Buying January 9, 2023

How to make your homebuying dreams come true

The past couple of years have been a wild ride for the housing market. With historically low mortgage rates, buyers were entering the market at an unprecedented rate—a rate so fast that supply couldn’t keep up with demand. As the pandemic progressed, prices soared while homes were swept off the market within hours.

Eventually, mortgage rates increased as well, making 2022 the year for increases in both home prices and mortgage rates—a costly combination that caused many buyers to retreat to the sidelines hoping for better luck next year. But now that next year is here, many of the homebuying headlines are painting a grim picture of the housing market.

If your goals for 2023 include buying a home, you might be wondering if you’ve set yourself up for failure. But it’s not all doom and gloom out there. With a little planning ahead, and a whole slew of loan options and programs to offer, we can help you reach that 2023 goal of getting into the home of your dreams.

So, what can you do if you were hoping to make 2023 the year for homebuying success?

Try for a temporary buydown

Giving you the peace of mind that comes along with a fixed-rate mortgage, this option allows you to keep your payments low for the first year or two of your loan but still know exactly what all your future payments will look like.

An upfront deposit at closing allows your mortgage rate to essentially be “bought down” for a specified period of time. This upfront deposit can come from sellers or builder partners. We offer five different Rate Reduce programs to help you ease into your new home and mortgage payment as you build equity.

It’s often during the first few years in a new home where owners are looking to make purchases that help to make a house a home—furniture, fittings and accessories, paint projects, etc.—but it’s not necessarily an ideal time to be adding extra costs to your budget. Our Rate Reduce programs can help to give you a little breathing room while you’re just getting acclimated to your new monthly mortgage payment.

Amplify your options with an ARM

Similar to our buydown programs, ARMs  (adjustable-rate mortgages) offer the potential for lower monthly payments at the beginning of the loan. With an initial fixed-rate period (usually for five, seven or 10 years) featuring a low introductory rate, ARMs can be an attractive option for those looking for and adjustment period (pardon the pun) with their mortgage payments.

This initial fixed-rate period is followed by a variable-rate period for the remainder of the loan. Though ARMs aren’t for everyone, they can be an excellent option for those who don’t plan on staying in their home for longer than five to 10 years.

If you do plan on staying in your home for longer than 10 years, there’s also always the opportunity to refinance when you’re getting close to the conclusion of your fixed-rate period. The risk with relying on refinancing is that you’ll be at the mercy of the market at that time. But if you keep an eye on current rates, you might be able to find an ideal time to refinance. Working with a good loan officer is key, too. Our loan officers will even reach out to you if they foresee an opportunity that could be beneficial for you.

Don’t forget about down payment assistance programs

Are you a first-time homebuyer? If so, there might be a down payment assistance program that could help give you a boost. Sound too good to be true? There are tons of options out there and you could end up being surprised by your eligibility. From state to federal programs to neighborhood- to occupation-specific options, both government agencies and private organizations have programs worth investigating.

A down payment can be a hurdle for many first-time buyers. There are instances where buyers are ultimately paying the same amount in rent as their monthly mortgage would cost, but just don’t have a large enough down payment to make buying a possibility. This is where a down payment assistance program proves to be invaluable—allowing buyers to start building equity sooner.

Consider community lending

These types of programs create alternatives for buyers who don’t necessarily meet the industry-standard, traditional mortgage qualifications. With more flexible guidelines, someone who might not have otherwise been approved for a mortgage could find the financing they need to become a homeowner through a community lending option.

We’re also seeing more of these programs not limiting requirements to income but looking at lending areas that may be underserved as a whole. It’s worth inquiring whether the neighborhood you’re looking to buy in would fall under this category. Your loan officer will be able to find that information out for you.

Turn your current home into your dream home

Maybe you’ve found yourself a fixer-upper, but you’re concerned with how you’re going to cover the costs of the much-needed repairs. Or maybe you’ve stretched your home budget to the limit (or know that you will once you make your move) after your down payment, closing costs and now new monthly mortgage payment, and you’re wondering how you’re going to fill your new rooms.

First of all, it’s fine to take your time with this. Don’t expect to have every room in your new home perfectly furnished right after you move in. If you’re going from a two-bedroom apartment to a three-bedroom home, it’s likely it’s not just the extra bedroom that you’re going to need to fill with new furniture. You might be looking at the addition (all at once) of a family room, dining room, living room, basement, back patio—all kinds of furniture-less new rooms.

A personal loan allows you to make some of these big-ticket purchases together with a set budget in the amount of your loan. You’ll know exactly how much your monthly payment will be, so you don’t have to worry about fluctuating bills. If you put these larger purchases on a credit card, but still need to use the card for other purchases before paying off your balance entirely, you’ll be unsure of what your bill will look like each month.

Personal loans also typically offer significantly lower interest rates than credit cards, as well as more time to pay off your purchase or project. While some credit cards offer balance transfers or a 0% APR for an introductory period, even the best of these promotional offers extend out for about only 15-21 months. Then once this introductory period is over the APR generally shoots up into the double digits, with some of the best-rated introductory offers adjusting to as high as a 27.99% variable APR. Personal loans offer a fixed rate for a specified number of years.

HELOC for home updates

If you’re already a homeowner and hoping to move because you’re looking for an upgraded kitchen, bathroom, extra bedroom—you name it—you might be able to use a HELOC (home equity line of credit) to make some of those updates to your current home without having to move.

A traditional HELOC is a revolving line of credit that turns your equity into money you can use for almost anything. Using your property as collateral, a HELOC sometimes comes in the form of a second mortgage (but not always). The amount you can borrow will depend on the amount of equity you’ve built up.

There are non-traditional HELOCs available as well. These function slightly differently, as the full amount is deposited into your bank account after loan approvals, so you aren’t paying as you go. These HELOC options are still a line of credit and typically offer the flexibility to draw more funds once you’ve started to pay back your initial deposit.

With a HELOC, you can use your home to improve your home—and bonus points if these improvements also boost its overall value. We have a great resource for gathering both estimates of potential projects as well as information regarding what your return on investment (ROI) might look like. Our article can help you decide when to stick with the basics and when to consider springing for a luxury version.

Conclusion

When it comes to getting into your dream home—or fixing up your current home to make it everything you’re looking for—there are so many options. A good loan officer will be able to help you clear some of the homebuying hurdles you’re facing. Make sure to speak with someone you trust to help you navigate all the options available to you.

 

https://www.grarate.com/article/making-your-homebuying-dreams-come-true

Home ImprovementSelling December 20, 2022

Thinking of selling in the spring? Here are home improvement projects you should tackle now (and which to skip)

Sellers gearing up for the spring home shopping season need to roll up their sleeves now and spruce up their homes if they want to attract a shrinking pool of buyers. Investing in improvements, maintenance and repairs could pay off when it’s time to sell. New research conducted by The Harris Poll finds a majority of recent sellers (65%) take on at least two home improvement projects to prepare their home for sale, while Thumbtack data finds they can invest about $5,400 on average when hiring a professional to complete the most common projects.

The survey finds that sellers who sold their home within the past two years most commonly completed interior painting (40% did this), carpet cleaning (35%) and landscaping (33%) before listing their home for sale.

Data from Thumbtack shows the average cost of those projects adds up to $5,388, but can average as much as $8,249 in metro areas like SeattleTacoma and as little as $4,102 in metro areas like Miami–Fort Lauderdale. In addition to location, costs for these home improvements can vary based on the size and scope of the project. For instance, smaller landscaping projects, such as flower planting, lawn upkeep and shrub trimming, can cost several hundred dollars, while larger projects involving tree planting and sprinkler installation can cost thousands.

“These projects can instantly boost a home’s online curb appeal,” said Amanda Pendleton, Zillow’s home trends expert. “An inviting outdoor space, clean floors and a fresh coat of paint — particularly in the right color — can deliver a powerful signal to potential buyers that a home is well-maintained and contemporary. While sellers may be reluctant to shell out for these projects up front, those improvements can ultimately pay off, either by helping a home sell faster or for more money.”

Nearly 3 in 4 recent sellers (74%) believe the improvement projects they completed to prepare their home for sale helped their home sell. The top projects that recent sellers say helped sell their homes were interior painting (27%) and landscaping (21%).

“A well-maintained home is one of the best ways for homeowners to attract buyers,” said David Steckel, home expert at Thumbtack. “Thumbtack research finds a well-maintained home can sell for about 10% more than a similar home in average condition. Buyers are making life’s biggest investment, and they want the peace of mind that they’re investing in a home that was well cared for.”

When considering which projects to skip, only 11% of recent sellers thought appliance repair or replacement, and roof repair, maintenance or cleaning helped sell their home. Meanwhile, fewer than 1 in 5 of recent sellers (17%) believe completing a kitchen renovation to prepare their home for sale helped sell it. While costs vary depending on the work done and materials chosen, this project can average $10,355.

Neglecting needed repairs and minor cosmetic updates can lead to seller regret, particularly in today’s shifting market. The Zillow survey found that 30% of recent sellers think more home improvements or repairs would have helped them get a higher sale price. Separate research finds that about 2 in 3 real estate agents believe today’s sellers are mistaken if they think they don’t need to make home improvements before selling.

Late April is traditionally the best time to list a home for sale, which means now is the time to get a jump on any repairs or improvements. Previous research found that the top seller’s regret is that they didn’t start the process of preparing their home for sale sooner. And one-quarter of sellers who made at least one home improvement before listing their home for sale say it took longer than expected.

Today’s housing market is far different than the frenzied pandemic era of bidding wars and record-fast sales. A recent study finds that homes are now lingering on the market for a median of 54 days, 45% longer than last year. However, the listings that are finding buyers are doing so in 18 days nationwide, suggesting the most appealing homes are still moving very quickly. A trusted local real estate agent can help sellers decide which projects are worth the investment based on the market in their neighborhood, and Thumbtack can help homeowners find a local professional to get the job done.

 

If you need financial assistance with preparing your home to list, call me! With RealVitalize and Coldwell Banker Realty, we can get the job done with no out of pocket expense to you.

-Suzanne

Market TrendsReal Estate December 13, 2022

NorCal Sales & Trends for November 2022 vs November 2021

NorCal Sales & Trends for November 2022 vs November 2021 For Sale / Sold / Days on Market / Sold vs Original List Price / Median Price.

Information provided by David Woods of Lennar Title Company. Click here for a better look!

BuyingMarket TrendsReal EstateSelling December 6, 2022

Home buyers’ and sellers’ biggest misconceptions in a shifting market

The housing market is rapidly rebalancing, but buyers and sellers are struggling to keep up with the changes. A new survey of real estate agents finds the most common misconception among would-be buyers is that home prices will crash, while sellers are holding on to outdated expectations of bidding wars and quick sales.

Nearly half of agents (46%) say the biggest misconception among aspiring home buyers is that home prices will significantly fall, while more than a third of agents (35%) say prospective buyers mistakenly think they should wait for high mortgage rates to come down.

“Buyers may think it’s better to wait out the market, but in reality, there is more opportunity in this market than I have seen in the past five years if buyers approach real estate as a long-term investment, ” said Michael Perry, an agent who leads The Perry Group in Salt Lake City, Utah. “If prices or mortgage rates take a meaningful dip, all those sidelined buyers will likely come rushing back to the market, driving up competition and prices. If a buyer can purchase today, they have bargaining power, more options and more time to find the right home, instead of being rushed into a purchase they might regret.

Research finds a rapid drop in home values is unlikely. Home value forecasts predict a flattening of home values over the next year, with prices increasing 1.3% by September 2023. Fewer new listings will keep upward pressure on prices. Meanwhile, some housing economists believe mortgage rates are more likely to rise than to fall as inflation pressures remain strong.

With volatile mortgage rates, 44% of agents say the most important action first-time buyers can take is to line up financing before home shopping.  First-time buyers should also understand what they’re willing to compromise on before shopping for a home. More than a quarter of agents (28%) say the biggest mistake first-time home buyers make is failing to separate their wants from their needs.

Buyers do appear to be taking advantage of today’s more favorable market. Nearly 3 in 5 agents say buyers are taking more time to consider a home (56%) and making offers below list price more often (55%). More than 40% of agents say today’s buyers are including more contingencies in their offers (43%), such as inspection and appraisal contingencies designed to protect buyers from unexpected costs.

Sellers, meanwhile, may be holding onto outdated expectations. A vast majority of agents say it’s a common belief among sellers to expect multiple offers on their home (81%), a price above market value (79%), a quick sale (79%) and no need to cut their price (74%).

“Sellers can no longer put a for-sale sign outside their home and expect the offers to pour in,” said Koby Sway, an agent with The Briley Team in Omaha, Nebraska. “They have to roll up their sleeves and make necessary repairs and home improvements before listing their home for sale. And it’s more important than ever to get the pricing right when competing against other sellers for a smaller pool of buyers.”

Nearly 3 in 4 agents say pricing a home correctly is the most important seller strategy (73%). Competitively priced listings are going under contract in 19 days nationwide, 10 days faster than they were prior to the pandemic, while other homes are lingering on the market a median of 54 days. More than a quarter of sellers have been forced to cut their home’s listing price (28%), the highest share since 2018.

Real Estate November 30, 2022

Real estate is the safest investment you can make today, millionaires say—Here’s why

If not in stock and bond markets, where are affluent consumers currently parking their wealth? The answer to that question can be a lot of things: art, handbags, jewelry. One should always check with their investment advisor, but in reality, luxury real estate is considered one of the safest long-term investments one can add to their portfolio.

This year, my team at Coldwell Banker put a closer lens on the habits and sentiments of the affluent to get a pulse on the top trends currently dominating the luxury landscape. We conducted a survey of more than 2,000 U.S.-based high-net-worth consumers, paired with our annual fall report newly dubbed, “The Trend Report.”

80% of the respondents agree that real estate is a safe investment. In addition, consumers are more than three times more likely to think that 2023 will be a better time to invest in real estate than was 2022—rising by a whopping 42% from only 11% a year ago.

Together, these insights help us better understand what else is driving affluent consumers’ desire to invest in real estate, where they’re purchasing properties, and their attitudes on the value of a trusted advisor.

Through the Coldwell Banker Global Luxury program, our affiliated agents sold $267 million in luxury homes sales every day during 2021—up 59% from 2020. With the guidance of our luxury specialists, clients have been able to reap huge returns on the sale of their homes by making property enhancements—in addition to installing chic furnishings and lush landscaping—paving the way for them to place those profits growing their real estate investment portfolio.

SEEKING STABILITY

Affluent consumers are gravitating towards real estate that gives them financial, emotional, and psychological security.

I spoke to industry legend Jade Mills, president of Jade Mills Estates and Coldwell Banker Global Luxury Ambassador, about her firsthand expertise in the luxury market. According to Jade, “luxury buyers still have leverage to purchase investment properties, with many of them taking advantage of lower prices in areas where the market is softer.”

Real estate has always been one of Americans’ favorite long-term wealth-building assets—and it shows in our survey. More than 77% respondents currently own an investment property, with nearly two-thirds of them owning two or more investment properties.

“Real estate is the best investment one can ever make,” noted Jade. “I don’t just sell property, I own property too, and it has done nothing but go up. For example, there are certain areas in California where prices never really go down. You just don’t make that kind of return on investment in the stock market.”

Not only can a long-term investment in real estate generate income to obtain financial security, but it also creates a path to generational wealth. More than 45% of survey respondents say they purchase real estate as an inheritance for their children.

SHIFTING LIFESTYLE FOOTPRINTS

Many wealthy buyers today are looking for smaller secondary homes and investment properties, particularly in traditional centers of luxury. 72% of survey respondents who are planning a home purchase in the future said that the new home would be a second residence, rental property, or vacation home.

“People want homes that are move-in perfect; there’s currently a sweet spot for homes priced between $3 to $4.5 million in Southern California,” Jade explained. “Not only that, but the neighborhood, schools, and community amenities are all major factors that buyers look at when purchasing a home. As real estate agents, we keep up with these insights to be ‘in the know’ for our clients.” Again, for true investment guidance, one should still seek the opinion of their investment advisor.

Interestingly, 25% of respondents who purchased a home during the pandemic were dissatisfied, and location was found to be one of the primary drivers of their discontent. Nearly 41% of respondents cited that their next purchase would be based on investment opportunity, eyeing prime locations like New York and California.

Among their reasons? 40% said that quality of life remained at the top of their priority list, underscoring the long-term strength of these historic epicenters of wealth.

PROFESSIONAL GUIDANCE

The unparalleled advice and white glove service of a trusted advisor when buying or selling a home has never been more vital than today. Nearly 90% of survey respondents have used a real estate agent to assist them in the purchase of their home, and plan to do so again in the future.

Star agents like Jade have quickly become the key to aspirational lifestyles. These agents understand luxury buyers’ unique needs for privacy and have the connections to access the other specialized amenities they desire.

“The deep connections I’ve built—both in real estate and across other luxury sectors within fashion, design, exotic cars, etc.—have helped me deliver incomparable service and expertise to my clients that keep them coming back,” Jade said.

GOING FORWARD

Despite the headlines, the trends tell a clear story about the resiliency of luxury market segments today and their value beyond the price tag. As buyers seek stability, safe-haven investments, and security, the demand for luxury continues to drive the resilience of the market.

To read the full Trend Report and learn more about Coldwell Banker’s exclusive luxury insights, please visit https://blog.coldwellbankerluxury.com/the-trend-report-2022.

Michael Altneu is vice president for Coldwell Banker Global Luxury. Follow Michael at @cbgl.michael on Instagram and @MAltneu on Twitter.

Uncategorized November 16, 2022

7 Reasons It’s Worth Buying a House at the End of the Year

The end of the year is upon us, and you still haven’t found a new home. Friends and family are likely advising you to put your real estate search on pause until spring, but something tells you this isn’t the best idea.

This is definitely a time to go with your instincts and keep searching, as your dream home — and an amazing deal on it — might currently be on the market or soon making its debut. GOBankingRates spoke with several real estate agents who shared seven advantages of buying a house at the end of the year.

Connect With a Highly Motivated Seller

“Ask yourself this, who thinks it is a good idea to put their home on the market around the holidays or sell their home so they have to move during the holidays?” said Greg Hriso, a real estate agent at Homie Colorado. “Typically, a more motivated seller.”

During this time of year, he said buyers can take advantage of the opportunity to pick up a home with little-to-no-competition.

“Once the snow flies, most sellers still on the market have a pretty important reason for selling,” he said. “Otherwise, why deal with strangers with snow on their shoes touring your home at inconvenient times?”

If you’re concerned about the affect rising interest rates will have on your monthly payment, he said buying at this time of year can help you save money.

“There is also a better chance of getting seller concessions to buy down the interest rate this time of year,” he said.

Score Builder Incentives

“Depending on a home builder’s fiscal year, there may also be more incentives to get existing inventory off their books,” Hriso said. Therefore, he said buyers might be able to get some of the best builder incentives of the year to move into a brand new home.

“One of the best deals I ever got for a client was on a builder’s existing inventory that they really wanted closed before December 31,” he said. “The client and I still talk about what a great deal that was every time we see each other.”

Be Home for the Holidays

“I have had buyers that wanted to close a week before the major holidays like Thanksgiving and Christmas to be able to enjoy the city and host in their new homes,” said Andy Feiwel, a real estate agent with Compass in New York City. “New York City is always an extremely festive and vibrant place during the holidays with window displays, tree lighting ceremonies and lots of socializing and parties.”

Whether you happen to live in New York City or elsewhere, securing your new home for the holidays can be an amazing gift to yourself and your family. Host a gathering or simply enjoy the comfort of knowing you have your own oasis to come home to amid the chaos of the season.

Enjoy Tax Benefits

Buying a home at the end of the year offers a huge tax advantage, said Ron Wysocarski, a real estate broker and CEO of the Wyse Home Team Realty in Florida.

“The benefit is the ability to save tax from property taxes or by deducting the mortgage interest,” he said. “The seller benefits from minimizing deductions and is therefore always open to discussion.”

He said even accepting a loss that will balance their income can be acceptable to a seller. “The transfer of ownership results in significant tax advantages for both the seller and the buyer during this [time of] year,” he said.

Cash In on an Income Property

If you’re thinking of purchasing an income property before the end of the year, Ryan Pineda, CEO of Tykes, said this can be a lucrative idea.

“For many investment properties, you have the opportunity to do a cost segregation and get a huge write-off for bonus depreciation,” he said. “Tax write-off is a huge advantage before the end of the year.”

See the Property at an Off-Peak Season

In many parts of the country, the end of the year brings less-than-ideal weather. This gives you a unique advantage, according to Michael McGivern, a real estate agent with Keller Williams Integrity Lakes, because it’s a lot easier to make a home look pristine in the summer months.

“When homes are on the market in quarter four, suddenly, you realize how daunting raking the front and back yard is, there are a couple of rough patches in desperate need of fresh sod and there is a lot of moisture in those windows in need of replacement,” he said. “Ownership comes with home maintenance, and people who buy in the summer often realize their home isn’t faultless in the fall.”

If you find a place that looks great at the end of the year, he said you can probably feel confident it will look even more amazing next summer.

Get All the Help You Need Without a Wait

Moving is hard work, but during peak homebuying months, it can be hard to find professionals with availability to take on new projects.

“Due to the lower demand for movers and contractors in the colder months of the year, you should have no problem getting help,” said Cameron Berens, a real estate agent with B&B Home Advisors in Kentucky. “Whether it’s hiring movers, or getting that kitchen remodel started right away, the wait time should be less this time of year.”

 

By Jennifer Taylor

November 15, 2022

 

Uncategorized November 16, 2022

Mortgage rates are soaring. Is it still OK to refinance your home?

Mortgage rates, over 7% or so, are at their highest levels in 20 years and loan applications are down. So, it should follow, that homeowners looking to refinance loans would also be headed to the sidelines in droves.

But according to experts, it might still make sense for homeowners to refinance. Why? Rates, even at current levels, can still be a decent deal compared to alternatives.

“People would still be refinancing if they need the cash, so they are withdrawing equity, even at much higher rates. ​This is (still) cheaper than other forms of credit,” Richard de Chazal, macro analyst at William Blair & Company, said in a statement.

According to Freddie Mac the current mortgage rate on a 30-year fixed mortgage surpassed 7% last week. With climbing rates, applications for mortgages fell 1.7% for the week ending October 21, but only because they were so low to begin with — down 86% from a year ago, according to Mortgage Bankers Association.

Not great news for those in the business of refinancing mortgage loans. But many homeowners still need the money and refinancing may still be a good way to raise cash.

According to Black Knight, there are currently about 133,000 U.S. homeowners who can save about $325 off their monthly payments by lowering their rate to 7.08%, the smallest population since 2000, when the analytics company started tracking this metric. (This population of homeowners got their mortgage from 2008 or earlier.)

To be sure, many homeowners sit with a mortgage lower than today’s average causing refinancing to be less attractive. There are, though, a few circumstances when refinancing can be helpful.

The first is for someone struggling with their finances.

“It’s people that are consolidating and using their mortgages to lower overall debt costs but that’s not going to make sense for the average person that’s holding a 2.75% mortgage now from well over a year ago,” Tim Pagliara, Chief Investment Officer at CapWealth, told Yahoo Finance in a phone interview.

The homeowner, who is willing to take a higher mortgage rate, believes “it’s still cheaper to borrow against your home than it is to have an 8% car loan,” Pagliara added.

Following two years of stratospheric home price appreciation, some borrowers may be willing to eat a higher mortgage rate when using a cash-out refinance option, this is a type of mortgage refinance where you replace your existing mortgage with a larger mortgage and your lender gives you the difference in cash.

“You could borrow up to 80% of the value of the house on a traditional conventional or FHA loan on a cash or refinance. You’re just borrowing on a certain percent of equity on the value of the property,” Tina Pecoraro, producing branch manager at Nationwide Mortgage Bankers Inc, told Yahoo Finance.

Another potential borrower, who would also consider refinancing, has a mortgage that’s about to end.

“Homeowners with shorter duration mortgages could be refinancing for longer duration to pay less, so again​, it frees up some cash without perhaps removing equity” Chazal said. For example: extend a traditional 30-year mortgage that has only 10 more years to go.

“We have seen volume drop on the refinance side,” Pecoraro said. But “we are seeing refinancing where people are looking to pay off high interest credit card debt or do home improvements instead of taking out a home improvement loan because those rates are still higher than where rates are today.”

Pecoraro, though, is optimistic that the refi business will claw its way back as the industry faces more layoffs.

“It depends where the rates turn back around,” he said. “Rates will one day go down and again, of course that’s just how the market is. I’ve been doing this for about 18 years, rates will go back down again.”

Market TrendsReal Estate November 8, 2022

Will Homeownership Soon Be A Thing Of The Past? The Strategy Millennials Are Using To Enter Real Estate Market

As the economy teeters on the brink of a recession, potential home buyers wrestling with high-interest rates, low affordability, and overpriced homes are asking themselves how to build the wealth they need to purchase their first primary residence.

According to a consumer insights report issued by tech-enabled real estate company Mynd, millennials have found the answer.

A growing number of young adults are prioritizing “rentvesting” over homeownership.

What is Rentvesting?

Mynd says 43% of adults under the age of 40 are considering becoming “rentvestors” — the act of prioritizing buying an investment property (while renting a home) before a primary residence, in order to shore up the funds needed to purchase their dream homes.

The strategy refers to investing in, or buying and renting out an investment property in an affordable, up-and-coming area, while continuing to pay rent for your primary residence in your preferred location.

Naturally, the idea of owning investment homes to complement the primary residence has been around for a long time, but millennials are making an effort to control the expanding industry with a variety of instruments, like micro-investing, at their disposal.

How do I Rentvest?

It’s easy. And, Benzinga has the tools — check out how you can invest in a rental property for as little as $100 (or more, depending on your appetite). Really, it’s that easy.

The trend, which first gained popularity in Australia’s main cities, reflects how young people are unwilling to lower their standards of life in order to participate in the real estate market.

The goal of rentvesting is to safeguard your financial future without compromising your way of life. If done correctly, rentvesting’s diversification strategy enables you to live where you want, rather than relocating to a neighborhood where you can afford to buy a house.

 

BuyingMarket Trends November 8, 2022

Buyers Embrace Adjustable Mortgages as Rates Surpass 7%

Rising interest rates have increased the average monthly loan payment by a whopping $1,000 year over year.

With the rate for a 30-year mortgage rising to 7.08% this week—the highest average since April 2002, according to Freddie Mac—the average monthly loan payment is now $1,000 more than a year ago, Nadia Evangelou, senior economist and director of forecasting for the National Association of REALTORS®, writes on the Economists’ Outlook blog.

That’s prompting a sharp pullback in the housing market as home buyers digest the higher rates. Mortgage applications for home purchases—a gauge of homebuying activity—are nearly half of what it was a year ago, the Mortgage Bankers Association reported this week.

Trying to snag a lower rate, more home buyers are reaching for an adjustable-rate mortgage, which tend to have lower introductory rates for a set period of time before resetting. Though ARMs are viewed as a riskier loan product, home buyers are being tempted: This week’s rate for a 5-year ARM is 5.96%. The share of home buyers applying for an ARM has more than quadrupled since the start of the year, MBA reports.

Higher mortgage rates are creating a “greater stagnation in the housing market,” says Sam Khater, Freddie Mac’s chief economist. “As inflation endures, consumers are seeing higher costs at every turn, causing further declines in consumer confidence this month. In fact, many potential home buyers are choosing to wait and see where the housing market will end up, pushing demand and home prices further downward.”

S&P’s CoreLogic Case-Shiller Index shows home prices fell at a record pace in August, dropping 2.6% in monthly comparisons from a year ago. Existing-home sales also are sliding, down 24% year over year in September, according to NAR data. And problems continue to brew for the new-home market, which saw sales plunge nearly 18% in September compared to a year earlier, prompting home builders to press the brakes on future construction, the Commerce Department reports.

Freddie Mac reports the following national averages with mortgage rates for the week ending Oct. 27:

  • 30-year fixed-rate mortgages: averaged 7.08% with an average 0.8 point, up from last week’s 6.94% average. Last year at this time, 30-year rates averaged 3.14%.
  • 15-year fixed-rate mortgages: averaged 6.36%, with an average 1.4 point, up from last week’s 6.23% average. A year ago, 15-year rates averaged 2.37%.
  • 5-year adjustable-rate mortgages: averaged 5.96%, with an average 0.3 point, increasing from last week’s 5.71% average. A year ago, 5-year ARMs averaged 2.56%.

Freddie Mac reports commitment rates along with average points to better reflect the upfront costs of obtaining the mortgage.

 

By: Melissa Dittmann Tracey

BuyingMarket Trends November 3, 2022

Yikes! Every Time Mortgage Rates Rise, Buyers Need To Make This Much More To Afford a Home

For home shoppers who thought 2022 would be their year, a pervasive sinking feeling is taking hold. They’re realizing the monthly payment for a home they thought they could afford—perhaps just barely—is now hundreds or even thousands of dollars more than they would have paid earlier this year. Their dream home is getting further and further out of reach.

The pain these higher rates have wrought on the housing market is already showing up in the high numbers of buyers who can no longer qualify for a mortgage—or are simply giving up as their purchasing power continues to plummet. Sellers are slashing prices or pulling their homes off the market. Home sales are dropping, and homes are sitting on the market longer.

And sure, we all realized that rising mortgage rates were going to mean higher monthly payments. But how much, exactly? We wanted to give prospective homebuyers a real road map to what’s going on—and what’s going to happen in the coming weeks and months. So the Realtor.com® data team crunched the numbers to find out just how much turmoil each mortgage rate increase is having on homebuyers.

How much does the pool of homebuyers shrink with each percentage point increase in the mortgage rate? And how much more do households need to earn in order to make monthly payments on a new home?

“People are just stopped in their tracks, watching, waiting to see what happens next,” says Rocke Andrews, a mortgage broker at Lending Arizona in Tucson. “It’s basically a frozen market until prices come down more or rates come down, or both.”

The numbers tell the tale: Roughly 3 out of every 4 U.S. households can no longer afford the monthly mortgage payment on a median-priced home of $427,250 with a mortgage rate of 6.7%. (This was the median list price in September using the most recent Realtor.com data.) Mortgage rates have more than doubled since the start of the year, rising from the low 3% range to nearly 7% for 30-year fixed-rate loans, according to Freddie Mac.

That means buyers need a six-figure household income of about $124,000 to buy the median-priced home, according to our analysis. However, just one year ago, when rates were about 3%, buyers would have needed to earn only about $89,000. That difference equates to around 20 million U.S. households that are priced out of the median-priced home in the span of a single year.

“A lot of people are very frustrated. Their income has stayed relatively stable. Their savings are roughly the same. But through no fault of their own, the costs are going up,” says Shmuel Shayowitz, the president and chief lending officer at Approved Funding in River Edge, NJ. “They’re rightfully very focused on the monthly payment—and it just keeps rising.”

If rates go up to 8%, which some real estate experts are predicting, buyers would need an annual household income of $137,356 for a median-priced U.S. home.

At 10%, they would need to bring home nearly $160,000 a year. Also at 10%, the median-priced home would be accessible to only about 1 in every 6 U.S. households.

To come up with our findings, we calculated the monthly mortgage payment for a median-priced home with a 6.7% mortgage rate on a 30-year fixed loan. This includes taxes and insurance and assumes buyers put down 10%. It works on the assumption that homebuyers are spending no more than the recommended max of 30% of their gross income (what they earn before taxes and deductions) on housing.

Higher mortgage rates have cut into affordability much more than most folks realize.

“When you reduce or raise interest rates by 1%, it increases or decreases buying power by about 12%,” says Andy Walden, vice president of enterprise research and strategy at Black Knight, a housing analytics company.

The real-life version of that math: If someone can afford just a $500,000 home at a 3% mortgage rate, when the rate rises to 4%, the same buyer would be looking at being able to afford something closer to $440,000.

As mortgage rates have climbed, and buyers don’t have as much money to spend on homes, prices have slowly begun correcting. Sellers have been forced to reduce asking prices, and buyers are negotiating them down even further.

“Prices will respond, as they already have,” says George Ratiu, senior economist and manager of economic research at Realtor.com.

Though it’s not a quick process, he warns. “It will take a while to drop below where they were a year ago.”

Across the nation, home prices are either plateauing or dipping, especially in the markets that became red-hot in the past few years. These are places like Austin, TX, and Phoenix, which became ultrapopular during the COVID-19 pandemic.

It isn’t just higher rates that are problematic. The lack of homes for sale is responsible for sky-high home prices. There are far more people in the market than there are homes available for them. That keeps prices high—and the remaining buyers frustrated.

And because incomes have not kept up, there’s been a growing affordability chasm.

Low mortgage rates of the past decade conveniently masked that problem, to some extent. Since rates were lower, buyers could purchase more expensive homes and still have reasonable payments.

“The incredibly low rates in the 2010s allowed people to stretch their budgets,” says Ratiu. Today, “mortgage rates surging at 20-year highs are making it prohibitively expensive for many buyers to afford a home purchase, and compounding the challenge of rising inflation cutting workers’ wages.”

As challenging as the housing market is right now, it’s been worse. When it comes to mortgage rates, much worse.

Following the 1979 energy crisis, the global economy plunged and high oil and gas prices pushed inflation to double-digit highs. That spurred the Federal Reserve to raise interest rates far beyond any point since. Mortgage rates followed. At their peak, mortgage rates were nearly 19%, according to Freddie Mac data.

That’s more than 2.5 times the rates now. Yet, people continued to purchase homes.

Rates came down slowly, through the late 1980s and early 1990s. Rates hovered near 6% during the 2000s, then dipped below 5% and stayed there during most of the 2010s. It wasn’t until the pandemic that they dropped below 3% for the first time in Freddie Mac’s recorded history, fueling the rapid home price growth.

However, home prices were much lower in the 1980s, when mortgage rates were in the double digits

Buyers in the 1980s “love to remind us” how high rates were when they purchased homes, Ratiu says. But median home prices in the early 1980s were in the $60,000 to low $70,000 range, according to National Association of Realtors® sale price data for existing homes (excluding new homes). Home prices today are about six times higher.

Walden, of Black Knight, looks at home prices compared with median household incomes over time. This helps him to figure out how much of their income buyers need to spend to become homeowners.

In January 2021, buyers spent about 20% of their income on becoming homeowners. Now, it’s nearly 40%.

“That’s the highest it’s been since 1984,” he says. “That’s significantly higher than it’s been over the last couple of years.”

Since 2000 or so, home prices have outpaced incomes by so much that mortgage rates largely took a backseat to a home’s price tag.

“When you go from that 18% interest rate environment in the early ’80s, and you get it all the way down to 3%, obviously, that has massive impacts on the amount of home that you can buy with the same amount of income,” Walden says. “And so if you look at the last time home affordability was at the levels it is today, interest rates were actually at 13%.”

Walden says home prices are roughly 35% higher than what current incomes should support. For the housing market to truly come back into balance—a combination of home price adjustments and higher incomes—it could take years.

Rates could continue to rise—making it even more challenging for already stretched buyers—but not to the levels seen in the 1980s.

“I could see 7.5% or, in more extreme cases, 8%,” Ratiu says. “In the next six to eight months, I don’t see them coming down.”

This doesn’t mean that those who need to purchase homes won’t ever be able to do so.

Mortgage lender Shayowitz says his clients are getting more creative. They’re trying to increase their down payments so their loans, and therefore monthly payments, will be lower and bringing on co-signers to help them qualify for mortgages. They’re also exploring adjustable-rate mortgages, where the interest rate is lower for a set period of years in the beginning of the loan and then readjusts down the road.

“It needs to be a situation where buyers sit down with their agent. You talk about location, you talk about affordability, you have to strategize,” he says. “People who do that are still able to make it work.”

 

By Evan Wyloge

Oct 17, 2022