Buying a HomeHome BuyersLoveland Real EstateNew BuyersNorthern Colorado Real EstatePurchasing a Home December 6, 2019

How to Determine If You Can Afford to Buy a Home

How to Determine If You Can Afford to Buy a Home

The gap between the increase in personal income and residential real estate prices has been used to defend the concept that we are experiencing an affordability crisis in housing today.

It is true that home prices and wages are two key elements in any affordability equation. There is, however, an extremely important third component to that equation: mortgage interest rates.

Mortgage interest rates have fallen by more than a full percentage point from this time last year. Today’s rate is 3.75%; it was 4.86% at this time last year. This has dramatically increased a purchaser’s ability to afford a home.

Here are three reports validating that purchasing a home is in fact more affordable today than it was a year ago:

CoreLogic’s Typical Mortgage Payment

“Falling mortgage rates and slower home-price growth mean that many buyers this year are committing to lower mortgage payments than they would have faced for the same home last year. After rising at a double-digit annual pace in 2018, the principal-and-interest payment on the nation’s median-priced home – what we call the “typical mortgage payment”– fell year-over-year again.”  

The National Association of Realtors’ Affordability Index

“At the national level, housing affordability is up from last month and up from a year ago…All four regions saw an increase in affordability from a year ago…Payment as a percentage of income was down from a year ago.”

First American’s Real House Price Index (RHPI)

“In 2019, the dynamic duo of lower mortgage rates and rising incomes overcame the negative impact of rising house price appreciation on affordability. Indeed, affordability reached its highest point since January 2018. Focusing on nominal house price changes alone as an indication of changing affordability, or even the relationship between nominal house price growth and income growth, overlooks what matters more to potential buyers – surging house-buying power driven by the dynamic duo of mortgage rates and income growth. And, we all know from experience, you buy what you can afford to pay per month.”

Bottom Line

Though the price of homes may still be rising, the cost of purchasing a home is actually falling. If you’re thinking of buying your first home or moving up to your dream home, make sure to reach out to a real estate professional to help you understand the difference between the two.

 

 

Loveland Real EstateNorthern Colorado Real EstateReal Estate MarketSelling Your Home November 22, 2019

3 Reasons This is NOT the 2008 Real Estate Market

3 Reasons This is NOT the 2008 Real Estate Market

No one knows for sure when the next recession will occur. What is known, however, is that the upcoming economic slowdown will not be caused by a housing market crash, as was the case in 2008. There are those who disagree and are comparing today’s real estate market to the market in 2005-2006, which preceded the crash. In many ways, however, the market is very different now. Here are three suppositions being put forward by some, and why they don’t hold up.

SUPPOSITION #1

A critical warning sign last time was the surging gap between the growth in home prices and household income. Today, home values have also outpaced wage gains. As in 2006, a lack of affordability will kill the market.

Counterpoint

The “gap” between wages and home price growth has existed since 2012. If that is a sign of a recession, why didn’t we have one sometime in the last seven years? Also, a buyer’s purchasing power is MUCH GREATER today than it was thirteen years ago. The equation to determine affordability has three elements:  home prices, wages, AND MORTGAGE INTEREST RATES. Today, the mortgage rate is about 3.5% versus 6.41% in 2006.

SUPPOSITION #2

In 2018, as in 2005, housing-price growth began slowing, with significant price drops occurring in some major markets. Look at Manhattan where home prices are in a “near free-fall.”

Counterpoint

The only major market showing true depreciation is Seattle, and it looks like home values in that city are about to reverse and start appreciating again. CoreLogic is projecting home price appreciation to reaccelerate across the country over the next twelve months.

Regarding Manhattan, home prices are dropping because the city’s new “mansion tax” is sapping demand. Additionally, the new federal tax code that went into effect last year continues to impact the market, capping deductions for state and local taxes, known as SALT, at $10,000. That had the effect of making it more expensive to own homes in states like New York.

SUPPOSITION #3

Prices will crash because that is what happened during the last recession.

Counterpoint

It is true that home values sank by almost 20% during the 2008 recession. However, it is also true that in the four previous recessions, home values depreciated only once (by less than 2%). In the other three, residential real estate values increased by 3.5%, 6.1%, and 6.6%.

Price is determined by supply and demand. In 2008, there was an overabundance of housing inventory (a 9-month supply). Today, housing inventory is less than half of that (a 4-month supply).

Bottom Line

We need to realize that today’s real estate market is nothing like the 2008 market. Therefore, when a recession occurs, it won’t resemble the last one.

 

 

Home BuyersLoveland Real EstateNew BuyersNew HomeNorthern Colorado Real Estate November 18, 2019

Homeowners Are Happy! Renters? Not So Much.

Homeowners Are Happy! Renters? Not So Much.

When people talk about homeownership and the American Dream, much of the conversation revolves around the financial benefits of owning a home. However, two recent studies show that the non-financial benefits might be even more valuable.

In a recent surveyBank of America asked homeowners: “Does owning a home make you happier than renting?” 93% of the respondents answered yes, while only 7% said no. The survey also revealed:

  • More than 80% said they wouldn’t go back to renting
  • 88% agreed that buying a home is the “best decision they have ever made
  • 79% believed owning a home has changed them for the better

Those surveyed talked about the “emotional equity” that is built through homeownership. The study says more than half of current homeowners define a home as a place to make memories, compared to 42% who view a home as a financial investment. Besides building wealth, the survey also showed that homeownership enhances quality of life:

  • 67% of current homeowners believed their relationships with family and loved ones have changed for the better since they bought a home
  • 78% are satisfied with the quality of their social life
  • 82% of homeowners said they were satisfied with the amount of time they spend on their hobbies and passions since purchasing a home
  • 75% of homeowners pursued new hobbies after buying a home

Homeowners seem to be very happy.

Renters Tell a Different Story…

According to the latest Zillow Housing Aspirations Report45% of renters regret renting rather than buying — more than five times the share of homeowners (8%) who regret buying instead of renting. Here are the four major reasons people regret renting, according to the report:

  • 52% regret not being able to build equity
  • 52% regret not being able to customize or improve their rentals
  • 50% regret that the rent is so high
  • 49% regret that they lack private outdoor space

These two studies prove that renting is just not the same as owning.

Bottom Line

There are both financial and non-financial benefits to homeownership. As good as the “financial equity” is, it doesn’t compare to the “emotional equity” gained through owning your own home.

 

 

Home BuyersLoveland Real EstateNorthern Colorado Real Estate November 6, 2019

How Will the Next Recession Affect the Housing Market?

Given the current media buzz of an impending recession, many Americans are fearing the worst and believe a downturn in the real estate market is inevitable.

Doubts about the market’s stability are completely rational considering the loss many agents and home buyers took when everything went belly-up in 2008.

We’re here to tell you this: don’t panic.

Let’s look at the facts.

RECESSION DOES NOT EQUAL HOUSING CRISIS

The gravity of the 2008 crash, and how it affected the real estate market is impossible to forget. But what we may not be remembering is that there were many economic downturns that resulted in appreciated home values.

Of the last five recessions in U.S. history, three of them saw increases. Two of those three saw prices appreciate faster than the historical average.

Home price change during last 5 recessions

For the two where prices decreased, one of them was by less than 2% and the other was because the housing market caused the recession in the first place. Historically, recessions are not caused by housing alone.

MARKET CONDITIONS ARE NOT THE SAME AS 2008.

This is the biggest indicator that we won’t see a crash like the one a decade ago. Home prices are projected to appreciate for the next 2-5 years. Sales are also projected to increase in 2020.

Don’t worry, the housing market is strong and home prices are forecasted to continue to rise.

Projected home price appreciation 2019, 2020 and 2021

SO WHAT EXACTLY IS A RECESSION?

Looking at the textbook definition of recession may give more insight.

According to Webster’s Dictionary, a recession is a period of temporary economic decline during which trade and industrial activity are reduced, generally identified by a fall in GDP for two successive quarters.

To simplify it, a recession means a time when the economy takes a dip for at least six months. We’re currently in the longest running economic recovery in American history. What ends a recovery? A slowdown.

But that doesn’t mean we need to be bracing for a 2008 repeat.

WHAT EXPERTS BELIEVE WILL CAUSE THE NEXT RECESSION

If an upcoming recession occurs, it will likely be due to trade policy, a geopolitical crisis, and/or stock market correction but NOT a housing slowdown, according to Yahoo Finanace.

This is going to be a much shorter recession than the last one. I don’t think the next recession will be a repeat of 2008…the housing market is in a better position,” said George Ratiu, Senior Economist for Realtor.com

The upcoming election along with current trade wars may be the defining factors that ends what has been the longest running economic expansion in U.S. history. But again, a slowdown by no means indicates a hit like the Great Recession.

WHAT YOUR CLIENTS BELIEVE ABOUT A RECESSION

According to a Realtor.com survey, 53% of consumer currently looking for home think a recession will come in the next 15 months. Worse than that, 55% of consumers surveyed said they would temporarily suspend their home search.

“You’re gonna have sellers that were ready to put the house on the market all of a sudden call and say we’re gonna wait a year or two. Those families are getting hurt because they’re making decisions, not on reality, but their perception of reality. The only people who can control that reality are [real estate agents].”

57% of homeowners believe the next recession will be worse

Now is the time to be up-front with your clients. Getting ahead of the panic and communicating the right information to them, backed by cold hard facts, will help dismantle fears.

Bottom Line

The next recession will not duplicate the one we saw in 2008 – but if we allow fear to spread – it could be much worse than it should be. Your clients could be hurt by mistakes made under the pretense of false information.

That is why it is so important that we, as real estate professionals and the trusted advisors, need to reclaim the narrative and eliminate this fear from the market.

People may question you over this, and that’s why you need to have the most relevant information and insights about what it means for you and your clients. Between now and the election next year, this will only become more important.

To stay current on real estate news without having to read every media outlet, KCM offers a Monthly Market Report to provide you with a comprehensive walkthrough of the most up-to-date information regarding the market.

https://www.keepingcurrentmatters.com/article/how-will-the-next-recession-affect-the-housing-market/

Home BuyersLoveland Real EstateNew BuyersNew HomeNorthern Colorado Real Estate November 4, 2019

Our Favorite Real Estate Podcast

 

Podcasts are a growing medium as listeners search for new sources of entertainment and information. In 2018 there were about 550,000 podcasts, in 2019 there are more than 750,000. Listeners are growing too, an estimated 20 million more people in the U.S. are listening to podcasts this year as compared to2018.

This growth in audio entertainment inspired us to pull together a few of our favorite real estate podcasts. Whether you’re interested in investing in real estate, looking to make a move to a new home, or just want to know what’s happening in the market, here are our recommendations:

 

For Investors:

The Millennial Real Estate Investor

Find your niches in Real Estate with Dan Mackin and Ben Welch, who host experts with stories about their investing successes and challenges. Learn from the experienced guests on this show the many ways to get into investing and succeed at it.

Listen to Millennial Real Estate Investor wherever you get your podcasts (Icon linked):

 

Cash Flow Connection

If you’re drawn to the commercial side of real estate, Cash Flow Connections with host, Hunter Thompson, is an informative podcast that interviews leading investors, sponsors and managers. Learn about all the aspects of commercial real estate from all viewpoints to find the right fit for you.

Windermere’s Chief Economist, Matthew Gardner, was just interviewed about the state of the real estate market, and what to expect in the next recession (hint: it won’t be driven by housing). You can listen to that episode here.

Listen to Cash Flow Connection wherever you get your podcasts:

 

For Those About to Move

Windermere Home and Wealth

Host Brian Bushlach interviews business owners, local guides, and Windermere agents in each episode about different areas throughout the Western U.S. and what they have to offer to those who live or visit there. Learn about what’s attracting newcomers to the area, and what the local real estate market looks like. This podcast is sure to stir your wanderlust.

Listen to Windermere Home and Wealth wherever you get your podcasts:

 

Finding Home with 106.1 KISS FM

Join first-time home buyers, and radio personalities, Anthony and Carla Marie from 106.1 KISS FM, as they walk through the home buying journey with their Windermere agents. This podcast is both entertaining and informative as they ask the questions you’ve always wanted answers to. With their knowledgeable real estate agents by their sides, they’re taking you along as they get approved, look for houses, and even put an offer on a home.

Listen to Finding Home on iHeartRadio:

 

Stay Informed

Housing Developments

Hosted by National Association of Home Builders CEO Jerry Howard and Chief Lobbyist Jim Tobin, this podcast covers updates in the housing market and building industry across the nation. Learn from experts in the field about recent laws and the news of the industry.

Listen to Housing Developments wherever you get your podcasts:

 

Real Estate News with Kathy Fettke

This podcast is aimed at real estate investors who want to stay curren on the latest real estate news. Presented in bite sized episodes, listeners can learn about laws, regulations, and economic events that affect real estate and their local market.

Listen wherever you get your podcasts:

New HomeNorthern Colorado Real EstateReal Estate Market October 23, 2019

Prepare Your Home for Winter

As the days shorten, you can mitigate many mid-winter headaches with some preemptive prep. Proper weatherizing can help protect your home from preventable damage, save money on energy costs, and, most importantly, keep you and your loved ones safe and warm throughout the winter season. Here is a useful checklist to manage your weatherization project. Setting aside some time on a couple of weekend days should be more than enough to knock this out:

 

Cracks & Leaks

Examine your entire house for any cracks and leaks, from your roof to your baseboards, to your basement and foundation. With unpredictable winter weather, these cracks and leaks are how the outside gets in, causing cold drafts and water damage.

Luckily, most cracks don’t require a professional to handle it. Depending on your house type and age, it’s likely you’ll be able to do it yourself with supplies from your local hardware store.

 

Windows & Doors:

Gaps and breaks in windows and doors is another way to let the winter in your home, and they can let heat escape, raising your heat bill throughout the season.

Make sure seals are tight and no leaks exist. If you have storm windows, make sure you put them on before the cold season begins. Additionally, add weather-strips and or a door sweep to prevent drafts and keep the heat in.

 

Rain Gutters: 

Clean your rain gutters of any debris. In colder climates, the buildup will cause gutters to freeze with ice, crack and then leak.

Once you have removed the residue from the drains, test them by running hose water to make sure cracks and leaks have not already formed. Even in warmer locales, the buildup can put undue stress on your roof and home.

 

Pipes: 

Protecting your pipes from freezing should be your number one priority this winter. A burst pipe can quickly become a disaster in any home.

Remember to turn off your exterior water source and take in your hose. Internally, wrapping your pipes is a recommended precaution to take.

 

Heating System:

Annual checks are vital in avoiding dangers such as house fires. Replace filters if you use a furnace and clear out any vents and ducts that carry heat through them. If you have baseboard heat, wipe them of dust and remove any debris that might catch fire.

 

Fireplace & Wood Burning Stoves:

Make sure to have chimneys and air vents cleaned early in the season if you are planning on warming your home with a wood-burning source. When your fireplace is not in use make sure to close the damper, some resources estimate an open damper can increase energy consumption by as much as 30%, increasing your bill about $200.

 

Outside: 

Bring your patio furniture inside or cover it for the winter. Don’t forget other, smaller items such as your tools, including the hose and planting pots. Clear out any piles around the side of your house, checking for cracks and holes in your home and foundation as you go so to avoid providing shelter for unwelcome guests over the cold season.

If your property has large trees check for loose branches and call someone to trim back any limbs that may fall in your yard, on your roof or even damage a window.

 

Emergency Kit: 

Lastly, make sure your emergency kit is up to date with provisions, batteries, fresh water, food for animals, entertainment for kids – especially if you live in an area prone to power outages.

For a more complete emergency preparedness guide, visit https://www.ready.gov/winter-weather.

Loveland Real EstateNew HomeNorthern Colorado Real EstateReal Estate AgentReal Estate Market October 21, 2019

5 Deal Breakers That Can Blindside Home Buyers

 

Purchasing a home can be a complex endeavor for even the most well-prepared home buyer.  You’ve diligently saved for your down payment, followed the market, researched agents and now you are ready to make an offer on your dream home.  Don’t let these 5 “Deal Breakers” come between you and your new home.

 

    1. Big Purchases on Credit. It is tempting to buy the furniture for your new home or a new car for the garage before the sale closes. Take care if you are making these purchases on credit. Large purchases on credit can have a major impact on your credit profile which effects your mortgage application. It’s a better plan to wait until after closing or pay cash for these transactions or you may be putting that furniture in a different living room than you originally picked them out for.

 

    1. Overpaying. Before your bank will approve your mortgage they will appraise the home you are purchasing.  If they feel you are overpaying they are likely to decline your mortgage application. If you find yourself in this situation consult with your agent on renegotiating your offer to be more in line with the bank’s appraised value.

 

    1. Purchasing too close to Foreclosure. If you are making an offer on a house which is facing foreclosure be sure to have a closing date set before the foreclosure date. Have your agent work with the lender to structure closing before the house goes back to the bank and into foreclosure.

 

    1. IRS liens. You’ve heard the old saying “Death and Taxes”.  Back taxes and liens can derail your attempts to get financing for a mortgage so be sure to have your books in order before filing your loan application.

 

    1. Comprehensive Loss Underwriting Exchange (CLUE). CLUE is a database of insurance claims for both people and property.  Your home insurance rates are determined by the information about you and the property you plan to purchase which is contained in this report. Past claims for water damage, falling trees and even dog bites from present and past owners can multiply your insurance rates. Consult your agent about the CLUE report for your future home as soon as possible once your home purchase offer is accepted.

 

When purchasing a home there will be challenges which you can plan for and the unexpected hurdles.  By educating yourself as a consumer and choosing a well trained real estate agent you can avoid many of the pitfalls of 21st century home ownership.

 

What about you? Tell us if you have had any “deal breaker” experiences.

Loveland Real EstateNorthern Colorado Real EstateReal Estate Market September 23, 2019

Mistakes to Avoid When Buying and Selling a Home

 

There’s nothing more exciting, rewarding, and fulfilling than buying a home. However, it’s a complex transaction; there are a number of steps along the path that can confuse, betwixt, and befuddle even the most seasoned buyers and sellers.

How can you avoid those potential pitfalls and common mistakes? Look to your real estate professional for advice and keep these guidelines in mind:

 

BUYERS:

 

#1 Review your credit reports ahead of time

Review your credit report a few months before you begin your house hunt, and you’ll have time to ensure the facts are correct and be able to dispute mistakes before a mortgage lender checks your credit. Get a copy of your credit report from Experian, Equifax, and TransUnion. Why all three? Because, if the scores differ, the bank will typically use the lowest one. Alert the credit bureaus if you see any mistakes, fix any problems you discover, and don’t apply for any new credit until after your home loan closes.

 

#2 Get pre-approved

Before getting serious about your hunt for a new house, you’ll want to choose a lender and get pre-approved for a mortgage (not just pre-qualified—which is a cursory review of your finances—but pre-approved for a loan of a specific amount). Pre-approval lets sellers know you’re serious. Most importantly, pre-approval will help you determine exactly how much you can comfortably afford to spend.

 

#3 Know what you want

You and your real estate agent should both be clear about the house you want to buy. Put it in writing. First, make a list of all the features and amenities you really want. Then, number each item and prioritize them. Now, divide the list into must-haves and really-wants.

 

#4 Account for hidden costs

In addition to the purchase price of the home, there are additional costs you need to take into consideration, such as closing costs, appraisal fees, and escrow fees. Once you find a prospective home, you’ll want to:

  • Get estimates for any repairs or remodeling it may need.
  • Estimate how much it will cost to maintain (gas, electric, utilities, etc.).
  • Determine how much you’ll pay in taxes monthly and/or annually.
  • Learn whether there are any homeowner’s or development dues associated with the property.

 

#5 Get an inspection

Buying a home is emotionally charged—which can make it difficult for buyers to see the house for what it truly is. That’s why you need impartial third parties who can help you logically analyze the condition of the property. Your agent is there to advise you, but you also need a home inspector to assess any hidden flaws, structural damage or faulty systems.

 

#6 Evaluate the neighborhood and location

When house hunting, it’s easy to become overly focused on the number of bedrooms and bathrooms, the condition of the home and its amenities while overlooking the subtleties of the surrounding neighborhood. Take time to check crime reports, school options, churches and shopping. If schools are a key factor, do more than simply research the statistics; speak with the principal(s) and chat with the parents waiting outside.

 

 

SELLERS:

 

#1 Avoid becoming emotional or sentimental about the sale

Once you decide to sell your house, it’s time to strip out the emotion and look at it as a commodity in a business transaction. If you start reminiscing about all the good times you had and the hard work you invested, it will only make it that much harder to successfully price, prepare, and market the home.

 

#2 Fix problems (or price accordingly)

Homes with deferred maintenance and repair issues can take far longer to sell and can be subject to last-minute sale-cancellations. These homes also often sell for less than their legitimate market value. If you simply can’t afford to address critical issues, be prepared to work with your agent to price and market your home accordingly.

 

#3 Don’t overprice your home (and/or refuse to negotiate)

Getting top dollar is the dream of every seller. But it’s essential that you let the market dictate that price, not your emotions or financial situation. Allow your agent to research and prepare a market analysis that factors in the value of similar homes in the area, and trust those results.

 

#4 Use quality photos

The vast majority of prospective buyers today search for homes online first. In order to make a good first impression, you need a wealth of high-quality photos of your home and surrounding grounds. You may also need to consider professional staging in order to position your home in the best possible light for prospective buyers.

 

 

The process of buying or selling a home can have plenty of twists and turns, but with some smart decision making, you can avoid the most common mistakes and pitfalls.