If you are thinking of buying a house, but waiting for the home prices to stop climbing, you may as well hunker down.
Recent statistics from the FHFA (Federal Housing Finance Agency) show that although home prices were expected to slow by the end of last summer, they have now risen for 17 consecutive quarters. Nationwide, the increase in August averaged 8%, rather than the 3 to 5 percent economists had predicted.
“The long-anticipated slowdown in home price appreciation did not occur in the third quarter,” said FHFA Principal Economist Andrew Leventis. “The factors that have contributed to extraordinary price growth over the last few years — low interest rates, tight inventories, strong buyer confidence, and improving income growth — continued to drive prices upward in much of the country. However, as prices continue to rise, reduced affordability will be a stronger market headwind,” Leventis said.
Translation? It means that the old adage “time is money” is truer than ever. The longer you wait to purchase a home, the less buying power you will have unless your income increases at a faster clip than home prices. When home mortgage interest rates rise (rumor has it that the Federal Reserve Board has an itchy trigger finger), your buying power will shrink even further.
So if you are serious about wanting to buy a home in the coming 3 to 6 months, your best move is to find a skilled real estate broker (that would be me, 206-708-9800) who can point you to a reputable lender, who can then get you pre-approved for a home loan.
Once you know how much you qualify for, we can get to work finding you a home.
Reports show that by the year 2030, the 65+ year-old population in this country will more than double — from 35 million to 73 million! (Source: Bipartisan Policy Center Report)
Increasingly, the majority of seniors express the desire to stay in their current homes as long as their health allows. But many of them may find that reaching the goal of “aging in place” requires modifying the structure of their existing home to include features that make independent living a safer option.
Home builders note that about three-quarters of remodeling projects now include aging-related retrofits. Adding grab bars, entrance ramps and main floor bathrooms are high on the list of priorities. Widening doorways and hallways to accommodate wheelchairs and walkers is also a common request. Filling out the list of features that add to safety and convenience are lever-style handles on doors and faucets, plus switches and outlets that are height-appropriate and therefore easily accessible.
One level homes, aka ramblers and/or ranch style homes, are obviously a good choice for older residents because they have few, if any stairs. Many of the existing ramblers were built in the 1950’s and the demand is already outstripping the supply. Moreover, the high cost of land dictates that most new construction is in the form of multi-level homes these days, and that shift is not likely to reverse itself.
Stair lifts are another option to overcome stairs, but one has to wonder, will the next big trend will be home elevators?
You might want to start buying stock now.
Everyone loves a bargain, but when you are talking about homes, how wise an investment is a fixer-upper?
The answer is, it depends.
Here are some key considerations.
- How much of the work can you do yourself and how much will you need to contract out? If you can’t do a quality job, don’t attempt it. Repairs that have obviously been done by an amateur do not increase the value of your home. True professionals earn their money, but the expense of hiring them strips away some of your intended savings.
- Get solid estimates for labor and materials before you make an offer. If you will be hiring a contractor, get him or her to tour the house with you and give you a written estimate. Then add 10-20% to allow for unforeseen problems. They are as certain as the sunrise.
- Research permit costs and requirements. Remodeling without the mandated permits may save you time and money in the short-run, but you are likely to pay for it down the road. In addition to possible safety hazards, unpermitted work can hurt your resale value, if not squelch a deal altogether. Also, if you are on a tight timeline, a lengthy permitting process can cost you money, and create headaches.
- Think twice about homes with structural problems. If you are considering an older home (built 50+ years ago) or one with obvious structural defects, spend the money to hire a structural engineer to give you a written assessment of the existing and foreseeable problems.Then get a binding, written estimate for the repairs before you make an offer. You may want to tack on another cushion for potential cost overruns. In my opinion, unless you have money to burn, homes needing major structural work should be left to investors and contractors.
- Determine the cost of financing. If you will be borrowing money to make the purchase, get pre-approved first. If you will not be occupying the home, you may be required to borrow as an investor. These loans carry a higher interest rate. Keep in mind that a typical home loan will not include additional funds for renovations, so you will need savings, a second loan or some other source to pay the costs of remodeling. A home renovation loan, such as a 203(k) loan, may be at least a partial solution. However, these loans are notoriously difficult to get and administer, and are not likely to cover the full cost.
- Work with your real estate broker to determine a fair offer price. Once you have a solid estimate for the renovations you want to make, use that figure to decide what your offer price should be. I.e., if the home were in post-remodel condition, what would it be worth in today’s market? Take that number and deduct your cost for renovation to calculate your opinion of the home’s current value. If this is a number that is acceptable to both you and the seller, you’re in business. If it’s not, you’d best move on to another property.
- Work with an agent who knows how to write a strong offer that will be accepted, while still protecting your interests. The offer should include an inspection contingency that allows you to back out of the deal — with your earnest money intact — if inspections reveal deal-breaking surprises for which the seller is unwilling to negotiate. Don’t forget to have the sewer line or septic system inspected. These repairs, when needed, typically start in the $10K-$20K range. You should also have a financing contingency that protects you in the event that your loan falls through.
If this all sounds like fun to you, then forge ahead and enjoy the ride! If not, I recommend that you find another place to invest your time and money.
Posted Nov. 8, 2015
You are probably familiar with Pinterest as an online source of ideas and inspiration for home redecorating ideas, but there are many others that may also interest you. Here are a few:
Features stylish, yet reasonably priced ideas such as turning closets into office nooks and creating vertical herb gardens for small balconies and terraces.
A curated gallery of photos from designers, architects and home owners worldwide.
Homeowners can post questions on a discussion board to ask professionals about how to solve specific problems or create a particular look.
A good jumping-off point for distinct projects such as making use of small spaces or sound-proofing a room.
Info about everything from how to organize closets to how to grow herbs sans a back yard.
Also, check out my Pinterest board dedicated to space saving ideas for your home.
You’re probably aware that we are smack dab in the middle of a strong sellers’ market, but that doesn’t necessarily mean it’s a good time for you to sell.
If you’ve concluded that it’s best for you to stay put right now, despite the high prices that many homes are commanding, you may be interested in doing some remodeling. If so, the next question is what project to tackle first? Perhaps you want to find a happy medium between making improvements that will increase your home value and those that will increase your home enjoyment.
Remodeling Magazine conducts an annual survey of home remodeling costs, and shares the results in their Cost Vs. Value report, which is available online for free download. To take advantage of this valuable info, go to www.remodeling.hw.net and click the “COST vs VALUE” tab at the top of the page.
You may be surprised to hear that projects involving replacement are generally less expensive and more apt to recoup their cost than remodeling projects. These smaller jobs are most impactful when they involve exterior features because first impressions are extremely powerful. For this reason, the top projects (nationally) with the best record for recouping their costs are:
1) Entry door replacement (101.8%)
2) Manufactured stone veneer (92.2%)
3) Garage door replacement (88.5% – 82.5%)
4) Siding replacement, fiber cement (84.3%)
Read the report for more specific information about the Seattle area and low, moderate, and high end price tiers.
Posted November 4, 2015
As home prices continue to escalate at a mind-boggling rate, the big question among real estate professionals these days is whether or not this constitutes another bubble. Leading economists seem united in their response that it is not. Their reasoning has to do with governmental safe guards that have been put in place to further regulate the banking industry. “Liar loans” (i.e. loans based on non-verifiable resources/assets) are a thing of the past, they say, so only people who can actually pay their mortgages are getting loans. Furthermore, the irrefutable law of supply and demand will keep prices on the rise.
As average home buyers get priced out of Seattle’s core, they are trading increased commuting times for lower housing costs by purchasing homes north and south of Seattle. However, it seems obvious that this is not a sustainable solution either. We will eventually reach a tipping point where the trade-off no longer makes sense.
Getting back to the question of whether or not we are heading for another housing bubble, perhaps a better analogy is a balloon. Although a balloon can certainly burst, it has an obvious and controllable source of inflation. If you stop adding air, it simply stops getting bigger. Buyers do not have unlimited amounts of money to spend on home purchases. Once the bidding warriors run out of money, prices will have to stabilize.
While competition for a limited supply of homes will undoubtedly keep prices high, at some point, the rate of increase will have to decelerate and market value will become easier to determine. This may be a long way off, however.
The good news is that the balloon scenario is unlikely to result in the recessionary drop in home values we saw in 2007. Rather than seeing their equity disappear, homeowners will simply see much more modest and reasonable gains.
Once again, real estate proves to be a solid investment over time.
I welcome your questions and comments.
Posted November 2, 2015