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Have You Budgeted for Closing Costs?

Have You Budgeted for Closing Costs? | MyKCM

Saving for a down payment is a key step in the homebuying process, and it’s not the only piece you need to include in your budget. Another factor that’s important to plan for is the closing costs required to obtain a mortgage.

What Are Closing Costs?

According to Trulia,

“When you close on a home, a number of fees are due. They typically range from 2% to 5% of the total cost of the home, and can include title insurance, origination fees, underwriting fees, document preparation fees, and more.”

For those who buy a $250,000 home, for example, that amount could be between $5,000 and $12,500 in closing fees. Keep in mind, if you’re in the market for a home above this price range, your costs could be significantly greater. As mentioned before,

Closing costs are typically between 2% and 5% of your purchase price.

 Trulia gives more great advice, saying,

“There will be lots of paperwork in front of you on closing day, and not enough time to read them all. Work closely with your real estate agent, lender, and attorney, if you have one, to get all the documents you need ahead of time.

The most important thing to read is the closing disclosure, which shows your loan terms, final closing costs, and any outstanding fees. You’ll get this form about three days before closing since, once you (the borrower) sign it, there’s a three-day waiting period before you can sign the mortgage loan docs. If you have any questions about the numbers or what any of the mortgage terms mean, this is the time to ask—your real estate agent is a great resource for getting you all the answers you need.”

Bottom Line

Let’s get together to discuss the homebuying process, to be sure your plan includes budgeting for what you need to purchase your dream home – without any surprises!

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How to Judge the Impact of the Next Economic Slowdown on Housing

How to Judge the Impact of the Next Economic Slowdown on Housing | MyKCM

We’ve experienced economic growth for almost a decade, which is the longest recovery in the nation’s history. Experts know a recession can’t be too far off, but when will this economic slowdown actually occur?

Pulsenomics just released a special report revealing that nearly 6 out of 10 of the 90 economists, investment strategists, and market analysts surveyed believe the next recession will occur by the end of next year. Here’s the breakdown:

  • 9% believe a recession will occur this year
  • 50% believe it will occur in 2020
  • 35% believe it will occur in 2021
  • 6% believe it will occur after 2021

When asked what would trigger the next recession, the three most common responses by those surveyed were:

  1. Trade Policy
  2. Stock Market Correction
  3. Geopolitical Crisis

How might the recession impact real estate?

Challenges in the housing and mortgage markets were major triggers of the last recession. However, a housing slowdown ranked #9 on the list of potential triggers for the next recession, behind such possibilities as fiscal policy and political gridlock.

As far as the impact the recession may have on home values, the experts surveyed indicated home prices would continue to appreciate over the next few years. They called for a 4.1% appreciation rate this year, 2.8% in 2020, and 2.5% in 2021.

Bottom Line

On the same day, in the same survey, the same experts who forecasted a recession happening within the next 18 months also claimed housing will not be the trigger, and home values will still continue to appreciate.

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How to Increase Your Equity Over the Next 5 Years

How to Increase Your Equity Over the Next 5 Years | MyKCM

Many of the questions currently surrounding the real estate industry focus on home prices and where they are heading. The most recent Home Price Expectation Survey (HPES) helps target these projected answers.

Here are the results from the Q2 2019 Survey:

  • Home values will appreciate by 4.1% in 2019
  • The average annual appreciation will be 3.2% over the next 5 years
  • The cumulative appreciation will be 16.8% by 2023
  • Even experts representing the most “bearish” quartile of the survey project a cumulative appreciation of over 6.7% by 2023

What does this mean for you?

A substantial portion of family wealth comes from home equity. As the value of a family’s home (an asset) increases, so does their equity.

Using the projections from the HPES, here is a look at the potential equity a family could earn over the next five years if they purchased a $250,000 home in January of 2019:How to Increase Your Equity Over the Next 5 Years | MyKCMBased on gains in home equity, their family wealth could increase by $42,000 over that five-year period.

Bottom Line

If you don’t yet own a home, now may be the time to purchase. Owning or moving up to your dream home could allow you to ride the increase in equity of a growing asset.

Home Price Expectation survey – Every quarter, Pulsenomics surveys a distinguished panel of over 100 economists, investment strategists, and housing market analysts regarding their 5-year expectations for future home prices in the United States.
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Mid-Year Housing Market Update: Three Things to Know Today

Mid-Year Housing Market Update: Three Things to Know Today | MyKCM

Shifting trends and industry-leading research are pointing toward some valuable projections about the status of the housing market for the rest of the year.

If you’re thinking of buying or selling, or if you just want to know what experts are saying is on the horizon, here are the top three things to put on your radar as we head into the coming months:

  1. Home prices are appreciating at a more normal rate: Home prices have been appreciating for about ten years now. Experts at the Home Price Expectation Survey, Mortgage Bankers Association, Freddie Mac, and Fannie Mae are forecasting continued growththroughout the next year, although it should be leveling-off to normal appreciation (3.6%), as we move into 2020.
  2. Interest rates are low: Over the past 30 years, the average mortgage rate in the United States has been 8.27%, and rates even peaked as high as 18% in the 1980s. Today, at 3.81%, the rate is considerably lower than the historical 30-year average. Although experts predict it may climb into the low 4% range in the near future, that’s still remarkably lower than our running average, suggesting a great time to get more for your money over the life of your loan.
  3. An impending recession does not mean there will be a housing crash: Although expert research studies such as those found in the Duke Survey of American CFOs and the National Association of Business Economics, are pointing toward a recession beginning within the next 18 months, a potential recession isn’t expected to be driven by the housing industry. That means we likely won’t experience a devastating housing crash like the country felt in 2008. Expert financial analyst Morgan Housel tweeted:

“An interesting thing is the widespread assumption that the next recession will be as bad as 2008. Natural to think that way, but, statistically, highly unlikely. Could be over before you realized it began.”

In fact, during 3 of the 5 last U.S. recessions, housing prices actually appreciated:Mid-Year Housing Market Update: Three Things to Know Today | MyKCM

Bottom Line

With prices appreciating and low interest rates available, it’s a perfect time to buy or sell a home. Let’s get together to discuss how you can take the next step in the exciting journey of homeownership.

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3 Powerful Reasons to Buy a Home Now

3 Powerful Reasons to Buy a Home Now | MyKCM

Whether you are a first-time buyer or looking to move up to the home of your dreams, now is a great time to purchase a home. Here are three major reasons to buy today.

1. Affordability

Many people focus solely on price when talking about home affordability. Since home prices have appreciated throughout the past year, they assume homes are less affordable. However, affordability is determined by three components:

  • Price
  • Wages
  • Mortgage Interest Rate

Prices are up, but so are wages – and interest rates have recently dropped dramatically (see #2 below). As a result, the National Association of Realtors’ (NAR) latest Affordability Index report revealed that homes are MORE affordable throughout the country today than they were a year ago.

“All four regions saw an increase in affordability from a year ago. The South had the biggest gain in affordability of 6.9%, followed by the West with a gain of 6.0%. The Midwest had an increase of 5.8%, followed by the Northeast with the smallest gain of 1.8%.”

2. Mortgage Interest Rates

Mortgage rates have dropped almost a full point after heading toward 5% last fall and early winter. Currently, they are below 4%.
3 Powerful Reasons to Buy a Home Now | MyKCMAdditionally, Fannie Mae recently predicted the average rate for a 30-year fixed mortgage will be 3.7% in the second half of 2019. That compares to a 4.4% average rate in the first quarter and 4% in the second quarter.

With mortgage rates remaining near historic lows, Fannie Mae and others have increased their forecasts for housing appreciation for the rest of the year. If home price gains are about to re-accelerate, buying now rather than later makes financial sense.

3. Increase Family Wealth

Homeownership has always been recognized as a sensational way to build long-term family wealth. A new report by ATTOM Data Solutions reveals:

“U.S. homeowners who sold in the second quarter of 2019 realized an average home price gain since purchase of $67,500, up from an average gain of $57,706 in Q1 2019 and up from an average gain of $60,100 in Q2 2018. The average home seller gain of $67,500 in Q2 2019 represented an average 33.9 percent return as a percentage of original purchase price.”

The longer you delay purchasing a home, the longer you are waiting to put the power of home equity to work for you.

Bottom Line

With affordability increasing, mortgage rates decreasing, and home values about to re-accelerate, it may be time to make a move. Let’s get together to determine if buying now makes sense for your family.

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The Cost of Waiting: Interest Rates Edition

The Cost of Waiting: Interest Rates Edition [INFOGRAPHIC] | MyKCM

Some Highlights:

  • Interest rates are projected to increase steadily heading into 2020.
  • The higher your interest rate, the more money you will end up paying for your home and the higher your monthly payment will be.
  • Rates are still low right now – don’t wait until they hit 5% to start searching for your dream home!
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Homeowners: Now Is A Good Time To Sell Your House

Homeowners: Now Is A Good Time To Sell Your House | MyKCM

Every month, the National Association of Realtors (NAR) releases their Seller Traffic Index as a part of their Realtors Confidence Index. In the latest release, NAR reported that homeowners have been reluctant to sell their houses. This is reflected when broken down by state. Only 11 states have a stable level of seller traffic compared to the remainder of the country, which came in with a weak rating.

As we can see in the following table, the number of people who moved last year is half of what the rate was in the 1980s.

Homeowners: Now Is A Good Time To Sell Your House | MyKCM

This does not come as a surprise, as tenure length (the number of years someone owns a home before moving again) among existing homeowners has increased. It has risen from an average of 6 years from 1985 to 2008, up to 9.5 years over the last few years. This is shown in the graph below:

Homeowners: Now Is A Good Time To Sell Your House | MyKCM

As we can see, there is a pent-up seller demand!

What led to this change in behavior? Falling prices during the housing crisis led to many homeowners having negative equity in their home, meaning they owed more on their mortgage than the home was worth. Others were able to secure a low interest rate on their mortgage and have not been quick to obtain a new mortgage with a higher rate.

Will this trend continue?

Recently NAR reported that “69% of people believe now is a good time to sell a home.”

With a strong economy, low interest rates, and wages continuing to rise, some homeowners will be ready to put their house on the market and move up to the home of their dreams!

Bottom Line

There is a great opportunity for sellers to take advantage of the current real estate market before new inventory comes to market. If you are considering selling your house or would like to know your options, let’s get together today to help you understand the possibilities available to you!

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How Long Will It Take To Save A Down Payment?

When asked, most Americans who don’t own a home say they’d like to become homeowners someday. Regardless of current market conditions or the state of the economy, the desire to own a home endures. Part of this is because it helps to build wealth. The other part is homeownership’s long-cemented status as a key element of the American dream. So what’s keeping aspiring homeowners from pursuing their dream? Well, one main factor is coming up with a down payment. The down payment is among the biggest obstacles that keep people from buying. Mostly, this is because the traditional 20 percent down payment can be difficult to save. In fact, according to one recent analysis, someone making the median income and saving 10 percent of their earnings each month would take more than seven years to save a down payment on the typical American home. And, because home prices have grown faster than incomes over the past few decades, the amount of time it takes has been increasing. Fortunately, though, a 20 percent down payment isn’t required, depending on the type of loan you choose. Also, where you’re looking to buy will affect the amount of time it’ll take. For example, a down payment in Pittsburgh will take just 4.8 years to save, while in cities like Boston or Miami it can take twice that long. More here.