Blog Archives

Homeownership: The American Dream

From The KCM Crew http://www.kcmblog.com

A major benefit to homeownership is community. There is a greater sense of community among homeowners than there is with renters. Studies have shown that homeowners have a higher participation in local volunteer activities; participate more in local political activities and organizations; have higher voting rates; and are more involved in self-help activities (like the PTA and neighborhood crime watches) than those who rent. Homeowners do not move as frequently as renters, therefore providing more neighborhood stability. This helps reduce crime and support neighborhood upkeep and value.

Let’s look at homeownership as an investment. In 1998 the average Homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Even in these toughest times, the wealth of the homeowner is still over 30 times that of renters. Now, homeownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is homeownership.  In Pew Research Center’s The Home as an Investment Survey, 81% of Americans agree that buying a home is still the best long-term investment a person can make.

There’s also the aspect of an educational investment. United States Immigrants all talk about home ownership because they want a better education for their children. It’s proven that children of homeowners achieve greater math and reading scores, they have lower high school dropout rates, and more years of schooling by the age of 25.

Not to mention there’s also a greater social network among homeowners than renters. You have a built in support system of neighbors and friends. You know the local merchants and they know you. You have that support system for you and your family – and it’s there for life.

There you have it. You now know the benefits to homeownership and the American dream.

Advertisements

Have you ever wanted to build your own house? What would it look like?


“Homeownership is the American dream,” they say.  Many people agree that owning your own home is a goal and a privilege.  Does that pride get even greater if you get the opportunity to build your own house?

Have you ever wanted to build your own house? 

If so, what would it look like?  From the architectural style to the floor plan, lot size, number of bedrooms and baths, garage, basement . . .

Tell us – what would your ideal built-from-the-ground-up home look like?

*Not up for the challenge of the do-it-yourself home design?  Take a look at thousands of homes on the market right here.

This Time We Are Sounding the Alarms

by Steve Harney on October 12, 2011

Occasionally, Steve Harney, our founder and lead content creator, asks us permission to share his personal feelings on a current real estate issue. Today is one of those times. – The KCM Crew

One of the things I often hear from people I meet is that real estate and mortgage professionals should have seen the current housing crisis coming and done something to prevent it. We should have realized that easing lending practices would lead to millions of families buying a home they could never afford. We should have warned our neighbors not to use their homes as ATMs. We should have realized that the economy could never withstand such growth and was about to crash.

Maybe these people are correct. Looking back, perhaps we could have been better stewards of the home buying process. We are committed to not making that same mistake again. Now, if we see a possible challenge in the future, we will speak up. That is what caused the writing of this blog post.

WE MUST SOUND THE ALARMS!

ALARM: Homeownership Percentage Has Dropped Dramatically!!

MSNBC.com, in an article entitled Housing Bust Worst Since Great Depression reported:

“The analysis by the Census Bureau found the homeownership rate fell to 65.1 percent last year… analysts say the U.S. may never return to its mid-decade housing boom peak in which nearly 70 percent of occupied households were owned by their residents.”

ALARM: People Are Losing Hope in the American Dream

In the same article, Patrick Newport, economist with IHS Global Insight is quoted saying:

“The changes now taking place are mind-boggling: the housing market has completely crashed and attitudes toward housing are shifting from owning to renting. While 10 years ago owning a home was the American Dream, I’m not sure a lot of people still think that way.”

ALARM: The Safety and Well Being of the Family Being Sacrificed

If we look at Fannie Mae’s quarterly National Home Survey, as far back as we can go, the top four reasons for buying a home are the same. The top four reasons people buy a home are:

  1. It means having a good place to raise children and provide them with a good education
  2. To have a physical structure where their family feels safe
  3. It allows for more space for their family
  4. It gives them control over what they do with their living space including renovations and updates.

Are children no longer important? Is safety less of a consideration today? Is the pride of homeownership soon to be forgotten? We must look at the long-range consequences of being a renters’ society.

ALARM: Building Family Wealth Being Threatened

Let’s look at homeownership as an investment. The Federal Reserve does a survey every 3 years. In 1998 the average Homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Now, homeownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is homeownership. Even in these toughest of times, the wealth of the homeowner is over 30 times that of renters.

At a time when we are discussing the gap in wealth between the top 1% and the other 99%, how does the less fortunate paying rent to pay off the mortgages of the more fortunate make any sense?

Bottom Line 

Homeownership is important to the American family. If we lose this as a basic concept, what else do we lose? We didn’t realize the consequences when it was too easy to buy a house a few years ago and we are paying a price for that. We will pay an even larger price if we don’t realize the consequences of it being much too difficult for many to own a home today. SOUND THE ALARMS!

What’s the One Thing You get Working First in Your New House?

When you move into a new house, there’s a LOT of work to be done. From cleaning, to putting things away, to making sure all utilities are transferred to your new residence.  There is bound to be one of these things that you just have to get done before you can focus on the others.

With all the things that need to be done, what is the FIRST thing you insist on having done? 

  • Internet? 
  • Cable? 
  • Utilities? 
  • Putting away all the boxes?

Money to Purchase AND Renovate Your Home

Written by Dean Hartman, KCM Blog

Whether you’re looking at a foreclosed home, bank REO, a Short Sale or really any home, you need to be aware of the FHA 203K Program. The general condition of real estate has taken a dip over the past few years, as homeowners are not sprucing up their home as they have in the past.

(Pssst…there’s a recession going on…people are afraid of losing jobs…and they believe they won’t “get back” the money they spend by renovating upon sale).

The 203K loan can be used for small repairs (with a minimum of $5000 of work) such as a new roof or replacing the boiler. It can go all the way up to practically rebuilding the home and anything in between.  Maybe you love a home, the neighborhood, etc., but you hate the kitchen cabinets. The 203K may be for you. As long as the existing foundation stays intact, we can talk about any type of repair, upgrade, modernization or expansion.

With one closing, we will give borrowers money to satisfy their contract with the seller AND establish a Rehab Escrow Account to fund the agreed renovations. The Rehab Escrow Account is managed like a Construction Loan. Money is released after work is completed, the property is inspected by the lender and the title is updated.

Like all FHA loans, the property must be owner occupied and loan approval requires full documentation of income, assets and credit worthiness. At the same time, underwriting guidelines have some flexibility built in. (In theory, we can lend up to 110% of the After-Improved Value of the home for example.)

Loans are processed in the same fashion as any other loan (in terms of income, asset and credit) with the exception of the appraisal. Appraisers work in conjunction with the home improvement contractor and a HUD Approved Pre-Planner to determine: “As-Is” Value, “After-Improved” Value, costs of construction and the draw schedule of the renovation portion of the loan. This work typically adds about a week to the approval process, largely because it should be done BEFORE contracts are signed.

SOME UNIQUE FEATURES OF THE 203K

  • Mixed-Use Properties may be eligible!As long as the commercial space is no more than the allowable square footage based on the number of floors in the building and none of the renovation monies are used for a commercial renovation, the 203K gives tremendous interest rates for Mixed-Use Properties.
  • The loan can be used  to change property usage(when appropriate municipality approval)…..converting a 1 Family Home to a 2 Family or a 4 Family to a 3 Family or any variation that stays within the 1-4 Family boundaries works.
  • On major renovations we will finance up to six months payments into the loan.In these cases,the house will not be habitable until after the work is completed.
  • There is a Streamline 203K for projects that require less than $35,000 of repairs. Typically, we like to see only one or two items of work that can be done quickly (with one inspection).

It is recommended that you work with an experienced loan officer when exploring the 203K Program, as there are many details that need to be considered (from selecting a qualified contractor to the inner workings of the draw schedule and preparing for different contingencies). While the program is more intricate, with the right education ahead of time, it is extremely manageable.

Why Do People Actually Buy a Home?

From KCM Blog: The KCM Crew

It seems that every time we talk about real estate today the conversation immediately goes to the financial aspects of buying a home. Where are prices headed? Where are interest rates headed? Should I wait to try and get a ‘better buy’? Should I wait until I can get a ‘steal’?

The odd thing about all these questions is that survey after survey keeps telling us that price is not the reason families actually buy a home. When money is considered at all, it is in light of not paying rent to a landlord. Let’s look at two recent surveys as examples:

National Housing Survey

The top five reasons given in the survey for buying a home, in order, are:

  • It means having a good place to raise children and provide them with a good education
  • You have a physical structure where you and your family feel safe
  • It allows you to have more space for your family
  • It gives you control of what you do with your living space (renovations and updates)
  • Paying rent is not a good investment

The Myers Research and Strategic Services Survey

The top five reasons given in the survey for buying a home, in order, are:

  • Home ownership provides a stable and safe environment for children and other family members
  • Home ownership means the money you spend on housing goes towards building equity, rather than to a landlord
  • Home ownership creates the opportunity to pay off a mortgage and own your home by the time you retire
  • Home ownership creates the opportunity to live in a neighborhood that you enjoy
  • Home ownership allows you the right to decorate, modify and renovate your home as you see fit

Bottom Line

Price dominates conversation when we talk about buying a home. However, when it comes down to it, we actually buy for the same reasons our parents and grandparents did – we want a better lifestyle for ourselves and our families.

Let’s Get Chicken Little

By Dean Hartman ~ KCM Blog

You all know the story…young chicken, fearful of the worst, runs around declaring that “the sky is falling, the sky is falling.”

In today’s real estate market, there are many people (professionals and amateurs alike) with opinions that make buying real estate sound like throwing money away.

One thing I have learned in life is that opinions are like belly buttons, everyone has one. I certainly have my opinions which  are not always universally shared. But, I wanted to share mine today by asking those of you Chicken Littles some questions:

  • If we all agree that homeownership has been the American Dream, what do you propose will replace it? Video games? iPads? A better social media vehicle? Without a dream, civilizations perish.
  • If people stop investing in real estate and values crumble much further, how do you propose stopping our economy from a complete and utter collapse? Moreover, how will it ever recover?

Let’s face it: The real estate frenzy got us into this mess, in the same way that the dot.com bubble overinflated the stock market and eventually popped. But, dot.com companies were only a part of the stock market; therefore, the market could take a hit and limp around for a while yet still fall back on the other industries to regain its footing. It has taken years, but the stock market is credible again.

Real estate is different. When it slides, there is no other sector of the economy that can bail it out. You could try and argue that commercial real estate or even real estate investors who buy and hold for rent can ease the pain. However, they can’t devour all the inventory. Real estate has to be salvaged and supported by the government or the whole economy slides into the ocean.

The government has tried many things from restructuring Fannie Mae and Freddie Mac to appraisal reform to tighter underwriting guideline to artificial manipulation of interest rates to licensing of loan officers and more. They understand the importance of real estate values to our nation’s net worth. They are committed to real estate.

My point, dear Chicken Little, is that if you believe that the United States of America is going to continue to lead the world, you know our economy has to lead the way.  In order to do that, we need housing to recover its position of strength.  That makes buying a home a safe, long term smart move. If you don’t believe it…..might be time to look for real estate in another country.

The problem with Chicken Little is nothing more than he doesn’t ever propose a solution. He just wants to predict and point out problems. Our faith in the American Dream is being tested. I believe in the Dream. And I think you should too. It may look like a leap of faith more than logic to some but there are few Chicken Littles who ever become wealthy until they change their perspective.

Just my opinion…from my belly button.

Have We Forgotten Something?

by Dean Hartman with KCM Blog

Over the past few weeks and months, the media,  so-called experts and most of our friends and relatives seemed to have almost soured on buying a home at this time. With fear of a fragile economy and high unemployment rates, who can argue with caution?

When the pervasive sentiment among even real estate and mortgage professionals is that home prices will continue to move downward and that mortgage interest rates don’t appear to be jumping significantly any time soon, the question remains… “Why would anyone that doesn’t have to buy now, buy now?”

One commenter to a previous blog post even went so far as to challenge the entire industry for promoting the “hurry up and buy” approach by asserting that buyers who listened to that advice six months ago are bemoaning taking that advice. That made me think: “Are people who bought six, eight, ten months ago kicking themselves because their home is worth less now than when they bought it?”

I had my team call some of our recent buyers and this is the feedback we received:

 

“Last year at this time, I was cooped up in a small apartment. Today, I am planning our Fourth of July celebration with 25 friends and family in our new home. Regrets? Are you kidding? We couldn’t be happier.”

“We are glad we now have a place of our own. We have a few friends looking to buy and we are helping to get them excited. Five years ago, we couldn’t afford it….now, we have our American Dream.”

“We were crammed into my in-laws’ home with no real privacy or room for the kids to just be kids. Now, they have a backyard to play in and they have settled in to their new school and made new friends. We couldn’t be happier.”

“Yeah, I realize, I might have been able to buy a home for $10,000 less if I waited, but there are two things to remember. One, what memories would we have missed if we weren’t here? And two, I am not selling my home now. Who cares what it is worth until we look to move again in 5-7 years? By then, we believe everything will be back to normal. Right now, we have a payment we can comfortable manage and we have a home to build roots and a foundation. I would urge everyone to do it, if they can.”

A home does remain a good long term investment. However, first and foremost, it really is a place for pride, peace, preference, and pleasure. We need to be reminded that the emotional component to buying a home may be worth more than simply the financial benefits. And from a financial perspective…who in your life is a better financial mentor? Donald Trump or Uncle Joe? Warren Buffet or your local newspaper writer who makes $30,000 a year? Remember, conventional wisdom breeds mediocre results (at best).

What About the Cost of Delaying Your Dreams?

From KCM Blog

Whether a family is thinking of buying or selling a home, price seems to have become all important. I’m not sure why that has occurred. I realize, whenever anyone sells or buys anything, making sure you get a ‘good deal’ is a crucial part of the transaction. However, in real estate today, it now seems that price has become the ONLY THING!

Yet, appreciation or depreciation is not usually the first thing that matters when the average family decides to buy or sell a home.

People move for numerous reasons. Here are a few examples:

  • to create a better lifestyle for themselves and their children
  • to be closer to family in other regions of the country
  • to be closer to necessary healthcare
  • to take advantage of a promotion or a new job
  • to downsize and lower long term financial obligations

Most voluntary moves help families achieve their goals and/or dreams.

Bottom Line
Which is more important: waiting to get a few more dollars for your home, sitting on the sideline hoping prices drop just a little bit lower before you buy or moving on with the rest of your life? Only you can decide.

 

Homeownership: Building Family Wealth

From KCM Blog

 The Joint Center for Housing Studies at Harvard University just released a study, America’s Rental Housing: Meeting Challenges, Building on Opportunities. The study discusses the need for a greater supply of quality rental units in America. We agree. However, there were a few nuggets of information found in the study we want everyone to know.

American’s Belief in Homeownership Has NOT Fundamentally Changed
There seems to be some feeling that homeownership has lost its luster and perhaps is no longer a component of the American Dream. Harvard explains:

  • To date, attitudes about owning have become only slightly more negative while attitudes about whether now is a good time to buy are little different than before the housing boom. In the latest Fannie Mae housing survey from October–December 2010, the vast majority of respondents—including renters—continued to believe that homeownership makes more financial sense than renting. In addition, nearly two-thirds of all renters surveyed reported their intention to buy homes in the future.

Homeownership Creates Wealth
Because prices have fallen dramatically in many parts of the country in the last five years, some are too easily dismissing homeownership’s role in building family wealth over the last century. The study explains:

  • In addition, renters have only a fraction of the net wealth of owners. Near the peak of the housing bubble in 2007, the median net wealth of homeowners was $234,600—about 46 times the $5,100 median for renters. Even if homeowner wealth fell back to 1995 levels, it would still be 27.5 times the median for renters.

The recent fall in prices can’t wipe out the 100 year history housing has as a good long-term investment.

Bottom Line
The study was promoting the need for the construction of more rental housing for the average American family. However, when it came to a discusion on building wealth, Harvard offered:

  • “And for individuals as well as businesses, owning rental properties is an avenue for wealth creation.”

And how do these individuals and businesses create that wealth? Owning the real estate and collecting rent from their tenants to offset the mortgage payments. Build your family’s wealth – not your landlord’s. We believe OWNERSHIP almost always makes the most sense.

 

%d bloggers like this: