Monday, March 12th, 2012

The last six years or so have been tough on home prices, and even the most optimistic prognosticators say it will take another six years for median sales prices to approach the halcyon days of assured annual value increases for home sellers. Generations of stable home price increases gave way to a boom-and-bust cycle that would have made the Pets.com sock puppet blush. As we enter what should be an active spring market, our communities would do well to focus effort toward creating healthy, happy homes. With those in place, prices will rise again.

In the Twin Cities region, for the week ending March 3:

  • New Listings decreased 23.2% to 1,402
  • Pending Sales increased 29.7% to 940
  • Inventory decreased 22.9% to 17,818

For the month of February:

  • Median Sales Price decreased 1.1% to $138,500
  • Days on Market decreased 9.0% to 145
  • Percent of Original List Price Received increased 2.6% to 90.6%
  • Months Supply of Inventory decreased 36.5% to 4.6

Click here for the full Weekly Market Activity Report.

From The Skinny.

Posted in The Skinny |
Thursday, March 1st, 2012

 

By Brian O’Connell

NEW YORK (MainStreet) – Growing signs of improvement in the housing market could draw more buyers in the coming months, and although the rules of the game haven’t changed much, the big question for anyone returning to the housing market – or getting into it for the first time – is what are the long-term lessons to be learned from the recent housing downturn?

In fact, all the key lessons are things buyers and borrowers should have known before the housing crash – the crash just underscored how important they were. Even if the market does improve this year, as many experts predict, it’s not likely to strengthen fast enough to offset the damage homeowners do when they make basic mistakes.

Lesson 1: Buy the cheapest home that will serve your needs for the next seven to 10 years. As we’ve seen, home prices can and do fall from time to time. That may be rare on a nationwide basis, but it happens quite often in individual markets. The more expensive your home is, the more you will lose if the market turns south.

Also, the recent downturn highlights a fact well known among experts but resisted by many homeowners: Homes are not always a very good investment. Even when there is not a downturn, in the average year home appreciation barely beats inflation, and mortgage interest, insurance, taxes, maintenance and other costs can turn a home into a money loser. It can be much more profitable to own a modest home and invest the savings in something more promising.

Lesson 2: Plan to stay put for a good, long while. Traditionally, experts assumed that the average homeowner could break even in four or five years. During that time a home could be expected to gain enough value to offset the various costs of buying and selling, making owning better than renting. But price gains could be small and intermittent during the next few years, pushing the breakeven period to seven, eight, even 10 years.

Lesson 3: Stick with a simple mortgage, like the standard 30-year fixed-rate loan. This is kind of a no-brainer right now, as lenders aren’t offering the exotic types of loans that got people into trouble in the mid-2000s – things like subprime, interest-only and pay-what-you-want loans. But as conditions improve, lenders could again offer unique products that could backfire.

Borrowers who can stomach some risk and don’t expect to keep their loans for decades might take a look at straightforward adjustable-rate loans, like five- and seven-year ARMs that don’t start rate adjustments until the initial period is over. But to make any ARM an acceptable risk, you must be certain you can afford the largest payment it could possibly require.

Lesson 4: Spruce up your credit rating. While this has always been a good practice, it is especially so now that lenders are so jittery. The borrower with a top-notch rating is likely to get a much lower mortgage rate than someone with a so-so rating.

Lesson 5: Don’t go overboard on home improvements. For many years, studies have shown that major improvements like new kitchens and bathrooms do not add as much value to a home as they cost. Improvements are lifestyle expenditures, not investments.

 

Thursday, March 1st, 2012

 

By The Associated Press

WASHINGTON — The housing market is flashing signs of health ahead of the spring buying season.

Sales of previously occupied homes are at their highest level since May 2010. More first-time buyers are making purchases. And the supply of homes fell last month to its lowest point in nearly seven years, which could push home prices higher.

Sales have now risen nearly 13 percent over the past six months. While they are still well below the 6 million that economists equate with a healthy market, the gains have coincided with other changes in the market that suggest more sales are coming.

“The trend is clearly upward,” said Ian Shepherdson, chief U.S. economist at High Frequency Economics.

 

The National Association of Realtors said Wednesday that re-sales increased 4.3 percent last month to a seasonally adjusted annual rate of 4.57 million.

Single-family home sales rose 3.8 percent. And the number of first-time buyers, who are critical to a housing recovery, increased slightly to make up 33 percent of all sales. That’s still below 40 percent, which tends to signal a healthy market.

One concern is that the market is still saturated with homes at risk of foreclosure, which can lower home prices generally. Those increased to make up 35 percent of sales.

But the supply of homes on the market has plunged to 2.3 million, the lowest level since March 2005. At last month’s sales pace, it would take more than six months to clear those homes, consistent with a healthy housing market. Fewer homes on the market could help boost prices over time.

Most economists said the January report was encouraging, especially when viewed with other recent positive housing data.

Mortgage rates have never been lower. Homebuilders are slightly more hopeful because more people are saying they might be open to buying this year — and they responded in January to that interest by requesting more permits to construct single-family homes.
“The rise in existing home sales in recent months adds to the indication from housing starts, building permits, and homebuilder sentiment that the sector has improved modestly since the middle of 2011,” said John Ryding, an economist at RDQ economics.

Much of the optimism has come because hiring has picked up. More jobs are critical to a housing rebound. In January, employers added 243,000 net jobs — the most in nine months — and the unemployment rate fell to 8.3 percent, the lowest level in nearly three years.

Analysts caution that the damage from the housing bust is deep and the industry is years away from fully recovering. Since the bubble burst, sales have slumped under the weight of foreclosures, tighter credit and falling prices.

Many deals are also collapsing before they close. One-third of Realtors say that they’ve had at least one contract scuttled over the past four months. That’s up from 18 percent in September.

Realtors say deals are collapsing for several reasons: Banks have declined mortgage applications. Home inspectors have found problems. Appraisals have come in lower than the bid. Or a buyer suffered a financial setback before the closing.

Sales rose across the country in January. They rose on a seasonal basis by nearly 9 percent in the West, 3.5 percent in the South, 3.4 percent in the Northeast and 1 percent in the Midwest.

Thursday, March 1st, 2012

 

Tara-Nicholle Nelson

When recently surveyed, over a third of real estate agents reported having had one or more home sale contracts fall out of escrow per month. Autopsies of these dead deals often surface a truly lethal culprit: appraisals that come in below the agreed-upon purchase price.

You see, mortgage lenders will only fund transactions up to a certain percentage of the appraised value of the home. If the home appraises low, either the buyer must come up with an increased down payment amount, the parties must agree to a price reduction, some combination of both of these must happen, or the deal is off.

While low appraisals can be particularly potent deal killers, their danger to your deal can be neutralized in some cases. If you find yourself facing an appraisal lower than the sale price in the contract, add these five steps to your immediate action plan.
1. Appeal errors or bad comps to the appraiser. Read the entire appraisal report, cover to cover. See if you spot any errors – it’s not at all unheard of for an appraisal report to miss a bedroom or underreport the home’s square footage. The trouble is that what starts out as a clerical error can often result in the application of the wrong “comparables” when it comes time for the appraiser to pick the properties to use as benchmarks of your home’s fair market value.
Whether or not you find actual errors in the details about the home you’re buying or selling, check in with your agent about whether the comparable properties used by the appraiser were reasonable, especially if they are from a different neighborhood, school district, town or construction era than the home you’re trying to buy or you are aware that much more similar or nearby homes have been sold in recent times than the comparable properties you see in the appraisal.
In my town, for example, within a half-mile radius you can find vast variations in property values based on neighborhood and schools and city limits that change almost imperceptibly. Changes in the mortgage industry over the last few years have created situations in which appraisers are sometimes assigned who have little or no familiarity with these hyperlocal types of nuances which you, as a party to the transaction, might be more readily able to detect and appreciate.
If you find errors or feel that there are much more comparable recent sales that justify a higher price for the property, work with your agent to send the correct information and the applicable comps you would propose to your mortgage professional, who can relay that information to the appraiser or Appraisal Management Company and request that the appraiser revise their report and estimate of value. The appraiser has no obligation to make the change, but the more glaring the error, the more likely it is that they will.
2. Ask for a second opinion. Particularly in cases of error or bad comps, if the appraiser ignores your request to revise the report, you might need to escalate your request to the lender itself. Here’s where it’s important to be working with an expert agent and mortgage pro with a great reputation; if they believe strongly in your case, they may be able to plead it to the underwriter and request that a second appraisal be done. The idea here is that if the second appraisal backs up your arguments, listing the correct property details or more accurate comparables, the lender is much more likely to exercise its discretion to deem the first one a dud and go with the second opinion.
3. Renegotiate. Low appraisals disappoint everyone around the negotiating table. If the sellers have the leeway (read: equity) or their bank agrees (in short sales), they might agree to bring the price down to the appraised value or near enough that the buyer feels comfortable putting some extra cash into the deal to close the purchase price-to-appraised price gap. Some buyers refuse to ever do this on general principal, as they feel like it’s overpaying for the property. Others realize that appraisals may come in low for reasons less indicative of the property’s value, like a dearth of comparable sales in the area, and figure that to get the home they want, they’re willing to kick in a little extra dough.
Of course, ‘little’ is relative, and neither position is right or wrong for everyone.
And the decision for sellers is just as personal. When the differential between the purchase price and the appraised value is small, it can seem like a no-brainer to bring the price down if mortgage considerations allow, but it can also seem sensible to request the buyer to make up such a small difference – especially in markets where properties are getting multiple offers. On the other end of the spectrum, when the differential is big, it is less likely that the buyer will want to come up with the cash to close the gap, and also less likely another buyer will come along and offer the appraised price.
You would think these things would make a seller more willing to slash the price where the gap is big, but it also may make their moving plans less feasible, and tempt them to stay put and wait on the market to be more active and bear better comps.
Work with your agent to figure out what re-bargaining position really works for you.
If you do find yourself renegotiating price due to a low appraisal, remember that this is real estate, so everything is back on the table. For example, when the appraisal gap is only $1,000, a buyer might be willing to close the gap if the seller agrees to leave the lawn mower and do some small repairs.

4. Pay the difference or split the difference. On the flip side of renegotiating is reconsidering your personal position. If you’ve been house hunting for two years, forgoing low rates and the tax and lifestyle advantages of owning your home, and you’ve finally found ‘the one’ – in great condition, not a short sale, perfect location – you might think long and hard about whether you are willing to pay the difference between a low appraisal and the purchase price. This is especially so when the gap is small and you have the cash, or when you know the seller is barely breaking even on the deal or has offered to split the difference with you, or the short sale bank refuses to go any lower.

And sellers, this goes for you, too: if you’re committed to trying to close the deal, it behooves you to consider whether you can reduce the price on the home. Consider that in some states and loan situations, a low appraisal report in a deal that dies may become a disclosure the seller must provide to future buyers (ask your agent whether this will apply to you). The fact is, if you don’t agree to a price reduction of some sort, the buyer could very well walk, limiting your options to selling at a lower price, doing a short sale or staying put anyway.

5. Change lenders. Mortgage banks have more control when it comes to choosing appraisers than mortgage brokers do. (Fortunately, many experienced local mortgage brokers work for companies that also have banking divisions, and may be able to process your loan through that division in an effort to get your transaction a fresh start and work around a low appraisal. Ask your mortgage broker if their office has a banking division, if you’re not sure.)

Mortgage brokers are no longer able to hand-pick appraisers for a given transaction like they once could, but unlike broker-only firms (who are forced to work through a middleman company that may pay a cut rate, attracting less experienced appraisers), mortgage banks and hybrid broker-bankers are allowed to pick the set of people included on their own short list of appraisers. I’ve found that lenders use this short list for good much more often than to try to exert any sort of inappropriate influence.
My experience has been that, when compared with the appraisers national lenders and the middleman companies put to work on brokered transactions, small mortgage banks and local, hybrid broker-bankers tend to fill their lists with appraisers who have more local experience and can appreciate the uber-important local nuances like those described in #1, above.

 

Thursday, March 1st, 2012

 

By Karen Haywood Queen • Bankrate.com
The price of neglect

In this economy, you may be tempted to delay or even skip minor home maintenance repairs, cleaning jobs and inspections in your home. But don’t be penny-wise and dollar-foolish. That $200 or $300 you save today could result in expenditures of $3,000 or even tens of thousands next month or next year if hidden problems in your home go unnoticed and become worse.

Consider coughing up a little dough to take care of these small jobs before they morph into gigantic, expensive jobs later.
Annual HVAC inspection

Cost: $200-$300, depending on where you live.

How often: at least once a year.

When: spring or fall. Heating, ventilation and air conditioning, or HVAC, companies aren’t as busy, and you’re not in dire need of heat or air conditioning.

What an inspection might find:

The furnace blower is not working properly. Cost to repair or replace: $100-$150. Possible consequence of letting it go: a broken heat exchanger. Potential savings down the road: $300-$1,000 to replace the heat exchanger or $750-$3,500, depending on the energy efficiency, to replace indoor or outdoor furnace components.

The reversing switch in the heat pump is broken. Cost to repair or replace: $100-$300. Letting it go results in no heat from the heat pump, and the system switches to a more expensive auxiliary heat. Potential savings: lower heating bills.

Bottom line: “Things that happen often happen at the worst possible time in the worse possible conditions and you’re looking at the maximum rate,” says Terry Townsend of Townsend Engineering in Chattanooga, Tenn., and former president of the American Society of Heating, Refrigerating and Air-Conditioning Engineers. Remember, continual maintenance prolongs the life of the equipment. “You’re sitting there with an investment of thousands in your HVAC system and you’re investing a few hundred dollars in maintenance.”
Chimney inspection

Cost: $65 for an inspection; $150 for inspection and cleaning, including removal of creosote buildup, which may lead to a chimney fire.

How often: once a year.

When: before your first fire in winter.

What an inspection might find:

There’s no chimney cap. Cost to add: $150. If you let it go, rain water can get into your chimney, damage the chimney liner and damper, and even saturate mortar joints — causing mold. Potential savings: $2,000-$4,000 to replace the chimney liner.

Other problems may include: a cracked chimney crown, which can be repaired for $300-$500; chimney flashing that needs caulking, which can be done for $80-$100; and waterproofing the exterior brick, $350-$600. All these fixes will prevent rainwater from getting in and mold from forming.

Bottom line: “A simple chimney cleaning can prevent chimney fires and damage to your entire house,” says Ray Gessner, a licensed professional engineer and owner of A Step in Time Chimney Sweeps, with offices in the eastern U.S. “Water is the No. 1 problem with chimneys. With water damage, you might need to have your whole chimney rebuilt.”
Cost: $75-$200 for an inspection; $200-$300 for a termite protection contract for qualifying homes with no current evidence of termites to cover treatment and repairs for any later infestation.

How often: once a year.

When: any time, although termites are more active in spring and early summer.

An inspection might find subterranean termites that come from the ground or flying termites. If left untreated, these bugs damage framing, trim, drywall, furniture, carpet, copper and other soft metals. Termites cause more than $5 billion in damages a year in the U.S., says Paul Curtis, director of quality assurance for Terminix in Memphis, Tenn. The average homeowner loss for termite damage is $3,000, but losses can be as high as $30,000 or even $80,000, Curtis says. Most homeowners insurance does not cover repair of termite damage.

Bottom line: “Termites eat the wood from the inside out,” Curtis says. “A typical homeowner would not be aware they are even in their home until months or years after they get in and start causing damage. A lot of people don’t realize that termites don’t just feed on the home. They’ll eat flooring, insulation, books — I’ve even seen them penetrate through swimming pool liners.”

Power washing and sealing wood deck

Cost: $100-$300 for a 200-square-foot deck, more for a larger deck.

How often: every one to three years, depending on the amount of traffic, moss and mold.

When: any time in sunny weather.

Power washing gets rid of stains, algae, mold, mildew and moss. Algae and mold can make your deck slippery and dangerous, says Justin Lee of JL Power Washing in Williamsburg, Va. Sealing your deck after it is cleaned helps prevent water damage. Wood soaks up rain like a sponge, expands and then shrinks, Lee says. Sealing makes the water bead up and roll off. And let’s not forget — your deck will look nicer, too.

If you let it go, your deck will warp, nails will pop out and the deck won’t last as long.

Potential savings: $4,000 to $20,000 or more to replace your deck, depending on size.

Bottom line: “A properly cleaned and sealed wood deck can last 20 to 30 years,” Lee says.

Dryer vent cleaning

Cost: $120-$200.

How often: every year.

When: a sunny day.

The purpose is to get rid of lint buildup. If your dryer is not on an exterior wall, it’s likely that the vent leading outside is clogged up, says Gessner of A Step in Time Chimney Sweeps.

If you ignore it, the result could be a disastrous fire. “Once the vent gets clogged, the dryer starts overheating and it can catch on fire,” Gessner says. “Dryer fires are very dangerous.”

Potential savings: your home, your furnishings, your belongings and your life.

Bottom line: “I had been airing a radio commercial talking about the importance of dryer vent cleaning for about a month when three people (in our area) died in a fire caused by a dryer vent fire,” Gessner says.

Carpet cleaning

Cost: about 50 cents per square foot for hot water extraction cleaning, or $500 for 1,000 square feet of cleaned carpet.

How often: every 12 months; more often for high-traffic areas and homes with small children, pets or smokers. Manufacturers’ warranties may require cleaning every 18 to 24 months. You can save money by focusing on regular cleanings for high-traffic areas and waiting up to two years for the entire carpet.

When: any time.

If the carpet looks dirty, you’ve waited too long because some soil can’t be removed with vacuuming. This soil will bind to your carpet and dull the texture, shortening the life of the carpet.

Your home also will be healthier with pollen, bacteria, insecticides and dirt removed, says Howard Partridge, founder and president of Clean as a Whistle, a cleaning company outside Houston.

Potential savings: extending the life of your carpet. Replacing 1,000 square feet of medium-grade carpet, including padding and installation, costs about $3,000.

Bottom line: “One of my neighbors had to replace his carpet in less than four years,” Partridge says. “And his carpet looked terrible the whole time. I’ve been able to keep my carpet for 12 years now.”