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      Homes are More Affordable in 44 out of 50 States...MA!

      Homes are More Affordable in 44 out of 50 States | MyKCM

      While both home prices and mortgage rates are increasing this year, many are concerned about a family’s ability to purchase a major part of the American Dream – its own home. However, if we compare housing affordability today to the average affordability prior to the housing boom and bust, we are in much better shape than most will believe.

      In Black Knight’s latest monthly Mortgage Monitor they revealed that in the vast majority of the country, it is actually more affordable to purchase a home today than it was between 1995 to 2003 when looking at mortgage payments (determined by price and interest rate) as compared to incomes. Home prices are up compared to 1995-2003, but mortgage rates are still much lower now than at that time. Today, they stand at about 4.5%. Here are the average mortgage rates for each of the years mentioned:

      • 1995 – 7.93%
      • 1996 – 7.81%
      • 1997 – 7.6%
      • 1998 – 6.94%
      • 1999 – 7.44%
      • 2000 – 8.05%
      • 2001 – 6.97%
      • 2002 – 6.54%
      • 2003 – 5.83%

      On the other hand, wages have risen over the last twenty years.

      Black Knight’s research revealed that, when comparing “the share of median income required to buy the median-priced home” today, to the average between 1995 to 2003, it is currently more affordable to purchase a home in 44 of 50 states.

      Here is a state map of the percentage change in the price-to-payment ratio. Positive numbers indicate that it is less affordable to buy while negative numbers indicate that it is more affordable.

      Homes are More Affordable in 44 out of 50 States | MyKCM

      Bottom Line

      Whether you are moving up to the home of your dreams or purchasing your first house, it is a great time to buy when looking at historic affordability data.

      Top Reasons to Own Your Home

      Top Reasons to Own Your Home [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • June is National Homeownership Month!
      • Now is a great time to reflect on the many benefits of homeownership that go way beyond the financial.
      • What reasons do you have to own your own home?

      Millennials Are Skipping Starter Homes for Their Dream Homes

      Millennials Are Skipping Starter Homes for Their Dream Homes | MyKCM

      A new trend has begun to emerge. With home prices skyrocketing in the starter home category, many first-time homebuyers are skipping the traditional starter homes and moving right into their dream homes.

      What’s a Starter Home?

      According to the National Association of Realtors (NAR), simply put, a starter home is a one or two-bedroom home (sometimes even a small, three bedroom). “Prices vary widely by each market but starters on average cost $300,000 to $350,000 while trade-up and premium homes cost upwards of $400,000.”

      Finding Their Forever Homes Now

      A recent CNBC article revealed that there are many factors that delayed older millennials (ages 25-35) from buying a home earlier in their lives. The aftereffects of the Great Recession teaming up with larger education costs forced many to either remain living in their parent’s homes or to rent.

      With the economy continuing to improve, many millennials have been able to break into better-paying jobs which has helped spur down payment savings. As the dream of homeownership comes closer to reality, many millennials are saving for their forever homes.

      According to the latest statistics from NAR, 30% of millennials bought homes for $300,000 or more this year (up from 14% in 2013). Diane Swonk, Chief Economist at Grant Thornton weighed in saying, “They rented for longer. Now they’re going to where they want to stay.”

      More and more millennials are settling down, getting married, and starting families, which is a huge factor driving them to look for larger homes.

      Increased competition in the starter home market has also been a driving force in waiting to afford their dream homes. Inventory in the starter home market is down 14.2% from last year, according to research from Trulia. This has driven prices up and has led to bidding wars.

      Many first-time buyers who were originally looking for starter homes are realizing that for just a little bit more of an investment, they could afford trade-up or premium homes instead.

      Bottom Line

      If you plan on purchasing your first home this year, let’s get together to determine how much house you can afford. You may be pleasantly surprised.

      Drop in Inventory Fuels Sales Slowdown [INFOGRAPHIC]

      Drop in Inventory Fuels Sales Slowdown [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • Existing Home Sales are now at an annual pace of 5.46 million.
      • Inventory of existing homes for sale dropped to a 4-month supply, marking the 35th month in a row of declines.
      • The median price of homes sold in April was $257,900. This is the 74th consecutive month of year-over-year price gains.

      Don't Wait to Sell Your House! Buyers Are Out Now

      Dont Wait to Sell Your House! Buyers Are Out Now | MyKCM

      Recently released data from the National Association of Realtors (NAR) suggests that a now is a great time to sell your home. The concept of ‘supply & demand’ reveals that the best price for an item is realized when the supply of that item is low and the demand for that item is high.

      Let’s see how this applies to the current residential real estate market.

      SUPPLY

      It is no secret that the supply of homes for sale has been far below the number needed to sustain a normal market for over a year at this point. A normal market requires six months of housing inventory to meet the demand. The latest report from NAR revealed that there is currently only a 3.6-month supply of houses on the market.

      Supply is currently very low!

       

      DEMAND

      A report that was just released tells us that demand is very strong. The most recent Foot Traffic Report (which sheds light on the number of buyers who are actually out looking at homes) disclosed that “foot traffic grew 10.5 points to 52.4 in March as the new season approaches.”

      Demand is currently very high!

       

      Bottom Line

      Waiting to sell will only increase the competition between you and all of the other sellers putting their houses on the market later this summer. If you are debating whether or not to list your home, let’s get together to discuss the conditions in our market.

      Why Home Prices Are Increasing

       

      Why Home Prices Are Increasing | MyKCM

      There are many unsubstantiated theories as to why home values are continuing to increase. From those who are worried that lending standards are again becoming too lenient (data shows this is untrue), to those who are concerned that prices are again approaching boom peaks because of “irrational exuberance” (this is also untrue as prices are not at peak levels when they are adjusted for inflation), there seems to be no shortage of opinion.

      However, the increase in prices is easily explained by the theory of supply & demand. Whenever there is a limited supply of an item that is in high demand, prices increase.

      It is that simple. In real estate, it takes a six-month supply of existing salable inventory to maintain pricing stability. In most housing markets, anything less than six months will cause home values to appreciate and anything more than seven months will cause prices to depreciate (see chart below).

      Why Home Prices Are Increasing | MyKCM

      According to the Existing Home Sales Report from the National Association of Realtors (NAR), the monthly inventory of homes for sale has been below six months for the last five years (see chart below).

      Why Home Prices Are Increasing | MyKCM

      Bottom Line

      If buyer demand continues to outpace the current supply of existing homes for sale, prices will continue to appreciate. Nothing nefarious is taking place. It is simply the theory of supply & demand working as it should.

      Thinking of Selling Your Home? Why You Need A Pro in Your Corner

      Thinking of Selling Your Home? Why You Need A Pro in Your Corner | MyKCM

      With home prices on the rise and buyer demand strong, some sellers may be tempted to try and sell their homes on their own (FSBO) without using the services of a real estate professional.

      Real estate agents are trained and experienced in negotiation and, in most cases, the seller is not. Sellers must realize that their ability to negotiate will determine whether or not they get the best deal for themselves and their families.

      Here is a list of some of the people with whom the seller must be prepared to negotiate if they decide to FSBO:

      • The buyer who wants the best deal possible
      • The buyer’s agent who solely represents the best interest of the buyer
      • The buyer’s attorney (in some parts of the country)
      • The home inspection companies, which work for the buyer and will almost always find some problems with the house
      • The termite company if there are challenges
      • The buyer’s lender if the structure of the mortgage requires the sellers’ participation
      • The appraiser if there is a question of value
      • The title company if there are challenges with certificates of occupancy (CO) or other permits
      • The town or municipality if you need to get the CO permits mentioned above
      • The buyer’s buyer in case there are challenges with the house your buyer is selling
      • Your bank in the case of a short sale

      Bottom Line

      The percentage of sellers who have hired real estate agents to sell their homes has increased steadily over the last 20 years. Let’s get together and discuss all we can do to make the process easier for you. 617-901-4500.

      How Much Do You Need to Make to Buy a Home in Your State?

      How Much Do You Need to Make to Buy a Home in Your State? | MyKCM

      It’s no mystery that cost of living varies drastically depending on where you live, so a new study by GOBankingRates set out to find out what minimum salary you would need to make in order to buy a median-priced home in each of the 50 states, and Washington, D.C.

      States in the Midwest came out on top as most affordable, requiring the smallest salaries in order to buy a median-priced home. States with large metropolitan areas saw a bump in the average salary needed to buy with California, Washington, D.C., and Hawaii edging out all others with the highest salaries required.

      Below is a map with the full results of the study:

      How Much Do You Need to Make to Buy a Home in Your State? | MyKCM

      GoBankingRates gave this advice to anyone considering a home purchase,

      “Before you buy a home, it’s important to find out if you can afford the monthly mortgage payment. To do this, some financial experts recommend your housing costs — primarily your mortgage payments — shouldn’t consume more than 30 percent of your monthly income.”

      As we recently reported, research from Zillow shows that historically, Americans had spent 21% of their income on owning a median-priced home. The latest data from the fourth quarter of 2017 shows that the percentage of income needed today is only 15.7%!

      Bottom Line

      If you are considering buying a home, whether it’s your first time or your fifth time, let’s get together to evaluate your ability to do so in today’s market!

      The COST of Your Next Home Will Be LESS Than Your Parents' Home Was

      There is no doubt that the price of a home in most regions of the country is greater now than at any time in history. However, when we look at the cost of a home, it is cheaper to own today than it has been historically.

      The Difference Between PRICE and COST

      The price of a home is the dollar amount you and the seller agree to at the time of purchase. The cost of a home is the monthly expense you pay for your mortgage payment.

      To accurately compare costs in different time periods, we must look at home prices, mortgage rates, and wages during each period. Home prices were less expensive years ago, but paychecks were also smaller and mortgage rates were much higher (the average mortgage interest rate in 1988 was 10.34%).

      The best way to measure the COST of a home is to determine what percentage of income is necessary to buy a home at the time. That would take into account the price of the home, the mortgage interest rate and wages at the time.

      Zillow just released research that examined home costs using this formula. The research compares the historic percentage of income necessary to afford a mortgage to the percentage needed today. It also revealed the cost if mortgage rates continue to rise as experts are predicting. Here is a graph of their findings*:

      The COST of Your Next Home Will Be LESS Than Your Parents' Home Was | MyKCM

      Rates would need to jump to 7% in order for the percentage of necessary income to be greater than historic norms.

      Bottom Line

      Whether you are a homeowner considering selling your current house and moving up to the home of your dreams, or a first-time buyer trying to purchase your first home, it’s a great time to move forward.

      *Assumptions in the Zillow report: Buyer puts 20% down, takes out a conforming, 30-year fixed-rate mortgage at rates prevailing at the time, earns the median household income, and is buying a median-valued home.

      US Housing Market Still In ?Buy Territory'!

      US Housing Market Still In 'Buy Territory'! | MyKCM

      According to the Beracha, Hardin & Johnson Buy vs. Rent (BH&J) Index, the U.S. housing market has continued to move deeper into buy territory, supporting the belief that housing markets across the country remain a sound investment.

      The BH&J Index is a quarterly report that attempts to answer the question:

      In today’s housing market, is it better to rent or buy a home?

      The index examines the entire US housing market and then isolates 23 major cities for comparison. The researchers “measure the relationship between purchasing property and building wealth through a buildup in equity versus renting a comparable property and investing in a portfolio of stocks and bonds.” 

      While 13 of the 23 metropolitan markets examined moved further into buy territory, markets like Dallas, Denver, and Houston are currently deep into rent territory. Due to a lack of inventory, the home prices in these areas have increased by 6.7%6.3%, and 5.3%  respectively from a year ago.

      According to Eli Beracha, Ph.D., Co-Creator of the index, home prices will begin to return to more normal levels.

      Our data indicates that prices are above their 40-year trend but not significantly so as they were in 2007. Rather than a crash, I anticipate slower growth in prices accompanied by longer marketing times for sellers and increasing inventories, which should bring prices back in conjunction with their 40-year trend.”

      Bottom Line

      The majority of the country is strongly in buy territory. Buying a home makes sense socially and financially, as rents are predicted to increase substantially in the next year. Protect yourself from rising rents by locking in your housing cost with a mortgage payment now. 

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