Is Homeownership Still Considered Part of the American Dream?

Since the birth of our nation, homeownership has always been considered a major piece of the American Dream. As Frederick Peters reports in Forbes:

The idea of a place of ones own drives the American story. We became a nation out of a desire to slip the bonds of Europe, which was still in many respects a collection of feudal societies. Old rich families, or the church, owned all the land and, with few exceptions, everyone else was a tenant. The magic of America lay not only in its sense of opportunity, but also in the belief that life could in every way be shaped by the individual. People traveled here not just for religious freedom, but because in America anything seemed possible.

Additionally, a research paper released just prior to the shelter-in-place orders issued last year concludes:

Homeownership is undeniably the cornerstone of the American Dream, and is inseparable from our national ethos that, through hard work, every American should have opportunities for prosperity and success. It is the stability and wealth creation that homeownership provides that represents the primary mechanism through which many American families are able to achieve upward socioeconomic mobility and greater opportunities for their children.

Has the past year changed the American view on homeownership?

Definitely not. A survey of prospective homebuyers released by realtor.com last week reveals that becoming a homeowner is still the main reason this year’s first-time homebuyers want to purchase a home. When asked why they want to buy, three of the top four responses center on the financial benefits of owning a home. The top four reasons for buying are:

• 59% – “I want to be a homeowner”
• 33% – “I want to live in a space that I can invest in improving”
• 31% – I need more space”
• 22% – “I want to build equity”

Millennials believe most strongly in homeownership.

The survey also reports that 62% of millennials say a desire to be a homeowner is the main reason they're buying a home. This contradicts the thinking of some experts who had believed millennials were going to be the first renter generation in our nations history.

While reporting on the survey, George Ratiu, Senior Economist at realtor.com, said:

“Americans, even millennials who many thought would never buy, have a strong preference for homeownership for the same reasons many generations before them have — to invest in a place of their own and in their communities, and to build a solid financial foundation for themselves and their families.”

Odeta Kushi, Deputy Chief Economist for First American, also addresses millennial homeownership:

Millennials have delayed marriage and having children in favor of investing in education, pushing marriage and family formation to their early-to-mid thirties, compared with previous generations, who primarily made these lifestyle choices in their twenties Delayed lifestyle choices delay the desire for homeownership.

Kushi goes on to explain:

As more millennials get married and form families, millennials remain poised to transform the housing market. In fact, the housing market is already experiencing the earliest gusts of the tailwind.

Bottom Line

As it always has been and very likely always will be, homeownership continues to be a major component in every generations pursuit of the American Dream.

 

There's No Reason To Panic Over Todays Lending Standards

Today, some are afraid the real estate market is starting to look a lot like it did in 2006, just prior to the housing crash. One of the factors they're pointing to is the availability of mortgage money. Recent articles about the availability of low down payment loans and down payment assistance programs are causing fear that were returning to the bad habits seen 15 years ago. Lets alleviate these concerns.

Several times a year, the Mortgage Bankers Association releases an index titled The Mortgage Credit Availability Index (MCAI). According to their website:

The MCAI provides the only standardized quantitative index that is solely focused on mortgage credit. The MCAI is a summary measure which indicates the availability of mortgage credit at a point in time.

Basically, the index determines how easy it is to get a mortgage. The higher the index, the more available mortgage credit becomes. Here's a graph of the MCAI dating back to 2004, when the data first became available:As we can see, the index stood at about 400 in 2004. Mortgage credit became more available as the housing market heated up, and then the index passed 850 in 2006. When the real estate market crashed, so did the MCAI (to below 100) as mortgage money became almost impossible to secure. Thankfully, lending standards have eased somewhat since. The index, however, is still below 150, which is about one-sixth of what it was in 2006.

Why did the index rage out of control during the housing bubble?

The main reason was the availability of loans with extremely weak lending standards. To keep up with demand in 2006, many mortgage lenders offered loans that put little emphasis on the eligibility of the borrower. Lenders were approving loans without always going through a verification process to confirm if the borrower would likely be able to repay the loan.

Some of these loans offered attractive, low interest rates that increased over time. The loans were popular because they could be obtained quickly and without the borrower having to provide documentation up front. However, as the rates increased, borrowers struggled to pay their mortgages.

Today, lending standards are much tighter. As Investopedia explains, the risky loans given at that time are extremely rare today, primarily because lending standards have drastically improved:

In the aftermath of the crisis, the U.S. government issued new regulations to improve standard lending practices across the credit market, which included tightening the requirements for granting loans.

An example of the relaxed lending standards leading up to the housing crash is the FICO credit score associated with a loan. What's a FICO score? The website my FICO explains:

A credit score tells lenders about your creditworthiness (how likely you are to pay back a loan based on your credit history). It is calculated using the information in your credit reports. FICO Scores are the standard for credit scores used by 90% of top lenders.

During the housing boom, many mortgages were written for borrowers with a FICO score under 620. Experian reveals that, in todays market, lenders are more cautious about lower credit scores:

Statistically speaking, 28% of consumers with credit scores in the Fair range are likely to become seriously delinquent in the future Some lenders dislike those odds and choose not to work with individuals whose FICO Scores fall within this range.

There are definitely still loan programs that allow a 620 score. However, lending institutions overall are much more attentive about measuring risk when approving loans. According to Ellie Maes latest Origination Insight Report, the average FICO score on all loans originated in February was 753.

The graph below shows the billions of dollars in mortgage money given annually to borrowers with a credit score under 620.In 2006, mortgage entities originated $376 billion dollars in loans for purchasers with a score under 620. Last year, that number was only $74 billion.

Bottom Line

In 2006, lending standards were much more relaxed with little evaluation done to measure a borrowers potential to repay their loan. Today, standards are tighter, and the risk is reduced for both lenders and borrowers. These are two very different housing markets, so there's no need to panic over todays lending standards.

 

 

Seed Starting 101

Planting a garden in the spring is a great way to have fresh fruits and vegetables throughout the year. Even homeowners who don’t have space for a large garden plot often plant a few things in containers or small raised gardens on their property. While it’s not quite time to start planting in a lot of places, that doesn’t mean you can’t get the jump on gardening season by starting your seeds. Depending on where you live and what you’re planting in your garden, there are a few different ways to get seeds started for your garden this year.

Starting Seeds Indoors

Before starting your seeds, be sure to read the seed packet to get an idea of how long before planting you should get your seeds started. In many cases this will be six to eight weeks, but it could be longer or shorter depending on exactly what you’re growing. In addition, the packet should give you an idea of when is best to plant based on where you live; you can then time you seed starting based on that guideline.

Prepare a growing medium by using a seed-starting mix or other potting soil. Break it apart to loosen it, then dampen it slightly with some water. Avoid using outdoor garden soil or soil with added fertilizers, as seeds won’t need the extra fertilizer or organic materials from the soil and having too much of these can actually cause problems.

Once you’ve prepped your growing medium, fill some seed-starting trays or other containers until they’re around 2/3 full. Place a few seeds in each cell or container, covering them with more of the dampened mix. Add just a little bit of water, then place the containers in a warm, sunny place. Cover them with a thin sheet of plastic wrap or plastic seed-starting domes to help control the humidity until the seeds sprout.

Starting Seeds Outdoors

Some plants, including a lot of flowers and certain vegetables such as squash and beans, do better when started outdoors. In many cases these are referred to as “direct sow” seeds because they are typically planted directly into the ground instead of being started in pots. This is often the case with plants that germinate and grow quickly, since they can rapidly outgrow indoor growing spaces. If you want to get a jump on these seeds, you’ll need to start them outdoors.

If you have a greenhouse set up, you can start a variety of seeds in it, including seeds that you might otherwise start indoors. Even if you don’t have a dedicated greenhouse set up, cutting the bottoms off of gallon water or milk jugs can still give you the benefits of a greenhouse without the dedicated structure. Failing that, you can also use plastic sheeting to construct a greenhouse tent to achieve the same end.

If you don’t wish to plant directly into the soil, use small individual flowerpots filled with the same seed starter material you would use for indoor starting. This provides more room for root development while still fitting inside of a greenhouse (either static or makeshift) for warmth and weather protection. Once the plants start to outgrow their greenhouses or fill out their pots, they are ready to transfer to the soil.

Planting Time

When it comes time to plant seeds that were started indoors or in pots, the process is pretty simple. Indoor plants should be placed in a partially shaded area that’s protected from the wind for a few hours each day, gradually exposing them to more sunlight and wind for around seven to ten days before planting. Once you’re ready to actually plant, dig a hole slightly larger than the container you started your seed in and add more starting soil to the bottom of it. Remove any excess sprouts from each starter, leaving the strongest plant as you transfer the plant and its surrounding soil to the hole. Fill in around it with soil, then water.

Growing a garden can be very rewarding, but there’s a lot of work involved early on. If you need help getting started, need additional plant starters, or need some assistance building a raised garden, HomeKeepr is there for you. Sign up for a free account today to connect with nurseries and other pros in your area who can give you all the help you need.

What Credit Score Do You Need for a Mortgage?

According to data from the most recent Origination Insight Report by Ellie Mae, the average FICO score on closed loans reached 753 in February. As lending standards have tightened recently, many are concerned over whether or not their credit score is strong enough to qualify for a mortgage. While stricter lending standards could be a challenge for some, many buyers may be surprised by the options that are still available for borrowers with lower credit scores.

The fact that the average American has seen their credit score go up in recent years is a great sign of financial health. As someone's score rises, they're building toward a stronger financial future. As more Americans with strong credit enter the housing market, we see a natural increase in the FICO score distribution of closed loans, as shown in the graph below:If your credit score is below 750, its easy to see this data and fear that you may not be able to qualify for a mortgage. However, that's not always the case. While the majority of borrowers right now do have a score above 750, there's more to qualifying for a mortgage than just the credit score, and there are still options that allow people with lower credit scores to buy their dream home. Here's what Experian, a global leader in consumer and business credit reporting, says:

• Federal Housing Administration (FHA) loans: With a 3.5% down payment, homebuyers may be able to get an FHA loan with a 580 credit score or higher. If you can manage a 10% down payment, though, that minimum goes as low as 500.
• Conventional loans: The most popular loan type typically comes with a 620 minimum credit score.
• S. Department of Agriculture (USDA) loans: In general, lenders require a minimum credit score of 640 for a USDA loan, though some may go as low as 580.
• S. Department of Veterans Affairs (VA) loans: VA loans don’t technically have a minimum credit score, but lenders will typically require between 580 and 620.

There's no doubt a higher credit score will give you more options and better terms when applying for a mortgage, especially when lending is tight like it is right now. When planning to buy a home, speaking to an expert about steps you can take to improve your credit score is essential so you're in the best position possible. However, don't rule yourself out if your score is less than perfect todays market is still full of opportunity.

Bottom Line

Don't let assumptions about whether your credit score is strong enough put a premature end to your homeownership goals. Lets connect today to discuss the options that are best for you.

Should We Fear the Surge in Cash-Out Refinances?

Freddie Mac recently released their Quarterly Refinance Statistics report which covers refinances through 2020. The report explains that the dollar amount of cash-out refinances was greater in 2020 than in recent years. A cash-out refinance, as defined by Investopia, is:

a mortgage refinancing option in which an old mortgage is replaced for a new one with a larger amount than owed on the previously existing loan, helping borrowers use their home mortgage to get some cash.

The Freddie Mac report led to articles like the one published by The Real Deal titled, House or ATM? Cash-Out Refinances Spiked in 2020, which reports:

Americans treated their homes like ATMs last year, withdrawing $152.7 billion amid a cash-out refinancing spree not seen since before the 2008 financial crisis.

Whenever you combine the terms spiked, homes like ATMs, and financial crisis, it conjures up memories of the housing crash we experienced in 2008.

However, that comparison is invalid for three reasons:

1. Americans are sitting on much more home equity today.

Mortgage data giant Black Knight just issued information on the amount of tappable equity U.S. homeowners with a mortgage have. Tappable equity is the amount of equity available for homeowners to use and still have 20% equity in their home. Here's a graph showing the findings from their report:In 2006, directly before the crash, tappable home equity in the U.S. topped out at $4.6 trillion. Today, that number is $7.3 trillion.

As Black Knight explains:

At years end, some 46 million homeowners held a total $7.3 trillion in tappable equity, the largest amount ever recorded…That's an increase of more than $1.1 trillion (+18%) since the end of 2019, the largest percentage gain since 2013 and you guessed it the largest dollar value gain in history, to boot. All in all, it works out to roughly $158,000 on average per homeowner with tappable equity, up nearly $19,000 from the end of 2019.

2. Homeowners cashed-out a much smaller amount this time.

In 2006, Americans cashed-out a total of $321 billion. In 2020, that number was less than half, totaling $153 billion. The $321 billion made up 7% of the total tappable equity in the country in 2006. On the other hand, the $153 billion made up only 2% of the total tappable equity last year.

3. Fewer homeowners tapped their equity in 2020 than in 2006.

Freddie Mac reports that 89% of refinances in 2006 were cash-out refinances. Last year, that number was less than half at 33%. As a percentage of those who refinanced, many more Americans lowered their equity position fifteen years ago as compared to last year.

Bottom Line

Its true that many Americans liquidated a portion of the equity in their homes last year for various reasons. However, less than half of them tapped their equity compared to 2006, and they cashed-out less than one-third of that available equity. Todays cash-out refinance situation bears no resemblance to the situation that preceded the housing crash.

 

Why You Should Think About Listing Prices Like an Auctions Reserve Price

For generations, the homebuying process never really changed. The seller would try to estimate the market value of the home and tack on a little extra to give themselves some negotiating room. That figure would become the listing price of the house. Buyers would then try to determine how much less than the full price they could offer and still get the home. The asking price was generally the ceiling of the negotiation. The actual sales price would almost always be somewhat lower than the list price. It was unthinkable to pay more than what the seller was asking.

Today is different.

The record-low supply of homes for sale coupled with very strong buyer demand is leading to a rise in bidding wars on many homes. Because of this, homes today often sell for more than the list price. In some cases, they sell for a lot more.

According to the Home Buyers and Sellers Generational Trends report just released by the National Association of Realtors (NAR), 45% of buyers paid full price or more.

You may need to change the way you look at the asking price of a home.

In this market, you likely cant shop for a home with the old-school mentality of refusing to pay full price or more for a house.

Because of the shortage of inventory of houses for sale, many homes are actually being offered in an auction-like atmosphere in which the highest bidder wins the home. In an actual auction, the seller of an item agrees to take the highest bid, and many sellers set a reserve price on the item they're selling. A reserve price is the minimum amount a seller will accept as the winning bid.

When navigating a competitive housing market, think of the list price of the house as the reserve price at an auction. Its the minimum the seller will accept in many cases. Today, the asking price is often becoming the floor of the negotiation rather than the ceiling. Therefore, if you really love a home, know that it may ultimately sell for more than the sellers are asking. So, as you're navigating the homebuying process, make sure you know your budget, know what you can afford, and work with a trusted advisor who can help you make all the right moves as you buy a home.

Bottom Line

Someone whos more familiar with the housing market of the past than that of today may think offering more for a home than the listing price is foolish. However, frequent and competitive bidding wars are creating an auction-like atmosphere in many real estate transactions. Lets connect so you have the best advice on how to make a competitive offer on a home in our local market.

 

 

Top Video Doorbells for 2021

It’s a new year and a new article about doorbells. What can we say? Video doorbells have added a much-needed component to a range of systems, from home security to smart homes. Who doesn’t want to know who’s at the door before they so much as bother to get up and look out the peephole? No one. That’s who.

Choosing a video doorbell can be a challenging process. There are a lot of technical differences between many different models that look alarmingly similar, as well as various considerations like subscription fees and installation requirements to be aware of.

What You Need to Get Started

Video doorbells require various methods of installation and have different means of powering the sensitive electronics within. Before you choose a doorbell, it’s important to determine if the doorbell will require an existing doorbell transformer, and if so, in what voltage. Older systems could produce as little as six volts, while newer systems could produce as much as 16 volts.

Systems that don’t require an existing transformer usually run on a battery pack that’s removable and rechargeable, which makes them far more flexible options for homes that might otherwise not be able to power a video doorbell. With a self-install, it’s important that you monitor the power usage for the first few weeks to ensure that your doorbell is getting adequate power.

What About Subscriptions?

Many video doorbells will require a monthly subscription fee in order to maintain your video feeds on their cloud storage. You can usually choose from a few different packages that will allow you to retrieve data for a set amount of time and in a specific resolution. It might seem silly to pay extra for HD video of your front door now, but if that video feed helps catch a porch pirate because the images were so crystal clear that the perp was unmistakable, you’ll appreciate it.

Top Video Doorbells for 2021

This is not meant to be an exhaustive list of video doorbells for 2021, but these are some of the better ones on the market as of the writing of this blog, as determined by independent reviewers.

• Ring Video Doorbell Pro 2. It’s on the upper end pricewise for video doorbells, but that’s because this doorbell has all the whistles and… er… bells. Using a radar sensor, the Ring Video Doorbell Pro 2 can actually tell where people are on your property in order to provide the best view of both visitors and intruders. It also has one of the highest resolution cameras currently available, at 1536p HD, as well as Alexa greetings.
• Nest Hello. With a mid-to-upper price point, you should expect a lot from the Nest Hello. Fortunately, it really delivers. Although it requires a hardwired connection, the Nest Hello can recognize individual visitors using facial recognition software, as well as announce them via Google Assistant or Alexa. It also continuously records video, unlike Ring products which require a triggering event to start recording. That’s a pretty nice feature for people who need more intense monitoring, as well as those who want to keep an eye on the wildlife scampering around their yard at night.
• Maximus Answer DualCam. Although the Maximus Answer DualCam won’t be able to communicate with Alexa or Google Assistant, it can do something no other video doorbell currently does: look straight down. This may seem like a small thing, but if you have limited porch space or simply struggle with neighborhood box thieves, being able to see that your package is still safe and sound on the porch is kind of a huge benefit. The doorbell is a dual cam, however, meaning that it also will look straight out at visitors like all other doorbells do. Reviewers have complained that the speaker can be very quiet, but if you’re only using it to watch packages, that may be a smaller concern considering the smaller price point.

Ready for Help Installing That New Doorbell?

There’s no shame in calling in some help to install your video doorbell, especially as a part of a wider smart home system. But who do you call? Just pop into your HomeKeepr community to find a recommendation for smart home experts or electricians in your area with experience. They can help you choose the right doorbell for your home, as well as upgrade any transformers before installing your brand new eye on the world.