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  • A Homeowner’s Net Worth is 45x Greater Than a Renter’s! | Simplifying The Market

    A Homeowner’s Net Worth is 45x Greater Than a Renter’s!

    Every three years, the Federal Reserve conducts a Survey of Consumer Finances in which they collect data across all economic and social groups. The latest survey, which includes data from 2010-2013, reports that a homeowner’s net worth is 36 times greater than that of a renter ($194,500 vs. $5,400).

    In a Forbes article, the National Association of Realtors’ (NAR) Chief Economist Lawrence Yun predicts that in 2016 the net worth gap will widen even further to 45 times greater.

    The graph below demonstrates the results of the last two Federal Reserve studies and Yun’s prediction:

    A Homeowner’s Net Worth is 45x Greater Than a Renter’s! | Simplifying The Market

     

    Put Your Housing Cost to Work for You

    Simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth. Every time you pay your rent, you are contributing to your landlord’s net worth.

    The latest National Housing Pulse Survey from NAR reveals that 85% of consumers believe that purchasing a home is a good financial decision. Yun comments:

    “Though there will always be discussion about whether to buy or rent, or whether the stock market offers a bigger return than real estate, the reality is that homeowners steadily build wealth. The simplest math shouldn’t be overlooked.”

    Bottom Line

    If you are interested in finding out if you could put your housing cost to work for you by purchasing a home, let’s get together to discuss your next steps.

  • 4 Reasons to Buy This Summer! | Simplifying The Market

    4 Reasons to Buy This Summer!

    Summer is here! The temperature isn't the only thing heating up right now, so too is the housing market in many areas of the country! Here are four great reasons to consider buying a home today instead of waiting.

    1. Prices Will Continue to Rise

    CoreLogic’s latest Home Price Index reports that home prices have appreciated by 5.9% over the last 12 months. The same report predicts that prices will continue to increase at a rate of 5.3% over the next year. The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report projects home values to appreciate by more than 3.2% a year for the next 5 years.

    The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

    2. Mortgage Interest Rates Are Projected to Increase 

    Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have remained around 4%. Most experts predict that they will begin to rise over the next 12 months. The Mortgage Bankers AssociationFreddie Mac & the National Association of Realtors are in unison, projecting that rates will be up almost a full percentage point by this time next year.

    An increase in rates will impact YOUR monthly mortgage payment. A year from now, your housing expense will increase if a mortgage is necessary to buy your next home. 

    3. Either Way You are Paying a Mortgage

    As a paper from the Joint Center for Housing Studies at Harvard Universityexplains:

    “Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

    4. It’s Time to Move On with Your Life

    The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

    But what if they weren’t? Would you wait?

    Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe now is the time to buy.

    If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

  • 3 Reasons to Buy Luxury Property THIS Year!! | Simplifying The Market

    3 Reasons to Buy Luxury Property THIS Year!!

    The housing market is hot, with prices rising as demand far outpaces supply in almost every region. However, when it comes to luxury real estate, things are quite different. In the upper-end market, inventory is plentiful in most locations.

    For that reason, prices haven’t skyrocketed as they have in the lower and mid-tier markets. This, coupled with sensational mortgage rates, means that this may be the perfect time to purchase the luxury property you have always desired.

    Let’s break it down into the three major reasons to act now:

    1. There are more homes from which to choose

    According to a recent Wall Street Journal article, inventory in the upper end is increasing, while it is decreasing at the lower and mid-tier price ranges. Here is a graph showing the average increase/decrease in inventory for the first four months of this year as compared to last year:

    3 Reasons to Buy Luxury Property THIS Year!! | Simplifying The Market

    2. Prices are becoming more reasonable

    In a separate article, the Wall Street Journal also talked about prices in the luxury market. They explained that downward price adjustments have been more common in the luxury market than in markets with lower prices. They went on to say:

    “The growing number of price cuts suggests luxury-home sellers are becoming more realistic about property values as sales have slowed, said several real-estate veterans.”

    Not only will you have more to choose from, but you may also be able to get the property at a reduced price.

    3. Mortgage rates are at historic lows

    In the past, one of the drawbacks to purchasing a luxury property was the larger mortgage rate on “jumbo” loans which are often required on high end properties.

    However, HSH.com just revealed that jumbo rates just set new record lows:

    “While conforming fixed-rate mortgages eased a little this week, 30-year fixed-rate jumbos declined enough to break into new record low territory (3.66%), besting the previous low set in April by two basis points.”

    Bottom Line

    More choices, better prices and historically low mortgage rates may make this the perfect time for you to own one of those luxury properties you and your family have always fantasized about.

  • Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly | Simplifying The Market

    Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly

    In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. One major challenge in such a market is the bank appraisal.

    If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that closed recently) to defend the price when performing the appraisal for the bank.

    Every month, Quicken Loans measures the disparity between what a homeowner believes their house is worth as compared to an appraiser’s evaluation in their Home Price Perception Index (HPPI). Here is a chart showing that difference for each of the last 12 months.

    Gap Between Homeowner’s & Appraiser’s Opinions Narrows Slightly | Simplifying The Market

    The gap between the homeowner vs. appraiser’s opinion has started to head in the right direction (closer to even), as June saw a slight decrease from May’s -1.95% to -1.89% nationally.

    Homeowners in the western part of the country, however, have been pleasantly surprised as their homes have appraised higher than they expected. Denver received its highest HPPI last month as homes came in an average of 3.28% higher than the homeowner believed it would. Nine of the twelve metro areas that had a positive HPPI last month were located in the west.

    Quicken Loans’ Chief Economist, Bob Walters explains:

    “The hot housing markets along the West Coast are growing quicker than owners realize, giving way to higher than expected prices for buyers and more home equity for existing owners.  

    On the other hand, the housing markets are more balanced in the East and Midwest, leading owners to be slightly over-enthusiastic about their home’s appreciation.”

    Bottom Line 

    Every house on the market has to be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, let’s get together to talk about what’s happening in our area.

  • 74% of Households in the US Now Have Significant Equity! | Simplifying The Market

    74% of Households in the US Now Have Significant Equity!

    CoreLogic’s latest Equity Report revealed that 92% of all mortgaged properties are now in a positive equity situation, while 74% now actually have significant equity (defined as more than 20%)! The report also revealed that 268,000 households regained equity in the first quarter of 2016 and are no longer under water.

     

    Price Appreciation = Good News for Homeowners

    Frank Nothaft, CoreLogic’s Chief Economist, explains:

    “In just the last four years, equity for homeowners with a mortgage has nearly doubled to $6.9 trillion. The rapid increase in home equity reflects the improvement in home prices, dwindling distressed borrowers and increased principal repayment.  

    These are all positive factors that will provide support to both household balance sheets and the overall economy.” 

    Anand Nallathambi, President & CEO of CoreLogic, believes this is a great sign for the market in 2016 as well, as he had this to say:

    “More than 1 million homeowners have escaped the negative equity trap over the past year. We expect this positive trend to continue over the balance of 2016 and into next year as home prices continue to rise.  

    Nationally, the CoreLogic Home Price Index was up 5.5% year over year through the first quarter. If home values rise another 5% uniformly across the U.S., the number of underwater borrowers will fall by another one million during the next year.” 

    Below is a map illustrating the percentage of households in each state with significant equity: 

    74% of Households in the US Now Have Significant Equity! | Simplifying The Market

    Many homeowners with more than 20% equity in their home would be able to use that equity as a down payment on either a larger home or even a retirement home.

    Bottom Line

    If you are one of the many Americans who are unsure of how much equity you have in your home, don’t let that be the reason you fail to move on to your dream home this year!

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