Archive for the ‘Home Ownership’ Category

Borrow From Yourself to Buy a Home

March 23, 2023

I personally think 401K accounts are great tools for workers to save for retirement, especially if the employer matches some of the employee’s contributions. Many people don’t realize it, but a 401K account can also help a home buyer purchase a home.

Many, but not all, 401K fund managers permit the account holders to borrow from their 401K accounts to help fund a home purchase. If the fund manager allows this, home buyers can typically borrow up to 50% of their account balance or $50,000, whichever is less. Because this is technically a loan, the home buyer does not pay an IRS penalty to access the account funds prior to retirement and the home buyer must repay the loan based on a schedule set by the fund manager.

As is often stated on the Mortgage Blog, home buyers can buy homes using less than a 20% down payment. In many cases, buyers can obtain a conventional mortgage with only 5%, and sometimes even 3% down. With today’s high home prices, accessing the 3% or 5% required down payment can still be problematic for some buyers. But if those buyers have a 401K account with a substantial balance, borrowing against the 401K balance could make home ownership a reality.

From an underwriting standpoint, the borrower must provide documentation showing that the fund manager permits accessing the 401K funds for a home purchase and 401K account statements showing the balance before taking the loan along with documentation of the funds transfer from the account. Home buyers using 401K funds should plan to start the 401K loan early in their loan approval process. Waiting too long could delay closing as underwriters must review and sign off on the funds transfer. One more added benefit is that, although accessing 401K funds is a loan that must be repaid, underwriters do not include the 401K loan payments in the debt-to-income ratio calculation.

Here is an article giving one financial planner’s perspective on accessing 401K account funds. This planner endorses using 401K funds to buy appreciating assets like a home. But she points out that there are some drawbacks to a 401K loan, including (1) it is a loan that requires monthly payments, so adding the 401K loan payment and a new mortgage payment could “stretch” a buyer’s finances, (2) taking money out of the market could cause the buyer to miss market appreciation during an rising market, and (3) if the buyer changes jobs, the employer might require that the 401K loan be fully repaid shortly after the job change. Ultimately, the home buyer can evaluate her situation, and if she thinks using 401K funds to buy a home now is more valuable than these concerns, then borrowing from the account to buy a home can be a wise option.

Are you considering buying a home in Georgia but have limited available cash for a down payment? If you have been using a 401K account to save for retirement, you might be able to buy a house sooner than you think. Give me a call and let’s discuss your options.

Housing market subdued

March 14, 2023

Subdued. That’s how Fannie Mae’s chief economist describes consumer sentiment toward the housing market, as recorded in the enterprise’s latest Home Purchase Sentiment Index (HPSI).

To which I respond…. “Oh, really? I hadn’t noticed.”

For those of us in the real estate industry, it is pretty obvious the market is subdued. I get it. Home prices are high and not substantially coming down (if at all depending on your market area). Also rates remain stubbornly high compared to the past few years. It is easy to see how the market got subdued.

While the index increased in January for the third-consecutive month, it remained well below its pre-pandemic high.

One thing to note about this index, it looks at past actions/sentiment. The recent reading from early March included data collected in January. Meaning, the data is five weeks old at its time of release.

Something changed in late February and March. My phone began ringing more often. My clients are making offers on homes with multiple offers. A more “real time” analysis seems to show the market gaining some momentum. Perhaps rates jump over 7% again (they’ve tested 7% twice in the past several months, and both times moved back below 7% rather quickly) or another bank crashes and people get really nervous. It’s quite an interesting time out there!

Even with all of this happening, the Spring market is here. More people are out looking, and competition for the limited number of homes out there is beginning to increase. I’ll be interested to see the HSPI numbers later this year once we have the figures for March and April.

For those of you looking to purchase a home in the state of Georgia, contact me today! I can get you ready to make an offer in just a few minutes, and work toward getting your loan pre-underwritten to make your offer stronger in an increasingly crowded market.

When will the housing shortage end?

February 21, 2023

Isn’t that the million dollar question? I wish I knew the exact answer. A safe answer is not in the next couple of years.

I’ve talked a lot about the lack of homes for sale. The same issue is in the rental market too. Reflecting the unprecedented housing shortages across the United States in the post-pandemic market, U.S. vacancy rates hit their lowest readings in decades in 2021. According to NAHB’s analysis of the 2021 American Community Survey (ACS), rental vacancy rates reached a new low of 5.2%, the lowest levels recorded by the ACS since the survey started generating these data in 2005.

Additionally, NAHB’s forecast indicates the balancing of the market will take years to correct itself, and will take place between 2025 and 2030. Even on their short term projection, it is still two years away.

If the rental market is stretched, and we’ve already discussed the shortage of homes being built/for sale in my February series, what should a buyer expect in 2023? Glad the question was asked 🙂

Realtor.com 2023 housing forecast says 2023 will offer buyers less competition on the number of for-sale homes. Compared to the wild ride of the past two years, 2023 will be a slower-paced housing market, which means drastic shifts like price declines may not happen (if at all) as quickly as some have anticipated.

Going back to the Zillow report referenced in my first post this month, it noted, while national home value declines from peak levels have been minimal, some markets have seen significant changes. Atlanta isn’t one of those markets. People are still moving into metro Atlanta, and there are not enough homes to buy for the number of people wanting to own homes in this market. Our housing prices have a floor, so there is no need to fear a 2008 home value crash.

In all of my posts, we are seeing a trend. The housing crunch isn’t changing in the next few years, more buyers will enter the metro Atlanta housing market as the US population continues to move to the southeast, housing prices have a “built in” floor due to supply and demand… the only thing different from the past few years and when the market heats up again is the competition… or lack thereof. Those who got out of the market and quit trying to buy will find it very different now in this cooled/fewer looking for homes market.

I remember speaking with someone is March 2020 saying they wanted to wait until the summer to get a really good deal as the housing market collapsed from Covid. I advised him if he wanted a good deal, he needed to purchase a home in March or April. Why? My thought process then was there was nothing wrong with the economy. When things open up and go back to normal in a month or two, home prices will go back to where they were and we will pick back up where we left off. Other than me being wildly optimistic on when life would go back to normal, when the economy opened up, the “deals” were gone.

I feel we are in a similar window now with fewer buyers making offers on homes. My clients are getting under contract with time for due diligence, appraisal/financing contingencies, the seller giving money for closing costs, and even contingencies to sell a home prior to buying the new home! This is as close to a “buyer’s” market we will see until the housing inventory issue sorts itself out, which is forecast to be years down the road.

Next month – new topics. Promise!

If you’ve read these posts and decided now is the time to buy before everyone else jumps back into the housing market, contact me today (see my banner above for contact info). I’ll get you ready to make offers on homes in no time!

2023 is not like 2008

February 14, 2023

Another housing crash weighs on a lot of people’s minds. Sharply rising mortgage rates, a steep decline in home sales and a record price appreciation slowdown have raised concerns that the housing market could crash. I get the logic, yet experts argue that these market trends are a symptom of a correction after two years of massive growth.

I wouldn’t expect 2023 to be like 2008. For one, something as extreme as 2008 only occurred twice in the past 100 years…. the first was the Great Depression in the 1930s. The second was the Great Recession beginning in 2008. The housing market and overall economy is completely different now versus 2008.

There are two huge differences:

  • Risky mortgages created an environment where people could buy more home than they could afford to pay. If people lost their jobs (and they did), it created a vicious feedback loop a cooling market/declining value market + more foreclosures = more declines in home values (and this cycle kept repeating itself).
  • In 2008, there was a glut of housing inventory. For once, too many homes were being built. This is the opposite problem we have today with housing inventory levels in Atlanta hovering around 3 months (ideal amount is 6 months to create a balanced market).

There are also too many people who do not own a home that want to buy a home. The housing glut in the 2000s was followed by close to a decade of under-building that contributed to a shortage of millions homes today. This was exacerbated by millennials coming of age near the end of this period of underproduction along with Boomers not downsizing as previous generations did (moving in with extended family, or to retirement communities, or to assisting living/nursing homes). The lack of homes along with the housing needs of the two largest generations in the history of this country (one looking to buy their first homes and the other not selling their homes) should put a floor on home prices.

While 2023 isn’t like 2008, 2024 could be like 2020- 2021. When the national media begins talking about “now being a great time to buy a home,” we’ll see a similar situation as we did during the peak buying years of the pandemic. This is why I keep harping on now being a great time to buy. Purchasing a home now with fewer competitors – even with a slight decline in home values – will be much better than double digit offers, over asking price offers, no contingencies, etc. as we are likely to see the next time it is ” a good time” to buy.

If you are thinking, “maybe 2023 is a good time to buy,” contact me today (see my banner above for contact info). We can get started in just a few minutes and get you pre-approved for the offer on your new home!

Home prices stabilizing

February 1, 2023

I started the year saying now is a great time to buy a home. For the month of February, I’ll include a series of posts expanding on this thought process. We’ll touch on affordability, housing prices, and the shortage of homes.

Let’s start with affordability. Zillow, Seattle, said U.S. home values are easing down, starting to provide relief for potential home buyers facing affordability challenges. Zillow reported the typical U.S. home fell to $357,733 in November, and is now down 0.5% from the peak peak last year.

Add on the fact mortgages rates improved to end 2022/start 2023, monthly costs for home ownership went down for the first time since July, and for only the second time in the past 19 months.  

We are not at a point of home prices dropping (more on this in the next post). But for the first time in several years, we aren’t seeing double digit appreciation.

Zillow Senior Economist Jeff Tucker said November’s news is a positive sign that affordability may at least stabilize in 2023, helping households budget and plan for housing decisions in the months and years ahead. Tucker said, “The two big questions are whether mortgage rates will continue to decline, and whether that will be enough to bring buyers back in time for the spring selling season. In the meantime, those on the prowl for a house will benefit from motivated sellers, unusual bargains and a welcome lack of competition.”

As I said to start the year, the articles saying 2023 is a bad time to purchase a home aren’t talking about the lack of competition. The quote from Zillow’s Senior Economist is spot on for those who are looking, and they are seeing contingencies, sellers doing repairs on homes, and seller concessions.

Beginning to think 2023 may be a good time to buy a home? If you are buying in the state of Georgia, contact me today! I can get you pre-approved quickly and have you out making offers in no time!

First time home buyers are back

January 17, 2023

First-time homebuyers have returned to the housing market. The share of buyers purchasing a home for the first time rebounded to pre-pandemic levels, now representing 45% of all buyers (up from 37% in 2021 per Zillow’s 2022 Consumer Housing Trends Report).

This is primarily attributed to a cooling market, allowing new buyers to survey their housing options. The share of first-time buyers plummeted during the pandemic, as first-time buyers lost out to older, repeat buyers who were able to tap the equity in their existing homes and use cash to make a stronger offer.

This also feeds into my post from last week… less competition for homes makes it easier for first time home buyers to get into their own home!

“First-time buyers now appear to be making relative gains as high mortgage interest rates disproportionately encourage current homeowners to stay put,” said Manny Garcia, a Zillow population scientist. “While rising mortgage rates are hurting affordability for all buyers, first-time buyers may be less deterred by higher rates because they’re comparing a monthly mortgage payment to what they’re paying in rent.”

As mentioned countless times on this blog, it is definitely cheaper to own than rent in Georgia!

A downside to this? While there are fewer buyers overall, first-time buyers may find more competition for starter homes. This trend will only worsen as the mood shifts to it being a “good time to buy a home.” No one knows when the sentiment will shift, but it will. Just look at how quickly the market cooled. Homes were flying off the market and then precipitously dropped from May to July. The housing market will come roaring back once people believe it is a good time to buy.

Given the current market, it is a good time to get ahead of the curve. Mortgage rates are higher now than in early 2022, but inventory levels are still tight. This means now is a great time to buy a home as the competition is lower than normal. If you are buying in the state of Georgia, contact me today. I can get you ready to make an offer on a home in just a few minutes!

Now is a great time to buy a home!

January 10, 2023

Happy New Year! Yes, 2023 is a great time to purchase a home. I am well aware if you do a search for “is now a good time to buy a home?,” one is likely to find plenty of articles saying now is a bad time to purchase. While there are many good points in these articles (I’ve read a lot of them), they all seem to be missing one important thing…

Competition.

Or perhaps I should say, the lack of competition.

Follow with me for a moment… in 2020-2021, the market was crazy. Sellers were receiving 5, 10, 20+ offers on a home (one agent I know received over 100 on a listing!). The offers were always over (sometimes way over!) asking price. Every offer waived some contingencies, and most waived all of them. This means the buyer had no protection on their earnest money and had to buy the home “as is,” or forfeit their earnest money if they decided not to buy the home.

This isn’t a great way to buy a home. As we moved into mid and late 2022, the market shifted. Yes, there are still multiple offers on homes. Yet it is only a few offers on most homes. Properties are going under contract at/around list price, and buyers are getting contingencies on their contracts (not to mention sellers giving money to closing costs!).

There are many reasons to consider waiting to buy a home (rates are higher, home prices are high, inventory levels are low, a looming recession). Why should someone consider buying right now? To me, it is simply competition…

Many would-be buyers will sit this spring market out because everything they read says “now is a bad time to buy a home.” Let’s say the stories change this time next year. For example, prices have leveled out, mortgage rates have lowered, so 2024 is a great time to buy. Do you know what that means? Competition will be fierce! Buyers in my “spring market 2024” example would include:

  • Everyone who decided to push off buying a home in 2023 because it “isn’t a good time to buy a home.”
  • Everyone who planned on buying a home in 2024.
  • Some who planned to buy in 2025 or 2026 and decided to move up their timeline because “now is a good time to buy a home.”

When the mood shifts to now being a “great time to buy a home,” inventory levels will still be low. The supply-and-demand dynamics dragging inventory levels (too many buyers and too few homes available) isn’t going away anytime soon. The market will resemble to craziness of 2020-mid 2022.

Yes, mortgage rates are higher, but finding the right home is hard. It is way easier to refinance a home you already own versus fighting the crowd to get a home when rates are lower. I’ve bought two homes in my life, and refinanced them both.

Regardless of what is in the news, taking the long term view, now is a great time to buy a home. If you are buying in the state of Georgia, contact me today. I can get you ready to make an offer on a home in just a few minutes!

Wills – A Wise Move for Homeowners

January 5, 2023

If you own a house in Georgia, and you want to control who receives title if you die, you need a will. In the last two weeks, I have heard of two young homeowners who died without a will, compounding the grief of their loved ones.

To be clear, I am not an attorney, so I strongly recommend you seek legal counsel regarding a will, but I have talked with multiple attorneys recently and here’s what they taught me.

Georgia homeowners can use a will to specify who will receive title to a home they own upon their death. If the will is legally drafted and properly executed, homeowners can specify anyone – even someone not related to them – as recipient of their home’s title upon their death.

Without a will, here’s how Georgia law works. Upon the homeowner’s death, then the home title is divided between the deceased’s legal spouse and children. The legal marriage is critical here. If the deceased is not married and has no children, then the home’s title passes to the deceased’s parents. Remember this is Georgia law – without a will to specify who receives title, Georgia law will always transfer title according to these rules.

Now here are two horror stories for instruction. An estate attorney told me about a client who lived with someone for several years, but they never legally married. The client’s partner owned the house, but title was never granted to the client and the partner did not have a will. Because this couple was not married, when the partner died suddenly, the deceased’s title passed by law to the deceased’s parents. Why? The surviving client was not on the title, the couple was not legally married, and the deceased had no children. The parents did not like the client and they took title to their child’s home per Georgia law and evicted the client.

Someone called me last week asking if I could help them refinance the home they occupy. This person and their fiancee lived in the home together for several years. They never married and the home’s title was in the fiancee’s name only, and there was no will. Then the fiancee died suddenly at a young age. The surviving partner was defined as beneficiary on the deceased’s accounts and insurance policies and was even able to obtain legal authority to serve as the estate administrator. Yet as administrator to an estate with no will, the surviving partner has a fiduciary duty to dispose of the estate’s assets according to Georgia law. While this person has been making all mortgage payments and has lived in the home for several years, they are now at the mercy of the deceased fiancee’s parents regarding the home. They could evict, move into the home, or force a sale of the home and take all of the profits from the sale. This person has no rights to the home under Georgia law.

If you own a home in Georgia, the easiest way to avoid these nightmares is to legally / officially execute a will. This is especially true if you want your house to go to someone who is not your legal spouse, your child, or your parent. It is not very expensive and will be priceless to your heirs if they can avoid the heartbreaking examples I described above. Even if you are young, tragedies can happen – none of us is guaranteed another day. I can connect you with an attorney who will handle your will efficiently and effectively.

And if you want to buy a home in Georgia, please give me a call. Dunwoody Mortgage helps our clients win contracts in competitive bid situations. I’ll remind you to document a will after closing.

Working with appraisers

December 20, 2022

Due to changes in the mortgage process, loan officers are no longer allowed to have direct contact with appraisers. It has been this way for years now. All appraisals are ordered through Appraisal Management Companies (AMC). When a lender has a question or needs something clarified on an appraisal report, all requests are made to the AMC and then relayed to the appraiser.

While loan officers cannot speak directly with an appraiser, real estate agents can. However, more than a quarter of real estate professionals say they avoid having any interaction with an appraiser, falsely believing they legally can’t. Often real estate agents only speak directly with an appraiser when there is a problem, and 19% say they don’t interact with appraisers at all. Of those who don’t interact, most say they avoid contact because they think they’re not legally allowed to speak to the appraiser, or they’re concerned that the interaction might lead to appraisal bias.

However, “regulations allow real estate agents, or other persons with an interest in the real estate transaction, to communicate with the appraiser and provide additional property information, including a copy of the sales contract,” according to NAR’s FAQs on the residential appraisal process.

Real estate pros who do interact with appraisers say they try to provide additional information to help them in their valuation, the survey shows. These pros also may meet with the appraiser onsite to provide comps, a list of improvements made to the property or information on multiple offers.

Working with an appraiser can make a big difference on where the value lands. In this hyper competitive/appreciating market over the past few years, the seller’s agent should speak with the appraiser and provide comps showing how they came up with the price, divulge unique features on the home, and provide details about how competitive the process was for getting the home under contract. The best agents I work with always consult with the appraiser during the appraisal process.

So while I cannot speak with an appraiser, real estate agents can, and should.

Home appreciation to decline

December 6, 2022

We definitely will not see double digit home apprecation in 2023. We could see a slight decline.

Reports from Fitch Ratings and Veros Real Estate Solutions forecast sharp declines in home price appreciation over the next year. Fitch expects overvaluation to moderate by the end of this year, with the declining trend in home prices.

“Home price correction exhibits strong locality,” the report said. “Price growth is still concentrated on the East Coast, while home prices on the West Coast started to dip, and this trend has begun to spread in the Midwest. Unbalanced housing inventory and the uneven relationship of house prices and rents across the country are the primary drivers behind the diverging trends.”

As previously mentioned in this blog, what is happening in the metro Atlanta area may not follow the same nationwide trends. Thur far, this is the case. Home prices out west have fallen since the late spring/early summer while keeping steady in metro Atlanta.

One thing keeping the Atlanta metro area different (so far) is constraints on the housing supply. There are still not enough homes on the market; meaning, supply and demand is keeping homes from falling. Even with all of this, the VeroFORECAST of 300 U.S. markets anticipates home prices will appreciate on average just 1.5% for the next 12 months (including metro Atlanta)

With rents still rising, now is a great time to buy. Yes, mortgage rates are higher, but finding the right home is still challenging. Find your home now (with less competition to get it) and look to take advantage of a dip in mortgages rates the next time rates fall to lower your payment. It is easy to refinance… much harder to find the perfect home.

Ready to own a home in Georgia? If yes, contact me today (see my banner above for contact info). We can get started in just a few minutes and get you pre-approved for the offer on your new home!