Buyer Advice May 17, 2024

43% of New Homeowners Are Struggling: Here’s Why (and How to Avoid It)

Buying a home is a major milestone, but it’s not always the right time for everyone. It’s important to remember that a home purchase is a long-term investment, and making this decision without proper financial planning can lead to significant stress. 

The truth is, knowing when not to buy a home is just as crucial as knowing when to buy. Whether you’re a first-time buyer or looking to move, understanding your financial situation is key to making a wise decision. Let’s start by looking at what recent home buyers are experiencing in today’s market.

Causes of Financial Stress for Today’s Home Buyers

According to a recent survey from Clever Real Estate, 43% of homeowners who bought in 2023 or 2024 have struggled to meet their monthly mortgage payments. This financial strain is due to several key factors:

  • 37% of buyers purchased a home that exceeded their initial budget
  • 44% of new homeowners have taken on extra debt outside of their mortgage to maintain their lifestyle
  • 50% accepted a higher interest rate than planned (Note: This is why it’s important to base your budget on a monthly payment, not the purchase price of the house—but more on that, later.)

 

All of these factors lead to financial stress and regret—and that’s the last thing new homeowners need to deal with. To help avoid these pitfalls, let’s discuss some key financial tips you need to consider before taking the plunge.

4 Key Financial Tips to Consider 

1. Assess and Plan Your Budget

Setting a realistic budget is the cornerstone of a successful home-buying experience. However, you can’t just think about the purchase price of the home. Factor in all potential expenses that will impact your monthly budget. Include costs such as property taxes, insurance, HOA fees, and unexpected repairs. You’ll also want to leave a little wiggle room for fluctuating mortgage rates. Knowing what you can comfortably afford in monthly payments rather than the total purchase price will set you up for success. 

Additionally, don’t forget about the upfront costs associated with buying a home. These include the down payment, closing costs, home inspections, and moving expenses. Saving for these costs is crucial to avoid dipping into emergency funds or taking on extra debt. Planning ahead for these expenses ensures you can cover them without compromising your financial stability.

2. Minimize Additional Debt

Aim to avoid taking on extra debt before, during and immediately after your home purchase. Keeping your finances in check will help you manage your mortgage payments more comfortably. Once you have been making regular payments for several months, you can reassess your finances and make adjustments to your budget where needed. 

3. Monitor and Improve Your Credit

In Q1 2024, the median credit scores for mortgages remained flat at 770 and auto loans were at a record high of 724, according to the New York Fed. This means banks aren’t just giving away mortgage loans like pre-2008 (which is a good thing!). It also means that maintaining good credit is essential for favorable loan terms. Regularly check your credit report and address any discrepancies.

4. Plan for the Future

Think about your long-term financial goals and how buying a home fits into them. Are you planning to stay in the home for several years, or is this a short-term move? Your plans will impact how you manage your finances—as well as your decision to buy. Ensure your home purchase aligns with your broader financial objectives to avoid future regrets.

 

In addition, having an emergency fund is vital for future financial stability. Ensure you have enough savings to cover at least three to six months of expenses. This safety net provides peace of mind and financial security if unexpected costs arise, helping you avoid financial stress.

Knowing When NOT to Buy 

So, when should you consider holding off on buying a home? Here are some signs:

  • High Debt Levels: If your debt-to-income ratio is high, adding a mortgage might strain your finances.
  • Unstable Income: If your job situation is uncertain, it might be wise to wait until your income is more stable.
  • Lack of Savings: Ensure you have enough savings not just for the down payment, but also for emergencies and ongoing maintenance.
  • Uncertain Plans: If you may be moving in the near future, purchasing a home may not be the best option. 

 

Recognizing these signs and being honest about your financial situation can save you from potential stress and regret. By taking the time to assess your readiness and plan carefully, you’ll be in a stronger position to make a successful and satisfying home purchase when the time is right. Remember, waiting until you’re financially prepared isn’t a setback—it’s a smart step towards a more secure and enjoyable homeownership journey.

 

Buyer Advice April 2, 2024

Closing Costs, What Every Buyer Should Know

Before making the decision to buy a home, it’s important to plan for all the costs you’ll be responsible for. While you’re busy saving for the down payment, don’t forget you’ll want to prep for closing costs too.

Here’s some helpful information on what those costs are and how much you should budget for them.

What Are Closing Costs?

A recent article from Bankrate explains:

Closing costs are the fees and expenses you must pay before becoming the legal owner of a house, condo or townhome . . . Closing costs vary depending on the purchase price of the home and how it’s being financed . . .”

Simply put, your closing costs are the additional fees and payments you have to make at closing. According to Freddie Mac, while they can vary by location and situation, closing costs typically include:

  • Government recording costs
  • Appraisal fees
  • Credit report fees
  • Lender origination fees
  • Title services
  • Tax service fees
  • Survey fees
  • Attorney fees
  • Underwriting Fees

How Much Are Closing Costs?

According to the same Freddie Mac article mentioned above, they’re typically between 2% and 5% of the total purchase price of your home. With that in mind, here’s how you can get an idea of what you’ll need to budget.

Let’s say you find a home you want to purchase at today’s median price of $384,500. Based on the 2-5% Freddie Mac estimate, your closing fees could be between roughly $7,690 and $19,225.

But keep in mind, if you’re in the market for a home above or below this price range, your closing costs will be higher or lower.

Make Sure You’re Prepared To Close

Freddie Mac provides great advice for homebuyers, saying:

“As you start your homebuying journey, take the time to get a sense of all costs involved – from your down payment to closing costs.”

The best way to do that is by partnering with a team of trusted real estate professionals. That gives you a group of experts to help you understand how much you’ll need to save and what you’ll want to be prepped for. It also means you have go-to resources for any questions that pop up along the way.

Planning for the fees and payments you’ll need to cover when you’re closing on your home is important. Partnering with a local real estate professional can give you the guidance and confidence you need throughout the process. Feel free to contact me with questions!

Seller Advice March 18, 2024

Our Seller’s Market – Good for Your Bottom Line?

Thinking about selling your house and wondering if now’s a good time to do it? Here’s what you need to know. Even though the number of homes for sale has been growing this year, there still aren’t enough homes on the market for all the buyers who want to buy.

So, what does that mean for you? To keep it simple, it means it’s still a seller’s market. Here’s how it works:

  • neutral market is when supply and demand is balanced. Basically, there are enough homes to meet buyer demand based on the current sales pace, and home prices hold fairly steady.
  • buyer’s market is when there are more homes for sale than there are buyers. When that happens, buyers have more negotiation power because sellers are willing to make compromises to close the deal. In a buyer’s market, sellers may have to do price cuts to re-ignite interest in their home, and prices may go down. But we haven’t seen this for years since there are so few homes available to buy.
  • In a seller’s market, it’s just the opposite. When the supply of homes for sale is as low as it is right now, it’s much harder for buyers to find homes to purchase. That creates increased competition among purchasers which can lead to more bidding wars. And if buyers know they may be entering a bidding war, they’re going to do their best to submit a very attractive offer upfront. This could drive the final sale price of your house up.

The graph below uses data from the National Association of Realtors to show just how deep into seller’s market territory we still are today:

a screenshot of a chart

What Does This Mean for You?

The market is still working in your favor. If you lean on an agent for advice on how to get your house list ready and how to price it competitively, it should get a lot of attention from eager buyers. That means you’ll likely get multiple offers and see your house sell quickly and for top dollar. As a recent article from Ramsey Solutions explains:

A seller’s market is when demand for homes is higher than the supply of homes. And that’s still the case right now. If you’re planning to sell your house, you can expect to sell it fairly quickly for close to your asking price—as long as your asking price is realistic for the current market.”

Bottom Line

Today’s housing market still favors sellers. If you’re ready to sell your house, connect with a local real estate advisor so you can start making your moves.

Buyer Advice March 18, 2024

4 Tips for Your Strongest Offer on a Home

Are you thinking about buying a home soon? If so, you should know today’s market is competitive in many areas because the number of homes for sale is still low – and that’s leading to multiple-offer scenarios. And moving into the peak homebuying season this spring, this is only expected to ramp up more.

Remember these four tips to make your best offer.

1. Partner with a Real Estate Agent

Rely on a real estate agent who can support your goals. As PODS notes:

“Making an offer on a home without an agent is certainly possible, but having a pro by your side gives you a massive advantage in figuring out what to offer on a house.”

Agents are local market experts. They know what’s worked for other buyers in your area and what sellers may be looking for. That advice can be game changing when you’re deciding what offer to bring to the table.

2. Understand Your Budget

Knowing your numbers is even more important right now. The best way to understand your budget is to work with a lender so you can get pre-approved for a home loan. Doing so helps you be more financially confident and shows sellers you’re serious. That gives you a competitive edge. As Investopedia says:

“. . . sellers have an advantage because of intense buyer demand and a limited number of homes for sale; they may be less likely to consider offers without pre-approval letters.”

3. Make a Strong, but Fair Offer

It’s only natural to want the best deal you can get on a home, especially when affordability is tight. However, submitting an offer that’s too low does have some risks. You don’t want to make an offer that’ll be tossed out as soon as it’s received just to see if it sticks. As Realtor.com explains:

“. . . an offer price that’s significantly lower than the listing price, is often rejected by sellers who feel insulted . . . Most listing agents try to get their sellers to at least enter negotiations with buyers, to counteroffer with a number a little closer to the list price. However, if a seller is offended by a buyer or isn’t taking the buyer seriously, there’s not much you, or the real estate agent, can do.”

The expertise your agent brings to this part of the process will help you stay competitive and find a price that’s fair to you and the seller.

4. Trust Your Agent During Negotiations

After you submit your offer, the seller may decide to counter it. When negotiating, it’s smart to understand what matters to the seller. Once you do, being as flexible as you can on things like moving dates or the condition of the house can make your offer more attractive.

Your real estate agent is your partner in navigating these details. Trust them to lead you through negotiations and help you figure out the best plan. As an article from the National Association of Realtors (NAR) explains:

“There are many factors up for discussion in any real estate transaction—from price to repairs to possession date. A real estate professional who’s representing you will look at the transaction from your perspective, helping you negotiate a purchase agreement that meets your needs . . .” 

Bottom Line

In today’s competitive market, be sure to work with a local real estate agent to find you a home you love and craft a strong offer that stands out.

Buyer AdviceTrending News December 21, 2023

Mortgage Savings? Look to Your Seller!

Steep mortgage payments dampening your dreams of homeownership? A 2-1 buydown, plus a willing seller, could be your answer.

What’s a 2-1 buydown?

It’s a mortgage strategy that temporarily trims your interest rate during the early years of your loan, offering more manageable payments. It’s ideal for first-time homebuyers or those eyeing an income surge soon.

Here’s how it works:

• Year 1: Interest is slashed by 2 percentage points below the lender’s rate. So, if a lender offers 7%, you’re only on the hook for 5%.

• Year 2: Interest nudges up but still remains 1 percentage point below the lender’s rate. With a 7% lender rate, you’d owe 6%.

• After Year 2: Interest resets with the lender’s standard rate for the remaining term. In this scenario, that’d be 7%.

The seller’s role:

Sellers can sweeten the deal by shouldering the buydown cost, which makes this a compelling negotiation chip during price talks.

While enticing, remember the 2-1 buydown is short-term relief. Payments will jump after two years, so it’s important for buyers to plan ahead for the increase.

Intrigued by a 2-1 buydown? Let’s chat about how this mortgage solution fits into your home-buying plans in 2024. connect with me here

Trending News August 4, 2023

Taming the Blaze: Wildfire Mitigation in Northwest Montana

It’s a warm, dry summer in Northwest Montana, and the parched terrain is riddled with tinder just waiting for a spark. As beautiful as our region is, it is equally susceptible to wildfires. While the occurrence of these wildfires is an integral part of the ecosystem, their frequency and intensity have been on the rise due to factors such as climate change and human activity. Consequently, protecting your home from this looming menace through fire mitigation becomes not just prudent, but a necessity.

Understanding Wildfires in Northwest Montana

Before we delve into fire mitigation techniques, it’s important to understand why Northwest Montana is particularly prone to wildfires. This area’s climate is typified by long, cold winters and short, hot summers. During these hot, dry summer months, the lush vegetation that flourishes in the spring can quickly become kindling for wildfires.

Rising global temperatures have also led to earlier snowmelts, lengthening the wildfire season. This, combined with human activities such as camping, farming, and construction, increases the risk of fires starting.

The Role of Fire Mitigation

Fire mitigation involves implementing measures aimed at minimizing the risks and impacts of wildfires. These measures can range from simple practices around your home to collaborating with local fire departments and forestry services to manage the broader landscape.

Fire mitigation can significantly reduce the potential for fire damage and allows firefighters to safely protect your property.

Practical Fire Mitigation Measures

Here are a few practical steps you can take to protect your home through fire mitigation:

1. Creating a Defensible Space: The area around your home, termed the ‘defensible space’, is the first line of defense against wildfires. This space is typically divided into two zones:

  • Zone 1 (0-30 feet from the house): This zone should be kept free of all flammable vegetation and materials. Regularly clean roofs and gutters of dead leaves and branches, keep lawns hydrated and mowed, and store firewood and other combustibles well away from the house.
  • Zone 2 (30-100 feet from the house): In this zone, reduce the density of trees and brush to decrease the chance of fire spreading. Use ‘fire-resistant’ plants in your landscaping, prune tree branches to a height of 10 feet from the ground, and maintain a spacing of at least 10 feet between tree crowns.

2. Employing Fire-Resistant Building Materials: If you’re building a new home or upgrading an existing one, consider using fire-resistant materials. Fire-resistant roofs, siding, and decks can prevent embers from igniting your home. Double-paned or tempered glass windows can also withstand higher heat.

3. Emergency Preparedness: Prepare and maintain an emergency plan and evacuation kit. The plan should include evacuation routes, meeting points, and important contact numbers. The kit should contain vital documents, essential medications, water, non-perishable food, and pet supplies.

4. Community Efforts: Join or initiate community efforts towards broader fire mitigation practices. This could involve participating in local Firewise programs, community cleanup days, or lobbying for stricter fire safety regulations.

While we can’t completely eliminate the risk of wildfires, diligent fire mitigation practices can go a long way in protecting our homes and communities. Remember, the best time to act is now!

With a community spirit and a proactive mindset, we can coexist with the natural cycle of wildfires while minimizing their destructive potential. Fire is a formidable force, but together, we can be a stronger one.

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FIRE RESOURCES

Current wildfires in Montana

Flathead National Forest wildfire alerts

Current fire danger in Northwest Montana

Fire restriction information

Trending News July 31, 2023

Pricing Your House Right Still Matters Today

While this isn’t the frenzied market we saw during the ‘unicorn’ years, homes that are priced right are still selling quickly and seeing multiple offers right now. That’s because the number of homes for sale is still so low. Data from the National Association of Realtors (NAR) shows 76% of homes sold within a month and the average saw 3.5 offers in June.

To set yourself up to see advantages like these, you need to rely on an agent. Only an agent has the expertise needed to find the right asking price for your house. Here’s what’s at stake if that price isn’t accurate for today’s market value.

The price you set for your house sends a message to potential buyers.

Price it too low and you might raise questions about your home’s condition or lead buyers to assume something is wrong with it. Not to mention, if you undervalue your house, you could leave money on the table, which decreases your future buying power.

On the other hand, price it too high and you run the risk of deterring buyers from ever touring it in the first place. When that happens, you may have to do a price drop to try to re-ignite interest in your house when it sits on the market for a while. But be aware that a price drop can be seen as a red flag for some buyers who will wonder why the price was reduced and what that means about the home.

recent article from NerdWallet sums it up like this:

Your house’s market debut is your first chance to attract a buyer and it’s important to get the pricing right. If your home is overpriced, you run the risk of buyers not seeing the listing . . . But price your house too low and you could end up leaving some serious money on the table. A bargain-basement price could also turn some buyers away, as they may wonder if there are any underlying problems with the house.”

Think of pricing your home as a target. Your goal is to aim directly for the center – not too high, not too low, but right at market value.

Pricing your house fairly based on market conditions increases the chance you’ll have more buyers who are interested in purchasing it. That makes it more likely you’ll see multiple offers too. Plus, when homes are priced right, they still tend to sell quickly.

To get a high-level look into the potential downsides of over or underpricing your house and the perks that come with pricing it at market value, see the chart below:

Lean on a Professional’s Expertise to Price Your House Right

So why is an agent essential in finding the right price? Your local agent has the skill and the insight necessary to find the market value of your home. They’ll use their expertise to determine a realistic listing price by assessing:

  • The prices of recently sold homes
  • The current market conditions
  • The size and condition of your house
  • The location of your house

Bottom Line

Pricing your house at market value is critical, so don’t rely on guesswork. Let’s connect to make sure your house is priced right for today’s market.

Trending News July 27, 2023

Homebuyers Are Still More Active Than Usual

Even though the housing market is no longer experiencing the frenzy that was so characteristic of the last couple of years, it doesn’t mean today’s market is at a standstill. In actuality, buyer traffic is still strong today.

The ShowingTime Showing Index is a measure of how much buyers are touring homes. The graph below uses that index to illustrate buyer activity trends over time to help put today into the proper perspective.

It shows there’s seasonality in real estate. If you look at the last normal years in the market (shown in gray), there was a consistent pattern as buyer activity peaked in the first half of each year (during the peak homebuying season in the spring) and slowed as each year came to a close.

When the pandemic hit in March of 2020, that trend was disrupted as the market responded to the resulting uncertainty (shown in blue in the middle). From there, we entered the ‘unicorn’ years of housing (shown in pink). This is when mortgage rates were record-low and buyer demand was sky high. Similar seasonal trends still existed even during that time, just at much higher levels.

Now, let’s look at 2023. Traffic is down from the previous month and it’s also lower than the peaks we saw in the ‘unicorn’ years. But what’s happening isn’t a steep drop off in demand – it’s a slow return toward more normal seasonality. As the ShowingTime report explains:

“Showing traffic declined about 10% in May . . . This follows a typical seasonal pattern – disrupted by the pandemic but now beginning to return . . .”

And, to highlight this isn’t a drastic decline, let’s zoom in. Here’s a graph using just the May data for the last five years. It shows just how strong buyer demand still is.

What Does That Mean for You?

Buyers are still out there touring homes. They’re more active than they were in May 2022 (when sticker shock over higher mortgage rates started to set in) and certainly more than they were in the last normal years. So, remember, buyer activity is still strong. And it could actually be even stronger if it wasn’t constrained by the limited supply of homes for sale. According to U.S. News:

“Housing markets have cooled slightly, but demand hasn’t disappeared, and in many places remains strong largely due to the shortage of homes on the market.”

Don’t lose sight of just how active the market still is today. If your house isn’t on the market, it’s not getting in front of all those buyers who are looking to make a purchase right now. Let’s connect to start the process.

Buyer AdviceTrending News July 26, 2023

Tips for Making Your Best Offer on a Home

While the wild ride that was the ‘unicorn’ years of housing is behind us, today’s market is still competitive in many areas because the supply of homes for sale is still low. If you’re looking to buy a home this season, know that the peak frenzy of bidding wars is in the rearview mirror, but you may still come up against some multiple-offer scenarios.

Here are a few things to consider to help you put your best foot forward when making an offer on a home.

1. Lean on a Real Estate Professional

Rely on an agent who can support your goals and help you understand what’s happening in today’s housing market. Agents are experts in the local market and on the national trends too. They’ll use both of those areas of expertise to make sure you have all the information you need to move with confidence.

Plus, they know what’s worked for other buyers in your area and what sellers may be looking for in an offer. It may seem simple, but catering to what a seller needs can help your offer stand out. As an article from Forbes says:

“Getting to know a local realtor where you’re hoping to buy can also potentially give you a crucial edge in a tight housing market.”

2. Get Pre-Approved for a Home Loan

Having a clear budget in mind is especially important right now given the current affordability challenges. The best way to get a clear picture of what you can borrow is to work with a lender so you can get pre-approved for a home loan.

That’ll help you be more financially confident because you’ll have a better understanding of your numbers. It shows sellers you’re serious, too. And that can give you a competitive edge if you do get into a multiple-offer scenario.

3. Make a Fair Offer

It’s only natural to want the best deal you can get on a home. However, submitting an offer that’s too low does have some risks. You don’t want to make an offer that will be tossed out as soon as it’s received just to see if it sticks. As Realtor.com explains:

“. . . an offer price that’s significantly lower than the listing price, is often rejected by sellers who feel insulted . . . Most listing agents try to get their sellers to at least enter negotiations with buyers, to counteroffer with a number a little closer to the list price. However, if a seller is offended by a buyer or isn’t taking the buyer seriously, there’s not much you, or the real estate agent, can do.”

The expertise your agent brings to this part of the process will help you stay competitive and find a price that’s fair to you and the seller.

4. Trust Your Agent’s Expertise Throughout Negotiations

During the ‘unicorn’ years of housing, some buyers skipped home inspections or didn’t ask for concessions from the seller in order to submit the winning bid on a home. An article from Bankrate explains this isn’t happening as often today, and that’s good news:

“While the market has largely calmed down since then, sellers are still very much in the driver’s seat in this era of scarce housing inventory. It’s not as common for buyers to waive inspections anymore, but it does still happen. . . . It’s in the buyer’s best interest to have a home inspected . . . Inspections alert you to existing or potential problems with the home, giving you not just an early heads up but also a useful negotiating tactic.”

Fortunately, today’s market is different, and you may have more negotiating power than before. When putting together an offer, your trusted real estate advisor will help you think through what levers to pull and which ones you may not want to compromise on.

When you buy a home this summer, let’s connect so you have an expert on your side who can help you make your best offer.

Buyer AdviceTrending News July 25, 2023

Don’t Fall for the Next Shocking Headlines About Home Prices

If you’re thinking of buying or selling a home, one of the biggest questions you have right now is probably: what’s happening with home prices? And it’s no surprise you don’t have the clarity you need on that topic. Part of the issue is how headlines are talking about prices.

They’re basing their negative news by comparing current stats to the last few years. But you can’t compare this year to the ‘unicorn’ years (when home prices reached record highs that were unsustainable). And as prices begin to normalize now, they’re talking about it like it’s a bad thing and making people fear what’s next. But the worst home price declines are already behind us. What we’re starting to see now is the return to more normal home price appreciation.

To help make home price trends easier to understand, let’s focus on what’s typical for the market and omit the last few years since they were anomalies. 

Let’s start by talking about seasonality in real estate. In the housing market, there are predictable ebbs and flows that happen each year. Spring is the peak homebuying season when the market is most active. That activity is typically still strong in the summer but begins to wane as the cooler months approach. Home prices follow along with seasonality because prices appreciate most when something is in high demand.

That’s why, before the abnormal years we just experienced, there was a reliable long-term home price trend. The graph below uses data from Case-Shiller to show typical monthly home price movement from 1973 through 2021 (not adjusted, so you can see the seasonality):

As the data from the last 48 years shows, at the beginning of the year, home prices grow, but not as much as they do entering the spring and summer markets. That’s because the market is less active in January and February since fewer people move in the cooler months. As the market transitions into the peak homebuying season in the spring, activity ramps up, and home prices go up a lot more in response. Then, as fall and winter approach, activity eases again. Price growth slows, but still typically appreciates.

Why This Is So Important to Understand

In the coming months, as the housing market moves further into a more predictable seasonal rhythm, you’re going to see even more headlines that either get what’s happening with home prices wrong or, at the very least, are misleading. Those headlines might use a number of price terms, like:

  • Appreciation: when prices increase.
  • Deceleration of appreciation: when prices continue to appreciate, but at a slower or more moderate pace.
  • Depreciation: when prices decrease.

They’re going to mistake the slowing home price growth (deceleration of appreciation) that’s typical of market seasonality in the fall and winter and think prices are falling (depreciation). Don’t let those headlines confuse you or spark fear. Instead, remember it’s normal to see a deceleration of appreciation, slowing home price growth, as the months go by.

If you have questions about what’s happening with home prices in our local area, let’s connect.