Does it make sense or not?

My partner, Marie, has a client that “Will not use FHA financing to purchase a home”. However, she has to wait until December of 2016, to qualify for a conventional loan, due to a short sale event expiring. Mortgage insurance for an FHA loan is for the life of the loan.  For a conventional loan, this insurance can be removed once the loan to value of the home has reached 80%. So this is understandable, or is it?

Let’s crunch the numbers. For our study we will use the following numbers:

Purchase Price: $200,000

Loan Type: FHA

Loan Term: 30 Years

Loan Amount w/MIP: $196,378

Down Payment Amount: $7,000  

Interest Rate: 3.5%

Monthly MIP: $139.10

Upfront MIP: $3378

Monthly P&I Payment: $882

Loan Balance at year end: $192,608

Now, we will run the numbers for the projected values and interest rates for 1 year from now, using the same information that I wrote in my “What we sow now, we will reap later” blog. Please read this blog to understand our projections.

Projected Purchase Price: $210,800

Loan Type: Conventional

Loan Term: 30 Years

FICO Score: 720

Loan Amount: $200,260

Down Payment Amount: $10,540 

Projected Interest Rate: 4.8%

Monthly MIP: $103.47

Monthly P&I Payment: $1,051

Years to Remove MIP 8.5 Years

The FHA payment, including principle, interest, and mortgage insurance is $1021 per month. For the conventional loan, with the projected principle, projected interest, and mortgage insurance, would be $1,051 per month. A difference between the two of $30 per month.

The mortgage balance at the end of the year on the FHA loan, including the upfront mortgage insurance, would be, $192,608, whereas the balance of the conventional loan would be $200,260.

The math on this scenario gets even more complicated as we add in the cost of renting for the year, appreciation, depreciation, and refinancing to get rid of the MIP, etc. The bottom line is… Are you better off purchasing a home now with an FHA loan, or waiting to get a conventional loan next year?

Although it is understandable that you do not want to pay mortgage insurance for the life of the loan, it does not make sense that you would want to pay more in a different scenario, to do so.

Also if you purchase a home now with an FHA loan, you can always refinance out of it. But, only if the payment will be lower than what you are currently paying, and, only if it makes sense.

In nearly every case, or scenario, waiting to purchase a home… simply does not make sense. 

What you sow now, you will reap later!

I am currently working with a prospective buyer to purchase a single family home, and he was shocked at how prices have gone up recently. I explained to him that prices really haven't gone up, they have just leveled out to where they should be while our market has adjusted accordingly. His next statement is what prompted me to write this blog. He said "I'm just going to renew my lease for one more year and try to purchase again next year."

Sounding like a tenacious salesperson, I said "BAD MOVE! Just get a rope, and hang yourself!" Without actual numbers to back me up, I said "Climbing interest rates, and housing prices will skyrocket your monthly payment obligation by this time next year... affording you something less than you can purchase now. And, that's just the beginning! Your accountant, will build you gallows, and your financial advisor will lay the noose over your head."

Now I had to crunch some numbers to help my client avoid the lynching. In doing so, I used my clients maximum purchase price of $285,000, with him securing a conventional loan in the amount of $270,750, and putting 5% down for the study.

First I mentioned interest rates climbing. In Freddie Mac's December 2015 Economic and Housing Market Outlook, the current 1st Quarter interest rate is 4.1%, and the projected interest rate for the 1st Quarter of 2017 is 4.8%. Currently, if my client purchased a home today his principle and interest payment on a 30 year mortgage would be, $1,308 per month with an interest rate of 4.1%.

And for the projected housing prices, I sought out CoreLogic to help me. CoreLogic is the leading provider of financial, property and consumer information, analytics and business intelligence. In their November 2015, US Home Price Insights Report their forecasted year over year percentage change in Nevada is 5.4%. Translated, this means a home priced now at $285,000 is forecasted to be valued at $300,390 by the 1st month of 2017.

Now let's calculate the payment for the forecasted value of $300,390. The projected principle and interest payment on a 30 year mortgage would be, $1,576 per month with a projected interest rate of 4.8%. A difference of $268 per month, or $3,216 for the year.

The subtotal my client will reap for sowing now is a whopping $18,606. I say subtotal, as the sum total can’t be tallied without his accountant, or financial advisor.

With just this discovery, and a little fear of the gallows, my client has decided to reap financial blessings, by sowing financially now!

Give it up, Live it up, and Party up!

In any economy, the backbone of survival is job creation. This fact is most often overlooked when buying a home. After all, when a buyer is buying a home, there are so many thoughts and process’ going on, the thought of a philanthropic contribution to society takes a back seat.

So you… Mr. & Mrs. Buyer, when buying a home, are giving to the masses.

How can this be? With available grant monies, seller contributions, tax credits, and lender incentives, a buyer can buy a home without spending a dime of their own. In fact, they can buy a home for less than it would cost to rent. And, get paid thousands of dollars, every year, for the life of the loan to do so. This sounds more like a Robert Kiyosaki “No Money Down” scheme, than a way to contribute to the masses. However, it’s true! No matter how you slice the pie, the money is still transferred when a home is sold.

The National Association of Realtors has published data on the economic impact of a home being sold, and they say that when a home is sold, based on the median sale price of a home in the United States of $176,800, the income derived from the sale is an astonishing $52,205.

Of this amount, real estate related industries generate $15,912. This is the income the Realtor, lender, and title companies receive. At this point the ball gets rolling.

When the smoke clears from the successful close of escrow, the buyers then purchase furniture, appliances, and begin remodeling their new home, with carpet, paint, and other items to make it their own. On average, they spend $4,429.

Additionally, when every 8 homes are sold, 1 new home is built. This generates another $22,100 of income.

And to top this all off, the celebrations begin! From builder to buyer, and seller too, dinners are bought, drinks are downed, trips to events are had, shows are attended, and tithes are given. These most necessary expenses come with a bill in the tune of… a whopping $9,764.

This is job creation at its best! So… Buy a home, and give it up, live it up, and party up! Everyone wins!

If you want to know how to buy a home with “No Money Down”, without a friend or relative giving it to you, give us a call. We are working with buyers every day to make this a reality.

I'll bet you didn't know this about Henderson

Courtesy of http://hendersonhistoricalsociety.org/

Born in America's defense, to supply magnesium to the efforts of World War II, Henderson was nearly sold as war surplus property when the war ended, as two thirds of the population vacated. For nearly 30 years it struggled from near oblivion.

As Las Vegas grew, it needed more land, and investors set their sights on Henderson, igniting the beginning of master-planned communities in Henderson with Green Valley in the late 70's, to the explosion of many more to come.

Today there are 17 master-planned residential areas in Henderson to include Anthem, Anthem Country Club, Black Mountain Vistas, Calico Ridge, Champion Village, Green Valley, Green Valley Ranch, Inspirada, Lake Las Vegas, MacDonald Highlands, MacDonald Ranch, Madeira Canyon, Seven Hills, Sun City Anthem, Sun City MacDonald Ranch, Tuscany Residential Village, and Whitney Ranch. This expansion has taken Henderson from being its own city to becoming part of the blossoming Greater Las Vegas Metropolitan area.

Without question, Henderson has come to fruition, exemplified by its accolades from Forbes magazine in 2011, ranking it as America's second safest city, and Bloomberg BusinessWeek naming it as "One of the Best Cities to Live in America", then the FBI Uniform Crime Report, ranking it as "One of the Top 10 Safest Cities in the United States".

Residents have a variety of choices for leisure, shopping, dining, and entertainment. Sitting close to the Strip, the largest outdoor amphitheater in Nevada, the largest recreational facility in Nevada - the Multigenerational Facility at Liberty Pointe, and the only scenic Bird Preserve in Nevada, all lend to their choices.

Henderson has been called the city of destiny - some would call it “quite a journey”. Once a city with aspirations, now a city to aspire… come fill your aspirations in Henderson.

Click here for homes for sale in Henderson.

Contact the Tracy Kaye Group.

Let Me Shock You!

A few days ago I ran across an article about the average home price and income needed to purchase a home in San Francisco, my partner Marie's, neck of the woods. She was sticker shocked. So it made me think, "let me shock everyone".

Consequently, I grabbed the data from the Census Bureau on the 50 largest metropolitan areas, and the data from the National Association of Realtors, on the average home prices in those cities for the 1st quarter of this year.

To get the income needed for each city, I ran the calculations for a 20% down, 30 year, conventional loan using Friday's interest rate of 4.14% retrieved from MortgageCalculator.org

The results are below, check your city out.

Metropolitan Area	Home Price	Salary Required	Population
Atlanta, GA	$141,900	$23,621	5,286,728
Austin, TX	$226,300	$37,671	1,716,289
Baltimore, MD	$224,500	$37,371	2,710,489
Birmingham, AL	$153,000	$25,469	1,128,047
Boston, MA	$363,200	$60,460	4,552,402
Buffalo, NY	$122,000	$20,309	1,135,509
Charlotte, NC	$167,500	$27,883	2,217,012
Chicago, IL	$176,900	$29,448	9,461,105
Cincinnati, OH	$121,700	$20,259	2,114,580
Cleveland, OH	$102,100	$16,996	2,077,240
Columbus, OH	$135,200	$22,506	1,901,974
Dallas, TX	$174,800	$29,098	6,426,214
Denver, CO	$288,400	$48,008	2,543,482
Detroit, MI	N/A	N/A	4,296,250
Hartford, CT	$209,300	$34,841	1,212,381
Houston, TX	$184,600	$30,729	5,920,416
Indianapolis, IN	$132,900	$22,123	1,887,877
Jacksonville, FL	$165,000	$27,467	1,345,596
Kansas City, MO	$140,800	$23,438	2,009,342
Las Vegas, NV	$191,600	$31,895	1,951,269
Los Angeles, CA	$406,200	$67,618	12,828,837
Louisville, KY	$131,100	$21,824	1,235,708
Memphis, TN	$125,900	$20,958	1,324,829
Miami, FL	$259,000	$43,114	5,564,635
Milwaukee, WI	$186,000	$30,962	1,555,908
Minneapolis, MN	$188,200	$31,329	3,348,859
Nashville, TN	$168,000	$27,966	1,670,890
New Orleans, LA	$157,600	$26,235	1,189,866
New York, NY	$388,900	$64,738	19,567,410
Oklahoma City, OK	$152,400	$25,369	1,252,987
Orlando, FL	$178,000	$29,631	2,134,411
Philadelphia, PA	$201,800	$33,593	5,965,343
Phoenix, AZ	$194,300	$32,344	4,192,887
Pittsburgh, PA	N/A	N/A	2,356,285
Portland, OR	$271,900	$45,262	2,226,009
Providence, RI	$217,100	$36,139	1,600,852
Raleigh, NC	$193,200	$32,161	1,130,490
Richmond, VA	$202,400	$33,692	1,208,101
Riverside, CA	$266,800	$44,413	4,224,851
Sacramento, CA	$255,800	$42,582	2,149,127
Salt Lake City, UT	$233,153	$38,812	1,087,873
San Antonio, TX	$169,300	$28,182	2,142,508
San Diego, CA	$483,000	$80,402	3,095,313
San Francisco, CA	$679,800	$113,163	4,335,391
San Jose, CA	$808,000	$134,503	1,836,911
Seattle, WA	$339,900	$56,581	3,439,809
St. Louis, MO	N/A	N/A	2,787,701
Tampa, FL	$145,000	$24,137	2,783,243
Virginia Beach, VA	$175,000	$29,131	1,676,822
Washington, DC	$358,900	$59,744	5,636,232

If you're looking to buy or sell a home anywhere in the world, we got you covered, please call us first!

Dezincify!

In 1995 manufacturer IPEX introduced Kitec to the world of plumbing. From that point through 2005 it was regarded as the darling in plumbing materials for its ease in use, efficiency, and cost effectiveness. Not until continued use, was it discovered that it had a major flaw… it didn’t work well with water.

Kitec plumbing consists of plastic-coated aluminum pipes and brass fittings, with the brass fittings the subject of a class action lawsuit certified by the Nevada District Court on October 16, 2006, alleging the brass fittings are defective because they dezincify when exposed to water.

In the research for this article I looked up the words brass, and dezincify, and found...
•      Brass: any of various metal alloys consisting mainly of copper and zinc.
•      Dezincify: To deprive of, or free from, zinc.

This led me to research “what corrodes zinc” and found… “The behavior of zinc in a specific atmospheric environment can be predicted within reasonable limits. However, it is generally accepted that the corrosion rate of zinc is low; it ranges from 0.13 µm/yr in dry rural atmospheres to 0.013 mm/yr in more moist industrial atmospheres.”

Now I don’t know what a µm (yacometer), or mm (micrometer) is, but this doesn’t seem like rocket science to me, it’s simply “Elementary, My Dear Watson.”  Using the method of compounding, it’s safe to say there’s a lot of dezincifying going on after 9 years.

What the hell? Did IPEX, the builders, and the plumbers not know that brass is made of copper and zinc?  And, when exposed to moist conditions, brass dezincifies? Or, were they just looking for money to flow to them, seeking the highest level, while the water flowing through their pipes, sought the consumers' lowest level, i.e. their basement.

This "dezincifying" caused a plaque like substance from the corrosion of the zinc to build up in the pipes and fittings, causing low water pressure at the faucets, and, additional pressure on the weaker "dezincified" fittings.

Therefore, it is easy for me to say the decision of the Court is just, in that IPEX, the builders, and the plumbers have been ordered to pay the homeowners the cost of remediation. (They should have looked up the words brass, zinc, and copper, and what corrodes them prior to installing them.)

Settlement began in 2007, and the initial deadline to make a claim on the money was to end on March 31st, 2012.

Not too long ago, I knew little of the Kitec issue, other than if your home was built in 1995 through 2004* there is a reasonable probability your home was built using Kitec fittings. And, a class member may claim monies to remediate the issue from the manufacturer, plumbers, or builders, and, that the first deadline of March 31st, 2012 was extended to January 29th, 2013 to make a claim.

Although they made great attempts to notify the homeowners that are due a claim, the homeowners have not all responded; leaving a substantial amount of money on the table after the January 29th, 2013 deadline.

Not too long ago my Broker, Aldo, blasted an email to all of our agents that another extension has been granted by the Court stating, “all prior Kitec claim deadlines have been lifted by Court order. Class members have 3 years to file claims for the available settlement relief, until approximately March 2017, or, until the available funds have been exhausted.”

Since this email I have spoken to another Realtor, a friend of mine, at another large company.  She was not aware of this extension. Once again, I was able to show her the benefits of working with Berkshire Hathaway HomeServices® Nevada Properties, and what sets us apart from other agents in our industry.

Currently, any claim member who is subject to this claim sells their home thinking they have missed the deadline, is grossly uninformed. This is why it is critical to not just hire a Realtor®, but to hire an experienced, knowledgeable, and trusted Realtor®, like myself, who has the support, and accountability behind the name Berkshire Hathaway HomeServices® Nevada Properties.

This is all good news for homeowners that haven’t made a claim yet, and for Realtors® that know how to leverage this information. Fortunately, you, my reader, can see the importance of both.

*Kitec was still in use after 2004, although it is now believed it was not used extensively in Clark County beyond 2004.

Roaming Gnomes, Smell All the Roses!

This man said to me yesterday “I’m never going to buy a home again, I’ll just keep renting.” So I asked him “are you aware of the disadvantages this poses for you?”  Suddenly he became hard of hearing.

For some there's an advantage not to own, like the roaming Gnome in the video below. But for the rest of us the reality is, if you don’t own a home free and clear, then you are paying a mortgage, paying a landlord, living on the cuff with a friend or family, in some involuntary living arrangement, or, you are surviving the elements. Other than the people who have some sort of constraint (mental, physical, financial, or legal), the rest should own a home.

I began searching for statistics to help me write this blog and found this excerpt from an article by Eric Belsky, from the Joint Center for Housing Studies at Harvard University, and it states:

“Leaving aside the question of optimal portfolio diversification of risk to simplify matters, the choice to own or rent can be reduced to an elegant user-cost equation that captures all the variables that influence the costs of owning that must be toted up before concluding whether owning or renting is better financially. It includes house price appreciation (or depreciation), the opportunity cost of making a down payment (the return on an alternative investment of the same amount over the same holding period), the cost of capital adjusted for the value deductions of mortgage interest, the amount paid in property taxes adjusted for the value of property tax deductions, the amount spent to offset the depreciation of the property through maintenance and repair and replacement of worn out systems, other operating costs, the costs of any insurances on the home or mortgage net of any deduction, transaction costs to buy and sell the home, and the outstanding mortgage balance at the end of the holding period. More sophisticated versions may take into account mortgage refinancing and its impact on the ultimate costs of owning as well.”

OMG… What did he just say? Wading through his hyperbole gave me a headache. I think what he wanted to say is… If you rent, you lose the benefits of appreciation, depreciation, tax benefits, return on investment, or even more sophisticated impacts of owning. Even if I missed something else he was trying to convey, these are huge benefits to lose.

He made no mention of lifestyle issues like, it’s a good, safer place to grow a family, with more control over your living space, providing a nicer living arrangement and pride of ownership. Or, the mention of financial issues like, it's a good vehicle for your financial health, providing a retirement instrument, with monthly mortgage payments (savings deposits) until the loan is paid off... WHILE RENT DOES NOT!

Then there are those who believe themselves appropriate not to own due to losses they have incurred during ownership, without considering all the money they will lose while renting. Or those "realists" who think the world's economy is going to hell in a hand basket, they too would be better off owning then renting when it comes time to pay the piper.

I’m certain I've missed something, however, you get the point. Owning makes much more sense than renting, especially while interest rates are low, and payments are considerably less.

If you are considering owning a home please consider The Tracy Kaye Group in helping you achieve your goal. You can check us out by clicking on the links to the right or by going to www.TracyKaye.com