Why First Time Home Buyers Are Crazy Not To Buy A Home Now

With some of life's milestones, there may not be a picture-perfect time to take the plunge. But when it comes to buying your first home, the combination of good market conditions and your own financial situation can dictate timing. If you've got the credit and down payment, you'd be crazy not to buy now. Want to know why?

Rates are still low

The Federal Reserve was expected to raise rates this summer, but so far they have stayed put. There is still talk that rates could go up before the end of 2015. So what does that mean for buyers? Well, if you're a millennial, a rise in interest rates could spell bad news.

"If mortgage rates hit 6%, a third of millennials (people younger than 35 years old) wouldn't be able to afford homes as they're currently listed, according to an analysis by HouseCanary, a housing-data analytics company," said Money magazine. "Mortgages are huge loans, so a seemingly small shift in interest rates can change a borrower's monthly payment by hundreds of dollars (though going from the current 4.08% rate to 6% is in no way a small shift)."

Investopedia's example using a $215,000 home with 20 percent down (leaving a $172,000, 30-year mortgage) figures a monthly payment of $821.15 at an interest rate of four percent and $923.33 at five percent. Is that $100 a month enough to get you moving?

New low down payment loans

First-time buyers have typically gravitated toward FHA loans for their low credit score requirements and down payments of just three and one-half percent. But new loans from Fannie Mae require as little as three percent. Known as the 97% LTV (Loan To Value) loan or Conventional 97, it can be more affordable for first-time buyers because "the Conventional 97 program does not require an upfront mortgage insurance premium, and because its annual mortgage insurance rates are cheaper, too," said The Mortgage Reports.

Rising rents

In many market, home prices are up significantly from their lowest levels several years ago, but are still within range of many buyers. Rents, on the other hand, continue to go up, pushing household spending to new, uncomfortable, heights.

"Payments on a mortgage used to purchase a three-bedroom home were more affordable than paying rent on a similar home in 66 percent of the counties recently analyzed by RealtyTrac," said Mortgage News Daily. "Across all 285 counties analyzed, the average percentage of median household income needed to rent was 29.96 percent while the average percentage of median household income needed to buy was 29.00 percent."

Tax deductions

When you pay rent, the entirety of your payment goes to the landlord or property owner, and all you get in return is a temporary place to stay. When you own your home, the government essentially pays you money back for your investment.

"Your biggest tax break is reflected in the house payment you make each month since, for most homeowners, the bulk of that check goes toward interest," said Bankrate. "And all that interest is deductible, unless your loan is more than $1 million."

Any points you paid on your loan are also deductible the year you paid them, as are your property taxes. "These taxes will be an annual deduction as long as you own your home," said Bankrate. "But if this is your first tax year in your house, dig out the settlement sheet you got at closing to find additional tax payment data. When the property was transferred from the seller to you, the year's tax payments were divided so that each of you paid the taxes for that portion of the tax year during which you owned the home. Your share of these taxes is fully deductible."

Lower PMI

First-time homebuyers who put less than 20 percent down on an FHA loan will have to pay Private Mortgage Insurance (PMI). It's one of the drags of having limited cash. For the past several years, those payments have cost buyers an annual premium of 1.35% of the loan balance, but a recent change dropped the premium to 0.85%.

"This change is expected to save more than 2 million FHA homeowners about $900 a year and allow about 250,000 consumers to buy their first homes in the next three years," said Credit.com.

Remember also that your PMI may also be tax deductible, subject to a few restrictions (and remind yourself again what portion of your rent is deductible: none).

Source: RealtyTimes, Jaymi Naciri
http://realtytimes.com/consumeradvice/buyersadvice1/item/38570-20150924-why-first-time-buyers-are-crazy-not-to-buy-a-home-now

Realtor Saftey Month

One year ago, a fellow Realtor lost her life by just doing her job of showing properties. Ever since then there has been greater awareness on Realtor safety which I whole heatedly agree with. During my career I've had my fair share of sketchy characters to deal with at open houses and while showing houses, and thankfully nothing happened. I sincerely hope that with this awareness campaign that is underway will stop any other Realtors from becoming victims in the future.



It’s been one year since real estate agent Beverly Carter went missing and was later found murdered after showing a vacant home to a prospective buyer in the rural area of Scott, Ark. Since that dark day on Sept. 25, 2014, Brenda Rhoads, Carter’s friend and managing broker at Crye-Leike, REALTORS®, in North Little Rock, Ark., has been working hard to promote safety awareness in the real estate industry.

“I don’t want Beverly’s death to be in vain,” she says. “If there’s just one person who comes out of this and realizes how important safety is, that’s the most important thing. Beverly would have wanted that.”

A husband and wife have been charged with Carter’s murder. The wife, Crystal Lowery, was sentenced to 30 years in a plea bargain, and the husband, Arron Lewis, will stand trial on charges of capital murder, kidnapping, and robbery in January.

National Association of REALTORS® President Chris Polychron has responded to Carter’s murder — which took place in his home state — by making safety a major priority during his tenure. Rhoads and Polychron participated in a safety discussion, along with broker and chairman-elect of the Texas Association of REALTORS® Leslie Rouda Smith, during NAR’s Broker Summit in Seattle in August.

During the discussion, three points were reinforced:

Know whom you’re dealing with. Brokers are encouraged to create a policy that requires all new clients to come into the office before being shown a property. At the office, photocopies of the person’s ID should be taken and a showing itinerary shared with office personnel.
Use a buddy system. A broker could also encourage agents to pair up for open houses or showings by offering sign-up sheets or opportunities to coordinate during sales meetings.
Be aware of your surroundings. Agents should understand the layout of a property before showings or open houses. Counsel them to put the phone away while walking, stay alert, and look for signs of forced entry before entering a home. Crye-Leike, REALTORS®, has promoted a two-second rule: Take two seconds to look around when you arrive at your destination, after you step out of your car, as you walk toward the home or property, at the door, and as soon as you enter the property.
Carter’s murder has motivated other brokers throughout the country to make safety a part of the industry culture.

Sam DeBord, managing broker of Seattle Homes Group with Coldwell Banker Danforth, says brokers have the power to minimize fears agents might have over losing a client by creating an office policy that makes it mandatory to check clients’ IDs.

“It seems like we hear almost weekly now about [another] assault against an agent,” DeBord says. “I don’t want to be the person who gets that call to say one of your agents went out to meet someone you sent to them and something happened to them.”

Source: Realtor Mag, Erica Christoffer
http://realtormag.realtor.org/for-brokers/network/article/2015/09/making-real-estate-safer-industry

Will the New Mortgage Disclosure Laws Delay Your Home Purchase?

Beginning October 3, 2015, home buyers applying for a mortgage will receive new rate and fee quote forms from lenders.

These federally required consumer disclosures, which go by the name TILA-RESPA Integrated Disclosures (or TRID), will make it easier for you to understand rate and fee quotes from lenders. However, they will also slow down your home-buying process.

Lenders must not only deliver these new rate and fee disclosures to you twice during the home loans process — after application and before closing — but also must comply with disclosure timing rules in the beginning and end of the loan process.

Speed wins when writing home purchase offers, and this extra time can mean the difference between a seller accepting and rejecting your offer. Here’s how to optimize your timing so you can write offers that will close faster than competing buyers.

Loan estimate disclosure and timing rules

The first new disclosure is called the Loan Estimate. This document clearly shows your rate quote, loan term, line-item fees, and cash needed to close.

Before the lender can collect fees for critical next steps in the loan process — like ordering an appraisal, which your loan can’t close without — the lender must also obtain your intent to proceed based on the quoted terms.

The Loan Estimate must be given to you within three days of applying for a mortgage. The federal agency that made and enforces the TRID rules — the Consumer Financial Protection Bureau (CFPB) — allows for mail or electronic delivery of the Loan Estimate.

If you applied with a lender who’s using mail delivery late on a Wednesday, they would mail your Loan Estimate and intent-to-proceed disclosures Thursday, you might get it Saturday, and they couldn’t collect fees and order your appraisal until they received your consent Monday, which is already day six into the process.

If you applied with a lender who’s using electronic delivery late on a Wednesday, they could deliver your Loan Estimate and intent-to-proceed disclosures for you to consent to online that evening, and they could collect fees and order appraisal that same evening — all on the first day of the process.

Closing disclosure and timing rules

The second new disclosure, called the Closing Disclosure, looks almost exactly the same as the Loan Estimate, which makes it easy for buyers to review the closing terms and compare them to the originally quoted terms. It also provides further clarity on closing costs by showing which line item costs are paid by buyer, seller, and third parties.

The lender must provide this document to you at least three days before closing.

The new CFPB disclosure rules don’t allow Sundays and holidays to count in this three-day waiting period, and day one is the day after you get the Closing Disclosure.

For example, if a lender sent your Closing Disclosure on a Wednesday, the three-day waiting period is Thursday, Friday, Saturday. Then they can fund your loan and close your home purchase on Monday, which is day six from the time you received the disclosure.

What is the fastest timing for the new disclosure process?

Prior to October 3, 2015, you could fund the same day you got final disclosures, and real estate agents are accustomed to writing purchase contracts based on this old timing.

As of October 3, your agent and lender must coordinate closely when writing purchase contracts to make sure your agent accounts for these new TRID timelines to write the fastest contract possible.

Shortest timeline post-application: If your lender is mailing disclosures, the CFPB’s new TRID rules add about six days in the beginning of the process from application to appraisal order. If your lender is using electronic disclosures, they can go from application to appraisal order in one day.

Shortest timeline pre-closing: All lenders must comply with the three-day waiting period after the Closing Disclosure is ready. But as the example above illustrates, the pre-closing waiting period is actually more than three days.

So here’s the key to making sure your mortgage process goes as quickly and smoothly as possible: When you find a lender in your current home shopping journey, ask them about their process for the new TRID rules, and have them clarify closing timelines for your real estate agent before you write any offers.

Source: Zillow Blog
http://www.zillow.com/blog/mortgage-disclosure-form-delay-184050/

Shopping for a home without a mortgage

A little Fiday real estate humor.

It's No Real Estate Myth: Fall Is The Best Time To Buy A Home

NEW YORK (MainStreet) – When's the best time to buy a house? You're closing in on it, even if there never seems to be an ideal time.

The folks at real-estate data firm RealtyTrac analyzed more than 32 million sales of single-family homes and condos since 2000 and found that buyers have gotten the best deal, on average, in October. Of the 2.7 million sales closed in October over the last 15 years, the average sales price was 2.6% below the average estimated full market value at the time of sale. That should make it a great bet for this year, but some aren't so sure.

"Despite the strong growth in sales since this spring, declining affordability could begin to slowly dampen demand," says Lawrence Yun, chief economist for the National Association of Realtors.. "Realtors in some markets reported slower foot traffic in July in part because of low inventory and concerns about the continued rise in home prices without commensurate income gains."

The median price for an existing home in July was $234,000, or 5.6% higher than it was a year earlier, while housing inventory fell 4.7% over the same span to 2.24 million. That's a 4.8-month supply, with a six-month supply considered normal.

However, the start of the school year, the drop in temperature, the return of rain and the loss of sunlight hours all conspire to make it more difficult for homebuyers to get out and look around this time of year.

“As we enter the rainy winter months in Seattle, things usually start to slow down," said O.B. Jacobi, president of Windermere Real Estate, covering the Seattle market where the best day to buy at a discount is April 1. "But it’s not just inclement weather; the days also get significantly shorter, making it challenging for sellers to present their homes in the best possible light. We often advise our sellers to take their homes off the market until spring. On the flip side, we tell our buyers that this can be a very opportune time for them because sellers, who keep their homes on the market through the holidays, are often very motivated to sell. There are also typically fewer buyers in the marketplace, so there is less competition for homes.”

For much of the country outside of Seattle, the worst month of the year to close on the purchase of a home is April, when buyers over the last 15 years have purchased at an average premium of 1.2 % above estimated market value at the time of sale. In fact, following October , the best months to buy were February, July, December and January. Out of 109 metro areas analyzed, 37 had their best day to buy in the fall months of September, October and November, and 44 had their best day to buy in the winter months of December, January and February.

But why October, which accounts for three of the top five days to buy at a bargain price? It isn't the coldest or warmest month out there, with the Environmental Protection Agency noting that the average temperature in October among all counties nationwide is 56 degrees. That's sixth highest among all, which puts October firmly in the middle of the pack. RealtyTrac observes, however, that October is the only month where all four major professional sports are in season or at least pre-season. Meanwhile, early February -- which accounts for two of the five lowest-priced days to buy -- is typically Super Bowl territory.

“Historically, winter months are slower and often a more advantageous time for buyers,” says Craig King, COO at Chase International brokerage, which covers the Lake Tahoe and Reno, Nevada markets, where the best day to buy is November 25. “Sellers are motivated in October, because many do not want their homes on the market for the holiday season.”
But what's the absolute best day to buy a home? Well, RealtyTrac removed all days with fewer than 50,000 sales over the last 15 years (the average among all days was 88,501), which took out New Year’s Day, Veteran’s Day, July 4, December 24, 25 and 26 and Leap Day, which has fewer sales because it only occurs once every four years.

Of the remaining days, the best day to close on a home purchase at a bargain price was October 8, when on average buyers have purchased 10.8% below estimated market value at the time of the sale. That was followed by November 26 (10.1% below market value), December 31 (9.7% below market value), Octobet 22 (9.6% below market value), and October 15 (9.1% below market value). However, that does vary by market. Notable exceptions include San Diego (August 20), Pittsburgh (March 17), and Cleveland (June 13).

What are the worst days, you ask? It doesn't get worse than January 19, when buyers paid an average 9.6% premium above estimated market value at time of sale. That's followed by February 16 (9.5% premium for those post-Valentines buyers), April 20 (9.5%), April 6 (8.4%) and April 27 (8.2%).

If you're just looking for the best weekday, for buying, you can't go wrong with a Monday. Out of 5.5 million single family home and condo sales over the last 15 years that closed on a Monday, buyers got an average discount of 2.3% below full estimated market value at the time of sale. Friday came in a close second with a 2% average discount. Thursday clocked in with the lowest discount of all at 1%.

While rising interest rates could make sellers even more motivated this year, the lack of first-time buyers in the marketplace could make this a more interesting October than most. The percent share of first-time buyers declined in July for the second consecutive month, falling from 30% in June to 28%, the lowest share since January of this year (also 28%). A year ago, first-time buyers represented 29% of all buyers.

"The fact that first-time buyers represented a lower share of the market compared to a year ago even though sales are considerably higher is indicative of the challenges many young adults continue to face," adds NAR's Yun. "Rising rents and flat wage growth make it difficult for many to save for a downpayment, and the dearth of supply in affordable price ranges is limiting their options."

This article is commentary by an independent contributor. At the time of publication, the author held TK positions in the stocks mentioned.

Source: TheStreet, Jason Notte
http://www.thestreet.com/story/13296731/4/it-s-no-real-estate-myth-fall-is-the-best-time-to-buy-a-home.html

The Attainable American Dream? Not in These Major Tech Hubs

Technology jobs mean booming housing markets in Denver, San Francisco, San Jose and Seattle, as young people flock there looking for high-paying jobs. But what’s great for the economy may not be so good for want-to-be homeowners.

According to the Zillow Housing Confidence Index (ZHCI), residents of these cities are feeling less optimistic about the housing market, with more people saying now is a bad time to buy than just six months ago.

Of the tech hubs in the survey, Denver had the biggest drop in people who said now is a good time to buy a home: just 46 percent in July, down from 54 percent when surveyed back in January.

San Jose had the next biggest drop with 36 percent saying now is a good time to buy, compared to the 43 percent surveyed six months ago. Seattle went down from 57 percent to 51 percent, and San Francisco went down from 45 percent to 40 percent.

“Growth in well-paying tech jobs is undoubtedly helping fuel some of the very rapid home value growth in these markets, along with low inventory and high demand,” said Zillow Chief Economist Svenja Gudell. “This rapid growth can mean different things to different groups. Renters planning to buy may be turned off by rapidly growing home values, bidding wars and a highly competitive housing landscape. Many renters may need to lengthen their timelines as they take longer to save for a down payment.

“Other long-time residents may be pushed out of these cities as the cost of housing rises too far, too fast,” Gudell continued. “But for current homeowners, rapid home value appreciation means substantial gains in equity. And some sellers may decide to capitalize on recent gains in home values and list their home for sale, boosting inventory.”

With home values continually on the rise in these cities, young people are less certain they’ll be able to afford a home of their own. In January, 18 percent of 18- to 34-year-old renters in San Francisco planned to buy within a year. Now, that number has dropped significantly to just 8 percent. Similar patterns hold true among young people in Seattle, San Jose and Denver.

For more information about Zillow’s survey and housing data, check out Zillow Research.

Source: Zillow Blog, Jordyn Lee
http://www.zillow.com/blog/home-buyers-major-tech-hubs-183208/

Don't Fall For The Wrong Home

When you go shopping for homes in the fall, you have some advantages. Buyer traffic has slowed with the start of schools. Sellers who've had their homes on the long hot summer market are weary of trying to sell their homes and more willing to drop prices. Your REALTOR® has more time for you, and is telling you about good deals in better neighborhoods.

But there's a reason you might be vulnerable to choosing a home too quickly, even though market conditions are more in your favor. You want to get into your new home before the holiday season starts. You're already under the nesting spell of grey skies, glorious turning leaves, and afternoon football games on TV. It's Thanksgiving at your house this year, everybody!

But wait. The holidays aren't a deadline. It's far better to choose a home that meets your needs no matter what time of year it is.

1. Get preapproved. Your lender will give you a price limit that you can comfortably afford based on your income and debts. These are time-tested formulas that allow some wiggle room in your finances so you won't be house-rich but cash-poor.

2. Shop for the right size, not the biggest. Buying the biggest home you can isn't the best idea. Think about the operating costs of heating, cooling and maintaining all that space. This is money wasted that could be spent on other things you may need such as a new car or furniture.

3. Think about your activities. Think about how you actually use a home. A home with a huge impressive kitchen is a poor investment if you don't cook much, except at Thanksgiving. Do you have the space you need for your home office or art studio? Are there enough bathrooms for the morning rush?

4. Consider the commute. Newer homes offer the most amenities, but they tend to be far from city centers. How long would you spend commuting to your job every day to live in a particular community? Those are hours spent in traffic that you could be spending with loved ones.



5. Look at the bones of the home. Appliances, wall colors, and flooring can easily be updated, but the basic floorplan has to flow well for the way you live. Look at the traffic flow. Is it easy to let the dog outside and clean muddy paws when he comes back in? Where do the kids put their backpacks when they come home from school?

6. Be willing to update. Many homes are affordable because they're older and need work. Many times, cosmetic updates can turn a so-so home into a treasure. If you set aside your holiday deadline, you can start work on your new home while more contractors are available and possibly less expensive than in the busy summer months.

7. Be sure to get year-round amenities. Remember what you enjoy doing in the fall, winter, spring and summer. The home you want to buy now should make you happy for the fall, but what about warm weather? Will you be able to garden, swim, or entertain outdoors? The best time to buy a home with a pool is in the fall and winter.

When you're comparing homes think about your wish list and which home comes closest to meeting your price, number of bedrooms, condition, space, features and the amenities of the neighborhood. Once you move in, you'll know you fell for the right choice.

Source: RealtyTimes, Blanche Evans
http://realtytimes.com/consumeradvice/buyersadvice1/item/38041-20150904-dont-fall-for-the-wrong-home

Want an FHA Loan? It’s About to Get More Difficult

If you’re looking to buy a home with a Federal Housing Administration loan, you can expect to face some new hurdles starting next week.

A few changes are coming on Sept. 14—and some of them have the potential to be a deal breaker for buyers, at least in the short term.

“I anticipate borrowers as a whole having a more difficult time qualifying for an FHA loan,” says Matt Hackett, operations and underwriting manager for Equity Now, a direct mortgage lender in New York City.

Why it’s happening

The backstory: FHA loans are backed by the federal government. Since they require very low down payments—starting at 3.5%—and have lenient credit requirements, these loans are often used by home buyers who wouldn’t otherwise be able to qualify for, or afford, a standard mortgage.

But now, the FHA wants to tighten up some loan requirements to favor backing mortgages for those with stronger fiscal records.

“We’re trying to promote access to mortgage finance—not to restrict it—but to do so in a responsible manner,” says Brian Sullivan, supervisory public affairs specialist with the U.S. Department of Housing and Urban Development.

Deferred student loan debt no longer ignored

Previously, student debt deferred at least 12 months beyond closing would not affect your debt-to-income ratio. But that’s no longer the case.

“We’re treating it as debt because it’s debt nonetheless,” Sullivan says.

So what does this mean for home buyers still paying off their education? And what should they do about it? According to our experts: Reach out to a mortgage broker or HUD counselor ASAP.

“Take the time to meet with an experienced loan officer who will be able to put together the best buying ‘game plan’ for you,” says Dave Fry, a Realtor in St. Paul, MN.

The new rule might deter some potential home buyers. But even if it removes them from the market in the short term, it might be for their own good, Fry says.

“It will ultimately protect them from trouble later,” Fry says.

Employment gaps face more scrutiny

If you haven’t been employed for six months or longer (known euphemistically as an extended absence), start working again as soon as you can. Under the new rules, borrowers will need six months on the job after an extended absence, regardless of the reason for the absence (even raising kids, which previously was deemed an “acceptable employment situation“).

Other notable changes

Some potential headaches include the following:

• More documentation for gift funds: Previously, gift funds were documented with a letter that included basic details such as the donor’s name, dollar amount, dates transferred, and deposit and withdrawal slips. Under the new rules, lenders will need to see a bank statement from the donor.
• More documentation for job changes: If you’ve changed jobs more than three times in a year, or switched careers once in the past year, you’ll need more documentation—including training and education transcripts, and evidence of continual increases in income and/or benefits.

The bottom line

So are these changes good or bad?

The changes are “generally more credit-restrictive, which reduces access to credit,” Hackett says. “In that sense, they are not beneficial to potential home buyers.”

Fry has a more positive outlook.

“I don’t think any of these new rules are bad,” Fry says. “Talk to both your Realtor and your loan officer—they are there to help you make the best decisions.”

For a more detailed look at the FHA changes, check out the new handbook.

Source: Realtor.com, Craig Donofrio
http://www.realtor.com/advice/finance/want-a-fha-loan-its-about-to-get-a-bit-more-difficult/

How to build your home equity now

There are three ways to build equity, or ownership, when you buy a home. One is to put money down in a down payment. The second is to pay your lender back, and the third is to take advantage of market upswings.

It's no secret that market momentum has been helping homeowners for a few years. Sales volume is still climbing, says the National Association of REALTORS®. You can still take advantage of low housing supplies and low interest rates to invest in a home.

One way to build equity is to put more money down on the home you want to buy. Lenders have returned to tried and true models of income to debt ratios and requiring that borrowers put more money down when they purchase a home. The more you put down, the more instant equity you have. Putting more money down also helps lower borrowing costs because it lowers risk for the lender.

As you make your house payments, you build equity slowly because interest payments at the beginning of a loan are much heavier than the money paid toward principal. The longer you own your home, the less you'll pay in interest and a greater share will go toward ownership, or building equity.

For example, if you borrow $250,000 at 5%, your monthly payment is $1,342.05. The first month you'll pay $1041.67 in interest, and only $300.39 toward reducing your principal. At that rate, building equity may seem like it takes forever. But only two years later, your interest rate lowers by $30 a month allowing $30 more to go toward reducing what you owe your lender.

You can build equity faster by adding a little more to your payment, which removes hundreds of dollars in interest and allows you to own your home in full much faster.

The other way to build equity is to allow the market to do it for you. Home values historically beat inflation by one to two percentage points, but the last decade has been anything but typical. However, all markets return to the norm, so assuming a normal market is on the way, on the modest side, your home should appreciate approximately one percent annually.

In theory, if you purchased your home for $300,000, your home should gain $3000 in value in one year. Home values are expected to rise about seven percent in 2015, so if you buy a home now, you could still do well.

Market variables from the weather to the Fed can all play a part in how quickly your home builds market equity. But one thing is certain, you can't build equity unless you're invested.

Source: RealtyTimes, Blanche Evans
http://realtytimes.com/consumeradvice/mortgageadvice1/item/38168-20150910-how-to-build-your-home-equity-now

$100 million zombie homes may signal market top

Homes listed for $100 million or more are piling up fast, but sales have ground to a halt, leading some to call a top in the very top of the real estate market.

Real estate brokers and analysts said there are roughly 20 homes for sale (either officially or unofficially) for $100 million or more in the U.S. That's up from about a dozen or 15 last year.

At the same time, sales of nine-figure homes have stalled. By the summer of 2014, three homes sold for $100 million or more. But so far this year, there hasn't been a single recorded sale at those prices, brokers and analysts said.
And as the inventory of super mansions rises, so have the price cuts—with some getting slashed by tens of millions of dollars.

Jonathan Miller, president and CEO of the Miller Samuel appraisal firm, said $100 million homes are largely "vanity listings," with owners setting prices "far detached from the market norm, the market conditions or the market price."

While some sellers may slap a blockbuster price on their homes to get marketing attention, the mega-prices have so far failed to generate sales.

"A $100 million price is just testing the market. But I don't know how much more testing they need to do," Miller said. "It's not working, this stuff isn't selling. Sellers are being extremely more aggressive and unrealistic than ever before."

Officially, there are only about seven or eight homes on the market in the U.S. that are priced at nine figures. The most recent is an eight-acre waterfront compound in Kings Point on New York's Long Island.

The property has 60,000 square feet of living space, 13 bedrooms, 35 bathrooms, an indoor lazy river, a two-story built-in doll house, a hair salon, wine room, indoor racquetball court, gym, saunas and a private pier than can hold a 200-foot yacht.

Yet Dolly Lenz, of Dolly Lenz Real Estate, said there are at least 20 homes for sale at $100 million or more when you include "whisper listings," those that are secretly for sale among high-end brokers, but not officially listed for buyers.

"These owners do not want pictures of their homes out there, and you have to show financial statements to tour the property," she said. "But there are a lot more $100 million homes out there than you think."

Lenz said that the lack of nine-figure sales is more a function of the quality of the specific listings than the result of any broader weakness in the luxury market.

"A property has to be super worthy to be sold for $100 million," she said. "But it doesn't have to be super worthy to be listed for $100 million. The buyers are the ones that matter and they haven't felt that any of these properties are worth it."

That's not to say that sales of $100 million homes have ended. Lenz said several new penthouses in New York that are coming online in the next few years will likely top $100 million. And a reported sale of the penthouse at 220 Central Park South will likely top the nine-figure mark when and if it closes.

But for now, hyper-priced homes have become the zombies of the luxury housing market—immovable and unchanging monuments to the hopes of super-rich sellers. And so far, those sellers are rarely budging.

"It seems like there is no shame to wildly over-pricing a property today," Miller said.

Granted, some sellers have shaved a little off their prices. Billionaire Jeff Greene this month cut the price of his Beverly Hills estate, called Palazzo di Amore, to $149 million from $195 million. He said the price cut was accompanied by several improvements to the house.

"We are very motivated to sell," Greene said.

Source: CNBC, Robert Frank
http://www.cnbc.com/2015/09/16/100-million-zombie-homes-may-signal-market-top.html

4 Reasons To Refinance Now. . . And 4 Reasons Not To

By the way, I know of a great loan officer who can help you with a refi or purchase money loan. . .

A nicer car. Some new furniture. A family vacation. Or a bigger, fatter savings account every month. They're just a few of the things you've been thinking about since you learned you can save a couple hundred dollars per month by refinancing.

We get it. That new low interest rate is tempting. But is refinancing really right for you? If you're only thinking about what you can buy with the money you'll save, the answer might be no.

"Whether or not refinancing makes sense for you comes down to a simple test: "It's only a great time to refinance if you're going to save money by refinancing and if it works with your long—or short-term—financial goals, said Fred Arnold, a mortgage professional and president of the Association of Mortgage Professionals, on Yahoo.

WHEN TO REFINANCE

1. To lower your interest rate

"One of the best reasons to refinance is to lower the interest rate on your existing loan," said Investopedia.

"Historically, the rule of thumb was that it was worth the money to refinance if you could reduce your interest rate by at least 2%. Today, many lenders say 1% savings is enough of an incentive to refinance."

People who refinanced a few years ago may also want to think about doing it again. "If they refinance now, they could lower their rate by 1 percent," said Diane George, founder of Vault Realty Group, a brokerage in Oakland, California, in Money magazine. "For example: A $450,000 loan with a 4.75 percent interest rate refinances into a 3.6 percent interest rate and will have a savings of an estimated $300 a month."

2. To shorten your loan term

Historically low interest rates have enticed many a homeowner to refinance in order to shorten the length of their loan—often trading in a 30-year fixed-rate loan for a 15-year term. Depending on the rate, homeowners can cut their loan term nearly in half without a huge jump in the monthly payment. Check out Bankrate's calculator to compare rates on the two loan types.

3. To get a fixed-rate mortgage

If your loan is adjustable and you're looking to get a fixed rate with payments that remain the same every month, a refi is a good idea, say experts. "While ARMs start out offering lower rates than fixed-rate mortgages, periodic adjustments often result in rate increases that are higher than the rate available through a fixed-rate mortgage. When this occurs, converting to a fixed-rate mortgage results in a lower interest rate as well as eliminates concern over future interest rate hikes," said Investopedia.

4. To use your home equity to pay off debt

If your home has risen in value while you've been making your payments and interest rates have dropped, you may have a nice chunk of equity in your home. Tapping that equity to pay off existing debts may make good financial sense—especially when the interest rates on your credit cards and store accounts are higher than the rate offered by your refi.

WHEN NOT TO REFINANCE



1. Because you want to cash out all that equity and buy a boat. Or an island

If there's one thing we learned from the real estate crash, it's that treating our homes like a discretionary spending account can be dangerous. Mortgaging yourself to the hilt and spending the cash on items that don't appreciate or that are risky could spell disaster—that's if a bank will even approve the refi.

It's also important to remember that our human nature may not change just because we were able to bail ourselves out.

"Unfortunately, refinancing does not bring with it an automatic dose of financial prudence," said Investopedia. "In reality, a large percentage of people who once generated high-interest debt on credit cards, cars and other purchases will simply do it again after the mortgage refinancing gives them the available credit to do so. The possible result is an endless perpetuation of the debt cycle and eventual bankruptcy."

2. Because your credit has declined

A refi requires lender approval, which means your credit will be checked. If you know those delinquent credit accounts and overdue car payments have killed your credit score, you might want to wait. Get your free credit report to check your score and ask your lender for options. They might recommend a credit repair program or a streamline refi if you are eligible.



3. When the numbers just don't make sense

A lower interest rate means a lower payment, which means you're saving money…right? Not necessarily.

"One of the most important details you need to pay attention to when you're planning to refinance is the break-even point. This is the amount of time it will take for you to recover the closing costs on the new loan. The break-even point is calculated based on how much you pay in closing costs and what your new interest rate will be," said smartasset. "If you're planning on moving before the break-even period ends, refinancing probably doesn't make much sense since you won't be reaping any significant financial benefits in the long run. Typically, closing costs average between 2 and 5 percent so it could take several years for you to get back to even. For example, if you pay $3,000 in closing costs and your payment only drops by $50 a month, it'll take 60 months before you break even."

4. Because it adds years to your mortgage

If you dream of nothing more than paying off your house and being free and clear, refinancing won't get you there since it typically adds to the length of your loan (The exception is if you're refinancing into a shorter term.).

"Increasing the number of years that you owe on your mortgage is rarely a smart financial decision," said Investopedia. "A savvy homeowner is always looking for ways to reduce debt, build equity, save money and eliminate that mortgage payment. Taking cash out of your equity when you refinance doesn't help you achieve any of those goals."

Source: RealtyTimes, Jaymi Naciri
http://realtytimes.com/consumeradvice/mortgageadvice1/item/38169-20150910-4-reasons-to-refinance-now-and-4-reasons-not-to

Credit Knowledge And Confidence

5 Things Your Home Appraiser Wishes You Knew

So you thought you were in the homestretch because you accepted a great bid on your home? Think again! The closing process has only just begun—and for most sellers, the appraisal can be one of the scariest parts.

For starters, lenders often require the use of their own, FHA-approved appraiser. That means you get zero say in who’s determining the financial value of the home you’ve lived in, loved, and sunk your savings into.

Here are some things sellers can do—straight from the appraisers’ mouths—to navigate the process.

Keep in mind that appraisers aren’t magicians

The appraiser won’t know what your home is worth the second he walks in the door.

“People think we know the value of the property as soon as we see it,” says Michael Coyle, the founder of The Coyle Group in Lafayette Hill, PA.

That’s simply not the case. A good understanding of the appraisal process will go a long way toward comprehending how your home’s value is determined.

First, an appraiser will pull comparable listings (called “comps”) from the nearby area. These are homes similar in style, location, and footage sold within the past few years. Then, he’ll come by your house to determine its condition and quality, as well as any other factors that would affect the cost of the home, and use that information—along with the comps—to make an accurate assessment.

This usually takes at least a few days—and definitely more than a few hours.

Prep your space—and its occupants

No, the appraiser isn’t coming by to judge the cleanliness of your homestead—but it’s still good form to declutter, dust, and mop beforehand to show your home in its best light, according to appraiser Adam Wiener, the founder of Aladdin Appraisal in Auburndale, MA.

A good appraiser won’t devalue your home because it’s messy—but a neat, organized home might help you.

“Even if they’re not consciously aware of it, the appraiser might value (a messy home) a little lower,” Wiener says.

Also, make sure the occupants of your home are prepared for the appraiser’s arrival, including teenagers who tend to stay holed up in their rooms.

“And make sure everyone’s clothed,” Coyle adds. “Sometimes, they forget to tell the teenager.”

Get your paperwork in order

Before the appraiser arrives, gather all the information you have about the house and send it over. Most appraisers will ask for this upfront, either directly or through the lender or broker.

Coyle recommends having on hand a list of major improvements as well as detailed info about the age and condition of the roof, HVAC systems, and major appliances. For any DIY projects, make sure you have the original permits.

“My favorite customers are the ones who have all the information ready for me,” he says.

There’s nothing worse than an appraiser pulling comps for a 1,200-square-foot 1920s Cape Cod–style house, only to realize on the day of appraisal that your master bedroom addition adds an additional 500 square feet.

When that happens “none of my comps are any good and my values are off,” Wiener says.

And that means more work—and more time before a final assessment can be reached.

So go the full-disclosure route.

“Hand it to them on a silver platter: Here’s my neat, gorgeous house, shown in its best light, and all the things that are awesome about it,” Wiener says.

Don’t put too much stock in home improvements

We’re sure your brand-new kitchen is stunning—but don’t be surprised if it doesn’t proportionally raise your home’s market value.

Appraisers stress moderation in assuming how much your shiny, brand-new kitchen will add directly to the worth of your house. If you spent $50,000, you’re likely to see only a fraction of that returned in value. That goes double for a new pool, which “does not bring as much value as people think,” Coyle says. (This might vary if you live in a hot climate where pools are near expected.)

As for your finished basement: Sorry, but that’s even less help. Most appraisers use ANSI standards for measuring the square footage of a home, which excludes any rooms below grade. That doesn’t mean your basement has no value, but it doesn’t technically add space.

Don’t engage in listing ‘puffery’

Before listing, make sure you and your Realtor® take a realistic look at what your home actually offers. Are you including the basement square footage in the total? Are you hoping no one will notice your roof isn’t new? Preparing yourself ahead of time with a pragmatic estimate will ease the appraisal process.

And above all else, make sure not to fudge the numbers.

“There’s an epidemic of puffery,” Wiener says.

This is particularly rampant in areas where the assessor’s information isn’t accessible online. When you know potential buyers have to actually, gasp, go in person to look up the sketches, it might be a lot more tempting to pad some square footage here and there.

After all, who will notice?

Here’s who: Your appraiser—who’s happy to go to the office and pull 20 or 30 comps. And he won’t be fooled.

Source: Realtor.com, Jamie Wiebe
http://www.realtor.com/advice/sell/five-things-your-appraiser-wishes-you-knew/

Selling With A Contingency

Question. We have been trying to sell our house for several months, and have just received an offer. The price is right, but the buyer wants the contract to be contingent on the sale of her own house. Our real estate broker has suggested that she could list the buyer's property, and would probably be able to sell that house quickly. What do you think of this kind of contingency?

Answer. You have raised two different questions, and both deserve a comprehensive response.

I personally do not like contingencies based on the sale of the purchaser's current residence. However, it is a fact of life which sellers have to accept if they want to sell their property quickly. Not everyone can afford to buy a new house while at the same time having to carry the financial burden of their existing home.

A contingency is a legal concept which basically means that if a particular condition is not met, then the real estate contract becomes null and void. In a home sale contingency situation, if the buyer cannot sell his or her house, then the buyer does not have to go forward with the sales contract to buy the new property.

Clearly, such a contingency is in the best interest of the buyer.

However, there are certain protections that a seller can obtain if they are properly incorporated into the sales contract.

If you, the seller, are prepared to accept a home sale contingency, this means that you will not have any certainty as to whether your buyers will in fact go to closing on your house until such time as the buyers have contracted or sold their current residence.

Thus, one important provision to add into any such contingency is a time limitation. How long are you as a seller prepared to keep your house off the market? Generally speaking, these contingencies expire by their terms between 90 and 120 days from the time the contract is entered into. At the end of this time period, the contract can be declared null and void at the option of the seller.



On the one hand, you have to be realistic; you cannot put a short time fuse on the buyer, because he or she may not be able to sell the home within such a short period of time. On the other hand, you do not want to have this open-ended, whereby the buyer at any time in the future can suddenly announce their house cannot be sold, and the current contract is null and void. Thus, a range of between 90 and 120 days is a fair compromise between both of these positions.

A seller should also incorporate into the contract what is known as a "kick out clause." The usual language reads as follows:

Seller shall have the right to continue to show the property for sale to others. On receipt by seller of any offer from another purchaser which is acceptable to seller, seller shall give purchaser ___ hours written notice to remove the contingency regarding the sale of purchaser's present residence. In the event purchaser fails to waive said contingency in writing and/or fails to provide seller with evidence satisfactory to seller that purchaser is able to complete settlement without regard to the sale of purchaser's present residence, then seller may, at seller's sole discretion, declare this contract null and void, in which all deposit money shall be refunded to purchaser. For the purpose of this paragraph, the ___ hour period shall commence upon delivery of the aforementioned written notice to purchaser or to the real estate agent, and such delivery date and time shall be recorded in writing on a separate receipt. Time is in the essence for this paragraph.
This will give the seller the opportunity to continue to market the property, and most real estate agents and brokers will be happy to assist in these efforts. If the seller obtains another satisfactory offer, the existing purchaser will be given a period of time in which to determine whether to cancel the contract or to go forward with the contract. The general rule of thumb is 72 hours.

It is important to note, however, that even if the existing purchaser decides to remove the contingency and go forward with the purchase, that purchaser must demonstrate satisfactory financial ability to the seller that he will be able to purchase even though the current residence has not yet been sold. If this language is not included in the real estate contract, the purchaser could remove the contingency, but nevertheless still not be able to get financing until the house is sold, and obviously the settlement will not take place.

The sellers should also keep in mind that if an acceptable second offer is received, they cannot accept that offer until they have given the 72 hour notice to the first purchaser. Alternatively, the seller could accept the offer as a "back up" contract, making it clear that this is a back up contract which will not become the primary contract until the seller gives written notice of that fact to the second purchaser.

Clearly, the seller does not want to be in the position of having sold the house twice under two different contracts.

By incorporating a kick out clause, this permits the seller to continue to show and market the property, while at the same time preserving an interested purchaser who presumably will diligently attempt to sell his own house.

The second issue raised by your question is, in my opinion, quite controversial. It is common practice for real estate agents or brokers to want to obtain a listing so that they can sell the purchaser's house also. However, there is, in my opinion, a clear potential conflict of interest created by these dual transactions. On the one hand, the real estate agent owes a duty to the first seller. Now, on the other hand, by obtaining a listing from the purchaser, the agent also owes a duty to that individual. It may very well be that the interests of the two will differ. The seller wants the purchaser to sell quickly, so that the purchaser will go to closing. The purchasers, on the other hand, will no doubt want to get the best possible price, and may not be anxious to settle on the new contract until their own house is under contract. Indeed, a properly drafted home sale contingency should make the first contract contingent not only on the purchaser obtaining a contract for the sale of their house, but also on the actual settlement on that house.

Additionally, when an agent receives certain information, there is a duty to disclose that information to the principal. There are times, however, when the purchaser make want to discuss and disclose certain private and financial information to a broker, which information may be significant if known by the seller. My recommendation in this case is for the purchaser to obtain his or her own real estate agent who will not have to be concerned with the possibility of a dual loyalty.

Source: RealtyTimes, Benny L. Kass
http://realtytimes.com/consumeradvice/sellersadvice1/item/38042-20150904-selling-with-a-contingency

More Chinese investment in American real estate

It can be argued that the real estate market here in the silicon valley is being propped up by foreign buyers and investors. This also seems to be the case for many other major markets in the United States. U.S. real estate is seen as a very safe investment for many foreign investors, particularly Chinese.

The article talks about the purchase of the Waldorf-Astoria hotel, a very famous and world renowned hotel being purchase by a Chinese insurance company. Obama was supposed to stay in the hotel during his visit to New York for a UN meeting, but changed to another hotel citing security concerns.

How Chinese Investors Found a Safe Haven at the Waldorf-Astoria

NEW YORK (TheStreet) -- Macroeconomic turmoil is once again putting the U.S. real estate market in the spotlight, but this time it's part of the solution, not the problem.

American real estate is becoming a refuge for Chinese investors, particularly insurance companies that may amass $3.32 trillion in premiums by 2020, who are seeking reliable returns as the world's second-largest economy slows and its stock markets decline, according to both advisers and industry executives.

Developers, financial institutions and high net-worth individuals are seeking "safe investments in income-producing commercial and residential investments rather than luxurious real estate purchases for personal use," said international real estate attorney Edward Mermelstein, who has spent 20 years advising clients on such transactions.

It's a strategy not unlike the one players use to get ahead in Hasbro's (HAS - Get Report)  Monopoly, buying real estate and adding revenue-generating houses and hotels.

Especially since August, when China's devaluation of its currency combined with an 8% drop on the Shanghai Stock Exchange to drag down equity prices worldwide, Mermelstein has seen a "positive and consistent interest" by Chinese investors. "There's an argument that this is a flight to safety," he said. "This is very much a flight to safety."

That flight builds on already increasing interest in European and U.S. assets from Chinese investors, whose purchases outside their country grew 11% to an estimated $120 billion in 2014, according to global accounting firm KPMG. High-value real estate deals in that period included the $1.95 billion purchase of New York's Waldorf Astoria hotel by insurance provider Anbang.

"Chinese real estate developers are eager to capture potentially higher and more stable returns overseas,"  KPMG noted in its "China Outlook 2015" report. "The overseas real estate market has also generated interest from Chinese companies in other industries, particularly insurance companies."

Chinese insurers have been allowed to invest as much as 15% of their assets in overseas real estate since 2012, though as of last October, they had invested only about 1%, KPMG said. Individuals are poised to gain more flexibility, too, with China's cabinet releasing a plan earlier this year that would allow people with at least $160,000 (1 million yuan) of financial assets and businesses to directly invest in real estate, stocks, and bonds in foreign markets, the Wall Street Journal has reported. The option would be limited to designated free-trade zones.

"What's going on in China has not dissuaded them one bit from continuing to look at and pursue the transactions they're working on," said Bob Knakal, Cushman & Wakefield's chairman of New York investment sales, who's working on several transactions with Chinese investors, including a $300 million project in Manhattan. "We have seen more investors coming into the market that want to deploy capital here."

The Chinese government doesn't want too much capital to flow out of the country, however.

"The government has trade-offs," said Tailan Chi, an international business professor at the University of Kansas. "First, they want to open up the capital markets gradually, so they can say the Chinese currency is largely determined by the market. Secondly, they want to prevent very large inflows or outflows of capital that would push the value of the Chinese currency up or down too quickly."

Source: TheStreet.com, Valerie Young
http://www.thestreet.com/story/13280655/1/china-boosts-spending-on-u-s-real-estate-amid-turmoil-at-home.html

The Ten Commandments of Buying A Home

Source: The Lighter Side of Real Estate, Mike Bell

Safety First when listing your home for sale

I always tell my clients this very advice when I'm about to put their property on the market. This video from C.A.R. sums it up in a fun way.

5 Signs It’s Time to Break Up With Your Real Estate Agent

If your agent goes MIA, it's on to the next one.

Working with a real estate agent is similar to a romantic relationship: the introduction, a whirlwind courtship, followed by a commitment. My dear agent, “I do” promise to work with you to search for and buy my beloved new home.

That initial flurry of activity turns into hanging out on the weekends, exploring home after home. The rush of a new project as you work together toward a common goal can bond your partnership even further.

But what happens if the rosy glow disappears from your cheeks and there’s no longer a real estate skip in your step? How do you know when it’s time to think about changing real estate agents? Here are five signs that it might be time to say “it’s not you, it’s me” to your real estate agent.

Missing in action

Whether it’s a personal or business relationship, we all know when we’re getting the brushoff. Text messages aren’t returned quickly. Phone calls get sent to voicemail — and then returned by your agent’s assistant. Your emails seem to disappear down a dark hole, and your request to see a new home on the market is begrudgingly met three days later.

In a cold market, this behavior is simply unacceptable. But when it’s a scorching hot market? Forget it. You’re never going to land your dream home with an agent who treats your business relationship this way. You’ve been sidelined, and it’s time to move on.

High-pressure sales tactics

Rather than a new home, you begin to feel as though you’re shopping for a used car on a discount lot. Each conversation leaves you shaky with anxiety, fearing that every other decent house in the city (and in your price range) is currently under contract and this is your only shot to lock one down.

Regardless of how hot the market is, interactions with your agent should not leave you feeling anxious. Sure, it’s their job to convey accurate market information, but in an honest and straightforward manner.

They’re not listening

You’ve communicated your deal-breaker list to your agent and they consistently show you homes without several of your coveted features. You’re tired of explaining that a second bathroom is not a luxury — it’s essential for your sanity.

When you feel as if you’re wasting time spending Saturday and Sunday afternoons touring homes with an agent who is so clearly missing the mark, it might be time to move on. But before you break the news to your agent, consider asking if there aren’t any homes with your required features in your price range — a problem with an entirely different fix.

They stand you up

After leaving work early and rushing to your agent’s office to sign paperwork, you find their assistant armed with a calendar for an appointment reschedule. Having other clients and commitments is perfectly acceptable, but failing to communicate in advance is not. Their time is not more important than yours.

With that said, life does sometimes get in the way of a carefully planned schedule. If this is an isolated incident, treat it accordingly — if not, you may need to make some changes.

They make decisions for you

You’ve submitted an offer and your agent neglects to ask if you would agree to a longer closing date. Instead, they take it upon themselves to reply for you — and the sellers went with another offer. Regardless of previous conversations, your agent should discuss all contracts and offer details with you in a timely fashion. Full representation does not mean making decisions on your behalf.

As in a romantic relationship, it can be easy to convince yourself you’re overreacting to circumstances by sweeping things under the carpet. Remember, this is an important business relationship and should be given priority. If you’ve communicated openly with your agent and you’re not 100% satisfied, then move on and find an agent who not only meets your needs but also exceeds them.

Source: Time.com,
http://time.com/money/4017994/break-up-with-real-estate-agent/?xid=gonewsedit

Why You Need to Learn More About Feng Shui

The ancient design philosophy of feng shui is gaining more traction in real estate as the number of Chinese home buyers are taking a bigger liking to U.S. real estate.

Eighty-six percent of Chinese Americans believe feng shui will play a role in a future home buying decision, according to a newly released survey of 500 Chinese-American home buyers, conducted by Better Homes and Gardens Real Estate, in conjunction with the Asian Real Estate Association of America. What’s more, 79 percent of respondents said they’d pay more for a home that follows feng shui principles — an average of 16 percent more to boot.

Seventy-five percent of respondents said deal breakers for them, which follow feng shui principles, would be a home being located at the end of a dead-end street, having the stairs directly facing the front door, and if the front and back doors are aligned.

Chinese buyers spent a whopping $28.6 billion on U.S. residential real estate from April 2014 to March 2015, according to the National Association of REALTORS®. That is prompting more real estate professionals to take notice of what feng shui is all about and what could be driving some of this growing number of buyers’ interests.

Peruse this infographic from Better Homes and Gardens Real Estate to learn more about feng shui.

Source: Realtor Magazine, Melissa Dittmann Tracey
http://styledstagedsold.blogs.realtor.org/2015/08/31/why-you-need-to-learn-more-about-feng-shui/?om_rid=AAFmZk&om_mid=_BV51HCB9FL7BXz&om_ntype=RMODaily

Five home improvement projects to give you the most return on investments

Not all home improvement projects will give you the best return on investment. Here are 5 that will give you the most money.

New home for Bay 101: Demolition to start by end of year on future cardroom site

The Bay 101 Club is an iconic Silicon Valley casino that is clearly visible from the 101 freeway. Local residences have been going there for years to satisfy their gambling addiction and now the City of San Jose gave approval for the owners to relocate the business across the freeway to an area where a hotel now sits. The new card club will be a casino and hotel and in the site of the old Bay 101, it will get torn down and new housing will get put up in its place.

With city planning approvals in hand, owners of San Jose’s Bay 101 card club aren’t wasting any time prepping for construction of a new casino and hotel complex valued at up to $100 million.

Sometime in November, wrecking balls will make make short work of the sprawling, 512-room San Jose Airport Garden Hotel — a 56-year-old landmark on North First Street that Bay 101’s owners bought in 2013. In its place: a roughly 70,000-square-foot card room and seven story, 174-room hotel.

“I think it will do that corner proud,” said Brian Bumb, whose family owns Bay 101. “The first two things that are going there will really enhance the area.”

The new project comes as Bay 101 faces a 2017 lease expiration at its current home at 1801 Bering Drive, a short distance from the new development site. That location is destined to be redeveloped as part of a planned office campus from development firm Peery Arrillaga. The city granted planning permits for the new Bay 101 project earlier this month, said Erik Schoennauer, a development consultant who is working with Bay 101. I first reported on the project two years ago.

The new Bay 101, slated for completion in the fall of 2017, will still have the same number of card tables as the old one (49), but Bumb said: “It’ll be a little different layout and a little more spread out. We are going to try to do a high-end restaurant and capitalize on everything that’s happening on in the North First Street area.”

Bumb said no agreement with a hotel brand has been reached, but said that a deal should be finalized by next May, when construction begins to go vertical. A second approved hotel, which would rise 10 stories and include 150 rooms, would come later. He estimated the total price tag for the first phase at $90 million to $100 million.

The project could eventually also include an office building of up to 250,000 square feet and 12 stories, which would also be built in a later phase, Bumb said.

First things first, though. The San Jose Airport Garden Hotel will close Nov. 7, and then Bumb said he has about 10 days “to get everything out of there: 500 beds, 500 refrigerators, headboards, end tables. There’s just a lot of stuff.” Bumb is working with Habitat for Humanity to try to donate some of the furniture. Demolition should start in earnest in December.

Barry Swenson Builder is the general contractor for the project and Kenneth Rodrigues & Partners Inc. is doing the design.

Bay 101 is one of two major cardrooms in San Jose. The other is Casino M8trix, which opened a glitzy new facility down the street from the new Bay 101 site in 2012.

The cardrooms have not always been popular with San Jose politicians, and attempts to increase the number of card tables have failed. Bay 101 was looking at moving to Milpitas last year, but that plan died when when a Milpitas citizens' group successfully campaigned against a Milpitas ballot measure that would have helped pave the way.

Source: Silicon Valley Business Journal, Nathan Donato-Weinstein
http://www.bizjournals.com/sanjose/news/2015/09/09/new-home-for-bay-101-demolition-to-start-by-end-of.html

What are Investors Purchasing?

Anti California Sentiment popping up in Portland area real estate

California has one of the highest real estate markets in the country and because of that, some home owners here are selling their homes and taking that money to buy a much lower cost home out of state with still some money left over. In Portland Oregon, locals there have grown resentful of outsiders, particularly people from California, with more money than common sense who are using their money to outbid other buyers and effectively pricing them out of the market. In fact they have even gone so far as to slap a No California sticker on housing For Sale signs in the area.

I guess they don't want us California folks to do to them what was done to us by foreign buyers from India and China.



'No California' stickers appear on real estate signs across Portland

As Stocks Fall, Real Estate May Be the Best Defense

Pencils ready? Here’s today’s investment pop quiz.

Which asset class has performed as well as bonds during U.S. equity bear markets of the past 60 years?

The answer, perhaps surprisingly, is residential real estate. During the Great Recession, of course, the real estate market collapsed along with stocks. But residential real estate’s performance during the 2007-2009 bear market was anomalous, according to data from Yale University’s Robert Shiller, winner of last year’s Nobel Prize in economics and the co-creator of the Case-Shiller Home-Price Index.

In 14 of the 15 previous U.S. equity bear markets, going back to 1956, the home-price index rose. And in that lone bear market prior to 2007 in which home prices did fall, they did so by just 0.4%.

Besides bonds, no other asset class comes close to this good a track record during bear markets.

Residential real estate’s ability to hedge equity bear markets is of more than just historical curiosity, of course. The stock market recently experienced a full-scale correction, and it’s possible that we are already in a new bear market. And even if we’re not, a 20% or greater decline will happen sooner or later.

Residential real estate might even be a superior hedge than bonds in the next equity bear market. While real estate historically has risen along with inflation (positive correlation), bonds have been inversely correlated, tending to fall when inflation rises. If inflation were to heat up during the next bear market — as it did during the stagflation era of the 1970s, for example — bonds would be battling stiff headwinds.

The $64,000 question for investors seeking a hedge: Was residential real estate’s crash during the 2007-2009 equity bear market an anomalous event?

Professor Shiller’s response, when I put that question to him, was “To some extent, it must be… Overall there just isn’t much correlation of home prices with the stock market. So it [what happened in 2007-2009] looks like just chance.”

He added that residential real estate’s terrible performance during the Great Recession was in no small part caused by idiosyncratic developments such as “subprime mortgages, securitized in tranches, and dubious innovations, [as well as] liars loans.” Those developments are unlikely to play as big a role in the future, due to the greater “vigilance” that regulators now exercise over the real estate market — such as the Dodd-Frank act, which became law in 2010.

All of this suggests that investors should consider the possibility of hedging their equity portfolios with an allocation to residential real estate. Unfortunately, however, as Professor Shiller hastens to point out, that’s easier said than done. Many of the obvious investment vehicles don’t actually provide genuine exposure to home prices.

Take your home, for example, or investments in any other individual properties, for that matter. Idiosyncratic factors that are unique to each property will cause its investment return to diverge widely from that of the residential asset class as a whole. In addition, the market for physical real estate is relatively illiquid and transaction costs are high.

Real estate investment trusts (REITs) have a different set of drawbacks as a hedge. Though the market for them is quite liquid, they tend to “pretty much track the stock market” rather than the average price of residential real estate, according to Professor Schiller.

The same goes for stocks of home construction companies. Over the past two decades, for example, there has been a statistically insignificant correlation between the S&P 1500 Homebuilding index and the Case-Shiller Home Price Index. In contrast, those home building company stocks have been highly correlated with the overall stock market.

It is difficult to construct an exchange-traded fund pegged to the Case-Shiller Home Price Index – in fact the one ETF that attempted to do shut down just a year after it was established.

That leaves the futures market. Investors can bet on the performance of residential real estate via futures on the Chicago Mercantile Exchange that are tied to the Case Shiller Home Price Indices. But the market for these contracts is relatively illiquid, so even this alternative is not ideal. If you do invest in these futures contracts, be sure to use limit orders rather than market orders to buy and sell.

If you were convinced that a bear market in stocks had begun, you could hedge your equity holdings with an investment in residential real estate by allocating a small portion of your portfolio to these futures. You would pick a contract with a long-enough maturity to encompass the likely length of the bear market.

According Ned Davis Research, the average bear market of the past century lasted 13 months — and no bear market since the Great Depression has lasted two years.

Many individual investors have an aversion to playing the futures market on the grounds that they are too risky or hard to trade. But what makes futures risky is the leverage that traders employ, not the contracts themselves. The standard deviation of the Case-Shiller index’s annual returns, for example, is less than half that of the S&P 500 — and even more than a third less than that of long-term U.S. Treasuries.

Furthermore, most of the largest discount brokerage firms now allow you to trade futures as easily as you would an individual stock or ETF. So the aversion to futures may be a legacy of days of old when you had to jump through a lot of hoops to trade.

Investors with no experience trading futures would be advised to consult a financial advisor before doing so. If residential real estate performs as well in the next equity bear market as it has in most declines over the past half century, you will be glad you included it in your portfolio.

Source: Barron's, Mark Hulbert
http://www.barrons.com/articles/as-stocks-fall-real-estate-may-be-the-best-defense-1441104699

Where HOA Fees Make Renting Cheaper Than Buying a Home

Where HOA Fees Make Renting Cheaper Than Buying a Home

Homeownership remains cheaper than renting in all 100 largest U.S. metro areas. In fact, buying is 35% cheaper than renting now, compared with 33% cheaper one year ago. Paradoxically, home price growth nationally has outpaced rents over the past year. So what gives? Two things. First, the 30-year fixed-rate mortgage rate has fallen from 4.5% in 2014 to 3.87% today (as of April 15). Second, the 3.9% home price gain wasn’t much larger than the 3.7% gain in rents. In the past year, these two trends have made homeownership even more affordable compared with renting.

Trulia’s Rent vs. Buy Report assumes a traditional 30-year fixed rate mortgage with a 20% down payment. But for those looking to buy a home, apartment, or condo with homeowner association (HOA) fees, the extra cost could make renting a more attractive option.

Our method for calculating the total costs of buying and renting follows these steps:

• We use our quality-adjusted measure of home prices and rents, which allows an apples-to-apples comparison between rental and owner-occupied housing units. For this report, we looked at all the homes listed on Trulia for rent or sale in March 2015.
• We calculate the initial total monthly costs of owning and renting, including mortgage payments, maintenance, insurance, and taxes. We make a separate calculation that factors HOA fees into the rent vs. buy equation.
• We calculate the future total monthly costs of owning and renting, taking into account expected price and rent appreciation, as well as projected inflation.
• We factor in one-time costs and proceeds, including closing costs, down payment, sale proceeds, and security deposits.
• We calculate net present value, which tells us the opportunity cost of using money to buy a house instead of investing it. Net present value is the worth in today’s dollars of a future stream of payments and proceeds, taking into account expected interest rates.

To compare the costs of owning and renting, we assume buyers get a 3.87% mortgage rate on a 30-year fixed-rate loan with 20% down; itemize their federal tax deductions and are in the 25% tax bracket; and will stay in their home for seven years. Under these assumptions, buying is 35% cheaper than renting nationwide, considering all costs and proceeds from buying or renting over the seven-year period. You can read our methodology here.

The interactive Rent vs. Buy map shows how the math changes under alternative assumptions for mortgage rates, income tax brackets, number of years in the home, and HOA fees, if any. To estimate HOA costs, we combed through Trulia’s for-sale listings and calculated the median homeowner’s fee for each of the 100 largest metro areas.

Trulia’s Rent vs. Buy Calculator lets you compare renting and buying costs using whatever assumptions about prices, rents, and other factors you want, including HOA fees. It uses the same math that powers our interactive map and this report.

Tougher Call between Renting and Buying in Honolulu and California
While homeownership is 35% cheaper than renting nationwide, the gap differs vastly across metros, largely because each market has its own typical prices and rents, as well as distinct patterns in property taxes and home-price appreciation. Taking all these factors into account, buying a home ranges from being 16% cheaper than renting in Honolulu to being 55% cheaper in Sarasota, FL.

Generally, it’s a closer call in California and an easier call in the South. What’s more, in seven of the 10 housing markets where buying has the smallest edge over renting, the buying advantage actually increased in the past year. On the other end of the spectrum, the buying advantage widened in six of the 10 markets where buying has the biggest edge.

Where Buying a Home is a Tougher Call
#	U.S. Metro	Cost of Buying vs. Renting (%), Spring 2015	Cost of Buying vs. Renting (%), Spring 2014	Difference (% points), 2015 vs. 2014
1	Honolulu, HI	-16%	-10%	-7%
2	San Jose, CA	-17%	-11%	-6%
3	Lancaster, PA	-19%	-16%	-3%
4	Sacramento, CA	-22%	-22%	0%
5	San Francisco, CA	-24%	-17%	-7%
6	Ventura, CA	-25%	-25%	0%
7	Los Angeles, CA	-26%	-24%	-2%
8	Madison, WI	-26%	-24%	-2%
9	Seattle, WA	-26%	-23%	-3%
10	Modesto, CA	-27%	-32%	5%

Where Buying a Home is an Easier Choice
#	Metro	Cost of Buying vs. Renting (%), Spring 2015	Cost of Buying vs. Renting (%), Spring 2014	Difference (% points), 2015 vs. 2014
1	Sarasota, FL	-55%	-56%	1%
2	Fort Myers, FL	-54%	-52%	-2%
3	Baton Rouge, LA	-53%	-50%	-3%
4	New Orleans, LA	-52%	-53%	1%
5	Miami–Fort Lauderdale, FL	-50%	-52%	2%
6	Columbia, SC	-50%	-46%	-4%
7	Chattanooga, TN	-50%	-45%	-5%
8	Oklahoma City, OK	-50%	-46%	-3%
9	Charleston, SC	-49%	-45%	-4%
10	Tampa, FL	-49%	-49%	0%
Note: Negative numbers mean that buying costs less than renting. For example, buying a home in New Orleans is 52% cheaper than renting in 2015. Trulia’s Rent vs. Buy calculation assumes a 3.87% 30-year fixed-rate mortgage with a 20% down payment, itemizing tax deductions at the 25% bracket, and staying seven years in the home. Year-over-year differences are rounded to the nearest percentage point, and the difference was calculated before rounding; therefore, the rounded difference might not equal the difference between the rounded shares.  Click here to download the full Rent vs. Buy cost considerations for the 100 largest U.S. metros.

HOA Fees Can Make a Big Difference in the Rent vs. Buy Decision
If you are a homeowner association member, you need to factor in your HOA fee into your monthly housing costs. What these fees cover varies, but they can include everything from landscaping and maintaining public spaces to utilities and cable TV. The fee amounts also vary and, in some areas, you might have to pay a lot.

The New York and Honolulu metropolitan areas top the list of markets with the most expensive HOA fees, with medians of $575 and $438 per month respectively. Fort Myers, FL, Riverside, CA, and Miami, FL round out the top five with median HOA fees between $310 and $356. In these high-fee markets, HOA costs can make a significant difference in whether it’s better to rent or buy.



To understand how much difference these costs make, we’ve factored in the median HOA fee for each of the 100 largest metros in our rent vs. buy analysis. If you want to know how much a homeowner fee on a specific property will affect your housing costs, Trulia’s rent vs. buy calculator allows you to plug in the fee amount in the advanced settings.

When we factor in the median HOA fee, the buying advantage almost disappears in some markets. In the New York metro area, buying a home becomes just 4% cheaper than renting, compared with 27% cheaper without the fee. And in the Honolulu metro, renting actually enjoys a 1% advantage when HOA fees are considered.

Without those fees, buying is 16% cheaper than renting. In some other markets, even though it’s still cheaper to buy a home with HOA fees than to rent, the swing can be large. For example, Melbourne, FL’s median HOA fee of $266 per month on a median-price house makes buying there 23% cheaper than renting, a swing of 22 percentage points from 45% cheaper without the fee. Other metros with similar swings include Youngstown, OH (48% vs. 28%), Fort Myers, FL (54% vs. 34%), and Riverside, CA (34% vs. 16%).

Where HOA Fees Matter Most in Rent vs. Buy Math
#	U.S. Metro	Cost of Buying vs. Renting with HOA Fee (%), Spring 2015	Rent Vs. Buy Difference with and without HOA Fees (% points)	Median Monthly HOA Fee ($)
1	Honolulu, HI	1%	17%	$438
2	New York, NY	-4%	24%	$575
3	San Jose, CA	-8%	9%	$290
4	Lancaster, PA	-13%	6%	$67
5	Portland, OR	-14%	13%	$220
6	Los Angeles, CA	-15%	11%	$285
7	San Francisco, CA	-15%	9%	$300
8	Madison, WI	-15%	10%	$152
9	San Diego, CA	-15%	12%	$296
10	Ventura, CA	-16%	9%	$230

By contrast, metros like Baton Rouge, LA and Oklahoma City, OK—where the median HOA fee will set you back only $30 and $22 per month respectively—are a bargain compared with New York and Honolulu. Furthermore, HOA fees in those areas are relatively cheap relative to median house prices, so they hardly affect the renting vs. buying calculation. In places where buying is the best deal even with HOA fees, the added monthly costs reduce the buying advantage by just 1-2 percentage points.

Where HOA Fees Are a Drop in the Bucket
#	U.S. Metro	Cost of Buying vs. Renting with Median HOA Fee (%), Spring 2015	Rent Vs. Buy Difference with and without HOA Fees (% points)	Median Monthly HOA Fee ($)
1	Baton Rouge, LA	-51%	2%	$30
2	Sarasota, FL	-51%	5%	$92
3	New Orleans, LA	-48%	4%	$63
4	Oklahoma City, OK	-48%	2%	$22
5	Columbia, SC	-47%	3%	$33
6	Jackson, MS	-47%	2%	$27
7	Charleston, SC	-46%	3%	$43
8	Houston, TX	-46%	3%	$44
9	Greenville, SC	-46%	3%	$38
10	Memphis, TN	-46%	2%	$25

To see how much HOA fees add to your monthly mortgage costs, we’ve compared the median monthly mortgage payment with the median fee in the five lowest and highest HOA markets. In markets with the highest HOA fees, the effect is substantial. In Honolulu, the extra hit is 19% and, in Fort Myers, FL, a whopping 50%. But, in markets with the lowest HOA fees, the change is slight. HOA fees add just 2% to your monthly mortgage payment in Sacramento, CA, and just 5% in Little Rock, AR, Indianapolis, IN, and Oklahoma City, OK.



Furthermore, it’s not hard to come up with plausible scenarios in which HOA fees help make buying cost more than renting. Suppose a homebuyer wants to buy a condo with HOA fees. If this buyer is not itemizing tax deductions, only stays put for five years, and qualifies only for a 4.5% mortgage rate, then buying ends up costing more than renting in 29 of the 100 largest metros.

Those 29 metros include not only pricey coastal markets, but also in markets like Madison, WI, Milwaukee, WI, and Minneapolis-St. Paul, MN. In this scenario, buying costs 28% more than renting in New York City and 41% more expensive in Honolulu. So the moral of the story is: A condo might be within reach of most first-time homebuyers, but when you take HOA fees into account, it may make renting cheaper than buying.

Still, at the end of the day, if your dream home comes with HOA fees, it isn’t necessarily a deal breaker. Considering that some HOA fees bundle expenses you’d have to pay anyway, such as garbage, water, sewer, and building maintenance, the HOA fee could turn out to be a good deal. So when considering a home with HOA fees, be sure to find out exactly what those fees cover and factor it in to your overall housing budget.

Note: the detailed methodology and assumptions behind our Rent Vs. Buy model are here. Additionally, for our comparison of HOA fees, we used the median HOA fee of all properties in metro listed on Trulia in 2014.


Source: Trulia, Ralph McLaughlin
http://www.trulia.com/trends/2015/05/rent-vs-buy-spring-2015/