Sellers Irk Home Buyers

Sellers Irk Home Buyers. Image courtesy of Vichaya Kiatying-Angsulee / FreeDigitalPhotos.net

Home sellers can do lots of things that drive home buyers’ nuts, from playing mind games to taking things in the home when they move out that they shouldn’t have, says McKay Price, assistant professor of real estate finance at Lehigh University.

Bankrate.com recently highlighted a few ways that sellers are getting on the nerves of buyers. Among those top offenses:

• Playing mind games. “What drives a buyer crazy? Falling in love with a house that’s not really for sale,” according to the Bankrate.com article. “Or one that has problems that a seller refuses to fix.” Buyers are getting annoyed at homes that need repairs that sellers refuse to make. When a home inspection reveals a home needs a new water heater or roof, for example, sellers often make the repair or adjust the price. But some stubborn sellers insist on doing nothing, says Justin Knoll, president of Madison & Co. Properties and past president of the Denver Board of REALTORS®. For buyers who go ahead, the question becomes: “Where’s that money going to come from down the road?” he notes.

• Fixture feuds. Some sellers may take more from the home than their allowed, including the chandeliers and maybe even the toilets. Price says one family showed up on moving day to find that sellers removed every single light bulb in the house. Another couple noticed on their final walk-through the sellers had stripped away all the window coverings, even though they were included in the sales contract. (Read more: The Pain of Fixture Feuds.)
• Becoming offended. Buyers look at comparables with their real estate agents and look at the asking price – which they agree is too high – and then submit a solid offer. But the offer then gets ignored and the seller appears offended.

“Are they really that thin-skinned? Is it a tactic? And to a serious buyer, does it even make a difference?” the Bankrate.com article notes. Pat Vredevoogd Combs, vice president of Coldwell Banker AJS Schmidt in Grand Rapids, Mich., says that it’s never smart for a seller to ignore an offer. “Even though it’s your home, it’s a financial transaction,” she says. “I’d rather have a lowball offer and be able to negotiate than no offer at all. … I tell my clients, look, this is a starting point.”

Read more ways that sellers irk buyers at Bankrate.com.

Source: “Ugh! Here Are 6 Things That Home Sellers Do That Drive Buyers Nuts,” Bankrate.com (September 2015)

Home Construction Is Trailing Job Growth

Home Construction Is Trailing Job Growth. Image courtesy of Danilo Rizzuti / FreeDigitalPhotos.net

New-home construction is insufficient in the majority of metro areas and is likely to lead to housing shortages and unhealthy price growth, according to new research by the National Association of REALTORS®.

In its analysis, NAR measured the volume of new-home construction to the number of newly employed workers in 146 metro areas over the past three years from 2012 to 2014. Researchers found that homebuilding activity for all housing types was underperforming in about two-thirds of the metro areas tracked.

“In addition to slow housing turnover and the diminishing supply of distressed properties, lagging new home construction – especially single-family – has kept available inventory far below balanced levels,” says Lawrence Yun, NAR’s chief economist. “Our research shows that even as the labor market began to strengthen, homebuilding failed to keep up and is now contributing to the stronger price appreciation and eroding affordability currently seen throughout the U.S.”

The study found that the historical average ratio for the annual change in total workers to total permits is 1.2 for all housing types and 1.6 for single-family homes. However through 2014, 63 percent of markets tracked had a ratio above 1.2, and 72 percent had a ratio above 1.6 — which indicates inadequate new construction.

With jobs being added at an increasing pace in many markets, the widening gap between housing starts to employment is alarming, Yun says.

In 2014, the average ratio of single-family permits to employment jumped to 3.7, while the ratio for total permits rose 50 percent to 2.4.

“Affordability issues for buying and renting because of low supply are already well-known in many of the country’s largest metro areas, including San Francisco, San Diego and New York,” says Yun. “Additionally, our study found that limited construction is a widespread issue in metro areas of all sizes.”

The study found that the markets with the largest disparity of jobs versus single-family home construction were in San Jose, Calif. (at 22.6); San Francisco (22.4); San Diego and New York (at 13.9); and Miami (11.1).

“While construction is limited in some markets – such as Trenton-Ewing, N.J., and Rockford, Ill. – they aren’t facing inventory shortages despite having high ratios because their job gains are more moderate,” Yun says.

Single-family housing starts also were found to be as nearly adequate to local job growth (a ratio of 1.6) in Jackson, Miss.; Colorado Springs, Colo.; Chattanooga, Tenn.; Amarillo, Tex.; and St. Louis.

“As local job markets continue to expand, the pool of home buyers will only increase,” Yun says. “That’s why it’s crucial for builders to begin shifting their focus from apartments to the purchase market and make up for lost time. If not, severe housing shortages and faster price appreciation will erode affordability and remain a burden for buyers trying to reach the market.”

Source: National Association of REALTORS®

Prices Squeeze Out Young Buyers

Prices Squeeze Out Young Buyers. Image courtesy of Serge Bertasius Photography / FreeDigitalPhotos.net

“One can say that we are having a nationwide housing cost problem,” says Lawrence Yun, the chief economist for the National Association of REALTORS®, in a new interview with The Huffington Post. Housing’s affordability problem remains a barrier particularly for first-time buyers wanting to enter the market.

Indeed, the latest existing home sales report shows that the share of first-time home buyers was 28 percent in July, down from 30 percent in June.

Home prices have been rising faster than the median household income of about two percent annually, and as of June 2015, home prices were up six percent annually, according to NAR.

The lack of available housing is one cause of these booming prices, with current home building activity at only half of the normal level.

In the recent REALTORS® Confidence Index Survey, REALTORS® report that homes are increasingly becoming unaffordable and that sellers are reluctant to move because they can’t find affordable homes.

“Home prices are rising anywhere from 3-4 times as fast as people’s income,” says Yun. “Rents are double the income growth rate. This is unhealthy, unsustainable. The only way to tame the housing costs is to have more supply. So, maybe relaxing the regulations on small-size banks so they can lend to the homebuilders. We have a mismatch, a dramatic shortage, of owner-occupant homes that are available for sale.”

Millennials in hot markets like San Francisco and Washington D.C. are having a tough time purchasing homes due to rising rental costs, which makes it hard to save for a downpayment, as well as a lack of income growth, the burden of student-loan debt, and tough mortgage underwriting standards.

However, in smaller markets away from the coasts, many young buyers are finding affordable deals, and the cities are evolving to meet their needs. “Many middle parts of the country, like Des Moines and Grand Rapids now have a vibrant downtown, with millennial walking communities and strong job creation,” says Yun. “In these markets, homes are quite affordable. So those millennials with jobs will be able to quickly convert into home purchase.”

Sources: “Real Estate Has Become Unaffordable,” The Huffington Post (Sept. 9, 2015) and “Sales to First-Time Buyers: 28 Percent of Sales in July 2015,” Economist Outlook blog (Sep. 9, 2015)

Fannie, Freddie Extend Foreclosure Timelines

Fannie, Freddie Extend Foreclosure Timelines. Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Mortgage financing giants Fannie Mae and Freddie Mac are increasing the maximum number of days for a foreclosure sale in the majority of the country. Fannie Mae and Freddie Mac announced that 33 states would see an increase in the maximum number of allowable days for “routine” foreclosure proceedings.

The new foreclosure timelines will apply to all foreclosure sales completed on or after Aug. 1.

The new timelines represents the maximum allowable period between the due date of the last paid installment and the completion of the foreclosure sale. The timeframe also reflects the time that is typically required for a “routine, uncontested” foreclosure proceeding.

The amount of extensions varies by state. For example, in Maine, Freddie Mac is increasing the foreclosure timeline by 300 days – from 690 days to now 990 days. In Hawaii, the foreclosure timeline is increasing by 240 days – 840 days to 1,080 days. Other states saw much smaller extensions, such as Arizona and Washington, which increased from 330 to 360 days.

Oregon saw the longest foreclosure timeline extension by an added 480 days – 600 days to now 1,080 days.

Fannie Mae and Freddie Mac say that if the amount of time to complete the foreclosure sale exceeds the maximum number of allowable days and the servicer fails to provide an adequate explanation for the delay, the GSEs will require the servicer to pay a “compensatory fee.”

The following states have had foreclosure sale timelines extended: Alaska, Arizona, Arkansas, California, Colorado, Connecticut, Delaware, Florida, Georgia, Hawaii, Idaho, Illinois, Kansas, Kentucky, Louisiana, Maine, Maryland, Michigan, Nevada, New Mexico, New Hampshire, Oklahoma, Oregon, Pennsylvania, Puerto Rico, Rhode Island, South Dakota, Tennessee, Texas, Vermont, Washington, West Virginia, Wisconsin, and Wyoming.

Source: “Freddie Mac Joins Fannie Mae in Extending Foreclosure Timelines,” HousingWire (Sept. 4, 2015)

43% of Homes at High Natural Disaster Risk

43% of Homes at High Natural Disaster Risk. Image courtesy of basketman / FreeDigitalPhotos.net

About 35.8 million U.S. single-family homes and condos are located in counties with “high” or “very high” risk of a natural hazard, such as from hurricanes, wildfires, tornados, earthquakes, or floods, according to RealtyTrac’s 2015 U.S. Natural Disaster Housing Risk Report. That equates to an estimated market value of $6.6 trillion of the housing stock at risk, according to the analysis, which measured the risk level of 83.4 million single-family homes and condos nationwide.

“In the interest of personal safety and protecting the value of what is likely their biggest financial asset, prospective buyers and investors should be aware of any natural disaster risk impacting a potential home purchase,” says Daren Blomquist, vice president at RealtyTrac. “There is no reason home buyers need to be surprised with natural disaster risk information when wading through a stack of disclosures at the closing table given the widespread availability of this data online and even through mobile apps. In most cases learning about natural disaster risk will not stop a home sale, but it will help buyers make a better-informed decision about where to buy and also be prepared in terms of appropriate insurance coverage and family contingency plans depending on the type of natural disaster risks most affecting the home they end up purchasing.”

The states with the most homes in the “high risk” or “very high risk” category for natural disasters were in California (8.4 million), Florida (6.7 million), New York (2.4 million), New Jersey (2.3 million) and North Carolina (2.3 million), according to the report.

On a metro level, the cities with the most properties at risk were New York (3.5 million), Los Angeles (2.5 million), Miami (1.9 million), Houston (1.2 million), and Riverside-San Bernardino in Southern California (1.1 million).

The report found that home values tended to be highest in the areas that had the highest risk for natural hazards. For example, homes located in “high risk” counties for natural disasters had an estimated market value of $191,244 compared to the average home value in “low risk” counties that is $151,793, according to the report.

Source: RealtyTrac

Remind Your Clients: Do an Annual Inspection

Remind Your Clients: Do an Annual Inspection.Image courtesy of Stuart Miles / FreeDigitalPhotos.net

Do your buyers think that once the home inspection is over and the concessions have been negotiated, they’re done? Remind them that their own annual inspection can save them a bundle by preventing headaches and spotting problems while they’re still minor.

Outside the house, they can use binoculars to get a good look at the status of high walls, the chimney, and the roof line. Make sure everything is level and looks solid. There shouldn’t be any crumbling in masonry or rot in wood. Also, look for crags and clogs around gutters and downspouts, cracked or peeling paint, and blockages or cracks around the chimney. The roof might be missing shingles, or tree branches might provide a path for pests to enter the house. Anything that lets water in can be a particular source of long-term problems.

Lower down, they should keep an eye on the grade around the foundation, check the driveway and garage for loose or cracked asphalt, examine caulk and other seals around windows, and check above and below stairs, decks, and porches for problems.

Inside, a flashlight comes in handy even in well-lit areas to help highlight small flaws. Check walls and ceilings for stains that suggest mildew or mold, kitchen backsplashes and seals for open spaces that let moisture in, tub surrounds for entry points for water, stairs and railings for solid structures, and other features to prevent long-term deterioration.

Finally, turn on hot and cold water at every faucet to look for leaks; start the heating and cooling systems to find loose pipes and listen for irregular sounds; and check boilers and heaters for problems. Doing this regularly ensures that your customers understand what normal is like so they can spot anything not normal as soon as possible.

And remind them that knowing their house inside and out gives them not only a solid home but also a line on a good market price and the comfort of knowing the home should receive a good inspection when it finally does go on the market.

Source: “How to Do Your Own Yearly Home Inspection,” Lifehacker.com (Sept. 2, 2015)