Inflation, Fed rate hikes, stock market sell-offs, Russia-Ukraine war … I think it’s fair to say that 2022 has begun with a bang. One of the top questions that I get, almost daily, is – “are we in a housing bubble” and “how high do you think interest rates are going.” These are important topics, all of which have a consequential impact on the financial wellbeing of American homeowners.
Given the environment that we are in, I wanted to call attention to some significant factors that I think every homeowner should consider. According to research firm Black Knight data, homeowner equity is now close to $10 trillion in aggregate. That comes after a 35% home appreciation gain in 2021, the largest annual increase on record. My question is: is this merely “paper gains” that can vanish in a year or two, and what should a homeowner be doing with this information?!
My first recommendation is to get an accurate market evaluation of your home. I’m not talking about an online “Zestimate” or the like. Here’s the problem, though, for many homeowners. The only real way to find out what their home is worth is to pay for an appraisal or call their Realtor. Most owners are afraid that before they hang up the phone with the real estate agent asking them to come by, there will already be a “For Sale” sign in their yard.
Granted, many agents work like that, but I am happy to introduce you to my network of professionals. They will genuinely give you real-time information about what your home might be worth, without ulterior motives. They would also give you some tips for minimal home improvements that could further improve your value and equity. If you have deferred home improvements, are you going to wait until you want to sell the house in a year, two, or three to do the work for your buyer’s benefit, or should you enjoy the improvements now?!
In conversations that I have been having together with Realtors and homeowners, they are shocked at the amount of equity available in their homes. Most people don’t understand what it would mean to sell or potentially “cash-out” to take advantage of the current market. These are conversations that I have, regardless of whether the client is a current or past client of mine. Looking online and seeing what your house is “electronically worth” is not a substitute for speaking to someone like me to understand how you can optimize your situation to build real wealth.
My second recommendation is to actually consider a cashout or equity loan. According to Black Knight, the average mortgage holder currently has about $185,000 in home equity to tap (even more in New Jersey). This is the amount they can access while still retaining at least 20% equity in their home.
Are you carrying any credit card or other loans? Do you have adequate reserves for an emergency or just to live “comfortably”? Do you have the necessary funds for retirement? Do you have a specific strategy for how your net worth will increase in 10, 15, or 20 years from now? Should you be investing in stocks or real estate in this inflationary environment? These are a few of the questions that I discuss during my financial consultations.
As inflation heats up, it is reported (CNBC) that 64% of Americans are now living paycheck to paycheck. Even among those earning six figures, 48% said they are now living paycheck to paycheck, according to a recent survey by LendingClub. Life is expensive and only growing from here. How should you protect yourself?!
I have spoken with clients who have rates in the 2’s who have benefited from a cash-out refinance despite a higher rate. Every circumstance is unique and must be evaluated based on the specifics of the situation, but the conversation should be happening today. The market will be topping “soon” – you should be doing this right now. I spend hours a day dissecting market analytics and listening to top experts, and everyone has an opinion. A different opinion, of course.
My third recommendation is the most intriguing of all. With the limit of space, I welcome anyone interested to reach out to me directly so I can share it with you.
Shout out and happy birthday to Renee Bouaziz, Dovid Eisner, Erica Engel, Yossi Faber, Yisroel Jeff Hochberg, Chaim Kowalsky, Orly Shapiro, and Yossi Wilbur
Shmuel Shayowitz (NMLS#19871) is President and Chief Lending Officer at Approved Funding, a privately held local mortgage banker and direct lender. Approved Funding is a mortgage company offering competitive interest rates as well as specialty niche programs on all types of Residential and Commercial properties. Shmuel has over 20 years of industry experience, including licenses and certifications as a certified mortgage underwriter, residential review appraiser, licensed real estate agent, and direct FHA specialized underwriter. He can be reached via email at [email protected].
