|
|
Top 3 First Time Homebuyer Tips
As a first time homebuyer, there are a lot of things you need to be aware of. This makes you vulnerable when you face situations you are not ready for. In addition, there are certain things you should keep in mind from the very beginning. Here are the first 3 (of many) things you should consider before buying a home, our top 3 tips for first time home buyers:
Budget:
Never go beyond your limits. This doesn’t mean buy a home based on your savings, but you should have a clear idea of what financial burden you can afford for a home. People oftentimes get in over their head when buying a home for the first time if they buy a home that is beyond their budget. Therefore, it is critical for you to set a reasonable budget for buying a house.
Then you start searching for a home that fits that budget. Don’t even look at a home that is not within your limits. Once you have finalized a budget, decide if the house you’re considering will cost you additional money for renovation or repairs. If the answer is yes, then it is better to look for another property.
Employ A Mortgage Broker:
An expert in the mortgage business can be worth his or her weight in gold for first time homebuyers, which is why you should employ the services of such an expert. A mortgage broker will analyze your finances and then will counsel you regarding buying a new house.
By following his or her advice, you avoid making silly mistakes. A mortgage broker will also help you manage funds for buying the property.
This tip also applies to anyone buying a home, not just first time homebuyers.
Make a Wise Decision:
First time homebuyers often times neglect all the advice and fall in love with a certain property, which becomes fatal for their financial well-being. Therefore, first time homebuyer tips, regardless of their source, should be properly analyzed and then you should make a wise decision. If you fail here, not even a mortgage expert will be able to save you from financial peril.
There are numerous other first time homebuyer tips that should be given careful consideration even by seasoned real estate investors. However, the aforementioned tips are among the more important. For more “Homebuying Tips” visit that category of our blog..
.T
Overcoming Homebuyer Turnoffs
Anyone selling their home wants to make their home as appealing as possible to prospective buyers, whether that means sprucing up the exterior, clearing away clutter, or fixing up the interior.
What if your home has a flaw that is a turnoff to a large number of buyers? What can you do?
Exterior:
Believe it or not, most home buyers want an ordinary backyard with a green grass lawn. That’s especially true for buyers who have young children. Those who don’t see that lawn in the backyard have a hard time understanding how to remove whatever’s there or envisioning other possibilities for the use of that space.
Recreational facilities are the good examples of exteriors that could hurt your curb appeal. Examples include a basketball court, tennis court, batting cage or high jump pit. Anything like that could prove problematic.
Another potential turnoff is a swimming pool, especially in a cold climate. Having a pool doesn’t universally appeal to everyone.
Alternative landscaping — such as a profusion of plants, an elaborate flower garden, a cactus, multiple water fountains or a pond — also can be a turnoff to buyers.
People sometimes go too far with the gardening and flowers. Buyers don’t want to have to maintain exotic gardens.
Another tricky item – a children’s tree house or play house. These items can raise liability and insurance questions with potential homebuyers.
Interior:
Most homebuyers want an easy-flowing floor plan that includes proportional numbers and sizes of bedrooms, bathrooms, kitchens, dining areas and living spaces. Homes that don’t conform to those expectations can be difficult to sell.
Things known in the industry as “functional obsolescence” means that some aspect of the home doesn’t meet most buyers’ needs. Things like:
- An awkward addition that disrupts the floor plan or blocks off a stairway
- Two bedrooms that have been combined into one room
- A bedroom that’s been turned into a large walk-in closet
- A massive bathtub that takes up most of a bathroom’s floor space
- Outdated wallpaper, which is almost always very difficult to remove
- Exterior window security bars in areas where crime isn’t a major concern
- A converted garage, which raises concerns in buyers’ minds about building permits, quality of construction, loss of storage space and limited vehicle parking.
Solutions:
The ideal solution for any of these issues is to remove the problem. If that’s cost-prohibitive, as is often the case, other recommendations include:
- Giving prospective buyers contractors’ estimates of the cost to remedy the defect themselves after the sale closes.
- Use home staging to show the defect in its best possible light
- Post pictures on a storyboard to show buyers other ways a tricky space could be used
- Adjust your asking price to reflect the undesirable element
- Be extremely patient
Don’t give up hope. Just realize that your home might sit on the market longer because you’re waiting for that perfect buyer.
.
.
Buying a Home? 3 Contract Contingencies You MUST Have
If you’re buying a home (or condo, townhouse, etc) there are three important contingencies your sales contract MUST have. A contingency simply means that if the matter is not resolved to your satisfaction, you have the right to cancel or terminate the sales contract and get a refund of any earnest money deposit you made when you submitted the offer to purchase.
The 3 MUST HAVE Contingencies are:
1 – Contingent on Financing. This is pretty obvious. If you cannot get a mortgage loan, you want to have the contract declared null and void and get your deposit back.
2 – Contingent on Appraisal. Again, pretty obvious, but you want to make sure the offer is contingent on the property being appraised at a minimum for the contract price. If your appraisal comes in lower than the purchase price (as is now very common around the country) your lender will only lend you 80 percent of the appraised value (if you are doing a conventional 80/20 loan, 20 percent down, financing the other 80 percent), which means you could have to come up with extra money at closing the lender won’t lend you because of the low appraisal.
3 – Contingent on a Satisfactory Home Inspection. You don’t want to buy a property only to find out that it needs a new roof, or the electricity is outdated, or the plumbing does not function properly. If your seller objects to such a contingency, run from the deal.
Don’t forget these contingencies when it comes time to make an offer on the home of your dreams.
|
|
Home Prices Show Strong Quarterly Gain
Home prices rose 6.9 percent in the second quarter, according to the Case-Shiller National Home Price Index compiled by Standard & Poor’s, the strongest quarter-over-quarter gain since the index began in 1987.
According to S&P, the monthly 10- and 20-city index rose 2.2 percent and 2.3 percent respectively in June. The two indexes were up 0.1 percent and 0.5 percent respectively in the last year, the first year-year gains in the monthly measures since September (20-year) and October (10-year) 2010.
The 10-city index rose to its highest level since September 2011 and the 20-city index to its highest level since August 2011.
Economists had expected the 20-city index to grow 1.4 percent in June and be flat year-over-year.
According to the National Association of Realtors, the median price of a single family home rose 4.7 percent in June while the government report from the Census Bureau and HUD showed the median price of a new home fell 3.4 percent in that month.
Year-over-year, the median price of an existing single family home was up 7.5 percent in June, according to the NAR as did the median price of a new home.
Meanwhile, Zillow’s July Real Estate Markets Reports show that home values increased 0.5 percent from June to July, marking another month of healthy monthly appreciation. Inventory shortages are being fueled by negative equity and a slowed distribution of REOs. More on inventory in our next story…
.
.T
Home Inventories Continue Falling
Record low home inventories (homes for sale) which are boosting home values and prices but depressing sales, show no signs of letting up. Though decline is normal this time of year, inventories stubbornly remain at decades-low levels.
The National Association of Realtors reported that the total housing inventory at the end July increased 1.3 percent to 2.40 million existing homes available for sale, which represents a 6.4-month supply at the current sales pace, down from a 6.5-month supply in June.
NAR’s chief economist, Lawrence Yun, said “given population and demographic demand, existing-home sales could be in a normal range of 5 to 5.5 million if all conditions were optimal. Sales may reach 5 million next year, but it will require more sensible lending standards and stronger job creation to push beyond that.”
Yun said there are distortions in housing inventory. “The total supply of housing inventory appears to be balanced in historic terms, but there are notable shortages in the lower price ranges which are limiting opportunities for first-time buyers. The low price ranges also are popular with investors, so entry-level buyers are at a disadvantage because many investors are making all-cash offers.”
.
.
Home Ownership at Lowest Rate in Nearly 50 Years
It seems fewer and fewer people are sharing in the American dream these days, whether by choice or circumstance.
A report released recently from John Burns Real Estate Consulting revealed that the “real” homeownership rate—measured as the percentage of households that own a home and are not seriously delinquent on their mortgage—has fallen to 62.1 percent, the lowest level in almost half a century.
The firm said that the Census Bureau’s 65.5 percent homeownership estimate was a vast overestimate, as it includes 3.8 million homeowners who are 90 or more days delinquent.
While the government and various lenders have taken steps to help struggling homeowners, John Burns Real Estate forecasted that those people are “really just renters in waiting.”
The spread between published and real homeownership rates has historically stayed slightly below 1.0 percentage point. That spread has widened in recent years for several reasons, including the economic downturn and the growing number of borrowers who have figured out how to keep their homes for an extended period without paying.
While the firm remains confident in the shared dream of homeownership, writer and John Burns Real Estate manager Sean Fergus said it’s time to face facts. He wrote, “let’s stop pretending that 65.5 percent of Americans own their own, recognize that the real number is 62.1 percent, and move forward with responsible mortgage programs that allow Americans to achieve the American dream.”
|
|
New Home Sales Down in June
When new home sales drop in the month of June, it’s cause for concern. June is traditionally one of the best months of the year for home sales, but the fact that June sales numbers were down after several months of increases, tends to indicate there are some underlying economic fundamentals that have just not recovered as much as first thought.
New home sales fell to 350,000, setting a five-month low in June. Economists had expected new home sales to inch up slightly from the preliminary sales report in May. May sales were revised up to 382,000 from the originally reported 369,000.
The report is a disappointment for the housing sector, which had seen some encouraging signs in recent data on builder confidence and housing starts. The 8.4 percent month-over-month drop in sales was the steepest since sales fell 11.4 percent from January to February 2011.
The June new home sales drop comes on the heels of another recent report from the National Association of Realtors that existing home sales fell in June to an eight month low, falling for the fourth time in five months.
June also saw a decline in the sales of existing homes. Home builders, however, remain optimistic. NAHB Chief Economist David Crowe said the lower number of new-home sales in June represents an adjustment from a robust level of activity in May, “yet overall results for the second quarter show we are still on track for continued improvement.”
Some economists are blaming a steady decline in the level of housing inventory for the drop in sales.
Since sales figures are a couple of months behind, it will be September and October before we know whether the traditional summer selling season was a bust or a boom. We’ll update you again in our September and October newsletters on July and August numbers. But heading into the elections in November, the economy certainly appears to be the number one issue for the candidates this time around. We’ll keep you posted.
.
.T
Home Refinancing: What You Need to Know
Mortgage refinancing means getting a new mortgage to replace your old one with the goal of reducing monthly payments, lowering your interest rate, or taking cash out of your home for other purchases.
According to the Mortgage Bankers Association, the average American refinances his or her mortgage every four years. With interest rates continuing to go lower and lower almost weekly, it’s no wonder so many people are trying get their mortgage refinanced.
The most popular reason for refinancing is to get a better interest rate. You can save a considerable amount of interest by just lowering your rate a point or two over a 30 year loan. For example, you have a $250,000 mortgage with a 30-year fixed rate of 6 percent. Your monthly mortgage payment is approximately $1,500. If after four years of owning your home you refinanced to a mortgage with an interest rate of 4 percent, your monthly mortgage payment would be $1,300 – a savings of $200 per month.
Another popular reason for mortgage refinancing is to switch mortgage types. Maybe you have an adjustable rate mortgage because that’s all you qualified for 5 years ago, and now the rate is about to adjust, and you want to switch to a fixed rate term. Likewise, maybe you have a 6 or 7 percent fixed rate mortgage and want to switch to the attractive rates an ARM offers.
Some people use mortgage refinancing to take some cash out of the equity they’ve built up in their home. Although more and more people are finding they have lost a lot of the equity they once had because home values have dropped so much over the past 5 years, many people are still fortunate enough to have the equity necessary to refinance and take cash out to pay for other things.
Is Refinancing Right For You?
Before you contact a lender, make sure it makes sense for you. Ask yourself these questions:
How long will I be in my home? The general rule is that unless you are planning to stay in your home at least another five years, then refinancing may not make sense.
Is there a prepayment penalty on my current mortgage? Since many mortgages carry a penalty if you pay off your existing mortgage, find out if you will be charged a “prepayment penalty.”
What are the costs of the new mortgage? Lenders almost always charge fees for taking out a new loan. Unless your new rate is at least a half a percentage point lower than your current rate, the fees may eat up your potential savings.
Can I reduce my monthly payments? For those whose cash flow has changed, refinancing for a longer term will likely lower your monthly payments. This will increase interest owed, but it could provide relief given a new set of financial considerations.
Can I cash out some of my equity? Taking out a new mortgage with a larger principal could provide a cash infusion for a major project or other needs. The advantage is that you can get a lower interest rate than if you used a credit card or an unsecured loan for the cash. This makes sense if the current interest rate is lower than your existing rate.
Whether or not refinancing is right for you depends on your individual circumstances. Just make sure you do the math and understand how the new loan will affect you.
.
.
Is The Housing Crisis REALLY Over?
The news on the housing front has been mostly positive for the past few months, making many analysts and forecasters say, “The housing crisis has finally ended.” But has it?
The country is still mired in record levels of personal debt, and more than 50% of the population is upside down in their homes and basically stuck in them for the foreseeable future. Add to all that the worsening crisis in Europe and Greece along with the instability of the Euro and you have the makings for a double-dip housing crisis.
A recent poll by Reuters shows most economists thinking the housing market has bottomed and prices should rise nearly 2 percent for 2013 after a mostly flat 2012. The main thing holding the market back now is the lack of any growth in the labor market.
In nearly every city in the U.S. it now costs less to buy a home than it does to rent. But many would-be homeowners can’t buy. They are virtually locked out of the market because they don’t qualify for a mortgage due to the strict underwriting standards. Some believe this credit freeze is only going to get worse.
Still, there’s no doubt that in most places the housing market appears to have bottomed out and is now gathering strength. We’ll stay on top of the market and pass the most up-to-date housing news to you here, good or bad. Stay tuned!
|
|
Pending Home Sales Up 13.3 Percent
Home contract signings rose for the 13th straight month, according to the National Association of Realtors, which reported pending home sales rising 13.3% over May 2011 and up nearly 6% over April 2012.
“The housing market is clearly superior this year compared with the past four years,” said Lawrence Yun, NAR chief economist. “Actual closings for existing-home sales have been notably higher since the beginning of the year and we’re on track to see a 9 to 10% improvement in total sales for 2012.”
On a seasonally adjusted basis, the Standard & Poor’s Case-Shiller 20-city index increased by 0.7% in both March and April. The CoreLogic national house price index rose by 1.1% and 1.2% in March and April, respectively. Additionally, Zillow’s home value index posted a 0.5% increase in May.
Housing analysts at Goldman Sachs said there are some suspicions as to whether all of this good housing news may be misleading. After all, they point out there are 2 million vacant housing units, with another 4 million in shadow inventory.
“These two seemingly contradictory aspects of the housing market lead many to ask: Can house prices increase in the presence of excess housing supply?” they ask.
Yun commented that desirable housing inventory is actually low, indicating a push on prices. This low inventory, he said, could actually hold back some contract activity. “If credit conditions returned to normal and if we had more inventory, especially in the lower price ranges, more people would become successful buyers. In an environment of historically favorable housing affordability conditions, it’s frustrating to see some consumers thwarted in the process,” Yun said.
.
.T
Reverse Mortgage = Foreclosure Risk
The Consumer Financial Protection Bureau (CFPB) released a report recently showing that although reverse mortgages are meant to help borrowers in retirement, they are in fact causing problems for many who don’t fully understand them.
A reverse mortgage is a type of home loan that lets older homeowners access the equity they have built up in their homes and defer loan payment until they sell the home, move out, or pass away. The original intent of reverse mortgages was to allow these homeowners to convert home equity into an income stream or line or credit to use in retirement. Borrowers were largely expected to age in place with their loans, living in their current homes until they passed or needed skilled care.
Reverse mortgages require no monthly mortgage payments, but borrowers must still pay property taxes and homeowner’s insurance. The report showed that nearly 10 percent of reverse mortgage borrowers are at risk of foreclosure because they failed to pay those costs.
The report found that many reverse mortgage borrowers do not understand how their loan balance will rise and their home equity will fall over time. In addition, the influx of new choices brought on by innovations and policy changes have made the matter too complex for many homeowners.
Many consumers are getting reverse mortgages before the age of 70 (with the most common age for a new borrower being 62, the first age at which reverse mortgages are available), and some are even getting them before retiring.
These borrowers will have fewer resources to pay for everyday and major expenses later in life and may find themselves without the financial resources to finance a future move-whether due to health or other reasons.
Another problem is that 70 percent of borrowers are taking out the full amount of proceeds as a single lump sum instead of treating the payment as an income stream. As a result, these borrowers have fewer available financial resources later in life. They may not be able to continue paying taxes and insurance on their homes, leading to potential foreclosure.
Then there is the issue of deceptive or misleading marketing materials about reverse mortgages. The report cited examples of mailers that depict reverse mortgages as a government benefit or entitlement program in the vein of Medicare and use images resembling government seals to entice consumers. It can be difficult for consumers to tell that a reverse mortgage is a financial product, not a government benefit.
If you’d like a copy of the 231 page report (PDF) click here.
.
.
A Turn in Housing: Are These Signs Real?
After several years of false hopes and news that things were turning around in the housing market, evidence is accumulating that the optimists may finally be right this time.
The housing market is starting to recover. Prices are rising. Sales are increasing. Home builders are clearing lots and raising frames.
Like the economic recovery that began three years ago, what happens next is likely to prove a little disappointing. The pace of recovery will probably be slow, and the price of homes in some areas will continue to decline.
Millions of people remain underwater, owing more on their homes than the homes are worth, and unable to sell. Millions of families still face foreclosure. And a setback in the still-fragile economic recovery could easily reverse the uptick in housing prices, too.
But roughly six years after the housing market began its longest and deepest slide since the Great Depression, a growing number of experts and people who actually put money into housing believe the end has come.
The trend is clear in the data. The widely respected S&P/Case-Shiller index reported recently that sales prices for existing homes rose in April for the first time this year. Several other measures, including a seasonally adjusted version of the index, show that price increases began in February. The pace of housing construction has increased. And the National Association of Realtors says that pending home sales climbed to the highest level since the end of a federal tax credit for first-time buyers in September 2010.
The rise in prices is happening despite the vast number of vacant houses awaiting buyers, up to two million more than the normal level, with several million more houses still at risk of being foreclosed.
Shadow inventory is not distributed uniformly, according to a new analysis by Goldman Sachs. Even within some metropolitan areas, vacant houses are clustered in less desirable neighborhoods, while buyers are seeking homes in areas where there are few vacancies.
Under these circumstances, researchers conclude, “It is possible for us to see both house price increases and excess housing supply at the same time.” Indeed, in a growing number of areas demand for homes is outstripping supply.
If you’ve been sitting on the sidelines waiting for the bottom of the real estate market, you may have sat there a little too long.
|
|
Home Buyers May Find Themselves in a Seller’s Market
Home buyers who have been sitting on the sidelines watching as the real estate market tanked, may soon find themselves right smack back in the middle of a sellers market. As we wrote in the May issue of this newsletter, some markets are already experiencing what may be the beginning of this very thing, believe it or not, where buyers are finding themselves caught in bidding wars for homes for sale.
Sales of previously owned homes rose at a robust clip in April, and prices jumped, the latest indications that the hard-hit housing market is recovering.
Existing home sales were up 3.4% from March, and if that pace holds up, 2012 could be the strongest year for home sales since 2007, just after the housing boom. The median home price, meanwhile, increased 10.1% from a year ago, the strongest year-to-year gain since January 2006.
Even more recent data shows that sales of newly built homes rose 3.3% in April from the March figures, and 9.9% from a year ago.
Home buyers would be wise not to sit and wait much longer, or they’ll find themselves suddenly in a seller’s market again like many homebuyers found themselves prior to the housing crisis. When sellers once again have the upper hand in negotiations because the market has turned in their favor, buyers will be kicking themselves for waiting so long and missing the bottom.
As most experts will tell you, cashing in on the bottom of any market, be it real estate, or any other, is a crapshoot. You’re playing a form of Russian Roulette with your finances to even try to time the bottom of the housing market.
With mortgage rates still breaking records, and the apparent bottom of the housing market either here, or already gone, now is the time to get into the real estate market and find your dream home, before it’s too late.
.
.T
Problem to Avoid When Buying a Home
There are all sorts of things you need to watch for when looking for a home. Since sellers often fail to disclose all the facts about their home, you need to have a watchful eye whenever you walk into a prospective property. If you could hire a home inspector to look over everything on each home you’re considering, you’d be keenly aware of most problems, but that of course is not financially feasible.
So we’ve put together this list of “Problems to Avoid When Looking for a New Home” to help you spot problems that may be lurking and waiting for you. Here they are, in no particular order:
1-Poor Upkeep
Look for the obvious signs that the current owners are not keeping up with maintenance. Things like a neglected lawn, gutters that are full of leaves and debris, paint that is peeling or in need of repair.
2-Foundation Damage
Glance at the slope of the yard and driveway. Does it slope towards, or away from the house? If it slopes toward the house, it could present a problem with water seeping into the foundation walls and basement area (if your area has basements). These problems can be expensive to repair, so look at the foundation of any home you’re considering for signs of buckling or cracking.
3-Archaic Wiring
You may not be a licensed electrician, but take the time to check switches and outlets. Make sure they are all in working order. Check to see if any of the switchplates are warm to the touch. If so, this could be a sign of wiring problems and you’ll want that checked before you buy.
4-One Newly Painted Wall
A fresh coat of paint can be a good thing, IF it’s the entire room. But if you detect one wall of a room with a fresh coat of paint, that could be a sign that the seller is trying to hide a problem like water damage, mildew, or mold. If you see any signs of water staining or sagging walls or ceilings, have a professional home inspector check that out.
5-Peculiar or Foul Odors
If you notice any peculiar or foul odors inside or outside the home, there could be a serious problem causing the smells. If you notice smells and you can’t figure out where they’re coming from, it could be serious. Don’t discount what your nose may be trying to tell you. Likewise, if you detect a strong scent of air freshener, this could be the sellers trying to cover up an issue.
6-Locked Doors
When you’re walking thorugh a home for sale, the sellers should never have any doors, closets or storage areas locked. If you encounter restricted areas, ask the sellers to open up. If an area is locked, there may very well be something the owner doesn’t want you to see.
7-Major Renovations
While additions may be nice, and renovations may have been made to modernize things, use caution here. If you detect that a home has had any major renovations, like a floor or structural wall removed or changed, proper adjustments may not have been made to ensure the home is sound. This could shift weight to other areas and repairs to fix this could be costly. If you suspect that any major renovations have been made, secure a structural engineer to check the home for safety.
While this list is far from complete, keeping these items in mind when looking for a home for sale could save you money after the purchase. And as always, we strongly recommend you get a complete home inspection on any home you are serious about buying, and make a satisfactory home inspection a contingency of your home purchase.
.
.
Welcome to Another Hurricane Season
June 1st means the start of yet another Atlantic hurricane season. And even though tropical cyclone activity doesn’t usually peak until late summer/early fall, we’ve already had two named storms (Alberto and Beryl) this year before the season even officially begins. Next up is Chris.
Does this mean we’re in for a stronger storm season this year because of all the activity already?
According to the preseason forecast, we’re expected to get 11 named storms, 6 hurricanes, and 2 major hurricanes. These forecast numbers are below the long-term average from 1950-2011. However, don’t let your guard down. Forecasts simply cannot accurately predict critical details like, where or how many landfalls will occur.
Fewer hurricanes doesn’t necessarily mean less damage and destruction. In 1992, there were only 5 named storms. However, one of those was Hurricane Andrew, a Category 5 hurricane that devastated South Florida. In 1983 there were only 4 named storms. One of those was Alicia, a Category 3 storm which pounded the Houston-Galveston area and caused almost as many fatalities there as Andrew did in South Florida.
There are six lists of hurricane names that continue to rotate. The lists only change when there is a hurricane that is so devastating, the name is retired and another hurricane name replaces it. As there were no significant hurricanes in 2006, the 2012 hurricane name list is exactly the same as the 2006 hurricane name list.
Now is the time to make sure you have proper insurance coverage, because once a storm forms and is named, most insurance companies stop writing any new insurance coverage. Flood insurance has a 30 day waiting period before it goes into effect, so if you don’t have flood insurance, now is the time to be checking into that.
The Atlantic basin is not the only activity center for hurricanes, as many storms form in the Pacific as well. So no matter where you are along any of our U.S. shorelines, you are not 100% safe from the wrath of mother nature in the form of a hurricane or tropical cyclone. Be prepared.