[This is an update to our previous blog post here]
Merely moments after being sworn in as our nation’s 45th President, President Trump’s HUD indefinitely suspended the MIP reduction of 25basis points, that was scheduled to begin on January 27th.
[UPDATE – According to Housing Wire, This reduction has been indefinitely suspended mere minutes after Donald J. Trump was sworn in as the 45th President of the United States of America.]
The Department of Housing and Urban Development announced on Monday that they plan to reduce the Mortgage Insurance Premium for FHA mortgage loans. Since 2012, the Federal Housing Administration’s(FHA) Mutual Mortgage Insurance(MMI) Fund has gained $44 billion, and is now 32 basis points above the 2 percent threshold level required by Congress. This is ~$13 billion more than projected for Fiscal Year 2017 in an Actuarial Review of the MMI Fund for Fiscal Year 2012.
The FHA Pays It Forward
“After four straight years of growth and with sufficient reserves on hand to meet future claims, it’s time for FHA to pass along some modest savings to working families,” … “This is a fiscally responsible measure to price our mortgage insurance in a way that protects our insurance fund while preserving the dream of homeownership for credit-qualified borrowers.” – Julián Castro, HUD Secretary
According to the FHA, the reduction will return the Mortgage Insurance Premium nearly to levels seen before the housing bubble crisis. The FHA also predicts that ~1 million borrowers will buy or refinance with an FHA loan over the next year, most of whom will see reduced costs.
“We’ve carefully weighed the risks associated with lower premiums with our historic mission to provide safe and sustainable mortgage financing to responsible homebuyers,” … “Homeownership is the way most middle class Americans build wealth and achieve financial security for themselves and their families. This conservative reduction in our premium rates is an appropriate measure to support them on their path to the American dream.”
– Ed Golding, Principal Deputy Assistant Secretary for HUD’s Office of Housing.
According to the FHA, annual mortgage insurance premiums will be lowered 25 basis points*, or one quarter of one percent, will come into effect on January 27th of this year. The FHA estimates that new rates could save, on average, $500 in 2017 alone for most FHA borrowers.
*For loans less than or equal to $625,500 with a maturity greater than 15 years. Please see the full report from HUD for more details of different loan scenarios and their actual MIP’s.
CNN recently ran an article explaining why self-made millionaire David Bach has said,
“The fact is, you aren’t really in the game of building wealth until you own some real estate.”
In his book, “The Automatic Millionaire” Bach writes,
“As a renter, you can easily spend half a million dollars or more on rent over the years ($1,500 a month for 30 years comes to $540,000), and in the end wind up just where you started — owning nothing. Or you can buy a house and spend the same amount paying down a mortgage, and in the end wind up owning your own home free and clear!“
We have touched on this in the past. (see Buying Still Cheaper Than Renting, Renting vs Buying a Home and Accumulating Wealth, and Homeowner Average Net Worth 3,600% Higher Than Renter)
Bach has told CNBC that buying a home is “an escalator to wealth“.
“If millennials don’t buy a home, their chances of actually having any wealth in this country are little to none. The average homeowner to this day is 38 times wealthier than a renter.”
In regards to the idea of a starter home, Bach says,
“Oftentimes, buying your first home means you’re not buying your dream home. You’re just getting into the market.”
Following David Bach’s logic is simple. We all have to live somewhere. We have to pay either rent or a mortgage. Over time, a mortgage can increase your net wealth over renting.
While buying your dream home would be nice, Bach says that the key is to just get into the market, and admits that your first home may not be your last.
On average, family wealth of homeowners is dramatically higher than that of renters, and this divide has seen growth over time. David Bach, best-selling author and self-made millionaire, advises homeownership as the surest path to building wealth.
The Federal Housing Finance Agency has announced that it is increasing the maximum conforming loan limits for mortgage loans beginning in 2017. A mortgage loan is considered “conforming” when it is eligible to be acquired by Fannie Mae and/or Freddie Mac. (Mortgages are often sold to Fannie or Freddie so that a lender has the liquidity/money available to issue more mortgage loans for home buyers.)
The New Conforming Loan Limit
The current 2016 loan limit for single-unit properties or single family homes has remained at $417,000 for the last 10 years until recently. The FHFA has announced that the loan limit for single-family homes is increasing approximately 1.7% on January 1, 2017 from $417,000 to $424,100.
The changes were established because of The Housing and Economic Recovery Act of 2008 [pdf], which previously set the baseline loan limit at $417,000. The law also determined that after a period of housing pricing declines, the loan limit may not rise until prices return to pre-decline levels. It follows that since the FHFA is increasing the limit, it stands to reason that home pricing is back to pre-decline levels!
See also: Low Housing Inventory Driving Values Up – Benchmark (why the latest rise in home pricing is not another bubble)
FHA National Loan Limit is Up, Too
The FHA national loan limit “ceiling” will rise to $636,150, formerly set at $625,500. Additionally, the “floor” will increase to $275,665 from $271,050. The actual limit is variable by state and county. The “floor” is the lowest assigned limit, and the “ceiling” is the highest assigned limit for the nation as a whole.
The national loan limit is recalculated annually by the FHA from a percentage calculation of the national conforming loan limit. The calculated increase is positively correlated with rising home prices in high-cost markets.
What Does This Mean?
It means that the Department of Housing and Urban Development has taken notice of the trend of rising home prices. It also means that borrowers will be able to borrow more than they previously could without affecting the ability of lenders to maintain liquidity.
It’s a great time to buy!
Benchmark is thankful for all United States veterans and the sacrifices they’ve made for our country.
We asked some of our own veterans here at Benchmark to share what makes them proud to have served our great nation.
I am proud to have served in the US Navy. Volunteering four years of my life seems such a small sacrifice to protect this great country we live in. I would do it all again in a heartbeat.
At the time I joined, war had already been waged for 6 years. I felt I had the ability and responsibility to enlist and fight in hopes that my family, friends and future children would not have to. The experience left me with a much different outlook on our world. Nothing has ever or will ever fulfill me in the way that my time did. That’s why Benchmark is such a great fit for me. It supplies the tight knit and likeminded environment of people who come here daily to accomplish one mission.
I wanted to do something different than the other girls. My time with the National Guard was spent helping the immediate community. You’re there at the worst of times. I loved that in those situations you get instant gratification knowing you’re making a real difference.
-Kathleen, National Guard
Whether you are striking out to your first job after college, or moving your whole family for a job relocation; moving is hard. Here are a few helpful tips to successfully begin adjusting to your new surroundings.
Plan Your New Commute
Think ahead, and plan the routes you’ll eventually need to follow. Knowing the quickest way to work, schools, and local centers will make you feel more confident about starting a new routine. As you map out your regular routes, make note of surroundings and landmarks. Having a general understanding of the city layout makes it seem less foreign.
Explore Your New Neighborhood
Discovering local places can help give you a good idea of your new neighborhood’s personality. Gainin an understanding of your community’s identity can put you in a better position to settle in. Shopping and dining locally is also a great way to integrate into your new community.
Keep Your Relationships
Staying connected with friends from your previous city requires some effort, but it’s worth it. Long distance friendships have a way of making you feel balanced and grounded when you experience change. New relationships can take time to develop when you move to a new city, but you’ll appreciate knowing you have support from your friends.
Remember that People are Mirrors
People tend to reflect the energy that they see and feel around them. If you don’t feel that your new city has a friendly environment, look to yourself first, and think of the way strangers see you. If you appear closed off and sullen, they’ll interact with you the same way. Making the conscious decision to be kind and warm toward everyone around you can make your new city feel that way to you, too.
Understand that Adjustment Takes Time
Moving to a new city is difficult. Don’t doubt yourself if your new place or your new city doesn’t feel like home right away. Be patient as you undergo this major change, and eventually, you will feel like your new home is, well… home.
Even in light of rising home prices, Trulia‘s October 2016 “Rent vs. Buy Report” successfully argues that owning your home with a conventional 30-year fixed rate mortgage costs less than renting in major US metros, even in high priced areas like Honolulu, HI (which sees 17.4% cost reduction over renting). The highest difference was 53.2% in Miami, FL and West Palm Beach, FL.
Nationally, the average was an impressive 37.7% cost reduction.
It’s a Game of Pace
Even while home prices are appreciating nation-wide, interest rates have remained so low that the pricing increase has not approached matching rental inflation. In fact,
Prices would have to appreciate 23% in Honolulu, HI, to over 45% in Ventura County, CA before renting, at current rates, becomes less expensive than buying. On the other side, rates would have to approach 9.1%, which would be a 145% increase over the current average of 3.7%, for renting to be financially more attractive than buying. (We have not seen rates like those since January 1995, according to Freddie Mac)
Consider also the Family Wealth aspect of home ownership, coupled with ownership being closely tied to the American Dream, and the reduced out-of-pocket cost of owning over renting, and it might make one wonder if the benefits of renting are really worth it.
The numbers are clear. It makes good financial sense to be a homeowner. Let’s not forget the slice of the American Dream that comes with it! If you are interested in taking advantage of the benefits of home ownership, but aren’t sure where to start, call or contact me today! contact your Benchmark mortgage consultant today. Find Your Branch here: Get Started Now!
Most agree that home prices have risen, and are still on the rise. We have written about why this is not like the housing bubble that we saw nearly ten years ago. In some areas, there are not enough homes for sale to meet the demands of home buyers, and prices are driven up organically. see – Low Housing Inventory Driving Values Up – Benchmark
The Good News
While this can make things more difficult for some home buyers, there is a bright side. The average household in the US gained over $11,000 in equity in the last year owing, at least in part, to rising home values, according to CoreLogic’s most recent US Economic Outlook.
This map is originally provided by CoreLogic’s report. This shows the average, by state, of home equity gained per homeowner from June 2015 to June 2016. The national average equity gain per homeowner was $11,152.
To address any fears that this nationwide appreciation harkens back to the bubble burst a decade ago, please recognize that homeowners are investing this new equity in their homes and in themselves rather than in speculation or assets subject to standard depreciation.
What does this mean? This means that it is probably helping families to pay for college, start small businesses, pay off their mortgage faster, or moving to a home more suited to their dreams or lifestyle.
What Does The Future Hold?
CoreLogic’s predictions are that home prices will rise another 5% by this date in 2017. Would you believe that it is still cheaper to buy than to rent? Stay tuned for our next post!
Fall brings changes to the colors outdoors, but it doesn’t stop there.
Pantone releases their fall colors annually. According to Pantone, this year’s fall color palette represents “a unity of strength, confidence and complexity.” The colors, inspired by “the desire for tranquility, strength and optimism” are led by the Blue family. Each of the individual colors stray from the typical fall shades to make vivacious statements.
Riverside is confident and practical. To bring this soothing and stable color into your home, consider napkins that follow the same color theme. Such a sensible shade lasts well through the season for your guests or family around the table.
The second shade of blue chosen for fall, Airy Blue nods to Serenity, one of the two Pantone colors of the year. This particular blue can easily fit into your home with candles to add a sense of warmth. Just like many of the other fall colors, Airy Blue is relatively easy to incorporate into your home and through the seasons.
If you’re looking to add a sharp and contemporary look in your home, check out Sharkskin. This color is bold, but natural. The edgy grey tone pairs well with bright or muted colors making it ideal in the form of sheets.
Warm Taupe is a shade that pairs well with any of the top 10 Fall colors. The timeless color suggests stability and trust. The versatile shade can be incorporated at your dinner table with a dinnerware set set that can be dressed up with complimentary table decor.
For a welcoming color, look at Dusty Cedar. As temperatures decrease, cozy up in this perfect fall version of pink with a soft blanket. This shade is fit for both fall and winter and the rose undertones will add a unique look to your couch.
If you’re searching for a sophisticated and elegant color, turn to Lush Meadow. Show off this vibrant color with natural green coasters. Lush Meadow is the color that let’s you bring the outdoors indoors.
Spicy Mustard is an unexpected color, but the zesty shade brings an uplifting splash of vibrancy. Set the dining table with a runner that brings excitement to a decorative place setting. Spicy Mustard pairs especially well with Riverside, Sharkskin and Potter’s Clay.
Potter’s Clay is full of orange undertones that make it perfect for both fall and winter. The earthy shade references the outdoor color changes of fall. Add a pair of taper candles to your dining room or mantle to bring the neutral earth tone indoors.
On the other hand, Bodacious is a more lively and electrifying shade of purple for the fall season. If you’d like to make a statement with this fall color in your living room, choose a soft throw pillow. Just like the rest of the fall palette, Bodacious pairs well with one or all of the colors to add vibrance in your home.