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Apache is functioning normally

June 2, 2023 by Brett Tams

The housing market is cooling. There’s really no debate. Things are slowing down. You can mostly thank a doubling in mortgage rates and high home prices for that.

However, talks of a more severe housing bubble might be overstated.

Sure, it’s easy to compare today to 2007 or 2008, if you don’t take time to dig down into the details.

After all, home prices are lofty, the stock market is shaky, and the economy is looking as uncertain as ever.

But let’s talk about why things aren’t the same as they were 15 years ago.

Yes, Home Prices Are Too High

First things first, home prices are too high. Similar to pretty much every other asset, whether it’s a tech stock or bitcoin, home prices overshot the mark.

This was arguably driven by the easy money days of the past decade, exacerbated by a pandemic and a frenzy to own real estate, especially in the suburbs and exurbs.

For example, everyone wanted lots of space all of a sudden, far from urban centers.

This ran counter to the trend of moving into cities and ditching cars for pedestrian-friendly, urban hubs.

The reason was COVID-19, which has now mostly abated, making those who purchased in far out places question the decision.

Certain cities saw massive inflows, like Boise, Idaho, which are now expected to see the biggest declines.

We’ve also had a massive supply/demand imbalance, with far too few homes available to satisfy the appetite of prospective home buyers.

Together, this led to record home price appreciation, with property values rising 125 straight months on a year-over-year basis.

In fact, home prices were up 18.3% in June 2022 from a year earlier, per CoreLogic. However, home price gains slowed from the prior month for the second consecutive month.

Home Price Gains Are Slowing, Cooling the Housing Market

cooling housing market

There’s been a lot of confusion regarding home prices lately. Some folks seem to be jumbling slowing appreciation with falling prices, as if they’re the same thing.

But as noted, home price GAINS are dropping. In other words, if your home was appreciating 10% year-over-year, it might only rise 5% next year.

The takeaway is that it’s still rising in price, which might be the best way to look at today’s housing market.

CoreLogic still expects home prices to rise 4.3% from June 2022 to June 2023 on a year-over-year basis.

This differs from the stock market, which has actually fallen quite a bit to the point of being in a bear market.

Because we experienced the worst housing crisis in our lifetimes just over a decade ago, it’s natural to start having those same concerns.

There are probably also sharks waiting and hoping for home prices to plummet so they can scoop up homes on the cheap.

But as of now, it doesn’t appear that an outright housing bubble is in the cards, as expensive as real estate is these days.

A Housing Bubble Should Burst, Right?

The term “housing bubble” is a somewhat loose phrase that may be defined in numerous different ways.

But the general thinking is that a bubble should pop if it’s a truly a bubble.

That means it’s unsustainable, and a soft landing isn’t possible. The air isn’t slowly let out of the balloon. It pops, violently.

With regard to a housing market bubble, this would mean plummeting home prices and a deluge of distressed inventory, including short sales and foreclosures.

I think if you asked the average American if they foresaw a housing market like that, they’d probably say no.

Instead, they might say “home prices are too high, they need to come down.” They might also express that it’s a bad time to buy a home.

This could mean slowing appreciation, or zero appreciation in the hardest hit markets.

It could also mean lower listing prices, price reductions, more days on the market, and fewer bidding wars.

Does that equate to a “pop,” or is it more of a fizzle?

Economist Mark Zandi already called a housing market correction back in June, but merely referred to it as the end of the housing boom.

The end of a boom isn’t synonymous with a bubble burst. It might simply mean that the housing market has peaked and is now expected to cool.

Why No Housing Bubble Burst This Time Around?

A housing market bubble is typically accompanied by rampant speculation, a huge run up in prices, and lots of questionable home loan financing.

It’s generally also driven by a supply glut, that is, too many homes for sale and not enough demand.

If you consider all of the above, the only thing that seems to stand out is a “huge run up in prices.”

There hasn’t been crazy speculation, there isn’t shoddy financing, and there certainly hasn’t been an oversupply of homes.

On the contrary, there’s been too few homes for sale and a mortgage market dominated by 30-year fixed mortgages priced at all-time lows.

To that end, how many existing homeowners with 2-3% 30-year fixed mortgages and tons of home equity are going to lose their homes if the housing market cools?

In 2007/2008, the typical homeowner had no equity, an option ARM for a mortgage, and wasn’t qualified to be in the property to begin with.

There was also a huge oversupply of homes on the market and more actively being built, which led to the worst housing bubble burst in recent memory.

This doesn’t mean home builders today won’t have to lower prices, or that prospective buyers will walk away from purchases.

That likely will happen as home price appreciation comes to a halt. And you’ll see all the negative headlines regarding the housing market along the way.

But unless something significant takes place, a housing bubble burst doesn’t appear likely at this juncture.

Source: thetruthaboutmortgage.com

Posted in: Renting Tagged: 2, 2022, 2023, 30-year, About, air, All, appreciation, ARM, asset, average, bear market, best, bidding, bidding wars, bitcoin, boise, bubble, builders, Built, Buy, buy a home, buyers, cars, Cities, cooling, covid, COVID-19, Crisis, debate, decision, Distressed, Economy, equity, estate, existing, expensive, Financial Wize, FinancialWize, financing, fixed, Foreclosures, friendly, General, home, home builders, home buyers, home equity, home loan, Home Price, home price appreciation, home price gains, home prices, Homeowner, homeowners, homes, homes for sale, Housing, housing boom, housing bubble, housing crisis, Housing market, idaho, in, inventory, loan, LOWER, making, market, market bubble, markets, money, More, Mortgage, mortgage market, Mortgage Rates, Mortgages, Moving, natural, or, Other, pandemic, place, pretty, price, Prices, PRIOR, property, property values, Rates, Real Estate, right, rise, sale, sales, second, short, Short Sales, space, speculation, stock, stock market, suburbs, Tech, The Economy, The Stock Market, time, trend, will

Apache is functioning normally

June 2, 2023 by Brett Tams

The second quarter of the housing market is experiencing a unique set of circumstances that are shaping the real estate landscape. The housing market traditionally experiences heightened activity during the second quarter, with increased listings, buyer interest and home sales. However, a combination of factors such as higher mortgage rates, inflation, rising home prices, lower inventory levels and recent bank collapses have contributed to a sense of uncertainty among purchasers and sellers alike. 

This prevailing hesitancy is reflected in the market, as potential buyers adopt a more cautious approach when it comes to making real estate decisions and sellers adapt their strategies to current market conditions. 

High mortgage rates, low affordability result in low buyer enthusiasm 

The ongoing situation with high mortgage rates has resulted in a decrease in buyer enthusiasm in the real estate market. During the first quarter, 30-year fixed mortgage rates fluctuated between 6.1% and 6.7%. Experts predict that these rates will continue to vary between 6% and 7% throughout the rest of the second quarter. 

The affordability gap continues to widen, making it more challenging for buyers, especially first-time buyers with limited equity, to enter the market. 

If the trend of high rates continues, it is possible that home prices may lower as the year progresses. This could occur as sellers adjust their expectations to align with the changing market conditions, giving buyers slightly more leverage.

When mortgage rates eventually do drop, it often leads to increased activity from buyers who had been waiting on the sidelines, hoping for more favorable interest rates. 

Inventory remains tight 

During the pandemic, one of the main factors contributing to the steep rise in home prices was the limited housing supply. Although inventory levels have increased compared to this same time last year, they are still only about half of what would be considered a balanced market. The rise in inventory can be attributed to homes taking longer to sell once they are listed, as well as a decrease in the number of new listings entering the market. 


This article is part of our ongoing 2023 Housing Market Update series that wraps with a virtual event that brings together some of the top housing experts. The event provides an in-depth look at the top predictions for this year, along with a roundtable discussion on how these insights apply to your business. To register for the on demand version, go here.


According to the National Association of Realtors, the inventory of unsold existing homes reached 1.04 million at the end of April 2023, equivalent to approximately 2.9 months’ supply. Further, the ongoing “lock-in effect,” which continues to discourage households with advantageous mortgage rates — over 70% of borrowers — from listing their homes. This phenomenon is contributing to the limited housing supply, and it is unlikely to change unless mortgage rates decrease in the current quarter. 

Despite these challenges, there is an opportunity for homebuilders in the market. With buyers facing fewer choices in the resale market, many are turning to newly constructed homes, resulting in an unexpected boost in business for homebuilders. Builders are capitalizing on this trend by developing more spec homes and offering additional incentives such as rate buydowns, which are not typically available on existing homes. 

Homebuilders are also targeting first-time buyers who are frustrated by the tight housing market. Some companies are strategically building in less expensive areas and reducing the size of their builds to address issues of affordability. These efforts aim to capture the attention of buyers and provide them with viable options in a challenging market. 

Future outlook 

While the current market conditions have resulted in decreased buyer enthusiasm and intensified competition, experts remain cautiously optimistic about the housing market rebounding. Adjustments in seller expectations and potential drops in mortgage rates could create more favorable conditions for buyers. Additionally, the opportunities for homebuilders to cater to changing buyer preferences and address affordability issues provide hope for a more balanced and dynamic housing market in the future.

This column does not necessarily reflect the opinion of HousingWire’s editorial department and its owners.

To contact the author responsible for this story:

Russ Stephens at [email protected]

To contact the editor responsible for this story:
Brena Nath at [email protected]

Source: housingwire.com

Posted in: Mortgage Rates, Refinance Tagged: 2, 2023, 30-year, 30-year fixed mortgage, About, affordability, affordable housing, author, Bank, borrowers, builders, building, business, buyer, buyers, Choices, companies, Competition, decisions, equity, estate, event, existing, expectations, expensive, experts, Financial Wize, FinancialWize, first-time buyers, First-time Homebuyers, fixed, future, gap, Giving, home, home prices, Home Sales, Homebuilders, Homebuyers, homes, Housing, Housing inventory, Housing market, in, Inflation, Insights, interest, interest rates, inventory, inventory levels, leverage, Listings, low, LOWER, Main, making, market, More, Mortgage, Mortgage Rates, Mortgage Rates Center, National Association of Realtors, new, new listings, Opinion, opportunity, pandemic, predictions, Prices, rate, Rates, Real Estate, real estate market, Realtors, resale, rise, rising home prices, sales, second, Sell, seller, seller expectations, sellers, Series, spec, story, Strategies, targeting, time, trend, unique, update, virtual, will

Apache is functioning normally

June 1, 2023 by Brett Tams

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America has lots of old houses. According to the National Association of Home Builders, the average owner-occupied structure is about 40 years old in 2016. For reference, that’s higher than the U.S. median age of 38.8.

In some parts of the country, the housing stock is far older. On average, owner-occupied housing in New York, Massachusetts, and Pennsylvania is more than 50 years old. Though there are exceptions to the rule, homes tend to be older throughout the Northeast and Midwest and in urban cores across the country.

By contrast, newer homes and bona fide new construction homes are more common in Southern and Western cities in general, and in suburban and exurban communities across the country. For example, the median age of owner-occupied homes in Nevada is barely 20 years old.

What Counts As an Older Home?

As a general rule of thumb, homes built after 1990 are considered newer, and homes built before 1940 are considered old or antique. But housing age is a subjective condition that turns on numerous factors, including construction style and quality, local climate and geology, and work done over the life of the home.

The most important factors include:

  • Construction style and quality. Prefabricated and mobile homes are generally constructed to lower quality standards than solidly built Tudors, Craftsmans, or Colonials. Mass-produced houses, which tend to be newer, can have quality issues as well. However, custom-built new homes may be constructed even more solidly and durably than older homes. Ultimately, construction quality comes down to the quality of the materials used and the skill and diligence of the builders.
  • Climate and geology. Climate — particularly humidity, temperature extremes, and storms — accelerate the aging process. Homes in the eastern half of the U.S. are more likely to experience problems attributable to these issues, such as roof damage and basement or foundation moisture, than homes in coastal California cities like San Francisco and Los Angeles. Geological factors that can accelerate the aging process include seismic activity, sinkholes and limestone geology, and high water tables.
  • Renovations. In some cases, antique homes are updated so dramatically that it’s difficult to define their age any longer. For instance, my wife’s parents owned a farmhouse built in the 1880s. But successive owners thoroughly updated, modernized, and expanded the house over the years. In fact, the only original components were an old cinder block foundation and basement (now completely encased by a newer, expanded foundation and basement) and a few structural supports rising above the original footprint. Most other components dated from the 1970s or later. So is it really fair to say the house was an original 1880s farmhouse?

Common Older Home Problems & Potential Solutions

Even well-maintained older homes can present problems that owners of newer homes simply don’t need to deal with. These include health hazards such as asbestos and mold, serious pest problems that can lead to structural issues, and issues with utility systems like wiring and plumbing.

1. Lead and Asbestos

Lead and asbestos are two hazardous materials that were used in residential applications until relatively recently.

Lead is a neurotoxic metal that’s particularly harmful to children. It’s commonly found in exterior and interior paint made before 1978. It’s also found in substantial quantities in pre-World War II plumbing systems and in smaller quantities in water pipes installed before the mid-1980s.

Asbestos is a naturally occurring fibrous material that causes a serious form of lung cancer and other respiratory problems. It was a ubiquitous insulation and fireproofing material until the mid-1970s. Successive EPA actions banned most asbestos applications by the late 1980s, but the agency never required building owners to remove existing asbestos products. Accordingly, many older crawlspaces, walls, and pipes still contain asbestos insulation.

If you determine that you need professional help to deal with either of these environmental issues, use a resource like HomeAdvisor to find reputable, pre-vetted contractors in your area.

Possible Solutions: Lead Paint

When you buy a home built before 1978, you’re usually required to affirm your understanding that the home may contain lead paint. If you’re uncomfortable with the idea of coexisting with lead paint, invest in professional lead paint removal services.

According to HouseLogic, professional removal of lead paint costs $8 to $15 per square foot, or about $10,000 for a typical whole-house project. The medical literature isn’t conclusive on the matter, and some housing experts say it’s fine to leave lead in place as long as it’s not disturbed. But removal is recommended for homeowners with small children.

Possible Solutions: Lead Plumbing

If your home’s plumbing system is very old, it could still contain measurable quantities of lead. The most cost-effective way to deal with this is a water filtration system, either for the entire house ($1,000 to $3,000, depending on house size and system quality) or the kitchen tap ($200 to $1,000, depending on brand and quality).

Replacing the home’s entire piping system is the only way to ensure totally lead-free water, but doing so can cost upwards of $10,000.

If your home is older but has had significant plumbing upgrades — plastic-looking or shiny copper pipes being giveaways — then the only remaining lead elements could be in the service line branching out from the water main under your street. That bad news is that replacing a service line means digging up your front yard or sidewalk (or both) at significant expense: anywhere from $3,000 to $5,000 for a short line to $15,000 or more for a longer line.

Fortunately, more and more states and cities subsidize lead service line replacement costs, so check with your local water department or state health department before paying out of pocket.

Possible Solutions: Asbestos

Though direct, prolonged exposure to asbestos is a serious health hazard, insulation tucked away in inaccessible walls is not likely to pose a direct risk. However, removal is recommended if you plan on knocking down walls, expanding your home’s footprint, or attempting other expansive projects likely to uncover asbestos-laden material.

Asbestos removal costs vary greatly by project size and location. The general range is $5 to $20 per square or linear foot, which doesn’t really narrow it down. Think of it this way: a single pipe or wall runs in the high three- or low four-figure range, while a whole-house project costs $10,000 to $30,000, depending how extensive the asbestos is.


2. Termite Damage

Over time, termites can devastate homes’ wooden and wood-like components, including floors, structural supports, and drywall. The problem is particularly acute in the southern half of the country, where termites are active for most or all of the year. Older homes are more likely to have active termite infestations or preexisting termite damage due to compromised foundations or drywall.

Depending on the length and severity of the infestation, termite damage repairs can range from cosmetic fixes (such as replacing damaged floorboards) that cost a few hundred dollars to structural remediation projects that can cost $10,000 or more.

Signs of termite damage include:

  • Sagging or buckling floors
  • Pinpoint holes in drywall
  • Hollow-sounding wood supports or floorboards
  • Bubbling or peeling paint

Possible Solutions: Prevention

Prevention is the cheapest and least invasive termite solution:

  • Remove all loose wood vectors — including shrubbery, mulch, building materials, and stacked firewood — from contact with the lowermost portion of your house.
  • Prevent water from pooling near or against your home’s foundation by filling in low ground or installing a surface drainage system.
  • Use treated lumber (toxic to termites) for decks and other wooden structures attached to your house.
  • Remove dead stumps and root systems from areas near the house.
  • Seal visible foundation cracks, which provide ready entry for termites.

Your prevention costs depend on what’s necessary. They range from basically free (if you don’t account for the value of your time) for removing shrubbery and mulch, to a few thousand dollars for termite-proof decks or elaborate drainage systems.

Possible Solutions: Ongoing Infestations

For infestations in progress, hire a pest control professional to shrink or eliminate the colony. Exterminators typically charge $3 to $20 per linear foot (as measured around the home’s perimeter), according to HomeAdvisor. The average home’s perimeter ranges from 150 to 200 feet, so expect comprehensive treatment to cost anywhere from $450 to $3,200.

Bear in mind that your actual all-in cost will depend on the foundation type, the infestation’s severity, and the treatment type used. Chemical, tenting, and bait treatments tend to be cheaper than heat or fumigation.

If you catch the problem before you buy, perhaps during a professional home inspection (which costs $200 to $500 and is highly advisable before you purchase a home anyway), get a repair estimate from a general contractor. Then negotiate with the seller to cover part or all of the repair costs, as well as the cost of professional pest control services if the infestation is still in progress.


3. Mold and Mildew Damage

Over time, homes exposed to excessive moisture often develop mold and mildew problems. Though particularly common in basements and bathrooms of wet-climate homes, moisture-related microorganism growth can occur anywhere. The problem is more likely to occur in old homes because moisture more readily seeps through cracked foundations and leaky pipes. However, since infestations can start inside walls, it’s possible to walk through a mold-infested older home for sale without realizing there’s a problem.

While small amounts of indoor mold growth are permissible and even expected, uncontrolled growth can worsen allergies and other respiratory problems (such as asthma) even in healthy children and adults. More serious infections can develop in the very young, the very old, and those with compromised immune systems.

Also, mold eats away at its host surfaces, particularly wood, drywall, grout, and other porous or semiporous substances. Unchecked mold infestations can cause structural problems and render a home temporarily or permanently uninhabitable.

Possible Solutions

Your mold and mildew solution will depend on the severity of the problem:

  • Prevention: As with termite infestations, the best solution to mold and mildew is prevention. Buying a dehumidifier (anywhere from $100 to $500 new, plus $30 to $100 in annual electricity costs) for your basement or crawlspace can work wonders. Ensuring proper ventilation through a combination of floor or ceiling fans and open windows during dry, mild weather can help on higher floors.
  • Minor Infestations: You can treat small mold infestations, such as on an isolated area of a basement or bathroom wall, with store-bought mold spray, abrasive sponges or brushes, kitchen gloves, and lots of elbow grease.
  • Major Infestations.: For larger infestations, the spray-and-scrub approach is impractical. According to HGTV, whole-home mold remediation can cost as much as $5,000 and possibly more if the infestation affects hard-to-reach areas like the attic, basement crawl spaces, or inside the walls. To reduce remediation costs, make sure your homeowners insurance policy covers mold cleanup before you buy an older home, and consider switching policies (using a comparison engine like PolicyGenius to save time) if your policy doesn’t.

4. Plumbing Problems

The biggest danger of an old or substandard plumbing system is the possibility of a pipe failure that floods the home or causes major water damage in the walls and floors. A serious failure can temporarily render the home uninhabitable and cost tens of thousands of dollars to clean up, though the damage is often covered by homeowners insurance. It can also cause longer-term problems, such as mold infestations.

Before purchasing an older home, ask the seller how old the plumbing system is and about the material used in supply (fresh water) and drainage pipes. Whereas brass and copper pipes typically last 50 years or more, steel pipes can wear out after as little as 20, according to HouseLogic. Pipes made from PEX, an increasingly common plastic material in fresh water piping, typically last 40 or 50 years.

Special care is warranted if your drainage pipes are made of polybutylene, a grayish, flexible plastic material used from the 1970s to the 1990s. Chlorine, which is found in bleach and other household cleaners, corrodes polybutylene pipes over time and can lead to spontaneous failure.

Root damage is another old home plumbing issue that’s particularly common in heavily vegetated neighborhoods — which also tend to be older and thus have more old houses. Over time, tree roots work their way into older drainage pipes under or outside the home’s foundation, busting through pipe joints and tapping the year-round supply of nutrient-rich water flowing within.

Without proper maintenance, this leads to clogs and backups that can interrupt washing routines and cause water damage in low-lying parts of the house. Remember that tree roots can travel a long way underground. There may be no obvious culprit near your main drain outlet, but that mature tree across the street or around the side of your house could be responsible.

Possible Solutions: Pipes

If you’re eying a home with polybutylene pipes, ask the seller to install (and pay for) new pipes or knock the replacement costs off the purchase price. If they refuse, consider whether you can put up with the inconvenience and cost of replacing the pipes yourself, which you should do as soon as your budget allows to minimize failure risk.

For other common pipe materials, you simply need to ascertain the system’s age and target a date several years before the end of its life expectancy. If you plan on still owning the house when that date arrives, begin saving for a full system replacement now, keeping in mind the effects of inflation.

In a 1,500 square-foot house with two bathrooms, whole-house pipe replacement costs range from $4,000 to $10,000, according to HouseLogic. The exact amount depends on the pipe material and number of water fixtures. Larger homes and homes with more bathrooms cost more than $10,000, so budget accordingly.

Possible Solutions: Root Damage

Root damage fixes can be even costlier. Replacing a root-infested main drain pipe typically requires excavation, a notorious cost multiplier. Expect to pay up to $25,000 if the repair crew needs to dig under the slab or dig a trench in your front yard. Other factors include the length of the pipe and required depth of excavation.

Root-and-line jobs, which remove existing roots and install impermeable liners that prevent further intrusion, are nearly as expensive: $5,000 to $15,000, on average.

Periodic root removals are much easier on the wallet: anywhere from a couple hundred bucks to around $1,000, depending on the severity of the problem. But they need to be repeated every couple years, and even then, the problem slowly worsens over time.


5. Foundation or Structural Problems

Over time, nature catches up with even the most solidly built homes. Older homes are prone to a variety of foundation and structural problems, such as:

  • Major cracks or unevenness in the slab or perimeter foundation wall
  • Corrosion, dry rot, or moisture damage in pilings or concrete foundation supports
  • Damaged piers (support footings)
  • Dry rot or moisture damage in above-ground studs

These issues are particularly common, and tend to occur sooner, in regions with abundant soil moisture, unstable bedrock, seismic activity, and other perils. Though alert homeowners generally catch structural problems before they render homes uninhabitable, remediation is costly and inconvenient.

Signs of foundation or structural problems include:

  • Doors that jam or fail to latch (though this can be a sign of localized moisture damage too)
  • Visible diagonal wall cracks that grow over time
  • Visible cracks wider than 1/8″ in basement or crawlspace walls
  • Cracked tile or concrete floors
  • Persistently stuck windows (also a possible sign of localized moisture damage)
  • Floors that are bowed or have a clear slope in one direction
  • Unexplained water in your basement or sealed crawlspace, especially after heavy rain or snowmelt

Possible Solutions

Any apparent foundation or structural issue requires an expert opinion from a structural engineer ($500, on average). Addressing a modest foundation issue, such as a crack in the perimeter wall, can cost a few hundred dollars. More serious problems, such as uneven soil that requires support piers underneath the foundation, can cost $10,000 or more. And in seismically active areas, foundation anchor bolts are required or recommended — at a cost of at least $1,500 apiece. Many homeowners insurance policies don’t cover these costs.

If the foundation requires extensive repair or wholesale replacement, costs can quickly escalate. Expect to pay a minimum of $25,000 and as much as $100,000 to raise your home and replace the foundation, per HomeAdvisor. Again, homeowners insurance often doesn’t cover these costs. If you’re seriously thinking about buying an older home with obvious foundation damage, factor repair costs into your offer price or ask the seller to address the problems before closing.

Also, note that the cost of repairing secondary issues related to foundation damage (such as damaged upper-level flooring, walls, and doors) varies greatly and can add thousands or tens of thousands of dollars to your project. So the total bill to make your home “like new” after a full foundation replacement — assuming that’s even possible — could well exceed $100,000.


6. Radon

Radon is a radioactive gas that occurs naturally in certain types of bedrock. An Environmental Protection Agency shows elevated radon potential across broad swathes of the Northeast, Midsouth, Midwest, and Intermountain West, but it can occur anywhere.

Radon enters homes through cracks in the foundation perimeter and basement walls, which are more common in older homes. The gas then circulates throughout poorly ventilated houses over time. Though it’s not acutely toxic and has little impacton health when encountered intermittently and in small doses, radon is the leading cause of lung cancer for nonsmokers. Exposure over the generally accepted safe concentration is not recommended for long periods.

Possible Solutions

Radon mitigation typically involves capturing gas in the soil or rock surrounding the foundation and piping it up to a rooftop vent, then sealing foundation cracks to prevent further leakage. It can also involve installing one or more depressurization vents outside the house (venting radon before it reaches the foundation), as well as negative-pressure fans that essentially blow radon from the basement or lowest level back into the soil.

According to Kansas State University, the average cost of a radon mitigation system is about $1,200. But the actual cost can vary between a few hundred dollars to more than $3,000, depending on the home’s size, foundation type, and the problem’s severity.

Amazon sells radon testing kits for less than $20, though you may need to pay to ship the kit to a certified lab for analysis. Still, your all-in cost should be under $50, making for an inexpensive way to see if you need to call in the professionals.


7. Roof Problems

Older homes tend to have older, possibly deteriorating roofs. This presents numerous problems, including pest infestations, interior water damage, and less-effective insulation. Problems stemming from a compromised roof, particularly once interior leaks begin occurring regularly, can cost tens of thousands of dollars to fix and may not be covered by homeowners insurance.

Warning signs of potential roof issues include:

  • Missing or damaged shingles
  • Crumbling roof cement
  • Bowed or sagging gutters
  • Persistent moisture in the attic
  • Evidence of water damage in the upper floors
  • Critters in the attic or upper crawlspaces

Possible Solutions

Before you buy an older home, assess the roof’s age and condition to the best of your ability. Unless the seller put the roof on, they might not be aware of when it was installed, so consider hiring a roof inspector ($100 to $800) if there are obvious signs of wear.

Next, consider the likely lifespan of your current roof and its potential replacement:

  • Shingles. On sloping roofs, asphalt shingles typically remain in good shape for 15 to 20 years. Treated wood shingles last 20 to 30 years.
  • Metal. Metal roofs are typically warranted for 20 to 40 years, though they often last longer and require little maintenance.
  • Tile and stone. Tile and stone roofs can last up to 100 years with proper installation and maintenance.

Within these categories, construction quality matters. For example, on sloping shingle roofs, a rubber or thermoplastic coating layer can mean the difference between a roof that goes bust at 15 years and one that keeps on chugging well beyond that. Of course, no matter the material, a roof’s actual lifespan depends on installation quality, prior maintenance record, roof slope, and local climate.

Replacement costs vary greatly by material, but you can expect to spend anywhere from $5,000 to more than $15,000 to replace an entire asphalt shingle roof. Slate (stone) roofs cost $20,000 to $40,000 to replace, on average. In both cases, inflation has done a number on project budgets due to surging material costs.

If the roof’s problems are confined to a small area and the roof isn’t near the end of its predicted lifespan, you can save money by replacing or repairing only the damaged section. If the roof is older or widely damaged, it makes long-term financial sense to replace the entire thing, or at least one whole side.


8. Inefficient Windows

Old homes are more likely to have older, inefficient windows. The primary downside of inefficient windows is higher electricity bills because the home’s climate control system has to work harder to compensate for leaks.

According to the Federal Government’s ENERGY STAR program, installing the most efficient class of windows in your entire home can reduce your annual electric bill by as much as $600, depending on the size of your home and where you live. You may also be eligible to claim federal tax credits under the Inflation Reduction Act, up to $1,200 per project. This credit must be shared with other types of projects, such as wall and attic insulation, if you’re doing more than one in a single tax year).

Possible Solutions

Address inefficient windows temporarily with passive heating and cooling methods, such as shutting windows and blinds on hot days and opening them at night, and by using plastic film ($10 to $20, on average) to seal leaks during the winter. Sealing cracks around your windows and reinforcing your home’s insulation, a more permanent solution, can cost upward of $1,000.

The ultimate leaky-windows solution is simply to replace old windows with more efficient ones. While judicious window replacement is often cited as one of the top home improvement projects to reduce long-term homeownership costs, bear in mind that super-efficient windows are costly. Installing them in your entire house could set you back $10,000 or more, meaning you might never earn back your investment even after accounting for the tax credits and energy savings.


9. Inadequate or Unsafe Electrical Systems

Electrical problems fall into two categories: convenience and safety.

First, convenience: Unless their electrical systems have been updated, older homes lack sufficient numbers of electrical outlets to address our collective addiction to electronic devices. They might also not have enough power supply to handle energy-hungry modern appliances, such as whole-house heat pumps, induction stoves, and electric vehicle chargers.

Second, and even more importantly, safety: The lifespan of electrical wiring itself is limited by the lifespan of the wire’s insulation. Wiring installed before 1960 lasts roughly 70 years, while newer wiring is estimated to last at least 100 years. Once the insulation deteriorates to the point that the actual wire is exposed, the risk of electrical fire, shocks, short circuits, and localized (single- or multiroom) power failures increases dramatically. Don’t let your home’s wiring reach that point.

Electrical service panels and circuit breakers are also prone to deterioration. Service panels last 60 or 70 years, while breakers last 30 or 40. Failing panels and breakers can cause shock, power failure, fire, and other dangers.

Note that water damage, fire, pest infestation, and other unusual events can harm some or all of an electrical system’s components, necessitating repair or replacement long before they reach their life expectancy.

Possible Solutions

Electrical work is dangerous and confusing for novices, so avoid taking the DIY route with your electrical project. Instead, hire a licensed electrician.

A qualified electrician typically takes 30 to 60 minutes to install a single outlet, at a cost of anywhere from about $100 to about $500, but the average cost is on the lower side of this range. If a new circuit is required, the cost will be higher, though not excessively so.

A new service panel starts at about $900, but a higher-amp option (which may be required for high-power appliances) costs more: up to $2,500 for new 200-amp service and up to $4,000 for new 400-amp service.


10. Failing or Inefficient Mechanicals and Appliances

Old homes are more likely to have old mechanical equipment, such as water heaters, furnaces, and air conditioning units, as well as older household appliances. Mechanical and appliance lifespan varies by item, brand, and workload. On average, expect major mechanical equipment and appliances to age as follows:

  • Water heater: 10 to 15 years
  • Furnace: 15 to 30 years
  • Central air conditioning system: 15 to 25 years
  • Refrigerator: 15 to 20 years
  • Washers and dryer: 10 to 15 years

Equipment near the end of its useful life is more prone to failure, raising the possibility of an inconvenient or dangerous situation — such as the heat going out in the dead of winter or an electrical fire — that needs to be addressed immediately. Moreover, older equipment is usually less energy-efficient, resulting in ballooning utility costs.

Possible Solutions

Older homes with recently updated mechanical equipment and appliances typically fetch a premium. If you’re fine with buying older mechanicals and appliances, research each unit and determine about how much longer it can be expected to last. Draw up a replacement schedule commensurate with your time horizon and begin saving for the most pressing projects. If your furnace has 15 years left and you plan on selling in five, replacement isn’t necessary.

Mechanical and appliance replacement costs vary by item and brand.

Natural gas furnaces cost about $3,000 to $7,000, on average, with existing ductwork. Heat pumps may cost less if they can be tied into existing ductwork. Ductless heat pumps typically cost $5,000 or more per zone, though you may get a deal on systems with three or more zones. Heat pumps have lower operating costs because they’re much more efficient than either gas or traditional electric heaters, however.

Efficient tankless water heaters can cost as much as $6,000, though the average installation cost (per Fixr) is closer to $3,000. Traditional gas or electric tank heaters cost even less, in the $1,000 to $2,500 range. A heat pump water heater costs $2,000 to $5,000, but the lifetime operating costs are lower than gas or traditional electric.

Thanks to the Inflation Reduction Act, your heat pump purchase may qualify for an impressive federal tax credit — up to $2,000 or 30% of the total project cost. State tax credits and utility rebates may stack on top of this incentive, saving you up to $8,000 in some places. So even if the out of pocket cost is a bit higher, your net cost is likely to be lower than a conventional appliance.

If you plan ahead to replace your old water heater or laundry machine, finding room in your household budget won’t be an impossible task. Set up an interest-bearing, FDIC-insured savings or money market account earmarked specifically for the project.

But an unexpected replacement can really set you back, particularly if there’s damage involved. A family friend recently had to replace his old dryer after a massive electrical fire was sparked by faulty wiring and exacerbated by a clogged dryer vent. Including cleanup, the bill came to more than $20,000, though his homeowners insurance policy covered most of the cost.


11. Unhelpful, Unfinished, or Outdated Updates

Older homes typically have more than one previous resident, and sometimes a lot more. All those past homeowners had license to do what they wished with the property.

While many older homes retain the charm and function of their original construction, others have a host of unhelpful or anachronistic updates that detract from the homeowner’s experience and potentially add to the cost of ownership. Particularly costly updates that may need to be rectified shortly after moving in include:

  • Poorly designed, inadequate, or simply tasteless kitchens
  • Illegal basement bedrooms (lacking egress windows, for instance)
  • Incomplete projects, such as a partially finished basement or partially laid patio

Before we bought our current house, my wife and I went to an open house at a 100-year-old home with a half-finished basement, half-finished screen porch, and a literally transparent exterior paint job. The home had been purchased just a few months earlier for far less than the current asking price, suggesting the current owner had attempted to flip the house and had become overwhelmed. Our real estate agent remarked, “It looks like this guy ran out of money and bailed.”

Possible Solutions

As long as they’re not unsafe, you can live with unhelpful or outdated features until you have room in your budget to fix them. The cost of said fixes varies widely. A full kitchen update typically runs north of $20,000, while replacing outdated moldings or rectifying a hideous interior paint job might cost only a few hundred.

Half-finished add-ons, such as the porch at the abandoned flip mentioned above, are another matter. They can be unsafe, particularly for small children, and may provide access points for insects and rodents. Think twice about buying an older home with too many wonky updates or haphazard design touches, as they often disguise bigger problems.

For instance, we found out later that the abandoned flip had serious foundation problems that would cost tens of thousands of dollars to fix. The scale of the foundation issue likely compelled the flipper to walk away from the property before completing the job.


12. Substandard or Unsafe Features

Older homes sometimes have too much charm. Depending on the style, location, and history of a particular house, some original features may be obsolete, not up to current building codes, or actually unsafe. Examples include:

  • Old laundry chutes
  • Servants’ staircases
  • Staircases leading nowhere (commonplace in houses that were once divided into multiple dwelling units)
  • Steep staircases
  • Low ceilings
  • Blocked-off chimneys
  • Nonworking fireplaces

Our current home is by far the nicest place we’ve ever lived, but it nevertheless has a steep, winding staircase we’d feel uncomfortable allowing a toddler to traverse, as well as an obsolete chimney that’s showing early signs of deterioration.

Possible Solutions

Many jurisdictions are lenient about substandard or against-code features in owner-occupied residences, relative to rental or commercial properties. Accordingly, you likely won’t be required to fix such issues after taking possession of your older home unless they threaten other properties (for example, by directing excessive storm runoff toward neighboring foundations). However, fixing these issues can preserve or increase your home’s value, not to mention enhance the safety and comfort of its occupants.

Some problems have straightforward, affordable solutions. For example, childproofing our steep staircase simply involves installing a latching door or child gate at the entrance. Others, such as a crumbling chimney, require regular upkeep (repairing flashing and any damaged roof materials) that can cost a few hundred dollars per year.


Potential Benefits of Owning an Older Home

You wouldn’t guess it from the litany of potential problems owners of old houses can face, but old-home ownership has its benefits too. Older homes are often conveniently located in established, amenity-rich neighborhoods; inside, they offer abundant charm and equity-building opportunities.

1. Convenient Location

Because most cities grow outward over time, older homes tend to be located closer to employer- and amenity-rich downtown cores. A convenient location offers many time-saving and healthful benefits, such as shorter commutes (and the opportunity to use public transit or commute by bike) and easier shopping trips.

By contrast, newer owner-occupied homes tend to be built where land is cheapest, often on the edges of existing towns and cities. Such places aren’t always convenient.

However, these rules aren’t universal. Big cities have plenty of newly built condos downtown or close by, and many rural homes are quite old.

2. Hard-to-Duplicate Original Features

Though some older homes lack character, many showcase charming, period-specific features that are pleasing to the eye and may increase resale value. For instance, the built-in storage and display cabinets in our older home’s dining room definitely influenced our purchasing decision because it was both aesthetically pleasing and practical. In our region, the only new homes that contain such built-in furnishings were well out of our price range and preferred neighborhood.

3. More Established Neighborhood

In towns and cities, older homes are often located in established neighborhoods with long-term homeowners who care about the area and community, mature landscaping and tree cover, and a general sense of community. Such areas are also more likely to be connected to municipal infrastructure, such as sewer and water systems.

By contrast, less-established neighborhoods tend to have less community engagement, particularly if the homes are very new and most residents are busy professionals without the time to engage their neighbors. Plus, newer subdivisions look bleak until newly planted trees and shrubs fill out.

4. Potential for Better Construction Quality

Depending on the building style and location, an older home may be constructed more solidly and durably than newer homes. This is particularly true for budget-friendly new homes in recent subdivisions, which are typically built by big companies with the ability to cheaply mass-produce the structures.

Then again, some of America’s original suburbs were mass-produced housing tracts built shortly after World War II. When considering any home built to standardized specifications, learn as much as possible about the materials, methods, and labor used by the construction company.

5. More Opportunities to Build Equity

Creative, enterprising, diligent homeowners see opportunity in older homes’ shortcomings. Every poorly designed kitchen, unfinished basement, or non-landscaped yard is a project in waiting. A well-chosen, well-executed renovation or update can boost a home’s appraised value, and its eventual resale value, by more than the project’s cost.

Your budget is likely to limit the scope of your vision, particularly right after you move in. But equity-building projects become more manageable when they’re planned and budgeted for well ahead of time. My wife and I are already kicking around ideas (and saving) for a finished basement and brand-new detached garage, even though we won’t start on either project anytime soon.


Final Word

Even a charming, beautifully staged older home in a convenient, tight-knit neighborhood is likely to have some of the drawbacks mentioned above. If you choose to fix most or all issues as they arise, you’ll likely end up spending tens of thousands of dollars during your time in the home.

Alternatively, if you choose to ignore serious issues or do only the bare minimum to fix them, you’ll likely have to accept a lower sales price or cover the cost of major repairs just before selling. Either way, you could limit or negate the overall return on your real estate investment by purchasing an older home.

That’s not to say that newer homes don’t require major repair and upkeep investments over time. And new homes often come with additional expenses that owners of older homes aren’t likely to face, such as homeowners association fees. Ultimately, it’s more important to choose the home that feels right to you and your family than to obsess over what could go wrong with your new abode.

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Brian Martucci writes about credit cards, banking, insurance, travel, and more. When he’s not investigating time- and money-saving strategies for Money Crashers readers, you can find him exploring his favorite trails or sampling a new cuisine. Reach him on Twitter @Brian_Martucci.

Source: moneycrashers.com

Posted in: Credit 101 Tagged: 1970s, 2, 2016, About, active, actual, affirm, affordable, age, agent, aging, air, Air Conditioning, All, allergies, Amazon, analysis, appliances, Applications, ask, asking price, attic, average, Banking, basement, bathroom, Bathrooms, Bedrooms, before, Benefits, best, Best of, big, Bike, bills, Budget, budgets, build, builders, building, building materials, Built, Buy, buy a home, Buying, cabinets, california, categories, ceilings, Children, Cities, Clean, clear, climate, closing, codes, Commercial, commute, commutes, companies, company, condos, construction, contractors, Convenience, cooling, cost, country, couple, Credit, credit cards, credits, custom, decision, decks, design, dining, dining room, display, DIY, doors, efficient, electric, employer, energy, energy savings, energy-efficient, engagement, entry, environmental, equity, estate, events, existing, expense, expenses, expensive, experience, experts, Fall, Family, farmhouse, FDIC, Features, Fees, Financial Wize, FinancialWize, finished basement, fire, fireplaces, floor, flooring, foundation, Free, friendly, front, garage, gas, General, Giveaways, good, government, Grow, growth, health, healthy, heat, heating, hgtv, Hiring, history, home, home builders, Home Improvement, home inspection, Home Ownership, HomeAdvisor, Homeowner, homeowners, homeowners insurance, homeownership, homes, hot, house, household, household budget, Housing, housing stock, How To, ideas, improvement, in, Inflation, Insects, inspection, install, Insurance, interest, Invest, investment, investments, job, jobs, kitchen, kitchens, knock, Land, landscaping, laundry, Learn, Life, life expectancy, Live, Local, LOS, los angeles, low, LOWER, Main, maintenance, Make, making, market, Massachusetts, Medical, Midwest, mobile, modern, mold, money, money market, Money Market Account, More, Move, Moving, moving in, National Association of Home Builders, natural, needs, negotiate, neighborhoods, neighbors, Nevada, new, new construction, new construction homes, new york, newer homes, News, offer, offer price, offers, old home, old houses, older homes, open house, Opinion, opportunity, or, Original, Other, ownership, paint, parents, passive, patio, Pennsylvania, pest control, pipes, place, plan, plumbing, points, policies, porch, premium, present, pressure, price, PRIOR, products, Professionals, project, projects, proof, property, protection, public transit, Purchase, quality, Raise, reach, ready, Real Estate, real estate agent, real estate investment, remediation, renovation, renovations, rental, repair, Repairs, resale, resale value, Research, Residential, return, rich, right, risk, room, rural, safe, safety, sale, sales, san francisco, save, Save Money, Saving, saving strategies, savings, second, Secondary, seller, selling, shopping, short, Side, single, skill, Spending, square, state tax, states, steel, stock, storage, Strategies, structural problems, Style, suburbs, target, tax, tax credit, tax credits, termites, tile, time, time horizon, toxic, traditional, Travel, Twitter, under, update, updates, upgrades, upkeep, utility costs, value, wall, war, washing, water damage, weather, will, windows, winter, wood, work, wrong, Yard, young

Apache is functioning normally

June 1, 2023 by Brett Tams

It’s getting tougher for house hunters to find a home to buy, particularly in large cities, as the housing industry faces a dearth of inventory.

The number of homes for sale in 2023 decreased in 21 of the 50 largest metropolitan areas compared to this time last year, according to a new report from Realtor.com. San Jose, California, saw the steepest decline, with 35% fewer homes listed for sale this year. Sacramento, California, ranked second highest, with a decline of 27%; followed by Hartford, Connecticut, where listings were down 26%.

Real estate agents in those cities told CBS MoneyWatch that in addition to inventory declines, elevated home prices and mortgage rates have changed the way buyers shop and quelled sellers’ eagerness to sell.

“In Sacramento, homes under $500,000 are moving very quickly because buyers in that price range don’t have a lot of options,” said David Orr, an agent for Redfin in Sacramento. “The inventory is really tight because sellers are hesitant to list their current home when they have such a low interest rate.”

according to Realtor.com. 

4 cities where it’s cheaper to buy a home than rent

03:21

While competition for houses is intense in California’s capital city, Orr said buyers are being cautious about their bids and asking sellers to help with closing costs or to pay for a lowered interest rate.

“I am seeing multiple offers, but it’s not like last year, when everyone was like ‘Hey I’m going to give you a first-born child along with this offer,'” he said “Now, people are making offers a bit above or below the asking price.” 

Bidding wars are new norm

Braxton Warren, a real estate agent at Compass, said Sacramento homes are priced lower than nearby Seattle and San Francisco, which is also fueling hot competition there.  

“House hunters have acknowledged the shortage of options but have come to accept the reality of the situation,” Warren told CBS MoneyWatch. “Homes are under a bidding war with 20-30 buyers all in line for the same home.”

Meanwhile, in Connecticut, the Hartford area “has witnessed a significant decrease in inventory, resulting in a transformative market shift,” said David Krasnoff, a realtor at Compass. 

“Bidding wars have become the norm as every reasonably priced home brings in multiple offers, often exceeding the listing price,” Krasnoff said. 

Other cities that saw year-over-year inventory declines are:

  • San Diego (26%)
  • Milwaukee (23%)
  • Cincinnati (23%)
  • San Francisco (20%)
  • Chicago (18%)
  • Washington, D.C. (16%)
  • Rochester, New York (13%)
  • Seattle (11%)
  • Providence, Rhode Island (11%)
  • New York City (10%)
  • Los Angeles (10%)
  • Baltimore (8%)
  • Philadelphia (6%)
  • Detroit (5%)
  • Boston (4%)
  • Virginia Beach, Virginia (2.5%)
  • Minneapolis (2%)
  • Riverside, California (1%)
  • Cleveland (.5%)

Cities where the number of homes for sale increased were mainly in the South, including Austin, Texas; Birmingham, Alabama; Jacksonville, Florida; Nashville; and San Antonio. 

More women join construction industry as worker shortage keeps home prices high

03:01

A nationwide lack of inventory has become a major headline in the housing market with homebuyers now facing a triple whammy of higher mortgage rates, elevated asking prices and few options from which to choose.  

Inventory overall grew in May when compared to a year ago but the rate of growth has slowed over the past three months, according to Realtor.com. A shortage of skilled workers in the construction industry is partly to blame for the decline in new homes for sale, the National Association of Home Builders has said.

Despite higher prices, more than 4.2 million people bought houses in April, according to the National Association of Realtors. 

“The good news for sellers is that buyers are still out there and this month’s slower growth in the active inventory of homes for sale indicates that shoppers are in the market and actively searching for homes that fit their needs and budget,” Danielle Hale, Realtor.com’s chief economist, said in a statement. 

Khristopher J. Brooks

Khristopher J. Brooks is a reporter for CBS MoneyWatch covering business, consumer and financial stories that range from economic inequality and housing issues to bankruptcies and the business of sports.

Source: cbsnews.com

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Apache is functioning normally

June 1, 2023 by Brett Tams

To say that mortgage rates have been on a wild Mr. Toad’s ride in 2022 is an understatement. In less than a year, we went from 2.78% on the 30-year fixed to as high as 6.28%, then recently got as low as 5% — only to have another move higher this week to 5.30%. People thought the mortgage rate drama in 2013-2014 was a lot when rates went from 3.5% to 4.5%. However, as we all know, after 2020, things are just more intense. 

The question is, can lower mortgage rates save the housing market from its recent downtrend? To understand this, we need to look back into the past to realize how different this period is from what we had to deal with in the previous expansion when rates rose and then fell.

Higher rates and sales data

We can see that when rates rise, sales trends are traditionally lower. We saw this in 2013-2014 and 2018-2019. We know the impact in 2022, working from the highest bar in recent history.

The most significant difference now from what we saw in the previous expansion is that mortgage rates never got above 5% in the previous expansion. However, more importantly, we didn’t have the massive home-price growth in such a short time. It does make an enormous difference now that home prices grew above 40% in just 2.5 years. 

This is why I focused my readers on the years 2020-2024, because if home prices only grew by 23% over five years, we would be ok. However, that got smashed in just two years, and prices are still rising in 2022. It’s savage man, truly savage with the mortgage rate rise. Yes, rates bursting toward more than 6% is a big deal in such a short time, but the fact that we had massive home-price growth in such a short time (and in the same timeframe) is even more critical.

While I truly believe that the growth rate of pricing is now cooling down, 2022 hasn’t had the luxury of falling prices to offset higher rates. So we can’t reference this period of time with rates falling as we did the previous expansion due to the massive increase in home prices and the bigger mortgage rate move. In 2018, sales trends fell from 5.72 million to the lows of January 2019 at 4.98 million. This year we have seen sales fall from 6.5 million to 5.12 million, and they are still falling.

Housing acts better when rates are below 4%

In the past, demand improved when mortgage rates were heading toward 4% and then below. Obviously, we are nowhere close to those levels today, barely touching 5% recently to only go higher in the last 24 hours.

Again, I stress that the massive home-price growth is different this time. However, with that said, considering the sales decline trends and that we have seen better-than-average wage growth, housing demand should act much better if rates head toward 4% and below. 

I stress that higher and lower mortgage rates impact the market, but it needs time to filter their way into the economy. When I talk about the duration, this means rates have to be lower for a more extended period. People don’t throw their stuff down and buy a home in a second; purchasing a home is planned for a year. Rates would need to stay lower for longer into the next calender year to make a big difference. 

Millions and millions of people buy homes every year. They have to move as well, so a traditional seller is a buyer most of the time when it’s a primary resident owner. Sometimes when rates go higher too quickly, some sellers can’t move, this takes a sale off the data line, but if rates fall quickly, they might feel much better about the process.

The downside of rates moving up so quickly is that some sellers pull the plug until rates are better. We see some of this in the active listing data as new listings are declining. Lower rates may pull some of these listings forward as people feel more comfortable with rates down; time will tell.

From Realtor.com 

From Redfin:

Of course, a 1% move lower in rates matters, but keep in context where we are coming from and how much home-price growth we have had in just 2.5 years. This isn’t like the previous expansion where home prices were working from the housing bubble crash and affordability was much better back then.

When to know when lower rates are working?

The best data line to see this take place is purchase application data, which is very forward-looking as the fastest data line we have in housing. Let’s take a look at the data today.
Purchase application data was positive week to week by 1% and down 16% year over year. The 4-week moving average is down negative 17.75% on a year-over-year basis.


This is one data line that has surprised me to a degree. I had anticipated this data to be much weaker earlier in the year. However, I concluded that 4%-5% mortgage rates didn’t do the damage I thought they would do. But, 5%-6% did, as I was looking for 18%-22% year-over-year declines on a four-week moving average earlier in the year. So, this makes me believe that if rates can get into a range of 4.125%-4.50% with some duration; the housing data should improve on the trend it has been at when rates are headed toward 6%. Again, we aren’t there on rates yet. 

The builders would love rates to get back to these levels so they can be sure to sell some of the homes they’re finishing up on the construction side. Now assuming rates do get this low; what would the purchase application data look like? Keep it simple, the year-over-year declines will be less and less, and then when things are improving, we should see year-over-year growth in this index. 

A few things about purchase apps: the comps for this data line will be much more challenging starting in October of this year. Last year’s purchase application data made a solid run toward the end of the year, which led existing home sales to reach 6.5 million. Next year we will have much easier comps to work with, so we need to keep that in mind. However, to keep things simple, the rate of change in the purchase applications data should improve yearly.

To wrap this up, lower mortgage rates should be looked at as a stabilizer first, but for them to change the market, we will need much lower rates for a more extended period. Also, we have to consider that rates moving from 3% to 6% is historical, and if rates fall, we have to look at housing data working from an extreme rise in rates that happened quickly. However, sales levels should fall if purchase application data shows negative year-over-year prints on a double-digit basis. 

Since home prices haven’t lost this year, you can see why I used talked about this as a savagely unhealthy housing market. The total cost of housing had risen in a fashion that isn’t comparable to what we saw in the previous expansion when rates went up and down due to the massive increase in home prices. Also, we have to know that we aren’t working from a high level of inventory data as well. Traditionally, total inventory ranges between 2 to 2.5 million. We are currently at 1.26 million.

NAR total inventory data

We shall see how the economic data looks for the rest of the year and if the traditional bond and mortgage rate market works as it has since 1982, then mortgage rates will head lower over time. However, as of now, it’s not low enough to change the dynamics of the U.S. housing market.

Source: housingwire.com

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Apache is functioning normally

June 1, 2023 by Brett Tams

While the average mortgage rate remains stuck above 6%, buyers of new homes are getting a much better deal, according to one expert.

“So buyers out there today that are buying new homes are not paying 6.5% — the headline rate,” John Lovallo, UBS homebuilders and building products analyst, told Yahoo Finance Live (video above). “They’re paying under 5% in most cases.”

That’s another big advantage that homebuilders have in this market — their financing — in addition to capitalizing on the low inventory environment in the previously-owned home market.

Builders “have the ability to do this because of the captive finance arms that they have,” Lovallo said. “And we think that positions the public homebuilders in particular extremely, extremely well here in this environment.”

MIAMI, FL - SEPTEMBER 25: A family rides their bike past a Lennar Corp sign, as the company reports that it's third-quarter net income ending on August 31st rose to $87.1 million, or 40 cents a share, from $20.7 million, or 11 cents, a year earlier on September 25, 2012 in Miami, Florida. The company said the better than expected quarter was due to demand for new houses has climbed and a real estate recovery is gaining traction.  (Photo by Joe Raedle/Getty Images)MIAMI, FL - SEPTEMBER 25: A family rides their bike past a Lennar Corp sign, as the company reports that it's third-quarter net income ending on August 31st rose to $87.1 million, or 40 cents a share, from $20.7 million, or 11 cents, a year earlier on September 25, 2012 in Miami, Florida. The company said the better than expected quarter was due to demand for new houses has climbed and a real estate recovery is gaining traction.  (Photo by Joe Raedle/Getty Images)

MIAMI, FL – SEPTEMBER 25: A family rides their bike past a Lennar Corp sign, as the company reports that it’s third-quarter net income ending on August 31st rose to $87.1 million, or 40 cents a share, from $20.7 million, or 11 cents, a year earlier on September 25, 2012 in Miami, Florida. The company said the better than expected quarter was due to demand for new houses has climbed and a real estate recovery is gaining traction. (Photo by Joe Raedle/Getty Images)

For homebuyers, a 1-percentage-point difference in the mortgage rate can significantly impact home purchasing power. The monthly mortgage payment on a $400,000 home with 20% down at 5.35% is $1,787. The payment rises to $1,991 at 6.35%. That’s over $200 more per month, or $2,400 a year.

A 2-percentage-point difference is even better. And that’s what Pulte Homes was offering earlier this year. The homebuilder recently offered a 30-year mortgage rate at 4.25% for qualified homes under construction through its financing arm. During the time it ran the special, the average rate on a 30-year mortgage ranged from 6.09% to 6.73%, according to Freddie Mac.

“By offering lower rates, we are helping to make our homes more affordable for today’s consumers.” Macey Kessler, Pulte Group’s corporate communications manager, wrote to Yahoo Finance, “Given the extremely low inventory of existing homes, providing an opportunity for consumers to purchase a new home is more important than ever.”

“What the builders have been able to do…is to help buyers find that clearing price,” Lovallo said, “whether it’s through incentives on lowering the actual price of the home or — what’s been happening more often — is buying down interest rates.”

Homebuilders are benefiting from higher average mortgage rates in another way: less competition.

Many would-be sellers feel rate-trapped by their current low mortgage rate and have decided against putting their home on the market. As a result, new homes are making up a larger portion of for-sale inventory.

More than a third of homes on the market in April were new construction, the National Association of Home Builders estimated, when that share is typically 13%. The dynamic has buoyed housing confidence among builders, which hit its highest level in 10 months in May.

“I think that what’s interesting in going back to the fact that there’s very little existing home inventory on the market, to the extent that folks are looking to buy a home, they are more inclined today than at probably at any point in history to look at a new home,” Lovallo said.

That lack of inventory is also helping to keep housing prices elevated — another boon to builders.

“Home prices have remained very resilient,” Lovallo said, “which I think is a testament to the demand that’s out there currently. Also, the fact that there is very little existing home supply.”

But for homebuyers in the market, Lovallo concedes: “It is a very tough time.”

Rebecca is a reporter for Yahoo Finance and previously worked as an investment tax certified public accountant (CPA).

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Source: finance.yahoo.com

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Apache is functioning normally

May 31, 2023 by Brett Tams

Low housing inventory and still-strong demand kept prices high in March, according to the latest according to the S&P CoreLogic Case-Shiller National Home Price Index, released Tuesday. The annual growth rate in March 2023 was up 0.7%. On a month-over-month basis, the index was up 1.3% before seasonal adjustment.

This was the second month-over-month increase following seven consecutive month-over-month decreases.

“The modest increases in home prices we saw a month ago accelerated in March 2023,” Craig Lazzara, the managing director at S&P DJI, said in a statement. “The National Composite rose by 1.3% in March, and now stands only 3.6% below its June 2022 peak.”

Both the 10-city and 20-city composite price indexes posted annual declines but monthly gains. For the 20-city composite, 19 of the 20 cities reported lower prices in the year ending March 2023 versus the 12-month period ending February 2023, with Chicago being the only city to report an increase at 0.4%.

“Low inventory, maintained by an extremely low level of new listings coming onto the market, has fueled demand amongst the few buyers who can afford to stay shopping. As a result, prices started picking back up on a monthly basis in early 2023 following months of price stagnation and declines,” Nicole Bachaud, Zillow’s senior economist, said in a statement. “As inventory remains a challenge in this market, so too will affordability be rocked by stubbornly high prices that aren’t looking to move drastically any time soon. New construction could be the beacon of light the housing market desperately needs right now, as home builders are gaining confidence amongst rising sales, hopefully soon to translate to more residential construction breaking ground in the coming months.”

Yet again, Miami (7.7%) and Tampa (4.8%), reported the highest annual price gains among the 20-cities analyzed, but Atlanta was bumped from the top-three by Charlotte, which recorded an annual price increase of 4.7%.

“One of the most interesting aspects of our report continues to lie in its stark regional differences. Miami’s 7.7% year-over-year gain made it the best-performing city for the eighth consecutive month,” Lazzara said. “Tampa (+4.8%) continued in second place, narrowly ahead of bronze medalist Charlotte (+4.7%). The farther west we look, the weaker prices are, with Seattle (-12.4%) now leading San Francisco (-11.2%) at the bottom of the league table. It’s unsurprising that the Southeast (+5.4%) remains the country’s strongest region, while the West (-6.2%) remains the weakest.”

Although March marked the second consecutive month of monthly price increases, Lazzara does not believe the industry is out of the woods yet. “Two months of increasing prices do not a definitive recovery make, but March’s results suggest that the decline in home prices that began in June 2022 may have come to an end,” he said. “That said, the challenges posed by current mortgage rates and the continuing possibility of economic weakness are likely to remain a headwind for housing prices for at least the next several months.”

The average rate in March on a 30-year-fixed rate mortgage in March was 6.54%, with the rate dropping to 6.34% in April.

Relatedly, the Federal Housing Finance Agency (FHFA) recorded a 4.3% increase in home prices in the first quarter of 2023 from the first quarter in 2022. House prices were up 0.5% compared to the fourth quarter of 2022. The FHFA’s seasonally adjusted monthly index for March was up 0.6% from February.

House prices rose in 78 of the top 100 largest metropolitan areas over the last four quarters. Per the FHFA’s HPI, the annual price increase was greatest in Miami-Miami Beach-Kendall, FL at 14.1% while the San Francisco metro area experienced the greatest price decline at 10.1%.

Source: housingwire.com

Posted in: Mortgage Rates, Real Estate Tagged: 2, 2022, 2023, 30-year, affordability, atlanta, average, beach, before, best, builders, buyers, Case-Shiller, charlotte, chicago, Cities, city, confidence, construction, country, Current Mortgage Rates, Federal Housing Finance Agency, FHFA, Finance, Financial Wize, FinancialWize, fixed, fixed rate, Fixed rate mortgage, fl, growth, home, home builders, Home Price, Home Price Index, home prices, house, Housing, housing finance, Housing inventory, Housing market, housing prices, in, index, industry, inventory, Listings, low, Low inventory, LOWER, Make, market, metro area, Miami, More, Mortgage, Mortgage Rates, Move, needs, new, new construction, new listings, place, price, Prices, rate, Rates, Real Estate, Residential, right, rose, s&p, sales, san francisco, seasonal, seattle, second, shopping, tampa, the west, time, versus, will, Zillow

Apache is functioning normally

May 30, 2023 by Brett Tams

Mortgage rates jumped higher this week, further dashing homebuyers’ hopes for an affordable spring home-shopping season.

Rates for a 30-year fixed-rate mortgage averaged 6.57% for the week ending May 25, according to Freddie Mac. That’s a hefty hike upward from last week’s 6.39%. As if that weren’t worrisome enough, Mortgage News Daily (which tabulates rates daily rather than weekly) pinned the average 30-year fixed rate even higher, at 7.12% on Thursday afternoon.

These numbers are a cruel twist given they arrive just as home prices seem to be drifting back down to earth.

“Recent momentum has home prices on a trend to dip below year-ago levels in a matter of weeks,” Realtor.com® Chief Economist Danielle Hale noted in her most recent analysis of housing data for the week ending May 20. “But while many homebuyers will certainly welcome a lower price tag, higher mortgage rates may minimize or erase any potential savings.”

When will buyers catch a break? When will homeowners decide to take the plunge and become sellers? Here’s what the latest real estate statistics seem to be saying in this edition of “How’s the Housing Market This Week?”

Home price gains keep grinding lower

In April, the median price of homes for sale came in at $430,000. Yet for the week ending May 20, listing prices were up just 0.7% compared with a year ago.

Home price gains keep shrinking, and Hale isn’t the only one expecting them to fall below year-ago levels soon. The economics team at Freddie Mac is forecasting a 2.9% decrease in national home prices over the course of 2023.

Of course, as Hale points out, all real estate is local; no one buys a “national” home.

Prices in the Midwest and Northeast remain more affordable, but they are gaining by double digits as these markets heat up. Meanwhile, prices in the West and South, which grew exponentially during the COVID-19 pandemic, are moderating or even falling now.

Why home sellers aren’t listing

The entire housing market would benefit if more homeowners decided to list their homes for sale, but few seem willing to volunteer.

For the week ending May 20, the number of new listings was down 26% versus the same time last year. There have been fewer listings compared WITH 2022 for almost an entire year now, thanks largely to the spike in mortgage rates.

“With roughly two-thirds of existing homeowners holding onto a mortgage more than 2 percentage points below current mortgage rates,” Hale said, “it’s easy to see why new listings lag behind.”

The slowing pace of home sales

Granted, overall inventory (comprising both new listings and older ones that have been lingering ) is up by 20% over last year. But the fact that many of those listings are stale suggests that buyers have already picked over these clunkers and passed.

And the slowing pace of sales suggests that home-shopping enthusiasm is on the wane.

In April, homes lingered on the market for a median of 49 days. And for the week ending May 20, listings spent an extra 15 days on the market compared with this same week last year.

Just how high might mortgage rates go?

Will homebuyers get rate relief anytime soon? Most signs point to not likely.

Just a month or so earlier, some economists predicted mortgage rates would dip lower later this year. But now, the Freddie economists aren’t so sure. They now forecast a scenario in which “long-term interest rates move largely sideways, staying in a range similar to where rates are today, perhaps moving up or down by around half a percentage point.”

Yet despite the gloomy outlook, determined buyers are finding ways to navigate today’s dismal market. Some are sifting through stale listings and lowballing. Others are exploring a whole new possibility they might not have considered before: new-construction homes.

“Even though existing home sales have waned in recent months, new-home sales have ticked up,” said Hale. “Buyers grappling with low inventory look to new construction as a relief valve.”

Given builders can sometimes offer discounted mortgage rates through preferred lenders, new construction might even cost less than pre-existing homes in certain areas today. This should give all homebuyers hope that the right house is out there, provided they keep looking and leave no stone unturned.

Source: realtor.com

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Apache is functioning normally

May 30, 2023 by Brett Tams

The co-founder and CEO of a so-called “tech-enabled residential mortgage servicer” named Valon (formerly Peach Street) has warned we could be on the brink of another foreclosure crisis.

While real estate is flying high at the moment, it’s appears that two very different stories are unfolding at the same exact time.

On the one hand, the housing market has never been hotter, with supply at record lows and dwindling, while demand from prospective buyers skyrockets.

Meanwhile, home builders are playing catch-up, which has pushed property values to all-time highs, with a further 10% increase expected in 2021.

Then there’s the other story, which got some press early last spring when the pandemic took hold, but has since been somewhat ignored.

Nearly 3 Million Homeowners Have Their Mortgage Payments on Hold

  • Currently 2.7 million borrowers are taking part in COVID-19 mortgage forbearance
  • These programs essentially put payments on hold for up to 360 days
  • But once the forbearance ends the borrower must at least resume regular payments
  • This could lead to another wave of short sales and foreclosures if the economy doesn’t get back on track

There are 2.7 million U.S. homeowners in mortgage forbearance plans at the moment, which represents 5.38% of loan servicers’ portfolio volume, per the latest weekly report from the MBA.

These borrowers essentially have their payments on hold for up to 360 days due to a COVID-19-related issue, such as unemployment or reduced earnings.

It’s even worse for government-backed loans like FHA loans and VA loans, with the Ginnie Mae forbearance rate at 7.61%.

Simply put, there are millions of existing homeowners unable to make payments, and scores of prospective buyers unable to land a property due to supply constraints.

At some point, these two stories will merge, and it could land us right back in another foreclosure crisis, similar to what was seen back in 2008.

What Happens When the Mortgage Forbearance Runs Out?

  • Using a conservative estimate of 20% of borrowers in forbearance falling into foreclosure
  • We would be back at 2008 levels with a 1.8% foreclosure rate across all housing
  • This could lead to another downturn similar to what was experienced a decade ago
  • But better loan servicing and more efficient loss mitigation has the potential to curtail some of this negative activity

One thing that should concern any homeowner, prospective home buyer, and loan servicer (the entity that collects monthly payments) is what happens post-forbearance.

While there are a variety of solutions to pay back the forbearance, such as a partial claim or payment deferral, most expect the homeowner to resume regular payments.

That means they won’t necessarily have to pay back the missed payments right away (no lump sum necessary), but they’ll at least have to get back to making regular monthly payments.

If they’re unable to do that, possibly due to a shuttered small business or long-term unemployment (or COVID-19 illness), they may be offered a loan modification plan.

But for some, the reality is going to be the loss of the property, either via a short sale, deed-in-lieu of foreclosure, or straight up foreclosure.

Valon co-founder and CEO Andrew Wang told me that the “forbearance and foreclosure moratoriums were a temporary fix,” and that the “stockpiling of forbearance and foreclosures will come to a head when these leniencies are lifted.”

While he does believe government efforts can help us avoid a full-scale industry-wide crisis, there’s still a good chance many Americans will lose their homes.

He expects “some in the forbearance pool will be OK,” but others will need to “move to liquidation scenarios – nearly all of which requires a homebuyer to leave their home.”

That means another wave of short sales and foreclosures, similar to what was seen about a decade ago when home prices plummeted during the Great Recession.

“Even if a conservative 20% of the current loans in forbearance move forward as foreclosures, we’ll be back at that level,” he added, noting the comparison to the 1.8% foreclosure rate for all housing in 2008.

Disrupting the Stale Loan Servicer Model

  • Valon says the largest mortgage servicing software controls more than half of all U.S. residential loans
  • This effective monopoly has apparently driven servicing costs up nearly 250% in the past decade
  • Their mobile-first cloud driven platform can reduce costs and improve borrower’s access to loan information
  • A more empowered borrower working with a more efficient servicer could reduce foreclosures and help us avoid another crisis

So you might be wondering how Valon can help us avoid another foreclosure crisis?

Well, their mission is essentially to disrupt the stale loan servicing industry, which like all parts of the home loan process, was in dire need of a refresh.

Their mobile-first mortgage servicing software that is built in the cloud (Google Cloud specifically) can reduce servicing costs by 50% and increase borrower self-service capabilities.

These features include improved access to their home loan information and the ability to make payments from wherever they are using a simple interface.

They also believe their tech can eliminate lengthy paper-intensive processes associated with loss mitigation and potentially keep more Americans in their homes.

After all, there are lots of borrowers who never even know they have options to avoid foreclosure simply because of poor (or no) communication from their loan servicer.

And when you think about how much time a homeowner spends with their loan servicer (potentially the entire loan term) vs. their lender (a month or so), you realize the importance of getting it right.

Valon just raised $50 million in Series A Funding, led by Andreessen Horowitz, and gained Fannie Mae approval to service agency-backed residential mortgages.

They will use the proceeds to acquire more mortgage servicing rights (MSR), with commitments already in place to grow to roughly $10 billion in servicing volume this year.

Valon operates in 49 states, and expects to add New York to the fold later this year.

Not only do they think they can reduce servicing costs, which can in turn pass savings onto consumers, they believe a technology-enabled alternative can keep borrowers better informed.

And a better-informed borrower may know just that little bit more to actually keep their home, thereby helping us all avoid another full-scale crisis.

Source: thetruthaboutmortgage.com

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Apache is functioning normally

May 29, 2023 by Brett Tams

Added NAHB’s chief economist, Robert Dietz: “April saw an increase in new home sales as buyers sought new construction even as builders struggle to keep up with demand because of a shortage of distribution transformers and skilled construction workers,” he said. “Sales for 2023 thus far are still down 9.7% on a year-to-date basis due … [Read more…]

Posted in: Refinance, Savings Account Tagged: 2, 2023, All, builders, building, buyers, construction, deposit, existing, Fall, Family, Financial Wize, FinancialWize, growth, home, home inventory, home sale, Home Sales, homes, in, interest, interest rates, inventory, LOWER, market, measure, Midwest, NAHB, new, new construction, new home, new home sales, or, price, Prices, PRIOR, Rates, resale, rise, Robert Dietz, sale, sales, seasonal, Sell, shortage, single, single-family, South, stage, the west, time, under, workers
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