Avoid the Rental Trap in 2022

Are you one of the many renters thinking about where you’ll live the next time your lease is up? Before you decide whether to look for a new house or another apartment, it’s important to understand the true costs of renting in 2022.

As a renter, you should know rents have been rising since 1988 (see graph below):

In 2021, rents grew dramatically. According to ApartmentList.com, since January 2021:

“. . . the national median rent has increased by a staggering 17.8 percent. To put that in context, rent growth from January to November averaged just 2.6 percent in the pre-pandemic years from 2017-2019.”

That increase in 2021 was far greater than the typical rent increases we’ve seen in recent years. In other words – rents are rising fast. And the 2022 National Housing Forecast from realtor.com projects prices for vacant units will continue to increase this year:

“In 2022, we expect this trend will continue and fuel rent growth. At a national level, we forecast rent growth of 7.1% in the next 12 months, somewhat ahead of home price growth . . .”

That means, if you’re planning to move into a different rental this year, you’ll likely pay far more than you have in years past.

Homeownership Provides an Alternative to Rising Rents

If you’re a renter facing rising rental costs, you might wonder what alternatives you have. If so, consider homeownership. One of the many benefits of homeownership is it provides a stable monthly cost you can lock in for the duration of your loan.

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:

“. . . fast-rising rents and increasing consumer prices, may have some prospective buyers seeking the protection of a fixed, consistent mortgage payment.”

If you’re planning to make a move this year, locking in your monthly housing costs for 15-30 years can be a major benefit. You’ll avoid wondering if you’ll need to adjust your budget to account for annual increases.

Homeowners also enjoy the added benefit of home equity, which has grown substantially right now. In fact, the latest Homeowner Equity Insight report from CoreLogic shows the average homeowner gained $56,700 in equity over the last 12 months. As a renter, your rent payment only covers the cost of your dwelling. When you pay your mortgage, you grow your wealth through the forced savings that is your home equity.  

Bottom Line

If you’re thinking of renting this year, it’s important to keep in mind the true costs you’ll face. Let’s connect so you can see how you can begin your journey to homeownership today.

How Much Do You Need for Your Down Payment?

As you set out on your homebuying journey, you likely have a plan in place, and you’re working on saving for your purchase. But do you know how much you actually need for your down payment?

If you think you have to put 20% down, you may have set your goal based on a common misconception. Freddie Mac says:

“The most damaging down payment myth—since it stops the homebuying process before it can start—is the belief that 20% is necessary.”

Unless specified by your loan type or lender, it’s typically not required to put 20% down. According to the Profile of Home Buyers and Sellers from the National Association of Realtors (NAR), the median down payment hasn’t been over 20% since 2005. It may sound surprising, but today, that number is only 13%. And it’s even lower for first-time homebuyers, whose median down payment is only 7% (see graph below):

What Does This Mean for You?

While a down payment of 20% or more does have benefits, the typical buyer is putting far less down. That’s good news for you because it means you could be closer to your homebuying dream than you realize.

If you’re interested in learning more about low down payment options, there are several places to go. There are programs for qualified buyers with down payments as low as 3.5%. There are also options like VA loans and USDA loans with no down payment requirements for qualified applicants.

To understand your options, you need to do your homework. If you’re interested in learning more about down payment assistance programs, information is available through sites like downpaymentresource.com. Be sure to also work with a real estate advisor from the start to learn what you may qualify for in the homebuying process.

Bottom Line

Remember: a 20% down payment isn’t always required. If you want to purchase a home this year, let’s connect to start the conversation and explore your down payment options.

The Perks of Putting 20% Down on a Home

If you’re thinking of buying a home, you’re probably wondering what you need to save for your down payment. Is it 20% of the purchase price, or could you put down less? While there are lower down payment programs available that allow qualified buyers to put down as little as 3.5%, it’s important to understand the many perks that come with a 20% down payment.

Here are four reasons why putting 20% down may be a great option if it works within your budget.

1. Your Interest Rate May Be Lower

A 20% down payment vs. a 3-5% down payment shows your lender you’re more financially stable and not a large credit risk. The more confident your lender is in your credit score and your ability to pay your loan, the lower the mortgage interest rate they’ll likely be willing to give you.

2. You’ll End Up Paying Less for Your Home

The larger your down payment, the smaller your loan amount will be for your mortgage. If you’re able to pay 20% of the cost of your new home at the start of the transaction, you’ll only pay interest on the remaining 80%. If you put down 5%, the additional 15% will be added to your loan and will accrue interest over time. This will end up costing you more over the lifetime of your home loan.

3. Your Offer Will Stand Out in a Competitive Market

In a market where many buyers are competing for the same home, sellers often like to see offers come in with 20% or larger down payments. The seller gains the same confidence as the lender in this scenario. You are seen as a stronger buyer with financing that’s more likely to be approved. Therefore, the deal will be more likely to go through.

4. You Won’t Have To Pay Private Mortgage Insurance (PMI)

What is PMI? According to Freddie Mac:

“For homeowners who put less than 20% down, Private Mortgage Insurance or PMI is an added insurance policy for homeowners that protects the lender if you are unable to pay your mortgage.

It is not the same thing as homeowner's insurance. It's a monthly fee, rolled into your mortgage payment, that’s required if you make a down payment less than 20%. . . . Once you've built equity of 20% in your home, you can cancel your PMI and remove that expense from your monthly payment.”

As mentioned earlier, if you put down less than 20% when buying a home, your lender will see your loan as having more risk. PMI helps them recover their investment in you if you’re unable to pay your loan. This insurance isn’t required if you’re able to put down 20% or more.

Many times, home sellers looking to move up to a larger or more expensive home are able to take the equity they earn from the sale of their house to put 20% down on their next home. With the equity homeowners have today, it creates a great opportunity to put those savings toward a larger down payment on a new home.

Bottom Line

If you’re looking to buy a home, consider the benefits of 20% down versus a smaller down payment option. Let’s connect so you have expert advice to help make your homeownership goals a reality.

Homebuyers: Be Ready To Act This Winter

To succeed as a buyer in today’s market, it’s important to understand which market trends will have the greatest impact on your home search. Danielle Hale, Chief Economist at realtor.com, says there are two factors every buyer should keep their eyes on:

“Going forward, the conditions buyers face are primarily dependent on two things: mortgage rates and housing supply.”

Here’s a look at each one.

Mortgage Rates Projected To Rise in 2022

As a buyer, your interest rate directly impacts how much you’ll pay on your monthly mortgage when you purchase a home. Rates are beginning to rise, and experts forecast they’ll continue going up in 2022 (see graph below):As the graph shows, mortgage rates are expected to climb next year. But they’re still low when you compare to where they were just a few years ago. That presents today’s buyers with some motivation to lock in a low mortgage rate before they climb higher.

More Homes Are Expected To Be Available This Season

The other market condition buyers need to monitor is the number of homes available for sale today. The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows the current supply of inventory sits at just 2.4-months. To put that into perspective, a 6-month supply is ideal for a balanced market where there are enough homes to meet buyer demand.

However, there may be good news for buyers who are waiting for more options. A recent realtor.com survey shows more sellers are planning to list their homes this winter, meaning more choices will likely be available soon.

What Does That Mean for You?

Even if your options improve some this season, it won’t significantly shift market conditions overnight. According to NAR, many more listings need to be available to move closer to a more neutral market:

“Given the average monthly demand . . . , 3.55 million homes should be on the market to meet a level of inventory equal to six months of demand, implying a shortage of homes for sale of 2.24 million.”

So remember, even with more homes expected to come to market this season, competition among buyers will remain fierce as there still won’t be enough homes for sale to meet the current demand. That means you’ll need to act quickly when you’re ready to make an offer.

Bottom Line

If you’re planning on buying a home this winter, more options are welcome news, but it doesn’t mean you should slow down. Let’s connect today so you have an expert on your side to help act as quickly as possible when the right home for you hits the market.

If You Think the Housing Market Will Slow This Winter, Think Again.

From the opportunity to take advantage of today’s low mortgage rates to changing homeowner needs, Americans have more motivation than ever to buy a home. According to the experts, buyers are making moves right now, creating an unseasonably strong housing market for this time of year.

As we wrap up the fall season and move into the winter months, here’s a look at what several industry leaders have to say about the continued momentum in the current market, and what it means as we head into the early part of next year.

Lawrence Yun, Chief Economist, National Association of Realtors (NAR)

“This solid buying is a testament to demand still being relatively high, as it is occurring during a time when inventory is still markedly low. The notable gain in October assures that total existing-home sales in 2021 will exceed 6 million, which will shape up to be the best performance in 15 years.” 

Odeta Kushi, Deputy Chief Economist, First American

“So far in November, purchase applications point to another strong month in sales. Still low rates and demographic demand support this strength, even as affordability and inventory headwinds remain.”

The M Report

“The demand for housing in the United States has reached a fever pitch, a trend that opposes the norm of this time of the year when the market cools as the winter months set in.”

Mark Fleming, Chief Economist, First American

“Strong demographic demand will continue to act as the wind in the housing market’s sails.”

What does this mean for the winter housing market?

Buyers are actively in the market, and they’re competing for homes to purchase. With the momentum coming out of this fall, all signs point to the winter housing market picking up steam, making it much busier than in a more typical year. And as we’ve seen in so many ways, 2020 and 2021 were anything but typical in real estate. It looks like 2022 may be joining that list before we know it.

Bottom Line

If you think the housing market will slow down this winter, think again. Whether you’re thinking of buying a home, selling your house, or both – let’s connect to determine if this winter is your best time to make a move too.

Tips for Single Homebuyers: How To Make Your Dream a Reality

If you’re living on your own and looking to buy a home, know that you can make your dream a reality with thoughtful planning and the right team of experts. Research from Freddie Mac shows 28% of all households (36.1 million) are sole-person, and that number is growing. Over the past 40 years, the number of sole-person households has nearly doubled, and that’s a trend that’s expected to continue. According to Freddie Mac:

“Our calculation suggests that there will be an additional 5 million sole-person households in the United States by the next decade. This means 42% of the household growth will be contributed by sole-person households, . . .”

If you fall into this category, here are three tips to help you achieve your homeownership goals.

1. Know Your Credit Score

When you buy a home on your own, you have to qualify for your loan based solely on your own finances and credit history. Investopedia says:

“. . . lenders will be looking at just one credit profile: yours. Needless to say, it has to be in great shape. It is always a good idea to review your credit report beforehand, and this is especially true of solo buyers.”

It’s important to find out your score so you know where it falls. If you’re not sure if it’s strong enough or where to focus your energy to improve it, meet with a professional for expert advice on your individual situation.

2. Explore Down Payment Options

Next, look into down payment programs so you can get a feel for what you’ll need to save to buy a home. Rob Chrane, CEO of Down Payment Resource, explains:

“Buyers should discuss their program options with their loan officer and real estate agent to make sure they choose the program best suited to their personal needs.”

In this step, lean on the pros to determine what you’re eligible for and what’s right for you.

3. Think About Your Future Home and Your Needs

You should also spend time thinking about what you want. What type of home do you picture yourself in? To answer that question, Quicken Loans shares this advice:

“Think about your lifestyle, what you want out of your home and your needs. Is being close to work important? Do you need a lot of yard space? Do you want an extra bedroom that you can transform into a home office? Condo or detached home? Lots of space for entertaining? It’s all up to you (and your budget).”

Again, a professional can help you balance what you want and how much you should spend on your monthly housing costs to determine what type of home is right for you.

While buying a home solo can feel like a big challenge, it doesn’t have to be. If you lean on the professionals, they can help you navigate these waters and make sure you’re able to take advantage of the great opportunities in today’s housing market (like low mortgage rates) to buy your dream home.

Bottom Line

The share of sole-person households is growing. If you’re looking to buy a home on your own, be confident that the dream is achievable. When you’re ready to begin your search, let’s connect so you have expert advice each step of the way.

Why December is Still a Great Time to Sell Your Home

As we near the end of the year, more homeowners are realizing the benefits of today’s sellers’ market. Record-breaking home price appreciation, growing equity, low inventory, and competitive mortgage rates are motivating homeowners to make a move that addresses their changing lifestyles.

In fact, recent data from realtor.com shows a larger share of homeowners are planning to list their houses this winter. So, that means more homes are about to hit the market, which will lead to more choices for buyers too.

According to George Ratiu, Manager of Economic Research at realtor.com:

"The pandemic has delayed plans for many Americans, and homeowners looking to move on to the next stage of life are no exception. Recent survey data suggests the majority of prospective sellers are actively preparing to enter the market this winter."

If you’re thinking of waiting until the spring to sell your house, know that your neighbors may be one step ahead of you by selling this winter. If you want to stand out from the crowd, this holiday season is the best time to make sure your house is available for buyers. Here’s why.

Sellers Are Still Firmly in the Driver’s Seat

Historically, a 6-month supply of homes for sale is needed for a normal or neutral market. That level ensures there are enough homes available for active buyers (see graph below):The latest Existing Home Sales Report from the National Association of Realtors (NAR) shows the inventory of houses for sale sits at a 2.4-month supply. This is well below a neutral market.

What Does That Mean for You?

When the supply of homes for sale is as low as it is today, it’s much harder for buyers to find homes to purchase. This drives up competition among buyers, who then submit increasingly competitive offers to win out against others in the home search process. As this happens, prices rise and your leverage as a seller rises too, putting you in the best position to negotiate a contract that meets your ideal terms.

And while the low housing supply we're facing won't be solved overnight, sellers this season should move quickly to maximize their potential. As the data shows, with more prospective sellers planning to list their homes this winter, selling sooner rather than later helps your house rise to the top of a holiday buyer’s wish list so you can close the best possible deal.

Bottom Line

Listing your home over the next few weeks gives you the best chance to be in front of buyers competing for homes this holiday season. Let’s connect today to discuss how you can benefit from today’s sellers’ market.

Retirement May Be Changing What You Need in a Home

The past year and a half brought about significant life changes for many of us. For some, it meant entering retirement earlier than expected. Recent data shows more people retired this year than anticipated. According to the Schwartz Center for Economic Policy Analysis, 2021 saw a retirement boom:

“At least 1.7 million more older workers than expected retired due to the pandemic recession.”

If you’ve recently retired, your home may not fit your new lifestyle. The good news is, you’ve likely built-up significant equity that can fuel your next move. According to the latest Homeowner Equity Insights report from CoreLogic, homeowners gained more than $50,000 in equity over the past 12 months alone. That, plus today’s sellers’ market, presents a great opportunity to sell your house and address your evolving needs.

You Can Move Closer to the Ones You Love

The 2021 Home Buyers and Sellers Generational Trends report from the National Association of Realtors (NAR) provides a look at the reasons people buy homes. For those reaching retirement age, the number one reason to buy is the opportunity to be closer to loved ones, friends, or relatives.

If you find yourself farther from your loved ones than you’d like to be, retirement and the equity you’ve built in your home may enable you to move closer to the people in your life who matter most.

You Can Find the Right Home for Your Needs

Not only can your equity power a move to a new location, but it can also help you purchase the right size home. Lawrence Yun, Chief Economist at NAR, says many homebuyers 55 and older choose to downsize – or buy a smaller home – when they make a purchase:

“Clearly from the age patterns, young people want to upsize, and the older generation is looking to downsize. . . .”

Whatever your home goals are, a trusted real estate advisor can help you to find the best option for your situation. They’ll help you sell your current home and guide you as you buy your next one while you move into this new phase of life.

Bottom Line

If you’ve recently retired and your needs are changing, you’re not alone. Let’s connect so you can get a better sense of how to find a home that will match your situation.

4 Things Every Renter Needs To Consider

As a renter, you’re constantly faced with the same dilemma: keep renting for another year or purchase a home? Your answer depends on your current situation and future plans, but there are a number of benefits to homeownership every renter needs to consider.

Here are a few things you should think about before you settle on renting for another year.

1. Rents Are Rising Quickly

Rent increasing each year isn’t new. Looking back at Census data confirms rental prices have gone up consistently for decades (see graph below):

If you’re a renter, you’re faced with payments that continue to climb each year. Realtor.com recently shared the September Rental Report, and it shows price increases accelerating from August to September (see graph below):

As the graph shows, rents are still on the rise. It’s important to keep this in mind when the time comes for you to sign a new lease, as your monthly rental payment may increase substantially when you do.

2. Renters Miss Out on Equity Gains

One of the most significant advantages of buying a home is the wealth you build through equity. This year alone, homeowners gained a substantial amount of equity, which, in turn, grew their net worth. As a renter, you miss out on this wealth-building tool that can be used to fund your retirement, buy a bigger home, downsize, or even achieve personal goals like paying for an education or starting a new business.

3. Homeowners Can Customize to Their Heart’s Content

This is a big decision-making point if you want to be able to paint, renovate, and make home upgrades. In many cases, your property owner determines these selections and prefers you don’t alter them as a renter. As a homeowner, you have the freedom to decorate and personalize your home to truly make it your own.

4. Owning a Home May Provide Greater Mobility than You Think

You may choose to rent because you feel it provides greater flexibility if you need to move for any reason. While it’s true that selling a home may take more time than finding a new rental, it’s important to note how quickly houses are selling in today’s market. According to the National Association of Realtors (NAR), the average home is only on the market for 17 days. That means you may have more flexibility than you think if you need to relocate as a homeowner.

Bottom Line

Deciding if it’s the right time for you to buy is a personal decision, and the timing is different for everyone. However, if you’d like to learn more about the benefits of homeownership, let’s connect so you can make a confident, informed decision and have a trusted advisor along the way.

Two Graphs That Show Why You Shouldn’t Be Upset About 3% Mortgage Rates

With the average 30-year fixed mortgage rate from Freddie Mac climbing above 3%, rising rates are one of the topics dominating the discussion in the housing market today. And since experts project rates will rise further in the coming months, that conversation isn’t going away any time soon.

But as a homebuyer, what do rates above 3% really mean?

Today’s Average Mortgage Rate Still Presents Buyers with a Great Opportunity

Buyers don’t want mortgage rates to rise, as any upward movement increases your monthly mortgage payment. But it’s important to put today’s average mortgage rate into perspective. The graph below shows today’s rate in comparison to average rates over the last five years:

As the graph shows, even though today’s rate is above 3%, it’s still incredibly competitive.

But today’s rate isn’t just low when compared to the most recent years. To truly put today into perspective, let’s look at the last 50 years (see graph below):

When we look back even further, we can see that today’s rate is truly outstanding by comparison.

What Does That Mean for You?

Being upset that you missed out on sub-3% mortgage rates is understandable. But it’s important to realize, buying now still makes sense as experts project rates will continue to rise. And as rates rise, it will cost more to purchase a home.

As Mark Fleming, Chief Economist at First American, explains:

“Rising mortgage rates, all else equal, will diminish house-buying power, meaning it will cost more per month for a borrower to buy ‘their same home.’”

In other words, the longer you wait, the more it will cost you.

Bottom Line

While it’s true today’s average mortgage rate is higher than just a few months ago, 3% mortgage rates shouldn’t deter you from your homebuying goals. Historically, today’s rate is still low. And since rates are expected to continue rising, buying now could save you money in the long run. Let’s connect so you can lock in a great rate now.