4 Reasons Why You Should Look At Refinancing Today

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Spring has not sprung in Michigan just yet!

With the weather in a holding pattern and most Michiganders working from home, now is the perfect time to prepare your funds for when the weather breaks. Rather you are planning a trip in the upcoming season, and need to take cash-out or wanting to do a “spring cleaning” on those high-interest credit cards, refinancing your mortgage can put you in a much better financial position.

Here are 4 reasons you should refinance before spring: 

Get rid of unwanted high-interest credit card debt

While having credit cards make purchasing high priced items a breeze, having to pay the monthly minimum on a card with high interest can be daunting. Paying on the interest and not the principle is just band-aiding over the problem and will send you further into debt. That doesn’t have to be you! The good news is that if you refinance right now, you can pay off your credit card completely and go into spring debt-free.

Take Cash-out

Cash is king! With the weather warming up comes the opportunity to take advantage of spring home improvement projects. Don’t use your tax return to fund building a new porch or a patio. Instead, you can simply refinance and take cash out of your home’s equity. Taking cash-out can also be spent on planning a nice spring or summer vacation without the stress of going into debt to do so. 

Lower your monthly mortgage payment 

What is better than not having to use credit cards? Cash! Even with a few weeks left of winter, you can still close on the refinance of your home loan before spring! Lowering your monthly mortgage payment means more cash in your pocket.

Rates are low

You’ve heard us say it for the last several months and its true, RATES ARE STILL HISTORICALLY LOW. Rates are the lowest they have been in a decade. The reason you need to act now is because we don’t know when rates will rise again. The housing market can be very unpredictable… take advantage today and contact one of our mortgage experts to receive a free 5-minute mortgage review.

HOMEOWNERSHIP = HAPPINESS

Happy Couple Keys

Source: Google

Recent studies have shown that 93% of homeowners say that having a house makes them happier than renting did.

Why is that?

Experts are coining it “The Homeownership Effect” explaining that owning a home can make you a better person because you naturally find yourself enjoying new hobbies like gardening, landscaping, cooking, and if you are a big spender maybe even remodeling.

Besides allowing you to find and create more hobbies for yourself, it has been said by the Consumer Financial Protection Bureau, that owning a home helps with financial responsibility and overall better well-being. These can be attributed to homeowners living in an affordable, comfortable home located in a connected neighborhood with a reasonable commute.

However, don’t think that owning a home is the magic key to happiness. There does take a level of preparation and making sure you can comfortably afford things like property taxes, insurance, and unexpected (but relatively normal) home repairs. If you are curious whether or not your family is ready for this next step – click here – to talk with someone today about your current situation.

Mortgage Rates Are At A Three-year Low

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Picture source: Google

This week mortgage interest rates have hit historical marks by reaching three-year lows. This significant marker of low rates comes just two months after The Federal Reserve announced rates have fallen and are not anticipated to rise again for the remainder of 2019. Low rates in conjunction with a surplus of home sales, the housing market is expected to continue to improve and show favorable conditions. Not only are the lower rates good news for potential homebuyers that are looking to enter into the market, but also continues to open opportunities to homeowners that are looking to refinance.

Big contributor, over-deliverer.

Big contributor, over-deliverer.

Both are descriptions of someone who is successful. But you wouldn’t waste these descriptions on the mundane, and that’s the whole point isn’t it?

To be a big contributor and an over-deliverer you can’t rest on your laurels. You must always be striving to do more, to BE more. Personally, I think to be either of these you must also be the other. You become a big contributor by consistently over-delivering. By continuously going the extra mile and thinking ahead.

over deliver

Start to ask yourself: was my work today satisfactory, or did I put forth my best effort and use every bit of my talent? Am I meeting deadlines, or am I BEATING deadlines? If this is what you strive to be, you can no longer accept on time. You must be early. That’s being a big contributor. Solving problems before they arise. Triple checking your to do list. Making sure it’s never empty. That’s over-delivering.

Think of the most successful people in your life. I bet they fit these descriptions. They aren’t striving to be typical or mediocre.  They have an uncommon desire to do more, be better and always find new ways to improve. Over-achieving doesn’t happen by accident.

I don’t strive to be ordinary. Ordinary gets forgotten and over looked. I strive to be EXTRAORDINARY day in and day out.

The American Dream and the looming recession

Refinances are finally making a comeback after last year’s drought. Black Knight revealed that an estimated 3.27 million homeowners could benefit from refinancing. This is an increase year-over-year by 16% from 2018. This means a jump of candidates around 75%, with rates at a current 10-month low.

Various areas throughout the country give low-income families a chance at the American Dream. Being a homeowner gives people a chance to benefit from their communities, as well as gain wealth from their home equity. With metros becoming more expensive and having a lack of affordable starter homes, low-income residents aren’t typically able to share in the prosperity of home ownership

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. To escape the high costs of homes, buyers are looking to relocate to inland markets.

With perks such as no down payment, it’s no surprise that VA loans have become increasingly more popular for first-time home-buyers. Benefits such as no mortgage insurance and strong loan servicing protections accompany this loan as well. Both prime and non-prime home-buyers using VA loans are reporting less early delinquency rates.

With a confident forecast of 2% economic growth for the next year, JP Morgan Chase chief economist Anthony Chan is dismissing concerns over a looming recession. During the Chicago Agent Magazine’s Accelerate Summit at the Chicago Merchandise Mart last Tuesday, he predicted that while it won’t be as exponential as last year, the economy will still see growth.

Purchase season, who has the power?

Realtor.com just provided data that reveals Millennials are finally ready to dominate the market. In January 2017, Gen X finally gave up its spot at the top for the most new mortgages. Millennials have held this position strong as their share of the mortgage market continues to rise. At the end of 2018 they were responsible for 45% of all new mortgages. However, while they are taking on larger mortgage payments, their down payments are significantly lower. The average for Millennials was only 8.8% while Gen X boasted an 11.9%.

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Roofstock is a real estate platform for buying and selling single-family rental homes. The company just announced that is it introducing a new program that will allow consumers to invest in a share of a single-family rental home without having to act as the landlord. With this new program investors can reap the reward of property ownership without the risk. Roofstock itself will be responsible for the financing, the insurance, property management, asset management, and the leasing. Profits from investment will be price appreciation, along with tax benefits and potential dividends. Investments can start as low as $5000.

According to LendingTree, 86.5% of mortgages borrowers now have a rate under 5% regarding a 30-year fixed. The most common rate offered was a 4.625%, which accounted for 19.2% of borrowers. This is notably below 2018. In 2018 87.3% of purchase mortgages were given a rate under 5%.

Over the past week purchase applications have rose 2% after four consecutive declines. This is also increased 2.5% from last year. With interest rates remaining low, there is certainly incentive for not only purchasing, but for refinancing as well. The refinance index just moved forward 6% from the previous week, while the purchase index moved forward 7%. This is a solid 3% higher than where the index was in 2018.

Lackluster Home Sales and Baby Boomers

In an analysis of 54 metropolitan areas, RE/MAX National Housing Report has conveyed the largest inventory increase in a decade. Although home sales themselves have scaled back by 11% on an annual basis, the increase in inventory has averaged 6% year-over-year. This greatly improves the market as there was a multi-year scarcity of homes for sale. Compared to just last year, January which is typically a slower month for home sales, had an improvement of .5 overall.

Baby Boomers continue to retire in waves without adequate savings to support themselves and their family during their golden years. It is becoming extraordinarily clear that the country is on the brink of a retirement crisis. As health care costs continue to skyrocket and pensions dwindle, Social Security is simply insufficient for the longevity of this generation. This all sounds doom and gloom, until it’s pointed out that many Americans are literally sitting in a pile of cash; their homes. Capitalizing on the equity of one’s home can solve many later in life money issues.

The Department of Housing and Urban Development announced its plan for awarding $10 million in “sweat equity” grants to nonprofit organizations. The funding is sourced from HUD’s Self-Help Home-ownership Opportunity Program. The actual money in combination with the labor from both volunteers and home-buyers will lower the overall cost of home-ownership. A minimum of 50 hours is required for a single ownership household, and the hours are doubled for a household of two. Community service is another requirement for eligibility. During the initial round of grants awarded more than half of the capital, around $5.3 million is going to Habitat for Humanity.

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While inventory is at a decade high, the affordability of homes for sale on the market is at a decade low. With only 56.6% of homes being affordable for the country’s median income, the National Association of Home Builders is calling on policymakers to make some changes. The Chief Economist of the NAHB, Robert Dietz indicates that wage growth is under performing while home appreciation continues to rise.

The U.S. Census Bureau’s most recent American Community Survey reported homeowners are currently spending more money per month than renters in all 50 states. This data was compiled tracking the median housing costs from 2013-2017. Costs such as mortgage payments, home insurance, property taxes and maintenance are making it far more expensive to own a home. However, experts say while renting saves money month to month it will not pay off in the end. Investing in a home can increase the home’s equity and look to put cash back in your pocket.  A mortgage is a major expense, but once it is dropped off the monthly spending homeowners can expect a significant increase in their savings.

Loan Insights, Rent Burdens, & More.

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CoreLogic’s Loan Performance Insights report for September 2018 was released last week, showing the nation’s labor market and increased home prices overall has had a positive impact on serious delinquent loans and foreclosure rates—the overall delinquency rate is down 0.6 percent since September 2017. The 30-day delinquencies showed an increase of 0.4 percent but is being entirely attributed to Hurricane Florence.

Will more homeowners tap into their home equity in 2019. While increases in home prices might keep some homebuyers from making a move, it’s also resulting in record levels of home equity, and more homeowners are projected to have more opportunity to tap into that equity. Consumers in need of paying off higher interest rate credit card debt or in need of home improvements are prime candidates. This also allows for homeowners who might otherwise upgrade to a bigger home save money by tapping into that home equity and invest in home additions or upgrades.

Builder Confidence dropped four points to 56 according to the National Association of Home Builders Housing Market Index. Buyer Traffic was the only piece below 50, the threshold. Current Sales and Future Sales, however, both remained in the 60s. A reading above 50 signals growth. We should note Builder Confidence dropped significantly in areas with high home prices—the current deterrent of buyers is not mortgage rates thanks to recent declines. The demand is still there but consumers are hesitating due to “rising home costs.”

While the overall level of homelessness across the nation has fallen despite housing costs continuing to increase, the rent burden is becoming so extreme it’s risking thousands of Americans becoming homeless. Many areas are already pass the 32 percent tipping point, where over 32 percent of a household’s income is going to rent. Monroe Country in Florida is almost double, “with a median market rate rent consuming 62.9 percent of the area’s median household income.” That’s insane.

Ann Arbor, MI might rank as the No. 1 best small college town in the nation but it was ranked third overall for best college towns and cities, regardless of size—Austin, TX scored the hot seat. Ann Arbor is noted for its low unemployment rate of only 3 percent but the college town is also known for its social environment and academic and economic opportunities. The city is booming with part-time jobs for college students.

The Federal Reserve meets this week and there’s an 80% expectation they will hike rates another quarter point. Wednesday we find out their decision after their two-day meeting but more importantly, we’re hoping for any indications of what 2019 will look like for rate hikes.

Housing Balance.

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Pending Home Sales fell 2.6 percent in October, a disappointing read and a miss. The National Association of Realtors is attributing this decline to the rise in mortgage rates, which really began in October, reducing the pool of eligible homebuyers. Last week we saw a dip in mortgage rates and compared to 18 years ago, rates are still favorable. Back in October 2000, mortgage rates averaged almost 8 percent for a 30-year fixed. What does all this mean? Short-term, experts are having difficulty finding consensus on the housing outlook. Mortgage rates are expected to rise modestly but they don’t know what that translates to for borrowers and homebuyers as it seems many hesitate. Long-term, there’s confidence homebuyers will accept the new norm for mortgage interest rates and continue to buy based on lifestyle and need. The benefit to sales cooling: the inventory of homes for sale is recovering.

Is 2019 the year for balance? That’s what Zillow is predicting as home values begin to slow down and are expected to continue the trend through next year, with mortgage rates expected to keep rising. 2019 should bring a more balanced market among buyers, sellers, and renters. Housing competition will remain strong in the most desirable areas.

The Federal Reserve Minutes from their meeting earlier this month were released yesterday afternoon, showing most Fed members still believe we need 3 more rate hikes, with a December quarter-point rate hike still on deck and expectations for the next one to not be until at least March 2019. While rate hikes are a sign of a healthy economy there is also risk of hiking too early, making December’s possibility of one still debatable.

Earlier this week, we mentioned home renovations are becoming more popular. Here’s some top common-sense tips we have found since:

  • “My dad told me, ‘You can do anything yourself, except foundation, electrical, or plumbing.'” —Kirsten Selvage, homeowner in Ontario, Canada.
  • “It’s cheaper to do it right than it is to do it over.” —Jim Molinelli, architect in Columbia, MD.
  • Renovate with the next buyer in mind but do so long before you sell in order to enjoy the improvements yourself.
  • Over schedule to not feel stressed by lack of time in case any mishaps come up.

Initial Jobless Claims for last week were reported at 234K. While compared to recent months and weeks this is higher than normal, it remains far below that 300K mark highlighting a good, healthy labor market. The ADP and BLS Job Reports are both scheduled for release next week and expectations are 190K and 170K job creations, respectively.

Home Renovations on the Rise.

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Photo Source: Realtor.com

The level of New Homes on the market is at the highest since January 2009—almost 10 years! New Home Sales, however, were down almost 9 percent in October, below expectations; though, a decrease in signed contracts on new homes was expected.

Home renovations: the popular solution for those who don’t want to face the homebuying competition or have hesitations with increased home prices. Not to mention, many have secured a very low mortgage interest rate they don’t want to give up by moving. In fact, there’s been about a 30 percent increase in home remodeling projects over the last five years, and unfortunately over 30 percent haven’t set aside the money for such renovations.

Home prices are slowing down and it’s welcomed news. The Case-Shiller Home Price Index, tracking changes in the value of residential Real Estate, showed a 5.5 percent annual gain for the National Index. The Federal Housing Finance Agency (FHFA) Housing Price Index, highlighting home appreciation on single-family housing, rose 0.2 percent in September and showed a 6 percent annual gain. For both these indices, the year over year appreciation rate decreased very slightly (talking .1 or .2 percent). This does not mean home prices overall decreased but rather are rising at a slower rate than they did last year. This is not a negative appreciation but rather a slower positive appreciation. (It’s a good time for cash out refinances before home prices do drop, though; help fund those renovation projects.)

Mortgage Applications for last week were up 5.5 percent, with purchases up 9 percent and refinances up 1 percent.

Over the last 20 years rent prices have more than doubled, going from about $450 in 1998 to over $1000 in the third quarter of 2018; and since 2008, the average rent for a new apartment has increased 28 percent. Over the last 10 years, the average size of a new apartment has decreased 5 percent—paying for less! California apartments have decreased in size by 12 percent. What’s driving this decline in size? Millennials looking to save a penny—they’d rather live in a smaller unit because of rental costs—and construction limitations: cost and space. Building smaller can yield room for more units to be built, increasing profit.

Debt doesn’t love Michigan—or maybe it does? Two Michigan cities, Ann Arbor and Lansing, made the Cities Where Home Buyers Have the Least Debt list with the former ranking at number 2! The median mortgage borrower’s debt-to-income (DTI) ratio is only 33.7 percent for the city. Honolulu held the highest DTI at 45.1 percent.

Older homeowners love Florida, with the state dominating all of the top 5 Metros with the Highest Average Homeowner Age. With the temperatures dropping in Michigan, we can’t blame anyone retiring to Florida.