For Buyers – Page 68

4 Quick Reasons NOT to Fear a Housing Crash

December 20, 2018 by simplify

There is a lot of uncertainty regarding the real estate market heading into 2019. That uncertainty has raised concerns that we may be headed toward another housing crash like the one we experienced a decade ago.

Here are four reasons why today’s market is much different:

1. There are fewer foreclosures now than there were in 2006

A major challenge in 2006 was the number of foreclosures. There will always be foreclosures, but they spiked by over 100% prior to the crash. Foreclosures sold at a discount and, in many cases, lowered the values of adjacent homes. We are ending 2018 with foreclosures at historic pre-crash numbers – much fewer foreclosures than we ended 2006 with.

2. Most homeowners have tremendous equity in their homes

Ten years ago, many homeowners irrationally converted much, if not all, of their equity into cash with a cash-out refinance. When foreclosures rose and prices fell, they found themselves in a negative equity situation where their homes were worth less than their mortgage amounts. Many just walked away from their houses which led to even more foreclosures entering the market. Today is different. Over forty-eight percent of homeowners have at least 50% equity in their homes and they are not extracting their equity at the same rates they did in 2006.

3. Lending standards are much tougher

One of the causes of the crash ten years ago was that lending standards were almost non-existent. NINJA loans (no income, no job, and no assets) no longer exist. ARMs (adjustable rate mortgages) still exist but only as a fraction of the number from a decade ago. Though mortgage standards have loosened somewhat during the last few years, we are nowhere near the standards that helped create the housing crisis ten years ago.

4. Affordability is better now than in 2006

Though it is difficult to afford a home for many Americans, data shows that it is more affordable to purchase a home now than it was from 1985 to 2000. And, it requires much less of a percentage of your income today than it did in 2006.

Bottom Line

The housing industry is facing some rough waters heading into 2019. However, the graphs above show that the market is much healthier than it was prior to the crash ten years ago.

Homeownership Remains a Huge Part of the American Dream

December 19, 2018 by simplify

As we head into 2019, many news outlets and housing experts warn that the housing market may slow down. Over the last six years, the inventory of homes for sale has been near historic lows, which has been the force behind increasing home prices.

This has been great news for sellers as many of them have been able to capitalize on the demand in the market and sell their homes quickly and at a great profit.

One of the big reasons why inventory has remained so low for so long is that an entire generation of home buyers is finally buying! The millennial generation (ages 19-35) has been the driving force behind bidding wars in many areas of the country as they ditch their renter lifestyles and put down roots in new communities.

First American recently released a study entitled “How ‘Renter’ Millennials Will Transform the Housing Market.” In their study, they explained that:

“…As more millennials age into their early-to-mid thirties, and begin to get married, have children and form households, they will continue to be the primary drivers of homeownership demand.”

Because of this, it is safe to say that one aspect of 2019’s housing market that WILL NOT slow down is the demand for housing from young renters who are no longer satisfied living in someone else’s homes.

According to the latest Housing Vacancies and Homeownership Report from the Census Bureau, home buyers under 35 are already out-buying older Americans. The chart below shows the year-over-year change in homeownership rate by those under and over the age of 35.

The national homeownership rate spiked to its highest level in 2004 and then steadily declined until the second quarter of 2016 when it reversed course. Homebuyers under the age of 35 are the reason for that shift.

More than half of the purchase mortgages originated by Fannie Mae and Freddie Mac in 2018 were to first-time homebuyers. In fact,

“according to Census Bureau and First American calculations, over the next 10 years, aging millennials are expected to purchase at least 10 million new homes. By 2060, it is estimated millennials will have produced more than 20 million first-time home buyers.”

Bottom Line

If you are a homeowner who is nervous that the demand for your home will slow, don’t worry! If your home is priced competitively, there will be demand for years to come as this generation of renters is finally able to buy!

No Bubble Here! How New Mortgage Standards Are Helping

December 13, 2018 by simplify

Real estate is shifting to a more normal market; the days of national home appreciation topping 6% annually are over and inventories are increasing which is causing bidding wars to almost disappear. Some see these as signs that the market will soon come tumbling down as it did in 2008.

As it becomes easier for buyers to obtain mortgages, many are suggesting that this is definite proof that banks are repeating the same mistakes they made a decade ago. Today, we want to assure everyone that we are not heading to another housing “bubble & bust.”

Each month, the Mortgage Bankers’ Association (MBA) releases a measurement which indicates the availability of mortgage credit known as the Mortgage Credit Availability Index (MCAI). According to the MBA:

“The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is calculated using several factors related to borrower eligibility (credit score, loan type, loan-to-value ratio, etc.).” *

The higher the measurement, the easier it is to get a mortgage. During the buildup to the last housing bubble, the measurement sat at around 400. In 2005 and 2006, the measurement more than doubled to over 800 and was still at almost 600 in 2007. When the market crashed in 2008, the index fell to just over 100.

Over the last decade, as credit began to ease, the index increased to where it is today at 186.7 – still less than half of what it was prior to the buildup of last decade and less than one-quarter of where it was during the bubble.

Here is a graph depicting this information (remember, the higher the index, the easier it was to get a mortgage):

Bottom Line

Though mortgage standards have loosened somewhat during the last few years, we are nowhere near the standards that helped create the housing crisis ten years ago.

*For more information on the MCAI, including methodology, FAQs, and other helpful resources, please click here.

Don’t Get Caught in the Rental Trap in 2019

December 12, 2018 by simplify

Every year around this time, we take time to reflect and plan for next year. If you are renting your current home but have dreams of homeownership, your plan for the new year may include buying, and you wouldn’t be alone!

According to the 2018 Bank of America Homebuyer Insights Report, 74% of renters plan on buying in the next 5 years, with 38% planning to buy in the next 2 years!

When those same renters were asked why they disliked renting, 52% said that rising rental costs were their top reason, and 42% of renters believe that their rent will rise every year. The full results of the survey can be seen below:

It’s no wonder that rising rental costs came in as the top answer! The median asking rent price has risen steadily over the last 30 years, as you can see below!

There is a long-standing rule that a household should not spend more than 28% of its income on housing expenses. With nearly half of renters (48%) surveyed already spending more than that, and with their rents likely to rise again… why are they renting?

When asked why they haven’t purchased a home yet, not having enough saved for a down payment (44%) came in as the top response. The report went on to reveal that nearly half of all respondents believe that “a 20% down payment is required to buy a home.”

If the majority of those who believe they haven’t saved a large enough down payment believe that they need 20% down to buy, that means a large number of renters may be able to buy now!

Bottom Line

If you are one of the many renters who is fed up with rising rents but may be confused about what is required to buy in today’s market, let’s get together to help you on your path to homeownership.

How to Simply Increase Your Family Wealth by Paying for Housing

December 11, 2018 by simplify

Everyone should realize that unless you are living somewhere rent-free, you are paying a mortgage – either yours or your landlord’s. Buying your own home provides you with a form of ‘forced savings’ that allows you to use your monthly housing costs to increase your family’s wealth.

Every month that you pay your mortgage, you are paying off a portion of the debt that you took on to purchase your home. Therefore, you own a little bit more of your home every month in the form of home equity. As your home’s value increases you also gain home equity.

Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts, and investment and market strategists and asks them to project how residential home prices will appreciate over the next five years for their Home Price Expectation Survey (HPES).

The latest data from their Q4 2018 Survey revealed that home prices are expected to round out the year 5.8% higher than they were in January. For the next 5 years, home values will appreciate by an average of nearly 3% a year.

This is still great news for homeowners!

For example, let’s assume a young couple purchases and closes on a $250,000 home in January. Simply through their home appreciating in value, those homeowners can build their home equity by nearly $40,000 over the next five years.

Let’s look at the potential equity gained over the same period of time at some higher price points:

In many cases, home equity is a large portion of a family’s overall net worth.

Bottom Line

If your plan for 2019 includes entering the housing market to purchase a home, whether it’s your first or your fifth, let’s get together to make your plan a reality!

What If I Wait A Year to Buy a Home?

December 10, 2018 by simplify

National home prices have increased by 5.4% since this time last year. Over that same time period, interest rates have remained near historic lows which has allowed many buyers to enter the market and lock in low rates.

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

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Insights Report, home prices will appreciate by 4.8% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.8% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

Bottom Line

If buying a home is in your plan for this year, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

Welcome to TeamEmond

1. There are fewer foreclosures now than there were in 2006

2. Most homeowners have tremendous equity in their homes

3. Lending standards are much tougher

4. Affordability is better now than in 2006

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This is still great news for homeowners!

Let’s look at the potential equity gained over the same period of time at some higher price points:

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What Does This Mean as a Buyer?

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