Buying is Now 33.1% Cheaper than Renting in the US

KCM Crew, June 21st, 2017

Buying Is Now 33.1% Cheaper Than Renting in the US | MyKCMThe results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

Other interesting findings in the report include:

  • Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
  • With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
  • Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

Bottom LineBuying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, let’s get together to find your dream home.

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Proceed With Caution: Existing Home Sales and Economic Growth, June 20th, 2017

Fannie Mae BHThe U.S. is embarking on its ninth year of economic expansion and Fannie Mae is predicting economic growth rebound. According to their Economic & Strategic Research Group’s June 2017 Economic and Housing Outlook, second quarter economic growth will rebound to 2.9 percent from last quarters 1.2 percent. Consumer spending growth is expected to return to its traditional role as the biggest contributor to economic growth, picking up to 3.1 percent this quarter from 0.6 percent in the first quarter. Fannie Mae said moderate growth is expected to continue into next year, however uncertainty in fiscal and monetary policy makes the forecast a little difficult.

“This month marks the eighth anniversary of the U.S. economic expansion, the third-longest of the post-World War II era. While we expect modest growth to continue in 2018, the potential for fiscal stimulus remains a notable wild card,” said Fannie Mae Chief Economist Doug Duncan. “The odds that Congress will enact major pieces of legislation this year and jump-start meaningful fiscal stimulus have diminished, and the economy also faces another fiscal policy uncertainty in coming months, as Congress will have to raise the debt ceiling to avoid a government shutdown.”

Duncan said the Federal Open Market Committee’s June decision to raise the fed funds rate by 25 basis points has increased the uncertainty of monetary policy.

“Our June forecast assumes that the Fed will increase the target rate once more this year in September and will begin to taper reinvestment of principal payments from its securities holdings in December. However, the recent slowdowns in hiring and inflation could lead the Fed to hold off on the September rate hike in order to gather more data.”

According to Duncan, the housing market hasn’t changed all that much in the last year. Labor and inventory shortages are constraining sales and therefore increasing home prices.

“We expect total home sales to rise 3.2 percent this year and total single-family mortgage originations to drop about 21 percent to $1.62 trillion,” Duncan said. “A large drop in refinance originations will likely outweigh a modest rise in purchase originations. We expect the refinance share to move down to around 34 percent in 2017 from 48 percent in 2016.”

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Current Costs of Living Effects Homebuyers Affording College Tuitions, June 19th, 2017

cutting-moneyFigures determined by GOBanking Rates surveyed the link between college costs and the amount needed to live securely in each state without taking out loans.

The results were determined by combining several figures including the price of in-state tuition at public four-year institutions, the cost of necessities for a year including a mortgage, utilities, groceries, transportation and healthcare, and what residents would spend on splurges and savings.

Hawaii topped the list of 50 states and requires the highest annual income, $126,454, to pay for in-state college costs and live securely. While the average in-state tuition and fees is not close to the most expensive in the nation at $10,670, the cost of living necessities is $57,892, higher than any other state. With a median household income of only $63,514, loans might be necessary to live comfortably and afford college tuition.

California, Massachusetts, Colorado and Connecticut complete the top five most expensive incomes needed to meet the standards of living comfortably and affording college tuition at the same time. The data reveals this isn’t due to higher tuition rates, but the higher prices to cover the states’ expensive costs of living.

Living in Indiana is the most affordable state to live comfortably and pay for a child’s college education on the list. This is due to the cost of living being one of the lowest in the country. With annual necessities at $26,446 and college tuition at $9,200, living comfortably and affording college tuition in Indiana will need a household income of $62,091.

The most affordable states following Indiana are Arkansas, Ohio, Missouri and Kentucky. What the ‘need to make the least’ to afford secure living and college tuition top five have in common is the lowest costs of living.

The differences in everyday expenses between states are significant. Homebuyers must think about providing for their child’s future education before considering which state to call home. According to these latest figures, avoiding loans and a potential college debt is possible, if a homebuyer chooses a more affordable cost of living.

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Super Simple Ideas for People Who Hate Yard Work

Super Simple Ideas for People Who Hate Yard Work #Landscaping, June 18th, 2017

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Industry Reacts: While June Rate Hike Expected, Rest of Year Remains Uncertain

Four meetings left this year

storm clouds

While Wednesday’s interest rate hike didn’t come as a surprise to the market, the rest of the year doesn’t look as certain, as industry reactions start to pour in on the news.

The common consensus heading into Wednesday’s meeting was that the Fed would raise interest rates, so the impact was already priced into the market.

“Recent weak economic data – notably, inflation and consumer spending – suggest that the pace of future hikes will remain slow,” said Erin Lantz, vice president of mortgages at Zillow. “This hike was largely priced in to markets already, so mortgage rates should remain flat or even fall slightly.”

From here, there are now four scheduled Federal Open Market Committee meetings left for the year, and there’s not a clear consensus on whether the Federal Reserve will raise rates again.

National Association of Realtors Chief Economist Lawrence Yun explained that the latest rate hike is partly justified from ongoing economic expansion and also a steadily falling unemployment rate.

“However, the Federal Reserve should be mindful of the lower than expected rate of inflation and the consequent low interest rates on long-dated bonds, like 10-year Treasury and 30-year mortgage rates,” he said. “An inversion in interest rates of short-term fed funds being higher than long-term bond yields can easily pull down the economy into a recession. We are getting closer to that inversion point.”

The most recent Freddie Mac mortgage report said that interest rates are at the lowest level in nearly seven months due to mixed economic data. The report put the 30-year fixed-rate mortgage at 3.89% for the week ending June 8, 2017.

And the economic uncertainty isn’t over yet moving into the rest of the year. “Policymakers are proceeding with caution,” explained Mike Schenk, Credit Union National Association vice president of economics and statistics. “Expectations of economic stimulus arising from tax cuts and from increased federal infrastructure spending were baked in to most economic forecasts earlier this year.”

“However, with each passing day, both tax reform and additional spending on roads, bridges, and the like seem less certain. Fed decision makers will undoubtedly be following developments on this front very closely,” he continued.

Meanwhile, another major part of the FOMC report includes the Fed’s plan for its balance sheet. Tucked into the May FOMC meeting minutes, the Fed revealed its plan to start to unwind the $4.5 trillion portfolio of bonds, which this latest announcement expanded on.

“The Fed will begin to reduce the securities held on its balance sheet later this year, limiting the amount of securities that will be allowed to run-off each month. With lower caps for mortgage-backed securities compared to Treasuries, it is possible that there will be less widening in mortgage spreads than previously estimated,” said Mortgage Bankers Association Chief Economist Mike Fratantoni.

“The plan emphasizes that the balance sheet will be reduced in a gradual and predictable manner and as Chair Janet Yellen described in the press conference, the process will be ‘running quietly in the background’ if economic growth and inflation continues as expected.”

Fratantoni added that the statement also reaffirmed that the target fed funds rate is still the primary means for monetary policy action.

“Markets viewed the statement as more hawkish than anticipated, with 10-year Treasury rates rising slightly following the statement,” he said.

Looking ahead, Fratantoni said, “The outlook was slightly upgraded, with increased household spending and business fixed investment, a labor market that has continued to strengthen, and economic activity ‘rising moderately.’ There was acknowledgement of recent declines in inflation, but the committee continues to expect this is temporary and will pick up.”

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Top Home Renovations for Maximum ROI

KCM Crew, June 16th, 2017

Top Home Renovations for Maximum ROI [INFOGRAPHIC] | MyKCMSome Highlights:

  • Whether you are selling your home, just purchased your first home, or are a homeowner planning to stay put for a while, there is value in knowing which home improvement projects will net you the most Return On Investment (ROI).
  • While big projects like adding a bathroom or a complete kitchen remodel are popular ways to increase a home’s value, something as simple as updating landscaping and curb appeal can have a quick impact on a home’s value.
  • For more information about top renovation projects that net you the most ROI, you can check out the complete list here.
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A Seller’s Market won’t Cure Inventory Shortages

It’s a good time to sell…but

Spring house

It’s finally a seller’s market, but according to a new Capital Economics report, the increased selling sentiment doesn’t guarantee a boost in much-needed housing inventory.

Fannie Mae’s most recent Home Purchase Sentiment Index reported that the net share of those saying it’s a good time to sell surpassed those saying it’s a good time to buy. This has only occurred twice in the survey’s history.

Unfortunately, Capital Economics explained that past rises in selling sentiment have not been accompanied by a significant rise in actual listings. And paired with the fact that the number of vacant homes that are being held off the market is rising, the report expects little chance for an improvement in inventory levels this year.

While selling sentiment is at its highest level in seven years, the change shouldn’t come as a shock.

Capital Economic attributed the change to multitude of factors, specifically pointing out the significant rise in home prices.

Since the share of homes with negative equity dropped to just 6.1% in the first quarter, compared to 8.1% a year ago, sellers can look forward to a good price and a quick sale.

The increase in selling sentiment, however, doesn’t translate to actual home listings, yet. The chart below compares selling sentiment to number of existing homes listed for sale.

Click to enlarge

inventory chart 1

(Source: Capital Economics)

According to the report, a part of the reason is that since home prices are expected to continue to appreciate, households may expect selling conditions to continue to improve, causing them the wait to sell.

Then, beyond selling sentiment, there’s the fact that there is a very high number of vacant homes being held off the market. These homes are being held off the market for a similar reason since owners also expect increased capital gains.

Capital Economics does predict that this will change eventually though, as higher interest rates and lower house price expectations will eventually lead to more of those homes coming onto the market. But this probably won’t happen this year.

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