What Does Reduced Home Affordability Mean for You?

Home affordability is shrinking fast. Here’s what you should do to get ahead of the curve.

Home affordability is shrinking rapidly, according to research by Arch Mortgage Insurance. In the first quarter, affordability (defined as the size of the monthly mortgage payment needed to buy a home) dropped by 5%. This was mainly due to the increase in mortgage rates. As a consequence, more people are now stretched and taking on greater debt relative to their income. Other buyers are being pushed out of the market altogether. 

That's not all. Affordability is expected to drop an additional 15% to 20% by the end of the year. That's because home prices continue to rise, and the Federal Reserve is expected to ratchet up its reference interest rate, which often leads mortgage rates, three more times this year.

What does this mean for you?

If you're looking to sell, you won't have a hard time finding a buyer. Even with decreasing affordability, demand for homes still far outstrips supply. That means that this spring and summer might see an additional rush on the real estate market. It also means that right now might be a very good time to list your home if you've been thinking about selling for a while.

There’s no need to panic if you’re a homebuyer.

On the other hand, if you are thinking of buying a home, you might think that this news spells doom for you. However, there's no need to panic. While affordability is dropping, it is still well above historic averages (just like current mortgage rates). In fact, Arch Mortgage Insurance estimates that homes are now 15% to 20% more affordable than they have been in the period from 1987 to 2004. When rates go up, it will affect what your monthly payments will be on a new home. From this perspective, it makes sense to move now in case you've been looking to buy before rates rise further. 

So what's the next step? If you’re thinking about buying or selling a home, give us a call. We’d be happy to answer any questions you may have. We look forward to hearing from you soon.

How the Fed’s Recent Rate Hike Impacts Our Market

The Fed’s recent rate hike shouldn’t have any significant impact on our market. In fact, it might actually stimulate it.

On June 14th, the Federal Reserve increased its federal funds interest rate by 0.25%. They’re also widely expected to raise rates once or twice more over the course of 2017. What does this mean for the real estate market?

While any action by the Fed always garners a lot of attention, I believe these increases will not have any significant impact on our market.

First of all, mortgage rates have actually trended lower in the wake of the Fed’s recent announcement. The 30-year mortgage rate recently hit 3.9%, the lowest level in 2017. In fact, it’s a common pattern for the mortgage rate and the Fed rate to move in opposite directions, and the same thing has happened the last two times the Fed raised rates. 

Second, the economy continues to do well. The Fed decided to increase its rate because unemployment and inflation are low, household spending is picking up, and we’ve seen steady growth for the past nine years. This is good news for the real estate market. As expected, we continue to see strong demand and a corresponding increase in home prices. 

These increases will not have any significant impact on our market.

Third, while the Fed’s rate increase is normally meant to cool off the economy, it might actually stimulate it in this case. Because interest rates were so low for such a long period of time, experts believe the recent increases might ease pressure on the financial system and encourage lending. 

Case in point: since the Fed started raising its rate in December 2016, total mortgages are up 2.5% year over year. 

In conclusion, while any move by the Fed is likely to lead to a lot of hand-wringing, I believe the real estate market will not be affected and will continue on its own healthy course. Nonetheless, it’s clear that right now is a uniquely good moment for everyone in the real estate market. Today’s low mortgage rates are good for homebuyers because they make homes more affordable.

If you have any questions about our market or you’re thinking of buying or selling a home, give me a call or send me an email. I’d love to help.

What Documents Do You Need to Get a Mortgage?

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Today, I want to discuss documenting your mortgage. If you don't, you may get in trouble with the mortgage police!

Tightening regulations are making the mortgage process more complicated than ever. Deadlines for signing your loan documents, ordering the appraisal, and getting the file into underwriting are now actually contained in the sales contract.

Guidelines now dictate that YOU are responsible for how smoothly the process will go. This makes it critical that you provide all required documentation to your lending team with plenty of time to spare. The fact of the matter is, the mortgage process is intrusive, as all of your financial information is needed in order to get approved for a loan.

Since the mortgage process isn't known as a fun one, it's crucial that you do all you can to make it go as smooth as possible. When we request every document that you've signed in the last 24 months, provide it with a smile! W-2s, tax returns, bank statements, and identification are only a handful of the documents we'll ask for!

The faster we can provide you, your agent, and your attorney with the coveted document we call a Clear to Close, the better! Give us a call if you have any questions about this process, we're always available to help!

Restaurants in Libertyville Are Sizzling

 If you'd like my free e-book of the Top 10 Credit Do's and Don'ts, you can contact me!

Today we're going to be chatting about some restaurants in Libertyville. Considering that we save the average borrower anywhere from $70-$450, we think that you might want to spend that money at one of the eighty-seven restaurants located here in Libertyville.

Let's talk about some of our favorite spots. We love outdoor patios because we can take our office dog with us, and this is why we love Mickey Finn's. They make and serve their own microbrews, and have been doing so since 1994. Their blarney balls are an excellent appetizer, just don't eat too many! (http://mickeyfinnsbrewery.com/)

Another favorite of ours is Chili U. They serve a variety of gourmet chilis such as African Chicken Chili and Thai Shrimp Chili. They also have a great outdoor patio. (http://chili-u.com/)

  

Casa Bonita is just down the street and they have upscale Mexican cuisine with great margaritas to match. They have a wonderful patio that is heated, which allows year-round dining. (http://www.casabonitalibertyville.com/)

If you're looking for a place with great ambiance, then you must head to Firkin. They have a huge selection of craft beers and possibly the best burger in the entire state. (http://www.firkinrestaurantlibertyville.com/)

We can't talk about restaurants in Libertyville and not talk about the Picnic Basket. It started out as a small deli and has morphed into a gourmet sandwich shop with great salads, soups, and vegetarian offerings. (http://www.picnicbasketfood.com/)

Check out this list of all the restaurants in Libertyville: (http://il-libertyville.civicplus.com/DocumentCenter/Home/View/1071)

If you have any questions about getting approved for mortgage loan in Libertyville, you know where to turn!