Good afternoon Tim Lewis Community!
David Wiest, our knowledgeable lender partner with Wells Fargo Home Mortgage, is always providing our team with valuable insight in the financial world that affects what we do. This week, with all the fluctuations in the markets and the world events, he was able to share this bit of information.
Even though rates kicked up possibly causing payments to go up monthly, one thing new home buyers may not be thinking about is the energy savings…the other is the alternative – what if they don’t buy and keep renting?
Remember to help your buyers keep things in perspective– yes rates jumped up over ½ a point in 1 day, (and a full point since the low on May 1) but in most cases that is not a catastrophic change in payment. (On a $250,000 loan amount, the change from 4% – 4.5% is only a $73 monthly payment increase. That is $881 a year, 2.50 a day – pull out that old starbucks analogy, the difference is really only a cup of coffee per day).
Also remember that values have been climbing. Maybe a reminder that what they went into contract on the home for is a lot less than what you are selling the home for now.
Some might say, yeah but it is still an increase and I’d just rather rent…well, the average increase in rent is projected to be a minimum of 5% increase per year. So if someone is paying $1000 a month for rent now, they are looking at about a $600 a year increase (or $50 each month), and $52.50 next and $55 the next – so if you calculate it out over a 5 year period – they will pay about $9600 more in rent vs. the $4400 in mortgage – that is a $5,000 swing over 5 years…but the kicker is the home value increase…they get none of that renting, but taking a very conservative 5% home value increase (it was just reported at 12.90% year over year) they would lose out on over $75,000 in appreciation.
Remember that even though rates kicked up from the lowest ever in history, if you take a broader historically view they are still at record lows! 4.5% for a 30 year fixed rate loan is still amazing. The key is Perspective!
The National Association of Home Builders (NAHB) is taking a look at the features today’s young homebuyers want most and how builders are adapting to those needs. As the economy recovers and young people who had to live at home with their parents (are my kids reading this?) move forward with their lives and achieve their dreams of homeownership, home builders are delivering homes that cater to the floor plans, features and affordability that this generation desires.
According to the association’s 2012 consumer preference survey, more than 80 percent of Generation Y homebuyers (people born in 1977 or later, which obviously include the Millennial darlings) prefer a highly energy-efficient home over a lower-priced home without energy-efficient features, preferring to save instead on utility costs.
To meet this need, builders are now constructing homes with ENERGY STAR-rated appliances; windows, doors, and insulation that help control the home’s climate; and other modern components such as tankless water heaters and heating, ventilation, and air conditioning (HVAC) systems that help save energy costs.
Gen Y also seems to favor media and game rooms more than any other kind of specialty room. New homes today not only contain those spaces, but they are outfitted with modern, state-of-the-art electronic and wiring components that can accommodate high-definition televisions, full-house sound systems, hard-wired fire and security alarms, and more. Beyond those features, NAHB noted that new homes today actually cost less to maintain than older homes. A study done by the group found that homes built before 1960 have average maintenance costs of $564 per year, while homes built after 2008 average $241 annually. (Versus my house which seems to cost about $8,000 per year to maintain.)
The current market presents outstanding opportunities with near record low interest rates, competitive prices, and new homes being built that include open layouts, energy efficient components, and other features that cater to young buyers who may not know how to pick up their socks, but can buy a house!
Have a great weekend and have a great 4th of July!