#MyRealtorDonna's Blog!Recently posted or modified blog posts by tag - home equityhttps://www.donnalernerhometeam.com/blog/Copyright DonnaLernerHomeTeam.com2022-07-06T06:46:09-07:00tag:donnalernerhometeam.com,2012-09-20:9548 How Your Equity Can Grow over Time
<img width="750" height="410" src="https://files.mykcm.com/2022/07/05165645/20220706-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="How Your Equity Can Grow over Time | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/07/05165645/20220706-KCM-Share.jpg 750w, https://files.mykcm.com/2022/07/05165645/20220706-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/07/05165645/20220706-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
It’s true that record levels of home price appreciation have spurred significant equity gains for homeowners over the past few years. As Diana Olick, Real Estate Correspondent at CNBC, says:
“The stunning jump in home values over the course of the Covid-19 pandemic has given U.S. homeowners record amounts of housing wealth.”
That’s great for your home’s value over the last couple of years, but what if you’ve lived in your home for longer than that? You may be wondering how much equity you truly have.
The National Association of Realtors (NAR) has done a study to calculate the typical equity gains over longer spans of time. The data they compiled could be enough to motivate you to move. Just remember, to find out how much equity you have in your specific home, you’ll want to get a professional equity assessment from a trusted real estate advisor.
How Your Equity Grows
Let’s start by establishing how you build equity in your home. While price appreciation is clearly a factor that can help boost your equity, you also build equity over time as you pay down your home loan. NAR explains:
“Home equity gains are built up through price appreciation and by paying off the mortgage through principal payments.”
Average Equity Growth over Time
The study from NAR breaks down the typical equity gain over time (see graph below). It calculates the equity a homeowner potentially gained if they purchased the median-priced home 5, 10, or 30 years ago and still own it today.
<img loading="lazy" class="aligncenter wp-image-103286" src="https://files.mykcm.com/2022/07/05165641/20220706-MEM-Eng-1.png" alt="How Your Equity Can Grow over Time | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/07/05165641/20220706-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/07/05165641/20220706-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/07/05165641/20220706-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/07/05165641/20220706-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
These six-figure numbers are impressive and certainly enough to help you fuel a move into your next home, but they’re not a promised amount. Remember, your own equity gain will be different. It depends on how long you’ve been in the house, your home’s condition, any upgrades you’ve made, your area, and much more.
If you want to find out how much equity you have, partner with a trusted real estate professional for an equity assessment on your home. They can provide an expert opinion on what your house is worth today and how the equity you’ve gained over time can help you when you purchase your next home. It may be some (if not all) of what you need for your next down payment.
Bottom Line
If you’re thinking about selling your house and making a move, home equity can be a real game-changer, especially if you’ve been in your current home for a while. If you’re ready to find out how much equity you have, let’s connect.
2022-07-06T06:00:00-07:002022-07-06T06:46:09-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9518Real Estate Consistently Voted Best Investment
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Some Highlights
Based on a recent Gallup poll, real estate has been rated the best long-term investment for nine years in a row.
Owning real estate is more than just a place to call home. It’s also an investment in your future. That’s because it’s typically a stable and secure asset that can grow in value over time.
If you’re ready to buy a home and invest in your future, let’s connect.
2022-07-01T06:00:00-07:002022-07-01T08:16:14-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9442Homeownership Is a Great Hedge Against the Impact of Rising Inflation
<img width="750" height="410" src="https://files.mykcm.com/2022/06/22164521/20220623-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Homeownership Is a Great Hedge Against the Impact of Rising Inflation | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/06/22164521/20220623-KCM-Share.jpg 750w, https://files.mykcm.com/2022/06/22164521/20220623-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/06/22164521/20220623-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you’re following along with the news today, you’ve heard about rising inflation. Today, inflation is at a 40-year high. According to the National Association of Home Builders (NAHB):
“Consumer prices accelerated again in May as shelter, energy and food prices continued to surge at the fastest pace in decades. This marked the third straight month for inflation above an 8% rate and was the largest year-over-year gain since December 1981.”
With inflation rising, you’re likely feeling it impact your day-to-day life as prices go up for gas, groceries, and more. These climbing consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.
If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.
Homeownership Helps You Stabilize One of Your Biggest Monthly Expenses
Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.
Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. When you have a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same. That’s certainly not the case if you’re renting.”
So even if other prices increase, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.
Investing in an Asset That Historically Outperforms Inflation
While it’s true rising home prices and higher mortgage rates mean that buying a house today costs more than it did even a few months ago, you still have an opportunity to set yourself up for a long-term win. That’s because, in inflationary times, you want to be invested in an asset that outperforms inflation and typically holds or grows in value.
The graph below shows how the average home price appreciation outperformed the average inflation rate in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):
<img loading="lazy" class="aligncenter wp-image-103042" src="https://files.mykcm.com/2022/06/22164524/20220623-MEM-Eng-1.png" alt="Homeownership Is a Great Hedge Against the Impact of Rising Inflation | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/06/22164524/20220623-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/06/22164524/20220623-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/06/22164524/20220623-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/06/22164524/20220623-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
So, what does that mean for you? Today, experts forecast home prices will only go up from here thanks to the ongoing imbalance of supply and demand. Once you buy a house, any home price appreciation that does occur will grow your equity and your net worth. And since homes are typically assets that grow in value, you have peace of mind that history shows your investment is a strong one.
That means, if you’re ready and able, it makes sense to buy today before prices rise further.
Bottom Line
If you’ve been thinking about buying a home this year, it makes sense to act soon, even with inflation rising. That way you can stabilize your monthly housing cost and invest in an asset that historically outperforms inflation. If you’re ready to get started, let’s connect so you have expert advice on your specific situation when you’re ready to buy a home.
2022-06-23T06:00:00-07:002022-06-23T06:26:28-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9417The Average Homeowner Gained $64K in Equity over the Past Year
<img width="750" height="410" src="https://files.mykcm.com/2022/06/16163903/20220621-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Average Homeowner Gained $64K in Equity over the Past Year | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/06/16163903/20220621-KCM-Share.jpg 750w, https://files.mykcm.com/2022/06/16163903/20220621-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/06/16163903/20220621-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you own a home, your net worth likely just got a big boost thanks to rising home equity. Equity is the current value of your home minus what you owe on the loan. And today, based on recent home price appreciation, you’re building that equity far faster than you may expect – here’s how it works.
Because there’s an ongoing imbalance between the number of homes available for sale and the number of buyers looking to make a purchase, home prices are on the rise. That means your home is worth more in today’s market because it’s in high demand. As Patrick Dodd, President and CEO of CoreLogic, explains:
“Price growth is the key ingredient for the creation of home equity wealth. . . . This has led to the largest one-year gain in average home equity wealth for owners. . . .”
Basically, because your home value has likely climbed so much, your equity has increased too. According to the latest Homeowner Equity Insights from CoreLogic, the average homeowner’s equity has grown by $64,000 over the last 12 months.
While that’s the nationwide number, if you want to know what’s happening in your area, look at the map below. It breaks down the average year-over-year equity growth for each state using the data from CoreLogic.
<img loading="lazy" class="aligncenter wp-image-102964" src="https://files.mykcm.com/2022/06/16163908/20220621-MEM-Eng-1.png" alt="The Average Homeowner Gained $64K in Equity over the Past Year | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/06/16163908/20220621-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/06/16163908/20220621-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/06/16163908/20220621-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/06/16163908/20220621-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
The Opportunity Your Rising Home Equity Provides
In addition to building your overall net worth, equity can also help you achieve other goals like buying your next home. When you sell your current house, the equity you built up comes back to you in the sale. In a market where homeowners are gaining so much equity, it may be just what you need to cover a large portion – if not all – of the down payment on your next home.
So, if you’ve been holding off on selling or you’re worried about being priced out of your next home because of today’s ongoing home price appreciation, rest assured your equity can help fuel your move.
Bottom Line
If you’re planning to make a move, the equity you’ve gained can make a big impact. To find out just how much equity you have in your current home and how you can use it to fuel your next purchase, let’s connect so you can get a professional equity assessment report on your house.
2022-06-21T06:00:00-07:002022-06-21T06:36:18-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9351More Americans Choose Real Estate as the Best Investment Than Ever Before
<img width="750" height="410" src="https://files.mykcm.com/2022/06/10135410/20220613-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="More Americans Choose Real Estate as the Best Investment Than Ever Before | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/06/10135410/20220613-KCM-Share.jpg 750w, https://files.mykcm.com/2022/06/10135410/20220613-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/06/10135410/20220613-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Americans’ opinion on the value of real estate as an investment is climbing. That’s according to an annual survey from Gallup. Not only is real estate viewed as the best investment for the ninth year in a row, but more Americans selected it than ever before.
The graph below shows the results of the survey since Gallup began asking the question in 2011. As the trend lines indicate, real estate has been gaining ground as the clear favorite for almost a decade now:
<img loading="lazy" class="aligncenter wp-image-102872" src="https://files.mykcm.com/2022/06/10135406/20220613-MEM-Eng-1.png" alt="More Americans Choose Real Estate as the Best Investment Than Ever Before | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/06/10135406/20220613-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/06/10135406/20220613-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/06/10135406/20220613-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/06/10135406/20220613-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
If you’re thinking about purchasing a home, let this poll reassure you. Even when inflation is high like today, Americans recognize owning a home is a powerful financial decision.
How an Investment in Real Estate Can Benefit You During High Inflation
Because inflation reached its highest level in 40 years recently, it’s more important than ever to understand the financial benefits of homeownership. Rising inflation means prices are increasing across the board, and that includes goods, services, housing costs, and more. When you purchase your home, you lock in your monthly housing payments, effectively shielding yourself from increases on one of your biggest budgetary items each month.
If you’re a renter, you don’t have that same benefit, and you aren’t protected from these increases, especially as rents rise. As Danielle Hale, Chief Economist at realtor.com, notes:
“Rising rents, which continue to climb at double-digit pace . . . and the prospect of locking in a monthly housing cost in a market with widespread inflation are motivating today’s first-time homebuyers.”
When Inflation Has Risen in the Past, Home Prices Have Too
Your house is also an asset that typically increases in value over time, even during inflation. That‘s because as prices rise, the value of your home does too. Mark Cussen, Financial Writer for Investopedia, puts it like this:
“There are many advantages to investing in real estate. . . . It often acts as a good inflation hedge since there will always be a demand for homes, regardless of the economic climate, and because as inflation rises, so do property values. . . .”
And since rising home values help increase your equity, and by extension your net worth, homeownership is historically a good hedge against inflation.
Bottom Line
Buying a home is a powerful decision. It’s no wonder why so many people view it as the best long-term investment, even when inflation is high. When you buy, you help shield yourself from increases in your housing costs and you own an asset that typically gains value with time. If you want to better understand how buying a home could be a great investment for you, let’s connect today.
2022-06-13T06:00:00-07:002022-06-13T08:57:33-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9321Luxury Homes Are in High Demand
<img width="750" height="410" src="https://files.mykcm.com/2022/06/08162240/20220609-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Luxury Homes Are in High Demand | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/06/08162240/20220609-KCM-Share.jpg 750w, https://files.mykcm.com/2022/06/08162240/20220609-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/06/08162240/20220609-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
As people realize their needs are changing, some are turning to luxury housing to find their dream home. Investopedia helps define what pushes a home into this category. In a recent article, they point out that a luxury home isn’t only defined by its price. Location is also an important factor. It could be a condo at a desirable city address, a spacious home on the water, or one with access to luxury activities like arts and entertainment, high-end shopping and dining, and more. The home itself will also boast some of the finest features available.
According to the Luxury Market Report from the Institute for Luxury Home Marketing, there’s been a substantial increase in how many buyers are purchasing luxury homes over the past two years. It says:
“. . . North America recorded the fastest growth of demand during the first year of the pandemic. Also, demand has . . . consistently increased, and even in April 2022, we saw a higher volume of sales compared to 2021.”
If you own a luxury home, it could be a great time to list your house today while demand is so high. But first, let’s understand where the demand is coming from.
What’s Driving the Heightened Buyer Demand for High-End Homes?
The same report says more people have reached a certain net-worth threshold, and that’s contributing to the increased interest in luxury housing:
“In 2020, we saw a 2.2% growth in the number of individuals with wealth of over $5 million in net value, but in 2021 that number grew by an outstanding 19.8%.
This total increase has resulted in the introduction of over 660,000 new individuals into the high net-worth bracket, which, combined with the existing affluent looking to both diversify and add new properties to their portfolio, provides a true insight into why the demand for luxury properties skyrocketed during 2021 and into 2022.”
So, if you’re looking to make changes to your real estate portfolio or are looking to sell your current house, it may be a great time to list and benefit from the high demand for luxury homes today.
Bottom Line
If you own a luxury home and want to know how strong demand is in your area, let’s connect so you can capitalize on current market conditions while buyer demand for upscale homes is so high.
2022-06-09T06:00:00-07:002022-06-09T06:47:15-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9160Don’t Let Rising Inflation Delay Your Homeownership Plans
<img width="1046" height="2334" src="https://files.mykcm.com/2022/05/18153723/20220520-MEM-1046x2334.png" class="attachment-entry size-entry wp-post-image" alt="Don’t Let Rising Inflation Delay Your Homeownership Plans INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/05/18153723/20220520-MEM-1046x2334.png 1046w, https://files.mykcm.com/2022/05/18153723/20220520-MEM-269x600.png 269w, https://files.mykcm.com/2022/05/18153723/20220520-MEM-459x1024.png 459w, https://files.mykcm.com/2022/05/18153723/20220520-MEM-768x1714.png 768w, https://files.mykcm.com/2022/05/18153723/20220520-MEM-688x1536.png 688w, https://files.mykcm.com/2022/05/18153723/20220520-MEM-918x2048.png 918w, https://files.mykcm.com/2022/05/18153723/20220520-MEM-100x223.png 100w, https://files.mykcm.com/2022/05/18153723/20220520-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
If recent headlines about rising inflation are making you wonder if it’s still a good time to buy, here’s what experts have to say.
Housing is an asset that typically grows in value. Plus, your mortgage helps stabilize your monthly housing costs, and buying protects you from rising rents.
Experts say owning a home is historically a good hedge against inflation. Let’s connect if you’re ready to start the homebuying process today.
2022-05-20T06:00:00-07:002022-05-20T07:09:17-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:9071What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market
<img width="750" height="410" src="https://files.mykcm.com/2022/05/11125456/20220512-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/05/11125456/20220512-KCM-Share.jpg 750w, https://files.mykcm.com/2022/05/11125456/20220512-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/05/11125456/20220512-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
While you may have seen recent stories about the volume of foreclosures today, context is important. During the pandemic, many homeowners were able to pause their mortgage payments using the forbearance program. The goal was to help homeowners financially during the uncertainty created by the health crisis.
When the forbearance program began, many experts were concerned it would result in a wave of foreclosures coming to the market, as there was after the housing crash in 2008. Here’s a look at why the number of foreclosures we’re seeing today is nothing like the last time.
1. There Are Fewer Homeowners in Trouble
Today’s data shows that most homeowners are exiting their forbearance plan either fully caught up on payments or with a plan from the bank that restructured their loan in a way that allowed them to start making payments again. The graph below depicts those findings from the Mortgage Bankers Association (MBA):
<img loading="lazy" class="aligncenter wp-image-102232" src="https://files.mykcm.com/2022/05/11125459/20220512-MEM-Eng-1.png" alt="What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/05/11125459/20220512-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/05/11125459/20220512-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/05/11125459/20220512-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/05/11125459/20220512-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
The same MBA report mentioned above estimates there are approximately 525,000 homeowners who remain in forbearance today. Thankfully, those people still have the chance to work out a suitable repayment plan with the servicing company that represents their lender.
2. Most Homeowners Have Enough Equity To Sell Their Homes
For those who are exiting the forbearance program without a plan in place, many will have enough equity to sell their homes instead of facing foreclosures. Due to rapidly rising home prices over the last two years, the average homeowner has gained record amounts of equity in their home.
Marina Walsh, CMB, Vice President of Industry Analysis at MBA, says:
“Given the nation’s limited housing inventory and the variety of home retention and foreclosure alternatives on the table across various loan types, . . . Borrowers have more choices today to either stay in their homes or sell without resorting to a foreclosure.”
3. There Have Been Fewer Foreclosures over the Last Two Years
One of the seldom-reported benefits of the forbearance program was it gave homeowners facing difficulties an extra two years to get their finances in order and work out a plan with their lender. That helped prevent the foreclosures that normally would have come to the market had the new forbearance program not been available.
Even as people leave the forbearance program, there are still fewer foreclosures happening today than before the pandemic. That means, while there are more foreclosures now compared to last year (when foreclosures were paused), the number is still well below what the housing market has seen in a more typical year, like 2017-2019 (see graph below):
<img loading="lazy" class="aligncenter wp-image-102233" src="https://files.mykcm.com/2022/05/11125502/20220512-MEM-Eng-2.png" alt="What You Actually Need To Know About the Number of Foreclosures in Today’s Housing Market | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/05/11125502/20220512-MEM-Eng-2.png 1000w, https://files.mykcm.com/2022/05/11125502/20220512-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2022/05/11125502/20220512-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2022/05/11125502/20220512-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
4. The Current Market Can Easily Absorb New Listings
When the foreclosures in 2008 hit the market, they added to the oversupply of houses that were already for sale. It’s exactly the opposite today. The latest Existing Home Sales Report from the National Association of Realtors (NAR) reveals:
“Total housing inventory at the end of March totaled 950,000 units, up 11.8% from February and down 9.5% from one year ago (1.05 million). Unsold inventory sits at a 2.0-month supply at the present sales pace, up from 1.7 months in February and down from 2.1 months in March 2021.”
A balanced market would have approximately a six-month supply of inventory. At 2.0 months, today’s housing market is severely understocked. Even if one million homes enter the market, there still won’t be enough inventory to meet the current demand.
Bottom Line
If you see headlines about the increasing number of foreclosures today, remember context is important. While it’s true the number of foreclosures is higher now than it was last year, foreclosures are still well below pre-pandemic years.
If you have questions, let’s connect to talk through the latest market conditions and what they mean for you.
2022-05-12T06:00:00-07:002022-05-12T07:11:16-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8989Today’s Home Price Appreciation Is Great News for Existing Homeowners
<img width="750" height="410" src="https://files.mykcm.com/2022/04/26123827/20220502-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Today’s Home Price Appreciation Is Great News for Existing Homeowners | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/04/26123827/20220502-KCM-Share.jpg 750w, https://files.mykcm.com/2022/04/26123827/20220502-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/04/26123827/20220502-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you’re planning to sell your home this season, rising prices are great news for you. But it’s important to understand why prices are rising to begin with. One major factor is supply and demand.
In any industry, when there are more buyers for an item than there are of that item available, prices naturally rise. In those situations, buyers are willing to pay more to get the product or service they’re looking for when options are scarce. And that’s exactly what’s happening in the current real estate market.
Selma Hepp, Executive, Research & Insights and Deputy Chief Economist at CoreLogic, puts it like this:
“With so few homes, buyers are once again left with fierce competition that’s driving the share of homes that sold over the listing price up to 66% . . . With the continued imbalance between supply and demand, home prices are likely to have another year of strong gains and are expected to average about 10% growth for the year.”
Because it will take some time for housing supply to increase, experts believe prices will continue rising. The latest Home Price Expectations Survey forecasts what will happen with home prices over the next 5 years. As the graph below shows, while the rate of appreciation will moderate over the next few years, prices will continue rising through 2026:
<img loading="lazy" class="aligncenter wp-image-101956" src="https://files.mykcm.com/2022/04/26123818/20220502-MEM-Eng.png" alt="Today’s Home Price Appreciation Is Great News for Existing Homeowners | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/04/26123818/20220502-MEM-Eng.png 960w, https://files.mykcm.com/2022/04/26123818/20220502-MEM-Eng-600x450.png 600w, https://files.mykcm.com/2022/04/26123818/20220502-MEM-Eng-768x576.png 768w, https://files.mykcm.com/2022/04/26123818/20220502-MEM-Eng-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
What This Means When You Sell Your House
If you’re a homeowner, the projection for continued price appreciation this year opens up an opportunity to move. That’s because it may give your equity a major boost. Equity is the difference between what you owe on your house and its market value. The amount of equity you have increases as you make your monthly payments and as rising home prices drive up the market value for your home.
Growing equity is a powerful tool for homeowners. When you sell your house, the equity you’ve built comes back to you in the sale. That money could be enough to cover some (if not all) of your down payment on your next home.
Of course, if you want to know how much equity you have in your current house, it’s crucial to work with a real estate professional. They follow current market trends and can help you understand your home’s value when you’re ready to sell.
What This Means for Your Next Purchase
But today’s rising home values aren’t just good news if you’re ready to sell. Because price appreciation is forecast to continue in the years ahead, you can rest assured your next home will be an investment that should grow in value with time. That’s one of several reasons why real estate has been rated the best investment in a recent Gallup poll.
Bottom Line
If you’re weighing whether or not you should sell your house this season, know rising home values may be opening up an opportunity to use equity to fuel your move. Let’s connect so you can find out how much your home is worth and to learn more about all the benefits you have in today’s market.
2022-05-02T06:00:00-07:002022-05-02T06:38:46-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8960 How Homeownership Can Help Shield You from Inflation
<img width="750" height="410" src="https://files.mykcm.com/2022/04/25102951/20220426-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="How Homeownership Can Help Shield You from Inflation | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/04/25102951/20220426-KCM-Share.jpg 750w, https://files.mykcm.com/2022/04/25102951/20220426-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/04/25102951/20220426-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you’re following along with the news today, you’ve likely heard about rising inflation. You’re also likely feeling the impact in your day-to-day life as prices go up for gas, groceries, and more. These rising consumer costs can put a pinch on your wallet and make you re-evaluate any big purchases you have planned to ensure they’re still worthwhile.
If you’ve been thinking about purchasing a home this year, you’re probably wondering if you should continue down that path or if it makes more sense to wait. While the answer depends on your situation, here’s how homeownership can help you combat the rising costs that come with inflation.
Homeownership Offers Stability and Security
Investopedia explains that during a period of high inflation, prices rise across the board. That’s true for things like food, entertainment, and other goods and services, even housing. Both rental prices and home prices are on the rise. So, as a buyer, how can you protect yourself from increasing costs? The answer lies in homeownership.
Buying a home allows you to stabilize what’s typically your biggest monthly expense: your housing cost. If you get a fixed-rate mortgage on your home, you lock in your monthly payment for the duration of your loan, often 15 to 30 years. James Royal, Senior Wealth Management Reporter at Bankrate, says:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”
So even if other prices rise, your housing payment will be a reliable amount that can help keep your budget in check. If you rent, you don’t have that same benefit, and you won’t be protected from rising housing costs.
Use Home Price Appreciation to Your Benefit
While it’s true rising mortgage rates and home prices mean buying a house today costs more than it did a year ago, you still have an opportunity to set yourself up for a long-term win. Buying now lets you lock in at today’s rates and prices before both climb higher.
In inflationary times, it’s especially important to invest your money in an asset that traditionally holds or grows in value. The graph below shows how home price appreciation outperformed inflation in most decades going all the way back to the seventies – making homeownership a historically strong hedge against inflation (see graph below):
<img loading="lazy" class="aligncenter wp-image-101920" src="https://files.mykcm.com/2022/04/25102953/20220426-MEM-Eng-1.png" alt="How Homeownership Can Help Shield You from Inflation | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/04/25102953/20220426-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/04/25102953/20220426-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/04/25102953/20220426-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/04/25102953/20220426-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
So, what does that mean for you? Today, experts say home prices will only go up from here thanks to the ongoing imbalance in supply and demand. Once you buy a house, any home price appreciation that does occur will be good for your equity and your net worth. And since homes are typically assets that grow in value (even in inflationary times), you have peace of mind that history shows your investment is a strong one.
Bottom Line
If you’re ready to buy a home, it may make sense to move forward with your plans despite rising inflation. If you want expert advice on your specific situation and how to time your purchase, let’s connect.
2022-04-26T06:00:00-07:002022-04-26T12:29:48-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8923Why This Housing Market Is Not a Bubble Ready To Pop
<img width="750" height="410" src="https://files.mykcm.com/2022/04/20152833/20220421-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Why This Housing Market Is Not a Bubble Ready To Pop | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/04/20152833/20220421-KCM-Share.jpg 750w, https://files.mykcm.com/2022/04/20152833/20220421-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/04/20152833/20220421-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Homeownership has become a major element in achieving the American Dream. A recent report from the National Association of Realtors (NAR) finds that over 86% of buyers agree homeownership is still the American Dream.
Prior to the 1950s, less than half of the country owned their own home. However, after World War II, many returning veterans used the benefits afforded by the GI Bill to purchase a home. Since then, the percentage of homeowners throughout the country has increased to the current rate of 65.5%. That strong desire for homeownership has kept home values appreciating ever since. The graph below tracks home price appreciation since the end of World War II:
<img loading="lazy" class="aligncenter wp-image-101888" src="https://files.mykcm.com/2022/04/20152835/20220421-MEM-Eng-1.png" alt="Why This Housing Market Is Not a Bubble Ready To Pop | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/04/20152835/20220421-MEM-Eng-1.png 1000w, https://files.mykcm.com/2022/04/20152835/20220421-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2022/04/20152835/20220421-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2022/04/20152835/20220421-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
The graph shows the only time home values dropped significantly was during the housing boom and bust of 2006-2008. If you look at how prices spiked prior to 2006, it looks a bit like the current spike in prices over the past two years. That may lead some people to be concerned we’re about to see a similar fall in home values as we did when the bubble burst. To help alleviate those worries, let’s look at what happened last time and what’s happening today.
What Caused the Housing Crash 15 Years Ago?
Back in 2006, foreclosures flooded the market. That drove down home values dramatically. The two main reasons for the flood of foreclosures were:
1. Many purchasers were not truly qualified for the mortgage they obtained, which led to more homes turning into foreclosures.
2. A number of homeowners cashed in the equity on their homes. When prices dropped, they found themselves in an underwater situation (where the home was worth less than the mortgage on the house). Many of these homeowners walked away from their homes, leading to more foreclosures. This lowered neighboring home values even more.
This cycle continued for years.
Why Today’s Real Estate Market Is Different
Here are two reasons today’s market is nothing like the one we experienced 15 years ago.
1. Today, Demand for Homeownership Is Real (Not Artificially Generated)
Running up to 2006, banks were creating artificial demand by lowering lending standards and making it easy for just about anyone to qualify for a home loan or refinance their current home. Today, purchasers and those refinancing a home face much higher standards from mortgage companies.
Data from the Urban Institute shows the amount of risk banks were willing to take on then as compared to now.
<img loading="lazy" class="aligncenter wp-image-101889" src="https://files.mykcm.com/2022/04/20152838/20220421-MEM-Eng-2.png" alt="Why This Housing Market Is Not a Bubble Ready To Pop | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/04/20152838/20220421-MEM-Eng-2.png 1000w, https://files.mykcm.com/2022/04/20152838/20220421-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2022/04/20152838/20220421-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2022/04/20152838/20220421-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
There’s always risk when a bank loans money. However, leading up to the housing crash 15 years ago, lending institutions took on much greater risks in both the person and the mortgage product offered. That led to mass defaults, foreclosures, and falling prices.
Today, the demand for homeownership is real. It’s generated by a re-evaluation of the importance of home due to a worldwide pandemic. Additionally, lending standards are much stricter in the current lending environment. Purchasers can afford the mortgage they’re taking on, so there’s little concern about possible defaults.
And if you’re worried about the number of people still in forbearance, you should know there’s no risk of that causing an upheaval in the housing market today. There won’t be a flood of foreclosures.
2. People Are Not Using Their Homes as ATMs Like They Did in the Early 2000s
As mentioned above, when prices were rapidly escalating in the early 2000s, many thought it would never end. They started to borrow against the equity in their homes to finance new cars, boats, and vacations. When prices started to fall, many of these homeowners were underwater, leading some to abandon their homes. This increased the number of foreclosures.
Homeowners didn’t forget the lessons of the crash as prices skyrocketed over the last few years. Black Knight reports that tappable equity (the amount of equity available for homeowners to access before hitting a maximum 80% loan-to-value ratio, or LTV) has more than doubled compared to 2006 ($4.6 trillion to $9.9 trillion).
The latest Homeowner Equity Insights report from CoreLogic reveals that the average homeowner gained $55,300 in home equity over the past year alone. Odeta Kushi, Deputy Chief Economist at First American, reports:
“Homeowners in Q4 2021 had an average of $307,000 in equity – a historic high.”
ATTOM Data Services also reveals that 41.9% of all mortgaged homes have at least 50% equity. These homeowners will not face an underwater situation even if prices dip slightly. Today, homeowners are much more cautious.
Bottom Line
The major reason for the housing crash 15 years ago was a tsunami of foreclosures. With much stricter mortgage standards and a historic level of homeowner equity, the fear of massive foreclosures impacting today’s market is not realistic.
2022-04-21T06:00:00-07:002022-04-21T10:05:55-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8884Is It Time To Buy a Smaller Home?
<img width="750" height="410" src="https://files.mykcm.com/2022/04/14140944/20220418-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Is It Time To Buy a Smaller Home? | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/04/14140944/20220418-KCM-Share.jpg 750w, https://files.mykcm.com/2022/04/14140944/20220418-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/04/14140944/20220418-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Life events can have a major impact on what you need from your home, and retirement is one of the biggest changes many of us face. This period of your life can mean doing more of the things you enjoy, like traveling, visiting with loved ones, or taking on new hobbies. But what does that mean for your home?
If you’re looking for ways to focus more on the important things in your life, the answer could be downsizing. A recent article from The Balance talks about why it could be a great option, saying:
“There are many reasons to buy a smaller home—or to downsize from your present home—but sometimes, the idea that “less is more” is what propels homeowners to buy a smaller home.”
You Can Find the Right Home for Your Needs
The 2022 Home Buyers and Sellers Generational Trends from the National Association of Realtors (NAR) provides more information on why people of retirement age choose to move. It shows the need for a smaller home, the desire to be closer to loved ones, and retirement itself as three of the top reasons homebuyers over the age of 55 make a move.
If you’re in this group, changing priorities may be top of mind for you today, and that could be driving your decision to downsize. After all, as your lifestyle changes, what you need in your home likely changes, too.
Plus, as The Balance notes, moving into a smaller home can open your schedule up even more. When you downsize, you can spend less time maintaining your home and more time with the people you love or exploring newfound hobbies. That’s a recipe that can lead to less stress and increased happiness.
Your Equity Can Make a Big Impact When You Downsize
Home equity plays a big role when you sell your existing house and move. It could be a great tool to use to help you downsize. According to the latest Homeowner Equity Insights report from CoreLogic, the average homeowner gained about $55,300 in equity over the past 12 months. Dr. Frank Nothaft, Chief Economist at CoreLogic, explains how important price appreciation and equity gains are for existing homeowners:
“Home prices rose 18% during 2021 in the CoreLogic Home Price Index, the largest annual gain recorded in its 45-year history, generating a big increase in home equity wealth, . . . For low- and moderate-income homeowners, home equity has historically been a major source of wealth.”
As home prices rise, your equity does, too. So, you may have more equity than you realize because of the record levels of home price appreciation over the past year. Those equity gains could allow you to make a larger down payment on your next home. And putting more money down can lead to a smaller monthly mortgage payment, which can give you greater financial freedom. It can also be a significant help in navigating today’s competitive housing market, since offering more money up front could help your offer stand out.
Whatever your homeownership goals are, a trusted real estate advisor can help you to find the best option for your situation. They’ll help you sell your current home and guide you as you buy your next one and enter this new phase of life.
Bottom Line
If you’ve recently retired or plan to soon, your needs are likely changing. That means now may be the perfect time to downsize. Let’s connect so we can work together to find a home that matches your situation.
2022-04-18T06:00:00-07:002022-04-18T07:13:45-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8797Do You Know How Much Equity You Have in Your Home?
<img width="1046" height="2334" src="https://files.mykcm.com/2022/04/05162315/20220408-MEM-1046x2334.png" class="attachment-entry size-entry wp-post-image" alt="Do You Know How Much Equity You Have in Your Home? [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/04/05162315/20220408-MEM-1046x2334.png 1046w, https://files.mykcm.com/2022/04/05162315/20220408-MEM-269x600.png 269w, https://files.mykcm.com/2022/04/05162315/20220408-MEM-459x1024.png 459w, https://files.mykcm.com/2022/04/05162315/20220408-MEM-768x1714.png 768w, https://files.mykcm.com/2022/04/05162315/20220408-MEM-688x1536.png 688w, https://files.mykcm.com/2022/04/05162315/20220408-MEM-918x2048.png 918w, https://files.mykcm.com/2022/04/05162315/20220408-MEM-100x223.png 100w, https://files.mykcm.com/2022/04/05162315/20220408-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
If you’re a homeowner, your net worth has gotten a big boost. That’s because recent home price appreciation has increased your equity.
Your equity grows as you pay down your loan and as your home increases in value. Over the past year, the average homeowner’s equity grew by $55,300.
Ready to sell? Let’s connect to talk about how you can use that equity to fuel your next move.
2022-04-08T06:00:00-07:002022-04-08T06:25:05-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8705A Key To Building Wealth Is Homeownership
<img width="750" height="410" src="https://files.mykcm.com/2022/03/24150309/20220328-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="A Key To Building Wealth Is Homeownership | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/03/24150309/20220328-KCM-Share.jpg 750w, https://files.mykcm.com/2022/03/24150309/20220328-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/03/24150309/20220328-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
The link between financial security and homeownership is especially important today as inflation rises. But many people may not realize just how much owning a home contributes to your overall net worth. As Leslie Rouda Smith, President of the National Association of Realtors (NAR), says:
“Homeownership is rewarding in so many ways and can serve as a vital component in achieving financial stability.”
Here are just a few reasons why, if you’re looking to increase your financial stability, homeownership is a worthwhile goal.
Owning a Home Is a Building Block for Financial Success
A recent NAR report details several homeownership trends and statistics, including the difference in net worth between homeowners and renters. It finds:
“. . . the net worth of a homeowner was about $300,000 while that of a renter’s was $8,000 in 2021.”
To put that into perspective, the average homeowner’s net worth is roughly 40 times that of a renter (see visual below):
<img loading="lazy" class="aligncenter wp-image-101625" src="https://files.mykcm.com/2022/03/24150344/20220328-MEM-Eng.png" alt="A Key To Building Wealth Is Homeownership | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/03/24150344/20220328-MEM-Eng.png 960w, https://files.mykcm.com/2022/03/24150344/20220328-MEM-Eng-600x450.png 600w, https://files.mykcm.com/2022/03/24150344/20220328-MEM-Eng-768x576.png 768w, https://files.mykcm.com/2022/03/24150344/20220328-MEM-Eng-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
The results from this report show that owning a home is a key piece to the puzzle when building your overall net worth.
Equity Gains Can Substantially Boost a Homeowner’s Net Worth
The net worth gap between owners and renters exists in large part because homeowners build equity. As a homeowner, your equity grows as your home appreciates in value and you make your mortgage payments each month.
In other words, when you own your home, you have the benefit of your mortgage payment acting as a contribution to a forced savings account. And when you sell, any equity you’ve built up comes back to you. As a renter, you’ll never see a return on the money you pay out in rent every month.
To sum it up, NAR says it simply:
“Homeownership has always been an important way to build wealth.”
Bottom Line
The gap between a homeowner’s net worth and a renter’s shows how truly foundational homeownership is to wealth-building. If you’re ready to start on your journey to homeownership, let’s connect today.
2022-03-28T06:00:00-07:002022-03-28T07:03:09-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8661The Many Benefits of Homeownership
<img width="750" height="410" src="https://files.mykcm.com/2022/03/21110149/20220322-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Many Benefits of Homeownership | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/03/21110149/20220322-KCM-Share.jpg 750w, https://files.mykcm.com/2022/03/21110149/20220322-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/03/21110149/20220322-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
The past two years have taught us the true value of homeownership, especially the stability and the feeling of accomplishment it can provide. But homeownership has so much more to offer. Here’s a look at a few of the non-financial and financial benefits of owning a home. If you’re looking to buy a home today, think about all the ways homeownership can impact your life.
Homeownership Has Impactful Personal and Emotional Benefits
Owning your home gives you a significant sense of pride because it’s a space that is truly yours. And as a homeowner, you can customize your home to your heart’s desire. Having a space you’ve put your stamp on enhances the pride and sense of ownership you may feel.
And that sense of ownership can extend beyond your shelter to help create social, community, and civic benefits as well. That’s because the average homeowner stays in their home for longer than just a few years. That means you’ll naturally feel a stronger connection to the community around you the longer you live there. This can help you experience a greater sense of belonging and a greater stake in your community as a whole. As the National Association of Realtors (NAR) says:
“Living in one place for a longer amount of time creates an obvious sense of community pride, which may lead to more investment in said community.”
Owning a Home Is a Significant Step Toward Financial Stability
In a financial sense, homeowners benefit from home price appreciation, equity gains, and having a shield against some of the effects of inflation. These benefits can have a big impact on your life. As you gain equity through home price appreciation and paying down your mortgage, you build your net worth. And in times of inflation, your 30-year fixed-rate mortgage can help you stabilize one of your largest monthly expenses for the duration of your loan.
Lawrence Yun, Chief Economist for NAR, explains how you can start to see these lasting effects of homeownership as soon as you make your purchase:
“Owning a home continues to be a proven method for building long-term wealth. . . . Home values generally grow over time, so homeowners begin the wealth-building process as soon as they make a down payment and move to pay down their mortgage.”
Knowing you’ve made a good investment soon after your purchase is powerful. And that may give you confidence in your decision to buy a home.
Bottom Line
The benefits of owning a home are foundational. As a homeowner, you can feel proud of the space you call home and know you’ve made a sound financial investment. To learn how homeownership can help you, let’s connect to start the conversation today.
2022-03-22T06:00:00-07:002022-03-22T06:12:35-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8588This Spring Presents Sellers with a Golden Opportunity
<img width="750" height="410" src="https://files.mykcm.com/2022/03/11104015/20220314-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="This Spring Presents Sellers with a Golden Opportunity | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/03/11104015/20220314-KCM-Share.jpg 750w, https://files.mykcm.com/2022/03/11104015/20220314-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/03/11104015/20220314-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you’re thinking of selling your house this year, timing is crucial. After all, you’ll want to balance getting the most out of the sale of your current home and making the best investment when you buy your next one.
If that’s the case, you should know – you may be able to get the best of both worlds today. Here are four reasons why this spring may be your golden window of opportunity.
1. The Number of Homes on the Market Is Still Low
Today’s limited supply of houses for sale is putting sellers in the driver’s seat. There are far more buyers in the market today than there are homes available. That means purchasers are eagerly waiting for your house.
Listing your house now makes it the center of attention. And if you work with a real estate professional to price your house correctly, you can expect it to sell quickly and likely get multiple strong offers this season.
2. Your Equity Is Growing in Record Amounts
According to the most recent Homeowner Equity Insight report from CoreLogic, homeowners are sitting on record amounts of equity thanks to recent home price appreciation. The report finds that the average homeowner has gained $55,300 in equity over the past year.
That much equity can open doors for you to make a move. If you’ve been holding off on selling because you’re worried about how rising prices will impact your next home search, rest assured your equity can help fuel your move. It may be just what you need to cover a large portion – if not all – of the down payment on your next home.
3. Mortgage Rates Are Increasing
While it’s true mortgage rates have already been climbing this year, current mortgage rates are still below what they’ve been in recent decades. In the 2000s, the average mortgage rate was 6.27%. In the 1990s, the average rate was 8.12%.
For context, the current average 30-year fixed mortgage rate, according to Freddie Mac, is 3.85%. And while recent global uncertainty caused rates to dip slightly in the near-term, experts project rates will rise in the months ahead. Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae, says:
“For homebuyers, we believe that borrowing costs will likely rise with the increase in mortgage rates….”
When that happens, it’ll cost you more to purchase your next home. That’s why it’s important to act now if you’re ready to sell. Work with a trusted advisor to kickstart the process so you can take key steps to making your next purchase before rates climb further.
4. Home Prices Are Climbing Too
Home prices have been skyrocketing in recent years because of the imbalance of supply and demand. And as long as that imbalance continues, so will the rise in home values.
What does that mean for you? If you’re selling so you can move into the home of your dreams or downsize into something that better suits your current needs, you have an opportunity to get ahead of the curve by leveraging your growing equity and purchasing your next home before prices climb higher.
And, once you make your purchase, you can find peace of mind in knowing ongoing home price appreciation is growing the value of your new investment.
Bottom Line
If you want to win when you sell and when you buy, this spring could be your golden opportunity. Let’s connect so you have the insights you need to take advantage of today’s incredible sellers’ market.
2022-03-14T06:00:00-07:002022-03-14T08:32:43-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8469Millennials: Do You Need a Home with More Space?
<img width="750" height="410" src="https://files.mykcm.com/2022/02/24162812/20220228-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Millennials: Do You Need a Home with More Space? | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/02/24162812/20220228-KCM-Share.jpg 750w, https://files.mykcm.com/2022/02/24162812/20220228-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/02/24162812/20220228-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you’re a millennial, homebuying might be top of mind for you. Your generation is the largest group of homebuyers in the market today and has been since 2014, according to the National Association of Realtors (NAR). And while other millennials are looking to buy for the first time, you may be one of the many who are now discovering you’ve outgrown your home.
If that’s the case, you’re not alone. The past two years brought about significant changes for many people, and today, homeowners are reevaluating what they truly need in a home. As a recent report from the Wall Street Journal states:
“They say the pandemic and the emergence of remote work accelerated millennial home-buying trends already under way. . . . Millennials who already owned homes traded up for more space.”
So, if you’re working remotely now or simply have a growing need for additional space, it may be time to move. And even if you purchased your current home sometime over the last few years, you can still move into a different one that has the space and features you’re looking for. That’s because there’s a good chance you have more equity than you realize. As Diana Olick, Real Estate Correspondent for CNBC, notes:
“The stunning jump in home values over the course of the Covid-19 pandemic has given U.S. homeowners record amounts of housing wealth. . . . Even homeowners who weren’t listing their properties for sale were gaining equity. About 42% of homeowners were considered equity-rich at the end of last year, meaning their mortgages were half or less than half the value of their home.”
Growing equity can be the key you need to fuel your next move, especially if you’re looking to purchase a larger home. When you sell your current house, the equity that comes back to you in the sale can be used toward the down payment on your next home.
In other words, your purchasing power may be greater than you realize, making a move to a larger home a realistic option. That, plus your changing needs, might make moving now more desirable than ever.
Bottom Line
If you’re a millennial thinking about moving this year, you’re not alone. Let’s connect today to discuss the equity you have in your current home and the opportunities it can create.
2022-03-01T07:00:00-07:002022-03-01T07:28:09-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8448The Difference Between Renting and Owning
<img width="1046" height="2279" src="https://files.mykcm.com/2022/02/24130106/20220225-MEM-1046x2279.png" class="attachment-entry size-entry wp-post-image" alt="The Difference Between Renting and Owning [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/02/24130106/20220225-MEM-1046x2279.png 1046w, https://files.mykcm.com/2022/02/24130106/20220225-MEM-275x600.png 275w, https://files.mykcm.com/2022/02/24130106/20220225-MEM-470x1024.png 470w, https://files.mykcm.com/2022/02/24130106/20220225-MEM-768x1674.png 768w, https://files.mykcm.com/2022/02/24130106/20220225-MEM-705x1536.png 705w, https://files.mykcm.com/2022/02/24130106/20220225-MEM-940x2048.png 940w, https://files.mykcm.com/2022/02/24130106/20220225-MEM-100x218.png 100w, https://files.mykcm.com/2022/02/24130106/20220225-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
If you’re deciding whether to rent or buy, consider the many financial benefits that come with owning a home.
As a renter, you build your landlord’s wealth and face rising costs. As a homeowner, you build your own net worth and can lock in your monthly payments for the length of your loan.
If you’re weighing your options, remember that owning a home is a decision that has considerable financial perks. If you want to learn more, let’s connect to talk about the perks of homeownership.
2022-02-25T07:00:00-07:002022-02-25T07:50:27-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8414 The Perks of Owning More Than One Home
<img width="750" height="410" src="https://files.mykcm.com/2022/02/18112554/20220222-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Perks of Owning More Than One Home | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/02/18112554/20220222-KCM-Share.jpg 750w, https://files.mykcm.com/2022/02/18112554/20220222-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/02/18112554/20220222-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Many things have changed over the past couple of years, and real estate is no exception. One impact is an increased desire to own more than one home. According to the recent Luxury Market Report from Luxury Home Marketing:
“As trends such as remote working and flexi-hours took hold in 2021, so too did the flexibility of relocating as well as the growth of second homeownership.”
This may be because the pandemic has altered how we think about our homes. Where we live has become, more than ever, our safe space and our getaway. And with the rise in remote work, more people are reconsidering where they want to live and buying second homes to give them greater flexibility. If you fall in that category, here are just a few of the perks you’ll enjoy, and how owning a second home may be a great decision for your lifestyle and your future.
Enjoy a Change in Scenery (or Weather)
When you have two homes, you can alternate between them as the weather changes or as you crave different scenery. Do you want to live in an area with a particular season? Would alternating between a resort and a suburban setting be ideal? With two homes, you have those options. Being able to move between homes based on which location best suits you at the time gives you added flexibility and variety that can help increase your happiness.
Build Your Wealth Faster
You may have heard that home equity is skyrocketing, thanks to ongoing home price appreciation. CoreLogic reports that the average homeowner gained $56,700 in equity over the last year. With home prices projected to continue rising, if you purchase a second home, you could benefit from rising equity on both properties to build your wealth (and your net worth) even faster.
Be Closer to Loved Ones
The pandemic has also reignited the importance of being near our loved ones. One option worth exploring is whether you want your second home to be near the people who matter most in your life. This makes it easier to see your loved ones but still gives you your own dedicated, private space so you can be nearby for major life events or longer visits.
Lock in Your Expenses
Buying a second home today and locking in your mortgage rate may be a good option if you’re looking to stabilize your housing costs for the long haul. If you’re approaching retirement or are looking to use your second home as your permanent residence in the future, buying that house now with today’s rate and price may be a good financial decision. That way, no matter what happens with rates and prices in years ahead, your monthly payment is locked in for the next 15-30 years.
Bottom Line
Having multiple homes has considerable benefits. If owning a second home is something you’re interested in, let’s connect to explore your options, discuss the benefits, and take the next step to start your home search.
2022-02-22T07:00:00-07:002022-02-22T07:59:55-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8398Real Estate Voted the Best Investment Eight Years in a Row
<img width="750" height="410" src="https://files.mykcm.com/2022/02/18105859/20220221-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Real Estate Voted the Best Investment Eight Years in a Row | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/02/18105859/20220221-KCM-Share.jpg 750w, https://files.mykcm.com/2022/02/18105859/20220221-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2022/02/18105859/20220221-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
In an annual Gallup poll, Americans chose real estate as the best long-term investment. And it’s not the first time it’s topped the list, either. Real estate has been on a winning streak for the past eight years, consistently gaining traction as the best long-term investment (see graph below):
<img loading="lazy" class="aligncenter wp-image-101232" src="https://files.mykcm.com/2022/02/18105653/20220221-MEM-ENG.png" alt="Real Estate Voted the Best Investment Eight Years in a Row | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2022/02/18105653/20220221-MEM-ENG.png 960w, https://files.mykcm.com/2022/02/18105653/20220221-MEM-ENG-600x450.png 600w, https://files.mykcm.com/2022/02/18105653/20220221-MEM-ENG-768x576.png 768w, https://files.mykcm.com/2022/02/18105653/20220221-MEM-ENG-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />If you’re thinking about purchasing a home this year, this poll should reassure you. Even when inflation is rising like it is today, Americans agree an investment like real estate truly shines.
Why Is Real Estate a Great Investment During Times of High Inflation?
With inflation reaching its highest level in 40 years, it’s more important than ever to understand the financial benefits of homeownership. Rising inflation means prices are increasing across the board. That includes goods, services, housing costs, and more. But when you purchase your home, you lock in your monthly housing payments, effectively shielding yourself from increasing housing payments. James Royal, Senior Wealth Management Reporter at Bankrate, explains it like this:
“A fixed-rate mortgage allows you to maintain the biggest portion of housing expenses at the same payment. Sure, property taxes will rise and other expenses may creep up, but your monthly housing payment remains the same.”
If you’re a renter, you don’t have that same benefit, and you aren’t protected from increases in your housing costs, especially rising rents.
History Shows During Inflationary Periods, Home Prices Rise as Well
As a homeowner, your house is an asset that typically increases in value over time, even during inflation. That‘s because, as prices rise, the value of your home does, too. And that makes buying a home a great hedge during periods of high inflation. Natalie Campisi, Advisor Staff for Forbes, notes:
“Tangible assets like real estate get more valuable over time, which makes buying a home a good way to spend your money during inflationary times.”
Bottom Line
Housing truly is a strong investment, especially when inflation is high. When you lock in a mortgage payment, you’re shielded from housing cost increases, and you own an asset that typically gains value with time. If you want to better understand how buying a home could be a great investment for you, let’s connect today.
2022-02-21T07:00:00-07:002022-02-21T08:11:02-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:8133Americans Choose Real Estate as the Best Investment
<img width="1046" height="2199" src="https://files.mykcm.com/2022/01/20142632/20220121-MEM-1046x2199.png" class="attachment-entry size-entry wp-post-image" alt="Americans Choose Real Estate as the Best Investment [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2022/01/20142632/20220121-MEM-1046x2199.png 1046w, https://files.mykcm.com/2022/01/20142632/20220121-MEM-285x600.png 285w, https://files.mykcm.com/2022/01/20142632/20220121-MEM-487x1024.png 487w, https://files.mykcm.com/2022/01/20142632/20220121-MEM-768x1615.png 768w, https://files.mykcm.com/2022/01/20142632/20220121-MEM-731x1536.png 731w, https://files.mykcm.com/2022/01/20142632/20220121-MEM-974x2048.png 974w, https://files.mykcm.com/2022/01/20142632/20220121-MEM-100x210.png 100w, https://files.mykcm.com/2022/01/20142632/20220121-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
According to a Gallup poll, real estate has been rated the best long-term investment for eight years in a row.
Real estate tops the list because you’re not just buying a place to call home – you’re investing in your future. Real estate is typically considered a stable and secure asset that can grow in value over time.
Let’s connect today if you’re ready to make real estate your best investment this year.
2022-01-21T07:00:00-07:002022-01-21T10:29:43-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7881The Average Homeowner Gained $56,700 in Equity over the Past Year
<img width="750" height="410" src="https://files.mykcm.com/2021/12/20121022/20211221-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Average Homeowner Gained over $56,700 in Equity over the Past Year | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/12/20121022/20211221-KCM-Share.jpg 750w, https://files.mykcm.com/2021/12/20121022/20211221-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/12/20121022/20211221-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
When you think of homeownership, what’s the first thing that comes to mind? Chances are you might focus on the non-financial benefits, like the security or stability a home provides. But what about equity? While it can be overlooked, a homeowner’s equity helps build long-term wealth over time. Here’s a look at what equity is and why it matters.
For a homeowner, your equity is the current value of your home minus what you owe on the loan. So, as home values climb, your equity does too. That’s exactly what’s happening today. There aren’t enough homes on the market to meet buyer demand, so bidding wars and multiple offers are driving prices up. That’s because people are willing to pay more to buy a home. Right now, this low supply and high demand are giving current homeowners a significant equity boost.
Dr. Frank Nothaft, Chief Economist at CoreLogic, explains it like this:
“Home price growth is the principal driver of home equity creation. The CoreLogic Home Price Index reported home prices were up 17.7% for the past 12 months ending September, spurring the record gains in home equity wealth.”
To find out just how much rising home values have impacted equity, we turn to the latest Homeowner Equity Insights from CoreLogic. According to that report, the average homeowner’s equity has grown by $56,700 over the last 12 months.
Curious how your state stacks up? Check out the map below to find out the average equity gain for your area.<img loading="lazy" class="aligncenter wp-image-100413" src="https://files.mykcm.com/2021/12/20170247/20211221-MEM-Eng.png" alt="The Average Homeowner Gained over $56,700 in Equity over the Past Year | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/12/20170247/20211221-MEM-Eng.png 1000w, https://files.mykcm.com/2021/12/20170247/20211221-MEM-Eng-600x450.png 600w, https://files.mykcm.com/2021/12/20170247/20211221-MEM-Eng-768x576.png 768w, https://files.mykcm.com/2021/12/20170247/20211221-MEM-Eng-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
How Rising Equity Impacts You<br />
If you’re already a homeowner, equity not only builds your wealth, it also opens doors for you to achieve your goals. It works like this: when you sell your house, the equity you built up comes back to you in the sale. You can use those proceeds to fuel your next move, especially if you’ve decided your needs have changed and you’re looking for something new.
If you’re thinking about becoming a homeowner, understanding the importance of equity can help you realize why homeownership is a worthwhile goal. It builds your wealth and gives you peace of mind that your investment is a wise one, not just from a lifestyle perspective, but from a financial one too.
Bottom Line
Whether you’re a current homeowner or you’re ready to become one, it’s important to know how equity works and why it matters. If this inspires you to make a move, let’s connect to explore your options and find out what steps you need to take next.
2021-12-21T07:00:00-07:002021-12-21T08:38:55-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:76224 Ways Homeowners Can Use Their Equity
<img width="750" height="410" src="https://files.mykcm.com/2021/11/18151516/20211122-KCM-share.jpg" class="attachment-entry size-entry wp-post-image" alt="4 Ways Homeowners Can Use Their Equity | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/11/18151516/20211122-KCM-share.jpg 750w, https://files.mykcm.com/2021/11/18151516/20211122-KCM-share-600x328.jpg 600w, https://files.mykcm.com/2021/11/18151516/20211122-KCM-share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Your equity is a powerful tool that can help you achieve your goals as a homeowner. And chances are, your equity grew substantially over the past year. According to the latest Equity Insights Report from CoreLogic, homeowners gained an average of $51,500 in equity over the past year.
If you’re looking for the best ways to use your growing equity, here are four options:
1. Use Your Equity To Buy a Home That Fits Your Needs
If you’re finding you no longer have the space you need, it might be time to move into a larger home. Or, it’s possible you have too much space and would like something smaller. No matter the situation, consider using your equity to power a move into a home that fits your changing lifestyle. Moving into a larger home can provide extra space for remote work or loved ones. Downsizing, on the other hand, may mean saving time and money by caring for a smaller home.
2. Move to the Location of Your Dreams
If the size of your home isn’t a challenge but your current location is, it could be time to relocate to a new area. Maybe you enjoy vacationing in the mountains, at the beach, or another area, and you’re dreaming of living there year-round. Or perhaps the distance between you and your loved ones is greater than you’d like, and you want to close the gap. No matter what, your home equity can fuel your move to the location where you really want to live.
3. Start a New Business
If you’re not ready to move into a new home, you can use your equity to invest in a new business venture. As the U.S. Small Business Administration Office of Advocacy says:
“There is an estimate of 31.7 million small business owners in the United States, many of them started their business with the equity they had in their home.”
While it’s not recommended that homeowners use their equity for unnecessary spending, leveraging your equity to start a business that you’re passionate about can potentially grow your nest egg further.
4. Fund an Education
Whether you have a loved one preparing to head off to college or you’re planning to go back to school yourself, the thought of paying for higher education can be daunting. In either situation, using a portion of your growing equity can help with those costs, so you can make an investment in someone’s future.
Bottom Line
Your equity can help you achieve your goals. If you’re unsure how much equity you have in your home, let’s connect today so you can start planning your next move.
2021-11-22T07:00:00-07:002021-11-22T08:25:23-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7591Retirement May Be Changing What You Need in a Home
<img width="750" height="410" src="https://files.mykcm.com/2021/11/16112900/20211117-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Retirement May Be Changing What You Need in a Home | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/11/16112900/20211117-KCM-Share.jpg 750w, https://files.mykcm.com/2021/11/16112900/20211117-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/11/16112900/20211117-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
The past year and a half brought about significant life changes for many of us. For some, it meant entering retirement earlier than expected. Recent data shows more people retired this year than anticipated. According to the Schwartz Center for Economic Policy Analysis, 2021 saw a retirement boom:
“At least 1.7 million more older workers than expected retired due to the pandemic recession.”
If you’ve recently retired, your home may not fit your new lifestyle. The good news is, you’ve likely built-up significant equity that can fuel your next move. According to the latest Homeowner Equity Insights report from CoreLogic, homeowners gained more than $50,000 in equity over the past 12 months alone. That, plus today’s sellers’ market, presents a great opportunity to sell your house and address your evolving needs.
You Can Move Closer to the Ones You Love
The 2021 Home Buyers and Sellers Generational Trends report from the National Association of Realtors (NAR) provides a look at the reasons people buy homes. For those reaching retirement age, the number one reason to buy is the opportunity to be closer to loved ones, friends, or relatives.
If you find yourself farther from your loved ones than you’d like to be, retirement and the equity you’ve built in your home may enable you to move closer to the people in your life who matter most.
You Can Find the Right Home for Your Needs
Not only can your equity power a move to a new location, but it can also help you purchase the right size home. Lawrence Yun, Chief Economist at NAR, says many homebuyers 55 and older choose to downsize – or buy a smaller home – when they make a purchase:
“Clearly from the age patterns, young people want to upsize, and the older generation is looking to downsize. . . .”
Whatever your home goals are, a trusted real estate advisor can help you to find the best option for your situation. They’ll help you sell your current home and guide you as you buy your next one while you move into this new phase of life.
Bottom Line
If you’ve recently retired and your needs are changing, you’re not alone. Let’s connect so you can get a better sense of how to find a home that will match your situation.
2021-11-17T07:00:00-07:002021-11-17T08:03:45-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7416Renters Missed Out on $51,500 This Past Year
<img width="750" height="410" src="https://files.mykcm.com/2021/10/29155117/20211101-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Renters Missed Out on $51,500 This Past Year | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/10/29155117/20211101-KCM-Share.jpg 750w, https://files.mykcm.com/2021/10/29155117/20211101-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/10/29155117/20211101-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Rents have increased significantly this year. The latest National Rent Report from Apartmentlist.com shows rents are rising at a rate much higher than the three years leading up to the pandemic:
“Since January of this year, the national median rent has increased by a staggering 16.4 percent. To put that in context, rent growth from January to September averaged just 3.4 percent in the pre-pandemic years from 2017-2019.”
Looking back, we can see rents rising isn’t new. The median rental price has increased consistently over the past 33 years (see graph below):<img loading="lazy" class="aligncenter wp-image-99793" src="https://files.mykcm.com/2021/10/29155119/20211101-MEM-Eng-1.png" alt="Renters Missed Out on $51,500 This Past Year | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/10/29155119/20211101-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/10/29155119/20211101-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/10/29155119/20211101-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/10/29155119/20211101-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />If you’re thinking of renting for another year, consider that rents will likely be even higher next year. But that alone doesn’t paint the picture of the true cost of renting.
The Money Renters Stand To Lose This Year
A homeowner’s monthly mortgage payment pays for their shelter, but it also acts as an investment. That investment grows in the form of equity as a homeowner makes their mortgage payment each month to pay down what they owe on their home loan. Their equity gets an additional boost from home price appreciation, which is at near-record levels this year.
The latest Homeowner Equity Insights report from CoreLogic found homeowners gained significant wealth through their home equity this past year. The research shows:
“. . . the average homeowner gained approximately $51,500 in equity during the past year.”
As a renter, you don’t get the same benefit. Your rent payment only covers the cost of shelter and any included amenities. None of your monthly rent payments come back to you as an investment. That means, by renting this year, you likely paid more in rent than you did in the previous year, and you also missed out on the potential wealth gain of $51,500 you could have had by owning your own home.
Bottom Line
When deciding whether you should rent or buy in the future, keep in mind how much renting can cost you. Another year of renting is another year you’ll pay rising rents and miss out on building your wealth through home equity. Let’s connect today to talk more about the benefits of buying over renting.
2021-11-01T06:00:00-07:002021-11-01T08:24:43-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7334Your Home Equity Is Growing
<img width="1046" height="2053" src="https://files.mykcm.com/2021/10/18091034/20211022-MEM-1046x2053.png" class="attachment-entry size-entry wp-post-image" alt="Your Home Equity Is Growing [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/10/18091034/20211022-MEM-1046x2053.png 1046w, https://files.mykcm.com/2021/10/18091034/20211022-MEM-306x600.png 306w, https://files.mykcm.com/2021/10/18091034/20211022-MEM-522x1024.png 522w, https://files.mykcm.com/2021/10/18091034/20211022-MEM-768x1507.png 768w, https://files.mykcm.com/2021/10/18091034/20211022-MEM-783x1536.png 783w, https://files.mykcm.com/2021/10/18091034/20211022-MEM-1044x2048.png 1044w, https://files.mykcm.com/2021/10/18091034/20211022-MEM-100x196.png 100w, https://files.mykcm.com/2021/10/18091034/20211022-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
If you’re a homeowner, today’s rising equity is great news. On average, homeowners have gained $51,500 in equity since this time last year.
Whether it’s funding an education, fueling your next move, or starting a business, your home equity is a great tool you can use to power your dreams.
Ready to sell? Let’s connect to talk about how you can take advantage of your rising equity to reach your goals.
2021-10-22T06:00:00-07:002021-10-22T06:25:27-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7265The Big Question: Should You Renovate or Move?
<img width="750" height="410" src="https://files.mykcm.com/2021/10/12131853/20211013-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Big Question: Should You Renovate or Move? | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/10/12131853/20211013-KCM-Share.jpg 750w, https://files.mykcm.com/2021/10/12131853/20211013-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/10/12131853/20211013-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
The last 18 months changed what many buyers are looking for in a home. Recently, the American Institute of Architects released their AIA Home Design Trends Survey results for Q3 2021. The survey reveals the following:
70% of respondents want more outdoor living space
69% of respondents want a home office (48% wanted multiple offices)
46% of respondents want a multi-function room/flexible space
42% of respondents want an au pair/in-law suite
39% of respondents want an exercise room/yoga space
If you’re a homeowner who wants to add any of the above, you have two options: renovate your current house or buy a home that already has the spaces you desire. The decision you make could be determined by factors like:
A possible desire to relocate
The difference in the cost of a renovation versus a purchase
Finding an existing home or designing a new home that has exactly what you want (versus trying to restructure the layout of your current house)
In either case, you’ll need access to capital: the funds for the renovation or the down payment your next home would require. The great news is that the money you need probably already exists in your current home in the form of equity.
Home Equity Is Skyrocketing
The record-setting increases in home prices over the last two years dramatically improved homeowners’ equity. The graph below uses data from CoreLogic to show the average home equity gain in the first quarter of the last nine years:<img loading="lazy" class="aligncenter wp-image-99559" src="https://files.mykcm.com/2021/10/12131855/20211013-MEM-Eng-1.png" alt="The Big Question: Should You Renovate or Move? | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/10/12131855/20211013-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/10/12131855/20211013-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/10/12131855/20211013-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/10/12131855/20211013-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />Odeta Kushi, Deputy Chief Economist at First American, quantifies the amount of equity homeowners gained recently:
“Remember U.S. households own nearly $35 trillion in owner-occupied real estate, just over $11 trillion in debt, and the remaining ~$24 trillion in equity. In inflation adjusted terms, homeowners in Q2 had an average of $280,000 in equity- a historic high.”
As a homeowner, the money you need to purchase the perfect home or renovate your current house may be right at your fingertips. However, waiting to make your decision may increase the cost of tapping that equity.
If you decide to renovate, you’ll need to refinance (or take out an equity loan) to access the equity. If you decide to move instead and use your equity as a down payment, you’ll still need to mortgage the remaining difference between the down payment and the cost of your next home.
Mortgage rates are forecast to increase over the next year. Waiting to leverage your equity will probably mean you’ll pay more to do so. According to the latest data from the Federal Housing Finance Agency (FHFA), almost 57% of current mortgage holders have a mortgage rate of 4% or below. If you’re one of those homeowners, you can keep your mortgage rate under 4% by doing it now. If you’re one of the 43% of homeowners with a mortgage rate over 4%, you may be able to do a cash-out refinance or buy a more expensive home without significantly increasing your monthly payment.
First Step: Determine the Amount of Equity in Your Home
If you’re ready to either redesign your current house or find an existing or newly constructed home that has everything you want, the first thing you need to do is determine how much equity you have in your current home. To do that, you’ll need two things:
The current mortgage balance on your home
The current value of your home
You can probably find the mortgage balance on your monthly mortgage statement. To find the current market value of your house, you can pay several hundreds of dollars for an appraisal, or you can contact a local real estate professional who will be able to present to you, at no charge, a professional equity assessment report.
Bottom Line
If the past 18 months have refocused your thoughts on what you want from your house, now may be the time to either renovate or make a move to the perfect home.
2021-10-13T06:00:00-07:002021-10-13T06:36:52-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7246Experts Agree: Homeownership Provides a Path to Long-Term Wealth
<img width="750" height="410" src="https://files.mykcm.com/2021/10/06105145/20211011-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Experts Agree: Homeownership Provides a Path to Long-Term Wealth | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/10/06105145/20211011-KCM-Share.jpg 750w, https://files.mykcm.com/2021/10/06105145/20211011-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/10/06105145/20211011-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
A recent survey from LendingTree.com found there are multiple reasons why Americans would choose to purchase a home instead of renting. Some of the most popular non-financial reasons given include:
The flexibility to make the space your own
The pride homeownership offers
The sense of stability
In the same survey, 41% of respondents say they’d rather own a home than rent because of the unique way homeownership builds wealth over time.
And experts agree – the home you own is an important tool for building your net worth. Here’s what many of those experts have to say about building long-term financial stability through homeownership.
According to the National Association of Realtors (NAR):
“Homeowners who purchased a typical single-family existing-home 30 years ago at the median sales price of $103,333 with a 10% down payment loan and who sold the property at the median sales price of $357,700 in 2021 Q2 accumulated housing wealth of $349,258, . . .”
Mark Fleming, Chief Economist at First American, points out that a home is truly a one-of-a-kind asset. It’s the only asset that’s both an investment and a place for you to call your own.
“The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation. . . . We won’t always have 17% house price appreciation, but we have to take into account the fact that the shelter that you’re owning is an equity-generating or wealth-generating asset.”
Homeowners can leverage the wealth they generate in several ways throughout their life. Tapping into accumulated equity has long been used to pay for the cost of an education, to start a business, or to fund various other expenses. The Joint Center of Housing Studies at Harvard points out:
“. . . by paying down mortgage principal each month and participating in the long-term appreciation of home values, a family can build wealth that can be used for retirement or other needs, including helping the next generation.”
Bottom Line
With home prices expected to continue to appreciate in coming years, homebuyers have an opportunity to start the long-term wealth-building process right now. Let’s connect today if you’re ready to begin your journey on the path to becoming a homeowner.
2021-10-11T06:00:00-07:002021-10-11T07:01:20-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7074Is It Time To Move on to a New Home?
<img width="750" height="410" src="https://files.mykcm.com/2021/09/17121645/20210920-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Is It Time To Move on to a New Home? | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/09/17121645/20210920-KCM-Share.jpg 750w, https://files.mykcm.com/2021/09/17121645/20210920-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/09/17121645/20210920-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
If you’ve been in your home for longer than five years, you’re not alone. According to recent data from First American, homeowners are staying put much longer than historical averages (see graph below):<img loading="lazy" class="aligncenter wp-image-99341" src="https://files.mykcm.com/2021/09/17121647/20210920-MEM-Eng-1.png" alt="Is It Time To Move on to a New Home? | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/09/17121647/20210920-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/09/17121647/20210920-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/09/17121647/20210920-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/09/17121647/20210920-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />As the graph shows, before 2008, homeowners sold their houses after an average of just five years. Today, that number has more than doubled to over 10 years. The housing industry refers to this as your tenure.
To really explore tenure, it’s important to understand what drives people to make a move. An article from The Balance explores some of the primary reasons individuals choose to sell their houses. It says:
“People who move for home-related reasons might need a larger home or a house that better fits their needs, . . . Financial reasons for moving include wanting a nicer home, moving to a newer home to avoid making repairs on the old one, or cashing in on existing equity.”
If you’ve been in your home for longer than the norm, chances are you’re putting off addressing one, if not several, of the reasons other individuals choose to move. If this sounds like you, here are a few things to consider:
If your needs have changed, it may be time to re-evaluate your home.
As the past year has shown, our needs can change rapidly. That means the longer you’ve been in your home, the more likely it is your needs have evolved. The Balance notes several personal factors that could lead to your home no longer meeting your needs, including relationship and job changes.
For example, many workers recently found out they’ll be working remotely indefinitely. If that’s the case for you, you may need more space for a dedicated home office. Other homeowners choose to sell because the number of people living under their roof changes. Now more than ever, we’re spending more and more time at home. As you do, consider if your home really delivers on what you need moving forward.
It’s often financially beneficial to sell your house and move.
One of the biggest benefits of homeownership is the equity your home builds over time. If you’ve been in your house for several years, you may not realize how much equity you have. According to the latest Homeowner Equity Report from CoreLogic, homeowners gained an average of $33,400 in equity over the past year.
That equity, plus today’s low mortgage rates, can fuel a major upgrade when you sell your home and purchase a new one. Or, if you’re looking to downsize, your equity can help provide a larger down payment and lower your monthly payments over the life of your next loan. No matter what, there are significant financial benefits to selling in today’s market.
Bottom Line
If you’ve been in your home for 5-10 years or more, now might be the time to explore your options. Today’s low rates and your built-up equity could provide you with the opportunity to address your evolving needs. If you feel it’s time to sell, let’s connect.
2021-09-20T06:00:00-07:002021-09-20T07:44:02-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:7018Home Price Appreciation Is Skyrocketing in 2021. What About 2022?
<img width="750" height="410" src="https://files.mykcm.com/2021/09/08115511/20210909-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Home Price Appreciation Is Skyrocketing in 2021. What About 2022? | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/09/08115511/20210909-KCM-Share.jpg 750w, https://files.mykcm.com/2021/09/08115511/20210909-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/09/08115511/20210909-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
One of the major story lines over the last year is how well the residential real estate market performed. One key metric in the spotlight is home price appreciation. According to the latest indices, home prices are skyrocketing this year.
Here are the latest percentages showing the year-over-year increase in home price appreciation:
The House Price Index (HPI) from the Federal Housing Finance Agency (FHFA): 18.8%
The S. National Home Price Index from S&P Case-Shiller: 18.6%
The Home Price Insights Report from CoreLogic: 18%
The dramatic increases are seen at every price point and in all regions of the country.
Increases Are Across Every Price Point
According to the latest Home Price Index from CoreLogic, each price range is seeing at least a 19% increase year-over-year:<img loading="lazy" class="aligncenter wp-image-99255" src="https://files.mykcm.com/2021/09/08114824/20210909-MEM-ENG-1.png" alt="Home Price Appreciation Is Skyrocketing in 2021. What About 2022? | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/09/08114824/20210909-MEM-ENG-1.png 960w, https://files.mykcm.com/2021/09/08114824/20210909-MEM-ENG-1-600x450.png 600w, https://files.mykcm.com/2021/09/08114824/20210909-MEM-ENG-1-768x576.png 768w, https://files.mykcm.com/2021/09/08114824/20210909-MEM-ENG-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
Increases Are Across Every Region in the Country
Every region in the country is experiencing at least a 14.9% increase in home price appreciation, according to the Federal Housing Finance Agency (FHFA):<img loading="lazy" class="aligncenter wp-image-99256" src="https://files.mykcm.com/2021/09/08114827/20210909-MEM-ENG-2.png" alt="Home Price Appreciation Is Skyrocketing in 2021. What About 2022? | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/09/08114827/20210909-MEM-ENG-2.png 960w, https://files.mykcm.com/2021/09/08114827/20210909-MEM-ENG-2-600x450.png 600w, https://files.mykcm.com/2021/09/08114827/20210909-MEM-ENG-2-768x576.png 768w, https://files.mykcm.com/2021/09/08114827/20210909-MEM-ENG-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
Increases Are Across Each of the Top 20 Metros in the Country
According to the U.S. National Home Price Index from S&P Case-Shiller, every major metro is seeing at least a 13.3% growth in prices (see graph below):<img loading="lazy" class="aligncenter wp-image-99257" src="https://files.mykcm.com/2021/09/08114848/20210909-MEM-ENG-3.png" alt="Home Price Appreciation Is Skyrocketing in 2021. What About 2022? | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/09/08114848/20210909-MEM-ENG-3.png 960w, https://files.mykcm.com/2021/09/08114848/20210909-MEM-ENG-3-600x450.png 600w, https://files.mykcm.com/2021/09/08114848/20210909-MEM-ENG-3-768x576.png 768w, https://files.mykcm.com/2021/09/08114848/20210909-MEM-ENG-3-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
What About Price Appreciation in 2022?
Prices are the result of the balance between supply and demand. The demand for single-family homes has been strong over the last 18 months. The supply of houses available for sale was near historic lows. However, there’s some good news on the supply side. Realtor.com reports:
“432,000 new listings hit the national housing market in August, an increase of 18,000 over last year.”
There will, however, still be a shortage of supply compared to demand in 2022. CoreLogic reveals:
“Given the widespread demand and considering the number of standalone homes built during the past decade, the single-family market is estimated to be undersupplied by 4.35 million units by 2022.”
Yet, most forecasts call for home price appreciation to moderate in 2022. The Home Price Expectation Survey, a survey of over 100 economists, investment strategists, and housing market analysts, calls for a 5.12% appreciation level next year. Here are the 2022 home appreciation forecasts from the four other major entities:
The National Association of Realtors (NAR): 4.4%
The Mortgage Bankers Association (MBA): 8.4%
Fannie Mae: 5.1%
Freddie Mac: 5.3%
Price appreciation is expected to slow in 2022 when compared to the record highs of 2021. However, it is still expected to be greater than the annual average of 4.1% over the last 25 years.
Bottom Line
If you owned a home over the past year, you’ve seen your household wealth grow substantially, and you’ll see another nice boost in 2022. If you’re thinking of buying, consider buying now as prices are forecast to continue increasing through at least next year.
2021-09-09T06:00:00-07:002021-09-09T10:46:46-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6870The Difference in Net Worth Between Homeowners and Renters Is Widening
<img width="750" height="410" src="https://files.mykcm.com/2021/08/25162102/20210830-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Difference in Net Worth Between Homeowners and Renters Is Widening | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/08/25162102/20210830-KCM-Share.jpg 750w, https://files.mykcm.com/2021/08/25162102/20210830-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/08/25162102/20210830-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Becoming financially secure is an important goal for many people today, but some don’t realize just how much homeownership can help them achieve that dream. A recent report, The Journey Toward Financial Freedom, surveys Americans about their perspective on financial wellness and their goals. It shows there may be a significant misconception about the role owning a home plays in building wealth:
“Home ownership is one of the indicators Americans say is least connected to financial health.”
Two major personal wealth goals – homeownership and net worth – work hand-in-hand. Below are just a few reasons why, if you’re looking for financial security, homeownership should be a top priority.
Homeownership Is an Important Cornerstone of Building Wealth
Every three years, the Federal Reserve releases the Survey of Consumer Finances which highlights the difference in wealth between homeowners and renters. The graph below shows the findings across the previous surveys including the latest data (2019), and the results are staggering:<img loading="lazy" class="aligncenter wp-image-99152" src="https://files.mykcm.com/2021/08/25162108/20210830-MEM-Eng-1.png" alt="The Difference in Net Worth Between Homeowners and Renters Is Widening | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/08/25162108/20210830-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/08/25162108/20210830-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/08/25162108/20210830-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/08/25162108/20210830-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />As the graph illustrates, the gap between homeowners and renters continues to widen. That’s because homeownership contributes massively to an individual’s overall net worth. Odeta Kushi, Deputy Chief Economist at First American, highlights this idea:
“. . . between 2016 and 2019, housing wealth was the single biggest contributor to the increase in net worth across all income groups . . . .”
When we look even closer at the most recent data from 2019, the average homeowner’s net worth is more than 40 times greater than that of the average renter (see graph below):<img loading="lazy" class="aligncenter wp-image-99151" src="https://files.mykcm.com/2021/08/25162105/20210830-MEM-Eng-2.png" alt="The Difference in Net Worth Between Homeowners and Renters Is Widening | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/08/25162105/20210830-MEM-Eng-2.png 1000w, https://files.mykcm.com/2021/08/25162105/20210830-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/08/25162105/20210830-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/08/25162105/20210830-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />The gap exists in large part because homeowners build equity as their home appreciates in value and they pay off a portion of their mortgage each month. When you own your home, your monthly mortgage payment is, in essence, forced savings that come back to you when you sell your home or refinance. As a renter, you’ll never see a return on the money you pay out in rent every month.
If you’re ready to start building your net worth, the current real estate market offers several opportunities you should consider. For example, with today’s low mortgage rates, your purchasing power may be higher now than it has been in some time. That means there may be no better time than now to start working towards your homeownership goals – especially since rates are anticipated to rise in the coming months.
Bottom Line
Owning a home provides one of the strongest foundations for building individual wealth and lasting financial security. If you’re ready to start your path towards homeownership, let’s connect today.
2021-08-30T06:00:00-07:002021-08-30T06:41:06-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6791Options for First-Time Homebuyers
<img width="1046" height="2452" src="https://files.mykcm.com/2021/08/19144631/20210820-MEM-1046x2452.png" class="attachment-entry size-entry wp-post-image" alt="Options for First-Time Homebuyers [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/08/19144631/20210820-MEM-1046x2452.png 1046w, https://files.mykcm.com/2021/08/19144631/20210820-MEM-256x600.png 256w, https://files.mykcm.com/2021/08/19144631/20210820-MEM-437x1024.png 437w, https://files.mykcm.com/2021/08/19144631/20210820-MEM-768x1800.png 768w, https://files.mykcm.com/2021/08/19144631/20210820-MEM-655x1536.png 655w, https://files.mykcm.com/2021/08/19144631/20210820-MEM-874x2048.png 874w, https://files.mykcm.com/2021/08/19144631/20210820-MEM-100x234.png 100w, https://files.mykcm.com/2021/08/19144631/20210820-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
With a housing market this competitive, sometimes you have to think outside the box.
Work with your trusted real estate advisors to do things like assess your budget, expand your search radius, look into other options, and determine your true needs.
If you’re having trouble finding your first home, let’s connect to explore your options. It’s out there!
2021-08-20T06:00:00-07:002021-08-20T07:49:46-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6774Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand
<img width="750" height="410" src="https://files.mykcm.com/2021/08/17115358/20210818-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/08/17115358/20210818-KCM-Share.jpg 750w, https://files.mykcm.com/2021/08/17115358/20210818-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/08/17115358/20210818-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
One of the major questions real estate experts are asking today is whether prospective homebuyers still believe purchasing a home makes sense. Some claim rapidly rising home prices are impacting demand and, by extension, leading to the recent slowdown in sales activity.
However, demand isn’t the real issue. Instead, it’s the lack of supply (homes available for sale). An article from the Wall Street Journal shows this is true for new home construction:
“Home builders have sold more homes than they can build. Now they are limiting their sales in an effort to catch up.”
The article quotes David Auld, CEO of D.R. Horton Inc. (the largest homebuilder by volume in the United States since 2002), explaining how they don’t have enough homes for the number of buyers coming into their models:
“Through our history, to have somebody walk into our models and to tell them, ‘We don’t have a house for you to buy today’, is something that is foreign to us.”
Danielle Hale, Chief Economist for realtor.com, also explains that, in the existing home sale market, the slowdown in sales was a supply challenge, not a lack of demand. Responding to a recent uptick in listings coming to market, she notes:
“. . . if these changing inventory dynamics continue, we could see a wave of real estate activity heading into the latter part of the year.”
Again, the buyers are there. We just need houses to sell to them.
If the slowdown in sales was the result of demand waning, we would start to see home prices beginning to moderate – but this isn’t the case. As Mark Fleming, Chief Economist for First American, explains:
“There’s a lot of conversation around rising prices and falling quantity in the housing market, and there’s this concept, or this idea, that it’s a demand-side problem . . . . But, if demand were falling dramatically, we would actually see less price pressure, less home price growth.”
Instead, we’re seeing price appreciation accelerate throughout this year, as evidenced by the year-over-year percentage increases reported by CoreLogic:
January: 10%
February: 10.4%
March: 11.3%
April: 13%
May: 15.4%
June: 17.2%
(July numbers are not yet available)
There’s a shortage of listings, not buyers, and there are three very good reasons for purchasers to still be interested in buying a home this year.
1. Affordability isn’t the challenge some are claiming it to be.
Though home prices have risen dramatically over the last 18 months, mortgage rates remain near historic lows. Because of these near-record rates, monthly mortgage payments are affordable for most buyers.
While homes are less affordable than they were last year, when we adjust for inflation, we can see they’re also more affordable than they were in the 1970s, 1980s, 1990s, and much of the 2000s.
2. Owning is a better long-term decision than renting.
A recent study shows renting a home takes up a higher percentage of a household’s income than owning one. According to the analysis, here’s the percentage of income homebuyers and renters should expect to pay now versus at the end of the year.<img loading="lazy" class="aligncenter wp-image-99010" src="https://files.mykcm.com/2021/08/17115400/20210818-MEM-Eng-1.png" alt="Real Estate: It’s Still a Lack of Supply, Not a Lack of Demand | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/08/17115400/20210818-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/08/17115400/20210818-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/08/17115400/20210818-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/08/17115400/20210818-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />While the principal and interest of a monthly mortgage payment remain the same over the lifetime of the loan, rents increase almost every year.
3. Owners build their wealth. Renters build their landlord’s wealth.
Whether you’re a homeowner or an investor, real estate builds wealth through growing equity year-over-year. If you own, your household is gaining the benefit of that wealth accumulation. Fleming says:
“The major financial advantage of homeownership is the accumulation of equity in the form of house price appreciation . . . . We have to take into account the fact that the shelter that you’re owning is an equity-generating or wealth-generating asset.”
Odeta Kushi, Deputy Chief Economist at First American, elaborates in a recent article:
“. . . once the home is purchased, appreciation helps build equity in the home, and becomes a benefit rather than a cost. When accounting for the appreciation benefit in our rent versus own analysis, it was cheaper to own in every one of the top 50 markets, including the two most expensive rental markets, San Francisco and San Jose, Calif.”
Today, that equity buildup is substantial. The National Association of Realtors (NAR) reports:
“The median sales price of single-family existing homes rose in 99% of measured metro areas in the second quarter of 2021 compared to one year ago, with double-digit price gains in 94% of markets.”
In 94% of markets, there was a greater than 10% increase in median price. That means if you bought a $400,000 home in one of those markets, your net worth increased by at least $40,000. If you rented, the landlord was the recipient of the wealth increase.
Bottom Line
For many reasons, housing demand is still extremely strong. What we need is more supply (house listings) to meet that demand.
2021-08-18T06:00:00-07:002021-08-18T06:23:28-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6757A Look at Home Price Appreciation and What It Means for Sellers
<img width="750" height="410" src="https://files.mykcm.com/2021/08/12135716/20210816-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="A Look at Home Price Appreciation and What It Means for Sellers | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/08/12135716/20210816-KCM-Share.jpg 750w, https://files.mykcm.com/2021/08/12135716/20210816-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/08/12135716/20210816-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
When you hear the phrase home price appreciation, what does it mean to you? Through context clues alone, chances are you know it has to do with rising home prices. And as a seller, you know rising home prices are good news for your potential sale. But let’s look past the dollar signs and dive deeper into the concept. To truly understand home price appreciation, you need to know how it works and why it matters to you.
Investopedia defines appreciation like this:
“Appreciation, in general terms, is an increase in the value of an asset over time. The increase can occur for a number of reasons, including increased demand or weakening supply, or as a result of changes in inflation or interest rates. This is the opposite of depreciation, which is a decrease in value over time.”
When we consider this definition and how it applies to real estate, a few words stick out: supply and demand. In today’s real estate market, we’re experiencing high buyer demand and very few sellers listing their homes for sale (see maps below):<img loading="lazy" class="aligncenter wp-image-98986" src="https://files.mykcm.com/2021/08/12135719/20210816-MEM-Eng-1.png" alt="A Look at Home Price Appreciation and What It Means for Sellers | MyKCM" width="600" height="338" srcset="https://files.mykcm.com/2021/08/12135719/20210816-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/08/12135719/20210816-MEM-Eng-1-600x338.png 600w, https://files.mykcm.com/2021/08/12135719/20210816-MEM-Eng-1-768x432.png 768w, https://files.mykcm.com/2021/08/12135719/20210816-MEM-Eng-1-100x56.png 100w" sizes="(max-width: 600px) 100vw, 600px" />No matter the industry, anytime there’s more demand than supply, prices naturally rise. It happens because buyers are willing to pay more to secure the scarce product or service they’re looking for. That’s exactly what’s happening in today’s real estate market. Buyers are competing with one another to purchase a home, leading to bidding wars that drive prices up. For sellers, the rising prices mean that opportunity is knocking.
According to Quicken Loans, the national average home price appreciation rate is between 3-5% in a typical year. Today, home prices are appreciating well beyond the norm thanks to high demand. Here are the latest expert projections on the rate of home price appreciation for this year (see chart below):<img loading="lazy" class="aligncenter wp-image-98987" src="https://files.mykcm.com/2021/08/12135722/20210816-MEM-Eng-2.png" alt="A Look at Home Price Appreciation and What It Means for Sellers | MyKCM" width="600" height="338" srcset="https://files.mykcm.com/2021/08/12135722/20210816-MEM-Eng-2.png 1000w, https://files.mykcm.com/2021/08/12135722/20210816-MEM-Eng-2-600x338.png 600w, https://files.mykcm.com/2021/08/12135722/20210816-MEM-Eng-2-768x432.png 768w, https://files.mykcm.com/2021/08/12135722/20210816-MEM-Eng-2-100x56.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
Compared to the normal pace of 3-5% appreciation per year, the current average forecast of nearly 11.5% is significant.
For sellers, this means that with the current rise in prices, your house may be worth more than you realize. That price appreciation helps give your equity a boost. Equity is the difference between what you owe on the home and its market value based on factors like price appreciation. It works like this (see chart below):<img loading="lazy" class="aligncenter wp-image-98988" src="https://files.mykcm.com/2021/08/12135724/20210816-MEM-Eng-3.png" alt="A Look at Home Price Appreciation and What It Means for Sellers | MyKCM" width="600" height="338" srcset="https://files.mykcm.com/2021/08/12135724/20210816-MEM-Eng-3.png 1000w, https://files.mykcm.com/2021/08/12135724/20210816-MEM-Eng-3-600x338.png 600w, https://files.mykcm.com/2021/08/12135724/20210816-MEM-Eng-3-768x432.png 768w, https://files.mykcm.com/2021/08/12135724/20210816-MEM-Eng-3-100x56.png 100w" sizes="(max-width: 600px) 100vw, 600px" />You can use your built-up equity to power a move into your dream home, or you can put it toward life-changing goals like funding an education or opening a business.
But don’t wait. While price appreciation is strong now, those same experts say it’ll start to appreciate at a more normalized pace next year. If you list your house sooner rather than later, you’ll be in a better position to capitalize on the higher-than-average home price appreciation we’re seeing today.
Bottom Line
If you’re thinking of selling your house, there really is no time like the present. Let’s connect so you can get an expert market analysis of your home and its potential.
2021-08-16T06:00:00-07:002021-08-16T06:26:32-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6753The Best Use of Time (and Money) When It Comes to Renovations
<img width="750" height="410" src="https://files.mykcm.com/2021/08/11133833/20210812-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Best Use of Time (and Money) When It Comes to Renovations | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/08/11133833/20210812-KCM-Share.jpg 750w, https://files.mykcm.com/2021/08/11133833/20210812-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/08/11133833/20210812-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
In the current sellers’ market, many homeowners wonder what, if anything, needs to be remodeled before they list their house. That’s where a trusted real estate professional comes in. They can help you think through today’s market conditions and how they impact what you should – and shouldn’t – renovate before selling.
Here are some considerations a professional will guide you through:
1. With current supply challenges, buyers may be willing to take on projects of their own.
A more balanced market typically sees a 6-month supply of homes for sale. Above that, and we’re in a buyers’ market. Below that, and we’re in a <a href="https://www.mykcm.com/2021/03/29/what-it-means-to-be-in-a-sellers-market/" title="sellers’ market">sellers’ market</a>. According to a recent <a href="https://www.nar.realtor/newsroom/existing-home-sales-expand-1-4-in-june" title="report" target="_blank" rel="noopener noreferrer">report</a> by the National Association of Realtors (NAR), our current supply of homes for sale, while rising, still remains solidly in sellers’ market territory:
“Unsold inventory sits at a 2.6-month supply at the current sales pace, modestly up from May’s 2.5-month supply but down from 3.9 months in June 2020.”
So, what’s that mean for you? If you’re a seller trying to decide whether or not to renovate, this is especially important because it’s indicative of buyer behavior. When there <a href="https://www.mykcm.com/2021/07/13/why-this-isnt-your-typical-summer-housing-market/" title="aren’t enough homes">aren’t enough homes</a> for sale, buyers may be more willing to purchase a home that doesn’t meet all their needs and renovate it themselves later.
2. Not all renovation projects are equal.
You don’t want to spend <a href="https://www.mykcm.com/2021/05/28/homes-across-the-country-are-selling-fast-infographic-3/" title="time">time</a> and money on a project that isn’t worth the cost or is too niche design-wise for some homebuyers. According to an article by <a href="https://www.renofi.com/blog/home-renovation-trends-2021/" title="Renofi.com" target="_blank" rel="noopener noreferrer">Renofi.com</a>, basing home updates on what’s trendy right now can be a costly mistake:
“The last thing you as a homeowner want to do is center your home design around a passing fad – even worse, one thats design quality won’t last a good while.”
Before making any decisions, talk to your real estate advisor. They have insight into what other sellers are doing before listing their homes and how buyers are reacting to those upgrades. Don’t spend the time and money to be trendy – if your buyer wants to upgrade to the newest fad later, they can.
3. If you’ve already made upgrades this past year, your agent can help spotlight them.
If you have already completed some renovations on your house, you’re not alone. The pandemic kept people at home last year, and during that time, many homeowners completed some home improvement projects. HomeAdvisor’s 2021 <a href="https://www.homeadvisor.com/r/wp-content/uploads/2021/02/DP6428-TrueCostReport-2021-FINAL.pdf" title="State of Home Spending Report" target="_blank" rel="noopener noreferrer">State of Home Spending Report</a> found:
“35% of households that completed an improvement project undertook some type of interior painting, while 31% completed a bathroom remodel and 26% installed new flooring.”
Let your real estate professional know if you fall in this category. They can highlight any recent upgrades you’ve made in your house’s listing.
Bottom Line
When it comes to renovations, your return-on-investment should be top of mind. Let’s connect today to talk through any upgrades you’ve already made and to find out what you should prioritize before you sell to maximize your house’s potential.
2021-08-12T06:54:00-07:002021-08-13T06:56:08-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:66504 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures
<img width="750" height="410" src="https://files.mykcm.com/2021/07/27160850/20210728-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/27160850/20210728-KCM-Share.jpg 750w, https://files.mykcm.com/2021/07/27160850/20210728-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/07/27160850/20210728-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
With forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like what happened after the housing bubble 15 years ago. Here are four reasons why that won’t happen.
1. There are fewer homeowners in trouble this time
After the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they simply gave it back to the bank.
As stay-at-home orders were issued early last year, the overwhelming fear was the pandemic would decimate the housing industry in a similar way. Many experts projected 30% of all mortgage holders would enter the forbearance program. Only 8.5% actually did, and that number is now down to 3.5%.
As of last Friday, the total number of mortgages still in forbearance stood at 1,863,000. That’s definitely a large number, but nowhere near 9.3 million.
2. Most of the 1.86M in forbearance have enough equity to sell their home
Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity in their homes. The 10% equity number is important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create.
The remaining 13% might not all have the option to sell, so if the entire 13% of the 1.86M homes went into foreclosure, that would total 241,800 mortgages. To give that number context, here are the annual foreclosure numbers of the three years leading up to the pandemic:
2017: 314,220
2018: 279,040
2019: 277,520
The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. The number does, however, draw a similar comparison to the three years prior to the pandemic.
3. The current market can absorb any listings coming to the market
When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a 9-month supply of listings for sale. Today, that number stands at less than 3 months of inventory on the market.
As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains when addressing potential foreclosures emerging from the forbearance program:
“Any foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines.”
4. Those in power will do whatever is necessary to prevent a wave of foreclosures
Just last Friday, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. Here are two examples mentioned in the release:
“For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower.”
“The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.”
When evaluating the four reasons above, it’s clear there won’t be a flood of foreclosures coming to the market as the forbearance program winds down.
Bottom Line
As Ivy Zelman, founder of the major housing market analytical firm Zelman & Associates, notes:
“The likelihood of us having a foreclosure crisis again is about zero percent.”
2021-07-28T06:00:00-07:002021-07-29T06:40:35-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6617Pop Quiz: Can You Define These Key Terms in Today’s Housing Market?
<br class="Apple-interchange-newline" /><img width="1046" height="2651" src="https://files.mykcm.com/2021/07/22135823/20210723-MEM-1046x2651.png" class="attachment-entry size-entry wp-post-image" alt="Pop Quiz: Can You Define These Key Terms in Today’s Housing Market? [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/22135823/20210723-MEM-1046x2651.png 1046w, https://files.mykcm.com/2021/07/22135823/20210723-MEM-237x600.png 237w, https://files.mykcm.com/2021/07/22135823/20210723-MEM-404x1024.png 404w, https://files.mykcm.com/2021/07/22135823/20210723-MEM-768x1947.png 768w, https://files.mykcm.com/2021/07/22135823/20210723-MEM-606x1536.png 606w, https://files.mykcm.com/2021/07/22135823/20210723-MEM-808x2048.png 808w, https://files.mykcm.com/2021/07/22135823/20210723-MEM-100x253.png 100w, https://files.mykcm.com/2021/07/22135823/20210723-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
The language of buying and selling a home may sound scary at first, but knowing how key terms relate to today’s market can help you. For example, current low mortgage rates and higher wages positively impact affordability for buyers, while home price appreciation continues to grow home equity, which sellers can use to fuel a move up.
Terms like appraisal (what lenders rely on to validate a home’s value) and contingencies (which buyers can minimize to make their offer stand out) directly impact the transaction.
You don’t need to be fluent in the language of the market to buy or sell. Instead, let’s connect today so that we can translate the process together.
2021-07-23T06:00:00-07:002021-07-23T08:23:12-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6610Today’s Real Estate Market Explained Through 4 Key Trends
<img width="750" height="410" src="https://files.mykcm.com/2021/07/21151200/20210722-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Today’s Real Estate Market Explained Through 4 Key Trends | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/21151200/20210722-KCM-Share.jpg 750w, https://files.mykcm.com/2021/07/21151200/20210722-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/07/21151200/20210722-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
As we move into the second half of the year, one thing is clear: the current real estate market is one for the record books. The exact mix of conditions we have today creates opportunities for both buyers and sellers. Here’s a look at four key components that are shaping this unprecedented market.
A Shortage of Homes for Sale
Earlier this year, the number of homes available for sale fell to an all-time low. In recent months, however, inventory levels are starting to trend up. The latest Monthly Housing Market Trends Report from realtor.com says:
“In June, newly listed homes grew by 5.5% on a year-over-year basis, and by 10.9% on a month-over-month basis. Typically, fewer newly listed homes appear on the market in the month of June compared to May. This year, growth in new listings is continuing later into the summer season, a welcome sign for a tight housing market.”
This is good news for buyers who crave more options. But even though we’re experiencing small gains in the number of available homes for sale, inventory remains a challenge in most states. That’s why it’s still a sellers’ market, giving homeowners immense leverage when they decide to make a move.
Buyer Competition and Bidding Wars
Today’s ongoing low supply, coupled with high demand, creates a market characterized by high buyer competition and bidding wars. Buyers are going above and beyond to make sure their offer stands out from the crowd by offering over the asking price, all cash, or waiving some contingencies. The number of offers on the average house for sale broke records this year – and that’s great news for sellers.
The latest Confidence Index from the National Association of Realtors (NAR) says the average home for sale receives five offers (see graph below):<img loading="lazy" class="aligncenter wp-image-98703" src="https://files.mykcm.com/2021/07/21151156/202010722-MEM-Eng-1.png" alt="Today’s Real Estate Market Explained Through 4 Key Trends | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/07/21151156/202010722-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/07/21151156/202010722-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/07/21151156/202010722-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/07/21151156/202010722-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />For buyers, the best way to put a compelling offer together is by working with a local real estate professional. That agent can act as your trusted advisor on what terms are best for you and what’s most appealing to the seller.
Home Price Appreciation
The competition among buyers is driving prices up. Over the past year, we’ve seen home price appreciation rise across the country. According to the most recent Home Price Index (HPI) from CoreLogic, national home prices increased 15.4% year-over-year in May:
“The May 2021 HPI gain was up from the May 2020 gain of 4.2% and was the highest year-over-year gain since November 2005. Low mortgage rates and low for-sale inventory drove the increase in home prices.”
Rising home values are a big part of why real estate remains one of the top sought-after investments for Americans. For potential sellers, it also means it’s a great time to list your house to maximize the return on your investment.
A Rise in Home Values and Equity
The equity in a home doesn’t just grow when a homeowner pays their mortgage – it also grows as the home’s value appreciates. Thanks to the jump in price appreciation, homeowners across the country are seeing record-breaking gains in home equity. CoreLogic recently reported:
“…homeowners with mortgages (which account for roughly 62% of all properties) have seen their equity increase by 19.6% year over year, representing a collective equity gain of over $1.9 trillion, and an average gain of $33,400 per borrower, since the first quarter of 2020.”
That’s a major perk for households to leverage. Homeowners can use that equity to accomplish major life goals or move into their dream homes.
Bottom Line
If you’re thinking about buying or selling, there’s no time like the present. Let’s connect to talk about how you can take advantage of the conditions we’re seeing today to meet your homeownership goals.
2021-07-22T06:00:00-07:002021-07-22T06:24:17-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:65983 Charts That Show This Isn’t a Housing Bubble
<img width="750" height="410" src="https://files.mykcm.com/2021/07/19150730/20210720-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="3 Charts That Show This Isn’t a Housing Bubble | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/19150730/20210720-KCM-Share.jpg 750w, https://files.mykcm.com/2021/07/19150730/20210720-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/07/19150730/20210720-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
With home prices continuing to deliver double-digit increases, some are concerned we’re in a housing bubble like the one in 2006. However, a closer look at the market data indicates this is nothing like 2006 for three major reasons.
1. The housing market isn’t driven by risky mortgage loans.
Back in 2006, nearly everyone could qualify for a loan. The Mortgage Credit Availability Index (MCAI) from the Mortgage Bankers’ Association is an indicator of the availability of mortgage money. The higher the index, the easier it is to obtain a mortgage. The MCAI more than doubled from 2004 (378) to 2006 (869). Today, the index stands at 130. As an example of the difference between today and 2006, let’s look at the volume of mortgages that originated when a buyer had less than a 620 credit score.<img loading="lazy" class="aligncenter wp-image-98641" src="https://files.mykcm.com/2021/07/19150732/20210720-MEM-Eng-1.png" alt="3 Charts That Show This Isn’t a Housing Bubble | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/07/19150732/20210720-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/07/19150732/20210720-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/07/19150732/20210720-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/07/19150732/20210720-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />Dr. Frank Nothaft, Chief Economist for CoreLogic, reiterates this point:
“There are marked differences in today’s run up in prices compared to 2005, which was a bubble fueled by risky loans and lenient underwriting. Today, loans with high-risk features are absent and mortgage underwriting is prudent.”
2. Homeowners aren’t using their homes as ATMs this time.
During the housing bubble, as prices skyrocketed, people were refinancing their homes and pulling out large sums of cash. As prices began to fall, that caused many to spiral into a negative equity situation (where their mortgage was higher than the value of the house).
Today, homeowners are letting their equity build. Tappable equity is the amount available for homeowners to access before hitting a maximum 80% combined loan-to-value ratio (thus still leaving them with at least 20% equity). In 2006, that number was $4.6 billion. Today, that number stands at over $8 billion.
Yet, the percentage of cash-out refinances (where the homeowner takes out at least 5% more than their original mortgage amount) is half of what it was in 2006.<img loading="lazy" class="aligncenter wp-image-98642" src="https://files.mykcm.com/2021/07/19150734/20210720-MEM-Eng-2.png" alt="3 Charts That Show This Isn’t a Housing Bubble | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/07/19150734/20210720-MEM-Eng-2.png 1000w, https://files.mykcm.com/2021/07/19150734/20210720-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/07/19150734/20210720-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/07/19150734/20210720-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
3. This time, it’s simply a matter of supply and demand.
FOMO (the Fear Of Missing Out) dominated the housing market leading up to the 2006 housing bubble and drove up buyer demand. Back then, housing supply more than kept up as many homeowners put their houses on the market, as evidenced by the over seven months’ supply of existing housing inventory available for sale in 2006. Today, that number is barely two months.
Builders also overbuilt during the bubble but pulled back significantly over the next decade. Sam Khater, VP and Chief Economist, Economic & Housing Research at Freddie Mac, explains that pullback is the major factor in the lack of available inventory today:
“The main driver of the housing shortfall has been the long-term decline in the construction of single-family homes.”
Here’s a chart that quantifies Khater’s remarks:<img loading="lazy" class="aligncenter wp-image-98643" src="https://files.mykcm.com/2021/07/19150737/20210720-MEM-Eng-3.png" alt="3 Charts That Show This Isn’t a Housing Bubble | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/07/19150737/20210720-MEM-Eng-3.png 1000w, https://files.mykcm.com/2021/07/19150737/20210720-MEM-Eng-3-600x450.png 600w, https://files.mykcm.com/2021/07/19150737/20210720-MEM-Eng-3-768x576.png 768w, https://files.mykcm.com/2021/07/19150737/20210720-MEM-Eng-3-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />Today, there are simply not enough homes to keep up with current demand.
Bottom Line
This market is nothing like the run-up to 2006. Bill McBride, the author of the prestigious Calculated Risk blog, predicted the last housing bubble and crash. This is what he has to say about today’s housing market:
“It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while because Millennials need houses. Prices will keep rising for a while because inventory is so low.”
2021-07-20T06:00:00-07:002021-07-20T06:42:58-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6518Your Home Equity Can Take You Places
<img width="1046" height="2095" src="https://files.mykcm.com/2021/07/08155756/20210709-MEM-1046x2095.png" class="attachment-entry size-entry wp-post-image" alt="Your Home Equity Can Take You Places [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/08155756/20210709-MEM-1046x2095.png 1046w, https://files.mykcm.com/2021/07/08155756/20210709-MEM-300x600.png 300w, https://files.mykcm.com/2021/07/08155756/20210709-MEM-511x1024.png 511w, https://files.mykcm.com/2021/07/08155756/20210709-MEM-768x1538.png 768w, https://files.mykcm.com/2021/07/08155756/20210709-MEM-767x1536.png 767w, https://files.mykcm.com/2021/07/08155756/20210709-MEM-1022x2048.png 1022w, https://files.mykcm.com/2021/07/08155756/20210709-MEM-100x200.png 100w, https://files.mykcm.com/2021/07/08155756/20210709-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
The amount of wealth Americans have stored in their homes has increased astronomically.
On average, homeowners gained $33,400 in equity over the last 12 months, and the average equity on mortgaged homes is now $216,000.
When it’s time to sell, your home equity can help accomplish your goals. Let’s connect to discuss how you can take advantage of today’s sellers’ market to get the most out of your home sale.
2021-07-09T06:00:00-07:002021-07-09T07:06:32-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6508The Truths Young Homebuyers Need To Hear
<img width="750" height="410" src="https://files.mykcm.com/2021/07/06103625/20210707-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="The Truths Young Homebuyers Need To Hear | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/06103625/20210707-KCM-Share.jpg 750w, https://files.mykcm.com/2021/07/06103625/20210707-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/07/06103625/20210707-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
For many young or first-time homebuyers, purchasing a home can feel intimidating. A recent survey shows some homebuyers ages 25 to 40 may be unsure about the homebuying process and what they can afford. It found:
“1 in 4 underestimated their buying potential by $150k or more”
“1 in 4 underestimated the increase in value by $100k or more”
“47% don’t know what a good interest rate is”
Because they feel uncertain, many young homebuyers have given up on their search, or worse, they’ve decided homebuying isn’t for them and never started on their journey to begin with.
If you’re interested in buying but aren’t sure where to begin, here are three key concepts about homeownership you should understand before you get started.
1. What You Need To Know About Down Payments
Saving for a down payment is sometimes viewed as one of the biggest obstacles for homebuyers, but that doesn’t have to be the case. As Freddie Mac says:
“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”
According to the most recent Home Buyers and Sellers Generational Trends Report from the National Association of Realtors (NAR), the median down payment for homes purchased between July 2019 and June 2020 was only 12%. That number is even lower when we control for age – for buyers in the 22 to 30 age range, the median down payment was only 6%.
2. You May Be Able To Afford More Home Than You Think
Working remotely, exercising, and generally spending more time than ever in our homes has changed what many people are looking for in their living space. However, some young homebuyers don’t feel they can afford a home that suits their growing needs and have decided to continue renting instead. That means they’ll miss out on some of the long-term benefits of owning a home. As an article recently published by NAR points out:
“Many young adults are underestimating how much they need for homeownership, the survey finds. Millennials underestimated how much home they can afford right now, how much interest they would pay over a 30-year mortgage, and how much home values appreciate, on average, over 10 years…”
Knowing how much home you can afford when starting the buying process is critical and could be the game-changer that gets you from renting to buying.
3. Homeownership Will Become Less Affordable the Longer You Wait
Finally, with mortgage rates starting to rise along with home prices appreciating, putting off buying a home now could cost you much more later. Sam Khater, Chief Economist at Freddie Mac, notes:
“As the economy progresses and inflation remains elevated, we expect that rates will continually rise in the second half of the year.”
Most experts forecast interest rates will rise in the months ahead, and even the smallest increase can influence your buying power. If you’ve been on the fence about buying a home, there’s no time like the present.
Bottom Line
If you feel overwhelmed by the prospect of starting your home search, you’re not alone. Let’s connect today so we can talk more about the process, what you’ll need to start your search, and what to expect.
2021-07-07T06:00:00-07:002021-07-07T07:25:53-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6479A Look at Home Price Appreciation Through 2025
<img width="750" height="410" src="https://files.mykcm.com/2021/07/02143314/20210706-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="A Look at Home Price Appreciation Through 2025 | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/07/02143314/20210706-KCM-Share.jpg 750w, https://files.mykcm.com/2021/07/02143314/20210706-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/07/02143314/20210706-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Home prices have increased significantly over the last year, which in turn has grown the net worth of homeowners. Appreciation and home equity are directly linked – as the value of a home increases, so does a homeowner’s equity. And with these recent gains, homeowners are witnessing their financial stability and well-being grow to record levels.
In more good news for homeowners, the most recent Home Price Expectations Survey – a survey of a national panel of over one hundred economists, real estate experts, and investment and market strategists – forecasts home prices will continue appreciating over the next five years, adding to the record amount of equity homeowners have already gained over the past year. Below are the expected year-over-year rates of home price appreciation from the report:<img loading="lazy" class="aligncenter wp-image-98476" src="https://files.mykcm.com/2021/07/02143316/20210706-MEM-Eng-1.png" alt="A Look at Home Price Appreciation Through 2025 | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/07/02143316/20210706-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/07/02143316/20210706-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/07/02143316/20210706-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/07/02143316/20210706-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
What Does This Mean for Homeowners?
Home prices are climbing today, and the data in the survey indicates they’ll continue to increase, but at rates that approach a more normal pace. Even still, the amount of household wealth a homeowner stands to earn going forward is substantial. This truly becomes clear when we consider a scenario using a median-priced home purchased in January of 2021 and the projected rate of appreciation on that home over the next five years. As the graph below illustrates, a homeowner could increase their net worth by a significant amount – over $93,000 dollars by 2026.<img loading="lazy" class="aligncenter wp-image-98477" src="https://files.mykcm.com/2021/07/02143318/20210706-MEM-Eng-2.png" alt="A Look at Home Price Appreciation Through 2025 | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/07/02143318/20210706-MEM-Eng-2.png 1000w, https://files.mykcm.com/2021/07/02143318/20210706-MEM-Eng-2-600x450.png 600w, https://files.mykcm.com/2021/07/02143318/20210706-MEM-Eng-2-768x576.png 768w, https://files.mykcm.com/2021/07/02143318/20210706-MEM-Eng-2-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
Home Price Appreciation and Home Equity
CoreLogic recently released their quarterly Homeowner Equity Insights Report, which tracks the year-over-year increases in equity. It shows an average annual gain of $33,400 per borrower over the past 12 months. In the report, Dr. Frank Nothaft, Chief Economist for CoreLogic, further explains:
“Double-digit home price growth in the past year has bolstered home equity to a record amount. The national CoreLogic Home Price Index recorded an 11.4% rise in the year through March 2021, leading to a $216,000 increase in the average amount of equity held by homeowners with a mortgage.”
The expected, sustained growth of home prices means homeowners can continue to build on the past year’s record levels of home equity – and their financial prosperity. It also presents today’s homeowners with a unique opportunity: using their growing equity for a home upgrade. With so few homes available to purchase and strong buyer demand, there may not be a better time to sell your current house and move into one that better meets your needs.
Bottom Line
Home prices are expected to continue appreciating over the next five years, and the associated equity gains are the quickest way homeowners can build household wealth. If you’re a current homeowner who’s ready to take advantage of your built-up equity, let’s connect today to discuss your options.
2021-07-06T06:00:00-07:002021-07-06T06:46:39-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6438Are We in a Housing Bubble? Experts Say No.
<img width="750" height="410" src="https://files.mykcm.com/2021/06/30105125/20210701-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Are We in a Housing Bubble? Experts Say No. | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/06/30105125/20210701-KCM-Share.jpg 750w, https://files.mykcm.com/2021/06/30105125/20210701-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/06/30105125/20210701-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
The question of whether the real estate market is a bubble ready to pop seems to be dominating a lot of conversations – and everyone has an opinion. Yet, when it comes down to it, the opinions that carry the most weight are the ones based on experience and expertise.
Here are four expert opinions from professionals and organizations that have devoted their careers to giving great advice to the housing industry.
The Joint Center for Housing Studies in their The State of the Nation’s Housing 2021 report:
“… conditions today are quite different than in the early 2000s, particularly in terms of credit availability. The current climb in house prices instead reflects strong demand amid tight supply, helped along by record-low interest rates.”
Nathaniel Karp, Chief U.S. Economist at BBVA:
“The housing market is in line with fundamentals as interest rates are attractive and incomes are high due to fiscal stimulus, making debt servicing relatively affordable and allowing buyers to qualify for larger mortgages. Underwriting standards are still strong, so there is little risk of a bubble developing.”
Bill McBride of Calculated Risk:
“It’s not clear at all to me that things are going to slow down significantly in the near future. In 2005, I had a strong sense that the hot market would turn and that, when it turned, things would get very ugly. Today, I don’t have that sense at all, because all of the fundamentals are there. Demand will be high for a while, because Millennials need houses. Prices will keep rising for a while, because inventory is so low.”
Mark Fleming, Chief Economist at First American:
“Looking back at the bubble years, house prices exceeded house-buying power in 2006 nationally, but today house-buying power is nearly twice as high as the median sale price nationally…
Many find it hard to believe, but housing is actually undervalued in most markets and the gap between house-buying power and sale prices indicates there’s room for further house price growth in the months to come.”
Bottom Line
All four strongly believe that we’re not in a bubble and won’t see crashing home values as we did in 2008. And they’re not alone – Goldman Sachs, JP Morgan, Morgan Stanley, and Merrill Lynch share the same opinion.
2021-07-01T06:00:00-07:002021-07-01T13:02:16-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6388Homebuyers: Hang in There
<img width="1046" height="2093" src="https://files.mykcm.com/2021/06/24105823/20210625-MEM-1046x2093.png" class="attachment-entry size-entry wp-post-image" alt="Homebuyers: Hang in There [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/06/24105823/20210625-MEM-1046x2093.png 1046w, https://files.mykcm.com/2021/06/24105823/20210625-MEM-300x600.png 300w, https://files.mykcm.com/2021/06/24105823/20210625-MEM-512x1024.png 512w, https://files.mykcm.com/2021/06/24105823/20210625-MEM-768x1536.png 768w, https://files.mykcm.com/2021/06/24105823/20210625-MEM-1024x2048.png 1024w, https://files.mykcm.com/2021/06/24105823/20210625-MEM-100x200.png 100w, https://files.mykcm.com/2021/06/24105823/20210625-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
Today’s sellers’ market provides unique challenges—and benefits—for buyers.
Current low interest rates won’t last forever, and home prices are forecast to rise.
If you’re a homebuyer, hang in there. Homeownership improves your quality of life, and the long-term benefits outweigh the short-term challenges.
2021-06-25T06:00:00-07:002021-06-25T07:07:05-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6373Homeowner Wealth Increases Through Growing Equity This Year
<img width="750" height="410" src="https://files.mykcm.com/2021/06/21160612/20210623-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Homeowner Wealth Increases Through Growing Equity This Year | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/06/21160612/20210623-KCM-Share.jpg 750w, https://files.mykcm.com/2021/06/21160612/20210623-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/06/21160612/20210623-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
Building financial wealth and stability remains one of the top reasons Americans choose to own a home, and as a homeowner, your wealth often grows without you even realizing it. In a recent paper published by the Urban Institute, Home Ownership is Affordable Housing, author Mike Loftin illustrates how homeowners increase their equity and their wealth simply by making monthly mortgage payments:
“The principal portion that reduces the loan balance builds the homeowner’s equity. In doing so, the principal payments behave like an automatic savings account. The principal payment is not money going out; it is money staying in.”
But home equity – the difference between the value of your home and what you currently owe – isn’t just built through your monthly principal payments. Home price appreciation plays a vital role in growing your equity and, ultimately, your wealth.
As Freddie Mac explains:
“Homeownership has cemented its role as part of the American Dream, providing families with a place that is their own and an avenue for building wealth over time. This ‘wealth’ is built, in large part, through the creation of equity…Building equity through your monthly principal payments and appreciation is a critical part of homeownership that can help you create financial stability.”
Homeowners Continue To See Equity Increase
CoreLogic recently published their latest Homeowner Equity Insights Report, and it shows continued growth in equity amidst record home price appreciation. The report provides several key takeaways, all of which point to rising wealth for homeowners:
The average equity gain of mortgaged homes during the past year was $33,400
The current average equity of mortgaged homes is greater than $216,000
There was a 6% increase in total homeowner equity over the past year
Total U.S. homeowner equity has reached nearly $1.9 trillion
Here, you can see the equity gains by state:<img loading="lazy" class="aligncenter wp-image-98293" src="https://files.mykcm.com/2021/06/21160614/20210623-MEM-Eng-1.png" alt="Homeowner Wealth Increases Through Growing Equity This Year | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/06/21160614/20210623-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/06/21160614/20210623-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/06/21160614/20210623-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/06/21160614/20210623-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />
Equity Provides Homeowners with Flexibility
In addition to being a critical tool in building wealth, a homeowner’s equity also provides significant flexibility. When you sell your house, the accumulated equity comes back to you in the sale. Recent increases in home equity coupled with record-low mortgage rates mean it could be the perfect time for homeowners looking to make a move.
Mark Fleming, Chief Economist at First American, notes:
“Existing homeowners today are sitting on record amounts of equity. As homeowners gain equity in their homes, the temptation grows to list their current home for sale and use the equity to purchase a larger or more attractive home.”
Increasing equity also helps families facing challenges brought on by the pandemic. Frank Martell, President and CEO of CoreLogic, explains in the recent Homeowner Equity Insights Report:
“Homeowner equity has more than doubled over the past decade and become a crucial buffer for many weathering the challenges of the pandemic. These gains have become an important financial tool and boosted consumer confidence in the U.S. housing market, especially for older homeowners and baby boomers who’ve experienced years of price appreciation.”
Bottom Line
Home equity has always been a powerful wealth-building tool, and homeowners continue to see their financial stability increase. Let’s connect today so you can better understand how much equity you have in your current home or if you’re ready to take the next step in building your savings as a homeowner.
2021-06-23T06:00:00-07:002021-06-23T07:31:43-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6318Owning a Home Has Distinct Financial Benefits Over Renting
<img width="1046" height="2442" src="https://files.mykcm.com/2021/06/16121610/20210518-MEM-1046x2442.png" class="attachment-entry size-entry wp-post-image" alt="Owning a Home Has Distinct Financial Benefits Over Renting [INFOGRAPHIC] | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/06/16121610/20210518-MEM-1046x2442.png 1046w, https://files.mykcm.com/2021/06/16121610/20210518-MEM-257x600.png 257w, https://files.mykcm.com/2021/06/16121610/20210518-MEM-439x1024.png 439w, https://files.mykcm.com/2021/06/16121610/20210518-MEM-768x1793.png 768w, https://files.mykcm.com/2021/06/16121610/20210518-MEM-658x1536.png 658w, https://files.mykcm.com/2021/06/16121610/20210518-MEM-877x2048.png 877w, https://files.mykcm.com/2021/06/16121610/20210518-MEM-100x233.png 100w, https://files.mykcm.com/2021/06/16121610/20210518-MEM.png 1300w" sizes="(max-width: 1046px) 100vw, 1046px" />
Some Highlights
When you rent, you build your landlord’s wealth, your monthly payment depends on ever-rising rents, and you don’t benefit from home price appreciation.
On the other hand, when you own your home, you build your own wealth, your monthly payment is locked in, and you benefit directly from home price appreciation.
If you’re feeling the challenges of a competitive market, remember that homeownership is a long-term game. Persevering today will lead to financial rewards in the future.
2021-06-18T06:00:00-07:002021-06-18T06:25:06-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6309Housing Wealth: The Missing Piece of the Affordability Equation
<img width="750" height="410" src="https://files.mykcm.com/2021/06/16101541/20210617-KCM-Share.jpg" class="attachment-entry size-entry wp-post-image" alt="Housing Wealth: The Missing Piece of the Affordability Equation | MyKCM" loading="lazy" srcset="https://files.mykcm.com/2021/06/16101541/20210617-KCM-Share.jpg 750w, https://files.mykcm.com/2021/06/16101541/20210617-KCM-Share-600x328.jpg 600w, https://files.mykcm.com/2021/06/16101541/20210617-KCM-Share-100x55.jpg 100w" sizes="(max-width: 750px) 100vw, 750px" />
The real estate market is soaring today. Residential home values are rising, and that’s a big win for homeowners. In 2020, there was a double-digit increase in home values – a trend that’s expected to head toward similar levels this year.
However, skyrocketing prices are causing some to start questioning affordability in the current housing market. Many are quick to emphasize the fact that homes today are less affordable than they were last year. Black Knight, a leading provider of data and analytics across the homeownership life cycle, just reported on the issue.
The findings show the historical averages of the national payment to income ratio, which they define as “the share of the median income needed to make the monthly payments on the median-priced home.” Their study reveals:
The average over the last 25 years was 23.6%
The average over the last 5 years was 20.1%
The average today stands at 20.5%
Right now, housing payments are slightly less affordable than the five-year average – but only by less than ½ a percentage point. However, they’re significantly more affordable than the 25-year average. Put another way, a buyer will likely make a slightly greater financial sacrifice to afford a home right now than if they purchased a home within the last five years. On the other hand, it also means the potential financial sacrifice is not nearly as great as it was over the last 25 years.
Does making a sacrifice to buy a home today make financial sense in the long term?
Last week, the Federal Reserve announced that, in the first three months of the year, household net worth increased by $968 billion based solely on the values of the real estate they owned. Another report from CoreLogic reveals the average annual gain in homeowner equity was $33,400 per borrower.
Homeownership continues to be the cornerstone to building personal wealth. For most Americans, their home is the largest asset they own. On top of that, the difference between the net worth of homeowners and renters is significant at every income level. Here’s a table detailing that point using data from a study done by First American:<img loading="lazy" class="aligncenter wp-image-98266" src="https://files.mykcm.com/2021/06/16102320/20210617-MEM-Eng-1a.png" alt="Housing Wealth: The Missing Piece of the Affordability Equation | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/06/16102320/20210617-MEM-Eng-1a.png 1000w, https://files.mykcm.com/2021/06/16102320/20210617-MEM-Eng-1a-600x450.png 600w, https://files.mykcm.com/2021/06/16102320/20210617-MEM-Eng-1a-768x576.png 768w, https://files.mykcm.com/2021/06/16102320/20210617-MEM-Eng-1a-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />Owning a home is an essential steppingstone to grow a household’s net worth. Despite the slightly greater sacrifice in the percentage of monthly income you’ll spend on housing today, for most homebuyers, the payoff of starting to build equity now will be worth it.
Bottom Line
Since prices have risen dramatically over the past 18 months, it’s slightly less affordable to buy a home today than it was a year ago. However, when you consider the equity gain and weigh the long-term benefits of building your net worth, you may question if you can afford not to buy now.
2021-06-17T06:00:00-07:002021-06-17T07:34:07-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:61706 Reasons to Celebrate National Homeownership Month
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Our homes are so much more than the houses we live in. For many, they’ve also become our workplaces, schools for our children, and safe harbors in which we’ve weathered the toughest moments of a global pandemic. Today, 65.6% of Americans call their homes their own, a rate that has risen to its highest point in 8 years.
As National Homeownership Month kicks off this June, homeowners have every reason to celebrate. A survey by Gallup just ranked real estate as the best investment you can make for the eighth year in a row. However, unlike other investment options, the benefits of owning a home aren’t purely financial. Here are the top ways Americans are winning by owning a home.
Non-Financial Benefits:
1. Civic Participation: Owning a home is owning a part of your neighborhood. Homeowners have a stronger connection to their neighborhoods and are more committed to volunteer work and other ways to get involved.
2. Pride of Ownership: Owning a home is having a space that is uniquely yours. You can customize it to your personal liking and make it reflect your personality and values.
3. A Safe Space: Owning a home gives you a sense of security and privacy – two things that have become even more valuable as we’ve tackled the challenges of the recent health crisis.
Financial Benefits:
1. Forced Savings: Owning a home builds equity. Your equity grows with each payment you make toward your mortgage. This form of forced savings can be used down the road to help you accomplish your biggest financial goals.
2. Appreciation: Owning a home is making an investment that steadily gains value, and experts project home values will continue to rise in the years to come.
3. Stability: Owning a home means having better control over your future housing payments. Over the years, a mortgage stays relatively steady, but rent costs continue to rise.
Bottom Line
If you own your home, take time this June to celebrate the ways homeownership has added value to your life. If you hope to become a homeowner this year, let’s connect today to take the first steps toward achieving your goal.
2021-06-01T06:00:00-07:002021-06-01T09:19:20-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6113Should I Move or Refinance?
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The level of equity homeowners have is at an all-time high. According to the U.S. Census, over 38% of owner-occupied homes are owned free and clear, meaning they don’t have a mortgage. Those with a mortgage are seeing their equity skyrocket too. Every time real estate values increase, homeowners get a dollar-for-dollar gain in their home equity.
According to the first-quarter 2021 U.S. Home Equity Report from ATTOM Data Solutions:
“17.8 million residential properties in the United States were considered equity-rich, meaning that the combined estimated amount of loans secured by those properties was 50 percent or less of their estimated market value.
The count of equity-rich properties in the first quarter of 2021 represented 31.9 percent, or about one in three, of the 55.8 million mortgaged homes in the United States. That was up from 30.2 percent in the fourth quarter of 2020, 28.3 percent in the third quarter and 26.5 percent in the first quarter of 2020.”
This surge in home equity has given most homeowners the opportunity to use that equity in one of two ways:
Refinance to cash out some of the equity or lower their current payment
Move to a home that better fits their current needs
Let’s break down the possibilities.
1. Refinance
An abundance of equity and record-low mortgage rates can make refinancing a home very easy. Some homeowners choose to refinance so they can lower their payments. Others convert a portion of the equity to cash while keeping their monthly payment the same.
There are many homeowners who could take advantage of lower rates and higher levels of equity, but they haven’t yet. According to an Economic & Housing Research Note from earlier this month, there were over five million homeowners with a loan funded by Freddie Mac who would benefit by refinancing their loan. As of January 2021, there were:
452,122 loans with an average mortgage rate of 6.17%
1,027,834 loans with an average mortgage rate of 4.39%
3,687,780 loans with an average mortgage rate of 4.21%
With mortgage rates currently hovering around 3%, any of these homeowners would benefit from refinancing. They could lower their payments by hundreds of dollars per month or cash out large sums of equity while keeping their monthly payment the same.
Example:
If a homeowner has a $200,000 fixed-rate mortgage with a 6% interest rate and refinances that loan to a 3% interest rate, their monthly mortgage payment (principal and interest) will go from $1,199 per month to $843 per month – a savings of $356 a month, or $4,272 each year.
On the other hand, if they keep their mortgage payment the same, they could cash out a significant amount of their equity.
2. Move into your dream home
The past year prompted many households to redefine what a dream home really means, and it’s something different to everyone. Those who have a high mortgage rate could use their equity as a down payment and perhaps buy their next home without significantly raising their mortgage payment.
Example:
Suppose a person bought a house for $216,000 at the height of the market in 2006. (The median home price in May of 2006). If they put 10% down and took out a mortgage of $194,400 at 6.41% (the average rate in 2006), the monthly mortgage payment (principal and interest) would have been $1,217.
According to the National Association of Realtors (NAR), a typical single-family home has grown in value by approximately $150,000 over the last fifteen years. That means the $216,000 house would be worth about $366,000 today.
After deducting selling expenses, they would be left with about $130,000 ($150,000 minus approximately $20,000 in selling expenses).
A seller could take that equity and use it as a down payment on a new house. Let’s assume they purchased a home for $450,000 (roughly $80,000 more than the value of their current home). If they put the $130,000 down, they could take out a mortgage of $320,000 with a 3% interest rate. The monthly mortgage payment (principal and interest) would be $1,349. Therefore, they could buy a home worth $80,000 more than the one they have today and only spend an extra $132 per month.
Bottom Line
Whether you’re refinancing your house or moving to a new home, your current mortgage rate and your level of equity are crucial in your decision-making process. Look at your mortgage documentation to find out your interest rate, and then let’s connect to determine the potential equity in your home. You may be surprised by the opportunities you have.
2021-05-20T06:00:00-07:002021-05-20T07:03:33-07:00Donna Lernertag:donnalernerhometeam.com,2012-09-20:6091Americans See Real Estate as a Better Investment Than Stocks or Gold
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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:<img loading="lazy" class="aligncenter wp-image-98050" src="https://files.mykcm.com/2021/05/17105457/20210518-MEM-Eng-1.png" alt="Americans See Real Estate as a Better Investment Than Stocks or Gold | MyKCM" width="600" height="450" srcset="https://files.mykcm.com/2021/05/17105457/20210518-MEM-Eng-1.png 1000w, https://files.mykcm.com/2021/05/17105457/20210518-MEM-Eng-1-600x450.png 600w, https://files.mykcm.com/2021/05/17105457/20210518-MEM-Eng-1-768x576.png 768w, https://files.mykcm.com/2021/05/17105457/20210518-MEM-Eng-1-100x75.png 100w" sizes="(max-width: 600px) 100vw, 600px" />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
America’s belief in the long-term investment value of homeownership has been, is, and will always be, very strong.
2021-05-18T06:00:00-07:002021-05-24T06:56:51-07:00Donna Lerner