Why Own My Home?

A soft real estate market that is ripe with all the conditions that should entice people to purchase a home still has some renters asking, "Why own my own home?"

Low interest rates, lower home prices and an improving job market still have some buyers sitting on the fence fearful of an uncertain real estate market. Real estate agents and even sellers are finding that prospective buyers (current renters) may need a little more "emotional" attention in these market conditions. They may need a little more explanation to ensure that they understand the benefits of purchasing your home rather than renting another.

While deciding to own a home or rent one is very personal, many tend to let fear of the unknown be the driving force in making their decision and that can later create an unhappy decision.

Here are five top reasons to at least consider owning your own home.

No more landlords: This may be a highly influential factor depending on a potential buyer's experiences. Many renters have poured a ton of money into a home that they're living in to keep it at the standard of living they enjoy, only to find that their landlord is soon planning to sell the home. Their hard-earned cash and money invested into their rented home will then only benefit the seller.

Making a home your style: This is much more difficult to do in a rental. Yes, as I just mentioned, you can make some modifications, but many things that can be done to a home you own can't be done to one you're renting. Taking into consideration Homeowner's Associations or planned community development restrictions, owning still provides more control and flexibility over renting.

Weighing the costs of homeownership: Of course, with homeownership you won't be calling the landlord to come fix your toilet or dishwasher. So, having a financial reserve is important to carry you through the months when you run into unexpected troubles. Websites such as GinnieMae.gov offer price charts that help you compare how much you'll save by buying or renting. It's a helpful tool that allows you to analyze factors such as how much tax savings you're likely to receive, how much possibly equity you'll gain, and how much you're rent may increase.

Long-term plans tilt the scale toward owning: In a recent Tampa Bay article, Walter Molony of the National Association of Realtors said, "For people with long-term plans, the rent vs. buy equation is tilting heavily toward buying because housing affordability is at record highs dating back to 1970," he explains. "Homes are undervalued in many areas—selling for less than the cost of replacement construction—and rents are rising at a faster pace. Many people are considering ownership now as a hedge against inflation."

Low interest rates and affordable homes will not last forever: If you're not ready to buy or simply can't afford to own a home, even the historically low interest rates and exceedingly affordable, home prices might not move you to take the leap into homeownership. However, understanding that these conditions won't last forever is important. Sometimes when conditions persist, we tend to think they'll always be this way.

Distressed sales will begin falling in 2013 and that would then cause home prices to creep upward, predicts Moody's Analytics. With little activity on the homebuilding front, and still a heavy supply, it's not expected to increase much more. Also, the number of new households each year is rising, which is expected to help alleviate the oversupply in the coming years.


Written by Phoebe Chongchua
June 10, 2011

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NAR: Home Hunting without Fear

As any daredevil, extreme sports addict or adrenaline junkie knows, well-grounded preparation for the specific task at hand is what takes the fear out of trying.

The sometimes risky sport of home buying is no different.

Those who've suffered the agony of defeat in what's likely the most dangerous consumer game, learned the hard way that sheer fearlessness isn't enough to become and remain a homeowner -- through good times and bad.

With the rules of the housing game changed forever, preparing to just squeak by thehome buying ordeal isn't enough to achieve a decisive and lasting victory.

The idea isn't just to buy a home. The goal is to keep your own roof over your head.

Preparation is key, according to the National Association of Realtors.

From NAR, here's how to get ready to be and remain a homeowner.

Create a wish list. Write down housing wants and needs. Include all the physical characteristics you want or need. Include style, size, layout and room configuration. Look at the number of bedrooms and bathrooms, and the basic amenities you must have. Include critical features such as location and services and a home's proximity to good schools or public transportation lines.

Browse for housing. Realtor.com and other Web sites offer home valuation features and neighborhood data on trends in local markets. Use features to determine how a listing compares with nearby, comparable properties in terms of value, actual sales prices, home features, neighborhood characteristics, and more.

Work with an expert. Finding a professional real estate agent who will represent your best interests can make the difference in location, negotiating the best offer, and closing the home of your dreams. Look for a full time real estate agent, who has uploaded telling photos and videos of their listings and look for agents with good Web sites to market your listing.

Get the complete picture before you visit. You can't know everything about a community from an online listing. Schools, crime, and proximity to shopping and work all impact property values. NAR says talk to a Realtor and go to Realtor.com to explore communities.

Make sure the property details are reliable. Buyers need know when a listing has experienced a price change. Look for Web sites like Realtor.com that updates listings frequently, including price changes. Fresh and reliable information is critical. Realtor.com time stamps listings to help buyers make better informed decisions. Get email alerts and stay on top of changes so you can be first to act.


Written by Broderick Perkins
July 16, 2009

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Old Ben Was Right

One of the earliest advocates of preventive maintenance was Ben Franklin. He wisely wrote: "A little neglect may breed mischief...for want of a nail, the shoe was lost; for want of a shoe the horse was lost..." Old Ben nailed what happens when relatively small repairs. Little things have major impact on homeowner association assets. For example, a small lack of flashing can lead to major dryrot, structural problems and major expense. Ka-CHING!

Preventive maintenance is critical to managing an HOA's assets. When executed properly, it extends the useful life of buildings, grounds and equipment. Stretching out useful lives means stretching member contributions and reducing downtime from component failures. Preventive maintenance involves fixing something before it breaks. Here are five objectives for a every preventive maintenance program:

1. To perform maintenance that keeps the property safe and functioning.

2. To promote the most effective and efficient use of resources.

3. To estimate the human resources needed for proper operation and maintenance.

4. To determine long range funding requirements and project scheduling.

5. To evaluate the effectiveness of the maintenance effort.

Preventive maintenance programs are common with elevators, HVAC and pool equipment, usually because there is a service contract. Other components, like paving, roofing, decks and paint require monitoring and planning.

Functional obsolescence is also a legitimate concern. Lack of parts, improvements in efficiency, computerization and changes in fire and building code can make equipment obsolete even though it's working just as designed. This is particularly applicable to elevators, boilers, pumps and HVAC. Buying new equipment is often a great investment in reduced operating costs. For example, by replacing all common area lighting with compact fluorescent bulbs, the light level will be significantly increased, the energy consumption reduced by 70% and the useful life of each bulb extended by 10-15 times thereby saving an enormous amount of labor costs. Within 12-18 months, the cost will be recouped in energy savings and then, it's money in the bank.

So, what is the best way to address major preventive maintenance? Two words: Reserve Study. A Reserve Study identifies all the significant components that the HOA is responsible to maintain, assesses current condition, cost of repair and replacement and charts a 30 year maintenance plan to keep the components in their best condition.

The Reserve Study can provide for cyclical preventive maintenance so components achieve their optimal lives. For example If cracks, minor repairs and sealcoating are performed at least every five years on asphalt paving, major repairs will not be required for 20-30 years. If this relatively inexpensive preventive maintenance is not done, significant and costly major repairs will be required much sooner. Pay a little to save a lot.

A Reserve Study will also guide the board how to systematically accumulate funds without special assessments. A full funding plan will have all owners contribute a fair share relating to the benefits received. A fair contribution plan means no one will get a better deal than anyone else and the money will be there when needed. The Reserve Study is absolutely the best way to prepare for a future which will certainly come to pass.

Remember Old Ben's nail analogy. Little things have a way of causing great things to happen. But rather than fail in the little things, plan for them and hit this nail right on the head.

For more innovative homeowner association management strategies, seeRegenesis.net.


Written by Richard Thompson
June 1, 2011

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Fixed Mortgage Rates Continue Downward Slide

MCLEAN, Va., June 2, 2011 -- Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which showed fixed-rate mortgages declining for the seventh consecutive week to new lows amid continuing weak economic and housing data. The 30-year fixed averaged 4.55 percent and the 15-year averaged 3.74 percent.

30-year fixed-rate mortgage (FRM) averaged 4.55 percent with an average 0.6 point for the week ending June 2, 2011, down from last week when it averaged 4.60 percent. Last year at this time, the 30-year FRM averaged 4.79 percent.

15-year FRM this week averaged 3.74 percent with an average 0.7 point, down from last week when it averaged 3.78 percent. A year ago at this time, the 15-year FRM averaged 4.20 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.41 percent this week, with an average 0.6 point, the same from last week when it averaged 3.41 percent. A year ago, the 5-year ARM averaged 3.94 percent.

1-year Treasury-indexed ARM averaged 3.13 percent this week with an average 0.6 point, up from last week when it averaged 3.11 percent. At this time last year, the 1-year ARM averaged 3.95 percent.

Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Fixed mortgage rates followed U.S. Treasury yields lower this week amid financial market concerns that the current lull in the economy is continuing. First quarter growth in consumer spending was revised downward by half of a percentage point to 2.2 percent, according to the Bureau of Economic Activity, consumer confidence in May was weaker than the market consensus forecast, and the manufacturing industry slowed for the third straight month in May."

"The housing market is showing strain as well. The S&P/Case-Shiller® National Home Price Index fell 5.1 percent between the first quarters of 2010 and 2011, representing the largest annual decline since the third quarter of 2009. In addition, the index of pending existing home sales dropped 11.6 percent from March to April, led by the Midwest and South regions where the tornados and flooding occurred."

Published on Realty Times, June 3, 2011

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Ask the HOA Expert

Question: We have a board member who has missed the last three meetings, all of which were very important. One was to meet the HOA manager candidates, another was to select our new manager and the last was to approve our annual budget. He has come in late on numerous occasions and never reviews the agenda and related material ahead of time. He has two years left on his term. What can be done to get him off the board?

Answer: The board president needs to have a heart to heart with him. When he ran for office, he agreed to serve the interests of the HOA members. He clearly is not fulfilling his obligation. Either he now is willing or he is not. If he is, great! He can do that by attending future meetings regularly and by making informed decisions. If he is not willing, he should voluntarily step down so the board can appoint someone that is. If he refuses to step down, there is little that can be done unless an appropriate number of owners (according to the governing documents) votes to remove him. But most slackers, when properly challenged, will step down voluntarily.

Question: I have just read one of your articles that stated: "If the reserve fund Percent Funded is below 100%, implement a funding strategy to increase that level to the 100% goal as soon as possible."

From my research, reserve study specialists often recommend that reserves be 100% funded but add that the law does not require they be 100% funded. Our management company acknowledges the 100% funding recommendation, but states that it is not necessary. My question is there a "Percent Funded" that is a widely accepted as the "should be" level?

Answer: There are two compelling reasons why reserves should be 100% funded each and every year: fairness and fiduciary duty. Consider the example of a 30 year roof that costs $300,000 to replace. Fully funding the roof reserve requires $10,000 per year ($300,000 ÷ 30 Years). In other words, as 1/30th of the roof is used up, 1/30th of its replacement cost should be set aside in reserves. If less than 1/30th of the cost is reserved each year, the shortage will have to made up by future owners.

It is normal for a certain percentage of ownerships to turnover each year. So, the owner roster in Year 1 will likely be different in Year 5, Year 15 and Year 30. The farther in the future a repair event takes place, the more likely different owners in the future will be asked to pay for what prior owners failed to pay. Those future owners are simply not financially responsible for paying for roof reserves prior to their ownership.

Secondly, the board has a fiduciary duty to protect the interests of all owners, current and future. Under funding reserves now is contrary to the interests of future owners. If the board transfers current owner obligations to future owners, it has failed its fiduciary duty.

For more innovative homeowner association management strategies, seeRegenesis.net.


Written by Richard Thompson
May 25, 2011

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Mortgage Rates Today: Low Mortgage Rates Remain in Holding Pattern

For yet another week, low mortgage rates have remained in a holding pattern that has become the trend this year. FreeRateUpdate.com's daily survey of wholesale and direct lenders show that mortgage rates have had little to no movement over the past week. The only fluctuation occurred with jumbo 30 year fixed mortgage rates which jumped back and forth .125% before settling at 5.000% on Wednesday. Current conforming 30 year fixed mortgage rates are at 4.375%, 15 year fixed mortgage rates are at 3.750% and 5/1 adjustable mortgage rates are at 3.000%. These are the lowest conforming mortgage rates available with 0.7 to 1% origination fee to well qualified borrowers who must also be able to produce the required documentation necessary for approval by lenders.

FHA mortgage rates have also remained steady this week. Borrowers with little available cash turn to FHA which has a down payment requirement as low as 3.5%. FHA mortgage loans can also be combined with gifts and other grant programs making home ownership more affordable. Current FHA 30 year fixed mortgage rates are at 4.250%, FHA 15 year fixed mortgage rates are at 4.000% and FHA 5/1 adjustable mortgage rates are at 3.375%. FHA mortgage loans have gained in popularity even though FHA closing costs (APR) tend to be higher due to various FHA fees and the upfront mortgage insurance premium.

The conforming loan limit is still $417,000 to $729,750, depending on location. Anything above these limits requires a jumbo mortgage loan. Current jumbo 30 year fixed mortgage rates are at 5.000% after rising to 5.125% earlier last week. Jumbo 15 year fixed mortgage rates are at 4.500% and jumbo 5/1 adjustable mortgage rates are at 3.625%. Borrowers must have excellent credit to obtain these low jumbo mortgage rates with 0.7 to 1% origination point.

MBS prices (mortgage backed securities) usually fluctuate daily along with other markets. Mortgage rates move in the opposite direction of MBS price changes. This past week data showed that new home sales and median home price rose as well as mortgage applications which is obviously a result of consistent low mortgage rates. Durable goods orders dropped, household purchase rose less than expected and there was an increase in jobless claims for the week ending May 21st. Most investor moves have been in reaction to the European debt crisis and the fluctuating price of crude. All of this further indicates a weak economic recovery, but consumers are jumping on low mortgage rates to save some money while they are still around.

FreeRateUpdate.com surveys more than two dozen wholesale and direct lenders' rate sheets to determine the most accurate mortgage rates available to well qualified consumers at a standard .07 to 1% point origination fee.

Written by Ed Ferrara
June 1, 2011

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Fixed Mortgage Rates Continue To Find New Lows

MCLEAN, Va., May 26, 2011 -- Freddie Mac (OTC: FMCC) today released the results of its Primary Mortgage Market Survey® (PMMS®), which shows slower economic activity pushing fixed-rate mortgages slightly lower for the sixth consecutive week. The 30-year averaged 4.60 percent; the 15-year averaged 3.78 percent, marking new lows for 2011.

30-year fixed-rate mortgage (FRM) averaged 4.60 percent with an average 0.7 point for the week ending May 26, 2011, down from last week when it averaged 4.61 percent. Last year at this time, the 30-year FRM averaged 4.84 percent.

15-year FRM this week averaged 3.78 percent with an average 0.7 point, down from last week when it averaged 3.80 percent. A year ago at this time, the 15-year FRM averaged 4.21 percent.

5-year Treasury-indexed hybrid adjustable-rate mortgage (ARM) averaged 3.41 percent this week, with an average 0.5 point, down from last week when it averaged 3.48 percent. A year ago, the 5-year ARM averaged 3.97 percent.

1-year Treasury-indexed ARM averaged 3.11 percent this week with an average 0.5 point, down from last week when it averaged 3.15 percent. At this time last year, the 1-year ARM averaged 3.95 percent.

Frank Nothaft, vice president and chief economist at Freddie Mac, reports, "Fixed mortgage rates eased slightly for the sixth consecutive week amid reports of slower economic activity. The index of leading indicators fell 0.3 percent in April and represented the first monthly decline since June 2010. In addition, the Federal Reserve banks reported less business and manufacturing activity in Philadelphia, Chicago and Richmond."

"U.S. house prices indexes may be nearing a bottom soon. On a national basis, prices fell 0.3 percent between February and March, which was the smallest decline since November 2009, according to the Federal Housing Finance Agency. In addition, four of the nine Census Regions exhibited positive growth, compared to none in February. Separately, the Mortgage Bankers Association reported a further reduction in the serious delinquency rate (90 or more days plus foreclosures) in the first quarter, which stood at the lowest reading since the second quarter of 2009."

Published on Realty Times
May 27, 2011

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