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Should The Seller Be Present At An Open House?

When you’re trying to sell your home, trying to work in open houses around your schedule can be frustrating. That’s true regardless of whether you want to be there or not. But is one better than the other? Should you schedule them for times when you will be there, or when you won’t be there?

Ultimately, it’s up to you. In general, though, if you choose to be there, it should be because you want to be there. Buyers actually don’t tend to want to talk to the seller so much as the agent, since the agent is usually the one who can answer any questions they might have. Of course, if you’re an outgoing sort of person, you may feel excited to welcome them. If not, though, it’s best to leave, otherwise things can get awkward for everyone involved. Buyers want to be able to imagine themselves living there, and that gets more difficult when it’s obvious that you live there. There is one practical benefit to staying, though — if any problems arise, you will already be there to sort them out.

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Trends Emerge In Homebuyer Risk Calculation For Natural Disasters

No matter where you live, there is a risk of natural disaster. The likelihood may be higher or lower, especially when comparing different types of disasters in different areas, but the possibility is always there. Since Realtor.com started displaying flood and wildfire risk data two years ago, they’ve been analyzing how prospective buyers use the information to make their homebuying decisions and how it affects prices.

Unsurprisingly, homes with lower risk of natural disaster tend to appreciate faster. Areas with low flood risk appreciate about 1.7% more quickly than areas with high flood risk, and this increased from 1.5% in the wake of flood disasters occurring in July-September 2021. Homebuyers also tend to have a preference for lower risk areas, despite the higher prices, showing awareness of natural disaster risk. The difference is even greater for wildfire risk at 3.7%, but there have been no significant shifts recorded in this value. However, buyers don’t show the same preference for areas with lower wildfire risk as they do for areas with lower flood risk. This could be because they’re more concerned about higher prices, possibility due to the difference being greater. However, there also isn’t a clear preference for cheaper, higher risk areas in some of the most wildfire prone states, such as California. It’s possible this is because homebuyers feel the risk is relatively high regardless of where they are living in California, or because risk and price point are both of relatively equal concern.

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More: https://news.move.com/2022-11-16-New-Realtor-com-R-Data-Highlights-the-Impact-of-Wildfire-and-Flood-Risk-on-Consumer-Behavior-and-Home-Prices

Top Destinations For Park Lovers

The Trust for Public Land has released their 2022 Parkscore Index, which compiles data regarding public outdoor spaces for the 100 largest US cities. It also includes some private parks and playgrounds if they have a joint-use agreement with the city. The criteria also don’t exclude public spaces that may not necessarily be strictly parks, such as trails or other open spaces. However, it does only count the 100 cities with the highest population — there are over 100,000 cities in the US, so it’s a small minority.

Portland Real Estate has taken this data and provided a list of the top 11 cities for public outdoor space, sorted by overall score. The categories include median park size, percent of city that is parkland, and percent of residents within a 10-minute walk to a park, among other factors. Of course, Portland Real Estate couldn’t have made it a top 10 list since they had to include their own city, Portland, OR, which is #11 on the list with a score of 74.5 out of 100. The highest score belongs to Washington, D.C. at 84.9. In order from #2 to #10 are St. Paul, MN; Arlington, VA; Cincinnati, OH; Minneapolis, MN; Chicago, IL; San Francisco, CA; Irvine, CA; Seattle, WA; and New York, NY.

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More: https://stacker.com/real-estate/11-cities-have-most-public-outdoor-space

Homebuyers Under-Informed About Mortgage Options

Buying a home is a major life decision. Because of this, it’s important that prospective homebuyers take the time to research the best option for them. Unfortunately, that tends not to happen with mortgage loans. Only about 13% of prospective buyers spend at least a month researching lenders. By contrast, 28% spend just as much time researching cars, and 23% vacation options.

One major reason is that they’re simply not well informed. 30% of prospective buyers believe that their credit score will take a major hit if they shop around, the most common reason cited for not shopping around. This is not accurate, as it’s only getting a pre-approval that reduces your credit score, not consulting with lenders. You can submit as many applications as you want within a 45 day period and your credit score will only drop once. 15% also believe that all lenders use the exact same rate, so there’s no reason to get a second quote, which is definitely not the case.

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More: https://zillow.mediaroom.com/2022-11-18-Prospective-home-buyers-spend-about-as-much-time-researching-new-TVs-as-they-do-mortgage-lenders

When To Get The Best Discount On Homes

It may be odd to think of getting a discount on a home. It’s not as though they have flash sales or seasonal specials, like you might find in a department store or supermarket. But price cuts do happen, and that’s kind of like a discount. And they’re actually not all that difficult to predict — there are fairly regular patterns as to when price cuts occur.

Most notably, home sales actually do have something a bit like seasonal specials. Price cuts are most common between the months of July and September, which roughly corresponds to the latter half of summer. By contrast, price cuts are significantly less common during the winter. You probably won’t see a price cut within the first three to four weeks of listing, either. It’s possible to fine-tune your timing some more, though. Price cuts are rare during the weekends, particularly Saturday, and are less common on Friday than other weekdays. Nationwide, the top day for price cuts is Thursday, though it’s not that much different from Monday, Tuesday, or Wednesday, and it definitely varies by region. The question remains, how much of a discount can you actually get? Currently, around 3%, but it has varied between 2.6% and 3.8% in the past few years.

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More: https://www.zillow.com/research/black-friday-price-cuts-31645/

Most Popular Metros Are Both Affordable And Sunny

Many people have delayed their homebuying search, and those that remain are looking for something cheaper. That often means looking outside their current metro, especially for those living in expensive areas, such as San Francisco and Los Angeles.

But expensive areas frequently have at least one thing in common — sunny weather. Those that are used to this type of weather are often reluctant to compromise, so they’re looking for equally sunny but much less expensive areas. The number one match is Sacramento. It’s within sunny California, but not near the coast and has much less suburban sprawl than Los Angeles, both making it a cheaper area. San Diego is also a common destination for Californians.

But the state with the greatest number of matching metros is not California, but Florida. Miami, Tampa, Cape Coral, and North Port-Sarasota are all in the top 10 destinations to move to. The remaining cities in the top 10 are Las Vegas, Nevada; Phoenix, Arizona; Dallas, Texas; and Portland, Maine.

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More: https://thehill.com/changing-america/sustainability/infrastructure/3712394-homebuyers-want-to-move-to-these-cities-amid-growing-inflation-report/

Homebuyers Are Submitting More Offers In 2022

Primarily due to financial concerns, homebuyers have been delaying attempting to purchase their first home, with 89% of homebuyers waiting for a better time. That started to change at the beginning of this fall. On average, first-time homebuyers submitted about 12 offers on properties in late September. This is up from 10 last year.

Not only are they submitting more offers, they’re actually looking at more properties, as well. In 2021, prospective buyers looked at an average of 15 properties before deciding if and where they would submit offers. That number jumped up to 24 this year. Combined with the average number of offers submitted, it means they’re submitting offers on 50% of properties viewed, versus 67% in 2021. While the reasons for this could certainly vary from person to person, being more selective in their choices probably means either there are more options within their budget, or they’re more comfortable being patient and don’t feel rushed. The latter is a real possibility, since high prices are indicative of lower demand and therefore less competition.

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More: https://www.apartmenttherapy.com/first-time-home-buyers-2022-37184326

Don’t Be Afraid To Be Selective With Mortgage Loans

The terms of mortgage loans have a lot more variance than one might expect. It’s well known that the average interest rate is just that, an average, but there would be no competition if that were the sole factor. Be sure to get lots of estimates, comparing both different types of loans at the same institution as well as the same type of loan at different institutions.

Make sure you understand the terms clearly, especially because some loans have hidden costs. These can include fees for printing documents or prepayment penalties, among others. Not all lenders have these, nor necessarily for all loans, so shop around. It’s also important to know the rate lock period, so you can be sure that the rate will still be valid by the time you finalize getting the loan. Some costs may even be negotiable, such as loan closing fees and interest rate.

Image by Pete Linforth from Pixabay

Builder Confidence Drops As Interest Rates Rise

The goal of the Fed’s decision to increase the benchmark rate was to ultimately lower prices. That is now beginning to happen, but many other things have been affected in the meantime. One is builder confidence. As can be expected, rising interest rates are causing lower demand for buyers, including new construction buyers. That means builders are getting less business. This is not a good sign in an environment that many believe is best solved through increased construction.

The Fed’s decision may be starting to solve one issue, but is it actually the optimal solution? Could something else have been done? Maybe, maybe not. According to the National Association of Home Builders (NAHB), the Housing Market Index (HMI), of which builder confidence is one component, was actually already below 50, which is the midpoint indicating neutral confidence. This is despite multiple laws making construction easier, especially for affordable housing. HMI dropped 5 points from 38 to 33 between October and November. Back in November of 2021, it was at 83. The builder confidence score in particular dropped six points from 45 in October to 39 in November. Though the problem is national, with decreases in every region, different regions have different levels of builder sentiment. The South dropped the most, by seven points, but still has the highest builder sentiment of any region at 42. Builder sentiment is by far the lowest in the West, at 29, despite only dropping five points. The smallest change was in the Midwest, dropping merely two points from 40 to 38.

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New 2023 Real Estate Laws

Six new laws affecting real estate are coming next year, and two more in 2024. The six coming next year go into effect January 1, 2023. SB 1495, going into effect January 1, 2024, modifies real estate licensing requirements. AB 2503, with a compliance date of December 31, 2024, requires a revision of the terminology used in real estate contract law to ensure consistency. In addition, SB 1005 and SB 1017 both clarify existing law, SB 1005 regarding probate code and SB 1017 regarding tenant protections against domestic violence.

AB 1410 requires homeowner’s associations (HOAs) to allow members and residents to discuss their common interest development (CID) on social media, as well as allow them to rent out a portion of owner-occupied space. HOAs also may not pursue enforcement for violations during an emergency if it is unsafe to fix it. AB 1837 and AB 2170 both modify existing laws regarding eligible bidders for foreclosed properties, making it easier for tenants, owner occupants, nonprofits, and governmental organizations to win a bid. AB 2559 defines a reusable tenant screening report, which landlords may choose to use, and which they must allow tenants free access to if they choose to use it. AB 2745 requires that experience used for a real estate broker exam be within the prior five years. AB 2960 states that disclosure requirements are set at the date of the contract, even if disclosure requirements change.

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Despite GDP Growth, Real Estate Is Still On A Downturn

Although it was undeclared, we’ve been in a recession, which is usually indicated by two consecutive quarters of gross domestic product (GDP) loss. GDP has been going down, but now suddenly GDP is going back up. So does that mean we are out of the recession? Well, if it had ever been declared, it would be declared over — but that doesn’t mean it actually is, especially since it was never declared to begin with.

GDP is ultimately based on consumer spending. When consumers spend more, GDP goes up. This is indeed what happened. However, that isn’t necessarily a good thing. You may have read one of my posts from a few days ago about plummeting savings rates. As stated in that post, savings rates have recently dropped dramatically, which is normally an indicator of consumer confidence, but in this situation is actually a result of necessity due to increasing costs of living. In other words, inflation occurs, consumers must spend more to buy the products they need, therefore GDP goes up. We tend to think of GDP increases as good, but the reality is that it’s simply a mathematical value that can shift as a result of a variety of different factors, both positive and negative.

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More: https://journal.firsttuesday.us/economic-recession-or-not-the-housing-market-recession-is-here/87069/

California Limits Pet Restrictions For Low-Income Rentals

Landlords tend to have a lot of leeway in determining what kinds of pets their tenants can have. Many don’t allow pets at all, and those that do often have breed restrictions and/or additional fees. This has led many pet-owning low-income earners to give up their pets in order to secure housing. In order to combat this issue, California has decided to standardize some pet restrictions for low-income rentals.

What landlords will no longer be able to do is ban pets outright, prohibit certain breeds, impose pet weight limitations, or collect additional monthly fees for pets. Landlords can still require a security deposit for pet owners or ban specific individual pets that are vicious or dangerous. The new law also sets forth a list of some reasonable restrictions. These include policies regarding nuisance behavior, leashing, liability insurance, and number of pets. The latter should be based on the unit’s size and not personal factors.

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More: https://journal.firsttuesday.us/new-california-law-requires-landlords-of-low-income-rental-housing-to-allow-pets/

Personal Savings Plummets Despite Low Consumer Confidence

The personal savings rate tends to hover around 8-10% during normal economic conditions, though it fluctuates constantly. These fluctuations tend to be inversely proportional to consumer confidence. If people think they can buy, they will. If they are hesitant, they will save their money instead. Across the last several decades, the record low was 2%, at the height of the Millennium Boom in 2005 when consumers felt they were in a stable economic position. By contrast, it hit a whopping 34% in April of 2020, just after pandemic stimulus payments began, most of which went directly to savings.

Now, the rate has dropped precipitously down to 3.8%. Unfortunately, that can’t be attributed to the inverse relationship with consumer confidence. Instead, the rate has dropped purely out of necessity. People aren’t saving money because they simply aren’t able to. The cost of living, proportional to wages, is incredibly high. Home and rent prices as well have accelerated at a rate far exceeding wage growth. The widening of the gap between cost of living increase and wage growth has been going on steadily for quite some time, but it’s more noticeable now with recent sharp increases in home and rent prices.

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More: https://journal.firsttuesday.us/the-20-solution-personal-savings-rates-and-homeownership-2/30156/

Home Prices Are Nearly 200% The Historical Norm

Despite all the uncertainty and chaos of fluctuating home prices, it’s possible to establish some trends. One such trend is the historical norm, which is the mean value of homes in a normal economy. It’s important to note that the historical norm is not a single value but rather a steadily increasing trendline, and is not a prediction itself, but can be used to form predictions. But it’s not increasing because home prices have been increasing — it’s actually based on homebuyer annual income, in other words, the annual earnings of people who are able and willing to purchase a home.

Boom and bust cycles affect the prices of homes, but not their long-term value according to the historical norm. This makes it significantly easier to tell when home prices seem too high or too low, and can be used to predict major economic events. The historical norm does suggest that home prices will continually increase, but what a 200% price-to-value ratio means is that prices are 200% of what they should be, even after accounting for this upward trend. It does not mean they have doubled from some prior value, rather from a hypothetical expected value. The last time the price-to-value ratio reached these numbers is in the mid-2000s, shortly before the crash of 2008-2009.

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More: https://journal.firsttuesday.us/discover-the-value-versus-price-for-a-california-home/86650/

Income Tax Adjustments Give a Break in Light of High Inflation

The Internal Revenue Service (IRS) has announced its new income tax brackets for 2023. There are some shifts designed to address the issue of bracket creep, which is when people move into a higher tax bracket despite no increase in income after accounting for inflation. The new tax brackets won’t completely solve the problem, and don’t address root causes of heavy inflation, but can provide some relief.

The IRS has done away with the 37% bracket entirely, so the most you’ll pay is 35%. For that, you’ll need a joint income of over $462,500, which is about 6.5 times the median household income in the US. Not only that, the minimum threshold has increased for every bracket, except the lowest 10% bracket which always has a minimum of $0.

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For the new tax brackets plus additional information, see here: https://journal.firsttuesday.us/will-high-inflation-help-you-pay-less-tax-for-2023/
You can also compare to 2022’s tax brackets here: https://www.nerdwallet.com/article/taxes/federal-income-tax-brackets

Some Areas Now Classify Mobile Homes As Permanent Dwellings

Because of rising housing costs, even starter homes are becoming more and more inaccessible. Recent legislation aimed at streamlining processes for accessory dwelling units (ADUs) has turned ADUs into the new starter home. ADUs typically need to be permanent structures to qualify. Some cities and counties are trying to change that.

Mobile homes are often put into the category of tiny homes rather than ADUs. There is no restriction on whether or not tiny homes need to be permanent, or whether anything else needs to be on the lot. They just need to be 400 square feet or less. However, the definition of a tiny home varies, so they can be considered ADUs in some jurisdictions. And now, seven cities and three counties have decided that any tiny home that is on wheels is considered a permanent dwelling, and therefore can also qualify as an ADU. These seven cities are Fresno, San Luis Obispo, California City, Los Angeles, Richmond, San Diego, and San Jose. The three counties are Placer County, Humboldt County, and Santa Clara County.

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More: https://journal.firsttuesday.us/tiny-homes-join-adus-in-the-housing-shortage-fight/

Expenses Involved in Selling Your Home

There are a few different categories of costs involved in selling a house, some more expensive than others. Certain expenses may not apply to every sale, but you should still be aware of them in case they do come up. If you account for every possible situation in your budget, you may even end up with more profit than expected, since they aren’t likely to all occur in a single sale. These costs could come up at any time during the process, so be ready.

Before even deciding to sell, take a look at whether you need to repair or make any upgrades. Houses do sometimes sell as-is, but remodels can be more valuable than their cost, and major repairs may be necessary to sell for anything beyond the value of the bare plot of land. You may want to get a home inspection, though there’s a possibility you could get a buyer to pay for this later. Once your home is listed, you’ll want to help buyers feel welcomed. There could be costs involved with getting the home ready for open houses, though your agent may be responsible for some of these costs. When it comes time to complete the sale, there could be any number of costs, such as taxes, commissions, paying off mortgage, or other fees. And don’t forget about costs that occur after the sale. Many sellers are selling their primary residence and are also moving. That incurs moving expenses, which can get expensive for large, bulky furniture items or traveling long distances.

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Closing Costs During a Cash Sale

Some of the most significant closing costs are related to loans. During a cash sale, loans aren’t a factor, so you may be thinking closing costs are no longer relevant. However, there are certainly closing costs unrelated to loans. And the rules for who pays don’t change; it’s still negotiated between the buyer and seller.

The costs related to loans include origination fees, processing fees, and credit checks. These are all generally paid by the buyer, but you don’t have to worry about these at all for a cash sale. That doesn’t mean everything else is automatically paid by the seller. Closing costs also include earnest money, property inspections, appraisals, title insurance, and a title search. It may also include attorney’s fees, notary expenses, and some escrow fees, if applicable. Earnest money is always paid by the buyer, and in most cases, all or nearly all closing costs are. However, there’s always room to negotiate. Particularly in the case of a cash buyer, the buyer may have more negotiating power because the seller is less likely to want to lose a cash buyer.

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Los Angeles Regulations Under the Rent Stabilization Ordinance

The Rent Stabilization Ordinance (RSO) is a section of the municipal code for the City of Los Angeles and regulates a few different aspects of renting out properties. In addition to setting the maximum allowable rent increase per year, it also requires landlords to submit proper documentation to collect rent, provides just cause evictions, and provides relocation assistance for no-fault evictions. RSO doesn’t apply to all properties. The property must have been built prior to 10/1/1978, or 7/16/2007 if it’s a replacement under the Ellis Act. If you don’t know for sure, you can enter the property’s address at www.zimas.lacity.org. There will be an RSO field under the Housing tab, which will say Yes or No. You can also text “RSO” to 855-880-7368.

Note that RSO applies exclusively to the City of Los Angeles and does not apply to commercial properties. There are a couple easy ways to tell if your property is legally within the City of Los Angeles. If your water and power company is the Los Angeles Department of Water & Power (LADWP), you are in the City of Los Angeles. If it’s a different company, you are not. If your area is served by the Los Angeles Police Department (LAPD), you are in the City of Los Angeles. If you’re still unsure, you can look up the property at neighborhoodinfo.lacity.org. If your property is not found, it’s not in the City of Los Angeles. For properties not in the City of Los Angeles but in Los Angeles County, you can visit rent.lacounty.gov, email rent@dcba.lacounty.gov, or call 833-233-RENT.

Once you’ve confirmed that your property falls under RSO, your regulations are currently governed by Covid-19 protections, until February 1, 2024. Rent increases are not allowed until that date for RSO units, nor are retroactive rent increases allowed. If your tenant was negatively impacted by Covid-19, you also can’t charge interest or late fees on missed payments. After this date, the allowable increase is expected to be 7%, but this could change. In order to collect rent, you will need to complete a Rent Registry Form and pay your Annual Bill. The form is sent out in January of each year and is due by February 28th. Your Annual Bill consists of an RSO fee of $38.75 per unit and and a SCEP fee of $67.94 per unit. Part of this cost can be surcharged to your tenants, at a rate of $1.61 per month for the RSO fee and $2.83 per month for the SCEP fee. This comes out to 50% of the annual cost of each fee over 12 months.

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Qualified Vs Non-Qualified Mortgage Loans

Before you get a mortgage loan, ask yourself whether you want a qualified mortgage (QM) or non-qualified mortgage (Non-QM). You may be wondering under what circumstances you’d want your mortgage to not be qualified. Well, there are advantages and disadvantages to both. Non-QMs don’t conform to the regulations set forth by the Consumer Financial Protection Bureau (CFPB), but they’re actually entirely legal — the government simply can’t guarantee consumer protections.

So what are these protections, and why might you want to risk going without them? A QM loan cannot last longer than 30 years, cannot have prepayment penalties, cannot be a balloon loan, and should not have negative amortization. It requires a process for verifying several sources of information, including but not limited to bank statements and income. Because of this, it’s often more difficult to qualify for a QM loan. Therefore, someone who can’t qualify for a QM, such as many gig workers, may risk a non-QM loan. Investors, especially foreign investors, also frequently opt for non-QM loans that only require payments on interest. It’s also possible that you want to go for a longer-term loan, which would come with smaller payments, albeit a higher total amount paid once the loan is fully paid off. In any case, you probably want to ask a professional to explain the terms and risks of any loan you are considering taking, whether qualified or not.

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