Is now the time to buy a home?

by Dan Krell © 2010

Today’s economy has a lot of people worried about buying a home. So much so that many would-be home buyers continue to sit it out. However, there are home buyers who are jumping into the market because they feel there is value in home ownership regardless of the economy.

So, is it a good time to buy a home? The answer, of course, depends on your circumstances. However, the basic indicators reveal we are at a time when the combination of historically low mortgage rates and low home prices provide an opportunity not only for real estate investors but for home buyers as well.

First, I’m sure you’ve heard that mortgage rates are at historic lows. Yes it is true that many economists forecasted that mortgage rates would increase through 2010 due to an anticipated global economic recovery. However, many now have conceded that the recovery has stalled; the rudimentary explanation is that economic concerns abroad have affected a domestic recovery. Additional economic pressures and volatile markets continue to suppress mortgage rates, such that it has sparked a new refinancing boom.

Second, home prices remain low. Even though the recent S&P/Case-Shiller Home Price Indices ( reveal home price increases in fifteen of the twenty composite cities (including the Washing DC metropolitan area) for what may seem to be the first quarter of gains this year, economists remain cautious in saying there is a housing recovery. As median home prices continue to remain relatively low, the National Association of Realtors Home Affordability Index ( indicates that homes continue to be as affordable as they have been in recent years.

Third, the Trulia Rent vs. Buy Index ( indicates that the Baltimore – Washington area rates relatively low in the index (meaning the costs of owning a home is less than renting). The Rent vs. Buy argument has always been hotly debated, even at the height of the seller’s market. There are those who will always say home ownership is more costly than renting (I suppose a broken watch is right twice a day); and let’s face it, home ownership is not for everyone. If you’re questioning the rent vs. buy issue, you can compare rent vs. buy via a “rent calculator” (available on various places on the internet) comparing the costs of home ownership as compared to renting.

Regardless where the housing indicators point, many home buyers are aware of and believe in the intangible advantages of owning a home.

Additionally, some financial talking heads are now talking about these housing indices and touting real estate as an alternative to volatile markets. Even the venerable Stuart Varney has recently been heard saying that buying a home is smart. (Of course I have to provide a disclaimer that I am not offering financial advice and you should consult the usual suspects of professionals and financial experts before you invest in real estate).

The American Dream of home ownership is not dead; it has just been on hiatus. Working hard to save money for a down payment to purchase your own home is on a comeback. And unlike some who might have you believe that buying a home is a “false economy,” those who know genuine value will always look to own their own home regardless of the economy.

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 August 16, 2010. Using this article without permission is a violation of copyright laws. Copyright © 2010 Dan Krell.

A step backward for affordable homeownership?

by Dan Krell © 2009

In a press release circulated on Monday, November 30, the FHA announced new proposed rules to “Strengthen Risk Management.” The proposed changes include increasing financial worth of FHA lenders, tighten underwriting requirements for borrowers, and require FHA lenders to take on the liability for the loans they originate.

FHA has a history of providing low down payment mortgages to millions of home owners since 1934. FHA sparked the resurgence of a very flat housing industry when it was created by providing affordable mortgages with acceptable terms at a time when mortgages had very stringent underwriting guidelines as well as very harsh terms. . FHA has played a major role in subsequent recessions and housing downturns to help stabilize the marketplace by assisting cash strapped home buyers purchase their first home.

FHA’s role in the housing industry has undoubtedly increased the value of homeownership by making homeownership affordable. Unfortunately, it seems as if FHA is another victim of the financial crisis as it no doubt suffered losses by bailing out troubled home owners through such programs as HOPE for Homeowners.

In a time when home buyer sentiment is wavering, increasing financial and credit requirements for potential home buyers will further diminish the value of homeownership. Increased financial and credit requirements in a time when recessionary forces have already reduced home buyer resources will undoubtedly affect the recovering real estate market and shift the consequences of the financial crisis to many potential home buyers by making home ownership less affordable.

This article is not intended to provide nor should it be relied upon for legal and financial advice.

What Cap and Trade (HR 2454) will require of home owners

by Dan Krell © 2009

A National Building Code

Get the facts, read the bill. View HR 2454 here:

If confused about Cap and Trade?you have heard of H.R. 2454 you may not have thought much about it. Yes, this is the famous (or infamous) American Clean Energy and Security Act of 2009 also known as “cap and trade.” What many home owners may not realize is that H.R. 2454 is not only directed toward commercial uses, it is aimed toward home owners as well.

Title II Energy Efficiency, Subtitle-A: Building Energy Efficiency Programs establishes that effective on the date of enactment, new buildings must meet a national building code to meet a thirty percent reduction of energy use relative to a baseline code. By January 1, 2014 new residential buildings must meet a fifty percent reduction in energy use; energy use reduction in residential buildings will be required to increase five percent every three years thereafter.

This legislation establishes National Energy Efficiency Building Codes for commercial and residential buildings “to meet each of the national building code energy efficiency targets.” The Secretary of Energy is given the duty to create and amend the National Energy Building Codes by determining the percentage of energy improvements that would be achieved by proposed improvements and to propose the improvements necessary to meet or exceed the target (Title II, subtitle A, section 304(a)).

Once the National Energy Efficiency Building Codes are established, state and local jurisdictions have one year to adopt the national code. If after the one year, a state and/or local jurisdiction fail to adopt the national building code, “the national code shall become the applicable energy efficiency building code for such jurisdiction” (Title II, subtitle A, section 304(d)”APPLICATION OF NATIONAL CODE TO STATE AND LOCAL JURISDICTIONS”).

If a building is out of compliance with the national code, a violation may be determined by state, local, and/or federal authorities. Enforcement of the national building code will be enforced by the state (if law is adopted) through random inspections of buildings. (Title II, subtitle A, section 304(e)”STATE ENFORCEMENT OF ENERGY EFFICIENCY BUILDING CODES”).the truth about Cap and Trade

If a state does not adopt the national building code, then enforcement falls to the Federal level, where the Secretary of Energy will create rules for building code violations and penalties. The Secretary will create “an energy efficiency building code enforcement capability” (which will conduct building inspections). Fees will be collected to “cover costs” of the enforcement procedures (Title II, subtitle A, section 304(f) “FEDERAL ENFORCEMENT AND TRAINING”).

The legislation also creates the Retrofit for Energy and Environmental Performance (REEP) program. The goal of the program is to “facilitate the retrofitting of existing buildings across the United States to achieve maximum cost-effective energy efficiency improvements and significant improvements in water use and other environmental attributes.”

Additionally, the Act creates the Building Energy Performance Labeling Program to provide the public the necessary efficiency information of a building. The information would be made accessible to “owners, lenders, tenants, occupants, or other relevant parties who can utilize it.” Buildings will be labeled at the time of sale, when retrofitted, or by inspection.

Although the Act is well intentioned, specifics are lacking that leave many rules and procedures (including inspections, violations, and penalties) to be decided at a later time at the discretion of the Secretary of Energy and/or state and local officials. Unfortunately, you may not hear much more about how “cap and trade” affects home owners; however, unclear legislation may have unintended consequences to home ownership and the real estate market.

This column 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 June 29, 2009. Copyright © 2009 Dan Krell.

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