Area Real Estate Tips, Trends & News You Can Use

                            

You’ll find our blog to be a wealth of information, covering everything from local market statistics and home values to community happenings. That’s because we care about the community and want to help you find your place in it. Please reach out if you have any questions at all. We’d love to talk with you!

July 30, 2021

Waiting to Buy Could Cost You!

Waiting To Buy a Home Could Cost You [INFOGRAPHIC]

Waiting To Buy a Home Could Cost You [INFOGRAPHIC] | MyKCM

Some Highlights

  • If you’re thinking of buying a home but wondering if waiting a few years will save you in the long run, think again.
  • The longer the wait, the more you’ll pay, especially when mortgage rates and home prices rise. Even the slightest change in the mortgage rate can have a big impact on your buying power no matter your price point.
  • Don’t assume waiting will save you money. Let’s connect to set the ball into motion today while mortgage rates are hovering near historic lows.
Posted in Market Updates
July 28, 2021

4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures 4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures | MyKCM With forbearance plans about to come

 

4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures

4 Reasons Why the End of Forbearance Will Not Lead to a Wave of Foreclosures | MyKCM

With forbearance plans about to come to an end, many are concerned the housing market will experience a wave of foreclosures like what happened after the housing bubble 15 years ago. Here are four reasons why that won’t happen.

1. There are fewer homeowners in trouble this time

After the last housing crash, about 9.3 million households lost their home to a foreclosure, short sale, or because they simply gave it back to the bank.

As stay-at-home orders were issued early last year, the overwhelming fear was the pandemic would decimate the housing industry in a similar way. Many experts projected 30% of all mortgage holders would enter the forbearance program. Only 8.5% actually did, and that number is now down to 3.5%.

As of last Friday, the total number of mortgages still in forbearance stood at  1,863,000. That’s definitely a large number, but nowhere near 9.3 million.

2. Most of the 1.86M in forbearance have enough equity to sell their home

Of the 1.86 million homeowners currently in forbearance, 87% have at least 10% equity in their homes. The 10% equity number is important because it enables homeowners to sell their houses and pay the related expenses instead of facing the hit on their credit that a foreclosure or short sale would create.

The remaining 13% might not all have the option to sell, so if the entire 13% of the 1.86M homes went into foreclosure, that would total 241,800 mortgages. To give that number context, here are the annual foreclosure numbers of the three years leading up to the pandemic:

  • 2017: 314,220
  • 2018: 279,040
  • 2019: 277,520

The probable number of foreclosures coming out of the forbearance program is nowhere near the number of foreclosures coming out of the housing crash 15 years ago. The number does, however, draw a similar comparison to the three years prior to the pandemic.

3. The current market can absorb any listings coming to the market

When foreclosures hit the market in 2008, there was an excess supply of homes for sale. The situation is exactly the opposite today. In 2008, there was a 9-month supply of listings for sale. Today, that number stands at less than 3 months of inventory on the market.

As Lawrence Yun, Chief Economist at the National Association of Realtors (NAR), explains when addressing potential foreclosures emerging from the forbearance program:

“Any foreclosure increases will likely be quickly absorbed by the market. It will not lead to any price declines.”

4. Those in power will do whatever is necessary to prevent a wave of foreclosures

Just last Friday, the White House released a fact sheet explaining how homeowners with government-backed mortgages will be given further options to enable them to keep their homes when exiting forbearance. Here are two examples mentioned in the release:

  • “For homeowners who can resume their pre-pandemic monthly mortgage payment and where agencies have the authority, agencies will continue requiring mortgage servicers to offer options that allow borrowers to move missed payments to the end of the mortgage at no additional cost to the borrower.”
  • “The new steps the Department of Housing and Urban Development (HUD), Department of Agriculture (USDA), and Department of Veterans Affairs (VA) are announcing will aim to provide homeowners with a roughly 25% reduction in borrowers’ monthly principal and interest (P&I) payments to ensure they can afford to remain in their homes and build equity long-term. This brings options for homeowners with mortgages backed by HUD, USDA, and VA closer in alignment with options for homeowners with mortgages backed by Fannie Mae and Freddie Mac.”

When evaluating the four reasons above, it’s clear there won’t be a flood of foreclosures coming to the market as the forbearance program winds down.

Bottom Line

As Ivy Zelman, founder of the major housing market analytical firm Zelman & Associatesnotes:

“The likelihood of us having a foreclosure crisis again is about zero percent.”

Posted in Market Updates
July 13, 2021

Financial Application Calculators

Posted in Financial Apps
July 8, 2021

Tips for Today's Sellers

Posted in Tips & Trends
July 8, 2021

How to Stay Motivated as a Buyer in a Sellers' Market

Posted in Tips & Trends
June 30, 2021

2020 Cost vs Value Update

Posted in Market Updates
June 29, 2021

2021 Midyear Real Estate Report

Posted in Market Updates
June 14, 2021

What to Bring to the Lender

Homes are selling quickly, set yourself up for house hunting success by being as prepared as possible. Another tip for success, work with a knowledgeable agent – like me! I'm just a message away. #thehelpfulagent #home #houseexpert #house #listreports #househunting #realestate #realtor #realestateagent #homeowners #themoreyouknow #icanhelp

Posted in Tips & Trends
June 10, 2021

7 Ways to Make Your Yard & Home a Bug-Free Zone

Click Here to find out just how to do it!

Posted in Tips & Trends
June 6, 2021

Simple Rates of Return ~ ROI

Looking for a simple way to determine if a rental property will give you the rate of return you want?  This modified annual property operating data may be just what you've been looking for.

There are many different rates of return that investors consider to determine whether a property will generate the yield that they expect.  Sometimes the simplest of calculations can tell you whether you want it or not and if you get the other things like tax advantages and appreciation, it just makes it that much better.

The first yield we will look at is commonly called the Cash-on-Cash rate of return.  It is calculated by dividing the initial investment, usually down payment and closing costs, into the Cash Flow Before Tax.

To arrive at Net Operating Income, it is simply taking the gross scheduled income, less vacancy allowance and all operating expenses.  From that is deducted the annual debt service which is the principal and interest payment times twelve.  The remaining amount is referred to as Cash Flow Before Tax.

In this example , the initial investment of the down payment and closing costs, $66,000 was divided into the Cash Flow Before Taxes of $5,468 to get an 8.28% Cash-on-Cash rate of return.

The second yield to be considered is called Equity Build-up.  Each payment made on an amortizing mortgage pays a portion toward the principal balance to retire the loan.  It is calculated by dividing the initial investment into the principal contribution for the year.

Continuing with the example, $66,000 is divided into the principal reduction for year one of $4,606 to get a 6.98% Equity Build-up rate of return.

This approach is easy to understand because you are not considering depreciation, anticipated appreciation, holding period, recapture of depreciation, or long-term capital gains. Simply rent the property, pay the bills, and if there is money left over, it pays a return on the initial investment.

The same goes for the Equity Build-up.  When you make the payment on the mortgage, the loan is reduced and while you don't have access to the money like cash flow, it is definitely your equity and tangible.

To determine whether an ROI on a rental is good, compare it to what your initial investment is earning currently.  Ten-year treasuries are earning less than 2%.  Certificates of deposit are earning less than 1%.

For more information, download the Rental Income Properties guide and schedule an appointment with your real estate professional.

Posted in Financial Apps