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 Homeownership Is Full of Financial Benefits

Homeownership Is Full of Financial Benefits

Fannie Mae survey recently revealed some of the most highly-rated benefits of homeownership, which continue to be key drivers in today’s power-packed housing market. Here are the top four financial benefits of owning a home according to consumer respondents:

  • 88% – a better chance of saving for retirement
  • 87% – the best investment plan
  • 85% – the chance to be better off financially
  • 85% – the chance to build up wealth

Additional financial advantages of homeownership included in the survey are having the best overall tax situation and being able to live within your budget.

Does homeownership actually give you a better chance to build wealth?

No one can question a person’s unique feelings about the importance of homeownership. However, it’s fair to ask if the numbers justify homeownership as a financial asset.

Last fall, the Federal Reserve released the Survey of Consumer Finances, a report done every three years, with the latest edition covering through 2019. Their findings confirmed that homeownership is a clear financial benefit. The survey found that homeowners have forty times higher net worth than renters($255,000 for homeowners compared to $6,300 for renters).

The difference in net worth between homeowners and renters has continued to grow. Here’s a graph showing the results of the last four Fed surveys:Homeownership Is Full of Financial Benefits | MyKCMhttps://files.mykcm.com/2021/04/07104540/20210408-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/04/07104540/20210408-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/04/07104540/20210408-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 647.359375px;">The above graph only includes data through 2019, but according to CoreLogic, the equity held by homeowners grew by $26,300 over the last twelve months alone. That means the gap between the net worth of homeowners and renters has probably widened even further over the last year.

Some might argue the difference in net worth may be due to homeowners normally having larger incomes than renters and therefore the ability to save more money. However, a study by First American shows homeowners have greater net worth than renters regardless of their income level. Here are the findings:Homeownership Is Full of Financial Benefits | MyKCMhttps://files.mykcm.com/2021/04/07104538/20210408-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/04/07104538/20210408-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/04/07104538/20210408-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 647.359375px;">Others may think homeowners are older and that’s why they have a greater net worth. However, a Joint Center for Housing Studies of Harvard University report on homeowners and renters over the age of 65 reveals:

“The ability to build equity puts homeowners far ahead of renters in terms of household wealth…the median owner age 65 and over had home equity of $143,500 and net wealth of $319,200. By comparison, the net wealth of the same-age renter was just $6,700.”

Homeowners 65 and older have 47.6 times greater net worth than renters.

Bottom Line

The idea of homeownership as a direct way to build your net worth has met the test of time. Let’s connect if you’re ready to take steps toward becoming a homeowner.

Don’t Sell on Your Own Just Because It’s a Sellers’ Market

Don’t Sell on Your Own Just Because It’s a Sellers’ Market

In a sellers’ market, some homeowners might be tempted to try to sell their house on their own (known as For Sale By Owner, or FSBO) instead of working with a trusted real estate professional. When the inventory of homes for sale is as low as it is today, buyers are eager to snatch up virtually any house that comes to market. This makes it even more tempting to FSBO. As a result, some sellers think selling their house will be a breeze and see today’s market as an opportunity to FSBO. Let’s unpack why that’s a big mistake and may actually cost you more in the long run.

According to the Profile of Home Buyers and Sellers published by the National Association of Realtors (NAR), 41% of homeowners who tried to sell their house as a FSBO did so to avoid paying a commission or fee. In reality, even in a sellers’ market, selling on your own likely means you’ll net a lower profit than when you sell with the help of an agent.

The NAR report explains:

FSBOs typically sell for less than the selling price of other homes; FSBO homes sold at a median of $217,900 in 2020 (up from $200,000 in 2019), and still far lower than the median selling price of all homes at $242,300. Agent-assisted homes sold for a median of $295,000…Sellers who began as a FSBO, then ended up working with an agent, received 98 percent of the asking price, but had to reduce their price the most before arriving at a final listing price.”

When the seller knew the buyer, that amount was even lower, coming in at $176,700 (See graph below):Don’t Sell on Your Own Just Because It’s a Sellers’ Market | MyKCMhttps://files.mykcm.com/2021/04/01150053/20210406-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/04/01150053/20210406-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/04/01150053/20210406-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 647.359375px;">That’s a lot of money to risk losing when you FSBO – far more than what you’d save on commission or other fees. Despite the advantages sellers have in today’s market, it’s still crucial to have the support of an expert to guide you through the process. Real estate professionals are trained negotiators with a ton of housing market insights that average homeowners may never have. An agent’s expertise can alleviate much of the stress of selling your house and help you close the best possible deal when you do.

Bottom Line

If you’re ready to sell your house this year and you’re considering doing so on your own, be sure to think through that decision carefully. Odds are, you stand to gain the most by working with a knowledgeable and experienced real estate agent. Let’s connect to discuss how a trusted advisor can help you, especially in today’s market.

Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year

Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year

If you’re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.

Using data from the Internal Revenue Service (IRS), it’s estimated that Americans can expect an average refund of $2,925 when filing their taxes this year. The map below shows the average anticipated tax refund by state:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCMhttps://files.mykcm.com/2021/04/01141857/20210405-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/04/01141857/20210405-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/04/01141857/20210405-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 647.359375px;">Thanks to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loans allow many veterans to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a 20% down payment isn’t actually required. It’s important to work with your real estate professional and your lender to understand all of your options.

How can your tax refund help?

If you’re a first-time buyer, your tax refund may cover more of a down payment than you realize.

If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average anticipated tax refund:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCMhttps://files.mykcm.com/2021/04/01141854/20210405-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/04/01141854/20210405-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/04/01141854/20210405-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 647.359375px;">The darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs. Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.

Not enough money from your tax return?  

A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, “One third report that they primarily saved the stimulus money.” If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.

Bottom Line

Saving for a down payment can seem like a daunting task, but it doesn’t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals.

Buyer & Seller Perks in Today’s Housing Market

Buyer & Seller Perks in Today’s Housing Market

Right now, the housing market is full of outstanding opportunities for both buyers and sellers. Whether you’re thinking of buying your first home, moving up to a bigger one, or selling so you can downsize this spring, there are perks today that are powering big moves for people across the country. Here are the top two to keep on the radar this season.

The Biggest Perk for Buyers: Low Mortgage Rates

 Today’s most compelling buyer incentive is low mortgage interest rates. The 30-year fixed-rate is now averaging just over 3%. While that’s slightly higher than the record-lows from 2020 and earlier this year, it’s still way lower than historic norms, making purchasing a home an ongoing perk for hopeful buyers (See graph below):Buyer & Seller Perks in Today’s Housing Market | MyKCMhttps://files.mykcm.com/2021/03/23143718/20210325-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/03/23143718/20210325-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/03/23143718/20210325-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">This is a huge advantage for buyers and helps to make owning a home attainable for more households – and there’s good reason to strive for homeownership. The latest Homeowner Equity Report from CoreLogic shows how homeowners saw major gains in their net worth last year, all thanks to owning a home. Frank Martell, President and CEO of CoreLogicexplains:

Positive factors like record-low interest rates and a booming housing market encouraged many families to enter homeownership. This growing bank of personal wealth that homeownership affords was noticed by many but in particular for first-time buyers who want a piece of the cake. As a result, we may see more of those currently renting start to enter the market in the near future.”

Low mortgage rates are a plus for buyers right now, but experts forecast we’ll see them continue to rise as the year goes on. If you’re ready to purchase a home, it’s wise to get started on the process soon so you can secure today’s comparatively low rate.

The Biggest Perk for Sellers: Low Inventory

Today, there are simply not enough houses on the market for the number of buyers looking to purchase them, and it’s creating a serious sellers’ market. According to Danielle Hale, Chief Economist at realtor.com:

“Total active inventory continues to decline, dropping 50 percent. With buyers active in the market and sellers still slow to put homes up for sale, homes are selling quickly and the total number actively available for sale at any point in time continues to decline.” (See map below):

Buyer & Seller Perks in Today’s Housing Market | MyKCMhttps://files.mykcm.com/2021/03/23143714/20210325-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/03/23143714/20210325-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/03/23143714/20210325-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">The lack of houses for sale continues to challenge the market, and with low mortgage rates fueling buyer demand, homes are hard for buyers to find today. According to the latest Realtors Confidence Index Survey by the National Association of Realtors (NAR), the average house is now receiving 4.1 offers and is on the market for only 20 days.

Buyers are clearly eager to purchase, and because of the shortage of inventory available, they’re often entering bidding warsThis is one of the factors keeping home prices strong and giving sellers leverage in the negotiation process.

Homeowners who are in a position to sell shouldn’t wait to make their move. There’s a light at the end of the tunnel for today’s inventory shortage, so listing this spring will get your house on the market when conditions are most favorable. With low inventory and high buyer demand, homeowners can potentially earn a greater profit on their houses and sell them quickly in the fast-paced spring market.

Bottom Line

Whether you’re thinking about buying or selling a home, there are major perks available in today’s housing market. Let’s connect today to discuss how these favorable conditions play to your advantage in our local area.

 To Renovate or Not To Renovate Before You Sell

To Renovate or Not To Renovate Before You Sell

When thinking about selling, homeowners often feel they need to get their house ready with some remodeling to make it more appealing to buyers. However, with so many buyers competing for available homes right now, renovations may not be as vital as they would be in a more normal market. Here are two things to keep in mind if you’re thinking of selling this season.

1. There aren’t enough homes for sale right now.

A normal market has a 6-month supply of houses for sale, but today’s housing inventory sits far below that benchmark. According to the National Association of Realtors (NAR), there’s only a 1.9-month supply of homes available today. As a result, buyer competition is high and homes are only on the market for about 21 days, during which time many receive multiple offers from hopeful buyers.

In a competitive market that’s moving so quickly, it makes sense to sell your house when buyers are scooping homes up as fast as they’re being listed. Spending costly time and money on renovations before you sell might just mean you’ll miss your key window of opportunity. While certain repairs on your house may be important, your best move right now is to work with a real estate advisor to determine which improvements are truly necessary, and which ones are not likely to be deal-breakers for buyers.

Today, many buyers are more willing to take on home improvement projects themselves in order to get the home they’re after, even if it means putting in a little extra work. Home Advisor explains:

When it comes to the number of home improvement projects completed, Gen Z homeowners are leading the pack, completing an average of 3.5 projects. Millennials closely follow Gen Z, taking on an average of 3.3 projects, followed by Gen X at 2.8 projects. Boomers completed an average of 2 projects, and the Silent Generation completed the fewest projects, on average, at 1.8 per household. Compared to 2019, millennials are spending 60% more on home improvement and doing on average 30% more projects.”

In this market, it may be wise to let future homeowners remodel the bathroom or the kitchen to make design decisions that are best for their specific taste and lifestyle. As a seller, your dollars and time might be better spent working on small cosmetic updates, like refreshing some paint and power washing the exterior. Instead of over-investing in your home with upgrades that the buyers may change anyway, work with a real estate professional to determine the key projects that will maximize your listing, without overdoing it.

2. Focus on getting a good return on your investment.

When planning any bigger projects to tackle, you and your real estate agent will want to discuss the potential return on your investment and if those projects are worth the cost. Some homes do need a kitchen or bathroom renovation, roof repairs, or other major work, but definitely not all of them. You might be surprised by how well your house could fair in today’s sellers’ market. Hanley Wood states:

“The 2020 Cost vs. Value report shows a predictable increase in costs for all 22 remodeling projects but a consistent dip in the perceived value of those projects at the time of home sale, as estimated by real-estate professionals in more than 100 metro areas across the U.S. This results in a slight downturn on the return on investment for nearly all projects relative to the trends we saw in last year’s report.”

Ideally, homeowners getting ready to move should try to avoid over-investing in big renovations if they won’t make that money back when they sell their house. According to the 2020 State of Home Spending report from Home Advisor:

The average household spending on home services rose to $13,138, an increase over last year’s survey results, where homeowners who did projects spent $9,081 on average in 2019.”

Before you renovate, contact a local real estate professional to see if it’s the best course of action. You may find out that putting your house on the market as-is will help you sell quickly, and it may result in the best return on your investment. Every home is different, but a conversation with your agent is mission-critical to make sure you make the right moves when selling this season.

Bottom Line

We’re in a strong sellers’ market, and that means you have the leverage to sell your house on your terms. Let’s connect today to determine if renovating is really the best way to spend your time and money before you sell.

 What Is the Strongest Tailwind to Today’s Recovering Economy?

What Is the Strongest Tailwind to Today’s Recovering Economy?

Last year started off with a bang. Unemployment was under 4%, forecasters were giddy with their projections for the economy, and the residential housing market had the strongest January and February activity in over a decade.

Then came the announcement on March 11, 2020, from the World Health Organization declaring COVID-19 a worldwide pandemic. Two days later, the White House declared it a national emergency. Businesses and schools were forced to close, shelter-in-place mandates were enacted, and the economy came to a screeching halt. As a result, unemployment in this country skyrocketed to 14.9%.

A year later, the economy is recovering, and the U.S. has regained more than half of the jobs that were originally lost. However, some businesses are still closed, and many schools are still struggling to reopen. Despite the past and current challenges, there is one industry that’s proven to be a tailwind helping to counter all of these headwinds to our economy. That industry is housing. Remarkably, the residential real estate market (including existing homes and new construction) has flourished over the last twelve months. Sales are up, prices are appreciating, and more new homes are being built. The housing market has been a pillar of strength in an otherwise slowly recovering economy.

How does the real estate market help the economy?

At the beginning of the pandemic, the National Association of Realtors (NAR) released a report that explained:

“Real estate has been, and remains, the foundation of wealth building for the middle class and a critical link in the flow of goods, services, and income for millions of Americans. Accounting for nearly 18% of the GDP, real estate is clearly a major driver of the U.S. economy.”

The report calculated the total economic impact of real estate-related industries on the economy as well as the expenditures that resulted from a single home sale. At a national level, their research revealed that a single newly constructed home had an economic impact of $88,416.

Here’s how it breaks down:What Is the Strongest Tailwind to Today’s Recovering Economy? | MyKCMhttps://files.mykcm.com/2021/03/16105621/20210317-MEM-Eng-1-600x450.jpg 600w, https://files.mykcm.com/2021/03/16105621/20210317-MEM-Eng-1-768x576.jpg 768w, https://files.mykcm.com/2021/03/16105621/20210317-MEM-Eng-1-100x75.jpg 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">The map below shows the impact by state:What Is the Strongest Tailwind to Today’s Recovering Economy? | MyKCMhttps://files.mykcm.com/2021/03/16105618/20210317-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/03/16105618/20210317-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/03/16105618/20210317-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">The impact of an existing home sale is approximately $40,000.

Real estate has done more for our economic wellbeing than virtually any other industry over the last year. It’s been a beacon of light during a very challenging time in our nation’s history.

Bottom Line

Whether you’re buying a newly constructed home or one that already exists, you’re making a positive economic impact in your local community – and it’s a step toward your homeownership goals as well.

6 Simple Graphs Proving This Is Nothing Like Last Time

6 Simple Graphs Proving This Is Nothing Like Last Time

Last March, many involved in the residential housing industry feared the market would be crushed under the pressure of a once-in-a-lifetime pandemic. Instead, real estate had one of its best years ever. Home sales and prices were both up substantially over the year before. 2020 was so strong that many now fear the market’s exuberance mirrors that of the last housing boom and, as a result, we’re now headed for another crash.

However, there are many reasons this real estate market is nothing like 2008. Here are six visuals to show the dramatic differences.

1. Mortgage standards are nothing like they were back then.

During the housing bubble, it was difficult not to get a mortgage. Today, it’s tough to qualify. Recently, the Urban Institute released their latest Housing Credit Availability Index(HCAI) which “measures the percentage of owner-occupied home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.

The index shows that lenders were comfortable taking on high levels of risk during the housing boom of 2004-2006. It also reveals that today, the HCAI is under 5 percent, which is the lowest it’s been since the introduction of the index. The report explains:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

6 Simple Graphs Proving This Is Nothing Like Last Time | MyKCMhttps://files.mykcm.com/2021/03/08151316/20210310-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/03/08151316/20210310-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/03/08151316/20210310-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">This is nothing like the last time.

2. Prices aren’t soaring out of control.

Below is a graph showing annual home price appreciation over the past four years compared to the four years leading up to the height of the housing bubble. Though price appreciation was quite strong last year, it’s nowhere near the rise in prices that preceded the crash.6 Simple Graphs Proving This Is Nothing Like Last Time | MyKCMhttps://files.mykcm.com/2021/03/08151314/20210310-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/03/08151314/20210310-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/03/08151314/20210310-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">There’s a stark difference between these two periods of time. Normal appreciation is 3.8%. So, while current appreciation is higher than the historic norm, it’s certainly not accelerating out of control as it did in the early 2000s.

This is nothing like the last time.

3. We don’t have a surplus of homes on the market. We have a shortage.

The months’ supply of inventory needed to sustain a normal real estate market is approximately six months. Anything more than that is an overabundance and will causes prices to depreciate. Anything less than that is a shortage and will lead to continued appreciation. As the next graph shows, there were too many homes for sale in 2007, and that caused prices to tumble. Today, there’s a shortage of inventory, which is causing an acceleration in home values.6 Simple Graphs Proving This Is Nothing Like Last Time | MyKCMhttps://files.mykcm.com/2021/03/08151312/20210310-MEM-Eng-3-600x450.png 600w, https://files.mykcm.com/2021/03/08151312/20210310-MEM-Eng-3-768x576.png 768w, https://files.mykcm.com/2021/03/08151312/20210310-MEM-Eng-3-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">This is nothing like the last time.

4. New construction isn’t making up the difference in inventory needed.

Some may think new construction is filling the void. However, if we compare today to right before the housing crash, we can see that an overabundance of newly built homeswas a major challenge then, but isn’t now.6 Simple Graphs Proving This Is Nothing Like Last Time | MyKCMhttps://files.mykcm.com/2021/03/08151309/20210310-MEM-Eng-4-600x450.png 600w, https://files.mykcm.com/2021/03/08151309/20210310-MEM-Eng-4-768x576.png 768w, https://files.mykcm.com/2021/03/08151309/20210310-MEM-Eng-4-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">This is nothing like the last time.

5. Houses aren’t becoming too expensive to buy.

The affordability formula has three components: the price of the home, the wages earned by the purchaser, and the mortgage rate available at the time. Fifteen years ago, prices were high, wages were low, and mortgage rates were over 6%. Today, prices are still high. Wages, however, have increased, and the mortgage rate is about 3%. That means the average homeowner pays less of their monthly income toward their mortgage payment than they did back then. Here’s a chart showing that difference:6 Simple Graphs Proving This Is Nothing Like Last Time | MyKCMhttps://files.mykcm.com/2021/03/08151306/20210310-MEM-Eng-5-600x450.png 600w, https://files.mykcm.com/2021/03/08151306/20210310-MEM-Eng-5-768x576.png 768w, https://files.mykcm.com/2021/03/08151306/20210310-MEM-Eng-5-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">As Mark Fleming, Chief Economist for First Americanexplains:

“Lower mortgage interest rates and rising incomes correspond with higher house prices as home buyers can afford to borrow and buy more. If housing is appropriately valued, house-buying power should equal or outpace the median sale price of a home. Looking back at the bubble years, house prices exceeded house-buying power in 2006, but today house-buying power is nearly twice as high as the median sale price nationally.”

This is nothing like the last time.

6. People are equity rich, not tapped out.

In the run-up to the housing bubble, homeowners were using their homes as personal ATM machines. Many immediately withdrew their equity once it built up, and they learned their lesson in the process. Prices have risen nicely over the last few years, leading to over 50% of homes in the country having greater than 50% equity – and owners have not been tapping into it like the last time. Here’s a table comparing the equity withdrawal over the last three years compared to 2005, 2006, and 2007. Homeowners have cashed out almost $500 billion dollars less than before:6 Simple Graphs Proving This Is Nothing Like Last Time | MyKCMhttps://files.mykcm.com/2021/03/08151303/20210310-MEM-Eng-6-600x450.png 600w, https://files.mykcm.com/2021/03/08151303/20210310-MEM-Eng-6-768x576.png 768w, https://files.mykcm.com/2021/03/08151303/20210310-MEM-Eng-6-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">During the crash, home values began to fall, and sellers found themselves in a negative equity situation (where the amount of the mortgage they owed was greater than the value of their home). Some decided to walk away from their homes, and that led to a wave of distressed property listings (foreclosures and short sales), which sold at huge discounts, thus lowering the value of other homes in the area. With the average home equity now standing at over $190,000, this won’t happen today.

This is nothing like the last time.

Bottom Line

If you’re concerned that we’re making the same mistakes that led to the housing crash, take a look at the charts and graphs above to help alleviate your fears.

5 Reasons to Sell Your House This Spring

5 Reasons to Sell Your House This Spring

When selling a house, most homeowners hope for a quick and profitable transaction that puts them in a position to make a great move. If you’re waiting for the best time to win as a seller, the market is calling your name this spring. Here are five reasons why this is the perfect time to sell your house if you’re ready.

1. There’s high demand from homebuyers.

Buyer demand is strong right now, and buyers are active in the market. ShowingTime, which tracks the average number of buyer showings on residential properties, recently announced that buyer showings are up 51.5% compared to this time last year. Daniil Cherkasskiy, Chief Analytics Officer at ShowingTime, notes:

“As anticipated, demand for real estate remains elevatedand continues to be affected by low levels of inventory…On average, each home is getting 50 percent or more requests this year compared to January of last year. As we head into the busy season, it’s likely we’ll push into even more extreme territory until the supply starts catching up with demand.”

When your house is positioned to get a ton of attention from competitive buyers, you’re in the best spot possible as the seller.

2. There aren’t enough houses for sale.

Purchaser demand is so high, the market is running out of available houses for sale. Recently, realtor.com reported:

“Nationally, the inventory of homes for sale in February decreased by 48.6% over the past year, a higher rate of decline compared to the 42.6% drop in January. This amounted to 496,000 fewer homes for sale compared to February of last year.”

The National Association of Realtors (NAR) also reveals that, while home sales are skyrocketing, the inventory of existing homes for sale is continuing to drop dramatically. Houses are essentially selling as fast as they’re hitting the market – in fact, NAR reportsthat the average house is on the market for only 21 days.

It’s this imbalance between high buyer demand and a low supply of houses for sale that gives sellers such an advantage. A seller will always negotiate the best deal when demand is high and supply is low. That’s exactly what’s happening in the real estate market today.

3. You have a lot of leverage in today’s market.

Clearly, many more people are interested in buying than selling this spring, creating the ultimate sellers’ market. When this happens, homeowners in a position to sell have the upper hand in negotiations.

According to NAR, agents are reporting an average of 3.7 offers per house and an increase in bidding wars. As a seller, this means the ball is in your court – so much so that you can use your leverage to negotiate the best possible contract. Demand is there, and now is the perfect time to sell for the most favorable terms.

4. It’s a great way to use your home equity.

According to the latest data from CoreLogic, as of the third quarter of 2020, the average homeowner gained $17,000 in equity over the past year, and that number continues to grow as home values appreciate. Equity is a type of forced savings that grows during your time as a homeowner and can be put toward bigger goals like buying your next dream home.

Mark Fleming, Chief Economist at First American, notes:

“As homeowners gain equity in their homes, they are more likely to consider using that equity to purchase a larger or more attractive home – the wealth effect of rising equity. In today’s housing market, fast rising demand against the limited supply of homes for sale has resulted in continued house price appreciation.”

5. It’s a chance to find a home that meets your needs.

So much has changed over the past year, including what many of us need in a home. Spending extra time where we currently live is enabling many of us to re-evaluate homeownership and what we find most important in a home.

Whether it’s a house that has the features suited to working remotely, space for virtual or hybrid schooling, a home gym or theater, or something else, selling this spring gives you a chance to make a move and find the home of your dreams.

Bottom Line

Today’s housing market belongs to the sellers. If you’ve considered making a move but have been waiting for the right market conditions, your wait may be over. Let’s connect so you’ll be positioned to win when you sell your house this spring.

How Smart Is It to Buy a Home Today?

How Smart Is It to Buy a Home Today?

Whether you’re buying your first home or selling your current house, if your needs are changing and you think you need to move, the decision can be complicated. You may have to take personal or professional considerations into account, and only you can judge what impact those factors should have on your desire to move.

However, there’s one category that provides a simple answer. When deciding to buy now or wait until next year, the financial aspect of the purchase is easy to evaluate. You just need to ask yourself two questions:

  1. Do I think home values will be higher a year from now?
  2. Do I think mortgage rates will be higher a year from now?

From a purely financial standpoint, if the answer is ‘yes’ to either question, you should strongly consider buying now. If the answer to both questions is ‘yes,’ you should definitely buy now.

Nobody can guarantee what home values or mortgage rates will be by the end of this year. The experts, however, seem certain the answer to both questions above is a resounding ‘yes.’ Mortgage rates are expected to rise and home values are expected to appreciate rather nicely.

What does this mean to you?

Let’s look at how waiting would impact your financial situation. Here are the assumptions made for this example:

  • The experts are right – mortgage rates will be 3.18% at the end of the year
  • The experts are right – home values will appreciate by 5.9%
  • You want to buy a home valued at $350,000 today
  • You decide on a 10% down payment

How Smart Is It to Buy a Home Today? | MyKCMhttps://files.mykcm.com/2021/03/02133347/20210303-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/03/02133347/20210303-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/03/02133347/20210303-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" style="box-sizing: border-box; outline: none !important; max-width: 700px; height: auto; vertical-align: middle; border: 0px; display: block; margin: 0px auto 1.5em; width: 700px;">Here’s the financial impact of waiting:

  • You pay an extra $20,650 for the house
  • You need an additional $2,065 for a down payment
  • You pay an extra $116/month in your mortgage payment ($1,392 additional per year)
  • You don’t gain the $20,650 increase in wealth through equity build-up

Bottom Line

There are many things to consider when buying a home. However, from a purely financial aspect, if you find a home that meets your needs, buying now makes much more sense than buying next year.

 Are There Going to Be More Homes to Buy This Year?

Are There Going to Be More Homes to Buy This Year?

If you’re looking for a home to purchase right now and having trouble finding one, you’re not alone. At a time like this when there are so few houses for sale, it’s normal to wonder if you’ll actually find one to buy. According to the National Association of Realtors(NAR), across the country, inventory of available homes for sale is at an all-time low – the lowest point recorded since NAR began tracking this metric in 1982. There are, however, more homes expected to hit the market later this year. Let’s break down the three key places they’ll likely come from as 2021 continues on.

1. Homeowners Who Didn’t Sell Last Year

In 2020, many sellers decided to pause their moving plans for a number of different reasons. From health concerns about the pandemic to financial uncertainty, plenty of homeowners decided not to move last year.

Now that vaccines are being distributed and there’s a light at the end of the COVID-19 tunnel, it should bring some peace of mind to many potential sellers. As Danielle Hale, Chief Economist at realtor.comnotes:

“Fortunately for would-be homebuyers, we expect sellers to return to the market as we see improvement in the economy and progress against the coronavirus.”

Many of the homeowners who decided not to sell in 2020 will enter the market later this year as they begin to feel more comfortable showing their house in person, understanding their financial situation, and simply having more security in life.

2. More New Homes Will Be Built

Last year was a strong year for home builders, and according to the National Association of Home Builders (NAHB), 2021 is expected to be even better:

“For 2021, NAHB expects ongoing growth for single-family construction. It will be the first year for which total single-family construction will exceed 1 million starts since the Great Recession.”

With more houses being built in many markets around the country, homeowners looking for new houses that meet their changing needs will be able to move into their dream homes. When they sell their current houses, this will create opportunities for those looking to find a home that’s already built to do so. It sets a simple chain reaction in motion for hopeful buyers.

3. Those Impacted Financially by the Economic Crisis

Many experts don’t anticipate a large wave of foreclosures coming to the market, given the forbearance options afforded to current homeowners throughout the pandemic. Some homeowners who have been impacted economically will, however, need to move this year. There are also homeowners who didn’t take advantage of the forbearance option or were already in a foreclosure situation before the pandemic began. In those cases, homeowners may decide to sell their houses instead of going into the foreclosure process, especially given the equity in homes today. Lawrence Yun, Chief Economist at NAR, explains:

“Given the huge price gains recently, I don’t think many homes will have to go to foreclosure…I think homes will just be sold, and there will be cash left over for the seller, even in a distressed situation. So that’s a bit of a silver lining in that we don’t expect a massive sale of distressed properties.”

As we can see, it looks like we’re going to have an increase in the number of homes for sale in 2021. With fears of the pandemic starting to ease, new homes being built, and more listings coming to the market prior to foreclosure, there’s hope if you’re planning to buy this year. And if you’re thinking of selling and making a move, doing so while demand for your house is high might create an outstanding move-up option for you.

Bottom Line

Housing demand is high and supply is low, so if you’re thinking of moving, it’s a great time to do so. There are likely many buyers who are looking for a home just like yours, and there are options coming for you to find a new house too. Let’s connect today to see how you can benefit from the opportunities available in our local market.

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