It’s time to move on. You’ve decided to sell your home and embark on a new adventure.
Unfortunately, potential buyers don’t care about how long you obsessed over choosing the perfect bathroom tiles or the number of carpenters you interviewed to make the perfect built-in bookcase. To the buyer, those items may not matter to the value of the home, even if you think they should.
When it’s time to sell, you have to price your home right, using tangible factors. Here are six rules to remember:
1. Price is king
Your asking price determines how long the home will sit on the market. Pricing the home too high may reduce the number of interested buyers, which can cause your home to sit on the market too long. If your house is on the market too long, it may create the perception that there’s something wrong with it. It can also lead a buyer to think that you’re desperate for an offer. You want to avoid these outcomes and not overvalue your home.
On the flip side, pricing the home too low may create some skepticism and raise unwanted questions about the home’s true value. This will hit you in the bank account if multiple offers don’t drive the price up to its true market value.
2. Use comparable sales
The simplest way to figure out the right price for your home is to compare similar homes that have sold in your neighborhood. Instead of skulking in the shadows and casing the neighbor’s house, use realtor.com to check out nearby stats.
Compare your house with those with the same number of bedrooms, bathrooms, and square footage. If you find comparable homes with similar floor plans and outdoor space, all the better. See how many homes in your area have sold recently and what they went for. You can also work with a real estate agent to help you compare houses.
3. Compare fairly
Make sure your comparison is fair. If there are neighborhoods in your city that are more desirable, consider that in your comparison. Also consider your location and what buyers want. If a similarly sized new-construction townhouse sold for top dollar down the block, you may not get the same amount for your cute ’40s bungalow.
4. Check the market history
To get a more comprehensive picture of the real estate market in your neighborhood, check the listing history of a home. Compare the original asking price with the final sale price, and note the amount of time the house was on the market until it sold. A REALTOR® can help you with this step.
If you’re looking to speed up the process, you may want to price your house a bit lower. However, if profit is your motive, you may need to wait a few months for a sale on the high end of the spectrum.
5. Consider special improvements
Consider whether major improvements you’ve made warrant a higher asking price. If you’ve remodeled the kitchen and put down a new parquet floor, or if you really feel the special woodwork details will clinch the sale, make sure those enhancements are reflected in the price of the home. Be reasonable. Don’t be surprised if you don’t get as much money as you expected—improvements don’t always recoup their cost.
6. Don’t ignore supply and demand
In a buyer’s market, with many homes for sale and sellers competing for attention, you may want to ask a bit less for your home to make it more attractive to potential buyers. In a seller’s market, where there is little home supply and much buyer demand, you may want to ask a bit more and maximize your profit.
By: Craig Donofrio
Updated from an earlier version by Aviva Friedlander
Tuesday, January 27, 2015
Wednesday, January 21, 2015
Where the Next Office Boom Will Be
Investors are turning to NERDS for the next big office boom.
We're not talking Steve Urkel here. JLL, a real estate investment management firm, classifies NERDS as the five cities expecting to benefit most from the next wave of commercial real estate success: Nashville, Tenn.; East Bay, Calif.; Raleigh-Durham, N.C.; Denver; and Salt Lake City.
From NAR: 4 Predictions for the Commercial Market
These cities, which are expanding and command lower prices than the U.S. average, are replacing big markets such as New York, San Francisco, and Washington, D.C., as big draws to investors. Companies seeking office space can get rental rates there that are 35 percent lower than the average U.S. rate, according to JLL. These cities also offer potentially high returns for investors in office REITS with cap rates, or income returns, between 5.5 percent and 7.5 percent.
"These markets are going to become attractive as these other markets continue to get hot, driven by Millennials who are going for quality of life," says Stephen Collins, who heads the America Capital Markets business of JLL.
Here's a closer look at each of the "hot office markets," according to JLL:
- Nashville: Education and health care jobs account for 15.5 percent of the employment in the city.
Office employment: 25% of total employment
Vacancy rate: 8.6%
- East Bay, Calif.: A more affordable option near San Francisco and Silicon Valley, this area boasts rental rates that are 54 percent lower.
Office employment: 24% of total employment
Vacancy rate: 15.8%
- Raleigh-Durham, N.C.: Population growth has surged 7 percent since 2010, and professional jobs have risen 30 percent since 2011. JLL predicts that rent growth here will rise 6 percent this year.
Office employment: 26% of total employment
Vacancy rate: 12.8%
- Denver: The city's diverse industry composition of tech, biotech, and professional and business sectors will likely help cushion the blow from the recent drops in the energy industry, JLL notes.
Office employment: 29% of total employment
Vacancy rate: 14.1%
- Salt Lake City: The city, as well as its state of Utah, has offered several tax breaks to entice more businesses to come.
Office employment: 27% of total employment
Vacancy rate: 11.7%
Source: “Where to Find the Next Office Hot Spots,” CNBC (Jan. 9, 2015)
Survey: Investors Preferred Flipping to Renting in Q4
Courtesy of: DS News http://dsnews.com/news/01-21-2015/survey-investors-preferred-flipping-renting-q4
A nationwide survey of real estate investors bidding on properties offered for auction during the fourth quarter of 2014 revealed that flipping was the preferred investing strategy over renting, according to Auction.com's Q4 2014 Real Estate Investor Activity Report.
Though various reports have suggested in the last year that flipping opportunities are dwindling, Auction.com's latest survey affirms that flipping is still going strong: 50 percent of investors said they intended to flip the homes they purchased, compared to 47.3 percent who said they intended to rent them out (2.7 percent were undecided).
"I think two things are probably true. I think the notion that flipping had gone away was probably overstated to begin with," Auction.com EVP Rick Sharga said. "I think in certain markets, conditions have changed to the point where buying and renting is less affordable and flipping makes more sense from an investor perspective. But I really do think that the decision to flip or to rent very often will come down to the location of the property."
Sharga said in areas such as California and in Northeastern states, investors are more likely to flip. Lately, he said there has been more of a shift toward flipping over renting in Washington State and in Arizona that can be tied to two factors – home price appreciation combined with lack of inventory.
"One is the fact that the properties are more expensive now, which makes them harder to rent at a profit, because you have fewer potential renters willing to pay higher prices," Sharga said. "The other is that some of these states have a very low inventory of existing homes for sale. So flippers can come in, invest some money in fixing up properties, and sell them pretty quickly at fair market value."
According to Auction.com's Q4 data, investors who purchased properties at live auctions were more inclined to flip. About 56 percent of investors who purchased properties at live auctions said they intended to flip, compared to 41.1 percent who said they intended to rent (2.8 percent undecided). The percentage of those who intended to flip was higher than those who intended to rent in all 10 states where Auction.com conducted live events in Q4. Washington (72.1 percent) and Nevada (71 percent) had the highest percentage of flippers among investors who purchased at live auctions.
Meanwhile, investors who purchased properties through online auctions showed more of a propensity to rent over flipping, according to Auction.com. About 55.1 percent of investors who purchased online in Q4 said they intended to rent the properties out, compared to just 42.3 percent who said they intended to flip (2.5 percent were undecided). Of the four regions (West, Midwest, South, and Northeast), the Northeast was the only one with a higher percentage of flippers purchasing online (50 percent) compared to renters (46.5 percent).
Auction.com's survey also revealed that the more properties an investor purchased, the more likely they were to flip. Of the investors who purchased an average of only one property per year, 36.3 percent intended to flip while 61.1 percent intended to rent. For those who purchased between two and 49 properties per year, 54.9 percent intended to flip compared to 42.7 percent who intended to rent; and for those who purchased more than 50 properties per year, 56.3 percent said they would flip compared to 39.6 percent who said they would rent.
Sharga said he expects the strong flipping numbers to continue through the year, albeit on a more regional basis.
"It'll be interesting to see if the numbers shift a little bit as more investors, perhaps, come back into the market," he said. "One of the things you have to keep in mind is that these percentages are based to a certain extent on where we're seeing the most investment activity. If we happen to go through a period, where, say, California is especially strong, that'll tilt the numbers a little bit in the direction of flippers. On the other hand, as weather warms up, if we see more investment activity in the Midwest, for example, that could make the numbers go in a different direction. By and large, I think we're going to see a very healthy market for property flipping in 2015."
Sunday, January 11, 2015
Mortgage Rates Kick Off 2015 at 20-Month Low
Borrowing costs moved even lower this week, with the 30-year fixed-rate mortgage averaging 3.73 percent, its lowest average since May 2013.
"Mortgage rates fell to begin the year as 10-year Treasury yields slid beneath 2 percent for the first time in three months,” says Frank Nothaft, Freddie Mac’s chief economist. “Meanwhile, the Fed minutes indicated ongoing discussion regarding the timing of the first rate hike.” Many housing economists have predicted that mortgage rates will rise sometime this year, with the 30-year fixed-rate mortgage likely reaching the upper 4 percent or 5 percent range by the end of the year.
More mortgage news:
Freddie Mac reports the following national averages with mortgage rates for the week ending Jan. 8:
- 30-year fixed-rate mortgages: averaged 3.73 percent this week, with an average 0.6 point, dropping from last week’s 3.87 percent average. The 30-year rate has not averaged this low since May 23, 2013, when it was 3.59 percent. A year ago at this time, 30-year rates averaged 4.51 percent.
- 15-year fixed-rate mortgages: averaged 3.05 percent, with an average 0.5 point, dropping from last week’s 3.15 percent average. Last year at this time, 15-year rates averaged 3.56 percent.
- 5-year hybrid adjustable-rate mortgages: averaged 2.98 percent, with an average 0.5 point, dropping from last week’s 3.01 percent average. A year ago, 5-year ARMs averaged 3.15 percent.
- 1-year ARMs: averaged 2.39 percent, with an average 0.4 point, falling from a 2.40 percent average the previous week. Last year at this time, 1-year ARMs averaged 2.56 percent.
Source: Freddie Mac
Friday, January 9, 2015
Housing In 2015: Four Reasons For Optimism (And One For Worry)
Mel Evans/AP
Six years ago, homebuilders and Realtors were facing brutal business conditions: millions of Americans were losing their jobs and homes.
As 2015 begins, hiring is strong and economic indicators are pointing up. Could this be the year when the housing market finally breaks out of its tepid recovery and takes off?
Economists see several reasons why 2015 might be a banner year for homebuying — and not just in San Francisco and Miami.
They also see One Big Factor that potentially could block a buying binge.
Before considering that possible downer, let's first look at the upside:
Employers are hiring again.
When companies are hiring, would-be homebuyers feel more confident about taking on mortgage debt.
During the recession, companies kept slashing positions, sending the unemployment rate soaring to 10 percent and frightening potential homebuyers. But job growth has been strong lately, with employers adding 321,000 jobs in November. The unemployment rate has tumbled to 5.8 percent.
As that good news sinks in, optimism is rising. The Conference Board's latestConsumer Confidence Index shows confidence is running 19.5 percent higher than a year ago.
Home prices just took a breather, which helps.
From January to October, home prices rose 4.5 percent nationally, according to the latest S&P/Case Shiller Home Price Index. That gain was subdued compared with October 2013, when home prices jumped 11 percent higher than the previous year.
But slower price appreciation in 2014 may have set the stage for a buying surge in 2015. That's because buyers need the right combination of steady income, decent savings, low interest rates and reasonable home prices to jump into the market.
The Labor Department's latest jobs report showed an uptick in wages, and the surging stock market has been boosting savings. Mortgages have been holding below 4 percent for 30-year fixed rates.
And now the decelerating growth in home prices may be creating an affordability opportunity that will attract buyers in early 2015.
Rents are high.
When millions of Americans were losing their homes in the recession, many started moving into apartments. That shift caused rents to soar.
"With rents now rising at a seven-year high, historically low [interest] rates and moderating [home] price growth are likely to entice more buyers to enter the market in upcoming months," Lawrence Yun, the National Association of Realtors' chief economist, said in a release.
Millennials are sick of Mom's basement.
The Census Bureau says just 36 percent of Americans under age 35 own a home. In 2007, that figure was 42 percent.
Some young people enjoy renting, but a recent survey by Fannie Mae showed 9 in 10 would prefer to own. They have been held back by tight lending standards that have made it tough to get around their heavy student debts and light savings.
But in December, Fannie Mae and Freddie Mac announced programs that would allow first-time buyers to get homes with down payments of just 3 percent, instead of 5 percent.
That lower amount would allow creditworthy but cash-strapped young buyers to qualify for mortgages. "If access to credit improves, we could see substantially larger numbers of young buyers in the market," Jonathan Smoke, chief economist for Realtor.com, said in his 2015 outlook.
But there's one reason for pessimism.
For years, many economists have been saying mortgage interest rates would rise. In 2015, they finally may be right.
That's because the Federal Reserve, which has held down both short- and long-term interest rates since 2008, has been signaling a coming change. The Fed is expected to allow rates to drift up, probably starting this summer.
Jim Watson/AFP/Getty Images
Industry economists generally expect mortgage rates to reach 5 percent by year's end. That would still be quite low by historical standards, but after having such cheap mortgages for so long, even a modest rate increase could scare off buyers, according to Lindsey Piegza, chief economist for Sterne Agee.
"A rising monthly payment — thanks to rising interest rates — could cause an unwelcome sticker shock for many potential homebuyers," she said.
Source: npr
By: Marilyn Geewax
Thursday, January 8, 2015
Stronger Economy Drives New Home Buyers
The strengthening of the economy and the labor sector is prompting more young professionals to gradually return to the real estate market.
Since the housing turnaround started in 2012, many first-time home buyers have been shut out, with a poor labor market and low wages forcing many young professionals to move back with their parents or to rent. Last year, the number of first-time buyers plunged to a 30-year low, according to data from the National Association of REALTORS®.
The New Crop of Buyers
“Credit tightness has been an issue for the housing market but demand weakness has been a bigger one,” says Douglas Duncan, chief economist at Fannie Mae. “The improving economy is going to put renters in a better place to buy.”
Duncan predicts a 6.3 percent jump in mortgage lending this year – that would follow a 9.6 percent drop in 2014. Growing confidence in the job market is the strongest indicator that home sales will improve, Duncan says.
With added jobs, more consumers see their wages growing too. Overall, consumers expect a 1.7 percent rise in their incomes this year, the highest increase since 2008, according to the Thomson Reuters/University of Michigan consumer sentiment poll. Americans under the age of 45 years old are expecting the largest gains in incomes at 4.7 percent.
“Young renters have wanted to keep their living situations flexible because they didn’t know if they were going to have to move for a job,” Duncan says. “More of them are going to be willing to put down roots if they feel more confident in the labor market.”
The economy added more than 2.7 million jobs in 2014, the highest amount since 1999, according to data from the Bureau of Labor Statistics.
Household formation is a key measure of real estate demand. Household formation is expected to increase to 1.1 million this year, the highest in three years, according to IHS Global Instight Inc. forecasts.
“If the first-time buyers aren’t in the market, the sellers can’t move up and buy their next houses,” Bill Banfield, vice president of Quicken Loans Inc. in Detroit, told Bloomberg News. “The real estate market needs an increase in entry-level demand” for it to fully recover.
Source: “Young Home Buyers Return to U.S. as Economy Enlarges,” Bloomberg News (Jan. 5, 2015)
Monday, January 5, 2015
Marriage, Mortgage No Longer Hand-in-Hand
A younger generation is no longer viewing marriage as a prerequisite to a mortgage, as they show some signs of committing to a house before a marriage, according to a recent Los Angeles Times article.
Catering to New Customers
"These key life-stage things impact when we buy, what we buy and where we buy," Mollie Carmichael, a principal at John Burns Real Estate Consulting in Irvine, told the Los Angeles Times. "But ... young people today aren't living by the same rules as 20 or 30 years ago."
Unmarried couples, same-sex partners, even pairs of roommates are making up a larger part of the housing market than they did a generation ago, says Rachel Drew, a researcher at Harvard University’s Joint Center for Housing Studies.
"The decline in married couples among younger buyers is almost entirely offset by growth in unmarried couples,” Drew notes. “You're not actually seeing a decline in two-adult households. [Unmarried couples] are much more likely than a single person to buy a home. They're acting like married couples."
Some couples are realizing they could take the cost of a big wedding and instead put it toward a home. The average wedding and honeymoon costs about $35,000, which is around the down payment many home buyers need, according to a study last year by real estate website Redfin.
"I think a lot of people my age have come to the realization that marriage is almost like a bonus,” Yvonne Carrasco, a 33-year-old public relations professional, told the Los Angeles Times. “If it happens, great. If it doesn't, great. But it's important to put yourself in the situation to feel safe and secure."
Still, while unmarried couples or singles may be showing more willingness to buy, some see marriage as still a key driver to home ownership.
"It's a pretty straightforward link," says Richard Green, director of USC's Lusk Center for Real Estate."Married people buy houses. Single people rent." For example, in California, 48.7 percent of households were headed by married couples in 2013, down from 51.1 percent in 2000, according to Census data. But more than two-thirds of married couples owned their homes compared to 40 percent of non-married households.
Source: “Many Buyers No Longer See Marriage as Prerequisite to a Mortgage,” Los Angeles Times (Jan. 2, 2015)
The Biggest Obstacles Facing Housing in 2015
Industry analysts and economists largely believe the real estate market will gain traction this year, but they acknowledge several challenges that pose a potential derailment to the ongoing recovery. CNNMoney recently highlighted several of those challenges:
Why Some Are Optimistic
Investors exit the market: Institutional investors accounted for 15 percent of all sales in October, a drop from 20 percent in January, according to National Association of REALTORS® housing data. “Rising home values are causing more investors to retreat from the market,” says Lawrence Yun, NAR’s chief economist. Institutional investors purchased thousands of properties during the onset of the housing recovery, helping to propel the market in many areas across the country. But now with higher home prices, they may be looking to cash out. "Home price appreciation has given those investors a good opportunity — and motivation — to sell and realize a solid return on many of their properties in many markets," according to a report by RealtyTrac looking at institutional investor activity. In that report, RealtyTrac found that institutional investors who bought in 2012 could potentially earn returns of 38 percent to 43 percent if they sold in the current market. But as investors lessen their stake in the market, first-time buyers, whose presence has been at 30-year lows, may be more poised to step in their place.
Lending criteria still tight. REALTORS® still say tight credit is holding many of their would-be buyers back and derailing transactions as buyers continue to struggle to qualify for a mortgage (although REALTORS® surveyed say they have seen a slight improvement in lending recently), according to the latest REALTOR® Confidence Index.
"The increase in mortgage insurance premium payments for FHA-insured loans continued to be reported as an added financial strain for first-time buyers," the report notes. "Obtaining FHA financing for condominiums (typically the entry points for home ownership) continued as a major issue; many condominiums were reported as not meeting FHA eligibility requirements."
In December, mortgage financing giants Fannie Mae and Freddie Mac announced they were easing lending standards, most notably with a 3 percent down payment offering for qualified borrowers. But that doesn’t mean all lenders will ease up on credit, Mark Zandi of Moody’s Analytics told CNNMoney. Some lenders may continue to be uneasy about lending to borrowers with sub-par credit or who are unable to make large cash down payments (more: Bank of America: We’re Not Easing Up).
Rising mortgage rates: Mortgage rates are sitting near historical lows at the moment, under 4 percent for the 30-year fixed-rate mortgage, but don’t expect that to last. Many economists are predicting rates will push up to 5 percent by the end of this year. “If [the Fed] pushes rates up, it could have a big impact on the market,” says Fannie Mae’s Chief Economist Doug Duncan. Home buyers particularly in high-priced markets, such as San Francisco and Los Angeles, who are already paying large portions of their incomes to housing could face a further chip in affordability, economists say.
Foreign buyers buying less in U.S.: Foreign buyers helped fuel the housing market recovery, but there are signs they’re presence is receding. “As the dollar has strengthened, it made U.S. housing more expensive,” Dunchan says. Chinese buyers continue to have a strong presence in the U.S. market, but buyers from Europe and Russia – where their economies are starting to soften – are beginning to lessen their stake in U.S. real estate, says Lawrence Yun, NAR’s chief economist. For example, in California alone, sales to international clients has plunged about 25 percent in the past year, according to the California Association of REALTORS® (more: NAR’s 2014 Profile of International Home Buying Activity).
Source: “5 Biggest Threats to the Housing Market,” CNNMoney (Jan. 2, 2015)
California's High Housing Costs Drive Out Poor, Middle-Income Workers
California's high cost of living has pushed hundreds of thousands of low- and middle-income workers to other states, federal data show.
The trend points to a challenge for the state's economy: how to attract workers of moderate means to some of the nation's most expensive housing markets.
The state overall has been losing people to other parts of the country since the 1990s. A snapshot of more recent U.S. Census migration numbers shows that nearly three-quarters of those who have left California for other states since 2007 earn less than $50,000 a year.
Experts point to the state's increasingly unaffordable real estate markets as a major driver of the trends. More than half of the nation's 50 most expensive residential real estate markets are in California, according to Coldwell Banker's Home Listing Report, including nine of the top 10.
"It's getting harder and harder for the middle-class Californian to buy a home," said Jordan Levine, director of economic research at Los Angeles' Beacon Economics, who points to the migration trends as a major hurdle for the state's future economic growth. "People just keep looking for ways to maximize that residential dollar. That attracts people to inland areas of the state and to other states."
Those moving to California tend to have higher incomes. About 35% of working-age people moving in make more than $50,000 annually, compared with 27% of those moving out.
The disparity gets progressively pronounced at the lower end of the income scale.
For those making $40,000 to $49,999, for instance, the net loss of population is 15,403 residents since 2007. The loss is 22,754 residents in the $30,000 to $39,999 range, then more than doubles to 46,318 residents in the $20,000 to $29,999 range.
"Housing prices are a primary factor, because that's usually the first thing you deal with when you're moving," said Dowell Myers, a professor of demography and urban planning at USC.
Census surveys back that up. According to data from the Census' Current Population Survey, those moving out of the state over the last 15 years listed housing as one of the most common factors, behind only family and job concerns.
"Rents are going up very rapidly, as well as housing prices," said Hans Johnson, a migration expert who is a senior fellow at the Public Policy Institute of California. "The economy is booming, but how do you supply housing for the workers who aren't commanding high incomes yet are still in demand?"
Darren Hayes is a native of Oxnard who worked for 15 years as a teacher in Orange and Ventura counties. He earned bachelor's and master's degrees at California universities. He spent most of his life in California until moving to the Dallas area last year.
He and his wife lost their Oxnard home to foreclosure after the housing crash, and the options for a replacement home in California were sparse.
Hayes always pictured Texas as a land of larger-than-life belt buckles and oversized pickup trucks. But he kept hearing about the great quality of life from his brother-in-law, Pete Paule, an insurance professional who left Simi Valley for Texas in 2012.
It took one visit to persuade Hayes to follow suit. He quickly found a similar teaching job in an affluent school district north of Dallas in 2013, and for the first time in years a dream home appears within reach.
"If we stayed in California to buy a house, in my opinion we would have to settle," said Hayes, 47. "Now we can be picky and choose the house we want."
The large flow of middle- and lower-income workers out of California is a trend that dates to at least the late 1980s, according to demographic expert William Frey, a senior fellow at the Brookings Institution in Washington.
During the last decade, out-migration from California peaked during the housing boom. The trend continued during and after the Great Recession, though at a slower pace.
The biggest recipients of the state's out-migration have been Texas and other western states such as Arizona, Nevada, Washington and Oregon.
"For a while now, the new frontier has not been 'Go west, young man,'" Frey said. "It's 'Go east,' if you're in California."
But the influx of higher-income, college-educated migrants from other states to California has been on the upswing since the recession, according to Census data.
That shift has pros and cons.
Attracting skilled workers with greater spending power means a boost for tax revenue and helps to retain innovative companies seeking a talented workforce. But it puts pressure on those in the middle — workers who have certificates or associate's degrees that fill crucial positions in industries such as healthcare.
According to the Census data from 2007 to 2013, one of the largest groups of workers leaving California was those who had more than a high school diploma but less than a bachelor's degree.
"For the people who can afford to go there, get the jobs and do well, the cost of living is not as much a problem," Frey said. "It's just difficult to live there in the middle."
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