates, and mounting economic concerns have some people questioning: should I still buy a home this year? While it’s true this year has unique challenges for homebuyers, it’s important to factor the long-term benefits of homeownership into your decision. Consider this: if you know people who bought a home 5, 10, or even 30 years ago, you’re probably going to have a hard time finding someone who regrets their decision. Why is that? The reason is tied to how you gain equity and wealth as home values grow with time. The National Association of Realtors (NAR) explains: “Home equity gains are built up through price appreciation and by paying off the mortgage through principal payments.” Here’s a look at how just the home price appreciation piece can really add up over the years. Home Price Growth Over Time Even though home price appreciation has moderated this year, home values have still increased significantly in recent years. The map below uses data from the Federal Housing Finance Agency (FHFA) to show just how noteworthy those gains have been over the last five years. If you look at the percent change in home prices, you can see home prices grew on average by almost 64% nationwide over that period. That means a home’s value can increase substantially in a short time. And if you expand that time frame even more, the benefit of homeownership and the drastic gains you stand to make become even clearer (see map below): The second map shows, nationwide, home prices appreciated by an average of over 290% over roughly a thirty-year span. While home price growth varies by state and local area, the nationwide average tells you the typical homeowner who bought a house thirty years ago saw their home almost triple in value over that time. This is why homeowners who bought their homes years ago are still happy with their decision. Even if home price appreciation eases as the market cools this year, experts say home prices are still expected to appreciate nationally in 2023. That means, in most markets, your home should grow in value over the next year even if the pace is slower than it was during the peak market frenzy when prices skyrocketed. The alternative to buying a home is renting, and rental prices have been climbing for decades. So why rent and fight annual lease hikes for no long-term financial benefit? Instead, consider buying a home. It’s an investment in your future that could set you up for long-term gains. Bottom Line Don’t let the shifting market delay your dreams. Data shows home values typically appreciate over time, and that gives your net worth a nice boost. If you’re ready to start your journey to homeownership, let’s connect today. Content previously posted on Keeping Current Matters
Read MoreThe Cost of Waiting for Mortgage Rates To Go Down
Mortgage rates have increased significantly in recent weeks. And that may mean you have questions about what this means for you if you’re planning to buy a home. Here’s some information that can help you make an informed decision when you set your homebuying plans. The Impact of Rising Mortgage Rates As mortgage rates rise, they impact your purchasing power by raising the cost of buying a home and limiting how much you can comfortably afford. Here’s how it works. Let’s assume you want to buy a $400,000 home (the median-priced home according to the National Association of Realtors is $389,500). If you’re trying to shop at that price point and keep your monthly payment about $2,500-2,600 or below, here’s how your purchasing power can change as mortgage rates climb (see chart below). The red shows payments above that threshold and the green indicates a payment within your target range. As the chart shows, as rates go up, the amount you can afford to borrow decreases and that may mean you have to look at homes at a different price point. That’s why it’s important to work with a real estate advisor to understand how mortgage rates impact your monthly mortgage payment at various home loan amounts. Are Mortgage Rates Going To Go Down? The rise in mortgage rates and the resulting decrease in purchasing power may leave you wondering if you should wait for rates to go down before making your purchase. Realtor.com says this about where rates could go from here: “Many homebuyers likely winced . . . upon hearing that the Federal Reserve yet again boosted its short-term interest rates by three-quarters of a percentage point—a move that’s pushing mortgage rates through the roof. And the already high rates are just going to get higher.” So, if you’re waiting for mortgage rates to drop, you may be waiting for a while as the Federal Reserve works to get inflation under control. And if you’re considering renting as your alternative while you wait it out, remember that’s going to get more expensive with time too. As Nadia Evangelou, Senior Economist and Director of Forecasting at the National Association of Realtors (NAR), says: “There is no doubt that these higher rates hurt housing affordability. Nevertheless, apart from borrowing costs, rents additionally rose at their highest pace in nearly four decades.” Basically, it is true that it costs more to buy a home today than it did last year, but the same is true for renting. This means, either way, you’re going to be paying more. The difference is, with homeownership, you’re also gaining equity over time which will help grow your net worth. The question now becomes: what makes more sense for you? Bottom Line Each person’s situation is unique. To make the best decision for you, let’s connect to explore your options. Content previously posted on Keeping Current Matters
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