Home Prices Up 6.15% Across the Country! [INFOGRAPHIC]

Home Prices Up 6.15% Across the Country! [INFOGRAPHIC] | MyKCM

Some Highlights:

  • The Federal Housing Finance Agency (FHFA) recently released their latest Quarterly Home Price Index report.
  • In the report, home prices are compared both regionally and by state.
  • Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!
  • Alaska, Delaware, West Virginia & Wyoming were the only states where home prices are lower than they were last year.

Again… You Do Not Need 20% Down to Buy NOW!

Again… You Do Not Need 20% Down to Buy NOW! | MyKCM

survey by Ipsos found that the American public is still somewhat confused about what is required to qualify for a home mortgage loan in today’s housing market. There are 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, 40% of consumers think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less.

Many renters may actually be able to enter the housing market sooner than they ever imagined with new programs that have emerged allowing less cash out of pocket.

2. FICO® Scores 

The survey also revealed that 62% of respondents believe they need excellent credit to buy a home, with 43% thinking a “good credit score” is over 780. In actuality, the average FICO® scores of approved conventional and FHA mortgages are much lower.

The average conventional loan closed in February had a credit score of 752, while FHA mortgages closed with a score of 686. The average across all loans closed in February was 720. The chart below shows the distribution of FICO® Scores for all loans approved in February.

Again… You Do Not Need 20% Down to Buy NOW! | MyKCM

Bottom Line

If you are a prospective buyer who is ‘ready’ and ‘willing’ to act now, but are not sure if you are ‘able’ to, let’s sit down to help you understand your true options.

The ‘REAL’ News about Housing Affordability

The 'REAL' News about Housing Affordability | MyKCM

Some industry experts are claiming that the housing market may be headed for a slowdown as we proceed through 2017, based on rising home prices and a potential jump in mortgage interest rates. One of the data points they use is the Housing Affordability Index, as reported by the National Association of Realtors (NAR).

Here is how NAR defines the index:

“The Housing Affordability Index measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national level based on the most recent price and income data.”

Basically, a value of 100 means a family earning the median income earns enough to qualify for a mortgage on a median-priced home, based on the price and mortgage interest rates at the time. Anything above 100 means the family has more than enough to qualify.

The higher the index, the easier it is to afford a home.

Why the concern?

The index has been declining over the last several years as home values increased. Some are concerned that too many buyers could be priced out of the market.

But, wait a minute…

Though the index skyrocketed from 2009 through 2013, we must realize that during that time, the housing crisis left the market with an overabundance of distressed properties (foreclosures and short sales). All prices dropped dramatically and distressed properties sold at major discounts. Then, mortgage rates fell like a rock.

The market is recovering, and values are coming back nicely. That has caused the index to fall.

However, let’s remove the crisis years (shaded in gray) and look at the current index as compared to the index from 1990 – 2008:

The 'REAL' News about Housing Affordability | MyKCM

Though prices and rates appear to be increasing, we must realize that affordability is composed of three ingredients: home prices, interest rates, and income. And, incomes are finally rising.

ATTOM Data Solutions recently released their Q1 2017 U.S. Home Affordability Index. The report explained:

“Stronger wage growth is the silver lining in this report, outpacing home price growth in more than half of the markets for the first time since Q1 2012, when median home prices were still falling nationwide. If that pattern continues, it will help turn the tide in the eroding home affordability trend.”

Bottom Line

Compared to historic norms, it is still a great time to buy from an affordability standpoint.

MEASURING YOUR ABILITY TO ACHIEVE THE AMERICAN DREAM

Forbes.com recently released the results of their new American Dream Index, in which they measure “the prosperity of the middle class, and…examine which states best support the American Dream.”

The monthly index measures several different economic factors, including goods-producing employment, personal and commercial bankruptcies, building permits, startup activity, unemployment insurance claims, labor force participation, and layoffs.

The national index score was rounded out to 100 in January and saw a modest jump to 100.5 in February.

Alaska represented the lowest score on the index at 80.7, due mostly to the recent collapse in oil prices. Nevada came in with the highest score at 108.8, boosted by big gains in goods-producing jobs and new construction activity. The full results can be seen in the map below.

Measuring Your Ability to Achieve the American Dream | Keeping Current Matters

Forbes Senior Editor Kurt Badenhausen explained why many states saw a boost in the index last month:

“[B]usinesses are hiring in part in anticipation of tax cuts and less regulation… Many areas of the country have experienced strong upticks in employment and construction, as well as declines in unemployment claims since the start of the year.”

Bottom Line

The American Dream, for many, includes being able to own a home of his or her own. With the economy improving in many areas of the country, that dream can finally become a reality.

Financial Planning: 4 Reasons to Buy a House Today

Financial Planning: 4 Reasons to Buy a House Today | Keeping Current Matters

Homeownership will always be a part of the American Dream. There are advantages to owning your own home (educational, health, social) that far transcend any economic impact. However, we want to look at several of the financial advantages of homeownership in today’s post.

1. Buying is Cheaper Than Renting

The results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States. The report reveals that:

“Interest rates have remained low, and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation…Nationally, rates would have to reach 9.1% for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.”

2. Homeownership “Forces” You to Save

According to SavingAdvice.com, homeownership is a great way to save. Their advice is quite simple:

“Homeownership is a “forced” savings account because you own the home, you have no choice – that monthly housing cost has got to be paid no matter what…Homeownership can be an outstanding way to force yourself to be more frugal in the rest of your spending so that you can save and build equity in your home.”

3. Homeownership Offers Several Tax Deductions

According to the Tax Policy Center’s Briefing Book -“A citizen’s guide to the fascinating (though often complex) elements of the federal Tax System” – there are several tax advantages to homeownership. Here are three:

  1. Homeowners who itemize deductions may reduce their taxable income by deducting any interest paid on a home mortgage.
  2. Homeowners who itemize deductions may also reduce their taxable income by deducting property taxes they pay on their homes.
  3. Taxpayers who sell assets must generally pay capital gains tax on any profits made on the sale.

4. Experts Expect Home Price Appreciation to Continue

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.

Over the next five years, home prices are expected to appreciate 3.22% per year on average and to grow by 17.3% cumulatively, according to Pulsenomics’ most recent Home Price Expectation Survey.

Bottom Line

Some are afraid that home values may have already peaked. However, we believe that purchasing a home now will prove to be a sound financial decision for years to come. As Warren Buffet said, “When others are greedy, be fearful. When others are fearful, be greedy.”

Do You Know the Cost of Waiting? [INFOGRAPHIC]

Do You Know the Cost of Waiting? [INFOGRAPHIC] | Keeping Current Matters

Some Highlights:

  • The “Cost of Waiting to Buy” is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.
  • Freddie Mac predicts that interest rates will increase to 4.8% by this time next year, while home prices are predicted to appreciate by 4.9% according to CoreLogic.
  • Waiting until next year to buy could cost you thousands of dollars a year for the life of your mortgage!

Inventory Shortages Are Slowing Down the Market

Inventory Shortages Are Slowing Down the Market | Keeping Current Matters

The real estate market is moving more and more into a complete recovery. Home values are up. Home sales are up. Distressed sales (foreclosures and short sales) have fallen dramatically. It seems that 2017 will be the year that the housing market races forward again.

However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory. While buyer demand looks like it will remain strong throughout the summer, supply is not keeping up.

Here are the thoughts of a few industry experts on the subject:

Lawrence Yun, Chief Economist at NAR:

“Sellers are in the driver’s seat this spring as the intense competition for the few homes for sale is forcing many buyers to be aggressive in their offers. Buyers are showing resiliency given the challenging conditions. However, at some point — and the sooner the better — price growth must ease to a healthier rate. Otherwise sales could slow if affordability conditions worsen.”

Tom O’Grady, Pro Teck CEO

“The lack of inventory is very real and could have a severe impact on home sales in the months to come. Traditionally, a balanced market would have an MRI (Months Remaining Inventory) between six and 10 months.

This month, only eight metros we track have MRIs over 10, compared to 27 last year and 48 two years ago—illustrating that this lack of inventory is not being driven by traditionally ‘hot’ markets, but is rather a broad-based, national phenomenon.”

Ralph McLaughlin, Chief Economist at Trulia

“Nationally, housing inventory dropped to its lowest level on record in 2017 Q1. The number of homes on the market dropped for the eighth consecutive quarter, falling 5.1% over the past year.”

Freddie Mac

“Tight housing inventory has been an important feature of the housing market at least since 2016. For-sale housing inventory, especially of starter homes, is currently at its lowest level in over ten years. If inventory continues to remain tight, home sales will likely decline from their 2016 levels. …all eyes are on housing inventory and whether or not it will meet the high demand.”

Bottom Line

If you are thinking of selling, now may be the time. Demand for your house will be strongest at a time when there is very little competition. That could lead to a quick sale for a really good price.