About Dan Krell

October 25, 2022October 25, 2022

Perception of a housing crisis

If you’ve watched the news lately, you might get the feeling that the housing market is imploding. Unfortunately, the talking heads are reporting the titles of the news releases, such as the October 20^th National Association of Realtors press release headline “Existing-Home Sales Decreased 1.5% in September,” without delving into the details. Like anything else that’s reported, just parroting a headline doesn’t tell the entire story. Get the big picture and avert the perception of a housing crisis.

Here are the highlights of the NAR report: “Existing-home sales sagged for the eighth consecutive month to a seasonally adjusted annual rate of 4.71 million. Sales slipped 1.5% from August and 23.8% from the previous year. The median existing-home sales price increased to $384,800, up 8.4% from one year ago. The inventory of unsold existing homes declined for the second straight month to 1.25 million by the end of September, or the equivalent of 3.2 months’ supply at the current monthly sales pace.”

The takeaway is that yes, existing-home sales have been sluggish (eight consecutive months), however does that mean a housing crash? No. Consider the other important data points included in the news release: the median existing-home sale price increased 8.4 percent year-over-year, AND the inventory of unsold homes continues to decrease.

What’s your perception of a housing crisis ? For many, the memories are still fresh of the housing crisis of 2007 and subsequent foreclosure crisis. So, it’s not surprising that the media’s alarms go off when existing-home sales drop as they did recently. However, the fundamentals of today’s housing market are much different than that of 2008-2010. During the housing crisis of 2007, home sale prices plummeted when home sales dropped. Additionally, inventories of unsold homes swelled to record levels.

Today’s housing market is much different and looking at the entire picture, the stats tell a different story than what is being portrayed by the media. NAR Chief Economist Lawrence Yun chalks up the decline in sales to increasing mortgage interest rates, which are approaching the accepted historical average of 7 to 8 percent. He also points out “…Despite weaker sales, multiple offers are still occurring with more than a quarter of homes selling above list price due to limited inventory… The current lack of supply underscores the vast contrast with the previous major market downturn from 2008 to 2010, when inventory levels were four times higher than they are today.”

By Dan Krell
Copyright © 2022

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Disclaimer. This article is not intended to provide nor should it be relied upon for legal and financial advice. Readers should not rely solely on the information contained herein, as it does not purport to be comprehensive or render specific advice. Readers should consult with an attorney regarding local real estate laws and customs as they vary by state and jurisdiction. Using this article without permission is a violation of copyright laws.

October 12, 2022October 12, 2022

Limit the trendy

Limit the trendy updates when renovating your home. If you’re renovating your home to prepare for a home sale, or for your living pleasure, there’s an overwhelming sense of excitement and creativity focused on the finished product. You may already have a vision of the design for the room and fixtures. Or you may decide to hire an interior designer (or certified home stager) to assist you with the project. Regardless of the route you take, take heed to design trends, as some are more fleeting and personal than others and could hinder your home sale.

One definition of “trend” is current style. Meaning that although a design or style is hot and desirable today, it won’t be in the near future. If you’re updating the home to live in a few years then sell a few years down the road, consider that any update you make today could seem outdated to home buyers in the future. Knowing this could help reign in your current budget, and budget for additional updates down the road.

If you’re renovating to sell, be careful to cross over the line of over-personalization. Over-personalized spaces/rooms/homes can turn off home buyers. Home buyers get distracted from the space of the home when they see updates, designs, and/or fixtures that they don’t like. “Look what they did here…” seems to be an automatic response I hear when viewing homes with clients who get distracted. Of course, distracted and otherwise turned off home buyers typically won’t pursue that home.

If you’re enticed to design by the latest and greatest trend, keep in mind that most home buyers are more interested in homes they can picture living in. A January 17th article from the NAR blog (“The Most-Hyped Home Design Trends for 2022; Home design is reflecting much more personality, from black accents to textures galore, by Krisztina Bell, No Vacancy Home Staging Inc.) has a comment about “maximalism design: “Maximalism is back, if the 2022 fashion shows are any indication. More people are seeking to surround themselves with objects that reflect their personality. We’re seeing expressionistic lighting—like geo-shaped groupings and swirls—as well as an explosion of colorful rugs. It’s popular to mix vintage pieces with contemporary furniture and colorful glass. Put a disco ball in the basement and add tinsel curtains for even more sparkle. That’s just how bold decor is getting. But don’t go overboard with ’70s decor! A few playful and unexpected pieces is all you need for this trend.”

Ms. Bell’s words of wisdom “don’t go overboard”and limit the trendy should be the rule when renovating.

By Dan Krell
Copyright © 2022

October 4, 2022October 4, 2022

Report mortgage fraud

The real estate industry, like other financial industries, has its issues with scammers and fraud. The appearance of new scams and new versions of old scams make mortgage fraud a continuing problem for the industry.

It’s not a victimless crime. You might think of those who are involved in a mortgage fraud scams as cheaters and criminals. However, it is not uncommon for innocent consumers to get caught up in a mortgage fraud scam. In the past, home flipping schemes ensnared unwitting consumers. During the great recession, mortgage modification and foreclosure rescue scams targeted unknowing homeowners.

The Federal Bureau of Investigation (fbi.gov) wants you to report mortgage fraud. The FBI describes mortgage fraud occurring “when someone lies to influence a bank’s mortgage decision or if a distressed homeowner is the victim of a fraud.” There are two types of mortgage fraud, fraud for profit (such as home flipping schemes), and fraud for housing (such as mortgage application fraud).

Application fraud is likely the most common mortgage fraud, as it can occur by any material misstatement, misrepresentation, or omission in relation to getting a loan. “Occupancy fraud” is when a borrower lies to get a better interest rate by stating they will occupy the property when it’s intended to be a rental property. “Employment fraud” is when a borrower lists an employer they don’t work for. “Income fraud” is when a borrower misrepresents their income to improve their profile for underwriters.

Among the many types of mortgage fraud, one takes advantage of seniors with home equity conversion mortgages (also known as reverse annuity mortgage). The FHA underwrites a HECM for borrowers who qualify when they become 62 years old. The HECM provides homeowners access to home equity without payment until the borrower moves or dies. Scammers obtain a HECM in the name of a recruited homeowner to convert equity in the homes into cash. The scammers keep the cash and pay a fee to the senior citizen or sometimes just take the full payout. Sometimes, appraisals are inflated. This type of fraud is more difficult to detect because the lender usually doesn’t discover something is wrong until the home owner dies.

The FBI works with partners to investigate mortgage and financial institution fraud cases. Report mortgage fraud to the FBI (https://www.fbi.gov/investigate/white-collar-crime).

By Dan Krell
Copyright © 2022

September 20, 2022September 20, 2022

Mortgage rates are on the move

This week’s Freddie Mac press release headline “Mortgage Rates Exceed Six Percent for the First Time Since 2008” grabbed everyone’s attention. Indeed, mortgage rates are on the move and what does that mean for you and the housing market?

According to Freddie Mac’s Chief Economist Sam Khater, “Mortgage rates continued to rise alongside hotter-than-expected inflation numbers this week, exceeding six percent for the first time since late 2008. Although the increase in rates will continue to dampen demand and put downward pressure on home prices, inventory remains inadequate. This indicates that while home price declines will likely continue, they should not be large.”

In her blog post, Nadia Evangelou, Senior Economist and Director of Forecasting for the National Association of Realtors, points out that the change in mortgage rates increased monthly payments about 60% compared to the same time last year. She also calls attention to the fact that the pace of rising rents is at a forty-year high! Regardless if you are renting or buying a home, housing affordability is declining. Using a little math, she underscores how increasing rents outpace a fixed-rate mortgage on the purchase of a home.

Yes, mortgage rates are increasing. But a little history will put things in perspective. We all know that mortgage rates reached its peak in the early 1981 as a result of the deep recession of the late 1970’s. Shortly afterward, average mortgage rates dropped of the next several decades (albeit the occasional peak).

However, after the peak housing market of 2007, average mortgage rates dropped slightly in 2008 as a reaction to the market crashes and a decimated housing market. It wasn’t until five years later and average mortgage rates hovering in 3 percent range, that the housing market once again became broadly attractive to owner occupants (as opposed to investors). Mortgage rates have been averaging below 4 percent since then, with the exception of 2018 when rates rose above 4 percent.

Mortgage rates are on the move. Average mortgage rates are now above 6 percent, and there may be a silver lining. Many are hoping that the rising interest rates will reduce home prices (although that remains to be seen). However, after the brief rate shock is over, increased mortgage rates will likely incentivize banks to lend which could increase the pool of home buyers

By Dan Krell
Copyright © 2022

September 14, 2022September 14, 2022

Get the necessary permits

Are you planning any home improvements in the near future? Get the necessary permits. I can already hear some of you grumbling about it, complaining that it’s just a money grab, but the truth is that the permitting process has a purpose.

The permitting process assures that buildings, land and home improvements adhere to the building and zoning codes within your locality. Building and zoning codes exist to ensure that homes and other improvements are safe, structurally sound, and help maintain health standard. If you think you’re savvy for avoiding the permitting process on your home improvements, read on.

If you’ve circumvented the permitting process when building your improvement, chances are that there will be consequences in the future. If you’re lucky, the permitting inspectors will catch up with you during your construction project. If you’re still in the process of your construction, you’ll likely get a notice to cease the project and go through the permitting process. However, if your required to reconcile with your local permit office after the improvement is completed, the process can vary depending on your local permit office and the age of the improvement.

Unpermitted improvements are red flags for home buyers and their agents. When you decide to sell, there’s a good chance that home buyers will ask you about permits on your improvements, especially if it is touted in the listing. Don’t think you can hide it, permit info is typically readily available online or calling the permit office. Your home sale price can be affected, depending on the size and scope of the unpermitted work.

Unpermitted improvements can also be a potential problem for your insurance company. For example, any claims that concern an unpermitted improvement could potentially be denied.

A common issue I come across more than you think is that although permits were issued, there was never a final inspection by the permitting office. Many contractors also fail to follow through to the final inspection. The consequences of not passing a final inspection could potentially have the same effect as not having a permit at all.

Regardless of the type of home improvement project you do, make certain the appropriate permits are obtained and finaled. The same applies when you hire a licensed contractor, make certain the appropriate permits are obtained and finaled.

By Dan Krell
Copyright © 2022