Category: real estate

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Trending home designs

by Dan Krell
© 2012
DanKrell.com

Trending home designs

You might be amazed if you stopped to think about how much the home has changed over the years. From modest beginnings, when most homes were one or two rooms, the home has transformed from the humble shelter to today’s technological marvel that expresses your personality and popular tastes.

Early home architectural designs were very practical, and may have changed along with heating/cooling innovations. Before the furnace was a standard feature in the home, most homes were built around the fireplace; in very early homes, a central fireplace was where the homeowners cooked their food. Further advances in home design occurred as new building materials were developed; the use of drywall may be responsible for the spread of “tract housing” in the 1940’s and 50’s, as home builders realized they could make homes faster and more affordable.

However, a driving factor in today’s home designs is popularity with home buyers (because that’s what sells of course). The American Institute of Architects (aia.org) conducts the quarterly Home Design Trends Survey to track architectural trends and reveal what home buyers want in their homes. Besides the fact that a wounded housing market reduced the demand for the McMansion, what else is trending?

Economy and energy efficiency design features and appliances have been trending since the financial crisis. Since 2007, there has been a significant increase in demand for high efficiency furnaces, tankless water heaters, and more insulation.

Highlights of the recent Home Design Trends Survey (2nd quarter 2011) reveal how the economy has impacted home design. Most “Special feature rooms” have declined in popularity; except for home offices where people can telecommute, there was a significant decrease in the demand for interior greenhouses, media rooms, interior kennels, safe rooms, kid’s wings, and exercise rooms (demand for au-pair suites has remained steady). Informal living features continue to trend as people are increasingly staying home to entertain themselves and friends; a demand for “home-centered activities” spaces and outdoor living spaces are increasing. Requests for indoor-outdoor transition rooms, such as mudrooms, remain strong.

Special features continue to focus on energy efficiency, as well as increasingly on accessibility. Insulation seems to be a major home buyer focus as extra insulation or the use of alternative insulation techniques are in high demand.

As visitability laws gain momentum nationwide, home accessibility design features have increased in demand. First floor owner suites, height adjusted fixtures (sinks faucets and light switches), ramps, and even elevators have increased in popularity among home buyers.

Technological advances also dictate home buyer preferences. New energy efficient devices continue in popularity as well as low-maintenance products. High performance windows were a top requested item, as were water saving devices. Home buyers are also demanding more low maintenance engineered materials in their homes; such as floors, siding, and decking.
As technology changes, home design is anticipated to change as well. For example, some foresee that the demand for the home office to diminish as wireless communication technologies advance such that people won’t anchor themselves to one room as they work from home.

If you think that trending home design features are only for new homes, think again. Popular design features often filter into older homes as home owners renovate. As a design feature’s popularity increases, so does the chance it can be found at the Home Depot.

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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 February 6, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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“Exceptionally” low mortgage rates for buyers and owners

by Dan Krell
© 2012
DanKrell.com

Last week, the Fed issued a statement from the most recent Federal Open Market Committee meeting indicating that the target rate was to remain between 0 and ¼ percent; and an “exceptionally” low rate is warranted through 2014. Although there were some bright areas of the economy, some sectors remain an obstacle- including housing (which was described as “depressed”).

The Fed’s estimation of the housing market appears contrary to the seemingly upbeat reports issued by the National Association of Realtors®, which recently revised downward several years’ worth of housing data. However, by keeping an ear to the ground, the Fed goes beyond the typical statistical analysis by collecting and analyzing anecdotal data from industry experts around the country. The anecdotes are compiled, analyzed and published eight times a year by the Fed as the “Beige Book.” Formally known as the “Summery of Commentary on Current Economic Conditions by Federal Reserve District,” the most recent report indicated an overall feeling that home sales are sluggish throughout the country. Furthermore, the report from the Richmond District (which covers MD, DC, VA) indicates that although there were a few pockets of “strength,” a softened housing market was depicted citing the sentiment of some local real estate agents.

Getting back to interest rates, the Fed’s monetary policy of “exceptionally” low interest rates for some time could mean cheap mortgage money for you. There’s no telling how much lower mortgage interest rates can go, as we are already seeing some of the lowest interest rates in several generations. The interest rate on your mortgage is tied directly to your monthly mortgage payment; a lower rate typically means a lower monthly payment.

For home buyers, “exceptionally” low interest rates could result in a more affordable home purchase; buying a home today may possibly be cheaper than paying rent. Even if home prices continue at the current level during the next few years, home affordability can drastically change if mortgage rates rise.

If you currently own a home, “exceptionally” low interest rates could mean that you could possibly reduce your monthly mortgage payment. However, refinancing is not for everyone. According to the Federal Reserve Board’s “A Consumer’s Guide to Mortgage Refinancings,” refinancing may not be for you if: you’ve had your mortgage for a long time, your mortgage has a prepayment penalty, or you plan to move in the next few years.

For a typical mortgage, the proportion of the mortgage payment that is applied to principal increases through the life of the loan. So, if you’ve had your mortgage for a while, chances are that you’ve been increasingly paying toward the mortgage principal (and building equity). However, if you refinance, the mortgage life cycle begins anew and much of your payment would be applied to interest.

If your mortgage has a pre-payment penalty, you can be charged for paying off your mortgage early. Any pre-payment penalty should be considered in the total cost of the refinance so as to consider how long it may take to “break even” based on your monthly mortgage savings.

In today’s market, many home owners are putting off a move and refinancing instead. However, if you’re planning to sell your home soon after the refinance, consider the “beak even” point of your monthly mortgage savings. Selling your home shortly after a refinance could make the short term mortgage savings seem short sighted.

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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 January 30, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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SOPA and real estate; Unintended consequences?

If you don’t surf the web very often, you may not have heard about SOPA and PIPA. No, SOPA is not something to wash with nor is PIPA the Duchess’ sister.

SOPA (H.R. 3261: Stop Online Piracy Act) and PIPA (S. 968: Preventing Real Online Threats to Economic Creativity and Theft of Intellectual Property Act of 2011; also known as Protect IP Act) were introduced with the intent to stop internet piracy and protect intellectual property. Essentially, the legislation gives the government authority to take down websites if a court finds a site in violation of the legislation; these websites would be considered “rogue” sites.

The main intention of the legislation is to protect intellectual property and revenue; there has been an annual increase of complaints of internet piracy, unauthorized copying, and counterfeit products that proliferates the internet. The bills are in the process of the maneuvering through Congress. H.R. 3261 is in “committee,” which is typically the first step after a bill is introduced in the House of Representatives; while S. 968 was recommended to be voted on by the Senate. Although the bills are the center of controversy, it is possible that they might not pass; but rather the wording could be incorporated in other legislation (much like the Indefinite Detention Without Charge or Trial provision that was included in the National Defense Authorization Act for Fiscal Year 2012, which was signed into law December 31st).

SOPA lists, among other things: expanding the definition of criminal copyright infringement; expanding what constitutes criminal trafficking of inherently dangerous goods or services; as well as increasing penalties for specified trade secret offenses and various other intellectual property offenses.

Supporters for SOPA/PIPA contend that internet theft has reduced corporate earnings; passing this legislation would protect their intellectual property from illegal distribution on the internet by shutting down or restricting access to offending websites, thus protecting revenue and entrepreneurship.

Critics claim that the legislation is an over reach and has the potential for abuse, which if passed could allow larger companies to control internet commerce by forcing competitors to take down competing websites. Some argue that such legislation, which concerns many bloggers and some news outlets, may conflict with the first amendment.

For example: the operators of Craigslist claim that if the legislation passes, they may be ordered to shutdown (http://www.techdirt.com/articles/20111005/10082416208/monster-cable-claims-ebay-craigslist-costco-sears-are-rogue-sites.shtml); Craigslist is listed by Monster Cable® as an “unauthorized dealer” and “blacklisted” along with Sears, Costco, eBay, and many other sites for allegedly selling counterfeit products (http://www.monstercable.com/).

The internet has become a major source of real estate information; consumers and professionals search the internet daily for home listings by brokers and FSBOs, housing and economic news, legislation, public and other related information. The National Association of Realtors® 2010 Profile of Buyers and Sellers indicate that 89% of home buyers use the internet for information and home searching. The number of home buyers, sellers, and owners using the internet to assist them in making a real estate related decision grows annually.

Although the consequences of enacting SOPA/PIPA into law (on the real estate industry) are unclear, it would be undesirable and unfortunate if readily accessible real estate information were to be unduly restricted by some association’s or real estate company’s claim of content ownership. Learn more about SOPA/PIPA, and provide feedback to our Representatives and Senators.

by Dan Krell
© 2012

This article is not intended to provide nor should it be relied upon for legal and financial advice. Using this article without permission is a violation of copyright laws.

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Buying a home after a foreclosure or shortsale

by Dan Krell
© 2012
DanKrell.com

If you’ve been through tough financial times, you know that it feels as if your financial picture may never improve. But for most people, experiencing a financial challenge turns out to be just a blip in time; they eventually move on with their life. Given that notion, mortgage lenders know that people endure temporary financial problems through their lives- underwriting guidelines may allow for a past foreclosure, short-sale, or even bankruptcy.

In the old days (prior to desktop underwriting), underwriting was “manual,” meaning that a loan’s approval or denial was decided by a human who reviewed your file. If you were lucky enough to borrow from the local small neighborhood lender, there was a very good chance they knew you, your family, and your financial circumstances (much like the Bailey Building and Loan from “It’s a Wonderful Life”); you had a chance to provide explanations and compensating factors to increase your chance of being approved.

Today, mortgage underwriting is mostly accomplished through automated systems, such as “Desktop Underwriter” and “Loan Prospector.” The automated systems make decisions based on algorithms and do not have the ability to weigh circumstances for negative reports on a credit history. Some lenders may still provide manual underwriting, but borrower requirements have become increasingly strict (including higher minimum credit scores).

Take heart; you still may be able to get a mortgage after a foreclosure, short-sale, or bankruptcy.

For conventional mortgages underwritten with Fannie Mae guidelines, you’ll have to wait at least seven years after a foreclosure. Likewise, you’ll have to wait seven years after a short-sale- unless you can muster a large downpayment (you may be able to qualify: after two years with a 20% downpayment; and four years with a 10% downpayment)! You’ll have to wait four years after a chapter 7 bankruptcy is discharged; and two years after a chapter 13 is discharged (but four years if the chapter 13 is dismissed).

For FHA mortgages, you’ll have to wait at least three years after a foreclosure, two years after a chapter 7 bankruptcy discharge, and one year current on a chapter 13 payment plan (with court approval). A short-sale is differentiated depending if the loan was in default: if the loan was not in default at the time of the short-sale and your previous 12 months payments were timely, you may be eligible for a FHA mortgage; however if the loan was in default prior to short-sale, you will have to wait at least three years before you can qualify.

If you are eligible for VA financing, you will have to wait two years after a foreclosure, short-sale, and chapter 7 bankruptcy (one year into a chapter 13 payment plan with court approval). However, if your foreclosure or short-sale was on a VA mortgage, then your eligibility may be reduced.

If you’re financial issues were caused by circumstances beyond your control, you may be able to get an exception that could shorten the waiting periods. However, you’ll have to provide documentation for the underwriter to review, and not all lenders grant such exemptions.

There are many different mortgage programs, and underwriting guidelines vary. The timelines and requirements posted here are as of time of article; it’s very possible that these guidelines will or have changed. It’s important to talk to a licensed loan officer to know what you need to qualify, as well as which mortgage program will be best for your particular circumstances.

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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 January 9, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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What’s the return on your investment?

by Dan Krell
© 2012
DanKrell.com

If you’ve been wavering over the decision to moving into a new home versus renovating your current home; or maybe you’re planning a sale this year and thinking of making improvements to improve the home’s appeal- here’s a resource to help. According to the Remodeling 2011–12 Cost vs. Value Report (www.costvsvalue.com), you can get an idea of how much return on your investment you might get from some of the most popular renovation and addition projects that people undertake.

The 2011-2012 Cost vs Value Report, published annually by Remodeling Magazine, is now available and compares the top remodeling projects and the value that you might recoup at resale. The Cost vs Value ratios were collected for major cities/regions across the country. While project costs were obtained from a construction estimates database compiled by Home Tech Publishing, the project resale values were obtained through a National Association of Realtors® survey of appraisers, agents and brokers.

It is noted that a project Cost vs Value ratio is typically higher in “hotter” real estate markets, and can sometimes exceed 100% (recouping more than was spent on the project at resale). This idea is consistent with the annual Trends in Cost vs Value, which indicates that the average return on investment was higher when the housing market was at the peak in 2005. Of course a major reason for decline in the Cost vs Value ratio from the peak has been the retreat of home prices nationwide. There is speculation that since the national ratio decreased less this year than recent years, the housing market may be bottoming out.

Besides differences in local home prices, differences in regional Cost vs Value ratios can also be attributed to variances in labor and materials costs. Some experts point to a glut of construction workers who are seeking work as a reason for decreased labor costs in some areas; while material costs have not changed much or have become more expensive.

The Cost vs Value Report groups the Washington DC area in the South Atlantic region, which was ranked as the third highest Cost vs Value ratio out of nine regions. The South Atlantic region averaged a ratio of 67.3%, while the highest performing region was Pacific with a ratio of 71.3% was and the lowest performing region was the West North Central with a ratio of 49.5%.

Enough of the technical stuff…
The top Cost vs Value ratio midrange job for the Washington DC area is a garage door replacement, which is estimated to recoup about 93.2% of the cost at resale; followed by a wood deck addition, which is estimated to recoup about 91.3% of the cost at resale (compared to a composite deck addition which is estimated to recoup only 78.8% of the cost).

The top “upscale” project is a fiber-cement siding replacement, which is estimated to recoup 89.7% of the cost at resale (compared to foam backed vinyl siding, which is estimated to recoup only 78% of the cost). The “upscale” garage door replacement is estimated to only recoup 81.4% of the cost (compared to the replacement described above).

Additional projects and descriptions of the projects with costs can be viewed in the Cost vs Value Report. The full Washington DC area renovation/addition Cost vs Value report can be downloaded at costvsvalue.com.

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 January 2, 2012. Using this article without permission is a violation of copyright laws. Copyright © 2012 Dan Krell.

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