Equity Insights

The real estate research firm Core Logic just produced their latest Homeowner Equity Insights report.

 

 

 

Some interesting tidbits:

·         63% of all properties nationally have a mortgage

·         Homeowners with mortgages collectively realized a $428 billion rise in equity over last year, an increase of 4.8%

·         Only 3.8% of all mortgaged properties have negative equity (where the loan is greater than the value of the home)

·         10 years ago 26% of all mortgaged properties had negative equity

 


If you want to see even more insights about the Colorado market so that you can make really good decisions about your real estate, you are welcome to watch this complimentary webinar, just click HERE.

Posted on October 18, 2019 at 11:34 am
Fort Collins | Category: Blog, Fun Facts | Tagged , , , ,

On Sale

With interest rates so low, one could argue that money is essentially on sale.

It’s actually half off.

30-year mortgage rates hit 3.75% which is exactly half of their long term average.

Rates have averaged 7.5% over the last 40 years so today buyers are getting half of that rate.

The “sale” on mortgage rates creates a significant savings in monthly payment because of the 1%/10% rule.

For every 1% change in interest rate, the monthly payment will change roughly 10%.

So when rates go up to 4.75%, a buyer’s payment will be 10% higher.

For example, the principal and interest payment on a $400,000 home with a 20% down payment at today’s rates is $1,482.

If rates were 1% higher, the payments jump up to $1,669.

Posted on August 9, 2019 at 10:54 am
Fort Collins | Category: Blog, Fun Facts | Tagged , , , , , , , , , , ,

Are You Better Off Paying Your Mortgage Earlier or Investing Your Money?

Photo Credit: Rawpixel via Unsplash

Few topics cause more division among economists than the age-old debate of whether you’re better off paying off your mortgage earlier, or investing that money instead. And there’s a good reason why that debate continues; both sides make compelling arguments.

For many people, their mortgage is the largest expense they will ever incur in their lives. So if given the chance, it only makes logical sense you would want to pay it off as quickly as possible. On the other hand, a mortgage is also the cheapest money you will ever borrow, and it’s generally considered good debt. Any extra money you obtain could be definitely be put to good use elsewhere.

The reality is, however, a little less cut and clear. For some homeowners, paying off their mortgage earlier is the right answer. While for others, it would be far more advantageous to invest their money.

 

Advantages of paying off your mortgage earlier

  • You’ll pay less interest: Each time you make a mortgage payment, a portion is dedicated towards interest, and another towards principal (we’ll ignore other costs for now). Interest is calculated monthly by taking your remaining balance, the length of your amortization period, and the interest rate agreed upon with your lending institution.

If you have a $300,000 mortgage, at a 4% fixed rate over 30 years, your monthly payment would be around $1,432.25. By the time you finish paying off your mortgage, you would have paid a total of $515,609, of which $215,609 were interest.

If you wanted to lower the total amount you pay on interest, you don’t need to make a large lump sum to make a difference. If you were to increase your monthly mortgage payment to $1,632.25 (a $200 a month increase), you would be saving $50,298 in interest, and you’ll pay off your mortgage 6 years and 3 months earlier.

Though this is an oversimplified example, it shows how even a small increase in monthly payments makes a big difference in the long run.

  • Every additional dollar towards your principal has a guaranteed return on investment: Every additional payment you make towards your mortgage has a direct effect in lowering the amount you pay in interest. In fact, each additional payment is, in fact, an investment. And unlike stocks, bonds, and other investment vehicles, you are guaranteed to have a return on your investment.
  • Enforced discipline: It takes real commitment to invest your money wisely each month instead of spending it elsewhere.

 

Your monthly mortgage payments are a form of enforced discipline since you know you can’t afford to miss them. It’s far easier to set a higher monthly payment towards your mortgage and stick to it than making regular investments on your own.

Besides, once your home is completely paid off, you can dedicate a larger portion of your income towards investments, your children or grandchildren’s education, or simply cut down on your working hours.

 

Advantages of investing your money

  • A greater return on your investment: The biggest reason why you should invest your money instead comes down to a simple, green truth: there’s more money to be made in investments.

Suppose that instead of dedicating an additional $200 towards your monthly mortgage payment, you decide to invest it in a conservative index fund which tracks S&P 500’s index. You start your investment today with $200 and add an additional $200 each month for the next 30 years. By the end of the term, if the index fund had a modest yield of 5% per year, you will have earned $91,739 in interest, and the total value of your investment would be $163,939.

If you think that 5% per year is a little too optimistic, all we have to do is see the S&P 500 performance between December 2002 and December 2012, which averaged an annual yield of 7.10%.

  • A greater level of diversification: Real estate has historically been one of the safest vehicles of investment available, but it’s still subject to market forces and changes in government policies. The forces that affect the stock and bonds markets are not always the same that affect real estate, because the former are subject to their issuer’s economic performance, while property values could change due to local events.

By putting your extra money towards investments, you are diversifying your investment portfolio and spreading out your risk. If you are relying exclusively on the value of your home, you are in essence putting all your eggs in one basket.

  • Greater liquidity: Homes are a great investment, but it takes time to sell a home even in the best of circumstances. So if you need emergency funds now, it’s a lot easier to sell stocks and bonds than a home.
Posted on July 3, 2019 at 4:02 pm
Fort Collins | Category: Blog | Tagged , ,

Renting vs Buying: Which is better for you?

The debate about whether it makes more financial sense to rent or buy has been raging for decades. Advocates of buying argue that when you pay rent you’re paying for someone else’s mortgage. When you buy, you are making an investment, which can significantly increase in value every year you live in the home.

Supporters of renting say that the extra costs associated with owning a home, such as interest payments, taxes, maintenance, can add up. They add that there’s no guarantee that those expenses will be recouped when the house is sold. Instead of investing in a home, you may be better off investing your savings in stocks, bonds, and other financial securities that hold less risk.

Matthew Gardner, our Chief Economist, forecasts, that we will not break 5% for 30-year fixed Mortgage rates for 2019, and likely won’t break it next year.

This means that getting a mortgage is relatively cheap, raising the question, ‘Is it really worth it to keep renting?’

Even if interest rates stay low, whether to rent or buy has a lot to do with each person’s specific situation. Here are a few considerations to make as you decide.

 

What’s the real estate situation in your city?

Industry groups put out reports every quarter stating the average national sales price for a home, and the average monthly payment for a U.S. rental. These reports are typically based on an average of all the cities in the U.S. But what really matters is what the numbers show when you dig into them on a local level.

Investigate the local sales and rental markets, and you’ll see there are some cities that fall well below that average, and some that rise far above it. When comparing housing costs, be sure to base your evaluation on what’s happening in your city and neighborhood, not the nationwide averages.

 

How long do you expect to live there?

If you don’t plan to be living in the same place for at least five years, renting is probably your best bet financially. But if you think you’re ready to settle down for as long as 7 to 10 years, chances are very good that any home you purchase will appreciate during that time even if the economy runs into some bumps along the way.

 

What’s the mortgage rate?

One of the other key factors to consider is the cost of your loan (the interest you’ll pay the lender). Fortunately, our Chief Economist, Matthew Gardner, does not expect interest rates to hit or break 5 percent, meaning money is relatively cheap.

Your mortgage rate will depend on how much money you have saved, your credit score, and other factors, so make sure to talk to a loan officer before you start looking for a home. Being pre-approved for a mortgage narrows down your price range and helps strengthen your offer when it comes time to compete for your new home.

 

Can you pay a bit more?

It can be advantageous to work a lower monthly payment to the bank so that you can pay a little more than the payment.

For example, if you can afford to pay a little extra towards your mortgage bill each month, say $300 more per month, on a 30-year, $300,000 loan, can knock eight years off the life of the loan and reduce your final bill by more than $63,000. That’s savings you would never see if you rented.

 

Will you need to make repairs or improvements?

Buying a fixer-upper may seem like a great way to get a deal on a house, but if the money you spend on the repairs is too great, your profit could be diminished when it comes time to sell. The same is true for remodeling and improvement projects.

Additionally, you can work with your Mortgage lender for a repair loan. This can help you get that lot you want, and help you pay for the repairs.

But ultimately, if you can only afford a home that demands major improvements, and you don’t have the skills to do much of the work yourself, it’s probably better to rent.

 

Do you have other ways to invest?

Many see a home purchase as an easy way to invest—a place where they can generate savings through home equity. But others say you can make more money renting an apartment and investing your savings in stocks, bonds, and other financial securities.

This is where a financial advisor might come in. They’ll be able to break down what you need to do in order to get the best return on your investments. They’ll also be able to see the big picture when it comes to your money.

 

Can you rent part of the house?

Speaking of a diverse portfolio, let your investment work for you. If you buy a house that includes a rental (extra bedroom, mother-in-law unit, etc.), you could be the landlord instead of paying the landlord. With that rental income, you could pay off the mortgage faster and contribute more to your savings. But, of course, you need to be willing to share your home with a tenant and take on the responsibilities of being a landlord or working with a professional property manager to help you with those duties.

 

Making your decision

To make your decision about whether to rent or buy easier, input the key financial facts regarding your situation into this Realtor.com Rent vs. Buy Calculator:  For help making sense of the results and analyzing other factors, contact an experienced Windermere Real Estate agent by clicking here.

Posted on June 13, 2019 at 11:15 am
Fort Collins | Category: Blog, Colorado Housing, For Buyers, For Sellers | Tagged , , , , , , , , , ,

Chugging Along

 

The real estate market keeps chugging along.

Here’s news from the Mortgage Banker’s Association…

Last week, applications to purchase a home hit their highest level since April 2010. This is clearly a sign that the spring selling season is starting off in full swing.

You may remember that the reason why April 2010 was so active is because of the Home Buyer Tax Credit that was in effect. In order to get a special income tax incentive, buyers had to go under contract in April 2010 and close by June 30, 2010.

Today, purchase applications are at their highest level in 9 years and are up 14% over last year. Interest rates are roughly 0.5% lower than 6 months ago and roughly 3.0% below their long-term average.

Let the Spring Selling Season begin!

Posted on April 19, 2019 at 11:40 am
Fort Collins | Category: Blog, Fun Facts | Tagged , , , , , , , , , , , , ,

The Risks, Rewards, and Benefits of Owning Rental Property

PiggyBankSavings

One area of the real estate market that is thriving right now is rental property. In the first quarter of this year, landlords and property managers across the country rented more apartments and homes than they have during the first quarters of the past ten years. And according to the Wall Street Journal, the amount that renters are willing to pay has also jumped to a nationwide average of $991 per month.

All indications suggest that the rental market will continue to improve because of the combination of low vacancy rates and rising rents. In fact, the demand for rentals is predicted to far exceed supply through 2015, with some 4.5 million new renters expected to enter the market in the next five years.

What to consider before buying a rental
Being a landlord has its challenges. The recession took a toll on rental prices for a few years and any future economic downturns could do the same. Once the job market returns to normal, there’s a strong possibility that more people will choose to move from rentals into homes of their own. And the demand for rental properties could become oversaturated at some point, resulting in an investment bubble of its own.

What’s more, while the income from a rental property can be significant, it can take at least five years before you’re making much more than what you need just to cover the mortgage and expenses. In other words, the return on your investment doesn’t happen overnight.

However, in the long run, if you select the right property, it could turn out to be one of your best investment decisions ever—especially since rental real estate provides more tax benefits than almost any other investment.

Tax deductions for the taking
One of the great things about owning rental properties is the fact that you’re able to deduct so many of the associated expenses—including a sizable portion of your monthly mortgage payment.

The commissions and fees paid to obtain your mortgage are not deductible, but the mortgage interest you pay each month is—including any money you pay into an escrow account to cover taxes and insurance. Whatever your mortgage company reports as interest on your 1098 form at the end of each year can likely be deducted.

For example, you may be eligible to deduct credit card interest “for goods and services used in a rental activity,” repairs made to the building, travel related to your rental, expenses related to a home office or workshop devoted to your rental, the wages of anyone you hire to work on the building, damages to your rental property, associated insurance premiums, and fees you pay for legal and professional services. However, as is the case with any transaction of this type, be sure to consult your attorney or accountant for detailed tax information.

What to look for
As with any real estate investment, the location of the property and its overall condition are both key. But with rental properties, there are some other factors you’ll also want to consider:

 Utilities: Look for a building with separate utilities (water, electric, and gas, etc.) for each rental unit. This will make it far easier to legally charge for the fair use of what can be a very costly monthly expense.

 Competition: If your property is one of the few rentals in the neighborhood, there will be less competition for interested renters.

 Transportation: Rentals that are near popular public transportation options and / or major freeways (without being so close that noise is an issue) are usually easier to rent—and demand more money.

 Landscaping: Properties with small yards and fewer plantings are far easier and less expensive to manage.

 Off-street parking: Not only is off-street parking a desirable feature (people with nice cars usually don’t like to park on the street), it’s also a requirement for rental properties in some communities.

How to start your search
Unlike homes, rental properties do not typically have a visible ‘for-sale’ sign standing out front (as landlords don’t want to irritate, bring attention to their current renters, or turn off any prospective renters). Therefore, if you are interested in a rental property, your best option is to schedule an appointment with your real estate agent/broker to discuss your investment goals and identify what opportunities currently exist in your market place.

Posted on March 29, 2019 at 4:15 pm
Fort Collins | Category: Blog | Tagged , , , , , ,

Investing in home: building a foundation for memories

Posted in BuyingSellingCommunity, and Living by Tara Sharp 
“Of course, thanks to the house, a great many of our memories are housed, and if the house is a bit elaborate, if it has a cellar and a garret, nooks and corridors, our memories have refuges that are all the more clearly delineated. All our lives we come back to them in our daydreams.”

Gaston Bachelard, the Poetics of Space

I have been following the news about the housing market pretty closely and am pretty disappointed with some of the articles declaring a case against homeownership. I couldn’t disagree more. If anything, I see the value of homeownership: responsible financial investment, social stability and community connection as more important than ever.

I was particularly moved by the story in the Seattle Times yesterday about the Lutz family in Ballard, a family with seven adopted siblings that are helping their parents move from their family home to a smaller condo now that their children have left the nest. Though their story is far from typical, it really resonates how home is the center of family life, a place where memories are created and how houses tell the stories of the lives we build while in their shelter.

Homes do that for people. They are the places where some of our most intimate stories unfold.

Finding and creating a home is an emotional, psychological, social and financial investment.  There is a lot of energy involved in finding the place to envision the future, raise a family, and perhaps retire. There is no other investment as enjoyable as your own home. Investments in gold or stocks cannot compare to the feelings about a place where you collect memories, create spaces that reflect your ideals and develop to fit your needs over time.

Beyond the emotional ties to home, a number of studies have shown that home ownership has a great impact on feelings of personal autonomy, life satisfaction and increased investment in the community. The sense of satisfaction goes beyond the ability to paint walls whatever color we want, or make improvements to our homes on our own terms. It goes deeper by improving our sense of well being. Furthermore, when we have a stake in the community we live in, we participate more, making our neighborhoods safer and healthier for all members.

Not all the news about the housing market is negative, actually there are many great articles: “in defense of home ownership”, “ten reasons to buy a home “and “a dream house after all” to name a few. But regardless of where you stand on the housing market right now, we can all likely agree that there is no place like a home.

All of our experiences of home are unique. Please share your best memories of home.

Welcome

Posted on February 19, 2019 at 5:00 am
Windermere Colorado | Posted in BlogUncategorized | Tagged 
Posted on March 8, 2019 at 10:00 am
Fort Collins | Category: Blog, Housing Trends | Tagged , , , , , , , , , ,

Are You Better Off Paying Your Mortgage Earlier or Investing Your Money?

Posted in BuyingSelling, and Living by Guest Author 

Photo Credit: Rawpixel via Unsplash

Few topics cause more division among economists than the age-old debate of whether you’re better off paying off your mortgage earlier, or investing that money instead. And there’s a good reason why that debate continues; both sides make compelling arguments.

For many people, their mortgage is the largest expense they will ever incur in their lives. So if given the chance, it only makes logical sense you would want to pay it off as quickly as possible. On the other hand, a mortgage is also the cheapest money you will ever borrow, and it’s generally considered good debt. Any extra money you obtain could be definitely be put to good use elsewhere.

The reality is, however, a little less cut and clear. For some homeowners, paying off their mortgage earlier is the right answer. While for others, it would be far more advantageous to invest their money.

 

Advantages of paying off your mortgage earlier

  • You’ll pay less interest: Each time you make a mortgage payment, a portion is dedicated towards interest, and another towards principal (we’ll ignore other costs for now). Interest is calculated monthly by taking your remaining balance, the length of your amortization period, and the interest rate agreed upon with your lending institution.

If you have a $300,000 mortgage, at a 4% fixed rate over 30 years, your monthly payment would be around $1,432.25. By the time you finish paying off your mortgage, you would have paid a total of $515,609, of which $215,609 were interest.

If you wanted to lower the total amount you pay on interest, you don’t need to make a large lump sum to make a difference. If you were to increase your monthly mortgage payment to $1,632.25 (a $200 a month increase), you would be saving $50,298 in interest, and you’ll pay off your mortgage 6 years and 3 months earlier.

Though this is an oversimplified example, it shows how even a small increase in monthly payments makes a big difference in the long run.

  • Every additional dollar towards your principal has a guaranteed return on investment: Every additional payment you make towards your mortgage has a direct effect in lowering the amount you pay in interest. In fact, each additional payment is, in fact, an investment. And unlike stocks, bonds, and other investment vehicles, you are guaranteed to have a return on your investment.
  • Enforced discipline: It takes real commitment to invest your money wisely each month instead of spending it elsewhere.

 

Your monthly mortgage payments are a form of enforced discipline since you know you can’t afford to miss them. It’s far easier to set a higher monthly payment towards your mortgage and stick to it than making regular investments on your own.

Besides, once your home is completely paid off, you can dedicate a larger portion of your income towards investments, your children or grandchildren’s education, or simply cut down on your working hours.

 

Advantages of investing your money

  • A greater return on your investment: The biggest reason why you should invest your money instead comes down to a simple, green truth: there’s more money to be made in investments.

Suppose that instead of dedicating an additional $200 towards your monthly mortgage payment, you decide to invest it in a conservative index fund which tracks S&P 500’s index. You start your investment today with $200 and add an additional $200 each month for the next 30 years. By the end of the term, if the index fund had a modest yield of 5% per year, you will have earned $91,739 in interest, and the total value of your investment would be $163,939.

If you think that 5% per year is a little too optimistic, all we have to do is see the S&P 500 performance between December 2002 and December 2012, which averaged an annual yield of 7.10%.

  • A greater level of diversification: Real estate has historically been one of the safest vehicles of investment available, but it’s still subject to market forces and changes in government policies. The forces that affect the stock and bonds markets are not always the same that affect real estate, because the former are subject to their issuer’s economic performance, while property values could change due to local events.

By putting your extra money towards investments, you are diversifying your investment portfolio and spreading out your risk. If you are relying exclusively on the value of your home, you are in essence putting all your eggs in one basket.

  • Greater liquidity: Homes are a great investment, but it takes time to sell a home even in the best of circumstances. So if you need emergency funds now, it’s a lot easier to sell stocks and bonds than a home.

 

Misael Lizarraga is a real estate writer with a passion for teaching real estate concepts to first time buyers and investors. He runs realestatecontentguy.com and is a contributing writer for several leading real estate blogs in North America.

Posted on March 4, 2019 at 8:00 am
Fort Collins | Category: Blog, Buyers & Sellers, For Buyers, For Sellers, Mortgage | Tagged , , , , , , ,

A History Lesson

One of the most common questions we hear from clients is “Where do you think interest rates are going?”

Virtually all of the experts we follow put rates above 5% going into next year and some see rates approaching 5.5% by the middle of 2019. What’s certain is that there are economic forces at work that are pushing rates higher.

So, how about a little history lesson? How do today’s 30- year mortgage rates compare to this same date in history going all the way back to 1990?

• Today = 4.85%
• 2017 = 3.94%
• 2015 = 3.82%
• 2010 = 4.27%
• 2005 = 5.98%
• 2000 = 7.84%
• 1995 = 7.75%
• 1990 = 10.22%

While today’s rates feel high only because they are higher than 2017, they are quite a bit lower than at many times in history.

Posted on October 19, 2018 at 9:19 am
Fort Collins | Category: Blog, Economy, Mortgage, Real Estate Market Update | Tagged , , , , , , ,

A Beginner’s Guide to Securing a Mortgage Loan

Entering into debt is a concept I grew up diametrically opposed to. I was raised, like many with frugal family members, to understand that anything you couldn’t pay for on the spot was something you couldn’t afford. But as we age we learn the pathway to financial growth requires a commitment beyond what many of us can deliver up front. Building and stabilizing wealth is, for many families, tied to home ownership. To reach that initial threshold, most aspiring homeowners will need to apply for a mortgage loan. That process can be daunting, but the long-term rewards of securing your home are worth it.

Step One – Break down your budget

A major financial decision like this can’t be made lightly. Many experts recommend a 50-20-30 style plan for finances, particularly for first-time homeowners. That means 50% of your budget is committed to core, unavoidable, monthly expenses like rent, groceries, loan payments, utilities, insurance, etc. The 20% segment is savings, placed in reserve towards a general or specific future financial goal. The final 30% (at maximum) is left as a remainder for personal spending, however, is most desired. Once this is set, you’re ready to evaluate the rate at which you can repay your loan and adjust accordingly.

Step Two – Take the time to get it right

It’s exciting to be in a position to purchase your first home, but if you find the right spot and realize the funds aren’t there yet it can be a huge disappointment. That’s what makes seeking pre-approval for a loan a must – particularly if it’s your first time. Having your credit in order, along with all key financial documentation (bank statements, tax returns, debt copies, prior records of significant ownership). If your credit isn’t in a great place, it’s likely worth taking the time to amend it before applying for your mortgage loan. When you earn lower interest rates and more manageable monthly payments you’ll be thankful for your prudence.

Step Three – The bigger the down payment the better

It’s rare that first-time homebuyers have significant cash on hand, but whatever you can muster makes a difference. Typically, the greater a down payment you can muster, the lower your subsequent interest rates will be. For many, there’s only so much that’s tenable as a bulk sum up front, of course. If that fits your situation, seeking a loan insured by the Federal Housing Administration (FHA) can earn you a healthy loan for a down payment of just 3.5% of your home’s total value. To calculate the limitations of your target home’s loan options, you can input your information on the Department of Housing and Urban Development (HUD) website here.

Step Four – Stick to the plan!

After all the effort you’ll go through to secure a mortgage loan, you’ve earned the home it’s helped you purchase. That loan, like any loan, is contingent on your continued monthly payments. It can feel daunting and dispiriting after a time to continually be paying for a home you’re already living in, but maintaining your financial balance is vital. You’ll never be able to predict every expense that comes up but maintaining your budget towards paying off your mortgage loans will set you up to be more financially flexible in the future. Should you ever hope to purchase a second home or other major investments requiring of loans, having a record of consistent mortgage loan payment can help you secure far more favorable interest rates in the future.

A mortgage loan, like any loan, is a major commitment, but entering into homeownership is a massive step towards financial stability and future life-planning. With proper patience and focus, you can get the loan you need at the rate you can afford.

Posted on July 20, 2018 at 5:00 am
Fort Collins | Category: For Buyers | Tagged , , ,