Monthly Archives: January 2017

Are Higher Mortgage Rates Scaring Off First-Time Homebuyers?

Source: RISMedia

First-time homebuyers are shying away from their plans to purchase this spring, according to a recently released report by realtor.com®, due to the surge in mortgage rates in the last two months of 2016. Though rates have deflated since the end of the year, they remain hovering above 4 percent—high enough to scare off first-timers this spring, now down to 44 percent from 55 percent in October.

“The rise in rates is associated with an anticipation of stronger economic and wage growth, both of which favor buyers,” says Jonathan Smoke, chief economist for realtor.com. “At the same time, higher rates make qualifying for a mortgage and finding affordable inventory more challenging. The decline in the share of first-time buyers since October suggests that the move-up in rates is discouraging new homebuyers already.”

First-time homebuyers affording a 20 percent down payment on a median-priced home at the current average 30-year rate would be responsible for an additional $720 in interest each year, according to realtor.com’s report.

Record-high home prices will tamp down first-time homebuyers, as well. The median list price in December 2016 matched the median list price in July 2016: $250,000. Inventory in December 2016, in addition, remained limited, setting the new year up with the lowest inventory since the recession. The National Association of Home Builders (NAHB) expects single-family construction to grow 10 percent in 2017.

The rise in rates is not stifling demand overall, though, according to realtor.com’s report—in fact, repeat homebuyer activity has continued, as buyers, uncertain about the future, take advantage of still-low rates. Consumers recently surveyed by Fannie Mae believe now is a good time to buy a home, but also believe mortgage rates will rise in the year ahead.

“Last fall, we saw a large jump in the number of first-timers planning home purchases, which was very encouraging because their market share is still well below pre-recession levels,” Smoke says. “But, as evidenced by their decline in share, first-time buyers are really dependent on financing, and affordability is one of their largest barriers to homeownership. This number could continue to decline with anticipated increases in interest rates and home prices.”

For more information, please visit www.realtor.com.

For the latest real estate news and trends, bookmark RISMedia.com.

Cost vs. Value: Which Home Improvements Offer the Highest ROI in 2017?

Source: RISMedia

With the many different projects reported annually in Remodeling Magazine’s Cost  vs. Value Report, not much has changed from last year…and that’s not a bad thing. The 29 projects found on this year’s report paid back an average of 64.3 cents on the dollar in resale value. Looking at the 24 most tracked projects (projects consistently tracked for the last six years), their payback for 2017 was also 64.3 cents—only three-quarters of a penny higher than 2016 projections.

Why the little change? Simply put: the differences in underlying numbers was minimal year-to-year. The average cost for those 24 projects rose a meager 3 percent, while the value that real estate professionals put on said projects only rose 4.2 percent. Minor gains, yes, but we’ll take what we can get.

Recent and long-time trends continued, reports Remodeling. Curb appeal projects like changes to doors, windows and siding garnered a higher ROI than work done inside the home. Replacement projects, like doors or windows, scored higher among real estate pros than did remodels.

On a national scale, the top five projects with the greatest ROI in the report’s “midrange” cost category are:

  1. Attic Insulation (Fiberglass) (107.7% ROI)
    Average Cost: $1,343
    Average Resale Value: $1,446
  2. Entry Door Replacement (steel) (90.7% ROI)
    Average Cost: $1,413
    Average Resale Value: $1,282
  3. Manufactured Stone Veneer (89.4% ROI)
    Average Cost: $7,851
    Average Resale Value: $7,019
  4. Minor Kitchen Remodel (80.2% ROI)
    Average Cost: $20,830
    Average Resale Value: $16,699
  5.  Garage Door Replacement (76.9% ROI)
    Average Cost: $1,749
    Average Resale Value: $1,345

The top five projects with the greatest ROI in the report’s “upscale” cost category are:

  1. Garage Door Replacement (85.0% ROI)
    Average Cost: $3,304
    Average Resale Value: $2,810
  2. Entry Door Replacement (fiberglass) (77.8% ROI)
    Average Cost: $3,276
    Average Resale Value: $2,550
  3. Window Replacement (vinyl) (73.9% ROI)
    Average Cost: $15,282
    Average Resale Value: $11,286
  4. Window Replacement (wood) (73.0% ROI)
    Average Cost: $18,759
    Average Resale Value: $13,691
  5.  Grand Entrance (fiberglass) (70.1% ROI)
    Average Cost: $8,358
    Average Resale Value: $5,855

Regionally, the Pacific division (California, Oregon, Washington, Alaska and Hawaii) saw an average payback of 78.2 percent for all projects, with 10 projects posting cost-recouped levels of at least 90 percent. The East North Central states of Ohio, Indiana, Michigan, Illinois and Wisconsin, however, saw an average of just 54.9 percent, with no single project offering a payback of as much as 80 cents on the dollar.

At the other end of the spectrum are projects with the lowest returns on investment—improvements generally not in demand by the market. Again on a national scale, the five projects with the lowest ROI in the “midrange” cost category are:

  1. Bathroom Remodel (64.8% ROI)
    Average Cost: $18,546
    Average Resale Value: $12,024
  2. Master Suite Addition (64.8% ROI)
    Average Cost: $119,533
    Average Resale Value: $77,506
  3.  Backyard Patio (54.9% ROI)
    Average Cost: $51,985
    Average Resale Value: $28,546
  4.  Backup Power Generator (54.0% ROI)
    Average Cost: $12,860
    Average Resale Value: $6,940
  5.  Bathroom Addition (53.9% ROI)
    Average Cost: $43,232
    Average Resale Value: $23,283

The five projects with the lowest ROI in the “upscale” cost category are:

  1. Major Kitchen Remodel (61.9% ROI)
    Average Cost: $122,991
    Average Resale Value: $76,149
  2. Master Suite Addition (59.9% ROI)
    Average Cost: $250,687
    Average Resale Value: $150,140
  3. Bathroom Remodel (59.1% ROI)
    Average Cost: $59,979
    Average Resale Value: $35,456
  4. Bathroom Addition (57.1% ROI)
    Average Cost: $81,515
    Average Resale Value: $46,507
  5. Deck Addition (composite) (56.4% ROI)
    Average Cost: $39,339
    Average Resale Value: $22,171

The 2017 Cost vs. Value Report compares, across 99 markets, the average cost of 29 popular remodeling projects with their average value at resale one year later. Average resale value is calculated based on estimates provided by real estate professionals. View the full report, including project descriptions and city-level data, here.

New Year Predictions: What’s on Tap for Real Estate in 2017?

Source: RISMedia

The new year is upon us and with it comes new factors which can and will affect real estate throughout the year. Here, New York Power Broker Louise Phillips Forbes of Halstead Property makes her predictions for what real estate will look like on a national scale in 2017, and how you can make the most of it. Keep an eye on the following:

1. Increased interest rates will be a game-changer.
While interest rates are still some of the lowest they’ve been in years, they are increasing and will be a motivating factor for buyers early in the first quarter, especially since 95 percent of first-time homebuyers are dependent on financing. Expect them to act quickly and lock-in reasonable long-term loans enabling them to make long-term buys.

2. The market is not in decline; it is re-setting.
Nationwide, home prices are forecast to slow to 3.9 percent growth year-over-year, from an estimated 4.9 percent in 2016. The biggest shift will occur in the ultra-luxury market, especially in urban environments with a massive construction boom, where the highly accelerated and unsustainable growth for the past five years lead to inflated asking prices and declining absorption rates. As a result, New York City in particular—a national leader in the housing market—is experiencing a very efficient re-setting of the high-end luxury sector, with values down 25- 40 percent to more realistic prices, establishing a growth pattern that is more in line historically.

3. Millennials and baby boomers will dominate again.
These two dominant demographics will power demand for the next 10 years. Both generations are approaching life changes that traditionally motivate people to buy or sell a home. These life-defining changes include: marriage, having children, retiring and becoming empty-nesters. As such, the baby boomers could boost the market with double transactions as both buyers and sellers. Most of them are already homeowners, so they will be looking to sell and downsize to a smaller home, lowering their cost of living to maximize ease of retirement. Baby boomers have the potential to make up 30 percent of buyers in 2017, and being less dependent on financing gives them an advantage to be more successful with closings. Millennials, on the other hand, are more likely to finance and thereby more susceptible to increased interest rates, but they are still expected to make up 33 percent of buyers in the new year.

4. The Midwest is the new frontier.
Due to escalating rents and inflated home prices in the coastal cities, millennials are drawn to the Midwestern markets because they have a lower cost of living coupled with tremendous job growth. Midwestern cities claimed 42 percent of the millennial purchase market share in 2016, much higher than the U.S. average of 38 percent.

There is strong affordability in 15 of the 19 largest Midwestern markets, so this trend is expected to continue even as interest rates increase. Strong local economies and population growth will fuel the appeal of these hot markets, so keep your eye on: Columbus, Ohio; Omaha, Neb.; Des Moines, Iowa; Grand Rapids, Mich.; Minneapolis, Minn.; and Colorado Springs, Colo.

5. Foreign buyers expand their borders beyond coastal cities.
While international buyers still look to New York City, Los Angeles, Miami and San Francisco real estate as a safe haven for their money, escalating price per square foot numbers—an average of $2,400-plus in Manhattan—are pushing them to look in other metropolitan areas nationwide. Cities like Nashville, Tenn.; Charlotte, N.C.; Columbus, Ohio; Chicago, Dallas and Austin, Texas are rapidly grabbing foreign buyers because prices are lower and they can get a better return on investment. Their primary interests are long-term growth opportunities, a luxury lifestyle and security. Moving forward, prime coastal locations will remain strong but the trend of international buyers expanding their searches and taking a serious look at new locations will continue to accelerate.

6. Consumer confidence will boost home sales.
With the anticipation of stronger economic and wage growth in 2017, home sales could exceed 6.3 million transactions, a significant increase from 2016. The GDP growth is forecast to be 2.1 percent with a 2.5 percent increase in the consumer price index, while unemployment is expected to decline to 4.7 percent by the end of 2017.

Furthermore, the record-breaking rise and powerful performance of the stock market post-election has fueled confidence and given people the assurance they need to loosen their purse strings. Folks who were hesitant to spend money during a tumultuous and uncertain election year are now ready to put their money to use.

7. Lack of inventory spurs fast-moving markets. Buyers should be prepared.
Inventory is currently down an average of 11 percent in the top 100 metropolitan markets nationwide, but with interest rates on the rise, prices may go down slightly. A slowdown in home price appreciation could motivate more property owners to sell, easing some of the inventory crunch. Regardless, in a competitive market, buyers need to be prepared and able to act quickly when they find Home Sweet Home. Build your team early on and don’t lose out on a property because of some unnecessary mistakes that occurred simply because you weren’t organized. Your team should include a real estate attorney, mortgage lender, real estate broker, appraiser and inspector (if necessary).

Louise Phillips Forbes is one of Manhattan’s elite Power Brokers. As a multi-time winner of Halstead Property’s esteemed Broker of the Year award, she currently leads the firm’s No. 1 team. Recognized as a highly-dependable advocate for her clients, she considers herself more of an “educator” than a salesperson.  She also appears on national and regional TV shows across the country to comment on local, domestic and international real estate issues.

Buying Is Better Than Renting in Most Markets…but for How Long?

Source: RISMedia

Buying a home is more affordable than renting one in 66 percent of housing markets in the U.S., with Cook County, Ill., Maricopa County, Ariz. and Miami-Dade County, Fla. among those with the highest buy affordability, according to ATTOM Data Solutions’ 2017 Rental Affordability Report. Renting a home, to compare, is more affordable than buying one in 34 percent of markets, with Dallas County, Texas, Kings County, N.Y. and Santa Clara County, Calif. among those with the highest rent affordability.

Predominantly impacting affordability are stagnant wages, which have lagged at a growth rate of 2.2 percent since one year ago, compared to home prices, up 5.7 percent, and rents, up 4.2 percent.

Rising mortgage rates, according to ATTOM Senior Vice President Daren Blomquist, could deal another blow to affordability. Average rates, which retreated since charging forward following the election, are currently above 4 percent.

“While buying continues to be more affordable than renting in the majority of U.S. markets, that equation could change quickly if mortgage rates keep rising in 2017,” says Blomquist. “In that scenario, renters who have not yet made the leap to homeownership will find it even more difficult to make that leap this year. Additionally, renting may end up being the lesser of two housing affordability evils in a growing number of high-priced markets.”

Home price growth outpaced wage growth in 79 percent of the counties analyzed in the report, while rent growth outpaced wage growth in 62 percent. Both percentages include Harris County, Texas, and Los Angeles County and San Diego County, Calif. Wage growth, however, outpaced home price growth in 21 percent of the counties analyzed, and outpaced rent growth in 38 percent.

A monthly house payment on a median-priced home will require 36.6 percent of average wages, according to the report; a monthly fair market rent will require 38.6 percent.

The most affordable rental markets in 2017, based on the percentage of average wages needed to pay fair market rent, are:

  1. Madison County, Ala. (23.9 percent)
  2. Allegheny County, Pa. (24.4 percent)
  3. Fulton County, Ga. (24.8 percent)
  4. Anderson County, Tenn. (25.1 percent)
  5. Rock Island County, Ill. (25.3 percent)

The least affordable rental markets in 2017:

  1. Marin County, Calif. (77.3 percent)
  2. Spotsylvania County, Va. (73.7 percent)
  3. Monroe County, Fla. (72.2 percent)
  4. Honolulu County, Hawaii (70.7 percent)
  5. Maui County, Hawaii (70.6 percent)

Source: ATTOM Data Solutions

For the latest real estate news and trends, bookmark RISMedia.com.

Foreign Real Estate Investors Not Dissuaded by Interest Rates, New Administration

Source: RISMedia

Foreign investors continue to view U.S. real estate as a sound investment, with an astounding 95 percent of those recently surveyed by the Association of Foreign Investors in Real Estate (AFIRE) reporting they plan to “maintain or increase their investment” in 2017. U.S. real estate was ranked No. 1 by respondents for both security and stability, as well as opportunity for capital appreciation.

Foreign investors’ perceptions of U.S. real estate, with the incoming administration and rising interest rates, are overwhelmingly positive: 60 percent of survey respondents reported an unchanged opinion about the market from last year, citing its stability and security. The top five cities for real estate investment this year, according to the survey, are New York, N.Y., Los Angeles, Calif., Boston, Mass., Seattle, Wash., and San Francisco, Calif. 2017 marks New York’s seventh year at the top of the list.

Washington, D.C., notably, slipped from the top five for the first time since 1992—a misleading move, according to Catherine Pfeiffenberger, AFIRE chairman.

“Washington, D.C. is a global gateway city with good leasing activity and a growing economy bolstered by a young workforce,” says Pfeiffenberger. “The combination of those stable fundamentals will continue to attract capital from around the world. The new administration’s focus on the defense and aerospace industries is also expected to benefit the D.C. area in the coming years.”

Investment opportunity in U.S. real estate has widened, according to the survey, with industrial properties moving ahead of multifamily properties as the No. 1 investment type. Multifamily, office, retail and hotel round out the top five. The shift has strengthened foreign investors’ confidence in emerging markets, such as Charlotte, N.C. and Nashville, Tenn.

Fifty percent of respondents, in addition, believe Brexit will be beneficial for U.S. real estate. (London fell to the No. 3 spot globally in the survey, as a result.) The most secure and stable countries this year behind the U.S., according to respondents, are Germany, Canada, Australia and the U.K; the countries with the best opportunities for capital appreciation are Brazil, Germany, the U.K. and Australia.

Impending economic and political changes in the U.S., still, have given some foreign investors pause, the survey shows—a cue for real estate professionals to offer comprehensive data to their investor clients.

“As uncertainty rises with a new government in Washington and interest rates that have risen dramatically, it is no surprise that investors have signaled a note of caution,” says James A. Fetgatter, CEO of AFIRE. “Previous, comfortable spreads between cap rates and interest rates have narrowed, making the investment criteria more selective and difficult. Increased market research and discipline will be required.”

Source: Association of Foreign Investors in Real Estate (AFIRE)

For the latest real estate news and trends, bookmark RISMedia.com.

10 Anti-Burglary Tips for Your Sellers

Source: NAR

After Christmas, many people put the empty boxes their expensive gifts came in out on the curb. What do you think that says to potential burglars? It screams, “I just got a brand-new TV! Come and rob me!”

That’s just one example of some unwise habits homeowners have. If those owners are sellers opening their doors to the public for showings, habits such as these put them in even greater danger. The above example is a good warning to give to your clients now, since we’re in the holiday season. But use it as a jumping-off point to have a deeper conversation about safety — and to show that your safety knowledge is an asset to sellers.

Consider using this checklist (you can request it as a customer handout on my website) during listing appointments to better prepare prospective sellers and show your value as a real estate professional. We spend a lot of time telling sellers how we’ll market their home, and while that is obviously important, we rarely address their true concern: how to keep their home safe while it’s open to the public. Touch on these 10 anti-burglary tips so your clients will know that you have their best interest at heart.

National Snapshot of Burglaries

A burglary is committed every 20 seconds, with nearly 1.6 million such crimes nationwide annually, according to the FBI’s 2015 Crime in the United States report. That’s down 7.8 percent from 2014. Total property crime, which includes arson, larceny theft, and motor vehicle theft, reached nearly 8 million instances in 2015, down 2.6 percent from 2014.

  1. Maintain your property. Especially in the wintertime, many people stay indoors and neglect issues such as peeling trim or an overgrown yard. But if the home looks unkempt, thieves may think it’s abandoned and, therefore, an easy target. Shoveling your walkways to clear them of snow and debris and removing holiday decorations and fallen tree branches in a timely manner will signal that the home is occupied.
  2. Know your neighbors. Many people don’t really know their neighbors; it’s more than just saying hi and being friendly. Invite them over to see your home before it goes on the market, and introduce them to the people they may see regularly stopping by during this time (especially your agent). Then they’ll know who is and isn’t supposed to be at your home and can better assess when there may be a threat while you’re gone.
  3. Assess your home’s vulnerability. Walk to the curb and face your house. Ask yourself, “How would I get in if I were locked out?” The first thing you think of, whether it’s the window with a broken lock or the door that won’t shut all the way, is exactly how a thief will get in. Think like a burglar, and then address the issues that come to mind.
  4. Respect the power of lighting. Criminals are cowards, and they don’t want to be seen. The house that is well-lit at night provides a deterrent because thieves don’t want the attention and the potential to be caught by witnesses. It’s wise to invest in tools that make nighttime light automation easy. That includes dusk-to-dawn adapters that go into existing light fixtures and motion detectors. But beware of leaving your exterior lights on at all times, which signifies the occupant is gone for an extended period of time.
  5. Use technology to make your home look occupied. In addition to lighting, smart-home technology has made it easier to make it appear like people are home, even when they’re not. Systems that remotely control lighting, music, and appliances such as a thermostat can help you achieve this. Though not considered smart-home tech, simple lamp timing devices available at hardware stores are also good for this purpose.
  6. Yes, it has to be said: Lock your doors. It’s amazing how many people think they live in a safe-enough neighborhood not to have to lock their doors when they leave. Some facts sellers should know: In 30 percent of burglaries, the criminals access the home through an unlocked door or window; 34 percent of burglars use the front door to get inside; and 22 percent use the back door, according to the FBI Uniform Crime Report.
  7. Reinforce your locks. A good door lock is nothing without a solid frame. Invest in a solid door jam and strike plate first, and then invest in good locks. Know the difference between a single-cylinder and a double-cylinder deadbolt. Double-cylinder deadbolts are recommended because they require a key to get in and out. For safety and emergency escape purposes, you must leave the key in when you are home. But double-cylinder locks are against regulations in some places, so check with your local police department’s crime prevention office.
  8. Blare the sirens. Burglars are usually in and out in less than five minutes, and they know police can’t respond to an alarm that quickly. Their bigger concern is witnesses to their crime. For that reason, an external siren is invaluable, whether as part of a monitored security system or a DIY alarm. Even if you don’t have an alarm, it’s not a bad idea to invest in fake security signs and post them near doors.
  9. Consider surveillance cameras. The Los Angeles Police Department started a program encouraging homeowners to install a device called Ring, a doorbell with video surveillance capability that allows homeowners to view what’s outside their door on their smartphone, in a neighborhood that was a target for burglaries. After Ring was installed in hundreds of homes, the burglary rate dropped by 55 percent, according to reports. Most state and local regulations require posting a warning that people are being recorded. (But again, this can be effective even if you don’t actually have the cameras installed!)
  10. Mark your valuables and record details. Use invisible-ink pens or engravers to mark identifying information (driver’s license or state ID numbers) on items. Log serial numbers and take photos of your belongings. Check to see if your police department participates in the Operation Identification program. They will have stickers for you to place on doors or windows warning would-be thieves that your items are marked. These steps may prevent them from pawning or selling stolen items and can help you reclaim recovered belongings.

2017 to See Slight Slowing of Home Price Movement

Source: RISMedia

Market Feels Effects of Rising Rates, Pending Home Sales Pull Back

SOURCE: RISMedia

The housing market is feeling the effects of rising mortgage rates, with pending home sales pulling back to year-lows last month as homebuyers struggled to put purchases in play, according to the National Association of REALTORS® (NAR). NAR’s Pending Home Sales Index (PHSI), a forward-looking indicator based on contract signings, dipped 2.5 percent to 107.3 in November, down from 110.0 in October.

“The budget of many prospective buyers last month was dealt an abrupt hit by the quick ascension of rates immediately after the election,” says Lawrence Yun, NAR chief economist. “Already faced with climbing home prices and minimal listings in the affordable price range, fewer home shoppers in most of the country were successfully able to sign a contract.”

All is not lost, however. Rising mortgage rates, according to Yun, will be balanced by a more robust growth in wages in the next year.

“Healthy local job markets amidst tight supply means many areas will remain competitive with prices on the rise,” says Yun. “Those rushing to lock in a rate before they advance even higher will probably have few listings to choose from. Some buyers will have to expand the area of their home search or be forced to delay in order to save a little more money for their down payment.”

The Northeast saw the most pending home sales activity in November, with the PHSI up 0.6 percent to 97.5—now 5.7 percent above one year ago. In the Midwest, the Index was down 2.5 percent to 103.5, 2.4 percent below one year ago. Pending home sales in the South were down 1.2 percent to 118.7, 1.3 percent below one year ago. The Index in the West was down 6.7 percent to 101.0, 1.0 percent below one year ago.

Existing-home sales are still expected to close out 2016 at 5.42 million, which will eclipse 2015 (5.25 million) as the highest since 2006 (6.48 million), according to NAR. The national median existing-home price is also still expected to end 2016 at a 5 percent growth rate.

Looking ahead, existing-home sales are expected to come in at 5.52 million in 2017, while the national median existing-home price is expected to grow 4 percent.

For more information, please visit www.nar.realtor.

For the latest real estate news and trends, bookmark RISMedia.com.

Sales in the Snow: 5 Home Staging Tips for Wintertime

Source: RISMedia

By Dixie Somers

While winter isn’t traditionally considered the best time to sell your home, there’s no reason you can’t get an offer during the colder months with the right staging. In fact, a study found that homes sold faster and for more money in the winter months, even in cold cities like Chicago. Here are five winter home staging tips that can increase your appeal to potential buyers.

1. Clear the Walkways

Whether you live in an area with heavy snow all winter or you’ve had a big storm on a day with several showings scheduled, all areas of the yard should be accessible for buyers. That means not only making sure there’s a safe, snow-free path to the front door, but also that paths are cleared to any outdoor areas the buyer will want to view. This means sheds, patios, garages and recreation areas. And while entries can get grimy if your family is in and out with their boots on, this area should be kept spotless and clear of debris.

2. Let There Be Light

Although our instinct in winter is to hunker down indoors, put your home in its best light by opening all shades and draperies, as well as turning on all available light sources (including closet lights). The exception? Turn off televisions and computers, which don’t necessarily add to the warm glow you’re trying to achieve.

Related: The Five Golden Rules of Home Staging on a Budget

3. Keep it Toasty

Speaking of a warm glow, your home should project a feeling of warmth to potential buyers when it’s cold outside. If you have a fireplace that’s in good condition, that’s a great place to start. Try setting your thermostat a degree or two higher than usual to give buyers a reason to linger instead of heading back out into the weather. Ask a real estate company whether homebuyers in your area would respond well to layers of soft throws, rugs, pillows and other richly textured fabrics.

4. Embrace the Holidays

While REALTORS® usually advise to pack away personal belongings when staging a home to create a clean canvas for buyers, tasteful holiday decorations can help create the warm, family feel you’re trying to achieve. Think lush wreaths, a tree with inviting white lights, and candles in the windows for subtle yet powerful emotional appeal.

5. Don’t Ignore the Outdoors

Although your landscaping won’t look as gorgeous as it does in the spring, pots of evergreens can help add some color to your walkways and yard. Always make sure that gutters are cleaned and shrubs are trimmed, too.