Home Buying Myths Slayed [INFOGRAPHIC]

Home Buying Myths Slayed [INFOGRAPHIC] | Simplifying the Market

Home Buying Myths Slayed [INFOGRAPHIC] | Simplifying the Market

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?

Is Family Mortgage Debt Out of Control? | Simplifying The Market

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? | Simplifying The Market

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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What Should I Be On The Look For During A Home Tour?

What-Should-I-Be-On-The-Look-For-During-A-Home-Tour?

When it comes to any major purchasing decision like buying a home, you always want to be sure of what you’re getting before you buy. There may not be enough time for you to have a second home tour with friends and family for a different opinion on it. It is therefore vital to have a guideline on the areas to look out for before making a decision. The first tour is essential, and one needs to focus their attention on things that will be hard or expensive to change in future as opposed to temporary issues such as personal items, décor and paint colors. Here are a few key areas of a home you should be focusing on:

 

Areas Of The Home To Concentrate On

  • Location

This is one of the most critical areas to look out for during a home tour. Consider the traffic flow (things to consider) to your ideal home, as congestion would mean getting to work or back home late (plus further expenses like your time and that increased transportation cost). For a potential pleasant presence with the location of your future home, be sure to consider the road systems, nearby buildings, noise, and other neighboring homes. Look out for proximity to public transport and on whether the neighborhood has ample sidewalks and paths that accommodate a leisurely stroll or a bike ride.

 

  • Lighting

Be sure to look out for whether the house has access to natural light, and permits good airflow. Fresh air and sunlight make a living in a home much more enjoyable, and it helps in reducing the utility bills during summer months (when you’re not lying on the beach) by opening the windows and catching a breeze.

 

  • Flooring

Consider whether the floor plans and room sizes match your preferences. Does the home have all the rooms you need and in the best size? It is expensive and takes a lot of time to bring down walls trying to create a bigger space. Look out for uneven flooring such as cracks, as it is expensive to repair foundation-associated problems.

 

  • Water Damage

Look out for possible water damage signs such as musty odor, dark spots and water lines on the ceiling and walls as they are an indication of damages from a leak or burst pipe. It is important to peek at any exposed piping in the laundry room (or possibly) basement to assess water stains, leaks or rust. It is easy to repair a water leakage, but when it has gone for months without detection and has caused notable damages, it could also mean it is unrepairable.

 

  • Roofs and Gutters

Be sure to look at the roof to make sure it is not worn out.Gutters should be intact. To determine the maintenance level of the roof look out for missing, covered or curling roof tiles. Also check on whether the roof structure has signs of leakages as this could for a new roof which is expensive. The roof may fail to meet the required standards necessary for processing your insurance or mortgage.

 

  • Space of the Closet

This could be a deal breaker for you in deciding on the home. The storage space should be ideally large enough to accommodate all your belongings and help you at keeping organized.

 

  • Windows

Pull the curtains to check on the status of the windows. Look out for lopsided frames and give the windows a take to ensure that they slide with ease. Windows that stick while opening may indicate poor foundational issues or poor installation, which can be expensive to repair.

 

  • The Driveway and Parking area

Be sure to check out the dimensions of the driveway and parking area. A narrow driveway while become frustrating in the long term. A very long driveway will necessitate future maintenance that you may not be completely up for in the future.

 

Now no matter what your thoughts are always remember to keep them to yourself when touring a home for better bargaining. You might consider bringing a camera (or use your phone if you prefer) to take photos of the property, or possibly even measuring tape in case you decide you’d like to measure something in the house.

 

These are only a few things to be on the look out for.

 

If you’re looking for a new home, a great realtor will be able to help you find what you’re looking for.

 

If you need help finding the right home, contact us today to see what’s available.

Why Is Home Ownership Important For The American Economy?

Why-Is-Home-Ownership-Important-For-The-American-Economy?

Homebuilding and real estate sit at the top of the food chain when it comes to fueling economic growth. Home ownership has been the absolute foundation for wealth building for centuries and the process of constructing homes fuels many sectors of the economy. Once built, those homes continue to support and grow economic activity both locally and nationally.

 

Consider these statistics about homebuilding and homeownership in the U.S. :

  • A Federal Reserve study found that the median net worth of homeowners reached $195,400 in 2013 compared to $5,400 for renters.
  • The National Association of Realtors (NAR) found that for every two homes sold (including new and resale), one job is created. Findings from a study executed by the National Association of Home Builders (NAHB) echoed those findings, which found that 3.94 jobs were created for every 100 single-family home built.

 

How Real Estate Supports the Economy

Activity in the field of real estate has a trickle-down effect that permeates nearly every other economic sector. The process of building a home is labor-intensive from the start. It starts with planning and zoning at the local level. Builders represent themselves or hire lawyers, both of whom make good salaries. Once approved, the builder uses local contractors to develop the land and build the homes.

 

The jobs in the building trades pay fairly well, and the employees and their families have room in their budgets for discretionary spending that creates even more jobs at the local retail level. The workers also need plenty of services from the local area, and homes for themselves. New homes need lots of materials and appliances, and all that purchasing creates another trickle down-flow through the local and national economy.

 

The National Association of Homebuilders reported that in 2015, 394 jobs were created for every 100 single-family homes built. Building these homes generated $28.7 million dollars in the private sector and $3.6 million in revenues for local governments. Once built, those families who occupy them continue to contribute to the well-being of the local economy by generating 69 jobs and $5.1 million in private and local revenues every year.

 

Apartments also have a direct impact on local economies, but not to the extent that for-sale properties do, especially after they’re constructed. Individual home owners are far more likely to make discretionary improvements compared to apartment owners who are interested in short-term profitability rather than long-term investment value or comfort.

 

The Role of Supply and Demand

The laws of supply and demand exert a heavy influence in the residential real estate market. When the economy is booming and jobs are being created, real estate values go up. Even when job growth slows, real estate values typically continue to climb in markets where insufficient land availability or the lack of new home inventory increases the demand for homes.

 

Appreciation Rate Trends in Charleston

Based on data collected by the NAR, the median price of homes sold in the Charleston area from 2012 to 2016 rose by $50,000 to $240,000 in 2016. Over the four year period, this increase leveled out to $12,500 annually. The U.S. Housing and Urban Development (HUD) reported that the average home price increased four percent from 2016 to 2017.

 

Bottom Line

Homeownership forms the foundation for economic well-being and wealth-building in the U.S. Homeowners benefit directly by building equity by owning their own homes, as do all the others who gain from its presence long after the home’s been built.

 

Home ownership is a vital metric when it comes to the American economy.

 

If you’re considering buying or selling in Charleston, let’s talk about what’s available today!

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

How Much Do You Need to Make to Buy a Home in Your State? | Simplifying The Market

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? | Simplifying The Market

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, let’s get together to evaluate your ability to do so in today’s market!

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Getting Pre-Approved Should Always Be Your First Step

Getting Pre-Approved Should Always Be Your First Step | Simplifying The Market

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]

A Tale of Two Markets [INFOGRAPHIC] | Simplifying The Market 

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

The COST of Your Next Home Will Be LESS Than Your Parents' Home Was | Simplifying The Market

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 | Simplifying The Market

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

Mortgage Interest Rates Have Begun to Level Off | Simplifying The Market

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 | Simplifying The Market

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. Let’s get together to evaluate your needs and help you with next steps!

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What Is Private Mortgage Insurance (PMI)?

What Is Private Mortgage Insurance (PMI)? | Simplifying The Market

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)? | Simplifying The Market

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, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.

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