“Short of a war or stock market crash…”

This month, Arch Mortgage Insurance released their spring Housing and Mortgage Market Review. The report explained that an increase in mortgage rates and/or home prices would impact monthly payments this way:

·         A 5% increase in home prices increases payments by roughly 5%

·         A 1% rise in interest rates increases payments by roughly 13% or 14%

That begs the question…

What if both rates and prices increase as predicted?

The report revealed:

“If interest rates and home prices rise by year-end in the ballpark of what most analysts are forecasting, monthly mortgage payments on a new home purchase could increase another 10–15%. That would make 2018 one of the worst full-year deteriorations in affordability for the past 25 years.”

The percent increase in mortgage payments would negatively impact affordability. But, how would affordability then compare to historic norms?

Per the report:

“For the U.S. overall, even if affordability were to deteriorate as forecasted, affordability would still be reasonable by historic norms. That is because the percentage of pre-tax income needed to buy a typical home in 2019 would still be similar to the historical average during 1987–2004. Thus, nationally at least, even with higher rates and home prices, affordability will just revert to historical norms.”

What about home prices?

A decrease in affordability will cause some concern about home values. Won’t an increase in mortgage payments negatively impact the housing market? The report addressed this question:

“Even recent interest rate increases and higher taxes on some upper-income earners didn’t slow the market, as many had feared…Short of a war or stock market crash, housing markets could continue to surprise on the upside over the next few years.”

To this point, Arch Mortgage Insurance also revealed their Risk Index which estimates the probability of home prices being lower in two years. The index is based on factors such as regional unemployment rates, affordability, net migration, housing starts and the percentage of delinquent mortgages.

Below is a map depicting their projections (the darker the blue, the lower the probability of a price decrease):

Bottom Line

If interest rates and prices continue to rise as projected, the monthly mortgage payment on a home purchased a year from now will be dramatically more expensive than it would be today.

Contact your local experts at The McLeod Group Network to start the search for your new home! 971.208.5093 or mcleodgroupoffice@gmail.com.​​

By: KCM Crew

Moving up Is MORE Affordable Now Than Almost Any Other Time in 40 Years

If you are considering selling your current home, to either move up to a larger home or into a home in an area that better suits your current family needs, great news was just revealed.

Last week, Trulia posted a blog, Not Your Father’s Housing Market, which examined home affordability over the last 40+ years (1975-2016). Their research revealed that:

“Nationally, homes are just about the most affordable they’ve been in the last 40 years… the median household could afford a home 1.5 times more expensive than the median home price. In 1980, the median household could only afford about 3/4 of the median home price.

Despite relatively stagnant incomes, affordability has grown due to the sharp drop in mortgage rates over the last 30 years – from a high of over 16% in the 1980s to under 4% by 2016.

Of the nation’s 100 largest metros, only Miami became unaffordable between 1990 and 2016. Meanwhile, 22 metros have flipped from being unaffordable to becoming affordable in that same time frame.”

Here is a graph showing the Affordability Index compared to the 40-year average:

The graph shows that housing affordability is better now than at any other time in the last forty years, except during the housing crash last decade.

(Remember that during the crash you could purchase distressed properties – foreclosures and short sales – at 20-50% discounts.)

There is no doubt that with home prices and mortgage rates on the rise, the affordability index will continue to fall. That is why if you are thinking of moving up, you probably shouldn’t wait.

Bottom Line

If you have held off on moving up to your family’s dream home because you were hoping to time the market, that time has come. 

 

Let’s get together and discuss your options! 971.208.5093 or mcleodgroupoffice@gmail.com.

By: KCM Crew

Is Qualifying for a Mortgage Getting Easier?

Last week I shared that requirements for obtaining a mortgage were easing as interest rates were beginning to creep.

I wanted to pass along this article as well that offers some additional information related to mortgages & the requirements to obtain a mortgage for first-time & next home buyers.

Is Qualifying for a Mortgage Getting Easier? 

Again, even with the loosening of the reins for qualifying, it is always important to mindful of the trajectory of mortgage interest rates, so that you can take advantage of the market at the best possible time.

Let me know if you have any questions!

~Amy

Source: KCMBlog.com

Take Control of Closing Costs

Expert tips on evaluating and managing the cost of your mortgage

As mortgage rates continue to stay at record lows, the costs of obtaining a mortgage are going up — according to Bankrate’s annual survey of closing costs, the average origination and title fees have jumped 8.8 percent from August 2010 to August of the this year.

Closing fees are not set in stone, and savvy mortgage shoppers can often reduce these costs or spread them out over time to minimize the financial burden.  Remember to be cool as ICE in negotiations, and you might save yourself some money:

ITEMIZE —make sure every single fee is identified and explained. Ask your lender to break down grouped fees line by line and to explain any fees that are unclear.

COMPARE —all lenders are not created equal. Compare loan costs from different lenders, and weigh the loan parameters as well. Low cost and no-cost loans often end up costing a lot more in the long term through higher rates and/or stiffer penalties.

EDUCATE —make sure you understand each fee and which ones have more play. Often “lender’s fees,” which can include loan-origination, administrative costs, wire-transfer, mortgage insurance application fee, among others, are the most negotiable. Third-party fees, fees that are passed through from another service provider to you, are less likely to be negotiable.

All experts agree, one of the best things you can do when applying for a mortgage is to request a Good Faith Estimate (GFE) from at least three different lenders. GFEs are a written estimate produced by lenders estimating all anticipated closing costs. Lenders are required by law to provide as accurate a GFE as possible to the inquiring borrower within three days after receiving a mortgage application.

For more tips on closing costs, visit these resources:

• Zillow.com: Curbing Closing Costs and Understanding Mortgage Fees and Closing Costs
• SayEducate.com: How to Reduce Your Closing Costs
• BankRate.com: Is no-closing-cost mortgage for you?
• Real Estate on MSN.com: 2011 closing costs survey: Which states have the highest, the lowest?