Unlocking the Benefits of Your Home's Equity

Some HighlightsEquity is the difference between what your house is worth and what you still owe on your mortgage.The typical homeowner gained $28,000 over the past year and has a grand total of $305,000 in equity. And there are a lot of great ways you can use that equity.To find out how much equity you have, connect with a real estate agent who can give you a Professional Equity Assessment Report (PEAR).

How the Economy Impacts Mortgage Rates

As someone who’s thinking about buying or selling a home, you’re probably paying close attention to mortgage rates – and wondering what's ahead.One thing that can affect mortgage rates is the Federal Funds Rate, which influences how much it costs banks to borrow money from each other. While the Federal Reserve (the Fed) doesn’t directly control mortgage rates, they do control the Federal Funds Rate.The relationship between the two is why people have been watching closely to see when the Fed might lower the Federal Funds Rate. Whenever they do, that’ll put downward pressure on mortgage rates. The Fed meets next week, and three of the most important metrics they’ll look at as they make their decision are:The Rate of InflationHow Many Jobs the Economy Is AddingThe Unemployment RateHere’s the latest data on all three.1. The Rate of InflationYou’ve probably heard a lot about inflation over the past year or two – and you’ve likely felt it whenever you’ve gone to buy just about anything. That’s because high inflation means prices have been going up quickly.The Fed has stated its goal is to get the rate of inflation back down to 2%. Right now, it’s still higher than that, but moving in the right direction (see graph below):2. How Many Jobs the Economy Is AddingThe Fed is also watching how many new jobs are created each month. They want to see job growth slow down consistently before taking any action on the Federal Funds Rate. If fewer jobs are created, it means the economy is still strong but cooling a bit – which is their goal. That appears to be exactly what’s happening now. Inman says:“. . . the Bureau of Labor Statistics reported that employers added fewer jobs in April and May than previously thought and that hiring by private companies was sluggish in June.”So, while employers are still adding jobs, they’re not adding as many as before. That’s an indicator the economy is slowing down after being overheated for quite some time. This is an encouraging trend for the Fed to see.3. The Unemployment RateThe unemployment rate is the percentage of people who want to work but can’t find jobs. So, a low rate means a lot of Americans are employed. That’s a good thing for many people.But it can also lead to higher inflation because more people working means more spending – which drives up prices. Right now, the unemployment rate is low, but it’s been rising slowly over the past few months (see graph below):It may seem harsh, but a consistently rising unemployment rate is something the Fed needs to see before deciding to cut the Federal Funds Rate. That’s because a higher unemployment rate would mean reduced spending, and that would help get inflation back under control.What Does This Mean Moving Forward?While mortgage rates are going to continue to be volatile in the days and months ahead, these are signs the economy is headed in the direction the Fed wants to see. But even with that, it’s unlikely they'll cut the Federal Funds Rate when they meet next week. Jerome Powell, Chair of the Federal Reserve, recently said:“We want to be more confident that inflation is moving sustainably down toward 2% before we start the process of reducing or loosening policy.”Basically, we’re seeing the first signs now, but they need more data and more time to feel confident that this is a consistent trend. Assuming that direction continues, according to the CME FedWatch Tool, experts say there’s a projected 96.1% chance the Fed will lower the Federal Funds Rate at their September meeting.Remember, the Fed doesn’t directly set mortgage rates. It’s just that whenever they decide to cut the Federal Funds Rate, mortgage rates should respond.Of course, the timing of when the Fed takes action could change because of new economic reports, world events, and other factors. That’s why it's usually not a good idea to try to time the market.Bottom LineRecent economic data may signal that hope is on the horizon for mortgage rates. Count on a local real estate agent you can trust to keep you up to date on the latest trends and what they mean for you.

A Newly Built Home May Actually Be More Budget-Friendly

If you’re in the market to buy a home, there’s some exciting news for you. Many people assume that newly built homes are more expensive than existing ones (houses that have already been lived in), but that’s not always the case. In fact, exploring newly built homes can sometimes lead to more cost-effective options, especially today. Hard to believe, right? But the data doesn’t lie.Here are two key reasons working with your agent to look into new home construction could help you find a more budget-friendly option.Reason 1: Lower Median Prices for Newly Built HomesThe median sales price for newly built homes is lower than the median sales price for existing homes today. This might seem surprising, but it’s true according to the latest data from the Census and the National Association of Realtors (NAR):Why is that? Builders are focused on building what they can sell. And right now, there’s a very real need for smaller and more affordable homes – so that’s what they’ve been bringing to the market. At the same time, there are also more newly built homes already on the market than there have been over the past few years, so builders are motivated to make sure they’re selling what they’ve got available before adding more.Reason 2: Attractive Incentives from Home BuildersAnother big reason to consider a newly built home is the range of incentives that many home builders are offering. Again, since builders are aiming to sell their current inventory, some are providing special deals to sweeten the pot for homebuyers. HousingWire explains today’s trend:“Overall, the usage of sales incentives was up to 61% in June, compared to 59% in May.”One of the most appealing incentives right now is how builders are able to offer competitive mortgage rates. They may also provide other incentives, such as covering closing costs, or offering free upgrades.Why This Matters to YouConsidering a newly built home could open up opportunities you hadn’t thought of before. With competitive pricing and attractive incentives, you might just find that a brand-new home is the most appealing option for you.Bottom LineBuying a home is a big decision, and it’s essential to consider all your options. By looking into newly built homes, you might find a perfect fit for your needs and your budget.Let’s explore the possibilities together. If you have any questions or want to see what’s available, reach out to a local real estate agent.

Why a Foreclosure Wave Isn’t on the Horizon

Even though data shows inflation is cooling, a lot of people are still feeling the pinch on their wallets. And those high costs on everything from gas to groceries are fueling unnecessary concerns that more people are going to have trouble making their mortgage payments. But, does that mean there’s a big wave of foreclosures coming? Here's a look at why the data and the experts say that’s not going to happen.There Aren’t Many Homeowners Who Are Seriously Behind on Their MortgagesOne of the main reasons there were so many foreclosures during the last housing crash was because relaxed lending standards made it easy for people to take out mortgages, even when they couldn’t show they’d be able to pay them back. At that time, lenders weren’t being as strict when looking at applicant credit scores, income levels, employment status, and debt-to-income ratio.But since then, lending standards have gotten a whole lot tighter. Lenders became much more diligent when assessing applicants for home loans. And that means we’re seeing more qualified buyers who have less of a risk of defaulting on their loans. That’s why data from Freddie Mac and Fannie Mae shows the number of homeowners who are seriously behind on their mortgage payments (known in the industry as delinquencies) has been declining for quite some time. Take a look at the graph below:  What this means is that, not only are borrowers more qualified, but they’re also finding ways to navigate through their challenges, exploring their repayment options, or maybe even using the record amount of equity they have to sell and avoid foreclosure entirely.The Answer Is: There’s No Sign of a Wave ComingBefore there can be a significant rise in foreclosures, the number of people who can’t make their mortgage payments would need to rise significantly. But, since so many buyers are making their payments today and homeowners have so much equity built up, a wave of foreclosures isn’t likely.Take it from Bill McBride of Calculated Risk – an expert on the housing market who, after closely following the data and market leading up to the crash, was able to see the foreclosure crisis coming in 2008. McBride says: “We will NOT see a surge in foreclosures that would significantly impact house prices (as happened following the housing bubble) for two key reasons: 1) mortgage lending has been solid, and 2) most homeowners have substantial equity in their homes.”Bottom LineIf you’re worried about a potential foreclosure crisis, know there’s nothing in the data to suggest that’ll happen. Buyers are more qualified now, and that’s one reason why they’re not falling seriously behind on their mortgage payments.