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      Home Prices: The Difference 5 Years Makes

      Home Prices: The Difference 5 Years Makes | MyKCM

      CoreLogic recently released their Home Price Index ReportOne of the key indicators used in the report to determine the health of the housing market was home price appreciation. CoreLogic focused on appreciation from July 2013 to July 2018 to show how prices over the last five years have fared.

      The graph below was created to show the 5-year change in price from July 2013 to July 2018 by price range.

      Home Prices: The Difference 5 Years Makes | MyKCM

      As you can see in the graph, the highest price appreciation occurred in the lowest price range with 48% growth, while the highest priced homes appreciated by 25%. This has been greatly fueled by the lack of inventory of homes available at the lower price ranges and high demand from first-time buyers looking to enter the market.

      Where were prices expected to go?

      Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts, and investment and market strategists and asks them to project how residential home prices will appreciate over the next five years for their Home Price Expectation Survey (HPES).

      According to the Q3 2014 survey results, national homes prices were projected to increase cumulatively by 19.5% by December 2018. The bulls of the group predicted home prices to rise by 27.8%, while the more cautious bears predicted an appreciation of 11.2%.

      Where are prices headed in the next 5 years?

      Data from the most recent HPES shows that home prices are expected to increase by 20.0% over the next 5 years. The bulls of the group predict home prices to rise by 31.2%, while the more cautious bears predict an appreciation of 9.3%.

      Bottom Line

      Every day, thousands of homeowners regain positive equity in their homes. Some homeowners are now experiencing values even greater than those before the Great Recession. If you’re wondering if you have enough equity to sell your house and move on to your dream home, let’s get together to discuss conditions in our neighborhood!

      Homeownership is a Dominant Gene

      Homeownership is a Dominant Gene | MyKCM

      There are many things that factor into the decision to buy a home. New research from the Urban Institute suggests that one of those things may be inherited from your parents.

      Children are More Likely to Own a Home if Their Parents Did

      According to an analysis of millennial homeowners, the homeownership rate of those whose parents rent their homes is 14.4%, while the rate amongst millennials whose parents are homeowners is 31.7%!

      “A young adult’s odds of homeownership are highly correlated with their parent’s homeownership.

      Without controlling for such factors as age, income, education, marital status, and race or ethnicity, there is a 17 percentage-point gap between the homeownership rate for young adults whose parents are renters and young adults whose parents are homeowners.”

      The study also revealed that as a parent’s net worth increases, so does the likelihood that their child will own a home. These two findings are not surprising as we know from the Survey of Consumer Finances that a homeowner’s net worth is 44x greater than that of a renter.

      So, a parent who is a homeowner will have more wealth which will, in turn, increase the chances that their children will own their own homes in the future.

      Below is a breakdown of the relationship between a parent’s wealth and a millennial’s likelihood to own a home.

      Homeownership is a Dominant Gene | MyKCM

      The Good News: The high homeownership rate amongst baby boomers (likely the parents of many millennials) is a great sign that millennials will want to own homes. We are already seeing this in the high-demand environment that we are currently experiencing in the starter and trade-up markets.

      Bottom Line

      Even though millennials took longer than many of the generations before them to start home searches of their own, the data shows that they will not be waiting much longer!

      Top 3 Myths About Today's Real Estate Market

      Top 3 Myths About Todays Real Estate Market | MyKCM

      There are many conflicting headlines when it comes to describing today’s real estate market. Some are making comparisons to the market we experienced 10 years ago and are starting to believe that we may be doomed to repeat ourselves. Others are just plain wrong when it comes to what it takes to qualify for a mortgage.

      Today, we want to try and clear the air by shedding some light on what’s causing some of these headlines, as well as what’s truly going on.

      Myth #1: We Are Headed for Another Housing Bubble

      Home prices have appreciated year-over-year for the last 76 straight months. Many areas of the country are at or near their peak prices achieved before the last housing bubble burst. This has many worried that we are headed towards another housing bubble.

      Reality: The biggest challenge facing today’s real estate market is a lack of homes for sale! Demand is strong, as many renters have come off the fence and are searching for their dream homes.

      Historically, a normal market requires a 6-month supply of inventory in order for prices to rise with the rate of inflation. According to the National Association of Realtors (NAR) there is currently a 4.3-month supply of inventory.

      The US housing market hasn’t had 6-months inventory since August 2012! The concept of supply and demand is what is driving home prices up!

      Myth #2: The Rumored Recession Will Lead to Another Housing Market Crash

      Economists and analysts know that the country has experienced economic growth for almost a decade. When this happens, they also know that a recession can’t be too far off. But what is a recession?

      Merriam-Webster defines a recession as “a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP in two consecutive quarters.”

      Reality: Recession DOES NOT equal housing crisis. Many people associate these two terms with one another because the last time we had a recession it was caused by a housing crisis. According to the Federal Reserve, over the last 40 years, there have been six recessions. In each of the previous five recessions, home values appreciated.

      Myth #3: There is an Affordability Crisis Looming

      Rising home prices have many concerned that the average family will no longer be able to afford the most precious piece of the American Dream – their own home.

      There are many different affordability indexes supported by different organizations that all measure different data. For this reason, there is a lot of confusion about what “affordable” actually means.

      The monthly cost of a home is determined by the home’s price and the interest rate on the mortgage used to purchase it. According to Freddie Mac, interest rates have risen from 3.95% in January to 4.59% just last week.

      Reality: As we mentioned earlier, home prices have appreciated year-over-year for the last 76 months, largely driven by high demand and low supply.

      According to a recent study by Zillow, the percentage of median income necessary to buy a home in today’s market (17.1%) is well below the mark reached in 1985 – 2000 (21%), as well as the mark reached in 2006 (25.4)! Interest rates would have to increase to 6% before buying a home would be less affordable than historical norms.

      The starter-home market has appreciated at higher levels (9.4% year-over-year) than any other market. One reason for this is the fact that many of the first-time buyers who have flocked to the starter-home market are being met with high competition. For some hopeful buyers, it may take more than a good offer to stand out from the crowd!

      Bottom Line

      There is a lot of confusion in today’s real estate market. If your future plans include buying or selling, make sure you have a trusted advisor and market expert by your side to help guide you to the best decision for you and your family.

      Rent or Buy: Either Way You're Paying A Mortgage!

      Rent or Buy: Either Way Youre Paying A Mortgage! | MyKCM

      There are some people who have not purchased homes because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize, however, that unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

      As Entrepreneur Magazine, a premier source for small business explained in their article, “12 Practical Steps to Getting Rich”:

      “While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”

      With home prices rising, many renters are concerned about their house-buying power. Mark Fleming, Chief Economist at First Americanexplained:

      “Over the last three years, renter house-buying power has increased fast enough to keep pace with house price appreciation, so the share of homes that a renter can afford to buy has remained the same since 2015.

      Although mortgage rates are expected to rise, they are still low by historic standards, and real household incomes are the highest they have ever been. Assuming this trend continues, our measure of affordability, which takes into account income, interest rates, and house prices, indicates thathomeownership is still within reach for renters.”

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

      Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 4.51% last week.

      Bottom Line

      Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

      The Net Worth of a Homeowner is 44x Greater Than A Renter!

      The Net Worth of a Homeowner is 44x Greater Than A Renter! | MyKCM

      Every three years, the Federal Reserve conducts their Survey of Consumer Finances in which they collect data across all economic and social groups. Their latest survey data, covering 2013-2016 was recently released.

      The study revealed that the median net worth of a homeowner was $231,400 – a 15% increase since 2013. At the same time, the median net worth of renters decreased by 5% ($5,200 today compared to $5,500 in 2013).

      These numbers reveal that the net worth of a homeowner is over 44 times greater than that of a renter.

      Owning a home is a great way to build family wealth

      As we’ve said before, simply put, homeownership is a form of ‘forced savings.’ Every time you pay your mortgage, you are contributing to your net worth by increasing the equity in your home.

      That is why, for the fifth year in a row, Gallup reported that Americans picked real estate as the best long-term investment. This year’s results showed that 34% of Americans chose real estate, followed by stocks at 26% and then gold, savings accounts/CDs, or bonds.

      Greater equity in your home gives you options

      If you want to find out how you can use the increased equity in your home to move to a home that better fits your current lifestyle, let’s get together to discuss the process.

      Supply & Demand Will Determine Future Home Values

      Supply & Demand Will Determine Future Home Values | MyKCM

      Will home values continue to appreciate throughout 2018? The answer is simple: YES! – as long as there are more purchasers in the market than there are available homes for them to buy. This is known as the theory of “supply and demand,” which is defined as:

      “The amount of a commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price.”

      When demand exceeds supply, prices go up. Every month this year, demand (buyer traffic) has increased as compared to last year and for the first five months of 2018, supply (the number of available listings) had decreased as compared to last year. However, a recent report by the National Association of Realtors (NAR) revealed the first year-over-year increase in supply in three years.

      Here are the numbers for supply and demand as compared to last year since the beginning of 2018:

      Supply & Demand Will Determine Future Home Values | MyKCM

      The increase in the June numbers doesn’t mean that prices won’t continue to appreciate. In that same report, Lawrence Yun, NAR’s Chief Economist, explained:

      “It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels.

      Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

      Bottom Line

      The reason home prices are still rising is that there are many purchasers looking to buy but very few homeowners ready to sell. This imbalance is the reason prices will remain on the uptick.

      5 Reasons to Hire a Real Estate Professional Before Entering the Market!

      5 Reasons to Hire a Real Estate Professional Before Entering the Market! | MyKCM

      Whether you are buying or selling a home, it can be quite the adventure. In this world of instant gratification and internet searches, many sellers think that they can ‘For Sale by Owner’ or ‘FSBO,’ but it’s not as easy as it may seem. That’s why you need an experienced real estate professional to guide you on the path to achieving your ultimate goal!

      The 5 reasons you need a real estate professional in your corner haven’t changed but have rather been strengthened by the projections of higher mortgage interest rates and home prices as the market continues to pick up steam.

      1. What do you do with all this paperwork?

      Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true real estate professional is an expert in his or her market and can guide you through the stacks of paperwork necessary to make your dream a reality.

      2. So you found your dream house, now what?

      There are over 230 possible steps that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to ensure you achieve your dream?

      3. Are you a good negotiator?

      So maybe you’re not convinced that you need an agent to sell your home. After looking at the list of parties that you will need to be prepared to negotiate with, you’ll soon realize the value in selecting a real estate professional. From the buyers (who want the best deals possible), to the home inspection companies, all the way to the appraisers, there are at least 11 different people who you will need to be knowledgeable of, and answer to, during the process.

      4. What is the home you’re buying/selling really worth?

      It is important for your home to be priced correctly from the start in order to attract the right buyers and shorten the amount of time that it’s on the market. You need someone who is not emotionally connected to your home to give you its true value. According to a recent article by the National Association of Realtors, FSBOs achieve prices significantly lower than the prices of similar properties sold by real estate agents:

      “FSBOs earn an average of $60,000 to $90,000 less on the sale of their home than sellers who work with a real estate agent.”

      Get the most out of your transaction by hiring a professional!

      5. Do you know what’s really going on in the market?

      There is so much information out there on the news and on the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively and correctly price your home at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?

      Dave Ramsey, the financial guru, advises:

      “When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

      Hiring an agent who has his or her finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

      Bottom Line

      You wouldn’t replace the engine in your car without a trusted mechanic, so why would you make one of the most important financial decisions of your life without hiring a real estate professional?

      Are Lending Standards Propping Up Home Prices?

      Are Lending Standards Propping Up Home Prices? | MyKCM

      Back in 2005, Federal Reserve Chairman Alan Greenspan described the dramatic increases in residential real estate values as a “froth in housing markets.” Greenspan went on to say:

      “The increase in the prevalence of interest-only loans and the introduction of more-exotic forms of adjustable-rate mortgages are developments of particular concern…some households may be employing these instruments to purchase homes that would otherwise be unaffordable, and consequently their use could be adding to pressures in the housing market.”

      Greenspan was warning that the loosening of lending standards could lead to disaster. And it did.

      With home prices again appreciating at percentages well above historic norms, many are wondering whether the market is again becoming “frothy.” Mortgage standards are much stricter now, however, than they were in 2005.

      The Urban Institute’s Housing Finance Policy Center issues a monthly index which measures the percentage of home purchase loans that are likely to default. A lower score indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards. A higher score indicates that lenders are willing to tolerate defaults and are taking more risks.

      Their July Housing Credit Availability Index revealed credit availability rose to 5.9%. For context, they went on to explain:

      “Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

      Here is a graph depicting the Urban Institute’s findings:

      Are Lending Standards Propping Up Home Prices? | MyKCM

      Bottom Line

      Though it may be slightly easier to get a mortgage today than it was a year ago, lending standards are nowhere near where they were during the build-up to the housing bubble.

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      Americans Rank Real Estate Best Investment for 5 Years Running! [INFOGRAPHIC]

      Americans Rank Real Estate Best Investment for 5 Years Running! [INFOGRAPHIC] | MyKCM

      Some Highlights:

      • Real estate has outranked stocks/mutual funds, gold, savings accounts/CDs, and bonds as the best long-term investment among Americans for the last 5 years!
      • The generations agree! Real estate is the best investment!
      • Generation X leads the way with 37% believing in real estate as the top investment.

      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.

      Will Your Current House Fit Your Needs in Retirement?

      Will Your Current House Fit Your Needs in Retirement? | MyKCM

      As more and more baby boomers enter retirement age, the question of whether or not to sell their homes and move will become a hot topic. In today’s housing market climate, with low available inventory in the starter and trade-up home categories, it makes sense to evaluate your home’s ability to adapt to your needs in retirement.

      According to the National Association of Exclusive Buyers Agents (NAEBA), there are 7 factors that you should consider when choosing your retirement home.1

      1. Affordability

      “It may be easy enough to afford your home today but think long-term about your monthly costs. Account for property taxes, insurance, HOA fees, utilities – all the things that will be due whether or not you have a mortgage on the property.”

      Would moving to a complex with homeowner association (HOA) fees actually be cheaper than having to hire all the contractors you would need to maintain your home, lawn, etc.? Would your taxes go down significantly if you relocated? What is your monthly income going to be like in retirement?

      2. Equity

      “If you have equity in your current home, you may be able to apply it to the purchase of your next home. Maintaining a healthy amount of home equity gives you a source of emergency funds to tap, via a home equity loan or reverse mortgage.”

      The equity you have in your current home may be enough to purchase your retirement home with little to no mortgage. Homeowners in the US gained an average of over $16,300 in equity last year.

      3. Maintenance

      “As we age, our tolerance for cleaning gutters, raking leaves and shoveling snow can go right out the window. A condominium with low-maintenance needs can be a literal lifesaver, if your health or physical abilities decline.”

      As we mentioned earlier, would a condo with an HOA fee be worth the added peace of mind in knowing that you do not have to do the maintenance work yourself?

      4. Security

      “Elderly homeowners can be targets for scams or break-ins. Living in a home with security features, such as a manned gate house, resident-only access and a security system can bring peace of mind.”

      As scary as that thought may be, any additional security and an extra set of eyes looking out for you, always adds to your peace of mind.

      5. Pets

      “Renting won’t do if the dog can’t come too! The companionship of pets can provide emotional and physical benefits.”

      Evaluate all of your options when it comes to bringing your ‘furever’ friend with you to a new home. Will there be necessary additional deposits if you are renting or moving into a condo? Is the backyard fenced in? How far are you from your favorite veterinarian?

      6. Mobility

      “No one wants to picture themselves in a wheelchair or a walker, but the home layout must be able to accommodate limited mobility.”

      Sixty is the new 40, right? People are living longer and are more active in retirement, but that doesn’t mean that down the road you won’t need your home to be more accessible. Having to install handrails and make sure that your hallways and doorways are wide enough may be a good reason to look for a home that was built to accommodate these needs.

      7. Convenience

      “Is the new home close to the golf course, or to shopping and dining? Do you have amenities within easy walking distance? This can add to home value!”

      How close are you to your children and grandchildren? Would relocating to a new area make visits with family easier or more frequent? Beyond being close to your favorite stores and restaurants, there are a lot of factors to consider.

      Bottom Line

      When it comes to your forever home, evaluating your current house for its ability to adapt with you as you age can be the first step to guaranteeing your comfort in retirement. If after considering all these factors you find yourself curious about your options, let’s get together to evaluate your ability to sell your house in today’s market and get you into your dream retirement home!

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