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5 Common Buyer's Remorse Culprits

by Melissa Dierks

Some home buyers suffer from post-purchase regret. Realtor.com® recently spoke to real estate industry experts to find out what home features tend to spark the biggest regrets among buyers. Topping the list:

1. Buying too big of a home. Buyers may think at the time having a big home is what they want, but after moving in, they may later regret the expense and upkeep of maintaining a big home. Cooling and heating bills can be much higher and just cleaning the place can become a much bigger chore. Also if the room size is big, buyers may find their furniture a mismatch and too small. Urge buyers to bring a tape measure to verify their furniture would work in the space and also to consider the utility bills.

Read more: What's at the Root of Buyer Remorse

2. Awkward layouts. The kitchen island is often a desirable amenity among home buyers – it can add prep space, after all. But “kitchen islands can be a mistake if you don’t take your ‘work triangle’ into account,” Baumbusch says. She urges buyers to walk around the kitchen and consider their usual prepping and cooking patterns.

3. Not considering what’s missing. Architects and remodelers sometimes will remove something from a room to give it a more modern, cleaner feel. For example, “there is a trend to eliminate the bathtub in favor of just a shower,” Baumbusch says. “Some home owners regret that decision because sometimes they find themselves wishing for a nice long soak after a tough day.”

4. Pools. For some home buyers, the pool can become a selling-point that later turns into a source of regret. Pools can be costly and some buyers may fail to consider the all of the additional costs. For example, there’s regularly monthly maintenance and cleaning as well as pools in seasonal areas often are opened and closed by a professional. “It can cost upward of $600 just to open a pool and prepare it for swimmers,” Baumbusch says.

5. Falling for fads. “Today’s popular ice-white appliances, steel countertops, and Edison bulb light fixtures are yesterday’s saloon doors, linoleum, and brass hardware,” realtor.com® notes. “If you buy a house just for its trendy look, you may end up regretting it when the styles change, especially if you have to sell the outdated design.” Baumbusch recommends buyers look for timeless features – classic, well-designed homes.

Source: “Skip the Pain: 7 Things That Will Fill You With Buyer’s Remorse,” realtor.com® (Oct. 12, 2015)

First-Time Buyer Share Edging Up

by Melissa Dierks

First-time home buyers comprised 32 percent of existing-home sales in August, up from 29 percent a year ago, according to the August 2015 REALTORS® Confidence Index Survey.

“Sustained net job creation, a low interest rate environment with 30-year fixed rates at below four percent for most of 2015, and better pricing of FHA-insured mortgages appear to be helping first-time home buyers,” according to the REALTORS® survey.

Buyers age 34 and under accounted for 29 percent of sales reported by the respondents. Nearly half of buyers were 35- to 55-years-old. Renters, meanwhile, accounted for 38 percent of sales.

REALTOR®s surveyed report that tight inventory, increasingly unaffordable prices, and weak credit profiles that fail to meet tighter underwriting standards are conditions that continue to work against first-time home buyers.

Source: “Sales to First-Time Buyers: 32 Percent of Sales in August 2015,” National Association of REALTORS® Economists’ Outlook blog (Oct. 6, 2015)

The Next Three Months: Best Time to Buy

by Melissa Dierks

DAILY REAL ESTATE NEWS | TUESDAY, OCTOBER 06, 2015
Low mortgage rates, declining home prices, and homes that are lingering on the market longer are three main reasons why the next three months could be the best time to buy so far this year, says Jonathan Smoke, realtor.com®’s chief economist.

“The spring and summer home-buying seasons were especially tough on potential buyers this year with increasing prices and limited supply,” Smoke says. “Buyers who are open to a fall or winter purchase should find some relief with lower prices and less competition from other buyers.”

Read more: 5 Top Motivators for Buying Now
The biggest challenge buyers will likely face buying in the next three months is the limited number of choices. There are fewer homes for-sale this fall than last year and housing inventory has already peaked for 2015, Smoke says.

In many markets, real estate is making its seasonal transition and is tilting in favor of home buyers lately.

Also, buyers are locking in low mortgage rates as the Federal Reserve continues to delay raising rates. For the past 10 weeks, the 30-year fixed-rate mortgage has averaged below 4 percent, according to Freddie Mac.

Here are some more factors pointing to a slowdown in the overall housing market:

Median home prices dropped 1 percent month-over-month in August (however, prices are still up 6 percent year-over-year).
Homes are staying on the market longer: The median age of home inventory is 80 days, up nearly 7 percent from August.
Mortgage applications dropped 6.7 percent week-to-week.
Source: “Mortgage Rates: Three Reasons to Buy in the Next Three Months,” Nerdwallet (Oct. 2, 2015)

3 Home Inspection Deal-Breakers

by Melissa Dierks

DAILY REAL ESTATE NEWS | WEDNESDAY, OCTOBER 07, 2015
Home inspectors are hired to perform an objective evaluation of a home's condition, but at times, their discoveries can prompt the buyer to terminate a sale contract.

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Dylan Chalk, owner of Seattle-based Orca Inspection Services LLC, writes on Redfin's blog that, in his experience, the following three issues kill the most deals:

Cover-ups. The house may look great, but a deeper inspection may reveal short-cuts on repairs or renovations made by a prior home owner. These commonly occur in homes that were purchased to be flipped. "I sometimes find flips in need of structural repairs or discover chronic moisture problems that were covered up in an effort to sell the house," Chalk writes. "On the outside, everything looks new and shiny, but there may actually be deep dysfunction lurking in the bones of the house." He also finds problems with vacation homes that have been remodeled multiple times over the years. "There can be a hodgepodge of foundations, additions, and rooflines that make them fundamentally different than they appear," Chalk notes. "These are not 'bad houses,' but they are often quirky and may present risks that buyers weren't anticipating. One tip that often gives these homes away is a quirky roofline that shows obvious additions."
More repairs than anticipated. This is a common scenario with younger homes, Chalk says. The clients may say, "It's only 20 years old!" But while most 20-year-old houses are in good shape, they often require expensive replacements for systems that last only 15 to 20 years. Systems that usually need to be replaced after 20 years are a deck, furnace, roof, and appliances. Carpets, the home's siding, and even hardwood finishes may need special attention at that point, too. The maintenance list may come as a surprise to some buyers.
The home has bad bones. Buyers go into fixer-uppers knowing they intend to do a host of repairs, such as the furnace, kitchen, bathrooms, flooring, paint, and appliances. But buyers may not have taken into account the foundation, frame, roofline, floorplan, and drainage. A home inspection that turns up structural problems or drainage issues will add a significant amount to the buyer's budget — even pushing them out of their price range.
Source: “The 3 Most Common Reasons a Home Inspection Kills a Deal,” Redfin Blog (Oct. 2, 2015)

Through 2017, Market Should Stay Strong

by Melissa Dierks

DAILY REAL ESTATE NEWS | TUESDAY, OCTOBER 06, 2015
You can expect at least three more years of favorable real estate conditions, with the overall housing market projected to continue expanding at steady levels from this year through 2017, according to a new survey from the Urban Land Institute Center for Capital Markets and Real Estate, based on 49 of the real estate industry’s top economists and analysts.

Read more: Stronger Economy Should Attract Buyers
Still, compared to previous forecasts, the latest ULI forecast is less bullish on its outlook. Overall, real estate indicators are expected to be better than their 20-year averages this year, except among the following indicators that are forecasted to perform worse: commercial property price growth, equity REIT returns, retail availability rates, and single-family housing starts.

“The latest Consensus Forecast has picked up on recent growth concerns and stock market corrections around the world,” says William Maher, ULI leader. “The U.S. economy and real estate markets are in much better shape than most other countries, but global economies and capital markets are increasingly inter-related. Still, the vast majority of indicators in the forecast indicate favorable economic and capital markets in the U.S., as well as moderately strong real estate fundamentals and investment returns.”

Additional highlights from ULI’s Consensus Forecast:

Commercial property transaction volume is predicted to rise for another two years and then level off to $500 billion by 2017.
Commercial real estate prices are forecasted to rise by 10 percent in 2015 and then slow to a 6 percent increase in 2016 and to 4.5 percent in 2017 – below the long-term average growth rate.
Vacancy rates are projected to decrease slightly for office and retail over the next three years. On the other hand, industrial availability rates and hotel occupancy rates are projected to improve in 2015 and then basically plateau in 2016 and 2017.
Single-family housing starts are projected to increase to 745,000 in 2015; 842,000 in 2016; and 900,000 in 2017. Despite the increases, starts are expected to remain below the 20-year average.
Home prices are expected to moderate to 5 percent this year; 4.3 percent growth in 2016; and 3.9 percent in 2017.
Source: Urban Land Institute

Where Millennial Home Ownership Thrives

by Melissa Dierks

Despite claims that millennials are just a “generation of renters,” this generation is showing itself as being just as interested in buying homes as other age groups, according to realtor.com® research.

“People who believe that millennials are disinterested in home ownership are grossly mistaken,” says Jonathan Smoke, realtor.com®’s chief economist. “This generation hit the job market during one of the largest recessions of all time, and they’ve had to work hard to establish credit and save for a down payment. With the older segment just beginning to enjoy living the life that drives home ownership—including marriage and children—now is the most appropriate time for them to consider home ownership. And that’s exactly what the latest numbers are showing.”

The financial profile of the average millennial who received a mortgage in the first half of 2015:

  • FICO score: 714
  • Down payment: 7.1%
  • Mortgage rate: 4.03%
  • Debt-to-income ratio: 36%

Source: realtor.com®

Indeed, nearly 65 percent of millennials between the ages of 21 to 34 spent time on real estate websites and apps in August, according to realtor.com®’s analysis. What’s more, “older” millennials – between the ages of 25 to 34 are 70 percent more likely than the average adult to look for a home to buy on realtor.com®.

Which markets are they targeting? Realtor.com® recently identified the top 10 areas where millennials are the most represented among mortgage borrowers – accounting for 44 to nearly 60 percent of all mortgages for home purchases.

1. Des Moines, Iowa

2. Provo, Utah

3. Baton Rouge, La.

4. Pittsburgh, Pa.

5. Lafayette, La.

6. Grand Rapids, Mich.

7. Madison, Wis.

8. Clarksville, Tenn.

9. New Orleans, La.

10. Shreveport, La.

Source: “Top 10 Markets for Millennials Seeking a Home,” realtor.com® (Sept. 30, 2015)

Buying a Home 48% More Affordable Than 2006

by Melissa Dierks

Home prices may be reaching new highs lately, but buying a home is still significantly more affordable than it was during the 2006 housing bubble, according to a new report by RealtyTrac. Low interest rates have largely contributed to keeping homes more affordable in recent months, according to the analysis.

View NAR's latest housing affordability index. 

Monthly payments on an average-priced home – including property taxes, home insurance, private mortgage insurance, and assuming a 3 percent down payment – required 36.5 percent of the average wage nationwide in the first quarter. That's slightly down from 37.4 percent in the first quarter a year ago, but it marks the most affordable level since the first quarter of 2013 – when affordability was 33.5 percent, according to RealtyTrac’s analysis.

“Although home prices continue to outpace wage growth in the majority of local markets, this analysis somewhat surprisingly shows that affordability is actually improving in most markets thanks to falling interest rates and slowing home price growth, which is allowing wage growth to catch up in some markets,” says Daren Blomquist, vice president at RealtyTrac. “At the national level, buying an average-priced home in the first quarter of 2015 was the most affordable it’s been in two years and nearly twice as affordable as it was in the second quarter of 2006 — when affordability was its worst in the past 10 years. At the local level we’re seeing several bellwether markets where wage growth matched or even outpaced home price growth over the past year.”

Housing affordability was highest in the last decade in the first quarter of 2012 – that’s when a monthly house payment required 32 percent of average wages. On the other hand, buying a home was the least affordable in the last decade in the second quarter of 2006. Monthly payments then required a whopping 70.7 percent of average wages, according to RealtyTrac’s analysis.

The average home price remains 12 percent below what it was in the second quarter of 2006 – the least affordable level in the last decade. During that same time period, the average wage nationwide has increased 34 percent and the average interest rate on a 30-year fixed-rate mortgage has dropped 44 percent during that time period. That has helped boost affordability by 48 percent, according to RealtyTrac’s analysis.

The most affordable counties in the first quarter, according to RealtyTrac’s analsyis, were:

  1. Hamilton County, Fla.: 5.6% of the average wage was needed to make monthly payment on an average-priced home
  2. Saint Louis County, Mo.: 8.3%  average wage needed
  3. Saint Louis City, Mo.: 9.4% average wage needed
  4. Lake County, Ind. (in the Chicago metro area): 9.5% average needed
  5. Fairfield County, S.C. (Columbia metro area): 10.3% average needed

Source: RealtyTrac

The Top Exterior Finishes for New Homes Are…

by Melissa Dierks

Vinyl is the clear champ when it comes to the most widely used exterior on new homes, shows Census Bureau's Survey of Construction and an analysis by the National Association of Home Builders.

In 2014, the latest data available, vinyl (including vinyl-covered aluminum) was the most commonly used wall material at 29 percent, followed by stucco and brick or brick veneer at 23 percent each, and fiber cement siding at 18 percent.

Read moreReenvisioning the Way We Live

Vinyl siding is the most popular exterior material in five out of the nine Census divisions, with the Middle Atlantic and New England areas having the highest prevalence at 76 percent and 72 percent, respectively. In the East and North West Central divisions, vinyl accounted for more than 50 percent. In the South Atlantic, however, vinyl was used in 36 percent of new single-family homes started in 2014.

But other exterior materials can be more common in different regions of the U.S. For example, stucco was the most popular exterior wall material in the Mountain and Pacific divisions at 55 percent and 52 percent, respectively. About 40 percent of homes started in the Pacific used fiber cement siding. In the East and West South Central divisions, brick or brick veneer were popular choices, with at least 59 percent of new single-family homes started in 2014 using it as the primary exterior material.

Source: "Vinyl Is the Most Widely Used Exterior for New Homes," National Association of Home Builders Eye on Housing blog (Sept. 23, 2015)

Closing Process Changes: What To Expect

by Melissa Dierks

New mortgage disclosure rules will take effect Oct. 3, and lenders and real estate brokerages are quickly preparing for what has been predicted to be big changes to home closings.

Mortgage lenders will be required to begin using new consumer disclosure forms on Oct. 3. The changes will merge the HUD-1 Settlement Statement, the Good Faith Estimate, and the Truth-in-Lending disclosure form into two new closing forms: a Loan Estimate and a Closing Disclosure.

Consumers will have more time to review the total costs of their mortgage prior to closing. The Loan Estimate form is due to consumers three days after they apply for a loan, while the Closing Disclosure form is due three days prior to closing. The Loan Estimate form shows the loan amount and interest rate, what the borrower’s monthly payment will be, estimated taxes and insurance, and how much cash is required to close.

Borrowers will face delays to closing if there are any last-minute changes with the financing of their loan. For example, if borrowers decide to change loan products at the last minute – such as switching from a fixed-rate mortgage to an adjustable-rate loan – borrowers will face a three-day delay in the closing to allow for reviews of the new Closing Disclosure form. Borrowers will not have a choice to waive the three-day review period.

Some mortgage experts are recommending that borrowers lock in their mortgage rates 45 or 60 days, rather than the more common 30-day lock, in case there is any delay in closing. 

At realtor.org, access a free webcast outlining the changes and new "Know Before You Owe" resources from the CFPB.

“There's going to be a little bit of a learning curve in the beginning,” says Tammy Felenstein, the executive director of sales for Halstead Property in Stamford, Conn. Consumers should “go with a lending institution that has prepared for these changes and knows what they’re doing.”

Consumers may face slightly longer closing times as the industry adjusts to the new process. The new rules will require lenders, title companies, real estate professionals and insurance representatives to all come together sooner in the process to ensure the disclosures do get out in time. 

As such, some real estate professionals say they’re planning to write contracts with 45-day closings instead of 30. About 56 percent of REALTORS® say they plan to change their purchase agreements to allow for a longer timeline for the closing process due to the upcoming changes from new mortgage disclosures rules, according to a new survey by the National Association of REALTORS®. Thirty-one percent of real estate professionals surveyed said they would also add contingencies to the contract.

Eighty-two percent of real estate professionals also say they've taken some training to prepare for the "Know Before You Owe" initiative.

To try to avoid a closing delay from the new rules, 30 percent of real estate professionals surveyed by NAR say they plan to share contracts and amendments sooner with lenders, title insurers, and closing agents. Thirty-three percent plan to perform final or pre-closing walk-through home inspections earlier, and 37 percent say they plan to develop a plan with lenders and title agents to ensure a smooth transition.

The Consumer Financial Protection Bureau has published a new guide for real estate agents detailing all the changes with the upcoming "Know Before You Owe" mortgage initiative. CFPB's toolkit for agents includes sections on how to have on-time closings, an overview of what has changed and the new loan documents, and the ability to share resources with your clients about the new rules.

Also, view a slideshow at Bankrate.com to see additional examples of the new disclosure forms. 

Source: "Tour the Loan Estimate Form for Mortgages," Bankrate.com (September 2015); "New Disclosure Rules for Mortgage," The New York Times (Sept. 25, 2015); and "Agents Plan to Extend Sales Contract for TRID," REALTOR® Magazine Daily News (Sept. 3, 2015)

Displaying blog entries 1-9 of 9

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Melissa Dierks
Keller Williams Professional Partners
7025 W Bell Road, Suite 10
Glendale AZ 85308
Direct: (623)229-0154
Office: (623)643-1092
Fax: (623)201-7562

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