7 Tips for Selling a Home Faster and for More
Online real estate firm Redfin offers seven recommendations for selling a home faster and for more money.
The seven tips come from an analysis of academic research, multiple listings service data, and from information posted on Redfin’s various Web sites.
1. Don’t overprice your property. According to a 2002 academic study of 3,490 California listings, homes without a price reduction sold for 97 percent of the initial list price, whereas homes with a price reduction sold for 88 percent of the initial list price.
2. Set your price to show up in Web searches. A September 2007 Redfin study analyzed how online search filters affect traffic to a listing. Because real estate sites filter on price in $25,000 or $50,000 increments, listings priced at or below these thresholds — $250,000 rather than $251,000, or $325,000 rather than $326,000 — get as much as 7.1 percent more online visits.
3. Debut on Friday. A December 2007 Redfin analysis of its online traffic for 119,079 listings across seven markets found that listings that debut on Friday get on average 7.7 percent more visitors in their first seven days than those that debut on the worst day, Thursday.
4. Get sellers engaged with your agent. According to several academic studies, motivated, active sellers are able to sell their property as much as 30 percent faster.
5. Market the property online. Promoting a listing on Web sites beyond the local Multiple Listing Service can drive a significant number of new online visits to a property. A December 2007 analysis of 121 Redfin listings found that promoting the listings on Craigslist resulted in an average of 6.8 online visits to the property for each Craigslist promotion.
6. Have sellers stay put. The study of 3,490 California listings, cited earlier, found that vacant homes were 9.5 percent more likely to undergo a price reduction.
7. Wait to list your property until neighboring foreclosures are off the market. According to a November 2007 report from the Center for Responsible Lending, a foreclosure costs neighboring home owners an average of $5,000 when listing their property.
Source: Redfin (12/14/07)
Greenspan Pinpoints Roots to Mortgage Crisis
Former Federal Reserve chief Alan Greenspan wrote a lengthy explanation of his view of the current mortgage crisis for The Wall Street Journal.
“The crisis was an accident waiting to happen,” Greenspan writes. “If it had not been triggered by the mispricing of securitized subprime mortgages, it would have been produced by eruptions in some other market.”
Here are some other key passages:
“I do not doubt that a low U.S. federal-funds rate in response to the dot-com crash, and especially the 1 percent rate set in mid-2003 to counter potential deflation, lowered interest rates on adjustable-rate mortgages (ARMs) and may have contributed to the rise in U.S. home prices. In my judgment, however, the impact on demand for homes financed with ARMs was not major.”
“Demand in those days was driven by the expectation of rising prices — the dynamic that fuels most asset-price bubbles. If low adjustable-rate financing had not been available, most of the demand would have been financed with fixed rate, long-term mortgages. In fact, home prices continued to rise for two years subsequent to the peak of ARM originations (seasonally adjusted).”
“The current credit crisis will come to an end when the overhang of inventories of newly built homes is largely liquidated, and home price deflation comes to an end. That will stabilize the now-uncertain value of the home equity that acts as a buffer for all home mortgages, but most importantly for those held as collateral for residential mortgage-backed securities. Very large losses will, no doubt, be taken as a consequence of the crisis. But after a period of protracted adjustment, the U.S. economy, and the world economy more generally, will be able to get back to business.”
Source: The Wall Street Journal, Alan Greenspan (12/12/07)
Tougher Standards Drive Up the Cost of Homeownership
Even borrowers with decent credit are beginning to feel the mortgage crisis pinch.
Fannie Mae, soon to be followed by Freddie Mac, has imposed an extra 0.25 percent upfront charge on all new mortgages that it buys or guarantees.
In a statement, Fannie said the new fee is needed “to ensure that what we charge aligns with the risk we bear.” The National Association of Home Builders labeled the fee “a broad tax on homeownership” because more than 40 percent of all mortgages outstanding are owned or guaranteed by Fannie or Freddie.
Mortgage insurers have raised premiums for certain borrowers and tightened standards. PMI Group Inc. has stopped writing mortgage insurance for borrowers with credit scores below 620 who are financing more than 95 percent of their home’s value. Triad Guaranty Insurance Corp. has stopped providing mortgage insurance on option adjustable-rate mortgages, which carry low introductory rates but can lead to a rising loan balance.
The bar for credit scores is rising, too. “Historically, lenders would consider top-tier credit [a score of] 680,” says David Soleymani, a mortgage broker in Los Angeles. “Now, many of those lenders want to see a 720,” but are rewarding such borrowers with better rates, he says.
Source: The Wall Street Journal, James R. Hagerty and Ruth Simon (12/11/07)
NAR: Another Monthly Gain for Pending Home Sales
The Pending Home Sales Index, a forward-looking indicator based on contracts signed, increased 0.6 percent in October, marking the second consecutive monthly gain, according to the NATIONAL ASSOCIATION OF REALTORS®.
The index rose to 87.2 from an upwardly revised reading of 86.7 in September. However, the October index still was 18.4 percent below year-earlier reading of 106.8.
“The broad trend over the coming year will be a gradual rise in existing-home sales,” says Lawrence Yun, NAR’s chief economist. “But because sales are exceptionally low in the final months of 2007, total sales for 2008 will be only modestly higher than 2007.” A recovery for new-home sales is unlikely before 2009, he adds.
Yun says the worst part of the credit crunch has already worked its way through the data: “Now that mortgage conditions have improved, some postponed activity should turn up in existing-home sales over the next couple of months, and I expect sales at fairly stable to slightly higher levels.”
Existing-home sales in 2007 are likely to total 5.67 million this year, the fifth highest on record, and then rise to 5.70 million in 2008. By comparison, home sales in 2006 totaled 6.48 million.
Regional Pending Home Sales Data
Pending home sales in the Northeast jumped 16.0 percent in October to 80.6 but is 11.1 percent below a year ago. In the West, the index rose 8.4 percent to 87.3 but is 16.9 percent lower than October 2006. The index in the Midwest slipped 1.4 percent in October to 85.5 and is 11.7 percent below a year ago. In the South, the index dropped 7.8 percent in October to 91.6 and is 25.3 percent below October 2006.
“The improvement in the Northeast reaffirms a trend apparent for some months now that shows signs of recovery, noteworthy because that was the first region to slump, and the gain in the West indicates some easing of interest rates for jumbo loans,” Yun says.
He says that raising the loan limits on FHA and GSE-backed conventional loans will markedly improve mortgage availability.
A Look at Prices: Slight Growth Expected
Prices for existing homes should be down 1.9 percent to a median of $217,600 for all of 2007, and then rise 0.3 percent to $218,300 in 2008.
“Home price growth in the vast affordable midsection of America will help raise the national median existing-home price slightly in 2008. I then expect price appreciation to return to more normal patterns in 2009, perhaps rising one or two percentage points above the rate of inflation,” Yun said.
Even with a modest decline in the national aggregate price this year, it’s important to keep in mind that nearly two-thirds of the metro areas in the U.S. are showing price increases, Yun says.
“The apparent disparity results from fewer sales in high-cost markets, so a change in the mix of sales is dragging down the national median home price.”
Areas showing healthy price gains include disparate markets such as Gary-Hammond, Ind.; Binghamton, N.Y.; Corpus Christi, Texas; and Spokane, Wash. “We can’t emphasis enough how much local conditions vary, even within a given area, so it’s important for consumers to make decisions based on local market conditions.”
Forecast for New Home Sales
New-home sales are forecast at 788,000 this year and 693,000 in 2008, down from 1.05 million 2006; no sustained improvement is seen for new homes until 2009.
Because builders have correctly adjusted production, housing starts, including multifamily units, will probably total 1.36 million this year and 1.16 million in 2008, down from 1.80 million last year.
The median new-home price is projected to drop 3.0 percent to $239,100 for 2007, and then decline another 0.2 percent to $236,600 in 2008.
Economic Outlook: Mortgage, GDP, Employment
The 30-year fixed-rate mortgage is estimated to rise slowly to the 6.4 percent range by the end of 2008, with additional cuts in the Fed funds rate lowering short-term interest rates.
Growth in the U.S. gross domestic product (GDP) should be 2.1 percent in 2007, down from a 2.9 percent growth rate last year; GDP growth is forecast to improve to 2.4 percent in 2008.
The unemployment rate is likely to average 4.6 percent for 2007, unchanged from last year, but rise to 5.0 percent in 2008. Inflation, as measured by the Consumer Price Index, will probably be 2.8 percent this year and 2.7 percent in 2008, down from 3.2 percent in 2006. Inflation-adjusted disposable personal income is estimated to grow 3.1 percent this year, the same as in 2006, and then grow 2.2 percent next year.
3 Places to Find Money for a Down Payment
Buyers who don’t have a 20 percent down payment are finding it harder and harder to buy a home. Here are some sources of money that are still available and the pluses and minuses of using them.
Borrowing from a 401(k). Only some companies allow this. The maximum available is $50,000 ($100,00 if both spouses have 401(k)s) and the loan must be repaid within five years. Failure to do so and the loan will be considered a withdrawal, leaving the borrower liable for penalties and federal income tax.
Withdrawing up to $10,000 from an IRA for a purchase of a first home. Spouses who both have IRAs can withdrawal a total of $20,000. A potential borrower who hasn’t owned a home in the past three years is considered a “first-time buyer” for this specific purpose and can make a withdrawal. Federal taxes must be paid on the withdrawal at the borrower’s current marginal tax rate.
A gift. If buyers are comfortable asking for money, their parents, friends, and relatives can give a gift toward the down payment. But for the lender to approve it, the giver must sign a gift letter stating that the money doesn’t need to be repaid.
Source: ThinkGlink.com, Ilyce Glink (12/07/07)
What the Foreclosure Plan Means for Home Owners
Last Thursday, after Treasury Secretary Henry Paulson explained the Bush administration plans to aid as many as 1.2 million home owners facing the prospect of foreclosure, questions arose quickly. Here are the answers to some of the key ones.
Which adjustable-rate mortgages are affected? To qualify to have their interest rate frozen for five years, home owners must have received a loan sometime between Jan. 1, 2005, and July 31, 2007, and be facing a reset of their interest rate sometime between Jan. 1, 2008, and July 31, 2010.
Who qualifies for this deal? Home owners who haven’t missed a payment, but who might if their mortgage resets. Those who can’t afford the higher payments, and who have credit scores below 660 and less than 3 percent equity in their homes, will get the biggest break from the lenders. People who are financially secure enough to pay the higher mortgage payments don’t qualify.
Do owners of second homes or investors qualify? No. The plan excludes people who don’t live in the property that’s facing foreclosure.
Why didn’t the plan go further? If home owners are going to pay less on their mortgages than investors expected, then people are going to lose money. Not all of those people are fat cats. Potential losers include pension funds for teachers, firemen, police and an array of mutual funds whose clients are individual investors.
Source: BusinessWeek Online (12/07/07)
30-Year Mortgage Rates Fall to 2-Year Low
Concerns that a severe housing downturn and prolonged credit crisis could rattle consumer confidence and hurt the broader economy contributed to a sharp drop in mortgage rates this week, according to Freddie Mac.
Interest on 30-year fixed loans sank to 5.96 percent from 6.10 percent last week, landing at the lowest point seen since September 2005.
Borrowing costs on 15-year fixed products fell to 5.65 percent from 5.73 percent over the week and five-year adjustable-rate mortgages were down to 5.75 percent from 5.86 percent, but one-year ARMs bucked the southward trend by bumping up to 5.46 percent from 5.43 percent.
“With lower consumer spending and personal income gains in October, interest rates on U.S. Treasury securities fell lower this week and mortgage rates followed,” said Freddie Mac chief economist Frank Nothaft.
Source: Baltimore Sun (12/07/07)
Last Chance to Save on Home Energy Improvements
Time has almost run out for home owners to take advantage of valuable tax credits for energy-efficient home improvements that expire at the end of 2007.
All the details on the tax credits can be found on the U.S. Department of Energy Web site.
Insulation and exterior doors, including storm doors: 10 percent of the cost of the product (but not the installation), up to $500. Includes materials to seal air leaks such as caulk, weather stripping, and foam sealants.
Central air conditioner, heat pump, or water heater: Up to $300 towards the full purchase price, including installation costs.
Exterior windows, skylights, and storm windows: 10 percent of the total cost, up to $200. All windows with the ENERGY STAR label, the government’s symbol for energy efficiency, qualify.
Pigmented metal roofs: 10 percent of the cost of the product (but not the installation), up to $500 for metal roofs with pigmented coatings that meet ENERGY STAR requirements.
Furnace or boiler: Up to $150 towards the full purchase price, and/or $50 for an efficient air-circulating fan in a furnace, including installation cost.
Source: Alliance to Save Energy, Ronnie Kweller (12/04/2007)
When It Comes to Remodeling, It’s What’s Outside That Counts, Realtors® Report
WASHINGTON, December 03, 2007 -
Many buyers judge a house by its exterior, or so it seems from the results of the 2007 Remodeling Cost vs. Value Report. Three of the four projects with the highest national percentage of costs recouped this year were exterior upgrades.
The most profitable project on the national level was upscale siding replacement, recouping 88 percent of costs upon resale. Wood deck additions and wood window replacements also returned more than 80 percent of costs, at 85 percent and 81 percent, respectively. On a national average, the only interior project to return more than 80 percent of remodeling costs this year was a minor kitchen remodel, returning 83 percent of project costs at resale.
“The results of this year’s Cost vs. Value report underscore the importance of curb appeal in the buyer’s eye,” said NAR President Dick Gaylord, a broker with RE/MAX Real Estate Specialists in Long Beach, Calif. “Realtors® know what attracts buyers in their local markets and can help your house put its best façade forward, so to speak – it’s another way Realtors® add value to the real estate transaction.”
The 2007 Remodeling Cost vs. Value Report compares construction costs with resale values for 29 midrange and upscale remodeling projects comprising additions, remodels and replacements in 60 markets across the country. Data are provided for nine U.S. regions, following the divisions established by the U.S. Census Bureau. This is the 10th consecutive year that the report, which is produced by Hanley Wood, LLC, was completed in cooperation with REALTOR® Magazine, as Realtors® provided their insight into local markets and buyer home preferences within those markets.
Four new projects were added this year: the aforementioned wood deck addition, a back-up power generator, and both a midrange and upscale garage addition. Nationally, the back-up power generator only returned 58 percent of the investment on resale, although the return was highest in the West South Central region, which comprises Arkansas, Louisiana, Oklahoma, and Texas, at 68 percent. Buyers in the Pacific region of Alaska, California, Hawaii, Oregon and Washington value their garages: The midrange garage addition returned nearly 70 percent nationally but 88 percent in this region, while the upscale garage addition returned approximately 65 percent nationally but 78 percent in this area.
Homeowners in the Pacific region could also expect to see some of the highest percentages of remodeling expenses returned at resale, with 13 of the 29 projects returning 90 percent or higher of project costs. Homeowners in the East North Central region of Illinois, Indiana, Michigan, Ohio and Wisconsin might expect some of the lowest returns; only one project – upscale fiber cement siding – returned more than 80 percent upon resale (82 percent of costs recouped), while nine projects returned less than 60 percent of project costs.
The least profitable projects were a back-up power generator, sunroom addition, and home office remodel. The back-up power generator returned the lowest percentage of initial cost in the East North Central, New England (Connecticut, Massachusetts, Maine, New Hampshire, Rhode Island, and Vermont), Pacific, and West North Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota and South Dakota) regions.
Sunrooms are least popular in the East South Central (Alabama, Kentucky, Mississippi and Tennessee), Mountain (Arizona, Colorado, Idaho, Montana, Nevada, New Mexico and Wyoming), and West South Central regions. Home office remodels return the lowest percentage of project costs in the Middle Atlantic (New Jersey, New York and Pennsylvania) and South Atlantic (Delaware, District of Columbia, Florida, Georgia, Maryland, North Carolina, South Carolina, Virginia and West Virginia) regions.
Gaylord explained that the resale value of any given remodeling project depends on a variety of factors. “When considering a remodeling project, particularly with an eye toward resale, it’s important to evaluate your home’s current condition, how the project will change the existing space in your home, as well as how your remodeled home will compare to other homes in your community,” said Gaylord.
“For example, using a breakfast nook to expand the kitchen seems like a good use of space, but using the same space to add a first-floor bathroom in an older home that doesn’t have one will draw more buyers,” Gaylord said. “Realtors® see hundreds, if not thousands, of homes every year with their buyer clients and can provide valuable insight into what projects and improvements will make a difference with buyers in your area.”
Results of the report are summarized in the December 2007 issue of REALTOR® Magazine. To read the full project descriptions, access national and regional project data, and download a free PDF containing data for any of the 60 cities covered by the report, visit www.costvsvalue.com. “Cost vs. Value” is a registered trademark of Hanley Wood, LLC.
Hanley Wood, LLC, is the premier media company serving housing and construction. Through four operating divisions, the company produces award-winning magazines and Web sites, marquee trade shows and events, rich data, and custom marketing solutions. The company also is North America’s leading provider of home plans. Founded in 1976, Hanley Wood is a $240 million company owned by JPMorgan Partners, LLC, a private equity affiliate of JPMorgan Chase & Co.
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.
Credit Score Primer: What Buyers Need to Know
In the wake of the credit crisis, lenders have become much pickier about whom they lend to. Here are some basic facts that will help potential borrowers understand what they face.
The measurement that most lenders use to assess applicants’ credit risk is the FICO score developed by Fair Isaac Corp. The score ranges from 300 to 850.
There’s not one FICO score. Buyers have three: one for each of the three credit bureaus, Experian, TransUnion, and Equifax.
Each credit score is based on information the credit bureau keeps on file. Since credit bureaus don’t share their data with one another, the three FICO scores may differ, sometimes by as much as 100 points.
The components of a FICO score are:
Payment history: 35 percent
Amounts owed: 30 percent
Length of credit history: 15 percent
New credit: 10 percent
Types of credit used: 10 percent
A consumer with a 580 credit score might qualify under FHA requirements, but, generally, in order to qualify for a prime loan, a borrower must have a credit score above 620 for a conventional loan at all and above 720 for a loan at terms and rates most borrowers would consider desirable.
Source: The Dallas Morning News, Pamela Yip (12/03/07)
