More on the
Numbers ....
Last week we
compared the gains for the stock market and housing over the past 20 years. The
moral of the story was that numbers can be deceiving in the short-run, but in
the long-run, the gains are easy to see. However, one may look at the fact that
the Dow is up 400% over twenty years and house prices up 120% over twenty years
and conclude that their money should go into the stock market. That was not
intended to be our message. For one, a home is more than an investment, it is
your home. Secondly, the numbers presented do not take into account the
investments requirement to purchase the asset. For example, stocks may cost
100% of their value. Even if you are able to purchase stocks "on margin,"
they would still likely cost at least 50% of the value.
Homes may be
able to be purchased for as little as 3.5% to 10% down. Therefore, the return
on money invested may actually be greater with regard to housing -- especially
considering the tax deduction on mortgage interest and the fact that you are
replacing rental expense. We are not saying that housing is a better investment
than stocks. We are only again making the point that the numbers can be
deceiving. In this case 400% to 120% is not an "apples-to-apples"
comparison. Speaking of numbers, the employment report released on Friday was
pretty interesting. The number of jobs created was much less than expected. One
bad month does not derail a recovery, but does mean that the increase in the
stock market and rates may have gone a bit too far too fast. Stocks did not
retract that much, but rates have again moved lower. This creates another
opportunity -- perhaps temporary -- for those who are purchasing or refinancing
real estate.
The Millennial generation is about 90 million strong—forming the largest demographic wave in the country’s history—and some reports suggest they’re readying for home ownership. Millennials’ entrance into home ownership has been delayed due to the recession, high unemployment, and high student loan debt. They’ve been living in their parents’ homes, as well as delaying marriage and having children, surveys show. But the pent-up demand from this generation is starting to surface, says Fred Ehle, vice president for PulteGroup. Homebuilders, like PulteGroup and Better Homes and Gardens Real Estate, recently revealed surveys of what Millennials want in their future homes. In general, the surveys reveal that this generation isn’t wowed by luxury and prefers technology and flexible space. As for what they’re looking for in a home, they appreciate an efficient use of space, an open layout for entertaining, ample storage space, and outdoor space that extends their living areas, according to the Pulte survey of 531 adult renters between the ages of 18 and 34. "What may be different about this buyer is that they may have more stuff," says Fred Ehle, vice president for PulteGroup. "It's different kind of stuff: technological gadgets, gaming. They also do work from home." The Better Homes and Gardens survey of 1,000 adults ages 18 to 35 found that Millennials don’t like traditional floor plans and prefer unique spaces. They like to do home improvements themselves and are “fix-it” types. One in five said that “home office” is a better suited name for their dining room, according to the Better Homes and Gardens survey. What’s more, 43 percent said they want to transform their living room into a home theater. The survey also showed they’d rather have extra space in their kitchen for a TV than a second oven. Nearly two-thirds of those surveyed say they wouldn’t purchase a home without up-to-date tech capabilities. Source: USA Today
Low appraisals
have been blamed on delaying—or even canceling—many real estate transactions
over the last few years. While real estate professionals are limited in how
much involvement they can have in the appraisal process, they can do a few
important things to help ensure their sellers receive a fair valuation.
·
Be there. Appraisers and other real estate agents say that being
present at the home’s appraisal is important. Agents can respond to any
possible questions the appraiser might have as he or she is valuing the
property. However, agents need to make sure they don’t overstep their
boundaries. Rules limit contact between agents and appraisers.
·
Provide extra information. Michael Citron of Coconut Creek, Fla.,
says he gives appraisers packages of information that include comparable sales
as well as a list of the home’s upgrades and amenities within the development.
Others also recommend that any information include the dates that renovations
took place, permits for additions, and even receipts for the work (if
available).
“You don’t want
things to be missed that may result in a higher value,” says appraiser Scott
Dooley in Fort Lauderdale, Fla. Source: RISMedia
A new credit
scoring model will potentially boost scores for many credit applicants and help
establish credit for millions of people who previously had little or no credit
history. The new scoring model will be used in the latest version of the
VantageScore, the credit score created by the three major credit bureaus --
Experian, Equifax and TransUnion. Currently, debts that go into collections,
even if they are paid off, are factored into all credit scores for up to seven
years, said John Ulzheimer, president of consumer education for
SmartCredit.com. But VantageScore 3.0 will no longer factor these accounts into
a consumer's score if the debt was paid in full or settled, just as long as the
balance is zero. Also, natural disaster victims will now be able to benefit
from good credit behaviors -- like making payments on time, despite the hardship
-- but will continue to be protected against negative accounts. Previously,
both negative and positive accounts were ignored in the aftermath of natural
disasters, making it difficult for victims to improve their credit scores.
"Consumers who have a zero-dollar balance on collections and no other
negative information on their credit reports should see their VantageScore's
increase significantly," he said. But the boost only matters if a lender
uses the new VantageScore. While FICO is still the most widely used scoring
model, the VantageScore is gaining ground. It's currently used by seven of the
top 10 financial institutions, six of the top 10 credit card issuers and four
of the leading auto lenders and residential finance lenders, according to its
website. VantageScore's new model will also weigh rent and utility payment
records, and public records like bankruptcies for people with very limited
credit histories. This will allow it to score as many as 30 million people who
previously couldn't get a credit score, and potentially help them qualify for
more competitive credit rates, said Ulzheimer. Other score developers, like
FICO, may follow suit. FICO announced that it will begin looking into ways of
factoring in alternative records to calculate scores for those without -- or
with limited -- credit files. Meanwhile, VantageScore is changing its scoring
range to align with FICO's 300 to 850 range. Earlier versions range from 501 to
990, often causing confusion for consumers and lenders since most are more familiar
with FICO's range. "This is like changing your speedometer from kilometers
per hour to miles per hour, it just makes more sense to American consumers and
American lenders," said Ulzheimer. Source: CNN/Money
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