What Home Improvement Stores Are Telling Us About The Housing Market

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A recent Bloomberg Business article reports that both Lowe’s & Home Depot experienced fourth quarter profits that beat revenue projections by the most in six quarters. So what does that mean to the housing market?

Consumer Confidence

Lowe’s Chief Executive Officer Robert Niblock sounded off about this,

Consumers are feeling better about their jobs, their wages and certainly feeling better about the value of their home, they are re-engaging in projects that they have put off.”

Sales to professional contractors have increased significantly as well, and were a driving factor in the quarter. Home Depot’s Chief Financial Officer Carol Tome calls this a “sign of health. If they are putting more items in their basket, it means they have work coming at them.”

Home Values Rising

In a quarterly consumer survey conducted by Lowe’s since 2007, the percentage of respondents who said that the value of their home is rising increased to its highest value ever, at 50%.

Whether Americans are finally adding that man-cave they’ve always wanted, or renovating a master suite, an increased confidence in the value of one’s home often sparks homeowners to invest in big-ticket projects.

The National Association of Realtors (NAR) reports that the median price of an existing home (for all housing types) rose year-over-year for the 35th consecutive month.

Not all who are renovating are planning on staying in their home. The Demand Institute reports that “nearly half of American households plan to move at some point in the future.”

For those who are planning on listing their home this spring, spending the time and money needed to update that 1950’s bathroom or kitchen can fetch higher prices in today’s market.

Bottom Line

Meeting with a local real estate professional can give you insight into the small (or big) improvements your home could use to draw the highest price and return on investment this spring.

To get a FREE home evaluation, log-in to: http://www.MyNorthTexasHomeValue.info

Contact the Trump Realty Team for professional real estate service, (214) 609-7123 or jtrump@kw.com

 

Have You Considered Investing In Real Estate?

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Have you ever considered buying a property as an investment? The property market is not reserved for experts and millionaires – you too could use it to make the most of your hard-earned savings.

A lot of people only buy a house as a family home and find paying off their mortgage before they reach retirement a big financial burden. Sound like you? However, buying a house as an investment (not living in it and instead renting it out) can make you a lot of money. In fact, it’s been shown that property outperforms other investments such as stocks, shares and savings accounts to bring you a nice fat profit in the long-term.

Yet somehow we’re all too cautious about hopping on the property investment train. Why? There are a few common apprehensions, questions and ‘buts’ people have when first looking at property, but there are good answers to all of them. So, before the words ‘finance’, ‘invest’ and ‘mortgage’ turn you off, have a read of the below to get clued in on what property investment can do for you and your piggy bank

But I don’t have the money to invest in property!

It’s a common misconception that you need to have all the cash up front. US banks may lend up to 75% of the property purchase price for investors, so for a $250,000 purchase (the average housing price in Lewisville according to Zillow) the total capital you need is $62,500. IRA’s and 401K’s are ways to get the down payment.

But I don’t want to take out another mortgage!

Before you panic about taking out a second mortgage, remember that the tenants who will be renting at your property will be paying off the mortgage for you, and that taking out a mortgage to pay for your investment means making more money.

But isn’t it risky?

As with all investments, there are low-risk and high-risk options.

But how can I make money from my investment if all my pennies are tied up in the property?

1) The increase in the property’s value over time. A well-chosen property and market will see the value of your investment jump up significantly over the course of five-to-ten years. You can then choose to resell at that higher price, keep it for longer to increase profits further or pass on the investment to your children.

2) The rent your tenants will pay you. This can cover the mortgage and/or provide you with an additional regular income – remember, rents will also increase over time as the area you invest in becomes more popular.

But I don’t want to be a landlord!

You don’t have to be! There are property management companies that exist to take that responsibility off of your hands. They can handle everything, from decorating and tenanting to taxes and reselling, and you’ll still be able to make a healthy profit.

When you’re ready to learn more or if you’re already clued in and want some more in-depth market advice, contact Jim Trump & Associates today! (214) 609-7123 or jtrump@kw.com

Is Buying A Home A Good Investment?

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A house is, with 100-percent certainty, an investment.

An investment is the outlay of money (i.e., a home down payment), usually for income or profit. Buying a home allows you to save on the monthly cash outflow you’d spend renting a comparable property. Instead, you’ll have a somewhat fixed, long-term housing cost thanks to your fixed mortgage payment until you pay it off, and then you’ll have no mortgage payment at all. You’ll also benefit through appreciation in your home’s value, possible tax advantages, mortgage amortization on the loan and not being burdened with housing costs in retirement.

Of course, while buying a home is an investment, that doesn’t necessarily mean it is a good investment. Avoid short-term real estate ownership, fixer-uppers, properties that are much more expensive to own than a comparable property would be to rent, and properties in poorly run homeowners associations.

The most important consideration when buying a home is your ownership time frame. Basically, the longer you own it, the better an investment it will be for you. The optimal holding period for most real estate purchases, whether it’s your personal home or a rental property, is your entire life.

Many homes do not have the best investment rates of return, and some, like fancy prize properties, should generally be avoided. However, two important aspects of investing in a personal residence do add value to your wealth picture (although, unfortunately, that value cannot be calculated):

  1. A monthly mortgage payment requires you to do something most Americans find challenging: Saving the money they earn.
  2. Individuals who retire with a paid-off home (or rental properties) are more likely to live a comfortable retirement than people who must pay rent or a big mortgage payment each month after they retire.

For those two reasons alone, most personal residences are a good investment, provided you hold them long-term. However, you must be sure to buy a home with a mortgage you can comfortably afford on your income, or that you can rent out later in life to a tenant who can pay the mortgage for you.

If you stick to those guidelines, you’re likely to reap the rewards of your real estate ownership.

DO NOT DELAY!! Move Up To The Home Of Your Dreams!

Now that the housing market has stabilized, more and more homeowners are considering moving up to the home they have always dreamed of. Prices are still below those of a few years ago and interest rates are still below 5%.

However, sellers should realize that waiting to make the move while mortgage rates are increasing probably doesn’t make sense. As rates increase, the price of the house you can buy will decrease.

Here is a chart detailing this point:

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10 Simple Steps to Losing Your House!

Open New Lines of Credit

Lenders must adhere to strict debt-to-income ratio requirements.  If you add a new car payment or credit card payment to the mix after you have been pre-approved, you debt-to-income ratios may now be too high to qualify for the proposed housing payment.

Run Up Balances on Current Credit Cards

Even if you don’t open new lines of credit, charging a substantial amount on a current card will raise the minimum monthly payment on that card your lender is using for financing. Again, this could throw your debt-to-income ratios completely out of whack!

Spend Down Payment Funds

Even if your lender verified down payment funds prior to your pre-approval, if your balance decreases to less than what you will need at closing and your lender requires new bank statements, this could cause a major delay in your closing date.  If you’re closing on a short sale with a hard deadline, you could end up losing the house if you cannot close in time and aren’t able to obtain an extension.

Lose or Switch Jobs 

Not much explanation needed here. If your qualifying income is no longer coming in every month, closing on your house isn’t going to happen unless you have a co-borrower who can carry the payment on his or her own.

Make a Late Payment on Your Credit Report

If your credit score is barely meeting the minimum threshold, one late payment could knock you out of the qualifying range.  If your credit score expires before closing and your lender needs to re-pull credit, then you would be in trouble if this has happened to you.

Failure to Communicate Alimony or Child Support to Your Lender

This information is important and will affect the amount for which you qualify. If it comes up too late in the process, there’s a chance you could lose the house, so please share this information with your lender, even if he or she doesn’t ask.

Failure in Communicating That You Are in the Market for a Condo

If you are purchasing a condo, the lender must factor in condo association dues, which can be very pricey. If your lender isn’t factoring a cushion for this into your pre-approval, you may find out that your debt-to-income ratios are too high once you are already under contract.

Getting a 10 Minute Pre-approval

Yes, I know you are busy, but getting a pre-approval shouldn’t be a 10 minute process with some online lender that you heard about on the radio.  Obtaining a mortgage loan is very complicated and your lender should spend time interviewing you, learning about your employment history, and reviewing the standard documents required for a mortgage pre-approval.  Just because you are supposed to receive court-ordered child support doesn’t automatically make that money qualifying income.  A lender must be able to show a history of receiving these payments on time, if not; the underwriter will not allow your lender to use the income.

Failure to Communicate an Employment Gap 

A lender should ask for your two-year work history upfront, and, if a large employment gap arises that your lender was unaware of, you could have issues if you don’t have a good letter of explanation.

Failure to Submit Lender-Required Documentation

Your lender may ask you for documentation several times throughout the process–in order to make sure he or she can submit your story to underwriting in a timely matter and close you on time. They aren’t doing this to be spiteful! You must be available via phone and email to respond to these requests in a timely manner.  If you aren’t, your loan won’t make it to final approval, and you will not be able to close on your home.

How Do You Make Sure This Doesn’t Happen To You? 

How can you be sure you won’t sabotage your own chances of closing on your dream home? Make sure you speak with a mortgage advisor who is knowledgeable, skilled, and thorough enough to make sure you’re not scaring underwriters away with your credit history, bank statements, and employment history.  A skilled loan officer will not conduct a 10 minute pre-approval or send you out to search for home without explaining closing costs and how to get to the closing table with ease. I have lenders that I work with that I trust implicitly, and will give you their information in order to streamline the lending process.

For professional real estate service, contact The North Texas Home Hunter at (214) 609-7123 or jtrump@kw.com

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Still A Great Time To Buy A Home, But Hurry!!

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Kevin Kelly, Chairman of the National Association of Home Builders (NAHB), recently explained that: 

“With interest rates near historically low levels and strengthening job growth, now continues to be a great opportunity to buy a home.”

I couldn’t agree more. However, we must realize that, with prices and interest rates both projected to increase, waiting could cost you. 

There are two organizations that look at the affordability of purchasing and actually measure it over time. The National Association of Home Builders has their Housing Opportunity Index (HOI) and the National Association of Realtors’ has the Housing Affordability Index.

Both indexes are reporting the same thing. The cost of buying a home is beginning to increase leading the affordability indexes to dip. Both indexes say we passed the bottom of the housing market.

According to NAHB’s HOI housing affordability dipped slightly in the second quarter of 2014. NAHB’s Chief Economist David Crowe explains: 

“The second quarter HOI reflects the slow but steady march toward the historic levels of price appreciation and interest rates that result in affordability levels we experienced before the mid-2000s boom.”

According to NAR in a recent Economists’ Outlook post, home affordability is down from both one month ago and one year ago in all regions. 

Michael Hyman, Research Assistant at NAR said: 

“At the national level, housing affordability is down for the month of June due to higher prices and qualifying income levels despite the lowest mortgage rates of the year.”

In a recent article, the Wall Street Journal also revealed that the cost of home ownership is higher than any time in over five years: 

“Housing affordability hit its lowest level in nearly six years in June as home prices continued to climb.” 

Bottom Line: 

If you were waiting for the bottom of the market, you missed it. Yet, with prices below values of seven years ago in most parts of the country and interest rates near historic lows, it is still a great time to buy a home…but hurry! 

For professional real estate service, contact me at (214) 609-7123 or jtrump@kw.com