Indecision Can Be Expensive

Connect with McKee Smith, REALTOR®, to find out the facts about the market because good information can make a difference in making a good decision.

With all that is going on in the world – a global pandemic, supply chain issues, highest inflation in 40 years, the economic effects of a war in Ukraine – it can be overwhelming to think about when the right time is to buy a home.

On a local level, there is a pent-up demand for homes that has been building for years.  Builders haven’t kept up with the demand for new housing for almost 15 years.  Low inventory, especially in the past three years, has driven up prices nationally in 2021 by 20% and even though, the rapid appreciation seems to be moderating, in June, NAR reported that the median price home was up 13.4% from one year ago.

Then, of course, there are mortgage rates that have gone up by 2% since the beginning of 2022.  Appreciation and rising interest rates are a double whammy for people looking for their first home or to move up. It is completely understandable that many people are faced with so much that they are sitting on the sidelines waiting to see if things will improve.

Let’s look at a hypothetical situation where buyers have the money for a 10% down payment on a $400,000 home but have decided to wait for three years to see if things improve.  They need to park their money somewhere safe so that it will be available when they feel comfortable buying but also earn as much as they can to ward off the effects of historically high inflation.

If they were to put the $40,000 into a certificate of deposit for three years that pays 2%, they would earn $2,448 in interest.  With current inflation at 8.5%, the purchasing power of their down payment would diminish.

A slightly riskier alternative would be to invest it in the stock market or a mutual fund.  Assuming they picked the right stock or fund that earned 7%, their $40,000 would grow to $49,002 in the same three-year period.

The problem is that homes are appreciating much faster and the buyers would either pay more to get the same home or to pay the same price in three years, the home would not have the same amenities.    

If the buyer purchased the home today that appreciates an average of 5% per year, the equity in the home in three years would be $118,000 based on two dynamics: appreciation and amortization.  The wealth position at the end of the three years in the home is almost three times what it would be with the certificate of deposit and over twice as much as the stock investment.

Homes have appreciated more than inflation over the last fifty years.  The average home price appreciation from 1970 to 2020 was 7.16% compared to the average inflation for the same period which was 4.3%.  In 2021, home prices were up close to 21% nationally compared to 7% inflation. 

Connect with your real estate professional to find out the facts about the market, the various mortgages available, what you can expect to buy, and if you have a home, what it will sell for.  Good information can make a difference in making a good decision.  Download my Buyers Guide.

McKee Smith, REALTOR®, is an experienced real estate agent that specializes in the Dallas and Fort Worth market. He understands the intricacies of the DFW housing market. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified.  Remember – McKee has the keys to selling your home!

David Weekly Homes in Elements 55+ at Viridian

I visited David Weekly Homes in Elements at Viridian. It’s a 55+ community in Arlington. Here is a video with more information!

Here are a few highlights:

  • Lots of floor plans in three lot sizes
  • Over 100 lots are available!
  • Amenities center was voted the “Best in Texas”

McKee Smith, REALTOR®, has years of experience in the DFW area housing market. He knows the many unique features of Dallas and Fort Worth area home sales. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified.  Remember – McKee has the keys to selling your home!

Moving Down In An Up Market

There are options available to coordinate the sale of your home and the purchase of your new one. Ask McKee Smith, REALTOR®, for details.

Selling and buying a lower priced home in an “Up” market can be to your advantage.  The advantage is to maximize the sales price of your existing home and replace it with a less expensive one.

Moving down in an “up” market may be to your advantage in multiple ways.  It is possible that your present home doesn’t meet your current needs like it once did.  Making a move can allow you to “re-balance” the equity in your home to better reach your future goals.

The “up” market maximizes the sales price you can expect to receive, and it will free the equity in your home. A lower priced home will result in reducing your housing costs with lower property taxes, insurance, utilities, and maintenance…while improving your liquidity position.

It is not required to reinvest the proceeds of the sale.  You may decide to get an 80% loan-to-value mortgage on the replacement home to get the best interest rate and avoid private mortgage insurance.  This would allow you to put the excess proceeds into an income producing or growth investment, start a business, fund an education, buy a second home, take a spectacular trip, gift a down payment to a relative, or any other different projects.

The expression “other people’s money” describes borrowing money and using it to invest with the expectations of earning more than the rate you’re paying.  Mortgage interest is one of the most attractive ways to borrow money because it is generally the lowest rate compared to other types of loans while having the option to get a fixed-rate mortgage for up to 30 years.  Most other borrowed funds involve short terms and floating interest rates.

Rental real estate could be a possibility to invest part of the funds.  There is a shortage of available rentals which has caused rents to increase like homes have appreciated.  Single-family homes for rentals provide large loan-to-value mortgages at fixed interest rates for long terms on appreciating assets with defined tax advantages and reasonable control not found in many other investments.  For more information, download our Rental Income Properties Guide.

Homeowners who have owned and occupied their principal residence for two of the last five years are entitled to exclude up to $250,000 of gain for single persons and $500,000 of gain for married persons filing jointly.  For more information, see IRS topic #701.

Contact your real estate professional to find out more information like potential sales price, what net proceeds you can expect to receive on a sale, available replacement homes, and the types of mortgages and rates available.

McKee Smith, REALTOR®, has been selling and buying homes in Dallas and Fort Worth for many years. He knows and understands the intricacies of the DFW housing market. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified.  Remember – McKee has the keys to selling your home!

Green Meadows Development in Celina with Pacesetter Homes

On Aug. 8, 2022, I visited the Pacesetter Homes in the Green Meadows development in Celina, Texas. If you’re looking for a newly built home in a highly rated school district like Celina, you should consider one of these!

This development has some special features for everyone:

  • HOA includes front yard mowing
  • Prices from $550,000 to $700,00
  • In the highly rated Celina ISD
  • Master planned community
  • Incredible amenities including pool with slides, trails, community garden, sports complex, and more
  • 10 minute drive (according to Google maps) to a grocery store
  • Much, much more!

Watch the video to see this great development. For extra fun, count how many times I said “great” in the video!

For more information on the Celina ISD, here is a link to their ranking information on Niche.com.

This video is just a tease of all that is available. Contact me for more information on these or any newly built homes in DFW.

Become A Victim Of Inflation Or Benefit From It

Inflation is here. How you react and what you do will make a difference in how it affects you!

In inflationary times like these, currently, the highest in 40 years, the purchasing power of your money diminishes each day; essentially, buying you less.  The biggest threat is to be without capital assets, like a home, that is benefiting from the increase in prices. 

Your money buys less gasoline now, than it did a year ago, by close to 50%. Beef prices are up about 20% since last year.  Used cars are about 35% more expensive than they were a year ago. Mortgage rates are near 5% after reaching their lowest of 2.65% in January 2021.

And then, there is the price of houses.  CoreLogic reports that home prices increased year over year by 20% in February 2022.  Their Home Price Index indicates an annual five percent increase in prices from 2014 to 2021.

For many people, the American dream of owning a home is slipping away.  Adjusting your expectations for the perfect home and when you expect to achieve it, can be a legitimate, long-term strategy for making the dream come true.  Delaying the gratification of getting everything you want in a home now and making compromises that would allow you to stair-step your way into the “forever home” could be the plan to incrementally reach your goal.

Owning a home in today’s market, even if it isn’t the ultimate home, provides a significant hedge against inflation.  Not only is the home appreciating faster than the rate of inflation, but the mortgage on the home also produces leverage that increases a homeowner’s return on their equity.

Homeowners have both the home’s appreciation and its amortization working in tandem to increase their equity.  Money in a bank account or the stock market can’t compare to the potential.

$40,000 invested in a certificate of deposit earning 1% would be worth $42,040 in five years.  If the same amount was invested in the stock market that earned 6% annually, it would be worth $53,529.  However, if the $40,000 were invested in a $400,000 home, with a mortgage at 5% for 30 years, that appreciated at 5% annually, the equity would be close to $180,000 at the end of the same five-year period.

Connect with me and let’s put together a plan to help you benefit from inflation.

McKee Smith, REALTOR®, has been selling and buying homes in Dallas and Fort Worth for many years. He knows and understands the intricacies of the DFW housing market. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified.  Remember – McKee has the keys to selling your home!

When Are Negotiations Over?

Experienced agents know negotiations continue through inspections, repairs, financing, contingencies and much more!

The primary negotiation in a home purchase takes place when the contract is agreed upon which includes the price, closing and possession.   With inventory down over 19% in the past year and multiple offers being more of the norm than the exception, the first round of negotiations can be challenging.

Buyers and sellers alike feel relieved once it has resulted in an agreement, but experienced agents know there is more to come if there are contingencies for financing, inspections, or other things.  The competition for the home may be so tough that the buyer waived their rights for what would be normal contingencies.

Financing is one of the most common contingencies in normal situations but when multiple offers are involved, the cash offers tend to have the advantage.  If you don’t have the resources to make a cash offer, the next best position is to be pre-approved with a commitment letter from the lender.  Arrange for the lender to confirm the pre-approval directly with the listing agent prior to the listing agent presenting the offer.

There have been buyers who know they don’t have the cash to close and apply for a mortgage anyway and try to reinsert the provision outside of the contract.  Experienced listing agents will advise the seller to have the buyer provide proof of funds necessary to close and verify that they do indeed exist.

The purpose of an inspection is for the buyer to receive an objective evaluation of the condition of the home and its components to identify existing defects and potential problems.  The expense for inspections can be several hundred dollars and it’s reasonable for buyers not to want to spend the money before they find out if they can come to terms with the seller.  From a different perspective, sellers want to know quickly if the buyer is going to reject the home due to the inspections because they could be losing time.   For that reason, inspection time frames are limited to a few days from acceptance of the offer.

Sometimes, buyers will expect sellers to make all the repairs listed on the report and this is where the second round of negotiations begins. If the seller refuses, the negotiations can go back and forth until the other party accepts the offer on the table.

When purchasing a new home from a builder, it is expected for everything to be in working order; after all, it is new.  However, it is reasonable to expect that existing homes, that are not new, have a different standard.  While it’s understandable that buyers would want to be aware of major items that are not in “working order”, normal wear and tear of components based on their age should be expected.

In a highly competitive seller’s market, buyers might do whatever they can to get their contract accepted, realizing that there is another place to negotiate when they’re not competing with other buyers’ offers to purchase.

The negotiations involved in a home purchase are not complete until the buyer and seller have signed the papers and the title has passed to the buyer.  Up until the closing is finished, any item that comes up could prolong the negotiations.

For this to be a WIN-WIN situation, both seller and buyer must feel good about the negotiations that led to the transaction closing.  Neither party should feel that the other party had an unfair advantage over them.

McKee Smith, REALTOR®, has years of experience in the DFW area housing market. He knows the many unique features of Dallas and Fort Worth area home sales. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified.  Remember – McKee has the keys to selling your home!

You Don’t Have To Give An Arm To Get A Lower Rate

As mortgage rates rise, more homeowners are considering adjustable-rate mortgages (ARMs). Talk to your mortgage professional about the pros and cons for YOUR specific situation!

Rising interest rates compounded with increasing home prices are causing affordability issues for many buyers. To keep payments low, you won’t have to give an arm, but more buyers are considering getting an ARM, adjustable-rate mortgages.

Mortgage rates are near their highest point since 2009. “While housing affordability and inflationary pressures pose challenges for potential buyers, house price growth will continue but is expected to decelerate in the coming months,” said Sam Khater, Freddie Mac’s Chief Economist.

A $400,000 home with a 10% down payment and a 30-year term has the choice of a 5.27% fixed-rate or 3.96% for a 5/1 adjustable-rate mortgage. The principal and interest payment will be $1,992.40 for the fixed-rate and $1,710.40 for the adjustable rate saving the buyer $281.99 per month for five years.

There is an additional saving for the buyer choosing the adjustable-rate mortgage because the unpaid balance at the end of the five-year first period is $6,429 less than the fixed-rate. The total savings to the buyer on the adjustable-rate during the first period is $23,348 or $389.13 per month for sixty months.

At the end of the first period, the rate on the mortgage can adjust according to the then, current index plus the margin subject to the caps as specified in the note. These safeguards remove control from the lender or servicer from arbitrarily raising the rate.

The caps restrict the payments from going up more than a certain amount at each period or overall, for the life of the mortgage. A common cap might be that it cannot adjust more than 2%, up or down, at any given adjustment period or 6% above or below the initial note rate.

Adjustable-rate mortgages must adjust downward if the index indicates a reduction at the anniversary of the adjustment period. The overall trend has been lower rates for the past thirty years until recently.

Using an Adjustable Rate Comparison tool, you can project a breakeven point to determine at what point the ARM would be more expensive than the fixed-rate, assuming a worst case situation where the rates would increase the maximum at each period.

In the case of the previous example, the breakeven would occur at 7 years and 6 months. This means that if the buyer were to sell the home prior to that projection, the ARM would provide the cheapest cost of funds to purchase the home. On the other hand, if the buyer knew they would stay longer than that, it might be a safer option to go with the fixed-rate.

It is good to be aware of available options when financing a home. Analyzing, using the best information available, can help you make an informed decision. Make your own comparison using our ARM Comparison. Current interest rates can be found on Freddie Mac.

McKee Smith, REALTOR®, has been helping people like you sell and buy homes in the DFW area for many years. He is very knowledgeable about the housing market in Dallas and Fort Worth. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified.  Remember – McKee has the keys to selling your home!

Helping Local Educators Get New Homes!

Better than a thousand days of diligent study is one day with a great teacher.”

Japanese Proverb

Here in Texas, schools are the tendons that tie our communities together. You cannot have schools without teachers. Teachers are vital members of any community.

In today’s real estate market, it is tougher than ever for teachers to get into the homes they want and need. To help, I will give licensed teachers at public schools $500 toward their closing costs if they use me as their REALTOR® and sign a buyer representation agreement between now and August 31, 2022.

But there’s more. If a teacher uses Charles Mentesana of Service First Mortgage, Service First will offer $500 in savings toward lender fees. That is a combined savings of $1,000! Limitations apply – see the details in this flyer.

Time is limited, so let’s start looking today. Fill out the information below and I will give you a call to get started!

    When you hit “submit,” I’ll send you an email to confirm I have your contact information. Let’s get started today!

    You Don’t Have To Give An Arm To Get A Lower Rate

    As mortgage rates rise, more homeowners are considering adjustable-rate mortgages (ARMs). Talk to your mortgage professional about the pros and cons for YOUR specific situation!

    Rising interest rates compounded with increasing home prices are causing affordability issues for many buyers. To keep payments low, you won’t have to give an arm, but more buyers are considering getting an ARM, adjustable-rate mortgages.

    Mortgage rates are near their highest point since 2009. “While housing affordability and inflationary pressures pose challenges for potential buyers, house price growth will continue but is expected to decelerate in the coming months,” said Sam Khater, Freddie Mac’s Chief Economist.

    A $400,000 home with a 10% down payment and a 30-year term has the choice of a 5.27% fixed rate or 3.96% for a 5/1 adjustable-rate mortgage. The principal and interest payment will be $1,992.40 for the fixed rate and $1,710.40 for the adjustable rate saving the buyer $281.99 per month for five years.
    There is an additional saving for the buyer choosing the adjustable-rate mortgage because the unpaid balance at the end of the five-year first period is $6,429 less than the fixed rate. The total savings to the buyer on the adjustable rate during the first period is $23,348 or $389.13 per month for sixty months.

    At the end of the first period, the rate on the mortgage can adjust according to the then, current index plus the margin subject to the caps as specified in the note. These safeguards remove control from the lender or servicer from arbitrarily raising the rate.
    The caps restrict the payments from going up more than a certain amount at each period or overall, for the life of the mortgage. A common cap might be that it cannot adjust more than 2%, up or down, at any given adjustment period or 6% above or below the initial note rate.

    Adjustable-rate mortgages must adjust downward if the index indicates a reduction at the anniversary of the adjustment period. The overall trend has been lower rates for the past thirty years until recently.
    Using an Adjustable Rate Comparison tool, you can project a breakeven point to determine at what point the ARM would be more expensive than the fixed rate, assuming a worst case situation where the rates would increase the maximum at each period.

    In the case of the previous example, the breakeven would occur at 7 years and 6 months. This means that if the buyer were to sell the home prior to that projection, the ARM would provide the cheapest cost of funds to purchase the home. On the other hand, if the buyer knew they would stay longer than that, it might be a safer option to go with the fixed rate.
    It is good to be aware of available options when financing a home. Analyzing using the best information available, can help you make an informed decision. Make your own comparison using our ARM Comparison. Current interest rates can be found on Freddie Mac.

    McKee Smith, REALTOR®, has been helping people like you sell and buy homes in the DFW area for many years. He is very knowledgeable about the housing market in Dallas and Fort Worth. He works out of his home in Coppell, Texas. He is a Senior Real Estate Specialist® (SRES®) and new home construction buyer representation certified. Remember – McKee has the keys to selling your home!