Entryway Impressions

Homeowners who have decided to stay put as well as sellers looking for ways to impress should pay close attention to the look and feel of their entryways.

We all know the power first impressions has over our society. We make snap-judgements of books, homes, and people in the first few moments of meeting. This makes it even more important for homeowners to get entry-ways looking their best.

According to a recent national home valuation study conducted by Therma-Tru, even the simple update of installing a new entryway door can increase the perceived value of a home by more than $24,000 on average!

When it comes to entry doors, the sky is the limit these days. Manufacturers know the power of a showstopping door. This is why, according to Therma-Tru, “manufacturers offer a wide array of choices for entryways incorporating decorative glass doorlites, sidelites and transoms. These choices allow homeowners to create a custom look for the home while making a statement about the homeowner’s personal sense of style.”

More and more homeowners are choosing to stay in their homes to wait out the down market. Home prices have fallen across much of the nation. This has amped up remodeling across the nation.

Decorative glass entry doors are a great way to bring light into your entryway as well as add a spark of class to the exterior of your home.

Aside from updating your front door, a great tip for your entryway is to keep it organized. If you’re not careful, your entryway can be come a dumping ground for keys, phones, paperwork, bags, coats, and other often used items. The key it to have a place for everything.

Invest in a suitable entry table that can house a docking port for phones as well as a hidden area for keys.

If your entryway has a coat closet be sure that it is cleared out to make room for daily use and for guest coats. Put in a shoe rack or bin for shoes, boots, and umbrellas. There shouldn’t be anything cluttering up your space.

Add a few warm touches to this space by including an entry rug, which can also reduce slippage on tile floors. Place a warm lamp and some simple artwork on top of the entry table. Think about first impressions when you choose colors and styles. This space should make guests or prospective buyers feel warm and welcome!

If you’re looking for a simple way to capitalize on your home’s first impression, then consider adding a touch of class with some decorative glass as well as organizing your space.

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Mortgage Interest Deduction

This term has been splashed across the front pages of many media outlets. What is it and what does it mean for today’s homeowners?

The “mortgage interest deduction”, or MID, is a way for homeowners to recoup some of the cost associated with interest paid on mortgage loans for qualifying houses (there’s a cap), for both equity debt (loans to improve your home) and acquisition debt (loans to build or buy a home).

How much does it save today’s homeowners? According to Trulia.com, 38.5 million homeowners (around half) take the mortgage interest deduction. The average mortgage interest tax deduction is $12,200, and a typical benefit for home owners is $3,050 a year.

The National Association of Realtors has been a leading proponent of keeping the mortgage interest deduction alive, despite Washington toying with the idea of eliminating the deduction in hopes of saving the government money during these tough times where federal debt has reached new highs.

With a federal debt load of over $14 trillion in 2011 it’s no wonder Congress is seriously considering ways of bringing in more taxes. Increased revenue could be a main solution in reducing our debt and increasing our financial stability as a nation.

Many first-time buyers aren’t even aware of this deduction, but the NAR retains that it is essential to keeping buyers coming to the table and helping the housing market improve. The real harm could come from essentially raising taxes on already struggling American families, they say.

Moe Viessi, NAR President, stated, “NAR firmly believes that the mortgage interest deduction is vital to the stability of the American housing market and economy. We urge the president and Congress to do no harm.”

He continued that “while progress has been made in bringing stability to the housing market, the recovery has been slow. The nation’s homeowners already pay 80 to 90 percent of U.S. federal income taxes. Raising taxes on them, now or in the future, could critically erode home values at all price levels. This would destroy middle-class wealth accumulation and trillions of dollars in home values nationwide.”

On the flip side of the coin it’s important to consider that a large portion of today’s buyers are making all-cash purchases. While many of those are investors, many still are buyers simply wanting to continue on in a debt-free lifestyle.

According the the NAR cash deals are up and now represent 30 percent of nationwide sales.

“We have been hearing about some baby boomers buying homes for their kids with all cash, giving their kids a loan that gets a better return than cash sitting in the bank,” Lawrence Yun, chief economist for the National Association of Realtors, said during a recent presentation at Cleveland State University, the Plain Dealer reported.

These types of purchases may mean missing out on certain deductions and on low rates, but it also means 100% assurance you own your home.

These all-cash buyers find ready and willing sellers who have the assurance that the sale will close, as opposed to the large number of buyers today who need to use financing to buy. The number of contract cancellations in recent months due to being unable to get a mortgage has been a large factor in slowed sales.

Additionally, a mortgage interest deduction isn’t an incentive for all-cash buyers, who now make up a large share of the market. The deduction could even be seen as a government reward for those that buy a house by way of a lender instead of through saved funds.

Still, the NAR presses that the MID is vital to the stability of the housing market and economy.

Personal, Financial Investment Returns Make Short-term Rentals Ever More Popular

The short-term rental market – largely seconds homes and vacation rentals  – is alive and well, thanks largely to online portals thrusting this unique form of accommodations into the limelight.

The risks associated with short term rental investments can include governmental oversight, community scrutiny and the costs of the investment, management, maintenance and upkeep. And that bears mentioning.

However, the short-term rental sector thrives with growth not seen in other housing sectors, because the investment currently offers a bounty of rewards.

Revenue potential

Obviously the primary benefit is the revenue potential. Property owners can charge significantly higher rates for nightly and weekly stays, compared to long-term rentals. The opportunity to rake in more cash flow is often keyed to the property’s location, especially when it’s a travel destination or attraction-based region. Beach towns, lake-side resorts, mountain vistas, even hip urban cores can make a short-term rental profitable.

Short-term rentals are the accommodations of choice for a growing number of bargain-seeking travelers who, in a single night, shell out enough to cover 25 percent of the property’s monthly mortgage. In some instances, there’s an opportunity to charge even more during high demand periods, during special events, holidays, and seasonal peaks.

Tax breaks

Tax write-offs for short-term rentals can add to the financial benefits.

If a property is rented for less than 15 days out of the year the owner does not have to report the rental revenue as income to the Internal Revenue Service (IRS). However, that also means the owner can’t make deductions for any costs associated with the property – upgrades, furnishings, maintenance or other over head costs.

If the property is rented for more than 15 days out of the year, the owner can take a business use deduction on a host of operating, upkeep and maintenance costs as well as the cost of large-ticket purchases such as hot tubs, replacing the HVAC, remodeling work and a host of other costs.

Short-term rental property ownersshould always consult with a licensed tax professional to determine the full list and value of deductions.

Calculated wisely, tax deductions can be a great asset to property owners.

Property preservation

Property owners also enjoy a certain sentimental appeal about caring for a property that’s been in the family or the neighborhood. Regular turnover allows owners to keep a closer eye on the property and to maintain it on a regular basis, avoiding some of the wear-and-tear complaints that arise from long-term rentals.

Sue Long, a founding member of the Austin Rental Alliance, prefers renting her property on a short-term basis because it’s a house she saved from destruction – a home neighboring the home where her father was born.

“I do it for the love of the house that I saved from being demolished. This house sat on a lot next door to the house where my father was born in 1914. We have such a cool neighborhood and I want people from out of town to have that experience. I don’t want someone in there for a whole year who won’t respect it or take care of it the way I do,” Long said.

Long says short-term renters are far less harsh on a property. For example, if a long-term renter doesn’t change air filters or perform regular maintenance, they can create the need for costly repairs.

Community benefits

Other owners say short-term rentals benefit the community.

Short-term rental owners must regularly upgrade, maintain and beautify their properties in order to compete and attract guests. That often keeps them in better shape than surrounding properties. Upgrading and maintaining a property helps boosts its value and homes in the neighborhood enjoy a trickle-down effect.

While the heightened value of the short-term rental helps raise the property values in the neighborhood, it can also encourage in all property owners a healthy, competitive “Keeping Up With the Jones” attitude about property care, creating a snowball effect on rising property values.

Short-term rentals can be long on rewards, but it’s important to research all the risks, weigh risks and rewards evenly, and make a decision based on knowledge and understanding before making an investment.

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Real Estate Outlook: Job Growth and Builder Confidence

The latest monthly report from the U.S. Bureau of Labor Statistics shows that the unemployment rate is still on its way down. This is good news for job seekers and home sellers alike.

The current unemployment rate is now at 8.3 percent. Last year the annual average was 8.9 percent, with nearly 14 million unemployed. February saw an increase of 428,000 employed, movement in a positive direction.

Will these newly employed be entering the housing market? We’ve heard it said over and over again over the last year that affordability rates are at historic highs.

This means more Americans today are able to afford buying a home than ever before. Does this mean more buyers for you home?

The latest Census Bureau’s American Community Survey indicates that while many Americans can now afford to buy, the price range they can afford may be much lower than some sellers had hoped for.

According to the National Association of Home Builders (NAHB) it takes around $26,430 of annual income to afford a $100,000 home. “In 2012, about 28.9 million households in the U.S. are estimated to have incomes lower than that threshold and, therefore, can only afford to buy homes priced under $100,000,” they reported. “These 28.9 million households form the bottom step of the pyramid. Of the remaining 87.5 million who can afford a home priced at $100,000, 23.3 million can only afford to pay a top price of somewhere between $100,000 and $175,000 (the second step on the pyramid).”

The higher the prices go, the smaller the pool of buyers. For many states and towns these average prices are much lower than their area median.

The Department of Commerce’s Census Bureau, both homeownership and rental vacancy rates are practically the same as they were in 2010. Does this mean buyers, even at lower income levels, are taking advantage of today’s affordable rates and prices?

National vacancy rates in the fourth quarter 2011 were 9.4 percent for rental housing and 2.3 percent for homeowner housing.

Among regions, the rental vacancy rate was highest in the South (12.0 percent) and lowest in the West (6.6 percent). The rental vacancy rate in the West was lower than in the fourth quarter 2010, while the rates in the Northeast, Midwest, and South were statistically unchanged.

Builders are building confidence in the multi-family housing market. The NAHB reports that the Multi-Family Production Index rose to the highest level seen since 2005.

Looking forward to the next six months, builder and developer expectations improved in the fourth quarter for all three components: low-rent units, market-rate rental units, and for-sale properties.

“The apartment and condo sector continues to be a bright spot in the housing market, with the overall index at its highest level in six years,” said NAHB Chief Economist David Crowe. “The rental components have been the driving force behind the increased index level. And although the for-sale component remains weaker, it is still double what it was just six quarters ago.”

This is good news since historical trends show that when these indices perform well, we’re likely to see movement in Census figure one to three quarters in advance.

Bank Mortgage Refinance Rates At Risk of Increasing

Now that headlines out of Europe have calmed down, the focus has been on the economy here in the U.S. Although there are some mixed signals coming out of data reports, investor confidence is evident in the direction that markets are moving. Investors are turning to risky assets that offer dividends which has sent the S&P to a four year high. All mortgage rates, including bank mortgage refinance rates are at risk of increasing now that the economy is showing some signs of improvement. It has been tough week for MBS prices that have been falling and, ultimately, sent mortgage rates higher by Thursday. Freerateupdate.com’s survey of wholesale and direct lenders shows that while most mortgage rates rose .125%, 30 year fixed mortgage rates increased .250% and are at 3.750%. 15 year fixed mortgage rates are at 3.000% and 5/1 adjustable mortgage rates are at 2.375%. With good qualifications and acceptable credit, these are the lowest mortgage rates available with 0.7 to 1% origination fee. These bank mortgage refinance rates increased just a few days ahead of the start of the Harp 2.0 refinancing program which is open to underwater borrowers who have mortgages owned by Fannie Mae and Freddie Mac. Since this program is a regular refinance with special guidelines, borrowers should research for the lowest mortgage rates available in order to recognize the most savings possible.

Also increasing .125%, FHA 30 year fixed mortgage rates are at 3.375%, FHA 15 year fixed mortgage rates are at 2.875% and FHA 5/1 adjustable mortgage rates are at 2.875%. FHA mortgage rates are not risk based according to credit scores which makes them more appealing to borrowers who do not have perfect credit. FHA’s streamline refinance program with no cash out now has a new incentive. The upfront and annual mortgage insurance premiums will be lower starting in June, 2012. This program is a quick and easy refinance for FHA borrowers that does not require an appraisal or other verifications, but still offers the same low FHA bank mortgage refinance rates. Any upfront mortgage insurance premium, whether for a purchase loan or refinance, will make FHA closing costs (APR) higher, but FHA allows these costs to be included in the mortgage.  

Jumbo 30 year fixed mortgage rates increased again by .125% and are now at 4.625%. Jumbo 15 year fixed mortgage rates are at 3.375% and jumbo 5/1 adjustable mortgage rates are at 2.500%. Borrowers are required to have excellent credit in order to obtain these lowest jumbo mortgage rates with 0.7 to 1% origination fee. Jumbo mortgages are a smaller market and are not government insured or sold to Fannie Mae or Freddie Mac. Most often, jumbo mortgages are held by the lender within their portfolio which is why they tend to have stricter guidelines.  

MBS prices were lower this past week after Greece received final approval for a second bailout from Euro zone finance ministers. Mortgage rates move in the opposite direction of MBS prices. Reports showed that retail sales rose in February, import prices increased, February PPI and Core PPI both rose while jobless claims dropped to 351,000. All of these reports are pointing to an improvement with the economy and has increased investor optimism. In the meantime, the price of gas has brought a drop to consumer confidence for this month. Last week’s Fed meeting indicated a somewhat more positive outlook of the recovery which is drawing investors away from bonds.