Buying a Home Is Still Affordable

The last year has put emphasis on the importance of ones home. As a result, some renters are making the jump into homeownership while some homeowners are re-evaluating their current house and considering a move to one that better fits their current lifestyle. Understanding how housing affordability works and the main market factors that impact it may help those who are ready to buy a home narrow down the optimal window of time in which to make a purchase.

There are three main factors that go into determining how affordable homes are for buyers:

1. Mortgage Rates
2. Mortgage Payments as a Percentage of Income
3. Home Prices

The National Association of Realtors (NAR) produces a Housing Affordability Index. It takes these three factors into account and determines an overall affordability score for housing. According to NAR, the index:

measures whether or not a typical family earns enough income to qualify for a mortgage loan on a typical home at the national and regional levels based on the most recent price and income data.

Their methodology states:

To interpret the indices, a value of 100 means that a family with the median income has exactly enough income to qualify for a mortgage on a median-priced home. An index above 100 signifies that family earning the median income has more than enough income to qualify for a mortgage loan on a median-priced home, assuming a 20 percent down payment.

So, the higher the index, the more affordable it is to purchase a home. Here's a graph of the index going back to 1990:The blue bar represents todays affordability. We can see that homes are more affordable now than they've been at any point since the housing crash when distressed properties (foreclosures and short sales) dominated the market. Those properties were sold at large discounts not seen before in the housing market for almost one hundred years.

Why are homes so affordable today?

Although there are three factors that drive the overall equation, the one that's playing the largest part in todays homebuying affordability is historically low mortgage rates. Based on this primary factor, we can see that its more affordable to buy a home today than at any time in the last eight years.

If you're considering purchasing your first home or moving up to the one you've always hoped for, its important to understand how affordability plays into the overall cost of your home. With that in mind, buying while mortgage rates are as low as they are now may save you quite a bit of money over the life of your home loan.

Bottom Line

If you feel ready to buy, purchasing a home this summer may save you a significant amount of money over time based on historical affordability trends. Lets connect today to determine if now is the right time for you to make your move.

 

 

Summer Bug Control Made Simple

Summer is wonderful. The weather is lovely, and there’s so much extra daylight that you have plenty of time for all kinds of outdoor activities. It’s almost too perfect. Well, that is until summer pests come along to ruin your lovely outdoor gatherings. But don’t worry, it’s still possible to have a perfectly pleasant time without having to fight off the bugs at your picnic.

Insects are Everywhere!

It’s inevitable that you’re going to run face-first into some kind of insects if you’re spending a lot of time in your own personal outdoor oasis, but it doesn’t mean that you have to like it. Even though there are way more of them than there are of us, only a few really have serious potential to ruin a party at any given moment. Let’s take a look at keeping those bugs under control all summer.

Flies
Flies are gross. There’s no two ways about it. They hang out in the trash, and then fly by to try to grab a bit of your lunch with no regards to personal hygiene. Once adult flies are running about, they can be hard to control, so the trick is to minimize places that are hospitable for their young to grow up big and strong. Start by monitoring your trash. In the summer, hot weather makes garbage cans super attractive to flies, since trash will begin to break down quickly. Wait until the day your trash service collects your cans to take out any kind of food waste, to reduce the chance flies have to find and breed in last week’s leftovers.

Mosquitos
There’s not much worse than flies, but mosquitos definitely fall into that category. Along with flying around and being obnoxious, they feed on humans like their own personal buffets. Handling mosquitoes effectively also starts with reducing breeding habitats, such as small stagnant pools of water (even a leftover party cup with standing water can be a mosquito haven) and gutters that need to be cleaned out. For bigger or more permanent water features, start using Mosquito Dunks regularly or add fish to ponds to eliminate larval mosquitoes before they grow big enough to breed.

Wasps
There are several different kinds of wasps to be aware of in the summertime, but they have a lot in common. If you find a flying insect with a narrow waist and an interest in sweet or savory foods, you’ve almost certainly found a wasp or hornet, which belong to the same family. Start by covering your outdoor trash cans, because they’re often drawn to pungent vinegar-like smells or sweet beverages, like that tiny bit of soda in the bottom of the can. Some wasps are also interested in raw meat, so keep the meat for the grill indoors until you’re ready to cook. Scanning your outdoor area regularly for wasp nests can help reduce populations dramatically. Never try to remove a hornet nest alone, but a smaller wasp nest can be taken out with wasp spray from a distance.

Ants
Like other outdoor bugs, ants tend to take advantage of the situation. If there’s food to be had, keep it tightly covered and off the ground so as not to attract their attention. Picnic blankets can be romantic, but they’re a great way to attract ants to the party, so keep your food on a table or at lap height. And make sure you’ve applied an ant barrier around your home so they don’t try to take the party inside!

How Misunderstandings about Affordability Could Cost You

There's a lot of discussion about affordability as home prices continue to appreciate rapidly. Even though the most recent index on affordability from the National Association of Realtors (NAR) shows homes are more affordable today than the historical average, some still have concerns about whether or not its truly affordable to buy a home right now.

When addressing this topic, there are various measures of affordability to consider. However, very few of the indexes compare the affordability of owning a home to renting one. In a paper just published by the Urban Institute, Homeownership Is Affordable Housing, author Mike Loftin examines whether its more affordable to buy or rent. Here are some of the highlights included.

1. Renters pay a higher percentage of their income toward their rental payment than homeowners pay toward their mortgage.

The report explains:

When we look at the median housing expense ratio of all households, the typical homeowner household spends 16 percent of its income on housing while the typical renter household spends 26 percent. This is true, you might say, because people who own their own home must make more money than people who rent. But if we control for income, it is still more affordable to own a home than to rent housing, on average.

Here's the data from the report shown in a graph:

2. Renters don't have extra money to invest in other assets.

The report goes on to say:

Buying a home is not a decision between investing in real estate versus investing in stocks, as financial advisers often claim. Instead, the home buying investment simply converts some portion of an existing expense (renting) into an investment in real estate.

It explains that you still have a housing expense (rent payments) even if you don't buy a home. You cant live in your 401K, but you can transfer housing expenses to your real estate investment. A mortgage payment is forced savings; it goes toward building equity you will likely get back when you sell your home. There's no return on your rent payments.

3. Your mortgage payment remains relatively the same over time. Your rent keeps going up.

The report also notes:

Whereas renters are continuously vulnerable to cost increases, rising home prices do not affect homeowners. Nobody rebuys the same home every year. For the homeowner with a fixed-rate mortgage, monthly payments increase only if property taxes and property insurance costs increase. The principal and interest portion of the payment, the largest portion, is fixed. Meanwhile, the renters entire payment is subject to inflation.

Consequently, over time, the homeowners and renters differing trajectories produce starkly different economic outcomes. Homeownerships major affordability benefit is that it stabilizes what is likely the homeowners biggest monthly expense, assuming a buyer has a fixed-rate mortgage, which most American homeowners do. The only portion of the homeowners housing expenses that can increase is taxes and insurance. The principal and interest portion stays the same for 30 years.

A mortgage payment remains about the same over the 30 years of the mortgage. Heres what rents have done over the last 30 years:

4. If you want to own a home and can afford it, waiting could cost you.

As the report also indicates:

We need to stop seeing housing as a reward for financial success and instead see it as a critical tool that can facilitate financial success. Affordable homeownership is not the capstone of economic well-being; it is the cornerstone.

Homeownership is the first rung on the ladder of financial success for most households, as their home is most often their largest asset.

Bottom Line

If the current headlines reporting a supposed drop-off in home affordability are making you nervous, lets connect to go over the real insights into our area.

 

 Don't Forget to Budget for Closing Costs

When buying a home, its important to have a budget and make sure you plan ahead for certain homebuying expenses. Saving for a down payment is the main cost that comes to mind for many, but budgeting for the closing costs required to get a mortgage is just as important.

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 example, for someone buying a 300,000 home, they could potentially have between 6,000 and 15,000 in closing fees. If you're in the market for a home above this price range, your closing costs could be greater. As mentioned above, closing costs are typically between 2% and 5% of your purchase price.

Trulia gives more great advice, explaining:

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

As home prices are rising and more buyers are finding themselves competing in bidding wars, its more important than ever to make sure your plan includes budgeting for closing costs. Lets connect to be sure you have everything you need to land your dream home.

 

 

Window Coverings Help Beat the Summer Heat

Keeping your home cool during the hot summer months can be an expensive prospect. This is especially true if you have large windows or rooms that have multiple windows that let sunlight in. While it’s great to have natural light during the day, it can work against your AC by heating up the air in those rooms at the same time you’re pumping cool air throughout the house. This can lead to your air conditioning running almost constantly throughout the day, and in some cases may even prompt an expensive HVAC upgrade if your current unit can’t keep up with the summer heat to your liking.

There’s some good news, though: It’s likely possible to cut your cooling costs during the summer without having to spend potentially thousands of dollars on a more powerful air conditioning solution. Through the use of various types of window coverings, you can make a big difference in how much heat is added to your home through your windows. Not only does this have the potential to cut your cooling costs significantly, but it can enhance the overall style of your home as well.

Curtains and Internal Coverings

Curtains, blinds, and other internal window coverings can have a significant impact on how much heat you gain from the sun during the summer. Medium to dark-colored curtains and drapes, especially those with white backings, block sunlight and heat gain significantly and can also help to hold heat in during the cold winter months. Blinds and rolling shades also offer some protection against heat gain, though their effectiveness depends on a number of factors including color, material, and reflectiveness.

Regardless of the covering type you choose, they are typically most effective when closed on south or west-facing windows, since these are the most likely to get direct sunlight during the hottest parts of the day. Closing the curtains or blinds on any window receiving direct sunlight can have at least some beneficial effect, however.

Window Films

One of the big problems with using coverings such as curtains and shades to prevent heat gain during the summer is that they block light and visibility as well as heat. If you still want to be able to see through your windows and enjoy some natural sunlight while preventing heat gain, a low-E window film might be a better option to meet your needs.
Low-E films are mildly tinted plastic films that have reflective particles of metal or metal oxide in them, reflecting UV rays while still allowing for some natural light and visibility. Because the UV rays are reflected back out into the outside, they are not able to heat up the air inside of your home. While the effectiveness of low-E films can vary depending on the manufacturer, thickness of the film, and how well they are installed, it’s estimated that some low-E films can reduce summer heat gain from sunlight by as much as 70 percent or more.

Shutters and Other Upgrades

There are a variety of other upgrades you can make to your home that will also help to block UV rays and prevent unwanted heat gain during the summer. Functional shutters that can be closed during the heat of the day can make a significant difference in solar heat gain, blocking the sunlight from actually reaching your windows in the first place. Awnings installed over windows can also block some light and heat, while still allowing for some visibility. Exterior solar screens are also an option, blocking UV rays and increasing your energy efficiency while preserving some light and visibility as well.

Of course, some of these options may be a bit more than you want to tackle as a DIY project. Even installing low-E films can be tricky if you have little experience with window films or have large windows to cover. Fortunately, HomeKeepr is here to help. Sign up for a free account today and get connected with installation pros in your area that can have you fixed up and staying cool in no time.

Americans See Real Estate as a Better Investment Than Stocks or Gold

Americans See Real Estate as a Better Investment Than Stocks or Gold

Last month, in a post on the Liberty Street Economics blog, the Federal Reserve Bank of New York noted that Americans believe buying a home is definitely or probably a better investment than buying stocks. Last week, a Gallup Poll reaffirmed those findings.

In an article on the current real estate market, Gallup reports:

Gallup usually finds that Americans regard real estate as the best long-term investment among several options — seeing it as superior to stocks, gold, savings accounts and bonds. This year, 41% choose real estate as the best investment, up from 35% a year ago, with stocks a distant second.

Here's the breakdown:The article goes on to say:

The 41% choosing real estate is the highest selecting any of the five investment options in the 11 years Gallup has asked this question.

Is real estate really a secure investment right now?

Some question American confidence in real estate as a good long-term investment right now. They fear that the build-up in home values may be mirroring what happened right before the housing crash a little more than a decade ago. However, according to Merrill Lynch, J.P. Morgan, Morgan Stanley, and Goldman Sachs, the current real estate market is strong and sustainable.

As Morgan Stanley explains to their clients in a recent Thoughts on the Market podcast:

Unlike 15 years ago, the euphoria in today’s home prices comes down to the simple logic of supply and demand. And we at Morgan Stanley conclude that this time the sector is on a sustainably, sturdy foundation . . . . This robust demand and highly challenged supply, along with tight mortgage lending standards, may continue to bode well for home prices. Higher interest rates and post pandemic moves could likely slow the pace of appreciation, but the upward trajectory remains very much on course.

Bottom Line

Americas belief in the long-term investment value of homeownership has been, is, and will always be, very strong.

 

Sellers Are Ready To Enter the Housing Market

One of the biggest questions in real estate today is, When will sellers return to the housing market? An ongoing shortage of home supply has created a hyper-competitive environment for hopeful buyers, leading to the ultimate sellers market. However, as the economy continues to improve and more people get vaccinated, more sellers may finally be in sight.

The Home Purchase Sentiment Index (HPSI) by Fannie Mae recently noted the percentage of consumer respondents who say its a good time to sell a home increased from 61% to 67%. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, indicates:

Consumer positivity regarding home-selling conditions nearly matched its all-time high. (See graph below):

Fannie Mae isn't the only expert group noticing a rise in the percentage of people thinking about selling. George Ratiu, Senior Economist at realtor.com, shares:

The results of a realtor.com survey . . . showed that one-in-ten homeowners plans to sell this year, with 63 percent of those, looking to list in the next 6 months. Just as encouragingly, close to two-thirds of sellers plan to sell their homes at prices under 350,000, which would offer a tremendous boost to affordable housing for first-time buyers.

Bottom Line

If you're considering selling your house, don't wait for more competition to pop up in your neighborhood. Lets connect today to explore the benefits of selling your house now before more homes come to the market.