THINGSTOCONSIDERWHENBUYINGAHOME

WINTER2019EDITION

Kris2MilliganRealtor.com561-302-3439

TABLEOFCONTENTS

WHAT'SHAPPENINGINTHEHOUSINGMARKET?

WHATYOUNEEDTOKNOWBEFOREYOUBUY

WHATTOEXPECTWHENBUYINGAHOME

4ReasonsToBuyAHomeThisWinter3

2FactorsToWatchInToday'sRealEstateMarket5HomePricesOverTheLastYear7BuyingRemainsCheaperThanRen2ngIn38States!8DoYouKnowTheCostOfWai2ngToBuy?9WhereAreMortgageInterestRatesHeaded?10

BuyingaHome?DoYouKnowTheLingo?12WhyPre-ApprovalShouldBeYourFirstStep13YouDoNOTNeed20%DownToBuyYourHome!14TheTrueCostOfNOTOwningYourHome16Star2ngToLookForAHome?KnowWhatYouWantVs.WhatYouNeed

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5ReasonsToUseARealEstateProfessional19HaveYouPutAsideEnoughForClosingCosts?20ReadyToMakeAnOffer?4TipsForSuccess22

18 61%OfFirst-TimeBuyersPutDownLessThan6%

Belowarefourgreatreasonstoconsiderbuyingahometodayinsteadofwai2ng.

1.  PricesWillConMnuetoRise

CoreLogic’slatestHomePriceIndexreportsthathomepriceshaveappreciatedby5.6%overthelast12months.Thesamereportpredictsthatpriceswillcon2nuetoincreaseatarateof4.7%overthenextyear.

Theboaominhomepriceshascomeandgone.Homevalueswillcon2nuetoappreciateforyears.Wai2ngnolongermakessense.

2.  MortgageInterestRatesAreProjectedtoIncrease

FreddieMac’sPrimaryMortgageMarketSurveyshowsthatinterestratesfora30-yearmortgagehaveincreasedbynearlyafullpercentagepointtoaround4.8%in2018.Mostexpertspredictthatrateswillriseoverthenext12months.TheMortgageBankersAssocia>on,FannieMae,FreddieMac,andtheNa>onalAssocia>onofRealtorsareinunison,projec2ngthatrateswillincreasebythis2menextyear.

AnincreaseinrateswillimpactYOURmonthlymortgagepayment.Ayearfromnow,yourhousingexpensewillincreaseifamortgageisnecessarytobuyyournexthome.

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4ReasonsToBuyAHomeThisWinter

3.  EitherWay,YouArePayingaMortgage

Therearesomerenterswhohavenotyetpurchasedahomebecausetheyareuncomfortabletakingontheobliga2onofamortgage.Everyoneshouldrealizethatunlessyouarelivingwithyourparentsrent-free,youarepayingamortgage-eitheryoursoryourlandlord’s.

Asanowner,yourmortgagepaymentisaformof‘forcedsavings’thatallowsyoutohaveequityinyourhomethatyoucantapintolaterinlife.Asarenter,youguaranteeyourlandlordisthepersonwiththatequity.

Areyoureadytoputyourhousingcosttoworkforyou?

4.   It’sTimetoMoveonwithYourLife

The‘cost’ofahomeisdeterminedbytwomajorcomponents:thepriceofthehomeandthecurrentmortgagerate.Itappearsthatbothareontherise.

Butwhatiftheyweren’t?Wouldyouwait?

Lookattheactualreasonyouarebuyinganddecideifitisworthwai2ng.Whetheryouwanttohaveagreatplaceforyourchildrentogrowup,youwantyourfamilytobesafer,oryoujustwanttohavecontroloverrenova2ons,maybenowisthe2metobuy.

Iftherightthingforyouandyourfamilyistopurchaseahomethisyear,buyingsoonerratherthanlatercouldleadtosubstanMalsavings.

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Whenitcomestobuyingorsellingahometherearemanyfactorsyoushouldconsider.Whereyouwanttolive,whyyouwanttobuyorsell,andwhowillhelpyoualongyourjourneyarejustsomeofthosefactors.Whenitcomestotoday’srealestatemarket,though,thetoptwofactorstoconsiderarewhat’shappeningwithinterestrates&inventory.

InterestRates

Mortgageinterestrateshavebeenontheriseandarenowoverthree-quartersofapercentagepointhigherthantheywereatthebeginningoftheyear.AccordingtoFreddieMac’sPrimaryMortgageMarketSurvey,rateshaveclimbedtoaround4.8%fora30-yearfixedratemortgage.

Theinterestrateyousecurewhenbuyingahomenotonlygreatlyimpactsyourmonthlyhousingcosts,butalsoimpactsyourpurchasingpower.

Purchasingpower,simplyput,istheamountofhomeyoucanaffordtobuyforthebudgetyouhaveavailabletospend.Asratesincrease,thepriceofthehouseyoucanaffordtobuywilldecreaseifyouplantostaywithinacertainmonthlyhousingbudget.

Thechartbelowdemonstratestheimpactrisinginterestrateswouldhaveifyouplannedtopurchasea$400,000homewhilekeepingyourprincipalandinterestpaymentsbetween$2,020-$2,050amonth.

Witheachquarterofapercentincreaseininterestrate,thevalueofthehomeyoucanafforddecreasesby2.5%(inthisexample,$10,000).Expertspredictthatmortgagerateswillbeover5%bythis2menextyear.

Buyer’sPurchasingPower

2FactorsToWatchInToday'sRealEstateMarket

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6.00 $2,398$2,338$2,278$2,218$2,1585.75 $2,334$2,276$2,218$2,160$2,1005.50 $2,272$2,214$2,158$2,100$2,0445.25 $2,208$2,154$2,098$2,044$1,9885.00 $2,148$2,094$2,040$1,986$1,9324.75 $2,086$2,034$1,982$1,930$1,8784.50 $2,026$1,976$1,926$1,874$1,824

$400,000$390,000$380,000$370,000$360,000-2.5% -5% -7.5% -10%

RATE

Principal&InterestPaymentsroundedtothenearestdollaramount

-9.7%

-11.1%

-9.5%

-8.1%-7.2%

-6.3% -6.1%

0.5%0.0%

2.7%

1.1%

2.8%

Nov Dec Jan Feb Mar Apr May Jun Jul Aug Sep Oct

Inventory

A‘normal’realestatemarketrequirestheretobea6-monthsupplyofhomesforsaleinorderforpricestoincreaseonlywithinfla2on.AccordingtotheNa>onalAssocia>onofRealtors(NAR),lis2nginventoryiscurrentlyata4.3-monthsupply(s2llwellbelowthe6-monthsneeded),whichhasputupwardpressureonhomeprices.Homepriceshaveincreasedyear-over-yearforthelast80straightmonths.

Theinventoryofhomesforsaleintherealestatemarkethadbeenonasteadydeclineandexperiencedyear-over-yeardropsfor36straightmonths(fromJuly2015toMay2018),butwearestar2ngtoseeashipininventoryoverthelastfivemonths.

Thechartbelowshowsthechangeinhousingsupplyoverthelast12monthscomparedtotheprevious12months.Asyoucansee,beginninginJune,inventorylevelshavestartedtoincreaseascomparedtothesame2melastyear.

BobomLine

Ifyouareplanningtoenterthehousingmarket,eitherasabuyeroraseller,let’sgettogethertodiscusswhatchangesinmortgageinterestratesandinventorycouldmeanforyou.

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HOUSING SUPPLY Year-Over-Year

Last 12 Months

Jun Jul Aug Sep Oct

HomePricesOverTheLastYearEveryquarter,theFederalHousingFinanceAgency(FHFA)reportsontheyear-over-yearchangesinhomeprices.Below,youwillseethatpricesareupyear-over-yearineveryregion.

Lookingatthebreakdownbystate,youcanseethateachstateisapprecia2ngatadifferentrate.Thisisimportanttoknowifyouareplanningonreloca2ngtoadifferentareaofthecountry.Wai2ngtomovemayendupcos2ngyoumore!

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InthelatestRentvs.BuyReportfromTrulia,theyexplainedthathomeownershipremainscheaperthanren2ngwithatradi2onal30-yearfixedratemortgagein98ofthe100largestmetroareasintheUnitedStates.

It’snosurprisethatthetwometroswhereren2ngbecamecheaperthanowningareSanJoseandSanFrancisco,CA,wheremedianhomepriceshavejumpedtoover$1milliondollarsthisyear.HomevaluesinSanJosehaverisen29%inthelastyear,whilerentshaveremainedrela2velyunchanged.Therangefortherestofthecountryisanaverageof2%lessexpensiveinHonolulu(HI),allthewayupto48.9%inDetroit(MI),and26.3%naMonwide!

AstudybyGoBankingRateslookedatthecostofren2ngvs.owningahomeatthestatelevelandconcludedthatin38states,itisactuallycheapertoown.Insixstatesthedifferencebetweenbuying&ren2ngwouldaccountforlessthana$50monthlydifference,leavingthechoiceuptotheindividualfamily.

BuyingRemainsCheaperThanRenMngIn38States!

Rentvs.OwnCheapertoOwn CheapertoRent Differenceof≤$50

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BobomLine

Homeownershipprovidesmanybenefitsbeyondthefinancialones.Ifyouareoneofthemanyrentersouttherewhowouldliketoevaluateyourabilitytobuythisyear,let’sgettogethertofindyourdreamhome.

$141.85

Monthly Annually Over30Years

$141.85 $1,702.20 $51,066

Mortgage InterestRate* Payment(P&I)**

Today $250,000 4.8% $1,311.66

2019 $261,750 5.3% $1,453.51

CoreLogicrecentlysharedthatna2onalhomepriceshaveincreasedby5.6%year-over-year.Overthatsame2meperiod,interestrateshaveremainedhistoricallylowwhichhasallowedmanybuyerstoenterthemarket.

Asaseller,youwillbemostconcernedabout‘short-termprice’–wherehomevaluesareheadedoverthenextsixmonths.Asabuyer,however,youmustnotbeconcernedaboutprice,butinsteadaboutthe‘long-termcost’ofthehome.

TheMortgageBankersAssocia>on(MBA),FreddieMac,andFannieMaeallprojectthatmortgageinterestrateswillincreasebythis2menextyear.AccordingtoCoreLogic’smostrecentHomePriceIndexReport,homepriceswillappreciateby4.7%overthenext12months.

WhatDoesThisMeanasaBuyer?

Ifhomepricesappreciatebythe4.7%predictedbyCoreLogicoverthenexttwelvemonths,hereisasimpledemonstra2onoftheimpactanincreaseininterestratewouldhaveonthemortgagepaymentofahomesellingforapproximately$250,000today:

BobomLine

Ifbuyingahomeisinyourplanforthisyear,doingitsoonerratherthanlatercouldsaveyouthousandsofdollarsoverthetermsofyourloan.

DoYouKnowTheCostOfWaiMngToBuy?

*RatesbasedonFreddieMac’spredic3onat3meofprint

DifferenceinMonthlyPayment

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Theinterestrateyoupayonyourhomemortgagehasadirectimpactonyourmonthlypayment.Thehighertherate,thegreaterthepaymentwillbe.Thatiswhyitisimportanttoknowwhereratesareheadedwhendecidingtostartyourhomesearch.

BelowisachartcreatedusingFreddieMac’sU.S.Economic&HousingMarke>ngOutlook.Asyoucansee,interestratesareprojectedtoincreasesteadilythroughtheendof2018andinto2019.

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WhereAreInterestRatesHeaded?

HowWillThisImpactYourMortgagePayment?

Dependingontheamountoftheloanthatyousecure,ahalfofapercent(.5%)increaseininterestratecanincreaseyourmonthlymortgagepaymentsignificantly.But,don’tletthepredic2onthatrateswillincreasestopyoufrompurchasingyourdreamhomethisyear.

Let’stakealookatahistoricalviewofinterestratesoverthelast45years.

BobomLine

Bethankfulthatyoucans2llgetabeaerinterestratethanyourolderbrotherorsisterdidtenyearsago,alowerratethanyourparentsdidtwentyyearsago,andabeaerratethanyourgrandparentsdidfortyyearsago.

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BuyingAHome?DoYouKnowtheLingo?Tostartyouonyourpathwithconfidence,wehavecompiledalistofsomeofthemostcommonterms

usedwhenbuyingahome.

Appraisal–Aprofessionalanalysisusedtoes2matethevalueofthehome.Anecessarystepinvalida>ngthehome’sworthtoyou&yourlendertosecurefinancing.ClosingCosts–Thecosttocompletetherealestatetransac2on.Paidatclosing,theyinclude:points,taxes,2tleinsurance,financingcosts,itemsthatmustbeprepaidorescrowed.Askyourlenderforacompletelistofclosingcostitems.CreditScore–Anumberrangingfrom300-850,thatisbasedonananalysisofyourcredithistory.Helpslendersdeterminethelikelihoodthatyou’llrepayfuturedebts.DownPayment–Downpaymentsaretypically3-20%ofthepurchasepriceofthehome.0%downprogramsalsoexist,askyourlenderformoreinforma>on.MortgageRate–Theinterestrateyoupaytoborrowmoneytobuyyourhouse.Thelowertherate,thebeSer.Pre-ApprovalLeber–Aleaerfromalenderindica2ngthatyouqualifyforamortgageofaspecificamount.RealEstateProfessional–Anindividualwhoprovidesservicesinbuying&sellinghomes.Realestateprofessionalsaretheretohelpyouthroughtheconfusingpaperwork,findyourdreamhome,nego>ateanyofthedetailsthatcomeup,andtohelpyouknowexactlywhat’sgoingoninthehousingmarket.

Thebestwaytoensurethatyourhome-buyingprocessisaconfidentoneistofindarealestateprowhowillguideyou

througheveryaspectofthetransacMonwith‘theheartofateacher,’pukngyourfamily’sneedsfirst.

FreddieMac–MyHomeSec2on

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