Homeownership: The Real Story Behind The Headlines

Posted on by Andrea Fowler
Homeownership: The Real Story Behind The Headlines | Keeping Current Matters
The big housing news this week is that the homeownership rate has dropped to 63.4% which represents the lowest rate in 48 years. That news definitely is making headlines. Yet, to fully understand what this means we have to look at the story that created these headlines.
There is no doubt the homeownership rate has declined since the housing crisis. Here is a graph showing the homeownership rate over the last twenty years. It skyrocketed during the housing boom and has steadily fallen since the bust:
HomeownershipRates | Keeping Current Matters

The story behind the headline…

The dramatic fall in the rate over the past year must be looked at very closely. The rate is determined by the “number of households” who rent versus those who own. Let’s assume you have nine friends that live on their own (thus forming a household); six of them own and three of them rent. That would mean that 66.6% (6 out of 9) of your friends that live on their own are homeowners.
Now, let’s assume you have another friend who has been living with his parents. He would not be considered a separate household because he lives within his parents’ household. Once that friend moves out of his parents’ home and gets a place of his own, he will become part of the household count. Let’s assume, since he is just starting out, that he moves into a rental.
When he does, you now have ten friends that live on their own. If six still own their home and four of your friends now rent, the homeownership rate of your friends drops to 60% (6 out of 10). The number who own didn’t decrease; but the percentage decreased.
With the economy improving and job numbers looking better, more and more young adults are beginning to move out and get a place of their own. However, most will start in a rental situation thus driving the “percentage” of homeownership down. Auction.comexplained the most recent drop in homeownership rate this way:
“This occurred as household formations popped, implying millennials are riding an improved labor market out of mom and dad’s house. Roughly a third of millennials live at home according to Census data, an elevated figure. Continued gains in the labor market will coax increased numbers out into their own places, a majority of which will be apartments, as this age cohort lacks the financial wherewithal to buy.”

What does this mean to the future of homeownership?

The great news is that study after study has shown that Millennials aspire to homeownership as they still see it as a major part of the American Dream. As they get more comfortable with their financial situation, many of the Millennials who finally made it out of their parents’ homes this year will become homeowners over the next several years. An increase in homeownership rates will follow.

Freddie Mac: Equity Matters (A LOT!)

Posted on by Andrea Fowler
Freddie Mac: Equity Matters (a Lot!) | Keeping Current Matters
According to a Merrill Lynch survey, over 80% of the people in this country believe that homeownership is still “an important part of the American Dream”. There are many financial and non-financial reasons people feel this way.
One of the biggest reasons is because it helps build family wealth. Last week, Freddie Mac posted about the power of home equity. They explained:
“In the simplest terms, equity is the difference between how much your home is worth and how much you owe on your mortgage. You build equity by paying down your mortgage over time and through your home’s appreciation. In a nutshell, your money is working for you and contributing toward your financial future.”
They went on to show an example where a person bought a home for $150,000 with a down payment of 10%, resulting in a loan amount of $135,000. The buyer secured a 30-year fixed-rate mortgage at 4.5% with a monthly mortgage payment of $684.03 (not including taxes and insurance). They then illustrated what would happen after seven years of making a mortgage payment, assuming 3% per year home appreciation (the historic national average):
Home Equity Calculation | Keeping Current Matters
And that number continues to build as you continue to own the home. Merrill Lynchpublished a report earlier this year that showed the average equity homeowners have acquired at certain ages.
Average Home Equity by Age | Keeping Current Matters

Bottom Line

Home equity is important to building wealth as a family. Referring to the first scenario above, Freddie Mac explained:
“Now, if you continued to rent, and made the same payment of $684.03 per month, you’d have zero equity and no means to build it.
Building equity is a critical part of homeownership and can help you create financial stability.”

What If I Wait Next Year to Buy?

Posted on by Andrea Fowler
What If I Wait Until Next Year to Buy? | Keeping Current Matters
First-time homebuyers are flocking to the housing market in greater numbers than any time in the last few years. Renters who are ready and willing to buy are now realizing that they are also able to as well. Many first-time buyers are Millennials (born between 1981 – 1997).
If you are one of the many in this generation who sees your friends and family diving head first into the real estate market, and wonder if now is the time for you to do the same, keep reading!
The Cost of Waiting to Buy is defined as the additional funds it would take to buy a home if prices and interest rates were to increase over a period of time.
Let’s look at an example of what the experts are predicting for the upcoming year, and what that really would mean for you. Let’s say you’re 30 and your dream house costs $250,000 today. Right now mortgage interest rates are at or about 4%.

Your monthly mortgage payment (principal & interest only) would be $1,193.54.

But you’re busy, you like your apartment, and moving is such a hassle. You decide to wait until next year to buy. CoreLogic predicts that home prices will appreciate by 5.1% in the next 12 months; this means that same house you loved now costs, $262,750.
Freddie Mac predicts that over this same period of time, interest rates will be a full point higher at 5.0%. Your new payment per month is now $1,410.50.

The difference in payment is $216.96 PER MONTH!

That’s basically like taking $8 and tossing it out the window EVERY DAY!
Or you could look at it this way:
  • That’s your morning coffee everyday on the way to work (average $2) with $10 left for lunch!
  • There goes Friday Sushi Night! ($50 x 4)
  • Stressed Out? How about a few deep tissue massages with tip!
  • Need a new car? You could get a brand new car for $217 a month.
Let’s look at that number annually! Over the course of your new mortgage at 5.0%, your annual additional cost would be $2,603.52!
Had your eye on a vacation in the Caribbean? How about a 2-week trip through Europe? Or maybe your new house could really use a deck for entertaining. We could come up with 100’s of ways to spend $2,603, and we’re sure you could too!
Over the course of your 30 year loan, now at age 61, hopefully you are ready to retire soon, you would have spent an additional $78,105.60, all because when you were 30 you thought moving in 2015 was such a hassle or loved your apartment too much to leave yet.
Or maybe there wasn’t an agent out there who educated you on the true cost of waiting a year. Maybe they thought you wouldn’t be ready. But if they showed you that you could save $78,000 you’d at least listen to what they had to say.
They say hindsight is 20/20, we’d like to think that 30 years from now when you are 60, looking back, you would say to buy now…

The Main Reason You Should Not Wait to Buy…

Posted on by Andrea Fowler
The Main Reason You Should Not Wait to Buy | Keeping Current Matters
The Joint Center for Housing Studies at Harvard University recently released their 2015State of the Nation’s Housing report. The report concentrated on the challenges renters in this country are facing because of the diminishing supply of quality rental units and dramatically escalating rents.
However, there was also information buried within the report that revealed that now is definitely the time to buy your first home or move-up to the home of your family’s dreams. With home prices still below peak values and mortgage rates still near historic lows, the monthly mortgage payment on a median priced home is less than at almost any time in the last 25 years.
Here is a graph which helps visualize the data from the report:
Median Mortgage Payment | Keeping Current Matters

Bottom Line

With home prices increasing and mortgage rates projected to increase, now is the time to buy.

Debunking Some Myths about Mortgage Availability

Posted on by Andrea Fowler
Debunking Some Myths about Mortgage Availability | Keeping Current Matters
There seems to be a growing chasm between what the public believes to be needed and what is actually needed to qualify for a residential home loan.
A recent survey by Ipsos reported that:
  • Two-thirds of those surveyed believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780.
  • Consumers overestimate the down payment funds needed to qualify for a home loan, with 36 percent thinking a 20 percent down payment is always required.
However, according to American Enterprise Institute’s International Center on Housing Risk’s May First-Time Buyer Mortgage Risk Index (FBMRI), reality is far from perception. The report reveals:
  • 70% of first-time buyer mortgages had a combined loan-to-value ratio of 95% or higher
  • About 20% of first-time buyers taking out mortgages had a FICO score below 660
  • 25% had total debt-to-income ratios above 43 percent
  • The median first-time buyer with an agency mortgage made a down payment of only 3 percent, or $7200 in dollar terms.
  • The median FICO score for first-time buyers with agency mortgages was 705
  • For first-time buyers with FHA-insured loans, the median FICO score was only 672
These numbers contradict the frequent claims that first-time buyers face difficulties in obtaining mortgages.

Bottom Line

Stephen Oliner, co-director of AEI’s International Center on Housing Risk explained the reality of the situation.
“One hears all the time that first-time buyers have limited access to mortgage debt.  But this isn’t true. Many first-time buyers with low FICO scores and little money down are buying homes every month.”

2015 Fourth of July Events

Posted on by Andrea Fowler

The best time of the year for barbecues, lakes, and most importantly summer fun has approached us. Yes, you guessed it. It is time for the 4th of July. Our friends at Fox4News have gathered a list of all the activities happening right here in DFW. So get out there and enjoy the holiday season!

Fireworks, food, music, parades and more family fun — it’s all happening across North Texas to celebrate the Fourth of July. See what’s happening in your neck of the woods.


JULY 4TH EVENTS

Addison, July 3
Kaboom Town
Fireworks and more
www.addisonkaboomtown.com

Allen, June 27
Allen USA Celebration
Free concerts, food, fireworks and more
allenusa.org

Arlington, July 4
Arlington Fourth of July Association Parade
arlington4th.org 

Balch Springs, July 4
4th of July Celebration
Fireworks, food and family fun
www.cityofbalchsprings.com 

Bedford, July 4
Bigtop 4thFEST
Fireworks, concert and more family fun
www.bedfordtx.gov/4thfest/

Burleson, July 4
Independence Day Celebration
Free concert and fireworks
www.burlesontx.com

Canton, July 4
Chamber of Commerce Parade
visitcantontx.com

College Station, July 4
“I Love America” Celebration at the George Bush Library
Free museum entry, entertainment, fireworks and much more
bushlibrary.tamu.edu

Coppell, July 3 – 4
Spirit of Coppell
Two days of Fourth fun include a parade, food, fireworks and more
coppelltx.gov/special-events-activities/july-4th-parade

Crowley, July 11
Celebration of Freedom
Parade, festival, fireworks display and more
www.ci.crowley.tx.us

Dallas, July 4
Fair Park Fourth
Fireworks, live music, rides, discounted museum admissions and lots more family fun
www.fairpark.org

Denton, July 4
Yankee Doodle Parade
www.cityofdenton.com
Kiwanis Fireworks Show at UNT
www.dentonkiwanisclub.org

Desoto/Lancaster, July 4
Fourth of July Celebration
Fireworks, food and family fun
www.ci.desoto.tx.us

Duncanville, July 4
Grand Old Flag Fourth of July Celebration
Parade, festivities
www.duncanville.com

Farmers Branch, July 3-4
Independence Day Celebration
Walking parade, pie eating contest, food, prizes and more
www.fbspecialevents.com
Red, White & Blue Bike Parade
www.facebook.com/FarmersBranchParade

Farmersville, July 4
Sparks of Freedom
Live music, booths and fireworks
www.farmersvilletx.com

Flower Mound, July 4
Independence Fest
Children’s parade, live music, fireworks and much more family fun
www.flower-mound.com/festival

Fort Worth, July 4
Fort Worth’s Fourth
Fun on the river, live music, fireworks and more
forthworthsfourth.com
Willie Nelson’s Fourth of July Picnic
www.willienelson.com
Texas Motor Speedway – Patriotic Friday Night Drag
www.texasmotorspeedway.com

Frisco, July 3-4
Frisco Freedom Fest
Children’s fun expo, live entertainment, food fest, FC Dallas soccer match, fireworks and more
www.friscofreedomfest.org

Garland, July 4
Star-Spangled Spectacular
Family friendly activities, food, live entertainment, fireworks
visitgarlandtx.com

Grand Prairie, July 4
Lone Stars & Stripes
Racing, family fun, music and fireworks
www.lonestarpark.com

Granbury, July 3-5
Old Fashioned 4th of July
Car show, 5K, parade, live music & fireworks
www.granburychamber.com/4th-july-celebration

Grapevine, July 3-4
Annual Fireworks Extravaganza
www.grapevinetexasusa.com
SummerBlast
Fireworks and family fun every Friday all summer
www.grapevinetexasusa.com/summerblast/

Greenville, July 4
Superbowl Speedway
Race and fireworks
www.superbowlspeedway.com 

Gun Barrel City, July 3-4
July Fest
Live music, fireworks, carnival and more
www.gunbarrelcityfestivals.net

Haltom City, July 4
Family 4th
Multi-city fireworks show for North Richland Hills, Haltom City and Richland Hills
www.netarrant.org

Haslet, July 2
Independence Day Parade & Fireworks Celebration
www.haslet.org

Hudson Oaks, July 4
Boomin’ 4th
Fireworks and live music
www.boomin4th.com 

Hurst, July 4
Hurst Stars & Stripes
Family fun, live music and fireworks
hursttx.gov

Irving, July 4
Independence Day Celebration
Fireworks show, parade, live music and more
cityofirving.org

Joshua, July 3
Family fun, children’s parade and fireworks at Owl Stadium
www.facebook.com/pages/City-of-Joshua-Texas-Administration/104652652287

Lake Cities, July 4
Lake Cities Fourth of July
Parade, carnival rides, live music, fireworks
www.lakedallas.com 

Lancaster/Desoto, July 4
Fourth of July Celebration
Fireworks, food and family fun
www.ci.desoto.tx.us

Lewisville, July 4
Red White & Lewisville
Fireworks
www.cityoflewisville.com

Mansfield, July 3
Rockin’ Fourth
Rock ‘n roll, recreation and rockets
www.mansfieldtexas.gov

McKinney, July 4
Red, White and Boom
Fireworks, food, live music, car show and much more
www.mckinneytexas.org/index.aspx?nid=830

Mesquite, July 4
Fireworks Extravaganza at Devil’s Bowl Speedway
Sprint Car Nationals and fireworks
devilsbowl.com

North Richland Hills, July 4
Family 4th
Multi-city fireworks show for North Richland Hills, Haltom City and Richland Hills
www.netarrant.org

Plano, July 3-4
All-American Fourth
Community band concert, parade and fireworks show
www.plano.gov

Richardson, July 4
Family 4th of July Celebration
Family fun, picnicking and fireworks
www.cor.net/index.aspx?page=336

Richland Hills, July 4
Family 4th
Multi-city fireworks show for North Richland Hills, Haltom City and Richland Hills
www.netarrant.org

Roanoke, July 3
Roanoke’s 3rd Rocks
Fireworks, live music and family fun
roanoketexas.com

Rockwall, July 4
Fireworks display at Myers Park at dusk
www.rockwall.com

Rowlett, July 4
Fireworks at Bayside
Live music, food, children’s activities, fireworks and more
www.rowlett.com

Sachse, July 3
Red, White & Blue Blast
Music, food, fireworks and more at Heritage Park
www.cityofsachse.com

Seagoville, July 4
Fireworks in the Park
Water slides, food, vendors and fireworks
www.seagoville.us

Southlake, July 3
Stars and Stripes Festival
Family fun, food and fireworks
www.visitsouthlaketexas.com/stars-stripes

The Colony, July 4
Liberty By The Lake
Family fun, food, live entertainment, 5 & 10 K, fireworks and more
libertybythelake.com

Trophy Club, July 4
Independence Day Celebration
5K, parade and fireworks
www.trophyclub.org

Waxahachie, July 3 – 4
Crape Myrtle Festival
Hometown parade, battle of the bands and fireworks
www.waxahachiecvb.com

One More Time…You DO NOT Need 20% Down!

Posted on by Andrea Fowler
One More Time You Don't Need 20% Down | Keeping Current Matters
A recent survey by Ipsos found that the American public is still somewhat confused about what is actually necessary to qualify for a home mortgage loan in today’s housing market. The study pointed out two major misconceptions that we want to address today.

1. Down Payment

The survey revealed that consumers overestimate the down payment funds needed to qualify for a home loan. According to the report, 36% think a 20% down payment is always required. In actuality, there are many loans written with a down payment of 3% or less and the number has increased through the first quarter of the year as shown by the graph below:
Percent of Low Down Payments | Keeping Current Matters

2. FICO Scores

The survey also reported that two-thirds of the respondents believe they need a very good credit score to buy a home, with 45 percent thinking a “good credit score” is over 780. In actuality, the average FICO scores of approved conventional and FHA mortgages are much lower:
Average FICO Scores | Keeping Current Matters

Bottom Line

If you are a prospective purchaser who is ‘ready’ and ‘willing’ to buy but not sure if you are also ‘able’, sit down with someone who can help you understand your true options.

CROWNED: The Alexanders

Posted on by Andrea Fowler
In the latest addition to the “Crowned” series, we meet The Alexanders. Now The Alexanders are personal friends of mine and newlyweds. Candisse is actually my sorority sister from LSU. It’s funny how when I first started my career in real estate we would have talks about her buying a home. Her and Evan were seriously dating but marriage wasn’t quite near, at least that’s what Candisse thought. 
I remember having her tag along to some of my previews or sending her random homes. She’d be like with a house like that I’d need a ring to make that possible. Well, that ring came a lot quicker than she thought. Candisse and Evan wed in February 2015. Of course weddings means homes, babies (I can’t say that too loud right now), and more. So as a friend I would suggest when would we go search for their new home as husband and wife. Their answer was always after the honeymoon we are ready. They definitely were. This is one of the only times where we did 2 days of showings. This was the first home they considered making an offer on and their offer was accepted. 
As a friend I thought this home was perfect too. It was the perfect size for them and great for entertaining their lovely friends (well maybe just my own personal implication). I’m happy that they trusted me to help them with this transaction. It means a lot to have your friends or family to support your business. After the real estate purchase, I stay in touch with clients and they become friends to me. So imagine how grand of a friendship this has evolved to? I love it and cannot wait to be around for the memories made in this home. 
Congratulations Evan and Candisse! 

CROWNED: The Clack Manor

Posted on by Andrea Fowler
In this addition of “Crowned” I wanted to showcase a recent home I sold for a lovely couple who I adored. The name of this home is “The Clack Manor”. The Georges’ name everything and each name showcased their loved for their homes and other things that made a home a home for them. 
What I loved the most about working on the sale of this home is the relationship that I built with the clients. They invited us to spend Memorial Day weekend with their family and of course food is my yes to just about anything. It was a splendid weekend being with their family as we prepped for the sale of The Clack Manor. 
The best thing about real estate is the relationships that you form from the process. It can be stressful in so many ways but the relationship and factors that help ease it are the bonus for me. 
Congratulations to The Georges on the sale of The Clack Manor and I wish them bliss on their new home (I forgot the name of it but believe when I say it has a title as well). 

Buy vs Rent: What Really Creates Family Wealth?

Posted on by Andrea Fowler
Buy vs Rent: What Really Creates Family Wealth? | Keeping Current Matters
There has been recent press regarding whether or not it makes better financial sense to rent rather than buy in today’s housing market. As an example, the recently released June Summary of the BH&J Buy vs. Rent Index reported:
“…as of the end of the first quarter of 2015, the housing market in the U.S. and all cities in the index are trending either closer to renting being the superior option or strictly favoring renting over purchasing a home.”
The summary goes on to explain that:
“The index conducts a “horse race” comparison between an individual that is buying a home and an individual that rents a similar quality home andreinvests all monies otherwise invested in homeownership.”(emphasis added)
Though the math may be correct, we are not as sure of the conclusion. Even if you check the methodology offered by the BH&J report itself, you will find that they realize:
“…any extra savings from renting might be spent on non-wealth enhancing goods resulting in any benefits from renting versus owning disappearing in a cloud of consumption spending rather than savings.”

The Concept of ‘Forced Savings’ and Wealth Accumulation

Many believe the wealth accumulation of homeowners is tied into the concept of “forced savings”. The New York Times late last year published an editorial entitled,“Homeownership and Wealth Creation, which discussed this concept. The article explained:
“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”
“Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”
Many of the points that were made in the article are on track with the research done by the Joint Center for Housing Studies at Harvard University which agrees that “forced savings” is a major advantage of homeownership. In a paper, The Dream Lives On: the Future of Homeownership in America, they concluded:
“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

The Truth is in the Historical Data

Edwards Deming once said: “Without data, you’re just another person with an opinion.”
Let’s look at the data on this subject. The Federal Reserve has conducted a study titled:Survey of Consumer Finances. The study found that the average net worth of a homeowner ($194,500) is 36 times greater than that of a renter ($5,400).

Bottom Line

The New York Times editorial articulated it best:
“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth…As a means to building wealth, there is no practical substitute for homeownership.”
If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!