All posts by Tomie Raines Housing News

Comparing Interest Rates…Check the APR

Buyer Information

Most buyers are shopping for the best mortgage loan rate. However, many don’t think to add the “closing costs” expense into the total cost of the loan.

When applying for a mortgage, you may not pay the advertised rate. The best rates are for those homebuyers with the best credit scores. However, lenders are competitive, so you’d be wise to compare the rates and closing costs of several lenders.  You’ll receive a loan estimate that you can compare side-by-side.

Compare the Interest Rate
There are many factors that affect interest rates, including the economy, inflation, and the Federal Reserve’s overnight borrowing rates for banks. You can’t control these things, but you can influence the factors influence your credit score.

If you have a credit score of 740 or higher, the risk of default is low enough that you will likely receive the lender’s best rate. A credit score of 620 or lower will give you fewer loan options and the highest rates. Lenders also look for a loan-to-value – code for how much money you’ll put down as a down payment. The more you put down the better the ratio.

What you’ll actually pay
The true rate you’ll pay is the annual percentage rate (APR). The APR is your mortgage interest rate plus closing costs that have been rolled into the loan.  These include loan origination fees, property appraisal, flood certification, credit reports, and other charges associated with getting a loan. You’ll be able to find these numbers under the “comparisons” section of your loan estimates.

There is no fixed amount for closing fees and they will vary from one lender to another. Basically, a low interest rate with higher closing costs may turn out to be a more expensive monthly payments than one with a higher interest rate and lower closing costs.

Make sure that you’re comparing loans that the APR is consistent. For example, if the average 30-year fixed mortgage rate is 3.030%, then the APR is 3.250%.

Are we headed for real estate crash?

Buyer Information, Finance and Taxes, Seller Information

Every fall, when the housing market begins the annual slowdown, buyers and sellers begin to ask if we are destined for another crash like the country experienced in 2007.

The housing market crash 15 years ago was responsible for a worldwide recession. Millions of families lost their homes and housing values plummeted more than 30%. It took nearly a decade for the Lansing market to fully recover from that disaster.  While it’s true that the real estate market is experiencing surging prices and a housing shortage much like market environment prior to 2007, the conditions are different than those 15 years ago.

Uncontrolled Mortgage Financing.
Following a period of high interest rates approaching 18%, mortgage money became available for a new low of 7%. The market quickly became flooded with new buyers hoping to  qualify for a mortgage loan. However, there was no agency regulating the business of mortgage financing. It was easy for just about anyone  to set themselves up as a mortgage broker and make a fortune offering loans to unsuspecting buyers who didn’t know they were not financially capable of sustaining monthly mortgage payments.

“If they have a pulse, we’ll give them a loan.”
This was the joke in the mortgage business. It was possible for a buyer to secure mortgage financing for much as $750,000 on “stated income” without proof of employment.  Millions purchased their home with no out-of-pocket expense. Adjustable-rate loans, with closing costs and down payment built into the monthly payment, made it easy for anyone to obtain a mortgage and become a homeowner.

These buyers often had a first and second mortgage and no equity in the home. Initially, the monthly payment was lower than renting, so it seemed like a good idea. However, the adjustable-rate eventually raised the monthly payment to more than many could afford.

Mortgage defaults rapidly increased nationwide with the investors who held those loans unable to sustain the financial loss. Ultimately, some of this country’s largest banks and mortgage companies went out of business.

Mortgage Practices have Changed.
These near fraudulent practices forced the United States Congress and federal regulators to change how mortgage lending is regulated. The Consumer Financial Protection Bureau was created to enforce standardized mortgage practice so that the process of obtaining a mortgage is more transparent. Lenders who do not follow prescribed practices will loose their license and suffer huge penalties.

Many economists are confident that there will eventually be a change in the market. Population movement, interest rates, and consumer confidence all contribute to a shift from “seller’s market” to “buyer’s market”…but not a crash.

 

This is the best time prepare your home for winter.

About the house...

winterIt’s still warm and cold weather is a few months away, but this is the best time prepare your home for winter.   First, it’s warm enough to enjoy being outdoors.  Second, busy service professionals may need to be scheduled weeks in advance.

Have your heating system checked.
Have your heating system cleaned and tuned by a qualified furnace service.  A pre-season tune-up is a good investment. It reduces the chances of breakdowns in the middle of winter, improves safety, and pays for itself through more energy efficient operation.

Check your furnace filter.
If it’s old and dusty, you should replace it. Furnace filters must be changed regularly to maintain the efficiency of your furnace and to prevent dust from spreading through your house.

Protect against carbon monoxide.
Any fuel burning appliance — gas, propane or oil furnace, gas water heater, gas range and oven, gas dryer, gas or kerosene space heater, fireplace, or wood stove — can put dangerous amounts of carbon monoxide into the air if they are not working properly.

You can’t see or smell carbon monoxide, but at a high level in can kill a person in minutes. Because the symptoms of carbon monoxide poisoning are similar to food poisoning, viral infections or the flu, you may not realize that CO poisoning could be the cause. Even at moderate levels, carbon monoxide can cause headaches, tiredness, nausea, mental confusion, and shortness of breath.

A carbon monoxide detector can be purchased at any hardware store and should be placed in a hallway or sleeping area. If carbon monoxide is present in your home an alarm will sound.

Clean the gutters.
This not anyone’s favorite job, so it’s best to do when the weather is nice. Remove leaves, sticks, and other debris from gutters, so melting snow and ice can flow freely. This will prevent ice damming, a condition where water is unable to properly drain through the gutters and instead seeps into the house, causing water to drip from the ceiling and walls.

You may also consider installing “gutter guards.” Available in most hardware stores. Gutter guards are screens that prevent debris from entering the gutter and direct the flow of water away from the house and into the ground.

Trim trees and remove dead branches.
Ice, snow and wind could cause weak trees or branches to break and damage your home,  car, or pull down your electrical and internet wires.

Cover your air conditioning unit.
This appliance is often neglected when the “Cool” is switched to “Heat”.  Winter’s freezing and thawing can damage the unit’s fragile cooling fins, reducing its efficiency and life. Covers are sold in all hardware stores (Home Depot, Lowes, ACE, etc.) and easy to install.

Garden hoses and irrigation systems.
These are easily forgotten once they’re no loner being used. Remove hoses from the faucets and store for the winter.  Underground sprinkler system should be “blown out” so that no water remains in the system. There are services that can do this for you.

 

Normal Real Estate Slowdown Entering September

Buyer Information, Current Lansing Area Sales Statistics, Seller Information

The current inventory of homes (770) is more than double the 353 homes available to buyers in April. This increase occurs at this time every year and does not indicate a change in the current seller’s market.

Historically low interest rates, currently at 2.87%, continue to offset the increased cost of purchasing a home with properly priced homes continuing to sell quickly, and with multiple offers.

Why the increased inventory?
Each spring the inventory includes a large number of properties that for a variety of reasons didn’t sell the previous year.  A home in poor condition or lacking a second bath may be passed over by buyers willing to wait until something better comes along. Obviously, an unappealing home is not going to easily sell as a growing number of more attractive homes become available.

Then there’s the reduced number of buyers.  As of August 30, 1,022 homes have accepted offers or are pending a closing.  Also, 5,255 homes have closed since the beginning of the year. This adds up to 6,277 buyers who are no longer searching for a home. Add to that figure the families involved with back-to-school activities who may need to postpone home shopping until next spring.

This is good news for September buyers still in the hunt.  Increased inventory plus reduced competition may provide an opportunity to acquire their home of choice.

 

Energy Star for Homeowners

About the house...

Energystar.gov offers a great deal of information for homeowners. From tax credits and rebates to referrals to qualified contractors, you’ll learn about Energy Star®-certified products you can purchase and install in your home that save energy, money and the environment.

The energy star program was established by the Environmental Protection Agency (EPA) to benefit consumers by encouraging manufacturers to create the most energy-efficient and cost-effective products in about 75 categories. Since 1992, Energy Star and its partners have saved U.S. families and businesses trillions in kilowatt-hours of electricity and helped them avoid more than $450 billion in energy costs.

For non-businesses, Energy Star tax credit benefits are limited to homeowners for their primary residence located in the United States and include the following:

  • Air Source Heat Pumps
  • Central Air Conditioning (CAC)
  • Gas, Propane, and Oil Hot Water Boiler
  • Gas, Propane, and Oil Furnaces and Fans
  • Water Heaters (non-solar)
  • Advanced Main Air Circulating Fan
  • Biomass Stove
  • Insulation
  • Roofs (Metal and Asphalt)
  • Windows, Doors, and Skylights

The tax credits for residential renewable energy products include geothermal heat pumps, small wind turbines, solar energy systems and fuel cells. In addition to federal tax credits, local rebates and offers may be available in your area.

Check the ENERGY STAR® Rebate Finder, where you can enter your zip code to find rebates and other offers in your area. Also, contact your local utility or state energy office about any available incentives or programs.

Home Values Increase 11.1% in 12 months

Current Lansing Area Sales Statistics, Finance and Taxes

Home prices have continued to rise as we’re half way through 2021.  Mortgage rates are currently at 2.78% making it easy for buyers to make extremely competitive offers for very few available home choices.  Through May, June and July, sellers have been receiving offers exceeding the listing price and are often given an “appraisal guarantee” assuring that the buyer will provide additional, out-of-pocket, funds for the closing of the purchase.

According to second quarter 2021 sales statistics,  the average sales price of Lansing area homes has increased from $188,150 at the end of June 2020 to $209,089 on June 31, 2021.  This is a 11.1% increase and represents an average home value increase of $20,939.  Average selling time for many homes is less than one month.  These figures include all sales through the Greater Lansing Association of Realtors.

 Check out our Second Quarter Sales Statistics Link (below) for an update of sales activity by community. (Please note that pending sales, properties under contract that have not yet closed, are not factored into these statistics.)

Second Quarter 2021 Sales Statistics


Market  View – July 29, 2021
• A strong seller’s market continued through the month of July.
• 688 homes listed for sale in the five county greater Lansing area.
• 355 homes have accepted offers, awaiting inspections .
• 599 home are listed as Pending. Have completed inspections and will soon close.

 

 

Is Lansing area Housing Becoming Overvalued?

Market Update, Seller Information

Home values in the Lansing area have risen by more than 12% over the past year.
This means, a home that sold for $250,000 a year ago would likely sell for $280,500 today.

This rapid rise in prices has many buyers and homeowners wondering if the housing market is becoming overvalued.

Is there a housing crash on the horizon?
This is not the first time the real estate market was considered to be overvalued. Home values escalated in 2002 through 2006, just before the nationwide housing market collapse.

Things are different in today’s market. During the last housing bubble, there was a huge surge in new home construction and extremely lax mortgage-lending standards.

In the current market, there an ongoing shortage of homes for sale across the mid-Michigan area. Instead of having too many houses on the market, we currently have a situation where the number of available properties falls well below the demand. This is the number-one reason why prices have risen so sharply over the past year or two.

Even though buyers continue to pay above asking price, that does not necessarily mean a crash is on the way. The ongoing problem with supply and demand will continue to force home values upward in the foreseeable future.

If real estate home values continue to climb, there could eventually be a decline in home sales due to many buyers being priced out of the market.  In addition, buyers may reconsider purchasing a home. Buyers worry that they will overpay for a home, only to see prices drop over the next few years. This can lead to a homeowner being “upside down” or underwater in the mortgage loan.

No one can predict future real estate or economic trends with complete accuracy.  So, home buyers simply have to think long term, when buying a home. Houses tend to gain value over the long term. That is what makes real estate one of the best investments over time.

 

No End in Sight for the Current Housing Market

Current Lansing Area Sales Statistics, Market Update

The housing shortage continues to drive the real estate market with sellers receiving offers almost immediately after listing their home…often well above the asking price.
Unprepared homebuyers are losing out to buyers with deeper pockets or those savvy enough to present an offer that is more likely to “win” the  home.

A typical story…
A buyer family currently owns a modest home that will sell easily. They have strong financing, been pre-approved for a mortgage and hope to upgrade to a larger home that will accommodate their growing family. This morning their Realtor notifies them that a home has become available in one of their target neighborhoods. They visit the home immediately after work that same day and decide to make an offer.  During the visit, the Realtor is informed via email or text that the seller has received multiple offers and all buyers must submit their “highest and best” by 9am tomorrow.

This fast-moving market has been driven by buyer demand, low mortgage rates and tight housing inventories.  It is an extremely competitive environment with a large number of prospective homebuyers making up the buyer pool.  As a result, buyers must be prepared to act quickly once they find the right home. Otherwise, they may not be moving any time soon.

Successful homebuyers have been increasing their budgets, decreasing their expectations, and even waiving standard contingencies like the home inspection…but be careful. These are practices to consider when making an offer on a home.

If you like the home…so will someone else!
It’s inevitable, if you are willing to make an offer…so are others.  Gone are the days when buyers could take a few days to consider the purchase and make a second visit to the home before making an offer.  In this market you must be prepared to make an instant decision.

Be prepared!  Well-maintained homes that have been priced appropriately can sell in the first few days on the market. If you really like a property, make sure you have an offer ready. The listing agent/homeowner likely won’t wait long, especially if there are other interested buyers.

Low-ball offers?  Forget making an offer below the listing price. Unless the home is grossly overpriced or requires too many expensive updates, a “low-ball” offer has little chance of being accepted.

Waiving the inspection contingency?  This has become a common offer tool which isn’t a good idea. While this may win a signed contract, buyers are placing themselves at risk of purchasing a “money pit”.

Current Mortgage Pre-approval.  Make certain your letter from the lender is updated. These letters normally expire after 60 days and may not be easily obtained when needed.

Appraisal Guarantee.  This is a way of assuring the seller that you will personally pay, in cash, the difference between the accepted offer and the home’s appraised value as determined by your mortgage provider. Paying more than the home is worth is a good financial strategy only as long as you plan to live there long enough to see home values rise.

Your down payment. The more money you can put down, the better. This tells the seller that you are a serious buyer with strong mortgage financing.  However, you don’t want to overextend yourself by using all your savings to make an attractive offer. You want to have money set aside to furnish the home and pay for needed improvements after you move in.

Be flexible with your closing date
When a home is occupied, the seller will likely need time move out.  It’s not unreasonable to expect the seller to move within 14 days after closing, but circumstances may require the seller to ask for 30 to 60 days before you can occupy your new home.  Allowing sellers the flexibility  to move on their timeline may possibly make your offer more attractive than the others.

Lansing Area Home Values Increase 12.2%

Current Lansing Area Sales Statistics, Market Update

7077953.largeHome prices will almost certainly continue to rise through 2021, primarily due to limited supply and strong demand.  Mortgage rates remain at only a little above 3% making it easy for buyers to make extremely competitive offers for very few available home choices.  Sellers receiving offers exceeding the listing price are often given an “appraisal guarantee” assuring that the buyer will provide additional, out-of-pocket, funds for the closing of the purchase.

According to First quarter 2021 sales statistics,  the average sales price of Lansing area homes has increased from $178,903 at the end of March 2020 to $200,743 on March 31, 2021.  This is a 12.2% increase and represents an average home value increase of $21,840.  Average selling time for many homes is less than one month.  These figures include all sales through the Greater Lansing Association of Realtors.

 Check out our Fourth Quarter Sales Statistics Link (below) for an update of sales activity by community. (Please note that pending sales, properties under contract that have not yet closed, are not factored into these statistics.)

First Quarter 2021 Sales Statistics


Market  View – April 27, 2021
– A strong seller’s market continues as we enter the Spring selling season.
– Only 320 homes listed for sale in the five county greater Lansing area.
– 332 homes have accepted offers, awaiting inspections .
– 600 home are listed as Pending. Have completed inspections and will soon close.

The Five-year Equity Rule

Buyer Information, Finance and Taxes

7118744.largeWhen you buy a home, plan on staying there for approximately five years. Why? You’ll need equity in order to sell the home without losing money.

Equity is your percentage of ownership VS how much the bank owns. With any mortgage loan, the first few years of payments go more toward paying interest than reducing your principal. To build enough equity to sell at break-even or a profit, you’ll have to recoup closing costs and fees as high as 14% in some areas. To build equity over time, do the following:

Put more money down. If you put 20 percent down, you’re in good shape, but if you put down 3.5%, 5% or 10%, it will take longer to build equity, so be patient.

Pay your mortgage on time and in full. Paying principal builds equity. The more months you pay, the more equity you’ll build.

Make additional mortgage payments. You can add an extra $50, $100, or any amount per mortgage payment. This will also help you get rid of private mortgage insurance or allow you to refinance to a PMI-free loan once you reach 22% equity.

Let time and the housing market work for you. The housing market typically rises one to two percentage points above inflation annually, but if you’re lucky, your home may gain much more value than that.

Building equity takes time, money and luck, which is why following the five-year equity rule will help you plan when to sell your home.