One might wonder if the continued improvement in the access to online information about properties for sale has removed the need for working with a qualified real estate agent or broker. It has not.
The trends reported by the National Association of REALTORS® (NAR) are interesting. Buyers are finding a home to purchase by searching online in larger numbers than before. In the NAR survey of homebuyers, the home was found online by the buyer for more than half of the homes purchased, with only 28% of the homes purchased suggested to the buyer by a real estate agent.
Even so, NAR also reports that 87% of buyers made their home purchase with the help of a real estate agent or broker. This trend is increasing. In 2001, only 69% of home buyers bought a home with the involvement of a real estate agent or broker. Why the upward trend of working with a real estate professional when buying a home?
The explanation is surprising. One is the cost of buying a home that is for sale by owner (FSBO) may be very close to the price of the same type of home bought with the help of a real estate agent. An FSBO home sale may put a little more money in the pockets of the seller but little of that savings on the real estate commission goes to the buyer. Moreover, the FSBO process creates a disadvantage when trying to market a home without a real estate professional's help. These trends are making FSBO properties decrease.
Additionally, using a real estate professional may help the transaction go more smoothly. A real estate agent handles the buying and selling of properties all the time. A homebuyer does this less often and therefore may not have the skills to manage a real estate transaction effectively.
Summary
When buying a home, it is the preference of the vast majority of buyers to work with a real estate professional. The process is likely to be easier with less chance of costly mistakes. The price paid for the home will likely be around the same as trying to close a deal without the benefit of using a real estate agent.
For sellers of a home, working with a professional real estate agent comes along with advice about market pricing, how to stage a home for better resale value, and the benefits of using effective marketing strategies that get the home seen by more prospective buyers.
For buyers and sellers, it becomes clear that working with a real estate agent is vastly preferable. This is why so many are using the services of a licensed professional to buy or sell a home.
The "Golden Girls" trend got its name from the popular television sitcom about four elderly women who live together to share expenses. It is becoming a popular way in real life for elderly adults to share homeownership and it has many benefits.
The cost of assisted living is quite high. The median cost in the United States for assisted living is $4,051 per month. In many parts of America, that amount makes a substantial mortgage payment. Rather than pay that high price to live in an adult assisted-living community, many able-bodied elderly are choosing to pool their resources and live together in a large home that they own together.
Buying A Home To Share
The homes that work well for this are those that have many bedrooms, each with a private bath, and are on one-level. Three- or four-bedroom homes are ideal because the cost of the home and the operating expenses can be shared among three or four elderly adults to reduce each person's cost compared to what they would spend if they were alone.
It Is Fun To Share
The communal areas for a shared-living arrangement are the main living room, dining area, and kitchen. Many find that by sharing the cost of a home, among like-minded peers, that the quality of life is very nice. The pooling of resources usually creates enough money to pay for the expenses and to pay for in-home personal assistance as needed. Most importantly, loneliness is reduced, which sometimes leads to serious depression in the elderly who live alone.
Many baby boomers are now entering retirement. Estimates are that seven out of 10 will need some form of assisted living care. Females still live longer than men on average, so that is why this trend is more about elderly women living together than men. However, the concept works just as well for both sexes.
Multigenerational living is also becoming popular for the same reasons. It costs so much to own and maintain a home that it is not as easily accomplished by households with one or two workers who contribute to pay for the expenses. Most situations benefit from having a third or a fourth contributor, which reduces the average contribution for all.
Get Competent Legal Advice
When considering any shared ownership of a home, it is very important to use the services of a competent legal counsel to draw up the ownership agreement. Shared homeownership is a type of partnership and benefits from having a "buy-sell" provision in the agreement that allows any remaining co-owners to buy out the portion held by a co-owner who dies or otherwise becomes physically unable to continue living in the home.
Summary
Most baby boomers had roommates when they went to college to share expenses. Embracing a "Golden Girls" strategy to share home ownership is like returning to a style from the younger times. It is wise to be very careful about who is chosen to form a home-ownership partnership; however, with proper legal documentation and prudence in choosing who to live with, this can be a very satisfying way to spend your golden years.
Last week’s scheduled economic news included readings on sales of new and previously-owned homes and consumer confidence. Weekly readings on mortgage rates and new jobless claims were also released.
COVID-19 Requirements Impact Home Sales
Widespread state and local requirements for sheltering at home negatively impacted home sales in March. New homes sold at an annual pace of 627,000 sales as compared to 741,000 sales reported in February. Analysts estimated 628,000 sales for March according to the Commerce Department.
The National Association of Realtors® reported lower sales of previously-owned homes in March with an annual pace of 5.27 million sales. February’s annual sales rate was 5.76 million homes. Sales of pre-owned homes exceeded analysts’expectations of 5.24 million existing homes sold annually.
Annual sales calculated for March were 8.50 percent lower than February’s reading. Lawrence Yun, the chief economist of the National Association of Realtors®, said that the organization expected home sales to fall in March and expected fewer home sales in April.
The COVID-19 outbreak impacted both home sellers and buyers as restrictions on open houses and home tours limited sellers’ability to show their homes; prospective buyers delayed their home shopping activities due to COVID-19 restrictions and job losses related to business closures.
Mortgage Rates Mixed, Jobless Claims Lower
Freddie Mac reported higher fixed mortgage rates last week; rates for 5/1 adjustable rate mortgages dropped. The average rate for 30-year fixed-rate mortgages rose two basis points to 3.33 percent; rates for 15-year fixed-rate mortgages rose six basis points and averaged 2.86 percent. Rates for 5/1 adjustable rate mortgages fell by six basis points on average to 3.28 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable rate mortgages.
First-time jobless claims remained far above average last week but were lower than the prior week. 4.43 million initial unemployment claims were filed last week as compared to 5.24 million claims filed the prior week. Analysts expected a reading of four million new claims filed last week.
April’s Consumer Sentiment Index reading fell to an index reading of 71.8 from the March reading of 89.1 Analysts expected a reading of 69.3. The University of Michigan said that the Index reading from March to April showed the steepest drop in Index history. Analysts said that April’s reading indicated an economic recession.
What’s Ahead
This week’s scheduled economic reports include Case-Shiller Home Price Indices, pending home sales, and the post-meeting statement of the Fed’s Federal Open Market Committee. Fed Chair Jerome Powell will give a press conference after the FOMC statement. Construction spending data will be released along with weekly readings for mortgage rates and new jobless claims.
The Federal Housing Finance Agency (FHFA) recently told lenders to allow borrowers to forego their mortgage payments for a period of time, usually 3 months, with an additional 3 - 9 month extension if needed. These are forbearance programs.
In a forbearance, the borrower is allowed to miss payments for a certain amount of time and then at the end of that time, pay the missed payments. There is no forgiveness of the missed payments.
Normally, if you have a forbearance for 3 months, at the beginning of month 4, your 3 months of payments are due, plus the fourth month. In the current situation, guidelines from the Government allow lenders to set up a repayment plan so that the missed payments are not all due at one time.
Even if you do pay the full amount, many lenders will see that you had a forbearance and will not allow you to refinance that loan to a lower rate or to get cash out. If you don’t pay as agreed, your credit will suffer dramatically.
If you must ask for forbearance make very sure you understand all of the lender’s requirements for paying back the missed payments and how the lender will report that to the credit bureaus.
Some realtors are tempting buyers with the idea they can buy a home, then skip their first payment and go into forbearance immediately -- a free ride. What they don’t say, is that the buyer’s credit is immediately slammed, and that the buyer has a high probability of being foreclosed upon.
Please be aware of these factors and let your friends and colleagues know. This forbearance program is designed for those who have a real economic hardship, and while it might allow you to stay in your home, it could have devastating consequences for your credit and ability to borrow in the future.
It is complicated! If you have questions on this, please contact me.
Stay Safe, Stay Well.
When you are in the process of buying a home, there are a lot of moving parts that need to work together. It can be hard for you to keep track of everything that has to happen, particularly if you are going through this process for the first time. With this in mind, there are a few basics that you should remember when you are looking for a home loan.
Work With A Professional
It is critical for you to work with a real estate agent who can act as a guide during this process. A real estate agent has taken plenty of individuals and families through the process of finding a home loan and purchasing a house. Therefore, he or she will be able to work with you from start to finish as the home loan process unfolds.
Find A Loan Officer
Once you have found a real estate agent, the next step is to find a loan officer. Your real estate agent might have connections throughout the industry and can recommend a loan officer. Many real estate agents will recommend that you use a mortgage broker. A mortgage broker often works with multiple loan companies. This means that you may have multiple home loan options at your disposal. Ideally, you will be able to leverage these options against each other and find the best deal for you.
Understand The Basics Of A Home Loan
When you are evaluating your home loan options, there are a few factors that you need to consider. The most important part of a home loan is the interest rate. You want to make sure that you get the lowest interest rate possible as this is going to impact the amount of money you pay over the life of the loan. Then, you want to make sure that you can afford the down payment required. If you can’t put enough money down, you might have to purchase mortgage insurance. You want to avoid this cost if possible.
Work With An Experienced Real Estate Agent.
During this process, it is important for you to follow the advice of your real estate agent. Once you have found the right home loan, you will be able to complete your home purchase.
Last week’s scheduled economic reporting included readings on home builder sentiment, housing starts and building permits issued. Weekly reports on mortgage rates and initial jobless claims were also released
NAHB: Homebuilder Confidence Crashes as Coronavirus Impacts Construction
Homebuilder sentiment concerning housing market conditions dropped significantly in April according to the National Association of Home Builders Housing Market Index.
April’s index reading of 30 was the largest month-to-month drop recorded since the Housing Market Index started 30 years ago. Homebuilder confidence was 42 points lower than the March reading of 72 and was the lowest reading since June 2012.
Index readings over 50 indicate that most builders are confident in current market conditions.
Sub-index readings also fell considerably in April; builder confidence in current market conditions dropped from 79 to 36. Builder confidence in housing market conditions over the next six months dipped to an index reading of 36 in April as compared to the March reading of 75.
Builder confidence in buyer traffic in new single-family housing developments dropped from an index reading of 56 in March to a reading of 13 in April; builder sentiment readings about buyer traffic don’t usually exceed an index reading of 50 but had done so in recent months. Homebuilders also said that federal assistance for builders wasn’t distributed consistently; Builders need federal financial help to maintain payrolls and other expenses.
Commerce Department readings on housing starts and building permits issued dropped in March. Housing starts progressed at a seasonally-adjusted annual rate of 1.216 million starts as compared to February’s pace of 1.564 million housing starts.
Analysts expected a March reading of 1.290 million housing starts. Building permits issued were lower at 1.353 million permits issued as compared to 1.452 million permits issued on an annual basis in February. Analysts expected a March reading of 1.250 million building permits issued.
Mortgage Rates Near All-Time Lows as Initial Jobless Claims Slow
Freddie Mac reported mixed results for mortgage rates last week; rates for 30-year fixed-rate mortgages averaged 3.31 percent and were two basis points lower. Rates for 15-year fixed-rate mortgages averaged 2.80 percent and were three basis points higher. Rates for 5/1 adjustable-rate mortgages fell by six basis points and averaged 3.34 percent. Discount points averaged 0.70 percent for fixed-rate mortgages and 0.30 percent for 5/1 adjustable-rate mortgages.
First-time jobless claims were lower last week but remained much higher than readings reported before the COVID-19 outbreak. 5.25 million initial claims were filed, which surpassed expectations of 5 million new claims filed. 6.60 million claims were filed the prior week.
What's Ahead
This week’s scheduled economic releases include readings on new and existing home sales, consumer sentiment and weekly reports on mortgage rates and new jobless claims.
For Renters – Did you know:
For Homeowners – Did you know:
Check with your insurance agent. Or if you don’t have one, I’d be happy to refer you to a local professional I use.
Home price increases have cooled down over the past few months, but are still up over 2% from last year (according to Zillow’s most recent numbers).For Homebuyers this means:
For Homeowners:
If you are curious about how much house you can afford to purchase or what you could save in a refinance, please give me a call. It only takes a few minutes to give you the information you need to make a wise choice.
I often get questions about appraisals, so I thought I’d clarify some aspects.
A home appraisal is not the same as a home inspection. In a purchase, the buyer is advised to get an inspection to determine the condition of the home. This is not required nor submitted to the lender.
The primary purpose of an appraisal is to verify the value of the home (for the lender).
The most common way for an appraiser to determine value is by comparing to other, comparable nearby homes that have sold within the last 3-6 months. The size of the home, number of bedrooms, bathrooms, size of the lot, and any detrimental factors (busy, noisy street, dated interior) are compared to the other homes. Although the price per square foot to build is calculated, the comparable sales method is the preferred valuation method.
While the condition of the home will play a part, it is not a critical element, unless there is visible evidence of a problem (such as termites or roof leaks). Still, a clean home, with no clutter, and a maintained yard, will definitely help your home make a good impression. This may give a subtle, overall impression of higher value to the appraiser.
The appraiser tries to give an objective opinion of value. For purchases, appraisers are informed of the sales price. In my experience, the appraiser does try to find comparable sales that will support that price.
If you have questions about home purchases or refinancing, please give me a call. Home financing is a big decision, and I want to help you make the right one.
Home prices in Los Angeles county rose at a modest annual pace of 2.1% (according to the latest data from CoreLogic). The median price was $597,500. In Orange County the median price dropped 0.7% from last year to $720,000. Expectations are for prices to stay stable or slightly up over the summer months, with lower rates making some homes more affordable.
For properties priced between $500,000 and $726,000, only a 5% down payment is needed, and some loans are only 3.5% down payment.
For properties priced at $500,000 and below, there are several loans with only 3% down payment required. Some of these are offered with a credit toward the full appraisal cost.
With so many different programs, it can be confusing to figure out the best one. I would be happy to go over the options that would be best for your situation. Call anytime.
In my last newsletter I highlighted the drop in mortgage rates. Well, this past week rates dropped even more. We are now at levels not seen in at least two years. If you were looking to buy a home and were not qualified, you might be now. Refinancing might help you save thousands of dollars a year. Please give me a call and we can see how lower rates could help you.
Don't Close Credit Card Accounts. This reduces your combined credit limit and will make your relative debts appear higher.Have questions about credit? Give me a call. I’ll be happy to explain what you can do to improve your credit score.
Home prices seem to still be rising but at a much slower pace. Zillow predicts prices will rise about 3% over the coming year. Median price of a home in LA County is $623,800, with LA City being $694,200.
This past week mortgage rates had the biggest weekly drop in a decade! Rates are now nearly a half percent lower than they were last year. Homeowners, call me to see if refinancing will lower your payment. Home Buyers, I can help you see if the home you want is now affordable with lower payments.
