Tag: housing market

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News News Feature

Is Now the Time to Buy a House?

Photo: Tierra Mallorca | Unsplash

If you’ve been thinking of buying a home, you’re likely aware of how volatile the housing market has been over the last few years. From soaring home prices during the Covid pandemic to rapidly rising interest rates and competitive bidding wars over new listings, it’s been a challenging time to enter the housing market.

So, when, if ever, is a good time to buy a house? The answer depends primarily on your personal financial situation and future goals. Following are some important considerations that can help you determine the right time to buy a house.

1. Long-term plans

Are you ready to commit to your current location for the long term? If you foresee a move in the near future, now may not be the right time to buy a home. It’s wise to approach a home purchase as a long-term commitment for several reasons.

• Commissions and closing costs — Because you pay real estate commissions and mortgage closing costs each time you buy or sell a home, it’s wise to put off buying until you’re relatively sure you won’t be moving anytime soon.

• Capital gains taxes — If your home appreciates in value and you sell it within two years of buying it, you may be subject to significant capital gains taxes.

• Appreciation — If you sell before your home has a chance to appreciate in value, you may not have enough equity to cover the costs of selling and buying a new home.

2. Mortgage rates and market conditions

As of October 27, 2023, the average rate for a 30-year fixed mortgage is 8.09 percent. That equates to a $2,590 monthly payment if you borrow $350,000 for your home purchase. Whatever the price of your desired home, it’s important to ensure you’re comfortable making your monthly payment over the long term.

Deciding on the timing of your home purchase depends a lot on your local housing market, as real estate conditions vary widely between different cities. It’s important to consider both market values and inventory to determine whether now’s a good time to buy in your location.

3. Down payment and closing costs

Before buying a home, it’s important to ensure you have enough assets for a down payment, mortgage closing costs, moving expenses, any necessary renovations, furniture, etc. While each mortgage lender has different down payment requirements, the more you put down, the lower your monthly payment will be.

4. Savings

Homeownership is a big financial responsibility. Before purchasing a home, make sure you have adequate emergency savings to cover unexpected home expenses, such as a new furnace or roof. It’s wise to have at least three to six months of living expenses saved in a semi-liquid account for easy access. Before purchasing a home, be sure to recalculate your monthly expenses to include the monthly costs of owning your home, and save enough in your emergency fund to cover these expenses.

5. Debt

When determining whether you’re eligible for a mortgage, lenders typically look at your debt-to-income ratio (DTI). This is the percentage of your monthly gross income that you can reasonably put toward your mortgage payment. It includes factors such as housing costs, student loan balances, credit card debt, and other types of debt. Most lenders prefer borrowers have a DTI of less than 36 percent, but the lower your DTI, the better chance you have of being approved for a favorable interest rate.

If you have significant outstanding debt, now may not be a great time to purchase a home. Focus on paying off that debt to put yourself in a better financial position.

6. Credit score

Before purchasing a home, it’s also important to make sure you have a strong credit score. Lenders typically offer better mortgage rates to borrowers with credit scores of 740 or greater. Although you may be approved for a mortgage with a lower score, you’ll likely need to pay a higher interest rate. If you have a low credit score, it may make sense to wait on your home purchase until you can boost your credit.

Gene Gard, CFA, CFP®, CFT-I™, is a Private Wealth Manager and Partner with Creative Planning. Creative Planning is one of the nation’s largest registered investment advisory firms providing comprehensive wealth management services to ensure all elements of a client’s financial life are working together, including investments, taxes, estate planning, and risk management. For more information or to request a free, no-obligation consultation, visit CreativePlanning.com.

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Opinion Viewpoint

Renting in Memphis by the Numbers

A porch in Memphis (Photo by Jenni Kowal on Unsplash)

I began my search for a rental home roughly three months ago, sometime in March 2022. My (soon to be, and from here on out referred to as ex) husband and I were in the beginning stages of our blessedly amicable divorce. The first prospective landlord I spoke to on the phone was obviously eager to get his property, a unit in a Midtown quadruplex, rented as soon as possible, simply to stop the incessant flow of inquiries. “Past evictions, credit, I don’t care about any of that,” he told me. “If you pay, you stay, that’s my philosophy.” He said he would be at the property in about 30 minutes if I could make it there by then, though he mentioned someone else would be viewing it before I did. I wondered if finding a place could actually be that easy. Then I got the call that it was rented. I had been beaten to it. It would become a familiar experience.

So began the long, arduous process of constant rejection. That could be the title of an epic poem summing up finding a rental in Memphis, Tennessee, in 2022. “A Long, Arduous Process of Constant Rejection.” If that seems overly dramatic, here are some numbers for you to consider. In the three-ish months that I searched, I looked at, inquired about, or saw roughly 115 rental properties. I say “roughly” because this doesn’t count the messages I deleted, the countless internet rabbit holes I went down, or all the phone calls I made. I arrived at the number 115 by looking through my inbox, message chains, notebooks, and Slack threads. My coworkers, my family, my ex-husband’s coworkers, my friend’s online mom-messaging board, my friends of friends of friends — a veritable army of kind, helpful people have been looking on my behalf as well. 

Perhaps the most important number of all to consider throughout this process has been the number three, as in “you must make three times the monthly rent to qualify for this property.” According to the U.S. Census Bureau, the median household income for Memphis in 2020 was $41,864. The per capita income was $26,704. So, hypothetically, a single person making roughly $27,000 per year looking for a place to rent in this city would need to find, in order to meet the three times monthly rent qualification, a house or apartment for $750 a month. Keep in mind, we’re talking gross income here, so taxes haven’t been taken out yet. If a property manager wants to base these qualifications on net income, the number goes down to about $640 per month. Right now, at 3:01 p.m. on June 9, 2022, there are 33 results on zillow.com for rentals no higher than $650 per month. This is barring any other filters, like a place being pet-friendly or having more than one bedroom. 

But wait! Don’t forget: Some rental companies require four times the monthly rent. I won’t go through all those numbers, but suffice to say, a person living alone on an average Memphis income won’t be able to make that work. I have had the cynical thought — and it has been suggested many times to me by others — that the three-times rent qualification is nothing more than a thinly veiled discrimination tactic. And yet, even when I decided on multiple occasions to forge ahead and ignore the three times thing, I would be rejected. “Insufficient funds,” reads one email that I received after viewing and applying for a Midtown duplex. I made it halfway through one online application before realizing that it required past pay stubs. I’ve worked part time and been a stay-at-home-mom for the past four years. My circumstances are changing, but an online application doesn’t care about that. I understand that a landlord needs to protect their investment, but I can also wish the process of finding housing were an easier one to navigate.

Here’s yet another number to consider: five. As in, your credit score is going to drop about five points every time it’s checked. How about the number 40? As in, you’re going to have to pay a $40 application fee in order for us to check your credit — which will then drop — and then reject your application anyway for “insufficient funds.” Do I seem bitter? Frustrated? Finding a place to live shouldn’t feel like running a gauntlet. And this is coming from a white woman with good credit history and a verifiable source of income. I’m so privileged it’s disgusting. Where does this kind of market leave anyone working minimum wage? Or someone who doesn’t have established credit? A retiree? A single parent paying for childcare? 

The last number to become relevant during this search was one. As in, I was the first person to view a property. As in, only one landlord actually asked for my opinion on what I could afford instead of making the decision for me. I feel extremely lucky to be able to end this piece by saying that I now have a place to live. How many others are being left hung out to dry? 

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News News Blog

‘Eviction Crisis’ Plagues Memphis’ Fast-Growing Rental Market

CREDIT: United Housing/Facebook

United Housing/Facebook

Memphis is the fastest-growing rental market in the country and the city faces an “eviction crisis,” according to experts at Tuesday’s inaugural State of Memphis Housing Summit.

It was a day of far-ranging discussions around housing that delved into topics like gentrification, redlining, the affordable housing gap, and the connection between housing and health. Speakers included government officials like Memphis Mayor Jim Strickland, Shelby County Mayor Lee Harris, and Paul Young, the city’s director of Housing and Community Development. But the summit also brought in real estate brokers, academics, lawyers, nonprofit leaders, and housing advocates from across the city and the country.

One discussion focused on the impacts absentee owners have on Memphis neighborhoods. In it, experts described a massive rental market here but one largely controlled by out-of-state, Wall-Street-backed investor groups that one speaker said ran their businesses here much like the mafia would.

Memphis was listed as the fastest-growing rental market in the country in a 2018 Zillow study, which found that 56 percent of single-family homes here were rented, not owned. It’s a massive statistic given more than three-quarters of the city’s housing stock is comprised of single-family homes. Investor groups and large corporations own 95,604 of those properties. Of those properties, more than 40 percent of their owners reside out of Tennessee.

With this boom in single-family rentals, has come a rising level of evictions from homes here. Austin Harrison, a researcher from Georgia State University and a housing consultant, told the Housing Summit crowd gathered at the Memphis Botanic Gardens Tuesday that the ”eviction crisis” here ”destabilizes families and communities.”

From 2016 to April 2019, 105,338 eviction notices were filed in Shelby County General Sessions Civil Court, according to Harrison. In 2016, 4,593 evictions were filed in New Orleans, 5,909 were filed in Birmingham, and 17,169 were filed in Richmond.

In that same year, 31,633 eviction notices were filed in Memphis. Notices here went out to nearly 21 percent of all Memphis renters. Renters who got eviction notices were predominantly African American, Harrison said.

Ben Sissman, a Memphis-based foreclosure prevention attorney, said most evictions here happen simply because the tenant does not make enough money to pay rent. But investor groups will use eviction or threat of eviction to squeeze money from tenants.

“These Wall Street guys — if you think of them in the same mindset as the mafiosos — they are predatory landlords,” Sissman said. “They’re selling high and doing no work. They deny responsibility for what they’re doing. All they want is the rent money and nothing else.”

Sissman described the strategy as “pump and dump.” Harrison called it “milking” the market.” They agreed, though, that the strategy is to buy homes in bulk for little, getting as much money for them as they can, and moving on.

“All these guys want to do is to maximize the short-term gain,” said Harrison. “They don’t inspect the properties. You’ll hear stories about mold, or the plumbing or the electricity not working. They don’t fix anything.”

United Housing/Facebook

But Harrison explained 90 percent of landlords are ”good actors.” The rest, though, are buying up large portions of housing stock and they’re doing it all over the country.

However, Nedra Reddit, a real estate broker in Memphis, said the city does “have a major problem” with absentee landlords here “but not as big as we’d like to sit around and discuss it.”

“I believe we’re just hiding behind ’we don’t know who they are,’” Reddit said. “We know who they are. I represent the National Association of Real Estate Brokers. Cheryl Muhammad is our president. Call her if you want to know what to do with an absentee landlord.

“We have in place a way to locate everybody and we’d like to let Memphis know we are here as the central point of contact for any housing need, whether someone isn’t paying their mortgage and they’re about to lose (their home) or they can’t get their landlord to fix the water heater.”