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How a Change in Mortgage Rate Impacts Your Homebuying Budget

3/30/2021

 

How a Change in Mortgage Rate Impacts Your Homebuying Budget | MyKCM

Mortgage rates are on the rise this year, but they’re still incredibly low compared to the historic average. However, anytime there’s a change in the mortgage rate, it affects what you can afford to borrow when you’re buying a home. As Sam Khater, Chief Economist at Freddie Mac, shares:

Since January, mortgage rates have increased half a percentage point from historic lows and home prices have risen, leaving potential homebuyers with less purchasing power.” (See graph below):

How a Change in Mortgage Rate Impacts Your Homebuying Budget | MyKCM

When buying a home, it’s important to determine a monthly budget so you can plan for and understand what you can afford. However, when you need to stick to your budget, even a small increase in the mortgage rate can make a big difference.  According to the National Association of Realtors (NAR), today, the median existing-home price is $313,000. Using $300,000 as a simple number close to the median price, here’s an example of how a change in mortgage rate impacts your monthly principal and interest payments on a home.How a Change in Mortgage Rate Impacts Your Homebuying Budget | MyKCM

If, for example, you’re getting ready to buy a home and know your budget allows for a monthly payment of $1200-1250 (marked in gray on the table above), every time the mortgage rate increases, the loan amount has to decrease to keep your monthly cost in range. This means you may have to look for lower-priced homes as mortgage rates go up if you want to be able to maintain your budget.

In essence, it’s ideal to close on a home loan when mortgage rates are low, so you can afford to borrow more money. This gives you more purchasing power when you buy a home. Mark Fleming, Chief Economist at First American, explains:

“Monthly payments have remained manageable despite soaring home prices because of low mortgage rates. In fact, monthly payments remain below the $1,250 to $1,260 range that we saw in both fall 2018 and spring 2019, but they are on track to hit that level this spring.

Although they remain low, mortgage rates have begun to increase and are expected to rise further later in the year, thus affordability will test buyer demand in the months ahead and likely help slow the pace of price growth.”

Today’s mortgage rates are still very low, but experts project they’ll continue to rise modestly this year. As a result, every moment counts for homebuyers who want to secure the lowest mortgage rate they can in order to be able to afford the home of their dreams.

Bottom Line

Thanks to low mortgage rates, the spring housing market's in bloom for buyers – but these favorable conditions may not last for long. Let’s connect today to start the homebuying process while your purchasing power is still holding strong.

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

2/25/2021

 

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

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.com, notes:

“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.

Where Have All the Houses Gone?

2/22/2021

 

Where Have All the Houses Gone? | MyKCM

In today’s housing market, it seems harder than ever to find a home to buy. Before the health crisis hit us a year ago, there was already a shortage of homes for sale. When many homeowners delayed their plans to sell at the same time that more buyers aimed to take advantage of record-low mortgage rates and purchase a home, housing inventory dropped even further. Experts consider this to be the biggest challenge facing an otherwise hot market while buyers continue to compete for homes. As Danielle Hale, Chief Economist at realtor.com, explains:

“With buyers active in the market and seller participation lagging, homes are selling quickly and the total number available for sale at any point in time continues to drop lower. In January as a whole, the number of for sale homes dropped below 600,000.”

Every month, realtor.com releases new data showing the year-over-year change in inventory of existing homes for sale. As you can see in the map below, nationwide, inventory is 42.6% lower than it was at this time last year:Where Have All the Houses Gone? | MyKCM

Does this mean houses aren’t being put on the market for sale?

Not exactly. While there are fewer existing homes being listed right now, many homes are simply selling faster than they’re being counted as current inventory. The market is that competitive! It’s like when everyone was trying to find toilet paper to buy last spring and it was flying off the shelves faster than it could be stocked in the stores. That’s what’s happening in the housing market: homes are being listed for sale, but not at a rate that can keep up with heavy demand from competitive buyers.

In the same realtor.com report, Hale explains:

Time on the market was 10 days faster than last year meaning that buyers still have to make decisions quickly in order to be successful. Today’s buyers have many tools to help them do that, including the ability to be notified as soon as homes meeting their search criteria hit the market. By tailoring search and notifications to the homes that are a solid match, buyers can act quickly and compete successfully in this faster-paced housing market.”

The Good News for Homeowners

The health crisis has been a major reason why potential sellers have held off this long, but as vaccines become more widely available, homeowners will start making their moves. Ali Wolf, Chief Economist at Zonda, confirms:

“Some people will feel comfortable listing their home during the first half of 2021. Others will want to wait until the vaccines are widely distributed.”

With more homeowners getting ready to sell later this year, putting your house on the market sooner rather than later is the best way to make sure your listing shines brighter than the rest.

When you’re ready to sell your house, you’ll likely want it to sell as quickly as possible, for the best price, and with little to no hassle. If you’re looking for these selling conditions, you’ll find them in today’s market. When demand is high and inventory is low, sellers have the ability to create optimal terms and timelines for the sale, making now an exceptional time to move.

Bottom Line

Today’s housing market is a big win for sellers, but these conditions won’t last forever. If you’re in a position to sell your house now, you may not want to wait for your neighbors to do the same. Let’s connect to discuss how to sell your house safely so you’re able to benefit from today’s high demand and low inventory.

3 Ways Home Equity Can Have a Major Impact on Your Life

2/17/2021

 

3 Ways Home Equity Can Have a Major Impact on Your Life | MyKCM

There have been a lot of headlines reporting on how homeowner equity (the difference between the current market value of your home and the amount you owe on your mortgage) has dramatically increased over the past few years. CoreLogic indicated that equity increased for the average homeowner by $17,000 in the last year alone. ATTOM Data Solutions, in their latest U.S. Home Equity Report, revealed that 30.2% of the 59 million mortgaged homes in the United States have at least 50% equity. That doesn’t even include the 38% of homes that are owned free and clear, meaning they don’t have a mortgage at all.

How can equity help a household?

Having equity in your home can dramatically impact your life. Equity is like a savings account you can tap into when you need cash. Like any other savings, you should be sensible in how you use it, though. Here are three good reasons to consider using your equity.

1. You’re experiencing financial hardship (job loss, medical expenses, etc.)

Equity gives you options during difficult financial times. With equity, you could refinance your house to get cash which may ease the burden. It also puts you in a better position to talk to the bank about restructuring your home loan until you can get back on your feet.

Today, there are 2.7 million Americans who are currently in a forbearance program because of the pandemic. Ninety percent of those in the program have at least 10% equity. That puts them in a better position to get a loan modification instead of facing foreclosure because many banks will see the equity as a form of collateral in a new deal. If you’re in this position, even if you can’t get a modification, the equity allows you the option to sell your house and walk away with your equity instead of losing the house and your investment in it.

2. You need money to start a new business

We’ve all heard the stories about how many great American companies started in the founder’s garage (i.e., Disney, Hewlett Packard, Apple, Yankee Candle, Keeping Current Matters). What we might not realize, however, is the garage (along with the rest of the home) supplied the start-up money for many of these companies in the form of a refinance.

If you’re passionate about an idea you have for a new product or service, the equity in your home may enable you to make that dream a reality.

3. You want to invest in a loved one’s future

It’s been a long-standing tradition in this country for many households to help pay college expenses for their children. Some have tapped into the equity in their homes to do that.

Additionally, George Ratiu, Senior Economist for realtor.com, notes:

52% of Americans who bought their first home in 2020 said they got help with their down payment from friends or family. The number one lender? Their parents.

It’s safe to assume a percentage of that down payment money likely came from home equity.

Bottom Line

Savings in any form is a good thing. The forced savings you can earn from making a mortgage payment enables you to build wealth through home equity. That equity can come in handy in both good and more challenging times.

Turn to an Expert for the Best Advice, Not Perfect Advice

2/1/2021

 

Turn to an Expert for the Best Advice, Not Perfect Advice | MyKCM

As we approach the anniversary of the hardships we’ve faced through this pandemic and the subsequent recession, it’s normal to reflect on everything that’s changed and wonder what’s ahead for 2021. While there are signs of economic recovery as vaccines are being issued, we still have a long way to go. It’s at times like these we want exact information about anything we’re doing. That information brings knowledge, and this gives us a sense of relief and comfort in uncertain times.

If you’re thinking about buying or selling a home today, the same need for information is very real. But, because it’s such a big step in our lives, that desire for clear information is even greater in the homebuying or selling process. Given the current level of overall anxiety, we want that advice to be truly perfect. The challenge is, no one can give you “perfect” advice. Experts can, however, give you the best advice possible.

Let’s say you need an attorney, so you seek out an expert in the type of law required for your case. When you go to her office, she won’t immediately tell you how the case is going to end or how the judge or jury will rule. If she could, that would be perfect advice. What a good attorney can do, however, is discuss with you the most effective strategies you can take. She may recommend one or two approaches she believes will be best for your case.

She’ll then leave you to make the decision on which option you want to pursue. Once you decide, she can help you put a plan together based on the facts at hand. She’ll help you achieve the best possible resolution and make whatever modifications in the strategy are necessary to guarantee that outcome. That’s an example of the best advice possible.

The role of a real estate professional is just like the role of a lawyer. An agent can’t give you perfect advice because it’s impossible to know exactly what’s going to happen throughout the transaction – especially in this market.

An agent can, however, give you the best advice possible based on the information and situation at hand, guiding you through the process to help you make the necessary adjustments and best decisions along the way. An agent will lead you to the best offer available. That’s exactly what you want and deserve.

Bottom Line

If you’re thinking of buying or selling this year, let’s connect to make sure you get the best advice possible.

What Record-Low Housing Inventory Means for You

1/28/2021

 

What Record-Low Housing Inventory Means for You | MyKCM

The real estate market is expected to do very well in 2021, with mortgage rates that are hovering at historic lows and forecasted by experts to remain favorable throughout the year. One challenge to the housing industry, however, is the lack of homes available for sale today. Last week, the National Association of Realtors (NAR) released their Existing Home Sales Report, which shows that the inventory of homes for sale is currently at an all-time low. The report explains:

“Total housing inventory at the end of December totaled 1.07 million units, down 16.4% from November and down 23% from one year ago (1.39 million). Unsold inventory sits at an all-time low 1.9-month supply at the current sales pace, down from 2.3 months in November and down from the 3.0-month figure recorded in December 2019. NAR first began tracking the single-family home supply in 1982.”
(See graph below):

What Record-Low Housing Inventory Means for You | MyKCM

What Does This Mean for You?

If You’re a Buyer:

Be patient during your home search. It may take time to find a home you love. Once you do, however, be ready to move forward quickly. Get pre-approved for a mortgage, be prepared to make a competitive offer from the start, and know that a shortage in inventory could mean you’ll enter a bidding war. Calculate just how far you’re willing to go to secure a home and lean on your real estate professional as an expert guide along the way. The good news is, more inventory is likely headed to the market soon, Lawrence Yun, Chief Economist at NAR, notes:

"To their credit, homebuilders and construction companies have increased efforts to build, with housing starts hitting an annual rate of near 1.7 million in December, with more focus on single-family homes…However, it will take vigorous new home construction in 2021 and in 2022 to adequately furnish the market to properly meet the demand."

If You’re a Seller:

Realize that, in some ways, you’re in the driver’s seat. When there’s a shortage of an item at the same time there’s a strong demand for it, the seller is in a good position to negotiate the best possible terms. Whether it’s the price, moving date, possible repairs, or anything else, you’ll be able to request more from a potential purchaser at a time like this – especially if you have multiple interested buyers. Don’t be unreasonable, but understand you probably have the upper hand.

Bottom Line

The housing market will remain strong throughout 2021. Know what that means for you, whether you’re buying, selling, or doing both.

Will Forbearance Plans Lead to a Tsunami of Foreclosures?

1/13/2021

 

Will Forbearance Plans Lead to a Tsunami of Foreclosures? | MyKCM

At the onset of the economic disruptions caused by the COVID pandemic, the government quickly put into place forbearance plans to allow homeowners to remain in their homes without making their monthly mortgage payments. Today, almost three million households are actively in a forbearance plan. Though 29.4% of those in forbearance have continued to stay current on their payments, many have not.

Yanling Mayer, Principal Economist at CoreLogic, recently revealed:

“A distributional analysis of forborne loans’ payment status reveals that more than one third (39.1%) of all forborne loans are now 150+ days behind payment, while as many as 1-in-4 (25.5%) are 180+ days past due.”

These homeowners have been given permission to not make their payments, but the question now is: how many of them will be able to catch up after their forbearance program ends? There’s speculation that a forthcoming wave of foreclosures could be the result, and that could lead to another crash in home values like we saw a decade ago.

However, today’s situation is different than the 2006-2008 housing crisis as many homeowners have tremendous amounts of equity in their homes.

What are the experts saying?

Over the last 30 days, several industry experts have weighed in on this subject.

Michael Sklarz, President at Collateral Analytics:

“We may very well see a meaningful increase in the number of homes listed for sale as these borrowers choose to sell at what is arguably an intermediate top in the market and downsize to more affordable homes rather than face foreclosure.”

Odeta Kushi, Deputy Chief Economist at First American:

“The foreclosure process is based on two steps. First, the homeowner suffers an adverse economic shock…leading to the homeowner becoming delinquent on their mortgage. However, delinquency by itself is not enough to send a mortgage into foreclosure. With enough equity, a homeowner has the option of selling their home, or tapping into their equity through a refinance, to help weather the economic shock. It is a lack of sufficient equity, the second component of the dual trigger, that causes a serious delinquency to become a foreclosure.”

Don Layton, Senior Industry Fellow at the Joint Center for Housing Studies of Harvard University:

“With a greater cushion of equity, troubled homeowners have dramatically improved options: a greater ability to access funding (e.g. home equity lines) to keep paying monthly expenses until family finances might recover, improved ability to qualify for and support a loan modification, and, if push comes to shove, the ability to sell the home and monetize their increased net worth while reducing monthly payment obligations. So, what should lenders and servicers expect: a large number of foreclosures or only a modest increase? I believe the latter.”

With today’s positive equity situation, many homeowners will be able to use a loan modification or refinance to stay in their homes. If not, some will go to foreclosure, but most will be able to sell and walk away with their equity.

Won’t the additional homes on the market impact prices?

Distressed properties (foreclosures and short sales) sell at a significant discount. If homeowners sell instead of going into foreclosure, the impact on the housing market will be much less severe.

We must also realize there is currently an unprecedented lack of inventory on the market. Just last week, realtor.com explained:

“Nationally, the number of homes for sale was down 39.6%, amounting to 449,000 fewer homes for sale than last December.”

It’s important to remember that there weren’t enough homes for sale even then, and inventory has only continued to decline.

The market has the potential to absorb half a million homes this year without it causing home values to depreciate.

Bottom Line

The pandemic has led to both personal and economic hardships for many American households. The overall residential real estate market, however, has weathered the storm and will continue to do so in 2021.

Is This the Year to Sell My House?

1/7/2021
Is This the Year to Sell My House? | MyKCM


If one of the questions you’re asking yourself is, “Should I sell my house this year?” consumer sentiment about selling today should boost your confidence in the right direction. Even with the current health crisis that continues to challenge our nation, Americans still feel good about selling a house. Here’s why.

According to the latest Home Purchase Sentiment Index from Fannie Mae, 57% of consumer respondents to their survey indicate now is a good time to buy a home, while 59% feel it’s a good time to sell one:

“The percentage of respondents who say it is a good time to sell a home remained the same at 59%, while the percentage who say it’s a bad time to sell decreased from 35% to 33%. As a result, the net share of those who say it is a good time to sell increased 2 percentage points month over month.”

As you can see, many still believe that, despite everything going on in the world, it is still a good time to sell a house.

Why is now a good time to sell?

There simply are not enough homes available to meet today’s buyer demand, and they’re selling just as quickly as they’re coming to the market. According to the National Association of Realtors (NAR), unsold inventory available today sits at a 2.3-month supply at the current sales pace, which is down from a 2.5-month supply from the previous month. This record-low inventory is not even half of what we need for a normal or neutral housing market, which should have a 6.0-month supply of unsold inventory to balance out.

With so few homes available for buyers to choose from, we’re in a true sellers’ market. Homeowners ready to make a move right now have the opportunity to negotiate the best possible contracts with buyers who are feeling the pull of intense competition when it comes to finding their dream home. Lawrence Yun, Chief Economist for NAR, notes how quickly homes are selling right now, further confirming the benefits to sellers this season:

“The market is incredibly swift this winter with the listed homes going under contract on average at less than a month due to a backlog of buyers wanting to take advantage of record-low mortgage rates.”

However, this sweet spot for sellers won’t last forever. As more homes are listed this year, this tip toward sellers may start to wane. According to Danielle Hale, Chief Economist at realtor.com, more choices for buyers are on the not-too-distant horizon:

“The bright spot for buyers is that more homes are likely to become available in the last six months of 2021. That should give folks more options to choose from and take away some of their urgency. With a larger selection, buyers may not be forced to make a decision in mere hours and will have more time to make up their minds.”

Bottom Line

If you’re ready to make a move, you can feel good about the current sentiment in the market and the advantageous conditions for today’s sellers. Let’s connect today to determine the best next step when it comes to selling your house this year.

The Do’s and Don’ts after Applying for a Mortgage

12/21/2020

The Do’s and Don’ts after Applying for a Mortgage | MyKCM


Once you’ve found the right home and applied for a mortgage, there are some key things to keep in mind before you close. You're undoubtedly excited about the opportunity to decorate your new place, but before you make any large purchases, move your money around, or make any major life changes, consult your lender – someone who is qualified to tell you how your financial decisions may impact your home loan.

Below is a list of things you shouldn’t do after applying for a mortgage. They’re all important to know – or simply just good reminders – for the process.

1. Don’t Deposit Cash into Your Bank Accounts Before Speaking with Your Bank or Lender. Lenders need to source your money, and cash is not easily traceable. Before you deposit any amount of cash into your accounts, discuss the proper way to document your transactions with your loan officer.

2. Don’t Make Any Large Purchases Like a New Car or Furniture for Your New Home. New debt comes with new monthly obligations. New obligations create new qualifications. People with new debt have higher debt-to-income ratios. Higher ratios make for riskier loans, and then sometimes qualified borrowers no longer qualify.

3. Don’t Co-Sign Other Loans for Anyone. When you co-sign, you’re obligated. With that obligation comes higher ratios as well. Even if you promise you won’t be the one making the payments, your lender will have to count the payments against you.

4. Don’t Change Bank Accounts. Remember, lenders need to source and track your assets. That task is significantly easier when there’s consistency among your accounts. Before you transfer any money, speak with your loan officer.

5. Don’t Apply for New Credit. It doesn’t matter whether it’s a new credit card or a new car. When you have your credit report run by organizations in multiple financial channels (mortgage, credit card, auto, etc.), your FICO® score will be impacted. Lower credit scores can determine your interest rate and maybe even your eligibility for approval.

6. Don’t Close Any Credit Accounts. Many buyers believe having less available credit makes them less risky and more likely to be approved. Wrong. A major component of your score is your length and depth of credit history (as opposed to just your payment history) and your total usage of credit as a percentage of available credit. Closing accounts has a negative impact on both of those determinants of your score.

Bottom Line

Any blip in income, assets, or credit should be reviewed and executed in a way that ensures your home loan can still be approved. If your job or employment status has changed recently, share that with your lender as well. The best plan is to fully disclose and discuss your intentions with your loan officer before you do anything financial in nature.

Is Buying a Home Today a Good Financial Move?

11/24/2020

 

Is Buying a Home Today a Good Financial Move? | MyKCM

There’s no doubt 2020 has been a challenging year. A global pandemic coupled with an economic recession has caused heartache for many. However, it has also prompted more Americans to reconsider the meaning of “home.” This quest for a place better equipped to fulfill our needs, along with record-low mortgage rates, has skyrocketed the demand for home purchases.

This increase in demand, on top of the severe shortage of homes for sale, has also caused more bidding wars and thus has home prices appreciating rather dramatically. Some, therefore, have become cautious about buying a home right now.

The truth of the matter is, even though homes have appreciated by a whopping 6.7% over the last twelve months, the cost to buy a home has actually dropped. This is largely due to mortgage rates falling by a full percentage point.  Let’s take a look at the monthly mortgage payment on a $300,000 house one year ago, and then compare it with that same home today, after it has appreciated by 6.7% to $320,100:
Is Buying a Home Today a Good Financial Move? | MyKCM

Compared to this time last year, you’ll actually save $87 dollars a month by purchasing that home today, which equates to over one thousand dollars a year.

But isn’t the economy still in a recession?

Yes, it is. That, however, may make it the perfect time to buy your first home or move up to a larger one. Tom Gil, a Harvard trained negotiator and real estate investor, recently explained:

“When volatile assets are facing recessions, hard assets, such as gold and real estate, thrive. Historically speaking, residential real estate has done better compared to other markets during and after recessions.”

That thought is substantiated by the fact that homeowners have 40 times the net worth of renters. Odeta Kushi, Deputy Chief Economist for First American Financial Corporation, recently said:

“Despite the risk of volatility in the housing market, numerous studies have demonstrated that homeownership leads to greater wealth accumulation when compared with renting. Renters don’t capture the wealth generated by house price appreciation, nor do they benefit from the equity gains generated by monthly mortgage payments, which become a form of forced savings for homeowners.”

Bottom Line

With home prices still increasing and mortgage rates perhaps poised to begin rising as well, buying your first home, or moving up to a home that better fits your current needs, likely makes a ton of sense.

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