Consider the Face of a Home Before Buying
The exterior of a house is a big factor in how much maintenance expense a home owner will face as the years go by.
Before purchasing a house, buyers should ask sellers about previous exterior maintenance. When did they last paint? How much did it cost?
North Carolina contractor John Harmon and real estate professionals from the Charlotte area offer these tips for buyers contemplating which exterior to prefer.
Wood looks great, but it must be painted or stained and is susceptible to rot and termites.
Brick is durable, never needs painting, is fire-resistant and energy efficient, but shifts in the soil and constant contact with rain and snow and can cause cracks in the mortar between the bricks. Re-pointing a house is expensive, so buyers should make sure the seller takes care of any problems with deteriorating brick.
Vinyl siding, if properly installed, is durable and needs little maintenance. Newer vinyls with insulated backing are rigid and energy efficient. From a distance, it looks like real wood. But vinyl tends to fade and can’t be repainted, and some people also think it looks cheap.
Fiber cement is a durable, low-maintenance siding that looks like wood. It resists fire, water and termite damage. It holds paint well and isn’t as expensive as it once was.
Stucco looks like concrete. It’s similar to brick in durability, maintenance and price.
Synthetic stucco applied over Styrofoam has had problem with rot and mold. Anyone interested in buying a house covered with this material should have it inspected by a stucco specialist before buying.
Source: Charlotte Observer, Kathy Haight (10/27/07)
Survey: People Want Mass Transit, Not New Roads
The solution to crammed highways and gridlocked streets? Not new roads, according to the majority of Americans who responded to the 2007 Growth and Transportation Survey.
Nearly half of respondents said that better public transportation is the best long-term answer to traffic congestion, while 26 percent thought the ideal solution would be to develop communities that encourage residents to walk more and drive less. Only one in five said building new roads would solve traffic problems.
The survey, which looks at what Americans think about how development affects their immediate community, was sponsored by the NATIONAL ASSOCIATION OF REALTORS® and Smart Growth America. Responses revealed that traffic congestion was a top concern.
“With increased traffic congestion and longer commutes, Americans are receptive to new ideas for handling growth, such as better transit or mixed-use communities that allow people to cut down on their driving,” says NAR President Pat V. Combs.
Schools Good, Growth Bad
For the most part, respondents gave their communities high marks when it comes to providing good public schools, parks, and open space. But they were less optimistic about their community’s ability to provide practical and convenient transportation and manage growth and development.
While one-third approve of growth in their local area, the percentage of those who disapprove of local growth has doubled since 1999, from 10 percent to 20 percent.
This year’s survey also showed that Americans are more concerned today about how their community is handling that growth and development than they have been in eight years of polling.
Only 39 percent say their community is doing an excellent or good job of handling growth, while the majority – 58 percent – believes the community is doing a fair or poor job.
Fear of Strip-Mall Mania
When asked about their top concerns regarding growth and development, respondents consistently cited the loss of farmland to development (72 percent), increased traffic congestion and commute times (70 percent), and loss of open land such as fields and forests (70 percent).
Other concerns include the loss of individual character of communities, increased reliance on cars because of sprawl, and the loss of historic landmarks and neighborhoods. The greatest increase was among those concerned about the rise in highway commercial development such as strip malls, up 25 percent in the past six years.
This year the survey also asked about climate change, and more than 70 percent of respondents are concerned about how growth and development affect global warming. Americans expressed strong support for bold measures to combat climate change
Nearly nine in 10 believe that new communities should be built so people can walk more and drive less; cars, homes and buildings should be required to be more energy efficient; and public transportation should be improved and made more available. Americans strongly disapprove (84 percent) of increasing gasoline taxes as a way to discourage driving and reduce energy use.
“With concern about climate change rising along with gas prices, Americans are looking for options that allow them to reduce the time they spend in the car,” says Don Chen, executive director of Smart Growth America. “Americans see smarter development patterns as a viable way to achieve that goal, while also reducing greenhouse gas emissions.”
Redevelop, Don’t Build New
Eight in 10 respondents prefer redeveloping older urban and suburban areas rather than building new housing and commercial developments on the edge of existing suburbs. More than half of those surveyed believe that businesses and homes should be built closer together to shorten commutes, limit traffic congestion and allow residents to walk to stores and shops instead of using their cars. Six in 10 also agree that new-home construction should be limited in outlying areas and encouraged in inner urban areas to shorten commutes and prevent more traffic congestion.
With road building costs often exceeding revenues, many states are turning to tolls as a key funding source. Americans are divided on tolls, although 55 percent approve of charging tolls on more roads if that improves roads and decreases congestion. On the other hand, six in 10 are opposed to charging tolls on freeways during rush hour to reduce congestion. Respondents are evenly split on charging tolls during rush hour, even if the money is used to provide transportation alternatives to the freeway.
When it comes to spending taxpayer dollars, respondents believe Congress should spend more money to maintain and repair roads, highways, freeways, and bridges and to expand and improve public transit than build new roads.
Americans are overwhelmingly opposed to the private ownership of roads; that is, selling key roads and highways to private companies who would charge a toll and give a portion of the toll money to the state. Eighty-four percent of respondents oppose private ownership of roads; only 14 percent support the concept. Similarly, 66 percent are opposed to allowing private companies to build, own and collect tolls for new roads – even if those companies gave a portion of the toll money to the state.
About the Survey
The 2007 Growth and Transportation Survey was conducted by telephone among 1,000 adults living in the United States in October 2007. The study has a margin of error of plus or minus 3.1 percentage points.
Smart Growth America is a diverse coalition of nearly 100 nonprofit organizations with a stake in how metropolitan expansion affects our environment, quality of life and economic sustainability. Coalition partners include national, state and local groups working on behalf of the environment, historic preservation, housing affordability, social equity, land conservation, neighborhood redevelopment, farmland protection, business, labor, public health and town planning and design.
Sanity-Saving Rules for New Landlords
Thinking of becoming a landlord? It’s not as easy as you might think, experts say. Here are six rules that will help you find good tenants and make money.
Rule 1: Don’t be deluded about the market. Joseph Cooper, vice president of Massachusetts-based Monument Mortgage, cites “underestimating the cost in time and the cost in money of actually owning property” as the biggest mistake investors make. To overcome that weakness, he and others suggest studying local vacancy rates, getting a good appraisal and gathering information about any construction in the area that could change the status quo.
Rule 2: Get out your calculator. To get a good estimate of the initial rate of return: Take the first-year revenue minus estimated first-year expenses (including some value placed on your time) divided by the full cost of the property when purchased (essentially price plus transaction costs minus mortgage). To calculate the rate of return in later years, divide by estimated equity in the property (what you could sell it for after deducting transaction costs and the remaining mortgage), taking into account price appreciation or depreciation. It’s also wise to consult an accountant on how much of a tax and cash-flow benefit depreciation will provide.
Rule 3: Choose tenants carefully. Prospective tenants who respond promptly and conscientiously to calls or e-mails and who show up on time to see units likely will be responsible when it comes to paying rent and taking care of the property. And be careful to observe discrimination laws. Landlords can choose among prospective tenants for economic reasons that arise after credit, employment, and reference checks. Set financial standards for prospective tenants that make you comfortable that they can cover the monthly rent.
Rule 4: Avoid getting sued. An aspect of the landlord-tenant relationship that can lead to litigation include mishandling of security deposits. If a tenant pays a security deposit, in many states several conditions must be satisfied, including placement of the money in an interest-bearing account and inspection of the property. Other issues include lead paint levels and failure to provide a minimum standard of habitability.
Rule 5: Get Expert Help. Keep an electrician on speed-dial — as well as a plumber and handyman. It also helps for landlords to know a good lawyer, financial adviser, mortgage broker, and real estate professional.
Rule 6: Forget about flipping. “Anybody who buys something and says to you, ‘I’m going to make a ton of money in two years and sell this thing’ isn’t being realistic,” says mortgage banker Joseph Cooper. “That does happen, but it’s extremely rare. You should be buying real estate with the idea that you’re going to hold it for five to 10 years. That will take you through a cycle of up and down.”
Source: Boston Globe, Shira Springer (10/21/07)
8 Tips for Investors Looking for Next Housing Gem
The Minneapolis-based Real Estate Investors Association, a club for people interested in real estate investments, isn’t discouraged by the state of the housing market.
Its members, who meet to ask questions and share advice, has grown from five to 100 over the last two years, despite the housing slowdown in some corners of the business.
“This is what buying low is all about,” says Jason Cramer, a member who has turned his hobby into a career. He recently opened a business that buys and sells distressed properties.
Here’s some advice from club members for potential investors:
Buy in a familiar neighborhood, near where you live, work or go to college.
Research the area thoroughly, identifying potential properties and other business opportunities.
Observe trends, costs, vacancies, and potential appreciation.
Assess your own skills. If you have to hire out maintenance, costs will hit the bottom line.
Start small. A single-family home or a duplex is a good beginning. Plan to hold it for at least three years.
Avoid foreclosed properties. They are complicated to buy and they aren’t a guaranteed deal.
Be pre-approved for financing. Most investment property loans require at least 10 percent down.
Remember, dealing with people is key, so hold onto your sense of humor.
Source: Star-Tribune, Lynn Underwood (10/20/07)
6 Common Housing Problems that Spook Buyers
Potential home buyers with lots of homes to choose from can be easily spooked by disclosures and the results of property inspections — even when the shortcomings are typical for homes of a certain age.
In a jittery market such as this one, it’s critical to give buyers tools and knowledge so they can decide which problems are serious.
Judi Seip, an associate with Coldwell Banker in Southern California, tells her clients to accompany the inspector so they can put the problems in perspective. Anything a handyman or an electrician could fix in a few hours isn’t worth worrying about, she says.
Here are six common issues that trouble buyers and some factors to weigh:
1. Water damage. Evidence of water damage frightens buyers, but all water damage isn’t serious. Minor leaks generally cost no more than a few hundred to repair. Get an estimate.
2. Missing permits. Ask the home inspector if the work was done well and meets code requirements, even though a permit wasn’t issued.
3. Code violations. How expensive is the repair? Ungrounded electrical outlets are common in old houses and easily fixed.
4. Cracks in the garage floor. Ask the inspector whether these cracks suggest other related problems. Generally these don’t affect the structure of a home.
5. Termites. Termites and termite damage are very common in many parts of the country. It’s important to get rid of them and to get a clear sense of how bad the damage is.
6. Foundation cracks and other foundation issues. Older homes often have cracks in the foundation. Get an expert to inspect the problem and estimate — what if anything — needs to be done.
Source: The Mercury News, Margaret Steen (10/19/07)
Get More Bang for Your Buck in Rehab Projects
Remodeling magazine’s latest “Cost vs. Value” report, which is prepared in cooperation with REALTOR® Magazine, won’t be released until Nov. 1, but the magazine’s editorial director Sal Alfano says returns on remodeling projects are down.
In 2007, 14 percent of remodeling projects had a return of at least 75 percent. That was down from 16 percent in 2006 and 20 percent in 2005.
The best return in 2007 came from replacing old siding with fiber-cement. Home owners got an average of 88.1 cents for each dollar invested after they sold their homes. Remodeling kitchens and bathrooms no longer net such large returns.
The 2007 decline reflects the slowdown in the real estate market and high materials costs, Alfano said in an e-mail. The return is not bad, he said, because home owners are paying “12 cents and 43 cents on the dollar” to remodel their homes, depending on the type of project being done.
Plus, he said, “You get the use of the newly remodeled space until you sell.”
Source: The Washington Post, Sandra Fleishman (10/19/07)
Disclosure Laws Have Big Impact on Prices
Disclosure Laws Have Big Impact on Prices
Disclosure laws that require sellers and real estate practitioners to provide prospective buyers with information about a neighborhood, like whether it is in a flood zone or an airport noise zone, decrease property prices by thousands of dollars, according to two studies from Virginia Tech University.
The studies examined housing prices a year before disclosures laws were passed in North Carolina and a year after. Homes near the Raleigh-Durham International Airport already sold for 4 percent less than comparable homes in parts of town farther from the airport. A year after the disclosure law went into effect, prices dropped an additional 3 percent, according to Jaren Pope, assistant professor of agriculture and applied economics at Virginia Tech.
Likewise, there was no substantial price difference between comparable homes in North Carolina that were in a flood zone and those that were not until the state legislature required home owners to disclose this information. After the law passed, houses in flood zones lost an average 4 percent in market value.
Pope says similar disclosure laws have been passed nationwide, but there is no standard, so the specific tenets vary not only from state to state but also from county to county, which makes the situation more difficult for buyers and sellers.
Source: Virginia Polytechnic Institute and State University (10/16/07)
Is the Open House What It Used to Be?
While 80 percent of home buyers used the Web to search for properties, only 42 percent visited open houses last year, reports the NATIONAL ASSOCIATION OF REALTORS®. But does that mean open houses are a waste of time? Depends on whom you ask.
Broker John Hodnett, of Lilia Delman Real Estate in Coastal Rhode Island, has only held one open house in his 16-year real estate career. He says serious buyers tend to view properties online and make appointments to tour the specific properties that truly spark their interest.
On the other hand, open houses often are frequented by people who simply want to see what a home looks like with no plans of making a purchase.
However, Hodnett notes that some sellers demand open houses because they want to know their agent is working hard to sell the home.
Real estate practitioners who believe in the benefits of open houses say they allow buyers to view properties without having to make an appointment or work with a real estate agent.
In a modern twist, some agents are scheduling the events at nontraditional times, tantalizing prospects with refreshments, and working with competitors to organize multi-agency tours. Advocates say this marketing tool also provide a means for agents to develop relationships with prospective buyers, who often go on to work with them to purchase a different home.
Source: RisMedia.com (10/10/07)
Getting Less Risky That Home Prices Will Dip
Eleven metropolitan areas still face a greater than 50 percent chance that home prices will decline, but that number of at-risk areas is down from 15 areas last quarter, according to the PMI Mortgage Insurance Co. Fall 2007 Market Risk Index.
Risk of falling prices remains largely concentrated in California, Florida, Las Vegas, and Phoenix, but 29 of the country’s largest MSAs still have a better than 30 percent chance for future price declines.
Areas where the market has improved the most are Boston, West Palm Beach, Fla., and Phoenix, although risk scores for all three markets remain higher than the national average.
Affordability improved in 299 MSAs, and in all but two of the 50 largest MSAs. Improvements in home price affordability across most MSAs resulted from declines in the rate of home price appreciation, coupled with steady income growth.
A copy of the full report is available at this Web site. The 11 markets with a greater than 50 percent risk in the second quarter that home prices will fall are:
Riverside-San Bernardino-Ontario, Calif.
Las Vegas-Paradise, Nev.
Santa Ana-Anaheim-Irvine, Calif.
Phoenix-Mesa-Scottsdale, Ariz.
Los Angeles-Long Beach-Glendale, Calif.
West Palm Beach-Boca Raton-Boynton Beach, Fla.
Sacramento-Arden-Roseville, Calif.
San Diego-Carlsbad-San Marcos, Calif.
Oakland-Fremont-Hayward, Calif.
Fort Lauderdale-Pompano Beach-Deerfield Beach, Fla.
Orlando-Kissimmee, Fla.
NAR: Mortgage Conditions Bode Well for Housing
Conditions in the mortgage market are improving for consumers, which should help to release some pent-up demand in early 2008, according to the latest forecast by the NATIONAL ASSOCIATION OF REALTORS®.
Lawrence Yun, NAR vice president of research, notes that widening credit availability will help turn around home sales. “Conforming loans are abundantly available at historically favorable mortgage rates. Pricing has steadily improved on jumbo mortgages since the August credit crunch, and FHA loans are replacing subprime mortgages,” he says.
Yun says it’s important to place the current housing market in perspective, and that 2007 will be the fifth highest year on record for existing-home sales.
“Although sales are off from an unsustainable peak in 2005, there is a historically high level of home sales taking place this year — a lot of people are, in fact, buying homes,” he says. “One out of 16 American households is buying a home this year. The speculative excesses have been removed from the market and home sales are returning to fundamentally healthy levels, while prices remain near record highs, reflecting favorable mortgage rates and positive job gains.”
Yun emphasizes that all real estate is local with naturally large variations within a given area. For example, markets such as Austin, Salt Lake City, and Raleigh have been outperforming recently and will continue to do well next year, Yun predicts. Also, other areas like Denver and Wichita, Kansas, will likely move up in the price growth rankings due to very positive local economic developments, he notes.
Housing Outlook
“Housing is still a good long-term investment, and we’ll be seeing a broad, modest improvement in home prices in 2008,” NAR President Pat V. Combs says.
Here’s what NAR predicts:
Existing-home sales: expected to total 5.78 million in 2007 and then rise to 6.12 million next year, in contrast with 6.48 million in 2006.
New-home sales: forecast at 804,000 this year and 752,000 in 2008, down from 1.05 million in 2006. A recovery for new homes will be delayed until next spring.
Home prices: existing-home prices will probably slip 1.3 percent to a median of $219,000 in 2007 before rising 1.3 percent next year to $221,800. The median new-home price should drop 2.1 percent to $241,400 this year, and then increase 1 percent in 2008 to $243,900.
“A cutback in housing construction is a positive sign for the market because it will help lower inventory and firm up home prices,” Yun says. Housing starts, including multifamily units, are likely to total 1.37 million in 2007 and 1.24 million next year, down from 1.8 million in 2006.
Meanwhile, the 30-year fixed-rate mortgage is expected to average 6.4 percent for the next two quarters and then edge up to the 6.6 percent range in the second half 2008. Additional cuts expected in the Fed funds rate will help to keep mortgage interest rates historically favorable, according to NAR.
Also, growth in the U.S. gross domestic product is estimated at 2 percent this year, below the 2.9 percent growth rate in 2006; GDP is likely to grow 2.7 percent next year.
The unemployment rate is forecast to average 4.6 percent this year, unchanged from 2006. Inflation, as measured by the Consumer Price Index, is expected to be 2.8 percent in 2007, compared with 3.2 percent last year. Inflation-adjusted disposable personal income will probably increase 3.6 percent in 2007, up from 3.1 percent last year.
— REALTOR® Magazine Online
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