The temperature may be frigid across much of the nation, yet home prices are sizzling and sellers are in the hot seat.
Sales prices jumped 7 percent annually in November, according to a new report from CoreLogic.
That is the third straight month at that pace, far higher than the price gains in the first half of 2017. Low supply and high demand are fueling the spurt and neither of those is expected to ease up anytime soon.
“Rising home prices are good news for home sellers, but add to the challenges that home buyers face,” said Frank Nothaft, chief economist at CoreLogic, in the report. Nothaft said the limited supply is the worst at the lower end, and will hit the growing number of first-time buyers hardest.
The largest metropolitan areas are seeing the biggest gains.
In the nation’s top 50 markets, half of the housing stock is now considered overvalued, based on market fundamentals, like income and employment. CoreLogic defines an overvalued housing market as one in which home prices are at least 10 percent higher than the long-term, sustainable level.
Las Vegas led the November report as not only being overvalued, but showing a double-digit annual price gain of 11 percent.
Las Vegas and Denver are both considered overvalued, but San Francisco is not, as incomes in the tech capital far exceed the national level.
Of the nation’s 10 major markets with the biggest price gains, seven are overvalued. These include Washington, D.C., Houston and Miami. Boston and Chicago are still seeing price gains but are considered at value.
Without a significant jump in home construction, prices will remain high and likely move higher. Mortgage rates could also move slightly higher, and new tax policy limiting mortgage and property tax deductions, is hitting homeowners in some states hard.
All will combine to make housing less and less affordable in the new year.
Follow this three-step process to help you determine how much you should spend on a home.
In order to determine the mortgage payment you can afford, you need to first prepare a budget. It is critical to include the proper short-term savings and long-term investing in your budget before you establish the amount to allocate toward a mortgage payment. While owning a home can help build your net worth, it is an extremely illiquid asset that is not easily converted to cash. You should make certain that you have enough in short-term savings to pay your mortgage for at least six months in the event of an unforeseen financial setback. Also, make certain not to reduce your long-term savings goals for things such as retirement or your children’s future college education expenses.
The good news is many of your budgeted items will not change with the purchase of a new home. For example, dining, food, clothing, and travel expenses will likely remain as they were before the move. However, some items like homeowners insurance, lawn care, pool maintenance, HOA dues, and utilities may increase when you purchase a residence. Property taxes will also likely increase, so just plugging in the amount the current owner pays may result in errors. If your purchase price is higher than the value listed on the tax rolls (as is commonly the case), you should recalculate the property tax based on the purchase price you will pay. It may take up to a year for the taxing authority to update the tax rolls, but eventually the purchase price will be used to determine your property tax due.
Economists say to expect more people to be looking to buy homes in 2017 despite higher mortgage rates. Sean Dowling (@seandowlingtv) has more. Buzz60
Once you have prepared a new budget, it will become apparent how much of a mortgage payment you can afford. If the amount you can afford is less than the amount you want to borrow, it may be necessary to adjust other budget items. Focus on reducing discretionary (non-essential) expenses. For example, you might consider reducing the amount you spend on vacations, entertainment, dining out, hobbies, and even your monthly television subscription so you can allocate more toward your new home. It is also a good idea to shop around for your auto insurance policy at the same time you are getting new homeowner insurance. Bundling these two policies with the same insurance company can often reduce your monthly premium by as much as 20%. All of these little changes to your budget can add up to a tidy sum that can help you purchase the home of your dreams.
Buying a home is no small feat, and there are many financial ins and outs to navigate as you prepare for this step in your life. As parting tips, don’t forget that you’ll need cash for your down payment (which will also influence the amount of your loan), and it’s helpful for you to check your credit report before speaking to a lender so you understand whether your lender will view you as a high-risk or low-risk borrower. Planning is key, and the more thought and energy you put into the process ahead of time, the more smoothly the home-buying process will go.
Clark Randall, Credit.com
by CHRISTOPHER RUGABER, AP Economics Writer & KOMO Staff
Wednesday, September 27th 2017
The last thing you want to do is make yourself “house poor” by spending more of your income on a home purchase than you should. The “affordability standard” for housing is that you should spend no more than 30% of your income on housing costs (including insurance and property taxes), while many mortgage lenders prefer that your housing cost is no greater than 28% of your income.
Your outstanding debts can also impact the amount you can spend on a home. Most lenders want a total debt-to-income ratio — including your mortgage payments and other debts — to be around 36% or less, although you can still get a standard mortgage with a ratio as high as 43%.
This means if your income is $50,000, you could reasonably afford about $1,170 per month for your total housing costs if you stuck to the 28% rule — assuming you didn’t have a substantial amount of other debt that would push your total monthly payments above the recommended 36% of income. If we also assume you can pay 20% down and qualify for an interest rate of 4%, then you could potentially afford a home price of up to $250,000. That may or may not be a realistic price in your area, and you may want to aim lower if you have other sizable debts.
In our example above, we factored in having a 20% down payment when calculating the price of the home you could afford. Paying at least 20% of the value of the home up front is vital, because it allows you to avoid private mortgage insurance (PMI). PMI insures your lender in the event that you’re unable to make payments and the lender must foreclose on you. On a $200,000 loan, PMI could cost you $100 a month or more, depending on how much you paid up front — and you could be paying it for several years.
You’re stuck with PMI until you pay your loan down to 78% or less of the home’s original value. Once you prove to your lender that you’ve reached that milestone, your lender is required to drop the PMI requirement. .
If you don’t have a down payment, not only will you waste thousands of dollars on PMI and additional interest payments, but you’ll also put yourself at substantial risk. When you make a 20% down payment on a home, the value of the house would have to fall more than 20% for the home to be worth less than you owe on it. If you only make a tiny down payment, however, even a slight downturn in the market could mean you’re underwater — i.e., your home is worth less than you still owe the bank. This makes it difficult or impossible to sell unless you can bring cash to the real estate closing for the difference between what your house sells for and what you still owe.
When you’re a homeowner, you are responsible for everything that goes wrong in your house. Instead of calling a landlord when the furnace breaks or the pipes freeze, you have to call — and pay for — a repair man. If the problems are costly to fix, or can’t be fixed, you’re the one on the hook. If you don’t have money set aside to cover maintenance, repairs, and replacements, then you’ll have to use credit. You don’t want to be paying interest on your new fridge for the next 10 years, so make sure you have an emergency fund to cover the many costs of being a homeowner.
Not only can an emergency fund help you pay for surprise repairs, but it can also ensure that you don’t lose your home in the event that an illness, job loss, or other crisis puts a major strain on your household finances. If you cannot pay your mortgage because your income has taken a hit, you could be foreclosed on, lose your house, and end up with ruined credit. You don’t want this to happen, so save up enough money to pay the mortgage for several months in case something goes wrong.
When you have your financial house in order, it’s time to prove to the bank that you’re ready for the responsibility of taking on a mortgage. You want to get pre-approved by your chosen financial institution before you start shopping for a home. Getting pre-approved means you’ll have a clear idea of what the bank will lend you so you don’t shop outside of your price range. You’ll also be taken much more seriously by real estate agents and any potential sellers to whom you make an offer. Some sellers won’t even consider offers from someone who isn’t pre-approved, because there’s no way to know whether the financing will be available to complete the sale.
If you want your bids to be competitive and you want to know you’re shopping for houses that are priced right, provide your financial information to the bank before you start house shopping and get a pre-approval letter to take with you.
Although you can technically buy a house without an agent, it’s usually a bad idea to try it — especially if it’s your first home. An agent can help you spot red flags that should send you running away from a prospective home. Agents know the market and can help you make a reasonable offer so you don’t overpay, and they can also guide you through the steps of the buying process, like getting a home inspection.
You’ll want to be sure you find a buyer’s agent, rather than letting the seller’s agent represent both you and the seller. A buyer’s agent is focused only on your interests and has lots of experience helping homebuyers find the house of their dreams. If you’ve already made sure you’re financially ready before calling a realtor, your agent can help you make the buying process low-stress and successful.
Okay baby boomers, is it time to downsize and move into a house better suited for aging?
Does the following describe you? The kids moved out a few years ago and you’re still living in the multi-story home where the kids grew from babes to college graduates.
A single-story house with a small yard is well-suited for aging in place. Maintenance will be manageable. And, as mobility challenges arise, there will be no stairs to the bedroom and bath.
Besides, a small place makes it difficult for adult kids to take up residence with you.
Does it make financial sense?
With Seattle’s real estate market being so unbelievably hot, there are financial factors to consider. Finding an affordable replacement will be difficult. On the other hand, selling your family-sized home might net cash for your retirement nest egg, pay for moving expenses, and cover the cost of a smaller home.
If you are considering this, I would start by researching various areas throughout the city and surrounding communities. Make neighborhood a priority. Factor in access to groceries and health care. Make sure the neighborhood is safe and relatively free from crime.
Once you’ve narrowed down the neighborhoods, then research what’s available. Online resources like Zillow and Trulia let you search and filter the marketplace by zip codes, price, and other factors.
How quickly you decide on a replacement home depends on your personality…impulsive or thoughtful. My suggestion: Study the market for a few months and get a sense of the price points of both your current home and homes in neighborhoods where you’d feel comfortable downsizing.
Here’s an issue that regularly comes up: My aging clients find health and mobility dictate a move to a house with access compliant with the standards of the Americans with Disabilities Act – wider doorways, walk-in tubs or showers with seats and safety bars, and higher toilets. Prioritize these amenities when choosing a home.
It’s best to downsize as soon as you can. Because of the stress of moving, many aging people wish they’d moved years prior to when they do.
What do I do with all my stuff? Can I just walk away?
I think the number one issue that stops people from downsizing is the overwhelming work of dealing with years of accumulated personal property.
I’m at this stage myself. In two years, I’ll move from my home of 30 years to a house where I’ll be able to “age-in-place.”
But then, what am I going to do with all my “stuff?”
I’m moving from a Tudor home with traditional furnishings to a modern home where none of my furnishings fit.
The thought of disposing of my furnishings and years of accumulation is overwhelming. How will I do it?
The shorter answer is, I won’t.
How? There are businesses that specialize in relocating the aging. They manage the details and do the work. They pack and move the things I want. What stays behind is split into three groups — items to sell, items to donate, and items to dump. They provide the labor to clear the house and facilitate a sale of unwanted items that have value. Then, they clean up and prep the house to make it market-ready. Depending on the value of the items, the companies can take their fee out of a percentage on the sale of goods.
When choosing any moving company, do your homework. Make sure the company is trustworthy. Ask if they thoroughly scrutinize employees before hiring. Check online reviews and get references.
Avoid using internet-based companies when shopping for a mover. Often, these companies are brokers, not movers; you’ll have no control over who they hire and will have limited recourse if something goes wrong.
The easy steps to downsizing: Identify the things you want, walk away from the rest, and settle into a new home where you can age-in-place. Doesn’t this sound like the way to go? Happy aging!
|By Marla Beck, Columnist
6/23/2017 7:11 PM
Washington state’s housing market showed the continuing effects of high demand in the first quarter of 2017, according to the Runstad Center for Real Estate Studies at the University of Washington.
The statewide median sales price rose to $324,300 in the first quarter, 12.1 percent higher than the same time period last year. While this does not represent an all-time high for statewide house prices, this price represents the highest first-quarter price ever recorded in Washington state.
Similarly, the seasonally adjusted annual rate of existing home sales rose 12.2 percent from the first quarter of 2016 to 107,590 homes. This indicates that the current annual rate of sales is well below that witnessed in previous periods of high house price growth, such as 2003. The low supply of existing homes listed for sale is likely a leading factor promoting rapid house price growth throughout the state.
Breaking down trends by region reveals a high level of variance in house prices throughout the state. Somewhat expectedly, median prices were highest in King County, at $577,300, with a year-on-year increase over 2016 of 11.1 percent. The lowest median prices were found in Lincoln County, at $70,000 with a low number of house sales recorded. House prices in many other state markets rose significantly, with Spokane up 8.0 percent to a median of $208,100 and Whatcom County (Bellingham) rising 8.4 percent to $329,500. Perhaps not surprisingly, median prices typically rose the fastest in the Puget Sound region.
Interestingly, however, the fastest growth in the region was farther out from King County than expected. For example, median prices in Snohomish County grew by 10.6 percent while in Skagit County prices grew by 14.0 percent. This indicates that some of the demand for housing is likely moving farther away from downtown Seattle in search of more affordable prices.
Other regional markets posted significant price increases with Benton and Franklin counties (The Tri-cities) posting a median price of $232,400, a 6.9 percent increase over the same period last year. Chelan County (Wenatchee) posted a median price of $264,100, up 5.9 percent from 2016, and Walla Walla posted a median price of $209,800, up 4.4 percent from 2016. Yakima’s median house price was $192,700 up 8.6 percent over last year.
An interesting development within regional house prices was the Olympic peninsula, where the median price in Jefferson County (Port Townsend) was up 19.1 percent on a median price of $353,800 and Clallam County (Port Angeles) was up 13.8 percent on a median price of $256,000.
Statewide, housing affordability was lower in the first quarter of 2017 than both the first and fourth quarters of last year. The index – where 100 means a middle-income family can just qualify for a median-priced home, given a 20 percent down payment and a 30-year fixed mortgage rate at prevailing rates – was 124.3, down from 132.7 in the fourth quarter of 2016. This metric suggests that, given the same down payment and mortgage, a middle-income family can afford a home selling for 24.3 percent above the median price.
Statewide, the first-time buyer index dropped of 4.7 points, ending the quarter at 70.4. This index assumes a less expensive home than a typical family home, lower down payment and lower income. Using the assumption that a first time buyer households would earn 70 percent of the area median household income, the index reveals that they had 70.4 percent of the income required to purchase a typical starter home.
With the overall house price increases noted statewide, it is not surprising that the number of building permits has increased as builders respond to increased demand. In the first quarter of 2017, a total of 8,878 building permits were recorded, an increase of 11.1 percent from the first quarter of 2016.
This report is produced by the Washington Center for Real Estate Research, the research arm of the Runstad Center, which is part of the UW College of Built Environments. The center produces home sales statistics in partnership with Washington Department of Licensing and the Washington Real Estate Commission. Sales, median home prices and affordability data for all Washington counties are available on the Runstad Center’s website.
Runstad Center for Real Estate Studies
For most of the housing market, homes are selling in Pierce County faster than owners can put new ones up for sale, drawing down an already dwindling supply of houses just as the market heats up for the spring and summer.
Typically, Tacoma-area homes in the million-dollar range are immune to broader market trends or even what’s happening in King County. Until now.
Think of it as our new trending market, without the bidding wars (yet).
In recent months, dozens of million-dollar abodes have sold or are in the process of closing. If the pace keeps up, sales of homes worth a million dollars or more could eclipse the record of 86 sales set in 2007.
“This is crazy talk,” said Kevin Mullin, owner-partner and designated broker of Windermere Professional Partners in Tacoma. “If all (homes) currently under contract sell, that would mean 42 sales, which is already more than half of last year. And we are not even halfway through the year.”
To date, 16 such homes have sold in Pierce County, with another 26 million-dollar homes pending sale. Among those pending is the $5.5 million Weyerhaeuser mansion, also known as Haddaway Hall.
Compare that with just a few years ago, when 23 residences worth $1 million or more sold in each of 2011 and 2012, according to data from Northwest Multiple Listing Service.
Thurston County also has seen growth in these properties. Just one sold for $1 million or more in 2012, the data show. Last year, nine such homes sold in that county.
Where are these buyers coming from? Many fly in from other parts of the country, said Jeff Williams, a real estate broker for South Sound Property Group, part of Windemere Professional Partners. He works with fellow broker Mark Pinto.
“They could be coming for a job or lifestyle change,” Williams said. “It could be a second home for people who live in California.”
One historic home in Tacoma’s North End listed at nearly $1.3 million. Its sweeping views of Commencement Bay and the Olympic and Cascade mountains drew 25 showings in three weeks — a pace unheard of just a few years ago, Williams said. The final sale price was not available.
Williams and Pinto work together to sell luxury and historic properties in Tacoma, Lakewood and Gig Harbor. They said the luxury or “trophy home” market has heated up in the county in the past six months to a year.
“I think it speaks to the confidence that people have in the market and the broader economy,” Pinto said. “They probably have been sitting on the sidelines in a house that they like, but they want to buy up to that aspirational house.”
Unlike homes at lower price points, high-end buyers won’t get into a bidding war just yet, Williams said.
That’s because it’s a buyer’s market above $1 million. Unlike the rest of Pierce County’s housing market, which has less than one month’s supply in some areas of the county, million-plus homes have a whopping 19.6 months of supply, Williams said. Most of those homes have been on the market for more than 100 days — a dream for a buyer in the lower-end markets.
But not all homes at that price point are priced realistically, Pinto said.
“If it’s completely unrealistic, the phone doesn’t ring,” Pinto said. “Well-priced homes over $1 million are selling and much more so than we’ve seen in years.”
In 1999, just 34 homes in Pierce County were valued at more than $1 million, according to News Tribune archives. Last year, the county valued 715 residences at $1 million or more, according to Pierce County Assessor records.
BY KATE MARTIN
NEW YORK (AP) — If you build it, they will stay.
The small businesses that dominate the home remodeling industry are expecting robust growth in the next few years, thanks partly to baby boomers who want to remain in their homes.
Home remodelers say they’ve had a pickup in projects from boomers who are in or approaching retirement and are seeking to modify their houses. It’s a trend known as “aging in place,” an alternative to moving to smaller quarters or a warmer climate.
Many of these homeowners are hoping to make their surroundings easier to manage and safer in case they have health problems.
They’re replacing bathtubs with walk-in showers, installing safety rails, widening doorways and building ramps — features known as “universal design” since they can be used by anyone, regardless of physical ability. Boomers are also redoing their kitchens and sprucing up other areas — since they’re staying put, they want to enjoy their surroundings.
Zach Tyson estimates that 30 to 40 percent of his revenue is now coming from boomer renovations, up from 15 to 20 percent five years ago. Most of the projects come from homeowners who are healthy and mobile now, but want to be prepared if illness or injury hits.
Besides making bathrooms safer, they’re enlarging rooms so wheelchairs or walkers can be used more easily, and also to give the rooms a more open feel.
“It’s trending up, for sure,” says Tyson, co-owner of Tyson Construction in Destrehan, Louisiana.
The oldest of the 76.4 million boomers, the U.S. generation born after World War II, are turning 71 this year. As more of them retire and make decisions about where they want to live, there will be a great need for accessible housing, according to a report released in February by Harvard University’s Joint Center for Housing Studies.
“A large share of these households live in older homes in the Northeast and Midwest, where the housing stocks have few if any universal design features,” the study said.
The report predicts home improvement spending by homeowners 65 and older will account for nearly a third of the total amount of remodeling dollars by 2025, more than twice the portion that group spent in 1995-2005. Owners age 55 and over already account for just over half of all home improvement spending.
“The boomer activity seems to be driving the market,” says Abbe Will, a research analyst at the Harvard center.
That’s a change from the past, when older homeowners generally handled maintenance, repairs and landscaping but tended not to renovate. And some of the boomer-driven remodeling is coming from younger homeowners who expect their parents might later come to live with them and want to be ready, Tyson says.
The requests Tiffany and Bryan Peters get from boomer customers include replacing traditional turning doorknobs with lever handles that can be pushed down. Homeowners want motion-sensor light switches and faucets, and non-slip flooring. In bathrooms, they’re replacing fixtures with models that are designed for people with disabilities — showers than can accommodate wheelchairs, and toilets at the same height as wheelchairs, Tiffany Peters says.
“We’ve definitely experienced an increase in requests for aging-in-place work,” says Peters, who with her husband owns a Handyman Connection franchise business in Winchester, Virginia. “We get several requests a month.”
Home remodeling companies began seeing an increase in boomer spending about 18 months ago and expect it to contribute to their growth in the next few years, says Fred Ulreich, CEO of the National Association of the Remodeling Industry, a trade group.
“We see this as something that is dramatically affecting the marketplace,” Ulreich says.
Boomers typically live in homes that are several decades old, prime targets for remodeling, Ulreich says. Unless they move to a brand-new home that’s designed for aging in place, their decision is likely to mean remodeling.
Sal Ferro says boomers are his biggest group of customers, but he’s not getting many requests for aging-in-place projects. It’s more renovations to make their homes more enjoyable.
“They’re finally getting the projects done that they always wanted. They’re getting that kitchen or bathroom,” says Ferro, owner of Alure Home Improvements, based in East Meadow, New York.
Some remodeling companies are specifically marketing to boomers, sending salespeople to trade expos and events those customers are likely to attend.
Miracle Method, a franchise business that refinishes kitchens and bathrooms, has increased its outreach to boomers, says Erin Gilliam, the company’s marketing manager. Franchise owners say much of the 11 percent growth in the franchise’s overall business in the past year was driven by boomers, she says.
Gilliam’s husband, Gabriel, sees the trend in the franchise he owns in Salt Lake City. He estimates that revenue from boomers has risen between 10 and 20 percent, and the growth is prompting him to hire more workers. He has five staffers now, having added one per month the past three months, and expects to reach 10 in the next year.
“I’m hiring as quickly as I can,” he says.
By JOYCE M. ROSENBERG
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