Discussing home equity, affordability for the average American, home prices have increased and will continue increasing, more Americans optimistic about the future and more!
Tappable Equity Hits Highest Level on Record
From Black Knight:
- Total tappable equity is the highest dollar amount on record and 10 percent above the prior 2005 peak
- 75% of all tappable equity is now held by borrowers with rates below the prevailing 30-year rate
Black Knight Vice President Ben Graboske said:
As home prices continued their upward trajectory at the national level, the amount of tappable equity available to homeowners with mortgages continued to rise as well. Tappable equity rose by $735 billion over the course of 2017, the largest calendar year increase by dollar value on record.
At $5.4 trillion, total tappable equity is also the highest on record and 10 percent above the previous, pre-recession peak in 2005. An estimated $262 billion in tappable equity was withdrawn in 2017 via cash-out refinances and home equity lines of credit (HELOCs), also reaching a new post-recession peak.
Still, Americans seem more reserved in tapping their equity than in years past, withdrawing less than 1.25 percent of all tappable equity available in Q4 2017 – a four-year low. Of that total, 55 percent was tapped via HELOCs, the second lowest such share since the housing recovery began. However, as interest rates rise, it is likely that we will see the HELOC share of equity withdrawals increase as well.
Although it is very tempting to use the equity in your home, your home’s equity is NOT an ATM! You need to ONLY use the equity in your home sensibly so you do not become underwater!
Median-Priced Homes NOT Affordable for Average Wage Earners in 68% of US
ATTOM Data Solutions recently reported that median home prices in Q1 2018 were not affordable for average wage earners in 304 of 446 U.S. counties analyzed in the report (68%).
Attom determined affordability for average wage earners by calculating the amount of income needed to make monthly house payments — including mortgage, property taxes and insurance — on a median-priced home, assuming a 3 percent down payment and a 28 percent maximum “front-end” debt-to-income ratio. That required income was then compared to annualized average weekly wage data from the Bureau of Labor Statistics.
The way that home prices and mortgage have increased is not making things easy on home buyers with average incomes. Please remember that Attom is talking about many areas of the country BUT this may not apply for your local market.
Attom did say that the median priced home is affordable for the average wage earner in Anderson County SC. I would say that you need to determine what is truly affordable for you!
Talk to a mortgage lender to determine how much you qualify for. Then set your maximum budget by the corresponding monthly mortgage payment that is very comfortable and easy for your budget, income and lifestyle.
Remember to allow for taxes, insurance, maintenance/repairs and anything such as HOAs. You need to always remember to not bite off more than you can chew when buying a home!
More on Affordability
I just said that you must determine what is affordable for you. The report above and many reports or measurements on affordability but they mainly focus on average this or median that.
This obviously does not indicate what is best for everyone. There is a problem with relying on averages or median to make personal decisions that have a huge financial impact!
This is why a new report from the Urban Institute is so interesting:
Future changes in the homeownership rate will depend on the ability of today’s renters to become homeowners. Our proposed housing affordability for renters index (HARI) focuses on how affordable homeownership is for current renters.
We compare the share of renters who reported the same or more income than those who recently purchased a home using a mortgage, in effect measuring how many renters have enough income to purchase a house. For each metropolitan statistical area (MSA), we construct a local area index that compares renters and borrowers in the same MSA and a national index that compares renters nationwide with homeowners in a specific MSA.
The new indexes reveal that slightly more than a quarter of current US renters have incomes higher than those who recently became homeowners using a mortgage.
Urban Institute said that 27 percent of renters across the country earned at least as much as households who recently purchased a home using a mortgage. While this is talking about the entire country and still does not reflect what is possible or best for each person.
Still this is something to consider if you are renting and thinking about buying!
The Guaranteed Basic Income Scam
From Truth Dig:
A number of the reigning oligarchs—among them Mark Zuckerberg (net worth $64.1 billion), Elon Musk (net worth $20.8 billion), Richard Branson (net worth $5.1 billion) and Stewart Butterfield (net worth $1.6 billion)—are calling for a guaranteed basic income. It looks progressive. They couch their proposals in the moral language of caring for the destitute and the less fortunate. But behind this is the stark awareness, especially in Silicon Valley, that the world these oligarchs have helped create is so lopsided that future consumers, plagued by job insecurity, substandard wages, automation and crippling debt peonage, will be unable to pay for the products and services offered by the big corporations.
The old saying is you should not look a gift horse in the mouth. However, it could be that a guaranteed basic income is a Trojan Horse and not a gift horse.
I suggest that you follow the link to check out this must read!
US Home Prices Up Over 52% Since Hitting Bottom
- National prices increased 6.7 percent year over year
- Home prices forecast to rise 4.7 percent over the next year
- After adjusting for inflation, home prices were still 16 percent below the 2006 peak
- This is the 7th consecutive month of increases
Corelogic also said that lower-priced homes are increasing more than other price ranges. They said:
Appreciation in the low-price tier began pulling ahead of the other price tiers in 2013, and appreciation in the low-price tier has been steady since then.
As with all national reports, you have to look locally. In Anderson County, the very lowest priced homes are not really increasing so much as bouncing around at about the same level.
But this is because we are talking about some really ugly homes in areas that are unattractive to most buyers. Just because a home is cheap does NOT mean it is a good deal…
In Anderson County, if we look at homes priced between $90,000 and $150,000, we will see that demand is very strong and supply can be limited. Strong demand and limited supply means rising prices…
What you could expect to pay for a brick 3 bedroom 1 bath home a year ago was lower than what you pay have to pay now! And if you start looking at larger, nicer homes in areas with more demand, you will see a more pronounced increase in values.
This is why I often say that waiting can be expensive…
Frank Martell, President and CEO of CoreLogic said:
Family income is rising more slowly than home prices and mortgage rates, meaning that the mortgage payment takes a bigger bite out of income for new homebuyers.
Which is a nicer and less blunt way of saying that waiting can be expensive! Again, rising home prices will make mean you will be able to afford less in the future than you can today…
Experts Say Home Price Increases Will Continue
According to the experts in the latest Pulsenomics survey had this to say about home prices in the next 12 months:
- 21.6% believe prices will appreciate by 6% or more
- 71.6% believe prices will appreciate between 3 and 5.99%
- 5.7% believe prices will appreciate between 0 and 2.99%
- Only 1.1% believe prices will depreciate
Almost 99% think that home prices will increase this year and 93% think that home prices will increase by 3% this year. Something to think about if you are considering buying a home but not in a hurry…
Americans More Optimistic About Future of Next Generation
About six in 10 Americans say it is very or somewhat likely that today’s young people will have a better life than their parents did. The latest reading marks continued improvement since the low of 44% in 2011 but is still not back to the level of 66% measured in February 2008.
This is great news and a very encouraging sign for the future. If more people are feeling this optimistic about the future, then we might read into it that they would also be feeling more optimistic about buying a home.
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