Tag Archives: rates

Homeowners: Do You Know Your Home’s Value?

 

Homeowners: Do You Know Your Home’s Value? | MyKCM

The latest edition of CoreLogic’s Home Price Index shows that nationally, home prices have appreciated 6.7% over the last year and 0.9% month-over-month. The release of the report included this headline,

“National Home Prices Now 50% Above March 2011 Bottom”

The real estate market has come a long way since 2011, which is great news for homeowners!

Nearly 79% of homeowners with a mortgage in the US now have significant equity in their homes (defined as over 20%), according to the latest Equity Report. The challenge is that not every homeowner knows how much their home’s value has appreciated.

Homeowners in Denver, CO lead the way with 8.7% appreciation over the last year, while owners in Washington and Utah have experienced a 3% increase in values since the start of this year!

Nationally, CoreLogic forecasts that home values will increase another 5.0% by this time next year.

Bill Banfield, VP of Capital Markets at Quicken Loans, recently explained the importance of knowing the conditions in your area,

“With home values constantly changing, and the rates of change varying across the country, this is one more way to show how important it is for homeowners to stay aware of their local housing market.”

Bottom Line

Do you know what your house is worth? Have you stayed put because you are nervous you won’t have enough equity to buy your dream home? Let’s get together to perform an equity analysis and give you the freedom to achieve your dreams.

The High Impact of Low Interest Rates on Your Purchasing Power

 

The High Impact of Low Interest Rates on Your Purchasing Power | MyKCM

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.96%, which is still near record lows in comparison to recent history!

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.

The High Impact of Low Interest Rates on Your Purchasing Power | MyKCM

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year.

Act now to get the most house for your hard-earned money.

Rates Are Actually Much Higher This Week. Here’s Why

After spending more than a month holding fairly steady near 8-month lows, rates are moving quickly higher this week. Not only are the underlying reasons somewhat opaque but there are multiple media outlets reporting the “lowest mortgage rates of the year.” What’s really going on here?

The discrepancy between actual mortgage rate movement and certain news stories is easy to explain (as seen in a past newsletter), so let’s start there.  At issue is the fact that Freddie Mac’s weekly rate survey is a longstanding industry benchmark for mortgage rates.  It’s heavily relied-upon by analysts working in the secondary mortgage market as well as journalists who simply use it as their one source for a weekly mortgage rate update.

Because the report is released at 10am on Thursday morning, we tend to see a glut of news stories offering similar conclusions about mortgage rate movement.  This seemingly unified message only adds to the confusion.  After all, if all these big news organizations are telling us that rates are at the lowest levels of the year, it must be true, right?

WRONG!

Freddie’s data is GREAT for long-term analysis of general mortgage rate trends but it does a GREAT DISSERVICE to prospective borrowers keeping an eye on day-to-day changes.

The reason is strikingly simple: rates can move every day, but Freddie’s survey only covers the first 3 days of any given week.  Moreover, most of the responses tend to come in on Monday and Tuesday.

In other words, Freddie’s survey is best described as “Monday/Tuesday rates vs last Monday/Tuesday’s rates.” This creates obvious problems if rates are making bigger moves in the second half of any given week–especially if they moved in the opposite direction during the first half of the week.

Here’s how all of the above played out this time around.  Mortgage rates were indeed in line with the year’s lowest levels on Monday (only June 14th was any better as far as individual days are concerned).  But the next 3 days all saw rates move convincingly higher.  Freddie’s survey responses–being weighted toward the start of the week–simply didn’t capture the magnitude of the rate spike (it will be reflected in next week’s numbers unless we get a friendly bounce between now and then).

The bottom line is that rates are definitely not at 2017’s lowest levels.  In fact, in terms of day-over-day changes in actual lender rate sheets (remember, humans respond to surveys, and they might not all be cross-checking actual rate sheets before firing off their responses to Freddie), rates are as high as they’ve been since May 16th.

A major caveat is that the recent range of mortgage rates has been exceptionally narrow by historical standards.  It’s also been holding fairly close to the lowest levels in 8 months.  Still, the amount of movement over the past few days adds up to hundreds, even thousands of dollars for some borrowers’ loan quotes.  That could be quite the surprise if they’ve just heard about the “lowest rates of the year” on the evening news.

2017-6-29 nl1

What’s Moving Markets?

Now that we know WHAT mortgage rates have actually been doing, let’s talk about WHY.  If you remember the so-called “taper tantrum” in 2013 (the market reaction to the Fed signalling its intent to buy fewer bonds), then you’re halfway there.

This time around, the focus is on the European Central Bank (ECB), whose bond buying puts it in the same league as the Fed in terms of impact on financial markets.  Whereas the Fed has long since stopped expanding its balance sheet (they may even begin shrinking it later this year), the ECB continues adding more bonds to its balance sheet every month.

Given the huge impact of the taper tantrum in the US, investors are on guard for any indication of tapering in the EU.  ECB President Mario Draghi gave just such an indication in a series of comments earlier this week.  He spoke of deflation being replaced by reflation, above-trend growth, and the need to gradually adjust bond-buying parameters.

ECB Officials would subsequently try to explain that Draghi was aiming for comments that balanced positive developments with the ongoing need for substantial bond buying.  But the takeaway for market participants was that the ECB is moving closer and closer to tapering.

Why should rates in the US care about what’s going on with the European Central Bank?  To make a long story short, global bond markets (which drive interest rates) are interconnected and interdependent to a certain degree.  US rates might not respond to European rates in lock-step, but they definitely respond.  As such, it’s no surprise to see European benchmark rates surging and US rates following with a more measured version of the same move.

2017-6-29 nl2

Is this the end of low rates forever?  Not by a long-shot.  First of all, we’re only a few days into a move that took several months to play out in the US.  We can’t yet know if European rates are embarking on a similar journey.

Even if that happens, it’s good to keep in mind that rates generally move higher when central banks are actually in a bond-buying cycle.  True, that sounds terribly counterintuitive (after all, if the Fed/ECB are buying bonds, rates should be going down), but the following chart with QE time-frames in the US doesn’t lie.

2017-6-29 nl4

Don’t read too much into this chart because it could be competently argued several ways.  The point of posting it is to offer perspective.  What might seem like a surefire reason for rates to move higher could merely be the catalyst for a temporary correction in the bigger picture.  After all, most economists and analysts thought low rates were a thing of the past by the end of 2010 and 2013.  The subsequent years were the best 2 years of the recovery.
Housing-Specific News

There were several interesting developments in housing this week.  2 weeks after comments on a potential “housing emergency” due to tight inventory, The National Association of Realtors (NAR) now says the perception of a seller’s market could provide motivation for owners to list their homes, thus relieving some of the inventory pressure.

As for the month of May, there was no such relief in sight.  The NAR blamed lopsided supply and demand for the lowest Pending Home Sales levels since January.  Despite the justification, it’s worth noting that this index hasn’t been able to get back above its current range since the meltdown.

2017-6-29 nl3

Both Black Knight and Case-Shiller released their monthly home price indices.  Both set record highs at the national level, and both reports agree that the national numbers are being dragged higher by several outstanding regional markets.  Of the two, the Case-Shiller report did more to provide a counterpoint to the positivity, citing some signs of deceleration.

Mortgage Interest Rates Reverse Course in 2017

 

Mortgage Interest Rates Reverse Course in 2017 | MyKCM

To start the year, housing experts all agreed on one thing: 2017 was going to be the year we would see mortgage interest rates begin to rise. After years of historically low rates, and an improving economy, the question wasn’t if they would increase but instead how much they would increase. Some thought we could see rates hit 5-5.5% by the end of the year.

However, the exact opposite has happened. Instead of higher rates as we head into the middle of 2017, we now have the lowest rates of the year (as reported by Freddie Mac). Here is a graph of mortgage rate movement since the beginning of the year:

Mortgage Interest Rates Reverse Course in 2017 | MyKCM

Projections still call for an increase…

Four major entities (Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors) are still projecting that rates will increase by the fourth quarter of the year.

Mortgage Interest Rates Reverse Course in 2017 | MyKCM

Bottom Line

No one knows for sure where interest rates will be in six months. However, if you are thinking about buying your first house or trading up to the home of your dreams, you can still get a mortgage at historically low rates RIGHT NOW.

No Matter What the Groundhog Says, Here are 5 Reasons to Sell Before Spring!

No Matter What the Groundhog Says, Here are 5 Reasons to Sell Before Spring! | Simplifying The Market

Is spring closer than we think? Depending on which groundhog you listen to today, you may have less time than you think to get your home on the market before the busy spring season.

Many sellers feel that the spring is the best time to place their homes on the market as buyer demand traditionally increases at that time of year. However, the next six weeks before spring hits also have their own advantages.

Here are five reasons to sell now.

1. Demand is Strong 

Foot traffic refers to the number of people who are out, physically looking at homes right now. The latest foot traffic numbers from the National Association of Realtors (NAR) show that the number of buyers out looking for their dream homes in December reached the highest mark since February 2016.

These buyers are ready, willing and able to buy…and are in the market right now! Take advantage of the strong buyer activity currently in the market.

2. There Is Less Competition Now 

Housing inventory just dropped to a 3.6-month supply, which is well under the 6-month supply needed for a normal housing market. This means, in many areas, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices; however, additional inventory is about to come to market.

There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last four years. Many of these homes will be coming to market soon.

Also, new construction of single-family homes is again beginning to increase. A study by Harris Poll revealed that 41% of buyers would prefer to buy a new home, while only 21% prefer an existing home (38% had no preference).

The choices buyers have will increase in the spring. Don’t wait for this other inventory to come to market before you sell.

3. The Process Will Be Quicker

One of the biggest challenges of the housing market has been the length of time it takes from contract to closing. Banks are requiring more and more paperwork before approving a mortgage. There is less overall business done in the winter. Therefore, the process will be less onerous than it will be in the spring. Getting your house sold and closed before the spring delays begin will lend to a smoother transaction.

4. There Will Never Be a Better Time to Move-Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by 4.7% over the next 12 months according to CoreLogic. If you are moving to a higher priced home, it will wind-up costing you more in raw dollars (both in down payment and mortgage payment) if you wait. You can also lock-in your 30-year housing expense with an interest rate around 4% right now. Rates are projected to rise by half a percentage point by the end of 2017.

5. It’s Time to Move on with Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take back control of the situation by putting your home on the market. Perhaps, the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.

2017… LIST IT!!!

Start 2017 Off Right… List Your House for Sale | Simplifying The Market

Start 2017 Off Right… List Your House for Sale

As we are about to bring in the New Year, families across the country will be deciding if this is the year that they will sell their current house and move into their dream home. Many will decide that it is smarter to wait until the spring “buyer’s market” to list their house. In the past, that might have made sense. However, this winter is not like recent years.

The recent jump in mortgage rates has forced buyers off the fence and into the market, resulting in incredibly strong demand RIGHT NOW!! At the same time, inventory levels of homes for sale have dropped dramatically as compared to this time last year.

Here is a chart showing the decrease in inventory levels by category:

Start 2017 Off Right… List Your House for Sale | Simplifying The Market

Bottom Line

Demand for your home is very strong right now while your competition (other homes for sale) is at a historically low level. If you are thinking of selling in 2017, now may be the time.

5 Reasons to Hire a Real Estate Pro!

5 Reasons to Hire a Real Estate Professional When Buying & Selling! | Simplifying The Market

5 Reasons to Hire a Real Estate Professional When Buying & Selling!

Whether you are buying or selling a home, it can be quite an adventurous journey; you need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.

The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but rather have been strengthened, due to the projections of higher mortgage interest rates & home prices as the market continues to pick up steam. 

1. What do you do with all this paperwork?

Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.

2. Ok, so you found your dream house, now what?

According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, someone who knows what these actions are, to make sure that you acquire your dream? 

3. Are you a good negotiator?

So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process. 

4. What is the home you’re buying/selling really worth?

It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $185,000 compared to $245,000 among agent-assisted home sales.”

Get the most out of your transaction by hiring a professional.

5. Do you know what’s really going on in the market?

There is so much information out there on the news and the internet about home sales, prices, and mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a lowball offer?

Dave Ramsey, the financial guru, advises:

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”

Hiring an agent who has their finger on the pulse of the market will make your buying or selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.

Bottom Line

You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of the most important financial decisions of your life without hiring a Real Estate Professional?