Should You Get a Reverse Mortgage?

You can't turn on the TV these days without seeing some worn out actor or former politician pitching reverse mortgages as if they they are a great deal for seniors. Well, maybe.

Some big lenders have pulled out of the reverse mortgage business--Wells Fargo and Bank of American, but plenty of other lenders remain, so if you want one, you'll have no trouble finding a lender.  Why? Because they are highly profitable for the lender, but perhaps not such a good deal for the borrower; they have steep up front fees.

Only get one if you:

• Have equity in your home and no way of paying your bills other than selling your home and living on the proceeds
• Can pay the property taxes and home owners insurance bills from now until you die with or without the money you're getting from the reverse mortgage.

With a reverse mortgage, only available to those 62 years young, you get to cash out most of your equity and keep your house.  The bank pays you the value of your house either in a lump sum or fixed monthly payments both of which are based on formulae taking into account your home's current value, current interest rates and your age.

Since you don't pay back a reverse mortgage, you don't have to prove income--the reverse mortgage is your future income.  If you take the lump sum and spend it, you get to stay until you die, but if you don't pay your property taxes the bank will and then they'll foreclose.  If you don't pay your insurance, the bank will buy a policy for you and expect you to pay for it, but if you can't, the bank will seek permission from HUD to foreclose.

So before you sign up for a reverse mortgage, make sure you'll be able to pay your property taxes and insurance in the future and allow for inflation, as they always go up, not down.  Here, along the South Carolina coast, expect substantial increase in windstorm and flood insurance.

A reverse mortgage can be a blessing if your retirement income isn't enough, just be sure you can always pay your taxes and insurance no matter what.

Mortgage Interest Rates Move Higher

According to the Mortgage Bankers Association, for the week ended May 31st, the average contract interest rate for a 30 year fixed rate mortgage was 4.07% the highest since April 2012.  

Home Improvements That Hurt Resale

1. Elaborate  landscaping or gardens

You may have a green thumb and be proud of the time you spent on the garden, the hedges or landscaping. But the next buyer might see it as too much maintenance. Potential buyers may not be willing to pay for it, hire a gardener or do the work themselves. This is especially true with Millennials and Gen X-ers. Certainly your property must have great curb appeal and nice landscaping does sell, but quick and inexpensive improvements to your yard may be all you need--consider hiring a lawn service for a one time going over and add a few flowering plants from a garden shop. 

2. Converting a garage into a family room

This may make sense if you have a large family the will actually use a family room, but be careful the renovation isn't done too late--children at college or on their own  won't use it. When it comes time to sell a garage is expected, especially in the suburbs, if you take it out, you've lost many buyers. Solution: Perhaps minor changes, that can easily be are is all you need--clear out the clutter, paint the floor, walls and inside of the garage door and remove and store the door opener.  Add a large area rug, new light fixtures a window AC with heat--what more do you need?  All this can be easily removed when it comes time to sell.

3. Taking out a bedroom

These days homeowners often transform a bedroom into a huge master closet or into a home office.If you do, make sure the room can be easily turned put back when you sell, no built-in desk and cabinet. . Buyers with kids may need that bedroom. They’ll see the room you converted into a home office or closet as more money they’ll need to spend to turn it back into a bedroom.

To convert a bedroom into, you'll probably want direct access from the master bedroom, which  may include taking out a door and putting up walls. Settle for storing your out of season clothing in the existing bedroom's closet and donate what you don't wear to a thrift store. Once you move your seasonal clothes and cleaned out the stuff you haven't worn in the last several years, you'll have plenty of room.

4. Adding a swimming pool

Same as fancy landscaping; a pool requires maintenance and is an even bigger liability. If you’re in the South, a pool may make sense, especially if they're common in your neighborhood. Think twice if you're in the Northeast, you'll have to heat the pool most of the time and prep it for winter. Join your local Family Y with a pool, instead.

5. Adding personalized colors, finishes or fixtures

Often, homeowners put in tile, sinks, vanities, counter tops and floor coverings specific to their tastes that are hard to replace. For example, you love the Italian tile from your  vacation last year and want it in your kitchen; have it made into a coffee table instead. Stick to neutral colors for permanent improvements; if you spent big bucks on upgrades, your home's value when you need to sell, may not reflect the expense. Some inexpensive improvements are always good--chair railings, crown moldings and an upgraded front door, for example. Be careful you don't turn off buyers who don’t like your taste and don’t want the hassle to undo your changes. Decorate to your taste with furniture and accessories that you can take with you and use in your new home.  If they are highly personal, ask your agent if they should go into storage be showing, so prospective buyers can easily view themselves in your home.

GRAND STRAND MARKET REPORT April 2013

Here's the mostly good news from Site Tech Systems:

Single family homes sales are up in April, 31.5% from last year; year to date sales are up 19.5% from 2012. The median sales price shows signs of stabilization, up 3.1% from 2012.  However, as the number of sales climbs and prices stabilize, more homes are coming on the market, inventory is about 6% above last year and will probably continue to grow in May.  Increasing inventory tends to keep prices down, but fewer available homes are distressed inventory (homes in some stage of foreclosure) which is good as distressed home sales tend to put downward pressure on prices.

Condo sales, both in number and median price remained flat with 2012 and inventory continues to decline, both overall and distressed, which over the next few months should help prices.

Much better news for sellers and for buyers, time to take action.

Read the entire report at:

http://www.sitetechsystems.com/Grand_Strand_Market_Report.pdf

Grand Strand Real Estate Activity March 2013

Here's the March 2013 Report from SiteTech Systems:

"Solid First Quarter for Grand Strand Real Estate Activity

…..sales activity up double digits and sales prices have stabilized and rebounded

The momentum for the last half of 2012 carried into the first quarter of 2013 in both Single Family Residential (SFR) and Condo activity. In March, SFR sales volume was up 11.6% as compared to March, 2012. This solid growth translated to Year to Date (YTD) sales to be up 11.6% to prior year levels. SFR inventory maintained it seasonal increase and is now 4.6% higher than March 2012 levels. Non distressed listings continued to decline and now represent 12.6% of all SFR listings. Continuing its trend from February, SFR median sales price was $176,000. YTD, the SFR median sales price is $174,990 which is up 3.5% from its 2012 level. The improvement in median sales price is driven by a reduction in the percentage of distressed sales. For condos, the listing inventory increased seasonally but is down 11.7% from its 2012 level. Distressed condo listings continue to decline and are down 33% from its prior year’s level. Condo sales remained strong, up 3.7% for March 2012. YTD, condo sales are up 9.3% from their 2012 level. Driven by cash and distressed sales prices, the median sales price for condos slid to $101,750. However, the YTD median sales price of condo sales are up 4.5% from 2012. After a strong 2012, residential lot sales activity has slowed and are down 8.1% from their 2012 levels. The median sales price of residential lots have remained stable at approximately $35,000."

For the full report:

http://ccarimages.fnistools.com/Uploads/RECos/1207/ContentFiles/monthlysalestrendpublicmar.pdf

Apartment Rents Continue to Rise

Landlords along the Grand Strand are finding that demand for apartments and rental houses is strong and high rents aren't deterring people from renting. But as rents continue to rise and and mortgage rates remain at near record lows, more folks are finding it's cheaper to buy than rent, if they can qualify for a mortgage.  However scraping together a down payment to buy a home remains tough for many consumers and tight mortgage standards are forcing some who might like to buy a home to continue renting.

Part of the high demand for rentals is driven by changing demographics as many people like the flexibility to be able to pick up and move; the improving job market makes people think twice about putting down roots if they believe relocating will be a good career move.

What's the impact for the Grand Stand?  If your job is secure and you're happy with the area, now is the time to buy; if you're looking for a better opportunity, keep renting.  As the economy continues to improve, developers are dusting off those apartment projects they put on hold; once new units hit the market, rents will stabilize.

Price Your Property Right

One of the biggest problems that we have in the Grand Strand  market is sellers still expect to get 2006 prices
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​Buyers in general are well informed and have done their homework on the Internet and always ask for market comps. All to often sellers ​say, “Well, my property is special which is why I bought it”. All those wonderful reasons are good points for potential buyers, but every buyer has their own list of dreams and desires and they’re all watching current sales on line.
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​In this market your property must be priced competitively AND it needs to be one or two best values in its market category to get agents' attention and on their show list. It has to be in great condition, because buyers are now looking for every flaw possible and are making objections for the smallest of items. If you're lucky enough to get a contract, there'll be an inspection and everything found will have to fixed, no matter how trivial, if the buyer doesn't insist, their lender will.

The end result for sellers that don’t price to the market is being just behind the selling price range and risking further price declines. If you are a property owner and truly want to sell, ask you listing broker to do a very thorough market analysis and ask what it will take to be the first one or two properties shown in your property's market niche. You might not like the answer, but pricing to market will greatly improve your odds of making a fast sale and time is money too.

Want To Get A Mortgage In 2013?

Ah, remember the good old days, say just a few years ago, when all you had to do to get a mortgage was ask and then fight off the mortgage brokers?  If you haven't applied for a mortgage in the last year or two, get ready now for the new reality: Credit standards are tight and that's an understatement.

Lenders these days are engaging in "defensive underwriting".  While the Federal Housing Administration (FHA) allows borrowers with credit scores under 700 and down payments of just 3.5% to buy homes, that doesn't mean that you can get a loan on these terms.  Lenders are scrutinizing property appraisals, income tax returns and bank statements for any flaw, no matter how small that could be used to force them to buy back a loan.  Did you sell grandfathers pocket watch on ebay and make a one time deposit of a few hundred dollars to your checking account? Be prepared to explain where the money came from, with documents.  If your bank statement says there are seven pages, don't throw away the last three even though they contain nothing but the terms and conditions of your checking account; the lender will want them all and for at least the previous three months.

What to do?  If you're even thinking of applying for a mortgage in the next year or so, start getting ready now.  Pull your credit report from all three credit bureaus and carefully review them.  If they are less than perfect, now is the time ask for corrections and do so by old fashioned letter, not phone calls and emails and keep a copy of everything.  It's usually not a good idea to close credit accounts you don't use, you might even consider using them occasionally. If you carry a balance month to month on your credit cards, get it down to less than 20% of your over all credit line and pay on time. Resist the urge to open new accounts at stores just to get a discount on a purchase; old credit is better than new credit.

Next assemble your last three years of tax returns and look for anything that might raise a question with a lender and gather the documentation now to substantiate the return.  The same with bank accounts, review the last year at least for abnormal deposits, you'll need to explain them.  Unlike credit accounts, closing little used savings and checking accounts might help, certainly you'll have less paper to submit and explain.

The bottom line: if you want to get a mortgage these days, you must be prepared to submit the most trivial financial documents and explain them, your credit report must be as clean as you can make it and be ready to explain any negative information with documentation.  Start now.

The Shadow Market in 2013

The real estate market across the county came alive in late 2012 with home sales and housing starts up strongly.  Prices are doing better, too.  But skeptics still point to sizable overhang of properties headed to foreclosure--the so called "shadow" inventory--that they say will erode the market's recent gains.  Maybe.  

While the shadow inventory remains high, it may not choke off the strength we're seeing.  There are several reasons, first the number of homes in foreclosure is shrinking, down from a peak of 4.7 million nationally in 2009 to 3.4 million at  the end of 2012. The discount at which foreclosures sell has narrowed significantly, from around 24% in 2009 to 7% now. Inventories of new homes for sale are tight and the number of listings of previously owned homes is at an eleven year low. 

On the demand side, sales of new homes are up strongly and sales of previously owned homes are likely to follow. Investor buying has slowed in most areas as well. Mortgage rates remain at historic lows for those who can qualify and are likely to stay low for the next several years. Banks have become more adept at handling foreclosures and realize it's not in their interest to dump large numbers of houses on the market.  They do more short sales now, where they allow the home owner to sell for less than the mortgage owned--faster and less costly for the bank.  

It's going to take years for housing is back to normal, but as long the recovery continues, however slowly, the shadow market should have little effect.

National Flood Insurance Re-Authorized

The Biggert-Waters Flood Insurance Reform Act of 2012 was passed late last week as part of a transportation funding bill and signed into law by the president on July 6, 2012. The legislation extends National Flood Insurance Program (NFIP) authority through September 30, 2017.


This 5 year re-authorization of the National Flood Insurance Program ensures access to affordable flood insurance for millions of home and business owners across the country. The 5-year re-authorization will end the uncertainty of NFIP stopgap extensions and shutdowns.


This legislation is especially important to Grand Strand property owners as flood insurance is required for mortgages. Without NFIP flood insurance rates would sky rocket, pricing many out of the market and further depressing coastal South Carolina prices.

Help For SC Home Owners Facing Foreclosure

Need help with your mortgage?

The S.C. Homeownership and Employment Lending Program has given about $26 million in aid to South Carolinians facing foreclosure since January 2011, but that's not even 10 percent of the $295 million it was given by the U.S. Treasury after South Carolina became one of five states to qualify in 2010 for the Obama administration's "Hardest-Hit Fund," based on high unemployment rates


Aid per home is capped at $36,000, meaning the program still has the resources to help you or someone you know.


The program has been endorsed by most of the large lenders in the state, including Citibank, Bank of America and Wells Fargo.


Applicants must meet at least one of several criteria: being unemployed, underemployed, dealing with the death of a spouse or facing unforeseen health issues.

The program is a nonprofit division of the SC state Housing Finance and Development Authority.

For more information: www.scmortgagehelp.com

But hurry,Whatever money SC HELP has left after 2017 must be returned to the U.S. Treasury.

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Harvard: Home Sales Finally Poised to Improve

Harvard: Home Sales Finally Poised to Improve


Click the link above to read the article...

FHA TIGHTENS LENDING AGAIN!

Beginning April 1, borrowers with on going credit disputes totaling more than $1000 will not be able to get a mortgage insured by the Federal Housing Administration.

This is a significant tightening for the FHA; previously there was no requirement that disputed credit account be paid off--before this rule a direct endorsement underwriter could determine if any of the borrower's debts should have an impact on the FHA's approval.

Now a borrower must either pay off the outstanding balance or document a payment arrangement that the lender must submit to the FHA before closing.  The payment arrangement will be counted into the debt-to-income ratio for the new home loan.

The rule excludes disputed accounts from more than two years ago, along with those related to theft.  But the lender must document an identity theft or a police report on the fraudulent charges.

The unintended consequences could be severe for those in the pipeline--kicking out many buyers, perhaps as many as 50%.  Bottom line, borrowers must clean up their credit reports before applying.

February 2012--Sales Up, Prices Down

Real Estate sales along The Grand Strand rose 10.2 percent in February, to 541, compared to last year, significantly out pacing state wide sales which increased 4.8 percent.  But prices continued to fall,  2.2 percent but compared to a state with increase of  2.6 percent.  However, if you look at other areas in the state, we're doing better--Aiken dropped 18.1 percent, Greenwood dropped 17.3 percent, the Piedmont region fell 15 percent and north Augusta fell 13.3 percent.  The median price of a house or a condo along the Strand fell to $135,000.

What are we likely to see going forward? --more of the same as the area works through a back log of foreclosures and a short sales.  Then there is the shadow inventory--houses not on the market, but whose owners want to sell.  Some are owned by banks and will hit the market as the foreclosure process is completed while others are owned by individuals waiting for the market to improve.

When can we see prices firming? Probably not until 2014.  When can we expect to see prices increasing? Even further out and then nothing like the boom years 2000-2006.  When prices start to increase again, they're likely to pace the rate of inflation, 2-3 percent a year.

Bottom line: A buyer's market for the next few years.

FHA To Raise Fees

If you're buying or refinancing with a mortgage backed by the Federal Housing Administration you can expect their fees to increase, unless you hurry.

The agency is raising its fees in an effort to try to restore its depleted reserves, which suffered from the rising number of home owners who defaulted on their mortgages, and to try to encourage the return of more private capital to the market.

FHA loans allow for down payments as low as 3.5 percent and they often have less stringent credit requirements, which have made them soar in popularity in recent years. (The agency insures loans but doesn’t issue them.) About 40 percent of all new mortgages for home purchases in 2010 were FHA-backed mortgages.

Starting April 1, it will increase its annual mortgage insurance premium for loans under $625,500,  from 1.15 percent of the loan amount to 1.25 percent. Starting June 1, larger loan premiums will see an increase of 0.35 percent of a percentage point, bringing the total premium costs up to 1.5 percent of the loan amount.

FHA also announced it will raise their upfront mortgage premium by 0.75 of a percentage point, which will now total 1.75 percent of the loan amount.

So, a borrower with a 3.5 percent down payment with a mortgage of $193,000 can expect to pay an upfront mortgage premium alone of $3,377, compared to the prior $1,930 but it can be rolled into the mortgage. The new fees will also apply to home owners who want to refinance their mortgages.

The raise in fees is expected to bring in $1.25 billion in additional revenue to the agency through September 2013. 

The upfront increase is pretty stiff and isn't going to help home sales recover, not such a good idea if you ask me, but then they didn't.

 

FORECLOSURE vs. SHORTSALE

ISSUE

Credit Score: 

• Foreclosure will probably lower your FICO score from 250 to 300 points and will affect your credit score for 3 plus years
• With a successful short sale, only late payments on mortgage will show and after sale, the mortgage is usually reported "paid as agreed", "paid as negotiated" or "settled" with a 50 point score hit for 12 to 18 months

Credit History:

• A foreclosure remains as a public record on a person's credit history for 10 years or more
• A short sale is not reported on a person's credit history.

Current Employment:

• Employers have the right and regularly check the credit of employees in sensitive positions; a foreclosure may be grounds for reassignment or termination.  If a person is a police officer, a military member or working for a government agency such as the CIA, any security clearances will be revoked and the person reassigned or terminated.
• On its own, a short sale is usually not reported on a credit report and will likely not affect employment

Future Employment:

• Many employers require a credit check of all job applicants and a foreclosure will likely preclude hiring.
• A short sale is not reported and should have no effect.

Deficiency Judgement:

• In South Carolina, the bank has the right to pursue a deficiency judgement and chances are they will.  As foreclosed homes sell at lowers prices and the market is still declining, the result may be a higher judgement.
• In a short sale, it may be possible to convince the lender to fore go their right to pursue a deficiency judgement.  Short sales often sell close to market value, making any deficiency judgement lower.

Insurance:

• Insurance companies are now checking credit records and a foreclosure will likely boost car insurance rates and other types of insurance as well, such as a renter's policy
• A short sale is not reported and should have no effect

Loans:

• A foreclosure makes one ineligible for a Fannie Mae backed mortgage for 5 years; other types of mortgages will have a higher perhaps prohibitive rate
• A successful short sale generates a 2 year waiting period for a Fannie Mae backed mortgage and likely will not affect other loans as it's not reported.  However, if asked, a borrow should answer truthfully.

So, in every instance, it's worth it to make every attempt to work with your lender to avoid a foreclosure, no matter how difficult that may be.  Start early.

Grand Strand Market Report, January 2012

After declining during the second half of 2011, the number of single family homes and condos on the market increased slightly in January 2012, however, the 2012 inventory is still below January 2011 by almost 6%.  Good news if this trend continues.

Sale prices increased Horry and Georgetown Counties except in top end properties; another good trend; top end homes will respond in time.  The number of sales of single family homes was up almost 14% in January as compared to last year, but distressed (foreclosures & short sales) properties accounted for 37% of all single family sales.  While this is the best January sales performance since 2007, those distressed sales kept the median home price to $163,700, up slightly from a year ago. 

Condo sales numbers are similar, slight increase in inventory with a median sales price of $94,900, a 10% drop from January 2012.  The price drop was fueled by distressed sales and the large number of cash buyers--over 70% of all condos were sold for cash.  The high percentage of condo cash sales is interesting, probably mostly real estate investors who hope to turn a profit in a few years.  Time will tell, stay tuned. 

Technology Notes

Have trouble keeping up with the modern world? Does your "smart" phone have a mind of it's own? Have trouble figuring out how to get your CD collection into your walkman, er, ipod?

Check into OLLI, that is Osher Life Long Learning Institute at Coastal Carolina University which provides scores of short courses for adults during the day and evening at three locations along the Grand Strand.  I heard about a class for android tablet users, signed up and spent three delightful afternoons at CCU's 79th Street campus with instructor Kathleen Libby, a seasoned instructor and self admitted "geek."  The classes cost a few bucks, but I learned numerous tricks about my android tablet AND almost all of them were directly applicable to my android phone. I've now figured out what a widget is, how to "sync" my portable devices with my desk top and how to print from the "cloud."

Kathleen's tip on wire management for all those wires under your desk was alone worth the price of the course--visit the drug store for some of those clips that ladies use to hold their pony tails in place; that's right, they come in all sizes and snap open and closed.  You can go from an unsightly mess of cables to a neat solution in a skinny minute.

More information on OLLI at www.coastal.edu/olli or call 843-349-2767.  

Popsitive Trends in 2011 & 2012

Clearly 2011 was a challenging year, but there is a lot to be positive about looking ahead to the rest of 2012.  Housing statistics are starting to look good and the length of the housing down turn itself points to turning the corner, maybe this summer.  Washington's fiscal policy remains indecisive, but most major economic indicators are showing stability and positive, though admittedly weak trends.  The pace of growth is slow, but that's to be expected in an economic recovery from a financial crisis. 

Some good trends:

• Households are paying off their consumer debt even though credit is becoming easier to obtain, including home equity lines of credit which grew for the first time in years in the 3rd quarter of 2011. 
• Consumer sentiment picked up sharply in the last half of 2011, to a 6 month high in December.  Still low, but maybe consumers believe the economy will pick up in 2012.  Increasing confidence can become self fulfilling.
• The labor market is slowly coming back--December jobless claims were at their lowest level since 2008, but unemployment remains persistently high and gains are often due to declines in the number of people in the workforce.  It's going to take years until we get unemployment down to where it should be, 2 or 3 percent, and until we do, those folks can't buy houses and will have trouble keeping the ones they have, both downward pressure on the housing market.
• Housing prices continue to decline, a trend that will continue until we work off the backlog of foreclosures, short sales and the shadow inventory  (homes that folks want to sell which they took off the market, waiting for higher prices).  Until all of these houses are sold, prices will remain under pressure.  Housing recessions are always long and this one is no different.  But the good news is, affordability is rising dramatically due to lower prices and rock bottom mortgage rates.

Home prices may not stabilize completely in 2012, but we're getting closer--rising affordability itself will put a floor under prices, maybe this summer.  Stay tuned.

Better Year in 2012?

No question about it, new home construction around town has picked up since the first of the year.  While noting like boom days a few years back, builders are back to work, perhaps at pre boom levels, building homes in all price ranges.  Hard data are difficult to gather and it's difficult to say what's causing this up tick in construction, but several things may be driving buyers.  First, folks may just be tired of waiting, second, interest rates remain historically low for those who qualify and third, some of the new homes sitting on the market have been sold and inventory levels are down from a year ago.

One thing for sure, the market is more competitive than ever as the many foreclosures and short sales continue to push prices lower. Home buyers are all looking for a good deal and all expect to spend less money than a few yearts ago, so builders will have to squeeze their profit margins and be ready to bargain.  Buyers who are serious have their financing lined up and ready to sign, something we haven't seen in a while.  If one developer can't make the deal happen, the next one will.

2012 may not mark the end of our troubled housing market, but it may mark the beginning of the long awaited stabilization of house prices and better markets down the road.