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Home Buying Myths Slayed [INFOGRAPHIC]

Some Highlights:

  • The average down payment for first-time homebuyers is only 6%!
  • Despite mortgage interest rates being over 4%, rates are still below historic numbers.
  • 88% of property managers raised their rents in the last 12 months!
  • The credit score requirements for mortgage approval continue to fall.

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Is Family Mortgage Debt Out of Control?

Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.

These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.

Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.

Is Family Mortgage Debt Out of Control? | Keeping Current Matters

Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).

Bill McBride of Calculated Risk recently commented on the ratio:

“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”

Bottom Line

Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.


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How Much Do You Need to Make to Buy a Home in Your State?

It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to make in order to buy a median-priced home in each of the 50 states, and Washington, D.C.

States in the Midwest came out on top as most affordable, requiring the smallest salaries in order to buy a median-priced home. States with large metropolitan areas saw a bump in the average salary needed to buy with California, Washington, D.C., and Hawaii edging out all others with the highest salaries required.

Below is a map with the full results of the study:

How Much Do You Need to Make to Buy a Home in Your State? | Keeping Current Matters

GoBankingRates gave this advice to anyone considering a home purchase,

“Before you buy a home, it’s important to find out if you can afford the monthly mortgage payment. To do this, some financial experts recommend your housing costs — primarily your mortgage payments — shouldn’t consume more than 30 percent of your monthly income.”

As we recently reported, research from Zillow shows that historically, Americans had spent 21% of their income on owning a median-priced home. The latest data from the fourth quarter of 2017 shows that the percentage of income needed today is only 15.7%!

Bottom Line

If you are considering buying a home, whether it’s your first time or your fifth time, consult a local real estate professional who can help evaluate your ability to do so in today’s market!


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Rising Prices Help You Build Your Family’s Wealth

Over the next five years, home prices are expected to appreciate, on average, by 3.6% per year and to grow by 18.2% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.

So, what does this mean for homeowners and their equity position?

As an example, let’s assume a young couple purchased and closed on a $250,000 home this January. If we only look at the projected increase in the price of that home, how much equity will they earn over the next 5 years?

Rising Prices Help You Build Your Family’s Wealth | Keeping Current Matters

Since the experts predict that home prices will increase by 5.0% in 2018, the young homeowners will have gained $12,500 in equity in just one year.

Over a five-year period, their equity will increase by over $48,000! This figure does not even take into account their monthly principal mortgage payments. In many cases, home equity is one of the largest portions of a family’s overall net worth.

Bottom Line

Not only is homeownership something to be proud of, but it also offers you and your family the ability to build equity you can borrow against in the future. If you are ready and willing to buy, find out if you are able to today!


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Getting Pre-Approved Should Always Be Your First Step

In many markets across the country, the number of buyers searching for their dream homes greatly outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are in a market that is not as competitive, understanding your budget will give you the confidence of knowing if your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you with this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential home buyers overestimate the down payment and credit scores needed to qualify for a mortgage today. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so.


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A Tale of Two Markets [INFOGRAPHIC]

Some Highlights:

  • A trend that has been emerging for some time now is the contrast between inventory & demand in the Premium & Luxury Markets vs. the Starter & Trade-Up Home Markets and what that’s, in turn, doing to prices!
  • Inventory continues to rise in the luxury & premium home markets which is causing prices to cool.
  • Demand continues to rise with low inventory in the starter & trade-up home markets, causing prices to rise!

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The COST of Your Next Home Will Be LESS Than Your Parents’ Home Was

There is no doubt that the price of a home in most regions of the country is greater now than at any time in history. However, when we look at the cost of a home, it is cheaper to own today than it has been historically.

The Difference Between PRICE and COST

The price of a home is the dollar amount you and the seller agree to at the time of purchase. The cost of a home is the monthly expense you pay for your mortgage payment.

To accurately compare costs in different time periods, we must look at home prices, mortgage rates, and wages during each period. Home prices were less expensive years ago, but paychecks were also smaller and mortgage rates were much higher (the average mortgage interest rate in 1988 was 10.34%).

The best way to measure the COST of a home is to determine what percentage of income is necessary to buy a home at the time. That would take into account the price of the home, the mortgage interest rate and wages at the time.

Zillow just released research that examined home costs using this formula. The research compares the historic percentage of income necessary to afford a mortgage to the percentage needed today. It also revealed the cost if mortgage rates continue to rise as experts are predicting. Here is a graph of their findings*:

The COST of Your Next Home Will Be LESS Than Your Parents' Home Was | Keeping Current Matters

Rates would need to jump to 7% in order for the percentage of necessary income to be greater than historic norms.

Bottom Line

Whether you are a homeowner considering selling your current house and moving up to the home of your dreams, or a first-time buyer trying to purchase your first home, it’s a great time to move forward.

*Assumptions in the Zillow report: Buyer puts 20% down, takes out a conforming, 30-year fixed-rate mortgage at rates prevailing at the time, earns the median household income, and is buying a median-valued home.

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Mortgage Interest Rates Have Begun to Level Off

Whether you are a buyer searching for your first home, or a homeowner looking to move up to your next home, you should pay attention to where mortgage interest rates are heading.

Over the course of 2018, according to Freddie Mac’s Primary Mortgage Market Survey, rates have increased from 3.95% in the first week of January to 4.40% in the first week of April.

At first glance, the difference between these numbers in such a short amount of time could be concerning, but if we look at the graph below, we’ll see that rates have already started to level off and return to the mark set in February.

Mortgage Interest Rates Have Begun to Level Off | Keeping Current Matters

This is great news for anyone looking to buy a home this spring! The spring is always one of the busiest seasons for home buying, and with rates increasing even more, buyers have come off the fence to lock in great rates! This is still great advice as the experts believe that rates will continue to rise throughout the year.

Every month, Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors release their projections for where they believe mortgage rates will be in the coming months. If we take the average of what each of the four organizations is predicting for the second quarter, rates are expected to rise to about 4.48% by June.

That average climbs to 4.73% by the end of this year.

So, what does this mean?

Waiting until the end of the year to buy, with rates still projected to increase, will end up costing you more money on your monthly mortgage payment. For every $250,000 you need to borrow to purchase your dream home, you will spend $49.21 more per month, $590.52 per year, and over $17,700 by the end of your 30-year mortgage.

And that’s just the impact of your interest rate going up!

Bottom Line

If you are ready and willing to purchase a home, find out if you’re able to by sitting with a local real estate professional who can evaluate your needs and help you with next steps!


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What Is Private Mortgage Insurance (PMI)?

When it comes to buying a home, whether it is your first time or your fifth, it is always important to know all the facts. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).

What is PMI?

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

 As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.” 

According to the National Association of Realtors, the average down payment for all buyers last year was 10%. For first-time buyers, that number dropped to 5%, while repeat buyers put down 14% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:

What Is Private Mortgage Insurance (PMI)? | Keeping Current Matters

The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, meet with a professional in your area who can explain your market’s conditions and help you make the best decision for you and your family.


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US Housing Market Still In ‘Buy Territory’!

According to the 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.” 

While 13 of the 23 metropolitan markets examined moved further into buy territory, markets like Dallas, Denver, and Houston are currently deep into rent territory. Due to a lack of inventory, the home prices in these areas have increased by 6.7%6.3%, and 5.3%  respectively from a year ago.

According to Eli Beracha, Ph.D., Co-Creator of the index, home prices will begin to return to more normal levels.

Our data indicates that prices are above their 40-year trend but not significantly so as they were in 2007. Rather than a crash, I anticipate slower growth in prices accompanied by longer marketing times for sellers and increasing inventories, which should bring prices back in conjunction with their 40-year trend.”

Bottom Line

The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially, as 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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VA Loans by the Numbers [INFOGRAPHIC]

Some Highlights:

  • Since the creation of the VA Home Loans Program, 22 million veterans have been able to achieve the American Dream of homeownership.
  • In 2017, $188 billion was loaned to veterans and their families through the program.
  • VA Purchase Loans are on the rise in 46 out of 50 states and Washington, DC.

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House Prices: Simply a Matter of Supply & Demand

Why are home prices still rising? It is a simple answer. There are more purchasers in the market right now than there are available homes for them to buy. This is an example of the theory of “supply and demand” which is defined as:

“the amount of a commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price.”

When demand exceeds supply, prices go up. This is currently happening in the residential real estate market.

Here are the numbers for supply and demand as compared to last year for the last three months (March numbers are not yet available):

House Prices: Simply a Matter of Supply & Demand | Keeping Current Matters

In each of the last three months, demand (buyer traffic) has increased as compared to last year while supply (number of available listings) has decreased. If this situation persists, home values will continue to increase.

Bottom Line

The reason home prices are still rising is because there are many purchasers looking to buy, but very few homeowners ready to sell. This imbalance is the reason prices will remain on the uptick.


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Boomerang Buyers: Most Qualify for Financing in 2-3 Years

According to a new study from Lending Tree, Americans who have filed for bankruptcy may be able to rebuild enough credit to qualify for a home loan in as little as 2-3 years.

This is in stark contrast to the belief that many have that they need to wait 7-10 years for their bankruptcies to clear from their credit reports before attempting to apply for either a mortgage or a personal or auto loan.

The study analyzed over one million loan applications for mortgages, personal, and auto loans and compared borrowers who had a bankruptcy on their credit report vs. those who did not to find out the “Cost of Bankruptcy.”

The study found that 43.2% of Americans who filed bankruptcy were able to repair their credit back to a 640 FICO® Score in less than a year. The percentage of those who achieved a 640 FICO® Score increased to nearly 75% after 5 years. The full breakdown of the findings was used to create the chart below.

Boomerang Buyers: Most Qualify for Financing in 2-3 Years | Keeping Current Matters

Americans who were able to repair their credit scores to a range of 720-739 within three years of filing were able to obtain the same financing options as those who had never filed bankruptcy.

According to Ellie Mae’s latest Origination Insights Report, 53.5% of those who were approved for a home loan had FICO® Scores between 600-749 last month. This is great news for Americans who are looking to re-enter the housing market.

Boomerang Buyers: Most Qualify for Financing in 2-3 Years | Keeping Current Matters

Raj Patel, Lending Tree’s Director of Credit Restoration & Debt-Related Services had this to say:

“People may think that filing a bankruptcy would put you out of the loan market for seven to ten years, but this study shows that it is possible to rebuild your credit to a good credit quality.”

“LendingTree’s research found that very few bankruptcy filers have a harder time [obtaining a mortgage] than those who have not filed for bankruptcy.”

Bottom Line

If you are one of the millions of Americans who has filed for bankruptcy and think that you have to wait 7-10 years to make your dream of returning to homeownership a reality, meet with a local real estate professional who can help you find out if you qualify now.


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What Should You Look for In Your Real Estate Team?

How do you select the members of your team who are going to help make your dream of owning a home a reality? What should you be looking for? How do you know if you’ve found the right agent or lender?

The most important characteristic that you should be looking for in your agent is someone who is going to take the time to really educate you on the choices available to you and your ability to buy in today’s market.

As the financial guru Dave Ramsey advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Do your research. Ask your friends and family for recommendations of professionals they’ve worked with in the past and have had good experiences with.

Look for members of your team who will be honest and trustworthy; after all, you will be trusting them to help you make one of the biggest financial decisions of your life.

Whether this is your first or fifth time buying a home, you want to make sure that you have an agent who is going to have the tough conversations with you, not just the easy ones. If your offer isn’t accepted by the seller, or they think that there may be something wrong with the home that you’ve fallen in love with, you would rather know what they think than make a costly mistake.

According to the Home Buyer and Seller Generational Trends Report:

Buyers from all generations primarily wanted their agent’s help to find the right home to purchase. Buyers were also looking for help to negotiate the terms of sale and to help with price negotiations.” Additionally, “Help understanding the purchase process was most beneficial to buyers 37 years and younger at 75 percent.”

Look for someone to invest in your family’s future with you. You want an agent who isn’t focused on the transaction but is instead focused on helping you understand the process while helping you find your dream home.

Bottom Line

In this world of Google searches, where it seems like all the answers are just a mouse-click away, you need an agent who is going to educate you and share the information that you need to know before you even know you need it.


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NOT Owning Your Home Can Cost You a Lot of Money!

Owning a home has great financial benefits, yet many continue to rent! Today, let’s look at the financial reasons why owning a home of your own has been a part of the American Dream for as long as America has existed.

Realtor.com recently reported that:

Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option… as people get more savings in their pockets, buying becomes the better option.”

What proof exists that owning is financially better than renting?

1. In a previous blog we highlighted the top 5 financial benefits of homeownership:

  • Homeownership is a form of forced savings.
  • Homeownership provides tax savings.
  • Homeownership allows you to lock in your monthly housing cost.
  • Buying a home is cheaper than renting.
  • No other investment lets you live inside of it.

2. Studies have shown that a homeowner’s net worth is 44x greater than that of a renter.

3. Just a few months ago, we explained that a family that purchased an average-priced home at the beginning of 2018 could build more than $44,000 in family wealth over the next five years.

4. Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment– along with a profit margin!!

Bottom Line

Owning a home has always been, and will always be, better from a financial standpoint than renting.


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The Cost of Renting vs. Buying Today [INFOGRAPHIC]

Some Highlights:

  • Historically, the choice between renting or buying a home has been a tough decision.
  • Looking at the percentage of income needed to rent a median-priced home today (28.9%) vs. the percentage needed to buy a median-priced home (15.7%), the choice becomes obvious.
  • Every market is different. Before you renew your lease again, find out if you can put your housing costs to work by buying this year!

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99% of Experts Agree: Home Prices Will Increase

Some believe that the combined effects of the new tax code and rising mortgage rates will have an adverse impact on residential real estate prices in 2018. However, the clear majority of recently surveyed housing experts believe that home values will continue to rise this year.

What is the Home Price Expectation Survey?

Each quarter, Pulsenomics surveys a nationwide panel of economists, real estate experts and investment & market strategists. Those surveyed include experts such as:

  • Daniel Bachman, Senior Manager, U.S. Economics at Deloitte Services, LP
  • Kathy Bostjancic, Head of U.S. Macro Investors Service at Oxford Economics
  • David Downs, Real Estate Finance Professor at VCU
  • Edward Pinto, Resident Fellow at American Enterprise Institute
  • Albert Saiz, Director at MIT Center for Real Estate

Where do these experts see home values headed in 2018?

Here is a breakdown of where they see home values twelve months from now:

  • 21.6% believe prices will appreciate by 6% or more
  • 71.6% believe prices will appreciate between 3 and 5.99%
  • 5.7% believe prices will appreciate between 0 and 2.99%
  • Only 1.1% believe prices will depreciate

Bottom Line

Almost ninety-nine percent of the top experts studying residential real estate believe that prices will appreciate this year, and over 93% believe home values will appreciate by at least 3%.


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Be Thankful You Don’t Have to Pay Your Parents’ Interest Rate!

Interest rates hovered around 4% for the majority of 2017, which gave many buyers relief from rising home prices and helped with affordability. In the first quarter of 2018, rates have increased from 3.95% up to 4.45% and experts predict that rates will increase even more by the end of the year.

The rate you secure greatly impacts your monthly mortgage payment and the amount you will ultimately pay for your home. Don’t let the prediction that rates will increase stop you from purchasing your dream home this year.

Let’s take a look at a historical view of interest rates over the last 45 years.

Be Thankful You Don’t Have to Pay Your Parents’ Interest Rate! | Keeping Current Matters

Bottom Line

Be thankful that you can still get a better interest rate than your older brother or sister did ten years ago, a lower rate than your parents did twenty years ago, and a better rate than your grandparents did forty years ago.


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Buyer Demand Still Outpacing the Supply of Homes for Sale

The price of any item is determined by the supply of that item, as well as 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 you rate buyer traffic in your area?”

Buyer Demand Still Outpacing the Supply of Homes for Sale | Keeping Current Matters

The darker the blue, the stronger the demand for homes in that area. Only four states had a ‘stable’ demand level.

Seller Supply

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

As you can see from the map below, 25 states reported ‘weak’ seller traffic, 21 states reported ‘stable’ seller traffic, 3 states and Washington D.C. reported ‘strong’ seller traffic, and only 1 state reported ‘very strong’ seller traffic. This means there are far fewer homes on the market than what is needed to satisfy the buyers who are out looking for their dream homes.

Buyer Demand Still Outpacing the Supply of Homes for Sale | Keeping Current Matters

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 buyer demand, prices will continue to increase. If you are debating listing your home for sale, meet with a local real estate professional in your area who can help you capitalize on the demand in the market now!


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5 Reasons Why to Sell This Spring!

Here are five reasons listing your home for sale this spring makes sense.

1. Demand Is Strong

The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase…and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.

Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

Housing inventory has declined year over year for the last 32 months and is still under the 6-month supply needed for a normal housing market. This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.

Historically, the average number of years a homeowner stayed in their home was six but has hovered between nine and ten years since 2011. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.

3. The Process Will Be Quicker

Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the average time it took to close a loan was 45 days.

4. There Will Never Be a Better Time to Move Up

If your next move will be into a premium or luxury home, now is the time to move up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly, AND you’ll be able to find a premium home to call your own!

Prices are projected to appreciate by 4.8% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.

5. It’s Time to Move on With Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.


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Freddie Mac: Rising Mortgage Rates DO NOT Lead to Falling Home Prices

Recently, Freddie Mac published an Insight Report titled Nowhere to go but up? How increasing mortgage rates could affect housing. The report focused on the impact the projected rise in mortgage rates might have on the housing market this year.

Many believe that an increase in mortgage rates will cause a slowdown in purchases which would, in turn, lead to a fall in house values. Ultimately, however, prices are determined by supply and demand and while rising mortgage rates may slow demand, they also affect supply. From the report:

 “For current homeowners, the decision to buy a new home is typically linked to their decision to sell their current home… Because of this link, the financing costs of the existing mortgage are part of the homeowner’s decision of whether and when to move.

Once financing costs for a new mortgage rise above the rate borrowers are paying for their current mortgage, borrowers would have to give up below-market financing to sell their home.

Instead, they may choose to delay both the sale of their existing home and the purchase of a new home to maintain the advantageous financing.”

The Freddie Mac report, in acknowledging this situation, concluded that prices are not adversely impacted by higher mortgage rates. They explained:

“While there is a drop in the demand for homes, there is an associated drop in the supply of homes from the link between the selling and buying decisions. As both supply and demand move together in this way they have offsetting effects on price—lower demand decreases price and lower supply increases price.

They went on to reveal that the Freddie Mac National House Price Index is…

“…unresponsive to movements in interest rates. In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

The following graph, based on data from the report, reveals what happened to home prices the last six times mortgage rates rose by at least 1%.

Freddie Mac: Rising Mortgage Rates DO NOT Lead to Falling Home Prices | Keeping Current Matters

Bottom Line

Whether you are a move-up buyer or first-time buyer, waiting to purchase your next home based on the belief that prices will fall because of rising mortgage rates makes no sense.


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Is a Major Home Renovation Worth It in the Long Run?

Last week, we shared 7 Factors To Consider When Choosing A Home To Retire In.For some homeowners, these seven factors can be taken into account with a home renovation, but is it worth it to remodel or change floor plans?

Let’s look at this example.

Let’s say you have a 4-bedroom colonial style home in a great school district. The neighborhood is amazing, and you are very comfortable there, but your kids are all grown up and the original benefits of the home no longer apply.

You’ve always wanted a huge master suite and are considering merging 3 of the smaller bedrooms on the second floor to achieve this dream.

In the short term, you are over the moon excited about your newly renovated oasis.

In the long term, when you go to sell your home down the road, you’ve now taken a 4-bedroom home in a great school district and turned it into a 2-bedroom home. Your pool of potential buyers has shrunk significantly and so has the value of your home (unless you are able to find someone who has the exact needs you have today!).

Why not consider listing your 4-bedroom home now and moving into a gorgeous 2-bedroom with a master suite? Your house can become a home for the next family looking for that perfect neighborhood with a great school district to raise their kids in!

You may even be able to achieve your dream in the same area you love, without having to give up your favorite restaurants and grocery stores.

Bottom Line

If you are debating a major renovation that would change the layout of your home, before you pick up that sledgehammer, meet with a local real estate professional who can show you the available listings in your area that might meet your needs today!


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Dreaming of a Luxury Home? Now’s the Time!

If your house no longer fits your needs and you are planning on buying a luxury home, now is a great time to do so! Recently, the Institute for Luxury Home Marketing released its Luxury Market Report which showed that in today’s premium home market, buyers are in control.

The inventory of homes for sale in the luxury market far exceeds the number of people searching to purchase these properties in many areas of the country. This means that homes are often staying on the market longer or can be found at a discount.

Those who have a starter or trade-up home to sell will find buyers competing, and often entering bidding wars, to be able to call their house their new home.

The sale of your starter or trade-up house will help you come up with a larger down payment for your new luxury home. Even a 5% down payment on a million-dollar home is $50,000.

But not all who are buying luxury properties have a home to sell first.

A recent Bloomberg article gave some insight into what many millennials are choosing to do:

“A new generation of affluent homebuyers powered by a surge in inherited wealth is driving the luxury-home market, demanding larger spaces and fancier finishes, according to a report heralding ‘the rise of the new aristocracy.’”

Bottom Line

The best time to sell anything is when demand is high, and supply is low. If you are currently in a starter or trade-up house that no longer fits your needs and you are looking to step into a luxury home, now’s the time to list your house for sale and make your dreams come true.


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The Cost of Waiting: Interest Rates Edition [INFOGRAPHIC]

Some Highlights:

  • Interest rates are projected to increase steadily heading into 2019.
  • The higher your interest rate, the more money you end up paying for your home and the higher your monthly payment will be.
  • Rates are still low right now. Don’t wait until rates hit 5% to start searching for your dream home!

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Moving up Is MORE Affordable Now Than Almost Any Other Time in 40 Years

If you are considering selling your current home, to either move up to a larger home or into a home in an area that better suits your current family needs, great news was just revealed.

Last week, Trulia posted a blog, Not Your Father’s Housing Market, which examined home affordability over the last 40+ years (1975-2016). Their research revealed that:

“Nationally, homes are just about the most affordable they’ve been in the last 40 years… the median household could afford a home 1.5 times more expensive than the median home price. In 1980, the median household could only afford about 3/4 of the median home price.

Despite relatively stagnant incomes, affordability has grown due to the sharp drop in mortgage rates over the last 30 years – from a high of over 16% in the 1980s to under 4% by 2016.

Of the nation’s 100 largest metros, only Miami became unaffordable between 1990 and 2016. Meanwhile, 22 metros have flipped from being unaffordable to becoming affordable in that same time frame.”

Here is a graph showing the Affordability Index compared to the 40-year average:

Moving up Is MORE Affordable Now Than Almost Any Other Time in 40 Years | Keeping Current Matters

The graph shows that housing affordability is better now than at any other time in the last forty years, except during the housing crash last decade.

(Remember that during the crash you could purchase distressed properties – foreclosures and short sales – at 20-50% discounts.)

There is no doubt that with home prices and mortgage rates on the rise, the affordability index will continue to fall. That is why if you are thinking of moving up, you probably shouldn’t wait.

Bottom Line

If you have held off on moving up to your family’s dream home because you were hoping to time the market, that time has come.


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