Blog :: 2018
Everyone knows that housing affordability has been negatively impacted by rising prices and increasing mortgage rates, but there is another piece to the affordability equation – wages.
How much a family earns obviously impacts how easy or difficult it is for them to afford to own a home. Because of an improving economy, wages are finally beginning to increase – and that dramatically affects home affordability.
According to the National Association of Realtors’ (NAR) September 2018 Housing Affordability Index, wages have increased in every region of the country:
After applying current salaries, home prices, and mortgage rates to their Home Affordability Index equation, the index, though still lower than this time last year (160.1 to 146.7), increased over the last month (141.2 to 146.7). For the complete methodology used by NAR, click here.
The percentage of income needed to own a home has also decreased each of the last three months. It currently sits at 17% which is substantially lower than historic numbers.
If you are a first-time buyer or a move-up buyer who believes that purchasing a home is not within your budget, let’s get together to determine if that is still true.
DID YOU KNOW? Since 1946, there have been 18 midterm elections. Stocks were higher 12 months after every single one. Every single one. That’s 18 for 18. Even though we’ve had every possible political combination in the past 72 years. Republican president years with Democratic Congress. A democratic president with Republican Congress. A Republican president and Congress. Democratic president and Congress. Since 1946, stocks have risen an average of 17% in the year after a midterm. (Marketwatch)
"You're gonna go a little bonkers if you work 120 hours a week." - Elon Musk
DID YOU KNOW? It is now rumored that Amazon will split its 'second headquarters' into TWO centers creating 25,000 jobs in each.....stay tuned. What is Amazon looking for? Skilled labor, housing, public transportation and infrastructure......and a few tax break perhaps? Amazon employs 45,000 people in Seattle alone. (WSJ)
DID YOU KNOW? Digital Real Estate is News Corp’s fastest-growing segment, contributing 44% of the total company (Earnings before Interest, Tax, Depreciation, & Amortization) EBITDA, almost 4X those of the company’s other segments individually largely due to the relatively low-cost nature of the business. Digital Real Estate accounts for around 45% of the company’s value, especially notable since the segment only accounts for about 14% of its total revenues. News Corp owns a 61.6% interest in the REA Group (Australia and Asia) and an 80% interest in Move Inc. (realtor.com in the U.S.). (Forbes)
With home prices on the rise and buyer demand still strong, some sellers may be tempted to try and sell their homes on their own 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 just some of the people with whom the seller must be prepared to negotiate with if they decide to For Sale by Owner (FSBO):
- The buyer who wants the best deal possible
- The buyer’s agent who solely represents the best interests 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
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 to discuss all that we can do to make the process easier for you.
A considerable number of potential buyers shy away from jumping into the real estate market due to their uncertainties about the buying process. A specific cause for concern tends to be mortgage qualification.
For many, the mortgage process can be scary, but it doesn’t have to be!
In order to qualify in today’s market, you’ll need a down payment (the average down payment on all loans last year was 5%, with many buyers putting down 3% or less), a stable income, and good credit history.
Throughout the entire home buying process, you will interact with many different professionals who will all perform necessary roles. These professionals are also valuable resources for you.
Once you’re ready to apply, here are 5 easy steps that Freddie Mac suggests to follow:
- Find out your current credit history & score – even if you don’t have perfect credit, you may already qualify for a loan. The average FICO Score® of all closed loans in September was 731, according to Ellie Mae.
- Start gathering all of your documentation – income verification (such as W-2 forms or tax returns), credit history, and assets (such as bank statements to verify your savings).
- Contact a professional – your real estate agent will be able to recommend a loan officer who can help you develop a spending plan, as well as help you determine how much of a home you can afford.
- Consult with your lender – he or she will review your income, expenses, and financial goals in order to determine the type and amount of mortgage you qualify for.
- Talk to your lender about pre-approval – a pre-approval letter provides an estimate of what you might be able to borrow (provided your financial status doesn’t change) and demonstrates to home sellers that you are serious about buying!
Do your research, reach out to professionals, stick to your budget, and be sure that you are ready to take on the financial responsibilities of becoming a homeowner.
DID YOU KNOW? Year-over-year gains in home prices fell below 6%, according to the latest S&P CoreLogic Case-Shiller National Home Price NSA Index. The index rose 5.8% from August 2017 to August 2018, down from last month’s annual gain of 6%. Yet home-price gains remain WELL above wage gains. (CNBC)
DID YOU KNOW? The number of new and existing houses and condominiums sold in Southern California during September dropped nearly 18% compared with 2017, the slowest September pace since 2007, mostly attributed to rising prices and interest rates. Sales fell 22% in September compared with August. (Sales usually fall about 10% from August to September.) Sales of newly built (Higher priced)homes were 47% below the September average dating back to 1988, while sales of existing homes were 22% below their long-term average. While the median sale price was up 3.6% year over year in September, the principal and interest mortgage payment on the median-priced home was up 14.2% because mortgage rates increased about 0.8 percentage point over that period. (CNBC)
"I don't expect a sharp turn in the housing market at this point." - Robert Shiller, Case-Shiller Index
DID YOU KNOW? Apple product prices are going up. Airlines are paying about 40% more for fuel than a year ago and raising fares. Trucking costs are up 7% annually. U.S. manufacturers are paying roughly 8% more for aluminum, 38% more for steel. 15% more for Chinese-made quartz countertops, 10% more for imported cabinets because of tariffs, than a year ago. Paint supplier Sherwin-Williams raised prices in its own stores up to 6% in October. A Big Mac costs 4.7% more and a Domino's Pizza 5.9%more. "They" say inflation is around 2%. Hmmmmm...... (WSJ)
"There are only 3 times you should rent a home instead of buy: 1) If you plan to move in 3 years or less 2) If you're not sure about your job 3) You plan to have kids or will need more space." - David Bach, AE Wealth Managment
According to a new study from Urban Institute, there are over 19 million millennials in 31 cities who are not only ready and willing to become homeowners, but are able to as well!
Now that the largest generation since baby boomers has aged into prime homebuying age, there will no doubt be an uptick in the national homeownership rate. The study from Urban Institute revealed that nearly a quarter of this generation has the credit and income needed to purchase a home.
Surprisingly, the largest share of mortgage-ready millennials lives in expensive coastal cities. These cities often attract highly skilled workers who demand higher salaries for their expertise.
So, what’s holding these mortgage-ready millennials back from buying?
Myths About Down Payment Requirements!
Most of the millennials surveyed for the study believe that they need at least a 15% down payment in order to buy a home when, in reality, the median down payment in the US in 2017 was just 5%, and many programs are available for even lower down payments!
The study goes on to point out that:
“Despite limited awareness, every state has programs that provide grants and loans to make homeownership more attainable, with average assistance in various states ranging from $2,436 to $21,171.”
With so many young families now able to buy a home in today’s market, the demand for housing will continue for years to come. If you are one of the many millennials who have questions about their ability to buy in today’s market, let’s get together so we can assist you along your journey!
DID YOU KNOW? 2020 could be the big year for electric big rigs. Truck makers are accelerating their electric truck projects toward launches in 2020, while TESLA told investors in June production of their Semi freight hauler should begin in the first half of 2020. In China, regulators are considering a long-term plan to replace 1 million diesel big rigs with cleaner trucks, including electric models, and some Chinese ports and cities are banning diesel trucks, which could significantly boost sales. Electric trucks could decrease road noise and air pollution dramatically (many trucks are diesel powered) and could elevate valuations of properties abutting highways and busy roads.... (Reuters)
DID YOU KNOW? One car-related event draws many of my wealthiest clients and now The Mille Miglia is coming to America. One of the most famous car races in the world, the original Mille Miglia was held quasi-annually in the 30 years between 1927 and 1957 on a 1000-mile circuit that formed a unique shaped loop between Brescia, Bologna, Rome, and Milan. A foreshortened (150-mile) version will be held in the U.S. from Oct. 25-27 celebrating American vehicles in the horse country of Virginia and Maryland surrounding Washington, D.C. A gala party will be held at the Italian Ambassador’s residence, Villa Firenze, a mansion in Rock Creek Park, a home formerly belonging to the Guggenheim family. (Bloomberg)
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