Five Money Moves To Make If You Are Buying Or Selling A Home In 2018

With interest rates creeping up and homesites being built by the droves, many people are wondering what they should do on both the buying a selling side here in 2018.  Is it too late to buy home?  What interest rate is too much? How can I sell my home quickly? What other factors should I watch out for with my real estate?  Here are five money tips on buying and selling homes for the rest of 2018.

This Is The Law Of Supply and Demand

  • Supply is shrinking amongst great demand- Remember, real estate is always driven by supply and demand. Depending on where you live, you may want to wait for the bubble to burst before you buy or look for areas in your city that are still gentrifying and try to buy before the big uptick happens in those areas.
  • Monthly Supply of houses is at the bottom range- Monthly housing supply is at five months and not more than a year ago is was twelve months. Historically, it’s never been lower than four months.  So, even though you may be asking yourself, “who’s going to buy all of these properties?” the market is still very thin on inventory.

Buyers- Interest Rates Are Still Low

  • 30-year rate is roughly 4.5%—and rising… This may be a turn off for some people, but let’s get a reality check that it is still a GREAT time to be borrowing money. With tax deductions still in play, your after-tax cost of borrowing will still be below 4%
  • 30 years ago in May of 1988 it was 10.46% (source:fedprimerate.com)- For all the millennials out there that we advise, this is a key statistic to remember. The recent run of 3% long term mortgage rates were historic.  When I bought my first home in 1993, I paid 8% to borrow money.  Now, it is still half.

Buyers-Be Careful About Overspending

  • Home Prices Up 6.2% vs. 1 year ago/Wages up 2.6%- It’s important to remember not to succumb to lifestyle inflation. It isn’t just the cost of the mortgage that you’ll have to pay for when you buy a home, but I recommend you use a 10% rule of home value as to what you will spend on improvements in your first year in the home.
  • Use the 28/36 Rule- No more than 28% on total mortgage payment, taxes, insurance. This is the most important rule to not crush yourself financially.  You need to pay attention to the ‘36’ number which says that your overall debt obligations (auto loan, student loan, etc.) should exceed 36% of your gross monthly income.  If you get to the 40% plus mark for debt payments, you’ll find yourself in an ongoing financial bind.

Sellers- How Can You Sell Quickly

  • Price Your Property Right – If you don’t know what you are doing, a good real estate agent will be important to have. The big mistake most families make is not pricing their property at the right amount.  Don’t overinflate the property too much for the negotiation game because you may ward off some families from looking at the property.
  • Staging May Be Worth The Money- If you really want to move the property spending 1% of the home value for a stage may be a good idea. Especially if your house has older furniture or a unique set up.  Giving new buyers ideas on what this ‘could’ look like can help sell the property faster.
  • Be Prepared To Move (sometimes property sell quicker than you expect)- People forget to make contingency plans when they put their property on the market thinking it will take 3 to 6 months. Then, you get an offer in two days.  Make sure you have thought out what will happen with your belongings and where you would stay short term if you haven’t lined up options already.

Sellers-What Would Be Your Replacement Property?

  • New Mortgage Deduction Cap At $750,000- Remember, with the new tax laws here in 2018, the top mortgage you can take for tax deduction purposes is $750,000. Any mortgage higher than that you won’t be able to deduct the interest you are paying above $750,000.  It used to be a million.  In addition, you can no longer deduct interest on home equity loans which was up to another $100,000.  You may want to consider this when you buy your replacement property.
  • Will You Be Paying Top Dollar When You Buy? – When you sell high on one end, it is likely you will buy high on the other end. This is why planning is so important for a move. By the time you pay sellers costs, moving costs, etc. and the costs to get into a new home you have to consider if the move was worth the trouble from a financial perspective.

 

Ted Jenkin, CFP®, AAMS®, AWMA®, CRPC®, CMFC®, CRPS®
Co-CEO and Founder oXYGen Financial, Inc.

 

If you want to set up a time to discuss specific investments in these areas, please go to oXYGen Financial to set up an appointment.

Ted Jenkin is a frequent guest columnist for the Wall Street Journal and Headline News Weekend Express.  He is the co-CEO of oXYGen Financial.  You can follow him on LinkedIn @ www.linkedin.com/in/theceoadvisor or on Twitter @tedjenkin.

Securities offered through Kestra Investment Services, LLC (Kestra IS), member FINRA/SIPC. Investment advisory services offered through Kestra Advisory Services, LLC (Kestra AS), an affiliate of Kestra IS. oXYGen Financial is not affiliated with Kestra IS or Kestra AS. Kestra IS and Kestra AS do not provide tax or legal advice.

The opinions expressed in this commentary are those of the author and may not necessarily reflect those held by Kestra Investment Services, LLC or Kestra Advisory Services, LLC. This is for general information only and is not intended to provide specific investment advice or recommendations for any individual. It is suggested that you consult your financial professional, attorney, or tax advisor with regard to your individual situation.

 

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