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Wednesday, February 8, 2012
4 steps to buying a house in 2012
Tuesday, February 7, 2012
Mortgage rates probe new lows
Image via WikipediaEight out of 10 loan applications are for refis
Share ThisMortgage rates plunged to new all-time lows this week as investors in bonds that fund most home loans reacted to news that the economy grew more slowly than expected during the last three months of 2011.
Freddie Mac's weekly Primary Mortgage Market Survey showed rates on 30-year fixed-rate mortgages averaged 3.87 percent with an average 0.8 point for the week ending Feb. 2, down from 3.98 percent last week and 4.81 percent a year ago. That's a new all-time low in Freddie Mac survey records dating to 1971.
Rates on 15-year fixed-rate loans averaged 3.14 percent with an average 0.8 point, down from 3.24 percent last week and 4.08 percent a year ago. Rates on 15-year loans have never been lower since Freddie Mac began tracking them in 1991.
For five-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) loans, rates averaged 2.8 percent with an average 0.7 point, down from 2.85 percent last week and 3.69 percent a year ago. That's a new low in records dating to 2005.
Rates on one-year Treasury-indexed ARM averaged 2.76 percent with an average 0.6 point, up slightly from last week's record low of 2.74 percent. At this time last year, the one-year ARM averaged 3.26 percent.
"Most mortgage rates eased to all-time record lows this week as fourth-quarter growth in the economy fell short of market projections," said Freddie Mac chief economist Frank Nothaft in a statement. "The gross domestic product rose 2.8 percent in the final three months of 2011, below the market consensus forecast of 3 percent, while consumer spending in December was flat. One bright spot, however, was that fixed residential investment increased for the third consecutive quarter and residential construction spending rebounded in December, rising 0.7 percent."
Looking back a week, a separate survey by the Mortgage Bankers Association showed demand for purchase loans was down a seasonally adjusted 1.7 percent during the week ending Jan. 27 compared to the week before. Demand for purchase loans was down 4.3 percent from the same time a year ago.
Requests to refinance accounted for 80 percent of all mortgage applications, down from 81.3 percent the week before.
"The Federal Reserve surprised the market last week by indicating that short-term rates were likely to stay at their current low levels until the end of 2014," said MBA chief economist Michael Fratantoni in a statement. "Longer-term Treasury rates dropped in response, and mortgage rates for the week were down slightly as a result."
Monday, February 6, 2012
Inside the short-sale machine
Working full time on a 100 percent commission basis is not for wimps. The cost of health insurance alone is enough to send most sane people screaming into the night.
I can do it, and have survived the crash of the housing market, yet there are still times when some of the big banks make me want to cry.Selling foreclosures really isn't a big deal and in most cases it goes smoothly. I occasionally run into trouble getting utilities turned on for inspections, but I can usually get it worked out with a few phone calls and some deep cleansing breaths, as needed.
It is the short sales that are the killer. Right now there are about 2,000 homes on the market in the Twin Cities area, and there are offers on some of them that are waiting for third-party approval -- bank approval. Many of those sales will fall through because the buyer will give up, move on or die of old age waiting for an answer.
In some cases, the home will go into foreclosure before an offer is approved. Agents do not get paid if there is no sale. There's nothing like working for free.
I would avoid short sales altogether if I could, but hard as I try I get dragged into them -- usually because a friend, family member or a neighbor needs help. I have never recommended a short sale because they are rarely in the best interest of my clients.
There is a really huge bank -- let's just say it is one of the banks that our tax dollars were used to bail out -- and it seems to own about half of the properties in town.
The bank put together a program to fast-track short sales -- they now "only" take five to 16 weeks -- but I don't think we are supposed to share that information with consumers.
In fact, I think that was in the fine print of a document I read yesterday. For a huge corporation, five weeks must seem fast to the point of being reckless.
Here is an example of how the bank operates, and why it can make me cry if I let it: The bank required my client to fill out and sign an authorization form so that the bank has my client's permission to talk to me. That form is standard procedure.
My client signed it and sent it back to the bank. Two days later the bank requested that I send a copy of the same document. Of course, the bank already had a copy and I did not, leading me to contact my client to send me a copy of it so that I can send it back to the bank.
And then the bank told me that the form is overdue, and if I don't hurry the file will be closed.
The bank has an automated system that agents must use. It is not at all user-friendly, and sometimes I get email messages alerting me to check the messages in the system.
There are red letters on the screen with warnings, and many colors and words. And way up in the corner, in a tiny font, the screen states that there are two tasks I must complete.
It isn't enough to upload the file into the system -- it has got be submitted now or very soon, and failure to fill out a field that has a red mark by it creates all kinds of red warning messages on the screen. It is not at all unusual to have to send the exact same documents each day as they are requested all over again.
This is not what I left corporate America and a very affordable group health insurance policy for, and don't tell me I need short-sale certification.
I have to follow the rules for my client. After dealing with these short-sale programs I am positive that I would never do business with any of the banks involved. I would never go to them for a mortgage, or send a client to them or open a checking account.
I know there are many different branches and departments, but I am not that open-minded about it. I don't accept the "other" department or subcontractor excuse. I see a big brand with a big logo. The brand is only as good as the worst employee of whichever company it contracts with to deal with people like me and my client.
The people who sell real estate who are reading this probably know which bank or banks I am writing about, and if I mentioned them in a roomful of agents you would hear a groan.
I have witnessed many rants about these institutions over the past few years and I hope they do lose business because of how inefficiently they operate. They remind me of how depressing it can be to work inside of a huge, heartless, bureaucratic corporation.
There has to be a better way. There should not be 2,000 homes in my community with offers on them waiting for approval. Those homes need to be sold, and the process could easily be streamlined.
They could start by taking out the automated systems that are in place to make the process more efficient. The best way for agents to deal with these behemoth corporations is to have a nice glass of wine with dinner. There is no reasoning with the short-sale machine.
The Stress of Buying a New Home
Buying a home can be one of the more stressful experiences in life. It is often a long and sometimes intimidating process, lasting up to six months on average. The Real Estate market is huge and changes often with swings up and down. It's easy to become overwhelmed by how much is ahead of you and how little you know about the process. But with the right attitude, it can also be an enjoyable, even exhilarating experience.
Here are some tips to make your home-buying experience positive and less stressful.
Preparing to Move
Organize Be prepared by becoming knowledgeable. Educate yourself on each step of the process so you know what to expect. Get organized ahead of time. Keep a notebook and calendar dedicated exclusively to the home-buying process. An Excel spreadsheet is a great way to organize and compare all the information you gather, such as the homes you are interested in, potential lenders, and different mortgage rates.Finances
Keep your finances in order until you close on your new home, which could be as long as six months away. Do whatever you can to help improve your credit score; don't acquire new debt (no major purchases, new loans or new credit cards), reduce or eliminate any current debt, and pay your bills on time. It is never too early to begin improving your credit and is best started as early as two years prior to purchasing a home.
Find an Agent Find a real estate agent who you trust and connect with on a personal level. Communication in this relationship is fundamental. Some questions to ask yourself: Are they good at translating industry jargon into terms you can easily understand? Do they communicate well using media that works for you, such as email, cell phone, or video conferencing? Credentials are a big factor too. Choose an agent with proven expertise in both the type of property and property location that interests you.
Finding a Home
"Think from the end," is a common phrase heard in human potential circles. See yourself in your new home. How does it make you feel? What does it look like? Keep a journal to record these thoughts. Be as descriptive as possible. This can help to not only narrow down precisely what you are looking for in a home, but it can also help anchor you emotionally during a potentially unstable time by keeping the big picture in mind.Once you've found a home you like and know what you can work with financially, don't let the latest market news influence your decision to move forward. If you start second-guessing the housing market or interest rates, you risk losing the home to another buyer. Choose a home because you love it. Listen to your heart.
Waiting for Acceptance
Inspection Period
Hire experienced and certified inspectors to conduct a thorough inspection of the property including possible insect damage. Be present during inspection, so you can ask questions regarding the home and become knowledgeable about any issues that are discovered.Getting approved for a Loan
Taking out a loan can be the most stressful part of the home-buying process. Transactions typically take at least a month to complete. Having your financial situation scrutinized can be an uncomfortable process. Worrying about whether you will be approved is an added stressor. It helps to gather your financial records (credit card balances/statements, bank statements, investment statements) prior to meeting with a loan officer. Obtain a copy of your credit report; you're entitled by law to one free credit report per year. A copy of your 4506 T form (IRS Tax Return Transcript), which includes a summary of your tax information, is also available online for download.After Close, Moving In
Congratulations! You've successfully negotiated yourself through the complex maze that is home-buying and now find yourself at last kicking back on your couch with your favorite drink in the home of your dreams.
Thursday, February 2, 2012
Flashy kitchens seldom make economic sense
Kitchen design has always been rife with faddish gimmicks.
Remember the indoor barbecue? The disappearing mixer? The built-in blender? The retractable range top?
If you're not old enough to recall those, how about all those wine racks, pot fillers and appliance garages seen in kitchens of the past 20 years? Or the dual dishwashers, six-burner ranges and colossal refrigerators that were considered so indispensable at the height of the "Great Big Ol' Housing Bubble"?
Kitchen fads aren't limited to fancy equipment. Finishes also make the inevitable journey from chic to dreck. For instance, countertop fashions have successively cycled from ceramic tile during the interwar years to plastic laminate ("Formica") in the postwar era, then back to tile in the 1970s before moseying through various solid plastics such as Corian.
In the '90s, countertop fads among the super-hip took a side trip to polished concrete, while mainstream kitchen design settled into today's ubiquitous and long-running infatuation with granite slabs.
To judge by most kitchens these days, in fact, you'd think granite was the only countertop material left on the planet. Granted, it's durable stuff, but for my money, putting stone with a 200-year lifespan on top of cabinets that'll wear out in 30 years, if that, seldom makes economic sense.
Moreover, while it's one thing to commit to a momentarily trendy color or pattern -- as people often did with inexpensive plastic laminates tops -- it's quite another to get stuck with a kitchen full of pink granite for all eternity.
Invariably, these and many other formerly red-hot kitchen fads are eventually revealed to be ingenious strategies for selling kitchen products, but not necessarily practical ideas for the way most people actually cook.
Chances are, if the absence of the latest kitchen gimmick hasn't cramped your normal cooking style up to now, you probably don't need it anyway.
Naturally, people in the business of selling expensive kitchen goodies aren't terribly anxious for people to get back to basics. They've worked long and hard since the postwar era to convince consumers that the kitchen should be as glitzy as any other room in the house -- hence all those furniture-grade cabinets with lustrous coats of lacquer, acres of shining granite, and yards of glittering stainless steel that are so emblematic of today's kitchen design.
But as anyone who actually cooks will attest, the quality of a kitchen isn't judged by the depth of lacquer on the cabinets. And especially in this dismal economy, no remodeler should measure a kitchen's worth against the absurdly inflated standards of recent years.
What matters most is that your kitchen is meticulously tailored to your own style of cooking. Where will you keep the silverware, the coffee, the Cheerios? Will the stock pot, the colander, the cheese grater be at hand when you need them?
When you get right down to it, it's not the chest-beating gimmicks, but rather the little details like these, that make for a great kitchen. How it cooks is still more important than how it looks.
Wednesday, February 1, 2012
Interesting report from Inman News I wanted to share "10 real estate markets poised to outperform in 2012"
Interesting report from Inman News I wanted to share
10 real estate markets poised to outperform in 2012
Inman News report features charts, analysis, commentary on rising metros By Inman NewsInman News®
Inman News, in a report released today, highlights 10 metro areas that data suggest are set to outshine many other markets in real estate performance this year.
The markets, which stretch from New York to Texas and include metros with populations above 150,000, were selected and ranked based on a range of demographic, economic and real estate market data, including real estate sales volume and median sales price appreciation.
Among the findings in this report, researched and written by Inman News reporter Andrea V. Brambila:
- Three of the 10 markets on this list are state capitals, and both Illinois markets benefit from proximity to that state's capital, Springfield.Four of the markets: Bloomington-Normal and Peoria in Illinois as well as Des Moines-West Des Moines and Waterloo-Cedar Falls in Iowa, are no more than 300 or so miles from each other.
- Nine of 10 markets had median sales prices below the national median in the third quarter of 2011.
- Where affordability rankings were available, the markets on the list had no less than 73.6 percent of homes affordable to those households earning the area's median income in the third quarter.
- All had unemployment, foreclosure, and vacancy rates lower than the national average. None of the markets had unemployment rates higher than 7.9 percent. All had lower shares of distressed sales than the national average.
- Only two of the markets had populations above 1 million, and three had populations above 500,000. The remainder had populations below that figure, but above a minimum 150,000.
- As in last year's report, jobs in the public sector as well as the health care industry were major employers in most markets. This year, however, nine out of 10 markets also counted manufacturing companies among primary employers. Technology companies, energy providers, and universities also boosted many markets.
View the "Top 10 Markets to Watch in 2012" Report
Vapor barrier tips for walls, floors
To keep moisture from getting where it doesn't belong, builders use what are known as vapor barriers. The more you understand about what vapor barriers are and how they work in conjunction with the insulation in your home -- especially when you're doing remodeling and repair work -- the more you can do to help prevent moisture problems, like dry rot and mold, from occurring.Moisture is something we all need to have in order to survive, and it's surrounding us all the time. Unfortunately, it's also the enemy of a lot of our building materials, and if it gets into the wrong places in our homes and is allowed to remain, it can do a lot of damage.
Moisture on the move
First of all, understand that moisture in your home's air is a fact of life. Some of it is there naturally, as a product of the humidity that's in the air, and the more humid the climate you live in, the higher the moisture level that may be inside your home.
Then there's the moisture that you generate yourself: That can come from a wide variety of sources -- anything from showers and cooking to house plants and even breathing.
During the winter months, you keep the air inside your home at a higher temperature than the air outside. Air has a natural tendency to move from a warm area to a cold area, so the heated air in your home is always trying to move toward the ceiling, the floor and the outside walls, carrying moisture vapor with it.
Also, our homes tend to be at a slightly higher air pressure than outside, and that slight overpressure is again pushing the air and moisture toward the ceiling and the exterior walls.
So what is a vapor barrier?
In simple terms, a vapor barrier is a material that won't allow moisture to pass through it, such as plastic sheeting. A very simple experiment to show how a vapor barrier works is to lay a plastic garbage bag down on some damp soil.
Pick the bag up a little while later, and you'll see that the underside of the bag is covered with moisture. The damp soil was trying to give off its moisture to the surrounding air, but the bag -- the vapor barrier -- prevented that from happening.
Once again, remember that the warm air in your home is trying to escape through the exterior walls, carrying moisture vapor with it. If it gets into the exterior walls, some of it will remain in the walls and condense back into a liquid, creating all kinds of problems.
So one of your home's most common vapor barriers -- and one of the most important -- is the one used over the insulation in your exterior walls. It's designed to stop the moisture before it can enter the wall cavities.
There are two basic types of vapor barriers used with exterior wall insulation. The most common is paper-faced insulation. This type of insulation has a Kraft paper face with two flanges. The insulation is installed into the wall cavity with the paper facing into the house. This is very important -- the paper, which is the vapor barrier, always faces the warm side of the house.
That's because that's where the moisture is coming from. After the insulation is pushed into the wall cavities, the paper flanges are unfolded, then they're stapled to the face of the studs. Done correctly, that creates a continuous vapor barrier across the face of the entire wall.
The second method is to fill the cavities with unfaced insulation, then cover the face of the wall with 4-millimeter clear plastic sheathing. The plastic sheathing is the vapor barrier, and has the advantage of having fewer gaps and openings than the paper-face method, and it's also easier for the drywallers to see the studs during installation.
For the ceiling, if you're using batt insulation it's important that the insulation be installed with the vapor barrier facing down -- again toward the heated space. If you're upgrading old batt insulation by adding a second layer of batts on top of the first, never use faced batts for the second layer. If you do, you run the risk of creating a double vapor barrier; any moisture that passes through the first layer of insulation can get trapped by the vapor barrier on the second layer.
For the most part, attics are insulated with blown-in insulation. So you might be wondering where the vapor barrier is. Actually, there isn't one in that case, other than the drywall and paint on the ceiling. The difference between the attic and the exterior walls is that the attic isn't a closed cavity. It's open to the outside, and has ventilation to allow the moisture to escape. That's why it's critical that attics be properly ventilated, and that exhaust fans not be vented into attic spaces.
The last area to consider is your crawl space, which actually has two vapor barriers to be concerned with. In the typical crawl space with a dirt floor, a 6-millimeter plastic vapor barrier is used to prevent moisture from the soil from coming up into the crawl space area. That vapor barrier is laid directly on the dirt, and the seams are overlapped at least 12 inches.
The other vapor barrier is created with your floor insulation. One common mistake people make when insulating a floor is to install faced batts between the floor joists with the Kraft paper facing down, so they can staple the paper to the joists to hold the batts in place. Remember, the paper is the vapor barrier, and it has to face the heated part of the house, which means it has to face up. Always install batt insulation between the joists with the paper facing up against the underside of the subfloor, then hold the insulation in place with lath, wire or other means.
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