by Matthew Gardner, Chief Economist, Windermere Real Estate
The following analysis of select Maui real estate markets is provided by Windermere Real Estate Chief Economist Matthew Gardner. We hope that this information may assist you with making better-informed real estate decisions. For further information about the housing market in your area, please don’t hesitate to contact your Windermere agent.
Hawaii’s economy continues to add jobs, but the rate of growth remains tepid. Over the past 12 months, the state added 3,200 new jobs, representing a growth rate of .5%. This lackluster growth may be due to the fact that the unemployment rate was a very healthy 2.7%.
On Maui, employment growth dropped 2.2% year-over-year, and has been contracting for the past 14 months. Even with this drop in employment, the unemployment rate was a healthy 2.8%, up from 2.2% a year ago. The unemployment rate may remain low, even given job losses, as the labor force continues to grow smaller. It is also worth noting that there are almost 3,600 job openings on Maui.
- In the first quarter of 2019, 490 homes sold—a drop of 7.4% compared to the first quarter of 2018.
- Three markets saw growth in sales over the first quarter of 2018: North Shore, the West Side, and Up Country. There was a significant decline in sales in the Central area.
- The contraction in sales came as inventory levels dropped 7.3%. Three market areas saw listing inventories rise: Up Country, the Westside, and the Central area. Lower inventory levels were seen in South Maui and North Shore.
- Pending home sales in the quarter were down 5.8% from a year ago but up 16% from the fourth quarter of 2018, suggesting that second quarter closings may be more positive.
- The average home price in the region dropped 9.9% year-over-year to $824,955.
- Affordability is a significant issue on Maui, where average home prices in areas like Westside and Up Country are now above $1 million. I’m hopeful the recent drop in interest rates will stimulate more buyers. It’s worth noting that jumbo loan interest rates are also very competitive, which may help the higher-end markets.
- Although the region saw an overall drop in average home prices, the Up Country area experienced an increase of 16.1%. One additional area saw prices rise year-over-year, while prices dropped in the remaining three markets.
- Even given affordability constraints in many Maui market areas, I anticipate we will see home prices rise in 2019, though at fairly modest rates.
DAYS ON MARKET
- The average number of days it took to sell a home on Maui dropped two days compared to the first quarter of 2018.
- The amount of time it took to sell a home dropped in two markets: South Maui and the Westside. Market time rose in the rest of the markets.
- In the first quarter, it took an average of 62 days to sell a home. The fastest-moving market was North Shore and the slowest was the Westside.
- The drop in days on market suggests a healthy demand for housing, despite the slowing pace of home sales. I anticipate we will see modestly rising activity as we move through 2019.
This speedometer reﬂects the state of the region’s real estate market using housing inventory, price gains, home sales, interest rates, and larger economic factors.
For the first quarter of 2018, I have moved the needle a little more in favor of buyers but the market is not yet at equilibrium, even given the drop in sales and lower home prices. Though the market is in need of more inventory, I remain positive about the longer-term outlook for home prices and demand on Maui.
As Chief Economist for Windermere Real Estate, Matthew Gardner is responsible for analyzing and interpreting economic data and its impact on the real estate market on both a local and national level. Matthew has over 30 years of professional experience both in the U.S. and U.K.
In addition to his day-to-day responsibilities, Matthew sits on the Washington State Governors Council of Economic Advisors; chairs the Board of Trustees at the Washington Center for Real Estate Research at the University of Washington; and is an Advisory Board Member at the Runstad Center for Real Estate Studies at the University of Washington where he also lectures in real estate economics.
by Kenady Swan
There are a number of things that can trigger the decision to remodel or move to a new home. Perhaps you have outgrown your current space, you might be tired of struggling with ancient plumbing or wiring systems, or maybe your home just feels out of date. The question is: Should you stay or should you go? Choosing whether to remodel or move involves looking at a number of factors. Here are some things to consider when making your decision.
Five reasons to move:
1. Your current location just isn’t working.
Unruly neighbors, a miserable commute, or a less-than-desirable school district—these are factors you cannot change. If your current location is detracting from your overall quality of life, it’s time to consider moving. If you’re just ready for a change, that’s a good reason, too. Some people are simply tired of their old homes and want to move on.
2. Your home is already one of the nicest in the neighborhood.
Regardless of the improvements you might make, location largely limits the amount of money you can get for your home when you sell. A general rule of thumb for remodeling is to make sure that you don’t over-improve your home for the neighborhood. If your property is already the most valuable house on the block, additional upgrades usually won’t pay off in return on investment at selling time.
3. There is a good chance you will move soon anyway.
If your likelihood of moving in the next two years is high, remodeling probably isn’t your best choice. There’s no reason to go through the hassle and expense of remodeling and not be able to enjoy it. It may be better to move now to get the house you want.
4. You need to make too many improvements to meet your needs.
This is particularly an issue with growing families. What was cozy for a young couple may be totally inadequate when you add small children. Increasing the space to make your home workable may cost more than moving to another house. In addition, lot size, building codes, and neighborhood covenants may restrict what you can do. Once you’ve outlined the remodeling upgrades that you’d like, a real estate agent can help you determine what kind of home you could buy for the same investment.
5. You don’t like remodeling.
Remodeling is disruptive. It may be the inconvenience of loosing the use of a bathroom for a week, or it can mean moving out altogether for a couple of months. Remodeling also requires making a lot of decisions. You have to be able to visualize new walls and floor plans, decide how large you want windows to be, and where to situate doors. Then there is choosing from hundreds of flooring, countertop, and fixture options. Some people love this. If you’re not one of them, it is probably easier to buy a house that has the features you want already in place.
Five reasons to remodel:
1. You love your neighborhood.
You can walk to the park, you have lots of close friends nearby, and the guy at the espresso stand knows you by name. There are features of a neighborhood, whether it’s tree-lined streets or annual community celebrations, that you just can’t re-create somewhere else. If you love where you live, that’s a good reason to stay.
2. You like your current home’s floor plan.
The general layout of your home either works for you or it doesn’t. If you enjoy the configuration and overall feeling of your current home, there’s a good chance it can be turned into a dream home. The combination of special features you really value, such as morning sun or a special view, may be hard to replicate in a new home.
3. You’ve got a great yard.
Yards in older neighborhoods often have features you cannot find in newer developments, including large lots, mature trees, and established landscaping. Even if you find a new home with a large lot, it takes considerable time and expense to create a fully landscaped yard.
4. You can get exactly the home you want.
Remodeling allows you to create a home tailored exactly to your lifestyle. You have control over the look and feel of everything, from the color of the walls to the finish on the cabinets. Consider also that most people who buy a new home spend up to 30 percent of the value of their new house fixing it up the way they want.
5. It may make better financial sense.
In some cases, remodeling might be cheaper than selling. A contractor can give you an estimate of what it would cost to make the improvements you’re considering. A real estate agent can give you prices of comparable homes with those same features. But remember that while remodeling projects add to the value of your home, most don’t fully recover their costs when you sell.
Remodel or move checklist:
Here are some questions to ask when deciding whether to move or remodel.
1. How much money can you afford to spend?
2. How long do you plan to live in your current home?
3. How do you feel about your current location?
4. Do you like the general floor plan of your current house?
5. Will the remodeling you’re considering offer a good return on investment?
6. Can you get more house for the money in another location that you like?
7. Are you willing to live in your house during a remodeling project?
8. If not, do you have the resources to live elsewhere while you’re remodeling?
If you have questions about whether remodeling or selling is a wise investment, we are here to help.
by Guest Author, Sharon Elbert, Professional Dog Trainer and writer for Wileypup.com
For many house hunters, a dream home isn’t complete without being a good fit for the family dog. Some might see the fenced in yard, and consider the box checked. However, if you are looking for your next home, you may want to look a little deeper to be sure the fit is right before signing on the dotted line.
It’s worth taking a little extra time to consider your pooch in a little more depth. Here is a quick checklist of considerations to be sure you find the right fit for your canine companion:
What’s in a Yard?
A fenced yard is, of course, ideal for many dog owners. It gives you the ability for off-leash play, a must for meeting the exercise needs of active breeds such as Border Collies or Labradors. But not all yards are the same. Here’s a quick checklist of what to look for:
- Check the fencing to be sure it is secure. Factor in any repair costs into the cost of the home since they will need to be addressed right away.
- Are there flower beds with potentially toxic plants that will need to be moved outside of the fenced area? Examples include many spring bulb favorites such as daffodils, tulips, and crocus, as well as some bushes such as azaleas.
- Is there a nice shady spot so your pooch can find shelter from the heat on a hot summer day?
- Is there access to water for an outdoor bath?
- Will delivery people be able to access your main entrance when the dog is outside without entering the fenced part of your yard? It is easy to overlook, but this can become a major annoyance if you do a lot of online shopping.
Indoor Space Considerations
It won’t always be a beautiful sunny day, even in your dream home. Make sure your new home will have enough space for a little indoor play on rainy days and during colder winter months. A long hallway can make a great runway for a game of fetch when getting outside just isn’t practical.
Likewise, consider the needs of aging or injured dogs. Does the layout of the home require going up and down stairs to get to the most used areas of the home? This can be a major problem for some special needs dogs, and a deal breaker for some pet owners.
Finally, most dog trainers recommend that every dog has a little space to call their own during times of stress. This may be as simple as a corner of the living room with a comfy dog bed or crate. If you have a puppy, however, a space that can be puppy-proofed and cordoned off (with appropriate flooring for potential accidents during potty training) is in order.
Go for a Walk
It may be impractical to include a dog walk for every home you look at while searching for your dream house. However, once you are down to a short list, it is time to actually take your dog on what is likely to be the daily walk route. Make sure this is a walk you would feel comfortable making every day, or even letting the kids take.
Be on the lookout for hazards: A dangerous intersection, a portion of the walk that requires walking in the road, or a neighbor who lets their dog run right up to the curb with invisible fencing (a recipe for territorial fights with leashed dogs passing by). A drive through is unlikely to reveal these walk spoiling annoyances. In addition, look for evidence of good lighting for evening or early morning walks.
Nearby Canine Amenities
If you are moving to a new part of town or relocating to a new state altogether, it is worth doing some research to find out where the pet services are located. Depending on the services you tend to use, it can make a big difference in your quality of life to be able to take advantage of nearby conveniences.
Think about what services you are likely to use most, and check on Google Maps to locate:
- Dog boutiques (particularly important if you buy specialty food)
- Grooming services
- Doggy daycare and boarding
- Pet sitting and dog walking services
- Dog-friendly restaurants (BringFido.comis a great research tool for this)
- Dog parks and dog-friendly paths for long walks
Although luxurious hardwood flooring adds a great deal of ambiance to a home, it will have the opposite effect if it gets scratched up from the nails of a rambunctious canine. Large and even medium sized dogs can easily create unsightly scars in hardwood floors that can only be fixed by a professional who will need to sand away the wood then stain and refinish it. It’s a costly fix!
Modern carpets can generally hold up to doggy traffic. However, think about where you will be coming in and out of the house with your pooch to be sure you have a place to wipe muddy paws first on rainy days. A mudroom or garage entrance can easily stow a few extra towels for the job.
Tile and high-quality laminate flooring are the most durable as both will resist scratching and are easy to clean.
Consider Pet-Friendly Condos and Planned Communities
If you have a truly pampered pooch, one way to go the extra mile is to ask your realtor about dog-friendly communities in your area. Many condominium complexes, for example, have pet services right on site. Pet grooming, pet-sitting, dog walking services, and even a fenced in dog park and/or pool is available in some areas.
Work with a Knowledgeable Realtor
Make sure to let your agent know upfront that you have a canine member of your family to consider during the house hunt. If there are certain “musts” such as a fenced yard, or proximity to veterinary services, be sure to put that on the table upfront to help your realtor find a home that works for you and your furry friend.
Condominium homes are a great, low-maintenance choice for a primary residence, second home, or investment property. This alternative to the traditional single-family home has unique issues to consider before buying, as well as unique benefits. Here’s some background information to help you decide whether purchasing a condo is a good match for you.
Increasingly, condos are not just for first-time homebuyers looking for a less expensive entry into the housing market. Empty-nesters and retirees are happy to give up mowing the lawn and painting the house. Busy professionals can experience luxury living knowing their home is safe and well-maintained while they are away on business. If you are considering buying a condominium for a home, here are a few things you should know:
With condominiums, you own everything in your unit on your side of the walls. Individual owners hold title to the condominium unit only, not the land beneath the unit. All owners share title to the common areas: the grounds, lobby, halls, parking areas and other amenities. A homeowners’ association (HOA) usually manages the complex and collects a monthly fee from all condominium owners to pay for the operation and maintenance of the property. These fees may include such items as insurance, landscape, and grounds upkeep, pool maintenance, security, and administrative costs.
The owners of the units in a condominium are all automatic members of the condo association. The association is run by a volunteer Board of Directors, who manage the operations and upkeep of the property. A professional management company may also be involved in assisting the board in their decisions. The condo association also administers rules and regulations designed to ensure safety and maintain the value of your investment. Examples include whether or not pets are allowed and the hours of use for condominium facilities, such as pools and work-out rooms. Should a major expense occur, all owners are responsible for paying their fair share of the expense.
The pros and cons of condominium living:
The condominium lifestyle has many benefits, but condominium ownership isn’t for everyone. Part of it depends on your lifestyle. Condominium living may not be optimum for large families with active kids. The other factor is personal style. By necessity, condominium associations have a number of standardized rules. You need to decide whether these regulations work for you or not. Here are some points to keep in mind if you’re considering condominium living.
Cost: Condominium homes typically cost less than houses, so they’re a great choice for first-time buyers. However, because condominiums are concentrated in more expensive locations, and sizes are generally smaller than a comparable single-family home, the price per square foot for a condominium is usually higher.
Convenience: People who love living in condominiums always cite the convenience factor. It’s nice to have someone else take care of landscaping, upkeep, and security. Condominium homes are often located in urban areas where restaurants, groceries, and entertainment are just a short walk away.
Luxury amenities: May condominiums offer an array of amenities that the majority of homeowners couldn’t afford on their own, such as fitness centers, clubhouses, wine cellars, roof-top decks, and swimming pools. Lobbies of upscale condominiums can rival those of four-star hotels, making a great impression on residents.
Privacy: Since you share common walls and floors with other condominium owners, there is less privacy than what you’d expect in a single-family home. While condominiums are built with noise abatement features, you may still occasionally hear the sound of your neighbors.
Space: With the exception of very high-end units, condominiums are generally smaller than single-family homes. That means less storage space and often, smaller rooms. The patios and balconies of individual units are usually much smaller as well.
Autonomy: As a condominium owner, you are required to follow the laws of the associations. That means giving up a certain amout of control and getting involved in the group decision-making process. Laws vary greatly from property to property, and some people may find certain rules too restrictive. If you long to paint your front door red or decorate your deck with tiki lanterns, condominium living might not be for you.
Things to consider when you decide to buy:
Condominium homes vary from intimate studios to eclectic lofts and luxury penthouses. The right condominium is the one that best fits your lifestyle. Here are a few questions to ask to determine which condominium is right for you.
How will you use it?
Will your condominium be your primary residence? A second home? An investment property? While a studio may be too small for a primary residence, it might be a perfect beachfront getaway. Also, consider how your lifestyle may change over the next five to seven years. If you are close to retirement, you may want to have the option of turning a vacation condominium into your permanent home.
Where would you like to live?
Some people love the excitement and sophistication of urban living. Others dream of skiing every weekend. Whether it’s the sound of the surf or the lure of the golf course, a condominium home affords you the ability to live a carefree lifestyle in virtually any setting.
What amenities are most important to you?
The variety of condominium amenities increases each year. Decide what you want, and you can be assured of finding it. Most urban and resort condominiums have an enticing array of extras, from spas to movie screening rooms to tennis courts.
What are your specific needs?
Do you have a pet? Some associations don’t allow them; others have limitations on their size. Parking can be a major issue, especially in dense, urban areas. How many spaces do you get per unit? Do you pay extra if you have more vehicles?
Finally, once you’ve found a property you like, examine the association’s declaration, rules, and bylaws to make sure they fit your needs. The association will provide you with an outline of their monthly fees and exactly what they cover so you can accurately budget your expenses.
Review the association board’s meeting minutes from the past year to get an idea of any issues the association is working on. An analysis of sales demand and property appreciation compared to like units may help ensure that you make the best possible investment.
by Matthew Gardner, Chief Economist, Windermere Real Estate
Interest rates have been trending higher since the fall of 2017, and I fully expect they will continue in that direction – albeit relatively slowly – as we move through the balance of the year and into 2019. So what does this mean for the US housing market?
It might come as a surprise to learn that I really don’t think rising interest rates will have a major impact on the housing market. Here is my reasoning:
1. First Time Home Buyers
As interest rates rise, I expect more buyers to get off the fence and into the market; specifically, first time buyers who, according to Freddie Mac, made up nearly half of new mortgages in the first quarter of this year. First-time buyers are critical to the overall health of the housing market because of the subsequent chain reaction of sales that result so this is actually a positive outcome of rising rates.
2. Easing Credit Standards
Rising interest rates may actually push some lenders to modestly ease credit standards. I know this statement will cause some people to think that easing credit will immediately send us back to the days of sub-prime lending and housing bubbles, but I don’t see this happening. Even a very modest easing of credit will allow for more than one million new home buyers to qualify for a mortgage.
3. Low Unemployment
We stand today in a country with very low unemployment (currently 4.0% and likely to get close to 3.5% by year’s end). Low unemployment rates encourage employers to raise wages to keep existing talent, as well as to recruit new talent. Wage growth can, to a degree, offset increasing interest rates because, as wages rise, buyers can afford higher mortgage payments.
There is a clear relationship between housing supply, home prices, and interest rates. We’re already seeing a shift in inventory levels with more homes coming on the market, and I fully expect this trend to continue for the foreseeable future. This increase in supply is, in part, a result of homeowners looking to cash in on their home’s appreciation before interest rates rise too far. This, on its own, will help ease the growth of home prices and offset rising interest rates. Furthermore, if we start to see more new construction activity at the lower end of the market, this too will help.
5. National versus Local
Up until this point, I’ve looked at how rising interest rates might impact the housing market on a national level, but as we all know, real estate is local, and different markets react to shifts in different ways. For example, rising interest rates will be felt more in expensive housing markets, such as San Francisco, New York, Los Angeles, and Orange County, but I expect to see less impact in areas like Cleveland, Philadelphia, Pittsburg, and Detroit, where buyers spend a lower percentage of their incomes on housing. The exception to this would be if interest rates continue to rise for a prolonged period; in that case, we might see demand start to taper off, especially in the less expensive housing markets where buyers are more price sensitive.
For more than seven years, home buyers and real estate professionals alike have grown very accustomed to historically low interest rates. We always knew the time would come when they would begin to rise again, but that doesn’t mean the outlook for housing is doom and gloom. On the contrary, I believe rising interest rates will help bring us closer to a more balanced real estate market, something that is sorely needed in many markets across the country.
by Tania Harmon
What’s my home worth?
A quick Google search of that questions will get you dozens of sites offering a home valuation tool that makes valuing your home, well, easy as pie. Online tools like these have become most sellers (and buyers) first step in the selling (and buying) process. But how accurate are they?
By nature, these valuation tools have their limitations. Each market has unique characteristics that influence home values. Maui is no exception. Each online valuation tool relies on different sources for their information. One of the most popular, Zillow, does not have access to the Maui MLS and therefore relies on user reporting for sold data. Other sites rely on limited shared data and public records, but this can also lead to gaps. If you spend just a little time on the site you may find discrepancies in key data points, such as bathroom count and square footage, which can greatly skew values. And they will acknowledge these limitations – you just have to dig a little.
Scroll to the bottom of the website page and click on one of the ‘fine print’ options – the site disclosure and Q&A sections – and you’ll discover quickly the acknowledged error rate alone should cause you to take pause. Zillow discloses it’s “Zestimate” offers a National median error rate of 4.3%. That may not sound like much, but in Maui County, where the median single family home price is currently $700,000, that equals a difference of more than $30,000. Dig even deeper and you’ll discover that for Maui County the “Zestimate” is within 20% of the actual sales price less than 95% of the time and within 5% of the actual sales price less than 67% of the time.
While automated home valuation tools can be useful as a starting point to your home buying or selling process, nothing compares to the knowledge and expertise offered by a licensed Realtor. An automated tool can’t possibly provide you with the expertise that comes from a real estate professional’s knowledge of the neighborhood, a home’s unique characteristics and local market buying trends. Kihei alone has 15 subdivisions and 84 condo developments. Each one has unique characteristics and market trends that effect each properties value.
If you’re interested in finding out what your home might be worth, give us a call. We are happy to come meet with you and offer a free Comparative Market Analysis to give you a more accurate idea of your home’s value in today’s market.
Entering into debt is a concept I grew up diametrically opposed to. I was raised, like many with frugal family members, to understand that anything you couldn’t pay for on the spot was something you couldn’t afford. But as we age we learn the pathway to financial growth requires a commitment beyond what many of us can deliver up front. Building and stabilizing wealth is, for many families, tied to home ownership. To reach that initial threshold, most aspiring homeowners will need to apply for a mortgage loan. That process can be daunting, but the long-term rewards of securing your home are worth it.
Step One – Break down your budget
A major financial decision like this can’t be made lightly. Many experts recommend a 50-20-30 style plan for finances, particularly for first-time homeowners. That means 50% of your budget is committed to core, unavoidable, monthly expenses like rent, groceries, loan payments, utilities, insurance, etc. The 20% segment is savings, placed in reserve towards a general or specific future financial goal. The final 30% (at maximum) is left as a remainder for personal spending, however, is most desired. Once this is set, you’re ready to evaluate the rate at which you can repay your loan and adjust accordingly.
Step Two – Take the time to get it right
It’s exciting to be in a position to purchase your first home, but if you find the right spot and realize the funds aren’t there yet it can be a huge disappointment. That’s what makes seeking pre-approval for a loan a must – particularly if it’s your first time. Having your credit in order, along with all key financial documentation (bank statements, tax returns, debt copies, prior records of significant ownership). If your credit isn’t in a great place, it’s likely worth taking the time to amend it before applying for your mortgage loan. When you earn lower interest rates and more manageable monthly payments you’ll be thankful for your prudence.
Step Three – The bigger the down payment the better
It’s rare that first-time homebuyers have significant cash on hand, but whatever you can muster makes a difference. Typically, the greater a down payment you can muster, the lower your subsequent interest rates will be. For many, there’s only so much that’s tenable as a bulk sum up front, of course. If that fits your situation, seeking a loan insured by the Federal Housing Administration (FHA) can earn you a healthy loan for a down payment of just 3.5% of your home’s total value. To calculate the limitations of your target home’s loan options, you can input your information on the Department of Housing and Urban Development (HUD) website here.
Step Four – Stick to the plan!
After all the effort you’ll go through to secure a mortgage loan, you’ve earned the home it’s helped you purchase. That loan, like any loan, is contingent on your continued monthly payments. It can feel daunting and dispiriting after a time to continually be paying for a home you’re already living in, but maintaining your financial balance is vital. You’ll never be able to predict every expense that comes up but maintaining your budget towards paying off your mortgage loans will set you up to be more financially flexible in the future. Should you ever hope to purchase a second home or other major investments requiring of loans, having a record of consistent mortgage loan payment can help you secure far more favorable interest rates in the future.
A mortgage loan, like any loan, is a major commitment, but entering into homeownership is a massive step towards financial stability and future life-planning. With proper patience and focus, you can get the loan you need at the rate you can afford.
by Matthew Gardner, Chief Economist, Windermere Real Estate
It’s the time of the year when I look deep into my crystal ball to see what’s on the horizon for the upcoming year. As we are all aware, 2017 has been a stellar year for housing across the country, but can we expect that to continue in 2018?
Here are my thoughts:
Millennial Home Buyers
Last year, I predicted that the big story for 2017 would be millennial home buyers and it appears I was a little too bullish. To date, first-time buyers have made up 34% of all home purchases this year – still below the 40% that is expected in a normalized market. Although they are buying, it is not across all regions of the country, but rather in less expensive markets such as North Dakota, Ohio, and Maryland.
For the coming year, I believe the number of millennial buyers will expand further and be one of the biggest influencers in the U.S. housing market. I also believe that they will begin buying in more expensive markets. That’s because millennials are getting older and further into their careers, enabling them to save more money and raise their credit profiles.
Existing Home Sales
As far as existing home sales are concerned, in 2018 we should expect a reasonable increase of 3.7% – or 5.62 million housing units. In many areas, demand will continue to exceed supply, but a slight increase in inventory will help take some heat off the market. Because of this, home prices are likely to rise but by a more modest 4.4%.
New Home Sales
New home sales in 2018 should rise by around 8% to 655,000 units, with prices increasing by 4.1%. While housing starts – and therefore sales – will rise next year, they will still remain well below the long-term average due to escalating land, labor, materials, and regulatory costs. I do hold out hope that home builders will be able to help meet the high demand we’re expecting from first-time buyers, but in many markets it’s very difficult for them to do so due to rising construction costs.
Interest rates continue to baffle forecasters. The anticipated rise that many of us have been predicting for several years has yet to materialize. As it stands right now, my forecast for 2018 is for interest rates to rise modestly to an average of 4.4% for a conventional 30-year fixed-rate mortgage – still remarkably low when compared to historic averages.
Something that has the potential to have a major impact on housing are the current proposals relative to tax reform. As I write this, we know that both the House and Senate propose doubling the standard deduction, and the House plans to lower the mortgage interest deduction from $1,000,000 to $500,000. If passed, the mortgage deduction would no longer have value for home owners who would likely opt to take the standard deduction.
If either of the current proposals is adopted into law, the potential reduction in mortgage-related tax savings means the after-tax cost of home ownership will increase for most home owners. Additionally, both the House and Senate bills also end tax benefits for interest on second homes, and this could have a devastating effect in areas with higher concentrations of second homes.
The capping of the deduction for state and local property taxes (SALT) at $10,000 will also negatively impact states with high property taxes, such as California, Connecticut, and New York. Furthermore, proposed changes to the capital gains exemption on profits from the sale of a home (requiring five years of continuous residence as compared to the current two) could impact approximately 750,000 home sellers a year and slow the growth of home ownership.
Something else to consider is that all of the aforementioned changes will only affect new home purchases, which I fear might become a deterrent for current home owners to sell. Given the severe shortage of homes for sale in a number of markets across the country, this could serve to exacerbate an already-persistent problem.
I continue to be concerned about housing affordability. Home prices have been rising across much of the country at unsustainable rates, and although I still contend that we are not in “bubble” territory, it does represent a substantial impediment to the long-term health of the housing market. But if home price growth begins to taper, as I predict it will in 2018, that should provide some relief in many markets where there are concerns about a housing bubble.
In summary, along with slowing home price growth, there should be a modest improvement in the number of homes for sale in 2018, and the total home sales will be higher than 2017. First-time buyers will continue to play a substantial role in the nation’s housing market, but their influence may be limited depending on where the government lands on tax reform.
by Kenady Swan
In addition to providing shelter and comfort, our home is often our single greatest asset. And it’s important that we protect that precious investment. Most homeowners realize the importance of homeowners insurance in safeguarding the value of a home. However, what they may not know is that about two-thirds of all homeowners are under-insured. According to a national survey, the average homeowner has enough insurance to rebuild only about 80% of his or her house.
What a standard homeowners policy covers
A standard homeowner’s insurance policy typically covers your home, your belongings, injury or property damage to others, and living expenses if you are unable to live in your home temporarily because of an insured disaster.
The policy likely pays to repair or rebuild your home if it is damaged or destroyed by disasters, such as fire or lighting. Your belongings, such as furniture and clothing, are also insured against these types of disasters, as well as theft. Some risks, such as flooding or acts of war, are routinely excluded from homeowner policies.
Other coverage in a standard homeowner’s policy typically includes the legal costs for injury or property damage that you or family members, including your pets, cause to other people. For example, if someone is injured on your property and decides to sue, the insurance would cover the cost of defending you in court and any damages you may have to pay. Policies also provide medical coverage in the event someone other than your family is injured in your home.
If your home is seriously damaged and needs to be rebuilt, a standard policy will usually cover hotel bills, restaurant meals and other living expenses incurred while you are temporarily relocated.
How much insurance do you need?
Homeowners should review their policy each year to make sure they have sufficient coverage for their home. The three questions to ask yourself are:
· Do I have enough insurance to protect my assets?
· Do I have enough insurance to rebuild my home?
· Do I have enough insurance to replace all my possessions?
Here’s some more information that will help you determine how much insurance is enough to meet your needs and ensure that your home will be sufficiently protected.
Protect your assets
Make sure you have enough liability insurance to protect your assets in case of a lawsuit due to injury or property damage. Most homeowner’s insurance policies provide a minimum of $100,000 worth of liability coverage. With the increasingly higher costs of litigation and monetary compensation, many homeowners now purchase $300,000 or more in liability protection. If that sounds like a lot, consider that the average dog bite claim is about $20,000. Talk with your insurance agent about the best coverage for your situation.
Rebuild your home
You need enough insurance to finance the cost of rebuilding your home at current construction costs, which vary by area. Don’t confuse the amount of coverage you need with the market value of your home. You’re not insuring the land your home is built on, which makes up a significant portion of the overall value of your property. In pricey markets such as San Francisco, land costs account for over 75 percent of a home’s value.
The average policy is designed to cover the cost of rebuilding your home using today’s standard building materials and techniques. If you have an unusual, historical or custom-built home, you may want to contact a specialty insurer to ensure that you have sufficient coverage to replicate any special architectural elements. Those with older homes should consider additions to the policy that pay the cost of rebuilding their home to meet new building codes.
Finally, if you’ve done any recent remodeling, make sure your insurance reflects the increased value of your home.
Remember that a standard policy does not pay for damage caused by a flood or earthquake. Special coverage is needed to protect against these incidents. Your insurance company can let you know if your area is flood or earthquake prone. The cost of coverage depends on your home’s location and corresponding risk.
Replacing your valuables
If something happens to your home, chances are the things inside will be damaged or destroyed as well. Your coverage depends on the type of policy you have. A cost value policy pays the cost to replace your belongings minus depreciation. A replacement cost policy reimburses you for the cost to replace the item.
There are limits on the losses that can be claimed for expensive items, such as artwork, jewelry, and collectables. You can get additional coverage for these types of items by purchasing supplemental premiums.
To determine if you have enough insurance, you need to have a good handle on the value of your personal items. Create a detailed home inventory file that keeps track of the items in your home and the cost to replace them.
Create a home inventory file
It takes time to inventory your possessions, but it’s time well spent. The little bit of extra preparation can also keep your mind at ease. The best method for creating a home inventory list is to go through each room of your home and individually record the items of significant value. Simple inventory lists are available online. You can also sweep through each room with a video or digital camera and document each of your belongings. Your home inventory file should include the following items:
· Item description and quantity
· Manufacturer or brand name
· Serial number or model number
· Where the item was purchased
· Receipt or other proof of purchase \Photocopies of any appraisals, along with the name and address of the appraiser
· Date of purchase (or age)
· Current value
· Replacement cost
Pay special attention to highly valuable items such as electronics, artwork, jewelry, and collectibles.
Storing your home inventory list
Make sure your inventory list and images will be safe incase your home is damaged or destroyed. Store them in a safe deposit box, at the home of a friend or relative, or on an online Web storage site. Some insurance companies provide online storage for digital files. (Storing them on your home computer does you no good if your computer is stolen or damaged). Once you have an inventory file set up, be sure to update it as you make new purchases.
We invest a lot in our homes, so it’s important we take the necessary measures to safeguard it against financial and emotional loss in the wake of a disaster.
by Tara Sharp
As sophisticated as homes are today, experts predict they’ll be far more so in the not-too-distant future— especially when it comes to their use of technology. Included are seven evolutionary trends that many expect to define the home of the future.
#1: Faster home-construction
Today, it takes somewhere between 18 months and two years to design and build your custom dream home. In the foreseeable future, experts predict that timeline will be slashed to six to nine months.
Architects will use immersion technology to not only develop plans faster, but also enable you to “walk” through a three-dimensional representation of the house and experience what it will be like to live there. Changes to the layout could be incorporated with a few clicks of the keyboard and mouse.
And, instead of delivering raw materials to the construction site and having workers cut and assemble them to match the plans, about 70 percent of the cutting and assembling work will take place in a precision-controlled factory environment. Once the foundation is ready, the pre-constructed walls, floors and roof will be delivered in “folded” sections, complete with windows, doors, fixtures, and even appliances, already installed.
#2: Alternative building materials and techniques
One of the big breakthroughs in home construction coming in the near future will be the use of steel framing in place of lumber.
Steel is not only stronger (able to withstand a 100-pound snow load, 110 mile per hour winds and significant earthquakes), it’s also far more eco-friendly than most people think (manufactured from up to 77 percent recycled materials) and much less wasteful (typical lumber framing generates 20 percent waste, while steel framing generates just two percent).
Other innovative home-building materials moving towards the mainstream include:
- Wall insulation made of mushroom roots (it grows inside the air cavity, forming an air-tight seal).
- Panels made of hemp and lime.
- Windows made from recycled wood fiber and glass.
- Recycled-glass floor and counter tiles.
- Reclaimed wood (beams and flooring re-milled and repurposed).
#3: Smaller homes with inventive layouts
The optimum home size for many Americans has been shrinking, and experts predict it will shrink more in the future. But it will feel bigger than it is because the layout will be so practical.
The driving forces behind the small-house movement (millennials purchasing their first home and baby boomers looking to downsize) aren’t interested in formal dining rooms, home offices, guest quarters and other spaces that have only one use and are only occasionally occupied. And they certainly aren’t interested in formal entries, high ceilings and three-car garages. They want an informal house layout, with flexible, adaptable spaces that can be used every day in one way or another.
Many of these homes will also feature a second master bedroom, so parents, children and grandparents can all comfortably live under one roof.
#4: Walkable neighborhoods
Even today, homebuyers are willing to give up some of their wants for a new house in order to get a location that’s within walking distance to stores, restaurants and other amenities. In the future, that trend is expected to only grow stronger.
#5: The net-zero house
For some time now, homeowners and homebuilders have both been striving to make the structures where we live more energy-efficient (green housing projects accounted for 20% of all newly built homes in 2012). But in the future, the new goal with be a net-zero home: A home that uses between 60 to 70 percent less energy than a conventional home, with the balance of its energy needs supplied by renewable technologies (solar, wind, etc.).
Essentially, these are homes that sustain themselves. While they do consume energy produced by the local utility, they also produce energy of their own, which can be sold back to the utility through a “net metering” program, offsetting the energy purchased.
#6 High-tech features
The technology revolution that’s transformed our phones, computers and TVs is going to push further into our homes in the not-too-distant future.
- Compact robots (similar to the Roomba vacuum) that will clean windows and more.
- Video feeds inside the oven that will allow you to use your phone to check on what’s cooking.
- Faucet sensors that detect bacteria in food.
- Blinds that will automatically open and close depending on the time of day, your habits and the amount of sun streaming through the windows.
- Refrigerators that will monitor quantities, track expiration dates, provide recipes, display family photos, access the Web, play music, and more.
- Washers and dryers that can be operated remotely.
- Appliances that will recognize your spoken commands.
- Heating and cooling systems that automatically adapt to your movements and can predict your wants.
#7: A higher level of security
In the future, home will continue to be a place where we want to feel safe and secure. To accomplish that, you can expect:
- Sensors that can alert you to water and gas leaks.
- Facial recognition technology that can automatically determine whether someone on your property is a friend or foe.
- A smart recognition system that will open the garage door, turn off the security system, unlock the doors and turn on the interior lights when it senses your car approaching.
- The capability to create the illusion that you’re home and moving about the property when you’re actually someplace else.
This is no pipe dream
Many of these products, processes and strategies are already in use. Some are still being tested. And others are only in the incubator stage. But in the not-too-distant future, experts believe they’ll all be available to homeowners across the country.