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Home Price Appreciation Forecast

by Cheryl Scott-Daniels
Home Price Appreciation Forecast | MyKCM

Questions continue to come up about where home prices will head throughout the rest of this year, as well as where they may be going over the few years beyond.

We’ve gathered current data from the industry’s most reliable sources to help answer these questions:

The Home Price Expectation Survey – A survey of over 100 market analysts, real estate experts, and economists conducted by Pulsenomics each quarter.

Mortgage Bankers Association (MBA) – As the leading advocate for the real estate finance industry, the MBA enables members to successfully deliver fair, sustainable, and responsible real estate financing within ever-changing business environments.

Zelman & Associates – The firm leverages unparalleled housing market expertise, extensive surveys of industry executives, and rigorous financial analysis to deliver proprietary research and advice to leading global institutional investors and senior-level company executives.

Freddie Mac – An organization whose mission is to provide liquidity, stability, and affordability to the U.S. housing market in all economic conditions extending to all communities from coast to coast.

The National Association of Realtors (NAR) – The largest association of real estate professionals in the world.

Fannie Mae – A leading source of financing for mortgage lenders, providing access to affordable mortgage financing in all markets.

Here’s the home price appreciation these experts are projecting over the next few years:

Home Price Appreciation Forecast | MyKCM

Bottom Line

Every source sees home prices continuing to appreciate, which is great news for the strength of the market. The increase is steepest throughout the rest of 2019, and prices should continue to rise as we move through 2020 and beyond.

What You Need to Know About Private Mortgage Insurance

by Cheryl Scott-Daniels

What You Need to Know About Private Mortgage Insurance (PMI)

What You Need to Know About Private Mortgage Insurance (PMI) | MyKCM

Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information about Private Mortgage Insurance (PMI).

What is PMI?

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:

“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.” 

According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.

Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:What You Need to Know About Private Mortgage Insurance (PMI) | MyKCMThe larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.

4 Renovations For The Greatest Return On Investment

by Cheryl Scott-Daniels

Home Energy Loss Awareness

by Cheryl Scott-Daniels

Home Energy Loss

5/28/2019

There are telltale signs that a home is wasting energy that every homeowner should be aware.

  • Drafts ... if you feel drafts in rooms when doors and windows are closed, it can indicate a leak that can adversely affect heating or air-conditioning.
  • Moisture on windows ... condensation occurs when warm moist air meets cooler dry air like when a bathroom mirror steams up after a shower.  The inside or outside of window can sweat due to temperature differentials.
  • Ice dams form at the edge of a room and prevent melting snow from running off the roof.  The water that backs up can leak into the home causing damage.
  • Higher than normal utility bills indicate that more energy is being required to keep the property at a desired temperature.
  • Excessive dust in a home can be the result of dirty HVAC filters or from air duct leaks that could be sucking in dust from the attic.
  • Mold thrives in warm, moist conditions which could exist because of leaking roof, walls, windows or poor ventilation.
  • Sinus problems affecting residents can be the result of conditions mentioned above like dust and mold.

Recognizing these conditions exist and resolving them can bring a homeowner more comfort and a safer, healthier home.  The cost of repairs may be able to be recaptured through utility savings.  Preserving energy provides a cleaner environment by eliminating greenhouse gas emissions that contribute to climate change.

Mainstream Concerns about an Economic Slowdown

by Cheryl Scott-Daniels

Mainstream Concerns about an Economic Slowdown

Mainstream Concerns about an Economic Slowdown Revisited | MyKCM

Many believe a recession could happen within the next two years. 70% of economists and market analysts surveyed last year believe that a recession will occur in 2019 or 2020 and that 42% of consumers currently looking to purchase a home also agree that a recession will occur this year or next.

However, the U.S. economy has performed well in the first quarter of 2019 and that has caused some experts to change their thinking on an impending economic slowdown.

Here are a few notable examples:

Anthony Chan, Chief Economist at JPMorgan Chase

“I feel really comfortable that the economy is slowing down this year, but not going into a recession… It doesn’t look, to me, like the odds of a recession in 2020 are there.”

Dean Baker, Senior Economist at the Center for Economic & Policy Research

 “To sum up the general picture, the U.S. economy is definitely weakening… However, with wages growing at a respectable pace, and job growth remaining healthy, we should see enough consumption demand to keep the economy moving forward. That means slower growth, but no recession.”

Lisa Shalett, Chief Investment Officer, Wealth Management at Morgan Stanley

“I’m not convinced a recession is coming soon… I see an improving housing market (low rates help), a rebound in bank lending, a tight labor market, higher oil prices and well-behaved credit markets. All these point to a stable U.S. economic outlook.”

Bottom Line

We are seeing a stronger economy than many had predicted. That has caused some experts to push off the possibility of a recession further into the horizon.

 

One Loan for Purchase & Renovations

by Cheryl Scott-Daniels
4/24/2019

The FNMA HomeStyle conventional mortgage allows a buyer to purchase a home that needs renovations and include them in the financing.  This facilitates the purchase of the home and the renovations in one loan rather than getting a separate second mortgage or home equity line of credit.

The combination of these loans should save closing costs as well as interest rates which would typically be higher on a home improvement loan.

The borrower will need to have an itemized, written bid from a contractor covering the scope of the improvements.  Any type of renovation or repair is eligible if it is a permanent part of the property.  Improvements must be completed within 12 months from the date the mortgage loan is delivered.

  • 15 and 30-year fixed rate and eligible adjustable rate loans are available.
  • Typical FNMA down payments are available starting as low as 3% for a one-unit principal residence to 25% for three and four-unit principal residence and one-unit investment properties.
  • Borrower must choose his or her own contractor to perform the renovation.
  • Lender must review the contractor hired by the borrower to determine if they are adequately qualified and experienced for the work being performed. The Contractor Profile Report (Form 1202) can be used to assist the lender in making this determination.
  • Borrowers must have a construction contract with their contractor. Fannie Mae has a model Construction Contract (Form 3734) that may be used to document the construction contract between the borrower and the contractor.
  • Plans and specifications must be prepared by a registered, licensed, or certified general contractor, renovation consultant, or architect. The plans and specifications should fully describe all work to be done and provide an indication of when various jobs or stages of completion will be scheduled (including both the start and job completion dates)

Up to 50% of the renovation funds may be advanced for the cost of materials after the closing of the loan.

This mortgage does have a provision for the borrower to do a portion of the work themselves if it doesn't exceed 10% of the total project and it must pass inspection on completion just as the contractor's work.

It is recommended that borrowers thoroughly research this program before they commit to a loan.  For detailed information, see FNMA HomeStyle Renovation Mortgage and Selling Guide Announcement SEL-2017-02  It is important to work with a mortgage officer who is familiar with these loans who can guide you through the process.

 

What You Need to Know About Today’s Real Estate Market

by Cheryl Scott-Daniels

3 Graphs that Show What You Need to Know About Today’s Real Estate Market

3 Graphs that Show What You Need to Know About Today's Real Estate Market | MyKCM

The Housing Market has been a hot-topic in the news lately. Depending on which media outlet you watch, it can start to be a bit confusing to understand what’s really going on with interest rates and home prices!

The best way to show what’s really going on in today’s real estate market is to go straight to the data! We put together the following three graphs along with a quote from Chief Economists that have their finger on the pulse of what each graph illustrates.

Interest Rates:

“The real estate market is thawing in response to the sustained decline in mortgage rates and rebound in consumer confidence – two of the most important drivers of home sales. Rising sales demand coupled with more inventory than previous spring seasons suggests that the housing market is in the early stages of regaining momentum.” – Sam Khater, Chief Economist at Freddie Mac

3 Graphs that Show What You Need to Know About Today's Real Estate Market | Keeping Current Matters

Income:

“A powerful combination of lower mortgage rates, more inventory, rising income and higher consumer confidence is driving the sales rebound.” – Lawrence Yun, Chief Economist at NAR

3 Graphs that Show What You Need to Know About Today's Real Estate Market | Keeping Current Matters

Home Prices:

“Price growth has been too strong for several years, fueled in part by abnormally low interest rates. A mild deceleration in home sales and Home Price Index growth is actually healthy, because it will calm excessive price growth — which has pushed many markets, particularly in the West, into overvalued territory.” – Ralph DeFranco, Global Chief Economist at Arch Capital Services Inc.

3 Graphs that Show What You Need to Know About Today's Real Estate Market | Keeping Current Matters

Bottom Line

These three graphs indicate good news for the spring housing market! Interest rates are low, income is rising, and home prices have experienced mild deceleration over the last 9 months. If you are considering buying a home or selling your house, let’s get together to chat about our market!

The Enormous Divide Between the Headline and the Truth

by Cheryl Scott-Daniels

The Enormous Divide Between the Headline and the Truth

The Enormous Divide Between the Headline and the Truth | MyKCM

“I have observed that not the man who hopes when others despair, but the man who despairs when others hope, is admired by a large class of persons as a sage.” – John Stuart Mill (1840s)

Even back in the mid-1800s, people knew that negative news sells. That is still true today. All forms of media realize that they will get more eyeballs, clicks, likes, and engagement by posting something negative. However, they must realize that negative headlines impact markets.

Just last week, the National Association of Home Builders released a survey revealing:

“Negative media reports making buyers cautious was a significant problem for 48% of builders in 2018, but 62% expect it to be a problem in 2019.”

Even today, good news is headlined with a negative spin in order to get attention. Here are two recent examples from mainstream media:

Actual Headline #1Cash-out refis are back – will homes become ATMs again?

The real story: The headline is accurate – to a point. It is true that the percentage of refinances in which the homeowner received cash at the closing has increased to levels that existed in 2006. However, the actual amount of equity homeowners “cashed-out” compared to a decade ago isn’t close.

The dollar amount cashed-out last year was $63 billion. That seems like a really large number until we compare it to 2006, when homeowners cashed-out $321 billion. That is more than five times the current amount.

In 2006, people did use their homes as ATMs. They purchased new cars, boats, and lavish vacations. Today, the cashed-out equity is being used to consolidate debt, as seed capital for a new business, or to help a child with their college tuition.

Actual HeadlineConsumer Debt hits $4 Trillion. Americans are diving deeper and deeper into debt.

The real story: The first sentence of the headline is accurate. The second sentence couldn’t be further from the truth. Total consumer debt is the highest it has ever been. That’s because the population continues to grow, and so does the economy (prices and wages).

The important number is how that total debt ranks as a percentage of disposable personal incomeThat percentage is the lowest ever recorded!! People are not “diving deeper and deeper into debt”. The exact opposite is true. They have less debt now than ever before.

Bottom Line

If you are thinking about buying or selling a home, it is important that you have a true professional handling your real estate needs. Someone who knows the truth about the current economy and its potential impact on the housing market.

The Housing Market Will “Spring Forward” This Year!

by Cheryl Scott-Daniels

The Housing Market Will “Spring Forward” This Year!

The Housing Market Will “Spring Forward” This Year! | MyKCM

Just like our clocks this weekend, in the majority of the country, the housing market will soon “spring forward!” Similar to tension in a spring, the lack of inventory available for sale has been holding back the market.

Many potential sellers believe that waiting until Spring is in their best interest. Traditionally, they would have been right.

Buyer demand has seasonality to it. Usually, this falls off in the winter months, especially in areas of the country impacted by arctic conditions.

That hasn’t happened this year.

Demand for housing has remained strong as mortgage rates have remained near historic lows. Even with an increase in rates forecasted for 2019, buyers are still able to lock in an affordable monthly payment. Buyers are increasingly jumping off the fence and into the market to secure a lower rate.

The National Association of Realtors (NAR) recently reported that in 2018 the top 10 dates sellers listed their homes all fell in April, May, or June.

Those who act quickly and list now, before a flood of increased competition, will benefit from additional exposure to buyers.

Bottom Line

If you are planning on selling your home in 2019, meet with a local real estate professional to evaluate the opportunities in your market.

Mortgage Payments - Can You Afford It

by Cheryl Scott-Daniels

Depends If You Can Afford It

Affordability, stability and flexibility are the three reasons homebuyers overwhelmingly choose a 30-year term.  The payments are lower, easier to qualify for the mortgage and they can always make additional principal contributions.

However, for those who can afford a higher payment and commit to the 15-year term, there are three additional reasons: lower mortgage interest rate, build equity faster and retire the debt sooner.

The 30-year, fixed-rate mortgage is the loan of choice for first-time buyers who are more likely to use a minimum down payment and are concerned with affordable payments.  For a more experienced buyer who doesn't mind and can qualify making larger payments, there are some advantages.

Consider a $200,000 mortgage at 30 year and 15-year terms with recent mortgage rates at 4.2% and 3.31% respectively.  The payment is $433.15 less on the 30-year term but the interest being charged is higher.  The total interest paid by the borrower if each of the loans was retired would be almost three times more for the 30-year term.

Let's look at a $300,000 mortgage with 4.41% being quoted on the 30-year and 3.84% on the 15-year.  The property taxes and insurance would be the same on either loan.  The interest rate is a little over a half a percent lower on the 15-year loan, but it also has a $691.03 higher principal and interest payment due to the shorter term.

The principal contribution on the first payment of the 30-year loan is $401.56 and it is $1,235.09 on the 15-year loan.  The mortgage is being reduced by $833.53 more which exceeds the increased payment on the 15-year by $142.50.  Interestingly, over three times more is being paid toward the principal.

Some people might suggest getting a 30-year loan and then, making the payments as if they were on a 15-year loan.  That would certainly accelerate amortization and save interest.  The real challenge is the discipline to make the payments on a consistent basis if you don't have to.  Many experts cite that one of the benefits of homeownership is a forced savings that occurs due to the amortization that is not necessarily done by renters.

Use this 30-year vs. 15-year financial app to compare mortgages in your price range.  A 15-year mortgage will be approximately half a percent cheaper in rate.  You can also check current rates at FreddieMac.com.

Displaying blog entries 1-10 of 69

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