real estate market

January 15, 2014

What Buyers Want to Know About Mortgages

We have spent the last couple of years in a buyer paradise.  Interest rates on mortgages have been at historical lows, going as low as 3 %.  The winds are shifting and we are anticipating mortgage rates to increase to 5%-6% by this time in 2015.  Buyers should also be aware that new regulations are going into effect in 2014, and some lenders are implementing new standards for approving loan applications.

My White Plains, Coldwell Banker Office is have a meeting tomorrow January 16th 2014 just to discuss mortgages. Agents are fielding many questions about what buyers should anticipate in terms of interest rates for 2014, how the new mortgage guidelines will affect buyers, what kind of credit will be available, and how changes to interest rates and availability of loans will affect home sales.   We are having expert mortgage representatives explain what to expect in 2014.

Since there is a wide range of information we could obtain, I want to know what YOU, the consumer, are confused about when it comes to mortgages, what you would like more information about, and what mortgage interest rates mean for you.

Leave me a comment and I will be sure to find the answers for you!

January 9, 2014

Mortgage Outlook for 2014

3 Things you should look out for in 2014 are:

  • Starting January 10th there will be no more interest only loans
  • Interest rates are going to be lower in early 2014 (January, February) than they were in November, December 2013
  • Interest rates will increase beginning in June and could reach 5% by this time next year

There are many changes going in affect in 2014 regarding home loans.  One of them is that starting Friday January 10th there will be no more interest only loans.  I am also hearing that credit will tighten slightly and standards for qualifying mortgage and ability to repay will take place. More about that at a later date.

As we all suspected, interest rates can not stay at 4% much longer.  I was speaking with a trusted mortgage colleague of mine, Robert Withers who has advised me that mortgage rates will drop slightly in the beginning of 2014, but will be on the rise by summer.  Robert had told me back in December that we were going to see a drop in rates in January due to poor retail performance during the holiday season.  This has come to fruition.  I am starting to see interest rates drop slightly already and we are only 9 days into 2014.

The drop in rates is only temporary. What does this mean for buyers?  If possible you should lock in your rates now. By the height of the spring/summer market rates will start climbing.  The reasoning for the higher rates is the FED will be pulling back on their mortgage buy back program, naturally allowing for interest rates to climb.  For buyers, you will see higher rates and also stricter guidelines for qualifying for a mortgage. Stricter does not mean that it will be impossible to get a mortgage, in fact the opposite, most people with good credit will still qualify, however lenders will be less forgiving if you fall even slightly below their guidelines.

What should you take away from this? If you are on the fence about buying, jump off! Get out there and try to lock in the low interest rates.  Same goes for people who are on the edge of being approved for a loan based on criteria like credit score or liquid assets.

2014 will be equal if not better than 2013 for the real estate industry.  You just need to make sure you have all the facts so you can make a more educated decision.

January 2, 2014

What is a CMA and why do I need one?

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When I first talk to perspective sellers I let them know that I will need to do a CMA on their home before I can tell them an appropriate list price for their home. The first questions I get back is always, “What is a CMA?”

A CMA is a Comparative Market Analysis.  In order to determine what your home is “worth” to prospective buyers, an agent needs to see what your neighborhood market is commanding.  As a seller you should be aware of what goes into a CMA (Comparative Market Analysis) so you can be better prepared for the results.

1. The style of your home – Each area has a favorite style of home.  Most buyers in Westchester County that I’ve worked with are interested in a colonial style home. If your home is a colonial in Westchester it could command a higher price because there is more demand for that style of home.  If the style of home in your area is mostly ranch style and your home is a ranch style home then buyers are more likely to be aware of the fact and your home’s value may not be as affected as it would be if it were in a neighborhood with mostly colonial style homes. Know that if your home is a unique or less desirable style that your asking price will have to reflect the lack of demand.

2. Condition – I know everyone believes that their home is in tip top condition, but unfortunately that isn’t always true. You may love your 1950’s kitchen because of the memories it holds for you, however be aware that it can affect the asking price of your home. You are either going to have to find that niche buyer who wants a 50’s style kitchen or a buyer who is willing to do the work to update the kitchen.  Also if your roof has not been done in 20 years expect a lower value of your home because buyers are going to want a lower price since they know they will have a large cost coming.  Buyers are savvy and will not pay top dollar for a home that needs repairs or updates because they know they will not recoup the cost of updates and repairs.

3. Location – Westchester County is a great microcosm to see that location plays a large role in home prices. Generally home prices in Westchester are higher than the nationals average due to our close proximity to New York City. In addition home prices rise in areas with high school system ratings.  Schools are usually a high priority for buyers making this a significant factor in pricing your home.

4. Number of bedrooms – Every home comes with a CO or Certificate of Occupancy. On the CO the town/city/village indicates how many bedrooms your home has. Even though you may be using 4 rooms as bedrooms, if your CO only reads 3 bedrooms it can only be marketed as a 3 bedroom and can lower the value of your home.

5. What has sold or about to sell – Real estate agents have the ability to see what is in contract in your area and what has sold. From there were can find out what list price was of the homes in contract or sold and what the final sale price was.  This will be an indicator of what buyers are willing to pay for a home in your area.

Now that you know what factors go into a CMA, the question is why do you need one? The answer is simple, you need to know what the market is going to command. You may have paid $800,000 for a house in 2004 and want to sell for $900,000, but the market has changed since then and you need to know that buyers in your neighborhood are only willing to pay $700,000 for your home.  Knowing this from the onset will not only manage your expectations but will also allow you to make better financial decisions for your family.  If there is not a way you can pay off the remainder of your original mortgage with a sale price of $700,000 then it may be better not to sell your home if possible. If you are moving and have to sell for a loss you will be better able to plan for how you will fund your future home.

A CMA from a licensed real estate associate broker is always going to be more accurate than the estimates you find online, because brokers are better able to look at the details of your home than an algorithm will be.  I always suggest looking at a few CMA’s from a few brokers. You not only will confirmation of the price range your home can be listed for, but you can also spot that agent who has less knowledge about the market.

December 16, 2013

Zillow’s New Neighborhood Section May Be Misleading

I have been reading and hearing a lot lately about Zillow’s new Neighborhood Market Health Section of their website.  As a real estate professional I think this new section may mislead the public about the actual health of their local real estate market.

Here are the facts.  Zillow is basing the health of an area on the below 10 factors according to Teka Wiggin of Inman news:

  1. Month-over-month change in the Zillow Home Value Index (ZHVI).
  2. Year-over-year change in ZHVI.
  3. Percent change in one-year ZHVI forecast.
  4. Percentage of homes selling for a gain.
  5. The number of days listings spend on Zillow, adjusted for seasonality and for deviations from historic norms.
  6. The percentage of mortgage holders with negative equity.
  7. The percentage of mortgage holders delinquent on their loans.
  8. The number of foreclosures out of 10,000 homes.
  9. The percentage of sales composed of previously foreclosed homes.
  10. The number of foreclosures out of 10,000 still held by banks.

However, the health of an area can be based on only 5 of these factors if Zillow doesn’t have all 10.  Zillow will also not cover every area of the United States, they will only cover areas that they can compare to 3 other markets.

Here is why the information can be misleading.  Your area may have a low score because it is surrounded by highly productive markets.  Since you score is based off the comparison of what Zillow is calling similar markets, your neighborhood’s score can be low.  Your neighborhood’s low score is then not a reflection of a poor market, but rather a market that is less healthy than an above average market. Zillow seems to be aware that the scoring can be confusing.  On their own press release for the new section they said “a low Market Health Index score does not necessarily indicate that a market is performing poorly, only that other markets are experiencing factors like higher home value appreciation or lower foreclosure activity.” Though Zillow is using many indicators and is right to compare surrounding markets to get more accurate information, that does not mean that the results are easy to understand. Users need to be keenly aware that they need to dig deeper into the results and not take them for face value.

Also, Zillow may not have access to all the sale data when compiling their scores.  Zillow is not privy to every home sold, they only have access to the public information and the information they gather from real estate agents.  For example Zillow does not even have record that a property I just sold in Hartsdale even exists, let alone was sold.  Since they don’t have a record of my listing even existing they can’t know if the home sold for a gain or loss or the number of days it was listed for. I’m sure this was not a one off property as I have seen this many times with my own listings.  It is important to know that data is missing when Zillow compiles the scores so you understand that there is a variation from what Zillow is saying the health of your neighborhood is to what the actual market is saying the health of your neighborhood is.

Overall just remember that like Zestimates, the Zillow Neighborhood Health Section should be used as a jumping off point.  Your local real estate professional will have more accurate data information from their Multiple Listing Service as well as advise about how the market is looking in your area.  Zillow may be able to tell you what your neighborhood is experiences at this very moment, but they won’t be able to advise you on what real estate professionals are seeing and expecting for the future of your market.