Home Buyer Archives - Page 32 of 36 - Real Estate News and Commentary

May 16, 2012

Renting vs Buying 2012

by Dan Krell © 2012
DanKrell.com

Inventories of homes for sale are at a five year low. The last time home inventories were this low, homes were sometimes selling as soon as you could put a “for sale” sign in the yard. For some, the recent shrinking inventories are a welcome sign of market equilibrium; even analysts at Barclay’s site low housing inventory as one indication of a housing comeback.

For others, however, the shrinking inventory is a sign that supply is just lessening to demand. Many individuals who might have previously thought of buying home are, for now, putting off home ownership. Many people are delaying family formation and do not want to be “anchored” by a home in a tight employment market. As Fed Chairman, Ben Bernanke, discussed in a speech given in February to the National Association of Home Builders, economic uncertainty has impacted the willingness to commit to home ownership. “…housing may no longer be viewed as the secure investment it once was thought to be…” (“Housing Markets in Transition”; federalreserve.gov).

As the inventory of homes for sale homes shrinks, the number of rentals increases- along with rent! According to rental statistics compiled by the Greater Capital Association of Realtors® (gcaar.com), fourth quarter 2011 rental listing volume increased about 89% compared to the fourth quarter 2010. Additionally, fourth quarter 2011 average rent list prices for Montgomery County increased 11.4% compared to the fourth quarter 2010; and the average rent price for Montgomery County increased 5.29% compared to the fourth quarter 2010.

More evidence of a strong rental market comes from the National Association of Home Builders (nahb.org): the Multifamily Vacancy Index (MVI) fell in the fourth quarter of 2011 indicating fewer rental vacancies. Additionally, the Multifamily Production Index (MPI), which measures builder and developer sentiment about current conditions in the multifamily market, is at its highest since 2005; the MPI component measuring developer sentiment for market-rate rentals is at an all time high.

The recent shift in the perception of homeownership has resulted in a falling homeownership rate: recent seasonally adjusted homeownership rates have been slowly declining from the all time high of 69.2% reached in the first quarter of 2005. The most recent seasonally adjusted homeownership rate (Q3 2011) is 66.1%, which is similar to the homeownership rate of 66.2% reported by the 2000 Census.

But evidence of a housing market attempting equilibrium comes from a May 9th National Association of Realtors® news release suggesting that home prices are stabilizing. First quarter 2012 “Median sales Price of Existing Single-Family Homes for Metropolitan Areas” compiled by the NAR indicate that although average national home sale prices decreased 0.4%, and average home sale prices for the Washington DC region increased 5.7% (realtor.org)

Reports of a recovering housing market may be supported by recent increases in home buyer activity. Market data reported by GCAAR indicates that “contracts” (also known as pending sales) increased 12.4% for the month of April (compared to April 2011); and increased 8.5% year to date 2012 (compared to the same period last year).

Even though home prices may be stabilizing, buying a home could still be cheaper than renting. According to Trulia’s Winter 2012 Rent vs. Buy Index (trulia.com), homeownership is less expensive (and may still be a better deal) than renting in 98 of 100 metro areas- including the Washington DC metro area.

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This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 14, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

May 10, 2012

Real estate pent up demand or pent up optimism

by Dan Krell © 2012
DanKrell.com

The National Association of Realtors® latest news release of April 26th stated that March’s increased pending home sales figures is an indication that the housing market is recovering. The NAR reported that March’s Pending Home Sale Index (the PHSI is a “forward looking number indicating contracts signed”) increased from February’s PHSI and is much higher than the PHSI a year ago. Lawrence Yun, NAR Chief Economist, claimed; “The housing market has clearly turned the corner. Rising sales are bringing down inventory and creating much more balanced conditions around the county, which means home prices, will be rising in more areas as the year progresses…” (realtor.org).

Regardless of the newly sparked optimism for the housing market, a news release of one week prior (April 19th) indicated although March’s existing home sales were better than the previous year, the number of home sales declined from February’s totals. Dr. Yun cautioned that, “We were expecting a seasonal increase in home listings, but a lack of inventory has suddenly become an issue in several markets with not enough homes for sale in relation to buyer interest”…“Home sales could be held back because of supply factors and not by demand…”

My local market (Montgomery County MD, which includes Bethesda, MD, Chevy Chase MD, and Rockville MD) is part of the one of the stronger housing markets in the country, and pending sales are strong. The April 2012 Montgomery County Single Family Home Housing Report released by the Greater Capital Area Association of Realtors (gcaar.com) indicated that the number of contracts increased 12.4% compared to the same time last year, as well as increasing 8.5% year-to-date compared to the same time last year.

However, when looking at closing sales, pending sales may not be converting. Although the number of settlements of single family homes in Montgomery County is reported to have increased 5.8% in April 2012 from April 2011, the number of settlements year-to-date has decreased 1.6% from the same time last year.

Additionally, housing inventory continues to pose a problem for the market. Montgomery County single family home new listings decreased 14.6% in April 2012 from April 2011; while total actives reported for year-to-date through April 2012 decreased 15.1% for the same time last year. A diminished housing inventory is not so much an issue of meeting an increased buyer demand, as Dr. Yun has stated; but rather the issue may be that the declining housing supply may be lowering to meet buyer demand.

However, if housing inventories were not meeting an increased buyer demand, then we might be experiencing something akin to what occurred 2005 through 2006 (when homes sold relatively quickly, the average time on market was less than 30 days, and home prices were increasing). But we’re not experiencing the activity of 2005-2006. Additionally, the average single family home sale price for Montgomery County as reported by GCAAR is $496,144 for the month of April 2012 (compared to $515,161 for the same time last year).

I remember (and reported) similar optimisms declared in recent years; for example, an October 2009 report indicated that the PHSI was proclaimed to be at the highest level since March 2007. Enthusiasm for a market turning point would surely be welcome; but the data is inconsistent. And in fact, maybe current reports of pent up home buyer demand may be indicative of something else- a projection of pent up optimism.

More news and articles on “the Blog”
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of May 7, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

May 2, 2012September 29, 2019

Non-hardship short sales on the rise

by Dan Krell ©2012
DanKrell.com

A March 2012 Housing Wire piece (housingwire.com) indicated that CoreLogic recently reported that there were 11.1 million home owners who owed more on their mortgages than what their home is worth, which roughly translates to 22.8% of all mortgages being underwater. At one time, most home sellers applying for a short sale were experiencing hardships and foreclosure. However, as the housing market continues to recover- an increasing number of short sale listings are from sellers who are current on their mortgage and are not experiencing hardships.

For home owners who are experiencing financial difficulty, there are a number of options available to keep your home; however often a last resort- the short sale is one alternative to losing your home to foreclosure. However, home owners who need to sell their homes (because of a job transfer, divorce, or other reason), but are not otherwise experiencing a financial difficulty nor hardship, are also turning to the short sale process because of depressed home sale prices.

Although short sale horror stories still circulate, much has changed and many lenders have attempted to “streamline” their short sale process. Still, this has not prevented Congress from attempting to force lenders to provide speedy short sale decisions. In 2010, H.R. 6133 H.R.: Prompt Decision for Qualification of Short Sale Act of 2010 was introduced to require a 45 day response from lenders, however it “died” in committee. A recent form of this legislation was introduced in 2011 (H.R. 1498: Prompt Decision for Qualification of Short Sale Act of 2011), but GovTrack (govtrack.us) gives the bill an 8% chance of becoming law. Another bill, S. 2120: Prompt Notification of Short Sales Act, was introduced in February; GovTrack gives that a 2% chance of being enacted.

Beware of the circulated “wisdom” regarding short sales, because it is not always reliable or accurate (e.g., hardships and delinquencies). If your home has negative equity (underwater) and you want to sell, consult with an attorney; there are financial and legal issues that may affect you presently and in the future. The short sale process may seem straightforward, but it can get complicated quickly (especially if there are multiple mortgages involved). Many experienced short sale agents work in tandem with attorneys to make the process much smoother than otherwise would be expected.

If you’re an underwater home seller, but have assets and are not experiencing a hardship, your attorney can advise you on the short sale process. The issue pertaining to a successful short sale is not always about the seller’s financial status; but rather, a short sale is more about the amount the lender will accept as payoff for the existing mortgage. Yes, the lender will collect your financial information to use in their short sale determination; but a skilled negotiator may be able to reduce the overall mortgage payoff (even if you have to bring funds to closing).

Finally, an attorney is the only person who can provide you legal advice. Real estate agents advising you to stop making payments on your mortgage or to “fudge” your short sale application could be putting you in a precarious position: your credit can be affected, or your home can go to foreclosure when payments are stopped; providing false or misleading information to your lender is fraud (lenders and law enforcement are working together to stop short sale fraud).

Additional information about short sales:
Short sale is an option
Don’t be pushed into a short sale
House bill proposes 45 day lender response on short sale
Mortgage fraud on the rise

More news and articles on “the Blog”
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 30, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

April 11, 2012

Is a home inspection good enough? Enter the Building Inspection Engineer

by Dan Krell © 2012
DanKrell.com

It wasn’t too long ago when home buyers wouldn’t even consider writing in a home inspection contingency in a contract for fear of losing the home of their dreams. Presently, of course, you can expect to find some type of home inspection in a most home purchase contracts. Some home buyers are even going a step further and employing Building Inspection Engineers for pre-purchase inspections.

With a little help from real estate agents, home buyers place high expectations on the home inspection. After all, the home buyer is making a big investment in their new home; they want to ensure the home’s condition is acceptable. To standardize expectations placed on home inspectors, the American Society of Home Inspectors (ashi.org) developed a standard of practice. According to ASHI, the home inspector will inspect the condition of visible and “readily accessible” home systems according to the standards of practice. The systems observed typically include: the HVAC system (heating/cooling depending on outside temperature); interior plumbing and electrical systems; the roof, attic and visible insulation; walls, ceilings, floors, windows and doors; the foundation, basement and structural components.

Even Maryland’s home inspector licensing law has a thing or two to say about what to expect from your home inspector. According to the standards of practice that are described in COMAR Title 9 Subtitle 36 Chapter 7, home inspectors are required to visually inspect the structural system and components, including the home’s foundation and framing. If the home inspector suspects that deterioration exists, they are required to probe the structural component, unless probing will damage the finished surface.

However, (usually at the time of the home inspection) the home inspector will briefly explain that they are limited. They will explain that the inspection is not “technically exhaustive,” and “may not identify concealed conditions or latent defects” (home inspection limitations are described in “Limitations and Exclusions” COMAR 09.36.07.03). So, maybe home inspectors are not the super heroes we make them to be.

Enter the Building Inspection Engineer. The Building Inspection Engineer may take the home inspection to the next level. The National Academy of Building Inspection Engineers (nabie.org) was established in 1989 to establish the highest standards in the home inspection, investigation and consultation industry. Along with verifying the qualifications of engineers and architects providing these services, the NABIE has developed the Building Inspection Engineer standards of practice.

According to NABIE, their members “have demonstrated competence involving inspection of buildings and building systems;” which can include site conditions and structure, as well as mechanical, electrical, plumbing and other major systems. The building inspection engineer’s perspective of the inspection is from a “demonstrated engineering judgment.”

The standards of practice set forth by the NABIE explain that the purpose of the inspection is identified and specified for each client, as the purpose can vary from a general inspection to investigating specific problems; the level of inspection and limitations are mutually agreed upon by the Building Inspection Engineer and the client. Typical inspections are defined by four levels: A) a visual inspection of systems and components; B) a functional inspection of systems and components; C) a specialized inspection that goes beyond level B and may require invasive techniques, material removal, or destructive testing; D) a specialized inspection with consideration to repair or improvement.

Regardless of the type of inspection you choose, make certain your inspector is licensed.

More news and articles on “the Blog”
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of April 9, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

March 28, 2012

Individual mandates and housing

by Dan Krell © 2012
DanKrell.com

This week, the Supreme Court (SCOTUS) heard arguments for and against issues surrounding the Patient Protection and Affordable Care Act of 2010 (PPACA). The arguments don’t have much of anything to do with providing healthcare, but rather the arguments are about certain elements of PPACA and the Constitution. In fact, Tuesday’s arguments about the individual mandate could be applied to anything – even the housing market.

The individual mandate portion of the PPACA basically requires certain individuals to purchase healthcare insurance or pay a penalty. Individual mandates are not new, and have been enacted in the past. For example, military drafts and income tax have been mandated (the initial enactment of an income tax was found unconstitutional- so the Constitution was amended which resulted in the sixteenth amendment).

I’m not an attorney, and I’m sure that I don’t begin to scratch the surface of the issue; however, the arguments for and against the individual mandate can basically be summed up as follows: Those that oppose the PPACA individual mandate argue that this mandate is different from others such that it regulates commercial inactivity (e.g., levying a fine when a product or service is not purchased); while those in support of the mandate argue it is not a fine for non-participation, but rather a tax.

Regardless, which way you approach the mandate, some contend that a mandate is only one way to have the public engage in commerce. In an editorial that appeared in the New England Journal of Medicine, Einer Elhauge, J.D. described the individual mandate as an alternative to providing subsidies (Elhauge, E (2012). The Irrelevance of the Broccoli Argument against the Insurance Mandate. The New England Journal of Medicine 366, e1. published on December 21, 2011). Putting aside Elhauge’s reasoning and opinion of the SCOTUS case; he points out that the Government has many ways to affect industries and commerce. Typically, the Government attempts to persuade us to engage in specific businesses industries by providing incentives and subsidies, such as tax credits to industry participants or purchasers of specific products. However, rather than persuading economic activity, the PPACA individual mandate is historic in that it requires participation and fines those who do not participate.

Like other industries, the housing industry is subsidized to encourage participation; home ownership is encouraged through the mortgage interest tax deduction and low interest rate mortgage programs (and for a brief time- first time home buyer tax credits). However, it is not implausible to think that if SCOTUS upholds the individual mandate, Congress could require people to make home a purchase, renovate, or retrofit their homes with green technologies (in an effort to increase economic activity in those industries).

There are some that argue that subsidies are bad enough for the housing market; one argument is that the mortgage interest deduction has artificially elevated home prices. However, some subsidies may only influence the timing of purchases rather than value: recent data suggests that the brief first time home buyer tax credit created short-term spikes of home sales that would have likely occurred over a period of time.

On the face of it, the housing market has little to do with health care. However, this week, housing and other industries may be affected by the SCOTUS decision regarding the healthcare individual mandate. Subsidies verses mandates- it may ultimately be about semantics and interpretation.

More news and articles on “the Blog”
This article is not intended to provide nor should it be relied upon for legal and financial advice. This article was originally published in the Montgomery County Sentinel the week of March 26, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.