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Better to Buy Than Rent, Index Shows

Owning a home is expected to produce greater wealth, on average, than renting, shows a national index produced by Florida Atlantic University and Florida International University.

“The U.S. as a whole is still in clear buy territory,” says real estate economist Ken Johnson, one of the index’s authors. “The cities of Cincinnati, Chicago, Cleveland, and New York City are deep into buy territory.”

The Beracha, Hardin & Johnson Buy vs. Rent Index reveals whether current market conditions favor buying or renting a home in terms of wealth creation over a fixed holding period relative to historical market conditions or alternative investment opportunities. It examines the housing market within 23 of the largest cities in the U.S.

The index found that two cities – Miami and Portland — that have been in more favorable renting territory are “pulling back” and are now “coming back toward a toss-up between buying and renting,” says Johnson. “That’s a good sign for home pricing in Miami and Portland as it suggests prices are going to level off in these metro areas.”

Meanwhile, Dallas, Denver, and Houston are showing signs of dipping slightly deeper into renter territory due to flat income growth, and, in Houston particular, also rapid property appreciation, according to the index.

http://realtormag.realtor.org/daily-news/2015/09/21/better-buy-rent-index-shows#.VgMa0OfDFTg.email

Mortgage meltdown

Mortgage uncertainty

5-things-learned-mortgage

“I thought our mortgage loan was approved and ready to go, but at the last minute the originating bank balked at the purchase price of our home—they thought it was too high. This was in 2008 in Silicon Valley—we thought we were getting a bargain! The bank was based somewhere in the Midwest, though. They assigned an assessor to come check it out, but fortunately the assessment supported our purchase price. It was a suspenseful few days, though.”

Takeaway: Don’t count on your mortgage until it’s signed. And make sure you double-check your property assessment.

Count your costs

Keep track of your mounting costs

Keep track of your mounting costs

“I might have experienced short-term memory loss during my loan approval process. All the closing costs were a mystery to me, and my loan officer or Realtor had to explain each expense every single time I saw them in updated loan docs.”

Takeaway: Go over the closing costs with your real estate agent and take notes on what to expect. You’ll see these costs itemized again and again, so best to get familiar fast.

Budget time and money for repairs

Repairs will cost you time and money

Repairs will cost you time and money

“I was surprised and worried about the problems that the home inspector found. How serious are termites? How about mold? Can these things be fixed and will the house be safe? Or will we regret buying a house with possible structural and health-related issues?

“And how much money will it cost for us to do roof repairs ourselves when the seller is selling “as-is” and it’s a competitive market where we lost out on two previous houses we bid on? Related question: How long could we put off doing roof repairs, since we were raiding our savings to fund the down payment for the house?”

Takeaway: You can’t foresee problems that might arise during the inspection. You might be able to negotiate with the sellers, but you’ll want to have enough money left over after closing for any unexpected repairs. Be prepared to walk away from your dream home if needed.

Multiple visits are OK!

Don’t be shy about visiting and revisiting the house

couple visits home for sale

“When we were buying our first house, I didn’t know I could go back to look at the house again before we placed a bid. I was also shocked that I was able to meet the sellers, which ultimately put our bid over the edge and got us the house.

“We saw the house on a Saturday and bids were due on Monday. The open house was full of potential buyers and I felt like I hadn’t spent enough time really seeingthe entire house. Our agent arranged for us to go see the house one more time on Sunday afternoon. I assumed the house would be empty, but the sellers were home and welcomed us in to take another look around.

“They were so friendly and walked us through the house, explaining little nuances along the way. We submitted our bid the next day and found out the house was ours a few days later. Our agent told us there were seven bids and ours was the same price as another couple’s, but because the sellers met and remembered me, our bid won. I firmly believe it was meant to be, but I’m glad I went back for another peek.”

Takeaway: Look as many times as you need. This is the place you’ll call home, after all. Even in a competitive market, a second look could end up giving you the edge. (And while you certainly don’t want to harass the seller, don’t be afraid to personalize your offer with a letter describing any details about you, your family, and why you love their home. It could be enough to sway the seller in your favor.)

Learn (and love) thy neighbors

Neighbors can make or break your living situation

Neighbors can make or break your living situation

“Maybe this is a very urban issue, but I didn’t realize how neighbors can make—or break—a home. When my wife and I moved to our small co-op in Brooklyn, we knew we could get along with the three families living on the floors below us, but over the years they’ve become more than just neighbors. They’re good friends: We all had children together at about the same time, so our kids have grown up together, we babysit for one another, and we regularly get together for barbecues in our common space.

It’s what people always say about “community”—you really do want to be in a place that not only welcomes but embraces you, that you look forward to being a part of. Maybe I was just a cynical New Yorker before my wife and I bought this place, dismissive of the idea of community in a city where people cherish their anonymity, but once it happens, you realize how good it is. If I’m ever foolish enough to move away from here, I’ll definitely consider my potential neighbors on equal (or greater!) footing with the bathroom fixtures and the price per square foot.”

Takeaway: Your community is often as important as the home you’re living in. Take a good look at the neighborhood, and don’t be afraid to ask the neighbors questions. These people could become your babysitters, your carpool buddies, and your closest friends over the years.

http://www.realtor.com/advice/buy/5-lessons-from-first-time-homebuyers/

Don’t Believe the Housing Bubble Rumors — Unless You’re in These 7 Markets — The Motley Fool

The term “housing bubble” is thrown around right and left lately, but are we really at risk? Not unless you’re in these seven markets, says a new study.

Housing Bubble Rumors

Across the nation, rising home prices suggest a definite recovery from the 2008 recession — and there’s no doubt you’ve come across more than a few articles speculating on an impending real estate bubble.

But are we really in store for a collapse of the housing market? Only in certain parts of the country, says a new study conducted by real estate experts Norm Miller, Hahn Chair of Real Estate Finance in the School of Business Administration’s Burnham-Moores Center for Real Estate at the University of San Diego (USD), Michael Sklarz, president of Collateral Analytics and Jim Follain, senior vice president for research and development at Collateral Analytics.

Pooling new research from almost 400,000 neighborhoods and 20,000 surrounding zip codes across the country, Miller and his co-authors detail their findings in a white paper called, “Is a New Home Price Bubble Forming?” In the study, they focus on defining the characteristics of a “bubble” and finding economically sound ways of evaluating the intrinsic value of homes so as to take a more accurate look at where we are in terms of market sustainability.

Their findings uncover strong correlations between an area’s industry and its real estate market’s volatility. “In markets where wealth is volatile, say for markets with a heavy concentration of recently successful tech start-ups, changes in the value of these companies could also be considered a volatile factor driving prices,” states the research paper. “Changes in incomes, on the other hand, rarely change rapidly and are less likely to trigger rapid price declines except in markets with little industrial diversification.”

What does this mean for specific markets?
Miller cautions against the abounding use of “bubble” when describing the U.S. real estate market as a whole. True real estate bubbles, he adds, are more rare than may be commonly believed:

[A] reason why we do not use the term ‘price bubble’ freely is that real ones are very infrequent. Examples of real bubbles include, stock prices in 1929, 1987, and NASDAQ stocks in 2000, gold and silver in 1980, Japanese land and real estate prices in 1989-90, and, of course, home prices in the U.S. in 2005- 2007. Based on these rare examples, it is reasonable to say that true bubbles only occur on average once in a generation.

Still, several specific markets may have reached levels of unsustainability. Factors that drive this volatility include neighborhoods with low equity and high loan to value ratios, median household income, the value of the U.S. dollar against foreign currency, demand for coastal housing with limited supply and dependence on low interest rates.

The study cites the following areas as at risk for near-bubble levels, in part due to reliance on tech capital and rapidly changing valuations of start-up industry:

  • Miami, FL
  • Denver, CO
  • Portland, OR
  • San Diego, CA
  • Oakland/Berkeley, CA
  • San Francisco, CA
  • San Rafael, CA

U.S. housing as a whole remains sustainable
Miller and his team focused specifically on the neighborhood level, he says, because when markets collapse, they tend not to do so evenly across metro areas. Rather, looking at localized areas is key to getting accurate housing data.

And while some specific areas are inflated (and this could be seen as more of a “tech bubble” than a “real estate” bubble, where declines will likely be driven by falling stock prices), the U.S. as a whole is not on the precipice of a burst real estate bubble, Miller says.

“Our analysis based on a number of approaches we have used over the years to identify home price bubbles is that we are far from bubble territory on a national or metropolitan level and that anyone claiming otherwise is looking to sensationalize an issue which does not exist.”

http://www.fool.com/investing/general/2015/07/27/dont-believe-the-housing-bubble-rumors-unless-your.aspx?source=eogyholnk0000001

Before You Get Settle Into Your New Home, Make These Changes Immediately | Fox News
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The moving frenzy never ends: Even after you close, the to-do lists drag on and on — endless pages of bullet points that keep you up at night when all you want is to begin your new life. Some of them are fun, like redecorating and buying new furniture.

Others, not so much.

“When you move into a new house, you’re more concerned with decorating and taking stuff out you don’t like,” says Kevin Minto, president of Signet Home Inspections in Grass Valley, CA. “But let’s not forget about the less romantic things that are mundane — but more important in the long run.”

Once you’ve got the keys, feel free to give yourself a break. You deserve it! But don’t rest on your laurels too long — and make sure to do these eight things right away.

1. Change the locks

Before moving even one tiny piece of furniture into your new home, change the locks — or at least have them rekeyed. It’s not that you don’t trust the sellers (who are, we’re sure, perfectly respectable and upstanding citizens). It’s that you shouldn’t trust everyone who’s had contact with those keys over the years, any of whom could have copied the keys for some unsavory purpose.

2. Change the alarm batteries

Making sure your fire and carbon monoxide detectors have fresh batteries may not seem like a pressing issue while you’re in the middle of a stressful move (and aren’t they all), but it’s the kind of thing that gets ignored and then forgotten. Better to deal with it now, when the home is empty and you can make a quick sweep of the house — without lugging a ladder around furniture.

3. Review your home inspector’s report

Can’t find your inspector’s report? Minto says reports are often filed with the escrow papers — but don’t wait until something goes wrong to pull them out. A good home inspector will outline the most important issues in their report, so use their expertise as a guide for your first few days of ownership. If they’ve marked anything as particularly pressing, make sure to handle it before moving in.

4. Find the circuit breaker

If you were there during inspection, you should know where your junction box is, but if you don’t, finding it “should be the first and foremost thing that should be attended to,” Minto says. During a move, when you’re plugging all sorts of electrical doodads into the wall, you don’t want to be lost in the dark hunting for that elusive metal box. (While you’re there, find the water shut-off, too.)

Then, get familiar: If it’s not already well-marked, have your spouse or another family member stand in different parts of the house while you flip different switches, and make a note of which ones handle different rooms.

5. Deal with any water problems

Looking at that inspector’s report? Deal with water-related issues immediately, says Minto. These tend to be troublesome because they’re so easily ignored — “out of sight, out of mind,” he says. A leaky toilet might seem minor, but the steady drip can damage internal structural components.

Check your roof, too: If the rubber vent boots on your roof are leaking, you might not know it for a while.

“By the time they see it in a ceiling, there’s been a fair amount of water,” Minto says.

6. Caulk everything

This one isn’t mandatory, but caulking is a whole lot easier if you do it when the house is empty, letting you see all the nooks and crannies that might need a little sealing — and don’t forget the exterior. Minto says he sees caulking issues on “every home,” and while they might seem minor, it doesn’t take long before cracking gives way to leaks and even more water issues.

7. Plan your emergency exits

Before you begin bringing in furniture, walk through every room and decide how you would escape in an emergency. This can help you spot problem areas or rooms that need some adjustments — say, removing bars or adding egress windows to a basement.

8. Clean your gutters

BO-RING. Right? You can put this off until Day 2 of your big move, but don’t let the dullness of the task push you to procrastination: If the previous homeowners didn’t clean the gutters, you need to do so ASAP.

“I see gutters that are filled with organic materials start to rot and start to rust through,” Minto says. Take 30 minutes to clear them out, and you’ll be rewarded come the rainy season.

http://www.foxnews.com/leisure/2015/07/21/before-get-settle-into-your-new-home-make-these-changes-immediately/

Stop Paying Your Landlord's Mortgage | Keeping Current Matters

There are some people that have not purchased a home because they are uncomfortable taking on the obligation of a mortgage. Everyone should realize that, unless you are living with your parents rent free, you are paying a mortgage – either your mortgage or your landlord’s.

As The Joint Center for Housing Studies at Harvard University explains:

“Households must consume housing whether they own or rent. Not even accounting for more favorable tax treatment of owning, homeowners pay debt service to pay down their own principal while households that rent pay down the principal of a landlord plus a rate of return.  

That’s yet another reason owning often does—as Americans intuit—end up making more financial sense than renting.”

Christina Boyle, a Senior Vice President, Head of Single-Family Sales & Relationship Management at Freddie Mac, explains another benefit of securing a mortgage vs. paying rent:

“With a 30-year fixed rate mortgage, you’ll have the certainty & stability of knowing what your mortgage payment will be for the next 30 years – unlike rents which will continue to rise over the next three decades.”

As an owner, your mortgage payment is a form of ‘forced savings’ which allows you to have equity in your home that you can tap into later in life. As a renter, you guarantee the landlord is the person with that equity.

The graph below shows the widening gap in net worth between a homeowner and a renter:

Increasing Gap in Family Wealth | Keeping Current Matters

Bottom Line

Whether you are looking for a primary residence for the first time or are considering a vacation home on the shore, owning might make more sense than renting since home values and interest rates are projected to climb.

http://www.keepingcurrentmatters.com/2015/07/21/stop-paying-your-landlords-mortgage/?utm_campaign=Blog_Promo&utm_medium=Social&utm_source=Facebook&utm_content=dailyblogpost

First-time home buyers are back, baby—but a new wave of these (mostly) millennial prospectors is more likely than other buyers to face certain obstacles to nailing the deals, a new survey of our users shows.

According to the latest existing-home sales report by the National Association of Realtors®, first-time buyers in May represented 32% of all sales, up from 30% in April and 27% a year ago. On realtor.com®, we’ve been seeing record traffic all year, and among serious house hunters, the share of 25- to 34-year-olds—the upper reaches of the millennial generation—has substantially increased.

“This is the beginning of millennials now seriously getting into the home-buying market,” said Jonathan Smoke, our chief economist, during a panel discussion on Wednesday at the National Association of Real Estate Editors conference in Miami. The topic was “Mortgage Availability for Millennials and Other First-Time Buyers.”

“This age range historically is the critical time frame in which most people buy their first home,” Smoke said after analyzing a survey of more than 12,000 site visitors  from Jan. 1 through June 15. “Even last year, when the first-time buyer segment was depressed, 25- to 34-year-olds still represented the largest single age demographic of buyers.”

In January this year, about 54% of these older millennials said they were planning to buy a home within three months. By mid-June, that figure was 65%. In addition, older millennials and first-time buyers are more optimistic than the average buyer, saying that they are “very likely to purchase within the next 12 months.”

But these buyers are more likely than typical buyers to struggle to find a good house within their budget, to gather funds for a down payment, and to improve their credit score.

Struggling to qualify for a mortgage

For example, only 3% of prospective buyers report that difficulty qualifying for a mortgage is an impediment, but 65% of them are under 45. Smoke did an in-depth analysis of these buyers with mortgage difficulties.

“It’s not just millennials, but also young Generation Xers,” he told the audience in Miami.

Would-be buyers who report that they’re having a hard time getting a mortgage are60% more likely to be first-timers. They have been trying to buy for quite some time—probably because they haven’t been able to qualify for a loan. In fact, 25% report that they started looking to buy more than a year ago, which is 50% higher than the typical buyer.

Here are the key impediments that they face:

  • 60% cite needing to improve their credit score, the No. 1 issue for this type of buyer; that rate is almost 7 times that of the typical buyer.
  • 52% cite lacking funds for a down payment.
  • 39% say they cannot find a good house in their budget.
  • 15% cite being on a lease, which is 2.5 times that of the typical buyer.

Despite the challenges, these would-be buyers clearly aren’t giving up—they are 85% more likely to say that they plan to buy even if it takes a year or more.

http://www.realtor.com/news/trends/how-are-millennials-doing-in-this-housing-market/

 

  • Here’s the deal: Realtor.com says median home prices are up to $225,000, with the hottest markets right now in Dallas/Fort Worth, Texas; Santa Rosa and Vallejo-Fairfield, Calif.; and Denver. One measure of a hot market

    “Sellers in the hotter markets are seeing listings move between 29 and 49 days more quickly than in the rest of the country, and at an accelerating pace from just last month — an average of five days faster,” says Jonathan Smoke, chief economist at Realtor.com. “These markets are especially attractive to buyers … listings are viewed two to three times more often than the national average.”

    If you’re looking to jump into the market, be prepared, and don’t focus on cutting the perfect deal as much as on a realistic deal that gets you a home you love.

    “Buying at a lower price might be the wrong thought process in this market,” says Edward Kaminsky, president of Kaminsky Real Estate Group in Manhattan Beach, Calif. “Information moves so rapidly through Internet sites that the chances of getting a bargain have long gone away. The bigger concern is where will prices be and where will interest rates be in six months, one year or two years.”

    Kaminsky offers a blueprint for buyers before they start looking for a new house:

    • Know your budget.

    • Shop within your budget.

    • Adjust your expectations if the market has passed you.

    • Make educated offers, and find out as much as you can before writing the offer. See if there are offers on the home you want, and if they are over the asking price.

    • Consider increasing your down payment to get your loan.

    Another big part of the preparation process is getting pre-approved, says Casey Fleming, a mortgage advisor at San Jose, Calif.-based C2 Financial and author of the blog LoanGuide.com. “To get the best deal in a competitive market, make sure you get pre-approved,” he says.

    But what many real estate agents won’t say is that your pre-approval must be credible, Fleming says. “Buyers should remember the highest bid is not necessarily the best bid,” he says. “The bid most likely to close is the best bid. If the mortgage advisor is experienced and knowledgeable, and works for a lender that is credible, the buyer has a good chance of having their offer accepted even if the offer is lower than others.”

    One good reason to buy now, even if prices are up and the inventory situation is sketchy, is that interest rates remain reasonable (at 3.79% for a 30-year fixed mortgage loan, according to BankingMyWay.com.) “Buyers should be taking advantage of the low rates and locking in a fixed low rate for 30 years,” says Craig McCullough, a Washington, D.C., realtor. “Even if prices were going to stay the same, rates are predicted to increase over the next year or so.”

    “Half a point of interest in not an unlikely rise, and depending on sales price, it can mean several hundreds of dollars a month to a buyer,” he adds. “Add in the likely rise in sales prices, and tardy buyers could face a double-whammy on both sales price and interest rate.”

Today, many real estate conversations center on housing prices and where they may be headed. That is why we like the Home Price Expectation Survey. 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.

The results of their latest survey

The latest survey was released last week. Here are the results:

  • Home values will appreciate by 4.5% in 2014.
  • The average annual appreciation will be 3.94% over the next 5 years
  • The cumulative appreciation will be 19.7% by 2018.
  • Even the experts making up the most bearish quartile of the survey still are projecting a cumulative appreciation of almost 11% by 2018.

http://www.keepingcurrentmatters.com/2014/03/10/where-prices-are-headed-over-the-next-5-years-2/

Last month, the Federal Reserve, in a unanimous vote, decided to further decrease its bond purchasing. The bond purchases were the government’s stimulus package created to keep long term mortgage interest rates artificially low in order to help drive the housing market. Most experts believe that tapering will cause interest rates to increase as we move through the year.

Interest rates have remained relatively stable since the onset of the tapering in December. This is probably because the first round of increases had already been ‘priced into’ the equation last summer when rates skyrocketed by over a full percentage point just on the speculation that tapering would take place later in 2013.

However, as we move forward, most analysts believe rates will start to rise culminating in a rate close to a full percentage point higher than current rates by this time next year. For example, Freddie Mac, Fannie Mae, The Mortgage Bankers’ Association and the National Association of Realtors have all recently projected rates to be between 5-5.4% at this time next year.

Bottom Line

If you are a first time buyer or a move-up buyer, the cost of the mortgage on your new home will probably increase as we move through the year. If the timing makes sense, buying sooner rather than later may save you a substantial amount of money over the long term in lower mortgage payments.

http://www.keepingcurrentmatters.com/2014/02/11/buying-a-home-should-you-do-it-now-or-later/

2.4 BlogBased on prices, mortgage rates and soaring rents, there may have never been a better time in real estate history to purchase a home than right now. Here are five reasons purchasers should consider buying before the spring market arrives:

Supply Is Shrinking

With inventory declining in many regions, finding a home of your dreams may become more difficult going forward. There are buyers in more and more markets surprised that there is no longer a large assortment of houses to choose from. The best homes in the best locations sell first. Don’t miss the opportunity to get that ‘once-in-a-lifetime’ buy.

Price Increases Are on the Horizon

Prices are projected to appreciate by over 25% from now to 2018. First home buyers will probably pay more both in price and interest rate if they wait until the spring. Even if you are a move-up buyer, it will wind-up costing you more in net dollars as the home you will buy will appreciate at approximately the same rate as the house you are in now.

Owning a Home Helps Create Family Wealth

Whether you are rent or you own the home you are living in, you are paying a mortgage. Either you are paying your mortgage or your landlord’s. The Fed, in a recent study, revealed that the net worth of the average homeowner is 30 times greater than that of a renter.

Interest Rates Are Projected to Rise

The Mortgage Bankers Association, the National Association of Realtors, Freddie Mac and Fannie Mae have all projected that the 30-year mortgage interest rate will be over 5% by the this time next year. That is an increase of almost one full point over current rates.

Buy Low, Sell High

We would all agree that, when investing, we want to buy at the lowest price possible and hope to sell at the highest price. Housing can create family wealth as long as we follow this simple principle. Today, real estate is selling ‘low’ compared to where it will be next year. It’s time to buy.

http://www.keepingcurrentmatters.com/2014/02/04/5-reasons-to-buy-a-home-now-instead-of-spring-2/