Category Archives: buyer

Building Family Wealth Over The Next 5 Years

Building Family Wealth Over The Next 5 Years | Keeping Current Matters

As the economy continues to improve, more and more Americans are seeing their personal financial situations also improving. Instead of just getting by, many are now beginning to save and find other ways to build their net worth. One way to dramatically increase their family wealth is through the acquisition of real estate.

For example, let’s assume a young couple purchases and closes on a $250,000 home in January. What will that home be worth five years down the road?

Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists every quarter. They ask them to project how residential prices will appreciate over the next five years. According to their latestsurvey, here is how much value that $250,000 house will gain in the coming years.

Family Wealth Earned with Home Equity | Keeping Current Matters

Over a five year period, that homeowner can build their home equity to over $40,000. And, in many cases, home equity is large portion of a family’s overall net worth.

Bottom Line

If you are looking to better your family’s long-term financial situation, buying your dream home might be a great option.

Home Prices: Where Are They Headed Over The Next 5 Years?

Home Prices: Where Are They Headed Over The Next 5 Years? | Keeping Current Matters

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey.

Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where they believe prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey:

Home values will appreciate by 3.9% by the end of 2015, 3.4% in 2016 and 3.1% in each of the following four years (as shown below). That means the average annual appreciation will be 3.2% over the next 5 years.

Projected Mean Appreciation | Keeping Current Matters

The prediction for cumulative appreciation rose from 18.1% to 21.6% by 2020. Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of 13.8%.

Cumulative House Appreciation | Keeping Current Matters

Bottom Line

Individual opinions make headlines. We believe the survey is a fairer depiction of future values.

Home Equity Increasing as Home Prices Rise [INFOGRAPHIC]

Home Equity Increasing as Home Prices Rise [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • 91.9% of homes in the US have positive equity
  • 256,000 homes regained equity in the third quarter of 2015
  • 37.5 million homes have significant equity (defined as more than 20%)

How Long Does It Take To Save A Down Payment?

How Long Does It Take To Save A Down Payment? | Keeping Current Matters

In a recent study conducted by Builder.com, researchers determined that nationwide it would take “nearly eight years” for a first-time buyer to save enough for a down payment on their dream home.

Depending on where you live, median rents, incomes and home prices all vary. By determining the percentage a renter spends on housing in each state and the amount needed for a 10% down payment, they were able to establish how long (in years) it would take for an average resident to save.

According to the study, residents in South Dakota are able to save for a down payment the quickest in just under 3.5 years. Below is a map created using the data for each state:

Years Needed to Save 10% Down | Keeping Current Matters

What if you only needed to save 3%?

What if you were able to take advantage of one of the Freddie Mac or Fannie Mae 3% down programs? Suddenly saving for a down payment no longer takes 5 or 10 years, but becomes attainable in under two years in many states as shown in the map below.

Years Needed to Save 3% Down | Keeping Current Matters

Bottom Line

Whether you have just started to save for a down payment, or have been for years, you may be closer to your dream home than you think! Meet with a local real estate professional who can help you evaluate your ability to buy today.

Don’t Let Rising Rents Trap You!

Don't Let Rising Rents Trap You! | Keeping Current Matters

There are many benefits to homeownership. One of the top ones is being able to protect yourself from rising rents and lock in your housing cost for the life of your mortgage.

Don’t Become Trapped

Jonathan Smoke, Chief Economist at realtor.com recently reported on what he calls a “Rental Affordability Crisis”. He warns that,

“Low rental vacancies and a lack of new rental construction are pushing up rents, and we expect that they’ll outpace home price appreciation in the year ahead.”

The Joint Center for Housing Studies at Harvard University recently released their 2015 Report on Rental Housing, in which they reported that 49% of rental households are cost-burdened, meaning they spend more than 30% of their income on housing. These households struggle to save for a rainy day and pay other bills, such as food and healthcare.

It’s Cheaper to Buy Than Rent

In Smoke’s article, he went on to say,

“Housing is central to the health and well-being of our country and our local communities. In addition, this (rental affordability) crisis threatens the future value of owned housing, as the burdensome level of rents will trap more aspiring owners into a vicious financial cycle in which they cannot save and build a solid credit record to eventually buy a home.”

 “While more than 85% of markets have burdensome rents today, it’s perplexing that in more than 75% of the counties across the country, it is actually cheaper to buy than rent a home. So why aren’t those unhappy renters choosing to buy?”

Know Your Options

Perhaps, you have already saved enough to buy your first home. HousingWire reportedthat analysts at Nomura believe:

“It’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment.

It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

Many first-time homebuyers who believe that they need a large down payment may be holding themselves back from their dream home. As we reported last week, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Have a professional help you determine if you are eligible to get a mortgage.

California Real Estate: Who Pays For What?

RE Fees

Customary Fees

In most areas in California, at close of escrow the buyer pays:

  • escrow fees (50/50 split)
  • title insurance fees (for 2 policies protecting the interests of themselves and their lender)
  • loan origination fee and discount points
  • miscellaneous doc drawing and courier fees
  • inspection and appraisal fees
  • loan closing costs, like prepayments of property taxes, interest, insurance and homeowner’s insurance or HOA dues, when the buyer is obtaining a loan with an impound account or as otherwise required by the buyer’s lender.

And the seller pays:

  • escrow fees (50/50 split)
  • broker commissions
  • a re-conveyance fee to their lender
  • buyers home warranty

However, ALL of this is open to negotiation. These are standard practices, but vary more and more in this market climate.

Also, be aware that with bank-owned properties the standard allocations are somewhat different. For example, banks often will pay for the buyer’s title insurance policy, assuming the buyer uses a title provider the bank chooses. Or, the bank may defer to the buyer to elect the title company at which point the buyer is responsible for title and escrow fees.

Also, costs like HOA transfer and documentation fees, city and county transfer taxes, and even escrow fees are often negotiated between buyer and seller. Additionally, many times buyers agree to “pay” their customarily allocated fees, but then negotiate a closing cost credit from the seller that covers some or all of that.

Loan closing fees vary significantly by loan type (i.e., FHA vs. conventional). Also, transfer taxes also vary widely in different California counties; I see transactions where buyers need to be prepared to pay anywhere from 2 to 6% of the purchase price in closing costs – depending on the location. Again, this can be reduced if the buyer is able to negotiate for the seller to pay some or all of their closing costs.

JUST LISTED: 3 Bed 2 Ba in Elk Grove, CA

**JUST LISTED**

8737  Springhouse Way,  Elk Grove: Located in the beautiful Seasons community, this lovely 3 bed 2 bath home is ready for your buyer. Near new hickory laminate flooring throughout, high cascading ceilings, wildly popular open floor plan, and for the cook in the family, you’ll thoroughly enjoy the large counter and cooking spaces for those gourmet meals! So much to see, near great schools, close to fine dining, entertainment, highways, and more.

3 bed,2 ba
1,667 sq ft
Listed at: $277,000

Contact Nick Lacy for showings and more info:
(510) 734-6136 direct
(916) 509-7110 office

One More Time…You DO NOT Need 20% Down

One More Time You Don't Need 20% Down | Keeping Current Matters

A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less and the number has increased through the first quarter of the year as shown by the graph below:

Percent of Low Down Payments | Keeping Current Matters

2. FICO Scores

The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower:

Average FICO Scores | Keeping Current Matters

Bottom Line

If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able’, sit down with someone who can help you understand your true options.

Buy vs Rent: What Really Creates Family Wealth?

Buy vs Rent: What Really Creates Family Wealth? | Keeping Current Matters

There has been recent press regarding whether or not it makes better financial sense to rent rather than buy in today’s housing market. As an example, the recently released June Summary of the BH&J Buy vs. Rent Index reported:

“…as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.”

The summary goes on to explain that:

“The index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home and reinvests all monies otherwise invested in homeownership.” (emphasis added)

Though the math may be correct, we are not as sure of the conclusion. Even if you check the methodology offered by the BH&J report itself, you will find that they realize:

“…any extra savings from renting might be spent on non-wealth enhancing goods resulting in any benefits from renting versus owning disappearing in a cloud of consumption spending rather than savings.”

The Concept of ‘Forced Savings’ and Wealth Accumulation

Many believe the wealth accumulation of homeowners is tied into the concept of “forced savings”. The New York Times late last year published an editorial entitled, Homeownership and Wealth Creation, which discussed this concept. The article explained:

“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.” “Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”

Many of the points that were made in the article are on track with the research done by the Joint Center for Housing Studies at Harvard University which agrees that “forced savings” is a major advantage of homeownership. In a paper, The Dream Lives On: the Future of Homeownership in America, they concluded:

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

The Truth is in the Historical Data

Edwards Deming once said: “Without data, you’re just another person with an opinion.” Let’s look at the data on this subject. The Federal Reserve has conducted a study titled: Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36 times greater than that of a renter ($5,400).

Bottom Line

The New York Times editorial articulated it best:

“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth…As a means to building wealth, there is no practical substitute for homeownership.”

If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!

Homeownership Still a Great Investment

(Courtesy of

Homeownership Still a Great Investment | Keeping Current Matters

Four recent news articles confirmed that most Americans still see real estate as a great long term investment. The Gallup organization polled the American people and discovered that they believe that real estate is a better long term investment than stocks/mutual funds, gold, savings or bonds:

Americans: Real Estate is Best Long Term Investment | Keeping Current Matters

A second survey was done by Edelman Berland which showed that:

Importance of Real Estate to Long-Term Investing | Keeping Current Matters

At the same time, Tim Rood, chairman of the business advisory firm The Collingwood Group, explained that real estate is:

“…one of the last legitimate wealth creation opportunities…The leveraged return if you put down 10 percent on a house, the trajectory of appreciation lately is you’re going to get your money back inside of a year and then after that 5 to 10 percent appreciation rates. It’s phenomenal.”

Bottom Line

Real estate continues to be a sensational long term investment. If you need help with any of your real estate needs, contact a local real estate professional and discuss the opportunities available in today’s market.