Napa Mortgage News

Home Equity Increases....should you tap into it?

July 17th, 2017 1:00 PM by Dale DiGennaro

Dear Gena,

Were you aware that 63% of homeowners have seen their equity increase since the first quarter of 2016, with the average owner gaining about $13,400 between then and the first quarter of 2017! That is apparently the largest increase since mid-2014!

Here are a few things you may want to consider before tapping into that equity...

Home Renovations.......knowing which one will pay you back for your efforts and money spent is key. Review Remodeling magazine's Cost vs. Value Report, which "compares average cost for 29 popular remodeling projects with the value those projects retain at resale in 99 U.S. markets." You can then take your research further, viewing data for your regional area. This will help you decide if that $50,000 kitchen is a good investment, or if that attic renovation you were considering will be a bust from an ROI standpoint.
A New Car.......Does it make sense to use your home equity to finance one or buy it outright even? Probably not at the moment since Auto loans are now one of the few consumer loans that are cheaper than home equity loans or lines of credit.
Additions.......adding on to your home can be a great way to make it more livable. Especially if you have a growing family. You might be surprised to learn that a midrange bathroom addition typically only pays back an average of 53.9%. But, if you bought an older home that only has one bathroom, adding another could have a much higher ROI that makes the addition worth it. Even though additions offer the potential for higher cost-value ratios than other renovation projects, you still may not recover the full cost of the addition when you actually sell since it will be determined by how strong the real estate market is at that time.
Vacation.......That European cruise or trip to Machu Picchu sounds like a great idea, especially because you've got some cash to pay for it with the rising equity in your home. But consider this: You may be paying back the money you spend on that vacation long after you return home.
More Real Estate.......while real estate is touted as a good "investment" ...be careful of putting all of your eggs into the real estate basket. Whether you're thinking about flipping a house for the first time or already have some experience under your belt, you'll want to weigh the pros and cons - and costs - involved in buying and owning two properties. "Lenders tend to give more favorable terms to those who tap their home's equity to pay for a second home because they have more skin in the game. The costs of borrowing, especially on home equity loans, can be lower as well, since these loans don't involve paying for title searches or insurance and other transactional costs of new mortgages.
College.....With the cost of college continuing to rise and mortgage rates reaming near historic lows, homeowners are increasingly looking to their home equity to offset some of the costs of education. Here's why it may be a good idea: "With a home equity loan or a home equity line of credit, the two biggest positives are that home equity loans may be cheaper than other loans, plus the interest paid on a home equity loan is usually tax deductible.

Feel free to call me any time to discuss your specific needs!

Fed Officials Debate Inflation

Comments from Fed officials caused some volatility this week but had little net effect. The economic data caused little reaction. Mortgage rates ended the week nearly unchanged, close to the best levels of the year.

Last week's weak inflation data had Fed officials talking this week. To the surprise of many, inflation has declined during each of the last few months. Fed officials seem divided on how to react. Some consider the recent decline transitory and want to continue monetary tightening. Others question this and want to slow things down. On Monday, New York Fed President Dudley said that he thinks rising wages will push inflation higher and that to slow the current pace of monetary tightening could do harm to the economy. On Tuesday, Chicago Fed President Evans said that the Fed "can afford" to wait "a little bit" to see if inflation moves higher. The debate caused some market volatility.

The existing-home sales data from the National Association of Realtors released on Wednesday revealed that a shortage of inventory continued to be an issue in May. Total inventory of existing homes available for sale was significantly lower than a year ago and was at just a 4.2-month supply. A 6-month supply is considered a nice balance between buyers and sellers. The low supply of inventory and robust buyer demand caused prices to rise and properties to be sold very quickly. The median existing-home price reached a record high in May, and it took just 27 days on average for properties to be sold. This was the shortest duration since tracking began in 2011.

Even with a low level of inventory in many markets, existing-home sales in May rose a little from April to the third highest level over the past twelve months. Sales of new homes, which make up roughly 10% of the market, also climbed in May, and the median price of new homes rose to a record high as well.

Looking ahead, Durable Orders, an important indicator of economic activity, will come out on Monday. Pending Home Sales will be released on Wednesday. The Core PCE price index, the inflation indicator favored by the Fed, will come out on Friday. In addition, there will be Treasury auctions on Monday, Tuesday, and Wednesday.

Napa's music scene is continuing to grow.......Friday night was a throwback to the 90's with Richard Marx acoustic style. HIs son Lucas opened for him at...

"The Uptown"!

Great Venue!

Then on toCa'Momi which features more local talent.

The band"Pistachio" was in from Oakland.

Entertaining....

If you are a jazz lover...

"The Blue Note"

has a lot of great talent.

Last night we saw master guitaristJulian Coryell with his late father....the infamous Larry Coryell's band...

"The Eleventh House"!

Excellent!

Thank you for always trusting in us to do the best for you and your family and please feel free to call me anytime you have questions. I will be happy to share with you whatever information you may need!"