Owners Overestimating Home Values

Owners Overestimating Home Values

The gap continues to widen between what homeowners say their home is worth and appraisers’ valuations. Homeowners’ estimates of values were, on average, 1.69 percent higher than appraisers’ home value opinions in February, according to Quicken Loans’ National Home Price Perception Index. The gap has been detected every month since February 2015.

A few metros are running counter to national trends with appraiser opinions actually higher than what homeowners expected. Many of these metros are located in western cities that are seeing rapid price appreciation, such as in Denver, Portland, Seattle, San Francisco, and Los Angeles.

Source: Quicken Loans

What’s the House Size? No One Is Really Sure

What’s the House Size? No One Is Really Sure

Just how large a house really is may depend on whom you ask, The Wall Street Journal reports. That’s because appraisers, developers, builders, real estate professionals, tax assessors, and architects all measure spaces differently. No universal standard exists for calculating a home’s square footage. Further, it can also vary regionally.

For example, some calculate space on only the interior dimensions of finished living spaces. Some industry insiders may count the garage or finished basement in the square footage; others may not. Whether to count the square footage of balconies, basements, garages, or even wall thickness can vary too.

Fifty-eight percent of 400 consumers recently surveyed by Houzz.com said estimates of their home’s square footage varied among real estate professionals.

Square footage is an important number when it comes to buying real estate, however. Buyers may even narrow their home search online and compare homes based on price per square foot.

“People want more space and have become very sensitive to that number,” says Robert Edelstein, a real estate and business professor at the University of California, Berkeley.

Real estate professionals, however, are not required to verify the square footage cited in the listings database, says Quincy Virgilio, chairman of the board of directors at MLS Listings. Real estate pros often draw from several sources, such as county records, developer floor plans, and previous sale listings.

Buyers who want to know more about the home’s true size need to ask more about how the size was computed. For example, they should ask the source of the measurements and what is included in that number, such as private outdoor terraces, the garage, basement, utility closets, or even staircases.

“Developers tend to say, ‘We are selling you this much square footage.’ But is it really living area?” says Chip Wagner, a real estate appraiser based in Naperville, Ill. Wagner told The Wall Street Journal that he spots size discrepancies of more than 50 square feet about 20 percent of the time in the homes he appraises.

Encourage your buyers to look past the “big number” and instead focus on the dimensions of individual rooms, suggests home builder Brian Hoffman, a principal with Red Seal Homes, based in Northbrook, Ill.

Source: “How Big Is Your House? That Depends,” The Wall Street Journal (March 10, 2017) [Log-in required.]

Mortgage Rates Zoom to 2017 High

Mortgage Rates Zoom to 2017 High

The 30-year fixed-rate mortgage surged to its highest average of the year this week, reaching 4.21 percent, Freddie Mac reports in its weekly mortgage market survey.

“The 10-year Treasury yield rose about 10 basis points this week,” said Sean Becketti, Freddie Mac’s chief economist. “For the first time in weeks, the 30-year mortgage rate moved with treasury yields and jumped 11 basis points to 4.21 percent. The strength of Friday’s employment report and the outcome of next week’s Federal Open Market Committee meeting are likely to set the direction of next week’s survey rate.”

Freddie Mac reported the following national averages with mortgage rates for the week ending March 9:

• 30-year fixed-rate mortgages averaged 4.21 percent, with an average 0.5 point, rising from last week’s 4.10 percent average. Last year at this time, 30-year rates averaged 3.68 percent.
• 15-year fixed-rate mortgages averaged 3.42 percent, with an average 0.5 point, increasing from last week’s 3.32 percent average. A year ago, 15-year rates averaged 2.96 percent.
• 5-year hybrid adjustable-rate mortgages averaged 3.23 percent, with an average 0.4 point, increasing from last week’s 3.14 percent average. A year ago, 5-year ARMs averaged 2.92 percent.

Source: Freddie Mac

Rising Rates Will Impact Home Prices

Rising Rates Will Impact Home Prices

Americans have, so far, stood resilient to rising mortgage rates, but a bigger impact will come soon, say Goldman Sachs economists.

Housing’s share of the economy rose above normal levels from November to January, despite mortgage rates surging 60 basis points at the time.

Still, economists caution that there may be a lag to the impact of rising rates and particularly their effect on home prices. In an analysis—pulling data from past 100-basis point increases in mortgage rates—economists found that the median home price often drops 3 to 4 percent.

“This median estimate suggests that the recent 60 basis point rise in mortgage rates should, all other things equal, lower house prices by 2 to 3 percent,” the Goldman analysts concluded. “This estimate thus supports our forecast that national house prices will continue to rise, but at a slower pace in the next few years.”

That said, buyer demand is much stronger than supply at the moment and the economy and job growth are continuing to support the housing market.

“The housing market is also in a more virtuous cycle: Home equity has recovered, mortgage rates remain low enough to be manageable, and high rents make home ownership attractive,” MarketWatch reports.

Many economists are skeptical whether mortgage rates will actually rise much more than they already have. A survey conducted by MarketWatch in December 2016 showed an average for rates of 4.5 percent throughout 2017, a 35 basis point increase from current readings.

Source: “Here’s How Home Prices May Respond to Rising Mortgage Rates,” MarketWatch (March 7, 2017)

If Pets Could Pick a Home, They’d Pick Here

If Pets Could Pick a Home, They’d Pick Here

Pet owners in some states do a better job than those in others creating a thriving home for their furry friends, according to a new survey by Care.com.

Care.com recently looked at a variety of data about pet care to rank the states based on four categories: illness; access to vet care; health environment; and a “total pet spend” rank. The states with the highest rankings have the lowest prevalence of pet illnesses, higher access to veterinary care, healthier environments for pets, and higher pet-related spending.

The following states ranked as the healthiest homes for pets:

1. Montana
2. Nebraska
3. Colorado
4. New Mexico
5. Idaho
6. New Hampshire
7. South Dakota
8. Wyoming
9. Kansas
10. North Dakota

Source: “How Are the States With the Healthiest Pets—Is Yours One of Them?” Care.com (March 2017)

Homeowners Turn to Their Equity Again

Homeowners Turn to Their Equity Again

As home values rise fast, homeowners are starting to realize they have a lot of wealth tucked into their homes, and it’s become enticing to tap into it.

Since the housing crash, homeowners have been shy about accessing any of their home equity, even those who still had money in their homes. But as millions of borrowers emerge from their underwater home loans and see their home values jump again, they’re turning to home equity lines of credit, or HELOCs, once again.

HELOC volume has increased 21 percent over the past two years. It’s now at the highest level since 2008, according to Moody’s data. Still, it is far from the levels of the housing boom.

“The more second liens that people take out, it adds a risk that comes from the rising home prices,” says Peter McNally, a senior analyst at Moody’s. “The fact that people are leveraging their homes more than before makes things more risky.”

Mixed with that, borrowers also are putting down smaller down payments. Prior to the last housing boom, the median down payment was just over 7 percent. Down payments dropped to 3 percent during the housing boom, but were back up to about 6 percent in 2016, according to ATTOM Data Solutions. Down payments are projected to move lower as more lenders offer greater low down payment options again.

Source: “More Homeowners Cashing in on Their New Housing Wealth,” CNBC (March 3, 2017)