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Douglas Zeller's Blog

By Douglas Zeller | Broker in El Dorado County, CA
  • Bigger Mortgage Rates, Smaller Homes?

    Posted Under: Market Conditions in Shingle Springs, Home Buying in Shingle Springs, Financing in Shingle Springs  |  September 17, 2013 2:48 PM  |  879 views  |  No comments

    As the costs of mortgages get bigger, could the size of homes buyers purchase get smaller?

    According to financial Web site The Motley Fool, interest rates and home size are closely tied together. “As interest rates fell in the late 1970s, home sizes grew,” Motley Fool reports. “As rates rocketed in the early 1980s, home sizes contracted. After reaching a peak in the 1980s, mortgage rates have fallen precipitously, and homes have grown in almost every single year since.”

    That's because as mortgage rates rise — as they are now — buyers can afford less. Mortgages at a 5.5 percent annual rate are 12 percent more expensive than at a 4.5 percent rate, Motley Fool notes. If rates climbed up to 6.5 percent — where they were about six years ago — monthly mortgage payments would be nearly 25 percent more costly than a 4.5 percent mortgage rate. 

    In 1975, the average home built was 1,535 square feet. In 2010, that grew to 2,169 square feet, according to U.S. Census data. 

    As mortgage rates rise again, buyers who are priced out may be able to still jump in by purchasing a smaller home, according to Motley Fool. Home buyers may be lured to smaller homes constructed 30 or 40 years ago, which could require some remodeling. Your comments? 

    Source: “Higher Mortgage Rates Could Revitalize Smaller Home Sales,” The  Motley Fool (Sept. 2, 2013)

  • 'Loans to Consider' for Home Fixer-ups!

    Posted Under: Market Conditions in Shingle Springs, Home Buying in Shingle Springs, Financing in Shingle Springs  |  January 26, 2013 7:38 PM  |  707 views  |  2 comments

    Low housing inventory has resulted in a lack of move-in ready homes available for sale.  Many buyers, especially first time buyers, tend to overlook properties in need of extensive repairs, but a federally backed lending program enables buyers to roll the cost of necessary repairs into their mortgage, which can sometimes yield a quick return on investment.

    The Federal Housing Administration’s 203(k) program provides for loans that cover purchase and renovation costs for single-family homes and multifamilies with up to four units. The total loan amount is based on the property’s appraised value once the repairs are completed.  The down payment requirement is 3.5 percent.

    FHA 203(k) loans are not available to investors – borrowers must live in the properties.  But some borrowers have used a 203(k) loan to buy and renovate a multifamily property, live in the property for a year or so, refinance into a conventional loan, and then sell the rehabbed property.

    The loans are more expensive than conventional financing, because the interest rates are slightly higher and private mortgage insurance is required.
    Additionally, borrowers must pay a building consultant, who writes the initial estimate of the cost of planned repairs.  Fees range from $400 to $1,000, depending on the extent of the repairs.  The consultant also ensures that the repairs will bring the house up to government health and safety standards.

    The loans do not cover the addition of luxury items, such as a pool.  But allowances are made toward the cost of repairing or removing a pool, as well as for the addition of solar panels.

    Renovations must be made within six months after closing.  The contractor is paid in intervals after periodic inspections of how the work is progressing.  Borrowers should make sure they hire experienced contractors who understand that they won’t be paid upfront and must adhere to strict timelines.

    Read the full story at: http://www.nytimes.com/2013/01/20/realestate/mortgages-loans-for-fixeruppers.

  • More Buyers Feel the Urgency

    Posted Under: Market Conditions in Shingle Springs, Home Buying in Shingle Springs, Investment Properties in Shingle Springs  |  December 26, 2012 1:44 PM  |  706 views  |  No comments

    Home buyers are feeling more confident that the housing market is in recovery mode and they’re realizing they better act soon if they want to take advantage of low mortgage rates and home prices before they rise more. 

    Seventy percent of home buyers in 18 markets believe home prices will rise in their neighborhood within the next year, according to a new survey by Redfin of more than 1,000 home buyers.

    In the first quarter of the year, only 30 percent of home buyers said they believed prices would rise in the next 12 months. 

    Fifty-seven percent of the survey respondents said that the record low mortgage rates were a main reason to purchase a home soon. 

    Meanwhile, nearly 60 percent of home buyers said their chief concern about purchasing a home was the smaller number of homes to choose from nowadays. 

    “Redfin expects the 2013 home-buying season to kick off early in January with very strong demand, which, paired with low inventory, will cause prices to continue to rise steadily into spring,” according to the company. 

    The 18 markets participating in the survey were Atlanta, Austin, Baltimore, Boston, Chicago, Dallas, Denver, Los Angeles, New York, Orange County, Phoenix, Portland, Riverside/San Bernardino, Sacramento, San Diego, San Francisco, Seattle, and Washington.

    Source: “Homebuyers Feeling More Confident,” The Baltimore Sun (Dec. 20, 2012)

  • FHA Looks to Raise Mortgage Fees to Avoid Bailout?

    Posted Under: Financing in Shingle Springs, Property Q&A in Shingle Springs, Home Ownership in Shingle Springs  |  November 19, 2012 4:12 PM  |  684 views  |  No comments

    The Federal Housing Administration plans to raise its mortgage fees next year in order to help avoid a taxpayer bailout, the Obama administration announced. A report last week revealed the FHA, which insures mortgages, faces a $16.3 billion deficit due to a rise in mortgage delinquencies over the last few years, particularly among loans that originated during the housing bubble from 2007 through 2009. 

    FHA says it plans to raise its premiums on loans it guarantees by 10 basis points, which equates to about $13 per month extra to borrowers’ costs, Reuters reports. Also the FHA says it plans to increase short sales on loans it guarantees, in an effort to avoid more borrowers foreclosing on their properties.  

    FHA is a big contributor to first-time home buyer mortgage funding. It insures about 1.2 million mortgages, which is about 15 percent of all U.S. home loans. The number of loans it insures has increased dramatically over the last few years. In 2006, FHA insured just 5 percent of the all U.S. home loans. 

    FHA is federally mandated to maintain a 2 percent capital ratio—a target it has yet to reach in four years. Its current ratio is negative 1.44 percent, according to a recent audit of its finances. 

    "The administration will do its best not to have FHA make a Treasury draw," Cliff Rossi of the University of Maryland's business school and a former employee at Fannie Mae, Freddie Mac, and Citigroup told Reuters. "Some sort of sleight of hand, they will get creative as they want to be, and likely avoid getting in a payment from Treasury."

    Source: “FHA to Shore Up Cash in Bid to Stave Off Bailout,” Reuters (Nov. 16, 2012)

  • Mortgage Rates this week “Near Record Lows”

    Posted Under: Market Conditions in Shingle Springs, Home Buying in Shingle Springs, Financing in Shingle Springs  |  September 7, 2012 3:35 PM  |  712 views  |  No comments

    Great news update to share! Interest rates for home mortgages continued to hover near all-time lows, keeping home buyer affordability high.

    Freddie Mac reports the following averages in this week’s mortgage market survey:

    •30-year fixed-rate mortgages: averaged 3.55 percent, with an average 0.7 point, dropping from last week’s 3.59 percent average. A year ago at this time, 30-year rates averaged 4.12 percent.

    •15-year fixed-rate mortgages: averaged 2.86 percent, with an average 0.6 point, holding steady from last week’s average. A year ago, 15-year rates averaged 3.33 percent.

    •5-year adjustable-rate mortgages: averaged 2.75 percent, with an average 0.7 point, dropping from last week’s 2.78 percent average. Last year at this time, 5-year ARMs averaged 2.96 percent.

    Source: Freddie Mac

  • Long-Term Homeownership Does Foster Civic Engagement

    Posted Under: Quality of Life in Shingle Springs, Market Conditions in Shingle Springs, Home Buying in Shingle Springs  |  August 23, 2012 3:55 PM  |  775 views  |  No comments

    Researchers in the upcoming September issue of the Urban Affairs Review examine data collected from a group of low- and mid-income homeowners and renters over four years to determine if owning a home inspires more people to get involved with the community.

    They found that this is indeed the case so long as the ownership is sustained. The study assumed civic engagement stems from three overarching factors: rates of mobility, financial self-interest and more general self-interests such as neighborhood amenities and social ties. Of those three, mobility -- how often one moves or stays put -- was deemed the strongest.

    Source: "Long-Term Homeownership Does Foster Civic Engagement," Greater Greater Washington (08/21/12)

  • Rents increase as vacancies decrease!

    Posted Under: Market Conditions in Shingle Springs, Rental Basics in Shingle Springs, Rent vs Buy in Shingle Springs  |  July 16, 2012 12:59 PM  |  928 views  |  No comments
    Despite the sluggish economy, average rents increased in all 82 markets tracked by Reis Inc., a real estate data firm.  Average rents are now at record levels in 74 of those markets and now top $1,000 a month on average in 27 of them.

    The nation's vacancy rate fell during the quarter to 4.7%, its lowest level since the end of 2001, Reis said. That's down from 4.9% in the first quarter of this year and from 8% in 2009, when millions of would-be renters were doubling up or living with family.

    Read the full story at: http://online.wsj.com/article/SB10001424052702303933404577505260835025948.html?mod=WSJ_RealEstate_LeftTopNews
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