Category: Real Estate

3 Common Mistakes When Buying for the First Time | Realtor Magazine

First-time buyers are finding the housing market challenging to break into. On average, they have to put in 3.8 offers before their offer is accepted, which is higher than the 2.5 offers that repeat buyers typically make, according to a new survey of about 2,000 U.S. adults from NerdWallet, a personal finance website.

Further, 56 percent of first-time buyers say they offered more than the asking price before they were successful in their home purchase. For comparison, 35 percent of repeat buyers say they offered more than the asking price.

“It shows that things are tough out there for first-time home buyers,” says Holden Lewis, home expert at NerdWallet. “There’s just more competition for those homes. There’s not a whole lot of them out there in a lot of markets, and there’s a lot of buyers who are competing for those homes.”

As the newbies in the market too, first-time buyers may be prone to some mistakes, such as lowballing initial offers or failing to shop around for their mortgage, Lewis says.

Here are three common mistakes first-time buyers often make:

Failing to shop around for a mortgage: NerdWallet’s research found that 50 percent of all buyers applied to just one lender for their mortgage. But that could be leaving money on the table. Shopping around can save you, on average, $430 in interest in the first year for those with a fixed-rate $260,000 mortgage, NerdWallet’s study finds. “That savings would accumulate and compound for every year that they had the loan,” Lewis told CNBC.

Believing the 20 percent down payment myth: Lewis says another common rookie mistake is believing you have to put down more of a down payment than you really do. Seventy-one percent of current homeowners say they made down payments of 20 percent or less, according to U.S. Census Bureau data (of those, 23 percent of buyers put down between 11 to 20 percent; 16 percent put down 6 to 10 percent; and 32 percent put down 5 percent or less). In markets where home prices are rising at a faster clip, buyers may find it time to buy now rather than wait until they ‘ve saved a 20 percent down payment, Lewis says. But Lewis adds that in some markets, however, home values may be increasing more than what a buyer would pay for mortgage insurance. Lenders usually require mortgage insurance when borrowers don’t put at least 20 percent down.

Showing unwillingness to compromise: First-time buyers may also be going in with too-high expectations. Housing inventories in the lower price ranges, which typically first-time buyers are looking at, are low and that means limited choices. Twenty-six percent of all recent buyers surveyed say they purchased a home knowing it would need improvement or work. Twenty-one percent also said they had to compromise on their list of must-haves. Real estate experts urge first-time buyers to identify their top priorities, such as commute times, schools, and square footage. “It really helps to know going into that it that you’re just simply not going to get everything you want,” Lewis told CNBC.

Spring Is in the Air: More Homes Going Up for Sale | Realtor Magazine

The housing market is changing quite a bit from a year ago. The number of homes up for sale is growing, reversing an inventory shortage trend that has plagued many markets over the last few years. The higher inventories are also driving greater price cuts, according to realtor.com®’s February housing report, released Wednesday.

 

© Jasenka Arbanas – Moment/Getty Images

 

About 73,000 more listings are for sale this year compared to last year. Inventories have increased 6 percent year over year, according to realtor.com®’s analysis. The largest jumps in For Sale signs are out West, led by San Jose, Calif. (up 125 percent year over year); Seattle (up 85 percent); San Francisco (up 53 percent); San Diego (up 39 percent); and Portland, Ore. (up 36 percent).

“This is the fifth consecutive month that we’ve seen housing inventory increase, especially in large markets,” says Danielle Hale, realtor.com®’s chief economist. “As is often the case in real estate, the important trends are going on at the local level. We see large markets continue to cool, but some markets still have some strength. Additionally, we still see fewer homes priced under $200,000 on the market, so entry-level buyers won’t see the same availability of options as high-end buyers.”

The median list price rose 7 percent year over year in February to $294,800. But prices are showing signs of cooling. Thirty-nine of the 50 largest housing markets saw an increase in price cuts in February. The largest percentage of price cuts were in Las Vegas (up 19 percent); San Jose (up 9 percent); Phoenix (up 7 percent); San Francisco (up 5 percent); and Dallas (up 4 percent).

 

The New-Home Pipeline Takes Another Hit | Realtor Magazine

Fewer new homes are being built across the country, despite desperate calls from the housing industry to build more. New-home starts plunged to the lowest level in more than two years in December, the U.S. Commerce Department reported Tuesday.

New-home construction dropped 11.2 percent in December and is now at the slowest pace of construction since September 2016. Housing starts have dropped 10.2 percent over the past year, with decreases in both single-family and apartment construction.

 

Bernard Hermant – Unsplash

 

“Looking back, the December drop in housing production correlated with the peak increase in mortgage rates and corresponding decline in builder sentiment,” says Greg Ugalde, chairman of the National Association of Home Builders. “During that time, builders adopted a cautious wait-and-see approach as demonstrated in the rise of single-family and multifamily units that were permitted but not under construction.”

The housing market may get a boost from lower mortgage rates in recent weeks. The 30-year fixed-rate mortgage has been dropping, averaging 4.35 percent last week, according to Freddie Mac.

Single-family home building mostly stagnated last year. Builders have consistently blamed rising costs of construction materials, labor costs, and a shortage of buildable lots for curtailing construction.

Residential building permits, a gauge of future construction, eked out a 0.3 percent increase in December compared to November, reaching an annual pace of 1.326 million. (December saw 1.078 million starts.)

“Looking ahead, we expect single-family production will be relatively flat in 2019, and multifamily starts will level off as well,” says NAHB Chief Economist Robert Dietz. “The biggest challenge facing builders this year will be ongoing housing affordability concerns as they continue to grapple with a shortage of construction workers, a lack of buildable lots and excessive regulatory burdens.”

Mortgage Rates Remain Low | Realtor Magazine

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After declining for three consecutive weeks, mortgage rates are in a holding pattern. The average rate for a 30-year fixed-rate mortgage is lower than it was a year ago.

“Mortgage rates remained mostly unchanged this week, while mortgage applications rose 5.3 percent from the previous week,” says Sam Khater, Freddie Mac’s chief economist. “The general decline in rates we have seen recently, combined with rebounding pending home sales, hint at a strong spring home buying season.”

Freddie Mac reports the following national average mortgage rates for the week ending Feb. 28:

• 30-year fixed-rate mortgages: averaged 4.35 percent, with an average 0.5 point, unchanged from last week. Last year at this time, 30-year rates averaged 4.43 percent.
• 15-year fixed-rate mortgages: averaged 3.77 percent, with an average 0.5 point, dropping slightly from last week’s 3.78 percent average. A year ago, 15-year rates averaged 3.90 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.84 percent, with an average 0.3 point, unchanged from last week. A year ago, 5-year ARMs averaged 3.62 percent.

Pending home sales rebound 4.6 percent in January

 

• Pending home sales, a measure of signed contracts to buy existing homes, increased 4.6 percent in January compared with December, according to a monthly survey from the National Association of Realtors. Contracts, however, were still 2.3 percent lower compared with a year ago.
• “A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” said Lawrence Yun, chief economist for the NAR.
• In January, when these contracts were signed, the average rate on the 30-year fixed mortgage hit a low of 4.43 percent, according to Mortgage News Daily.

Home buyers are coming back to the market, possibly due to lower mortgage rates.

Pending home sales, a measure of signed contracts to buy existing homes, increased 4.6 percent in January compared with December, according to a monthly survey from the National Association of Realtors. Contracts, however were still 2.3 percent lower compared with a year ago. This marks the thirteenth straight month of annual declines.

“A change in Federal Reserve policy and the reopening of the government were very beneficial to the market,” said Lawrence Yun, chief economist for the NAR. “Homebuyers are now returning and taking advantage of lower interest rates, while a boost in inventory is also providing more choices for consumers.”

 

The average rate on the 30-year fixed mortgage jumped over 5 percent at the start of November but then began falling in December. In January, when these contracts were signed, it hit a low of 4.43 percent, according to Mortgage News Daily. That likely helped buyers not only afford homes but feel better about the overall investment.

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Regionally, pending sales in the Northeast rose 1.6 percent monthly and were 7.6 percent above a year ago. In the Midwest, sales rose 2.8 percent monthly but were 0.3 percent lower annually. In the South sales jumped 8.9 percent monthly and were 3.1 percent lower annually. Sales in the West increased 0.3 percent monthly and fell 10.1 percent compared with a year ago.

Closed sales of existing homes fell in January, but those represent contracts signed in November and December, when rates were still falling but were higher than they are now. Some are now reporting increased demand, thanks to lower rates, but there is still a hesitancy in the overall market.

“The buyers and the sellers are in this dance right now where it’s a little harder to put deals together because nobody’s certain where the market is going to land,” said Glenn Kelman, CEO of Redfin in an interview on CNBC’s Power Lunch. “It’s a little bit better than it was in the fourth quarter, we’re seeing stronger buyer demand, but it’s not as if people are willing to pay any price to get a home, which is what we saw at the beginning of 2018 and for the past four years before that.”

Be Cautious About Renos Without Permits | Realtor Magazine

Some homeowners bypass the permit process when they remodel their home. They may find the process too expensive or cumbersome. Permitting fees can sometimes cost hundreds of dollars or more. Some homeowners may believe that if they go ahead with a kitchen or bath remodel without a permit, they’ll likely never get caught.

But failing to get a permit could be troublesome when they go to sell the home.

Most states require homeowners to fill out a disclosure statement when they go to sell. In that form, sellers are usually asked if they completed work to the home without a required permit. Lying about it can also backfire—the sellers could be sued later by the new homeowner for making false statements.

“You can personally become liable for work carried out without permits,” writes Bill Gassett, a real estate professional with RE/MAX, REALTORS® in New England, forThe Washington Post. “Maybe the finished basement built by the previous homeowner with the fancy kitchen that sold the home has to be ripped out, or you’ll have to pay a penalty.”

Also, if there’s any incident that was caused by the lack of permits, the homeowner may face a denial of their insurance claim. If their insurance company finds they didn’t have the required permit, they could deny the claim. Many of these denied insurance claims stem from incidents that involve remodeling projects around electricity, gas, or water that were done without the appropriate permits.

The High-Priority Home Features for Buyers | Realtor Magazine

Laundry rooms and Energy Star–compliant windows topped the list of what buyers considered the most “essential” or “desirable” features in a home, according to the National Association of Home Builders’ 2019 “What Home Buyers Really Want” report, released at the NAHB International Builders’ Show in Las Vegas this week. Most of the features that new homeowners or aspiring buyers ranked highest related to helping them save in utility costs, add extra storage, and spruce up the outside, said Rose Quint, the NAHB’s assistant vice president of survey research.

The NAHB surveyed nearly 4,000 consumers who either purchased a home within the last three years or plan to buy a home in the next three years to identify their top desires in a home. Consumers were asked to rank 175 home features based on how essential they were to their home purchase decisions.

Consumers ranked the following home features highest:

1. Laundry room: 91%
2. Energy Star windows: 89%
3. Patio: 87%
4. Energy Star appliance: 86%
5. Ceiling fan: 85%
6. Garage storage: 85%
7. Exterior lighting: 85%
8. Walk-in pantry: 83%
9. Hardwood flooring: 83%
10. Double kitchen sink: 81%
11. Energy Star–whole home: 81%

While consumers may rank certain energy-saving features highly, they may not be motivated to pay more for them, Quint said. Sixty-eight percent of consumers said they are concerned about the environment and would like an environment friendly home, but they were not willing to pay extra for one.

However, when asked if they would pay more for a home to save $1,000 a year in utilities, the responses changed. Forty-six percent of respondents said they’d pay an average of $1,000 to $9,999 more for a home to save $1,000 per year on their utility bills; 37 percent would pay $10,000 or more.

“Buyers may not be turning their hearts to the concept of saving the environment, but they will respond positively if you put it in the dollar sense of what they can save,” Quint said. “This shows it’s important to advertise homes on the savings it will bring the home buyer and how it could put money back in their pocket.”

Additional consumer preferences that emerged from the survey included:

• 86% prefer an open layout, where the kitchen and dining room are open, either completely or partially.
• 70% of consumers prefer the washer and dryer on the first floor.
• 67% prefer 9-foot ceilings on the first floor.
• 64% want two or two-and-a-half bathrooms.

On the other hand, the survey found the features that ranked the lowest on home buyers’ wish lists:

1. Elevator: 66%
2. Wine cellar: 57%
3. Daycare center: 50%
4. Plant-covered roof (partially or completely): 50%
5. Pet-washing station: 49%
6. Dual toilets in the master bath: 48%
7. Cork flooring: 47%
8. Golf course community: 47%
9. Two-story family room: 47%
10. High-density development: 46%
11. Laminate kitchen countertop: 46%

Tubs and Laundry Rooms Gain Prominence as Builders Update Floor Plans | Realtor Magazine

Designing houses with features buyers want is a continuous process for the home building industry. During a Feb. 19 session at the 2019 International Builders’ Show in Las Vegas, builders and designers took a break from their work to talk about some of the changes they’re seeing.

Curved entryway staircases step back.

A curved stairway leading to the upper floor can make for a grand entrance into a home, and certainly serves as a focal point for people when they go in. But architect Todd Hallett, president of TK Design and Associates, told a builders at the session “Do This, Not That! Design Do’s and Don’ts for 2019” that curved staircases are a “not” in today’s floor plans. They take up too much space and can make an entryway feel crowded, he said. Also, when you first enter a home, the stairway disrupts your line of sight, making it hard to see through to the back of the house. Plus, he added, curved staircases can be costly to build.

Instead, builders are looking at simplifying staircases and putting them in where more of the action is. “This might be a stairway leading upstairs that is off the great room or the kitchen,” Hallett said. Or, if the staircase does go in the entryway, it may be tucked off to the side so it’s not the first thing you see when you walk through the front door.

Bathtubs bubble back up.

© Jeff Davis/Jeffrey A. Davis Photography

For the last few years, homeowners have traded bathtubs for large, luxurious showers. But while expansive showers are still a hot trend, Hallett said tubs are reclaiming their place in the bathroom. A standalone bathtub “is becoming a focal point when you walk into the bathroom,” Hallett said. “When you walk in, you look directly ahead to see the tub and the shower then behind it. … It becomes a dramatic space.”

A clean look at the laundry room.

The laundry room is the most “essential” and “desirable” feature in a home,according to an NAHB consumer preference survey released this week. As such, builders want to transform the space from a small room tucked away to conceal the washer and dryer into a more prominent part of the home.

“The appliances are getting bigger .. and they’re getting better-looking now,” Hallett said. “We don’t have to close off the laundry room.” In more new-home floor plans, the laundry room is becoming part of a larger family entry area—a large open space off the garage. It features not only the washer and dryer but also cabinetry, a mudroom, and maybe even a desk and computer area, shelving, and benches, Hallett said. “It’s a lot more open, and you’re no longer walking into this tight hallway space,” he said.

Closets come together.

© Jeff Davis/Jeffrey A. Davis Photography

Builders are moving away from having to squeeze two separate closets into the owner’s suite. “The trend now is going back to just one big closet,” Hallett said.

Hallett said builders can do more with one larger space than by dividing it into two. For example, one large walk-in closet can feature a large island in the middle with extra drawers and a long countertop. A window can also be added to let in natural light.

You can also dress up a bigger closet with artwork and a seating area. AtThe New American Home, a showcase home in Henderson, Nev., unveiled during the conference, the master suite closet (in photo at left) features a large carmel stone hanging on the wall that was backlit to illuminate the space. It also served as a centerpiece for the adjoining master bathroom.

Lower Mortgage Rates May Sprout Early Spring Buying Season | Realtor Magazine

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Mortgage rates inched lower for the third consecutive week. Freddie Mac Chief Economist Sam Khater says the lower rates bode well for the spring home buying season, typically the busiest time of the year for home shopping.

“Mortgage rates … [are] continuing the general downward trend that began late last year,” Khater says. “Wages are growing on par with home prices for the first time in years, and with more inventory available, spring home sales should help the market begin to recover from the malaise of the last few months.” The National Association of REALTORS® reported this week that more houses were on the market in January, rising to 1.59 million nationwide and at a 3.9-month supply at the current sales pace.

Freddie Mac reports the following national averages for mortgage rates for the week ending Feb. 21:

• 30-year fixed-rate mortgages: averaged 4.35 percent ,with an average 0.5 point, dropping from last week’s 4.37 percent average. Last year at this time, 30-year rates averaged 4.40 percent.
• 15-year fixed-rate mortgages: averaged 3.78 percent, with an average 0.4 point, falling from last week’s 3.81 percent average. A year ago at this time, 15-year rates averaged 3.85 percent.
• 5-year hybrid adjustable-rate mortgages: averaged 3.84 percent, with an average 0.3 point, falling from last week’s 3.88 percent average. A year ago, 5-year ARMs averaged 3.65 percent.

More Owners May Reconsider That Remodeling Project After All | Realtor Magazine

Homeowners are hitting the pause button on remodeling projects, which may prompt home renovation activity to fall to its lowest level in three years, according to a new report from Harvard University’s Joint Center for Housing Studies.

 

© Hoxton/Tom Merton/Getty Images

 

“Remodeling activity tends to go hand-in-hand with home sales, so when a homeowner is preparing their home for sale they’re likely to do some work just getting their home ready for the market,” Abbe Will, associate project director at the center, told CNBC. “Then really in the first two or three years after purchase, that new homeowner typically spends quite a bit more on home improvements, making that home kind of fit their needs, customizing it, maybe doing some work before they even move in.”

Indeed, new homeowners spend about 30 percent more on remodeling a newly purchased home than a longtime resident does, according to the center. Most homeowners tend to use home equity—either through a cash-out refinance or a second line of credit—to fund their renovation projects. But with home values softening, they may be less inclined to take money out, Will notes.

In addition, higher mortgage rates make tapping home equity to pay for renovation projects more costly. On top of that, material costs are also on the rise.

“If they’re going to do a cash out refi, or they’re looking at a home equity loan or line of credit, I think the sentiment is that homeowners are taking a pause and wondering if that’s really the right move right now, and then thinking, we don’t have to do this major discretionary project now,” Will says. “We can put that off and see what’s happening with the market.