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HOMEBUYER’S
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Friday, August 21, 2015
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Q&A:
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What to Know About Buying Your Next Home
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HOMEBUYER'S GUIDE 2015
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HOMEBUYER’S GUIDE 2015
BUY NOW – OR FOREVER HOLD YOUR PEACE? Experts anticipate home prices, mortgage rates and inventories to rise in 2015. Does that mean house hunters should act fast? GETTING A MORTGAGE IN TODAY’S MARKET Lending standards are making it easier to get a loan, but that doesn’t you can just walk into the bank and get one. Here’s how to prep for today’s buying environment
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WHAT TO ASK YOUR POTENTIAL REAL ESTATE AGENT How to vet the candidates to make sure you find the right fit THE SECOND RETURN OF THE FIRST-TIME BUYERS They've been missing the past few years, but in 2015, they’re poised to make another big impact in the market ASK OUR BROKER: The 411 on giving – and getting – help with the down payment MEET YOUR BUYING TEAM Every homebuyer needs a key group of players to help make their purchase a reality. WHAT TODAY’S HOMEBUYERS WANT The modern home features that buyers are looking for
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HOMEBUYER’S GUIDE 2015
Friday, August 21, 2015
Meet the Homebuyers
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Every purchase has a story. Here’s the current state of buying
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nyone can purchase a home. Sure, there are the credit and down-payment requirements, but homeownership with ultra-exclusive membership requirements. Men, women, married couples, single folks, 1-percenters and those with more modest incomes – all are and, more importantly, can be homeowners. Including you. To see where you fit in, take a look at some of the highlights from National Association of Realtors’ 2014 Profile of Buyers and Sellers.
THE FIRST-TIME HOMEBUYER According to the NAR profile, 33 percent of recent home buyers were first-time homebuyers, a low figure given that, historically, first-time buyers account for around 40 percent of purchases, according to the NAR. The typical first-time buyer was 31 years old and had a median income of $68,300. (The typical repeat buyer was 53 years old and had a median income of $95,000).
WHY THEY BUY
Seventy-nine percent of homebuyers purchased a detached single-family home. Further, 13 percent of buyers purchased a multi-generational home for cost savings or to accommodate an adult child or aging parent. Buyers listed the following as their primary reasons for their recent home purchase:
24 % DESIRE TO OWN THEIR OWN HOME 9 % JOB-RELATED RELOCATION/MOVE 8 % BE IN A BETTER AREA OR CHANGE IN FAMILY SITUATION
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HOMEBUYER’S GUIDE 2015
HOW THEY FIND THEIR HOME The typical homebuyer searched 10 weeks for their home and view 10 homes. Here is how recent homebuyers searched for their home:
43 % GO ONLINE TO LOOK AT PROPERTIES AS THE FIRST STEP IN THEIR HOMEBUYING PROCESS 12 % OF HOMEBUYERS FIRST LOOKED ONLINE FOR INFORMATION ABOUT THE BUYING PROCESS
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FINANCING THE HOME Eight in ten buyers believe their home is a good financial investment and expect to live in their home for 12 years. Here’s how the rest of the purchase-related numbers stack up:
88 % OF HOMEBUYERS FINANCED THEIR RECENT HOME PURCHASE 90 % WAS THE TYPICAL PERCENTAGE OF PURCHASE PRICE THAT WAS FINANCED 46 % OF BUYERS REPORTED THEY HAVE MADE SPENDING SACRIFICES TO HELP FACILITATE THE PURCHASE 12 % OF BUYERS CITED SAVING FOR THE DOWN PAYMENT AS THE MOST DIFFICULT TASK IN THE HOMEBUYING PROCESS. © CTW FEATURES
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Friday, August 21, 2015
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WHAT TO ASK YOUR POTENTIAL REAL ESTATE AGENT Your agent is the pro who is going to help you find the right home, in the right neighborhood, for the right price. Here’s how to vet the candidates to make sure you find the right fit BY CARLEY LINTZ CTW FEATURES
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he process of buying a home can be a daunting venture, especially for first-time homebuyers. That’s where a real estate agent comes in. A good agent is your guide to finding your dream home, so you want to choose the right one for you. The best way to find a real estate professional is through referrals. Ask your circle of family and friends for recommendations, look at reviews of agents online and do your research. Once you’ve found a few likely candidates, you should have a face-to-face meeting. Come prepared with an idea of the house you’re looking for and, of course, some of the following questions for your agent.
WHAT IS YOUR BACKGROUND? WHAT ARE YOU CREDENTIALS? Trust is a key part of the buyer/agent relationship, so choose a professional with a level of experience that gives you confidence. Ask about their education background and understand the differences between titles. For example, a Realtor is a member of the National Association of Realtor and abides by a strict code of ethics, while a broker has furthered their education and has passed a broker’s license exam.
Also inquire about the agent’s professional background and any specializations or extra skill sets. “I would try to figure out what their strengths are,” says Andrew Wendt, president of Be Realty in Chicago. “Someone might have design experience or they might come from a corporate situation and have good negotiation experience.”
HOW MANY DEALS HAVE YOU DONE IN THIS NEIGHBORHOOD? The more knowledgeable an agent is about the community you want to live in, the better according to Steve Goddard of with RE/MAX Beach Cities Realty in Los Angeles,. “You want to ask [the agent], ‘How well do you know this area?’ Did they just move here or have they lived here for 40 or 50 years? How long have they been selling real estate?” says Goddard. These kinds of connections may be priceless throughout your home search.
WHAT IS YOUR TYPICAL CASE LOAD? This question is not necessarily about the number but rather their availability. “Getting an understanding of what their case load is or if they work with a delay of marriage and children, a key factor in the decision to buy a home. Overall economic factors, individual job prospects and personal life choices have all contributed to the lack of homebuying in the younger generation. However, things
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HOMEBUYER’S GUIDE 2015 partner will give you an indication as to how much time this particular person will have for your purchase,” Wendt says. Essentially you want to be aware if an agent is overloaded with clients and may not be able to dedicate the appropriate time to finding your future home.
WILL YOU HELP ME FIND OTHER REAL ESTATE PROS? Another characteristic of a reputable agent is their professional connections with vendors like mortgage brokers and home inspectors. “A good Realtor should help you with some names of people that they know and trust would service you properly,” Goddard says.
HOW WILL WE COMMUNICATE THROUGHOUT THIS PROCESS? From first meeting through closing on a house, you should expect reliable and accurate communication from an agent, says Wendt. Inquire about how they make themselves available, whether it’s via email, phone or text message and how often you should expect an update. Purchasing a home is one of the biggest (and priciest) decisions you’ll ever make. And at the end of the day you want someone on your team that makes you feel comfortable with the process. “Just make sure that your personalities match,” Wendt says. “You’re going to spend a lot of time with this person so you want to make sure that you get along with them.” © CTW FEATURES
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HOMEBUYER’S GUIDE 2015
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Friday, August 21, 2015
BUY NOW – OR FOREVER HOLD YOUR PEACE?
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Experts anticipate home prices, mortgage rates and inventories to rise in 2015. Does that mean house hunters should act fast?
BY ERIK J. MARTIN CTW FEATURES
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hey say the early bird gets the worm – and, likewise, the fast-acting homebuyer gets the best deal. In 2015, the latter may turn out to be a bigger truism than previously believed, given the newest market predictions by housing experts. Consider the recently published numbers. The National Association of Realtors forecasts that in 2015: • Existing home sales will increase 7.4 percent. • New home sales will increase 37 percent. • Median home prices will increase 4 percent (and another 4 percent in 2016).
The NAR’s consumer arm, Realtor.com, meanwhile predicts that in 2015: • Median existing home prices will appreciate 4 to 5 percent • 30-year fixed mortgage interest rate mortgage rates will increase mid-year, reaching 5 percent by the end of the year. • Housing affordability will decline 5 to 10 percent based on price appreciation and increased interest rates. Further, the National Association of Home Builders projects: • Single-family production is expected to increase 26 percent in 2015 to 804,000 units. • Multi-family homes will enjoy 358,000 starts in 2015, up 2 percent from last year. • And new single-family home sales are forecast to reach 564,000 this year, up about 30 percent% from the year prior.
CMYK Friday, August 21, 2015
HOMEBUYER’S GUIDE 2015
The point: The longer you wait to purchase a property this year, the more it will likely cost you. “Any prospective buyer in the right financial position and able to find a home that fits their needs is far better off buying now than waiting,” says Jonathan Smoke, a Washington, D.C.-based chief economist with Realtor.com. Smoke credits the rise in prices, rates and inventory to improved U.S. economic numbers in recent months, including strong growth in GDP, jobs and wages, expanding labor force participation, and positive consumer sentiment. These and other factors will empower the Federal Reserve to release its current hold on interest rates, resulting in a higher cost of borrowing for new home seekers. “Affordability will decline as a result of increasing prices and rates, which will only be partially offset by improving incomes,” Smoke says. Adam DeSanctis, economic issues media manager with the NAR in Washington, D.C., says there are pros and cons to buying now versus later. “Buyers may be able to lock in a lower interest rate today but have fewer choices. Buyers who wait to purchase until later in the year will pay a higher interest rate, but they’ll also have more units to choose from thanks to increased inventory,” DeSanctis says. “And with more units available, prices gains should stay relatively stable.” However, interest rates, sales prices and market supply shouldn’t be the only factors you weigh when deciding when to buy, says Michael J. Seiler, professor of real estate and finance at The College of William & Mary in Williamsburg, Virginia. “Now is good if you are settled in your job and family life. Now is bad if you see great uncertainty in your employment status, marriage or family,” Seiler says. “You should never rush into a purchase, and trying to time a real estate market is particularly dangerous. Instead, research the quality of the neighborhood, local schools, and the prospective home carefully.”
In addition, it’s important to calculate the full monthly cost of owning before committing to a purchase – including principal, interest, taxes and insurance, and expected maintenance expenses – in addition the length of time you plan to stay in the home, Smoke says. Alternatively, some would-be homeowners may be better off renting, depending to consider renting instead. “If you happen to reside in a community that is overbuilt in the rental market, the prospective buyer could find renting more economically profitable when the total costs and benefits of owning vs. renting are considered,” says Brent C. Smith, professor of real estate at the Virginia Commonwealth University School of Business in Richmond. © CTW FEATURES
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HOMEBUYER’S GUIDE 2015
Friday, August 21, 2015
GETTING A MORTGAGE IN TODAY’S MARKET in 2005, and with relatively low mortgage rates, affordability is still favorable, says Andres Carbacho-Burgos, senior economist at Moody’s Analytics. Here, experts shed light on today’s mortgage rules, and why this year the path to ownership is clear for more buyers:
LOWER THE BAR FOR DOWN PAYMENTS
The down payment – defined as the portion of a home’s value that a buyer pays for up front, for example someone who puts up $20,000 on a $200,000 home is making a 10 percent down
payment – has been in focus lately. Most experts agree that saving for a down payment is the biggest struggles for consumers hoping to buy. “Most of the efforts by [the government entities that back mortgages] have been targeted at buyers with low accumulated assets for a down payment and who have at least moderately good credit,” notes Erin Lantz, vice president of mortgages at Zillow. One government loan, the Federal Housing Administration or FHA mortgage, allows just a 3.5 percent down payment, and has been especially popular in the past few years because it was
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Lending standards are making it easier to get a loan, but that doesn’t you can just walk into the bank and get one. Here’s how to prep for today’s buying environment BY MARILYN KENNEDY MELIA CTW FEATURES
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his could be the year. All those would-be buyers who’ve been sidelined because they’re unable to secure a mortgage may find there’s finally a path to homeownership. “As we have wound our way from the financial crisis, hurdles and obstacles to accessing credit are starting to diminish,” says Keith Gumbinger of mortgage site HSH.
However, lending regulators are still hyperaware of the widespread pain inflicted by the foreclosure crisis, and don’t want to see any borrower without a strong financial and credit profile win mortgage approval. At the same time, consumer advocates, lenders and government regulators have debated how strict mortgage rules should be while still ensuring that qualified buyers have the opportunity to buy. In early 2015, home prices are down about 7 percent from where they stood at the bubble level
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often the only option that borrowers with limited down payments could qualify for. In late 2014 Fannie Mae and Freddie Mac, two other government agencies that back mortgages, announced new loan programs with just a 3-percent down payment. Each of these programs has special rules, like requiring at least one borrower be a first-time borrower. Freddie Mac’s loan, the Home Possible Advantage program – beginning March 23, 2014 – offers qualified borrowers a conforming, conventional fixed-rate 15-, 20- or 30-year mortgage with a maximum loan-to-value ratio of 97 percent, which can be used to purchase a single-unit property or complete a refinance (without taking out cash) of an existing mortgage. Although the program is available to any eligible borrower, first-time homebuyer applicants must complete a homeownership education and counseling program, and other restrictions apply. Fannie Mae began offering a similar 97-percent LTV loan option in December 2014 for any borrower who hasn’t owned a primary residence for three years. A counseling/education course is not required, but other stipulations and
HOMEBUYER’S GUIDE 2015 exclusions apply. Applicants to either program must have a minimum credit score of 620, provide thorough documentation of employment, income and assets, and purchase private mortgage insurance.
TAKE A WIDER LOOK AT CREDIT
The FICO credit scoring model, which takes data on whether consumers pay their credit card, medical, phone and other bills from the three major credit bureaus, and then assigns a number from 300 to 850, is used by most mortgage lenders. The higher the number, the better the score. In the immediate wake of the financial crisis scores well into in the 700s were required for borrowers making less than a 20 percent down payment, says Don Frommeyer, past president of the National Association of Mortgage Brokers, but there has been easing since then. (See the 620 requirements on the new 3-percent Fannie and Freddie loans.) Scores work in tandem with other factors, like down payments and whether an applicant will have emergency savings after buying, says Frommeyer.
Strength in one area can help compensate for some weakness in another. One important change to how FICO scores are computed, enacted last year, should boost scores for millions of consumers. The new scoring model, “gives less weight to unpaid medical debt than other types of unpaid debt,” reports Karen Paculba, a spokeswoman for the Fair Isaac Corp., the FICO parent. “Scores for consumers whose only major negative items in their credit reports are medical collections can increase by up to 25 points.” However, not all lending companies may be using the new FICO model just yet.
TALLY DEBT TO ENSURE AFFORDABILITY
The Dodd-Frank Wall Street Reform and Consumer Protection Act mandates that lenders look at how affordable a mortgage will be to a borrower, taking into consideration all the other recurring debts, like his credit card and auto loan payments. Those monthly recurring obligations, combined with the monthly amount that a borrower would pay on the new mortgage – including a monthly
Suffolk News-Herald | Page 11
allotment for property taxes and homeowner’s insurance – shouldn’t take up more than 43 percent of the borrower’s gross (pre-tax) monthly income. “Some lenders can figure out ways to get slightly above the 43 percent cap, but these are fringe cases,” notes Lantz. Usually, homebuyers make an initial visit to a lender to get “pre-qualified,” where the lender looks at the financial profile of the potential borrower, including the tally of recurring debt to income and estimate how big a mortgage the borrower should be eligible to obtain. But when a buyer selects a home and makes a formal application, the debt-to-income ratio is again measured, and lenders also will check to see that no new debt, such as an auto loan, has been added when the borrower is ready to close on the loan, notes Frommeyer. Indeed, lending rules are still strict enough that borrowers must be careful to keep up prudent financial practices every step of the way. © CTW FEATURES
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HOMEBUYER’S GUIDE 2015
Friday, August 21, 2015
MEET YOUR BUYING TEAM Every homebuyer needs a key group of players to help make their purchase a reality. Here are the pros you want on your side when it comes time to buy
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BY LAURA DEPTA CTW FEATURES
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urchasing your first home represents a major life event, but you can’t do it alone. Homebuying is a team sport, and you’ll only be successful with all the key players going to bat for you. Here are the pros you need on your side:
THE LENDER
First, you need to set your finances in order by selecting the right lender – this could be a mortgage broker, bank or credit union. “The financing is the most important part of the whole transaction,” says Rhonda Duffy, owner of Duffy Realty of Atlanta. Keep in mind, not all lenders will offer the same thing. Duffy recommends speaking to several lenders and then comparing their loan proposals. “When you’re hunting the right kind of loan,” explains Duffy, “You’ve got to know the questions to ask these lenders and then be able to compare what they tell you.” Once you’ve made a decision, the lender will help you determine what you can afford based on your application and credit history. Your lender will help you get pre-approved for a mortgage, so you know how much home you can shop for.
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THE AGENT
Next, it’s time to meet with your real estate agent and start the search for your perfect home. Michael Wolf, author of “The First Time Homebuyer Book” (Dog Ear, 2010), suggests a referral system to find the right agent. “Poll the people you know who bought a property, see what their experience was, and see if they would attach their name to their real estate professional,” advises Wolf. Your agent is essentially the coach of your homebuying team. The agent is there to guide you through all the complex steps of finding and purchasing a home. “The agent’s role is to be a sounding board,” Duffy says. “To know what happens in the transaction next and to, with urgency, put those pieces into place.”
THE HOME INSPECTOR
Once you’ve found your dream home, made an offer, and the seller has accepted, the next step is to hire a home inspector, who will – yes – inspect that the home is up to code and does not have major issue lurking. Your real estate agent can generally recommend one, but it is also important to independently investigate the professionals on your team. “You want to give the client the opportunity to do research on these people who you recommend,” Wolf says. “Ultimately, we want to make sure that the decision is the client’s.” Duffy adds, “For the inspector, the most
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THE APPRAISER
The appraiser is a member of your team, but not one that you recruit. The appraiser is hired by the lender to assess the home’s value to make sure it’s worth what they’re offering you. The goal is to protect both you and the lender to make sure you’re not overpaying for the home.
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THE CLOSING AGENT
The closing agent is the final piece of the puzzle. This could be an escrow company or an attorney, depending on the state. Either way, the closing agent works for the buyer, seller and lender to tie up the loose ends of the transaction. The closing agent escrows funds and ensures that contracts are being followed. Ultimately, your homebuying team is there to help guide you through a complex, life-changing journey. “Homeownership is very valuable,” Duffy says. “I don’t want [buyers] to be afraid of it, like they can’t accomplish it. All they have to do is apply a little bit of rational logic to an emotional process.” © CTW FEATURES
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HOMEBUYER’S GUIDE 2015
Page 14 | Suffolk News-Herald
Friday, August 21, 2015
THE SECOND RETURN OF THE FIRST-TIME BUYER
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Just a few years ago first-time buyers bought a record number of homes. In 2015, they’re poised to make another big impact in the market
BY LAURA DEPTA CTW FEATURES
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irst-time homebuyers come, and first-time buyers go. Historically, first-time buyers make up approximately 40 percent of purchasers in a given year, according to the National Association of Realtors. In 2010, spurred in large part by a federal tax credit of up to $8,000 for a first home purchase, first-time buyers flooded the market and accounted for half of all buyers, a record high. But by 2014, a lack of incentives and tough economic realties had seemingly scared away younger buyers; first-time buyers accounted for just 33 percent purchases last year, a near record low. To this point, millennials – that is, adults aged 18-33 – have been slow-
er to get into the homebuying game. Multiple factors have influenced that trend, including increased student debt and decreased post-college job opportunities. “Rising rents and repaying student loan debt makes saving for a down payment more difficult, especially for young adults who’ve experienced limited job prospects and flat wage growth since entering the work force,” Lawrence Yun, the NAR’s chief economist, said in a statement regarding the 2014 buying numbers. Not only that, but young people have been slower to settle down and get married in recent years. According to Zillow, the low rate of homebuying in millennials has not been due to a lack of desire for homeownership, but instead due to the
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are starting to change for millennials. According to the NAR, millennials in 2014 saw 60 percent better job growth as compared to the overall U.S., and unemployment has dropped to 6 percent. These improved economic conditions and the maturation of the generation should lead to an increase in homebuying. In fact, Realtor.com’s 2015 Housing Forecast suggests that millennials are more likely to buy a home in 2015 than any other age group. “The residual financial effects of recessiondriven job losses and subsequent unemployment have impeded millennials’ entry into the home-owning market,” Jonathan Smoke, chief economist for Realtor.com, said in the forecast. “In 2015, increases in employment opportunities will empower younger buyers to return to the market and fuel the continued housing recovery.”
A FIRST-TIME BUYER’S MARKET
Part of the reason for the predicted uptick in first-time homebuying is the overall status of the housing market. To start, it is currently cheaper to buy than rent in many places. According to real estate site Zillow, home values will increase by 2.5 percent in 2015, but rentals will outpace that figure at 3.5 percent. As renting costs continue to rise, renters may seek the stability of fixed mortgage payments. Brian Teyssier, an agent with RE/MAX Advanced Realtors in Pittsburgh, predicts that the disadvantages of renting may even cause young people to move up their five-year plan. “The increased rental fees coupled with low interest rates and the fact that FHA lowered their down payments – it’s a no brainer for those people that were renting to move their plan up,” he says. Buyers also may gain market leverage due to increased inventory of smaller, less expensive homes. In its 2015 forecast, Zillow predicted favorable buying conditions and an increase of “entry-level” homes should entice first-timers to the market. “In recent years, home builders seem to have made a conscious decision to sell fewer, more expensive homes instead of more, cheaper homes,” Dr. Stan Humphries, Zillow chief economist, said in the forecast. “In 2015, that will change, especially as demand moves toward the lower end of the market as millennials begin buying en masse.” While millennials are predicted to be the largest group of homebuyers in 2015, baby CMYK
HOMEBUYER’S GUIDE 2015
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boomers also will factor into the mix as well. According to the NAR, as millennials search for starter homes, baby boomers will look to downsize. Thus, the demand for smaller, more affordable homes will rise from multiple angles.
WHERE TO?
Though millennials are definitely looking to buy, some markets are better than others. The challenge is to find the right marriage of lifestyle preferences and affordability. According to the NAR, millennials tend toward urban environments with efficient mass transit systems. They also tend to value communities with a “work, live, play” vibe. That said, home prices are also expected to rise by 4 to 5 percent in 2015. That means highpriced urban markets such as San Francisco will continue to offer limited affordable prospects. Because of this, first-time homebuyers in search of less expensive housing will be better off in markets that offer both strong employment prospects and affordability. “If access to credit improves, we could see substantially larger numbers of young buyers in the market,” agrees Smoke. “However, given a high dependency on financial qualifications, this activity will be skewed to geographic areas with higher affordability such as the Midwest and South.” Zillow predicts the top housing markets for first-time buyers in 2015 will be: • Pittsburgh • Hartford, Connecticut • Chicago • Las Vegas • Atlanta These markets all boast strong income growth among 23- to 34-year-old, in addition to an increase in affordable startup homes available on the market. Teyssier, the Pittsburgh agent, agrees with that sentiment toward his market. “The median price range is still super low here – it’s $133,000 right now,” he says. Teyssier adds that the increased demand for affordable housing in his area should not drive up won’t drive up costs at a significant rate. “Our home values have gone up over the last three years,” Teyssier says. “And I would say that the Pittsburgh area is hitting a peak, that the prices aren’t going to go too much higher.” Overall, millennials are growing up, and they are looking to buy their first homes. As a result, look for affordable urban environments to see a significant uptick in buying activity in 2015. © CTW FEATURES
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HOMEBUYER’S GUIDE 2015
Page 16 | Suffolk News-Herald
Friday, August 21, 2015
WHAT TODAY’S HOMEBUYERS WANT
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It takes more than four walls and a roof to get buyers in the door. Here are the modern home features that buyers are looking for
BY MADHUSMITA BORA CTW FEATURES
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he best way to know what the next wave of homebuyers want is to ask a homebuilder. Ask around, and you’re likely to hear energy-efficient appliances and windows, granite kitchen countertops and walk-in closets. These were among the most-desired features in the nationwide homebuilders survey on home trends and millennial home preferences released in January 2015 by the National Association of Home Builders. “Storage and organizations and energy efficiency are highly wanted features and you are most likely to see them in the average home this
year,” says Rose Quint, assistant vice president of Survey Research, Economics and Housing Policy at the NAHB. No longer are features like outdoor cabinets, carpeted floors, laminated kitchen countertops and media rooms making the “must have” list. “Builders are responding to consumer preferences,” Quint adds. Builders are taking their cue and replacing them with amenities that buyers want. The sluggish economy of recent years and hurdles to homebuying shut out many first-time buyers, mostly millennials. Slow job growth, tight lending guidelines and credit scrutiny made it difficult for younger folks to invest in a home. Wealthier move-up buyers, who were using their equity to
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buy their second home, were driving the market with their preferences. They liked bigger homes, sun rooms, media rooms and other luxury amenities. Quint said she believes that the market is now primed for first-time buyers. Moderate home price gains in 2014 coupled with record job growth and loosening credit guidelines will allow more new buyers to enter the market, and they will demand smaller, more affordable and energy efficient homes, she says. Although builders reigned in on new-home construction, with numbers dipping 2 percent in January 2015, starts are up almost 19 percent compared to the year-ago period. There will be newer homes in the market and they will cater most likely to new buyer preferences. In the NAHB survey, 75 percent of millennial buyers said they prefer single-family homes, and 46 percent respondents said they want a four-bed-
HOMEBUYER’S GUIDE 2015 room house and are willing to pay more for an energy-efficient home. Here are some of the other key trends industry experts expect to see in new homes this year:
GREAT ROOMS
Families today are voting for open kitchendining-living-family spaces. “The kitchen is becoming the center of action in the house,” Quint says. “They want to watch the kids do their homework while cooking dinner and watching TV. They want to feel connected as a family.” The concept of an open dining/kitchen/living space sans walls adds volume to the house and lends a much bigger look.
ENERGY EFFICIENCY
Beenu Sikand, an Indianapolis-area Realtor,
says today’s clients prefer smaller, energy-efficient homes with additional bedrooms for extended family. “They don’t want to pay a lot on utilities,” she said. According to the NAHB survey, Energy Star-rated windows and appliances and programmable thermostats are among the Top 10 likely new-home features this year, according to the NAHB survey.
OUTDOOR SPACE
Buyers want outdoor space – but not the typical massive yard, says Cathy Davis a Realtor with Elfant Wissahickon Realtors in Philadelphia. “They prefer roof decks or patios, or even little decks on the side,” Davis says. “People don’t have the time to care for their yards like they used to.”
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STORAGE & ORGANIZATION
Walk-in closets and laundry rooms were the first two most likely features to be added to a typical single-family home this year. Home organization and storage space also are very important to buyers these days, says Quint. “They want their linen closets and walk-in closets and two-car garages to help keep their home organized,” she said.
WALLPAPER – MAYBE!
Trends are oftentimes cyclical, and it looks like wallpaper, which went out of vogue, is now making a reappearance. Advertisements for wallpapers are picking up, says Davis. “It’s coming back, although not in a big way yet,” she says. “People are just using it for aesthetics and accent.”
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HOMEBUYER’S GUIDE 2015
ASK OUR BROKER: THE 411 ON GIVING – AND GETTING – HELP WITH THE DOWN PAYMENT BY PETER G. MILLER CTW FEATURES MY WIFE AND I WANT TO HELP OUR SON AND HIS WIFE PURCHASE THEIR FIRST HOME. WE’RE NOT SURE WHAT’S THE BEST WAY TO GO. WE CAN PROVIDE $50,000 FOR A DOWN PAYMENT, BUT WHAT ABOUT THE TAX IMPLICATIONS? WOULD IT BE BETTER FOR US TO INVEST IN THE PROPERTY?
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According to the IRS the annual tax exclusion for gifts is $14,000 for 2015. That means you can give your son $14,000 and another $14,000 for your daughter-inlaw. Your wife can do the same, meaning you and your wife can give your son and his wife as much as $56,000 tax-free in 2015. For details and specifics speak with a tax professional. If your son and his wife buy property with a mortgage, the lender will want to know about the source of their funds. The lender will have you provide a “gift letter” showing that the money given to your son and his wife is a gift and that you do not expect repayment. As to holding an interest in the property as an investment, that’s a different story. Under the Black Lung Benefits Revenue
You and your wife have a 30-percent interest in the property – a number that entirely is negotiable – and your son and his wife own 70 percent. Each month they pay you rent equal to 30 percent of the fair market rental for the property. Equity-sharing arrangements raise a number of questions: What if you want to sell and your son doesn’t? What if there’s a family fight? Or a divorce? What happens if you die and leave your interest to someone other than your son? If the property is sold do you get back the full $50,000 or just 30 percent of the sale price? Equity sharing is complex. You’ll need to get advice from an attorney, and you’ll also need to consider related tax and estate issues so speak with a tax professional. Meanwhile, your son and his wife should understand that they’re lucky to have parents who have the financial capacity to be helpful and are willing to assist their children. In an economy where young people are having a tough time you should be proud of what you want to do.
WE’REGETTINGMARRIEDANDRATHER THAN REGISTERING FOR GIFTS WE WOULD PREFER CASH TO HELP SAVE FORADOWN PAYMENT. SOME OFOUR RELATIVES THINK THIS IS NONTRADITIONAL AND MAYBE UNWISE. WHAT DO YOU THINK? Act of 1981 you might want to consider buying jointly with your son and his wife by using an “equity-sharing” arrangement. In basic terms, an equity-sharing agreement allows your son and his wife to be resident equity owners while you and your wife are nonresident investors. Your son and his wife can deduct a portion of the mortgage interest and property taxes, while you and your wife can deduct a portion as investors. Because you are “investors” and not residents you can also depreciate your share of the property. As an example, you put up $50,000, and a property worth $300,000 is purchased.
Stick to your guns. According to TheKnot.com, the average wedding now costs upward of $30,000. That’s a huge amount for most families given that the average household income in 2013 was $51,939. That’s also a huge amount for another reason: Household income in 2013 was 8.7 percent lower than in 1999. Is some of that wedding money better spent on a down payment for a house? The answer depends on family preferences, finances and dynamics, and whatever is best in your particular situation. It also depends on family goals: Many families see weddings as a way to help the new couple get a head start in life. The important point
Friday, August 21, 2015
is not to let social pressures drive anyone into debt or financial discomfort, including the bride, groom, parents or the guests. Mortgage lenders like financial gifts. With FHA loans, as one example, the borrower is responsible for coming up with the down payment. There can be a “seller contribution” – say a credit toward closing from the owner – but the down payment itself must come from the purchasers. However, one big exception to the down payment rule is that gifts are allowed from family, friends, an employer or labor union, a charitable organization and even a government agency. “In order for funds to be considered a gift,” says HUD, “there must be no expected or implied repayment of the funds to the donor by the borrower.” The value of such gift funds is enormously important. First, the larger the down payment the less there is to borrow, so monthly ownership costs are lower. Second, if the down payment is at least 20 percent of the purchase price then the borrowers won’t need mortgage insurance, a big cost. In effect, not having to pay mortgage insurance is a sizable dividend. What about registering for gifts? The reality is that people are getting married later. Back in 1960 the typical bride was age 20.3 at the time of her wedding, but now the bride is likely to be age 26.6, according to the Census Bureau. Because people are marrying later they tend to own more stuff at the time of their nuptials, so they have less need for mixers and bathroom scales. Instead, in many cases, checks and cash are very welcome. The socially acceptable way to get financial gifts is to let the word spread that you would prefer cash and to explain why: Money from a wedding that’s intended for a responsible purpose – perhaps toward the down payment for a home, the repayment of student debt or just for savings – is likely to be an acceptable idea, especially in today’s fragile economy. © CTW FEATURES
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Suffolk News-Herald | Page 19
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