Home-Buying: Do You Know the Lingo?
Some Highlights: Home-Buying: Do You Know the Lingo
- Home-buying can be intimidating if you’re not familiar with the terms used throughout the process.
- To point you in the right direction, here’s a list of some of the most common language you’ll hear when buying a home.
- The best way to ensure your home-buying process is a positive one is to find a real estate professional who will guide you through every aspect of the transaction with ‘the heart of a teacher.’
Housing Supply Not Keeping Up with Population Increase
Many buyers are wondering where to find houses for sale in today’s market. It’s a true dilemma. We see an increase in buyer demand, but the supply available for purchase isn’t keeping up.
The number of new housing permits issued prior to the great recession increased for 15 years until 2005 (from 1.12 million in 1990 to a pre-recession peak of 2.16 million in 2005). According to Apartment List,
“From 1990 to 2005, the number of single-family permits issued more than doubled, while the number of multi-family permits grew by 49 percent.”
When the housing market crashed, the number of new homes permitted decreased to its lowest level in 2009 (see below):Since then, supply and demand have been out of balance when it comes to new construction. According to the same report,
“Construction of single-family homes has recovered much more slowly — the number of single-family housing units permitted in 2018 was barely half the number permitted in 2005.”
Why is new construction so important?
As the U.S. population increases, there is also an increase in the need for new homes. Today, new construction is not keeping up with the increase in the nation’s population. The report continues:
“The total number of residential housing units permitted in 2018 was roughly the same as the number permitted in 1994, when the country’s population was 20 percent less than it is today.”
Essentially, the dip in home building coupled with the steadily increasing U.S. population means there is now a selling opportunity for homeowners willing to list their current houses.
If you’re considering selling your home to move up, now is a great time to get a positive return on your investment in a market with high demand. Let’s get together to determine the specific options available for you and your family.
Seniors Are on the Move in the Real Estate Market
Did you know August 21st was National Senior Citizens Day? According to the United States Census, we honor senior citizens because,
“Throughout our history, older people have achieved much for our families, our communities, and our country. That remains true today and gives us ample reason…to reserve a special day in honor of the senior citizens who mean so much to our land.”
To give proper recognition, we’re going to look at some senior-related data in the housing industry.
According to the Population Reference Bureau,
“The number of Americans ages 65 and older is projected to nearly double from 52 million in 2018 to 95 million by 2060, and the 65-and-older age group’s share of the total population will rise from 16 percent to 23 percent.”
Seniors Believe in Homeownership
In a recent report, Freddie Mac compared the homeownership rates of two groups of seniors: the Good Times Cohort (born from 1931-1941) and the Previous Generations (born in the 1930s). The data shows an increase in the homeownership rate for the Good Times Cohort because seniors are now aging in place, living longer, and maintaining a high quality of life into their later years.This, however, does not mean all seniors are staying in place. Some are actively buying and selling homes. In the 2019 Home Buyers and Sellers Generational Trends Report, the National Association of Realtors® (NAR) showed the percentage of seniors buying and selling:
Here are some highlights from NAR’s report:
- Buyers ages 54 to 63 had higher median household incomes and were more likely to be married couples.
- 12% of buyers ages 54 to 63 are first-time homebuyers, 5% (64 to 72), and 4% (73 to 93).
- Buyers ages 54 to 63 purchased because of an interest in being closer to friends and families, job relocation, and the desire to own a home of their own.
- Sellers 54 years and older often downsized and purchased a smaller, less expensive home than the one they sold.
- Sellers ages 64 to 72 lived in their homes for 21 years or more.
According to NAR’s report, 58% of buyers ages 64 to 72 said they need help from an agent to find the right home. The transition from a current home to a new one is significant to undertake, especially for anyone who has lived in the same house for many years. If you’re a senior thinking about the process, let’s get together to help you make the move as smoothly as possible.
A Latte a Day Keeps Homeownership Away [INFOGRAPHIC]
- The pumpkin spice latte just launched, so you may be tempted to spend your extra cash on a daily caffeine fix, but that small expense can add up to a big number – fast!
- Saving for a down payment takes a little discipline, so limiting your extra purchases (like a latte a day from your favorite coffee shop) will help you get there faster.
- Depending on where you live, putting away just a small amount each day will get you to the average down payment you may need for homeownership faster than you think
Mortgage rates have fallen by over a full percentage point since Q4 of 2018, settling at near-historic lows. This is big news for buyers looking to get more for their money in the current housing market.According to Freddie Mac’s Primary Mortgage Market Survey,
“the 30-year fixed-rate mortgage (FRM) rate averaged 3.60 percent, the lowest it has been since November 2016.”
Sam Khater, Chief Economist at Freddie Mac, notes how this is great news for homebuyers. He states,
“…consumer sentiment remains buoyed by a strong labor market and low rates that will continue to drive home sales into the fall.”
As a potential buyer, the best thing you can do is work with a trusted advisor who can help you keep a close eye on how the market is changing. Relying on current expert advice is more important than ever when it comes to making a confident and informed decision for you and your family.
Even a small increase (or decrease) in interest rates can impact your monthly housing cost. If buying a home is on your short list of goals to achieve, let’s get together to determine your best move.
Experts Predict a Strong Housing Market for the Rest of 2019
We’re in the back half of the year, and with a decline in interest rates as well as home price and wage appreciation, many are wondering what the predictions are for the remainder of 2019.
Here’s what some of the experts have to say:
“We see the cooldown flattening or even reversing course in the coming months and expect the housing market to continue coming into balance. In the meantime, buyers are likely claiming some ground from what has been seller’s territory over the past few years. If mortgage rates stay low, wages continue to grow, and inventory picks up, we can expect the U.S. housing market to further stabilize throughout the remainder of the year.”
“We expect the second half of year will be notably better than the first half in terms of home sales, mainly because of lower mortgage rates.”
“The drop in mortgage rates continues to stimulate the real estate market and the economy. Home purchase demand is up five percent from a year ago and has noticeably strengthened since the early summer months…The benefit of lower mortgage rates is not only shoring up home sales, but also providing support to homeowner balance sheets via higher monthly cash flow and steadily rising home equity.”
The housing market will be strong for the rest of 2019. If you’d like to know more about our specific market, let’s get together to discuss what’s happening in our area.
PMI, What you need to know about Private Mtg Ins
Whether it is your first time or your fifth, it is always important to know all the facts when it comes to buying a home. With the large number of mortgage programs available that allow buyers to purchase homes with down payments below 20%, you can never have too much information: PMI, What you need to know about Private Mortgage Insurance.
What is PMI?
Freddie Mac defines PMI as:
“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.
Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”
As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. Freddie Mac goes on to explain that:
“The cost of PMI varies based on your loan-to-value ratio – the amount you owe on your mortgage compared to its value – and credit score, but you can expect to pay between $30 and $70 per month for every $100,000 borrowed.”
According to the National Association of Realtors, the average down payment for all buyers last year was 13%. For first-time buyers, that number dropped to 7%, while repeat buyers put down 16% (no doubt aided by the sale of their homes). This just goes to show that for a large number of buyers last year, PMI did not stop them from buying their dream homes.
Here’s an example of the cost of a mortgage on a $200,000 home with a 5% down payment & PMI, compared to a 20% down payment without PMI:The larger the down payment you can make, the lower your monthly housing cost will be, but Freddie Mac urges you to remember:
“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”
Bottom Line: PMI, What you need to know about Private Mtg Ins
If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.
Stop Wondering What Your Budget Is & Get Pre-Approved!
In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show that you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.
Even if you are not in an incredibly competitive market, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.
Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:
“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”
One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”
Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:
- Capacity: Your current and future ability to make your payments
- Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
- Collateral: The home, or type of home, that you would like to purchase
- Credit: Your history of paying bills and other debts on time
Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.
Bottom Line: Get Pre-Approved
Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so today. Contact me today for more info on lenders you can speak with, or even apply using an app!