by Michelle Clemons, Realtor
Some homeowners have recently done a “cash out” refinance and have taken a portion of their increased equity from their house. Others have sold their homes and purchased more expensive homes with larger mortgages. At the same time, first-time buyers have become homeowners and now have mortgage payments for the first time.
These developments have caused concern that families might be reaching unsustainable levels of mortgage debt. Some are worried that we may be repeating a behavior that helped precipitate the housing crash ten years ago.
Today, we want to assure everyone that this is not the case. Here is a graph created from data released by the Federal Reserve Board which shows the Household Debt Service Ratio for mortgages as a percentage of disposable personal income. The ratio is the total quarterly required mortgage payments divided by total quarterly disposable personal income. In other words, the percentage of spendable income people are using to pay their mortgage.
Today’s ratio of 4.44% is nowhere near the ratio of 7.21% during the peak of the housing bubble and is instead at the lowest rate since 1980 (4.38%).
Bill McBride of Calculated Risk recently commented on the ratio:
“The Debt Service Ratio for mortgages is near the low for the last 38 years. This ratio increased rapidly during the housing bubble and continued to increase until 2007. With falling interest rates, and less mortgage debt, the mortgage ratio has declined significantly.”
Many families paid a heavy price because of questionable practices that led to last decade’s housing crash. It seems the American people have learned a lesson and are not repeating that same behavior regarding their mortgage debt.
Whether you are a buyer searching for your first home, or a homeowner looking to move up to your next home, you should pay attention to where mortgage interest rates are heading.
Over the course of 2018, according to Freddie Mac’s Primary Mortgage Market Survey, rates have increased from 3.95% in the first week of January to 4.40% in the first week of April.
At first glance, the difference between these numbers in such a short amount of time could be concerning, but if we look at the graph below, we’ll see that rates have already started to level off and return to the mark set in February.
This is great news for anyone looking to buy a home this spring!The spring is always one of the busiest seasons for home buying, and with rates increasing even more, buyers have come off the fence to lock in great rates! This is still great advice as the experts believe that rates will continue to rise throughout the year.
Every month, Freddie Mac, Fannie Mae, the Mortgage Bankers Associationand the National Association of Realtors release their projections for where they believe mortgage rates will be in the coming months. If we take the average of what each of the four organizations is predicting for the second quarter, rates are expected to rise to about 4.48% by June.
Waiting until the end of the year to buy, with rates still projected to increase, will end up costing you more money on your monthly mortgage payment. For every $250,000 you need to borrow to purchase your dream home, you will spend $49.21 more per month, $590.52 per year, and over $17,700 by the end of your 30-year mortgage.
And that’s just the impact of your interest rate going up!
If you are ready and willing to purchase a home, find out if you’re able to. Let’s get together to evaluate your needs and help you with next steps!
Why are home prices still rising? It is a simple answer. There are more purchasers in the market right now than there are available homes for them to buy. This is an example of 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. This is currently happening in the residential real estate market.
Here are the numbers for supply and demand as compared to last year for the last three months (March numbers are not yet available):
In each of the last three months, demand (buyer traffic) has increased as compared to last year while supply (number of available listings) has decreased. If this situation persists, home values will continue to increase.
The reason home prices are still rising is because 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.
This Sunday at 2 a.m., your clocks will jump ahead one hour, the start of more evening sunlight for months to come.
To many a minor annoyance or a bit of relief, Daylight Saving Time reminds us of the sun's daily effect on our lives and tells us spring is on its way. If only we could save ourselves from the seasonal allergies.
But no matter what the time change tells you, Daylight Saving Time is implemented for a reason. The tradition of springing forward and falling back is overseen by the U.S. Department of Transportation and is rooted in saving energy.
The agency boasts people tend to spend more time outside during Daylight Saving Time, meaning they tend to run household appliances and lights less during the nearly 8-month period. Also, it prevents traffic incidents because people are driving around more during the light hours. It also is a crime deterrent, DOT claims, because people are out during the daylight and not at night, "when more crime occurs," the agency states.
Daylight Saving Time was first used in World War I and World War II. But the U.S. didn't implement a nationwide Daylight Saving Time standard, the U.S. Department of Energy said, until Congress passed the Uniform Time Act of 1966. In 2007, the federal government expanded Daylight Saving Time, according to the National Institute of Standards and Technology, in order to reduce energy consumption. Daylight Saving Time now accounts for about 65 percent of the year.
However, not everyone agrees it offers energy saving benefits. Some studies claim the time switch saves energy on lighting but is surpassed by usage increases for heating and air-conditioning.
States are able to exempt themselves. Hawaii and most of Arizona don't take part in Daylight Saving Time. Arizona gets plenty of sunlight and in 1968, decided to opt out of the time change. However, certain Native American reservations in Arizona still participate. Other non-observers are the American Samoa, Guam, Puerto Rico and the Virgin Islands.
For a convenient worksheet, go to pueblo.gsa.gov.
Your credit report affects a lender’s willingness to give you a loan, and if there’s a mistake that negatively impacts you, you can try to correct it.
Real estate agents and lenders can help with this, or use one of the mortgage calculators on the Web (such as on bloomberg.com).
Look for the best rates and terms and a good-faith estimate of closing costs.
You won’t waste time looking at houses you can’t afford. Plus, a preapproval letter will demonstrate your viability as a buyer (a good edge, when you bid on a house, if there are multiple offers), and you’ll save time once a bid is accepted.
An agent, who will be paid by the seller, can do a lot of the legwork for you. To find an agent, ask friends and family, interview several candidates (make sure they’re licensed and have access to Multiple Listing Service). Decide who you’re most comfortable with, and contact references if possible.
Investigate issues like crime rate, schools, local services, proximity to museums or other institutions that are important to you, commuting distance, ethnic diversity, and property taxes.
Divide it into must-haves and like-to-haves.
Read the newspaper real-estate section, check out online sources (like realtor.com), go to open houses, and use your agent. Print out a checklist of things to look for in each home you tour at hud.gov.
But it should be contingent on the results of a home inspection and your ability to secure a mortgage.
To find a qualified inspector, ask for recommendations, or search for a certified inspector at nachi.org. Ask for and check references.
Once the sale is final, use the Moving Checklist to help you hire movers, order supplies, and pack up your belongings.
1. Check your hot water heater's thermostat. You might want to set it to 120 degrees, suggests Andy Farmer, education resources manager for Virginia Energy Sense, a statewide initiative developed to encourage electric energy efficiency and conservation in Virginia. "The default manufacturer setting for many water heaters is 140 degrees Fahrenheit," Farmer says. "However, 120 degrees is typically sufficient for your water heating needs all year round, according to the Department of Energy."
[See: 8 Energy-Efficient Home Improvements That Save Money.]
But then again, you may not want to set it there. Many dishwashers – especially the newer models – need 140 degree water, so before you do anything, check the manual. If it indicates that the appliance needs 140 degrees, the next time you buy a dishwasher, you could get one with a booster heater – and then lower your hot water heater's thermostat to the 120 degree setting.
It might be worth the hassle. Farmer says the lower temperature should save homeowners an estimated 6 to 10 percent on their utility bill, which could be significant. "On average, water heating is the second-largest energy expense in homes, accounting for about 18 percent of your utility bill," he says.
2. Look for – and fix – leaks. Repair leaking faucets, toilets and pipe; a leaking roof is a good idea to check out, too. An easy way to check for leaks – aside from eyeballing your sink – is to check your water meter before and after a two-hour period when no water is being used, says Mark LeChevallier, director of Innovation and Environmental Stewardship at American Water, a public utility company that serves 30 states and parts of Canada. If the meter changes at all, you probably have a leak somewhere.
3. Cook with something smaller than the oven. You bought your stove for a reason. Still, it's probably not a bad thing to be aware that any time you use a toaster oven, electric skillet, slow cooker or microwave, you use less energy.
4. Run your appliances in the evening. Especially if it's a brutally hot day. Why? "Because these appliances produce heat, it will cause your air conditioning to work harder," says Farmer, adding that holding off in the evening helps your neighbors, too. "It can also reduce any potential strains on the grid." Of course, if you really want to save money on your electric bill, Farmer points out that you could wash your dishes by hand.
5. Replace your filters. You hopefully are doing this anyway, since clogged air filters often lead to air-conditioning units and other items breaking down. Even if that weren't the case, an unchanged air filter means the air-conditioning unit, dryer or what have you will work harder or run longer, and – you guessed it – use more energy.
[See: 10 Ways to Live Green On a Budget.]
6. Turn off the ceiling fan. That is, when you aren't home. "Ceiling fans don't actually cool your home; they only circulate air to make you feel cooler," says Kathy Lyford, vice president of New England Operations at the National Grid, an international electric and gas company servicing the northeastern United States and England. So when you're at home, by all means, let your fans whirl away. But to let the blades spin for hours on end when you're gone – that just adds to your electric bill.
7. Use electric fans. Instead of constantly running the air conditioner, try an electric fan. Even if they're on continuously, they use little electricity compared to an air conditioner, Lyford says.