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      Compass Contemplations for Sunday

       

      DID YOU KNOW? According to a 2018 report from the Pew Research Center, 19% of American adults live in “upper-income households.” The median income of that group was $187,872 in 2016. The share of U.S. adults considered upper-class varies depending on where you live, Pew noted: In affluent metropolitan areas, it’s much higher than 19%. The metropolitan areas with the largest shares of adults in upper-income households are mostly in the coastal areas of the Northeast and California and tend to be in high-tech corridors, such as Boston-Cambridge-Newton, MA-NH, or in financial and commercial centers, such as Hartford-West Hartford-East Hartford, CT. The metro with the highest share was San Jose-Sunnyvale-Santa Clara, CA, where 32% of adults were considered upper-income. (CNBC)

       

      "Narratives that can periodically surge into epidemics are capable of changing the economy’s direction or of turning small booms and recessions into big ones. The probability that a recession will come soon — or be severe when it does — depends in part on the state of ever-changing popular narratives about the economy. These are stories that provide a framework for piecing together the seemingly random bits of information that one picks up from friends, the news or social media." - Robert Schiller, NYT 

       

      DID YOU KNOW? Here are some interesting stats from the NAPLES, Florida area via NABOR (Naples Area Board of Realtors) (Thanks to Yasmin Saad).

      * Collier County Florida 2017 Population: 372,880

      * # of licensed brokers/agents who are members:  Brokers: 689, Agents: 6,375

      * 96% of users logged in at least once to the SunshineMLS in the last 12 months.

      * # of homes sold in the last 12 months (buyer or seller side):  6,574 Single Family homes closed had a Naples agent on the Listing Side

      914 Land sales closed that had a Naples agent on the Listing Side

      * The total number of sales in the last 12 months: 14,130 closed.

      Everybody Calm Down! This Is NOT 2008

      Everybody Calm Down! This Is NOT 2008 | MyKCM

      Last week realtor.com released the results of a survey that produced three major revelations:

      1. 53% of home purchasers (first-time and repeat buyers) currently in the market believe a recession will occur this year or next.
      2. 57% believe the next recession will be as bad or worse than 2008.
      3. 55% said they would cancel plans to move if a recession occurred.

      Since we are currently experiencing the longest-ever economic expansion in American history, there is reason to believe a recession could occur in the not-too-distant future. And, it does make sense that buyers and sellers remember the horrors of 2008 when they hear the word “recession.”

      Ali Wolf, Director of Economic Research at the real estate consulting firm Meyers Research, addressed this point in a recent interview:

      “With people having PTSD from the last time, they’re still afraid of buying at the wrong time.”

      Most experts, however, believe if there is a recession, it will not resemble 2008. This housing market is in no way the same as it was just over a decade ago.

      Zillow Economist, Jeff Tucker, explained the difference in a recent article, Recessions Typically Have Limited Effect on the Housing Market:

      “As we look ahead to the next recession, it’s important to recognize how unusual the conditions were that caused the last one, and what’s different about the housing market today. Rather than abundant homes, we have a shortage of new home supply. Rather than risky borrowers taking on adjustable-rate mortgages, we have buyers with sterling credit scores taking out predictable 30-year fixed-rate mortgages. The housing market is simply much less risky than it was 15 years ago.”

      George Ratiu, Senior Economist at realtor.com, also weighed in on the subject:

      “This is going to be a much shorter recession than the last one, I don’t think the next recession will be a repeat of 2008…The housing market is in a better position.”

      In the past 23 years, there have been two national recessions – the dot-com crash in 2001 and the Great Recession in 2008. It is true that home values fell 19.7% during the 2008 recession, which was caused by a mortgage meltdown that heavily impacted the housing market. However, while stock prices fell almost 25% in 2001, home values appreciated 6.6%. The triggers of the next recession will more closely mirror those from 2001 – not those from 2008.

      Bottom Line

      No one can accurately predict when the next recession will occur, but expecting one could possibly take place in the next 18-24 months is understandable. It is, however, important to realize that the impact of a recession on the housing market will in no way resemble 2008.

       

       

      5 Reasons to Sell This Fall

      5 Reasons to Sell This Fall | MyKCM

      Below are 5 compelling reasons listing your home for sale this fall makes sense.

      1. Demand Is Strong

      The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains strong throughout the vast majority of the country. These buyers are ready, willing, and able to purchase…and are in the market right now. More often than not, in many areas of the country, multiple buyers are competing with each other to buy the same home.

      Take advantage of the buyer activity currently in the market.

      2. There Is Less Competition Now

      Housing inventory is still under the 6-month supply that is needed for a normal market. This means that in the majority of the country, there are not enough homes for sale to satisfy the number of buyers.

      Historically, a homeowner would stay an average of six years in his or her home. Since 2011, that number has hovered between nine and ten years. There is a pent-up desire for many homeowners to move as they were unable to sell over the last few years due to a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

      Many homeowners were reluctant to list their homes over the last couple years, for fear that they would not find a home to move to. That is all changing now as more homes come to market at the higher end. The choices buyers have will continue to increase. Don’t wait until additional inventory comes to market before you decide to sell.

      3. The Process Will Be Quicker

      Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and simpler, as buyers know exactly what they can afford before shopping for a home. According to Ellie Mae’s latest Origination Insights Report, the time needed to close a loan is 43 days.

      4. There Will Never Be a Better Time to Move Up

      If your next move will be into a premium or luxury home, now is the time to move up. There is currently ample inventory for sale at higher price ranges. This means if you’re planning on selling a starter or trade-up home and moving into your dream home, you’ll be able to do that in the luxury or premium market.

      According to CoreLogic, prices are projected to appreciate by 5.2% over the next year. If you’re moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage) if you wait.

      5. It’s Time to Move on with Your Life

      Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than having the freedom to go on with your life the way you think you should?

      Only you know the answers to these questions. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

      That is what is truly important.

       

      Top Priorities When Moving with Kids

      Top Priorities When Moving with Kids | MyKCM

      According to the Pew Research Center, around 37% of U.S students will be going back to school soon and the rest have already started the new academic year. With school-aged children in your home, buying or selling a house can take on a whole different approach when it comes to finding the right size, location, school district, and more.

      Recently, the 2019 Moving with Kids Report from the National Association of Realtors®(NAR) studied “the different purchasing habits as well as seller preferences during the home buying and selling process.” This is what they found:

      When Purchasing a Home

      The major difference between the homebuyers who have children and those who do not is the importance of the neighborhood. In fact, 53% said the quality of the school district is an important factor when purchasing a home, and 50% select neighborhoods by the convenience to the schools.

      Buyers with children also purchase larger, detached single-family homes with 4 bedrooms and 2 full bathrooms at approximately 2,110 square feet.

      Furthermore, 26% noted how childcare expenses delayed the home-buying process and forced additional compromises: 31% in the size of the home, 24% in the price, and 18% in the distance from work.

      When Selling a Home

      Of those polled, 23% of buyers with children sold their home “very urgently,” and 46% indicated “somewhat urgently, within a reasonable time frame.” Selling with urgency can pressure sellers to accept offers that are not in their favor. Lawrence Yun, Chief Economist at NAR explains,

      “When buying or selling a home, exercising patience is beneficial, but in some cases – such as facing an upcoming school year or the outgrowing of a home – sellers find themselves rushed and forced to accept a less than ideal offer.”

      For sellers with children, 21% want a real estate professional to help them sell the home within a specific time frame, 20% at a competitive price, and 19% to market their home to potential buyers.

      Bottom Line

      Buying or selling a home can be driven by different priorities when you are also raising a family. If you’re a seller with children and looking to relocate, let’s get together to navigate the process in the most reasonable time frame for you and your family.

       

       

      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.

      Rent Vs. Own [INFOGRAPHIC]

      Rent Vs. Own [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • Owning your own home vs. renting may lead to some great options, such as locking in your monthly payments and having the freedom to customize your living space.
      • Whether you rent or own, you have to cover someone’s mortgage costs. You may as well be doing so to build your own wealth, rather than that of your landlord.
      • Renting and owning both have up-front fees when you sign your lease or close, respectively. Think about putting that money to work for you!

      Why Now Is the Perfect Time to Sell Your House

      Why Now Is the Perfect Time to Sell Your House | MyKCM

      As a homeowner, it’s always tempting to dream about the next big project you’re going to tackle. The possibilities are endless. Should I renovate? Should I refinance? Should I stay? Should I move? The list goes on and on.

      In today’s housing market, it’s actually a great time to shift your thoughts toward selling your house and moving up into the home of your dreams. Here’s why:

      Inventory is on the rise, but there’s still an overall shortage of houses for sale (less than a 6-month supply found in a more normal market), so homes are going under contract quickly. In fact, the National Association of Realtors (NAR) Realtors® Confidence Index Survey reports that right now homes are only staying on the market for an average of 27 days. That’s less than one month, an even more accelerated pace from the 36-day trend we saw last spring.

      Why Now Is the Perfect Time to Sell Your House | MyKCM

      The same report also indicates there are more interested buyers than active sellers today, which is one of the big factors driving home prices higher.

      .Why Now Is the Perfect Time to Sell Your House | MyKCM

      Why Now Is the Perfect Time to Sell Your House | MyKCM

      This power combination provides an ideal environment for sellers aiming to close a quick sale and earn a big return as we wrap up the summer season.

      Bottom Line

      There’s still time to make a move before the school year starts and the fall weather sets in. Maybe it’s time to make a change. Let’s get together to determine if selling now is the right decision for your family.

       

      Is Renting Right for Me?

      Is Renting Right for Me? | MyKCM

      If you’re currently renting and have dreams of owning your own home, it may be a good time to think about your next move. With rent costs rising annually and many helpful down payment assistance programs available, homeownership may be closer than you realize.

      According to the 2018 Bank of America Homebuyer Insights Report, 74% of renters plan on buying within the next 5 years, and 38% are planning to buy within the next 2 years.

      When those same renters were asked why they disliked renting, 52% said rising rental costs were their top reason. The results of the survey can be seen here:

      Is Renting Right for Me? | MyKCM

      It’s no wonder 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:

      Is Renting Right for Me? | MyKCM

      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, it’s never a bad idea to reconsider your family’s plan and ask yourself if renting is your best angle going forward. 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.”

      The reality is, the need to produce a 20% down payment is one of the biggest misconceptions of homeownership, especially for first-time buyers. That means a large number of renters may be able to buy now, and they don’t even know it.

      Bottom Line

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

      5 Powerful Reasons to Own Instead of Rent

      5 Powerful Reasons to Own Instead of Rent | MyKCM

      Owning a home has great financial benefits.

      In a recent research paper, Homeownership and the American Dream, Laurie S. Goodman and Christopher Mayer of the Urban Land Institute explained:

      “Homeownership appears to help borrowers accumulate housing and nonhousing wealth in a variety of ways, with tax advantages, greater financial flexibility due to secured borrowing, built-in ‘default’ savings with mortgage amortization and nominally fixed payments, and the potential to lower home maintenance costs through sweat equity.”

      Let’s breakdown 5 major financial benefits of homeownership:

      1. Housing is typically the one leveraged investment available

      Homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. A 20% down payment results in a leverage factor of five, meaning every percentage point rise in the value of your home is a 5% return on your equity. If you put down 10%, your leverage factor is 10.

      Example: Let’s assume you purchased a $300,000 home and put down $60,000 (20%). If the house appreciates by $30,000, that is only a 10% increase in value but a 50% increase in equity.

      2. You’re paying for housing whether you own or rent

      Some argue that renting eliminates the cost of property taxes and home repairs. Every potential renter must realize that all the expenses the landlord incurs (property taxes, repairs, insurance, etc.) are baked into the rent payment already – along with a profit margin!!

      3. Owning is usually a form of “forced savings”

      Studies have shown that homeowners have a net worth that is 44X greater than that of a renter. As a matter of fact, it was recently estimated that a family buying an average priced home this past January could build more than $42,000 in family wealth over the next five years.

      4. Owning is a hedge against inflation

      House values and rents tend to go up at or higher than the rate of inflation. When you own, your home’s value will protect you from that inflation.

      5. There are still substantial tax benefits to owning

      We know that the new tax reform bill puts limits on some deductions on certain homes. However, in the research paper referenced above, the authors explain:

      “…the mortgage interest deduction is not the main source of these gains; even if it were removed, homeowners would continue to benefit from a lack of taxation of imputed rent and capital gains.”

      Bottom Line

      From a financial standpoint, owning a home has always been and will always be better than renting.

       

      What You Need to Know About Private Mortgage Insurance (PMI)

      What You Need to Know About Private Mortgage Insurance (PMI) | MyKCM

      Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).

      What is PMI?

      Freddie Mac defines PMI as:

      “An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

      Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

      As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

      “The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.” 

      According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

      Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment

      What You Need to Know About Private Mortgage Insurance (PMI) | MyKCM

      without PMI: The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

      “It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

      Bottom Line

      If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.

      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.

      Time for Your Dream Home, Gen X!

      Time for Your Dream Home, Gen X! | MyKCM

      During the housing market crash, Gen X homeowners lost more wealth than other generations. However, things are changing now! A strong economy, increasing home prices, and the recovery of the housing market are helping this generation to regain their lost wealth.

      According to Pew Research Center,

      Their fortunes have rebounded more than those of other generations during the post-recession economic expansion and as home and stock prices have risen. Since 2010, the median net worth of Gen X households has risen 115%. In fact, in 2016, the most recent year with available data, the net worth of a typical Gen X household had surpassed what it was in 2007 ($84,200 vs. $63,400)”.

      The same report also mentioned,

      15% of Gen X’s homeowners were ‘underwater’ on their homes in 2010 (meaning they owed more than they owned). By 2016 only 3% were underwater.

      As a result of homes regaining market value and their increasing net worth, many Gen Xers are presented with the opportunity of selling their current home in order to move up to the house they always dreamed of!

      According to the 2019 Home Buyers and Sellers Generational Trends Report by the National Associations of Realtors, in 2018 Gen Xers made up the second largest share of home buyers by generation at 24%.

      The report also provided some highlights about their purchase:

      • Greatest share that purchased a multi-generational home (16%).
      • Largest share that purchased a detached single-family home (88%).
      • Highest median household income ($111,100).
      • Bought the most expensive homes of all the generations.
      • Job-related relocation was identified as the primary reason to buy.

      But this generation is not only buying- they are selling too!

      • The largest share of home sellers (25%).
      • Highest median household income among sellers ($123,600).
      • Tenure in the previous home was a median of 9 years.
      • House too small was indicated as the primary reason to sell.
      • 91% sold the home using a real estate professional.

      Bottom Line

      If you are a Gen Xer who would like to know exactly how much your house is worth today so you can move up to the home of your dreams, let’s get together to analyze your current circumstances.

       

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