Bubble Alert? Is it Getting Too Easy to Get a Mortgage?

There is little doubt that it is easier to get a home mortgage today than it was last year. The Mortgage Credit Availability Index (MCAI), published by the Mortgage Bankers Association, shows that mortgage credit has become more available in each of the last several years.

In fact, in just the last year:

  • More buyers are putting less than 20% down to purchase a home
  • The average credit score on closed mortgages is lower
  • More low-down-payment programs have been introduced

This has some people worrying that we are returning to the lax lending standards which led to the boom and bust that real estate experienced ten years ago. Let’s alleviate some of that concern.

The graph below shows the MCAI going back to the boom years of 2004-2005. The higher the graph line, the easier it was to get a mortgage.

Bubble Alert! Is it Getting Too Easy to Get a Mortgage? | MyKCM

As you can see, lending standards were much more lenient from 2004 to 2007. Though it has gradually become easier to get a mortgage since 2011, we are nowhere near the lenient standards during the boom.

The Urban Institute also publishes a Home Credit Availability Index (HCAI). According to the Institute, the HCAI:

“Measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates … it is easier to get a loan.”

Here is a graph showing their findings:

Bubble Alert! Is it Getting Too Easy to Get a Mortgage? | MyKCM

Again, today’s lending standards are nowhere near the levels of the boom years. As a matter of fact, they are more stringent than they were even before the boom.

Bottom Line

It is getting easier to gain financing for a home purchase. However, we are not seeing the irresponsible lending that caused the housing crisis.  We’re also seeing less new construction and new homes entering the market, which is keeping inventory levels extremely low. While the demand for homes and new buyers entering the marketing continues to grow. With new companies moving into the Boston market, it’s predicted that 2018 will continue to be another busy year for Boston real estate.

5 Reasons Homeownership Makes ‘Cents’

The American Dream of homeownership is alive and well. Recent reports show that the US homeownership rate has rebounded from recent lows and is headed in the right direction. The personal reasons to own differ for each buyer, but there are many basic similarities.

Today we want to talk about the top 5 financial reasons you should own your own home.

  1. Homeownership is a form of forced savings – Paying your mortgage each month allows you to build equity in your home that you can tap into later in life for renovations, to pay off high-interest credit card debt, or even send a child to college. As a renter, you guarantee that your landlord is the person with that equity.
  2. Homeownership provides tax savings – One way to save on taxes is to own your own home. You may be able to deduct your mortgage interest, property taxes, and profits from selling your home, but make sure to always check with your accountant first to find out which tax advantages apply to you in your area.
  3. Homeownership allows you to lock in your monthly housing cost – When you purchase your home with a fixed-rate mortgage, you lock in your monthly housing cost for the next 5, 15, or 30 years. Interest rates have remained around 4% all year, marking some of the lowest rates in history. The value of your home will continue to rise with inflation, but your monthly costs will not.
  4. Buying a home is cheaper than renting – According to the latest report from Trulia, it is now 37.4% less expensive to buy a home of your own than to rent in the US. That number varies throughout the country but ranges from 6% cheaper in San Jose, CA to 57% cheaper in Detroit, MI.
  5. No other investment lets you live inside of it – You can choose to invest your money in gold or the stock market, but you will still need somewhere to live. In a home that you own, you can wake up every morning knowing that your investment is gaining value while providing you a safe place to live.

Bottom Line

Before you sign another lease, let’s get together to help you better understand all your options.

Low Interest Rates Have a High Impact on Your Purchasing Power

According to Freddie Mac’s latest Primary Mortgage Market Survey, interest rates for a 30-year fixed rate mortgage are currently at 3.92%, which is still near record lows in comparison to recent history!

The interest rate you secure when buying a home not only greatly impacts your monthly housing costs, but also impacts your purchasing power.

Purchasing power, simply put, is the amount of home you can afford to buy for the budget you have available to spend. As rates increase, the price of the house you can afford will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows what impact rising interest rates would have if you planned to purchase a home within the national median price range, and planned to keep your principal and interest payments between $1,850-$1,900 a month.

Low Interest Rates Have a High Impact on Your Purchasing Power | Simplifying The Market

With each quarter of a percent increase in interest rate, the value of the home you can afford decreases by 2.5% (in this example, $10,000). Experts predict that mortgage rates will be closer to 5% by this time next year. The values of homes in the Boston area, particularly in Downtown Boston continue to rise month over month – supply is at an all time low. Act now to get the most house for your hard-earned money.

Rent or Buy in Boston?

In the latest Rent vs. Buy Report from Trulia, they explained that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers show that

it is on average of 23% less expensive in Boston to rent and 33.1% nationwide! Home values in Boston have increased 7% since 2016.

A study by GoBankingRates looked at the cost of renting vs. owning a home at the state level and concluded that in 39 states, it is actually ‘a little’ or ‘a lot’ cheaper to own (represented by the two shades of blue in the map below).

 

Nationally, home prices have been tracking steadily higher over the past four years.  One of the main reasons owning a home has remained significantly cheaper than renting is the fact that interest rates have remained at or near historic lows. Freddie Mac reports that the current interest rate on a 30-year fixed rate mortgage is 3.91%.

Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters who would like to evaluate your ability to buy this year, let’s get together and find you your dream home.

Samantha Jason, Realtor

William Raveis Boston

16 Clarendon Street, South End

Pre-Construction sales underway at 65 Green Street

The Residential Group at William Raveis Real Estate has been selected as the exclusive sales and marketing team for 65 Green Street in Jamaica Plain.

Developed by Watermark Development, this new construction 8 unit development combines the quality craftsmanship that Watermark is known for with open floorplans, exceptional outdoor living spaces and garage parking, all in one of JP’s most coveted locations.

“Reservations are coming in before we even officially hit the market” said Mark Hand, Associate Partner from The Residential Group.  “Buyers love the location and layouts, and the developer has not cut one corner in selecting high-end designer finishes.  The end product is sure to be among JP’s finest.”

Occupancy is slated for Winter 2017.  For more information, visit www.liveat65green.com

Only 1 Residence Remaining at 2 Loring Street

“… the sale of the property went seamlessly.”

We worked with Mark Hand to sell our townhome/condo in summer 2014 and were extremely pleased with the experience and the results. From the initial scoping discussions, even before we had made the decision to sell, Mark gave us some great feedback on some projects we could undertake to improve the  ‘marketability’ of our home but never applied any pressure. Once we had made the decision to sell, we didnt have to worry about much. Mark’s approach included professional photography, carefully timed and planned open houses, and agressive marketing, all of which drove significant interest in our home. When it came to the pricing discussion, which as I understand it can be a bit of a sensitive one for a lot of homeowners, he handled it professionally and gracefully and was dead on with his suggested listing price.

A few short weeks later, we were in a multiple offer situation. Mark did a great job of summarizing all of the offers for us, including a detailed breakdown of the various pros and cons of each, in an easy to digest manner. He handled the negotiations skillfully and the sale of the property went seamlessly (and it was sold for over asking). Mark was always available for a conversation or a meeting, day or night, even though his wife was due with a child at any point! I would highly recommend Mark to any homeowner.

Seller Client – Watertown

“… a genuine pleasure to work with.”

We have now worked with Samantha on two separate residential real estate transactions and I would share with you that she was very competent, knowledgeable and professional in all aspects of her field. She is confident, experienced, has a can-do attitude, and is very thorough when it comes to details and follow through. She was also a good problem solver when needed and a genuine pleasure to work with. We would recommend her to anyone in the market buying or selling a residential property and will definitely call upon her again.

S. Prusank – Buyer and Seller Client

“… excellent connections that make the process a piece of cake.”

Mark Hand’s knowledge of the real estate world is outstanding! Mark has sold two properties for me and also found my current home. One of the properties he sold for me was an extremely difficult sell in a difficult market and he powered through it! He is nothing but professional and hard-working and has excellent connections that make the process a piece of cake. I wouldn’t go anywhere else!

Seller Client – Jamaica Plain

“… the offers came quickly.”

From the first meeting with Samantha, I knew that I found the perfect real estate professional to market my condo. She is professional, down to earth, knowledgeable about the various Boston  neighborhoods, and is highly responsive. Samantha was also very respectful of my needs and also knew the right time to step in when I needed guidance or advice on the selling process. I had a tenant living in the condo at the time it was placed on the market and Samantha could not have been more respectful and patient with the tenant. I truly enjoyed working with Samantha. The process was seamless, the marketing materials were beautifully designed and the offers came quickly. If you are looking to put your home on the market, I recommend Samantha Jason.

M. Mihos – Seller Client