Need-to-know home buying info for first-timers

Homeownership starts with a desire to achieve the American Dream – to have a home of one’s own. After that, however, pragmatic questions must be answered, such as how much a buyer can afford and whether a bank will be willing to lend them money.

“Buying a home can be one of the biggest purchases a consumer will make,” says Cheryl Nolda, president, Home Lending Solutions, RBS Citizens Financial Group. “A house is the foundation where individuals and families build their lives and make memories.”

Charter One Bank put together a list of home buying tips for consumers who have decided that homeownership is right for them:

• Determine purchasing power. Calculate how much you can afford to spend before you start looking to focus on houses in that price range. The answer depends largely on income and current monthly debt payments.

• Secure your credit report. If there are any credit issues, get them addressed before applying for a mortgage loan. A free annual credit report can be obtained by calling 1-877-322-8228 or going to:www.annualcreditreport.com.

• Do your mortgage homework. Take the time to learn important mortgage and home-buying terms; more importantly, understand what they mean. Investigate the details – What are the additional costs, such as origination or application fees?

• Get pre-approved. A mortgage pre-approval assessment tells you approximately how much money you can borrow from your lender. In addition, many sellers require a pre-approval letter before reviewing a buyer’s offer. (After applying, avoid doing anything that would negatively impact your credit score, such as opening a new credit card or making a large purchase until after the home closing.)

• Buyer’s checklist. Use a homebuyer’s checklist at each house to keep track of important features like amenities, neighborhood and schools. This helps you compare notes and remember the differences and characteristics of each house, especially if you visit several houses in different locations.

• Know the market. When you know local market and home values, you’re less likely to overpay for a property. Use the Comparative Market Analysis (CMA) and full MLS listing details of the most similar comparable properties to help you know how much you should offer. And be on the lookout for owners who are eager to sell and willing to negotiate – this can save you thousands of dollars.

• Home inspection. Hire a professional home inspector to determine if there are any potential problems that can be expensive to repair.

• Have a backup plan. You and a seller may reach a stalemate when negotiating. Consider developing a back-up plan, just in case you are unable to reach an agreement. Define your maximum offer and don’t go over it – there are almost always other homes that will meet your criteria.

Source: Florida Realtors®

NAR: Pending sales rise modestly as inventory tightens

Pending home sales increased in March and remain above year-ago levels, but contract activity in recent months shows only modest movement, according to the National Association of Realtors® (NAR).

NAR’s Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 1.5 percent to 105.7 in March from a downwardly revised 104.1 in February, and is 7 percent above March 2012 when it was 98.8.

Pending sales have been above year-ago levels for the past 23 months; the data reflect contracts but not closings.

“Contract activity has been in a narrow range in recent months, not from a pause in demand but because of limited supply,” says Lawrence Yun, NAR chief economist. “Little movement is expected in near-term sales closings, but they should edge up modestly as the year progresses. Job additions and rising household wealth will continue to support housing demand.”

The pending index in the Northeast was unchanged at 82.8 in March and is 6.3 percent higher than March 2012. In the Midwest, the index increased 0.3 percent to 103.8 in March and is 13.7 percent above a year ago.

Pending home sales in the South rose 2.7 percent to an index of 120 in March and are 10.4 percent higher than March 2012. In the West, the index increased 1.5 percent in March to 102.9 but is 4.3 percent below a year ago.

NAR predicts that total existing-home sales in 2013 will increase 6.5 to 7 percent over 2012 to nearly 5 million sales this year, while the national median existing-home price is forecast to rise about 7.5 percent.

Source: Florida Realtors®

Builders Raising Prices, Limiting Supply

Those looking to buy new homes will likely start to see price hikes, and possibly a smaller selection. Many of the nation’s builders say they’ve had to increase prices due to the rising costs of land, labor, and materials.

For example, Pulte’s sale price, on average, has increased 10 percent to $287,000 in the first quarter of this year. Meanwhile, the average existing home price was $233,200 in March, according to the National Association of REALTORS®.

“Builders are feeling pinched by rising costs of key building components which is causing home construction costs to rise at a faster pace than appraised values,” says David Crowe, chief economist of the National Association Home Builders.

Some builders are limiting sales in order to keep prices higher.

“We are pricing our homes and limiting the number of lots we’re releasing for sale in some communities to better manage our order volumes relative to our production capacity, and to maximize our profit from those communities,” Meritage CEO Steven J. Hilton wrote in the company’s quarterly earnings report recently.

Source: “Despite Rising Demand, Some Builders Slow Production,” CNBC (April 25, 2013)

Buyers Will Pay Extra for These Features

Some home shoppers say they are willing to spend thousands of dollars above the price of the home in order to have certain interior features.

The most coveted home features tend to center around the kitchen, such as stainless steel appliances and a kitchen island, says Errol Samuelson, president of realtor.com.

24/7 Wall St. used data from the National Association of REALTORS® to determine some of the most desired home features. Here are eight features that made the list and how much extra, on average, buyers say they’re willing to pay for having that feature in a home:

Central air conditioning: $2,520
New kitchen appliances: $1,840
Walk-in closet in master bedroom: $1,350
Granite countertops: $1,620
Hardwood floors: $2,080
Ensuite master bath: $2,030
Kitchen island: $1,370
Stainless steel appliances: $1,850

Source: “11 Home Features Will Pay Extra For,” 24/7 Wall St. (April 28, 2013)

30-year mortgage slips to 3.40%, 15-year hits record low

The average U.S. rate on the 30-year mortgage fell closer this week to its historic low and the 15-year rate marked a record low. Low rates are increasing the affordability of buying homes and refinancing.

Mortgage buyer Freddie Mac said Thursday the average rate for the 30-year fixed loan slipped to 3.40 percent from 3.41 percent last week. That’s near the 3.31 percent rate reached in November, which was the lowest on records dating back to 1971.

The average rate on the 15-year fixed mortgage fell to 2.61 percent from 2.64 percent last week. That’s below the previous record low of 2.63 percent in November, the lowest since the 1990s.

Low mortgage rates are helping drive a housing recovery that began last year. Home prices are rising. Sales of new and previously occupied homes are up this year. Builders broke ground on homes in March at the fastest annual pace in nearly five years.

Sales of new homes rebounded last month to a seasonally adjusted annual rate of 417,000, the government reported Tuesday. The increase added to evidence of a sustained housing recovery at the start of the spring buying season.

New-home sales are still below the 700,000 pace considered healthy by most economists. But the pace has increased 18.5 percent from a year ago. Most economists see more gains ahead, as housing is likely to remain a consistent driver of economic growth this year.

Mortgage rates are low because they tend to track the yield on the 10-year Treasury note, which has fallen in recent weeks.

The Federal Reserve has been buying Treasury bonds since the fall. That has helped to lower the yield. And in recent weeks, concerns that the U.S. and global economies are slowing have led investors to shift money into safer assets, like Treasurys, and away from stocks. Greater demand for Treasurys raises their price and lowers their yield.

The yield was 1.72 percent at midday Thursday, up from 1.69 percent last week but still at a historically low level.

To calculate average mortgage rates, Freddie Mac surveys lenders across the country on Monday through Wednesday each week. The average doesn’t include extra fees, known as points, which most borrowers must pay to get the lowest rates. One point equals 1 percent of the loan amount.

The average fee for 30-year mortgages rose to 0.8 point from 0.7 point last week. The fee for 15-year loans was unchanged at 0.7 point.

The average rate on a one-year adjustable-rate mortgage fell to 2.58 percent from 2.63 percent last week. The fee for one-year adjustable-rate loans increased to 0.5 point from 0.4.

The average rate on a five-year adjustable-rate mortgage rose to 2.62 percent from 2.60 percent. The fee declined to 0.3 point from 0.5.

Source: The Associated Press, Marcy Gordon.

Best Time to Sell? More Americans Say 'Yes'

Seller confidence is surging: The number of home sellers who say now is a good time to sell doubled in the second quarter, according to a new survey of nearly 2,000 owners conducted by real estate brokerage Redfin. In the first quarter of 2013, 22 percent surveyed said it was a good time to sell compared to 45 percent in the second quarter.

The percentage of respondents who say now is a good time to buy dropped by 10 percent in that time frame. Forty-four percent of home owners say it's a good time to buy, compared to 54 percent in the first quarter.

"More folks who bought before the bubble burst are now above water and listing their homes," says Chad Dierickx, a real estate practitioner with Redfin. "When sellers see their neighbors' homes selling quickly and for prices they never would have imagined a couple of years ago, they can't help but be optimistic about the market."

Nearly 32 percent of home owners surveyed said they have no concerns about selling right now. Eighty-five percent of sellers say they believe home prices will rise in their area for the next year — up from 81 percent in the first quarter, according to the survey.

Read more at: Redfin

U.S. considers mortgage interest deduction change

Gary Thomas, 2013 president of the National Association of Realtors® (NAR), testified yesterday before the U.S. House Ways & Means Committee in support of the mortgage interest deduction many homeowners use when filling out their federal taxes.

The deduction for mortgage interest has been part of the federal income tax code since its inception in 1913. Despite a century of additions, modifications, deletions and overhauls of the tax code, Congress has left the mortgage interest deduction in place.

Current law allows a homeowner to deduct the interest paid yearly on up to $1 million in total acquisition debt for a principal residence and a second, non-rental home. Homeowners may also deduct the interest on up to $100,000 in home equity debt.

“The tax system does not ‘cause’ homeownership. People buy homes to satisfy many social, family and personal goals,” Thomas told the committee. “The tax system facilitates ownership. The tax system supports homeownership by making it more affordable. … Over time, mortgages get paid off, other new homeowners enter the market and family tax circumstances change. Individuals who utilize the mortgage interest deduction in the years right after a home purchase are, over time, likely to switch to the standard deduction.”

Rep. Buchanan supports the mortgage interest deduction and asked numerous questions to presenters, who represented different sectors of the real estate market, including homebuilders, apartment/multi-housing groups and market research groups.

Buchanan also appealed to fellow committee members to keep the mortgage interest deduction. Eliminating the deduction, he told committee members, could cause unnecessary pain to millions of homeowners, notably the 63 percent of Americans who claim the deduction and earn less than $100,000 annually.

“This recession has been brutal on homeowners and job creators throughout my home state,” Buchanan said. “As Congress works to create a simpler and fairer tax code, I urge my colleagues to bear in mind the powerful importance this deduction has on Florida, working families and the economy.”

Source: 2013 Florida Realtors®

Builders Say Headwinds Remain for Recovery

Single-family and multi-family housing starts are predicted to post double-digit gains this year over last year, according to the National Association of Home Builders. NAHB says that the market could post even stronger gains but several factors are holding back the recovery.

The biggest obstacles? Labor and lot shortages, rising costs of building materials, obtaining construction credit, and overly restricting mortgage-lending rules are hampering the market,  NAHB economists noted during NAHB’s recent Spring 2013 Construction Forecast Conference webinar.

“As demand for housing gradually picks up steam, supply chains for building materials, developed lots, and skilled workers will take some time to re-establish themselves in the aftermath of the Great Recession,” NAHB notes. 

For example, prices of building components — such as gypsum, softwood lumber, and concrete — are above 90 percent of their housing boom peak. 

As such, home construction costs are rising at a faster pace than appraised values, says David Crowe, NAHB chief economist.

Still, there are plenty of positives to point to in the recovery, NAHB notes. Home prices are posting solid gains, with nearly a 6 percent annual rate of home price appreciation on a national basis. Growth in housing is rising at a faster pace than the overall economy, Crowe says.

Notably, North Dakota, Texas, Oklahoma, Wyoming, Montana, and Louisiana — all energy-producing states — are the first projected to return to normal production of homebuilding levels by next year, says Robert Denk, NAHB's assistant vice president for forecasting and analysis. Denk also noted that Iowa is also approaching a faster return to normal conditions. 

Source: National Association of Home Builders

Lenders Embrace Home Equity Loans Again

As housing values rise, home-equity loans and lines of credit are staging a comeback, MSN Money reports.

In late 2008 as the housing market slowed dramatically, home-equity borrowing came to nearly a standstill as lenders became cautious because values were falling so quickly. By late 2011, nearly a third of U.S. homes with mortgages owed more on their loan than their house was worth. 

In markets where home prices are rising, though, lenders are starting to issue equity loans once again. New players have jumped in too. For example, Discover Financial Services announced in March that it will offer fixed-rate home-equity loans of $25,000 to $100,000. The offer is for current customers, but eventually will be extended to others. 

While lenders may be more willing to extend a home-equity loan, they are being more cautious than they were in the past. Lending on 100 percent of owners' equity is now rare, and borrowers won’t likely get more than 85 percent of that amount. 

Source: “Home-equity loans make quiet comeback,” MSN Money (April 23, 2013)

Barclays: Home Prices to Rise 10% This Year

Home prices will likely climb 10 percent in 2013 and 8 percent in 2014, according to Barclays analyst Stephen Kim, who recently upgraded his view of the housing market from neutral to positive. 

Kim told The Wall Street Journal recently that low mortgage rates are helping to make buying more affordable than renting in many markets. 

About “18 months ago, the industry was nothing much to look at: dilapidated foreclosures were flooding the market, home equity had suffered the worst retrenchment in a generation, and housing starts and sentiment were far below historic troughs levels,” Kim notes. “But after stabilizing in 2012, both new and existing home prices are now accelerating much more rapidly than in the 1990s cycle.”

Source: “The Housing Market: Not Your Analyst’s Oldsmobile?” The Wall Street Journal (April 23,