September 2012 interest rates!!

Buying A Home Is 45% Cheaper than Renting

The most important housing decision that most consumers face is whether to rent or to buy. So to help them with this decision, we took a look at the key market factors affecting the cost of homeownership.  First off, asking home prices have started to rebound and have risen by 2.3% year over year in August (3.8% excluding foreclosures); however, rents have risen more (4.7%). This means that prices are lower relative to rents than they were a year ago. But more importantly, mortgage rates have fallen: the best rates this summer have been around 3.5%, while last summer rates were closer to 4.5%. Based on asking prices and rents during the summer of 2012, buying is now 45% cheaper than renting in the 100 largest U.S. metros, on average ??? that???s a savings of $771 a month. If you plan to stay in a home for 7 years, which is the average time that Americans traditionally live in a home before moving again, it is more affordable to buy than to rent in ALL of the 100 largest metros in the U.S.

Costs aside, the decision to rent or buy a home is very personal. There???s a strong emotional component: some people want the security of homeownership and others want the footloose freedom of renting. But the financial factors are also very personal because the decision to rent or buy depends on:

1. Can you qualify for a mortgage at the best rate available?
2. Which tax bracket are you in, and do you itemize your deductions?
3. How long will you stay in your home?

To calculate whether renting or buying costs less, we assume people can get a low mortgage rate of 3.5%, itemize their federal tax deductions and are in the 25% tax bracket, and will stay in their home for seven years. (Below, we???ll show how changing these assumptions can affect the rent-versus-buy math.) We do the following calculations:

• First, we looked at all the homes for sale and rentals listed on Trulia in June, July and August 2012. On for-sale homes, we took the asking price and estimated what it would rent for; for rentals, we took the asking rent and estimated what it would sell for. That way, we can calculate the average rent and asking price for an identical set of properties in a metro area, for a direct apples-to-apples comparison. By looking at homes currently for sale or rent, we???re able to illustrate the actual housing options that consumers face right now.

• Second, we estimated the total costs of renting and buying for the typical property in a metro over a seven-year period. We factored in all the costs of homeownership (e.g., closing costs, maintenance, insurance, taxes, etc.), along with the tax benefit of deducting mortgage interest and property taxes, as well as the proceeds from selling the home after seven years with modest home price appreciation. On the rental side, we factored in renters??? insurance and the security deposit. Finally, we calculate the net-present-value of all those costs to capture the opportunity cost of tying your money up in a down payment. This gives us the total cost of buying versus renting. We then calculated the dollar difference and percentage difference between renting and buying.

• Finally, we looked at alternative scenarios of the costs of renting versus buying, by changing the mortgage rate, the income tax bracket for tax deductions, and the time horizon.

Where Buying is a Slam Dunk
With a 20% down payment, a 30-year fixed mortgage rate at 3.5% and at the 25% federal tax bracket, homeownership is cheaper than renting in all of the 100 largest metros by a wide margin. There is no market where the financial decision is even close, so long as you plan to stay in the home for at least seven years, get 3.5% mortgage, and itemize your tax deductions. However, how much cheaper it is to buy a home than to rent really depends a LOT on where you live.

Buying is 24% cheaper than renting in Honolulu, 28% cheaper in San Francisco, and 31% cheaper in New York. On the other end of the spectrum, homeownership is extremely affordable in Detroit, where buying a home is 70% cheaper to buy than to rent, and 63% cheaper in both Oklahoma City and Gary IN. Check out the top 10 lists below to see where the cost differences between buying and renting are smallest and largest.

Where the Financial Advantage of Buying Over Renting is Smallest
U.S. Metro	Monthly cost of home ownership ($)	Monthly cost of renting ($)	Difference ($)	Difference (%)
Honolulu, HI	$1,519	$2,007	-$488	-24%
San Francisco, CA	$2,327	$3,226	-$899	-28%
New York, NY-NJ	$1,857	$2,687	-$831	-31%
San Jose, CA	$1,819	$2,646	-$827	-31%
Los Angeles, CA	$1,379	$2,020	-$641	-32%
Ventura County, CA	$1,516	$2,274	-$759	-33%
Orange County, CA	$1,610	$2,423	-$813	-34%
San Diego, CA	$1,314	$1,981	-$667	-34%
Albany, NY	$999	$1,535	-$536	-35%
Long Island, NY	$1,603	$2,513	-$910	-36%

Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly cost is based on net present value of costs over 7 years. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

Where the Financial Advantage of Buying Over Renting is Huge
U.S. Metro	Monthly cost of home ownership ($)	Monthly cost of renting ($ )	Difference ($)	Difference (%)
Detroit, MI	$349	$1,149	-$800	-70%
Gary, IN	$616	$1,649	-$1,033	-63%
Oklahoma City, OK	$590	$1,576	-$987	-63%
Lakeland–Winter Haven, FL	$495	$1,276	-$781	-61%
Toledo, OH	$476	$1,222	-$746	-61%
Dayton, OH	$524	$1,332	-$808	-61%
Warren–Troy– Farmington Hills, MI	$588	$1,494	-$907	-61%
Memphis, TN-MS-AR	$548	$1,389	-$841	-61%
Cleveland, OH	$585	$1,464	-$879	-60%
West Palm Beach, FL	$723	$1,764	-$1,041	-59%

Note: Cost of homeownership assumes that the home is sold after 7 years and includes closing costs, maintenance, insurance, property taxes and other costs. Cost of renting includes security deposit and renters insurance. Monthly cost is based on net present value of costs over 7 years. Monthly costs are based on the average across all properties listed in the metro area, including those for sale and those for rent, in summer 2012.

What does this mean in dollars? Buying is cheaper than renting by several hundred dollars a month in every large metro. The charts above show how the percent difference in buying versus renting may be smaller in San Francisco (-28%) than in almost all other metros, but the annual dollar savings is big ($899) because the rents and home prices there are so high ??? so even a smaller percentage difference means a big dollar difference. (Remember that we???re looking at the annual cost of buying or renting the typical listed home. Most homes listed are for-sale, and for-sale homes tend to be much larger than rentals, on average. That???s why the monthly cost of renting the typical home is higher than the actual amount most renters pay.)

Scroll through the table below to see the cost of buying versus renting in major metros across the country below or check out the full interactive infographic.

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Why Mortgage Rates, Tax Brackets and Timing Matters in the Rent vs. Buy Debate
But what if you can???t get the best mortgage rate, don???t itemize your tax deductions or stay in your home for less than seven years? Each of those raises the cost of homeownership, so buying wouldn???t be quite as good of a deal relative to renting. Here???s why each matters:

• The best mortgage rates are available for people with the best credit scores ??? and a not-so-hot credit score could make your mortgage a full percentage point higher, which translates to at least a 10% difference in your monthly mortgage payment.
• Itemizing your tax deductions lets you subtract your mortgage interest and property tax payments from your pre-tax income, which lowers your tax burden especially if you???re in a higher tax bracket. How much does not itemizing raise the cost of homeownership? It depends on your tax bracket and the amount of mortgage interest and property taxes you would deduct.
• Selling a home in less than seven years after buying it means that you???re spreading your buying and selling closing costs overfewer years ??? making the average monthly cost of homeownership higher.

To see how your mortgage rate, tax bracket and time horizon affect the cost of renting versus buying, let???s look at several scenarios for a few large metros:

SCENARIO	New York	LA	Boston	Atlanta
3.5% mortgage, 25% tax bracket, stay 7 years (baseline)	-31%	-32%	-41%	-57%
4.5% mortgage *	-23%	-24%	-34%	-53%
Not itemizing tax deductions *	-18%	-21%	-30%	-50%
Stay 5 years *	-21%	-22%	-32%	-52%
4.5% mortgage, not itemizing, AND 5 years	3%	-1%	-12%	-40%

* For these scenarios, the factors not mentioned are the same as the baseline.

 

Take Los Angeles, for instance. The top row shows that if you can (1) get a 3.5% mortgage, (2) are in the 25% tax bracket and itemize your deductions, and (3) stay 7 years, it???s 32% cheaper to buy than to rent.

Change any one of those scenarios, and buying is still cheaper than renting but less so:

•  With a 4.5% mortgage instead of a 3.5% mortgage, buying drops from 32% cheaper than renting to 24% cheaper.

• Failing to itemize tax deductions drops buying from being 32% cheaper to 21% cheaper.

• Staying 5 years instead of 7 makes buying 22% cheaper.

• But all three ??? the 4.5% mortgage, not itemizing, and staying only 5 years ??? makes buying just 1% cheaper than renting ??? as the bottom row shows.

In New York, these same differences make buying 3% MORE expensive than renting instead of 31% cheaper. In fact, with a 4.5% mortgage, not itemizing and staying only 5 years, buying is more expensive than renting in Honolulu (by 13%), San Francisco (by 10%), and San Jose (by 4%), too.

In the other 96 of the 100 largest metros, though, buying is still cheaper than renting. In Atlanta, for instance, where buying is 57% cheaper than renting in the best of circumstances (3.5% mortgage, itemizing, and staying 7 years), buying remains 40% cheaper even with a 4.5% mortgage, not itemizing, and staying only 5 years. In fact, today???s low mortgage rates make it financially better to buy even if you only stay put for 3 years in many metros. But buying a home also involves a lot of time, emotional energy and financial risk, so we can???t really recommend buying a home that you plan to live in for just 3 years even if the financial calculation is in favor of buying. Money isn???t everything.

If Buying is So Cheap ???
??? why isn???t everyone doing it? Home sales are still less than halfway back to normal, and the homeownership rate continues to fall. The big obstacle holding back renters who want to buy is the down payment ??? even more than getting a mortgage. And keep in mind, in the metros where the cost of buying is less than half of what it would cost to rent over the long term, it still takes years to save enough for a down payment. It may be 56% cheaper to buy than to rent in Denver, for instance, but it takes more than 8 years to save enough for a down payment there. And high unemployment during the recession made it even harder than usual for people to save for a down payment. On top of that, people who lost their homes or took on lots of debt might not qualify for a mortgage. Bottom Line: Buying may beat renting in every major metro by a wide margin, saving consumers thousands of dollars a year, but buying still remains out of reach for many would-be homeowners.

via pro.truliablog.com

Real estate industry welcomes changes to FHA condo rules

The Federal Housing Administration has finally done what it promised back in May: published revised rules that could convince condo associations across the country to get certified or re-certified for financing, thereby opening individual unit owners and sellers to low down payment, FHA-insured mortgages once again.

For condo boards, real estate agents and property managers, the long-awaited rule changes announced yesterday should prove to be “excellent news,” that will “help spark home sales and help tens of thousands of condominium associations recover from the housing slump,” according to the Community Associations Institute, the largest U.S. trade group in the field.

Among other changes, the rules eliminate some of the legal liability headaches that caused many condo boards to balk at FHA certifications; raise the permissible investor-ownership limit; and increase the percentage of non-residential, commercial use allowed in an FHA-certified project.

To Christopher Gardner, managing member of FHAProsLLC, a Los Angeles-based firm that assists condo boards with their applications for FHA certifications, the changes “aren’t a home run but maybe a double,” but should still significantly reduce the impediments associations encountered in seeking FHA approvals.

Under federal rules, individual units in condo projects are not eligible for financing unless the entire project has passed FHA’s certification process, which looks at project budgets, reserves, forthcoming capital improvement needs, insurance policies, delinquent payments of association dues, composition of renters versus owner-occupants, and various other factors.

Industry experts welcomed the revisions to the certification form itself, which previously intimidated condo association officers because it appeared to ask them to accept broad legal liability on matters they couldn’t totally be certain about, such as disputes among tenants in the building, litigation filed with courts involving the condo project or board, compliance with local and state regulations and the like.

Though FHA attempted to reassure them that it would be rare that the government would seek the maximum penalties in cases of misinformation in applications for certification, those penalties nonetheless were daunting: up to $1 million in fines and 30 years in prison.

Now the certification form asks a single signer representing the association to attest that, to the signer’s knowledge and belief, the information in the application is accurate, has been reviewed by an attorney, and that the project complies with local and state regulations.

The signer also must warrant that he or she has no knowledge of circumstances that might have an adverse impact on the project, including construction defects, “operational issues,” or legal problems. The federal penalties remain, but consultants such as Gardner say the revisions should alleviate “a lot of the fears” boards had with the previous language.

The rule changes published Thursday are “temporary” until FHA replaces them with formal, final regulations that would be preceded by proposed rules giving the industry additional opportunity to seek improvements. The new policies also represent the culmination of lengthy negotiations between FHA and industry groups, including NAR, CAI and consulting and management firms that started last spring.

At a conference held by the Northern Virginia Association of Realtors Thursday, acting FHA commissioner Carol J. Galante said the revisions show “that we listened” to the critiques from the industry, while still protecting the government’s insurance funds.

Under the previous rules, condo associations abandoned FHA in droves, even at significant costs to their own unit owners who suddenly had difficulty selling because FHA financing was no longer available to purchasers.

Only one out of 10 condo associations that would normally qualify for FHA financing currently is certified, according to Gardner, whose firm maintains a massive database of information on condos. HUD confirms that just 2,100 out of a possible 25,000 projects had obtained certifications or recertifications as of late last year.

The human costs of the previous rules were sometime extreme, Gardner says. In one case, an elderly woman who owned a unit in a non-certified community sought to obtain an FHA reverse mortgage in order to
help pay the costs of her cancer treatments. The condo board said no — it didn’t want to run the certification gauntlet or take on the legal liabilities.

Among the key changes now in effect:

• The investor ownership limit in existing projects has been raised to 50 percent. Previously there was a 10 percent cap on the number of units owned by any single investment entity. Now the rule states that “any investor/entity (single or multiple owner entities) may own up to 50 percent of the total units…if at least 50 percent of the total units in the project” are owned or under contract for purchase by owner-occupants.
• The percentage of space used for commercial/non-residential purposes in a project is limited to 25 percent, but applicants can request exceptions up to 35 percent and even above in certain mixed-use developments that are still “primarily residential” in character and where the project is “free of adverse conditions to the occupants of the individual condominium units.”
• Condo associations in which as many as 15 percent of unit owners are 60 days delinquent on their condo fees will now be eligible for certification. Under the previous rules, no more than 15 percent could be 30 days late. This was a major issue for many associations since they didn’t track 30-day delinquencies. Industry groups had sought a 90 day delinquency standard.
• Previous confusion over FHA requirements on fidelity bonds for management companies — with coverage that sometimes duplicated what was already maintained by the condo association itself — appears to be resolved. If the association’s fidelity bond policy names the management company as an insured or agent, it should pass muster.

Ken Harney writes an award-winning, nationally syndicated column, “The Nation’s Housing,” and is the author of two books on real estate and mortgage finance.

ForSalebyOwner.com founder gives up on own listing, hires real estate broker

Former FSBO CEO sells home the traditional way Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on …

Former FSBO CEO sells home the traditional way

Founder and former CEO of ForSalebyOwner.com, Colby Sambrotto listed his 2,000 square foot New York condominium on his own through online classified ads and FSBO sites, but after six months, he opted to hire New York broker Jesse Buckler who immediately advised a price change as the listing was not attracting the right buyer

After giving up on the DIY route, Sambrotto’s decision to hire a broker led to attracting multiple offers, closing for $150,000 over the original asking price. The Wall Street Journal reports the listing sold for $2.15 million including a 6% commission.

Many FSBOs turn to Realtors

The news stands as an enormous validation of the real estate profession and while some may tease, it is no laughing matter and the former FSBO CEO made a good financial decision.

AGBeat columnist Herman Chan said, “If people want to take a stab at For Sale By Owner (ie FSBO), go for it. But well over 80% of FSBO’s eventually have to list with an real estate agent to get their house sold. It’s harder than it looks!”

Not a new dilemma

Marlow Harris, Seattle Residential and Investment Consultant at Coldwell Banker Bain Associates told AGBeat, “The ForSaleByOwner.com founder’s dilemma is one we see quite often and is not unusual. Trying to sell your own property yourself or using a discount brokerage, is not the solution for everyone. Unusual properties, properties in the higher price range, these are more difficult to sell and often require specialization.”

Harris continues, “We see these choices across the board, from single family homes to huge housing developments. For instance, Vulcan, one of Paul Allen’s companies which has invested heavily in Redfin, does not use Redfin to market their many condominium projects. They use traditional real estate firms such as John L. Scott, Williams Marketing and Matrix Real Estate, finding that the do-it-yourself approach to real estate just doesn’t work for these types of sales.”

Realty Times – Summit County, Colorado Real Estate Market Conditions

Market Conditions Summary for Summit County, Colorado

Check other local areas for more detailed information posted by real estate professionals who live and work in the area.

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July Pending Home Sales Rebound

Washington, DC, August 29, 2011

Pending home sales rose in July to the highest level in over two years and remain well above year-ago levels, according to the National Association of REALTORS^??.

The Pending Home Sales Index, a forward-looking indicator based on contract signings, rose 2.4 percent to 101.7 in July from 99.3 in June and is 12.4 percent above July 2011 when it was 90.5. The data reflect contracts but not closings.

Lawrence Yun , NAR chief economist, said the index is at the highest level since April 2010, which was shortly before the closing deadline for the home buyer tax credit. “While the month-to-month movement has been uneven, more importantly we now have 15 consecutive months of year-over-year gains in contract activity,” Yun said.

Limited inventory is constraining market activity. “All regions saw monthly increases in home-buying activity except for the West, which is now experiencing an acute inventory shortage,” Yun added.

The PHSI in the Northeast increased 0.5 percent to 77.0 in July and is 13.4 percent higher than a year ago. In the Midwest the index grew 3.4 percent to 97.4 in July and is 20.2 percent above July 2011. Pending home sales in the South rose 5.2 percent to an index of 111.7 in July and are 15.6 percent above a year ago. In the West the index slipped 1.7 percent in July to 109.9 but is 1.3 percent higher than July 2011.

Existing-home sales are projected to rise 8 to 9 percent in 2012, followed by another 7 to 8 percent gain in 2013. Home prices are expected to increase 10 percent cumulatively over the next two years.

“Falling visible and shadow inventories point toward continuing price gains. Expected gains in housing starts of 25 to 30 percent this year, and nearly 50 percent in 2013, are insufficient to meet the growing housing demand,” Yun said.

The National Association of REALTORS^??, “The Voice for Real Estate,” is America’s largest trade association, representing 1 million members involved in all aspects of the residential and commercial real estate industries.

The National Association of Realtors??, “The Voice for Real Estate,” is America’s largest trade association, representing 1.1 million members involved in all aspects of the residential and commercial real estate industries.

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via realtytimes.com

Auction (video) this week 2 killer deals

Our Market is on FIRE!

Click to play video

I am adding the info on the properties for those of you who don’t like video…only 1 person that I heard from, but here it is anyway! 12-140 Villamont Condo Bid $272K 2bed 2bath with tax value of $209K 12-138 Caravelle@Keystone Bid $6.2 M $540K def 6000 sqft house and 5 lots worth around $100K each 11-008 Villas@SwansNest Bid $196K 2 bed 2 bath 930sqft tax value $321 Here is a similar unit in Swans Nest Villas at Swans Nest 11-006 918 American Way Bid $381K $300K def 3 bed 3 bath home tax value $589K American Way.pdf Remember to give us a CALL at 970-333-1388 if you have ANY INTEREST in bidding on a property this week. Amy, Kevin, Brigitte and Mark

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Wildernest

 Fannie Mea Homepath as little as 3% down!!

4 beds, 2.5 bath, 2 car garage, 2,497 sq ft

PRICE REDUCED!   $409,900

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