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      5 Essentials When Buying Real Estate

      Problems and misunderstandings in the buying process lead to unhappy homeowners. A common one is buying close to their pre-approval and then they are stretched financially. It may seem like a great purchase at the time but will lead to frustration over time.   How do we limit these mistakes?

      Homebuyers remember these five strategies when making your next real estate purchase.

      #1 Stay Consistent: Real estate values tend to rise over time. If you give up on looking at properties, you will never find the home you are looking for. The key is to learn why you are losing out on your offers.

      #2 Be Creative: Personalize your offer. A video or letter will be unique and may draw attention to your offer. It will stand out from the others. Make the video short and entertaining or the letter short and sweet. Your agent can use this to introduce your offer to purchase.

      #3 Location: As months pass when you continue to look, the market may change. You may need to look in nearby towns and explore other options.

      #4: Rely on Documents Not Verbal: Written documentation is very important in real estate. If the seller says they will leave a refrigerator, make sure it is documented. Read through your offer letters and purchase and sale. Read through the clauses and make sure you understand what they are saying. Speak with your lawyer if unsure about a clause or phrase.

      #5 After Offer Accepted. The Real Work Begins: After accepted, the house is still the sellers until close. This can be between 30-60 days on average. The seller is responsible for insuring the property and keeping it in condition when the offer was accepted. You can schedule an inspection and renegotiate will the seller. You will review the purchase and sale. You will need a financing commitment from your lender.

      Hopefully, these 5 essential tips are helpful! Until you get the keys, the process is not officially over. If you found this article helpful, please share with a friend!

      Blog courtesy of Steve Bracero

       

      Your Opportunity to Achieve the American Dream Keeps Getting Better!

      Your Opportunity to Achieve the American Dream Keeps Getting Better! | MyKCM

      Forbes.com recently released the latest results of their American Dream Index, in which they measure “the prosperity of the middle class, and…examine which states best support the American Dream.”

      The monthly index measures several different economic factors, including goods-producing employment, personal and commercial bankruptcies, building permits, startup activity, unemployment insurance claims, labor force participation, and layoffs.

      The national index score was rounded out to 100.0 in January as a baseline for comparison and it rose the fourth straight month in a row to 101.8.

      Alaska, coming in at 89.4, represented the lowest score on the index due in part to the recent collapse in oil prices. In contrast, Wyoming came in with the highest score at 115.1. The full results can be seen in the map below.

      Your Opportunity to Achieve the American Dream Keeps Getting Better! | MyKCM

      Forbes Senior Editor Kurt Badenhausen explained why many states saw a boost in the index last month:

      “The American Dream Index rose for the fourth straight month to 101.8 propelled by gains in goods-producing jobs and building permits, as well as declines in unemployment claims and mass layoffs.

      Goods-producing jobs (manufacturing, mining, construction and agriculture) were up for the ninth straight month in May…Building permits rose for the fourth straight month compared to the prior year.”

      Bottom Line

      The American Dream, for many, includes being able to own a home of one’s own. With the economy improving in many areas of the country, that dream can finally become a reality.

      75% of Homeowners Think Now is a Good Time to Sell!

      75% of Homeowners Think Now is a Good Time to Sell! | MyKCM

      The National Association of Realtors (NAR) recently released the findings of their Q2 Homeownership Opportunities and Market Experience (HOME) Survey. The report covers core topics like, “if now is a good time to buy or sell a home, the perception of home price changes, perceived ability to qualify for a mortgage, and [an] outlook on the U.S. economy.”

      The survey revealed that 75% of homeowners think now is a good time to sell, compared to 70% last quarter. This is a considerable increase from more than a year ago when 66% agreed.

      Even though homeowners believe that now is a good time to sell, many have not taken the step to list their homes, as inventory shortages still exist across the country. Lawrence Yun, NAR’s Chief Economist, had this to say:

      "There are just not enough homeowners deciding to sell because they’re either content where they are, holding off until they build more equity, or hesitant seeing as it will be difficult to find an affordable home to buy...

      As a result, inventory conditions have worsened and are restricting sales from breaking out while contributing to price appreciation that remains far above income growth.”

      Bottom Line

      If you are wondering if now is a good time to sell your house, let’s get together to discuss the opportunities available in our market.

      Buyer's Market Helps Premium Home Sales Soar

      Buyer's Market Helps Premium Home Sales Soar | MyKCM

      We previously reported how a shortage of inventory in the starter and trade-up home markets is driving prices up and causing bidding wars, creating a true seller’s market. At the same time, in the premium home market, an over-abundance of inventory has started to see prices come down and put buyers in the driver’s seat, creating the beginning of a buyer’s market.

      Last week, the National Association of Realtors released their Existing Home Sales Report which shed some additional light on the impact of inventory levels on sales in each price range.

      The chart below shows the year-over-year difference in sales at each price range.

      Buyer's Market Helps Premium Home Sales Soar | MyKCM

      The under $100K range has shown declines in recent years due to the shortage of distressed homes available for sale (just 5% of sales this past month, compared to 35% in January 2012). Sales in the next two price ranges are no doubt being hindered by low inventory as buyers compete for the same home.

      NAR’s Chief Economist, Lawrence Yun, explained:

      "Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace and the prevalence of multiple offers in some markets are pushing prices higher."

      The biggest surprise? This is the first time in years where the $1M and up price range had the highest jump in sales when compared to last year and to all other price ranges (29.1%)! The two price ranges right underneath the $1M range were a close second and third. As the price went up, so did the sales!

      With additional inventory available in the higher price ranges, and the economy improving, many luxury buyers are finding it easier to find their dream homes. Yun commented,

      “The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level.”

      Bottom Line

      If you are one of the many homeowners who is looking to sell your starter or trade up home and move up to a luxury home, now is the time!

      2 Myths Holding Back Home Buyers

      2 Myths Holding Back Home Buyers | MyKCM

      In Realtor.com’s recent article, “Home Buyers’ Top Mortgage Fears: Which One Scares You?” they mention that “46% of potential home buyers fear they won’t qualify for a mortgage to the point that they don’t even try.”

      Myth #1: “I Need a 20% Down Payment”

      Buyers overestimate the down payment funds needed to qualify for a home loan. According to the First Quarter 2017 Homeownership Program Index (HPI) from Down Payment Resource, saving for a down payment was the barrier that kept 70% of renters from buying.

      Rob Chrane, CEO of Down Payment Resource had this to say,

      There are many mortgage-ready renters today, but they don’t know it. Often, homebuyers remain sidelined for years due to the down payment.

      Many believe that they need at least 20% down to buy their dream home, but programs are available that allow buyers put down as little as 3%. Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

      Myth #2: “I Need a 780 FICO® Score or Higher to Buy”

      The survey revealed that 59% of Americans either don’t know (54%) or are misinformed (5%) about what FICO® score is necessary to qualify.

      Many Americans believe a ‘good’ credit score is 780 or higher.

      To help debunk this myth, let’s take a look at Ellie Mae’s latest Origination Insight Report, which focuses on recently closed (approved) loans.

      2 Myths Holding Back Home Buyers | MyKCM

      As you can see in the chart above, 53.2% of approved mortgages had a credit score of 600-749.

      Bottom Line

      Whether buying your first home or moving up to your dream home, knowing your options will make the mortgage process easier. Your dream home may already be within your reach.

      The Importance of Home Equity in Retirement Planning

      The Importance of Home Equity in Retirement Planning | MyKCM

      We often discuss the difference in family wealth between homeowner households and renter households. Much of that difference is the result of the equity buildup that homeowners experience over the time that they own their home. In a report recently released by the nonpartisan Employee Benefit Research Institute (EBRI), they reveal how valuable equity can be in retirement planning.

      Craig Copeland, Senior Research Associate at EBRI, recently authored a report, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth, in which he reveals:

      “Individual account retirement plan assets, plus home equity, represent almost all of what families have to use for retirement expenses outside of Social Security and traditional pensions. Those families without individual account assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses.”

      The report echoed the findings of a working paper, Home Equity Patterns Among Older American Households, authored by Barbara Butrica and Stipica Mudrazija of Urban Institute. Fannie Mae highlighted these findings for their blog The Home Story this past winter, quoting Butrica and Mudrazija:

       “For most adults near traditional retirement age, a home is their most valuable asset — dwarfing retirement accounts, other financial assets, and other nonfinancial assets. Although relatively few retirees tap into their home equity, having it provides financial security… In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources — Social Security, pensions, and savings — is incomplete because it ignores the home.”

      USAToday interviewed two area experts to comment on the EBRI report. Randy Bruns, a private wealth adviser with HighPoint Planning Partners, agreed with the findings:

      “Social Security and home equity are major pieces of the retirement puzzle.”

      Wade Pfau, Professor of Retirement Income at The American College of Financial Services and author of Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement, said having the equity without a plan to use it won’t help:

      “Home equity is a very important asset for American retirees, and so it is important to think about how to make best use of home equity in retirement planning.”

      Do You Know How Much Equity You Have in Your Home?

      Do You Know How Much Equity You Have in Your Home? | MyKCM

      CoreLogic’s latest Equity Report revealed that 91,000 properties regained equity in the first quarter of 2017. This is great news for the country, as 48.2 million of all mortgaged properties are now in a positive equity situation.

      Price Appreciation = Good News for Homeowners

      Frank Nothaft, CoreLogic’s Chief Economist, explains:

      “One million borrowers achieved positive equity over the last year, which means risk continues to steadily decline as a result of increasing home prices.”

      Frank Martell, President and CEO of CoreLogic, believes this is a great sign for the market in 2017 as well, as he had this to say:

      “Homeowner equity increased by $766 billion over the last year, the largest increase since Q2 2014. The rising cushion of home equity is one of the main drivers of improved mortgage performance. Since home equity is the largest source of homeowner wealth, the increase in home equity also supports consumer balance sheets, spending and the broader economy.”

      This is great news for homeowners! But, do they realize that their equity position has changed?

      According to the Fannie Mae’s Home Purchase Sentiment Index (HPSI), more homeowners are beginning to realize that they may have more equity than they first thought.

      This is only the second time in the survey’s history that the net share of those saying it’s a good time to sell surpassed the net share of those saying it’s a good time to buy.

      78.8% of homeowners have significant equity (more than 20%) in their homes today!

      This means that many Americans with a mortgage have an opportunity to take advantage of today’s seller’s market. With a sizeable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing).

      Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae spoke out on this issue:

      “High home prices have led many consumers to give us the first clear indication we’ve seen in the National Housing Survey’s seven-year history that they think it’s now a seller’s market. However, we continue to see a lack of housing supply as many potential sellers are unwilling or unable to put their homes on the market…” 

      Bottom Line

      If you are one of the many Americans who is unsure of how much equity you have built in your home, don’t let that be the reason you fail to move on to your dream home in 2017! Let’s get together to evaluate your situation!

      Buying Is Now 33.1% Cheaper Than Renting in the US

      Buying Is Now 33.1% Cheaper Than Renting in the US | MyKCM

      The results of the latest Rent VS Buy Report from Trulia show that Homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

      The updated numbers actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

      Other interesting findings in the report include:

      • Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
      • With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
      • Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

      Bottom Line

      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.

       

      Are Home Prices Approaching Bubble Territory?

      Are Home Prices Approaching Bubble Territory? | MyKCM

      As home values continue to rise, some are questioning whether we are approaching another housing bubble. Zillow just reported that:

      “National home values have surpassed the peak hit during the housing bubble and are at their highest value in more than a decade.”

      Though that statement is correct, we must realize that just catching prices of a decade ago does not mean we are at bubble numbers. Here is a graph of median prices as reported by the National Association of Realtors (NAR).

      Are Home Prices Approaching Bubble Territory? | MyKCM

      We can see that prices rose during the early 2000s, fell during the crash and have risen since 2013.

      However, let’s assume there was no housing bubble and crash and that home prices appreciated at normal historic levels (3.6% annually) over the last ten years.

      Here is a graph comparing actual price appreciation (tan bars) with what prices would have been with normal appreciation (blue bars).

      Are Home Prices Approaching Bubble Territory? | MyKCM

      Bottom Line

      As we can see, had there not been a boom and bust, home values would essentially be where they are right now.

      The TRUTH Behind the RENT vs. BUY Debate

      The TRUTH Behind the RENT vs. BUY Debate | MyKCM

      In a blog post published last Friday, CNBC’s Diana Olnick reported on the latest results of the FAU Buy vs. Rent Index. The index examines the entire US housing market and then isolates 23 major markets for comparison. The researchers at FAU use a “‘horse race’ comparison between an individual that is buying a home and an individual that rents a similar-quality home and reinvests all monies otherwise invested in homeownership.”

      Having read both the index and the blog post, we would like to clear up any confusion that may exist. There are three major points that we would like to counter:

      1. The Title

      The CNBC blog post was titled, “Don’t put your money in a house, says a new report.” The title of the press release about the report on FAU’s website was “FAU Buy vs. Rent Index Shows Rising Prices and Mortgage Rates Moving Housing Markets in the Direction of Renting.”

      Now, we all know headlines can attract readers and the stronger the headline the more readership you can attract, but after dissecting the report, this headline may have gone too far. The FAU report notes that rising home prices and the threat of increasing mortgage rates could make the decision of whether to rent or to buy a harder one in three metros, but does not say not to buy a home.

      2. Mortgage Interest Rates are Rising

      According to Freddie Mac, mortgage interest rates reached their lowest mark of 2017 last week at 3.89%. Interest rates have hovered around 4% for the majority of 2017, giving many buyers relief from rising home prices and helping with affordability.

      While experts predict that rates will increase by the end of 2017, the latest projections have softened, with Freddie Mac predicting that rates will rise to 4.3% in Q4.

      3. “Renting may be a better option than buying, according to the report.”

      Of the 23 metros that the study reports on, 11 of them are firmly in buy territory, including New York, Boston, Chicago, Cleveland, and more. This means that in nearly half of all the major cities in the US, it makes more financial sense to buy a home than to continue renting one.

      In 9 of the remaining metros, the decision as to whether to rent or buy is closer to a toss-up right now. This means that all things being equal, the cost to rent or buy is nearly the same. That leaves the decision up to the individual or family as to whether they want to renew their lease or buy a home of their own.

      The 3 remaining metros Dallas, Denver and Houston, have experienced high levels of price appreciation and have been reported to be in rent territory for well over a year now, so that’s not news…

      Beer & Cookies

      One of the three authors of the study, Dr. Ken Johnson has long reported on homeownership and the decision between renting and buying a home. The methodology behind the report goes on to explain that even in a market where a renter would be able to spend less on housing, they would have to be disciplined enough to reinvest their remaining income in stocks/bonds/other investments for renting a home to be a more attractive alternative to buying.

      Johnson himself has said:

      “However, in perhaps a more realistic setting where renters can spend on consumption (beer, cookies, education, healthcare, etc.), ownership is the clear winner in wealth accumulation. Said another way, homeownership is a self-imposed savings plan on the part of those that choose to own.” 

      Bottom Line

      In the end, you and your family are the only ones who can decide if homeownership is the right path to go down. Real estate is local and every market is different. Let’s get together to discuss what’s really going on in your area and how we can help you make the best, most informed decision for you and your family.

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