Home Prices Up 6.54% Across The Country!

Some Highlights:

• The Federal Housing Finance Agency (FHFA) recently released their latest Quarterly Home Price Index report.
• In the report, home prices are compared both regionally and by state.
• Based on the latest numbers, if you plan on relocating to another state, waiting to move may end up costing you more!

Source: Keeping Current Matters | The KCM Crew 121517

Using Your Home's "Dead" Equity

Question. Our house is free and clear. We have a $100,000 home equity line of credit, and the interest rate is somewhere in the neighborhood of 7 percent. We itemize tax deductions and are in a high federal tax rate, and hoping that any new tax laws will reduce our taxes.

My question concerns using the home equity loan for investment. We are considering using $50,000 of the home equity line of credit and investing it in a growth stock for the next five years. Our accountant/tax advisor, however, is strongly in favor of having an unencumbered house especially as we are close to retirement.

Answer. It is my strong belief that homeowners -- of any age -- should make use of the equity they have gained from their real estate investments. As this column has suggested in the past, there are too many retired persons who are "house rich and cash poor." Hopefully, your house will appreciate in the future, and this appreciation will continue whether you have equity or not in the home. Thus, for all practical purposes, that equity is "dead equity."

There are, however, a number of parts to your question.

First, should you use the equity in your home for investment purposes? My answer is a qualified yes. Are you prepared to lose your investment if the stock market tumbles? Growth stocks may grow -- or they may not. If you are in any way concerned about risk, you should consider investing in government insured programs or tax free bonds. Of course, the higher rate of potential return will also carry a higher risk.

I am sure that readers will ask: why borrow money at 4 or 5 percent only to invest it in a security which has a 2 or 3 percent rate of return? Here, you have to do the numbers, and also look to your own future situation.

At first blush, it makes no sense to pay more interest than you are receiving from your investment -- especially if that investment has no (or little) growth capacity. But there is one important factor that must be considered, namely the liquidity of your investments. If you find at a later date that you need money for emergency purposes, if may be difficult -- if not impossible -- to tap into the equity of your home when you are retired and no longer employed. The investments you are considering -- whether stocks, mutual funds, or government securities -- do have immediate liquidity.

Second. If you decide to invest the equity in your home, what is the best route to take? You have indicated that your current home equity line of credit is around 7 percent. This seems rather high in today's market.

More importantly, most home equity loans fluctuate in rate; the rate of interest is pegged to some index -- such as "prime." If the prime rate rises or falls, so will the interest rate on your home equity loan.

Instead of using your home equity, you may want to consider refinancing your home, while interest rates are relatively low and stable. You can probably get a fixed 30 year rate for around 4 percent. While I understand you may be reluctant to borrow for such a long time -- especially when faced with retirement -- the alternative is to keep the equity in your home.

How will you make the monthly mortgage payments when you are retired? If you do not have other sources of income -- such as a pension plan -- you still have the liquidity of your investments that should be able to carry you for a long period of time.

Additionally, if you decide to refinance your home, although the refinance funds will pay off your home equity loan, nevertheless, you definitely should keep the home equity loan available. As you know, a home equity loan is a line of credit; you only pay interest on the amount of the money you have actually borrowed. If you obtain a refinance mortgage, make sure that you can also keep the existing (or obtain a new) home equity loan. There are some logistical legal issues that your attorney can handle to make these arrangements.

Third. You must understand the tax implications of borrowing on your home equity. Interest deductions for tax purposes are based, in part, on what the IRS calls "acquisition indebtedness." In your case, this indebtedness is zero, since your house is free and clear. You will only be entitled to deduct interest on the first $100,000 that you borrow -- whether this money comes from a new first mortgage or a home equity loan. And this may all change if Congress enacts a new tax code.

These are difficult -- and clearly personal -- decisions that everyone must consider. Talk to your tax advisors, and "crunch the numbers."

Source: Realty Times | Benny L. Kass 121217

What Is The Cost Of Waiting Until Next Year To Buy?

We recently shared that over the course of the last 12 months, home prices have appreciated by 7.0%. Over the same amount of time, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Report, home prices will appreciate by 4.7% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 4.7% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

Bottom Line

If buying a home is in your plan for 2018, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

Source: Keeping Current Matters | The KCM Crew 121317

3 Tips For Making Your Dream Home A Reality

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.

Source: Keeping Current Matters | The KCM Crew 120817

Five No Regrets Real Estate Buying Strategies To Avoid Missing-Out

In real estate, "the one that got away" stories get told and retold, usually with little satisfaction to the teller.

The real estate you didn't buy, but still wish you had, can weigh heavily on your mind and may even top your "Big Regrets List."

Every piece of real estate, vacant or otherwise, is unique. Once a property is sold, searching for its exact match is fruitless. Compromise becomes key.

Here's Five No-Regrets Buyer Strategies to spare you dreaming about a property you missed out on:

#1. View When You Can Buy: There's a whole group out there who casually visited an open house for a number of reasons but who were not ready to buy. When the property proved to be "it" — their dream home — and they could not buy it, missing out haunted future home searches. View homes when your finances are in place and you can put in an offer, just in case the open house you visit is the "one."

#2. Buy Before The Market Turns: When real estate prices are down or stalled, jump in. Your purchasing power goes further. Those who wait to see whether the market will come back or that a neighborhood will catch on can find themselves squeezed out of properties they could have afforded during the slump. Real estate professionals have been tracking prices and value longer than you have, so talk to them about where opportunity lies for you now.

#3. Buy The Abutting Condo Unit: If noise is an issue, buying the unit over yours can mean quieter living while expanding your home into a two-level delight. If you'd like to widen your terrace and add interior space in the process, consider purchasing an abutting unit. Before you select a condominium complex, check out rules on combining units to be sure you know your options. Contractors can tell you which approach makes sense and project costs. Keep an eye on what happens around you.

#4. Buy The Abutting Property: Keep in touch with the neighbors whose properties surround yours, so you act quickly when someone decides to sell. Protect your view by buying the vacant lot across the street; protect the mature trees edging your property by buying that land; protect your mutual driveway or other access by purchasing that abutting property; protect your solar rights before a new owner builds a sunshine-blocking monster home. Anticipation is a key talent in real estate ownership. It's not only what's happening now that should occupy owner's thoughts, but what could happen next to upset their current use and peace of mind.

# 5. Investigate That Amazing Property: Do you have a special lot or recreational property that you have always admired? Is there a house or condominium unit that you feel would suit you and your family beautifully? If the property you love is suddenly listed, act just as quickly to get your real estate professional working for you. You may have even put this expert on notice in case that property comes on the market. If you have your eye on a property that's not listed, tell your real estate professional and they'll approach the owner and get the ball rolling for you. Sometimes, this proactive approach nets buyers a dream home without having to search the market.

The ultimate strategy to ensure you get the real estate you want is to put in an offer!

That's the crucial task that real estate professionals take responsibility for by asking a buyer to put in an offer when they show interest in a property.

If you don't make it to the offer stage, that real estate may be a property that was never within your grasp in the first place.

Source: Realty Times | PJ Wade 120417

Why Is There So Much Paperwork Required To Get A Mortgage?

Why is there so much paperwork mandated by the lenders for a mortgage loan application when buying a home today? It seems that they need to know everything about you and requires three separate sources to validate each and every entry on the application form.

Many buyers are being told by friends and family that the process was a hundred times easier when they bought their home ten to twenty years ago.

There are two very good reasons that the loan process is much more onerous on today’s buyer than perhaps any time in history.

1. The government has set new guidelines that now demand that the bank proves beyond any doubt that you are indeed capable of paying the mortgage.

During the run-up to the housing crisis, many people ‘qualified’ for mortgages that they could never pay back. This led to millions of families losing their home. The government wants to make sure this can’t happen again.

2. The banks don’t want to be in the real estate business.

Over the last seven years, banks were forced to take on the responsibility of liquidating millions of foreclosures and also negotiating another million plus short sales. Just like the government, they don’t want more foreclosures. For that reason, they need to double (maybe even triple) check everything on the application.

However, there is some good news in the situation.

The housing crash that mandated that banks be extremely strict on paperwork requirements also allowed you to get a mortgage interest rate around 4%.

The friends and family who bought homes ten or twenty years ago experienced a simpler mortgage application process, but also paid a higher interest rate (the average 30-year fixed rate mortgage was 8.12% in the 1990s and 6.29% in the 2000s).

If you went to the bank and offered to pay 7% instead of around 4%, they would probably bend over backward to make the process much easier.

Bottom Line

Instead of concentrating on the additional paperwork required, let’s be thankful that we are able to buy a home at historically low rates.

Source: Keeping Current Matters | The KCM Crew 120517

5 Reasons To Sell This Winter!

Here are five reasons listing your home for sale this winter makes sense.

1. Demand Is Strong

The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase… and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.

Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

Housing inventory is still under the 6-month supply that is needed for a normal housing market. This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon.

Historically, the average number of years a homeowner stayed in their home was six, but has hovered between nine and ten years since 2011. There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.

3. The Process Will Be Quicker

Today’s competitive environment has forced buyers to do all they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to 44 days, after seeing a 12-month high of 48 days in January.

4. There Will Never Be a Better Time to Move Up

If your next move will be into a premium or luxury home, now is the time to move up! The inventory of homes for sale at these higher price ranges has forced these markets into a buyer’s market. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly, AND you’ll be able to find a premium home to call your own!

Prices are projected to appreciate by 4.7% over the next year according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.

5. It’s Time to Move on With Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.