U.S. house prices have plunged by nearly a third since 2006, and homeownership rates are falling at the fastest pace since the Great Depression.
The good news? Two key measures now suggest it's an excellent time to buy a house, either to live in for the long term or for investment income (but not for a quick flip). First, the nation's ratio of house prices to yearly rents is nearly restored to its prebubble average. Second, when mortgage rates are taken into consideration, houses are the most affordable they have been in decades.
Two of the silliest mantras during the real-estate bubble were that a house is the best investment you will ever make and that a renter "throws money down the drain." Whether buying is a better deal than renting isn't a stagnant fact but a changing condition that depends on the relationship between prices and rents, the cost of financing and other factors.
But the math is turning in buyers' favor. Stock-oriented folks can think of a house's price/rent ratio as akin to a stock's price/earnings ratio, in that it compares the cost of an asset with the money the asset is capable of generating. For investors, a lower ratio suggests more income for the price. For prospective homeowners, a lower ratio makes owning more attractive than renting, all else equal.
Nationwide, the ratio of home prices to yearly rents is 11.3, down from 18.5 at the peak of the bubble, according to Moody's Analytics. The average from 1989 to 2003 was about 10, so valuations aren't quite back to normal.
But for most home buyers, mortgage rates are a key determinant of their total costs. Rates are so low now that houses in many markets look like bargains, even if price/rent ratios aren't hitting new lows. The 30-year mortgage rate rose to 4.12% this week from a record low of 3.94% last week, Freddie Mac said Thursday. (The rates assume 0.8% in prepaid interest, or "points.") The latest rate is still less than half the average since 1971.
As a result, house payments are more affordable than they have been in decades. The National Association of Realtors Housing Affordability Index hit 183.7 in August, near its record high in data going back to 1970. The index's historic average is roughly 120. A reading of 100 would mean that a median-income family with a 20% down payment can afford a mortgage on a median-price home. So today's buyers can afford handsome houses—but prudent ones might opt for moderate houses with skimpy payments.
For example, the median home in the greater Phoenix market, including houses, condos and co-ops, costs $121,700, according to Zillow.com. With a 20% down payment and a 4.12% mortgage rate, a buyer's monthly payment would be about $470. Rent for a comparable house would be more than $1,100 a month, according to data provided by Zillow.com.
Of course, all of this assumes mortgages are available—no given now that lending standards have tightened. But long-term data on down payments and credit scores suggest conditions are more normal than many buyers think, according to Stan Humphries, chief economist at Zillow. "If you have good credit, a job and a down payment, you can get a mortgage," Mr. Humphries says. "There's more paperwork and scrutiny than five years ago, but things are pretty much like they were in the '80s and '90s."
Not all housing markets are bargains. Mr. Humphries says Zillow has developed a new price/rent ratio that uses estimates for each individual property rather than city medians, to better reflect the choices facing typical buyers. A fresh look at the numbers suggests Detroit and Miami are plenty cheap for buyers, with price/rent ratios of 5.6 and 7.7, respectively. New York and San Francisco are more expensive, with ratios of 17.6 and 17.2, respectively. The median ratio for 169 markets is 10.7.
For investors seeking income, one back-of-the-envelope way of seeing how these numbers stack up against yields for other assets is to divide 1 by the price/rent ratio, resulting in a rent "yield." The median market's rent yield is 9.3% and Detroit's is 17.9%.
Investors would then subtract for taxes, insurance, upkeep and other expenses—costs that vary widely. But suppose total costs were 4% of the purchase price. That would still leave a 5.3% rent yield in the typical market. With the 10-year Treasury yield at 2.2% and the Standard & Poor's 500-stock index carrying a dividend yield of 2.1%, rents for residential housing in many markets look attractive.
A few caveats are in order. First, not all transactions are average ones. Even in low-priced markets, buyers should shop carefully. Second, prices could fall further. Celia Chen, a senior director at Moody's Analytics, expects prices to drop 3% before bottoming early next year and rising slowly thereafter. "If the economy slips back into recession, however, we could easily see a 10% drop," Ms. Chen says.
And property "flipping" can be dangerous even when prices are rising. That is because, absent a real-estate boom, house price gains simply aren't that exciting. Research by Yale economist Robert Shiller suggests houses more or less track the rate of inflation over long time periods.
Houses aren't the magic wealth creators they were made out to be during the bubble. But when prices are low, loans are cheap and plump investment yields are scarce, buyers should jump.
Wednesday, November 2, 2011
Sunday, May 22, 2011
More than just real estate.
PAYBACK ON YOUR HOME REMODELING PROJECT
Dollars Invested Don't Always Add To Value
During economic downturns, home improvement stores often see increased sales as homeowners decide to improve their existing homes rather than buy new ones. Unfortunately, taking on those common home improvement projects may not return as many dollars as you hoped.
Replacing the front door of your Atlanta home may be the most cost efficient remodeling project you can make. That's according to the annual "Cost To Value" survey conducted by Remodeling Magazine in conjunction with data supplied by the National Association of Realtors. The project involves removal and replacement of both the existing door and jamb, and replacing the lock and entryset. The new door is steel clad and contains dual-pane half glass panels.
According to numbers representing the Atlanta metro real estate market, such a project would cost just under $1,150, but would add only $1,099 to your home's projected resale value. Of all the remodeling projects listed, this one was the only one that recouped close to 100 percent of its cost.
Construction cost figures include labor, material, and subtrade expenses, plus industry-standard overhead and profit, and reflect local commodity and labor costs. Resale estimates are based on responses to a poll of appraisers, agents and brokers.
The 2010-2011 edition of the report found that a typical garage-door replacement project in the Atlanta area cost around $1,245, and recouped about $1,039 - or about 83 percent - of that cost upon resale. In this case, it was specified that the motorized door opener was not replaced, but re-used.
The next two highest scoring home remodeling projects should be no surprise to Atlanta residents:
* Addition of a 16' by 20' pressure-treated wood deck with a built-in bench and planter is projected to cost about $10,500, but would recoup only about $8,018 - or only 77 percent - at time of sale. I found this to be the most surprising data of the Atlanta survey, based on my personal selling experience. I can't begin to tell you how many houses I have sold by taking prospective buyers out on the deck in nice weather and painting them a word picture of rib eye steaks sizzling on the grill. * Replacing 1,250 square feet of existing siding with new vinyl siding, including all trim, was estimated to cost around $10,948 in our area. This project was expected to return a disappointing $7,111 - about 65 percent - of the dollars it cost. * The "attic bedroom" project was specified to convert unfinished attic space to a 15-by-15 foot bedroom and a 5-by-7 foot bathroom with shower. This would include a 15-foot shed dormer, four new windows, and closet space under the eaves. The contractor would insulate and finish ceiling and walls, and carpet the floor. HVAC will be extended into the new space; electrical wiring and lighting to code.
Again, I was surprised by the poor return.
The survey estimated that this project would cost just over $50,000, which seems a speck high for this market. There are plenty of skilled home builders who are hungry for work right now, and I think you could find a good contractor who would find a way to do this job for less. Maybe I am wrong.
In any case, survey respondents estimated that this project would return only 64 percent of the dollars invested - just $32,276 - upon resale.
Particularly disappointing in this survey was a ever-popular major kitchen remodeling project. It involved updating an outmoded 200-square-foot kitchen with a functional layout of 30 linear feet of semi-custom wood cabinets, including a 3-by-5-foot island; laminate countertops; and standard double-tub stainless-steel sink with standard single-lever faucet. Included was an energy-efficient wall oven, cooktop, ventilation system, built-in microwave, dishwasher, garbage disposal, and custom lighting. This project was estimated by Atlanta remodelers to cost about $57,000, but added only about $33,400 on resale.
Copyright John Adams April 2010.
PAYBACK ON YOUR HOME REMODELING PROJECT
Dollars Invested Don't Always Add To Value
During economic downturns, home improvement stores often see increased sales as homeowners decide to improve their existing homes rather than buy new ones. Unfortunately, taking on those common home improvement projects may not return as many dollars as you hoped.
Replacing the front door of your Atlanta home may be the most cost efficient remodeling project you can make. That's according to the annual "Cost To Value" survey conducted by Remodeling Magazine in conjunction with data supplied by the National Association of Realtors. The project involves removal and replacement of both the existing door and jamb, and replacing the lock and entryset. The new door is steel clad and contains dual-pane half glass panels.
According to numbers representing the Atlanta metro real estate market, such a project would cost just under $1,150, but would add only $1,099 to your home's projected resale value. Of all the remodeling projects listed, this one was the only one that recouped close to 100 percent of its cost.
Construction cost figures include labor, material, and subtrade expenses, plus industry-standard overhead and profit, and reflect local commodity and labor costs. Resale estimates are based on responses to a poll of appraisers, agents and brokers.
The 2010-2011 edition of the report found that a typical garage-door replacement project in the Atlanta area cost around $1,245, and recouped about $1,039 - or about 83 percent - of that cost upon resale. In this case, it was specified that the motorized door opener was not replaced, but re-used.
The next two highest scoring home remodeling projects should be no surprise to Atlanta residents:
* Addition of a 16' by 20' pressure-treated wood deck with a built-in bench and planter is projected to cost about $10,500, but would recoup only about $8,018 - or only 77 percent - at time of sale. I found this to be the most surprising data of the Atlanta survey, based on my personal selling experience. I can't begin to tell you how many houses I have sold by taking prospective buyers out on the deck in nice weather and painting them a word picture of rib eye steaks sizzling on the grill. * Replacing 1,250 square feet of existing siding with new vinyl siding, including all trim, was estimated to cost around $10,948 in our area. This project was expected to return a disappointing $7,111 - about 65 percent - of the dollars it cost. * The "attic bedroom" project was specified to convert unfinished attic space to a 15-by-15 foot bedroom and a 5-by-7 foot bathroom with shower. This would include a 15-foot shed dormer, four new windows, and closet space under the eaves. The contractor would insulate and finish ceiling and walls, and carpet the floor. HVAC will be extended into the new space; electrical wiring and lighting to code.
Again, I was surprised by the poor return.
The survey estimated that this project would cost just over $50,000, which seems a speck high for this market. There are plenty of skilled home builders who are hungry for work right now, and I think you could find a good contractor who would find a way to do this job for less. Maybe I am wrong.
In any case, survey respondents estimated that this project would return only 64 percent of the dollars invested - just $32,276 - upon resale.
Particularly disappointing in this survey was a ever-popular major kitchen remodeling project. It involved updating an outmoded 200-square-foot kitchen with a functional layout of 30 linear feet of semi-custom wood cabinets, including a 3-by-5-foot island; laminate countertops; and standard double-tub stainless-steel sink with standard single-lever faucet. Included was an energy-efficient wall oven, cooktop, ventilation system, built-in microwave, dishwasher, garbage disposal, and custom lighting. This project was estimated by Atlanta remodelers to cost about $57,000, but added only about $33,400 on resale.
Copyright John Adams April 2010.
Wednesday, December 22, 2010
5 Reasons you should sell your home now
Selling your house in today’s market can be extremely difficult. It is for that reason that every seller should take advantage of each and every chance that appears. There is a fantastic opportunity available right now. Meet with your real estate agent and mortgage professional today and see whether it is the right time for you and your family to make a move.
Here are five reasons you should consider selling in the first 90 days of 2011.
1. Interest rates have spiked up.
Rates have jumped over 1/2 point in the last several weeks. The short term result of increasing rates is a surge of buyers jumping off the fence to purchase in fear that rates may continue climbing upward. This is a short window of opportunity. If rates fall again, buyers will jump back on the fence. If rates continue to rise, it limits the number of buyers who can qualify at each price point. Now is the best time to sell your house.
2. If you are moving up, you can save thousands.
If your family goal is to sell your current house and take advantage of the fabulous selection of properties currently available to buy the home of your dreams a at bargain basement price, DO IT NOW! Prices will continue to soften in most markets. However, if you are buying, COST should be more important than PRICE. Cost can be dramatically impacted by rising mortgage interest rates. Do the math and decide if now is the time.
3. During the winter months, the buyers are serious.
We all realize that buyers are not quick to pull the trigger on the purchase of a home today. There is no sense of urgency with the supply of eligible properties at all time highs. However, at this time of year, the ‘lookers’ are either staying warm (in the North) or just busy with other priorities. The home buyers left in the market are serious and are more apt to buy. Less showings – but to more motivated purchasers.
4. You beat the rush of inventory that is coming next year.
Every year there is an increase of inventory which comes to market from January through April as homeowners put their houses up for sale in preparation for the spring market. Here is the number of listings available for sale in 2010.
• January – 3,277,000
• February – 3,531,000
• March – 3,626,000
• April – 4,029,000
We believe there is a pent-up selling demand (homeowners who have held off selling over the last year) that will lead to an increase in these numbers this spring. You won’t have to worry about this increasing competition if you sell now.
5. You have less ‘discounted’ inventory with which to compete.
This year, sellers of non-distressed properties have been given an early holiday present. With banks trying to rectify their foreclosure procedures, there has been a large supply of discounted properties removed from competition. No one knows how long it will take banks to return to the normal flow of foreclosed properties to the market. However, until they do, every homeowner has a better chance of selling their property.
Bottom Line
If you are looking to sell in 2011, there may not be a more opportune time than this right now. Serious buyers, great move-up deals and less competition from super-motivated sellers and foreclosures creates the perfect selling situation. Don’t miss it! Wherever you are located, contact me at 770 377 1319. As a Member of Leading Real Estate Companies of The World I have access to the best and most professional agents in almost every city.
Here are five reasons you should consider selling in the first 90 days of 2011.
1. Interest rates have spiked up.
Rates have jumped over 1/2 point in the last several weeks. The short term result of increasing rates is a surge of buyers jumping off the fence to purchase in fear that rates may continue climbing upward. This is a short window of opportunity. If rates fall again, buyers will jump back on the fence. If rates continue to rise, it limits the number of buyers who can qualify at each price point. Now is the best time to sell your house.
2. If you are moving up, you can save thousands.
If your family goal is to sell your current house and take advantage of the fabulous selection of properties currently available to buy the home of your dreams a at bargain basement price, DO IT NOW! Prices will continue to soften in most markets. However, if you are buying, COST should be more important than PRICE. Cost can be dramatically impacted by rising mortgage interest rates. Do the math and decide if now is the time.
3. During the winter months, the buyers are serious.
We all realize that buyers are not quick to pull the trigger on the purchase of a home today. There is no sense of urgency with the supply of eligible properties at all time highs. However, at this time of year, the ‘lookers’ are either staying warm (in the North) or just busy with other priorities. The home buyers left in the market are serious and are more apt to buy. Less showings – but to more motivated purchasers.
4. You beat the rush of inventory that is coming next year.
Every year there is an increase of inventory which comes to market from January through April as homeowners put their houses up for sale in preparation for the spring market. Here is the number of listings available for sale in 2010.
• January – 3,277,000
• February – 3,531,000
• March – 3,626,000
• April – 4,029,000
We believe there is a pent-up selling demand (homeowners who have held off selling over the last year) that will lead to an increase in these numbers this spring. You won’t have to worry about this increasing competition if you sell now.
5. You have less ‘discounted’ inventory with which to compete.
This year, sellers of non-distressed properties have been given an early holiday present. With banks trying to rectify their foreclosure procedures, there has been a large supply of discounted properties removed from competition. No one knows how long it will take banks to return to the normal flow of foreclosed properties to the market. However, until they do, every homeowner has a better chance of selling their property.
Bottom Line
If you are looking to sell in 2011, there may not be a more opportune time than this right now. Serious buyers, great move-up deals and less competition from super-motivated sellers and foreclosures creates the perfect selling situation. Don’t miss it! Wherever you are located, contact me at 770 377 1319. As a Member of Leading Real Estate Companies of The World I have access to the best and most professional agents in almost every city.
Uderwater borrowers have decreased
The number of homeowners in the U.S. who owe more on their properties than what those homes are worth has declined steadily for most of 2010, according to Santa Ana, Calif. research firm CoreLogic. But the drop in properties with negative equity has more to do with troubled borrowers losing their homes to foreclosure than an increase in prices. About 10.8 million, or 22.5% of residential properties with mortgages were in negative equity positions at the end of the third quarter. That is down from 11 million, or 23%, in the second quarter.
The number of underwater borrowers has declined by more than 500,000 during the first nine months of 2010, according to CoreLogic.
“Negative equity is a primary factor holding back the housing market and broader economy,” CoreLogic Chief Economist Mark Fleming said. “The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement.”
About 2.4 million borrowers had very little equity, less than 5%, at the end of the third quarter. Underwater and near-underwater loans accounted for 27.5% of all U.S. mortgages.
The states with the most underwater mortgages at the end of the third quarter were Nevada with 67%, Arizona with 49%, Florida 46%, Michigan 38% and California 32%.
(c) 2010, Los Angeles Times.
RISMEDIA, December 15, 2010—(MCT)—
Distributed by McClatchy-Tribune Information Services.
The number of underwater borrowers has declined by more than 500,000 during the first nine months of 2010, according to CoreLogic.
“Negative equity is a primary factor holding back the housing market and broader economy,” CoreLogic Chief Economist Mark Fleming said. “The good news is that negative equity is slowly declining, but the bad news is that price declines are accelerating, which may put a stop to or reverse the recent improvement.”
About 2.4 million borrowers had very little equity, less than 5%, at the end of the third quarter. Underwater and near-underwater loans accounted for 27.5% of all U.S. mortgages.
The states with the most underwater mortgages at the end of the third quarter were Nevada with 67%, Arizona with 49%, Florida 46%, Michigan 38% and California 32%.
(c) 2010, Los Angeles Times.
RISMEDIA, December 15, 2010—(MCT)—
Distributed by McClatchy-Tribune Information Services.
Tuesday, June 15, 2010
More than just real estate.
Locally there are many Atlanta Real Estate bargins to be had, some investors and home buyers choose get a bargain by offering to buy homes owned by banks after the conclusion of the foreclosure process. Unfortunately, many of those homes need a substantial amount of work before they can be occupied, and it may not be possible to obtain financing on such a property.
But there's another way to pick up a good deal on your next house. And it can be a win-win transaction for all parties to the deal. It's called a short sale, and here's how it works:
When a borrower decides that he can no longer make the required monthly payments, he may contact a real estate professional about obtaining help with selling his house rather than losing it to foreclosure. If the agent then determines that more is owed on the loan than the house is currently worth, she can call the lender's loss mitigation department.
If the agent can convince the lender that 1) a foreclosure is imminent and that 2) the lender is going to lose money on the eventual sale of the house, the bank may agree to accept less than the full balance of the loan as a payoff. They will only consent if they believe this course of action will result in less of a loss for the bank. And in today's Atlanta Real Estate market that's a fairly easy case to make.
One of the biggest hurdles to a successful short sale is getting the lender to make a decision on any "short sale" offer you might make. And because the process of getting to a closing can be an extremely difficult one, it pays to work with an agent who is a short sale specialist. While there is little anyone can do to move a bank forward in the process, a persistent agent can try to get all the required paperwork submitted in a timely manner. And yes, there is a remarkable amount of paperwork required. Remember, you are dealing with a bank.
Perhaps the biggest problem is that the bank will require that the homeowner (also the defaulting borrower) prove that he has no assets and no income, and that he has suffered some misfortune that prevents him from paying. Proving financial hardship is an art form all its own. In addition, the homeowner can not benefit financially from the sale of his home.
As a result, the homeowner has little incentive to participate in the short sale. And if the bank discovers that you have compensated the seller in any way, they will revoke their agreement to participate in the sale. This is where the patience and professionalism of the facilitating agent can make all the difference.
Finally, make sure you obtain solid legal advice during these transactions. Short sales are not your typical transaction.
Based on an article that appeared in the Atlanta Journal-Constitution
Locally there are many Atlanta Real Estate bargins to be had, some investors and home buyers choose get a bargain by offering to buy homes owned by banks after the conclusion of the foreclosure process. Unfortunately, many of those homes need a substantial amount of work before they can be occupied, and it may not be possible to obtain financing on such a property.
But there's another way to pick up a good deal on your next house. And it can be a win-win transaction for all parties to the deal. It's called a short sale, and here's how it works:
When a borrower decides that he can no longer make the required monthly payments, he may contact a real estate professional about obtaining help with selling his house rather than losing it to foreclosure. If the agent then determines that more is owed on the loan than the house is currently worth, she can call the lender's loss mitigation department.
If the agent can convince the lender that 1) a foreclosure is imminent and that 2) the lender is going to lose money on the eventual sale of the house, the bank may agree to accept less than the full balance of the loan as a payoff. They will only consent if they believe this course of action will result in less of a loss for the bank. And in today's Atlanta Real Estate market that's a fairly easy case to make.
One of the biggest hurdles to a successful short sale is getting the lender to make a decision on any "short sale" offer you might make. And because the process of getting to a closing can be an extremely difficult one, it pays to work with an agent who is a short sale specialist. While there is little anyone can do to move a bank forward in the process, a persistent agent can try to get all the required paperwork submitted in a timely manner. And yes, there is a remarkable amount of paperwork required. Remember, you are dealing with a bank.
Perhaps the biggest problem is that the bank will require that the homeowner (also the defaulting borrower) prove that he has no assets and no income, and that he has suffered some misfortune that prevents him from paying. Proving financial hardship is an art form all its own. In addition, the homeowner can not benefit financially from the sale of his home.
As a result, the homeowner has little incentive to participate in the short sale. And if the bank discovers that you have compensated the seller in any way, they will revoke their agreement to participate in the sale. This is where the patience and professionalism of the facilitating agent can make all the difference.
Finally, make sure you obtain solid legal advice during these transactions. Short sales are not your typical transaction.
Based on an article that appeared in the Atlanta Journal-Constitution
Tuesday, March 9, 2010
The YOUR HOME Credit Guide
Credit is one of the most important tools in the arsenal of your
financial health. Here’s how to keep it sharp.
As a homeowner, you already know the importance of good credit. But no matter how
hard you try, you may not be able to maintain perfect credit year after year. Your
circumstance may change, priorities could shift, and despite good intentions, you could
end up damaging your credit rating.
If you think this is happening to you, what should you do? First, understand that you
are not alone. Millions of Americans every year discover that their credit “score,” the
numerical calculation lenders use to gauge a borrower’s creditworthiness, has fallen.
Second, educate yourself. Though mysterious on the surface, the logic behind credit
scores—how they are determined, how they are used by lenders—is pretty simple, and
there are a few steps you can follow to improve your credit standing.
What’s in a Score?
The three main credit reporting agencies, Experian, Trans Union and Equifax, collect
data on consumers and their borrowing history and share this information with lenders
nationwide. A fourth company, Fair Isaac Company has designed a simple way of
interpreting this data, known as a credit score. Lenders use this score to make quick and fair decisions when offering credit.
Credit scores can range from 350 on the low end to 850 at the top, with the low 600s
representing the generally accepted cut-off for “good”credit. Lenders, such as your
mortgage company or auto dealer, often set numerical guidelines based on credit scores to help them determine whom to offer credit and on what terms. According to Costa Mesa, California-based Experian, the average nationwide credit score as of May 2007,was 692.
Your credit score isn’t the sole determinant of whether or not you are able to secure
credit—and at what interest rate—but it is a factor. Some lenders may set a floor (or
lowest acceptable credit score) beyond which they will not offer credit, while other
lenders may simply assign different interest rates or payment terms to borrowers with
lower scores.
Credit Culprit: Identity Theft
One of the biggest single threats to a homeowner’s credit today is identity theft.While you may not be responsible for the debt if fraud was proven to be the culprit, it could take months or even years to clean up the mess. And during that time, you may have trouble refinancing or getting other credit.
Tracking your credit use is the best method for detecting identity theft. Each of the three credit agencies provides a service (for about $50 annually) that will alert you to unauthorized use of your credit.
Certain financial institutions offer similar types of services, such as e-alerts, which will automatically notify you of any suspicious activity on your account. Many times these services are free.
The Right Mix
Credit scores are influenced by a number of factors, some of
which go beyond the simple standard of whether all your bills
have been paid on time. According to Fair Isaac, the weight of
any one factor depends on the overall information in your
credit report(s).
The biggest determinant (35 percent) of a credit score is your
payment history—how timely and fully you’ve made your
payments. In this regard, every additional month you fall
behind on a payment can lower your score further, while long
stretches of on-time payments are viewed favorably. The
second most important determinant (30 percent) is the total
outstanding amount that you owe, particularly in relation to
your income. Lenders perceive every additional line of credit
(from any source) as a potential barrier to your ability to pay
your bills on time, particularly if your yearly income remains
the same. As a rule, experts suggest carrying no more than 50
percent of your total available credit. In other words, if you
have $20,000 available on all of your credit cards, you should
try to restrict your amount owed to less than $10,000 at any
one time. A common misconception is that closing some
credit card accounts will boost your score. In reality, your
score will only rise if you’re paying down the outstanding debt
on those cards as you’re closing them.
Another factor is the amount of time you’ve had available
credit, particularly revolving credit lines like credit cards or
home equity loans. A credit report with mostly new accounts
is not as favorable as one with accounts that hold a long credit
history. It may be useful to consider any accounts under a year
old as “new.”The type of credit matters, too. A borrower who
has a mortgage, a home equity loan, credit cards and an
education loan, for example, has a healthier mix of credit
products than just holding credit cards. A final significant
factor in determining your credit score is the number
of “inquiries,” or times that a potential lender reviews your
credit report. Even though all credit inquiries received
within a 14-day period is seen as a single inquiry, shopping
for credit numerous times throughout the year can raise a
red flag. This doesn’t include the unsolicited, preapproved
credit card offers you receive in the mail.
Get a Better Score
So what do you do if you discover that your credit score is
lower than desired? Here are a few simple rules to follow
that can help boost your score.
• Pay down your revolving debt. Don’t move debt
around between credit cards.
• Get current on bills and stay current. If paying your
bills is an issue, consider using online bill paying or
other automatic ways to pay your bills. You’ll set it up
once and not only pay your bills but build your score
automatically
• Don’t open a lot of new accounts. Instead, hang onto
and maintain your older accounts.
• If you are having trouble making ends meet, contact
your creditors or see a legitimate, non-profit credit counselor.
Believe it or not, creditors (mortgage or otherwise)
would rather work out a payment schedule than see you
fall delinquent and not pay at all. Good credit can be a
homeowner’s most valuable possession. Use it wisely and
guard it well!
By Robert Irwin
More than just real estate.
Credit is one of the most important tools in the arsenal of your
financial health. Here’s how to keep it sharp.
As a homeowner, you already know the importance of good credit. But no matter how
hard you try, you may not be able to maintain perfect credit year after year. Your
circumstance may change, priorities could shift, and despite good intentions, you could
end up damaging your credit rating.
If you think this is happening to you, what should you do? First, understand that you
are not alone. Millions of Americans every year discover that their credit “score,” the
numerical calculation lenders use to gauge a borrower’s creditworthiness, has fallen.
Second, educate yourself. Though mysterious on the surface, the logic behind credit
scores—how they are determined, how they are used by lenders—is pretty simple, and
there are a few steps you can follow to improve your credit standing.
What’s in a Score?
The three main credit reporting agencies, Experian, Trans Union and Equifax, collect
data on consumers and their borrowing history and share this information with lenders
nationwide. A fourth company, Fair Isaac Company has designed a simple way of
interpreting this data, known as a credit score. Lenders use this score to make quick and fair decisions when offering credit.
Credit scores can range from 350 on the low end to 850 at the top, with the low 600s
representing the generally accepted cut-off for “good”credit. Lenders, such as your
mortgage company or auto dealer, often set numerical guidelines based on credit scores to help them determine whom to offer credit and on what terms. According to Costa Mesa, California-based Experian, the average nationwide credit score as of May 2007,was 692.
Your credit score isn’t the sole determinant of whether or not you are able to secure
credit—and at what interest rate—but it is a factor. Some lenders may set a floor (or
lowest acceptable credit score) beyond which they will not offer credit, while other
lenders may simply assign different interest rates or payment terms to borrowers with
lower scores.
Credit Culprit: Identity Theft
One of the biggest single threats to a homeowner’s credit today is identity theft.While you may not be responsible for the debt if fraud was proven to be the culprit, it could take months or even years to clean up the mess. And during that time, you may have trouble refinancing or getting other credit.
Tracking your credit use is the best method for detecting identity theft. Each of the three credit agencies provides a service (for about $50 annually) that will alert you to unauthorized use of your credit.
Certain financial institutions offer similar types of services, such as e-alerts, which will automatically notify you of any suspicious activity on your account. Many times these services are free.
The Right Mix
Credit scores are influenced by a number of factors, some of
which go beyond the simple standard of whether all your bills
have been paid on time. According to Fair Isaac, the weight of
any one factor depends on the overall information in your
credit report(s).
The biggest determinant (35 percent) of a credit score is your
payment history—how timely and fully you’ve made your
payments. In this regard, every additional month you fall
behind on a payment can lower your score further, while long
stretches of on-time payments are viewed favorably. The
second most important determinant (30 percent) is the total
outstanding amount that you owe, particularly in relation to
your income. Lenders perceive every additional line of credit
(from any source) as a potential barrier to your ability to pay
your bills on time, particularly if your yearly income remains
the same. As a rule, experts suggest carrying no more than 50
percent of your total available credit. In other words, if you
have $20,000 available on all of your credit cards, you should
try to restrict your amount owed to less than $10,000 at any
one time. A common misconception is that closing some
credit card accounts will boost your score. In reality, your
score will only rise if you’re paying down the outstanding debt
on those cards as you’re closing them.
Another factor is the amount of time you’ve had available
credit, particularly revolving credit lines like credit cards or
home equity loans. A credit report with mostly new accounts
is not as favorable as one with accounts that hold a long credit
history. It may be useful to consider any accounts under a year
old as “new.”The type of credit matters, too. A borrower who
has a mortgage, a home equity loan, credit cards and an
education loan, for example, has a healthier mix of credit
products than just holding credit cards. A final significant
factor in determining your credit score is the number
of “inquiries,” or times that a potential lender reviews your
credit report. Even though all credit inquiries received
within a 14-day period is seen as a single inquiry, shopping
for credit numerous times throughout the year can raise a
red flag. This doesn’t include the unsolicited, preapproved
credit card offers you receive in the mail.
Get a Better Score
So what do you do if you discover that your credit score is
lower than desired? Here are a few simple rules to follow
that can help boost your score.
• Pay down your revolving debt. Don’t move debt
around between credit cards.
• Get current on bills and stay current. If paying your
bills is an issue, consider using online bill paying or
other automatic ways to pay your bills. You’ll set it up
once and not only pay your bills but build your score
automatically
• Don’t open a lot of new accounts. Instead, hang onto
and maintain your older accounts.
• If you are having trouble making ends meet, contact
your creditors or see a legitimate, non-profit credit counselor.
Believe it or not, creditors (mortgage or otherwise)
would rather work out a payment schedule than see you
fall delinquent and not pay at all. Good credit can be a
homeowner’s most valuable possession. Use it wisely and
guard it well!
By Robert Irwin
More than just real estate.
Thursday, November 5, 2009
House Passes Federal Homebuyer Tax Credit
More than just real estate.
Fantastic news! The House of Representatives just voted 403-12 to pass the Homebuyer Tax Credit! This is the same bill that passed in the Senate yesterday. The next step is the President’s signature, but he has already committed to signing it (probably tomorrow). This news should help us build on the momentum that we are now experiencing in our housing market.
After the Senate gave final approval last night without a dissenting vote, the House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in the process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.
In the House debate, Speaker Nancy Pelosi (D-Calif.) took the floor to say the homebuyer tax credit was helping a new generation of Americans live out their dream of homeownership and financial independence. Debate on the homebuyer credit was overwhelmingly positive and the legislation passed 403 to 12.
However, several leading economists have voiced concern about the $16.7 billion cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales and White House support for extending the credit has been lukewarm at best. However, it is virtually certain that the President will sign the legislative package, which contains an expansion of unemployment benefits as well as the tax changes.
In the Senate, the homebuyer tax credit was amended to a bill expanding unemployment benefits by 20 weeks for those who have exhausted their benefit. The latest unemployment numbers are due out tomorrow and Congressional leaders are rushing the unemployment bill to the White House so that the President can show compassion by signing on the same day more job losses are announced.
The legislation included provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
The legislation also contains a provision supported by the National Association of Home Builders which will help larger companies strapped for cash with net operating losses (NOL). Ordinarily these companies can carry back these losses for only two years to qualify for a tax refund. The provision would make this process extend the carry-back to five years for either 2008 or 2009. The tax break will now apply to losses in either 2008 or 2009, and the income cap will come off.
From RISmedia
Fantastic news! The House of Representatives just voted 403-12 to pass the Homebuyer Tax Credit! This is the same bill that passed in the Senate yesterday. The next step is the President’s signature, but he has already committed to signing it (probably tomorrow). This news should help us build on the momentum that we are now experiencing in our housing market.
After the Senate gave final approval last night without a dissenting vote, the House of Representatives voted overwhelmingly this afternoon to pass legislation containing an extension and expansion of the homebuyer tax credit, completing Congressional action and sending the tax credit to President Obama for his signature, possibly as early as tomorrow.
The $8,000 homebuyer tax credit for first-time buyers, due to expire in 25 days, will be extended through April 30 of next year and buyers will have an additional two months, until the end of June, to close. First-time buyers who are in the process of making a purchase will no longer need to worry about qualifying for the $8,000 credit if they close after the November 30 deadline. The new legislation increases the income limit for couples with income up to $225,000, a nearly $55,000 increase above the level in existing law.
For the first time, the new legislation makes buyers who already own a home eligible for a credit. A $6,500 maximum credit will be available to existing homeowners who have lived in their current residence for five of the prior eight years. The legislation limits eligibility for the existing homeowner credit to homes worth $800,000 or less.
The legislation takes effect December 1 and is not retroactive. Both credits are available only for primary residences, not second homes or investment properties.
In the House debate, Speaker Nancy Pelosi (D-Calif.) took the floor to say the homebuyer tax credit was helping a new generation of Americans live out their dream of homeownership and financial independence. Debate on the homebuyer credit was overwhelmingly positive and the legislation passed 403 to 12.
However, several leading economists have voiced concern about the $16.7 billion cost of the credit and the wisdom of spending up to $400,000 per homebuyer to stimulate real estate sales and White House support for extending the credit has been lukewarm at best. However, it is virtually certain that the President will sign the legislative package, which contains an expansion of unemployment benefits as well as the tax changes.
In the Senate, the homebuyer tax credit was amended to a bill expanding unemployment benefits by 20 weeks for those who have exhausted their benefit. The latest unemployment numbers are due out tomorrow and Congressional leaders are rushing the unemployment bill to the White House so that the President can show compassion by signing on the same day more job losses are announced.
The legislation included provisions added to address complaints of fraud. The Internal Revenue Service is given greater authority to oversee the process to root out fraud, and provisions are added in response to past abuses of false sales or underage buyers. An investigation by the Treasury Department’s Inspector General for Tax Administration found that more than 580 children, some as young as four years old, had received $627,000 in first-time homebuyer credits. The IRS has identified 167 suspected criminal schemes and opened nearly 107,000 examinations of potential civil violations of the first-time homebuyer tax credit.
The legislation also contains a provision supported by the National Association of Home Builders which will help larger companies strapped for cash with net operating losses (NOL). Ordinarily these companies can carry back these losses for only two years to qualify for a tax refund. The provision would make this process extend the carry-back to five years for either 2008 or 2009. The tax break will now apply to losses in either 2008 or 2009, and the income cap will come off.
From RISmedia
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