Will Low Mortgage Rates Continue through 2021?

by | Feb 18, 2021 | Buyers, First Time Home Buyers, Housing Market Updates, Interest Rates, Move-up Buyers

Will Low Mortgage Rates Continue through 2021? | MyKCM

With mortgage interest rates hitting record lows so many times recently, some are wondering if we’ll see low rates continue throughout 2021, or if they’ll start to rise. Recently, Freddie Mac released their quarterly forecast, noting:

“The average 30-year fixed-rate mortgage hit a record low over a dozen times in 2020 and the low interest rate environment is projected to continue through this year. We expect interest rates to average below 3% through the end of 2021. While this is a modest rise from 2020 averages, the recent vote by the Federal Reserve to keep interest rates anchored near zero should keep rates low.”

As shown in the graph below, Freddie Mac is projecting low rates going forward with a modest rise that’s expected to continue through 2022.Will Low Mortgage Rates Continue through 2021? | MyKCMFreddie Mac isn’t the only authority forecasting low rates with a slight rise. Fannie Mae, The Mortgage Bankers Association (MBA), and the National Association of Realtors (NAR) also anticipate low rates with a small increase as 2021 continues on. Here’s the quarterly breakdown of their projections and how they’re expected to play out over the next year:Will Low Mortgage Rates Continue through 2021? | MyKCMIt’s important to note that, while a small change in interest rates can have a substantial impact on monthly mortgage payments, these rates are still incredibly low compared to where they were just a couple of years ago.

What does this mean for buyers?

Low mortgage rates are creating an outstanding opportunity for current homebuyers to get more for their money while staying within their budget. As the economy gets stronger and we recover from the challenges of 2020, it’s natural for rates to potentially rise in response to a healthier economy. Mark Fleming, Chief Economist at First American, reminds us:

“Rising interest rates reduce house-buying power and affordability, but are often a sign of a strong economy, which increases home buyer demand. By any historic standard, today’s mortgage rates remain historically low and will continue to boost house-buying power and keep purchase demand robust.”

With low rates fueling activity among hopeful buyers, there are a lot of people who are highly motivated and looking for homes to purchase right now. In this environment, it can be challenging to find a home to buy, so a local real estate agent will be key to your success if you’re thinking of buying too. Working with a trusted real estate professional to navigate the process while rates are in your favor might be the best move you can make.

Bottom Line

If you’re ready to buy a home, it may be wise to make your move before mortgage rates begin to rise. Let’s connect to discuss how today’s low rates can create more opportunities for you this year.

3 Ways Home Equity Can Have a Major Impact on Your Life

by | Feb 17, 2021 | Buyers, Distressed Property, Equity, First Time Home Buyers, Foreclosures, Home Equity, Move-up Buyers, Rent vs Buy

3 Ways Home Equity Can Have a Major Impact on Your Life | MyKCM

There have been a lot of headlines reporting on how homeowner equity (the difference between the current market value of your home and the amount you owe on your mortgage) has dramatically increased over the past few years. CoreLogic indicated that equity increased for the average homeowner by $17,000 in the last year alone. ATTOM Data Solutions, in their latest U.S. Home Equity Report, revealed that 30.2% of the 59 million mortgaged homes in the United States have at least 50% equity. That doesn’t even include the 38% of homes that are owned free and clear, meaning they don’t have a mortgage at all.

How can equity help a household?

Having equity in your home can dramatically impact your life. Equity is like a savings account you can tap into when you need cash. Like any other savings, you should be sensible in how you use it, though. Here are three good reasons to consider using your equity.

1. You’re experiencing financial hardship (job loss, medical expenses, etc.)

Equity gives you options during difficult financial times. With equity, you could refinance your house to get cash which may ease the burden. It also puts you in a better position to talk to the bank about restructuring your home loan until you can get back on your feet.

Today, there are 2.7 million Americans who are currently in a forbearance program because of the pandemic. Ninety percent of those in the program have at least 10% equity. That puts them in a better position to get a loan modification instead of facing foreclosure because many banks will see the equity as a form of collateral in a new deal. If you’re in this position, even if you can’t get a modification, the equity allows you the option to sell your house and walk away with your equity instead of losing the house and your investment in it.

2. You need money to start a new business

We’ve all heard the stories about how many great American companies started in the founder’s garage (i.e., Disney, Hewlett Packard, Apple, Yankee Candle, Keeping Current Matters). What we might not realize, however, is the garage (along with the rest of the home) supplied the start-up money for many of these companies in the form of a refinance.

If you’re passionate about an idea you have for a new product or service, the equity in your home may enable you to make that dream a reality.

3. You want to invest in a loved one’s future

It’s been a long-standing tradition in this country for many households to help pay college expenses for their children. Some have tapped into the equity in their homes to do that.

Additionally, George Ratiu, Senior Economist for realtor.com, notes:

“52% of Americans who bought their first home in 2020 said they got help with their down payment from friends or family. The number one lender? Their parents.”

It’s safe to assume a percentage of that down payment money likely came from home equity.

Bottom Line

Savings in any form is a good thing. The forced savings you can earn from making a mortgage payment enables you to build wealth through home equity. That equity can come in handy in both good and more challenging times.

6 Foundational Benefits of Homeownership Today

by | Feb 9, 2021 | Buyers, First Time Home Buyers, Home Search, Move-up Buyers, Rent vs Buy

6 Foundational Benefits of Homeownership Today | MyKCM

Over the past year, our homes have become an integral part of our lives more than ever. They’re much more than the houses we live in. They’re our workplaces, virtual schools, and safe havens that provide shelter, stability, and protection through the evolving health crisis. Today, 65.8% of Americans are fortunate enough to call their homes their own.

As we continue to think about the future, our goals for the year, and what we want to achieve well beyond 2021, it’s a great time to look at the benefits of owning a home. Below are some highlights and quotes on the benefits of homeownership shared by the National Association of Realtors (NAR). From feel-good motivations to economic and social impacts on the local community, these items may give you reason to believe homeownership stretches well beyond your financial investment.

Non-Financial Benefits

Owning a home brings a sense of happiness, satisfaction, and pride.

  • Pride of Ownership: It feels good to have a place that’s truly your own, especially since you can customize it to your liking. “The personal satisfaction and sense of accomplishment achieved through homeownership can enhance psychological health, happiness and well-being for homeowners and those around them.”
  • Civic Participation: Homeownership creates stability, a sense of community, and increases civic engagement. It’s a way to add to the strength of your local area and drive value into your neighborhood.

Financial Benefits

Buying a home is also an investment in your financial future.

  • Net Worth: Homeownership builds your net worth. Today, the median household net worth of all homeowners is $254,900, while the median net worth of renters is only $6,270.
  • Financial Security: Equity, appreciation, and more predictable monthly housing expenses are huge financial benefits of owning a home. Homeownership is truly the best way to improve your long-term financial position.

Economic Benefits

Homeownership is even a local economic driver.

  • Housing-Related Spending: An economic force throughout our nation, housing-related expenses accounted for more than one-sixth of the country’s economic activity over the past three decades.
  • Entrepreneurship: Homeownership is also a form of forced savings that can provide entrepreneurial opportunities. “Owning a home enables new entrepreneurs to obtain access to credit to start or expand a business and generate new jobs by using their home as collateral for small business loans.”

Bottom Line

The benefits of homeownership go well beyond the basics. Homeownership is truly a way to build financial freedom, find greater satisfaction and happiness, and make a substantial impact in your community. If owning a home is part of your dream this year, let’s connect so you can begin the homebuying process today.

Why Owning a Home Is a Powerful Financial Decision

by | Feb 4, 2021 | Buyers, First Time Home Buyers, Home Search, Interest Rates, Rent vs Buy

Why Owning a Home Is a Powerful Financial Decision | MyKCM

In today’s housing market, there are clear financial benefits to owning a home: increasing equity, the chance to build your net worth, and appreciating home values, just to name a few. If you’re a renter, it’s never too early to think about how homeownership can propel you toward a stronger future. Here’s a dive into three often-overlooked financial benefits of homeownership and how preparing for them now can steer you in the direction of greater financial security and savings.

1. You Won’t Always Have a Monthly Housing Payment

Personal finance advisor Dave Ramsey explains:

“Every payment brings you closer to owning the house. When you pay your rent, that money is spent. Gone. Bye. Not returning. But when you pay your mortgage, you work toward full ownership.”

As a homeowner, you can eventually eliminate the monthly payment you make on your house. That’s a huge win and a big factor in how homeownership can drive stability and savings in your life. As soon as you buy a home, your monthly housing costs begin to work for you as forced savings in the form of equity. When you build equity and grow your net worth, you can continue to reinvest those savings into your future, maybe even by buying that next dream home. The possibilities are truly endless.

2. Homeownership Is a Tax Break

One thing people who have never owned a home don’t always think about are the tax advantages of homeownership. The same article states:

“You have tax advantages. Many of the costs of owning a home—like property taxes—are tax deductible. And if you’re paying off a mortgage, you’ll get to count your mortgage interest as a deduction when you file your tax return.”

Whether you’re living in your first home or your fifth, it’s a huge financial advantage to have some tax relief tied to the interest you pay each year. It’s one thing you definitely don’t get when you’re renting. Be sure to work with a tax professional to get the best possible benefits on your annual return.

3. Monthly Housing Costs Are Predictable

A third benefit is the fact that monthly costs start to become more predictable with homeownership, something that doesn’t happen if you’re renting. Ramsey also notes:

“Rent rates will go up. Even if you found a killer deal in a hot area, inflation, competition, and rising property values will cause your rent to go up year after year.”

With a mortgage, you can keep your monthly housing costs relatively steady and predictable. Your monthly costs are most likely based on a fixed-rate mortgage, which allows you to budget your finances over a longer period of time. Rental prices have been skyrocketing since 2012, and with today’s low mortgage rates, it’s a great time to get more for your money when purchasing a home. If you want to lock-in your monthly payment at a low rate and have a solid understanding of what you’re going to spend in your mortgage payment each month, buying a home may be your best bet.

Bottom Line

If you’re ready to start feeling the benefits of stability, savings, and predictability that come with owning a home, let’s connect to determine if buying sooner rather than later is right for you.

Want to Build Wealth? Buy a Home This Year.

by | Feb 2, 2021 | Buyer Myths, Buyers, First Time Home Buyers, Home Equity, Home Search, Housing Market Updates, Move-up Buyers, Pricing, Rent vs Buy

Want to Build Wealth? Buy a Home This Year. | MyKCM

Every year, households across the country make the decision to rent for another year or take the leap into homeownership. They look at their earnings and savings and then decide what makes the most financial sense. That equation will most likely take into consideration monthly housing costs, tax advantages, and other incremental expenses. Using these measurements, recent studies show that it’s still more affordable to own than rent in most of the country.

There is, however, another financial advantage to owning a home that’s often forgotten in the analysis – the wealth built through equity when you own a home.

Odeta Kushi, Deputy Chief Economist for First American, discusses this point in a recent blog post. She explains:

“Once you include the equity benefit of price appreciation, owning made more financial sense than renting in 48 out of the 50 top markets, with the only exceptions being San Francisco and San Jose, Calif.”

What has this equity piece meant to homeowners in the past?

ATTOM Data Solutions, the curator of one of the nation’s premier property databases, just analyzed the typical home-price gain owners nationwide enjoyed when they sold their homes. Here’s a breakdown of their findings:Want to Build Wealth? Buy a Home This Year. | MyKCMThe typical gain in the sale of the home (equity) has increased significantly over the last five years.

CoreLogic, another property data curator, also weighed in on the subject. According to their latest Homeowner Equity Insights Report, the average homeowner gained $17,000 in equity in just the last year alone.

What does the future look like for homeowners when it comes to equity?

Here are the seven major home price appreciation forecasts for 2021:Want to Build Wealth? Buy a Home This Year. | MyKCMThe National Association of Realtors (NAR) just reported that today, the median-priced home in the country sells for $309,800. If homes appreciate by 5% this year (the average of the forecasts), the homeowner will increase their wealth by $15,490 in 2021 through increased equity.

Bottom Line

As you make your plans for the coming year, be sure to consider the equity benefits of home price appreciation as you weigh the financial advantages of buying over renting. When you do, you may find this is the perfect time to jump into homeownership.

How to Make the Dream of Homeownership a Reality This Year

by | Jan 18, 2021 | Buyers, Down Payment, Financing, First Time Home Buyers, Home Search, Move-up Buyers, Rent vs Buy

How to Make the Dream of Homeownership a Reality This Year | MyKCM

In 1963, Martin Luther King, Jr. inspired a powerful movement with his famous “I Have a Dream” speech. Through his passion and determination, he sparked interest, ambition, and courage in his audience. Today, reflecting on his message encourages many of us to think about our own dreams, goals, beliefs, and aspirations. For many Americans, one of those common goals is owning a home: a piece of land, a roof over our heads, and a place where we can grow and flourish.

If you’re dreaming of buying a home this year, start by connecting with a local real estate professional to understand what goes into the process. With a trusted advisor at your side, you can then begin to answer the questions below to set yourself up for homebuying success.

1. How Can I Better Understand the Process, and How Much Can I Afford?

The process of buying a home is not one to enter into lightly. You need to decide on key things like how long you plan on living in an area, school districts you prefer, what kind of commute works for you, and how much you can afford to spend.

Keep in mind, before you start the process to purchase a home, you’ll also need to apply for a mortgage. Lenders will evaluate several factors connected to your financial track record, one of which is your credit history. They’ll want to see how well you’ve been able to minimize past debts, so make sure you’ve been paying your student loans, credit cards, and car loans on time. If your financial situation has changed recently, be sure to discuss that with your lender as well. Most agents have loan officers they trust and will provide referrals for you.

According to ConsumerReports.org:

“Financial planners recommend limiting the amount you spend on housing to 25 percent of your monthly budget.”

2. How Much Do I Need for a Down Payment?

In addition to knowing how much you can afford on a monthly mortgage payment, understanding how much you’ll need for a down payment is another critical step. Thankfully, there are many different options and resources in the market to potentially reduce the amount you may think you need to put down.

If you’re concerned about saving for a down payment, start small and be consistent. A little bit each month goes a long way. Jumpstart your savings by automatically adding a portion of your monthly paycheck into a separate savings account or house fund. AmericaSaves.org says:

“Over time, these automatic deposits add up. For example, $50 a month accumulates to $600 a year and $3,000 after five years, plus interest that has compounded.”

Before you know it, you’ll have enough for a down payment if you’re disciplined and thoughtful about your process.

3. Saving Takes Time: Practice Living on a Budget

As tempting as it is to pass the extra time you may be spending at home these days with a little retail therapy, putting that extra money toward your down payment will help accelerate your path to homeownership. It’s the little things that count, so start trying to live on a slightly tighter budget if you aren’t doing so already. A budget will allow you to save more for your down payment and help you pay down other debts to improve your credit score.

A survey of millennial spending shows, “68% reported that shelter in place orders helped them save for their down payment.” Danielle Hale, Chief Economist at realtor.com, also notes:

“If there is any silver lining to the current economic landscape, it’s that mortgage rates are hanging around record lows…Additionally, shelter-in-place orders helped many who were fortunate enough to keep their jobs save for a down payment — one of the largest hurdles of buying a home. The combination of low rates and the opportunity to save is enabling many millennials to move up their home buying timeline.”

While you don’t need to cut all of the extras out of your current lifestyle, making smarter choices and limiting your spending in areas where you can slim down will make a big difference.

Bottom Line

If homeownership is on your dream list this year, take a good look at what you can prioritize to help you get there. To determine the steps you should take to start the process, let’s connect today.