Saving for a down payment is often the biggest hurdle for a first-time homebuyer as median incomes, rents, and home prices all vary depending on where you live.

There is a common misconception among homebuyers that a 20% down payment is required, and it is this limiting belief that often adds months, and sometimes even years, to the home-buying process.

So, if you can purchase a home with less than a 20% down payment… why aren’t more people doing just that?

One Possible Answer: Private Mortgage Insurance (PMI)

Freddie Mac defines PMI as:

“An insurance policy that protects the lender if you are unable to pay your mortgage. It’s a monthly fee, rolled into your mortgage payment, that is required for all conforming, conventional loans that have down payments less than 20%.

Once you’ve built equity of 20% in your home, you can cancel your PMI and remove that expense from your mortgage payment.”

As the borrower, you pay the monthly premiums for the insurance policy, and the lender is the beneficiary. The monthly cost of your PMI depends on the home’s value, the amount of your down payment, and your credit score.

Below is a table showing the difference in monthly mortgage payment for a $250,000 home with a 3% down payment and PMI vs. a 20% down payment without PMI:

The first thing you see when looking at the table above is no doubt the added $320 a month that you would be spending on your monthly mortgage cost. The second thing that should stand out is that a 20% down payment is $50,000!

If you are buying your first home, $50,000 is a large sum of money that takes discipline and sacrifice to save. Many first-time buyers save for 5-10 years before buying their homes.

To save $50,000 in 10 years, you would need to save about $420 a month. On the other hand, if you save that same $420 a month, you could afford a 3% down payment in less than a year and a half.

In a recent article by My Mortgage Insider, they explain what could happen in the market while you are waiting to save for a higher down payment:

“The time it takes to save a (larger) down payment could mean higher home prices and tougher qualifying down the road. For many buyers, it could prove much cheaper and quicker to opt for the 3% down mortgage immediately.”

The article went on to say,

“Since renters typically devote a higher percentage of their income to housing than homeowners, providing flexible down payment options can help renters with solid earnings purchase a home – and gain a fixed-rate mortgage with principal and interest payments that will not increase over the life of the loan.”

If the prospect of having to pay PMI is holding you back from buying a home today, Freddie Mac has this advice,

“It’s no doubt an added cost, but it’s enabling you to buy now and begin building equity versus waiting 5 to 10 years to build enough savings for a 20% down payment.”

Based on results of the most recent Home Price Expectation Survey, a homeowner who purchased a $250,000 home in January would gain $50,000 in equity over the next five years based on home price appreciation alone (shown below).

Bottom Line

If you have questions about whether you should buy now or wait until you’ve saved a larger down payment, let’s get together to discuss our market’s conditions and help you make the best decision for you and your family.

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747
www.ChristieCannon.com
www.CannonTeamHomes.com

Here are five reasons why listing your home for sale this fall makes sense.

1. Demand Is Strong

The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase…and are in the market right now! In fact, more often than not, multiple buyers end up competing with each other to buy the same homes.

Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now 

Housing inventory is still under the 6-month supply needed for a normal housing market. This means that, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in the market. This is good news for homeowners who have gained equity as their home values have increased. However, additional inventory could be coming to the market soon!

Historically, a homeowner stayed in his or her home for an average of six years, but that number has hovered between nine and ten years since 2011. Many homeowners have a pent-up desire to move as they were unable to sell over the last few years because of a negative equity situation. As home values continue to appreciate, more and more homeowners will be given the freedom to move.

The choices buyers have will continue to increase. Don’t wait until this other inventory comes to market before you decide to sell.

3. The Process Will Be Quicker

Today’s competitive environment has forced buyers to do all that they can to stand out from the crowd, including getting pre-approved for their mortgage financing. This makes the entire selling process much faster and much simpler as buyers know exactly what they can afford before home shopping. According to Ellie Mae’s latest Origination Insights Report, the average time it took to close a loan was 44 days.

4. There Will Never Be a Better Time to Move Up

If your next move will be into a premium or luxury home, now is the time to move up! The abundance of inventory available in these higher price ranges has created a buyer’s market for anybody looking to purchase these homes. This means that if you are planning on selling a starter or trade-up home, your home will sell quickly AND you’ll be able to find a premium home to call your own!

According to CoreLogic, prices are projected to appreciate by 5.1% over the next year. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.

5. It’s Time to Move on With Your Life 

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you feel you should?

Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747
www.ChristieCannon.com

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there, watching entire seasons of “Love it or List it,” “Million Dollar Listing,” “House Hunters,” “Property Brothers,” and so many more all in one sitting.

When you’re in the middle of your real estate themed show marathon, you might start to think that everything you see on TV must be how it works in real life, but you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and decide to purchase one of them.
Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors the average homebuyer tours 10 homes as a part of their search.  

Myth #2: The houses the buyers are touring are still for sale.
Truth: Everything is staged for TV. Many of the homes being shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the open house.
Truth: Of course, this would be great! Open houses are important to guarantee the most exposure to buyers in your area but are only a PIECE of the overall marketing of your home. Keep in mind that many homes are sold during regular showing appointments as well. 

Myth #5: Homeowners decide to sell their homes after a 5-minute conversation.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives/goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee that you can make the home of your dreams a reality!

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747
www.ChristieCannon.com

Will home values continue to appreciate throughout 2018? The answer is simple: YES! – as long as there are more purchasers in the market than there are available homes for them to buy. This is known as the theory of “supply and demand,” which is defined as:

“The amount of a commodity, product, or service available and the desire of buyers for it, considered as factors regulating its price.”

When demand exceeds supply, prices go up. Every month this year, demand (buyer traffic) has increased as compared to last year and for the first five months of 2018, supply (the number of available listings) had decreased as compared to last year. However, a recent report by the National Association of Realtors (NAR) revealed the first year-over-year increase in supply in three years.

Here are the numbers for supply and demand as compared to last year since the beginning of 2018:

The increase in the June numbers doesn’t mean that prices won’t continue to appreciate. In that same report, Lawrence Yun, NAR’s Chief Economist, explained:

“It’s important to note that despite the modest year-over-year rise in inventory, the current level is far from what’s needed to satisfy demand levels.

Furthermore, it remains to be seen if this modest increase will stick, given the fact that the robust economy is bringing more interested buyers into the market, and new home construction is failing to keep up.”

Bottom Line

The reason home prices are still rising is that there are many purchasers looking to buy but very few homeowners ready to sell. This imbalance is the reason prices will remain on the uptick.

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747

www.ChristieCannon.com

With home prices continuing to appreciate above historic levels, some are concerned that we may be heading for another housing ‘boom & bust.’ It is important to remember, however, that today’s market is quite different than the bubble market of twelve years ago.

Here are four key metrics that will explain why:

1. Home Prices
2. Mortgage Standards
3. Foreclosure Rates
4. Housing Affordability

1. HOME PRICES

There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.

Last week, CoreLogic reported that,

“The inflation-adjusted U.S. median sale price in June 2006 was $247,110 (or $199,899 in 2006 dollars), compared with $213,400 in March 2018.” (This is the latest data available.)

2. MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a monthly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Their July Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

3. FORECLOSURE RATES

A major cause of the housing crash last decade was the number of foreclosures that hit the market. They not only increased the supply of homes for sale but were also being sold at 20-50% discounts. Foreclosures helped drive down all home values.

Today, foreclosure numbers are lower than they were before the housing boom. Here are the number of consumers with new foreclosures according to the Federal Reserve’s most recent Household Debt and Credit Report:

• 2003: 203,320 (earliest reported numbers)
• 2009: 566,180 (at the valley of the crash)
• Today: 76,480

Foreclosures today are less than 40% of what they were in 2003.

4. HOUSING AFFORDABILITY

Contrary to many headlines, home affordability is better now than it was prior to the last housing boom. In the same article referenced in #1, CoreLogic revealed that in the vast majority of markets, “the inflation-adjusted, principal-and-interest mortgage payments that homebuyers have committed to this year remain much lower than their pre-crisis peaks.”

They went on to explain:

“The main reason the typical mortgage payment remains well below record levels in most of the country is that the average mortgage rate back in June 2006, when the U.S. typical mortgage payment peaked, was about 6.7 percent, compared with an average mortgage rate of about 4.4 percent in March 2018.”

The “price” of a home may be higher, but the “cost” is still below historic norms.


Bottom Line

After using these four key housing metrics to compare today to last decade, we can see that the current market is not anything like that bubble market.

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747

www.ChristieCannon.com
 

Every homeowner wants to make sure that they maximize their financial reward when selling their home, but how do you guarantee that you receive the maximum value for your house?

Here are two ways to ensure that you get the highest price possible.

1. Price it a Little Low

This may seem counterintuitive, but let’s take a look at this concept for a moment. Many homeowners think that pricing their homes a little OVER market value will leave them with room for negotiation when, in actuality, it just dramatically lessens the demand for their houses (see chart below).

Instead of the seller trying to ‘win’ the negotiation with one buyer, they should price their house so that demand for the home is maximized. By doing so, the seller will not be fighting with a buyer over the price but will instead have multiple buyers fighting with each other over the house.

Realtor.com gives this advice:

“Aim to price your property at or just slightly below the going rate. Today’s buyers are highly informed, so if they sense they’re getting a deal, they’re likely to bid up a property that’s slightly underpriced, especially in areas with low inventory.”

2. Use a Real Estate Professional

This, too, may seem counterintuitive as the seller may think that he or she will make more money by avoiding a real estate commission. With this being said, studies have shown that homes typically sell for more money when handled by real estate professionals.

A study by Collateral Analytics, reveals that FSBOs don’t actually save any money, and in some cases may be costing themselves more, by not listing with an agent. The data showed that:

“FSBOs tend to sell for lower prices than comparable home sales, and in many cases below the average differential represented by the prevailing commission rate.”

The results of the study showed that the differential in selling prices for FSBOs, when compared to MLS sales of similar properties, is about 5.5%. Sales in 2017 suggest the average sales price was near 6% lower for FSBO sales of similar properties.

Bottom Line

Price your house at or slightly below the current market value and hire a professional. This will guarantee that you maximize the price you get for your house.

Christie Cannon | REALTOR
The Christie Cannon Team
Keller Williams Realty Frisco
972-215-7747
www.ChristieCannon.com