Online Home Values And The Price of Your Home

Plenty of sellers have visited online home valuation sites such as Zillow, Trulia, and others only to be shocked at the published value of their homes. Most sellers are pleased when the values appear higher than they expected, but many online valuations come in far lower. So should you use these values to price your home for sale?

Estimating a home’s market value is far from an exact science. What these sites attempt to do is provide greater transparency to homebuyers and sellers by making data derived from public records more accessible. They publish what you paid for your home and how much you pay in taxes. Many have satellite views so accurate they can spot your cat laying on the front walk.

But few consumers realize that two homes right next door to each other could have been purchased at different times and have vastly different tax bases which in turn skews values. The property tax base resets for each home every time it’s sold. Then the taxes can go higher every year, remain the same, or go down according to market conditions. Most communities impose ceilings so that your taxes don’t escalate to an unaffordable level in a single year.

If you’ve only owned your home for five years, you are likely paying much more in property taxes than your retired neighbors who bought their home 30 years ago. Yet your home may not be “worth” more unless you’ve done some substantial updates and/or additions.

Then how do these sites come up with valuations? All property is registered with the city and county for property taxing purposes. Home valuation sites contract with major title companies such as First American to obtain county tax roll data. They also find ways to become members of local multiple listing services, which are either subsidiaries of real estate associations or owned by local real estate brokers. That way, they have access to current listing data and recent solds.

Between tax roll data and listing data, home valuation sites apply their own secret sauce, or algorithm to come up with “zestimates” or approximate values of what homes in a given area are worth. Sometimes the results are spot on, but they can also be inaccurate.

First, transaction data has to be recorded with the county, which could take weeks. But, what alters the algorithm most is that properties not currently on the market are included in the data. These homes have not been tested by the current marketplace and cannot possibly contribute to recent market values.

In addition, the algorithms may include whether or not a home has been updated, but there’s no way to quantify subjective information such as how well the home is maintained, curb appeal, interior design, window and yard views, and neighborhood popularity. For these reasons, online valuations should be used only as one of many tools to estimate a home’s value.

Your best approach to choosing a listing price is to ask your real estate professional for a comparative market analysis, or CMA. He or she can show you the most recent listing asking prices and sold comparables in your neighborhood. These results are accurate up to the hour in most cases. Realtor.com updates listings from MLSs every half hour.

If your home is estimated for far less on a home valuation site than current comparables, be prepared to argue pricing with buyers who take these numbers as gospel. If they have a real estate agent representing them, the agent can confirm the comparables you show them to help them understand the market a little better.

By the same token, don’t expect to get more for your home if home valuation sites put your home in a
higher price bracket. Recent comparables tell the true story of the current market as long as buyers and sellers are using the same search parameters.

Remember, a set of comparables is only a guide to pricing your home, so you can sell your home quickly and for the most money in the current market.

Written by Blanche Evans

Market Commentary for the Week of Memorial Day

 

This holiday-shortened week brings us the release of five relevant economic reports for the markets to digest in addition to a couple Treasury auctions that have the potential to influence bond trading and mortgage rates. None of the reports are considered to be key data, but most of them do carry enough significance to affect mortgage rates if their results show sizable surprises. The financial and mortgage markets are closed today in observance of the Memorial Day holiday and will reopen for regular trading tomorrow morning.

April’s Durable Goods Orders will start this week’s calendar early tomorrow morning. This data gives us an indication of manufacturing sector strength by tracking orders at U.S. factories for big-ticket products. These are items made with an expected life span of three or more years such as airplanes, appliances and electronics. It is currently expected to show a decline in new orders of approximately 0.6%, hinting that the manufacturing sector softened a little last month. That would be relatively good news for the bond market and mortgage rates, but this data is known to be quite volatile. Therefore, a small variance from forecasts will likely have little impact on Tuesday’s mortgage rates. The larger the decline, the better the news it is for mortgage rates.

The Conference Board is next with their Consumer Confidence Index (CCI) at 10:00 AM tomorrow. This data measures consumer willingness to spend. If the index rises, it indicates that consumers felt better about their personal financial and employment situations and therefore are more apt to make large purchases in the near future. If confidence is sliding, analysts think consumer spending may slow in the near future. The latter is good news for the bond market because consumer spending makes up over two-thirds of the U.S. economy. A decline in the index should boost bond prices and push mortgage rates lower tomorrow morning while a larger than expected increase would likely cause rates to move higher. It is expected to show a reading of 94.0, down from April’s 95.2 reading.

The final release of the day is April’s New Home Sales report, also at 10:00 AM ET. It is the sister report of last week’s Existing Home Sales. This data gives us a similar measurement of housing sector strength and future mortgage credit demand, but tracks a much smaller portion of housing sales than that report did. Actually, it probably will not have much of an impact on mortgage pricing unless it shows a sizable variance from forecasts. Analysts are expecting to see gains in sales from March’s level, meaning the new home portion of the housing sector strengthened last month.

Wednesday has nothing scheduled that is expected to affect mortgage rates except the first of this week’s two Treasury auctions that are worth watching. The Fed will auction 5-year Notes Wednesday and 7-year Notes on Thursday. Neither of these sales will directly impact mortgage pricing, but they can influence general bond market sentiment. If the sales go poorly, we could see broader selling in the bond market that leads to upward revisions to mortgage rates. On the other hand, strong sales usually make bonds more attractive to investors, bringing more funds into bonds. The buying of bonds that follows usually translates into lower mortgage rates. Results of the sales will be posted at 1:00 PM ET each auction day, so look for any reaction to come during afternoon hours Wednesday and Thursday.

The next report will be Friday’s revision to the 1st quarter Gross Domestic Product (GDP) at 8:30 AM ET. This is the first of two revisions in the GDP that we get. The second revision to this index comes next month but isn’t expected to carry much importance. The GDP is the sum of all goods and services produced in the U.S. and is considered to be the best measurement of economic growth. Last month’s preliminary reading revealed a 0.2% annual rate of growth. Analysts expect a downward revision of 0.9% in this update, equating to economic contraction of 0.7%. If the revision comes in much stronger than expected, we may see the bond market react negatively and mortgage rates move higher because it would mean the economy was stronger than thought last quarter. It will be interesting to see how the markets react if we did have economic contraction during the first three months of the year since bonds tend to thrive during weaker economic conditions.

The last relevant data of the week will come from the University of Michigan, who will update their Index of Consumer Sentiment for May late Friday morning. This type of data is watched fairly closely because when consumers are feeling more confident about their own financial situations, they are more likely to make a large purchase in the near future. Rising confidence and the higher levels of spending that usually follow are considered negative news for bonds and mortgage rates. Friday’s report is expected to show a small upward revision to this month’s preliminary reading of 88.6. A higher reading would be considered bad news for bonds and mortgage pricing while a decline should help boost bond prices and lead to a slight improvement in rates.

Overall, I think Tuesday is the best candidate for most active day for mortgage rates this week although Friday’s GDP reading will draw plenty of attention also if it does show a negative reading. With two relatively important reports scheduled for Friday, it may also be an active day. The least active day will probably be Wednesday unless the stock markets rally or show sizable losses. Please keep in mind though, as we saw several days the past couple weeks, we don’t necessarily have to have important data for the markets and mortgage pricing to move considerably. Therefore, please maintain contact with your mortgage professional if still floating an interest rate and closing in the near future.

It Doesn’t Pay to Wait To Buy A Home

There will always be those who try to “time the market,” but there’s one factor you can’t know — when buying a home will become more expensive.

Certainly you can tell from recent trends whether or not prices and mortgage interest rates are in your favor. Monthly prices have risen year-over-year for three years. Mortgage interest rates are slowly rising, but remain at extremely attractive levels.

You could wait for prices to fall, but there are two problems with that idea. First, it would take an economic recession to lower prices, which could take months or years. With the exception of the Great Recession, you won’t know if you’re in or out of a recession until the talking heads online inform you.

Second, mortgage interest rates have been kept artificially low for five years. That’s a very long time. With steady gains in employment, it’s not likely they will go any lower. In fact, higher interest rates could wipe out any gains you could save by waiting to buy.

Here’s a real life example:

If you buy a home and get a $200,000 30-year, fixed-rate mortgage at 4.5 percent, your monthly payment will be $1,013.37 and you’ll pay $164,813.42 in interest over the life of the loan.

The same home at 5.0 percent interest costs $1,073.64, a difference of $60.27 more per month and $186,511.57 in interest over the life of the loan. The difference in interest payments alone is $21,698.15.

If your home dropped 5% in value and you were able to buy it at $190,000 and 4.5% interest, your payment would be $962.70, a difference of $50.67 per month, with $156,572.75 in interest over the life of the loan. You’d save $50.67 more per month than if you’d paid $200,000.

At 5.0 percent, your $190,000 home costs $1019.96, or $53.68 more per month than if you’d gotten the loan at 4.5 percent. Your interest payments would total $177,185.99 over the life of the loan. The difference in payments is $20,613.24.

Currently, mortgages for borrowers with good credit are around 4.00 percent. If you had purchased your $190,000 home a year and a half ago when prices were lower and interest rates were at 4.00% interest, it would cost you $907.09 per month and a total of $13,6552.06 in interest.

The question is — did you?

There’s never a perfect time to buy a home and you shouldn’t buy a home just for financial reasons. Buy your home to raise your family, be close to friends and relatives and to be free from a landlord where you get nothing back but cancelled checks at the end of the lease.

Don’t put your dreams off to gamble with the market. Think of getting the home you want at a reasonable price and payment as the best way to beat the market.

Written by Blanche Evans

Market Commentary for the Week of May 18th

This week brings us the release of four pieces of relevant economic news in addition to the minutes from the most recent FOMC meeting. Only one of the economic reports is considered to be highly important to the markets and mortgage rates, but a couple do carry enough significance to influence mortgage rates if they show a wide variance from forecasts. Monday has nothing of importance scheduled, so look for stock movement and overseas bond momentum to heavily influence our bond trading and mortgage rates.

April’s Housing Starts will kick-off the week’s calendar early Tuesday morning. It will give us an indication of housing sector strength and mortgage credit demand by tracking newly issued permits and actual starts of new home construction. It is expected to show an increase in new construction starts from March’s reading, hinting at housing sector growth. However, since this report is not considered to be of high importance to the bond market, it likely will have little impact on mortgage rates unless it varies greatly from forecasts.

The next event of the week comes late Wednesday when the minutes of the last FOMC meeting will be released. Market participants will be looking for how Fed members voted during the last meeting and any comments about inflation or concerns about economic growth. The goal is to form opinions about the Fed’s next move regarding interest rates, which is expected to happen sometime this year. Since the minutes will be released at 2:00 PM ET, if there is a market reaction to them it will be evident during afternoon trading Wednesday.

The National Association of Realtors will give us their Existing Home Sales report at 10:00 AM ET Thursday. This data tracks resales of existing homes in the U.S. during April, giving us a measurement of housing sector strength and mortgage credit demand. This type of data is relevant because a weakening housing sector makes broader economic growth less likely. Current forecasts are calling for a small increase in home sales between March and April. Ideally, the bond market would prefer to see a decline, indicating housing sector weakness. A large increase in sales could lead to bond weakness and a slight increase in mortgage rates Thursday morning since a strengthening housing sector raises optimism about general economic growth.

April’s Leading Economic Indicators (LEI) will also be released at 10:00 AM ET Thursday. This Conference Board report attempts to predict economic activity over the next three to six months. It is expected to show a 0.3% increase from March’s reading, meaning that economic activity is likely to strengthen over the next few months. A decline would be good news for the bond market and mortgage rates, while a larger increase could cause mortgage rates to inch higher Thursday.

Friday has just April’s Consumer Price Index (CPI) at 8:30 AM ET, but it is the most important economic report of the week. This is the sister report of last week’s PPI report, but measures inflationary pressures at the more important consumer level of the economy. These results will be watched closely and could lead to significant volatility in the bond market and mortgage pricing if they show any significant surprises. Current forecasts are calling for a 0.1% increase in the overall index and a 0.2% rise in the core data reading. The core data is the more important of the two readings as it excludes more volatile food and energy prices. This data can also affect the Fed’s timeline for raising key short-term interest rates and will also help dictate mortgage rate direction.

Overall, I believe Friday will be the most important day for rates, not just due to the CPI release, but also because it will be a shortened trading day ahead of the Memorial Day holiday. Wednesday afternoon could also be pretty active if the minutes show anything of importance. The calmest day will likely be Monday or Tuesday. Despite a relatively light calendar, I still recommend maintaining contact with your mortgage professional if you have not locked an interest rate yet as recent trading shows we don’t need key data for the bond market and mortgage rates to turn volatile.

Keeping Your Home Safe While Selling

As a homeowner, you want to ensure your valuables are safe and protected if you’re still living in the house you’re selling. A good Realtor will work with you to take care of your things; however, it’s best to be on top of your stuff. There are two times when strangers will be in your home: during open houses and during private viewings.

With open houses, you have quite a bit of time to straighten up and remove items. With private viewings, you may not even have an hour.

Your best strategy is to pack up and put into storage items that are valuable or very breakable. The other bonus is that it will declutter your home making it look bigger and more valuable.

This video by Peter Walsh is on keeping flat surfaces clear during the holidays which is similar to keeping your home clean for viewings.



Consider packing away jewelry, small electronics and other valuables to avoid any danger of theft during showings or open houses. You may also request that your listing Realtor do his or her best to avoid showing valuables when taking listing photos to be posted online, including expensive electronics, antiques and valuable art that might attract someone with poor intentions to target your home.

Then have a special basket to throw items into like your prescriptions, everyday jewelry, spare keys, financial statements, and family photos. Then you can easily bring that to your car as you leave. Always leave the lights on when you leave. You may not be able to go home until after dark, and you don’t want to trust other people to do that. Plus, it increases the safety of the Realtor showing the house.

People are nosy. They will be looking through everything as they tour the house. Consider having a trusted friend point out the things you may not see that are personal, or may be tempting to take. Also, remember to pack away and hide bills or insurance statements that have your personal information and identification numbers that could be used for identity theft.

If you’re not staying at the house, consider putting in an alarm system temporarily to safeguard it since it’s unoccupied. (You may even want to do this if you’re living there to protect your property since you may not be there a lot of the time.)

You may get knocks on your door with curious people wanting to see the home. It may be another Realtor stopping by. Do not let them in. Refer them to your Realtor to set up an appointment.

Always keep your doors and windows shut and locked. The lockbox will provide entry to other agents for approved showings, so there should never be a need to leave your doors unlocked to provide an entry point. Inform your Realtor immediately if you are contacted and asked to leave your door unlocked for a showing, inspection or other purpose.

Your Realtor is your partner in looking out for your property. So do what you can to minimize the risk.

Don't Let Mortgage Myths Scare You

Don’t Let Mortgage Myths Scare You     The national average for the 30-year fixed-rate mortgage last week was 3.69 percent, according to Freddie Mac’s most recent survey. Freddie’s Deputy Chief Economist Len Keifer believes 2015 will be a great year, with the highest number of housing sales since 2007. The outlook for 2015 is even better, assuring almost instant equity if you purchase now.

Keifer names several reasons why Freddie Mac is optimistic:

1. Jobs have grown at a rate of 250,000 per month for over a year, with strong job growth in the first-time homebuyer age group.

2. About 80 percent of metro markets are affordable for the median family income to purchase the median priced home.

3. Rents have risen 11 percent over the last three years, which may be the tipping point for renters to become homeowners.

So with interest rates only slightly above record lows, why aren’t you running to the nearest lender to get a home loan? Maybe you’re spooked by two mortgage myths – that you have to have 20% down to buy a home and that only buyers with perfect credit can get a loan. Neither one is true.

Lending requirements aren’t as strict as media horror stories might lead you to believe. Freddie Mac is making it possible for more borrowers to meet conforming loan standards. Qualifying borrowers who buy within maximum loan limits, up to $417,000 in most areas and $625,000 in high-cost areas such as parts of California can get loans with less than 20 percent down. Of course, any loan with less than 20 percent down will require private mortgage insurance, but PMI is tax deductible along with the interest you pay on your mortgage if you itemize.

Low-income and first-time buyers can get a conforming loan with as little as three percent down from Fannie Mae, and after March 23, 2015, so will Freddie Mac borrowers. You’ll have to meet certain credit and income qualifications, but the upside is you can start building equity now.

Government-guaranteed loans are also available with as little as zero down through the Veterans Administration for veterans and active-duty military. And the Federal Housing Administration has programs as low as 3.5 percent down. All FHA loans require PMI for the life of the loan.

It’s also not true that only borrowers with perfect credit can get loans. Higher credit scores help borrowers qualify for a better rate. You can get an FHA loan with a credit score as low as 580 if you can provide the 3.5 percent down payment. A credit score of 650 or above will get you in the game for a Fannie or Freddie conforming loan if other variables in your financials are in order.

The rule of thumb is simple — less money down requires a higher credit score and vice versa.

Credit scores tell you how much money you have to put down and they’re a factor in your interest rate. If you put 20 percent down, you can get a loan even if you have a low credit score of 580 or 620. If you have a 740 or 760, the lender will allow you to put less money down.

Other lending myths are also out there, such as lenders are no longer doing stated income loans or jumbo loans. Again, that’s not true. Lenders are doing loans that don’t require an income verification if the customer has a large portfolio of liquid assets.

You may qualify for a better rate on one criteria, but not qualify on another. Lenders look at approximately 15 to 20 pieces of criteria, including credit scores, downpayments, liquid assets, current employment, revolving loans, ownership of other properties, and much more.

The lesson for you is this – don’t try to outsmart the market. The housing market is getting stronger. In fact, there’s rarely been a better time to buy a home.

Written by Blanche Evans

Market Commentary for the Week of May 11th

This week brings us the release of four economic reports that have the potential to influence mortgage rates. All of the week’s relevant events will take place the middle and latter days, with nothing of importance set for Monday or Tuesday. Several of the reports are considered to be of elevated importance to the bond market and therefore mortgage rates. This raises the possibility of seeing noticeable movement in rates multiple days this week.

The first piece of data this week is April’s Retail Sales at 8:30 AM ET Wednesday morning. This is an extremely important report for the financial markets since it measures consumer spending. Consumer spending makes up over two-thirds of the U.S. economy, so this data can have a pretty significant impact on the markets. Current forecasts are calling for a 0.2% increase in sales from March to April. A weaker than expected level of sales should push bond prices higher and mortgage rates lower Wednesday morning as it would signal that economic activity may not be as strong as thought. However, an unexpected increase could renew theories of economic growth that would lead to stock buying and bond selling, pushing mortgage rates higher.

Thursday has April’s Producer Price Index (PPI) at 8:30 AM ET. It helps us track inflationary pressures at the producer level of the economy. If this report reveals weaker than expected readings, indicating inflation is not a concern at the manufacturing level, we should see the bond market improve. The overall index is expected to rise 0.2%, while the core data that excludes more volatile food and energy prices has been forecasted to rise 0.1%. A decline in the core data will be ideal for mortgage shoppers because inflation is the number one nemesis for long-term securities such as mortgage-related bonds. As inflation rises, longer-term securities become less appealing to investors since inflation erodes the value of those securities’ future fixed interest payments. That is why the bond market tends to thrive in weaker economic conditions with low levels of inflation.

The last two pieces of data will be posted Friday morning. April’s Industrial Production is the first of the day at 9:15 AM ET. It measures manufacturing sector strength by tracking output at U.S. factories, mines and utilities. It is expected to show a 0.1% increase in production, indicating that manufacturing activity was fairly flat. A decline in output would be good news for the bond market and mortgage rates because it would indicate that the manufacturing sector is not as strong as thought. This report is considered to be moderately important, so it will likely need to show unexpected strength or weakness to cause movement in mortgage rates.

May’s preliminary reading to the University of Michigan’s Index of Consumer Sentiment will close out the week’s calendar just before 10:00 AM ET Friday. This index measures consumer willingness to spend, which relates to consumer spending. If consumers are more confident in their own financial situations, they are more apt to make large purchases in the near future. This report usually has a moderate impact on the financial markets though, because it is not exactly factual data. It is expected to show a reading of 96.0, which would be a slight change from April’s final reading of 95.9, indicating consumers are a just as confident as last month. If it shows a large decline in consumer confidence, bond prices could rise and mortgage rates would move slightly lower because waning confidence means consumers are less apt to make a large purchase in the near future.

The Treasury will hold a 10-year Note sale Wednesday and a 30-year Bond sale Thursday. Results of the auctions will be posted at 1:00 PM ET each day. If they are met with a strong demand from investors, we could see bond prices rise enough during afternoon trading to cause downward revisions to mortgage rates. However, lackluster bidding in the sales, meaning longer-term securities are losing their appeal, could lead to higher mortgage pricing those afternoons.

Overall, the calmest day for mortgage rates will likely be Monday while the best candidates for most active day are Wednesday and Thursday. Both have key economic data being posted that will attract plenty of attention in the bond market. We also need to watch stocks for mortgage rate movement. Generally speaking, stock weakness usually makes bonds more attractive while stock gains tend to draw funds from bonds, leading to higher mortgage rates.

Seller's Advice: Hiring a Handyman

Seller’s Advice: Hiring a Handyman

As you get ready to sell your home, you may discover the need to make numerous repairs and updates. But when do you have the time? Most jobs you can do yourself, but others require a little more skill. Maybe it’s time to consider hiring a handyman.

A handyman is someone who can handle small painting and carpentry jobs that can be completed quickly. He typically works alone, charges by the hour plus materials, and in some states is required to be licensed and carry insurance.

If you think you’re going to more extensive work, you should consider a contractor. A contractor differs from a handyman by taking larger jobs that require going behind walls, or tearing out and rebuilding areas. Contractors supervise specialized tradespeople such as plumbers, electricians, and craftsmen.

According to Angie’s List, hiring a handyman can prevent waste and overcharging, as the handyman will only charge you for hours worked. Plus they keep their rates low with low overhead and by not having to pay other workers.

Before you hire a handyman or a contractor, make a list of the jobs you need done. If your list is composed mostly of repairs and some updating like painting, a handyman should suit your needs.

To hire the right person for the job, do the following:

1. Get recommendations from family, friends, or your real estate professional. She may know an individual or company that specializes in “make-ready,” a room-by-room clean-up, touch-up and fix-up. You can also contact sites such as HomeAdvisor.com or Angie’s List.com, to hire workmen.

2. Interview several handymen before making your decision. Make sure the handyman you hire has the experience and equipment to do the jobs you need and is willing to guarantee the work.

3. You want someone you’ll feel comfortable having around your family and in your home. Hire only personnel who are bonded and insured.

4. Inspect the work while it’s in progress and when it’s finished. Most professionals want to do a good job out of pride of workmanship. Handymen also rely heavily on referrals, so if you’re pleased, you’ll recommend the handyman to your family and friends.

What you don’t want to do is leave small repairs undone. Home buyers notice if maintenance has been ignored, and may conclude the home is in need of greater repair than it actually does.

Written by Blanche Evans