Moving-Up? Do it NOW not Later

A recent study revealed that the number of existing home ownersplanning to buy a home this year is about to increase dramatically. Some are moving up, some are downsizing and others are making a lateral move. Another study shows that over 75% of these buyers will, in fact, be in that first category: a move-up buyer. We want to address this group of buyers in today’s blog post.

There is no way for us to predict the future but we can look at what happened over the last year. Let’s look at buyers that considered moving up last year but decided to wait instead.

Assume they had a home worth $300,000 and were looking at a home for $400,000 (putting 10% down they would get a mortgage of $360,000). By waiting, their house appreciated by 13.8% over the last year (national average based on the Case Shiller Pricing Index). Their home would now be worth $341,400. But, the $400,000 home would now be worth $455,200 (requiring a mortgage of $409,680).

Here is a table showing what additional monthly cost would be incurred by waiting:

Move Up Cost of Waiting (2)

Prices are projected to appreciate by over 4% and interest rates are also expected to rise by as much as another full percentage point. If your family plans to move-up to a nicer or bigger home this year, it may make sense to move now rather than later.

  

Posted on February 25, 2014 at 5:12 pm
Shelia Simmons | Category: Home improvement, Home ownership, Real Estate News

Old-fashioned cleaning a healthy choice

 

Originally published January 29, 2014 at 11:25 PM | Page modified January 29, 2014 at 11:55

 

Many are turning back the clock when it comes to cleaning and rediscovering old-time cleaning recipes — many of them used before the advent of the synthetic formulas widely available after World War II.

 

Q: What home-cleaning products are safe for the environment?

A: There is a greater awareness among homeowners that chemicals in commercial home-cleaning products can have negative effects on personal health — not to mention the environment.

Many are turning back the clock when it comes to cleaning and rediscovering old-time cleaning recipes — many of them used before the advent of the synthetic formulas widely available after World War II.

Believe it or not, you can handle nearly all of your day-to-day cleaning with just seven easily available, inexpensive, environmentally benign ingredients: baking soda, washing soda, soap flakes, oil soap, vinegar, borax and ammonia. And of those, only ammonia is potentially hazardous in its concentrated form. Just use it carefully, and store it out of the reach of children and pets.

Kitchens and baths

Instead of using commercial products to clear your kitchen sinks, faucets and drains, give baking soda a try. Just dampen with water and apply it the same way you would with scouring products. Unlike bleach and phosphates, which are common ingredients in commercial cleaning products, baking soda isn’t toxic to the environment and won’t kill the bacteria that sewage and septic systems need to work properly.

When baking soda is combined with vinegar, it produces an impressive foaming reaction. Pour a cup or more of vinegar into the toilet bowl, and then toss in a handful of baking soda. The combination will strip off hard-water lime deposits if you leave it for a while.

Vinegar and baking soda are also effective for cleaning drains. Dump a handful of baking soda into the drain, then pour in a big shot of vinegar and put the plug in to drive the carbon dioxide down the pipe. Keep the plug in until the fizzing stops, and then run hot water down the drain. Not only does it clean and clear pipes, it also eliminates the need for corrosive cleaners.

Vinegar by itself is terrific for cleaning faucets. And mixed with warm water, it’s your secret weapon if you have to deal with the occasional pet stain on carpeting. Combine equal parts vinegar and water and wipe pet stains away. It also works on linoleum that isn’t heavily soiled.

Laundry rooms

A mixture of one part borax, one part washing soda and one part soap flakes (about three-fourths of a cup of the mix per normal load) will work as well as any detergent. It is especially effective and kind to natural fabrics. Be sure to start by running all of your clothes through a cycle with washing soda only, which removes detergent residue. Otherwise, your whites could look yellowed.

White clothes that contain synthetic materials can yellow slightly over time with this formula, but you can counteract that by line-drying your whites in the sun now and then. Sunshine is the oldest and best bleach and disinfectant of them all.

Mother, grandmother and great-granny really did know best.

 

HomeWork is the weekly column by the Master Builders Association of King and Snohomish Counties’ Remodelers Council about home care, repair and improvements. If you have questions about home improvement, send them to homework@mbaks.com.

Posted on February 7, 2014 at 4:34 pm
Shelia Simmons | Category: Home improvement, Home ownership, Real Estate News

5 Things to Ask Your Real Estate Agent

http://www.foxbusiness.com/personal-finance/2014/01/31/5-things-to-ask-your-real-estate-agent/

Selling a home can be difficult — you probably want to sell in a certain time frame and for the maximum price. For most of us, it represents one of the biggest financial transactions of our lifetimes, and it can help to have expert guide us through the process. A knowledgeable and trustworthy real estate agent can be a huge asset — and you want to do a thorough screening to get the best match for you.

You’ll want to ask about commission, of course, but it doesn’t stop there. Here are five questions that you should ask your potential real estate agent.

1. What’s Your Experience Like?

This is an important question because it will tell you how long the agent has been selling homes and what kinds of of properties they usually deal with (condos or single-family homes, or in-town or suburban). It’s important to find someone who not only has years of experience, but someone who is familiar with the neighborhoods you’re interested in and often sells homes in your price range.

2. May I See Your References?

Just as when you’re hiring a new employee, it’s important to check up on your real estate agent’s references. You should call every one of them. Ask what it was like to work with this person on a day-to-day basis. Was the agent easy to reach? Would you hire him again? Did she follow up with you regularly? Most real estate agents will give out their best references so don’t be afraid to ask the tough questions in order to get the most honest responses.

3. How Many Clients Do You Have?

Asking this question should give you a good idea of how much time your agent will have for you. You don’t want a real estate agent with too many clients nor do you want one with too few. The latter could be a bad sign since no one else seems willing to hire her. (On the other hand, seasonal fluctuations are normal.)

If you’re worried that your real estate agent might have too many clients or not enough time for you, ask if he works independently or with a team. A good agent will generally have a solid support staff to handle the routine tasks.

4. What Can You Tell Me About Growth Trends?

One of the biggest strengths real estate agents can bring to the table is their ability to analyze trends in the housing market. Anyone can go on Redfin or Zillow and look up homes for sale, but how do you know what is or isn’t a competitive price? Some ZIP codes might turn from a bustling metropolis to a forgotten foreclosure town in just a few years so it’s important to hire an agent who pays close attention to growth and price trends and can help you set an appropriate asking price.
5. What’s Your Success Rate?

The Internet has made it easy to look up your real estate agent’s sales records but don’t be afraid to ask. One thing you could ask for is the agent’s list-to-selling-price ratio. This ratio is found by comparing the list price to the selling price. But don’t get too caught up in this number, make sure to vet his or her other success metrics too.

Posted on February 6, 2014 at 6:35 pm
Shelia Simmons | Category: Home improvement, Home ownership, Real Estate News

6 WAYS TO MAKE AN UNFINISHED BASEMENT AWESOME

Date: September 06 2013 | Author: Brian | Category: Creative on BrightNest.com
 

When you think of a cozy room, what comes to mind?

Warm lighting? Thick throw blankets? Roaring fire? Stuff like that? Makes sense. Here’s what you probably didn’t visualize: ceiling pipes, excessive moisture and concrete floors.

And that, my friend, is why unfinished basements get a bum rap. They frequently suffer from all three issues. But turning a cold basement into a cozy spot isn’t impossible! Even better, it can be done for far less than you’d pay for a full remodel.

Here’s how:  

1. Stop the Moisture

The biggest anti-cozy factor in most unfinished basements is moisture. Nobody likes that damp, wet sock smell, and you can’t put nice things down there if they’re just going to get wet. That means that before you do anything else, you need to handle the moisture issue. Sometimes this is as simple as purchasing a dehumidifier (about $200) and letting it rip.

If your moisture problems are more serious (i.e. leaks or puddles), you’ll need to employ a more aggressivebasement waterproofing strategy. Note: A basic waterproofing will run you $200-$500, but if any changes need to be made to your foundation, it can cost $2,000 or more. 

2. Add Some Area Rugs

Now that your basement is moisture-free, you can cozy up that concrete floor. Area rugs are a cost-effective way to do just that. If you happen to have a few unused rugs, put them to good use  downstairs (an eclectic look totally works, so don’t be afraid to mix and match). Tip: No extra rugs? No problem. We recommend using Amazon’s handy rug finder to locate a size, pattern and price that works for you.

3. Throw Down Some Pillows

When in doubt, add throw pillows. Even a second-string sofa with feel cozy if it’s covered with soft cushions. We recommend choosing ones that are pretty big for some extra comfort. These 20×20 Isabella Ikat pillows might do the trick, or maybe these 24” Knit Fringed pillows are more your style? Tip: If you like the bohemian look, try arranging on a bunch of throw pillows on your new, awesome rug.

4. Add Tasteful Lighting

Nothing kills the mood faster than a bunch of naked bulbs hanging from the ceiling. Make them irrelevant by adding lamps, string lights or both. You can find a lot of nice floor lamps for less than $50, like this IKEA lamp for $20.

5. Hide Unsightly Spots

It’s going to be hard to make that water heater in the corner look chic, but it’ll be easy to hide that ugly beast. Simply hang up a colorful sheet or even a shower curtain in front of it! If you want to help separate out different areas of your basement in a tasteful fashion, try a room divider. Wine crates, bookshelves and window frames all make good, cheap room dividers.

6. Paint the Ceiling

Those pipes, joists and air ducts definitely take away from your cozy basement vibe. But if you paint everything a dark color – like a charcoal gray – you can go a long way towards disguising all the stuff going on up there. Plus, it’s a lot cheaper than covering your ceiling with drywall ($4,000 or more). Note: Doing this yourself is very labor intensive, since a lot of the painting may need to be done by hand. There may also be some special considerations for electrical wiring or heating pipes. Unless you’re an experience painter (or are up for a challenge) we recommend hiring a professional for this.

Posted on December 31, 2013 at 5:45 pm
Shelia Simmons | Category: Home improvement, Home ownership, Real Estate News

Average US rate on 30-year loan rises to 4.47 pct.

Average U.S. rates for fixed mortgages rose slightly this week but remained near historically low levels.

SeattleTimes.com

WASHINGTON —

Average U.S. rates for fixed mortgages rose slightly this week but remained near historically low levels.

Mortgage buyer Freddie Mac said Thursday the rate on the 30-year loan increased to 4.47 percent from 4.42 percent last week. The average on the 15-year fixed loan rose to 3.51 percent from 3.43 percent.

Mortgage rates peaked at 4.6 percent in August and have stabilized since September, when the Federal Reserve surprised markets by taking no action on starting to reduce its $85 billion-a month bond purchases. The Fed decided this week that the outlook for the economy appeared strong enough for it to reduce the monthly bond purchases starting in January by $10 billion.

The purchases are designed to keep long-term rates such as mortgage rates low.

A government report issued Wednesday showed that U.S. builders broke ground on homes in November at the fastest pace in more than five years, strong evidence that the housing recovery is accelerating despite higher mortgage rates.

Data from the National Association of Realtors released Thursday showed the number of people who bought existing homes last month declined for the third straight month as higher mortgage rates made home-buying more expensive. In addition, the lingering impact of the partial government shutdown in October may have deterred some sales. Still, the Realtors' association projects that total U.S. home sales this year will be 5.1 million. That would be the strongest since 2007, when the housing bubble burst.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn't include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for a 30-year mortgage was unchanged at 0.7 point. The fee for a 15-year loan declined to 0.6 point from 0.7 point.

The average rate on a one-year adjustable-rate mortgage rose to 2.57 percent from 2.51 percent last week. The fee increased to 0.5 point from 0.4 point.

The average rate on a five-year adjustable mortgage rose to 2.96 percent from 2.94 percent last week. The fee remained at 0.4 point.

Posted on December 24, 2013 at 5:19 pm
Shelia Simmons | Category: Economic News, Home improvement, Real Estate News

5 home improvement projects guaranteed to cure the winter blues


If you’re dreading the long months of cold weather ahead and the thought of being stuck inside, consider curing cabin fever with some fun, easy and rewarding home improvement projects.

When choosing projects to tackle first, Brian Bolger, Lead Contractor with Bolger Design & Remodeling in Mechanicsburg suggests focusing on ones that will increase your property value, save money on your utility bills, and, of course, add a smile to your face. Here are five ideas to get you started.

1. Create walls that wow

Since you're stuck inside staring at the walls, why not give them a new look. Adding modern trim work, crown molding and a bold coat of paint can completely change the look of a room without the expense of doing a complete renovation, Bolger said.

“Contrary to what many homeowners might believe, you can use paint in your home without opening up every window as long it’s an environmentally friendly and waterborne paint, which has virtually no fumes,” he said. “Plus, the dryness of the colder months can actually produce faster results.”

To really add visual interest to your walls, homeowners could go with a new or dramatic paint color or use painter’s tape to create stripes or patterns. A winter project Bolger and his wife are actually getting ready to do is hang wallpaper in their bedroom.

“Wallpaper is making a bit of a comeback thanks to home improvement shows,” Bolger said. “It can definitely be a do-it-yourself project or you can get professionals to do it. My wife and I have hung it before in other rooms, so we have some experience on our side.”

“Replacing interior doors is an affordable way to give your home an updated look versus an expensive remodel,” said Ken Shuman with B&B’s Custom Trim

Bolger also works on a lot of custom trim and crown molding projects which he said for an investment of between $500 and $800 dollars, can make all the difference in the world in bringing some life back into a room. A popular trend right now he said is replacing typical baseboard with ones that are at least five inches wide.

2. Add a “splash” of personality to your kitchen

For homeowners looking to spice up their kitchen without spending a pretty penny, adding a backsplash is a great solution, not to mention the perfect project for a cold winter weekend.

“For several hundred dollars you can completely change the look of your kitchen, as well as customize it to fit your personality,” said Clark Shindel, an at-home service specialist at The Home Depot in Mechanicsburg. “Our free do-it-yourself backsplash and tile workshops are our most popular classes.”

Just a few years ago The Home Depot had only about 40 tiles to choose from. Today, the store has more than 400 different styles and sizes, ranging from classic subway tile to natural stone to metal. While adding more functionality to a kitchen, a backsplash can also help accessorize and emphasize countertops, cabinets and appliances.

“Installation is a relatively simple process, but it is very tedious and time intensive,” said Shindel, who recommends making it a weekend project. “We offer products like theSimple Mat and peel and stick tiles that save time and eliminate a lot of the mess.”

Two pitfalls he warns do-it-yourselfers about are not taking the time to prep and lay out a template which can result in irregular lines or spaces. And not cleaning off the grout completely, which once dry can result in a nasty haze that is almost impossible to get off.

In addition to free tile classes, The Home Depot does offer backsplash installation services for those homeowners not quite daring enough to tackle it themselves.

3. Lighten up your rooms

What better way to brighten and warm your spirits this winter than with new lights, lamps or ceiling fans. Not to mention it’s an easy and affordable way to update the style of any room.

“We get a lot of customers during the winter who are shopping for new lights to get ready for the holidays or to accent kitchen and bathroom renovations,” said Charlotte Couch, showroom manager at Yale Lighting Concepts & Design in Swatara Township. “They are also looking to save on their energy bill with ceiling fans which push heat back down.”

LED-style lights, which come in contemporary and bold styles, also provide a money-saving option. Installing dimmers in areas like the family room or dining room saves money, while allowing homeowners to customize the ambiance.

In addition to pendant lighting, another style that is growing in popularity, said Couch, is Steampunk, which is a cross between vintage and industrial designs. But for a softer more romantic feel, a crystal chandelier is still a timeless choice.

“When it comes to installation and dealing with electrical issues my advice is to hire a professional so you know it’s done right,” Couch said. “Especially with ceiling fans, you want to be sure they aren’t loose or wobbly.”

4. Turn dull doors into classy decor

With home improvement projects, sometimes it’s the things that are used the most that are noticed the least. Like all the doors in your home — in and out of rooms, to closets and utility rooms. But after a closer look, the scratches, cracks, old hinges and outdated style can be hard to miss.

“Replacing interior doors is an affordable way to give your home an updated look versus an expensive remodel,” said Ken Shuman, salesman and estimator B&B’s Custom Trim Inc. in Rapho Township. “Most of the homeowners that come to us are looking for doors that have a unique or more modern look than what they have.”

According to Shuman, there are a lot of options that many people might not even think about. For example, double doors are a much more functional and attractive alternative to sliding doors and bi-fold doors, while French-style doors can add natural light and architectural detail to a space.

“A big thing with customers right now is not so much the door, but the hardware,” Shuman said. “Homeowners are choosing update hinges and doorknobs with more modern colors like brushed nickel or aged bronze.”

While installing interior doors can be a job for do-it-yourselfers, Shuman pointed out that it can quickly turn into a bigger job than expected, especially when replacing doors in older homes.

“Most doors are not going to just fall into place,” Shuman said. “The jobs we do involve cutting, trimming and shaping the door to size, and sometimes replacing the molding.”

Shuman’s advice to homeowners looking to replace interior doors is for them to do their homework, know their budget, and have an idea of what they like.

5. Take your bathroom from drab to fab

There’s no better time than the winter to turn your boring bathroom into a spa retreat. While replacing a faucet, re-grouting tile, or repainting are relatively easy for the do-it-yourselfer, more ambitious jobs like replacing the tub or adding tile floor might be better left to a professional.

While a complete remodel might be a bigger investment, it’s worth considering, said Charles Cornelius, owner of Chazz’ Home Improvement in Mifflin Township

“Many older homes were not built using mold-resistant drywall, so if you’re going to make an investment in upgrading your bathroom, that’s one of the best places to start,” he said. “Knowing what’s going on behind the walls is important before making expensive updates.”

According to Cornelius, there is also a lot of plumbing involved with replacing bathtubs, sinks and toilets, which requires an expert to ensure it’s done right. Once the walls are closed up, a small leak can go unnoticed for a long time, resulting in serious damage and possibly a complete remodel.

“My philosophy is that if you’re going to invest in a project, do it right the first time,” he said.

By Karren L. Johnson | Special to PennLive 


on November 21, 2013 at 10:30 AM, updated November 21, 2013 at 10:33 AM

Posted on December 13, 2013 at 7:14 pm
Shelia Simmons | Category: Home improvement, Home ownership

Harvard: 5 Financial Reasons to Buy a Home

  


Eric Belsky is Managing Director of the Joint Center of Housing Studies at Harvard University. He also currently serves on the editorial board of the Journal of Housing Research and Housing Policy Debate. This year he released a new paper on homeownership – The Dream Lives On: the Future of Homeownership in America. In his paper, Belsky reveals five financial reasons people should consider buying a home.

Here are the five reasons, each followed by an excerpt from the study:

1.) Housing is typically the one leveraged investment available. 

“Few households are interested in borrowing money to buy stocks and bonds and few lenders are willing to lend them the money. As a result, homeownership allows households to amplify any appreciation on the value of their homes by a leverage factor. Even a hefty 20 percent down payment results in a leverage factor of five so that every percentage point rise in the value of the home is a 5 percent return on their equity. With many buyers putting 10 percent or less down, their leverage factor is 10 or more.”

2.) You're paying for housing whether you own or rent. 

“Homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord.”

3.) Owning is usually a form of “forced savings”.

“Since many people have trouble saving and have to make a housing payment one way or the other, owning a home can overcome people’s tendency to defer savings to another day.”

4.) There are substantial tax benefits to owning. 

“Homeowners are able to deduct mortgage interest and property taxes from income…On top of all this, capital gains up to $250,000 are excluded from income for single filers and up to $500,000 for married couples if they sell their homes for a gain.”

5.) Owning is a hedge against inflation.

“Housing costs and rents have tended over most time periods to go up at or higher than the rate of inflation, making owning an attractive proposition.”

Bottom Line

We realize that homeownership makes sense for many Americans for many social and family reasons. It also makes sense financially.

 

Posted on December 13, 2013 at 6:50 pm
Shelia Simmons | Category: Economic News, Home improvement, Home ownership, Real Estate News

14,027 Houses Sell Every Day in the U.S.!!

  

houses with cartThere are some homeowners that might consider waiting for the spring to sell their house thinking that no one buys a home during the winter months. What we should understand is that homes sell EVERY DAY. As a matter of fact, according to the latest Existing Homes Sales Report from the National Association of Realtorson average 14,027 homes sell daily in this country.

It is true that more houses sell in the spring than the winter in most markets.  However, it is also true that there will be more competition as many sellers wait to the spring to put their house on the market.

Thousands of homes sell each and every day in this country. Don’t be afraid to put your house on the market this winter.

Posted on December 3, 2013 at 6:06 pm
Shelia Simmons | Category: Home improvement, Home ownership, Real Estate News

Planning to Buy a Home in 2014? Get Ready Now

By Christine DiGangi
By Credit.com   | Posted Dec 2nd 2013 9:07AM Updated Dec 3rd 2013 12:37PM



With big changes coming to the mortgage industry at the beginning of next year, many consumers will want to evaluate their homebuying plans. Regulations drafted by the Consumer Financial Protection Bureau will change the definition of a qualified mortgage for any loan applications received on and after Jan. 10, and many consumers may find themselves unable to meet the new requirements.



Qualified mortgages are loans that meet certain standards designed to ensure that borrowers are highly likely to be able to pay back the amount in question. Facing this challenge, it's up to the hopeful homeowner to improve their chances of mortgage approval by doing the necessary research, improving their credit profiles and meeting the qualified mortgage standards well in advance of filling out loan applications.



It's important to meet qualified mortgage standards because government-sponsored enterprises, known as GSEs, like Fannie Mae and Freddie Mac have said they won't buy non-qualified mortgages starting next year, said Joshua Weinberg, senior vice president of compliance with First Choice Lending/Bank. Fannie and Freddie don't lend to homeowners directly, rather they purchase mortgages from banks and then bundle them into securities and sell those securities to investors.



For lenders that originate mortgages with the intention of selling them to the GSEs, as many do, originating non-qualified mortgages won't be feasible. Other lenders own the mortgages they originate, meaning they don't have to worry about selling them to GSEs, and such larger portfolios could probably take on non-qualified mortgages.



What's Changing? Mortgages must pass tests of sorts to meet the standards of a qualified mortgage: The APR must be within 150 basis points (1.5 percentage points) of the annual prime offer rate, the loan term cannot exceed 30 years, points and fees cannot exceed 3 percent of the loan balance and there can be no negative amortization or interest-only payments. Under these conditions, the mortgage qualifies for safe harbor, meaning the lender is not at risk of being sued by a borrower who is unable to repay the loan.



There's a class of loans called higher-priced qualified mortgages, in which the APR exceeds the 150 basis-point limit, and in those cases, the loan falls under rebuttable presumption, meaning the lender is assumed to have complied with ability-to-pay requirements, unless a borrower or attorney argues otherwise. Loans with rebuttable presumption will likely come at an additional premium, said Cameron Findlay, chief economist at Discover Home Loans, though the price of that premium is unclear at this point.



The ability to repay comprises a series of requirements that must be met by the borrower and verified by the lender, including income and debt levels. All of these CFPB regulations are aimed at protecting consumers from mortgages they can't reasonably expect to repay, because such faulty loans triggered the recent financial crisis. Given these limitations, and some new restrictions on lenders that also go into effect in January, some have suggested that consumers may find themselves struggling to acquire a mortgage.



Weinberg described it this way: Originating a mortgage has been a process that blends science and art. The science includes the regulations that give clear guidelines for what does and does not meet qualified mortgage standards. The art comes in when an originator decides to approve or deny a mortgage application, even if a borrower doesn't meet every requirement in the book, because his or her experiences can give important context to a case that numbers and rules cannot.



"With this QM rule we're seeing an elimination of the art and a focus on the science," Weinberg said. "The way the points and fees will be calculated is now a pretty defined standard. My gut says because of the shrinking art component and the emphasis on the science, fewer people are going to qualify for loans."



While the new regulations are beyond consumer control, there are several things potential homeowners can do to prepare for buying residential property in 2014.



1. Ask Questions: If this all sounds a bit confusing, don't worry. You're not alone. Both Findlay and Weinberg acknowledged the complexity of the new rules and said there's confusion among lenders. For potential homeowners who don't understand what these changes mean for them, there's no shame in asking someone to explain them.



There are a lot of components to mortgages that first-time homebuyers may not be familiar with. Say a lender instructs you to reduce your debt-to-income ratio — that means how much of your income is tied up in student loan payments, collections accounts, judgments and other existing loan obligations. You've just learned that points and fees can't exceed 3 percent of the loan balance, but what's a point?



A point, for the record, is prepaid interest on the loan, with one point equal to 1 percent of the loan. If a borrower would rather have a lower interest rate than the one they're offered then they can pay points to lower that rate.



There's bound to be something that confuses the borrower, and no one should enter into such a large financial decision with uncertainty. Ask a lender to explain it to you, but understand that the lenders are nailing down the new processes, as well. "It doesn't bode well for the consumer when there's this confusion," Findlay said.



It's important to shop around for mortgages, and consumers should know that they can concentrate their mortgage search into a few weeks in order to minimize the impact on their credit scores. Inquiries are a major factor in your credit scores, and too many inquiries can hurt your credit. Mortgage inquiries made within that short period (which varies by credit scoring model) will count as a single inquiry on their credit reports, and because multiple inquiries would normally ding credit scores, this allows consumers to find the best offer without harming their credit profiles. If you want to see how inquiries are affecting your credit, you can look at your free Credit Report Card, which grades you on important credit score factors and gives you free credit scores.



2. Tackle Debt: If you have debt, you should try to reduce it, and this is true for all consumers, not just those looking to buy a house. Potential homeowners, however, should be extra motivated to conquer their debt: Under new ability-to-repay requirements necessary to attain a qualified mortgage, a borrower's debt-to-income ratio must be 43 percent or less, including the potential mortgage payment.



"Not only do we consider the debts that show up on your credit report, but we have to look at debts you may expect to pay in the future," Weinberg said, giving the examples of child support and student loans in deferment. "They are also going to need to be comfortable and aware of managing that debt. They are going to be asked questions about that."



Whether you're looking to buy a home next year or in two years, make a plan to manage debts now. It can only help.



3. Start the Paperwork: Though these new requirements impact consumers, they also affect lenders, and no one wants to be the first to screw up. The ability-to-repay measures require a lot of documentation, which will need to come from you, the applicant.



"We're really needing to get a very holistic perspective on the borrower in order to complete the analysis necessary to meet compliance," Weinberg said. Borrowers should ask a lender exactly what they'll need to provide, and in order to answer lenders' questions, they should also take stock of their credit profile.



Consumers are entitled to a free annual copy of their credit report from each of the three major credit bureaus — Experian, Equifax and TransUnion. That's three credit reports, so it's smart to review at least one before starting the homebuying process.



No one is sugar-coating these changes — they're a lot to handle. Changes are common in this post-crisis climate, so the best consumers can do is ask questions and do their part to prepare and educate themselves. "If we're making better loans, and the consumers are protected better, that's better at the end of the day," Weinberg said.

Posted on December 3, 2013 at 5:59 pm
Shelia Simmons | Category: Economic News, Home improvement, Real Estate News

2014 housing outlook: Home prices head higher

 

After a surge in home values in most cities in the past year, prices will increase more slowly in 2014.

By Pat Mertz Esswein of Kiplinger on msn.com

Home prices will rise in 2014 but at a slower, more steady pace compared with historical trends.

The housing recovery has pushed up home prices nearly everywhere. In the past year, home prices rose in 225 of the 276 cities tracked by Clear Capital, a provider of real estate data and analysis. Prices nationwide increased  by 10.9 percent, pushing the median price for existing homes up by $30,000, to $215,000. For people who have waited to sell their home or refinance their mortgage, that's good news. 

Rising home prices in Seattle enabled Mike and Kristin Litke to refinance their first mortgage last summer and pay off a second mortgage that had an 8.2 percent interest rate. The Litkes, who bought their three-bedroom, 1.5-bath home for $512,500 in 2007 at the peak of Seattle's housing market, had used the second mortgage to avoid paying private mortgage insurance. In 2010, just as home prices in the area hit a trough, they refinanced their first mortgage to a 30-year fixed rate of 4.375 percent but were stuck with the second mortgage because they didn't have enough equity to do a "cash-out" refi.

This time, however, their home appraised for $521,000, allowing them to refinance into one 30-year, fixed-rate mortgage of $416,800 at 4.25 percent. They have reduced their monthly payment by $360, giving them some wiggle room in their budget and providing an infusion of college-savings funds for their kids: Stephen, 3½, and Stella, 10 months.

What's ahead
In 2013, a sense of urgency drove traditional buyers hoping to take advantage of still-affordable home prices and historically low mortgage rates. Buyers found selection limited and were often forced into bidding wars with investors and other buyers who paid cash. Sellers reaped the rewards in terms of quick sales, often above the asking price.

Almost half of the cities tracked by Clear Capital experienced double-digit increases in home prices, led by Las Vegas, with a gain of 32 percent. Such spikes reflected a continuing "correction to the overcorrection," says Alex Villacorta, vice-president of research and analytics for Clear Capital. Buyers and investors rushed in to snap up homes with prices that had fallen too far. Homes continue to be affordable, despite recent run-ups — on average, prices are still 31.5 percent below their 2006 peak. The percentage of monthly family income consumed by a mortgage payment (assuming a mortgage rate of 4.1 percent) is just 15.6 percent, on average, compared with 23.5 percent in mid 2006.

"Houses are very cheap," says David Stiff, principal economist at CoreLogic, a property and mortgage-data analytics company.

Market observers agree that home prices will rise in 2014, but at a slower, more steady pace compared with historical trends. Clear Capital forecasts that home prices nationally will rise by 3 percent to 5 percent in 2014, about the historical average. Kiplinger expects an increase of 4 percent.

"The most notable thing about 2014 will be how un-notable 2014 is," Villacorta says.

Meanwhile, the Conference Board, a nonprofit association of businesses, found that the percentage of consumers who intend to buy a home in the next six months was the highest since 2000. Adding to the push: pent-up demand among young people who, hampered by lack of jobs or insufficient income, have been living in their parents' basements or sharing apartments with roommates. Celia Chen, a housing analyst with Moody's Analytics, says Moody's expects the economy to expand enough in the coming year to enable young people to begin moving out. They'll probably rent first, but low vacancy rates and higher rents will prompt some renters to move on to homeownership.

As home prices continue to rise, more owners who had been underwater — meaning that they owed more on their mortgage than their home was worth — will emerge from the sidelines and start selling and buying homes. CoreLogic reports that almost 3.5 million homeowners were lifted out of negative equity between the end of 2012 and mid 2013. Nevada, Florida, Arizona, Michigan and Georgia have the highest shares of underwater homeowners.

A sellers market
In the past year, sales of existing homes and condos rose by 11 percent, to 5.29 million — almost the highest level in four years. The National Association of Realtors expects sales to remain about the same in 2014. Sales nationally have increased across all regions and in all but one price category, signaling a broad-based recovery.

Although sales of entry-level homes (priced at $100,000 or less) have fallen by almost half in the past year in the West, they're still rising in the Northeast, where the job recovery has lagged behind other regions. Sales of homes priced between $750,000 and $1 million have risen the most.

"A consistent stock market recovery for a prolonged period has opened up the wallets of upper-income homeowners," says Lawrence Yun, chief economist for the National Association of Realtors.

Nationally, the supply of homes for sale stands at five months' worth. (Months' supply is a measurement of how long it would take to sell everything at the current pace of sales. A market balanced between buyers and sellers has about six months' supply of homes.) The current level slightly favors sellers, but in many cities inventory is much tighter. For example, the Washington, D.C., suburbs of Montgomery County, Md., and Northern Virginia had about two months' supply in September. Yun says the housing market has moved toward a shortage that will persist through 2014.

Why is inventory low?
In some cities, institutional investors have been scooping up properties to rent out. Plus, builders cut way back on new-home construction during the bust, and homeowners who bought at the top of the market are still reluctant to sell until they can recoup more of their investment. Some are still underwater, unable to pay off their mortgage with what they'd get for their home.

In Oakland County, Mich., in suburban Detroit, agent Melanie Bishop says home prices fell so far during the economic downturn that even longtime homeowners reaped little or no profit when they sold. But with the housing market's rebound, sellers' prospects have improved. She recently helped Corey and Suzy MacDonald sell the four-bedroom, 2.5-bath home in West Bloomfield that they bought in late 2006 for $272,000.

In the spring of 2012, Corey MacDonald became self-employed, and the couple decided to relocate to Florida. They listed their home for sale at $265,000, just enough to pay off their mortgage and expenses. The best offer they received was $245,000, so they decided to postpone their move and try again later. Last summer, they listed the home for sale at $289,900. On the first day, they received an offer of $310,000. "It was a perfect deal," MacDonald says. He ultimately took a job in Atlanta, and the couple used the proceeds from their Michigan sale to put down 20 percent on their next home.

The influence of investors will wane as the low-hanging fruit (including foreclosures) disappears in 2014. Once, whole cities were ripe for the picking — such as Cape Coral, Fla., and Phoenix in 2012, as well as Las Vegas and Atlanta in 2013 — but investors must now dig deeper at the neighborhood level, says Villacorta. That's a job probably best suited to smaller numbers of local investors who know their markets best.

Where will new supply come from?
Most people who list their homes for sale expect to buy another one, so it's a wash in terms of net inventory. According to the National Association of Home Builders, whose members retrenched during the bust, just less than half as many homes were started this year as in a normal market. NAHB forecasts that a normal pace of housing starts won't resume until late 2015. Tight credit, land and labor, as well as rising costs for materials, are constraining builders.

Distressed properties are still adding to the supply of homes nationally, but foreclosure filings are falling. Fewer homeowners are losing their homes as the economy improves, home prices (and home equity) rise, and lenders agree to more short sales (homes sold for less than their owners owe on their mortgages).

"We're in the home stretch of getting through the foreclosure crisis," says Daren Blomquist, vice-president at RealtyTrac, which monitors the foreclosure market. "But we won't cross the finish line, with filings back to pre-crisis level, until early 2015."

Posted on December 3, 2013 at 5:50 pm
Shelia Simmons | Category: Economic News, Home improvement, Home ownership