Why you should stop renting and buy today

Why you should stop renting and buy today

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There are many young people debating whether they should renew the lease on their apartment or sign a contract to purchase their first home.

Housing Cost & Net Worth

Whether you rent or buy, you have a monthly housing cost.

As a buyer, you are paying YOUR mortgage. 

Every mortgage payment is a form of what Harvard University’s Joint Center for Housing Studies calls “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.”

The principal portion of your mortgage payment helps build your net worth through building the equity you have in your home.

As a renter, you are paying YOUR LANDLORD’S mortgage. 

Below is an example of the home equity that would be accrued over the course of the next four years if you were to buy a home by the end of this year based on the results of the Home Price Expectation Survey.

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In this example, simply by paying your mortgage, you have just increased your net worth by over $34,000.

Bottom Line

Use your monthly housing cost to your advantage. Meet with a local real estate professional who can explain the opportunities available in your market. For more information, please contact The Olear Team today!

Most experts agree: There is no housing bubble

Most experts agree: There is no housing bubble

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There is no doubt that home prices in the vast majority of housing markets across the country are continuing to increase on a month over month basis. The following map (based on data from the latest CoreLogic pricing report) reveals the appreciation level by state:

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These increases in value have caused some to be concerned about a new price bubble forming in residential real estate. Here are quotes from many of the most respected voices in the housing industry regarding the issue:

Nick Timiraos, reporter at the Wall Street Journal:

“Predictions of a new national home price bubble look unfounded for now, according to data.”

Michael Fratantoni, chief economist, the Mortgage Bankers Association:

“I don’t really see it as a bubble.”

Jack M. Guttentag, professor of finance emeritus at the Wharton School of the University of Pennsylvania:

“My view is that we are a long way from another house price bubble.”

Rajeev Dhawan, director of economic forecasting center at J. Mack Robinson College of Business, Georgia State University:

“To have a bubble, you need to have construction rates higher than the perceived demand, which is what happened in 2003 to 2007. Right now, however, we have the reverse of that.”

Victor Calanog, chief economist, Reis:

“The housing market has yet to show evidence of systematic runaway asset price inflation characterized by home prices rising much faster than household income.”

David M. Blitzer, chairman of the index committee for S&P Dow Jones:

“I would describe this as a rebound in home prices, not a bubble and not a reason to be fearful.”

Andrew Nelson, U.S. chief economist, Colliers International:

“I don’t think there is a housing bubble.”

George Raitu, director, quantitative and commercial research, NAR:

“We do not consider the current market conditions to present a bubble.”

Christopher Thornberg, founding partner, Beacon Economics:

“The housing market is far from overheated.”

So why have prices been increasing?

Today, there is a gap between supply (number of houses on the market) and demand (the number of buyers looking for a new home). In any market, this would cause values to increase. Here are some experts’ comments on this issue:

Jonathan Smoke, realtor.com chief economist:

“So does that mean we’re in a bubble? Nope, that’s just what happens when demand increases faster than supply.”

Robert Bach, director of research – Americas, Newmark Grubb Knight Frank:

“I don’t think the housing market is overheated based on demand and supply fundamentals.”

Mark Dotzour, chief economist, real estate center, Texas A&M University:

“We are not in a housing bubble. We are in a situation where demand for houses is much higher than supply.”

Calvin Schnure, SVP of research and economic analysis, NAREIT:

“Given all the demand and little supply the residential market is FAR from overheated.”

Bottom Line

Currently, there is an imbalance between supply and demand for housing. This has created a natural increase in values, not a bubble in prices. For more information, please contact The Olear Team today!

Thinking of buying a home? Ask yourself these three questions!

Thinking of buying a home? Ask yourself these three questions!

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If you are debating purchasing a home right now, you are surely getting a lot of advice. Though your friends and family will have your best interest at heart, they may not be fully aware of your needs and what is currently happening in real estate.

Let’s look at whether or not now is actually a good time for you to buy a home.

There are three questions you should ask before purchasing in today’s market:

1. Why am I buying a home in the first place?

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances.

A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:

  • A good place to raise children and for them to get a good education
  • A place where you and your family feel safe
  • More space for you and your family
  • Control of that space

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

2. Where are home values headed?

When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over 100 economists, real estate experts and investment and market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

Here is what the experts projected in the latest survey:

  • Home values will appreciate by 4.1 percent in 2015.
  • The cumulative appreciation will be 18.1 percent by 2019.
  • Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 10.5 percent by 2019.

So what does that really mean for you and your family?

The chart below was made using the Home Price Expectation Survey’s predictions:

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If the experts are right and you were to purchase a home by January 2016 for $250,000, that home would appreciate by over $34,000 over the next four years. As we have reported before, homeownership is one of the best ways to build your family’s wealth.

3. Where are mortgage interest rates headed?

A buyer must be concerned about more than just prices. The “long-term cost” of a home can be dramatically impacted by an increase in mortgage rates.

The Mortgage Bankers Association (MBA), the National Association of Realtors and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next 12 months as you can see in the chart below:

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Bottom Line

Only you and your family will know for certain if now is the right time to purchase a home. Answering these questions will help you make that decision. And for additional advice and assistance, please do not hesitate to contact The Olear Team!

Over 23 percent thinking of selling. Why the hesitation?

Over 23 percent thinking of selling. Why the hesitation?

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Last month, the National Association of Realtors (NAR) reported that housing inventory was down 4.7 percent from the same time last year and that the month’s inventory of homes for sale stood at 4.8 — far below the six months necessary for a normal housing market. Why is there such a shortage of inventory?

The recently released Homeowner Sentiment Survey suggests that the American homeowner may not be fully aware of the opportunities that exist in the current real estate market. The survey, conducted by Edelman Berland for HSF Affiliates, also reports that many homeowners would be placing their home up for sale if they were better informed about today’s market.

Since the housing industry is facing a shortage of housing inventory, the survey’s findings are crucially important.

The survey reported that 23 percent of current homeowners questioned are considering selling their home but haven’t yet put it up for sale. That’s almost one out of every four houses. This is the inventory necessary to normalize the balance between “supply & demand” in the current market.

Why are potential sellers hesitating?

The survey shows that 55 percent of the 23 percent contemplating selling “would be more likely to put their homes on the market if given more information about the process.” What information do they need?

Here are a few of the challenges that potential sellers perceive to exist according to the survey along with what is actually happening in today’s market:

1. More than half (53 percent) don’t realize that the number of homes for sale on the market is lower, giving buyers fewer choices.” As a matter of fact, only 6 percent of potential sellers believe that listing inventory has recently decreased.

In reality, as we mentioned before, inventory is down from last year.

2. 80 percent think credit scores make it difficult to get a loan. 

In reality, though other studies have shown that many Americans believe that you need a credit score of at least 780 to get a loan, the actual median scores on closed loans are demonstratively lower than that.

3. 76 percent believe stricter lending requirements make it more difficult to get a mortgage.

In reality, the Mortgage Credit Availability Index shows lending standards have been consistently easing over the last year.

4. 68 percent think that current homeowners are trapped into their mortgages and are unable to sell their current homes.

In reality, a recent Fannie Mae study revealed that 32 percent of Americans are dramatically underestimating the current equity in their homes. Many more can afford to make the move they desire.

What’s the answer?

Every family should feel confident when they are buying or selling a home. In order to feel confident they need to truly understand their options and opportunities. HSF Affiliates CEO Gino Blefari put it best when he addressed the findings of the survey:

“Education is essential in today’s market. The stage is set for real estate professionals to connect with consumers, learn their needs and concerns and determine the best way for sellers and buyers to capitalize on the opportunities that exist today.”

For more information or assistance, please contact The Olear Team today!