How Green Remodeling Pays Off
Green remodeling can pay off — not only in lowered utility bills, but also in buyer appeal when the property is sold.
Here are some green things to consider.
Site selection. Prefer infill development instead of a new subdivision in a far-flung new suburb that gobbles wetlands and displaces animals.
Energy-efficient products. Choose Energy Star appliances, double-paned windows, low-flush toilets, and compact fluorescent light bulbs.
Spray foam insulation. Seal the home with insulation that doesn’t let the heat or cooled air leak out.
Sustainable wood flooring. Select flooring certified by Forest Stewardship Council, which protects forests by managing the amount of wood harvested annually.
Locally made products. Buy products made less than 250 miles away to reduce transportation costs. Granite, for instance, is generally imported from afar.
Nontoxic paint. Use paint that is low in volatile organic compounds (VOCs) — chemicals that evaporate into the atmosphere. Look for Green Seal certified brands.
Source: St. Petersburg Times, Susan Thurston (12/28/07)
Pre-Listing Inspections: Are They Worth it?
Pre-listing inspections increasingly are being used by agents to give their listings a competitive edge, although it may be difficult to get sellers on board when they insist that inspections are the responsibility of the buyer.
However, there are numerous benefits to using pre-listing inspections on a regular basis. If sellers know about flaws and repair needs ahead of time, they can remedy them in a time frame that is less hectic than when problems arise out of buyer’s inspections.
Additionally, when sellers provide inspection reports to buyers before offers are made, it creates an atmosphere of honesty and trust and decreases the likelihood that deals will fall through after the buyer’s inspection.
Pre-listing inspections allow agents to market homes as “Certified Pre-Owned;” and homebuyers, like those purchasing new cars, are willing to spend more money on properties that have been professionally inspected.
Source: Realty Times, Steve Rodriguez (12/27/07)
Fastest-Growing States in West, South
Nevada regained the title of fastest-growing state with its population increasing by 2.9 percent to 2.6 million through July 2007.
Nevada had held that title for 19 years in a row before being dethroned by Arizona last year. Arizona is the second-fastest-growing stat,e according to the current estimate, with a population increase of 2.8 percent to 6.3 million, according to the U.S. Census Bureau’s annual estimate of state population changes.
Florida saw the sharpest fall off in population growth. Florida grew 1.07 percent, only slightly faster than the U.S. growth rate of 0.96 percent and the slowest growth rate in the state since 1990, making it the 19th fastest-growing state.
The only two states in the country to lose population were Michigan and Rhode Island. Michigan lost 30,500 residents, a 0.3 percent decline.
The 10 fastest-growing states in order are:
Nevada
Arizona
Utah
Idaho
Georgia
North Carolina
Texas
Colorado
Wyoming
South Carolina
Source: The Associated Press, John Dunbar (12/26/07)
Demand Versus Buyer Hesitation
by Lawrence Yun, NAR Chief Economist
U.S. Economic Outlook
Any boost to buyer confidence will have a significant impact in reviving the housing market and in lifting the economy.
The Forecast: Charts
Anticipated lower home prices are holding back many people from buying a home now.
The weakness in the U.S. economy in the fourth quarter of 2007 was affirmed by very soft job figures for December. Only 18,000 net new payroll jobs were added during the month compared to 119,000 monthly job gains for the rest of 2007 and 189,000 (monthly) in 2006. The unemployment rate rose to 5.0%, its highest level in two years, after having treaded at around 4.5% in the first half of 2007.
Housing Market Fallout
Not surprisingly, the housing market fallout contributed heavily to the weak overall conditions. Residential construction and related contractor jobs fell by 28,500 during the month and are now lower by 291,000 from their peak employment level nearly two years ago. The commercial real estate market appears to be topping out as 16,800 jobs were cut in December. NAR’s commercial leading indicator had pointed to a modest slide in the commercial sector back in November. Still, the commercial market has held on much better than the residential sector. The latest job figures in commercial real estate showed 334,000 more jobs currently than from a cyclical low in February 2004. The multiyear job gains reflect a strong rise in commercial real estate spending. Spending on non-residential private construction totaled $483 billion (annualized) as of the third quarter 2007; that is considerably higher than the $277 billion and $298 billion recorded in 2003 and 2004, respectively.
Current housing market conditions remain weak. Existing-home sales have been right at or near 5 million for the past three months, possibly hinting at stabilization and a formation of a bottom. But the current annualized sales pace would only match the 1998 annual figures (10 years ago) and are down 20% from a year ago and down 30% from the peak year of 2005. The current level of activity is far below that of even the pre-boom year of 2001.
New home construction and new home sales have contracted even more. Recent new single-family housing starts have been in the range of 800,000 to 900,000 and new home sales have fallen well below 700,000. Those figures are down by roughly 50% from their respective peak annual figures in 2005. Though the cutbacks are hampering the economy, they have brought down housing inventory. Housing supply is one of those figures that is usually not in the headlines, but new home inventory has been trending down for more than a year. (The months’ supply has not fallen because the sales pace has weakened.) There were 570,000 new homes for sale in the summer of 2007. There were 509,000 at the end of November.
At the national level, home prices continue to move lower. The most timely and broadest measure from NAR based on multiple listing service information indicates home prices are 3.3% below a year ago.
The near-term forecast continues to point toward weak conditions. Housing permits continue to fall, indicating a further decline in new home construction and new home sales. NAR’s pending home sales index also remains soft, though it has been essentially flat for the past three months.
Will housing demand return solidly by spring of 2008 – even after we account for the normal higher sales activity in the spring months? It is a bit uncertain. On the one hand we have a sizable pent-up demand. On the other hand, we have buyers waiting it out, hoping for lower home prices and lower interest rates.
Pent-Up Demand
The pent-up demand is indeed sizable once we run through the tapes. Job and income gains have risen solidly over the past two years – interesting when at the same time home sales have been falling. Net job gains have increased by 4.3 million according to both company payroll data and household survey data. U.S. aggregate personal income has risen by $1.4 trillion over the past two years. Such job gains should have translated into about 2 million additional homeowners, yet the actual rise over the two-year span was only 600,000. Over the same time period, housing affordability has actually improved with incomes rising, home prices falling, and conforming mortgage rates at near historic lows, yet … a very slow rate of net new homeowners.
Furthermore, household formation has mysteriously slowed. With normal population and job increases, household formation typically expands by 1.2 million to 1.5 million per year. The latest Census data points to only 650,000 net new households formed in 2007. Many people have evidently doubled-up with additional roommates or have moved back with parents and family members.
But buyers are hesitant. Why? Anticipated lower home prices are holding back many people from buying a home now. Foreclosures will continue to rise in 2008. There are many research reports and media reports (irrespective of validity) pointing to further price declines. Anticipated lower interest rates are also holding back many potential buyers. It is widely believe that the Federal Reserve will be cutting rates in the next two or three meetings. Though there is no direct relationship between a Fed rate cut and mortgage rate changes, many consumers perceive that mortgage rates will fall with the later Fed rate cut. Given this perception, it would be wise to make a one-time large rate cut rather than a series of small rate cuts in order to end the delay in home buying. Since the Fed Funds rate is likely to be at 3.5% by late spring, why not just cut it to that level (from its current 4.25%) at the next FOMC meeting?
Though pent-up demand clearly exists, it is still tricky to anticipate when a meaningful recovery will take place. I do not foresee any major existing-home sales declines from this point onwards, but sales could remain at their current soft pace for a while. Will it be spring or summer or fall when we will see a notable pick-up in home sales? Difficult to say, but it will happen in 2008.
5 Simple Ways to Increase a Home’s Value
Good home maintenance is key to creating and preserving a home’s value. Not to mention, it also impresses potential buyers.
Here are five basic steps that every home owner ought to take — before spending money on dream bathrooms or gourmet kitchens.
1. Safety. Make sure smoke detectors and carbon monoxide detectors are installed and in good working order. Check fuel-burning appliances to make sure they are properly vented and no gas connections leak. Make sure the electrical system is adequate. Flickering lights and popping breakers are the sign of a problem. Anchor handrails and grab bars adequately.
2. Preventive maintenance. Repair any leaks in the roof, seal gaps in the siding, paint bare wood, replace damaged decking, patch cracks in concrete, and caulk around tubs and showers.
3. Conserve energy. Install a programmable thermostat, weatherstrip doors and windows, fix leaking faucets, upgrade insulation, and replace leaky windows.
4. Go green. Consider environmentally friendly materials for windows, doors, siding, decking, fencing, roofing, flooring, and insulation.
5. Improve comfort. Get rid of clutter, open up spaces, update window treatments to allow in more light, and organize closets and storage.
Source: The Associated Press, James and Morris Carey (12/29/07)
How Hidden Incentives Distort Home Valuation
Some real estate attorneys and appraisers warn that the use of incentives by home builders and home sellers to entice buyers is making it difficult to adequately determine property values.
Residential appraisers and lenders need to exercise caution when using the price recorded by the county clerk, as the value of incentives is rolled into that figure, experts say. However, given that incentive information is not included on the public record and that builders and real estate practitioners are not required to disclose the information to appraisers, it is virtually impossible to determine the actual price paid for a property.
There are concerns that incentives used by builders conceal discounts that might anger owners in the same development who paid more for their units. Including incentives in the recorded price also may lead buyers of nearby properties to pay too much or enable lenders to make bigger loans than they would have otherwise.
Source: Wall Street Journal, James Hagerty and Michael Corkery (12/19/07)
Bush Signs Mortgage Tax Relief Into Law
President George W. Bush signed legislation into law on Thursday that will ease the tax burden for home owners who have had debt forgiven on a mortgage due to a foreclosure, short sale, or deed in lieu of foreclosure. The bill — Mortgage Forgiveness Debt Relief Act — has been supported by NAR since the 1990s.
“The president offered a Christmas present to many people who have suffered the agony and humiliation of losing their home,” said NAR President Dick Gaylord in a statement. “Today’s bill will ensure that any debt forgiven on a mortgage secured for a principal residence will not be taxed. This is very significant legislation.”
The tax code used to require a lender who forgives debt to provide a Form 1099 to the IRS stating the amount the borrower had been forgiven. If the property was sold at foreclosure or was sold for less than what was borrowed, that difference was considered income and subject to the tax.
“We have always believed that it is clearly an issue of fairness and of not kicking people when they are down,” Gaylord said. “By making the forgiven debt taxable income, individuals in already unfortunate situations most likely faced IRS actions because they did not have the money to pay the additional taxes. This legislation will relieve that additional burden and may also encourage families to work with their lender to negotiate terms, knowing they will now not be subject to an IRS bill.”
Other key provision: Mortgage Insurance Tax Deductibility.
Also in the bill is an extension of a provision permitting home owners to deduct from their federal taxes mortgage insurance premiums. The bill makes mortgage insurance premiums tax deductible for all mortgages originated for the next three years. Mortgage insurer Genworth Financial estimates that this tax break is worth $350 to the average taxpayer who has purchased a home with less than 20 percent down.
Source: The Associated Press, Jim Abrams, and Dow Jones International News (12/18/07) and REALTOR® Magazine Online (12/20/07)
Groups Warn Seniors: Beware of Reverse Mortgages
The U.S. senior community is warming up to reverse mortgages, but the product’s increasing popularity also is breeding a new crop of unscrupulous brokers, lenders, and loan agents who are taking advantage of the nation’s elderly.
In general, reverse mortgages allow home owners who are 62 and older to borrow against their home equity without having to repay the money until the home is sold or the borrower dies or permanently moves out.
But the mortgages have some groups concerned. Speaking at a recent hearing before the Senate Special Committee on Aging, legislators and consumer advocates warned that, without better loan counseling and tougher government oversight, a flood of older home owners could be pressured into taking out inappropriate loans — just as millions of mortgage borrowers were persuaded to accept subprime loans that are now going into default at a rapid clip.
“We have gone through a savings and loan collapse, a stock market bubble and are currently in the middle of a lending mess,” noted Sen. Claire McCaskill (D-Mo.) at the hearing. “Our goal is to make sure that the reverse mortgages don’t become the scandal of the next decade.”
National Reverse Mortgage Loan Association President Peter Bell says the perceived problem may be somewhat overblown. But he concedes that some sales agents who are finding themselves unemployed due to the housing downturn could be picking up jobs in the reverse mortgage sector but may have “a different type of mentality about moving transactions through quickly.”
Source: Buffalo News, Tony Pugh (12/17/07)
Market Brings New Rules for Pricing a House
How do you price a home in this market? Pat Hiban of the Pat Hiban Real Estate Group in Ellicott City, Md., says comparables are irrelevant these days.
“You want to price it less than the active competition,” he advises.
He dismisses the notion that someone who is less eager to sell a home quickly can set the price a little higher. In this market, the lower price is “realistic,” Hiban says.
He suggests looking at the three most competitive active listings that the seller will be up against. If there are no real differences between those houses and your seller’s home, undercut the competition on price. If the house you’re trying to sell has something that the competition doesn’t — say a finished basement — then go with the same price.
Source: The Baltimore Sun, Jamie Smith Hopkins (12/14/07)
FHA Legislation Will Help Homeowners, Economy, Says NAR
WASHINGTON, December 14, 2007 -
The FHA Modernization Act of 2007, passed today by the U.S. Senate, would help protect the interest of America’s current and future homeowners by giving borrowers a safer alternative to riskier mortgage products while also helping many homeowners who may be facing foreclosure, according to the National Association of Realtors®.
“A reformed FHA is positioned to help homeowners who face unaffordable mortgage payments as a result of resetting adjustable subprime loans and help bring stability to local markets and economies,” said NAR President Richard Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “NAR commends the leadership of Majority Leader Harry Reid, D-Nev.; Senate Banking Chairman Christopher Dodd, D-Conn.; and Sens. Mel Martinez, R-Fla., and Richard Shelby, R-Ala., for passing the Federal Housing Administration reform bill, S. 2338, today.”
NAR has long supported FHA modernization legislation that would increase loan limits, reduce or eliminate the statutory 3 percent minimum cash down payment, and give FHA increased flexibility and the ability to streamline certain programs, in addition to strengthening the loss mitigation program.
“FHA can once again be a leader in providing safe loan products and preventing foreclosures by authorizing lenders to help borrowers who are in default. That assistance will make a substantial difference for many families that may otherwise face foreclosure,” Gaylord said.
In addition, the increase in FHA mortgage loan limits would help first-time home buyers, minority buyers, and people who do not qualify for conventional mortgages. Increased loan limits would also help people living in high-cost areas; current FHA limits make the program unusable in these areas,” said Gaylord.
Gaylord noted that FHA has made mortgage insurance widely available to individuals regardless of race, ethnicity or social status during periods of prosperity and economic depression. The FHA program makes it possible for higher risk yet creditworthy borrowers to obtain prime financing.
“NAR recognizes and appreciates the Senate’s bipartisan effort. We hope this bill is sent quickly to the President and that he signs it into law swiftly,” said Gaylord. “As the leading advocate for homeownership and housing issues, NAR believes that FHA reform not only helps home buyers, but also is a good catalyst for the nation’s economy.”
The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing more than 1.3 million members involved in all aspects of the residential and commercial real estate industries.
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