Preparing to Spring Forward [INFOGRAPHIC]

Preparing to Spring Forward [INFOGRAPHIC] | Simplifying The Market

Preparing to Spring Forward [INFOGRAPHIC] | Simplifying The Market

 

Some Highlights:

  • In the majority of the country, this weekend marks the start of Daylight Savings Time as we set our clocks forward an hour on Sunday at 2:00 AM EST.
  • Whether you plan on buying or selling this spring, these tips could help you ‘spring ahead’ of your competition!
  • Spring brings two things: more buyers & more sellers! Get prepared now to stand out in the crowd!

No Worries… Home Prices Coming in for a SOFT Landing

No Worries… Home Prices Coming in for a SOFT Landing | MyKCM

Home prices have appreciated considerably over the last five years. This has some concerned that we may be in for another dramatic correction. However, recent statistics suggest home values will not crash as they did a decade ago. Instead, this time they will come in for a soft landing.

The previous housing market was fueled by an artificial demand created by mortgage standards that were far too lenient. When this demand was shut off, a flood of inventory came to market. This included heavily discounted distressed properties (foreclosures and short sales).

Today’s market is totally different. Mortgage standards are tighter than they were prior to the last boom and bust. There is no fear that a rush of foreclosures will come to market. The Mortgage Bankers’ Association just announced that foreclosures are lower today than at any time since 1996.

Case Shiller looks at the percentage of appreciation as compared to the same month the year prior. Here is a graph of their findings over the last ten months:

No Worries… Home Prices Coming in for a SOFT Landing | MyKCM

 

As we can see, home price appreciation is softening as more inventory comes to market. This shows that real estate prices are not crashing, but merely returning toward historic appreciation numbers of 3.6% annually.

Bottom Line

Home prices are leveling off. Long term, that is a good thing for the housing market.

Interest Rates Hit New 12 Month Low!

Interest Rates Hit New 12 Month Low! | MyKCM

According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at their lowest for 2019. Rates like these haven’t been seen since February 2018!

Last week’s survey results reported an interest rate of 4.35%. This is a welcome change from the near 5% rates seen in mid-November. At 4.32%, the second week of February 2018 was the last time rates were this low. This can be seen in the chart below.

Interest Rates Hit New 12 Month Low! | MyKCM

Freddie Mac’s Chief Economist, Sam Khater, had this to say:

“Mortgage rates fell for the third consecutive week, continuing the general downward trend that began late last year.

Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.”

Bottom Line

If you plan on buying a home this spring, meet with a local real estate professional who can help prepare you for today’s market before rates increase!

What are the Benefits of Becoming a Homeowner?

What are the Benefits of Becoming a Homeowner? | MyKCM

Every family has a list of important dates. We celebrate birthdays, anniversaries, pet adoptions…and the list goes on. For 64.4 percent of households in the United States, this list includes the day they became a homeowner for the first time!

Why is this date important? Homeownership is not just a roof over your head! It represents shelter, stability, wealth, and pride! For decades, homeownership has been an important part of the American Dream!

However, many question if the next generations see the same benefits of homeownership as their predecessors.

In case we have forgotten, some of those benefits are:

Non-Financial Benefits

1) Educational Achievement: Homeownership has a positive impact on academic achievement, including reading and math performance in children 3-12 years old.

2) Civic Participation: “Owning a home means owning a part of the neighborhood.” Homeowners have a stronger connection to their neighborhood and are more committed to volunteer.

3) Health Benefits: Adjusting for a range of demographic, socioeconomic and housing-related characteristics, homeowners have a substantial health advantage over renters.

4) Public Assistance: The report shows 47% of homeowners use their home equity credit lines to help pay other debts, diminishing their need for public assistance.

5) Property Maintenance and Improvement: A well-maintained home not only generates benefits through consumption and safety, but a high-quality structure also raises mental health.

6) Pride of Ownership: This place is uniquely “yours.” You can customize it according to your likes and personality.

In addition to financial benefits, homeownership also brings significant social benefits. These not only pertain to the family, but extend to the communities, the state, and the country!

Financial Benefits

Buying a home is an investment in your future!

  1. Appreciation: On average, home prices are appreciating annually at a rate of 3.6%. This helps to create a safety net.
  2. Forced Savings: Your mortgage is like a forced savings plan! With each payment, you are reducing the principal of your loan.
  3. Home Equity: Homeownership builds equity every single month. You can later use that equity to start a business, send your children to college, etc.
  4. Net Worth: A homeowners’ net worth is 44x greater than renters! This gives you the financial freedom to invest.
  5. Stability: Rent prices increase 4% annually! A fixed mortgage payment allows you to save for future projects and guard against inflation.
  6. Tax Benefits: The government has created tax benefits to encourage customers to purchase. (Talk to your CPA to see which benefits apply to you).

Bottom Line

Homeownership is and will always be part of the American Dream! There are many financial and non-financial benefits to take advantage of when owning a home. If owning a home is part of your dream, contact a local real estate professional to help you with the process!

How Can I Increase My Family’s Net Worth?

How Can I Increase My Family’s Net Worth? | MyKCM

Every three years, the Federal Reserve conducts their Survey of Consumer Finances. Data is collected across all economic and social groups. The latest survey data covers 2013-2016.

The study revealed that the median net worth of a homeowner is $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).

These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.

Owning a home is a great way to build family wealth.

As we’ve said before, simply put, homeownership is a form of ‘forced savings.’Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.

That is why Gallup reported that Americans picked real estate as the best long-term investment for the fifth year in a row. According to this year’s results, 34% of Americans chose real estate. Stocks followed at 26%, and then gold, savings accounts/CDs, or bonds.

Bottom Line

If you want to find out how you can use your monthly housing cost to increase your family’s wealth, let’s get together to guide you through the process.

3 Tips for Making Your Dream of Buying A Home Come True [INFOGRAPHIC]

3 Tips for Making Your Dream of Buying A Home Come True [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking too much about it.
  • Living within a budget right now will help you save money for down payments while also paying down other debts that might be holding you back.
  • What are you willing to cut back on to make your dreams of homeownership a reality?

3 Reasons Why We Are Not Heading Toward Another Housing Crash

3 Reasons Why We Are Not Heading Toward Another Housing Crash | MyKCM

With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.

Here are three key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates

HOME PRICES

A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.

Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.

MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Last month, their January Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

FORECLOSURE INVENTORY

Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealedjust last week that:

“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”

Bottom Line

After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.

Why A Normal Market is Just What We Need

Why A Normal Market is Just What We Need | MyKCM

The housing market has been hot for a while now. Homes have been flying off the shelves as fast as they have been listed. Buyers have been competing in bidding wars just to find a home to buy, let alone find their dream home.

This ‘seller’s market’ has driven home prices to new heights. Home price appreciation averaged over 6% across the country.

However, home price growth has recently started to cool down. The latest report from CoreLogic shows that home prices have only risen by 4.7% over the last 12 months.

Many buyers and sellers planning to enter the housing market this year have started to wonder if we are headed towards another housing crash. Ralph McLaughlin, Deputy Chief Economist at CoreLogic, recently stated in an interview,

“There’s no reason to panic right now, even if we may be headed for a recession. We’re seeing a cooling of the housing market, but nothing that indicates a crash.

The real elephant in the room here is housing supply.”

The simple answer is we are returning to a ‘normal’ market. The inventory of homes for sale more closely matches the demand in the market. The added supply means fewer buyers are outbidding each other. Therefore, prices are experiencing less upward pressure. McLaughlin went on to explain,

“If there are a lot of homes on the market and suddenly no one wants to buy them, you’ll get into a downward spiral of price competition. Right now, however, we’re in the opposite situation, there isn’t an over-abundance of homes on the market.”

As more renters looking for their piece of the American Dream enter the housing market, demand for housing will continue to grow. The Joint Center for Housing Studies at Harvard University estimates over 30 million new households will enter the market from now through 2040.

“There’s the natural life cycle of young people getting older and starting to do adult life things which include … buying a house and that’s a lot of potential inertia that could last indefinitely.”

Bottom Line

Home prices will start to appreciate by historical norms as we continue to head towards a more ‘normal’ market, rather than the over 6% seen over the course of the last couple of years. This is great news! Homeowners looking to sell their home will have buyers, as more buyers will be able to afford them!

2019 Will Be a Great Year for Buyers AND Sellers

2019 Will Be a Great Year for Buyers AND Sellers | MyKCM

Many homeowners believe that rising interest rates and home prices have scared away buyers and therefore have not listed their houses for sale. However, the truth is that buyers who were unable to find a home last year are out in force, and there are even more coming!

NerdWallet’s 2018 Home Buyer Report revealed that:

“Approximately one-third (32%) of Americans plan to purchase a home in the next five years. Millennials are most likely to have such a purchase in their five-year plan (49%), versus 35% of Generation X and 17% of baby boomers.”

As we can see, buyers are optimistic! According to the report, here are the top reasons Americans plan to buy:

2019 Will Be a Great Year for Buyers AND Sellers | MyKCM

The most common reason Americans prioritize buying is that they believe it’s a good investment!

If you’re a homeowner looking to sell, 2019 is the perfect year to put your house on the market. But why?

  1. Buyers want to buy
  2. No competition!

At least 3 of the renowned organizations that report on real estate market trends predict that homeowners are going to wait until 2020 to list their homes, leading to a nice increase in sales (as shown in the graph below).

2019 Will Be a Great Year for Buyers AND Sellers | MyKCM

Don’t wait for a competitive market; be ahead of the curve and sell your house at the best possible price!

Bottom Line

There are plenty of buyers entering the market! Whether you’re a first-time homebuyer or a current homeowner looking to move-up to your next home, let’s get together to discuss your real estate needs!