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Will Your Current House Fit Your Needs in Retirement?

As more and more baby boomers enter retirement age, the question of whether or not to sell their homes and move will become a hot topic. In today’s housing market climate, with low available inventory in the starter and trade-up home categories, it makes sense to evaluate your home’s ability to adapt to your needs in retirement.

According to the National Association of Exclusive Buyers Agents (NAEBA), there are 7 factors that you should consider when choosing your retirement home.1

1. Affordability

“It may be easy enough to afford your home today but think long-term about your monthly costs. Account for property taxes, insurance, HOA fees, utilities – all the things that will be due whether or not you have a mortgage on the property.”

Would moving to a complex with homeowner association (HOA) fees actually be cheaper than having to hire all the contractors you would need to maintain your home, lawn, etc.? Would your taxes go down significantly if you relocated? What is your monthly income going to be like in retirement?

2. Equity

“If you have equity in your current home, you may be able to apply it to the purchase of your next home. Maintaining a healthy amount of home equity gives you a source of emergency funds to tap, via a home equity loan or reverse mortgage.”

The equity you have in your current home may be enough to purchase your retirement home with little to no mortgage. Homeowners in the US gained an average of over $16,300 in equity last year.

3. Maintenance

“As we age, our tolerance for cleaning gutters, raking leaves and shoveling snow can go right out the window. A condominium with low-maintenance needs can be a literal lifesaver, if your health or physical abilities decline.”

As we mentioned earlier, would a condo with an HOA fee be worth the added peace of mind in knowing that you do not have to do the maintenance work yourself?

4. Security

“Elderly homeowners can be targets for scams or break-ins. Living in a home with security features, such as a manned gate house, resident-only access and a security system can bring peace of mind.”

As scary as that thought may be, any additional security and an extra set of eyes looking out for you always adds to peace of mind.

5. Pets

“Renting won’t do if the dog can’t come too! The companionship of pets can provide emotional and physical benefits.”

Evaluate all of your options when it comes to bringing your ‘furever’ friend with you to a new home. Will there be necessary additional deposits if you are renting or moving in to a condo? Is the backyard fenced in? How far are you from your favorite veterinarian?

6. Mobility

“No one wants to picture themselves in a wheelchair or a walker, but the home layout must be able to accommodate limited mobility.”

Sixty is the new 40, right? People are living longer and are more active in retirement, but that doesn’t mean that down the road you won’t need your home to be more accessible. Having to install handrails and make sure that your hallways and doorways are wide enough may be a good reason to look for a home that was built to accommodate these needs.

7. Convenience

“Is the new home close to the golf course, or to shopping and dining? Do you have amenities within easy walking distance? This can add to home value!”

How close are you to your children and grandchildren? Would relocating to a new area make visits with family easier or more frequent? Beyond being close to your favorite stores and restaurants, there are a lot of factors to consider.

Bottom Line

When it comes to your forever home, evaluating your current house for its ability to adapt with you as you age can be the first step to guaranteeing your comfort in retirement. If after considering all these factors you find yourself curious about your options, let’s get together to evaluate your ability to sell your house in today’s market and get you into your dream retirement home!

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Lack of Listings Slowing Down the Market

As the real estate market continues to move down the road to a complete recovery, we see home values and home sales increasing while distressed sales (foreclosures and short sales) continue to fall to their lowest points in years. There is no doubt that the housing market will continue to strengthen throughout 2018.

However, there is one thing that may cause the industry to tap the brakes: a lack of housing inventory!

Here’s what a few industry experts have to say about the current inventory crisis:

Lawrence Yun, Chief Economist for the National Association of Realtors

“Inventory coming onto the market during this year’s spring buying season…was not even close to being enough to satisfy demand, that is why home prices keep outpacing incomes and listings are going under contract in less than a month – and much faster – in many parts of the country.”

Sam Khater, Chief Economist for Freddie Mac

“While this spring’s sudden rise in mortgage rates [took] up a good chunk of the conversation, it’s the stubbornly low inventory levels in much of the country that are preventing sales from really taking off like they should… Most markets simply need a lot more new and existing supply to cool price growth and give buyers enough choices.”

Alexandra Lee, Housing Data Analyst for Trulia

This seasonal inventory jump wasn’t enough to offset the historical year-over-year downward trend that has continued over 14 consecutive quarters…Despite the second-quarter gain, inventory was down 5.3% from a year ago. Still, this represents an easing of the double-digit drops we’ve been seeing since the second quarter of 2017.”

Bottom Line

If you are thinking about selling, now may be the time. Demand for your house will be strongest while there is still very little competition which could lead to a quick sale for a great price.

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House-Buying Power at Near-Historic Levels

We keep hearing that home affordability is approaching crisis levels. While this may be true in a few metros across the country, housing affordability is not a challenge in the clear majority of the country. In their most recent Real House Price Index, First American reported that consumer “house-buying power” is at “near-historic levels.”

Their index is based on three components:

  1. Median Household Income
  2. Mortgage Interest Rates
  3. Home Prices

The report explains:

“Changing incomes and interest rates either increase or decrease consumer house-buying power or affordability. When incomes rise and/or mortgage rates fall, consumer house-buying power increases.”

Combining these three crucial pieces of the home purchasing process, First American created an index delineating the actual home-buying power that consumers have had dating back to 1991.

Here is a graph comparing First American’s consumer house-buying power (blue area) to the actual median home price that year from the National Association of Realtors (yellow line).

House-Buying Power at Near-Historic Levels | MyKCM

Consumer house-buyer power has been greater than the actual price of a home since 1991. And, the spread is larger over the last decade.

Bottom Line

Even though home prices are increasing rapidly and are now close to the values last seen a decade ago, the actual affordability of a home is much better now. As Chief Economist Mark Fleming explains in the report:

“Though unadjusted house prices have risen to record highs, consumer house-buying power stands at near-historic levels, as well, signaling that real house prices are not even close to their historical peak.”

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How Long Do Most Families Live in a House?

The National Association of Realtors (NAR) keeps historical data on many aspects of homeownership. One of their data points, which has changed dramatically, is the median tenure of a family in a home, meaning how long a family stays in a home prior to moving.

As the graph below shows, over the last twenty years (1985-2008), the median tenure averaged exactly six years. However, since 2014, that average is almost ten years – an increase of almost 50%.

How Long Do Most Families Live in a House? | MyKCM

Why the dramatic increase?

The reasons for this change are plentiful!

The fall in home prices during the housing crisis left many homeowners in a negative equity situation (where their home was worth less than the mortgage on the property). Also, the uncertainty of the economy made some homeowners much more fiscally conservative about making a move.

With home prices rising dramatically over the last several years, 95.3% of homes with a mortgage are now in a positive equity situationaccording to CoreLogic.

With the economy coming back and wages starting to increase, many homeowners are in a much better financial situation than they were just a few short years ago.

One other reason for the increase was brought to light by NAR in their 2018 Home Buyer and Seller Generational Trends ReportAccording to the report,

“Sellers 37 years and younger stayed in their home for six years…”

These homeowners, who are either looking for more space to accommodate their growing families or for better school districts to do the same, are likely to move more often (compared to typical sellers who stayed in their homes for 10 years). The homeownership rate among young families, however, has still not caught up to previous generations, resulting in the jump we have seen in median tenure!

What does this mean for housing?

Many believe that a large portion of homeowners are not in a house that is best for their current family circumstance; they could be baby boomers living in an empty, four-bedroom colonial, or a millennial couple living in a one-bedroom condo planning to start a family.

These homeowners are ready to make a move, and since a lack of housing inventory is still a major challenge in the current housing market, this could be great news.

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VA Loans: Making a Home for the Brave Possible

Since the creation of the Veterans Affairs (VA) Home Loans Program, over 22 million veterans have achieved the American Dream of homeownership. Many veterans do not know the details of the program and therefore do not take advantage of the benefits available to them.

If you are a veteran or you know someone who is, here is a breakdown of the VA Home Loan benefits that can be used to achieve the American Dream!

Top 5 Benefits of a VA Home Loan

  1. The greatest benefit of a VA Loan is that borrowers can buy a home with a 0% down payment. In 2016, 82% of all VA Loans put down 0%!
  2. Private Mortgage Insurance (PMI) is not required! (Most other loans with down payments under 20% require PMI, which adds additional costs to your monthly housing expense!)
  3. Credit Score requirements are also lower for VA Home Loans. The average FICO® score of a borrower for an approved VA Loan is 620, compared to 676 (FHA) or 753 (Conventional).
  4. There is also a limitation on a veteran buyer’s closing costs. Sellers can pay all of a buyer’s loan-related closing costs and up to 4% in concessions in some cases.
  5. Even with interest rates rising, VA Loans continue to have the lowest average interest rates of all loan types.

Who Qualifies for a VA Home Loan?

One of the most important first steps when applying for a VA Home Loan is obtaining your Certificate of Eligibility (COE). “The COE verifies to the lender that you are eligible for a VA-backed loan.”

You Can Apply for a VA Loan if You:

  • Serve 90 consecutive days during wartime
  • Serve 181 consecutive days during peacetime
  • Have more than 6 years in the National Guard or Reserves
  • Are the spouse of a service member who has died in the line of duty or as the result of a service-related disability

You Can Use a VA Loan To:

  • Purchase a Home
  • Purchase a Condo
  • Build a Home
  • Refinance an existing home loan
  • Make improvements to a home by installing energy-related features or making energy-efficient improvements

Bottom Line

For more information or to find out if you or a loved one would qualify to use the VA Home Loan Benefit, let’s get together! Thank you for your service!