Market - A Quick Guide to Understanding the Housing Market
You hear it on the news all the time: "It's a buyer's market," "It's a seller's market," or "The housing market is on the rebound." And while you probably get the gist of what these folks are talking about, having a deeper understanding of the housing market and how it works can help you immensely during the homebuying or selling process. Let's start with the basics The housing market refers to the general market of houses being bought and sold between buyers and sellers. These houses are either bought or sold directly by owners or indirectly through brokers. Like any market, the housing market is governed by the law of supply and demand. When demand is high and supply is low, the market appreciates. When demand is low and supply is high, the market depreciates. How inventory affects the value In the real estate industry, we think of supply and demand in terms of available inventory. You can measure inventory by answering the following question: At the current pace of sales, how long would it take all of the houses available on the market to be sold? As inventories rise, home prices tend to decline. This is because as inventories rise, so does the competition amongst sellers, which drives prices down. The difference between a buyer's and a seller's market A buyer's market is associated with longer inventory periods. As homes sit on the market for longer and longer, sellers become more and more flexible with their prices. This is great for buyers, as they usually end up getting a good deal (hence the term "buyer's market"). In contrast, a seller's market is associated with shorter inventory periods. Homes sell rapidly, giving sellers a lot of pricing power (hence, it's a "seller's market"). Keep in mind that as with other markets, the housing market is cyclical: There are periods of rapid appreciation followed by periods of stabilization or depreciation. By studying the market, you can learn to foresee such trends.
How To Help Your Adult Kid Buy: Advice For Mom And Dad
As a parent, it's hard to watch your kids struggle with anything, but watching them struggle to buy a house can be especially tough. We all want the best for our offspring, and owning a home is one of the best ways to build wealth -- so if kids are having trouble taking that step, it's normal to worry about how they'll manage when you're gone.The good news is this: There's a lot you can do as a parent to help your kids get their feet on the property ladder. Follow this advice and you'll be able to both assist your children and ensure that your own financial future is secure. Understand your 'why' "Because I want to help my child" is a great reason to do just about anything -- but a house is a huge financial investment and responsibility, so you need to dig a little bit deeper.Ask yourself these questions about your child and their life circumstances, as well as your own financial circumstances: How does my kid handle finances? Is my kid in debt? If so, how much is that debt? Does my kid know how to save money? Is my kid living in a real estate market where prices are steadily increasing -- and if they don't get in the door now, they might be locked out for years? Do I want to transfer my wealth to my kid now, when they arguably need it most, or would I rather wait? How would that decision affect my estate taxes and other financial considerations? Is my kid attending a college where they'll stay for several years? (And would it make sense to buy a house there instead of help them pay rent?) Can my kid already qualify for a mortgage? If so, would it make sense to help them qualify for a bigger one? After you've taken time to answer these questions, you should have a better idea of exactly why you want to help your child buy a house. Whether you want to encourage financial responsibility or help your kid buy a bigger house than they could on their own, knowing why will help guide your decision-making during the process. Manage your own credit first It's admirable to want to help your kids -- but not at the expense of your own financial well-being. So before you make any tangible offers to help, make a full assessment of your income and expenditures, your savings and assets, and decide how much you can afford to give. Put a dollar amount on it, and don't be tempted to exceed what you've decided you can spend.There are a lot of options for helping your adult kids buy that will directly involve your credit, too. For that reason, all of the advice that applies to buyers also applies to parents who want to help their kids buy -- whether you're buying a home to rent to your kid, or co-signing or co-borrowing the loan, you'll want to make sure your credit is in great condition. Don't open a lot of new lines of credit or make any big purchases on credit, and follow all the standard best practices, too, like paying your own bills on time.And maybe after all this assessment you've come to the conclusion that you don't have a lot of financial help to give. That's OK! You should know by now that parenting is about much more than spending money, so think about other ways you might be able to help, from offering advice, to connecting your kid with a mortgage broker or real estate agent, to cleaning and repairing the home when it's time to move in. Get your kid's credit in order A credit score is really important when it comes to a mortgage loan -- it helps the lender figure out how reliable (or not) each borrower is, and it directly influences the interest rate on the loan, which adds up to tens of thousands of dollars over decades.If your child doesn't know what their credit score, then help them find it, and then work with them to improve it. Maybe your kid has trouble paying all their bills on time, so help them make a budget or set up automatic payments. Settling debts like student loans or car loans can have a significant positive impact on credit score, so if you're in a financial position to clear a large debt for your kid, this might be a good time to do it.Mortgage lenders are also going to look at your child's bank account statements, seeking red flags like frequent overdrafts. If your kid frequently overdraws accounts, then think about how you might help them balance their finances. Savings now go a long way later There are essentially two reasons why you might want to encourage your child to save as much as possible right now. One is obvious: Down payments on houses are expensive, especially if you want to avoid mortgage insurance and put down 20% or more on the home purchase. That 20% of a home's sales price adds up pretty quickly, and most kids probably don't have tens of thousands of dollars handy in their bank account.Another reason to facilitate savings for your kids is, again, the fact that mortgage lenders are going to want to see bank statements, and it will help your kid's mortgage rate if the lender sees a decent savings account that grows over time instead of being wrung dry every month.As a parent, there are tons of ways you can help your kids save money, including inviting them to come live at home with you again for a spell, which can decrease their rent payment significantly. If you go this route, then make sure that any agreements you make with your kids about rent and contribution to utilities or household chores are documented and signed.But you don't have to invite your kids to live at home again; you also have the option of taking over some of their bills (cell phone, car insurance, utilities or others), dropping off groceries or meals, handing down a gently used appliance or car and buying yourself a new one -- there are tons of ways that parents can help subsidize a child's savings account. Time to buy? Consider all options Once your kid's credit is in decent order and he or she has a down payment secured, you might not feel like your work is done. Some parents like to chip in with the actual purchase of the home -- and if that's you, fantastic! Just make sure you know what all your options are before you decide on any given path.An incredibly common way to help your adult kid buy a house is to give them money for a down payment. This is a significant upfront expense for buyers, who may need tens of thousands of dollars to avoid mortgage insurance, and oftentimes parents make that possible.But backing up your kid's home purchase with a down payment is far from the only option open to parents. Some choose to buy the house themselves, either as an investment rental where the kid can stay for a few years before selling, or as a rent-to-own deal where the kid pays the parents back for the house over time. If you have the ability to pay cash for a house, this can be an especially good deal for both the child and the parent: You can set an interest rate that's lower than what the market's currently dictating (a win for your kid) and make all your money back plus a profit over time (a win for you).Other parents might prefer co-borrowing or co-signing a mortgage loan. These can be good options for a kid who can already qualify for a mortgage -- often, they can increase their price range with a co-borrower or co-signer. Think about both; a co-signer doesn't accrue any equity in the home and is responsible for the balance of the loan of the borrower defaults, and a co-borrower does accrue equity in the home, but co-borrowing might have a bigger immediate impact on your credit. Cover your bases One thing never to forget about adult kids: They are adults, and adults are going to make their own decisions. And some of those decisions might have an impact on your real estate deal.Decisions that impact your real estate deal go well beyond paint or landscaping preferences. If your child has a common-law relationship or decides to get married while they're living in a house that they're renting from you -- or a house that lists you as a co-borrower -- and things go sour, that partner could have a claim on your real estate, especially if the partner was paying rent or helping with the mortgage.Make sure that whatever agreements you're making with your kids are thought through in their entirety, and do your best to consider any changes or contingencies that might change the agreement. Document them and incorporate them into any legal verbiage for your own protection -- and to protect your kids, too.
11 Steps To Downsizing Your Home
Nothing lasts forever -- including a home where you raised a family or lived most of your working life. And it's a fact of life that suddenly, a place that was perfect for you a decade or two ago might start to feel cavernous and empty (or just contain more square footage than you really want to clean regularly).If you're starting to dream about trading in your rambling old house for a smaller cottage or new condo, then it's probably time to seriously consider downsizing from your current home. Before you start shopping and put your home on the market, though, there are a few things you need to think about and discuss with any family members who'll be making the journey with you. Consider your finances It's tempting to look up your home on a website like Zillow or Redfin and revel in how much money it's worth today. So finances might not be top-of-mind when you're thinking about downsizing -- you may believe that you're guaranteed to save money, but that's not always the case.Mortgage rates have been rising steadily, and if you bought or refinanced your home during the years of historic low rates, then you might get a bit of sticker-shock at how much you'll pay in mortgage interest over the life of the loan. And even as your home's value has increased, others have, too -- so unless you're also perusing the type of home where you'd ideally move after your downsizing, you might not be prepared to spend what's necessary on a new place. Also, hopefully your credit score has been maintained or improved since you moved in, but if not, that's something else you'll have to consider.Depending on where you want to move, there might also be homeowners' association (HOA) restrictions and dues, new taxes to consider if you're changing counties or moving to a new state, and a number of other fees and expenses that haven't yet factored into your accounting. If you have a financial advisor, now would be a good time to talk to that person about downsizing and get some background on what it would mean for you financially. Think about space A lot of people really love the idea of living in a tiny home, but in practice, it's not always as fun as it sounds. You might be well aware that the amount of house you have is in excess of what you really need, but if you don't think hard about the right amount of space for you at this time in your life, then wherever you land might also be too big ... or too small, on the other end of the spectrum.Talk to any family members coming with you, if applicable, about what your needs are right now. If you aren't sure what might feel "right," then visit some open houses for smaller homes (warning: you might be tempted to buy one -- resist!) or, if there's an IKEA handy, head there for an afternoon and walk through some of the showroom examples. Wherever you go, bring a notebook or use an app on your phone to record the square footage of the home and a few sentences or words to help you remember whether you felt like it was too big, too small -- or just right.In addition to interior space, you'll want to think about lot size. Do you really want an acre of lawn to maintain, or on the flip side, will you miss having a bit of grass to mow? See if you and any moving partners can come to some kind of resolution about the ideal space guidelines for this new leg of your life. Ask yourself: Can you change enough to stay? Another option to consider while you're examining your finances is the opposite of downsizing: remodeling and staying put. It's an increasingly popular solution to the too-much-house problem, and it's possible that it could be right for you.Maybe you can convert one floor of your home into a small unit and rent it out, for example. Maybe you need wider stairs, or maybe the bathroom needs an update and some adjustments. If it's not really the space that's the issue, but instead it's the features of the home, then it's very possible you might be able to get away with updating and revamping some things and then staying where you are.Talk to a contractor or possibly even an architect (depending on the scope of changes) about what to do and get a ballpark figure for what it might cost, realizing that it's likely to go over-budget. Then decide whether a big change might be enough to keep you where you are. Decide where to go If you're bent on moving out of your current place, then the obvious next question that everyone is going to ask -- from your relatives to your real estate agent -- is "where are you going?"Maybe you know you want to stay in the same general area, but you want to be a bit closer to amenities like the park or the grocery store. Or perhaps you have it in your head to shift gears entirely and move to a different city or state, or even a different country.It's not enough to just want a change -- you need to have a goal, a reason for the change, because moving is never fun, and downsizing can be especially taxing. Think about where you've always wanted to live and why, and then decide where you're going to plant your roots for the next set of life adventures. Factor in cost-of-living changes While you're thinking about your finances, it's a good idea to also consider whether you'll be accruing any additional cost-of-living changes. This is best done after you know where you'll be moving -- cost of living might not fluctuate all that much within a city or a county, but if you're moving to a different state, or from the suburbs to the city or the city to the suburbs, then there might be some additional costs that you're not used to and therefore aren't considering.It might not be a bad idea to talk to a real estate agent or people you know who live where you want to move. Ask them how much groceries and gas cost, what they pay for utilities and parking, and whether they can share any tips or insight into other costs of living. You might discover that it costs an arm and a leg to call up a ride-share car on your phone like you're used to doing, but that there's a reasonably priced train that's very accessible -- so increased cost of living items might not be dealbreakers, but they're still something to understand and consider. Find a place to land Now that you've got an idea of where you're going and how much it will cost, it's a good idea to start looking more specifically at your housing options. Even if you don't buy a house or condo immediately, you'll want to familiarize yourself with how big the homes are in the area where you want to move, and to get a ballpark feel for how much space you'll have to work with in the new place. If it's possible, you may also want to get specific measurements for a typical room (including floor-to-ceiling height).This way you'll have what you need to evaluate all your stuff -- your furniture, your kitchenware, even your clothes -- and to start making the tough decisions about what's going to stay and what has to go. Replacing and shedding furniture You probably already know that you're going to be getting rid of some furniture -- they don't call it "downsizing" because you're adding new items. But knowing exactly what to bring and what to purge can be difficult, especially if you love a particular item of furniture but can't see its future in your new home.There are companies that can help you with this exercise (such as everythingbutthehouse.com), and if you decide to go solo, there are also lots of tips on how to furnish a smaller space. First, prioritize your own current furniture by considering its size, its function, and its daily usage. Eliminate any duplicate items -- for example, the ten-person dining room set is probably unnecessary if you have a four-person dinette that's tucked in the breakfast nook.It might also be worth considering replacing some of your furniture -- a bed with drawers underneath the mattress platform could be a better investment than the luxurious but space-hogging four-poster. Make sure you're taking measurements of anything you buy and comparing it against what you know about your new place so that you don't wind up cramming way too much furniture into a smaller space. Getting rid of excess baggage Apart from furniture, you'll need to think about all your stuff, the books and decorations and clothes and kitchenware and appliances. The kitchen is another good place to demand multitasking from your gadgets, especially if you'll be losing cabinet space in the move. There are new appliances that might be a worthwhile investment because they'll help you get rid of two or three existing appliances, so do a little bit of research before you start making serious decisions there.This is probably the hardest step, all in all, because there's a lot that you might want to keep but just doesn't make sense with your new lifestyle. Instead of considering it a loss, try to think of the baggage-shedding as an opportunity to free yourself from these possessions and find them a new home where they'll be more appreciated and loved. Understand your storage options Some condos have a storage closet where you can stash overflow, and if you're moving into a new house, there might even be a garage, basement, or attic where your boxes can lurk. Whatever the case, think about all your options -- including renting a storage unit -- and make sure you factor in anything that you currently have in storage and aren't willing to let go of just yet.Speaking of renting a storage unit, you should know this: It's a popular option when downsizing, but if you find yourself with a giant stash of things that you're going to store, ask yourself how likely it is that you'll ever go to visit that stuff, pull it out, look at it, or enjoy it in any way. The idea of just putting everything away but still possessing it can be very seductive, but realistically, most of the time you're just creating another headache for yourself and potentially for the executors of your estate. If you like it, but not enough to keep it in the house with you, then maybe it's time to say goodbye. Organize, organize, organize Chaos is part of any move, and downsizing can be especially fraught because there are more moving parts to the process. The more organized you can be at every level, the better this move will go.Make sure your finances are well-organized to start with, then start applying that focus and detail-orientation to everything else. If you can, sometimes it's easiest to move yourself out first with anything you know you're taking with you, then ask your family and friends to help themselves to whatever they might want. After that, you can sell the rest -- either in bulk to a company or service like everythingbutthehouse.com or piecemeal, depending on your preferences -- or donate it; there are many donation services that will come pick things up from your house so you don't have to cart them into a donation center."A place for everything and everything in its place" is an aspirational goal for many of us, but when you're downsizing, try to make it your (at least temporary) mantra. It will guide you through the downsizing process and help keep you organized to boot. Make the move When it's finally time to execute, it's very common for downsizers to be seized with second thoughts. Will you like your new home as much as your old one? Will you miss your things too much to fathom? What if you're making a huge mistake? What if you change your mind?The good news is that humans, despite hating the idea of change, are highly adaptable creatures. Make a list of all the things that you don't like about your about-to-be-downsized house and lifestyle, and refer to it often throughout the process. You can even pull it back up in the new place to remind yourself why you moved if something is frustrating or annoying you. But within a few weeks or months, it'll be hard to imagine how you ever managed before downsizing, so in the meantime, trust the process and find a solid team that can help you get from your oversized starting line to the just-right finishing line.
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