Author: Marlowe Clark

How Refinancing Can Help Pay Off Your Loan Faster

There are two main reasons to refinance your home. One is to reduce your monthly payments in order to free up cash, and the other is to pay off the loan more quickly. But refinancing doesn’t just simply do this automatically; you have to choose a new mortgage with terms that work for you. Figure out what your goal is and pick the right mortgage.

Reducing your interest rate is the surest way to free up cash, but it can also simply be used to pay off the loan faster. With a lower interest rate, a greater percentage of the principal is reduced each time you make a payment. However, this only works if you can qualify for a lower interest rate. If you don’t qualify normally, consider reducing the length of the mortgage. This will probably result in higher monthly payments, but will also likely allow you to qualify for a lower rate, and almost certainly allow you to pay off the mortgage faster as long as you make the payments. If you have plenty of cash on hand and just want to save money in the long run, consider replacing your mortgage with one that allows you to make larger payments on your principal. This is more costly in the short term, but would allow you to pay off the loan early and thus spend less on interest, reducing the overall cost.

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Missteps of Inexperienced Home Sellers

Sellers who haven’t done their research, especially first-time sellers, are prone to certain errors when selling their home. Many of these involve wanting to get as much money as they possibly can. What sellers don’t realize is that they may need to either temper their expectations or spend some money to make money. Besides these sorts of issues, sellers also sometimes don’t have a new place lined up for themselves for when the sale goes through, which can cause them to spend unnecessary money on temporary rentals.

Especially in a hot market, sellers tend to overprice their homes. It’s true that prices are high right now, but listing your home at exactly market value isn’t going to draw attention. List lower, and let market competition do more of the heavy lifting. More competition also means more serious offers, but do keep an eye out for offers that seem too good to be true — they probably are, and would be a waste of time. Time is something you don’t want to waste when trying to sell your home, since interest will wane and home values may change. The best offer isn’t necessarily the highest offer, either; look at contingencies and down payment percent as well.

“For sale by owner,” or FSBO, can be tempting because it cuts out the middleman. If sellers don’t have to pay an agent, they keep more of the profit. Seems simple, but as it turns out, their profit will probably still be higher with an agent representing them. Agents have better marketing tools, more experience with pricing and staging, and the ability to host open houses or get in contact with photographers and videographers to create virtual tours. FSBO sellers can decide to do these things themselves, but the cost comes out of their pocket, so they don’t manage to skip out entirely on costs.

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More: https://www.realtor.com/advice/sell/things-first-time-home-sellers-get-wrong/

March Real Estate Market Trends

Prices are still going up, as are interest rates. Despite this, the market is currently going strong. It’s unclear whether this is temporary or seasonal, or part of a larger trend, but the near future of real estate is looking fairly good.

The reason for the rate increase is a recent increase to the federal funds rate of 25 basis points. The initial announcement didn’t have an immediate effect, but later caused an increase in interest rates. This, in addition to rising prices, has contributed to a decrease in home sales. However, it’s still above pre-pandemic levels, and supply is improving, which should help keep prices in line.

Part of the reason for supply increases is increased construction. Though construction actually decreased in the Western US, it has increased elsewhere and is at its strongest since 2006. Builders remain confident despite a slight drop in confidence, from 81 to 79, due to increased costs.

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Let Your Kids Help With Moving

Kids can complicate the process of moving. Young children may not understand what’s happening, or just not understand the reasons why. Older kids that know what’s going on may simply have strong emotions about significant life changes such as this. Parents wish they could do something to make the transition smoother. Well, it turns out they can: Involve the kids in the process.

A large factor in kids’ reluctance to move is that they feel a lack of control. It’s simply something that’s happening and unavoidable, rather than something they’re doing. Take them to open houses with you, so they can familiarize themselves with their potential new homes. Ask them to help pack — you may think your kids aren’t going to want to be given tasks, but if it helps them feel like they are an actor rather than observer, they will feel more in control. Hosting a goodbye party for the kids, and not just for adults, can also help to add closure.

The process doesn’t end with moving out. There is more to do after moving in. Unpacking is just as important as packing. Let them help choose paint colors and the arrangement of furniture, especially in the room that will become their new bedroom. Once you’ve settled in the new house, go meet your neighbors, and take your kids with you.

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Preparing Your Income Property for Pet-Owning Tenants

Some property owners don’t like the idea of allowing pets on their property. However, it’s probably a good idea to consider offering a pet-friendly rental property. 72% of renters own pets, so pet-friendly rentals are in high demand. This ensures you’re more likely to find a tenant and also allows you to charge more for rent. You can also ask for a pet deposit, in addition to the normal security deposit.

You also shouldn’t be too worried about property damage. Yes, pets can cause minor damage to property, but it’s actually more likely that costly property damage is caused by young children or even adults. In addition, you can reduce property damage by replacing carpets with linoleum, vinyl, or laminate floors. These are more resistant to damage and easier to clean. It may also be a good idea to install pet doors and gates.

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Is California the Happiest State?

WalletHub examined 182 of the largest cities in the US in an effort to answer the question of which cities were the happiest. Their research focused on various aspects of emotional and physical well being, income and employment, and community and environment. As it turns out, their data suggest that California could be a very happy state. 6 of the top 10 ranked cities are in California. This includes Fremont, which was the number 1 ranked city, as well as San Francisco, San Jose, Irvine, Huntington Beach, and San Diego. The other four cities in the top 10 were Columbia, MD; Madison, WI; Seattle, WA; and Overland Park, KS.

However, these results should be taken with a grain of salt. WalletHub never directly asked anyone whether they were happy or not, though their methodology does include –among many other criteria — a few clear correlations, such as suicide rates and depression rates. Their data may be accurate, but the conclusion that their data points to happiness is up for debate. In addition, the focus was 182 of the largest cities. It’s entirely possible that the happiest places are not large cities, or even cities at all. Not to mention California has a huge advantage in this regard, since it is very large, is almost entirely urban, and makes no legal distinction between cities and towns. California therefore has far more cities analyzed by the data than any other state, at 28. WalletHub’s selection criteria did include at least two cities per state, but many states only use data from those two cities.

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More: https://wallethub.com/edu/happiest-places-to-live/32619

Preapproval Doesn’t Lock Mortgage Rates

Many people are blindsided by rising mortgage rates after getting a preapproval, thinking that the preapproval has locked their rate. It hasn’t. The first opportunity to lock your mortgage rate happens when your final loan application is approved, though you don’t even have to lock it until shortly before closing on a purchase, if you think rates will go down. In addition, the lock period is not indefinite. It usually lasts anywhere from 15 to 60 days, and it could definitely take longer than that to find a home.

There are ways to mitigate the issues presented by shifting mortgage rates. Rates don’t tend to change much during a typical closing period, but you want to lock early when rates are rising and late when rates are falling. Consider budgeting for a loan lower than your preapproved amount in order to account for fluctuations in mortgage rates. Different lenders also have different locking policies. Make sure to shop around and ask about lock periods, renewing options for locked rates, and the possibility of locking out rising rates but not falling rates.

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More: https://themortgagereports.com/89634/can-my-rate-rise-after-preapproval

Small Money-Saving Tips That Add Up Over Time

Some routine expenses may not seem like they’ll break your bank individually, but they aren’t just one-off expenses, and there’s often a cheaper way. You may notice these things more easily if you record your budget in a spreadsheet. This is a good practice for tax season anyway, and it could open your eyes to a whole lot of unnecessary spending.

Many people start their work day by grabbing a cup of coffee from someplace like Starbucks or a donut shop, then at lunch time, pick up a ready-made sandwich. Both of these things can be done at home. It takes more time, but it doesn’t have to get in the way of your morning, and it’s far cheaper. The coffee machine can be prepped at night and turned on when you wake up, and you can prepare and bag a sandwich in the evenings as well. You can also probably save on groceries by creating a list and sticking to it. Impulse buys are not uncommon, and while you may simply start adding some of these items to your list, they probably won’t all make it there. Another cost saving measure, this time unrelated to food, is ditching cable service. Streaming services can cover the same channels for a fraction of the cost.

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2022 Forecast is Unclear, But Points to Likely Slowdown

The results of a November 2021 survey of real estate professionals about the 2022 forecast are in, and they’re rather split. 41% expect prices to continue to rise and 41% expect them to fall. The remaining 18% predict prices will remain about where they are. Keep in mind, though, the survey was conducted a few months ago and may not reflect experts’ current beliefs. In addition, all of those who predicted continued rise in price conceded that the rate of increase will probably be slower.

There are a few factors pointing to slowdown, whether it’s a decline or a slower rise in home prices. Interest rates are increasing, which decreases buyer demand and buyer purchasing power, pulling down prices. The job recovery is still lagging behind. Forbearance exits mean greater inventory. Even global events are threatening to destabilize the economy, and uncertain buyers makes for less frequent buyers.

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More: https://journal.firsttuesday.us/housing-experts-divided-on-home-price-forecast/82154/

Townhouse Construction Recovers Quickly and Continues to Increase

Most people who have been paying attention to real estate are aware that the construction industry has been struggling lately. But there’s one area where the industry is doing just fine, and that’s townhouses. Townhouse construction dropped in 2020 along with everything else, but it’s already recovered and is now above pre-pandemic levels. It seems townhouses are simply in fashion right now, as they feel like single-family homes — and are considered as such by some categorization methods — but are generally less expensive.

The truth is a little more complex, though. In reality, townhome construction has been on the rise for about a decade, and 2020 was merely a small dip — which also happened in 2011 and 2012. Perhaps townhome construction specifically was largely unaffected by the most recent recession, and this is just a continuation of the trend. It was actually the Great Recession in the latter half of the 2000s that caused townhome construction to plummet, and it’s been steadily recovering ever since. It’s not quite back at 2006 levels, slightly lower than the 2005 peak, but it’s not far off.

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More: https://eyeonhousing.org/2022/02/townhouse-construction-surged-in-2021/

Make Sure Your Fire Safety is Up to Snuff

Almost everyone has a few smoke detectors and a fire extinguisher somewhere in their home. If you don’t, you definitely should, and are required to by law in California. Unfortunately, that’s as much care as many people take in their fire safety. That may not be enough.

Smoke detectors should be spaced around your home so that they can be heard regardless of where you are. California requires smoke detectors in certain areas of the home. This includes every bedroom, every hallway that leads to a bedroom, and at least one per floor in a living area. Check to make sure that you are conforming to code, and that your smoke detectors have working batteries. If your home is large, you may also want to consider additional smoke detectors above the minimum requirements to cover more area.

Homes are only required by law to have one fire extinguisher. However, this is the bare minimum and not ideal. You want to have easy access to a fire extinguisher regardless of where you are. The suggested number is one per floor. If you live in a multi-family building, every unit should have easy access to a fire extinguisher. This doesn’t necessarily need to be inside the unit, if there are hallways with access to multiple units. But having just one for the entire building isn’t a good idea, even if there are only a few units.

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Tips for Online Rental Marketing

Technology has made it easier than ever to secure a tenant for your rental property, as long as you’re making good use of the technology. There are several websites that you can use to help spread the word about your listing. Some of these are websites you may use already for other purposes, and others are specific to real estate. You can even create your own website, though you’ll have to make sure people find out about it.

There’s a number of websites that allow you or your agent to list properties for rent. There’s the local MLS, which would need to be accessed by your agent, but this will also spread to aggregator sites like Zillow and Redfin. Alternatively, you can post to Zillow and Redfin yourself. Other similar websites include Zumper, HotPads, and ListHub. Make sure to verify the information after a property is listed, since automated systems can get things wrong. In your descriptions, include certain frequently searched keywords, like the school district, amenities, area, and some basic features.

Email campaigns still work, but it’s not the only way to expand your reach. Social media websites are excellent at this. It’s especially necessary if you’ve created your own website. The obvious ones include Facebook and Twitter. perhaps less obviously, you can post pictures or videos of your property on Pinterest and Instagram. You can also reach out to your network on LinkedIn.

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More: https://journal.firsttuesday.us/stepping-up-your-modern-apartment-marketing/82043/

Airbnb vs Traditional Rentals

Airbnb is a commonly used method for vacation-goers to find lodgings. It’s usually — though not always — cheaper than a hotel, and often significantly more flexible and easier to book. All of this makes it attractive to people going on vacation. But what about the other party? Is Airbnb a good investment over traditional income property? Well, that depends.

If your property is in a heavily touristy location, it can probably earn quite a bit as an Airbnb rental. Part of this is the per night costs, which add up quickly if you have guests most nights. In addition, cancellations aren’t as backbreaking as losing a tenant. However, overhead costs may be higher, with Airbnb taking a cut and the high likelihood that you’ll be paying for utilities and housekeeping. You don’t want long periods of inactivity with high overhead costs. Unfortunately, such periods are likely because vacations are frequently seasonal.

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If You Must Purchase Now, Be Ready for the Long Haul

We’re currently either at or approaching the top of the market, which means it’s generally not a good time to buy. Sometimes it’s inevitable, but that just means you need to be prepared for losses if you don’t keep your home long enough to gather equity. When you buy at the top of the market, your home’s value will go down before it goes up, so you’ll need to wait a while in order to sell at a profit.

If you’re an investor, don’t look at flipping right now. It’s just not going to provide the return on investment that you want, especially with construction costs being high. Instead, look at purchasing rental property, as rent prices are also on the rise. You can collect rental income now and sell much later down the line when the cycle completes itself.

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More: https://journal.firsttuesday.us/buying-at-the-top-of-the-market-prepare-to-stay-put/81992/

Simplify Your Retirement by Downsizing

For many people, their goal is to pay off their mortgage so that they can continue to live in their home without any more mortgage payments to make after retirement. This is certainly a good financial decision, but with a bit more planning, it could be made even better. Consider downsizing going into retirement. You may even be able to sell your home and purchase a smaller, cheaper home without a mortgage at all.

That’s not the only way smaller homes are cheaper. Insurance and tax payments would also be lower. Smaller space generally means less utility usage. A smaller home probably won’t have a pool to maintain and may not have much lawn or garden space to take care of. Money isn’t the only thing you’ll save, either; you’ll also spend less time cleaning and maintaining your home. With the time and money you’ll save, you’ll also have the opportunity to take more vacations and relax even further.

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A Home Office Doesn’t Need to Be Its Own Room

Home offices have become more popular as more people are transitioning to work-from-home. This has increased the popularity of larger homes with additional space that can be used for a home office. But a home office doesn’t actually require that much space, and certainly doesn’t need its own room, unless you need privacy.

If you have an attic or basement, either of these spaces can be converted into a home office. Converting the attic can even add to your home’s value, and an office space probably won’t even take up the entire basement. Another feature your home may have is a breakfast nook. Often, this is superfluous and the same purpose is served by a dinner table. It would not be difficult to convert the breakfast nook into an office space. Even if your home doesn’t have any of these features, you can probably find an unused corner of a bedroom or the living room to put a small desk and a chair.

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Commercial Market Continues Current Trends

The commercial real estate market has been experiencing mixed performances, with some sectors doing better than others. That’s not about to change any time soon. The industrial sector is still going strong, the retail sector continues its recovery, and the office sector keeps lagging behind.

Already low vacancy rates in industry have dropped to near-zero, as what few vacancies remain are completely unusable. New construction isn’t focusing on the industrial sector, except in the Inland Empire, which nevertheless still has a mere 0.9% vacancy rate, down from 3.1% in 2020. San Diego has the highest vacancy rate in Southern California at 2.3%. In the retail sector, the vacancy rate didn’t change much, only increasing 0.2% in San Diego from 4.7% to 4.9%. However, the availability rate — which includes all properties on the market, whether vacant or currently leased — dropped from 6% to 5%. It’s likely that this is representative of off-market leases. Offices are still struggling, with vacancy rates above 12% and availability rates around 17%. The solution to the office problem will probably come in the form of conversions to residential or mixed-use property, which are far more in demand than office space.

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More: https://journal.firsttuesday.us/2022-commercial-market-to-be-led-by-industrial-and-conversions/81922/

Mortgage Rates Continue to Climb

As of the end of last week, the average 30-year FRM rate is at 3.69%. It’s been steadily increasing since the historic lows of 2020. The ARM and 10-year Treasury Note rates also increased between January and February. Periods of historic lows followed by steady increases aren’t necessarily unexpected, though. That’s been the trend for at least the past three decades — ups and downs but a clear overall downward trend. Precipitous drops have tended to result in a period of reduced average. For the past decade it has averaged somewhere around 4%, but it’s unclear whether the sharp decline in 2019-2020 will result in a reduced average for the coming future.

What may prevent a reduced average is the Fed’s plans for the future. Their gradual reduction of purchases of mortgage-backed bonds (MBBs) has kept mortgage rates relatively stable. They will cease buying MBBs entirely in March, at which point they will begin increasing their benchmark rate throughout 2022. This is going to result in higher interest rates. With the rate already approaching 4%, the increasing rates will likely result in the average going above 4% and continuing the trend of the past decade.

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More: https://journal.firsttuesday.us/current-market-rates/3832/

Top Priorities of Homebuyers

While homebuyers don’t necessarily have the experience to know everything they should be considering when buying a home, they definitely know what they want. It may not be easy or even possible to match all the criteria at once, but there are several top priorities buyers look for in an ideal home. These are the factors buyers typically tell their agents they’re considering most.

The first is safety. Buyers will usually research a specific area’s crime rate before considering it, though if they don’t have a predetermined idea of which area they want to live in, they may not know all of the crime rates in various regions. You shouldn’t only rely on statistics, though. Go visit and see for yourself what the area is like. Spend some time there. If you don’t feel safe, you probably don’t want to live there, even if the crime rate doesn’t seem very high. Something else buyers want is proximity to work, friends and family, and community amenities. However, they also want to be careful to balance this with light traffic, while being close enough to main roads. There’s going to be some sacrifice made. Make the commute yourself before buying, instead of just looking at map data. Another extremely important factor for most buyers is having a good school system. It’s very difficult to enrolls your children in a school system outside of your school district, though it is technically possible. Buyers also want to make sure the area isn’t too expensive to live in outside of purchasing the home, meaning low cost of living and low local taxes.

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More: https://finance.yahoo.com/news/buyers-most-important-factors-deciding-130014349.html

Fewer Buyers Waiving Contingencies

As of the end of 2021, fewer buyers are choosing to waive contingencies than earlier in the year. This is a return to normalcy, as the frequency of waivers was inflated during the period of heavy competition. Buyers had sought to improve sellers’ perception of their offers by foregoing things such as inspections and appraisals in order to expedite the process. As competition dwindled, fewer buyers felt the need to do that. In addition, the appraisal process is starting to move faster with increased vaccination rates, and home prices remaining high means buyers want to make sure they’re getting their money’s worth.

The percent of people who did not waive any contingencies increased steadily from the trough of 21% in June to the peak in December of 40%. Inspection and appraisal contingencies were most often waived, though there are other types of contingencies. For waivers of inspection contingencies, the peak was 27% in July, down to 19% in November and December. The percent waiving appraisal contingencies decreased from 29% in June to 21% in November and December.

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More: https://www.nar.realtor/blogs/economists-outlook/december-2021-realtors-confidence-index-survey-fewer-buyers-waiving-appraisal-inspection-contract