Be Careful Not to Get Caught in The Rental Trap!
There are many benefits to homeownership. One of the top benefits is being able to protect yourself from rising rents by locking in your housing cost for the life of your mortgage.
Don’t Become Trapped
A recent article by ConsumerAffairs addressed the continuous rise in rents, stating:
“The cost of putting a roof over your head continues to go up. Not only are home prices still rising, but the cost of rent rose 0.5% in June.”
Additionally, in the Joint Center for Housing Studies at Harvard University’s 2017 State of the Nation’s Housing Report, it was revealed that,
“Despite a slight improvement from 2014, fully one-third of US households paid more than 30 percent of their incomes for housing in 2015. Renters continue to be more likely to face cost burdens…the number of cost-burdened renters (21 million) considerably outstrips the number of cost-burdened owners (18 million) even though nearly two-thirds of US households own their homes.”
These households struggle to save for a rainy day and pay other bills, including groceries and healthcare.
It’s Cheaper to Buy Than Rent
As we have previously mentioned, the results of the latest Rent vs. Buy Report from Trulia shows that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.
The updated numbers show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!
Know Your Options
Perhaps you have already saved enough to buy your first home. A nationwide survey of about 24,000 renters found that 80% of millennial renters plan to eventually buy a house, but 72% cite affordability as their primary obstacle. Aside from affordability, one in three millennial renters have concerns about their credit scores, and another 53% said that a down payment is an obstacle.
Many first-time home buyers who believe that they need a large down payment may be holding themselves back from their dream homes. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!
Don’t get caught in the trap that so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you can qualify for a mortgage now! https://goo.gl/qno7mv
According to Freddie Mac’s latest Primary Mortgage Market Survey, the 30-year fixed rate mortgage interest rate jumped up to 3.94% last week. Interest rates had been hovering around 3.5% since June, and many are wondering why there has been such a significant increase so quickly.
Why did rates go up?
Whenever there is a presidential election, there is uncertainty in the markets as to who will win. One way that this is noticeable is through the actions of investors. As we get closer to the first Tuesday of November, many investors pull their funds from the more volatile and less predictive stock market and instead, choose to invest in Treasury Bonds.
When this happens, the interest rate on Treasury Bonds does not have to be as high to entice investors to buy them, so interest rates go down. Once the elections are over and a President has been elected, investors return to the stock market and other investments, leaving the Treasury to raise rates to make bonds more attractive again.
Simply put, the better the economy, the higher interest rates will go. For a more detailed explanation of the many factors that contribute to whether interest rates go up or down, you can follow this link to Investopedia.
The Good News
Even though rates are closer to 4% than they have been in nearly 6 months, they are still slightly below where we started 2016, at 3.97%.
The great news is that even at 4%, rates are still significantly lower than they have been over the last 4 decades, as you can see in the chart below. Continue reading →
The housing crisis is finally in the rear view mirror as the real estate market moves down the road to a complete recovery. Home values are up, home sales are up, and distressed sales (foreclosures & short sales) are at their lowest mark in over 8 years. This has been, and will continue to be, a great year for real estate.
However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. According to the National Association of Realtors (NAR), buyer traffic and demand continues to be the strongest it has been in years. The supply of homes for sale has not kept up with this demand and has driven prices up in many areas as buyers compete for their dream home.
Traditionally, the winter months create a natural slowdown in the market. Jonathan Smoke, Chief Economist at realtor.com, points to low interest rates as one of the many reasons why buyers are still out in force looking for a home of their own.
“Overall, the fundamental trends we have been seeing all year remain solidly in place as we enter the traditionally slower sales season, and pent-up demand remains substantial as buyers seek to get a home under contract while rates remain so low.”
NAR’s Chief Economist, Lawrence Yun, points out that the inventory shortage we are currently experiencing isn’t a new challenge by any means:
“Inventory has been extremely tight all year and is unlikely to improve now that the seasonal decline in listings is about to kick in. Unfortunately, there won’t be much relief from new home construction, which continues to be grossly inadequate in relation to demand.”
Healthy labor markets and job growth have created more and more buyers who are not just ready and willing to buy but are also able to. If you are debating whether or not to put your home on the market this year, now is the time to take advantage of the demand in the market.
Every year at this time, many homeowners decide to wait until after the holidays to put their homes on the market for the first time, while others who already have their homes on the market decide to take them off until after the holidays. Here are six great reasons not to wait: https://goo.gl/eyosVz
A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainty about the buying process. A specific cause for concern tends to be mortgage qualification.
For many, the mortgage process can be scary, but it doesn’t have to be!
In order to qualify in today’s market, you’ll need to have saved for a down payment (the average down payment on all loans was 11% last month, with many buyers putting down 3% or less), a stable income and good credit history.
Throughout the entire home buying process, you will interact with many different professionals, all of which perform necessary roles. These professionals are also valuable resources for you.
Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests to follow:
In this day and age of being able to shop for anything anywhere, it is really important to know what you’re looking for when you start your home search.
If you’ve been thinking about buying a home of your own for some time now, you’ve probably come up with a list of things that you’d LOVE to have in your new home. Many new homebuyers fantasize about the amenities that they see on television or Pinterest, and start looking at the countless homes listed for sale with rose-colored glasses.
In todays “HOT MARKET” it is still a matter of importance before listing your home to remember – You only make a first impression once.
Many sellers are under the assumption that their home will sell as it is. This may be so, but do you want to risk not getting the highest price possible. This all starts with the first impression. This first photo seen on line is usually the outside of the home, this first thing a buyers see when driving past the home is the exterior. Why not take the extra effort in making the curb appeal of your home the best you absolutely can before listing your home.
Here are a few simple suggestions that will not break the bank but will have a tremendous effect on the curb appeal of your home.
- Repaint the front door and replace the hardware
- Update the house numbers
- Add or update light fixtures by the entrance
- Rinse or sweep the driveway regularly and reseal holes and cracks
- Check your roof for any missing or badly curled or damaged shingles that need to be replaced.
- Clear all gutters and downspouts of any debris
- Trim any overgrown shrubs, remove weeds and tidy up planting areas.
- Add colorful flowers and shrubs where possible
- Add new barkdust if this is something that you already have in place.
- Keep the lawn trimmed
- Walk the fence looking for loose slats or missing components. Make sure all the latches and gate are working properly
- repaint if necessary
- Wash everything- the windows, front door, porch and garage doors.
- Pressure wash the driveway and sidewalks and siding.
These are just a few simple things that will help improve the overall curb appeal of your home.
Remember Selling your home is work and buying a home is fun, make your home stand out to the buyers.
“The fourth quarter RESI found that title agents continue to believe that property valuation issues will be the most likely cause of title order cancellation over the coming year.”
So far this year I have already had to deal with a low appraisal and I have had other agents comment on the same issue, especially when the appraiser has been out of area appraiser. This caught both myself and the listing agent off guard as we both had supporting comps that supported both the listing price and the offer price.
“This shouldn’t come as a surprise. In a housing market where supply is very low and demand is very high, home values increase rapidly. One major challenge in such a market is the bank appraisal. If prices are jumping, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.”
WORD FOR THE WISE
If you are listing your home and expect offers above listing price, be prepared for the conversation that the appraiser may not show the same value as the offer presented. Make sure there is a significant down payment and that you have a plan in place for negotiation in this situation.
If you are a buyer and you not putting a significant down payment down on a home, your agent had better be sure that the offer is supported by comparable comps and as recent as possible. Another buyer beware opportunity for the buyer to avoid the pit falls of not getting the home you love because of the appraisal.
“Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. ” According to an article by Keeping Current Matters.
Let’s get together and discuss how this may impact the sale of your home.
Eric Belsky, the Managing Director of the Joint Center of Housing Studies at Harvard University expanded on the top 5 financial benefits of homeownership in his paper –The Dream Lives On: the Future of Homeownership in America.
Here are the five reasons, each followed by an excerpt from the study:
1.) Housing is typically the one leveraged investment available.
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”
2.) You're paying for housing whether you own or rent.
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”
3.) Owning is usually a form of “forced savings”.
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”
4.) There are substantial tax benefits to owning.
“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”
5.) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”
We realize that homeownership makes sense for many Americans for an assortment of social and family reasons. It also makes sense financially. If you are considering a purchase this year, contact a local professional who can help evaluate your ability to do so.