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July 30, 2017August 13, 2017

How to find your affordable home

The latest headline for the Case-Shiller Home Price Index boasts, “hits all-time high for sixth consecutive month” (us.spindices.com). The data for May’s S&P CoreLogic Case-Shiller U.S. National Home Price NSA Index revealed a 5.6 percent year-over-year increase for the US Census divisions. However, the month-over-month Case Shiller composite indices decreased about 0.1 percent. Seattle, Portland, and Denver continue to lead in home price growth with double digit gains. The Washington DC region posted a 1.0 percent gain in May and a modest annual increase of 3.6 percent year-over-year. The bottom line is that homes are becoming more expensive. And as a home buyer, you want to know how to buy an affordable home.

David M. Blitzer, Managing Director and Chairman of the Index Committee at S&P Dow Jones Indices, provided analysis of this week’s release suggesting that the continued climb of home prices is a manifestation of the housing market, and not necessarily reflective of the economy. He stated:

“Home prices continue to climb and outpace both inflation and wages…Housing is not repeating the bubble period of 2000-2006: price increases vary across the country unlike the earlier period when rising prices were almost universal; the number of homes sold annually is 20% less today than in the earlier period and the months’ supply is declining, not surging. The small supply of homes for sale, at only about four months’ worth, is one cause of rising prices. New home construction, higher than during the recession but still low, is another factor in rising prices.”

Rising home prices are impacting the housing market and making it difficult to find an affordable home. The latest National Association of Realtors Housing Affordability Index (nar.realtor) indicates that buying a home is less affordable compared to the same time last year, which decreased from 161.2 to 158.8. Additionally, the median sales price for a single family home jumped 4.6 percent.

Even though home prices continue to climb, the good news for home buyers is that mortgage rates are still relatively low. According to last week’s Freddie Mac Mortgage Rate Survey (freddiemac.com), the 30-year fixed rate mortgage dropped from 4.03 percent to 3.96 percent. Although slightly higher from the same time last year (3.45 percent), historically low interest rates help make a home purchase affordable.

Although wages are not increasing on the same pace as home prices, home buyers are benefiting from low mortgage rates. However, a concern that is echoed throughout the industry is the continued low inventory of homes for sale. The low inventory of homes, specifically turn-key homes, is a factor in increasing home prices and making it harder to find an affordable home.

If you’re a home buyer and are frustrated with the competition, think outside of the box. It’s true the best looking and well priced homes are receiving multiple offers and sell quickly. The competitive atmosphere is pushing home prices higher. However, keeping an open mind could help you to not only cope with the current market, but also help you find your next home.

One way home buyers are finding their affordable home is by renovating a distressed home. Homes that languish on the market and are in need of repair or renovation may be a “diamond in the rough.” Renovation loans, such as the FHA 203k or Fannie Mae’s HomeSyle loan can make the process easier and affordable. Renovation loans are designed to help buy and renovate a home. There are a various renovation loan programs, so having a long conversation with a qualified renovation loan specialist can help you decide which program is best for you.

Be prepared and line up your licensed contractors. Renovation loans require documentation and plans from your licensed contractor. Most of these programs will provide funding in stages. However, there are a few renovation loan programs that are “streamlined” and designed for less expensive renovations. Check with your lender for qualifications, loan limits and requirements.

Additionally, you don;t have to look in the MLS to find your affordable home. Work with an experienced agent who has the savvy to find homes for sale that are not currently listed for sale. These may include (but not limited to) for sale by owners, expired listings, and auctions.

Home owners who did not have luck selling their homes earlier in the year may be open to selling to you. Your agent can find and contact home owners who have recently taken their homes off of the MLS.

Look for homes that are “For Sale by Owner.” It used to be hard to find the FSBO, and you would have to drive through neighborhoods to look for the “For Sale by Owner” signs. But of course the internet has made it easier to find the FSBO. They are listed in the MLS by listing placement services. They are also posted online on “for-sale-by-owner” sites, as well as Zillow, Trulia, or Craigslist.

Neighborhood listservs and internet groups are a great way to fnon-MLS homes for find FSBO’s. But you have to be a resident of the neighborhood, or know someone who is a resident to get access to the listserv.

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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 9, 2017September 9, 2018

First time home buyer assistance

Are you a first time home buyer worried, overwhelmed, or intimidated by the process? You’re not alone. First time home buyers have had the most difficulty getting back into the real estate market after the Great Recession. Many would-be first time home buyers lack the financial resources, while others worry about the long term value. However, there is probably no better time than now to buy your first home.

This is a first time home buyer market

You may be one of the many would-be first time home buyers who opted to continue to rent or live with their parents until the timing was right. Many would-be home buyers did the same, as a 2106 Pew Research Center report pointed out the millennial housing trend that may be associated with the decline in the homeownership rate since the Great Recession (For First Time in Modern Era, Living With Parents Edges Out Other Living Arrangements for 18- to 34-Year-Olds; pewsocialtrends.org; May 24, 2016). However, economic factors have significantly improved, and the housing market has stabilized. So what’s holding you back?

Are you overwhelmed or intimidated by the home buying process?

Buying a home can seem intimidating, and overwhelming. But it doesn’t have to be. On the Holmes and Rahe Stress Scale (Holmes & Rahe 1967), having a mortgage over $10,000 rates 31 (just above being foreclosed upon) and moving is rated as 20. This commonly used stress scale is cumulative, so the rating for buying a home is at least 51. However, being prepared can help you anticipate and deal with most circumstances that may arise.

Finding a professional and competent Realtor who will “be” with you throughout the process is highly important. Of course, finding an agent whom you trust can be a process too. It’s important to know your agent will be there for you, not only to answer questions and resolve your concerns, but to also represent your best interests.

What are your expectations? Your home buying expectations are influenced by your experiences. However you are also influenced by a combination of the media, relatives, friends, and co-workers. Having very high and unrealistic expectations can not only increase your stress, but can but a wrench in the transaction before it starts. Discussing your expectations with your Realtor will determine if they are realistic or not.

Choosing your Realtor

Before deciding on the realtor you want to work with, informally talk to several about how they help first time home buyers. Unfortunately, home buyer surveys (such as the annual National Association of Realtors Profile of Home Buyers and Sellers (nar.realtor)) suggest that the majority of home buyers and sellers typically hire the agent they first encountered.

Besides assisting in home searching and negotiating sales contracts, your agent should be by your side throughout the transaction. Your agent should be available to you to help you maneuver the bumps and surprises that can derail your home purchase.

Even though you may not place an agent’s experience high in your list of agent characteristics, a research study by Bennie Waller and Ali Jubran (“The Impact of Agent Experience on the Real Estate Transaction.” Journal of Housing Research 21, no. 1 (2012): 67-82) suggests otherwise. They concluded that an experienced real estate agent can yield a better result than an agent with little or no experience.

Check your agent’s license. Make sure your agent is a full time agent (meaning that the only job they have is selling real estate). Don’t be shy about asking and calling your agent’s references.

First time home buyer down payment and closing cost assistance

If affordability, down payment and closing costs are a concern, apply for a first time home buyer assistance and/or grant program. There are many programs available offered through local and state organizations. Your lender can help you find and apply to the programs for which you qualify. Regular communication with your loan officer is important because the funding is limited annually and can quickly run out.

Locally, one of the mainstays for first time home buyer assistance is the Maryland Mortgage Program (mmp.maryland.gov). The MMP is provided through the Maryland Department of Housing and Community Development, and funded by the Community Development Administration. It is described as “…providing home loans and down payment assistance to Maryland’s working families to encourage responsible homeownership and build strong communities, working through a network of Maryland Mortgage Program lender organizations.”

MMP loans are just like other mortgages, except that they offer competitive rates and offer additional assistance in the form of Down Payment Assistance and Partner Match Programs (up to $8,500 from the Department and possibly more from partner organizations). Some Partner Match programs offer homebuyer grants. However, other Assistance programs are generally in the form of deferred, no-interest loans.

Combining Down Payment Assistance with a Partner Match program can significantly reduce the amount you need to buy your first home! The Down Payment Assistance program is a loan of up to $5,000. The loan is a zero-percent deferred loan, which is repaid when you pay off the main Maryland Mortgage Program mortgage when you refinance, or sell the home.

Department of Housing and Community Development has partnered with many organizations and employers that can provide you with additional assistance. Your current employer may be a participant with the Partner Match program (check the Partner list at mmp.maryland.gov). Local organizations also offer home buyer assistance (including the Moderately Priced Dwelling Unit Program) as well, such as the Housing Opportunities Commission (hocmc.org) and The City of Gaithersburg (gaithersburgmd.gov).

Original published at https://dankrell.com/blog/2017/07/09/first-time-home-buyer-assistance/

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July 7, 2016September 20, 2018

Home buyer life hacks

“Life hacks” have been trending everywhere the last few years, from the internet to social media. Life hacks are typically actions or “wisdoms” to make life easier. However, home buyer life hacks are not easy to find.

The home buying experience can be time consuming and stressful. Over time, the home buyer’s responsibilities change. In fact, the home buying experience has drastically changed in the last decade. Consider that mortgage programs and Realtor® contracts changed and continue to evolve. Which includes the TILA-RESPA Integrated Disclosure (TRID) rule that went into effect last fall, which changed how a transaction settles. Here are a five home buyer life hacks to make the experience straightforward and more enjoyable.

The first home buyer life hack is to learn about the home buying process. Certainly a must for first time home buyers. However, even experienced home buyers may find themselves in strange waters if they’ve not bought or sold a home in the last couple of years. Becoming acquainted with home buying process can help you anticipate and prevent most surprises that can upset the flow of the transaction.

Home buyer life hack number 2 – make a budget. Creating a budget may take the romance out of the buying process, but will help you with your home search and contract decisions down the road. Consult a professional if necessary. In making your budget, consider your income, debts and other financial obligations, as well as your life style. Make a housing budget that includes mortgage, property taxes, HOA or condo fees (if any), homeowner’s insurance, utilities and maintenance. In creating your budget, also consider future changes to income and home related cost increases.

Home buyer life hack number 3 – know what to expect from the housing market. Knowing whether the housing market is benefiting the seller or buyer can help decide on a winning home buying strategy. Understanding that a low inventory market may necessitate you and your agent to do a little more leg work to find homes for sale. Know the current housing trends for the neighborhoods you are perusing, so you can prepare for competition and multiple offer scenarios.

Home buyer life hack number 4 – hire a professional. The process isn’t rocket science, however, you can easily find yourself in over your head if you’re not experienced in buying a home in today’s market. Although some home buyers believe they can get a better deal by not using an agent to help them buy a home, it could end up costing more because of poor negotiating in price, home inspection, and other add-ons. Hiring a buyer agent can also free up time that is necessary to conduct the process. Experts know the market such that they can help you determine the best offer price. They can also package your offer in a way that facilitates the transaction.

Most home buyers will follow home buyer life hacks 1 through 4. However, they will take for granted that everything they are told is true. Which brings us to home buyer life hack number 5 – do your due diligence. As you can imagine, not everything you are told is true or depicted accurately. “Trust and verify” can help you identify and reduce hidden and obscure risks by verifying the truth. Conduct your due diligence throughout the home buying process; from the veracity of a seller’s statements about their home to vetting the professionals you hire.

Original published at https://dankrell.com/blog/2016/07/07/5-home-buyer-life-hacks/

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March 31, 2016September 17, 2019

Buyers and sellers – Mentally prepare to be in real estate market

Realtors® are guilty of romanticizing, if not glorifying, the idea of buying and selling a home. And it’s probably true for many, that initial thoughts of buying or selling a home (and everything that goes along with it) are sanguine. And yet, shortly after they are faced with details of the move, many are hit with the reality that the process is full of potential pitfalls and setbacks. Buying and selling a home can be a confusing endeavor, that can become overwhelming if you’re not mentally prepared.

Getting through the process of buying and selling requires organization and planning to seek the best outcome. As a home buyer you organize before viewing homes by having a mortgage approval in hand, as well as determining a price range and area in which you are looking. As a home seller you have a plan in place before the home is on the market; which includes a pricing and marketing plan, as well as having your home in its best possible condition so as to give the best impression.

Even though the process of buying or selling a home is straightforward (after all it’s not rocket science), being prepared for various stages can help you through potential issues. If you’re a first time buyer or seller, having a checklist helps you be aware of where you are in the process. Even if you’ve bought or sold a home before, you should be aware of changes to the process that have been made in the last eight years.

You should also be aware that every transaction is different; each transaction has a different set of personalities, conditions, and issues. You no doubt have heard your relatives’, friends’ or coworkers’ account of their buying or selling experience. But chances are that they may not remember the snags they endured. Reactions among buyers and sellers, as well as their real estate agents, vary depending on their personalities and life circumstances. So, your experience may be similar to others’; however, be prepared that it could also be very different.

Additionally, many never realize how many individuals are involved in getting their transaction to settlement. Besides the buyer, seller and real estate agents, there is a lender, a title company, and a home inspector, (among others); each increasing the number by a factor of their employees, and increasing the opportunity for Murphy’s Law to interrupt your smooth settlement.

Although the process of buying or selling a home appears to be task oriented, there is also an emotional component. Did you know that having a major change in living conditions and taking on a mortgage are rated in the Holmes and Rahe Stress Inventory? This acknowledges that buying and selling a home is an emotional investment that could impact your emotional wellbeing (positively and negatively). Chances are that at some point you may feel the added pressure of your sale/purchase.

Mental preparation for your home purchase or sale may include moderating expectations and anticipating how you may cope with various circumstances that may arise. Mental preparation can help maintain a feeling of control over your transaction. It can be helpful to work with an agent who can address your worries and fears about the transaction through listening and empathy. Most of all, hire an experienced real estate agent, who not only has the ability to problem solve and work through problems, but will help you organize and prepare.

by Dan Krell
Copyright © 2016

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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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