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      Blog :: 04-2018

      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. 

      House Prices: Simply a Matter of Supply & Demand

      House Prices: Simply a Matter of Supply & Demand | MyKCM

      Why are home prices still rising? It is a simple answer. There are more purchasers in the market right now than there are available homes for them to buy. This is an example of 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. This is currently happening in the residential real estate market.

      Here are the numbers for supply and demand as compared to last year for the last three months (March numbers are not yet available):

      House Prices: Simply a Matter of Supply & Demand | MyKCM

      In each of the last three months, demand (buyer traffic) has increased as compared to last year while supply (number of available listings) has decreased. If this situation persists, home values will continue to increase.

      Bottom Line

      The reason home prices are still rising is because 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.

      What Should You Look for In Your Real Estate Team?

      ?What Should You Look for In Your Real Estate Team? | MyKCM

      How do you select the members of your team who are going to help make your dream of owning a home a reality? What should you be looking for? How do you know if you’ve found the right agent or lender?

      The most important characteristic that you should be looking for in your agent is someone who is going to take the time to really educate you on the choices available to you and your ability to buy in today’s market.

      As the financial guru Dave Ramsey 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.”

      Do your research. Ask your friends and family for recommendations of professionals they’ve worked with in the past and have had good experiences with.

      Look for members of your team who will be honest and trustworthy; after all, you will be trusting them to help you make one of the biggest financial decisions of your life.

      Whether this is your first or fifth time buying a home, you want to make sure that you have an agent who is going to have the tough conversations with you, not just the easy ones. If your offer isn’t accepted by the seller, or they think that there may be something wrong with the home that you’ve fallen in love with, you would rather know what they think than make a costly mistake.

      According to the Home Buyer and Seller Generational Trends Report:

      Buyers from all generations primarily wanted their agent’s help to find the right home to purchase. Buyers were also looking for help to negotiate the terms of sale and to help with price negotiations.” Additionally, “Help understanding the purchase process was most beneficial to buyers 37 years and younger at 75 percent.”

      Look for someone to invest in your family’s future with you. You want an agent who isn’t focused on the transaction but is instead focused on helping you understand the process while helping you find your dream home.

      Bottom Line

      In this world of Google searches, where it seems like all the answers are just a mouse-click away, you need an agent who is going to educate you and share the information that you need to know before you even know you need it.

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