Archive for May, 2010
Refi madness: Surge continues as rates edge lower still
May 27th, 2010 Categories: Buying a Home
With mortgage rates near record lows, homeowners are applying to refinance their loans at the highest rate in seven months, the Mortgage Bankers Assn. said Wednesday.
The volume of refinancings jumped 17% last week as the average contract rate for a 30-year fixed mortgage sank to 4.80% from 4.83% a week earlier, the mortgage trade group said. It was the highest volume since October, according to the group’s weekly report on home loan applications.
Refinance applications had begun to surge two weeks earlier as global investors worried about the European debt crisis fled to the perceived safety of U.S. Treasury securities. That drove down the yield on Treasuries and mortgage rates followed, as they generally do.
Although the latest surge is powerful, it doesn’t compare with the tidal wave of refinancings that took place after December 2008, when the Federal Reserve, battling the fierce recession, first lowered its benchmark interest rate to nearly zero.
That burst of replacement home lending continued as rates bumped lower until September 2009, when 30-year fixed-rate loans dropped below the 5% threshold for the first time in decades, recalled Stew Larsen, head of mortgage banking for Bank of the West.
There are still plenty of homeowners with higher-rate loans who have never refinanced despite several opportunities since then to lock in rates starting with a 4, he said.
“Many of our customers now feel they missed a couple of other windows,” Larsen said.
In contrast to the latest refinance boom, applications to purchase homes fell further after a sharp decline the week before. The refinance share of mortgage activity was at 72% of total applications, up from 68% the previous week and the highest refinance in the survey since December 2009.
Industry observers said any home purchasers who could do so completed their transactions by the end of April, when federal tax credits expired for people buying houses.
It will be worth watching to see if purchase lending picks up again without the federal stimulus to spur sales.
– E. Scott Reckard
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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Optimistic Outlook for Housing, But Challenges Remain
May 25th, 2010 Categories: Real Estate Tools
Economists participating in a recent NAHB Construction Forecast Conference Webinar agreed that the housing market is on the road to recovery, but cautioned that several factors could contribute to a bumpy ride in the coming months.
“Home buyer tax credits clearly did their job and got people back into the marketplace,” said NAHB Chief Economist David Crowe, who also served as moderator of the webinar.
With the expiration of the tax credits in April, Crowe said the housing momentum is being carried forward by low interest rates, pent up household formations, stabilizing prices and budding employment growth.
However, many factors continue to drag on housing at this time–including the critical shortage of credit for new and existing projects, competition from short sales and foreclosures and regional economic disparities.
The availability of acquisition, development and construction (AD&C) financing remains a major concern as the industry moves forward, Crowe said. “Builders still tell us that credit is extremely tight. Banks are saying not so much. That gap is an indication that something is broken, at least when it comes to residential construction.”
NAHB is forecasting 552,000 single-family starts in 2010, up 25% from last year’s 445,000 level, which was the lowest annual output since 1959 when the government began collecting this data.
Suffering from an acute shortage of available financing and a significant shadow inventory of homes lost to foreclosure that are competing against normal inventory, Crowe said that multifamily housing starts are expected to lose further ground this year, falling 18% to 93,000 units, before rebounding to 150,000 units in 2011.
Crowe anticipates that nationwide home prices will remain flat this year and post a modest increase in 2011 and that mortgage interest rates will continue to stay low, barely breaking 6% by the end of this year, and not rising much above that level through 2011.
The road back to normal levels of residential construction will be longer for some states than others. By the end of 2011, the top 20% of the states will see their production levels back to normal. Those states include Texas, Oklahoma, Montana, Wyoming, Tennessee, Louisiana, Mississippi, Alabama, Arkansas and Kansas. The previous boom markets in California, Arizona, Florida and Nevada, along with the Great Lake states of Michigan, Indiana, Ohio, Illinois and Wisconsin that were hit by deep cuts in auto production and manufacturing, will be the last ones to recover.
Housing Demand Reflects Job Growth
Like his co-panelists, Mark Zandi, chief economist of Moody’s Analytics, said that housing will improve as the job market does. He forecast that the economy will average monthly job gains of 125,000 this year, 250,000 in 2011 and 300,000 in 2012.
Mirroring anticipated employment growth, Zandi expects GDP to rise 3% this year, approximately 4% in 2011 and closer to 5% in 2012.
The key factor driving housing demand is jobs, said Zandi. “We’re not going to get home sales unless we have jobs. Here the prospect is good. Business balance sheets are in good shape and improving rapidly. These are pre-conditions for better job growth and we should see the job market steadily gain traction.”
Zandi forecast that overall housing starts will total 700,000 units this year, close to 1 million in 2011 and about 1.7 million by 2012, which he describes as close to trend and consistent with demographics in a normal functioning economy.
Driven largely by the high foreclosure rate, Zandi expects that home prices will continue to fall modestly in 2010, down about 5% on a national average. He calculates that the difference between supply and demand is approximately 750,000 units annually, and it will require until the end of 2011 to work off this extra inventory.
“The good news,” he said, is “as the job market improves, so will household formations and demand. So I anticipate we will work off the excess inventory more quickly than the two-year period.”
He added that most of the housing surplus is regionally concentrated in Florida, around Atlanta, along the South Carolina coast, in Las Vegas, Phoenix, and Tucson and in the central valley of California.
Consumers Fuel Recovery
Taking the most bullish approach to the ongoing recovery, Chris Varvares, president of Macroeconomic Advisers, LLC, forecast that GDP will rise 3.7% this year and that housing starts will total 750,000, well above the Blue Chip Economic Indicators consensus of 690,000.
“Personal consumption expenditures are making a very solid recovery,” said Varvares. “Residential investment is going from a drag to a contributor. The difference between our forecast and the consensus is the strength in personal consumption and housing.”
Although the huge number of foreclosures on the market are accounting for about 300,000 to 400,000 fewer starts than there otherwise would be, Varvares said the fundamentals still point to a solid trajectory for housing.
“With prices stabilizing, demand is picking up and we expect builders to respond. By the end of 2011, we expect about 1.2 million housing starts. This suggests we can have recovery in starts this strong while simultaneously working down excess housing inventory.”
The panelists were in unanimous agreement on a number of areas–the Federal Reserve will likely continue to keep interest rates near rock bottom levels at least through the end of the year; the chance of a double dip recession is extremely slim; and policymakers will need to take action within the next two years to increase revenues and cut spending to rein in the burgeoning structural deficit.
For more information, visit www.nahb.org.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Search Luxury Homes in Los Angeles at Valerie Fitzgerald Real Estate Listings
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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Permanent Mortgage Modifications Up in April 2010
May 19th, 2010 Categories: Buying a Home
The Obama administration recently announced that its program to prevent foreclosures has continued to make slow but steady progress, with the number of homeowners who have received permanently modified mortgages up about 13% in April 2010.The 295,348 permanent modifications amount to about a quarter of the 1.2 million trial modifications started under the program, which began last year.
During the trial, banks and mortgage servicers reduced a homeowner’s monthly payment for 90 days, with a median reduction of about $500. If the homeowner made the payments and submitted additional paperwork, the servicer made the modification permanent and became eligible for cash incentives from the government.
The Los Angeles-Orange County area now accounts for the most active trial and permanent modifications under the Home Affordable Modification Program, with 57,758, or 6.2% of the total, nudging past the New York City area.
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Servicers have canceled a total of 277,640 trial modifications through April, according to the Treasury Department. That was up sharply from the 155,173 modifications that had been canceled through March. In addition, 3,744 people have had their permanent modifications canceled.
The increased cancellations largely were caused by many servicers granting temporary modifications without verifying the homeowners’ income. Starting June 1, 2010, the program will require all modifications be made based on verified income statements, Treasury officials said.
The $75 billion program has been criticized for moving too slowly to modify loans to create lower payments for 3-4 million people by the end of 2012. In December, the Obama administration began pushing mortgage services to move more quickly to convert eligible trial modifications to permanent ones.
Since then, the number of permanent modifications has nearly tripled. Large servicers such as Bank of America Corp., JPMorgan Chase & Co., Wells Fargo & Co. and Citigroup Inc., which had been lagging behind smaller firms, have improved their performance.
Those large companies account for more than half of the active trial and permanent modifications. Still, they have turned only about 25% of their temporary modifications into permanent ones, compared with 50% or higher for some other lenders, such as GMAC and U.S. Bancorp.
Many homeowners and housing advocates have complained about bureaucratic runarounds by mortgage servicers in trying to get their mortgages modified. Treasury officials said they planned to collect new data about the performance of companies and release it beginning in July.
“The number of homeowners receiving significant relief through a mortgage modification continues to rise,” said Phyllis Caldwell, head of the Treasury’s Homeownership Preservation Office. “Our focus now is on improving the homeowner experience and holding servicers accountable for their performance.”
The new data will focus on the eight largest mortgage servicers. It will include the average time from the start of a trial modification to a permanent modification, how long it takes servicers to answer phone calls from homeowners and the time it takes them to respond to homeowner problems that come from housing counselors, attorneys and other third parties.
(c) 2010, Los Angeles Times.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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Lenders ordering second, last-minute credit report before closing mortgages
May 18th, 2010 Categories: Buying a Home
Changes taking effect June 1 are part of Fannie Mae’s ‘loan quality initiative’ to cut down on slipshod underwriting and fraud by borrowers.
If you’re thinking about applying for a home mortgage this year, here’s some important news: Beginning June 1, your lender is likely to order a second full credit screening immediately before closing.
The last-minute credit report will be designed to find out whether you’ve obtained — or even shopped for — new debt between the date of your loan application and the closing. If you’ve made applications for credit of any type — for furnishings and appliances for the new house, a car, landscaping, a home equity line, a new credit card — the closing could be put on hold pending additional research by the lender.
If you’ve taken out new loans that are sizable enough to affect the debt-to-income ratio calculations used in your original mortgage approval, the deal could fall through. The added debt load could render you ineligible for the mortgage because you suddenly appear unable to handle the payments without a strain on your household budget.
The June 1 changes are part of a new effort by mortgage giant Fannie Mae to cut down on slipshod underwriting by lenders and frauds by borrowers. Fannie’s so-called “loan quality initiative” will require lenders not only to pull two credit reports for each mortgage transaction but to perform additional verifications of borrower occupancy plans for the property, Social Security numbers and Individual Taxpayer Identification Numbers, among other changes.
“There’s an almost irresistible urge” for many mortgage borrowers to spend, said Don Unger, chief executive of Advantage Credit Inc. of Evergreen, Colo. “The lender says, ‘OK, you’re approved for the loan,’ and you immediately think about shopping for all the things you need for the house.”
Borrowers may go to a retailer and put in a credit application. In the past, that might not have raised an eyebrow, or even been detected. But under the new double-check policy, when the application shows up as a “hard” or borrower-initiated inquiry on a credit report, Unger said, the lender is going to have to contact the merchant and determine whether credit was extended, in what amount and how this might affect the applicant’s home-financing transaction.
Marc Savitt, president of the National Assn. of Independent Housing Professionals and a mortgage broker in Martinsburg, W.Va., says it’s not an uncommon scenario. “Most often the new debt involves furniture or other goods for the house,” Savitt said. “However, we have seen debt for new cars and other major purchases.”
Terry Clemans, executive director of the National Credit Reporting Assn., recalls one case where home buyers “went out and gorged on $40,000 worth of new furniture and all types of stuff” after their loan approval — resulting in monthly payments far beyond what they could afford. Under the new policy, they’d probably be shot down before closing.
Fannie Mae spokesperson Janis Smith said lenders “will have to look for things like new credit accounts, increased credit lines, increased balances on existing accounts, undisclosed or newly recorded liens, second mortgages — anything that may have changed since initial application that might impact a borrower’s debt-to-income ratio.”
As a practical matter, some lenders are likely to ask their credit-reporting vendors to perform the investigations when new debts or inquiries pop up on borrowers’ files. Fannie Mae’s instructions say that “lenders must determine that all debts of the borrower incurred or closed up to and concurrent with the closing” are considered in the final loan analysis.
Unger, however, said all this may not be as straightforward as it sounds. For example, if the credit report is pulled immediately before closing to comply with the “up to and concurrent” requirement, there may not be sufficient time to check out inquiries — especially those where no actual drawdown of debt has been reported to the national credit bureaus. He also questioned whether entire loan packages might need to be re-underwritten — a time-consuming process — based on credit data discovered at the 11th hour.
How should home buyers and refinancers prepare for the new credit-check procedures? Lenders and credit reporting company executives say everybody needs to follow just one basic rule: abstinence. Between your application for a mortgage and the date of closing — which might be a span of 45 to 60 days or more — resist spending.
And don’t apply for new credit unless you discuss it in advance with your lender and get a green light.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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The Economy Strengthens According to Fannie Mae
May 17th, 2010 Categories: Buying a Home
Improving labor market conditions and a strong increase in consumer spending led to solid economic growth according to the May 2010 Economic Outlook released today by Fannie Mae’s Economics & Mortgage Market Analysis Group. The economy is expected to grow at a 3.5 percent pace for the year but concerns over European sovereign debt and possible long-term effects of the Gulf of Mexico oil spill bring uncertainty to the overall 2010 forecast. A welcome surge in home sales points to the positive impact of the homebuyer tax credit, although the increase will likely be temporary as incentives wind down.“Strong momentum coming out of the first quarter puts us in the direction of a self-sustaining economic recovery,” said Fannie Mae Chief Economist Doug Duncan. “Consumer spending grew at the fastest pace in three years and the job market posted gains across the board. Home sales grew in March, and will likely increase further in coming months, presumably from buyers rushing to sign contracts before the tax credit deadline at the end of April. We continue to project a pullback in home sales starting in July as the tax credit will likely pull sales forward into the second quarter,” said Duncan. “The pace of employment growth and confidence in the labor market will be key factors for a pick up in home sales by the end of the year.”
The Economic Outlook includes the Economic Developments commentary, Economic Forecast, and Housing Forecast — which detail movement of interest rates, the housing market, the mortgage market, and the overall economic climate. To read the full May 2010 Economic Outlook, visit the Economics & Mortgage Market Analysis site at www.fanniemae.com.
Opinions, analyses, estimates, forecasts, and other views of Fannie Mae’s Economics & Mortgage Market Analysis (EMMA) group included in these materials should not be construed as indicating Fannie Mae’s business prospects or expected results, are based on a number of assumptions, and are subject to change without notice. Although the EMMA group bases its opinions, analyses, estimates, forecasts, and other views on information it considers reliable, it does not guarantee that the information provided in these materials is accurate, current, or suitable for any particular purpose. Changes in the assumptions or the information underlying these views could produce materially different results. The analyses, opinions, estimates, forecasts, and other views published by the EMMA group represent the views of that group as of the date indicated and do not necessarily represent the views of Fannie Mae or its management.
Fannie Mae exists to expand affordable housing and bring global capital to local communities in order to serve the U.S. housing market. Fannie Mae has a federal charter and operates in America’s secondary mortgage market to enhance the liquidity of the mortgage market by providing funds to mortgage bankers and other lenders so that they may lend to home buyers. Our job is to help those who house America.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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Mortgage Rates at Lowest Level in 6 Weeks
May 10th, 2010 Categories: Real Estate Tools
Freddie Mac recently released the results of its Primary Mortgage Market Survey (PMMS) in which the 30-year fixed-rate mortgage (FRM) averaged 5.00% with an average 0.7 point for the week ending May 6, 2010, down from last week when it averaged 5.06%. Last year at this time, the 30-year FRM averaged 4.84%.
The 15-year FRM this week averaged 4.36% with an average 0.7 point, down from last week when it averaged 4.39%. A year ago at this time, the 15-year FRM averaged 4.51%.
The 5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.97% this week, with an average 0.7 point, down from last week when it averaged 4.00%. A year ago, the 5-year ARM averaged 4.90%.
The 1-year Treasury-indexed ARM averaged 4.07% this week with an average 0.6 point, down from last week when it averaged 4.25%. At this time last year, the 1-year ARM averaged 4.78%.
“Treasury bond and note yields declined this week, and rates on fixed-rate mortgages and hybrid ARMs followed suit,” said Frank Nothaft, Freddie Mac vice president and chief economist. “Rates for both the 30-year and 15-year fixed-rate mortgages were the lowest in six weeks; initial rates on 5/1 hybrid ARMs hit an all-time low since they were added to the survey in the beginning of 2005.
“The home buyer tax credit helped support home sales in March, and anecdotal reports point to strong April sales as well. Pending existing home sales rose for the second consecutive month in March to the strongest pace since October 2009, just before the original deadline for the credit, based on figures published by the National Association of Realtors. Three of the four Census regions showed an uptick in sales, led by the South with a 12.7% gain, while sales in the Northeast fell 3.3%. To receive the federal tax credit, home buyers had to sign contracts by April 30th and settle by June 30th of this year.”
Copyright© 2010 RISMedia
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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Pending Homes On An Upswing
May 6th, 2010 Categories: Real Estate Tools
Pending home sales increased again in March 2010, affirming that a surge of home sales is unfolding for the spring home buying season, according to the National Association of Realtors®. The Pending Home Sales Index (PHSI) forward-looking indicator based on contracts signed in March, rose 5.3% to 102.9 from 97.7 in February, and is 21.1% above March 2009 when it was 85.0; this follows an 8.3% increase in February. The data reflects contracts and not closings, which usually occur with a lag time of one or two months.
Lawrence Yun, NAR chief economist, said favorable affordability conditions have been working with the tax credit. “Clearly the home buyer tax credit has helped stabilize the market. In the months immediately following the expiration of the tax credit, we expect measurably lower sales,” he said. “Later in the second half of the year, and into 2011, home sales will likely become self-sustaining if the economy can add jobs at a respectable pace, and from a return of buyer demand as they see home values stabilizing.”
The PHSI in the Northeast declined 3.3% to 75.1 in March but remains 27.2% higher than March 2009. In the Midwest the index increased 1.2% to 98.9 and is 18.5% above a year ago. Pending home sales in the South jumped 12.7% to an index of 121.2, which is 28.3% higher than March 2009. In the West the index rose 1.9% to 99.9 and is 8.8% above a year ago.
“Another encouraging sign is the improvement in the availability for jumbo and second-home mortgages,” Yun said. “As bank balance sheets strengthen, it is just a matter of time before lending of non-government-backed mortgages steadily opens up.”
The National Association of Realtors, “The Voice for Real Estate,” is one of America’s largest trade associations, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.
The Pending Home Sales Index is a leading indicator for the housing sector, based on pending sales of existing homes. A sale is listed as pending when the contract has been signed but the transaction has not closed, though the sale usually is finalized within one or two months of signing.
The index is based on a large national sample, typically representing about 20% of transactions for existing-home sales. In developing the model for the index, it was demonstrated that the level of monthly sales-contract activity parallels the level of closed existing-home sales in the following two months. There is a closer relationship between annual index changes (from the same month a year earlier) and year-ago changes in sales performance than with month-to-month comparisons.
An index of 100 is equal to the average level of contract activity during 2001, which was the first year to be examined as well as the first of five consecutive record years for existing-home sales.
Copyright© 2010 RISMedia
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Check out Valerie Fitzgerald Beverly Hills Real Estate Listings
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NAR Pulse: This Week’s Top Stories from the National Association of Realtors
May 5th, 2010 Categories: Real Estate Tools
Get the Good News at NAR’s Booth #1707 at the Midyear Trade Expo
If you are attending the Midyear Legislative Meetings and Trade Expo, be sure to stop by NAR’s Booth #1707 to get the tools and resources you need to succeed! Join The Heart of the Market movement by sharing why you LOVE being a REALTOR®. Browse a wide variety of market relevant publications, including the new publication “Social Media for REALTORS®: 101 Dos and Don’ts.” Learn the latest news on Realtors Property Resource (RPR), NAR’s exclusive online real estate database. Attend a REALTOR® Party Rally at 11 a.m. daily to learn how you can get involved in the REALTOR® Party. Get hands-on help downloading FREE eProducts and purchase publications AT COST, thanks to Right Tools, Right Now. Learn about the two new partners in the REALTOR Benefits® Program, and pick up NAR’s Top 10 Benefits brochure, the Catalog, and a big cookie to-go. See you in DC!
Educational Opportunities from NAR’s REALTOR Benefits® Program
NAR understands that education is a key component for REALTORS looking to differentiate themselves in the marketplace. To help you achieve your goals, the REALTOR Benefits Program includes special pricing on certain real estate focused certifications and designations. For a current listing of educational offerings, click here.
Green MLS Toolkit Unveiled
NAR’s Green REsource Council, along with a number of green industry groups and real estate associations announces the launch of a new Green MLS Toolkit at www.greenthemls.org. The MLS Toolkit provides a snapshot of the green home industry, outlines why adopting a green initiative for the MLS is important and offers strategies for effective change for brokers, REALTORS®, builders and appraisers looking to spearhead the greening of the MLS system in their local community.
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
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The hidden costs of homeownership
May 4th, 2010 Categories: Buying a Home
Many first-time buyers are unprepared for the financial burdens of homeownership.
Lenders to tell them the maximum they can afford based on their incomes with little regard for the “extras” such as utilities, upkeep and improvements.
You’re told what your monthly nut for principal, interest, taxes and insurance — the all-important PITI — will be. But likely because you won’t know exactly what the other costs will be until you actually move into your new place, they are rarely mentioned. And as a result, borrowers who mortgage themselves to the hilt often find themselves “house poor.”
They own a home, all right, but they can’t afford anything else. Sometimes not even the heat or hot water.
Rookies who are transitioning from an apartment are usually better prepared than those who are making the move from the family nest. Renters probably paid at least something for their utilities, whereas those leaving the friendly confines of Mom and Dad’s house for the first time probably have never ever had to dig into their pockets for food, let alone electricity.
As owners, though, they will be responsible for electricity and/or gas, water and sewer and trash removal. Then there’s the phone bill if you want a landline, and cable if you expect to watch television.
Utilities are a big add-on. According to the U.S. Department of Energy, the typical family spends $1,900 a year — $158 a month — on home utilities.
Another frequently overlooked expense is association dues. There isn’t any hard data, but estimates are that four of five housing starts in metropolitan areas are part of “common interest” subdivisions or condominiums. That means residents not only own their homes or apartments but also a share of the community’s public areas — the streets, parking lots and walkways — with all the other owners.
Some 60 million people nationwide live in 305,000 homeowner and condo association-governed communities, all of which collect fees usually monthly or quarterly, according to the Community Associations Institute (CAI). Even if you don’t use the pool or golf course, you have to pay your share.
Whatever the amount — less than $25 monthly or more than $500 — it shouldn’t be overlooked. “I don’t think we’ve properly addressed it in terms of the real cost of housing,” said Steve Melman, director of economic services at the National Assn. of Home Builders (NAHB).
Indeed, as Melman rightly points out, the tax benefits of ownership — annual mortgage interest and property tax write-offs — are often offset, at least partially, by the cost of association dues. Not only are dues not deductible, he notes, they “add a significant amount” to the monthly outlay.
Another significant expense all buyers, not just first-timers, tend to forget is what they’ll spend for furnishings, appliances and property alterations.
A 2007 study by the Harvard’s Joint Center for Housing Studies shows that consumers spent an average of $14,206 on home improvements during their first two years of ownership. But according to NAHB’s research, most of the extra spending — 60% — occurs within the first three months after taking occupancy.
The spending doesn’t stop there, though, especially if you’re buying a previously occupied house. There’s also the cost of upkeep.
“Whether you are moving into a new or old home,” says Dan Steward, president of Pillar to Post, a home-inspection company, you “need to be aware of the ongoing maintenance any home requires.”
Buyers should figure on spending 1% of the home’s value per year for maintenance, Steward said.
From L.A. Times
Valerie Fitzgerald specializes in luxury residential real estate in Beverly Hills, Bel Air, Brentwood, Santa Monica and Malibu. Valerie has more than 20 years of real estate experience and is known for her solid reputation in the West Los Angeles brokerage community. She’s also the author of the book published by Simon and Schuster Heart and Sold: How to Survive and Build a Recession-Proof Business.
Check out Valerie Fitzgerald Beverly Hills Real Estate Listings
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