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Are Home Prices Too High?

 

A lack of new construction in the last 10 years may actually be a blessing in disguise. For now, that is.

 

’ve been getting a lot of questions lately about home prices. Are they too high? Is the market overheating? I think people are overreacting just a little bit. Here’s why.

As you can see on the chart in the video above, the number of new construction homes being built has moved up and down in cycles for the last 60 years. The gray lines on the graph show our recessions.

If you look closely, you’ll see that we’ve built less than 1.2 million new homes in the last 10 years. We’ve never had another 10-year period where we built less than 1.2 million. We’ve occasionally dipped below that, but those dips have never lasted longer than 18 months.

“If you don’t already own a house, you need to.”

Another topic I get asked about a lot is inventory. The reason it’s so low right now is because we haven’t built enough homes in the last 10 years. Homes are going to continue to go up in value as long as this is true.

If you don’t own a house already, you need to. If you have any questions at all about buying or aren’t sure what you can afford, give me a call or send me an email. I would be glad to help you out.

~Anthony

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NEW TAX PLANS AFFECT UTAH HOME OWNERS


The Final tax plan that will affect Utah Home Buyers and Owners has just been approved. One of the biggest new changes will be the proposed doubling of the standard deduction. This will leave very few people to itemize deductions and write off their mortgage interest. The plan increases the standard deduction for individual taxpayers who don’t itemize from $6,350 to $12,000, and from $12,700 to $24,000 for couples.

My opinion is raising the standard deduction is great for families and most people will save money on their taxes as the majority of tax returns that I review have itemized deductions far below $24,000. I think this is a great thing that will save a lot of people a lot of money. The National Association of Realtors (NAR) believes that this removes an incentive for people to purchase houses and that home values will decline 10%. I do agree with NAR to a degree, but I don’t believe this section will truly hurt home owners or lower home prices. In all my years of helping people buy houses not one has bought a home for the tax write-off. It’s a bonus, but my experience is that people buy homes to house their families, stop throwing money away on rent, and to better prepare for retirement.

The Current tax code allows home owners to deduct mortgage interest on loans up to $1,000,000. The New tax Plan lowers that to $750,000 on mortgages.

Some great news is that the final tax plan eliminated the verbiage changing the capital gains exclusion for primary residences. Currently if you live in your home for 2 out of the last 5 years you will not pay any capital gains taxes. The initial plans were a big concern for me because both the senate and house proposed tax plans increased the live-in time period to five out of the last eight years. This means that owners would need to live in their homes for 5 years in order to claim the exemption. If they were to sell their house prior to living in it 5 years they would be required to pay capital gains taxes. I am glad this changed.

I think had this been approved changing the live-in time period for the capital gains exemption is a tragedy. This would have caused fewer people to sell and purchase a new house, further tightening home inventory. If an individual gets a raise and wants to upgrade their home, they may think twice if they’ve experienced home appreciation. They would not be able to use all of their equity for the down payment on the next house because they would have to pay hefty capital gains taxes. This may cause fewer entry level houses to come up for sale and less buyers looking for move up properties.

Lastly, are current home prices in a bubble and could they fall dramatically with this new tax plan?  I don’t think so. I see home prices continue to appreciate modestly for the foreseeable future. I do not see home prices decreasing until there is a significant change in employment. Part of the new tax plan is lowering the corporate tax rate from 35% to 20%. This is going to cause big corporations to have significantly more money in their pockets allowing them to hire more employees and increase wages. I feel that the lowering of the corporate tax rate will keep the unemployment rate at record low levels for an extended time. Until the labor market gets significantly worse people will continue buying and upgrading homes, especially as their wages increase. The lowering of corporate taxes means more home appreciation for longer. If you don’t own, the longer you wait the more you will pay for a house when you do buy.

 

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Is The Market Over Heated?

 

Lately, I have been asked over and over again are home prices too high? Is the market over heated? Are we headed for another down turn?

My answer is I don’t think so, here is why: the first statistic I always look at is the Housing Starts Number. This shows the number of new houses beginning construction.

Interestingly, we have had a 10 year period of housing starts below 1.2 million. We have never had another 10 year period in the last 60 years below this point. You can see we have dipped below this level occasionally, specifically after a recession but we have never stayed below 1.2 million for longer than 12—18 months. Over the last 60 years a more normal housing starts number is around 1.6 million.

I am often asked about why we have such low inventory. This is why. We haven’t built enough houses for the last 10 years in a row. Low inventory is here to stay for the foreseeable future. This means home prices will continue going up.

The second statistic I always look at is the jobs number. When people have jobs they buy houses. Utah’s Unemployment rate is one of the best in the nation and it looks like it is going to keep getting stronger. In the last year Utah has seen job growth in almost every category . In 2016 Utah added 49,500 new jobs.

I expect to see home appreciation in the 4-6% range for the next few years. Now is a great time to be a homeowner. If you have any questions on where the market is headed, homeownership, or mortgages please give me a call.

 

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Top Agent Magazine Cover

Anthony VanDyke

With 187 online client reviews high-lighting his expertise, communication skills and dedication, Anthony VanDyke has developed quite a successful career as a mortgage loan specialist in the state of Utah. He serves many clients in Salt Lake County, but also has clients all over Utah as well as in California. “Originally, I wanted to be a real estate investor and have money coming in from rental properties, so I got into the business to learn more about real estate investing. One thing led to another, and I fell in love with lending. It has turned out well,” shares Anthony. He became a licensed mortgage officer nearly 10 years ago, and he currently has his own brokerage firm. “Our team specializes in refinance mortgages and first-time home buyers. We help everybody,” says Anthony.

His firm’s significant number of positive testimonies from clients is indicative of his mission statement. “Our mission is to deliver a positive mortgage experience consistently. We put a lot of systems, processes and checklists in place and have different team members who work together to communicate when clients have questions or any needs. Communication really helps out. I always return phone calls the same day, and our firm has a Tuesday update call program to communicate with all of the parties involved in the transaction. If there are any changes, our system sends automatic emails
to everyone,” explains Anthony.

In addition to his top-notch customer service, Anthony excels at creative problem-solving. When thinking of finance, creativity does not always come to mind, but Anthony brings his ingenuity to the table. He says, “I’m often referred to as the ‘resurrector.’ If a loan is dead, our team keeps working until we find a way to solve it. When a potential client has bad credit, and we can’t approve them, we create a detailed plan, provide free credit repair and follow-up with them monthly until they qualify.”

Anthony’s firm has not only gained a reputation of excellence from clients, but he and his business have also been featured multiple times in Yahoo News and the Salt Lake Tribune for success in the mortgage industry. When asking Anthony what he likes most about working as a mortgage specialist, he says, “I enjoy helping people buy a home who never thought they could afford to make it happen.”

On his off hours, Anthony gives back to the community and is an avid reader. He and his firm donate time on a quarterly basis to the Utah Food Bank that provides meals to those in need. In addition to feeding children during after-school programs and delivering meals to senior citizens, the organization
has a Backpack Program that gives children backpacks filled with food so they have plenty to eat during
the weekend. Anthony explains, “We invite real estate agents and our clients to help volunteer with
whatever the Utah Food Bank needs. We have bagged food and helped sort out canned goods. The last time we volunteered, there was a 100-pound bag of beans that we had to measure into 1-pound increments so the food could be distributed.” When not giving to charity, you can find Anthony reading business books or novels by Ernest Hemingway. “I can’t get enough of Ernest Hemingway,” shares Anthony. One of my favorite books he has written is ‘A Farewell to Arms.’”

 

 

 

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Purchase your home with just 1% down

One Month's Rent Could get you into your dream home

 

 

 

 

ALV Mortgage IS EXCITED TO OFFER THE CONVENTIONAL 1% DOWN WITH EQUITY BOOST LOAN PROGRAM

  • You put down 1%, your lender contributes 2%*, giving you 3% equity at closing
  • Great low rates
  • Close in 30 days or less
  • Conventional 30-year fixed program
  • Available with no monthly Mortgage Insurance

 

There’s no reason to wait. Call today and get the home you’ve always wanted.

ALV Mortgage Announces Exciting 1% Down Payment Equity Boost Program for Utah

If you’ve been putting off the search for your dream home trying to build up the required down payment, you will definitely be interested in a new program offered by ALV Mortgage.

Just 1% Cash Down Payment

Our new innovative Equity Boost Program requires a buyer put down 1 percent of a home’s purchase price as a down payment.  We as the lender contribute an additional 2 percent down payment, and the 3 percent total equity at closing allows qualified buyers to obtain a conventional mortgage at a great rate.

We can actually close this loan in 30 days or less, and it is available without monthly Mortgage Insurance.

Innovative and Exciting

Although we have already helped thousands of Utah homebuyers find the financing that they required for their dream homes, this new program makes buying an easy decision for many others. When qualified Utah buyers find they can get into a new home with a down payment often less than one month’s rent. We are proud to introduce our Equity Boost Program as one of the most creative mortgages in the industry.

Secure Your Future

Home ownership has long been viewed as one of the primary ways to achieve a secure future by building an equity stake in real property. The ability to gain a 3% equity share with only one third of that amount invested in cash is almost unheard of.

For details of this new program, or to discuss other available options, Call Anthony VanDyke. As one of the top 2% of mortgage loan originators in the country, Anthony will find the right mortgage product to suit your needs. Whether you’re buying a first home or a retirement villa. Why not contact us now and let us go to work for you? We’ll help you save money and set you on the path to home ownership and equity building.

 

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Fannie Mae Launches New HomeReady™ Mortgage Program

Fannie Mae just announced an exciting new, affordable lending product called the HomeReady™ Mortgage. What separates it from other programs is for the first time ever Fannie Mae is considering income from family members living in the house, but not signing on the loan.  Also the HomeReady™ Mortgage only requires a 3% down payment.  Standard conventional loans require 5%, FHA requires 3.5%. Grants are available to help with down payment. Picture1

My favorite new feature with the HomeReady™ Mortgage is that it considers rental income from mother-in-law units in qualifying borrowers. This means that if your property has an accessory unit that can be rented out we can count that rental income which helps you qualify for a nicer larger house. For example, a young family with one small child who would like to have three more.  They find a beautiful house with a basement apartment.  They don’t need the room in the basement now, but they’ll need it in the future.  They can qualify for a HomeReady™ Mortgage because they can rent the basement apartment now and include the rental income in their application.  As their regular income grows, they won’t need to rent the basement apartment and can convert it into space for their growing family.

Who else will benefit most from this program?  First, we have multi-generational families.  There are more multi-generational families in 2015 than ever before.  Baby Boomers are moving in with their children.  College graduates are moving in with their parents to save money or because they can’t find jobs. With the HomeReady™ Mortgage, income from all the household members may be considered.  For example, retired parents may move in with their children.  Their monthly social security income may be used toward qualifying their children for a loan, without them signing or obligating themselves on the loan.

Couples where one person has good credit and the other has poor credit also benefit from this program.  For example, a married couple each make $2,500 per month.  The wife has great credit, but the husband’s credit is terrible.  Their combined $5,000 monthly income allows them to easily afford a $1,400 house payment.  Unfortunately, the husband cannot be on the loan because of his bad credit, and the wife’s income isn’t enough to qualify for a mortgage.  Now with the HomeReady™ Mortgage, the husband’s $2,500 income can be considered even though he won’t be a signer on the loan.

What does the HomeReady™ Mortgage really mean for home buyers ?  Buyers who couldn’t afford or qualify for a mortgage loan yesterday may be able to today.  This increases the pool of available buyers and will increase demand and home prices.

If you know anyone who hasn’t been able to qualify for a mortgage but fits into one of the above scenarios please call us with their name and phone number. We love referrals.

 

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The Price of Waiting

home ownership - should I wait or buy now

For most Americans, owning their own home is a top priority. The simple facts are that being in your own home provides a more stable, secure environment and the lifestyle most people desire for themselves and their family.

The Dollars and Sense

However, home ownership is also a major financial factor for most of our clients. The purchase of a home is often the largest single investment most people will ever make, and having your home paid off has provided a better retirement for millions of Americans.

Many of my clients wonder if they should wait and save up enough money to make a larger down payment or if they should buy now with a smaller down payment.

The reality is that for most real estate, time is a major factor for considering the best strategy. This is especially the case in state our of Utah that continues to experience great growth and long-term appreciation in the value of homes. What you will find with a careful analysis is that time generally works against you if you choose to delay your purchase simply to save more.

Crunching the Numbers

Chart 1

To better understand this reality, let’s take a look at a real example for anyone considering a home purchase in Utah. First, let’s look at actual historical housing data for a real home in Draper, Utah, that sold in 2010, 2013, and 2015, gathered from the WFRMLS:

If you were the buyer who bought this home in 2010 in a normal transaction, you would have put 3.5 percent down. This means you had $13,282 in a down payment, leaving you with a monthly loan payment (P&I) of $1,696.

Moving forward to 2013, you would be a happy homeowner who now owns a home worth $425,000 (an increase of three times your original down payment). You now owe only $346,070 or 81% of your home’s value (even if you only made the minimum payments). This means you could now consider a refinance and eliminate the mortgage insurance from you monthly payment. Also, this doesn’t address the tax savings you have enjoyed and what you might be paying in rent if you had not purchased.

The story gets even sweeter if you look at the situation in 2015. Along with the other benefits above that you have enjoyed, you now owe only

$331,233 and have a value of $462,000. That is a whopping $131,000 in equity, ten times your original down payment. That 28 percent equity means you could actually pull cash out of a refi if you desired.

The Price of Waiting

Picture3Of course, not everyone was smart enough to buy in 2010. Let’s assume a person living in Utah decided they wanted to wait and save until they had a 20 percent down payment to get a lower rate and avoid mortgage insurance.

 

If they took 5 years to do that, they would now need $92,400 to buy a house valued at $462,000 (that they could have purchased for $379,500 just five years ago). Even if you had $75,900 five years ago for a 20 percent down payment, you would have to save an additional $16,000 just for the down payment today. Now, that careful saver will actually have to pay $82,500 more for the home, have a larger down payment, and probably have a larger monthly payment.

 

While everyone’s situation is different, this analysis shows why time is the factor that often makes it smart for our clients to purchase now instead of waiting to move into their own home after they have saved for 5 years for a 20% down payment. If you have any clients who are on the fence and have decided to wait to buy a house please call me. I have multiple professionally designed marketing material we can share with them to help them understand the true cost of waiting.

While everyone’s situation is different, this analysis shows why time is the factor that often makes it wise to purchase now instead of waiting to move into your own home as soon as it is practical for you.

 

Check out the math behind making the decision to save up or #buyyourhomenow.

 

 

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Why Home Ownership Makes Dollars and Sense

Hands holding a piggy bank and a house modelWhen you evaluate the financial factors, the numbers make an impeachable case for owning a home over the long-term rather than simply paying rent. If you take as an example buying a $250,000 home you will find these advantages include the following.

Example based on a $250,000 purchase price

  1. Tax Write Off
    Loan Amount                      $237,500
    Interest Per Year                $10,116
    Property Taxes                    $1,800Total Write Off                    $11,916Tax Rate                                25%
    Monthly Savings                 $248.25
  2. Forced Savings
    Amount of principle reduction each month = $327
  3. Appreciation
    4% is the national average for annual home appreciation
    4% on a $250,000 house is = $10,000 per year or $833 per month

 

Total Monthly Savings                            Tax Write Off                      $248.23
Forced Savings                   $327

 

  • Tax Savings. That favorable tax treatment translates into significant after-tax savings. In the case of our sample home, the savings are as much as $248 every month, using these assumptions:
    • Tax Write Off
      • Loan amount of $237,500
      • Average interest per year of $10,116
      • Deductions from property taxes of $1,800
      • Total deductions from home ownership of  $11,916
      • Tax rate of 25 percent
  • Forced Savings. In addition to this recapture of taxes, you will be reducing your principal balance by an average of $327 per month. That is essentially the same thing as putting that amount in the bank every time you write a mortgage check.
  • Appreciation in Market Value. Historically, homeowners have enjoyed an annual appreciation of the value of their properties of at least 4 percent. Our $250,000 home will appreciate by at least $10,000, or another $833 in accrued assets and personal wealth. Even more importantly, this increase is often compounded in many areas.

A simple process of addition shows that home ownership quickly turns your mortgage payment into a private wealth-building plan. The totals of $248 from tax savings, $327 in principal reduction, and $833 in appreciation come to a stunning $1,408. This form of financial alchemy helps explain why many Americans retiring today are able to enjoy a comfortable lifestyle. They pay off their homes during their working lives, use a lower tax bill to save even more, and then either sell their greatly appreciated homes or use a reverse mortgage to tap into their accumulated equity.

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The New World of Closings that August 1 Brings

The economic meltdown of 2007-2008 brought a lot of attention to the real estate business, and to the mortgage industry specifically. As a result of major issues over how residential mortgages were closed and sold, Congress introduced a number of regulatory changes dealing with this important segment. The stated goal of all the new rules and laws is to increase consumer awareness and the transparency of financial transactions.

New Laws and New Processes

The Consumer Financial Protection Bureau was chartered as part of this legislation. Among many other responsibilities for consumer credit, the CFPB took over administration of the Real Estate Settlement Procedures Act. While this function formerly resided with HUD, the forms defined in RESPA have been restructured and renamed.

What has been known as the HUD-1 closing process involved the well-known HUD-1 settlement form and the lender’s Good Faith Estimate. Those two documents, as well as the Truth in Lending Act disclosures will be eliminated as of August 1, 2015. They are replaced by new procedures and forms, including the:

  • Closing Disclosure form and
  • Loan Estimate form.

In addition to these and other documentation changes, there are new rules pertaining to closings that go in effect on August 1. For example, all documents that are part of the closing must be completed and presented to the parties a full three days before the closing. This is a hard and fast rule, so much so the National Association of Realtors is recommending that all the documents be prepared seven days prior to the closing date.

This approach allows time to comply with the three-day requirement and still have time to make any changes the parties find necessary. Short of this, there are other rules and requirements that may require you to start the countdown all over again. While there are exceptions to restarting the waiting period, there will be a new focus among the realtors, buyers and sellers, and mortgage companies to cooperate and resolve any issues prior to the new closing window.

There is a great deal of information available about these changes from a number of sources, including on the CFCB website. If you are just starting to get up to speed, you have until August 1, but you should allow yourself plenty of time to review the numerous changes. The CFCB information and a visit to Realtor.org/respa are excellent starting points for your educational process.

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