This month, Arch Mortgage Insurance released their spring Housing and Mortgage Market Review. The report explained that an increase in mortgage rates and/or home prices would impact monthly payments this way:
- A 5% increase in home prices increases payments by roughly 5%
- A 1% rise in interest rates increases payments by roughly 13% or 14%
That begs the question…
What if both rates and prices increase as predicted?
The report revealed:
“If interest rates and home prices rise by year-end in the ballpark of what most analysts are forecasting, monthly mortgage payments on a new home purchase could increase another 10–15%. That would make 2018 one of the worst full-year deteriorations in affordability for the past 25 years.”
The percent increase in mortgage payments would negatively impact affordability. But, how would affordability then compare to historic norms?
Per the report:
“For the U.S. overall, even if affordability were to deteriorate as forecasted, affordability would still be reasonable by historic norms. That is because the percentage of pre-tax income needed to buy a typical home in 2019 would still be similar to the historical average during 1987–2004. Thus, nationally at least, even with higher rates and home prices, affordability will just revert to historical norms.”
What about home prices?
A decrease in affordability will cause some concern about home values. Won’t an increase in mortgage payments negatively impact the housing market? The report addressed this question:
“Even recent interest rate increases and higher taxes on some upper-income earners didn’t slow the market, as many had feared…Short of a war or stock market crash, housing markets could continue to surprise on the upside over the next few years.”
To this point, Arch Mortgage Insurance also revealed their Risk Index which estimates the probability of home prices being lower in two years. The index is based on factors such as regional unemployment rates, affordability, net migration, housing starts and the percentage of delinquent mortgages.
Below is a map depicting their projections (the darker the blue, the lower the probability of a price decrease):
If interest rates and prices continue to rise as projected, the monthly mortgage payment on a home purchased a year from now will be dramatically more expensive than it would be today.
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Making the decision to start a family is one of the most important choices you’ll make in your life. It is not something to rush into. Aside from making sure that you are financially ready to support a child, you’ll also need to think about your living situation. Here are the primary concerns you’ll need to take into consideration when buying a home for your growing family.
One of the most important factors you’ll need to evaluate is your budget. You’ll need to find a balance between buying a house that will be large enough to accommodate the changing needs of your family going forward and making sure that it is a home that you can afford.
Remember that children will add several new categories to your budget, including diapers, baby food and an ongoing supply of new clothes as they grow. You’ll also need to factor in unexpected expenses, like visits to the pediatrician or emergency room, when your child gets sick. You will not want to be stretched so thin that you wouldn’t be able to cover these expenses while still making your mortgage payments.
Number of Children
In your mind, you may like the sound of having four children, but that doesn’t necessarily mean that you actually will (nor that it’s the right idea for you). On the other hand, you may think you only want one child but then change your mind later and want to grow your family even more.
In selecting a house, look for one that will be able to house your first child with the possibility of more. Young children can share a bedroom, even if they are of opposite sexes, so don’t feel the need to have separate bedrooms for each child. If you can afford it, get a house with an extra bedroom. You can always use it as a guest bedroom for when the grandparents or that Uncle Jesse in your family decides to make a visit.
Schools in the Area
Your children will need to go to school at some point, unless you plan on homeschooling, so be absolutely sure to look for a neighborhood with good schools.. Focus primarily on the elementary and middle schools, as you may very well end up moving again by the time your children reach high school.
You’ll want to look for an area that provides plenty of fun things for young children to do. Look for parks and playgrounds nearby, as you’ll likely be spending a fair bit of time there. Day care centers, indoor playgrounds and even toy stores in the area can be signs that a neighborhood is family-friendly.
Finally, you’ll want to make sure that the neighborhood will be safe for your children. Check the crime rate in the area, and look for possible houses on cul-de-sacs. Kids love to play with their friends out in the street, and you don’t want tons of cars whizzing by during rush hour if you can avoid it. Look for other children playing outside or families walking together along the sidewalk. These are positive signs that a neighborhood is safe for children.
Look to the Future
So many home buyers will initially only consider (and still buy) homes that they only plan to stay in for a couple of years, instead of thinking longer term when their children will get older and what items they will need at that time. Once they make friends, uprooting them will become harder. Be sure to think about what is going on in the area and how it might change over the years. Think about what your kids will need then, and not solely what they will only need in the next couple years. Will this house still be suitable for your family five or even ten years down the line? If the answer is “yes,” you may have very well found your dream home!
If You Are Considering Buying, Let’s Talk About What’s Available In Charleston Today.
A new study by WalletHub used “30 key metrics, ranging from share of millennials to millennial unemployment rate to millennial voter-turnout rate” to find out which states are the ‘Best States for Millennials.’
The Top 5 Best States for Millennials are:
- Washington, D.C. (also ranks highest in percentage of millennials already living there!)
- North Dakota (lowest unemployment rate)
- Minnesota (highest millennial homeownership rate)
- Massachusetts (highest percentage of millennials with health insurance coverage)
- Iowa (ranked #1 in lowest housing cost for millennials)
Below is a map with the rankings for each of the 50 states:
We recently reported on a study that set out to find out “How Much You Need to Make to Buy a Home in Your State,” which may have left you wondering what the average salaries are in each of the five states listed above.
According to WalletHub’s research, the top 5 states with the Highest Average Millennial Salaries are:
- Washington, D.C.
- New York
Every day, more and more millennials are aging into the ‘Responsibility Zone,’ the time in their lives when their responsibilities start to dictate their behaviors. For many, this includes buying a home. The top 5 states with the Highest Millennial Homeownership Rate are:
- West Virginia
If owning a home is next on your list, let’s get together to answer any questions you may have and set you on the path to homeownership!
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Retirement brings about numerous changes, with one of the of the most significant changes possibly being your change of residence. Homeowners who have recently retired or who are planning their final days in the workforce may need to reevaluate their living situations. This might leave thoes retirning and looking for a new home, wondering what they need to consider. Upgrading, downsizing, or even buying a second home can help retirees ensure their families’ future comfort or earn extra monthly income.
Be sure to consider these points before buying a new home in which to spend your retirement years.
Leaving a Legacy
Retiring well means more than just having enough to keep you and your spouse comfortable. A good retirement includes the ability to leave something behind to keep your family growing strong when you can’t be with them. Retiring parents might buy a second home for many reasons.
- Is your current home just too big? Consider buying a second, smaller home to live in. Use your large family home for big family gatherings like weddings and special holiday events. You can also use it as a guest-house, a vacation home for your adult children, or as a storage for all your family’s precious treasures.
- The fluctuating economy is making it difficult for young families to get a good start. A 2013 study found that 36% of adults between the ages of 18 and 31 lived with their parents. Retiring parents can help their adult children reach independence by purchasing a large property they can share if it ever becomes necessary to do so.
- Retiring parents with special needs adult children may want to buy a new home that features a detached dwelling or “mother-in-law” quarters. The adult children can learn to live independently while you are still around to guide them. When you are gone, the designated caregiver can move in and your child can continue living in the comfort they’ve come to know.
Just because you aren’t working doesn’t mean you can’t make a little extra cash. You can use additional properties to boost your monthly income so you can afford to have all the fun you deserve.
- Consider downsizing into something more suitable for your needs. Rent out your large family home on a monthly basis or possibly offer short-term rental services like Airbnb. You may decided to contract with a property management service to handle repairs, collections, and all the other landlord duties. Your property will be maintained and available if your plans ever change..
- Retirement is the time to do what you’ve always wanted to do with your life. You might purchase a small property to house your new business. Or upgrade your current home to one that has plenty of space for your woodworking, papercraft, metal art, or whatever hobby you want to convert into a paying enterprise. You might even look for properties that have unique features you can use to make your work easier. A screened porch very well might be the perfect place to paint.
- You may even consider easing your yearly tax burden by donating your existing home to a local charity. You will enjoy generous tax deductions while giving back to your community. Since the home still belongs to you, you can leave it to whomever you like in your will. This is a great way to preserve wealth for your family while also reducing your expenses.
Buying a new home during retirement can help seniors achieve the right balance, help their loved ones, and even increase or protect their wealth.
If You Are Considering Buying Or Selling, Let’s Talk About What Options There Are Today.
Buying and becoming a new homeowner can be a difficult challenge, and an extremely rewarding endeavor once you own your first home. As a new homeowner, you gain access to several different tax benefits for both primary or secondary residents such as vacation homes. With recent changes to the federal tax law, it is important to review how home tax credits were affected. There were many alliterations of the tax bill reported on in the press and luckily many of the more severe recommendations were not passed in the final bill. However, some changes were made and are reflected below where applicable. Here is a broad overview of the five federal tax credits you can claim as a homeowner.
Real Estate Taxes: Referring to state and local property taxes, under the proposed changes to the 2018 tax bill, this is a deduction cap of $10,000 total for state and local property tax and associated income or sales taxes. This limit is the same for both single and married couples filing jointly.
Concerning Your Other Deductions: When taking a tax credit for mortgage-related tax benefits you have to itemize your deductions. This can be highly advantageous because it allows you to take credit on other non-home related tax write-offs that have to be itemized to be claimed. These include unreimbursed employment expenses, charitable giving, medical expenses, and others.
Loan Interest Deduction: For 2018 you can deduct interest payments on your home’s mortgage as long as your mortgage is less than $750,000 or $375,000 for married couples filing separate returns. Note that these figures were higher in previous years but recent tax law changes resulted in the above figures. Unchanged is the fact you must have a loan secured by the home and the home must be your main or secondary residence.
Points: Note the interest you paid upfront during the mortgage closing process. As this type of payment improves your overall mortgage rate, most closings have points to some degree. These are deductible provided you meet several specific criteria. Key amongst these is that points must be paid with a secured loan, the loan in question must be secured by your main home, and the mortgage loan goes toward your home’s purchase or construction. Also, note your points total value must be in the ‘normal range’ for your geographic area and the surrounding home market values. Figures deemed unusual may result in this credit not being usable.
Future Tax Benefits: Lastly, you can claim a capital gains write off when you sell the home in the future provided you meet the habitation requirements. You have to live at the residence for 2 of the last 5 years and these two years do not have to be concurrent. By meeting these requirements you do not have to pay taxes on gains on a home sale up to a specific amount. The limits are $250,000 if filing single or $500,000 if filing jointly. This law was unchanged in the 2018 Tax Bill despite being considered at various points for modification or outright removal.
As the above shows, there are several tax advantages to purchasing a home. Despite changes made to the tax code these benefits are still ones that should not be ignored and should be correctly accounted for on your tax return. As always should you need further clarification on these or similar real estate matters, a knowledgeable and professional realtor will be able to give you a bit more detail.
Here in Charleston, you may find yourself with a lot of choices when it comes to Realtors and real estate agents. Because of this, it can be difficult to separate the average agents from those who truly excel. Here’s what to look for when choosing an agent to represent you in your real estate dealings.
Communication is one of the most important skills a Realtor or real estate agent must have, let alone for any business. After all, you’re going to be in touch frequently throughout the home buying or selling process, so you want your representative to be as accessible as possible. Real estate doesn’t necessarily follow traditional business hours, so your agent shouldn’t either. Ask about their policies on after-hours or weekend communication to ensure they’ll be accessible when you have questions or need advice.
You want to choose an agent who will find exactly what you are looking for, and this requires getting to know your taste and preferences. Attention to detail is vital for this, so look for an agent who will take the time to get to know you on a personal level and truly understands your needs and preferences, not just for the size and location of the home but also in terms of the layout, style and any other preferences you may have.
It is helpful to have a Realtor who has experience helping clients buy and sell the type of home you are seeking. For example, if you are looking for a luxury property in an upscale area, an agent whose experience comes mostly from starter homes in affordable areas may not be the best fit. This doesn’t mean that an up-and-coming agent can’t help you, but you may be better off with a Realtor who better understands your market. Ask about past sales and purchases to get a better sense of their forte.
Some Realtors are more aggressive than others in terms of negotiating, so you want to ensure that your representative will stand up for what you want. Of course, you need to have room for some flexibility, as the other party will have their interests in mind as well, but you want to have confidence that your agent is doing everything in their power to achieve favorable results for you.
Knowledge of the local area is absolutely critical for the agent you choose. You want someone who either lives in the area themselves or has been working there for a long time. This way, they’ll have insider knowledge as to which schools are the best, where the top amenities are located and other information that may be important to you. This is especially important if you are moving from another city or state and aren’t familiar with the area yourself.
It’s one thing to be a great Realtor during the process or buying or selling a home, but it is quite another to maintain relationships with clients after the deal closes. Every agent will work closely with you during the process, but many are not as attentive after the fact. Ask the Realtors you are considering what ongoing services they may provide. If they don’t have a good answer, you may want to look elsewhere to find someone more attentive.
Finding the right Realtor is almost as important as finding the right home, so be sure to take your time in choosing your agent. Ask pointed questions, and make note of the answers to reference later when it comes time to make your decision. With a bit of patience and research, you are sure to find the perfect agent to represent your interests.
If You Are Considering Buying Or Selling This Year, Let’s Talk About What Options There Are Today.
With home prices on the rise and buyer demand strong, some sellers may be tempted to try and sell their homes on their own (FSBO) without using the services of a real estate professional.
Real estate agents are trained and experienced in negotiation and, in most cases, the seller is not. Sellers must realize that their ability to negotiate will determine whether or not they get the best deal for themselves and their families.
Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interest of the buyer
- The buyer’s attorney (in some parts of the country)
- The home inspection companies, which work for the buyer and will almost always find some problems with the house
- The termite company if there are challenges
- The buyer’s lender if the structure of the mortgage requires the sellers’ participation
- The appraiser if there is a question of value
- The title company if there are challenges with certificates of occupancy (CO) or other permits
- The town or municipality if you need to get the CO permits mentioned above
- The buyer’s buyer in case there are challenges with the house your buyer is selling
- Your bank in the case of a short sale
The percentage of sellers who have hired real estate agents to sell their homes has increased steadily over the last 20 years. Let’s get together and discuss all we can do to make the process easier for you.
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The results of the 2018 Rental Affordability Report from ATTOM show that buying a median-priced home is more affordable than renting a three-bedroom property in 54% of U.S. counties analyzed for the report.
The updated numbers show that renting a three-bedroom property in the United States requires an average of 38.8% of income.
The least affordable market for renting was Marin County, CA, just over the Golden Gate Bridge from San Francisco, where renters spend a staggering 79.5% of average wages on rent, while the most affordable market was Madison County, AL where 22.3% of average wages went to rent.
Other interesting findings in the report include:
- Average rent rose faster than income in 60% of counties
- Average rent rose faster than median home prices in 41% of counties
- While median home prices rose faster than average rents in 58% of counties
Buying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let’s get together to find your dream home.
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As far as home ownership is concerned, there can be a lot to it than meets the eye. Aside from expenses like property taxes, you have to deal with monthly utility bills, which can take up a significant portion of your money. Nevertheless, technological advancement appears to be changing this situation by availing numerous smart home tech products aimed at cutting such costs without compromising the allure of top-of-the-line technology. Hence, if you are interested in cutting costs and transforming your Charleston SC home into a smart home, consider adding these smart in-home products.
Electricity helps with your lighting, heating, cooling, running electrical devices, and cooking among other things. For this reason, electricity bills are normally high for most homeowners. To avoid being a victim of such varying costs that fluctuate with the seasons, consider trying these products:
- Smart Lights
Unlike their incandescent counterparts, smart LED lights such as the Philips Hue line are programmable. Aside from features like motion detection, you can access and control them remotely using voice assistants such as Siri and Alexa. Furthermore, they are less costly to operate thanks to their dimmable feature. That’s without even mentioning how fun it can be to go through the different colors now available with your lighting!
- Smart Thermostats
Thanks to smart thermostats, you can effectively save money on heating and cooling your home. In fact, some of the leading thermostats on the market like Nest thermostats eliminate unnecessary energy consumption through customizing cooling and heating schedules. Also, most of these gadgets not only boast of sensors to monitor cold and hot home areas but they are also remotely programmable. You can save a sgnificant amount on your energy bills by automating your home’s temperature when you are not there or asleep. Setting your thermostat higher in the summer or colder in the winter (when you’re not home or awake) can lead to a significant reduction in your energy use.
- Surge Protectors
Television sets, gaming devices, computers and other electronic devices suck up your electricity even when they are not in use, as long as they are still plugged into a socket. With surge protectors (such as the Belkin Conserve Switch Surge Protector), you can even switch your devices off remotely. You can also rely on smart plugs like the iDevices Switch, which cuts power to your devices remotely.
Although you cannot do without water, you can regulate the amount of money you spend on water bills. Here are some options that can slash your water expenditure considerably.
- Smart Toilets
These toilets can help in keeping your home green by getting rid of toilet paper waste and saving water. According to EPA, toilets that come with a WaterSense label minimize water consumption by 20-60%. Consider going green by installing a smart toilet.
- Smart Water Meter
Failing to keep tabs with your water consumption can occasionally lead to high water bills. As such, you might want to consider a smart home water meter to help you monitor not only how you are utilizing water in your home, but also the amount. In turn, you can easily verify the amount of water that is going into various uses like lawn maintenance or possibly laundry.
- Faucet Aerator
By installing a high-efficiency faucet aerator on your taps and in your shower, you can minimize your water consumption in half. The aerator limits the flow of water via the faucet in comparison to the water flow of a tap without an aerator. Furthermore, adding this feature to your taps eliminates your low-pressure problems.
Lastly, by adding a smart home security system you can significantly save your money, particularly on costs like homeowners insurance. You will end up paying lower insurance premiums than usual for putting in the right measures to avert risk.
Do not sit around and let high utility bills be an issue when you decide to move into a new home (or the one you’re already in). You can absolutely do better things with that money. So, be sure to consider the above smart products and a myriad of others on the market today in a bid to save money and go green!
If you’re considering real estate decisions in Charleston, be sure to contact us today!