Tips for Moving Into a Smaller House as a Senior

 

 

For many seniors, there comes a time when the expense and upkeep of a big home no longer seem realistic. All of your kids have moved out, and suddenly, your multi-bedroom house feels excessively large and empty. Plus, it may be difficult to keep up with mortgage payments if you’re expecting a lower income during retirement. Whether downsizing is a financial necessity or an emotional decision, here’s how to tackle the process without getting overwhelmed.

Do Online Research

Before you start looking at houses in person, narrow down your options by doing some research online. Search the local housing market on sites or reach out to a Realtor to get a feel for house prices in your desired area. Explore listings in your preferred size range and location so you can come up with a realistic budget for your new home.

Think far ahead as you look at homes, considering the possibility that the needs of you and your spouse may change over time. One-story homes can be much more accessible for you and your friends down the line. You should also take time to research the neighborhood and pay attention to the house’s proximity to grocery stores, leisure centers, and public transportation.

Plan for Your Storage Needs

If you’re moving to an apartment or condo, you may not have the attic, basement, or even the closet space that you’re used to. Look for a nearby for an affordable self-storage unit so you aren’t left crowding boxes and furniture into your new home. Some simple online research can help you find the best deals in your area.

Go Through Your Possessions Methodically

One of the hardest parts about downsizing is getting rid of things you’ve had for decades. Apartment Guide recommends looking at pictures of clutter-free homes in magazines or do a search on google for inspiration before starting your own purge. This will mentally prepare you for getting rid of all the stuff you don’t need cluttering up your new, smaller space.

As you declutter, go room by room and sort items into no more than five piles: keep, donate, sell, gift, and throw away. Don’t be afraid to let go of things that are useful but not particularly necessary in your own life. Likewise, don’t keep things out of obligation or feelings of guilt. While you’re cutting the clutter, keep a floor plan of your new home nearby so you can plan out your rooms and ensure your furniture will fit.

Pack Like a Pro

Protect your items during your move and make them easier to unpack later by trying out some expert packing tips. For example, socks make great padding for glasses and mugs, while oven mitts are perfect for transporting knives a little more safely. Secure entire desk drawers and kitchen storage trays with plastic wrap for much faster unpacking later. Also, keep your clothing on hangers and simply slip a garbage bag over them for protection. Remember to pack an essentials box of everything you need during your first day and night in your new house.

Follow a Moving Checklist

There is a lot to remember to do before moving day. For example, you need to update your mailing address with the post office, find a new doctor, and transfer your utilities. Follow a moving checklist (or hire a senior move manager for around $316 per day) to avoid forgetting important tasks. One of your moving tasks should involve researching moving companies at least two months before your move. This gives you plenty of time to find the help you need within your budget. Learn about how to spot rogue moving companies so you can avoid being scammed, especially if you’re moving long distance.

Moving is exhausting for anyone. But moving into a smaller home can be especially emotional as you say goodbye to personal objects that have surrounded you for much of your life. For this reason, it’s important to take things slow while you sort through your possessions and search for the perfect place to spend your golden years.

 


Posted on January 16, 2019 at 10:00 am
Kara Brem | Posted in Uncategorized |

Tips for Downsizing

downsizing to move

Downsizing is both freeing and stressful. It’s never easy to pare down a lifetime of memories, and most of us tend to associate our belongings with events and the people we love.  Here are some downsizing tips to help make sure you don’t make any mistakes, but pare down enough to happily move to a smaller home or apartment.

Browse beautiful rooms & contemplate simplicity

You can simply thumb through magazines and books, or peruse the beautiful images of Houzz.com.  Pay attention to how little clutter you see.  Pay attention to the positive feelings you have about those simplified rooms.  Get yourself mentally prepared – if not excited – that you have the opportunity to live in a simpler space, a space filled with ONLY the things you love.

Hot Tip: Tape a photo of a beautiful, simplified room into each room of your home; they can inspire you during your purge.

Think, too, about how many things you own that you haven’t actually used, touched or even seen in over a year. Focus on the joy you will feel by donating, selling or giving those items away. No matter which option you choose, you win.

Ask who wants some of your belongings

Ask family members and close friends if they would be interested in any of your belongings before you start to sort.  Ask them to list what type of items they might be interested in, or to make any specific requests (in case someone loves a particular painting, memento or piece of furniture). If you don’t get a reply – especially from those under the age of about 30 – make a mental note to save a few things for them ANYWAY. They might be too young to know the value of sentiment.

Buy Rubber Tubs for Items You’ll be Gifting

These are your gift tubs; we recommend rubber tubs with lids that seal tight. Think of them like a lovely gift, because they are. With each piece of jewelry, photo, letter, memento, homemade quilt or old letter jacket, you are filling this box with treasures that are sure to elicit a smile. Picture future generations of your family enjoying or telling stories about these items. Label your tubs and put them in one room of the house.

If you have lots of family pics, consider one galllery wall of favorites and ask your kids to take or digitize the rest.
If you have lots of family pics, consider one gallery wall of favorites.  Ask your children to take or digitize the remaining images.

Identify items you absolutely LOVE or CHERISH

Picture having to quickly evacuate your home.  What few items would utterly devastate you if they were lost? (We’re not talking about collectibles with value; we’ll get to those in a minute).  These are likely photos, letters, artwork, handmade gifts or things you made, jewelry, a small family heirloom, perhaps an item or two from your travels.  What sentimental items would you save from  a burning house?  Gather or identify these items first (sticky notes might help, or start a list).

Keep this selection deliberately small.  It’s special. There’s another level of belongings you can keep which are non-critical. But a ‘personal treasure’ pile should fit in your backseat.

sort belongings for downsizing

Room by Room: Gift, Sell, Donate or Trash

Now you’re ready to go room by room and learn the extraordinary feeling of lightness that a purge can bring.  There are the four categories that matter most to you now: gift, sell, donate, trash.  The more items you can identify for each category, the happier you will be (and the lighter your load at moving time).  Tackle your home room by room; you’ll have a larger feeling of accomplishment that way.

If you have the space to do so, move items you plan to sell or donate into dedicated spaces, like the garage or a spare room.  Fill your rubber gift tubs.  And think about how you’d like to sell other items.  There’s ebay (yourself or through a hired seller); consignment stores; online apps and Facebook sale pages; a garage sale; or – if you amass enough items – an estate sale or auction.  It won’t be long before you get a rush from filling your trash cans.  You can do it!

It also helps to have a floor plan of your new home, with the dimensions on it.  Measure your favorite furnishings and figure out which pieces will comfortably fit into new spaces, and which should find a new home. There’s fun in acquiring a few pieces for a smaller home, and selling, auctioning or consigning older furnishings and collectibles might well cover those expenses.

Hot Tip: Many cities have thrift stores and organizations which will pick up items if scheduled on the day the truck goes to your neighborhood.

high school letter jacket
Don’t throw out a high school letter jacket or other special personal items without giving your children a chance to claim them.

Where to be careful

There are a few mistakes you can make. One is getting rid of your children’s items without telling them. Give adult children a deadline by which to claim their left-behind items. Send them pics from your phone if they’re far away.  Offer to ship them a box but don’t consider moving their items to your smaller home. The time has come. You are no longer obligated to store their old school yearbooks or letter jackets, cheerleading uniforms or trophies.

If you’re downsizing after a tragedy, don’t go overboard. You might consider putting some things in storage for a year, or having a friend help you decide what to keep. Emotions run high after unexpected events, and if you’re depressed, you may get rid of things you’ll want later. Don’t, however, use this as an excuse to keep everything.

The last warning: don’t be sloppy when it comes to collectibles. Set them aside until you can get them evaluated by an expert, or at least a friend or relative with a computer. These might include baseball cards, signed memorabilia, vintage toys or artisan crafted pieces.

Items you only need ONE of

Here’s a quick list to help you pare down some things of which we all accumulate extras.  these are items you likely only need one of

Set of dishes
Set of glassware
Set of tupperware
Set of mixing bowls
Large serving platter
Household tools (hammer, screwdriver, tape measure)
Extra blankets  (keep one heavy and one light, per guest bed)
Large winter and summer purse
Coat for each type of weather (extra warm, lighter weight, rain jacket, windbreaker)
Umbrella (one travel size, one oversized)
Cooler (you might keep a small one for car trips or picnics with grandkids)
Set of small tools, measuring tape

Hot Tip: Remember that donations will be a tax write-off.  Always get a receipt.  

Items you won’t need in an apartment or smaller home

Ladders larger than a step-stool
Garden tools
Wheelbarrow
Large power tools
Excessive outdoor Christmas decorations

Hot Tip:  If an item’s been in a box for more than a year, it’s very likely time to let it go. 

[find-an-apartment]

Ask a friend or professional to help

If you have trouble with decision-making, ask someone impartial to help you, someone who embraces your goal. A friend won’t have the same emotional attachment to your items, and can help you narrow down your belongings, while ALSO helping make sure you keep what you love. A professional or aspiring home organizer is a great investment. They will be efficient while also being kind.


Posted on January 16, 2019 at 9:48 am
Kara Brem | Posted in Uncategorized |

Excited About Buying A Home This Year? Here’s What to Keep an Eye on

Excited About Buying A Home This Year? Here's What to Watch | MyKCM

As we kick off the new year, many families have made resolutions to enter the housing market in 2019. Whether you are thinking of finally ditching your landlord and buying your first home or selling your starter house to move into your forever home, there are two pieces of the real estate puzzle you need to watch carefully: interest rates & inventory.

Interest Rates

Mortgage interest rates had been on the rise for much of 2018, but they made a welcome reversal at the end of the year. According to Freddie Mac’s latest Primary Mortgage Market Survey, rates climbed to 4.94% in November before falling to 4.62% for a 30-year fixed rate mortgage last week. Despite the recent drop, interest rates are projected to reach 5% in 2019.

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 to buy will decrease if you plan to stay within a certain monthly housing budget.

The chart below shows the impact that rising interest rates would have if you planned to purchase a $400,000 home while keeping your principal and interest payments between $2,020-$2,050 a month.

Excited About Buying A Home This Year? Here's What to Watch | MyKCM

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).

Inventory

A ‘normal’ real estate market requires there to be a 6-month supply of homes for sale in order for prices to increase only with inflation. According to the National Association of Realtors (NAR), listing inventory is currently at a 3.9-month supply (still well below the 6-months needed), which has put upward pressure on home prices. Home prices have increased year-over-year for the last 81 straight months.

The inventory of homes for sale in the real estate market had been on a steady decline and experienced year-over-year drops for 36 straight months (from July 2015 to May 2018), but we are starting to see a shift in inventory over the last six months.

The chart below shows the change in housing supply over the last 12 months compared to the previous 12 months. As you can see, since June, inventory levels have started to increase as compared to the same time last year.

Excited About Buying A Home This Year? Here's What to Watch | MyKCM

This is a trend to watch as we move further into the new year. If we continue to see an increase in homes for sale, we could start moving further away from a seller’s market and closer to a normal market.

Bottom Line

If you are planning to enter the housing market, either as a buyer or a seller, let’s get together to discuss the changes in mortgage interest rates and inventory and what they could mean for you.

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

Posted on January 8, 2019 at 8:00 am
Kara Brem | Posted in Uncategorized |

Proof It’s NOT 2008 All Over Again

Further Proof It’s NOT 2008 All Over Again | MyKCM

Home sales numbers are leveling off, the rate of price appreciation has slowed to more historically normal averages, and inventory is finally increasing. We are headed into a more normal housing market.

However, some are seeing these adjustments as red flags and are suggesting that we are headed back to the same challenges we experienced in 2008. Today, let’s look at one set of statistics that prove the current market is nothing like the one that preceded the housing crash last decade.

The previous bubble was partially caused by unhealthy levels of mortgage debt. New purchasers were putting down the minimum down payment, resulting in them having little if any equity in their homes.

Existing homeowners were using their homes as ATMs by refinancing and swapping their equity for cash. When prices started to fall, many homeowners found themselves in a negative equity situation (where their mortgage was higher than the value of their home) so they walked away which caused prices to fall even further. When this happened, even more homeowners found themselves in negative equity situations which caused them to walk away as well, and so a vicious cycle formed.

Today, the equity situation is totally different. According to a new report from ATTOM Data Solutions more than 1-in-4 homes with a mortgage have at least 50% equity. The report explains:

“…nearly 14.5 million U.S. properties were equity rich — where the combined estimated amount of loans secured by the property was 50 percent or less of the property’s estimated market value…The 14.5 million equity rich properties in Q3 2018 represented 25.7 percent of all properties with a mortgage.”

In addition, according to the U.S. Census Bureau, 30.3% of homes in the country have no mortgage on them.

Further Proof It’s NOT 2008 All Over Again | MyKCM

Almost 50% of all homes have at least 50% equity.

If we take both numbers, the 30.3% of all homes without a mortgage and the 17.9% with at least 50% equity (25.7% of the 69.3% of homes with a mortgage), we realize that 48.2% of all homes in the country have at least 50% equity.

Bottom Line

Unlike 2008, almost half of the homeowners in the country are sitting on massive amounts of home equity. They will not be walking away from their homes if the housing market begins to soften.


Posted on December 5, 2018 at 9:27 am
Kara Brem | Posted in Uncategorized |

75% of Renters Have Been Misinformed

75% of Renters Have Been Misinformed | MyKCM

Recently, multiple headlines have been written asserting that homeownership is less affordable today than at any other time in the last decade. Though the headlines are accurate, they lack context and lead too many Americans to believe that they can’t partake in a major part of the American Dream – owning a home.

In 2008, the housing market crashed and home values fell by as much as 60% in certain markets. This was the major trigger to the Great Recession we experienced from 2008 to 2010. To come back from that recession, mortgage interest rates were pushed down to levels that were never seen before.

For the last ten years, you could purchase a home at a dramatically discounted price and attain a mortgage at a historically low mortgage rate.

Affordability skyrocketed.

Now that home values have returned to where they should be, and mortgage rates are beginning to increase, it is less affordable to own a home than it was over the last ten years.

However, what is not being reported is that it is MORE AFFORDABLE to own a home today than at any other time since 1985 (when data was first collected on this point).

If you take out the years after the crash, affordability today is greater than it has been at almost any time in American history.

This has not been adequately reported which has led to many Americans believing that they cannot currently afford a home.

As an example, the latest edition of Freddie Mac’s Research: Profile of Today’s Renterreveals that 75% of renters now believe it is more affordable to rent than to own their own homes. This percentage is the highest ever recorded. The challenge is that this belief is incorrect. Study after study has proven that in today’s market, it is less expensive to own a home than it is to rent a home in the United States.

Thankfully, some are starting to see this situation and accurately report on it. The National Association of Realtors, in their 2019 Housing Forecast, mentions this concern:

“While the U.S. is experiencing historically normal levels of affordability, potential buyers may be staying out of the market because of perceived problems with affordability.”

Bottom Line

If you are one of the many renters who would like to own their own homes, let’s get together to find out if homeownership is affordable for you right now.


Posted on November 15, 2018 at 9:20 am
Kara Brem | Posted in Real estate |

Still Think You Need 15-20% Down to Buy a Home? Think Again!

Still Think You Need 15-20% Down to Buy a Home? Think Again! | MyKCM

According to a new study from Urban Institute, there are over 19 million millennials in 31 cities who are not only ready and willing to become homeowners, but are able to as well!

Now that the largest generation since baby boomers has aged into prime homebuying age, there will no doubt be an uptick in the national homeownership rate. The study from Urban Institute revealed that nearly a quarter of this generation has the credit and income needed to purchase a home.

Surprisingly, the largest share of mortgage-ready millennials lives in expensive coastal cities. These cities often attract highly skilled workers who demand higher salaries for their expertise.

So, what’s holding these mortgage-ready millennials back from buying?

Myths About Down Payment Requirements! 

Most of the millennials surveyed for the study believe that they need at least a 15% down payment in order to buy a home when, in reality, the median down payment in the US in 2017 was just 5%, and many programs are available for even lower down payments!

The study goes on to point out that:

“Despite limited awareness, every state has programs that provide grants and loans to make homeownership more attainable, with average assistance in various states ranging from $2,436 to $21,171.”

Bottom Line

With so many young families now able to buy a home in today’s market, the demand for housing will continue for years to come. If you are one of the many millennials who have questions about their ability to buy in today’s market, let’s get together so we can assist you along your journey!


Posted on October 24, 2018 at 9:17 am
Kara Brem | Posted in Uncategorized | Tagged , , , , , , , ,

Minimize and simplify your life. Are you ready?

 

October 17, 2018

Written through real-life experience by:  Kara Brem

Image may contain: indoor

Have you considered what it would feel like to let go of the “stuff” in your life and downsize?  To remove all the excess items you’ve acquired over the years and really minimize? 

I recently did just that and I will tell you…it feels better than I ever imagined.  Everything I own now fits in my recently purchased 800 sq ft one bedroom La Costa condo and 1 car garage…including my car!

Living a minimalist lifestyle is not for everyone.  It’s certainly a case-by-case scenario and if you still have little ones in the house there are other versions of minimalism or simplifying that can also be rewarding, without limiting your living space to an extreme degree. 

In my situation, my independent daughter is 25 and has been out of the house for years.  She’s not coming home to live with mom anytime soon.   When she does come for a visit, I splurge and get her an airbnb right down the street.  She has her space and I have mine.  It’s perfect!


 

 

When I bought my little condo, people thought I was a tad off my rocker.  Some thought I must be experiencing financial difficulties.  WHY would I ever want to do such a thing and why live in a small space?

 

 

Well here you have it.  These are  the benefits I’ve experienced thus far in my minimizing adventure:

  • I know exactly where EVERYTHING I own is.  No more searching through boxes or cabinets looking for that one item.
  •  I’m organized beyond belief.  You have to be in a small space!
  • Instead of buying a home that was MORE than I needed, I now have money to travel, explore, and enjoy life when I have the time off work.  I’m not a slave to my mortgage.
  • My manageable mortgage payment allows me to start on my next life goal…purchasing investment properties to create future financial comfort and stability for my “later years”.
  • I don’t waste my money on anything I don’t need because it just doesn’t fit!  If I want to purchase something, something else has to go first.

 

Letting go and giving away my excess “stuff” allowed me to share things I did not need with those that did.  Smiles for days.  This activity was enough to make me want to give away more and so I did!  People are so appreciative and many needed these things much more than I did.                                                                     

So, if this sounds like a way of life you’d like to explore and if you’re ready to downsize, let’s get started looking for your new home. It’s a great time to start a new, simple lifestyle and it starts with your home base.  I’m happy to help and I’m so excited about this new way of life I just want everyone to experience it.
 

 

 


Posted on October 17, 2018 at 9:38 am
Kara Brem | Posted in Real estate, Uncategorized |

What Does the Future Hold for Home Prices?

What Does the Future Hold for Home Prices? | MyKCM

Home prices are at the top of everyone’s minds. Can they maintain their current pace of appreciation? Will rising mortgage rates negatively impact home values? Will the next economic slowdown cause prices to crash?

Let’s try to answer these questions based on what has happened in the past as well as what we know about the current real estate market.

The Impact of Rising Interest Rates

We explained earlier this year that rising mortgage rates have not negatively impacted home prices in the past and probably wouldn’t this time either. Freddie Mac’s comments were very direct:

“In the current housing market, the driving force behind the increase in prices is a low supply of both new and existing homes combined with historically low rates. As mortgage rates increase, the demand for home purchases will likely remain strong relative to the constrained supply and continue to put upward pressure on home prices.”

They were correct. So far this year, home values have continued to appreciate above normal historic percentages and it appears the gradual increase in rates has had little impact on prices.

The Impact of an Economic Slowdown

Many people fear that when the economy turns, we may see the same depreciation in home values as we did a decade ago.

However, we recently reported that the same group of economists, real estate experts, and investment & market strategists who predicted the next recession will occur in the next 18-24 months have also projected that house prices will continue to appreciate for the next five years, albeit at smaller percentages.

It Comes Down to Supply and Demand

As always, home prices will be determined by the demand to purchase compared to the available inventory of homes for sale. For the last six years, demand has far exceeded the available supply which has resulted in the average annual appreciation to top 6% since 2012. That is far greater than the historic norm of 3.6% annual appreciation that we saw prior to the housing boom.

There are currently small signs that housing inventory is slowly beginning to increase. Months supply of houses for sale matched last year’s numbers for the last two months after 37 consecutive months of decreasing inventory. New construction data has also shown positive signs that inventory will be increasing.

As inventory begins to meet demand, we will see appreciation return to more normal levels. We are already seeing projections coming in lower than the 6.2% annual average we have seen more recently.

CoreLogic is predicting that home values will appreciate by 5.1% over the next twelve months and the Home Price Expectation Survey calls for values to increase by 4.2% in 2019.

Bottom Line

Mark Fleming, Chief Economist at First American, explained it best:

“We’re seeing the first indications that price appreciation may be slowing, but the underlying fundamental housing market conditions support a natural moderation of house prices rather than a sharp decline.”

 

The information contained, and the opinions expressed, in this article are not intended to be construed as investment advice. Keeping Current Matters, Inc. does not guarantee or warrant the accuracy or completeness of the information or opinions contained herein. Nothing herein should be construed as investment advice. You should always conduct your own research and due diligence and obtain professional advice before making any investment decision. Keeping Current Matters, Inc. will not be liable for any loss or damage caused by your reliance on the information or opinions contained herein.

Posted on September 11, 2018 at 10:39 am
Kara Brem | Posted in Uncategorized |

Housing Market: Another Gigantic Difference Between 2008 and 2018

Housing Market: Another Gigantic Difference Between 2008 and 2018 | MyKCM

Some are attempting to compare the current housing market to the market leading up to the “boom and bust” that we experienced a decade ago. They look at price appreciation and conclude that we are on a similar trajectory, speeding toward another housing crisis.

However, there is a major difference between the two markets. Last decade, while demand was being artificially created by extremely loose lending standards, a tremendous amount of inventory was coming to the market to satisfy that demand. Below is a graph of the inventory of homes available for sale leading up to the 2008 crash.

 

Housing Market: Another Gigantic Difference Between 2008 and 2018 | MyKCM

A normal market should have approximately 6 months supply of housing inventory. As we can see, that number jumped to over 11 months supply leading up to the housing crisis. When questionable mortgage practices ceased, and demand dried up, there was a glut of inventory on the market which caused prices to drop as there was too much supply and not enough demand.

Today is radically different!

There are those who believe that low mortgage rates have created an artificial demand in the current market. They fear that if mortgage rates continue to rise, some of the current demand will dry up (which is a possibility).

However, if we look at supply again, we can see that the current supply of homes is well below the norm of 6 months.

Housing Market: Another Gigantic Difference Between 2008 and 2018 | MyKCM

Bottom Line

We will not have a glut of inventory like we did back in 2008 and home values won’t come tumbling down. Instead, if demand weakens, we will return to a normal market (approximately a 6-month supply) with historic levels of appreciation (3.6% annually).


Posted on August 21, 2018 at 9:53 am
Kara Brem | Posted in Uncategorized |

4 Reasons Why We Are Not Heading Toward Another Housing Bubble

4 Reasons Why We Are Not Heading Toward Another Housing Bubble | MyKCM

With home prices continuing to appreciate above historic levels, some are concerned that we may be heading for another housing ‘boom & bust.’ It is important to remember, however, that today’s market is quite different than the bubble market of twelve years ago.

Here are four key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates
  4. Housing Affordability

1. HOME PRICES

There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.

Last week, CoreLogic reported that,

“The inflation-adjusted U.S. median sale price in June 2006 was $247,110 (or $199,899 in 2006 dollars), compared with $213,400 in March 2018.” (This is the latest data available.)

2. MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a monthly index which,

“…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 that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Their July Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

3. FORECLOSURE RATES

A major cause of the housing crash last decade was the number of foreclosures that hit the market. They not only increased the supply of homes for sale but were also being sold at 20-50% discounts. Foreclosures helped drive down all home values.

Today, foreclosure numbers are lower than they were before the housing boom. Here are the number of consumers with new foreclosures according to the Federal Reserve’s most recent Household Debt and Credit Report:

  • 2003: 203,320 (earliest reported numbers)
  • 2009: 566,180 (at the valley of the crash)
  • Today: 76,480

Foreclosures today are less than 40% of what they were in 2003.

4. HOUSING AFFORDABILITY

Contrary to many headlines, home affordability is better now than it was prior to the last housing boom. In the same article referenced in #1, CoreLogic revealed that in the vast majority of markets, “the inflation-adjusted, principal-and-interest mortgage payments that homebuyers have committed to this year remain much lower than their pre-crisis peaks.”

They went on to explain:

“The main reason the typical mortgage payment remains well below record levels in most of the country is that the average mortgage rate back in June 2006, when the U.S. typical mortgage payment peaked, was about 6.7 percent, compared with an average mortgage rate of about 4.4 percent in March 2018.”

The “price” of a home may be higher, but the “cost” is still below historic norms.

Bottom Line

After using these four key housing metrics to compare today to last decade, we can see that the current market is not anything like that bubble market.


Posted on August 1, 2018 at 10:43 am
Kara Brem | Posted in Uncategorized |