Equity Position Improvements

Another sign of an improving economy — an improvement in the equity position of U.S. households. The Federal Reserve Board of Governors recently released data showing that homeowners are continuing to regain the equity in their homes they lost during the housing crisis that began in 2007.

In its analysis of the data, CoreLogic found that at the end of the first quarter of 2014, 12.7 percent (6.3 million) of homes with a mortgage were in negative equity, meaning the homeowners owed more on the mortgage than the property was worth. This is a significant decrease from the year prior, when 20.2 percent of homeowners were “underwater.”

“Prices continue to rise across most of the country and significantly fewer borrowers are underwater today compared to last year, “ said CoreLogic president and CEO Anand Nallathambi. “An additional rise in home prices of 5 percent, which we are projecting will occur over the next 12 months, will lift another 1.2 million properties out of the negative equity trap.”

States with the highest share of negative-equity properties include Nevada, Arizona, Florida, and Mississippi. Those with the lowest share are Texas, Montana and North Dakota.

The current level has not been seen since 2007 and bodes well for the real estate market, as fewer underwater borrowers help unlock housing supply and demand.

Speculation Abounds on Mortgage Applications

The Mortgage Bankers Association’s Purchase Index keeps tabs on the rate that people are applying for mortgages, and that number can give economists some insight into what’s going on within the market.

The first half of 2014 saw the numbers falling, corresponding with a slower-than-expected recovery in home sales during first quarter.

But then over the course of one week in early summer, the index rose by 10 percent. Such a jump is leading real estate professionals and mortgage lenders to speculate about the future. Some believe it is just a blip, a repeat of a similar temporary increase that occurred in 2013. But others are more hopeful.

National Association of Mortgage Brokers vice president Rocke Andrews said he saw the jump as a good sign. “This is a response to an increase in consumer confidence and feeling good about the economy, along with a short-term dip in interest rates,” he said. “The economy is getting better and people are feeling better about their jobs. If interest rates stay stable, we will see a pretty good rebound.”

Lender loanDepot conducted a survey and reported that half of the potential home buyers surveyed indicated that they had not pursued financing for a home purchase because they were afraid they wouldn’t qualify.

President and COO of loanDepot Dave Norris said too many people are sitting on the fence. “Potential buyers are forfeiting their dreams of homeownership before they find out what financing options are available to them. It’s never been easier than it is today to go online and research your options.”

Easy Ways to Increase Home Value

Whether you are planning to put your house on the market or you just want to grow your investment in your home, there are a number of simple ways you can increase your home’s value without tackling a large remodeling project. 

Inspect Your Home
Typically buyers will request an inspection of your home. Beat them to it by regularly inspecting it yourself and taking care of any problems you find along the way.

Paint Kitchen Cabinets
You don’t have to replace all your cabinetry to give your kitchen a new look. Just give cupboards a fresh coat of paint and maybe some new hardware to spruce them up.

Replace Light Fixtures
Light fixtures tend to be put up and be forgotten, so replacing old lighting with new fixtures can give rooms a more modern feel.

Add Seating
Anyplace you have open space, think about putting in a table and some chairs. This showcases the potential of the space, which can translate into a perceived higher value.

Declutter
The simplest way to make a room appear bigger is to remove the photos, knick-knacks and other clutter that accumulate over time.

Highlight Storage
Creating or showing off the storage capabilities of your house lets potential buyers see that their stuff will fit there too. Even a wire rack closet system presents the appearance of organization.

Before investing a lot of time or money into a home-improvement project, give me a call. As your real estate professional, I can let you know what buyers in your area are looking for and save you money by preventing unnecessary upgrades!

 

Leading Markets Continue to Improve

Although it’s been slow, the economy does continue to improve, and along with it the housing market. The National Association of Home Builders (NAHB) and First American Title Insurance Co. produce a “Leading Markets Index” (LMI), which uses single-family housing permits, house prices and employment levels in various metro markets to measure how close to normal the markets are functioning.

 The LMI indicates that, nationally, we are running at 88 percent of normal economic and housing activity. Scores for metro areas varied, but 59 of the 351 measured are at or exceed 100 percent of normal activity, and 85 percent improved over the last year.

 “Things are getting slowly better overall,” said NAHB Chairman Kevin Kelly. “The nation’s economy is headed in the right direction.”

Cash Purchases on the Rise

The latest Confidence Index, published by the National Association of REALTORS® (NAR), found that more home buyers are paying cash – 33 percent in the first quarter of 2014. Usually when that number goes up, it’s because the number of distressed home sales has gone up. But in this case, the number of distressed home sales has actually gone down, a fact that has economists puzzled.

“Distressed home sales, most popular with investors who pay cash, have declined notably in the past two years, yet the share of all-cash purchases has risen,” said Lawrence Yun, NAR chief economist. “At the same time, investors have declined as a market share, indicating other changes have been under way.”

A number of factors could explain the increase in cash purchases:

• Mortgage lending regulations.


• The baby-boom generation, and its accumulated equity, is retiring and trading down.


• Individual investors and purchasers of second or vacation homes usually pay in cash.


• Foreign buyers typically pay cash.

Save Money through Window Treatments

Are you thinking about changing up your window treatments? Why not make them more energy-efficient and save a little money while you’re at it?

The U.S. Department of Energy (DOE) states that window shades can be one of the simplest and most effective window treatments for saving energy. Dual shades that are highly reflective (white) on one side and heat-absorbing (dark) on the other can be reversed with the seasons. Drapes can also be effective in any season, depending on fabric type and color.

In warm seasons, blinds and high-reflectivity film can reduce heat gain. The DOE estimates that, used correctly, blinds can reduce heat gain by as much as 45 percent. However, blinds aren’t that efficient at keeping out the cold, and film reflects sunlight regardless of the season, so these options are best for warmer climates.

For exterior changes, your best bets are awnings or overhangs. Overhangs can shade south-facing windows in the summer and, if oriented correctly, still allow sunlight in during the winter. Awnings can be quite effective in the summer, reducing solar heat gain by up to 77 percent. Plus, they add some personality and curb appeal to your home.

Tip: The key to any window treatment’s effectiveness in conserving energy is proper installation, so be sure to do your research.

Alternative Ways to Pay Your Mortgage

Are you looking for a different way to pay your mortgage? Maybe your payment is eating up all of one of your bimonthly paychecks and you’d like to spread it out. Or maybe you want to pay it off earlier. You have several options for making payments, either involving your lender or on your own.

Some lenders will set up bimonthly or biweekly payment plans for you. Paying bimonthly just splits your monthly payment in half, and you pay it twice a month. This can take the burden off your whole monthly payment coming out of one paycheck. Paying biweekly involves making half of your monthly payment every two weeks, which over the course of a year adds up to an additional monthly payment made (26 payments biweekly vs. 24 payments bimonthly). This speeds up the rate at which you pay off the loan, resulting in years being taken off the term. The drawback to paying biweekly is that most lenders charge extra fees.

If you like the idea of shortening your term but don’t want to pay extra, you can do it yourself by changing the amount you pay each month. Add an extra 1/12 of your monthly payment each month, and at the end of the year you will have made the equivalent of 13 monthly payments.

Note: Anytime you pay an amount that exceeds your monthly payment, be sure to indicate to your lender that you want the additional money to go toward the principal.