Why 20% Downpayments Don't Always Make Sense (or Dollars)

the “doom and gloom” in today’s headlines, in the current economic climate, homeownership is more affordable than ever, thanks to low interest rates and lower home values. For those buyers who manage to have a 20% (or more) downpayment, they believe this will get them the lowest monthly mortgage payment. However, simply because buyers can afford to put down this amount does not necessarily mean they should.

Those buyers who have saved enough to put 20%—or more—down on the purchase of a home may want to consider another approach—preserving some of their cash for savings, investing or other purposes. It may sound counterintuitive, but with today’s interest rates and the competitive pricing of private mortgage insurance (MI), borrowers can retain some of their money by putting less money down on a home—say only 10%—and still get a low monthly payment.

Real estate professionals and loan officers have a responsibility to all home buyers to help them evaluate their purchasing power based on existing assets as well as future need. The right counsel can help home buyers leverage their current assets while keeping sufficient reserve for any immediate or future financial needs, not to mention all the trips to the local big box hardware store that seem to come standard for any new homeowner.

While in the past the adage was, “The more you borrow, the more you leverage,” in today’s financial times, the scenario is much different. Today, borrowers can leverage private MI to put as little as 3.5% down on a home and still have a competitive payment. And for those potential buyers who have stayed out of the market over worries of declining property values, they can still purchase a home without funneling all of their available cash into the downpayment. By utilizing this strategy, home buyers are able to leverage their current assets, while still keeping sufficient cash reserve.

So, while putting 20% down on a home doesn’t always make sense (or dollars), buying at a time of high affordability does.

clear skies,
Doug Reynolds
 
www.BHGshortsales.com

2011 Year in Review – Sacramento County Real Estate

Doug Reynolds, a Sacramento Area Realtor, discusses the local real estate market while looking back at 2011.  He highlights the flat median sales price, extremely low inventory, buyer competition, high sales volume and the current “Price Sensitive Sellers Market.”  This is a great video for buyers are sellers to get a quick update on what happened during 2011 in the local market.  Remember, real estate is mostly a local issue; you cannot listen to the national news and trust that is what is happening in your market.  Connect with Doug Reynolds on Facebook, follow his informative blog and subscribe to his YouTube channel.

clear skies,

Doug Reynolds

 

www.BHGshortsales.com

Sacramento County Real Estate Update December-January 2011-2012

Doug Reynolds, a Sacramento Realtor, provides an analysis of the local market statistics from November. This month discussing how Sacramento area sales were strong in November in spite of the expected dip in winter months. National low interest rates and in Sacramento we are seeing cash buyers and multiple offers. More information can be found at his website, www.BuyWithDoug.com, as well as his blog and Facebook page (Doug Reynolds Real Estate). Become a fan of his YouTube page and Facebook pages.

clear skies,

Doug Reynolds

 

www.BHGshortsales.com

December19: 10 Ways to Prevent Costly Mold Damage to Your Home

By: Karin Beuerlein

Fixing mold damage is an expensive and time-consuming home repair. But you can save time and money by implementing these 10 ounces of prevention.

Mold spores are always present indoors, particularly in humid areas. You can minimize mold growth, however, by buying a humidity monitor, which helps you keep track of home moisture that lets these spores colonize.

Here are 10 more ways to control and combat mold in your home.

1. Eliminate clutter

Cast a critical eye on household clutter, and pare down your stuff. Clutter blocks airflow and prevents your HVAC system from circulating air. Furniture and draperies that block supply grilles cause condensation. All this moisture creates microclimates in your home that welcome and feed mold growth.

So throw out things you don’t love or don’t use. Push furniture away from vents and grilles to keep air circulating. On humid, still days, run a couple of fans to keep air moving.

2. Control indoor climate

Mold problems often emerge during hot, humid summers when you’re tempted to play with the air conditioner. But set the thermostat too high, and the air conditioner won’t dehumidify your air effectively; set it too low, and you create cold surfaces where water vapor can condense.

To prevent moisture problems, and maximize energy efficiency, set the thermostat at 78 degrees F.

3. Shut windows and doors when AC is on

When you open windows and doors, you let air conditioning escape, waste money, and invite humid air into your cooler home: This causes condensation, which mold loves. So keep doors and windows shut when the AC is humming.

Also, maintain your home at around 80 degrees when you’re on vacation or at work. Too often, we bump the thermostat up to 85 degrees, or turn off the AC when we’re away. This raises temperature and humidity, which creates the ideal home for mold.

4. Properly size your AC unit

Make sure your air conditioning unit is properly sized for your house. If it’s too small, the unit will run constantly, elevating costs but not the temperature; too big, and the unit will constantly start and stop, which wastes energy, too.

Install an HVAC unit that is just right. For guidance, call an HVAC professional, or consult Energy Star’s square footage/AC capacity chart. 

5. Monitor humidity

An indoor humidity monitor will help you keep track of moisture levels that, ideally, fall between 35% and 50% relative humidity; in very humid climates, at the height of summer, you may have to live with readings closer to 55%.

But if you reach 60% relative humidity, it’s time to look for the source of the added moisture; above 70% relative humidity, certain species of mold can begin growing.

Indoor humidity monitors start at about $20; more sophisticated models that simultaneously and remotely track several rooms can climb to $300.

6. Evaluate your AC

If you get a high humidity reading, first make sure your air conditioning is doing its job.

·         Is it set to the proper temperature?

·         Is it cycling on and off periodically?

·         Does it blow cold air when it reaches the set point?

·         Are coils clean?

Inspect the condensate drain pipe (the narrow white pipe sticking out the side) to make sure it’s dripping regularly. If it isn’t, the pipe is blocked and water may be accumulating inside the unit--or on your floor. If you suspect a problem, call your HVAC professional.

7. Look for standing water

If the air conditioner isn’t the issue, search for standing water or chronic dampness that is increasing indoor humidity and providing a lovely environment for mold.

Check for puddles or dampness around hot water tanks, sump pumps, freezers, refrigerators, basement doors, and windows. Inspect crawl spaces for ground water dampness or foundation leaks.

8. Cover crawl space

Ground water seeping into crawl spaces can add gallons of moisture vapor into your house every day. The simplest defense is to cover crawl space floors with a plastic vapor barrier--6 mil polyethylene (landscapers plastic)--that traps moisture in the ground.

If you crawl in your crawl space, use a heavier plastic that won’t rip as easily: Some 20 milplastic coverings are on the market.

9. Add a dehumidifier

A dehumidifier removes excess moisture from the air.

You can buy a whole house dehumidifier ($1,100 to $1,800) that attaches to your furnace, treats air throughout the house, and connects to a drain so you never have to empty a tank. If you live in very humid areas, a whole-house system is the way to go.

If you have occasional bouts of dampness and musty smells, a portable dehumidifier will suffice ($150 to $200).

Most models have an auto shutoff that keeps the unit from overflowing when the storage tank is full. Some portables have a hose hookup that automatically sends water into a nearby floor drain.

10. Call a professional

If you can’t find the moisture problem on your own, or you aren’t sure how to correct a problem you do find, call a home inspector or indoor air quality consultant. Look for credentials from a respected industry organization, such as the American Society of Home Inspectors or the Indoor Air Quality Association. A house call will likely run $250 or more.

Mold remediation isn’t necessarily covered by home owners insurance, which typically pays only if the problem results from a sudden emergency covered in your policy, such as a burst pipe. Insurance usually doesn’t pay if the problem results from deferred maintenance or floodwaters (unless you have flood insurance).

clear skies,
Doug Reynolds
 
www.BHGshortsales.com

December17: 7 Smart Strategies for Kitchen Remodeling

By: John Riha

Kitchen remodeling can turn a ho-hum room into your home’s pride and joy. Here are strategies to help your project run smoothly.

A significant portion of kitchen remodeling costs may be recovered by the value the project brings to your home. Kitchen remodels in the $50,000 to $60,000 range recoup about 66% of the initial project cost at the home’s resale, according to recent data from Remodeling Magazine’s Cost vs. Value Report.

A minor kitchen remodel of about $20,000 does even better, returning more than 72% of your investment.

To make sure you maximize your return, follow these seven smart kitchen remodeling strategies.

1. Establish priorities

The National Kitchen and Bath Association (NKBA) recommends spending at least six months planning your kitchen remodeling project. That way, you won’t be tempted to change your mind during construction, create change orders, and inflate construction costs. Here are planning points to cover:

·         Cooking traffic patterns: A walkway through the kitchen should be at least 36 inches wide. Work aisles should be a minimum of 42 inches wide and at least 48 inches wide for households with multiple cooks.

·         Child safety: Avoid sharp, square corners on countertops, and make sure microwave ovens are installed at the proper height—3 inches below the shoulder of the primary user but not more than 54 inches from the floor.

·         Outside access: If you want easy access to entertaining areas, such as a deck or patio, factor a new exterior door into your plans.

A professional designer can simplify your kitchen remodel. Pros help make style decisions, foresee potential problems, and schedule contractors. Expect fees around $50 to $150 per hour, or 5% to 15% of the total cost of the project.

2. Keep the same footprint

No matter the size and scope of your kitchen remodel, you can protect your budget by maintaining the same footprint: Keep the walls, locate new plumbing fixtures near existing plumbing pipes, and forget bump-outs.

Not only will you save on demolition and reconstruction costs, you’ll cut the amount of dust and debris your project generates.

3. Get real about appliances

It’s easy to get carried away during your kitchen remodeling project. A six-burner commercial-grade range and luxury-brand refrigerator may make eye-catching centerpieces, but they may not fit your cooking needs or lifestyle.

High-priced appliances are worth the investment if you’re an exceptional cook. Otherwise, save thousands with trusted brands that receive high marks at consumer review websites, like www.ePinions.com and www.amazon.com, and resources such as Consumer Reports.

4. Light your way

Good kitchen lighting helps you work safely and efficiently.

·         Install task lighting, such as recessed or track lights, over sinks and food prep areas; assign at least two fixtures per task to eliminate shadows. Under-cabinet lights illuminate cleanup and are great for reading cookbooks. Pendant lights over counters bring the light source close to work surfaces.

·         Ambient lighting includes flush-mounted ceiling fixtures, wall sconces, and track lights. Pair dimmer switches with ambient lighting to control intensity and mood.

5. Be quality conscious

Functionality and durability should be top priorities during kitchen remodeling. Resist low-quality bargains, and choose products that combine low maintenance with long warranty periods. Solid-surface countertops, for instance, may cost a little more, but with the proper care, they’ll look great for a long time.

If you’re planning on moving soon, products with substantial warranties are a selling advantage.

“Individual upgrades don’t necessarily give you a 100% return,” says Frank Gregoire, a real estate appraiser in St. Petersburg, Fla. “But they can give you an edge when it comes time to market your home.”

6. Add storage, not space

Here’s how you can add storage without bumping out walls:

·         Install cabinets that reach the ceiling: They may cost more--and you might need a stepladder--but you’ll gain valuable storage space for Christmas platters and other once-a-year items. In addition, you won’t have to dust cabinet tops.

·         Hang it up: Mount small shelving units on unused wall areas and inside cabinet doors; hang stock pots and large skillets on a ceiling-mounted rack; and add hooks to the backs of closet doors for aprons, brooms, and mops.

7. Communicate early and often

Establishing a good rapport with your project manager or construction team is essential for staying on budget. To keep the sweetness in your project:

·         Drop by the project during work hours: Your presence broadcasts your commitment to quality.

·         Establish a communication routine: Hang a message board on site where you and the project manager can leave daily communiqués. Give your email address and cell phone number to subs and team leaders.

·         Set house rules: Be clear about smoking, boom box noise levels, available bathrooms, and appropriate parking.

clear skies,
Doug Reynolds
 
www.BHGshortsales.com

 

November 2011 Housing Statistics - Sacramento County

Sales price hovering in mid-$160’s

Sales decreased for the holiday season to 1,531 units sold, down 5.1% from the 1,614 closed

escrows last month. On the other hand, year-to-year closed escrows were up 17.6% from the 1,302 units sold last November. Making up the closed escrows this month were 514 REOs (33.6%), 453 short sales (29.6%) and 564 conventional sales (36.8%).

The median home sales continues bump along, this month increasing .1% to $165,000 from the

$164,900 median sales price of last month. The median sales prices has bumped up and down in the $160,000s for the last 10 months (see chart below).

Closed escrows from conventional financing (545 units or 33.5% of all sales) increased 6%, cash buyers decreased 4.5% (445 units or 27.4%) and FHA financing increased 4.5% (522 or 32.1%). These numbers include the 94 condo sales this month. The average amount of days spent on the market (from list date to opening escrow) 72 days; the median DOM was 40.

Active Listings numbered 3,236 properties and Active Short Sales Contingent showed 2,196. Active Short Sale Contingent properties are short sale properties on which initial offers have been made and are not entirely “active.” The Housing Market Supply figure for November was 2.1 Months – a 4.5% decrease from last month. This figure represents the amount of time – in months – it would take to deplete the Active Listing Inventory (3,236) given the current number of closed escrows (1,531).

According to MetroList® MLS data, the average home was 1,706 square feet. Of the 1,531 sales this month, 150 (9.7%) had 2 bedrooms or fewer, 832 (54.3%) had 3 bedrooms, 440 (28.7%) were 4 bedroom properties and 109 properties (7.1%) had 5+ bedrooms.

clear skies,

Doug Reynolds

 

www.BHGshortsales.com

Study Examines Impact of Social Networks on Strategic Default

RISMEDIA, Thursday, December 08, 2011— Unemployment and other factors have caused many homeowners to involuntarily default on their mortgages. At the same time, falling home prices, the possibility of being underwater for many years and advice from certain influencers, or “mavens,” may have encouraged others to simply stop paying, with deleterious consequences in some markets, according to a study recently released by the Mortgage Bankers Association (MBA).

The study, titled “Strategic Default in the Context of a Social Network: An Epidemiological Approach,” conducted by Michael J. Seiler of Old Dominion University; Andrew J. Collins of the Virginia Modeling, Analysis and Simulation Center; and Nina H. Fefferman of Rutgers University, and sponsored by MBA’s Research Institute for Housing America (RIHA), examines the factors that can lead to mortgage default, the role that influential members of our society play in people’s decision to stop paying their mortgage, and the impact on the broader housing market.

“Recently, the overwhelming media coverage of the current financial crisis has made homeowners aware—or at least alerted them to become aware—of their equity position in their home,” says Seiler. “While the merits of such a choice can and will continue to be debated, what is indisputable is that the possibility to strategically default has certainly been brought to the attention of current homeowners like never before, with potentially negative consequences for housing markets.”

Key findings from the study include: 

• The study, citing other research, reviews the main drivers of default, including unemployment, declines in home prices, life changes, such as illness or divorce, and other shocks to household income or wealth. Strategic default is a result of a borrower’s unwillingness to pay, even if able. It can be very difficult to determine whether a borrower is unable or unwilling to pay.
• Ideas are transmitted through the population in ways similar to those in which diseases are transmitted. Thus, they can be modeled in a similar manner. Certain corrective factors may lead some borrowers to be resistant to the temptation to strategically default, including the ability of lenders to pursue deficiency judgments, provisions of the tax code and bankruptcy laws.
• The model shows that real estate experts can influence market dynamics, but not in all cases. Markets are strong or weak due to fundamentals, however, markets in between can be pulled down or lifted up depending upon individual and expert behavior.

The study highlights those factors that distinguish an “economic default” (caused by hardship) from “strategic default” (selected as an option by homeowners who may be underwater on their mortgage), and the methods by which an idea such as “strategic default” can be transmitted through a population by contact with individuals and through social networks. Through simulation modeling, the authors demonstrate that because defaults and foreclosures lead to lower home prices, an epidemic of strategic defaults initiated by advice from those who might be considered experts can lead to the collapse of a housing market.

“Whether by choice or necessity, as foreclosures increase, they have an increasingly negative impact on the price of the healthy homes around them,” says Seiler. “One default does little to negatively impact the price of surrounding homes. However, as more and more mortgages in the neighborhood go into default, the negative impact is felt at an increasing rate. Much the same way as a disease spreads throughout a population, so, too, do decisions to ‘strategically’ default.”

Michael Fratantoni, MBA’s vice president of Research and Economics, adds, “Research has clearly shown the factor that is most predictive of a mortgage default—a borrower’s inability to continue making mortgage payments. It is much more difficult to predict or even detect a strategic default—a borrower who has the ability to pay, but simply stops in expectation of a financial gain. This research illuminates the consequences of strategic defaults on housing markets, finding that they can be destabilizing, particularly in markets that are already on the edge.

To access a copy of the report, visit the RIHA website atwww.housingamerica.org.

clear skies,

Doug Reynolds

 

www.BHGshortsales.com

What should I do before the appraiser goes out to the house?

Doug Reynolds, a Sacramento Area Realtor, discusses the topic with a local appraiser.  Ryan Lundquist, Ludquist Appraisal Company, provides tips for both buyers and sellers as to what things can be done to make the appraisal process smooth, seamless and provide the best outcome for the valuation inspection.  Give Ryan a call or email if you have any questions about the appraisal process (http://sacramentoappraisalblog.com/) .

clear skies,
Doug Reynolds
 
www.BHGshortsales.com

 

Last Call for Energy Efficiency Homeowner Tax Credits

RISMEDIA, Wednesday, December 07, 2011— The Alliance to Save Energy urges American consumers to give themselves the gift of energy efficiency this holiday season—and reap the benefits when they file their 2011 federal tax returns—by taking advantage of tax credits for energy efficiency home improvements. The tax credits of up to $500 are set to expire on December 31, and Congress may not renew them for 2012.

"The outlook for renewal of federal energy efficiency tax incentives is uncertain at best," stated Alliance President Kateri Callahan, "so we encourage homeowners to complete those upgrades before the ball drops in Times Square at midnight on New Year's Eve.

"Making efficiency improvements this year will lower home energy bills and improve home comfort for years to come, while also reducing 2011 federal income tax bills," Callahan added. "Energy efficiency is truly the gift that keeps on giving!"

The specific home improvements that qualify for tax credits fall into a number of categories:

• Exterior windows, skylights and storm windows. 
• Insulation, exterior doors, roofs, storm doors and products to seal air leaks such as caulking, weather stripping and foam sealants. 
• Highly-efficient heating and cooling equipment, including central air conditioners, heat pumps, furnaces, boilers, water heaters and biomass (e.g. corn) stoves.
• Each product category also must meet specific energy efficiency requirements, which are spelled out on the Alliance's tax credits web page. 
• Percentage and/or dollar limits on particular energy-efficient upgrades include:
• 10% of the cost of insulation and sealing materials, exterior doors and roofs. 
• 10% of the cost, up to $200, of exterior windows or skylights. 
• Up to $300 for electric heat pump water heaters, electric heat pumps, central air conditioners, biomass stoves and natural gas, propane or oil water heaters. 
• Up to $50 for advanced main air circulating fans. 
• Up to $150 for natural gas, propane or oil furnace or hot water boilers.

And to see what energy efficiency can do in your home, check out the Alliance's home energy tips videos produced with energyNOW!

For more information, visit http://www.ase.org/.

clear skies,

Doug Reynolds

 

www.BHGshortsales.com

2012 Mortgage delinquencies seen dropping sharply

By EILEEN AJ CONNELLY, AP Personal Finance Writer Wednesday, December 7, 2011

If the U.S. economy does not suffer more setbacks, the rate of mortgage holders behind on their payments should decline significantly by the end of next year, according to credit reporting agency TransUnion.

Mortgage delinquency rates — the ratio of borrowers 60 or more days behind on their payments — will likely tick up to about 6 percent through the first three months of 2012, TransUnion said in its annual delinquency forecast issued Wednesday.

But by the end of next year, it could drop to 5 percent, TransUnion said. That's well off the peak of 6.89 percent seen in the fourth quarter of 2009.

Chicago-based TransUnion's forecast takes into consideration several factors, including expectations that consumer confidence and the economy will improve next year.

Also, banks are expected to get a good portion of pending foreclosures off their books next year, said Charlie Wise, TransUnion director of research and consulting.

clear skies,

Doug Reynolds