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What is Your American Dream?

These days, the “American Dream” is no longer a universal idea; it means different things to different people. In previous decades, the American Dream meant doing better than your parents, which can include buying a home. But today, owning property isn’t necessarily everyone’s immediate goal.

During the Great Recession, between 2007 and 2014, 7.3 million consumers lost their homes, according to RealtyTrac. With so many families affected by this loss, it is no surprise that in recent years the home ownership rate has fallen from 69 percent in the early 2000s to 63.7 percent at the beginning of 2015, according to the Washington Post. As home ownership has declined, the 2010s are on track to see the fastest growth in renters in history.

In the Ohio Credit Union League’s 2017 Consumer Survey, 25 percent of all respondents do not own their home, and only 8 percent of all respondents are planning on buying a house in the next year. A CityLab article recently reported that renting is increasing nationally across an array of demographics, including age and income bracket. This indicates people are renting because they choose to, not because it’s their only option.

Some consumers want more flexibility and don’t want to be locked into a mortgage when they might want to leave in a few months or years. Some don’t want the responsibility of maintenance and shouldering costs of homeownership, and would rather rely on landlords to handle. To others, choosing a location, even if they can’t afford to buy a home in the desired area, is the deciding factor, and they are willing to forego ownership to live exactly where they want.

As for how Ohio consumers make their housing decisions, 67 percent of survey respondents said location plays the biggest role, followed by 23 percent who consider monthly rent or mortgage payment to be the most significant factor. The size and layout were the most important consideration for 10 percent of respondents.

So, will you put off those big life purchases or remain a mainstay of the American Dream with homeownership? For those weighing renting vs. buying, here are a few things to consider about where you want to live.

• Short-term future: Think about the lifestyle you want to live. If you’d like to stay in a place for at least five years and have enough savings to make a down payment, buying a house may be the best choice. Use a home affordability calculator to crunch the numbers.

• Consider the details: Moving to a new home isn’t just about the building where you’ll be living. Think about the neighborhood: what stores, shops, and restaurants are nearby? Is your new home close to public transportation? If you have kids, what sort of schools does the area have?

• Be prepared: Check your credit score and history before you look for a new place. If you’re going to rent, get renter’s insurance. If you’re going to buy, get pre-approved financing to ensure a smooth closing process. Fully understand the terms of your lease or purchase agreement.

• Take your time: Avoid waiting until the last minute to decide where you’ll be living next. Knowing what’s available in your market will help you choose well and save the trouble of moving again shortly.

ProMedica FCU will be hosting a home buyer seminar in the near future. Please keep a look out for dates and times.

Mortgage Rates

Mortgage Rates Remain Near 7-Month Lows

Mortgage rates touched seven-month lows early this month, and stayed there last week.
According to Bankrate.com’s weekly national survey, the benchmark 30-year fixed mortgage rate inched lower last week, moving from 4.04 percent down to 4.02 percent.

The larger jumbo 30-year fixed nosed up to 4.00 percent, and the average 15-year fixed mortgage rate settled at 3.25 percent. Adjustable mortgage rates were mixed, with the 3-year ARM slipping to 3.48 percent while the 7-year ARM climbed to 3.60 percent.

Bankrate points out that, despite another interest rate hike by the Federal Reserve, mortgage rates are hovering at the lowest point since mid-November and are little changed from where they were 18 months ago when the Fed started boosting interest rates.

The common theme then, as now, has been a slow growth economy with low inflation. This week brought additional evidence of low inflation and the recent softening has garnered the attention of the Fed, who noted in their statement that they are “monitoring inflation developments closely.”

Mortgage rates are closely related to yields on long-term government bonds, which appeal to investors any time uncertainty, or low inflation, is in the air.

Mortgage

Mortgage Rates Do an About-Face

Mortgage rates started the year on a tear, continuing an upward trend that push them to highs not seen in years. There was one-party rule in Washington! A new president who wanted to spend a trillion on infrastructure! An aggressive Fed eager to push interest rates higher and higher! And then, reality set it.

First, the one-party rulers failed to pass a healthcare bill. This exposed deep rifts within the party, and cast doubt on the spendy president’s ability to get his agenda passed.

All of this played out against a backdrop of global uncertainty, with a (potentially) unravelling European Union, a horrible civil war continuing in Syria and an emboldened young tyrant in North Korea, eager to play with his nuclear toys.

According to Bankrate, the international tensions, coupled with a spate of weak economic data, have prompted more investors to move into safe haven instruments like U.S. Treasuries.
When bond prices rise, bond yields fall and mortgage rates are closely related to the yields on long-term government bonds.

And fall they have: last week, the benchmark 30-year fixed mortgage rate fell to 4.16 percent – its lowest level of the year, Bankrate said.

Weakness, uncertainty, and nervousness, which have each been in plentiful supply in recent weeks, are good news for bond investors and mortgage shoppers alike.

Expectations for a June Fed interest rate hike have also eased slightly, further contributing to the downward adjustment on bond yields and mortgage rates.

Home Ownership

When the Housing Market Sneezes, the U.S. Economy Catches a Cold

U.S. Housing Worth Hit $29.6 Trillion in 2016

If you want to understand how important the residential housing market is to the well-being of the U.S. economy, consider this: The total value of the U.S. housing stock grew to a record-high $29.6 trillion in 2016, according to online real estate company Zillow.

The national housing market gained $1.6 trillion over the past year, a 5.7 percent increase from 2015.

Los Angeles is the most valuable metro, worth a cumulative $2.5 trillion, while Portland, Ore. had the biggest increase in value among the largest housing markets, growing 13.4 percent in 2016.

These are BIG numbers. They illustrate just why the 2008 financial crisis led to a Great Recession.

The same market that can add trillions of dollars of wealth in a few years can also take it away, in a matter of months.

When the Federal Reserve meets to decide where to go with monetary policy, the housing market must be front and center in their debates.

After all, an upward move in mortgage interest rates can cause house prices to drop, costing the country those trillions in wealth.

On the other hand, a monetary policy that is too loose (low interest rates, easy money) can fuel an asset bubble in housing, creating the dangerous conditions that led to the financial crisis.

The Fed must therefore maintain the right balance. They failed in that mission during the 2000s; let’s hope they’re getting it right in this decade.

Categories:
Moving

Moving May Cost More Than You Realize

Ohioans are on the move. According to the Ohio Credit Union League’s Quarterly Performance Summary (2nd Quarter, 2016), first-mortgage originations at Ohio credit unions grew 26.4 percent from June 2015 to June 2016. And, 26 percent of Ohioans plan to move within the next two years, according to a 2016 Mid-Year Consumer Survey, conducted by the Ohio Credit Union League. But what happens once you’ve found a new home and are beginning the process of moving? Everything seems to be falling into place when the expenses of the move itself begin to surface.

Forty-three percent of Mid-Year Consumer Survey respondents said the biggest moving expense is paying movers, 15 percent said time off work, another 15 percent said renting moving equipment, and 8 percent said connecting new utilities is the biggest moving expense. It’s important for consumers to become educated about the various costs associated with a move in order to know their financial options. Whether a potential mover needs financial advice or a short-term loan to help with moving expenses, ProMedica FCU can help.

According to the American Moving & Storage Association, the average cost of an intrastate move in 2015 was $1,170 and the average cost for between states was $5,630. The cost is based on a load size of 7,100 pounds.

Apart from just having a cushion of extra funds for unexpected expenses, here are a few helpful tips for staying organized and keeping moving costs low.

Tips to cut moving costs:
• Plan ahead: Hiring professional movers is likely one of the largest moving expenses and an accurate estimation of these expenses ahead of time will eliminate any financial surprises. Using sites such as MyMovingReviews.com allow you to approximate your moving costs and compare local moving companies.

• Insure your belongings: Avoid costly damages to your possessions by insuring your belongings and checking licenses and insurance of the moving company you choose.

• Don’t buy boxes: Instead of purchasing boxes and packaging materials, visit local grocery stores, packaging facilities, and warehouses for boxes. You can also use clothes, linens, and old newspapers to wrap fragile items, rather than buying packing materials.

• Purge clutter: Movers often charge clients who are moving out of state based on the weight of the truck. Throw out anything you don’t need or want anymore. Or even better, hold a garage sale and use that money to help pay the movers or to purchase new items for your new home.

• Check with ProMedica FCU: We offer short-term loans to help with circumstances such as a move.

To learn more about how ProMedica FCU can help with Your Financial Health, call 419-479-4040, or stop into one of our four locations.