There is little doubt that it is easier to get a home mortgage today than it was last year. The Mortgage Credit Availability Index (MCAI), published by the Mortgage Bankers Association, shows that mortgage credit has become more available in each of the last several years. In fact, in just the last year:

More buyers are putting less than 20% down to purchase a home

The average credit score on closed mortgages is lower

More low-down-payment programs have been introduced

This has some people worrying that we are returning to the lax lending standards which led to the boom and bust that real estate experienced ten years ago. Let’s alleviate some of that concern.

The graph below shows the MCAI going back to the boom years of 2004-2005. The higher the graph line, the easier it was to get a mortgage.

As you can see, lending standards were much more lenient from 2004 to 2007. Though it has gradually become easier to get a mortgage since 2011, we are nowhere near the lenient standards during the boom.

The Urban Institute also publishes a Home Credit Availability Index (HCAI). According to the Institute, the HCAI:

“Measures the percentage of 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 … it is easier to get a loan.”

Here is a graph showing their findings:

Again, today’s lending standards are nowhere near the levels of the boom years. As a matter of fact, they are more stringent than they were even before the boom.

Bottom Line

It is getting easier to gain financing for a home purchase. However, we are not seeing the irresponsible lending that caused the housing crisis.

Source: KCM.com

In today’s housing market, where supply is very low and demand is very high, home values are increasing rapidly. Many experts are projecting that home values could appreciate by another 5%+ over the next twelve months. One major challenge in such a market is the bank appraisal.

If prices are surging, it is difficult for appraisers to find adequate, comparable sales (similar houses in the neighborhood that recently closed) to defend the selling price when performing the appraisal for the bank.

Every month in their Home Price Perception Index (HPPI), Quicken Loans measures the disparity between what a homeowner who is seeking to refinance their home believes their house is worth, and an appraiser’s evaluation of that same home.

Bill Banfield, Executive VP of Capital Markets at Quicken Loans urges anyone looking to buy or sell in today’s market to remember the impact of this challenge:

“Based on the HPPI, it appears homeowners in the markets where prices are rising faster than the national average – like Denver, Seattle and San Francisco – are continuing to underestimate just how quickly home values are rising, so the average appraisal is higher than homeowner estimate.

On the inverse of that, homeowners in areas where the values aren’t rising as fast may think they are rising faster than they are, leading to the appraisal lagging the estimate.”

The chart below illustrates the changes in home price estimates over the last 12 months.

Bottom Line

Every house on the market must be sold twice; once to a prospective buyer and then to the bank (through the bank’s appraisal). With escalating prices, the second sale might be even more difficult than the first. If you are planning on entering the housing market this year, meet with an experienced professional who can guide you through this and any other obstacles that may arise.

Source: KCM.com

The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

Today we want to talk about the top 5 financial reasons you should own your own home.

Homeownership is a form of forced savings – Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.

Homeownership provides tax savings – One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.

Homeownership allows you to lock in your monthly housing cost – When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.

Buying a home is cheaper than renting – According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.

No other investment lets you live inside of it – You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

Bottom Line

Before you sign another lease, perhaps you should sit with a real estate professional in your area to better understand all your options.

Source: KCM.com

With residential home prices continuing to appreciate at levels above historic norms, some are questioning if we are heading toward another housing bubble (and subsequent burst) like the one we experienced in 2006-2008.

Recently, five housing experts weighed in on the question.

Rick Sharga, Executive VP at Ten-X:

“We’re definitely not in a bubble.”

“We have a handful of markets that are frothy and probably have hit an affordability wall of sorts but…while prices nominally have surpassed the 2006 peak, we’re not talking about 2006 dollars.”

Christopher Thornberg, Partner at Beacon Economics:

“There is no direct or indirect sign of any kind of bubble.”

“Steady as she goes. Prices continue to rise. Sales roughly flat.…Overall this market is in an almost boring place.”

Bill McBride, Calculated Risk:

“I wouldn’t call house prices a bubble.”

“So prices may be a little overvalued, but there is little speculation and I don’t expect house prices to decline nationally like during the bust.”

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices:

“Housing is not repeating the bubble period of 2000-2006.”

“…price increases vary unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging.”

Bing Bai & Edward Golding, Urban Institute:

“We are not in a bubble and nowhere near the situation preceding the 2008 housing crisis.”

“Despite recent increases, house prices remain affordable by historical standards, suggesting that home prices are tracking a broader economic expansion.”

Source: KCM.com

There are some people who have not purchased homes yet because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent-free, you are paying a mortgage – either yours or your landlord’s.

As Entrepreneur Magazine, a premier source for small business, explained in their article, “12 Practical Steps to Getting Rich,”

“While renting on a temporary basis isn’t terrible, you should most certainly own the roof over your head if you’re serious about your finances. It won’t make you rich overnight, but by renting, you’re paying someone else’s mortgage. In effect, you’re making someone else rich.”

Christina Boyle, Senior Vice President and head of the Single-Family Sales & Relationship Managementorganization at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to build equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

Interest rates are still at historic lows, making it one of the best times to secure a mortgage and make a move into your dream home. Freddie Mac’s latest report shows that rates across the country were at 3.94% last week.

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, now may be the time to buy.

Source: KCM.com

Respect for Architecture and Attention to Detail Revive an English Tudor Kitchen

“Can you do a black kitchen?” Mario J. Mulea laughs as he recalls the first words the homeowner spoke to him. The homeowner had just stepped into the showroom for Kitchen Designs by Ken Kelly (kitchendesigns.com), a firm serving the Long Island area of New York where Mulea works as a kitchen designer. As an experienced interior designer herself, the homeowner had a clear vision of what she wanted to accomplish. That she sought Mulea’s help offers a clue into how specialized and complicated kitchen design can be.

The kitchen in the homeowner’s nearly-century-old Tudor was the final update that needed to be made to return the home to its former glory. In Mulea, she found a kindred spirit who appreciated the history of her home and believed it should inform and inspire the design. “I always talk about the house first,” he says, describing his design process. “What’s the style of the house? What neighborhood is it in? Do the interiors match the architecture? If you have a center-hall colonial and you ask for cobalt-blue, high-gloss cabinets, I’ll tell you that you’ve picked the wrong designer. I’m not going to do that.”

With pickled maple cabinets, green Formica countertops, and vinyl flooring, nothing about the kitchen matched the home’s Tudor style. Respecting that architecture necessarily constrained the design. Windows, doors, and a radiator could not be moved. Another design constraint, which would ultimately become the room’s centerpiece, was a wish-list purchase by the homeowner. “She absolutely had to have the La Cornue CornuFé range,” Mulea recalls.

After the must-go, must-stay, and must-add items were defined, Mulea’s next questions revolved around how the room would be used. “I talk with clients about how their family uses the kitchen and how they use it when they have visitors,” he says. “We discuss zones and how kitchens work.” He notes that the “work triangle” notion is now outdated for most modern homes. It’s more helpful to know how homeowners actually use the space and what traffic flows in and out of the room.

Once all the information is gathered, Mulea starts sketching possible ideas. That’s the creative side of the process, but it’s paired with more analytical considerations. “A kitchen is both a giant jigsaw puzzle and a math problem,” he explains. Once you know window and door positions and appliance sizes, you then have to figure out the best way for cabinets, islands, and countertops to fill the room’s envelope. Every available inch of space in this kitchen is put to use.

Respecting the home’s history meant choosing materials that seemed contemporaneous. “The materials you use don’t have to be historic, as if they’ve been there for one hundred years. The critical thing that makes a kitchen timeless is integrating it into the fabric of the rest of the house,” says Mulea. The distressed finish of the black cabinets is one such example. Handscraped hickory floors with black distressing also add a patina of history to the room.

The black La Cornue range with brass trim serves as a centerpiece. Other appliances were clad in cabinet panels so they would not distract from the showpiece. The mantel hood arches over the range and an English foxhunt print rests on its ledge.

No detail was overlooked during the remodel. The diamond angles of the white-tile backsplash match the angles in the room’s windows and leaded-glass cabinet fronts. A fireplace back hangs behind the range and looks like a reproduction from the Victorian era. In a corner of the room, a new door with a ring pull was added to the home’s original milk delivery box. A copper sink serves the wet bar off to the side of the room. The same wet bar camouflages the room’s radiator, which sits behind a lattice door and vented toe kicks that allow air circulation. Practical quartz counters top the perimeter cabinets, while walnut slabs cover the wet bar and island.

The homeowner added her own special design touches throughout the space, too. She discovered the vintage chandelier, which now hangs over the island, in an antique store and had it rewired. The wallpaper was her request, and the plaid-covered stools with brass nailheads were one of her finds. On a trip to England, she gathered many of the teapots, crystal, and curios on display behind the glass-fronted cabinets.

The surfaces in the kitchen exude Old-World charm, but beneath them lies functionality. A tug on custom brass hardware reveals deep pot drawers, appliance garages, an ice dispenser, and a trash bin.

The end result is a kitchen that looks like it could have been there from the home’s beginning, but incorporates all the modern needs for today’s family. “If you look at my portfolio, you’ll see I do not have a signature design,” says Mulea. “To me, my signature is that the design must fit the house and the people who live there above everything else.”

A report released by Down Payment Resource shows that 61% of first-time homebuyers purchased their homes with a down payment of 6% or less.

The trend continued among all buyers with a mortgage, as 73% made a down payment of less than 20%.

An article by Chase points to a new wave of millennial homebuyers:

“We teamed up with Google to help us better understand what customers are searching for and how the home buying landscape is evolving. We found that millennials and first-time homebuyers are making a big splash in the market, and affordability remains top of mind.”

Among millennials who purchased homes, David Norris, Loan Depot’s Head of Retail Lending, said:

“It’s clear from the survey results that Millennials have a lot of anxiety built up about the home buying process.

There is good news, however, as there’s more flexibility than most Millennials think regarding how to qualify for a loan and what’s needed for a down payment.”

Bottom Line

If you are one of the many millennials who is debating a home purchase this year, contact a local professional who can help you understand your options and set you on the path to preapproval.

Source: KCM.com

There is no doubt that it is easier to sell your house when using the services of a local real estate professional. The agent will provide:

• Greater exposure to more buyers
• The skills of a professional negotiator
• A layer of protection from possible legal liabilities
• Professional guidance in navigating any pitfalls that may arise
• A level of safety while showing the home

There is no doubt that these services are valuable to any family that decides to sell. The only question is – how valuable? One of the main reasons For Sale By Owners (FSBOs) don’t use a real estate agent is because they believe these services are not worth the fee an agent charges. But, what if those services didn’t cost the seller a penny?

A study by Collateral Analytics, however, reveals that FSBOs don’t actually save anything and, in some cases, may be costing themselves more by not listing with an agent.

In the study, they analyzed home sales in a variety of markets in 2016 and the first half of 2017. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many casesbelow the average differential represented by the prevailing commission rate.” (emphasis added)

Why would FSBOs net less money on their own than if they used an agent?

The study makes several suggestions:

• “There could be systematic bias on the buyer side as well. FSBO sales might attract more strategic buyers than MLS sales, particularly buyers who rationalize lower-priced bids on with the logic that the seller is “saving” a traditional commission. Such buyers might specifically search for and target sellers who are not getting representational assistance from agents.” In other words, ‘bargain lookers’ might shop FSBOs more often.
• “Experienced agents are experts at ‘staging’ homes for sale” which could bring more money for the home.
• “Properties listed with a broker that is a member of the local MLS will be listed online with all other participating broker websites, marketing the home to a much larger buyer population. And those MLS properties generally offer compensation to agents who represent buyers, incentivizing them to show and sell the property and again potentially enlarging the buyer pool.” If more buyers see a home, the greater the chances are that there could be a bidding war for the property.

Three conclusions from the study:

1. FSBOs achieve prices significantly lower than those from similar properties sold by Realtors using the MLS.
2. The differential in selling prices for FSBOs when compared to MLS sales of similar properties is about 5.5%.
3. The sales in 2017 suggest the average price was near 6% lower for FSBO sales of similar properties.

Bottom Line

If you are thinking of selling, FSBOing may end up costing you money instead of saving you money.

Source: KCM.com