Down Payments Declining in Changing Mortgage Scene

Good news for homebuyers: Average down payments are declining, a sign that lenders are serious about easing home-loan requirements.

Many buyers assume they need to put down at least 20 percent of the purchase price in order to qualify for a loan, but the average down payment for a 30-year, fixed-rate mortgage in the first quarter of 2014 was 15.78 percent, according to data compiled by LendingTree. That’s down from 16.01 percent in the fourth quarter of 2013.

Also, average credit scores for LendingTree customers dropped 6 percent year over year, suggesting that lenders are more willing to consider a wider pool of borrowers.

“As the housing market improves and refinance activity declines, lenders are adapting their guidelines to improve credit accessibility for borrowers,” Doug Lebda, LendingTree founder and CEO, said in a statement.

“Relaxed lending guidelines translates to a larger pool of qualified homebuyers that could boost the housing recovery,” Lebda said. “While lenders still need proof that a borrower has the financial ability to repay the loan, lenders have started to accept lower down payments and credit scores from potential borrowers.”

Average down payments by state in the first quarter ranged from 12.31 percent in North Dakota to 19.36 percent in New Jersey. Unsurprisingly, California residents dropped the third largest down payments in the U.S. — 18.21 percent — slightly lower than buyers in New York, who put down an average of 18.54 percent.

The LendingTree data supports another recent study that found lenders have lowered borrowers’ minimum FICO credit scores and debt-to-income ratios over the past year to attract more business.

First-time buyers, who generally face the closest scrutiny from lenders, would do well to talk with a real estate professional for help finding a lender and prequalifying for a home loan before entering negotiations with a seller.

If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success. 

(Image: Flickr/Lucas Stanley)

With Rates & Prices on the Rise, Do You Know the True Cost of Waiting?

We, at KCM, have often broken down the opportunity that exists now for Millennials who are willing and able to purchase a home NOW... Here are a couple other ways to look at the cost of waiting.

Let’s say your 30 and your dream house costs $250,000 today, at 4.41% your monthly Mortgage Payment with Interest would be $1,253.38.

But you’re busy, you like your apartment, moving is such a hassle...You decide to wait till the end of next year to buy and all of a sudden, you’re 31, that same house is $270,000, at 5.7%. Your new payment per month is $1,567.08.
The difference in payment is $313.70 PER MONTH!

That’s like taking a $10 bill and tossing it out the window EVERY DAY!

Or you could look at it this way:

§ That’s your morning coffee everyday on the way to work (Average $2) with $12 left for lunch!

§ There goes Friday Sushi Night! ($80 x 4)

§ Stressed Out? How about 3 deep tissue massages with tip!

§ Need a new car? You could get a brand new $22,000 car for $313.00 per month.

Let’s look at that number annually! Over the course of your new mortgage at 5.7%, your annual additional cost would be $3,764.40!

Had your eye on a vacation in the Caribbean? How about a 2-week trip through Europe? Or maybe your new house could really use a deck for entertaining. We could come up with 100’s of ways to spend $3,764, and we’re sure you could too!

Over the course of your 30 year loan, now at age 61, hopefully you are ready to retire soon, you would have spent an additional $112,932, all because when you were 30 you thought moving in 2014 was such a hassle or loved your apartment too much to leave yet.

Or maybe there wasn’t an agent out there who educated you on the true cost of waiting a year. Maybe they thought you wouldn’t be ready, but if they showed you that you could save $112,932, you’d at least listen to what they had to say.

They say hindsight is 20/20, we’d like to think that 30 years from now when you are 60, looking back, you would say to buy now…

Agents: How are you preparing to help Millennials understand the opportunity available to them TODAY, to become homeowners? Watch a free replay of our most recent webinar, "Spring Ahead in 2014: KCM's Action Plan for DOMINATING the Spring Buyers' Season" to find out the steps you need to take!

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Homebuyers Are Happy, Led by Millennials

Recent homebuyers are overwhelmingly happy with their purchases, according to a recent survey, but the reasons why depend on the age of the buyer.

Most younger buyers consider their homes strong investments, while older buyers view their new homes as a match to their changing lifestyles — typically choosing a smaller house after their children move out on their own.

These are just a few of the findings in agenerational trends study by the National Association of Realtors, based on a survey of more than 8,700 buyers and sellers.

Eight out of 10 recent buyers considered their home purchase a good financial investment, ranging from 87 percent for buyers age 33 and younger to 74 percent for buyers 68 and older.

The largest group of recent buyers are millennials — those under the age of 34 — who accounted for 31 percent of recent home purchases. Generation X buyers, born between 1965 and 1979, made up 30 percent of recent purchases, and younger baby boomers, born between 1955 and 1964, accounted for 16 percent.

“Given that millennials are the largest generation in history after the baby boomers, it means there is a potential for strong underlying demand,” Lawrence Yun, NAR’s chief economist, said in a statement accompanying the survey results.

“Moreover, their aspiration and the long-term investment aspect to owning a home remain solid among young people. However, the challenges of tight credit, limited inventory, eroding affordability, and high debt loads have limited the capacity of young people to own.”

The median age of millennial homebuyers is 29 and the median income is $73,600, according to the NAR study. They typically purchased an 1,800-square-foot home costing about $180,000.

In comparison, Gen X buyers’ median age is 40 with a median income of $98,200, and they tended to buy a 2,130-square-foot home costing $250,000.

Other findings from the survey:

• Millennials were more likely to buy in an urban or central city area than older boomers.
• Younger buyers tended to place higher importance on commuting costs than older generations. Older buyers were likely to place more emphasis on energy efficiency, landscaping, and community features.
• Millennials planned to stay in the home for 10 years, while those in the baby boom generation planned to stay for 20 years.
• Younger buyers tended to move to larger, higher-priced homes, but “there is a clear trend of downsizing to smaller homes among both younger and older baby boomers and the Silent Generation (those born between 1925 and 1945),” according to the study.
• Overall, 88 percent of recent buyers financed their home purchase. Nearly all (97 percent) millennials financed, compared with just 55 percent of Silent Generation buyers.
• Among the generations, Gen X (29 percent) is the largest group who are recent home sellers, followed by older boomers (22 percent) and younger boomers (21 percent).

(Image: Flickr/Tony Hoffarth)

Top Tips for Mortgage Borrowers in 2014

In the market for a mortgage? Take a look at these helpful mortgage tips for 2014, compiled by 
Bankrate, an online aggregator of financial rate information:

1. Be Prepared to Document Your Finances

Mortgage regulations went into effect in January that put new pressure on lenders to verify that borrowers are able to repay their loans. Keep track of financial documents, including bank statements, tax returns, and investment accounts, and be ready to show them to a loan officer.

2. Rates Are Rising, So Don’t Delay

Mortgage rates will almost certainly climb in 2014 as the Federal Reserve scales back the economic stimulus program that helped keep rates low in recent years. If you are planning to get a mortgage, don’t put it off much longer.

3. Don’t Wait to Refinance, Either

Owners who are paying more than 5 percent interest on their home loans still have a chance to refinance at lower rates, but those rates won’t last forever (see above). Speak to a loan officer and take a look at the numbers to see if refinancing still makes sense.

4. You Have Bargaining Power. Use It.

Lenders saw a big drop in refinancing activity in 2013 as interest rates started climbing higher, so they will be more aggressive in courting homebuyers in 2014. Buyers should take advantage of the bargaining power they gain with that increased competition. Shop around for the best deal.

5. You Have New Rights, Too

New mortgage rules created by the Consumer Financial Protection Bureau go into effect in 2014, giving borrowers many new rights. Learn more about these rules, and if you have problems with your mortgage servicer or fall behind on payments, take advantage of your rights.

6. Pay Attention to Your Credit Score

Good credit is a essential when applying for a home loan. Monitor your credit history and score until your loan closes. The best mortgage rates go to borrowers with credit scores of 720 or higher. Though you may still get a mortgage if your score is 680, lower numbers will result in higher rates or higher closing costs.

7. Keep Your Spending Under Control

You are less likely to get a home loan if you won’t have much money left each month after paying the mortgage and other obligations such as credit cards and student loans. Try to keep your monthly debt obligations — including mortgage and property taxes — to less than 43 percent of your income.

8. Which Mortgage Is Right for You?

A homeowner who expects to keep a house for seven to 10 years could get lower mortgage rates by choosing a seven- or 10-year ARM instead of a 30-year fixed-rate mortgage. If you are not sure how long you plan to own the property, a fixed-rate loan is probably the wisest option.

9. Think Twice About an FHA Loan

First-time buyers frequently turn to FHA loans, in part because they allow for low down payments and have more lenient underwriting standards than conventional loans. But consider these points: Mortgage insurance premiums on FHA loans are expected to rise in 2014, and the borrower is now required to pay for mortgage insurance for the life of the loan.

10. Buy Your Home When You’re Ready

Mortgage rates will almost certainly rise in 2014. If you are in the process of house hunting, try to move quickly, but remember that this is likely the largest financial decisions of your life. Take the mortgage and homebuying process at a pace you feel comfortable with.

If you plan to buy a home in the Bay Area or the Tahoe/Truckee region, Pacific Union’s mortgage partner, Mortgage Services Professionals, can offer loan advice and consultation to help make your purchase a success.

Current Real Estate Market Favors Older Buyers

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious:

Some couples are putting off marriage to buy homes together.

YOUNGER HOMEBUYERS STRUGGLE TO KEEP UP WITH MARKET
Silver-haired homebuyers increasingly have a leg up over their younger counterparts, who are struggling to afford homes in the current market, new research suggests.

Rising home prices have boosted older Americans’ equity, enabling them to buy new or second homes, sometimes in cash, according to BBVA Compass data.

“Younger people are finding it more difficult to buy into the American dream of homeownership with price tags that outpace their income growth,” the financial group said in a statement.

Still, BBVA predicted the U.S. housing market would continue to flourish in 2014, with prices increasing an estimated 8.5 percent and the number of owner-occupied homes growing for the first time in seven years.


COUPLES CHOOSING PROPERTY OVER WEDDED BLISS
It should probably come as no surprise then that many couples are delaying tying the knot to buy a home instead.

“These practical pairs haven’t given up on the idea of marriage, they just can’t afford to buy a home and pay for a wedding at the same time, and interest rates are too enticing right now,” Redfin reported just in time for Valentine’s Day.

The brokerage points out that this may actually be a savvy financial choice. Wedding and honeymoon costs add up to a whopping $35,000 for the average happy pair. But putting that cash down on a $175,000 home could result in nearly $47,000 in gained equity over five years.


BAY AREA RECORDS SLOWEST JANUARY FOR HOME SALES SINCE 2008
Tight inventory levels pushed Bay Area home sales to a six-year low in January, but prices continued to rise over year-ago levels.

San Diego-based DataQuick reported that 4,696 homes sold in the nine-county Bay Area last month, the lowest number for any January since 2008. Sales were particularly slow in Napa County, where they declined nearly 30 percent from January 2013.

San Mateo and Marin counties saw the smallest drops in activity, with 2.6 percent and 4.4 percent respectively.


MORE HOMEOWNERS KEEPING UP WITH MORTGAGE PAYMENTS
In more good news for the economy and housing market, mortgage delinquency rates have reached their lowest level since 2008, a new report shows.

The percentage of mortgage holders at least two months behind on payments shrank to 3.85 percent in the October-December quarter, down from 5.08 percent a year earlier, credit-reporting agency TransUnion said.

In California, late-payment rates were down an impressive 37.8 percent year over year, second only to Arizona, which saw a 38.6 percent decline.



(Photo: Flickr/Chris Goldberg)

Current Real Estate Market Favors Older Buyers

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious:

Some couples are putting off marriage to buy homes together.

YOUNGER HOMEBUYERS STRUGGLE TO KEEP UP WITH MARKET
Silver-haired homebuyers increasingly have a leg up over their younger counterparts, who are struggling to afford homes in the current market, new research suggests.

Rising home prices have boosted older Americans’ equity, enabling them to buy new or second homes, sometimes in cash, according to BBVA Compass data.

“Younger people are finding it more difficult to buy into the American dream of homeownership with price tags that outpace their income growth,” the financial group said in a statement.

Still, BBVA predicted the U.S. housing market would continue to flourish in 2014, with prices increasing an estimated 8.5 percent and the number of owner-occupied homes growing for the first time in seven years.


COUPLES CHOOSING PROPERTY OVER WEDDED BLISS
It should probably come as no surprise then that many couples are delaying tying the knot to buy a home instead.

“These practical pairs haven’t given up on the idea of marriage, they just can’t afford to buy a home and pay for a wedding at the same time, and interest rates are too enticing right now,” Redfin reported just in time for Valentine’s Day.

The brokerage points out that this may actually be a savvy financial choice. Wedding and honeymoon costs add up to a whopping $35,000 for the average happy pair. But putting that cash down on a $175,000 home could result in nearly $47,000 in gained equity over five years.


BAY AREA RECORDS SLOWEST JANUARY FOR HOME SALES SINCE 2008
Tight inventory levels pushed Bay Area home sales to a six-year low in January, but prices continued to rise over year-ago levels.

San Diego-based DataQuick reported that 4,696 homes sold in the nine-county Bay Area last month, the lowest number for any January since 2008. Sales were particularly slow in Napa County, where they declined nearly 30 percent from January 2013.

San Mateo and Marin counties saw the smallest drops in activity, with 2.6 percent and 4.4 percent respectively.


MORE HOMEOWNERS KEEPING UP WITH MORTGAGE PAYMENTS
In more good news for the economy and housing market, mortgage delinquency rates have reached their lowest level since 2008, a new report shows.

The percentage of mortgage holders at least two months behind on payments shrank to 3.85 percent in the October-December quarter, down from 5.08 percent a year earlier, credit-reporting agency TransUnion said.

In California, late-payment rates were down an impressive 37.8 percent year over year, second only to Arizona, which saw a 38.6 percent decline.



(Photo: Flickr/Chris Goldberg)

What is the Deal with Boomerang Buyers?

InfoGraphic Sourced From KCMBlog.com
http://www.keepingcurrentmatters.com/blog/page/2/

What it Cost if You Waited to Buy

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Buying a Home? Don't Let Fear Get in Your Way

Last week, I was talking to a young couple I know that was about to close on their first home. They were riding the wild rollercoaster of current mortgage rate swings and were not happy about the mortgage process overall. Yet, when the conversation shifted to finally living in a home that they own, their disposition changed dramatically.

A smile came across their faces as they talked about decorating their son’s bedroom and how much he will enjoy the backyard. They talked about inviting friends over for dinner and their family over for the holidays. The more they talked, the more excited they became.

I asked them if many of their friends were also buying. I was shocked to find out that they weren’t. Why not? Their friends believed that homeownership was financially unobtainable right now. Many wanted to own but didn’t think they could afford the monthly mortgage payment. They decided to rent instead.

I said that, with interest rates and prices where they are today, owning a home might not be any more expensive than renting one. The couple agreed but said their friends were afraid; afraid they might not qualify for a loan, afraid to handle negotiations with a seller, afraid of the home buying process itself.
Wow!


People should not make decisions out of fear! 
I’m not saying that every young person should own a home. I am saying that anyone that is qualified and wants to buy should not be afraid of the process. I realize the process may seem daunting but realize over 10,000 homes sell every day in this country. Sit down and discuss your goals with professionals from both the real estate and mortgage industries. Get the facts. Make an informed decision. Don’t let the fear of the unknown prevent you from living the life of your dreams.

Article & Photo Sourced From the KCMblog:
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Harvard: 5 Financial Reasons to Buy a Home

Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. This year he released a new paper on homeownership - The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.
Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available. 
“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You're paying for housing whether you own or rent. 
“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning. 
“Homeowners are able to deduct mortgage interest and property taxes from income...On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.
“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for many social and family reasons. It also makes sense financially.



Article & photo Sourced From the KCMblog.com:
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Real Estate Roundup: Bay Area Home Prices Spike 33 Percent in a Year

Here’s a look at recent news of interest to homebuyers, home sellers, and the home-curious:

BAY AREA HOME PRICES SET JUNE RECORD
Bay Area home prices set a new record for the biggest June increase, rising 6.9 percent from May and 33.1 percent from a year earlier.

The median price paid for a home in the nine-county Bay Area last month was $555,000, the highest since December 2007 when it was $587,500, according to the research firm DataQuick. The median price was $519,000 in May and $417,000 in June 2012.

DataQuick said prices rose because of “disappearing distress sales, an improving economy, and mortgage rates that, while up off bottom, remain very low.”

The Bay Area median home price peaked at $665,000 in June and July 2007, then dropped to $290,000 in March 2009.

“We’re still bouncing off the bottom,” said DataQuick President John Walsh. “This next part of the cycle should be fairly self-adjusting: As prices go up, more homes will come on the market. Price pressures will ease.”

HOPEFUL SIGN IN INVENTORY LEVELS
The supply of homes for sale in the Bay Area remains far below year-ago levels, but the tide is slowly turning, according to the latest figures from Realtor.com.

In the San Francisco metropolitan area, the number of listings grew 3.9 percent from May to June, although June’s numbers were still down 21.7 percent from a year earlier. Oakland-area listings jumped 12.1 percent from May to June but also lagged 21.2 percent behind last year’s level.

The data showed a more pronounced spike in Southern California listings from May to June, with inventories rising by 51.5 percent in Orange County, 45.7 percent in Los Angeles, and 18.1 percent in San Diego.

BANKS MAY EASE LOAN REQUIREMENTS
The recent rise in interest rates may be a blessing in disguise for homebuyers.

A recent Inman News story noted that fewer homeowners are taking out second mortgages as higher interest rates make them less affordable, resulting in falling profits at U.S. banks. To generate more business, “banks may be more likely to extend credit to a larger swath of borrowers.”

According to Zillow senior economist Svenja Gudell,“Because refi activity is down, you have a little more room to do business with people who don’t have an 800 credit score.”

HOUSING MARKET HAS BUILDERS UPBEAT
Builders continue to feel more optimistic about the market for newly built single-family homes.

Builder confidence rose six points in July to 57, according to the National Association of Home Builders/Wells Fargo Housing Market Index. Any number above 50 indicates more builders view conditions as good rather than poor, and July marked the index’s third consecutive monthly gain and its strongest reading since January 2006.

“Builders are seeing more motivated buyers coming through their doors as the inventory of existing homes for sale continues to tighten,” said NAHB economist David Crowe in a statement. “Meanwhile, as the infrastructure that supplies home building returns, some previously skyrocketing building material costs have begun to soften.”

(Image: Flickr/Bhautikjoshi)

3 Reasons to Buy that House NOW!

Here are three great reasons to consider buying a home today instead of waiting.

1.) Prices Will Continue to Rise
The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released last week projects appreciation in home values over the next five years to be between 12.3% (most pessimistic) and 32.8% (most optimistic).
The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes any sense.


2.) Mortgage Interest Rates Are Increasing
As reported by Freddie Mac, interest rates for 30-year fixed-rate mortgages have risen about one full percentage point over recent historic lows.
The National Association of Realtors, the Mortgage Bankers Association, Freddie Mac and Fannie Mae, in their July forecasts, have all projected 30-year-fixed mortgage interest rates to be between 4.8 and 5.1% by this time next year.
An increase in rates will impact YOUR monthly mortgage payment. 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.


3.) It’s Time to Move On with Your Life
The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise. But, what if they weren’t? Would you wait?
Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.


If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings. 


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Three Financial Reasons To Buy A Home Now

Three Financial Reasons To Buy A Home Now

See also:        3 Reasons to Sell Your House Today!

Part I 

Prices Are Rising at an Accelerated Rate

The price of a home is the major consideration when deciding whether or not it makes financial sense to purchase a house. Experts are not only projecting that house values will increase in 2013. They are also more optomistic in the level of appreciation they are projecting as the market begins to heat up. Here are some examples:

The Home Price Expectation Survey

The latest survey of a nationwide panel of 118 economists, real estate experts and investment and market strategists reveals they project home values to end 2013 up an average of 4.6% according to the first quarter. This is after they had projected a 3.1% increase just three months ago.

Bank of America

In a report titled, Someone Say House Party?, Bank of America analysts revised their projections upward:

“Home prices continue to show momentum amid shrinking inventory and record high affordability, prompting us to revise up our original forecast of 4.7% for home prices this year. We now expect national home prices, as defined by the S&P Case Shiller home price index, to increase 8% this year.”

Capital Economics

According to a report in DSNews, Capital Economics also upgraded their prediction:

“Strong demand and tight inventory have brought existing home sales back to ‘normal’ levels, and further gains are possible, according to the latest market report from Capital Economics. Additionally, market conditions may prompt lenders to “loosen the purse strings slightly” and lend a little more freely.

These conditions, combined with broader economic indicators, lead Capital Economics to revise its previous forecast of a 5% price gain this year up to 8%.”

Morgan Stanley

In an article from HousingWire, Morgan Stanley joined the party:

“Strong momentum in home prices as well as housing activity gave Morgan Stanley analysts enough confidence to upgrade their home price appreciation projections to roughly 7% (from 5%) for 2013, according to its latest global securitized credit report…

“The momentum in most metrics of housing activity is running well ahead of the pace we had expected,” said James Egan, Jose Cambronero and Vishwanath Tirupattur, analysts for Morgan Stanley.” 

Not only are prices projected to appreciate. Experts are actually revising their projections upward as demand maintains its momentum.

Part II 

 Interest Rates Are Increasing

A big component in the cost of a home is the mortgage interest rate a purchaser pays. Understanding where rates are headed will help in making a decision whether to buy now or wait.

So, Where Are Rates Headed?

No one can know for sure. The Fed has been artificially holding rates down to stimulate the economy. However, as the economy improves, many experts expect rates to creep up. As an example, HSH Associates, the nation’s largest publisher of mortgage and consumer loan information, recently explained:

“The stronger the economy becomes, the higher rates may grind; the Federal Reserve is keeping them low to goose the economy, but an economy responding to the Fed’s medicine will soon see less of a need for it in order to function. If not otherwise manipulated, higher rates are the natural result of a growing economy, as rising demand for available credit supply and concerns about inflation allow costs to rise.”

The Mortgage Bankers Association (MBA) agrees. They were quoted in HousingWire late last year regarding their thoughts on where rates would be headed in 2013.

“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association predicted.”

In the MBA’s latest Mortgage Finance Forecast they forecast that the 30 year interest rate will be 4.3% by the end of the year. This represents an increase of almost a full percentage point from the 3.4% rate available at the end of 2012.

For example, we show the impact a one percent increase in rate will have on the monthly principal and interest payment on a $200,000 mortgage.

Freddie Mac’s Weekly Primary Mortgage Market Survey reveals that rates have increased by 2/10ths of a percentage point already this year.

As we mentioned, no one knows for sure where rates will be a year from now. But, many experts think they may be as much as a point higher. With rising residential real estate prices and the possibility of higher mortgage rates, waiting to buy a home makes no sense in our opinion.

Part III 

  Rents Are Skyrocketing

Whether you own or rent, you will have a monthly housing expense. The question is how that expense will change in the future. When you purchase a home, for the most part, you lock-in that monthly housing expense for the length of the mortgage you take (15 or 30 years for example). When you rent a home, your housing expense is impacted by movements in the supply and demand for rental properties.

Historically, residential rental rates increase by 3.2% on an annual basis. However, in the current housing environment, there is an increasing demand for residential rental properties. This increase in demand has dramatically impacted rates. Zillow, in their most recent report, revealed that rental rates in the U.S. increased by 4.5% over the last twelve months. Other studies have projected rental rate increases of 4-5% over the next few years.

The only way to have control of your housing expense is to buy.

But Isn’t Buying Much More Expensive Than Renting?

Not right now! As a matter of fact, with prices down and mortgage rates at historic lows, it is LESS EXPENSIVE to buy than rent in most areas. In a recent report, Trulia revealed it is cheaper to buy than rent in ALL of America’s largest regions.

According to Jed Kolko, Trulia’s Chief Economist:

“People who didn’t buy a home last year may have missed the bottom of the market, but they haven’t completely missed the boat. Buying remains cheaper than renting in all 100 large metros. Even buyers who can’t get today’s lowest mortgage rates will still find that buying makes more financial sense than renting in nearly all local markets.”

However, Kolko went on to say that this opportunity may soon disappear:

“Although buying a home is still cheaper than renting, the gap is closing. In 2013, home prices should rise faster than rents, and mortgage rates are likely to rise in the next year as the economy improves. By next year, buying could be more expensive than renting in some housing markets, even for people with the best credit.”

Again, the only way to lock-in your monthly housing expense is to take that decision out of the hands of a landlord by owning. With both prices and interest rates set to increase, the best time to buy is right now.

Article & Photos Sourced from:     The KCM Blog
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