Baby Boomers: Looking For Dream Retirement Homes

A lot of baby Boomers are retiring and looking to buy their retirement homes. According to the National Association of Home Builders, builder confidence has reached 76 for the 55 and older market. With the recent decline in mortgage rates, this has been particularly favorable for the demand on 55 and older housing. There could be slight challenges with the new demand of retirement homes being built for Baby Boomers. Rising construction costs and a lack of skilled labor, will present problems for builders, which could rev up cost.

For the last several weeks Mortgage Applications have been on the decline but that’s all changing. Within this past week, applications are on the rise and purchase season is picking back up. According to the Mortgage Bankers Associations, there has been a 2.7% increase compared with the previous week. Majority of new applications were from purchases. The average loan size for purchases has elevated slightly from $332,000 to $335.600.

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Don’t forget before purchasing a home to take all cost into consideration, especially property tax. While property taxes range in price, they are calculated on the area you live in. According to ATTOM data solutions, property taxes have gone up on average. One of many reasons why property taxes are rising, is due to changes in the cost of government and the level funded by State taxes. Another factor in the rise of property taxes is that State and local governments are receiving less from the federal government and need to pay for all services provided by residents.

Down payments can feel like a looming cost and be the greatest financial barrier to home ownership according to research. However, there is a common misconception about the amount of money new homeowners need to put down. According to The Mortgage Report, new homeowners do not have to put much down at all. Most buyers put down only 10% in comparison to the 20% that many people think they need.

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.

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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.

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.

Purchasing Young, Existing Home Sales, & More.

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Housing Starts for October were up 1.5 percent but Single-family Starts were down 1.8 percent which was disappointing, showing the gain was propelled mostly by multi-family starts. With price growth slowing down and mortgage rates not increasing as fast as some experts had forecasted, mortgages and homeownership is “attractive” right now. If only supply would catch up. That being said, for some homebuyers, the notice of rates and prices both still rising coupled with the limited most in-demand housing (starter homes) have lead some homebuyers to hit pause or hesitate; thus one reason why builder confidence dropped 8 points to a reading of 60 according to the National Association of Home Builders (NAHB) Housing Market Index. Note: any reading above 50 is still considered good, healthy, and strong.

Existing Home Sales showed a different story, highlighting homebuyers taking action with Sales up 1.4 percent in October, beating expectations and the first increase seen in 6 months. The report also showed 80 consecutive months of annual median existing home prices gains, though they have slowed down in growth—this is good for homebuyers. Reminder: deceleration is not a decline.

For the first time in 28 years, since 1994, the Federal Reserve is proposing to increase the threshold of an appraisal requirement from $250K to $400K, allowing certain home sales of $400K and below to no longer require an appraisal. However, this “would not apply to loans wholly or partially insured or guaranteed by, or eligible for sale to, a government agency or government-sponsored agency.” Meaning, home loans sold or guaranteed by the Federal Housing Administration, Department of Housing and Urban Development, Department of Veterans Affairs, Fannie Mae, or Freddie Mac would not be eligible for the appraisal exemption. Why the proposal? The threshold doesn’t hold up against today’s home prices. What do appraisers have to say? This could be significantly dangerous for lending as the expectation is more evaluations will be allowed to replace appraisals. More to come on this in the future.

Those who purchase a home between ages 25 and 35 can accumulate an additional $100K in home equity than those who purchase after the age of 35, leading those who purchase at a younger age to be more financially stable in retirement and have more home wealth than those who purchase later in life. Those who purchase a home before the age of 25 proved to receive more “bang for their buck” as they typically purchased a lower priced home but had less equity than those who purchased between 25 and 35 years old because they, typically, purchased such a lower priced home. Moral of the story: if you can make it work, purchase young.

Confident Builders, Confident Older Borrowers.

The number of homeowners over 60 years old are more likely to have a mortgage today than 35 years ago. Why? Basically, it comes down to older generations taking advantage of the equity in their home. The three reasons quoted for influencing older households to carry a mortgage into retirement:

  1. Financial planners advising on the benefits of a mortgage in retirement planning.
  2. Tax incentives and mortgage interest rates being “deductible from income taxes at the federal level and in most states.”
  3. Home equity is a primary source of wealth for those without pensions, with low incomes, and who are less affluent.

Highlight of the report: they don’t appear to be stressed over their mortgage.

Time to sell a home depends on more than just supply and demand in the area, it also depends on the home being correctly priced ­and competitively priced. In less terms, it’s all up to you. It might be a seller’s market in most areas but appealing to buyers still plays an important role. Getting greedy with price could turn away potential buyers and the longer a home is on the market, the more buyers grow wary. Don’t discount staging a home if you’re looking to sell fast.

Builders remain confident in September thanks to a stable and low unemployment rate, growing economy, rising incomes, and increasing household formations. Expectation: boosted demand for new single-family homes. Challenges: rising material costs, moderately higher interest rates (emphasis on moderate because they’re still quite low compared to history), and “burdensome regulations”.

The Best Places to Live in America for 2018 is in but the median household income averages $120K—these cities aren’t for the single folk and only areas with populations over 50K were taken into account. These lists are all about the details. Frisco, TX won the No. 1 spot.

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To Buy in an Older Community?

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For homes listed for sale on Zillow, about 14.2 percent saw a price cut in June, up almost a full percent from a year prior. Some have begun to argue this, coupled with rising home prices across the nation beginning to slow, forecasts the beginning of a shift to a buyer’s market. However, these price cuts are largely in the higher priced homes housing market. While people are buying homes at the top end of the market, much of the traffic we’re seeing today is for the starter homes, where it’s still a seller’s market.

Could age influence home prices? Homes in the top three areas with the oldest residents are lower priced despite the beachfront location that’s so in-demand. The counties with the highest percentage of working-age residents (aged 20-64) also have home values that are well above the national median. Arlington, VA has an average home price of $672K, triple that of the $217K national average, and in San Francisco, home prices are more like $1.3M. “Retiring early” to an older, beachfront community is sounding better and better.

Millennials are worrywarts and at 77 percent, more likely than any other generation to lose sleep over things like money, credit card debt, career, relationships, and more. However, it was older millennials who worried most about monthly housing costs. It’s still a good time to compare rent vs. buying, and possibly refinancing to lower that monthly payment. Best part: mortgage reviews are free. Seven-in-ten adults lose sleep thanks to stress, and over a third of these individuals quote money as the cause.

Paying More in Rent for Less? No Thanks.

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Downpayment: it’s the obstacle most quoted by potential homebuyers. First-time millennial homebuyers continue to fret over not having enough to put down on a home and it’s not something lenders should stop educating on. In fact, 32 percent of millennials planning to buy their first home this year were also planning to find a second job. In today’s intense market, it can help to have a larger downpayment to beat out competitive offers but there are some amazing lowdown option programs and depending on the location, one can buy a home with only a few grand for a downpayment. Having a great realtor and reliable lender helps make this more possible.

Speaking of competitive offers, what if offering more money simply isn’t an option? Well, there’s other options! Try offering to pay for the seller’s moving costs, write a heartfelt letter as to how much you love the home (how it’s not just a house to you), or add a photo to your offer so the seller knows who you are. Of course, again, a great realtor will be great at offering up ideas here as well.

Why pay rent if you can afford to buy? No, really, why? Rent prices are going up and unfortunately, they’re not keeping up with the amenities or meeting expectations, making renters often pay more for less. Sounds like an unfair deal, right? According to a recent survey, only 17 percent of renters were able to live in their ideal location. Might be a good time to see what one can get approved for and to break out the old pro/con list for renting vs. buying. After all, it’s free to consult with a mortgage expert.

Like all things real estate, home improvements, too, are locational. Arizona might love pools but Montana would prefer to pass. It also depends on the cost—100% return on investment is not guaranteed and doesn’t always add the value one expects thanks to some increased construction prices. Doing research helps. Don’t spend $50K for a patio if it’s solely to up your home’s value. There’s other options that can increase curb appeal and home value that might be more affordable. Kitchen and bathroom, the two more common renovations, also no longer yield as great of an ROI as it once did. Knowing your future buyers and what’s in demand can help.

Impressive Housing. [#DHallTheINSIDER]

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New Home Sales for October beat expectations, hitting a 10-year high and an increase in inventory of new homes on the market. Most sales were in the Northeast and Midwest. Also notable, sales were up an impressive 19% from a year ago. What might this mean for the coming winter, spring, and summer markets? Paul has our thoughts in today’s Mortgage Minute.

New single-family homes are continuing to shrink in size as builders begin to focus more on the entry-level market.

Independent mortgage lenders are increasingly becoming more active while traditional banks lose activity in their mortgage lending division. One reason for this might be options available as independents are “expanding credit availability to borrowers with lower FICO scores.”

Looking to upgrade your home but want to make sure it pays off? Here’s the top 5 improvements suggested:

  1. Temp-controlled square footage.
  2. Fresh coat of paint—think “neutral, cheerful, light, and bright.”
  3. Manicured landscaping—think simple curb appeal, potted plants near the front door, or fresh mulch; no need to go overboard.
  4. Cosmetic kitchen fixes—yes, stainless steel appliances are not just a fad it’s the trend folks want.
  5. Smart storage space—try installing an extra closet rod or built-in bookshelves or window seats with shelving/storage underneath (every inch counts).

Grand Rapids, MI ranks No. 4 for U.S. News and World Report’s Best Places to Retire in 2018, thanks to their growing and improving health care service providers and lower housing costs than other cities. Sarasota won the top spot—warm weather wins.

Looking at 75 of the largest metro cities, Milwaukee, WI won the No. 1 spot for having the fastest growing homeownership rate at 68.7%, up 11% over the last 3 years.

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