Category: Real Estate

Mortgage Rates Hit Another Low for 2017 | Realtor Magazine

Interest rates for a 30-year fixed-rate mortgage took another dip this week, setting a new low for 2017, Freddie Mac reported in its weekly mortgage market survey.

“The 30-year mortgage rate fell 2 basis points to 3.88 percent this week,” says Sean Becketti, Freddie Mac’s chief economist. “However, the majority of our survey was conducted prior to Tuesday’s sell off in the bond market, which drove Treasury yields higher. Mortgage rates may increase in next week’s survey if Treasury yields continue to rise.”

Freddie Mac reports the following national averages with mortgage rates for the week ending June 29:

• 30-year fixed-rate mortgages: averaged 3.88 percent, with an average 0.5 point, dropping from last week’s 3.90 percent average. Last year at this time, 30-year rates averaged 3.48 percent.
• 15-year fixed-rate mortgages: averaged 3.17 percent, with an average 0.5 point, holding the same as last week. A year ago, 15-year rates averaged 2.78 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.17 percent, with an average 0.5 point, rising from last week’s 3.14 percent average. Last year at this time, 5-year ARMs averaged 2.70 percent.

5 First-Year Mistakes New Owners Make | Realtor Magazine

Homeowners can make a lot of mistakes during that first year in homeownership, especially when eagerness can sometimes lead to ignorance. HouseLogic recently featured several of the most common and costly missteps homeowners most often make in their first year, including:

1. Always going with the lowest bid.

Homeowners may be smart about gathering multiple bids when, say, that HVAC system needs repairs. But they may be tempted to always go with the lowest price. HouseLogic recommends ensuring that all bids include the same project scope. At times, one bid may be less expensive but may not include all of the actual cost or details of the project, or the contractor may lack the experience to do a good job.

2. Submitting small insurance claims.

Owners shouldn’t be in a rush to submit an insurance claim every single time something goes wrong. Filing a claim or two, particularly over a short time, can prompt an increase to your premium. Amy Bach, executive director of United Policyholders, says it’s better to pay out of pocket than to submit claims that are less than your deductible. “You want the cleanest record possible,” Bach says. “You want to be seen as the lowest risk. It’s like a driving record—the more tickets you have, the more your insurance.”

3. Failing to consider the ROI of home remodeling improvements.

Homeowners shouldn’t believe that just because they see the value in an upgrade, they will get an added market value for it when they go to sell. Owners can over-upgrade their home. “It’s easy to build yourself out of your neighborhood” and invest more than you can make at resale, says Linda Sowell, a real estate professional in Memphis, Tenn. Homeowners should check with a real estate professional or appraiser before they start a project to learn whether the improvement will help boost their property value.

4. Tossing receipts and paperwork.

Homeowners need to be good record-keepers. HouseLogic recommends keeping home improvement receipts, contracts, and manuals in a three-ring binder with clear plastic sleeves. Or they can photograph documents and and store them on a computer or in the cloud.

5. Ignoring seemingly minor items on an inspection report.

An inspection report can make a great first to-do list once moving in, HouseLogic says. Seemingly minor issues, like loose gutters or uninsulated pipes, may eventually cause bigger damage if not repaired soon. New owners should consult a contractor and make an informed decision about what needs to be fixed right away and what can wait.

More Lenders Easing Up Credit Standards | Realtor Magazine

More mortgage lenders are reporting that they have lowered their credit standards and expect to continue to do so in the coming months, according to Fannie Mae’s second-quarter 2017 Mortgage Lender Sentiment Survey.

The share of lenders reporting they have eased mortgage credit standards over the prior three months has gradually been growing since the fourth quarter of 2016. Additionally, the number of lenders who say they plan to ease credit standards for Fannie Mae and Freddie Mac loans, non-GSE eligible, and government loans has reached or surpassed survey highs in the second quarter, the survey finds.

“Expectations to ease credit standards climbed to survey highpoints in the second quarter as more lenders reported slowing mortgage demand and increasing concerns about competition from other lenders,” says Doug Duncan, Fannie Mae’s chief economist. “Lenders cited additional contributing factors such as diminishing compliance concerns and more support from the GSEs, including clarification on representations and warranties and tools that provide greater certainty during the loan underwriting process. Easing credit standards might also be due in part to increased pressure to compete for declining mortgage volume.”

For the third consecutive quarter, the number of lenders expecting a profit decrease within the next three months was higher than those with an expected profit increase, according to Fannie’s survey. More lenders say they are concerned about increased competition from other lenders for business.

Spike in Renters Looking to Buy | Realtor Magazine

A surge of renters are ready to make the leap into homeownership. According to a new TransUnion analysis on the U.S. rental market, 55 percent of those who actively shopped for a mortgage in the first quarter of 2017 were non-homeowners and primarily renters. This is up from 50 percent in the first quarter of 2016 and 45 percent in the first quarter of 2015.

“The rental market has seen sustained growth for the last several years, but occupancy rates have flattened from their peak in the second quarter of 2016,” says Mike Doherty, senior vice president of TransUnion’s rental screening solutions group.

The report shows that millennials’ interest in homeownership is continuing to grow, with 29 percent of non-homeowners who have shopped for a mortgage in 2017 coming from the millennial age range.

The shifting preference from renting to homeownership will affect brokers and agents who work in property management. “This new uptick in mortgage shopping could be a precursor to further declines in occupancy, which would impact rent growth—and ultimately, revenue—for multifamily property owners,” Doherty says.

Brokers and agents who work with or manage rental properties should consider new services and amenities to attract tenants, Doherty says. According to a previous TransUnion survey, 51 percent of renters “would be more likely to choose a property if they knew their landlord would report their rental payments to credit bureaus,” as 79 percent of survey respondents said they prioritize rental payments above all other monthly bills.

How To Hire A Contractor | Questions To Ask A Contractor | HouseLogic

It’s the contractor you pick that makes — or breaks — your remodeling project. Finding the right contractor for your job will determine the quality and timeliness of the work, and the amount of emotional and financial stress you’ll have to deal with.

To make sure you’re getting the best work from a contractor, here are five questions to ask the candidates.

Tip: Listen for how prospective contractors answer your questions. Difficulty communicating now means difficulty communicating on the job later.

1. Would You Please Itemize Your Bid?

Many contractors prefer to give you a single, bottom-line price for your project, but this puts you in the dark about what they’re charging for each aspect of the job.

For example, if the original plan calls for wainscot in your bathroom, but you decide not to install it, how much should you be credited for eliminating that work? With a single bottom-line price, you have no way to know.

If you get an itemized bid, it’ll show the costs for all of the various elements of the job, including:

• Demolition and hauling trash
• Framing and finish carpentry
• Plumbing
• Electrical work
• HVAC
• Tiling or other floor covering installations
• Lighting fixtures
• Drywall and painting

That makes it easier to compare different contractors’ prices. If you need to cut the project costs, you can easily figure your options. Plus, an itemized bid becomes valuable documentation about the scope of your project, which may eliminate disputes later.

Contractors shouldn’t give you a hard time about itemizing their bids. If they resist, it’s a red flag for sure. 

2. Is Your Bid an Estimate or a Fixed Price?

Some contractors treat their bids as estimates, meaning bills could wind up being higher in the end. Be sure to request a fixed price bid instead.

If a contractor says he can’t offer a fixed price because there are too many unknowns about the job, then try to eliminate the unknowns. For example, have him open up a wall or examine a crawl space.

If you can’t resolve the unknowns, have the project specs describe only what he expects to do. If additional work is needed, you can do a change order — a written mini-bid for new work. 

3. How Long Have You Been Doing Business in This Town?

A contractor who’s been plying his trade locally for five or 10 years has an established network of subcontractors and suppliers in the area and a local reputation to uphold. That makes them a safer bet than a contractor who’s either new to the business or planning to commute to your job from 50 miles away.

Ask for:

• A business card with a nearby address — not a P.O. box.
• References from one or two of his earliest clients. This’ll help you verify he hasn’t just recently hung his shingle.

4. Who Are Your Main Suppliers?

Contractors are networked with their suppliers. You can tap into information on your contractor’s reliability and level of quality by talking to proprietors of:

• Tile shops
• Kitchen and bath showrooms
• Lumber yards
• The pro desk at your favorite home improvement center

Ask about a contractor’s professional reputation, whether he has left a trail of unhappy customers in his wake, if he’s reliable about paying his bills — and whether he’s someone you’ll want to hire.

Your contractor should have no qualms about telling you where he gets his materials if he’s an upstanding customer.

5. I’d Like to Meet the Job Foreman — Can You Take Me to a Project He’s Running

Many contractors don’t actually swing hammers. They spend their days bidding new work and managing their various jobs and workers. That makes the job foreman — the one who’s working on your project every day — the most important member of your team.

Meet the foreman in person and see if his current job is running smoothly. Asking to meet the foreman on the job gives your general contractor an incentive to assign you one of his better crews, since you’re more likely to hire him if you see his A Team.

If your contractor says he’ll be running the job himself, ask whether he’ll be there every day. He’ll want to give you a positive response — something you can hold him to later on.

As home prices climb, what buyers need to remember

CBS NEWS – MONEYWATCH If it seems like home prices are back to trending ever higher, that’s because they are. The median price of an existing home rose to a record $252,800 in May. That’s naturally prompting many people to wonder if this is housing bubble 2.0?

It’s probably not. Despite the new records for prices, they aren’t likely to fall in the spectacular fashion as they did starting in 2007. The consensus forecast is that real estate prices will likely grow over the next several years at a 1 percent to 4 percent annual rate, thanks mostly to healthy labor markets, low mortgage rates and tight inventories of available homes for sale.

Still, buyers today would be well served to avoid the mistakes so many Americans made during last decade’s home price bubble. Here are a few of those hard lessons that today’s homebuyers should keep in mind.

The key to making a good buying decision is to have good information. And in today’s market, buyers need more information than ever before.

Start with research online, and do lots of it. Sites such as Zillow and Realtor.com put the information you’ll need right on your smartphone or tablet. Make a note of the median and average selling price of homes in your area, how much homes in your price range have appreciated in value over the past several years and how fast homes sell once they hit the market.

Also, visit a local real estate agent and ask her to compare the information you come up with from your searches.

You’ll also want to know the home price-to-income ratio in your local market. If the median home price is $240,000 and the median income is $80,000, the ratio is three, which is reasonable.

But if the median home price in your local market is $450,000 and the median income is $80,000, that ratio is over five. That’s an indication that home prices relative to incomes may be too high and are unsustainable, may stagnate or head lower.

Owning a home involves taking on a substantial amount of debt and responsibility, which could mean adjusting your lifestyle, especially if you’ve been renting. How much house you can buy depends on two things: how much you have for a down payment and your income. Banks, mortgage lenders and realtors will offer to run your numbers and tell you what you could afford to buy and the mortgage you could carry.

Their estimates are usually based on two important ratios.

The housing expense, or front-end, ratio shows how much of your gross monthly income would go toward your housing costs. As a general guideline, your monthly payment — including loan principal, interest, real estate taxes and homeowner’s insurance — shouldn’t exceed 28 percent of your gross monthly income.

To calculate your housing expense ratio, multiply your annual salary by 0.28 and divide by 12. The answer is the maximum monthly housing expenses you should incur. So if your annual income is $70,000, you should be able to pay about $1,650 in monthly housing costs and thus afford to buy a home at the current median price of $252,800.

The total debt-to-income, or back-end, ratio shows how much of your gross income would go toward all your debt obligations, including mortgage, car loans, child support and alimony, credit card bills, student loans and condominium fees. In general, that amount shouldn’t exceed 36 percent of your gross income.

To calculate your debt-to-income ratio, multiply your annual salary by 0.36 and divide by 12. The answer is your maximum allowable monthly debt payments.

Finally, factor in costs for maintenance and repairs before you buy. A general rule is that total housing expenses shouldn’t exceed 25 percent of your gross income. With about a quarter of your gross income going toward home expenses and another 25 percent going to income taxes (federal, state and Social Security), you have just 50 percent of your income to live on, save for retirement, kids’ education, etc.

Clearly, that math didn’t work for a lot of homebuyers in the 2000s, so be sure it doesn’t happen to you now.

Low-Maintenance Landscaping Hacks | Realtor Magazine

Help your clients give the illusion of a perfectly manicured yard with these easy steps for sprucing up greenery from HouseLogic.

Create accents with rocks. They don’t require the same level of care, water, and sunlight that grass and plants do. Rocks are good tools for forming pathways, adding design elements, or creating dry creek beds. Spots in the yard that collect water can be kept under control with rocks, which aid water runoff.

Use colorful objects instead of flowers. Benches, birdbaths, pots, and chairs can all be used to add color to your landscape without planting flowers, which require regular maintenance. Try adding a couple of yellow ceramic flower pots—without the flowers—for decoration.

Have a rain garden. Turn that mushy chunk of yard into a rain garden—a small wetland area that looks a lot better than soggy grass. Comprised of gravel, sand, and native plants, these rainfall gathering spaces are almost maintenance-free: no mowing, watering or major weeding needed. Rain gardens help reduce stormwater runoff into the sewer system and instead utilize the water for plant life.

Build a platform deck. Without steps or railings, a platform deck is an easy yard booster. Ipe, cedar, redwood, and other composites make for long-lasting, low-maintenance hardwoods, according to Tomi Landis, president of Landis Garden Design in Washington, D.C. Landis also challenges how homeowners use their decks. “Will you be using it in the morning while having coffee?” Landis says. “If so, it should be oriented to the east. If it’s mainly for dining out in the evening and having cocktails, it should be facing west.”

Plant tall grass. Tall grasses grow quickly and don’t need much maintenance. These include switchgrass, bluestem, muhly, and fountaingrass. The taller grasses soak up water, serve as an organic privacy shade, and can even be used as mulch.

12M Consumers May Get Credit-Score Boost | Realtor Magazine

The three largest credit-reporting agencies will begin cleaning up credit reports in July, which could help lift the credit scores of about 12 million consumers.

In a survey by the Federal Trade Commission, one in four people say they spot errors in their credit reports, most commonly concerning tax liens and civil judgments. Up to half of tax lien data on a credit report is inaccurate or incomplete, says Eric J. Ellman, senior vice president for public policy and legal affairs at the Consumer Data Industry Association. Civil judgments—which means a court has ruled a person owes money—also tend to be ripe with errors or omissions on a credit report, experts say. Consumers can dispute the errors, but the process can be cumbersome.

Beginning July 1, Equifax, Experian, and TransUnion will automatically exclude tax lien and civil judgment records from credit reports if they are missing a person’s name, address, Social Security number, or date of birth. Claims that do contain this key information, however, will remain on credit reports.

Six percent of Americans with a credit score—or 12 million— likely willsee their score go up once the new policy takes effect. About 11 million could see an increase of about 20 points. “A lot of people who have liens or judgments against them already have crummy credit to begin with,” says Keith Gumbinger, vice president at HSH.com, a mortgage resource website. “A 10- or 20-point increase isn’t going to make a difference for a lot of borrowers.”

But borrowers who are on the cusp of qualifying for a home loan may stand to benefit the most. For example, Gumbinger says, a would-be buyer with a credit score of 570 who receives a 10-point uptick may be able to qualify for an FHA loan. FHA loans require a minimum 580 credit score

NAR: Home Prices Zoom to New High | Realtor Magazine

Housing shortages propelled the median sales price to a new high in May, the National Association of REALTORS® reported Wednesday. But that did not appear to spook home buyers as demand remained high. The median days on the market dropped to a record low in May as homes sold faster, NAR reports.

Overall, existing-home sales—which include completed transactions for single-family homes, townhomes, condos, and co-ops—rose 1.1 percent month over month in May to a seasonally adjusted annual rate of 5.62 million. Existing-home sales are now 2.7 percent higher than a year ago. Every region of the U.S. except for the Midwest saw an uptick in sales last month.

“The job market in most of the country is healthy and the recent downward trend in mortgage rates continues to keep buyer interest at a robust level,” says Lawrence Yun, NAR’s chief economist. “Those able to close on a home last month are probably feeling both happy and relieved. Listings in the affordable price range are scarce, homes are coming off the market at an extremely fast pace, and the prevalence of multiple offers in some markets are pushing prices higher.”

The median existing-home price for all housing types rose to $252,800 in May. That surpasses last June’s peak of $247,600, NAR reports.

“That is not sustainable in the long run,” Yun says. “Current demand levels indicate sales should be stronger, but it’s clear some would-be buyers are having to delay or postpone their home search because low supply is leading to worsening affordability conditions.”

Indeed, housing shortages continue to be a thorn in the side of the industry. Total housing inventory ticked up just 2.1 percent to 1.96 million existing homes available for sale in May. Inventories are 8.4 percent lower than a year ago. Unsold inventory is at a 4.2-month supply at the current sales pace.

Properties sold fast in May. Fifty-five percent of homes sold in May were on the market for less than a new month, a new high, NAR reports.

Nationwide, properties stayed on the market for a median of just 27 days in May, the shortest time frame since NAR began tracking such data in May 2011. Short sales were on the market the longest at a median of 94 days, foreclosures sold in 48 days, and nondistressed homes took 27 days.

“With new and existing supply failing to catch up with demand, several markets this summer will continue to see homes going under contract at this remarkably fast pace of under a month,” Yun says. The metro areas where listings stayed on the market the shortest amount of time in May, according to inventory data from realtor.com®, were:

• Seattle-Tacoma-Bellevue, Wash.: 20 days
• San Francisco-Oakland-Hayward, Calif.: 24 days
• San Jose-Sunnyvale-Santa Clara, Calif.: 25 days
• Salt Lake City: 26 days
• Ogden-Clearfield, Utah: 26 days.

Buying Is Now 33.1% Cheaper Than Renting in the US | Keeping Current Matters

The results of the latest Rent vs. Buy Report from Trulia show that homeownership remains cheaper than renting with a traditional 30-year fixed rate mortgage in the 100 largest metro areas in the United States.

The updated numbers actually show that the range is an average of 3.5% less expensive in San Jose (CA), all the way up to 50.1% less expensive in Baton Rouge (LA), and 33.1% nationwide!

Other interesting findings in the report include:

• Interest rates have remained low and, even though home prices have appreciated around the country, they haven’t greatly outpaced rental appreciation.
• With rents & home values moving in tandem, shifts in the ‘rent vs. buy’ decision are largely driven by changes in mortgage interest rates.
• Nationally, rates would have to reach 9.1%, a 128% increase over today’s average of 4.0%, for renting to be cheaper than buying. Rates haven’t been that high since January of 1995, according to Freddie Mac.

Bottom Line

Buying a home makes sense socially and financially. If you are one of the many renters out there who would like to evaluate your ability to buy this year, meet with a local real estate professional who can help you find your dream home.