Housing Market Changes

Big changes in the housing market last year provided good news to existing homeowners while presenting a challenge to consumers in the housing market.

According to a Washington Post interview with the National Association of Realtors (NAR), home sales set records last year, due in part to the pandemic. From small apartments in the city primarily used to offer respite from the hustle and bustle to condos positioned in multi-family buildings, folks are now seeking single-family homes to accommodate lifestyle changes brought on by the pandemic. Final data for 2020 is still pending, but the trade association for real estate agents estimates new home sales rose 20 percent over 2019, and NAR predicts new home sales will increase by 21 percent in 2021.

The increase in consumers looking to purchase a home means a decrease in the supply of houses available to sell. At the same time, rates on mortgage loans reached historical lows in 2020. Those two factors combined to cause a rise in the cost of homeownership.

According to an article by The Ascent, the median price of an existing home in June 2020 was $295,300, or 3.5 percent higher than during the same time period in 2019. This increase in home value is great news for existing homeowners, as it has boosted their wealth accumulation. However, this trend also reveals a decline in housing affordability and could significantly limit achieving the American dream of homeownership for communities of color and young adults if the affordable housing supply is not increased.

Preparing to purchase a home

If you are someone preparing to enter the housing market, here are a few suggestions from The Mortgage Reports to help you prepare for this monumental purchase:

  1. Check your credit – Consumers should check their credit at least 6 to 12 months before they consider purchasing a house to allow time to mediate a low credit score if necessary. Your credit score determines eligibility for a mortgage and influences your rate. Most mortgage programs require a minimum credit score between 580 and 620.
  2. Save money – Common advice is to pay a 20 percent down payment for a home to avoid paying mortgage insurance. But even if you decide to take the mortgage insurance option, most mortgage programs require a down payment of 3 to 5 percent. It is important to remember that the consumer is also responsible for closing costs, or roughly 2 to 5 percent of the loan amount.
  3. Determine your budget – It is important to understand how much house you can reasonably afford before starting to look. Before meeting with a mortgage lender, use an online mortgage calculator to estimate affordability. Once you know how much you can afford, be sure to also calculate how much you will need to have on-hand as a down payment.
  4. Do not rush – Buying a home is a huge decision, and one that should not be rushed. If you move too fast, you could overlook vital steps that could save you money, including home inspection and comparison shopping. Do not end up with a fixer-upper when you thought you were buying a turn-key home!
Home Improvements

Home Improvements That Matter

When you’re looking to upgrade your home, tapping into the equity with a home equity loan or line of credit makes a lot of sense.

In some cases, the interest on the loan might be tax deductible — and even if it isn’t, home equity loans typically carry a lower interest rate than credit cards or other types of loans. And if the upgrades increase your home value,  you may end up with more equity than when you started.

But, a lot of upgrades don’t appreciably increase your home’s value, and they might be better paid for with savings or by earning extra money to cover the costs. Another option would be to trade services with a contractor, if you’ve got skills that can earn money.

Wise Home Improvements

Certain home upgrades tend to provide more value than the actual cost.

Kitchen upgrades can offer great value. New lighting, modern appliances, and better storage can really increase your home’s value while also making your kitchen easier to use.

Bathroom renovations can also be a safe bet. Tile, a tub refresh, and, again, new cabinets, are great options. Fresh paint is also useful.

Paint in any room — or on the exterior — can offer good return on investment if you’re covering a funky or outdated color, especially if you do a lot of the work yourself rather than paying a professional.

Outside, you might want to invest in landscaping or patio or deck upgrades.

Home Improvements That Are a Bust

Trendy upgrades that may be out of fashion in the next few years don’t tend to be a good bet.

Wall-to-wall carpeting can also be a bad investment, as many buyers may plan to rip it out and replace it with an easier-to-clean laminate or wood floor.

Expensive upgrades, even in the kitchen or bathroom, might also be a waste of money, if they don’t fit the style of the home or offer the type of experience that is out of step with the home values in your neighborhood. For example, a full spa shower in a 1,000 square foot ranch home in a modest neighborhood might be nice, but these upgrades are not likely to bring you a better sale price. Same with a commercial grade stove or $10,000 refrigerator may not be a great value.

Now, if you’ve got the money for these upgrades and would love them, by all means go for it, especially if you plan to be in your house using them for a long time. But don’t go into debt or decrease your available home equity for them.

Got more questions about smart ways to use a home equity loan or line of credit? Give us a call at 419-479-4040. We can’t wait to talk to you about your needs.

Rent or own photo

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 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.


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.