Are Home Values Really Overinflated?

Are Home Values Really Overinflated? | Simplifying The Market

Last week, the National Association of Realtors (NAR) released their most recent Existing Home Sales Report. According to the report:

“The median existing-home price for all housing types in January was $240,500, up 5.8 percent from January 2017 ($227,300). January’s price increase marks the 71st straight month of year-over-year gains.”

Seventy-one consecutive months of price increases may have some concerned that current home values may be overinflated.

However, at the same time, Zillow issued a press release which revealed:

“If the housing bubble and bust had not happened, and home values had instead appreciated at a steady pace, the median home value would be higher than its current value.”

Here are two graphs that help show why home prices are exactly where they should be.

The first graph shows actual median home sales prices from 2000 through 2017.

Are Home Values Really Overinflated? | Simplifying The Market

By itself, this graph could heighten concerns as it shows home values rose in the early 2000s, came tumbling down and are now headed up again. It gives the feel of a rollercoaster ride that is about to take another turn downward.

However, if we also include where prices would naturally be, had there not been a boom & bust, we see a different story.

Are Home Values Really Overinflated? | Simplifying The Market

The blue bars on this graph represent were prices would be if they had increased by the normal annual appreciation rate (3.6%). By adding 3.6% to the actual 2000 price and repeating that for each subsequent year, we can see that prices were overvalued during the boom, undervalued during the bust, and a little bit LOWER than where they should be right now.

Bottom Line

Based on historic appreciation levels, we should be very comfortable that current home values are not overinflated.

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It’s Tax Season… Use Your Refund to Jump Start Your Down Payment Savings!

It's Tax Season… Use Your Refund to Jump Start Your Down Payment Savings! | Simplifying The Market

According to data released by the Internal Revenue Service (IRS), Americans can expect an estimated average refund of $2,840 this year when filing their taxes. This is down slightly from the average refund of $2,895, last year.

Tax refunds are often thought of as ‘extra money’ that can be used toward larger goals; for anyone looking to buy a home in 2018, this can be a great jump start toward a down payment!

The map below shows the average tax refund Americans received last year by state. (The refunds received for the 2017 tax year should continue to reflect these numbers as the new tax code will go into effect for 2018 tax filings.)

It's Tax Season… Use Your Refund to Jump Start Your Down Payment Savings! | Simplifying The Market

Many first-time buyers believe that a 20% down payment is required to qualify for a mortgage. Programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae all allow for down payments as low as 3%, with Veterans Affairs Loans allowing many veterans to purchase a home with 0% down.

If you started your down payment savings with your tax refund check this year, how close would you be to a 3% down payment?

The map below shows what percentage of a 3% down payment is covered by the average tax refund by taking into account the median price of homes sold by state.

It's Tax Season… Use Your Refund to Jump Start Your Down Payment Savings! | Simplifying The Market

The darker the blue, the closer your tax refund gets you to homeownership! For those in Alabama looking to purchase their first homes, their tax refund could potentially get them 69% closer to that dream!

Bottom Line

Saving for a down payment can seem like a daunting task. But the more you know about what’s required, the more prepared you can be to make the best decision for you and your family! This tax season, your refund could be your key to homeownership!

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Is Now a Good Time to Rent?

Is Now a Good Time to Rent? | Simplifying The Market

People often ask if now is a good time to buy a home, but nobody ever asks when it’s a good time to rent. Regardless, we want to make certain that everyone understands that today is NOT a good time to rent.

The Census Bureau recently released their 2017 fourth quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:

Is Now a Good Time to Rent? | Simplifying The Market

As you can see, rents have steadily increased and are showing no signs of slowing down. If you are faced with making the decision of whether or not you should renew your lease, you might be pleasantly surprised at your ability to buy a home of your own instead.

Bottom Line

One way to protect yourself from rising rents is to lock in your housing expense by buying a home. If you are ready and willing to buy, let’s meet to determine if you are able to today!

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Rents Are on the Rise: Don’t Get Caught in the Rental Trap!

There are many benefits to homeownership. One of the top benefits is protecting yourself from rising rents, by locking in your housing cost for the life of your mortgage.

Don’t Become Trapped

A recent article by Apartment List addressed rising rents by stating:

“Rents are up 2.7% year-over-year at the national level. Year-over-year growth continues to fall between the 2.1% rate from this time last year and the 3.4% growth rate from October 2015.”

The article continues explaining that:

“Despite the seasonal slowdown, rents are still up year-over-year in 89 of the 100 Largest cities.

Additionally, the Urban Institute revealed that,

Over a quarter of renters, or 11.1 million households, are severely cost burdened, spending at least half their income on rental housing.

These households struggle to save for a rainy day and pay other bills, including groceries and healthcare.

It’s Cheaper to Buy Than Rent

As we have previously mentioned, the results of the latest Rent vs. Buy Report from Trulia shows that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that the range is an average of 6.5% less expensive in San Jose (CA), all the way up to 57% less expensive in Detroit (MI) and 37.4% nationwide!

Know Your Options

Perhaps you have already saved enough to buy your first home. A nationwide survey of about 24,000 renters found that 80% of millennial renters plan to eventually buy a house, but 72% cite affordability as their primary obstacle. Aside from affordability, one in three millennial renters have concerns about their credit scores,and another 53% said that a down payment is an obstacle.

Many first-time homebuyers who believe that they need a large down payment may be holding themselves backfrom their dream homes. As we have reported before, in many areas of the country, a first-time home buyer can save for a 3% down payment in less than two years. You may have already saved enough!

Bottom Line

Don’t get caught in the trap that so many renters are currently in. If you are ready and willing to buy a home, find out if you are able. Let’s get together to determine if you can qualify for a mortgage now!

3 Tips for Making Your Dream Home a Reality

3 Tips for Making Your Dream Home a Reality [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Realtor.com shared their “5 Habits to Start Now If You Hope to Buy a Home.”
  • Setting up an automatic savings plan that saves a small amount of every check is one of the best ways to save without thinking a lot about it.
  • Living within a budget will not only help you save money for down payments but will help you pay down other debts that might be holding you back.

Your Friends Are Crazy Wrong If They’re Telling You Not to Buy

The current narrative is that home prices have risen so much so that it is no longer a smart idea to purchase a home. Your family and friends might suggest that buying a home right now (whether a first-time home or a move-up home) makes absolutely no sense from an affordability standpoint. They are wrong! Continue reading “Your Friends Are Crazy Wrong If They’re Telling You Not to Buy”