March 18th, 2015
Home Builder prices are now 30% higher than comparable resale properties. Historically, it is 15% higher. Thank you home builders for making my FSBO property more appealing to the home buyer. “Builders are making a conscious decision to sell fewer homes at higher prices than to sell more homes at lower prices.” according to ZIllow economist, Stan Humphries. Between 2008 to 2012, I saw many builder developments go back to the banks and resold for 20-40 cents on the dollar. Plus I saw many larger builders selling developments for 40-50% of the development costs. To put this is real dollars. Example: an 80 lot development, ready to have homes built on it cost (in major metro areas) $80,000 to $100,00 per lot. This includes the cost of purchasing the raw land, getting it developed and approved with roads, utilities, etc. These developments were then sold for $40,000 - $50,000 per lot. Today, with an improving economy, low interest rates the buyers are looking to purchase. The builders owning these properties now own them for $50,000 less then the cost 5 years ago, plus materials & labor have stayed the same. So, why do they ask so much for these properties? Simple answer is ‘because they can’. To their surprise, the public is not buying it.
FSBO properties asking prices are 30% that of a comparable new builder home. Plus the resale development is already finished. Have you ever lived in a new home and over half of your community had vacant lots. When these lots are finally built on, you take the risk they will have smaller, less expensive homes which hurt your value. Big risks.
March 11th, 2015
searching online for a new home. First thing that jumps out at you is the main photo. This is the single most important item to get right, if you plan to market your property online. SELLERS TAKE NOTE! Buyers searching in your area first see a home page. Lot’s of Main Photos. Once a search is completed, many houses are seen. Do they click on all, or just the good ones? Northern properties with snow or dormant lawns are understandable in the winter time, but as soon as the snow melts or the grass turns green you need a new photo right away. It’s easy to replace photos online. Log in, click manage your photos, then add new ones and remove old ones. If you have someone doing this for you, they should have no problem with it. It they tell you they can’t, won’t or are unable, then it is time to find someone else. Main photos don’t necessarily need to be the front of your property. New, beautiful updated kitchens can work. Or maybe the backyard deck with a view. Utility rooms, bath rooms, and unfinished basements are a no, no. Are you taking the photos with a smart phone. Some photos you take can be horizontal, vertical or upside down. Review them and correct before putting them online. If you have trouble opening the photos quickly on your home computer, then possibly they are too large of a file. Resize to a slightly smaller size. The websites you use automatically resize the format and this process maybe slow if your photos are too large. Another suggestion for those that have many trees in the front yard that block the view of your home. Take several photos today, right now, while the leaves are off of the trees. Save those photos for the day you put your property on the market. Buyers want to see the front of your property and this will help you in the sale.
February 18th, 2015
that is the century old question. Like many things in life, you need to do your homework, be prepared and fully understand your options. What are the current market conditions? Is it a hot buyers market or a soft sellers market? What can you expect to net out of your current home and is it ready to be put on the market? If your current house sells fast, but you have not closed on the new one, where do you live? Can you afford two house payments? Here are some thoughts and suggestions:
- get several opinions of the value of your current home via appraisers, agents, Internet and your own search
- meet with your mortgage broker (more then one is a good idea). Find out your options regarding mortgage approvals for two properties, temporary (home equity, bridge) loans, locking in interest rates, and get any suggestions from your mortgage person regarding current market conditions
- go inside and take a look at as many properties as possible. This will give you a good idea of the new home you will be buying. Plus it gives you a good idea of how your current property needs to look to sell fast
- consider all options. If you sell first, do I have a temporary place to live. If I buy first, can I afford two mortgage payments.
It is very rare to buy the new home at a low price, then sell your current one at a high price. I usually prefer to buy first. This way you get the house you want and at the best price. Put in as many offers as it takes to get the best price. Once you get a good deal, now you can price your home just below the competition and it should sell fast. If you sell first, then you are under a lot of pressure to pay top dollar and it may not be the perfect property you were looking for. Remember, the three most pressured moments of your life will be dealing with 1. a family death 2. a divorce 3. buying a new home
February 9th, 2015
You only need one buyer, but you have multiple competitors. You need to know them so you can convince the buyer yours is the best one for them. First, there is the Investor resale property. The investors with deep pockets either flip or wait for their tenant to move out. Then put their property on the market with newly finished hardwood floors, new interior and exterior paint, new carpet, upgraded fixtures and more. Their property is vacant and in move in condition. Plus they will pay the buyers closing cost. Second, is the builder of new homes. Their properties are brand new, with new roof, appliances, move in condition and never lived in. They offer Home Warranty’s between 1 - 10 years. They also will pay the buyers closing costs. Third, is the owner occupied resale property down the street from yours. They know your property is for sale and they watch your asking price very closely.
We strongly suggest you view the inside of each of the competitors property. As stated in the Godfather movie: ‘keep your friends close and your enemies closer’. The buyer for your property will do their research online, then quickly try to view all properties in their price range and location desired. Be ready to answer all questions and give out extra information based on anticipated questions that may come up.
January 14th, 2015
2015 is the year to take ‘charge’. 5% is the magic number. For the past five years interest rates have been at historic lows (the first Window opened). During that time you should have either refinanced or bought a new home with a mortgage rate below 5%. If not, this is the year to ‘take charge’ and do it. Auto loan rates, whether new or used, are below 5%. If you are paying more, this is the time to refinance or trade in. Gas prices are down dramatically (the second Window opened). What are you going to do with the savings? I learned an interesting fact over 30 years ago. Approximately 50% of all credit cards have a balance and only the minimum is paid each month. That means you are paying 18% or higher interest rate each month. Today, the number is still approximately 50% of all credit card holders. That’s terrible. I strongly suggest to those with a balance, use the gasoline savings to pay down your balance. This is a huge step towards improving your credit score and setting yourself up to buy a home. If you have any loans that you are paying over 5% interest rate, now is the time to make a change. Another 5% suggestion. Right now job openings are at a 14 year high, 5 million unfilled positions. It’s time for a 5% raise at your current job or a new job that pays 5% more.
Remember, the more you make and the better your credit will equal a better home for your family.
December 24th, 2014
New buyers: with 5.2 million foreclosed homes in 2007 & 2008, these owners will be passing the seven year mark in which their foreclosure drops off their credit report. Starting now, they will be able to qualify for a non-FHA mortgage. Plus with their credit improved and tired of renting, we look for these buyers to be back in the market.
New sellers: current average time staying in a home is over 13 years (longest ever). Sellers that have been waiting for prices to rebound will be putting their homes up for sale. Those baby boomers and empty nesters that are anxious to downside. Plus the first time home buyers from a few years ago that need a larger home will be selling to move up.
Interest rates: we are always talking about how low they are. This year will be the bottom and you better hurry to lock in. Federal Reserve policy of lower rates were based on employment, inflation and GDP. Historically, the Fed has been slow to react and it looks like they are doing it again.
Renters: 35% of households rent. This has slowly increased each year since 2005, with a low of 30%. Today, with millions of properties owned by investors for rental purposes, the renter with large families are opting to rent 3 or 4 bedroom homes versus renting the two bedroom apartment. Get ready in 3-4 years when the investors decide to sell/cash in and these renters turn into buyers.
New developments for 2015: Look for mortgage qualifying to get easier. Look for builders to keep increasing the home price. Look for developers to over build new apartment buildings. Look for investors to start selling.
December 16th, 2014
3/1, 5/1, 7/1 adjustable rate mortgages offer a lower interest rate the first year, thus a lower monthly payment. But, don’t be fooled. Each year the interest rate changes and at the end of the term, either 3, 5 or 7 years there is a balloon payment. Balloon payment means you owe the entire balance right now. If you are confident rates won’t move much or that you can quickly sell the property, here are some historical facts:
Interest rate moves- Federal Reserve raised short term interest rates from 8.85% in August 1980 to 20% in January 1981 (less then six months). Other countries move their short term rates even quicker, for example; this week Russia raised their short term rates from 10% to 17%. Our country has not seen this is a long time, but it could happen.
Home values- Baby boomers had gone the last 40 years confident that their real estate holdings are guaranteed to always go up. Well, they did until 2009. That myth was proven wrong.
To avoid future problems and pressures, lock in today’s low interest rates with a 15 or 30 year fixed mortgage. Avoid buying a property that is over the appraised price or the real estate agent added their commission to the price, which means you are paying more.
December 9th, 2014
FNMA announced they are now backing 3% down payment, full documentation loans, to first time home buyers. FNMA said: “Our goal is to help additional qualified borrowers gain access to mortgages”. Freddie Mac also announced a similar 3% down payment program called “Home Possible Advantage”. Both companies have been major players in the mortgage business for many years, but both were hurt with the sub-prime mortgage melt down. In the past five years, FHA has backed 80% of all new mortgages. With this added liquidity, buyers will have more options to buy their new home. This is good news for people that want to buy or sell a house. This will end up being bad news for those investors that have purchased properties to rent out. You will start to see less renters next year as the renters turn into buyers.
December 2nd, 2014
Existing home sales: after four years in a row with under 5 million homes sold, 2014 will be the 2nd year in a row of over 5 million homes sold.
Inventory of homes on the market: after four years in a row of over 2 million homes on the Market for sale, 2014 will be the 2nd year in a row of under 2 million homes for sale.
Mortgage down payment: 3.5% down payment needed for a FHA mortgage. Over 75% of new loans this year used the FHA program. New programs coming by the year end through FNMA and Freddie Mac will require only a 3% down payment.
Mortgage interest rates: 4.1% 30 year and 3.2% 15 year. These are the best rates if your credit score is 740 or higher. New FHA standards require minimum of 580 credit score. The mortgage rate depends on your credit score.
Home Equity Lines of Credit (HELOCs): with home values up, over $67 billion in HELOCs in 2014. The most since 2009.
These facts all point to a positive real estate market in 2015.
November 3rd, 2014
Rent versus Buy a home. The foreclosure and bank owned properties are now behind us. Low interest rates have been low for so long now that everyone has gotten used to them at these levels, so I guess that must be the new normal. Home values have come back and builders are building. So what now? How about the new trend? More renters then buyers. This is music to the ears of all the investors that have bought millions of residential homes over the past few years. After all, renting them out was the main purpose for buying in the first place. Now, the investors dreams have come true. With more renters then buyers, what do you think is going to happen? That’s right, rents are increasing. This will continue until the renters decide they are being taken advantage of. At that point they will start a new trend: ‘First-time buyers are back in the market’. Today’s report that first-time buyer this year represents the lowest level in nearly three decades-just 33 percent of all homes sold. The experts are starting to debate the reasons why and this discussion will be a major topic next year. I remember the first book I read after graduation, ‘The 25 wealthiest people in American History’. I discovered that they either made their money from real estate or once they accumulated wealth from banking, shipping, railroad, etc., they invested their money into real estate. Eventually the renters will figure that out. More updates to follow.