Is it really 2016 already? For those of you who happen to be planning on buying a home in the new year—or even just trying to—there’s a whole lot to celebrate. Why? A variety of financial vectors have dovetailed to make this the perfect storm for home buyers to get out there and make an (winning) offer. Here are six home-buying reasons to be thankful while ringing in the new year:
Reason No. 1: Interest rates are still at record lows
Even though they may creep up at any moment, it’s nonetheless a fact that interest rates on home loans are at historic lows, with a 30-year fixed-rate home loan still hovering around 4%.
“Remember 18.5% in the ’80s?” asks Tom Postilio, a real estate broker with Douglas Elliman Real Estate and a star of HGTV’s “Selling New York.”“It is likely that we’ll never see interest rates this low again. So while prices are high in some markets, the savings in interest payments could easily amount to hundreds of thousands of dollars over the life of the mortgage.”
Reason No. 2: Rents have skyrocketed
Another reason home buyers are lucky is that rents are going up, up, up! (This, on the other hand, is a reason notto be thankful if you’re a renter.) In fact, rents outpaced home values in 20 of the 35 biggest housing markets in 2015. What’s more, according to the 2015 Rent.com Rental Market Report, 88% of property managers raised their rent in the past 12 months, and an 8% hike is predicted for 2016.
“In most metropolitan cities, monthly rent is comparable to that of a monthly mortgage payment, sometimes more,” says Heather Garriock, mortgage agent for The Mortgage Group. “Doesn’t it make more sense to put those monthly chunks of money into your own appreciating asset rather than handing it over to your landlord and saying goodbye to it forever?”
Reason No. 3: Home prices are stabilizing
For the first time in years, prices that have been climbing steadily upward are stabilizing, restoring a level playing field that helps buyers drive a harder bargain with sellers, even in heated markets.
“Local markets vary, but generally we are experiencing a cooling period,” says Postilio. “At this moment, buyers have the opportunity to capitalize on this.”
Reason No. 4: Down payments don’t need to break the bank
Probably the biggest obstacle that prevents renters from becoming homeowners is pulling together a down payment. But today, that chunk of change can be smaller, thanks to a variety of programs to help home buyers. For instance, the new Fannie Mae and Freddie Mac Home Possible Advantage Program allows for a 3% down payment for credit scores as low as 620.
Reason No. 5: Mortgage insurance is a deal, too
If you do decide to put less than 20% down on a home, you are then required to have mortgage insurance (basically in case you default). A workaround to handle this, however, is to take out a loan from the Federal Housing Administration—a government mortgage insurer that backs loans with down payments as low as 3.5% and credit scores as low as 580. The fees are way down from 1.35% to 0.85% of the mortgage balance, meaning your monthly mortgage total will be significantly lower if you fund it this way. In fact, the FHA predicts this 37% annual premium cut will bring 250,000 first-time buyers into the market. Why not be one of them?
Reason No. 6: You’ll reap major tax breaks
Tax laws continue to favor homeowners, so you’re not just buying a place to live—you’re getting a tax break! The biggest one is that unless your home loan is more than $1 million, you can deduct all the monthly interest you are paying on that loan. Homeowners may also deduct certain home-related expenses and home property taxes.
Demand: December residential sales were at 4,054, an increase of 4.7% from the previous year.
Price: Average and median sales prices continue to gain traction and outpace 2014's figures, with positive gains. The median sales price in December was $225,000, an increase of 7.1% from last December. The average sales price was $286,000, up 5.5% from the previous year.
Supply: Atlanta area housing inventory totaled 13,840 units in December, a decrease of 2.9% from December 2014. New listings totaled 2,904, up 2.3% from December 2014 and down 16.4% from the previous month. The supply for sales over a 12 month period declined to its lowest in 2015, at 3.2.
A Word from 2016 ABR President LaneMcCormack: "December was a very healthy month for the Atlanta housing market. Once the final numbers are in for 2015, I am confident that we will see a year of immense improvement, setting the stage for a return of more normal conditions in the months to come. According to Realtor.com, home prices rose 5-7% nationally in 2015, this growth is very evident in Metro Atlanta. Despite these rising prices, affordability remained strong, as we ended 2015."
The six-acre estate, in the Holmby Hills area of Los Angeles, is nearly 90 years old, but reports are that it's still in good condition — and we're sure it's going to attract some interest from buyers!
According to reports, the owner — Playboy Enterprises — believes it to be worth more than $200 million!
Other real estate sources say there's no chance they get that asking price, though, and that Playboy should expect something more like $80 million for the house and lot.
Still, not a bad payday!
There are two strings attached, though: first, anybody who buys the property must give Hefner a "life estate," somewhere he can live out his dies at the mansion until he dies.
And second, prospective buyers who are touring the house can go anywhere and everywhere… except Hefner's own bedroom!
If you had the money, would you buy the Playboy Mansion?!
Buying a home makes more financial sense than renting in more than half of U.S. housing markets. Despite home-price appreciation outpacing rent growth in 55 percent of markets, buying a home is still more affordable than renting in 58 percent of the nation's real estate markets, according to a new RealtyTrac report analyzing sales data from 504 counties with populations of at least 100,000.
Uphill Battle for Renters
Why Renters Can't Make the Move
Half of Renters Are Struggling to Afford Rent
94% of Young Renters Want to Buy
What's more, the rise in rents is outpacing weekly wage growth in 57 percent of the housing markets.
"Renters in 2016 will be caught between a bit of a rock and a hard place with rents becoming less affordable as they rise faster than wages, but home prices rising even faster than rents," says Daren Blomquist, vice president at RealtyTrac. "In markets where home prices are still relatively affordable, 2016 may be a good time for some renters to take the plunge into home ownership before rising prices and possibly rising interest rates make it increasingly tougher to afford to buy a home."
The report found that the least affordable markets for renters — where average wage earners need to spend the highest percentage of their income on renting a three-bedroom property — are counties in Honolulu, Washington, D.C., New York, and the Northern California metros of Salinas, Santa Cruz, and San Francisco. Average rents in all six of those markets require more than 60 percent of average wages.
Also, the markets that saw the largest increases in rents are:
Freddie Mac Chief Economist Sean Becketti is dismissing concerns that the Federal Reserve’s latest change in monetary policy could spell trouble for the real estate market. The Fed’s decision to raise its benchmark short-term rates will not cause mortgage rates to skyrocket, reduce housing affordability, or reverse recent improvements in the housing market, he writes on Freddie Mac’s Executive Perspectives blog.
In fact, Becketti predicts that the Fed’s move won’t take much of a toll on mortgage rates at all. As an example, he cites a time during the mid-2000s when the 17 consecutive monthly rate hikes issued by the Fed basically had no effect on mortgage rates, which remained at about 6 percent.
That said, Becketti does suggest long-term rates will begin to nudge upward this year, but only marginally compared to short-term rates. Regardless, even a slight increase in mortgage rates could hamper home affordability, particularly for first-time home buyers or low-to-moderate income buyers. He says that could dampen home price increases at the lower tier of the market.
Becketti predicts that mortgage rates will increase gradually from 2015’s 4.1 percent to an average of 4.4 percent by the end of 2016. He expects home prices to moderate more in the new year too, increasing about 4.4 percent this year.
“While we believe the housing sector will remain strong in 2016, there is some uncertainty about the strength of the broader economy,” Becketti says.