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Predictions on Interest Rates for 2019 May Disappoint Buyers

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When purchasing a home, there are a number of variables that may influence or even dictate which home the buyer can afford.  Obviously the price of the home, the property taxes for a specific home as well as how much money the buyer has to use as a down payment all are important factors for home buyers to consider when zeroing in on a home to purchase.   However, there is another variable that truly can vary and that is the mortgage interest rate.

For the past several years, buyers in the US have been spoiled by rates that hovered near record low interest rates.  Small upticks in the rates may have alarmed some home buyers that disappointed to see how it changed their monthly payment.  Obviously, as the interest rates for mortgages increase, the monthly payment also increases and it could be a deal breaker for some buyers.  This is why it is important for prospective home buyers to continue to be aware of interest rates fluctuations.

Unfortunately, based on an article published in Keeping Current Matters “Where are Interest Rates Headed in 2019?”, Freddie Mac is expecting rates to continue to increase throughout 2019.  Nevertheless, even if rates inch closer to 5.3 by the end of 2019,  a glance back at the history of rates in the US over the past 40 or so years may offer a bit of relief.  It is still nowhere near the 18% homeowners in the 1980s had to work with.

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Do People Still Use Real Estate Agents?

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Technology seems to be the heart of the real estate market.  It begs the question, do house hunters and owners selling their house still feel that they need to use a real estate agent?  Based on a recent housing consumer study completed by Harris Insights, the answer is a resounding yes.

In fact, the percentage of home buyers or sellers who used a real estate agent in a recent transaction has increased 5 percentage points from the last study three years ago and up 9 percentage points since 2001.

Many might assume that the older population of buyers and sellers are the most likely to use a real estate agent for their transaction.  After all, Gen Xers and Millennials are tech savvy and more accustomed to navigating the virtual world.  However, according to an article published by Housing Wire, “91% of those ages 18 to 34 used real estate agents in their transaction. That number is slightly higher among Gen Xers, or those ages 35 to 44 years old, at 94%…Actually, it’s the older generations that are cutting real estate agents out of the picture as just 81% of those ages 55 and older reported using a real estate agent in their transaction.”

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Is Buying a Home A Good Financial Decision?

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Recent news of rising mortgage rates, low housing inventory, and an increase in property taxes may sound alarming and scary to prospective home owners.  It might even make them question whether or not buying a house is right for them.  Despite the ups and downs of rates, prices and taxes, owning a home still has many benefits.

A recent post in the Dragas Communities Blog shares the top five reasons to purchase a home, according to a Harvard University study.  The top reasons listed in the article detail the financial benefits of purchasing a home.

For example, owning a home can allow a homeowner to have a leveraged investment, meaning they are many times borrowing money and, over time the homeowner is seeing an appreciation in their investment.  Additionally, the dreaded property taxes and mortgage interest that homeowners have to pay, they are, in fact, tax deductible up to a specific dollar amount.  Further, capital gains up to a certain dollar amount, made on the sale of the home are excluded from income when filing taxes.

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Chicago Area Real Estate Values Take A Downward Turn

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Homeowners in the Chicagoland area may have noticed that home values around them are on the decline.  After a steady climb in value over the past few years, it appears that the combination of high home prices, increasing mortgage rates and real estate taxes that continue to soar has caught up with the local market.

Recent data, provided by a group called Illinois Realtors, indicate “Sales of homes in Chicago were down 16.6 percent in September from a year earlier,” according to an article published by Crain’s Chicago Business.  In fact, Chicago area home owners haven’t seen a decline this steep since May 2011.  Disappointing news, especially considering the national figure only slide of 3.4 percent.

However, Dennis Rodkin also reports in the article that local experts warn against jumping to any conclusions about the long term projections.  One expert stating “it is difficult to extract any trend from one month’s data and it will require more monitoring in the months ahead to determine longer-term market impacts.”

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No Cash for a Down Payment? New Mortgage Programs Might Offer Options

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Would be home buyers who have been held back from purchasing a home due to a lack of cash for the down payment may be able to see their dreams become a reality, even without a hefty down payment. Both Freddie Mae and Freddie Mac have introduced home mortgage programs that require as little as 3% down payment.

According to an article published by Fox Business, written by Brittany De Lea, “These new products are designed to compete with the low-down-payment options offered by the Federal Housing Administration (FHA), which offers loans for as little as 3.5 percent down for those with a credit score of at least 580.”
Freddie Mae’s program is named Home Ready and applicants can get approved with credit scores as low as 620 . The program allows parents to co-sign, even if they will not reside at the home. The product is geared toward prospective home buyers in with low to moderate income; both first time and repeat home buyers can qualify for a Home Ready Mortgage.
Similarly, Freddie Mac’s program, Home Possible, serves to offer affordable, low down payment loans specifically to “homebuyers in high-cost and underserved communities”. Either first time or repeat home buyers can qualify, even with credit scores as low as 640.
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Housing Market Predictions: Are We In Store for a Crash?

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Could a housing market slowdown, or worse a housing market crash, be looming?  If Lawrence Yun’s, National Association of Realtors chief economist, analysis is correct, the answer is a resounding “no”.   In fact, the slowdown in the housing market that some areas are experiencing is due to “insufficient supply”, not a lack of demand by buyers.

In an article published by Realtor Magazine, many positive signs for the housing market are present.  For example, the article states “home price growth remains strong in markets across the country—about 5 percent on a nationwide basis so far this year”.

However, the negative effect of the lack of housing supply is that the prices are being driven into price ranges that price some buyers out of the market.  A solution to that issue,the article notes , would be to have builders increase the supply of homes available.

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Why Should You Stage Your Home To Sell

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There are many decisions to make when deciding to sell your home.  You need to decide if you are going to use a real estate agent,  decide which agent to use, when to put the house on the market, what price to ask for the house.  It can be overwhelming and exhausting.  Once all those decisions have been made, it is then time for photos of the house to be taken for the listing, not to mention getting the house ready for showings and open houses.

A step in the home selling process that might either be overlooked or undervalued is the process of “staging” your home.  In an article written by Devon Thorsby, published in U.S. News and World Report, Thorsby states, “Home staging is the act of cleaning, rearranging and remodeling parts of a property to make it more appealing to potential homebuyers. Professional home stagers are often brought in by real estate agents – or the agents practice a bit of staging themselves – to help homeowners make a house ready to show to potential homebuyers.”

The spectrum of staging services is vast and the prices vary depending on how involved the project is.  Some stagers may go as far as recommending some personal items be put in a storage unit and staging furniture brought in.  It may not include every room in the house, but certainly some of the rooms that are most critiqued by buyers such as the kitchen, living room and master bedroom.

In the end, the purpose of staging is to help sell your home as quickly as possible for as close to asking price as possible.  Personal style choices, décor and clutter may make your house feel like a home, but it needs to appeal to the general buyer so it may not have a place in the house during the process.

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Finding the Best Real Estate Agent: Tips and Considerations

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Buying and selling  a home might be one or the biggest personal financial transactions of your life.  It can be emotional, confusing and time consuming.  Many home owners and those looking to purchase a home will eventually look to a real estate professional to guide them through the process.

In an article published by US News and World Report, the author, Devon Thorsby, provides some helpful tips and suggestions for finding a real estate agent for your next real estate transaction.  Thorsby begins by suggesting that potential home buyers or those considering listing their home begin the process of searching or a real estate agent earlier rather than later.  A real estate agent can help make important decisions and suggestions early on that may help the process go more smoothly.

Its important, of course, to find the right agent.  Narrowing down what kind go real estate professional you need is important:  an agent, Realtor or broker; each provides a different level of service and expertise.  Having a prepared list of questions for a potential agent can help ensure that there aren’t any surprises or concerns late in the process.  You  want to be sure you feel comfortable with the type and level service the agent will provide and what the ultimate price of using the agent will be.

Read the entire article for more specific information and details about tools to use when selecting a real estate professional.

 

 

Photo Credit:  Scott Maxwell

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Disappointing News for Many Chicago Homeowners

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Many American home owners have been relieved to see the real estate market, and their home value, rebound from the real estate collapse which began more than ten years ago.  At the height of the real estate market crash, many homeowners found that their homes were worth less than they owed on the home.  In a recent report from Zillow, the percentage of homeowners “underwater” on their mortgage has finally fallen below ten percent, the first time the number has been this low since the collapse.

However, according to an article published in the Chicago Tribune, by Darcel Rockett, Chicago homeowners may not be feeling the same market rebound.  In fact,  Rockett states, “According to Zillow’s 2017 Q4 Negative Equity report, the city has the most homes with negative equity of all the metro areas in the country.”   A little over 15% of Chicago metro homeowners are underwater on their mortgage.  More alarming, about 20% of these homeowners with negative equity owe two times as much as their home value.

Homeowners are faced with limited options when they owe more than their house is worth.  They can wait out the market until their home value returns to a value that matches what they owe.  However, some homeowners may choose to cut their losses and sell their homes at the current value.  Fournier Law Firm can assist homeowners with the process of a short sale.  Contact us at 630-792-1000 or info@fournierlawfirmltd.com

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Photo Credit: ANNA SZLACHTA

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Surprising New Trends Revealed in Recent Home Mortgage Data

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Freddie Mac recently released data on mortgage trends for the first quarter of 2018.  One figure that may surprise many:  almost half of new mortgages in the first quarter of 2018 were secured by first time home buyers.

According to the National Association of Realtors, the age of these first time home buyers is around 32 years old.  It would, therefore, seem that these first time home buyers are, in fact, millennials.  A generation entering the economy with student debt, rising home prices, rising interest rates and a shortage of homes for sale, many would not have expected them to account for 46 percent of the new mortgages.

According to an article written by Phashant Gopal published by Bloomberg, with the improving job market and access to easier credit regulations, this group has been moving out of the rental market and becoming home owners.  These young adults are aware that mortgage rates and home prices are increasing and have decided to enter the home ownership ranks before they are priced out.

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Photo Credit: Investment Zen

 

 

 

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