Coldwell Banker Dominates Luxury Real Estate Market

Lest you have any doubts that Coldwell Banker dominates the luxury real estate market, read this piece from Forbes. The next time you need to sell your house or purchase a home, come to me and Coldwell Banker first. We've been around for over 100 years and we're still on top! Nobody can give your luxury listing the kind of exposure that we can give it.

http://www.forbes.com/sites/morganbrennan/2012/09/11/neighborhoods-where-10-million-home-sales-are-the-norm/

Thinking of Refinancing Your Jumbo Mortgage?

Here is a simple article from the New York Times about some of the potential benefits of refinancing your jumbo loan into a conventional loan.

http://www.nytimes.com/2012/09/02/realestate/mortgages-downsizing-the-jumbo-loan.html

Stainless Steel Appliances: Love Them or Ready for Something New?

For at least the past 15 years stainless steel appliances have dominated the kitchen landscape. Before that the white kitchen dominated the 1980s, and prior to that our nation had a love affair with bisque and mushroom tones as it recovered from its avocado fetish and wood laminates. But 15 years is a long time for any one trend to stay around, so I find myself asking the question, "What's next?". Maybe I ask this question because I am tired of buying special stainless steel wipes to constantly clean my appliances.

It turns out that a lots of manufacturers have been asking the same question. Perhaps taking a cue from the stainless steel craze, General Electric has introduced a line of appliances in slate, which is a muted grey. Then there are the custom kitchen with the appliances blending into the rest of the custom woodwork. Jenn-Air launched its oiled bronze appliances in 2007 but they seem to have gotten a tepid response. Personally I can't understand why, they look fabulous in a kitchen with warm hues. Glass is also making an appearance, like the black glass on the Sub-Zero E Series line and the glossy white appliances from Whirpool Corp.'s Ice Collection.

At the high end of the market you see brands like Viking, which has 23 color choices but, according to their design director, 80 percent of their sales are for stainless appliances. Then there is La Cornue, maker of the Faberge egg of ovens. Like a crown jewel in the kitchen, they come in all kinds of colors.

In Florida people tend to move every 3-5 years on average (the national average is 5-7 years). With that in mind, if you are redoing your kitchen now, it would be smart to consider whether stainless steel is still going to be de rigueur in five years. Nothing lasts forever my friends, just ask all of the avocado-colored appliances.

Highest Rates of Negative Equity

According to CoreLogic, the number of underwater mortgages fell from 12.1 million (25.2 percent) at the end of 2011 to 11.4 million (23.7 percent) – by the end of the first quarter of this year. However, that number is a national average, so the figure varies by state. This is a list of the seven states with the highest number of homeowners with negative equity, according to the Wall Street Journal:

 Nevada: 61.2%
 Florida: 45.1%
 Arizona: 43.4%
 Georgia: 37.2%
 Michigan: 35.6%
 California: 30.5%
 Illinois: 28%

Chase Reducing Principal Balances, Interest Rates

As part of a settlement with the government after the robo-signing scandal, Chase has begun sending letters to is borrowers offering them either a principal balance reduction, an interest rate reduction, or, for some borowers, both. For homeowners who are delinquent on payments, Chase will make them an offer to reduce the principal balances or interest rates (or both). For those who are not delinquent but have negative equity, Chase will automatically reduce the interest rates, amounting to an average savings of $300 per month.

Interest Rates

Interest rates increased slightly for the third week in a row, though they continue to hover around their historic lows. According to Freddie Mac, the average rate for a 30-year fixed mortgage rose to 3.62 percent from 3.59 percent. The average rate for a 15-year fixed mortgage increased from 2.84 percent to 2.88 percent.

Citizens Reviewing Policy Changes

Citizens Property Insurance Corp. is modifying its home reinspection program that began in 2010 after consumers vociferously complained about the $137 million increase in premiums. Some of Citizens' customers saw their insurance rates increase after they lost premium discounts upon the reinspections. In some cases the discounts were lost simply because the inspectors were unable to get into the attics because boxes were in their way and they refused to wait while the homeowners moved them.

The changes include creating new ways for the customers to dispute the first inspection report and allowing a second, free inspection. It has not yet been determined whether these changes will be retroactive, but the 175,000 property owners whose premiums have risen by an average of $810 will undoubtedly push for the changes to apply to them as well.

Last year 200,000 properties were inspected and another 90,000 are scheduled for inspections this year. Approximately 75 percent of those inspections resulted in property owners losing their discounts, which lead to an average 30 percent increase in their rates.

Average Closing Costs Falling

Last week Bankrate.com issued a report that said that the average closing costs, including the mortgage origination fees (which fell 1 percent), decreased 7 percent nationally between 2011 and 2012. The report's data was gathered in June from a survey of up to 10 lenders from all 50 states and Washington D.C. and was based on a $200,000 mortgage. This is great news for propsective homebuyers because the price they pay for the home they buy is only a percentage of the total cost they are going to pay once they consider their interest payments and closing costs. Combined with the historically low interest rates, this adds incentive for would-be buyers to finally buy.

Florida ranked as the fourth most expensive state, with an average mortgage origination fee of $1,623 and title and closing costs of $2,772 for a total of $4,395. Based on a $200,000 mortgage, closing costs are 2.2 percent (remember that they'll be higher when factoring in the actual sale price, not just the mortgage). New York is the most expensive state with a $5,435 total. The least expensive state is Missouri at $3,006. The national average is $3,754.

The educate yourself further on closing costs, read the below article from the New York Times and the Bankrate.com report. The more educated you are, the smarter your home purchase will be.


NYT Closing Costs
Bankrate.com Report

Even Rich People Lose Homes to Foreclosure

It is easy to follow the news about all of the dilapidated foreclosed homes that are for sale. But what about getting your hands on a custom home with 9,000 sf and a fabulous pool? What if it had the added interesting sidenote of being owned by a celebrity? Forbes just wrote an interesting article on this very topic. Who knows? Maybe you could sleep in the same bedroom as your favorite celebrity.

http://www.forbes.com/sites/morganbrennan/2012/08/15/foreclosure-woes-of-the-rich-and-famous/

Warren Buffett and the Housing Recovery

Even Warren Buffett is getting in on the housing recovery. Smart investors know that the best time to buy is when the market is down. Click on the link to the video below.

Wall Street Journal

Why Didn't Your Short Sale Get Approved?

If you have been involved with a short sale that did not go through, blame could lie with the second lien holder. In many cases the seller and the first lient holder are in agreement on a sale but the second lien holder prevents that deal from closing. In order to stop that from happening as much, a bill called the Fast Help for Homeowners Act is in Congress. If it wins approval, second mortgage holders on federal mortgages would be required to make a decision on a proposed short sale within 45 days. If they do not, the short sale will automatically be approved on the 46th day.

Home Price in Major Cities Increased in May

The Stand & Poor's/Case-Shiller home price index, released last Tuesday, said that there were price increases in all of the 20 cities the index tracks and that nationally the prices rose 2.2 percent from April to May. This was its second increase after seven months of flat or lowered prices. The biggest price changes occurred in Chicago, Atlanta, and San Francisco. The index has decreased 0.7 percent since May of last year, which is the smallest decline since September 2010. As a point of comparison, the April 2012 year-over-year comparison showed a 1.8 percent decline.

Interest Rates

According to Freddie Mac, the average rate on a 30-year fixed mortgage increased to 3.55 percent last week after hitting record lows in the last four consecutive weeks. The average 15-year fixed mortgage was bumped up to 2.82 percent, up from 2.80 percent two weeks ago.

Citizens To Raise Rates 8.8 Percent

The Citizens Property Insurance Corp. has approved an average 8.8 percent rate increase for 2013 for most of its homeowner policyholders. The increase will be higher in areas at risk for sinkholes, such as Tampa. Citizens must now submit the rate increase to the state's Office of Insurance Regulation for approval, which must be given within 45 days.

The rate increase is meant to help the state-owned Citizens be able to fund its policies should a hurricane strike and to encourage homeowners to seek alternate insurance. Citizens is meant to be the insurer of last resort in Florida.

Fannie Mae and Freddie Mac Not Allowed to Reduce Principal

The Federal Housing Finance Authority (FHFA), which is independent of the Obama administration, announced on Tuesday that Fannie Mae and Freddie Mac will not be allowed to reduce the principal balance on home loans for borrowers at risk of default. According to Edward DeMarco, the  FHFA's acting director, the risks of strategic defaults outweighed the benefits. The FHFA's anlysis showed that 11 million homeowners have negative equity. Of that number, between 74,000 and 280,000 borrowers would have been eligible for principal reduction.

This is significant for the real estate industry because the homeowners who could have stayed in their homes might now have to consider short sales or could fall into foreclosure. In other words, many of those homes are now going to end up for sale at some point. That is good news for potential buyers and likely bad news for sellers who are going to face continued competition from distressed sales. This decision won't help our recovery but it will prevent people from taking unfair advantage of government assistance.

Dollars and Sense: Why You Should Consider Refinancing

With interest rates at historic lows, it is smart for anyone without a very low rate to talk to their mortgage lender about refinancing. To give you an example of the money you could save, let's say a woman took out a 30-year fixed rate $750,000 loan in 2007 at 7.36 percent. Her monthly payment would have been $5,172. If she refinanced in August 2010 at 5.29 percent, her payment would have fallen to $4,033. If she refinanced again in July 2012 at 4.29 percent, her payment would be $3,483, which is just 67 percent of her original payment. Assuming she lives in the home for the entire 30-year term of her mortgage, refinancing twice will save her $349,600!!!

Should You Stage Your Home?

Staging a home has been a popular practice in real estate, particularly in luxury real estate, for many years. By now many people know the basics: keep the house clean, pare down the knickknacks, put away family photos. Yet so many of the homes I see are not styled to advantage and there is no excuse for that!

If you are trying to sell your home, think about it in terms of making an excellent first impression. When you go on a first date you make sure your outfit is clean, neat and flattering. You put some extra effort into your hair and make-up or maybe buy a new cologne. You think of some interesting things to say about yourself so the person will want to see you again. The same goes for your home. Below are my tips for staging your home yourself.

1. Always keep it clean and ready to be shown.
2. Put away your personal photos.
3. If you are a collector, put away your collections. It will be a lot of work to do but you'll have to do it anyway when you move. I just took clients to see a home owned by an antiques dealer- there was stuff everywhere! And my clients left the home with the impression that it lacked storage space and didn't have a good flow. That wasn't true, it had a lot of closets and a good flow, but not with all of those antiques laying around.
4. Many homes in Florida lack a first floor coat closet (Why??? We have jackets and umbrellas, too. Where are we supposed to put them?). Avoid pointing that out to potential buyers by not leaving your jackets, umbrellas, purses, briefcase and shoes laying around. Remember the old adage: out of sight, out of mind.
5. If you have a pet, please take her or him with you while the house is being shown. If that is not possible, crate them. It is not acceptable to leave them in the kitchen or the laundry room. Buyers are going to want to see those rooms and any buyer who doesn't feel comfortable around animals is not going to go into the room if your pet is in it. I was once in a house with clients in which a rambunctious dog had been left in the kitchen. None of us felt comfortable enough around the strange dog to look in the kitchen.
6. When I think about a well staged home, I think about a good hotel room. It is clean, decorated in a subtle way and makes you feel welcome. Aim to make your house feel that way.
7. Be willing to move your furniture around. Now that you are trying to sell, go for form over function. Put the furniture where it looks best, not where it is most useful.
8. If you have a small nook somewhere (like the top of a landing), turn it into an office by adding a small desk, a chair, a lamp and a few office supplies.
9. Got an empty room you don't use? Make it into a yoga room. Add a few yoga mats, some yoga props, some battery-operated candles and some diaphanous curtains. You've suddenly turned an unused room into a luxurious amenity.
10. If you have a pool that has seen better days, you can distract from the dated tile by placing some large hurricane lanterns around the pool, adding some flowering potted plants and cleaning your outdoor furniture. Want to even make it look more luxurious? Take a cue from a hotel. Place neatly rolled towels in a wicker basket and leave out a tray of sunscreen. If you want to take it even further, leave out a tray on a lounge chair with a newspaper or book, a carafe of water and a small vase with some flowers.

Below is an article on staging that shows some great before and after photos.


Staged

South Florida Home Values Increase

According to a Zillow report, home values in South Florida increased 6.5 percent in year-over-year comparisons during the second quarter of 2012. The report also projects an additional 6 percent increase by the middle of 2013. These findings rank South Florida second out of 150 metro areas measured by Zillow (trailing only Phoenix, which saw a 12 percent increase with a prediction of another 9.9 percent gain).

Zillow's index said that Palm Beach County's median home value was $145,000, an increase of 1.8 percent from a year ago (although West Palm Beach's decreased by .9 percent to $111,600). Jupiter's median home value rose 5.4 percent to $226,600 and Palm Beach Gardens recorded a 5.1 percent jump to $226,300.

These numbers are certainly influenced by the artificially low supply of available homes, which is due to homeowners who want to move but cannot afford to and to banks taking a long time to foreclose on properties and then not putting them back into the market right away. While some people might believe we have a second wave of foreclosures coming our way, so far the banks seem interested in alternative solutions, such a loan modification and short sales.

As far as the forecast for another 6 percent gain in home prices, I am skeptical. Certainly if supply continues to be restricted we'll see higher prices. But if the supply chain begins to function more normally, I don't anticipate that significant of a gain. Wages are not rising and unemployment is still a problem, which would mean the rise in home prices seriously outpaced people's ability to purchase a home.

Interested in seeing more of the metro areas reported by Zillow? Click on the below link.
Zillow Report

New Condos in West Palm Beach

The First Baptist Church in West Palm Beach has signed a $23 million contract to sell a 3.2 acre lot that includes the Chapel By the Lake, the waterfront amphitheater just south of Okeechobee Blvd. The proposal for redeveloping the site includes two luxury condo towers (5,000 sf units with asking prices between $4 - $6 million) and an 85,000 sf medical office. The developers are Allan Adelson of Palm Beach Gardens and Golub & Co. of Chicago. The sale will not close until the city approves the proposal.

New Luxury Condos in West Palm Beach

Redevelopment at President Country Club

An ambitious redevelopment is planned for part of President Country Club in West Palm Beach, which is under new ownership. The plan proposes extensive changes around the club's north course (called the Patriot course), which will include a five-story, 400-unit hotel; a 30,000 sf spa; a 30,000 sf clubhouse; 10,000 sf of medical offices; a 50,000 sf conference center; 100 single-family homes to be used as timeshares; 200 condos; pools and a tennis center. The proposal is for the project to be completed in phases, with the first phase being the construction of the hotel.

This property is quite close to the Palm Beach Mall, which itself is also facing redevelopment, supposedly into an outlet mall. If these two projects do come to fruition it will be a much needed boost to the Palm Beach Lake Boulevard corridor.

More New Houses Being Built

Housing starts rose 6.9 percent in June from the previous month to a seasonally-adjusted annual rate of 760,000, according to the Commerce Department. That is the highest number since October 2008. Single-family housing starts increased for the fourth straight month and reached a two-year high.

Florida Real Estate By the Numbers

We have some great news for statewide sales! According to Florida Realtors Industry Data, there were 18,800 sales of exiting single-family homes, a 5.3 percent increase from June 2011. The median sales price rose 8.2 percent from a year ago to $151,000. As for condos and townhouses statewide, 9,202 units were sold in June, an increase of 1.5 percent from June 2011. The median price for those properties was $110,000, up a whopping 15.8 percent over the previous year!

To put that in perspective against those numbers nationally, according to the National Association of Realtors (NAR), in May 2012 the median sales price for existing single-family homes rose 7.7 percent to $182,900. The statewide median sales price for single-family existing homes in California was $312,110; in Maryland, it was $259,207; and in New York, it was $208,000. The national median existing condo price in May 2012 was $180,000.

How Do You Know It Is the Right Time for You to Buy?

There is a lot of talk in the real estate market about now being the time to buy; we've been hearing that for years. To dig deeper into the issue of when is the right time to buy, the question needs to be expanded to be specific to each buyer. When is the right time for you to buy?

Nationally prices have begun to stabilize. According to the Standard & Poor's/Case-Shiller Index, 16 of the 20 cities in tracks have not lost value this year. But just because prices are stabilizing does not mean that they will soon rise. Since history is a great indicator of future behavior, let's look at the real estate bubble from the 1980s- adjusted for inflation, it took the Index until 2000 to return to its 1989 peak. That real estate decline was not nearly as big as the decline we just had, so it is safe to assume that it is going to take 10 years or more for some of the markets to return to their 2005 peaks.

According to Harvard's Joint Center, 11 million homeowners have negative equity. Knowing that, you need to be reasonable about the feasibility of waiting for the market to rebound before you sell. Do you have ten years to wait? Do you want to put off a planned move because of your negative equity? No one can make that decision for you, but sometimes it is just best to take your lumps so you can move on to the next stage of your life. You need to understand the opportunity cost of waiting for the market to improve.

Before you say that is easier said than done, I have seen it work. I had a client whose home sold for 50% of what he paid for it five years earlier. As painful as that loss was, accepting it meant he could be transferred for his job to a city he liked much better. Even better, he no longer stresses about what he is going to do about his house. He took his loss and moved on.

Even if you take a loss on a home you sell, you could very well make it up on the next home you buy. Interest rates are at historic lows, so chances are that your new mortgage will have better terms than your current mortgage. With prices stabilizing you've got a good chance that your new home won't lose equity.

If you are a renter, the decision to buy should include consideration of the price-rent ratio, which is the cost to purchase a proprety divided by the annual rent. It measures how much the buyer is paying for each dollar of rent she receives. Historically speaking, 15 is the average ratio. Any number over 18 indicates the market is overpriced and a number under 12 indicates it is a good time to buy.

No one- not your parents, friends, reporters or even your real estate agent- can decide whether you should buy or sell. Since the privilege of making that decision is all yours, make sure you take into account not just the money but also your life goals.

Jumbo Loans

Jumbo loans, or nonconforming loans, are loans that exceed certain limits, like $625,500 in expensive markets. Those limits are set by Fannie Mae and Freddie Mac, who buy conforming loans and sell them to investors. During the economic contraction it because harder to get a jumbo loan but recent data suggests the jumbo loan market is coming back to life.

According to an article in the New York Times, one estimate is that the number of lenders making jumbo loans has increased 20 percent from 2009, when just a few banks were making them. In particular, there are competitive loans available in the $2 million range, where down payments can be 30 to 40 percent. In the first quarter of 2012, banks made $63.8 billion in jumbo loans, which was an 18 percent increase from the first quarter of 2011. According to Inside Mortgage Finance, jumbo loans were 16.8 percent of al loan originations, up from 9.9 percent for all four quarters of 2009.

Why the change? The jumbo market is dominated by wealthy individuals who generally have higher credit scores and higher down payments, which translates into less risk for the bank. Also, because the wealth among wealthy individuals can come from many different sources- a job or a trust fund, for example- the loans tend to me more uniquely tailored.

Jumbo Loans

Pending Home Sales Increase in May

May saw the highest pending home sales since April 2010, when buyers were motivated to buy homes to take advantage of the homebuyer tax credit. In fact, the latest increase in signed contracts was the 13 consecutive month in year-over-year gains.

The National Association of Realtors' Pending Home Sales Index (PHSI), is a forecast indicator based on contract signings (but not closings). It increased 5.9 percent to 101.1 in May from 95.5 in April and it is 13.3 percent above the May 2011 level of 89.2. The PHSI reached 101.1 in March, which is the highest level since April 2010.

Also according to NAR, the national median existing-home price is expected to rise 3.0 percent this year and another 5.7 percent in 2013.

O Homeo, Homeo! Wherefore Art Thou, Homeo?

Hopefully all of my readers read my June 13 post about the lack of inventory and its effect on the housing market. Well, perhaps I can count the New York Times among my followers, because a week after I wrote my post, they wrote an article on the issue.

Where did all of the homes go???

Aluminum Awnings: Love Them or Hate Them?

Ah, if ever there has been a love-hate relationship with a feature on a home, I'd rate the aluminum awning as one of the top contenders for that honor. Sure, they serve an excellent purpose when it is raining or snowing and they are keeping you dry. But. they. are. just. so. ugly. What can I say? Looks matter. But beyond being ugly, they are reminiscent of an era in home design that focused heavily on utility and minimally on aesthetics. Wherever you fall on this debate, this recent article in the New York Times will let you know that you are not alone.

Aluminum Awnings

Full-Floor Condo at Trump Plaza!

529 S. Flagler Drive, Units 15 E, F, G, H

West Palm Beach

I have a fabulous listing at Trump Plaza! This full-floor condo is available for rent or purchase. Featuring 7 bedrooms, 10 bathrooms and 9,093 square feet, this property lives like a home with the amenities and security of a full-service building. Three units have been combined into one lavish residence that includes a massive living/family room, an office, a billiards room with a wet bar, a formal dining room and multiple terraces. The fourth unit is separate and functions as guest or staff quarters.

Amenities at Trump Plaza include a valet, concierge, full-service gym, tennis court, two pools, a dock and a theatre room.

The entire 15th floor, comprised of units E, F, G, and H is available for purchase at $3,499,000 or for rent at $19,000/month. The combined three apartments (F, G, H) are available for purchase at $3,250,000 or for rent at $17,500. Unit E may be purchased for $710,000 or rented for $3,800.

Sold Homes in West Palm Beach

Sold Homes in El Cid, Prospect Park and South of Southern neighborhoods since May 1, 2012.

296 Barcelona Rd. sold for $1,875,000 on 6/15.
110 Bunker Ranch Rd. sold for $925,000 on 5/24.
230 Sunset Rd. sold for $671,000 on 6/13.
135 Greenwood Dr. sold for $625,000 on 5/14.
3409 S. Flagler Dr. sold for $478,000 on 5/30.
208 Westminster Rd. sold for $360,000 on 6/13.
3418 Washington Rd. sold for $350,000 5/9.
3213 Vincent Rd. sold for $360,000 on 6/19.
322 Monceaux Rd. sold for $322,000 on 5/31.
228 Santa Lucia Dr. sold for $329,000 on 5/31.
205 Ellamar Rd. sold for $300,000 on 6/15.
343 Rilyn Dr. sold for $271,000 on 5/18.
218 N. Worth Ct. sold for $215,000 on 5/15.
312 Nathan Hale Rd. sold for $231,755 on 5/11.
360 Hunter St. sold for $179,000 on 6/12.
333 Palmetto St. sold for $150,000 on 5/3.
244 Pilgrim Rd. sold for $134,000 on 6/13.
203 Conniston Rd. sold for $86,000 on 5/4.
338 Linda Ln. sold for $99,000 on 5/18.

Do You Need A Real Estate Agent?

Using a real estate agent is an excellent idea in any market, but basically a necessity in a complicated market like the one we are in now. The New York Times, which is not always favorable in its view of real estate agents, just published an interesting article on not only the benefits of having a good agent, but on the different types of agents. The article cited, among others, the hand-holder, an agent who will patiently walk you through every step of the deal and then some; the authority, an agent with a lot of expertise in the market and one who is likely to counter unrealistic expectations; and the legacy broker, who is one agent that helps generations of the same family.

I'll be the first to admit that a good match between a buyer's or seller's personality and an agent's personality is very helpful to getting a deal done and leaving everyone happy. So if you're looking for an agent, check out this article; perhaps some further insight will result.

Which Agent Suits You?

Having Trouble Finding a House You Like?

If you are ready to buy but are having trouble finding a house you want to own, I can point you to the source of your problem: lack of inventory. In April 2012 there were 2.5 million homes for sale nationwide, the lowest inventory since April 2006, according to the National Assosciation of Realtors. The cause? Well, there isn't just one cause. Partial blame can be levied on the banks who are holding approximately five years worth of housing supply that is due to foreclosures.

Another contributor to the paucity of supply are sellers who want to sell but can't afford to because they owe more than their home is worth. And don't forget the professional investors, flush with cash, who are buying up distressed properties and turning them into rentals. Furthermore, new construction is at a historic low, with just 46,000 new single-family homes for sale, which is the lowest number since 1973 when the Census Bureau started keeping track. And just 70,000 single-family homes are currently under construction.

Finally, there is another source for the lack of supply that is actually government-sponsored! The federal government came up with a terrible plan to auction huge groups of government-owned homes to groups of investors to turn into rentals. This plan is bad for the taxpayers. We bailed out the banks and we, not concentrated groups of wealthy investors, deserve first crack at those homes. This is just another example of the redistribution of wealth in our country that is hurting almost everyone.

Luckily for the discouraged buyers out there, I can offer you one suggestion for managing this challenging market: team up with a very good real estate agent, like me! I know about homes that are coming on the market well before they are listed. I also know about which homes are likely to be short sales even if they are not yet listed as short sales. And popular websites like Zillow and Trulia, while helpful, can't keep up with the real time changes that occur in the MLS. By the time you see a good deal listed on Zillow, there are probably already multiple offers on it.

Interested in a Fixer-Upper But Lack the Funds?

It is common knowledge that a fixer-upper can be a great investment. A little cash, a lot of elbow grease and suddenly you've got yourself some equity! And while handyman specials about in this market and interest rates are at historic lows, there is a paucity of lenders will to make home improvement loans. But there is at least one solution out there besides hitting up mom and dad for some dough: the FHA 203(k) loan. This loan, available from approved FHA mortgage lenders, is for borrowers who plan to live in the home and have 3.5 percent of the total loan amount available for a down payment.

First of all, there are limits to how big of a loan you can get from the FHA; in most areas the magic number is $417,000. And the limit for how much you can add to your loan for repairs is $35,000. So make sure you find a home that doesn't need more than that amount in repairs. When you sign a sales contract for the property, make sure the contract is contingent on the buyer receiving a 203(k) loan and contingent upon loan approval for the additional repairs.

The buyer must submit a proposal to the lender detailing the work to be done and the cost estimates. Then the bank will request an appraisal to make sure the buyer is not paying more for the property than an appraiser thinks it is worth after the repairs are made.

Once the lender approves the loan, the loan closes for the purchase price, the repair costs and closing costs. The loan will also include a contingency reserve of 10 to 20 percent of the repair portion of the loan to cover any unexpected repair costs. The repair funds will go into an escrow account at closing. As the repairs are completed, the homeowner requests to retrieve funds from the escrow account in order to pay the contractors. If the necessary repairs preclude living in the home, up to six months of mortgage payments may be added to the cost of the repairs.

Why Single-Family Homes Make Great Investment Properties

Despite losing their homes to foreclosure, many families are unwilling to give up living in a single-family home. So instead of renting apartments, they are renting single-family homes in droves. According to Fannie Mae and based on U.S. Census data, single-family home rentals was the fastest growing segment of the real estate market from 2005-2010 (I know that it is hard to think of any segment of the real estate market growing during that time except for distressed sales). If you are thinking of buying an investment property, a single-family home in a desirable neighborhood is the way to go. If your rental rate is competitive, you'll have people lining up to rent it.

Hybrid Cars

I know that this is a real estate blog, but sometimes I find something unrelated to real estate that I think my readers should know about. The U.S. Department of Energy has created a website that allows user to figure out whether purchasing a hybrid car is worth the cost- in other words, whether the extra cost of purchasing a hybrid will be offset by the savings in fuel during the time when you own the car. The website shows how much the hybrid feature adds to the sticker price as compared to a comparable non-hybrid model, how much money it will save every year and how long you'll need to own the car to break even.

http://www.fueleconomy.gov/

Interest Rates

Average rates for the 15-year and 30-year fixed mortgages fell again last week to record lows. The 15-year rate fell to an incredible 2.97 percent, down from 3.04 percent. The 30-year fixed rate dropped from 3.78 percent to 3.75 percent.

Rents Likely to Increase

Marcus & Millchap, the real estate investment company, is predicting apartment rental rate increases in most of Florida's major cities this year. This is due to increased demand for apartments and a lack of new supply. This is good news for landlords but bad news for renters.

One of my clients just told me that his landlord tried to raise his rent. I gave him a strategy to use for negotiating with her that worked extremely well; in fact, he convinced her not to raise his rent! Interested in finding out some great ways to convince your landlord not to raise your rent? Call me at 561-339-3123 so we can talk about it.

Sold Homes

Below are some recent sales between El Cid and South of Southern.

343 Rilyn Dr.- Sold for $271,000 on 5/18/12.
218 N. Worth Ct.- Sold for $215,000 on 5/15/12.
135 Greenwood Dr.- Sold for $625,000 on 5/4/12.
3409 S. Flagler Dr.- Sold for $478,000 on 5/30/12.
3418 Washington Rd.- Sold for $350,000 on 5/9/12.
203 Conniston Rd.- Sold for $86,000 on 5/4/12.

Home Prices Increase in Major Cities

March data for the Standard & Poor's/Case-Shiller home price index, which tracks the changes in the prices of homes nationally and in 20 major metropolitan area, was released yesterday. Home prices increased in 12 of tho 20 cities, including Miami and Tampa. Prices dropped in Atlana, Chicago and Detriot. For the first quarter of 2012, the national composite, the 10-City Composite and the 20-City Composite were at new post-crisis lows.

The national composite decreased by 2.0% and was down 1.9% versus the first quarter of 2011. The 10- and 20-City Composites saw annual returns of -2.8% and -2.6%, respectively, in March 2012. Month-over-month, their changes were insignificant; average home prices in the 10-City Composite fell by 0.1% compared to February and the 20-City remained essentially the same.

Want Your Foreclosure Reviewed for Mistakes?

As part of the settlement between the banks and the governement for the banks' improper foreclosure proceedings, by April 30, 2012, 4.1 million people received letters from the Office of the Comptroller of the Currency inviting them to submit their foreclosure for review. An anemic 165,000 people did so, just 4 percent of the people who could do so. If errors are found, restitution can range from a few hundred dollars to over six figures.

Interested? Go to https://independentforeclosurereview.com/

Interest Rates

According to Fannie Mae last week, the average 30-year fixed rate mortgage is 3.79 percent. The 15-year fixed rate mortgage is 3.04 percent.

Interest Rates

According to Freddie Mac, average rates for 30-year and 15-year fixed rate mortgages reached record lows this week. The 30-year fixed rate fell to 3.84 percent and the 15-year fixed rate dropped to 3.07 percent.

What Should Buyers Consider?

In addition to the old real estate maxim of location, location, location, there are many other factors that buyers need to consider before making an offer on a home.

-Neighborhood zoning is very important. Buyers can go to a town's planning or urban development department to find out what projects might be upcoming in a neighborhood. Even if nothing is planned, being aware of the zoning could help buyers make educated guesses about what could happen in a neighborhood.

-Rules governing renovations. Before you buy anywhere you need to make sure you know what rules, if any, govern construction. For example, at Trump Plaza in West Palm Beach, construction is permitted only from May 15-Nov. 15. And don't be fooled into thinking that these rules would only affect a condo. Single family homes on Hobe Sound in Jupiter must adhere to the local restricitons on how many large trucks can drive onto the island in a day.

-Crime rate. Neighborhoods with lower crime rates can come with lower insurance rates as well. You might not realize it, but moving can increase or decrease your car insurance rates.

Sold Homes

Palm Beach
210 Eden Rd.- Sold for $3,100,000 on 5/4/12.

West Palm Beach
100 Alhambra Pl.- Sold for $350,000 on 5/4/12.

Have You Ever Seen This Before?

This home on Island Road in Palm Beach has been lifted off the ground and is now being held in the air by metal beams and wooden support beams. I am not sure what is being done to the home (perhaps reinforcing the foundation?) but I think the unusual site is worth sharing with my readers.

If any of my readers have interesting photos of homes they want to share, please send them in to me and I will post them on my blog.

Sold Homes

Palm Beach
261 List Rd.- Sold for $2,100,000 on 5/1/12.
1510 N. Lake Way- Sold for $912,500 on 5/1/12.
2273 Ibis Isle Rd.- Sold for $1,142,500 on 4/30/12.


West Palm Beach
234 Edmor Rd.- Sold for $537,500 on 4/30/12.

Buyers Facing Stiffer Competition

The Wall Street Journal is reporting that buyers are finding more competition than they expected for homes they like and, in some cases, bidding wars. The unanticipated level of competition for homes results from more buyers entering the market, historically low interest rates, more investors in the market buying up distressed properties in cash deals, and an artificial decline in inventory due to would-be sellers who want to sell but won't because they owe more on their property than it is worth.

I also believe that buyers have come to accept the state of the real estate market and are no longer as scared as they were a few years ago. They don't find the process of buying a foreclosed home or a short sale nearly as intimidating as it was a few years ago. This is our new reality and people are adjusting their behavior and expectations accordingly.

Florida's Shadow Inventory

According to Florida Realtors:

• Since the end of 2010, all distressed property listings and sales, except for single-family-home short sales, have declined.

• Average prices for distressed and normal property sales have begun to stabilize.
• Compared to total listings in the MLS, Florida’s highest percentage of distressed property are in the I-4 corridor and Southeast Florida; the lowest percentages occur in Northwest Florida.

• Florida’s shadow inventory was 550,000 units at the end of 2011, approximately a 9 percent decline from its peak in the first quarter of 2010.

• Currently, the flow of new seriously delinquent (90 days or more) loans moving into the shadow inventory is offset by the approximately comprable flow of distressed sales.
• The number of foreclosures and REOs was significantly lower in February of 2012 than one year earlier.

House Tour in Lake Worth

The New York Times just wrote a fabulous features piece on two cottages in Lake Worth that were purchased in a foreclosure sale and turned into a his-and-hers compound. For any of my readers who are intimidated by the condition that some foreclosure are in, just look at what some ingenuity, paint and elbow grease can do!

His-and-Hers Compound

Keeping Your Mind (and Wallet) Out of the Gutter

How many of you take the time to maintain your gutters? Chances are that many of you don't spend much time thinking about your gutters because you assume they continue to work without maintenace. It is that assumption that could one day cost you thousands in water damage remediation. Below is a link to a great article from the New York Times that should remove the intimidation factor from tackling that project.

Clean Your Gutters!

Sold Homes in El Cid, Prospect Park

According to the MLS, below are recent sales in El Cid and Prospect Park.

El Cid
205 Belmonte Rd.- 1,904 sf sold for $645,000 on 3/13/12.
2901 S. Olive Ave.- 1,984 sf sold for $335,000 on 4/16/12.
2418 Aravale Rd.- 1,832 sf sold for $665,000 on 4/17/12.

Prospect Park
133 Greenwood Dr.- 2,514 sf sold for $450,000 on 3/5/12.
319 Edgewood Dr.- 2,554 sf sold for $420,000 on 3/16/12.
221 Greymon Dr.- 2,612 sf sold for $245,500 on 4/12/12.

More New Homes To Come?

According to the Commerce Department, U.S. builders requested more permits for future construction projects in March than they have in the last 3.5 years, suggesting many builders believe that the market is about to improve. Building permits rose 4.5 percent to a seasonally adjusted annual rate of 747,000, which is the highest level since 2008.

Short Sales Set to Overtake Foreclosures?

According to market research firm Realty Trac, 12 states had more short sales than foreclosures in January. In year-over-year statistics, short sales increased 33 percent from January 2011 to January 2012. This is great news for our recovery because short sales tend to sell for more than foreclosures.

Bloomberg News reported last week that mortgage tracker Lender Processing Services data said that in January short sales actually surpassed foreclosures for the first time, with Florida being one of those states in which that was true. Nationwide the number of foreclosure exceeds the number of short sales, but expect to see that gap lessen as banks get their acts together and stop making short sales so difficult.

The rise in short sales is also due to lenders pricing the homes more realistically. According to Realty Trac, the average short sale price in January was 10 percent lower than a year earlier, which exceeds to overall average decline in pricing from January 2011 to January 2012.

Interest Rates

According to Freddie Mac, the average rate for a 30-year fixed mortgage rose to 3.90 percent from 3.88 percent last week. The 15-year fixed rate rose to 3.13 percent from 3.11 percent.

Add Yourself to the Florida Do-Not-Call List

I have great news for anyone who dislikes being bothered by telemarketers! Florida has made adding your number to the Florida Do-Not-Call list easier and free. You can now add your home, mobile or pager number to the list. The old $10 fee for initial set-up and $5 annual fee no longer apply. To add your number, go to http://www.fldnc.com/ or call 800-HELP-FLA.

Pets and Selling Your Home

As a dog owner, I know that my Yorkie is a member of our family. However, when it comes to selling a home, pets are not going to help your cause. In fact, serious sellers should remove all traces of pets from the home during showings. You do not know how prospective buyers feel about pets and you do not want the presence of pets to raise doubts about the cleanliness of your home or carpets. My best (and free) advice to all sellers is not only to remove your pets from your home during showings but to put away their toys, bowls, and leashes where they cannot be readily seen. Out of sight, out of mind.

If your pets have left behind smells or stains, those need to be remediated before your property is shown. A home that smells of animals or urine is a massive turnoff. And cute as your little furry friends might be, they do not belong in the photos that accompany your listing. You are selling your house, not your pet.

Home Prices Back at 2002 Levels

According to the Standard & Poor's/Case-Schiller Index, home prices are back to 2002 prices.

Interest Rates

The average rate on a 30-year fixed mortgage fell to 3.88 perent last week, down from 3.98 percent the week before. The all-time low average was set in February 2012 at 3.87 percent.

The average rate for a 15-year fixed mortgage decreased to a new low of 3.11 percent from 3.21 percent.

Do You Need Help Deciding Whether a Home Fits Your Needs?

Do you need help keeping track of whether a home meets your criteria? How do you remember which house had the pool and which house had room for a pool? House Hunter is a new app that allows buyers to keep track of a home's features from a list of 80 features. Not only can you track the features, but you can score them as well. You can also add your own criteria to the list in case you want something really specific, like an indoor water slide (yes, I have seen houses with indoor water slides!). The app is available from Apple and consumers can choose between two versions- the free, limited version or the full version for $4.

While touring a home you rank the home's features. You can also add photos or comments. Once you are done the app calculates an overall score for the property. You can then e-mail your ratings to your real estate agent (or anyone else invovled in your home search).

This app should be very helpful to buyers. If you have seen a lot of properties in one day (and by a lot I mean anything over 4), this will allow you to keep them straight, which is harder than you think. It will also be great if your home search is taking place over an extened period of time. And it will force buyers to have a clearer idea of what they are looking for before they start to look at homes. Refining your list of needs and wants is essential to making an informed real estate purchase.

Average Mortgage Rates

The average rate on a 30-year fixed mortgage decreased to 3.98 percent last week from 3.99 percent the week before. The average 15-year fixed mortgage rate declined to 3.21 percent from 3.23 percent.

Easy, Breezy Hurricane Season

Good news for all of us who live in South Florida! Climatologists are predicting a slower hurricane season, with just ten named storms as opposed to the average 12 named storms. The forecast is for just four hurricanes, only two of which are major. On average, the forecasts predict six hurricanes, three of which are major.

To give you a point of comparison, 2011 had 19 named storms, which was a 145 percent increase from the average season. That doesn't mean that we aren't still at risk for one of those storms making land, but hopefully we can all appreciate that the odds are more in our favor this year.

Why might we get lucky? Well, thanks to cooler temperatures in the tropical Atlantic and the likelihood that El Nino (which is an atmosperic force that suppresses storms) will develop by the summer, we don't have conditions conducive to major storms.

Most Americans Think Now Is a Good Time to Buy

According to Fannie Mae's March 2012 National Housing Survey (which gives an indication of the nation's attitude about housing), 73 percent of American say that now is a good time to buy a house. They also believe that home rental prices will increase by 4.1 percent by March 2013. Among respondents, 66 percent would purchase their next home if they were to move, versus the 30 percent who say they would rent their next home. Just 12 percent of respondents think their financial stability will decrease in the next year while 21 percent say their income is substantially higher than it was a year ago.

Bank of America Speeds Up Short Sale Process

Beginning April 14, Bank of America will have a new short sale process and documents that are supposed to reduce the approval process to 20 days. BoA will require that five documents be submitted: a purchase contract and buyer's acknowledgment and disclosure form; a HUD-1; IRS Form 4506-T (which gives BoA the right to obtain copies of the seller's prior tax returns); Bank of America short sale addendum; and Bank of America third part authorization form.

Real estate agents will have five days (down from 14) to submit a counteroffer and buyers will be limited to two counteroffers. The agents will receive a response within three days.

It is about time that banks simplified the short sale process. The process has been unnecessarily arduous and drawn out. Not having such a dysfunctional process will help to encourage buyers and sellers and ultimately contribute to stabilizing the market.

Ignore the Zestimate

Zillow provides a feature called the Zestimate that automatically generates a value estimate for a property based on a proprietary algorithm. Some buyers will see the Zestimate and consider it scripture when it comes to their opinion of a home's value. However, the Zestimate is an ersatz value estimation. First of all, without getting inside of the home to assess its condition, there is no way to have an accurate estimate. How does Zillow know whether you have a top-of-the-line kitchen and newly updated baths? Secondly, it isn't capable of tracking the neighborhood-centric factors that impact a home's value. I have seen a different Zestimate for each of four newly constructed attached townhouses that were absolutely identical. If you need an accurate estimate of your home's value, I can create a comparative marketing analysis for your home that will give you a much more accurate estimate of what the number really is.

Fed Endorses Banks' Plan to Rent Foreclosures

The Federal Reserve has issued new policy statement for banks that want to rent out foreclosed properties that they own. Normally the banks would be required to sell the properties, but the Fed is making an exception given the stressed market conditions. The policy said that banks need to establish procedures for how they are going to rent the properties, determine whether the properties adhere to local building codes, whether the homes are inhabitable, and how they are going to choose which properties to rent.

Home prices and rents are inversely related, which means as housing prices fall (due to decreased demand), rents rise (due to increased demand). We have seen an increase in rental rates as homeownership has declined. So adding more homes to the rental pool could theoretically help stem the rise in rents. What remains to be seen is whether banks would make good landlords.

As a Realtor, I can tell you that when dealing with foreclosures it can be very difficult to get the bank to respond to questions and offers. We have also all seen homes that are bank-owned in utter states of disrepair that violate local codes. Would banks be more responsive as landlords? Would tenants be able to reach someone with the power to act if there were a problem with the home? Over the past few years the banks' performance has been subpar (the robo-signing scandal comes to mind); I am not sure if there is a reason to believe they would be good landlords.

Who is Buying Foreclosed Homes?

A new marketplace of mass-scale landlords has emerged. Fueled by the knowledge that foreclosed properties that are turned into rentals often offer a larger return than many banks or investments these days, large investors, either individuals or companies, are snapping up homes. After investing in updating them and cleaning them up, tenants are found.

In the short term it is good for communities to have foreclosed homes purchased and fixed up. What remains to be seen is whether large-scale landlords will have the ability to maintain homes that are geographically spread out.

Any buyers out there who have been toying with the idea of becoming investors and landlords should click on the link below to read an article from the New York Times about it. With the historically low interest rates and the increased number of renters, it is a fantastic opportunity.

I would love to help any of my readers who are interested in this find out more about great deals on foreclosures in Palm Beach County. Interested? Call or e-mail me, Regis Ahern, at 561-339-3123 or regis.ahern@floridamoves.com.

http://www.nytimes.com/2012/04/03/business/investors-are-looking-to-buy-homes-by-the-thousands.html?pagewanted=1&hp

Palm Beach Public School in Top Ten Percent of Schools Statewide

Congratulations to Palm Beach Public School, which ranked 172 out of the state's 1,795 elementary schools in 2011! For the third year in a row, the school also earned an 'A' rating. Ranking in the top ten percent is an excellent achievement and is one that makes living in Palm Beach (or in the neighborhoods in West Palm Beach that can send their children to Palm Beach Public School) even more attractive.

In addition to the excellent teachers and administration, the students also benefit from a tutoring program that began in the late 1990s. The program pairs students with 30 tutors on the island that teach math and reading skills once or twice per week. Many of the tutors are professionals or retired teachers.

The Palm Beach Country Club also funds an after-school program that focuses on different subjects. This year's subject is visual arts, which encompasses drawing, computer art, chess and the fine art of clowning. It is wonderful to see that the community has taken such an interest in the children's education and that their education, in addition to being top-nothc, is inclusive of the arts and culture.

Interest Rates Rise

According to Freddie Mac, the average rate for a 30-year fixed mortgage rose to 4.08 percent two weeks ago, up from 3.92 percent. This marks the first time in five months that that interest rate has been above 4 percent. The average 15-year fixed mortgage rate rose to 3.30 percent, up from 3.16 percent.

Interest rates tend to track the yield on the 10-year Treasury note. Because the economic outlook has been more buoyant in recent weeks, investors have shifted funds out of the less-risky T-bills and into the riskier stock market, leading to higher yields on the T-bill.

70 Percent of Renters Believe Owning Makes More Sense

According to Fannie Mae's newest quarterly National Housing Survey, 70 percent of renters believe owning makes more sense than renting. In fact, across all education levels, American think that owning is the smarter move. Almost 66 percent of current renters say they plan to buy a home. Interestingly, the top reasons for buying, including neighborhood safety and good schools, are not financial reasons.

How Can You Figure Out Your Design Perspective?

I have the greatest design resource for my readers! Go to www.houzz.com to discover hundreds of thousands of home photos- both interior and exterior- that you can then sort into your personal folder so that you can keep track of what you like. The genius behind this idea is that it allows you to see so many different designs that you can truly flush out your personal design philosophy. You might find yourself consistently attracted to photos that feature a certain something that you didn't even know you liked. After I spent a few hours on the site, I realized that I really like master bedrooms that either feature indoor/outdoor space or that have floor-to-ceiling windows that bring nature inside. I didn't even know that was one of my design priorities. I also discovered a drawer specifically designed to hold sunglasses. Genius!

The Dangers and Costs of Thirdhand Smoke

I have written about this in my blog before, but I want to keep reminding my readers that it is so very important for them not to smoke in their homes. We all know that secondhand smoke is dangerous, but thirdhand smoke is as well. What is thirdhand smoke? It is the carcinogenic chemicals that remain in the walls, flooring, railings and dust in a home for a long time after the smokers have gone. The deadly chemicals can be ingested by new occupants, especially by children and pets.

Before you buy a home, you need to figure out whether the owners smoke in the home. Owners are not required to disclose that information, so let your senses figure out whether they smoke inside. Does the home smell of smoke? That smell means you are breathing in carcinogens. Are the walls or ceiling yellowing? Painting, tearing out old carpets and cleaning the home from top-to-bottom will help clear out the carcinogens, but your best bet is to let the home air out for as long as possible.

As for my readers who are smoking in their homes, stop! Potential buyers are going to offer you less for your home if it comes loaded with carcinogens by deducting the cost of remediation from their offer. Simply put, your smoking is decreasing the value of your home and is very bad for the health of subsequent owners.


http://www.utsandiego.com/news/2010/dec/16/smokers-move-out-tobacco-related-carcinogens-remai/

Before Buying a House, Should You Test for Meth?

Below is a link to a story about a couple who bought a home that had previously been a meth lab. Unfortunately, the presence of the chemicals sickened them and they had to move out. And the bill to clean up the house? $61,000. There are no laws in Pennsylvania (or in Florida) that require disclosing whether a home has been found by the government to have been a drug lab.

Before you buy a house, you should consider having it tested for methamphetamines. You should also check to see if the home is registered on the U.S. Drug Enforcement Administration's National Clandestine Laboratory Registry, http://www.justice.gov/dea/seizures/index.html

http://www.cnn.com/2010/US/11/29/couple.buys.meth.house/index.html?hpt=C1

Sold Homes in El Cid

According to the MLS, five properties sold in El Cid between October 26, 2011 and March 26, 2012.

348 N. Bromeliad- This townhouse in Magnolia Court has 3 bedrooms, 3.5 bathrooms, and 2,028 sf. It sold for $300,000 ($147.93/psf) on 2/2/12.

310 Cordova Rd.- This 3,486 sf home has 3 bedrooms and 3 bathrooms in the main house and a 2-bedroom guest house. It sold for $710,000 ($203.76/psf) on 12/27/11.

2501 S Flagler Dr.- This 1,672 sf home has 2 bedrooms and two bathrooms. It sold for $1,100,000 ($657.89/psf) on 12/30/11.

194 Pershing Way- This 2,028 sf home has 3 bedrooms and 4 bathrooms. It sold for $495,000 ($244.08/psf) on 1/6/12.

205 Belmonte Rd.- This 1904 sf home has 2 bedrooms and 2 bathrooms. It sold for $645,000 ($338.76/psf) on 3/13/12.

Mortgage Insurance Premium to Increase

Effective April 1, 2012 (and no, it ins't a joke!), the Federal Housing Authority (FHA) is increasing the up-front mortgage insurance premium (MIP) by 75 basis points (.75 percent) (BPS) and annual mortgage insurance premiums will increase 10 basis points (.10 percent). This is the fourth time in two years that the FHA has raised the MIP. The MIP is a fee added to loans to protect lenders from losses on loans that default. Translation? If you pay a MIP, you are subsidizing the losses of people who default on their loans. The FHA generally requires MIP for borrowers making a downpayment of less than 20 percent. For 15-year loans, no MIP will be charged if the downpayment is 10 percent or greater.

Now:
30-year mortgage with LTV> 95 percent will have a MIP of 115 BPS per year;
30-year mortgage with LTV<= 95 percent will have a MIP of 110 BPS per year (and the annual premiums will be cancelled when the loan reaches 78 percent and the mortgagor has paid the annual premiums for at least five years);
15-year mortgages with LTV> 90 percent will have a MIP of 50 BPS per year (and the annual premiums be be cancelled when the loan reaches 78 percent LTV);
15-year mortgages with LTV<= 90 percent will not have a MIP;
Loans > $625,000 will have an additional 65 BPS (.65 percent) added to their annual MIP.

To put that into dollar terms, the new MIP will add $1,500 to a $200,000 loan, plus an annual increase of $200 in annual mortgage insurance premiums.

To calculate the monthly MIP on your FHA loan, multiply your initial loan amount by the MIP and divide by 12.

Want to avoid this? Get your loan application in before April 1 because existing loans will not be effected by this increase.

30-Year Fixed Mortgage Rate

Last week the average 30-year fixed mortgage rate has risen to 3.92 percent, up from 3.88 percent the week before. The average 15-year fixed rate rose to 3.16 percent, up from 3.13 percent.

Shadow Inventory

According to Florida Realtors,

• As of January 2012, shadow inventory remained at 1.6 million units, or 6-months’ supply and represented half of the 3 million properties currently seriously delinquent, in foreclosure or REO.

• Of the 1.6 million properties currently in the shadow inventory, 800,000 units are seriously delinquent (3.1-months’ supply), 410,000 are in some stage of foreclosure (1.6-months’ supply) and 400,000 are already in REO (1.6-months’ supply).

• Florida, California and Illinois account for more than a third of the shadow inventory. The top six states, which would also include New York, Texas and New Jersey, account for half of the shadow inventory.

• The shadow inventory is approximately four times higher than its low point (380,000 properties) at the peak of the housing bubble in mid-2006.

• Despite 3 million distressed sales since January 2009, the period when home prices were declining at their fastest rate, the shadow inventory in January 2012 is at the same level as January 2009.

• The shadow inventory is approximately half of the size of all visible inventory listings. For every two homes available for sale, there is one home in the “shadows.”

• The segment of borrowers 60-plus days delinquent in the past but “cured” – now current on their payments – is increasing. This figure was 7.2 percent in January 2012, up from 5.7 percent a year ago.

• The total percent of borrowers over 60-plus days delinquent (irrespective of delinquency status today) increased to 15.5 percent in January 2012, up from 14.3 percent a year ago.

• The highest concentration of shadow inventory is for loans with loan balances between $100,000 and $125,000. While the overall supply of homes in the shadow inventory is declining versus a year ago, the declines are being driven by higher balance loans. For loans with balances of $75,000 or less, however, the shadow is still growing and up 3 percent from a year ago.

30-Year Fixed Interest Rate

The average rate for a 30-year fixed mortgage is 3.90 percent and the 15-year fixed rate is 3.17 percent.

Explaining Negative Equity, Short Sales and Foreclosures

Negative equity exists when the value of an asset used to secure a loan (like a house) is less than the outstanding balance of that loan. Near-negative equity means that the borrower has less than 5 percent equity. Negative equity becomes a problem when the borrower would like to refinance because the banks will often refuse to refinance a loan that is underwater (another term for negative equity).

If a homeowner wants to sell their property and they owe more than they will be able to sell the house for, they have options. The first option is for the homeowner to pay they difference to the bank between what they owe on the property and the price for which it sells. This option, though painful, has many advantages. The first advantage is that the homeowner won't take a huge hit to their credit score, as they would with a short sale or a foreclosure. The second advantage is that they can move on with their life, as opposed to always living under the threat of having to one day pay back the difference (the deficiency, see below). Thirdly, they won't have to wait either three (for a short sale) or seven (for a foreclosure) years before they can get another mortgage. Finally, they won't owe income tax on that deficiency (see the short sale explanation below).

A short sale is when a bank agrees with the borrower to accept less than the full amount owed on a debt. The unpaid balance balance is called the deficiency. What many people don't understand is that having a short sale does not necessarily release them from the obligation to pay back the deficiency. In order to have that happen, the bank must agree to forgive the deficiency. The borrower's credit score will also take a serious hit, though exactly how much depends on the lender and the credit bureau. It will be significant but not nearly as high as it would be with a foreclosure. And the seller will have to wait at least three years before being able to finance another home.

A foreclosure happens when a borrower falls behind on their mortgage payments and the lender then seizes the home in order to sell it and recover as much of the debt as possible. If the sale price does not cover the outstanding balance of the loan then the lender can file for a deficiency judgement, which means that the borrower will still owe that difference. With a deed in lieu of foreclosure, the borrower gives the lender the title to the property and the debt is forgiven. Otherwise, the lender must sue the borrower in state court for defaulting on the loan. States in which foreclosures must go through the courts have much slower foreclosure processes than states that do not require it. A foreclosure will result in a serious penalty on the borrower's credit score and the borrower will have to wait seven years before being able to obtain another mortgage.

For either a short sale or a foreclosure, the amount of debt that is forgiven in the deficiency judgement counts as income and the bank will issue the borrower a 1099. The borrower will then owe income tax on that debt.

Looking to Refinance But Have Negative Equity?

Homeowners who want to refinance but have been unable to do so because they owe more on their home than their home is worth will be relieved to find that they might now be able to do so. For those whose mortgages are owned or guaranteed by Fannie Mae and Freddie Mac, have less than 20 percent equity and are current on payments, the Home Affordable Refinance Program (HARP) might be able to help.

Demand for this program doubled from January to February of this year. For the week ending February 24, 20 percent of the refinance applications submitted were for HARP loans, up from 10 percent in January. Moody's Analytics forecasts that 1.6 million loans will be refinanced under the HARP program by the end of 2013, with average monthly savings of $250. In fact, borrowers under this program might get better rates than borrowers with more equity and better credit scores who refinance because HARP caps some of the fees banks can charge.

Database of Foreclosed Properties in West Palm Beach

Yesterday, West Palm Beach's city commission unanimously voted to create a database that will require banks to register foreclosed properties and provide contact information for a property manager. The database was approved in an effort to hold banks responsible for maintaining the foreclosed properties in a manner in keeping with local ordinances. The property manager must live within 20 miles of the property and will be required to post a sign on the property that gives their contact information so that residents and code enforcers can contact them if there is a problem with the property. The properties will be inspected by code enforcers every two weeks.

The motion was passed because, according to Development Services Director Doug Wise, the city spends thousands of dollars per day cleaning up the unkempt properties. In order to pass along this cost to the property owners or the banks, the ordinance will be tied in with the city's Chronic Nuisance Abatement Code, which allows a magistrate to order code enforcement and police services billed to a resident's tax bill.

This is an excellent decision by the city. Neglected properties are an eyesore that detract from local property values. They are also a problem because snakes and other animals can take up residence in long grass, posing a threat to neighbors and pets. Finally, if the banks are choosing to hold onto these properties for an unnecessarily long time, they must realize they are going to be held to the same laws as all of the other homeowners.

Questions to Ask About Homeowners Insurance

Below are some important questions to ask when shopping for homeowners insurance.

1. How much would it cost to rebuild your home in its existing location in the event of a total loss? You want your policy to provide for total reconstruction. Normally policies cover damage from fires, hurricanes, hail, lightning and any other disaster listed in the policy. Generally, coverage for earthquakes or floods must be purchased separately.

2. Should you buy separate earthquake and flood insurance? Flood coverage isn't as widely available as earthquake insurance, which you can usually get as a supplemental policy from the same company that is issuing your homeowners policy. Should your company not offer flood insurance, you can get it from the federal government's National Flood Insurance Program.

3. How much is your personal property worth in the event of a total loss? Many policies cover personal property at a set percentage of the total amount of insurance on the home, usually around 50-70 percent. It should cover personal property losses that occur either from theft or any of the covered natural disasters. As a homeowner, you should have a good idea of the value and inventory of the contents in your home.

4. How much liability protection do you need? Liability covers owners against lawsuits from property damage or bodily injury (including animal bites) caused to other people anywhere. So if your dog bites someone while you are walking her and you get sued, your homeowners policy will cover that. The costs of legal defense and any damages awarded to injured parties is covered by the liability aspect of the policy up to the set amount in the policy. Liability coverage usually starts at $100,000, but the more assets you have, the more insurance you should get.

5. How much additional living expense coverage do you need? This coverage is needed when your home becomes uninhabitable because it covers the cost of alternative housing, meals and other living expenses. Many policies offer this coverage at 20 percent of the amount of coverage on the home. Also find out if there is a time limit on how long you can take advantage of this coverage.

6. Do you qualify for any discounts? Discounts can be given for lots of reasons, including your age (55+), having sprinkler and alarm systems, or updated electrical and plumbing systems. Just ask!

Average Home Size Decreases

According to the Census Bureau, the average size of a newly constructed single-family home was 2,392 in 2010. That is a 5.1 percent decline from 2007, when the average was 2,521. Although the Census Bureau didn't share from where the extra square footage was being cut, formal living rooms and formal dining rooms are becoming less popular.

Government Settlement with Banks Over Illegal Actions

As I have previously written, the government has reached a settlement with Ally Financial, Bank of American, Citibank, JPMorgan Chase, and Wells Fargo over the banks' illegal foreclosure practices. This settlement is a great... for the banks. Part of the deal includes $17 billion in principal reductions, which might sound like a lot until you consider that there are approximately 11 million borrowers with around $700 billion in negative equity, according to Paul Diggle, a property economist at Capital Economics in London. That works out to a 2.4 percent reduction on the negative equity, which works out to a joke in my book. And the banks have three years to distribute this money.

Homeowners who were improperly foreclosed upon will share $1.5 billion, which comes out to roughly $2,000 per improper foreclosure. Big whoop. If an improper foreclosure is only going to cost a bank $2,000, they should just keep doing them. I am willing to bet a $2,000 fine is cheaper than the cost of properly foreclosing on a home.

According to the Palm Beach Post, Florida homeowner's will receive $7.6 billion in loan modifications (only California will receive more than Florida). Approximately $170 million will be paid to Florida homeowners who were the victims of illegal foreclosure practices between January 1, 2008 through December 1, 2011. There will be $309 million in refinanced loans and the state will receive a direct payment of $350 million (and I am very curious to see what the state does with that money).

Interested in reading more about this? Check out this article from the New York Times.

http://www.nytimes.com/2012/02/12/business/mortgage-settlement-leaves-much-to-be-desired-fair-game.html?ref=realestate

Getting Your House Ready to List

If you are getting ready to place your home up for sale, the first thing you should do is call me so that I can give you the best marketing plan for getting your home sold! But there are other things you need to do as well in order to get your home in show-ready condition.

1. Remove the clutter! We all can get a little bit lazy with letting junk accumulate, but you need to remove yours before potential buyers look at your home. Think about putting as much effort into your home's presentation as you would for yourself on a first date. To give yourself a good idea of what needs to be done, walk into your home from the front door and pretend you are a visitor. What looks like it needs to be neatened up?

2. Regarding your style, you need to be honest about how widely appealing it is. I was recently in a home that was packed with ornate furniture and accessories; I could barely see the house because I was so distracted by what was in it. If you have a particularly ornate, busy or otherwise unusual design perspective, try to tone it down. Your interior design should complement the home's features, not detract or distract from them.

3. Does your home smell? If so, have it professionally cleaned, buy some room fresheners, open the windows and get some fresh flowers. I have been in a number of homes recently that smelled of mold, mildew, urine or just of not having enough fresh air. In particular if a member of your household or a pet is incontinent, that smell needs to be dealt with before the home is listed. It is an absolute turnoff to buyers to tour a home that smells foul.

4. Personal photographs are a distraction. Even if you are the supermodel, put the personal photos away. Photos are a bad idea either because prospective buyers will be curious about the current owners and will stop looking at the room in order to look ay your photos or because the buyers won't be able to envision themselves in the home with reminders of you everywhere. If you have pencil marks or scuff marks on your walls from where photos were hung, you can remove them with a Mr. Clean Magic Eraser. To fill holes, apply spackling paste and wipe it down with a wet sponge when you are done so that it dries smoothly (you'll avoid having to sand later).

5. Do not stay home during showings or an open house. Buyers feel really uncomfortable looking around a home when the owner is there. Trust that your real estate agent will make sure that nothing is broken or stolen.

6. This is simply my opinion, but I think leaving out candies or cookies is a welcoming touch and is another reference point for buyers to remember your home if they are seeing many homes in one day. It is easier for a buyer to say, "Remember the house where we had the cookies? I love that house," rather than "Remember the house with the white kitchen?".

7. Finally, make your home available for showings. Some sellers require 24 hours notice, but I think if you have something for sale, you should be willing to show it whenever an interested party wants to see it. Don't make it hard for buyers to see your home, that is a turnoff. And if you have a dog, either remove her from the property or put her in a crate. Being able to show it on short notice also requires that you keep it in show-ready condition at all times.

30-Year Fixed Mortgage Rate at Record Low

The average 30-year fixed mortgage rate fell to 3.87 percent last week, setting a new record low (the previous record of 3.88 percent that was set two weeks prior). The average 15-year fixed mortgage rate also set a new record at 3.14 percent.

Home Prices Decline

Standard & Poor's Case-Shiller composite index, which tracks single-family home prices in 20 metropolitan areas, decreased by 0.7 percent from October 2011 to November 2011 and was down 3.7 percent from November 2010. That leaves the average home price at roughly the same prices as 2003. Of the 20 cities that were tracked, 19 showed lower prices. The worst area was Atlanta, with an almost 12 percent decline. Tampa, Seattle and Las Vegas also saw decreases. Phoenix was the one city to show a price increase.

Foreclosures in 2011

According to RealtyTrac, foreclosure notices were filed on 1,887,777 homes (one in every 69 homes) in the U.S. in 2011, a 34% decline from 2010, which itself had an artificially low number of foreclosures filed because banks halted foreclosures in October 2010. Foreclosure activity in 2011 was also 33% below 2009 levels and 19% below 2008 levels.

We have a dysfunctional foreclosure system in which banks are not processing foreclosures at an acceptable rate. It is unclear what the banks' long-term plan is with the homes they own through foreclosure, but a key part of our recovery is to get these homes back onto the market and purchased. The government's plan to allow investors to buy portfolios of foreclosed properties to turn into rentals is not good for the rest of us. The U.S. taxpayers bailed out the banks and Fannie Mae and Freddie Mac and they are the ones who deserve first crack at the foreclosed properties.

30-year Fixed Mortgage Rate

The 30-year fixed mortgage rate rose to 3.98% last week, up from 3.88% from the previous week. The 15-year fixed mortgage rate increased to 3.24% from 3.17%. The Federal Reserve said last week that it plans to keep rates low until 2014.

The mortgage interest rates we see now are historical lows and present an incredible opportunity for anyone who needs financing to purchase a home. Owning at home at these interest rates means your mortgage will likely be much lower than your rent would be for the same home.

Some Homeowners to Get Principal Reductions?

In an approximately $20 billion to $25 billion deal reached between federal regulators and banks, about one million homeowners could receive principal reductions on their mortgages. The settlement was reached to resolve acts of robo-signing and other unlawful foreclosure practices engaged in by the banks. By agreeing to the settlement banks are avoiding the risk of federal government lawsuits, though states could still go after the banks civilly. The banks participating in the deal include Bank of America, Wells Fargo, J.P. Morgan Chase, Citigroup and Ally Financial.

It is unclear how the money will be distributed or how homeowners will qualify or apply for this program. The mortgages that qualify for principal reduction will be limited to private mortgages that were foreclosed upon between 2008 and 2011. Since this program is limited to private mortgages, all mortgages owned by Fannie Mae and Freddie Mac (about 50 percent of all mortgages, or about 31 million mortgages) will not qualify.

Approximately 750,000 mortgagees (about half the number who will qualify for this program) will receive checks for $1,800. The banks will put $5 billion in reserve accounts for state and federal programs, part of which would be used to cover the $1,800 checks. One million mortgagees could have their principal reduced by around $20,000 (this will account for approximately $17 billion of the settlement). And $3 billion would be used to help homeowners refinance at 5.25 percent.

I see this deal as being a big coup for the banks and not much help to homeowners. A check for $1,800 isn't going to make a difference for someone who already lost their home to foreclosure.

Florida's 2011 Home and Condo Sales Increase from 2010

Florida's existing home sales increased to 185,921 in 2011 from 172,462 in 2010, an 8 percent increase. The median price was $131,700 in 2011, a decrease of 3 percent from the $135,900 median price in 2010. For condos, 87,581 units sold were sold in 2011, which was a sizable 15 percent gain over the previous year's 76,209 units. The median price in 2011 was $88,300, down 2 percent from the $90,000 median in 2010.

Rate on 30-Year Fixed Mortgage Hits Record Low

Setting a record for the eighth time in a year, the average rate on a 30-year fixed mortgage fell to 3.88%, down from the record 3.89% from last week. The average 15-year mortgage increased to 3.17% this week from 3.16% last week, which was a record low. Records on interest rates date back to the 1950s.