March 2019 Newsletter

Zillow Changes

Zillow is one of the leading online real estate and rental marketplaces designed to empower consumers with knowledge. However, their property valuation tool, the Zestimate, causes much contention in the real estate industry with consumers relying heavily on the estimate of their home’s value.
Zillow publishes a Zenstimate on over 100 million homes, but does make sure to recommend a Comparative Market Analysis from a real estate agent or an appraisal from an appraiser for more accurate values.
The company launched a contest with a $1 million dollar prize to the person who could create an algorithm better at calculating a home’s estimated value. After almost 2 years and nearly 4,000 teams from over 90 different countries, a winning team was just announced in January.
The winning team improved the current model by about 13% by incorporating public data like rental rates and commute times. The plan is to now incorporate the best of the contest’s entries to create more accurate Zestimates in an effort to decrease the average current error rate of 4.5%.

Interest Rates

While there is much speculation about where interest rates will go since the 4 rate increases in 2018, the cost to the borrower is probably going to increase since the 12-month low of a 4.35% average seen just last week.
These past few weeks we have seen interest rates fall due to the market and politics. However, it is anticipated that this will soon reverse, and an increase is coming.
Experts predict an interest rate of 5% this year within one or two rate hikes despite the San Fransisco Federal Reserve President saying that, if predictions are correct, we may see no rate hikes this year.
The Federal Reserve will meet March 19th to submit updated rate projections, so we should all know more sometime this month.

How Much Do You Need for a Down Payment?

The biggest concern of most first time home buyers is having enough money for a down payment. Many believe a 20% down payment is required, but that is so far from the truth! Most home buyers only pay 5% down, and some even pay zero! There are many home buying assistance programs available with an average down payment assistance of $11,000. USDA Rural Development Loans and Veterans Administration Home Loans offer zero down payment programs.
Corporations like Fannie Mae and Freddie Mac offer programs requiring only 3% down. In addition, they may eliminate the Private Mortgage Insurance (PMI) once 20% equity is built up in the property. I’ll explain PMI below. The Federal Housing Administration offers first time home buyers down payment as low as 3.5%. You can also find state and local assistance programs. All you have to do is speak with a local mortgage broker to find out your options and determine your eligibility.
So… what is this PMI? Private Mortgage Insurance is typically an amount added to your monthly mortgage payment when less than 20% equity is built up in the home. It is designed to protect the lender and borrower in case of default. It is typically 0.5 – 1% of the original mortgage amount, so If you borrow $100,000, the PMI is $1,000, or $83.33 per month added to your mortgage payment.