Real Estate Tips

Do I Need a Permit for That? - Don't jeopardize a future sale.

When undertaking a remodel or home improvement project, how do you know when you need a building permit from your city government?

Cities require permits to ensure that the changes on a home go on record. The changes also are reviewed by an inspector to ensure they’re up to code. For example, if you decide to rewire your electricity panel , exposed wires could represent a safety issue to you and your home.

When homeowners sell their home, buyers and lenders will want to know if any remodels they did complied with building codes. So the permit could salvage a sale too.

“The general rule of thumb is that structural, electrical, plumbing, or mechanical work will require a permit,” notes Redfin at a recent blog post.

The Home Inspector’s File

A fence installation or repair, window installations, plumbing and electrical work, replacing the water heater or changes to the ventilation system, as well as gas and wood fireplaces all will likely require a permit for the work. Also, any additions or upgrades made to the home, typically of $5,000 or more, will likely require a permit.

On the flip side, permits likely won’t be needed for painting, installing floors or faucets, or landscaping work.

Permit requirements vary by city. Check with the local building department to be on the safe side.

Americans Have Never Felt This Good About Real Estate

Fannie Mae’s Home Purchase Sentiment Index surged to a new high as consumers became more upbeat about buying and selling, mortgage rates, and their jobs. Five of the six components measured by the index rose month over month.

“Consumer job confidence and favorable mortgage rate expectations lifted the HPSI to a new survey high in July, despite ongoing housing supply and affordability challenges,” says Doug Duncan, Fannie Mae’s senior vice president and chief economist. “Consumers appear to have shaken off a winter slump in sentiment amid strong income gains. Therefore, sentiment is positioned to take advantage of any supply that comes to market, particularly in the affordable category. However, recent financial market events following when the survey data were collected could weigh on consumer views looking ahead.”

Overall, the HPSI, based on a survey of 1,000 Americans, rose 7.2 points compared to a year ago to a record-high reading of 93.7 in July. Here are some highlights from the index’s latest readings:

  • Buying: The net share of Americans who said now is a good time to buy a home rose 3 percentage points from June to 26%, up 2 percentage points from a year ago.

  • Selling: The net share of consumers who say it’s a good time to sell rose 1 percentage point to 44%, up 3 percentage points from a year ago.

  • Home prices: The share of Americans who say home prices will go up over the next 12 months fell 1 percentage point to 37%, down 2 percentage points from a year ago.

  • Mortgage rates: The share of consumers who believe mortgage rates will drop over the next year rose 1 percentage point and is up 24 percentage points from a year ago.

  • Job stability: Americans are more confident about their job situation, with the share who say they’re not concerned about losing their job over the next year rising 8 percentage points to 81%. This is up 16 percentage points from a year ago.

  • Household incomes: The share of Americans who say their household income is significantly higher than 12 months ago rose by 1 percentage point to 21%, essentially unchanged from a year ago.

Source: “Home Purchase Sentiment Index,” Fannie Mae (Aug. 7, 2019)

Bottom Line

Consumers are feeling good about the real estate market. Since Americans are not worried about their jobs, see mortgage rates near an all-time low, and believe it is a good time to buy, the housing market will remain strong for the rest of the year.

5 Real Estate Reality TV Myths Explained

Have you ever been flipping through the channels, only to find yourself glued to the couch in an HGTV binge session? We’ve all been there, watching entire seasons of shows like “Property Brothers,” “Fixer Upper,” and “Love It or List It,” all in one sitting.

When you’re in the middle of your real estate-themed TV show marathon, you might start to think everything you see on the screen must be how it works in real life. However, you may need a reality check.

Reality TV Show Myths vs. Real Life:

Myth #1: Buyers look at 3 homes and decide to purchase one of them.
Truth: There may be buyers who fall in love and buy the first home they see, but according to the National Association of Realtors, the average homebuyer tours 10 homes as a part of their search.  

Myth #2: The houses the buyers are touring are still for sale.
Truth: Everything is staged for TV. Many of the homes shown are already sold and are off the market. 

Myth #3: The buyers haven’t made a purchase decision yet.
Truth: Since there is no way to show the entire buying process in a 30-minute show, TV producers often choose buyers who are further along in the process and have already chosen a home to buy. 

Myth #4: If you list your home for sale, it will ALWAYS sell at the open house.
Truth: Of course, this would be great! Open houses are important to guarantee the most exposure to buyers in your area, but they are only one piece of the overall marketing of your home. Keep in mind, many homes are sold during regular showing appointments as well. 

Myth #5: Homeowners decide to sell their homes after a 5-minute conversation.
Truth: Similar to the buyers portrayed on the shows, many of the sellers have already spent hours deliberating the decision to list their homes and move on with their lives and goals.

Bottom Line

Having an experienced professional on your side while navigating the real estate market is the best way to guarantee you can make the home of your dreams a true reality.

New FHA Rule Will Ease Condo Approval Process

The long-waited Federal Housing Administration (FHA) rule regulating condominium lending was finalized Wednesday afternoon.  The Department of Housing and Urban Development (HUD), the parent agency of FHA, published the final regulation and the policy implementation guidance establishing a new condominium approval process.

As a way of background, under existing rules, to obtain an FHA mortgage a borrower must not only satisfy the lender and the FHA that he or she is a qualified buyer but must purchase a unit that is itself qualified for financing. 

According to the National Association of Realtors®, FHA has put its stamp of approval on many complexes, but given the universe, not nearly enough. Of the more than 150,000 condominium projects in the U.S., only 6.5 percent are approved to participate in FHA's mortgage insurance programs.   

To be approved under existing rules, condo communities must submit a pile of paperwork, be vetted by the administration, make any improvements specified by FHA, and then submit to a reexamination. Specified requirements cover the percentage of owner-occupied units, budgetary reserves, insurance coverage, and HOA dues collections. There are also location requirements related to transportation access.  FHA said its requirements were intended to "make sure that the property remains in good standing and will be desirable."

These requirements often left buyers selecting a condo only to find they could not obtain an FHA mortgage for which they were otherwise qualified. This has had implications for homeownership, especially for low-income borrowers, those with less than perfect credit scores, or with downpayments below the minimum level to obtain other financing.  This has become increasingly problematic as prices for single-family homes have escalated, making condo purchases more important as an option for entry-level buyers.

The new rule, which becomes effective on October 15, will allow a homebuyer to obtain an FHA mortgage for an individual condo unit in an unapproved condominium project if that project is completed and meets the following criteria:

  • In a development with fewer than 10 units, no more than two can be insured by FHA.

  • In a development that exceeds 10 units, a maximum of 10 percent can be insured by the FHA.

  • A minimum of 50 percent of project units must be owner-occupied.

The rule change also extends the certification period from two to three years and expands the eligibility criteria for mixed-use units.

HUD estimates the new rules will make an additional 20,000 to 60,000 condo units eligible for FHA insured loans each year.

HUD Acting Deputy Secretary and FHA Commissioner Brian Montgomery said, "Today we are making certain FHA responds to what the market is telling us. This new rule allows FHA to meet its core mission to support eligible borrowers who are ready for homeownership and are most likely to enter the market with the purchase of a condominium."

BY: JANN SWANSON

Busting the Myth About a Housing Affordability Crisis

It seems you can’t find a headline with the term “housing affordability” without the word “crisis” attached to it. That’s because some only consider the fact that residential real estate prices have continued to appreciate. However, we must realize it’s not just the price of a home that matters, but the price relative to a purchaser’s buying power.

Homes, in most cases, are purchased with a mortgage. The current mortgage rate is a major component of the affordability equation. Mortgage rates have fallen by over a full percentage point since December 2018. Another major piece of the affordability equation is a buyer’s income. The median family income has risen by 3.5% over the last year.

Let’s look at three different reports issued recently that reveal how homes are very affordable in comparison to historic numbers, and how they have become even more affordable over the past several months.

1. National Association of Realtors’ (NAR) Housing Affordability Index:

Here is a graph showing the index going all the way back to 1990. The higher the column, the more affordable homes are:

housing affordability index.png

We can see that homes are less affordable today (the green bar) than they were during the housing crash (the red bars). This was when distressed properties like foreclosures and short sales saturated the market and sold for massive discounts. However, homes are more affordable today than at any time from 1990 to 2008.

NAR’s report on the index also shows that the percentage of a family’s income needed for a mortgage payment (16.5%) is dramatically lower than last year and is well below the historic norm of 21.2%.

payment as percentage of income.png

2. Black Knight’s Mortgage Monitor:

This report reveals that as a result of falling interest rates and slowing home price appreciation, affordability is the best it has been in 18 months. Black Knight Data & Analytics President Ben Graboske explains:

“For much of the past year and a half, affordability pressures have put a damper on home price appreciation. Indeed, the rate of annual home price growth has declined for 15 consecutive months. More recently, declining 30-year fixed interest rates have helped to ease some of those pressures, improving the affordability outlook considerably…And despite the average home price rising by more than $12K since November, today’s lower fixed interest rates have worked out to a $108 lower monthly payment...Lower rates have also increased the buying power for prospective homebuyers looking to purchase the average-priced home by the equivalent of 15%.”

3. First American’s Real House Price Index:

While affordability has increased recently, Mark Fleming, First American’s Chief Economist explains:

“If the 30-year, fixed-rate mortgage declines just a fraction more, consumer house-buying power would reach its highest level in almost 20 years.”

Fleming goes on to say that the gains in affordability are about mortgage rates and the increase in family incomes:

“Average nominal household incomes are nearly 57 percent higher today than in January 2000. Record income levels combined with mortgage rates near historic lows mean consumer house-buying power is more than 150 percent greater today than it was in January 2000.”

Bottom Line

If you’ve put off the purchase of a first home or a move-up home because of affordability concerns, you should take another look at your ability to purchase in today’s market. You may be pleasantly surprised!