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News, trends, and my opinion about the local real estate market in the Greater Philadelphia area.
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Here is a great article from http://realestate.msn.com about options for a homeowner who is under water (by Susan Johnston from U.S. News and World Report):
Nearly 11 million homeowners are underwater — meaning they owe more
on their mortgage than the property is worth — according to the most
recent data from CoreLogic. For those homeowners, there are no easy
answers. Should they keep paying and hope the market improves? Try for a
loan modification? Cut their losses and walk away? Gerri Detweiler, personal-finance expert for Credit.com, explains the pros and cons of several options.
1. Stay and pay. People feel attached to their homes, their first impulse is often to stay put and keep sending in mortgage checks, even if it doesn't make financial sense in the long run. "Is it realistic for you for a while?" Detwiler asks. "Not just the next few months, but can you afford to stay and pay for the next several years? You may still be underwater at that point." Maintenance fees are another consideration. For instance, if you know you'll need a new roof or the heating system is on its way out, those repairs can add up. Of course, if the value of your home has declined, you may be able to get it reassessed and pay lower property taxes.
2. Refinance. A traditional refinance may not be an option for homeowners with negative equity. But those with loans owned by Fannie Mae or Freddie Mac who have not made late payments in the past six months and have no more than one late payment in the past 12 months may qualify for a refinance under the Home Affordable Refinance Program, which was recently extended through the end of 2013. If your loan hasn't been sold to Freddie or Fannie, Detweiler says you may be able to work directly with your lender on a refinance. Your credit score should not be affected if you refinance, although you could still lose your home if your situation changes and you can't afford the mortgage payments.
3. Loan modification. In a loan modification, the lender agrees to lower the interest rate and payments, either temporarily or permanently. If your mortgage payment is more than 31% of your monthly pretax income and you have suffered a financial hardship, you may qualify for a loan modification under the Home Affordable Modification Program. Some lenders have their own loan-modification programs as well. Trouble is, the process can be extremely time-intensive. And few loan modifications actually reduce the principal, so you're still in negative equity — you've just lowered your monthly payments. "Until you're at positive equity, you're stuck with that house," Detweiler says, pointing out that if there is a reduction in principal, you might have to pay taxes on that amount. Depending on how the modification is reported by the lender, it could also affect your credit score. She suggests consulting a credit agency approved by the Department of Housing and Urban Development to discuss your options.
4. Short sale. If your lender agrees to a short sale, you're allowed to sell your house for less than you owe on the mortgage. "One couple I interviewed got … $120,000 wiped out by their lenders," Detweiler says. "Depending on where you live and your financial circumstances, there are some amazingly good deals. But you could be one of the unlucky ones who has a lender who doesn't want to play ball." Before you close on a short sale, be sure to consult a tax professional, who can explain if you will owe any taxes on the forgiven debt, and a real-estate lawyer with experience in short sales to make sure the agreement relieves you of the deficiency.
What's your home worth?
5. Foreclosure or walking away."Walking away from your mortgage is essentially the same as foreclosure," Detweiler says. "It's one of the most serious items on your credit report, in the same category with bankruptcy and repossessions." But the impact on your credit score shouldn't be the only consideration, Detweiler says. "Focus on 'How am I gonna come out of this financially?'" If you do decide to walk away, your biggest challenge could be getting the bank to take back the house. "The bank doesn't actually foreclose on that, so you're still legally responsible," Detweiler says. "The city may bill for trash pickup; you could be on the hook for insurance issues that arise." She suggests staying on the property as long as possible to make sure it's properly maintained leading up to the foreclosure.
'Listed': HARP reboot may spur more refinancing — but how much? And when?
6. Bankruptcy. Filing for bankruptcy won't erase mortgage debt. "What you're doing in a bankruptcy is you're trying to give yourself a reprieve," Detweiler says. Eliminating other debts could free up money to cover your mortgage, and a Chapter 13 bankruptcy could allow you to catch up on payments for five years without interest. But it doesn't allow you to stop paying the mortgage altogether. "In some areas of the country, you are able to wipe out a second loan that has become unsecured because the value of your property has dropped," Detweiler says. "Unfortunately, our current bankruptcy codes let borrowers negotiate any kind of debt but mortgages."
MSN Money: How to recover from financial ruin
Whether you're planning to stay and pay or you're considering bankruptcy, Detweiler stresses that it's a good idea to consult an attorney early on. "Don't make that your last resort," she says. "Specifically, a bankruptcy attorney could help you decide if you can afford to stay in your home." ----------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------------- Clearly, this is an issue for a lot of people today in the U.S. The good news is that there are options out there and many professionals available to help. If you have any questions about this, or need more information, please call my office. I am here and ready to serve.
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Did you know that by sealing drafts in your home can save 3% to 18% on your heating bill? It can according to Danny Parker, a research scientist who works with the Department of Energy. In the Northeast region of the US, this can save a homeowner anywhere between $250 to $550 annually. Here are some quick tips to seal those drafty areas of your home: - Use durable weather stripping.
- If you can easily slide a piece of paper between an exterior or attic door and its frame, it needs weather stripping. Bronze strips, which cost about $20 per door, do a better job and will last for many years. Windows can be sealed also, but they are a little tricky and may require the service of a handyman.
- Install an automatic door sweep.
- Sweeps are blocking strips attached to the bottom of an exterior door that prevent icy gusts from rushing underneath. Some sweeps can scratch wood floors and catch on welcome mats as the door swings open. Spring-loaded automatic sweeps, which cost about $11 each, lift as the door opens and presses down to form a tight seal when the door is closed.
- Insulate the attic hatch.
- Pull-down ladders are one of the notorious energy losers because they do not account for air sealing and are not insulated. Both problems can be fixed with an attic tent (costs about $200), which is an insulated fabric hut. These are installed over the attic hatch, stapled to the attic floor and zip open when you need to climb through.
- Cover your AC unit.
- An in-wall air condition, or a window unit that too large to remove in the colder months, will cool your home in the winter thanks to drafts blowing right through it. Insulated wraps that are custom made to fit snugly over the unit can be purchased for about $60 each and will keep the heat in.
- Seal remaining cracks.
- Close all doors and windows and turn on all the fans in the home. The fans will suck all the air out of the home, causing drafts to rush in and replace the air. By holding a stick of incense near any gaps and seeing if the smoke sprays away, such as where the baseboard meets the floor and where the pipes penetrate the wall, you can easily identify any areas that need to be sealed in the home. Great stuff insulating foam or caulk can be used to seal these small cracks.
All of these tips should help save money on your heating bill and are easy enough to do without the help of a professional.
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Earlier in the week, The Wall Street Journal called for many U.S. decision makers to take a hard look at the housing market and find a way to to positively effect it. Ben Bernanke talked about the housing market about a week ago and urged Congress and the President to develop a "future path" for housing according to the Dow Jones. Given political realities, it is hard to imagine any type of fiscal push right now, housing or elsewhere. Even Warren Buffett, amended his view that housing would recover by the end of 2011. The Fed has tried to spur housing with its "Operation Twist" effort by dropping the long-term interest rate below their historic meager levels. Many experts and people within the industry, including myself, agree that these rates will not help much if consumers cannot qualify for mortgages or cannot refinance because the value of their home has declined or they do not have much equity. This is where changes can be made. According to The Wall Street Journal's recommendation, the people who are current with their mortgages should be able to refinance to take advantage of the rates near 4%. The savings resulting from a refinance of a current mortgage would go into additional spending and stimulate the economy. It would also boost a consumer's economic psychology, which is critical. Fear, morale and uncertainty are just as much of a part of the current economic state as are the financial conditions of the country. Even if the savings was used to pay down the principle amount of the loan, it would do good. It is clear that mortgage qualifications are tougher than ever. Qualifying for a home loan became too easy during the peak of the housing bubble and now the pendulum has swung too far the other way. The key is trying to find middle ground and return this part of the purchase process to a moderate, normal state. Lenders have become too black and white and there are many loans that should be approved in the gray. The key will be too lend to qualified borrowers without excessive risk to lenders.
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Thinking about buying and a home on the cheap and flipping it for big profits? That dream is all but dead as sales of homes to investors have dropped by more than half over the past five years, according to CNNMoney.com. Plus, the number of those investors who quickly sell off those homes -- the flippers -- has fallen even faster. In
July, investors flipped only 50% of their purchases, down from 75% a
year earlier, according to Tom Popik, research director for Campbell
Surveys, which tracks housing trends for major banks and government
agencies. They held onto the rest to rent out. David Hicks,
president of HomeVestors, the "We Buy Ugly Homes" company, says his
clients are now much more likely to buy rentals than to flip -- 57% more
likely than two years ago, according to a recent survey the company
conducted. Right now, many investors are looking at a buy and hold strategy. In the Greater Philadelphia area, you know see many flippers renting out their properties and anticipating a minimum 5 year hold before testing the resale market. The rental economics simply make more sense than flipping. Additionally, the demand for rental is on the rise and rents are up 10% to as high as 25% locally. Investors can buy
and rent out the homes and start earning good returns immediately. Most
real estate investors are individuals and small partnerships who tap
their own assets. They use savings, retirement accounts and home equity
lines of credit for the cash they need. Flippers can turn that
capital over several times a year, but if they buy and hold, they
deplete their cash and can make no new purchases. Overall, real estate is still a great, stable investment that has the ability to yield a positive cash flow almost immediately. The quick, big hit that a flip can provide is no longer out there. The conservative, long term hold is clear segment of the market in which consumers can make money.
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The US Department of Housing and Urban Development has changes the maximum mortgage limits for FHA loans based on the median home sale price in our local market. The new limits for the Philadelphia Metro Area, effective October 2011, are as follows: - Single Family Property - $379,500
- Two-family Property (AKA Duplex) - $485,800
- Three-family Property (AKA Triplex) - $587,250
- Four-family Property (AKA Quadraplex) - $729,800
Again, these numbers have not changed drastically, but it is always prudent to know the financing options available. New FHA limits for all areas can be found on the HUD website: https://entp.hud.gov/idapp/html/hicost1.cfm.
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Many people do not know that short sales stand a much better chance of approval as oppossed to a loan modification. However, there are a variation of outcomes that can occur. Mainly, the inconsistency involves how the lender deals with the deficiency. Here are some of the current outcomes being seen in the market place: - The lender forgives the short-fall between what is owed on the home and the agreed upon sale price. This is also known as a full satisfaction. This is usually the goal with short sales and happens more often with a first mortgage. Sellers will receive an IRS 1099 form for the forgiven amount and the Seller will be free of all debt and any future obligations.
- The lender approves the short sale as a lien release. Therefore, the lender still expects repayment of the loan from the borrower and has not written off the deficiency. The lien is removed from the property and repayment plans are discussed between the borrower and lender after settlement. This is more likely with second mortgages.
- The lender release or forgives the debt owed, but the Seller agrees to sign a promissory note. The terms of a promissory note are often negotiable and usually favorable to the borrower. The lender only writes off part of the deficiency balance and the seller repays the unsecured bank note back after final settlement occurs.
- The lender releases or forgives debt after a cash contribution by the Seller. These contributions can range from $2,000 to $15,000 depending on the homeowner's financial situation.
This should shed a bit more light on what happens during the lender approval process. As always, feel free to contact me with questions.
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Most of the news about the housing market lately has been dismal. However, the one bright spot is being overlooked by many - the rental market. Rental demand is up and and rental rates are rising. Many foreclosures victims (estimated north of 4 million) are now renters. Many prospective homeowners are concerned about losing their jobs or about prices falling further, so they are reluctant to buy. As with many investments, the best to to buy in is when others are sitting on the sidelines. Currently, many factors make it an attractive time to buy real estate. Mortgage rates are at historic lows (current 30 year fixed rates are just north of 4%). Prices are considerably lower than they have been in years, and demand for rentals has risen in most cities and markets in the US. Hotpads.com has reported that rental rates have increased 11.6% in 2010. Most investors plan to hold onto their income producing properties for 10 years, according to the National Association of Realtors. If you can hang on that long, the investment should produce a solid gain for you, especially if you finance the purchase. Feel free to call or email me directly for more information about current rental property opportunities in our local market.
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 Here is a great blog post from my Coach, Carl Rizzuto:
More Americans are getting back to work. The latest Non-Farm Payrolls survey from the Bureau of Labor Statistics shows that 117,000 net new jobs were created in July, thumping analyst estimates and surprising Wall Street investors.
In addition, May and June’s originally-reported figures were both revised higher:
- May 2011 was revised higher by 28,000 jobs
- June 2011 was revised higher by 28,000 jobs
The national Unemployment Rate slipped to 9.1 percent.
The jobs report’s strong readings would typically be a boon to stock
market and a threat to mortgage rates. This is because more employed
Americans means more disposable income spent on products and services;
and more taxes paid to governments at the federal, state and local
level.
This combination fuels consumer spending and supports new job growth,
a self-reinforcing cycle that spurs economic growth and often to draw
investors into equities.
This month, however, the market reaction has been decidedly different.
Since the Friday release of the July Non-Farm Payrolls report, the
Dow Jones Industrial Average has lost close to 6 percent of its value.
Furthermore, mortgage bonds — which typically sink on a strong jobs figure — have thrived.
High demand for mortgage-backed bonds have pushed mortgage rates
below their all-time lows set last November; the biggest cause of which S&P's credit downgrade of U.S. government-issued debt.
Ironically, the credit rating downgrade sparked a surge of safe haven
bidding that has been tremendous to rate shoppers and home buyers in the Greater Philadelphia area and nationwide. Bond buyers are flocking to the U.S. If you’ve been shopping for a mortgage, therefore, or recently bought
a home, use this week’s action to your advantage. Call your lender and
ask about rates. You may be surprised at what you find.
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Everyone is very concerned about the debt rating downgrade right now. However, the economy is the main driver for current housing market conditions. Greg McBridge, senior financial analyst at Bankrate.com, says that "as long as the economy continues to limp along, interest rates will not increase." This is great news for those people who are ready to purchase a home, have a strong credit history, and are looking for a low mortgage rate. Currently rates are in the mid-4% range, which is a historic low. Short term rates fell since the S&P credit downgrade to 50 year lows. With unemployment rates above 9% and the current weak job growth, many households, especially younger households, are unwilling to pull the trigger and make a move. These conditions are one of the reasons that home sales fell unexpectedly in June. Fears about job security, tougher borrower requirements from banks, and overreaction to the wild stock market swings of the past few days are other factors that have kept some Buyers on the sidelines. One consideration many experts fail to mention is the seasonal nature of the real estate business. Each year, there is a documented slow down in sales during July and August in the Great Philadelphia area. Buyers are beginning to prepare for the fall purchases we see every year, with the goal of being in a home by the end of 2011. A much more accurate assessment of the real estate market can be made then, as opposed to now when there is a historical trend that sales slow.
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Here are some great tips for keeping your home cool during the hot, humid days during the summer: 1. Reduce the cooling load by employing cost-effective conservation
measures. Provide effective shade for east and west windows. When
possible, delay heat-generating activities such as dishwashing until
evening on hot days.
2. Over most of the cooling season, keep the house closed tight
during the day. Don’t let in unwanted heat and humidity. Ventilate at
night either naturally or with fans.
3. You can help get rid of unwanted heat through ventilation if the
temperature of the incoming air is 77 F or lower. (This strategy works
most effectively at night and on cooler days.) Window fans for
ventilation are a good option if used properly. They should be located
on the downwind side of the house facing out. A window should be open in
each room. Interior doors must remain open to allow air flow.
4. Use ceiling fans to increase comfort levels at higher thermostat
settings. The standard human comfort range for light clothing in the
summer is between 72 F and 78 F. To extend the comfort range to 82 F,
you need a breeze of about 2.5 ft/sec or 1.7 mph. A sow-turning
ceiling-mounted paddle fan can easily provide this air flow.
5. In hot climates, plant shade trees around the house. Don’t plant
trees on the South if you want to benefit from passive solar heating in
the winter.
6. If you have an older central air conditioner, consider replacing
the outdoor compressor with a modern, high-efficiency unit. Make sure
that it is properly matched to the indoor unit.
7. If buying a new air conditioner, be sure that it is properly
sized. Get assistance from an energy auditor or air conditioning
contractor.
8. Buy a high-efficiency air conditioner: for room air conditioners,
the energy efficiency ratio (EER) rating should be above 10; for
central air conditioners, look for a seasonal energy efficiency ratio
(SEER) rating above 12.
9. In hot, humid climates, make sure that the air conditioner you
buy will adequately get rid of high humidity. Models with variable or
multi-speed blowers are generally best. Try to keep moisture sources
out of the house.
10. Try not to use a dehumidifier at the same time your air
conditioner is operating. The dehumidifier will increase the cooling
load and force the air conditioner to work harder.
11. Seal all air conditioner ducts, and insulate ducts that run through unheated basements, crawl spaces, and attics.
12. Keep the thermostat set at 78 degrees F or higher if using ceiling fans. Don’t air-condition unused rooms.
13. Maintain your air conditioners properly to maximize efficiency.
Warm Weather Window Solutions
14. Install white window shades or mini-blinds. Mini-blinds can reduce solar heat gain by 40-50 percent.
15. Close south and west-facing curtains during the day for any
window that gets direct sunlight. Keep these windows closed, too.
16. Install awnings on south-facing windows, where there’s insufficient roof overhang to provide shade.
17. Hang tightly woven screens or bamboo shades outside the window
during the summer to stop 60 to 80 percent of the sun’s heat from
getting to the windows.
18. Apply low-e films.
19. Consider exotic infills in your windows, a new technology that
fills the space between panes with krypton or argon, gasses that have
lower conductivity than air, and which boost R-values.
Tips for your A/C
19. Provide shade for your room A/C, or the outside half of your
central A/C if at all possible. This will increase the unit’s efficiency
by 5 percent to 10 percent.
20. Clean your A/C’s air filter every month during cooling season.
Normal dust build-up can reduce air flow by 1 percent per week.
22. Turn off your A/C when you leave for more than an hour.
23. Several studies have found that most central air conditioning systems are oversized by 50 percent or more.
STAY COOL!
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Now available - 226 Cambridge Chase in Exton, PA. This is a spectacular 3 bed, 2.1 bath townhome with a finished basement and 1-car garage! Community is surrounded by 17 acres and consists of only 35 homes. Offered at $367,900. Click here for more details: http://www.tomtoole.com/Listing/ViewListingDetailsAuthenticated.aspx?ListingID=39894610&Preview=false&TabID=2270211 Contact me for a private tour!
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Home prices have continued to drop during the first quarter of 2011, dropping 4.6% from a year earlier according to CNNMoney.com and the National Association of Realtors. Condo prices fell ever harder by a rate of 10.4%. The main cause for this decline is the sale of foreclosed properties, which accounted for 29% of the market - a 3% increase from a year earlier. The "distressed" homes are usually in poor condition and priced to move. As a result, they sell for approximately 20% less than conventional home sales. The market for distressed home may expand over the next few months. There are many bad loans in the foreclosure pipeline and we do not know how many strategic defaults (people who simply walk away from their mortgage) will result. Falling prices have sent more mortgage borrowers underwater (owing more on their mortgage than their homes are worth), which makes them more likely to default. There is some good news about the housing market, rates on a 30 year fixed mortgage are now fluctuating between 4.63% and 4.71% - the lowest levels seen so far in 2011. What does this all mean? Buying a home right now is a no-brainer. There a great opportunities out there for buyers and it is an excellent time to upgrade from your current property. By taking a haircut on the current home, consumers can get into a new home at a much lower price than expected only a few years ago.
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According to Kathleen Howley at Bloomberg Businessweek, the most affordable real estate in a generation is failing to lure buyers as some Americans are souring on the idea of home ownership. At the end of 2010, the share of people who said a home was a safe investment dropped to 64% from 70% in the first quarter of 2010. The December 2010 figure was the lowest since this survey started in 2003. Many experts feel that the magnitude of the housing crash is the main reason some people view home ownership in such a negative light. Some potential consumers will never buy a home, even as the economy continues to improve. The people will be the ones left behind as the market recovers and great buying opportunities dry up. It is clear that now is a great time to buy-in and watch your investment grow. Rates and prices are at all time lows. There is risk involved in any investment and the housing market is no different. The market is flooded with investment properties that will yield a positive cash flow and properties that are heavily discounted. With less people in the US ready to or in a position to buy, buying a home or investment property right now is a no-brainer. As hiring picks up and people have a greater willingness to buy, the market will begin to shift. Savvy buyers and investors will take advantage now and not less this rare opportunity by-pass them.
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Spacious single family home now available, minutes from major roads and the Exton Mall. Hardwood floors throughout. Private wooded, lot. Go to http://www.tomtoole.com/Exton/Pennsylvania/Homes/Century_Oaks/Agent/Listing_35390422.html for more information. Asking $444,000.
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Immaculate 4 bed, 2.1 bath brick front Colonial. 3,200 SF of living space. Huge room sizes. Granite counters in the huge eat-in kitchen. Three fireplaces! Awesome master suite with fully tiled bath. Offered at $414,900.
Check out more information here: http://www.tomtoole.com/Phoenixville/Pennsylvania/Homes/Phoenixville_Borough/Agent/Listing_34412003.html
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