Monday, June 26, 2017

Painting Your Home This Color Increases Your Home's Value by $5,440

Color psychology probably doesn't affect your life on a day-to-day basis – until you're trying to sell your home, that is. The color of your walls can actually raise or lower the value of your property, a dollar amount that changes annually along with the year's color trends. Zillow recently examined over 32,000 photos of sold homes around the country, dissecting how certain colors impact their closing price. While some of the don'ts from 2016 still stand, 2017 has ushered in brand-new swatches of profitable paint colors. Here are the dos and don'ts of paint colors in 2017, as originally reported by MarketWatch.
DO:
Keep it light. "Painting walls in fresh, natural-looking colors, particularly in shades of blue and pale gray, not only make a home feel larger but are also neutral enough to help future buyers envision themselves living in the space," said Zillow's chief economist, Svenja Gudell. Homes with blue bathrooms, specifically lighter shades of blue or periwinkle, brought in roughly $5,440 more than expected. Similarly, light blue-gray kitchens sold for $1,809 more, while natural hues like oatmeal and pale gray consistently overperformed.
DON'T:
While a yellow kitchen brought in $1,100 more in 2016, the sunny hue is now lowering your home's value by an estimated $820. Similarly, walls with no color at all (read: stark white) had the most negative impact on sale prices. "Homes with white bathrooms, for instance, sold for an average of $4,035 less than similar homes," noted Zillow. Finally, terra-cotta walls continued to slash a home's value by $2,031 – a $1,000 increase from last year.

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Sunday, May 21, 2017

How Long Can Orange County Housing Stay Expensive?

Are the finances of Orange County homebuying out of whack?
At least by one measure, a home purchase’s financial hit to a typical household budget is nearing the insanity of the housing bubble of a decade ago. And these recent costs are even on par with the late 1980s housing boom, when inflation is factored into the equation.
A strong job market and a shortage of homes to buy has created rising home prices. Toss in higher interest rates and you get one estimate of recent homebuyers’ monthly payments at a nine-year high. CoreLogic says a typical buyer in March who financed their Orange County purchase would be paying $3,228 a month on the mortgage. CoreLogic arrives at the estimate by studying public details on each purchase mortgage made.
That’s a jump of $266 a month or 9 percent in a year. And it’s up $1,280 a month, or 66 percent, since the cyclical bottom in December 2011. (Yes, that was the time to buy!)
This recent jump in house pricing — and CoreLogic’s math includes newly built and existing single-family homes, townhomes and condos — is certainly a jolt to any house hunter’s budget. But it’s not unfamiliar territory for the Orange County market.
CoreLogic stats show between June 2004 and February 2008 this measure of homebuyer payments ran above March 2017’s level. But that era’s housing market — clearly overheated by easy lending terms — soon collapsed into the Great Recession.
Then factor inflation into the math. That makes housing costs in the middle of last decade look even sillier: One-third higher at that insanity’s peak vs. the latest costs. Ouch!
Curiously, when you look at inflation-adjusted mortgage payments back even further, you learn that 1989’s inflation-adjusted house payment for a buyer basically equaled today’s costs.
In those days, a booming local economy had a few dark clouds on the horizon. Unemployment had dipped below 4 percent, much like it has done lately. Plus, another similarity to 2017: a burgeoning local slow-growth movement threatened a needed supply of new residences.
Yes, the Orange County price tags looked leaner. The median selling price for all residences in 1989 peaked at $218,000. For March 2017, it was $665,000. Yet local paychecks were being stretched three decades ago, too. Orange County’s median household incomes ran around $40,000 as the 1980s ended. Today, it’s pushing $90,000.
Yes, home prices have essentially tripled. Incomes grew, but not as much. But I didn’t instantly recall this tidbit: the typical rate on a 30-year fixed mortgage 28 years ago was slightly above 10 percent. That is T-E-N percent. And some folks complain we’re now above 4 percent.
Three decades of inflation also has roughly doubled the costs of everyday goods. To jog your memories: In 1989, postage stamps were a quarter; gasoline ran about a buck a gallon, and a movie ticket would often cost you $4. Another “bargain” of that day: After the second stock market crash in two years, the Dow Jones Industrial Index fell to just above 2,000 in late 1989. It’s above 20,000 this month.
So, an Orange County buyer’s typical house payment in June 1989 was $1,679 — roughly half of 2017. But converted into today’s dollars to account for inflation, that payment translates to $121 more a month than the average payment this March.
Additionally, many late 1980s buyers took on added risks with the popular mortgages of the day. To save money, adjustable-rate loans were almost half of 1989’s financed purchases In March 2017, just 1-in-6 buyers used adjustable financing.
History reminds us that the late 1980s real estate upswing ended poorly, too. Aggressive lending by failing savings and loans led to overbuilding. U.S. defense-spending cutbacks, spurred by Soviet Russia’s demise, hit Southern California hard, eliminating numerous good-salaried jobs. Homebuying shrank as prices went limp, taking most of the 1990s to regain any serious momentum.
Orange County housing has been expensive for a really long time, and the affordability headaches created often lead to much suffering inside and outside of the ownership game.
Even in an advancing economy, housing’s no sure bet. So … is today’s market a just little out of balance or amid a mania that is overpricing deals and priming the market for another tumble?

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Monday, March 20, 2017

Southern California's House Flipping Takes A Dip

Southern California isn't exactly flipping over real estate.
The quick-buck, buying-fixing-selling residential real estate bets were a huge part of housing in both the boom and bust periods a decade ago. Today’s market presence of these speedy resales is nowhere near the crazed heights surrounding the bubble and its subsequent bust.
But the current buzz is more sizzle than sales. Flipping became part of pop culture with the help of real estate-themed reality TV shows like “Flip or Flop,” which started in Orange County.
New data from Attom shows flips were on the upswing nationally in 2016 while declining locally.
The region’s four counties – Los Angeles, Orange, Riverside and San Bernardino – had a combined 11,148 flips in 2016, defined by Attom as homes bought and resold within a year by non-related parties. That local flipping pace was down 3 percent from 2015 and off 49 percent in five years.
Those flipping dips run contrary to slight growth nationwide in 2015 – 193,000 flips, up 3 percent in a year – and slower longer-term decline – down 18.5 percent since 2011.
“Many local flippers are being priced out of the Southern California market and are either going further inland or to other states to flip, or not flipping at all,” Attom’s Daren Blomquist says. “One flipper I talked to in Norwalk who has been doing this for 25 years said he has completely stopped buying and even compared the market to what he was seeing in 2008.”
It’s curious that Orange County, home to the popular “Flip or Flop” show, is the region’s least-likely place to flip.
In 2016, 1,588 flips notched only 5 percent of sales. Flipping in O.C. was down 5 percent in a year and off 54 percent in five years.
One good reason for limited flipping was that Orange County was the priciest place to flip in the region. The median purchase price of $465,000 vs. selling at $585,000, translated to $120,000 in typical gross profits before an expense are incurred. Flips were pricy and slow: an average 186 days, or roughly six months, up 10 days in a year – the region’s largest flip-speed slowdown.
Conversely, San Bernardino County had the region’s largest share of flips, with 1,978 quick sales equaling 7.9 percent of last year’s sales.
Why? It’s the region’s cheapest place to flip: Median purchase price was $182,750 vs. selling at $260,000, or a typical $77,250 profit.
San Bernardino flipping was down only 1 percent in a year and off 46 percent in five years. Flips took 181 days (six months) last year, flat vs. 2015 – the only local county not to see its deal speed lengthen.
Los Angeles County had 5,470 flips, deals that made up 7.6 percent of all sales and a pace down 2.3 percent in a year and off 43.5 percent since 2011. Median purchase was $362,121 vs. selling $489,000, or a $126,879 typical profit – highest in the region. Flips took 193 days last year, three more than 2015.
And Riverside County had 2,112 flips, 6.1 percent of sales and down 5 percent in a year and off 58 percent since 2011. Median purchase was $235,000 vs. selling at $310,000, or a profit of $75,000. Flips took 185 days last year, up four days in a year.
But don’t be fooled by some of these slipping trends in local flipping because quick resales are still a noteworthy slice of the Southern California housing market.
Flips were 6.8 percent of 2016 all home sales in the four local counties vs. 5.7 percent nationwide and 6.3 percent statewide.

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Tuesday, January 10, 2017

FHA to Cut Fees, Lowering Rates For First-Time Home Buyers

The Obama administration cut mortgage-insurance premiums charged under a government program that’s popular with first-time home buyers with little money for a down payment, a move that may ease the burden of rising interest rates.
The annual fees the Federal Housing Administration charges to guarantee mortgages it backs are being cut by a quarter of a percentage point, the Department of Housing and Urban Development said in a statement on Monday. With the reduction, the annual cost for most borrowers will be 0.60 percent of the loan balance.
The change -- which could be reversed after President-elect Donald Trump takes office -- may hurt bond investors, as it speeds up repayment on some securities. Private insurers that compete with the FHA also could suffer. Shares of insurers MGIC Investment Corp., Radian Group Inc. and Essent Group Ltd. fell 2 percent to 3 percent after the announcement.
The reduction, which lowers the cost of a home for those who use the FHA, is charged to mortgage borrowers. HUD on Monday said the fee cut would save new FHA-insured homeowners an average of $500 this year. The cut would take effect on Jan. 27.
The Obama administration’s decision may cause tension with some Republicans who say a fee cut could put taxpayers at risk by reducing the amount of money the agency collects to buffer against mortgage defaults. The FHA is part of HUD, whose secretary sets the fees. The decision will put the spotlight on Ben Carson, nominated as HUD secretary of under Trump. Carson declined to comment on whether he would reverse the decision, according to a spokeswoman.
HUD Secretary Julian Castro said on a call with reporters he had no reason to believe the cut would be altered by the Trump administration. Trump’s transition team received notification of the premium cut shortly before its public announcement, he said.
“It’s time the FHA passed along some modest savings to working families,” Castro said.
Mark Calabria, director of financial regulation studies for the libertarian Cato Institute in Washington, described the cut in an e-mail as a “bad idea, and irresponsible for an administration on its way out the door.”
The FHA doesn’t make mortgages. It sells insurance, paid by borrowers, on loans protecting investors in case of default. The program allows borrowers to get a mortgage with a down payment of as little as 3.5 percent and a credit score of as low as 580, on a scale of 300 to 850. That makes it one of the most forgiving mortgage programs and popular among first-time home buyers.
Some in the real-estate industry have been calling for another fee cut and heralded Monday’s move.
“Dropping mortgage insurance premiums today will mean a whole lot more responsible borrowers are suddenly eligible to purchase a home through FHA,” William Brown, president of the National Association of Realtors, said in a statement.
The FHA last cut premiums two years ago. That cut, which came as rates dropped and lowered the annual fee for most borrowers to 0.85 percent from 1.35 percent, led to a wave of refinances.
The cut announced Monday will likely have less of an impact, in part because mortgage rates have risen sharply since Trump’s election. The effective FHA mortgage rate at the end of last year was about 4.32 percent, according to the Mortgage Bankers Association, compared to 3.71 percent for the week ended November 4.
Some of the cut’s impact could also be washed out if investors in Ginnie Mae-backed mortgage bonds, which include loans insured by the FHA, drive rates up after the cut.
The FHA required a $1.7 billion taxpayer infusion after the financial crisis, and just in 2015 met its statutory minimum capital requirements for the first time since then.
There is precedent for a change in mortgage fees shortly before a change in leadership. In 2013, Edward DeMarco, then acting director of Fannie Mae’s and Freddie Mac’s regulator, announced that he would direct the mortgage-finance companies to increase fees. Incoming director Mel Watt soon after said he would put a stop to the fee changes.

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