Category Archives: Blogs

Finally Some Good News for the Condo Market

The demographics and financing policies of the past were stacked against the condo market. The demographics have changed with baby boomers retiring and downsizing and with millennials becoming first time home buyers, while still wanting the walk-able community life of their former apartments. Now the government in a fleeting and surprising moment of bipartisanship have helped to boost the condo market.

In years past the FHA had been a major player in condo financing. However, they have very strict guidelines for FHA approval of these condos. Over time the approved condos have dwindled to 14,000 of the 152,000 condo associations in the U.S. Every two years condo associations had to jump through hoops in the complicated process of FHA re-certification. Many associations just threw in the towel and decided not to play the game anymore.

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Along comes bill H.R. 3700 which should correct many of the key problems of the FHA certification process. The bill allows condo associations to have a 35% owner-occupancy ratio, down from the previous 50% benchmark. This is especially helpful as the housing bubble caused many condos to be underwater and many instead of taking a loss or going through a short sale elected to rent their condo, thus causing higher owner-investor ratios.

In many communities it makes good financial sense for the condo building to rent out space to commercial tenants. Not only does it give a good revenue stream, but also puts amenities within seconds of the residents. Previously FHA considered much of this commercial component excessive, but with the new bill they can judge on a case by case basis and allow for more commercial use.

The new law also prompts the FHA to streamline the now complicated certification process. This will very much help persuade condo associations to certify or re-certify.

Condo associations often charge a small transfer fee when new units are sold, which are spent to benefit all residents. These once disallowed fees to qualify for FHA financing will now be allowed.

It may take some time for FHA to put these updated procedures into use. Consequently, for condo associations to get back on board and become certified. Out comes the crystal ball, I do strongly feel that with time the condo market will see greater appreciation in prices and lower relative average interest rates once these changes get rolling.

Ask, comment, complain, share, etc. Always open and welcome to all interactions, whether through this public forum or one on one. Call or text to 301-221-4760 or email me at IGreathead@Outlook.com. Look forward to hearing from you.

Securing a Home Mortgage: A Crash Course

Incredible amounts of time, money and research go into the home buying process. Most of this time is focused on the finding, researching, and inspecting the actual real estate asset. While this is very important and frankly how I spend most of each day assisting my clients, time needs to be also spent on the financing of this investment.

The basics of the process are finding a lender, locking in a great rate, and deciding what amount you are comfortable financing that yields a monthly payment that is right for you. If you are now or in the future will be buying a home please take a moment to read and integrate some of these suggestions and tips into your financing formula.

So how does one find a lender? Well asking your real estate agent for some good names is a great start. Your agent works for you and how the lenders that he refers performs is a reflection on him/her and your future business and referrals are dependent on him/her doing a great job for you. Thus, an experienced agent has been through the process with many different lenders and has narrowed their list down to the ones that are hardworking, honest, go the extra mile, have good rates, have good products, are kind, and who may fit for different clients and circumstances. Make sure to ask your agent for a couple of names and call a couple to see which one has a personality that works with you and also to get a couple of quotes on rates and products. Do not get quotes from many lenders as each time they pull your credit it is called a ‘hard pull’ and too many can cause your credit score to go down.

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Often big banks are not the best way to go for many people. Local banks or regional or national mortgage brokers that are independent of a bank can often give you more one on one attention, meet with you in person, know your local market, be more creative with their offerings, and move more quickly when there is a bump in the road or something out of ordinary. This can be especially true with people that are recently self-employed, people that have recently started to rent out an asset that was formerly a personal expense, etc. Besides, often the smaller lenders will be selling your loan to a large bank soon after closing, so you will likely be paying your mortgage to a large bank and have the large bank level of telephonic customer service soon after closing.

Rates change daily, sometimes more than once a day! Start watching rates early and often. There are a good number of lenders that offer programs where you can lock in the rate now and if the rate goes down at all or by a certain amount you can float the rate down to the lower rate at least once. But you have the protection that if the rates go up you are not stuck with the higher rate. A small increase in the rate can mean tens to hundreds more a month, which over 30 years can be a substantial cost.

Be a hawk about your credit score! One late payment on a credit card can stay on your credit report for 7 years and drop your FICO score by 60 to 110 points. Also try not to open a new credit card or increase your balance at least 6 months before applying for a mortgage if it can be avoided.

Other things to do when you are getting ready to get a mortgage are: keep originals or have access to all of your bank statements, pay-tubs, tax returns and other important financial documents; provide your Earnest Money Deposit from your own personal bank account or acceptable gift funds; and decide early to either file taxes or file an extension and do either early so that it is registered with the tax authorities (for rental income and self-employment income the banks will want to see it through taxes, especially if you don’t have at least a two year history).

There are other things you should avoid doing during the process: change jobs/employer before asking if it will impact your loan; deposit monies outside of your payroll deposits (especially cash or personal property sale) as they will often require substantial documentation as to it’s source; don’t make major purchases before or while under contract (ie new car, furniture, appliances); change your legal name; take substantial vacation or unpaid time off before closing.

I highly advise talking with a real estate agent about your particular circumstances and having them in your corner during the process. They can be your advocate with any lenders you choose and help to make sure that the process goes smoothly and that you get the best deal you can. I am available to anyone that has any questions, needs, concerns, etc. about this subject and other real estate related subject. Happy mortgage hunting!

Home-ownership: What Will Be Our Policy or Lack Thereof?

The crisp autumn air is among us and swirling around our homes and places of work. We are also in an increasingly popular and publicized presidential primary season. As the candidate’s campaign and debate, one of the country’s largest topics has been largely ignored, housing. I know we have a lot of important immediate issues! Extreme conflicts all over the Middle East, immigration, Russia, China, the economy, etc. However, housing is very important for our quality of life of our country and driver of our economy. 19834607_s

We currently are at a lower home ownership rate than we have been in decades. Traditionally housing accounts for around 18% of GDP, currently it accounts for 15%, since the crash.

Politicians have spoken often about income inequality, but somehow have left one of the key indicators and way for upper mobility out of the equation. Housing has been a way for many to produce wealth. However, there is not enough supply of affordable housing for entrants into the housing market.

More than half of renters pay over 30% of their income on housing costs. Affordable housing is vital to a vast array of people all over the country. With the aging population, health care costs rising, and the viability of social security at risk, where will retirees live afford-ably in the coming decades?

The policies and decisions now will affect our countries well being for years to come! Critics may say that our government’s promotion of home ownership caused the crash and situation that we are currently in. It however was not the promotion of individuals being homeowners that caused the crash, it was the deregulation of commercial banks becoming investment banks, the lack of regulation of government sponsored entities, and private sector short term profit philosophy that were the main contributors to the crisis.

What may that look like in policy, it can mean many things, and varies by the area of the country and specific factors? It could mean larger first time home buyer credits, subsidizing or promoting mixed used developments, co-operatives, crowd funding, rezoning, etc.

So I ask that you keep this issue front of mind. That you talk about it with friends and family. That you write or speak with your local elected officials. We are a very intelligent country, so let’s do the right thing proactively, rather than re-actively so that we can build the country of the future that many can own a slice of.

I would love to hear all your wonderful ideas about housing, please share!

Short-term Rentals Can Be Lucrative, But Do Your Homework

Did you know that currently there are more than 1,000 possible short term rentals in the Washington area. Facilitated by the Airbnb Web site, VRBO and the like, out of towners can rent a private room, a shared room and even an entire apartment or house.

While this cozy alternative to the traditional hotels and motels is inviting, there are many critics and possible downsides to renting your home for short-terms. Condominium unit owners should check their association’s legal documents as most allow only 6 month or one year rentals and some don’t allow any rentals. Ignoring this advice could cost you thousands of dollars, just as it did Kyle Piers in Boston, whom rented his unit for $200-$300 a night and was fined $9,700 for breaking his association’s laws.

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Short-term rentals can be more lucrative than long-term rentals, thus depleting the housing stock for long-term rentals. The Department of Housing and Urban Development, parent agency of the low-cost FHA-insured mortgages, may remove approval status and eligibility if they find that short-term rentals are in a community. Boards should be clear about what they will and won’t allow, with feedback from the communities homeowners.

For homeowners that are thinking of allowing short-term rentals in their home, make sure to do your due diligence. First make sure you use a service that has a detailed vetting process that verifies the identity of your potential guests with forms of ID matching them to social media or other forms of verification. Contact your insurance company to make sure you are fully insured or use the insurance through the booking service you go with. It is best to personally contact potential guests and go with your gut, if you have any hesitation, don’t rent to them. Taking a security deposit is highly advised. Keep your valuables, important documents, and official forms of identification in a safe place, preferably not in the home you are renting.

If you would like more information about short-term rentals or anything real estate related, please do not hesitate to contact me. I am ready and available to help you and yours with anything I can and nothing is too big or too small, if I can’t help directly I will work to connect you with other competent and knowledgeable people who can. If you have stories, information, and/or thoughts about short-term rentals please add them for the benefit of all.

U.S. Housing Bubbles

Looking back at the last 150 years of the US Housing market, it has had a consistent pattern of about every year 18 years peaking real estate sales and prices followed by declines. This coincides to real estate construction peaks driven by land speculation encouraged by the banks and fiscal policy with inappropriate credit creation.

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In 2001, I first noticed the most recent housing bubble, but did not predict it would grow so big and last so long. In the summer of 2005 the market activity peaked, but home prices continued to rise for another year. Inventories were rising in 2006, yet prices continued to rise.

Housing bubbles can be caused by many factors. Some include speculative fever, historically low interest rates, lax lending standards, tax policies (such as exemptions of housing from capital gains), and failure of regulators to intervene among others. Bubbles in certain markets can be caused by bubbles in other markets. The fiscal policies to stimulate the economy after the 90s dot-com bubble had the Fed drop interest rates to a low 1% flooding the U.S. economy with cheap money, with much of it ending up in the real estate market.

House Under Water

Already again, starting in 2012, a new housing bubble is forming in the western United States, especially in California. However, in most markets I predict the rapid appreciation seen since 2012 will slow. One indicator of housing value is the price-to-rent ratio. Measuring the cost to rent versus the cost to own, this ratio indicates the demand overall for housing. Pre-bubbles the price of housing is much higher than the price to rent, showing that the demand for shelter is not in fact rising at the rates home prices are rising. Currently the price-to-rent ratio is near its long-term average, which should result in lower price appreciation. The Fed talking about raising interest rates, yet the devaluation of the Chinese currency and the credit problems in Europe are some of the many competing factors in the Fed’s mind.

Current homeownership rates are also near their long-term average of 65%. In the past the government felt that there was not such a thing as too much homeownership. Now with the recent lessens of the dangers of pushing homeownership to quickly, one would think that a more moderate approach will be taken going forward. Housing wealth (value of all homes in U.S.) to GDP has historically averaged about 1.4 times the GDP, it has recently returned to this ratio. Another indicator that the real estate appreciation will slow, is that investor activity has slowed with one indicator being the recent decline of cash buyers in most of the biggest metropolitan areas.

We are all influenced by the real estate market. Please write me with your comments, ideas, questions, concerns, solutions, and more. One of the main things the largest housing bubble in the history of the United States has taught us is that citizens can’t watch from the sidelines and hope that financial institutions and the government is correctly regulating the market. We all need to have our eye on the pulse as the repercussions are too great to let it happen again!

Eco and Financially Friendly Home Adaptions, an Oxymoron No More

We care about the planet, but many can’t afford the large price tag of solar panels, geothermal heating, temperature regulating walls, triple pane windows, etc. Fret no more, there are many ways to reduce your homes environmental footprint without breaking the bank. We all know the standard ones: buy energy efficient appliances, try to set the thermostats at good levels, having house plants, energy efficient windows, turning off faucets and lights when not in use, etc.

As you might have guessed, many of these come down to conserving energy. Compact fluorescent light bulbs save 66% energy over incandescent bulbs, which equates to 400 pounds of greenhouse gas per bulb replaces. Homes that have multi-socket extension leads and switch them off while the attached devices are not in use, can reduce up to 15% of their energy consumption (ie power used by TVs, etc. while they are on standby). If possible put your fridge in a place that doesn’t get sunlight to save energy and about 4 inches from the wall for proper air flow. Also decide what you want to eat before opening the fridge, rather than leaving open for a long time (similarly for opening oven door while cooking). Using a microwave saves 50% less energy than a conventional oven. Take a shower instead of a bath, which can use as little as 14% of the water a bath uses.

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Heating and cooling are the lion share of most homes energy consumption. During the day open your blinds and drapes to let light in, which can save up to 10% of energy from the sun’s passive heating (reverse for days wanting to keep the house cooler). Using rugs on wooden floors can save 4% – 6% on energy bills. Have a party! Each person in your home can generate the same amount of heat as a 100-watt heater.

What finishes you use in your house also can make a huge difference. The fastest growing plant in the world, bamboo, is much more environmentally friendly to use for flooring than hardwood flooring. Use organic cotton or sustainable bamboo sheets, cotton linens account for 25% of the world’s insecticide use. Toilets account for 30% of total indoor water use, install a low-flow one. Install a low-flow shower head, a family of 4 can save 160,000 liters a year.

Compost organic matter to reduce the need for water, fertilizers, and pesticides as well as reduces the household waste that ends up in a landfill and eases the energy and costs associated with trash collection.

There are so many other simple and cheap things that can be done to nurture the planet we all inhabit. Please write in and share more great ideas! If anyone wants to also look into solar, geo-thermal, additional insulation, etc. please do not hesitate to contact me so I can give you the names of great contractors.

Round 2: Knocked Down but Not Knocked Out

Between 2006 and 2009 about seven million home owners had trouble repaying their mortgage, according to TransUnion, one of three major credit reporting agencies. 2006 being the year prices began to decline and 2009 when the bubble burst. However, this group of people have since diligently worked to meet the qualifications to again secure a mortgage and re-enter the coveted homeowner group. In this year alone (2015) 700,000 United States consumers will be capable of re-entering the housing market. This group, called “Boomerang Buyers”, is expected to grow to 2.2 million (out of the 5.7 million former homeowners) within the next five years.

Mortgage eligibility varies among lenders, so contacting an experienced mortgage broker or real estate agent that knows the standards and products in the mortgage market is highly recommended. Minimum requirements to re-enter the mortgage market generally include: a 620 FICO credit score; no garnishments, outstanding liens, or unpaid judgements; no past due accounts; and four years from a short sale and seven years after a foreclosure.

The boomerang buyers are often unaware that they may qualify to purchase a home again or have a lasting after-taste from their unfortunate experience. Fortunately there are low cost services that can help a person interested in improving their credit. Credit can be monitored for free on websites such as Credit.com. If you are working toward improving your credit score, remember to keep your balances of revolving lines of credit as low as possible, pay your bills so they are not sent to collections, and make loan and credit card payments on time.

Please write about your experience with the housing bubble, re-entering the housing market, or any questions or comments you may have. I am available to help anyone look into financing, plan their entry or re-entry to the housing market, and many related subjects. With the right people on your side your interests will be protected and your home sale or purchase will meet or exceed your needs.

Time is Valuable: Use the Right Real Estate Applications For You

Applications such as Zillow, Trulia, Realtor.com, etc., have been great to educate Real Estate consumers and sellers with what is available on the market, ancillary services, and many other facets to Real Estate. Beyond these common services were you aware of the vast and constantly growing world of Real Estate applications that exist? The Real Estate industry has been slower to adopt and embrace the growth of technology and investments in it had lagged many other industries. Not anymore. In the 4th quarter of 2014 $300 Million was invested in Real Estate Technology. Some of it is happening in fast growing economies of China (Fangdd.com, 80M) and India (CommonFloor.com, 63 M), but there is also a lot of investment in United States Real Estate technology.

Some include UrbanCompass.com (Online property search in NYC and DC), Fundrise.com (Real Estate crowdfunding), Thestorefront.com (short term retail rental space), Breather.com (Work or Relaxing Hourly Rental Space) and many more just starting or on the horizon. Many of these new ventures have been spearheaded by Real Estate professionals themselves by finding solutions to common problems they say in their day to day practice.

Personally as an agent many of these innovations has increased the flow of information to and from my clients. With MRIS Homes application and online clients give me real time information about what properties they like most and which they don’t. Contracts and paper work can be signed electronically saving time and paper for having to do in person signatures. There are many other benefits and here are some of the great applications to aide in your search and ownership of Real Estate.

With Homesnap a picture taken with your phone becomes information about the subject home that can then be sent to an agent to add to a let’s see this one list or something like this, or to simply know how much your buddies home is worth. Sitegeist will provide information about school districts, demographics, and many other things. Some of the information from Sitegeist is information that Real Estate agents can’t ethically provide and thus is a place to obtain that information. Closeit! is an application that will estimate your monthly payments, closing costs, fees, and taxes for a property and even draw up an estimated HUD1. iScape will aide in landscape design by using a picture of your house and importing and moving around various soft and hardscape elements. EasyMeasure allows for one to measure a room, door, window with your phone. HomeZada is your right hand man for home projects. With this application you can plan materials needed, your budget, and time line for a home improvement project as well set reminders for home maintenance.

Of course as with anything there are downsides to the technology as well. The Real Estate search sites are not always up to date and cause people to request houses that are under contract already or not see properties that are on the market when they come on the market, causing less time to be able to put an offer on a house that will sell quickly. Also the estimating algorithms of these sites have very limited data and can be greatly over or underestimating value. Right now about 8 out of 10 listings are undervalued by these estimation tools. This can cause buyers to offer unrealistically too low prices and not get a house or when overestimated offer a higher value than the property is worth and leave money on the table. For Sellers it can cause them to list too low and make less than they could or price too high and have the property sit on the market and sell for less than it would have if priced correctly. Also online home auctions have caused many to lose money being scammed and need to be used with caution.

Other recent technology innovations are the use of drones for aerial photography and videos of properties. Virtual home staging where the home may be empty of furniture but pictures online show it with furniture, making it more appealing.

A good real estate agent can see the features and condition of your property, pull comparable properties, know the appreciation and days on market trends, know the desirability of your neighborhood, and give you a much more accurate estimate of the value of a home.

The future of Real Estate Technology is very promising! It will continue to grow and offer many advantages to the market and professionals that service it. It is important to know the upsides and downsides. The younger generations are becoming a larger portion of the market and they are very comfortable with technology, leading to even quicker adoption and increased usage. Commercial Real estate is lacking in this technology and I believe that commercial Real Estate applications will eventually hit the market that could be disruptive to the two big players of CoStar and Loopnet.

It is always best to have a good Real Estate Agent by your side to educate, assist, negotiate, share trustworthy inspectors, lenders, etc., and be your advocate and protect your interests every step of the way. Technology is a tool and very useful, use it wisely and allow it to help not hinder you! If you have any experiences, comments, questions, please share through the blog or privately by contacting me directly.

Are You Ready to Buy a Home?

Many people ask me, “How do I know when it is a good time to buy a home?”. What they are generally asking is: what is the real estate market like now, what size loan would I qualify for, what can I get for that amount, and what would be my monthly payments? These are good questions and the answers are very subjective to what your life style is and what can be done going forward to get the best possible house for you for the best price with great financing.

There is no question that housing prices in most markets are appreciating. With low interest rates and houses bought 2004-2008 being at par with today’s prices or underwater, there is a lack of supply on the market. I have spoken with many appraisers who saying it is hard to justify many contract prices with purchase prices being well over recent comparable house prices. Of course there are many different markets and sub-markets where the speed of appreciation and depreciation varies greatly, even in a small geographic area. The best bet is to do an inventory of your current life and what you like or don’t like about places you have lived as well as places you have visited. Speaking with an agent can also help tease out great insights into things you may of not thought about and qualities and observations a third party may be able to add. I have a number of tools to help in the process if you aren’t afraid of a little homework. Then once your essential property qualities have been identified the state of the market for that location and the type of dwelling can be given to you.

Weekly average mortgage rates as of April 11, 2015 were 3.66% for a 30-year, 2.93% for a 15-year, and 2.83% for a 5-year ARM. The financing aspect is so important to the process, but many don’t spend enough time getting educated on the options and impact of different types of loan products. There are loan counselors, lenders, and real estate agents that can give you important information in getting the best loan for you. Some key aspects for planning is your debt to equity ratio, how much you have for a down payment and where it is coming from (savings, gift, etc.), how long you plan to own the property, what monthly payment you are comfortable with, and your credit score. Clients of mine have been pre-qualified or pre-approved in as little as an hour upon submitting some basic information and documents, but the important part going in is to know what you may be looking for. Some lenders don’t do FHA loans, some lenders are approved for programs that offer down payment assistance, some lenders can do low down payment loans with no mortgage insurance when certain criteria is met, etc. Also getting pre-qualified is a hard hit on your credit score and should be done with a select few lenders. For people with little money for a down payment, there are many programs that offer assistance with the down payment, some can be found at downpaymentresource.com.

I have done workshops on this very subject that take over an hour to convey all the factors that one should think about. Some more include your current living situation and how flexible it is, the time and effort to commit to spend each week looking at listings an agent sends and visiting properties, whether a standard move in ready home is your thing or would you want an alternative (tear down, land and new house, renovation project, etc.) and so many more factors.

Anyone even thinking about buying a home, please do not hesitate to contact me. Whether it is 3 years away or in a couple of months there are important things to know, plan for, and start to think about at any stage. Also others that have any type of experience about being ready or not for buying a home, please add to the discussion. Whatever you do, buying a home is the most important investment you will make in your life and please have someone working with you that you can trust and will make sure you get what is best for you.

First Quarter 2015 Real Estate Pulse

The sun is shining, daffodils blooming, buds forming on many plants, birds chirping; what is happening in the real estate market? Where do we start…

Well, appreciation of the housing market continues at a steady pace nationally and in many markets. Current home owners have nearly doubled their equity in the last five years, since the recession. The Federal Reserve estimates that Americans’ now have home equity holdings exceeding $11 trillion.

This trend has led to a 36% increase in the last year of home equity lines of credit, according to Consumer Bankers Association. Owner and lender confidence is back in the real estate market. Also with unemployment continuing to decrease, the trade deficit decreasing and many other factors, mortgage rate continue to inch up. Job growth is still at a slow pace and the appreciation of mortgage rates (30 and 15 year) is slowly increasing. The five-year and one year ARM average has held steadily to the same numbers (two weeks for five-year and four weeks for one year). Mortgage applications have also increased with 60 percent of all applications coming from refinances. With interest rates still at low levels 7.1 million borrowers could reap benefits of refinancing, according to Black Knight Financial Services.

Many general statistics have not changed much. Frist time home buyers make 38% of the market with the average age being 31. The average home purchased is 1,900 square feet, three bedrooms, and two bathrooms and was built in 1992. Buyers have financed 90% of their home price on average.

Last year prices appreciated 4.8% in Washington DC with the median home value of $476,600. This year price appreciation has slowed with about 1.5% in January and a projected 2% average for the year. In Maryland the price appreciated 4.4% last year with a median home value of $257,000. The prices appreciated about 4% in January with a predicted price appreciation average for this year to be 2.7%. In Virginia the prices appreciated at 3.1% last year with a median home value of $232,600. The prices are predicted to rise by 1.2% within the next year. Nationally home values have appreciated by 4.9% in the last year with the median home price being $178,700. This year prices nationally are predicted to rise by 2.6%. Please remember that these are state and national averages and there are local Counties, Town, and Neighborhoods that can have much different rates of appreciation/depreciation.

Please contact me to find out specific information about statistics in markets you are looking to sell or purchase. There are many factors such as days on market, inventory, home starts, appreciation, etc. that can help influence when is a good time to buy or sell and where one decides to purchase properties as a residence and investment. Please add the conversation with any experiences, questions, concerns, and ideas.