Preparing to Buy Your First Home

My Realty Times by Angela Smith on Friday, 25 July 2014

You’ve spent nearly seven years in this quaint little apartment, and it’s safe to say that your family has gotten their fair share of use out of it. When it was just you and your wife, this place had plenty of space, but two rambunctious children later, the apartment has become a disaster area. Bored and restless, your kids have essentially taken over your compact living space. Frankly, you can’t blame them for being so antsy. An apartment this size is no place for children to grow up. Furthermore, you and your wife need some personal space, and you’re certainly not going to get it here. That being the case, it’s high time you bought a house. Since you and your wife both have stable careers and a sizable amount of money in the bank, there’s no time like the present to start scoping out the local real estate scene. When preparing to purchase your first home, make sure to utilize the following tips.


Find a Trustworthy Lender

In light of 2006’s housing market crash, real estate has essentially become a buyer’s market. Even so, homes are still very expensive. In fact, a house is most likely the largest financial investment you’ll ever make. No matter how much money you and your wife have in the bank, there’s no way it’s enough to pay off a house in full. With this in mind, you’ll need to find a reliable lender from whom to acquire a mortgage loan. Depending on your credit history and level of income, you may be eligible for a 15, 20 or 30-year fixed rate loan. When looking for the right lender, make a point of finding someone who doesn’t impose exorbitant interest rates and has earned a fair number of favorable customer reviews online.

Limit Your Search to Good School Districts

As a parent, you want your children to receive the finest education possible. Short of sending them to private school, the best way to achieve this goal is to seek out highly-rated public schools for them to attend. When shopping around for the right home, limit your search to areas in the vicinity of good schools. Even if you come across the perfect house in a poorly-rated school district, a nice home is hardly worth sacrificing your kids’ education.

Stay within Your Financial Means

Finding a house that has sufficient space for their families to live comfortably is the foremost priority of first-time home buyers. However, it’s equally important to abstain from mortgaging a home you know you can’t afford. A certain house may have everything you’re looking for, but if the asking price is well outside of your range, don’t sign the paperwork unless you’re fully prepared to put your money where your mouth is. There’s no question that finding a nice home is important, but no house is worth plunging your family into massive debt.

Purchasing your first real home is equal parts frightening and exhilarating. By knowing what to look for in a house, staying within your means and finding the right lender, you can make the experience considerably less stressful for your entire family.

Best markets to become a landlord

NEW YORK (CNNMoney) By Les Christie  @CNNMoney July 3, 2014

The rental market has been booming over the past several years, with many landlords earning double-digit returns of 10% or more.

And while rising home prices have dampened returns for landlords in some markets, other markets still offer plenty of profits, according to RealtyTrac which analyzed rental market conditions in 370 major U.S. counties, including median home prices, average rents and unemployment rates. 

Landlords in Anderson County, S.C., for example, who rent out a median priced three-bedroom home would average returns of 15.3% -- well above the national average of 10%, RealtyTrac found. That's because homes here are cheap at a median of less than $70,000, while rents average $900 a month.
Home to a university and several auto parts makers for BMW, Anderson is part of the Greeneville metro area and has a low 4.3% unemployment rate, meaning demand should continue to strengthen and help add to future profits.

Related: Buy vs. rent: What you'll pay in 10 big cities
Other areas that offer landlords more bang for their buck include Woodbury County, Iowa. Median home prices in the area, which includes the Sioux City metro area, were a low $84,250 while rents averaged $914 a month. That translates into a rental return of about 13% for landlords.
While low unemployment is one factor landlords should look for while assessing a market, RealtyTrac also suggested that investors take the demographics of an area into account as well, particularly when it comes to baby boomers and millennials.
"Many individuals in both of those demographic groups are in the midst of major life changes that will often involve changes in housing, something that smart real estate investors should take into consideration when deciding when and where to buy or sell," said Daren Blomquist, vice president at RealtyTrac. Markets where these populations are growing rapidly should produce strong returns for investors going forward, he said.

Related: Dream beach houses for sale
For boomers, who were born between 1945 and 1964, retirement-friendly markets in Florida are predictably hot, RealtyTrac found. Some local markets have seen their boomer populations grow by 20% or more since 2007.
The Tampa-St. Petersburg-Clearwater, Fla. metro area topped the list among markets where rentals to boomers are... well, booming.

Millennial markets, on the other hand, were scattered throughout the nation. RealtyTrac cited the Baltimore, Philadelphia, Jacksonville, Fla. and Atlanta metro areas as leading rental markets for this age group.
Several smaller markets are also good Millennial bets such as Fayetteville, N.C. and Virginia Beach/Newport News City, Va.

Which Makes Sense for You: Renting or Buying a Home?

Should you rent or should you buy? It’s a big question that nearly everyone faces at some point in life.


Take Nila Dulay and her husband, Erick. They owned a home in a beautiful gated community in Lakeland, FL, complete with a pool, tennis court and boat dock. But when the couple accepted jobs in the Seattle area in late 2012, they faced serious sticker shock: Seattle’s home value index is currently $465,300 – more than $300,000 above the values in Lakeland.
“The prices of homes were so much higher, we realized we wouldn’t get a nice home for the same money,” said Nila.
So, for $1,600 per month, plus utilities, the couple moved into a rental in Covington, WA, 25 miles south of Seattle. The situation wasn’t ideal, but it made short-term sense for twenty-somethings who just moved across the country.
Finances drove the Dulays’ decision to rent. But there are other factors to consider.

Reasons to rent

• Flexibility. Renting offers an easy way to test an area’s safety, amenities and ease of commute.
• Career uncertainty. If job stability is a concern, renting may be a better option since buying is typically a longer-term commitment.
• Smaller cash outlay. Renting usually requires first and last months’ rent and a security deposit. Buying requires tens of thousands of dollars down.
• Bad credit. Creating a history of on-time rental payments may raise your credit score and help you qualify for a mortgage that may better suit your needs.
• No maintenance. There’s typically no need to worry about repairs – just report the problem to the landlord.  Incidentals. Sometimes utilities such as water, sewage or garbage are included in the rent price. Plus, many rental complexes include their own pool and gym.

Reasons to buy

• Equity. This is the difference between the market value of your home and the amount still owed on the mortgage. As you make your mortgage payments and reduce the loan principal, you may increase your equity in your home.
• Tax deductions. You may be able to deduct mortgage interest as well as property taxes from your income taxes. Talk to your tax professional for more information.
• Creative control. Paint your walls bright orange if you want. Rentals rarely allow redecorating or remodeling.
• Maintenance choices. Do it yourself or call your own contractor. An exception is a condo or homeowners association, where you might have maintenance covered.

Figure out your ‘breakeven horizon’

Determining your “breakeven horizon” can help you to better understand the costs involved before you make your decision. This metric, introduced by Zillow, uses market-by-market data to determine the number of years it would take for buying a home to become more financially advantageous than renting the same home.
“Given how high rents are and how low home values are in many markets, buying may appear to make financial sense even if you’re only going to be there for a couple years,” says Svenja Gudell, director of economic research for Zillow. “But then you have to consider the emotional stress that goes along with buying a home, moving and adjusting to a new neighborhood. It’s not the sort of stress most people want to deal with every 2 years.”

So, should you rent or buy?

Whether it makes more sense to rent or buy a home is something only you can decide, based on your lifestyle, location and personal preferences.

July 2, 2014 | Zillow Blog | Author: Mary Boone

Millennials will soon be a Force to be Reckoned with in Housing Markets

18.4 million 20- and 30-somethings are living with their parents

The U.S. homeownership rate dropped for the ninth year in a row in 2013, thanks in no small part to the fact that millions of 20- and 30-somethings were still living with their parents, according to the latest “State of the Nation’s Housing” report from Harvard University’s Joint Center for Housing Studies.

The decline in homeownership rates from 2004 to 2013 was most dramatic among 25- to 34-year-olds (down nearly 8 percentage points) and 35- to 44-year-olds (down 9 percentage points). Some 15.3 million adults in their 20s and 3.1 million in their 30s were still living with their parents last year, helping bring the homeownership rate down to 65.1 percent.



Real median income for households aged 25 to 34 fell 11 percent from 2002 to 2012, to levels below those enjoyed by people in the same age group in 1972. Mounting debt is also an obstacle to homeownership, with 39 percent of households in the 25-34 age group reporting student loan debt in 2010, up from 26 percent in 2001.

While rising interest rates, inventory shortages and dwindling investor purchases have all weighed on home sales, “fundamentally … the slow pace of the single-family housing recovery reflects steady but unspectacular job growth,” the report said.

The good news is that household formation should rebound to historical levels in the decade ahead, with demographic forces alone creating 1.1 million to 1.3 million new households a year from 2015-2025, up from 600,000 to 800,000 a year from 2007-2013.

The total number of households in their 30s is expected to increase by 2.7 million during the next 10 years, and millennials should soon be making their presence felt in the owner-occupied market, just as they have in rentals, where rents are up and property values posted double-digit gains for the fourth year in a row in 2013, said Daniel McCue, research manager of the Joint Center, in a statement.

Minorities are expected to drive 76 percent of net household growth, but despite their growing presence in the market, still have a hard time obtaining financing, the report noted. In 2011-12, lending to Hispanics was up just 7 percent and 5 percent among blacks, compared with 15 percent or more in the volume of loans extended to white, Asian and other borrowers.

Qualifying for mortgage loans is still a challenge for those with lower credit scores, with the average score for mortgage purchased by Fannie Mae rising from 694 in 2007 to 751 in 2013, and from 640 to 693 for FHA loans during the same time period.

“While some lenders have announced that they are ready to relax underwriting standards, it is too soon to tell how large an impact this will have,” the report said. “An easing of credit constraints will be one of the most important determinants of how strongly the national homeownership rate rebounds in the coming years.”

Inman News, Paul Hagey, July 2014

Pending home sales surge on growing inventory, lower mortgage rates

The number of homes that went under contract in May leaped from the previous month as lower mortgage rates and growing home inventory stimulated buyer activity, according to a report from the National Association of Realtors.
Pending home sales — an indicator based on contract signings that anticipates home sales — jumped 6.1 percent month over month in May, but were down 5.2 percent from the same time last year.

Growth in real estate image via Shutterstock.

 

“Sales should exceed an annual pace of 5 million homes in some of the upcoming months behind favorable mortgage rates, more inventory and improved job creation,” said NAR Chief Economist Lawrence Yun in a statement.
“However, second-half sales growth won’t be enough to compensate for the sluggish first quarter and will likely fall below last year’s total.”
All four regions of the country posted increases in pending sales, with the Northeast and West showing the largest gains, according to NAR.
The jump in pending sales provides the latest evidence that the housing market may have shrugged off a recent slump.

One tailwind has been growing inventory, which increased 2.2 percent month over month in May as existing-home sales jumped 4.9 percent. Another is lower mortgage rates. Rates on 30-year fixed-rate mortgages recently posted their first annual decline in more than a year, according to Freddie Mac.
Despite the improvement, Yun said that the outlook for first-time homebuyers remains gloomy. Constrained by tight credit and declining affordability, purchases made by the group accounted for 27 percent of existing-home sales in May, Yun said. Historically they’ve comprised about 40 percent.
“The flourishing stock market the last few years has propelled sales in the higher price brackets, while sales for homes under $250,000 are 10 percent behind last year’s pace,” Yun said. “Meanwhile, apartment rents are expected to rise 8 percent cumulatively over the next two years because of tight availability.”

Inman News; Teke Wiggin; June 30, 2014