You’ve Played the Housing Market Perfectly. Don’t Blow it Now!

You've Played the Real Estate Market Perfectly! Don't Blow It Now! | Keeping Current Matters

Many people suffered through the housing crisis. We realize that most of the heartache was the result of a housing and mortgage market gone wild. Many consumers were swept away by the waters of a frenzied real estate market that resulted in a crisis even the experts didn’t see coming.

However, some of the suffering was caused by home buyers and home owners simply making bad decisions. NOT YOU! You didn’t buy that house that stretched your family finances past the point of sustainability. You didn’t take out a home equity loan and buy new water skis. You didn’t do a cash-out refinance for the maximum amount possible.

Instead, you bought a home your family could enjoy – and afford! You waited for interest rates to drop to historic lows and then refinanced your mortgage; not for the sake of taking cash out but instead to lower your monthly payment.

You have equity in your house and a nice, low mortgage payment. You played the housing market perfectly.

Don’t Miss the Last Move

Yet, there is one more move many should consider. With interest rates still at historic lows, and prices projected to increase by almost 20% over the next four and a half years, this may be time to buy a new home.

Whether, you are a growing family ready to move-up to that waterfront home you always wanted or an empty nester downsizing to a home that makes more sense, now may be the time to buy. If you have considered buying a vacation/retirement home, there may never be a better time to move forward with that plan.

You have been fiscally astute enough to navigate the treacherous waters of a housing market that sank many a homeowner. Now, that the seas have settled, don’t think there aren’t even greater opportunities on the horizon.

Moving Up: Was it Worth Waiting?

Moving Up? Do it Now!! | Keeping Current Matters

New reports are revealing that the number of months’ inventory of existing homes available for sale is increasing. Some of these sellers are moving up, some are downsizing and others are making a lateral move.

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, last year, they had a home worth $300,000 and were looking at a home for $450,000 (putting 10% down they would get a mortgage of $405,000). By waiting, their house appreciated by approximately 10% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $330,000. But, the $450,000 home would now be worth $495,000 (requiring a mortgage of $420,000 assuming the original $45,000 down plus the additional $30,000 from the sale of their home).

Here is a table showing what the difference in monthly cost (principal and interest) would be if a purchaser had waited:

Cost of Waiting: Was it Worth It? | Keeping Current Matters

3 dollars and 27 cents. Was it worth waiting a year to move up to the home of your dreams? Only you can answer that question.

Moving Up?

If your family plans on moving up in the next twelve months, it may make sense to move now rather than later. Prices are definitely still appreciating and, unlike the last year, interest rates are also projected to increase.

Buying a Home? Know ALL Your Options

Buying a Home? Know ALL Your Options | Keeping Current Matters

In a post earlier this week, we suggested that the Millennial generation’s struggles with student debt and the overarching concept of homeownership are not the reasons for so many first time buyers hesitating to move forward with the purchase of their first home. Now there is another firm suggesting the same. The asset management company, Nomura, came out with strong guidance to their investors. According to an article in Housing Wire last week:

“Nomura’s note to clients has a take few have offered: The first time homebuyers are holding out and it’s not student debt, a shift away from homeownership as a choice by Millennials, or any of that.”

Instead, they think it is a lack of a full understanding of the mortgage process. The article explains:

“Analysts say it’s not that Millennials and other potential homebuyers aren’t qualified in terms of their credit scores or in how much they have saved for their down payment. It’s that they think they’re not qualified or they think that they don’t have a big enough down payment.” (emphasis added)

This comes off the heels of a survey by Zelman & Associates that revealed that 38% of those between the ages of 25-29 years old and 42% of those between the ages of 30-34 years old believe that a minimum of 15% is required as a down payment to purchase a home. In actually, a purchaser may be able to put down far less.

The Reality of the Situation

According to Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management, in a recent Executive Perspectives piece:

  • A person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent (sometimes with as little as 3 percent coming out of their own pockets)”.
  • Freddie Mac’s purchase of mortgages with down payments under 10 percent more than quadrupled between 2009 and 2013.
  • More than one in five borrowers who took out conforming, conventional mortgages in 2014 put down 10 percent or less.
  • Qualified borrowers can further reduce the down payment coming out of their own pockets to 3 percent by lining up gifts from family or grants or loans from non-profits or public agencies.

Ms. Boyle goes on to explain:

“Letting more consumers know how down payments are determined could bring more qualified borrowers off the sidelines. Depending on their credit history and other factors, many borrowers can expect to make a down payment of about 5 or 10 percent.”

Bottom Line

If you have considered purchasing a house or moving-up to a new dream home, know all of your options. Reach out to a real estate and/or mortgage professional in your marketplace to get the best, most up-to-date information available. You may be surprised to learn what you and your family are capable of achieving.

Buying a Home: The Cost of Waiting

Buying a Home: The Cost of Waiting | Keeping Current Matters

Whether you are a first time buyer or a move-up buyer, you should look at the projections housing experts are making in two major areas: home prices and mortgage rates.

PRICES

Over 100 economists, real estate experts and investment & market strategists were recently surveyed. They were asked to project where home prices were headed. The average value appreciation projected over the next twelve month period was approximately 4%.

MORTGAGE INTEREST RATES

In their last Economic & Housing Market Outlook, Freddie Mac predicted that 30 year fixed mortgage rates would be 4.8% by this time next year. As of last week, the Freddie Mac rate was 4.14%.

What does this mean to you?

If you are a first time buyer currently looking at a home priced at $250,000, this is what it could cost you on a monthly basis if you wait to buy next year:

First Time Homebuyer's Cost of Waiting | Keeping Current Matters

If you are a move-up buyer currently looking at a home priced at $500,000, this is what it could cost you on a monthly basis if you wait to buy next year:

Move Up Buyer's Cost of Waiting | Keeping Current Matters

Bottom Line

With both home prices and interest rates projected to increase, buying now instead of later might make sense.