2014 Should be a Good Year for the Real Estate Market
If potential homebuyers thought 2013 was a difficult year for home buying they may be relieved by what 2014 has in store for the real estate market. With the elections happening in the New Year the federal government will see changes to the rules and regulations currently making their way through the house and senate.
There will be a lot of talk and promises made during campaign speeches, but big issues like the replacement of Fannie May and Freddie Mac or comprehensive tax reform will take a back seat as leadership thinks these ideas are too unlikable to handle in an election year. Serious consideration of a broad-based tax reform will have to wait until the next election sweep. Mortgage interest, capital gains and other key real estate provisions should be safe until then.
The fates of Fannie and Freddie may well be the same story: Though committee hearings were held this year in both the Senate and the House on how to phase them out and create a replacement secondary mortgage market system, the bills that have emerged are philosophically so far apart that the gap cannot be bridged in the 2014 election year.
Republicans in the House want little or no federal role in mortgage finance other than a pared-down Federal Housing Administration. Senate Democrats insist on a strong federal financial backup for the mortgage market, and more than a few would like to retain something along the lines of Fannie and Freddie, perhaps combined.
Meanwhile, Fannie and Freddie are generating surpluses and appear to be set to keep minting money by the billions for the federal Treasury. In a time of ballooning deficits, who is going to stop that?
Get ready for some exceptionally bumpy mortgage market conditions in the first half of 2014 as lenders to figure out how to comply with the new qualified mortgage and other rules taking effect, beginning in January. Look for longer processing times, more rejections on QM grounds, all complicated by likely increases in mortgage interest rates as the Federal Reserve’s “tapering” of its securities purchases begins to phase in. More contracts written on home purchases are likely to fall through, and applicants are certain to find early 2014 a more challenging marketplace than they would have encountered in 2013.
The Consumer Financial Protection Bureau will take a tougher approach on key issues with realtors, builders, lenders, equal credit opportunity and mortgage servicing complaints. The bureau will pick up on the Obama administration’s evolving shift to the left in domestic policy.
The overall real estate market in 2014 is likely to be the first “normal” year in terms of sales, inventory and price changes since the bust in 2008. Record low inventories in multiple markets, especially California raised home prices abnormally in 2013.
Listings should be less of a problem in 2014 for most of the country as sellers have more confidence they will get fair pricing and millions of previously underwater owners have crossed into positive equity status in recent quarters.
Unless rates spike or there is a market crash on Wall Street, there will be a better balance between supply and demand making 2014 potentially a great year for real estate.
Excerpted from an article by Ken Harney: “Follow the mortgage money, why 2014 should be a good year for real estate.”
According to the S&P/Case-Shiller 10 and 20-City Home Price Indices released Tuesday, the U.S. Housing Market is on a roll based on year-over-year increases in average home values, but month-to-month results were mixed.
- Dallas, Texas posted its highest rate of annual growth since 2000.
- Chicago’s average home price rose by 11.00 percent, its highest annual gain since December 1988.
- The 10 and 20-City Indices posted their best November home prices since 2005.
Top year-over-year gains in home prices included Las Vegas, Nevada at 27.30 percent, San Francisco, California at 23.20 percent, Los Angeles, California at 21.60 percent and San Diego, California at 18.70 percent. Atlanta, Georgia rounds out the top five cities with a year-over-year increase in home prices of 18.50 percent.
The annual readings for the S&P/Case-Shiller 10 and 20-City Housing Market Indices in November suggests that U.S. markets are strong enough to sustain momentum in spite of rising mortgage rates. The month-to-month results show that both indices decreased by an incremental 0.10 percent in November, 2013.
Keeping in mind the traditional slump in home sales during the winter and holiday season, lower month-to-month readings were neither unexpected nor disappointing.
Eight of the nine top cities posting the highest month-to-month growth in home prices were located in the Sun Belt. San Diego, California and Minneapolis, Minnesota home prices remained nearly flat after decreasing in October.
Nine of the 20 cities surveyed posted positive month-to-month growth in home prices. Of the nine cities, only Boston, Massachusetts and Cleveland, Ohio were not located in the Sun Belt.
S&P/ Dow Jones Index Committee Chairman Expects Slower Growth In 2014
David Blitzer, Chairman of the Index Committee at S&P Dow Jones Indices, noted that November’s month-to-month readings for the 10 and 20-city home price indices indicated that Phoenix, Arizona, Los Angeles, California and Las Vegas, Nevada, had each posted 20 or more consecutive months of rising home prices.
While positive in his remarks about increasing home prices, Mr. Blitzer also noted that indicators suggested a slower rate of growth during 2014.
This aligns with previously released economic news citing uncertainty about mortgage rates that may continue to rise as the Federal Reserve continues tapering its monthly asset purchases under its quantitative easing program.
The Fed’s FOMC meeting is scheduled to end Wednesday, January 29, at which time the committee’s customary statement will indicate whether or not the Fed’s monthly asset purchases will be reduced from their current level of $75 billion.
On the positive side, Chairman Blitzer said that the low inflation rate (1.50 percent in 2013) and rising home prices are helping homeowners accumulate home equity at a faster pace.
Locally, here in South Orange County, home selling activity has been a bit stronger than our typical Winter/Holiday season. In addition, our current inventory of available listings is considerably higher than it was at this time last year, which should make for a more normal market for the Spring season, for our area, which – believe it or not – starts in about a week and a half.
Once the Super Bowl activities evaporate, the following weekend is typically the start of our most active period of the year, gaining strength each week into and through Summer, before it starts to poop out, come September. Based on my 37+ years of local experience, I foresee a fairly normal buying season, good for both buyers and sellers. For sellers, I look for steady but slow appreciation, likely in the 5% range by the end of Summer, and for buyers, I look for plenty of inventory to choose from, meaning not so many “multiple offer” situations, except for just those few exceptional properties, that are also priced competitively.
If you’re going to be participating in this year’s local real estate market, it should be a “normal” one. It would be my great pleasure to assist you. Give me a call, or shoot me an email, and let’s talk about your real estate plans.
An article by Brena Swanson, of HousingWire.com, January 28, 2014
When rising homes prices are not enough. Positive equity is not necessarily a barrier to foreclosure
“Although rising home prices have pushed many homeowners out of negative equity, escalating values are not a panacea for all distressed borrowers.
A growing percentage of borrowers are now entering foreclosure with positive equity in their homes, a new report from Fitch Ratings claims.
According to the study, the percentage of borrowers entering this process with equity has roughly doubled in the last two years.
While equity continues to play a significant role in borrower payment behavior, income and the ability-to-pay also remain key factors.
In September 2013, RealtyTrac discovered that 24% of all homeowners who are in some stage of foreclosure have at least some positive equity built up. By December 2013, that number continued to rise and 31% of people in the foreclosure process were struggling despite the presence of positive equity.
“One of the things that stood out is that the percentage of homeowners in foreclosure who have positive equity is increasing,” said Daren Blomquist, vice president atRealtyTrac. “That was even more surprising because that equity is a lifeline that homeowners can use to avoid foreclosure.”
Many of the borrowers with equity are unable to sell their properties because the proceeds of the sale would not be enough to cover the mortgage amount, the closing costs and the backlog of missed payments.
“Loans entering foreclosure today have missed roughly two years of payments on average, more than double the pre-crisis, long term average,” Fitch Ratings said.
Another factor is that the composition of borrowers entering foreclosure is changing. The percentage of loans entering foreclosure, which had been cash-out refinance at origination increased steadily since 2008, and now account for 50% of the total.
Due to today’s tighter loan underwriting and origination guidelines, borrowers are unable to tap the equity in their homes to cover expenses.
“Also, the loan-to-value and cash-out dollar limits are significantly lower than what was available during peak-vintage years and, despite the improved equity situation, few of these delinquent borrowers could materially benefit from further cash-out refinancings,” Fitch Ratings said.
Approximately half of all loans that recently entered foreclosure have been unsuccessful in at least one prior loan modification. In addition, the percentage of loans entering foreclosure that had been underwritten to subprime guidelines is increasing.
Fitch Ratings did emphasize that there is a chance some portion of borrowers currently in the foreclosure process obtained additional and/or secondary financing subsequent to the origination of their first liens, which could be factoring into their ability to pay.
“I think it is hard to know if this is a glass half full or glass half empty type thing. These are homeowners who now have a lifeline to avoid foreclosure. But the other side of the coin is just that equity is not enough to prevent foreclosure,” Blomquist said.
“I think the real question is are these homeowners that just do not know or are they homeowners that are in such a tough situation even equity is not going to help them avoid it,” he explained.” ( End of Brena’s article.)
From Bob Phillips: Looking for solutions? I am completely trained, and experienced, with distressed property situations, whether helping find a lender who might be able to refinance you, help you with a possible loan modification, or to get your property sold, in a way that satisfies all the lenders, and affords you some dignity of not having to go through a foreclosure. I have been able to stop foreclosures sales with as little as a week to spare. In many cases, my clients have been able to emerge from such scenarios with some cash incentives to move, and/or an ability to buy another home in as little as one year.
If you are having difficulty with your mortgage, there may be options you’re not aware of. Give me a call, and let’s see if we can solve your dilemma.
Last week was an action-packed week for economic news, and all of it was packed into Thursday:
Weekly Jobless claims came in at 326,000 which was lower than the expected 330,000 new claims. This week’s claims were higher than the prior week’s 325,000 new jobless claims filed.
The NAR released its Existing Home Sales Report for December; sales of existing homes sold at a seasonally adjusted annual rate of 4.86 million.
December’s reading fell shy of estimates of 490 million existing home sales, but the estimate was based on November sales that were later adjusted downward to 4.82 million sales of existing homes. Existing home sales for 2013 came in at 5.09 million sales, a 9.10 percent increase over 2012 sales.
The median price of a pre-existing home reached $198,000 in December, with the median price for all of 2013 at $197,100, which was an increase of 11.50 percent over the average price for an existing home in 2012.
Pent-up demand and a lingering shortage of available homes likely contributed to last year’s rapid rise in home prices.
Mortgage Rates Mixed, FHFA Reports Slower Gain For Home Prices
Freddie Mac reported mixed results for average mortgage rates in its weekly PMMS report. The rate for a 30-year fixed rate mortgage fell from last week’s 4.41 to 4.39 percent.
The average rate for a 15-year mortgage dipped by one basis point to 3.44 percent; discount points for both 30 and 15-year mortgages were unchanged at 0.70 percent.
The average rate for a 5/1 adjustable rate mortgage rose from 3.10 to 3.15 percent with discount points unchanged at 0.50 percent.
FHFA, the agency that oversees Fannie Mae and Freddie Mac, released its Home Price report for November 2012. This report is based on information gathered about homes with mortgages owned or backed by the two firms. According to FHFA, home prices increased by 7.60 percent year-over-year.
Home prices moved up by 0.10 percent in November as compared to a rate of 0.50 percent in October.
Leading Economic Indicators Suggest Economy Strengthening
The Leading Economic Indicators report for December moved up by 0.10 percent, which pushed the index to a reading of 99.4. December’s reading represented the sixth consecutive month that the index gained ground.
Economists associated with the LEI report note that while steady growth is expected during the spring, the economy will likely encounter a few obstacles including rising interest rates and possible political gridlock over raising the national debt ceiling.
This week’s economic news is set to include New Home Sales, the Consumer Confidence Index, and Weekly Jobless Claims. Freddie Mac’s PMMS mortgage rates and reports on consumer spending and consumer sentiment round out the week’s news.
The FOMC statement expected after the committee concludes its meeting on Wednesday is expected to provide news of the Fed’s plan for further tapering of its quantitative easing program.
The kitchen is one of the most important rooms of your home. It is where you prepare all of your meals and it is often a hub of family activity. When you host a party, the action often ends up in the kitchen.
Where drinks and snacks are enjoyed into the early hours of the morning. It’s crucial that your kitchen functions well because you will use it every day, but you also want to make it beautiful and stylish.
Renovating and decorating your kitchen can also be one of the best ways to increase the resale value of your home. If you are planning on a kitchen makeover:
Here Are Some Dos And Don’ts To Keep In Mind:
- Don’t forget to consider the proportions of everyone who will use the kitchen. Don’t choose kitchen stools that are too high for your kids to sit on, or cabinets that your wife cannot reach.
- Think carefully about storage space. What do you need to store and how much room do you need? You might want to store away your blender and toaster and other small appliances as well, so that they don’t have to clutter up the counter all the time.
- One of the hottest trends of 2014 is a simple and elegant white and cream kitchen. A neutral color like this can be accented with vibrant splashes of color, such as a bright fruit bowl or a wall hanging. If you are selling your home, a neutral tone will appeal more to the majority of buyers.
- Another popular trend is green and environmentally sustainable elements within the kitchen. Recycled, renewable and energy-efficient products are in abundance at the moment and these options will not only save you money, they will be much better for the environment.
- Instead of placing your microwave on the counter, it makes a lot more sense to fit it in seamlessly with your cabinets. This will allow you to free up counter space in your kitchen.
- Be careful not to over design – it’s a common decorating mistake. Keep things simple and know when to stop, so that you don’t have a kitchen that looks overwhelming and cluttered.
These are just a few tips to keep in mind if you are giving the kitchen of your home a makeover for 2014.
Houseplants are great for decorating. They can brighten up any room. Plus, houseplants can increase the air quality in a room. That makes you happier, healthier and reduces stress.
Speaking of stress, these plants won’t create any at all. All of the plants on this list are great at producing oxygen and require very little care.
10. Heartleaf Philodendron
A tough plant that’s a good filter for toxins like formaldehyde, Heartleaf Philodendron makes a great houseplant. The only downside is that it’s toxic to eat, so it may not be the best choice for those with kids or pets. But if you can control your appetite, the Heartleaf Philodendron is an excellent indoor houseplant for air quality.
9. Snake Plant
Also called Mother-in-Law’s Tongue, the Snake plant thrives in the bathroom. It loves the steamy conditions and can do without much light. It’s a great air filter as well.
8. Bamboo Palm
It thrives indoors and requires little maintenance. The Bamboo Palm even produces flowers and berries.
7. Red-edged Dracaena
Another great air filter, the Red-edged Dracaena is interesting because of its size. It can grow all the way to the ceiling. This beast of an oxygen-producing plant makes a great addition to the living room.
6. Chinese Evergreen
This is one of the prettier options. With interesting leaf colorings as well as berries and blooms, the Chinese Evergreen will contribute to your décor as well as your air quality.
5. Peace Lily
The Peace Lily only needs water about once a week. This is a great houseplant for air quality, and it’s easy to care for.
4. Devil’s Ivy
This air purifier looks great in a basket. Try hanging it in the garage.
3. English Ivy
English Ivy is an excellent filter plant. It’s been shown to filter out formaldehyde, which can be found in some cleaning products, and it even filters fecal matter particles (I bet you didn’t even know there were any of those in your house). English Ivy is an invasive species though. It’s fine to keep inside as a houseplant, just make sure it doesn’t end up in the yard.
2. Weeping fig
A type of Ficus, this is a great houseplant for air quality. It’s a bit bigger than the others though. It would fit best in the living room.
1. Spider Plant
The Spider plant is nearly impossible to kill. Even if you’ve been a plant murderer in the past, try this one. It will do wonders for your air quality, and I promise you won’t kill it.
Houseplants have been shown to reduce stress in the home. Combine that with higher air quality and your quality of life can be greatly improved with the help of a new green friend.
Even if you don’t have a green thumb, you can take care of these. These are great houseplants for air quality.
“A professor stood before his philosophy class and had some items in front of him. When the class began, he wordlessly picked up a very large and empty mayonnaise jar and proceeded to fill it with golf balls. He then asked the students if the jar was full. They agreed that it was.
The professor then picked up a box of pebbles and poured them into the jar. He shook the jar lightly. The pebbles rolled into the open areas between the golf balls. He then asked the students again if the jar was full. They agreed it was.
The professor next picked up a box of sand and poured it into the jar. Of course, the sand filled up everything else. He asked once more if the jar was full.. The students responded with a unanimous ‘yes.’
The professor then produced two Beers from under the table and poured the entire contents into the jar effectively filling the empty space between the sand. The students laughed..
‘Now,’ said the professor as the laughter subsided, ‘I want you to recognize that this jar represents your life. The golf balls are the important things—-your family, your children, your health, your friends and your favorite passions—-and if everything else was lost and only they remained, your life would still be full. The pebbles are the other things that matter like your job, your house and your car.. The sand is everything else—-the small stuff.
‘If you put the sand into the jar first,’ he continued, ‘there is no room for the pebbles or the golf balls. The same goes for life.
If you spend all your time and energy on the small stuff you will never have room for the things that are important to you.
Pay attention to the things that are critical to your happiness.
Spend time with your children. Spend time with your parents. Visit with grandparents. Take your spouse out to dinner. Play another 18. There will always be time to clean the house and mow the lawn.
Take care of the golf balls first—-the things that really matter. Set your priorities. The rest is just sand.
One of the students raised her hand and inquired what the Beer represented. The professor smiled and said, ‘I’m glad you asked.’ The Beer just shows you that no matter how full your life may seem, there’s always room for a couple of Beers with a friend.”
From an unknown source – I thank you, whoever you are.
This past year has seen an extraordinary comeback for real estate prices in South Orange County. Some homeowners now have some equity in their home for the first time in the past 6 or 7 years, while fortunate others have seen their equity grow by a substantial margin. The average home’s value has increased by over 20% over the past 12 months.
Are you thinking of selling your house in South Orange County? Want to get an excellent idea as to its value? Give me a quick call or text at (949) 887-5305, or shoot me an email at BobPhillipsRE@gmail.com, and you’ll receive a free, no obligation estimate of its worth. All I need is your address, ( Feel free to tell me a little about its features, if you’d like.) and a way to get back to you – phone, or email.
A new article from one of my favorite real estate bloggers, Tara-Nicholle Nelson, a Nationally renowned attorney/real estate expert from the Silicon Valley area.
“If you’re planning to sell your home, chances are good that you’re seeking a lifestyle level-up: you want to bring your home’s size, shape, features, location, maintenance and financial obligations into better alignment with your life – or your future. Making sure that you execute a home sale that actually does align your home with your life requires a lot of prep work.
For most home sellers, it’s the property preparation work that is top of mind. You’ve gotta pick an agent, let them come and tell you all the junk that has to go, pack up that stuff and then let the painters and housekeepers do their job. Then, and only then, the stagers can begin, telling you to pack up all the rest of your stuff so they can create a really clutter-free, updated, neutrally-chic vignette of an irresistible life in your home for the next folks. (Be forewarned – sellers have been known to love their post-staging house so much they question their decision to move!)
But there are a number of financial prep steps that also need to happen to ensure your home’s sale actually does improve your life the way you hope it will, without creating any surprise dramas or burdens. Here are four of those money-do’s to add into your list of home sale prep steps:
1. Get clear on your current credit status. I know, I know – checking credit is an ever-present item on a home buyer’s prep checklist. But if you’re selling a home, chances are good that you’ll want to buy a replacement one. The best time to spot credit glitches and hitches – bills you need to pay down, rogue errors and the like – is not when your current home is on the escrow countdown. If you’re thinking you want to sell your home this year, now is the time to check your credit, spot issues and begin fixing them.
Some credit rehabilitation projects take months, even a year, to complete – so the earlier you get started, the more time you’ll have on your side. And this advice is for everyone – even if you think you have stellar credit, check your reports far enough in advance that you can spot and dispute any erroneous information that might have found its way there. Get started by visiting AnnualCreditReport.com.
2. Scope out your minimum desired decrease – or maximum tolerance for increase – in housing costs. Often times, we eyeball these things: rates are still good, you just got a raise, you can well afford your current payment, looks like your home is worth more now and those houses up the hill don’t cost that much more – time to move up, right?
Maybe so. But maybe no. There’s a lot more to account for in this equation. You need to factor in what the actual increase in your mortgage payment will be, but also how much you’ll net on your home, how much cash you’ll need to close on your next one, and how much your utilities, property taxes, insurance and other home-related expenses might increase if you move up.
Same with downsizing: if you downsize from a home you’ve live in for decades to a brand new, but smaller, condo – you could actually see an increase in property taxes in some areas and get an HOA bill you never had before, to boot. By no means does that mean it’s not the right move to make: the increased bills might be offset by decreased heating, cooling and maintenance, and the fact is that the smaller, new place might just be the right size and style for the next stage of your life.
But you can’t know that’s the fact until you have clarity about how much you can truly, sustainably, wisely afford to spend on your next move. To get this clarity before you list, you’ll need to enlist
your agent – who can help you understand what sort of downsize or move-up property you can get at various price points
your mortgage broker – they can help you understand various financial scenarios for purchase prices, down payments and monthly payments – including property taxes
your tax advisor – who can help you understand the differential impact of various next-home scenarios on your income tax situation, and
your financial planner – if you don’t have one, it might be worth engaging one to help you make a wise financial move as you carry out your next home move. A fee-based financial planner can help you get clarity around your current income and expenses, your debt, as well as your savings and investments – this insight allows you to wisely time your move vis-a-vis your other life and financial goals.
3. Get inspections and key reports in advance (then read them). The potential for big, bad financial surprises is the scariest element of any real estate transaction. And when you’re selling your home, that potential comes in the form of surprise property problems that complicate your sale, surprise liens and taxes that must be paid to close the deal and even surprise HOA problems that don’t manifest fully until the buyer gets HOA disclosures.
One way to limit your financial exposure to these sorts of surprises is to simply decide not to wait to gather this information until a buyer is on the hook. In many markets, it’s now standard operating procedure for sellers to actually have home, pest and/or roof inspections – and any governmentally-mandated inspections – conducted before the house even goes on the market. This empowers you, the seller, to either begin conducting repairs or to fully disclose what needs doing and list your home in as-is condition. You might not get the same price for it as you would have without the reports, but you will minimize the likelihood of tense negotiations and falling out of escrow – things that are common when a buyer gets a mid-transaction surprise of negative property condition reports. Ask your agent for advice about whether obtaining any or all of these inspection reports in advance makes sense in your situation.
Additionally, work with your agent to get early copies of your home’s preliminary escrow report and HOA disclosures. If you have outstanding liens or there are HOA issues that will make it difficult to carry out a sale, better to know – and solve for – them sooner than later.
4. Create a financial plan for your home’s sale. “It takes money to make money,” they say. What they didn’t say is that it also takes money to turn your home into the cash your equity represents. So I’ll say it:
When you bought your home, the seller paid both agents’ commissions. Now that you’re selling, it’s your turn – make sure you calculate the average 5-6% of the purchase price that you’ll need to cover your listing agent’s work, and the buyer’s agent’s, too.
Depending on the condition of your home, you may need to spend anywhere from a few hundred dollars to more than a few thousand getting it market-ready, whether you decide to do a DIY-fix-it sweep or to hire the best stager in town to showcase your showplace.
Depending on how much financial margin you have – or need – and on what your advance inspections revealed (if you did them – see #3, above), you might want to build in a line item for a repair credit to offset the cost of any repairs that come up during escrow.
Your agent can help you project other costs of selling your home, like property transfer taxes and paying for the buyer’s home warranty – costs customarily covered by the seller vary widely state-by-state, and even across counties within the same state. Your escrow holder and agent can also get you up-to-speed on precisely how much of your home’s sale price will go to pay off your mortgage(s), property taxes and any other liens.
Your final money-do is to actually document your financial plan and budget for selling your home. Many agents will sit right down with you and help you do this; if yours will, take them up on the offer. It also creates a perfect time and space to get educated about the flow of the home selling process and standard bargaining practices in your area. The goal is to get a clear, concrete understanding of the dollars that will flow in and out during this major life change, so you can make clear, calm decisions throughout the process that set you up for success long after closing.” ( End of Tara-Nicholle’s article.)
For more ideas, give me – Bob Phillips – a call at (949) 887-5305, or shoot me an email at BobPhillipsRE@gmail.com, and let’s talk about real estate.