3 Questions to Ask Before Buying Your Dream Home

3 Questions to Ask Before Buying Your Dream Home | Simplifying The Market

If you are debating purchasing a home right now, you are probably getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in the real estate market.

Ask yourself the following 3 questions to help determine if now is actually a good time for you to buy in today’s market.

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with money.

For example, a recent survey by Braun showed that over 75% of parents say “their child’s education is an important part of the search for a new home.”

This survey supports a study by the Joint Center for Housing Studies at Harvard University which revealed that the four major reasons people buy a home have nothing to do with money. They are:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What does owning a home mean to you? What non-financial benefits will you and your family gain from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

According to the latest Home Price Index from CoreLogic, home values are projected to increase by 5.3% over the next 12 months.

What does that mean to you?

Simply put, if you are planning on buying a home that costs $250,000 today, that same home will cost you an additional $13,250 if you wait until next year. Your down payment will need to be higher as well to account for the higher home price.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by even a small increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase over the next twelve months as you can see in the chart below:

Mortgage Rate Projections | Simplifying The Market

Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision.

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Mortgage Rates by Decade Compared to Today [INFOGRAPHIC]

Mortgage Rates by Decade Compared to Today [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • The interest rate you secure for your mortgage greatly influences your monthly housing costs.
  • In the 1980s, 30-year fixed mortgage rates averaged in the high 12s making the monthly principal and interest payment over $2,000.
  • Interest rates are still at historic lows; this is a great time lock in your housing cost and protect yourself from increasing rents, or refinance your current mortgage.

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Why We Need More Newly Constructed Homes

Why We Need More Newly Constructed Homes | Simplifying The Market

The number of new home sales is far off historic norms. The National Association of Realtors (NAR) just reported that the percentage of all house sales that were newly constructed homes has fallen to the lowest numbers in forty years. Here is a graph showing the percentages:

Why We Need More Newly Constructed Homes | Simplifying The Market

This should come as no surprise as the number of new housing starts has fallen dramatically over the last several years:

Why We Need More Newly Constructed Homes | Simplifying The Market

Bottom Line

We need more new construction for two reasons:

  1. It will relieve some of the pent-up buying demand that is causing price appreciation to continue to increase well above historic norms.
  2. It will give better opportunities to many current homeowners who want to sell but can’t find an adequate home to move in to.

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Have You Put Aside Enough for Closing Costs?

Have You Put Aside Enough for Closing Costs? | Simplifying The Market

There are many potential homebuyers, and even sellers, who believe that you need at least a 20% down payment in order to buy a home, or move on to their next home. Time after time, we have dispelled this myth by showing that there are many loan programs that allow you to put down as little as 3% (or 0% with a VA loan).

If you have saved up your down payment and are ready to start your home search, one other piece of the puzzle is to make sure that you have saved enough for your closing costs.

Freddie Mac defines closing costs as:

“Closing costs, also called settlement fees, will need to be paid when you obtain a mortgage.  These are fees charged by people representing your purchase, including your lender, real estate agent, and other third parties involved in the transaction. Closing costs are typically between 2 and 5% of your purchase price.”

We’ve recently heard from many first-time homebuyers that they wished that someone had let them know that closing costs could be so high. If you think about it, with a low down payment program, your closing costs could equal the amount that you saved for your down payment.

Here is a list of just some of the fees/costs that may be included in your closing costs, depending on where the home you wish to purchase is located:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services (insurance, search fees)
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting fees

Is there any way to avoid paying closing costs?

Work with your lender and real estate agent to see if there are any ways to decrease or defer your closing costs. There are no-closing mortgages available, but they end up costing you more in the end with a higher interest rate, or by wrapping the closing costs into the total cost of the mortgage (meaning you’ll end up paying interest on your closing costs).

Home buyers can also negotiate with the seller over who pays these fees. Sometimes the seller will agree to assume the buyer’s closing fees in order to get the deal finalized.

Bottom Line

Speak with your lender and agent early and often to determine how much you’ll be responsible for at closing. Finding out you’ll need to come up with thousands of dollars right before closing is not a surprise anyone is ever looking forward to.

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Strong Buyer Demand Continues to Outpace Inventory of Homes for Sale

Strong Buyer Demand Continues to Outpace Inventory of Homes for Sale | Simplifying The Market

The price of any item is determined by the supply of that item, as well as the market demand. The National Association of REALTORS (NAR) surveys “over 50,000 real estate practitioners about their expectations for home sales, prices and market conditions” for their monthly REALTORS Confidence Index.

Their latest edition sheds some light on the relationship between Seller Traffic (supply) and Buyer Traffic (demand).

Buyer Demand

The map below was created after asking the question: “How would your rate buyer traffic in your area?”

Strong Buyer Demand Continues to Outpace Inventory of Homes for Sale | Simplifying The Market

The darker the blue, the stronger the demand for homes in that area. Only four states came in with a weak or moderate demand level.

Seller Supply

The Index also asked: “How would your rate seller traffic in your area?”

As you can see from the map below, the majority of the country has weak Seller Traffic, meaning there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for their dream homes.

Strong Buyer Demand Continues to Outpace Inventory of Homes for Sale | Simplifying The Market

Bottom Line

Looking at the maps above, it is not hard to see why prices are appreciating in many areas of the country. Until the supply of homes for sale starts to meet the buyer demand, prices will continue to increase. If you are debating listing your home for sale, let’s get together and discuss the demand in our area.

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Why We All Need A ‘Phil Dunphy’ On Our Side

Why We All Need A ‘Phil Dunphy’ On Our Side | Simplifying The Market

Whether or not you’ve ever seen an episode of Modern Family, or know who Phil Dunphy’s character is, the concept of knowing that you have someone in your corner who is looking out for your best interests is something we all want.

When it comes to buying a home, whether you are a rookie homebuyer or have gone through the process many times, having a local real estate expert who is well versed in the neighborhood you are looking to move into, and the trends of the area, should be your goal.

For those who aren’t familiar, the character Phil Dunphy is a Realtor with a huge heart who always strives to do the best for his family and his clients.

In one recent episode, Phil even shared the oath that he created and holds himself to:

“On my honor, I promise to aid in man’s quest for shelter, to recognize I’m not just in the business of houses — I’m in the business of dreams in the shape of houses. To disclose all illegal additions, shoddy construction, murders, and ghosts. And to put my clients’ needs before my own.” 

While this might seem silly, and it was definitely written with humor in mind, the themes of helping someone achieve the American Dream and putting a clients’ needs above your own are not to be taken lightly.

Bottom Line

When you make the decision to enter the housing market, as either a buyer or a seller, make sure you look for an agent who exemplifies these values and will help you through every step of the process.

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US Housing Market Moving Further into ‘Buy Territory’

US Housing Market Moving Further into ‘Buy Territory’ | Simplifying The Market

According to the latest Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the U.S. housing market has continued to move deeper into buy territory, supporting the belief that housing markets across the country remain a sound investment.

The BH&J Index is a quarterly report that attempts to answer the question:

In today’s housing market, is it better to rent or buy a home?

The index examines the entire US housing market and then isolates 23 major cities for comparison. The researchers “measure the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds.” 

Ken Johnson, Ph.D., Real Estate Economist & Professor at Florida Atlantic University, and one of the index’s authors explains that:

“Housing prices, in general, continue to slow and when considered in light of the recent trends in the Buy vs. Rent Index signal that ownership remains an excellent investment for the majority of Americans.”

While 15 of the 23 metropolitan markets examined moved further into buy territory since last quarter, Dallas, Denver, and Houston are three of the major cities that are currently deep into rent territory. In these three markets, it is estimated that renting will top homeownership 7 out of 10 times.

Eli Beracha, Ph.D., Assistant Professor in the T&S Hollo School of Real Estate at FIU, believes that, in these three markets, the strong odds in favor of renting to create more wealth should begin to have an impact on the demand for home ownership and from that, impact property prices in these areas.”

Simply put, home prices in these areas will begin to return to more normal levels once residents realize that renting may be a better choice, therefore bringing home affordability back as well.

Bottom Line

The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year. Protect yourself from rising rents by locking in your housing cost with a mortgage payment now.

To Find Out More About the Study: The BH&J Index and other FAU real estate activities are sponsored by Investments Limited of Boca Raton. The BH&J Index is published quarterly and is available online at http://business.fau.edu/buyvsrent.

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4 Reasons to Buy This Fall

4 Reasons to Buy This Fall | Simplifying The Market

It’s that time of year; the seasons are changing and with them come thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether or not now is the right time to buy don’t have to look much further to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.4% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.5% a year for the next 5 years.

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Remain at Historic Lows

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained at or below 3.5% for 13 consecutive weeks. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will increase by this time next year.

Any increase in rates will impact YOUR monthly mortgage payment. A year from now, the percentage of your income that you spend on housing will increase substantially if you choose to wait.

3. Either Way You Are Paying a Mortgage

Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either your mortgage or your landlord’s. As a paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move on with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

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Foreclosure Rate Drops to Pre-Crisis Levels [INFOGRAPHIC]

Foreclosure Rate Drops to Pre-Crisis Levels [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Only 2.9% of homes are in serious delinquency, down 17.1% from July 2015.
  • This is the 57th consecutive month with a year-over-year decline.
  • The national foreclosure rate has returned to August 2007 levels, at only 0.9%.

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5 Stats that Prove the Real Estate Market is Getting Stronger

5 Stats that Prove the Real Estate Market is Getting Stronger | Simplifying The Market

Whenever there is talk about an improving housing market, some begin to show concern that we may be headed toward another housing bubble that will be followed by a crash similar to the one we saw last decade.

Here are five data points that show the housing market will continue to recover, and that a new housing crisis is not about to take shape.

1) Mortgage availability is increasing, but is nowhere near the levels we saw in 2004-2006.

A buyer’s chances of being approved for a mortgage have increased over the last three years; That’s good news for the market. This is not a precursor to another challenge, as many experts maintain that it is still too difficult for many buyers to attain house financing.

As Jonathan Smoke, the Chief Economist of realtor.com, recently explained:

“The havoc during the last cycle was the result…of speculation fueled by loose credit. That’s the exact opposite of what we have today.”

2) The Housing Affordability Index, which measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home, based on the most recent price and income data. The current index shows that it is more affordable to buy a home today than at any other time between 1990 and 2008. With median incomes finally beginning to rise, houses should continue to remain affordable and housing demand should remain strong.

3) Home prices are well within historic norms. Prices have increased substantially over the last several years; However, those increases followed the housing crash of 2008 and national prices are still not back to 2006 levels. If there were no bubble (and subsequent bust), today’s prices would actually be lower than if they were measured by historic appreciation levels from 1987-1999.

4) Demand for housing, as measured by new household formations, is growing. The Urban Land Institute projects that 5.95 million new households will be formed over the next three years. Even if the homeownership rate drops to 60%, that would be over 3.5 million new homeowners entering the market.

5) New home starts are finally beginning to increase. This helps eliminate the number one challenge in the industry – lack of inventory. And it does so in two ways:

  1. Some first time buyers will, in fact, purchase a newly constructed home.
  2. Many current homeowners will move-up (or move-down) to a new construction and then put their current home on the market.

This means that there will be an increase in both new construction and existing home inventories.

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