Page 2 of 71

The Power of Home Ownership

September 5, 2024 / Tom Bonetto

Imagine turning your monthly expenses into a growing investment, something that could multiply your net worth exponentially.

Billionaire Andrew Carnegie famously said that 90% of millionaires got their wealth by investing in real estate.

Not a lot of people know this, but the average homeowner’s net worth is 40 times that of a renter.

Right now, if you’re renting, you’re paying someone else’s mortgage, essentially filling their pockets, but getting zero in return for your own financial future.

Enter home ownership. It’s not just a roof over your head; it’s equity in your pocket. In fact, on average, two-thirds of a person’s net worth comes from home equity!

Plus, home values continue to appreciate. Case-Shiller recently reported that national home prices saw an annual gain of 5.4% for June, hitting another all-time high!

Switching from renter to homeowner is simpler than you might think. It’s a strategic move towards securing your financial future.

Just ask Peter Hernandez of Teles Properties:

“Most millionaires I know made more money from owning real estate than any other investment. Real estate consistently increases in value over time and outperforms other investments.

Plus, it isn’t as vulnerable to short-term fluctuations as the stock market. You get a tangible, usable asset, whether you’re renting out an apartment or commercial building for income or buying a home. And there can also be tax benefits for investment properties.”

Do reach out to me for help, as it would be my pleasure to work with you to explore a personalized buy vs rent scenario tailored just for you.

The blog postings on this site represent the positions, strategies or opinions of the author and do not necessarily represent the positions, strategies or opinions of Guild Mortgage Company or its affiliates. Each loan is subject to underwriter final approval. All information, loan programs, interest rates, terms and conditions are subject to change without notice. Always consult an accountant or tax advisor for full eligibility requirements on tax deductions.

Today’s Wealth Creation Opportunity in Housing

August 21, 2024 / Tom Bonetto

Articulating the financial opportunity that exists in homeownership is more important than ever. Especially as media misinformation continues to spread doom and gloom about the housing market – and endlessly predicting crashing home prices…incorrectly, of course.

The reality is that national home price gains continue…and in fact have reached new record highs, even in the face of high mortgage rates and rising inventory!

Home Prices

The Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices nationwide rose 0.3% from April to May after seasonal adjustment, breaking the previous month’s all-time high.

The 0.3% gain is the seasonally adjusted number, which considers the typically stronger appreciation seen during this time of the year. The non-seasonally adjusted figure showed that home values rose 0.9% in May alone.

Home values in May were also 5.9% higher than a year earlier, following a 6.3% annual gain in April.

The deceleration in the annual reading was due to a larger home price appreciation figure from May 2023, which was removed from the rolling 12-month calculation when the figure for May 2024 was added.

S&P DJI’s Head of Commodities, Brian D. Luke, explained, “While annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging. Our home price index has appreciated 4.1% year-to-date, the fastest start in two years.”

Should Buyers Wait?

Luke also addressed the crucial question many prospective buyers have wondered about: Should I wait for rates to move lower before buying a home?

He noted that all 20 cities in their composite index have observed annual gains for the last six months as “the waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward.”

And Case-Shiller was not alone in their reporting, as home price gains have also been seen in the other major indexes across the country. CoreLogic’s Home Price Index showed that prices rose 0.6% in May after rising 1.1% in April and 1.2% in March, confirming it’s been a strong season for home values nationwide.

Prices are also 4.9% higher when compared to May of last year.

In addition, ICE (formerly known as Black Knight) reported that national home values rose 0.3% in May after seasonal adjustment, with their index showing that prices are 4.6% higher than a year ago.

The Federal Housing Finance Agency’s House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts, also showed that home prices were flat in May and are up 5.7% year over year.

In Conclusion

The bottom line is that housing still proves to be one of the best investments for wealth creation. And it’s not too late for people to start building wealth through homeownership.

As the famous Chinese Proverb says, “The best time to plant a tree was 20 years ago. The second best time to plant a tree is today.”

Reach out to me for more information, as I’d be happy to strategize with you to see how can best take advantage of today’s real estate opportunities!

Missed Opportunities by Trying to Time the Market | Don’t Wait!

August 5, 2024 / Tom Bonetto

Those who have been waiting for mortgage rates to come down have missed a huge financial opportunity.

Home prices rose 6% in 2022, 6% in 2023 and 4% so far year-to-date in 2024.

person holding white ipad on brown wooden table

That means over the last 30 months home prices have risen on average 17% compounded.

Using a median home price of $350K 30 months ago – if you waited for rates to improve, you would have missed a $60,000 wealth creation opportunity.

But don’t let those statistics discourage you. Now’s a very good time to purchase, as appreciation gains look likely for the near future!

What the Experts Are Saying

Case-Shiller’s lead analyst, Brian Luke said “while annual gains have decelerated recently, this may have more to do with 2023 than 2024, as recent performance remains encouraging. Our home price index has appreciated 4.1% year-to-date, the fasted start in 2 years”

He goes on to talk about the cost of waiting, saying “the waiting game for the possibility of favorable changes in lending rates continues to be costly for potential buyers as home prices march forward.”

Mortgage Rates

Mortgage rates are near 12-month lows – as inflation seems to be coming down and the unemployment rate has moved higher.

Both of these are potential recession indicators, meaning that the Federal Reserve may cut the Federal Funds rate shortly. You can find out more here…

Pricing Pressure Ahead?

As rates move lower, more buyers will become eligible to purchase. In fact, the National Association of Realtors states that for every 1% decline in mortgage rates, 5 million more people can be eligible to buy.

Even if a small fraction of these eligible buyers decides to move forward, it will likely pressure prices higher and shrink the number of available home choices even further. More on that here…

The Bottom Line

Home price appreciation remains strong, despite higher mortgage rates and slightly increasing inventory.

Home values continue to set new all-time highs, and housing still proves to be one of the best investments out there. If you’ve been thinking about purchasing, now is a good time to do it!

Do reach out to me and we can strategize about your next purchase or refinance!

Federal Reserve “Getting Closer” to Rate Cuts

July 29, 2024 / Tom Bonetto

scrabble letters spelling fed on a green mat

After years of higher rates by the Federal Reserve, it looks like thing might be changing.

Thanks to friendly inflation readings throughout the second quarter, more Fed members are signaling they are “getting closer” to cutting interest rates.

Remember, the Federal Reserve does not control mortgage rates (you can find out more about that here), but their actions and comments do impact the mortgage market.

It looks like the first cut might happen at their meeting on September 18. Inflation and labor market data between now and then will play a pivotal role in this decision.

Nick Timaros, the Wall Street Journal’s go-to writer for all things Federal Reserve, recently penned an article title “A Fed Rate Cut Is Finally Within View” (subscription required).

Three Reasons

Timaros thinks that a September cut is likely given these three factors:

Inflation over the last quarter has shown progress and has given the Fed the confidence they need that inflation is going to get to their 2% target
The labor market is starting to cool, with the unemployment rate rising each of the last three months and now at a level of 4.1%
Fed Chairman Jerome Powell is concerned about waiting too long to cut rates and cause unnecessary economic weakness and a potential recession

What This Might Mean

A rate reduction this fall would be the first since the pandemic and could be a potential boost to the economy. Fed rate cuts, over time, typically lower borrowing costs for such things as mortgages, auto loans and credit cards.

It really depends on how the economy performs in the next few months. That factor will likely determine how quickly the Federal Reserve will act.

If economic growth remains solid and employers keep hiring, the Fed would most likely take its time and cut rates slowly as inflation continues to decline.

Mortgage Rates

For mortgage rate shoppers, one of the key messages for which to listen is the one the Fed talks about on inflation. Inflation is the enemy of mortgage bonds and, in general, when inflation pressures are growing, mortgage rates are rising.

Fortunately, this trend seems to be abating, but at a slow rate. We’ve also seen the 10-year Treasury Bond yield move lower, and that is actually a better measure of mortgage rates.

The 30-year fixed mortgage rate and 10-year treasury yield move together because investors who want a steady and safe return compare interest rates of all fixed-income products.

In Conclusion

We will be hearing more comments from the Federal Reserve and Chairman Powell over the next few weeks. Nothing is set in stone, but it does appear that rates might be coming down this fall.

How Much Can Sellers Contribute Towards Closing Costs?

July 22, 2024 / Tom Bonetto

One of the interesting things about purchasing a home is that the seller can actually help pay for the buyer’s closing costs.

When purchasing a home, prospective buyers will see various expenses beyond the purchase price, including closing costs.

One way to manage these costs is through interested party contributions (IPCs), which are payments made by parties involved in the transaction, such as the seller, builder, lender, or real estate agent.

Interested party contributions can significantly ease the financial burden on buyers by covering a portion of the closing costs, which typically range from 2% to 5% of the loan amount. These costs include fees for appraisals, inspections, title insurance, and loan origination, among others.

paper house labeled closing costs with keys

By negotiating IPCs, buyers can reduce the immediate cash required to finalize the home purchase, making homeownership more accessible. This arrangement is particularly beneficial for first-time homebuyers or those with limited liquid assets.

However, there are limitations and regulations governing IPCs to prevent inflation of property values and ensure fair lending practices. Different loan programs, such as conventional, FHA, and VA loans, have specific caps on the amount of IPCs allowed. Here are the specifics:

Conventional

For conventional loans, the amount of IPCs allowed actually depend on the down payment amount and if the transaction is an investment property purchase.

chart of occupancy type with LTV/CLTV ratio with max IPC

FHA

VA

While IPCs can alleviate some financial pressure, it is essential for buyers to consider the potential trade-offs. Accepting seller contributions might lead to a higher purchase price or less room for negotiating other favorable terms.

Buyers should carefully evaluate the overall cost-benefit scenario, ensuring that the contributions genuinely result in a net financial gain.

In Conclusion

By understanding the regulations and potential impacts on loan terms, buyers can strategically use IPCs to their advantage.

Reach out to me for more information, as I’d be happy to strategize with you to see how to best utilize IPC’s for your next transaction!

The Lending Coach

Page 2 of 71

The Power of Home Ownership

Today’s Wealth Creation Opportunity in Housing

Home Prices

Should Buyers Wait?

In Conclusion

Missed Opportunities by Trying to Time the Market | Don’t Wait!

What the Experts Are Saying

Mortgage Rates

Pricing Pressure Ahead?

The Bottom Line

Federal Reserve “Getting Closer” to Rate Cuts

Three Reasons

What This Might Mean

Mortgage Rates

In Conclusion

How Much Can Sellers Contribute Towards Closing Costs?

Conventional

FHA

VA

In Conclusion

Apply Now – Online Application

Schedule Appointment With Tom

Guild Mortgage

Contact Tom

About The Coach

Categories

BLOG ARCHIVES