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Why Your Mortgage Is Getting More Expensive

RisMedia Consumer News - February 21, 2018 - 2:48pm

(TNS)—World events are conspiring to make it more expensive for you to borrow money to buy a house.

Mortgage rates have increased for five consecutive weeks, according to Bankrate data, bringing interest on a 30-year fixed rate loan to 4.44 percent—the highest level in 11 months—while home prices continue to rise due to a lack of available homes.

After years of tepid economic growth, animal spirits are aflame. Inflation and wage growth recently found a groove, while the Federal Reserve’s plan to raise short-term interest rates multiple times for a consecutive year has reduced the value of government debt. The yield on 10-year Treasuries is close to a four-year high. (Bond prices and yields are inversely related.)

Oh, and China may reduce its appetite for U.S. bonds.

Homebuyers Should Get off the Fence
Mortgage rates are moved by the yield on 10-year Treasuries, rather than short-term rate hikes by the Fed. That’s why mortgage rates fell throughout 2017, for instance, even as the central bank raised the federal funds rate three times.

Rates remain cheap, however, compared to historical prices. A 30-year fixed-rate mortgage came with an interest rate above 6 percent just before the Great Recession in 2007.

Potential homeowners should get off the fence and make a bid, assuming you have an affordable home target and adequate savings, because rates are likely only heading north.

Why Mortgage Rates Are Increasing
You’ve seen this movie before.

Immediately after the 2016 election, investors sold government debt en masse, causing the 10-year yield to rise from 1.88 percent on November 8 to 2.60 percent five weeks later. That dramatic rise was predicated on investors thinking a newly Republican-controlled Washington would bring about faster economic growth through infrastructure spending and tax cuts.

Optimism waned throughout 2017, though, as the GOP failed to overhaul the Affordable Care Act, casting doubt on their cohesion as a governing party. The long-promised massive infrastructure bill never materialized, while the prospects of a tax overhaul dampened. By the first week of September, the 10-year yield was 2.05 percent.

But then Republicans made progress on a $1.5 trillion tax bill, while the employment picture continued to brighten, and the U.S. economy grew at a solid clip over the last six months of the year.

With Congress agreeing to a $300 billion spending bill—which will only throw more coal on the burning economy—investors see fewer reasons to own bonds. Economic growth and higher pay could result in long-awaited inflation gains. Prices have been rising below the Fed’s 2 percent target, according to the central bank’s preferred prices gauge, for years now.

Higher inflation is a boon for fixed-rate borrowers but hurts debtors. The January jobs report, which showed a 2.9 percent-year-over year earnings increase, was a signal to market observers that inflation may be coming.

Meanwhile, Bloomberg reported in January that China, the largest foreign holder of U.S. debt, may reduce or cease U.S. debt purchases, causing market jitters.

Should You Be Worried?
Given the recent run-up in yields, you may be worried—but don’t panic just yet.

“This is not alarming,” notes Chris Vincent, fixed income portfolio manager at William Blair. “There is no significant drama in the credit markets.”

Markets, after nearly a decade of low rates and low growth, are adjusting to the new normal and corresponding volatility—and while China may own over a trillion dollars of U.S. debt, that’s less than 20 percent of all debt owned by foreign nations, and a fifth of what America owes itself.

You are entering a world where it’s going to become more expensive to borrow money. It’s time to get used to it.

©2018 Bankrate.com
Distributed by Tribune Content Agency, LLC

For the latest real estate news and trends, bookmark RISMedia.com.

The post Why Your Mortgage Is Getting More Expensive appeared first on RISMedia.

Categories: Real Estate

Buyers Use Escalation Clauses to Win Bidding Wars

NAR Daily News Magazine - February 21, 2018 - 12:00am

But escalation clauses aren’t always a winning strategy for either buyers or sellers, housing experts warn. 

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2018 Home Sales Off to Sluggish Start

NAR Daily News Magazine - February 21, 2018 - 12:00am

Blame it on the housing shortage: Existing-home sales posted their largest declines on an annual basis in more than three years. Read more from...

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Man Pleads Guilty to Hiding Arizona Agent’s Body

NAR Daily News Magazine - February 21, 2018 - 12:00am

A handyman pleaded guilty to concealing the body of Sidney Cranston Jr., who disappeared two years ago after showing a property in a remote area...

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Higher Rates Offset Loan Demand

NAR Daily News Magazine - February 21, 2018 - 12:00am

Home buyers and homeowners may be getting spooked by higher mortgage rates, as loan applications plummet. 

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How Will Wakanda Come to Real Cities?

NAR Daily News Magazine - February 21, 2018 - 12:00am

The new super-hero movie is so popular that architects and urban planners are looking for ways to bring its look into real-life counterparts.

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Can Yelp Pinpoint the Next Big Neighborhood?

NAR Daily News Magazine - February 21, 2018 - 12:00am

Yelp reviews may be a key to help find neighborhoods on the edge of gentrification, where higher home prices may be on the horizon.

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Higher Rates Could Raise Housing Costs 15%

NAR Daily News Magazine - February 20, 2018 - 12:00am

If forecasted mortgage rate hikes pan out, home buyers may be paying much more expensive monthly payments. 

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Home Maintenance Can Cost Up to $2K a Year

NAR Daily News Magazine - February 20, 2018 - 12:00am

Find out the most common services homeowners use and how much they cost monthly.

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Stop Flu From Spreading to Your Listings

NAR Daily News Magazine - February 20, 2018 - 12:00am

These four tips will help your sellers keep the virus at bay during periods of high foot traffic from open houses and showings.

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How Buyers Misjudge the Mortgage Process

NAR Daily News Magazine - February 20, 2018 - 12:00am

Many consumers find it “stressful” or “complicated” to obtain a mortgage, according to recent surveys. Here are some of...

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Could Glut of Luxury Rentals Cause ‘Crisis’?

NAR Daily News Magazine - February 20, 2018 - 12:00am

Builders have focused for too long on serving the high-end market, while a shortage of affordable rental housing is worsening, economists warn.

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New-Home Market Picks Up the Pace

NAR Daily News Magazine - February 20, 2018 - 12:00am

The increase in single-family housing construction may help tame home price growth, while the uptick in multifamily units could help slow rent...

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Survey Finds Hidden Costs of Homeownership

RisMedia Consumer News - February 19, 2018 - 3:04pm

(TNS)—Your day burns brightly on both ends.

You prod your kids out of bed at daybreak, get them dressed, fed and off to school. You drive to work, endure meetings, colleagues, power lunches, memos and strategy sessions, only to return home through gridlocked traffic just as the sun sets, beg your kids to eat dinner, wash them, coax them to sleep, do the dishes and then mercifully collapse in front of the television set.

You fret over your emergency savings account, retirement savings account, credit card debt, mortgage rate, health insurance, college savings, and on and on.

It makes sense, then, you’d opt to pay a cleaning or lawn service every week to lighten your load. Hiring someone to keep your property in working order, either on your own or through homeowners association fees, doesn’t come cheap, though.

More than three in five homeowners—63 percent—use at least one recurring home maintenance provider, while 35 percent use two, according to a recent Bankrate survey. The average homeowner pays $2,000 annually on maintenance services, the survey finds.

Costs of Owning a Home
The price of biweekly landscaping probably never factored into your calculus when deciding how much house you can afford.

The average home mortgage neared $250,000 last year, according to the National Association of REALTORS®, which came with a monthly principal and interest payment of $973, or about one-sixth of median family income.

Homeowners saw an average property tax bill of $3,300 in 2016, according to ATTOM’s most recent data, adding another $275 to your monthly budget. You’ll also owe hundreds more in insurance premiums depending on where you live and what type of house you own.

That doesn’t even include the money you need saved in case something unexpected happens. If your air conditioning unit or washer and dryer gives out, you could immediately owe hundreds, if not thousands.

Kevin Mahoney, CEO of fee-only financial advice firm Illumint, recommends to designate a savings account as a “home maintenance fund.” Mahoney, who recently bought a renovated row house in Washington, D.C., contributes $100 to $200 a month as a hedge against unexpected repairs and wear-and-tear. Maintaining a house fund will inoculate you against high-interest debt, leaving your budget open for routine maintenance services.

Cost You Probably Didn’t Think About
After the years required to amass a sufficient down payment—the average among new homebuyers is 11 percent—and all the big costs staring homeowners in the face, it’s little wonder if you don’t account for smaller fare.

But the price tag for convenience can rise quickly.

People who opt for housekeeping shell out an average of $285 a month, while HOA dues ($210) and landscaping ($144) followed behind. A home security system costs $130, slightly more than pool care ($123). Snow removal ($84), septic service ($67) and trash and recycling collection ($55) proved more affordable.

Unsurprisingly, renters are less likely than homeowners to pay for recurring maintenance services, and when they do, they pay less for most services.

On average, renters pay less for housekeeping ($128), HOA dues ($71), pool care ($70), landscaping ($61) and snow removal ($24); however, they fork over a little more for security systems ($142), septic service ($113), and trash and recycling collection ($63).

Nate Masterson, a director of Finance for Maple Holistics, pays $1,000 annually for gardening services, and another $70 to clear his Riverside, N.Y., home of snow.

“It would require a lot of strenuous work to perform either task, and it’s simply more worthwhile for me to pay a professional,” says Masterson, 34.

Make Sure You Account for All Costs
Americans broadly struggle mightily to save.

The average person wouldn’t pay for an unexpected $1,000 expense from their savings, per a recent Bankrate survey, while the median amount in a savings and checking account for a middle-income household has essentially remained flat over the past 27 years, according to Federal Reserve data.

Credit card debt recently hit an all-time high, while the personal savings rate has dropped precipitously over the past two years.

If you don’t have a fully-funded emergency fund comprising three to six months’ worth of expenses in a high-yield savings account, strongly consider suspending as many as these services as possible until you do. Dropping almost $300 a month on housekeeping while lacking $1,000 in the bank is simply too risky. What if the roof caves in? At the very least, start contributing to a home maintenance fund.

You may not have a say in other costs—trash collection and HOA fees were two of the three most common—but make sure to account for those expenses into your budget prior to moving in, and in your emergency fund.

Life’s hard, and there’s nothing wrong with paying someone else to mow your lawn. Unless you can’t afford it.

©2018 Bankrate.com
Distributed by Tribune Content Agency, LLC

For the latest real estate news and trends, bookmark RISMedia.com.

The post Survey Finds Hidden Costs of Homeownership appeared first on RISMedia.

Categories: Real Estate

Brokerage’s Pig Stunt Annoys Seattle Residents

NAR Daily News Magazine - February 16, 2018 - 12:00am

Marketing campaigns can sometimes prompt backlash, as one startup real estate company learned this week.

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House Passes Bill to Curb ‘Drive-by’ Accessibility Lawsuits

NAR Daily News Magazine - February 16, 2018 - 12:00am

Legislation would likely lead to greater accountability by building owners with regard to potential violations of the...

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Builder Lets Consumers Design Its Model Homes

NAR Daily News Magazine - February 16, 2018 - 12:00am

Taylor Morrison Home Corp. is crowdsourcing the design of its model homes to give home shoppers more of a say through its myModel Home Project.

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Climbing Mortgage Rates Reach 4-Year High

NAR Daily News Magazine - February 16, 2018 - 12:00am

Rates continue to increase, soaring this week to the highest average since 2014. 

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First-Time Buyers May Have it Easiest Here

NAR Daily News Magazine - February 16, 2018 - 12:00am

First-time home buyers are entering the market under tight inventory conditions and rising home prices. But not all cities are posing a challenge...

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Are Romantic Addresses a Better Investment?

NAR Daily News Magazine - February 14, 2018 - 12:00am

A new study suggests a sales-to-love connection for certain sweet street names.

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