Freddie Mac: Equity Matters (a Lot)

KCM Crew July 23rd, 2015

According to a Merrill Lynch survey, over 80% of the people in this country believe that homeownership is still “an important part of the American Dream”. There are many financial and non-financial reasons people feel this way.

One of the biggest reasons is because it helps build family wealth. Last week, Freddie Mac posted about the power of home equity. They explained:

“In the simplest terms, equity is the difference between how much your home is worth and how much you owe on your mortgage. You build equity by paying down your mortgage over time and through your home's appreciation. In a nutshell, your money is working for you and contributing toward your financial future.

They went on to show an example where a person bought a home for $150,000 with a down payment of 10%, resulting in a loan amount of $135,000. The buyer secured a 30-year fixed-rate mortgage at 4.5% with a monthly mortgage payment of $684.03 (not including taxes and insurance). They then illustrated what would happen after seven years of making a mortgage payment, assuming 3% per year home appreciation (the historic national average):

And that number continues to build as you continue to own the home. Merrill Lynch published a report earlier this year that showed the average equity homeowners have acquired at certain ages.

Bottom Line

Home equity is important to building wealth as a family. Referring to the first scenario above, Freddie Macexplained:

“Now, if you continued to rent, and made the same payment of $684.03 per month, you'd have zero equity and no means to build it.

Building equity is a critical part of homeownership and can help you create financial stability.”

Looking to Buy or Sell, contact us and let's get you moving.

Noemi Cardoso 
RE/MAX Terrasol
Licensed in CA
714-698-9555

3 Questions to Ask Before Buying a Home

by The KCM Crew on January 20, 2015

 

If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home.

 

There are three questions you should ask before purchasing in today’s market:

 

1. Why am I buying a home in the first place?

 

This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:

• A good place to raise children and for them to get a good education
• A place where you and your family feel safe
• More space for you and your family
• Control of the space

 

What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.

 

2. Where are home values headed?

 

When looking at future housing values, Home Price Expectation Survey provides a fair assessment. 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.

 

Here is what the experts projected in the latest survey:

• Home values will appreciate by 4% in 2015.
• The cumulative appreciation will be 23.5% by 2019.
• Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 15.1% by 2019.

 

3. Where are mortgage interest rates headed?

 

A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates.

 

The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.

 

Bottom Line

 

Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.

Home Mortgage Rates: Where are They Headed?

by The KCM Crew on July 15, 2014 in Interest Rates

Many of our readers ask us where interest rates are headed over the next several months. While no one has a crystal ball, we did want to share what some experts are saying on the subject.

HSH.com

 

“For now, and likely through the summer, we may see data-driven bumps and dips in rates. Although we managed a slight dip presently, a bump is in order before long.”

Freddie Mac

 

“In the next few months, mortgage rates are likely to remain at their current, low level, but will not remain there for long. As the Federal Reserve is expected to ‘taper’ its purchases of long-term Treasuries and mortgage-backed securities, and as economic growth picks up, long-term yields will gradually rise. Fixed-rate mortgages are expected to be higher in six months, and may even approach 5 percent a year from now.”

National Association of Realtors

 

“Mortgage rates could move suddenly higher in anticipation of rate increases, much as they did last summer when refinance and transaction activity was high. Steady purchase transaction volume and lower refinance volume could mean that mortgages rates may adjust in a more gradual fashion. In either case, as the economy improves—and today’s data clearly suggests it is improving—the overall trend for mortgage rates is up, not down.” 

Fannie Mae

 

Projects the 30 year fixed mortgage rate to be 4.3% by the end of the year.

Mortgage Bankers Association

 

Projects the 30 year fixed mortgage rate to be 4.7% by the end of the year.

If you are ready to buy or sell and take advantage of the still lower rates, call us and let's get the process in motion.

Noemi Cardoso
William Raveis Real Estate
 Cell: 508-558-1945
www.DistinctiveHomes-NE.com

Should I Wait for a interest Rates to Come Back Down?

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Should I Wait for Interest Rates to Come Back Down? Posted: 03 Sep 2013    Above is a graph of the movement of the 30 year fixed mortgage rate since the beginning of 2012. Some buyers are waiting to see if interest rates will come back down before making a decision about buying a home. Though no one can guarantee where rates will be in a few months, we don’t believe waiting is a good strategy. Most experts believe rates may actually move higher. The Mortgage Bankers Association,Fannie Mae, Freddie Mac and the National Association of Realtors are in unison projecting that rates will continue to climb. With home prices increasing and interest rates projected to also increase, the cost of buying a house could quickly increase rather dramatically.

Buying a House: Is Now the Time?

by The KCM Crew on June 10, 2013

in For Buyers, Pricing

The real estate community is often criticized for always seeming to have a Pollyanna attitude about the housing market. Many believe that the industry’s current call ‘to buy now’ is nothing more than a scare tactic with the sole purpose of creating more commissions for the industry. Let’s take a look at whether or not that advice was good advice over the last year.

The ‘cost’ of a home is determined by two major components: the price of the home and the current mortgage rate. According to the most recent Case-Shiller Home Pricing Index, home values have risen over 10% in the last year. If we look at Freddie Mac’s Weekly Primary Mortgage Market Survey®, the 30 year mortgage rate has increased from 3.67% to 3.91% during that same period.
The table below compares the cost of the same exact house over the last twelve months:

 

We can see that the advice to buy a year ago made complete financial sense.

What About Moving Forward?

Most experts are not only calling for prices to continue to rise but are also upgrading their projections as the housing market is showing strong signs of recovering.

Regarding interest rates, the 30 year mortgage rate has soared by over a half point already this year and many believe that the increases will continue. Even those trying to be the voice of reason on this issue are projecting higher rates. For example, Polyana da Costa, senior mortgage analyst at Bankrate.com said:

“Rates are unlikely to keep going up so quickly and should remain below 5 percent.”

Bottom Line

The next time a real estate professional says that now is the time to buy they may not be giving you a ‘sales pitch’. They may be giving you nothing but excellent advice.

Visit www.Distinctivehomes-Ne.com and click on testimonials to see what my clients have to say about their experience. I look forward to hearing from you so we can start looking for your new home.

Noemi Cardoso
William Raveis. Real Estate
Cell: 508-558-1945
www.DistinctiveHomes-NE.com
 

3 Financial Reasons to Buy a Home NOW! (Part II)

by The KCM Crew on March 26, 2013

 

This week, we are going to look at the three financial reasons to buy a home now instead of waiting: prices are rising at an accelerated rate, interest rates are increasing and rents are skyrocketing. – The KCM Crew

Part II – Interest Rates Are Increasing

A big component in the cost of a home is the mortgage interest rate a purchaser pays. Understanding where rates are headed will help in making a decision whether to buy now or wait.

So, Where Are Rates Headed?

No one can know for sure. The Fed has been artificially holding rates down to stimulate the economy. However, as the economy improves, many experts expect rates to creep up. As an example, HSH Associates, the nation’s largest publisher of mortgage and consumer loan information, recently explained:

“The stronger the economy becomes, the higher rates may grind; the Federal Reserve is keeping them low to goose the economy, but an economy responding to the Fed’s medicine will soon see less of a need for it in order to function. If not otherwise manipulated, higher rates are the natural result of a growing economy, as rising demand for available credit supply and concerns about inflation allow costs to rise.”

The Mortgage Bankers Association (MBA) agrees. They were quoted in HousingWire late last year regarding their thoughts on where rates would be headed in 2013.

“After reaching record lows in 2012, mortgage rates are expected to creep up slowly in 2013, the Mortgage Bankers Association predicted.”

In the MBA’s latest Mortgage Finance Forecast they forecast that the 30 year interest rate will be 4.3% by the end of the year. This represents an increase of almost a full percentage point from the 3.4% rate available at the end of 2012.

For example, we show the impact a one percent increase in rate will have on the monthly principal and interest payment on a $200,000 mortgage.

Freddie Mac’s Weekly Primary Mortgage Market Survey reveals that rates have increased by 2/10ths of a percentage point already this year.

As we mentioned, no one knows for sure where rates will be a year from now. But, many experts think they may be as much as a point higher. With rising residential real estate prices and the possibility of higher mortgage rates, waiting to buy a home makes no sense in our opinion.

Tomorrow, we will look at skyrocketing rents.

If you are thinking of buying a home in Westport or surrounding areas please visit www.DistinctiveHomes-NE.com for a free list of homes for sale in Westport and Bristol County MA and RI.

If you are thinking of selling your home contact me for a FREE Current Market Analysis and to learn about our Market Plan to get your home SOLD!

We work with one going in mind, YOURS!

Noemi Cardoso
Local Office. Local Agents. Local Knowledge.
William Raveis Real Estate
911 Main Rd - Westport MA 02790
Cell: 508-558-1945
www.DistinctiveHomes-NE.com
noemi@DistinctiveHomes-NE.com 

Housing Market in 2013: Freddie Mac’s Projections

by KCM Group 02/20/2013

 

Some believe that our coverage of the housing market at times is too optimistic. Today, we want to report on Freddie Mac’s projections for the real estate market in 2013 as per their latest U.S. Economic and Housing Market Outlook.

 

Frank Nothaft, Freddie Mac vice president and chief economist, explains:

 

“Across the nation, most local housing markets have room for sustainable growth, particularly in home construction and sales. As the broader economy heals, expect to see more good news with house prices continuing their recent upward trend, and home sales and housing starts continuing to post strong growth rates.”
 

The report also offered projections on sales and prices.

 

Housing Starts and Sales

 

• Projecting housing starts in 2013 will increase to 950,000 units or about 22 percent higher than 2012 levels.
• Existing home sales are expected to pick-up as the house price recovery allows homeowners who have been forced on the sidelines by negative equity to get back into the market.

House Prices

• While most metro areas saw substantial run-ups in prices during the boom, well above income growth, the subsequent market correction was in many cases more severe.
• The level of affordability in most markets suggests a continued improvement in home prices, and strong growth in sales and construction.

It seems Freddie Mac is also optimistic about the future of real estate in the U.S.

If you are thinking of buying a home in Westport MA visit www.DistinctiveHomes-NE.comfor a free list of homes for sale in Westport MA.

If you are thinking of selling your home contact me for a FREE Current Market Analysis and to learn about our Market Plan to get your home SOLD!

We work with one going in mind, YOURS!

Noemi Cardoso
Local Office. Local Agents. Local Knowledge.
William Raveis Real Estate
911 Main Rd - Westport MA 02790
Cell: 508-558-1945
www.DistinctiveHomes-NE.com
noemi@DistinctiveHomes-NE.com