Real Estate News & Market Trends

 

April 2, 2021

Spring Buyers Have 50% Fewer Homes to Choose From

sold topper on real estate sign

If your buyer is struggling to find a home for sale, they’re not alone. For every 10 homes for sale last year, there are fewer than five today. Home shoppers this spring have 52% fewer homes to choose from than last year, and they’re facing record-breaking prices, according to realtor.com®’s latest Monthly Housing Trends Report.

The national median list price in March increased to $370,000, a 15.6% jump compared to a year ago and an all-time high, realtor.com® reports.

Because of the high demand and low inventory, “home prices have skyrocketed, shattering previous records,” said Danielle Hale, realtor.com®’s chief economist. “We expect to see more sellers emerge in the weeks ahead, which should give buyers more options. Homes will likely continue to sell fast, but increasing interest rates and monthly costs could slow the pace of price gains unless we see a boost in demand from equity-rich repeat buyers.”

Listing prices increased the most in March in Austin, Texas, up 39.8% annually; Buffalo, N.Y., up 28.3%; and Los Angeles, up 24.8%.

Home buyers appear to be in a hurry. They are trying to buy before any further increases in home prices and mortgage rates, which have moved above their sub-3% averages over recent weeks.

But finding a home hasn’t been easy. ”In many areas of the country, there are half as many available homes for sale than a year ago—and in some markets that number increases to less than one-third,” Hale says.

The National Association of REALTORS® released its Pending Home Sales Index on Wednesday, which showed contract signings fell 10.6% in February, due to inventory shortages rather than a lack of buyer demand. Read more: Pending Home Sales Dip in February

Chart with home prices in cities Second half of chart with pricing information in cities

SOURCE:realtor.com®

 

 

March 31, 2021

Selling Your Home

 

SELLING YOUR HOME

If You Have These Features in Your Kitchen, Show Them Off

When you’re ready to sell, a pizza oven might be your friend, according to new Zillow research.

After a year of life indoors watching cooking shows, baking bread and taking part in Tik Tok cooking challenges, home buyers seem to have developed a newfound appreciation for the kitchen.

 

From the pleasurable to the practical, kitchen amenities such as quartz countertops and smart appliances dominate a list of features associated with homes that sold for more than expected in 2020, according to a new Zillow analysis.

Luxury kitchen amenities account for six of the top 10 home features identified with for-sale listings that fetched higher prices than expected. Some of the features come with a hefty price tag, and it’s worth noting here that the analysis did not look at whether sellers recouped what they spent on the features, only that buyers are willing to pay a premium for homes that include those features in their listing description.

In other words, adding these design features to a home  — or including words that describe them to a for-sale listing description  — does not guarantee or definitively cause the ultimate sale price to increase or fall as much as observed. The most likely explanation for the findings is that for-sale homes that include these features in their listing descriptions may be of generally higher quality all around (or are at least perceived to be), in ways that are difficult to observe or quantify but which tend to lead to a higher final sale price.

“The features should be viewed as signals that the home may be generally well-crafted and thoughtfully updated,” said Zillow senior economist Jeff Tucker. “For instance, if a home has a steam oven, it likely has other high-end finishes that buyers are willing to pay for. This spring home shopping season, sellers would be wise to flaunt those features in their listing description if they’ve got them.”

If you’ve got them, flaunt them

The top 6 kitchen features associated with a sales premium are:

Steam ovens

As their name implies, steam ovens cook food with steam instead of hot air. The ovens make regular appearances on cooking shows, a popular pandemic pastime that may have influenced home cooks’ decision to buy one. Homes that mentioned a steam oven in their listing are associated with a 4.9% price premium.

Pizza ovens

People take their pizza seriously, and for those devoted to crafting the perfect pie, a pizza oven is a must-have. Homes that mentioned pizza ovens in their listing sold for 3.4% more than expected.

New appliances

A home with new appliances can help assure buyers that they won’t have to sink a bunch of money into replacing a broken refrigerator or dishwasher, and instead save, invest or spend that money on other home projects. Homes with new appliances carry a 3.2% sales premium.

Quartz countertops

Quartz countertops are made from an engineered material made of crushed stone particles bound together by plastic resin. Known for durability and stain resistance, countertops made from quartz are associated with a 3.2% price premium.

Smart appliances

Smart appliances are devices that can be operated and controlled through a smartphone or tablet. The technology, which makes appliances more efficient, can be found in everything from refrigerators to thermostats to water heaters. Homes that listed smart appliances in their listing description sold for 3% more than expected.

Butcher block countertops

Wood is one of those rare materials that can infuse any room with a feeling of warmth, and the kitchen is no exception. Butcher block comes in a variety of wood types and thickness, all of which affect the cost. They were associated with a 2.7% sales premium.

Features associated with quicker sales

If selling your home as quickly as possible is your main goal, consider emphasizing these features if you’ve got them. Listings that mention them are associated with faster sales:

  • “Drought-resistant” plantings or yards sold 13.2 days faster than expected for homes in their price range
  • “Bohemian” or “boho” design sold 11 days faster
  • Turf, 10.9 days
  • Mid-century style homes, 9 days
  • Smart sprinkler systems, 7.5 days

The bohemian design trend seemed to hit on a listing description sweet spot in 2020: In addition to selling quickly, homes described this way also sold for a solid 2.3% sale premium.

Features mentioned in slower-selling properties did not fit a common theme this year, although past research shows that — in general — higher-end, custom homes tend to take longer to sell.

The slowest-selling homes were ones that mentioned “wellness” — usually wellness rooms — which sold 11.8 days slower than expected; bidets (11.2 days); professional appliances (10.7 days); energy-efficient appliances (10.1 days); and bike storage or hooks (9.4 days).

Features associated with lower than expected sales prices

On the flip side, buyer appetite for homes described as “fixers” and “investment” prospects or homes needing “TLC” sold for less than expected:

  • Self-described fixer-upper homes fetched 12.9% less than expected
  • Those advertising their need for some “TLC” brought in 11.1% less
  • Homes marketed for their “investment” potential sold for 4.5% less than expected

“These stark results for red-flag terms like “TLC”, “fixer-upper” and even “investor” properties are a reminder that the true condition of a home is only evident when it’s listed,’’ said Tucker. “The Zestimate algorithm — which Zillow uses to estimate the value of off-market homes — can only rarely tell whether a house needs major repairs in the eyes of most buyers. That’s why homes that are described in these terms by sellers or their agents end up selling for substantially less than the Zestimate for the home before it was listed.”

Still, Tucker said there is a benefit to marketing homes in those terms since certain buyers actively seek out homes that need work, and using those terms can help buyers spot them in a crowded market place. Being forthright about a home’s condition also can help set buyers expectations.

Nothing to wag about

A wave of newly-adopted pets was one of the bright spots in 2020. Listings that mentioned “dog house” carried a sales premium, but listings that described the home as “pet-friendly” experienced a 2.2% discount.

“Bike parking” also was associated with a 2% negative premium. It may be that those features were correlated with small indoor spaces in large multifamily buildings.

SOURCE: Zillow

 

 

March 30, 2021

Eviction Moratorium Still in Effect

eviction notice and paper mask

March 30, 2021

The Centers for Disease Control announced it is extending by an additional three months—through June 30—its nationwide eviction moratorium, a measure that has come under increased scrutiny recently. The moratorium prohibits housing providers from evicting tenants who are unable to pay their rent due to financial hardship from the COVID-19 pandemic.

The moratorium, however, has been blamed for negatively impacting housing providers due to the loss of rental payments. The National Association of REALTORS®, along with a coalition of other housing industry groups, have been advocating for an end to the eviction moratorium and asking for additional rental assistance funds to “ensure the moratorium doesn’t lead to a spiraling crisis for housing providers and tenants.”

Since being enacted on Sept. 4, 2020, the moratorium has been challenged by several states and localities. The CDC has the authority to grant an eviction moratorium under Section 361 of the Public Health Service Act, citing the purpose is to prevent the further spread of COVID-19.

Among the qualifications for tenants to use the CDC order, residents must ensure they’ve pursued all appropriate government assistance, met certain income and employment requirements, and used their best efforts to make timely partial payments. The latest CDC order expands it to include people who are confirmed to have or been exposed to COVID-19. Anyone using the CDC order for protection must provide their housing provider with a copy of a signed declaration form stating they meet the requirements to be covered by the moratorium. Read more about the CDC’s order.

The CDC order is for tenants who have been affected by the COVID-19 pandemic. But property owners may still evict tenant orders for criminal activity, damaging property, or violating other obligations within their leases.

NAR has been advocating for federal rental assistance to help housing providers who are seeing a surge in missed payments due to the fallout of the COVID-19 pandemic. “NAR helped secured $25 billion in 2020 and another $21.55 billion earlier this month in federal rental assistance funding, which can be paid directly to property owners,” says Shannon McGahn, NAR’s chief advocacy officer. “This was critical to averting a multifamily real estate crisis, as many of our nation’s housing providers are mom-and-pop operations. Our focus now turns to ensuring there is not just enough funding but also a smooth implementation of rental assistance while the various challenges to eviction bans work their way through the courts.”

The National Council of State Housing Agencies is tracking the individual state programs on the distribution of emergency rental assistance funding to housing providers and renters who qualify.

Source: “What the Moratorium Means to You,” National Association of REALTORS®

March 23, 2021

97 Offers on One Listing?

Vector image of hands grabbing at house

The buying frenzy continues as multiple offers become the norm and buyers offer thousands or tens of thousands above the asking price to try to get the home they want. In many cases, buyers also are increasingly waiving appraisals and even some inspections to make their offers stand out.

Buyers are also feeling a greater sense of urgency as mortgage rates begin to rise, and they’re eager to lock in a low rate ahead of any further increases.

“Fifteen offers, 25 offers, we even had one last week with 97 offers—and the list price is the starting point,” Mark Wolfe, broker-owner of RE/MAX DFW Associates, told the Dallas Business Journal. “An agent in our firm received 17 offers on a property before they cut off receiving additional offers. Twelve of the offers were cash, all above list, and most buyers not even seeing the home. They are just grabbing.”

Nationwide, 36% of homes sold above list price in February, the highest share on record, according to housing data from Redfin. The most competitive markets in February were Oakland, Calif., where 70.5% of homes sold above list price, followed by San Jose, Calif. (66.6%); Tacoma, Wash. (65.7%); Sacramento, Calif. (62.3%); and Austin, Texas (57.3%), according to Redfin’s research.

“This is the strongest seller’s market since at least 2006,” says Daryl Fairweather, Redfin’s chief economist. “Buyers outnumber sellers by such a huge margin that many homeowners are staying put because they know how hard it would be to find a place to move to. It seems like the only move-up buyers who are confident enough to list their homes are those who are relocating to a more affordable area where they’ll have an edge on the local competition.”

Despite the rapid price increases, this isn’t a housing bubble, housing economists say.

“Yes, some buyers are overpaying for homes, particularly those who are moving to affordable destinations and paying well over asking prices to win homes in bidding wars,” Fairweather says. “But these buyers are often covering any shortfall in the bank’s appraisal amount and locking in low monthly mortgage payments that they can easily afford. As mortgage rates rise, I expect demand to settle down and be better balanced by more new listings as high home prices lure more sellers to the market.”

 

Source: “‘It Is Unprecedented’: Buyers Beware in Dallas-Fort Worth’s Supercharged Housing Market,” Dallas Business Journal (March 17, 2021) and “36% of Homes Sold Above List Price in February, the Highest Share on Record,” Redfin (March 18, 2021)  https://www.redfin.com/news/record-share-of-homes-sold-over-list-in-february/

 

March 18, 2021

Lopsided Recovery’ Still Causing Housing Market Hurdles

Lopsided Recovery’ Still Causing Housing Market Hurdles

close up of for sale sign by home

March 11, 2021

The housing market largely outperformed the rest of the economy throughout 2020. But the housing market’s recovery still remains more “lopsided than ever as the gap between buyer demand and supply widens,” according to a newly released report from realtor.com® about the pandemic’s impact on the housing market over the past year.

New listings remain well-below the pre-COVID-19 baseline. However, the housing market overall in sales is performing above pre-pandemic levels, according to realtor.com®’s Housing Market Recovery Index.

“The housing market bounced back so much faster than other sectors of the economy that many have forgotten that housing activity slowed to a crawl during the early days of the pandemic,” says Danielle Hale, realtor.com®’s chief economist. “One year later, the demand for housing remains strong, while supply remains limited.”

Realtor.com® reports there are 50% fewer homes available for sale now than a year ago. The homes that are on the market are selling quickly. During the week ending March 6, homes sold, on average, six days faster than a year ago. “Buyers not only have fewer homes to choose from, they need to act fast to succeed,” realtor.com® notes in its report.

 

But Hale cautions a turn may be ahead for the housing market. “We expect the vaccine’s rollout to alleviate some sellers’ anxieties, which could help the supply crunch,” she notes. “At the same time, although interest rates remain low, they’ve begun to increase, which could test buyer demand in the coming months.”Source: realtor.com®

How the housing market performed year-over-year in February and March 2021.

March 15, 2021

Mortgage Rates Continue Slow Climb Over 3%

 

Calculator and keys on table in front of image of house

Mortgage Rates Continue Slow Climb Over 3%

March 12, 2021

The 30-year fixed-rate mortgage continued to move higher this week, now averaging 3.05%, Freddie Mac reports. 

“It looks like rates in the 2% range are over while current mortgage rates will likely be the lowest,” Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, writes on the association’s Economists’ Outlook blog. “Since the pandemic struck our country one year earlier, year-over-year comparisons for most of the economic indicators are going to be much higher for the next several months.” Many of these higher readings will put upward pressure on the 10-year Treasury yield, which mortgage rates tend to follow.

Still, mortgage rates remain historically low, if in the 3% range. The all-time low for the 30-year fixed-rate mortgage was set in January, averaging 2.65%.

“As the economy improves given labor market optimism, continued vaccination roll-out, and additional stimulus pending, mortgage interest rates increased this week,” says Sam Khater, Freddie Mac’s chief economist. “But even as rates rise modestly, the housing market remains healthy on the cusp of spring home buying season. Home buyer demand is strong and, for homeowners who have not refinanced but are looking to do so, they have not yet lost the opportunity.”

 Freddie Mac reports the following national averages with mortgage rates for the week ending March 11:

30-year fixed-rate mortgages: averaged 3.05%, with an average 0.6 point, rising from last week’s 3.02% average. Last year at this time, 30-year rates averaged 3.36%.

15-year fixed-rate mortgages: averaged 2.38%, with an average 0.6 point, increasing from last week’s 2.34% average. A year ago, 15-year rates averaged 2.77%.

5-year hybrid adjustable-rate mortgages: averaged 2.77%, with an average 0.3 point, increasing from last week’s 2.73% average. A year ago, 5-year ARMs averaged 3.01%.

Freddie Mac reports average commitment rates along with average points to better reflect the total upfront cost of obtaining a mortgage.

Source: Freddie Mac and “Instant Reaction: Mortgage Rates, March 11, 2021,” National Association of REALTORS® Economists’ Outlook blog

March 12, 2021

Public boat landings in Charleston, SC

When the sun’s out there’s one thing on Charlestonian minds: Boating.

 

Remleys Point Public Boat Landing, 112 2nd St., Mount Pleasant

        At the western end of 5th Ave. in Remleys Point neighborhood

        Open 24/7

        Access to the Charleston Harbor

 

W. O. Thomas, Jr. Boat Landing, 4354 Bridge View Dr., North Charleston

        Take I-526 to Leeds Ave. Exit + go southeast on Leeds Ave. a short distance, then turn right onto Bridge View Dr. and drive until it ends at the boat landing.

        Open 24/7

        Picnic areas

        Access to the Ashley River

 

Limehouse Landing, 495 Main Rd., Johns Island

        At the base of the Limehouse Bridge

        Open 24/7

        Access to the Stono River

 

Pierpont Public Boat Landing, Cedar Ln.

        At the end of Cedar Ln. off Ashley River Rd.

        Open during daylight hours

        Access to a creek + the Ashley River

 

Herbert H. Jessen Public Boat Landing, 4850 Ladson Rd., Summerville

        Take I-26 to exit 203 + go southwest on College Park Rd. for about a mile. Turn right and go southwest on Ladson Rd. for about five miles until it ends at the boat landing.

        Parks, walking trails + picnic areas

        Open daily from 6 a.m.–10 p.m.

        Access to the Ashley River

 

Paradise Island Public Boat Landing, Chandler Rd., Awendaw

        At the end of Chandler Rd. off Hwy. 17

        Open 24/7

        Good for smaller watercraft like kayaks

        Access to the Wando River

 

Bettis Boat Landing, Bettis Boat Landing Rd, Hanahan

        Directly off Railroad Ave. — drive about one block then turn left onto Bettis Boat Ramp Rd. until it ends at the boat landing.

        Open

        Access to the Goose Creek Reservoir

 

Toogoodoo Landing, 4528 Parishville Rd., Yonges Island

        Take US 17 S + turn left onto 162. Take Parishville Rd. until it ends at the boat landing.

        Take US

        Open 24/7

        Access to Toogoodoo Creek

 

For more public landings, check out Charleston County Parks’ list here

Posted in Lifestyle
March 11, 2021

Borrowers Gained $1.5 Trillion in Equity as Home Prices Surge

Borrowers Gained $1.5 Trillion in Equity as Home Prices Surged

Borrower Equity Update: Fourth Quarter 2020

BY MOLLY BOESEL HOUSING AFFORDABILITY, MORTGAGE FINANCE

©2021 CoreLogic, Inc. All rights reserved

 

  • Average equity gain of $26,300 per homeowner in 2020 was the highest in seven years.
  • National negative equity share was 2.8% for the fourth quarter of 2020, the lowest in over 10 years.

National Home Equity Trends 

The amount of equity in mortgaged real estate increased by $1.5 trillion in 2020, an annual increase of 16.2%, according to the latest CoreLogic Equity Report. The average annual gain in equity was $26,300 per homeowner -- the largest average equity gain since the third quarter of 2013. 

The nationwide negative equity share for the fourth quarter of 2020 was 2.8% of all homes with a mortgage, the lowest share of homes with negative equity since CoreLogic started tracking this number in the third quarter of 2009.  The number of properties in negative equity decreased by 410,000 from the fourth quarter of 2019 to the fourth quarter of 2020. 

Home prices soared in 2020, appreciating by the most since 2013 as buyers competed for a dwindling supply of homes for sale. The resulting home equity gains cushion homeowners from financial difficulties brought on by the pandemic and reduce the risk of foreclosure. Equity gains are likely to continue in 2021 as strong home-purchase demand is expected to remain high and continue pushing prices up.

State and Metro Level Home Equity

Figure 1 shows the ten states with the largest negative equity shares in the fourth quarter of 2020. Louisiana stands apart with 8.5% of mortgages with negative equity – more than three times the national average. Iowa (5.6%) and Illinois (5.4%) rounded out the top three states with the highest negative equity shares. States with high negative equity shares have experienced low home price appreciation compared with the national average. In addition, places with high negative equity shares are at higher risk for foreclosure and distressed sales.

 

Figure 1: Ten States With the Largest Negative Equity Shares

Figure 1: Ten States With the Largest Negative Equity Shares

 

Figure 2: Average Amount of Negative Equity By CBSA (Q4 2020)

Figure 2: Average Amount of Negative Equity By CBSA (Q4 2020)

Negative equity shares vary greatly by metro area. Among the 10 large metro areas shown in figure 2, San Francisco had the lowest negative equity share (0.7%) and Miami the highest (8.4%). Figure 2 also shows that he average amount of negative equity is inversely related to the negative equity share. The average underwater amount in San Francisco was $715,000, more than 10 times the average underwater amount in Miami.

 

Home equity reached new highs in 2020 as home prices increased the fastest since 2013. This increase in home equity will buffer homeowners from hardships caused by the pandemic. For ongoing housing trends and data, visit the CoreLogic Insights Blog: www.corelogic.com/insight  

 

 

Posted in Home Sales
March 9, 2021

You're Only Ready to Buy a House if You Can Answer 'Yes' to These 7 Questions

You're Only Ready to Buy a House if You Can Answer 'Yes' to These 7 Questions

BY LESLIE COOK courtesy of Money Magazine | JANUARY 31, 2021

How to Know Financially Ready Buy

 

Buying a home is both exhilarating and scary. It means you are setting down roots and ready for the next chapter in life. On the other hand, it also means you’re taking on the largest debt you’ll possibly ever have to pay.

 

The financial realities of preparing to buy a home can come with a lot of stress, uncertainty, and questions: will I qualify for a loan? How much will I qualify for? Do I have enough for a down payment? The list goes on.

 

According to Glenn Brunker, president of Ally Home, learning as much as possible about the homebuying process before making a decision will help you feel comfortable with the investment you’re about to make. Knowledge is the best way to avoid unexpected costs that can turn your dream home purchase into a nightmare. 

1. Do you have a stable income?

This may sound like a no-brainer, but figuring out how secure your income is can be deceptively tricky to determine, especially with the economic impact of the COVID-19 virus. You should not only feel comfortable that your income is secure for at least the next few years, but also be able to demonstrate a history of stable employment in the past.

 

Lenders will ask to see at least two years of tax returns or pay stubs as proof of income. Lenders also like to see the money you will use for a down payment deposited in a bank account for at least 60 days. It tells them you have the money to finance your mortgage. If you’re depending on gifts from family and friends to help with a down payment, make sure you get it well before you apply for a mortgage and deposit it.

 

If you’re one of the 57 million Americans who are self-employed and don’t have a steady paycheck, getting a mortgage can be extra challenging. In this case documentation is key. Make sure you’ve collected two years’ worth of bank statements that will allow a lender to verify your earnings.

 

“Do you feel comfortable with your current employment or your source of income?,” asks Bill Banfield, executive vice president of capital markets at Rocket Mortgage. “Because if you didn’t feel comfortable with it and you weren’t sure what was going to happen, you might feel like now’s not the right time.”

 

2. Do you want to stay in the same area long-term?

Are you looking to buy in an area you envision living in for five or more years? Raising a family? Growing old? Consider: “Do I see myself living in this home, in this geography? Will my job remain in this geography over the next two, three, four years?” notes Brunker.

 

A home is a big long-term investment. According to the National Association of Realtors, the median length of homeownership in the U.S. is 13 years and the typical tenure has been going up over the last decade.

 

If you may only be living in an area for a few years, determine if it makes financial sense to buy by considering closing costs, which can range between 3% and 4% of the home’s sales price, as well as how much renting would cost.

 

You can use a rent vs. buy calculator to compare the cost of renting versus the cost of buying a home in your area to see when a home purchase is more economical than renting.

 

3. Are you comfortable managing debt?

People who have a demonstrated history of being able to manage their debt are more likely to get more favorable terms on a home loan.

 

Paying your monthly debts on time and using your available credit wisely will lead to a higher credit score. The higher your score the less risky you appear to a lender, which in turn will qualify you for a lower interest rate. A good credit score according to FICO is 700. For the best rates, however, a score of 740 or higher is needed.

 

For those who have no credit history — sometimes known as a thin file — it may be impossible to obtain a mortgage. To start building a responsible credit history consider a low limit credit card or a secured loan.

 

In addition to your credit score, lenders will also look at your debt-to-income ratio. A DTI ratio compares your total monthly debts (including your new mortgage) to your gross monthly income and is used by lenders to determine your ability to repay the money you’re borrowing.

 

Most lenders prefer a DTI of around 28%, while others may accept a ratio as high as 50%. The lower your DTI, the more comfortable you’ll be with the mortgage payment. A high DTI can not only increase your interest rate but also limit the amount of money you’ll be able to borrow.

 

Use Money’s debt-to-income ratio calculator to figure out your current DTI and determine how much house you might be able to afford while keeping your ratio at a sustainable level.

 

4. Do you have an emergency fund?

An emergency fund can tide you over if you are out of work or help defray the cost of unexpected expenses. Most experts recommend having enough cash to live on for three to six months in a savings account — and homeowners may want more.

 

Homes require maintenance and repairs, especially when buying older homes that may need upgrades. Being able to buy the house but then not have the money to repair it will only make your financial situation worse.

 

Homeowners spent an average of $3,192 on maintenance and another $1,640 on emergency repairs last year, according to HomeAdvisor. While newly built homes may not need repairs right away, building up a fund for the future is a wise idea. A good rule of thumb to follow when budgeting for home repairs, according to Realtor.com, is to set aside between 1% to 4% of the home’s value, with a higher percentage being set aside for older homes.

 

Saving money is a smart move. Saving before applying for a mortgage is even smarter.

 

5. Do you have enough cash for a down payment?

You may have heard that to buy a home you need to have 20% of the purchase price for a down payment. But according to Banfield, needing to put 20% down on a home is “a modern-day fallacy.” Many lenders that will accept down payments as low as 3%. In fact, the average down payment in 2020 was 6%, according to Rocket Mortgage.

 

For prospective homebuyers, coming up with a down payment can be daunting, says Jess Kennedy, co-founder of online lender Beeline. Having to amass tens of thousands of dollars is difficult.

 

Banfield recommends that you align your down payment with your goals for the home once you’ve closed.

 

Does the home need a lot of work? Do you need to buy appliances, install new carpeting, or repair a roof? A smaller down payment may be necessary to avoid taking out another loan or racking up a credit card debt. The right home improvements can also make your home more valuable and increase your equity.

 

Keep in mind, however, that borrowers who put less than 20% down are required to pay private mortgage insurance. PMI protects the lender from losing money in case you default. The cost of PMI is usually added to your monthly mortgage payment and can range between 0.5% to 2% of the loan amount. (Once you have paid enough of the loan to reach 20% equity, your lender should remove the PMI.)

 

Of course, putting as much as possible down up front will also save you on interest over the life of the loan. For example, you want to purchase a $200,000 home. You have a good credit score, and you qualify for a 3% interest rate on a 30-year fixed rate mortgage. If you put 20% down on the home, you’ll pay a total of $82,844 in interest over the term of the loan. If you put just 6% down, your total interest payments would be $97,342 — over $14,000 more. A higher down payment can also mean a lower interest rate to begin with.

 

6. Do you know how much you can afford to spend on a home?

Knowing how much house you can afford means having a clear idea of not only how large your monthly payments will be, but also closing costs, insurance, and taxes. Compare how your current housing costs relate to a new mortgage payment, whether you’re upgrading to a new home or a renter looking for your first home.

 

A good way of getting an idea of how much home you can afford is to use a mortgage calculator. By using this tool, you can input information, such as down payment amounts and interest rates, to see how your monthly payment would change. In turn, you’ll get a better idea of how much you feel comfortable paying.

 

Most financial experts recommend the 28/36 rule when determining affordability. This means that you should spend only 28% of your gross monthly income on mortgage payments and 36% on your total debt.

 

 

7. Are you willing to make sacrifices to become a homeowner?

Kennedy believes that in addition to being comfortable with your financial ability to pay a mortgage, you should also consider how a home fits into your lifestyle.

 

For example, do you like eating out every weekend? Do you go on vacation every year? Will the financial cost of a mortgage allow you to continue doing the things that make life fun? Does buying a home fit into your future plans like starting a family or a business?

 

“These are kind of hard questions people sometimes need to be asking themselves that elicit an emotional response,” notes Kennedy. If buying a home means cutting out things that you are unwilling or uncomfortable giving up, it may be best to wait. Only you can tell.

 

Feb. 27, 2021

Mortgage Rates Rise But Stay Near Historic Lows

Mortgage Rates Rise But Stay Near Historic Lows

Calculator and keys on table in front of image of house

The 30-year fixed-rate mortgage came off its recent all-time lows to average near 3% this week. The 10-year Treasury yield, which mortgage rates closely follow, hit its highest level in the past year, prompting the increase in rates. 

“As the economic recovery progresses, mortgage rates are expected to rise further in the upcoming months,” writes Nadia Evangelou, senior economist and director of forecasting at the National Association of REALTORS®, for the association’s Economists’ Outlook blog. “Nevertheless, the upcoming rise in mortgage rates should not be alarming to would-be home buyers. The Federal Reserve recently assured that it would keep interest rates unchanged for a long time.”

Rates continue to remain near historic lows, said Sam Khater, Freddie Mac’s chief economist. The all-time low for the 30-year fixed-rate mortgage was set in January, averaging 2.65%.

 

Freddie Mac reports the following national averages with mortgage rates for the week ending Feb. 25:

 

30-year fixed-rate mortgages: averaged 2.97%, with an average 0.6 point, up from last week’s 2.81% average. Last year at this time, 30-year rates averaged 3.45%.

15-year fixed-rate mortgages: averaged 2.34%, with an average 0.6 point, rising from last week’s 2.21% average. A year ago, 15-year rates averaged 2.95%.

5-year hybrid adjustable-rate mortgages: averaged 2.99%, with an average 0.1 point, rising from last week’s 2.77% average. A year ago, 5-year ARMs averaged 3.20%.

Freddie Mac reports average points along with average commitment rates to better reflect the total upfront cost of obtaining the mortgage.

 

Source: Freddie Mac and “Instant Reaction: Mortgage Rates, February 25, 2021,” National Association of REALTORS® Economists’ Outlook blog (Feb. 25, 2021