2010 real estate predictions

I hope everybody had a nice holiday.  I can’t believe that the first decade of the 2000s is already coming to a close.  We definitely had some real estate “ups,” but more recently, some mega “downs.”  I figured this would be the perfect week to talk about some of the predictions for real estate for next year, as well as what some experts predict.

CNBC is predicting a lot more foreclosures than what was previously expected.  They think that homeowners will continue to struggle with mortgage payments and the banks will end up owning the property.  While that can cause a delay in getting approval for a buyer to come in and buy the property, hopefully Obama’s new short sale reform proposal should give us timely responses. 

CNBC also doesn’t think there will be any super low interest rates for borrowers to finance a mortgage.  They’re not thinking they’ll be through the roof, either.  Most likely, they say, they’ll level off around 6%.  This is still reasonably low, considering that in the ’80s the rates were around 20% or higher.

About.com is predicting that home prices will stabilize.  They think that prices will remain steady, with a few cities having some appreciation and some more depreciation, but that prices and the market shouldn’t completely bottom out. 

Similar to CNBC, they think that mortgage refinancing will take a big dip in 2010.  With interest rates on the rise and people losing equity in their homes, it will be hard to make a refinance worthwhile to many homeowners.  However, if you are on an ARM, interest-only loan, or have a rate higher than 6.5%, it’s definitely worth talking to a broker about your refinancing options, especially if your ARM is coming due or you’re not paying any principal on a monthly basis.

Since lenders are requiring better credit scores and are very particular about financing options, it is more likely that move-up buyers will indeed move up.  A lot will stay put when they realize it will be hard to come up with a significant down payment on a new home.  This could clear the inventory out a little, if it’s not bombarded with more and more short sales and foreclosures.

What do you see happening in 2010?  Do you think housing prices will slowly work their way up?  Do you expect Obama’s short sale proposal to come into effect?  I’d love to hear your thoughts.  And if you are thinking about buying, don’t forget that the $8,000 tax credit expires April 30th.  So the first quarter of the year is your best chance to buy.  Please leave me a comment or visit me online.

Have a very safe and Happy New Year.  See you in 2010!!

Should you try to pay your mortgage off early?

Even in this economy, people are struggling with how to get rid of their accumulating debt.  If they have extra money at the end of the month, they’re wondering if they should try to pay down their mortgage debt.  The biggest bonus to paying down your mortgage faster is to get peace of mind.  No moe huge monthly payments.  They tell you that with interest, by the end of the 30 years (or whatever term you’ve agreed to with your lender) you can end up paying 3x what you paid for your house, just because of the huge monthly interest.  How nice would it be to be done with the biggest debt of them all?

Don’t go grabbing your checkbook yet.  If you’ve been struggling with mortgage payments and are on the verge of foreclosure, don’t go putting any extra money toward your mortgage.  The lender could choose to foreclose on you anyway, and you won’t get that money back.  If you are underwater and you have some extra money laying around, your best bet is to put it away in a savings account or a money market – somewhere you can have it available at the snap of a finger should you need it for an emergency.

If you’re not underwater on your loan, but still have extra money, you will want to start tackling debt.  However, look at the debt that has the highest interest rate.  This is usually credit cards.  You’ll want to contribute extra money each month toward credit card debt first.  Do you have car loans?  Student loans?  Personal loans?  When you think about it, mortgage loans generally have some of the lowest interest rates – usually under 7%. 

If you have no other debt and have an emergency fund of at least 6 months (enough savings to cover the cost of living for 6 months should you or a spouse lose a job), then do you consider paying down your mortgage?  You can … however, there is at least one benefit to having a mortgage on your house.  It can be a great tax deduction.  Mortgage interest you pay every year is tax deductible. 

Make sure you have adequate life insurance policies, especially if you have others depending on you (aged parents, spouse, children).  If you have children that haven’t reached college age yet, start putting money away for school.  Do you have any money saved for retirement?  You won’t want to be working in order to feed yourself when you’re in your retirement years.  Make sure you’re contributing money toward a retirement fund.

If you have all of those categories satisfied, you might consider putting a little extra toward your mortgage each month.  If you’re only doing it for the peace of mind, though, it’s probably not worth it.  It’s best to consult with a certified financial advisor about how best to use your money.  Some other great ideas can be found in this MSN article.

 Have a wonderful holiday and be sure to visit me online.

Government proposal to help with short sales

If you’ve been a buyer looking to purchase a home and put an offer in on a short sale, you know that the paperwork and the wait times can be excruciating.  I’ve seen cases where buyers have had to wait months – as many as 6 – to hear from the lender about whether the short sale has been approved.  The Obama administration is working on a new proposal that would help streamline the short sale process and hopes to roll it out over the next few months.

As a reminder, a short sale is when the lender is willing to accept a less amount of money for the property than what is currently owed.  The lender needs to determine if they will make more money this way than if the home went into foreclosure by the homeowner no longer making payments and then being able to resell it.  This is what can lead to extremely long wait times. 

So what the government is proposing is quicker turnaround times.  They haven’t named a figure yet, but hopefully it will be a maximum of X number of days to get a response from the lender.  They’re also proposing uniform documents required by everyone.  No more specific paperwork for each lender that makes each short sale request different.  They’re proposing to pre-approved short sale terms.  This has the potential to mean that it will be accepted no matter what if it meets a certain percentage back to the lender or if the buyer has a certain amount of financing covered.  That’s still up in the air.

The proposal also includes financial incentives for everyone who takes part.  This includes $1,500 back to the homeowners to help out with relocation costs and having to move.  So a benefit to having to short sale your house will help a lot of people out.  Especially if they need to rent right away and don’t have any money at their fingertips.

Mortgage servicers would earn $1,000.  Investors purchasing the home would get $1,000.  That can help with a lot of remodeling costs, if they’re needed.  Even real estate agents wouldn’t be forced to cut their commission if the bank asked them to.  We’re still waiting to see all the details related to the plan, but the news seems positive thus far.  A streamlined process and money for all involved … what’s the negative?

I’d love to hear your thoughts on this.  Please leave me a comment or visit me online.  More info can be found here.

How to choose between hardwood and laminate floors

I’m working with clients who have severe allergies but the house they love is covered in carpet.  Because it’s such a good deal, they want to make an offer.  However, they plan on replacing all the carpet with either laminate or wood flooring before they move in.  They’re torn about what to buy.  So I figured this would be a great reason to list the pros and cons of both hardwood and laminate flooring to help others out there with the same decision.

Let’s start with laminate.  You may often here the term “Pergo,” which is a brand of laminate flooring.  Designed to look like wood, these floors can save you a lot of money.  They’re a lot less expensive than traditional hardwood.  Another bonus to save money with laminate is that you can install it yourself.  A lot of laminate comes in snap and lock pieces, so you don’t have to absorb the cost of paying a professional.  This flooring is extremely easy to clean and doesn’t dent or scratch like hardwood can.

Of course, the negatives have it not being as durable as hardwood.  Since it’s a fairly new product, we don’t know how it stands the test of time in the long run.  It can warp when exposed to water and moisture over a long period of time.   So it’s not so great in the bathroom.  It’s not as sound absorbent as hardwood.  And a lot of people don’t feel it’s as “cozy” as hardwood flooring is.

Hardwood floors can look great in any home and there’s a variety of finishes and styles to match any room.  Generally, hardwood floors can increase the value of your home.  They’re very durable and easy to clean.  And it acts as an insulator, meant to hold in heat.  If you walk barefoot, you can feel the difference between a real hardwood and  laminate.

Of course, there’s some downsides, too.  They can dent and scratch easily.  If you have pets with claws, this might not be the best option.  Don’t move furniture around without something to protect the floors.  You really can’t pull the scratches out.  You’ll have to refinish the floors.  And if they’re not sound-insulated, they can be noisier than laminate.  Plus they’re generally a lot more expensive.

If you do choose real hardwood, you’ll need to choose between pine, maple, birch, bamboo, oak, mahogany, and a handful of others.  Your best bet is to talk to someone in the flooring department at your local hardware store.  You can also find a great set of resources online, including here and here.

Please visit me online for assistance in buying or selling a home.