Apr 16, 2021

Real Estate Investment Trusts (REITS) Buying Up Homes To Rent

Huge Real Estate Investment Trusts (REITS) are buying up homes to rent.  The trend began back in the 2008 - 2009 Financial Crisis when so many homes went into foreclosure and or lost significant value.  The sharks on Wall Street swooped in to buy the bargains for cash.  They attracted investors into huge funds seeking a good return like any other investment.  And, boy have they gotten it in the last ten years as values have sky rocketed and so have rents.  

The problem is the sweet spot for these REITS are middle class housing in great neighborhoods with great schools.  REITS pay cash so no mortgages needed to qualify.  They work with national property management companies some of which they actually set up when they bought thousands of homes in key markets during the last financial crisis.   They operate their REITS like any business looking for economies of scale to cut cost to generate more profit. 

Now that this investment modality has been discovered, it is not likely to go away any time soon.  It is just another way to diversify a portfolio.   Real Estate is generally a good hedge against inflation and has very favorable tax treatment.  So buyers today need to realize that they are competing with multi billion dollar REITs in the marketplace making it harder to buy a home.  Renters need to understand that there is a pretty good chance that they are renting from one of these REITS that will regularly raise rents and process evictions as allowed by law for failure to pay rent.  To REITS, this investment is strictly business with nothing emotional about it.  

Apr 15, 2021

The Housing Market Is 4 Million Homes Short

It is estimated that the housing market is short about 4 million homes to meet buyer's demand.  Builders have just not kept up with the need in the marketplace.  To say it is a seller's market is an understatement.  Houses are often selling above list price as buyers bid up prices.  Home inspections are being waived, or at least ignored in terms of required repairs as home are being sold "as is".  

What all this means is that it may take more than 3 years to catch up with demand as long as interest rates remain low, prices are likely to remain high.  However, if President Biden raises taxes, it could cause a recession.  If that happens, there will be lay off's and fewer people in a position to buy homes.  If interest rates go up besides, which is likely because of projected inflation coming our way, it could bring home prices down.  

A lot of this is a crap shoot.  What we know today is that home prices have gone up dramatically.  Average home prices nationally are above $300,000.  In many markets, prices are significantly higher.  The cost of building materials are going through the roof, which insures that new home prices will keep going up.  Used homes bench mark against new homes.  So used homes are usually about 20% less expensive that new homes.  So as the price of new homes goes up, so will the price of used homes. 

At Paragon Home Resources, we work with families all over the country to sell and buy homes.  We know how to negotiate the best price when selling and the best price when buying.  In these times, having an expert on your side is even more important.    

Making New Friends After Moving

What we have discovered from the Covid Pandemic is just how much our family and friends mean to each of us.  Social isolation has led to all sorts of problems in the last year.  So when people move away from family and friends, it is really important that new friends take their place in the new location as quickly as possible.  That means finding things in common with other people to make acquaintances.  

Some communities have Welcome Wagon groups.  The easiest way to meet new friends is to buy into a master planned community that has a recreational facility and all sorts of organized clubs.  Of course, it is possible to join a country club; but more expensive.  The least expensive way to meet new friends is to join a church, temple or mosque.  In that case, people have their faith in common. 

Most important, it is critical to understand that new friends don't just happen.  It could take years for people who are shy and not very talkative to make new friends.  That is why joining groups centered around activities in common is the best way to meet new people.  Further, in some ways hanging on to old friends in the old location as a crutch, not that old relationships should be abandoned, but they can be somewhat counter productive.   Those old friend interactions can actually impede the need to have social interaction with new friends.

Rooting in a new location is all about making new friends.  The sooner you just jump right in, the happier you will be.  


Apr 13, 2021

Buying A New Home - What To Expect

If you are thinking of buying a brand new home from a tract home builder expect lotteries to get on a waiting list.  There is little if any standing inventory in many markets.  And, many builders may not commit to a final price because the cost of building materials is going through the roof.  Further, if you are lucky enough to land a home, expect it to take 10 - 12 months to complete from the time you sign a purchase contract.  Many people are selling their current homes quickly because the markets are so hot and then finding themselves with no place to live.   

If you do sell your home and must wait for the new home to be completed, you may need to rent a home or apartment and put things in storage.  Rents are not cheap and neither is storage.  Try to do a six month lease if the owner will agree and then month to month after that with 30 days notice so you can move quickly when your home is ready.  Don't be surprised if the landlord demands a 12 month lease.  Though you will pay more, if you rent big storage lockers, make sure they are temperature controlled because otherwise, your furniture and other belongs could be ruined from excess heat during hot months.  

If you do buy a brand new home, expect to pay at least 20 - 30% above the list price for upgrades and lot premiums.  What you see in the models are highly upgraded homes.  What you get without the upgrades is really crap.  This can be a very frustrating process; but with a little patience, it can be done.  If you are thinking of building a custom home expect a 2 - 3 year process from start to finish and a whole lot more money. 


Apr 12, 2021

Living In A Desert Climate

Many times people who live in a desert climate try to bring a little bit of back home with them; planting grass and other water hungry plants.  That is not a good idea especially since many of these cities like Las Vegas are low on water.  It is a whole smarter to embrace desert landscaping.  If you must have grass or something green in some patches, there is artificial grass that works just fine.  But otherwise, planting succulents, cactus and desert tolerant trees and bushes are the way to go. 

And, of course, all of it requires a drip system so that not one one drop of water is wasted in sprinkler spray or run off.  Where there are no plants, rocks come in various sizes and colors to complete the job. Stay away from small grain sands that blow away in the wind.  Go with gravel size, or larger rocks. 

There are a wide variety of flowering trees and bushes that complement cactus, which also flower.  Bougainvillea, that come in many colors do particularly well in desert climates.   These bushes grow large as a hedge to cover an entire wall, or can be trimmed into bushes.   Either way, the flowers are very attractive when in bloom.  

Living in the desert does not have to be drab or boring.  Fortunately, lots of flowering plants and trees can create a really beautiful environment that is stingy on water.  

Buying A Home In A Seller's Market

Buying a home in a Seller's market can be tough to accomplish.  First, prices are higher than might otherwise be the case.  Sellers don't really need to negotiate much because they know they can get their price.  And, even if the buyer requests a home inspection, Sellers don't don't have to make repairs.  They can sell the home in "as is" condition.  

Further, many sellers may not accept offers contingent on mortgage approval because in a lot of cases and markets they can generate all cash offers.  So what is a buyer to do.  In some cases, it may be smarter to rent until the market cools down.  The risk is that though prices may fall when there is more inventory, when that happens mortgage interest rates are likely to be higher.  So whatever is saved by a lower price could be eaten up in higher payments over time.  

The best scenario is the all cash buyer.  If downsizing in particular, if the buyer can make an all cash offer with a quick close, the chances are the seller may negotiate on price a bit.  After closing on the home, the buyer can then take out a mortgage if needed to claw back some of the cash for living or other investments.  This is the best scenario that can be expected in a seller's market.  

Otherwise, be prepared to pay top dollar to buy a home and perhaps even be out bid with another buyer willing to pay more than list price.  It is very frustrating; but since real estate like all investments is cyclical.  The day will come when it is a buyer's market.  

Apr 11, 2021

Making Your Home Retirement Friendly

Unless purchasing a single story home in a retirement community, odds are pretty good that your home is not retirement friendly.   Certainly any two story home with the master bedroom and or other bedrooms upstairs is not the best living space for retired people, since stairs or steps of any kind are the enemy as people grow older.  Falling is the single biggest cause of serious injury for people over 65, so at all costs avoiding any circumstance that could cause a fall is critical.  

So, the first step in making your home retirement friendly might be to move from a two story home to a one story home.  If that is not possible, then if not already the case, making first floor the primary living space, would be the next best option.  That could involve some renovation to at least create a master bedroom and bath on the first floor along with a guest room and office if needed.  If none of this is possible, then putting in an elevator, or stair step so that actually using the stairs to get to the second floor will be come unnecessary. 

If the laundry is in the basement, it needs to come up or down to the living space.  Fortunately, with stackable washers and dryers, a closet can be converted to house both units.  Carrying laundry up or down stairs is not a good option.  This problem must be solved one way or another.  And, then there is bathing.  Old bathtubs can be converted to a shower with a sit down bench, which is much safer.  There are the walk in tubs that can also be installed in the space of an old bathtub if that is preferred.  Either way, the notion of climbing into a bath tub is dangerous.  Which ever option is selected, grab bars must be installed to allow for holding on when bathing.  

Making the kitchen easier to use is also something that should be done.  High cabinets that require a step stool to get to is a No No.  In fact, climbing on a ladder to do anything is a No No.  Again the chances of falling are too great.  Instead, dishes can be put in pull out drawers instead of overhead cabinets.  Glasses should never be higher than the first space in an overhead cabinet.  

Making an existing home retirement friendly just takes some good thinking.  It could be much cheaper than moving.  Most important, as we all grow older, living in a home that is retirement friendly is important to the quality of life.   

 

Apr 9, 2021

Getting Your Home Ready for An Appraisal

In many cases, a mortgage appraisal of your home when selling it will be necessary for your buyer to obtain a mortgage.  Lately this has become a problem because appraisers look at history to determine value rather than what the market may be doing today.  So, in a hot market, your home may sell for more than the appraised value.  If the home does not appraise, your buyer may have to come up with more down payment to qualify for the loan.

Even so, you want your home to appraise for top dollar.  So get rid of clutter so the appraiser can see the home.  Spruce things up.  Paint exterior wood work if needed.  Do some work on the landscaping if over grown.  Plant some flowers.  The appraiser is just like anybody else.  Some of what they do is predicated on emotion; but most of what they do is based on recent comparable sales.  

When negotiating your sale, the real estate agent must put in language to deal with the eventuality that your home may not appraise for the price agreed to in order to prevent the buyer from coming back to demand that you lower your price.  Of course, in a hot market, there could very well be cash buyers and or other buyers that can come up with the down payment to close on your sale.  Don't waste time with buyers that don't have money to close your sale.  

Your real estate agent will demand proof of funds to close the deal and should require the buyer to show that they have money beyond the initial down payment in the deal to close the sale.  You can even make the deal not contingent on mortgage qualification.  This is a seller's market in many areas so the seller gets to set the terms of the deal if the buyer wants the home.  

Apr 8, 2021

Living In A Motor Home

There are presumably retired people choosing to live in a fancy motor home.  They follow the sun so to speak and move their motor home to camps with great weather through out the year either as their second home or even only home.  It certainly would not be my cup of tea, but I can see some advantages.  I suspect the big fancy motor homes must cost $200,000 or more; though smaller ones would cost less.  It probably would be necessary to tow at least a small car because once you are parked in a camp site, using the motor home to get around is not too practical. 

There are places like Quartzsite in Arizona about 20 miles from the California border that fills up with motor homes, thousands of them, from December - April.  Presumably these are snowbirds coming from cold places that winter in Arizona.  The nearest town is Blight, California and it is not much of a town.  Phoenix is three hours away driving time.  So for serious medical and or shopping or any other amenity it would mean a long drive or helicopter ride. 

Anyone considering this life style really needs to be closer to good medical in particular in case crap happens.  So getting closer into a big city would make more sense.  There are many camp sites all over the country that could accommodate this life style.  Choose wisely in case crap happens.  

Apr 7, 2021

Mortgage Foreclosures and Loan Modifications

There are millions of homeowners in the United States that have lost their jobs because of business closures and as a result, they have been unable to make mortgage payments.  Lenders have been prevented so far from foreclosing on those mortgages. The federal government may be extending until the end of the year the prohibition preventing lenders from foreclosing.  That is the good news.

Homeowners in trouble can seek loan modification from their lenders.  It is not an easy process and it takes 60 or more days, but it is possible to get done.  You can ask for a lower interest rate, lower payments, interest only on the loan or other modification that may make it possible to stay in your home. 

Mortgage companies have departments set up to assist with loan modifications.  Don't get frustrated.  Just hang in there and provide the information requested.   Even though the real estate market is hot right now, mortgage companies really do not want to foreclose on your home.  They know that to do so creates a non performing asset for them for some extended period of time.  They would rather work with you to extend your mortgage terms to allow you to stay in your home.  Be patient to make it happen.  


Apr 6, 2021

Buying Home Insurance

 If you have a mortgage, the lender will require you to have home insurance to protect their interests.  In essence, when you buy insurance the lender becomes a co-insured.  Home insurance is even more important if your home is paid off.   Many people have done business with the same insurance company for years so when rates go up, we all just end up paying it.  However, when your current provider announces a rate increase, maybe it is a good time to shop the policy with various companies to get the best rate and terms. 

One of the games that some insurance companies play these days is insisting on a deductible that is one percent of value.  So, if your home is worth $350,000 that would be $3,500 out of your pocket before they pay any claim.  It is better to have $1,000 deductible.  You may pay a little more for it, but at least you cap your out of pocket expense in the event you do need to file a claim. 

And, then there is always the fine print.  You may think you have coverage when in fact you don't.  Things like flood and earthquake insurance require riders to get coverage.  In addition, antiques and jewelry of special value would also require riders to be insured.  Ask lots of questions when speaking to the insurance agent to make sure you have the coverage that you need.

Finally, make sure you have enough insurance to cover a total loss of your structure and that means building replacement cost not just a flat amount of money that may not be enough.  Right now the cost of building materials has skyrocketed so you may need more insurance coverage.  The last thing you want in case of a total disaster is haggling with your insurance provider. 

Apr 4, 2021

Living In A High Rise Condo

There are many people, usually in big urban cities or near the beach that live in high rise condos.  It is definitely a different life style than living in a single family home, or even a regular condo, or town home.  Some of the more expensive ones and they can cost millions of dollars have terraces to provide some outdoor living; but most do not offer any outdoor space.  There is a distinction between a Co-op that is really buying stock in the building and fee simple condo ownership, which is the same as buying any property. 

In order to buy a Co-op, the Co-op board must approve the sale, which can take weeks or months.   This Blogger is not in favor of that sort of ownership because when it comes time to sell, the seller is at the mercy of the board that must approve the buyer before a sale can take place.   Either way, people who live in high rise building should expect very high Home Owners Association fees.  Many of these buildings have door men and other amenities that can be very expensive.  Occasionally, the building may be tied to a high end hotel that actually provides services to owners in the building.  

Further, high rise buildings may or may not come with any parking under the building So, if you own a car, you may need to make arrangements to buy monthly parking nearby in a parking structure.  High rise living is basically owning an apartment that can be nothing special, or incredibly luxurious for millions of dollars.  This life style is clearly not for everyone.  Before you do it, maybe it would be best to rent an apartment in a high rise building for a few years to make sure the life style is for you. 

Living Life Outdoors

Now that warmer weather is coming our way, people love living life outdoors.   It might relate to our primal past.  This could involve a simple barbeque and a few lounge chairs, or elaborate outdoor kitchens and all sort of outdoor furniture.  Backyards have become an oasis especially including a resort style pool and spa.  The backyard has become an extension of the home's interior like never before. 

More expensive homes often have glass sliding doors that open up indoor space to outdoor space.  Areas that have bugs in summer often have homes with screened in patios, or in some places like Florida, the entire pool area can be covered by a screened in enclosure.  This is to rid the backyard of those mosquitos that everybody hates.

People are spending hundreds of thousands of dollars to make their backyards into incredible entertainment spaces like never before.  Often heaters are added to allow for cooler nights so that using the space in climates where when the sun goes down so do the temperatures.  These can be portable propane, or natural gas or electric installed in the ceilings of patio covers.   And, then there is lighting entire backyards to extend entertainment into the night.

All of this can be very simple, or incredibly extensive and expensive.  The backyard has clearly become a way to make even a small home much bigger as homeowners see the backyard as a place for entertaining family and friends.    

Apr 2, 2021

Eliminating the State and Local Tax Limit Deduction

When President Trump implemented his tax cuts, which positively impacted all Americans that pay income taxes, as part of the deal state and local tax deductions were limited to $10,000.  Though you could still deduct home mortgage interest on loans up to $750,000,  state income and property tax deductions were limited to no more than $10,000.  Naturally states like California and New York and others that have very high state income taxes and property taxes screamed because their most wealthy residents were marginally impacted.  

However, since the top federal personal income tax rate went from 39.6% to 36%, it could be argued that giving up this deduction really did not have much impact for high wage earners.  In any case, now that President Biden wants to raise rates again to 39.6% for high wage earners making more than $400,000 a year, blue state members of Congress want to restore the SALT deductions.  Ironically, it really benefits high income earners the most.

The key to all of this is that President Biden is planning the largest tax increase since 1993. Homeowners in particular will need to watch to see how it impacts them.  There will no doubt be winners and losers when the dust settles.  There always is any time they tamper with the tax code.  


Selling Your Home For Sale By Owner - Think Twice

Often people look to save real estate commissions by selling their homes, For Sale By Owner.  Unless you have a friend or relatives interested in buying your home, it may not be the best idea.  Once you put that sign on your front lawn, people you don't know will begin knocking at your door. These could be crooks looking to get into your home to case it out for a robbery.  Or, they could just be nosey lookie lou's interested in seeing your home; in other words, not serious buyers.

Real Estate Agents provide a valuable service.  In addition to exposing your home on the multiple list as the best way to find a qualified buyer, they screen potential buyers.  They don't waste time on lookie lou's and or people that can't possible purchase your home.  They know who they are showing your home to before an appointment is ever made.  Further, they will be there to negotiate the best price and terms and then coordinate the closing through the escrow or title company.  Most important, you don't have a sale until the sale closes and money changes hands.

The agent is there to make sure that the sale closes because otherwise their commission is never paid.  So, the agent is motivated to make the deal happen and to close the sale.  Selling a home and moving is stressful enough.  So before you consider For Sale By Owner, think twice.  It is better to  hire a professional to get the job done for you.

At Paragon Home Resources, we have worked with families all over the United States to sell and buy homes.  We work with the best real estate agents in the local market to get the job done.  And, clients that come through us receive a cash back reward once the sale closes.  We assist with negotiating the best price so that in the end our clients benefit from our assistance.