When is it a Good Time to Rent? Definitely NOT Now!

People often ask whether or not now is a good time to buy a home. No one ever asks when a good time to rent is. However, we want to make certain that everyone understands that today is NOT a good time to rent.

The Census Bureau just released their second quarter median rent numbers. Here is a graph showing rent increases from 1988 until today:

At the same time, a report by Axiometrics revealed:

“The national apartment market’s annual effective rent growth rate of 5.1% in June 2015 represented a 47-month high, and continued a streak of 5.0%-plus rent growth that is now the longest in at least six years, according to apartment market research. The effective rent growth in June 2014 was 3.7%, putting June 2015’s exceptional performance into perspective.

This is the highest rate since the 5.3% of July 2011. The metric has reached at least 5.0% for five straight months, the longest such streak since Axiometrics started monthly reporting of annual apartment data in April 2009.”

Where will rents be headed in the future?

Stephanie McCleskey, Axiometrics vice president of research, commented on the above report in an article by Real Estate Economy Watch:

“Rent growth is just shy of the post-recession peak, and the June metrics reflect the continued strength of the apartment market. The demand for apartments is still strong, despite the record number of new units being delivered this year. Tight occupancy is why landlords can push rents higher.”

Bottom Line

If you are ready, willing and of course able to buy, now may make sense.

Foreclosure Inventory Hits Lowest Mark in Over 7 Years [INFOGRAPHIC]

Some Highlights:

• The number of homes in the US in some stage of foreclosure is down 28.9% to 472,000.
• Only 3.5% of homes in the US are currently in serious delinquency.
• Foreclosure Inventory levels hit the lowest level since January 2008 at 1.2% of all homes with a mortgage.

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Where Are Mortgage Rates Headed? This Fall? Next Year?

The interest rate you pay on your home mortgage has a direct impact on your monthly payment. The higher the rate the greater the payment will be. That is why it is important to look at where rates are headed when deciding to buy now or wait until next year.

Below is a chart created using Freddie Mac’s July 2015 U.S. Economic & Housing Marketing Outlook. As you can see interest rates are projected to increase steadily over the course of the next 12 months.

How Will This Impact Your Mortgage Payment?

Depending on the amount of the loan that you secure, a half of a percent (.5%) increase in interest rate can increase your monthly mortgage payment significantly.

Dr. Frank Nothaft, the SVP & Chief Economist for CoreLogic, had this to say in their latest MarketPulse:

“If you are thinking of buying a home and have the financial means to do so, this could be a good time to take a look at the neighborhoods you are interested in. We expect home prices in our national index to be up about 4.3% in the next 12 months, and mortgage rates are also likely to increase over the next year.”

If both the predictions of home price and interest rate increases become reality, families would wind up paying considerably more for their next home.

Bottom Line

Even a small increase in interest rate can impact your family’s wealth. Meet with a local real estate professional to evaluate your ability to purchase your dream home.

Are Home Values REALLY at Record Levels?

Last week, the National Association of Realtors (NAR) released their Existing Home Sales Report. The report announced that the median existing-home price in June was $236,400. That value surpasses the peak median sales price set in July 2006 ($230,400). This revelation created many headlines exclaiming that home prices had hit a “new record”:

Wall Street Journal: Existing-Home Prices Hit Record

USA Today: Existing home sales surge, prices hit record

Though the headlines are accurate, we want to take a closer look at the story. We do not want people to believe that this information is evidence that a new “price bubble” is forming in housing.

NAR reports the median home price. That means that 50% of the homes sold above that number and 50% sold below that number. With fewer distressed properties (lower valued) now selling, the median price will rise. The median value does not reflect that each individual property is increasing in value.

Below are the comments from Bill McBride, the author of the esteemed economic blog Calculated Risk. McBride talks about the challenges with using the median price and also explains that in “real” prices (taking into consideration inflation) we are nowhere close to a record.

“In general I'd ignore the median sales price because it is impacted by the mix of homes sold (more useful are the repeat sales indexes like Case-Shiller or CoreLogic). NAR reported the median sales price was $236,400 in June, above the median peak of $230,400 in July 2006. That is 9 years ago, so in real terms, median prices are close to 20% below the previous peak. Not close.”

Earlier this week, the Wall Street Journal covered this issue in detail. In this story, Nick Timiraos explained that this rise in median prices is nothing to be concerned about:

“Does this mean we have another problem on our hands? Not really…There may be other reasons to worry about housing affordability by comparing prices with incomes or prices with rents for a given market. But crude comparisons of nominal home prices with their 2006 and 2007 levels shouldn’t be used to make cavalier claims about a new bubble.”

Bottom Line

Home values are appreciating. However, they are not increasing at a rate that we should have fears of a new housing bubble around the corner.

Mortgage Interest Rates Climb in June

RISMEDIA, Monday, August 03, 2015— Nationally, interest rates on conventional purchase-money mortgages increased from May to June, according to several indices of new mortgage contracts.

The National Average Contract Mortgage Rate for the Purchase of Previously Occupied Homes by Combined Lenders index was 3.85 percent for loans closed in late June, up 10 basis points from 3.75 percent in May.  

The average interest rate on all mortgage loans was 3.85 percent, up 10 basis points from 3.75 in May.

The average interest rate on conventional, 30-year, fixed-rate mortgages of $417,000 or less was 4.04 percent, an increase of 14 basis points from 3.90 in May.

The effective interest rate on all mortgage loans was 3.99 percent in June, up 9 basis points from 3.90 percent in May. The effective interest rate accounts for the addition of initial fees and charges over the life of the mortgage.

The average loan amount for all loans was $325,600 in May, up $14,700 from $310,900 in May.