Buyer Scenario #1 ... New Mortgage |
|
Purchase Price |
$400,000 |
10% Down Payment |
$40,000 |
Mortgage at 6.42% for 30 years |
$360,000 |
Principal & Interest Payment |
$2,256.54 |
Future Value at 3% Appreciation in 7 years |
$493,342 |
Future Unpaid Balance |
$325,062 |
Future Equity |
$168,280 |
Buyer Scenario #2 ... Assumption |
|
Purchase Price |
$400,000 |
10% Down Payment |
$40,000 |
Assume Existing Mortgage at 3% for 28.8 Remaining Years |
$328,871 |
Assume Principal & Interest Payment |
$1,386.66 |
New Second Mortgage at 6.5% for 30 years |
$31,098 |
Payment on Second Mortgage |
$247.32 |
Total Monthly Payments |
$1,633.94 |
Monthly Savings |
$622.55 |
Future Value at 3% Appreciation in 7 years |
$493,342 |
Unpaid Balance on 1st Mortgage in 7 years |
$266,313 |
Unpaid Balance on 2nd Mortgage in 7 years |
$35,379 |
Future Equity in 7 years |
$191,649 |
Increased Equity Over New Mortgage |
$23,369 |
2/1 Buydown Example |
1st Year |
2nd Year |
3rd ... 30th Years |
Interest Rate |
4.7% |
5.7% |
6.7% |
Principal & Interest Payment |
$1,867.10 |
$2,089.44 |
$2,323.00 |
Monthly Savings |
$455.90 |
$233.56 |
|
Annual Savings/Total Savings |
$5,470.80 |
$2,802.72 |
$,8,273.52 |
5% price increase |
10% price increase |
||
Sales Price |
$400,000 |
$420,000 |
$440,000 |
Mortgage |
$360,000 |
$378,000 |
396,000 |
Current Rate vs Possible 1.00% increase |
4.5% |
5.5% |
5.5% |
Monthly Payment |
$1,824 |
$2,146 |
$2,248 |
Payment Difference |
$322.18 |
$424.38 |
|
Additional Cost for 7 years |
$27,063 |
$35,648 |
|
Additional Cost for 30 years |
$115, 983 |
$152,776 |
We have all heard this expression that implies that had a person known earlier in life what they know now, they would have done things differently. The subject possibilities are endless While no one has a crystal ball to see into the future, it may be possible to learn from people who have experienced similar situations.
In the late sixties, mortgage rates in the Florida Keys hit 8.5% but before the decade had finished, the rates had come down to 7% where they stayed for some time. Homeowners who purchased at the higher rate, could buy a larger, more expensive home for the same payment if they could get out from under the obligation of their existing mortgage.
FHA and VA mortgages, up until the late 80's, could be assumed by anyone, regardless of credit worthiness. Since these homes were purchased one or two years earlier, the sellers didn't really have much equity in them, and many homeowners were willing to "give" them to investors so they could qualify on a new, lower rate mortgage.
It was a fantastic opportunity for investors who could afford the negative cash flow because the homes wouldn't rent for the payment. As the 70's economy, started heating up, so did inflation. Most people consider inflation an undesirable thing but for people who owned rental property, it meant the values were going up and so were the rents.
Soon, the rentals no longer had negative cash flows and the investments turned the corner. If you talk to investors who purchased those homes during that period, you'll very likely hear, "I should have bought more of them."
If we could fast forward into the future to see how people will be talking about the period we're currently in, we might see an even greater opportunity in our present time. Interest and mortgage rates have been on a downward trend for thirty years. In the past ten years, they hit an historic low. They are trending up currently and it appears they will continue to do so.
Homes are in short supply which has caused the prices to go up. Builders haven't returned to the number of new units needed to meet demand and that has been going on for over ten years. Even when the supply does increase, it will take a long time to catch up with demand.
Combine that with supply chain shortages due to the pandemic and prices look like they are unaffordable. Many millennials and some Gen Xers believe the "window of opportunity" has closed.
For tenants, rents are continuing to increase due to the same causes that home prices are increasing. Buyers, by acting now, can lock in their mortgage rate and the purchase price of the home. As prices continue to increase and the amortization of the mortgage pays down the unpaid balance, homeowners' equity increases and so does their net worth.
Unfortunately, for tenants, the rents will continue to rise, along with prices which will make it more difficult in the future to purchase. Their rent is used to pay the landlord's mortgage who benefits in the principal reduction for each payment made.
The market is changing and people who don't own a home currently must find a way to buy one. The longer they wait, the harder it will be to buy one.
People wanting to purchase a home in today's market must educate themselves with facts and not hearsay. There are all sorts of programs available to address low down payments, varieties of mortgages, credit issues and other things.
It starts by meeting with a real estate professional who can recommend a trusted mortgage professional. Download our Buyers Guide and check out your numbers using the Rent vs. Own. Call Michael Rojewski Key Largo REALTOR today 305.942.7755
30-year |
15-year |
|
$300,000 mortgage for 30 years |
3% |
2.5% |
Monthly payment |
$1,264.81 |
$2,000 |
Unpaid balance at end of 12 years |
$210,900 |
$69,310 |
Increased equity |
$141,590 |
|
Additional monthly payment |
$735.56 |
|
Additional total payments for 12 years |
$105,920 |
|
Savings |
$35,670 |
#KeysRockAgent
Buying a home is certainly one of the biggest decisions people make. Careful consideration and planning are necessary steps leading to a prudent decision. Considering today's market that includes a global pandemic, financial volatility, and rapidly rising home prices, it is understandable that many people thinking about a home purchase are in a wait and see posture.
However, there is a cost connected to waiting and it may be a lot more than you think. The recent Home Price Expectation Survey 2021 Quarter two estimated appreciation rates will average just under 5% annual for the next five years. It expects prices to increase by 8% in the next one year.
Being a renter or even putting off moving to a larger home, could keep you from enjoying the benefit of that appreciation. If your down payment is in the bank, your expected earning will be less than 2%. In a home, the owner has the benefit of leverage when a mortgage is used to finance the home.
Buyers are borrowing a large portion of the purchase price at around 3% interest but the entire value of the home is appreciating at a higher rate and the profit builds equity for the homeowner.
Another major component for the owner is that the amortizing mortgage is being reduced with each payment that is made. As the home goes up in value due to appreciation, the unpaid balance goes down with principal reduction creating equity from two directions.
If you waited one year to buy a $350,000 home today, the price could easily be $378,000. A 5% down payment on this home at today's price is $17,500. If you could earn 2% on a certificate of deposit, it would be worth $17,850 in one year. If it used as a down payment on a $350,000 home that appreciates at 8%, the equity in one year would be $52,442. Use the Your Best Investment calculator to make your own projection.
Mortgage experts anticipate rates to rise by 0.75% in the next year which means that you'll pay more interest on a larger mortgage by waiting. The monthly payment could easily be $200 more by waiting a year. Based on how long you intend to be in the home, it could make the overall housing cost much more.
To run some examples of projections based on your own expectations and at the price you are considering, go to Cost of Waiting to Buy and Rent vs. Own.
If you have some specific concerns that is keeping you from deciding today, let's get together on the phone, an online meeting or somewhere face-to-face so that you can get the facts about what it takes to buy a home now. #keysrockagent
Looking for a simple way to determine if a rental property will give you the rate of return you want? This modified annual property operating data may be just what you've been looking for.
There are many different rates of return that investor's consider to determine whether a property will generate the yield that they expect. Sometimes the simplest of calculations can tell you whether you want it or not and if you get the other things like tax advantages and appreciation, it just makes it that much better.
The first yield we will look at is commonly called the Cash-on-Cash rate of return. It is calculated by dividing the initial investment, usually down payment and closing costs, into the Cash Flow Before Tax.
To arrive at Net Operating Income, it is simply taking the gross scheduled income, less vacancy allowance and all operating expenses. From that is deducted the annual debt service which is the principal and interest payment times twelve. The remaining amount is referred to as Cash Flow Before Tax.
In this example , the initial investment of the down payment and closing costs, $66,000 was divided into the Cash Flow Before Taxes of $5,468 to get an 8.28% Cash-on-Cash rate of return.
The second yield to be considered is called Equity Build-up. Each payment made on an amortizing mortgage pays a portion toward the principal balance to retire the loan. It is calculated by dividing the initial investment into the principal contribution for the year.
Continuing with the example, $66,000 is divided into the principal reduction for year one of $4,606 to get a 6.98% Equity Build-up rate of return.
This approach is easy to understand because you are not considering depreciation, anticipated appreciation, holding period, recapture of depreciation or long-term capital gains. Simply rent the property, pay the bills and if there is money left over, it pays a return on the initial investment.
The same goes for the Equity Build-up. When you make the payment on the mortgage, the loan is reduced and while you don't have access to the money like cash flow, it is definitely your equity and tangible.
To determine whether an ROI on a rental is good, compare it to what your initial investment is earning currently. Ten-year treasuries are earning less than 2%. Certificates of deposit are earning less than 1%.
For more information, download the Rental Income Properties guide and schedule an appointment with your real estate professional.
19 out of 20 builders face an appliance shortage, with 57% calling it a “serious shortage.” Lumber products hold the 2, 3 and 4 spots, with windows and doors at No. 5.
WASHINGTON – A May survey of builders finds frustration as 19 out of 20 (95%) say they’re having trouble buying appliances. Of that 95%, 6 out of 10 (57%) says it’s a “serious shortage.”
In a report from the National Association of Home Builders (NAHB), lumber products top the list of shortages after appliances, holding the next three spots: 94% for framing lumber (47% say serious shortage), 92% for oriented strand board (54% say serious), and 90% for plywood (48% say serious).
In most cases, the problem was caused by a disruption in the supply chain caused by the COVID-19 pandemic. Tariffs on Canadian lumber, pandemic slowdowns in the U.S. lumber industry and higher demand from homeowners opting to remodel dinged the lumber industry.
For appliances, a key reason for the shortage is a computer chip, which most now require.
Average Mortgage Rates Move Higher in the Florida Keys – But Still Under 3%
A 30-year, fixed-rate mortgage averaged 2.99% this week, up from last week’s 2.95%, as it continues to hover in a relatively short range. One year ago, it was 3.18%.
WASHINGTON (AP) – Mortgage rates were flat to higher this week. The benchmark 30-year home loan remained below the 3% mark amid continued positive indications of the economy’s recovery from the pandemic recession.
Mortgage buyer Freddie Mac reported Thursday that the average for the 30-year rate rose to 2.99% from 2.95% last week. At this time last year, the average long-term rate stood at 3.18%.
The rate for a 15-year loan, popular among those seeking to refinance, was unchanged from last week at 2.27%.
In the latest economic news, the government reported that the number of Americans seeking unemployment benefits dropped last week for a fifth straight week, to 385,000, a new pandemic low and additional evidence that the job market is regaining its health as the economy further reopens.
With historically low mortgage rates prevailing, the U.S. housing market has grown so overheated as demand outpaces supply that prices keep hitting record highs – and roughly half of all houses are now selling above their list price.
Bank of America says it will resume foreclosures in July, though “the amount … is way down, and most of the clients have become current,” and JP Morgan Chase says 90% of customers have left forbearance. But Wells Fargo plans to wait until 2022 to resume foreclosures.
NEW YORK – Pandemic-related moratoriums on foreclosures and evictions expire June 30, and some lenders plan to start resuming foreclosures in July. About 2.1 million homeowners are still in mortgage forbearance, which means they’re delinquent but not an immediate foreclosure possibility, according to the Mortgage Bankers Association.
As of April, however, about 1.8 million households who aren’t in forbearance were 90 days delinquent on their loan, according to Black Knight data.
Bank of America says its foreclosure suspension will end on bank-owned loans and government-backed loans when the national moratorium ends at the end of June.
“The good news is the amount of deferrals is way down, and most of the clients have become current,” Brian Moynihan, CEO of Bank of America, said at last week’s Senate hearing. “Irrespective of that deadline passing, we’ll continue to work with a few clients we have left to help them.”
JPMorgan Chase said during the hearing that about 90% of its customers have exited forbearance programs.
Forbearance and delinquency rates have gradually dropped since the nation started reopening last summer. Nearly 92% of mortgage holders were making loan payments as of April 23, the largest share for any month since the onset of the pandemic, Black Knight reports.
Some lending giants plan to delay taking any action against delinquent homeowners even after federal moratoriums expire. For example, Wells Fargo told lawmakers that it plans to extend moratoriums on foreclosures and evictions for loans that they own until the end of the year. Wells Fargo also said it supports the Consumer Financial Protection Bureau’s proposed rule that would prevent lenders from initiating foreclosure proceedings until 2022.
The housing industry anticipates more inventory in the coming months, according to National Association of Realtors® (NAR) Chief Economist Lawrence Yun.
“We’ll see more inventory come to the market later this year as further COVID-19 vaccinations are administered and potential home sellers become more comfortable listing and showing their homes,” Yun said after last week’s existing-home sales report. “The falling number of homeowners in mortgage forbearance will also bring about more inventory.”
Source: “Bank of America and Chase Could Restart Mortgage Foreclosures as Early as July, But Wells Fargo Is Waiting Until 2022,” CNBC.com (May 27, 2021)
© Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Rising home prices, material costs and a labor shortage have taken their toll, builders say, and more potential new-home buyers have been priced out of the market.
WASHINGTON – Rising building material costs and low inventory caused new-home sales prices to jump 20% year-to-year, according to the National Association of Home Builders (NAHB). And that has hurt housing affordability and driven down the pace of new home sales.
According to the U.S. Census Bureau and Department of Housing and Urban Development (HUD), sales of newly built, single-family homes fell 5.9% in April (863,000 seasonally adjusted annual rate), following a significant downward revision of the March estimate.
“Affordability factors are clearly affecting new home sales,” says Chuck Fowke, chairman of the National Association of Home Builders (NAHB) and a custom home builder from Tampa. “A growing number of builders are limiting sales in order to manage supply chains, including access and cost factors associated with lumber, appliances and other building materials.”
Fowke again called on policymakers “to find ways to improve the supply-chain by facilitating more domestic production, or in cases where that cannot be done, suspending tariffs to allow for more imports.”
A new home sale occurs when a sales contract is signed or a deposit accepted. At that time, the home can be in any stage of construction – not yet started, under construction or completed. In addition to adjusting for seasonal effects, the April reading of 863,000 units is the number of homes that would sell if that month’s pace continued for the next 12 months.
“After a period of builders holding back price increases, new home prices were 20% higher year-over-year per the April Census data,” says NAHB Chief Economist Robert Dietz. “Higher costs have priced out buyers, particularly at the lower end of the market. A year ago, 45% of new home sales were priced below $300,000. In April 2021, only 27% … were priced below $300,000.”
The median April sales price was $372,400, up from the $310,100 median sales price posted a year earlier. Inventory also remains low at a 4.4-month supply. There were 316,000 new single-family homes for sale – 33.3% lower than April 2020.
Completed homes also continue to fall as a share of the market, representing only about 11 percent of the inventory in April compared to 24 percent a year ago.
Regionally, new home sales rose in all four regions year-to-year, up 50.7% in the Northeast, 45.7% in the Midwest, 45.5% in the South, and 3.6% in the West.
However, those seemingly notable sales increases are due, in part, to the pandemic that started to take hold in April 2020. It’s not that April 2021 sales were so high, so much as April 2020 sales were so low.
The Executive Order doesn’t block individual businesses from requiring masks or social distancing, but it limits the authority of cities and counties to mandate them.
TALLAHASSEE, Fla. – Gov. Ron DeSantis suspended all local-government coronavirus emergency orders on Monday as he signed a bill that makes permanent his ban on COVID-19 vaccine “passports” and limits the authority of cities and counties in future health-care crises.
“My message is that the vaccines protect you. Get vaccinated, and then live your life as if you are protected,” DeSantis said during an event at the Big Catch at Salt Creek, a St. Petersburg restaurant. “You don’t have to chafe under restrictions infinitum.”
DeSantis announced an executive order suspending local-government orders about coronavirus precautions and signed an emergency-management bill (SB 2006) approved Thursday by the Legislature.
While the executive order won’t block businesses from requiring customers to socially distance or wear masks, DeSantis said he will call at the next state clemency board meeting for lifting outstanding COVID-19-related fines that local governments have imposed on businesses.
Democrats called the executive order “premature” and a separate so-called vaccine passport-ban “strange” as Republicans advocated for business freedom. The vaccine-passport ban prevents businesses, schools and government agencies from requiring people to show proof of vaccination before gaining entry.
DeSantis on April 2 issued an executive order blocking vaccine passports, which he said would create “huge” privacy issues that could result in people handing over medical information to a “big corporation.” The bill makes that permanent. The bill signed Monday by DeSantis will allow the governor to override local orders during health crises if they are determined to “unnecessarily restrict individual rights or liberties.”
House Minority Co-leader Evan Jenne, D-Dania Beach, said the executive order will pressure businesses to lift COVID-19 requirements to avoid confusion.
The bill signed by DeSantis will require local emergency orders to be narrowly tailored and to be extended in seven-day increments for a maximum duration of 42 days. Currently, such orders can be issued initially for seven days and extended indefinitely in seven-day increments.
Also, state agencies will be required to develop by the end of 2022 public health emergency plans, and the Division of Emergency Management will have to stockpile personal protective equipment.
According to the federal Centers for Disease Control and Prevention, 6.4 million people in Florida have been fully vaccinated, 29.86% of the population, the 36th-best rate among states.
The state Department of Health reported Monday that nearly 2.6 million people have received the first doses of a two-dose series.
Source: News Service of Florida
This will make things so much easier and uniform throughout the state and the Florida Keys.
A 46-page report from Freddie Mac and an LGBTQ alliance finds $1T in housing-market buying power – but at 49.8%, LGBTQ ownership trails the overall 65.8% rate.
WASHINGTON – Perceived and real threats of discrimination prevent many members of the LGBTQ community from purchasing a home, according to a new study from the LGBTQ+ Real Estate Alliance in partnership with Freddie Mac. The 46-page report looks at how discrimination throughout LGBTQ people’s lives can influence housing decisions. Survey respondents shared a range of experiences in facing discrimination, from the renting and homebuying process, to the legal and mortgage forms they signed.
The LGBTQ community has an estimated potential for $1 trillion in buying power in the housing market that hasn’t been fully unlocked, according to the report. At 49.8%, the homeownership rate for the LGBTQ population trails the overall U.S. average of 65.8%, the report says.
However, discrimination isn’t illegal based on sexual orientation and gender identity under the Fair Housing Act – but most people aren’t aware of that, the report’s authors claim. Twenty-seven states also don’t offer any housing protections for the LGBTQ population, according to UCLA’s Williams Institute, a research center tracking sexual orientation and gender identity law and public policy.
“We hope the report provides those working in the real estate industry and beyond with a greater understanding of how discrimination is keeping so many in the LGBTQ+ community from reaching their full potential and ultimately becoming homeowners,” said John Thorpe, president of the LGBTQ+ Real Estate Alliance.
Source: “How Discrimination Impacts the LGBTQ+ Community on the Journey to Homeownership and Beyond,” LGBTQ+ Real Estate Alliance (April 2021)
Some homeowners feel like they may as well throw a dart against the wall to decide whether to move or not. Other people might invoke a process attributed to Benjamin Franklin. Supposedly, to evaluate the options and bring clarity to the choice, this American founding father would list all the reasons for and against the decision on a sheet of paper. After reducing it to writing, the choice would appear either by obvious majority or practicality.
Buying a home is an emotional decision but selling a home can be also. Separating the rationale from the emotion can make decisions seem obvious but they may still not be crystal clear.
There is an inventory shortage in the Florida Keys that caused prices to rise and market time to shorten. In many active markets there is less than 30-days' supply of homes for sale which is half of what was available a year ago. This will make it easier to sell and maximize the proceeds from your current home.
69% of economists who participated in the first quarter 2021 Zillow Home Price Expectations survey believe home inventory will begin to grow in the second half of this year or the first half of 2022.
Mortgage rates are near record lows which will keep payments at a minimum. With the inflation rate in the United States expected to be between 2-3%, many borrowers consider that it balances with the mortgage rate to be an effective zero percent.
"Consumers are facing much higher home prices, rising mortgage rates, and falling affordability, however, buyers are still actively in the market," said Lawrence Yun, NAR's chief economist. "At least half of the adult population has received a COVID-19 vaccination, according to reports, and recent housing starts and job creation data show encouraging dynamics of more supply and strong demand in the housing sector."
The pandemic has allowed many buyers have the flexibility to work from home for now and in some situations, permanently. That opens new location possibilities options that would not have existed if they had to commute to work daily. Economists believe that the increased preference to work remotely will be a permanent shift even if it is only a part of the work week.
This provides opportunities for homeowners to relocate in an area that doesn't have the high demand that their current area does and could benefit from more affordable housing for the replacement while possibly, maximizing the sales price of their current home.
Good information specific to your needs is essential to making good decisions. Explore the possibilities with your real estate agent. They can provide facts about the sale and purchase of another home. Once you have the facts, you may use the Ben Franklin Balance Sheet to help you with your decision.
Call Michael Rojewski REALTOR® (KeysRockAgent) today for more information.
"How long do I have to keep this stuff?" is the usual question you ask yourself when feeling that you are running out of room for all this "paper" that may never be needed.
The paper receipt you get from your fast-food lunch may go directly into the trash. The prudent consumer may keep it to reconcile it with their monthly statement and then, trash it. The natural hierarchy with receipts and documents associated with purchases is that as the price or value goes up, the more important it is to keep them. The question becomes "but for how long?"
The following table will give you an indication on how long certain documents related to your home need to be kept according to best practices of tax professionals. IRS recommends that records are kept for three years from the date the taxpayer files their original return or two years from the date the tax was paid, whichever is later. There is no time limit in the case of fraud or failure to file a tax return.
Document |
Length of time to keep |
Home Purchase/Sale Documents |
|
Home purchase documents |
Duration of ownership + 3 years |
Closing documents & statements |
Duration of ownership + 3 years |
Deed to property |
Duration of ownership |
Home warranty or service contract |
Until expiration |
Community/Condo Association Covenants |
Duration of ownership |
Receipts for capital improvements |
Duration of ownership + 3 years |
Mortgage Payoff statements or Release of Lien |
Forever, in case proof is needed |
Annual Tax Deductions |
|
Property tax statement & cancelled check |
3 years after IRS due date for return |
Year-end mortgage statements |
3 years after IRS due date for return |
Federal tax returns |
3 years after filing return or |
Insurance and Warranties |
|
Home Inventory |
Keep current |
Homeowners insurance policy |
Until the replacement is received |
Service contracts and warranties |
Until warranty/service contract expiration |
Home repair receipts |
Until warranty/service contract expiration |
Going digital with your records can make them easy to keep as well as to find when you need them. Create a folder on your computer that automatically backs up to the cloud like Dropbox, Google Docs or OneDrive so that if something happens to your computer, you have them safely tucked away.
The main folder could be the address of your home with subfolders for purchase documents, capital improvements, warranties, etc.
When you receive statements that are already in digital format, simply move them to the correct folder and subfolder. If it is a paper format, scan it and save it in the proper folder so you will have it when you need it.
A 3.2% increase for multi-peril policies was approved instead of a requested 6.2% hike; a request to charge actuarially sound rates for new customers was also rejected.
TALLAHASSEE, Fla. – Regulators have scaled back rate increases sought by Citizens Property Insurance Corp., dealing a blow to leaders of the state-backed insurer who argue it needs to charge more for coverage.
The Florida Office of Insurance Regulation released details Tuesday of rate increases that will take effect Aug. 1, including decisions that reduced amounts sought by Citizens.
As an example, Citizens requested an average 6.2% increase for homeowners’ multi-peril policies – the most common type of policies – but regulators approved a 3.2% increase.
Regulators also rejected a series of moves that Citizens proposed to boost rates. Perhaps the most far-reaching decision involved a proposal by Citizens to charge actuarially sound rates for new customers – a move that would have effectively led to many new customers paying more than current customers.
State law limits rate increases for existing customers to a maximum of 10% a year. Citizens officials contend that limit, dubbed a “glide path,” has led to many customers paying less for coverage than they should.
“Citizens’ recommended rates include a provision requiring that new business policyholders be charged the actuarially indicated rates, while renewing policyholders would be subject to the 10% statutory glide path. … The office finds the justification for this provision to be insufficient and that all policies, whether new or renewal, should be subject to the same capping,” an order signed by Insurance Commissioner David Altmaier said.
Similarly, the order rejected a proposal by Citizens to include what is described as a “risk factor” in its rates, which would have helped lead to larger increases.
“Citizens’ recommended rates include a provision described in the rate filings as an estimate of the amount extra Citizens should charge for the cost of catastrophic risk that Citizens is assuming,” the order said. “The office finds the justification for the provision to be insufficient and that it should be removed from the rate determination.”
The office released the details amid a legislative debate about proposals to make changes in the state’s property insurance system, as the industry says carriers are sustaining financial losses. Private insurers during the past year have filed dozens of requests for large rate increases and have shed policies.
Many of those policies have ended up at Citizens, which was created as an insurer of last resort. As an indication of the growth, Citizens had 569,868 policies as of March 31, up from 446,327 policies a year earlier.
The growth has alarmed Citizens leaders and many lawmakers, at least in part because of concerns about financial risks if the state gets hit by a major hurricane or multiple hurricanes.
Citizens staff members initially proposed an average 3.7% increase in residential rates to take effect in August, but the Citizens Board of Governors in December requested that staff seek ways to increase rates more. That led to a series of changes proposed to the Office of Insurance Regulation, which has to sign off on any increases.
The office’s decisions will lead to varying increases for customers based on factors such as types and locations of homes or other structures. Along with approving an average 3.2% rate increase for homeowners’ multi-peril policies, regulators approved an average 5.1% hike for homeowners’ wind-only policies, down from a Citizens request for a 7% increase.
As another example, regulators approved an average 9% increase for mobile-home owners’ multi-peril policies, down from a Citizens request for a 9.3% hike.
News Service of Florida
There is a little-known provision in the tax code that allows homeowners to rent their principal residence or second home for up to 14 days a year without having to recognize the income. In this situation, the taxpayer does not deduct the rental expenses associated with the income.
There is no restriction on how much you earn. If your first or second home is in a desirable area where people are looking for short-term rentals, it could provide a windfall to the homeowner.
In cities where any big sports championships are played, there could be a market for a temporary rental of a home. Events like PGA tournaments, college basketball tournaments, Bowl games, NFL playoffs and others can create a demand for this type of rental.
For instance, there are people in Augusta, Georgia who rent their homes during the Master's Golf Tournament each year. There are not a lot of hotel rooms in the area relative to the number of people who usually attend in non-pandemic years and the homes can fetch a nice daily rate.
There can be confusion about the different types of properties and what constitutes a home. The intended use coupled with actual experience will usually determine the type of property.
There are four types of property. A principal residence is the home you live in. There is income property that you rent and do not live in. There is investment property that is primarily held for an increase in value. And, there is inventory, which is related to your business like homes that are built or purchased to be flipped.
A second home is one that is used for the primary enjoyment of the owner in addition to their principal residence. Taxpayers are allowed to deduct the mortgage interest and property taxes on a first and second home up to specific limits. A vacation home could be another name for a second home but more accurately, it is a rental property that has more than 14 days of personal use during the year. It becomes a hybrid.
You might want to check with your insurance agent to see if your current policy covers temporary rentals, including liability in case of an accident involving personal injury. This could affect your decision as to whether you want to consider the rental.
For more information, see IRS facts about renting out a residential property or consult your tax professional.
Before you pay cash for a home, ask yourself if there is a possibility, at some point in the future, you might put a mortgage on the home and would want to deduct the mortgage interest on your federal tax return.
Current federal tax law allows homeowners to deduct the interest on up to $750,000 in acquisition debt used to buy, build or improve a property. When a person pays cash for a home, the acquisition debt is zero. The only way to increase the acquisition debt is to make and finance the improvements to the home.
As with many IRS regulations, there are exceptions to this rule. If a mortgage is secured on the first or second home within 90 days of the purchase closing, the debt is considered acquisition debt. The interest on the funds used to purchase the home can be deducted on up to $750,000 of the mortgage balance.
Assuming a borrower has good credit, the ability to repay the loan and the home justifies the loan, lenders are willing to make mortgages for homeowners. It does not mean that the interest on the mortgage will be deductible.
Additional information can be found in Publication 936, Home Mortgage Interest Deduction, of the Internal Revenue Service at IRS.gov.
To deduct home mortgage interest, you must file Form 1040 or 1040-SR and itemize deductions on Schedule A. The mortgage must be secured debt on a qualified home in which you have an ownership interest. Interest on home equity loans is only deductible if the borrowed funds are used to buy, build or substantially improve the taxpayer's home that secures the loan.
If you answered yes or even maybe to the question first posed in this article, contact your tax professional to determine the best way to approach your individual situation. For more information, download the Homeowners Tax Guide.
Teachers, firefighters, EMTs and police can buy HUD homes at half price within seven days of posting. Few exist now, but the number will likely grow post-foreclosure ban.
NEW YORK – The Department of Housing and Urban Development’s (HUD) Good Neighbor Next Door Program serves a dual purpose: To provide homes to frontline workers at a 50% discount and help revitalize communities around the country.
Who’s eligible? The Good Neighbor Next Door Program is available to law enforcement officers, firefighters, emergency medical technicians (EMTs), and teachers.
How deep is the discount? Eligible participants can purchase a home at 50% off the current appraised value. For example, if a home appraises for $300,000, the buyer will pay $150,000. The other $150,000 becomes a “silent” second mortgage that is forgiven after 36 months of residency.
Specific eligibility. Not every police officer, firefighter, EMT, or teacher qualifies for the Good Neighbor Next Door Program. Here are the specifics.
What’s the catch? Eligible applicants must purchase a home in the community they work in, and the home must be used as their primary residence. There is an annual certification process to ensure that participants live on the property for three years. After three years, the “silent” second mortgage is forgiven, and the homeowner is free to sell the property. When the home is sold, the homeowner keeps all the proceeds.
How to buy. When a HUD home hits the market, it is only available to participants in the Good Neighbor Next Door Program for seven days, meaning you must act quickly. Check the listings for HUD homes online at hudhomestore.com/Home/Index.aspx.
Once HUD knows you’re interested, you will be assigned a real estate agent to assist you with the process. The agent provides you with the information you need to get pre-qualified with a mortgage lender and places your name in a lottery drawing. The name HUD pulls from that drawing is the “winner.” While that may sound like a frustrating process, HUD insists that the odds of winning a home are high and that many homes go unclaimed in the seven-day period. Also, because you’re competing against a select group of buyers, there are rarely many names in the drawing at the same time.
The amount of money you need for a down payment depends on the type of loan you choose.
The minimum credit score required also depends on the type of mortgage you get.
What if a home is a mess? All properties for sale are HUD-owned and frequently located in areas considered in need of revitalization. Although HUD homes are sold “as is,” buyers can use any loan type to purchase the property, including: VA loans, FHA loans, USDA loans and Conventional loans.
Down payment needed
Data Sources: FDIC; VA.gov; Mortgage Research Center; Quicken Loans
Minimum credit score needed
Data Sources: FDIC; VA.gov; Mortgage Research Center; Quicken Loans
© Copyright 2021, Erie Times-News. All rights reserved.
WASHINGTON – Call it “the great reshuffling” – one in 10 Americans moved during the year of the pandemic, and with the health situation (hopefully) stabilizing through the widespread accessibility of vaccines, more may be on the way.
“Millions of additional households could enter the real estate market as a result of the pandemic,” predicted the real estate firm Zillow, which has been tracking changes in buyer preferences since the onset of the COVID crisis in March 2020.
The firm pegs the possible COVID-driven moves as upward of a possible 2.5 million, and those attempting to find the right home might find a less-constrained inventory than has been the case over the past year.
“Life and financial uncertainty are among the top reasons homeowners have not listed their home for sale during the pandemic,” analysts said. “The COVID-19 vaccine is likely to change that and prompt many more people to move.”
Zillow data finds a large majority of homeowners (70%) say they would be mostly or completely comfortable moving to a new home when there is widespread vaccine distribution.
Among those who have relocated over the past year, three-quarters (75%) say they moved for positive reasons, such as being closer to family or friends or living in an area they’ve always dreamed of. New flexibility to telework has opened up those opportunities for many, and new real estate technology has enabled prospective purchasers to get an immersive experience of a home from hundreds or thousands of miles away.
Phoenix, Charlotte and Austin saw the highest net inbound moves in the first 11 months of 2020, sought out by those eager for relative affordability and warmer weather. Those Sun Belt metros are expected to continue to surge in 2021.
Data from North American Van Lines also finds some of the country’s largest and most expensive housing markets saw the highest net outbound moves, including New York, Los Angeles, San Francisco and Chicago. Zillow saw for-sale inventory in these metros climb in the city, while inventory nationally hit new lows.
“The pandemic brought an acceleration of trends we were seeing in 2018 and 2019,” said Zillow senior economist Jeff Tucker. “More affordable, medium-sized metro areas across the Sun Belt saw significantly more people coming than going, especially from more expensive, larger cities farther north and on the coasts. The pandemic has catalyzed purchases by millennial first-time buyers, many of whom can now work from anywhere.”
Zillow’s survey found that nearly a third of recent movers (31%) say they had been dreaming about moving for a year or longer. More than three-quarters of recent movers (76%) say emotional factors had been holding them back from making their most recent move. Stress over not being financially prepared to make the move and the expectation that the moving process would be hard or stressful were the most commonly cited factors.
Nearly a quarter (23%) of recent movers say the concern that their move would cause stress for their child(ren) held them back from making their most recent move.
After their most recent move, more than half of Americans said they experienced happiness (54%) and relief (53%). A vast majority of recent movers (80%) say their most recent move was worth it.
Many recent movers say starting a new chapter in their life was among the most rewarding parts of moving to a new home. Nearly three in five (59%) say positive life events happened after their most recent move, most commonly citing that they fulfilled a dream or became passionate about something new.
© Arlington Sun Gazette © Copyright 2021, Sun Gazette Newspapers, Springfield, VA.
The 30-year mortgage rate dropped to 3.13% this week from 3.18% last week; it was 3.33% a year ago. High prices and limited supplies continue to impact buyers.
McLEAN, Va. (AP) – Mortgage rates fell for the first time in more than two months as buyers continue to be stifled by high prices and limited supply.
Mortgage buyer Freddie Mac reported Thursday that the benchmark 30-year loan rate dipped to 3.13% this week from 3.18% last week. At this time last year, the long-term rate was 3.33%.
The rate for a 15-year loan, popular among those looking to refinance, fell to 2.42% from 2.45% last week. One year ago it was 2.77%.
Mortgage rates have been historically low for years, but strong demand and low inventory have pushed prices higher.
Last week the National Association of Realtors® reported that its index of pending home sales tumbled 10.6% to 110.3 in February, its lowest level since May of 2020. Contract signings are now slightly behind where they were last year after eight straight months of year-over-year gains.
Meanwhile, U.S. home prices rose at the fastest pace in seven years in January, according to the S&P CoreLogic Case-Shiller 20-city home price index. The pandemic has fueled demand for single-family homes as people look for more space.
Economists expect home loan rates to remain low as the Federal Reserve says it intends to keep its main borrowing rate near zero until the economy recovers from the coronavirus pandemic.
Also Thursday, the Labor Department reported that the number of Americans applying for unemployment benefits rose last week to 744,000, signaling that many employers are still cutting jobs even as more people are vaccinated against COVID-19 and state and local governments lift virus restrictions.
Copyright © Associated Press (AP). All rights reserved.
Doing a lot of work to a car before you trade or sell it to a dealer is not generally a good idea. In most cases, you won't recapture the cost of the repairs. They can do the repairs for a less than you can. Not to mention, you are selling to a wholesaler who needs to sell it again to the end user and still make a profit.
A home sale is totally different. The owner is selling the home to an end user. Since the buyer, in many cases, is using their available funds for the down payment and purchase costs, they don't have money to spend on repairs or decorating the home. They would need to live in it "as is" for a while which may not be as appealing as finding a home that is refurbished, up-to-date, and ready to move into.
Even if the buyer would be willing to get a home improvement loan after the sale, it would be a separate loan at a higher interest rate making their payment higher than financing it all in one mortgage at the lower first mortgage rates.
The seller may experience some inconvenience going through the remodeling process, but it will, most likely, result in a higher sales price in less time. Occasionally, sellers say they'll let the buyer choose their own colors but not all people have the imagination to know what something will look like after it is finished. It is better to go ahead and get the work done before putting it on the market.
The bathrooms and kitchen are the most important rooms to update. If the finish on the cabinets is bad, have them painted. New countertops and appliances can make a world of difference. Paint, countertops, and fixtures in the bath give the home a great feel.
In addition to the repairs, a major cleaning and decluttering can make a home look and feel better than the competition.
The first step is to go through the home and pack up or get rid of things you don't need or things that detract from the home like excess furniture, exercise equipment, personal artwork, etc. Now, do the same with the closets and cabinets. By getting rid of things, there will be more room and they'll look larger.
Next, walk across the street from your house and give it a critical look. How is the drive-up appeal? Would you want to go inside to see the rest if you were a buyer? Are the trees and shrubs trimmed? Yard cleaned up? Do you have blooming flowers in the beds? Does the front door and mailbox need a new coat of paint? Do you need to power wash the outside of the home and the sidewalks and driveway? Do the windows need washing?
Buyers are visual people and beauty is always rewarded. Restaurants know that people eat with their eyes first and they go to a lot of effort to plate the food so it is visually appealing. The same approach works for selling a home. Ask your agent if they have ever taken a buyer to a home that refused to go inside because they didn't like the looks from the street.
Your real estate professional can make specific recommendations and assist you in finding someone to do the work. This is what they do. TRUST THEM!
That’s up from 3.09% last week – a year ago, it was 3.5%. While rising, rates are still near historic lows as the Fed keeps interest rates near zero for now.
McCLEAN, Va. (AP) – U.S. long-term mortgage rates jumped to their highest level since June, though they still remain near historic lows.
Mortgage buyer Freddie Mac reported Thursday that the average rate on the 30-year fixed-rate home loan rose to 3.17% from 3.09% the previous week. One year ago, the benchmark rate stood at 3.5%.
The average rate on 15-year fixed-rate loans, popular among those seeking to refinance their mortgages, increased to 2.45% from 2.40% last week. It was 2.92% a year ago.
Economists have expected modest increases in home-loan rates this year, though they likely will remain low while the Federal Reserve keeps interest rates near zero until the economy recovers from the coronavirus pandemic.
Record-low lending rates have prodded buyers into the housing market, which has been one of the strengths of the U.S. economy. But a shortage in the supply of homes remains a problem and has pushed prices higher.
Also Thursday, the government reported that the number of people seeking unemployment benefits fell sharply last week to 684,000, the fewest since the pandemic erupted a year ago and a sign that the economy is improving. It is the first time that weekly applications for jobless aid have fallen below 700,000 since mid-March of last year.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
To understand the reasoning behind why a homeowner should not sell their home by themselves, we need to identify the motivation. Probably, more times than not, the homeowner wants to "save" the cost of the commission. It certainly represents a significant amount of money.
In 1981, homes sold For Sale by Owner represented 15% of the homes closed while 85% were agent-assisted. The percentage of sellers handling their own homes alone has declined over the decades to only 8% of homes sales in 2020. Interestingly, half of the sellers knew the buyers and the other half did not.
The FSBO sellers who knew the buyers, who were predominantly a friend, relative or neighbor, had a market time of less than a week and received 100% of the asking price, less expenses of course.
According to the NAR 2020 Profile of Home Buyers and Sellers, 50% of FSBO sellers determined the asking price of their home by recent home sales in the area while slightly more than 1/3 used an appraisal. 41% of sellers stated they did not want to pay a fee or commission as the reason they sold it FSBO. Another 30% did so because they had a relative, friend or neighbor who wanted to buy their home.
A significant problem encountered by For Sale by Owners was exposing their home to the marketplace. They run the risk of selling the home for a lower price because it is not marketed to the highest pool of available buyers.
Negotiating on their own behalf is another concern many for sale by owners share. There are so many different things as well as people with whom to negotiate. For instance, besides the sales price in the contracts, other negotiable terms include financing concessions, closing and possession dates, inspections and earnest money. However, the negotiations could continue well up to the moment of closing with repairs, appraisals and other unforeseen things.
While the seller might feel uncomfortable negotiating directly with a buyer, there could also be negotiations with the appraiser, inspectors, mortgage company or escrow company. The layer of separation that exists between the seller and other parties is the real estate professional. They are trained to de-escalate sensitive areas so that feelings are not hurt as well as acting as a go between so the way something is said can be minimized.
Difficulties experienced by FSBOs include negotiations with the buyer, not familiar with the process and standards that are involved in the 92% of the transactions that are agent assisted. 89% of Sellers say they were satisfied with the service their agents gave and would use them again and recommend them to others.
A seller should realize the motivation of a buyer wanting to deal directly with a seller without an agent. They are trying to save the commission but both buyer and seller cannot save the commission. The more knowledgeable and possibly, the better negotiator will usually benefit the most.
13% of the sellers were contacted directly by the buyer. It is conceivable that these buyers may have been trying to take advantage of an unknowledgeable seller to eliminate competition and purchase a home at a lower than market value.
In a seller's market, a FSBO can sell their home. The question will be whether they received the highest price with the best terms and the fewest problems. Protecting a large financial asset is important and sellers deserve the peace of mind that a real estate professional provides along with the fiduciary duties that accompany them.
The median price achieved by For Sale by Owners is considerably less than the median price sold by agents. While there may be other factors involved, it certainly introduces the question "is the FSBO is selling below fair market value?"
Before embarking on the sale of your home by yourself, talk to a real estate professional or possibly two, to get as much information as possible to make an informed decision. Your objective should be to maximize the proceeds from the sale. For more information, download my Sellers Guide.
Florida Realtors economist: The most often discussed form of stimulus from the government? Direct payments to qualifying Americans. But low interest rates offer another form of stimulus for homeowners who are able to refinance.
ORLANDO, Fla. – A few things gained significant popularity in 2020: sourdough starters, home exercise equipment and refinancing for existing homes.
Refinancing has been on fire since early 2020, when mortgage interest rates continued on a steep downward slope toward 2%. Mortgage Bankers Association survey data shows that Florida refinance applications were up 52% in 2019 – and up 118% in 2020.
For those who own a home and qualified, millions of people took notice and jumped in. From the first quarter of 2020, when the average rate on a 30-year fixed-rate mortgage was 3.5%, to the second quarter, when rates fell to 3.13%, refinance lending jumped more than 60%. And compared with the same time last year, refinance activity spiked by an astounding 200%.
Fannie Mae recently recalibrated its forecast for refinance activity in 2020 to $2.4 trillion, which is $350 billion more than what the government-backed mortgage entity predicted at the end of last summer.
What does this mean for a borrower? Let’s consider a fictitious Florida family of five who purchased a median-priced home in late 2018 for $255,000. Interest rates then were relatively high, around 4.9% for a 30-year fixed rate mortgage with a 20% down payment. Under those terms, their monthly payment for principal and interest only would be $1,078 per month.
But if they refinance now at 2.7%, their monthly payment would go down by $253 per month, or $3,036 per year. This, plus the ability to skip a payment while the loan is being restructured puts an extra month’s mortgage payment in this family’s savings account. Note: Credit scores (minimum 720), equity (20%+) and other things often apply to qualify for a refinance.
Depending on a homeowner’s income eligibility, the amount saved is about comparable to the first round of stimulus checks. But the difference between the direct check from Uncle Sam and a mortgage refinance is it that a refinance is a gift that keeps on giving, year after year, long after the effects of the pandemic are behind us.
Of course, there are costs associated with completing a refinance transaction, and the interest rate the family is financing from matters greatly. Anything less than a 0.75% reduction may not be worth it, so it’s important that the borrower knows the intricacies of the deal.
While refinancing is a great boon for a homeowner’s bottom line right now, there are other caveats to note. Refinancing to get a better rate, without cashing out on equity, will ensure the homeowner isn’t in danger of going underwater if prices fall in the future. The homeowner should also plan on being in their home for 5-7 years to allow enough time to absorb the closing costs of the transaction.
And it is worth noting that there may be an unintended consequence of all this refinancing: continued inventory shortages. As people lock in low rates today, they are less likely to sell and buy something new when the interest rate environment is less favorable. This could lead to some paralysis in certain sectors of the market.
Still, the unlocked money that comes from refinancing is an under-appreciated source of stimulus to American homeowners able to free up funds and take care of other needs, not only now but for years to come.
Jennifer Quinn is an economist and Director of Economic Development
© 2021 Florida Realtors®
Well....This is not something I would normally share on my blog but it is an interesting article. Don't worry, I would never do this with any of my clients.
An Oklahoma agent attached wires to willing buyers and found that their top-of-mind thoughts often don’t match how they really feel about a home.
OKLAHOMA CITY, Okla. – Oklahoma City real estate pro Landon Whitt, CEO of OKCREAL, is reading the brainwaves of his clients so he can help them find the perfect home.
Whitt literally attaches wires to willing buyers’ heads. It’s akin to a polygraph test, but he’s monitoring brain waves to get an idea of what buyers really think of a home they’re viewing, even if their words may differ somewhat from how they truly feel about it.
Whitt hooks his buyers (willing participants) up to a Muse electroencephalogram device, which will detect and measure brain activity. The buyer slips on an Oculus Quest 2 VR headset and view spaces within a home. As they do so, Whitt monitors their subconscious reactions.
In many cases, buyers’ brain reactions differ from their conscious thoughts.
In a recent demonstration of the technology to Input Magazine, the reporter describes Whitt’s monitoring of a married couple viewing a space through the VR headset. The couple is separated for the experiment so they can’t hear the other’s responses. The first participant is shown a wide-open living area with cathedral ceilings, a fireplace, huge windows and a staircase leading upwards. Her brain image starts lighting up yellow and red in the frontal lobes. Then she’s shown another room: It’s closed off, darker, with dated ‘90s taupe walls. Her brain lights up in different areas. The next participant is shown the same images.
In describing the home they want, each person’s words nearly match. But their brain responses don’t.
The women’s brainwave response shows she’s more open to discussing the second smaller, more dated space, despite her words indicating otherwise. When pressed about that second space, the woman said she was surprised that the emotional center of her brain lit up when viewing that space, but then said she reacts to spaces like that warmly because they make her recall discussions about homes with her partner in the evenings.
Whitt, who studied kinesiology in college, has taken buyers on hundreds of tours over the years. He became interested in what his buyers were really thinking when viewing homes for sale. He consulted with Tre Azam, founder and CEO of MyndPlay, a brain tech and media company that specializes in brainwave and sensor technology based in the United Kingdom.
Whitt’s hope was that he could take buyers on tours in person, and agents could follow with a tablet as they did an EEG assessment. But that is more difficult to pull off, he realized. For now, he’s doing brain-reading experiments in controlled environments.
However, Whitt believes the technology could one day help real estate professionals and homebuyers narrow their home choices – whether that’s done consciously or subconsciously.
“Most of the people who tell me I’m wasting my time are people in the real estate industry who have a vested interested in the system remaining unchanged,” he told Input Magazine. “My approach is not to decide what the readings are, but to provide the data in an easy-to-understand format and, together with the consumer, decide how we are going to use it. … Rather than scrolling endlessly through Zillow, we’ll be able to pinpoint home features people prefer. This will transform the homebuying experience.”
Read more about Whitt’s experiment at Inputmag.com.
Source: “This Oklahoma City REALTOR® Can Read Your Mind – Literally,” Input Magazine (March 17, 2021)
© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688
New-home market problems aren’t new – rising prices for supplies and a tight workforce. But pending sales continue to be high, and many builders are pausing to complete a backlog of projects. In top-listed Jacksonville, pending new-home sales are up 80.5% year-to-year.
NEW YORK – Builders are slowing down production to catch up with a backlog of projects while trying to keep construction prices in check. In some cases, they may be turning down willing, qualified buyers because they already have too many homes in production.
According to real estate analytics firm Zonda’s latest New-Home Pending Sales Index, which reflects February housing data, pending new-home sales fell month-over-month, but they’re still up 35% annually across the country.
Government data also showed a 10.3% decrease in February new-home construction. Builders are reporting that increases in material costs – notably on lumber – are continuing to challenge growth in new-home construction.
In a list of the 25 cities most impacted by too much demand, three Florida cities were ranked with Jacksonville at the top of the list. The number of pending new-homes sales – homes under contract but not yet completed – rose 22.9% in February compared to the month before. In a year-to-year comparison, the number of pending home sales was up 80.5%.
Tampa ranked at No. 10, with a 13% month-to-month increase in pending sales, and a 43.7% year-to-year increase in pending sales.
Orlando came in at No. 19. It saw a 7.1% month-to-month increase in pending sales in February, and a 15.2% year-to-year increase in pending sales.
“Seventy percent of builders are intentionally slowing or pausing sales to better align contracts with production capacity, which makes drawing market conclusions more difficult,” says Ali Wolf, chief economist of Zonda, which is focused on the home building and multifamily industries. “The underlying demand in the housing market is still there, though, even as prices and mortgage rates rise.”
Still, February’s pending new-home sales trended above year-ago levels in 22 of the 25 top markets Zonda tracks. The top-performing new-home markets in February were Jacksonville, Fla., Cincinnati, and San Antonio. But the numbers could be even higher if there was more inventory, economists note.
Zonda’s New-Home Pending Sales Index is a residential real estate indicator based on the number of new-home sales contracts signed across the country. The index is comprised of two components: new-home orders (which look at total sales and will fall based purely on limited supply) and the average sales rate per community (which captures how well builders are selling). Both gauges can be negatively impacted if builders intentionally cap sales.
Source: “New Home PSI: Sales Grew 35% YoY in February as Consumers Pushed Past Rising Home Prices and Mortgage Rates,” Zonda (March 19, 2021)
© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688
Florida Realtors’ data: Single-family home sales rose 15.7% year-over-year, median sales price up 16.6%; condo sales up 28.7%, median price up 16.6%. Chief Economist O’Connor: Fewer new listings and a tight inventory means a strong seller’s market.
ORLANDO, Fla. – Amid increased COVID-19 vaccinations and hopeful signs for the future, Florida’s housing market in February reported more closed sales, higher median prices, more new pending sales and increased pending inventory in February 2021 compared to a year ago, according to Florida Realtors® latest housing data. Single-family existing home sales rose 15.7 % compared to February 2020.
“Florida’s housing market continued its momentum in February, but higher interest rates could be a factor going forward,” says 2021 Florida Realtors President Cheryl Lambert, broker-owner with Only Way Realty Citrus in Inverness. “While rising rates could potentially slow the pace of home sales, rates remain relatively low by historical standards. Record-low inventory is continuing to put pressure on home prices to rise and creates challenges for buyers. However, new pending sales rose 10.9% for single-family existing homes last month compared to February 2020, while new pending sales for condo-townhouse units increased 35.4% year-over-year.”
Closed sales of single-family homes statewide in February totaled 23,947, up 15.7% year-over-year, while existing condo-townhouse sales totaled 11,379, up 28.7% over February 2020. Closed sales may occur from 30- to 90-plus days after sales contracts are written.
The statewide median sales price for single-family existing homes was $314,900, up 16.6% from the previous year, according to data from Florida Realtors Research Department in partnership with local Realtor boards/associations. Last month’s statewide median price for condo-townhouse units was $233,240, up 16.6% over the year-ago figure. The median is the midpoint; half the homes sold for more, half for less.
Florida Realtors Chief Economist Dr. Brad O’Connor notes that Florida’s current housing market is a strong seller’s market, with fewer new listings and a very tight inventory (active listings), particularly for single-family existing homes.
He says, “The statewide inventory of active single-family home listings, which Florida Realtors has been tracking since January 2008, is currently at an all-time low. At the end of February, single-family inventory was down 56.3% compared to a year ago. Most of this decline has been a result of our ultra-high rate of sales.
“However, so far in 2021, new listings of single-family homes have not kept up with their pace of 12 months ago. In February, they were down 4.9% year-over-year, which is an improvement over January, but still represents a move in the wrong direction. There’s a likelihood that much of this decline has been due to some sellers, who in normal times might have listed in January or February, instead listing ahead of 2021 in response to the unusually strong market in the second half of 2020. But there’s also the possibility that a small but increasing number of homeowners, who have been thinking of selling their current home and buying another one, are starting to get turned off by the lack of available inventory and the rising prices that have resulted from it.”
The condo-townhouse category shows a slightly different picture, O’Connor says.
“In February, closed sales in this category rose 28.7% year-over-year, which is consistent with the growth rates we’ve been seeing each month going back to September,” he says. “Some of this growth is likely being fueled by frustrated buyers who had their hearts set on a single-family home finally giving up and settling for an attached unit instead, but we’re also seeing high demand from folks with the typical condo- and townhouse-buyer profile, as well. And while inventory in this category is still high relative to what we’re seeing in the single-family home category, it was down 34.4% compared to a year ago.”
On the supply side of the market, inventory (active listings) remained constrained in February. Single-family existing homes were at a very restricted 1.3-months’ supply while condo-townhouse inventory was at a 3.4-months’ supply.
According to Freddie Mac, the interest rate for a 30-year fixed-rate mortgage averaged 2.81% in February 2021, significantly lower than the 3.47% averaged during the same month a year earlier.
To see the full statewide housing activity reports, go to Florida Realtors Tools and Research section. Realtors also have access to local market data (password protected) through Florida Realtors’ SunStats resource.
© 2021 Florida Realtors®
National homeowner equity grew in the fourth quarter of 2020 by $1.5 Trillion or 16.2% year-over-year based on a CoreLogic analysis. The study was done on the six out of ten homeowners who have mortgages on their home.
The fourth quarter of 2020 also saw the number of mortgaged residential homes with negative equity decrease by 8% from the third quarter. Compared to the same quarter in 2019, negative equity decreased by 21%.
Equity is defined as the value of the home less the mortgage owed. Negative equity means that the homeowner's debt is more than the value of the home. Appreciation is the dynamic that is moving homeowner's equity to the positive position.
On a national basis, according to National Association of REALTORS®, annual price growth for the last ten years has been 6.4%. In the last five years, it has grown at 7.3% annually. According to the CoreLogic Home Price Index, home prices in December 2020 were up 9.2% from the year before.
Frank Nothaft, Chief Economist for CoreLogic, is quoted as saying "the amount of home equity for the average homeowner with a mortgage is more than $200,000."
Equity in a home is a significant component of net worth. The latest Survey of Consumer Finances reports the median homeowner has 40 times the household wealth of a renter: $254,000 compared to $6,270. According to the 2019 Survey of Consumer Finances by First American, housing wealth was the single biggest contributor to the increase in net worth across all income groups.
The study also concluded that housing wealth represented nearly 75% of total assets of the lowest income households. For homeowners in the mid-range of income, it represented 50-65% of total assets and 34% of total assets for the highest income households.
Renters do not benefit from the appreciation of housing or the amortization of the mortgage which are significant contributors to home equity that results in net worth. Examine what a down payment can grow to in seven years with a Rent vs. Own.
Mortgage rates are going up as I keep saying. Secure a new mortgage now while the rates are still fairly low.
While lumber costs deserve a lot of the blame for the rising price of new homes, other things – crude oil (paint), drywall, ceramic tile – are also more expensive.
NEW YORK – The U.S. Bureau of Labor Statistic’s producer-price index reveals record prices for granite, insulation, concrete blocks and common brick for 2021. And as the prices for raw materials used to build homes rises, so do the costs of homes and home improvement projects.
Lumber, one of the biggest costs in homebuilding after land and labor, has never been more expensive at more than twice the typical price for this time of year.
Crude oil, a starting point for paint, drain pipes, roof shingles and flooring, has shot up more than 80% since October.
Copper – used for waterpipes in many homes – costs about a third more than it did in the autumn. Drywall and ceramic tiles are short of record prices but have also climbed.
The National Association of Home Builders says rising lumber prices alone have added $24,000 to the cost of building the average single-family home and about $9,000 per apartment.
On the plus side, rock-bottom mortgage rates have made homeownership more affordable, and lower household spending during the lockdown and federal stimulus checks have helped people accumulate down payments. Many, however, went on a remodeling bender further straining the U.S. supply of building materials. Overall, Americans pocketed $152.7 billion from cash-out refinancings last year.
Due in part to the remodeling, building suppliers dealt with slowdowns during the lockdowns, but they haven’t been able to catch up, especially since building permits for residential construction are being issued at the highest rate since 2006.
Source: Wall Street Journal (03/17/21) Dezember, Ryan; Quiroz-Gutierrez, Marco
© Copyright 2021 INFORMATION INC., Bethesda, MD (301) 215-4688
Rates broke the 3% barrier two weeks ago and have increased each week since, leading Freddie Mac’s chief economist to call buyer competition “a challenging reality.”
MCLEAN, Va. – The 30-year fixed-rate mortgage (FRM) averaged 3.09% this week, putting it past the psychologically noteworthy 3% mark for the second week in a row, according to Freddie Mac’s weekly survey of mortgage rates.
“As expected, mortgage rates continued to inch up but are still hovering around 3%, keeping interested buyers in the market,” says Sam Khater, Freddie Mac’s chief economist.
“However, residential construction has declined for two consecutive months and, given (today’s) very low inventory environment, competition among potential homebuyers is a challenging reality, especially for first-time homebuyers.”
The 30-year, fixed-rate mortgage averaged 3.09% with an average 0.7 point for the week ending March 18, 2021, up from last week’s 3.05%. A year ago, the 30-year FRM averaged 3.65%.
The 15-year fixed-rate mortgage also rose, averaging 2.40% with an average 0.7 point, up from last week when it averaged 2.38%. A year ago, it averaged 3.06%.
And adjustable-rate mortgages moved higher too. The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 2.79% with an average 0.3 point, up from last week’s 2.77%. A year ago, the 5-year ARM averaged 3.11%.
© 2021 Florida Realtors®
Now is the time to Secure a loan or Refinance in the Florida Keys. Call me today if you need a referal to a lender. I work closly with several.
Call Michael Rojewski (305) 942-7755
The rent to income ratio is the monthly affordable rent as a percentage of monthly income. Ideally, tenants should keep it within 30% of monthly gross income. In some markets, in may not be possible because the shortage of available rental units. In these situations, tenants are required to spend more than 30%.
Let's assume that a person/couple makes $100,000 a year which would be $8,333 per month. Thirty percent of their monthly gross income would be $2,500 which would be at the top of the ratio for their rent.
If they were to buy a $300,000 home on an FHA loan at 3.00% for 30 years, the total payment, principal, interest, taxes, insurance and mortgage insurance premium would be around $2,034 or almost $450 less per month than their rent.
If you factor in the monthly principal reduction and the monthly appreciation, assuming 3% annually, the net cost of owning the home would be under $1,000 a month. The people would be paying about $1,500 more per month to rent than to own. In a year's time, it would amount to over $18,000 lost by renting which is more that the $10,500 down payment for an FHA loan and the closing costs.
Rent vs Own Example |
|
Purchase Price |
$300,000 |
Mortgage at 3.00% for 30 years |
$294,566 |
Monthly Payment ... principal & interest |
$1,241.90 |
Monthly Tax & Insurance escrow (estimated 2.25%) |
$562.50 |
|
|
Total Payment (PITI + MIP) |
$2,033.89 |
Less Monthly Principal Reduction |
$512.50 |
Less Monthly Appreciation |
$750.00 |
Plus Estimated Monthly Maintenance |
$150,00 |
Plus HOA fee |
$20.83 |
Net Cost of Housing |
$942.22 |
|
|
Monthly Rent for Comparison |
$2,500 |
Monthly Cost of Renting vs. Owning |
$1,557.78 |
Annual cost of Renting vs. Owning |
$18,693.30 |
|
|
Down Payment |
$10,500 |
Estimated Equity after 7 years at 3% Appreciation |
$121,579 |
One of the benefits of renting for tenants is that they are not responsible for the maintenance and repairs. At the end of the lease, they are able to move without having to dispose of a home. However, they also do not benefit from the increase in value due to appreciation nor do they benefit from the equity buildup due to amortization of the mortgage.
Disregarding the monthly net cost of housing in the example above since it considers both appreciation and amortization, the payment alone is over $450 less than the rent in this example. If you look at the cumulative results, the down payment, or initial investment, of $10,500 grows to $121,579 in equity in seven years. The owner of the home, in accepting additional risk, reaps the rewards of the equity as well as the lower cost of housing.
In the case of a tenant, their landlord will receive the benefits of the appreciation and the equity buildup. Whether you rent or buy, you pay for the house you occupy...either for yourself or your landlord.
To plug in your own numbers, go to the Rent vs. Own. If you have questions with the calculator or would like to visit about anything, give me a call (305) 942-7755.
U.S. News & World Report ranked Fla. No. 10 this year as overall best state, up from 13 last year. Created via a survey of residents, the list covers 8 categories.
MIAMI – The Sunshine State – with its dazzling beaches, exciting nightlife and picture-perfect weather – is shining bright in a new annual survey.
According to the latest standings from U.S. News & World Report, Florida ranks 10th overall among the “Best States in the U.S.” And we’re on the rise.
Florida finished at No. 13 in 2019.
State rankings were determined based on the average of three years of data from an annual survey that asked 70,000 people to rank their state in eight categories – health care, education, economy, infrastructure, opportunity, fiscal stability, crime and corrections, and natural environment.
Florida – a paradise for the young and old, water-sports enthusiasts, golfers and others from all walks of life – ranked at No. 3 in education, No. 8 in economy, and No. 8 in fiscal stability in this year’s survey.
New York, which has a large number of transplants in Florida, came in at No. 21 overall, two spots behind New Jersey. Washington was No. 1 overall in the 2021 rankings, followed by Minnesota, Utah, New Hampshire and Idaho.
The bottom five were Alabama, West Virginia, New Mexico, Mississippi and Louisiana.
© 2021 the Sun Sentinel (Fort Lauderdale, Fla.) Distributed by Tribune Content Agency, LLC.
A University of Chicago study found that property valued in the bottom 10% in a metro generally averaged an effective tax rate double of those in the top 10%.
CHICAGO – The Center for Municipal Finance at the University of Chicago Harris School of Public Policy has completed a nationwide analysis revealing that property taxes, which generate roughly $500 billion and represent the single largest revenue source for local governments each year, are inequitable, with the burden falling disproportionally on owners of the least valuable homes in most counties, cities, and other taxing jurisdictions across the United States.
The study finds that a property valued in the bottom 10% within a particular jurisdiction pays an effective tax rate that is, on average, more than double that paid by a property in the top 10%. This means that, on a nationwide basis, the lowest-income homeowners effectively subsidize the tax bills of their higher-income counterparts fueling inequities across racial, economic, housing and other divides.
For example, properties located in neighborhoods that are 90-100% Black experience assessment levels that are more than 1.5 times the average for their county.
“People wouldn’t tolerate this if the system were easier to understand, like the income tax. Because the way property taxes are calculated is murky to many people, the problem has gone unnoticed for a very long time,” said Prof. Christopher Berry, who authored the research and is a leading expert in municipal governance. “Our analysis shows, unfortunately, that the problem is pervasive across the country, exists in each state and in the vast majority of counties. It ultimately impacts almost everyone, both homeowners and renters alike.”
Using data from millions of residential real estate transactions between 2007 and 2017, Berry who directs the Center for Municipal Finance and is the William J. and Alicia Townsend Friedman Professor at Harris Public Policy, developed the nationwide analysis and a new tool, searchable by county and city, which looks at property tax records for communities around the U.S.
The analysis compares assessed values with sales history and finds that lower-value homes were on average assessed at higher rates than higher-value homes. The interactive tool allows users to see how a particular community compares with others throughout the nation, and also provides a visual comparison of a community, county or state.
Berry’s findings and methodology are available in a recent paper, Reassessing the Property Tax, and on the Property Tax Fairness website. The analysis is also highlighted in a major Bloomberg Businessweek story, published March 9, detailing how property tax inequities impact residents of Detroit and other communities across the nation.
Despite the widespread nature of the issue, flaws in how properties are assessed and then taxed largely arise from limitations in the data and methods used by assessors, rather than from their government’s explicit policy choices. Some localities will choose, as an example, to set limits on maximum assessment levels; grant appeals to homeowners, a process typically favoring more affluent taxpayers; or treat condominiums and single-family homes differently in the process.
Berry finds, though, that a primary challenge to more equitable taxation lies in the fact that many important features of a home that are observable to buyers and sellers are not observable to assessors and their models.
“Of course, each place has its own unique story and some of the factors that drive disparities in New York are different from those in Baltimore or St. Louis, Detroit or Miami,” Berry explained. “And while there are inherent limitations to any assessor’s ability to fully redress the problems at the local level, the reality is property taxes in America are regressive and create clear economic and racial disparities. It is a clear example of structural racism, but it is also much more than that. Even in places without significant minority populations, owners of low-priced homes are getting a raw deal.”
Earlier analysis by Berry on the topic demonstrated that roughly $2.2 billion was inappropriately shifted from high value to low value properties in Chicago. The resulting media coverage and political fallout from that study ultimately contributed to the election loss of former Cook County Assessor Joseph Berrios. Berry has also studied Detroit where he found evidence of a particularly unfair and regressive system, which has helped stimulate widespread activism for change.
“While the property tax has lots of appealing features in theory, in practice the tax is highly regressive, and this regressivity often violates the law,” Berry concluded. “Policymakers across the country, at all levels of government, should recognize that the most important tax used to fund local governments is unfair as currently administered.”
This story was first published by the Harris School of Public Policy.
2020 States News Service
The Florida Keys is known to have relatively low property tax. It seems surprising when compared to other luxury regions of the United States. This is a good thing when financing a home in the Florida Keys because many lenders make it even more difficult to secure a loan when the taxes are going to be high. Now is the time to purchase your dream home in the Island paradise of the Florida Keys. Call Michael Rojewski TODAY to start the search!
There are tried and true things that can be done to energize a tired listing that will result in a sale. In the Florida Keys some people tend to get a little complacent in the sale of their home. It is very important to price right according to a CMA in the local area. I make sure to keep my listings up to date and fresh because I feel that makes a massive difference when it comes to the ultimate goal the SALE of your home. Lets get that red SOLD sign up!
For generations, people have begun their homeowner experience with a "starter" home. Part of the logic may be that by beginning with a smaller home, they can learn what it takes to run the home and discover some of the unexpected costs that come along with it. A slightly longer view into the future could suggest a different strategy.
As of March 4, 2021, the average 30-year mortgage rate according to Freddie Mac was 3.02%; up .37% from the week of January 7th this year. At the same time, in 2020, the rate was 3.29% and in 2019, it was 4.41%. That is a difference of 28 and 139 basis points.
The principal and interest payment on a $300,000 mortgage would have been $236 higher two-years ago and $44 more one-year ago. Today's low mortgage rates are saving buyers lots of interest especially when you factor in the median tenure for sellers is approximately ten years. Even though prices have increased over the last two years, some people may be able to afford more now with the lower rates.
Anticipating the future wants and needs now may present some opportunities for preparing for the inevitable. By purchasing a larger home today, a buyer can lock in today's low rates and prices to allow themselves room to grow without the expenses of moving.
Each time you sell and purchase a home, there are expenses associated with each side of the transaction. Purchase costs could be 1.5 to 3% while sales expenses could easily be 2.5 times that much. These expenses lower the value of your equity.
Instead of looking at the low mortgage rates as generating a savings from the payment you might normally have to make, consider it an opportunity to purchase more home that will possibly meet your needs for a longer time while eliminating the cost of selling and purchasing in the transition.
High buyer demand and slim housing inventories mean homeowners ready to sell now have more negotiating power. But those who sell may also need to buy their next home.
NEW YORK – “A lot of people are missing the best market now by waiting,” Kris Lindahl, CEO and founder of Kris Lindahl Real Estate in the Minneapolis area, told MarketWatch.
Homeowners find themselves with more negotiating power as buyer demand remains high and housing inventories slim. The supply of homes for sale is at a record low of 1.9 months. A six-month supply is considered a healthy balance between sellers and buyers.
The high demand sparked home prices to surge. The median home price was $303,900 for an existing home in January – a 14% jump from the year prior, according to the National Association of Realtors®.
Homeowner equity has grown. Thirty percent of U.S. homes with a mortgage – nearly one in three – in the U.S. are now considered “equity-rich,” according to ATTOM Data Solutions, a real estate research firm. A home being equity rich means that the combined estimated amount of loans secured by the property is 50% or less of the estimated market value.
Homes are selling fast, too.
“At this point, I’m telling my sellers, ‘Pick a Saturday,’” Marc J. Jenkins, a real estate professional with Prime Property Partners in the Atlanta area says. “‘Give me four or six hours, and I’ll sell your house.’”
So what’s holding sellers back? They often have to buy as well and struggle to find a home to move to. And potential sellers fear they’ll pay more for a comparable home, even if they’re downsizing. This can leave sellers unsure of what to do, but there are ways around the stress.
“I would say buy first because this way they can take their time,” says Sonia Figueroa, a real estate pro with EXP Realty in Chicago. “They’re not feeling rushed, and they’re not just going to jump into any house because they need to hurry up and move out.”
However, a seller would need to get preapproved for a mortgage to buy their next home while still paying a mortgage on their current home. For some homeowners, that is not a financial option for them.
Others can list their homes and then accept an offer from a buyer who is willing to wait while they find a place to buy. Sellers have more negotiating power and often are able to ask for this extra time. Sellers also may be able to negotiate a rent-back agreement to allow them more time to shop for a home.
Source: “Thinking of Selling Your Home? Don’t Wait,” MarketWatch (March 1, 2021)
© Copyright 2021 INFORMATION, INC. Bethesda, MD (301) 215-4688
The National Association of REALTORS® applauded the House on Thursday after lawmakers reintroduced and passed the Equality Act, a 2019 bill that would extend fair housing and other civil rights protections to LGBTQ Americans. The House first passed the measure nearly two years ago, but it stalled in the Senate. This time, the Equality Act is expected to move forward in the Senate, though support for its successful passage remains unclear. President Joe Biden has vowed to sign the law if it makes it to his desk.
The Equality Act, also known as H.R. 5, would amend the Fair Housing Act of 1968 to prohibit discrimination on the basis of sexual orientation and gender identity, giving the LGBTQ community added protections in home sales, rentals, financing, insurance, and other housing-related transactions. It would also ban LGBTQ discrimination in the application of credit, employment, public education, public accommodations, federal funding, and the jury system.
“NAR applauds the House of Representatives for taking action to extend fair housing protections to LGBTQ Americans,” NAR President Charlie Oppler said in a statement. “As stewards of the right to own, use, and transfer private property, REALTORS®’ livelihoods depend on an open housing market, and discrimination of any kind limits our shared goals, undermines our values, and inhibits our ability to conduct business.”
NAR is among more than 600 organizations and 300 major companies that have voiced support for the Equality Act, including numerous real estate and mortgage firms. The association also has been a leader in anti-discrimination policy: NAR amended its Code of Ethics to prohibit discrimination based on sexual orientation in 2011 and gender identity in 2013.
The LGBTQ+ Real Estate Alliance, an industry organization founded last June, is working with the Human Rights Campaign to help Alliance members lobby their senators to support the Equality Act, CEO Ryan Weyandt told REALTOR® Magazine in an email Thursday. “President Biden has made his support for the LGBTQ+ community abundantly clear,” he said. “We are getting closer and closer to the day when we have the same protections as everyone else—in all 50 states—with or without an executive order or modified interpretation of existing law. We are people, and being our authentic selves should not have any bearing on how we are treated or exclude us from protections that apply to all other minority classes.”
Jeff Berger, founder and president of the National Association of Gay & Lesbian Real Estate Professionals, acknowledged the hard-fought road to housing equality as he praised the House action. “Today’s passage by the House of the Equality Act is the first step in the right direction on a long-overdue path to housing equality,” Berger said in a statement Thursday emailed to REALTOR® Magazine. “Let’s hope the momentum brings this legislation through the Senate and to the president’s desk for his signature.”
Whether your home is on the market or not, it should always be ready for visitors. Impressions mean a lot especially if you are staging your home for sale. Even though we get a little relaxed here in the Florida Keys it is important to have your home ready for visitors and potential buyers.
Florida Realtors economist: Investors are following renters into the suburban spillover markets. Strong demographics, population growth and an expected recovery in hospitality pulled the Tampa- St. Pete, Miami and Orlando markets into the top 20.
ORLANDO, Fla – The CrowdStreet Investment team leveraged several resources in commercial real estate to determine the top market rankings for 2021. Strong demographics, population growth and an expected recovery in hospitality pulled the Tampa- St. Pete, Miami and Orlando markets into the top 20.
Multifamily investors in particular should note the smaller-sized cities renters have been favoring over the past year, leaving behind their pricey urban centers and coastal cities for suburban locales, the Sun Belt and secondary gateway cities.
Like their larger counterparts, smaller cities’ multifamily fundamentals remained relatively stable thanks to government stimulus and eviction moratoriums that kept rent collections near pre-COVID levels. Collections never dropped below 93% in 2020, according to the National Multifamily Housing Council, helping to push vacancy rates for suburban multifamily product lower (to 6%) and downtown vacancy higher (to 9%).
Cape Coral-Fort Myers emerged as a strong market for the Build-to-Rent product, which is currently a solid-asset type throughout the country. Overall, these communities have a strong outlook, fueled by the current tenant migratory trend that has been opting out of smaller, denser urban housing in favor of larger, less-dense housing options.
Millennials are a driving force behind this trend. They’re looking for more space as they contemplate a post-pandemic world where they still work from home for a portion of the week.
Still, this demographic doesn’t want to leave the amenities of urban living behind. They look to Build-to-Rent communities as a way to have the best of both worlds – the space of a single-family home without the isolation that comes from a typical suburban location. Markets with less land constraints, like Cape Coal-Fort Myers, fit the bill at this product type typically requires three to four times as much space as the standard garden-style multifamily property.
Orlando continues to top the list for retail and hospitality investment despite the challenges these sectors have faced this past year. The fundamentals in place that made Orlando desirable prior to the pandemic persist, and indications of a recovery will set the area back on track for a strong recovery for these asset types.
For the detailed report, visit crowdstreet.com.
Jennifer Quinn is an economist and Director of Economic Development
Source: Crowdstreet.com
© 2021 Florida Realtors®
Overall residential spending increased 2.5%, boosted in part by higher demand for outer-urban areas where builders have more land to develop.
SILVER SPRING, Md. (AP) – Spending on U.S. construction projects rose 1.7% in January as new home building continues to lift the sector.
Last month’s increase followed small, revised gains in December and November.
Spending on residential construction rose 2.5% in January, with single family home projects up 3%, the Commerce Department reported Monday.
Despite an economy that’s been battered for nearly a year because of the coronavirus pandemic, historically low interest rates and city dwellers seeking more space in the suburbs and beyond boosted home sales. Last week, the Commerce Department reported that sales of new homes jumped 4.3% in January, and are 19.3% higher than they were last year at this time.
In a separate report, the government reported that applications for building permits, which typically signal activity ahead, spiked 10.4% in January.
Spending on government projects, which has been constrained by tight state and local budgets in the wake of the pandemic, rose 1.7%.
Non-residential construction was up 0.4% after months of declines, but it’s still down 10% from January of last year. The category that accounts for hotels also ticked up 0.7% but it’s still down a whopping 22.7% from the same time last year because the travel and leisure sector has been one of the hardest hit by the pandemic.
Total spending on construction in January was $1.52 billion, 5.8% higher than January 2020.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
Brokers are getting more calls from out-of-staters, and the demand isn’t limited to Fla.’s traditional feeder markets. It adds yet another challenge for local buyers.
FORT LAUDERDALE, Fla. – As homebuyers jostle for a dwindling supply of houses in South Florida, local bidders are finding themselves in a growing competition with out-of-state people who are offering cash on the spot.
Brokers are astounded by the increase in out-of-state inquiries pouring into their offices in Florida. They describe how local buyers have lost out to COVID-driven buyers from New York and other northern states. Many callers on the other end of the line have a pile of cash ready – often the fruit of higher-priced house sales in their hometowns.
For the seller, “it’s a no-brainer – you go with the cash deal,” said Ken Johnson, a real estate economist at Florida Atlantic University. “That’s going to squeeze out locals using financing. You’ve got somebody else using cash.”
Couple that with a diminishing supply of homes to buy in South Florida, and the search for a new home “is getting tougher for everybody,” Johnson said. “Nationally the number of existing homes on the market has fallen off tremendously.
“That uniformly transfers to Florida. I wouldn’t want to be buying right now.”
Since the coronavirus pandemic severely crippled the nation’s economies last March, prices for single-family homes have spiked and the supply has dwindled.
“I’m amazed by the number of New Yorkers who are moving here permanently,” said Craig Studnicky, CEO and president of the Related/ISG brokerage firm in Miami. “They’re not just buying second homes. This isn’t just normal winter traffic. It’s the most dynamic market I’ve ever seen. These are prominent homeowners moving here permanently. I’ve never seen this in South Florida before.”
It has created fierce competition.
Earlier this month, Redfin, the online brokerage firm, said offers made by its brokers are being increasingly challenged in bidding contests. The company said 56% of Redfin home offers faced competing bids last month, the ninth straight month that more than half of the firm’s offers were challenged. In the Miami area, the figure was 43.7%, up from 37.5% in December.
“With so few new listings hitting the market, I expect bidding wars to become more common and involve even more potential buyers as we head into the spring homebuying season,” Redfin chief economist Daryl Fairweather said in a statement
Studnicky is not only hearing from New Yorkers who are moving to Florida, but from people who live in Oregon, California, Ohio and Illinois – all places not known for driving large numbers of homebuyers to South Florida.
“People are grabbing everything they can get,” Studnicky said. “A year from now we’ll have the same conversation about condos that we’re having about houses now.”
But some new arrivals don’t believe they have an upper hand. Two New Yorkers interviewed by the South Florida Sun Sentinel are bringing new businesses to the area – one in financial services and the other in technology. And they’re not trying to take the market by storm.
They are taking their time with their searches, waiting for the right opportunities.
Alan Schwartz, who opened the wealth management firm Mondeum in Miami, and who with his wife is looking for a single-family home in Boca Raton with a garage and a front door that opens to the great outdoors.
Their search has been an uphill task. So for now, they’re renting in Boca West.
“The prices that people were paying just didn’t make sense,” Schwartz said. “We were fortunate we knew someone who renovates in Boca West. We literally took it last month and we just came down yesterday. It’s bigger than our apartment in Manhattan but far smaller than we hoped. We hope in the next year to find something to buy.”
Michael Stone, a Manhattan-based staffing recruiter for technology companies, is opening an office for his firm, Stone Search, in Fort Lauderdale. He is in the process of selling his place in New York.
“I’ve been actively looking for a home in Florida,” he said. “I’m going to spend my winters there and live in the summer in the Hamptons. Finding a home is a big problem for everybody.”
Stone has immediate family in Boca Raton and in Parkland and would like to live near them. He has looked from Fort Lauderdale’s Victoria Park to Pompano Beach to West Palm Beach and deployed several brokers to help hunt for a townhome to house himself, his husband, a dog and a car collection.
Florida, he said, is “just a better lifestyle, an easier lifestyle. The winters can be so brutal.”
The prices, he added, are “inflated right now.”
Other newly arrived businesses are adding to the demand for housing as they bring employees with them or create new positions. The Miami Downtown Development Authority announced Friday that more than a half-dozen firms are coming to town, creating new jobs – and more than likely additional housing requirements – for 700 people.
Jamie Sturgis, CEO and founder of Native Realty in Fort Lauderdale, a commercial real estate firm, said most of his clients are “by and large from New York,” with others coming from New Jersey and California.
“Many are permanently relocating their headquarters down here,” he said. “We’re also seeing a fair amount that are moving down here for investments, as well, in both residential and commercial.”
Sturgis said he recently received an unsolicited offer for his home, which isn’t even on the market. He didn’t accept it.
Real estate associations and other industry leaders say Florida home sales during the pandemic have been fueled by record-low mortgage rates and a desire by out-of-state residents to escape higher taxes and live in bigger, greener spaces in Florida.
“Homebuyers, particularly those from tax-burdened northeastern states, are purchasing in sunny South Florida and looking for larger spaces for working and schooling from home,” JTHS-MIAMI President Bill Mate of Jupiter said in a recent statement.
Single-family home prices in Broward County increased 12.2% year-over-year in January 2021, rising from $374,450 to $420,000. Existing condo prices jumped 22.9% year-over-year, from $170,000 to $209,000, according to the Miami Association of Realtors and Multiple Listing Services.
Strong demand coupled with limited supply continue to drive prices upward in Palm Beach County, the association said.
Single-family home prices in the county rose 16.3% year-over-year in January, increasing from $363,000 to $422,000. Existing condo prices increased 12.3% year-over-year, from $195,000 to $218,900.
Sturgis said the pandemic-era spike in prices can’t be entirely placed at the doorsteps of New Yorkers.
“It’s not all of their fault, so to speak,” Sturgis deadpanned.
In fact, Florida was not the prime destination of New Yorkers on the move during the pandemic, according to an analysis published in December by the National Association of Realtors.
Of the 8.9 million people who moved nationally since March, it was U.S. suburbs that gained the most movers. Using U.S. Postal Service data, the analysis placed most New Yorkers on the move in the borough of Brooklyn, the Hamptons on Long Island, and in Jersey City, N.J.
South Floridians are moving around the region, too, as many are working from home.
“There are a lot of people relocating locally – especially people in condos or apartments – and they realize if they are going to spend so much time at home they want a bigger place,” he said. “Priorities have changed a little bit.”
And so a thinning of inventory at various price levels is slowing the pace of sales for single-family homes, industry officials say. They expect that the pool of houses for sale will expand later this year as the number of housing starts increases and previously reluctant sellers place their homes on the market.
Meanwhile, many out-of-towners are turning to condos, said Todd Richardson, vice president of sales and marketing for Group P6, which is selling luxury condos at the Royal Palm Residences near the Intracoastal Waterway in Boca Raton.
“Three of my last four buyers are from New York and before that we didn’t have any,” Richardson said. They came from Long Island in mid to late January.
“They’re all friends,” he said. “They have families. They were full time in Long Island and are all moving to Boca Raton.
“Ever since January it’s been more of a Northeast buyer,” he said. Prior to that, inquiries came from people living in local country club communities who were looking to downsize their homes.
He said New Yorkers in their late 50s and early 60s are the ones heading south. “The timeline has been accelerated on retirement, if you will. It just seems on the surface that’s what’s happening.”
Richardson suggested that people who might be looking to sell their single-family homes might become stuck if they cut a deal now. “The inventory on the houses is gone,” he said. “If you sell your home, you get a great number for it. But where do you go after that?”
Not everyone is convinced that the southbound surge from New York and other Northeast states will emerge into a long-term phenomenon.
Vanessa Grout is CEO of the real estate arm of Miami-based OKO Group, which was founded by the Russian billionaire developer Vladislav Doronin. She called the movement to Florida “temporary.”
OKO currently has high-rise condo and office tower projects in Miami, and several others in Moscow. It also acquired 7 acres of land south of the New River in Fort Lauderdale, although it has yet to publicize what it intends to build there.
“I know Miami is as extremely popular as it’s always been,” Grout said by telephone from New York, where OKO has a luxury residential and hospitality project under way in Manhattan. “Buyers are coming down in droves to establish Miami as a potential home. The urgency is real and buyers are coming down in a relative panic to find the perfect property.”
Yet, she’ll allow only that “it’s an interesting pattern we should all keep our eye on. We can’t make any conclusions from this.”
© 2021 the Sun Sentinel (Fort Lauderdale, Fla.) Distributed by Tribune Content Agency, LLC.
With the average tax refund near $3,000, it could open the door to buying a home sooner rather than later. The Florida Keys is a HOT market right now and it is the prefect time to grab your dream home in paradise now before prices start going up.
To pay your home off sooner, save interest and build equity faster, consider a 15-year mortgage. In the Florida Keys this would be very beneficial. Who wouldnt want to own their home sooner. Stop paying the bank or your financial institution so much money just to use their money. SAVE money today and change the term of your mortgage. You will gain more equity fast and pay the bank much less.
One of the silver linings to filing your income tax return is finding out that you are going to receive a refund that could literally open the door to owning a home. If you happen to be one of these fortunate taxpayers, your next decision is what to do with it.
With the average tax refund near $3,000, it could be the ticket to buying a home sooner rather than later. Regardless of the size of your refund, it can be used toward the down payment or closing costs of the home.
Most people think it takes 10% or more down payment to purchase a home, but actually, it is much less because of several low down payment mortgages . There are VA and USDA mortgages that allow for no down payment for qualified buyers. FHA has a 3.5% down payment program and FNMA and Freddie Mac have 3% down payment mortgages for qualified creditors as well as 5% down programs.
Closing costs for originating new mortgages can easily range from two to three percent of the purchase price but most lenders will allow the seller to pay part or all of them based on the agreement in the sales contract. If you are using a VA or USDA loan, your refund could go toward paying the closing costs.
On a practical matter, if you are due a refund, have it deposited directly into your account. It is necessary to trace the source of the funds. Cashing a refund check and depositing the cash adds an unnecessary aging requirement.
Maybe you have the money saved for your down payment and closing costs but you have other debt that is keeping you from qualifying for a mortgage. The IRS refund could be used to pay down that debt. However, you need solid advice from a trusted mortgage professional before you do that.
While the average tax refund might not cover the down payment on the median price home, it certainly helps. Your refund could make it a simple as 1-2-3 to get into a home.
Download the Buyers Guide and contact me at (305) 942-7755 or KeysAgentMichael@gmail.comto get started.
RE Q&A: First step? Check the lease agreement. Most residential leases require a new agreement to be signed yearly and don’t allow the annual lease to be renewed.
KINGSPORT, Tenn. – Question: Our tenants are nice people but consistently pay their rent late. Their annual lease expires in September, and I do not want to renew it. With everything going on, am I allowed to do this? – Barbara
Answer: A lease is a contract, and you and your tenant are bound by its terms.
Your first step is to review your lease agreement to see if you agreed to give your tenant the option to renew. Most residential leases do not allow the lease to be renewed and require a new agreement to be signed each year.
Leases that give the tenant the right to continue for another year only allow the renewal if the tenant is in good standing and current on the rent.
If your tenant remains behind on the rent and you have to terminate the lease for non-payment, the right to renew also ends.
Speak with your renters a month or two before the end of their lease so they are not surprised that they cannot stay another year. It takes time to find a new home, pack and move, and you want to make sure that everyone is on the same page.
Unless a renewal is guaranteed, neither the landlord nor tenant needs a reason to move on other than not wanting to continue the relationship.
Due to the pandemic, there are a lot of protections for tenants right now.
This does not mean that your tenant gets to stay for free.
Even if you temporarily cannot evict your tenant, the balance keeps growing, and you may collect this debt long after the pandemic ends.
Many programs and grants are popping up that can assist your tenant in catching up.
Check with your city and county government to see if these will help in your situation.
About the writer: Gary M. Singer is a Florida attorney and board-certified as an expert in real estate law by the Florida Bar. He practices real estate, business litigation and contract law from his office in Sunrise, Fla. He is the chairman of the Real Estate Section of the Broward County Bar Association and is a co-host of the weekly radio show "Legal News and Review." He frequently consults on general real estate matters and trends in Florida with various companies across the nation.
Copyright © 2021Sandusky Newspaper Group, Kingsport Times-News. All rights reserved.
It depends. Average cost of a new home in Dec. was $302.8K; it was $309.8K for an existing home. But factors like location, custom options and lumber costs affect prices.
WASHINGTON – As inventories remain tight, homebuyers may be drawn to new-home construction. But what determines whether they will pay more for buying new than for an existing home?
If the buyer takes steps to limit construction costs and omits custom finishes, building a house may be about $7,000 cheaper than buying an existing home, according to a new analysis from Bankrate.com.
Prices also depend on location and the options the buyer selects.
The median sales price of an existing home was $309,800 in December 2020, according to the National Association of Realtors® (NAR). The average cost of building a new house was $302,817, according to HomeAdvisor. However, recent run-ups in lumber costs may be adding considerably more to new home costs.
It’s not a simple calculation – a number of variables must be considered. The operating costs for a new home may be cheaper in the long run, according to the National Association of Home Builders. Homes built after 2010 tend to have operating costs of about 3% of the home’s value, while the operating costs of homes built prior to 1960 are more than 6%, according to the NAHB’s analysis.
But when buying new, homebuyers may face extra costs for upgrades, landscaping and appliances that they may not have in purchasing a resale home.
“The cost of new construction and the buyer’s moving timeline are some of the factors to consider, but also the area [and] location that they are looking to move into,” Rose Kemp, a real estate professional with RE/MAX Town Centre in Orlando, Fla., told Bankrate.com. “In some cases, there is better value in a new home for the purchaser versus resale. Also, sometimes the resale homes in an area may be older.”
Real estate agents cite several pros of buying new – such as avoiding the hassle of competing offers and eliminating the need for renovations. But they also cite some cons for buyers to consider like the extended timeline and cost overruns, which are common in new-home construction.
On the other hand, existing homes tend to offer faster move-in times and potentially more bargaining power. But market competition for a limited stock of homes in many areas is making bidding wars more common.
Source: “Is It Cheaper to Build or Buy a House?” Bankrate.com (Feb. 18, 2021)
© Copyright 2021 INFORMATION, INC. Bethesda, MD (301) 215-4688
These three general types of mortgages allow for different down payments, terms, and special conditions like including home improvements.
Sales came in at 923K – much higher than the 842K economists expected even after revising Dec. numbers. That increase is also 19.3% higher than sales in Jan. 2020.
SILVER SPRING, Md. (AP) – Demand for new homes in the U.S. surged 4.3% in January with the housing market still one of the strongest segments of the economy.
Last month’s increase pushed sales of new homes to an adjusted annual rate of 923,000, the Commerce Department reported Wednesday. That’s much stronger than the 855,000 that economists were expecting. December’s new home sales figure was revised higher as well, from 842,000, to 885,000.
Sales of new homes are now 19.3% higher than they were last year at this time.
“Sales would have been much higher if only builders could build faster,” said Robert Frick, economist with Navy Federal Credit Union. “Supply is only one issue, and for many Americans trying to buy their first home, rising prices are shutting them out of the market.”
Although the median price of a new home sold in January slipped to $346,400, that is up more than 5% from a year ago, far outpacing wage gains in the U.S. Persistent demand fueled by record low mortgage rates has pushed prices higher over the past year.
The cost of labor and materials is also rising. Lumber futures have spiked 130% in the past year, adding thousands of dollars to the cost of a new home.
After a three-month spring slide during the coronavirus outbreak, housing boomed in the summer and fall (there was a slight dip in November). It appears to be surging again with the busy spring buying season approaching.
Only in the Northeast did sales slide, down 13.9%. Sales jumped 12.6% in the Midwest, 6.8% in the West and 3% in the South.
The housing market has remained remarkably resilient in the face of the economic fallout of the coronavirus pandemic. Economists’ biggest worries are availability and affordability. Inventory of available houses slipped to a four-month supply. Last January, there was a five-month supply.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
With the Internet being the most popular tool to find a home, sellers should optimize the list price for Internet tools that use rounded dollar amounts.
Fueled by low interest rates and high buyer demand, home prices surged 10.1% higher year-to-year in Dec., according to the Case-Shiller 20-city home price index.
WASHINGTON (AP) – U.S. home prices surged at the fastest pace in nearly seven years in December, fueled by low mortgage rates and Americans moving from crowded urban areas to houses in the suburbs.
The S&P CoreLogic Case-Shiller 20-city home price index, released Tuesday, climbed 10.1% in December from a year earlier. The year-end jump was the biggest since April 2014 and follows a strong 9.2% year-over-year gain in November.
Home prices climbed 14.4% in Phoenix, 13.6% in Seattle and 13% in San Diego in December. But prices rose all over. Chicago, which recorded the slowest price gain, saw a 7.7% uptick. Detroit was not included in the year-over-year figures because of record-keeping delays caused by the coronavirus pandemic.
“These data are consistent with the view that COVID has encouraged potential buyers to move from urban apartments to suburban homes,” said Craig Lazzara, global head of index investment strategy at S&P DJI.XX. But he said it was unclear whether the trend would last.
Prices have also been pushed up by the limited supply of homes on the market.
“With mortgage rates remaining relatively low and the wave of eager buyers continuing to swell, it’s unlikely that this competition for housing, and subsequent strong price appreciation, will meaningfully abate in the near future,” said Matthew Speakman, economist at the real estate firm Zillow.
Homebound consumers are also sprucing up their living quarters. Commenting on a year-end surge of revenue and earnings at Home Depot, Neil Saunders of GlobalData calculated that Americans each spent the equivalent of $402 last year at the home-improvement giant.
The housing market has been resilient throughout the coronavirus pandemic, helped by rock-bottom rates on home loans. The average rate on the benchmark 30-year, fixed-rate mortgage ticked up to 2.81% last week from 2.73% but remains well below where it was a year earlier: 3.49%.
But the Commerce Department reported last Thursday that U.S. home construction fell 6% in January, dragged down by a 12.2% drop in construction of single-family homes; apartment construction climbed 16.2%. Still, applications for building permits, which typically signal where home building is headed, rose sharply in January.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed without permission.
As people approach the inevitable, even if they have a will, the decision to transfer title to real estate prior to death could be an unnecessary expense for the would-be heir.
A small down payment in a home can increase dramatically through appreciation amortization creating Equity Build-up. |
OWNING MAKES SENSE When comparing the cost of owning a home to renting, there is more than the difference in house payment against the rent currently being paid. It very well could be lower than the rent but when you consider the other benefits, owning could be much lower than renting. Each mortgage payment has an amount that is used to pay down the principal which is building equity for the owner. Similarly, the home appreciates over time which also benefits the owner by increasing their equity. There are additional expenses for owning a home that renters don’t have like repairs and possibly, a homeowner’s association. To get a clear picture, look at the following example of a $300,000 home with a 3.5% down payment on a 4.5%, 30-year mortgage. The total payment is $2,264 including principal, interest, property taxes, property and mortgage insurance. However, when you consider the monthly principal reduction, appreciation, maintenance and HOA, the net cost of housing is $1,218. It costs $1,282 to rent at $2,500 a month than to own. In a year’s time, it would cost $15,000 more to rent than to own which is more than the down payment and closing costs to buy the home. With normal amortization and 3% annual appreciation, the $10,500 down payment in this example turns into $112,00 in equity in seven years. Owning a home makes sense and can be one of the best investments a person will ever make. Contact our office to see a Rent vs. Own with your numbers. Total Monthly Payment (PITI + MIP) $2,263.68 Less Monthly Principal Reduction 396.00 Less Monthly Appreciation $750.00 Plus Estimated Monthly Maintenance 100.00 Plus Homeowners Association 25.00 Net Cost of Housing $1,217.67 3 Rent or buy, you pay for the house you occupy…either for yourself or your landlord.
FORCED SAVINGS One of the big banks has a voluntary program available that transfers $100 each month from your checking account to your savings account. In a period of five years, the account owner would have over $5,000 in the savings. It is a form of forced savings. Similarly, when a person buys a home with an amortizing loan, each month, a part of the payment is used to reduce the principal loan amount. Amazingly, almost $3,700 would be applied toward the principal in the first year of a $250,000 mortgage at 5% for 30 years. In five years, the loan amount would be reduced by over $20,000 through normal payments. The other dynamic that is in play is that while the unpaid balance is being reduced, appreciation increases the value. The difference between the two makes the equity grow even faster. Three percent appreciation on a $250,000 home would increase its value in five year by almost $40,000. A 30-year mortgage of $250,000 will be paid for in 30 years. At an average of 3% appreciation, the asset would be worth about $600,000. If you continue to rent, the asset belongs to your landlord instead. Many experts believe that the homeowner benefits from the forced savings of amortization and the leveraged growth that takes place in the investment. It has been observed in the tri-annual Consumer Finance Survey by the Federal Reserve Board that homeowner’s net worth is 44 times higher higher than that of renters.
7 REASONS TO BUY NOW The house payment with taxes and insurance is probably cheaper than the rent. Lock-in the principal & interest payment with a fixed-rate mortgage. The mortgage interest deduction is intact for taxpayers. Prices are continuing to increase partially due to lower inventories and several years of low housing starts. Rents will continue to rise making the difference even greater in the future. 30-year mortgage terms are available to most borrowers. The capital gain exclusion for principal residences up to $500,000 remains in place.
LOW DOWNPAYMENT OPTIONS It is increasingly more difficult for first-time home buyers to save for their down payment. Contributing factors include rising rents, rising home prices, student loan debt and flat wages. Some would-be buyers cannot buy a home today but there is a large segment of them who are making decisions based on inaccurate assumptions. Nine out of ten non-owners believe they need ten percent or more for a down payment. The typical down payment for firsttime buyers is six percent. VA has 100% loan programs as well as USDA for certain qualifying areas and buyers. FHA is known for 3.5% down payments. And FNMA and Freddie Mac have down payments as low as 3% and 5%. There are gift provisions available for buyers who have an “angel” who would like to help them with their down payment. There are ways to borrow against a person’s qualified retirement program for a down payment. It isn’t necessarily limited to the buyer but could include a relative. Interestingly, a son or daughter can borrow against their retirement to benefit the parents. In some respects, having good credit and sufficient income is more important than the down payment. Don’t rely on “common knowledge.” Get expert advice and counsel to see if there is a way to advance your dream of owning a home.
DOWNPAYMENT: FOUND! Saving the down payment may be unnecessarily keeping would-be buyers from getting into a home. The funds may be available, and they were unaware they could access them. The NAR Profile of Home Buyers and Sellers reports that 81% of first-time buyers got all or part of their down payment from savings. Less than 4% said that all or part of the down payment came from a withdrawal in their IRA and 8% from their 401k or pension fund. Traditional IRAs have a provision for first-time buyers which include anyone who hasn’t owned a home in the previous two years. A person and their spouse, if married, can each withdraw up to $10,000 from their traditional IRA for a first-time home purchase without incurring the 10% early-withdrawal penalty. However, they will have to recognize the withdrawal as income in that tax year. For more information, go to IRS.gov. Allowable withdrawals from traditional IRAs can be from yourself and your spouse and your or your spouse’s child, your or your spouse’s grandchild or your or your spouse’s parent or ancestor. Roth IRA owners can withdraw their contributions tax-free and penalty-free at any age for any reason because the contributions were made with posttax income. After age 59 ½, earnings may be withdrawn as long as the Roth IRA have been in existence for at least five years. Up to half of the balance of a 401(k) or $50,000, whichever is less, can be borrowed by the owner at any age for any reason without tax or penalty assuming the employer permits it. There can be specific rules for loans from 401(k)s that would determine the repayment; interest is usually charged but goes back into the owner’s account. You can consult with your HR department to find out the specifics. A risk in borrowing against a 401(k) comes if your employment ends before the loan has been repaid. The loan may have to be repaid within as soon as 60 days to keep the loan from being considered a withdrawal and subject to tax and penalty. Even if you continue with the same employer, failure to repay the loan could be considered a withdrawal also. Your tax professional can provide you specific information on how making a withdrawal from your retirement program might affect you. Additional information can be found on www.IRS.gov.
WAITING WILL COST BUYERS MORE An economist was once asked how interest rates would change and he said: “They may fall some and then, rise and after that, they’ll fluctuate.” Increased rates directly affect the payments on homes but so does the price. With inventory levels remaining low, the prices will continue to go up. When interest rates and prices rise at the same time, it will cost buyers a lot more. If the mortgage rates go up by one percent and prices increase by five percent in the next year, the payment on a $250,000 home could go up by $200 a month. In a seven-year period, the buyer would pay $18,000 more for the home. People planning to buy a home, need to investigate the possibilities of accelerating their timetable to take advantage of lower rates and prices.
NOT AVAILABLE FOR ALL BUYERS Lenders regularly publish mortgage rates, but they may not be available for all buyers. Imagine that the mortgage payment based on an advertised rate influenced a buyer to make an offer on a home. After negotiating a binding contract, this buyer makes a loan application and finds out that for any number of possible reasons, that rate isn’t available. Even if the person does financially qualify for a loan at a higher interest rate, it will not be the payment that the buyer expected when the contract was negotiated. Lenders evaluate several factors such as the borrower’s credit score, debt-to-income and loan-tovalue ratios. These variables are used to assess the risk associated with the repayment of the loan. While mortgage money is a commodity, it isn’t priced the same way items are that involve cash for goods. The lender puts up the money today based on a promise from the borrower to repay over a long term, possibly up to thirty years. The simple solution to avoid surprises such as the one described here is to get pre-approved at the beginning of the home search process. Since pre-qualification is not the same, call if you’d like a recommendation of a trusted mortgage professional.
5 THINGS THAT HURT YOUR CREDIT SCORE Credit scores are used by lenders to measure the credit worthiness of borrowers. While there are several different companies that offer scores, the FICO, Fair Isaacson Corporation, is the model that is used most often. There are five key components that determine the overall score or rating. The most emphasis, 35% of the overall score, is placed on payment history which reflects whether the borrower paid on time and as agreed by the terms of the credit. Being late, missing payments or going into default would have adverse effects on this part of the score. The second largest component, 30%, is credit utilization or the amount owed in relation to amount available. A person might have a $4,000 outstanding balance on available credit of $20,000. This would be a 20% ratio and would be considered acceptable. Owing $15,000 on $20,000 of available credit would be a 75% ratio and would negatively affect this part of the credit score. The combination of all five areas make up the total score which lenders use to determine credit worthiness. Another confusing issue is that all credit scores are not mortgage credit scores. This particular score determines not only whether the lender will make a mortgage but at what interest rate. The best place to get your credit score if you’re planning on purchasing a home is from a trusted mortgage professional. This person will be able to suggest things to improve your score if necessary. Buying a home is one of the largest investments in most people’s lives; it is really not a do-it-yourself activity.
PRE-APPROVAL IS GOOD FOR EVERYONE ESPECIALLY IN THE FLORIDA KEYS There is no shortage of lenders ready and willing to take your application fees to start the loan process. Without having to use a search engine, they’re listed on a variety of websites, many of which have nothing to do with real estate. Doing business with a full-time professional who specializes in residential loans like you’re trying to get is important. You want the loan officer to be familiar with local conditions, values and practices. There is a huge advantage to be able to sit across the table from someone you’re doing business with and look them straight in the eye. It’s difficult to make an informed decision based on a website and a phone call. It’s to your benefit to have a loan officer who has the experience to put the unusual transaction together. With ever-changing underwriting guidelines, the unexpected is now commonplace. Here are a few questions that will be helpful in selecting the right loan officer. DISCOVER THE RIGHT LENDER
» What percentage of your business are FHA, VA & conventional mortgages and how long have you been doing them?
» What percentage of your loans close on time according to the sales contracts? » Will my credit score affect my interest rate?
» Will you help me select the best loan product for me regardless of what types you have to offer?
» Are there prepayment penalties on any of the loans we’re considering? » Are there any restrictions on refinancing of any of the loans we’re considering?
» When is my loan rate locked-in? Is there a charge for that? Is there a float-down option? A real estate professional can be your best source of information and can recommend a lender.
THE “RIGHT” AGENT AND THE “RIGHT” HOME Some buyers think that finding the right home is the critical part of the buying process and that’s how they determine which agent to use. While that is important, there may be a broader skill set to consider for your real estate professional. The most recent NAR Profile of Home Buyers and Sellers indicate that 52% of buyers do want help in finding the right home to purchase. There was a time when the public didn’t have access to all the homes on the market, but the Internet has changed that. Helping to negotiate the price and terms of sale were identified by almost 25% of the buyers. No one wants to pay more than is necessary. The next largest area of assistance that buyers value has to do with financing and the paperwork. Even if a buyer has been through the process before, it very likely could have been several years and things have probably changed. Since an owner’s cost of housing is dependent on the price paid for the home and financing, a real estate professional skilled in these specialized areas can be invaluable in finding the “right” home. An agent’s experience and connections to allied professionals and service providers is equally important. Ask the agent representing you to specifically list the tools and talent they have available to address these areas.
FACTS OR MYTHS “Adjustable Rate Mortgages are more expensive than fixed rate mortgages.” - FACT! Adjustable Rate Mortgages can be less expensive than fixed rate mortgages if the buyer’s circumstances warrant it. If a buyer is only going to be in a home for a few years before selling, it can be determined if an ARM loan will result in the lowest way to finance the property. There are many variables and you need to be aware of them before deciding which type of loan to finance your home purchase. “It’s impossible to get low down payment loans.” – FACT! FHA down payments are 3.5% and VA is 0%. In some areas, there may be some 0% down payment USDA loans available. FNMA and Freddie Mac have 3% down payment programs. “It takes perfect credit to get a loan.” - FACT! There is a relationship of better rates to better credit but many issues on a credit report can be explained or corrected. The way to know for sure is to speak to a reliable lender. “If I’ve had a bankruptcy or foreclosure, I can’t qualify.” - FACT! Credit history following a bankruptcy or foreclosure is very important and there can be extenuating circumstances. It only takes a few moments with a reliable lending professional to find out if your individual situation will allow you to qualify for a new mortgage. “Getting pre-approved is expensive.” - FACT! Usually, the only expense to getting pre-approved is the cost of the credit report which could be around $35. The advantage is that you will know that you qualify for a particular mortgage amount. “I should wait to qualify until I find a home.” - FACT! It can take time to qualify for a mortgage especially if there are issues that need to be corrected. The best interest rates are only available for the highest credit scores. It is to your advantage to start the qualifying process early in your home search. “All lenders are the same.” - FACT! Reliable lending professionals will explain the entire process before collecting fees, quote fees upfront, have competitive products, do what is necessary to get the loan approved, and close at the locked rate and terms. Ask for recommendations from recent borrowers. Buyers and Sellers need solid information to make good decisions. Call us with your questions or to get a recommendation of a reliable lender who can give you the real facts.
By Kerry Smith
ATTOM: In Jan. 2021, Fla. foreclosures were down 83% year-to-year, in part due to the foreclosure moratorium, which “doesn’t reflect market reality.”
IRVINE, Calif. – ATTOM Data Solutions’ January 2021 U.S. Foreclosure Market Report found a total of 9,702 U.S. properties with foreclosure filings – default notices, scheduled auctions or bank repossessions – a drop from 11% from a month earlier and 80% from a year ago.
In Florida, the number of REO properties was down 83% year-to-year in January.
“January foreclosure activity declined at least in part due to the Biden Administration’s decision to continue the foreclosure moratorium on government-backed loans through the end of March,” says Rick Sharga, RealtyTrac executive vice president. “The moratorium and CARES Act mortgage forbearance program have effectively prevented millions of seriously delinquent loans from entering the foreclosure process.”
But Sharga adds that the current numbers don’t “reflect market reality – and that’s something we’ll need to deal with once these government programs expire.”
In the final half of the Great Recession, many homes went into foreclosure, but many also had no equity – or negative equity. In the current pandemic-led downturn, housing values have hit record highs, and many homeowners who can’t make their monthly payments or refinance may still have equity in their homes. In those cases, they might prefer a short sale rather than a foreclosure if they can’t work out an agreement with their lender.
Even as foreclosures bottom out, however, Florida remains one of the top states for activity. According to ATTOM, the states with the highest foreclosure rates were Delaware (one in every 4,923 housing units had a foreclosure filing), Louisiana (one in every 6,581 housing units), Florida (one in every 7,920 housing units), Indiana (one in every 8,668 housing units) and Alabama (one in every 8,707 housing units).
Miami also made the list for “major metropolitan statistical areas (MSAs) with a population greater than 200,000 that saw the greatest number of REOs,” even though the numbers aren’t high. The list includes Birmingham, Alabama (124 REOs); Chicago (65 REOs); Baltimore, (41 REOs); Miami (40 REOs); and Beaumont, Texas (38 REOs).
© 2021 Florida Realtors®
The 30-year, fixed-rate mortgage averaged 2.81% compared to last week’s 2.73% – but economists still expect rates to hover around 3% for the rest of 2021.
SILVER SPRING, Md. (AP) – U.S. long-term mortgage rates ticked up this week but remain at historic lows as the coronavirus pandemic continues to batter the economy even as more Americans get vaccinated.
Mortgage buyer Freddie Mac reported Thursday that the average rate on the benchmark 30-year fixed-rate home loan rose to 2.81% from last week’s 2.73%. One year ago, the rate was 3.49%.
The average rate on 15-year fixed-rate loans, popular among those seeking to refinance their mortgages, rose to 2.21% from to 2.19% last week. A year ago it was 2.99%.
The 5-year adjustable-rate mortgage averaged 2.77%, down from last week’s 2.79%. It averaged 3.25% one year ago.
While economists expect modest increases in home-loan rates this year, they likely will remain low with the Federal Reserve keeping interest rates near zero until the economy recovers.
Record-low lending rates have helped push buyers into the housing market, but a lack of supply has left many prospective buyers empty handed. The lack of supply was pushing prices up even before the pandemic struck last March.
Although the housing market has been one of the stronger sectors of the U.S. economy since early summer, the overall economy remains at the mercy of the ongoing pandemic.
The number of Americans applying for unemployment aid rose last week to 861,000, evidence that layoffs remain elevated despite a steady drop in the number of confirmed viral infections. About 1.7 million Americans are getting vaccinated each day, although those efforts have been complicated by recent winter weather in many parts of the country.
Copyright 2021 The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.
Credit scores hit a record high, and one analyst calls that “bizarre.” But many employed Americans used stimulus checks and commute-money savings to pay down debt.
NEW YORK – Credit scores have never been higher, positioning more Americans to qualify for some of the best mortgage rates ever. Yet nearly 10.1 million Americans remain unemployed and have skipped mortgage or debt payments. How can this be?
“It’s been bizarre with this recession to see credit scores go up,” Matt Schulz, chief credit analyst at LendingTree, told MarketWatch.
At the beginning of 2020, FICO credit scores averaged 703. By October, the average FICO credit score rose to 711, Experian FICO credit score data shows. VantageScore credit scores – which factor mortgages in more heavily – rose an average of four points above 2019 scores to 690 in 2020. (In general, a FICO score above 660 and a VantageScore above 670 is considered good, MarketWatch notes.)
Government stimulus programs and relief measures during the pandemic may be helping. Studies have shown that many consumers used the stimulus checks to pay down their debts, which could have helped to boost their credit scores.
Also, forbearance and deferment programs put in place during the pandemic for mortgages, student loans and car payments may have freed up money, allowing borrowers to pay down some of their other bills. Under COVID-19 relief measures, lenders must report accounts as current or “paid as agreed” for borrowers who delay payments due to financial struggles caused by the coronavirus.
“That means that consumers’ credit scores won’t be lowered if they didn’t have any preexisting delinquencies,” MarketWatch reports. “That would make it easier for these consumers to secure a loan or mortgage in the short- and medium-term.”
But credit scores won’t remain frozen. CARES Act provisions will remain in effect for 120 days after the national coronavirus emergency is terminated by the president or Congress. And once borrowers are required to start repaying any frozen debts, they may start to see their credit scores decrease if they still can’t make those payments.
Source: “‘It’s Been Bizarre With This Recession to See Credit Scores Go Up’,” MarketWatch (Feb. 16, 2021)
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The investment benefits don't go to the tenant but instead, the owner, whether it is a homeowner or an investor.
When buying a home, purchasers may not have enough resources for a large down payment to avoid mortgage insurance but they should try to eliminate it to reduce the expense when possible. |
Normally, debt forgiven is considered income but qualified principal residence indebtedness is excluded through 12/31/20.
Home renovation TV shows are more entertainment than instructional.
Mortgage insurance benefits the lender if a borrower with less than a 20% down payment defaults on their loan. Most conventional mortgages greater than 80% and all FHA loans require the borrower to have this coverage.
Private mortgage insurance on conventional loans can range from 0.5% to 2.25% based on the loan-to-value and the credit worthiness of the borrower. A $350,000 mortgage would have a monthly mortgage insurance premium of $146 a month at the low-end of the scale and over $600 on the high-end.
You may request that your mortgage servicer cancel the PMI when the principal balance reaches 80% of the original value at the time the loan was made. You should have received a PMI disclosure form when you signed the mortgage documents stating the date. If you have made additional principal contributions, it will accelerate the date.
Other criteria considered to cancel the PMI on your loan is:
Conventional loans are supposed to remove the mortgage insurance when the unpaid balance is 78% of the original purchase price.
Another possibility is that the lender/servicer must end the PMI the month after you reach the midpoint of your loan's amortization schedule. For a 30-year loan, it would be after the 180th payment was paid. The borrower must be current on the payments for the termination to occur.
With the rapid appreciation that many homes have enjoyed in recent years, homeowners may be able to refinance their home and if the new mortgage amount is less than 80% of the current appraised value, no mortgage insurance would be required.
The owner would incur the cost of refinancing but eliminate the cost of the mortgage insurance. To calculate the savings, subtract the new principal and interest payment from the old principal and interest with PMI. Then, divide the savings into the cost of refinancing to determine the number of months necessary to recapture the cost.
FHA loans have two types of mortgage insurance premium: up-front and monthly. For loans with FHA case numbers assigned on or after June 3 2013 with LTV% greater than 90%, the MIP will be paid for the entire term of the loan. If that is the case, refinancing on a conventional loan is the only way to eliminate the MIP. For loans with original LTV% less than 90%, the MIP is collected for 11 years until the balance is 78% of the original amount.
When buying a home, purchasers may not have enough resources for a large down payment. It is understandable to use the best mortgage available to buy the home. The next goal should be to manage the mortgage to lower the overall costs. In this article, we explored eliminating the private mortgage insurance.
Wishing everyone a very Happy and Safe Valentine's day! May you eat lots of chocolate!
Vacation home sales are up 44% year-over-year according to the National Association of REALTORS® based on sales during the July to September period. Not only are the number of units up, but they are also selling faster than in previous years.
On a national basis, 72% of existing vacation homes closed in October were on the market for less than one month.
The increased desirability and affordability of vacation homes, according to the National Association of Realtors, seems to be influenced by the pandemic and low mortgage rates. The ability to work from home seems to be contributing to this increase.
Freddie Mac reports the average commitment rate for a 30-year, conventional, fixed-rate mortgage decreased to 2.83% in October compared to the aver commitment rate for all of 2019 which was 3.94%.
There may also be a safety factor involved with these decisions to purchase vacation or second homes. Contagious diseases flourish more in highly populated areas like big cities and suburbs. The locations of the vacation or second homes are generally in areas with less residents.
The slower pace from the city may also add to the appeal of considering second homes. Proximity to the mountains or water, whether it be the ocean, rivers or lakes, have become a lure to people who realize that if where they work doesn't matter, they can select a place where they want to be.
Historically, Americans on the east coast left the cities during the 1793 yellow fever epidemic. The same migration took place in the mid-19th century during three waves of Cholera and Scarlet fever.
Trends have yet to determine whether some of these new vacation home buyers may consider moving permanently or may reconsider the decision after the pandemic. Currently, it does have broad-based appeal and offers a lot of flexibility to owners who can afford it.
At-risk homeowners can now postpone mortgage payments (via forbearance) for 15 months. Foreclosure and REO-related eviction bans run until March 31.
WASHINGTON, D.C. – The Federal Housing Finance Agency (FHFA) announced that mortgages held by Fannie Mae and Freddie Mac have extended their moratoriums on single-family foreclosures and real estate owned (REO) evictions until March 31, 2021.
The foreclosure moratorium applies to single-family mortgages and only those backed by Fannie and Freddie. The REO eviction moratorium applies to properties they’ve acquired through foreclosure or deed-in-lieu of foreclosure transactions. The current moratoriums were set to expire on Feb. 28, 2021.
Mortgage borrowers with a loan backed by Fannie Mae or Freddie Mac may also be eligible for an additional forbearance extension of up to three months.
Under forbearance, homeowners financially harmed by the pandemic can postpone payments that can then be paid at the time the home is sold, refinanced or at mortgage maturity. Foreclosures aren’t expected to pick up significantly until forbearance ends, and the government hopes most homeowners in forbearance will be able to return to work before then.
Eligibility for the forbearance extension is limited to borrowers who are already on a COVID-19 forbearance plan as of Feb. 28, 2021, and FHFA says other limits may apply.
With the just announced extension, the COVID-19 Payment Deferral allows borrowers with a Fannie or Freddie-backed mortgage to cover up to 15 months of missed payments.
FHFA projects that the program will cost Fannie and Freddie $1.5 to $2 billion for the COVID-19 foreclosure moratorium and its extension.
© 2021 Florida Realtors®
Mortgage assumptions have not been a practical matter for the last 30 years because mortgage rates have been on a steady decline. Even if the seller had a rate lower than the current rate, the new purchaser must qualify to assume the loan.
In the case of conventional loans, the lender has the right to increase the rate to the current rate which neutralizes the reason for assuming the loan. This change took place in the early 1980's when lenders added due on sale provisions so lower rates could not be assumed.
FHA and VA loans can be assumed at the existing rate with the provision that the purchaser qualifies for the loan. This could be an advantage if the rate on the loan to be assumed was lower than the current mortgage rate for FHA or VA and the buyer is going to owner-occupy. Unfortunately, investors are prohibited from assuming FHA and VA loans.
Besides the obvious advantage of a lower rate which would have a lower payment, the closing costs are lower on an assumption than originating a new loan. Another benefit is that the loan will be further into the amortization schedule than starting a new 30-year loan which means it would be retired sooner while the equity is also growing faster.
The current rates are close to one-percent lower than they were a year ago, so, assumptions are probably not a method of financing a home purchase in the near future. The Freddie Mac forecast expects rates to remain low, possibly at a yearly average of 3.0% in 2021.
Mortgage rates have remained low since the Great Recession even though experts anticipated they would start trending upward. If rates increase, especially rapidly, assumptions of FHA and VA loans could easily be a tool that buyers and real estate professional alike will be employing. For sellers with an assumable loan at a below market rate, it could add to the value of the property as well as the marketability.
The supply for homes is going down in the Florida Keys but the market is booming in the ammount of sales. Shop around now while there is still lots of homes on the market. They are selling fast!
Debt-to-Income ratio is a tool that lenders use to qualify buyers for a mortgage and is an important factor in determining loan approval. It provides an indication of the amount of debt that a potential borrower is obligated to in relation to how much income they have.
Total monthly debts are determined by adding the normal and recurring monthly debt payments such as monthly housing costs, car payments, minimum credit card payments, personal loan payments, student loans, child support, alimony, and other things.
By dividing the monthly income into the monthly debt, you arrive at a percentage of the monthly income. Lenders actually look at two different ratios commonly called the front-end and the back-end.
The front-end ratio is the proposed total house payment including principal, interest, taxes, insurance, mortgage insurance if required, and homeowner association fees. Lenders generally don't want these expenses to be more than 28% of the monthly gross income.
The back-end ratio includes the same items that are in the front-end ratio plus any other monthly obligations like the ones mentioned earlier. Lenders prefer to see this ratio not to exceed 36% of monthly gross income but some lenders may extend that to 43%. Borrowers obtaining an FHA mortgage might also be allowed an even higher back-end ratio.
If a borrower had $8,000 monthly gross income, their proposed house payment should not exceed $2,240 or 28% of their monthly gross income. Then, their house payment and monthly debt should ideally not exceed $2,880 or 36% of their monthly gross income.
For the sake of an example, let's say that their monthly debt was $900. That would only leave $1,980 for the maximum house payment. The monthly debt became a limiting factor affecting the house payment.
In addition to determining whether the buyer qualifies for the mortgage, it could affect the interest rate. Having good credit and having the proper ratios can result in being approved for a mortgage. On the other hand, if the debt is on the upper side of an acceptable range, the lender may charge a higher interest rate for the addition risk of a marginal borrower.
While the math is not difficult to come up with your ratios, it is not necessarily a do-it-yourself project. A trusted lending professional can assess your situation and give you an accurate picture of what price home you can afford and the rate you can expect to pay.
Both things are important to know before you start looking at homes and especially before you contract for one. All lenders are not the same. Call me to get a recommendation of a trusted mortgage professional who specializes in the type of mortgage you want.
It is the perfect time to buy before prices start going back up.
Imagine what happens when there is not a pre-listing inspection. The buyer contracts for the home with a provision for professional home inspection. When it is made, there could be things that the buyer didn't expect or even, anticipate. If it doesn't trigger an action to terminate the contract, the buyer will inevitably, ask the seller to make all the repairs. This is important here in the Florida Keys especially.
When presented with the buyer's request, the seller may take the opposite position of not wanting to do any of the repairs. The buyer could accept the property in its "as is" condition or negotiate the repairs or a reduced price with the seller.
Any experienced agent can tell you that sometimes a mutually agreed negotiation is reached and other times, an impasse is met that cannot be resolved. The contract is terminated, and the house has to go back on the market but this time, a disclosure has to be made to all parties looking at the home which may deter showings.
Taking a pro-active approach, by obtaining a pre-listing inspection, the seller can find out about things that will probably show up in a buyer's inspection. They can get them repaired before the home is shown and it will help the buyer feel more confident with the home. Another option would be to disclose them as not working and make a price adjustment, either way, the seller is in control and is taking a position of transparency with potential buyers.
In some cases, the pre-listing inspection may show things in working order that the buyer's inspection indicates as needing repair. With two disinterested parties having opposing opinions, negotiations have a more likely chance for a mutual agreement.
Disclosing things that are not in working order can reduce liability in the future. Some deficiencies with the home are not discovered prior to the closing and the surprise issues could lead to liability. The pre-listing inspection by a professional combined with the seller disclosing it properly can reduce potential liability.
For the small investment in the pre-listing inspection, the benefits are well worth the expense. You and potential buyers will have a better idea of the condition of your property and know what to expect. You can present the property in a transparent way that will build confidence with the buyer. You'll avoid unpleasant surprises as well as possible delays. Pre-listing inspections can lead to faster sales and satisfaction for everyone involved.
This strategy is not about trying to negotiate the best price; it is about beating out the competition and buying the home. It may be difficult to understand until you have lost a few homes to better offers but when the reality of the situation is that there are not that many homes on the market, the competition heats up and different tactics are necessary.
Sales in December were annualized at 6.76 million, a 22.2% increase year over year according to the National Association of REALTOR®. The median sales price is $309,800 which is up 12.9% from the previous year. Inventory for December fell to 1.9 months' supply from 3.0 months' supply in December of 2019. Six months inventory is considered a balanced market.
Things that work in a buyer's market will not work in a seller's market. The shortage of available homes for sale has led to not only shorter market times but multiple offers that have sales prices above the listing price. Buyers, especially in entry to mid-level priced ranges, may have lost out multiple times to buy a home.
Buyers must be strategic if they want to successfully find a home. There are some things that are absolutely essential to just be in the game.
Unless you are paying cash and have adequate proof of funds, you need to get pre-approved. REALTORS® and financial advisors have been saying this for decades, but it is critical now. There are plenty of reasons that benefit the buyer but most importantly, it is to show that a buyer is serious and has gone through the effort to have a lender run his credit and verify his income, expenses, employment, and credit.
If the home fresh on the market, in a desired location and price range, you need to assume there will be competing offers and you may never even get a counteroffer from the seller. You need to consider making your highest and best offer first, as if you will not get a second chance. This is more difficult for some people than others because of their bargaining nature.
Earnest money that accompanies a contract shows that the buyer is acting in good faith. The amount that may be customary may not be enough in a competing market. Consider two or three times what might be normal. Talk to your agent about what would make an impression on the seller.
While contingencies will protect your earnest money from specific concerns like loan approval and inspections, the seller will look at them as ways that the buyer can get out of the contract and they'll need to put the home back on the market. If a seller is presented multiple offers, they might be prone to accept one with the least contingencies, especially, if the prices are comparable.
There is usually a period connected to the different contingencies that are allowed to complete them. By shortening these times as much as possible limits the time the seller might feel they are in limbo.
If you have the flexibility, you might express your willingness to move the closing and/or possession dates to accommodate the seller's schedule. This could be an important factor in your favor and could be done in a verbal statement conveyed from your agent to the listing agent.
These are things buyers should consider and discuss with their agent before they find the home that they want to buy. While you are formulating your position, another offer may be accepted before you even make yours. For more information, download our Buyers Guide.
Florida Keys Real Estate tips: What is a point? This is in relation to mortgage points. Many people do not understand. This is a simple explanation.
Rental homes in the Florida Keys: whether they be single-family detached properties, condos, two, three or four-unit properties share many of the same benefits. Most people instinctively understand many of the working parts because they are the same as their home. They have a basic understanding of value and how to maintain the property. The service providers for a home would be the same for a rental home.
These properties allow an investor to obtain a large loan-to-value mortgage at fixed interest rates for up to thirty years. They appreciate in value, currently exceeding many other assets; have defined tax advantages and allow an investor more control than many alternative investments.
Most lenders require 20-25% down payment and will finance the balance at rates close to owner-occupied homes. Buyer closing costs will add another three to four percent to the amount of cash needed to close. It is also prudent to have available funds for repairs and maintenance.
There are successful real estate investors in every price range and part of town. If your ultimate goal is to have the rent handle the holding costs and to sell the appreciated property at the end of a seven to ten year holding period, it might be advantageous to stay in predominantly owner-occupied neighborhood. They usually appreciate faster and will appeal to a buyer who wants it for their home. Chances are, this type of buyer will pay a higher price than an investor who may not be willing to pay as high a price.
By staying in an average price range, or possibly, slightly lower, you'll be able to appeal to the broadest group of not only buyers but also tenants while you are renting the property. Even during the mid-80's when FHA interest rate was 18.5%, buyers were still purchasing homes. Whereas the higher priced homes have a tendency to slow down during trying economic times.
Ask your real estate professional what price ranges sell the best, rent the best and have mortgage money available.
Some investors manage their properties themselves and others don't want to be involved. Professional property management has advantages like expertise, established contacts, operating statements and economies of scale. The main disadvantage is the cost factor but if they can rent it for a higher price and keep expenses lower than you can, it could minimize the difference.
A possible consideration might be to have a real estate professional place the tenant, check the credit and write the lease. There would be a one-time fee for this, but the owner/investor could then, manage the property, saving the expense of a monthly fee.
Understanding the landlord tenant laws would be particularly important to an investor managing their own property but regardless, the investor needs to have a basic familiarity of the law. There can be civil as well as criminal aspects. Examples might be that a landlord is required to change the locks on a property for a new tenant; the number of days before a landlord must return a deposit and what to do if there are damages causing all or part of it to be withheld.
Another tool that can be very helpful for investors is an investment analysis that will assist them in selecting a property that is likely to provide a satisfactory rate of return. Ask your real estate professional if they can provide this for you. They should be more familiar with rents and expenses to be able to determine the cash flow and what kind of yield you may be able to expect over your intended holding period.
For more detailed information, download our Rental Income Properties and contact me to schedule a meeting to talk about the possibilities.
This is a great way to get the most out of listing your home. You want to make it look and feel nice and large inside for prospective buyers. No one wants to see your home dark and cluttered.
A much-repeated investment strategy is to buy low and sell high. Some people who purchased around the financial crisis of 2010-2012 are poised to make considerable profits.
The median home price in America is now $295,300 up from $155,600 in February 2012 which calculates close to an 8% annual increase. The median equity that homeowners have earned during the same period is $140,000.
Inventory is in short supply while demand is high which has caused prices to increase. Factors that continue to contribute to the lower number of homes on the market are record low mortgage rates and housing starts have not met expectations since the Great Recession. This year, people spending more time at home due to the pandemic has caused some people to rethink their current living space which has added to the demand.
Some experts believe that a significant portion of the workforce will continue to work from home after the pandemic has passed making the motivation for a larger home more of a long-term effect.
The median days on the market for a listing is 24 which is a direct result of the low inventory and heightened competition. Sold homes are receiving an average of three offers with some situations ending in a bidding war. This is an advantage for a seller who can not only realize a higher sales price but also accelerate a move into another home.
While the pandemic has certainly wreaked havoc on some businesses like the hospitality industry, real estate has continued to boom. Seven out of ten sales contracts are closing on-time which can give sellers a great deal of confidence.
Taxpayers can exclude up to $500,000 of qualified gain if they are married and up to $250,000 if single. Some homeowners are taking the profit from their homes while at the top of the market, reserving part of their equity for investments, and purchasing another home with a higher loan-to-value mortgage at the incredibly low mortgage rates now available.
If you're curious to see if this might work for you, contact us at (305) 942-7755 to find out what your home is worth now and what homes are available that may fit your lifestyle better. Download our Sellers Guide.
Many homeowners with mortgages pay for both types of insurance but only one of them protects the owner.
Homeowner's insurance covers damage to your property and losses from fire, burglary, vandalism, and other named natural disasters. When an insured has a loss, they file a claim with the insurance carrier which would be subject to the deductible mentioned in the policy.
If the homeowner has a mortgage on the property, the lender will require that the borrower carry adequate insurance on the property and name the lender as an additional insured. This protects the lender that the home will continue to be sufficient collateral for the loan in case of a loss.
Mortgage insurance is not like homeowner's insurance in that it is solely for the protection of the lender if the borrower defaults on the loan. Usually, lenders require mortgage insurance on any loan greater than 80% loan-to-value. Occasionally, they may require it on some loans less than 80% based on their underwriting requirements and possibly, from anticipated risk from the borrower.
VA loans do not require mortgage insurance. Conventional lenders must remove the mortgage insurance when the loan amortizes below the stated percentage. FHA loans require mortgage insurance for the life of the loan.
When a property appreciates so that when the owners refinance, the loan-to-value ratio is less than 80%, no mortgage insurance would be required. This can be a strong motivation for some owners to refinance to save the cost of the mortgage insurance.
Mortgage insurance premiums are not regulated by law like homeowner's insurance is in most states. Most buyers are concerned about the interest rate on their mortgage, but few question the amount of the mortgage insurance premium.
The homeowner can select the carrier for his homeowner insurance, but the lender determines the carrier for the mortgage insurance. When you are interviewing lenders, the type of insurance that will be required and the price of the mortgage insurance should be included in the discussion.
Get Pre-Approved First.
It has always been recommended to be pre-approved but with the low inventory situation, it should be the first thing a buyer does.