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If Mortgage Rates Remain at 7%, Home Prices Won’t Fall Significantly. However, They Could Rise Slightly in 2023.

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According to Lawrence Yun, Chief Economist at NAR, severe shortages of housing inventory will keep large price drops from most of the country next fiscal year, despite high inflation, rising mortgage rates, and slowing sales activity.

Yun shared his outlook for 2023 at 2022 NAR NXT, The Realtor , Orlando, Florida.

Yun stated that home prices have been stable in most areas of the country because there is very little inventory. Some areas are experiencing price increases, while others, most notably California, are seeing prices drop.”

Yun said that the market conditions today are fundamentally different from those during the Great Recession.

Yun stated that the housing inventory was only about 25% of 2008’s. Yun said that distressed property sales are nearly non-existent at 2% and not near the 30% mark during the housing crash. Because of the substantial price appreciation over the past two years, short sales are nearly impossible.”

Yun explained that the extraordinary rate at which mortgage rates rose in 2022, from 3% in Jan to around 7% today, has caused a downturn in housing market.

Yun stated that the decline in home sales and home construction has “brought down GDP.” GDP would be positive if the housing market were stabilizing and not falling.

Yun said that there are signs suggesting that mortgage rates will rise, especially since October’s consumer price index showed an inflation decline. However, he expressed concern over the spread between federal funds rates and mortgage rates.

Yun stated that the gap between the 30-year fixed rate mortgage rate and government borrowing rate today is larger than it was in the past. If there wasn’t this gap, mortgage rates would not be 7%. They would be 5.8%. Normal spreads would help revive the economy. If inflation is eliminated, we will see less anxiety in the financial markets, and lower interest rates which will allow owners to refinance.

Yun predicts that home sales will decline by 7% in 2023. However, the median national home price will rise by 1%. Some markets may experience price increases while others see price drops.

He projects a strong housing rebound in 2024 with a 10% increase in home sales and an additional 5% in the median home price.

The National Association of Realtors represents more than 1.5million members in America’s residential and commercial realty industries.

 

Original Blog: https://realtytimes.com/real-industry-news-articles/item/1045981-nar-s-lawrence-yun-predicts-us-home-prices-won-t-experience-major-decline-could-possibly-rise-slightly-in-2023-if-mortgage-rates-remain-at-7?rtmpage=

Loan Estimate

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After applying for a mortgage, you will receive a loan estimate. Lenders must give you a loan estimate within three days of receiving your application.

The loan estimate provides details about the loan that you are requesting. This form was created in 2015.

The information you get with a loan estimate may include the following: Monthly payments, estimated interest rates and total closing costs.

Information about insurance and taxes will be provided. You can also find out how interest rates and payments could change at any given time. You will also be informed about the special features of your loan through this form. It will inform you if your loan has a prepayment penalty. If applicable, the loan estimate will also include negative amortization. Even if your payments are on time, negative amortization can increase your mortgage loan balance.

The description of your loan product will include the negative amortization option.

As the title suggests, this document contains preliminary information that is not final. Although it is an estimate, it can help determine the loan you should apply for and make a commitment to.

Buyers will be provided with a loan estimate that includes prepaid interest, third-party fees and closing costs. The buyer will also receive a detailed estimate payment to get a full picture of the transaction’s costs. It is easy to compare and see the costs of different lenders as all will use the same document.

Lenders cannot hide fees with loan estimates, which can also be a useful comparison tool.

Lenders are required to give you a loan estimate within three business days after you submit your mortgage application. Before they can provide you with a loan estimate, lenders will need some information, such as your legal name, social security number and proof of income. They also require proof of desired property address, price, and loan amount.

You’ll find the following information in the first page and section of a loan estimate:

  • * The term of your loan is usually 30 years. However, other terms may be possible.
    * Product refers to the type of mortgage that you are applying for such as a fixed-rate mortgage or an adjustable-rate mortgage.
    * What loan type is it? For example, is it a conventional or VA loan? It could be an FHA loan or VA loan.
    * A rate lock is when your lender locks down the interest rate on your mortgage and the expiration date.

Information is provided in the second section.

  • * How much you can borrow and how it can be increased
    * The interest rate is a percentage and can be increased.
    * Monthly principal and interest is the monthly mortgage payment, excluding homeowners’ insurance and property taxes.
    * A prepayment penalty is a fee you may have to pay if your loan was not repaid by the due date or you made an additional payment.
    * If there is a balloon payment. This is a lump sum that you must pay at the end your loan term

Information is included in the third and fourth sections.

  • * Payment calculation: Breaking down your monthly mortgage payment, principal and interest, private Mortgage Insurance Premiums, if applicable, as well as escrow amounts
    * Monthly estimated payment
    * Estimated taxes and insurance.
    * Mortgage closing costs estimates
    * Cash to close is the estimated cash amount, which includes closing costs and any other charges you may have upfront

The second page of a loan estimation includes three major elements: loan costs, other charges, and cash to close.

The second page should focus on the origination fees and any fees that you will be charged for items you cannot shop for. These charges vary from one lender to the next, so it is important to compare them. Other charges are not subject to much variation between lenders. You can search for the services needed to close a mortgage. This includes how much they cost. You can’t shop services such as an appraisal or credit check.

The name of the loan officer or lender will be included on page three. This information is useful for comparing loan estimates. The first will show you how much of your loan principal your loan will pay off over the first five year. It’ll also show your annual percentage rate (APR), and total interest percentage.

It’s a great time to review your loan estimate and ask any questions that you may have.

 

Original Blog: https://realtytimes.com/archives/item/1045883-what-is-a-loan-estimate?rtmpage=

Signs You’re About to Make an Offer on the Wrong House

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Buyers today’s housing market can be difficult. Real estate inventory is very limited and home prices are still high. This means that buyers have to make compromises in order to buy a home of their choice.

Flexibleness is one thing, but it’s another. This could mean that you accept a smaller home than you expected or that you have to do some renovations.

There is no such thing as being too compromise when purchasing a home. These signs may indicate that you might not be able to offer on the property you are considering.

If you have a $350,000 home-buying budget, but find the perfect property for $360,000, then it is possible to get a great deal. You might argue that it is worth paying more for a home in such a situation.

If your initial budget is $350,000 you should not be willing to increase it to $400,000 or $425,000. This could lead to financial stress.

Your monthly housing costs should not exceed 30% of what you earn. This includes your mortgage payment and property taxes. If you find that you are spending more than your initial home-buying budget, it is best to hold off on the house you are considering and wait for a better deal.

It is common to purchase a home that needs work. There’s a big difference between making minor repairs and cosmetic changes to your home and having to completely gut it, replace major appliances, and upgrading all its electrical wiring. You might end up spending more money and doing more work if you consider the former.

You can renovate a kitchen that you have bought if it is outdated. You might also be able to expand a bathroom if your home has only one bathroom.

No amount of renovations can change the fact that you bought a home in a place you don’t like. If you value being close to a park, or having a walkable neighborhood, you might not be willing to compromise. If you have children and would like to live near a park, don’t offer to buy a house that is more than three miles from the closest one.

Flexibility is key in today’s tight housing market. However, don’t let this flexibility get too far. You might regret buying a home.

The mortgage rates are at their highest levels in many years and they will continue to rise. To get the best rate and minimize fees, it is important to compare rates with different lenders. A small change in your rate can make a huge difference in your monthly payments.

 

Original Blog: https://www.fool.com/the-ascent/mortgages/articles/3-signs-youre-about-to-make-an-offer-on-the-wrong-house/

The Most Volatile Mortgage Rates in More Than Three Decades are Causing Struggle with Homebuyers

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A typical house hunter who began looking in July and closed on their home in September saw their potential mortgage rates fluctuate by approximately half a percentage point every four week, according to a new report of Redfin ( Redfin.com), a technology-powered realty brokerage. This is the most volatile period in three months since 1987 when mortgage rates surged after soaring to an all-time high of almost 19% earlier in the decade. The Fed was working to curb severe inflation.

This could be a good deal for a house hunter who is looking to purchase a home worth $500,000:

  • They expected their monthly payment of $3,051 when they began looking in July. This amounts to $1.098million over 30 years, with a 20% downpayment and the 5.7% mortgage interest rate. 435,777 of that total payment is interest.
  • They expected to pay $2,874 per month when they bought their dream home in August. This amounts to $1.035million over 30 years, with a 20% downpayment and a 4.99% mortgage rate. Interest is the largest component of that $372,143 total payment.
  • Their final monthly payment was $3,202 after they had locked in a mortgage rate in September. This amounts to $1.153million over 30 years, with a 20% downpayment and the current 6.29% mortgage interest rate. 490,382 of that total payment is interest.
  • The buyer’s expected total payment fell by $64,000 (5.8%), but then rose by $118,000 (11.4%) between July and August.

Taylor Marr, Redfin’s Deputy Chief Economist, stated that the challenges facing homebuyers today go beyond the declining affordability due to high mortgage rates and high home prices. It is extremely difficult to plan ahead due to the whiplash in mortgage rates that occurs between when homebuyers decide on their budget and when they make an offering.

The Federal Reserve has been increasing interest rates to reduce sky-high inflation, which is why mortgage rates are fluctuating. Last week, the Fed increased interest rates by three quarters of an percentage point to a range between 3% and 3.25%. This was its third major hike in a row. They also predicted that they would reach 4.4% by year’s end. Freddie Mac’s weekly data shows mortgage rates at 6.29%, the highest since 2008. However, a separate daily gauge shows them at 7.08%.

As the Fed tries to reduce inflation, volatility in mortgage rates is likely to continue for the near future. However, mortgage rates should fall within the next 12-18 months if inflation eases, according to Justin Dimler, Redfin’s mortgage company Bay Equity.

Dimler, who is a regional sales manager at Bay Equity Seattle, said that “the good news for those people who can afford to purchase a home” and could refinance to a lower interest rate within a year or so. I advise house hunters who were approved for a loan a few months ago to have their mortgage advisor requalify them. The change in mortgage rates could mean that they are no longer eligible to borrow the same amount.

Refinancing is a possibility for homeowners in the near future, but buyers should be aware of the potential costs.

 

Original Blog:  https://realtytimes.com/real-industry-news-articles/item/1045729-homebuyers-are-grappling-with-the-most-volatile-mortgage-rates-in-over-three-decades?rtmpage=

Why Ag Exemptions Are Important

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A property that is eligible for exemption from the agricultural property tax must meet minimum requirements in terms of size, use and location. To be eligible for the exemption, the property must have been in agriculture production for at least 5 years. The receipts and proof of this information must be presented in order to apply. The status must be maintained annually and run as a profitable business in order to keep it.

Why is it so important to have an exemption from property taxes for ag? It will significantly lower your annual property taxes.

If you’re considering buying a property with an ag exemption in place, please ensure that you work with an agent or broker who is familiarized with the requirements for the county where the property is located.

As different types of agriculture and land requirements are required in each county, there will be different exemptions and minimum requirements. Depending on the type of operation, some counties may require more land than others. Others will need as little as 5 acres.

You might not be buying the minimum amount for your county if you purchase land from a larger area that is exempt from ag taxes. This is because you might not be able to keep the exemption in place in the future.

Rollback taxes will apply to properties that do not keep the agricultural exemption. This means that the property is now responsible for all property taxes, including those incurred in the 5 years prior to the exemption. This amount will run into the thousands. You should calculate the amount of rollback taxes you will owe and set aside money to pay it when it becomes due. The taxes won’t become due immediately, but it will be gradual.

If you’re a seller who knows your property may not be in an ag exempt area, ensure that the contract protects you from any liability to pay those rollback taxes.

However, you can choose to rollover into a wildlife valuation rather than an agricultural valuation. This requires annual reports and plans.

If your looking to buy property contact Preferred Properties of Texas today.

 

Original Blog: https://texaslandandhome.com/2019/07/07/what-is-an-ag-exemption/

Selling Your Home, The Tax Angle

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The buying and selling of homes are the largest financial transactions you may make, and as with most financial transactions, there’s a tax angle. If you know what your tax implications are as you go into the deal, you’re better able to plan and avoid unpleasant surprises.

Unlike with most other capital gains, the government gives you a big break when selling your principal home for a profit. You can exclude up to $250,000 ($500,000 if married filing jointly) of the profit from the sale. This exclusion is available for an unlimited number of times. And it applies to houses, apartments, condominiums, stock cooperatives, and mobile homes fixed to land.

However, there are other rules and limitations. To take advantage of the exclusion, you must own and occupy the home as your principal residence for at least two years before you sell it. Owning it and occupying it are two different things, however, and although you have to meet both tests, you don’t have to do this simultaneously. As legal site Nolo explains, “As long as you have at least two years of ownership and two years of use during the five years before you sell the home, the ownership and use can occur at different times.” This is an eligibility break for renters-turned-buyers, who can count rental time before the purchase as part of the “occupy” time.

Also note the word “principal.” This is your main home, where you spend most of your time. You can only have one principal residence at a time. If you have a townhouse in the city where you work but spend August in your country home, your townhouse is still your principal residence.

The IRS also imposes conditions to be eligible for the larger $500,000 married exclusion. You must meet all the conditions below:

  • You are married and file a joint return for the year.
  • Either spouse meets the ownership test.
  • Both spouses meet the use test.
  • During the two-year period ending on the date of the sale, neither spouse excluded gain from the sale of another home.

If a spouse is deceased, under what conditions can the surviving spouse use the $500,000 exclusion? You have to meet all of the following conditions:

  • You sell your home within two years of the death of your spouse.
  • You haven’t remarried at the time of the sale.
  • Neither you nor your late spouse took the exclusion on another home sold less than two years before the date of the current home sale.
  • You meet the two-year ownership and residence requirements (including your late spouse’s times of ownership and residence if need be).

Getting a Break on Improvements

If you’re single and buy a house for $300,000, you’re limited to a sale later of $550,000 before you start having to pay taxes. However, any improvements you made will increase that $300,000 basis, and the IRS is generous in what it considers an improvement. You can add a new room, landscaping, a heating system, new siding — even a satellite dish. General repairs, like fixing a broken windowpane, do not add to the basis. But fixing the windows as part of a larger renovation project will count.

The bottom line? When selling a home, work with professionals to make sure your plans are aligned with tax rules.

Contact our office to speak with one of our knowledgeable agents.

Preferred Properties of Texas

(254) 965-7775|Contact Preferred Properties of Texas