Vladimir G. Diaz's Blog

Why A Normal Market is Just What We Need | MyKCM

The housing market has been hot for a while now. Homes have been flying off the shelves as fast as they have been listed. Buyers have been competing in bidding wars just to find a home to buy, let alone find their dream home.

This ‘seller’s market’ has driven home prices to new heights. Home price appreciation averaged over 6% across the country.

However, home price growth has recently started to cool down. The latest report from CoreLogic shows that home prices have only risen by 4.7% over the last 12 months.

Many buyers and sellers planning to enter the housing market this year have started to wonder if we are headed towards another housing crash. Ralph McLaughlin, Deputy Chief Economist at CoreLogic, recently stated in an interview,

“There’s no reason to panic right now, even if we may be headed for a recession. We’re seeing a cooling of the housing market, but nothing that indicates a crash.

The real elephant in the room here is housing supply.”

The simple answer is we are returning to a ‘normal’ market. The inventory of homes for sale more closely matches the demand in the market. The added supply means fewer buyers are outbidding each other. Therefore, prices are experiencing less upward pressure. McLaughlin went on to explain,

“If there are a lot of homes on the market and suddenly no one wants to buy them, you’ll get into a downward spiral of price competition. Right now, however, we’re in the opposite situation, there isn’t an over-abundance of homes on the market.”

As more renters looking for their piece of the American Dream enter the housing market, demand for housing will continue to grow. The Joint Center for Housing Studies at Harvard University estimates over 30 million new households will enter the market from now through 2040.

“There’s the natural life cycle of young people getting older and starting to do adult life things which include … buying a house and that’s a lot of potential inertia that could last indefinitely.”

Bottom Line

Home prices will start to appreciate by historical norms as we continue to head towards a more ‘normal’ market, rather than the over 6% seen over the course of the last couple of years. This is great news! Homeowners looking to sell their home will have buyers, as more buyers will be able to afford them!

Posted by VLADIMIR G. DIAZ on February 21st, 2019 7:52 PM
3 Reasons Why We Are Not Heading Toward Another Housing Crash | MyKCM

With home prices softening, some are concerned that we may be headed toward the next housing crash. However, it is important to remember that today’s market is quite different than the bubble market of twelve years ago.

Here are three key metrics that will explain why:

  1. Home Prices
  2. Mortgage Standards
  3. Foreclosure Rates

HOME PRICES

A decade ago, home prices depreciated dramatically, losing about 29% of their value over a four-year period (2008-2011). Today, prices are not depreciating. The level of appreciation is just decelerating.

Home values are no longer appreciating annually at a rate of 6-7%. However, they have still increased by more than 4% over the last year. Of the 100 experts reached for the latest Home Price Expectation Survey, 94 said home values would continue to appreciate through 2019. It will just occur at a lower rate.

MORTGAGE STANDARDS

Many are concerned that lending institutions are again easing standards to a level that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.

The Urban Institute’s Housing Finance Policy Center issues a quarterly index which,

“…measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”

Last month, their January Housing Credit Availability Index revealed:

“Significant space remains to safely expand the credit box. If the current default risk was doubled across all channels, risk would still be well within the pre-crisis standard of 12.5 percent from 2001 to 2003 for the whole mortgage market.”

FORECLOSURE INVENTORY

Within the last decade, distressed properties (foreclosures and short sales) made up 35% of all home sales. The Mortgage Bankers’ Association revealed just last week that:

“The percentage of loans in the foreclosure process at the end of the fourth quarter was 0.95 percent…This was the lowest foreclosure inventory rate since the first quarter of 1996.”

Bottom Line

After using these three key housing metrics to compare today’s market to that of the last decade, we can see that the two markets are nothing alike.

Posted by VLADIMIR G. DIAZ on February 21st, 2019 7:48 PM

Buying a House This Year? This Should Be Your 1st Step! | MyKCM


In many markets across the country, the number of buyers searching for their dream homes outnumbers the number of homes for sale. This has led to a competitive marketplace where buyers often need to stand out. One way to show that you are serious about buying your dream home is to get pre-qualified or pre-approved for a mortgage before starting your search.

Even if you are not in an incredibly competitive market, understanding your budget will give you the confidence of knowing whether or not your dream home is within your reach.

Freddie Mac lays out the advantages of pre-approval in the ‘My Home’ section of their website:

“It’s highly recommended that you work with your lender to get pre-approved before you begin house hunting. Pre-approval will tell you how much home you can afford and can help you move faster, and with greater confidence, in competitive markets.”

One of the many advantages of working with a local real estate professional is that many have relationships with lenders who will be able to help you through this process. Once you have selected a lender, you will need to fill out their loan application and provide them with important information regarding “your credit, debt, work history, down payment and residential history.”

Freddie Mac describes the ‘4 Cs’ that help determine the amount you will be qualified to borrow:

  1. Capacity: Your current and future ability to make your payments
  2. Capital or cash reserves: The money, savings, and investments you have that can be sold quickly for cash
  3. Collateral: The home, or type of home, that you would like to purchase
  4. Credit: Your history of paying bills and other debts on time

Getting pre-approved is one of many steps that will show home sellers that you are serious about buying, and it often helps speed up the process once your offer has been accepted.

Bottom Line

Many potential homebuyers overestimate the down payment and credit scores necessary to qualify for a mortgage. If you are ready and willing to buy, you may be pleasantly surprised at your ability to do so today.


Posted by VLADIMIR G. DIAZ on January 17th, 2019 9:51 PM



Tax Reform & Housing: A Reference Guide

Disclaimer: This guide is not meant to be a resource for tax advice but instead a resource for basic information concerning only certain aspects of the new tax code and how they may impact the real estate market. You should get tax advice from your accountant or tax preparer who will explain how the entire tax code will affect your personal return.

This information comes immediately after the new tax code became law. Some of the information may be revised as the analysis of the new law evolves.

When the tax code was originally being overhauled by the House and the Senate, there were three major proposals being considered that would have substantially impacted the residential real estate market:

  • Changing the requirements for the exclusion of gain on the sale of a principal residence
  • The reduction on the limit of the Mortgage Interest Deduction (MID)
  • The elimination of the State and Local Tax deduction (SALT) which includes property taxes

Let’s look how the tax code has evolved from the original proposal, and decipher what impact experts believe it may have on the housing market.

1. Exclusion of gain on sale of a principal residence

Original Proposal: Owners would need to live in their house for at least 5 out of the last 8 years to claim this exemption. Under the former tax framework, a typical owner, who has lived in their house for at least 2 years out of the last 5 years, would pay nothing in capital gain taxes if they sell the house.

The New Tax Code: No change. The “at least 2 years out of the last 5 years” requirement is unchanged.

Impact on the Market: None.

2. Mortgage Interest Deduction

Original Proposal: Reduce the limit on the mortgage interest deduction (MID) amount from $1,000,000 to $500,000.

The New Tax Code: Reduces limit on deductible mortgage debt to $750,000 for new loans taken out after 12/14/17. Current loans up to $1 million are grandfathered.

Impact on the Market: Assuming a 20% down payment, this reduction in the MID will impact buyers that are purchasing a home between the prices of $938,000 and $1,250,000. Any home under the lower price is still covered and any home over the higher price was not covered under the former tax code either.

What does that mean to the market? Experts disagree. Calculated Risk’s Bill McBride:

“I think the impact of reducing the MID from a maximum of $1 million in mortgage debt to $750 thousand in mortgage debt will have very little impact on the housing market.”

On the other hand, Capital Economics claims:

“The impact on expensive homes could be detrimental, with a limit on the mortgage interest deduction raising taxes for those that itemize.”

3. State and Local Taxes (SALT)

Original Proposal: The elimination of the state and local tax deduction (which includes property taxes).

The New Tax Code: Allows an itemized deduction of up to $10,000 for the total of state and local property taxes and income or sales taxes.

Impact on the Market: Most experts agree that higher taxed regions will be impacted as homeowners in those communities now have a cap on these deductions.

Calculated Risk’s Bill McBride stated:

“SALT will have an impact on housing in some areas. Some people might choose to live in one state over another (if they have a choice), based on taxation. This could impact demand in certain states – especially for the middle and upper-middle class homeowners.”

Mark Zandi of Moody’s Analytics said:

“The impact on house prices is much greater for higher-priced homes, especially in parts of the country where incomes are higher and there are thus a disproportionate number of itemizers, and where homeowners have big mortgages and property tax bills.”

What will be the overall impact on the housing market?

For most of the country, the new tax code will not have a negative impact on the market. As Capital Economics reports:

“Given most households will see an overall tax cut, and potential buyers are likely to put that saving towards their home, we doubt it will have a significant detrimental impact on the housing market.”

There is also no doubt that some higher priced, higher taxed regions will be affected more than others. However, most experts agree that other portions of the tax code will favor the high-end buyer and seller, and this might mitigate many concerns. McBride explains:

“The corporate tax cuts (and other tax cuts) will mostly benefit the wealthy, and this will be a positive for high end real estate.”

What does this all mean to you?

To know for sure, you should sit with your accountant or financial planner and explore how all the aspects of the new code will impact your family.

Most families consider homeownership an essential part of the American Dream, and don’t purchase a home based solely on the tax advantages. The main reasons they buy a home are personal (they just got married, they are looking for a good place to raise children, they want to be near friends and family, they want to better enjoy their retirement, etc.). This will never change.

Looking at the new tax code, Mr. McBride’s opinion makes the most sense:

“There will be some negative impact based on SALT, but overall the impact of these policy changes on housing will be minimal.”


Posted by VLADIMIR G. DIAZ on December 27th, 2017 11:37 AM

The kitchen is one area of the home that sees the most wear and tear. All the water, heat, and food spills add up
quickly so it’s important to focus on quality and lasting appeal when you’re choosing materials for a kitchen remodel.
Here are a few things you should avoid:

Cheap Laminate Countertops: The bottom rung of laminate is extremely susceptible to wear and tear. It can
melt if you forget to place a hot pad under a pan that’s fresh out of the oven and the edges can chip off from
repeated exposure to moisture and heat.

Flat Paint: A flat or matte finish is great in rooms with lower traffic, but it’s a bad idea in the kitchen where the
walls are regularly exposed to splatters and spills. You need paint that can withstand an occasional heavy scrubbing,
so opt for gloss or semi-gloss finishes.

Trendy Backsplash: If you watch any home remodeling show, you’ll certainly see kitchens with expensive,
elaborate backsplash designs and materials. Those trends can be pricey to pursue and can look dated in a hurry.
Subway tile is a cheaper, classic option that you’ll never regret, plus you’ll have more room in your budget to
purchase quality materials to be used elsewhere.

Cheap Flooring: Just like the countertops, your kitchen floor needs to be strong enough to take some abuse.
Cheap flooring easily scuffs and peels (especially from moisture). Quality flooring is worth the investment.

Posted in:General
Posted by VLADIMIR G. DIAZ on August 27th, 2017 2:16 PM

Budgeting for buying a home can be difficult enough when you're just weighing mortgage options and a purchase
price. But there are many other factors that go into the cost of home ownership. Some of them are one-time expenses
that you'll pay during the home buying process, while others will be recurring costs for as long as you own the home.

Closing costs

There are several smaller fees that add up to a rather large sum when you're going through the closing process-loan
fees, attorney fees, underwriting fees, and more. They typically add up to 2-5% of the purchase price. For a $300,000
home-roughly the national median-that's in the neighborhood of $10,000, so be sure to budget for it.

Appraisal

Your lender will require an appraisal, and the appraisal fee (a few hundred dollars) comes out of your pocket.

Inspection

The few hundred dollars you'll pay for a home inspection is money well spent, but it's something you have to keep
in mind during the purchase process. You'll have the peace of mind of knowing the house is free from any major
issues, and you're making a smart, solid investment.

Insurance

Although homeowners insurance isn't legally required, it'll almost certainly be required by your lender.
Further insurance, such as flood insurance, may also be required (depending on your location).

Home Owners Association

If you're living in a property or community with shared spaces, you'll almost certainly have an HOA fee.
This pays for things like trash removal, maintenance of common areas, and for recreational facilities like gyms
 and swimming pools.




Posted by VLADIMIR G. DIAZ on August 23rd, 2017 11:02 PM

We all know that searching for and viewing potential homes is the fun part of the home-buying process.
The not-so-fun part? The mortgage.

But if you don't pay attention to the details, your mortgage can end up dragging down the enjoyment of your new
home and cause some major regrets. Here are a few mistakes to avoid to ensure that you love your mortgage terms
as much as your hew home.

Don't find your home first: Shopping around for the best mortgage rate should be the first step in the home
buying process. You may even want to talk to a mortgage broker a full year before you plan to buy. It'll give
you time to get your affairs in order to qualify for the best rate, could save you thousands of dollars in the long
run, and you won't feel rushed to accept an unattractive loan because you're worried you'll miss out on your
dream home.

Don't forget your real budget: There's often a big difference between what a lender says you can afford and
what you can actually afford. Your debt-to-income ratio doesn't include the money you spend on hobbies, or the
cost of commuting to work, or maintenance and utility costs. Really sit down and examine your spending before
committing to the loan amount the lender is offering. You won't enjoy your home nearly as much if it's eating into
your favorite hobbies.



Posted by VLADIMIR G. DIAZ on August 18th, 2017 6:37 PM

Some the features that increase property values are obvious-like a remodeled bathroom, a modern kitchen, or a sought-after neighborhood. But here are a few features and circumstances you have not have realized can affect property values.

  1. The neighbors: Not every neighborhood or community has an HOA that can keep the neighbors from going overboard with decorations or neglecting to care for their home. Homes adjacent to crazy neighbors can potentially be undervalued.
  2. Trendy groceries and coffee: Recent statistics suggest that if your home is a short walk from popular grocery stores like Whole Foods or coffee chains like Starbucks, it can actually appreciate faster than the national average.
  3. Mature trees: A big beautiful tree in the front yard is enviable, and it's not something that can be easily added to any home. Homes with mature trees tend to get a little boost in value.
  4. Parking: This isn't too much of an issue if you live in the suburbs or in a rural area, but residents in dense cities can have real problems with parking, and homeowners might need to rent a spot just to guarantee a place to park each night. That's why having guaranteed parking in urban areas will raise property values.
  5. The front entrance: First impressions matter to buyers-many will cross a home off their list within 10 seconds of stepping through the front door. An appealing front door, a friendly entryway, and a functioning doorbell are all necessities for getting top dollar.

Posted in:Real Estate and tagged: real estate
Posted by VLADIMIR G. DIAZ on August 15th, 2017 11:48 PM

Today's Rates

Mtg Loan Rate APR
30-yr Fixed 4.35% 4.39%
15-yr Fixed 3.78% 3.84%
1-yr Adj 3.84% 3.86%
* national averages