How Do Home Buyers Compete in Today's High Interest Rate Market?

How Do Home Buyers Compete in Today's High Interest Rate Market? In today's real estate market, mortgage interest rates are at a 20 year high, homebuyers are constantly seeking ways to secure more affordable financing options. One strategy gaining popularity is the 3/1 buy down mortgage. Let’s explore what a 3/1 buy down mortgage is and why it can be a sound financial plan in today's high-interest mortgage market.   Understanding the 3/1 Buy Down Mortgage   A 3/1 buy down mortgage is a type of mortgage financing technique where the borrower obtains a lower interest rate for the first three years of their mortgage. This is achieved through a temporary reduction in the interest rate, making it more affordable in the initial years. The structure typically involves a 3% reduction in the interest rate for the first year, followed by 2% in the second year, and 1% in the third year.   Benefits of a 3/1 Buy Down Mortgage   Immediate Savings: In a high-interest mortgage market, securing a lower interest rate for the first few years can lead to significant cost savings. This can help borrowers better manage their initial mortgage payments until lower interest rates are achievable through a refinance. Affordability: The gradual increase in interest rates over the first three years allows borrowers time to adjust to their mortgage payments. This is especially beneficial for those who anticipate higher income in the future. Competitive Advantage: With rising interest rates, homebuyers who choose a 3/1 buy down mortgage may have a competitive edge in the real estate market, as they can buy now while many buyers stay on the sideline. Avoid the future buying frenzy: Many buyers are willing to sit on the sidelines and wait until interest rates decrease. Unfortunately, this strategy may not be financially beneficial here’s why; Once rates drop, this will create another buyer’s frenzy we previously experienced during the covid years. This frenzy has previously induced a seller’s market where buyers were willing to pay well over market value, waiving inspections and required to provide appraisal gap protection to the Sellers. The two major factors that directly affect your payment is the price and the interest rate. Even if you wait for a lower interest rate but are required to pay $30,000 more for the home due to future competition, your payment could be the same if you had an 8% interest rate today. Utilizing the buydown is a way to secure the home today while we wait for the lower interest rate tomorrow. Potentially zero cost to the Buyer: In today’s market sellers are sitting on tons of equity while their home continues to sit on the market without selling. Many are willing to pay for the buyers cost of the 3/1 Buydown. (Ask me how we can structure this in a contract offer of your new home!) The best part is the money used in the buydown is still yours. If you refinance prior to using all these funds, they can be used to pay for the cost of the refinance when interest rates decrease back to manageable levels. If your home isn’t selling: Offering to pay for the Buyers 3/1, 2/1, or even a 1/1 buydown can be a strategy to sell your home fast while still receiving top dollar. (Ask me how!) Is it time to get off the fence? Points to Remember: Rate relief is coming Loan amount matters more than interest rate Today’s Market: Less expensive home at a higher interest rate. Tomorrows Market: More expensive home at a lower interest rate. You need to be able to afford your payment (not love it) Less competition for fewer homes today. Colorado will continue to have low inventory for the foreseeable future. What will you need to pay tomorrow for the same home, when we factor in the annual appreciation and more competition when rate relief does happen? In conclusion, a 3/1 buy down mortgage can be a prudent financial strategy in today's high-interest market. It provides immediate savings, increased affordability, and a competitive edge. However, careful financial planning is necessary to ensure you can manage the higher payments and remain committed to refinancing. Let’s discuss your individual situation today and analyze if a buydown is right for you,

Growing Your Net Worth with Homeownership

Growing Your Net Worth with Homeownership Take a moment to imagine where you want to be in a few years. You might be thinking about your job, money, wanting more stability, or goals you want to reach soon. Is homeownership a part of that vision? If it is, you should know owning a home has a whole lot of financial benefits. One of the many reasons to buy a home is that it’s a great way to build wealth and gain financial stability. That’s because the value of most homes increases over time, which in turn grows your net worth. Here’s how home values are rising right now. According to Zillow: “The total value of the U.S. housing market – the sum of Zillow’s estimated value for every U.S. home – is now slightly less than $52 trillion, which is $1.1 trillion higher than the previous peak reached last June.” Basically, homeownership is a tremendous wealth-building tool. And with home values back on the rise across the nation, now might be a good time to consider if owning a home is something you want to reach for. Here’s a look at some data to see how much owning a home can really make a difference in your life. Household Net Worth Is Rising Data shows that while those in the top 1% saw the most dramatic net worth increase, people from every single tax bracket have seen their wealth grow over the past few years (see graph below):     For many of those people, the rising value of their home plays a big part in that. Owning a Home Helps You Achieve Financial Success You can tell homeownership had a lot to do with that growth because there’s a significant net worth gap between homeowners and renters. As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), says:  “. . . homeownership is a catalyst for building wealth for people from all walks of life. A monthly mortgage payment is often considered a forced savings account that helps homeowners build a net worth about 40 times higher than that of a renter.” The big reason why? Homeowner’s build equity. Home equity is the value of your home minus the amount you owe on your mortgage. And for most homeowners, that’s the largest contributor to their net worth. Here’s the data from First American to prove it (see graph below):   The blue portion of each bar represents housing as a portion of net worth – and it’s clearly a bigger contributor than other investments like stocks, gold, and cryptocurrencies. As you can see, across different income levels, homeownership does more to build the average household’s wealth than anything else. Bottom Line One of the biggest benefits of owning a home is that it can provide an avenue to grow your net worth. Let’s connect so you can start investing in homeownership.

Are Grandparents Moving To Be Closer to Their Grandkids?

Are Grandparents Moving To Be Closer to Their Grandkids? During the pandemic, many people distanced themselves from their loved ones for health reasons. Grandparents were told to stay away from their grandkids, especially as schools started to open. That’s because it would have been risky to visit with their grandchildren who may have gotten sick from school. Now that the pandemic has passed, many grandparents want more than ever to be near their grandchildren again to make up for that lost time. But how are they getting that “Grandparent Wish?” The data tells us many are moving to make sure they’re getting more quality time. Grandparents Are Moving To Be Near Loved Ones Recent data from the National Association of Realtors (NAR) shows people between the ages of 55 and 74 are moving farther (more than 100 miles) than any other age group (see graph below):   The average age of grandparents in the U.S. is 67 years. The logical leap is that at least some of the people who are moving the furthest are grandparents. But what’s causing them to move so far? The same report from NAR shows the top reason people move is to be closer to loved ones (see graph below):     Based on this data, it’s fair to say many grandparents are getting their wish of more quality time with their grandchildren by moving to be closer to them. And after experiencing isolation and loneliness during the COVID pandemic, that’s an especially good thing. If you’re a grandparent, you know how important your grandchildren are. And you may be willing to sell and move just to be closer by. As Vance Cariaga, a journalist at Go Bank Rates, explains: “Never underestimate the power of grandchildren – especially when it comes to lifestyle and financial decisions. Recent data shows that many baby boomers are relocating further away from home than they used to so they can be closer to their grandbabies.” Bottom Line The data shows grandparents are moving further to be near their grandchildren. If you have grandchildren of your own, maybe you can relate. When you decide it’s time to be closer to your loved ones, let's connect.

Home Prices are not Falling

Home Prices are not Falling While the percentage of Americans who think prices will fall has been slowly declining this year, the latest Consumer Confidence data indicates that’s ticked back up recently (shown in red). This change is surprising especially since the home price data shows prices are going up, not down. It tells you the impact the media still has on public opinion.  Don’t fall for the negative headlines and become part of this statistic. Remember, data from a number of sources shows home prices aren’t falling anymore. Bottom Line Even though the media may make things sound doom and gloom, the data shows home prices aren’t falling anymore. So, don’t let the headlines scare you or delay your plans. Let's connect so you have a trusted resource to cut through the noise and tell you what’s really happening in our area.