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Laura Anderson

Los Angeles Real Estate

HOW MUCH TO OFFER ON A HOUSE: SHOULD YOU GO BELOW OR ABOVE ASKING PRICE?

original post: https://www.realtor.com/advice/buy/how-much-below-asking-price-should-you-offer-on-a-house/

by: Tara Mastroeni

How much should you offer on a house? This will depend on the market you’re in, the property’s list price, how long it’s been on the market, and many other factors that you should weigh before beginning negotiations with a home seller.

Of course, every homebuyer wants to score a deal. It can feel good to negotiate a seller’s price down, and even a small price cut can make a big difference to those monthly mortgage payments.

But, if you go in with a lowball offer on a house, you could risk offending the sellers—and having them write you off completely. Buying real estate is all about striking the right balance.

To help out, here’s a guide on some questions to ask yourself to figure out how much to offer on a house so you can land on the perfect offer price.

ARE YOU IN A BUYER’S MARKET OR SELLER’S MARKET?

“Your ability to present a lower offer will depend greatly on current market conditions—meaning if it’s a buyer’s market or seller’s market,” suggests Cynthia Jacinta Keskinkaya, co-founder of the Keskinkaya Dartley Team at Douglas Elliman in New York City.

So before you make any real estate purchase offer, determine what type of market you’re in. Traditionally, buyer’s markets come with a lot of flexibility on price, because available inventory is high and houses tend to sit on the market for longer. Here, home sellers tend to be more willing to negotiate, because offers are few and far between.

“In a buyer’s market, I would not hesitate to submit an offer that’s around 10% below asking,” advises Chris Cloud of EXIT Heritage Realty in Haymarket, VA. “Most sellers will at least see that as worthy of a counteroffer.”

HOW MUCH TO OFFER ON A HOUSE IN A SELLER’S MARKET

In a seller’s market, it’s much harder to go below asking price, because inventory is low, and multiple buyers tend to be interested in the same properties. In this case, the sellers may be getting multiple offers, so don’t expect them to be too willing to negotiate with you. If you’re determined to make this house your new home, it’s best to offer list price, or better yet, consider going above the listing price if you can.

Know that other home buyers might be willing to submit an all-cash purchase offer, or even waive a home inspection, to persuade the sellers to accept their offer, so prepare to get competitive.

Before you start submitting offers, your real estate agent can help you determine which market you’re currently in. Alternatively, here’s more advice on how to tell whether you’re in a buyer’s or seller’s market.

HOW LONG HAS THE REAL ESTATE LISTING BEEN ACTIVE? 

“By paying attention to the property history, you can get a better idea of the demand for that house,” notes Jennifer Carlson of Coldwell Banker in East Greenwich, RI. “Two days on the market? Probably not a good idea to go in with a lowball offer $50,000 below asking price. A whole year on the market, with price reductions? Go ahead and roll the dice. The longer a house has been on the market, the less of an upper hand the seller has in negotiation.”

If the house has been on the market for a long time, the homeowner is probably motivated to sell as soon as possible, and that can mean flexibility on price. In the worst case, if you come in with an offer that’s too low, the seller might come back with a counteroffer that’s still reasonable.

Fortunately, info on how long a house has been on the market can be easily found on most real estate listings—or if not, any good real estate agent will have access to this information through the multiple listing service. Ask for this to be pulled up for you, and use it as a reference as you draw up your offer.

HOW LOW TO LOWBALL ON A REAL ESTATE OFFER

However, Michael Russell of Ratchet Straps USA also emphasizes the importance of making sure a lowball offer doesn’t insult the seller, if you want it to be taken seriously as a buyer.

“The rule I’ve always followed is to never go more than 25% below the listed price,” he says. “Chances are, after fees, commission, and sentimental value, the sellers are already hurting. If you dip below that point, they may disregard your offer entirely.”

HOW DOES THE PRICE COMPARE TO SIMILAR HOMES IN THE AREA?

Once you have a general sense of how much wiggle room there is to work with, it’s time to look at comparable sales in your desired neighborhood. Ask your real estate agent to work up a comparative market analysis (also called a comp or CMA), which will show you the list and sale prices for similar homes that have sold in the last few months. Use that as your guide to homebuying.

“The comparables should be your go-to on a first offer,” says Shane Lee on behalf of Realtyhop. “If, for instance, a similar property in the same neighborhood is quoted $10K less, then it makes sense for you to go $10K below the asking price.”

As a homebuyer, knowing the market value is key to getting a fair price on your new home.

HOW BADLY DO YOU WANT THE HOME?

Last but not least, ask yourself: How would you feel if your offer got rejected? Let’s say you’ve been house-hunting for a while and you’ve finally found your dream home. It may be worth it to consider offering exactly what they’re asking for—or a bit more—to let the seller know you’re move-in ready.

“If you want the home badly enough, you need to make the seller an offer they can’t refuse,” advises Jenny Ditty Kang, a real estate agent with Wakefield Reutlinger Realtors in Louisville, KY.

However, if you think you’ll be able to move onto the next property without any issues coming up, there’s no harm in trying to score a deal. In the worst case, the seller rejects your offer and you go back to house-hunting. In the world of real estate, there’s almost always a long list of new and exciting properties.

HOW MUCH TO OFFER ON A HOUSE WITH MULTIPLE OFFERS

If you think you can fall in love with another property, don’t waste your time and money competing with multiple offers and other buyers. If you find yourself going over market value or potentially overpaying in a bidding war, take a step back, and ask yourself if this particular house is worth it.

Real estate is expensive, and with the added cost of home inspections, closing costs, real estate agent fees, and so on, it’s best to make sure you can afford the house before you get locked into a mortgage you can’t afford.

This last piece of advice may be the most subjective of all, but it’s important. Ultimately, it’s up to you to determine what you’re willing to offer for a house.

How homebuyers can compete in a strong seller’s market

original post: https://www.bankrate.com/real-estate/how-to-compete-for-housing/

by: Zach Wichter

1

The real estate market may be cooling down, but like water going from 212 degrees to merely 210, the change may be imperceptible if you dip your toe in, because a full simmer is nearly indistinguishable from boiling.

Earlier this summer, Bankrate reported that the third quarter promised some relief for buyers seeking a place to live, and while it may be true that things are cooling off ever so slightly in many markets, that doesn’t mean the housing hunt has gotten noticeably easier for most would-be buyers.

“It’s still competitive. We’re going from 20 offers on a place to four offers on a place,” said Angelica Olmsted, an agent at Denver’s RE/MAX Professionals Cherry Creek. “When I say it’s cooling down, it is, but we’re not really feeling it.”

So, if you’re planning to embark on a home search or hope to buy a new place to live in the coming months, prepare yourself for what’s in store.

What’s going on in real estate

Low inventory and favorable mortgage rates are pushing prices up and continue to promote competition in the market.

“We’re still in a strong seller’s market,” said Shanta Patton-Golar, region 15 vice president at the National Association of Real Estate Brokers, and an agent with ERA Brokers Consolidated in Las Vegas. “Homebuyers are still competing against a minimum of 10 offers, especially here in Las Vegas. There’s still strong competition.”

Even as more homes come on the market, the National Association of Realtors (NAR) projects that new home construction will lag behind market demand by about 5.5 million homes in the next decade, so there’s little long-term relief in sight, even as life returns to pre-pandemic normal.

Things are rebounding slightly, however. NAR reported a 3 percent increase in listings from May to June of this year, and Realtor.com reported a 9 percent increase in the last week.

What homebuyers should expect

The key thing for buyers is to be realistic about how tough the housing search is right now.

“We’re advising our clients: you won’t get one quickly, but you will get one and you only need one,” Patton-Golar said. “On average, we’re probably writing 30 offers per buyer.”

How Much Home Can I Afford?

Because competition is so tough, buyers still need to be prepared to offer more than the list price, and also may need to make other concessions to sellers.

“Even offers coming in at list price are being discarded and rejected within an hour,” she said. “If the best you can offer isn’t money, think about other terms,” like waiving inspections or appraisals.

It’s also important to get preapproved or prequalified for your mortgage. Among other benefits, it proves to sellers that your offer is serious.

Olmsted added that many buyers’ bidding strategies have changed in response to market conditions.

“It used to be: get your offer in as soon as possible and follow up consistently,” she said. “Now it pays to wait until right before the acceptance deadline to submit. If you submitted earlier, they used your offer against you, so you didn’t have a shot.”

Above all, Olmsted said, buyers should try to avoid getting too attached to a property they’re bidding on, because the odds are probably not in their favor.

What home sellers need to know

“Homeowners are still making the rules,” Patton-Golar said.

While the market does continue to favor sellers, helping them get top-dollar for their properties and other concessions from potential buyers, there are some guidelines they should continue to follow.

“It is more important than ever for sellers to price correctly,” Olmsted said. “If it’s not priced correctly, it will sit, you will have to drop the price and people will think something is wrong with it.”

To avoid a price cut, Olmsted said sellers or their agents should research their neighborhood and make sure the list price is in line with the closing price for other nearby, recent sales.

What do agents expect the rest of this year to look like?

While more properties should become available in the months ahead, there will still likely be more interested buyers than there are homes available. So, competition is going to remain intense for the foreseeable future, but that doesn’t mean buyers should drop out of the market.

“If you’re ready to get into the market with me now, there’s no point in waiting, let’s do it now,” Olmsted said.

The search may just take a while.

“I’m not sure that people can afford to wait,” Patton-Golar said. “The median prices in most communities have gone up significantly. With interest rates going lower, now is the time to buy because if interest rates go higher, that’s less borrowing power you have.”

She added that it’s especially important for minority and lower-income households to stick with it.

“This type of market can be very detrimental to communities of color and low-to-moderate income households, but by no means does renting make sense for that population, because this is the only way they create wealth for their households and their communities,” she said. “Stick with it, make this a goal. Sometimes you have to fight for what matters most, and this is one of those things.”

Bottom line

The rest of this year is likely going to remain competitive in the real estate market, and buyers need to be prepared for what’s in store if they are determined to become homeowners.

“You have to be creative and diligent and ready for the long road,” Patton-Golar said. “We have to work a little bit harder.”

But finding the right agent and steeling yourself for a series of rejections can make the process less intimidating.

DIVING DEEP INTO TODAY’S BIGGEST BUYER CONCERNS

original post: https://activatedagent.com/diving-deep-into-todays-biggest-buyer-concerns/

Last week, Fannie Mae released their Home Purchase Sentiment Index (HPSI). Though the survey showed 77% of respondents believe it’s a “good time to sell,” it also confirms what many are sensing: an increasing number of Americans believe it’s a “bad time to buy” a home. The percentage of those surveyed saying it’s a “bad time to buy” hit 64%, up from 56% last month and 38% last July.

The latest HPSI explains:

“Consumers also continued to cite high home prices as the predominant reason for their ongoing and significant divergence in sentiment toward homebuying and home-selling conditions. While all surveyed segments have expressed greater negativity toward homebuying over the last few months, renters who say they are planning to buy a home in the next few years have demonstrated an even steeper decline in homebuying sentiment than homeowners. It’s likely that affordability concerns are more greatly affecting those who aspire to be first-time homeowners than other consumer segments.”

Let’s look closely at the market conditions that impact home affordability.

A mortgage payment is determined by the price of the home and the mortgage rate on the loan used to purchase it. Lately, monthly mortgage payments have gone up for buyers for two key reasons:

  1. Mortgage rates have increased from 2.65% this past January to 2.9%.
  2. Home prices have increased by 15.4% over the last 12 months.

Based on these rising factors, a home may be less affordable today, but it doesn’t mean it’s not affordable.

Three weeks ago, ATTOM Data released their second-quarter 2021 U.S. Home Affordability Report which explained that the major ownership costs on the typical home as a percent of the average national wage had increased from 22.2% in the second quarter of 2020 to 25.2% in the second quarter of this year. They also went on to explain:

“Still, the latest level is within the 28 percent standard lenders prefer for how much homeowners should spend on mortgage payments, home insurance and property taxes.”

In the same report, Todd Teta, Chief Product Officer with ATTOM, confirms:

“Average workers across the country can still manage the major expenses of owning a home, based on lender standards.”

It’s true that monthly mortgage payments are greater than they were last year (as the ATTOM data shows), but they’re not unaffordable when compared to the last 30 years. While payments have increased dramatically during that several-decade span, if we adjust for inflation, today’s mortgage payments are 10.7% lower than they were in 1990.

What’s that mean for you? While you may not get the homebuying deal someone you know got last year, that doesn’t mean you shouldn’t still buy a home. Here are your alternatives to buying and the trade-offs you’ll have with each.

Alternative 1: I’ll rent instead.

Some may consider renting as the better option. However, the monthly cost of renting a home is skyrocketing. According to the July National Rent Report from Apartment List:

“…So far in 2021, rental prices have grown a staggering 9.2%. To put that in context, in previous years growth from January to June is usually just 2 to 3%. After this month’s spike, rents have been pushed well above our expectations of where they would have been had the pandemic not disrupted the market.”

If you continue to rent, chances are your rent will keep increasing at a fast pace. That means you could end up spending significantly more of your income on your rental as time goes on, which could make it even harder to save for a home.

Alternative 2: I’ll wait it out.

Others may consider waiting for another year and hoping that purchasing a home will be less expensive then. Let’s look at that possibility.

We’ve already established that a monthly mortgage payment is determined by the price of the home and the mortgage rate. A lower monthly payment would require one of those two elements to decrease over the next year. However, experts are forecasting the exact opposite:

  • The Mortgage Bankers Association (MBA) projects mortgage rates will be at 4.2% by the end of next year.
  • The Home Price Expectation Survey (HPES), a survey of over 100 economists, investment strategists, and housing market analysts, calls for home prices to increase by 5.12% in 2022.
Diving Deep into Today’s Biggest Buyer Concerns | Simplifying The Market

Based on these projections, let’s see the possible impact on a monthly mortgage payment:By waiting until next year, you’d potentially pay more for the home, need a larger down payment, pay a higher mortgage rate, and pay an additional $3,696 each year over the life of the mortgage.

Bottom Line

While you may have missed the absolute best time to buy a home, waiting any longer may not make sense. Mark Fleming, Chief Economist at First American, says it best:

“Affordability is likely to worsen before it improves, so try to buy it now, if you can find it.”

THE TRUTHS YOUNG HOMEBUYERS NEED TO HEAR

original post: https://activatedagent.com/the-truths-young-homebuyers-need-to-hear/

For many young or first-time homebuyers, purchasing a home can feel intimidating. A recent survey shows some homebuyers ages 25 to 40 may be unsure about the homebuying process and what they can afford. It found:

  • “1 in 4 underestimated their buying potential by $150k or more”
  • “1 in 4 underestimated the increase in value by $100k or more”
  • “47% don’t know what a good interest rate is”

Because they feel uncertain, many young homebuyers have given up on their search, or worse, they’ve decided homebuying isn’t for them and never started on their journey to begin with.

If you’re interested in buying but aren’t sure where to begin, here are three key concepts about homeownership you should understand before you get started.

1. What You Need To Know About Down Payments

Saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As Freddie Mac says:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

According to the most recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR), the median down payment for homes purchased between July 2019 and June 2020 was only 12%. That number is even lower when we control for age – for buyers in the 22 to 30 age range, the median down payment was only 6%.

2. You May Be Able To Afford More Home Than You Think

Working remotely, exercising, and generally spending more time than ever in our homes has changed what many people are looking for in their living space. However, some young homebuyers don’t feel they can afford a home that suits their growing needs and have decided to continue renting instead. That means they’ll miss out on some of the long-term benefits of owning a home. As an article recently published by NAR points out:

“Many young adults are underestimating how much they need for homeownership, the survey finds. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years…”

Knowing how much home you can afford when starting the buying process is critical and could be the game-changer that gets you from renting to buying.

3. Homeownership Will Become Less Affordable the Longer You Wait

Finally, with mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later. Sam Khater, Chief Economist at Freddie Mac, notes:

“As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”

Most experts forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. If you’ve been on the fence about buying a home, there’s no time like the present.

Bottom Line

If you feel overwhelmed by the prospect of starting your home search, you’re not alone. Let’s connect today so we can talk more about the process, what you’ll need to start your search, and what to expect.

Housing Market Update: Pending Sales Slide as New Listings Reach Pre-Pandemic Levels

by Tim Ellis and Taylor Marr

original post: https://www.redfin.com/news/housing-market-update-new-listings-on-par-with-2019/

Some buyers have hit their limit on record-high prices, but others may return to the market with more homes to choose from and less competition.

The U.S. housing market lost more steam as summer began, with pending sales continuing their slide and the number of homes for sale slowly growing. Google trends also revealed a continued decline in online house hunting, with searches for “Real Estate” dipping below 2019 levels (-4.5%) for the first time this year. Mortgage purchase applications fell dramatically week over week (-5%) to their lowest level since May 2020, according to the Mortgage Bankers Association home purchase index.

Home prices are still climbing, posting their highest year-over-year gain on record, but the share of homes for sale with price drops inched above 2020 levels for the first time this year. Most measures of early-stage homebuying demand point to further cooling in the housing market over the summer, but Redfin’s Homebuyer Demand Index—a measure of requests for home tours and other home-buying services from Redfin agents—rose slightly from the prior week. This may be a reflection of the fact that there was a small increase in the number of homes available to tour.

Unless otherwise noted, the data in this report covers the four-week period ending June 27. Redfin’s housing market data goes back through 2012.

“The month of June was a clear turning point in the ultra-hot housing market of 2021,” said Redfin Lead Economist Taylor Marr. “As home prices continue to set records, some buyers have hit their limit and are stepping back. At the same time, homes are hitting the market at pre-pandemic levels again, which may finally ease competition and bring some sense of balance to the market. The upshot is that fewer bidding wars could actually keep some on-the-fence buyers in the market and lure back some of the homebuying dropouts.”

Key housing market takeaways for 400+ U.S. metro areas:

Data based on homes listed and/or sold during the period:

  • The median home-sale price increased 23% year over year to $364,048, a record high.
  • Asking prices of newly listed homes were up 14% from the same time a year ago to a median of $366,202, also a record high.
  • Pending home sales were up 15% year over year, the smallest increase since the four-week period ending July 19, 2020. Pending sales were down 9% from the four-week period ending May 30, compared to a 2% increase over the same period in 2019.
  • New listings of homes for sale were up 6% from a year earlier, and have been mostly flat since the beginning of May. New listings had been below 2019 levels since late March, but reached parity with 2019 during the most recent period.
  • Active listings (the number of homes listed for sale at any point during the period) fell 33% from 2020—the smallest decline since the four-week period ending February 14—but have climbed 7% since their 2021 low during the four week period ending March 7.
  • 55% of homes that went under contract had an accepted offer within the first two weeks on the market, well above the 45% rate during the same period a year ago, but down 2 percentage points from the high point of the year, set during the four-week period ending March 28.
  • 41% of homes that went under contract had an accepted offer within one week of hitting the market, up from 32% during the same period a year earlier, but down 2.6 percentage points from the high point of the year, set during the four-week period ending March 28.
  • Homes that sold were on the market for a median of 15 days, a new all-time low and down from 39 days a year earlier.
  • A record 55% of homes sold above list price, up from 26% a year earlier.
  • The average sale-to-list price ratio, which measures how close homes are selling to their asking prices, increased to 102.4%. In other words, the average home sold for 2.4% above its asking price. This measure is an all-time high and 3.8 percentage points higher than a year earlier.
  • The share of homes for sale with price drops rose to 3.8%, surpassing 2020 levels for the first time this year. A few large markets–New York, Washington, D.C., and Chicago drove this trend, posting the most sizeable increases in their price-drop rates.

Other other leading indicators of homebuying activity:

  • Mortgage purchase applications decreased 5% week over week (seasonally adjusted) during the week ending June 25. For the week ending July 1 30-year mortgage rates fell back below 3% to 2.98%.
  • From January 1 to June 27, home tours went up 26%, compared to a 47% increase over the same period last year according to home tour technology company ShowingTime.
  • The seasonally adjusted Redfin Homebuyer Demand Index—a measure of requests for home tours and other services from Redfin agents—ticked up slightly during the week ending June 27, and is up 4% from a year earlier.

Refer to our metrics definition page for explanations of all the metrics used in this report.

Can You Afford To Buy That House During This Crazy Real Estate Market?

by: David Rae

original post: https://www.forbes.com/sites/davidrae/2021/06/23/can-you-afford-to-buy-that-house-during-this-crazy-real-estate-market/?sh=6960e9c64983

Photo of open house in Beverly Hills for sale. Housing prices are continuing to appreciate. Story o
Photo of open house in Beverly Hills for sale. Housing prices are continuing to appreciate. Story on … [+] LOS ANGELES TIMES VIA GETTY IMAGES

The housing market has been on fire during the Covid-19 pandemic. People are looking to change locales, get more space, or just make some money owning real estate. Don’t forget less than a decade ago; we were just coming out of the great recession and a major housing crisis. It is imperative that you put some thought behind where you want to live and how much house you can really afford. It may be tempting to rush and get in a bidding war during this crazy real estate market, but is this the best thing for your financial future? Or a huge real estate mistake?

Keep reading for eight questions you need to answer before buying a home today. I will leave the conversation about changing locales, or even neighborhoods, for another time. Mostly, this conversation around buying a home boils down to how much house you can afford and does it really make sense to spend the money.

1. What Is the Total Cost to Live in This Home?

The cost of ownership is not just your mortgage payment. There is homeowners insurance (I was just notified that mine is jumping 25% next year), property taxes, and maintenance. Don’t forget utilities. You may also have to pay a gardener, pool person, HOA, private mortgage insurance (PMI), etc. I also don’t think I’ve met anyone, who isn’t downsizing, who hasn’t had to buy some new furniture or décor for their new home. 

All of these can add up, so make sure they are within your budget. Try to get an estimate of the total cost to live in the home. 

2. Will You Still Have an Emergency Fund After the Down Payment?

First off, having a good down payment, as well as an emergency fund, signals that you are already making smart financial choices. It costs a lot of money to move into a new home beyond the cost associated with purchasing that new home. Many homebuyers face a budget crunch with overlapping rent and mortgage payments. This is on top of money for appraisals and home inspections (both a must for any homebuyer). You will then get the joy of paying to move all your possessions.

At the end of all this, make sure you still have an emergency fund. Your home purchase will likely come with a home warranty. But this warranty often doesn’t cover everything. You will still get hit with service charges every time someone comes to fix or just look at your house’s problems.

3. Can You Make The 20% Down Payment Threshold?

I recently asked in another Forbes post, “Is the 20% Down Payment Dead?” As a financial planner, there is a difference between being able to make the 20% down payment and choosing to make this large of a down payment. For potential homebuyers who have been able to save a good amount of money (i.e., a 20% down payment) likely have some room in their budgets to afford a new home. For those who have nothing saved, how will you cope when something breaks, or you don’t get that bonus or raise?

Also, putting down the full 20% payment can eliminate the need for private mortgage insurance (PMI), which can make the monthly payments more affordable. By the way, this insurance protects the lender, not you. PMI will cost somewhere between 0.3% and 1.2% of the balance on your loan. So, assuming you are buying a $1 million home, you could spend more than $12,000, per year, on PMI. As the price of your home gets larger, so will the PMI premiums.

4. What Percentage of Your Income Goes to Housing?

If purchasing a home will push you to spend more than 30% of your income on housing, you might be looking at more house than you can afford. On the flip side, if the total cost of ownership is lower than 30% of your monthly income, you are probably in good shape to make the home purchase.  

5. What Will You Be Giving Up To Buy This House?

The more of your money that goes towards housing means there is less money for other things you enjoy. What will you have to give up making this home purchase? Will you have to travel less? Cut back on your kids’ activities? Reduce savings rate for retirement? Skip time with friends? 

This will really depend on your priorities and financial goals. You may be willing to work a few more years to live in your dream home. One of my clients hates to travel, so we took that portion of her budget and put it towards building her dream home for retirement.

6. Will You Have Cash On Hand After Down Payment?

Over the years, I’ve spoken with many people who said they wouldn’t need anything new after they moved. Let me just say that they all needed something. Some needed new furniture because what they had did not fit in the new place. Others had to replace lost or damaged items. Also, your new space deserves some new décor, bedding, etc. Even simple things like hanging things on the wall or installing your TVs can add up quickly. Will you have money for items like this after you move?

Online shopping
Make sure student loans, credit cards and other debt are under control before buying a home. GETTY

7. You Aren’t Drowning In Debt

It is crazy to expect people to have all their debts paid off before buying a home. Let’s be real; some people reading this will likely have student loan debt seemingly forever. Others will have a car note most of the time. If you have the payments under control, I don’t think it is really that big of a deal to have some debt. 

Credit card debt is different. If you are carrying debt on credit cards, it means you are likely spending more than you make; I would make every effort to get this debt paid before buying a home.

8. Consider Your Debt To Income Ratio

I just said in the last section that you don’t need to pay off all your debts before buying a home. While it is still true, it does not mean your debts shouldn’t be considered when determining how much house you can afford. After all, these debts do come with payments that need to be made.

If your debt-to-income ratio is high, the size of mortgage you can qualify for might be limited. Generally, 43% is the highest ratio that can be approved for a mortgage. You can check this by adding up all your monthly debt payments and dividing that by your monthly income. This may be a tough pill to swallow for small-business owners, as the income a mortgage company will consider is smaller than what you feel your income is, assuming you are doing some tax planning along the way.

Purchasing a home is a major decision. Make sure you can truly afford the home so that if prices drop, you know you won’t have to sell low. You don’t want to be house-poor for the next 30 years.

HOUSING WEALTH: THE MISSING PIECE OF THE AFFORDABILITY EQUATION

original post: https://activatedagent.com/housing-wealth-the-missing-piece-of-the-affordability-equation/

The real estate market is soaring today. Residential home values are rising, and that’s a big win for homeowners. In 2020, there was a double-digit increase in home values – a trend that’s expected to head toward similar levels this year.

However, skyrocketing prices are causing some to start questioning affordability in the current housing market. Many are quick to emphasize the fact that homes today are less affordable than they were last year. Black Knight, a leading provider of data and analytics across the homeownership life cycle, just reported on the issue.

The findings show the historical averages of the national payment to income ratio, which they define as “the share of the median income needed to make the monthly payments on the median-priced home.” Their study reveals:

  • The average over the last 25 years was 23.6%
  • The average over the last 5 years was 20.1%
  • The average today stands at 20.5%

Right now, housing payments are slightly less affordable than the five-year average – but only by less than ½ a percentage point. However, they’re significantly more affordable than the 25-year average. Put another way, a buyer will likely make a slightly greater financial sacrifice to afford a home right now than if they purchased a home within the last five years. On the other hand, it also means the potential financial sacrifice is not nearly as great as it was over the last 25 years.

Does making a sacrifice to buy a home today make financial sense in the long term?

Last week, the Federal Reserve announced that, in the first three months of the year, household net worth increased by $968 billion based solely on the values of the real estate they owned. Another report from CoreLogic reveals the average annual gain in homeowner equity was $33,400 per borrower.

Housing Wealth: The Missing Piece of the Affordability Equation | Simplifying The Market

Homeownership continues to be the cornerstone to building personal wealth. For most Americans, their home is the largest asset they own. On top of that, the difference between the net worth of homeowners and renters is significant at every income level. Here’s a table detailing that point using data from a study done by First American:Owning a home is an essential steppingstone to grow a household’s net worth. Despite the slightly greater sacrifice in the percentage of monthly income you’ll spend on housing today, for most homebuyers, the payoff of starting to build equity now will be worth it.

Bottom Line

Since prices have risen dramatically over the past 18 months, it’s slightly less affordable to buy a home today than it was a year ago. However, when you consider the equity gain and weigh the long-term benefits of building your net worth, you may question if you can afford not to buy now.

Buying a house is a great investment — if you need a home

by: Erik J. Martin 

original article: https://themortgagereports.com/75914/is-buying-a-house-a-good-investment

Is a home an investment?

Many people don’t think of their home as an investment vehicle. Unless it’s a property you plan to rent out or fix-and-flip, you might think a house is just a place to live.

But the truth is, your home is an investment in many ways.

You’ll be putting a lot of money into the property — and its value can rise or fall with the economy. Plus, unlike renting, a house helps you build wealth.

Many experts believe buying a home is a great investment because it’s a fairly safe place to put your money, and home values generally increase over time.

However, the returns aren’t as large as you might see on other investment vehicles.

So, is buying a home the right financial decision for you? That all depends on your goals.

Is a home an investment?

Many people don’t think of their home as an investment vehicle. Unless it’s a property you plan to rent out or fix-and-flip, you might think a house is just a place to live.

But the truth is, your home is an investment in many ways.

You’ll be putting a lot of money into the property — and its value can rise or fall with the economy. Plus, unlike renting, a house helps you build wealth.

Many experts believe buying a home is a great investment because it’s a fairly safe place to put your money, and home values generally increase over time.

However, the returns aren’t as large as you might see on other investment vehicles.

So, is buying a home the right financial decision for you? That all depends on your goals.

Is buying a house a good investment?

The short answer is that it depends what you mean by ‘investment.’

Buying a house versus investing in securities

If your main goal is to turn your money into more money, a home purchase likely isn’t the best investment you can make.

That’s because, when compared to stocks, bonds, and other investment vehicles, you’ll likely see lower returns on the money you spend on your home. Real estate has earned 3-4% per year historically, versus around 10% per year on stocks.

But when compared to alternative forms of housing — such as renting — buying a home is typically a much better investment if you can afford it.

Buying versus renting

“Purchasing a home is generally regarded as a good investment compared to renting because you can build equity. When you rent, all you do is pay someone else’s mortgage,” notes Annie Kou, owner of AK Luxury Properties and a contract attorney in Los Angeles.

“If this is where you intend to live for at least three to five years, it makes more sense than leasing in many markets,” she continues.

“Also, rent, unlike some homeownership expenses such as your mortgage interest and property taxes paid, is not tax-deductible in general.” Buying a home can have tax benefits such as deductions and even tax credits.

Of course, there are some cities in which renting is significantly more economical — especially for a one- or two-bedroom apartment — than purchasing a starter home, says Michael Fischer, director and wealth advisor for Round Table Wealth Management in New York City.

“But as with other investments, real estate ownership can be a great way to pass wealth to the next generation,” Fischer adds.

How a home helps you build wealth

Ask Nadia Evangelou, senior economist with the National Association of Realtors in Washington DC, and she’ll tell you purchasing a home is a smart investment.

That’s because your home’s value is likely to increase over time, which in turn increases your wealth.

Financial benefits of buying a home

“Consider that the typical home has appreciated nearly $150,000 in the last nine years,” Evangelou says.

“Especially for risk-averse people, purchasing a home is often a safe investment that has traditionally been a great inflation hedge to protect against a loss in purchasing power of the dollar.”

Put more simply, while homes and real estate can lose value (as they did during and after the Great Recession), home values have been on an overall upward trend throughout recent history.

“While home values can go up or down, they are generally much less volatile than the stock market” –Brian Koss, Executive Vice President, Mortgage Network

In fact, U.S. housing stock gained about $2.5 trillion in value in 2020, per Zillow.

Data firm Black Knight reports that yearly home price growth has seen a 25-year average return of 3.9% (not bad for a low-risk investment).

“While home values can go up or down, they are generally much less volatile than the stock market,” explains Brian Koss, executive vice president of Mortgage Network in Danvers, Massachusetts.

Potential risks of home buying

Still, others caution that money put into housing can often yield better returns elsewhere.

“Too often, people make the mistake of spending too much of their income on a house and effectively crowding out other investment opportunities,” says Robert Johnson, professor of finance at Heider College of Business, Creighton University, in Omaha, Nebraska.

“These include investing in stocks and bonds and funding 401(k)s and retirement accounts, especially if doing so could earn a full match by their employers,” he continues.

Budgeting is crucial

Before buying, you should evaluate your cash flow and monthly expenses to make sure you can afford the payments on a home, while still making smart personal finance moves like contributing to retirement accounts and maintaining an emergency savings account.

Don’t forget — mortgage payments include homeowners insurance and property taxes as well as principal and interest due on the home loan.

You can use a mortgage calculator or talk to a lender to figure out what you an afford.

When is it smart to buy a house?

The argument is simple: You need a place to live full time anyway. So why not own a home nstead of “borrowing” it in the form of renting?

“Based on the most recent data, a typical homeowner’s net worth was $255,000 compared to only $6,300 for the average renter,” says Evangelou. “That’s a net worth 40 times greater.”

Additionally, owning a home can bring long-term social benefits to homeowners, including nurtured friendships with neighbors.

“Homeowners tend to remain in their homes for much longer — the median length is 10 years — than renter households” (two years) Evangelou adds. “This residential stability provides a wide range of benefits to the homeowner and the broader community.”

Also consider that monthly housing payments stay the same with a fixed-rate mortgage, even 30 years after buying a home.

“This gives you more financial predictability and control than renting, as rents generally go up gradually over time, if not suddenly,” Koss points out.

Finally, home equity can be a great asset. If your home’s value has risen above the purchase price by the time you sell, you could see a large profit.

And, even if you’re not ready to sell, you may be able to cash-out home equity for renovations and other large expenses.

Borrowing against your home’s value at a low mortgage rate can be a much more affordable way to access large sums of cash than paying with a credit card or personal loan.

When is a house not a good investment?

This is not to say that homeownership is the right strategy for everyone.

Many first-time buyers today are priced out of their local real estate markets. Some are unable to afford the steep down payment, closing costs, and monthly mortgage payments involved.

“Single-family existing home prices rose in all metro areas in the last quarter of 2020, while 88% of the metro areas had double-digit price gains,” Evangelou says.

The silver lining to these statistics is that homeowners have quickly built more equity in recent years, and sellers are reaping huge rewards. Today’s prospective buyers may benefit from these same perks over time, too.

“Purchasing a house should primarily be about matching your needs for space, community, and your family, and secondarily be about adding value or resale.” –Michael Fischer, Director and wealth advisor, Round Table Wealth Management

However, Johnson reminds readers that home equity can dissipate quickly, as seen during the financial crisis over a decade ago.

“Real estate is generally very illiquid — meaning not easily converted to cash unless you tap into your home’s equity,” he says.

“Because homes aren’t actively traded and the market is relatively illiquid, many investors assume that home values won’t fluctuate much. Homeowners convince themselves that the value of their home is more stable than that of stocks, but that concept is illusory. Home prices can fall precipitously, as history has shown us.”

Fischer says a home may not be a good investment if you don’t anticipate remaining in or renting out the home for at least five years, or if the local housing market has increased significantly over the past few years.

If the latter is true, “you may be better served looking at a nearby market that has yet to appreciate,” he adds.

What about investment properties?

Real estate investing — buying rental homes and investment properties — is a different matter altogether.

If you’re purchasing a home to lease out via long- or short-term rentals, or you plan to fix-and-flip the property, it’s easier to view the home as a bona fide investment tool.

Unlike a primary residence (the home you live in), investment properties are intended to generate cash flow through rental income. Thanks to the low interest rates on real estate, this can be a relatively low-cost and stable way to create passive income.

But that doesn’t mean you can’t lose money on this venture.

“Rental properties can create an ongoing income stream for their owners,” says Evangelou. “But choosing the right property and location is key, as is crunching the numbers. You must first calculate the profit that you can potentially make from the net income generated versus your expected operating expenses.”

Those expenses can include management, upkeep, and maintenance costs.

“If you don’t like collecting rents, personally handling repairs, or paying a third party to operate and maintain your investment property, owning investment real estate may not be for you,” says Koss.

Should you buy a house?

There are both risks and rewards that come with purchasing a home.

Homeownership can pay dividends, provided that you’ve done your homework and:

  • Understand the seriousness of this financial commitment
  • Qualify for mortgage financing
  • Have a reliable job and a steady source of income
  • Can afford the monthly payments, taxes, and ongoing maintenance that come with homeownership

Ultimately, “Owning a home should be considered independent of your investment goals,” Fischer suggests.

“Purchasing a house should primarily be about matching your needs for space, community, and your family, and secondarily be about adding value or resale. As an investment, it’s not as preferred as owning stocks, mutual funds, or exchange-traded funds.”

The bottom line? If you’re solely looking for investment opportunities, buying a home to live in might not be your best option.

But if you need somewhere to live, a home could be the smartest investment you’ll ever make.

5 Tips for Staying Stress Free While Selling Your Home

by Dana George 

original post: https://www.fool.com/the-ascent/mortgages/articles/5-tips-for-staying-stress-free-while-selling-your-home/

A man and woman standing with their arms around each other in front of their house with a For Sale sign behind them.

Image source: Getty Images

Just because selling a home is often stressful doesn’t mean it has to be.

Before taking out a mortgage on a new home, my husband and I have always sold our existing property. And it’s only fair to admit that everything we know about staying stress free while selling is a result of doing things wrong — sometimes very wrong. Based on the good, the bad, and the ugly moments in selling a home, here are five things we’ve learned about staying cool throughout the process.

1. Work with the right agent

The right agent makes all the difference in terms of stress. We’ve worked with an agent who wasn’t familiar with our neighborhood, one who blew so much smoke that we were constantly confused, and an agent who insisted we accept our first offer, even though it wasn’t what we wanted. We’ve also worked with an agent who was so honest it hurt but gave us a realistic idea of what we could expect, an agent who told us exactly where to spend our money and time as we prepared to sell, and an agent who saw red flags and steered us away from a sketchy buyer. Taking your time to interview agents until you find one that fits will help prevent stress and may even help you net more on the sale.

2. Edit what’s in your house, then edit again

It took a few house sales to learn this trick, but it makes all the difference. Before the house goes on the market, remove everything you don’t regularly use. Donate stuff you don’t want, and rent a storage unit for items you want to keep, or ask a relative to let you store extras at their house until yours sells. The less you have in your home, the more it looks move-in ready.

Typically, your agent calls and says someone would like to tour your house at a certain time. You run around tidying, wiping down, picking up, turning on lights, and generally trying to make the house ready for potential buyers. The less you have in your home, the easier the process. Keeping it simple is key to stress reduction.

3. Set your own hours

Speaking of running around, I’m not sure how I manage to yell at everyone in my household as I tidy, but then again, I’m good at dual-tasking. I’m pretty sure I make everyone in my path anxious with my rabid “it must be perfect” cleaning frenzies. Now I limit the hours during which the property can be shown. For example, I may set 4 p.m. until 7 p.m. on weekdays and 9 a.m. to 5 p.m. on weekends. I’m not away from the house during those hours unless there’s a showing. I do, however, have the property in show-worthy condition. As excited as I may be to sell a home, setting hours reduces the stress of a call that comes at an inconvenient time.

4. Have a plan for the pets

Between an ancient cat who once cornered a real estate agent and a dog who barks at everyone (particularly those he hopes to become best friends with), I know my pets can be nowhere near the house during showings. The cat has gone on to his greater reward, but the dogs are still part of the family. Here’s my sanity-saving system:

  • Fifteen minutes before the scheduled tour, I take one final spin around the house to make sure everything looks great.
  • I grab the basket of dog toys, pick up their food bowls, tell the dogs we’re leaving, strap them into their car seats, and take a nice drive.
  • If I’m lucky, my agent texts to let me know the showing is over. If not, I meander back by the house like I’m stalking the joint (and hope to goodness no one sees me).

It sounds like a lot, but the dogs love the excitement, and I don’t have to worry about their bothering anyone (or our house feeling like a kennel).

5. Know your triggers

I know where every dust bunny in my house hides. I’m not saying it’s a superpower, but it is super annoying to those around me. I will not allow an agent to show my home unless I believe everything is just right. Because I know that messes, large and small, trigger me, I have a routine that helps avoid potential stress traps. It includes:

  • Working with an agent who agrees to an open house the first weekend the house goes on the market.
  • Planning a trip out of town for that weekend.
  • Hiring a cleaning crew to come in early on the day we plan to leave town and deep clean.

Hiring a cleaning crew is worth every penny. It means that by the time I leave town and the agent holds an open house, the home looks and smells as lovely as possible.

Maybe your stress meter goes up when you must leave the house for a showing. If so, make it a treat. Drive somewhere for a cherry limeade or a chocolate malt. Perhaps you’re triggered by negative feedback. Let your agent know you don’t take criticism well, and ask them to filter the comments they get from other agents. If the thought of packing up all your belongings to make a move makes you break out in hives, come up with a written plan that breaks it all down into bite-sized pieces that are easy to accomplish.

Whatever the issue may be, address it before the house goes on the market. Going into the sale of your home with a plan in place may seem like an unnecessary step, but it can help you avoid the stressful obstacles most likely to trip you up.

A historic opportunity to potentially save thousands on your mortgage

Chances are, interest rates won’t stay put at multi-decade lows for much longer. That’s why taking action today is crucial, whether you’re wanting to refinance and cut your mortgage payment or you’re ready to pull the trigger on a new home purchase.

6 REASONS TO CELEBRATE NATIONAL HOMEOWNERSHIP MONTH

original post: https://activatedagent.com/6-reasons-to-celebrate-national-homeownership-month/

Our homes are so much more than the houses we live in. For many, they’ve also become our workplaces, schools for our children, and safe harbors in which we’ve weathered the toughest moments of a global pandemic. Today, 65.6% of Americans call their homes their own, a rate that has risen to its highest point in 8 years.

As National Homeownership Month kicks off this June, homeowners have every reason to celebrate. A survey by Gallup just ranked real estate as the best investment you can make for the eighth year in a row. However, unlike other investment options, the benefits of owning a home aren’t purely financial. Here are the top ways Americans are winning by owning a home.

Non-Financial Benefits:

1. Civic Participation: Owning a home is owning a part of your neighborhood. Homeowners have a stronger connection to their neighborhoods and are more committed to volunteer work and other ways to get involved.

2. Pride of Ownership: Owning a home is having a space that is uniquely yours. You can customize it to your personal liking and make it reflect your personality and values.

3. A Safe Space: Owning a home gives you a sense of security and privacy – two things that have become even more valuable as we’ve tackled the challenges of the recent health crisis.

Financial Benefits:

1. Forced Savings: Owning a home builds equity. Your equity grows with each payment you make toward your mortgage. This form of forced savings can be used down the road to help you accomplish your biggest financial goals.

2. Appreciation: Owning a home is making an investment that steadily gains value, and experts project home values will continue to rise in the years to come.

3. Stability: Owning a home means having better control over your future housing payments. Over the years, a mortgage stays relatively steady, but rent costs continue to rise.

Bottom Line

If you own your home, take time this June to celebrate the ways homeownership has added value to your life. If you hope to become a homeowner this year, let’s connect today to take the first steps toward achieving your goal.

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