You’ve most likely heard the rule: Save for a 20-percent down payment before you buy a home. The logic behind saving 20 percent is solid, as it shows that you have the financial discipline and stability to save for a long-term goal. It also helps you get favorable rates from lenders among other benefits.
But there can actually be financial benefits to putting down a small down payment—as low as three percent and sometimes no-money down—rather than parting with so much cash up front, even if you have the money available.
The downsides of a small down payment are pretty well known. You’ll have to pay Private Mortgage Insurance for years, and the lower your down payment, the more you’ll pay. You’ll also be offered a lesser loan amount than borrowers who have a 20-percent down payment, which will eliminate some homes from your search.
The national average for home appreciation is about five percent. The appreciation is independent from your home payment, so whether you put down 20 percent or three percent, the increase in equity is the same. You may find that even with low or no money down, the interest rate and mortgage insurance, you are paying less than or about the same as you are currently paying for rent. It could make sense for you to jump into the market and at least start to build equity. If you’re looking at your home as an investment, putting down a smaller amount of downpayment can lead to a higher return on investment, while also leaving more of your savings free for home repairs, upgrades, or other investment opportunities.
THE HAPPY MEDIUM
Of course, your home payment options aren’t binary. Most borrowers can find some common ground between the security and advantages of a traditional 20 percent and an investment-focused, small down payment.
(Keep in mind that besides downpayment, buyers typically must also pay closing costs in addition to whatever minimum downpayment may be required. Depending on the market and your loan product, sellers may contribute none, some or all of your closing costs.)
To learn more about what is involved in purchasing a home, don’t hesitate to contact me for a complimentary home buyer consultation.
Becoming a homeowner is a big step with big rewards. However, it can also be a challenge, especially when it comes to saving for a down payment. Thanks to a new law that goes into effect in 2019, Alabamians will be able to save for a down payment with the First-Time Homebuyer Savings Account Program, an Alabama state tax-free savings account dedicated to the purchase of your first home. It also applies to those re-entering the housing market if you haven’t owned a home in the last 10 years.
Individuals or couples can open one of these tax-free savings accounts at any local bank, credit union or other financial institution in Alabama.
The principal deposits and earnings will be deductible on your state income taxes. Savings from the account can be used to pay for the down payment and/or closing costs for the purchase of a single family dwelling.
Mythbuster: Many people believe that they need to put 20% down to purchase a home.
The average down payment is actually closer to 11%. In many cases, the down payment can be even lower than that. In our area, there are often low money down options–and your savings may be used for closing costs!
If you want to own a home, opening a tax-free savings account through the First-Time Homebuyer Savings Account Program is an important first step in making your dream a reality. To learn more about this program contact me, your local bank or credit union, and view the Infographic.
Information courtesy of Alabama Association of Realtors.
The Central Alabama real estate market continues among the most affordable and generally stable markets in the US. The average home in our Central Alabama area sold for $171,272 in September.¹ It appears that sold prices may be on the rise, about 3.3% more in September compared to just last month (August 2018), BUT they are still under 1% higher than September last year 2017.
While many other parts of the country continue to experience major price increases along with lack of inventory, the Central Alabama market overall is more in balance with realatively stable prices adjusting for seasonal variation and a hint of a sellers market–maintaining close to a 5 month supply of homes. Average days on the market in the Central Alabama region had been hoovering around 90 days for quite some time, but this past month, it edged up to 102 days. Over half (57%) of the homes sold in under 90 days, but nearly 18% of homes that closed in September were on the market over six months.¹ It is possible that as inventories are lower, additional properties that have been on the market longer periods are selling and causing the average days on market calculation to increase.
Data from Montgomery Area Association of Realtors, MAAR MLS only, September 2018 as of October 1, 2018.
When looking at market trends it’s important to look at year to date information and to compare the same time periods in previous years. We are all familiar with the impact of seasonal and even monthly variations on both housing supply and buyers in the marketplace. In our area, our home sale activity varies seasonally, but not as dramatically as many areas of the country. According to the data through August, the actual Montgomery area home sales are closely aligning with the Alabama Center for Real Estate (ACRE), Culverhouse College of Business at the University of Alabama monthly projections for homes sold in the Montgomery area, suggesting a relatively stable and predictible market²:
ACRE data shows that January and February are expected to have the fewest home sales in our area. While this year started out slightly below the monthly projections, several of the following months exceeded the projections. You can also see from the monthly data and projections that the lowest number of sold homes occurs early in the year, with the increase in spring market activity in 2018 beginning as early as March and peaking in June. By the end of August, 3226 residential units were actually sold, slightly over the projected year to date of 3192 by 34 units. Projections from September through December 2018 reveal an expected seasonal decline in homes to be sold, with a projected 1445 additional homes sold before the end of the year. As we close out 2018, we will keep an eye on how the market actually performs and update on expectations for 2019.
What does this mean?
Although our area real estate market is relatively stable, there is a tendency toward a seller’s market and relatively low inventories with slightly increasing prices in the Montgomery area. Regardless of the time of year, there is an active real estate market with buyers looking to purchase a home year round. If you are thinking about selling in our area, the best time to sell is when you are ready!
For buyers, this is a great time to make a move to buy a home. Prices here are relatively steady and there has not been the pricing frenzy and multi-offer competitive buying situation that have been experienced in many areas of the country causing prices to go incredibly high. This means that you can place an offer to purchase a home with more confidence that a reasonable offer will be accepted and be in a position to build equity for the future. While no one can guarantee which direction the market will actually go, the Central Alabama area market is relatively stable and affordable.
Keep in mind that markets vary by neighborhood. If you are interested in a more detailed breakdown of market trends by a particular zip code or neighborhood of interest , let me know and I’ll send you a free report: Free Market Report for Your Neighborhood!
¹Montgomery Area Association of Realtors, Multiple Listing Service, September 2018 residential sales data (pulled October 1, 2018).
²The University of Alabama, Culverhouse College of Commerce, Alabama Center for Real Estate, Montgomery Area Real Estate Sales Forecast, August 2018 update.
Are you stuck in a hamster wheel or are you on the path to live your dreams?
Do you feel like you are working hard but not getting ahead? Have you thought about goals, but don’t think you’ll be able to reach them? It can be tempting to just give up or to work even harder on the hamster wheel. The problem with either choice is that you will just get even more tired and disheartened and are not likely to get where you really want to be.
We’ve all heard it–the definition of insanity: “Doing the same thing over and over and expecting a different result”.
I meet so many people all the time who feel like they are in a rut or running the preverbial hamster wheel. They may be in a job that is not fulfilling or that they even hate, they may be in financial stress but don’t know if anything can be done. In real estate I meet alot of people who have a dream of home ownership but do not think they are financially able to buy a home today or ever. People often feel incredibly frustrated or feel that the challenge to reach their dreams is overpowering. These negative feelings and helplessness can take away from the energy you need to reprogram your attitude, your priorities and change your life. The real challenge is setting goals, getting out of your comfort zone to make a plan, and facing your fears and using your energies to do something purposeful to move forward and take action on your plan. No excuses.
The best time to get started purposefully working toward your goals is right now. You can’t change the past, but you can change today and your future. As you make progress you will begin to feel satisfaction knowing that you are on a path to lead you where YOU want to go–whether it’s getting the facts about how to progress toward your goal, taking a class to move to a new career, setting relationship goals, saving money for a downpayment to buy a home, paying down debt and improving your financial picture, relocating to live the life of your dreams, or whatever may be in your plan to live your dreams. Moving outside the hamster wheel can be a bit scary for some people at first, but to be on the right path and enjoying your accomplishments along the way is an irreplaceable and awesome feeling! And YOU CAN DO IT!
Here are a few inspirational quotes to help you think through your dreams and motivate you to set and stay the course to reach your goals.
“If you don’t make the time to work on creating the life that you want, you’re going to spend a lot of time dealing with a life you don’t want.” — Kevin Ngo
“You can conquer almost any fear if you will make up your mind to do so. For remember, fear doesn’t exist anywhere except in the mind.” — Dale Carnegie
“I have discovered in life that there are ways of getting almost anywhere you want to go, if you really want to go.”
? Langston Hughes
“It doesn’t matter where you are coming from. All that matters is where you are going.” — Brian Tracy
“Dream as if you will live forever; Live as if you will die today.”
? James Dean
Interested in life or financial coaching to help you set your goals and work your plans? Are you thinking of buying or selling a home now or in the future? Feel free toContact Us for more information.
When you put your home up for sale, one of the best ways to determine the asking price is to look at comparable sales. There’s rarely a perfect apples-to-apples comparison, so a pricing decision often relies on comparisons to several recent sales in the area. Here are five criteria to look for in a sales comparison.
Location: Homes in the same neighborhood typically follow the same market trends. Comparing your home to another in the same neighborhood is a good start, but comparing it to homes on the same street or block is even better. When dealing wih unique properties and rural properties, setting a value can get complicated. Home valuation models typically vary greatly on these homes,
Date of sale: It varies by location, but housing markets can see a ton of fluctuation in a short time period. It‘s best to use the most recent sales data available.
Home build: Look for homes with similar architectural styles, numbers of bathrooms and bedrooms, square footage, and other basics.
Features and upgrades: Remodeled bathrooms and kitchens can raise a home’s price, and so can less flashy upgrades like a new roof or HVAC system. Be sure to look for similar bells and whistles and home condition.
Sale types: Homes that are sold as short sales or foreclosures are often in distress or sold at a lower price than they’d receive from a more typical sale. These homes are not as useful for comparisons. The same may apply to sales between family members.
Let us help you price your home right the first time around ! You might be surprised at what your home is worth! For a general idea of your home’s value, hop on over to my automated home valuation and see what it says: Instant home value estimate
Are you one of those people who wakes up at night thinking about money?
Sometimes the thoughts keep us from even getting to sleep. Sometimes they creep up even during the day. Usually the thoughts are questions like: How to get more? How to pay the bills? Will I ever have enough to live, let alone to ever afford the finer things in life? How am going to make it? What if the car breaks–how can I afford to fix it? These thoughts can be a simple case of overanalyzing, or it could be unhealthy worry, stress and anxiety that takes away our joy and interferes with our relationships and our health. I can relate because I’ve been there–but more about that another day….
If you don’t have money concerns, good for you! You may consider yourself extremely special!
Either you have learned how to manage your finances effectively, manage stress well, or on the downside perhaps you haven’t given your situation much thought. Many of us get up and go to work everyday and go through life paycheck to paycheck and squeak by, thinking that’s the way it is supposed to be.
If you are one of those who are concerned about their finances though, you have plenty of company.
A recent report from the American Psychological Association (APA)¹ indicated that money (62 percent) and work (61 percent) remain among the top common stressors for Americans. An article earlier this year from CNBC² noted that 43 percent of adults polled identified unexpected expenses and 34 percent identified simply making ends meet as their primary financial concerns. The article goes on to say that fewer than half of adults have saved $1000 to cover an emergency–meaning they are basically going pay check to pay check. Does that sound familiar?
Not only do most American’s lack sufficient savings to cover emergencies, but they are also racking up credit card debt to record-breaking levels.
Earlier this month, BizJournals3 reported that credit card debt is on the upswing, up 8.6% over last year, with the average American adult with over $4,000 in credit card debt and $8,683 per household. Credit card companies are charging higher interest rates, and according to Credit Card Catalog4, average rates are moving up to 20% for new cardholders. Existing cardholders are also seeing increased rates. Do the math, and see how much the credit card company is making each year on that balance…and how much consumers (you) are paying to borrow that money.
Fun (not-so fun?) fact about worrying about money:
Worrying about money is bad for your health. People who worry about their finances have higher risks of significant health problems. Worrying about money can affect your health in more ways than you may realize. Research reported in Business News Daily 5 has established that the risks of several significant health problems increase when people worry about their financial situation. In fact, people with high stress over their finances were found to be twice as likely to have a heart attack versus those not worried. And health problems weren’t limited to those of the heart—digestive tract problems, headaches and migranes, depression, and significantly higher levels of muscle tension and low back pain were reported. And you already may have thought that you had enough to worry about!
The good news is that there are some proven methods to get your finances under control and to reduce worry and stress.
Business News Daily5 reported that people who take an active role in planning and learning about their finances were less stressed and more confident in their financial situations. Stay tuned for more info about how you can feel better about your finances, get your finances in order, and fulfil your destiny.
And if you can’t wait for Part 2, feel free to contactme.
When buying a new house, it’s easy to get distracted by size and think that bigger is better. However, depending on your situation, the opposite may be true.
So how can you determine if your new home is too small, too big, or “just right?” You’ll want to consider these elements.
What’s Your Long-Term Goal?
How many years do you see yourself in this house? Is this the place where you want to raise your kids and retire? Do you expect to have other family members live with you now or in the future, such as an aging parent, sibling, or adult children? If not, then a larger size home may not be as crucial as you think. Consider the fact that you will likely move again, which means that you can upgrade or downsize in the future if necessary. Many first time buyers start out with an entry level home and then leverage their equity in the future toward their next home when it’s time for a move.
What’s Your Financial Limit?
For the most part, you don’t want more home than you can truly afford. Keep in mind that the cost of ownership no only includes your regular housing expense such as mortgage, taxes and insurance but also includes other expenses such as maintenance costs and utility costs that tend to escalate with the increased size of the home. While you may be getting that promotion in a couple of months, you can’t buy now expecting to have more money in the bank later. This is especially important for commission based consumers who are not guaranteed a regular paycheck. Overextending your financial reach is always a bad move, so it’s best to avoid putting yourself (or your family) in that position.
How Many People are Living Here?
In a perfect world, everyone would be able to have their own bedrooms, but that’s not always possible or practical. However, more and more multi-generational families are in the housing market, and are looking for multiple main bedroom suites within the home. When thinking about this situation, consider how imperative it is to have sufficient space for everyone, and what it will do to your budget. Also, keep in mind how long you may expect to have a certain number of people living with you, if you need guest quarters, or must have the flexibility of multiple areas of personal space.
Overall, buying a home should be about your current needs with an eye toward how you plan to grow into space in the future–or on the other hand how you may eventually want to downsize your living area. Don’t buy big for the sake of showing off – in the end, you’ll probably regret it.
Last month, our blog included a review of the state and the Montgomery area residential real estate markets. (If you missed it, you can take a look at the previous blog, “Real Estate Market Trends: Part 1”). We learned that by the end of 2017 the supply of residential homes for sale was down compared to the previous December and that the number of home sales and home prices were on the upswing.Although the Montgomery market is overall not as robust as the state, trends are showing significant positive improvements.
As we head into spring and the beginning of our most active real estate season in Central Alabama, a common question we hear is, “What’s the outlook for area real estate for 2018?”
What most people are interested in are the price and value of homes and most importantly what that means for their home and for them personally.
In fact, this local market information is extremely important for those considering buying or selling as well as homeowners interested in their equity position for possible refinance or eventual sale.
Nationally and statewide, we expect continued real estate growth in 2018, including continued price increases.But what about our local area?
WILL HOME VALUES CONTINUE TO RISE?
Nationally, prices are expected to increase in 2018 with predictions of 3 percent growth rate.1 We anticipate a similar trend for 2018 in our local area based on the rising trend in home prices in the Montgomery region over the past several years, including 2017.Data from the University of Alabama show the historical median selling price in Montgomery has steadily risen since 2014, from $130,000 to $147,750 in 2016.Montgomery area Multiple Listing Service (MLS) data from 2017 show the overall average sales price in 2017 was $167,792, up approximately 5% from 2016 levels. 2
ARE THERE MARKET DIFFERENCES BY COUNTY?
The short answer to this is a resounding YES! Let’s look at some data and check out the details!
In general, in 2017 the average price of homes sold (including resale and new construction) were highest in Autauga County and Lowest in Montgomery and Elmore.The average home sold price in the Montgomery Area MLS in 2017 of $158,368 was just slightly lower than the average sold price of $165,019 for Montgomery County.Elmore County residential sold property averaged $172,645.Autauga County topped the ranking of the three counties for price, coming in at an average sale price of $193,087. (The overall Montgomery Area MLS data includes other areas not included in the three counties mentioned here, which accounts for the differences in average price.) You can take a look at the chart to see the ovrall pattern between counties and new construction homes by county.
AVERAGE MONTGOMERY AREA HOME SALE PRICES (Overall, New Construction and Selected Counties) :
Average price ofall area homes (ALL) and new construction (NC) and breakdown by selected county for Montgomery (MGM), Autauga (AUT) and Elmore (ELM). Data from the Montgomery Area Multiple Listing Service (MLS) for the period January 2017 through December 2017).
WHAT IS THE IMPACT OF NEW CONSTRUCTION ?
You can see in the chart above that the overall average home price is influenced by the much higher home prices commanded by new construction across the area and in the three counties shown. New construction in the Central Alabama region is clearly contributing to home sales in our market and to the average price of homes. New construction residential homes across the Montgomery MLS sold at an average price of $263,294 in 2017. Montgomery County led the average sold price in new construction homes at $293,283. Autauga County followed with an average new construction home sold price of $246,035. Elmore county new construction sold at an average price of $214,568.
New construction is especially important in keeping up with the dwindling inventory of available homes to meet the needs of buyers. Growth in home sales nationally will be driven largely by new home sales, which is expected to continue to increase with single-family construction according to economists at Freddie Mac.3 Volume of new construction sold in the Montgomery region is also up markedly over the past few years, with an increase of 25 percent in 2017 over 2014 levels.(691 new construction units sold in 2017 compared with 553 new construction units sold in 2014).
WHAT DOES THIS MEAN FOR YOU?
Home prices in Central Alabama are on the rise and demand is increasing.
If you’re looking to get into the market either to buy or sell, now could be the time you’ve been waiting for.If you’ve been thinking of selling and possibly purchasing another home, prices and market competition are on your side to transition you to a new home.If you’re thinking about buying, there are many great options for financing available so that you can start your road to home ownership and build equity. But if you’re concerned about rising prices and home affordability in our area, keep in mind the the nationwide median price based on residential sales is $335,000! 4
WHERE CAN YOU GET HELP?
While national, state and regional real estate numbers and predictions can provide a “big-picture” outlook, real estate is neighborhood and home specific. As a local market expert, I can guide you through the specifics of our market andhelp you understand the factors that are likely to drive home values in your particular neighborhood. As a Certified Pricing Strategy Advisor by the National Association of Realtors, I can help ensure you have comprehensive information concerning the value of your home—whether you are buying or selling.If you have specific questions, or would like more information about area real estate, please give me a call! Id love to discuss the market and help you sort through your plans to buy or a sell a home this year or in the future.
Overall, Alabama real estate ended 2017 relatively strong. Demand for residential real estate in Alabama Statewide rose 9% in December 2017 compared to 2016. Prices also rose 10% over the prior year level. The increasing demand has resulted in significantly reduced supply over the same period last year; overall statewide the supply of homes for sale is down 10%. The months of available housing supply varies by metro, urban and rural areas in our state. Metro areas in Alabama report 4.4 months of supply, midsize markets report 6.4 months of supply, while rural areas report 7.7 months of supply as of December 2017.*
What does this means to you as a seller? The months of supply relates to whether it is a buyer’s or seller’s market. The market is considered to be in balance at approximately 6-7 months; but under 6 months it is considered a “seller’s market” and if supply exceeds 7 months it is considered a “buyer’s market.” When you are in an area with a smaller supply of homes on the market, there is overall reduced competition for the sale of your home–so not only are you more likely to sell your home, but you are more likely to get a good price and prices may be expected to increase. When the supply of homes is smaller and you are a home buyer, you will find fewer choices and higher prices. If you’ve been thinking about owning a home, you may not want to wait.
*Data obtained from The University of Alabama, Culverhouse College of Commerce, Alabama Center for Real Estate. Data in the chart represents year over year change (% change of current period (Dec 2017) versus same period last year (Dec 2016)).
But what about Central Alabama?
We all know that real estate trends vary by region and by individual community. This month and next we will look at overall Central Alabama trends. Over the year we will look at what is going on in the particular communities of interest.
2016 to 2017 Montgomery Area Real Estate:
Data obtained from The University of Alabama, Culverhouse College of Commerce, Alabama Center for Real Estate. Data in the chart represents year over year change (% change of current period (Dec 2017) versus same period last year (Dec 2016)).
The month of December 2017 in the Montgomery Market showed a 12% increase in the number of homes sold (demand) over the same period last year (December 2016). Supply was also reduced by 8%, not quite as high a reduction as statewide. However, in the Montgomery area, home prices were up approximately 5%, significantly less than the statewide average increase of 10%.
Data from the Montgomery Area Multiple Listing Service shows that closed sales of residential homes were up overall in 2017 almost 2% from the previous year (2016). That represents an increase of just short of 100 units over the course of the year. What is most interesting is that that average price of sold homes in 2017 has risen over 5% from 2016 prices, an increase of nearly $9,000.
Based on the December data and the yearly trend from 2016 to 2017, the Montgomery Area market as a whole is not appearing as robust as the statewide data suggest. Although the number of Montgomery area homes that have been on the market for over a year have gone down slightly in 2017 compared with 2016, most homes are still on the market up to 90 days. In fact, only about 24-25% of homes sold in our area were sold within 30 days in 2016 and in 2017. As of December 2017 reporting, the Montgomery market was considered “in balance” with an approximately 6 month supply of homes.*
So why do prices appear to be on the upswing despite relatively small changes in volume of closed sales and unremarkable changes in days on market and a relatively “in balance” market? Review of the data suggests the impact of an increased number of homes selling in the $180,000-$499,000 price range with a significant decrease in the total number of homes selling for under $50,000. Just where are these homes? Are the more expensive homes new construction or preowned? Is it a trend? Although the supply of homes has gone down and appear to be in balance, what is the trend in the balance of supply and demand and is that affecting prices? We will look a little closer next month, so stay tuned. We will also look more into what is in store for 2018!
Do you sometimes think you are throwing away your money on rent? With homeownership there are many advantages as shown in the graphic, but one of the biggest advantages is that at the end of the time period of your mortgage you will OWN THE PROPERTY and your monthy expenses will be greatly reduced! With renting, you will never own the property, but you are buying it for the landlord!
Did you know that the average cost to rent in the Central Alabama area is over $800/month? That amount is strictly for your rent to the landlord and does not include your renters insurance, any fees, or utility costs that you need to pay in addition. (Data from the US Census American Community Survey).
Even if you are spending less than the average of about $800 each month for your rent, take a look at this chart and see how much money you will spend each year as you continue to rent. And if you are spending more, you may be even more shocked to see just how much you will have paid over the course of just a few years!
The median total monthly home owner costs are under $1200/month in our area. This value is the monthly median housing expense for all homes in the area that are mortgaged. The statistic includes the median cost of the mortgage AND taxes, insurance, and utilities. (Data from the US Census American Community Survey). And of course your monthly mortgage payment and housing expenses may be significantly less or more than $1200/month depending on the price of the home you purchase and your financing terms and operating expenses.
In our area we are fortunate that there are a number of affordable homes available. Our median home value is between $122,000 and $141,000 depending on the county, well below the national median home value of $203,000 for homes with a mortgage. (Data from the US Census American Community Survey.) We also have a number of financing programs available to individuals that require little or no money down and will consider purchasers with credit scores in the 600 range (and above of course!) You don’t need a ton of money or have perfect credit to purchase a home.
If you are interested in learning more about how you can make home ownership a reality, contact me and I’ll be happy to help you get started.