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      How the Housing Market Benefits with Uncertainty in the World

      How the Housing Market Benefits with Uncertainty in the World | MyKCM

      It’s hard to listen to today’s news without hearing about the uncertainty surrounding global markets, the spread of the coronavirus, and tensions in the Middle East, just to name a few. These concerns have caused some to question their investment plans going forward. As an example, in Vanguard’s Global Outlook for 2020, the fund explains,

      “Slowing global growth and elevated uncertainty create a fragile backdrop for markets in 2020 and beyond.”

      Is there a silver lining to this cloud of doubt?

      Some worry this could cause concern for the U.S. housing market. The uncertainty, however, may actually mean good news for real estate.

      Mark Fleming, Chief Economist at First American, discussed the situation in a recent report,

      “Global events and uncertainty…impact the U.S. economy, and more specifically, the U.S. housing market…U.S. bonds, backed by the full faith and credit of the U.S. government, are widely considered the safest investments in the world. When global investors sense increased uncertainty, there is a ‘flight to safety’ in U.S. Treasury bonds, which causes their price to go up, and their yield to go down.”

      Last week, in a HousingWire article, Kathleen Howley reaffirmed Fleming’s point,

      “The death toll from the coronavirus already has passed Severe Acute Respiratory Syndrome, or SARS, that bruised the world’s economy in 2003…That’s making investors around the world anxious, and when they get anxious, they tend to sell off stocks and seek the safe haven of U.S. bonds. An increase in competition for bonds means investors, including the people who buy mortgage-backed bonds, have to take lower yields. That translates into lower mortgage rates.”

      The yield from treasury bonds is the rate investors receive when they purchase the bond. Historically, when the treasury rate moves up or down, the 30-year mortgage rate follows. Here’s a powerful graph showing the relationship between the two over the last 48 years:

      Popular Perspective Delivers Gift to U.S. Housing Market | MyKCM

      How might concerns about global challenges impact the housing market in 2020? Fleming explains,

      “Even a small change in the 10-year Treasury due to increased uncertainty, let’s say a slight drop to 1.6 percent, would imply a 30-year, fixed mortgage rate as low as 3.3 percent. Assuming no change in household income, that would mean a house-buying power gain of $21,000, a five percent increase.”

      Bottom Line

      For a multitude of reasons, 2020 could be a challenging year. It seems, however, real estate will do just fine. As Fleming concluded in his report:

      “Amid uncertainty, the house-buying power of U.S. consumers can benefit significantly.”

      2020 Home Buying Checklist

      2020 Homebuying Checklist | MyKCM

      Some Highlights:

      • If you’re thinking of buying a home, plan ahead and stay on the right track, starting with pre-approval.
      • Being proactive about the homebuying process will help set you up for success in each step.
      • Make sure to work with a trusted real estate professional along the way, to help guide you through the homebuying steps specific to your area.

       

      2020 Luxury Market Forecast

      2020 Luxury Market Forecast | MyKCM

      By the end of last year, many homeowners found themselves with more equity than they realized, and at the same time, their wages were increasing. When those two factors unite, it can spark homeowners to think about making a move to a larger or more expensive home in the luxury space. That said, now is a perfect opportunity to take a look at the forecast for the 2020 luxury market.

      Three Things to Think About in the 2020 Luxury Housing Market

      1. Prices

      The U.S. economy is strong today, with buying opportunities throughout the luxury end of the market. Thomas Veraguth, Strategist at UBS Global Wealth Management, says in Barrons.com,

      “There’s a good link between luxury real estate prices and [economic] growth.”

      Available inventory is a key element that can impact home prices. In the upper range, the inventory is greater in comparison to the entry-level market, making moving up to a luxury home a growing reality for many buyers right now.

      2. Activity in the Market

      With more buying opportunities at the higher end, we should start to see an increase in activity. The same article states,

      “Affluent homebuyers will start to come out of the woodwork as they find rising luxury rents less appealing and sellers get even more negotiable on price.”

      Buyers looking in the luxury market are taking the opportunity to negotiate on price in a segment where there are more choices, too. According to the Luxury Market Report, homes sold for an average of 96.94% of the list price in December.

      Buyers are also getting more for their money with greater purchasing power due to the current low-interest rates.

      3. Buyers Are Coming Back

      Keep in mind, buyers are often sellers too, especially those looking to move up. Homeowners with an entry-level home can take advantage of the inventory shortage at the lower end of the market, thus driving higher sales prices for their current homes. Combined with growing equity in the homes they’re listing, it’s a great time for those who are ready to make a luxury move.

      The extra equity and greater purchasing power are bringing many buyers back to the market. The same article mentioned that,

      “We’ve already seen buyers who’ve been on the sidelines for two years tread back into the market.”

      Bottom Line

      If you’re considering entering the luxury market, 2020 is shaping up to be a great year for those who are ready to make that move. Let’s get together to set your real estate plan for the year.

       

      Compass Contemplations for Thursday

      Good morning,

      DID YOU KNOW?  Mortgage application volume decreased 9.2% from the previous week, according to the Mortgage Bankers Association’s seasonally adjusted index. The week’s results also include an adjustment for the Thanksgiving holiday. Refinance weakness caused the overall drop. Those applications fell 16% for the week but were 61% higher than the same week a year ago. (CNBC)

       

      DID YOU KNOW?  In 2000, just before the Bush tax cuts and a recession, U.S. governments collected 28.3% of GDP in taxes. Today that figure has dropped to 24.3% of GDP in 2018, the 4th lowest in the OECD and down from 26.8% a year earlier and 25.9% in 2016. (WSJ)


      DID YOU KNOW?  Realtor.com predicts sales of existing homes will fall 1.8% compared with 2019. Home prices will flatten nationally, increasing just 0.8% annually, but in 25% of the 100 largest metropolitan markets, prices will fall. These include Chicago, Dallas, Las Vegas, Miami, St. Louis, Detroit, and San Francisco. Millennials will dominate the housing market, accounting for 50% of all mortgages by spring, according to the forecast. Just short of 5 million millennials will turn 30, which is when many people buy their first home, and the oldest will turn 39.

      DID YOU KNOW? According to its 2019 U.S. Vacation Home Counties Report, between 2013 to 2018, the median sales price in vacation home counties increased at a slightly higher pace of 36% compared to the pace of increase of all existing and new homes sold, at 31%. (NAR)

      DID YOU KNOW? National home prices increased 3.5% year over year in October 2019 and are forecast to increase by 5.4% from October 2019 to October 2020. The October 2019 HPI gain was down from the October 2018 gain of 5.2% and was up a bit from the September 2019 gain of 3.3%.  Home prices have been increasing year over year in a narrow range of 3.2% to 3.5% over the past six months, indicating that the rate of home price growth is leveling off. (CORE LOGIC)

      DID YOU KNOW?  As a percentage of disposable income, we have the lowest debt service to income obligations in 40 years in the USA. (JP MORGAN)
       

      The True Cost of Not Owning Your Home

      The True Cost of Not Owning Your Home | MyKCM

      There are great advantages to owning a home, yet many people continue to rent. The financial benefits are just some of the reasons why homeownership has been a part of the long-standing American dream.

      Realtor.com reported that:

      “Buying remains the more attractive option in the long term – that remains the American dream, and it’s true in many markets where renting has become really the shortsighted option…as people get more savings in their pockets, buying becomes the better option.”

      Why is owning a home financially better than renting?

      Here are the top 5 financial benefits of homeownership:

      1. Homeownership is a form of forced savings.
      2. Homeownership provides tax savings.
      3. Homeownership allows you to lock in your monthly housing cost.
      4. Buying a home is less expensive than renting.
      5. No other investment lets you live inside of it.

      Studies have also shown that a homeowner’s net worth is 44x greater than that of a renter.

      A family that purchased a median-priced home at the start of 2019 would build more than
      $37,750 in family wealth over the next five years with projected price appreciation alone.

      Some argue that renting eliminates the cost of taxes and home repairs, but every potential renter must realize that all the expenses the landlord incurs are already baked into the rent payment – along with a profit margin!

      Bottom Line

      Owning a home has many social and financial benefits that cannot be achieved by renting. Let’s connect to determine if buying a home is your best move.

       

       

      The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

      Expert Advice: 3 Benefits to Owning a Home

      Expert Advice: 3 Benefits to Owning a Home | MyKCM

      Success is something often worth repeating, and Brent Sutherland, a Certified Financial Planner, and Real Estate Investor has certainly made his way in a momentum-driving direction. Here are 3 tips he shares from a recent piece in Business Insider on the benefits of owning real estate:

      1. Real estate diversifies your income

      “While it is certainly important to be properly diversified with your investments, it is even more important to be diversified with your income. This is because the largest financial risk for most of you is the loss of your primary source of income, which is typically in the form of a day job.”

      The article highlights how having multiple sources of income, such as those derived from real estate investments, can eventually lead to relying less and less on a day job. Sound dreamy? It can be. When done well, real estate investments may eventually open up your time and the financial freedom to explore other things, like travel and other aspirations you may have for the future, particularly in the golden years of retirement.

      2. Real estate produces near-immediate results

      “You can achieve and feel the results almost immediately. Property improvements are visible and tangible. You can cash, spend, and invest rent payments. Today! Not 30 years in the future.”

      Currently, home prices are appreciating in all price ranges, and just last week CoreLogic announced their 12-month home value projection at 5.6%, an increase from 4.5% noted earlier this summer. With that in mind, real estate today is definitely driving immediate results!

      3. Passive income can help you become financially independent sooner

      “If you need $40,000 a year to live, you could alternatively invest in assets that generate an 8% cash-on-cash return. This is a very reasonable assumption. And it means you would only need to save a total of $500,000 (instead of $1 million). Yet, your investments would still meet your annual household living needs.

      While returns, taxes, and inflation can, of course, affect your timeline, cash-flowing real-estate is a clear asset.”

      Homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you’re contributing to your net worth by increasing the equity in your home, bringing you one step closer to true financial independence.

      Bottom Line

      If you want to increase your savings and overall net worth, real estate is a great way to go. To learn how you can make it happen, let’s get together to discuss the process.

      Buyer Demand Growing in Every Region

      Buyer Demand Growing in Every Region | MyKCM

      Buyers are out in full force this fall, increasing the demand for homebuying in all four regions of the country.

      According to the latest ShowingTime Showing Index,

      “Home showing activity was up again nationwide with a 4.6 percent rise in traffic, as the traditionally slow fall season began with a marked boost in buyer interest.”

      Buyers clearly have the right idea, as mortgage rates have dropped over a full percentage point since the fall of 2018. They’ve hovered in a historically low range since this summer, making the overall cost of homeownership significantly more attractive and affordable.

      Here’s the breakdown of how ShowingTime reports current buyer traffic patterns across the country:

      “The West Region, which until August had experienced 18 consecutive months of flagging home buyer traffic, lead the four regions in year-over-year improvement with an 8.9 percent increase in buyer activity.

      The South followed with a 6.4 percent increase, the largest such improvement in the region since April 2018, with the Northeast Region’s 5.6 percent increase the next largest among the four regions.

      The Midwest’s more modest 0.8 percent year-over-year growth rounded out the nation’s promising month.”

      Buyer Demand Growing in Every Region | MyKCMWith ShowingTime reporting “nationwide growth for the second consecutive month, a first since December 2017 – January 2018”, it’s one more reason why selling your house this winter is the way to go. List while buyers are on the market before the competition with other sellers pops up in your neighborhood.

      Bottom Line

      If you’re thinking of waiting until spring to sell, think again! Let’s get together to discuss listing your house now while buyer traffic is actively surging throughout the country.

      Millennials: Here's Why the Process is Well Worth It.

      Millennials: Heres Why the Process is Well Worth It. | MyKCM

      Millennials have waited longer than any other generation to become homeowners, but the wait for this cohort is just about over.

      According to National Mortgage News,

       “Millennials, those young adults now aged 23 to 38, are now entering their peak household formation and homebuying years.

      If you’re a Millennial, you’re already well aware that you’re among a generation of those who favor fast-paced, real-time answers – and results. When you’re ready to make a decision, it’s go-time, and you probably want the latest technology at your fingertips to make it happen.

      National Mortgage News agrees, stating,

      “Millennials are different than previous generations—not only in their delayed homebuying but also in how they approach interactions with financial institutions, including mortgage lenders. Taking a picture of a check on their phone and depositing it without visiting a branch is not novel, it’s the way Millennials learned to do banking. They expect real-time access to account and transaction data and are frustrated when it’s not available.”

      Here’s the catch – the overall speed of the homebuying process can take some time, and it might feel like it is slowing you down. When you’re ready to buy, you can make an offer and go under contract quickly, but the rest of the process might take a little longer. The same article explains why:

      “When Millennials apply for a loan, the mortgage lender must qualify the borrower and determine who owns the property, how much the property is worth, and the property’s risk profile. Traditionally, this has been one of the most time-consuming and fragmented parts of the mortgage process…There are many moving pieces, each data point being sourced from a different provider, which can ultimately lead to a lengthy or delayed process.

       What has historically been accepted as the process norm does not align with the expectations of the most prominent generation in the home buying market today. Millennials have come to expect rapid, digital workflows in their daily purchase decisions, and in their mind, the home buying process shouldn’t be any different.”

      So, where do you go from here?

       If you’re pre-approved for a mortgage, that will help speed things up. But the steps it takes and the time to finalize a loan with most traditional lenders may feel like an eternity to you and your generational peers. Don’t worry, though – it’s well worth the wait when you finally get the keys to your new castle!

      The financial benefits of homeownership, like increasing your net worth by building equity, and the non-financial benefits, like being able to customize and improve your space, will ultimately set you on the course to happiness, success, overall satisfaction, and much, much more.

      Bottom Line

      If you’re feeling like it’s go-time, let’s get together and get the process moving to determine if homeownership is your next best step.

       

       

      The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

      Buying a home can be SCARY…Until you know the FACTS

      Buying a home can be SCARYUntil you know the FACTS [INFOGRAPHIC] | MyKCM

      Some Highlights:

      Many potential homebuyers believe they need a 20% down payment and a 780 FICO® score to qualify to buy a home. This stops many people from even trying to jump into homeownership! Here are some facts to help take the fear out of the process:

      • 71% of buyers who purchased homes have put down less than 20%.
      • 78.1% of loan applications were approved last month.
      • In September, the average credit score for approved loans was 737.

      4 Reasons to Buy a Home This Fall

      4 Reasons to Buy a Home This Fall | MyKCM

      Here are four great reasons to consider buying a home today, instead of waiting.

      1. Prices Will Continue rising

      CoreLogic’s latest Home Price Insights Report shows that home prices have appreciated by 3.6% over the last 12 months. The same report predicts prices will continue to increase at a rate of 5.8% over the next year.

      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 Next Year

      The Primary Mortgage Market Survey from Freddie Mac indicates that interest rates for a 30-year mortgage have recently hovered just above 3.5%. This is great news for buyers in the market right now, because low-interest rates increase your purchasing power – but don’t wait! Most experts predict rates will rise over the next 12 months. The Mortgage Bankers Association, Fannie Mae, Freddie Mac, and the National Association of Realtors are in unison, projecting that rates will increase 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 needed to buy your next home.

      3. Either Way, You Are Paying a Mortgage 

      There are some renters who haven’t purchased a home yet because they’re uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you’re living rent-free with your parents, you are paying a mortgage – either yours or that of your landlord.

      As an owner, your mortgage payment is a form of ‘forced savings’ that allows you to have equity in your home you can tap into later in life. As a renter, you guarantee your landlord is the person with that equity.

      Are you ready to put your housing costs to work for you?

      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 both are on the rise.

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

      Look at the actual reason you’re buying and decide if 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 custom renovations, maybe now is the time to buy.

      Bottom Line

      Buying a home sooner rather than later could lead to substantial savings. Let’s get together to determine if homeownership is the right choice for you and your family this fall.

       

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