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April 2, 2015

Home seller expectations are high for 2015 market

Have you ever waited to be seated in the new trendy restaurant? You’re anticipating the menu, and thinking about what you might eat. If the wait is too long, your patience wears thin; you begin to calculate the time to the next open table. You might even scan the dining room trying to determine how much longer individual diners intend to stay at their table. If your wait is too long, you might even decide to leave. If you do get seated, you might be disappointed with an over-priced and limited choice menu.

Today’s housing market is much like the visit to that restaurant. Home buyers are motivated to jump into the market and eagerly await the next home listing; and like the restaurant menu, are often disappointed with limited choice and high prices. Additionally, low housing inventory, much like the restaurant’s long table turnover, may leave many to look for other options; some would-be home buyers are putting off their purchases and renewing leases for another year.

One of the factors that contribute to low housing inventory is the velocity of home ownership (how often a home gets sold). And indeed, home owners are staying in their homes longer before selling, according to a special study conducted by the National Association of Home Builders (nahb.org). Dr. Paul Emrath, of NAHB’s Economics and Housing Policy, provides details in a follow up study showing a decline in home owner mobility since 2007. Single family home owners stayed in their homes for an average of 12 years between 1987 and 2007. However, since 2007 the average time the home owner stayed in their home increased to 16 years. And since 2001, first time home buyers stayed in their homes 4 to 7 years less than move-up buyers.

If you’re one of those who feel that your stay in your home has been long enough, it may seem as if the market would favor a home sale. You might believe that the low inventory environment should make your sale quick, and possibly resulting in multiple offers. After all, the low number of homes listed for sale was cited for price growth by National Association of Realtors® Chief Economist Lawrence Yun in the NAR March 23^rd press release (realtor.org). And it makes sense to think that that first time home buyers should be motivated by relatively low interest rates and higher rents.

But before you set your expectations too high, consider that not all homes sell quickly – even in today’s low inventory environment. The Montgomery County average days on market during February exceeded 70 days. And even though the NAR reported a 7.5% increase in the average home prices across the country during February; the Montgomery County average sale price during February decreased 5.4% compared to the previous February and decreased 2.1% compared to January, according to RealEstate Business Intelligence (getsmartcharts.com).

If you’re putting your home on the market, don’t take home buyers for granted. Just like diners at the restaurant, home buyers have high expectations and want choices. Home buyers typically look for a combination of location, quality, and value. And just because inventory is low, buyers are not compelled to purchase your home – especially if the home is perceived to be over-priced.

For best results this spring – work with your listing agent to prepare your home, and price it according to neighborhood trends.

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 26, 2015

Home buyer strategy to cope with a low inventory market

As the weather warms, many home buyers are venturing out making themselves known; only to be greeted with low inventories and higher list prices. The National Association of Realtors® March 23^rd press release indicated that nationwide low housing inventory is pushing home prices to grow rapidly; average home prices across the country increased 7.5% during February compared to the same period last year (realtor.org).

Much like the “tire kicker;” a typical home buyer visits selected open houses and lurks online to see what’s out there before talking to a lender and/or a real estate agent. While desiring to be low-key and pretending to be demure may be the strategy of choice; acting this way during a low inventory market could lead you to miss out on the home of your dreams.

If you’re part of this year’s home buyer cohort, prepare for a low inventory market by talking with a mortgage lender and a real estate agent before you begin your search. Working with an experienced agent and lender may increase your chances of not only finding a home, but getting your offer accepted.

Even though home buyers are instructed to get qualified for a mortgage before they begin looking for a home, it is often left until just prior to writing their first offer. A lender approval not only provides you the certainty of knowing what you can afford; it tells the home seller you are capable of buying their home.

Although getting a mortgage qualification letter today is more involved than it was in bygone years, it is for the better. To comply with new rules and regulations, lenders today require a formal application before they will provide you an approval letter that can accompany your offer to purchase. You will need to provide documents indicating your income and assets to determine how much you can afford as well as verify the funds for down payment and closing costs. The application not only helps you through the home buying process, it will make your mortgage process more streamlined too.

Although hiring a buyer agent is not always a consideration during the home search, your choice of agent could affect the outcome of your purchase. Choose carefully – research has indicated that real estate agents are not all alike; veteran agents positively affect your transaction and are more efficient compared to rookies. Experienced agents offer intangible services such as understanding the nuances of the housing market, as well as having an increased ability to engage the parties in the transaction. Additionally, it was found that home buyers who employ full-time agents have better outcomes than those who hire part-time agents.

Rather than waiting to choose your agent until you’re ready to make an offer on a home, meeting and interviewing several agents could help you determine their experience and commitment. Although most buyers think of savvy agents as being expert negotiators; in a low inventory market it also pays to have an agent who thinks outside the box to seek home sale opportunities that are not typically advertised in the MLS.

A low inventory housing market presents the home buyer with a number of issues. Working with an experienced agent and mortgage lender can help you through the ups and downs of the process as well as reframing your expectations to fit the reality of market.

March 20, 2015March 20, 2015

You are more resilient to winter than your home

Did you know that enduring a harsh winter can make you more resilient? At least that’s what University of Buffalo researcher Mark Seery believes. His research on stress and coping reveals that negative events and adversity promotes adaptability and resilience, which benefits your overall wellness (buffalo.edu).

Your home, however, may not be as resilient as your psyche. A severe winter can create the ideal conditions for water penetration into and around your home. Unfortunately, many home owners won’t know that an issue exists until there is a noticeable leak, or water seeps into the basement. Left unchecked, water leaks can not only cause water damage to ceilings, walls, and basements, it can also promote mold growth as well as structural issues in and around the house.

Ice dams are often the cause of water finding its way into the home. Occurring on exterior coverings, ice dams typically occur through the melting and rapid freezing of snow or ice, which can lift and separate the covering giving water a pathway into the house. Ice dams are common on the roof, lifting shingles and separating chimney flashing; but can also occur on siding and exterior trim as well.

Rather than taking water away from your home’s foundation, blocked gutters and downspouts can be the cause of water penetration into the basement. Gutters and downspouts can become blocked with debris any time of year; however, winter presents additional issues. Snow and ice covered downspouts are sometimes shifted or damaged; while eroded grading can redirect water toward the house.

Part of the home’s drainage system, a sump pump helps to keep water from penetrating into the basement. It is designed to collect water in a basin and pump it away from the home. After severe winter weather, a large volume of melted snow and ice can saturate the grounds and fill the basin quickly. If the pump is not operating properly (or the pump drain is blocked), water can unknowingly seep into the basement.

Winter weather can also affect the home’s walkway and driveway. Freezing water can expand existing cracks, while snow removal and ice treatments can deteriorate the stability and integrity of the materials. Not only can the sidewalk and driveway become unsightly, they can also become a trip hazard.

You may be able to examine much of your home’s exterior by walking around the perimeter. However, it may be necessary to have a licensed contractor to inspect/repair the roof, gutters, and other areas. Although your home may not need maintenance, common items that may need to be addressed include repairing/replacing lifted or missing shingles; repairing flashing; realigning gutters and downspouts; re-grading; testing the sump pump; repairing/replacing broken or missing siding and/or exterior trim; repairing window and door seals; repairing/replacing fascia boards; repairing and/or sealing walkway and driveway; and touch-up painting.

Even if your home escaped busted pipes (which many home owners experienced this year), a leaking roof, or other cold weather crises this winter; it still may be in need of urgent maintenance. As the weather warms, taking the time to check your home’s exterior and making necessary repairs could not only improve your home’s aesthetics, but may also help prevent potential issues and impede developing damage. It should go without saying that this is a priority if you’re planning to put your home on the market this spring/summer.

March 11, 2015October 15, 2019

Credit reporting changes may help home buyers

It’s no secret that your credit report can affect your ability to buy a home. Most mortgage lenders impose minimum credit score requirements to qualify; and tiered interest rates can cost you hundreds of dollars if your credit score is too low.

Your credit score is used as a predictor of your ability to manage debt. The score is the result of an analysis of information that is reported about you to the three credit reporting agencies; and is produced by each agency’s proprietary algorithm. Typical information that can be found in your credit report includes revolving and installment credit accounts, such as credit cards, home equity lines of credit, mortgages, and auto loans. Reported late payments, collections, and judgments can adversely affect your credit score.

Financial experts recommend you review your credit report annually to ensure accuracy, and dispute incorrect information. Annualcreditreport.com is the only authorized website where you can obtain a free annual credit report.

Correcting credit report errors can be tedious; and unfortunately, the outcome may not please you. However, this could change as a result of a recent settlement between New York Attorney General Eric Schneiderman and the three credit reporting agencies. A March 9^thpress release (ag.ny.gov) announced a settlement with the three credit reporting agencies to “improve credit report accuracy; increase the fairness and efficacy of the procedures for resolving consumer disputes of credit report errors; and protect consumers from unfair harm to their credit histories due to medical debt.” The statement quoted a 2012 FTC study that suggested that millions of consumers’ credit reports contain errors. The study indicated that 26% of the participants reported at least one error; and about 13% of the participants reported a positive change to their credit score after disputing errors.

The Consumer Data Industry Association (which represents the consumer data industry, including the three credit reporting agencies) also announced on March 9^th (cdiaonline.org) the creation of the National Consumer Assistance Plan. Stuart Pratt, President and CEO of the Consumer Data Industry Association, stated; “The National Consumer Assistance Plan we are announcing today will enhance our ability to offer accurate reports and make the process of dealing with credit information easier and more transparent for consumers…”

The implementation of the National Consumer Assistance Plan (NCAP) is expected in upcoming months, and is focused on improving how consumers interact with the credit reporting agencies, as well as data accuracy and quality. The NCAP is to build upon recent improvements to consumers’ experience with the credit reporting agencies, which includes a 2013 digital application to facilitate credit report disputes. To ensure consistent and uniform data submission to credit reporting agencies, a multi-company working group is to be formed.

To improve the consumer experience, the NCAP is to: provide expanded credit report education; provide dispute results and suggestions on what to do if not satisfied with dispute outcome; and enhance dispute resolution for proven victims of identity theft and fraud.

To improve data accuracy and quality, the NCAP is to: implement a “waiting period” of 180 days for medical debt; remove previously reported medical collections that have been paid, or being paid by insurance; reinforce consistent standards for data submission; reject data that does not include a date of birth; and eliminate reporting debt which did not arise from a contract or agreement to pay (e.g., tickets or fines).

By Dan Krell
© 2015

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March 4, 2015July 6, 2019

How to price your home in 2015

In case you haven’t been following along closely, the March 3^rd release of CoreLogic’s Home Price Index (corelogic.com) indicated that nationwide home prices increased 5.7% during January compared to the same period last year; and there was a 1.1% increase during January compared to December. And believe it or not, CoreLogic stated that nationwide home prices including distressed sales are only 12.7% below the peak; and only 8.6% below peak if you exclude distressed sales.

Of course, national home price data are an average of regions that vary economically, reflected in their respective housing market. CoreLogic Chief Economist Dr. Frank Nothaft stated, “House price appreciation has generally been stronger in the western half of the nation and weakest in the mid-Atlantic and northeast states…In part, these trends reflect the strength of regional economies. Colorado and Texas have had stronger job creation and have seen 8 to 9 percent price gains over the past 12 months in our combined indexes. In contrast, values were flat or down in Connecticut, Delaware and Maryland in our overall index, including distressed sales.” The only 2 states that realized negative price appreciation year over year (including distressed sales) during January were Maryland and Connecticut, where home prices appreciated (–0.3%) and (-0.6%) respectively.

If you include distressed sales, Maryland’s January home prices appreciated (–0.3%) year over year, (-0.1%) month over month, and is (-25.3%) from the peak. Regional differences, of course, exist: DC home prices including distressed sales appreciated 3.3.% year over year, (-0.4%) month over month, and is only (-1.4%) from the peak; Virginia home prices appreciated 1.4% year over year, (-0.2%) month over month, and is (-15.6%) from the peak.

The CoreLogic HPI Forecast projects nationwide home prices, including distressed sales, to appreciate 0.4% from January to February, with an annual appreciation of 5.3%.

CoreLogic expects consistent home price appreciation through 2015 and into 2016, due in part to a current shortage in housing inventory. Anand Nallathambi, president and CEO of CoreLogic, stated that “Many homeowners have taken advantage of low rates to refinance their homes, and until we see sustained increases in income levels and employment they could be hunkered down so supplies may remain tight. Demand has picked up as low mortgage rates and the cut in the FHA annual insurance premium reduce monthly payments for prospective homebuyers.”

According to the Greater Capital Area Association of Realtors® (gcaar.com) January Montgomery County single family home statistics, home inventory and home buyer activity increased compared to last January. Although total housing inventory increased 26.5% year over year, contracts (pending sales) increased 16.6%, and settlements (sales) increased 4.8%.

If you’re wondering how these statistics might affect your sale, you’re not alone; many home sellers are trying to shape a sensible marketing plan this spring, which includes deciding on a listing price. Consider that although listing inventory is currently relatively low, it is likely to spike within the next two months adding competition to a market competing for discerning home buyers.

Typical home buyers have been increasingly demanding value; besides looking for a “turnkey” (updated and ready to move in) home, they have also been sensitive to home prices. Since cash buyers are not as prevalent as they were two years ago, and many buyers are concerned about their monthly obligations and budgets; pricing your home correctly will be more important this year than it has in the past.

By Dan Krell
© 2015