The Value of Home Ownership

Despite the market’s ups and downs, Americans continue to value the concept of home ownership as a long term investment, and as an integral part of the American Dream.

Kitchen Aid

The kitchen is the epicenter of your home while you live there, and the most crucial room of your home when it is for sale.  If you kitchen needs a new look, you needn’t worry about breaking the bank.  there are plenty of ways to give it a makeover without spending a fortune.

What’s the Difference?

Over half of prospective homebuyers polled in a recent Ipsos survey didn’t undersand the difference between a home inspection and home appraisal.  Let’s clear up any confusion right now.

Move-Up Mistakes

With interest rates still low, this is a great time to move up in the market.  But things are a little more complicated for move-up buyers than first-timers. Here are a few mistakes to avoid as you trade up.

First Impressions Matter

Will your house be on the market this spring? If so, you’ll need your property to make a great first impression on buyers.  Be sure to avoid these top curb-appeal-busting oversights.

Read this month’s newsletter here.

According to the “Winter 2012 Rent vs. Buy Index” from Trulia, homeownership is currently more affordable than renting in all but two of the 100 largest U.S. metropolitan areas.

The latest index, which is based on asking prices for rental units and for-sale homes between Dec. 1, 2011, and Feb. 29, 2012, shows that homeownership is often a relatively affordable option even in expensive real estate markets, such as New York, Los Angeles and Boston. Only in Honolulu and San Francisco is renting currently a better deal than buying.

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The U.S. housing market, a notable soft spot in the nation’s weak economy for the past four years, is showing marked signs of recovery.

Real estate markets are showing signs of life as falling prices spur buyer demand, lifting home sales and new construction from the depressed levels of the past three years. The spring selling season, traditionally the busiest period of the year, appears to be off to its best start in five years. Sales of existing homes in January and February were at their highest level since 2007, according to data out early this week. The decline in real estate prices has slowed its pace, making Americans less cautious about spending and potentially more disposed to buy a home.

For the first time since 2005, investment in residential real estate, including home building and renovation, has contributed to U.S. economic output for the past 3 quarters.

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Bidding wars, absent from most parts of the U.S. residential market since its peak in 2006, are erupting from Seattle to Washington, D.C. The inventory of homes hovers close to a six-year low, while an increase in jobs and record affordability are tempting more buyers. The number of contracts to buy previously owned homes jumped 14% in February from a year earlier, the National Association of Realtors reported earlier this week.

The U.S. metropolitan areas with the strongest economies appear ready to absorb the additional inventory, said Mark Zandi, chief economist for Moody’s Analytics Inc.

A banner employment report this morning as employment data climbed more than forecast in January and the U.S. jobless rate unexpectedly fell to the lowest level in three years, casting some doubt on whether the Federal Reserve can wait until 2014 before raising interest rates.

The 243,000 increase in payrolls was the largest increase since April and exceeded all forecasts in a Bloomberg News survey, Labor Department figures showed in Washington. The unemployment rate dropped to 8.3%, the lowest level since February 2009.

The jump in hiring shows companies are gaining confidence that the economic expansion will weather the European slump and may boost President Barack Obama’s re-election bid. The data comes one week after Fed policy makers said the economy wasn’t growing fast enough to push down the jobless rate, prompting them to extend a pledge to keep interest rates low for another two years. Based on the data this morning, there are conversations on trading desks that the Fed may not be able to stay on hold regarding interest rates as long as they think.

The Fed said on January 25th after a two day meeting that it would keep its benchmark lending rate low “at least” until late 2014 from a prior target of mid 2013. “We still have a long way to go before the labor market can be said to be operating normally,” Fed Chairman Ben S. Bernanke told the House Budget Committee in Washington yesterday. “Fortunately, over the past few months, indicators of spending, production and job market activity have shown some signs of improvement.”

The median projection in the Bloomberg survey called for a rise of 140,000 payrolls after an initially reported 200,000 gain in December. Estimates of the 89 economists ranged from increases of 95,000 to 225,000. Revisions also added a total of 60,000 additional jobs to payrolls in November and December. The Labor Department revised December’s gain to 203,000.

Takeaway: Fantastic news for the economy and for consumer confidence, particularly home seekers on the fence. A slight retracement in rates given this morning’s news, but rates still at historical lows with 30 year terms in the mid to high 3’s and 10-15 years in the high 2’s/low 3’s.

3, 2, 1…Happy New Home!

Welcome to 2012, and to a whole new year of real estate opportunities!  If you have friends or family who are currently renting their homes, please forward this to them, as there is information wihtin they may be very interested in hearing.

To Your Health!

A very happy New Year to you, and a healthy one, too! You’ve no doubt heard it said that most accidents occur inside the home.  With that in mind, here are some helpful tips onhow to make your home a safer place to live in, in 2012 and beyond.

Home Hunting Don’ts

Whether your looking for your next home now or your planning to pound the pavement this spring, be sure to avoid these home-hunting “don’ts”.

Justifying Your Price

Ideally, you’d never have to haggle over your selling price.  While there’s not much you can do to prevent buyers from offering less than you’re asking, there are some things you can do to help justify your asking price.

Well Documented

Missing paperwork can hold back or even stop a real estate transaction.  For a smoother sale, gather the following documents so they’ll be available to your real estate representative and to buyers as needed.

Read this month’s newsletter here.

This was the headline of a great article that ran in the Wall Street Journal’s weekend section last week. For those of you who didn’t get a chance to see it, here is a synopsis.

• The nation’s ratio of house prices to yearly rents is nearly restored to its pre-bubble average, U.S. house prices have plunged by nearly a third since 2006, making it a terrific value proposition.
• Taking historically low mortgage rates into consideration, houses are the most affordable they have been in several decades.
• “Price to Rent” ratios are among the lowest since the 1960’s, with the combination of housing prices coming down and rents maintaining their price levels of 5 years ago (even increasing to some degree in some cases):

• The Philadelphia region tri-state price to rent ratio is reported at 11.6
• Washington/Southern MD/Northern VA is at 13.3 o The New York Metro Area is at 17.6
• All three of these regions are down significantly from where they were in 2005 to 2008
• Nationwide, the average is 11.3, down significantly from the peak of 18.5 according to Moody’s

• The numbers are quickly turning in the buyers favor: stock-oriented individuals can think of a house’s price/rent ratio in line to a stock’s price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.

So how does the value conscience consumer capitalize on this? Your first step is to meet with your knowledgeable Weichert Realtor and your trusted Weichert Financial Gold Services Manager to strategize a plan and set your course of action. With the buy vs. rent equation never being more in your favor, coupled with near historically low interest rates, the time to capitalize is now. Ask me how…I can help!

Equities and Fixed Income investments are delivering low (negative) returns, and home prices are at bargain levels. That has prompted a lot of would be investors to contemplate if the time is right consider buying investment properties for rental housing

As you would imagine, investing in real estate right now can be surprisingly profitable, if everything goes right. Rents are climbing in many areas, and more properties may be coming on the market. Last month, the Obama administration asked for proposals on how to convert some of Fannie Mae’s and Freddie Mac’s bulging inventories of foreclosed homes into affordable rentals.

Investors used to aim for rents that were 1% of the purchase price, or $1,000 a month for a $100,000 home, which equates to an annual gross return of 12%. Today in many areas, that has increased to 1.5% to 2%. However, average returns after taxes and expenses are more like 5% to 6% of the property value. But that is still well above what many other investments yield.

When investigating potential investment property purchases, avoid the following pitfalls:

• Confusing a cheap deal for a good deal – It is true that you can buy some homes for ridiculously low prices, but that doesn’t mean you can rent them out. Homes in deserted subdivisions aren’t appealing to renters or buyers in many cases. The same is true for less attractive properties or those in less desirable school districts.

• Forgetting that time is money – In real estate, time is not always on your side. You lose money when your property is empty, whether you are painting it or between tenants. Many times, you may be better off accepting a lower rent than waiting for a higher paying tenant.

• Assuming you will sit back and watch the rent roll in – When you become a landlord, you also become a rent collector. Just like homeowners who can’t pay the mortgage, tenants lose their jobs and stop paying the rent. Evicting them can sometimes take several weeks. There are extra steps such as upfront screening and pulling credit reports to see who is the “best credit risk” to rent your property, much like in mortgage lending.

• Knowing the area you are investing in – Is the town ripe for renters? Is it a commuter town that is more apt to have a high renter’s population? Does the town lend to a conducive renting environment. Don’t guess if it is or isn’t. Your knowledgeable Weichert Realtor can help with those questions and provide valuable insight to find the right investment.

• Financing your investment property… is often different then financing your own home. Weichert Financial can help you analyze the differences and make an educated decision. Ask us how!

If you are not still in the midst of a massive cleanup effort from the earthquake that rocked the Northeast last Tuesday (I already picked up the cup that knocked over on my desk), and if you have some free time while you are shut in this weekend from the negative effects of Hurricane Irene, now is a great time to pull out your laptop and run some numbers to see how truly affordable it is to finance that home of your dreams, or refinance your existing residence, if you haven’t already (that is, assuming you have power to run the computer). Let’s analyze some of the numbers.

• If you have a $300K, 30 year mortgage at say 4.99% (existing loan to Refinance or rate you would have gotten on a Purchase mortgage in 1Q11), your P&I payment would be ~$1,609. If you were Purchasing that same house today, or looking to Refinance that purchase from early 2011 or before, the P&I payment would be ~ $1,431, a savings of $178 a month, over $2,100 a year, and over $10,000 in just 5 years! A terrific opportunity to act now on both a Purchase and a Refinance.
• Or let’s say that you Purchased that same property in Q1 ($300K, 30 year mortgage at 4.99%), and now you wanted to refinance that mortgage into a 20 year mortgage at 3.99%. Your P&I payment would increase by $208 a month, BUT, you would cut 9 1/2 years off the life of your loan (assuming you originally closed in early 2011), and on the life of the loan payments, the interest saved in switching from the 30 year to a lower rate 20 year mortgage example above would be over $134,400 life of loan (assuming full term payments vs. a loan that originally closed in 1Q11).
• Let’s take another example which can apply to both Purchases and Refinances: Let’s assume you Purchased a house with a 30 year, $300K mortgage in August of 2008 at 6.5% (yes, those were the rates in mid-2008). Your P&I payment would be ~ $1,896 a month. Now it is three years later, and assuming no additional principal was paid, the loan amount would now be ~$289,252. If you Refinanced that loan into a 20 year mortgage at 3.99%, you would cut 7 years of payments off your loan AND, additionally, you would reduce your P&I payment to ~$1,752 a month, a monthly savings of $144 a month in addition to reducing the payment by 7 years. This scenario can work on 15 year and 10 year mortgages as well in many cases.

Don’t let the shaking earth, the sideways rain, and the howling winds get you down. The bright spot this weekend is we can help you analyze how to finance that new home at the cheapest rates in years, or save money on your existing mortgage by Refinancing. We will take the time to do it right and garner your trust. Ask us how…we can help…before the sun comes back on Monday!

CoreLogic, a leading provider of information, analytics and business services, released its May Home Price Index (HPI) last week which shows that home prices in the US increased on a month over month basis. According to the CoreLogic HPI, national home prices, including distressed sales, increased by 0.8% in May 2011 compared to April 2011, the second consecutive month over month increase.

“Two consecutive months of month over month growth and continued relative strength in the non-distressed market segment are positive seasonal signs in the housing market. Slowly declining shadow inventory and stabilized negative equity levels are also positive signs,” said Mark Fleming, chief economist for CoreLogic.

Leading the way in our footprint was a 4.4% increase from April to May in New York.

Shaun Donovan, secretary of the U.S. Department of Housing and Urban Development (HUD), has urged Americans to purchase homes. In an interview broadcast Sunday on CNN’s “State of the Union,” Donovan insisted that the housing market was showing signs of improvement.. “Housing is more affordable than it’s been in a generation,” Donovan said. “In the long run, it is a good time to become a homeowner because it’s so affordable today, compared to where it’s been for generations.”

As we enter the second half of 2011, rates continue to be at lower levels then where we started the year, still trending not much higher than historical lows (albeit they have inched up in the past couple of weeks). Things to watch for to see how rates trend in 2H11:
- How will the end of the Fed Purchase Program impact supply/demand?
- What will be the end game for Greece (Portugal, Ireland), and how will that impact the global economy?
- What does the employment picture look like as the year progresses? Is there improvement on the horizon?
- Does the economy pick up steam or plod along?

‘Q: On the market monitor you send out each week, you have a bunch of different economic releases on there. Which release is most important from a housing perspective and can give us a sense of which direction the market is going? Thank you.

A: We give a full sense of all the critical releases each week, as they all may impact Fixed Income directly and Mortgage Rates indirectly. In regards to your question, the index that is probably most relevant to the housing sector is the Case-Shiller Index.

The Case-Shiller Index was developed in the 1980s by three economists: Allan Weiss, Karl Case and Robert Shiller, and is distributed by Standard & Poor’s. (I guess Dr Weiss was out of the room when they were deciding on a name.)  The index includes foreclosures and is actually not one index, but a composite of 23 indices. The national home price index, which covers nine major census divisions, is calculated quarterly and published on the last Tuesday of February, May, August and November.

The 10 city composite index covers Boston, Chicago, Denver, Las Vegas, Los Angeles, Miami, New York, San Diego, San Francisco and Washington, DC. The 20 city composite index includes all of the above cities plus Atlanta, Charlotte, Cleveland, Dallas, Detroit, Minneapolis, Phoenix, Portland (Oregon), Seattle and Tampa. There are twenty individual metro area indexes for each of the cities listed above. The indices, aside from the national index, are published on the last Tuesday of each month at 9AM EST. There is a two month lag time in the data that is reported, so the report issued in May only covers home sales through March. Each index measures changes in the prices of single family, detached residences using a “repeat sales method”, which compares the arm length sale prices of the same properties over time (so there is no new construction). So it is a lagging indicator, but gives a good sense of where home prices are heading, directionally, nationwide.

Probably the second most import index is Pending Home Sales, which is slated for release next Tuesday. That gives us, on a lagging sense, which direction home sales are headed and also what type of ramp up percentage we are seeing in the industry nationally. There is also a New Home Sales index, but because of the ratio between Existing and New Homes, and because New Homes sales is that much more muted in the Northeast percentage wise, Existing Home Sales is more traditionally the focus for us.’

Home Ownership: Just a Tax Credit Away!

As you may recall, Congress passed new legislation in the fall in an effort to stimulate the U.S. housing market.  The Extended Home Buyer Tax Credit can help both first time homebuyers and current homeowners in the following ways.

Make an Entrance

Your entryway is the first thing you and your guests — and potential buyers — see when entering your home.  To learn how to create a foyer that functions well and makes a great first impression, keep reading.

Get It In Writing

Spring is a popular time for home renovations.  To help minimize disputes with your contractor and ensure your project goes smoothly, your contract should include the following details.

Over Emotional

Buying a home is an emotional process — but sometimes our emotions get the better of us.  Below are four emotional mistakes homebuyers should be aware of.

New Light

Spring is almost here, and buyers will soon be out in full force, scouting prospective houses and neighborhoods — and not just during the day.  Here are some tips to boost your home’s nighttime curb appeal.