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April 3, 2014November 23, 2021

House shopping strategies without using MLS

The low housing inventory is discouraging many home buyers. Low inventory along with increasing home prices and buyer competition can make shopping for a home today a frustrating endeavor. If you’re a serious home buyer, there may be other strategies to finding homes for sale other than those listed in the multiple list system (MLS).

The “For Sale by Owner” sign in the yard is a tell tale sign; however did you know that many FSBO’s can be found listed in the MLS? These are listed through brokers who are paid a flat fee as an MLS listing placement service. And although most are listed online, not all FSBO’s are found in the MLS. You can also find FSBO’s on numerous “by-owner” sites, as well as Zillow, Trulia, or Craigslist.

Listservs and internet groups are another way to find non-MLS homes for sale; however, neighborhood groups often restrict membership to residents. Leveraging your personal and social networks by announcing your search for the non-MLS home for sale will most likely prompt them to inform you about what they have heard through their networks and neighborhood listservs/groups.

The National Association of Realtors® 2013 Profile of Home Buyers and Sellers (realtor.org) indicates that 92% of buyers search the internet. Besides FSBO’s; online services such as Zillow, Trulia, Craigslist, also list foreclosures auctions, pre-foreclosures, and of course broker listings too. The internet is also where scammers are lurking, waiting to prey on you. Be wary about phone numbers that are out of the area; experts agree that you can avoid most scams if you deal with local individuals with whom you can meet in person.

Buying a foreclosure is often suggested as an avenue to buy a non-MLS home. Although most bank-owned homes become listed in the MLS, you have the opportunity to purchase a home at the foreclosure auction. If you’re an auction novice, seek out a real estate professional to assist you; homes are purchased “as-is” and you usually do not have the opportunity to inspect the interior. Mistakes that are often made by inexperienced auction bidders include misunderstanding the terms of the auction, overestimating home values on those they bid, as well as getting carried away and over bidding. Pre-foreclosures are often listed in the MLS as short sales; however, it is necessary to be aware of local laws (such as the Maryland Protection of Homeowners in Foreclosure Act) when approaching distressed home owners who have not listed their home for sale.

Searching through expired and withdrawn MLS listings is another way to find eager home sellers. Your real estate agent can provide you with such a list; however, it is not easy and you may quickly discover the reasons why many of these homes did not sell.

Even though, many alternate strategies for finding a non-MLS home for sale can be achieved without a real estate agent you should consider hiring an agent; besides representing you and assisting in structuring and facilitating the transaction, it is also common for agents to use these strategies to search on behalf of their busy clients.

A down side of the search for the non-MLS home for sale is that instead of competing with other home buyers, you’re competing with many real estate agents; not just those agents representing home buyers, but also the many agents searching for their next MLS listing.

by Dan Krell ©
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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. This article was originally published the week of March 31, 2014 (Montgomery County Sentinel). Using this article without permission is a violation of copyright laws. Copyright © Dan Krell.

March 26, 2014July 3, 2019

Real estate, climate change, and data-porn

The National Association of Realtors® (realtor.org) March 20^th news release reported that February home sales remained subdued because of rising home prices and severe winter weather. The decline in existing home sales was just 0.4% from January, but was 7.1% lower than last February’s figures. NAR chief economist Lawrence Yun stated that home sales declines were due to “weather disruptions, limited inventory, increasingly restrictive mortgage underwriting, and decreasing housing affordability.” And although it may sound bad, Yun actually has a rosy outlook saying, “…Some transactions are simply being delayed, so there should be some improvement in the months ahead. With an expected pickup in job creation, home sales should trend up modestly over the course of the year.”

So, if a snow filled and cold February is to blame for poor home sales, was Snowmagedden and Snowzilla the reason for increased home sales during February 2010? Of course not. And although home sales increased 5.1% year-over-year here in Montgomery County MD during February 2010, it was mostly due to increased home buyer demand that some speculate was due in part to the availability of first time home buyer tax credits. Additionally, RealtorMag reported that Southern California December home sales dropped about 21% month-over-month, and were down about 9% in compared to the same period in 2012.

As home sales are trending lower, it’s reasonable to look for reasons why demand is soft; but can weather be the main reason to keep potential home buyers at home? Probably not. Consumer demand is a robust force that is multifaceted, and can even prevail over seemingly difficult circumstances. Consumer demand can even trump weather, as was the case during the winter of 2010.

Consumer demand can even be resilient in the face of the speculative effects of global warming. A November 2013 RealtyToday article (The Looming Global Warming Catastrophe and its Effect on Real Estate; realtytoday.com) discusses how home buyer demand for coastal property has remained strong even as increased claims that climate change will make these areas uninhabitable.

Housing data cause and effect is only conjecture unless it is directly observed. To make sense of the “data-porn” that is excessively presented in the media, often without proper or erroneous explanation; economic writer Ben Casselman offers three rules to figure out what the media is saying (Three Rules to Make Sure Economic Data Aren’t Bunk; fivethirtyeight.com): Question the data; Know what is measured; and Look outside the data. Casselman states, “The first two rules have to do with questioning the numbers — what they’re measuring, how they’re measuring it, and how reliable those measurements are. But when a claim passes both those tests, it’s worth looking beyond the data for confirmation.”

Keeping these rules in mind, could the winter slowdown be the result of cold weather, or is it something else? Sure, cold weather may have marginal effects on home buyer behavior and demand; however, weather does not typically affect extended periods of consumer behavior unless weather events are catastrophic. The current data may be indicative of a housing market that is returning to the distinct seasonal activity that we have been used to for many years prior to the “go-go” market and subsequent recovery years.

However, other factors referenced by Dr. Yun, such as increased home prices and tougher mortgage standards, are more likely to be the reasons for subdued home sales. And as the year progresses, these factors may emerge to be significant issues for home buyers.

by Dan Krell
© 2014

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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.

March 20, 2014July 3, 2019

A new housing finance system is one step closer

The end is near for Fannie and Freddie. The next step to remaking the housing finance system.

Like FHA, Fannie Mae and Freddie Mac were also financially battered during the financial and housing crises. While FHA became the mortgage to rescue many distressed home owners, the Federal Housing Finance Agency (FHFA) was created in 2008 as conservator for the hemorrhaging Fannie and Freddie. Although the writing was on the wall about necessitating change in the conventional mortgage sector, there could only be speculation about what that change would entail.

Fast forward to June 2013, and the bipartisan bill S.1217 Housing Finance Reform and Taxpayer Protection Act of 2013 was introduced as the groundwork for replacing Fannie and Freddie with the (to be created) Federal Mortgage Insurance Corporation (FMIC). Moving along to last week, Senate Banking Committee Chairman Tim Johnson (D-SD) and Ranking Member Mike Crapo (R-ID) released a draft for “A New Housing Financing System” (banking.senate.gov).

Building upon S.1217, the Bipartisan Housing Reform Draft’s intention is stated to “…protect taxpayers from bearing the cost of a housing downturn; promote stable, liquid, and efficient mortgage markets for single-family and multifamily housing; ensure that affordable, 30-year, fixed-rate mortgages continue to be available, and that affordability remains a key consideration; provide equal access for lenders of all sizes to the secondary market; and facilitate broad availability of mortgage credit for all eligible borrowers in all areas and for single-family and multifamily housing types.”

In addition to supervision and enforcement authority, the purpose of the FMIC is to maintain a re-insurance fund that will insure mortgage backed securities meeting FMIC guidelines. The re-insurance fund is to be modeled after the Deposit Insurance Fund (maintained by the FDIC), and to be funded by private companies. Additionally, the new system is meant to protect taxpayers by requiring future mortgage backed security guarantors to be private and hold a minimum of 10% private capital as a first loss position; bailouts of these private institutions are to be prohibited.

The FMIC will also institute underwriting guidelines that are to “mirror” the Qualified Mortgage (QM). The recent definition and rules for the QM announced by the Consumer Finance Protection Bureau (CFBP) were effective January 10^th. The QM is characterized to be a safer loan compared to some loans originated prior to the crises because the lender must assess and the borrower must demonstrate the ability to repay the loan; the ability to repay is based on typical factors that include the borrower’s income, assets, and debts. Additionally, the borrower cannot exceed a total monthly debt-to-income ratio (all monthly obligations including mortgage payments) of 43%.

Conforming loan limits will be maintained, so as to provide the additional credit needed to purchase homes in “high-cost” areas. If you’re a first time home buyer, you will need a minimum down payment of 3.5%; however if you’re not a first time home buyer you will need at least a 5% down payment for your home purchase.

The transition period is expected to be at least 5 years, however possible extensions may be required to prevent market disruptions and cost spikes to borrowers. The plan is to simultaneously wind down Fannie and Freddie’s operations while increasing expansion of the new system. The FMIC will take over the functions and duties of FHFA; and as of the FMIC’s certification date, Fannie and Freddie won’t be able to conduct new business.

by Dan Krell
© 2014

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.

March 14, 2014July 11, 2019

The pros and cons of smart home tech

Decades of futurists dreamed about and designed their vision of a “smart home” intended to make living easier and more comfortable. The 1933 World’s Fair envisioned that all homes would have helicopter pads; the 1962 World’s Fair highlights an electronic central brain in the home; the 1964 World’s Fair was about computerizing the home with time saving appliances. And of course, who can forget Disney’s “House of Tomorrow?”

Retro-futurism seems almost cartoonish today, much like watching an episode of the Jetson’s. However, like the retro-futuristic home, today’s smart home is meant to make life easier. Filled with devices and appliances that are connected to the internet, remote access to your home’s systems and appliances is becoming increasingly commonplace. There is an increasing ability for you to control your home, even when you are not there. You can remotely monitor cameras in your home, change thermostat settings, and even program the DVR.

Realtor Magazine (Homes Are Getting Smarter, More Connected; January 09, 2014) reported that smart home tech is a growing sector showcased at the annual Consumer Electronics Show. Besides the growing number of devices that can be remotely controlled, there is also a trend for appliances to send text messages and email. Although smart home technology today is about producing individual gadgets that are programmable and controlled by smart phone apps, it appears that there is a trend toward integrating devices as well. As smart home technology advances, home appliances and systems will be integrated with each other allowing them to communicate with each other; which expected to make the home function more efficiently.

All this technology is great, but there appears to be a downside as well. Although there have been warnings about hacking smart home devices for a number of years, the recent report of hacked smart refrigerators that sent spam has attracted and focused attention on the hackers’ ability to take control of a smart home (phys.org/news/2014-01-cyberattack-hacked-refrigerator.html). A Forbes article published July 2013 (When ‘Smart Homes’ Get Hacked: I Haunted A Complete Stranger’s House Via The Internet) discussed the ease of identifying and gaining access to smart home devices via the internet. Security specialist indicated that they were able to access and control smart devices (such as lighting, thermostats, garage doors, and security systems); more importantly, they were able to access personal data (including names) and device IP addresses from these devices as well. The consensus among security specialists about protection from such intrusions is to basically stay “unplugged.”

While we wait for the perfect smart home, we can continue dreaming of the home of the future. “1999 A.D.” (A 1967 Ford-Philco production; the video featuring Wink Martindale is posted above) is one of the best retro-future depictions of a home that incorporates technology considered to be state-of-the-art by today’s standards, as well as technology that we have yet to perfect. Central to the home is a computer that collects and maintains information from all home devices, including biometric data that is sent to the medical center for analysis. 3D television, a “home post office” (email), push button meals, and shopping from a home computer is standard in this home. As technology advances, there seems to be a post-modern sentiment exclaimed in the video that may ring true, “…if the computerized life extracts a pound of flesh, it has some interesting rewards…”

By Dan Krell
Copyright © 2014

Original published at https://dankrell.com/blog/2014/03/14/the-pros-and-cons-of-smart-home-tech/

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.

March 7, 2014November 23, 2021

How many more years for housing recovery?

The “long slog” housing recovery prediction appears to be relevant as a recent study published by the Demand Institute (DI) now estimates that the recovery may take several more years. DI, a non-profit that studies consumer demand, suggests that home values may not rebound until 2018.

The DI study was reported by Realtor Magazine (Uneven Recovery to Continue for 5 Years; March 03, 2014) to be comprehensive and include 2,200 cities across the country and 10,000 interviews. Overall, the report concludes that the recent sharp increase in home prices was mostly due to real estate investors who purchased distressed properties. Now that distressed home sales are declining, values are not expected to increase as precipitously; the continued housing recovery is expected to be driven by new household formation.

The study reported the appreciation rate of the 50 largest metro areas in the country through 2018; home prices are estimated to appreciate about 2.1% annually. However, the top five appreciating cities will average an overall increase of 32% through the recovery; while the bottom five will only average about 11% (Washington DC is listed among the bottom five). Cities that experienced the highest appreciation and subsequently sharpest depreciation in home prices will likely have the longest and protracted recovery, and yet may only recover a fraction of the peak home values by 2018.

Not highlighted, and not yet expected to be an impact on the housing recovery, is the move-up home buyer. The typical move-up home buyer is sometimes characterized as a home owner who decides they need more space, which results in the sale of their smaller home and the purchase of a larger home. Similar to previous recessionary periods and real estate down markets, the move- up home buyer was the missing piece to a housing recovery; the move-up home buyer provides much of the housing inventory that first time home buyers seek. However, it seems as if psychological barriers hold back many move-up buyers today as it did in past recoveries. During the current housing recovery, many potential move-up buyers have remained in their homes. And until the move-up home buyer presence is felt in the marketplace, we may yet to endure a few more years of “recovery.”

Much like the DI study, there has been a lot of discussion and debate about the effects (on housing) of the lack of housing formation during the recession and in the subsequent recovery. Andrew Paciorek, an economist at the Federal Reserve Board of Governors, described household formation during a presentation given at the Atlanta Fed’s Perspectives on Real Estate speaker series (June 2013); “Think of the unemployed or underemployed college graduates living in their parents’ basements instead of renting or buying their own place. When a person establishes a residence, whether that’s an apartment or a house or another dwelling, that person is forming a household. Mainly because of a weak labor market that held down incomes, the rate of household formation cratered during the recession and subsequent recovery…”

To give perspective to the issue, the rate of decrease of household formation during the great recession was significant (an 800,000 per year decrease compared to the previous seven years). Additionally, household formation between 2007 and 2011 was at the lowest level since World War II, and was 59% below the 2000 to 2006 average. Most significantly: during 2012, 45% of 18 to 30 year olds lived with older family members; compared to 39% during 1990, and 35% during 1980. He described the household formation crash as an indirect contributor to declining home prices, which diminished household wealth linked to home values.

Although household formation continues to be a concern as the labor participation rate has decreased, Paciorek points to improvements in the job market as the spark to increasing household formation. He forecasts that household formation should increase to 1.6 million over the next several years, and could possibly exceed the pre-recession average due to pent up demand of those who waited to form a household during the recession. However, a disclaimer was provided saying his forecast is “based on assumptions that could prove overly optimistic;” and has “lots of caveats and lots of uncertainty” – much like the housing recovery.

by Dan Krell
Copyright © 2014

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.