Real Estate Stays On Top As Americans’ Favorite Investment For The Long Term

by Shay Brunson

Real Estate Stays On Top As Americans’ Favorite Investment For The Long Term

James Royal

Mortgage rates are surging higher, inflation is soaring, and many experts are forecasting a recession may soon be on the way. Despite these negative impacts on the housing market, real estate remains America’s favorite long-term investment in 2022, according to a just-released Bankrate survey. It was the third time in the last four years that real estate took the top honors.

In all, 29 percent of Americans said that real estate was their top pick for investing money that they didn’t need for 10 or more years. Real estate made a strong showing, and it was the second-highest result – behind only the 31 percent it notched in 2019 – in the survey’s 10 years of polling.

“Despite a housing market that is coming off the boil, preference for real estate remains high,” says Greg McBride, CFA, Bankrate chief financial analyst. “For the third time in the past four years and sixth time in the past 10 years, real estate is Americans’ preferred way to invest money not needed for more than 10 years.”

Key takeaways:

Real estate remains the most popular long-term investment, with 29 percent of Americans saying it’s their top choice.
Of those who did not select stocks as their preferred investment, 36 percent cited high volatility as the biggest reason why they picked something else.
About 75 percent of Americans say they’re uncomfortable with cryptocurrency.
Stocks were the top pick for baby boomers, college graduates and higher earners.

Real estate remains the most popular long-term investment

As it did last year and for three of the past four years, real estate sits atop the list of Americans’ favorite ways to invest money not needed for 10 or more years. More than 29 percent tapped real estate as their preferred long-term investment, the second-highest showing ever in the 10 years of the Bankrate survey.

Here’s the full list of responses and the percentage of Americans who favored each:

Real estate – 29 percent
Stock market – 26 percent
Cash investments (savings, CDs) – 17 percent
Gold or other precious metals – 9 percent
Bonds – 9 percent
Bitcoin/cryptocurrency – 6 percent
None of these – 3 percent

Real Estate News • July 27, 2022

Rising Mortgage Rates Are Hitting Americans’ Wallets. Here’s How to Adjust Your Housing Budget

by Shay Brunson

Rising Mortgage Rates Are Hitting Americans’ Wallets. Here’s How to Adjust Your Housing Budget

Michelle Fox

Homebuyers are feeling the squeeze of rising mortgage rates. On top of that, housing prices remain high. That may lead many to rethink their budget.

“As mortgage rates go up, it raises the cost of buying a home with a mortgage,” explained Danielle Hale, chief economist at Realtor.com.

“For many homebuyers, higher mortgage rates equal a higher monthly cost, especially for those taking out a large mortgage.”

The rate for a 30-year fixed mortgage is now 5.65%, according to Mortgage News Daily, up from 3.29% at the start of the year. The median listing price hit a record $450,000 in June, according to Realtor.com.

At the current rate, the cost of a 30-year fixed mortgage on a $450,000 home means $2,078 in monthly payments, if you put down 20%, according to Realtor.com’s calculator. That doesn’t include property tax, home insurance, homeowner association fees or mortgage insurance, since the down payment was 20%. If you put down less, you are typically subject to private mortgage insurance, or PMI.

At a 3.29% rate, the cost for such an arrangement is $1,575 a month.

The good news is that supply constraints are easing as more homes are coming on to the market.

“We are seeing a shift from where we were six months ago,” said Glenn Brunker, president of Ally Home.

“I wouldn’t say we are in a buyer’s market, but definitely the market where the seller controls the experience, the transaction [and] the price, we are seeing some softening in that.”

Here’s what to look at when adjusting your housing budget.

Consider your overall budget

Take into account all of your monthly expenses when looking at your housing budget.

The general rule of thumb for how much you should spend on housing costs is 30% of your income. Those costs include not only the mortgage payment, but also any property taxes, homeowners insurance and maintenance.

However, how much you actually devote to housing costs depends on your situation. If you don’t have children, perhaps you can spend more than 30% of your income — or if you have children or student debt, it may mean less than that percentage, Hale said.

“The No. 1 thing for buyers to make sure [of] is that the monthly payment is comfortable and fits their budget,” she said.

Look into available interest rates

In addition to having a dependable real estate agent, research mortgage lenders and find one you can trust. Compare available interest rates and be aware of any fees the lenders charge.

The interest rate you get depends in part on your credit score. Generally, to land more favorable advertised rates, your credit score should be over 740, Brunker said.

Work with your lender on different scenarios, so that you can get an idea of how your monthly payment would change with future rate increases. You can also test out different payments on a variety of mortgage calculators, from either lenders or sites like Bankrate or NerdWallet.

Consider your mortgage terms

There are different mortgage products on the market and different ways to approach calculating your monthly bill.

One way to lower your monthly payments is to make a larger down payment so that you aren’t borrowing as much on the cost of the property. That may work for someone who is selling a home and has a large amount of equity available, but this choice is likely a difficult one for first-time buyers, Hale said.

Similarly, shelling out money ahead of time by buying what are termed “mortgage points” can lower your interest rate. Each point costs 1% of the mortgage amount and typically lowers the rate by 0.25%, according to Bankrate. This approach may or may not work for your financial situation.

“It may be a very high cost to bring the mortgage rate down just a little bit, or sometimes you get a big reduction without paying many points,” Hale said. “Most lenders will give you the best execution rate.”

On the flipside, you can lower the final cost of the home if you get a 15-year fixed mortgage instead of a 30-year fixed loan, Brunker said. Right now, a 15-year fixed loan has a 4.95% interest rate, according to Mortgage Daily News.

“You’ll pay off the loan faster, saving 15 years of interest,” Brunker noted.

However, the monthly payments will be higher.

A riskier way to lower your payments is taking out an adjustable-rate mortgage. The loans offer lower initial rates than fixed-rate loans. After a certain period — which is generally three, five, seven or 10 years — the rate of the ARM adjusts to reflect current market conditions.

The risk is that once the fixed rate ends, you could wind up with a higher interest rate and, therefore, higher monthly payments. Make sure you’ll be able to afford those payments when the time comes, even if you think mortgage rates will eventually go down and give you the opportunity to refinance.

“I would not bet on that happening and risking long-term homeownership,” Brunker said.

Home Buying • Real Estate News • June 21, 2022

How Buying a House Can Hedge Against Inflation

by Shay Brunson

How Buying a House Can Hedge Against Inflation

Natalie Campisi

The cost of goods across industries is rising, leading to broader concerns about inflation and whether people will struggle to purchase the items they could afford in the past. But there are financial moves consumers can make to hedge against inflation. One of those strategies is to invest in real estate, especially when mortgage rates are low, as they are now.

The latest Consumer Price Index (CPI)—which is the weighted average of the price of goods and services over time—jumped 5% for the 12 months ending in May, the highest annual increase since August 2008. A rise in the CPI is an indicator of inflation.

As inflation rises, the cost of everything goes up, including real estate. However, if you can lock in a low-interest, fixed-rate mortgage, then the cost of your home—an appreciating asset—will stay the same as the value of your property rises.

“We often get hung up on the exact definition of inflation, but one thing we all know is that prices for a lot of items in the economy have gone up,” says Ali Wolf, chief economist at Zonda, a housing data and consulting firm. “If you have cash and are expecting inflation, you want to think through where you can put your money so it does not lose value. Housing is commonly looked at as a good inflation hedge, especially with interest rates so low.”

On the flip side, a bad inflationary hedge would be to leave your cash in a savings account. Even though banks usually pay higher interest rates during inflationary periods, the value likely won’t outperform inflation.

3 Ways a Home Purchase Is a Reliable Hedge Against Inflation

Typically, inflation ushers in higher prices for everything, including mortgage rates, home prices and rental costs. So, if you’re considering buying a home and think we might be heading for rising inflation, here are some ways buying a home now can help you later.

Lock in a mortgage with a low, fixed rate. The average rate for a 30-year fixed mortgage is bouncing around the low-3% range, making this a great time to borrow money. As inflation increases, mortgage rates will likely climb, so folks who lock in a low rate now can avoid paying higher interest rates later.
You won’t be exposed to rising rent. The rising inflation tide lifts all boats, including rent prices. Homeowners are shielded from mounting rental prices because their cost is fixed, regardless of what’s happening in the market
Property values increase over time. Tangible assets like real estate get more valuable over time, which makes buying a home a good way to spend your money during inflationary times.

Private Investors Are Taking Advantage of Cheap Money

You might have heard lately about private investors scooping up single-family homes, making it even more challenging for first-time homebuyers to enter today’s extremely competitive housing market.

Even though housing prices are surging, most homebuyers are interested now because they want to take advantage of the low interest-rate environment. Likewise, investors are keen on getting cheap money for assets that will go up in value.

In the first quarter of 2021, investors bought one of every seven U.S. homes purchased, which is a significant jump from the previous three quarters, when they were grabbing about one out of every 10 homes. Investors are the largest segment of buyers of multifamily properties, making up 25.8% of all purchases in the first quarter, according to a report by Redfin.

Lennar Homes—one of the largest homebuilders in the United States—recently announced it was purchasing more than $4 billion of new single-family homes and townhomes in high-growth areas in order to rent them out. This is a prime example of investors hedging against inflation while loan rates are low.

“If an investor can lock in a low 30-year, fixed-rate loan, offset that with rising rents due to lack of housing supply and also enjoy the property value appreciation that has been roaring through the U.S., that investor would be well suited against rising inflation,” says John Toohig, a managing director at Raymond James. “Couple this with fintech—like Airbnb, Landing.com or Whyle.com,—making rental access ever easier for consumers and you could see a surge in this product.”

Where Inflation is Headed

For nearly a decade, the Federal Open Market Committee (FOMC), which is in charge of monetary policy for the Federal Reserve, has set the inflation target at around 2%. Inflation has consistently fallen short of that goal, so its new spike—deemed transitory by the Fed—is not as concerning.

Because of scarcity in different parts of the economy, from computer chips to the labor market, the cost of goods and services is rising. This causes inflation to climb. Whether it’s a short-term rise or the beginning of a longer inflationary period is still uncertain.

“The near-term inflation is almost a free lunch and it’s something the Fed wants to encourage,” says Chester Spatt, professor of finance at the Tepper School of Business at Carnegie Mellon University. “Central bankers are more fearful of deflation than inflation. People will delay purchasing goods in deflation which really gets in the way of an effective economy.”

Some economists, like Gus Faucher, chief economist at PNC Financial Services Group, expect inflation to remain at around 4% through the end of the year, followed by some tapering in 2022, with inflation falling to 3%.

“This 4% level is above the recent average, but it’s certainly contained,” Faucher says. “Inflation in 2023 and beyond will be around 2% to 2.5%, right where the Fed wants it.”

Final Thoughts for Homebuyers

Although buying a home can help protect the homeowner’s money against inflation, buyers should still consider how long they plan on staying in the house.

Because closing costs are so expensive, buyers have to factor in those costs before buying a home because it impacts your ability to afford that home in the long run. When you purchase a house you will pay between 2% to 6% of the purchase price in closing costs. And when you sell the home, closing costs can run anywhere from 1% to 3% of the sale price.

If you don’t accrue enough equity in your home to cover those costs, you could end up losing money on the sale. Similarly, some people are purchasing homes above the appraised value, which means they start out in their new home upside down on their mortgage—they owe more than what the property is worth. This is not a good position to be in if you don’t plan on staying in the home long enough for appreciation to catch up.

Often, the only thing that can help you build equity is time. Of course, there are wild card events that cause a housing market boom, and you could see your home appreciate much more rapidly than the average appreciation rate, which is typically 3% to 5%.

Today’s housing market is a great example of rapid price appreciation. Depending on your area, you could be paying top dollar for a house. This isn’t necessarily a bad thing if you plan on staying in the house long-term, says Steve Schnall, CEO of Quontic Bank.

“Even homes that were bought at the peak of the housing market, prior to the Great Recession of 2008, are worth much more now than they were then. Time smoothes out the dips and proves equity growth,” Schnall says. “If, on the other hand, you’re buying with an eye on flipping or simply as a speculative move, buyer beware.”

Home Buying • May 25, 2022

Is it Better to Rent or Own a Home? Here’s How to Decide the Right Move for you

by Shay Brunson

Is it Better to Rent or Own a Home? Here’s How to Decide the Right Move for you

Michelle Fox

With skyrocketing housing prices, homeownership may be out of reach for many Americans.

Yet rents are also rising. So how do you know if you should own a home or rent? It depends on a number of factors, experts said.

“If you’re not sure whether or not you want to rent or buy right now … it’s better to make your decision based on your personal situation and your personal needs,” said Lexie Holbert, housing and lifestyle expert for Realtor.com.

More from Invest in You:

When to up your home-buying budget or stick to your original price. Why you should start paying off debt now — and how to get started. Inflation is costing U.S. households nearly $300 more a month.

Home prices jumped 19.2% year over year in January, according to the S&P CoreLogic Case-Shiller Index. Meanwhile, single-family rental homes gained a record 12.6% in January from 12 months prior, according to CoreLogic.

On top of rising prices, mortgage interest rates are also soaring, hitting their highest level in more than three years last week.

When it comes down to the numbers, it’s generally more affordable to own a home, but the gap in affordability is shrinking as interest rates rise, according to ATTOM, a real estate data tracker. Owning the median-priced home is more affordable than the average rent on a three-bedroom home in 58% of the country, ATTOM reported in January.

To be sure, affordability is an issue for many. Fully 64% of non-homeowners said it’s holding them back from owning a home, including 43% who believe their income levels are not high enough, a Bankrate survey found. High home prices and the inability to swing a down payment and/or closing costs were also constraining buyers.

Here’s what to consider when making a decision whether to own a home or rent.

Timing is everything

Before you consider buying, think about where you are in your life. Are you looking to settle down somewhere for a while or will you be moving in a couple of years?

The general rule of thumb is it takes about five years to seven years in a home to recoup the purchase costs, Holbert said. That includes closing costs, which add between 2% and 5% to the purchase price.

“If your home needs are going to be pretty consistent and pretty stable over the next few years, now may be a really good time to buy for you,” she said.

“If they’re changing, you may want to consider renting so that you have the flexibility to move.”

Check your finances

Ask yourself if you are financially ready to own a home. That includes having enough emergency savings in case something happens in your first year of homeownership, Holbert said. You should also have enough monthly income to afford the mortgage payment, taxes and insurance, as well as extra monthly expenses like utilities.

Check your credit report, as well, since your credit score has a direct bearing on the mortgage you’ll get and interest rate you may pay. If you see any mistakes, get them corrected before you apply for a loan.

If you can’t afford the monthly payments, continue to rent and keep saving money if homeownership is your ultimate goal, Holbert said. If high rent prohibits you from saving, consider downsizing or making other big lifestyle changes so you can start putting more money aside.

“You’ll read that if you cut back on your $4 latte habit, it could really help you save for a home,” she noted.

“While it’s really good to save, where you’re really going to find that big cash for that down payment is going to be in those big spending categories, like housing or your car.”

Know your number

Figuring out what you can afford if you were to purchase a home is especially important now as home prices are rising, Greg McBride, chief financial analyst at Bankrate.

This way, you have boundaries set around your home shopping.

“The position you won’t want to be in is falling in love with a home and getting your offer accepted and then having to figure out how to pay for it,” he said.

Check out homes in your price range to determine if they fit your needs.

You can also use online calculators to help you make a financial determination between renting and buying.

Also, keep an eye on rising mortgage rates, Holbert warned. The Federal Reserve has indicated it will increase interest rates six more times this year, which, in turn, impacts mortgage rates. That’s why, if you are currently in the market to buy a home, it may be better to do so now before rates and prices climb higher, she said.

Just don’t get caught up in FOMO — or the fear of missing out. That could lead you to regret your purchase and put you in a financial bind down the road, McBride said.

“The novelty of that house will wear off; the mortgage payments will not,” he said.

Home Buying • April 25, 2022

Should I Buy a House? How to Tell If You’re Ready

by Shay Brunson

Take an in-depth look at your goals and priorities, as well as your finances, before you begin house hunting.

Buying a house is one of the most significant financial decisions you’ll ever make. But beyond altering your financial picture, buying your first home also represents a substantial lifestyle change for most people. In terms of impact on your day-to-day, homeownership is right up there with finishing school or having a child.

If you’re wondering whether you’re ready to buy a house, here’s a cheat sheet showing what you might factor into the decision. In some cases, all you need to do is run the numbers; others may require some soul searching. Once you’ve gone through this list, you’ll have a better idea of whether you’re ready to buy a house.

You should feel good about buying a house if …

Let’s start with five signs you might be ready to buy. Of course, this isn’t a checklist or a quiz, so it’s not like all five are must-haves. But if these sound like you, you may have already started down the path to homeownership.

You’ve got a steady income

Whether you’re self-employed, work a 9-to-5 or have some combination of the two, you’ve got money regularly coming in. That’s important for obvious reasons, like paying your bills, but also for getting a home loan. Your income is one way mortgage lenders gauge whether you’ll repay the loan. Lack of steady employment or an incomplete employment history may make it harder to qualify for a mortgage. Most mortgage lenders will request documentation showing an employment history of at least two years.

You have solid plans for the immediate future

Buying a house is a commitment; if you decide the place isn’t working out for you, selling a home is much more involved and expensive than, say, breaking an apartment lease. You want a place where you’ll be comfortable now, but also one that could meet your future needs. For example, if you know you want kids, it could make more sense to shop for a three-bedroom now instead of struggling to sell your starter home and upgrade when you’ve got a toddler (or two) underfoot.

You’ve built up savings for a down payment

Saving up for a down payment is one of the biggest hurdles on the path to homeownership. While you don’t have to put down 20%, depending on the type of home loan you’re using, you’ll likely make a down payment that’s between 3% and 10% of the purchase price. There are closing costs to consider, too — those will run about 2% to 5% of the total price. Having savings already socked away puts you much closer to homeownership.

You’re ready to take ownership

Besides paying the mortgage, owning a house comes with a ton of responsibilities. All the stuff you used to lean on your landlord or super for is now your job (unless you pay someone else to do it, in which case it’s yet another expense). So even with a new, move-in-ready home, be realistic about giving up some of your weekends and other free time for home maintenance. One way to skip a bit of the work? Buy a condo instead of a detached house. You’ll have less autonomy, but those homeowners association fees should handle the majority of your maintenance.

You can afford a location that meets your needs

Buying a house because you can afford a house, period, is not the same as buying a place where you actually want to live. If urban homeownership is beyond your budget, but you love your everything’s-in-walking-distance city lifestyle, keep renting for now. Found a town that fits your lifestyle and your bank account? You might be ready to start looking. While you may need to make tradeoffs — for example, compromising on your commute for a better school district — this isn’t just an investment; it’s your home. It’s best to buy in a place that really works for you.

* written by Kate Wood

Home Selling • March 24, 2022

How To Sell Your House: A Complete Guide for Sellers

by Shay Brunson

How to Sell Your House: A Complete Guide for Sellers

Most home sellers dream of a stress-free sale in which they simply list their house, quickly find a qualified buyer, collect the cash and hand over the keys. If only it were that simple! In reality, selling a home involves many moving parts — some that you can control, and some that are out of your hands.

For example, geography might influence how long your house lingers on the market or how much mark-up you can get away with. Where competition is high and inventory is low, odds are you’ll sell faster and command a higher price. Conversely, in places where home sales have cooled, homeowners will likely have to work harder to attract the right buyer.

Given the unprecedented growth in the housing market since the coronavirus pandemic, there has been an uptick in pricing and bidding wars, and extremely low levels of inventory, over the past two years. However, the market is expected to settle down a bit as mortgage rates climb and prices begin to stabilize.

So, you’ll want to be prepared as a seller and control the factors that could have a big impact on your bottom line. Things like hiring a great real estate agent and maximizing your home’s online appeal can translate into a more seamless closing — and more money in the bank.

Here are 12 steps to take to sell your home in 2022:

Hire an agent who knows the market.
Set a timeline for selling your home.
Get a pre-sale home inspection.
Don’t waste money on needless upgrades.
Get professional photos.
Put your house on the market.
Set a realistic price.
Review and negotiate offers.
Anticipate seller closing costs.
Weigh the tax implications.
Gather necessary paperwork to close.
Consider hiring a real estate attorney.

1. Hire an agent who knows the market

The internet makes it simple to delve into real estate agents’ sales history and professional designations, so you can choose the right person to work with. Look up agents’ online profiles to learn how long they’ve been in the industry, how many sales they’ve done and what designations they may have earned. Pay attention to how and where they market their listings, and whether or not they use professional photos.

“Any designation they’ve earned is a huge plus, because it’s a sign they’ve taken the time to learn about a particular niche,” says Jorge Guerra, Global Liaison for the National Association of Realtors.

Some homeowners might be tempted to save on paying a commission and instead sell their home themselves, without an agent. This is known as “for sale by owner,” or FSBO. The amount sellers stand to save on those fees can be thousands of dollars, usually 5 percent or 6 percent of the total sale price.

However, an experienced agent does a lot to earn their fee. For example, they can expose your house to the broadest audience and negotiate on your behalf to garner the best offers possible. If you go it alone, you’ll have to personally manage prepping your home, marketing it, reviewing buyers’ offers and handling all the negotiations and closing details.

When working with an agent and negotiating a commission, keep this in mind: Real estate fees have fallen to all-time lows. So you might be able to get a break at the closing table.

2. Set a timeline for selling your home

Selling a house is a major undertaking that can take two to four months from start to finish — or much longer, depending on local market conditions and the level of inventory available.

As soon as you decide to sell your house, jump right into researching real estate agents to find someone with the right experience for your situation.

At least two or three months before you plan to list, consider getting a pre-sale home inspection (more on that below!) to identify any problem areas, especially structural or mechanical issues that might need addressing to facilitate a sale. Leave enough time to schedule necessary repairs.

About a month before listing your house, start working on staging and deep cleaning in preparation for taking photos.

Here’s a checklist of things to do before listing your home:

Research and interview real estate agents.
Declutter, perhaps moving excess items to a storage unit.
Get an optional home inspection to identify any issues.
Schedule repairs if needed.
Deep clean.
Stage the house.
Have professional photos taken.

3. Get a pre-sale home inspection

A pre-sale home inspection is optional, but it can be a wise upfront investment. A detailed inspection report can identify any structural or mechanical problems before you list your home for sale. It may cost a few hundred dollars, but it will alert you in advance of issues that buyers will likely flag when they do their own inspection later in the process.

By being a few steps ahead of the buyer, sellers might be able to speed up the selling process by doing repairs in tandem with other home prep work. This means by the time the house hits the market, it should be ready to sell, drama-free and quickly.

4. Don’t waste money on needless upgrades

If you’re going to spend money on costly upgrades, make sure that the changes you make have a high return on investment. It doesn’t make sense to install new granite countertops, for example, if you only stand to break even or even lose money on them. Plus, these improvements may not be necessary to sell your home for top dollar, particularly if inventory levels are low in your area.

Here’s where a good real estate agent can help guide you. They often know what people expect in your area and can help you plan upgrades accordingly. If local shoppers aren’t looking for super skylights or a steam shower, then it doesn’t make sense to add them. A fresh coat of neutral paint, new carpet and a spruced-up landscape are typically low-cost ways to make a great first impression.

In general, updates to the kitchen and bathrooms provide the highest return on investment. If you have old cabinetry, you might be able to simply replace the doors and hardware for an updated look. For example, you can swap out those standard-issue kitchen cabinet doors for modern, Shaker-style doors in a weekend without breaking the bank.

5. Get professional photos

Work with your real estate agent to schedule a photographer to capture marketing photos of your home. High-quality photos are critical, since maximizing your home’s online appeal can make all the difference between a quick sale or a listing that languishes.

Some real estate agents build professional photography and virtual online tours into their suite of services. If they don’t, though, you might want to seek a photographer out on your own. The fee for professional photography will vary based on the size of your home, its location and how long it takes to shoot the property.

A professional photographer, with a strong portfolio, knows how to make rooms appear bigger, brighter and more attractive. The same goes for your lawn and outdoor areas. Dimly lit online photos can turn off homebuyers before they even have a chance to read about the lovely bike path nearby or the new roof you just installed, so well-taken photos can really pay off.

6. Put your house on the market

Here are tips to get your home market-ready and attract buyers for a speedy sale:

Focus on the home’s online appeal

You’ve probably heard of curb appeal, but professionals say online appeal is now even more important. “Your home’s first showing is online,” Guerra says. “The quality of your web presentation will determine whether someone calls and makes an appointment or clicks on the next listing.”

Stage it and keep it clean for showings

Real estate agents will often suggest that sellers stage their homes. Staging a home simply means removing excess furniture, personal belongings and unsightly items from the home while it’s on the market, and arranging rooms for optimal flow and purpose. If you’re in a slower market or you’re selling a luxury home, investing in a professional stager could help you stand out. Nationally, professional home staging costs an average of around $1,200, according to HomeAdvisor, but prices can range between about $500 and $2,000.

Let someone else show the house

Make yourself scarce when potential buyers come to view your home. Let them imagine themselves in the space, free from the distraction of meeting and talking to you. Generally, buyers are accompanied by their own real estate agent to view your home. You can also ask your own agent to be present at showings.

“Seeing the current homeowner lurking can cause buyers to be hesitant to express their opinions,” says Grant Lopez, Realtor at KW Heritage and former chairman of the San Antonio Board of Realtors in Texas. “It could keep them from really considering your home as an option.”

7. Set a realistic price

Even in competitive markets, buyers don’t want to pay more than what the comparables, or “comps” show, so it’s crucial to get the pricing right. Going too high can backfire, while underestimating a home’s value might cause you to leave money on the table.

To price your home right from the start, consult your neighborhood’s comps. These are data sheets about recently sold properties in a specific area. At a glance, you can get an idea of what homes around you are selling for.

“A frequent mistake sellers make is pricing a home too high and then lowering it periodically,” Lopez says. “Some sellers think this practice will yield the highest return. But, in reality, the opposite is often true. Homes that are priced too high will turn off potential buyers, who may not even consider looking at the property.”

In addition, homes with multiple price reductions may give buyers the impression there’s something wrong with your home’s condition, or that it’s undesirable. So it’s best to eliminate the need for multiple reductions by pricing your home to attract the widest pool of buyers from the start.

8. Review and negotiate offers

After your home officially hits the market and buyers have seen it, ideally the offers will start rolling in. This is where a real estate agent (or attorney) is your best advocate and go-to source for advice. If your local market is competitive and favors sellers, buyers will likely offer at or above asking price. You might even get multiple bids. On the other hand, if sales are slow in your area and you don’t get many offers, you may have to be open to negotiating.

When you receive an offer, you have a few choices: Accept the offer as it is, make a counteroffer or reject the offer.

A counteroffer is a response to an offer, in which you negotiate on terms and price. Counteroffers should always be made in writing and have a short timeframe (48 hours or less) for the buyer to respond. You can offer a credit for paint and carpet, but insist on keeping your original asking price in place, for example. Or, you might offer to leave behind certain appliances to sweeten the deal.

If you’re lucky enough to get multiple offers, you might be tempted to simply go with the highest one. But look closely at other aspects of the offer too, such as:

Form of payment (cash versus financing)

Type of financing
Down payment amount
Contingencies
Requests for credits or personal property
Proposed closing date
Be mindful that if a buyer is relying on lender financing, the property has to be appraised. Any shortfall between the purchase price and appraised value will have to be made up somewhere, or the deal could fall apart.

9. Anticipate seller closing costs

Both the homebuyer and seller have closing costs. The home seller typically pays the real estate agent’s commission, usually around 5 percent to 6 percent of the home’s sale price.

Some other costs commonly paid by the seller include:

Government transfer tax
Recording fees
Outstanding liens
Attorney fees

Additionally, if the buyer has negotiated any credits to be paid at closing for repairs or closing costs, the seller will pay those too. Your real estate agent or the closing agent should provide you with a complete list of costs you’ll be responsible for at the closing table. While the buyer typically pays a bulk of closing costs, anywhere from 2 percent to 4 percent of the sales price, be aware that you might have to pay some fees, too.

10. Weigh the tax implications

The good news is, many home sellers won’t owe taxes on profits from the sale of their primary home. If you’ve owned and lived in your home for at least two out of the previous five years before selling it, then you will not have to pay taxes on any profit up to $250,000. For married couples, the amount you can exclude from taxes increases to $500,000. However, if your profit from the home sale is greater than that, you need to report it to the IRS on your tax return as a capital gain.

11. Gather necessary paperwork to close

There’s lots of paperwork needed to properly document a home sale. Organize it all in one place to help things go more quickly. Some of the main documents you’ll need to gather include:

Your home’s original purchase contract
Property survey, certificate of occupancy and certificates of compliance with local codes
Mortgage documents
Tax records
Appraisal from your home purchase
Homeowners insurance
Home inspection report, if you had one

12. Consider hiring a real estate attorney

Not all states require sellers to bring a real estate attorney to the closing. Hiring one could cost a couple thousand dollars, but the expense might be worth it to protect such a large financial transaction. (Especially if you’re selling your home solo.)

An attorney can help fill out paperwork, review contracts and documents, identify potential issues and ensure the sale goes as smoothly as possible. An attorney would also be able to spot title issues that could hold up your sale for weeks or months — or even torpedo the deal — such as:

Outstanding liens or judgments
Trust issues
Mortgage balances
Tax issues
Encroachments

Real Estate News • February 25, 2022

As Mortgage Rates Hit 4%, Buyers Can Still Boost Their Chances

by Shay Brunson

The 30-year mortgage rate has risen rapidly to its highest level since 2019, around 4%. The increase could compel home shoppers to look for houses in lower price ranges. Some might need to get preapproved again.

Mortgage rates have risen almost a full percentage point since late December. A few days before Christmas, the 30-year mortgage averaged around 3% APR in NerdWallet’s daily rate survey. Tuesday, it averaged 4.03% APR.

Rising rates reduce one’s buying power. Let’s say you can afford $2,000 a month in principal and interest on a mortgage.

If you started looking at homes before Christmas, when the 30-year mortgage was around 3%, you could have borrowed about $474,400 to get a $2,000 monthly payment.
But with a mortgage rate of 4%, you could get a $418,900 loan with that same $2,000 a month in principal and interest. That’s a reduction in affordability of about $55,500.

Rates went up so fast that the effects may feel shocking and disheartening. Here’s what would-be buyers can do to increase their chances of success.

Update the preapproval

Many buyers are encouraged to get mortgage preapproval letters, which describe how much the buyer is qualified to borrow at a certain interest rate. But when rates go up as quickly as they have in recent weeks, preapproval letters go out of date.

Even when a preapproval letter says it’s good for 60 to 90 days, “that’s really not relevant in a rising rate scenario, and you need to talk to your mortgage loan officer again,” says Shashank Shekhar, CEO of InstaMortgage.

Adjust the price range

Higher rates may mean “you have to scale back somewhat,” says Jim Sahnger, a loan officer in South Florida for C2 Financial Corp. “If you want a pool, you don’t get a house with a pool. Or you look at a house that isn’t as renovated, but you know you’ll take care of it in time.”

Find other ways to decrease your payment

If you have spare cash, you may have other options besides reducing your price range, says David Kuiper, vice president of mortgage lending for Northpointe Bank in Holland, Michigan. You may be able to pay discount points to get a lower rate, he says.

Or you might pay off some of your outstanding debts to improve your debt-to-income ratio, he says. This can increase the maximum monthly mortgage payment that you would be eligible for.

Remember it could be worse

The last time the rate on the 30-year mortgage was higher was the week of May 23, 2019, when it averaged 4.06% in Freddie Mac’s weekly survey. This is where it’s desirable to put today’s mortgage rates into perspective: “Even at 4%, that’s a phenomenal rate,” Sahnger says.

Phenomenal compared to what? In Freddie Mac’s weekly rate survey, the 30-year mortgage averaged 4.09% in the 2010s, 6.29% in the 2000s, 8.12% in the 1990s and 12.71% in the 1980s. The average rate topped out at 18.63% in October 1981, and people still bought houses in those days, presumably while wearing leg warmers and bopping to Duran Duran.

But this early-2022 rise in interest rates is happening while home prices are skyrocketing, too. Affordability is likely to diminish even more. “I’m not a pushy person,” Kuiper says, “but if buying a home is the right thing for you to do, sooner is better than later.”

Home Buying • January 26, 2022

How Much House Can I Afford?

by Shay Brunson

How much house you can afford is directly related to the size and type of mortgage you can qualify for. Understanding how much you can comfortably spend on a new mortgage while still meeting your existing obligations is crucial during the homebuying process.

How Much House Can I Afford?

Purchasing a home is a decision that will impact your financial situation for the next 15 to 30 years. It’s important to be realistic about your monthly income and expected expenses to avoid winding up with a mortgage loan you can’t pay in the long run.

How much house you can afford will mainly depend on the following:

Your loan amount and mortgage term
Your gross monthly and annual income
Your total monthly debt or monthly expenses, including credit card debt, student loan payments, car payment, child support, and other expenses
State property taxes, which are paid annually or biannually and vary by state
Current mortgage rates and closing costs, both vary by location
Homeowner’s association (HOA) and condo fees

The first step to a new home is putting in the work and finding out how much you can afford.

Mortgage Experts are available to get you started on your home-buying journey with solid advice and priceless information.

What Is the 28/36 Rule?

Lenders may determine your ability to afford a new home by using the 28/36 rule. Breaking it down, the rule establishes that:

Housing expenses should be no more than 28% of your total pre-tax income. This includes your monthly principal and mortgage interest rate, annual property taxes, and private mortgage insurance payments (PMI).

Total debt should not exceed 36% of your total pre-tax income. This includes the housing expenses mentioned above — credit cards, car loans, personal loans, and student loans — so long as these monthly debt payments are expected to continue for 10 months or more.

In concrete numbers, the 28/36 rule means that a borrower who makes $5,000 a month should not spend more than $1,400 on housing costs every month. If you’re a renter, that’s the most you should spend on your lease to maintain good financial health.

However, for a homeowner, $1,400 should cover your monthly mortgage payment, as well as homeowners insurance premiums and property taxes.

How Do You Calculate Your Home Affordability?

Credit score

Your credit score is a three-digit summary of your creditworthiness. A very high credit score usually corresponds to a lower interest rate, whereas having a low score will result in much higher rates.

The credit score is one of the most important factors that lenders consider when applying for a mortgage. Lenders use it to determine how likely they’ll be repaid on time if they give a person a loan.

Homebuyers have access to a free credit report once per year from each of the three major credit bureaus. You may also access your credit report for free under certain conditions, like being the victim of identity theft.

Debt-to-income ratio

Debt-to-Income Ratio, or DTI, compares how much you owe to how much you earn, specifically your monthly debt compared to your monthly pre-tax household income. It’s an important metric that lenders use to determine how much you can borrow — or if you can borrow at all.

A high DTI indicates that your debt is high relative to your income and vice versa. The higher your DTI, the harder it will be to get a mortgage. In fact, many lenders won’t even consider applicants with a DTI higher than 43 percent. Lenders prefer borrowers with a DTI of 36 percent or less and will offer them better interest rates on their mortgage.

Down payment

Unless buyers are applying for a VA loan or a 0% down payment mortgage program, they will have to provide a down payment on their home. Conventional loans have a minimum down payment of 3 percent for certain buyers and 5 percent for most buyers. For FHA loans, the minimum is 3.5 percent.

Ideally, buyers should be able to provide a 20% down payment on their homes. A payment this large will:

Lower your loan-to-value ratio
Lower your monthly payments
Make it more likely to earn a lower interest rate
Buy you enough home equity to bypass private mortgage insurance

If you don’t have enough money for a down payment this large, there is the option of refinancing later on. This can get you a better rate if the market conditions are favorable.

House Affordability Options

There are several options to consider if you are struggling to afford the home you have your eyes on. Some methods must be undertaken over time, whereas others will immediately impact your mortgage application.

Lower DTI

DTI is one of the most important factors that lenders consider when looking at borrowers. Lowering your DTI by paying off as much existing debt as possible will put you in a better position to manage your monthly costs and any emergency expenses that may spring up. This is a good option if your DTI is too high to get pre-qualified for a reasonable interest rate (or to qualify at all).

Higher credit score

As with any other big purchase, the better your credit score, the lower your interest rate. One way to improve your score is to make your credit card payments on time every month. Another is to reduce your debt — which will also lower your DTI ratio.

Federal loans

The type of mortgage you’re requesting will help determine a lender’s flexibility in evaluating your loan application. FHA loans, VA loans, and USDA loans all have certain benefits that may help you afford the home you want.

FHA loans

FHA loans are insured by the Federal Housing Administration and have more relaxed qualifying standards. They feature maximum qualifying ratios of 31/43 for most applicants with a credit score higher than 500 — 31% for housing costs and 43% for total debt. This makes them ideal for first-time home buyers.

You may be allowed to have ratios as high as 40/50 with this type of loan if your credit score is over 580 and you meet other requirements.

VA loans

Borrowers with a military connection may qualify for a VA loan. VA loans are more lenient than conventional and FHA loans. They are backed by the Department of Veterans Affairs and typically don’t require a down payment.

While the maximum DTI ratio is set at 41% in the general guidelines, the VA insures loans for people with higher ratios provided they meet other compensating factors.

USDA loans

USDA loans are backed by the U.S. Department of Agriculture and offer many benefits over conventional loans. They enjoy lower interest rates, are more lenient with credit scores, and offer 100% financing, meaning you do not need to provide a down payment.

The catch is that USDA loans are designed to help finance homes only in eligible rural areas. The desired property must fall within specific geographical areas, generally outside the limits of major metropolitan centers.

If you are eligible, USDA loans have many benefits, and you may build, rehabilitate, improve or relocate a dwelling as your primary residence to your new location.

Higher down payment

Most applicants will need to put at least 20% down on their mortgage if they want to avoid paying for private mortgage insurance. While there are options if you don’t have that much money upfront, increasing your down payment could reduce your interest rate, monthly payment, and DTI ratio considerably.

Home Affordability and the COVID-19 Pandemic

The coronavirus pandemic and the resulting economic downturn have shaken up the real estate market. In August, the median home price in the U.S. rose to $290,225 — an annualized 15.9 percent from the prior month. Mortgage rates remain near historic lows as of September, but there is no way to know whether they will fall even lower or start to move back up.

The fact remains that interest rates are lower right now than they have ever been. If you are in a good financial position to purchase a home at the moment— meaning you have enough cash for a down payment, a good or great credit score, stable employment, and a low debt-to-income ratio — it may make sense for you to take that step now rather than later.

—

Home Buying • December 17, 2021

Why the Holidays Are a Good Time To Buy a House

by Shay Brunson

The end of the year is upon us, and many people are busy shopping for gifts, attending parties, and living out annual holiday traditions — but all you want to do is buy a new house. While the holiday season isn’t a peak time to purchase real estate, that doesn’t mean doing so is a bad idea.

Or, perhaps, you need to sell your home. Listing now might seem like a hassle, but it could pay off.

Jason Gelios, a realtor in Southeast Michigan, said buyers and sellers can both benefit from the unique opportunities offered this time of year. For sellers, he said one main advantage is their home will be seen by the most serious buyers.

“Typically, people who are looking to purchase a home during the holiday season have a strong reason to move,” said Gelios, who is also the author of the book “Think Like a REALTOR.” “You get fewer window shoppers and more serious buyers who need to make a move fast.”

If you’re looking to buy a home this holiday season, he said you need to go into the process informed.

“Homebuyers should still apply the same general rules of getting their offer accepted, which include knowing what the market is doing, knowing if they are up against other offers, and how motivated the seller is,” he said. “If a home buyer is shopping in a sellers’ market, they will need to have an aggressive and favorable offer — even during the holiday season.”

While you need to make the buying process as seriously as ever, Gelios said one fun perk of shopping for a new home during this time of year is the holiday décor.

“One of the best and most fun times to purchase a home is during the holiday season because savvy sellers will have their homes decorated to impress,” he said.

If you end up buying a home decked with boughs of holly, you can use the current owners’ decorations as inspiration for your own next year.

Another major benefit you might enjoy is the ability to score your dream house at a discount.

Denise Supplee, a licensed real estate agent, and property manager with Long and Foster, based in Doylestown, Pennsylvania, said the holiday season can be advantageous for homebuyers.

“Typically, a home that is listed during the holidays is one where the sellers are more desperate,” said Supplee. “And even if they are not, generally, the volume of buyer clients drops.”

While it’s been hard to score a deal this year in many areas, she said the holiday season might be the exception.

“Even a hot market like the one we have seen this past year may offer better deals and be a bit more buyer-sided,” she said. “This means there may be more room for negotiation, fewer bidding wars, and the ability to add more contingencies, such as home inspections.”

In fact, Supplee said the holiday season buyers’ market might already be starting. “I have already seen homes now sitting on the market for about 15 days plus, were only a month ago, they were flying off the market so fast, often being bid on by several buyers,” she said.

While many homes on the market during the holidays will still be occupied, Mayer Dallal, managing director with mortgage lender MBANC, said many are not.

“If someone is selling during the holidays, it usually indicates they’ve already left their former home behind, and they’re spending the holidays elsewhere, so they have emotionally disassociated themselves from the home,” he said.

When this happens, he said it could work to your advantage.

“That means they may be more open to negotiation because they have moved on,” he said. “They may also be more motivated to sell during that time, since many prospective buyers will be putting their buying plans aside, traveling or putting off major business transactions until the new year.”

Additionally, Mayer said you might also be able to save money on taxes.

“You may get a tax break because the interest you would pay is all tax-deductible,” he said. “You’ll get every tax advantage for that tax year if you close the deal by December 31st.”

Chase Michels, a licensed real estate broker with The Michels Group, a Compass real estate team based in Downers Grove, Illinois, said yet another advantage of buying a home this time of year is your agent will have more time to focus on you.

“Your agent is not as busy during winter months, [so] you can trust that you’re getting the most out of them,” he said.

Plus, if you’re like many people, he said you’ll probably have an easier time getting out of the office to see homes since things at work often slow down at the end of the year. Beyond that, he said another added bonus is simply having the ability to check the home out during the colder months of the year.

“You get to see firsthand how a home handles the elements,” he said. “Is the home properly insulated? Does the heat work as expected?”

If you were previously on the fence about starting — or continuing — your house-hunting mission during the holidays, you can feel very confident moving forward. Hopefully, your diligence will allow you to score the keys to your dream home.

Home Selling • November 18, 2021

How much is my house worth?

by Shay Brunson

While the past year or more has been a roller-coaster ride on many fronts, there was a silver lining for homeowners: Home prices have risen considerably. You might be wondering if you should take advantage of the climb in values and sell your home or tap its newfound equity. As you consider your options, a good starting point is to ask yourself: exactly how much is my house worth?

How much is my house worth?

When getting a home value estimate, consider the three main types of valuation:

Fair market value: Fair market value encompasses what your home looks like to prospective buyers compared to other homes in the area. Consider the sale price of a home that’s similar to yours (the same number of bedrooms and bathrooms, square footage, or outdoor space, say). If you work with a real estate agent to help you sell your home, this is where your agent will start: by looking at comps to gauge what buyers have been willing to pay for a property comparable to yours.

Appraised value: While the appraised value of your home factors in comps, it differs from fair market value. To calculate the appraised value, a licensed appraiser considers the location, size, and condition of your home, and any renovations you’ve completed. The appraised value is what mortgage lenders look at when a borrower buys a home or refinances their mortgage.

Assessed value: The assessed value is then assigned dollar value of your home used by local county tax assessors to determine property taxes. “Tax assessors calculate an assessed value based on various factors, which may include the appraised value and the fair market value, as well as any home improvements, whether you generate income from the property, and any tax exemptions,” explains Jade Duffy, a Realtor with TXR Homes based in Carlsbad, California. Usually, the assessed value is lower than fair market value and doesn’t actually represent how much a property could sell for, Duffy says.

My home’s value went up. What should I do?

Your home’s value can rise due to a range of factors. Right now, home prices have increased in many places due to a shortage of supply mixed with the lowest mortgage rates in history. If your home value has increased, you have a few options and considerations to make:

You might be able to save money by eliminating private mortgage insurance. If you’re paying for private mortgage insurance (PMI) and your home’s value has gone up to the point where you now have at least 20 percent equity, you can ask your lender to cancel your PMI premiums.

You might need to adjust your homeowners’ insurance policy. Your homeowners’ insurance cost and coverage are typically based on your home’s value. If it’s increased, you’ll want to make sure you’re fully protected. “It’s important to review your property’s value with your insurance agent yearly to make sure your residence has the proper insurance coverage,” explains Kimberly Smith, owner of Garnet Property Group in Bristol, Connecticut.

You might be in a better position to improve your home. With more equity in the property, you can take advantage of a home equity loan or cash-out refinance and invest in a renovation or remodeling project. “Determining a home’s valuation is useful if you’re considering tapping into your home’s equity in the form of a home equity loan, home equity line of credit or cash-out refinance so that you know how much equity you’ve accrued,” Smith says.

You might consider selling your home. You could stand to profit if your home’s value has gone up considerably, but before putting it on the market, carefully evaluate whether it really is the right time to move for you or your family, whether you’ll be able to find a new home quickly and how you’ll pay for it. “If it is a good time, making minor repairs and decluttering your property is always going to help increase the final sales price,” Duffy says.

What factors affect home value?

A number of factors can affect the value of your home, including:

The neighborhood
Its age
Its condition
Its size
Any home improvements or upgrades

There are other factors that impact property values overall, too. These include the local housing market, economy, interest rates, and tax rates, Reed says.

How can I add value to my home?

You don’t get a second chance to make a first impression, and this bit of wisdom can apply to your home and its value.

“Your property’s curb appeal does make a difference,” Duffy says. “Make your home welcoming and tidy — cut your grass, trim any shrubs and add some new plants or flowers.”

A fresh coat of paint either on the interior or exterior of the house will more than pay you back for the money spent, Duffy adds: “This is one of the most cost-effective ways to improve value.”

A minor bathroom or kitchen update (as opposed to large-scale renovations) can also help improve your home’s resale value. You can simply replace an outdated sink, old tiles, or dated light fixtures to give these spaces a refresh.

“It also pays to install a new garage door,” Duffy says. “Some reports estimate a new garage door can increase home values by 4 percent — great curb appeal does matter.”

Bottom line

No single home valuation method is guaranteed to be 100-percent accurate. That’s why using a combination of resources can help give you a more informed perspective of what your home is worth.

For example, you might get a free CMA and conduct your own research using an online home value estimator, as well as the FHFA calculator and county auditor’s website. Additionally or alternatively, you could pay for a professional appraisal. Averaging together all the final values you gather could give you a more accurate picture of your home’s value.

Ultimately, however, the most reliable home value estimates come from professionals who take the time to carefully assess your property based on a variety of factors.

“All of the evaluation tools are useful in giving an idea of the worth of your home, but an appraiser and/or an experienced agent will be the most accurate sources for determining value,” Krasnow says. “A trained professional will have an advantage, as a computer cannot determine the intrinsic value or consider the condition and improvements you’ve made to your home.”

Real Estate Stays On Top As Americans’ Favorite Investment For The Long Term

Real Estate Stays On Top As Americans’ Favorite Investment For The Long Term

Key takeaways:

Real estate remains the most popular long-term investment

Rising Mortgage Rates Are Hitting Americans’ Wallets. Here’s How to Adjust Your Housing Budget

Rising Mortgage Rates Are Hitting Americans’ Wallets. Here’s How to Adjust Your Housing Budget

Consider your overall budget

Look into available interest rates

Consider your mortgage terms

How Buying a House Can Hedge Against Inflation

How Buying a House Can Hedge Against Inflation

3 Ways a Home Purchase Is a Reliable Hedge Against Inflation

Private Investors Are Taking Advantage of Cheap Money

Where Inflation is Headed

Final Thoughts for Homebuyers

Is it Better to Rent or Own a Home? Here’s How to Decide the Right Move for you

Is it Better to Rent or Own a Home? Here’s How to Decide the Right Move for you

Timing is everything

Check your finances

Know your number

Should I Buy a House? How to Tell If You’re Ready

You should feel good about buying a house if …

You’ve got a steady income

You have solid plans for the immediate future

You’ve built up savings for a down payment

You’re ready to take ownership

You can afford a location that meets your needs

How To Sell Your House: A Complete Guide for Sellers

How to Sell Your House: A Complete Guide for Sellers

As Mortgage Rates Hit 4%, Buyers Can Still Boost Their Chances

How Much House Can I Afford?

Why the Holidays Are a Good Time To Buy a House

How much is my house worth?

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