Buyers: Window of Opportunity Still Open

  

opportunity windowThe Fed recently announced they would continue their current pace of purchasing bonds until the economy was stronger. This bond purchasing program is the reason that mortgage interest rates are at historic lows. Rates began to increase over the last several months just on the anticipation that the Fed would announce that they would be reducing the level of bond purchases last month. When that didn’t happen, rates actually decreased (4.50 to 4.37).

That was great news for any buyer in the process of purchasing a home. However, this window of opportunity is expected to close in the very near future as most experts expect the Fed to taper the bond purchasers in December. Even Ben Bernanke, Chairman of the Fed, suggested that the Fed could still scale back the stimulus this year. He stated:

"If the data confirms our basic outlook, then we could move later this year.”

Where will mortgage rates head in 2014?

The Mortgage Bankers AssociationFannie MaeFreddie Mac and the National Association of Realtors have each projected that the 30 year fixed rate mortgage will have interest rates in excess of 5% by this time next year. The average of their four projections is 5.3%. The table below shows the impact this will have on the monthly principal and interest payment on a $250,000 mortgage:

Payment A buyer should take advantage of the current window of opportunity before it is too late.


Posted on September 30, 2013 at 11:08 pm
Debi Bloomquist | Posted in Economics, Homeowner News, Real Estate |

Why It’s Wise to Reduce Debts Before Applying for Mortgage

 

car and  house made of dollars
Shutterstock

By Credit.com   | posted Sep 11th 2013 12:41PM

Updated Sep 12th 2013 1:07PM



By Scott Sheldon



Trying to secure a mortgage right now? From higher mortgage rates, to rising home prices to the contraction in buying power — securing financing, for some, can be no easy endeavor. As prices, and rates rise simultaneously, lenders will still place the weighted emphasis on "real income," or, the amount of monthly payment you can afford — as that's what the loan is truly made against. Unfortunately, the amount of debt you have effectively chips away at your "real income." So before you try to get a mortgage, you might want to pay down your debt. Just make sure you do it the right way.



Before I delve into the specifics, here are some quick terms you need to know:

• Debt to income ratio, or DTI: Represents the total amount of monthly debt payment (including the house payment) divided into monthly income. Whenever this number exceeds 45 percent of the gross monthly income, things get tricky.

• Real Income: Also known as "qualifiable income," the net income considered for the housing payment after present liabilities are factored in. If you have $5,000 in monthly income × 0.45, that gives you $2,250 as a total debt allowance. If your other debts total $250 per month, that means your real income is $2,000 per month. Real income is also equivalent to a proposed housing payment.

• Debt: Refers specifically to the minimum payment obligations the consumer is responsible for. This has nothing to do with the total amount of debt, but what the monthly payments are. Lenders are looking for cash flow, how much or how little of it there is. Tip: Debt erodes income (ability to borrow money) at a ratio of 2 to 1; it takes $2 of income to offset $1 of debt.



Now, the strategy for paying off debt to qualify differs when buying a house from refinancing. Let's look at the differences:



Paying Off Debt When Buying a Home: When buying a home, and prior to attaining an accepted purchase offer, paying off debt to qualify is simply a function of learning how much more buying power is achievable by eliminating debt like credit cards, student loans or car loans. A qualified mortgage lender can run "what if" possibilities, which could become crucial in your endeavor to purchase not only the right home, but ultimately the home you can afford.



Let's say there's $5,000 left on your car loan, you have the cash in the bank and the car loan payment is $600 per month. $600 per month on a car loan reduces your ability to purchase to the tune of more than $100,000 in loan amount. Consider this: A $100,000 mortgage loan at 4.5 percent on a 30-year fixed rate mortgage translates to $506 per month, $94 per month less than if you didn't have the debt. If you pay off the debt in full, your DTI is reduced, improving your ability to qualify and increasing your real income.




How to Pay Off the Debt and Still Meet the Lending Credit Standard: If you're paying it off pre-contract, simply inform your mortgage company and they can do a third-party validation and the debt can be omitted. When paying off during the escrow process, monies will have to be sourced and paper trailed, which is a little more technical, but still achievable. The same goes for credit cards and other payment obligations.



Paying Off Debt When Refinancing: When you're refinancing, the lender's going to require that your credit obligations — such as a car loan or credit card — are paid off in full and closed to prevent the possibility of your accumulating further debt, thus potentially affecting your ability to repay in the future. Moreover, the lender would call for an escrow account to pay off the debt through the loan closing. When it comes to paying off debt to qualify in refinancing, different lenders will vary on their specific approaches. Generally, though, the accounts will have to be closed as well. That won't prevent you from reapplying for credit after the mortgage has closed, however.



How to Pay Off the Debt and Still Meet the Lending Credit Standard: The monies you use to pay off your debt, similar to a purchase transaction, will have to be sourced — and you'll have to have proof that the obligation has been closed. If possible, pay the credit card in full, learn the date the creditor reports to the bureaus, then apply for the mortgage after the creditor has reported it to the bureaus. Doing this will show the updated balance on the credit report, which will improve real income (revealing less debt), making the process more streamlined.



If you have debt that otherwise could be eliminated and have the means to pay off the debt, strongly consider doing so, as higher credit risk mortgages tend to be more pricey overall — compared to those for borrowers with lower debt-to-income ratios and better credit scores.



As you get ready to buy a house or refinance your mortgage, it's important to pull your credit reports and credit scores to see where you stand. You can get your credit reports for free once a year from each of the three credit reporting agencies, and you can monitor your credit score using a free tool like Credit.com's Credit Report Card.

 


Posted on September 26, 2013 at 8:52 pm
Debi Bloomquist | Posted in Economics, Home Finances, Homeowner News |

Do you really need to spend a lot on home insurance?

By Andrea Duchon | Yahoo! HomesWed, Sep 11, 2013 1:53 PM EDT

Want to make sure your home and family are adequately protected? Here are five questions to help you figure out how much insurance you actually need on your home.

When you buy a new house, it seems like there are a million moving pieces and thousands of documents that need your signature. But how closely did you pay attention when you chose your home insurance policy?

Paula Pant, founder of AffordAnything.com, a money management website, says that most people gloss over their policy and either end up paying more than they need or simply not enough.

"That's a lose-lose situation," she says. "You need the Goldilocks policy: not too much and not too little."

To make sure you're adequately covered, here are a few questions to ask to help you figure out how much home insurance you need…

How Much Will it Cost to Rebuild Your Home?

When determining how much home insurance you need, understanding the cost of rebuilding your home is crucial.

"You need enough insurance to cover the cost of rebuilding your home at current construction costs," according to the Insurance Information Institute (III). It also warns against confusing rebuilding costs with the price you initially paid for the home, as the current value and reconstruction costs could vary greatly.

Below is a list of some factors that will decide the cost of rebuilding your home, notes the III:

  • Local construction costs
  • The square footage of the structure
  • The type of exterior wall construction – frame, masonry (brick or stone) or veneer
  • The style of the house (ranch, colonial)
  • The number of bathrooms and other rooms
  • The type of roof and materials used
  • Other structures on the premises such as garages, sheds

To gauge how much insurance you'll need to reconstruct your home, the III suggests multiplying the total square footage of your home by local building costs per square foot. You can figure out "local" costs by getting rates from contractors and talking to local real estate agent and builders.

And because there's so much to consider in determining reconstruction costs, Pant suggests walking through your home and taking pictures of everything from your countertops and cabinets to your tile and hardwood floors.

"When you submit a claim to your insurance company to justify the cost of rebuilding your home," she says, "these pictures of the components of your home will be immensely helpful in getting back the value of everything inside."

How Much are the Items in Your Home Worth?

It can be hard to know how much insurance to buy if you don't know what all of your assets are worth, says Pant.

"Many people underestimate the value of their assets because they don't conceptualize them as being worth cash," she adds.

However, Pant says it's important to have a good handle of the monetary value of your possessions as it will put you in a better position to recoup your costs should disaster strike.

To do this, Pant recommends having photographic evidence of your possessions.

"Walk around your house with the video camera, even if it's just the camera on your phone, gathering video evidence of what the interior of your home looks like. Couple that with any receipts or invoices from contractors that you've saved."

The III offers similar advice, noting that homeowners should take an inventory of their personal possessions: "You need to conduct a home inventory. This is a detailed list of everything you own and information related to the cost to replace these items if they were stolen or destroyed by a disaster such as a fire."

What's Your Likelihood of Getting Sued?

Do you have a dog? Swimming pool? Trampoline?

If you said yes to any of the above, you'll want to make sure you have strong liability coverage in the event that someone is injured by your pet or while they're on your property. Being covered is good risk management – just ask Mitchell D. Weiss, an adjunct professor of finance and member of the board of the University of Hartford's Barney School of Business.

"There are three good steps to good risk management," advises Weiss. "You want to identify the risks that concern you, estimate the likelihood of their coming to pass, and determine the cost you'd incur should that thing occur."

Once you take a look at those things, Pant says it's a good idea to carry an umbrella insurance policy to protect you in case someone sues.

"These umbrella policies are generally cheap – less than $100 a year can provide coverage for up to $1 million or more dollars for lawsuits and liabilities. If someone slips on ice in your front yard and sues you, it's good to have the peace of mind that you have additional protection."

Are Earthquakes and Floods Common in Your Area?

"If you're particularly prone to hurricanes, floods, or other natural disasters, make sure you buy added insurance specifically for that. Many standard plans won't cover natural disasters that your neighborhood is most likely to experience," says Pant.

In fact, the III says that floods, earthquakes, maintenance damage (like mold, for example), and sewer backup, are a few disasters that are not covered in a standard insurance policy.

Luckily, you do have coverage options available.

"Ground water flooding is not covered by most (if not all) homeowner's insurance policies. You'll need flood insurance for that, which the government makes available," says Weiss.

He also suggests looking at wind-damage insurance limitations.

"These are used to describe an issue that's common to beachfront – or near beach – properties. Insurance companies set high deductibles for that, which leaves the homeowner to cover the difference," Weiss explains.

So, if you live in an area that's known to experience natural disasters or just bad weather in general, you'll want to add any coverage necessary to ensure you're protected.

How Much Would it Cost to Live Elsewhere if Your Home is Damaged?

You obviously don't want to think about your home being damaged to the point where it's uninhabitable, but it's an important thing to consider when you're talking insurance.

"Remember: you'll unfortunately have to live somewhere else if your home is destroyed," says Pant. For this reason, she suggests that homeowners "opt for a plan that gives you a payout, or stipend, to cover the cost of renting a home for at least six months while your current home is being fixed."

A basic, bare-bones plan usually won't cover this, but many insurance companies offer riders, or a provision of your insurance policy that is purchased separately from the basic policy, which help pay for this cost.

"Of course, adding these riders to your insurance plan also increase your premium," Pant warns. But, paying a little more a month to ensure you have place to live if disaster strikes is probably worth it.

 


Posted on September 18, 2013 at 3:49 pm
Debi Bloomquist | Posted in Economics, Homeowner News, Real Estate |

Thinking of Selling Your House? 5 Reasons to Do it Now

by The KCM Crew on September 10, 2013 ·in For Sellers, Pricing

Many now realize that it is a great time to buy a home. Today, we want to look at why it might also be an opportune time to sell your house. Here are the Top 5 Reasons we believe now may be a perfect time to put your house on the market.

1.) Demand Is High

The most recent Existing Home Sales Report by the National Association of Realtors (NAR) showed a 17.2 percent increase in sales over July 2012; sales have remained above year-ago levels for 25 months. There are buyers out there right now and they are serious about purchasing.

2.) Supply Is Beginning to Increase

Total housing inventory last month rose 5.6% to 2.28 million homes for sale. This represents a 5.1-month supply at the current sales pace, compared with 4.3 months in January. Many expect inventory to continue to rise as 3.2 million homeowners escaped the shackles of negative equity in the last 12 months and an additional 1.9 million are expected to enter positive equity in the next 12 months. Selling now while demand is high and before supply increases may garner you your best price.

3.) New Construction Is Coming Back

Over the last several years, most homeowners selling their home did not have to compete with a new construction project around the block. As the market is recovering, more and more builders are jumping back in. These ‘shiny’ new homes will again become competition as they are an attractive alternative for many purchasers.

4.) Interest Rates Are Rising

According to Freddie Mac’s Primary Mortgage Market Survey, interest rates for a 30-year mortgage have shot up to 4.57% which represents a jump of more than a full point since the beginning of the year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will continue to climb.

Whether you are moving up or moving down, your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

5.) It’s Time to Move On with Your Life

Look at the reason you are thinking about selling and decide whether it is worth waiting. Is the possibility of a few extra dollars more important than being with family; more important than your health; more important than having the freedom to go on with your life the way you think you should?

You already know the answers to the questions we just asked. You have the power to take back control of your situation by putting the house on the market today. The time may have come for you and your family to move on and start living the life you desire. That is what is truly important.


Posted on September 17, 2013 at 6:45 pm
Debi Bloomquist | Posted in Economics, Everett, Home Improvement, Homeowner News |

Cultural Trends: How driving trends are impacting the housing market

Posted in Buying by Edward Krigsman 

Windermere Blog

 

As we have mentioned in previous blog posts, home buyers continue to consider their daily commute when making home purchase decisions. Some Americans are limiting their driving or forgoing cars all together. In recent years, the driving trends of Millennial and Boomer generations have decreased steadily. More Americans in general are embracing alternatives to driving like mass transit, walking, bicycling, car sharing, and working from home.

Recent studies and articles in publications like the Washington Post and theNew York Times document declining automobile use. Driving measured by consumption of auto fuel tells the same story. Whether you are a home buyer, seller, or owner, these trends may impact your decisions in new and surprising ways, with the value of your home being shaped, at least in part, by this trend.

If you are in the market for a home, considering your commute, walk-score, and transportation options could be an important part of determining if a particular neighborhood is right for you. It might also be helpful to seek out the assistance of a real estate agent familiar with such issues.

Real estate companies have started adding search features to their websites to assist buyers with evaluating commuting information. For example, Windermere recently added INRIX DriveTime™ to its website which allows home buyers to search for homes based on commute times. Walkscore.com and Transitscore.com provide home buyers with a quick and easy way to assess the quality of a community based on walkability and access to mass transit. These online tools highlight those homes with shorter drive times and higher walkability, factors which could end up impacting the value of certain homes as some buyers “vote with their feet,” rather than with their car.

Real estate developers are embracing this trend too by building in locations that reduce car use; this is why you may notice an increase in new housing as you travel from suburban neighborhoods into cities like San Francisco, Portland, San Diego, or Seattle. In some of these cities, it is increasingly common to see townhomes built in more walkable neighborhoods, many without dedicated, private garages. 

City planners are encouraging such construction by changing zoning laws to foster "Transit Oriented Development," (TOD). TOD changes zoning to incentivize developers to create new housing construction close to light rail stations, with progressively lower housing density to about 1/2 mile from their stops. This solves what city planners have come to call the "last mile problem," (getting more commuters home from a transit hub). Cities with TOD initiatives include Seattle, the San Francisco Bay Area, the Salt Lake City Metro Area, and the Portland Metro area.

With experts saying that consumers are trending towards less driving, home buyers may wish to evaluate the location of their purchase by asking themselves the following questions:

  • Does this neighborhood lower the cost of living, while increasing the quantity and quality of free time, by increasing my independence from cars?
  • What is the travel time between the places those in my household frequent most, such as home, work, schools, and recreational amenities?

If you are selling your home, consider highlighting its location as one that might improve the quality of life for the next residents by showcasing drive time, walkability, and proximity to transit—to the extent that such benefits exist.

Studies continue to show that the amount of time a person spends commuting every day is a major factor when buying a home. In recent years, there has also been a significant trend towards mass transit and reducing one’s “carbon footprint” by driving less. This is important for both buyers and sellers to keep in mind, as these factors can have a significant impact on the long-term value of a home – and on the quality of life for you and those in your community.

 

 


Posted on September 11, 2013 at 9:52 pm
Debi Bloomquist | Posted in Economics, Real Estate |

Should I Wait for Interest Rates to Come Back Down?

 

by THE KCM CREW on SEPTEMBER 3, 2013 ·in FOR BUYERS

 

 

Above is a graph of the movement of the 30 year fixed mortgage rate since the beginning of 2012.

Some buyers are waiting to see if interest rates will come back down before making a decision about buying a home. Though no one can guarantee where rates will be in a few months, we don’t believe waiting is a good strategy.

Most experts believe rates may actually move higher. The Mortgage Bankers AssociationFannie MaeFreddie Mac and the National Association of Realtors are in unison projecting that rates will continue to climb.

With home prices increasing and interest rates projected to also increase, the cost of buying a house could quickly increase rather dramatically.


Posted on September 10, 2013 at 11:07 pm
Debi Bloomquist | Posted in Economics, Home Finances, Homeowner News, Real Estate |

Washington home prices up more than 12% in a year

 
by Ben Miller Contributing Editor – Puget Sound Business Journal

Home prices in Washington state have risen 12.4 percent in the past year, which mirrors the national average.

According to property information company CoreLogic Inc., single-family home prices in both Washington state and nationwide, including distressed sales, increased 12.4 percent on a year-over-year basis in July 2013 compared with July 2012.

Excluding distressed sales, single-family home prices increased 12.7 percent in Washington state.

According to CoreLogic, including distressed sales, the five states with the highest home price appreciation were: Nevada (up 27 percent), California (up 23.2 percent), Arizona (up 17 percent), Wyoming (up 16.4 percent) and Oregon (up 15 percent).


Posted on September 5, 2013 at 10:36 pm
Debi Bloomquist | Posted in Economics, Real Estate |

Massive rent increases to continue

The average annual increase of 3.9% is outpacing inflation and income growth. Will renters be priced out of many cities?

It's no secret renters have been feeling the crunch of a competitive rental market for a few years now. If it seems like rent increases have been unusually high this year, though, that's because they have been.

In June, the real-estate data firm Trulia analyzed the rent prices in 25 of the largest rental markets in the United States. What Trulia found is an average annual increase of 3.9%. This is a huge increase when compared with inflation. And, generally speaking, incomes are not keeping pace with rent increases, putting renters in an even tighter position.

According to Trulia, the five least-affordable rental markets in the country are New York City, Miami, Los Angeles, San Francisco and Boston. In these cities, rents often make up half or more of a renter's average monthly wage.

The cities that experienced the highest rent hikes for 2012-13 were Houston, Miami, Boston, Tampa-St. Petersburg, Fla., and San Diego. Some cities, such as Houston, already had lower rents than the national average for major cities, whereas in others the increases came on top of already higher-than-average rates. For instance, Boston — already one of the most expensive cities in the country — saw a 5.5% increase in rents this year.

It would seem the recent rent increases are an enduring ripple effect of the foreclosure epidemic that catalyzed the Great Recession, flooding the market with prospective renters. At the same time, the gradual economic recovery has resulted in rising employment rates. With a shortage of available rentals, landlords are in the enviable position of being able to name their price and have their pick among tenants willing to pay it.

In their most recent survey, the apartment-research firm RealFacts found not only that rents are up nationwide in 39 of the 41 markets analyzed but that these increases also occurred even in cities that are building rental units at a precipitous pace.

In particular, Seattle experienced a large rent increase this past year despite a projection that 12,000 rental units will be added to the market by the end of the year. Portland, which also experienced an impressive increase in average annual rents, did so even as 4,000 units were added in the city. In fact, Portland saw its occupancy rate jump a full percent this past year. San Francisco, which has also added thousands of units recently, saw an occupancy rate increase of 1.2%.

"So far, it appears aggressive rent hikes and new construction hasn't had a negative impact on occupancy rates," according to the RealFacts report.

Though there seem to be no signs of rent increases slowing down, the report warned that the market will soon become oversupplied: The increased availability of new rentals, coupled with the rise in interest rates, will eventually lead to a downturn in the rental market.

Additionally, more people will turn to buying as an affordable alternative. That's because even though home prices rose 7% in the past year, outpacing rent increases, the gap between buying and renting is still quite large.

Forbes reported this year that buying is much more affordable than renting in all of the 100 largest metro areas in the nation. According to mortgage lender Freddie Mac, buying is an average of 41% cheaper than renting nationwide.

But buying is only slightly cheaper in some cities and drastically cheaper in others. For example, buying is 19% cheaper than renting in San Francisco but 70% cheaper in Detroit. In New York, buying has remained 26% cheaper for the past couple of years.

Despite the regional fluctuations in price, though, it looks as though buying will be the cheaper option for some time to come no matter where you live. That is because 30-year fixed rates on home purchases would need to reach 10.5% to become the more expensive option. The rate is at 4.4%, as of the week of Aug. 14.

RealFacts predicts that in 2014 or 2015, rent rates will begin to stall as the rate of homeowners rise and renters decline.

Until then, renters will have to grit their teeth and wait it out — or start shopping around for their own home.


Posted on August 28, 2013 at 6:37 pm
Debi Bloomquist | Posted in Economics |

Moving Up? Do It Now!!

by THE KCM CREW on AUGUST 5, 2013 

PrintNew reports are revealing that the number of existing home ownerspurchasing a house is beginning to increase. Some are moving up, some are downsizing and others are making a lateral move. Another study shows that over 75% of these buyers will, in fact, be in that first category: a move-up buyer. We want to address this group of buyers in today’s blog post.

There is no way for us to predict the future but we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.

Assume they had a home worth $300,000 and were looking at a home for $400,000 (putting 10% down they would get a mortgage of $360,000). By waiting, their house appreciated by 12% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $336,000. But, the $400,000 home would now be worth $448,000 (requiring a mortgage of $403,200).

Here is a table showing what additional monthly cost would be incurred by waiting:

Move up

If your family sees yourself in this situation, it may make sense to move now than later. Prices are definitely appreciating and interest rates are beginning to rise.


Posted on August 20, 2013 at 8:09 pm
Debi Bloomquist | Posted in Economics, Real Estate |

Selling a House? Don’t Overprice It

 

by THE KCM CREW on JULY 15, 2013 ·

in FOR SELLERSPRICING

There is no doubt that the housing market is coming back nicely. What, if anything, could slow down the current momentum? We believe it may be sellers’ over exuberance when it comes to pricing. There is little doubt that house prices have appreciated over the last twelve months in most regions of the country. However, with both the inventory of homes for sale and interest rates increasing, we have to be careful to not over judge what the market can bear.

Trulia just reported that asking priceshave jumped dramatically and the increase is accelerating:

  • Year-Over-Year prices jumped 10.7%
  • Quarter-Over-Quarter prices jumped 4.1% (16.4% annualized)
  • Month-Over-Month prices jumped 1.5% (18% annualized)

No expert is expecting home prices to shoot up 18% in the next twelve months. If anything, price appreciation may slow as rates and inventories increase. Investors will begin to slow their purchases and the first-time buyers expected to take their place will be working within a pre-set budget in many cases.

Buyers’ Purchasing Power

Let’s look at an example: A young couple is looking for a home and have predetermined that their budget will only allow them to spend $1,000 a month on a mortgage. At today’s mortgage rate of 4.5%, they could afford a $200,000 mortgage ($1,013 principal & interest). However, if rates jump to 5%, they would have to lower their mortgage amount to $190,000 in order to keep their monthly payment where they need it ($1,020). At 5.5%, the mortgage would need to be no more than $180,000 ($1,022).

The Impact on Prices

This decrease in buyers’ purchasing power will have an impact on home values going forward. We do not believe it will cause a decrease in prices. However, we do believe it will likely cause current rates of appreciation to slow.

If you are thinking about selling your home, don’t get carried away with current headlines about home price increases that have taken place over the last twelve months. Instead, call a local real estate professional. They will be best prepared to explain where prices are headed over the next six months.


Posted on August 1, 2013 at 12:01 am
Debi Bloomquist | Posted in Economics, Home Finances, Real Estate |