You are more resilient to winter than your home

home salesDid you know that enduring a harsh winter can make you more resilient? At least that’s what University of Buffalo researcher Mark Seery believes. His research on stress and coping reveals that negative events and adversity promotes adaptability and resilience, which benefits your overall wellness (buffalo.edu).

Your home, however, may not be as resilient as your psyche. A severe winter can create the ideal conditions for water penetration into and around your home. Unfortunately, many home owners won’t know that an issue exists until there is a noticeable leak, or water seeps into the basement. Left unchecked, water leaks can not only cause water damage to ceilings, walls, and basements, it can also promote mold growth as well as structural issues in and around the house.

Ice dams are often the cause of water finding its way into the home. Occurring on exterior coverings, ice dams typically occur through the melting and rapid freezing of snow or ice, which can lift and separate the covering giving water a pathway into the house. Ice dams are common on the roof, lifting shingles and separating chimney flashing; but can also occur on siding and exterior trim as well.

Rather than taking water away from your home’s foundation, blocked gutters and downspouts can be the cause of water penetration into the basement. Gutters and downspouts can become blocked with debris any time of year; however, winter presents additional issues. Snow and ice covered downspouts are sometimes shifted or damaged; while eroded grading can redirect water toward the house.

Part of the home’s drainage system, a sump pump helps to keep water from penetrating into the basement. It is designed to collect water in a basin and pump it away from the home. After severe winter weather, a large volume of melted snow and ice can saturate the grounds and fill the basin quickly. If the pump is not operating properly (or the pump drain is blocked), water can unknowingly seep into the basement.

Winter weather can also affect the home’s walkway and driveway. Freezing water can expand existing cracks, while snow removal and ice treatments can deteriorate the stability and integrity of the materials. Not only can the sidewalk and driveway become unsightly, they can also become a trip hazard.

You may be able to examine much of your home’s exterior by walking around the perimeter. However, it may be necessary to have a licensed contractor to inspect/repair the roof, gutters, and other areas. Although your home may not need maintenance, common items that may need to be addressed include repairing/replacing lifted or missing shingles; repairing flashing; realigning gutters and downspouts; re-grading; testing the sump pump; repairing/replacing broken or missing siding and/or exterior trim; repairing window and door seals; repairing/replacing fascia boards; repairing and/or sealing walkway and driveway; and touch-up painting.

Even if your home escaped busted pipes (which many home owners experienced this year), a leaking roof, or other cold weather crises this winter; it still may be in need of urgent maintenance. As the weather warms, taking the time to check your home’s exterior and making necessary repairs could not only improve your home’s aesthetics, but may also help prevent potential issues and impede developing damage. It should go without saying that this is a priority if you’re planning to put your home on the market this spring/summer.

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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.

Credit reporting changes may help home buyers

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It’s no secret that your credit report can affect your ability to buy a home. Most mortgage lenders impose minimum credit score requirements to qualify; and tiered interest rates can cost you hundreds of dollars if your credit score is too low.

Your credit score is used as a predictor of your ability to manage debt. The score is the result of an analysis of information that is reported about you to the three credit reporting agencies; and is produced by each agency’s proprietary algorithm. Typical information that can be found in your credit report includes revolving and installment credit accounts, such as credit cards, home equity lines of credit, mortgages, and auto loans. Reported late payments, collections, and judgments can adversely affect your credit score.

Financial experts recommend you review your credit report annually to ensure accuracy, and dispute incorrect information. Annualcreditreport.com is the only authorized website where you can obtain a free annual credit report.

Correcting credit report errors can be tedious; and unfortunately, the outcome may not please you. However, this could change as a result of a recent settlement between New York Attorney General Eric Schneiderman and the three credit reporting agencies. A March 9th press release (ag.ny.gov) announced a settlement with the three credit reporting agencies to “improve credit report accuracy; increase the fairness and efficacy of the procedures for resolving consumer disputes of credit report errors; and protect consumers from unfair harm to their credit histories due to medical debt.” The statement quoted a 2012 FTC study that suggested that millions of consumers’ credit reports contain errors. The study indicated that 26% of the participants reported at least one error; and about 13% of the participants reported a positive change to their credit score after disputing errors.

The Consumer Data Industry Association (which represents the consumer data industry, including the three credit reporting agencies) also announced on March 9th (cdiaonline.org) the creation of the National Consumer Assistance Plan. Stuart Pratt, President and CEO of the Consumer Data Industry Association, stated; “The National Consumer Assistance Plan we are announcing today will enhance our ability to offer accurate reports and make the process of dealing with credit information easier and more transparent for consumers…”

The implementation of the National Consumer Assistance Plan (NCAP) is expected in upcoming months, and is focused on improving how consumers interact with the credit reporting agencies, as well as data accuracy and quality. The NCAP is to build upon recent improvements to consumers’ experience with the credit reporting agencies, which includes a 2013 digital application to facilitate credit report disputes. To ensure consistent and uniform data submission to credit reporting agencies, a multi-company working group is to be formed.

To improve the consumer experience, the NCAP is to: provide expanded credit report education; provide dispute results and suggestions on what to do if not satisfied with dispute outcome; and enhance dispute resolution for proven victims of identity theft and fraud.

To improve data accuracy and quality, the NCAP is to: implement a “waiting period” of 180 days for medical debt; remove previously reported medical collections that have been paid, or being paid by insurance; reinforce consistent standards for data submission; reject data that does not include a date of birth; and eliminate reporting debt which did not arise from a contract or agreement to pay (e.g., tickets or fines).

By Dan Krell
© 2015

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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.

How to price your home in 2015

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In case you haven’t been following along closely, the March 3rd release of CoreLogic’s Home Price Index (corelogic.com) indicated that nationwide home prices increased 5.7% during January compared to the same period last year; and there was a 1.1% increase during January compared to December. And believe it or not, CoreLogic stated that nationwide home prices including distressed sales are only 12.7% below the peak; and only 8.6% below peak if you exclude distressed sales.

Of course, national home price data are an average of regions that vary economically, reflected in their respective housing market. CoreLogic Chief Economist Dr. Frank Nothaft stated, “House price appreciation has generally been stronger in the western half of the nation and weakest in the mid-Atlantic and northeast states…In part, these trends reflect the strength of regional economies. Colorado and Texas have had stronger job creation and have seen 8 to 9 percent price gains over the past 12 months in our combined indexes. In contrast, values were flat or down in Connecticut, Delaware and Maryland in our overall index, including distressed sales.” The only 2 states that realized negative price appreciation year over year (including distressed sales) during January were Maryland and Connecticut, where home prices appreciated (–0.3%) and (-0.6%) respectively.

If you include distressed sales, Maryland’s January home prices appreciated (–0.3%) year over year, (-0.1%) month over month, and is (-25.3%) from the peak. Regional differences, of course, exist: DC home prices including distressed sales appreciated 3.3.% year over year, (-0.4%) month over month, and is only (-1.4%) from the peak; Virginia home prices appreciated 1.4% year over year, (-0.2%) month over month, and is (-15.6%) from the peak.

The CoreLogic HPI Forecast projects nationwide home prices, including distressed sales, to appreciate 0.4% from January to February, with an annual appreciation of 5.3%.

CoreLogic expects consistent home price appreciation through 2015 and into 2016, due in part to a current shortage in housing inventory. Anand Nallathambi, president and CEO of CoreLogic, stated that “Many homeowners have taken advantage of low rates to refinance their homes, and until we see sustained increases in income levels and employment they could be hunkered down so supplies may remain tight. Demand has picked up as low mortgage rates and the cut in the FHA annual insurance premium reduce monthly payments for prospective homebuyers.”

According to the Greater Capital Area Association of Realtors® (gcaar.com) January Montgomery County single family home statistics, home inventory and home buyer activity increased compared to last January. Although total housing inventory increased 26.5% year over year, contracts (pending sales) increased 16.6%, and settlements (sales) increased 4.8%.

If you’re wondering how these statistics might affect your sale, you’re not alone; many home sellers are trying to shape a sensible marketing plan this spring, which includes deciding on a listing price. Consider that although listing inventory is currently relatively low, it is likely to spike within the next two months adding competition to a market competing for discerning home buyers.

Typical home buyers have been increasingly demanding value; besides looking for a “turnkey” (updated and ready to move in) home, they have also been sensitive to home prices. Since cash buyers are not as prevalent as they were two years ago, and many buyers are concerned about their monthly obligations and budgets; pricing your home correctly will be more important this year than it has in the past.

By Dan Krell
© 2015

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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.

Stumbling housing market reignites housing policy debate

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Surely 2015 is to be the year when the housing market would bounce back from its recent disappointing performance; at least that’s what I wrote back in November. But as January’s news from the National Association of Realtors® (NAR) is not as rosy as we expected; a housing policy debate, that has been subdued since 2010, gets heated.

The NAR revealed in a February 23rd press release (nar.realtor) that although the pace of home sales increased compared to the same time last year, existing homes sales have declined to the lowest rate in nine months. The typically optimistic Lawrence Yun (NAR Chief Economist) was cited as saying “the housing market got off to a somewhat disappointing start to begin the year with January closings down throughout the country.”   Adding that “seasonal influences” can make January data erratic, the combination of low inventory and home price gains over the pace of inflation seems to have slowed home sales – notwithstanding low mortgage interest rates.

Keeping mortgage interest rates low is not the sole solution; however, if it was, the housing market may have bounced back several years ago. Although a myriad of causes have been blamed for a lackluster housing market that has been trying to make a comeback for six years, most are correlational and incidental.

However, Richard X. Bove (Equity Research Analyst at Rafferty Capital Markets) recently made a case for a sole cause in his February 23rd commentary (There’s a new mortgage crisis brewing; cnbc.com/id/102447414). Bove described how mortgage markets are in trouble; rules and regulations put into place to strengthen the market by increasing borrower standards have dried up a lot of the funding. And not necessarily in the way you might expect; besides shrinking the pool of qualified buyers, Bove suggested that the rules and regulations have made mortgage lending unprofitable and unpalatable for some lenders (leading them to walk away from the business).

As a response, it would seem as if the Federal Housing Finance Agency (FHFA) took steps to make mortgages increasingly available (returning to 3% down payment loans, and increasing the number of loans on Fannie and Freddie’s balance sheets). These actions, along with recorded losses in Q4 2014, Bove described, is making some nervous.

If you don’t remember, the FHFA was created in 2008 as a temporary conservator to Fannie Mae and Freddie Mac; whose original goals included: ensuring a positive net worth for Fannie and Freddie; reducing Fannie and Freddie’s mortgage portfolios; and facilitating a streamlined and profitable model for Fannie and Freddie.

Bove’s catch-22 conclusion, of either hindering the housing market by stopping Fannie and Freddie’s growth or increasing Fannie and Freddie’s debt obligations with continued growth, is not a new dilemma. The debate has been ongoing since 2008.

Having faded somewhat since 2010, the housing policy debate heated up during testimony given by FHFA Director Mel Watt on January 27th during the congressional hearing, “Sustainable Housing Finance: An Update from the Director of the Federal Housing Finance Agency.” Trey Garrison of HousingWire succinctly portrayed opposing views (January 27, 2014; FHFA hearing: GOP fear housing policy headed for Crash 2.0; housingwire.com): “Democrats said policies in the past year are necessary to expand housing opportunities to lower income and challenged borrowers…” while, “…Republicans…said the administration is adopting dangerous policies that risk another housing crash that will put taxpayers on the hook for billions.

By Dan Krell
© 2015

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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.

New rules in Real Estate

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Real estate canon used to be straight forward and for the most part consistent. For instance, if you planned a sale, you would target spring time because that was generally accepted as the time when home buyer activity was the greatest; or buying a home was a rite of passage. But since 2008, what was generally accepted has been persistently challenged; home buyers and sellers have shifted into a new paradigm with new rules.

It is no coincidence that Zillow Talk: The New Rules of Real Estate (by Zillow CEO Spencer Rascoff and Chief Economist Stan Humphries, Ph.D.) comes at a time when significant changes in consumer beliefs and expectations about real estate have become widely recognized. The book is described by Zillow as “…poised to be the real estate almanac for the next generation.” And looking at the table of contents, you might think that the highly acclaimed tome is just another book about the buying and selling process; yet it seems to discuss practical aspects about buying and selling a home, as well as possibly confronting real estate myths.

It will remain to be seen how influential the work will become, as research has indicated that home buyers are typically well informed and out in front of housing trends.

A 2012 study by Karl Case, Robert Shiller, & Anne Thompson (What have they been thinking? homebuyer behavior in hot and cold markets. Brookings Papers on Economic Activity, 265-315) revealed perceptions and expectations of homebuyers from four metropolitan markets over a 25 year period. The authors concluded that the surveyed home buyers were well informed and very much aware of home price trends prior to their purchase. Data suggested that home buyer opinions (beliefs) fluctuated over time; there was more agreement among respondents during strong markets, and increased doubt during times of market uncertainty. There was also a strong correlation between price perceptions and actual movement in prices. Although home buyers were “out in front” of short term market movements, their short term expectations “underreacted” to actual home price changes; while long term expectations were persistently “more optimistic.”

Suggesting a set of “guidelines” for real estate is a trap that implies that the housing market is straightforward and static; where personal and regional differences don’t matter and the market doesn’t change. However, David Wyman, Elaine Worzala, and Maury Seldin raise the question about becoming complacent with trends and models. In a 2013 exploratory paper (Hidden complexity in housing markets: a case for alternative models and techniques, International Journal of Housing Markets and Analysis, 6:4, 383 – 404) they discuss how rigid market models may lead to rules where buyers and sellers could make poor decisions.

The authors’ discussion of “complexity theory” in real estate in not unlike the application of “chaos theory,” which focuses on letting go of assumptions upon which rules are definitive; and view housing as a dynamic and changing environment. Citing incidents leading up to the financial crisis, the authors make a case for understanding the market as complex and using common sense before making (buying and selling) decisions.

So as we begin to understand the new real estate dogma, it is likely that the new rules will most likely change along with the market. And much like the housing market, consumer beliefs are also dynamic – which seem to be ahead of the industry experts.

Dan Krell
© 2015

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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.