When Will the Next Housing Market Crash Take Place?

I’ve noticed a trend lately. Everyone’s a real estate expert.

It seems the most recent crisis and recovery has turned just about every single person into a guru on all things to do with home buying and selling.

I suppose part of it has to do with the fact that the massive housing bubble that formed a decade ago swept the nation and was front page news.

It also directly affected millions of Americans, many who serially refinanced their mortgages, then found themselves underwater, then eventually short sold, were foreclosed upon, or held on for the ride back up to new heights.

It’s a common conversation piece these days to talk about your local housing market.

Thanks to greater access to information, folks are scouring Redfin and Zillow and coming up with theories about what that home should sell for, or what they should have listed it for.

Neighbors are getting upset when nearby listings are not to their liking for one reason or another. What were they thinking?!

A New Housing Bubble Mentality

  • Real estate is red-hot again thanks to limited supply and intense demand
  • It can feel like an ominous sign that we’re headed down a dark road again
  • But that alone isn’t reason enough for the housing market to crash again
  • There have to be clear catalysts and financial stress for another major downturn

All of this chatter portends some kind of new bubble mentality in my mind, though it seems everyone is just basing their hypotheses on the most recent housing bust, instead of perhaps considering a longer timeline.

One could look at the recent run-up in home prices as yet another bubble, less than a decade since home prices bottomed around 2012.

After all, many housing markets have now surged well beyond their previous lofty levels seen about 15 years ago when home prices peaked.

For example, Denver area home prices are about 86% higher than they were in 2006. And back then, everyone felt home prices were completely out of control.

In other words, home prices were haywire, and are now nearly double that.

Meanwhile, the typical U.S. home is currently valued around $273,000, per Zillow, which is about 27% higher than the peak of $215,000 seen in early 2007.

It’s also nearly 70% higher than the typical home price of $162,000 back in early 2012, when home prices more or less bottomed.

So if want to look at home prices alone, you could start to worry (though you also have to factor in inflation which will naturally raise prices over time).

But they say bubbles are financially driven, and we’ve yet to see a return to shoddy underwriting.

I will say that there’s been a recent return of near-zero down financing, with many lenders taking Fannie and Freddie’s 97% LTV program a step further by throwing a grant on top of it.

This means borrowers can buy homes today with just 1% down payment, and even that tiny contribution can be gifted from someone else.

So things might be getting a little murky, especially if you consider the increase in prices over the past four or five years.

One could also argue that affordability is being supported by artificially low mortgage rates, which history tells us won’t be around forever.

There’s also a general sense of greed in the air, along with a feeling amongst homeowners that they’re getting richer and richer by the day.

That type of attitude sometimes breeds complacency and unnecessary risk-taking.

But When Will Home Prices Crash Again?!

real estate cycle

  • If you believe in cycles, which seem to be pretty evident in real estate and elsewhere
  • We will see another housing crash at some point relatively soon
  • There appears to be an 18-year cycle that has been observed for the past 200 years
  • This means the next home price peak (and then bust) might begin in 2024

All of those recent home price gains might make one wonder when the next housing market crash will take place.

After all, home prices can only go up for so long before they drop again, right?

Well, the answer to that age-old question might not be as elusive as you think.

The real estate market apparently moves in cycles that some economists think can be predicted to a relatively high degree.

While not a perfect science, there seems to be “a steady 18-year rhythm” that has been observed since around the year 1800.

Yes, for over 200 years we’ve seen the real estate market follow a familiar boom and bust path, and there’s really no reason to think that will stop now.

It puts the next home price peak around the year 2024, followed by perhaps a recession in 2026 and a march down from there.

How much home prices will fall is an entirely different question, but given how much they’ve risen (and can rise still), it could be a long, long way down.

And we might not have super low mortgage rates at our disposal to save us this time, which is a scary thought.

You’ll Never Get Back Into the Housing Market…

  • There are four main phases in a real estate cycle
  • A recovery period and an expansion period
  • Followed by hypersupply and an eventual downturn
  • Don’t believe the hype that if you don’t buy today, you’ll never get the chance!

Another housing bust in inevitable, despite folks telling us we’ll never get back in again if we sell our home today, or don’t buy one tomorrow.

There are four phases to this predictable cycle, including a recovery phase, which we’ve clearly experienced, followed by an expansion phase, where new inventory is created to satisfy demand. This is happening now.

At the moment, home builders are ratcheting up supply to meet the intense demand in the market, with some 45 million expected to hit the average first-time home buyer age this decade.

The problem is like anything else in life, when demand is hot, producers have a tendency to overdo it, creating more supply than is necessary.

That brings us to the next phase, a hypersupply period where builders overshoot the mark and wind up with too much new construction, at which point prices plummet and a recession sets in.

The good news (for existing homeowners) is that according to this theory, we won’t see another home price peak until around 2024.

That means another three years of appreciation, give or take, or at least no major losses for the real estate market as a whole.

So even if you purchased a home recently and spent more than you would have liked, it could very well look cheap relative to prices a few years down the line.

The bad news is that the real estate market is destined to stall again in just three short years, meaning the upside is going to diminish quite a bit over the next few years.

This might be especially true in some markets that are already priced a little bit ahead of themselves, which may be running out of room to go much higher.

But perhaps more important is the fact that home prices tend to move higher and higher over time, even if they do experience temporary booms and busts.

So if you don’t attempt to time the market you can profit handsomely over the long term, assuming you can afford the underlying mortgage.

And remember, there’s more to homeownership than just the investment.

Source: thetruthaboutmortgage.com

5 Reasons You Should Pay for a Pre-Drywall Inspection

When building a new home, there are architectural requirements along with city and state codes that the builder must follow; and while general builder inspections are required along the way, it’s still a good idea to pay for your own inspections, especially the pre-drywall inspection. 

If you’re building (or thinking about building) a new home, congratulations! Unlike buying an existing home, you get to select everything you want from top to bottom, inside and out, to create your dream home. We’re currently building our new home and recently had our pre-drywall inspection. You usually don’t hear much about these kinds of inspections, so I wanted to share with you why we did a pre-drywall inspection, and what we learned.

pre-drywall inspectionpre-drywall inspection
Our soon to be new home!

Isn’t the Builder’s Pre-Drywall Inspection Enough?

During the builder’s inspection, the builder will go over anything you added during the design process,  explain how things work, and show you where things are located inside your walls before the drywall is added. It’s the perfect time to ask questions — but what if you don’t know what to ask? This is where a pre-drywall inspection is beneficial.

Think of it as more of a pre-drywall “walk through”  and not so much of a traditional inspection. The purpose is to look at every aspect of the home, not just the pretty parts. If there are potential issues with the foundation, plumbing, electrical or roof, it’s better to address them sooner and not after signing the papers and moving in.

(READ MORE: The Pros and Cons of Building vs. Buying as a First-time Homeowner)

What the Process Looked Like for Us

We used Chad Brittingham with Cardinal Home Inspections, LLC out of Charleston, SC. The timing of this inspection was perfect because we scheduled to meet with the builder for their pre-drywall walk through a few days later.

Mr. Brittingham went through the house several times and with each pass, looked at different building aspects. The first pass involved the foundation, followed by framing, plumbing, electrical, HVAC, and the roof. We walked with him and he explained the reason for certain building items, pointed out any issues and took pictures for his report, and also took the time to explain how certain systems worked. As an inspector, his job was to comb through the fine details and find potential issues that we as buyers may overlook because we just don’t know. 

pre-drywall inspectionpre-drywall inspection
Chad Brittingham, home inspector, testing the window function.

5 Benefits of a Pre-Drywall Inspection

  1. It can address any issues: Once the drywall is installed it will be more challenging to fix any issues involving the internal items behind the drywall. Cracks in foundation, poor building materials, mold, etc., will simply be a lot harder to see later.
  2. It can check on any modifications you added during your design meeting: We added recessed lighting to some rooms, extra outlets, a security light and a few other things. But, during our pre-drywall inspection, we discovered that a few of those items were not there. It’s a lot easier to add them before the dry wall; like the builder put it, it would be like doing surgery on your house and then leaving scars!
  3. You can visualize where important pieces are in your wall: Word of advice, take pictures. When you move in and you need to find a stud, you’ll have a better idea where they are located within the wall. Most importantly, you’ll know where plumbing, gas lines, and electrical lines are located so you can avoid them before you hang anything or secure anything to your walls. 
pre-drywall inspectionpre-drywall inspection
Taking pictures before hanging drywall will help you avoid any costly repairs when affixing items to the wall.

4. It can reveal workmanship and materials: While builders have a construction manager who oversees everything, each part is handled by a different subcontractor. Getting a chance to see the work of the electrical team, plumber, roofer, HVAC, etc can not only ensure they’re not only using the proper materials, but that these systems are installed within code.

5. It can protect your investment and your peace of mind: You’ll have a written record of the issues that were found and you can document how it was fixed. This is your home that you’re spending your money on and you want to know that your home is sound. After the inspection was over, we were more confident that we picked a great home for our family.

Man bending over pointing to the floor in partially constructed house. Man bending over pointing to the floor in partially constructed house.
Mr. Brittingham pointing out construction details.

After the Pre-Drywall Inspection: Next Steps

At the end of the pre-drywall inspection, Mr. Brittingham gave us a couple items that he felt were of a greater concern to keep an eye on, but overall felt that the items he found were typical for this stage in the building process. Mr. Brittingham provided us with a full inspection report, including the items he found with pictures of areas that needed to be addressed, which I forwarded to the builder prior to our walkthrough. As the buyer, we definitely felt our inspection better prepared us for the walk through with the builder.

While the builder is bound by certain laws and codes, and their own inspections, the pre-drywall inspection we paid for independently, is acting on our behalf as the buyer. I definitely don’t believe our builder is trying to “slide anything past us,” and we did our research on the builder prior to signing. This was just one more step to further protect our investment, which will ultimately protect our family. 

Need More Home Building Advice?

Be sure to check out the Homes.com “How to Build” section, with videos and articles covering a range of topics that’ll carry you on the building journey from start to finish!


Brooke has a lifestyle blog called Cribbs Style and currently lives in Charleston, SC. This wife, mom of two almost tweens, and mom of three fur children enjoys all things DIY and organizing. When she’s not helping others tackle the chaos of life, she’s either working out, at the beach, or just enjoying time with family and friends.

Source: homes.com

What Every Homeowner Needs to Know About Contractors

When you’re building or renovating a home, having the right team on your side makes all the difference.

Building or renovating a home is a complex project with plenty of moving parts. Even if you’re planning to take a DIY approach, it’s likely you’ll need some help from contractors along the way. Here’s a guide to the types of contractors you might enlist to help you complete your dream home.

General contractors

If you think of a general contractor like a general in the military, you have the basic idea of what a general contractor does. Like a general leading a military campaign, a general contractor organizes the strategy of a building or remodeling project. The general contractor decides when to bring in the plumbers, electricians, and roofers; makes sure they do their jobs correctly; and checks details, like ensuring that the carpenters install the porch handrails according to code.

Especially if there is no architect involved, the general contractor ensures that the building permits are in order and that the project is legal — meaning that it is being done to city or country building codes. (If it isn’t, your city’s building inspectors will make you redo it. Ouch!) Like a military general who is ultimately responsible for the success of a campaign, the general contractor is responsible for the outcome of remodeling project.

Subcontractors

Subcontractors are specialists who work under the direction of the general contractor. Subcontractors include plumbers, electricians, tile setters, carpenters, framers, roofers, painters and cabinetmakers, among others.

Ideally, they show up at your construction or remodeling project when they are needed. If the subcontractors are reliable and efficient, the pace of your project continues to move steadily along, and it is finished when it is supposed to be. If all that happens, it is usually because a good general contractor has been overseeing their work.

Owner as general contractor

Homeowners who are skilled at organizing multimillion-dollar sales campaigns at their office or at running three local volunteer organizations in their spare time sometimes like to act as their own general contractors. There is no law that says you can’t. As a rule of thumb, general contractors charge about 15 to 20 percent of the total cost of the job, so acting as your own general contractor can save money.

But before you leap into the general contractor role, consider whether you really have the time, expertise, and patience to run a remodeling project, especially a complicated one. How much time can you spend on site? Can you take phone calls at unexpected times of the day?

The one thing you can count on with any remodel is that something will go wrong at some point. It may not be a big deal, but it will mean making new arrangements, often on short notice, and rearranging schedules for subcontractors and suppliers.

This could mean dozens of phone calls in a single afternoon. It could mean running around hunting down some piece of hardware or building material that is needed on site right now. If this sounds like fun, you may have what it takes to act as your own general contractor.

Design/build firms

An alternative to hiring a general contractor or acting as your own is to hire a design/build firm. Design/build firms are companies that offer start-to-finish building and remodeling services. They employ architects or designers as well as the skilled builders.

A design/build firm essentially offers the services of architect, general contractor, and subcontractors. The obvious advantage to using these firms is that the entire project should be a fairly smooth operation, since the firm takes responsibility for everything.

While general contractors, subs, and independent architects can, in the worst scenarios, blame each other for mishaps and toss the responsibility for correcting the mishaps back and forth, design/build firms know the buck stops with them. They have to make it right.

Carpenters

If your home improvement project really is as straightforward as installing a wall of built-in bookshelves in your living room, your best bet is probably to find a good carpenter or cabinetmaker.

People who bill themselves as handymen may be fine at installing new light switches or doing minor carpentry, but, as always, ask to see some of their work. If you want your new bookshelves to look like elegant additions to your living room, find an expert in cabinetry.

Related:

Source: zillow.com

5 Ways to Win in a Purchase Money Market in the New Reality

During my recent conversations with sales leaders, managers across the board expressed concern about their originators adapting to the new environment of rising interest rates and the shift to purchase money.

Sherlock: not having an accurate view of sales performance is a recipe for disaster
Pat Sherlock

The decline in refinance business is a reality with mortgage applications dropping 43% in the last week, according to the MBA. This raises a critical question: how many lenders and originators will be able to transition to a purchase money marketplace when the easy money of refinancing is replaced by the hard work of finding customers who want to purchase and finance a home?

Every experienced mortgage lender has certainly witnessed big changes in interest rates over the last 20 years. Sometimes it happens quickly. Other times it can be a slow climb to higher interest rates. This time, it is a little of both. The global pandemic caused the Fed to drop interest rates to historic lows and now, with the end in sight, rates are inching back up.

The real question for lenders and originators that have 90%+ refinance business is: can they switch to the traditional purchase money market that still depends on local relationships or will they decide to sell out to other, better structured lenders? Frankly, the selling out strategy has likely already run its course, leaving lenders that have not invested in digital technology or sales training with few alternatives.

5 Steps to Success

That said, what changes should originators who have been living off of refinance lending make to succeed in a purchase money environment? Here are five recommendations:

  1. Develop a marketing plan. Yes, I know having a plan doesn’t seem like the right strategy when a loan officer is panicked and needs income. But, setting aside some time to analyze the market and identifying underserved opportunities is a worthwhile activity because where producers commit their time and marketing resources is always a balancing act. There are only so many hours in a day and spending them correctly matters a lot.
  2. Understand growth in the local area. An originator’s marketing plan should determine what home building activities in their local market are driving growth. Is it new construction, retirement homes, second homes, etc.? Every market is different and understanding where growth will be coming from is critical. Looking at the research the local municipality has already done is a good start.
  3. Identify underserved market opportunities and the people associated with them. Every market has underserved opportunities that some individuals have already recognized—you want to know these professionals. Rarely is an underserved market completely void of participants. An originator’s job is to develop relationships with the parties in the market before other loan officers decide to market to them. Building relationships takes time and requires originators to form relationships with builders, attorneys, real estate agents and other professionals.
  4. Don’t forget about previous customers. Since developing and building relationships is time-consuming, originators must also work their database of closed loans over the last several years. Former customers are already familiar with an originator’s service levels and a certain percentage might be interested in purchasing a second home or investment property. Some clients might be receptive to listening to a webinar on the latest trends in the local real estate market. This is a great opportunity for originators to partner with a realtor to target a particular audience. The real estate agent can provide his or her perspective as part of the webinar or live stream event. However originators reach out, they should avoid sending mass emails and direct mail. Consumers want a more personal, customized approach.
  5. Rekindle referral business. Originators who have a plan, determine their niche and develop relationships with referral sources and customers in an underserved marketplace are on the path to success in a purchase money environment. Working former customers is a smart way for producers to generate current business while establishing relationships with new referral sources.

Implementing all five strategies is a great way for originators to position themselves for robust performance in a purchase money market.

Pat Sherlock is the founder of QFS Sales Solutions, an organization that helps organizations improve their sales talent management and performance. For more information, visit https://patsherlock.com.

Source: themortgageleader.com

Pros & Cons to Building Your Own New Home

When it comes to owning a house, the decision whether to build or buy is one you have to contend with. Each option comes with its set of advantages and disadvantages. For instance, buying ensures you become homeowner in record time as opposed to building which takes longer. Whichever option you settle on, it helps to evaluate the argument for and against each. With that in mind, here are the pros and cons to building your own new home.

Building Your Own HomeBuilding Your Own Home

Pros

Less
Competition

Building has less competition than buying when it comes to getting your desired home. Properties are typically on the market for a little over a month. This means the competition is not only high but it’s also possible not to get a home; between the time it takes for financing to be approved and shopping, ‘your house’ could already be off the market.

Customization

Building means that you get to come up with a
design that embodies your dream house. You can personalize every detail from
the wall colors to the types of faucets. This beats buying whereby you have little
or no control on the layout, number of rooms or even the types of installations.

With own construction you can replicate
design features from your parents house for nostalgia. You also get the chance
to choose the type of contractors whose work is reliable. This is in contrast
to buying a home whose construction integrity could be faulty and easily to be
missed by real estate assessors.    

Less
Maintenance

Building codes and standards keep on
changing. This makes building from the ground up a chance for you to make your
home up-to-date. You can incorporate energy saving measures such as solar
powered HVAC systems. Furthermore, new appliances and building material means
you will be spending less on renovations for some years to come.

Cons

Time
Consuming

Building a new home can take anywhere between
a few to over 10 months, this is according a US Census Bureau report. This means for the entire duration of contraction you will have to
shoulder rent payments; money that could have gone to other expenses if you
opted to buy.

Can
be More Expensive

According to figures from the National Association of Home Builders, on average the cost of building a single-family house is about $289,415; this translates to over $66,415 more than the cost of purchasing a ready home. The high cost is a result of the level of personalization that comes with your own design and preferences. This could be spacious rooms, expensive décor or antique finishes.

Stressful

Building is quite stressful, even if you are not doing it with your own two hands; you are bound to get some headaches from overseeing the process. The project manager or foreman will be there to ask questions on specifications, design alterations and of course payments.

These issues will more than likely leave you exhausted and will eat into your daily routine. The stress from seeing construction can even lead to under performance in your job and cutting into your family time.

The Bottom Line  Building
comes with the satisfaction of knowing that you are the first owner of the
home. You get to install modern and energy saving appliances which lowers your
utility bills. You can also count on paying less for maintenance and upgrades
that comes with buying a house. On the other hand, building has some drawbacks.
These includes; having to wait for a long time before construction is
completed, being stressed due to strenuous decision making and lastly, there is
the possibility of spending way more on your new home than you would if you
chose to buy.

Source: creditabsolute.com

How to Measure the Square Footage of a House or Apartment

It’s important to understand just how big your space is.

When you find the perfect place to rent in your chosen neighborhood that’s also within your budget, you probably aren’t wondering whether the square footage in the listing is accurate. However, that calculation is one of the most important factors when evaluating a property’s value. After all, if your rent is based on 1,200 square feet, you have the right to get what you’re paying for, right?

The American National Standards Institute (ANSI) provides guidelines for measuring and calculating residential square footage. Many builders and real estate agents follow these, but because compliance with these standards is voluntary, what’s advertised isn’t always accurate.

Also, square footage guidelines can vary depending on where you live: Some states disclose this information, and others don’t. Here’s how to measure the square footage of a house or apartment.

Gather a few supplies for the task

Tape measurer on wood.

Calculating square footage is pretty easy. First, you will need a couple of things on hand that will help you measure the space:

  • A large piece of paper
  • A pencil
  • A calculator
  • A laser measuring tool or a measuring tape

Sketch out your space

If you’re planning to rent a one-story condo that’s rectangular, that’s an easy calculation: Measure the width and length, in feet, and then multiply those two numbers.

Since most properties aren’t perfectly shaped, however, you’ll probably need to complete a few steps to get the full picture. Begin by drawing a diagram of all rooms and hallways, and be sure to label each one so you can keep track of the measurements.

If you’re looking at a new rental unit, ask the landlord if you can see the builder plans of your apartment’s floor plan because the square footage is usually already calculated.

Measure each room

Going room by room, measure the length and width, rounding off to the nearest half-foot.

Real estate agents often use an electronic laser distance measuring tool. If you have one, place it on a wall, aiming it directly at the wall opposite it. You will then see the square footage displayed on the device’s screen. A tape measure works well if you don’t have a laser tool.

Multiply those numbers, rounding off to the nearest square foot, then write down your measurement on your sketch. For instance, if the kitchen is 10 feet by 16 feet, the total square footage is 160 square feet.

If a room has an alcove, such as a living room with an area for a home office, measure that space separately and add it to the overall square footage of the room. The same is true for rooms with closets: measure each one by multiplying the length by width.

Sketching out square footage of an apartment space.

Leave out these spaces, because they don’t count

Generally, ANSI standards suggest counting only finished spaces — any lived-in area that has walls, a ceiling height of seven feet or more and a floor. So, if you can’t walk on or live in a certain spot, that is a non-usable space, not part of the gross living area. For example, if you’re renting a house, patios, porches and garages — don’t count towards your unit’s square footage. If the garage is converted into a living space though, it will count in the overall square footage.

Pool houses, storage areas or guest houses are also excluded, and in some states, so basements.

Calculator.

Add up all your measurements

Once you’ve measured each space, you can add up all your numbers to find out the rental unit’s total square footage.

How to calculate square footage if you can’t visit the unit

If you’re apartment hunting from another location and can’t physically measure the rooms, there are other ways to find out a house’s total square footage.

You can look up the city or county’s property records. Some towns make detailed property records — including square footage — available online. If not, and you’re working with a real estate agent, he or she can pull this information for you.

Or, you can hire an appraiser to measure the property for you.

Square footage is an important factor when renting

Measuring an apartment or house’s square footage helps determine its value. While knowing this information can help you decide if a property is worth the rent being charged, remember that calculating square footage is subjective.

Some landlords and real estate agents may use ANSI guidelines and some not. Certain states require square footage in every listing description while others do not. That’s why it’s up to you to figure it out yourself or hire a professional to do it for you.

Source: rent.com

So You Want to be President of Your HOA?

Before you buy a home in an HOA-governed community, make sure you review the rules thoroughly.

What does HOA mean?

HOA means homeowners association. It can also be referred to as HOD or Home Owners Dues. HOAs can exist in planned housing developments, town homes, and condos. It is generally billed on a monthly basis.

Most people think of homeowners associations (HOAs), legally known as Common Interest Developments, as related to attached housing structures like condominiums or town homes. But this is not always the case.

Around the 1980s, developers started building communities of single-family homes that were actually Common Interest Developments. These communities came with their own sets of rules, regulations and HOA fees.

The reason builders starting developing communities in the HOAs structure was to maintain order and the aesthetics of a community. Their rules keep home paint colors and front yards in harmony, restrict building additions that don’t fit into the neighborhood, and stop owners from parking broken-down vehicles in their driveways or front yards. Such regulations assure new and existing owners that a neighbor’s behavior and choices will not diminish property values.

But they also mean that you must follow the rules yourself, and typically contribute monthly fees to manage and run the HOA for the benefit of all owners. When residents violate these rules — which can cause stress for other owners and hurt property values– the HOA will typically step in and enforce them with violation notices, fines and possibly litigation, if the issue gets that far.

The root of the issue

Often, the problem is not the rules, it’s that people don’t read the rules and regulations before they buy into a community, and then they violate the rules. But ignorance is no excuse — those rules are recorded on the property title, and likely given to every buyer to review before they purchase a home in a standard transaction. Owners are still bound by those rules whether they received and read them or not.

If you are buying into an HOA-governed community, be sure to read the rules and regulations before you buy. Once you’ve read them, if you don’t like them, then you should avoid buying a property in that community.

What if you already own in an HOA, and don’t like the rules or how the elected HOA board of directors interprets and enforces them? Luckily, an HOA is a democracy and the owners can vote out the board of directors and change the rules!

Any member-owner can try to get elected to the board and change the regulations. They just have to get enough other community members to support their opinion and vision for the community.

Unfortunately, most community members never go to a board meeting and never get involved. They just complain about the board — who are all volunteers, by the way — and complain about HOA fees, rules, and special assessments, etc.

If you are one of those owners who doesn’t like the rules, then get involved and take the time to campaign in your community, get on the board, and change the regulations.

Do Renters Pay HOA Dues?

“The landlord cannot force you to pay the HOA unless that is what is required in the lease. If it is part of the lease, then you have to pay. If not, you don’t, but the owner may decide to find another tenant when the lease is up.

If the HOA is not doing their job in clearing snow, I would write them a letter and send copy to the landlord. You are not the owner so they may not listen, but it gives you proof of the issue and may prompt the owner to act.”

Related:

Note: The views and opinions expressed in this article are those of the author and do not necessarily reflect the opinion or position of Zillow.

Source: zillow.com

Only 36% of Buyers Can Afford a Home in California, Lowest Share Since 2008

Posted on August 12th, 2013

As I warned over the past few weeks, affordability is becoming a major issue for the overheated housing market.

And we’re finally beginning to see a few pieces of data that back up these concerns.

This morning, the California Association of Realtors released a troubling report about housing affordability in the Golden State.

The group noted that only 36% of home buyers could afford a median-priced, single-family home in California during the second quarter, a steep decline from both the first quarter of 2013 and the second quarter of last year.

During the first quarter, 44% could still afford to purchase a median-priced home, and a year ago that figure was a much healthier 51%.

The current reading marks the first time their Traditional Housing Affordability Index (HAI) has been below 40% since the third quarter of 2008, back when the housing crisis was in full swing after an intense run-up.

Affordability was lowest in San Francisco, with only 17% of would-be buyers actually able to afford a home purchase where the median was a hefty $902,420.

Conversely, 69% could afford to buy a home in once hard-hit San Bernardino County, where the median price was just $169,760 last quarter.

Making matters even worse is the fact that the data relies on much lower interest rates and home prices. Let me explain.

To come up with the affordability numbers, CAR assumed a prospective buyer would need to make $79,910 annually in order to purchase a $415,770 home.

With 20% down, the monthly housing payment is around $2,000, with taxes and insurance included, using an effective composite interest rate of 3.64%.

Unfortunately, the average rate on a 30-year fixed mortgage is now closer to 4.5%, so that would push the mortgage payment up another $150 or so.

At the same time, asking prices are higher, so the buyer would be stuck with a larger loan amount and a higher tax payment.

In other words, I wouldn’t be surprised if less than 30% of buyers will be able to afford a home in California going forward.

Does this mean we’re going to repeat history in just five short years?

Things Are Different, But Risks Remain

HAI

This isn’t the same housing market we saw during the previous boom. For one, inventory is still highly constrained.

During the bubble years, it wasn’t difficult to find a home to buy. The home builders were going nuts buying land and throwing up new communities seemingly overnight, and plenty of people could sell because there weren’t any negative equity issues yet.

[Five Reasons Why Housing Inventory Will Rise]

Today, there are still very few properties on the market, though that too is beginning to shift as would-be sellers see a golden opportunity presenting itself.

At the same time, mortgage lending standards are still quite rigid, with high-risk products (option arms, cash out refis, limited documentation loans) still largely absent from the market.

In other words, not just anyone can qualify for a mortgage like they could during the lead up to the great bubble burst.

Finally, many of the mortgages held by homeowners these days are quite superior to those held before things went so very wrong.

Most loans today are fixed at very low rates, though there are plenty of homeowners with high-LTV loans, thanks to programs like HARP 2.0.

But all in all, the credit quality of mortgages these days is pretty darn solid, even if home prices do pull back.

It’ll definitely be interesting to see how the market reacts to affordability concerns. Will more stated income and high-LTV stuff return, or will lenders be more prudent this time around?

One thing is for sure; the next year or two will be very telling for the housing market going forward.

About the Author: Colin Robertson

Before creating this blog, Colin worked as an account executive for a wholesale mortgage lender in Los Angeles. He has been writing passionately about mortgages for 15 years.

Source: thetruthaboutmortgage.com

New Construction or Existing Homes: The Pros and Cons of Both

Some people hate hand-me-downs; others like things with a history. When it comes to housing, new construction has a never-been-touched attraction, while existing homes have stories to tell. For every advantage of buying newly built and existing homes, there’s a flip side. For example, newly constructed homes tend to cost more than similar pre-owned homes, sometimes as much as 20 percent more. But they are initially less expensive in terms of maintenance and utilities.

As you weigh whether to buy shiny new construction or a charming pre-owned home, here are some other factors to consider.

Benefits of new construction

Floor plan: If you opt for a custom-built home, you’ll work with the contractor to create a traditional or modern layout that works for your life. If you’ve always dreamed of a formal dining room for family gatherings, it’s yours. If you’re buying pre-built new construction, chances are good the layout will lean to modern, with wide-open floor plans. Kitchens flow into family rooms so you can cook and oversee homework or watch the game. Rooms in new construction homes – especially bedrooms and bathrooms – tend to be larger and brighter, with lots of natural light.

Personalization: Even if you’re not opting for a custom home, you may be able to upgrade finishes from builder-grade materials if you connect with the builder before construction is completed. It may cost you a bit more, but adding your own personal touches may be worth it to you.

Efficiency: New appliances and home systems are more energy efficient. Plus more efficient insulation and windows create buttoned up homes that are less expensive to heat and cool than older models. All of that translates into lower utility bills.

Smart and healthy: “Smart” technology options allow you to automate internet, cable, speakers and even an alarm system. And new homes often use low- and zero-VOC (volatile organic compound) paints and building materials, improving indoor air quality.

Maintenance: A newly built home requires less maintenance since everything from appliances to the HVAC system and roof are brand new. This means you can better predict monthly homeownership costs, since you’ll likely spend less to maintain your home. Warranties can protect your new home for years before you need to undertake any major repairs.

Amenities: Buying new construction often means buying a lifestyle. Master or planned communities often include amenities like parks and community spaces that are close to schools and transit. The key is finding a builder who offers what you care about.

Timing: The median time to complete new construction – five months for single-family homes and six months for condos – lets you feel less rushed than scrambling with other buyers for an existing home.

The flip side

Location: New construction typically grows up in exurbia where land is plentiful but commutes can be longer. In cities, new construction tends to be high-rise condos or in-fill homes on smaller urban lots, with very little outdoor space.

Landscaping: Existing construction is often surrounded by mature trees that shade the home in summer, protect against wind in winter, and block out traffic noises at bedtime. Mature trees may be salvaged at new building sites but often the landscaping takes years to grow into itself.

Floor plan: Builders, especially in planned communities, tend to stick with exterior design styles and finishes that appeal to the broadest range of customers. You’ll have to count on post-purchase painting and decorating to stand out from your neighbors.

Waiting: If you’re looking at new homes that are already built, this isn’t a factor. But if you’re building a custom home, it could take several months longer than moving into an existing home. You can expect a custom home to take five to six months, but that varies by market and builder.

If you’re interested in new construction, read about the types of new homes, the steps to building a custom home, and tips for buying a brand new home.

Source: zillow.com

Higher Mortgage Rates May Exacerbate Already White-Hot Housing Market

Posted on March 25th, 2021

You’ve seen the headlines – mortgage rates have jumped from recent all-time lows. And they’re seemingly on an upward spiral that can’t be stopped.

Except, they’ve actually seen some improvement over the past few days, thanks in part to the recent stock market rout, coupled with an easing in the 10-year bond yield.

Still, the 30-year fixed is pricing about .50% higher than it did at the start of 2021, when it was closer to 2.65%.

Today, your quoted rate might be closer to 3%, though some lenders are back to offering sub-3% rates too with limited or no lender fees.

Higher Mortgage Rates May Just Make Matters Worse

  • There’s already a record low supply of homes for sale
  • And intense bidding wars are becoming all too common these days
  • The threat of even higher mortgage rates may just compel more buyers to enter the fray
  • That could result in even higher home prices as more buyers clamor over what’s out there

Let’s face it, there aren’t many available homes on the market at the moment. This has been the case for a while now, and hasn’t improved one bit lately.

Meanwhile, home prices are on a tear and record home purchase activity is expected in 2021 despite higher rates.

The median home price has already increased 17% year over year to $330,250, an all-time high, per Redfin.

That also happens to be the biggest increase on record, which goes back through 2016.

On top of that, asking prices of newly-listed properties hit an all-time high of $350,972, up 10% from the same period a year ago.

Oh, and new listings haven fallen 17% from a year earlier. Good luck.

In other words, if you thought homes were expensive last year, don’t look now! And if you thought competition was intense in 2020, well, hmm…yeah.

The good news is mortgage rates are still lower today than they were a year ago, with the 30-year fixed averaging 3.17% at last glance, down from 3.50% during the same week in 2020.

The bad news is that the threat of increasing rates may actually be pushing more prospective buyers off the fence and into the mix.

If more folks think the end of the low mortgage rate era is upon us, they might finally take action.

In the past when this type of thing has happened, the housing market has held up just fine.

Don’t buy into the idea that home prices and mortgage rates have an inverse relationship. In many cases, both can rise or fall in tandem.

Ultimately, you want to pay attention to the economy to determine the direction of the mortgage rates, not home prices.

What Happens When Mortgage Rates Go Higher?

  • Home prices may also increase because there’s no inverse relationship
  • Bidding wars may become even more intense as urgency rises among buyers
  • Mortgage lenders may loosen underwriting guidelines to facilitate home sales
  • Home builders may build smaller homes and/or cheaper ones to maintain some sense of affordability

If and when mortgage rates do increase, and actually stay elevated for a sustained period of time, a variety of things may happen.

For one, home prices may increase, for a couple different reasons. For one, there will be more urgency to lock in that low mortgage rate before they worsen even further.

Compounding that will be even more bidders on each home out there, which will further drive up the final sales price.

Additionally, higher interest rates are a sign of an improving economy, so if things are looking up, so too might home prices.

At the same time, mortgage lenders may ease up and loosen underwriting guidelines to ensure borrowers can obtain a home loan.

And home builders may take notice and make adjustments to the new homes they build by making them smaller and/or cheaper.

They might also ramp up their volume to satisfy the intense demand from prospective buyers. This is usually where things go wrong and we overshoot the mark.

Why It Might Be Good to Wait for a Pullback

While there’s a sense mortgage rates may never revisit their recent all-time lows, it’s also foolish to believe that.

Why can’t they go back to where they were just a few months ago? I liken it to the stock market, where human psychology plays a big role.

One day, stocks are flying high and everyone is piling in. The next day, it’s doom and gloom and everyone’s thinking about selling.

This mentality is exactly how/why many retail investors get burned, assuming they attempt to time the market.

With the recent rise in mortgage rates, you might think it’s best just to accept the higher rate before things get even worse.

And while that’s not imprudent, it’s time like these where we often see reversals. When all hope is gone, things suddenly improve.

Of course, this won’t do the hot housing market any favors. Either way, it’s not going to get any easier to submit a winning bid on a home, whether mortgage rates go up or down.

Read more: 2021 Home Buying Tips to Help You Win

Source: thetruthaboutmortgage.com