Scott Smolen's Maryland Real Estate News and Updates

March 14, 2024

Mastering the Art of Buying and Selling a Home Simultaneously

Timing and a little bit of luck play a crucial role when buying a new home while selling your old one. While some aspects of the process are beyond your control, there are steps you can take to increase the chances of a smooth closing, perhaps even on the same day! Here is some essential information to guide you through the process of buying and selling a house simultaneously.

1. Assess the Local Housing Market:  The state of the real estate market in your area is a pivotal factor in timing your home purchase and sale correctly. Whether you're moving within the same town or across the country, understanding the market you're dealing with is vital. The time it takes to buy and sell a property can vary significantly based on local real estate conditions.

     • In a buyers’ market, more homes are available than buyers. In this situation, finding your new home might be easier, but selling your old home might take longer. Sellers might be open to a contingent offer, meaning you buy their home contingent on selling yours first.

     • In a sellers’ market, more buyers are present than available homes. Your current home is likely to sell quickly, making it more challenging to find a new home. You could consider asking your buyers for a rent-back agreement after closing to allow time to find your next place.

2. Select an Experienced Real Estate Agent:  Navigating the process of buying and selling simultaneously can be complex and overwhelming. Having Scott and the Smolen Team by your side is immensely helpful. An experienced local agent can help determine the market value of your home, guide you through timing, strategy, and negotiation.

     • The agent can assist you in finding the perfect listing price for your home based on local market expertise and comparable sales.

     • If buying and selling in the same market, consider using Scott for both transactions to streamline communication. If you are buying in another market area, talk to Scott and get a good referral from him for that area.

3. Understand Your Finances:  After selecting an agent and getting a sense of your local market, it's time to delve into your financial situation. Consult with your mortgage lender and financial planner to assess your financial feasibility. Factors such as liquid cash, home equity, and qualifying loan products can influence your decision-making.

4. Determine Your Home's Resale Value:  Researching your equity involves understanding your house's likely selling price in the current market. Consider conducting a pre-inspection to identify any necessary repairs or concessions you might need to make to potential buyers.

5. Know Your Home Equity:  If you're selling a mortgaged property, find out how much equity you have. Equity refers to the amount left over after deducting the remaining mortgage balance from the current market value of your home. You should also consider whether you can afford to purchase a new home without using your home equity, as it won't be accessible until after the sale closes.

 

Buying a House before Selling:

Option 1: Make an offer with a sale contingency, which means you find your new home first and submit an offer that's contingent on selling your current home successfully. This approach works best in buyers’ markets.

Option 2: Request an extended closing if you're confident your current home will sell quickly. This gives you more time to sell and use your home equity to buy a new property, making it more viable in buyers markets.

Option 3: Purchase with savings if you can afford to pay the down payment from your savings. You can then sell your old home after completing the purchase. Make sure to account for closing costs, inspections, and moving expenses.

Option 4: Purchase with a home equity line of credit (HELOC) if you qualify. A HELOC allows you to borrow against your current home's equity for the down payment, to be repaid once your home sells.

Option 5: Use a bridge loan, a short-term loan offered by banks to cover the down payment until your home sale closes. Ensure you inquire about this option early, as not all banks offer it.

Option 6: Rent out your first home if you don't need the sale proceeds immediately. Becoming a landlord can have challenges, but it allows you to delay selling until you find the right home.

 

Pros of Buying before Selling:

     • Immediate place to move to.

     • Saves money on storage and temporary housing.

     • Less pressure to rush into buying. Cons of Buying before Selling:

     • A rushed selling process might lead to lower offers.

     • Contingent offers might be less competitive in fast-paced markets.

     • Limited cash for a competitive offer if your money is tied up in your current home.

     • Being a landlord may not be ideal, and selling while tenants are in the home can be challenging.

 

Selling a House before Buying: 

Option 1: Make an offer with a settlement contingency. List your current home first, find a new home, and submit an offer with a settlement contingency, contingent on your existing home's sale closing. Works best in sellers’ markets.

Option 2: Find a temporary rental to live in. Closing one sale before starting another can be less stressful and provides more time to find the perfect new home.

Option 3: Sign a rent-back agreement. Proceed with the sale and agree to rent the home from the new owners for some days, giving you more time to search for your next home while accessing the sale proceeds.

 

Pros of Selling before Buying:

     • Clear idea of available equity for the new purchase.

     • Easier to roll existing equity into the new home.

     • Less stress, focusing on one move at a time.

 

Cons of Selling before Buying:

     • Need to find temporary living arrangements.

     • Additional storage and moving costs.

 

Remember, each approach has its merits and challenges, and it's essential to weigh your financial situation, market conditions, and personal preferences when deciding the best route for your unique circumstances. With the right preparation and the guidance of The Smolen Team, you can successfully navigate the intricate process of buying and selling a home simultaneously.

 

March 13, 2024

The Advantages of Partnering with a Real Estate Agent

Contemplating the sale of your home independently through a "For Sale by Owner" (FSBO) approach? Before embarking on this journey, it is crucial to weigh the responsibilities that come with it. Going solo can be a demanding task, as highlighted by a recent report from the National Association of Realtors (NAR). The report identifies pricing accuracy and navigating the intricacies of paperwork as two of the most challenging aspects for FSBO sellers.  Here is how a real estate agent can alleviate these challenges and enhance your selling experience.

 

Accurate Pricing Strategies

Determining the optimal price for your property is pivotal in attracting potential buyers. Engaging in a FSBO sale introduces the risk of either overpricing or underpricing your home. Overpricing may lead to decreased visibility, as interested buyers may not even come across your listing. Conversely, underpricing can result in missed opportunities and potential financial losses. NerdWallet emphasizes the importance of getting the price right from the outset, stating, "When selling a home, first impressions matter." To navigate this delicate balance, partnering with a real estate agent proves invaluable. Agents possess a profound understanding of the local housing market and leverage their expertise to set a competitive price that aligns with buyer expectations. By doing so, your home stands a better chance of making a positive impression on potential buyers right from the start.

 

Efficient Handling of Paperwork

Selling a property entails a myriad of paperwork and legal documentation, a task that can be overwhelming for homeowners handling it on their own. The multitude of rules and regulations adds complexity to the process, increasing the likelihood of errors that could lead to legal complications. Real estate agents are well-versed in the complexities of contracts and paperwork associated with home sales. Their expertise enables them to guide you seamlessly through the process, minimizing the risk of mistakes that may result in legal issues or delays. By aligning yourself with a professional, you gain a valuable advisor who can navigate the paperwork with precision and ensure a smoother transaction.

 

In Conclusion

Selling your home is a significant undertaking, and the complexities involved can be daunting. Collaborating with a real estate agent can significantly impact your selling experience by ensuring accurate pricing and adept management of all details. To streamline the process and alleviate the stress associated with a solo sale, connect with Scott and the Smolen Team who can provide the expertise needed for a successful transaction.

 

Posted in Buying a Home
March 12, 2024

Credit Unions vs. Banks for Mortgages: Choosing the Right Option

When it comes to securing a mortgage, you are not limited to just big or regional banks. Credit unions have been steadily gaining prominence in the mortgage market, offering competitive loan terms and a more personalized customer service experience. Additionally, they often feature flexible lending criteria. However, the choice between a credit union and a traditional bank for your mortgage should be made after a careful consideration of the advantages and disadvantages of each.

 

Comparing Credit Unions and Banks for Mortgages:

Both banks and credit unions have their own unique merits, making the decision between the two pivotal. While they share certain similarities, it is their distinctive characteristics that can influence your choice.

 

Commonalities between Credit Unions and Bank Mortgages:

1. Application Process: Both banks and credit unions allow you to apply for a mortgage through various channels, including online applications, phone assistance, or in-person visits to their branches.

2. Mortgage Types: You can find a wide array of mortgage loans, including fixed and adjustable-rate mortgages, conventional mortgages, and FHA loans, from both banks and credit unions.

3. Financial Products and Services: Banks and credit unions serve as comprehensive financial service providers, offering services beyond mortgages, such as auto loans, savings and checking accounts, and personal loans.

 

Distinctive Aspects between Credit Unions and Bank Mortgages:

1. Profitability: The primary distinction lies in these institutions. Credit unions are typically non-profit organizations, while banks operate with a profit motive.

2. Membership: While banks are open to the public, credit unions may have more selective membership criteria. Some credit unions require individuals to reside in specific regions or work in particular professions.

3. Loan Programs: National banks often offer a more extensive range of loan types compared to credit unions.

4. Loan Retention: Credit unions typically retain the mortgages they originate (portfolio loans), while banks frequently sell the mortgages, they originate on the secondary mortgage market.

 

Pros and Cons of Opting for a Credit Union Mortgage:

Choosing a credit union mortgage comes with its own set of advantages and disadvantages that are essential to consider:

Advantages of a Credit Union Mortgage:

1. Fewer Fees: Credit unions are member-oriented, resulting in fewer fees passed on to borrowers. This is a notable contrast to banks, which primarily aim to generate revenue for investors.

2. Lower Rates: Credit unions often offer competitive mortgage rates. On average, they tend to provide lower rates on mortgage loans, which can translate to significant savings.

3. Personalization and Service: Credit unions are renowned for their superior customer service, fostering more personalized relationships with their members.

4. Easier Approval: Credit unions are more likely to accommodate individuals who do not fit the traditional profile of borrowers with excellent credit histories, making them a preferable choice for those with lower or middle incomes.

 

Drawbacks of a Credit Union Mortgage:

1. Membership Requirements: Certain credit unions have membership prerequisites based on their target demographics. Failure to meet these criteria may restrict your eligibility for a mortgage with a specific credit union.

2. Limited Technology: Credit unions may not offer the same level of technological sophistication and online convenience as banks or online lenders.

3. Branch and ATM Access: Credit unions generally have a smaller geographical footprint, leading to fewer branch and ATM locations. While some credit unions are part of national ATM networks or reimburse ATM fees up to a specific limit, availability may still be limited.

4. Potentially Higher Costs: Although credit unions often offer competitive rates, they may occasionally be outperformed by larger banks that provide notably lower mortgage rates.

 

Choosing the Right Lender:

Selecting the right mortgage lender is crucial, and it is vital to assess your specific needs and financial situation. Here is how to make an informed decision:

1. Consider Your Preferences: Credit unions are an excellent choice if you prioritize personalized service, lower rates, and fewer fees. Conversely, if you prefer a technology-driven, seamless lending experience or do not meet the membership requirements of a credit union, a bank or online institution might be a better fit.

2. Shop Around: Always explore your options with at least three different mortgage lenders. Comparing offerings from various institutions helps you make an informed choice that aligns with your unique circumstances.

3. Seek Expert Advice: For trustworthy guidance and a referral to a reputable local lender, do not hesitate to reach out to Scott and the Smolen Team. We are here to assist you in finding the right mortgage lender that meets your requirements.

 

In conclusion, the decision between a credit union and a bank for your mortgage involves evaluating your individual preferences and circumstances. Both options offer distinct benefits, so careful consideration and shopping around are key to making the best choice for your homeownership journey.

 

 

Posted in Buying a Home
March 11, 2024

Securing Your Family's Future: Building Generational Wealth Through Home Equity in 2024

Every parent dreams of providing a foundation for their children and grandchildren to lead healthier, happier, and more prosperous lives. In the realm of generational wealth, where assets are passed down to family members, real estate emerges as a pivotal player. This article explores the crucial role of home equity in building generational wealth, offering insights into its significance and practical strategies for leveraging it as a cornerstone for your family's financial legacy.

 

Generational Wealth and Homeownership Statistics:

The U.S. residential real estate market, valued at $43.5 trillion, surpasses the market cap of the Standard and Poor’s 500 ($36.7 trillion) and the total value of all U.S. public companies ($40 trillion). Homeowners' equity in the U.S. has surged from $16 trillion in 2018 to $31.6 trillion in 2023 (Q2), with the average homeowner now possessing nearly $290,000 in equity, up from $182,000 pre-pandemic. Real estate holds a significant place in the wealth portfolios of different generations, particularly Gen X ($13.6 trillion), Millennials ($5 trillion), and Baby Boomers ($18.3 trillion). Millennials and Gen X-ers are projected to inherit $84 trillion by 2045. Despite the high aspiration for homeownership (74% considering it part of the "American Dream"), challenges, such as affordability concerns, are prevalent, with 32% believing they may never afford their dream home.

 

Importance of Home Equity:

Home equity represents the portion of your property that you own, calculated as the current market value minus outstanding mortgage debt. It grows through mortgage payments and appreciation resulting from factors like home improvements, neighborhood enhancements, and overall market trends. Home equity serves as a tangible financial asset, offering avenues for borrowing, refinancing, or selling for profit, often at favorable interest rates.

 

Building Generational Wealth with Home Equity:

Generational wealth is nurtured through disciplined actions, primarily regular mortgage payments to reduce the mortgage balance and resisting the temptation to borrow against accumulated home equity. The gradual accrual of home equity acts as a forced savings mechanism, fostering wealth accumulation even for those lacking discipline in other savings avenues.

 

Using Home Equity to Support Younger Generations:

Real estate, appreciating over time, becomes a valuable asset passed down from one generation to the next, providing economic benefits and options. Descendants inheriting property can choose to sell, live in it, leverage its equity for financial ventures, rent it out for passive income, or benefit from potential tax advantages. Passing down home equity not only creates economic opportunities but also strengthens familial bonds and preserves the family home's legacy.

 

Building Home Equity in 2024:

Despite recent market shifts due to factors like rising interest rates, low supply, and sustained demand, home values and equity continue to grow, albeit at a moderated pace. Waiting for better market conditions carries risks, as delaying homeownership might result in missing out on potential home equity growth. The enduring value of real estate and its historical appreciation make homeownership a powerful tool for long-term prosperity, despite current market challenges.

 

Challenges of Passing Down Property:

While homeownership and home equity contribute to generational wealth, challenges exist. Estate or inheritance taxes, unresolved liens or mortgages, and differing opinions among heirs regarding the property's future are potential hurdles. Liquidity issues arise as home equity wealth cannot be easily shared among multiple heirs, requiring the sale of the property to monetize the equity.

 

In Conclusion:

Owning a home can be a strategic path to building generational wealth, provided it aligns with your financial goals and circumstances. Despite challenges, the enduring value of real estate, coupled with the potential for equity growth, positions homeownership as a powerful tool for securing your family's financial legacy. By leveraging home equity and understanding the dynamics of real estate, you can establish a solid foundation for long-term prosperity for generations to come.

 

 

March 8, 2024

Unraveling the Mystery of HOA Fees: A Comprehensive Guide

The dream of homeownership is an integral part of the American ethos, with a resounding 74 percent of Americans expressing their agreement, as per a recent survey by Bankrate Financial Security. For homeowners residing in communities governed by homeowners’ associations (HOAs), a host of benefits awaits, ranging from landscaping and lawn maintenance to access to swimming pools and sports facilities. The extent of services managed by an HOA can vary depending on the community type, covering responsibilities like maintaining common areas in high-rise buildings, lobbies, hallways, or an array of other amenities. As a member of an HOA, you will be responsible for paying HOA fees, which fund these services. The fee's value can differ widely based on the level of amenities offered within your community, and it can be influenced by external factors such as economic conditions or the geographical location of the community. Here, we delve into everything you need to be aware of before you decide to purchase a home within an HOA community.

 

HOA Fee Insights

• According to estimates from the U.S. Census Bureau's American Housing Survey, the average monthly HOA fee stands at $170. However, most HOA members pay less than $50 each month.

• A noteworthy 29 percent of the U.S. population, translating to 74.2 million Americans, lived within homeowners’ associations, condominium communities, or co-ops in 2021, as reported by the Community Associations Institute (CAI).

• These associations manage properties collectively valued at a staggering $11 trillion, as indicated by data from the CAI.

• In terms of sheer numbers, California leads with over 50,000 associations, closely followed by Florida with 49,420, per CAI's findings.

 

Understanding Homeowners Associations (HOAs)

A homeowner’s association, or HOA, is an entity within a community that establishes and enforces regulations governing the properties within its jurisdiction. These rules can encompass diverse aspects, ranging from the permissible colors for house exteriors to the number and types of pets allowed. Whether you dwell in a single-family home, condominium, or townhouse, if your community offers shared spaces or amenities such as swimming pools, tennis courts, or security gates, it's highly likely that the maintenance of these common areas is overseen by an HOA or condo association. Typically, the HOA is managed by a board of property owners who are elected by fellow property owners residing in the community. HOA fees are designed to cover the expenses incurred by these services.

 

The Pros and Cons of HOAs

Pros:

• Access to valuable amenities such as fitness centers, playgrounds, or pools.

• Maintenance responsibilities that can be cumbersome, such as lawn care or snow removal, are handled for you.

• Rules pertaining to property upkeep and aesthetics often ensure a visually appealing neighborhood and stable property values.

Cons:

• You are obliged to pay HOA fees, which can vary widely based on the community and may range from a mere $100 annually to over $1,000 each month.

• HOAs impose numerous restrictions and rules, potentially impacting how you can use your property. For instance, they often prohibit home-based businesses and rentals.

• Failure to pay dues promptly may lead to the risk of foreclosure, depending on your state's laws.

 

Deciphering HOA Fees

An HOA fee is a regular charge, typically assessed on a monthly or quarterly basis, which is collected by the homeowner’s association to finance the services it offers. If you reside in a condominium, a comparable fee might be paid to the condo association. Understanding how HOA fees function is crucial when considering a home purchase within an HOA. These fees are typically utilized to maintain or enhance the community's quality of life, and they are distinct from your mortgage, property tax, and homeowner’s insurance payments. Even when your mortgage is fully paid off, you'll continue to bear the responsibility of paying HOA fees. "HOA fees and dues managed by a homeowners' association can provide residents with quality-of-life amenities that an individual owner might not be able to enjoy on their own," says Candy La Monica, broker of the Candy La Monica Team at RE/MAX Executive in North Carolina. "If you find these benefits essential, you won't mind paying the fees or dues. However, be sure to work alongside your real estate agent to conduct proper due diligence before making a purchase. If these services and amenities are not of particular importance to you, you might find greater contentment in an area outside of an HOA."

 

What Do HOA Fees Cover?

The services covered by HOA fees can vary significantly and are contingent upon the amenities available in your community. Your HOA's governing documents should specify what these fees are designated for, which may include common services like grounds maintenance, landscaping, snow and trash removal, and electricity and pest control for shared areas. HOA dues might also be allocated to enforce HOA regulations. In general, these regulations aim to ensure that every property remains visually appealing and well-maintained, thereby helping to sustain property values and maintain a secure environment for all residents. It is important to note that the more services your HOA provides, the higher your HOA dues are likely to be.

 

Determining the Cost of HOA Fees

On a national scale, the mean monthly HOA fee stands at $170, according to census data. The amount of HOA fees can vary considerably based on the property's location and the array of amenities available to property owners. It is the HOA's governing board that determines the fees property owners must pay to cover the community's expenses. For instance, an oceanfront condo owner with an abundance of amenities may be subject to HOA fees of $1,000 per month, while a homeowner in a modest gated community situated ten miles inland might pay only $150 monthly. It is not uncommon for larger residences within an HOA to have higher fees, as they are assumed to utilize a greater extent of services. For example, maintaining the grounds of a spacious single-family home is more costly compared to a narrower townhouse.

 

Special Assessment Fees

While regular HOA fees tend to remain relatively stable, the community's board may also authorize something known as a "special assessment." These assessments are typically implemented to cover the costs of substantial or unforeseen work, such as repairing damage to common areas after a natural disaster or refinishing a building's facade (an obligation enforced in some cities, such as New York, on a periodic basis). Special assessments may also be used to build up the community's reserve fund, which serves as the HOA's financial safeguard. This fund stands ready to help offset much larger special assessments in the event of significant required work. Special assessments can take the form of one-time charges or ongoing fees in addition to your regular dues. HOA boards typically enjoy a significant degree of autonomy in implementing these assessments and may not always need to seek the input or even notify residents beforehand. Nonetheless, passing a resolution and notifying the community is considered a best practice.

 

Inflation and Its Impact on HOA Fees

Your HOA fees cover the costs associated with goods and services, and these costs can be significantly influenced by inflation. For example, if the company responsible for maintaining the community pool raises their prices due to increased costs of materials caused by inflation, your fees may increase in response to cover this additional expense. Any inflation-induced rise in the expenses that an HOA must bear is likely to be passed on to homeowners through higher fees.

 

Key Inflation Statistics and Its Consequences for HOA Fees:

• As of August 2023, the annual inflation rate stands at 3.7 percent, as reported by the U.S. Bureau of Labor Statistics' Consumer Price Index.

• Industry experts anticipate that community associations will need to raise dues by 10 to 15 percent by the end of 2023 to keep pace with inflation, according to HOA Management.

• Data from Bankrate's American Dream survey reveals that 53 percent of Americans are currently not homeowners due to unfavorable housing market conditions, including high prices and elevated mortgage rates.

• Housing constitutes one of the most significant contributors to overall inflation, with the shelter index increasing by 7.3 percent in the past 12 months.

• Soaring insurance premiums are also contributing to the escalation of HOA fees.

 

HOA Fees and Location

The location of your property plays a significant role in determining the amount of HOA fees you will incur, as these fees can differ considerably depending on local regulations and the cost of living in the area. An illustrative example is the situation in Tampa Bay, Florida, where owners of high-rise condos are grappling with a new law that necessitates milestone inspections and mandates HOA associations to maintain ample reserves for any necessary repairs. In another instance, Miami, Florida, registered the highest inflation rate of any metropolitan area in the United States during 2022, according to data sourced from the Bureau of Labor Statistics. Other cities in the top five included Phoenix, Seattle, Atlanta, and Philadelphia, followed by New York, Baltimore, Detroit, St. Louis, and Chicago. In these areas, HOA fees are likely to increase due to the elevated inflation.

 

Are HOA Fees Tax-Deductible?

IRS regulations can be intricate, but as a rule, HOA fees are not tax-deductible when the property you own within the community serves as your primary residence. However, if you rent out the property, your HOA dues might qualify as deductible rental expenses. Special assessments imposed by HOAs are generally not deductible.

 

Addressing Financial Challenges with HOA Fees

If you find it difficult to meet your HOA dues, the HOA board or management company might be able to arrange a payment plan to assist you. It is advisable to be transparent about your financial situation with the board at an early stage to explore the possibility of reaching an agreement. Ultimately, if you fall into arrears for an extended period or face insurmountable debt, the HOA holds the authority to initiate eviction proceedings. In some cases, a lien could be placed against your deed to facilitate the recovery of the community's financial losses.

 

Key Questions to Ask Before Buying into an HOA

If you are contemplating a property purchase within a homeowner’s association, you should have access to information regarding the amount and nature of the HOA fees. Often, this information is included in real estate listings. You should also be able to obtain minutes from past board meetings and other records, which detail fee changes and any rules related to these fees, through your real estate agent or the HOA.

As you delve deeper into the realm of HOAs, it is advisable to seek answers to the following questions:

• How frequently has the HOA increased fees in recent years?

• What services do these fees specifically cover? What do they not cover?

• Does the HOA maintain a reserve fund for long-term repairs and maintenance, and if so, how substantial is it?

• Has the HOA engaged an expert to conduct a reserve study, which estimates the amount of money that should be set aside to cover future expenses?

• Does the HOA have a history of imposing special assessments? If so, what were the amounts, the reasons behind them, and how often were they implemented?

Gathering responses to these inquiries can aid you in concluding whether the HOA has set aside sufficient funds to address significant expenses, thus averting the need for unexpected high assessments, or whether higher fees or special assessments might be in the cards.

 

Concluding Thoughts

In conclusion, when considering the purchase of a home within an HOA community, it is essential to weigh the costs against the benefits. HOA fees can vary significantly due to various factors, encompassing your location, the range of amenities provided, and the impact of inflation. Areas with a higher cost of living or exposure to severe weather conditions are more likely to have higher fees. While these fees might initially seem like an additional financial burden or a substantial portion of your monthly budget, their conveniences can be invaluable, sparing you the substantial effort required for tasks like snow removal and lawn maintenance. For a thorough exploration of the pros and cons of living in an HOA-governed community, do not hesitate to reach out to Scott and the highly informed Smolen Team. Their expertise can provide you with the insights you need to make an informed decision about your future in an HOA community.

 

Posted in Buying a Home
March 7, 2024

Unlocking Homeownership: Factors Shaping Affordability

In the realm of housing affordability, the past year has sparked widespread discussions about its increasing challenges. While recent relief has been observed, attributed to a decline in mortgage rates from their peak in October, the intricacies of home affordability extend beyond this singular aspect. To gain a comprehensive understanding of home affordability, one must consider the harmonious interplay of three pivotal factors: mortgage rates, home prices, and wages.

1. Mortgage Rates

In recent months, mortgage rates have experienced a downtrend, with experts predicting further declines throughout the year. Jiayi Xu, an economist at Realtor.com, anticipates this trend, stating, "While there could be some fluctuations... the general expectation is that mortgage rates will continue to trend downward, as long as the economy continues to see progress on inflation." Even a slight shift in mortgage rates can significantly enhance purchasing power, easing the burden on potential homeowners by reducing monthly mortgage payments.

2. Home Prices

The second crucial factor influencing affordability is home prices. Despite a relatively normal pace of increase last year, home prices are expected to rise moderately in 2024. The growth is attributed to a projected increase in inventory, although the demand still outpaces the available supply. According to Lisa Sturtevant, Chief Economist at Bright MLS, "More inventory will be generally offset by more buyers in the market." While this projection signifies a more stable market compared to pandemic-driven surges, waiting may result in higher costs for prospective buyers. Acting swiftly before market dynamics change further might be in the best interest of those ready to make a purchase.

3. Wages

A positive factor contributing to affordability is the simultaneous rise in income. Elevated wages play a pivotal role in improving affordability by reducing the percentage of income required to cover mortgage payments. This means that with higher wages, individuals need not allocate as much of their income towards monthly housing costs.

Implications for Prospective Buyers

Home affordability hinges on the delicate balance of mortgage rates, home prices, and wages. The encouraging news is that these factors are currently aligning favorably for buyers.

In Conclusion

For those contemplating homeownership, it is crucial to recognize that the key factors influencing affordability are trending positively. Stay informed with the latest updates on mortgage rates, home prices, and wage trends by connecting with Scott and the Smolen Team today! Unlock the doors to homeownership with confidence.

Posted in Buying a Home
Nov. 7, 2023

Safeguarding Your Inbox: 2 Strategies to Prevent Mortgage Rate Shopping Spam

Imagine this scenario: You were recently in pursuit of the best mortgage rates or submitted an online application for a home loan, and now your phone is buzzing incessantly. Your email inbox is overflowing with messages from lenders vying for your attention. You simply wanted to explore the interest rate on that charming bungalow, but now you find yourself inundated with unsolicited communication. How did all these companies manage to obtain your contact information?

One likely explanation, as highlighted by Fred Winchar, co-founder and CEO of MaxCash, a financial brokerage connecting users with lenders, is that your data may have been sold by a credit bureau. When you apply for a loan with a mortgage company, they typically pull your credit record to assess your creditworthiness. As a result, the credit bureau obtains a record of this credit inquiry, which they subsequently sell to other mortgage companies as potential leads.

"This information informs other mortgage companies that you are actively searching for a mortgage, prompting them to reach out to you in an attempt to secure your business," explains Winchar.

In case you were curious, credit bureaus are indeed allowed to sell your information to lenders and insurers, who can then inundate you with unsolicited credit or insurance offers through "prescreening offers." Fortunately, you can opt out of these offers, as advised by the Federal Trade Commission. Here's how:

Opting Out for Five Years: You can visit optoutprescreen.com or call 1-888-5-OPT-OUT (1-888-567-8688). Both the phone number and the website are managed by the major credit bureaus.

Opting Out Permanently: Visit optoutprescreen.com or call 1-888-5-OPT-OUT (1-888-567-8688) to initiate the process. To complete your request, you'll need to sign and return the Permanent Opt-Out Election form, which you can obtain online after starting the process.

Another likely scenario, according to financial planner Jeff Rose, CFP, and the founder of GoodFinancialCents.com, is that when you apply for a mortgage, your application enters various databases or networks associated with the initial company. Some companies may also sell or share lead information with other lenders, particularly if they are unable to service your loan, resulting in multiple companies reaching out to you.

Feel free to reach out to Scott and the Smolen Team at anytime so they can connect you with a reputable, local lender that can discuss your mortgage options with you privately!

Posted in Home Tips
Nov. 4, 2023

Continuous Rise in Home Prices: Insights from the Case-Shiller Index

In a remarkable turnaround, home prices have experienced a seven-month streak of growth, as reported by the S&P CoreLogic's Case-Shiller U.S. National Home Price NSA Index. The latest data, released on October 31, reveals that home-price growth surged by 2.6 percent in August 2023, more than doubling the 1.0 percent increase seen in July. This positive trend is evident in 13 out of the 20 metropolitan markets assessed by the Case-Shiller Index.

Reaching New All-Time Highs

Craig J. Lazzara, the managing director at S&P DJI, expressed, "U.S. home prices continued to rise in August 2023," highlighting that the national composite index marked its seventh consecutive monthly gain since hitting its lowest point in January 2023. The national composite now stands at a level 2.6 percent higher than a year ago and a significant 6.4 percent above its January level. This growth is not isolated to the national level; both the 10- and 20-city composites also showed year-over-year improvements.

Remarkably, many facets of the index are currently at historically high levels. Lazzara noted, "One measure of the strength of the housing market is the relationship of current prices to their historical levels." Notably, the national composite, the 10-city composite, and seven individual cities are all at their all-time highs. These cities include Atlanta, Boston, Charlotte, Chicago, Detroit, Miami, and New York.

On a year-to-date basis, the national composite has recorded a substantial increase of 5.8 percent, exceeding the median full calendar year increase observed over the past 35 years.

Regional Variation Persists

Lazzara emphasized that regional differences continue to play a significant role in housing market dynamics. The best-performing metropolitan areas in August included Chicago, New York, and Detroit, each showing positive year-over-year growth.

However, the Western region experienced the largest decline in August, with both Las Vegas and Phoenix witnessing price drops of 4.9 percent and 3.9 percent, respectively. The Southwest, in general, faced a regional decline of 0.9 percent.

August's data continues to highlight the Midwest as the nation's strongest region, with a 3.9 percent increase, followed by the Northeast with a 3.8 percent rise. These disparities underscore the varying dynamics in the U.S. housing market.

The Fed's Impact on the Housing Market

The Federal Reserve's efforts to combat inflation through consecutive interest rate hikes have inevitably influenced mortgage rates. While the Fed does not directly control mortgage rates, its policy decisions shape market expectations, impacting the cost of home loans.

The era of historically low mortgage rates that followed the Great Recession ended in 2022, with rates exceeding 6 percent for the first time since 2008. This upward trend persisted, with rates crossing the 7 percent and 8 percent thresholds in October 2022. As of October 25, 2023, the average 30-year mortgage rate stood at 8.01 percent, a level not witnessed in over two decades.

Steve Reich, division president at Go Mortgage, Pennsylvania, highlighted the profound effects of these trends on the housing market. He pointed out that the higher interest rates have constrained the purchasing power of homebuyers, impacting home sales. Furthermore, the increased rates have exacerbated the housing shortage by discouraging homeowners from selling their properties, limiting the supply of available housing.

Implications for Homebuyers and Sellers

In this evolving market, both homebuyers and sellers must adapt to changing conditions, which have proven challenging on both sides of the real estate transaction. Prospective sellers may need to remain flexible on pricing to navigate the challenges posed by rising mortgage rates.

For motivated homebuyers, the current market requires preparation for potential financial adjustments, given the increased cost of financing a home. This adaptability may involve considering smaller properties, different neighborhoods, or even a downgrade in the quality of the home.

Reich assures that despite the difficulties, buying a home in this market is still possible. The extended duration that active listings stay on the market has contributed to a slightly less competitive atmosphere, offering some relief to homebuyers. This is corroborated by data from the National Association of Realtors, which shows an increase in the median days-on-market length, offering hope to homebuyers who are determined to enter the housing market.

Posted in Market Updates
Sept. 26, 2023

Unlocking the Non-Financial Perks of Homeownership

The decision to purchase and possess your own home extends far beyond financial considerations. It's about embracing the intangible benefits that transform a mere residence into a place that truly reflects you.

Here, we explore some of the compelling non-financial incentives that accompany homeownership.

1. Creative Control Over Your Living Space

According to a survey by Fannie Mae, a resounding 94% of respondents place great value on "Having Control Over What You Do with Your Living Space" as a prime motivation for homeownership. When you own a home, it becomes your canvas, a space where you can freely express yourself. Except for specific homeowner association restrictions, your home is your blank slate. Whether it is small adjustments or significant renovations, the power to mold your dwelling according to your unique taste lies firmly in your hands. Investopedia highlights this freedom: "One often-cited benefit of homeownership is the knowledge that you own your little corner of the world. You can customize your house, remodel, paint, and decorate without the need to get permission from a landlord."

In contrast, renting may limit your ability to truly imprint your personality on your living space, often requiring you to revert any modifications upon departure. Ownership grants you the liberty to craft a home that resonates with your individuality, fostering a sense of pride and connection to your living environment.

2. A Nurturing Environment for Your Family

Another pivotal aspect to consider is your stage in life. U.S. News provides insights into this: "For those with young children, buying a home and putting down roots is a major driver. . .. You don't want the upheaval of a massive rent increase or a non-renewed lease to impact your sense of stability." At any life stage, stability and predictability are priceless commodities.

Life is marked by change, but having a steadfast home base, unaffected by the uncertainty of frequent moves, can bolster your sense of security and comfort.

3. Deepening Community Engagement

Fannie Mae's research underscores that 82% of individuals regard "Feeling Engaged in Your Community" as a compelling motive for homeownership. Homeownership naturally encourages a deeper connection to your neighborhood. Typically residing in one place for an average of nine years, homeowners could cultivate friendships and solidify bonds within their communities, as noted by the National Association of Realtors (NAR).

Gary Acosta, CEO and Co-Founder at the National Association of Hispanic Real Estate Professionals (NAHREP), highlights: "Homeowners also tend to be more active in their local communities . . ." When you feel a profound connection to your neighbors, you are inclined to actively contribute to the betterment of your local area.

In Conclusion, owning a home transcends mere financial investment; it enriches your life with a sense of accomplishment, pride, stability, and community. If you are contemplating the journey to homeownership and desire further insights, do not hesitate to connect with Scott and the Smolen Team! They can provide invaluable guidance and help you embark on the path toward achieving your homeownership goals.

Posted in Buying a Home
Sept. 21, 2023

Today's Mortgage Interest Rates Report - September 21, 2023 | Rates Show Decline, but Federal Reserve Hints at Future Hikes

In the ever-fluctuating world of mortgage rates, today's update brings a significant dip in rates across the board. The standout news is the 30-year mortgage rates, which have plummeted by 16 basis points in just one week. But while borrowers may rejoice at the immediate savings potential, there is a shadow of uncertainty cast by the Federal Reserve's recent meeting.

The Federal Reserve concluded its September meeting today, and the central bank announced a decision that could have a substantial impact on the lending landscape. For now, the Federal Funds Rate remains untouched, providing a sigh of relief for borrowers who feared another hike. However, it's imperative to note that the Fed hasn't ruled out the possibility of future rate increases before the year's end.

During his press conference following the meeting, Federal Reserve Chair Jerome Powell emphasized the central bank's commitment to data-driven decision-making. As borrowers eagerly await the next moves, it's recommended to keep a close eye on forthcoming job reports and Consumer Price Index releases, scheduled for early next month. These indicators will shed light on the economic trajectory and potentially signal whether another Fed rate hike is on the horizon.

The direction of mortgage rates hinges on how the broader economic factors play out. Should the economy continue its sluggish pace and the Federal Reserve manages to steer clear of additional rate hikes, borrowers could anticipate further decreases in mortgage rates soon. However, if inflation remains persistently high, we may find ourselves grappling with elevated mortgage rates for a bit longer.

Now, let us take a closer look at the specific mortgage rates for homebuyers and those considering refinancing: 30-Year

Fixed Mortgage Rates: Down by 0.16%

The current average 30-year fixed mortgage rate stands at 6.89%, marking a substantial 16 basis point decrease from the previous week. Notably, this rate is also lower compared to a month ago when it was at 7.10%. At this rate, for every $100,000 borrowed, you can expect to pay $658 monthly toward principal and interest. The 30-year fixed-rate mortgage is a popular choice, offering stability with a consistent interest rate over the loan's lifetime.

20-Year Fixed Mortgage Rates: A Slight Decrease of 0.02%

The average 20-year fixed mortgage rate has dipped by just two basis points, now sitting at 6.79%. In comparison to the previous month's rate of 6.88%, this marks a minor reduction. With this rate, borrowers would allocate $763 per month toward principal and interest for every $100,000 borrowed. While less common than its 30-year counterpart, 20-year fixed mortgages are still an available option.

15-Year Fixed Mortgage Rates: Virtually Unchanged, Up by 0.01%

The average 15-year mortgage rate currently stands at 6.29%, registering a marginal one basis point increase from the previous week. In contrast to the rate of 6.28% recorded a month ago, it remains essentially stable. With this rate, borrowers can anticipate monthly payments of $860 for every $100,000 borrowed. The 15-year fixed-rate mortgage offers predictability and the potential to save significantly on interest over the life of the loan.

7/1 ARM Rates: A 0.17% Increase

The 7/1 adjustable mortgage rate has experienced a slight uptick from the previous week, currently settling at 7.62%. This represents an increase from the 7.36% rate observed a month ago. For the first seven years, borrowers can expect monthly payments of $707 for every $100,000 borrowed, with subsequent adjustments in the following years based on the new rate.

5/1 ARM Rates: A Minor Decrease of 0.06%

The average 5/1 ARM rate has decreased slightly, now at 7.23%, compared to a slightly higher rate of 7.26% recorded last month. For the initial five years, borrowers would make monthly payments of $681 for every $100,000 borrowed.

30-Year FHA Rates: No Change

The average 30-year FHA interest rate remains stable at 6.04%, consistent with the previous week's rate. However, it reflects a decrease from the 6.68% rate noted a month ago. Borrowers considering FHA mortgages should note that a 3.5% down payment and a minimum 580 credit score are typically required to qualify.

30-Year VA Rates: Minimal Decrease of 0.02%

The current VA mortgage rate is 6.11%, a modest two basis point decrease from the previous week. Compared to a rate of 6.44% a month ago, it represents a slight reduction. With this rate, borrowers would allocate $607 monthly toward principal and interest for every $100,000 borrowed.

Now, let's delve into the refinancing rates:

30-Year Fixed Refinance Rates: Slight Decrease of 0.06%

The average 30-year refinance rate is 7.17%, slightly lower than the previous week. It also reflects a decrease from the 7.47% rate recorded a month ago. For every $100,000 borrowed, this rate would entail monthly payments of $677. While refinancing into a 30-year term may yield lower monthly payments, it's essential to consider the overall cost.

20-Year Fixed Refinance Rates: An Increase of 0.11%

The current 20-year fixed refinance rate stands at 6.92%, marking a rise from the previous week. In comparison to the 7.50% rate observed a month ago, it's still a more attractive option. Borrowers contemplating this rate would anticipate monthly payments of $771 for every $100,000 borrowed.

15-Year Fixed Refinance Rates: Decrease of 0.25%

The average 15-year fixed refinance rate is 6.50%, lower than the previous week. In contrast to the 6.68% rate noted last month, it offers potential savings. With this rate, borrowers would allocate $871 each month for every $100,000 borrowed. A 15-year term can result in long-term savings due to the lower interest rate, albeit with higher monthly payments.

7/1 ARM Refinance Rates: An Increase of 0.21%

The average 7/1 ARM refinance rate has risen slightly to 7.97%, compared to the previous week's rate. A month ago, it was at 7.42%. Borrowers considering this rate would have monthly payments of $732 for every $100,000 borrowed for the initial seven years, followed by annual adjustments.

5/1 ARM Refinance Rates: A Decrease of 0.27%

The 5/1 ARM refinance rate has decreased to 7.27%, down from the previous week. Compared to the 7.45% rate observed last month, it offers a more favorable option. For the first five years, borrowers can anticipate monthly payments of $684 for every $100,000 borrowed.

30-Year FHA Refinance Rates: No Change

The 30-year FHA refinance rate remains at 5.92%, consistent with the previous week. This rate is down from the 6.52% rate recorded a month ago. Borrowers considering FHA refinancing can expect monthly payments of $594 for every $100,000 borrowed.

30-Year VA Refinance Rates: A Minor Decrease of 0.01%

The average 30-year VA refinance rate is 6.34%, marking a minimal one basis point decrease from the previous week. In contrast to the 6.50% rate noted a month ago, it represents a slight reduction. Borrowers contemplating VA refinancing would allocate $622 monthly for every $100,000 borrowed.

In summary, mortgage rates have seen a decline in the short term, presenting potential opportunities for both homebuyers and those considering refinancing. However, the Federal Reserve's stance and economic indicators will play a pivotal role in shaping the mortgage rate landscape. As borrowers navigate these changes, exploring options like home equity lines of credit (HELOC) with low current rates can be a prudent strategy to leverage home equity for major expenses. For more information, check out our recommendations for the best HELOC lenders.

A HELOC functions as a flexible line of credit that allows you to borrow against your home's equity, providing financial flexibility akin to a credit card without the need to replace your existing mortgage. Furthermore, the current HELOC rates remain favorable compared to other borrowing options, such as credit cards and personal loans.

Posted in Market Updates