New York Times: Homeownership is Best Way To Build Wealth

by The KCM Crew on December 15, 2014 in First Time Homebuyers, For Buyers

The New York Times recently published an editorial entitled, “Homeownership and Wealth Creation.” The housing market has made a strong recovery, not only in sales and prices, but also in the confidence of consumers and experts as an investment.

The article explains:

“Homeownership long has been central to Americans’ ability to amass wealth; even with the substantial decline in wealth after the housing bust, the net worth of homeowners over time has significantly outpaced that of renters, who tend as a group to accumulate little if any wealth.”

Many of the points that were made in the article are on track with the research that the Federal Reserve has also conducted in their Survey of Consumer Finances.

The study found that the average net worth of a homeowner ($194,500) is 36x greater than that of a renter ($5,400).

One reason for this large discrepancy in net worth is the concept of ‘forced savings’ created by having a mortgage payment and was explained by the Times:

“Homeownership requires potential buyers to save for a down payment, and forces them to continue to save by paying down a portion of the mortgage principal each month.”

“Even in instances where renters have excess cash, saving a substantial amount is difficult without a near-term goal, like a down payment. It is also difficult to systematically invest each month in stocks, bonds or other assets without being compelled to do so.”

Bottom Line

“As a means to building wealth, there is no practical substitute for homeownership.” If you are a renter who is considering making a purchase, sit with a local real estate professional who can explain the benefits of signing a contract to purchase over renewing your lease!

Freddie Mac: Buy Sooner Rather than Later...(www.ModernHomeBuyers.com)

In a recent video update on the housing market, Frank Nothaft, Freddie Mac’s chief economist, stated that with both mortgage interest rates and home prices projected to increase in 2015 buying now makes sense.

“If you are planning to buy a home in the next year, it’s better to do it sooner rather than later.”

Here are the latest mortgage interest rate projections from four major housing entities:Fannie Mae, Freddie Mac, the Mortgage Bankers Association (MBA) and the National Association of Realtors (NAR):

Thinking of Selling & Moving Up?

This advice isn’t limited to just the first-time buyer. If you are considering moving up to the home your family has always wanted, waiting also makes no sense.

Don't Trust Zillow, it could cost you THOUSANDS!

Once upon a time there was a home buyer. This buyer was looking to get a good deal on a home. They found an advertisement and called the owner directly. The owner told the buyer that if he didn’t use an agent he would keep the price lower and save them thousands. Excited, the buyer looked up the home on Zillow and saw that it was worth $424,000. The seller offered to sell the home to him for $365,000. “What a deal” the buyer thought and quickly agreed to the purchase. And the SELLER lived happily ever after!

The buyer thought they were saving $59,000, but in reality they LOST $30,000!

What the buyer didn’t know was that the owner was willing to sell their home for $349,000. In fact they had the home listed on the market for a YEAR without anyone expressing interest at that price. This is not information you can get on Zillow. If the buyer had used a Neighborhood Expert, they could have bought the home for a lot less.

Sadly this story is more common than you might think.  I’ve written multiple articles on why Zillow is inaccurate. I’ve even seen real estate agents make the mistake of using Zillow estimates when buying their own property. So why are people losing money when they listen to Zillow? The average home buyer and real estate agent are not as experienced and don’t know where to find better data. They put too much trust in Zillow. Zillow is excellent when it comes to marketing and web presence. The shear volume of data makes them seem credible, when in reality they are not.

Where does Zillow make their money? Advertising.

In an interview Greg Schwartz (Zillow CEO) said  “The first and largest revenue stream is our Marketplace revenue stream — which includes local advertising from real estate agents, from mortgage brokers, banks, and brokerage firms — which is our largest and dominant revenue stream.”

Unfortunately, that doesn’t help you with your home purchase. Zillow is not looking out for you, they are providing a service for those annoying pop-up ads that bombard you while you’re on their site. So who is looking out for you?

Neighborhood Experts!

While Zillow’s estimates are generated by incorrect information on a very broad scale, Neighborhood Experts have intimate knowledge about your local area. So they can provide an accurate evaluation. They are also local, so they care about maintaining the value and stability of the area.

Neighborhood Experts don’t make their money from advertising. Agents are paid by home sellers to get their home sold. If the home doesn’t sell, no one get’s paid. Can you imagine if you had to pay your agent every time someone wanted to see your home? They’d over price the house so it would never sell, or under-price it to get more showings. That may be the way Zillow does it, but not Neighborhood Experts.

An average real estate agent sells approximately 6 homes a year. Neighborhood Experts sell more than 4 times that. This experience will give you the assurance you need when making your transaction. You wouldn’t want to use the same agent who may fell for Zillow’s advertising would you? 

Any time I hear about another victim of Zillow’s inaccurate evaluations I just cringe. Before you make any real estate decisions goBE Informed! If you’re looking at buying or selling a home in the near future contact us today to talk with your Neighborhood Expert.

Won’t be moving for a while? Get a free Market Snapshot to give you insights into your market. These periodic reports will keep you informed on the changes in your area. Then if you ever have any questions about the market you can contact a Neighborhood Expert immediately.

Don’t fall into Zillow’s trap, make your decisions based on accurate information.

By Utah Dave
Thursday, March 20, 2014

Lot Shortages and Builders over inflating New-Home Prices, Are You Paying To Much?

Nearly 60 percent of builders report that the overall supply of developed lots in their areas is "low" or "very low," marking the largest percentage since the National Association of Home Builders/Wells Fargo Housing Market Index began tracking such information in 1997. 

A shortage of buildable lots will likely translate into higher prices for new homes.

Thirty-nine percent of builders surveyed say the price of developed "A" lots — which are considered the most desirable locations — is "somewhat higher" than it was a year ago, while 30 percent note the price is "substantially higher." Eighteen percent of builders say the price of "B" lots — which are considered to be in good locations but not prime areas — is substantially higher than a year ago, and 10 percent say the price of "C" lots is substantially higher. 

Home buyers can expect 100 percent of the increased lot costs to be passed on to them via a higher sales price, says David Crowe, NAHB's chief economist. 

"Builders price homes based on what they are going to have to pay for all the ingredients," Crowe told The Wall Street Journal. "If they are starting to pay more for lots, they are going to have to pass that on right away."

Source: “Lot Shortage Still a Problem for Builders,” National Association of Home Builders’ Eye on Housing (June 4, 2014) and “Most home builders see shortage of lots to build,” The Wall Street Journal (June 3, 2014)

CEO of BuyOwner.com can't sell, hires a Realtor...

By Josh Salman

Published: Thursday, May 15, 2014 at 1:00 a.m.

The longtime chief executive of BuyOwner.com built a successful business in Florida and Georgia, helping people sell homes without a professional Realtor.

But that has not stopped Al Bennati from hiring a professional REALTOR to help in listing his own Florida mansion, now on the market.

Bennati has listed an estate on St. Petersburg Beach for $3.78 million with Coldwell Banker agent Donna Miller.

The custom-built residence, at 604 55th Ave. in Brightwater Beach Estates, sits on 90 feet of waterfront and has five bedrooms, seven full bathrooms and a six-car garage. In all, the living area measures 6,682 square feet.

"To sell a home it needs to be done by a person and a company that reaches buyers," Bennati said in a statement.

"I was a spokesperson and co-owner of BuyOwner with my sister for over 20 years in Florida and Georgia. Selling homes like mine was never the market for BuyOwner."

The three-story, Mediterranean Revival-styled residence features a gourmet kitchen with upscale Wolf appliances; a custom billiard and pub room; marble and mahogany floors; and a master suite with its own private entry, sitting area and his and hers custom walk-in closets.

A guest suite boasts fossilized travertine tiles, marble countertops and flooring, and wooden blinds.

Established in 1984, BuyOwner.com capitalized on a growing trend involving "for sale by owner" transactions that arose when the Internet gained in popularity.

Its website claims "BuyOwner.com allows you to reach the most potential buyers in the shortest amount of time, in the most effective (the Internet) and most cost effective manner (no commission!) possible."

Yet, Bennati couldn't sell his own home using his own product which claims to be "the best tool on the market". 

If he does not have enough confidence in his own product (which he sells to millions), why should you as a consumer hoping to save "a few bucks"?

According to the National Association of REALTORS, “the typical FSBO home sold for $184,000 compared to $230,000 among agent-assisted home sales.”

There is so much information out there on the news and the Internet about home sales, prices, mortgage rates; how do you know what’s going on specifically in your area? Who do you turn to, to tell you how to competitively price your home correctly at the beginning of the selling process? How do you know what to offer on your dream home without paying too much, or offending the seller with a low-ball offer?

“When getting help with money, whether it’s insurance, real estate or investments, you should always look for someone with the heart of a teacher, not the heart of a salesman.” – Dave Ramsey

You wouldn’t hike up Kilimanjaro without a Sherpa, or replace the engine in your car without a trusted mechanic, why would you make one of your most important financial decisions of your life without hiring a Real Estate Professional?

2013-14 Cost vs. Value: Remodeling Pays Off Big Time

Home improvement projects across the board are giving home owners a greater return on their investment when it comes time to sell. Find out which projects “open the door” to buyers and where remodeling dollars stretch the furthest.

BY ERICA CHRISTOFFER

As existing-home sales and home prices make remarkable strides upward nationwide, remodeling projects are also continuing to make a comeback in a big way.

This is the second year in a row that all 35 projects inRemodelingmagazine’s Cost vs. Value Report saw more home improvement dollars recouped upon resale of a home than the previous year.

Existing-home sales reached 5.02 million in 2013, a 9.1 percent increase from 2012, according to the National Association of REALTORS®. Home prices also rose in 2013: Existing homes commanded a median price of $197,100, up 11.5 percent from the 2012 median price of $176,800. This is the largest price gain since 2005.

Also for 2013, the cost-value ratio of remodeling projects nationwide averaged 66.1 percent, up 5.5 points over the previous year — which is, like median price, the largest increase since 2005.

Remodels That Payoff

The fan favorite in the 16th annual Cost vs. Value Report, which was released this month, was again the steel door entryway. Topping the list last year as well, this project is ideal for clients considering a quick update to the curb appeal of a home. The survey shows that a new steel door, with an average cost of $1,162, will recoup 96.6 percent of the remodeling cost at resale.

Making the biggest gain in percentage of recouped costs was the addition of a backup power generator. This project, averaging $11,742, jumped 28 percent in estimated resale value, recouping 67.5 percent of its cost in 2013. Usually at the bottom of the list, this project now ranks 25th out of the 35 projects. The increase is attributed in the report to 2013’s “unpredictable weather and multiple large storms.”

Regional Trends

The report also shows where remodeling dollars go the furthest.

Topping the list for remodeling costs recouped upon resale were Honolulu and San Francisco, at 110.8 percent and 109.4 percent, respectively. San Jose, Calif., came in third, with just shy of 100 percent of remodeling costs recouped on average. San Diego came in fourth, with 89.8 percent of costs recouped at resale; and fifth was Bridgeport, Conn., bringing in 85.9 percent of remodel costs at resale.

Also signifying distinct improvements over last year, seven of the country’s nine regions outperformed the nationwide cost-value average of 66.1 percent.  

Holding onto their positions as the top two regions for recouping remodeling costs were the Pacific (Alaska, California, Hawaii, Oregon, and Washington), with an 88 percent cost-value ratio, and West South Central (Arkansas, Louisiana, Oklahoma, and Texas), with a 76.4 percent cost-value ratio.

The award for most improved region could go to New England (Connecticut, Maine, Massachusetts, New Hampshire, Rhode Island, and Vermont), which moved from sixth to third this year with an overall cost-value ratio of 74.6 percent.

The two regions that held lower cost-value ratios than the national average were the Middle Atlantic (New Jersey, New York, and Pennsylvania) and West North Central (Iowa, Kansas, Minnesota, Missouri, Nebraska, North Dakota, and South Dakota), with cost-value ratios of 63.2 percent and 57.3 percent, respectively.

Top Projects

If your clients are considering a home improvement project to boost the quality and appeal of their home, pass on this list of top 10 midrange and upscale projects from the 2013-14 Cost vs. Value Report:

Midrange	Mountain			Salt Lake City, UT
PROJECT	JOB COST	RESALE VALUE	COST RECOUPED	JOB COST	RESALE VALUE	COST RECOUPED	CHANGE VS 2013
Attic Bedroom	$47,266	$39,113	83.0%	$44,865	$32,790	73.1%
Backup Power Generator	$11,454	$6,298	55.0%	$11,232	$5,419	48.2%
Basement Remodel	$59,808	$48,426	81.0%	$57,149	$43,173	75.5%
Bathroom Addition	$36,604	$20,527	56.0%	$34,952	$20,911	59.8%
Bathroom Remodel	$15,393	$9,844	64.0%	$14,686	$9,413	64.1%
Deck Addition (composite)	$15,113	$10,923	72.0%	$14,700	$11,204	76.2%
Deck Addition (wood)	$9,300	$7,510	81.0%	$8,400	$7,642	91.0%
Entry Door Replacement (fiberglass)	$2,792	$1,965	70.0%	$2,756	$1,817	65.9%
Entry Door Replacement (steel)	$1,133	$994	88.0%	$1,100	$982	89.3%
Family Room Addition	$77,193	$52,134	68.0%	$73,583	$45,275	61.5%
Garage Addition	$48,573	$32,386	67.0%	$46,823	$31,916	68.2%
Garage Door Replacement	$1,485	$1,190	80.0%	$1,426	$1,326	93.0%
Home Office Remodel	$27,023	$12,676	47.0%	$26,107	$8,132	31.1%
Major Kitchen Remodel	$53,170	$38,156	72.0%	$51,450	$40,553	78.8%
Master Suite Addition	$99,375	$63,663	64.0%	$94,751	$53,667	57.0%
Minor Kitchen Remodel	$18,215	$14,448	79.0%	$17,604	$15,161	86.1%
Roofing Replacement	$17,888	$11,585	65.0%	$16,788	$12,382	73.8%
Siding Replacement (vinyl)	$10,986	$8,723	79.0%	$10,329	$7,827	75.8%
Sunroom Addition	$71,269	$34,424	48.0%	$68,778	$31,125	45.3%
Two-Story Addition	$150,546	$103,939	69.0%	$145,526	$93,986	64.6%
Window Replacement (vinyl)	$9,680	$7,298	75.0%	$9,330	$6,417	68.8%
Window Replacement (wood)	$10,599	$8,124	77.0%	$10,211	$7,139	69.9%

Upscale	Mountain			Salt Lake City, UT
PROJECT	JOB COST	RESALE VALUE	COST RECOUPED	JOB COST	RESALE VALUE	COST RECOUPED	CHANGE VS 2013
Bathroom Addition	$70,217	$42,231	60.0%	$67,702	$40,229	59.4%
Bathroom Remodel	$50,026	$30,305	61.0%	$48,678	$25,281	51.9%
Deck Addition (composite)	$34,028	$22,316	66.0%	$32,670	$22,991	70.4%
Garage Addition	$79,716	$45,842	58.0%	$77,057	$43,400	56.3%
Garage Door Replacement	$2,731	$2,255	83.0%	$2,692	$2,317	86.1%
Grand Entrance (fiberglass)	$7,201	$4,873	68.0%	$7,004	$4,706	67.2%
Major Kitchen Remodel	$107,524	$65,234	61.0%	$104,948	$59,056	56.0%
Master Suite Addition	$218,440	$124,618	57.0%	$211,980	$110,938	52.0%
Roofing Replacement	$30,973	$19,830	64.0%	$29,715	$21,000	70.7%
Siding Replacement (fiber-cement)	$12,788	$11,857	93.0%	$12,047	$11,000	91.3%
Siding Replacement (foam-backed vinyl)	$13,720	$11,445	83.0%	$13,207	$10,220	77.4%
Window Replacement (vinyl)	$13,151	$9,877	75.0%	$12,874	$8,694	67.5%
Window Replacement (wood)	$16,511	$12,114	73.0%	$16,171	$10,394	64.3%