10 Steps to Finding Your First Rental

February 6, 2013 By Leave a Comment

Apt. for rent

When you’re looking for an apartment for the first time, it can be overwhelming. The best way not to panic is to break the process down into 10 sequential steps. The timeline will mostly depend on how long it will take you to save the upfront cash you’ll need, but after the money is in the bank, you should be in your own place in no time.

Determine your price range

There are two common ways to do this: You can divide your monthly take-home income by three. (For example, if you take home $1,800 a month after taxes, you could afford a place that costs up to $600 per month.) Or divide your annual gross income (before taxes and other deductions) by 40. (For example, if you made $40,000 a year, you could afford a place that cost up to $1,000 per month.) Either way gives you a rough idea of your maximum budget.

Start saving

Before long, you’ll need to put down a security deposit (usually equal to one month’s rent), plus the first month’s rent. And that doesn’t even include application fees and credit-check fees you may be charged. So start saving now, particularly because moving itself can cost anywhere from $200-$2,000, depending on the distance of the move and how much you do yourself.

Check your credit

Management companies will be checking your credit once you start applying. You don’t want to be caught flat-footed, so check if there are any blemishes on your report at the free Annual Credit Report website, which is sponsored by the federal government. If you have great credit, you have nothing to worry about. If your credit has blemishes, you may need to ask a friend, parent or relative if they would be willing to serve as your co-signer on a lease. In any case, be ready to explain your low score to potential landlords and what you are doing to fix it.

Settle on a neighborhood

Whether you’re moving crosstown or across the country, the best way to decide on a neighborhood is to visit. Also, ask friends who already live in the neighborhood what they think. Another thing to consider is affordability — we’d all love to live in SoHo, but most of us can’t afford it. In other words, be realistic. To determine the cost of a neighborhood, go online to see what an average 1- or 2-bedroom runs. A good rule of thumb is that at least a third of the listings in your neighborhood of choice should be within your budget. If it’s any fewer than that, you’re going to have limited options.

Start looking

Find listings online, but also remember to network among friends and colleagues, respond to “For Rent” signs you see in-person and cold-call management companies that have appealing buildings. If the rental market in your chosen city is really tight, you may need to use a broker. That will typically cost one month’s rent, so to move in you’ll need to have three months of rent in cash. Ouch! Also, be wary of red flags. If you know a particular landlord or management company is involved in poor practices, don’t even bother looking at their places.

Another word of advice: If something seems too good to be true, it probably is. When dealing with a potential landlord, the conversation should be respectful and straightforward. And remember to always Google the address of the building as a final precaution.

Put in an application

Once you find a great place, don’t get cold feet. If it’s within your budget, in a neighborhood you love and with a solid management company, then apply. If your credit score is good — or you have a co-signer lined up — you’re likely to get it!

Sign the lease

Your lease is a contract, so make sure you understand it. Often, if you have issues with certain points on the lease, you can alter or discuss them with the management company before signing. So read the lease carefully. A few things to look out for: the penalty for breaking the lease early, the policy for fixing issues with the apartment, how much notice you must give if you want to renew and the rules for getting your security deposit back.

Transfer/set up your utilities

Call the utility companies at least a week in advance, so you have a buffer in case you need to schedule an appointment. Other things to think about: You should get renter’s insurance before you move in, and you should also change your address with the USPS. Depending on where you’re moving, you may also need to register for parking stickers, change your driver’s license (if you’re changing states) and get a local library card.

Conduct a walk-through

During the walk-through, you need to document any pre-existing problems you find with the apartment, so that you’re not held liable. This means testing everything from the burners on the stove to the quality of the carpet to the functioning of the refrigerator. If anything’s off, document it. If the landlord needs to fix something, get it in writing. This is the best way to protect yourself, your future home and your security deposit.

Make the move

If you’re moving long distance, schedule movers several weeks in advance (prime dates book up quickly). If you’re finally moving out from your parent’s basement, they’ll probably help you pack up the station wagon and drive you! In any case, start packing early: It takes longer than you think, and if you’re not totally packed when the movers arrive, you’re courting disaster. Also, label your boxes and make sure you have staples such as toilet paper, light bulbs and cleaning supplies at the ready. You’ll need them right away when you move in.

This may all seem like a lot, but if you break it down step by step, finding and moving to a new apartment becomes very manageable. And nothing beats that great feeling you’ll have when you first walk into own apartment.

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Improve salability of home riddled with permit issues

February 1, 2013 By Leave a Comment

REThink Real Estate

BY TARA-NICHOLLE NELSON, THURSDAY, JANUARY 31, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=43156006" target="_blank">Kitchen remodel</a> image via Shutterstock.
Kitchen remodel image via Shutterstock.

Q: I’m having trouble selling my place because I added a second kitchen in what was the garage without permits. My bad, but I will have to take it out to get conventional lending. It’s a two-story house with one bedroom (with a walk-in closet), a living room and kitchen in the upstairs unit. The downstairs has a kitchen and dining area in the converted garage space, another room that can be used as a bedroom with closet space under the stairwell, and a three-quarter bath.

This is on one acre of horse property on a dirt road with a section of state land across the street. It was listed last summer and had four offers within a month, but because I didn’t have the permits for the second kitchen no lender will finance the place.

Here’s my question: Should I spend the money to install a real closet in the downstairs bedroom, or just leave it as it is? –Jan

A: It sounds like the big selling point of your place is its fundamentals, the land, the horse zoning and the location near the undeveloped/state land. But as you’ve been through this odyssey with trying to get this place sold, I can tell that you are in danger of getting off track and unfocused with respect to how you move forward. Here’s how I’d suggest you avoid that:

1. Solve for the real problem. Stay focused on solving for the real problem that stopped you from selling the place the first go-round. If you had four offers right off the bat when you listed it, I would say that adding a closet is really not going to increase your chances of selling the place this go-round. Stay strategic and devote your additional investment and preparation efforts to what really matters: rendering the place mortgage-worthy and salable by either removing the second kitchen or obtaining permits for it.

That said, if you happen to know that the downstairs kitchen was a big selling point for the buyers who made offers before and you decide to remove it before relisting the place, then I’d say you can put the closet conversation back on the table. It might, in fact, limit how some buyers might like to use that living space, but I’d first talk with your agent and get her sense for whether the earlier buyer feedback suggests that a closet would be greatly valuable in that room to the average buyer for your property. I just doubt that a closet will be a major deal maker or breaker on a property that already had such a high level of buyer interest without the closet.

2. Don’t make the same mistake twice. To carve out an exception to my earlier advice, if installing a closet gets you an additional, legal bedroom, then you should consider doing it. That would allow you to list the home as a two-bedroom vs. a one-bedroom — and that does have major, incremental buyer-attracting value. But for that to happen, you’d have to apply for permits to turn the space into a bedroom with a closet. The fact that it is under a stairwell makes me suspect that it might not qualify for bedroom status, but talk that over with your agent and a local, licensed contractor.

And be aware that if you do apply for permits to turn the open space into a bedroom, you could be opening up a can of worms by inviting inspectors into the property who may begin to require other upgrades of the property to current building code standards. Given that you’ve heavily modified the home already without permits, this could be a train you’ll wish desperately you could put back in the station — and might not be worth the risk, even if you do think you could get an extra legal bedroom out of a closet addition.

3. Don’t assume removing the kitchen is the only solution. Allow me to add one more layer of complexity to this decision tree you face. Is it possible that you can get permits for the downstairs kitchen? Talk with your agent. If she feels like the property will get just as much buyer interest and just as many offers if you just pull the kitchen out, because of the nature of the place, then I’d say you should do that.

But if the downstairs “unit” was a primary reason buyers were interested last time, talk with your agent and contractor about whether it’s possible to cost-effectively get the kitchen permitted. If so, consider going that route, but do keep in mind the reality that applying for permits on the kitchen might expose you to additional inspector demands, like upgrades to electrical and other systems. So make sure you have a trusted, legitimate contractor on board who can tell you in advance what such demands would likely be.

Tara-Nicholle Nelson is a real estate broker, attorney and the author of two critically acclaimed books on real estate. Tara also speaks and writes on the art and science of life transformation at RETHINK7.com.

Courtesy of your Arcadia Real Estate Agent

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Common surprises in real estate negotiation

January 28, 2013 By Leave a Comment

When contingencies are involved, expect the unexpected

BY DIAN HYMER, MONDAY, JANUARY 28, 2013.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=22697938" target="_blank">Underwater minefield</a> image via Shutterstock.Purchase offers usually aren’t accepted as written. Commonly, buyers and sellers engage in the equivalent of a tennis match, counter offering back and forth until they meet a mutually agreeable purchase contract. At this point, you might be inclined to think the negotiation phase of the transaction is over.

That may have been the case decades ago. But the home sale process has become more complicated over the years. Today, it might be more appropriate to say that the negotiations are over when the transaction closes. That is, if there aren’t any after-closing issues, like a leaky roof that wasn’t disclosed that could require more negotiation.

After a purchase contract is signed — including all the addenda and counteroffers — it is said to be ratified. A ratified contract is binding on both parties and usually can’t be unilaterally changed by one party without agreement from the other party. Any modification to a ratified purchase contract needs to be in writing. Verbal agreements to sell real estate are not binding.

Most purchase contracts include contingencies that provide buyers a time period to comply with certain parts of the transaction. The most common contingencies are for inspections and investigations, loan approval, appraisal of the property, and the sale of another property.

Usually, if the buyers use their best efforts to satisfy these contingencies but are unable to do so, they can withdraw from the contract without penalty and have their good faith deposit returned to them.

You should fully understand any purchase offer you sign as well as the impact of the buyers removing or not removing contingencies before you sign the contract. Not all contingencies contain the same language.

For example, some inspection contingencies give the sellers the right to remedy a defect; others allow the buyers to withdraw from the contract for any reason at the end of the inspection contingency period. Any questions should be directed to a real estate attorney.

HOUSE HUNTING TIP: Even though the ratified contract is legally binding on both the buyer and seller, circumstances can change during the transaction that may result in renegotiation. The most common occurs when the buyers’ inspection contingency is due. If buyers’ inspections reveal new information about the property, the buyers may agree to remove the inspection contingency but only if the sellers repair defects or contribute financially to repairs.

This puts the contract in limbo and requires good faith negotiation to salvage the transaction. Otherwise, the buyers and sellers agree in writing to cancel the contract. The sellers put their home back on the market and the buyers look for another home to buy.

Not all buyers renegotiate the contract when the inspection contingency is due. If the sellers have provided presale inspection reports and thorough disclosures before the buyers made an offer, it’s less likely that the buyers will make further requests from the sellers.

Another trigger for further negotiations can occur when an appraisal ordered by the buyers’ lender values the property at a price that’s lower than the purchase contract price. The effect of this is that the buyers’ lender will lend less than it said it would before the appraisal was done.

The buyers could ask for another appraisal, withdraw from the contract or try to negotiate a solution with the sellers. This might mean that the buyers agree to put more cash down, or they could ask the sellers to lower the purchase price, or a combination of the two. The goal is to reach a price that will work with the lower loan amount.

Buyers who feel they overpaid for the property may be more inclined to request a reduction to the appraised value and hold firm at that price.

THE CLOSING: If the sellers won’t agree, the transaction will fail.

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

 

Courtesy of your Arcadia Real Estate Agent

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Eight ways to improve your home appraisal

January 25, 2013 By Leave a Comment
  • By Lou Carlozo

WASHINGTON (Reuters) – When Kellie and Michael May decided to refinance their home in the New York suburbs, they wanted to take advantage of historically low interest rates. But before landing a new 30-year fixed-rate mortgage, they had to get through a home appraisal.

“It was a major stumbling block,” says Kellie May, who has owned the 4-bedroom, 3-bath colonial for seven years. Not that she and her husband were unprepared; they’d been through an appraisal for another refinance in 2010, so they knew to point out improvements they’d made to the 3,400 square foot home, and supply prices for other neighborhood properties that had sold recently.

But the appraisal came back roughly $70,000 less than the $1,230,000 the Mays were expecting, and too low to support their new loan.

They responded with a paperwork arsenal aimed at their lender, asserting that the appraisal had been based on faulty recent sales data. The loan squeaked through, after the bank crafted an exception for the Mays. It was able to do that because their loan was a jumbo loan, not subject to the more rigid underwriting standards they would have encountered if it were a conventional loan aimed at secondary buyers like Fannie Mae and Freddie Mac.

Low appraisals are becoming a bigger problem for many would-be buyers and refinancers as home values have started to stabilize and rise in some markets.

In Leesburg, Florida, for example, low appraisals have caused the cancellation of as many as 15 percent of home sales for local real estate broker Gus Grizzard.

“We are seeing higher price appreciation and are starting to run into appraisal problems,” said Charlie Young, chief executive officer of ERA Franchise Systems, a firm with a national network of real estate brokerage offices, including Grizzard’s. The National Association of Realtors reported on Tuesday that inventories of homes were low and the median price a home resale was, at $180,800 in December, up 11.5 percent in a year.

Appraisals are based on recent sales prices of comparable properties. And in rising price markets, those sales prices might not be high enough to support the newest deals. Young said there were many places in California reporting appraisal problems.

On Friday, the federal government issued new rules aimed at improving the appraisal process as it pertains to high-interest mortgages on rapidly appreciating homes.

But those rules don’t go into effect for a year, and don’t apply to most conventional loans. It pays to protect your own loan before the bank even thinks about sending that guy with the clipboard over to your house.

“The reality is that the appraiser is only there for 30 minutes at most,” says Brian Coester, chief executive of CoesterVMS, a nationwide appraisal management company based in Rockville, Maryland. “The best thing a homeowner can do to get the highest appraisal possible is make sure they have all the important features of the home readily available for the appraiser.”

Here are eight ways you can bolster your appraisal:

MAKE SURE APPRAISER KNOWS YOUR NEIGHBORHOOD

Is the appraiser from within a 10-mile radius of your property? “This is one of the first questions you should ask the appraiser,” says Ben Salem, a real estate agent with Rodeo Realty in Beverly Hills, California.

He recalled a recent case where an appraiser visited an unfamiliar property in nearby Orange County and produced an appraisal that Salem said was $150,000 off. “If the appraiser doesn’t know the area intimately, chances are the appraisal will not come back close to what a property is really worth.”

You can request that your lender send a local appraiser; if that still doesn’t happen, supply as much information as you can about the quality of your neighborhood.

PROVIDE YOUR OWN COMPARABLES

Provide your appraiser with at least three solid and well-priced comparable properties. You will save her some work, and insure that she is getting price information from homes that really are similar to yours.

Websites including Realtor.com, Zillow and Trulia offer recent sales prices and details such as the number of bedrooms and bathrooms in a home.

KNOW WHAT ADDS THE MOST VALUE

If you’re going to do minor renovations, start with your kitchen and bathrooms, says G. Stacy Sirmans, a professor of real estate at Florida State University. He reviewed 150 variables that affect home values for a study sponsored by the National Association of Realtors. Wood floors, landscaping and an enclosed garage can also drive up appraisals.

DOCUMENT YOUR FIX-UPS

If you’ve put money into the house, prove it, says Salem.

“Before-and-after photos, along with a well-defined spreadsheet of what was spent on each renovation, should persuade an appraiser to turn in a number that far exceeds what he or she first called out.”

Don’t forget to highlight all-important structural improvements to electrical systems, heating and cooling systems – which are harder to see, but can dramatically boost an appraisal. Show receipts.

TALK UP YOUR TOWN

If your town has recently seen exciting developments, such as upscale restaurants, museums, parks or other amenities, make sure your appraiser knows about them, says Craig Silverman, principal and chief appraiser at Silverman & Co. in Newtown, Pennsylvania.

DISTINGUISH BETWEEN UPSTAIRS AND DOWNSTAIRS

Many homeowners covet that refinished basement, but that doesn’t mean appraisers look at it the same way. “Improvements and additions made below grade, such as a finished basement, do not add to the overall square footage of your house,” says John Walsh, president of Total Mortgage Services in New York. “So they don’t add anywhere near as much value as improvements made above grade.”

According to Remodeling magazine, a basement renovation that cost $63,000 in 2011-12 will recoup roughly 66 percent of that in added home value. That’s not as good as an attic bedroom, which will recoup 73 percent of its cost. Even similar bedrooms typically count for more if they are upstairs instead of downstairs.

CLEAN UP

Even jaded appraisers can be swayed by a good looking yard. “Tree trimming, cleaning up, a few flowers in the flower beds and paint touch up can all help the appraisal,” says Agnes Huff, a real estate investor based in Los Angeles.

That advice holds true indoors, too. “Get rid of all the clutter in your home,” says Jonathan Miller, a longtime appraiser in New York. “It makes the home appear larger.”

GIVE THE APPRAISER SOME SPACE

Don’t follow the appraiser around like a puppy. “I can’t tell you how many homeowners or listing agents follow me around in my personal space during the inspection,” he says. “It’s a major red flag there is a problem with the home.”

And while you’re at it, make the appraiser’s job as pleasant as possible by giving your home a pleasant smell. At a minimum, clean out the litter box. Baking some fresh cookies and offering him one or two probably won’t sway your appraisal, nor should it. But it couldn’t hurt.

(The writer is a Reuters contributor. The opinions expressed are his own.)

Courtesy of your Arcadia Real Estate Agent

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Housing recovery hinges on mortgage supply

December 11, 2012 By Leave a Comment

Commentary: Outstanding mortgages now below $10 trillion for first time since 2005

BY LOU BARNES, FRIDAY, DECEMBER 7, 2012.

Inman News®

<a href="http://www.shutterstock.com/pic.mhtml?id=97779053" target="_blank">Mortgaged home</a> image via Shutterstock.
Mortgaged home image via Shutterstock.

Markets are very quiet despite the usual first-week-of-month flood of new data. In the last week the 10-year T-note has not traded above 1.63 percent nor below 1.58 percent, and mortgages are holding just below 3.5 percent depending on borrower and property.

The November payroll survey estimate arrived with a 146,000-job gain. That’s better than forecast but garbled by Sandy, and we cannot know whether up or down. The unemployment rate fell to 7.7 percent, but may have been more distorted by Sandy than payrolls: The percent of unemployed fell because the surveyed workforce shrank.

“I’m calling from the Bureau of Labor Statistics. If you are not at work, do you still have a job but just can’t get to it? Have you quit looking for work because you’re demoralized, or because a tree fell on your car? Hello? Hello? You’re too cold to talk? You don’t seem to understand how important this call is to the nation. Hello? Is your phone out? Yes, I know that if it were we wouldn’t be talking. No need to be insulting.”

The Institute for Supply Management (“Purchasing Managers” in old days) takes two surveys at the end of each month. The manufacturing survey for November dumped two points from October to 49.5, the worst since 2009. The second one, for the service sector, rose to 54.7 from 52.3 in October. Tend to trust the manufacturing number: It has longer history, four decades versus one.

This morning the University of Michigan released its consumer confidence survey for December. It had been on a rising trend since late summer, up to 82.7 last month and was expected to stay there or higher, and instead tanked to 74.5. Economy rolling over? Republicans who just discovered who won in November? Nobody knows.


Without added mortgage supply, a genuine housing recovery lives only in the minds of the pollyannas.

Intermission for Fiscal Cliff. The election has brought order to Republicans, most of whom understand they could have had a better deal in 2011. House Speaker John Boehner fired two unruly Tea Pots from their committee posts, and South Carolina Republican Sen. Jim DeMint resigned altogether, headed for the Heritage Foundation, where he can screech in its phone booth undisturbed.

President Obama has less feel for his tax base and the economy than Mitt Romney for the people, but this time might not overreach his way out of a deal in plain sight. I think chances have reversed two bad weeks and improved now.

Back to reality. Each quarter the Fed releases Z-1, describing the movement and landing place of every buck in the financial system. Some new numbers are striking.

The net worth of U.S. households in the last 90 days rose by $1.7 trillion. Feel that?

Didn’t think so. A mere wobble in a base of $64 trillion. Which by the way is not a shabby net worth. Over the last year the wobbles have combined for genuine progress, a gain of $4.5 trillion.

The Fed estimates recovery of $1 trillion of the $7 trillion in home equity lost since 2006, a long way to go but moving. The other $3.5 trillion gained is in financial assets, most buried out of sight in pension funds, insurance company reserves, and retirement accounts, slow and quiet, but real.

Included in Z-1 are mortgage accounts. Yesterday’s release shows a pickup in post-Bubble plodding in some places, but a total stall in another. The overall figure contains both the good and the troublesome news: Aggregate U.S. residential mortgages have fallen by $88 billion in 90 days, $289 billion in the last year, and are now below $10 trillion for the first time since 2005 (from the $11.2 trillion peak in 2007).

Some of the overall decline is from overdue write-offs. Loans also disappear via sales and refis, but there is little of that in the worst stuff. The trash in private-label MBS is down to $936 billion from $2.2 trillion in 2007. Home equity loans (including seconds) from a same-year peak at $1.13 trillion have fallen to $790 billion.

The bad news: Without added mortgage supply, a genuine housing recovery lives only in the minds of the Pollyannas. The nation’s sole supply of new mortgages, Fannie-Freddie-FHA-VA, has been the same since 2009, about $5.8 trillion. All other sources, the “private” dreamland of government-haters, are just as inert as they have been since 2007.

When these mortgage aggregates begin to rise, then we’ll know that housing really is healing, and the economy with it.

Thanks to Bill McBride at www.calculatedriskblog.com, and his best-in-biz charts. He is more optimistic about today’s employment numbers, but I can’t see any of the “sustainable” progress here that the Fed is looking for, and expect them at their meeting next week to continue and even amplify QE3.


Graph via Calculated Risk Blog.

Lou Barnes is a mortgage broker and nationally syndicated columnist based in Boulder, Colo. He can be reached at lbarnes@pmglending.com.

 

Courtesy of your Arcadia Real Estate Agent

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Pending Home Sales Index Leaps To Multi-Year High

December 3, 2012 By Leave a Comment

Published November 30, 2012

Pending Home Sales IndexHomes were sold at a furious pace last month.

According the National Association of REALTORS® (NAR), the Pending Home Sales Index rose 5.2 percent in October, crossing the benchmark 100 reading, and moving to 104.8.

It’s a 5-point improvement from September’s revised figure and the highest reading April 2010 — the last month of that year’s federal home buyer tax credit.

October also marks the 18th consecutive month during which the index showed year-to-year gains.

As a housing market metric, the Pending Home Sales Index (PHSI) differs from most commonly-cited housing statistics because, instead of reporting on what’s already occurred, it details what’s likely to happen next.

The PHSI is a forward-looking indicator; a predictor of future sales. It’s based on signed real estate contracts for existing single-family homes, condominiums, and co-ops. Later, when the contract leads to a closing, the “pending” home sale is counted in NAR’s monthly Existing Home Sales report.

Historically, 80 percent of homes under contract, and thus counted in the Pending Home Sales Index, will go to settlement within a 2-month period, and a significant share of the rest will close within months 3 and 4. The PHSI is a predictor of Existing Home Sales.

Regionally, the Pending Home Sales Index varied in October 2012 :

  • Northeast Region : 79.2; +13 percent from October 2011
  • Midwest Region : 104.4; +20 percent from October 2011
  • South Region : 117.3; +17 percent from October 2011
  • West Region : 105.7; +1 percent from October 2011

A Pending Home Sales Index reading of 100 or higher denotes a “strong” housing market.

Of course, with rising home sales comes rising home values. 2012 has been characterized by strong buyer demand amid falling housing supplies. It’s one reason why the Case-Shiller Index and the FHFA’s Home Price Index are both showing an annual increase in home prices. Plus, with mortgage rates low as we head into December, the traditional “slow season” for housing has been anything but.

The housing market in Greenville is poised to end 2012 with strength. 2013 is expected to begin the same way.

Jobs

 COURTESY OF YOUR NUMBER ONE ARCADIA REAL ESTATE AGENT
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NAR: Housing to Rebound Through 2014

November 13, 2012 By Leave a Comment

Fri, 2012-11-09 16:14 — NationalMortgag…

For Sale/Credit: Stockbyte

The housing market recovery should continue through the coming years, assuming there are no further limitations on the availability of mortgage credit or a “fiscal cliff,” according to the National Association of Realtors (NAR).

“Existing-home sales, new-home sales and housing starts are all recording notable gains this year in contrast with suppressed activity in the previous four years, and all of the major home price measures are showing sustained increases,” said Lawrence Yun, chief economist for NAR. “Disruption from Sandy likely will be temporary, notably in New Jersey and New York, but the market is likely to pick up speed within a few months with the need to build new homes in damaged areas.”

Yun sees no threatening signs for inflation in 2013, but projects it to be in the range of four to six ercent by 2015.

“The huge federal budget deficit is likely to push up borrowing costs and raise inflation well above two percent,” said Yun.

Rising rents, qualitative easing (the printing of money), federal spending outpacing revenue, and a national debt equal to roughly 10 percent of Gross Domestic Product are all raising inflationary pressures. Mortgage interest rates are forecast to gradually rise and to average four percent next year, and 4.6 percent in 2014 from the inflationary pressure.

With rising demand and an ongoing decline in housing inventory, Yun expects meaningfully higher home prices. The national median existing-home price should rise 6.0 percent to $176,100 for all of 2012, and increase another 5.1 percent next year to $185,200; comparable gains are seen in 2014.

“Real estate will be a hedge against inflation, with values rising 15 percent cumulatively over the next three years, also meaning there will be fewer upside-down home owners,” Yun said. “Today is a perfect opportunity for moderate-income renters to become successful home owners, but stringent mortgage credit conditions are holding them back.”

Existing-home sales this year are forecast to rise nine percent to 4.64 million, followed by an 8.7 percent increase to 5.05 million in 2013; a total of about 5.3 million are seen in 2014. New-home sales are expected to increase to 368,000 this year from a record low 301,000 in 2011, and grow strongly to 575,000 in 2013. Housing starts are forecast to rise to 776,000 in 2012 from 612,000 last year, and reach 1.13 million next year.

“The growth in new construction sounds very impressive, and it does mark a genuine recovery, but it must be kept in mind that the anticipated volume remains below long-term underlying demand,” Yun said. “Unless building activity returns to normal levels in the next couple years, housing shortages could cause home prices to accelerate, and the movement of home prices will be closely tied to the level of housing starts. Home sales and construction activity depend on steady job growth, which we are seeing, but thus far we’ve only regained half of the jobs lost during the recession.”

Yun projects growth in Gross Domestic Product to be 2.1 percent this year and 2.5 percent in 2013. The unemployment rate is showing slow, steady progress and is expected to decline to about 7.6 percent around the end of 2013.

“Of course these projections assume Congress will largely avoid the ‘fiscal cliff’ scenario,” Yun said. “While we’re hopeful that something can be accomplished, the alternative would be a likely recession, so automatic spending cuts and tax increases need to be addressed quickly. People who purchased homes at low prices in the past couple years, including many investors, can expect healthy growth in home equity over the next four years, while renters who were unable to get into the market will be in a weaker position because they are unable to accumulate wealth.  Not only will renters miss out on the price gains, but they’ll also face rents rising at faster rates.”

Yun projects the market share of distressed sales will decline from about 25 percent in 2012 to eight percent in 2014.

 COURTESY OF YOUR NUMBER ONE ARCADIA REAL ESTATE AGENT
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Debate leaves some taxing questions about housing unresolved

October 10, 2012 By Leave a Comment

Commentary: Obama and Romney need to provide more details on their positions

BY KEN HARNEY, WEDNESDAY, OCTOBER 10, 2012.

Inman News®

Mitt Romney and Barack Obama images via MittRomney.com and WhiteHouse.govMitt Romney and Barack Obama images via MittRomney.com and WhiteHouse.gov

Anybody who watched it knows that Mitt Romney scored a technical knockout of President Obama in last week’s debate. But are there some potential future costs and concerns for housing that have to be looked at in the wake of that victory?

On the one hand, Romney surprised Obama with sharp criticism over an issue that has plagued homebuyers and refinancers: the super-strict underwriting and documentation that banks are requiring for home loans, in part because they’re worried about forthcoming “qualified mortgage” federal rules under the Dodd-Frank financial reform legislation.

“It’s been two years,” Romney said to Obama at the Denver debate, “We (still) don’t know what a ‘qualified mortgage’ is. So banks are reluctant to make mortgages … It’s hurting the housing market.”

There’s no question that regulators have proceeded at a frustratingly glacial pace since the passage of Dodd-Frank in July of 2010, and we don’t know what the Consumer Financial Protection Bureau will come out with on this issue in early 2013.

COURTESY OF YOUR NUMBER ONE ARCADIA REAL ESTATE AGENT

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China’s Hidden Housing Debt

May 9, 2012 By Leave a Comment

By TOM ORLIK

China’s property sector might be sinking in the sand of mounting liabilities.

The official data suggest that loans to China’s thousands of developers at the end of the first quarter totaled a manageable 3.6 trillion yuan ($570 billion), equal to just 6.3% of total yuan loans in the banking system.

A look at the financials of 159 mainland-listed developers, though, suggests the official numbers are not telling the whole story. Numbers from Wind—a China data provider—show total liabilities for this subset ballooned to 1.8 trillion yuan in the first quarter of 2012. That’s more than 100% higher than the level when the government first pointed its policy needle at the property bubble in early 2010.

[CHINAHERD]

Mounting liabilities reflect a variety of factors. In 2010, despite declaring war on house prices, the government was slow to clamp down on credit. By 2011, loans were in short supply but developers allowed other liabilities like supplier invoices to mount. Most recently, lending rebounded in the first quarter of 2012, listed developers borrowed 48 billion yuan, more than twice the figure for all of 2011.

Official data might also understate the banks’ exposure to property. Alongside bona fide developers, state-owned enterprises are sometimes tempted to dabble, either as developers or speculators. Some loans intended for building blast furnaces or shipping fleets actually end up as luxury apartments.

The banks are also exposed through the use of property as collateral. At Bank of China,3988.HK -0.98% for example, 39% of loans were secured on property and other immoveable assets at the end of 2011. The risk is that a sharper-than-expected price fall would hit developers’ ability to repay loans at the same time as the a decline in the value of property banks hold as collateral.

China’s real-estate sector is in a policy-induced correction, with sales and prices both down from a year ago. Despite that, signs of a modest recovery in demand and easier access to credit in recent months have made markets optimistic about the prospects of a soft landing. Listed mainland developers have rallied strongly in Hong Kong this year.

If sales continue creeping higher, most developers are well placed to cover their debts. But if sales dry up, higher debt than is recognized in official data means the foundations of China’s real-estate sector are less solid than they appear.

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