Mortgage Rates Drop Again

Existing-Home Sales and Prices Climb

As we head into the busy spring home-selling season, home buyers will be happy to know that mortgage rates are back on the decline. The same can’t be said of home prices, though, which continue to rise.

Freddie Mac’s just-released weekly survey of lenders shows little change in the following average rates for the most popular home loan terms:

30-year fixed-rate mortgages averaged 3.62% with an average 0.6 point for the week ending Feb. 18, 2016. A year ago, the rate averaged 3.80%.
15-year fixed rates averaged 2.93% with an average 0.5 point. The same term priced at 3.07% a year ago.
5-year adjustable-rate mortgages priced at 2.79% with an average 0.5 point. Last year at this time, the same ARM averaged 2.99%.

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“Since the beginning of 2016, 30-year rates have fallen almost 40 basis points, helping housing markets sustain their momentum into this year. ” Sean Becketti, chief economist for Freddie Mac, said in a release.

In the meantime, rising home prices put a damper on home loan activity, according to the Mortgage Bankers Association weekly report. Overall, mortgage loan applications dropped 4.3% from one week earlier, with an 8% slip in refis in contrast to previous weeks of gains.

Purchase applications were down 4%, but are still 27% higher than the same week one year ago.

Existing-home sales, home prices climb

A shortage of housing inventory is pushing home prices and sales to new heights, but the upward climb isn’t necessarily a good thing for homebuyers.

According to the National Association of Realtors, existing-home sales in January climbed slightly — 0.4% — to a seasonally adjusted annual rate of 5.47 million. That’s the highest annual rate since July 2015. While that’s good news for the market, homebuyers are feeling the pressure of inventory shortages, which helped push the median existing-home price up to $213,800, an 8.2% increase over January 2015.

Lawrence Yun, NAR chief economist, says that the housing market is off to a strong start this year, but a slowdown in new-home construction, as well as a lack of existing homes for sale in many markets, has the potential to keep pushing prices higher.

“The spring buying season is right around the corner, and current supply levels aren’t even close to what’s needed to accommodate the subsequent growth in housing demand,” Yun said in a release. “Home prices ascending near or above double-digit appreciation aren’t healthy — especially considering the fact that household income and wages are barely rising.”

To complicate things a bit more, new-home sales fell 9.2% in January to a seasonally adjusted annual rate of 494,000, according to the U.S. Commerce Department. A 32.1% drop in new sales in the West (where homes are typically more expensive) was the driving force behind the plunge, followed closely by losses in the Midwest.

With a stall in new housing starts during these cold winter months, homebuyers might find it difficult to get into a newly built home or resale without some fierce competition. And despite mortgage rates staying below 4%, more homebuyers might be priced out of the market as housing prices continue to rise.

This article originally appeared on NerdWallet.

Seasonality in Real Estate

How Weather and the Time of Year Affect Housing!

Weather and the time of year have a big impact housing activity, and in every housing market there are times of the year when fewer homes sell. For most, that time of year coincides with the winter months, and in much of the U.S., that’s the case right now.

But no matter where you live, it’s important to know how seasonality affects the housing market. So let’s look at the current housing numbers, how seasonality affects them, and what it means for you if you’re looking to buy or sell.

With few homes available, sellers are in pole position

Last year, limited inventory dominated the headlines for the real estate industry, and that trend looks to continue this year. According to the National Association of Realtors (NAR), inventory dropped 12.3 percent from November to December, falling to 3.8 percent lower than December 2014. That equated to just a 3.9-month supply of homes.

Generally speaking, a 6-month supply of homes (meaning it would take six months at the current sales pace to sell all the homes on the market) represents a balanced market, one in which there are enough homes to meet demand. For much of 2015, inventory remained well below a 6-month supply, and will likely remain so for 2016.

Why is inventory so constrained? Part of the sharp drop in December is due to the seasonal slow down in many states. Cold weather and holidays keep many buyers out of the market and many sellers waiting for demand to pick back up. Additionally, new home construction came to a standstill when the housing market crashed, so there are fewer new homes available. Existing home inventory is low as well. A combination of factors, such as locked-in low interest rates and a sense that home prices will continue to increase, are keeping current homeowners from listing their homes.

If you’re thinking of selling, this market is very much a seller’s market. When inventory is scarce, buyers are forced to compete over the few homes for sale. Homes are selling faster, and in many markets bidding wars drive home prices up well above asking. At the very least, you’ll be in a strong negotiating position.

Economic Conditions and Home Affordability Continue to Sideline Buyers

For buyers, the market is tough, and the low number of first-time buyers illustrates just how tough it is. In a separate study conducted by NAR, first-time homebuyers in 2015 made up the lowest share of the market in nearly three decades.

Many factors are keeping first-time home buyers sidelined. Despite a strengthening economy and job growth, wages have remained relatively stagnant. At the same time, rent prices have skyrocketed and continue to rise. Combined, these factors are preventing millennials from saving enough for a significant down payment.

At the same time, home affordability continues to suffer. Home prices have risen quickly over the last three and half years, again outpacing wage and job growth. Prices are expected to rise more modestly this year, somewhere around 4 to 5 percent.

These factors combined with limited inventory are making it difficult for buyers to find the home they want at a price they can afford. However, if you’re thinking of buying, it is important to start looking sooner rather than later…

Mortgage Rates & Increasing Finance Accessibility

In February, mortgage rates remain near record lows. According to Freddie Mac’s Mortgage Survey, the average mortgage rate for a 30-yr FRM was just 3.65%. Despite tough market conditions, these rates present an excellent opportunity if you’re thinking of buying.

In a piece of good news for buyers, it should be easier to get financing in 2016. Fannie Mae’s fourth quarter 2015 Mortgage Lender Sentiment Survey™ shows that lenders expect to ease mortgage credit standards for GSE-eligible loans and government loans over the next three months, opening the door for more buyers to get financing.

If You’re Thinking of Buying, Act Sooner Rather Than Later

If you’re thinking of buying a home, it’s important to act sooner rather than later. As the year goes on, affordability will continue to suffer. With home prices expected to increased around 4 to 5 percent this year and mortgage rates expected to rise to around 4.5 percent, the longer you wait to buy, the less home you’ll be able to afford. Even small increases in mortgage rates and home prices can have a large impact on your future monthly mortgage payment!

Homeowner Tax Deductions

Decrease Your Tax Burden
You can’t avoid paying taxes, and we all need to pay our fair share. However, paying your fair share shouldn’t place an unjust burden on you. As a homeowner, your tax burden is doubled because you pay both income and property taxes. To decrease that burden and boost your tax savings, take advantage of these homeowner tax deductions. As a result, you can use your tax savings to go on a vacation, increase your child’s college fund, build upon your retirement fund, or complete another home improvement project.

Home Improvement Tax Deduction
You spend so much of your time at home, and you try to make it as comfortable a place to live as possible. If your home needs some upgrades, consider improvements that will help foot the bill for themselves.

You can get an energy-efficient tax credit of up to $500 for installing storm doors and energy-efficient insulation and air-conditioning and heating systems. Switching out your old windows for energy-efficient ones could earn you $200. This credit expires this year on December 31^st. So, this year will be your last chance to take advantage of getting tax credit for making your home more energy efficient.

Also, installing equipment that uses renewable sources of energy makes you eligible for the Renewable Energy Efficiency Property Credit. The credit covers 30 percent of the cost of equipment and installation. This credit also expires this year on December 31^st.

Mortgage Interest and Refinancing
If your mortgage payment makes you cringe each month, you’ll be glad to know you can deduct taxes on the following:

Interest towards mortgage
Mortgage payments for additional property
Rental properties
Refinancing and home equity lines of credit (HELOC) up to $100,000 of debt.
If you own multiple properties, the mortgage interest on additional property is deductible as well. The cool thing is that it doesn’t have to be a house. It can be a boat or RV; as long as it has cooking, sleeping, and bathroom facilities, it counts as additional property.

Regarding using your second home as a rental, you need to vacation at least 14 days at the property or spend more than 10 percent of the number of days you rent it out.

Furthermore, you can claim points on your mortgage the year you paid them if the following happened:

The loan was to purchase or build your main home
Payment of points is an established business practice in your area and the points were within the usual range

Property Taxes
Now, this is the big one. Property taxes you pay each year are tax deductible. The amount of property taxes you paid for the year shows up on your lender’s annual statement. You must deduct them as an itemized expense on your Schedule A tax form.

First-time home buyers, look at your settlement sheet to see additional tax payment data. You may deduct the portion of property taxes you paid during the first year of your homeownership.

Protesting Your Assessment to Lower Your Property Taxes
Although you must pay property taxes, you can make sure that you pay a reasonable amount based on the true value of your home and land. Many homes get overvalued because assessors err in valuing a home and homeowners don’t pay attention to these mistakes. Consequently, homeowners unwittingly pay more than they should in property taxes.

However, if you’ve owned your home for more than a year, you can potentially lower your property tax burden by showing that your home has been overvalued, meaning that your tax assessment claims your property is worth more than it is.

Even if the number on the tax assessment seems close, you should still consider protesting your property tax. Typical savings from a successful tax protest is over 15%!

According to SmartAsset, the national median property tax paid is roughly $2,839.00. That’s about 1.192 percent of a home valued at $238,200.00.

If you’re able to reduce your assessed value by 15 percent to $202,470.00 and consequently save 15 percent on your tax bill, your new tax bill will be about 2,413.00. That’s a savings of $426.00!

To get started protesting your property tax, read your assessment letter. Your assessment letter will list data about your property and the assessed value of your house and land. Make sure your assessment letter has the correct information about your property.

Understanding that assessors can make mistakes assessing your home value will help you with your appeal. There are three key mistakes assessor make when assessing property. These mistakes include:

Outdated Historic Sales Data: Sometimes assessors will use sales data from previous years. Because the real estate market is fluid, this data changes quickly, as a result; this data can over value your home.
Mass Appraisal Methods: Also, when assessors use mass appraisal methods, they do not take into account all the market adjustments that occurred over time. Consequently, there sales data can’t always produce useful comparable properties to set future sales.
Living Area: Assessors notoriously make mistakes about the living area of your house. This is especially true if you live in a 1.5 or 2 story home. Check any previous appraisals to ensure correct measurements and description of our home. Does the assessment letter show the right number of bathrooms and bedrooms? Does it report the correct size of your lot? .5 acres differs greatly than 5.0 acres.

After reading your assessment letter, consult a Realtor. We can find three to five approximate values of comparable properties similar to yours, and these comps can then be used to support your claim that your home is overvalued. This is especially useful if the assessor used poor historical sales data.

You’ll have 30 days to file an appeal of your assessment, so you’ll want to get the comps as soon as your assessment arrives. You can speak with an assessor on the phone or request a formal review.

You’ll then need to fill out a form and follow specific instructions regarding your supporting evidence. Typically, it’s not necessary for you to appear at the review. The review can take one to three months to complete, and you’ll receive a decision in writing.

The majority of assessment appeals are successful. However, if at first you don’t succeed, appeal. You’ll need to pay a small filing fee for an independent appeals board to hear your second appeal. This process could take up to a year to complete, so you’ll need to decide whether it’s truly worth it.

As a homeowner, you have plenty of options available to decrease your tax burden. The benefit is that you can use your tax savings for major life events such as weddings, vacations, and home improvements.

To find out more about your tax saving options as a homeowner, check out tax information for homeowners. You can also contact me directly and I’ll gladly lead you in the right direction towards saving you money on your taxes.