THINGSTOCONSIDERWHENBUYINGAHOME
WINTER2019EDITION
Kris2MilliganRealtor.com561-302-3439
TABLEOFCONTENTS
WHAT'SHAPPENINGINTHEHOUSINGMARKET?
WHATYOUNEEDTOKNOWBEFOREYOUBUY
WHATTOEXPECTWHENBUYINGAHOME
4ReasonsToBuyAHomeThisWinter3
2FactorsToWatchInToday'sRealEstateMarket5HomePricesOverTheLastYear7BuyingRemainsCheaperThanRen2ngIn38States!8DoYouKnowTheCostOfWai2ngToBuy?9WhereAreMortgageInterestRatesHeaded?10
BuyingaHome?DoYouKnowTheLingo?12WhyPre-ApprovalShouldBeYourFirstStep13YouDoNOTNeed20%DownToBuyYourHome!14TheTrueCostOfNOTOwningYourHome16Star2ngToLookForAHome?KnowWhatYouWantVs.WhatYouNeed
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5ReasonsToUseARealEstateProfessional19HaveYouPutAsideEnoughForClosingCosts?20ReadyToMakeAnOffer?4TipsForSuccess22
18 61%OfFirst-TimeBuyersPutDownLessThan6%
Belowarefourgreatreasonstoconsiderbuyingahometodayinsteadofwai2ng.
1. PricesWillConMnuetoRise
CoreLogic’slatestHomePriceIndexreportsthathomepriceshaveappreciatedby5.6%overthelast12months.Thesamereportpredictsthatpriceswillcon2nuetoincreaseatarateof4.7%overthenextyear.
Theboaominhomepriceshascomeandgone.Homevalueswillcon2nuetoappreciateforyears.Wai2ngnolongermakessense.
2. MortgageInterestRatesAreProjectedtoIncrease
FreddieMac’sPrimaryMortgageMarketSurveyshowsthatinterestratesfora30-yearmortgagehaveincreasedbynearlyafullpercentagepointtoaround4.8%in2018.Mostexpertspredictthatrateswillriseoverthenext12months.TheMortgageBankersAssocia>on,FannieMae,FreddieMac,andtheNa>onalAssocia>onofRealtorsareinunison,projec2ngthatrateswillincreasebythis2menextyear.
AnincreaseinrateswillimpactYOURmonthlymortgagepayment.Ayearfromnow,yourhousingexpensewillincreaseifamortgageisnecessarytobuyyournexthome.
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4ReasonsToBuyAHomeThisWinter
3. EitherWay,YouArePayingaMortgage
Therearesomerenterswhohavenotyetpurchasedahomebecausetheyareuncomfortabletakingontheobliga2onofamortgage.Everyoneshouldrealizethatunlessyouarelivingwithyourparentsrent-free,youarepayingamortgage-eitheryoursoryourlandlord’s.
Asanowner,yourmortgagepaymentisaformof‘forcedsavings’thatallowsyoutohaveequityinyourhomethatyoucantapintolaterinlife.Asarenter,youguaranteeyourlandlordisthepersonwiththatequity.
Areyoureadytoputyourhousingcosttoworkforyou?
4. It’sTimetoMoveonwithYourLife
The‘cost’ofahomeisdeterminedbytwomajorcomponents:thepriceofthehomeandthecurrentmortgagerate.Itappearsthatbothareontherise.
Butwhatiftheyweren’t?Wouldyouwait?
Lookattheactualreasonyouarebuyinganddecideifitisworthwai2ng.Whetheryouwanttohaveagreatplaceforyourchildrentogrowup,youwantyourfamilytobesafer,oryoujustwanttohavecontroloverrenova2ons,maybenowisthe2metobuy.
Iftherightthingforyouandyourfamilyistopurchaseahomethisyear,buyingsoonerratherthanlatercouldleadtosubstanMalsavings.
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Whenitcomestobuyingorsellingahometherearemanyfactorsyoushouldconsider.Whereyouwanttolive,whyyouwanttobuyorsell,andwhowillhelpyoualongyourjourneyarejustsomeofthosefactors.Whenitcomestotoday’srealestatemarket,though,thetoptwofactorstoconsiderarewhat’shappeningwithinterestrates&inventory.
InterestRates
Mortgageinterestrateshavebeenontheriseandarenowoverthree-quartersofapercentagepointhigherthantheywereatthebeginningoftheyear.AccordingtoFreddieMac’sPrimaryMortgageMarketSurvey,rateshaveclimbedtoaround4.8%fora30-yearfixedratemortgage.
Theinterestrateyousecurewhenbuyingahomenotonlygreatlyimpactsyourmonthlyhousingcosts,butalsoimpactsyourpurchasingpower.
Purchasingpower,simplyput,istheamountofhomeyoucanaffordtobuyforthebudgetyouhaveavailabletospend.Asratesincrease,thepriceofthehouseyoucanaffordtobuywilldecreaseifyouplantostaywithinacertainmonthlyhousingbudget.
Thechartbelowdemonstratestheimpactrisinginterestrateswouldhaveifyouplannedtopurchasea$400,000homewhilekeepingyourprincipalandinterestpaymentsbetween$2,020-$2,050amonth.
Witheachquarterofapercentincreaseininterestrate,thevalueofthehomeyoucanafforddecreasesby2.5%(inthisexample,$10,000).Expertspredictthatmortgagerateswillbeover5%bythis2menextyear.
Buyer’sPurchasingPower
2FactorsToWatchInToday'sRealEstateMarket
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6.00 $2,398$2,338$2,278$2,218$2,1585.75 $2,334$2,276$2,218$2,160$2,1005.50 $2,272$2,214$2,158$2,100$2,0445.25 $2,208$2,154$2,098$2,044$1,9885.00 $2,148$2,094$2,040$1,986$1,9324.75 $2,086$2,034$1,982$1,930$1,8784.50 $2,026$1,976$1,926$1,874$1,824
$400,000$390,000$380,000$370,000$360,000-2.5% -5% -7.5% -10%
RATE
Principal&InterestPaymentsroundedtothenearestdollaramount
-9.7%
-11.1%
-9.5%
-8.1%-7.2%
-6.3% -6.1%
0.5%0.0%
2.7%
1.1%
2.8%
Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct
Inventory
A‘normal’realestatemarketrequirestheretobea6-monthsupplyofhomesforsaleinorderforpricestoincreaseonlywithinfla2on.AccordingtotheNa>onalAssocia>onofRealtors(NAR),lis2nginventoryiscurrentlyata4.3-monthsupply(s2llwellbelowthe6-monthsneeded),whichhasputupwardpressureonhomeprices.Homepriceshaveincreasedyear-over-yearforthelast80straightmonths.
Theinventoryofhomesforsaleintherealestatemarkethadbeenonasteadydeclineandexperiencedyear-over-yeardropsfor36straightmonths(fromJuly2015toMay2018),butwearestar2ngtoseeashipininventoryoverthelastfivemonths.
Thechartbelowshowsthechangeinhousingsupplyoverthelast12monthscomparedtotheprevious12months.Asyoucansee,beginninginJune,inventorylevelshavestartedtoincreaseascomparedtothesame2melastyear.
BobomLine
Ifyouareplanningtoenterthehousingmarket,eitherasabuyeroraseller,let’sgettogethertodiscusswhatchangesinmortgageinterestratesandinventorycouldmeanforyou.
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HOUSING SUPPLY Year-Over-Year
Last 12 Months
Jun Jul Aug Sep Oct
HomePricesOverTheLastYearEveryquarter,theFederalHousingFinanceAgency(FHFA)reportsontheyear-over-yearchangesinhomeprices.Below,youwillseethatpricesareupyear-over-yearineveryregion.
Lookingatthebreakdownbystate,youcanseethateachstateisapprecia2ngatadifferentrate.Thisisimportanttoknowifyouareplanningonreloca2ngtoadifferentareaofthecountry.Wai2ngtomovemayendupcos2ngyoumore!
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InthelatestRentvs.BuyReportfromTrulia,theyexplainedthathomeownershipremainscheaperthanren2ngwithatradi2onal30-yearfixedratemortgagein98ofthe100largestmetroareasintheUnitedStates.
It’snosurprisethatthetwometroswhereren2ngbecamecheaperthanowningareSanJoseandSanFrancisco,CA,wheremedianhomepriceshavejumpedtoover$1milliondollarsthisyear.HomevaluesinSanJosehaverisen29%inthelastyear,whilerentshaveremainedrela2velyunchanged.Therangefortherestofthecountryisanaverageof2%lessexpensiveinHonolulu(HI),allthewayupto48.9%inDetroit(MI),and26.3%naMonwide!
AstudybyGoBankingRateslookedatthecostofren2ngvs.owningahomeatthestatelevelandconcludedthatin38states,itisactuallycheapertoown.Insixstatesthedifferencebetweenbuying&ren2ngwouldaccountforlessthana$50monthlydifference,leavingthechoiceuptotheindividualfamily.
BuyingRemainsCheaperThanRenMngIn38States!
Rentvs.OwnCheapertoOwn CheapertoRent Differenceof≤$50
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BobomLine
Homeownershipprovidesmanybenefitsbeyondthefinancialones.Ifyouareoneofthemanyrentersouttherewhowouldliketoevaluateyourabilitytobuythisyear,let’sgettogethertofindyourdreamhome.
$141.85
Monthly Annually Over30Years
$141.85 $1,702.20 $51,066
Mortgage InterestRate* Payment(P&I)**
Today $250,000 4.8% $1,311.66
2019 $261,750 5.3% $1,453.51
CoreLogicrecentlysharedthatna2onalhomepriceshaveincreasedby5.6%year-over-year.Overthatsame2meperiod,interestrateshaveremainedhistoricallylowwhichhasallowedmanybuyerstoenterthemarket.
Asaseller,youwillbemostconcernedabout‘short-termprice’–wherehomevaluesareheadedoverthenextsixmonths.Asabuyer,however,youmustnotbeconcernedaboutprice,butinsteadaboutthe‘long-termcost’ofthehome.
TheMortgageBankersAssocia>on(MBA),FreddieMac,andFannieMaeallprojectthatmortgageinterestrateswillincreasebythis2menextyear.AccordingtoCoreLogic’smostrecentHomePriceIndexReport,homepriceswillappreciateby4.7%overthenext12months.
WhatDoesThisMeanasaBuyer?
Ifhomepricesappreciatebythe4.7%predictedbyCoreLogicoverthenexttwelvemonths,hereisasimpledemonstra2onoftheimpactanincreaseininterestratewouldhaveonthemortgagepaymentofahomesellingforapproximately$250,000today:
BobomLine
Ifbuyingahomeisinyourplanforthisyear,doingitsoonerratherthanlatercouldsaveyouthousandsofdollarsoverthetermsofyourloan.
DoYouKnowTheCostOfWaiMngToBuy?
*RatesbasedonFreddieMac’spredic3onat3meofprint
DifferenceinMonthlyPayment
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Theinterestrateyoupayonyourhomemortgagehasadirectimpactonyourmonthlypayment.Thehighertherate,thegreaterthepaymentwillbe.Thatiswhyitisimportanttoknowwhereratesareheadedwhendecidingtostartyourhomesearch.
BelowisachartcreatedusingFreddieMac’sU.S.Economic&HousingMarke>ngOutlook.Asyoucansee,interestratesareprojectedtoincreasesteadilythroughtheendof2018andinto2019.
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WhereAreInterestRatesHeaded?
HowWillThisImpactYourMortgagePayment?
Dependingontheamountoftheloanthatyousecure,ahalfofapercent(.5%)increaseininterestratecanincreaseyourmonthlymortgagepaymentsignificantly.But,don’tletthepredic2onthatrateswillincreasestopyoufrompurchasingyourdreamhomethisyear.
Let’stakealookatahistoricalviewofinterestratesoverthelast45years.
BobomLine
Bethankfulthatyoucans2llgetabeaerinterestratethanyourolderbrotherorsisterdidtenyearsago,alowerratethanyourparentsdidtwentyyearsago,andabeaerratethanyourgrandparentsdidfortyyearsago.
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BuyingAHome?DoYouKnowtheLingo?Tostartyouonyourpathwithconfidence,wehavecompiledalistofsomeofthemostcommonterms
usedwhenbuyingahome.
Appraisal–Aprofessionalanalysisusedtoes2matethevalueofthehome.Anecessarystepinvalida>ngthehome’sworthtoyou&yourlendertosecurefinancing.ClosingCosts–Thecosttocompletetherealestatetransac2on.Paidatclosing,theyinclude:points,taxes,2tleinsurance,financingcosts,itemsthatmustbeprepaidorescrowed.Askyourlenderforacompletelistofclosingcostitems.CreditScore–Anumberrangingfrom300-850,thatisbasedonananalysisofyourcredithistory.Helpslendersdeterminethelikelihoodthatyou’llrepayfuturedebts.DownPayment–Downpaymentsaretypically3-20%ofthepurchasepriceofthehome.0%downprogramsalsoexist,askyourlenderformoreinforma>on.MortgageRate–Theinterestrateyoupaytoborrowmoneytobuyyourhouse.Thelowertherate,thebeSer.Pre-ApprovalLeber–Aleaerfromalenderindica2ngthatyouqualifyforamortgageofaspecificamount.RealEstateProfessional–Anindividualwhoprovidesservicesinbuying&sellinghomes.Realestateprofessionalsaretheretohelpyouthroughtheconfusingpaperwork,findyourdreamhome,nego>ateanyofthedetailsthatcomeup,andtohelpyouknowexactlywhat’sgoingoninthehousingmarket.
Thebestwaytoensurethatyourhome-buyingprocessisaconfidentoneistofindarealestateprowhowillguideyou
througheveryaspectofthetransacMonwith‘theheartofateacher,’pukngyourfamily’sneedsfirst.
FreddieMac–MyHomeSec2on
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