Home Prices are Up Again

 In Qualifying for a Mortgage

Once again, existing home values in the Denver area have gone up in the past year by 20%.  Each month, the Case-Shiller Home Price Index is released.  This index shows the increase in value of existing, single-family homes and is considered the most accurate report for home price values.

What does this mean for current homeowners and for people hoping to become homeowners?  Here’s what you need to know.

Current Homeowners

For current homeowners, this is great news.  Your house is worth about 20% more than it was a year ago.  Say your house was worth $300,000 last year, it’s now worth $360,000.  If it was worth $500,000 last year, it’s now worth $600,000.  If it was worth $700,000 last year, it’s now worth $840,000.

Chances are, if you got your mortgage within the past few years, you probably have an interest rate that is lower than current rates.  Forget about refinancing if you want to lower your rate.  That’s not going to happen.

Refinancing

On the other hand, if you need money to pay down debts, make some home improvements, pay for college, buy a second home or investment property – anything at all – you can get a cash-out refinance and still get some pretty cheap money.  We will tell you if it makes more sense to refinance your current mortgage, or to keep your current mortgage and get a home equity line of credit (HELOC) for the cash you need.  

Owning a house now should make you feel good about your financial decisions.  You nailed this one!

Future Homeowners

For those who do not own a house, but want to own one, this is a tough time indeed.  There is a huge shortage of available houses, and when the supply falls far short of the demand, as it does now, values will continue to go up.  

Many buyers object to paying more for a house than the listing price.  They feel it is foolhardy to pay more for a house than it’s supposedly worth.  However, that kind of thinking neglects to consider that house values will continue to go up as long as there are fewer houses for sale than there are people willing to buy them.  If you bought a house a year ago – even if you paid more for it than it was worth – the value still went up by 20%.  Unless you paid more than 20% over the appraised value for it, you still made money.

The Housing Market

There are also many people who don’t own a house who are hoping that a housing crash is around the corner.  We seriously doubt that will happen.  Again, if there are more people wanting to buy a house than there are houses for sale, values will continue to go up.  Although there are always plenty of people willing to tell you that a housing crash is imminent, none of the warning signs exist.  Demand exceeds supply.  Predatory loans are almost non-existent.  Collusion between lenders and appraisers has been stopped by updated lending laws.  Builders are not building anywhere near the number of homes that they can sell.  Interest rates are rising, but they are still well below the average historical rate.  

Interest Rates

The highest average rate since 1972 was 18.63% and the lowest was 2.65%.  Even though you may have never experienced rates higher than 3% – 4%, they have been higher than 5% for 38 out of the past 50 years.  The past 12 years have not been “normal” when it comes to interest rates.  The government has been buying mortgage bonds by the billions every month to artificially lower rates.  That is coming to an end, and rates will rise.  It will be a rude awakening for people who have never experienced inflation.  

What is our advice to people who want to own a house?  Buy whatever you can afford.  You will almost certainly make money.  It might not be your dream home, but it will be a wise financial decision, and you will be building equity every time you pay your mortgage.

To see how much you can qualify for, contact us today.  You will be amazed at how easy it is to get a mortgage.

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