Archive for the ‘Real Estate Economics’ Category
Green Mortgages?
Posted by Sibet B Freides in Green, Real Estate Economics, Real Estate Trends on August 17th, 2011
There are actually many programs available to help homeowners make energy-saving improvements to their homes without getting an additional mortgage just for the cost of them. The FHA’s Energy Efficient Loan program helps current or potential homeowners significantly lower their monthly utility bills by enabling them to roll the cost of energy efficient improvements into their mortgage.
This Energy Efficient Mortgage can be used by homeowners with both Federal Housing Administration (FHA) and Veterans Administration (VA) loans.
To be eligible for an Energy Efficient Mortgage, the projected energy savings naturally need to be greater than the cost of the work. The savings are calculated using the Home Energy Rating System (HERS) index, which calculates what the average energy usage would be in the home once the improvements are made compared to a similar home that did not have the work done.
Knowing your home energy rating will help you choose smart energy upgrades and investments that will save you in energy costs, improve your home comfort, and protect the environment.
Home Buying Based on the Seasons
Posted by Sibet B Freides in Real Estate Economics, Real Estate Sales, Real Estate Trends on August 10th, 2011
The best time to purchase a home is in the late fall or early winter. For buyers, you want to look for homes when supply is higher than demand, which gives you greater negotiating room. Purchasing when supply is low and demand is high puts you at a decided disadvantage.
Of course, buyers naturally are less inclined to move as they get closer to the holiday season. If the purchase and closing process takes three months to complete, and the house is purchased after Labor Day, the new homeowner could end up with a move-in date right around Christmas. That’s too much stress for most homebuyers. If you can handle the pressure, buying a house in late September may offer you a wider selection of affordable houses.
Conversely, toward the end of February and spring just around the corner, for-sale signs start popping up everywhere. The winter is ending and sellers want to get the house on the market as soon as possible. Likewise, buyers begin contacting real estate agents during the spring so you’ll have more competition for the house you want.
What do you think? When is the best season to buy or sell your home?
New Break for Unemployed Homeowners
Posted by Sibet B Freides in Real Estate Economics, Real Estate Trends on July 20th, 2011
The Obama administration is making it easier for out-of-work homeowners to stay in their homes.
As of August 1, the Federal Housing Administration will extend the period for unemployed homeowners to miss mortgage payments to a full year instead of three months. You read that right. That means homeowners can go a full 12 months without making a monthly payment before the foreclosure process starts.
This will only apply to FHA-backed loans, which represents about 14 percent of all current mortgages. The government does hope that Fannie and Freddie, and perhaps even private lenders will also adopt this new policy.
The initial foreclosure program was launched in 2009 to help those at risk of foreclosure by lowering their monthly payments on a trial basis, but creating permanent loan modifications has not been very successful to date.
Recently, President Obama tweeted that the housing market has “been most stubborn to us trying to solve the problem,” admitting, too, that the government’s programs to aid homeowners hasn’t been enough to help the economy.
According to msnbc.com, the failures of the foreclosure assistance program has been blamed on the three largest U.S. mortgage lenders for incorrectly determining many applicants ineligible for assistance.
Do you think the FHA’s new 12-month delay program will make the difference needed in our housing market? What would you have done differently if you were in charge? Let us know by commenting below!
The Perils of the Debt Ceiling
Posted by Sibet B Freides in Real Estate Economics on July 12th, 2011
There’s been a lot of talk in the media about the risk of a “double-dip” recession and about raising the debt ceiling.
What does it all mean to you?
Let’s first talk about what a debt ceiling is.
Congress limits the total amount of debt that the federal government can carry, and it periodically increases this amount as the government comes close to reaching it. If our current limit of $14.3 trillion dollars is not raised by August 2, the US will enter default.
Since spending right now exceeds tax revenue, the government must borrow to cover the difference. When the debt ceiling is reached, the government will not be able to borrow anymore, and the US will be unable to fulfill its obligations. Social Security checks may not be issued or government offices may be shut down. Of course, this has never happened before in our history, so we don’t really know what to expect if it does.
Most likely, the number one consequence is that interest rates will jump and investors will demand a higher interest rate on government bonds to make up for the increase in risk.
What does this mean for you?
The interest rate that you get on a home loan is directly affected by the interest rate on government bonds, so if August 2 comes around without a debt ceiling increase and interest rates go up, people will be less likely to buy things that require financing, such as homes. The housing market has not yet recovered from the recession, so this would not be a positive outcome.
However, declining home-ownership would result in an increase in demand for rental properties. Recently, the multifamily industry has seen impressive growth, so this could be a silver lining.
Do you think Congress will increase the debt ceiling before the deadline? What’s your prediction on the outcome if they do or do not? Let us know by commenting below!
5 Solid Reasons to Buy Now
Posted by Sibet B Freides in Real Estate Economics, Real Estate Trends on June 16th, 2011
Lowest Housing Prices We’ve Seen in Years
Prices are at the lowest in several years and may soon start inching back up again. So buying now or in the near future may be the right time. An abundance of great priced product is available right now and should be taken advantage of!
Interest Rates at a 50-Year Low
Interest rates are near a 50-year low, according to housing analysts. The 30-year rate at this level is an attractive incentive to first-time buyers, or buyers such as empty nesters wanting to sell and move to smaller houses or condos.
Interest Rates Will Go Up
As the economic recovery gains momentum, interest rates are expected to increase, making mortgages more expensive. Even a half-percent increase in mortgage interest can add a hundred dollars or more to your monthly payments.
Low Down Payment Mortgages Available
Low-down-payment financing through FHA-insured mortgages is currently available as an additional option to buy a house. Potential buyers with less cash should strongly consider buying now.
Builders Eager to Sell
Home builders, competing with the resale market, are offering incentives to potential buyers to reduce their inventory of unsold new homes. Incentives may include cash for furniture or free refrigerators, washers and dryers.
Considering all the factors above, there may not be a better time to buy than right now. It’s a buyer’s market, but eventually this will change. Don’t get caught after the momentum shifts and be forced to buy on the upside.
Cheat Sheet on Second Home Tax Rules
Posted by Sibet B Freides in Real Estate Economics on May 31st, 2011
Are you in the market for a second home but are not sure about the tax benefits or what needs to be 
reported? Here’s a quick summary of the tax rules for second homes:
Second home use
If you use the place as a second home and not a rental, interest on the mortgage is deductible just as interest on the mortgage on your first home is. You can write off 100% of the interest you pay on up to $1.1 million of debt. You can also deduct property taxes paid on any number of homes you own.
Rental use
Many second-home buyers rent their property part of the year. If you rent the place out for 14 or fewer days during the year, that income is tax-free regardless of what you are charging for rent.
If you rent for more than 14 days you must report all rental income. You also get to deduct rental expenses, which can get complicated because you need to divide costs between the time the property is used for personal purposes and the time it is rented.
If you and your family use a beach house for 30 days during the year and it’s rented for 120 days, 80% (120 divided by 150) of your mortgage interest and property taxes, insurance premiums, utilities and other costs would be rental expenses. The entire amount you pay a property manager would be deductible, too.
If you limit personal use to 14 days the vacation home is considered a business and up to $25,000 in losses might be deductible each year. Fix-up days don’t count as personal use.
Tax-free
Although the rule that allows home owners to take up to $500,000 of profit tax-free applies only to your principal residence, there is a way to extend the break to your second home: make it your principal residence before you sell.
**Please note: This article is for informational purposes ONLY, you should consult a tax attorney or accountant to determine actual tax ramifications.
Mortgage Denied
Posted by Sibet B Freides in Real Estate Economics on May 16th, 2011
Getting a mortgage just keeps getting tougher and it seems as if many homebuyers are getting rejected for loans they could easily afford.
What’s the issue? Tighter standards from Fannie Mae and Freddie Mac.
Without the Fannie and Freddie guarantee, banks are reluctant to make loans.
In 2009, the agencies lifted the minimum credit score that borrowers must have from 580 to 620; however, they’ve pushed through a host of other requirements to coincide with it. What does that mean? Real estate sales don’t happen, even for many low-risk borrowers.
It really seems as if there is a great deal of overreaction to the declining housing market and it has caused the pendulum to swing too far in the other direction.
Sometimes it has little to do with the buyers themselves and how qualified they are. Banks must turn down borrowers for mortgages if too few of the condos in your association have been sold or if more than 30% are still owned by the company that built the complex.
Fannie and Freddie will also refuse to fund condo loans if more than 15% of owners are behind on homeowner dues or if more than 10% of units are owned by a single entity.
While the minimum credit score has been lifted, the agencies have actually increased their emphasis on income relative to debt. If someone’s total debt payments exceed 45% of income, the mortgage will be denied. In 2009, the limit was 55%, according to CNN.
These rules can penalize very qualified buyers, ones who should be able to meet their debt obligations.
Fannie and Freddie also used to be okay with one or two missed credit card payments. Now, one missed payment will greatly affect your debt-to-income ratio, as banks will add 5% of your outstanding loan balance to the debt part of the calculation.
Do you think Fannie and Freddie are too stringent now, or do you think it’s a good move to reclaim the economy? Post your thoughts below or on our Facebook page!
Surprising Condo Market Recovery – Can You Guess Where?
Posted by Sibet B Freides in Real Estate Economics, Real Estate Sales, Real Estate Trends on April 28th, 2011
The hardest hit real estate market in the U.S. is making a resounding recovery! The Miami Association of Realtors report that existing condo sales topped 1,500 units in the month of March. That’s an 85% surge in the market!
It’s surmised that lower priced units and record low mortgage rates are responsible; however, these low prices actually attracted a large percentage of cash buyers. In fact, more than 64% of buyers paid cash.
What is not surprising is that buyers came from around the world to get their hands on American condos at the lowest prices in more than 15 years: more than 90% of new construction condos were purchased by non-U.S. buyers.
What do you think this means for the overall market recovery? Is this a step in the right direction, or is that fact that 60% of all closed residential sales in Miami-Dade County were distressed giving us false hope? Do you think this is unique to the Miami market, or a starting trend for Condos?
Is a Vacation Home Out of Your League? Not Necessarily…
Posted by Sibet B Freides in Real Estate Economics, Real Estate Sales, Real Estate Trends on April 26th, 2011
Have you been dreaming of a vacation home? Are you resigned to the idea that the current market is making your dream impossible? Think again!
Second homes/vacation/pre-retirement homes are priced right. If you were even remotely thinking of buying, there will probably never be a better time. Prices are reduced, and many distressed deals are being purchased at .30 cents on the dollar.
Conversely, beware when purchasing distressed properties because you won’t know the future of the project. Is there an active HOA to manage finances and other issues? What happens if an investor buys the project? How would the future inventory be priced? Unfortunately, along with affordable pricing comes a lot of unknowns.
At Idea Associates, most second home purchases we are seeing for our clients are cash deals. Anywhere from downsizing to Intown Condos to planned retirement housing in second home neighborhoods – many are bought with cash. The price is lower so buyers can afford to pay with cash, especially since most can’t get financing anyway with banks’ new stringent policies.
With the future so unsure, most buyers don’t’ believe they are making money in investments for these second homes, so they are choosing to buy something they want for the future instead.
Have you personally considered taking advantage of the prices and buying a second home? If you’re a builder, developer or agent – what are the trends you are seeing?
Try Before You Buy – the New Way for Potential Homeowners?
Posted by Sibet B Freides in Real Estate Economics on April 18th, 2011
With banks being so stringent about homeowner loans, consumers are finding more and more that they need a back up plan. Enter the growing popularity of the lease to own option.
Lease to own requests are most common in hard-hit markets where foreclosures have driven down home prices and sellers can’t or don’t want to come down anymore on the asking price. If the house isn’t occupied it’s an opportunity to create some revenue for the seller.
But while sellers seem more likely to consider lease-to-buy arrangements, most won’t advertise it. Agents are reluctant as well, as it delays their commission.
What are the risks?
The renter-buyer could back out of the deal. For that reason, it’s important for home sellers to understand the difference between a lease option–where the renter simply has the option to buy down the road–and a lease purchase agreement, which requires that the renter put down anywhere from .5% to 2% of the sale price in earnest money or pay a monthly rent premium with a share of the rent going toward the purchase price. The sale price and timeline are also spelled out in the contract.
If the renter backs out, the homeowner does get to keep the earnest money, however they may not be able to get the renter to move out in order to put the house back on the market.
If renter-buyers don’t buy the home they’re usually out earnest money, unless they convince a homeowner to do a lease option with no strings attached. An agreement like that usually signifies a seller’s desperation, which would warrant further questioning regardless.
Conversely, what if the homeowner stops paying the mortgage? If the homeowner is foreclosed on, buyers of course have a claim against them, but will be competing with other creditors.
Potential lease-to-own tenants should at minimum ask for proof that the owners are current on their mortgage.
Strict loan requirements and rising rents – do you think least-to-own is the new growing trend? Is it a positive or negative trend in your opinion? Tell us by commenting below or post your thoughts on our Facebook page!
