Waiting to Buy a Home?

What If I Wait Until Next Year to Buy a Home?

What If I Wait Until Next Year to Buy a Home? | MyKCM

We recently shared that national home prices have increased by 6.7% year-over-year. Over that same time period, interest rates have remained historically low which has allowed many buyers to enter the market.

As a seller, you will likely be most concerned about ‘short-term price’ – where home values are headed over the next six months. As a buyer, however, you must not be concerned about price, but instead about the ‘long-term cost’ of the home.

The Mortgage Bankers Association (MBA), Freddie Mac, and Fannie Mae all project that mortgage interest rates will increase by this time next year. According to CoreLogic’s most recent Home Price Index Reporthome prices will appreciate by 5.2% over the next 12 months.

What Does This Mean as a Buyer?

If home prices appreciate by 5.2% over the next twelve months as predicted by CoreLogic, here is a simple demonstration of the impact that an increase in interest rate would have on the mortgage payment of a home selling for approximately $250,000 today:

What If I Wait Until Next Year to Buy a Home? | MyKCM

Bottom Line

If buying a home is in your plan for this year, doing it sooner rather than later could save you thousands of dollars over the terms of your loan.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

Posted on May 7, 2018 at 10:33 AM
Mike Gant | Category: Buying a Home, Financial

No, it’s not a housing bubble, and you should ask for a raise

 

A real-estate economist says the local economy is fundamentally strong, despite aerospace job losses.

  • By Jim Davis
  • Thursday, October 19, 2017 5:36am
  • HERALD BUSINESS JOURNAL

 

EVERETT — No, we’re not in a housing bubble. Now is a good time to ask your boss for a pay raise. And we need to forget about the recession — it was a long time ago.

Those are the conclusions of economist Matthew Gardner.

“I’m an economist, it’s my job to worry and find bad things, that’s why it’s a dismal science,” said Gardner, who works for Windermere Real Estate in Seattle. “I’m trying to find bad things and I’m having a problem with it.”

Even developments that would have given him pause in the past no longer carry the same weight. He pointed to the loss of 6,700 aerospace jobs in the Puget Sound region — including 5,400 in Snohomish County — in the past year.

“If you would have showed me this slide a decade ago, I would have looked at it and said, ‘Buy canned goods, a gun and move to Montana, aerospace is collapsing,’” Gardner said. “Now I’m like, ‘OK, whatever.’ Don’t get me wrong. Boeing and aerospace is remarkably important, but because we continue as a region to diversify, we’re not going the way we did” with the Boeing Bust of 1972.

Gardner spoke before a crowd of about 75 on Wednesday morning at an event put on by Mountain Pacific Bank at the Everett Golf and Country Club.

Mountain Pacific President and CEO Mark Duffy said he felt that Gardner’s assessment was spot on about a wide range of economic topics, including housing and aerospace.

“Losing that many jobs has less of an impact than it used to around here,” Duffy said.

As an economist with a real estate firm, Gardner is most frequently asked whether the region is in a housing bubble. He points to a Google Analytics chart that shows the search term “Housing Bubble” jumped massively in July.

The dynamics that led to the last housing collapse aren’t in play, locally or nationally, he said. Borrowers are more sound. Home building is slow. And more first-time buyers are looking for a home.

“So we have limited supply, we have good demand, we have great credit and we’re not over-leveraged and the interest rates are staying low,” Gardner said. “Housing prospects across America look pretty good as far as I can see.”

The unemployment rate continues to drop locally and nationally as it has for the past several years. And that’s both people actively looking for jobs (the official tally) and those who had once stopped looking but are now returning to the workforce (the unofficial tally). The official rate was 4.3 percent for Snohomish County in August.

While wage growth has been stagnant for a decade, employees are going to start demanding higher wages and they’ll receive them or get hired elsewhere.

“For those of you who are employers, get ready for the staff to start beating your door saying ‘I want a pay raise,’ ” Gardner said. “If you are an employee and you haven’t hit up your boss, it’s a good time to start.”

While all of the traditional indicators point to a strong economy, the last recession lingers in people’s minds.

“Quite frankly, we should be skipping down the street, but we’re not — we’re still remarkably cautious,” Gardner said. “… We’re still not over the recession. That’s what’s fascinating. When did the recession start? Ten years ago in December. A decade. By now, we should be totally forgetting about it, but no, it sticks with us.”

Things on the horizon could cause a change in the outlook. The stock market cannot continue its torrid pace, Gardner said. He expects a correction at some point and the could spark a new recession.

In the county and region, affordability of land might force companies to look elsewhere to build their products. He thinks Amazon will look outside of the region for its second headquarters, because the office space is built out and its employees can’t afford to buy homes.

The amount of student loan debt is staggering. Graduates from 2016 carried nearly $34,000 in student loan debt. He pointed to a statistic that shows one out of five students are in default on their student loans.

“We owe — they owe $1.4 trillion on student loans,” Gardner said. “That’s a big number. Twelve zeroes. What does it really mean? If you take all of our credit card debt as a country, it’s about $870 billion. We owe a third more on student loans than on credit cards.

“Here’s the kicker, you could file bankruptcy as one does and your credit card debt goes away. Your student loan debt doesn’t. It stays with you even through bankruptcy.”

As for Millennials, many wish the Baby Boomers would just retire, go play golf and open up jobs and careers. But that’s not happening. People older than 55 are keeping their jobs to save for health care and other costs. And those people are spending their children’s inheritance.

“We’re not seeing the transfer of wealth between generations that we have seen, because we’re living longer …” Gardner said. “In retirement, I want to die bouncing a check with a modest hangover.”

Posted on October 19, 2017 at 8:38 AM
Mike Gant | Category: Financial

AVOID THESE TWO BIG MORTGAGE MISTAKES

We all know that searching for and viewing potential homes is the fun part of the home-buying process. The not-so-fun part? The mortgage.

But if you don’t pay attention to the details, your mortgage can end up dragging down the enjoyment of your new home and cause some major regrets. Here are a few mistakes to avoid to ensure that you love your mortgage terms as much as your hew home.
Don’t find your home first: Shopping around for the best mortgage rate should be the first step in the home buying process. You may even want to talk to a mortgage broker a full year before you plan to buy. It’ll give you time to get your affairs in order to qualify for the best rate, could save you thousands of dollars in the long run, and you won’t feel rushed to accept an unattractive loan because you’re worried you’ll miss out on your dream home.

Don’t forget your real budget: There’s often a big difference between what a lender says you can afford and what you can actually afford. Your debt-to-income ratio doesn’t include the money you spend on hobbies, or the cost of commuting to work, or maintenance and utility costs. Really sit down and examine your spending before committing to the loan amount the lender is offering. You won’t enjoy your home nearly as much if it’s eating into your favorite hobbies.

Posted on September 28, 2017 at 3:22 PM
Mike Gant | Category: Buying a Home, Financial

The Importance of Home Equity in Retirement Planning

The Importance of Home Equity in Retirement Planning | MyKCM

We often discuss the difference in family wealth between homeowner households and renter households. Much of that difference is the result of the equity buildup that homeowners experience over the time that they own their home. In a report recently released by the nonpartisan Employee Benefit Research Institute (EBRI), they reveal how valuable equity can be in retirement planning.

Craig Copeland, Senior Research Associate at EBRI, recently authored a report, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth, in which he reveals:

“Individual account retirement plan assets, plus home equity, represent almost all of what families have to use for retirement expenses outside of Social Security and traditional pensions. Those families without individual account assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses.”

The report echoed the findings of a working paper, Home Equity Patterns among Older American Households, authored by Barbara Butrica and Stipica Mudrazija of Urban Institute. Fannie Mae highlighted these findings for their blog The Home Story this past winter, quoting Butrica and Mudrazija:

 “For most adults near traditional retirement age, a home is their most valuable asset — dwarfing retirement accounts, other financial assets, and other nonfinancial assets. Although relatively few retirees tap into their home equity, having it provides financial security… In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources — Social Security, pensions, and savings — is incomplete because it ignores the home.”

USAToday interviewed two area experts to comment on the EBRI report. Randy Bruns, a private wealth adviser with HighPoint Planning Partners, agreed with the findings:

“Social Security and home equity are major pieces of the retirement puzzle.”

Wade Pfau, Professor of Retirement Income at The American College of Financial Services and author of Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement, said having the equity without a plan to use it won’t help:

“Home equity is a very important asset for American retirees, and so it is important to think about how to make best use of home equity in retirement planning.”

Bottom Line

Whether you use the equity in your home through a reverse mortgage or by selling and downsizing to a less expensive home, it should be a crucial piece of your retirement planning.

Posted on June 22, 2017 at 6:23 PM
Mike Gant | Category: Financial