7 neighborhood threats to your home's value (cont.)

Power plants. The data are fairly clear on the impact of a power plant on nearby home values — it usually hurts them. A study (PDF) from the University of California at Berkeley shows that home values within two miles of a power plant can be decreased between 4% and 7%.

Landfills. A study (PDF) from the Pima County, Ariz., assessor’s office shows that a subdivision near a landfill loses 6% to 10% in value compared with a subdivision that isn’t near a landfill — all other residential factors being equal, including house size, school quality and residential incomes.
Robert A. Simons, an urban planning professor at Cleveland State University, says that if you live within two miles of a Superfund site — a landfill that the government designates as a hazardous-waste site — your home’s value could decline by up to 15%.

Sex offenders. Living near a registered sex offender is one of the biggest downward drivers of home values. Researchers at Longwood University in Farmville, Va., concluded that the closer you live to a sex offender, the more your home will depreciate. In the paper, "Estimating the Effect of Crime Risk on Property Values and Time on Market: Evidence from Megan's Law in Virginia," Longwood researchers say, “The presence of a registered sex offender living within one-tenth of a mile reduces home values by about 9%, and these same homes take as much as 10% longer to sell than homes not located near registered sex offenders.”

7 neighborhood threats to your home's value

Who — or what — is next door can affect how much people will pay for your home.

Bad neighbors can be a serious problem, according to the Appraisal Institute. An unkempt yard, proximity to a sex offender or having certain commercial facilities nearby, such as a power plant or funeral home, can reduce the value of surrounding homes by as much as 15%.
The impact can vary tremendously, depending on a few factors: how ‘bad’ the bad neighbor is, the kind of neighborhood you’re located in and the type of market that exists.
But what exactly is a “bad” neighbor? Definitions vary, but real-estate professionals say it boils down to any home or business that turns people off.
A bad neighbor is one that has no consideration for the rest of the community. For example, someone who doesn't take care of the outside appearance of the home, such as the gardening, painting of the outside of the home, roof, garbage and general upkeep. In addition, a bad neighbor may have constant visitors taking up parking spaces, perhaps on the street, loud house parties, dogs that bark all night or stray cats lingering around.

A “bad” neighbor can also be a business or government enterprise whose very existence drives down the value of your property. Here are seven surprising neighbors that can reduce your home’s value:

How you can gain from a mortgage refinance

There are lots of reasons to refinance a mortgage, and not all of them are solely about reducing your monthly payment. Here are five ways to benefit from the lowest mortgage rates in decades.

Cut rate and term, but not payment

If you can handle the same monthly payment (or even a little more), consider reducing the term of the mortgage when you refinance. With rates so low, you might be able to get the same payment for a 20-year loan as your current 30-year mortgage. Shorter terms mean lower rates.
A client traded in his 30-year fixed mortgage of $315,000 at 5.75 percent for a 20-year fixed-rate mortgage at 3.625 percent. His payment went from $1,838.25 to $1,847.17 (almost the same), but he eliminated eight years of interest.

Had he refinanced into a 30-year loan, his interest rate would have been 4 percent, and his payment would have shrunk to $1,503. He would have saved $300 per month, but his total interest payments over the life of the loan would have been higher.

Extract equity

If you have big expenses in your future -- tuition, medical treatment, or a family event (not a boat or a beach house) -- you can borrow while rates are low. While refinancing your current loan, see what borrowing a few extra bucks would do to the payment.
One home owner refinanced his 30-year fixed-rate mortgage, halved the number of years, took out an extra $30,000 to cover his son's future tuition and increased his mortgage payment by $211 a month.

Get rid of an ARM

Change from an adjustable-rate mortgage, or ARM, to a fixed-rate loan while the rates are low, even if it means sacrificing a lower payment.
Another has a condo in Manhattan with a 5/1 ARM at an awesome 2.875 percent. Her original mortgage amount is for $350,000, but she has paid it down to $280,000. Her monthly payment is $1,500, but the party is set to end in December 2013. Now, 20 months before the rate adjusts, she is applying for a $280,000 fixed-rate loan at 4 percent with the same monthly payment. By refinancing at the reduced loan amount, her monthly payment stays the same for the balance of the loan term.

Merge first and second mortgages

If you have two mortgages that, combined, are less than 80 percent of the value of your home, try a cash-out refinance to pay off the second loan. Your monthly payment will increase because you are paying more than just interest on the second mortgage, but if the prime rate goes up in a few years, you will benefit.
If the value of the home decreased and you have less than 20 percent equity, a cash-out refinance can be difficult to do. But you can refinance the first mortgage for 80 percent of the appraised value, and if you have cash left after paying off the first mortgage, you can repay part of the outstanding balance of the home equity line of credit. Then you can ask the HELOC lender to reduce your credit limit. A good loan officer can walk you through this tricky process.

Splitting a jumbo loan

Jumbo mortgages -- in most places, home loans for more than $417,000 -- tend to have higher interest rates. To save money on a refinance of a jumbo mortgage, consider splitting the loan into two.
In this scenario, the first mortgage is no higher than $417,000, and the second mortgage is a home equity line of credit. This loan structure especially benefits borrowers who can pay down the HELOC in fewer than 10 years. By paying down the HELOC within a decade, they are left with a low-rate first mortgage.
One caution: If you want to refinance a jumbo loan into a $417,000 first mortgage and a line of credit, you'll find that most lenders will require you to have 20 percent equity or, in some cases, 15 percent equity.

Traditional 'rules' of homebuying return

Buyers can balance the bargain hunt with realistic expectations.

Depending on the location, house hunters may find themselves in a strange, transitional real-estate market that's emerging from historic lows.
Does the buyer have an advantage? Yes, in many areas, that's still the case.
But buyers have guidelines for success in this type of market, too. They need to show that they're serious if they hope to secure their dream house amid stiff deal-sniffing buyer competition or sellers so frustrated they may be willing to hold out for a stronger market turnaround. Professionalism and realistic expectations can go a long way toward ensuring a smooth and timely closing transaction, which is important to buyers and sellers alike.
Deals can be found, but playing hardball with lowball offers that are out of sync with comparable local sales can be time-consuming. Time can mean money.

There may be wiggle room with seller concessions — covering closing costs, tossing in repair credits — so entering into a prospective deal armed with local-market knowledge and respectful consideration of the seller's position can go a long way toward getting a great deal on a great property.

Here are a few tips for buyers to consider, culled from National Association of Realtors data and independent brokerage sites:

• Save yourself and all involved the delay and headache of financial surprises by researching your own credit report. You should also consider securing a preapproved loan or at least let a bank determine the range for which you'll likely qualify. This will help set realistic expectations for your search.
• Short sales, foreclosed properties or rent-to-own dwellings shouldn't be ruled out as part of a wide and comprehensive home search. But these types of sales may take more time and involve more financial hoops, so be prepared.
• With your agent or on your own, thoroughly study the comparable nearby sales. Limit the search to recent transactions — no older than six months if such data are available. Extend the time frame if you need to. Price isn't all that matters; find out how long properties are staying on the market, on average. This statistic can also help inform how far below the asking price you might consider for an opening bid.
• Speaking of negotiations, they're back and have been for a few years. Gone — in most markets — are the bidding wars where would-be buyers didn't stand a chance unless they came in above the asking price from the start. Ironically, tough competition has cropped up in some instances, thanks to the weak housing market. If buyers are going for a foreclosure, for instance, all-cash offers from property developers and other buyers are edging out bank-financed offers. Again, be prepared and know your own financial situation in advance.
• Keep in mind that real-estate health is not only a local market story (you can essentially ignore national sales statistics), but it can change street by street. Maybe the property you desire is near a prestigious hospital, university, large government employer or vibrant restaurant and shopping district. That's good for your long-term investment, but it also means the seller has a pricing advantage at the outset and couldn't care less about macro-pricing trends. Competition may be tight; if the economy remains spotty, other buyers will look for this kind of neighborhood stability. 
• It's perfectly acceptable to ask how firm the seller is on the price. You or your agent can pose this question to the seller's agent. Semantics are important: Ask, "How flexible are they on the price?" Avoid: "How much less will they take?" Consult with your agent for his opinion on the likelihood of the success of a lowball offer. You have the right to go in at whatever level you want, but keep in mind that a lowball number may turn off the seller and close down any chance at negotiation. You may have to bid on several properties before you get a seller to jump. Of course, this tactic might work on your first try. Try to check your emotions at the door.
• Incentives are great, but buyers may still be responsible for closing costs and should plan on this expense well ahead of house-hunting. The average amount of closing costs and prepaid items needed to cover your closing are approximately 4% of your loan amount. Buyers may also have to put up "earnest" or "good faith" money, which is essentially a deposit before moving into the offer/contract phase.
• Regardless of market conditions, there are a few basics to add to the checklist. These can be a jumping-off point for negotiations. Buyers should hire a title company to check the house for liens and tax arrearages and hire their own inspector, not the seller's. Buyers should have their inspector also check for any potentially unpermitted work, such as an addition. Keep in mind that some states have specific rules about disclosures. Verify the accuracy of the property lines by requesting a seller-secured survey, or buyers may have to buy their own survey. Be respectful as you talk with sellers and their agents about these needs. Sellers should be accommodating, as these steps show that a buyer is serious about the property.

Bottom line: Savvy buyers should know what they're up against and what opportunities abound, as another traditional springtime homebuying season ramps up — this one as market traffic and pricing are on the rise.

3 new programs aimed at improving the housing market

A mass-refinancing plan would allow borrowers who owe more than their house is worth but who are current on their loan payments to refinance at today's low interest rates. The plan would save such borrowers an average of $3,000 annually. The catch: Congressional approval of a fee paid by the largest lenders to fund the program is unlikely.

A pilot buy-to-rent program launching this year in hard-hit markets will let investors buy foreclosures from Fannie Mae, then rent them out. Look for the program in Atlanta, Chicago, Las Vegas, Los Angeles, Phoenix and parts of Florida. Investors must qualify to participate (for information, go to www.fhfa.gov). The aim is to make a quick dent in the supply of foreclosures for sale. Success depends on whether bargain-hungry investors pay the prices Fannie expects for its properties.

None of the programs is a quick fix. In fact, the pace of foreclosures will continue to pick up in the wake of a $25 billion settlement reached in February among the federal government, attorneys general in 49 states and the nation’s largest mortgage servicers. Although much of that money is slated for principal reductions, refinancing and other consumer assistance, banks are now free to step up foreclosures that were delayed pending the settlement.
Foreclosure fixes will become moot as the economy gains traction and housing demand picks up. By 2013, the number of distressed sales will still be high, but their share of total home sales will decline, allowing home prices to rise. The speed of recovery depends on how big a market share distressed properties represent.

3 new programs aimed at improving the housing market- #1

Can a trio of new policies ease foreclosures and get the market back on track?

Foreclosed homes continue to plague communities, the housing market and the economy. Banks completed 3.2 million foreclosures between 2008 and 2011, and half again as many lurk in a "shadow inventory" that includes homes with seriously delinquent mortgages, those that are in the foreclosure process and those that have been taken over by banks but not yet listed for sale, according to CoreLogic, a mortgage data firm. Many of those homes are vacant, and they sell for about one-third less than other properties, on average.
Foreclosures have been a drag on the market for years, and relief can't come soon enough. But the latest proposed fixes won't get rolling before year-end.
The Home Affordable Modification Program (HAMP) helps troubled borrowers by reducing their monthly mortgage payment to 31% of their gross monthly income, usually by reducing their interest rate, extending the loan term, deferring repayment of principal or forgiving some of it. The Treasury has extended the program through the end of 2013, tripling the incentives for lenders that choose to reduce loan principal. Borrowers will begin qualifying under the expanded criteria by this summer. Bank analysts estimate that the beefed-up program will help an additional half-million homeowners. For more, visit www.makinghomeaffordable.gov.

First-time homebuyers shut out in some cities

Falling prices had made homeownership more affordable, but only in some areas. In some major  cities, working couples still can't afford to buy.

One of the silver linings to the sharp decline in home prices in the past five years is that first-time homebuyers who had been shut out of the market were able to afford homes again. Unless they lived in expensive areas such as New York, Boston, Hawaii, San Francisco and other places where median home prices still are far above the ability of working couples to afford.
 
Unless you are a lawyer, owning a home is out of the question. A couple would have to save a full year's salary to come up with a 20% down payment.

Citing statistics from Fiserv Case-Shiller, The Times notes that prices nationwide have fallen 32% from their peak. The national median home price is $166,000, a level not seen since the mid-1990s and down substantially since the peak, when the median price was $226,000.
 
But if you look at a number of larger cities, the median home price far exceeds the ability of a couple with the median household income to buy. The Times writes: In fact, prices in several metropolitan areas — including New York, Los Angeles and Boston — will end up being higher than their pre-bubble levels, at least relative to local income. There are a few reasons, but one of the main drivers is the work force: these areas develop pools of specialized, highly compensated employees.
In Washington, D.C., homes are relatively affordable in the outer suburbs in Maryland, but would-be homebuyers are having a hard time finding homes they can afford closer to central D.C.

It’s very difficult to get a house in a desirable neighborhood for less than $400,000. If they’re out there, they probably haven’t been cared for and need several thousand to bring them up to conditions.