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What is Leverage and how can you benefit from it?

Leverage in real estate refers to the practice of using borrowed funds, typically in the form of a mortgage or a loan, to purchase an investment property or real estate asset. The concept of leverage involves using a smaller amount of your own money (equity) and a larger amount of borrowed money to make the investment. This strategy can amplify potential returns but also comes with increased risk. Here's how leverage works in real estate: Purchase a Property: Let's say you want to buy a rental property valued at $200,000. Instead of paying the full purchase price in cash, you decide to make a 20% down payment, which amounts to $40,000. This is your equity in the property. Borrow Funds: To cover the remaining $160,000, you secure a mortgage from a lender. This borrowed money is used to buy the property. Rental Income and Property Value Appreciation: You rent out the property, and the rental income helps cover the mortgage payments, property maintenance, and other expenses. Over time, the property may also appreciate in value. Leverage Effect: Here's where leverage comes into play. If the property appreciates in value, the increase in value applies to the entire $200,000 property, not just your initial $40,000 investment. This means that your return on investment (ROI) is calculated based on the property's total value, not just your own funds. If the property's value goes up by 5%, your equity has grown by 25% ($40,000 increase on a $160,000 investment). Benefits of leverage in real estate: Amplified Returns: By using leverage, you can potentially achieve higher returns on your investment. If the property appreciates in value, the gain is multiplied because it's based on the property's total value. Diversification: Leverage allows you to diversify your real estate portfolio by investing in multiple properties with a relatively smaller amount of your own money. Tax Benefits: Mortgage interest payments and other property-related expenses may be tax-deductible, reducing your overall tax liability. Risks of leverage in real estate: Increased Risk: While leverage can magnify gains, it also amplifies losses. If property values decline, you could face a significant loss of equity, and you are still obligated to make mortgage payments. Cash Flow Challenges: If rental income doesn't cover mortgage payments and expenses, you may need to use your own funds to cover the shortfall. Interest Costs: Borrowing money comes with interest costs, which can eat into your profits. Market Volatility: Real estate markets can be cyclical and subject to fluctuations. Economic downturns can lead to lower property values, impacting your equity. It's important to carefully assess your financial situation, risk tolerance, and investment goals before using leverage in real estate. While it can be a powerful wealth-building tool, it also carries significant risks, and investors should have a solid understanding of the market and a well-thought-out investment strategy. Consulting with financial advisors or real estate professionals can be beneficial when considering leveraged real estate investments.

The 3-Sided Balance Sheet and Liability Advice!

In order to understand how liability advice can be helpful when it comes to creating and growing wealth over time it's necessary to be open to the idea of a 3-sided balance sheet. My goal with this short video is to hopefully open your mind up to the idea of liability advice so we can have a conversation.

The Smartest, Fastest Way To Pay Off Your Mortgage!

The decision to prepay your mortgage or invest your extra funds depends on various factors, including your financial goals, risk tolerance, and current financial situation. Here are some key considerations to help you make an informed decision: 1. Interest Rate on Your Mortgage: If your mortgage has a high-interest rate, it might be advantageous to prioritize paying it off early. This is because the interest you save on your mortgage can often exceed the potential returns from investments, especially in a low-risk environment. 2. Investment Returns: Consider the potential returns on your investments. Historically, the stock market has yielded an average annual return of around 7-8% after adjusting for inflation. If you believe you can earn a higher return on your investments than the interest rate on your mortgage, you might consider investing instead of prepaying the mortgage. 3. Risk Tolerance: Assess your risk tolerance. Paying down your mortgage is a low-risk, guaranteed return on your money. Investing in the stock market carries higher risk, but it also offers the potential for higher returns. Your risk tolerance should align with your chosen strategy. 4. Diversification: Diversifying your investments can help spread risk. If you have no other investments besides your home, you might want to consider building a diversified investment portfolio alongside your mortgage payments. 5. Tax Considerations: Mortgage interest may be tax-deductible in some situations, which can reduce the effective interest rate. Consult with a tax advisor to understand how this might affect your decision. 6. Financial Goals: Consider your financial goals. If you have specific short-term or long-term financial goals, such as saving for retirement, paying for education, or buying another property, these goals should influence your decision. 7. Emergency Fund and Debt Management: Ensure you have an emergency fund in place before allocating extra funds to either prepaying your mortgage or investing. Paying off high-interest consumer debt should also take precedence over both options. 8. Psychological Factors: Some individuals find peace of mind in owning their home outright, while others are comfortable with mortgage debt as long as they can invest and potentially earn higher returns. In summary, there is no one-size-fits-all answer to the "prepay mortgage or invest" question. It depends on your unique financial situation, goals, and risk tolerance. It's often advisable to strike a balance by considering a mix of both approaches. For example, you could make extra mortgage payments while also investing some funds to achieve a diversified financial strategy that aligns with your goals and comfort level with risk. Consulting with a liability advisor as well as a financial advisor can also help you make a more personalized decision.

Liquidity and Your House!

Liquidity refers to the ease with which an asset, such as an investment or property, can be quickly converted into cash without significantly affecting its price. When discussing liquidity in the context of a house, it usually refers to how easily the house can be sold or turned into cash. A house is generally considered a relatively illiquid asset compared to more liquid assets like stocks or bonds. This is because selling a house can be a complex and time-consuming process. It often involves finding a buyer, going through negotiations, legal procedures, inspections, and other steps that can take weeks or even months to complete. Factors that can influence the liquidity of a house include: Market Conditions: In a hot real estate market where demand is high, houses tend to sell more quickly and may have higher liquidity. In a slower market, it might take longer to find a buyer. Location: Houses in desirable neighborhoods or locations are generally more liquid because there's higher demand for them. Property Condition: A well-maintained house is likely to attract more buyers and sell faster than a house in poor condition. Price: Pricing a house competitively can impact its liquidity. Overpricing a property might deter potential buyers and extend the time it takes to sell. Economic Factors: Economic stability and interest rates can affect the real estate market. During uncertain economic times, the liquidity of houses might decrease. Type of Property: Different types of properties (single-family homes, condos, multi-unit buildings) might have varying levels of liquidity based on the demand for that type of housing. Selling Motivation: The urgency of the seller can also impact the liquidity. For instance, someone who needs to sell quickly might be more willing to negotiate and accept a lower price. Market Demand: If there's a high demand for housing in your area, your house is more likely to sell quickly and have higher liquidity. It's important to consider liquidity when investing in real estate. If you're purchasing a house as an investment, you should be aware that real estate markets can be cyclical, and there might be times when it's more difficult to sell quickly. It's also essential to have a financial buffer in case you need to hold onto the property longer than anticipated. If you're looking to sell a house quickly, pricing it right, making necessary repairs or improvements, and working with a skilled real estate agent can help improve its liquidity and increase your chances of a faster sale.

ADP Employment Report – Released August 2nd, 2023 for July

The ADP Employment Report was released today. Here's how it affected bond which, in turn, impacts mortgage rates. Also not helping Bonds was a much stronger than expected ADP employment report for July, showing that there were 324,000 jobs created, higher than the roughly 190,000 expected. There was a negative revision to the monster 497,000 June figure, which was lowered by 42,000 to 455,000. The BLS said there were only 149k private sector job gains in June or 1/3 of the gains, so there is clearly a big disconnect. The goods sector added 21,000 jobs, led by natural resources/mining, but construction was pretty flat and manufacturing shed 36,000 jobs and has been showing job losses for several months. The service sector added 303,000 jobs, led by Leisure and Hospitality, which added 201,000 jobs after adding 232,000 in June. This compares with only 21,000 jobs in that space in BLS in June. Also for a 2nd month in a row ADP said leisure and hospitality drove the job gains with a rise of 201,000, following 232,000 in June. In comparison, the BLS said there were only 21,000 leisure/hospitality jobs that were added in June. ADP also reported that annual pay for job stayers increased 6.2% year over year, down from 6.4% in the previous report. Job changers saw an average increase of 10.2%, down from 11.2% in the previous report. While these figures are still high, they have been moderating and showing lower wage pressured inflation. Wages have now moderated for 13 months in a row and have cooled considerably from their levels of 8% on stayers and 16% on switchers last year. Bottom line, there has been a big disconnect between the ADP and BLS employment Reports. Even though ADP has a good sample size of 25M private payrolls, they may have a seasonal adjustment issue and these figures do not necessarily mean that Friday’s BLS Jobs Report will be as strong.

Pending Home Sales – June 2023 (Released July 27th, 2023

Here's how the Pending Home Sales Report typically works: Data Collection: The NAR collects information from real estate agents and brokers across the country on the number of homes that went under contract during a specific month. These homes have accepted offers but have not yet completed the sales process. Index Calculation: The data is used to calculate the Pending Home Sales Index (PHSI). The index is a seasonally adjusted value that serves as a leading indicator for future existing home sales. It compares the number of pending home sales in the current month to a baseline value based on the average level of contract activity in a specific base year (usually 2001). Interpretation: The PHSI can be interpreted as follows: PHSI value above 100: Indicates that contract activity is above the baseline, suggesting an increase in future home sales. PHSI value below 100: Suggests that contract activity is below the baseline, indicating a potential decline in future home sales. Release: The Pending Home Sales Report is usually released to the public on a specific day of the month, and it covers data from the previous month. Importance: The Pending Home Sales Report is closely watched by economists, real estate professionals, policymakers, and investors as it provides valuable insights into the housing market's health and can be a leading indicator of future economic trends. A strong reading in the report can indicate a robust housing market, which is often considered a positive sign for the overall economy. Conversely, a weak reading may signal potential challenges in the real estate sector and broader economic implications. Keep in mind that the details of economic indicators can evolve over time, so it's always a good idea to refer to the latest information from official sources like the National Association of Realtors or other relevant authorities for the most up-to-date and accurate understanding of the Pending Home Sales Report.

New Homes Sales Report – June 2023 (Released in July)

The New Homes Sales Report is a monthly economic indicator released by the U.S. Census Bureau and the U.S. Department of Housing and Urban Development (HUD). Its primary purpose is to provide information about the sales of newly constructed homes in the United States. The report gathers data from surveys of homebuilders and uses this information to estimate the number of new homes sold during the reporting period. The data collected includes metrics such as the number of new homes sold, the average selling price, and the inventory of unsold homes. The New Homes Sales Report is an essential indicator for various stakeholders in the real estate and housing sectors, as well as for economists and policymakers. It provides insights into the overall health of the housing market, including trends in homebuyer demand, housing affordability, and the pace of new home construction. Key components of the New Homes Sales Report: New Homes Sold: This represents the total number of newly constructed homes that were sold during the reporting period. Median Sales Price: The median price of the new homes sold during the reporting period. It is the middle value when all the sale prices are arranged in ascending order. Average Sales Price: The average (mean) price of the new homes sold during the reporting period, calculated by dividing the total sales revenue by the number of homes sold. Inventory of Unsold Homes: The number of new homes that were constructed but remained unsold during the reporting period. This provides an indication of the supply of new homes available in the market. Months of Supply: This is calculated by dividing the inventory of unsold homes by the average number of sales per month. It indicates how many months it would take to sell the current inventory at the current sales pace, providing insights into the balance between supply and demand in the housing market. The New Homes Sales Report is usually released near the end of each month and covers data from the previous month. For example, the report released in July will cover sales and related metrics from June. Investors, homebuilders, real estate professionals, and policymakers analyze this report to assess the overall state of the housing market, its trends, and potential implications for the broader economy. If there are significant changes in new home sales, it can indicate shifts in consumer confidence, interest rates, housing affordability, and economic conditions. Please note that the specific details and format of economic reports may change over time, so it's always a good idea to check with official sources or financial news outlets for the most up-to-date information on the New Homes Sales Report.

Case Shiller and FHFA Home Price Index Reports – Released July 2023

The Case-Shiller Home Price Index (CSHPI) and the Federal Housing Finance Agency (FHFA) House Price Index are two prominent measures used to track and report changes in residential real estate prices in the United States. Both indices provide valuable insights into the housing market's performance, but they differ in terms of methodology and scope. Case-Shiller Home Price Index (CSHPI): The Case-Shiller Home Price Index is named after the economists who developed it: Karl Case, Robert Shiller, and Allan Weiss. It is now managed and published by S&P Dow Jones Indices. The CSHPI is released on a monthly basis and tracks changes in the prices of single-family homes in specific metropolitan areas, as well as a national composite index. Methodology: The CSHPI uses a repeat-sales methodology, which means it tracks the price changes of individual properties over time. It follows the sales of the same properties at different points in time to calculate the percentage change in home prices. The index is based on a three-tiered approach, categorizing homes into three price tiers (low, middle, and high) to provide a more detailed analysis of the market's performance. Coverage: The CSHPI covers 20 major metropolitan areas in the United States, including cities like New York, Los Angeles, Chicago, and others. It also provides a composite index that represents a weighted average of all these metropolitan areas, giving a broader view of the national housing market. Federal Housing Finance Agency (FHFA) House Price Index: The FHFA House Price Index is published by the Federal Housing Finance Agency, an independent regulatory agency overseeing government-sponsored enterprises in the housing finance sector, including Fannie Mae and Freddie Mac. The FHFA House Price Index is released on a monthly basis and tracks changes in single-family home prices throughout the entire United States. Methodology: The FHFA House Price Index uses a repeat-sales methodology similar to the Case-Shiller Index, following the price changes of individual properties over time. It takes into account the mortgage data from Fannie Mae and Freddie Mac to calculate changes in property values. Coverage: The FHFA House Price Index covers all 50 states and includes data on home prices from both urban and rural areas. It also provides a comprehensive national index, which reflects the overall performance of the entire U.S. housing market. Both the Case-Shiller Home Price Index and the FHFA House Price Index are important tools for economists, policymakers, and real estate professionals to gauge housing market trends, identify potential bubbles or declines, and make informed decisions related to real estate investments. However, it's essential to consider the limitations of these indices, such as potential time lags in reporting data and the focus on single-family home prices, which may not fully capture the entire housing market's dynamics.

A house, or a home?

The terms "house" and "home" are often used interchangeably, but they actually have different meanings and connotations: House: A house refers to a physical structure or building where people live. It is a place designed to provide shelter, accommodation, and protection from the elements. A house is made up of walls, rooms, a roof, and various amenities. It is primarily a tangible and material concept, representing the physical aspect of a dwelling. Home: A home, on the other hand, goes beyond the physical structure and encompasses the emotional and psychological aspects of a living space. A home is where people have a sense of belonging, comfort, and emotional attachment. It is a place where individuals or families create memories, share experiences, and feel safe and loved. In essence, a house is a physical entity, while a home is a place that holds emotional significance and is connected to personal experiences and relationships. People can live in a house without it feeling like a true home if it lacks the emotional connection and personalization that make it a special and comforting place. Conversely, a home can be established in various settings, such as an apartment, a cottage, or even a non-traditional living space, as long as it provides that sense of belonging and emotional attachment.

Understanding The Risks of Making Additional Payments Toward Principal

Additional wealth (money) invested to pay down a mortgage provides added security for the lender, not the owner (maybe you). The wealth (money, aka, equity) in your house is not guaranteed. If you were unable to make the necessary payments, the bank could exercise its contractual right to take possession of the deed.

Annual Equity Review – They’re wonderful and here’s why!

There are several reasons why homeowners might choose to utilize their home equity. Here are some common reasons: Home Improvements: One of the most popular uses of home equity is to fund home renovations or improvements. By tapping into your home equity, you can access the funds needed to remodel your kitchen, add an extension, or make other upgrades that can increase your home's value. Debt Consolidation: Homeowners with high-interest debt, such as credit card debt or personal loans, may choose to use their home equity to consolidate these debts. By taking out a home equity loan or line of credit, you can pay off your higher-interest debts and replace them with a single, lower-interest loan. Education Expenses: Funding education costs, whether for yourself or your children, is another reason to consider utilizing home equity. The funds can be used to pay for college tuition, vocational training, or other educational expenses. Home equity loans often offer lower interest rates compared to student loans or personal loans. Emergency Expenses: In times of financial hardship or unexpected emergencies, accessing home equity can provide a safety net. Whether it's covering medical bills, major repairs, or other unforeseen expenses, using your home equity can provide a source of funds during challenging times. (This is why it's important to gain access to your equity while you can) Start a Business: Some entrepreneurs choose to leverage their home equity to finance the start-up or expansion of a business. By using the equity as collateral for a loan, you can secure the capital needed to fund your business venture. Retirement Planning: Home equity can play a role in retirement planning. Options like a reverse mortgage allow homeowners aged 62 and older to convert their home equity into a stream of income or a lump sum, providing additional financial security during retirement. Investment Opportunities: For those knowledgeable about investing, utilizing home equity can be a way to access funds for investment purposes. However, it's essential to consider the risks and consult with a financial advisor to make informed investment decisions. It's important to remember that utilizing home equity involves taking on debt secured by your home. Before making any decisions, it's advisable to carefully assess your financial situation, explore the available options, and consult with me and/or your financial advisor to determine the best course of action for your specific needs and goals.

Additional Payments Toward Principal – Should I or Shouldn’t I

If you have extra cash leftover at the end of the month there are only 3 things you can do with it. You can save it, you can spend it, or you can prepay a debt. Today, we're going to take a closer look at what I mean.

Bid Above Asking?

Bidding above the listing price typically refers to making an offer on a property or item that is higher than the price at which it is listed for sale. While it is not uncommon for buyers to make offers above the listing price in competitive real estate markets, it ultimately depends on the seller's willingness to accept such offers. Here are a few things to consider if you're thinking about bidding above the listing price: Market conditions: Assess the current real estate market conditions in the area. If it is a seller's market with limited inventory and high demand, it might be more common for buyers to submit offers above the listing price to secure a property. Property value: Evaluate the fair market value of the property by looking at comparable sales in the area. This will help you determine if the listing price is already at or above the market value, which could influence your decision to bid higher. Financial implications: Consider your budget and the financial implications of bidding above the listing price. Determine the maximum amount you are willing and able to pay for the property without overextending yourself financially. Seller's motivation: Understand the seller's motivation to sell. If they are in a hurry to sell or have received multiple offers, they may be more inclined to accept an offer above the listing price. On the other hand, if the seller is not in a rush or believes the property is already priced competitively, they may be less likely to accept a higher offer. Consult with your real estate agent: Work with a knowledgeable real estate agent who can provide guidance based on their experience in the local market. They can advise you on whether bidding above the listing price is a common practice and help you navigate the negotiation process. Remember, bidding above the listing price is not a guarantee of securing the property. Ultimately, it will depend on various factors, including the seller's preferences and the competitiveness of the market.

Bid Above Asking!

Bidding above the listing price typically refers to making an offer on a property or item that is higher than the price at which it is listed for sale. While it is not uncommon for buyers to make offers above the listing price in competitive real estate markets, it ultimately depends on the seller's willingness to accept such offers. Here are a few things to consider if you're thinking about bidding above the listing price: Market conditions: Assess the current real estate market conditions in the area. If it is a seller's market with limited inventory and high demand, it might be more common for buyers to submit offers above the listing price to secure a property. Property value: Evaluate the fair market value of the property by looking at comparable sales in the area. This will help you determine if the listing price is already at or above the market value, which could influence your decision to bid higher. Financial implications: Consider your budget and the financial implications of bidding above the listing price. Determine the maximum amount you are willing and able to pay for the property without overextending yourself financially. Seller's motivation: Understand the seller's motivation to sell. If they are in a hurry to sell or have received multiple offers, they may be more inclined to accept an offer above the listing price. On the other hand, if the seller is not in a rush or believes the property is already priced competitively, they may be less likely to accept a higher offer. Consult with your real estate agent: Work with a knowledgeable real estate agent who can provide guidance based on their experience in the local market. They can advise you on whether bidding above the listing price is a common practice and help you navigate the negotiation process. Remember, bidding above the listing price is not a guarantee of securing the property. Ultimately, it will depend on various factors, including the seller's preferences and the competitiveness of the market.

Median Home Value Change vs. Appreciation…What Is The Difference?

Median Home Price Change: This refers to the difference in the median (middle) price of homes sold in a specific area or market over a given period. Median home price change is a simple measure of the overall price movement in the housing market. It is calculated by finding the middle value in a list of home sale prices, where half of the prices are higher and half are lower. Then, the change in this median value is tracked over time to determine the price change. Appreciation: Home price appreciation specifically measures the increase in the value of a property over time. It focuses on the appreciation of individual homes rather than the overall market. Appreciation is influenced by various factors, including supply and demand dynamics, location desirability, economic conditions, and improvements made to the property.

Fixed vs. ARM

Be Your Own Bank!!

According to a recent article from Investopedia, the average homeowner today has about $185,000 in home equity. In this video, I explain why setting up a home equity line of credit is a smart move. They're inexpensive to set up and you don't have to make a payment unless you utilize it but could be priceless if you get yourself in a bind or if you just want to reallocate some higher interest debt. Please don't misunderstand me, I am not suggesting to open up a line and then go on a shopping spree, what I am saying though, is to utilize your house, like the asset it is, to your advantage. #borrowsmart #repaysmart #yourlenderandfriend Link to Investopedia Article: https://www.investopedia.com/average-equity-in-u-s-homes-5270147

Be Your Own Bank!!

According to a recent article from Investopedia, the average homeowner today has about $185,000 in home equity. In this video, I explain why setting up a home equity line of credit is a smart move. They're inexpensive to set up and you don't have to make a payment unless you utilize it but could be priceless if you get yourself in a bind or if you just want to reallocate some higher interest debt. Please don't misunderstand me, I am not suggesting to open up a line and then go on a shopping spree, what I am saying though, is to utilize your house, like the asset it is, to your advantage. #borrowsmart #repaysmart #yourlenderandfriend Link to Investopedia Article: https://www.investopedia.com/average-equity-in-u-s-homes-5270147

Prepay or Invest

What's better? Prepaying my mortgage or investing? The best answer is, it depends, let's run the numbers and find out. #borrowsmart #repaysmart #yourlenderandfriend

30 Year vs. 7/1 ARM ~ What’s The Difference And WIIFM (What’s In It For Me)

In this video I compare a 30 year fixed mortgage product to a 7/1 ARM product to illustrate the importance of thinking about what product would best suit you and your family when you're buying or refinancing. Enjoy!

Housing Starts ~ August 2022

Housing Starts and Permits are reported monthly by the U.S. Census Bureau and the report serves as a good indicator of future supply of new homes in the real estate market. Housing Starts in August were up 12% to a 1.575M unit annualized pace, following a downward revision to July. When factoring in the negative revision, Starts are really up 8.6%. Starts are flat year over year. Single-family starts, which are most important, were up 3.4% last month at a 935M unit pace. Once again, there was a slight negative revision to July, and when factoring that in, SF starts are up 2%. They are now down 15% year over year. So while interest rates are higher, and demand is lower, supply remains tight. The slowing new construction and supply we are seeing is going to hurt economic activity, but from a price standpoint, will be somewhat supportive. As demand is declining, so is supply. This is very different from the housing bubble, where demand was waning, but supply of new homes was significantly increasing. Housing Permits, which is the future supply, were down 10% last month at a 1.52M unit pace, while single family were down 3.5% last month to 899k units and 15% year over year. Additionally, Competitions were down 5.4% at a 1.34M unit annualized pace. With household formations trending between 1.6M to 1.7M annualized, supply is not meeting demand. #borrowsmart #repaysmart #yourlenderandfriend

Help your kids retire as millionaires!!

In this video I demonstrate how to make sure your child is a millionaire when he or she reaches retirement age. This can be done saving just $25 per month for them from the time of birth up until his or her 16th birthday. Then, they take over from there and save $3000 per year until their 26th birthday! They can stop there or keep saving but the more they save the more they'll have!!

Fall 2022 ~ Sellers Guide

If you're considering selling your home during the Fall 2022 season this guide should certainly come in handy. As always, if there's anything I can help with just let me know.

Fall 2022 ~ Buyers Guide

Hello. If you're looking to buy during the fall 2022 season this guide should be helpful. Best of luck and please let me know how I can help!

Equity Withdrawals By Transaction Type ~ September 2022

Equity lines of credit are a critical financial planning tool. When rates go up, and you want to access the equity in your house you have 2 choices. 1. You can sell, or, 2. You need to borrow If you refinance to borrow you are subject to rates that may be higher than what you have today and that may not make sense. The equity line of credit provides a flexible way to use the house as your own personal bank and limits the rate reset while providing flexible repayment terms you create for yourself. It appears homeowners are getting that message and using the equity line of credit as a key financial tool to access the wealth in their house. #borrowsmart #repaysmart #yourlenderandfriend

Tappable Equity of U.S. Mortgage Holders

September 7th, 2022 Mortgage balances by nature are usually declining and even if the house values stay the same, your equity (wealth) in the house should be going up. Most house equity growth comes from appreciation of the house value. As a whole, we are peaking at over $11 Trillion in equity (according to a recent BlackKnight Mortgage Monitor Report). This provides a really nice cushion for home owners if the values do start to drop further. If you own a home and have a strong equity position, opening a home equity line of credit (HELOC) would be a smart move. The benefit is you have easy access to your equity should you need it and you don't pay anything until it's utilized. In my view, it's better to have access to your equity and not need it then to need it and not be able to access it. As a side note, I do not offer HELOC's but if you're wondering what they are and want to know more about how they work, I'd be happy to have that conversation with you. #borrowsmart #repaysmart #yourlenderandfriend

Press Release For Len Herbert ~ 2022 Graduate from Borrow Smart University

I normally try to stay pretty humble but I'm really proud of this accomplishment. The course was not easy and I learned a ton that I hope to pass along to my clients, family, and friends. I learned so much that I'm actually taking the class again and I'm picking up more great info the second time around. Thank you, Todd Ballenger

FHFA (Federal Housing Finance Agency) Home Price Index ~ June 2022 – Released August 2022

The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. Different than Case Shiller, it does not include cash buyers or jumbo loans. The FHFA reported that prices rose 0.1% in June and are up 16.2% year over year, which is a decline from 18.3%, but again still very hot on an annual basis.

Case Shiller Home Price Index for June 2022 – Released August 2022

The National Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 0.6% in June and 18% year over year, which is a decline from the previous reading of 19.9% in May, but still strong. Appreciation is clearly slowing, but as of June, still increasing at a robust rate. Craig Lazzara from Case Shiller said, “Prices are clearly increasing at a slower rate. It’s important to bear in mind that deceleration and decline are two entirely different things, and that prices are still rising at a robust clip. June’s growth rates for all three composites are at or above the 95th percentile of historical experience. For the first six months of 2022, in fact, the National Composite is up 10.6%. In the last 35 years, only four complete years have witnessed increases that large.”

Pending Home Sales ~ July 2022

Pending Home Sales, which measures signed contracts on existing homes, fell 1% in July, which is better than the 3% drop expected. Year over year, sales are now down 20% year over year. As expected, activity continues to slow, but the Chief Economist from the NAR, Lawrence Yun, believes that we are at or close to the bottom in contract signings. He went on to say that home prices are still rising by double digits year over year, but annual gains should moderate to 5% by year end and into 2023. He also said that home sales should start to rise by early next year.

Zillow and Pulsenomics 2nd Quarter Survey

The Q2 Zillow and Pulsenomics Home Price Expectations Survey, which is a survey of the top 100 to 150 economists in the US, showed some interesting forecasts on housing: Of the 114 economists surveyed this time, participants expect on average 4.8% appreciation per year over the next 5 years. Cumulatively, they expect over 26% appreciation. While it's not easy to buy a home, it still may prove to be a smart financial decision. Risk outlook: 14% risk to upside, 29% balanced, 56% risk to downside. On housing currently being in a bubble: 65% no, 35% yes ~ On soft landing: 71% said no, 29% said yes – most believe we will see a recession ~ On peak inflation at 8.5%: 59% said no, 41% said yes

Case Shiller Home Price Index Report

The National Case-Shiller Home Price Index, which is considered the “gold standard” for appreciation, showed home prices rose 2.6% in March and 20.6% year over year, which is an increase from 19.8% in the previous report. The hottest markets are as follows: Tampa: 34.8% Phoenix: 32.4% Miami: 32% While this is a dated report, it shows no signs of appreciation slowing down as of March. If you were to annualize the monthly gain it would be over 30% for the year. This report does not fully take into account the rise in interest rates, so we will know where we are in the coming months. But because it’s so strong through March, it’s supportive of our thoughts that we will see the gains slow, but not decreases in pricing.

FHFA (Federal Housing Finance Agency) Home Price Index

The FHFA (Federal Housing Finance Agency) released their House Price Index, which measures home price appreciation on single-family homes with conforming loan amounts. While you can have a million-dollar home with a conforming loan amount, it’s typically measuring your lower priced homes. Prices rose 1.5% in March and are up 18.7% year over year, which is a slight decline from 19.4% year over year, but still extremely hot.

Pending Home Sales – May 2022

Pending Home Sales, which measures signed contracts on existing homes, fell 3.9% in April, which was weaker than the 2% decline expected. Sales are now down 9.1% year over year. There is no doubt that higher interest rates are impacting demand, but this is still hanging in there considering the increases in prices and lack of inventory. I personally believe that if more homes were on the market there would be more sales so I'm contributing this decline to a lack of supply, not demand.

Help Your Buyers Win In Today’s Competitive Market!

In today's incredibly competitive real estate market it's more important than ever to have your buyers and sellers prepared for all the different scenarios that may come their way. That's why I have the conversation about the home possibly not appraising during the preapproval consultation and then provide solutions so the buyer can be fully prepared and armed to make their best offer upfront with 100% confidence.

New Homes Sales – July 2022

New Home Sales, which measures signed contracts on new homes, were down 12.6% in July at a 511k unit annualized pace, which was much worse than expected. Sales are now down almost 30% year over year. There were 464,000 homes for sale at the end of July, but only 45,000 or under 10% are actually completed…24% have not even been started and 66% are still under construction. At the current pace of sales, there is a 10.9 months’ supply. But when factoring in the amount of completed homes, the month’s supply is really about 1 month. The median home price rose by 5.9% last month to $439,400, which is up a little over 8% year over year. While we are clearly seeing an activity recession in housing, pricing is still quite strong.

April 2022 ~ Housing Starts

Housing Starts for April were down 0.2% overall, but single family homes, which are most important, were down 7.3%. Housing Permits were down 3.2% last month, but once again single family were down by a larger amount, dropping 4.6%. Overall, these figures are higher on a year over year basis, but there are challenges to getting homes completed. Single family units authorized, but not started, are up almost 1%, while single family units completed is down 5% from last month…showing that the backlog continues to grow for builders.

4 Simple Graphs Showing Why This Is Not a Housing Bubble

National Association of Home Builders (NAHB) Home Price Index

The NAHB Housing Market Index, which measures builder confidence, fell 8 points to 69 in May, which is much worse than expectations. Looking at the internals, it’s important to remember that a reading above 50 signals expansion, while a reading below signals contraction: ~ Current Sales: down 8 points to 78. ~ Sales Expectations: down 10 points to 63. ~ Buyer Traffic: down 9 points to 52. These numbers are not necessarily bad, as they all still signal expansion, but the drop is significant. Builder sentiment is weakening, as their material costs are still up 19% from last year, home prices and interest rates are higher, and they still have labor issues and a big backlog.

Will Home Prices Fall This Year?

How Homeownership Can Help Shield You From Inflation

Burlington County, New Jersey ~ Real Estate Report Card

When buying a house it's only natural, and smart, to want to know the health of the local real estate market and this "Real Estate Report Card" for Burlington County, NJ provides some great information and insight.

How To Save More Money

Saving money isn't just about skipping a trip or two to Starbucks every week. You want to pay yourself first and over time you'll have more money than you think. Take a look and if you have any questions let me know. Also, here's a link to the calculator shown in the video. https://www.investor.gov/financial-tools-calculators/calculators/compound-interest-calculator

Bureau Of Labor Statistics Jobs Report – Released May 2022

The Bureau of Labor Statistics (BLS) reported that were 428,000 jobs created in April, which was just above market expectations. There were a -39,000 revision to February and March, which tempers the optimism slightly. The Unemployment Rate remained at a very strong 3.6%, but did not decline to 3.5% as expected. The unemployment rate is derived from the household survey, which has its own job creation component. Within the household survey there were 353,000 job losses, while the labor force decreased by 363,000, which is why the unemployment rate remained the same. This means that the unemployment rate remained stable for the wrong reasons – It was not due to strong job growth, but rather more people leaving the labor force than job losses. The labor force participation declined from 62.4% to 62.2%, which was beneath expectations and about 1.2% below where it was pre-Covid. Average hourly earnings were up 0.3% in April and are up 5.5% year over year. Average weekly earnings were up 0.3% and are up 4.6% year over year.

Jobless Claims – Released May 5th, 2022

Initial Jobless Claims, which measures individuals filing for unemployment benefits for the first time, increased 1,000 to 203,000. Continuing claims, which are those that continue to receive benefits after their initial claim, increased 44,000 to 1.384M. This is the lowest number of continuing claims since January 1970. Unemployment claims are extremely low and the labor market remains tight. Even though the increase in initial claims is minor, it has risen the past two weeks and is something we need to keep a close eye on as it’s an early indicator for the unemployment rate.

ADP Employment Report – Released May 4th, 2022

ADP released their employment report, showing that there were 247,000 job creations in April, which was weaker than estimates of 400,000. There was a positive revision to last month – The March report was revised higher from 455,000 to 479,000 job gains, a total revision of 24,000. Small businesses lost 120,000 jobs, while large businesses saw a gain of 321,000. This shows that small businesses are having a tough time competing with the wage increases demanded by workers in today’s high inflation environment and higher costs.

Middlesex County Real Estate Report Card

The Real Estate Report Card is a fantastic report that gives you insight into the health of any specific real estate market. This one's for Middlesex County, New Jersey!

House Appraises For Less Than The Purchase Price

Loan-To-Value (LTV) is a very common term used in the mortgage industry. It's calculated by dividing the loan amount by the lower of the purchase price or appraised value. For example, if someone is buying a house for $200,000 and putting 20% down the LTV would be 80%. Meaning the client is borrowing 80% of the value of the house. However, if the house only appraises for $190,000, the LTV increases to just over 84% if the loan amount remains the same. In this video, I go through a scenario where the appraisal came in a little lower than the purchase price.

What’s Your Credit Score Worth? Maybe more than you think…

Whether you're buying a house, a car, furniture or opening a credit card your interest rate is going to be based on your credit score. The higher the score, the lower the rate. In this video Len compares what the terms of a 30 year fixed loan would be for someone with a 662 credit score vs. a 745 credit score. The difference in the cost over the years is eye opening to say the least!

FHA vs. Conventional

What's the better loan? FHA or Conventional? It's a great question but it's not an easy one to answer. Getting to the answer is more involved than you might think and that's why I, and my clients, love my Mortgage Coach software. Take a look and let me know what you think? Do you have a scenario I can run to see what loan is best?

Give Your Curb Appeal A Boost Before You Sell

Here are some great tips for getting your home in "Ready To Sell" shape!

Rent Vs. USDA

In this 5 minute or so video, Len compares renting vs buying a a home using a USDA 100% financing loan. If you watch you'll see the tremendous benefit of owning as time goes by!

Weekly Newsletter –

I post this newsletter weekly on Mondays. To get an idea of what we can expect from the housing market it's a great idea to take a look at what's been happening. That's exactly what this newsletter will do. It provides info on housing reports, jobs reports, bond movement and much more!

Help me understand closing costs!

One of the most popular questions over the years has unequivocally been about closing costs. Clients always want to know how much they'll need to bring to closing and I get it. So would I if I was buying a home. This short video breaks down the mystery of the "closing costs and prepaids items" in a really easy way to understand.

Thinking of Pulling Cash Out of a Retirement Account?

Here's the inside scoop about taking cash from your retirement account for a down payment!

What is amortization?

Amortization refers to the way a mortgage is paid out over time. Your monthly payment is always the same but what does change as each month goes by is the amount of money that goes toward principal and the amount that goes toward interest.

Considering Paying Points For A Lower Rate? Learn The Correct Way How To Calculate If It Makes Sense!

Whether you're considering paying a point, a portion of a point, or more than a point to buy down your rate you should know how long it will take to make the initial expense worthwhile. That's what I'll show you in this video. By the way, just in case you're not aware, a point is always 1% of the loan amount and most of the time, clients consider paying them in order to get a lower interest rate. I'd say 9 times out of 10, 1 point gives clients the opportunity to buy down the their rate by about .25%.

What You Need To Know About Selling in a Sellers’ Market

The current real estate market has incredible opportunities for homeowners looking to make a move so listing your house this season means you’ll be in front of serious buyers who are ready to buy.

Pending Home Sales – March 2022

Pending Home Sales is reported monthly by the National Association of Realtors and measures signed contracts on existing homes. This is a really good leading indicator for existing homes sales. Within the report there's a monthly and annual reading that shows how much pending homes sales are up or down in comparison to the previous month and year.

Ocean County, New Jersey ~ Real Estate Report Card

A "Real Estate Report Card" is an extremely valuable report for buyers and realtors. In this video, Len goes over some key aspects of the report card and so you'll see why he feels every buyer should have one for the area they're looking to purchase in.

Bid Above Asking

April 28, 2022 - Today's real estate market is incredibly competitive to say the least and many buyers are having to offer above the seller's asking price in order to secure a home. Naturally, this causes any buyer to wonder if they've paid too much. This "Bid Over Asking Tool" is perfect for anyone in that situation and who's looking for a little peace of mind.

Renovation

Before making any major renovations this year, it’s important to get a sense of what's necessary in today's market. Many buyers are willing to tackle projects on their own. Message me so you have a trusted advisor on your side to help you understand where to spend your time – and money – as you prepare to sell.

Buy It, Fix It, Love It

By utilizing our Fix It loan buyers can get additional funds to turn any house into their home.

The Benefits of Getting Pre-Approved

High Balance And Vacation Home Loans Are Increasing

Hello, I wanted to get this critical information out about a change FHFA (Fannie Mae) made yesterday. The change will impact your costs on obtaining financing on a second home and loans above 647k, which is called "high balance." The video above has all of the essential info if you plan to purchase a 2nd home soon and or you plan to pull cash out on a " high balance " loan. These costs, called LLPA ( loan-level price adjustments), take effect on April 1st. But you need to be in application and locked by February 14th to avoid these costs. Link to the announcement - https://singlefamily.fanniemae.com/media/30326/display

Middlesex County Real Estate Report Card

When you're thinking about buying a home numbers matter and this Real Estate Report Card has the numbers that matter most. Take a look and watch the video to understand how to understand the report.

Cost of Waiting

How to help your buyer clients make better decisions

Providing our clients with information that will help them make smart decisions based on facts rather than emotion is important. The tools mentioned in these videos do exactly that. If you have any questions, comments, or would like to talk more about how you can leverage any of these tools in your business let's set up a time to talk. #educateandempower #yourlenderandfriend

Spring 2022 Sellers Guide

It’s difficult to know when is the best time to sell, or how to get the most money for your house, but you don’t need to go through the process alone. You may be wondering if prices are projected to rise or fall…or how much competition you may be facing in your market. The free guide below will answer many of your questions and likely bring up a few things you haven’t even thought about yet. If you'd like to set up a time to chat and get some sound advice click on the link below to set up a time that works best for you. https://lenherbert.info/callwithlen

Summer 2022 Buyers Guide

The process of buying a home can be overwhelming at times, but you don’t need to go through it alone. You may be wondering if now is a good time to buy a home…or if interest rates are projected to rise or fall. The free guide below will answer many of your questions and likely bring up a few things you didn’t even know you should consider when buying a home. If you'd like to chat to get and get some sound advice, click the link below to set up a time that works for you. https://lenherbert.info/callwithlen

Debt Consolidation

Leveraging your home's equity can be a smart, life changing, strategy to pay off your existing debt and accelerate your net worth.

Atlantic County Real Estate Report Card

This "Real Estate Report Card" is super useful and provides great insight into any local real estate market. This one happens to be for Atlantic County, NJ but if you're looking somewhere else and you'd like one for the area you're looking in let me know. I'll get it right over to you!

Is less better?

Is having the lowest monthly payment always the best choice? I guess there would be some scenarios where that would make sense but not always. Please take a look to see what I mean.

General Capabilities

New 2022 Conforming Loan Limits

The Housing and Economic Recovery Act (HERA) requires that the baseline Conforming Loan Limit be adjusted each year to reflect the change in the average U.S. home price. FHFA, Federal Housing Finance Agency, published its third quarter 2021 FHFA House Price Index® (FHFA HPI®) report, which includes statistics for the increase in the average U.S. home value over the last four quarters. According to the nominal, seasonally adjusted, expanded-data FHFA HPI, house prices increased 18.05 percent, on average, between the third quarters of 2020 and 2021. Therefore, the baseline Conforming Loan Limit in 2022 will increase by the same percentage. ​ What does this mean for you? Well, there're several ways it could make a difference. Let's chat and see how it impacts you :-)

Certified Mortgage Advisor

Conventional Loan Limits Increase

Monmouth County Real Estate Report Card

The Real Estate Report Card is a fantastic report that gives you insight into the health of any specific real estate market. This one's for Monmouth County, New Jersey!

Road Signs

If you want to get an idea of what's going to happen tomorrow, next week, next month, or next year when it comes to the real estate and mortgage market, this is a great place to start. You see, what happens in the recent past and what trends have come together can give us some insight as to what's coming up next. That's why I call it, "Road Signs".

Road Signs

If you want to get an idea of what's going to happen tomorrow, next week, next month, or next year when it comes to the real estate and mortgage market, this is a great place to start. You see, what happens in the recent past and what trends have come together can give us some insight as to what's coming up next. That's why I call it, "Road Signs".

Home Equity Is Going Up

Reviews

"They are extremely kind and helpful. Made the home loan process a very easy and understandable process. Definitely going to recommend them to any friends/family who are looking for a home!"

randy s

"When we needed to close fast your team made the process seamless!"

cathleen l

"Even though it took us over 3 years to find the right home at the Jersey shore Len maintained contact with us the entire time and was always eager & ready to assist us whenever we started the process of bidding on a home. His suggestion of using a HELOC leveraging our previous house's value allowed us to put down a substantial down payment on our new home without the need to touch our retirement savings."

kenneth l