Property Taxes...Should I Escrow or Not?

Many first time homeowners have questions about taxes + insurance and how they will impact a monthly mortgage payment. When you set up your mortgage, you may have some choices in regards to how often you pay toward your property taxes and insurance, but first it’s important to see what category you fit in to better understand your options:

Category One: If you are putting less than 20% down on your home OR if you have an FHA loan, you will likely be required to set up an escrow account with your lender. An escrow account is part of your loan paperwork and agreed upon at closing. Each month, your lender collects the required insurance and tax payments from you along with your mortgage amount. The money then gets held in an escrow account and used to pay off the insurance and property taxes either annually or semi-annually, whenever they are due. The lender takes care of these payments for you out of your escrow account and pays directly into the insurance company and county tax office for you. While these payments are collected at the same time as your monthly mortgage payment, they are technically separate. The convenience of an escrow account is that it forces you to save for these big annual or semi-annual bills every month along the way. However, many times the lender does not grant any interest on the money sitting in an escrow account whereas if it were sitting in your own private account, the same money could have some interest earning potential.

Category Two: If you are putting more than 20% down on your home or have your home paid off, you have some different options when it comes to property taxes and insurance. Instead of setting up a required escrow account, you can accumulate the money you need for insurances and taxes on your own, earning interest on that money all the way up until the time it is due. When the bill comes, you are in charge of paying the taxes directly to your county tax collector and the insurance payment directly to your insurance company. In Austin, the tax bill always arrives around Christmas and is due at the end of January. The disadvantage to this method is that it requires discipline to make monthly payments to yourself in your savings account and earmark that money for insurance and taxes. You do not want to be surprised by a hefty annual bill (right at Christmastime) and have no accumulated savings to pay it. However, avoiding escrow does ensure that your mortgage payments are consistent from month to month throughout the year. If you have an escrow account and your property tax bill or your insurance premiums suddenly jump, you might not be made aware of the change until the end of the year when you see the breakdown from the lending company.

Whatever your decision when it comes to paying insurance and property taxes, it is important to discuss your options with your realtor and financial lender to make the most financially sound decision for you!

2015-2018 ATX Urban Core Growth Trends

The final 2018 numbers are in, and the data confirms that the Austin real estate market continues to be on the rise in the urban core.

When comparing the numbers from 2017 to 2018, the median price, median price per square foot, overall dollar transactions in the urban core, highest price per square foot, and highest overall price all increased from 2017 to 2018. For example, the median price of a home in the urban core in 2017 was $434,000; in 2018, that same number increased to $450,000. The median price per square foot back in 2015 was $273.38. That number has increased almost $50 per square foot over the past 4 years, resulting in a median price per square foot in 2018 of $320.64.

Will prices continue to be on the rise for 2019? With Apple’s company announcement and the arrival of a major league soccer team in ATX, expansion and growth do not seem to be slowing down anytime in the real estate market of Austin, TX. Check out my urban core trends and market analysis below! For more market statistics and analysis in the downtown area specifically, click here!

Urban Core Stats 2015-2018.png

Are you considering purchasing a property in the urban core of Austin? Jump in now before prices continue to rise! Contact me today to help you find the home of your dreams!

10 Ways to Prepare Your Home BEFORE It's Listed

“It’s time to sell.”   These few words can be quite an emotional decision for many homeowners. Sometimes we can be in denial that we are actually moving out of our home or that our lives are going to change.  However, before the “For Sale” sign ever goes in the front yard, the preparation for selling needs to start on the inside of YOU and on the inside of the house. 

Although you love your house and have worked hard to get it exactly “this way,” other buyers may not have your same style preferences or affiliations.  When you are preparing your home to put it on the market, you have to take a more neutral approach and ask yourself, “Would this room appeal to most home buyers?”  “Would most buyers like this paint color or these decorations?” 

Often times it is hard to have such an unbiased approach to our own homes.  If that is the case, I would recommend a third party friend, realtor or stager come into your home and give you advice.  However, this comes with a warning: put on your adult pants and prepare yourself.  Because that mural you slaved on for hours in your baby’s room probably has to go.  And the curtains you love so much, and the bright neon green contrast wall you thought would look great in the game room might have to go as well.  However, if you can accept advice from a neutral third party and follow it, you will have much more success in preparing your home to be listed on the market. 

 

Below are 10 suggestions of my suggestions for you to consider as you prepare your home to sell:

1.     Paint- Most buyers prefer neutral paint colors throughout the house.

2.     Furniture-Only leave enough furniture in the room to make the room functional.  However, when in doubt, leave the area empty without furniture and open up more room for walking paths. Empty space makes the room feel bigger and gives the buyer vision for how they could use the space.

3.     One-Function Rooms- If you have a multi-purpose room such as an guest room/playroom  or a guest room/office, it is better to choose one function and to decorate the room according to that function.  For example, if you have a combination office/guestroom, remove the bed and just dress the room up as an office for showing.  You want to be as clear as possible when casting vision for a space.

4.     Pictures- All personalized pictures, artwork, and drawings need to come off the wall.  You are moving anyway;  just start packing up early.  When these personalized items are left up on the walls, buyers feel like guests in your home rather than people who are themselves in the space.

5.     Sports/School Paraphernalia- Just because the whole block knows you are an Aggie fan doesn’t mean your UT alumni buyer needs to know it too.  Like it or not, school and sports teams’ paraphernalia hanging on the walls can have a negative psychological effect on people who would root for a different team or graduated from a different school.  Again, it makes buyers feel like guests in your house and does not help them see themselves as potential owners of the home.

6.     Holiday Decorations-Try to tame down the holiday decorations as much as possible as you prepare to list your house.  After all, your buyer may not celebrate the same holiday or may not celebrate it in the same way as you.  Your goal is to create a space in which the buyer can envision celebrating his/her next holiday, and that is hard to do if they are in a space that has decorations that are foreign to them.  If you have to decorate for a holiday, try to keep your decorations as neutral and widely appealing as possible.  Also, I recommend that you store/stack presents in a secure location and do not leave them under a tree or within view of those taking tours of your home during the winter holidays.

7.     Jewelry/Medicines- Aside from being a theft risk, leaving jewelry or medicines out is exceptionally personal.  Again, it makes buyers feel like they are invading your space, and it limits their ability to envision making it their own.

8.     Closets- Open up your spaces as much as possible.  Why?  Because storage space sells, but only if the buyer can SEE it.  If needed, rent an outside storage unit to store furniture, art, and other boxes/containers.  Storage space is a huge asset in selling a house unless it is clear by looking into the closet that the home owner is out of room. A cramped storage space will make a potential buyer concerned about the space, not excited about the space.

9.     Clean the Exterior of Your Home-Many sellers think through the inside of their home but completely forget to consider what the outside looks like.  Curb appeal IS your first impression.  Are you making a good one?  Are their cobwebs around your front porch or pavers missing on the foot path up to your door?  Power wash your sidewalk and driveway, wash your windows, clean out your gutters, wipe down your front door, sweep your porch, and put a fresh door mat out. These ideas can go a long way in tidying up the street appeal of your home.

10.  Repairs-Have a squeaky door that you have never bothered to fix?  Is one of the kitchen cabinets missing a pull?  Do you have a light fixture that needs to be updated? Some repairs are simple and small, but yield big returns on the sell of a home.  Have a neutral party walk through your house and use some of the items in the house.  Sometimes we are so accustomed to the problem areas of our home that we don’t see them anymore.  With help from a friend, make a list of simple/quick fixes you can do before listing your home on the market.

 

Remember, once you decide to sell your home, you have already begun the moving process.  Your goal now is to create a vision casting space for every buyer that walks through the home you are listing for sale.  If the buyer can not envision their own needs being met in the house, it will not sell.  So, take pictures of all your favorite corner nooks and cozy artwork, and then clean them all out, and get ready to maximize the sell of your home! 

Supply and Demand in the Austin Housing Market

Real estate is a business of supply and demand.  For the past four plus years in Austin, Texas, there has consistently been less than four months’ worth of housing inventory available. Data shows that low supply in the housing market also has driven up the median home price.   

In a relatively short period of time, there’s been a dramatic shift in home sales by price range. In 2011, 67 percent of houses that were sold were priced below $250,000, while 32 percent were priced from $250,000 to just under $1 million. By 2017, those percentages flipped: 63 percent of sales were above $250,000, and 35 percent were below.

The trends of low supply and high demand look to continue as Austin’s population is projected to increase from 1 million in 2014 to an estimated 2.3 million by the end of 2020.  In 2017, Austin saw 151 net new people move to Austin every single day!

In the past 10 years, the median home price in the Austin area has soared as well. In 2018, the Austin median home price was $319,000, up 66 percent from $192,000 in 2008, and median home prices in recent years have seen a year-over-year increase of 5.4%.  In May of 2020, the median home price rose to $424,050 with an average of only 1.7 months of available inventory.

What does all of this mean for the continued growth of the housing market?  There are some that think there will be an inevitable “normalization” of this strong market curve, while others that think the housing market will continue to boom if the city’s economy and job markets continue to prosper. 

What, if anything, could cause a downturn in the market in coming years?  Perhaps another U.S. Presidential election? Other potential factors could be trade/tariff issues, labor shortages, increased traffic and potential water-supply developments as the city continues to expand.  And of course, we have yet to see the full impact of the global pandemic on the housing market.

However, for now, we are enjoying a real estate market that continues to boom with demand significantly higher demand than supply in Austin, Texas. 

Are you wondering what the fair market price of your home is?  Contact me for a complimentary home evaluation today!  

 

 

Articles sourced:

1. http://austin.culturemap.com/news/city-life/09-15-15-what-will-austin-look-like-in-2020-new-lawnstarter-report-confirms-rapid-growth/

2. https://www.statesman.com/business/20180627/expert-outlook-bright-for-austin-economy-housing-market

3. https://communityimpact.com/austin/central-austin/development-construction/2018/02/01/austin-housing-market-expected-to-continue-growth-despite-low-supply-and-increasing-interest-rates/

4. https://www.bizjournals.com/austin/news/2018/03/22/austins-population-keeps-popping-heres-how-many.html

Conventional 30 Yr Fixed Interest Rates Are Going Up

The overnight rate is the interest rate the central bank sets to target monetary policy.  Since the Federal Reserve decides when to increase the overnight rate, it can be a good predictor for the movement of short-term interest rates for consumers in the broader economy.  When the Fed increases its interest rate to the banks, the banks then tend to pass on some, if not all, of that increase to the consumer.  Therefore, the higher the overnight rate, the more expensive it can be to borrow money.

After an extremely low interest rate in the recession of 2008, the overnight lending rate has been increasing slowly over the past 10 years and is expecting another rate hike in December, three more hikes in 2019 and another increase in 2020. 

source: https://tradingeconomics.com/united-states/interest-rate

source: https://tradingeconomics.com/united-states/interest-rate

As mentioned previously, many predict that this overnight rate hike will result in increased interest rates being passed on to the consumer. 

30 YEAR FIXED RATE MORTGAGE INTEREST RATE FORECAST 2018, 2019, 2020

https://longforecast.com/mortgage-interest-rates-forecast-2017-2018-2019-2020-2021-30-year-15-year

https://longforecast.com/mortgage-interest-rates-forecast-2017-2018-2019-2020-2021-30-year-15-year

Since the Fed has continued to announce project rate hikes until 2020, here are some suggestions for you, the consumer, to think about now:

1.      Pay close attention to variable interest rates.  These will continue to rise as the federal rate rises.  Credit cards interest, home equity lines of credit and adjustable rate mortgages will continue to climb. Student loans with variable interest rates may also be impacted.

2.     If you are a borrower with an adjustable rate mortgage, consider refinancing if your interest rate is set to change in the next 1-2 years.

3.     The sooner you can lock in a fixed rate mortgage, the better.  Even if you are in the process of searching for a home, many lenders will let you lock in a fixed rate once you have been pre-approved for a loan.