Archive for May, 2019

Buying a Home Earlier Delivers Long Term Wealth Benefits

May 22, 2019


It is common knowledge that many Millennials are delaying “life milestones.”  A recent study by the Urban Institute shows this by documenting the increase in young adults living with their parents.  People often assume that adults living with parents can save more money, better positioning themselves for a home purchase.  But this study reports that although the intentions are positive, the actual economic results tend to be negative.  The study concludes that adults who lived with their parents between ages 25 and 34 were less likely to form independent households and buy homes 10 years later, as compared with young adults who did not live with their parents.  And this result can negatively impact their future wealth.

The study reported that the percent of young adults living with parents almost doubled between 2000 and 2017 – growing from 11.9% to 22%.  This means 5.6 million more young adults live with parents now.  Reasons for this increase include, but are not limited to (1) Student debt – since 2000, student loan debt has more than tripled.  This debt burden makes it harder for young adults to live independently.  (2) Income – adults with lower incomes are more likely to live with parents.  (3) Housing costs – real rents are at historic highs, making it harder for young adults to live independently.  (4) Below average credit – in 2016, the median credit score was 640 for Millennials and 662 for Gen Xers.

So how does this trend affect young adults over time?  Studies show that home ownership is one of the best tools for building wealth.  And UI reports here that the biggest housing investment returns go to adults who bought homes at younger ages.  The study concludes, “our results suggest that living with parents has negative long-term economic consequences.”

As mentioned in a previous blog post, perhaps many of these young adults believe the many untrue myths that stop people from pursuing home ownership.  The fact is, buying a home with a small down payment, below average credit, and other debt can be easier than many people imagine.

Do you have friends in Georgia whose adult children live with them?  Do you know a young co-worker living with his parents?  Perhaps they fear they cannot buy a home because of below average credit scores or limited available cash.  Since the study shows these young adults may wind up better off financially if they buy a home sooner, refer these people to me.  We at Dunwoody Mortgage will do everything we can to help them buy a home and start building their wealth now, positioning them for a better economic future.

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Still cheaper to own than rent

May 21, 2019

The trend continues – especially in Atlanta – it is cheaper to own than rent.

With the latest housing push over the past few years, homebuyers have fared better than those who continue to rent. In the recent CoreLogic report:

  • On average, renters tend to be more cost-burdened than homeowners
  • Across the US, monthly rents continue to rise.
  • Home loan payments and associated home ownership costs are lower.

Another stat from the study shows the rental index is up 36% from during the during the housing boom through today, yet home loan payments are down just shy of 5% over the same time period. The study looked at twelve metro areas. On average the rent increases ranged from 20-60% while reporting a drop in the home loan payments anywhere from 3-24%. Lastly, these are sound loans being issued today. With a combination of income growth during the economic recovery, home values appreciating, and sound underwriting guidelines, delinquency rates are lower than they’ve been in decades.

So what is preventing potential buyers from purchasing a home? Often it is misinformation. Too many people feel you must have 20% down to purchase a home (one can buy with as little as 3% down), perfect credit (loan approval can be obtained with a score as low as 620), and no debt (debt to income ratios can be as high as 50% for conventional loans and 55% on FHA loans). This is simply not true. Owing a home with a small down payment, below average credit, and other debt is easier than most imagine.

Contact me today. If the home you are looking to buy a home in the state of Georgia, you can be ready to purchase in as little as a 10 minute phone call. We can also start the process online. It can be that easy!

 

Trade wars and mortgage rates

May 14, 2019

Last week was to be the culmination of negotiations between the US and China about a trade deal. Then came some finger pointing, blaming, and honestly tactics you see as negotiations come to an end. What is all of this doing to the market? I’m glad you asked!

Stocks were all over the place last week and this week… down 500 points to open one day only to rebound and finish the day flat… down a few hundred points… down over 600 points Monday… up 350 points as I write this post. Stocks are all over the map.

Brace yourselves!

Mortgage rates are in a similar position. The talk toward the end of the year (slowing economy, trade wars, bad economic news) pushed mortgage rates lower. In fact, rates are well over a half a point lower today than they were this time last year. The many months of tariffs and speculation pushed stocks lower and rates higher.

What happens with the trade negotiations:

  • If a trade deal is reached, one would expect stocks to rebound back to their all-time highs. Obviously this depends on the final details of the trade agreement, but overall expect to see rates get a little worse.
  • If both sides walk away from the negotiating table, then expect stocks to get worse and mortgage rates continue to improve.

What to do? If considering a refinance, this is a good time to move forward. Mortgage rates are as low as they’ve been in over a year. If considering a refinance to lower one’s rate OR take equity out of a home, there hasn’t been a better time in quite some time to do it. If you’ve been sitting on the fence about buying a home hoping rates could go lower, this angle is trickier. On the one hand, sure, mortgage rates could improve should trade negotiations fail. On the other hand, rates were much higher than they are now when stocks were at all-time highs. If a trade deal is finalized, we could see stocks jump back up to or surpass the all-time high. If that happens, expect mortgage rates to rise. It’s no coincidence that mortgage rates improved towards the end of 2018 as stock values fell. The same will happen should stocks take off again.

With rates sitting as low as they’ve been in over a year, now is the time to take advantage of them whether you are looking to purchase or refinance. If you are in need of a mortgage in the state of Georgia, contact me today. I can have you ready to move forward on a purchase or refinance is a little over 10 minutes. It’s that easy!

Home Sales Sentiment on the Rise

May 1, 2019

Lower than expected mortgage interest rates in the first four months of 2019 have helped drive Fannie Mae’s Home Purchase Sentiment Index (HPSI) to its highest level since June 2018.  Economists and experts have predicted higher mortgage rates for the last few years.  Rates trended higher in 2018 until the stock market volatility happened in November.  Then interest rates declined to below 4.5% and have stayed there for the last few months.  Lower interest rates occurring when potential home buyers expected higher rates translates to great news for home buyers.

HPSI jumped 5.5 points in March to the highest level since last June.  Survey responses considering now a “good time to buy” rose 7% while responses considering now a “good time to sell” rose 13%.  And the study shows that more consumers expect interest rates to decrease further.

Doug Duncan, senior vice president and chief economist at Fannie Mae stated, “The results further corroborate the positive effect of falling mortgage rates on affordability, which we expect will help support a rebound in home sales.”  Duncan further noted, “job confidence…also continues to support housing sentiment, while income growth perceptions firmed from both prior month and year-ago levels, potentially supporting an uptick in housing demand.”  Ultimately, lower interest rates, job confidence, and growing income expectations are fueling the current housing market.

Personally, I am seeing more interested buyers and homes for sale than I have seen since 2016.  That is a great thing.  Ultimately, with the lower rates and positive overall economic news, now is a great time to buy or sell a home.

Do you have a friend who complains about high rent and an inattentive landlord?  Tell her that now is a great time to fire her landlord and start building equity in her own home.  Then have her call me.  We at Dunwoody Mortgage will deliver outstanding mortgage experience along with these great low mortgage rates.