Home Ownership-Should I Rent or BUY?

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If you go back to 2002, everyone wanted to buy a home, and we wanted everyone to be able to get a mortgage in order to buy a home. Unfortunately, we went too far in that direction and people who were not ready for homeownership entered into it. But there are times when we go too far in the other direction – when qualified people aren’t entering into homeownership. It’s up to you to give good advice so people don’t get caught in either situation (wanting a home they can’t afford or thinking they can’t achieve homeownership). Be a counselor – educate them with the heart of a teacher. Explain to them that if prices are going up, they should buy before prices go up even more and if prices are falling, they shouldn’t necessarily run away from the idea of owning a home.

NAR has a Home Affordability Index. This index measures whether or not a typical family could qualify for a mortgage loan on a typical home based on price, mortgage interest rate, down payment and ratios to debt. Know what the current numbers are and be able to explain them to others. You see, if prices are falling, affordability is getting better.

There’s cost vs. price and you have to be able to look at the overall picture. Maybe the time to buy a home is in a difficult market. You shouldn’t be worried about price; you should be worried about cost. Cost is determined by price and interest rates. If the price falls but the interest rates go up, then cost may be greater. The price may sound good, but interest rates impact the cost in different ways. Even if prices fall, they would have to fall 10% to make up for just a 1% increase in interest rates to get the same mortgage payment.

At times, people are afraid to buy and may think they’re doing the right thing by renting. Let’s take a look at the rent vs. buy situation. According to the Consumer Price Index, prices for rent of a primary residence have increased at an average rate of a little more than 3% per year for the last ten years. Experts are projecting rents to increase by 5% annually over the next few years. If you buy a home with a 30 year fixed mortgage and you don’t refinance, you know what your payments will be for the next 30 years. There are no surprises. And, at least for now, homeowners enjoy significant tax savings if they are paying mortgage interest.

The reason people buy homes is the same generation after generation. It’s what Americans do. They want the best education for their children, the safety, the sense of community, and all the other benefits surrounding home ownership. They don’t need the studies and statistics, but you need them so you can prove to people that their gut feelings are already good and that they should consider homeownership if not now, in the future when it’s the right choice and possible for them.

People have fear when it comes to buying. This fear comes from not understanding and it can cause paralysis. It’s up to you to make sure they understand these concepts.  You are the guardians of the American dream. Make sure everyone who wants to achieve this dream has a clear path and you have the lantern to light that path with knowledge.

 

More Home Ownership-The American Dream

A major benefit to homeownership is community. There is a greater sense of community among homeowners than there is with renters. Studies have shown that homeowners have a higher participation in local volunteer activities; participate more in local political activities and organizations; have higher voting rates; and are more involved in self-help activities (like the PTA and neighborhood crime watches) than those who rent. Homeowners do not move as frequently as renters, therefore providing more neighborhood stability. This helps reduce crime and support neighborhood upkeep and value.

Let’s look at homeownership as an investment. In 1998 the average Homeowner’s net worth exceeded that of renters by 31 times. In 2001 it was 36 times and eventually in 2007 it was all the way up to 46 times that of renters. Even in these toughest times, the wealth of the homeowner is still over 30 times that of renters. Now, homeownership isn’t about a guaranteed financial short-term return – the market goes up, down and back up again. We have to be prepared for the long-term and a key component to wealth is homeownership.  In Pew Research Center’s The Home as an Investment Survey, 81% of Americans agree that buying a home is still the best long-term investment a person can make.

There’s also the aspect of an educational investment. United States Immigrants all talk about home ownership because they want a better education for their children. It’s proven that children of homeowners achieve greater math and reading scores, they have lower high school dropout rates, and more years of schooling by the age of 25.

Not to mention there’s also a greater social network among homeowners than renters. You have a built in support system of neighbors and friends. You know the local merchants and they know you. You have that support system for you and your family – and it’s there for life.

There you have it. You now know the benefits to homeownership and the American dream.

 

The American Dream and The Idaho Dream

Home ownership has always been considered part of the American Dream.  And I have had the privilege of assisting several Idahoans recently of obtaining there own version of the Idaho Dream and get in their first homes.  What a great part of my job!

From KCM Blog

The good news is 96% of homeowners see homeownership as a positive experience and 88% of renters aspire to own a home. This is true in the United States more than any other country. Owning a part of our country has always been the American Dream and as an agent you are instrumental in this dream. It’s your job to help guide people to their ultimate goal of homeownership. The first thing you must realize is that homeownership is NOT about the money. In fact, if we look at Fannie Mae’s quarterly National Home Survey, as far back as we can go, the top four reasons for buying a home are the same. The top four reasons people buy a home are: It means having a good place to raise children and provide them with a good education To have a physical structure where their family feels safe It allows for more space for their family It gives them control over what they do with their living space including renovations and updates. Homeownership means something more to people and their families than just financial considerations. It’s up to you to be ready to communicate ALL the advantages to homeownership, not just the financial ones. In tomorrow’s post, we will address more advantages of homeownership.

More dark clouds?

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The Next Big Threat to Home Owners Looms

DAILY REAL ESTATE NEWS | MONDAY, JULY 16, 2012

While the housing market is showing signs of picking up across the country, housing experts warn of a new concern for home owners: resetting home equity lines of credit.

Home equity lines of credit often require low payments in the initial years as home owners only pay the interest on these loans at the onset. But later on, these loans reset with higher payments when home owners have to start paying down the principal.

About 44 percent of home owners with home equity lines of credit through Wells Fargo have paid only the minimum amount due on these loans, reports The New York Times.

Many borrowers may soon see their home equity lines of credit reset with higher payments and those higher payments may be too much for some borrowers.

The Office of the Comptroller of the Currency recently warned of the danger these resetting payments could pose for many home owners across the country. The OCC warned that nearly 60 percent of all home equity line balances would require payments of both principal and interest between 2014 and 2017.

The report highlights three main threats home equity borrowers face: Rising payments as they begin to pay back the principal and not just the interest on these loans; the risk of rising interest rates (many of these loans have adjustable rates); and refinancing challenges “because collateral values have declined significantly since these loans originated.”

Many of the home owners have seen their property values decrease since they first took out the home equity loans.

“These are among the riskiest loans in any bank’s portfolio,” The New York Times reports. “As borrowers are pressed to pay principal and interest, write-offs are almost certain to rise.”

 

What time is it? It's time for lunch!

What time is it? It's time for lunch! At least so goes the refrain from one my little granddaughters favorite cartoon.  But for us not so little ones, what time is it should be answered with: It's time to BUY!

We have left the bottom with regard to prices, interest rates are still at the historical bottom, waiting will only increase costs. So if you are on the fence, get off. If you would like to purchase but are not sur eif you can, find out.

Call me 208-602-0055  or email roger@lowesflatfee.com

Obstacles to Buying a Home!

Recent surveys have shown that more Americans have a thirst for buying real estate, with home affordability at record highs and mortgage rates at record lows. In fact, real estate buyer agents report a 59 percent increase in buyer inquiries this year compared to last year, according to a recent survey conducted by the Real Estate Buyer’s Agent Council.

So what’s preventing some buyers from making it all the way to the closing table?

REBAC surveyed its buyer agent members to determine the top issues preventing home buyers in their local markets from completing a home purchase. The top three obstacles identified in its 2012 survey are:

1. Economic insecurity


2. Difficulties in obtaining financing


3. Problems selling current home

The number of home buyers citing difficulties obtaining financing has fallen markedly in the last few years. In 2011, 65 percent of home buyers cited this as a big hurdle to purchasing, and 61 percent cited it in 2010. This year that number has dropped to 49 percent, as economic insecurity overtakes it in having the biggest effect on stalling home sales, according to the survey.

In 2011, the top three issues cited by buyers were difficulties obtaining financing, problems selling a current home, and holding out for lower prices, according to the survey.

 

Hot time, Summer in the city..."

Ada County Market Report courtesy on Marc Lebowitz of the Ada County Association of Realtors.

Sales in June 2012 were 690 in Ada County, an increase of 8.6% compared to June 2011.   Year-to-date sales are 3,333; 9.4% over the first six months of 2011. Dollar volume for June was up 21%! New homes sold in June increased 52% over new homes sold in June of 2011!!…and are up 65% YTD. Historically, June sales outpace May by an average of 5% or less.  June 2012 sales increased by 14% compared to May 2012. Of our total sales in June… 26% were distressed….down 4% from May 2012. In June 2011, 47% of our sales were distressed.  In January 56% of distressed properties were REOs and 44% were short sales.  In June the ratio was 58% short sales and 42% REOs. This is three consecutive months with short sales being the larger percentage of distressed properties sold. Whether this is a short term effect or a real indication that we are clearing out the “shadow inventory” remains to be seen in coming months. Pending sales at the end of June were 1,236; essentially unchanged from the end of May. In general pending sales in May are the highest of the year; and June the second highest.  The percentage of pending sales in distress decreased 1% from May, totaling 27% overall. This is the lowest number we’ve seen in several years. We were averaging close to 50% of pendings in distress over that last five months; but have decreased steadily since January.  Of Pending sales in distress, short sales outnumbered REO’s 3 to 1. At the end of June, we had 29% more sales pending than at the end of June 2011. June median home price was $174,000; up 13.4% from June 2011. Median home price is up 26% since January of this year and above $150,000 for five months running. New Homes median price for June was $221,727; an decrease of 8.3% from June 2011. The number of houses available increased ever so slightly for the third consecutive month. At the end of June our total active inventory was 2,054 homes. This is up <1% from May and 29% less than last year at this time. At the same time, the percentage of distressed active inventory dipped 1% to 26%. This is the lowest number we’ve seen in several years. We have been hovering between 33% and 36% for the last year. We remain well below the 40% levels set last spring….when we were on the increase. Of our Distressed Inventory 92% is Short Sales and only 8% is REO; unchanged from last month. The only price point with an increase in available properties is $160,000 to $200,000 which added 21 units in June. In Ada County we now have less than 3.2 months of inventory on hand. The price category in shortest supply is <$119,000 with 1.7 months. In the range of $120,000 to $159,999 we have 2.4 months. All price points up to $400,000 have less than 4 month’s supply. We have benefited for nearly two years from inventory levels much lower than national average. Multiple offers are much more prevalent; now becoming the norm. Based on June sold data, our most desirable price point is $120,000 to $200,000 which increased by 26% from May; The next largest price point sold is <$120,000 at 14% of all sales; up 17% from last month.  The biggest increase was in sales between $200,000 and $250,000; which were up 300% from January 2012. Comparing Sales to Inventory, for key price points… @<$120,000 we sold 57% of all that we had in June; for $120,000 to $160,000 we sold 41% of all that was available; for $160,0000 to $200,000 we sold 24% of the total available. We all received our annual tax assessments in June. Mine finally went up after three years of declines. First time that I can recall that I was happy to be paying more taxes. My crystal ball is clouded by all the smoke in the air today, but I just don’t see any looming threat to our continued recovery. I’m still going to stick with my conservative forecast for the rest of the year; single digit sales increase and double digit median price increase.

 

PTC Index for Ada and Canyon Counties

The PTC Index is a monthly measurement of the vibrancy of the Treasure Valley real estate market. Based on a custom weighted algorithm, it combines nine critical measurements of the real estate market into a single, useful number: the PTC Index. To give you some perspective, when the market was at its most active point in 2005, the PTC Index average would have been 225. In January of 2010 we reached a low of 28. Though times have changed, the need for this data is greater than ever.

May 2012

Building Permits	261
New Home Sales	151
Existing Home Sales	706
Refinance	1268
Average Sales Price	163570
Financial-Bond Market(10-yr Treasury)	1.8
Days on Market	78.5
Distressed(Short Sales and REO)	2690
Notices of Default	368
PTC Index	199

The PTC Index hits the highest point of the year as we officially kick off the summer. First, building permits surged by nearly 100% in the year-ago period; building permits are up 10% from the month prior. New home sales were at their highest levels in May, up 12% from the month prior and doubled over May 2011. Refinances in May 2012 versus May 2011 are up 231% while up slightly by 3.6% from the month prior. The disparity mostly likely stems from the current governmental programs for eligible home owners and record-low interest rates. The average sales price in the Treasure Valley also inched up from April by 12% and by nearly 25% from a year ago. Notices of default dropped from the previous month by 19% while distressed properties inched up slightly by just one half of a percentage point, but still down from a year ago by 28.8%.

Thanks to Pioneer Title Company for this compilation!

 

Boise-Nampa Area and Multiple Offers

Here is a national story that illustrates what is happening in our local market. We have multiple offers in the entry level to mid level homes. Buyers need to compare to value, not listed price as many homes are selling above listed price. As a result of low inventory levels we have seen an increase in values.

RISMEDIA, Monday, July 09, 2012— Record tight inventories are making it increasingly difficult for growing numbers of buyers, who are creating multiple-bid environments in markets that haven’t seen buyers battle over homes in six years. Buyers are back but sellers aren’t, especially in Western markets recovering from large volumes of foreclosures. The result is that inventories are still tightening as the spring buying season ends. Buyers are fighting over what’s available, often to the benefit of those sellers who took a risk in this year’s evolving marketplace. Prices are reported to be on the uptrend with 62 percent of REALTORS® reporting constant or increasing prices compared to the same time a year ago, according to the National Association of REALTORS’® (NAR) REALTOR® Confidence Index for May29 -June 8, 2012 that was released recently. Buyer demand is reported to be growing faster than supply, and many REALTORS® are reporting multiple offers. However, buyer foot traffic slowed in May compared to last year, perhaps as buyers grew discouraged by slim pickings. However, buyer traffic is still well above the moderate level, but seller traffic is flat, according to the NAR survey. First-time homebuyers accounted for 34 percent of total buyers. Normally first-time buyers are in the neighborhood of 40 percent of total residential sales, according to NAR’s Profile of Home Buyers and Sellers. A majority of the 145 markets monitored by NAR Research experienced slower foot traffic in May of this year relative to the same time in 2011. The data, provided by SentriLock, LLC., is based on the total number of visits to properties as recorded on electronic clock boxes. Foot traffic was lower over the 12 months ending in May in 60 percent of the markets, while 35 percent expanded and 5 percent were unchanged. This moderating pattern suggests a broad based decline in the late spring following an equally broad-based expansion in the late spring/summer of 2011 and early spring of this year. Multiple bids are changing the playing field in a number of markets this spring and summer. Many agents new to the business who have little experience with them are dealing with a sudden and unexpected competition for homes brought about by inventors more than 20 percent below those of a year ago. “Remember the “Roaring ’90s?” Those days when you could list your house on Friday and on Saturday people would be parked in your driveway writing offers and good faith checks on the hood of their cars? Multiple offers were the norm and offered sellers a generous selection of offers from which to choose. Believe it or not. we are experiencing a trend toward multiple offers even in this still difficult market and there is evidence that this trend will continue as buyers compete in a market with limited inventory,” reported REALTOR® Noel Crider of Auburn, Calif. In Seattle, multiple offers on beginner houses in Seattle are common again reports Phil Leng of Kirkland, Wash. and in Austin, broker Gwynn Teal Carpenter reports, “It’s happened again! We are in one of those real estate markets where we are seeing homes with multiple offers. In Austin Texas, the market is so sizzling hot that it isn’t unusual to have more than 2 offers on a fantastic priced and conditioned home.”

 

Can you sell my house?

Here are some great suggestions when comes time to sell your home.

Courtesy of KCM Blog.

The most important need of anyone attempting to sell their house is – TO GET IT SOLD!

ACCESS

A seller should be willing to give almost unlimited access to potential purchasers if they are looking to sell. Any restrictions to showing the home will result in fewer buyers which could result in a lower price, a longer time on market or both.

CONDITION

Condition goes a long way in determining whether or not a house sells. Bringing in a professional stager is the ultimate answer. If that is not possible, the seller should at least be willing to remove all the clutter and ‘throw on’ a fresh coat of paint where necessary.

MORTGAGE OPTIONS

Very few owners are willing to give a first mortgage to a potential buyer. However, there are other mortgage options they perhaps should consider. Allowing FHA financing is an example. Perhaps, they would be willing to help the buyer out with a seller’s concession. The easier it is for a purchaser to finance the home, the greater the chance more buyers will be interested.

PRICE

Every house must be sold twice: to the buyer and to the bank if a mortgage is involved. To get a home sold the price has to be right. There are studies that have shown that listing a house at a price greater than the market warrants results in that home taking a longer time to sell and also selling for less money.

 

Rising Rents in Idaho and the U.S.

 

Short Sale Assistance for Military Families

Military families have just been given help to sell their homes when forced to move because of their service. Permanent Change of Station (PCS) orders often require quick moves and can create hardship for military homeowners who are underwater on their mortgages and therefore cannot sell their home without taking a loss. Homeowners who receive (PCS) orders now will be eligible to sell their homes in a short sale even if they are current on their mortgage. Previously, many service members felt their only option was either to maintain financial obligations on two residences or to default on their mortgage.

Under the new policy, Fannie Mae and Freddie Mac will not pursue a deficiency judgment or any cash contribution or promissory note from members of the military with a change in duty station for any property purchased on or before June 30, 2012.

Edward J. DeMarco, Acting Director of the Federal Housing Finance Agency (FHFA) explained:

“It is in everyone’s interest for the men and women serving in our armed forces to focus on the important job they are doing defending our country, rather than worry about the maintenance and leasing of a property in another jurisdiction.”

 

Boise-Should I wait to sell my house?

I am reprinting an article from KCM Blog, addressing recovering values and whether it is time to sell. In the Treasure Valley market we have seen values take a marked turn to appreciation and our inventory levels are still restricted. Will it continue? And for how long and at what rate? I wish I knew.

There have been more and more reports showing that the housing market is beginning to recover. This has caused angst among some homeowners who are considering whether or not to sell their house in the next several months. With the market showing signs of life, the question becomes should they wait to sell because prices may be about to increase.

The data proves that sales are increasing nicely. However, there is no consensus on home prices yet. At the National Association of Real Estate Editors conference in Denver at the end of June, Lawrence Yun, chief economist of the National Association of Realtors (NAR) said:

“This time next year, there could be a 10% price appreciation. I would not be surprised to see that.”

During the same week, Morgan Stanley came out with a housing report that stated where they believed housing values were headed over the next eighteen months:

“We estimate a drop of 5-10% more.”

Which direction are prices headed? As we previously stated, there are opinions on both ends of the argument.

However, if we look at the Home Expectation Survey, which asks a distinguished panel of over 100 economists, investment strategists, and housing market experts to give their 5-year expectations for future home prices in the United States, we see the average cumulative appreciation expected by the end of next year (2013) is only .9%.

Should you sell now or wait? Does it make sense to delay your move for 18 months in order to get less than a 1% increase in your selling price? Only you can answer that question.

 

Celebrating Homeownership in America

Celebrating homeownership in America by marclebowitz with credit to the Kansas City Star newspaper Homeownership has a rich history in America, and one worth remembering, as we celebrate National Homeownership Month in June. T.S. Elliot once wrote: “Home is where one starts from.” Realtors are in the business of giving people a place to start from — no matter where they come from and no matter what their background. Helping people realize the American Dream of homeownership makes a positive difference in the personal lives of buyers, as well as for the country as a whole. Throughout history, homeownership has played a major role in the growth of our nation’s economy. America’s homeownership rate hovered around 46 percent between 1900 and 1920, before declining to a low of 44 percent by 1940. After World War II, the homeownership rate rose dramatically — to 55 percent by 1950 — as the postwar economic boom contributed to American prosperity. Purchases of homes were central to building that prosperity, and by 1960, homeownership had grown to 60 percent, thanks to favorable tax treatment and attractive financing related to homeownership. Today, America’s national homeownership rate stands at 65 percent, with Idaho showing one of the highest in the nations at 71.0%, according to the U.S. Census Bureau. Homeownership offers both immediate benefits and long-term value. Many homeowners will tell you that the most valuable aspect of owning a home is simply the life that happens within it, from birthday parties and backyard barbecues to family movie nights and good night hugs. Not only does homeownership create a solid foundation on which to build lifelong memories, it’s also how many American families begin to accumulate wealth. According to data from the Federal Reserve Board, a homeowner’s net worth is 45 times that of a renter’s. Local housing markets may experience temporary price declines as well as rapid price increases in the short term, but historically, home values rise over the long term. When purchased for the long term, housing is one of the safest investments consumers can make. In addition to the savings accumulated through a buildup of equity and tax advantages, a home provides shelter – a benefit that a paper investment cannot provide. Not only does homeownership offer financial benefits for those who own homes, housing is also a key driver in our national economy, accounting for more than 15 percent of the U.S. Gross Domestic Product and generating more than 2.5 million private-sector jobs in an average year. While the nation celebrates Homeownership Month in June, locally there is also reason to celebrate the housing market. According to the May 2012 real estate market report released by the Ada County Association of Realtors (ACAR), the Treasure Valley shows continued improvement, including double-digit growth sales and median home value. Among the highlights of the report is the existing home sales category, which saw a 9 percent increase YTD over the same period in 2011. Median sales prices for new and existing homes in May 2012 also showed positive growth with a 25 percent increase over May 2011. According to ACAR’s data, pending sales of new and existing homes increased 5 percent in May 2012 vs. May 2011, indicating the continuation of the positive trend that has been seen in our market in recent months. As we celebrate our nations independence this week; let’s remember the role of homeownership in creating the land that we love.

 

Making Hay While the Sun Shines

My posts have slowed way down the last couple of weeks. We held our regular family reunion at McCall, or as we call it Lowe Family Fun Days! It was a great time but then I had to spend the next week getting caught back up, I had several closings both while I was gone and the week after I got home. Which is great but it has been busy, busy.

Then yesterday I am finishing up three offers that I started after falling asleep from pain medicine for an abscess tooth. What fun! But as the old adage states, you need to make hay while the sun shines. (Regardless of the tooth pain!)

Leadership & Courage Gave Birth To This Nation

Enjoy the Holiday!