Your go-to resource for mortgage news, real estate advice, home-selling tips, negotiation strategies, distressed sales, investments and much more!
By Bridge Builders, Courtesy of Erica Jorgenson, HomeStreet Bank, NMLS 265452, +18585393088
With home prices rising again this year, some are concerned that we may be repeating the 2006 housing bubble that caused families so much pain when it collapsed. Today’s market is quite different than the bubble market of twelve years ago. There are four key metrics that explain why:
There is no doubt that home prices have reached 2006 levels in many markets across the country. However, after more than a decade, home prices should be much higher based on inflation alone.
Frank Nothaft is the Chief Economist for CoreLogic (which compiles some of the best data on past, current, and future home prices). Nothaft recently explained:
"Even though CoreLogic's national home price index got to the same level it was at the prior peak in April of 2006, once you account for inflation over the ensuing 11.5 years, values are still about 18% below where they were." (emphasis added)
Some are concerned that banks are once again easing lending standards to a level similar to the one that helped create the last housing bubble. However, there is proof that today’s standards are nowhere near as lenient as they were leading up to the crash.
The Urban Institute’s Housing Finance Policy Center issues a Housing Credit Availability Index (HCAI). According to the Urban Institute:
“The HCAI measures the percentage of home purchase loans that are likely to default—that is, go unpaid for more than 90 days past their due date. A lower HCAI indicates that lenders are unwilling to tolerate defaults and are imposing tighter lending standards, making it harder to get a loan. A higher HCAI indicates that lenders are willing to tolerate defaults and are taking more risks, making it easier to get a loan.”
Back in 2006, many homeowners mistakenly used their homes as ATMs by withdrawing their equity and spending it with no concern for the ramifications. They overloaded themselves with mortgage debt that they couldn’t (or wouldn’t) repay when prices crashed. That is not occurring today.
The best indicator of mortgage debt is the Federal Reserve Board’s household Debt Service Ratio for mortgages, which calculates mortgage debt as a percentage of disposable personal income.
At the height of the bubble market a decade ago, the ratio stood at 7.21%. That meant over 7% of disposable personal income was being spent on mortgage payments. Today, the ratio stands at 4.48% - the lowest level in 38 years!
With both house prices and mortgage rates on the rise, there is concern that many buyers may no longer be able to afford a home. However, when we look at the Housing Affordability Index released by the National Association of Realtors, homes are more affordable now than at any other time since 1985 (except for when prices crashed after the bubble popped in 2008).
After using four key housing metrics to compare today to 2006, we can see that the current market is not anything like the bubble market.
The long and short, hard truth about short sales and foreclosures in Carlsbad, California If you are selling your home in a short sale or it is one of the many foreclosure homes in San Diego, California or nearby Carlsbad, there are rules you must follow. Benjamin and Sara Valenzuela learned the hard way that they did not have legal right to their home after their lawyer erroneously advised them to threaten the new owner with violence. What are your rights if your house sells in a short sale or is one of the many foreclosure homes in San Diego, California? Is it legal to break into your home if it is one of the many foreclosure homes in San Diego, California and live there until the new owner moves in? Do you still have rights to your house will sell soon at a foreclosure auction? Knowing your rights can help save you from trespassing and having a new homeowner file a restraining order. Many California homeowners do not realize if they fall behind on their mortgage payments and the bank forecloses, they cannot buy their house back at the foreclosure auction. Few foreclosure homes in Carlsbad mean good news. It may be difficult to tell if the six listings on Zillow for Carlsbad houses was good news.
Many homeowners are struggling still to keep up with mortgage payments and some potential homeowners have delayed buying the home of their dreams because of a tight economy. Zillow’s few internet listing may not be a good sign if there are more Carlsbad home owners on the brink of foreclosure or facing a short sale. The numbers may may mean the calm before the storm, if house buyers overextend themselves and pay more for Carlsbad homes on the market than they are worth. In a tight economy, it is difficult to predict how many more homeowners may lose their jobs and with it, the ability to pay their home loans or mortgages. Zillow’s six listings also may not offer an accurate picture of homes in foreclosure and offered by real estate companies that do not use the multi-million dollar website. How can you tell if the few foreclosures in San Diego and the area are good? The answer may simply mean waiting a longer amount of time to see real estate marketing trends. If there remain fewer foreclosures over the next two to three years, it may signify that the worst of San Diego’s housing market bubble or spiral is over.
Do you have rights with foreclosure homes in San Diego, California? Every state has different rules concerning foreclosures and short sales. Is your foreclosure a judicial or non-judicial foreclosure? In California, it matters which type of foreclosure process you are undergoing. With a judicial foreclosure, retirees, couples or single homeowners do still have a short window where they can regain the rights to their foreclosed property. However, the rules change with foreclosures that are non-judicial foreclosure homes in San Diego, California. These foreclosures are not necessarily resolved in a courtroom. As a result, homeowners lose all rights to their house once they ordered to move out and bank officials schedule a house to sell at a short sale or foreclosure auction. Why cannot you simply buy your house back at a foreclosure sale? California law does not allow homeowners to have any part in a foreclosure sale, nor can the former homeowner’s family or friends pay the house for them. By law, former house owners may not be able to live in a house that has a new owner, thanks to a short sale. It may be up to the new owner if the former homeowners may stay and rent the property.
Short sales are better than foreclosures in San Diego, California In the case of the short sales vs foreclosures, Californians came out ahead if their property is in a short sale. The main reason is that former homeowners may not lose possession of their home. The new homeowner may allow them to rent their former home and continue to live on the property. This scenario or option is never available for former homeowners whose houses are in foreclosure. Count the time you have to move. In some cases, former homeowners have 10 days or less to vacate the premises of a foreclosure property. However, in the case of a short sale, California allows homeowners to have up to a month to move. If you can negotiate a deal with the new owner following the short sale, you may be able to stay in a home that has been sold in a short sale longer. The new owner may allow families more time to gather their things and move. If you have been a homeowner for more than a year, those 30 days is increased to 60 days. However, do not think you will be granted this luxury in any one of the sales of foreclosure homes in San Diego, California. This reason makes short sales a better option for families who fall behind on their mortgage payments and do not qualify for refinancing. With a short sale, homeowners may nor lose all their rights permanently.
Both market values and appraisal values are utilized in the real estate dealings of residential homes, retail buildings, commercial properties, farms and plots of land. However, there is a distinct difference between the appraisal value and the market value of any property. Market values are consumer-driven, while appraisal values are decided by experts. The appraisal value of a property describes the determination of an exact number that indicates the home’s value/worth based on gathered data and the professional judgment of an expert. The market value is a more subjective way to obtain a number. Unlike the appraisal value, variable conditions, such as current market trends, have influence on the market value. Buyers also have a good deal of influence over the market value of a property because a property is only worth what a buyer is willing to pay.
So, what affects the market value of your home and how much control do you have over it? The major factors that affect the market value of your home are location, competition, timing, property appearance/condition and negative factors. Location is possibly the most important factor of all of these. Is your home located in a quiet, attractive rural setting or in an urban setting that offers convenience to grocery stores, entertainment venues and shopping malls? What are the schools like in your area? Is your area safe? What is the price of recent nearby real estate transactions? Has the quality of the other homes in the neighborhood been kept up? Does the area have a strong sense of community? And so on and so forth. Everyone is looking for their own little slice of heaven, so prospective buyers are likely to evaluate all of these things. With competition and timing, buyers compare your property against other properties offered in the current climate and marketplace. Factors such as a strong buyer’s market and a soft buyer’s market are likely to apply. These determinations will get a buyer closer to an offer that makes sense to them. Finally, the condition of your home will be the final important factor that will affect the market value of your property. This means that upgrading kitchen appliances, giving rooms and doors a fresh coat of paint and cleaning your home from top to bottom are all important tasks that should be done in order to impress prospective buyers. Also, if there is structural damage, a leaky roof or water in the basement, these factors will lower the amount that a buyer is prepared to pay. Negative factors can also affect the market value of your home. If your home was the site of a fire or of a violent crime, you can most definitely expect this to negatively affect the price that a prospective buyer is willing to offer.
So, while market value factors are relatively subjective, appraisal value factors are very precise. Only a certified or licensed individual can perform a property appraisal. An appraiser will evaluate the condition of your home’s structure, the interior, any amenities and upgrades and the front and back yards. The structure in particular is very important. He/she will evaluate the strength of the foundation and the quality of the siding and roofing to determine the materials used, and the condition of each. The appraiser will look for leaks, cracks, damage or defects around the exterior of your home. Custom-built homes will gain value with these inspections, as they are usually made with higher-quality materials and are often one of a kind. This adds even more to the home’s overall value. He will then evaluate the quality and materials used in the walls and in the inside of the roof. He will note the type of flooring and its condition, then he will move on to the windows and doors. He will also note any damage or defects found on the permanent fixtures installed in the home, which includes appliances, plumbing and lighting fixtures. Amenities and upgrades will be noted and these, if they are well-maintained and in good condition, will surely raise your appraisal value. Finally, he will head outside to evaluate the front and back yards. Here, size of plot, landscaping and permanent fixtures (such as sprinkler systems) will be appraised.
So, as you can see it is possible that your home can end up with two totally different numbers when both an appraisal has been performed and when buyers have started to make offers. While some of the affecting factors can be out of your control, you will serve yourself and your needs best if you keep a clean and well-maintained house. Take care of small defects, such as leaky faucets and give your house a makeover with new paint, attractive decor and upgraded appliances and work on your home’s curb appeal. These will present your home in its best light and will raise BOTH your appraisal value and your market value.
Selling your home can be a difficult decision for numerous reasons. You may have an emotional attachment to the area, you may feel safe and secure in your own home, you may have fantastic neighbors and family members close by. But life’s twists and turns and financial realities may create a situation in which you are forced to move. You may have accepted a job transfer to another state for financial reasons, you may have lost your job and your mortgage payment is now unaffordable, you may have inherited an unwanted property from your family members, the crime rate in your neighborhood may have escalated to the point where you feel unsafe, or you may be facing the realities of a divorce.
Some of these reasons are more pressing than others, but if you truly feel that you need to sell your house quickly, follow the rules below to help you to attain this goal:
Firstly, make an excellent first impression. This will put you ahead of the game and you may get numerous offers in the first 30 days that your house is listed.
1. Price your house right from the start. Some sellers think that they should start with a high number and then drop the price as time moves on. But that make for a slower sale and if you price your home too high, you risk alienating buyers who may believe that you will be unwilling to negotiate. Try to pick as fair a number as possible for a quick sale.
2. Add some curb appeal. Remember that curb appeal makes a great first impression and first impressions are everything! If you have a beautiful yard and porch, prospective buyers will be excited to see what is inside. You can enhance your curb appeal in relatively inexpensive ways, such as planting colorful flowers, painting the front door or adding decorative touches to the porch.
3. Update and improve the interior. Upgrade your kitchen and appliances, give rooms a fresh painting and add new fixtures. Also clean and declutter each room. Get rid of musty throw rugs, take down unneeded knick knacks and add lovely curtains, pillows and framed paintings.
4. Make the home easy to show. Be flexible about when you will allow prospective buyers to view the property. Show the property at all hours, meaning early in the morning, late at night and on weekends. This way lots of people will be able to view your home.
5. Make sure that your listing is on ALL major online portals that are related to real estate. The major sites are Zillow, Trulia and Realtor.com. Ask your agent to even post your listing on Facebook.
So, with these great tips, you are certain to attract buyers and in no time the offers will start rolling in. Just make sure that you take the initiative to improve your home’s interior and exterior and then make sure you work it on social media so that all prospective buyers in your area have seen your home. Quick sales may seem daunting at first, but by following these suggestions, you are sure to make an easier (and quicker) sale.