Archive for the ‘Real Estate Matters’ Category
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More Home Buyers Putting Less Down
A recent post by the National Association of Realtors (NAR) revealed that in the months of December 2014 through February 2015, there was an increase in the number of first-time buyers making a down payment of 6% or less as compared to last year:
- 2014: 61% of first time home buyers
- 2015: 66% of first time home buyers
While the number of small down payments is lower than it was in 2009 when 77% of down payments were 6% or less, it does show the recent decisions by both Fannie Maeand Freddie Mac to offer 3% down payment options to certain buyers is impacting the market. FHFA Director Mel Watt recently explained why Freddie and Fannie made this decision:
“The new lending guidelines by Fannie Mae and Freddie Mac will enable creditworthy borrowers who can afford a mortgage, but lack the resources to pay a substantial down payment plus closing costs, to get a mortgage with 3% down. These underwriting guidelines provide a responsible approach to improving access to credit while ensuring safe and sound lending practices.”
This is great news to millions of purchasers that have been denied the opportunity to own their own home because of the almost impossible burden of saving for a 20% down payment.
Will these programs create future challenges?
Certain pundits fear that low down payment programs will create a wave of foreclosures down the road. Mr. Watt also addressed this concern:
“To mitigate risk, Fannie Mae and Freddie Mac will use their automated underwriting systems, which include compensating factors to evaluate a borrower’s creditworthiness. In addition, the new offerings will also include homeownership counseling, which improves borrower performance. FHFA will monitor the ongoing performance of these loans.”
Also, the Urban Institute revealed data showing what impact substantially lower down payments would have on default rates in today’s mortgage environment. Their study revealed:
“Those who have criticized low-down payment lending as excessively risky should know that if the past is a guide, only a narrow group of borrowers will receive these loans, and the overall impact on default rates is likely to be negligible. This low down payment lending was never more than 3.5 percent of the Fannie Mae book of business, and in recent years, had been even less. If executed carefully, this constitutes a small step forward in opening the credit box—one that safely, but only incrementally, expands the pool of who can qualify for a mortgage.”
Thanks to KCM Blog for this information!
5 Tech Questions that Seniors Should Ask When Interviewing a Real Estate Agent
If you have not bought or sold a home in a few years (or maybe decades) it is likely that there are more than a few new trends in real estate that you will encounter as you begin to interview real estate agents.
One particular trend now common among many real estate brokerage firms is called the practice of “going paperless.” This can be a bit scary for some people, especially senior adults who are not accustomed to using computers in their personal or professional lives.
If you are one of the many with reservations about the paperless process, you will want to talk with your agent about any concerns or questions you have. In this article we have provided some basic information about the paperless process and some key questions to ask your real estate agent.
How your agent handles your questions may just help you determine if he or she is the right agent for you!
What does it mean to go paperless?
Going paperless simply means that instead of printing out every contract, form or disclosure for your signature, you may be asked to sign certain documents electronically.
This could mean:
- Typing your name into a designated field included in a form (received via email)
- Signing your name on a digital touchpad (laptop, netbook, smartphone, etc.)
While some have experienced this type of technology before and are perfectly willing and comfortable using it, others are not. Frankly, the first time I was asked to sign a real estate document electronically via email I was a bit perplexed and required some guidance.
If you have not been exposed to this type of technology, it can seem a little overwhelming, especially if introduced to it in the midst all of the other things going on during a move. This is why it’s important to educate yourself on the front end, mitigating potential delays, avoiding unnecessary frustration, and preventing surprises down the road.
Here are 5 simple questions you should ask before you ‘sign on the dotted line’
1. How do you typically communicate with your clients (phone, email, text, instant messaging, etc.)?
Good agents know that the best method (and frequency) of communication is the one that best serves the client, so getting this agreed upon early in the relationship is paramount — for both you and the agent.
If you want to communicate strictly by phone, be sure that you and your agent agree on the protocols for leaving and returning messages, hours of availability, and which phone numbers are best for certain times of day. Similar discussion around email, text messaging, and other modes of communication should be had as well, if that is your desired method of information delivery.
2. What method(s) do you use for getting client signatures?
The goal here is to find out your options. Many agents are still in the conversion process of going paperless and they are more than willing to use “more conventional” methods of getting signatures.
Some may be required, however, by their respective brokerage firms to utilize only paperless systems. If this is the case, ask the agent to show you examples of the types of things that may be asked of you during the course of working together.
If after a quick tutorial, you aren’t comfortable with the electronic signature process, it’s “OK” to choose an agent who can better accommodate your preferences.
3. Can you assess my devices to insure they are compatible with the systems you use?
Even if you are completely prepared to enter the paperless world with no reservations whatsoever, it can only be done if you have the right equipment. Before agreeing to a paperless process, ask the agent to do a “test run” using a non-official/non-binding document on your system to insure its functionality.
4. Will you provide technical support if I am not “techy” and need some help?
My dad (self described “non-techy” and proud of it), has a computer, printer, smart phone, email address, and wifi. He does not, however, have the faintest idea how they work or how to pull up attachments in his email.
When he decided to purchase a new home this past year using a reverse mortgage, the lender was located out of state, which meant everything was done via email — electronically. Needless to say, I was dad’s tech support in this situation. If you do not have a trusted advisor who can help you with troubleshooting potential technology issues, make sure your agent or their staff is capable, patient, and willing to personally walking you through the steps.
5. Are you flexible if I choose to use phone and paper over electronic communication and documentation?
Options are the key. While some agents are extremely flexible in how they deliver their services, others may be married to a very specific process or style. Insure the agent you are considering is willing and able to do what is right for you, based on your comfort level, knowledge, and ability.
Bottom Line
It goes without saying that it is critical to have the conversation with your real estate professional about their paperless processes and communication methods.
Not only will doing so put your mind at ease regarding unfamiliar territory, but it may also provide your agent with necessary information so he or she can serve you more effectively.
There’s No Place Like Home
Last week, we reported on the financial reasons purchasing a home in today’s market makes sense. The Joint Center for Housing Studies at Harvard University performs a study every year surveying participants for the reasons that American’s feel are most important in regards to homeownership.
The top 4 reasons to own a home cited by respondents were not financial.
1. It means having a good place to raise children & provide them with a good education
From the best neighborhoods to the best school districts, even those without children at the time of purchasing their home, may have this in the back of their mind as a major reason for choosing the location of the home that they purchase.2. You have a physical structure where you & your family feel safe
It is no surprise that having a place to call home with all that means in comfort and security is the #2 reason.3. It allows you to have more space for your family
Whether your family is expanding, or an older family member is moving in, having a home that fits your needs is a close third on the list.4. It gives you control over what you do with your living space, like renovations and updates
Looking to actually try one of those complicated wall treatments that you saw on Pinterest? Want to finally adopt that puppy or kitten you’ve seen online 100 times? Who’s to say that you can’t in your own home?The 5th reason on the list, is the #1 financial reason to buy a home as seen by respondents:
5. Owning a home is a good way to build up wealth that can be passed along to my family
Either way you are paying a mortgage. Why not lock in your housing expense now with an investment that will build equity that you can borrow against in the future?Bottom Line
Whether you are a first time homebuyer or a move-up buyer who wants to start a new chapter in their life, now is a great time to reflect on the intangible factors that make a house a home.
Consumer Confidence at Highest Level in Over a Decade
Two recently released reports reveal that the American public is starting to feel much better about the U.S. economy. The University of Michigan’s Surveys of Consumersshowed that:
“Consumer optimism reached the highest level in the past decade in the January 2015 survey…Consumers judged prospects for the national economy as the best in a decade, with half of all consumers expecting the economic expansion will continue for another five years. The anticipated strength in the overall economy has been accompanied by more favorable income and employment expectations.”
Here is a chart showing results over the last decade:
As all consumers are feeling more optimistic, more young adults are moving out of their parents’ basements and into a residence of their own. The recent Census report shows that new household formations skyrocketed in 2014. Below is a chart showing the historical significance of the numbers:
Bottom Line
The economy is definitely improving and, more importantly, the American consumer is beginning to feel much more confident. This should lead to a very robust real estate market in 2015.
5 Reasons to Hire a Real Estate Professional
Whether you are buying or selling a home, it can be quite an adventurous journey. You need an experienced Real Estate Professional to lead you to your ultimate goal. In this world of instant gratification and internet searches, many sellers think that they can For Sale by Owner or FSBO.
The 5 Reasons You NEED a Real Estate Professional in your corner haven’t changed, but have rather been strengthened due to the projections of higher mortgage interest rates & home prices as the market continues to recover.
1. What do you do with all this paperwork?
Each state has different regulations regarding the contracts required for a successful sale, and these regulations are constantly changing. A true Real Estate Professional is an expert in their market and can guide you through the stacks of paperwork necessary to make your dream a reality.
2. Ok, so you found your dream house, now what?
According to the Orlando Regional REALTOR Association, there are over 230 possible actions that need to take place during every successful real estate transaction. Don’t you want someone who has been there before, who knows what these actions are to make sure that you acquire your dream?
3. Are you a good negotiator?
So maybe you’re not convinced that you need an agent to sell your home. However, after looking at the list of parties that you need to be prepared to negotiate with, you’ll realize the value in selecting a Real Estate Professional. From the buyer (who wants the best deal possible), to the home inspection companies, to the appraiser, there are at least 11 different people that you will have to be knowledgeable with and answer to, during the process.
4. What is the home you’re buying/selling really worth?
It is important for your home to be priced correctly from the start to attract the right buyers and shorten the time that it’s on the market. You need someone who is not emotionally connected to your home to give you the truth as to your home’s value. According to the National Association of REALTORS, “the typical FSBO home sold for $208,000 compared to $235,000 among agent-assisted home sales.”
Get the most out of your transaction by hiring a professional.
5. Do you know what’s really going on in the market?
There is so much information out there on the news and the internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to in order to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?
Dave Ramsey, the financial guru advises:
“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.”
Hiring an agent who has their finger on the pulse of the market will make your buying/selling experience an educated one. You need someone who is going to tell you the truth, not just what they think you want to hear.
Bottom Line:
You wouldn’t replace the engine in your car without a trusted mechanic. Why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?
3 Questions to Ask Before Buying a Home
If you are thinking about purchasing a home right now, you are surely getting a lot of advice. Though your friends and family have your best interests at heart, they may not be fully aware of your needs and what is currently happening in real estate. Let’s look at whether or not now is actually a good time for you to buy a home.
There are three questions you should ask before purchasing in today’s market:
1. Why am I buying a home in the first place?
This truly is the most important question to answer. Forget the finances for a minute. Why did you even begin to consider purchasing a home? For most, the reason has nothing to do with finances. A study by the Joint Center for Housing Studies at Harvard University reveals that the four major reasons people buy a home have nothing to do with money:A good place to raise children and for them to get a good education
A place where you and your family feel safe
More space for you and your family
Control of the space
What non-financial benefits will you and your family derive from owning a home? The answer to that question should be the biggest reason you decide to purchase or not.2. Where are home values headed?
When looking at future housing values, Home Price Expectation Survey provides a fair assessment. Every quarter, Pulsenomics surveys a nationwide panel of over one hundred economists, real estate experts and investment & market strategists about where prices are headed over the next five years. They then average the projections of all 100+ experts into a single number.Here is what the experts projected in the latest survey:
Home values will appreciate by 4% in 2015.
The cumulative appreciation will be 23.5% by 2019.
Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of over 15.1% by 2019.
3. Where are mortgage interest rates headed?
A buyer must be concerned about more than just prices. The ‘long term cost’ of a home can be dramatically impacted by an increase in mortgage rates.The Mortgage Bankers Association (MBA), the National Association of Realtors, Fannie Mae and Freddie Mac have all projected that mortgage interest rates will increase by approximately one full percentage over the next twelve months.
Bottom Line
Only you and your family can know for certain the right time to purchase a home. Answering these questions will help you make that decision.
Big News!
Prudential Chaplin Williams becomes Berkshire Hathaway Home Services Chaplin Williams Realty. We are proud and honored to be part of this exciting transition on January 15, 2015.
We will continue as the same great “Team”, providing excellent service, remaining in our same location and offering the most advanced search tools for finding property in Northeast Florida. As always, our “Team” is here to assist you with all your real estate needs!
New York Times: Homeownership is Best Way To Build Wealth
The New York Times recently published an editorial entitled, “Homeownership and Wealth Creation.” The housing market has made a strong recovery, not only in sales and prices, but also in the confidence of consumers and experts as an investment.
The article explains:
“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth.”
Many of the points that were made in the article are on track with the research that the Federal Reserve has also conducted in their Survey of Consumer Finances.
The study found that the average net worth of a homeowner ($194,500) is 36x greater than that of a renter ($5,400).
One reason for this large discrepancy in net worth is the concept of ‘forced savings’ created by having a mortgage payment and was explained by the Times:
“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”
“Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”
Bottom Line
“As a means to building wealth, there is no practical substitute for homeownership.” If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!
Rent Increases Expected to Continue through 2015
CNBC’s Diana Olick recently reported that rents in the residential housing sector continued to rise in 2014. She interviewed Jed Kolko, Chief Economist at Trulia, who revealed:
“Rents are rising because of strong demand that supply hasn’t kept up with. Nearly all the new households are renters, and young people moving out of their parents’ homes will keep fueling rental demand.”
Where are rents headed in 2015?
The question now is where rents will be heading over the next twelve months. In a press release last week, Zillow chief economist Dr. Stan Humphries predicted residential rental prices will continue to climb in 2015:
“Home value appreciation will continue to cool down, from roughly 6 percent now to around 2.5 percent by the end of 2015. But rents will see no such slowdown, and will continue to grow around 3.5 percent annually throughout 2015. As renters’ costs keep going up, I expect the allure of fixed mortgage payments and a more stable housing market will entice many more otherwise content renters into the housing market.”
However, those potential buyers must make a decision quickly because, as Kolko explains:
“Paying more on rent makes it harder for would-be homebuyers to save for a down payment.”
Bottom Line
Ryan Severino, a senior economist at Reis, in Olick’s article stated the obvious:
“Landlords should still be able to push asking rent increases on to their tenants.”
If you are thinking about buying a home in 2015 instead of continuing to rent, it probably makes sense.
Paul & Karen Werling - Team Werling 