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      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.

      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!

      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.

      If Your Home Hasn't Sold Yet? Definitely, Check the Price!

      If Your Home Hasn’t Sold Yet… Definitely Check the Price! | MyKCM

      The residential housing market has been hot. Home sales have bounced back solidly and are now at their fourth highest pace over the past year. Demand has remained strong ­throughout spring as many real estate professionals are reporting bidding wars with many homes selling above listing price. What about your house?

      If your house hasn’t sold, it could be the price.

      If your home is on the market and you are not receiving any offers, look at your price. Pricing your home just 10% above market value dramatically cuts the number of prosp­­ective buyers that will even see your house. See chart below.

      If Your Home Hasn’t Sold Yet… Definitely Check the Price! | MyKCM

      Bottom Line

      The housing market is hot. If you are not seeing the results you want, sit down with your agent and revisit the pricing conversation.

      3 Reasons the Housing Market is NOT in a Bubble

      3 Reasons the Housing Market is NOT in a Bubble | MyKCM

      With housing prices appreciating at levels that far exceed historical norms, some are fearful that the market is heading for another bubble. To alleviate that fear, we just need to look back at the reasons that caused the bubble ten years ago.

      Last decade, demand for housing was artificially propped up because mortgage lending standards were way too lenient. People that were not qualified to purchase were able to attain a mortgage anyway. Prices began to skyrocket. This increase in demand caused homebuilders in many markets to overbuild.

      Eventually, the excess in new construction and the flooding of the market with distressed properties (foreclosures & short sales), caused by the lack of appropriate lending standards, led to the housing crash.

      Where we are today…

      1. If we look at lending standards based on the Mortgage Credit Availability Index released monthly by the Mortgage Bankers Association, we can see that, though standards have become more reasonable over the last few years, they are nowhere near where they were in the early 2000s.

      3 Reasons the Housing Market is NOT in a Bubble | MyKCM

      2. If we look at new construction, we can see that builders are not “over building.” Average annual housing starts in the first quarter of this year were not just below numbers recorded in 2002-2006, they are below starts going all the way back to 1980.

      3 Reasons the Housing Market is NOT in a Bubble | MyKCM

      3. If we look at home prices, most homes haven’t even returned to prices seen a decade ago. Trulia just released a report that explained:

      “When it comes to the value of individual homes, the U.S. housing market has yet to recover. In fact, just 34.2% of homes nationally have seen their value surpass their pre-recession peak.”

      Bottom Line

      Mortgage lending standards are appropriate, new construction is below what is necessary and home prices haven’t even recovered. It appears fears of a housing bubble are over-exaggerated.

      Gallup: Real Estate is Best Long-Term Investment 4 Years Running

      Gallup: Real Estate is Best Long-Term Investment 4 Years Running | MyKCM

      Every year, Gallup surveys  Americans to determine their choice for the best long-term investment. Respondents are given a choice between real estate, stocks/mutual funds, gold, savings accounts/CDs, or bonds.

      For the fourth year in a row, Real Estate has come out on top as the best long-term investment! This year’s results showed that 34% of Americans chose real estate, followed by stocks at 26%. The full results are shown in the chart below.

      Gallup: Real Estate is Best Long-Term Investment 4 Years Running | MyKCM

      The study makes it a point to draw attention to the contrast of the sentiment over the last four years compared to that of 2011-2012 when gold took the top slot with 34% of the votes. Real estate and stocks took second and third place, respectively, while still in recovery from the Great Recession.

      Bottom Line

      As the real estate market has recovered, so has the belief of the American people in the stability of housing as a long-term investment.

      Inventory Shortages Are Slowing Down the Market

      Inventory Shortages Are Slowing Down the Market | MyKCM

      The real estate market is moving more and more into a complete recovery. Home values are up. Home sales are up. Distressed sales (foreclosures and short sales) have fallen dramatically. It seems that 2017 will be the year that the housing market races forward again.

      However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. While buyer demand looks like it will remain strong throughout the summer, supply is not keeping up.

      Here are the thoughts of a few industry experts on the subject:

      Lawrence Yun, Chief Economist at NAR:

      "Sellers are in the driver's seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers. Buyers are showing resiliency given the challenging conditions. However, at some point — and the sooner the better — price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen."

      Tom O’Grady, Pro Teck CEO

      “The lack of inventory is very real and could have a severe impact on home sales in the months to come. Traditionally, a balanced market would have an MRI (Months Remaining Inventory) between six and 10 months.

      This month, only eight metros we track have MRIs over 10, compared to 27 last year and 48 two years ago—illustrating that this lack of inventory is not being driven by traditionally ‘hot’ markets, but is rather a broad-based, national phenomenon.”

      Ralph McLaughlin, Chief Economist at Trulia

      “Nationally, housing inventory dropped to its lowest level on record in 2017 Q1. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year.”

      Freddie Mac

      “Tight housing inventory has been an important feature of the housing market at least since 2016. For-sale housing inventory, especially of starter homes, is currently at its lowest level in over ten years. If inventory continues to remain tight, home sales will likely decline from their 2016 levels. …all eyes are on housing inventory and whether or not it will meet the high demand.”

      Bottom Line

      If you are thinking of selling, now may be the time. Demand for your house will be strongest at a time when there is very little competition. That could lead to a quick sale for a really good price.

      Buying a Home? Do You Know the Lingo?

      Buying a Home? Do You Know the Lingo? | MyKCM

      Buying a home can be intimidating if you are not familiar with the terms used during the process. To start you on your path with confidence, we have compiled a list of some of the most common terms used when buying a home.

      Freddie Mac has compiled a more exhaustive glossary of terms in their "My Home" section of their website.

      Annual Percentage Rate (APR) – This is a broader measure of your cost for borrowing money. The APR includes the interest rate, points, broker fees and certain other credit charges a borrower is required to pay. Because these costs are rolled in, the APR is usually higher than your interest rate.

      Appraisal – A professional analysis used to estimate the value of the property. This includes examples of sales of similar properties. This is a necessary step in getting your financing secured as it validates the home’s worth to you and your lender.

      Closing Costs – The costs to complete the real estate transaction. These costs are in addition to the price of the home and are paid at closing. They include points, taxes, title insurance, financing costs, items that must be prepaid or escrowed and other costs. Ask your lender for a complete list of closing cost items.

      Credit Score – A number ranging from 350-800, that is based on an analysis of your credit history. Your credit score plays a significant role when securing a mortgage as it helps lenders determine the likelihood that you’ll repay future debts. The higher your score, the better, but many buyers believe they need at least a 780 score to qualify when, in actuality, over 55% of approved loans had a score below 750.

      Discount Points – A point equals 1% of your loan (1 point on a $200,000 loan = $2,000). You can pay points to buy down your mortgage interest rate. It’s essentially an upfront interest payment to lock in a lower rate for your mortgage.

      Down Payment – This is a portion of the cost of your home that you pay upfront to secure the purchase of the property. Down payments are typically 3 to 20% of the purchase price of the home. There are zero-down programs available through VA loans for Veterans, as well as USDA loans for rural areas of the country. Eighty percent of first-time buyers put less than 20% down last month.

      Escrow – The holding of money or documents by a neutral third party before closing. It can also be an account held by the lender (or servicer) into which a homeowner pays money for taxes and insurance.

      Fixed-Rate Mortgages – A mortgage with an interest rate that does not change for the entire term of the loan. Fixed-rate mortgages are typically 15 or 30 years.

      Home Inspection – A professional inspection of a home to determine the condition of the property. The inspection should include an evaluation of the plumbing, heating and cooling systems, roof, wiring, foundation and pest infestation.

      Mortgage Rate – The interest rate you pay to borrow money to buy your house. The lower the rate, the better. Interest rates for a 30-year fixed rate mortgage have hovered between 4 and 4.25% for most of 2017.

      Pre-Approval Letter – A letter from a mortgage lender indicating that you qualify for a mortgage of a specific amount. It also shows a home seller that you're a serious buyer. Having a pre-approval letter in hand while shopping for homes can help you move faster, and with greater confidence, in competitive markets.

      Primary Mortgage Insurance (PMI) – If you make a down payment lower than 20% on your conventional loan, your lender will require PMI, typically at a rate of .51%. PMI serves as an added insurance policy that protects the lender if you are unable to pay your mortgage and can be cancelled from your payment once you reach 20% equity in your home. For more information on how PMI can impact your monthly housing cost.

      Real Estate Professional – An individual who provides services in buying and selling homes. Real estate professionals are there to help you through the confusing paperwork, to help you find your dream home, to negotiate any of the details that come up, and to help make sure that you know exactly what’s going on in the housing market. Real estate professionals can refer you to local lenders or mortgage brokers along with other specialists that you will need throughout the home-buying process.

      The best way to ensure that your home-buying process is a confident one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher,’ and who puts your family’s needs first.

      Homes are Selling Fast Across the Country [INFOGRAPHIC]

      Homes are Selling Fast Across the Country [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • The National Association of REALTORS® surveyed their members for their monthly Confidence Index.
      • The REALTORS® Confidence Index is a key indicator of housing market strength based on a monthly survey sent to over 50,000 real estate practitioners. Practitioners are asked about their expectations for home sales, prices and market conditions.
      • Homes sold in 60 days or less in 36 out of 50 states, and Washington D.C.
      • Homes typically went under contract in 34 days in March!

      Thinking of Selling? Now Is the Time to Act

      Thinking of Selling? Now Is the Time to Act | MyKCM

      If you thought about selling your house this year, now may be the time to do it. The inventory of homes for sale is well below historic norms and buyer demand is skyrocketing. We were still in high school when we learned the concept of supply and demand: the best time to sell something is when supply of that item is low and demand for that item is high. That defines today’s real estate market.

      Jonathan Smoke, Chief Economist at realtor.com, revealed in a recent article that:

      “The biggest challenge to buyers this spring will be simply finding a home to buy and getting it successfully under contract. That’s because the supply of homes for sale is at an all-time low, and yet demand is strong and getting stronger.”

      Smoke goes on to say:

      “We started the year with the lowest inventory of homes available for sale that we’ve ever seen on realtor.com. While we did see inventory grow 2% in February, total inventory was down 11% over last year.”

      In this type of market, a seller may hold a major negotiating advantage when it comes to price and other aspects of the real estate transaction including the inspection, appraisal and financing contingencies.

      Bottom Line

      As a potential seller, you are in the driver’s seat right now. It might be time to hit the gas.

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