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Family Wealth Grows as Home Equity Builds

21 Oct 2015 Posted by NooshiAdmin in Blog

Family-Wealth-KCM

With residential real estate values rising quite substantially in most parts of the country over the last few years, many homeowners are seeing a major increase in their family’s wealth as equity continues to build in their house.

A recent study by the Joint Center of Housing Studies at Harvard University revealed that home equity grew nicely last year and has grown dramatically over the last five years…

Equity.1-KCM

Buyers looking today may not see the same build-up in equity but could still do quite well.

Let’s assume you went into contract in the next six weeks and closed on a $250,000 home in January. If we take the house value projections from the last Home Price Expectation Survey, here is how your equity would grow over the next four years:

Equity.2-KCM

Bottom Line

Homeownership has historically been a great way for the average American family to build wealth over time.

Source : KCM.com

Buying a Home Remains 35% Less Expensive than Renting!

20 Oct 2015 Posted by NooshiAdmin in Blog

Houses-on-Money-KCM

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage throughout the 100 largest metro areas in the United States.

The updated numbers actually show that the range is from an average of 16% in Honolulu (HI), all the way to 55% in Sarasota (FL), and 35% Nationwide!

The other interesting findings in the report include:

  • Interest rates have remained low and even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation. “In the past year, these two trends have made homeownership even more affordable compared with renting.”
  • Some markets might tip in favor of renting if home prices increase at a greater rate than rents and if – as most economists expect – mortgage rates rise, due to the strengthening economy.
  • Nationally, rates would have to rise to 10.6% for renting to be cheaper than buying – and rates haven’t been that high since 1989.  

Bottom Line

Buying a home makes sense socially and financially. Rents are predicted to increase substantially in the next year, lock in your housing cost with a mortgage payment now.

Source: KCM.com

Do You Really Think Your Landlord Pays for Repairs?

16 Oct 2015 Posted by NooshiAdmin in Blog

Home-Repairs-KCM

A recent article that appeared on Nasdaq.com addressed the issue of whether it is best to buy or rent in today’s real estate environment. The article was very fair in discussing both options.

However, there was one portion of the article that we questioned. One of the experts was quoted as saying:

“For some people, the choice is very clear: Buying a home can be more costly, given the cost of the purchase itself, plus taxes and insurance, plus maintenance and repairs.”

This argument is often made in defense of renting. However, we don’t believe it makes logical sense. They claim that, as a renter, you won’t have the expenses of “taxes and insurance, plus maintenance and repairs”. Do they really believe that the landlord pays all those expenses for their tenants?

The vast majority of landlords own rentable real estate as a form of investment. As any other investor would, they expect to make a return on that investment (ROI) – otherwise known as profit. In order to make a profit, the landlord needs to include EVERY expense they incur into the rent…AND THEN ADD A PROFIT MARGIN!!

We think it is incorrect to advise a prospective renter that they won’t have the same expenses that a homeowner would have. They just pay those expenses to a landlord with a “premium” built in.

Source : KCM.com

New Home Sales Surge

14 Oct 2015 Posted by NooshiAdmin in Blog

New-Home-Sales-KCM

According to the latest report from the US Census Bureau and the Department of Housing and Urban Development, newly constructed home sales jumped 5.7% month-over-month and 21.6% year-over-year to an annual pace of 552,000.

Many buyers are looking to the new homes market to make up for the lack of existing home sales inventory. National Association of Home Builders Chief Economist David Crowe explains:

“Today’s report indicates the release of pent-up housing demand as the overall economy strengthens, consumer confidence grows and mortgage interest rates remain low. The housing market should continue to move forward at a modest but more persistent pace throughout the rest of 2015.”

Regionally, the Northeast led the way with a 24.1% increase in new home sales, followed by the South (7.4%) and West (5.4%). Sales in the Midwest declined by 9.1%.

The inventory of new homes for sale currently sits at a 4.7-month supply down slightly from July (4.9) and significantly from August 2014 (5.4).

Buyers who purchased a new home were willing to spend more to get the amenities that they wanted. The median home price for new homes was $64,000 higher than existing homes in August at $292,700!

Approved applications for building permits increased 3.5% over July and 12.5% over this time last year. Permit applications are seen as a strong indicator of builder confidence in the market.

Bottom Line

Buyer demand continues to outpace inventory of homes for sale. If you are thinking of selling your house this year, now may be the time to list before builders have a chance to replenish the supply of new homes.

Want to know more about New Home Sales? Check out this infographic!

Source : KCM.com

4 Reasons to Buy BEFORE Winter Hits

13 Oct 2015 Posted by NooshiAdmin in Blog

Winter-Lantern-KCM

It’s that time of year; the seasons are changing and with them bring thoughts of the upcoming holidays, family get-togethers, and planning for a new year. Those who are on the fence about whether now is the right time to buy don’t have to look much farther to find four great reasons to consider buying a home now, instead of waiting.

1. Prices Will Continue to Rise

The Home Price Expectation Survey polls a distinguished panel of over 100 economists, investment strategists, and housing market analysts. Their most recent report released recently projects appreciation in home values over the next five years to be between 10.5% (most pessimistic) and 25.5% (most optimistic).

The bottom in home prices has come and gone. Home values will continue to appreciate for years. Waiting no longer makes sense.

2. Mortgage Interest Rates Are Projected to Increase

Although Freddie Mac’s Primary Mortgage Market Survey shows that interest rates for a 30-year mortgage have softened recently, most experts predict that they will begin to rise later this year. The Mortgage Bankers Association, Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will be up almost a full percentage point by the end of next year.

An increase in rates will impact YOUR monthly mortgage payment. Your housing expense will be more a year from now if a mortgage is necessary to purchase your next home.

3. Either Way You are Paying a Mortgage

As a recent paper from the Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return. That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

4. It’s Time to Move On with Your Life

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. It appears that both are on the rise.

But, what if they weren’t? Would you wait?

Look at the actual reason you are buying and decide whether it is worth waiting. Whether you want to have a great place for your children to grow up, you want your family to be safer or you just want to have control over renovations, maybe it is time to buy.

Bottom Line

If the right thing for you and your family is to purchase a home this year, buying sooner rather than later could lead to substantial savings.

Source : KCM.com

October 2015 San Francisco Real Estate Report

07 Oct 2015 Posted by NooshiAdmin in Market News, Newsletter

The autumn selling season started with a large surge of new listings right after Labor Day, but it will be another month or so before preliminary statistical data is available on home sales negotiated since then. However, it is clear that the recent volatility in national and international financial markets has not so far caused a severe adjustment to local home prices. While we wait for early autumn sales to close in quantity, we’ll review the market from a variety of angles.

A wide range of other reports pertinent to SF real estate values and trends can be found here: San Francisco Market Reports and San Francisco Neighborhood Values

Short-Term & Long-Term
San Francisco Home Price Appreciation

2011 – 2015, by Quarter
Median-Price_Bar-Chart_Qtr_SFD-Condo-Combined

It’s not unusual for median prices to drop in the 3rd quarter, which happened this year as well. This has less to do with fair market value, than with the fact that the market for higher priced homes slows down much more than that of the general market in summer.

1994 – 2015, by Year
1993-2010_SF_Median_Sales_Prices_Cycle-Labels

Return on Cash Investment
Comparing Buying a Home in San Francisco
to Inflation, Gold, the S&P 500 & Apple Stock

10-15_ROI-on-Cash-Invest_Comp-RE-Gold-Apple-SP500

For the purposes of this analysis, we’ve broken home ownership into 2 aspects, the first being ongoing housing costs – mortgage interest, home insurance, property taxes, maintenance – which after tax deductions could be compared to the cost of renting a similar home. The second aspect, illustrated in the chart above, is the cash investment side of buying a home and the compound annual return on that investment, after closing costs and loan principal repayment are deducted, if one had purchased a median SF house in 1994.

For the San Francisco Median House calculation, we used the 1994 median price ($265,000), with a 20% down payment ($53,000) and paying 1.5% in buy-side closing costs ($3975) for a total cash investment of $56,975. Net proceeds were calculated using the 2015 YTD median sales price ($1,250,000), deducting 6% in sell-side closing costs ($75,000) and the original 80% mortgage balance ($212,000), which equals $963,000. This equals an annual compound return on investment of 14.4% over the 21-year period.

All of us should have put every penny we had into Apple stock in 1994, but barring that, purchasing a home in San Francisco would have been a decent alternative – particularly if you’d bought in Noe Valley or the Mission. Three factors not included in the above analysis further increase the financial benefits of home purchase over the other investments graphed: 1) the $250,000/$500,000 capital gains tax exclusion on the sale of a primary residence (potentially saving up to $75,000 in taxes), 2) the “forced savings” effect of gradually paying off one’s mortgage (if one resists refinancing out growing home equity), which has a substantial wealth-building effect, and 3) over time, the ongoing cost of housing with a fixed rate loan, strategically refinanced when rates go significantly lower, will usually fall well below rental costs that continue to rise with inflation.

With financial assets subject to market cycles, changing the buy or sell dates in this analysis can dramatically affect the return. We picked 1994, because of the availability of MLS median price data going back to then.

 

3rd Quarter Market Snapshot

These analyses were made in good faith with data from sources deemed reliable, but they may contain errors and are subject to revision. Statistics are generalities and all numbers should be considered approximate. How any median or average statistic applies to a particular home is unknown without a specific comparative market analysis. We are not qualified to render legal or tax advice of any kind. Sales statistics of one month generally reflect offers negotiated 4 – 6 weeks earlier.

© 2015 Paragon Real Estate Group
 

Sales Up In (Almost) Every Price Range!

07 Oct 2015 Posted by NooshiAdmin in Blog

Price-Up-KCM

The National Association of Realtors’ most recent Existing Home Sales Report revealed that home sales were up rather dramatically over last year in five of the six price ranges they measure.

Only those homes priced under $100,000 showed a decline (-7.7%). The decline in this price range points to the lower inventory of distressed properties available for sale and speaks to the strength of the market.

Every other category showed a minimum increase of at least 5.6%, with sales in the $250,000- $500,000 range up 16.9%!

Here is the breakdown:

Sales-Up-KCM

What does that mean to you if you are selling?

Houses are definitely selling. If your house has been on the market for any length of time and has not yet sold, perhaps it is time to sit with your agent and see if it is priced appropriately to compete in today’s market.

Source : KCM.com

#1 Reason to List Your House Today

06 Oct 2015 Posted by NooshiAdmin in Blog

Reason-To-Sell-KCM

If you are debating listing your house for sale this year or even early next year, here is the #1 reason not to wait!

Buyer Demand Continues to Outpace the Supply of Homes For Sale

According to the National Association of REALTORS’ (NAR) Foot Traffic report, there are more buyers out in the market right now than at any other time in the past three years.

The graph below shows the significant increase in foot traffic experienced this year compared to 2014.

Demand-KCM

The latest Existing Home Sales report shows that there is currently a 5.2-month supply of homes for sale. This remains lower than the 6-month supply necessary for a normal market and well below August 2014 numbers.

The chart below details the year-over-year inventory shortages experienced so far in 2015:

Supply-KCM

Bottom Line

Meet with a local real estate professional who can show you the supply conditions in your neighborhood and assist you in gaining access to the buyers who are ready, willing and able to buy today!

Source : KCM.com