2009 Cost vs. Value Report: Small Projects, Big Bang
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2009 Cost vs. Value Report: Small Projects, Big Bang Judicious home remodeling is still worth the investment, according to Remodeling magazine's annual "Cost vs. Value Report." By G.M. Filisko Uncertainty and restraint are the order of the day in this economy, and that sense of caution is reflected in home owners’ return on their investment in remodeling projects, according to REALTORS® in 80 metropolitan markets surveyed by Remodeling magazine for this year’s Cost vs. Value Report. The majority of the 10 remodeling projects with the best return on investment nationally are a testament to pragmatism. Six of the 10 projects—siding and window replacement using a variety of materials—involve home maintenance that costs less than $14,000. Two more—adding an attic bedroom or a wood deck—reinforce the notion that boosting the amount of livable space in and around your home will attract buyers who are increasingly looking for more room for their buck. In past years, converting an attic into a bedroom was a project that landed squarely in the middle of the rankings, but this year it leapfrogged over other categories into third place. It’s an admittedly pricey project, with an average national cost of nearly $50,000, but it generates an average national return of 83.1 percent and a better-than-100 percent return on investment, according to REALTORS® in 14 of the 80 cities surveyed. Adding a wood deck is much more economical, with an average national cost of slightly more than $10,000. Its average national return is 80.6 percent, but in six cities, its return is estimated at 100 percent or greater. The six siding and window home maintenance projects in the top 10, combined with the project with the biggest return on investment—a mid-range entry door replacement—prove something that every sales associate tells sellers throughout the country: First impressions count. A mid-range entry door replacement, a project new to the survey this year, is the only home remodeling project that REALTORS® expect to generate a full return for the money nationally. It’s the least expensive of the 33 projects included in the analysis, yet it brings a whopping average national return on investment of 128.9 percent. It generates a better-than-100 percent return in 48 of the 80 cities, according to REALTORS® surveyed, and in several cities, its return is estimated at more than double its cost. Additional data prove the value of restraint. Upgrading kitchens and baths is still a smart bet. However, home owners will recoup the greatest share of their costs by foregoing super-deluxe projects in favor of mid-range kitchen and bath remodels. A mid-range kitchen remodel brings an average 72.1 percent return on investment, while an upscale kitchen re-do returns only an average of 63.2 percent of the money invested. A mid-range bathroom project has an average 71 percent cost recovery, but the average recovery on an upscale bathroom project is nearly 10 points lower, at 61.6 percent. The only upscale projects that cracked the top 10 were the home maintenance projects of fiber-cement siding replacement and vinyl window replacement. The average cost of fiber-cement siding is more than $13,000, but its return on investment reached 83.6 percent, placing it squarely in second place in the survey. The average cost of vinyl window replacement is nearly $14,000, and it generates an average return of 76.5 percent, or tenth place in the survey. Of the 12 upscale projects, nine landed in the bottom half. Overall, home owners recouped an average of 63.8 percent of their investment in 33 different home improvement projects, according to REALTORS® who responded to the survey. The expected cost recoup was generally down from previous years in line with the drop in home prices nationally (see page 23). The return on home owners’ investment in remodeling projects has declined an average of 3.5 percentage points between 2008 and 2009. That’s down from the 2.7 point drop between 2007 and 2008 and much less than the 5.5 point drop between 2006 and 2007 and the 10.5 point drop from 2005 to 2006. Zooming in from the national to the city level, Honolulu sits atop the rankings for having the most projects—18—that generate at least a full return on investment. In Honolulu, adding a wood deck, completing a minor kitchen remodel, adding fiber-cement siding, and replacing an entry door bring the highest returns, ranging from 121.1 to 195.3 percent return on investment. San Francisco is closest behind with 10 projects generating at least a full return on investment. Adding a master suite, doing a minor kitchen remodel, and replacing an entry door have the biggest returns, producing between 112.2 and 119.1 percent return on investment. One surprise: Despite the common perception that contractors are hungry for work and therefore willing to wheel and deal, the average national cost of every project surveyed has gone up, though at a slower rate than in the previous year. View 2009-10 Cost Vs. Value Report. Data courtesy of Remodeling Magazine |
Benefits of a Buyer's Agent
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Benefits of a Buyer's Agent For most of us, buying a home is the biggest single investment we're likely to make – and we're only likely to do it maybe once or twice in a lifetime. The process is, by nature, filled with checks and balances - and many complex details. Traditionally, agents were legally obligated to protect the interests of the home seller. Today preferences are changing. One of these changes is that more homebuyers are choosing to have their own real estate agent, known as a buyer's agent, to legally represent them. A buyer's agent represents you, the buyer, not the seller, and has full fiduciary duties, including loyalty to you. By definition, the buyer's agent has your best interests in mind throughout the transaction. The percentage of homebuyers with buyer representation has grown significantly in the past decade. According to a recent National Association of Realtors® survey, nearly half (46%) of home buyers used the services of a buyer's agent last year, and four out of every five buyer's agent agreements were in writing. The benefit of buyer representation is the dedication of a buyer's agent to the home buyer. The buyer's agent and homebuyer establish a mutual agreement, known as a buyer agency agreement that will entitle the homebuyer to, but is not limited by: · Loyalty
The real estate agent must act in the best interest of the buyer. · Disclosure
All material facts such as relationships between agent and other parties, existence of other offers, status of earnest money, seller's financial condition, property's true worth, commission split with other brokers, and legal effect of important contract provisions. · Confidentiality
Any discussions, facts, or information that should not be revealed to others but does not include responsibility of fairness and honesty in dealings with all parties. · Accounting in dealings
Reporting of where any money placed in the hands of the broker is kept. · Reasonable Skill and Care
Arriving at a reasonable purchase price and advising the buyer of such, affirmatively discovering material facts and disclosing them to the buyer, investigating the material facts related to the sale. With a buyer agency, the interests of the homebuyer will be represented in the purchase of the home. This scenario is different from a typical transaction where the buyer is not technically represented. |
Record Streak Continues for Pending Home Sales
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Record Streak Continues for Pending Home Sales RISMEDIA, October 3, 2009—Pending home sales have increased for seven straight months, the longest in the series of the index which began in 2001, according to the National Association of Realtors®. The Pending Home Sales Index, a forward-looking indicator based on contracts signed in August 2009, rose 6.4% to 103.8 from a reading of 97.6 in July, and is 12.4% above August 2008 when it was 92.4. The index is at the highest level since March 2007 when it was 104.5. Lawrence Yun, NAR chief economist, said not all contracts are turning into closed sales within an expected timeframe. “The rise in pending home sales shows buyers are returning to the market and signing contracts, but deals are not necessarily closing because of long delays related to short sales, and issues regarding complex new appraisal rules,” he said. “No doubt many first-time buyers are rushing to beat the deadline for the $8,000 tax credit, which expires at the end of next month.” The Pending Home Sales Index in the Northeast jumped 8.2% to 85.3 in August and is 12.0% higher than August 2008. In the Midwest the index rose 3.1% to 90.8 in August and is 7.6% above a year ago. In the South, pending home sales increased 0.8% to an index of 104.6 and is 8.2% above August 2008. In the West the index surged 16.0% to 130.5 and is 22.3% above a year ago. “There is likely to be some double counting over a span of several months because some buyers whose contracts were cancelled have found another home and signed a new contract to buy,” Yun explained. “Perhaps the real question is how many transactions are being delayed in the pipeline, and how many are being cancelled? Without historic precedents, it’s challenging to assess.” Yun also noted that the data sample coverage for pending sales is smaller than the measurement for closed existing-home sales, so the two series will never match one for one. NAR President Charles McMillan, a broker with Coldwell Banker Residential Brokerage in Dallas-Fort Worth, said first-time buyers need to act now. “Potential first-time buyers must make a contract offer very soon to have a reasonable chance of qualifying for the tax credit,” he said. “Congress needs to extend and expand this program because it’s stimulating the economy and reducing inventory close to price stabilization points.” McMillan said a sizable number of homebuyers already in the pipeline could be let down because of the tight deadline. “We know there is a pent-up demand because sales are below normal levels for the size of our population. The faster we absorb excess inventory, the sooner we’ll turn the corner on home prices, prevent additional families from becoming upside-down in their mortgages, and give Wall Street the confidence to extend credit to other sectors,” he said. “Each home sale pumps an additional $63,000 into the economy through related goods and services, so the benefits of extending and expanding the tax credit far outweigh the costs.” Yun said the forecast for home sales and prices depends very much on whether a tax credit is extended. “All we can say for certain is sales will decline when the tax credit expires because we are not yet on a self-sustaining recovery path. It also raises a risk of a double-dip recession,” he said. “Extending and expanding the tax credit is the best tool in our arsenal to encourage financially qualified buyers to stimulate the economy and help reduce the budget deficit.” |
6 Landscaping Tricks That Wow Buyers In today's market, sellers have to work harder to persuade buyers that their property is worth the bite. 1. Add splashes of color. With every changing season, a landscape should provide a new display of colors, textures, and fragrances. "It’s best to use one or two and repeat them," Glassman says. Example: white iceberg roses that bloom in spring, summer, and fall as a backdrop; in front, a contrasting punch of purple salvia or lavender that will flower at the same time; and as an accent, a crape myrtle tree that provides changing leaf colors in fall and interesting branches come winter. 2. Size trees and shrubs to scale. These should be planted in the right scale for the house so that they don’t block windows, doors, and other architectural features on the home’s facade. A large two-story house can handle a redwood, Chinese pistache, sycamore, or scarlet oak, but a one-story cottage is better paired with a flowering cherry, crabapple, or eastern redbud. Too many trees cast too much shadow and cause potential buyers to worry about maintenance and costs. 3. Maintain a perfect lawn. A velvety green lawn demonstrates tender loving care, so be sure sellers’ homes don’t have brown spots. Some rocks, pebbles, boulders, drought-tolerant plants, and ornamental grasses will generate more kudos, especially in drought areas. 4. Light up the outside. Good illumination allows buyers to see a home at night and adds drama. Sellers should use low-voltage lamps to highlight branches of specimen trees, a front door, walk, and corners of the house. But less is better. The yard shouldn’t resemble an airport runway. 5. Let them hear the water. The sound of water appeals to buyers, and you shouldn’t just reserve this for your backyard. A small fountain accented with rocks provides a pleasant gurgling sound, blocks street noise, and is affordable. 6. Use decorative architectural elements. A new mailbox, planted window boxes, and a low fence wrapped in potato vines add cachet, particularly during winter months when fewer plants blossom. Colors should complement the landscape and home. Just don’t overdo it: Too much can seem like kitschy lawn ornaments. Source: Michael Glassman, landscape designer, Michael Glassman and Associates, Sacramento, Calif., www.michaelglassman.com |
2008 Cost vs. Value Report: Still Many Happy Returns for Home Rehabs Remodeling magazine's annual report shows that maintenance-related projects and moderately priced upgrades are providing stable paybacks, even in a slower market. Despite home price drops in many cities, remodeling projects are holding their own as a way for owners to add value. Many people are wondering where their money will be safest during these uncertain economic times. When home owners turn to you for your expert advice, counsel them that some things never change: Investing in their home still pays off. NATIONAL ASSOCIATION OF REALTORS® statistics show that home prices have fallen by an average of 7 percent nationally in the past year. But the value of home owners’ investment in remodeling projects has declined only 3.86 percent on average between 2007 and 2008, according to Remodeling’s 2008–2009 Cost vs. Value Report. Remodeling produces the Cost vs. Value Report each year in cooperation with REALTOR® magazine. REALTORS® responding to a survey in midsummer said home owners could expect to recoup a national average of 67.3 percent of their investment in 30 different home improvement projects. At the height of the housing boom in 2005, home owners could expect to recoup a national average of 86.7 percent on projects. Remodeling remains hot in 10 cities, where, on at least some projects, home owners can recover 100 percent of their costs. In Charlotte, N.C., for example, decks, midrange kitchen remodels, vinyl siding, and window-replacement projects all would net more than they cost, in respondents’ estimation. High rates of recovery were seen in both strong real estate markets and weak ones. Many cities with the highest rates of recovery were smaller—Jackson, Miss., and Billings, Mont., for example—which may point to lower labor and materials costs that are easier to recoup. Seattle also made the list of cities with a cost recovery of more than 100 percent on decks and minor kitchen remodels. In fact, Pacific Coast cities recorded the best payback on remodeling by a wide margin, as they did in 2007. Although construction costs on the Pacific Coast are nearly 17 percent higher than national averages, the value of renovations at resale more than makes up for those higher prices. The result is an average cost-recouped percentage that’s 14.8 percent higher than in the rest of the country. The toughest place to get your money back: Midwestern cities such as Chicago, Cleveland, Indianapolis, and Milwaukee. Top 10 Project Paybacks Once again, exterior remodeling projects lead the way for recovery on dollars spent in this year’s Cost vs. Value survey. When you compare the national averages, replacement projects that boost curb appeal—siding, windows, and decks—give you the greatest chance of recouping your money. Inside, only kitchen remodels can compare, at least on a national level. 1. Upscale fiber cement siding (86.7%) 2. Midrange wood deck (81.8%) 3. Midrange vinyl siding (80.7%) 4. Upscale foam-backed vinyl (80.4%) 5. Midrange minor kitchen remodel (79.5%) 6. Upscale vinyl window replacement (79.2%) 7. Midrange wood window replacement (77.7%) 8. Midrange vinyl window replacement (77.2%) 9. Upscale wood window replacement (76.5% 10. Midrange major kitchen remodel (76.0%) The Real Deal: Examples from You REALTORS® around the country helped us track down home owners who had recently completed remodeling projects. In all cases, the projects cost far less than the job cost estimates provided with the Cost vs. Value survey.  ATTIC-TO-BEDROOM
Location: Oak Park, Ill. When Rick Nagle and Eileen Deamer of Oak Park, Ill., spent more than $35,000 to convert the attic of their 100-year-old home into a combination master bedroom and office, "resale value wasn’t our concern," says Deamer, a U.S. government employee and the married mother of two. The transformation turned 600 square feet of makeshift office with a toilet in the middle of the room to a colonial-style bedroom/office with two walk-in closets and an adjoining sage green bath with a walk-in shower. To allow two simultaneous uses, pocket doors separate the bedroom and office spaces.  BATHROOM Location: Fountain Hills, Ariz. "This is such a crazy market to try to judge how much a renovation is worth, but having a refurbished kitchen and bathrooms makes almost any house more salable," says Shari Gay, ABR®, sales associate at RE/MAX Sun Properties in Fountain Hills, Ariz. The owner—Gay’s sister—added Saltillo clay floor tile throughout the 1,800-square-foot home, including the new bathroom. Bathroom finishes included a new cherry vanity cabinet, a tile shower, oil-rubbed bronze fixtures, and a soothing, sophisticated yellow color scheme, which all add up to a great look. Total cost? About $5,000. "She’ll at least break even on the upgrades," predicts Gay. "If this were a boom market, she would get even more."  KITCHEN Location: Honolulu A kitchen is the heart of most homes. That’s why Hollywood set designer Wally White decided to spend most of his $15,000 renovation budget on upgrading the kitchen of his Honolulu studio condo. To spruce up the existing white cabinetry, which he left to save costs, the owner added bursts of color with celadon green granite countertops and walls painted in a complementary shade of light green. An undermounted white porcelain sink, a six-light halogen fixture on a dimmer, and brushed stainless steel faucet completed the look. It paid off. White grossed $45,000 when he sold eight months later. "The unit sold for more than any other studio—and most of the one-bedroom condos in the building," says Susan Weinik, a sales associate with Realty Executives Oahu.  BASEMENT Location: West Brighton, N.Y. In a modest 1950s ranch in West Brighton, N.Y., a midrange basement upgrade suited Bernard Fallon’s mother-in-law, Ligaya Nocon, just fine. After purchasing her home "on the high end of the market," according to Fallon, broker at Fallon Associates Realty in Rochester, N.Y., Nocon kept basement renovation costs under $9,000. She created a cottage feel by whitewashing the knotty pine paneling rather than replacing it. She also reupholstered the existing bar to cover wear and warmed up the room with wall-to-wall carpeting instead of wood or tile. "We just dressed it up for the personal enjoyment of my mother-in-law," says Fallon, "but I think it will help sell the property later." The Specs To help respondents determine the resale value of improvements, the survey provided specifications for each project: Attic Bedroom Remodel. Convert unfinished attic space to a 15-by-15-foot bedroom and a 5-by-7-foot bathroom with shower. Include a 15-foot shed dormer, four new windows, and closet space under the eaves. Insulate and finish ceiling and walls. Carpet floor. Extend existing HVAC to new space; provide electrical wiring and lighting to code. Retain existing stairs, but add rail and baluster around stairwell. Minor Kitchen Remodel. In a functional but dated 200-square-foot kitchen with 30 linear feet of cabinetry and countertops, leave cabinet boxes in place but replace fronts with new raised-panel wood doors and drawers, including new hardware. Replace wall oven and cooktop with new energy-efficient models. Replace laminate countertops; install mid-priced sink and faucet. Repaint trim, add wall covering, and remove and replace resilient flooring. Basement Remodel. Finish the lower level of a house to create a 20-by-30-foot entertaining area with wet bar and a 5-by-8-foot full bathroom; construct 24 linear feet of finished partition to enclose mechanical area. Walls and ceilings are painted drywall throughout; exterior walls are insulated; painted trim throughout. Include five six-panel factory-painted hardboard doors with passage locksets. Electrical wiring to code. Main room> Include 15 recessed ceiling light fixtures and three surface-mounted light fixtures, as well as a snap-together laminate flooring system. Bathroom> Includes standard white toilet, vanity with cultured marble top, resilient vinyl flooring, two-piece fiberglass shower unit, a light/fan combination, vanity light fixture, recessed medicine cabinet, towel and paper-holder hardware. Bar area> Include 10 linear feet of raised-panel oak cabinets with laminate countertops, stainless steel bar sink, single-lever bar faucet, undercounter refrigerator, and vinyl floor tile. Upscale Bathroom Remodel. Expand an existing 35-square-foot bathroom to 100 square feet within existing house footprint. Relocate all fixtures. Include 42-by-42-inch shower with ceramic tile walls with accent strip, recessed shower caddy, body-spray fixtures, and frameless glass enclosure. Include a customized whirlpool tub, stone countertop with two sinks, two mirrored medicine cabinets with lighting, a compartmentalized commode area with one-piece toilet, and a humidistat-controlled exhaust fan. Use all color fixtures. Use larger matching ceramic tiles on the floor, laid on the diagonal with ceramic tile base molding. Add general and spot lighting including waterproof shower fixture. Cabinetry includes a custom drawer base and wall cabinets for a built-in look. Extend HVAC system and include electric in-floor heating and heated towel bars. Why Renovation Pays Why are renovations holding their value better than home prices today? "When housing slows down, people stay put and renovate their house to make it more livable," says Paul Zuch, president of Capital Improvements, a designing, building, and remodeling company in Dallas. And by renovating before they sell, home owners get to enjoy the new space themselves, not just make the home more appealing to buyers. "It just makes sense," says Zuch. Recent renovations also make buyers’ lives easier. "Home owners who remodel their home are providing a service to future buyers," says Eileen Nelis, a broker at Savvy and Co. in Charlotte, N.C. "When buyers purchase, they don’t want to do all that painting and remodeling, and they don’t want that price tag. They may be willing to make improvements down the line, but when they purchase, they want to open the door and have everything complete. It reduces their stress." Making home improvements can also reduce sellers’ stress by heading off that time-honored negotiating technique—pecking away at the sales price by pointing out imperfections. "If sellers have done some improvements and dressed up their property, the improvements will help sell it," says Bernard Fallon, broker at Fallon Associates Realty in Rochester, N.Y. "If sellers don’t want to improve their property, buyers will tick off the repairs and try to take them off the price." That doesn’t mean that every home owner should do every renovation, even in a more stable real estate market. Take Tulsa, Okla., where median home prices actually edged up slightly more than 2 percent in 2008, according to NAR. REALTORS® in Tulsa reported that, of the 30 remodeling projects surveyed, only 16 netted home owners at least 80 percent of the cost. "Not every neighborhood will support the additional work," says Jim Hemphill, a sales associate at Coldwell Banker Select in Tulsa, "but in older, more established neighborhoods, if you redo a kitchen or bathroom or add a master bath or bedroom, you’ll get your money out." Despite the value, the weak economy is likely to slow seller spending on remodeling, at least in the short term, predicts the most recent Leading Indicator of Remodeling Activity computed by the Joint Center for Housing Studies at Harvard University. The LIRA for the third quarter of this year estimated that owners’ spending on home improvements will decline at an annual rate of 12 percent by the second quarter of 2009, continuing a two-year downward trend. Spending is unlikely to recover until the housing market turns around, according to the Center. Yet, despite declines in overall remodeling dollars spent and a still shaky housing market, "people’s homes are still one of their best, most solid investments," notes Zuch. "Even though the markets have gone through some adjustments, it’s still smart to invest in your home." |
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10 Big-Impact, Low-Cost Remodeling Projects
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10 Big-Impact, Low-Cost Remodeling Projects Working with sellers who have some—but not unlimited—cash for upgrades? Here are budget-minded enhancements you can suggest to make their home stand out. 1. Tidy up kitchen cabinets. "Potential buyers do open kitchen cabinets and look inside," says Morrissey. "Home owners can add rollout organizing trays so when buyers peek in, they feel like there’s lots of room for their stuff."
2. Add or replace tile. "By retiling very inexpensively, you make a room look way cleaner that it was," says Javier Zuluaga, owner of Home Repairs and Remodeling LLC in Tempe, Ariz. "Every city has stores that offer $1 to $2 tile, so home owners have to pay only for the low-cost tile and labor to replace a dated backsplash or add a new one. We also use inexpensive tile to upgrade bathrooms."
3. Add a breakfast bar. When a wall separates a kitchen from a family room, suggest cutting out an opening to create a breakfast bar. "In one home, there was a cutout in the wall between the kitchen and living room," explains Matthew Quinn, a sales associate at Quinn’s Realty & Estate Services in Falls Church, Va., who handles estate and real estate sales for family members whose loved ones have passed away. "We left the structure of the cutout, added an oversized granite breakfast bar, and put chairs in front of it. That cost about $600." 4. Install granite tile instead of a slab. "Everybody is hot for granite kitchen countertops, but that can be a $5,000 upgrade," says John Wilder, a general contractor and owner of Fence and Deck Doctor in New Castle, Ind. "Instead, home owners can put in 12-inch granite tiles for about $300 in materials and get very high impact for little money." 5. Freshen up a bathroom without retiling. "With a dated bathroom, I recommend putting in a new medicine cabinet for $100 to $150, light fixtures for about $100, a faucet for $50 to $75, and a vanity for $200 to $300," says Wilder. "And instead of replacing the tile, the existing grout can be lightly scraped and regrouted, which leaves a haze that can be buffed out and will make the tile look brand new. Also install glass shower doors. A French door adds a lot of panache and elegance for $250, and people will notice the door, not the tile. With all that, you’ve done a bathroom remodel for $1,000 to $2,000." 6. Freshen up the basement. "If home owners have cement block or poured concrete walls in the basement, suggest they have a contractor fill in cracks with hydraulic cement and then paint with waterproofing paint," recommends Wilder. "They can then add a top coat to add color. They can also paint the basement floor with a good floor paint, which spiffs it up. The basement may not be finished, but it’s no longer a damp dungeon." 7. Add a room. Look for large spaces that can be enclosed to create a new bedroom for just the price of creating a wall. "One time, we closed off a half-wall to an office and added a door to the other side of the room, thus creating another bedroom," says Quinn. "That $400 procedure, which took a contractor one day, netted about $40,000 in the sales price." Zuluaga has also added bedrooms inexpensively. "In a two-bedroom house, there was an archway that led to a third room that was used as a den," he explains. "It had a dry bar where there would have been a closet, so we took out the dry bar and created a closet so the owners had a third bedroom." 8. Spruce up cabinet fronts. Suggest home owners update tired-looking kitchen cabinets. Reconditioning is the least expensive move for under $1,000. "If the wood is starting to look shabby from use or contaminants in the air, we take out the nicks and scratches, recondition it with oil, and put new hardware on," explains Heidi Morrissey, vice president of marketing and sales at Kitchen Tune-Up in Aberdeen, S.D. For $1,500 to $4,000, owners can replace the cabinet doors and drawer fronts, and for $4,000 to $12,000, they can have all the cabinets refaced. "With refacing, owners can change the color of the cabinets by replacing the door and having a new skin put on the boxes," says Morrissey. "If they have oak cabinets today, they can have cherry the next day." 9. Replace light fixtures. "In a foyer and in bathrooms and kitchens," says Wilder, "replacing overhead light fixtures provides a lot of pop for a little money." If the kitchen has track lighting, Zuluaga suggests the home owner spend $450 to $600 to have an electrician replace it with recessed canned lights on a dimmer switch to add ambience. For about $700, Zuluaga also suggests installing pendant lights over a kitchen island or peninsula. 10. Tech-up the garage. "Sometimes we replace the garage door opener with a remote touchpad entry system," says Zuluaga. "That costs about $425 and makes it look like a high-end system." |
Senate Approves Tax Credit Extension, Expansion
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Senate Approves Tax Credit Extension, Expansion
The Senate yesterday passed legislation to extend the $8,000 home buyer tax credit to May 1, 2010, for first-time buyers and add a $6,500 tax credit for repeat buyers if they've lived in their home for five of the past eight years. Home prices are capped at $800,000.
The legislation was included in a bill to extend unemployment benefits and is expected to be passed by the House today or tomorrow. President Obama is expected to sign the legislation when it's sent to his desk.
Under the bill, income limits are expanded to $125,000 for individuals and $225,000 for joint filers. Individuals with incomes up to $145,000 and joint filers with incomes up to $245,000 qualify for reduced credits.
Households who have binding contracts in place by April 30 will be allowed an additional 60 days to complete their transaction. The deadline for members of the military serving out the U.S. for at least 90 days between Jan. 1, 2009, and May 1, 2010, has been extended one year.
Taxpayers can claim the credit on their federal income tax returns. If the credit exceeds their tax bill, the government will issue a check. Taxpayers will be able to claim the credit on their 2009 income tax return for purchases made in 2010.
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Top 12 Tips for Buying an Investment Property
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Top 12 Tips for Buying an Investment Property RISMEDIA, September 19, 2009—Christine Van Tuyl and Margaret La Grange, an award-winning mother-daughter team with Prudential California Realty in Coronado, have compiled their latest list, the “Top Twelve Tips for Buying an Investment Property.” “Real estate investors aren’t necessarily all-cash buyers with millions in the bank,” said Van Tuyl, Prudential agent. “Normal folks with $50,000 to put down can make solid investments and get positive cash flow.” Are you ready to buy an investment property? Here are some things to consider. 1. Location, location, location. We’ve said it before and we’ll say it again. Invest in the best location you can afford. It will determine the kind of tenants you will attract, and how much rent you can charge. A property in a desirable location will also appreciate more over time and be less susceptible to the ups and downs of the real estate market. 2. Don’t go overboard when you’re fixing up an investment property. You don’t necessarily need granite countertops and stainless appliances. After all, you’re going to get some reasonable wear and tear when the tenants move out. Most renters are happy with units that are light, bright and clean. 3. Forget about flipping. Real estate today is a buy-and-hold investment—for at least five to ten years. You’ll face considerably more risk with a shorter time frame. Although your rental will almost certainly appreciate over the next 20 years, the next few years are anyone’s guess. 4. Think long term. For most small investors, long-term ownership makes the most sense. You’ll have plenty of time to ride out any swings in the market, and your rental income will be a nice supplement to your day job. Historically, real estate has been an excellent investment, always appreciating a few points over the rate of inflation. 5. Be prepared to have cash on hand. These days, buying a non-owner occupied property requires at least 25-30% down. 6. Calculate the cost of ownership. This includes all the expenses of owning and managing an investment property, not just mortgage payments. Common expenses include property taxes, insurance, utilities, maintenance, vacancies, and repairs. 7. Look for a property for what it can be, not what it is. Buyers with a little imagination can look past the cracked paint and overgrown landscaping and score a great deal. 8. Hire and pay skilled workers to do your renovations. Start collecting recommendations for electricians, plumbers, painters, and contractors. 9. Always screen your tenants. Run a credit check and call old landlords. Ask if they paid the rent on time, what condition the property was when they left, and if they caused any problems with the neighbors. 10. Read up on your rights as a landlord. Learn about the eviction process and other potential issues so you can do things right, saving time and money. 11. Carefully consider all options. In general, buildings with 3-4 units or duplexes pencil out best, followed by single family homes with 3 bedrooms. Some investors find it works out best to buy a duplex and move into one of the units. 12. Enjoy the advantages of your investment property. When managed correctly, investment properties are a great source of passive income—now, and when you retire. Take advantage of amazing tax benefits to make your investment pay off. |
Lose Your Job, Keep Your Home – Ask for Help Before it’s Too Late
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Lose Your Job, Keep Your Home – Ask for Help Before it’s Too LateBy Amy Hoak  RISMEDIA, Sept 11, 2009—(MCT)-Few words sting like the ones that inform you that you’re being laid off — especially today, with jobs so hard to come by. If you’re a homeowner, the blow of a job loss can be even worse. In households with more than one wage earner, halving the monthly income can severely stretch a budget. And in households where there’s one breadwinner, having zero income can be devastating. A rainy day fund helps, but it’s important to craft a plan early about how you’re going to get through the rough patch. More people are facing this nightmare today: While the volume of subprime mortgages headed to foreclosure is falling, the volume of prime, fixed-rate mortgages defaulting is on the rise, according to statistics from the Mortgage Bankers Association. The MBA’s chief economist said that’s a result of rising unemployment.
“If you don’t have the prescribed three to six months income in the bank (now eight to 12 months due to how long it takes to replace that job), you’re really in deep trouble with some troubling decisions to make,” said Gail Cunningham, vice president of public relations for the National Foundation for Credit Counseling, in an e-mail. The NFCC is a national, nonprofit credit-counseling network. “We always advise people to pay their living expenses in full (this includes the house payment), followed by any secured debt (usually the car payment), and then the creditors. This will keep a roof over your head, food on the table, utilities paid, medicine in the cabinet, the kids at day care, etc. Once the money runs out, no one beneath that line gets paid. However, this assumes that there’s either some savings to fall back on or another income source,” she said. Between programs offered by the government and loan servicers, there are additional options available for today’s homeowners before they slip into foreclosure — if they speak up and ask for help. Or maybe the best answer is to start over again by cutting your losses and selling your home or pursuing a short sale if you owe more on your mortgage than your home is worth, those in the industry say. Whichever road you choose, it’s important to make contact with the lender or servicer as early as you know you could have a problem on your hands — and before you get behind on your payments. The MBA has a listing of contact information for lenders and servicers, including links to Web sites that give consumers a glimpse of some of the help that is offered. “A lot of customers call us very late in the process, and it becomes extremely difficult for us to explain everything in one shot and to resolve everything to their satisfaction,” said Sanjiv Das, CEO of CitiMortgage. Early communication is also stressed at Chase, said Christine Holevas, a bank spokeswoman. Remember also to be open and honest about your financial situation. You may think you’re bettering your chances for help by fudging on income information, for example, but it will in fact slow the process down; when income is verified and is found to be false, you’ll have to start over again, she said. For help, there are counselors who will sit down with you and sort through options and paperwork. Chase, for example, has counselors at 27 homeownership centers throughout the country to assist its borrowers, Holevas said. The U.S. Department of Housing and Urban Development has a list of approved housing counselors, or homeowners can connect with a counselor through the NFCC site. The solution that has gotten some of the most press this year has been the government’s Home Affordable Modification Program, which lowers monthly payments for borrowers based on debt-to-income ratios. Borrowers have to successfully complete a three-month trial period before the modification is finalized. Some homeowners are still confused about who is eligible, said Greg Hebner, president of MOS Group, a loss-mitigation service provider that works with lenders and servicers. For one, the program “requires a hardship, but does not require you to be delinquent,” Hebner said. “That is an important consumer misconception—if I’m still making my payments there is no help for me.” But what the government does require is some amount of monthly income within the household, said Drew Kessler, director of sales for Rand Mortgage, in New City, N.Y. In a dual-income household, for example, if one person loses his or her job, a modification is a possibility. With one breadwinner, it probably isn’t. “There has to be some viable source of income,” Kessler said. “If they lost wages, or found a new job, the banks will work with them.” Kessler’s advice: It might be best to accept a job that pays less instead of holding out for one that is best suited to your salary history in order to qualify for the adjustment. A borrower also has to be in danger of imminent default to be eligible, Holevas said. “They’re going to take a look at what your liquid assets are,” she said. If a borrower has more than seven months worth of payments in savings, he or she is not yet in imminent danger of falling behind and likely won’t be able to modify, she said. If you do qualify, it’s important to submit complete and accurate information in order for the application to move through the process without hiccups, Holevas added. If you don’t, “the back and forth tends to really slow things down,” she said. Remember, if you don’t qualify for the government’s program, many mortgage servicers have their own modification plans, Holevas said. All options can be examined if you start early enough. “Contact your lender when you think you’re going to have a problem,” she said, even if you’re a couple of months out from not being able to make your payment. For some homeowners, however, it might make more sense to sell their home and start fresh. Home sales are up recently in many markets, and if you’re living in a home that would be attractive to a first-time buyer eligible for the government’s first-time buyer tax credit, you might be able to take advantage and make a sale before the credit expires at the end of November, Kessler said. “Maybe sell now and get yourself in a smaller property, a less costly property,” he said. For homeowners who owe more on their mortgages than their homes are currently worth, short sales can be a viable option. In a short sale, the home is sold for less than the mortgage amount — with approval from the lender — and the difference is forgiven. Short sales usually take longer than a traditional sale, so borrowers might want to seek out a real-estate agent who is a certified default property expert in order to expedite the process, said Rich Rollins, president of National Quick Sale, a firm that works with the mortgage industry to get short-sale offers processed. His firm also helps match up investors with distressed properties, working out deals that allow the homeowners to give up ownership but rent their home, with the potential for them to “rent to re-own,” he said. He warns, however, to be careful of unsolicited offers of help from people claiming they can save your home, he said. “Be very wary of people who approach you for a profit or fee upfront,” Rollins said. “You’ve got to be diligent because there are people out there trying to steal your money,” he said. “You’re already in a precarious position. Don’t let people take advantage and take the money that you do have.” (c) 2009, MarketWatch.com Inc.
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Homeowners Save Energy, Cash with Tax Breaks
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Homeowners Save Energy, Cash with Tax BreaksBy Nirvi Shah  RISMEDIA, August 28, 2009-(MCT)-Bob Menconi enjoys his newly replaced air conditioner at his house. The A/C was replaced by a federal tax rebate. So your car isn’t a clunker? And you’re not buying a new home? But maybe your air-conditioning unit is on the fritz. Or your small business needs new equipment or office furniture. Perhaps you have always wanted solar panels. Then there is a tax break waiting for you, too.
Although there hasn’t been much hype surrounding these credits and deductions-all increased or expanded by federal stimulus bills passed this year and last year-retailers say sales of new, energy-efficient products are beating expectations in the midst of the recession. The reason, they say, is the prices are that good. In Davie, Fla., Menconi said he paid the same amount for a new air conditioner as he did for the one he bought about 20 years ago. The price for his new Ruud air conditioner: $6,295. But the combination of a rebate from Florida Power & Light, the manufacturer and a $1,500 credit on his taxes next year means he will pay $3,520. On top of that, he said, the first month, the family electric bill was $200 less than the previous month. The tax credit “pushed us in the direction to do it,” Menconi said. The old one “cooled the house, it was just not efficient. We wanted to catch it before it broke. At 20-plus years old, it was just waiting to bust.” Any air conditioner that qualifies for the tax credit will also definitely qualify for the FPL rebate, said Ralph Scanga, owner of Air Conditioning Excellence in Hollywood, because the federal energy efficiency requirement is more stringent than the power company’s. Federal stimulus laws allow homeowners to get a tax credit of 30% of the cost of energy efficient windows, doors, water heaters, air conditioners and furnaces, up to a maximum of $1,500. So if you max out the credit on your new A/C, you can’t use it for one of the other items. But if you don’t use any or all of the credit this tax year, you can buy a qualifying item and claim the credit or any remaining credit in 2010, said Amy McAnarney, an executive director at H&R Block’s Tax Institute. The items have to be installed by Dec. 31, 2010, for taxpayers to claim the credit. McAnarney also cautioned buyers not to take a company’s word that an item qualifies. She said to get a copy of the manufacturer’s statement. Another tax credit allows homeowners to get up to 30% of the cost of solar energy systems, such as solar water heating and solar power, small wind systems and geothermal heat pumps if they are installed by Dec. 31, 2016. It’s separate from the credit for windows, doors and air conditioners, so homeowners can use both. And there’s no cap on the amount of the credit, much to the liking of Miami Shores area homeowner Spike Marro. Marro spent about $54,000 to install solar panels and a battery back-up system for his three-bedroom home. But he got about $20,000 from a state solar energy rebate program, and will receive a further $10,200 as a credit on his taxes. That puts the final price tag for his system at around $24,000-and he will keep saving because his electricity use has shrunk to less than $100-and some months, less than $20. “In the long run it pays for itself,” he said. But to keep customers like Marro buying, the state needs to keep the rebates coming in addition to granting the tax credit, said Paul Farren, owner of The Energy Store in Hollywood. The program had run out of money until the state padded the fund for rebates with federal stimulus dollars. Water heaters are also a hot item because energy efficient water heaters might also qualify for more money back than just the tax credit, said John Lipka, owner of E.H. Whitson Plumbing in Hollywood. For example, he said, a natural gas tankless water heater, which can run from $1,600 to $2,000, would net a $450 rebate from gas company TECO and a 30% tax credit on the purchase price. That price is competitive with a traditional $800 tank water heater, he said. Some of the deductions and credits might be harder to come by than others though. Miami-Dade and Broward counties have strict codes for impact resistant windows, but many energy efficient windows don’t meet that code, said Susan Roeder, corporate affairs manager of Andersen Windows. But at least one company, PGT Windows, based in Venice, has a product that meets both counties’ impact resistant standards and the federal tax credit program’s energy efficiency rules, said Jim DiPietro, administrative director of Broward County’s Board of Rules and Appeals, which oversees building code enforcement in the county. “The products do exist,” said Rusty Carroll, the county’s chief structural compliance officer. “You just have to dig a little to find them.” Another obscure tax break: a bigger deduction for businesses that buy new equipment or furniture, IRS spokesman Mike Dobzinski said. Land, buildings and items like a new central air conditioner don’t count. Section 179 of the tax code has been around for a while, but the 2008 stimulus package doubled the amount deductible to a maximum of $250,000 and the 2009 law extended the deduction through the end of 2010. In this case, businesses could claim the entire deduction each year, he said. Still not enough? A whole new set of government gifts will arrive late this year or early next. That’s when Florida’s version of a Department of Energy rebate program for energy efficient appliances should be approved, said Jeremy Susac, director of the Florida Energy Office. The state is expecting at least $17.5 million in federal dollars it can issue in the form of rebates to buyers of the right kinds of dishwashers, washing machines, refrigerators, dryers, air conditioners and other items. But the Feds have to approve Florida’s list of appliances, and that might not happen until later this year. Think carefully before you run out and buy a new fridge right away, he said. It’s unclear whether the state will be able to issue rebates for items bought before the federal government approves Florida’s plan. “We’ve asked that question,” he said. “Certainly, save the receipt.” |
Appraisals Roil Real Estate Deals
Conservative Approach to Home Pricing Makes It Harder to Refinance or Sell
By JAMES R. HAGERTY and RUTH SIMON Appraisals are becoming one of the biggest obstacles for Americans trying to sell their homes, refinance their mortgages or tap into home-equity credit lines. During the housing boom, appraisers often complained of pressure from lenders to inflate home-value estimates to justify dubious mortgage lending. Now, some people in the mortgage business -- and some borrowers -- say the pendulum has swung too far the other way. Patti Sanders, an aerospace engineer in Oakdale, Calif., knew prices were down sharply but said she was "flabbergasted" recently when her 3,100-square-foot Victorian home was appraised at $250,000, compared with $635,000 assayed two years earlier. The new estimate prompted a lender to reject her application for a refinancing that would have lowered her mortgage payments about $400 a month. Patti Sanders The Sanders home in Oakdale, Calif., which has been appraised for much less than the owner feels it is worth. Lenders burned by huge losses from defaults now are pressing appraisers to be more conservative. And appraising itself is more difficult with home prices fluctuating rapidly and transactions few and far between in some markets; sale prices from a few months back may no longer reliably indicate the value of nearby homes. "If history is no longer valid, then it is very difficult to get good and accurate values," said Mark Rattermann, an appraisal trainer in Indianapolis. John Rooney, an appraiser in Phoenix, said about half the recent appraisals he has done for people seeking to refinance have been too low to allow it. Applying to other lenders is likely to cost borrowers $350 or more for another appraisal. Valuation disputes are also throwing a monkey wrench into some sales. Chris Rubis, a real-estate agent in Fairfield County, Conn., said one client recently accepted an offer of about $750,000 on a fourbedroom, four-bathroom home. But the appraisal, which was done by someone outside the local area, came in last week at $700,000. That might require the buyer to come up with more cash for a down payment. "It's opened a whole new door for negotiation," Mr. Rubis said. Appraisals Roil Real Estate Deals - WSJ.com Page 1 of 3 http://online.wsj.com/article/SB124450388959795613.html 6/9/2009 Credit lines are also vulnerable. J.P. Morgan Chase & Co. recently froze one customer's home-equity line of credit because, the bank said, his Manhattan apartment -- a 2,650-square-foot three-bedroom, two-bedroom duplex with a terrace appraised at $1.475 million in 2005 -- was worth just $600,000. Chase told the borrower, who asked not to be identified, that the lower credit line would remain in effect until a new appraisal could demonstrate the value was much higher than $600,000. The borrower then paid for a new appraisal that pegged the property at $1.8 million. "To protect borrowers and the bank, we use an automated appraisal system on our portfolio," a Chase spokesman said. "The system has proven effective. However, we encourage customers who think that the valuation is too low to order an appraisal and we will reimburse them...if it supports their claim." Chase will restore this borrower's full credit line, he added. In some cases, lenders are requiring that appraisals be based on sales closed within the past three months rather than the prior six-month norm, appraisers said. Some lenders are also asking for comparisons with at least one sale in the past 30 days. Taking their cues from lenders, appraisers are avoiding any estimate that could be deemed excessive. "I don't want to stick my neck out," said Mr. Rooney, the Phoenix appraiser. The situation became more complicated on May 1 when the appraisal industry adopted the Home Valuation Code of Conduct. These new rules apply to mortgages that will be owned or guaranteed by government-backed mortgage companies Fannie Mae and Freddie Mac, which recently have accounted for about two-thirds of all new home loans. Fannie and Freddie agreed to the code last year after New York Attorney General Andrew Cuomo accused them of failing to ensure that appraisers were shielded from pressure to inflate their estimates. The code bars loan officers, mortgage brokers or realestate agents from any role in selecting appraisers. This has encouraged lenders to outsource the selection to appraisal-management companies, or AMCs, which take a sizable cut of the appraisal fee. As a result, appraisers are under pressure to "do it faster, do it cheaper," said Bill Garber, a spokesman for the Appraisal Institute, a trade group. Debbie Huber, a Las Vegas appraiser for 20 years, said she has turned down requests from AMCs that offer to pay 50% to 70% of her standard fee and require that the work be completed in as little as 48 hours. Some appraisers said AMCs settle for appraisers who have little experience or live far from the homes they evaluate. John Simms of Peoria, Ariz., said he often gets assignments more than 100 miles away in neighborhoods he doesn't know well. The upshot, appraisers said, is less accuracy and certainty about a property's actual value. The code also permits lenders to own stakes in AMCs. That means lenders can profit from a service they require borrowers to buy -- and that protects the lenders themselves. Appraisal-management companies said they need a big cut of fees to cover their costs and ensure quality. Jeff Schurman, executive director of the Title/Appraisal Vendor Management Association, said AMCs typically take about 40% of the fees and appraisers get the rest. Mr. Schurman said he has seen no evidence that AMCs' practices lead to lower quality. While the new code is likely to prevent some abuses, it also removes flexibility. For instance, loan officers or mortgage brokers used to be allowed to discuss specific home values with appraisers, who sometimes would advise against ordering an appraisal if it seemed unlikely to be high enough to warrant a loan. That would save borrowers money. The new regime also results in higher costs in at least some cases. Mitch Ohlbaum, a Los Angeles mortgage broker, said one client was recently charged $500 for an appraisal that would have cost about $300 before the code took effect. Another source of frustration: If a borrower is happy with an appraisal ordered by one lender but decides to seek better loan terms from another, a new appraisal will likely be needed. The Mortgage Bankers Association said it is looking at ways to make appraisals more "portable" from one lender to another. |
FHA Is Having Busiest Year Ever
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FHA Is Having Busiest Year Ever
About 25 percent of all new mortgages are backed by the Federal Housing Administration in what will probably be the busiest year yet for the federal agency.
Applications for FHA mortgages rose 50 percent from last October through mid-August 2009 and approvals for purchases, refinancings, and reverse mortgages rose 70 percent to 1.67 million.
FHA loans "are one of the most important sources in this market," says Mark Zandi of Moody's Economy.com. "Without FHA, the housing slide would be much more severe. We wouldn't be talking about a recovery now. We'd still be talking about a crash."
Some analysts are concerned about the risk the FHA has taken on, but others point out that borrowers with FHA-insured loans now have an average credit score of 690, compared to 630 two years ago. Borrowers with a credit score below 500 must come up with a 10 percent down payment.
Source: USA Today, Stephanie Armour (09/02/2009)
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First Time Homebuyers Dominate Market
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First-Time Home Buyers Dominate Real Estate Market RISMEDIA, August 27, 2009-With the first-time home buyer’s tax credit in full effect, younger buyers are taking the opportunity to enter the real estate market and the New Jersey real estate market has seen its fair share of first-time buyers enter the playing field recently. Across the state, agents are finding that they must consider the first-time home buyers’ unique needs and adapt to this new type of client. “Those first-time home buyers who’ve entered the housing market- drawn by the perfect storm of historically low interest rates, attractive prices and the $8,000 tax credit- expect much more from their Realtors,” said Dave Liniger, Co-Founder of RE/MAX International. “They want access, they want answers, and they want ongoing communication through text messaging. They just want to know, ‘How fast can I get the information?’ and ‘How available are you?’”
Part of an ‘instant-gratification’ and Internet generation, first-time home buyers are tech savvy and educated and they don’t want to wait for answers. They are confident and eager to become home owners. “Making a point to notice how certain generations and certain clients like to communicate is vital. You have to adapt, you have to anticipate, and you have to be ok doing business on the phone, through text message, through email, whatever your client wants,” says Anita Jacobus of RE/MAX at Barnegat Bay in Toms River. First-time home buyers are being drawn to the housing market because of low interest rates, attractive prices, a huge volume of inventory, and the tax credit. Not only do they have options and room to negotiate, but they have $8,000 that they can use to cover closing costs or to just get back come tax time. “First-time home buyers are a large percentage of our clients right now and we’re having the best spring in three years. They are creating a domino effect in the real estate market, purchasing homes, allowing the sellers of those homes to move up or to downsize if they choose, and are stimulating the furniture and home improvement industry as well,” said Richard Wieland of RE/MAX First Realty in East Brunswick. To qualify for the $8,000 tax credit, buyers must meet the first-time home buyer criteria and they must be a first-time home buyer. They qualify if they have not owned a principle residence in the last three years and must close on their home purchase before November 30, 2009. As long as they live in the home for three years, they never have to repay the tax credit.
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Positive Signs: Home Prices on an Upswing in Second Quarter 2009
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Positive Signs: Home Prices on an Upswing in Second Quarter 2009 RISMEDIA, August 26, 2009-Data through June 2009, released by Standard & Poor’s for its S&P/Case-Shiller Home Price Indices, the leading measure of U.S. home prices, show that the U.S. National Home Price Index improved in the second quarter of 2009. The S&P/Case-Shiller U.S. National Home Price Index- which covers all nine U.S. census divisions- recorded a 14.9% decline in the 2nd quarter of 2009 versus the 2nd quarter of 2008. While still a substantial negative annual rate of return, this is an improvement over the record decline of 19.1% reported in the 1st quarter of the year. The 10-City and 20-City Composites recorded annual declines of 15.1% and 15.4%, respectively. These are also improvements from their recent respective record losses of -19.4% and -19.1%. “For the second month in a row, we’re seeing some positive signs,” says David M. Blitzer, Chairman of the Index Committee at Standard & Poor’s. “The U.S. National Composite rose in the 2nd quarter compared to the 1st quarter of 2009. This is the first time we have seen a positive quarter-over-quarter print in three years. Both the 10-City and 20-City Composites posted monthly increases, as did most of the cities. As seen in both seasonally adjusted and unadjusted data, there are hints of an upward turn from a bottom. However, some of the hardest hit cities, especially in the Sun Belt, show continued weakness.” As of the 2nd quarter of 2009, average home prices across the United States are at similar levels to what they were in early 2003. From the peak in the second quarter of 2006, average home prices are down 30.2%. The 10-City and 20-City Composites posted their second consecutive monthly increases. Both indices were up 1.4% in June over May, and up 0.5% in May over April. Eighteen of the 20 metro areas saw improvement in their annual returns compared to those of May. Looking at the monthly data, the same 18 metro areas reported positive returns in June. In spite of the recent positive data, the overall numbers remain weak, with all metro areas and the two composites posting negative annual returns, and 15 out of the 20 metro areas reporting double digit annual declines. While not alone, Las Vegas and Detroit continue to be two markets that are struggling severely. These are the only two markets that fell in June and saw deterioration in their annual rates of return. Since their relative peaks they have fallen 54.3% and 45.3%, respectively. More upbeat news is seen in the monthly data across other markets; Dallas and Denver have reported four consecutive months of positive returns. In addition to the two composites, 13 of the MSAs reported positive monthly returns for June that were greater than +1.0%. |
Signs the Housing Market is Changing
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Overlooked Signs the U.S. Housing Market is TurningOverlooked Signs the U.S. Housing Market is Turning  [1]RISMEDIA, June 12, 2009-(MCT)-In the Sacramento Delta suburbs east of San Francisco - where home prices soared and fell as viciously as anywhere in the country - a housing market rebound is feverishly under way.
A 1,600-square foot rancher listed for $179,000 - after last selling for $425,000 in 2004 - drew multiple offers last month with a high of $210,000 in cash. The topper: The property was a “short sale” whose owner needs lender approval to sell for less than the mortgage owed-and which buyers wouldn’t touch just three months ago. “My phone was ringing off the hook, my voice mail was on overload and people were coming into the office receptionist saying they couldn’t reach me,” said Christy Howard, a Coldwell Banker Coon and McCreary agent who listed the Antioch house. “Everyone was waiting for the bottom, and the problem is they waited to long, because the bottom has already come and gone.” Spurred by markdowns up to 80% from market highs, first-time buyers and investors both American and foreign descended en masse in the last three months on San Francisco’s hardest-hit hinterlands as Wall Street and the economic climate improved. They’re picking clean the Delta region’s banked-owned inventory as soon as properties hit the market and are engaged in unprecedented bidding wars even on short sales. The panicked buying - fueled by buyers’ fear they’ll miss out on fire-sale prices - belies the doom-and-gloom evoked by recent reports of rising mortgage delinquency rates and foreclosure activity. It is one of several overlooked signs the U.S. housing-market turnaround has started in the nation’s hardest-hit markets, which is critical to driving an overall recovery: - After spending most of the 1990s in the $250,000 range, the median-priced home that was sold in the seven-county San Francisco area rose to a staggering $850,000 by its May 2007 peak. It since fell to a low of $399,000 in February - a 53% drop in just 21 months - before posting its first monthly gain in March, albeit a 1% uptick. The median is expected to continue rising at a healthy clip in months ahead since it’s now at the level of nine years ago, before the bubble began inflating. - California’s statewide inventory of unsold homes - based on the number on the market divided by the present monthly sales rate - stood at a 15.2 months supply in February, 2008. That figure was down to 5.8 months in March, near the historic average. - At roughly 22,000 units, Las Vegas’ inventory is not far off its recent record high. Yet total sales closed in March showed flourishing demand, the fourth best on record. That monthly record - set during the height of the boom - is expected to be broken this summer. “Things have been looking up but it’s going unnoticed,” says Forrest Barbee, a board member with the Greater Las Vegas Association of Realtors and a broker for Prudential American Group Realtors. “It’s just going to take the data a little longer to catch up with reality.” Listen to one analyst’s thoughts about housing having hit bottom. Adds Rick Sharga, senior vice president of RealtyTrac, which compiles home sales and foreclosure data: “We’ve overshot the market in places like Las Vegas and Arizona in terms of fair value and buyers are bidding prices up again on many properties. The challenge is going to be whether there is enough financing to eat up the inventory that’s yet to come.” The specter of rising foreclosures - born now of the recession rather than just overleveraged subprime borrowers - is the wild card in future health of the U.S. housing market and the economy by extension. Read about the difficulty borrowers are having with mortgage modifications. The number of U.S. homeowners behind on payments or in foreclosure shattered the record in the first quarter, the Mortgage Bankers Association reported last week. Nearly one in eight mortgage holders were either delinquent or in the foreclosure process - and prime mortgages in trouble for the first time outnumbered subprime loans on a percentage basis. Read more on the record jump in foreclosures in the first quarter. Yet the number of pending sales of existing U.S. homes took a surprising upswing in April, rising 6.7% in the biggest monthly gain in more than seven years, the National Association of Realtors reported Tuesday. That increase lags the 9.2% jump in October 2001, but that spike owed to buyers temporarily putting off home shopping following 9/11. See the latest data on pending home sales. And in an overlooked report that belies the first-quarter delinquency numbers, defaults on privately insured mortgages - where borrowers are more than 60 days behind - fell 3% in April and were down 24% from a record 106,482 in February, the trade group Mortgage Insurance Companies of America reported Friday. Most important for gauging the strength of the nationwide market is how conditions are improving in the most-depressed regional markets. With those markets now stabilizing, banks are no longer anxious to dump real-estate owned properties, as houses in their foreclosure portfolios are called, fearing they’ll get appreciably less three months from now for their foreclosed properties. As a result, they’ll be more judicious about the pace at which they release foreclosures onto the market. The new goal: To maximize the value of supplies in hand rather than unload it helter-skelter and torpedo the housing market like they did while they were shell-shocked by the devastation they’d wrought. With the banks themselves now somewhat more stable, they’ll also be less likely to want to part with their “toxic assets” knowing the most-scorched, still-serviceable mortgages will be the most valuable on a credit-risk markup once the economy recovers. In fact, the price stabilization in the most-depressed U.S. markets will allow a clearer valuation of the toxic assets we now all hold by virtue of bank bailouts - a modicum of certainty that will hasten the overall recovery. Homeowners in most of America know by their own property’s value that the spike in U.S. median home values was driven in considerable measure by soaring prices and volume in major markets, especially in California, Florida, Nevada and Arizona. By virtue of their climates and economic-growth rates, those four states have been on the extremes of the U.S. boom-and-bust housing cycle since the 1950s. You can’t discount how critical an upturn in those states will be, considering they account for 46% of foreclosures nationwide. If foreclosures there are more quickly consumed as they’re starting to be now - fueled in part by foreign buyers who recognize their value - we’ll all reap a return on our bailout money a lot faster. “The banks are getting smarter and realizing that if they don’t sell it in a short sale, they lose more money going the foreclosure route,” Barbee said. Adds Sharga: “The banks will be very particular and thoughtful about how they’ll release new foreclosures, because they know now how flooding the market will have a disastrous effect.” That, and if the chastened lenders would just swallow crow and pony up for rights to an encouraging Beatles song to play on their delinquent-payers’ hold line: “We can work it out.” Posted By susanne On June 11, 2009 @ 3:08 pm In Business Outlook, Today's Marketplace, Today's Top Story | Comments Disabled ©2009, MarketWatch.com Inc.
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