- ELIZABETH CHASE, Realtor, ABR HARBOURTOWNE REAL ESTATE Contact: email@example.com "Helping You Unlock the Home of Your Dreams"
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Pets are having more of an influence in home buying and selling as well as renovation, a new study by the National Association of REALTORS® shows. Eighty-one percent of Americans say that animal-related considerations play a role when deciding on their next living situation, according to the 2017 Animal House: Remodeling Impact report.
“In 2016, 61 percent of U.S. households either have a pet or plan to get one in the future, so it is important to understand the unique needs and wants of animal owners when it comes to homeownership ” says NAR President William E. Brown. “REALTORS® understand that when someone buys a home, they are buying it with the needs of their whole family in mind; ask pet owners, and they will enthusiastically agree that their animals are part of their family.”
Indeed, a whopping 99 percent of pet owners say they consider the animal part of the family. Eighty-nine percent of respondents say they would not give up their animal because of housing restrictions or limitations. Home owners are willing to move for their pets too. Twelve percent of pet owners have moved to accommodate their animal; 19 percent would consider moving to accommodate their animal in the future.
Pets could cost you real estate deals. REALTORS® surveyed say that about one-third of their pet-owning clients often or very often will refuse to make an offer on a home because it is not a good match for their pet. Sixty-one percent of buyers, REALTORS® say, find it difficult or very difficult to locate a rental property or a homeowners association that accommodates pets.
Animals are having a say when it comes to the selling of a home too. Sixty-seven percent of REALTORS® say animals have a moderate to major effect on selling a home. About two-thirds of REALTORS® say that they advise pet-owning sellers to always replace things in the home damaged by an animal, have the home professionally cleaned to remove any animal scents, and to take animals out of the home during a showing or open house.
Pets are serving as guides to renovations too. Fifty-two percent of respondents say they had completed a home renovation project specifically to accommodate their pet. Twenty-three percent of those remodelers had built a fence around their yard; 12 percent added a dog door; and 10 percent installed laminate flooring.
Realizing the growing importance of pets in real estate matters, more real estate professionals are marketing themselves as pet friendly. Eighty percent of REALTORS® surveyed by NAR say they consider themselves animal lovers. Twelve percent of the REALTORS® say they volunteer for an organization that helps animals, and 21 percent plan to do so in the future.
13More Americans are showing optimism toward their personal finances and the housing market, a reversal to a five-month decline.
In particular, Americans are more upbeat about home prices, home selling, their rising household incomes, and they’re less scared about losing their jobs, according to Fannie Mae’s Home Purchase Sentiment Index, a survey of 1,000 Americans in January about their attitudes toward housing.
“Three months after the presidential election, measures of consumer optimism regarding personal financial prospects and the economy are at or near the highest levels we’ve seen in the nearly seven-year history of the National Housing Survey,” says Doug Duncan, senior vice president and chief economist at Fannie Mae. “However, any significant acceleration in housing activity will depend on whether consumers’ favorable expectations are realized in the form of income gains sufficient to offset constrained housing affordability. If consumers’ anticipation of further increases in home prices and mortgage rates materialize over the next 12 months, then we may see housing affordability tighten even more.”
Here’s a closer look at some of the findings from the latest survey:
- 42% of Americans believe home prices will increase, a month-over-month uptick of 7 percentage points in January.
- 69% of Americans say they are not concerned about losing their job, a 1 percentage point increase from December 2016.
- 15% of Americans say now is a good time to sell, a 2 percentage point month-over-month increase.
- 15% of Americans who say their household income is significantly higher than it was 12 months ago, a month-over-month increase of 5 percentage points.
- 29% of Americans who say now is a good time to buy a home, a 3 percentage drop from December 2016 and a new survey low from May and September 2016.
Source: Fannie Mae
Confusion over down payment requirements is hindering some consumers’ confidence about buying a home.
For the past three years, the median down payment for first-time buyers has been 6 percent and 14 percent for repeat buyers, according to the National Association of REALTORS®’ Profile of Home Buyers and Sellers. Yet, when consumers are asked about the down payment amount they need to buy, 87 percent of non-owners say that a down payment of 10 percent or more is necessary.
“Current non-owners’ ultimate goal of owning a home may not be as far-fetched as they believe,” says NAR President William E. Brown. “There are mortgage options available for creditworthy borrowers with manageable levels of debt and smaller down payments. Those interested in buying their first home in 2017 should review their finances, sit down with a lender to see if they qualify for a mortgage, and find a REALTOR® to help them get started on their home search.” (Read: Smaller Down Payments Lure More Buyers and 3% Down Payments May Be Game Changer)
Consumers in general have a favorable view over homeownership: 90 percent of home owners and about eight in 10 non-homeowners indicate that owning a home is part of their American Dream, according to NAR’s Aspiring Home Buyer Profile, which included 2016 survey data from its Housing Opportunities and Market Experience (HOME) survey. That said, optimism about now being a good time to buy is starting to diminish among non-homeowners.
In the first quarter of 2016, 63 percent of consumers said now is a good time to buy. By the fourth quarter of last year, that percentage had dipped to 55 percent.
“Nearly all non-homeowners said they want to own a home in the future (87 percent), but it’s evident that higher rents and home prices – up 41 percent in the past five years – along with limited entry-level supply and repaying student debt have combined to make buying a challenging goal,” says Lawrence Yun, NAR’s chief economist. “It’s also a little surprise that non-owners in the West – where price appreciation has been the strongest – were the least optimistic about buying.”
Not surprisingly, however, the number one reason non-owners cites as not wanting to own: The inability to afford homeownership. More than half of non-owners in 2016 said they could not afford to buy a home; about one-fifth of respondents said they needed the flexibility of renting.
Student debt is increasingly sidelining many would-be buyers too. Of the 39 percent of non-homeowners who said they had student debt in the second quarter, a majority indicated they were not very or not at all comfortable taking on a mortgage (59 percent). A separate study last year conducted by NAR similarly found that nearly three-quarters of non-homeowners who are employed and repaying their student loans on time believe their debt is preventing them from purchasing a home; slightly more than half of borrowers expected that delay to be five years or more.
“In addition to having to postpone important milestones such as getting married and starting a family, many young adults are financially falling behind previous generations in part because of having to prioritize repaying their sizeable student loans over buying a home and saving for retirement,” says Yun.
Source: “Aspiring Home Buyers Profile,” National Association of REALTORS® (February 2017)
Housing affordability dropped to the lowest level in seven years at the end of 2016. It now takes 22.2 percent of a person’s median income to make the monthly principal and interest payment on a median-priced home, according to new findings from Black Knight Financial Services. That amounts to a 10 percent increase in the fourth quarter alone.
Economists blame rising mortgage rates, price increases, and sluggish income growth for the growing housing affordability problem.
Home prices increased gradually throughout last year. In December 2016, home prices were 7.2 percent higher compared to a year ago, according to CoreLogic. Some markets, such as California, Colorado, and Texas, prices are reaching new record highs as well.
Still, “nationally, homes remain more affordable than pre-bubble ‘norms,’ but it’s clear that the market is now experiencing the most pressure — from an affordability perspective — since the housing recovery began,” says Ben Graboske, executive vice president of Black Knight Data & Analytics.
Source: “Houses Are the Least Affordable They’ve Been in Seven Years: Here’s Why,” CNBC (Feb. 7, 2017)
There’s still a lot of equity-building potential for home owners. Freddie Mac’s Multi-Indicator Market Index stands at 86, which the mortgage giant says is on the “outer edge of its historic benchmark range of housing activity.”
The index has climbed 45 percent since its all-time low set in 2010. It continues to trail way below its historic benchmark normalized of 100 and far away from its high of 121.7.
“The purchase applications indicator is up nearly 19 percent from last year, indicating strong housing demand and a market that’s poised to close out the best year in home sales in a decade,” says Len Kiefer, Freddie Mac’s deputy chief economist. “National home prices have surpassed their pre-recession nominal peak with about half of states still below their pre-recession peak. Factoring in low mortgage rates and modest income gains, house prices still have some room to run, as indicated by the MiMi payment-to-income indicator which is nearly 33 percent below its historic benchmark.”
Forty-one of the 50 states, plus the District of Columbia, have MiMi values within range of benchmark averages, Freddie Mac reports. The following states rank in the top five: Utah (100.4), Colorado (97.8), Hawaii (97), Idaho (96.7) and North Dakota and Oregon at (95.8).
The most improved states year-over-year are: Nevada (+11.74 percent), Florida (+11.58 percent), Massachusetts (+11.35 percent), Mississippi (+9.76 percent), and New Jersey (+9.61 percent). On a metro-level, the most improving areas are: Orlando, Fla. (+17.85 percent), Worcester, Mass. (+14.49 percent) Tampa, Fla. (+14.36 percent), Chattanooga, Tenn. (+14.20 percent), and Dallas, Texas (+13.89 percent).
An increase in mortgage rates likely will dampen affordability and demand for home sales next year, Kiefer says.
“Though we’ve come far, as indicated in the national statistics, housing still has significant room for improvement in many markets across the country as indicated by the fact that 24 out of the top 100 metros are still more than 20 percent below their historic benchmark, as measured by MiMi,” Kiefer says.
Source: Freddie Mac
Frigid temperatures and treacherous winter weather are here to stay a little while longer, since the groundhog Punxsutawney Phil saw his shadow this morning, signaling six more weeks of winter.
This weather prediction may even bring more deals for buyers wanting to kickstart their home search. Typically winter months have a higher number of housing bargains due to stressful weather conditions and lack of competition, with February coming out on top as the month with the most housing deals.
In fact, a recent study by Attom Data Solutions looked at the sales of 50 million homes from 2000 through 2016 and found that the median selling price during February was around $104 per square foot, a 6 percent discount over the rest of the months of the year.
With these housing bargains, why aren’t more people buying this time of year? According to Daren Blomquist, senior vice president at Attom Data Solutions, besides the difficult winter weather, many potential buyers are cash-strapped after the holidays and don’t want move during the middle of the school year.
Sellers in the winter months are also willing to make a deal. “It’s a buyer’s market during the colder winter months,” says NAR President William E. Brown. “When sellers list in the winter, they know it’s slower, so they’re more motivated and more willing to negotiate.”
If your buyers aren’t quite ready, let them know that March and April are also good months for bargains, boasting discounts of 4 percent and 2 percent over the annualized median price of $110 per square foot.
Source: “Better Deals on Homes Can Chase Away Winter Doldrums,” The New York Times (Feb. 1, 2017)
The Chicago Cubs’ 108-year journey to its World Series championship this year provides some lessons about strategic investment strategies that can be applied to the real estate industry, says David Scherer, cofounder of Chicago-based private equity firm Origin Investments. Theo Epstein, president of baseball operations for the Cubs, learned these lessons from Billy Beane, general manager of the Oakland Athletics and Boston Red Sox, which were then chronicled in the book Moneyball. How can you and your clients compare real estate investment to baseball? Here are Scherer’s six real estate lessons from the Cubs:
- Don’t follow the herd. Moneyball shows investors that information alone doesn’t make a market efficient; it’s what you do with it. Beane and Epstein used statistics widely available to fellow general managers, who instead trusted traditional scouting reports. The same can be true of investment strategies: Profitable choices often are ignored in popular vehicles such as index funds. Investors can’t beat the market if they mirror the market. Investors can diversify a portfolio with alternative investments such as commercial real estate, which is not correlated to pubic equities.
- Be ready to change your lineup. While baseball players often enjoy long-term contracts based on past performance, championship-caliber teams are buoyed by veterans who show immediate productivity even when inked to short-term deals. Likewise, investors should remember not to fall in love with specific assets in their portfolios. A property may show its fastest appreciation in just a few years’ time. While it may continue to bring in steady rents, its timetable for maximum appreciation might be much shorter. Strategic private equity real estate managers know how to minimize risk and maximize investment value.
- Don’t be scared off by shortcomings. As a GM, Beane, and then Epstein, were successful with players other teams had discarded because of age, injury, lack of speed, or awkward mechanics. But those players had talents that were needed or that could be improved. Similarly, value investors look for companies with fixable problems or properties that have been overlooked due to age, management, or marketing issues. In real estate, this is known as value-added investing. Thoughtful and strategic business plans can turn around undervalued assets.
- Don’t trade at the deadline. The best deals made by championship teams are those made throughout the year, not just at the trading deadline when bidding is fiercest. Beane once told ESPN, “I don’t want to make decisions based on micro-events [or] the small sample size.” In investing, the price swings of stocks and bonds show that markets constantly overreact to new information. Smart investors anticipate market changes rather than reacting to them. Choosing less volatile alternatives, such as commercial real estate, will give a portfolio added protection compared to frequently traded REITS.
- Look for a track record. Like Beane did years before, Epstein drafted out of college rather than high school, looking for experience that could translate more closely to the big leagues. It’s best not to choose investments based on a single top-rated performance — it’s unlikely to repeat, compared to one that has rated near the top for several years. Similarly, in real estate, we don’t judge an investment’s projected internal rate of return (IRR) without comparing projected and actual IRRs for a manager’s past choices.
- Measure the right things. The Moneyball approach picked players based not only on their batting average but their on-base percentage, since walks proved as useful as singles. Real estate investors looking to build wealth might want to focus not on IRR alone as much as types of risk and multiple on equity, the degree to which property values are expected to rise.
Source: David Scherer, cofounder of Origin Investments
Under a backdrop of rising mortgage rates and shrinking consumer confidence, expect modest gains in existing-home sales in the new year, according to the National Association of REALTORS®’ 2017 housing forecast, released Wednesday.
The decline in affordability in many parts of the country is taking a toll on the public’s outlook about their housing market, says Lawrence Yun, NAR’s chief economist.
“Rents and home prices outpacing incomes and scant supply in the affordable price range has been a prominent headwind for many prospective buyers this year,” Yun says. “Making matters worse, the unwelcoming reality of higher mortgage rates since the election is likely further holding back confidence. Younger households, renters, and those living in the costlier West region — where prices have soared in recent months — are the least optimistic about buying.”
Still, a majority of more than 2,700 households surveyed by NAR say now is a good time to buy a home, but consumer confidence has retreated significantly among renters. Fifty-seven percent of renters say now is a good time to buy, down from 68 percent a year ago. Meanwhile, 78 percent of homeowners say now is a good time to make a home purchase.
Despite this year’s dip in buyer enthusiasm, existing-home sales are expected to close 2016 at 5.42 million, 3.3 percent more than 2015 and making it the best year since 2006 (6.47 million), NAR reports. Sales in 2017 are forecast to grow by about 2 percent and reach 5.52 million.
“Although the economy is expected to continue to expand with around 2 million net new job creations, existing home sales are expected to see little expansion next year because of affordability tensions from rising mortgage rates and prices continuing to outpace income growth,” says Yun.
The national median existing-home price is forecasted to rise around 5 percent this year and by 4 percent in 2017.
Met with rising home prices, home buyers will also see higher mortgage rates in the new year. Mortgage rates are expected to jump to about 4.6 percent by the end of next year. The higher mortgage rates could also slow the pace of homeowners listing their homes for sale, NAR notes.
“Some would-be sellers may be reluctant to move up or trade down — especially if they’ve refinanced in recent years,” Yun says. “That’s why it’s extremely necessary for home builders to step up their production of homes catering to buyers in the affordable price range. Otherwise the nation’s low homeownership rate will struggle to shift higher in 2017.”
Nevertheless, there are some silver linings in the look ahead. Yun predicts buyer demand will stay strong for the most part due to continued job growth and more millennials reaching their prime buying years. Plus, the share of households believing the economy is improving increased to 54 percent in the fourth quarter and is at its highest level since NAR’s survey debuted a year ago. The most optimistic about the economy are those under the age of 44, living in urban areas, and having higher incomes.
Tuesday |The Mortgage Bankers Association addresses the difficulties real estate professionals and consumers are still having adjusting to changes in the closing process.
Since federal closing rules went into effect last year, real estate agents, lenders, and others in the industry say they’ve seen a mix of progress and challenges. That’s not surprising. The changes, which replaced the HUD-1 Settlement Form with a Closing Disclosure and the Good Faith Estimate with a Loan Estimate and imposed a number of requirements and deadlines, represent sweeping reforms to how closings are managed in the United States. Among the issues still lingering is the difficulty some agents say they’re facing in getting access to the Closing Disclosure.
To get a sense of how the process is going at the one-year mark, Pete Mills, senior vice president of residential policy and member engagement at the Mortgage Bankers Association, and Joe Ventrone, deputy chief of regulatory affairs at NAR, sat down for a brief Q&A. In their discussion, they refer to the rules either as the “Know Before You Owe” rules, or TRID, which stands for RESPA-TILA Integrated Disclosure. In both cases, they’re referring to the closing rule changes that were finalized in 2013 and took effect last year on Oct. 3.
Get more information on the changes to the closing process at realtor.org.
Joe Ventrone, NAR Deputy Chief of Regulatory Affairs: The “TRID” or “Know Before You Owe” (KBYO) rule has been a top priority for the industry since it was finalized in 2013, but we regularly hear from members and colleagues in the industry who have lingering concerns. Before we discuss how the industry is operating now, let’s talk about the goals of the rule. From MBA’s perspective, why did these changes happen?
Pete Mills, MBA Senior Vice President of Residential Policy and Member Engagement: Homebuyers invest a lot of energy in shopping for just the right home to meet their needs. Borrowers should be shopping for a mortgage like they shop for a home. Not every borrower is the same and not every lender or loan product is the same. As many REALTORS® can recall, before KBYO borrowers were getting a lot of information and paper that was not easy to decipher. With the rule and these new forms, the Loan Estimate (LE) and the Closing Disclosure (CD), the Consumer Financial Protection Bureau (CFPB) was trying to consolidate overlapping disclosures, reduce confusion about loan terms and details for borrowers, and make it easier for consumers to shop and compare loan options. As important as it is for buyers to find the right home, it is just as important for them to find the right loan and understand all the key terms of that loan.
Joe Ventrone: This was a challenging implementation and everyone in the process — lenders, settlement service providers, and REALTORS® — did a lot of work to get ready and be able to help consumers understand the new process. For their part, REALTORS® did a lot of work in the run-up to KBYO to educate themselves on what was coming. After all, staying current on developing issues is critical in this new regulatory environment. We believe the reforms were important and will ultimately aid the consumer by offering a clearer picture of their mortgage, but there’s no question there are still bumps in the road that need to be smoothed over. How does MBA see it?
Pete Mills: The KBYO rule was undoubtedly the most complex reform of the home mortgage disclosure regime ever undertaken and there are definitely issues that need to be addressed. Despite the detailed nature of the rule, the first year of implementation has uncovered a number of challenges and questions. This resulted in a variety of different interpretations by different parties to the loan transaction that threatened to jam up the system, particularly in the secondary market. Fortunately, the CFPB heeded the industry’s call for a good-faith compliance period, and in August released a proposed rule to address some of the outstanding questions and concerns.
Joe Ventrone: Is there anything specific that REALTORS® should know about the proposed changes to the KBYO rule that might help home buyers and refinancers?
Pete Mills: The proposed changes to the rule provides lenders greater clarity on a wide variety of technical issues that are impeding the ability to sell loans into the secondary market and that expose lenders and investors to compliance and legal risks for minor errors on the disclosures. For example, the proposed changes would help ensure that KBYO does not result in delayed closings when the buyer and seller decide to change the closing date. There are other provisions that will make it easier to do one-time close construction loans and provide greater clarity on co-op loans. It’s important for the smooth functioning of the real estate sales process to have clear compliance requirements.
Joe Ventrone: I’m glad you brought up need for additional clarity with respect to some components of the rule. REALTORS® are telling us that getting their hands on the Closing Disclosure has been a challenge since KBYO went into effect. They are saying some lenders and title agents cite concerns with federal privacy rules and simply won’t do it. In fact, nearly half of our members in a recent survey have reported trouble getting copies of the CD to review. The CFPB did include some additional guidance in its proposed rule to provide clarity on the interaction of KBYO with Regulation P, the CFPB’s privacy rules. We’re hopeful that will have a real effect on lenders. Does MBA share that optimism?
Pete Mills: In the proposed rule, the Bureau says that it is “usual, accepted, and appropriate” for creditors and settlement agents to provide a closing disclosure to the relevant parties. The proposed rule says this standard meets one of the exceptions to the restrictions in Regulation P on sharing consumer information. This provides some helpful clarity for lenders. With this language, we expect more lenders will now feel comfortable sharing the CD with their customer’s real estate agent. It’s important to remember, however, that Reg P only sets a legal floor for privacy standards. Some lenders may take extra steps to protect their own customers’ privacy, such as asking for a signed consent form from the borrower. This approach is commonly used today, and should not pose a significant barrier for your members getting the information they need.
Joe Ventrone: Our members are trusted advisors who help guide consumers through a large, complex transaction, which lenders should appreciate when it comes to helping the client understand the CD. Do you agree that sharing the CD is not just a help to real estate agents — it makes good business sense, too?
Pete Mills: At the end of the day, we all know that real estate is a business built on relationships. The clarification proposed by the Bureau should help smooth the process. We are all working toward the same goal of making sure that our clients walk away from the closing table feeling happy and confident with their decisions and prepared to be successful home owners.
Homeowners are finding that as they renovate and walls are removed, they’re uncovering tokens from the home’s past. They’ve found everything from ritual objects placed behind the walls to ward off evil spirits to time capsules with notes enclosed for future owners to find.
Michelle Morgan Harrison, an interior designer, recently found a skull buried beneath an old white oak beam while renovating her 1816 New Canaan, Conn., home. She was relieved to discover it was a dog’s skull, and not a human one.
“I’ve seen a bit of everything” while renovating, contractor and carpenter Patrick Kennedy told The New York Times. He’s renovating Harrison’s home. “But the skull was unique, and there’s no way it could have fallen in there the way it was buried. It was placed almost exactly in the center under the doorway, and there were no other bones with it. I immediately thought it was something superstitious.” As such, he plans to rebury it in the same spot once the home’s renovations are complete.
Indeed, “the practice of burying or concealing items in the structure of a house is called immurement,” says Joseph Heathcott, an architectural historian who teaches at the New School in New York. “It is actually an ancient practice that cuts across many cultures and civilizations.”
For centuries, archeologists have discovered ritual objects tucked inside walls from the Egyptian pyramids to Roman villas to ordinary houses. Often times, the tucked away objects are believed to bring good luck to the inhabitants of the home. For example in Ireland, it was once customary to bury a horse skull in the home’s floor or ground. In England and Ireland, many regions would bury dead cats in the walls or under the floors to ward off bad spirits, Heathcott says.
“In my 30 years of architectural practice we’ve found many different things under floors and inside of walls, most left there inadvertently,” Marvin J. Anderson, a Seattle architect, told The New York Times.
In fact, Anderson says that when they renovate homes, “we encourage clients and their families to create and leave time capsules inside the house somewhere, something to be discovered when walls and ceilings are opened up in 50 to 100 years.”
Source: “The History Hidden in the Walls,” The New York Times (Jan. 20, 2017)