Homeownership Builds Wealth & Offers Stability

Homeownership Builds Wealth & Offers Stability | Simplifying The Market

The most recent Housing Pulse Survey released by the National Association of Realtors revealed that the two major reasons Americans prefer owning their own home instead of renting are:

  1. They want the opportunity to build equity.
  2. They want a stable and safe environment.

Building Equity

John Taylor, CEO of the National Community Reinvestment Coalition, explains that those who lack the opportunity to become homeowners have a weakened ability to reinvest their wealth:

“We traditionally have been huge supporters of homeownership. We see it as a way to provide stability for households but also as an asset-building strategy. If you continue to be a renter, locked out of the homeownership arena, increasingly those things are further and further out of reach. They’re joined at the hip. They perpetuate each other.” 

Family Stability

Does owning your home really create a more stable environment for your family?

survey of property managers conducted by rent.com disclosed two reasons tenants should feel less stable with their housing situation:

  • 68% of property managers predict that rental rates will continue to rise in the next year by an average of 8%.
  • 53% of property managers said that they were more likely to bring in a new tenant at a higher rate than negotiate and renew a lease with a current tenant they already know.

We can see from these survey results that renting will provide anything but a stable environment in the near future. 

Bottom Line

Homeowners enjoy a more stable environment and at the same time are given the opportunity to build their family’s net worth.

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Saving to Buy a Home? Do You Know the Difference Between Cost & Price?

Saving to Buy a Home? Do You Know the Difference Between Cost & Price? | Simplifying The Market

As a seller, you will be most concerned with the ‘short term price’ – where home values are headed over the next six months. As a buyer, you must be concerned not with price but instead with the ‘long term cost’ of the home.

Many economists have pointed to Brexit (Britain’s exit from the European Union) as a reason that interest rates will remain low for the next few months. But Trulia’s Chief Economist Ralph McLaughlin warns that this will not always be the case in a recent post:

“While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”

The Mortgage Bankers Association (MBA), the National Association of Realtors (NAR) and Freddie Mac all project that mortgage interest rates will increase by close to a full percentage point over the next twelve months.

According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 5.3% over the next 12 months.

What Does This Mean as a Buyer?

Here is a simple demonstration of what impact an interest rate increase would have on the mortgage payment of a home selling for approximately $250,000 today if home prices appreciate by the 5.3% predicted by CoreLogic over the next twelve months:

Saving to Buy a Home? Do You Know the Difference Between Cost & Price? | Simplifying The Market

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Saving To Buy A Home? What Would You Sacrifice? [INFOGRAPHIC]

Saving To Buy A Home? What Would You Sacrifice? [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • 95% of first-time homebuyers are willing to sacrifice to make homeownership a reality.
  • The top thing that buyers sacrifice are new clothes at 54%.
  • Even repeat or experienced buyers say they sacrificed taking a vacation or buying a new car to buy their last home.

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4 Reasons to Buy This Summer!

4 Reasons to Buy This Summer! | Simplifying The Market

Summer is here! The temperature isn’t the only thing heating up right now, so too is the housing market in many areas of the country! Here are four great reasons to consider buying a home today instead of waiting.

1. Prices Will Continue to Rise

CoreLogic’s latest Home Price Index reports that home prices have appreciated by 6.2% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.3% 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 3.2% 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 Are Projected to Increase 

Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained around 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers Association, Freddie Mac & the National Association of Realtors are in unison, projecting that rates will be up almost a full percentage point by this time next year.

An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home. 

3. Either Way You are Paying a Mortgage

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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Happy Independence Day!

Happy Independence Day! | Simplifying The Market

Enjoy the holiday weekend with family and friends!

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Sales at Highest Pace in 9 Years! [INFOGRAPHIC]

Sales at Highest Pace in 9 Years [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Sales of existing homes reached the highest annual pace in over 9 years at 5.29 million.
  • Inventory remains below the 6-month norm and prices are still on the rise.
  • Interest rates are at a historic low of 3.48%.

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3 Reasons to Buy Luxury Property THIS Year!!

3 Reasons to Buy Luxury Property THIS Year!! | Simplifying The Market

For that reason, prices haven’t skyrocketed as they have in the lower and mid-tier markets. This, coupled with sensational mortgage rates, means that this may be the perfect time to purchase the luxury property you have always desired.

Let’s break it down into the three major reasons to act now:

1. There are more homes from which to choose

According to a recent Wall Street Journal article, inventory in the upper end is increasing, while it is decreasing at the lower and mid-tier price ranges. Here is a graph showing the average increase/decrease in inventory for the first four months of this year as compared to last year:

3 Reasons to Buy Luxury Property THIS Year!! | Simplifying The Market

2. Prices are becoming more reasonable

In a separate article, the Wall Street Journal also talked about prices in the luxury market. They explained that downward price adjustments have been more common in the luxury market than in markets with lower prices. They went on to say:

“The growing number of price cuts suggests luxury-home sellers are becoming more realistic about property values as sales have slowed, said several real-estate veterans.”

Not only will you have more to choose from, but you may also be able to get the property at a reduced price.

3. Mortgage rates are at historic lows

In the past, one of the drawbacks to purchasing a luxury property was the larger mortgage rate on “jumbo” loans which are often required on high end properties.

However, HSH.com just revealed that jumbo rates just set new record lows:

“While conforming fixed-rate mortgages eased a little this week, 30-year fixed-rate jumbos declined enough to break into new record low territory (3.66%), besting the previous low set in April by two basis points.”

Bottom Line

More choices, better prices and historically low mortgage rates may make this the perfect time for you to own one of those luxury properties you and your family have always fantasized about.

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BREXIT: What’s the FIXIT for U.S. Home Buyers and Sellers?

BREXIT: What’s the FIXIT for U.S. Home Buyers and Sellers? | Simplifying The Market

Now that much of the dust has settled and the panic has waned, let’s take a look at what impact Britain’s exit from the European Union may have on the U.S. housing market.

The most immediate impact of Brexit will be on mortgage interest rates. Interest rates have remained at historic lows for the last several years. Contrary to what many experts believed, rates have remained low throughout the first half of 2016.

Possible impact of Brexit on mortgage rates?

In a recent article, the Washington Post explained:

“Brexit has spawned the recent bout of volatility in global financial markets. That has anxious investors scurrying for safety — and few assets are safer than U.S. Treasuries. High demand for government debt pulls down interest rates.

That all translates into ultra-low mortgage rates for American households. And with Britain voting for Brexit, they could go even lower.”

However, the lower rates caused by Brexit may be short lived as Trulia Chief Economist Ralph McLaughlin pointed out in a recent post:

“While the departure of the UK from the European Union has driven down the 10-year bond, and thus mortgage rates, we expect them to rebound later in the year as uncertainty over the economic consequences of the departure lifts.”

Bottom Line

Rates are already at historic lows. The UK’s exit from the EU almost certainly guarantees they will remain low (and possibly go lower) over the next few months. If you were thinking of buying your first home or trading up to the house of your dreams, this may be the time to act. The cost of money may never be better for a potential buyer.

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Do Homeowners Realize Their Equity Position Has Changed?

Do Homeowners Realize Their Equity Position Has Changed? | Simplifying The Market

Yesterday, we reported that according to CoreLogic’s latest Equity Report, nearly 268,000 homeowners regained equity and are no longer underwater on their mortgage in the first quarter. Homes with negative equity have decreased by 21.5% year-over-year.

A study by Fannie Mae suggests that many homeowners are not aware of how their equity position has changed as their home has increased in value.

For example, their study showed that 23% of Americans still believe their home is in a negative equity position when, in actuality, CoreLogic’s report shows that only 8% of homes are in that position. 

The study also revealed that only 37% of Americans believe that they have “significant equity” (greater than 20%), when in actuality, 74% do!

Do Homeowners Realize Their Equity Position Has Changed? | Simplifying The Market

This means that 37% of Americans with a mortgage fail to realize the opportune situation they are in. With a sizable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing).

Fannie Mae spoke out on this issue in their report:

“Homeowners who underestimate their homes’ values not only underestimate their home equity, they also likely underestimate: 1) how large a down payment they could make with their home equity, 2) their chances of qualifying for mortgages, and, therefore, 3) their opportunities for selling their current homes and for buying different homes.”

CoreLogic’s report also revealed that if homes were to appreciate by an additional 5%, over 800,000 US households would regain positive equity.

Bottom Line

If you are one of the many homeowners who is unsure of your current equity situation, let’s meet up to discuss your options.

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74% of Households in the US Now Have Significant Equity!

74% of Households in the US Now Have Significant Equity! | Simplifying The Market

CoreLogic’s latest Equity Report revealed that 92% of all mortgaged properties are now in a positive equity situation, while 74% now actually have significant equity (defined as more than 20%)! The report also revealed that 268,000 households regained equity in the first quarter of 2016 and are no longer under water.

Price Appreciation = Good News for Homeowners

Frank Nothaft, CoreLogic’s Chief Economist, explains:

“In just the last four years, equity for homeowners with a mortgage has nearly doubled to $6.9 trillion. The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment.  

These are all positive factors that will provide support to both household balance sheets and the overall economy.” 

Anand Nallathambi, President & CEO of CoreLogic, believes this is a great sign for the market in 2016 as well, as he had this to say:

“More than 1 million homeowners have escaped the negative equity trap over the past year. We expect this positive trend to continue over the balance of 2016 and into next year as home prices continue to rise.  

Nationally, the CoreLogic Home Price Index was up 5.5% year over year through the first quarter. If home values rise another 5% uniformly across the U.S., the number of underwater borrowers will fall by another one million during the next year.” 

Below is a map illustrating the percentage of households in each state with significant equity: 

74% of Households in the US Now Have Significant Equity! | Simplifying The Market

Many homeowners with more than 20% equity in their home would be able to use that equity as a down payment on either a larger home or even a retirement home.

Bottom Line

If you are one of the many Americans who are unsure of how much equity you have in your home, don’t let that be the reason you fail to move on to your dream home this year!

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