Construction Rebound in 2012? Not so fast…

New home construction starts in 2012 reached their highest level since 2008, but remain way below long-term normal levels. Raleigh, Austin, and Houston led the U.S. in construction activity.

On January 17th, the Census reported that there were 780,000 new housing starts in 2012, a 28% increase over 2011 and the highest level since 2008. (Census also reported that the seasonally adjusted annualized rate for December 2012 was 954 , 000). However, construction activity is still far below normal levels in most of the country. Here are the key takeaways about 2012’s construction rebound:

  1. Construction is still at historically very low levels, even after the 2012 “rebound”. Average housing starts over the period 1990-2011 were almost 1.4 million. At 780 thousand, 2012 construction starts were 43% below this long-term average. Aside from the even-worse years of 2009-2011, construction starts in 2012 were at their lowest level since 1959, when the Census began reporting housing starts.
  2. A marked shift toward multi-unit buildings. In 2012, 31% of new home starts were in multi-unit buildings, as opposed to single family homes. That’s the highest share in the last twenty years, during which multi-unit buildings have accounted for just 20% of new home starts, on average. Strong rental demand, as well as overbuilding in some sprawling single-family neighborhoods during the boom, has pushed developers to focus more on multi-unit construction.
  3. New construction started in 2012 isn’t being completed quickly. Single-family homes typically take around four months from start to completion; multi-unit buildings take a little over a year. New home completions were only 11% higher in 2012 than in 2011 – a smaller increase than the 28% increase in starts. That means many of the homes started in 2012 won’t be completed until 2013 (even though new homes are often sold before they’re completed).
  4. It has been a jobless construction rebound. Despite the 28% increase in construction starts between 2011 and 2012, residential construction jobs actually fell 1.2% between December 2011 and December 2012 (though there was a slight uptick at the very end of 2012). Construction jobs are down 23% since December 2008, when construction starts were running at close to the 2012 level. And construction employment is down 45% from its peak in April 2006, at the height of the construction boom.

Builders Bet on Housing Markets with Healthy Fundamentals

Construction is sprinting ahead in some metros and struggling in others. Based on local permit data through November, the latest available, Raleigh, NC had the highest rate of construction activity in 2012. With 25.6 new building permits per 1,000 housing units. The three Texas metro areas of Austin, Houston and Dallas were also among the top 10 markets for construction activity. None of the top construction markets are in the Northeast or Midwest.amparo-pic-blog1

On the National Scene

Nationally, construction starts were 43% below normal levels in 2012. But in a few metros, permitting activity in 2012 was ahead of the metro’s own historical normal over the years 1990-2011. Construction in Austin  in 2012 was 33% above normal; Raleigh, Houston and Oklahoma City also have above-average construction activity. In the San Francisco metro area, 2012 permits were 39% above the local historical normal – highest in the country — but normal construction activity in San Francisco is a lot lower than in Houston and other fast-growing metros.

Most permits were in multi-unit buildings in Seattle (60%) and Austin (57%). But multi-unit buildings accounted for the highest share of construction activity in New York (91%) and San Francisco (90%). Surprisingly, the majority of construction activity in Los Angeles (76%), San Diego (63%), and Orange County (61%) was in multi-unit buildings, despite southern California’s reputation for sprawl.

What explains these local differences in construction activity? These top markets for 2012 construction tend to have strong job growth and low vacancy rates, and they suffered relatively little during the housing bust. In contrast, construction in Phoenix and Las Vegas – the two markets with the biggest price gains in 2012–is running at less than half the local historical normal. In 2012, builders bet on the markets with healthy market fundamentals that avoided the boom-and-bust – not the markets where prices were rebounding.

 

Pending Home Sales Rise Again in November

Pending home sales continued to gain in November and reached the highest level in 19 months, according to the National Association of Realtors®.

The Pending Home Sales Index,* a forward-looking indicator based on contract signings, increased 7.3 percent to 100.1 in November from an upwardly revised 93.3 in October and is 5.9 percent above November 2010 when it stood at 94.5. The October upward revision resulted in a 10.4 percent monthly gain.

The last time the index was higher was in April 2010 when it reached 111.5 as buyers rushed to beat the deadline for the home buyer tax credit. The data reflects contracts but not closings.

Lawrence Yun, NAR chief economist, said the gains may result partially from delayed transactions. “Housing affordability conditions are at a record high and there is a pent-up demand from buyers who’ve been on the sidelines, but contract failures have been running unusually high. Some of the increase in pending home sales appears to be from buyers recommitting after an initial contract ran into problems, often with the mortgage,” he said.

“November is doing reasonably well in comparison with the past year. The sustained rise in contract activity suggests that closed existing-home sales, which are the important final economic impact figures, should continue to improve in the months ahead,” Yun added.

Pending home sales are not affected by the recently published rebenchmarking of existing-home sales because the index uses a different methodology based directly on contract signings, and is adjusted for seasonality.

The PHSI in the Northeast rose 8.1 percent to 77.1 in November but is 0.3 percent below November 2010. In the Midwest the index increased 3.3 percent to 91.6 in November and is 9.5 percent above a year ago. Pending home sales in the South rose 4.3 percent in November to an index of 103.8 and remain 8.7 percent above November 2010. In the West the index surged 14.9 percent to 121.2 in November and is 2.9 percent higher than a year ago.

The National Association of Realtors®, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

 

 

Buying a Foreclosure? What you need to know…

Get prequalified for a loan and set aside funds, and you’ll be ready to purchase a foreclosed home.

When lenders take over a home through foreclosure, they want to sell it as quickly as possible. Since lenders aren’t in the real estate business, they usually turn to real estate brokers for help marketing their properties. Buying a foreclosed home through the multiple listing service can be a bargain, but it can also be a problem-filled process.

Foreclosures offer great opportunities to purchase a home at a low price.

The South Florida area was hit particularly hard with foreclosures. It has a large inventory of bank-owned properties for sale, which represents never before seen opportunities to purchase real estate at low prices.

Should you want to go ahead with buying a foreclosure, here’s a few things to keep in mind.

1. Choose a foreclosure sale expert. Lenders rarely sell their own foreclosures directly to consumers. They list them with real estate brokers. You can work with a realtor who sells foreclosed homes for lenders, or have a realtor find foreclosure properties for you.

2. Be ready for complications. In some states, the former owner of a foreclosed home can challenge the foreclosure in court, even after you’ve closed the sale. Ask your realtor to recommend a real estate attorney who has negotiated with lenders selling foreclosed homes and has defended legal challenges to foreclosures.

Have your attorney explain your state’s foreclosure process and your risks in purchasing a foreclosed home. Set aside as much as $5,000 or more to cover potential legal fees.

3. Work with your realtor to set a price. Ask your real estate agent to show you closed sales of comparable homes, which you can use to set your price. Start with an amount well under market value because the lender may be in a hurry to get rid of the home.

4. Get your financing in order. Many mortgage market players, such as Fannie Mae, require buyers to submit financing preapproval letters with a purchase offer. They’ll also reject all contingencies. Since most foreclosed homes are vacant, closings can be quick. Make sure you have the cash you’ll need to close your purchase.

5. Expect an as-is sale. Most homeowners stopped maintaining their home long before they could no longer make mortgage payments. Be sure to have enough money left over after the sale to make at least minor, and sometimes substantive, repairs.

Although lenders may do minor cosmetic repairs to make foreclosed homes more marketable, they won’t give you credits for repair costs (or make additional repairs) because they’ve already factored the property’s condition into their asking price.

Lenders will also require that you purchase the home “as is,” which means in its current condition. Protect yourself by ordering a home inspection to uncover the true condition of the property, getting a pest inspection, and purchasing a home warranty.

Be sure you also do all the environmental testing that’s common to your region to find hazards such as radon, mold, lead-based paint, or underground storage tanks.

Final Thoughts

Buying foreclosures is not the for the faint of heart. But they do offer great opportunities to buy properties at low prices, if you can handle the additional complexity involving such transactions. Your realtor will be critical in helping you navigate the purchase process successfully.

 

 

Steps You Can Take Now To Improve Your Credit

Boost your credit score by paying the balance on your credit cards in full, and on time, every month.

Here’s how to clean up your credit so you get the least-expensive home loan possible.

Getting the loan that suits your situation at the best possible price and terms makes homebuying easier and more affordable. Here are seven ways to boost your credit score so you can do just that.

1. Know your credit score

Credit scores range from 300 to 850, and the higher, the better. They’re based on whether you’ve paid personal loans, car loans, credit cards, and other debt in full and on time in the past. You’ll need a score of at least 620 to qualify for a home loan and 740 to get the best interest rates and terms.

You’re entitled to a free copy of your credit report annually from each of the major credit-reporting bureaus, Equifax, Experian, and TransUnion. Review them at least once a year to ensure the information is accurate.

2. Correct errors on your credit report

If you find mistakes on your credit report, write a letter to the credit-reporting agency explaining why you believe there’s an error. Send documents that support your case, and ask that the error be corrected or removed. Also write to the company, or debt collector, that reported the incorrect information to dispute the information, and ask to be copied on any materials sent to credit-reporting agencies.

3. Pay every bill on time

You may be surprised at the damage even a few late payments will have on your credit score. The easiest way to make a big difference in your credit score without altering your spending habits is to diligently pay all your bills on time. You’ll also save money because you’ll keep the money you’ve been spending on late fees. Credit card or mortgage companies probably won’t report minor late payments, those less than 30 days overdue, but you’ll still have to pay late fees.

4. Use credit carefully

Another good way to boost your credit score is to pay your credit card bills in full every month. If you can’t do that, pay as much over your required minimum payment as possible to begin whittling away the debt. Stop using your credit cards to keep your balances from increasing, and transfer balances from high-interest credit cards to lower-interest cards.

5. Take care with the length of your credit

Credit rating agencies also consider the length of your credit history. If you’ve had a credit card for a long time and managed it responsibly, that works in your favor. However, opening several new credit cards at once can lower the average age of your accounts, which pushes down your score. Likewise, closing credit card accounts lowers your available credit, so keep credit cards open even if you’re not using them.

6. Don’t use all the credit you’re offered

Credit scores are also based on how much credit you use compared with how much you’re offered. Using $1,000 of available credit will give you a lower score than having $1,000 of available credit and using $100 of it. Occasionally opening new lines of credit can boost your available credit, which also affects your score positively.

7. Be patient

It can take time for your credit score to climb once you’ve begun working to improve it. Keep at it because the more distance you put between your spotty payment history and your current good payment record, the less damage you’ll do to your credit score.

Final Thoughts

These guidelines should help you make an educated assessment of your particular situation on your own. However, always consult your financial adviser or tax preparer for a qualified opinion that takes into account your full financial situation.

 

 

How Much Mortgage Can I Afford?

By knowing how much mortgage you can handle, you can ensure that home ownership will fit in your budget.

How much can I afford?

Homeownership should make you feel safe and secure, and that includes financially. Be sure you can afford your home by calculating how much of a mortgage you can safely fit into your budget.

Instead of just taking out the biggest mortgage a lender qualifies you to borrow, consider how much you want to pay each month for housing based on your financial and personal goals.

Think ahead to major life events and consider how those might influence your budget. Do you want to return to school for an advanced degree? Will a new child add day care to your monthly expenses? Does a relative plan to eventually live with you and contribute to the mortgage?

Still not sure how much you can afford? You can use the same formulas that most lenders use, or try another of these traditional methods for estimating the amount of mortgage you can afford.

1. The general rule of mortgage affordability

As a rule of thumb, you can typically afford a home priced two to three times your gross income. If you earn $100,000, you can typically afford a home between $200,000 and $300,000.

To understand how that rule applies to your particular financial situation, prepare a family budget and list all the costs of homeownership, like property taxes, insurance, maintenance, utilities, and community association fees, if applicable, as well as costs specific to your family, such as day care costs.

2. Factor in your downpayment

How much money do you have for a downpayment? The higher your downpayment, the lower your monthly payments will be. If you put down at least 20% of the home’s cost, you may not have to get private mortgage insurance, which costs hundreds each month. That leaves more money for your mortgage payment.

The lower your downpayment, the higher the loan amount you’ll need to qualify for and the higher your monthly mortgage payment.

3. Consider your overall debt

Lenders generally follow the 28/41 rule. Your monthly mortgage payments covering your home loan principal, interest, taxes, and insurance shouldn’t total more than 28% of your gross annual income. Your overall monthly payments for your mortgage plus all your other bills, like car loans, utilities, and credit cards, shouldn’t exceed 41% of your gross annual income.

Here’s how that works. If your gross annual income is $100,000, multiply by 28% and then divide by 12 months to arrive at a monthly mortgage payment of $2,333 or less. Next, check the total of all your monthly bills including your potential mortgage and make sure they don’t top 41%, or $3,416 in our example.

4. Use your rent as a mortgage guide

The tax benefits of homeownership generally allow you to afford a mortgage payment—including taxes and insurance—of about one-third more than your current rent payment without changing your lifestyle. So you can multiply your current rent by 1.33 to arrive at a rough estimate of a mortgage payment.

Here’s an example. If you currently pay $1,500 per month in rent, you should be able to comfortably afford a $2,000 monthly mortgage payment after factoring in the tax benefits of homeownership.

However, if you’re struggling to keep up with your rent, consider what amount would be comfortable and use that for the calcuation instead.

Also consider whether or not you’ll itemize your deductions. If you take the standard deduction, you can’t also deduct mortgage interest payments. Talking to a tax adviser, or using a tax software program to do a “what if” tax return, can help you see your tax situation more clearly.

Final Thoughts

These guidelines should help you make an educated assessment of your particular situation on your own. However, always consult your financial adviser or tax preparer for a qualified opinion that takes into account your full financial situation.

 

Selling? Get Your Home In Shape!

A clean and tidy home will not guarantee it will sell quickly. But one that isn’t WILL keep it from selling.

Buyers are finicky, and will very quickly strike your home right off the short-list of candidates, regardless of if it meets all other criteria to entertain the property for an offer. If your home shows over and over and does not sell, or only attracts low-ball offers, maybe it’s time to look at how ship-shape it is. If your home is on the market for too long,  realtors who have already seen it will begin to ignore it. It has become “stale”.

So, use this list to make sure it’s ready for prime-time before you start showing it.

Get a Home Inspection

Home Inspection

Get A Home Inspection

Having a home inspection done by a professional inspector is money well spent. Running between $250 – $500, it will provide you with an un-biased, objective opinion by someone who has seen hundreds or even thousands of homes.

Sometimes, inspectors will find things you didn’t know about your home that are in need of attention and would make a potential buyer balk.

If necessary, make any repairs BEFORE putting your home on the market.

What If I Can’t Afford the Repairs?

Sometimes, a home inspection will uncover repairs you can’t afford, but are necessary. You should still get estimates for the work, because they will help a buyer determine if they can afford the home and the repairs. Whenever possible, use all your manufacturer warranties to get things fixed.

Make sure also that all user manuals for your furnace, A/C, washer and dryer, dishwasher, and any other similar appliances are available for the potential buyer to review.

If Repair Costs are Minor. Do It!

Once again. It’s money well spent to make repairs of as many defects as possible. It will give the impression that you have maintained the home well, and a possible buyer will feel at ease that no major problems are to be expected if they decide to make an offer. Small things like sticky or squeaky doors, torn screens, cracked caulking, dripping faucets, stained carpets, cracked drywall, burnt out lights, loose fixtures, worn door handles may seem trivial, but they’ll give buyers the impression your house wasn’t well maintained.

Eliminate the Mess

A lived-in home is not always ready to show. We all have pets, kids and ourselves rushing about to go to school or work, and that means we tend to leave things strewn about.

Clear The Clutter

Clear the Clutter

Unfortunately, that will work against you during a showing. The mess distracts the buyer and keeps from seeing the home itself. It provides too many “other” things that they may not like and will unconsciously influence the impression they form.

Take a tour and make a list of things to clear or clean out – kitchen counters, closets, bedrooms and beds, toys and pet items. Spend a little money on closet organizers if you don’t have them. Get rid of old clothes, shoes that you haven’t used in a while. If you have a lot of furniture that contributes to the impression of “clutter”, put as much as you can in storage, especially the large items. Remove personal items such as photos and wall hangings to depersonalize your home as much as possible.

Put things in perspective, and remove or store as much as you can during the period while you are marketing and showing your home. It’s only temporary!

Clean, Clean and Clean Again

First impressions are usually the strongest and longest lasting. Your home needs to show that it has been cared for and not mistreated or ignored. Once again, a small investment is money well spent, so if you can’t do it yourself, consider hiring a professional cleaning service.

Areas of particular attention should be carpets & flooring, counter tops, cabinets, drawers and behind the stove & refrigerator. Under the sink, bathtubs and showers. Don’t forget to clean windows and doors and the attic or basement if you have one. Open the doors and windows to get fresh air in the home, pay attention to odors and use deodorizer if you have pets.

The Outside Matters Too

Don’t forget the exterior!! The exterior of your home must be made inviting so it will draw buyers inside for a look. So, make sure your roof is clean and if the paint is over 5 years old,  consider giving the exterior walls a fresh coat. Inspect the driveway and fix any cracks or oil stains. Clean and polish door knobs and windows.  Finally, clear any shrubs or overgrown plants that clutter the entrance and finish it off with some landscaping if you can afford it.

Final Thoughts

During showings, your home is “on a date”. It needs to look the best for someone to fall in love with it.

 

 

How do I Price My Home For Sale?

You can do this yourself! Although it’s easier said than done, finding out what other similar homes in your area have sold for recently should get you in the ballpark. To help you do this, here is a list of some tips to follow if you go about it on your own.

Keep in mind that there are many subtle factors to take into consideration before you have an accurate selling price. Which is why I encourage you to have a Comparative Market Analysis (CMA) done by a Realtor®.

For more information about Selling your home and a FREE, no-obligation CMA, visit the Sellers section of my website.

So what should I compare my home to?

Particularly in subdivisions, most homes are built by the builder from a selection of different models. Your best comparable sale is the same model as your house in the same subdivision. If you can’t find that, here are other factors that count:

Location – The closer to your house the better, so try to choose from within a mile or two of your home. Good comparable sales are other houses in your neighborhood, your subdivision, on the same type of street as your house, and in your school district.

Home style – Focus on comparable sales that are the same home style, construction material, roof type, square footage, number of bedrooms and bathrooms,  similar layout (1 or 2 floors), finishes, garage and yard size and community amenities.

Upgrades – Does it have a new kitchen? How about a central A/C or window A/C? Is there crown molding, a deck, or a pool? How big is the pool?

Community – Does your community offer the same amenities (pool, gym, lake, walking trails, etc.) as what you are comparing? Is there a homeowners association and what are the fees?

Sale date – Keep your comparison to homes that have sold recently (2 years max). Even more recently (6 months) in fast moving markets where prices are rising or falling quickly.

Value-add incentives – Was down payment assistance, closing costs contributions, or a free TV/Cable offered to buyers? Make sure you take into account the value of any incentives used to close comparable sales.

Realtor® Agents can do things you may not be able to

Your home will always be different from your neighbor, even when both are the same model. Those differences—such as when your home has one more bedrooms than the comparables or home office— are what your Realtor® Agent will focus on to determine what adds value to the sale price.

Realtor® Agents have been inside many homes in your neighborhood, have access to the tools and are in the best position to find the best comparable sales. They can read the comments a selling agent put into the MLS, seen the ugly wallpaper, and heard what other REALTORS®, lenders, closing agents, and appraisers have said about the comparable sale.

The importance of a professional opinion

If you took it upon yourself to self-appraise the value of your home, do get a professional opinion anyway. Remember, as a homeowner it is hard to be objective and all too easy for self-appraisers to become emotionally attached to the unique qualities of a home. After all, you live there and it is your home!

Your Realtor® Agent will be honest with you and offer an un-biased opinion of how your home sale will stack up against the competition in your immediate area. A professional opinion will help you put in perspective the things that affect the sale price and the ones that don’t, regardless of how much you like them. And don’t take any criticism personally as it is a reflection of the things that add or subtract from your property’s value, and not a reflection of you as a person.

Should you compare against foreclosures or short sales?

No.

Foreclosed properties are often in poor condition because due to very same reason why mortgage payments have not been made, maintenance has also been insufficient or flat-out ignored. Most foreclosed properties are sold below market value and are a poor comparable sale.

Short sales are typically in good condition, because often the seller who was occupying the home a the time of sale has maintained the property. However, they are still distressed sales and as such, the sale price may be substantially lower than market value. Don’t forget that Short sales as forced sales due to personal reasons – divorce, relocation to another city or missed payments and a looming foreclosure – resulting in the seller or the lender being willing to lower the price to unload the property.

Final thoughts

Your Realtor’s® knowledge and experience with the local market is a great asset to have on your side, working for you as you approach the sale of your home. They truly can be the difference between weeks and months of frustration, time wasted and disappointments or a quick and successful sale.

 

 

Welcome to my Real Estate Blog

Welcome to my Blog!

Here you will find interesting articles, thoughts, opinions and news about what is going on in South Florida real estate. If you need another reason to visit frequently, remember this: you will find plenty of tips for homeowners, sellers, and investors and information about South Florida luxury properties which will help you enhance the value of your property.

So, please come back soon. And don’t forget. If you are thinking about buying, investing or selling a property, I am your South Florida Realtor. Call me at my direct number below…

Thanks for visiting!

Elizabeth A Ford

One | Sotheby’s International Realty
401 East Las Olas Blvd Suite #100
Fort Lauderdale, FL 33301
(954) 465-8591 Direct Cell
(954) 522-2831 Office
(954) 522-2832 Fax
eford@onesothebysrealty.com