Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year

Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCM

If you’re planning to buy a home this year, saving for a down payment is one of the most important steps in the process. One of the best ways to jumpstart your savings is by starting with the help of your tax refund.

Using data from the Internal Revenue Service (IRS), it’s estimated that Americans can expect an average refund of $2,925 when filing their taxes this year. The map below shows the average anticipated tax refund by state:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCMThanks to programs from the Federal Housing Authority, Freddie Mac, and Fannie Mae, many first-time buyers can purchase a home with as little as 3% down. In addition, Veterans Affairs Loans allow many veterans to put 0% down. You may have heard the common myth that you need to put 20% down when you buy a home, but thankfully for most homebuyers, a 20% down payment isn’t actually required. It’s important to work with your real estate professional and your lender to understand all of your options.

How can your tax refund help?

If you’re a first-time buyer, your tax refund may cover more of a down payment than you realize.

If you take into account the median home sale price by state, the map below shows the percentage of a 3% down payment that’s covered by the average anticipated tax refund:Your Tax Refund and Stimulus Savings May Help You Achieve Homeownership This Year | MyKCMThe darker the blue, the closer your tax refund gets you to homeownership when you qualify for one of the low down payment programs. Maybe this is the year to plan ahead and put your tax refund toward the down payment on a home.

Not enough money from your tax return? 

A recent paper from the National Bureau of Economic Research found that, of the households that received a stimulus check last year, “One third report that they primarily saved the stimulus money.” If you had the opportunity to save your Economic Impact Payments, you may consider putting that money toward your down payment or closing costs as well. Your trusted real estate professional can also advise you on the down payment assistance programs available in your area.

Bottom Line

Saving for a down payment can seem like a daunting task, but it doesn’t have to be. This year, your tax refund and your stimulus savings could add up big when it comes to reaching your homeownership goals.

What It Means To Be in a Sellers’ Market

What It Means To Be in a Sellers’ Market | MyKCM

If you’ve given even a casual thought to selling your house in the near future, this is the time to really think seriously about making a move. Here’s why this season is the ultimate sellers’ market and the optimal time to make sure your house is available for buyers who are looking for homes to purchase.

The latest Existing Home Sales Report from The National Association of Realtors (NAR) shows the inventory of houses for sale is still astonishingly low, sitting at just a 2-month supply at the current sales pace.

Historically, a 6-month supply is necessary for a ‘normal’ or ‘neutral’ market in which there are enough homes available for active buyers (See graph below):What It Means To Be in a Sellers’ Market | MyKCMWhen the supply of houses for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. As a result, competition among purchasers rises and more bidding wars take place, making it essential for buyers to submit very attractive offers.

As this happens, home prices rise and sellers are in the best position to negotiate deals that meet their ideal terms. If you put your house on the market while so few homes are available to buy, it will likely get a lot of attention from hopeful buyers.

Today, there are many buyers who are ready, willing, and able to purchase a home. Low mortgage rates and a year filled with unique changes have prompted buyers to think differently about where they live – and they’re taking action. The supply of homes for sale is not keeping up with this high demand, making now the optimal time to sell your house.

Bottom Line

Home prices are appreciating in today’s sellers’ market. Making your home available over the coming weeks will give you the most exposure to buyers who will actively compete against each other to purchase it.

Home Prices: What Happened in 2020? What Will Happen This Year?

Home Prices: What Happened in 2020? What Will Happen This Year? | MyKCM

The real estate market was on fire during the second half of 2020. Buyer demand was way up, and the supply of homes available for sale hit record lows. The price of anything is determined by the supply and demand ratio, so home prices skyrocketed last year. Dr. Lynn Fisher, Deputy Director of the Federal Housing Finance Agency (FHFA) Division of Research and Statisticsexplains:

“House prices nationwide recorded the largest annual and quarterly increase in the history of the FHFA Home Price Index. Low mortgage rates, pent up demand from homebuyers, and a limited housing supply propelled every region of the country to experience faster growth in 2020 compared to a year ago despite the pandemic.”

Here are the year-end home price appreciation numbers from the FHFA and two other prominent pricing indexes:

The past year was truly a remarkable time for homeowners as prices appreciated substantially. Lawrence Yun, Senior Economist at the National Association of Realtors (NAR), reveals:

“A typical homeowner in 2020, just by being a homeowner, would have accumulated around $24,000 in housing wealth.”

What will happen with home prices this year?

Many experts believe buyer demand will soften somewhat as mortgage rates are poised to bump up slightly. Some also believe the inventory challenge will ease as more listings come to market this year.

Based on this, most forecasters anticipate we’ll see strong appreciation in 2021 – but not as strong as last year. Here are seven prominent groups and their projections:Home Prices: What Happened in 2020? What Will Happen This Year? | MyKCM

Bottom Line

Home price appreciation will be strong this year, but it won’t reach the historic levels of 2020. Let’s connect if you’d like to find out what your house is currently worth in our local market.

Will Low Mortgage Rates Continue through 2021?

Will Low Mortgage Rates Continue through 2021? | MyKCM

With mortgage interest rates hitting record lows so many times recently, some are wondering if we’ll see low rates continue throughout 2021, or if they’ll start to rise. Recently, Freddie Mac released their quarterly forecast, noting:

“The average 30-year fixed-rate mortgage hit a record low over a dozen times in 2020 and the low interest rate environment is projected to continue through this year. We expect interest rates to average below 3% through the end of 2021. While this is a modest rise from 2020 averages, the recent vote by the Federal Reserve to keep interest rates anchored near zero should keep rates low.”

As shown in the graph below, Freddie Mac is projecting low rates going forward with a modest rise that’s expected to continue through 2022.Will Low Mortgage Rates Continue through 2021? | MyKCMFreddie Mac isn’t the only authority forecasting low rates with a slight rise. Fannie Mae, The Mortgage Bankers Association (MBA), and the National Association of Realtors (NAR) also anticipate low rates with a small increase as 2021 continues on. Here’s the quarterly breakdown of their projections and how they’re expected to play out over the next year:Will Low Mortgage Rates Continue through 2021? | MyKCMIt’s important to note that, while a small change in interest rates can have a substantial impact on monthly mortgage payments, these rates are still incredibly low compared to where they were just a couple of years ago.

What does this mean for buyers?

Low mortgage rates are creating an outstanding opportunity for current homebuyers to get more for their money while staying within their budget. As the economy gets stronger and we recover from the challenges of 2020, it’s natural for rates to potentially rise in response to a healthier economy. Mark Fleming, Chief Economist at First Americanreminds us:

Rising interest rates reduce house-buying power and affordability, but are often a sign of a strong economy, which increases home buyer demand. By any historic standard, today’s mortgage rates remain historically low and will continue to boost house-buying power and keep purchase demand robust.”

With low rates fueling activity among hopeful buyers, there are a lot of people who are highly motivated and looking for homes to purchase right now. In this environment, it can be challenging to find a home to buy, so a local real estate agent will be key to your success if you’re thinking of buying too. Working with a trusted real estate professional to navigate the process while rates are in your favor might be the best move you can make.

Bottom Line

If you’re ready to buy a home, it may be wise to make your move before mortgage rates begin to rise. Let’s connect to discuss how today’s low rates can create more opportunities for you this year.