Archives for category: Home Improvements

Downsizing is not necessarily settling for less.  Several of our homeowners recently decided that they didn’t need as large a home now that their children have left.  Their lifestyle has changed, and includes traveling and visiting friends and family from time to time, leaving their home in some cases for several weeks at a time.  As they evaluated their options, several of our clients chose to move to the Wilshire Corridor and Ocean Avenue where there are condominiums, making it is easier to lock up and easily leave.  One of our other clients chose to buy a contemporary home in Pacific Palisades in a community that better suits their needs with a smaller yard and beautiful ocean views.  In each and every case that our clients decided to downsize, there was not a sacrifice made; in fact, there was an upgrade and a positive change in lifestyle.

If you are interested in possibly buying a newer home that is more streamlined to your current lifestyle, please let us know.  You can choose a contemporary style or one with ocean views.  You may decide that a condo is perfect for your lifestyle, or perhaps you may decide to move out of town where there is less traffic and an environment that caters to a slower lifestyle.  If you appreciate beautiful gardens and tranquil views, we have some selections in mind.  Remember, downsizing need not require the thought of stepping down, but in fact is the opportunity to step up while minimizing your financial commitment at the same time.

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The numbers report for the home-building industry couldn’t have been more grim in February: New-home construction in the U.S. fell to a pace that would translate to about 250,000 homes for all of 2011, which would be the fewest built since the Commerce Department began keeping track in 1963.

If home building isn’t dead, there’s certainly time to think about what it would look like when it revives, perhaps from 2013 to 2015. That’s according to John McIlwain, a senior fellow at the Urban Land Institute in Washington, which studies trends in housing and development.

McIlwain regularly talks with builders and developers across the country. He expects that when home building once again is flourishing, the big master-planned subdivision that was the face of residential construction for so long won’t have disappeared, but it will look different and be restyled to appeal to a broader array of buyers, especially those who have little in common with the old notion of “a family equals two parents with two kids.”

He talked about what he sees ahead:

Is the big master-planned community dead?

It’s not dead, but it depends on where you are in this country. There are very, very few subdivisions being started, because, by and large, there’s no financing for land development. Prices have come down, but it’s pretty hard for developers to go out and borrow to buy land.

Some developers are taking new approaches to building out their existing communities. They’re selling sections of land to builders in smaller chunks. Instead of saying, “Why don’t you take 500 lots?” as they once did, they’re saying, “Take 50 lots and target them for one particular market, such as empty-nesters.”

To whom are they marketing these chunks?

These builders and developers are beginning to think more in terms of life cycle than in terms of first-time buyer or move-up buyer, etc.

One group is empty-nesters in their late 50s and early 60s who are going to continue to work. They don’t want a big home, but one that’s open and wired and has high ceilings, which helps to visually compensate for the smaller spaces.

Older baby boomers, 56 to 65, haven’t really started to come to grips with aging, but they will in the next five years. They’re going to want a one-story home or an elevator for a two-story.

And home buyers today are more diverse than they have been. Builders should consider marketing to single women, some with kids and some without. Or to two women, offering them two equal master bedrooms.

There’s going to be a need for multigenerational spaces that can accommodate grandparents, adult children and young grandchildren. This is going to be particularly in demand where there is heavy Latino and Asian buying.

What about the houses themselves? Do you buy into the notion that we’re over the McMansion phase and desirous of something compact?

I think you’re right to be skeptical of some kind of fundamental cultural shift for Americans. For post-World War II Americans, it was decades of “I want to express my success with bigger cars, bigger TVs and bigger homes.”

But the median size of new homes already is steady or dropping. Smaller lots already have become acceptable because people don’t have time to take care of them.

With younger adults who may be buying in a few years, longer-term, this generation isn’t going to be able to afford bigger, bigger, bigger. Financial conservatism is replacing the go-for-broke house. These buyers will be willing to trade the over-the-top features that used to be put in just for resale value in exchange for flexible, open spaces that are energy-efficient. And they do want to be able to work at home, with wired and wireless connectivity. (LA Times)

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Sales of U.S. previously owned homes rose in March as a mounting supply of properties in or near foreclosure lured investors.

Purchases increased 3.7 percent to a 5.1 million annual rate, exceeding the 5 million median forecast of economists surveyed by Bloomberg News, figures from the National Association of Realtors showed today in Washington. All-cash deals accounted for 35 percent of transactions, the most on record, the group said.

Unemployment, falling property values and stricter loan rules may push the number of households losing their homes to a record level this year, a sign the market will take time to recover. Even with last month’s gains, housing may remain a weak component in the economic recovery that began in June 2009.

“We continue to just tread water along the bottom,” said John Herrmann, a senior fixed-income strategist at State Street Global Markets LLC in Boston. “The housing market is fairly depressed. We think home prices will fall further.”

Stocks climbed as sales at companies from Intel Corp. to Yahoo! Inc. exceeded estimates and commodity producers gained. The Standard & Poor’s 500 Index rose 1.3 percent to 1,329.69 at 12:37 p.m. in New York.

Estimates for March existing home sales ranged from 4.59 million to 5.4 million, according to the median of 74 forecasts in the Bloomberg survey.

Paying Cash

The share of all-cash transactions is the highest since monthly tracking began in August 2008, Lawrence Yun, chief economist at the Realtors’ association, said at a news conference today in Washington. Yearly figures before 2008 showed the share at about 10 percent, Yun said.

Distressed properties, which include foreclosures and short sales, accounted for 40 percent of all deals last month, according to Yun. Purchases by investors climbed to 22 percent of transactions last month, up from 19 percent in February.

“This is part of the cleansing process that needs to occur,” Yun said, referring to distressed sales. “Home sales are strongest in the very-low price range” of less than $100,000, he said, reflecting the increase in demand by investors paying in cash.

Sales rose in three of four U.S. regions in March, led by an 8.2 percent gain in the South. The West fell 0.8 percent.

The median sales price fell 5.9 percent from March 2010 to $159,600 last month as less-expensive properties became a bigger share of the market. Sales of houses priced at $100,000 or less were up 9.6 percent from March 2010, compared with a 6.3 percent drop for the market as a whole, the report showed.

More Supply

The number of previously owned homes for sale climbed to 3.55 million. At the current sales pace, it would take 8.4 months to sell those houses compared with 8.5 at the end of the prior month. Supply in the eight months to nine months range is consistent with stable home prices, the group has said.

Federal Reserve officials, in a statement following their March 15 monetary policy meeting, said that while the “economic recovery is on a firmer footing,” residential real estate is still “depressed.” The central-bank committee is scheduled to next meet April 26-27 in Washington.

Home prices dropped in the 12 months to January by the most in more than a year, according to the S&P/Case-Shiller index of home values. In 20 cities, prices fell 3.1 percent, the biggest year-over-year decrease since December 2009, the group said March 29.

Foreclosures

Some underlying home values are less than the mortgages on the properties. CoreLogic Inc. last month estimated that about 1.8 million homes were delinquent or in foreclosure, a so-called “shadow inventory” set to add to the 3.5 million existing homes already on the market.

Cheaper homes and distressed properties are making homebuilders pessimistic. Builders overall are not optimistic. The National Association of Home Builders’ confidence fell to 16 this month, according to the group’s gauge released this week. A reading under 50 means a majority of builders view conditions as poor.

KB Home, the Los Angeles-based homebuilder that targets first-time buyers, this month reported a bigger-than-expected loss for the quarter ended Feb. 28 as orders plunged.

“We do not anticipate a net profit for 2011,” Chief Executive Officer Jeffrey Mezger said during a conference call with analysts on April 5. “The economy is continuing to improve. Even so, this recovery has yet to include significant job growth and has not spilled over into housing.” (Bloomberg)

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The home-improvement sector, already benefiting from spending on rehabilitating foreclosed properties, can be expected to get an even larger boost in the coming months from owners who have deferred maintenance during the recession and newly minted empty nesters who want to turn Buffy’s bedroom into a home office.

But the question is, how are you going to pay for that new roof you needed two years ago or that kitchen remodel you’ve been yearning for since the kids left the roost?

Turns out there are still options available. There just aren’t as many of them, and with the exception of one tried-and-true alternative — a government-insured rehabilitation loan — the terms are somewhat more onerous than they were during the housing boom.

Of course, you can always rob your savings to pay for your home improvement. But that assumes you have enough cash socked away to cover the cost and still have some left over to pay for at least six months’ worth of living expenses in case you find yourself out of work or hit with a major illness.

If your credit is good enough and you have a strong, long-term relationship with your bank, you might want to consider a personal loan. Your signature, not the property, secures such loans, and the fees tend to be lower than other loan choices. But the rates are high, and the interest you pay is not tax deductible.

If you still have some equity in your place, you can borrow against that, either as a straight loan or as a line of credit that you can tap as the need arises. But even if you own your home free and clear without any encumbrances whatsoever or have a low-balance mortgage, you might be surprised how much less your home is worth than you realize.

According to the Federal Housing Finance Agency, owners lost more than half their equity from 2006, when the housing market began its free fall, to 2009. That’s when the economic recession ended, but not the housing recession. And according to some estimates, the bleeding hasn’t stopped yet, especially in markets where foreclosures and short sales still dominate.

Even if you have enough equity to borrow against, it’s going to be difficult to find a lender. It’s not as hard as it was, say, 12 months ago, but the home-equity business is far different from what it was during the go-go years when lenders often were glad to lend more than 100% of a home’s value.

One viable option, however, is the FHA 203(k) rehab mortgage.

This is the Federal Housing Administration’s rehabilitation mortgage. It has been a hot ticket for investors who are picking up distressed properties because it allows them to roll both the price of the house and the cost to make it habitable or marketable into a single loan. And some foreclosures are in woefully bad shape.

But regular buyers also can use the 203(k), especially if they want to do some work before moving in. And more important, current owners can use it as a refinancing tool to incorporate the cost of their home improvements into a brand-new first mortgage.

The FHA doesn’t make 203(k) loans directly. Rather, it insures loans made by primary lenders against the possibility that the borrower will not make his payments as promised. So you’ll have to search for a lender in your neck of the woods who is familiar with the product. But once you find one, you’ll discover that the guidelines are extremely liberal.

For example, there is no limit on how much you can spend on your improvements. As long as the total loan amount does not exceed the FHA maximum, you are good to go. The current FHA ceiling ranges from $271,050 to as much as $729,750 in the country’s high-cost areas. (For the maximum loan amount in your area, go to http://www.fha.gov.)

On Oct. 1, though, the ceiling in expensive markets such as California and Massachusetts is scheduled to revert to the old maximum of $625,500. And the Obama administration has signaled that the high-cost ceiling may be whittled down even further. In addition, the FHA’s annual insurance premium will be increased with the start of the next fiscal year.

As long as the “as improved” appraised value of your property — that is, the value of the house plus the value of the improvements — does not exceed the maximum loan amount, almost anything goes. Only luxury items are verboten, says Jim Ragan, who manages the 203(k) program for Bank of America Home Loans.

“You can’t build Bobby Flay’s outdoor kitchen or a swimming pool,” Ragan says. “But other than that, practically anything else is permitted.”

Actually, the extent of the project can range from something relatively modest to a virtual reconstruction. The cost must exceed $5,000. But as long as the existing foundation remains in place, you can tear down the house and rebuild it if you so choose. Even such “soft” costs as inspection fees, architectural fees, closing costs and permits can be included.

The formula for how much you can borrow is fairly straightforward. The maximum loan amount (subject to the aforementioned ceilings) is 97.75% of the improved value of the property.

If the appraiser says your project will add $125,000 in value to your $300,000 home, then you can borrow $415,438.

Better yet, there is no requirement for a reappraisal once the work is finished. Only a single up-front valuation is necessary.

(Los Angeles Times)

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