buying a home Archives - Page 10 of 15 - Real Estate News and Commentary

October 22, 2015December 13, 2022

Housing affordability in a post recession world

I talk to lots of people at open houses. You shouldn’t be surprised to hear that although some express concerns about increasing home prices and their ability to buy a home, many also express their exasperation with increasing rents. And although home prices and ability to get a mortgage are among top concerns for home buyers, according to Realtor® Magazine (Top 6 Home Buyer Concerns, realtormag.realtor.org, August 24,2015); buyer apprehensions have not changed much over the years. There is always a group of buyers who fuss over home prices, down payments, and mortgages. So much so, that it seems as if it is a permanent part of the housing landscape.

The housing market is experiencing year-over-year home price gains. The September 29^th release of the S&P/Case-Shiller U.S. National Home Price Index (spindices.com) that indicated the 10-city composite increased about 4.5% year-over-year, while the 20-city composite increased about 5% year-over-year. And a recent report from Zillow Research (zillow.com) that indicated median national home prices increased about 3.3% year-over-year during August, while median national rent increased 3.8% during the same period. However, owning a home may be presently a lower percentage of income when compared to other historical periods: Zillow Research indicated that the U.S. Share of Income Spent on Mortgage was about 15% during June 2015, and the U.S. Share of Income Spent on Rent was about 30% during June 2015; while the Historic Share of Income Spent (during 1985 to 1999) was 21% and 24% respectively.

Home prices certainly affect housing affordability. However, affordability may also be affected by the cost of qualifying of a mortgage. Although there is a recent movement for lenders to loosen credit guidelines, qualifying for a mortgage is still more difficult today than it was a decade ago.

Laurie Goodman, Director of the Housing Finance Policy Center at the Urban Institute, recently wrote about how the lack of private-label mortgage securitization has affected many who don’t fit government backed mortgage guidelines. (Mortgage securitization is what provides the mortgage market liquidity, and allows banks to make the loans.) Goodman had this to say about the present lack of private-label mortgage securitization: “The disappearance of this market has affected the availability and cost of mortgages for one group of borrowers—those with less wealth and less than perfect credit who do not quality for government-backed loans” (Why you should care that private investors don’t want to buy your mortgage anymore, urban.org, October 9, 2015).

Goodman pointed out that prior to the great recession, the private-label mortgage securitization market was thriving; however post recession, private-label securitization has all but “collapsed.” Presently, mortgages are primarily government backed and or purchased by Fannie Mae, Freddie Mac, FHA, VA and others; which eliminates many borrowers with imperfect credit and/or don’t meet strict guidelines. However, if the private-label securitization further retreats or is eliminated, she predicts that borrowers with perfect credit and those living in “expensive” regions (such as Washington DC, New York, San Francisco) will be affected as well.

Tight credit guidelines may not be the only reason for many renters to rule out a home purchase. Not having an adequate down payment is another reason many don’t qualify for a mortgage. The lack of savings by Americans was documented by a survey conducted by the Consumer Federation of America (7th Annual Savings Survey Reveals Persistence of Financial Challenges Facing Most Americans, consumerfed.org, February 24, 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.

May 8, 2015September 24, 2018

Basements, humidity and dehumidifiers

There seems to be a misconception of the relationship between basements, humidity and dehumidifiers; which probably results in the dehumidifier being one of the most misunderstood and least respected household appliances. This is apparent because many first time home buyers are turned off to any home where they see a dehumidifier, thinking there is a moisture problem. The dehumidifier doesn’t even have to be running; it could be turned off and tucked away in a closet.

The battle that all home owners deal with is keeping moisture out of the basement. Of course, regular maintenance can retard water penetration from the exterior: having the proper grading and extending downspouts will keep rainwater away from the home’s foundation. And serious water penetration issues should be resolved by licensed professionals. However, if the home doesn’t have a foundation or water penetration issue, basement humidity is still an ongoing battle. And if your home has an in-ground basement, chances are you know what I am talking about.

Believe it or not, it’s not necessarily a water problem that dictates humidity in a basement; but rather it’s physics. More precisely: thermodynamics and entropy. Put simply: temperatures in your home seek equilibrium, and warm air will move toward cooler air. Basements tend to be cooler than the upper floors because warm air rises. However, as the temperature seeks equilibrium, the warm air will also move toward the cooler basement air. When warm air meets cold air, the air condenses and develops humidity.

Basements, humidity and dehumidifiers

Although humidity is generally thought of as the amount of moisture in the air; according to Dehumidifier Basics(energystar.gov), it is most commonly referred to as “relative humidity” or RH. “RH is the amount of water vapor actually present in the air compared to the greatest amount of water vapor the air can hold at that temperature.” An RH between 30% and 50% is considered to be optimal. When RH is above 50%, bacteria and mold may grow.

If you don’t have a dehumidifier, you might consider buying one to help maintain the optimal RH in your basement. Dehumidifiers are differentiated by capacity, which is described as pints per 24 hours (measured by the size and conditions of the area where the unit may be placed). Energy Star provides a chart to help you decide the capacity best suited for your needs.

If you already have a dehumidifier, you might be surprised to know that most units are not meant to be operated in areas that are below 65°F (according to Energy Star); however, there are models that are designed for lower temperatures. If you use your dehumidifier in temperatures below 65°F, the unit may not function properly even though you may hear the compressor running. Below 65°F, frost can form over the condensing coils inhibiting the unit from removing moisture from the air. If your unit frosts, it should be unplugged and allowed to defrost.

Although some units are designed to be placed against walls, Energy Star recommends placing your dehumidifier in an area that allows free circulation of air around the unit for optimal operation. And of course, refer to manufacture’s manual for operation and electrical safety warnings.

Maintaining a comfortable RH level in the home can be achieved, and it starts by proper home maintenance. However, a dehumidifier may be necessary for optimal comfort. Energy Star (energystar.gov) provides consumer information about selecting and safely operating a dehumidifier.

Original published at https://dankrell.com/blog/2015/05/08/basements-humidity-and-dehumidifiers-whats-the-problem/

By Dan Krell

January 16, 2015July 16, 2019

Due diligence when buying a home

If you’re a home buyer who’s ready to jump into the housing market this spring, you’ve probably begun searching to see what’s on the market. You may have already met a real estate agent or two; and if you’ve haven’t yet talked with a mortgage lender for a prequalification, it’s probably high on your priority list. Exercise due diligence throughout the home buying process.

Before you know it, you’ve selected an agent, mortgage lender, and title attorney to assist you. Then you find yourself searching for homes. Guess what? You’re well into in the process of buying a home! But before you put the buying process on cruise control, how much trust should you put into the professionals helping you?

Exercise your due diligence when buying a home.

It’s not to say that real estate agents, loan officers, home inspectors, or anyone else assisting your home purchase are not qualified. But then again, some professionals are better than others. Buying a home is probably one of the biggest purchases you’ll make during your life. The saying “trust but verify” should be your mantra throughout the home buying process to ensure you exercise due diligence.

Have you verified the credentials of those you’ve hired?

Believe it or not, there are some who are doing business without the authorization of the corresponding licensing agency. And yet, some reasons given for not having a license may sound innocuous, such as forgetting about a license renewal deadline; other reasons may not seem as innocent (for example, licensed professionals from neighboring jurisdictions, DC or VA, attempt to do business locally where they are not licensed).

Professional licensing is a regulatory safeguard that provides consumers a pool of professionals that meet or exceed a minimum professional competency. Agencies such as the Maryland Real Estate Commission; Maryland Home Improvement Commission; Maryland Commission of Real Estate Appraisers, Appraisal Management Companies, and Home Inspectors; Office of the Commissioner of Financial Regulation; and the Maryland Insurance Administration offers an internet portal to verify a licensee’s status, check for disciplinary actions, and also explains how to file a complaint.

Although the MLS strives for accuracy in home listings, there are inaccuracies. The MLS provides guidelines and standards for home listing data. However, exactness and truthfulness can vary because data input is performed by many agents and/or their staff. a disclaimer used by our local MLS prompts you to verify MLS listing information,

“Information is believed to be accurate, but should not be relied upon without verification. Accuracy of square footage, lot size, schools and other information is not guaranteed…”

Verify the schools are accurate.

You can verify schools by checking with the local school board. Our local school board has an online tool to check schools assigned to any county address. The tool is located here: Montgomery County Public Schools “School Assignment Tool” (gis.mcpsmd.org/SchoolAssignmentTool2/Index.xhtml).

Verify zoning, development and other information

You can verify zoning or development questions with your locality. Montgomery County allows you to check information online via Montgomery County Planning Department (montgomeryplanning.org).

Verify permits.

Sure the deck is beautiful and the basement is fully finished. But how do you know that they were built to meet county code? Maybe the home seller went with the lowest priced contractor who cut corners and did not pull a permit. Or worse, the seller did it themself to save paying a licensed contractor. Make sure any improvements and recent repairs have had the proper permitting! The permitting process certifies that repairs/renovations comply with building and zoning codes. Permitting ensures that houses are safe, structurally sound, and meet health standards. Permits can be checked by contacting your locality. Montgomery County allows you to check most building permits online via Montgomery County Department of Permitting Services (permittingservices.montgomerycountymd.gov) “eServices” data search portal.

Most home buyers are familiar with basics of the home buying process. However, “trust and verify” can help identify and reduce hidden and obscure risks. Exercising your due diligence can make your home buying experience increasingly trouble free and more enjoyable.

By Dan Krell
© 2015

Original located at https://dankrell.com/blog/2015/01/16/trust-and-verify-home-buyer-due-diligence/

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December 11, 2014November 23, 2021

Value vs. affordability – how inflation affects home prices

Home buyers have been tagged as being too picky for not buying homes this year. Surely home buyers have a right to be particular; after all, they’ll be spending a lot of time in the house – and spending a lot of money to get it too! But, maybe there are other reasons that home buyers have become hesitant.

Consider the uncertainty that immediately followed the Great Recession, when home sales volume dropped off. At that time home buyers seemed overly analytic, weighing many factors including short term value. Yet in truth they were fearful about economic uncertainty, and paying for a home that could potentially depreciate after closing.

The specter of another housing bubble in late 2013 may have seemed farfetched by many. But the double digit appreciation in many housing markets around the country reminded many home buyers of the environment that existed in the pre-downturn “go-go” market of 2005-2007. Anecdotal reports of bidding wars and high listing prices in early 2014 may have scared off some home buyers who reported not wanting to participate in such a market.

Reasons for home sales sluggishness during the latter part of this year may have been signs that the fear of a home price bubble was being realized by home buyers. As home buyers sought value, home sellers wanted higher home price appreciation. Was the psychology of fear playing a part in the ongoing home pricing struggle?

In hindsight, the limited housing inventory that existed during 2013 may have caused upward pressure on home prices by forcing increased competition among home buyers. The rapid home price appreciation may have also been the reason for many home owners to go to market. Brimming with listings, housing inventory swelled to levels not seen in years. Yet it may not be home prices per se that is at issue, but rather affordability.

Affordability goes beyond just the purchase price of a home. It comprises the overall costs of home ownership; which includes monthly mortgage payments, property taxes, homeowners’ insurance, regular and emergency maintenance, and utility costs. Putting aside home prices, home buyers are faced with the prospect of sharply inflating ownership costs. Consider the April 25^th LA Times article reporting on utility costs (U.S. electricity prices may be going up for good; latimes.com); Ralph Vartabedian stated, “… the price of electricity has already been rising over the last decade, jumping by double digits in many states, even after accounting for inflation. In California, residential electricity prices shot up 30% between 2006 and 2012, adjusted for inflation, according to Energy Department figures. Experts in the state’s energy markets project the price could jump an additional 47% over the next 15 years.”

Savings also affect the affordability of a home. Marilyn Kennedy Melia, in her May 17^th feature: Savings Habits and the Housing Market: American are saving less, issues with affording a home (nwitimes.com), reported that a lack of savings is preventing some home buyers from purchasing homes by not having enough for a down payment and/or little for homeownership costs. She described a recent Bankrate survey that indicated “…51 percent of Americans have more emergency savings than credit card debt, the lowest percentage since the financial site began tracking this issue in 2011.” Doug Robinson, of NeighborWorks America, was quoted to say, “Two-thirds of the people who faced foreclosure didn’t have any emergency savings…”

November 14, 2014November 23, 2021

Narcissistic real estate agents?

A common criticism of real estate agents is that they are manipulative and often focused on their own needs rather the home buyer or seller. Could it be that real estate agents are narcissists? Samuel Lopez De Victoria, Ph.D. describes a narcissist in the World of Psychology blog (psychcentral.com/blog) as someone who is preoccupied with “self, personal preferences, aspirations, needs, success, and how he/she is perceived by others.” How can you tell when you are dealing with narcissistic real estate agents?

In an industry that relies on self promotion, it’s not as easy as you might think to spot narcissistic real estate agents. They initially don’t often come across as manipulative or self centered. Dr. Lopez De Victoria describes. Extreme narcissists as being able to portray themselves in many ways to attract others to get what they want. They will seem likeable and be the “nice person.” They may often seem to be the “proper diplomatic” person. They often appear to care about you, but it is not authentic empathy. And of course, they are often a charming person.

Dr. Lopez De Victoria says that having some amount of narcissism is normal and even healthy. So even though most agents are not extreme narcissists, it does not address the remorse expressed by some about the agents they chose. Even though industry experts recommend interviewing several agents before buying or listing a home, the majority of home buyers and sellers do not. According to the National Association of Realtors® 2014 Highlights of the Profile of Buyers and Sellers (realtor.rog), 70% of home sellers and about 66% of home buyers only contacted one agent before listing or buying a home. Regardless of the remorse expressed by home buyers and sellers about their agent, maybe they would have chosen to work with other agents if given the chance.

Although interviewing several agents before you buy or sell a home won’t eliminate all remorse over your choice of agent, it can certainly increase the probability of your satisfaction. If you choose to interview several agents, you might consider having a conversation about their experience, knowledge, and expertise. Additionally, knowledge about the local neighborhood market and surrounding neighborhoods is extremely important because market trends are hyper-local. You should also talk about the agent’s specialized experience, if your buying or selling situation is unique.

You should also ask about the agent’s limitations. This is an area where some agents get themselves into trouble is by not knowing, or are unwilling to disclose their limitations to potential buyers or sellers. By discussing the agent’s limitations, you can understand what the agent can and cannot do as well as know when the agent will refer you to other professionals for advice; this can also frame your expectations.

To get some insight into the agent’s way of thinking and service, you might consider asking atypical questions too! Surely an agent is more than happy to talk about their accomplishments, number of sales, and even name drop a past client or two; but what about the listings that didn’t sell? Have they been fired by a client?

The ratio of expired to sold listings can be telling; is the agent focused on servicing your listing or is it a “numbers game” for them? If an agent is open to sharing those figures, ask for reasons why the listings didn’t sell; was it about price or the marketing? If an agent has a history of being fired, it could be a possible indication of issues with the quality of service, including over-promising and not meeting expectations.

Original published at https://dankrell.com/blog/2014/11/14/narcissistic-real-estate-agents/