Sunday, August 23, 2009

Home Affordability: Myth or Reality?

For many young couples, the idea of owning their own house just like their parents is an attractive idea, but it’s not very realistic. A recent poll conducted by the Associated Press and America On Line Real Estate showed that 80 percent of respondents believe that it is hard for first-time buyers to afford a home. A majority of those polled – 59 percent – also said that they believe it is harder to buy a home now than it was five years ago.

Taking a closer look at the poll reveals that young adults and those that classify themselves as minorities consider the affordability of homes a bigger problem now than five years ago, compared to those over the age of 50 and those that identify themselves as white.

Broken down by region, almost 70 percent of those living in the western United States and almost 65 percent of those living in the Northeastern US say that it’s harder to buy now than five years ago, compared to only 54 percent of those living in the South and 51 percent of those living in the Midwest.

The poll also found that almost half of those surveyed thought that the real estate market in their home area was overpriced.

A recent report by the census bureau seems to back up the findings of the AP/AOL survey. The census report found that approximately one third of all homeowners in the US that have mortgages spent at least 30 percent of their income on housing and housing related costs. It’s widely considered excessive if your housing costs make up more than one third of your income. The census took things like mortgage payments, insurance and utilities and taxes into account.

The biggest reason for this lack of faith in new home ownership can be directly attributed to the recent housing boom over the last five years. Also, a recent increase in mortgage rates has also dampened optimism. And while incomes are up, as well, most don’t even keep up with inflation.

Another recent trend that has kept optimism for first time home buyers down is the 32 percent jump in median home value from 2000 to the end of 2005. The current median price is around $167,500.
While buying your first home is never easy, things may be a bit harder now than they have ever been. But bargains so still exist, and if you’re patient, a first home can still be yours.

Gulf Markets Experience Slow Recovery

After the disaster that was Hurricane Katrina last year, many who lived in the affected areas in Louisiana, Alabama and Mississippi packed up and left. It is only now, over a full year after the flooding subsided that a comprehensive look at the future of gulf real estate can be made. There is a recovery going on, but it’s slow.

According to sources in the affected areas, the biggest problem facing reconstruction is labour. A catch-22 has the New Orleans construction market treading water. More hands are needed to build more homes, but the bodies attached to those hands have no place to live in New Orleans, so they don’t come.

The housing market isn’t doing much better. Predictably, the price of undamaged homes shot up during the immediate aftermath of Hurricane Katrina, and are still anywhere between 10-40 percent higher than pre-storm levels throughout most of the gulf coast area.

The amount of inventory is most of the storm-ravaged area is still very small, and the areas that did manage to escape damage tended to absorb a large amount of homeless from areas that were harder hit. This influx of demand has kept supply very, very low.

Areas such as Pearl River County in Mississippi found themselves with a doubled population almost overnight as people from flooded areas flocked there. The area had been reporting just over 400 properties for sale at any given time before the storm, but the influx in population has shrunk housing availability down to 275. As for prices, they are up significantly, from around $90,000 to $150,000.

A much larger area that took in hundreds of thousands of people was Houston, Texas. Unlike many of its counterparts, Houston has taken the influx of people quite well. New home construction is way up, and the inventory is only down from 45,000 to 40,000.

Middle-of-the-road areas like Baton Rouge essentially doubled in population, much like Pearl River. Today, the population is still 50% higher than it was before Katrina hit. There is almost no inventory here, as soon as a house goes up on the market, it is inundated with offers and sells very quickly.

Hurricane Katrina was a legendary storm that changed the lives of millions of people. The real estate market will recover there, especially in a magical city like New Orleans, but it is going to take years. The surrounding areas may not be as lucky.

Getting Real Estate Advice From Uncle Sam?

As anyone who has decided to buy or sell a piece of property can tell you, the entire process can seem daunting and intimidating. Many who seek the help of a professional real estate broker spend many a sleepless night trying to decide who is taking advantage of them more: the broker or the bank? While there is no cure-all to this ages-old dilemma, there is a new pamphlet available that helps real estate newbies navigate their way through some of the red tape that comes with buying or selling real estate.

And it’s from the United States Government.

No, really.

The Federal Trade Commission has recently issued a helpful guide that helps new buyers or sellers with some frequently asked questions concerning real estate. Titled Selling Your Home? Tips for Selecting a Real Estate Professional, the guide focuses on the proper amount you should expect to pay for a real estate commission, the ins and outs of contracts as well as business models.

While the guide is a bit slim, weighing in at only four pages, it does come with some useful info. Under the section about commissions, the guide explains that while six percent is the industry standard, it is negotiable, and if your real estate agent tells you there is a local or federal law on the books that says the commission must stay at that rate, they are lying and it’s probably a good sign to find a different broker who will be honest with you.

The guide goes on to encourage prospective clients to try to negotiate for a lower commission, since the broker needs your business just as much as you need theirs.

In the next section, the guide explains the difference between full-service real estate brokers, and discount brokers and emphasizes that if you go with a discount broker, you may have to do more of the leg work yourself. The guide also says that while a full-service agent usually provides all needed services for one flat rate, the discount broker is more likely to have an “a la carte” approach, where for each additional bit of help, there is an additional cost.

The guide goes on to provide advice on negotiating contracts in your favour and not the banks, as well as info on hiring a trustworthy real estate broker.

While taking advice from the federal government on, say, invading Iraq may not be a good idea, this pamphlet may end up being a godsend for those needing basic real estate advice. The pamphlet can be picket up at the FTC’s website

Gated Communities – Are they for you?

There is something uniquely American about gated communities. Usually tucked away in the suburbs, they are given majestic titles, such as Yosemite Rivers or Acadia Meadows. They feature narrow, winding streets that also have cutsey names like Bubbling Brook Circle. If you can stand the naming, you have the actual houses. While many of them tend to be large 3-bedrooms or bigger, they do tend to all look the same. Most of them feature manicured lawns that look better than the local municipal golf course. But for some people, this is a snapshot of the American Dream. Should you buy a home in a gated community? Let’s take a look at some of the plusses and minuses.

A big plus for most potential homeowners is that houses in gated communities keep their value. Since maintenance rules for most gated communities are so strict and there is very little through-traffic, the values of homes in most gated communities tends to stay high. Reselling your home if you have to move away is also easier.

A minus for many is the evil homeowners association. The scope of what a homeowners association asks of its homeowners has become the stuff of legend. The ridiculous standards to which a home and lawn must be kept can drive a person crazy. Everything from the color you’re allowed to paint your home, to how you decorate it, to what you’re allowed to keep on your lawn are all up to the local homeowners association, not you. This is more than most people can stomach after paying a few hundred grand for a house. But some find the conformity comforting.

A plus if you have kids is the safety of a gated community. Of course, the community is much safer if your gate is guarded and the gate mechanism deters people from following the car in front into the community. But there is little doubt that little Johnny and Sarah will be safer riding their bikes on streets with very little traffic and excruciatingly slow speed limits found in most gated communities.

Just like the guard at the gate can work in your favour to keep riff raff out as well as drunk drivers targeting your kids, the gate guard can work against you, too. Every time you order a pizza, or if you need an emergency visit from the plumber, you have to let the gate guard know and have them buzzed in. This can be a hassle, and more times than not, you’ll probably forget and this will leave your visitor stranded.

Buying a house is a stressful enough decision in life but when you factor in the pros and cons of living in a gated community, the process can seem overwhelming. The best piece of advice of all is to talk to those that already live in a gated community and see what it’s really like before you take the plunge.

Flipping a House – Is it Right for You?

Of all the reality TV shows that have come and gone since the fad started, very few have caused people to sit up and say, “hey, I can do that, and I can make a mint!” like the house-flipping shows that seem to be everywhere on cable these days. But is what you see on TV accurate? Can the process really be that easy? Let’s take a closer look.

The first step is analysing your finances to see if you can afford to take on a second home and remodel it. You should have an idea as to how much your total budget is going to be for the project, and make sure to factor in closing costs on the project home, contractor overruns because things are bound to take longer than you thought, and then money for incidentals and accidentals, as well.

Once you’ve got an iron clad budget, the next step is to find a home that you think is flappable. Most people go into these projects with a property already in mind, but for some, searching for a saveable house that is within their budget and at the same time will be sellable can be extremely difficult. There are many people out there looking to flip houses, so finding one for yourself can be a real chore.

Once you’ve picked your property, you have to go through the buying process. Expect delays and make sure you have the property appraised by an independent appraiser. Also, be aware that closing costs can fluctuate dramatically.

So, the house is all yours. Now what? The best thing to do is to bring in an expert to help you see everything that needs to be done. From electrical to plumbing to interior design, flipping a house right is a huge job, and you have to be prepared to spend the money.

Once renovations have started, be prepared to dedicate as much time as needed to the project. The things that you can do yourself will save you money, but don’t be afraid to call in an expert for the big jobs.

Once the property looks like it should, have it reappraised, and once you’re ready to sell, don’t be afraid to embrace non-traditional methods of selling it, like the Internet or out-of-town newspapers. You need as many eyes on your flipped house so you can unload it as quickly as possible and stop making payments on it. The longer the property sits there, the less successful your house flip will be.

House-flipping has become one of the most fashionable ways to make money for hard working people. But be prepared to go into your investment with your eyes, and your wallet, wide open.

Monday, August 10, 2009

A Second Home: Take it or Leave it?

For many, wanderlust is just a part of life. You buy a beautiful home somewhere, settle down, have a family, but there is always a part of you that’s itching to get away. Vacations are part of that wanderlust; the chance to get away someplace beautiful. And then you see it. The local newspaper at your vacation destination, and lo and behold, there is a real estate section right there. Dare you even look? You can’t afford it, can you? Two homes? Is dual home ownership for you?

A second home can work for you, but you have to go into the process knowing what to expect. If you’re looking to get rich quick, don’t count on it. According to recent data, the price of real estate in areas that are deemed “Vacation Markets” has risen twice as fast as real estate in other areas. So, not only is a second home in your destination of choice going to cost you a pretty penny, it’s no longer a well-kept secret anymore and the chances of you flipping it to make a quick buck are slim.

The best piece of advice a possible vacation home buyer can heed right now is to buy for love not for money. Recent sharp downturns in vacation markets like Naples, Florida, Lake Tahoe, Nevada and Cape Cod, Massachusetts, have shown that trying to turn a profit in a vacation market is close to impossible. But there is a bright side to all of this. With the housing bubble going poof all across the country, those that are looking to sell will be doing so at lower prices. Now could be a great time to buy a place that you’re planning on keeping for a long while.

But how do you know if you have your head on straight about the whole thing? Well, take some time and evaluate the pluses and minuses of buying another home. Once you’ve decided on a area, spend some time there to make sure you like it. If it’s going to be a vacation home, you’ll want the scenery to be relaxing (if that’s what you’re looking for) or exciting (if that’s what you go on vacation to experience). A final check should be the bottom-line cost. If the price of the two houses makes up more than one third of your total income, you’ve spent too much.

Buying property is a huge investment for everyone, even the rich. Take the time to properly evaluate the pros and cons before you decide to own a second home or you could find yourself on a permanent vacation.

Are you House Poor?

The great American Dream has always revolved around owning a home. Sure, having the 2.3 kids, the cushy corporate job and the stylish car to drive to work everyday are part of the myth, too, but nothing quite summed up Americana quite like the white picket fence. But if recent economic numbers are any clue, this dream is becoming a nightmare for many in the US.

According to date released by the United States Census Bureau, an increasing number of homeowners are spending a larger and larger amount of their incomes on housing than in previous years. People in 49 out of 50 states reported an increase. The only state that didn’t, Alaska, spent the same amount. The report showed that people are spending around 21 percent on their housing needs, up from 19 percent in 1999.

This is a huge problem for first-time buyers who may now be priced out of housing markets all across the country. Economists point to rises in home prices in the last 7 years, as well as higher interest rates, coupled with stagnant wages over the same period.

While everyone seems to be in agreement that the housing “bubble” is either bursting, or getting ready to burst depending on where you live, housing prices are still up a remarkable 32 percent since the beginning of the decade.

Household incomes, on the other hand, haven’t done a very good job of keeping up. The same Census report showed that income has actually dropped, not risen, over the past 7 years, down 2.8 percent.

Maybe the worst news in the report was the percent of people who allot more than 30% of their income for housing. The numbers are up almost 8%. National guidelines suggest that more than 30% of household income for housing is excessive and not financially healthy.

What does this mean in the long run?

Most experts agree that until income can catch up to housing, the real estate market will remain lifeless. And since real estate is one of the biggest drivers to the overall economy, a weak real estate market means a weak economy.

Things appear to be the worst in California. Not only do they have the most expensive real estate in the nation, 48 percent of California homeowners spend more than 30% of their income on housing related costs.

Until income can begin to grow as quickly as the real estate market, this trend shows no signs of slowing down. Which could mean that the upcoming real estate slump could last much longer than anyone predicted.

Buying a Home Overseas: Practical?

For those of us that have been lucky enough to travel to Europe, Asia or Australia from North America, we have seen some of the most beautiful land on Earth. The people, the sights and especially the food make international travel one of the most exotic and special things you can do. But what about making that trip to another country permanent? If you can afford a second home and the thought of spending your summers in the Hamptons isn’t doing it for you, what about buying a little place in Italy? Or Ireland? Here are some tips on making your dream a reality.

First off, rest assured that you’re not the first person to do this. It’s estimated that about four million US citizens live abroad right now. The first thing you should do is check the local country’s property rights. There are websites run by the International Real Estate Association that can tell you if it’s even legal for non-residents of a country to own land there. You should also check with the US Government about the stability of a particular region. Remember, if you vacationed somewhere nice, that doesn’t mean it’s necessarily safe once you leave the resort.

The next step would be to seek out a real estate broker in that particular country for help. This is when a possible language barrier could be a problem. Luckily, there are websites available that will have links to international brokers who do speak English. A broker who is familiar with the local laws and customs of the region you’re looking to move to will be able to help you find out how the local laws work when it comes to real estate.

Another good tip is that you should expect to pay cash. Most countries don’t have as sophisticated a system for loans and mortgages as the US and Canada, so you are looking at either paying cash or if you are looking to move somewhere where you might be able to get a loan, a down payment of almost 50 percent wouldn’t be unusual. If that’s too rich for your blood, you might want to think twice about the whole thing.

Being able to retire in that pretty Tuscan villa overlooking the vineyards is a dream millions of Americans have, and while it may only become a reality for a select few, you CAN make it happen with proper planning, a helpful heaping of common sense and a few tips to help you on your way.

Canadian Markets Hot and Cold

For many Americans, Canada has been a refuge from instability for generations. Canada was the final destination for thousands of runaway slaves before the American Civil war, and then later during Viet Nam, for draftees that felt the war was unjust. The slow and steady migration to Canada continues to this day, although it’s mostly to get away from gun violence and George W. Bush. For those looking to buy real estate in Canada, the third quarter numbers had both good and bad news.

The good news? Canadian real estate is on a record pace in 2006.

The bad news? The third quarter numbers are down sharply from the second quarter of this year, and even down from the third quarter of last year. What does all this mean?

It basically means that Canada’s sizzling real estate market is still hotter than ever, but that it can’t keep up the incredible pace that it’s been on.

Breaking down the numbers, Canadian real estate is down 6 percent compared to the same quarter last year, and down 2.5 percent from the second quarter of this year, according to the Canadian Real Estate Association.

Overall, sales during the first nine months of this year are still up over the same nine months from last year, but things do appear to be slowing down.

The hardest hit cities during the third quarter slow down were Vancouver, home of the 2010 Winter Olympic Games, red-hot Calgary, which is still booming thanks to the local oil industry, and Toronto. Sales in Edmonton, Alberta and Hamilton, Ontario are actually up for the third quarter, helping to offset the losses in other cities.

Proving that the incredible Canadian real estate market is still on fire, year-to-date sales records were set in various cities all across the country in the third quarter. Montreal, Winnipeg, Ottawa, Saskatoon, Edmonton and Calgary all reported record sales for this year.

The average price for a home in Canada has been sky rocketing in recent years, with the total now at $258,000 (US dollars) up from $234.000 just in the last calendar year.

This real estate frenzy is being led by the province of Alberta and their incredible economy. The cities of Calgary and Edmonton, which reported their highest level of new real estate listings ever in the third quarter. Montreal and Toronto reported their second highest amounts of new listings for any quarter, as well.

The Canadian real estate market is still breaking records and making money despite the third quarter downturn. The breakneck pace simply couldn’t be sustained. But if you’re looking to move north of the border, do so knowing that it might cost you a few more loonies than you thought.

Credit History can Bite you in the Butt

A recent study has shown that the number of people who pay more than they should for their mortgage is rising. And if you look at the surface, the number one reason this rise is happening is because of race.

A study done by the Federal Reserve shows that around 55 percent of African-American borrowers pay higher than normal interest on their mortgages. But it’s not just the African-American community. The same study showed that 46 percent of people who identify as Latino also pay more due to a higher than average interest rate on their loan. As for Caucasians, only 17 percent of borrowers fell into that category.

The overall numbers of people who pay more than the average interest rate is up considerably, from 11.5 to 24.6 percent in the last two years.

While these numbers appear to be caused by rampant racism amongst seemingly all lenders, there might be another explanation. The connection between the interest rate offered and the borrowers credit history.

The interest rate that is offered on a mortgage loan is directly proportional to the amount of risk the lender feels that they are taking. If you have sparkling credit, the chances of you getting the best possible interest rate are fantastic. On the other hand, if you have declared bankruptcy or if there are any other black marks on your credit history, the chances of you getting a great loan are almost zero.

Another possible culprit is the rise in speciality loans that have gained in popularity over the last few years. While the idea of buying a house without a down payment was once a rarity, these days, it’s fairly common. And in almost all cases when this happens, the interest rates are higher because the lender is taking an additional risk by not having a down payment.

Sometimes, home buyers are agreeing to let the closing costs associated with buying a home be figured into the interest rate. Again, this is a less than honest way for a family to buy a home with very little to no cash on hand. The catch is, of course, that you will end up paying significantly more over time than if you had just paid the closing costs up front.

While no one can suggest that racism is dead in America, it is possible that while African-Americans and Latinos pay more for their mortgages, it could be caused by various other factors that may or may not be connected to a persons’ race.