Do You Know the Cost of Renting vs. Buying? [INFOGRAPHIC]

Do You Know the Cost of Renting vs. Buying? [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Historically, the choice between renting or buying a home has been a close decision.
  • Looking at the percentage of income needed to rent a median priced home today (30%) vs. the percentage needed to buy a median priced home (15%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you could use your housing costs to own a home of your own!

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The Past, Present & Future of Home Prices

The Past, Present & Future of Home Prices | Simplifying The Market

CoreLogic released their most current Home Price Index last week. In the report, they revealed home appreciation in three categories: percentage appreciation over the last year, over the last month and projected over the next twelve months.

Here are state maps for each category: 

The Past – home appreciation over the last 12 months

The Past, Present & Future of Home Prices | Simplifying The Market

The Present – home appreciation over the last month

The Past, Present & Future of Home Prices | Simplifying The Market

The Future – home appreciation projected over the next 12 months

The Past, Present & Future of Home Prices | Simplifying The Market

Bottom Line

Homes across the country are appreciating at different rates. If you plan on relocating to another state and are waiting for your home to appreciate more, you need to know that the home you will buy in another state may be appreciating even faster.

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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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Lack of Existing Home Sales Inventory Impacting Sales [INFOGRAPHIC]

Lack of Existing Home Sales Inventory Impacting Sales [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Existing home inventory is down 10.1% from last year.
  • A lack of inventory explains the modest increase in home sales (0.8% year-over-year) despite strong buyer demand.
  • Existing home prices increased 5.1% year-over-year, which is directly related to the lack of inventory.

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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

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