Half of Americans Can't Afford Their House

I found this great article on realtor.com and had to share it with you. Such good information to know.

As the housing market slowly recovers, a majority of homeowners and renters are finding it hard to meet rising rents and mortgage payments, new research finds.

Over half of Americans (52%) have had to make at least one major sacrifice in order to cover their rent or mortgage over the last three years, according to the “How Housing Matters Survey,” which was commissioned by the nonprofit John D. and Catherine T. MacArthur Foundation and carried out by Hart Research Associates. These sacrifices include getting a second job, deferring saving for retirement, cutting back on health care, running up credit card debt, or even moving to a less safe neighborhood or one with worse schools.

“Affordability issues are real and a major hurdle,” says Lawrence Yun, chief economist at the National Association of Realtors, an industry group. Home prices have increased 20% over the past two years while wages have barely gone up, he says. “Only by adding more new supply, via housing starts, can home prices be tamed,” Yun adds. In fact, construction of housing units has averaged around 1.5 million a year for the past five decades, he says, but it’s likely to be less than 1 million in 2014.

What’s more, at least 15% of American homeowners (or residents of 78 counties across the country) were living in housing markets where the monthly mortgage payment on a median-priced home requires more than 30% of the monthly median household income — long considered the maximum for rent/mortgage repayments. Housing costs above that threshold are “unaffordable by historic standards,” says Daren Blomquist, vice president at real estate data firm RealtyTrac. In New York county/Manhattan, mortgage payments represent 77% of the median income and in San Francisco County represents 70%.

Although mortgage rates are still quite low, down payments, poor credit and tighter lending standards remain three of the biggest hurdles for buying a home, especially among young people, Blomquist says. “The slow jobs recovery for young adults has made it harder for them to save and to get a mortgage.” Some 84% of young people are delaying major life decisions due to the poor economy, according to a 2013 survey by Generation Opportunity, a nonprofit think tank based in Arlington, Va.

Some people also appear to be cooling on one facet of the American dream. About 43% of respondents in the “How Housing Matters Survey” say owning a home is no longer “an excellent long-term investment and one of the best ways for people to build wealth and assets,” and over half say buying a home has become less appealing. Although 70% of renters aspire to own a home, some 58% believe that “renters can be just as successful as owners at achieving the American dream.”

But they’re still suffering the aftershocks of the property bust, experts say. In the years after the recession of 2008, more than 7.5 million homeowners lost their home to foreclosure or short sale and about 9 million more homeowners are still underwater and owe more than their property is worth, Blomquist says. “If one looks at the last seven years as a predictor of housing market behavior in the future, it certainly should give one pause about whether buying a home is a good investment or not,” he adds.

That’s not necessarily a bad thing, says Stuart Gabriel, director of UCLA’s Richard S. Ziman Center for Real Estate. “From a policy perspective, we overshot in prescribing homeownership too often and to those who would have benefited more from other housing solutions,” he says. Homeownership rates hit 64.8% in April, the lowest since 64.7% in the second quarter of 1995, according to the Census Bureau. “It’s wise to approach homeownership with more skepticism and more trepidation,” he says.

The good news: Rising prices have lifted millions of homeowners out of negative equity. Since the lowest point in the housing market crash, rising prices have led to an additional $4 trillion in housing equity, going to existing homeowners, smart investors and those who can afford to buy, Yun says. Home prices, including distressed sales, increased 10.5% in April 2014 year-over-year, according to the latest survey from mortgage-data firm CoreLogic, representing the 26th consecutive month of annual increases in home prices.

This story was originally published Jan. 31, 2015, on MarketWatch.com.

The Five Golden Rules of Home Staging on a Budget

Our friends at Moshells.com have put out a great guide for staging your home on a budget. Properly staging your home is an important, cost effective part of the home selling process. Staging not only helps show off the best qualities of your home, but when done correctly it can also add to your final selling price!

Rule #1: De-Personalize

Buyers want to picture themselves in the house, so that wedding photo over the mantel might distract from that. Safely tuck away your photos while your home is on the market to prevent the distraction that prevents them from seeing a home for their family.

Rule #2: Maximize

Declutter and maximize the space in your home. Consider storing any clutter at an offsite location until you move into your new house. Closets that are packed tight make your home look like it lacks closet space.

Rule #3: Sanitize

Make sure you keep the house clean. This is the easiest and cheapest way to stage your house. A sink full of dirty dishes is as unappealing to you as it is to the buyer.

Rule #4: Modernize

All homes can benefit from some updating. If the buyer feels the home is dated they may reflect that feeling in a lower offer. Updating does not have to be expensive though. Consider a simple update such as changing out gold fixtures for nickel or chrome.

Rule #5: Neutralize

We have all seen on HGTV House Hunters how a paint color can make or break a buyers decision on a home. You may love the colors in your house, but the buyer may be turned off by the amount of painting that needs to be done because the colors clash with their style.


Visit the article to find more helpful staging tips to maximize the return on your home and speed the sale of it.

What you should do in the winter to get your home ready to sell in the Spring & Summer

The holidays are over, and many of us are in the middle of very cold weather, but even under those conditions it looks like it will be a great spring and summer for real estate.  I addressed some things to do in my last posting and I’m going to address more things now. 

Every homeowner has a “honey do” list of items that they know needs to be fixed.  These may be as minor as drippy faucets or it may be as big as refinishing hardwood floors.   But we all have them.  

If you’ve cleaned out the closets and begun to de-clutter the next thing to do is to prioritize this “honey do” list and start working on it.  I don’t mean to say that you need to remodel the kitchen or update the bath, but taking care of things like cleaning the oven (yes, buyers will look inside your oven – and if it’s got 5 years of baked on stuff in the bottom …. well enough said).  It’s all about making your home attractive to a potential buyer.  One thing that I always encourage a home owner to do is to make sure that the front door opens easily with the key.  Curb appeal is important and your front door is the opening to your home.  Think about what goes thru a buyers mind if the agent has trouble getting in the house – they begin to think “what else doesn’t work”.   Buyers buy with their heart, so make your home warm, comfortable and inviting ….

After almost 30 years I have found out that buyers only can see what they see …. 90% of buyers cannot see the potential of a property.  I have had many sellers who have said “well I know that (blank) needs to be replaced.  I’ll just let it be and the buyer can purchase what they want.  Well, the buyer can only see that (let’s say) the carpet is old and dirty …. that’s all they can see, most of them cannot see past that item to the charm of house.  So if something needs to be fixed – fix it, if it needs to be cleaned - clean it, if it needs to be replaced then replace it.  In the long run your home will sell faster and for more money.    As a seller you don’t want to find that your home has been on the market for longer than average and that you’ve had to take some price reductions, and then items that need to be fixed come up as inspection items once you do get a contract.

And let me address the old myth about giving a buyer a “credit” to do repairs.  Yes, when I began in this business 30 years ago, it was not unusual to be able to get a “credit” or even some money from a seller for repairs or improvements.  Not today.  Banking regulations do not allow a buyer to make a “profit“ when purchasing a home … and a credit can be seen as “profit”.   Sellers often want to offer credits because they just do not want to hassle with fixing or replacing items … I can promise this will just cause the buyer to reduce the offer price even more.  SO again the best thing is to clean it up, repair or replace it if necessary.  If these just are not in the cards, then make sure you price the home accordingly and don’t be offended if a buyer offers you less, because they may not have the money or time to clean it, repair it or replace it ….

Winter Projects to help your get your home ready to sell in the spring.

I recently was asked by a past client what things they needed to do now during the winter that would let them get a jump on and have their home ready for sale in the spring.  This is not an unusual question for those of us who live in colder clients – we tend to have our big “selling season” in the spring, summer and into the early fall.  It’s not that people don’t buy and sell houses in the winter, but most people tend to think about selling in the early spring with the nice weather.

So here goes, some projects that you can tackle in the winter to help you get ready to sell in the spring…

• A really good project is to tackle the overflowing closets and cabinets.  IF the kids have outgrown (and it’s not just the kids) the clothes from last school year, now’s a good time to clean out the closets and get rid of them …. Donate them to a local charity or give them to family and friends who have smaller children.  No need to keep them and it will help to make your closets look bigger.

• Another project is to start the de-clutter process.  We all tend to do special decorating for the holidays … if that’s the case just pack up the “clutter” and get it stored away – unfortunately we realtors are always telling people to de-clutter so that a possible buyer can see the full space.  So when January 1^st comes around and you take down the holiday decorations, think about what you don’t necessarily need to put back out. 

• Another good winter project is to make an assessment of those little items that all us home owners know we need to get fixed but that we have learned to live with. You know what I mean, that front door that always “sticks” or that light switch that doesn’t always turn on.  I personally have a bath fan that squeaks!!!  If you start making your list of items that you know need to be repaired now and just tackle one item every week or so you will be on the road to getting your home on the market.

One thing that I’d like to mention however is if you have a big project to tackle, now is also a good time to check with your realtor of choice. They will be able to help you prioritize those items that will bring a return on your repair/renovate investment. 

So if you are thinking that the right time to move will be this spring, now is the time to tackle some of the projects that will help you present your home in the best light. You should put some time and money into making the necessary repairs and alterations to your home now to make it appealing to homebuyers in the spring. You want potential buyers to imagine themselves living in your home. You don't want buyers coming into your home and trying to imagine how nice the home will be after all of the chores have been done.

Your Journey Home ---- the last few items

All’s been approved, repairs have been done and the appraisal has been completed and sent off to the loan underwriter by your lender for final approval.   All that’s left to do is to pack …. You hope.

In your haste to pack … do not pack any important financial documents.  TRUST ME, the lender will be calling and asking for some document that you know you have already provided.  But even more important than that is under no circumstances should you incur any new debt.  While it may seem like a good idea to go out and buy that new refrigerator so it can be delivered the day you move in, it isn’t.  I promise you the lender will pull your credit report 24hrs prior to closing and any new expenses can and will derail the closing.  My advice to buyers – especially to a first time buyer is if you cannot pay for an item in cash … don’t purchase it, wait till after closing and funding.

One other thing that you will need to do just before closing is your final walk-thru.   What is the final walk-through? It's your last chance to identify any problems before you move in. The walk-through generally takes place 1-2 days before the closing – once the seller has moved their belongings out of the house, if possible.  Here's a checklist of items to look over on your final walk-through:

-Check to make sure that all agreed to repairs have been completed and that you have copies of any receipts for those repairs.

- Electrical fixtures. Turn switches on and off to make sure everything is functioning properly.

- Plumbing. All the faucets in the kitchen, bathroom, and the exterior of the house should be turned on to make sure they are connected and there is decent water pressure. Flush the toilets to make sure they are draining properly.

- Exhaust. Test fans in the kitchen, bathrooms, and laundry room to make sure they are functional.

- Windows and doors. Do they close properly? Are they latching correctly? Do all of the locks work?

- Appliances. Run a check of the stove, oven, dishwasher, garbage disposal, trash compactor, refrigerator and freezer, washer and dryer, and any other appliances that the previous owner left behind.

- Environmental controls. Are the heating and air conditioning working properly? Check the furnace and make sure the water heater is providing adequately hot water.

- Safety. Are the smoke detectors and carbon monoxide detectors plugged in or are their batteries charged?

- Damage. Is there any evidence of disrepair, including leaks and water damage, that wasn't noted in your inspection report? Be especially vigilant to make sure that floors, walls, and door frames haven't been damaged during the removal of furnishings. Examine both the interior and exterior of the home for anything that needs to be repaired.

Make sure you haven't been left with any trash or belongings that the previous owner neglected to remove. Verify the presence of all items (appliances, window treatments, etc.) that were supposed to be part of the transaction.

- Keys. Make certain you have keys to all doors, outbuildings, and mailboxes as well as the garage door opener.

- Documents. Ask that the seller leave behind manuals for any household systems or appliances that will remain with the house. If there are home blueprints, records of modifications or renovations to the house, or other information that would be useful to have when you move in, make sure that you ask for them.

If the previous owner has been diligent, the home should be clean and you should be able to move right in with a minimum of extra work.

You will need to make sure that you have switched out utilities and have service turned on in your name – especially critical utilities such as gas, electricity & water – you don’t want those services turned totally off.  If they get turned off, it will most likely result in a reconnection fee which could be more costly than a name change on a bill – and let’s not forget that in cold temperature climates, turning off the heat  (be it gas or electric) can result in frozen pipes and broken water lines ….

It’s best to try and schedule your closing in the morning – that way funding can most likely occur in the early afternoon and you can get the keys to your new home and move in.  This is especially critical with new construction. Most builders will not turn over the keys to a property until they have their funds in the bank.  Sometimes the seller will have negotiated that they have a day after the closing to move out if this is agreeable to you that’s OK – but remember if that is the case you may not be able to do an empty home final walk-thru. 

BUT YOU HAVE MADE IT!!! You are now HOME!   All you need to do now is move in your boxes, decide where to place your belongings.

Your Journey Home – almost there!

You're almost to the finish line. You've found the home of your dreams, secured financing, and your offer has been accepted. You've been thru inspections and negotiated any repairs with the home owner. Now all’s that left to do is pack and wait till the day of closing.

The next few weeks should be pretty quiet, but there will be several things going on.

Quickly, after inspections have been done and all repairs items negotiated, the bank will order an appraisal.  An appraisal is an independent look at the property that the bank orders to determine the value of the property in relationship to the neighborhood. Your lender will require an appraisal as security for your loan.  Don't confuse an appraisal with a comparative market analysis, or CMA.  Your  real estate agent probably used some version of a  CMA when you were first considering making an offer on the property.   Realtors use CMA’s to help home sellers determine a realistic asking price. Experienced agents often come very close to an appraisal price with their CMAS, but an appraiser's report is much more detailed--and is the only valuation report a bank will consider when deciding whether or not to lend the money.  There are several ways that an appraiser will look at your new home.

Sales Comparison Approach

The appraiser estimates a subject property's market value by comparing it to similar properties that have sold in the area (within about a 1 mile radius). The properties used are called comparables, or comps.  Since no two properties are exactly alike, the appraiser must compare the comps to the subject property, making paperwork adjustments to the comps in order to make their features more in-line with the subject property's. The result is a figure that shows what each comp would have sold for if it had the same components as the subject. 

Cost Approach

The cost approach is most useful for new properties, where the costs to build are known. The appraiser estimates how much it would cost to replace the structure if it were destroyed.

So What Does the Appraisal Mean to You?

Your personal loan approval is accomplished early in the loan process, but final loan commitment usually hinges on a satisfactory appraisal. The bank wants to be sure its investment is covered in case you default on the loan.  If the property appraises lower than the sales price, the loan might be declined, but that isn't the only hurdle it must pass. Other facts on the appraisal can be a problem, too: if the appraiser notes some building defects, the underwriter can call for additional inspections.   If during inspections a price reduction was agreed to, and it was noted that the price reduction was in lieu of repairs being made, the underwriter can request the inspection report and ask for any of the items to be corrected before closing.  Those are just a few examples of negatives that could stall your purchase.

An Appraisal Isn't a Home Inspection!

Appraisers make notations about obvious problems they see, but they are not home inspectors. They do not test appliances, look at the roof, check the chimney or do any other typical home inspection tasks. Never count on an appraisal to help you determine if the home is in good condition.

If the Appraisal Comes in Low

Don't panic if the appraisal comes in low, because there are often steps you can take to make the deal work. If the appraisal uncovers other problems, remember that most problems are correctable. Try to keep your cool and work through issues one step at a time.

At the same time you are waiting for the appraisal the bank is finalizing your financial approval – there are still some loan questions that you will probably encounter.  In your haste to pack … do not pack any important financial documents.  TRUST ME, the lender will be calling and asking for some document that you know you have already provided.  But even more important than that is … under no circumstances should you incur any new debt.  While it may seem like a good idea to go out and buy that new refrigerator so it can be delivered the day of closing, it isn’t.  I promise you the lender will pull your credit report 24hrs prior to closing. Any new expenses, especially big items, will become a disaster, and could derail the closing.  My advice to buyer – especially to a first time buyer is if you cannot pay for an item in cash … don’t purchase it.

It’s getting close to closing time … so keep you cool and you will soon be in your new place.