The Importance of Home Equity in Retirement Planning

The Importance of Home Equity in Retirement Planning | Simplifying The Market

We often discuss the difference in family wealth between homeowner households and renter households. Much of that difference is the result of the equity buildup that homeowners experience over the time that they own their home. In a report recently released by the nonpartisan Employee Benefit Research Institute (EBRI), they reveal how valuable equity can be in retirement planning.

Craig Copeland, Senior Research Associate at EBRI, recently authored a report, Importance of Individual Account Retirement Plans and Home Equity in Family Total Wealth, in which he reveals:

“Individual account retirement plan assets, plus home equity, represent almost all of what families have to use for retirement expenses outside of Social Security and traditional pensions. Those families without individual account assets typically have very low overall assets, so they have almost nothing to draw from for retirement expenses.”

The report echoed the findings of a working paper, Home Equity Patterns among Older American Households, authored by Barbara Butrica and Stipica Mudrazija of Urban Institute. Fannie Mae highlighted these findings for their blog The Home Story this past winter, quoting Butrica and Mudrazija:

 “For most adults near traditional retirement age, a home is their most valuable asset — dwarfing retirement accounts, other financial assets, and other nonfinancial assets. Although relatively few retirees tap into their home equity, having it provides financial security… In fact, many retirement security experts argue that the conventional three-legged stool of retirement resources — Social Security, pensions, and savings — is incomplete because it ignores the home.”

USAToday interviewed two area experts to comment on the EBRI report. Randy Bruns, a private wealth adviser with HighPoint Planning Partners, agreed with the findings:

“Social Security and home equity are major pieces of the retirement puzzle.”

Wade Pfau, Professor of Retirement Income at The American College of Financial Services and author of Reverse Mortgages: How to use Reverse Mortgages to Secure Your Retirement, said having the equity without a plan to use it won’t help:

“Home equity is a very important asset for American retirees, and so it is important to think about how to make best use of home equity in retirement planning.”

Bottom Line

Whether you use the equity in your home through a reverse mortgage or by selling and downsizing to a less expensive home, it should be a crucial piece of your retirement planning.


Source: KMC

Do You Know How Much Equity You Have in Your Home?

Do You Know How Much Equity You Have in Your Home? | Simplifying The Market

CoreLogic’s latest Equity Report revealed that 91,000 properties regained equity in the first quarter of 2017. This is great news for the country, as 48.2 million of all mortgaged properties are now in a positive equity situation.

Price Appreciation = Good News for Homeowners

Frank Nothaft, CoreLogic’s Chief Economist, explains:

One million borrowers achieved positive equity over the last year, which means risk continues to steadily decline as a result of increasing home prices.”

Frank Martell, President and CEO of CoreLogic, believes this is a great sign for the market in 2017 as well, as he had this to say:

Homeowner equity increased by $766 billion over the last year, the largest increase since Q2 2014. The rising cushion of home equity is one of the main drivers of improved mortgage performance. Since home equity is the largest source of homeowner wealth, the increase in home equity also supports consumer balance sheets, spending and the broader economy.”

This is great news for homeowners! But, do they realize that their equity position has changed?

According to the Fannie Mae’s Home Purchase Sentiment Index (HPSI), more homeowners are beginning to realize that they may have more equity than they first thought.

This is only the second time in the survey’s history that the net share of those saying it’s a good time to sell surpassed the net share of those saying it’s a good time to buy.

78.8% of homeowners have significant equity (more than 20%) in their homes today!

This means that many Americans with a mortgage have an opportunity to take advantage of today’s seller’s market. With a sizeable equity position, many homeowners could easily move into a housing situation that better meets their current needs (moving to a larger home or downsizing).

Doug Duncan, Senior Vice President and Chief Economist at Fannie Mae spoke out on this issue:

“High home prices have led many consumers to give us the first clear indication we’ve seen in the National Housing Survey’s seven-year history that they think it’s now a seller’s market. However, we continue to see a lack of housing supply as many potential sellers are unwilling or unable to put their homes on the market…” 

Bottom Line

If you are one of the many Americans who is unsure of how much equity you have built in your home, don’t let that be the reason you fail to move on to your dream home in 2017! Let’s get together to evaluate your situation!


Source: KMC

Top Home Renovations for Maximum ROI [INFOGRAPHIC]

Top Home Renovations for Maximum ROI [INFOGRAPHIC] | Simplifying The Market

Top Home Renovations for Maximum ROI [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Whether you are selling your home, just purchased your first home, or are a homeowner planning to stay put for a while, there is value in knowing which home improvement projects will net you the most Return On Investment (ROI).
  • While big projects like adding a bathroom or a complete kitchen remodel are popular ways to increase a home’s value, something as simple as updating landscaping and curb appeal can have a quick impact on a home’s value.
  • For more information about top renovation projects that net you the most ROI, you can check out the complete list here.


Source: KMC

Are Home Prices Approaching Bubble Territory?

Are Home Prices Approaching Bubble Territory? | Simplifying The Market

As home values continue to rise, some are questioning whether we are approaching another housing bubble. Zillow just reported that:

“National home values have surpassed the peak hit during the housing bubble and are at their highest value in more than a decade.”

Though that statement is correct, we must realize that just catching prices of a decade ago does not mean we are at bubble numbers. Here is a graph of median prices as reported by the National Association of Realtors (NAR).

Are Home Prices Approaching Bubble Territory? | Simplifying The Market

We can see that prices rose during the early 2000s, fell during the crash and have risen since 2013.

However, let’s assume there was no housing bubble and crash and that home prices appreciated at normal historic levels (3.6% annually) over the last ten years.

Here is a graph comparing actual price appreciation (tan bars) with what prices would have been with normal appreciation (blue bars).

Are Home Prices Approaching Bubble Territory? | Simplifying The Market

Bottom Line

As we can see, had there not been a boom and bust, home values would essentially be where they are right now.


Source: KMC

The Impact Your Interest Rate Makes [INFOGRAPHIC]

The Impact Your Interest Rate Makes [INFOGRAPHIC] | Simplifying The Market

The Impact Your Interest Rate Makes [INFOGRAPHIC] | Simplifying The Market

Some Highlights:

  • Interest rates have come a long way in the last 30 years.
  • The interest rate you secure directly impacts your monthly payment and the amount of house that you can afford if you plan to stay within a certain budget.
  • Interest rates are at their lowest in years… RIGHT NOW!
  • If buying your first home, or moving up to the home of your dreams is in your future, now may be the time to act!


Source: KMC

Mortgage Interest Rates Reverse Course in 2017

Mortgage Interest Rates Reverse Course in 2017 | Simplifying The Market

To start the year, housing experts all agreed on one thing: 2017 was going to be the year we would see mortgage interest rates begin to rise. After years of historically low rates, and an improving economy, the question wasn’t if they would increase but instead how much they would increase. Some thought we could see rates hit 5-5.5% by the end of the year.

However, the exact opposite has happened. Instead of higher rates as we head into the middle of 2017, we now have the lowest rates of the year (as reported by Freddie Mac). Here is a graph of mortgage rate movement since the beginning of the year:

Mortgage Interest Rates Reverse Course in 2017 | Simplifying The Market

Projections still call for an increase…

Four major entities (Freddie Mac, Fannie Mae, the Mortgage Bankers Association and the National Association of Realtors) are still projecting that rates will increase by the fourth quarter of the year.

Mortgage Interest Rates Reverse Course in 2017 | Simplifying The Market

Bottom Line

No one knows for sure where interest rates will be in six months. However, if you are thinking about buying your first house or trading up to the home of your dreams, you can still get a mortgage at historically low rates RIGHT NOW.


Source: KMC

If Your Home Hasn’t Sold Yet… Definitely Check the Price!

If Your Home Hasn’t Sold Yet… Definitely Check the Price! | Simplifying The Market

The residential housing market has been hot. Home sales have bounced back solidly and are now at their fourth highest pace over the past year. Demand has remained strong ­throughout spring as many real estate professionals are reporting bidding wars with many homes selling above listing price. What about your house?

If your house hasn’t sold, it could be the price.

If your home is on the market and you are not receiving any offers, look at your price. Pricing your home just 10% above market value dramatically cuts the number of prosp­­ective buyers that will even see your house. See chart below.

If Your Home Hasn’t Sold Yet… Definitely Check the Price! | Simplifying The Market

Bottom Line

The housing market is hot. If you are not seeing the results you want, sit down with your agent and revisit the pricing conversation.


Source: KMC

5 Reasons You Should Sell This Summer

5 Reasons You Should Sell This Summer | Simplifying The Market

Here are five reasons listing your home for sale this summer makes sense.

1. Demand Is Strong

The latest Buyer Traffic Report from the National Association of Realtors (NAR) shows that buyer demand remains very strong throughout the vast majority of the country. These buyers are ready, willing and able to purchase… and are in the market right now! More often than not, multiple buyers are competing with each other to buy a home.

Take advantage of the buyer activity currently in the market.

2. There Is Less Competition Now

Housing inventory is currently at a 4.2-month supply, well under the 6-months needed for a normal housing market. This means, in the majority of the country, there are not enough homes for sale to satisfy the number of buyers in that market. This is good news for home prices. However, additional inventory could be coming to the market soon.

There is a pent-up desire for many homeowners to move, as they were unable to sell over the last few years because of a negative equity situation. Homeowners are now seeing a return to positive equity as real estate values have increased over the last two years. Many of these homes will be coming to the market this summer.

Also, builder’s confidence in the market has hit its highest mark in over 11 years. Experts are predicting that new construction of single-family homes will ramp up this summer.

The choices buyers have will continue to increase. Don’t wait until all this other inventory of homes comes to market before you sell.

3. The Process Will Be Quicker

Fannie Mae anticipates an acceleration in home sales that will surpass 2007’s pace. As the market continues to strengthen, banks will be inundated with loan inquiries causing closing-time lines to lengthen. Selling now will make the process quicker & simpler. According to Ellie Mae’s latest Origination Insights Report, the time to close a loan has dropped to a new low of 42 days, after seeing a 12-month high of 48 days in January.

4. There Will Never Be a Better Time to Move Up

If you are moving up to a larger, more expensive home, consider doing it now. Prices are projected to appreciate by 4.9% over the next year, according to CoreLogic. If you are moving to a higher-priced home, it will wind up costing you more in raw dollars (both in down payment and mortgage payment) if you wait.

You can also lock in your 30-year housing expense with an interest rate around 4% right now. Rates are projected to increase in the next 12 months.

5. It’s Time to Move on with Your Life

Look at the reason you decided to sell in the first place and determine whether it is worth waiting. Is money more important than being with family? Is money more important than your health? Is money more important than having the freedom to go on with your life the way you think you should?

Only you know the answers to the questions above. You have the power to take control of the situation by putting your home on the market. Perhaps the time has come for you and your family to move on and start living the life you desire.

That is what is truly important.


Source: KMC

Can Your Real Estate Agent Answer These Important Questions?

Can Your Real Estate Agent Answer These Important Questions? | Simplifying The Market

Whether you are selling or buying a home, the real estate agent you hire is critical to guaranteeing your family makes the right decision. Most agents can walk you through the process and explain the industry ‘lingo,’ but you should expect so much more than that.

The housing crisis made everyone aware that truly understanding the real estate market is more complicated than it seems. Today, there are many questions your real estate agent must be able to answer to ensure your family is making the right decision. Here are just a few:

  • What impact does the movement in mortgage interest rates have on buyer demand? 
  • With home prices increasing rapidly, are we headed toward another housing bubble?
  • Do you need a 20% down payment to purchase a home?
  • Why can’t we list at a higher price and drop it later if necessary?

When you are interviewing an agent to represent your family in your next real estate transaction, make sure they can intelligently answer all your questions, while simply and effectively explaining what is happening in the current housing market.


Source: KMC

Why Working with a Local Real Estate Professional Makes All the Difference

Why Working with a Local Real Estate Professional Makes All the Difference | Simplifying The Market

If you’ve entered the real estate market, as a buyer or a seller, you’ve inevitably heard the real estate mantra, “location, location, location” in reference to how identical homes can increase or decrease in value due to where they’re located. Well, a new survey shows that when it comes to choosing a real estate agent, the millennial generation’s mantra is, “local, local, local.”

CentSai, a financial wellness online community, recently surveyed over 2,000 millennials (ages 18-34) and found that 75% of respondents would use a local real estate agent over an online agent, and 71% would choose a local lender.

Survey respondents cited many reasons for their choice to go local, “including personal touch & handholding, longstanding relationships, local knowledge, and amount of hassle.”

Doria Lavagnino, Cofounder & President of CentSai had this to say:

“We were surprised to learn that online providers are not yet as big a disruptor in this sector as we first thought, despite purported cost savings. We found that millennials place a high value on the personal touch and knowledge of a local agent. Buying a home for the first time is daunting, and working with a local agent—particularly an agent referred by a parent or friend—could provide peace of mind.”

The findings of the CentSai survey are consistent with the Consumer Housing Trends Study, which found that millennials prefer a more hands-on approach to their real estate experience:

“While older generations rely on real estate agents for information and expertise, Millennials expect real estate agents to become trusted advisers and strategic partners.”

When it comes to choosing an agent, millennials and other generations share their top priority: the sense that an agent is trustworthy and responsive to their needs.

That said, technology still plays a huge role in the real estate process. According to the National Association of Realtors, 95% of home buyers look for prospective homes and neighborhoods online, and 91% also said they would use an online site or mobile app to research homes they might consider purchasing.

Bottom Line

Many wondered if this tech-savvy generation would prefer to work with an online agent or lender, but more and more studies show that when it comes to real estate, millennials want someone they can trust, someone who knows the neighborhood they want to move into, leading them through the entire experience.


Source: KMC