What’s The True Cost of Waiting To Buy a Home?

With rates and prices on the rise, do you know the true cost of waiting?

(Hey Millennials, I’m talking to you!)

Let’s say your 30 and your dream house costs $250,000 today, at 4.41% your monthly Mortgage Payment with Interest would be $1,253.38.

But you’re busy, you like your apartment, moving is such a hassle…You decide to wait till the end of next year to buy and all of a sudden, you’re 31, that same house is $270,000, at 5.7%. Your new payment per month is $1,567.08.

The difference in payment is $313.70 PER MONTH!

That’s like taking a $10 bill and tossing it out the window EVERY DAY!

Or you could look at it this way:

• That’s your morning coffee everyday on the way to work (Average $2) with $12 left for lunch!
• There goes Friday Sushi Night! ($80 x 4)
• Stressed Out? How about 3 deep tissue massages with tip!
• Need a new car? You could get a brand new $22,000 car for $313.00 per month.

Let’s look at that number annually! Over the course of your new mortgage at 5.7%, your annual additional cost would be $3,764.40!

Had your eye on a vacation in the Caribbean? How about a 2-week trip through Europe? Or maybe your new house could really use a deck for entertaining.  We could come up with 100’s of ways to spend $3,764, and we’re sure you could too!

Over the course of your 30 year loan, now at age 61, hopefully you are ready to retire soon, you would have spent an additional $112,932, all because when you were 30 you thought moving in 2014 was such a hassle or loved your apartment too much to leave yet.

Or maybe there wasn’t an agent out there who educated you on the true cost of waiting a year. Maybe they thought you wouldn’t be ready, but if they showed you that you could save $112,932, you’d at least listen to what they had to say.

They say hindsight is 20/20, we’d like to think that 30 years from now when you are 60, looking back, you would say to buy now…

A Snapshot Of Home Buyers

Who’s Buying Homes, and Where Do They Live?

Who Says You Should Buy A House?

I have never been shy about my feelings that if you able to, you should own your own home. That does not mean I think EVERYONE should run out and buy a house. However, if a person or family is ready, willing and able to purchase a home, I believe that owning is much better than renting. Here’s some other sources that seem to think the same…

Benefits of Owning

Joint Center for Housing Studies, Harvard University

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord…Having to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings.”

The Federal Reserve

“Renters have much lower median and mean net worth than homeowners in any survey year.”

Benefits of Buying Now

Trulia

“Buying costs less than renting in all 100 large U.S. metros… Now, at a 30-year fixed rate of 4.5%, buying is 38% cheaper than renting nationally.”

Freddie Mac

“One thing seems certain: we are not likely to see average 30-year fixed mortgage rates return to the historic lows experienced in 2012…Yes, rates are higher than they were a year ago – and certainly higher than two years ago. But if you look at the averages over the last four decades, today’s rates remain historically low.”

You are the only one who knows if this is the year you buy a home, but with prices on the upswing and interest rates still affordable, you might take a closer look. Good luck and Happy House Hunting!

Here’s 5 Reasons To Buy A Home Now

What do you think? Is this the time to buy a home?

Based on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five major reasons purchasers should consider buying.

1. Competition is about to Increase

Every spring a surge of prospective purchasers enter the housing market. Like you, they will want the best home available in the best location at the best price. They will be competing with you for the ‘steals’ in the market. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy available today that no longer be available as the market heats up..

2. Price Increases Are on the Horizon

Nationally, home prices are projected to appreciate by 4.5% in 2014 and by over 19% from now until 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

3. Owning a Home Helps Create Family Wealth

Whether you rent or you own the home you are living in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Federal Reserve, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

4. Interest Rates Are Projected to Rise

The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the spring of 2015. That is an increase of almost 3/4 of a point over current rates.

5. Buy Low, Sell High

Most would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.

Where Are Home Prices Headed?

What Will Happen In The Next Five Years?

Today, many real estate conversations center on housing prices and where they may be headed. That is why I like the Home Price Expectation Survey. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.

The results of their latest survey

The latest survey was released last week. Here are the results:

• Home values will appreciate by 4.5% in 2014.
• The average annual appreciation will be 3.94% over the next 5 years
• The cumulative appreciation will be 19.7% by 2018.
• Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of almost 11% by 2018.

Individual opinions make headlines. I believe the survey is a fairer depiction of future values. What do you think?

Thinking About Buying A Home?

Buying a Home? How the Serenity Prayer May Help

You may be frustrated while attempting to buy a home in today’s market. You may feel powerless to the process. How could YOU possibly know whether the current good news about housing will continue? There is no doubt that today’s real estate market is extremely difficult to navigate. However, we want you to know that thousands of homes sold yesterday, thousands will sell today and thousands will sell each and every day from now until the end of the year.

It is totally within your power to decide whether it is the right time for you and your family to move. Even in the current market.

“How?” Let’s look at the simplicity of the famous Serenity Prayer and apply it to buying a home in today’s real estate market.

“God, grant me the serenity to accept the things I cannot change; courage to change the things I can; and wisdom to know the difference.”

Accept the things you cannot change

The two main concerns many talk about when discussing the housing market are:

1. the current lack of inventory impacting housing prices
2. the impending raise in interest rates

As an individual, there is very little you can do to impact either of those two situations. The best think-tanks in the country are struggling to discover what impact each of these items have on real estate.

Have the courage to change the things you can

Whether you are a first-time buyer or a move-up buyer and you believe now is the right time for your family to purchase a home – DO IT! Prices will only be higher later this year and though interest rates are rising they are still at historic lows. That means that your monthly housing expense will still be lower than almost any time in the last 50 years – and probably lower than your current rent payment.

The wisdom to know the difference

With the winter ending, the outlook on inventory is positive. Sellers will look to come out of hibernation and list their homes. The question is whether or not it makes sense to delay moving on with your life until everything gets ‘better’. Should you not buy a house and enable your kids to attend the school you have already decided is best for them? Should you spend another winter up north even though your doctor recommends you move to a climate better suited to your current medical situation?

This is where your wisdom must kick in. You already know the answers to the questions we just asked. You have the power to take back control of the situation by moving forward. The time has come for you and your family to move on and start living the life you desire. That is what truly matters.

Thinking About Moving Up To a New Home? Better Do It Now!

A recent study revealed that the number of existing home owners planning to buy a home this year is about to increase dramatically. Some are moving up, some are downsizing and others are making a lateral move. Another study shows that over 75% of these buyers will, in fact, be in that first category: a move-up buyer. We want to address this group of buyers in today’s blog post.

There is no way for us to predict the future but we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.

Assume they had a home worth $300,000 and were looking at a home for $400,000 (putting 10% down they would get a mortgage of $360,000). By waiting, their house appreciated by 13.8% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $341,400. But, the $400,000 home would now be worth $455,200 (requiring a mortgage of $409,680).

Here is a table showing what additional monthly cost would be incurred by waiting:

Prices are projected to appreciate by over 4% and interest rates are also expected to rise by as much as another full percentage point. If your family plans to move-up to a nicer or bigger home this year, it may make sense to move now rather than later.

More Signs of Sonoma County Economic Growth

Check out this article from today’s Santa Rosa Press Democrat. Do you feel things are getting better?

North Bay economy shows signs of growth | The Press Democrat.

Mortgage Interest Rates On The Rise?

This may be the best time to move forward if you have been thinking about buying a home! Also a great time for sellers as fewer buyers will be able to qualify when rates start to rise. Lots to think about; what do you think will happen with interest rates?

It is projected that if the Fed continues to cut back on bond purchases that long term mortgage rates would start to climb. Many experts felt that Janet Yellen, who replaced Ben Bernanke as Fed Chair, was going to be less inclined to continue tapering bond purchases at the level established.

However, in her testimony in front of the Financial Services Committee last week, Yellen made it quite clear that she will in fact continue the current pace of tapering:

“In December, the Committee judged that the cumulative progress toward maximum employment and the improvement in the outlook for labor market conditions warranted a modest reduction in the pace of purchases, from $45 billion to $40 billion per month of longer-term Treasury securities and from $40 billion to $35 billion per month of agency mortgage-backed securities. At its January meeting, the Committee decided to make additional reductions of the same magnitude. If incoming information broadly supports the Committee’s expectation of ongoing improvement in labor market conditions and inflation moving back toward its longer-run objective, the Committee will likely reduce the pace of asset purchases in further measured steps at future meetings.”

What does that mean to a prospective purchaser? Currently, Freddie Mac’s 30 year rate is at 4.28%. Here are the projected interest rates for this time next year:

Should You Buy A Home Now?

Some compelling reasons why now may be a good time

Last month, the Federal Reserve, in a unanimous vote, decided to further decrease its bond purchasing. The bond purchases were the government’s stimulus package created to keep long term mortgage interest rates artificially low in order to help drive the housing market. Most experts believe that tapering will cause interest rates to increase as we move through the year.

Interest rates have remained relatively stable since the onset of the tapering in December. This is probably because the first round of increases had already been ‘priced into’ the equation last summer when rates skyrocketed by over a full percentage point just on the speculation that tapering would take place later in 2013.

However, as we move forward, most analysts believe rates will start to rise culminating in a rate close to a full percentage point higher than current rates by this time next year. For example, Freddie Mac, Fannie Mae, The Mortgage Bankers’ Association and the National Association of Realtors have all recently projected rates to be between 5-5.4% at this time next year.

Bottom Line

If you are a first time buyer or a move-up buyer, the cost of the mortgage on your new home will probably increase as we move through the year. If the timing makes sense, buying sooner rather than later may save you a substantial amount of money over the long term in lower mortgage payments.