More Home Owners Remodel to Raise Home’s Value

More Home Owners Remodel to Raise Home’s Value. Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net

Home owners are remodeling their homes to increase the value, but they also are showing more desire to stay and enjoy their remodels before they move on.

Fifty-three percent of U.S. home owners say they are remodeling to increase the resale value of their home, but they have no plans to move in the next five years, according to a new Houzz & Home survey of more than 135,000 respondents. Sixteen percent of re-modelers say they plan to sell their home in the next two years.

One in five — or 22 percent — of the re-modelers surveyed say they feel home prices are rising too quickly to consider moving yet. Twenty-four percent of respondents say they would prefer to move, but remodeling their home makes more economic sense.

The Millennial generation of home owners seem to be the most apt to move within the next five years, according to the survey. Thirty-six percent of them say they are remodeling to increase their home’s value with the intent to move to their next home soon.

Overall, the most popular renovation projects are bathroom remodels or additions and kitchen remodels. Home owners continue to devote the highest share of dollars to kitchen remodels, spending an average of $26,172.

That can vary drastically by region, however. Home owners in the Northeast and West tend to spend the most on their renovation projects at an average of $32,155 and $29,411, respectively, on their kitchens (compared to $23,946 in the Midwest and $21,894 in the South), according to the survey.

The most popular replacement projects are flooring/paneling/ceiling, followed by windows/doors and roofing.

The top challenges that home owners say they face when renovating are finding the right products, defining their style, making decisions with spouse/partner, and educating themselves.

Source: Houzz

Housing Affordability Slips, But Not Everywhere

Housing Affordability Slips, But Not Everywhere. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Housing affordability continued to fall across the country as the median price of single-family homes rose due to a continued lack of housing inventory, according to the latest National Association of REALTORS® Housing Affordability Index. The median single-family home price was $198,200 in March, up 7.4 percent from year-ago levels.

What’s more, mortgage rates are higher than last year. Income levels rose 2.1 percent from last year.

“An increase in inventory along with price stabilization will improve affordability,” according to NAR’s Economists’ Outlook blog.

Affordability is down in all regions across the country, but the West saw the biggest drops in affordability due to a 12.5 percent price gain.

Still, more than 63 percent of homes sold in the first three months of the year were affordable to buyers earning the U.S. median income of $63,900, according to a new analysis by the National Association of Home Builders. In some markets, the income needed to qualify is a fraction of that.

The following housing markets are known as the most affordable markets in the nation for a median-priced home, where buyers need less than $21,000 in income to qualify for a mortgage when putting 5 percent down.

• Youngstown-Warren-Boardman, Ohio-Pa.; $14,894 (income needed to qualify when putting 5% down)
• Decatur, Ill.: $16,046
• Toledo, Ohio: $16,623
• Rockford, Ill.: $16,853
• Cumberland, Md.-W.Va.: $18,767
• South Bend-Mishawaka, Ind.: $19,758
• Dayton, Ohio: $21,649
• Canton-Massillon, Ohio: $21,741
• Fort Wayne, Ind.: $21,787
• Fond du Lac, Wis.: $21,810

Meanwhile, the least affordable markets were San Jose-Sunnyvale-Santa Clara, Calif. (where a buyer would need an income of $186,285 to qualify), followed by San Francisco-Oakland-Fremont, Calif. ($156,728); Honolulu ($154,999); and Anaheim-Santa Ana-Irvine, Calif. ($154,423).

Source: “Latest Housing Affordability Index Data,” National Association of REALTORS® Economists’ Outlook Blog (May 20, 2014) and  “Where it Takes $185k to Get a Loan,” Bankrate.com (May 14, 2014)

Home-Price Appreciation to Slow Down Through 2016

Home-Price Appreciation to Slow Down Through 2016. Image courtesy of ddpavumba / FreeDigitalPhotos.net

Home values are expected to appreciate by 4.4 percent on average through the end of the year, but that rate will slow to 3.8 percent in 2015 and 3.4 percent in 2016, say 106 economists, real estate experts, and investment and market strategists surveyed by Pulsenomics LLC.

After a sharp double-digit percentage increase in home values last year, the rollback in appreciation would put them more on par with historical norms. Prior to the housing bubble years of 1987 to 1999, home values averaged 3.6 percent growth per year.

The majority of economists surveyed say they expect median home values to exceed their pre-recession peaks by the first quarter of 2018. They cited the following as the most common concerns for declining housing affordability: income growth (28%); abnormally high rates of home-price and rent appreciation (27%), and an abnormally low supply of homes for sale or rent (21 percent).

“Time will tell whether Washington’s unfolding plan to expand mortgage credit will have a durable, positive impact on home values, housing confidence, and market expectations,” says Terry Loebs, founder of Pulsenomics.

Source: “Economists and Experts Expect 2014 Price Increases to Average 4.4 Percent,” RISMedia (May 19, 2014)

Bank Repos on the Rise in 26 States

Bank Repos on the Rise in 26 States. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

RealtyTrac reports in its U.S. Foreclosure Market Report for April that foreclosure filings dropped 1 percent over the previous month. Despite the decrease, bank repossessions rose 4 percent that same month.

The number of bank repossessions rose from the previous month in 26 states, and 16 states posted increases over the past year. The following states posted the largest year-over-year increases in bank repossessions:

• New York: +142% year-over-year
• Oregon: +91%
• New Jersey: +58%
• Illinois: +55%
• Indiana: +52%
• Maryland: +45%
• Connecticut: +44%
• California: +27%
• Nevada: +15%

“The rise in bank repossessions in many states is a sign that those markets are working through the final remnants of foreclosures left over from the recent housing crisis,” says Daren Blomquist, vice president at RealtyTrac. “Many of these bank-owned homes are bottom-of-the-barrel properties in terms of location or condition, but they will provide much-wanted inventory of homes for sale in some markets in the coming months. Investors and other buyers willing to do more extensive rehab will likely be best-suited for these upcoming REOs.”

Source: RealtyTrac

5 Property Management Mistakes

5 Property Management Mistakes. Image courtesy of digitalart / FreeDigitalPhotos.net

“It doesn’t matter how good you are in the property management business, there’s always something you’re can get sued for,” Lori Burger, CPM and the Institute of Real Estate Management’s 2014 president-elect, said at a property management forum Thursday during the REALTOR® Party Convention & Trade Expo in Washington, D.C.

Part of it is just the nature of the business: Balancing relationships and contractual agreements with both property owners and renters can leave property managers open to litigation from all sides. To mitigate this, Burger outlined five common mistakes property managers make and five ways they can protect themselves.

Mistakes

1. You don’t have a written property management agreement. Burger calls this “your greatest protection.” The agreement should clearly state your responsibilities as the property manager and your client’s responsibilities as the property owner. Do not perform work that is not listed in the agreement as part of your management duties.
2. You’ve pieced together a makeshift lease agreement. “Don’t take a lease agreement you found somewhere and edit it to meet your needs,” Burger said. Draw up a lease with your attorney, and make sure it complies with laws while still meeting your needs.
3. You don’t put the security deposit in a proper trust account. If you hold a renter’s security deposit for the owner yourself, you may be required to pay interest on it.
4. You don’t make the tenant sign a move-in and move-out form. “You should personally do a move-in and move-out inspection and checklist with the tenant,” Burger said. You need to be able to document the condition of the apartment at both move-in and move-out times. Take photos and video, and save them to the tenant’s file. One thing many property managers overlook is documenting the serial numbers of a unit’s appliances. That way, if tenants take appliances with them when they move out, you can track them down more easily.
5. You incorporate a lease-purchase agreement into the lease agreement. Should an issue with a tenant arise that lands you in court, a judge could have a hard time determining whether the property is purchased or leased — thus making it more difficult to determine what your rights are as the property manager. Keep lease-purchase and lease agreements separate.

Successful Strategies

1. Keep properties close together. You might not have the staff to manage properties that are too far apart from one another. Distance shouldn’t be a factor that makes it difficult for you to keep an eye on your inventory. Generally, properties shouldn’t be more than 25 or 30 miles apart, Burger said.
2. Select tenants very carefully. “I would love to believe that I am the best judge of character there is, but I’m not,” Burger said. “It’s unfortunate when people you think will prove to be good tenants turn out not to be.” Have strict criteria for renters to meet, and do not make exceptions.
3. Be visible to tenants. Keep in communication with tenants, and be responsive to their needs. Most times that will give you an opportunity to swing by and check on the property.
4. Stay in touch with the client. “We’re not just collecting rent,” Burger said. “We’re there to preserve, protect, and enhance the owner’s investment.” She said her company once set up roof inspections for all its clients for $250 apiece, giving the owners a chance to opt in or out. “If the owner knows you can add value like this, you can turn that client into a referral,” Burger said.
5. Charge what you’re worth. Many will be tempted to lower their fees to land the deal. But that can backfire. “You need to be compensated for the work you do,” Burger said. Don’t sell yourself short, and if you do extra work, charge accordingly for it.

—Source REALTOR Mag

Home Sales Struggle, But Improvement Seen

Home Sales Struggle, But Improvement Seen. Image courtesy of phanlop88 / FreeDigitalPhotos.net

Two years into the economic recovery, residential home sales are struggling. But because of demographic and other trends, long-term growth prospects remain good, NAR Chief Economist Lawrence Yun said Thursday at the REALTOR® Party Convention & Trade Expo.

At the Residential Economic Issues & Trends Forum, Yun forecast 4.9 million existing-home sales this year, a roughly 3 percent drop from last year and a signal that the recovery in home sales that started two years ago is flagging.

Weakness in the broader economy is part of the problem. Economic growth turned negative in the first quarter of 2014, by about a percentage point, in part because severe winter weather hampered consumption. The rest of the year should be better, Yun said, but growth will remain tepid: only about 2.1 percent rather than the 3 percent that analysts would like to see.

Home sales were hit by the cold weather, too, although a portion of the stalled activity is expected to return now that the weather is improving.

The more fundamental problem is the continuing tough time households face getting financing and the lack of inventory, which is hurting affordability by keeping prices rising at a time when interest rates are going up as well.

Yun is forecasting a national median home price of $209,000 for this year, up from $197,000, and an average rate of 4.7 percent for a 30-year, fixed-rate loan. The rate remains historically low, but the days of an accommodating Federal Reserve interest-rate policy are ending and the rate could get close to 6 percent next year.

What’s needed is a ramp up in new-home starts to about 1.7 million a year, the historical average, from about 1.1 million now, Yun said. Until there’s more inventory, sales volume will remain low and prices will keep rising.

To get more starts, community banks—the traditional sources of credit for small builders—need to pick up their lending. Although there are lagging signs that lending might be poised to head up, uncertainty over banking regulations enacted after the financial crisis is contributing to the status quo.

For the long term, the picture is much brighter, because there is a lot of pent-up demand from young adults who can’t overcome income and financing hurdles to buy and increasing interest from international buyers who want to purchase in the United States. As the broader economic recovery strengthens, with the creation of more and better-paying jobs, the gap between the country’s growing population and flat-lining home sales will narrow.

For 2015, Yun is forecasting 5.2 million existing-home sales, 710,000 new-home sales, up from 510,000 this year, and a home-sale dollar-volume increase of 11 percent from the year before.

Looking further ahead, as the global population nears the 9 billion mark at the beginning of the next decade, destination cities including New York, San Francisco, Washington, Boston, Chicago, San Diego, Dallas, and Miami, among others, will see ever-increasing home values as global buyers stoke demand.

—Source, REALTOR® Magazine