Homeowners Cash in on Equity in Droves

Daily Real Estate News | Thursday, June 01, 2017

Homeowners may be reluctant to sell, but they still want to see a piece of that equity in their homes now. They’re cashing out in levels that have not been seen since the financial crisis, Freddie Mac reports.

Nearly half of borrowers who refinanced their homes during the first quarter did a cash-out option, the highest level since the fourth quarter of 2008, according to Freddie Mac.

Still, the number of borrowers doing a cash-out refi remains well below the nearly 90 percent peak reached prior to the housing crash. But it is up significantly from the post-crisis 12 percent in the second quarter of 2012.

Rising home prices have helped increase the number of homeowners who now have equity in their homes. As such, more owners are finding they can refinance to get a lower mortgage rate and also take out some cash for other uses. In hot markets like Denver and Dallas, in which home prices have surged by some of the highest amounts in the country, more than half of refinancers opted to refinance for cash last year, according to Freddie Mac.

While the number of cash-out refis grows, Len Kiefer, Freddie Mac’s deputy chief economist, does not see this as playing out similarly to the run-up to the financial crisis when borrowers were using their homes like ATMs. Borrowers must follower stricter underwriting standards now when they refinance a mortgage or get a loan. Also, there is less money at stake than a decade ago, Kiefer notes.

Source: “Homeowners Are Again Pocketing Cash as They Refinance Properties,” The Wall Street Journal (May 27, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Credit Scores Hit Record High

Daily Real Estate News | Wednesday, May 31, 2017

Credit scores among U.S. consumers surged to a record high this spring. Further, the share of borrowers considered among the riskiest borrowers hit a record low. The higher credit scores could be a boon for the mortgage market: A good credit score can help borrowers snag a better mortgage rate and better their chances of qualifying for financing.

“Higher scores lead to more available credit,” says Cris deRitis, senior director in the economics group at Moody’s Analytics. “We’d see more activity in terms of loan approvals and credit-card approvals, more spending, and that would have a ripple effect across the economy, increasing aggregate demand for goods and services.”

In April, the average credit score nationwide reached 700, which is up one point from last fall, according to the Fair Isaac Corp. That is the highest average since FICO began tracking such data in 2005.

The share of consumers considered to be the riskiest — with scores below 600 — hit a record low of about 40 million, or 20 percent of U.S. consumers who have FICO scores, according to Fair Isaac. That is down from a 25.5 percent peak in 2010.

Rising credit scores will likely prompt banks to make more credit available to consumers and at a cheaper cost, finance experts say.

“The domino effect for lenders would be more consumers they can market to [and] more consumers who may be credit-eligible who weren’t in last year’s models,” says Nidhi Verma, senior director of research and consulting at TransUnion, a credit-reporting firm.

Part of the reason behind the soaring credit scores is the increasing number of foreclosures and bankruptcies that are falling from American’s credit reports. More than 6 million U.S. consumers will have personal bankruptcies disappear within the next five years from their reports, according to Barclays PLC.

Consumers have a greater likelihood of getting approved for financing after negative events, like bankruptcies and foreclosures, drop from their reports. Foreclosures stay on credit reports for up to seven years (dating to the missed payment that resulted in the foreclosure). Foreclosure starts peaked in 2009 at 2.1 million, according to ATTOM Data Solutions. Personal bankruptcies can stay on credit reports for seven to 10 years.

Source: “Credit Scores Hit Record High as Recession Wounds Heal,” Dow Jones Newswires (May 29, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Lower Rates Buoy Refis, Not New Mortgages

Daily Real Estate News | Wednesday, May 24, 2017

Lower mortgage rates are prompting homeowners to refinance, but applications for home purchases aren’t rising. The Mortgage Bankers Association reported on Wednesday that total mortgage applications—including for refinances and home purchases—rose 4.4 percent week-over-week on a seasonally adjusted basis for the week ending May 19.

The 30-year fixed-rate mortgage averaged 4.17 percent last week, down from 4.23 percent the week prior, MBA reports. But overall mortgage rates dropped to the lowest level since last November, helping to push refinancing applications up 11 percent for the week. Refinance volume still remains 30 percent below the same week one year ago, when rates were even lower.

“Homeowners took advantage of the six basis-point drop in rates,” says Lynn Fisher, MBA’s vice president of research. “Jumbo rates fell even more, sending the average refinance loan size up 5 percent, as borrowers with larger loans, who are typically more sensitive to rate changes, moved to refinance.”

Meanwhile, mortgage applications for home purchases dropped 1 percent week-over-week, and purchase applications are now just 3 percent higher than the same week a year ago. “Despite favorable rates and labor market trends, the purchase market is struggling to accelerate due to low inventories of homes for sale and rising home prices,” Fisher says.

Source: “Big Drop in Mortgage Rates Juices Refinances, But Doesn’t Seduce Buyers,” CNBC (May 24, 2017)

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Time on Market Hits New Low in April

Daily Real Estate News | Wednesday, May 24, 2017

Low inventory pushed existing-home sales down in April and sped up the median number of days a home sat on the market to a new low of 29 days, the National Association of REALTORS® reported Wednesday. That is the shortest timeframe since NAR began tracking such data in May 2011. The previous record was 32 days, which was reached last May.

The Metros With the Fastest Sales

According to inventory data from realtor.com®, these are the metro areas where listings were on the market the shortest amount of time in April:

  • San Jose-Sunnyvale-Santa Clara, Calif.: 23 days
  • San Francisco-Oakland-Hayward, Calif.: 25 days
  • Denver-Aurora-Lakewood, Colo.: 27 days

Though homes are selling faster, inventory woes persist. Total existing-home sales—which are completed transactions of single-family homes, townhomes, condos, and co-ops—decreased 2.3 percent to a seasonally adjusted annual rate of 5.57 million in April. However, sales are still 1.6 percent higher than a year ago.

“Last month’s dip in closings was somewhat expected given that there was such a strong sales increase in March at 4.2 percent, and new and existing inventory is not keeping up with the fast pace of homes coming off the market,” says Lawrence Yun, NAR’s chief economist. “Demand is easily outstripping supply in most of the country, and it’s stymieing many prospective buyers from finding a home to purchase.”

Regional Breakdown

Here’s a closer look at how existing-home sales fared across the country in April:

  • Northeast: Existing-home sales decreased 2.7 percent to an annual rate of 730,000. Sales are now 2.7 percent below a year ago. Median price: $267,700, up 1.6 percent from a year ago.
  • Midwest: Existing-home sales rose 3.8 percent to an annual rate of 1.36 million in April. Sales are 0.7 percent below a year ago. Median price: $194,500, up 7.8 percent from a year ago.
  • South: Existing-home sales dropped 5 percent to an annual rate of 2.3 million but are 3.6 percent higher than a year ago. Median price: $217,700, up 7.9 percent from a year ago.
  • West: Existing-home sales decreased 3.3 percent to an annual rate of 1.18 million in April, but are still 3.5 percent above a year ago. Median price: $358,600, up 6.8 percent from April 2016.

Source: National Association of REALTORS®

Total housing inventory at the end of April stood at 1.93 million existing homes available for sale, NAR reported. That’s 9 percent lower than a year ago, when inventory stood at 2.12 million. At the current sales pace, unsold inventory is at a 4.2-month supply.

“REALTORS® continue to voice the frustration their clients are experiencing because of the insufficient number of homes for sale,” Yun says. “Homes in the lower- and mid-market price range are hard to find in most markets, and when one is listed for sale, interest is immediate and multiple offers are nudging the eventual sales prices higher.”

Here are a few additional housing indicators from NAR’s latest report:

  • The median existing-home price for all housing types last month was $244,800, up 0.6 percent from a year ago.
  • Short sales took the longest to sell at a median of 88 days on the market in April. Foreclosures sold in a median of 46 days. Foreclosures and short sales comprised 5 percent of sales in April, down from 7 percent a year ago. Broken out, 3 percent of sales were foreclosures and 2 percent were short sales. Foreclosures sold for an average discount of 18 percent below market value, while short sales were discounted 12 percent.
  • First-time home buyers comprised 34 percent of sales in April, matching the highest percentage since last September.
  • All-cash transactions made up 21 percent of sales in April, down from 24 percent a year ago. Individual investors make up the biggest bulk of cash sales. They purchased 15 percent of homes, up from 13 percent a year ago.

Source: National Association of REALTORS®

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How to Choose a Neighborhood

9 key questions to answer when you’re location shopping.

Location is everything when you’re searching for a home. Finding your dream neighborhood may seem like the easiest part, but once you factor in budget, non-negotiable home features, and proximity to the things you can’t live without, it may be less obvious where you should live.

When it comes to searching for a new neighborhood, here’s what you need to know.

Property Taxes

Property taxes can play a huge role in your overall cost of living. To get a sense of what your property taxes might look like in a particular county, check out this simple property tax map. Also, property taxes for specific homes are typically included in online property listings.

Safety and Crime

Before you sign on the dotted line, search sites like City-Data.com and CrimeReports to get a sense of the safety level of a particular neighborhood. As with all homebuying decisions, determining what level of crime you feel safe with is all part of the process of choosing a neighborhood.

Your real estate agent can guide you to various resources to help you answer questions about the neighborhood, but can’t voice an opinion about it per the Fair Housing Act. The act aims to provide equal access to housing for all groups of people and to protect against discrimination.

What to consider:

  • What is the crime rate in this particular neighborhood? How about the neighborhood next door?
  • What level of crime do I feel comfortable with? 

Topography and Geography

Land geography can play a role in costs — especially if you’re overlooking a scenic vista or you’re right by the water. On the flipside, look out for flood zones or other danger-prone areas when making a decision.

What to consider: 

  • Do I need special insurance in addition to homeowners insurance?
  • Is this property in a flood zone?

Property Value

If there have been some sales recently, then you can get a better idea of the potential value of the homes in the neighborhood. Typically, homes of the same type in the same location will sell within a few thousand dollars of each other. When looking at homes, your agent will pull listings of comparable properties, or comps, to see what other similar homes sold for so you can see if the home you’re interested in is priced correctly.

Question(s) to ask:

  • What are the comps in this area?
  • What’s the projected growth rate for this area?

School Zones

School zones come to mind when thinking of location, especially if you have children (or plan to have them soon), as they tend to affect home values. If schools are important to you, evaluate the schools in your neighborhood and which homes fall into which district. Additionally, there may be community centers or parks that increase the value of the neighborhood.

What to consider:

  • What school would my child attend if we moved here?
  • Are there parks or community centers in this area?

Using these factors as a guide for finding the right neighborhood can help you evaluate what you care about and make the decision that’s right for you.

This article was contributed by LaTisha Styles, a millennial finance expert and business coach, who blogs at “Young Finances.”

“Visit HouseLogic.com for more articles like this.  Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”

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Why Millennials Value Local Real Estate Agents

Daily Real Estate News | Thursday, April 20, 2017

Millennials love to conduct many aspects of their lives online, but a new survey says that’s not always true when it comes to real estate dealings.

Seventy-five percent of millennials recently surveyed by financial wellness website CentSai say they prefer the help of a local real estate agent than an online agent. Seventy-one percent would also prefer to work with a local mortgage lender. They cited more desire for face-to-face collaboration, associating it with greater “handholding,” “local knowledge,” “longstanding relationships,” and “personal touch.” CentSai surveyed more than 2,000 Americans aged 18 to 34.

“We were surprised to learn that online providers are not yet as big a disruptor in this sector as we first thought, despite purported cost savings,” says Doria Lavagnino, cofounder and president of CentSai. “We found that millennials place a high value on the personal touch and knowledge of a local agent. Buying a home for the first time is daunting, and working with a local agent—particularly an agent referred by a parent or friend—could provide peace of mind.”

That said, the internet is still a crucial element in the homebuying process for millennials. Ninety-five percent of home buyers look for prospective homes and neighborhoods online, according to the National Association of REALTORS®’s research.

Source: “Millennials Are All About the Online Experience—Except in Real Estate,” RISMedia (April 19, 2017)

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Owners, Appraisers Aren’t Seeing Eye-to-Eye

Daily Real Estate News | Thursday, May 11, 2017

Appraisals in April were, on average, 1.9 percent lower than what homeowners expected. That means on an average home price of $236,400, homeowners misjudged their price by about $4,500.

The gap between appraiser and homeowner views on price is spreading wider, according to the latest National Quicken Loans Home Price Perception Index. April marks the fifth consecutive month that the gap between price opinions has widened. In March, homeowners estimated their home prices were 1.77 percent higher than what appraisers said they were worth.

“The appraisal is one of the most important data points in a mortgage transaction,” says Bill Banfield, Quicken Loans vice president of capital markets. “This single number can impact how much money a buyer needs to bring to closing, or the equity that is available to the homeowner on a refinance. If homeowners have a grasp on home value differences, throughout their local area, it can lead to a smoother mortgage process.”

The study continues to show appraised values tend to be higher than expected in the West. On the other hand, appraisals were lower than expectations in the Midwest and East.

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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Buyers Grow More Confident About Housing

Daily Real Estate News | Tuesday, May 09, 2017

You may need to do less convincing to get home shoppers to make their move in the housing market. Fannie Mae’s Home Purchase Sentiment Index rose 2.2 percentage points in April, with five of six components rising that measure confidence in buying, employment, household incomes, financing, and more.

The share of Americans who say now is a good time to buy rose 5 percentage points in April. However, the net share of those saying now is a good time to sell fell 5 percentage points, the index showed.

“The Home Purchase Sentiment Index returned to its longer-term trend line after reclaiming ground last month,” says Doug Duncan, Fannie Mae’s chief economist. “This is aligned with our market forecast of about 3 percent sales growth in 2017. Historically strong inflation-adjusted house price gains are tempering consumer sentiment, whereas consumer optimism regarding the ease of getting a mortgage reached a survey high. On balance, housing continues on a gradual growth track.”

Here are more findings from Fannie Mae’s Home Purchase Sentiment Index reading from April, which is based on a survey of about 1,000 consumers.

  • 35%: the net share of Americans who say it’s a good time to buy a home, up 5 percentage points from March.
  • 26%: the net percentage of consumers who say it’s a good time to sell, dropping 5 percentage points from last month’s all-time survey high.
  • 45%: the net share of Americans who believe home prices will rise by 1 percentage point.
  • 77%: the net share of consumers who say they’re not concerned about losing their job, up 7 percentage points from March.
  • 13%: the net share of consumers who say their household income is significantly higher than it was 12 months ago, up 2 percentage points from March.

“Copyright National Association of REALTORS®. Reprinted with permission.”

 

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5 Reasons You’ll Regret Painting Your Brick House

The best paint for brick? No paint at all (in most cases). Here’s why.

Brick, brick, brick. All the homes in your neighborhood are brick. You’re itching to paint over that red-orange-brown color palette so your home’s personality can shine through.

Although painting brick is doable — and sometimes even necessary (more on that later) — it’s not an easy DIY paint project, and it can be a huge risk to your biggest financial asset.

In other words: Tread carefully, homeowner. Although painted brick might be aesthetically pleasing today, it could be a big, fat regret in just a few years.

Here are five reasons you shouldn’t paint brick (plus a few exceptions when it’s OK):

#1 You’ll Probably Destroy the Brick

Brick “breathes.” Unless it can’t. Trapped moisture is the main issue in the relationship between brick and paint. “Once you put a membrane [like paint] over the brick, it can no longer breathe,” says Mike Palmer, a masonry contractor and president of the upstate New York chapter of Mason Contractors Association of America.

Brick is the ultimate “coat” for your home, protecting it from all the elements while letting it breathe, too. Much like your beloved four-legged family member, your home’s “brick coat” adjusts as needed to protect your home from rain, sleet, snow, heat, etc. (but without all the shedding, ha!).

Putting paint on it is like encasing it in plastic. It’ll breathe no more.

If you paint the exterior brick and there’s moisture trapped in it, “once you go through a freeze-and-thaw cycle, [the brick can] degrade as moisture freezes inside it,” Palmer says.

When exterior brick erodes — and if the mortar between the brick erodes — your home’s structural integrity is at risk.

#3 It Can Look Really Bad, Really Fast

As the bricks begin to degrade, the paint starts to peel and flake away — making your house look neglected and nasty. That’s bad news. Really bad news. That means the damage mentioned above is well under way — and it’s showing up on your home’s face.

#4 You Might Be Destroying a Bit of History

How old is your home’s brick? If your brick is considered historic, painting it could be considered a sin against history.

If you have an older home with decorative features, such as dog-toothing, you might have brick that should be preserved in its natural state.

“Old brick was handmade in a kiln, and some … has a harder surface. It weathers better, and was used on the face of buildings because it’s more impervious,” says architect Ashley Wilson with the National Trust for Historic Preservation.

Since today’s bricks are machine-made, these handmade varieties are worth preserving. Paint will only destroy their historic value, and if done incorrectly could result in structural damage to your home.

#5 You Can’t Easily Go Back to Unpainted

The time and money it takes (plus the risk to the brick’s integrity) to remove existing paint makes it a very challenging task. Power-washing or sandblasting can damage the brick, so it all has to be painstakingly stripped away using chemicals.

Technically, this is a chore you could do yourself, but do you really want to get to know every square inch of your entirehouse’s exterior? Even if it’s a little one?

As comedian Steven Wright used to joke, “It’s a small world, but I wouldn’t want to paint it.

4 Exceptions That Make It OK to Paint Brick

#1 If It’s Already Been Painted

Most painted brick needs regular repainting, and compared to removing the old paint, it’s typically the lesser evil. Just be sure to use the right paint.

The right paint to use for exterior brick:  Use a mineral-based paint or a silicate paint that’s designed to be breathable, and is recommended for brick, such as the brand KEIM.

Should you DIY it?The long and short of it is this: There is so much critical, tedious prep work required, like cleaning and repairing damage, you’re better off having it done by a professional. According to Homewyse, the average cost for a professional to paint your brick home is $1.70 to $3.27 per square foot. That adds up fast.

#2 If the Brick is Severely Damaged

Let’s say you’ve got an older home and the “the grout between the brick is old, and may have turned to sand,” says Chris Landis, partner/owner of Landis Architects/Builders, who sits on the board of Washington, D.C.’s, Historic Preservation Review Board. Painting could be the solution.

Sure, you could have the brick repointed (replacing/adding new mortar), but that can be costly — as much as $25 a square foot — depending on where you live and the degree of damage. (Cha-ching!)

If you try fixing it yourself, “You’ll likely get cement all over the brick, which is really messy. The best thing to do in that case is to actually paint it,” Landis says. Dried cement all over your brick isn’t a good look.

#3 If the Brick Was Meant to Be Painted

There’s a slim chance your home might have an old type of brick that actually needs to be painted to protect it. A few rules of thumb to help determine if that’s the case with your home’s brick:

  • It was built before 1870.
  • The brick was handmade, not machine-made.
  • It has traces of paint that looks faded or whitewashed.
  • The home lacks ornamental brick decoration.

The paint, however, for these bricks isn’t your typical latex paint. The paint must be all-natural, such as milk paint or lime-based whitewash. Modern paints will only damage the brick, potentially causing structural damage.

Because these bricks are more delicate, homes using them are less likely to have ornate brick architectural features such as dog-toothing. If you see features like those, then you have the more durable handmade bricks, which should never be painted.

#4 If the Brick is Inside

Indoor brick isn’t subject to harsh outdoor elements. If you were to paint your fireplace surround, for example, Palmer says you won’t have the issues of moisture and humidity. So have fun with it!

“Visit HouseLogic.com for more articles like this.  Reprinted from HouseLogic.com with permission of the NATIONAL ASSOCIATION OF REALTORS®.”

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