Saturday, March 31, 2012

Housing Marketing Stabilizing? Real Estate Agents Divided On The Issue

Housing Marketing Stabilizing?
A HomeGain survey recently reported that real estate agents are very optimistic about their industry. The survey found that the number of industry professionals expecting home values to increase more than doubled over last quarter, according to a national survey.

HomeGain reported that some real estate agents see a "bullish" outlook on the market. In recent years the percentage of those expressing that view point never topped 25 percent. The recent survey found that, nationally, 37 percent of the respondents, surveyed this year, anticipate home values to increase in the next six months. That's a huge jump from the mere 15 percent that believed home values would increase in the last quarter of 2011.

In a press statement, General Manager of HomeGain, Louis Cammarosano, said, "Real estate professionals have grown more optimistic regarding the direction of home prices, especially in the states that have been hardest hit in the past few years, like Arizona, Nevada and Florida and also in states that have done comparatively well, like Massachusetts and Virginia".

However, 22 percent of the agents are expecting home values to fall and 41 percent, think there won't be a change in the next six months. The HomeGain nationwide survey focuses on home values during the first quarter of 2012. More than 400 real estate agents and 1,700 homeowners participated in the survey. Both national and regional results were recorded and are detailed on the HomeGain site.
So how do homeowners weigh in on this issue? According to those surveyed, 29 percent of homeowners expect home values to decrease over the next six months and 46 percent of homeowners think that home values will remain the same.

But when it comes to the value of a homeowner's own house, 77 percent of homeowners think their homes are worth more than the recommended agent listing price, according to surveyed agents and brokers. Meanwhile, 62 percent of home buyers think homes are overpriced. The challenge of a meeting of the minds continues.

Thursday, March 29, 2012

Snag mortgage or pay cash for home?

What kind of return are you earning on your cash investment?
Do the math and take into consideration how close you are to retirement before making a decision.

A common question is whether a consumer should prepay his mortgage. My rule of thumb is that if the individual expects to earn more after tax on his investments than he pays after tax in interest on his mortgage, he shouldn't prepay the mortgage. The more conservative the investor, the easier it is to make the argument that he should prepay the mortgage.

You can use the same rule for whether you should take out a mortgage. What kind of return are you earning on your cash investment? Odds are that even in the current low interest rate environment your mortgage rate will be 2% to 3% higher than the yield on your cash investment. I'm assuming your cash is held outside of a tax-advantaged retirement account because you list your retirement balances separately.

Another reason to consider paying cash for the house is how close you are to your planned retirement. You're in your late 50s. I'd guess your planned retirement would be within the next decade. Taking out a 15-year fixed-rate mortgage will have you making monthly mortgage payments into your early 70s.

I used a mortgage payment calculator to calculate a monthly mortgage payment on a 15-year fixed-rate mortgage at 3.5% for a $120,000 loan, assuming you would make at least a 20% down payment on the $150,000 purchase price. That monthly mortgage payment is approximately $858, well over half your monthly income. I'd rather see you pay cash for the house and set money aside to rebuild your savings each month than commit to this monthly payment.

Monday, March 26, 2012

Smaller, cheaper, more flexible — and 5 other ways new homes are changing with the economy (cont.)

6. Flexible
With specialty rooms disappearing and a home's footprint shrinking, the trend is toward flexible spaces that can be deployed as a family requires.
In small, first-time homes, you may not see any formal space now

In small, first-time homes, you may not see any formal space now. If it's a trade-up house of any kind, there may still be one formal space, but people need to select between a dining room and living room.
The Open Series home model by KB Home, for example, is built around a great room and has a loft that buyers can customize as a playroom, extra bedroom, den, entertainment room or office.
New great rooms combining kitchen-dining-living functions are the heart of smaller homes. Big homes dispersed family members to far-away rooms. The great room gathers them while letting each concentrate on something different — homework, meal preparation, eating, socializing, playing, entertaining, relaxing and even working. To accommodate this activity, kitchens are growing. A brand-new kitchen is another clear advantage of new construction, so builders are playing it up, lavishing budget share on bigger islands, better appliances, great lighting and lots of attractive flooring, cabinet, counter and finish choices.

7. Doubled up
Separate self-contained living units are appearing in some new homes. They're essentially in-law suites, either inside the main house or attached to it, often with a separate entrance. At the minimum, these include a bedroom and adjoining bathroom. Some have a small living area and kitchen or kitchenette.

The demand for these houses is complex. By 2010, 16% of Americans were living in multigenerational homes, according to the Pew Research Center. The census, looking at the picture slightly differently, last year found 30% of adults in "doubled-up" households that include adults besides students, spouses and partners. Reasons for this new closeness include cutting costs and desire to be nearer to family members. Immigrant cultures — particularly Latino and Asian – are a market force and bring traditions of including several generations under one roof. At the same time, as the elderly live longer, many adult children are bringing their parents into their homes, often motivated at least partly by the need to contain elder-care costs. A 2011 poll by Harris Interactive and Generations United, a group promoting intergenerational collaboration, found financial stress driving much of the trend.

In the past, the solution was to put a casita (a little house) over the garage. And if grandma wanted to use it, she had to walk up stairs. Moving the casita into or alongside the house makes life easier for everyone. It's hard to judge the strength of demand. A surge in construction of dual master suites in homes, predicted in a 2007 NAHB member survey, hasn't materialized — probably because of the extra expense.

However, the market for new and old homes with ADUs (accessory dwelling units, a planning term) is strong. Buyers mostly want them as rentals, for supplemental income. All three of Builder Magazine's showcase homes at the National Association of Home Builders' International Builders' Show in February include ADUs.

Sunday, March 25, 2012

5 ways to save a failed home sale-(cont.)

Short sale stalls
Another common problem is the slow pace at which lenders approve short sales, which occur when a seller is allowed to accept a sale price that's less than the loan balance, leaving the bank with a loss. These deals can be painfully slow if the seller has multiple mortgages.
A lot of borrowers have second mortgages and sometimes third mortgages and one of the major problems with closing is that you can't get the first and the second on the same page. The first will approve (the short sale) and the second won't, and then the second will approve it and the first approval will expire.
Many short sales linger beyond the point of salvation, but in other cases, patience and persistence are rewarded. Hastings recalls one short sale in which the seller had two loans held by the same lender, but the approvals were still out of sync. Time passed, the paperwork came together and eventually the deal closed.
'Low' appraisals
Often, home sales are victims of the "low appraisal" trap
Often, home sales are victims of the "low appraisal" trap, which occurs when an appraiser's opinion of the home’s value is less than the agreed-upon sale price. This situation can be a major headache, especially for sellers. If they refuse to reduce the price, the buyer might cancel the sale through an appraisal or financing contingency. But if another deal is then subsequently struck with a backup buyer, the result might be just another low appraisal.
To overcome a low appraisal, the seller must persuade the appraiser to reconsider or negotiate a price that's acceptable to the buyer. This is rarely possible, and if the property is a foreclosure that's owned by an out-of-state bank, these negotiations can be even more difficult.
The solution is  going back and forth, trying to justify the price. Or the seller is going to have to lower the price. If it's a bank, that's a big deal. They're going to drive a hard bargain. Moreover, if the bank is located in a different city such as Dallas or Minnesota, they have no idea what's happening in California.
Repair credit disputes
Buyers naturally want to purchase a house that's in good condition, while sellers usually don’t want to spend a lot of money to fix up a house they've put on the market. In some cases, the list of repairs is so long that buyers become nervous about the condition of the house, and that puts the sale in jeopardy, says David Moody, a broker at Sunrise Realty in Athens, Ga.

One strategy to remedy this situation is for buyers and sellers to get estimates of repair costs and "start nibbling away" at what might seem like an insurmountable list of defects. Don't let it overwhelm you. Get prices. I'm always amazed at the number of times (a repair) is not nearly as much as either party thought it was going to be.
REO title delays
Buyers who want to purchase a bank-owned property, also known as real-estate owned or REO, sometimes run into glitches in the chain of title or ownership, Moody says. This gap occurs when a home is put on the market and readied to be sold before all the last details of the foreclosure have been finalized.
The solution, again, is patience — and a lot of it.

Saturday, March 24, 2012

5 ways to save a failed home sale

Home sales get hung up for all sorts of reasons.

See what the common glitches are — and what you can do about them.

Home sales get hung up for all sorts of reasons. Sometimes a buyer can't secure approval for a loan or a seller won't make repairs the buyer insists are necessary. Appraisal issues often result in delays or failed deals, as do complexities arising from short sales.
These problems are common, judging by a recent survey by the National Association of Realtors that found that 33% of real-estate agents surveyed had experienced one or more contract failures in 2011. That figure was up from 8% a year earlier.
These problems can be stressful. Granted, some sales are doomed never to close, but others can be saved with a little creativity and a lot of patience. Here's how:

Buyer financing fails
Many prospective homebuyers enter into a purchase contract with the best of intentions only to discover they can't qualify for a loan as easily as they had expected. Instead, "they get turned down,".
Documentation snafus, job losses and credit-score hiccups are but three examples of the types of problems that can derail a buyer's financing. Seemingly inexplicable delays by lenders can also stall a buyer's financing.
In some cases, the process "seems like it takes forever," dragging on so long that the buyer gives up and abandons the deal.
Still, many borrowers eventually do get a loan approval. Buyers need to stay in touch with their loan officers and buyers, and sellers need to be patient while the slow wheels turn.
Sometimes the banks just make it a living hell for all of us — and then they end up closing it.