1. Opportunity Costs. When you rent, you lose out on the chance of equity – which can mean an increase in your home’s value but, even in a down market, can also mean the chance of ever owning the place you live free and clear.
2. Income taxes. If you earn above a certain level of income, the income taxes you’re paying as a renter will be substantially higher than they would be if you owned a home and could deduct your property taxes and mortgage interest.
3. Storage. Many a renter simply has too many personal belongings to stuff into their small apartment, so it’s not uncommon for tenants to also pay for a storage space, without calculating that expense into their “housing” budget.
4. Costs of improving the property. Long-term renters may paint, replace the flooring, and do other improvements to make the place livable. But since it’s not technically “their” home, when they do move out, all the cash they invested is lost. In fact, some landlords may require them the pay or forfeit deposit money to bring the place back to its original, neutral décor.
5. Lost deposits. Anyone who has rented more than a couple of apartments is well aware of the chances of losing some or all of your security or peet deposits, no matter how well you care for your home.
Thursday, January 20, 2011
Tuesday, January 18, 2011
2011: What’s On the Horizon for Real Estate
To truly understand the real estate market and be able to identify trends that impact your lives as agents, I also do an enormous amount of research into things that most agents don’t even think about when they hear the words “real estate”. I research dozens of sources – and I’m not talking about CNN or the nightly news.
Because I research the market, and the economy, on a daily basis I have the ability to look at where we’ve been, and have a pretty good sense of where we’re headed. Which brings me to my 2011 predictions.
Every year I do predictions for the coming year. And in the 11 years I’ve been doing this, my success rate is 98%. You see, numbers don’t lie. Economic indicators are just that – indicators of where we’re headed.
Here are three of my predictions for 2011:
Home Prices
While most national and local economists are forecasting continued declines in the price of homes, I completely disagree. I believe 2011 is the year prices will increase. There are two reasons for this:
1) the American Recovery and Reinvestment Act (ARRA) is pumping jobs into the economy. More jobs equate to more home buyers … and more home buyers equate to more demand for housing, leading to an increase in home prices in many areas. Those areas that are highly sensitive to the job market will be affected more—positively when there are more jobs; negatively when there are fewer jobs.
2) The affordability index is at an all-time high, which also lures buyers into the marketplace. Both the ARRA and the affordability index are contributing factors in 2010 that will peak in 2011. Home prices should increase slightly in 2011. Look for national increases of 2-3%, and increases of 4-5% in the State of Washington.
Interest Rates
Mortgage rates will likely rise slightly throughout 2011, exceeding the 5% level before year-end. However, rates should remain below 5% until May. The Federal Reserve will not raise rates until the unemployment rate decreases significantly, and will keep the short-term interest rate near zero through 2011.
Consumer Confidence
Research from a variety of sources shows that consumer confidence was on the rise in the last quarter of 2010. This important index rose to 49.9% in October of 2010, and to 54.1% in November of 2010. Additional reports indicate a 5.5% increase in retail sales in the period from November 5 to December 24, as consumer spending continued to make a comeback. While there is always some increase in consumer confidence after an election, if the index continues to improve at this level it will most certainly help the economy and the real estate market in 2011.
Compliments of Denise Lones
Because I research the market, and the economy, on a daily basis I have the ability to look at where we’ve been, and have a pretty good sense of where we’re headed. Which brings me to my 2011 predictions.
Every year I do predictions for the coming year. And in the 11 years I’ve been doing this, my success rate is 98%. You see, numbers don’t lie. Economic indicators are just that – indicators of where we’re headed.
Here are three of my predictions for 2011:
Home Prices
While most national and local economists are forecasting continued declines in the price of homes, I completely disagree. I believe 2011 is the year prices will increase. There are two reasons for this:
1) the American Recovery and Reinvestment Act (ARRA) is pumping jobs into the economy. More jobs equate to more home buyers … and more home buyers equate to more demand for housing, leading to an increase in home prices in many areas. Those areas that are highly sensitive to the job market will be affected more—positively when there are more jobs; negatively when there are fewer jobs.
2) The affordability index is at an all-time high, which also lures buyers into the marketplace. Both the ARRA and the affordability index are contributing factors in 2010 that will peak in 2011. Home prices should increase slightly in 2011. Look for national increases of 2-3%, and increases of 4-5% in the State of Washington.
Interest Rates
Mortgage rates will likely rise slightly throughout 2011, exceeding the 5% level before year-end. However, rates should remain below 5% until May. The Federal Reserve will not raise rates until the unemployment rate decreases significantly, and will keep the short-term interest rate near zero through 2011.
Consumer Confidence
Research from a variety of sources shows that consumer confidence was on the rise in the last quarter of 2010. This important index rose to 49.9% in October of 2010, and to 54.1% in November of 2010. Additional reports indicate a 5.5% increase in retail sales in the period from November 5 to December 24, as consumer spending continued to make a comeback. While there is always some increase in consumer confidence after an election, if the index continues to improve at this level it will most certainly help the economy and the real estate market in 2011.
Compliments of Denise Lones
Short sales spike across South Florida in 2010
MIAMI – Jan. 17, 2011 – The number of homeowners completing short sales rose sharply across South Florida in 2010, following the release of government guidelines designed to simplify the process.
But real estate agents and housing analysts say other factors besides the new rules have largely driven these transactions over the past year.
Many potential buyers have steered away from foreclosed homes since foreclosure freezes began last fall, concerned that the deals would be delayed or canceled while lenders investigated possible wrongdoing by so-called robo-signers. As a result, banks have been more willing to approve short sales.
Even without the effect of moratoriums, lenders have warmed up to short sales, realizing they can dispose of properties more quickly and make $30,000 to $50,000 more per sale than they could by foreclosing on a home, said Peter Zalewski, principal at CondoVultures.com, a Bal Harbour-based consulting firm.
“My experience was very positive,” said Fernando Incarnacao, 54, who recently arranged a short sale on his three-bedroom Parkland home. “I’m very happy with the outcome. Now I can kick back.”
He owed about $321,000 and hoped to avoid foreclosure, so he listed the home with real estate agents Michael Citron and Rosy Baron. They worked with lender U.S. Bank to complete a $230,000 deal that closed Jan. 5 after less than four months.
There were 16,767 short sales in Palm Beach, Broward and Miami-Dade counties last year, up 49 percent from 2009 and 437 percent from 2008, according to CondoVultures.
In a short sale, the homeowner gets approval to sell the property for less than what’s owed on the mortgage, and the lender typically forgives the difference.
The transactions are seen as a key to reducing the massive inventory of available properties, which will go a long way to solving the nation’s housing woes, now heading into a sixth year.
The most recent figures from Zillow.com show that roughly four in 10 single-family mortgages in South Florida are worth more than the homes, making short sales one of the only viable options for “underwater” homeowners who need to move.
In the past few years, though, sellers and buyers complained that lenders took several months or longer just to consider short sale offers. Frustrated buyers walked away during the delays, and properties lingered on the market, prolonging the housing slump and the recession.
To address those concerns, the U.S. Treasury last spring introduced a voluntary program called Home Affordable Foreclosure Alternative, which included a series of guidelines governing short sales.
The rules call for lenders to approve or deny offers within 10 business days. Also, sellers, loan servicers and investors who own the mortgages receive financial incentives for completing the deals.
Sellers don’t have to repay any of the remaining debt and also get $3,000 in moving expenses. Servicers get $1,500, while investors owning the first mortgage receive a maximum of $2,000 for allowing up to $6,000 of sale proceeds to be distributed to less senior mortgage holders.
The guidelines were supposed to take effect by April 2010, but some lenders didn’t start following them until the summer, Treasury spokeswoman Andrea Risotto said.
“It’s still pretty early in the program’s life,” she said.
Some real estate agents remain skeptical.
Terry Story, a real estate agent for Coldwell Banker in Broward and Palm Beach counties, said the Treasury program hasn’t meant anything to her clients.
“I haven’t heard of any success stories with it,” she said.
Douglas Rill, an agent for Century 21 America’s Choice in West Palm Beach, said lenders seem to be approving more short sales because they realize it makes good business sense. Also, he said, a new automated computer system that banks use is expediting the process.
Joe Kohn, a Fort Lauderdale lawyer, agrees that some banks are getting better at executing short sales. Still, no lender that he has worked with on a transaction has stuck to a 10-day deadline.
“There’s no 10 days,” Kohn said. “That’s not how it happens.”
Two of the nation’s largest lenders insist they follow the government guidelines.
A spokeswoman for Chase said in an e-mail the lender does respond to bona fide offers within 10 days “under normal circumstances.” Bank of America responds “well within 10 days” for short sales approved under the program, spokeswoman Jumana Bauwens wrote in an e-mail.
But not all homeowners who want to complete short sales qualify for the government program. If a property isn’t eligible, lenders aren’t subject to the 10-day deadline and don’t receive the incentives. In those cases, deals still tend to drag.
First-time buyer Martin Austin said he offered $84,900 for a two-bedroom villa last fall in Boynton Beach.
Austin said the lender, Bank of America, didn’t respond for more than 80 days. When it did, the bank said it wanted more money for the house – $104,000 – and the deal collapsed, Austin said.
Bauwens said the property wasn’t eligible for the short sale program, but she denied it took so long for the lender to respond.
“I was in shock,” said Austin, a 49-year-old waiter, standing outside another short sale nearby that he expects to close on this month. “If I would have known, I would have told my Realtor, ‘No short sales.’“
But real estate agents and housing analysts say other factors besides the new rules have largely driven these transactions over the past year.
Many potential buyers have steered away from foreclosed homes since foreclosure freezes began last fall, concerned that the deals would be delayed or canceled while lenders investigated possible wrongdoing by so-called robo-signers. As a result, banks have been more willing to approve short sales.
Even without the effect of moratoriums, lenders have warmed up to short sales, realizing they can dispose of properties more quickly and make $30,000 to $50,000 more per sale than they could by foreclosing on a home, said Peter Zalewski, principal at CondoVultures.com, a Bal Harbour-based consulting firm.
“My experience was very positive,” said Fernando Incarnacao, 54, who recently arranged a short sale on his three-bedroom Parkland home. “I’m very happy with the outcome. Now I can kick back.”
He owed about $321,000 and hoped to avoid foreclosure, so he listed the home with real estate agents Michael Citron and Rosy Baron. They worked with lender U.S. Bank to complete a $230,000 deal that closed Jan. 5 after less than four months.
There were 16,767 short sales in Palm Beach, Broward and Miami-Dade counties last year, up 49 percent from 2009 and 437 percent from 2008, according to CondoVultures.
In a short sale, the homeowner gets approval to sell the property for less than what’s owed on the mortgage, and the lender typically forgives the difference.
The transactions are seen as a key to reducing the massive inventory of available properties, which will go a long way to solving the nation’s housing woes, now heading into a sixth year.
The most recent figures from Zillow.com show that roughly four in 10 single-family mortgages in South Florida are worth more than the homes, making short sales one of the only viable options for “underwater” homeowners who need to move.
In the past few years, though, sellers and buyers complained that lenders took several months or longer just to consider short sale offers. Frustrated buyers walked away during the delays, and properties lingered on the market, prolonging the housing slump and the recession.
To address those concerns, the U.S. Treasury last spring introduced a voluntary program called Home Affordable Foreclosure Alternative, which included a series of guidelines governing short sales.
The rules call for lenders to approve or deny offers within 10 business days. Also, sellers, loan servicers and investors who own the mortgages receive financial incentives for completing the deals.
Sellers don’t have to repay any of the remaining debt and also get $3,000 in moving expenses. Servicers get $1,500, while investors owning the first mortgage receive a maximum of $2,000 for allowing up to $6,000 of sale proceeds to be distributed to less senior mortgage holders.
The guidelines were supposed to take effect by April 2010, but some lenders didn’t start following them until the summer, Treasury spokeswoman Andrea Risotto said.
“It’s still pretty early in the program’s life,” she said.
Some real estate agents remain skeptical.
Terry Story, a real estate agent for Coldwell Banker in Broward and Palm Beach counties, said the Treasury program hasn’t meant anything to her clients.
“I haven’t heard of any success stories with it,” she said.
Douglas Rill, an agent for Century 21 America’s Choice in West Palm Beach, said lenders seem to be approving more short sales because they realize it makes good business sense. Also, he said, a new automated computer system that banks use is expediting the process.
Joe Kohn, a Fort Lauderdale lawyer, agrees that some banks are getting better at executing short sales. Still, no lender that he has worked with on a transaction has stuck to a 10-day deadline.
“There’s no 10 days,” Kohn said. “That’s not how it happens.”
Two of the nation’s largest lenders insist they follow the government guidelines.
A spokeswoman for Chase said in an e-mail the lender does respond to bona fide offers within 10 days “under normal circumstances.” Bank of America responds “well within 10 days” for short sales approved under the program, spokeswoman Jumana Bauwens wrote in an e-mail.
But not all homeowners who want to complete short sales qualify for the government program. If a property isn’t eligible, lenders aren’t subject to the 10-day deadline and don’t receive the incentives. In those cases, deals still tend to drag.
First-time buyer Martin Austin said he offered $84,900 for a two-bedroom villa last fall in Boynton Beach.
Austin said the lender, Bank of America, didn’t respond for more than 80 days. When it did, the bank said it wanted more money for the house – $104,000 – and the deal collapsed, Austin said.
Bauwens said the property wasn’t eligible for the short sale program, but she denied it took so long for the lender to respond.
“I was in shock,” said Austin, a 49-year-old waiter, standing outside another short sale nearby that he expects to close on this month. “If I would have known, I would have told my Realtor, ‘No short sales.’“
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