Midyear Report: The Housing Market Is on Track for Its Best Year Since 2006 (and It Ain’t a Bubble)

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Realtor.com| Jonathan Smoke| June 10, 2015| Link

As we approach the midpoint of 2015, the residential real estate market is on track for its best year since 2006, the peak of the housing bubble. (This time, though, it’s no bubble.)

Job growth is powering the surge in demand for homes. More than 3 million jobs have been created in the past 12 months. And more than 1 million jobs have been created for 25- to 34-year-olds, the age range in which most Americans buy their first home.

We’re seeing record traffic at realtor.com®Real estate websites across the board are experiencing 15% year-over-year growth in unique users, but our site has seen more than twice that (perhaps thanks to Elizabeth Banks?). The vast majority of our visitors report that they intend to purchase a home.

With rising demand, homes are selling more quickly, too. In May the median age of inventory (homes on the market) nationwide was 66 days—that’s 8 days faster than for last year. The hottest markets are seeing inventory move 18 to 45 days faster.

A rapidly declining age of inventory signals that demand is growing more rapidly than supply. Indeed, we’ve had 32 months in a row of existing-home inventory at less than a six months’ supply. That’s why we’re also seeing above-normal price appreciation.

Year-over-year median home price appreciation reached 9% in April, which has helped existing homeowners see strong gains in equity.

That level of price appreciation would be problematic if it continued, but we don’t think it will. Median list prices, which often predict the direction of actual price changes, moderated in each of the past two months as the number of listings grew.

Meanwhile, rents are increasing at a similar or even stronger pace than home prices. Record numbers of renting households have driven down apartment vacancies, and low vacancies led to higher rents. As a result, it is cheaper to buy rather than rent in 80% of the counties in the U.S.

And now the clock is ticking as mortgage rates are on the rise. With strong employment data in April and May, the average 30-year fixed conforming mortgage rate broke through the 4% level, and in the past week moved above 4.10%.

Is that slowing down demand? No, just the opposite. Consumers can clearly see that affordability is going down for real, so those who are ready and able to buy are searching for homes, looking at listings, visiting open houses, applying for mortgages, and signing contracts.

In April, new-home sales were up 26% over last year. Pending home sales, which are new contracts on existing homes, were up 14%.

At this level of growth, total home sales in 2015 could come close to 6 million, which is a level comparable to 2007 (if not quite at the level of peak 2006). But 2007 was a year of decline for the housing market, whereas in 2015, we’re expecting more good things to come.

2015: Buy Now, Before the Fed’s Patience Ends

buyinghome

Realtor.com|January 30, 2015| Jonathan Smoke

By now you’ve probably heard that 2015 is expected to be a pretty good year for real estate. It’s a prediction that we chief economists are all fairly aligned on.

But what I can’t emphasize enough is why I’m so confident this is a defining year for the housing industry.

It comes down to three simple factors:

  1. Home sales will increase.
  2. Prices will increase.
  3. Mortgage rates will increase.

When combined, those three indicators point to an extremely strong real estate market. And potential home buyers should move fast if they want to spend less.

Buy before it’s too late

Buyers should act now––delayed purchases will only result in higher monthly mortgage payments as prices and rates rise. In fact, our forecast data show affordability may decline as much as 10% over the course of the year.

Plus, we won’t get another head fake on mortgage rates like we did in 2014. The economy is much stronger now, and the Federal Reserve continues to communicate loudly to the financial markets that it will raise the target for the federal funds rate this year.

Right now, the Fed is using the word “patient” to describe its approach to picking the time to raise the target rate.

However, when the Fed “loses patience,” rates will go up at least 20 to 40 basis points in anticipation of the target rate officially going up.

The last time the word “patient” disappeared from the Fed’s language, it raised the target two months later. And when “patient” disappeared from the Fed’s language, mortgage rates went up in anticipation of the official move.

So, buyers beware: The clock on these low mortgage rates may be ticking.

Job growth, global economy will boost housing

From a macro level, the economy and the housing market are in far better shape now than a year ago. We are creating jobs at a pace now that we haven’t seen in 15 years.

Friday’s initial report on fourth-quarter GDP came in at 2.6% growth. Underneath the number was mounting evidence that consumer spending is indeed strong and wage growth is finally accelerating.

Low prices at U.S. gas pumps have turbocharged consumer confidence and are enabling households to spend more and save more for big purchases—say, buying a home.

Besides global factors that bode well for buyers, the U.S. housing market is also in much healthier shape. Foreclosure inventories have fallen to nearly normal levels everywhere except for a few slow markets. As a result, distressed sales are no longer weighing on the market.

We’re back to a normal and upward trajectory for housing prices, and there’s little risk of prices declining because inventories are very low. I’m actually more worried about listings and new home construction not keeping up with the demand.

Market is primed for first-time buyers, sellers

I’ve said it before and I’ll say it again: 2015 is the year of the millennial when it comes to real estate. Millennials are at a critical demographic tipping point where their sheer numbers will naturally drive demand for more home sales. Most first-time buyers move into their first home when they’re between the ages of 25 to 34.

Sellers should also be encouraged—especially if they’re sitting in affordable homes waiting for a long-overdue upgrade. With recent clarification of mortgage standards, new low-down-payment programs, and lower FHA insurance premiums, access to credit should improve. That means those folks who’ve been sitting on equity in entry-level homes can finally upgrade to bigger homes and retirement homes.

What are the downsides?

There are some risks to keep in mind.

Supply must keep pace with demand, otherwise affordability declines more rapidly and would-be buyers can’t find the home of their dreams.

The U.S. economy could hiccup from global weakness.

Consumers could take the money they’re saving on gas and buy lottery tickets instead.

The probability of those risks completely reversing the recovery is slight, but it is strong enough to limit the potential. On the flip side, if the economy ends up growing more than expected and first-time buyers come roaring back, we could end up in an even stronger market. Here’s to a robust and strong 2015!

Jonathan Smoke is chief economist at realtor.com®.

To Sell or Not to Sell? 5 Signs it’s Time to List Your Home

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RISMedia HouseCall| April 27, 2015| Maria Patterson|

If you’re like me, thoughts of putting your home on the market and moving up, down or out of dodge all together periodically float through your mind. These days, there’s extra incentive given the inventory shortage in most regions of the country—some areas are even experiencing bidding wars.

“After back-to-back years of a robust housing recovery, we are continuing to experience another year of a shortage of inventory of homes for sale,” reports Phil McBride, COO of John L. Scott Real Estate in the Northwest. “With a large backlog of homebuyers, multiple offers on new listings are the norm. We are seeing approximately 90 percent of sales activity in the market areas and price ranges where we are experiencing the shortage/low inventory, which is sending prices upward.”

National statistics bear this out. According to the National Association of REALTORS®, total existing-home sales increased 6.1 percent in March—the highest annual rate since September 2013—however, the housing supply has only experienced a modest increase, just 2 percent above a year ago. Long to short—it’s a seller’s market.

Still, choosing to sell is a big decision—a decision that requires the careful weighing of a variety of factors, both lifestyle and financial. To help sort things out, here are five telling signs that now just might be the time to finally put your home on the market.

  1. You’ve outgrown your space—really. This is usually the number-one reason that gets me thinking about moving up to a bigger home. I get anxious trying to find sleep spaces for overnight guests or frustrated by my overcrowded closet. But truly needing more space is about more than that. Do you have kids outgrowing shared bedrooms? An in-law moving in? A new virtual work opportunity that requires a home office? These are the life events that really necessitate a bigger home—not the inability to curb one’s shoe-buying habit.
  2. Your neighborhood is booming. While home sales and values are improving at a healthy yet gradual rate on a national level, you may find yourself smack-dab in the middle of a hot market. Pay attention to those “Recently Sold” postcards in your mailbox and talk to those neighbors plunking down For Sale signs in their yards. Contact your local real estate professional and check out comparable sales. If homes are selling above listing price and you’ve been on the fence about selling for a while, now might be a wise time to take the leap.
  3. You’re letting things go. Remember when home improvement projects and landscaping chores were fun? When you’d spend hours happily painting, planting and hammering away? Well, if that’s a distant memory and your grass is knee-high and the porch railing’s rotting, this may be a sign that you’re ready to move onto a maintenance-free way of life. Realize that the more you let things go around the house, the more money you’ll have to invest to get it ready for market or worse, you’ll have to drop the price to get it sold. So honestly evaluate if it’s time for a home that offers a simpler, less work-intensive option.
  4. Your equity is back. Many of us didn’t even consider selling for many years based on the fact that our equity evaporated during the housing crash. But don’t stay stuck in that mindset. The fact is, increasing numbers of homeowners are returning to positive equity. According to Corelogic’s Third Quarter 2014 Equity Report, 94 percent of homes priced at $200,000 and above have positive equity. So do some research and have your home reappraised. You may find that your equity is back and that selling is an option again.
  5. Your life has changed. An important life change can trump all other reasons to sell your home. Growing or shrinking families, a new job with a new, long commute, retirement, divorce, etc., are cause to seriously consider moving on to a home that makes more sense for life as you now know it. Ultimately, a happy home is one that’s in sync with your current phase of life. Make sure you find the right fit.

12 Tips for Spring Homebuying in a Seller’s Market

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US News & World Report| Teresa Mears| April 13, 2015| Link

With spring finally here for most of the nation, prospective homebuyers can look at houses and condos without traipsing through snow and ice. Better weather, plus the traditional belief that families search for homes so they can move in between school years, makes spring a major homebuying season in much of the country.

“Especially considering this winter, we’re expecting a very busy spring season,” says Daniel Hedaya, president of Platinum Properties in New York City. “We’re already seeing an uptick.”

The biggest challenge facing homebuyers in many markets may be finding a home to buy. The inventory of available homes for sale remains low in many cities, especially in certain price ranges.

At the end of February, according to the latest data from the National Association of Realtors, there was nearly a five-month supply of homes available for sale, slightly below the number available a year earlier. That means that, at the current sales rate, it would take five months to sell all the listed homes. That’s a nationwide average, and the supply is even tighter in many cities. A six-month supply is considered a balanced market.

“Insufficient supply appears to be hampering prospective buyers in several areas of the country and is hiking prices to near unsuitable levels,” said Lawrence Yun, the chief economist for the NAR, in a news release. “Stronger price growth is a boon for homeowners looking to build additional equity, but it continues to be an obstacle for current buyers looking to close before rates rise.”

The median price of a home sold in February was 7.5 percent above the median price a year previously, according to NAR data.

A seller’s market means that buyers have to be smart and prepared if they want to get the right house at the right price. Agents suggest that prospective buyers start by looking online at homes, narrowing down neighborhood choices and deciding between must-have and preferred features.

At the same time, buyers should visit a mortgage professional and get their financing in order. It’s best to start that process before you start looking at homes, in case your credit needs repair or you need to pay off debts to qualify for a mortgage. In a competitive market, agents may not even show homes to buyers who don’t have a mortgage preapproval.

A desirable listing may be sold in days or hours, meaning there is no time to organize financing or mull over preferred features before making an offer.

“Any market here in the Midwest is very fast-paced right now,” says Missy Price, an agent with Better Homes and Gardens Real Estate Kansas City Homes. “If they do see the property that they want and they love, they’re going to have to act on it.”

It’s also important to know how much house you can afford before you get started. Looking at more expensive houses and then scaling down several thousand dollars often leads to disappointment. “I do not like to show somebody out of their price range unless the house is terribly overpriced,” says Sharon Voss, president of the Orlando Regional Realtor Association and an agent with Watson Realty Corp. “You get people prequalified, and you’re not going to have a problem.”

Here are 12 tips for buying a home this spring:

Get mortgage prequalification or, even better, preapproval before you start shopping. This helps you know what you can afford and makes your offer much stronger in the eyes of a seller. In a competitive situation, you may even consider waiving the mortgage contingency clause, which is something you want to avoid unless you are sure you can get the loan. “In New York City, it’s always advisable to see if you can go in without a financial contingency,” Hedaya says. “It’s a market that’s dominated by cash.”

Find a good agent. Using a real estate agent costs buyers nothing because the seller pays the real estate commission. Ask friends, family and co-workers for referrals. Look for a full-time agent who works often in the neighborhoods where you’re looking. You may want to interview several agents to find a good fit. If you can only look for homes on weekends, for example, you don’t want an agent who takes weekends off.

Do your research. Use the Internet and apps from major portals such as Zillow, Trulia and Redfin to research neighborhoods and asking prices for the type of home you want. But you should keep in mind that you’re not always getting a complete picture.

Visit neighborhoods you’re considering at different times of day. A neighborhood that’s quiet during the middle of the workday may be noisy and crowded at night and on weekends. Get out and walk the streets, talking to people who live in the neighborhood, visiting shops and restaurants and “trying out” your desired location. Drive to and from work during commuting hours to get an idea of what a typical day might be like.

Expect to provide lots of documentation to get a mortgage. Since the recession, mortgage lenders have become much stricter about documentation, income verification and other paperwork. Well-qualified buyers can still get a mortgage, with rates for 30-year loans at 3.66 percent last week. “Borrowing has become much, much more difficult,” says Steve Roney, CEO and owner of Berkshire Hathaway HomeServices Utah Properties. “It has become a much more cumbersome process.”

Separate your needs from your wants. In a competitive market, most buyers find they have to compromise on location, amenities or condition of home. It’s easier to make a choice when you know going in which features you must have and which you’d like to have but can live without. “Be flexible,” Hedaya says. “Be prepared to compromise.”

Be ready to move fast. A well-located house in good condition and priced right will sell quickly, sometimes the first day it goes on the market. You need to be ready to make a decision when you find a home you like. “You have to be prepared to act fast because we’re seeing bidding wars,” Price says. “If they don’t know what they want, the property is going to be gone.”

Don’t expect to get a smoking deal. The days of getting a house at a discount are long gone. That doesn’t mean you can’t ever get a substantial discount on a house that needs work, is in a less popular location or otherwise is in less demand. But in a seller’s market, there is usually very little negotiating room on price.

Understand that no house is perfect. Making your offer contingent on a home inspection is a good move, but all homes have small defects. Many sellers won’t fix anything, and there is no reason for them to if there is a backup offer waiting if you walk away. “You can’t nitpick a house,” Voss says. “It is a used house.”

Find a way to sweeten your offer. Most buyers can’t pay all cash, but there are ways beyond price to make your offer more attractive to a seller. Have your agent ask the seller’s agent if he would like a faster or slower closing. Consider whether you can waive mortgage or inspection contingencies (which does not mean forgoing an inspection), go without a seller-provided warranty or otherwise improve the deal from the seller’s perspective.

Don’t buy more than you can afford. Lenders will often approve a buyer for a higher payment than he or she can make comfortably. When you’re calculating what you can afford to pay, remember that a mortgage payment is only part of the cost of homeownership. “Buyers should make sure they’re taking into account all the secondary costs,” Roney says, including insurance, taxes, lawn maintenance, condo or homeowners association fees, repairs and even furniture.

Don’t buy a house you don’t love. While most buyers may have to compromise on some of the features they wanted, they shouldn’t settle for a home they don’t like. If you don’t find the right home this year, maybe you should rent and try again later rather than make a purchase you’ll regret. “Make sure that you have a really strong emotional attachment to what you want to buy,” Roney says. “Make sure you love it before you buy it.”

7 Cheap Tricks to Prep Your Home for a Quick Sale

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US News & World Report| Lars Peterson| March 11, 2015| Link

Spring is almost here, and soon it will be home-selling season. Some economists expect 2015 to be a good one for home sales because mortgage interest rates will continue to hover at near historic lows, the overall economy is heating up and there’s a lot of pent-up demand.

For sellers looking to get the maximum out of their home sale, this all means they’ll need to do some careful home prep and staging, without spending so much that they cut into profit from the sale. Here are seven ways to prep your place for a sale without spending lots.

1. Have a plan.

Before you jump in and start on a long list of home repairs and upgrades, talk to a real estate agent and find out what’s worth the effort and what isn’t. Most homeowners can name at least one aspect of their home that really irks them – a slightly leaning fence, a scratch on the cooktop, the light switch that feels out of place. An agent can tell you which of those fixes are likely to be noticed by buyers and which you can ignore. You can even make this part of your agent interview process.

After that, get a checklist to help you stay on track as you knock out those jobs that only require elbow grease.
Cost? Free!

2. Clear clutter.

Speaking of checklists, every home prep checklist includes advice to clear your clutter. You probably love all your stuff, but it’s hiding your home’s features. Worse, a cluttered home presents as poorly maintained, which will cause potential buyers to think twice and ask deeper questions. Get a head start on moving day by packing up your knickknacks, photos and books. Or earn some extra moving money by selling some of that stuff cluttering up your basement or attic. Why pay to move it from one attic to another?

Cost? Free!

3. Paint one room.

Even if all your rooms need a fresh coat of paint, you can maximize your effort while minimizing your cost by only painting the most important room or rooms. Todd Tisdell, a real estate agent and mortgage broker of Citrus Grove Real Estate and Lending in California, advises sellers to paint either the entryway, kitchen or master bedroom. “Those are the rooms looked at the hardest by buyers,” Tisdale says. “If those rooms are fresh and clean, it will go a long way toward improving perception of the whole house.”

Cost? Under $200 if you do it yourself.

4. Clean.

This is not your everyday clean. It’s not even your special occasion clean. This is your as-seen-in “Architectural Digest” clean. While all rooms should be clean and tidy, it pays to focus your efforts on rooms buyers are most interested in – kitchen and bathrooms, the living room and the master bedroom. Follow the top-to-bottom, left-to-right method so no surface is overlooked. In kitchens, get behind and under appliances. In bathrooms, pay attention to mold and mildew.

5. Plant colorful flowers.

A good first impression counts in home selling, and most real estate agents will advise sellers to spruce up the front of the house first. Along with basic lawn care – a bag of fertilizer and regular mowing go a long way – Tisdale advises planting colorful flowers against the house or along the sidewalk or both. “The color against the house will pop the most,” he says.

Cost? Under $100 if you shop smart. Almost free if you start early from seeds.

6. Stage and depersonalize the right rooms.

Not all real estate agents agree that staging is necessary. In a recent study of over 2,300 Realtors, the National Association of Realtors found that about a third of selling agents said they stage homes, while 44 percent said they advise clients only to declutter and make repairs to faults. On the other hand, 81 percent of buyers reported that staging helped them visualize the features of the home. If you decide to stage, you can control the cost by staging only the rooms most important to buyers, in order: living room, kitchen, master bedroom, dining room, bathroom, child’s room and guest room.

Otherwise, get even more aggressive with the clutter and remove personal photos and keepsakes. The story you want to tell is about the buyers and their new house. It’s not about you and your old one.

Cost? Under $700, on average.

7. Create the right vibe.

With the place finally ready, create a warm, welcoming feeling throughout your home. Open windows to bring in fresh air, and open curtains and blinds to let in the light. Install higher wattage bulbs in your best fixtures, and turn on all your lights. In the days leading up to an open house or showing, refrain from cooking fish or broccoli, which can leave your home smelling not so great. You don’t really have to bake cookies to put buyers in the mood – lightly orange-scented candles will do. In fact, a Journal of Retailing study of retail shoppers found that simple aromas such as orange, lemon or pine boosted sales as much as 30 percent, while complex aromas – such as from baking or potpourri – depressed sales a few percentage points.

Cost? A few dollars for oranges (or free with some pine boughs plucked from the yard).

WHEN IT COMES TO REAL ESTATE, NICE GUYS FINISH LAST

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Realty Times| Jaymi Naciri| June 11, 2014| Link

When it comes to real estate, nice guys finish last. Especially in tough markets. And by tough markets, we mean seller’s markets, buyer’s markets, depressed markets, rebounding markets – and any other type of market we missed.

Buying a home can be a highly charged, emotionally draining time under any circumstances. It’s easy to let the process get the best of you. You have to get tough if you want to meet your real estate goal.

Buying in a hot market

Looking to buy a house in a hot market, where the neighborhood is especially popular or because it caters to first-time buyers requires an extra level of grittiness. Be the “nice guy” and you can overpay for the home you want, or lose out altogether, because you weren’t willing to negotiate.

“In a competitive market, you have to have a strong backbone. It’s going to get tough out there,” said Mark Allen, a California real estate expert. “Many buyers today are facing tough conditions, particularly in entry-level neighborhoods where there is tremendous competition for well-priced homes. They’re having to contend with multiple offers on homes and then deal with the disappointment of being outbid time and again. I have seen buyers who have had to make up to six or eight offers on different homes before they were able to finally buy one. You have to be tough and stay tough, even when you feel like giving up.”

MSN recommends doing a little homework on your neighborhood of choice to increase your chances of getting that house. “Researching who lives in and around the home you’re [considering] buying is of the utmost importance,” said MSN. “By speaking with neighbors, you’ll gain a sense of what life is like in the community and perhaps even pick up some insight into why the sellers are moving.” Every little bit of info can help during negotiations.

Tough Negotiating

Getting tough starts at offer time. No one wants to pay more than they’re comfortable with. But if you’re in a market where homes are selling fast with multiple offers, you may need a real estate market reality check. Go in with an offer that’s too low and you could turn off the seller, who will then reject your offer and move on to the others that were already more in line with what they were hoping to get for their home.

Real estate agents regularly caution clients against making offers that are exceedingly low for that very reason; being in a location and/or a price range where multiple offers are becoming commonplace can add another layer of pressure to an already stressful situation.

That doesn’t mean paying full price no matter what. It means being aware of what’s going on in the area you’re interested in, hiring a trustworthy agent who is a tough negotiator, and listening to your agent’s advice. You will want to choose an agent who is a strong negotiator and who can get tough on your behalf. An experienced agent with a history of successful real estate transactions should be better able to navigate the murky real estate waters, using existing relationships and relationship-building skills to help give you an edge.

Being Tough While In Escrow

It’s not over once you have an accepted offer. Thirty or 45 or 60 days or more can feel like an eternity, and things will undoubtedly come up during escrow. The title company will need proof that the home you owned in another state eight years ago is not still owned by you, and you’ll have to scramble to provide proof of sale. You’ll have to dig up your original divorce decree. The inspection will turn up something you weren’t expecting, and then here comes that negotiation thing again.

“Buyers have the ability to continue negotiating the price after escrow has opened during their buyer investigation period,” said Eller’s Sellers. “The important thing for any buyer to remember is that negotiating for credits and repairs is just that — a negotiation. It is highly unlikely that the seller will agree to everything the buyer has asked for. However, at the same time, sellers need to understand that once a repair issue has been identified, they will be required to disclose it to any subsequent buyer. So it is usually in their best interest to agree to some sort of compromise.”

At the end, if you stay strong, you’ll end up with the keys to your new home. And then you can go back to being the nice guy. Until it’s time to start negotiating with a contractor…

Renters: Are You Ready to Buy a Home?

Zillow Blog| January 5, 2015| Link

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For renters planning to buy a home, preliminary steps like creating a budget and saving for a down payment are obvious. Here are five more advanced steps toward moving out of your rental and into a dream home of your own.

Understand the full cost of homeownership

As a renter, a single rental fee covers your monthly housing payment. But as a homeowner, four main factors go into your monthly housing payment: principal, interest, taxes and insurance (P.I.T.I.). Understanding these costs will help you determine how much house you can afford.

Together, principal and interest comprise your monthly mortgage payment, with the principal paying down your loan balance each month, and the interest paying your fee for borrowing the money. Use a mortgage calculator to determine how much of your payment goes toward principal versus interest each month.

Taxes refer to property taxes, which are assessed by the county you live in. They average 1.2 percent of your home’s value each year.

Insurance — paid to a homeowner’s insurance company of your choice — is required when you have a mortgage. Lenders require that your insurance cover the cost of rebuilding the home if it is ruined by fire or other disaster. This “replacement cost” is determined by your insurer, and must be agreed to by your lender. Insurance will typically cost $700 to $1,200 per year for a single family home.

For condo owners, there’s a fifth monthly cost category: homeowners association (HOA) dues. These fees cover common area amenities, landscaping, ongoing upkeep and reserves for future maintenance like roof replacement or exterior painting. These monthly dues range from $100 for cheaper condos to $1,000 or more for luxury condos.

Single family home buyers can take a useful cue from HOA budgets, which generally require that at least 10 percent of dues go toward reserves. Even if you’re not buying a condo, it’s a good idea to set up a similar savings plan for future maintenance like replacing a roof or major appliances.

Know your homeowner tax benefits

Mortgage interest and property taxes are deductible when you file your annual tax returns, and reduce taxable income.

These deductions significantly lower your cost of homeownership. For example, for a $300,000 home with 20 percent down and a 30-year fixed mortgage at 4 percent, monthly P.I.T.I. is about $1,545. Tax deductions reduce this total housing cost to about $1,215.

Study rent-vs.-buy math

Often, people judge the cost of renting vs. buying by comparing P.I.T.I. to a rental payment. But to get an apples-to-apples comparison, you actually have to look at after-tax-benefit homeownership costs and rent costs.

Using the example above of a $300,000 home that costs $1,215 per month after taxes, you could compare this residence to a home that rents for about $1,200. If the $300,000 home was more spacious or in a more desirable area, the math would seem to favor buying — but don’t forget this example requires a $60,000 down payment.

Identify mortgages that fit your budget and timeline

If you don’t have 20 percent to put down, you can still get a mortgage with as little as 3 percent down. However, if your down payment is less than 20 percent, you’ll have to pay mortgage insurance, which is about .85 percent of your loan amount, and isn’t tax deductible.

Your monthly P.I.T.I. (which includes mortgage insurance) is about $1,995 on a $300,000 home with 3 percent down and a 30-year fixed mortgage at 4 percent. After tax deductions, this total housing cost drops to about $1,614. And you’d only need $9,000 for the down payment.

You can also lower your rate and P.I.T.I. with a shorter-term loan like a 5-year ARM, but rates on these loans will adjust in 5 years, so you risk having a much higher payment if you plan to stay in the home longer than that.

Start preparing your credit score now

Credit scores are critical for getting the best mortgages with the lowest rates. Lenders want reliable on-time payment history as well as credit depth.

More credit accounts are better, so renters with only one credit card should consider obtaining more credit. Just note that your credit score can drop 5 to 15 points when you first open a new account, then will come back up when you’ve established a good payment history.

The Home Sellers Guide To Understanding Comparable Sales

Forbes.com|May 24, 2014| Link

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One of the trickiest parts of the home selling process is selecting a list price that’s just right. Not just any number will do: if you overprice your home, it will sit idle on the market, and if you underprice it, you miss out on cash and equity that could’ve been earned in the sale. This is when you need to think like a buyer, scoping out other homes that are for sale or have recently sold in your neighborhood. Hop on Trulia and enter your zip code to get familiar with what’s out there – and maybe even swing by a few nearby open houses. Most importantly, work with your realtor to understand and analyze “the comps.” They’re the only way to truly determine an accurate list price for your home. Remember, this is one case where true value doesn’t come from within, it’s actually based on those around us.

In the meantime, take a look at Trulia TRLA -0.67%’s quick guide to comparable homes:

1.  Apples to Apples: Analyzing the comps entails some detective work. Obviously, your house isn’t exactly like every other on the block. It can be far better – or far worse. You have to wade through and pick out comps that truly come closest to yours. Then make note of what similar homes have that your doesn’t and what your house has that the comps lack? Consider these comparisons:

  • Square footage: This is significant for most buyers. Some will even hunt based on square footage alone. And when it comes to pricing, the bigger the property, the bigger the price tag.
  • Age and condition: Do you live in a 1910 Victorian? Or is your house practically brand new? Newer homes don’t necessarily command higher prices, or vice versa, but condition relative to age does factor into price. So when you compare your home to others, stay within a five-year range.
  • Number of bedrooms and baths: How many your home has – and where they’re located – can radically change the price. Like square footage, families often shop for homes based on these numbers.
  • Amenities: This one’s pretty straightforward: the more perks you have, like walk-in closets, a pool, spa, gourmet kitchen, and so on, the higher the price.
  • Lot size: Is there room for the buyer to add on to the house or plant a sprawling rose garden in the backyard? The exact acreage of your land correlates to price. When you compare your home to others, stay within .05 acres.
  • Condition: A tear-down, a fixer-upper, updated, or pristine – where do you fall in the spectrum? The condition of your house can be a deal-maker or a deal-breaker. That’s why you have to pay close attention to other homes’ upgrades to make a fair assessment of how they affect value.
  • Location: This factor is multi-faceted. It relates not only to your state, city, and neighborhood, but also to where your house sits on the street. Does it face an eyesore or busy intersection? Does it have a view? Does it get nearby freeway noise or sit on the bank of a tranquil lake? Don’t forget to take these location nuances into consideration.

2.  Don’t Look Back (Too Far) – The price of your home today can’t be compared to the selling price of your neighbor’s identical home 6 months ago. This has been a year of quick price increases in most cities. If you’re looking at comps further back than 3 months, dump them. Your house could be worth more. In fact, in some of the fastest-paced cities, like New York, Miami, and San Diego, homes move so rapidly that sellers should only look at the prior 60 days of sales, if possible.

3.  Go Online and Check Prices – A wealth of information lives online, and it’s accessible with the click of a mouse. Right here on Truila, you can see exactly what homes have recently sold for in your neighborhood; just enter your zip code, and select “sold” from the filters menu. How does access to this information change the way you price your house?  First, think of it as a ballpark guide – not an exact number. Then price your home confidently based on the similar comps knowing you have more information than ever before, and it’s literally at your fingertips.

 4.  Check Out the Competition in Person – Don’t analyze your comps on paper alone. Get moving! Ask your realtor to recommend homes you should drive by or open houses you should attend. It’s important for you as a home seller to know what’s out there. Find out up close and in person where your home stacks up against the competition.

5.  List vs. Sale Prices – The difference in percentage between list prices and actual sales prices for the homes in your neighborhood speaks volumes about the current real estate climate. This number is a strong indicator of which direction the market is moving, and it will suggest how much under – or over – your ideal asking price you can expect to get for your home. Anyone can throw a house on the market at a high price. But the number you want to look at closely is the sale price of the home, which is much more indicative of the actual value.

6.   Know What’s Not Selling – You can learn a lot by observing not only what IS selling nearby, but also what’s NOT selling. Is a home that initially looks like a comp really overpriced for what it offers? How does it compare with your house? What is it lacking that yours isn’t?  Once you identify why it’s not selling at its current price, you can avoid the same mistake when determining your own home’s price tag.

#1 Reason to Sell Now

Keeping Current Matters| January 5, 2015|Link

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If you are one of the many homeowners out there who are debating putting their home on the market in 2015, don’t miss out on the opportunity that currently exists. There will be significantly less competition in the winter months than in the spring.

According to the National Housing Survey released by Fannie Mae, 45% of homeowners“say mortgage rates will go up in the next 12 months.”

What Does This Mean?

Homeowners are unaware that interest rates are projected to go up by all four major reporting institutions – This is big news for move-up buyers reflecting the overall amount of housing inventory that will be on the market.

If existing homeowners believe that mortgage interest rates are not going to increase, then they won’t be inclined to make a move by putting their home up for sale, meaning less competition for sellers who list now.

Don’t Wait!

The study also revealed that:

“Those who say it is a good time to buy a house rose to 68%” & “the share of respondents who think it would be difficult to get a home mortgage today decreased by 3 percentage points.”

As Doug Duncan, senior vice president and chief economist at Fannie Mae explains:

“We expect consumer attitudes toward housing to improve as the pickup in the overall economy lifts employment and income prospects.“

Bottom Line

There are buyers out there who are ready to make a move. If your goal this year is to move up to your dream home, what are you waiting for?

4 Reasons to Buy a Home During the Holidays

December 2, 2014| Vera Gibbons| Zillow Blog| Link

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In the market for a new home? Here are four reasons to add real estate shopping to your December to-do list.

Bargain prices

Did you know that, historically, home prices are lower in December than in any other month?

As for the overall housing picture, if you’re not yet in the market, you’ll like this news: While home prices are continuing to rise, it’s happening at a much slower pace.

According to a recent report from Zillow, U.S. home values are currently up 6.4 percent year-over-year and have been slowing for nearly two years. Next year home values are expected to grow at 3 percent — roughly half their current pace.  These changing dynamics, and a shift toward healthy stabilization, put more power in the hands of buyers.

Low mortgage rates     

What’s driving affordability? Low mortgage rates. Currently hovering in the 4 percent range, rates are projected to edge up to 5 percent by the end of 2015, according to Zillow Chief Economist, Stan Humphries.

To put this in perspective, did you know that if rates go up by just one percentage point, your purchasing power is reduced by a whopping 11 percent? Find out how much waiting to buy could cost you.

Motivated sellers

If sellers are listing their home for sale this time of year, this likely means they’re serious about shedding the weight of their residences.

Regardless of why that is – perhaps they’ve recently gotten divorced, have to relocate for a new job opportunity, or are under some other personal pressure – this puts you, the buyer, in a much better position to negotiate and ultimately cut a deal, particularly since competition is minimal this time of year.

Tax savings

At the end of the year, everyone is looking for ways to lower their tax bill. And closing on your new home before Dec. 31st is one way to get some breaks.

After all, you can deduct home purchase costs, including mortgage interest, property taxes and points — while you build equity and save yourself a significant amount of money.