As the economy continues to recover, the millennial generation is still feeling the longer-term effects of the recession due to underemployment and low salaries combined with high student debt and uncertainty about the future. These factors have affected the housing market, and the renter status of this generation was examined in a new survey by LendingTree. Continue reading
Six signs a home will hold its resale value
Most buyers have a wish list of features they’d like to have in a home. Often missing from that list is how salable the home will be when they later decide to sell.
Generally, buyers deal indirectly with resale value. They want a home they can buy at market value or less. They want to buy a home that will retain its value. They want to buy a home that will suit their needs. They want to buy a home they can make their own.
A listing that’s priced low to sell fast may be one that will have good resale value only if you use this marketing strategy. The low price may offset an incurable defect, such as a location on a busy street.
There’s nothing wrong with buying a home on a busy street as long as (1) you buy it at a price that reflects the location issue; (2) it suits your long-term needs; and (3) you understand that you will probably have to discount the price accordingly when you sell, depending on the market at the time.
In a hot seller’s market, buyers are desperate to buy. They often overpay, and they are more likely to overlook defects that they would shun in a sour market.
Resale value has become a bigger issue since the housing recession began five years ago. Buyers are more cautious in their home-buying decisions. They don’t want to buy just any home; they don’t want to make a mistake and end up wanting to move in a slow market in which they might lose money.
The homes that hold their resale value well are the ones that appeal to a broad cross section of buyers; offer a good floor plan that works for different lifestyles; have a good amount of space but are not enormous and expensive to maintain; and exhibit a pride of ownership. They should also be in good condition.
Location is also a critical element of resale value. There are market niches that are always in demand, in both hot and soft markets. For example houses in neighborhoods with close proximity to shops, cafés and public transportation systems.
That’s not to say that every listing in these neighborhoods sell quickly. To sell, it needs to be priced right for the market.
It’s easier to recognize a home with good resale value in the current market than it was in the bubble market of 2005 and 2006 when virtually all homes sold in many areas. In a soft market, the homes that sell within 30 to 60 days are either good homes or good deals.
Ideally, you want to buy a home that has good resale value. Not one that’s just a good deal. There’s no urgency to buy now in many areas, although it would be nice to take advantage of record-low interest rates. But you shouldn’t buy a home that won’t work for you long term just to lock in a great interest rate.
Even though there are a lot of homes for sale on the market, in many areas there is a not a surplus of quality inventory on the market. One reason for the lack of quality homes on the market is that many sellers are waiting for a better time to sell. Another reason is that homes with good resale value don’t tend to change hands that often.
THE CLOSING: There may be good news ahead. Leslie Appleton-Young, chief economist for the CALIFORNIA ASSOCIATION OF REALTORS®, predicts that sellers who have been waiting for a better time to sell may decide they’ve waited long enough and list their homes for sale in 2012.
Dian Hymer is a real estate broker with more than 30 years’ experience and is a nationally syndicated real estate columnist and author.
My Thoughts on the Current Real Estate Market: Mortgage Reform, Refinance, Really?
With interest rates at the lowest rate in history, and foreclosures bursting through the ceiling still at this writing, I ask myself, why is this still happening? How does the 1-in-4 upside-down homeowner out there, staring at their bank and scratching their head, get help to avoid walking away?
The empty promises, or the so-called “helping hand” being offered by the banks and the government, is still a joke to say the least. For the people who sold their home in recent years, they are in a position to buy or have already bought another home and recovered from that stress of “What do I do?” while taking advantage of the low interest rates and prices.
It still is not too late to make that leap and start over–because the faster you do, the faster you will recover. Property values are not expected to go anywhere for at least two more years, and the laws for selling short sales that protect homeowners will expire at the end of this year. Laws allow a purchase after two years of selling a short sale. With a consultation with me and strategy, you could pay off most of your unsecured debt, while not paying your mortgage. This can only be done with someone who has had experience with this. I have done this with clients that have recouped while living in their home for over 3 years without paying a mortgage.
The latest reform laws are offering a glimmer of hope; however, when and how these guidelines are implemented by the banks and government is clear to not happen for awhile. The state governments will have to also be on board. At this time, California is weighing the settlement being offered for unlawful foreclosure practices from five of the larger banks that have agreed to pay a settlement.
My opinion is that any settlement should accompany a mandate that the banks must reduce every upside-down property out there to fair market values, to allow the homeowner an opportunity to keep their home; granted that the home is not dilapidated to the point that the owner does not have the funds to repair the home or care for it after the refinance. This exclusion is warranted to the extent that a home that is in bad shape is only dropping or keeping the values low in the neighborhood and should be taken care of. In a perfect world, the banks would allow the homeowner funds after the refinance to repair the home–heck, let’s go for it all!
As always, my gratitude to you for reading my blog. Please share your opinions or questions–I look forward to any questions I can answer or help I can give!
John A. Silva, Realtor
(619) 890-3648 | www.JohnASilva.com
Goodbye 2011 & Hello 2012! Is this a Happy New Year?
Is it goodbye to a bad year or hello to the same? While the economy is still struggling, unemployment slightly better, and real estate showing signs of improvement only to retract its position, I believe the glass is still half full, with an asterisk.
The holiday season began strong on Thanksgiving weekend, reports are that retailers numbers receded which led to heavy markdowns the week of Christmas. Final numbers are still to come, while job growth is modest, mostly in low-paying sectors like retail and hospitality. This past year also saw an increase in credit card spending for gifts as a result of higher gasoline, food prices, and general inflation.
With mortgage rates still at historic low rates, the housing industry is still struggling with values dropping, even though sales have shown signs of recovery. With more than one in every five borrower still owing more than their home is worth, many homeowners are too pressed to spend on much more than the essentials which leave us to the big question: WHAT SHOULD I DO?
With all predictions expecting more of the same this year as last, there is still and always will be optimism, but each homeowner out there who is still upside-down, either waiting for or in a modification, is so far upside down that they most likely will never recoup the past negative equity in the future. They are at the same time struggling to make ends meet with just the essentials. Mortgage companies and investors are still holding the belt tight and are not reducing principle for most people waiting for modifications or who have them–leaving homeowners to finally make that decision that enough is enough.
There are opportunities to purchase and leave your upside-down home, but you would need to act fast. Other opportunities are also available and action now will help you live a life more care-free and stress-free in a fast-paced, ever-uncertain economic time.
Call me now and let’s talk. My direct line of contact is 619-890-3648.
Sales of previously owned homes got an unexpected boost last month while the number of homes on the market continued to decline, according to data released Monday by the National Association of Realtors (NAR).
The trade group recorded a 1.4 percent month-over-month increase in existing-home sales in October, pushing the annual rate of sales to 4.97 million. NAR’s latest reading is 13.5 percent above the 4.38 million-unit sales pace in October 2010.
That’s down from an 8.3-month supply in September. NAR says the housing supply has been trending gradually down since setting a record of 4.58 million in July 2008.
Distressed homes – foreclosed REOs and short sales – slipped to 28 percent of October’s transactions, down from 30 percent in September. They were 34 percent in October 2010.
NAR says 17 percent of last month’s existing-home sales were foreclosures and 11 percent were short sales.
Market analysts were expecting up to a 3 percent drop in overall existing-home sales between September and October. Forecasts ranged between an annual rate of 4.76 million and 4.80 million.
According to NAR, October home sales should have risen higher than the 1.4 percent the trade group recorded.
According to Lawrence Yun, NAR’s chief economist, contract failures reported by Realtors jumped to 33 percent in October from 18 percent in September. Only 8 percent of contracts fell through in October of last year.
“A higher rate of contract failures has held back a sales recovery,” Yun said. “Home sales have been stuck in a narrow range despite several improving factors that generally lead to higher home sales such as job creation, rising rents, and high affordability conditions. Many people who are attempting to buy homes are thwarted in the process.”
NAR’s report shows the national median existing-home price was $162,500 in October, which is 4.7 percent below October 2010.
“In some areas we’re hearing about shortages of foreclosure inventory in the lower price ranges with multiple bidding on the more desirable properties,” Yun said. “Realtors in such areas are calling for a faster process of getting foreclosure inventory into the market because they have ready buyers.”
Yun adds that extending credit to responsible investors would help to absorb distressed inventory at an even faster pace, which he says “would go a long way toward restoring market balance.”
NAR’s data indicates investors purchased 18 percent of homes in October, while first-time buyers accounted for 34 percent of transactions. All-cash sales made up 29 percent of last month’s purchases.
This article is by DSNews.com.
There are some additional hurdles for homeowners who have gone through a foreclosure, short sale or bankruptcy, but a little patience and some financial hard work will go a long way.
Buying a home is a challenging goal for most hopeful homeowners. But for those who have experienced a bankruptcy, foreclosure or short sale, the hurdles are even higher.
Still, it’s not impossible to buy a home after financial difficulties, says Dan Keller, a mortgage banker with Hometown Lending in Everett, Wash. In fact, Keller says, people who have cleaned up their credit and are otherwise qualified to get a mortgage can buy a home as soon as they have outlasted a prescribed waiting period after the bankruptcy, foreclosure or short sale.
Wait a while
The waiting period can last one to seven years, says Kirk Chivas, chief operating officer at First Commerce Financial in Wixom, Mich. The one-year requirement applies to buyers who complete a Chapter 13 bankruptcy, have a spotless subsequent credit history and want to get a new loan insured by the Federal Housing Administration or guaranteed by the U.S. Department of Veterans Affairs. The seven-year requirement applies to buyers who experienced a foreclosure and want to get a new conventional loan that can be sold to Fannie Mae or Freddie Mac.
In between are a number of two-, three- and four-year timelines based on similar criteria and other factors such as whether the buyer’s previous mortgage was current at the time of a short sale or the size of the buyer’s new down payment as a percentage of the home’s purchase price.
Generally speaking, the waiting periods after a bankruptcy tend to be more black and white while the waits after a foreclosure or short sale have more gray areas, Keller says. And in some cases, a waiting period can be waived or shortened if the buyer’s bankruptcy, foreclosure or short sale was due to extenuating circumstances or a hardship beyond his control.
Technically, it is possible for a buyer whose prior loan wasn’t in default at the time of a short sale to get a new FHA-insured loan with no waiting period, Chivas says. But he adds that he’s never encountered anyone in that situation.
Buyers must have very clean or perfect credit histories before they can buy homes after bankruptcy, foreclosure or short sale. A slip-up as small as one late credit card payment could disqualify a post-bankruptcy buyer from some loan programs, even if the waiting period has been completed, Keller says.
“Bankruptcy is a serious word,” he says. “If you do it, it’s a get-out-jail-free card. But once you get out of bankruptcy, you need to be flawless in your credit. Don’t even drop a gum wrapper.
Credit dings can be difficult to sort out for buyers who experienced a loan modification or short sale, in part because, as Chivas says, there’s “no consistency” in how lenders report those events to the credit bureaus. Buyers should review their credit reports and correct any errors or clarify the circumstances of adverse items.
Stable employment can be a plus, too, Keller says, noting that some loan programs are more lenient than others. “If there was a gap,” he says, “it needs to be explained.”
Consult a loan pro
Given these complexities, buyers are advised to consult a loan officer or mortgage broker early on for advice that applies to their situation.
“They may think they’re fine, but if they’re not talking to a professional, their hopes can get dashed or crushed,” Chivas says. “That’s why you want to speak to someone as soon as you start dreaming it up in your head” that you want to buy a home after a bankruptcy, foreclosure or short sale.
This article is by RealEstate.MSN.com, and is viewable here: “Getting a mortgage after foreclosure.”
Under the SAVE (Sensible Accounting to Value Energy) Act, estimated energy-consumption expenses for a house would be included as a mandatory new underwriting factor.
When you apply for a mortgage to buy a house, how often does the lender ask detailed questions about monthly energy costs or tell the appraiser to factor in the energy-efficiency features of the house when coming up with a value?
Hardly ever. That’s because the big three mortgage players — Fannie Mae, Freddie Mac and the Federal Housing Administration, which together account for more than 90% of all loan volume — typically don’t consider energy costs in underwriting. Yet utility bills can be larger annual cash drains than property taxes or insurance — key factors in standard underwriting — and can seriously affect a family’s ability to afford a house.
A new bipartisan effort on Capitol Hill could change all this dramatically and for the first time put energy costs and savings squarely into standard mortgage underwriting equations. A bill introduced Oct. 20 would force the three mortgage giants to take account of energy costs in every loan they insure, guarantee or buy. It would also require them to instruct appraisers to adjust their property valuations upward when accurate data on energy efficiency savings are available.
Titled the SAVE (Sensible Accounting to Value Energy) Act, the bill is jointly sponsored by Sens. Michael Bennet, a Democrat from Colorado, and Johnny Isakson, a Republican from Georgia. Here’s how it would work: Along with the traditional principal, interest, taxes and insurance (PITI) calculations, estimated energy-consumption expenses for the house would be included as a mandatory new underwriting factor.
For most houses that have not undergone independent energy audits, loan officers would be required to pull data either from previous utility bills — in the case of refinancings — or from a Department of Energy survey database to arrive at an estimated cost. This would then be factored into the debt-to-income ratios that lenders already use to determine whether a borrower can afford the monthly costs of the mortgage. Allowable ratios probably would be adjusted to account for the new energy/utilities component.
For houses with significant energy-efficiency improvements already built in and documented with a professional audit such as a home energy rating system study, lenders would instruct appraisers to calculate the net present value of monthly energy savings — i.e., what that stream of future savings is worth today in terms of market price — and adjust the final appraised value accordingly. This higher valuation, in turn, could be used to justify a higher mortgage amount.
Read the rest of this article is by the Los Angeles Times: “Factoring energy efficiency into a home’s value“.
The real estate market meltdown was much more severe and has lasted much longer than even the most bearish housing market observer would ever have predicted. Rather than values taking a dip, they’ve taken a double dip in many places; and the housing sector drama has infected the job market and the entire world’s economy.
Yet, there are some very shiny silver linings to this whole mess — a handful of ways in which our mindsets, habits, behaviors and approaches to money, mortgage and even life decision-making — have been changed by this real estate market debacle. As I see it, here are the five best things about this housing recession:
1. People now buy for the long term
Even Jeff Lewis, that reality TV house flipper extraordinaire, has declared that he’s tapped out of the flipping business for the foreseeable future, trading in his real estate wheeling and dealing for the design business.
Recently, he mentioned having lost six homes in the real estate market crash.
While Lewis flipped homes as his business, just five years ago, many Americans — homeowners and investors alike — took a short-term view on their homes, buying them with the idea that they could count on refinancing, pulling cash out or even reselling them anytime they wanted, at a profit.
Reality check — those days are gone. Now, buyers know they’d better be prepared to stay put for somewhere between seven and 10 years (shorter in strong local markets, longer in foreclosure hot spots) before they buy if they want to break even. And this is causing them to take mortgages they can afford over time, and make smarter, longer-term choices about the homes they buy.
2. Dysfunctional properties are being weeded out and creatively reused
Municipalities like Detroit and Cleveland are demolishing blighted and decrepit properties in dead neighborhoods en masse, intentionally shrinking their cities to match their shrinking populations. These efforts are also eliminating breeding grounds for crime, and focusing resources on the neighborhoods that have a better chance of surviving and thriving in the long term.
In the so-called “slumburbias” of central California, Nevada and Arizona, McMansions are being repurposed into affordable housing for groups of seniors, artist communities and group homes.
3. American housing stock is getting an energy-efficient upgrade
The news would have you believe that every American has lost his or her home, walked away from it, or is now renting by choice. In fact, the vast majority of homeowners have simply decided to stay put.
Instead of selling and moving on up, homeowners are improving the homes they now plan to stay in for a long(er) haul. And this generation of remodeling is focused less on granite and stainless steel, and more on lowering the costs of “operating” the home and taking advantage of tax credits for installing energy-efficient doors, windows, water heaters and more. And while the first-time homebuyer tax credit is a thing of the past, the homeowner tax credits for energy-optimizing upgrades are in effect until the end of this year.
4. People are making more responsible mortgage decisions, and building financial good habits in the process
Buyers are buying far below the maximum purchase prices for which they are approved. They are reading their loan disclosures and documents before they sign them. And, thanks to the stingy mortgage market, they are spending months, even years, in the planning and preparation phases before they buy: paying down their debt; saving up for a down payment (and a cash cushion, so that a job loss wouldn’t be disastrous); being responsible and sparing in their use of credit to optimize their FICO scores; and creating strong financial habits in one fell swoop.
5. Our feelings about debt and equity have been reformed
Americans no longer use their homes like ATMs, to pull out cash, pay off their credit cards and then start the whole overspending cycle over again. Many can’t, because their homes are upside down and cannot be refinanced in any event — much less to pull cash out.
Others have been reality-checked by the recession, and are dealing with their non-mortgage debt the old fashioned way: by ceasing the pattern of spending more than they make, and applying the self-discipline it takes to pay their bills off.
Home equity, in general, is no longer viewed as an inexhaustible source of cash. Rather, we see it as a fluctuating asset to be protected and increased — not so much through the vagaries of the market, but through the hard work of paying the principal balance down. Many of those refinancing into today’s lower rates aren’t doing it to pull cash out, as was the norm at the top of the market; instead, they are refinancing into 15-year loans to pay their homes off sooner than planned, or reducing their required payment so their extra savings can be applied to principal.
Of course, it remains to be seen how lasting these changes will be if and when home prices go up and mortgage guidelines loosen up. But since neither of these things look likely to happen in the short term, hopefully there’s a chance that these behavior shifts will become part of a permanent mindset reset for American housing consumers.
Tara-Nicholle Nelson is an author and the Consumer Ambassador and Educator for real estate listings search site Trulia.com. ClientDirect.net.