Mortgage Rates for August 12, 2013

Mortgage Rates for August 12, 2013 by one Grand Strand Lender:

30 yr fixed 4.50% purchase;   4.50% refinance

20 yr fixed 4.125% purchase; 4.25% refinance

15 yr fixed 3.50% purchase;   3.625% refinance

10 yr fixed 3.375% purchase; 3.50% refinance  

While up a little from months past, they still represent a historic opportunity to lock in a low rate.

Home Improvements That Hurt Resale

1. Elaborate  landscaping or gardens

You may have a green thumb and be proud of the time you spent on the garden, the hedges or landscaping. But the next buyer might see it as too much maintenance. Potential buyers may not be willing to pay for it, hire a gardener or do the work themselves. This is especially true with Millennials and Gen X-ers. Certainly your property must have great curb appeal and nice landscaping does sell, but quick and inexpensive improvements to your yard may be all you need--consider hiring a lawn service for a one time going over and add a few flowering plants from a garden shop. 

2. Converting a garage into a family room

This may make sense if you have a large family the will actually use a family room, but be careful the renovation isn't done too late--children at college or on their own  won't use it. When it comes time to sell a garage is expected, especially in the suburbs, if you take it out, you've lost many buyers. Solution: Perhaps minor changes, that can easily be are is all you need--clear out the clutter, paint the floor, walls and inside of the garage door and remove and store the door opener.  Add a large area rug, new light fixtures a window AC with heat--what more do you need?  All this can be easily removed when it comes time to sell.

3. Taking out a bedroom

These days homeowners often transform a bedroom into a huge master closet or into a home office.If you do, make sure the room can be easily turned put back when you sell, no built-in desk and cabinet. . Buyers with kids may need that bedroom. They’ll see the room you converted into a home office or closet as more money they’ll need to spend to turn it back into a bedroom.

To convert a bedroom into, you'll probably want direct access from the master bedroom, which  may include taking out a door and putting up walls. Settle for storing your out of season clothing in the existing bedroom's closet and donate what you don't wear to a thrift store. Once you move your seasonal clothes and cleaned out the stuff you haven't worn in the last several years, you'll have plenty of room.

4. Adding a swimming pool

Same as fancy landscaping; a pool requires maintenance and is an even bigger liability. If you’re in the South, a pool may make sense, especially if they're common in your neighborhood. Think twice if you're in the Northeast, you'll have to heat the pool most of the time and prep it for winter. Join your local Family Y with a pool, instead.

5. Adding personalized colors, finishes or fixtures

Often, homeowners put in tile, sinks, vanities, counter tops and floor coverings specific to their tastes that are hard to replace. For example, you love the Italian tile from your  vacation last year and want it in your kitchen; have it made into a coffee table instead. Stick to neutral colors for permanent improvements; if you spent big bucks on upgrades, your home's value when you need to sell, may not reflect the expense. Some inexpensive improvements are always good--chair railings, crown moldings and an upgraded front door, for example. Be careful you don't turn off buyers who don’t like your taste and don’t want the hassle to undo your changes. Decorate to your taste with furniture and accessories that you can take with you and use in your new home.  If they are highly personal, ask your agent if they should go into storage be showing, so prospective buyers can easily view themselves in your home.

Housing Recovery Picks Up Speed

The housing recovery has picked up speed, as home prices posted their highest year-over-year gain since February 2006, according to the latest housing data from CoreLogic. 

CoreLogic's home price index climbed 12.1 percent in April over year-ago levels. Home prices have been on the rise for more than a year. 

"The pace of the housing market recovery quickened in April as home prices rose across the U.S.," says Anand Nallathambi, CoreLogic's chief executive officer. "We expect this trend to continue, bolstered by tight supplies and pent-up buyer demand."

CoreLogic economists predict home prices will rise another 2.7 percent in May. 

The following five states had the largest price gains over the past year: 

• Nevada: +24.6%
• California: +19.4%
• Arizona: +17.3%
• Hawaii: +17%
• Oregon: +15.5%

Will this trend continue, yes, but almost certainly not at this pace.  

Financing and re-financing remain difficult for most buyers, new construction is ramping up and sellers who had postponed selling are not listing their houses; these factors and others will pressure further price increases.

And, let's learn from experience, it prices do continue to increase at these levels, what's that called?  A BUBBLE.  What the nation needs to see is steady increase in housing prices, matching the the rate of inflation or a little more.

Pre-Approval versus Pre-Qualified....

If you were taking a home buying class, the first thing you would talk about is getting pre-approved by a lender.  Unless you're in the fortunate position of being able to pay for your new home up front, you will have to borrow money. 

When the real estate market was slow, the sense of urgency to get financing was not very high. Buyers figured they could take their time to find a home and then they'd firm things up with their lender. Now the market is starting to improve,  but financing remains difficult to get, so the first thing a serious buyer should do is line up their financing.  This means getting pre-approved to borrow a certain amount, not just being pre-qualified.

There is a big difference.  A pre-qualification is just an initial step, typically a phone conversation about your overall financial picture. The lender may discuss income, debts, and go over different payment options, but it should not be confused with a firm pre-approval.

In order to grant a pre-approval letter,  a lender will probably complete a formal application, pull the buyer's  credit report and collect specific documentation such as pay stubs, W-2's and tax returns. This will allow them to better define your maximum price range and that that they can make the loan.

Being pre-approved will make you a stronger buyer and allows you to move quickly if needed. In an active market, you never know when you'll find the home for you, but when you do, you should act quickly.  If you have to wait while you get your financing in order, you may lose the home to other buyers.

Another benefit to being pre-approved is that real estate agents will take your interest more seriously and be willing to devote their time and money to helping you find a home. Many top agents require their clients have a firm pre-approval letter before they will show property. The same with sellers.  A buyer who can demonstrate that they can actually buy the house is more likely to have their offer accepted and is in a stronger negotiating position.

Good bye to Adjustable Rate Mortgages?

The Feds have changed the rules for adjustable rate mortgages making it harder for buyers to qualify and probably forecasting the end of ARMs.

They've instituted an ability to repay rule, effective January 2014, requiring lenders to evaluate whether a borrower can repay if the loan adjusts upwards.  Unlike fixed rate mortgages which have the same interest rate and payment over the life of the loan, ARMs fluctuate with interest rates, usually being pegged to LIBOR, a world wide reference rate computed in London.

Instead of qualifying buyers with an ARM's low introductory rate, the lender will be required to use the loans loan's "fully indexed rate" or LIBOR plus the lender's margin.  This will make it harder for some buyers to qualify,  but once they do it's less likely they'll be forced out of their home if (really when) interest rates rise.

One thing for sure, interest rates will eventually go up,  it's just a matter of when and how far--how can I be so sure, easy, they can't go much lower unless we start paying banks to hold our money....

So why bother with an ARM?  An ARM with a low introductory rate might make sense if you know you will be moving around the end of the introductory period; otherwise a fixed rate mortgage is likely to be a better deal for the long term.

The Shadow Market in 2013

The real estate market across the county came alive in late 2012 with home sales and housing starts up strongly.  Prices are doing better, too.  But skeptics still point to sizable overhang of properties headed to foreclosure--the so called "shadow" inventory--that they say will erode the market's recent gains.  Maybe.  

While the shadow inventory remains high, it may not choke off the strength we're seeing.  There are several reasons, first the number of homes in foreclosure is shrinking, down from a peak of 4.7 million nationally in 2009 to 3.4 million at  the end of 2012. The discount at which foreclosures sell has narrowed significantly, from around 24% in 2009 to 7% now. Inventories of new homes for sale are tight and the number of listings of previously owned homes is at an eleven year low. 

On the demand side, sales of new homes are up strongly and sales of previously owned homes are likely to follow. Investor buying has slowed in most areas as well. Mortgage rates remain at historic lows for those who can qualify and are likely to stay low for the next several years. Banks have become more adept at handling foreclosures and realize it's not in their interest to dump large numbers of houses on the market.  They do more short sales now, where they allow the home owner to sell for less than the mortgage owned--faster and less costly for the bank.  

It's going to take years for housing is back to normal, but as long the recovery continues, however slowly, the shadow market should have little effect.

10 Lessons Learned as Housing Recovers

Headlines abound: The Housing Bust is over… 

Housing has hit bottom and is turning around.  Realtors, homeowners, renters, and all Americans are sighing with collective relief.  If they're correct.

But first we need to pause and consider what we've learned in the last few years:

1  The economy is global.  The mess in Europe has to be resolved for the U S to see a sustained economic recovery and sustained housing recovery.

2 The folks in Washington D.C. must get their act together, work together and begin to resolve the economic issues facing the nation.  Fiscal cliffs, increased government spending and borrowing from China to support that spending do not bolster consumer confidence or boost the economy. 

3 The economy cannot recover without housing. Good News: the stock prices of the major U. S. home builders are up and they are beginning to build again. That puts Americans to work and guess what, if you have a job, that's the first step to buying your  own house.   

4 Homeowners confidence in the economy is directly related the value of their own homes.

5 Everyone needs shelter, but not everyone needs to own their shelter.  The American dream of owning your own home may not be appropriate for everyone.

6 High home ownership rates are important but they must be sustainable.  Owners must be able to afford their homes in the long run.

7 Home prices go UP and go DOWN.  If home prices have bottomed, they're likely to remain stable for some time.  Increases for the foreseeable future are likely to mirror the rate of inflation for most areas, but there'll be exceptions of course.

8 The process of purchasing/financing a home is more complicated now than ever before and will remain so. Sound  mortgage underwriting is critical.  Prospective buyers must be prepared for a detailed application process to get a mortgage. Expect every fact and every document to be verified. 

9 Home equity should not be used for ordinary living expenses.  We're not likely to see the days of taking out equity every few years.  

10 Financial reserves for families, companies, and countries are necessary.

What is important is that we remember what happened as we prepare to write the future.  Most importantly, we should also have a sense of accomplishment that we endured these life lessons.

There are seasons in the weather: spring, summer, fall and winter.  So there are in economic cycles.  It is great to be at the thaw of winter and the budding of spring.

Harvard: Home Sales Finally Poised to Improve

Harvard: Home Sales Finally Poised to Improve


Click the link above to read the article...

South Carolina Real Estate Tax Law Change

The South Carolina Real Property Valuation Reform Act of 2006 requires properties to be reassessed when there is a an "assessable transfer of interest", usually a change in ownership due to a sale.  Also known as a point of sale reassessment, it can cause large increases in property tax bills.

Last year the General Assembly changes the rules for commercial property, including rental property and second homes.  Such property is still reassessed, but the new value is discounted by 25 percent if the owner applies for the "commercial exemption."  The discounted assessment cannot be lower than the assessment prior to the sale or transfer.

So what's the affect been?  Large commercial deals are benefiting while the impact on second home sales is limited as many second homes are located along The Grand Strand where prices have been falling in recent years.  Still, if you've owned property for a long time and still have a gain, the break may help you get a higher price than the guy next door who bought a few years ago.

Tax Breaks for South Carolina Seniors

If you're turning 65, South Carolina has a deal for you, in fact lots of them. 

In the year you turn 65 you can deduct $15,000 from your taxable income for the year and a married couple, if each spouse is 65, can deduct $30,000 which would save the couple up to $2100 in state income tax. And SC does not tax Social Security payments as some states do. 

Next is a break on property taxes, over 65 and there's no tax on the first $50,000 of a home's value; the same break available to the blind and permanently disabled. The home must be one's legal residence and the homeowner must file an application with the county auditor's office.  A savings of around $300.

At 65 you pay $20 for your annual vehicle registration instead of $24, small change, but every little bit helps.  An annual pass for SC state parks, the Palmetto Passport is half price at $37.50 and can be purchased at any park office. 

If you want to return to school, state supported colleges and technical schools must offer low or no cost classes for retired seniors on a space available basis, usually starting at age 60. 

Discounts are also offered at many businesses, museums and attractions--just ask.   

FHA To Raise Fees

If you're buying or refinancing with a mortgage backed by the Federal Housing Administration you can expect their fees to increase, unless you hurry.

The agency is raising its fees in an effort to try to restore its depleted reserves, which suffered from the rising number of home owners who defaulted on their mortgages, and to try to encourage the return of more private capital to the market.

FHA loans allow for down payments as low as 3.5 percent and they often have less stringent credit requirements, which have made them soar in popularity in recent years. (The agency insures loans but doesn’t issue them.) About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages.

Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500,  from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount.

FHA also announced it will raise their upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.

So, a borrower with a 3.5 percent down payment with a mortgage of $193,000 can expect to pay an upfront mortgage premium alone of $3,377, compared to the prior $1,930 but it can be rolled into the mortgage. The new fees will also apply to home owners who want to refinance their mortgages.

The raise in fees is expected to bring in $1.25 billion in additional revenue to the agency through September 2013. 

The upfront increase is pretty stiff and isn't going to help home sales recover, not such a good idea if you ask me, but then they didn't.

 

Grand Strand Market Report, January 2012

After declining during the second half of 2011, the number of single family homes and condos on the market increased slightly in January 2012, however, the 2012 inventory is still below January 2011 by almost 6%.  Good news if this trend continues.

Sale prices increased Horry and Georgetown Counties except in top end properties; another good trend; top end homes will respond in time.  The number of sales of single family homes was up almost 14% in January as compared to last year, but distressed (foreclosures & short sales) properties accounted for 37% of all single family sales.  While this is the best January sales performance since 2007, those distressed sales kept the median home price to $163,700, up slightly from a year ago. 

Condo sales numbers are similar, slight increase in inventory with a median sales price of $94,900, a 10% drop from January 2012.  The price drop was fueled by distressed sales and the large number of cash buyers--over 70% of all condos were sold for cash.  The high percentage of condo cash sales is interesting, probably mostly real estate investors who hope to turn a profit in a few years.  Time will tell, stay tuned. 

Technology Notes

Have trouble keeping up with the modern world? Does your "smart" phone have a mind of it's own? Have trouble figuring out how to get your CD collection into your walkman, er, ipod?

Check into OLLI, that is Osher Life Long Learning Institute at Coastal Carolina University which provides scores of short courses for adults during the day and evening at three locations along the Grand Strand.  I heard about a class for android tablet users, signed up and spent three delightful afternoons at CCU's 79th Street campus with instructor Kathleen Libby, a seasoned instructor and self admitted "geek."  The classes cost a few bucks, but I learned numerous tricks about my android tablet AND almost all of them were directly applicable to my android phone. I've now figured out what a widget is, how to "sync" my portable devices with my desk top and how to print from the "cloud."

Kathleen's tip on wire management for all those wires under your desk was alone worth the price of the course--visit the drug store for some of those clips that ladies use to hold their pony tails in place; that's right, they come in all sizes and snap open and closed.  You can go from an unsightly mess of cables to a neat solution in a skinny minute.

More information on OLLI at www.coastal.edu/olli or call 843-349-2767.  

Popsitive Trends in 2011 & 2012

Clearly 2011 was a challenging year, but there is a lot to be positive about looking ahead to the rest of 2012.  Housing statistics are starting to look good and the length of the housing down turn itself points to turning the corner, maybe this summer.  Washington's fiscal policy remains indecisive, but most major economic indicators are showing stability and positive, though admittedly weak trends.  The pace of growth is slow, but that's to be expected in an economic recovery from a financial crisis. 

Some good trends:

• Households are paying off their consumer debt even though credit is becoming easier to obtain, including home equity lines of credit which grew for the first time in years in the 3rd quarter of 2011. 
• Consumer sentiment picked up sharply in the last half of 2011, to a 6 month high in December.  Still low, but maybe consumers believe the economy will pick up in 2012.  Increasing confidence can become self fulfilling.
• The labor market is slowly coming back--December jobless claims were at their lowest level since 2008, but unemployment remains persistently high and gains are often due to declines in the number of people in the workforce.  It's going to take years until we get unemployment down to where it should be, 2 or 3 percent, and until we do, those folks can't buy houses and will have trouble keeping the ones they have, both downward pressure on the housing market.
• Housing prices continue to decline, a trend that will continue until we work off the backlog of foreclosures, short sales and the shadow inventory  (homes that folks want to sell which they took off the market, waiting for higher prices).  Until all of these houses are sold, prices will remain under pressure.  Housing recessions are always long and this one is no different.  But the good news is, affordability is rising dramatically due to lower prices and rock bottom mortgage rates.

Home prices may not stabilize completely in 2012, but we're getting closer--rising affordability itself will put a floor under prices, maybe this summer.  Stay tuned.

Better Year in 2012?

No question about it, new home construction around town has picked up since the first of the year.  While noting like boom days a few years back, builders are back to work, perhaps at pre boom levels, building homes in all price ranges.  Hard data are difficult to gather and it's difficult to say what's causing this up tick in construction, but several things may be driving buyers.  First, folks may just be tired of waiting, second, interest rates remain historically low for those who qualify and third, some of the new homes sitting on the market have been sold and inventory levels are down from a year ago.

One thing for sure, the market is more competitive than ever as the many foreclosures and short sales continue to push prices lower. Home buyers are all looking for a good deal and all expect to spend less money than a few yearts ago, so builders will have to squeeze their profit margins and be ready to bargain.  Buyers who are serious have their financing lined up and ready to sign, something we haven't seen in a while.  If one developer can't make the deal happen, the next one will.

2012 may not mark the end of our troubled housing market, but it may mark the beginning of the long awaited stabilization of house prices and better markets down the road.