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November 1, 2018July 21, 2019

Buyer and seller attitudes about real estate market

Economists are officially pessimistic about the housing market. This is the general sentiment following another month of declining home sales. Experts are pointing to a number of factors for the slowdown, including increased interest rates and housing affordability. But what are home buyer and seller attitudes about real estate? The National Association of Realtors’ most recent Housing Opportunities and Market Experience survey hints at a busy spring!

Economic attitudes about real estate market

An October 19^th NAR news release (nar.realtor) reported that September’s home sales were the weakest in several years. The nationwide trend affected all regions. NAR chief economist Lawrence Yun stated:

“This is the lowest existing home sales level since November 2015…A decade’s high mortgage rates are preventing consumers from making quick decisions on home purchases. All the while, affordable home listings remain low, continuing to spur underperforming sales activity across the country.”

First-time-home-buyers are finding the housing market increasingly challenging. This segment’s participation needs to be strong for a healthy home sales. September’s low thirty-two percent first-time-home-buyer participation is attributed to rising interest rates and home prices.

But low housing inventory is also an issue. September’s housing inventory decreased to 1.88 million existing homes available for sale (from the 1.91 available during the previous month). NAR President Elizabeth Mendenhall stated:

“Despite small month over month increases, the share of first-time buyers in the market continues to underwhelm because there are simply not enough listings in their price range.”

Economists at Fannie Mae believe that the housing market will continue to disappoint. In an October 18^th press release (fanniemae.com) Fannie Mae Chief Economist Doug Duncan stated:

“Our expectations for housing have become more pessimistic. Rising interest rates and declining housing sentiment from both consumers and lenders led us to lower our home sales forecast over the duration of 2018 and through 2019. Meanwhile, affordability, especially for first-time homebuyers, remains atop the list of challenges facing the housing market.”

But what do economists really know about the future? Let’s hear it directly from the consumer!

Home buyer and seller attitudes about real estate

NAR’s Housing Opportunities and Market Experience survey tracks opinions from renters and homeowners about homeownership, economy, and the housing market. The release of their third quarter 2018 survey indicates that sixty-three percent of respondents strongly or moderately believe that it’s a good time to buy a home. Although optimism is somewhat diminished from the second quarter’s survey, there continues to be a positive sentiment about buying a home. The survey’s positive sentiment continues even though a majority of respondents believed that home prices will continue to increase in the immediate six months. Additionally, a majority of respondents believe that qualifying for a mortgage may be an obstacle to a home purchase.

The survey also concurs with other metrics indicating high consumer sentiment for the economy. In light of the recent slide in home sales, NAR’s recent Housing Opportunities and Market Experience survey reveals “a near-record high of sixty percent of households believe that the economy is improving.” Adding to the strong sentiment is the survey’s increased monthly Personal Financial Outlook Index, which indicates that respondents believe that their financial situation will be better in six months.

The survey also indicates a record high of home sellers who believe it is a good time to sell a home. But given the seasonal decline of housing inventory, it is likely this will translate to a surge of home listings in the spring. The added inventory combined with high consumer sentiment will boost the housing market. So sayeth the consumer.

By Dan Krell
Copyright © 2018.

Original located at https://dankrell.com/blog/2018/11/01/attitudes-real-estate-market/

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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.

July 26, 2018December 13, 2022

Affordable housing

It’s no secret that housing is expensive. Home prices are relentlessly marching forward, making it more difficult for first-time home buyers to purchase a home. One of the contributing factors is the low inventory of homes for sale. The deficiency of homes on the market is limiting options and stoking competition among determined home buyers, many of whom are willing to offer slightly more than then their cohorts. All this puts upward pressure on home prices and impacting affordable housing.

Having enough for a down payment and closing costs is a hurdle for many first-time home buyers. Home buying programs exist to help home ownership more affordable for home buyers. The Maryland Mortgage Program (mmp.maryland.gov) offers down payment assistance in the form of loans, an employer match program, or financial grants. In Montgomery County, the Housing Opportunities Commission of Montgomery County (hocmc.org) offers several down payment assistance options, including the House Keys 4 Employees program for many Montgomery County Employees. Of course, you must meet eligibility, so check with your lender and/or mortgage program.

Affordable housing is not only an issue for home buyers. It’s also an issue for renters. According to the US Census Bureau’s American Community Survey five-year estimates results (census.gov), the median rent in the US increased about $21. That does not sound life changing, however, it is the result of an analysis of nationwide monthly rents. Results of the Survey indicated that, “Of the 382 metropolitan areas in the United States, the median gross rent in 156 areas did not change between 2007 to 2011 and 2012 to 2016…” However, “Of the 219 that did change, increases outnumbered decreases four to one with 175 increases and 44 decreases.”

Some areas had a decrease in rent, while others faced increases. Among some of the areas with top increases include Andrews TX and McKenzie County ND, where monthly rents increased an average of $352 and $397 respectively.

The Census Bureau recent survey on rent concludes that “gross rents are on the rise.” Other Census data indicates that 2017 had the lowest percentage of renters move since 1988. The combination of fewer available rentals and increased rents are making it difficult to find an affordable rental.

Although “affordable housing” has been tossed about like a football, it wasn’t until Mary Schwartz and Ellen Wilson’s (US Census Bureau) analysis of the 2006 American Community Survey that really gave it meaning (Who Can Afford To Live in a Home?: A look at data from the 2006 American Community Survey; census.gov). The analysis revealed the percentage of income that is spent towards housing.

The report indicated that forty-six percent of renters spend 30 percent or more of their income on housing costs. Compare that to home owners: thirty-seven percent of owners with mortgages and sixteen percent of owners without spent 30 percent or more of their income on housing. Schwartz and Wilson came up with the “30 percent standard,” and discussed that thirty percent or more of income spent on housing is considered a “housing-cost burden.”

Addressing affordable housing for renters, Representative Joe Crowley introduced H.R.3670 – Rent Relief Act of 2017 to help renters with their housing-cost burden. The credit would only be available for taxpayers whose gross income is less than $125,000. The bill allows for a refundable tax credit when rent exceeds 30 percent of the individual’s gross income for the taxable year. Depending on the renter’s gross income, the amount of the credit could range from 10 to 100 percent of the excess (above 30 percent). One caveat is that if the tenant’s rent exceeds 150 percent of the fair market rent for that specific residence, the excess above 150 percent won’t be included for the purpose of determining the amount of the credit. Government-subsidized renters would be able to claim a credit equal to 1/12 of the rent paid by the taxpayer. Although the bill was last heard in the House Committee on Ways and Means, at the time of this article, it is being prepared by Senator Kamala Harris to be introduced in the Senate.

Maryland offers tax credits for some renters, check with the Maryland Consumer Rights Coalition (marylandtaxcredit.com) for qualifying information.

By Dan Krell
Copyright © 2018.

Original published at https://dankrell.com/blog/2018/07/26/affordable-housing/

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March 17, 2018December 13, 2022

Home buyer savings account?

Maryland first-time home buyers may soon have another program to help them buy a home. Two related bills are making their way through the Maryland General Assembly to create a first-time home buyer savings account. If enacted, Maryland would join a handful of other states that have already enacted such programs to incentivize home buying.

The bills are an effort to address the lack of first-time home buyer participation in the housing market. The lack of first-time home buyer participation has received a lot of attention since the Great Recession. Not just because of the rising costs of buying a home, but also because of the lack of home buyer savings. The lack of down payment was identified by the National Association of Realtors as one of the issues barring first-time home buyers from entering the housing market. The October 18th 2016 NAR news release (Five Notable Nuggets from NAR’s Home Buyer and Sellers Survey’s 35-Year History; realtor.org) also cited underemployment, student debt, and delayed family formation.

The idea of a home buyer savings account is not new. It was first conceived by Montana in the 1990’s as an incentive for home buyers to save money for down payment and closing costs. Virginia was the second state to enact a similar program in 2014. Several other states have since enacted similar plans, while others (including Maryland) have proposed such plans in their respective state legislatures.

The increased attention to first-time home buyer savings account during 2017 has made it a hot topic. While states are looking to provide state tax breaks for first-time home buyers, Rep. Mike Coffman of Colorado wants to provide federal tax incentives to first-time home buyers for saving down payment and closing costs. H.R.2802 First-Time Homebuyer Savings Account Act of 2017 was introduced in Congress last June by Rep. Mike Coffman of Colorado, and co-sponsored by Rep. Sean Patrick Maloney and Rep. Barbara Comstock. The bill has yet to make it out of the House Ways and Means Committee.

Rep Coffman stated in a press release:

“The American dream of homeownership is getting harder and harder to attain for those starting out on their own these days, especially Millennials, because of the challenges involved in saving up for the down payment…The First-Time Homebuyer Savings Account Act is a straightforward and bipartisan solution to this problem. If we can help Millennials attain homeownership, this would not only be a wise financial move for them, but would have broader positive financial impact for our economy as a whole“

Maryland’s proposed first-time home buyer savings plan, introduced by HB0463 and SB0972, is currently being debated in the Maryland General Assembly. If enacted as introduced, the legislation would allow $50,000 to be deposited “state tax free” into an account for the purpose of buying a home in Maryland by a first-time home buyer. Any interest earned up to $150,000 would also be state tax free, as long as the interest is also used in said purchase. However, if the funds and interest are used for any other purpose, the holder of the account would be subject to state tax and penalties.

Would a first-time home buyer savings account stimulate interest in the housing market?

Lisa Prevost, writing for the New York Times, brought attention to Montana’s struggle to get first-time home buyers to participate in their savings plan (Tax Free Accounts for Homes: nytimes.com; August 8, 2013). At the time of Prevost’s article, the Montana Department of Revenue reported that “…no more than 225 people, and as few as 125, have participated annually since the program’s inception. Their annual deposits have averaged around $400,000.” Edmund Caplis, director of tax policy and research for Montana’s Department of Revenue, was quoted in the article as saying, “What you’ve got to understand is, this is people trying to get into their first home. For most working families, trying to pull together an extra buck is a stretch.”

By Dan Krell
Copyright © 2018

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October 15, 2017October 20, 2020

Real estate contract know-how

When I started selling homes almost sixteen years ago, a typical real estate contract (with addenda) may have been about twenty pages. My mentor used to pine about the two-page contracts he used when he started in real estate. I used to think he was exaggerating, but I found that he was actually telling the truth. It is true that real estate contracts have evolved and become quite lengthy through the years. Today, our local Realtor contract with addenda can exceed sixty pages! As much as it may sound like a chore, you should take the time to read and understand the real estate contract you are asked to sign.

In today’s world of convenience and digital everything, electronically signing your real estate contract may seem like a time saver. Real estate apps make it all too easy for your agent to email you a boiler plate contract and ask you to click the mouse to sign it. But do you really know what you’re signing? More importantly, does your real estate agent know what they are asking you to sign?

A typical Realtor contract is a legally binding contract once it is ratified and delivered to all parties. That means there are potential consequences for not doing what you agreed to do. Don’t solely rely on your agent for an explanation of the contract, they may not fully understand it or its nuances. As pedestrian as it sounds, read through the contract before you sign it. Reading the contract will inform you of the terms and conditions to which you’re agreeing, which include your obligations and contingency timelines. Reading the contract will also alert you to any errors and you need clarified.

The terms and conditions of your real estate contract are more than just the sale price and closing date. Both the home buyer and seller have obligations in our local Realtor contract. A few of the many obligations included in the terms are: settlement, obtaining financing, delivering a “clean” title, and providing access to the property.

Are there contingencies? Typical real estate contract contingencies include financing, appraisal, and various inspections. However, other contingencies may be included too, such as the buyer’s home sale, the seller finding a home, third party approval, or even reviewing the county or city master plan. The contingencies you choose may vary depending on your situation. Contingencies are time limited. The contract describes how each contingency is met as well as timelines for completion and description of giving notice and responses.

Although the Realtor contract has become increasingly lengthy, it has become more standardized (at least in my area). In the past, local agents needed to know or find out the contract and addenda requirements for multiple counties and cities, much of the time falling short. Today, the Realtor contracts and addenda we use in Maryland are mostly consistent with each other, making it easier to put together and understand.

Make sure you are comfortable with the real estate contract you are signing. You should ask your agent to take the time to sit with you and review the contract before you sign it. If you’re a first-time home buyer or seller, getting the one-on-one review will allow you to ask questions about your obligations and the process. Even if you have bought or sold a home in the past, reviewing the contract with your agent will make you realize how times have changed. Since the contract is a devise, always consult with an attorney for legal advice.

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August 13, 2017December 13, 2022

Improving home buyer credit scores

There’s been a lot of anticipation about the new credit scoring model by VantageScore (vantagescore.com). It’s supposed to increase the availability of credit to many consumers. Launching this fall, VantageScore 4.0 is touted to be a more accurate scoring system that uses trending data instead of “snapshots.” This credit scoring system is also supposed to help those with limited credit, and incorporates the improved credit reporting standards included in the National Consumer Assistance Plan. This and other new scoring systems have a lot of promise, but will improving home buyer credit scores help the mortgage process?

Let’s take a step back to see how home buyer credit scores reporting has evolved in recent years. The National Consumer Assistance Plan (nationalconsumerassistanceplan.com) was launched in 2015 as a result of an agreement between the credit reporting agencies (Equifax, Experian, and TransUnion) and New York Attorney General Eric Schneiderman. The agreement stemmed from Schneiderman’s investigation into the credit reporting agencies’ practices including (but not limited to) the accuracy of collected data, the practices in handling consumer disputes, and the reporting of medical debt.

The National Consumer Assistance Plan’s focus is to improve the consumer’s experience as well as increase data quality and accuracy. Consumers will have increased information related to credit report disputes, including instructions on what to do if they’re dissatisfied with the result of their dispute. Additionally, there is an “enhanced dispute resolution process” for fraud victims.

Among the many changes made by the National Consumer Assistance Plan to increase accuracy and quality of data includes: issuing consistent standards for those who report data to the credit agencies; medical debt won’t be reported during a 180-day waiting period so as to allow for insurance payments to catch up with billing; and the elimination of reporting of debts that were not contractual (such as parking tickets).

From The National Consumer Assistance Plan:

Consumers visiting www.annualcreditreport.com, the website that allows consumers to obtain a free credit report once a year will see expanded educational material.
Consumers who obtain their free annual credit report and dispute information resulting in modification of the disputed item will be able to obtain another free annual report without waiting a year.
Consumers who dispute items on their credit reports will receive additional information from the credit reporting agencies along with the results of their dispute, including a description of what they can do if they are not satisfied with the outcome of their dispute.
The credit reporting agencies (CRAs) are focusing on an enhanced dispute resolution process for victims of identity theft and fraud, as well as those who may have credit information belonging to another consumer on their file, commonly called a “mixed file.”
Medical debts won’t be reported until after a 180-day “waiting period” to allow insurance payments to be applied. The CRAs will also remove from credit reports previously reported medical collections that have been or are being paid by insurance.
Consistent standards will be reinforced by the credit bureaus to lenders and others that submit data for inclusion in a credit report (data furnishers).
Data furnishers will be prohibited from reporting authorized users without a date of birth and the CRAs will reject data that does not comply with this requirement.
The CRAs will eliminate the reporting of debts that did not arise from a contract or agreement by the consumer to pay, such as traffic tickets or fines.
A multi-company working group of the nationwide consumer credit reporting companies has been formed to regularly review and help ensure consistency and uniformity in the data submitted by data furnishers for inclusion in a consumer’s credit report.

Recent credit reporting changes are sure to make an impact for home buyer credit scores. But, you may still have impaired credit that would make it difficult for you to buy a home. So how can you improve your home buying process? Be proactive!

A credit report contains a lot of information about you. It reveals your personal information, including where you’ve lived and worked. It indicates the credit cards and other loans you have, and how you pay on them. It may also include any collection activity against you, as well as bankruptcies, liens or judgements. Know what’s being reported about you by obtaining your free annual credit report (annualcreditreport.com) and dispute discrepancies. Successful disputes should improve your credit score.

However, if your home buyer credit scores are impaired as the result of poor habits, don’t despair. You can improve your credit report and score on your own by creating “good” credit habits. First: make sure you pay your bills on time. Planning specific times each month to pay bills will make it hard to miss a payment. Second: reducing credit card balances may improve your credit score. And third: be mindful of how many credit cards you maintain. Having too many credit cards could lower your credit score. Also, be careful to not apply for too much credit at any given time, as these “inquiries” could lower your score as well.

To learn more how a credit report functions, affects you, and how improve your home buyer credit scores, visit the Consumer Financial Protection Bureau (consumerfinance.gov), the Federal Trade Commission (ftc.gov), and the Federal Deposit Insurance Corporation (FDIC.gov).

Original published at https://dankrell.com/blog/2017/08/13/improving-home-buyer-credit-scores

By Dan Krell
Copyright© 2017

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