Evansville Real Estate News Letter for August 2012

Market Watch

This month’s Market Watch is about mortgage financing and how it affects the housing market. We all know that our country suffered a terrible recession just a few years ago. Although we don’t hear as much as we used to no one disputes that the primary cause of the recession was mortgage loan defaults caused by lending standards that were far too lenient. The Federal Government, primarily through Fannie Mae and Freddie Mac not only loosened lending standards but in many instances mandated, through the guise of the Community Reinvestment Act, that mortgages be extended to unqualified buyers. In addition to being the biggest single cause of the recession Fannie Mae and Freddie Mac sustained billions of dollars in losses on these loans. Since that time, lending standards have been made much more stringent. In my opinion, the pendulum swung too far one way and has now swung too far the other way. In addition to lending standards other restrictions and rules are inhibiting lending. The HUD disclosure, which was 3 pages, is being “simplified” to 8 pages, for example. The National Association of Realtors estimates that as many as 20% of potential buyers are being prevented from entering the housing market by unreasonable lending standards. Regulators are currently planning and implementing even more rules and restrictions. Clearly these are not only unnecessary, but are becoming oppressive and hurting the housing market. Although no one wants Fannie Mae and Freddie Mac to lose money that is no longer a problem. Last quarter Fannie Mae and Freddie Mac combined made over $8 billion in profits. Lending standards already in place are more than stringent enough to generate a profit for these lenders. Further restrictions will slow the housing market, reduce lending and reduce profits because fewer loans will be extended.

Our local market had another acceptable month. This calendar year has been remarkably consistent and through July we are up 6.6% in closed units and up 2% in median price. Inventory levels are better here than in many parts of the country. Interest rates are still unbelievably low. These rates will not last forever. Buyers continue to remain selective about the condition and maintenance of properties they are considering. If you are selling make sure your property is neat, clean and well maintained. Call me if you would like some tips on preparing your house for sale. You can reach me on my cell phone 812-499-9234.

Do-It-Yourself Home Security Check: 5 Essential Steps

Conduct a do-it-yourself home security check by walking around your house to assess what needs to be done to reduce the risk of a break-in.
1. Keep your home well-maintained on the outside.
Burglars want an easy target. Stand on the street outside your house and ask yourself: Does my property look neglected, hidden, or uninhabited? A front door or walkway that’s obscured by shrubbery offers crooks the perfect cover they need while they break a door or window. To improve security, trim shrubs away from windows and widen front walks.
2. Install motion detector lights.
All sides of your house should be well-lit with motion-activated lighting, not just the front. Simple motion-activated floodlights cost less than $50 each, and installing them is an easy DIY job if the wiring is already in place.
3. Store your valuables.
Thieves want easy-to-grab electronics, cash, jewelry, and other valuables, though some are not above running down the street with your flat-screen TV. Most make a beeline for the master bedroom, because that’s where you’re likely to hide spare cash, jewelry, even guns. 

Tour each room and ask yourself: is there anything here that I can move to a safe deposit box? Installing a home safe ($150 to $500) that’s bolted to your basement slab is a good repository for items you don’t use on a daily basis.
4. Secure your data.
While you probably won’t be putting your home computer in a safe anytime soon, take steps to back up the personal information stored on it. Password protect your login screen, and always shut off your computer when not in use (you’ll save energy, too!) Don’t overlook irreplaceable items whose value may hard to quantify, like digital photos.
5. Prepare ahead of time in case the worst happens.

• Take a photo or video inventory of items of value in your home, and store the file online or in your home safe.

• Check that you’re properly insured for theft. Note that high-ticket items in your home office, such as computers, professional camera equipment, or other business essentials, may require an additional rider or a separate policy.

Source: http://members.houselogic.com/start/??nicmp=rcrim&nichn=editorial&niseg=rmonews

New report shows most Americans not prepared for disaster

According to a recent survey conducted by the insurer Allstate, many American consumers are woefully unprepared for a disaster. If recent disaster-filled years are any indication, this problem must be rectified as quickly as possible.

In 2011, the Federal Emergency Management Agency (FEMA) issued 99 major disaster declarations - the most since FEMA began the disaster declaration system in 1953. According to FEMA's website, major disaster declarations in 2011 ranged from a tornado in Massachusetts to a hurricane in Texas - in other words, the incidents were completely unpredictable.

Natural disasters can strike anywhere, at any time, but according to Allstate's survey, that is not enough incentive to provoke American consumers to take precautions. The numbers show that despite the large percentage of Americans whose homes have been damaged by natural disasters - 21 percent - a staggering 56 percent of consumers have not taken inventory of their belongings.

Taking inventory can make the process of filing homeowners insurance and property insurance claims much easier in the event of a disaster. Without the proper inventory, families could easily lose property in a storm, fire or flood, and be unable to replace it. Consumers who have prepared for disaster before it strikes will be able to file proper claims and rest easily knowing their property is protected.
Source: http://homeinsurance.com/news/new-report-shows-most-americans-not-prepared-for-disaster.php

Need to Modify Your Home for Medical Reasons? 2012 is the Year to Do It

With tax deduction limits coming for 2013, medically related home upgrades are a smart project this year.


What a difference year makes.
For the 2012 tax year, you can take a tax deduction on medically necessary home improvements — like installing a wheelchair ramp and other projects that make life easier for an ill or injured family member — if you:

• Itemize deductions

• Spend more than 7.5% of your adjusted gross income on the upgrades (10% of AGI if you’re subject to alternative minimum tax).

Starting in 2013, if you’re under age 65, you can’t take the tax deduction on medical expenses until you spend 10% of your AGI. But if you’re 65 or older in 2013, you can stick with the 7.5% AGI tax deduction threshold through the end of 2016.
The rules for tax deductions on medical home improvements are tricky:
1. Start with what it costs to modify your home.
2. Subtract the value the upgrades add to your home.
3. What’s leftover is your tax deduction — if you meet your AGI threshold.
How it works
Say you’re 45 years old and spend $20,000 to put a bathroom on the first floor of your home because your husband can’t climb stairs anymore. Your AGI is $100,000. A REALTOR® says the bathroom adds $10,000 to the value of your house.
1. Start with the cost of the improvements: $20,000
2. Subtract your added home value: $10,000
3. Of that $10,000 difference, you can only take a deduction for expenses that exceed 7.5% of your AGI or $7,500.
So if you itemize, you can take a $2,500 deduction for the 2012 tax year. Wait until 2013 and you get no deduction because your threshold rises to 10%. If you’re over age 65, though, you can claim a $2,500 deduction.
Tip: Doing all your improvements in a single year will help you meet the AGI threshold.
Some of the improvements that you can claim a tax deduction for, according to IRS Publication 502, “Medical and Dental Expenses”:

• Entrance ramps for your home

• Grading the yard before building a ramp, or to make it easier to get in your home

• Widening exterior or interior doorways

• Widening or removing hallways

• Installing railings, support bars, or other bathroom improvements

• Lowering or modifying kitchen cabinets and equipment

• Moving or modifying electrical outlets and fixtures

• Installing porch lifts and other forms of lifts (but elevators generally add value to the house)

• Modifying fire alarms, smoke detectors, and other warning systems

• Modifying stairways

• Adding handrails or grab bars anywhere (whether or not in bathrooms)

• Changing door knobs

• Upkeep of medically necessary upgrades, like elevators, and operating costs

• Lead-based paint removal if your child has lead poisoning

• Renovating an existing bathroom to make it handicap accessible or adding a new accessible bath

Will the tax change encourage you to make necessary changes this year?


Read more: http://www.houselogic.com/blog/tax-deductions/medical-tax-deduction-changes-2013/#ixzz23dg4PbL4

4 Strong Reasons to Buy a Home Now

“It’s hard to argue against buying a house now, assuming you can get a loan,” writes John Waggoner, a columnist with USA Today. Sure, Waggoner says that getting a credit check for approval of a mortgage can be a “only slightly less intrusive than a CIA background check,” but for those who are able to qualify, a lot of analysts say that now can be a good time to purchase a home.
1. The price is right. The median single-family home price hit its lowest in more than a decade when it reached $154,600 in January, according to the National Association of REALTORS®. That was the lowest since October 2001. During the height of the housing market in July 2006, the median home price for a single-family home was $230,900.
2. It’s cheaper to buy than rent. In nearly every major metro market, it is cheaper to buy a home than rent. Rents have been on the rise the last few years and are predicted to continue to rise. Meanwhile, home affordability is at record highs, which means that buying a home is more within reach to the median income family.
3. Inventories of for-sale homes are shrinking. Ned Davis Research estimates that excess inventories of homes to be eliminated by the end of next year. “When excess supply dries up, people start building more new houses, which has the virtuous effect of reducing the unemployment rate and increasing the economy generally,” according to the USA Today article.
4. Mortgage rates are at record lows. Mortgage rates have hovered near record lows for weeks, which has helped pushing housing affordability higher. For example, the average 30-year fixed-rate mortgage, which is the most popular among home buyers, is 3.59 percent, according to Freddie Mac—just above its record low set on July 26 of 3.49 percent average. “It’s conceivable that at some point in the next 30 years, your interest rate would be less than the rate of inflation,” writes Waggoner for USA Today.
Source: “If You Can Pull it Off, a House is a Smart Investment,” USA Today (Aug. 9, 2012)

Your Evansville Relocation Can Be Smooth Sailing

Uncertain economy or not, we Americans remain a highly mobile bunch. In fact, the Census Bureau says that no fewer than 6,700,000 Americans packed up and moved to a new state in the period between 2010 – 2011, the latest year on record. The study sheds light on the movement of people within the U.S. -- and it lets us know that of the most common reason for interstate relocation (43.9%) was for employment-related reasons. The official stats are not yet available for last year, but the relocation numbers are expected to increase as people continue to relocate in search of more stable economic environments.

For just about everyone, even thinking about relocating is a daunting proposition. Although it can turn into a planet-sized headache, if you are one of those considering relocation to our neck of the woods, the surest way to keep yourself sane is to connect with an experienced buyer's agent.

A buyer's agent can accomplish several momentous things to simplify your local relocation. He or she can take your "wish list" and find the available area properties that suit your needs. With a good working knowledge of what is available, your agent will provide guidance on the price similar properties have recently commanded. Buyer's agents are contractually bound to have your best interests at heart -- which is why having a buyer’s agent is preferable to using the seller's agent.

If you are starting from scratch, and don’t yet know anyone in Southwest Indiana, your new coworkers may be able to offer a referral. A thorough Internet search can turn up a stellar agent or two, as well -- bonus points if you can find a site where previous customers have supplied ratings.

As with any other key professional service provider, you shouldn’t be willing to settle for the first person you come across. Taking the time up front to find a sympathetic agent can wind up saving a lot more time in the long run. It is important to interview several buyer’s agents, asking enough questions to make sure you are both on the same page. One good question to ask is whether the agent tends to work with more buyers than sellers.

Where your new home is concerned, there is really no need to take chances. A great buyer's agent will help make your Evansville relocation as painless as possible. I hope you will include me on your interview list -- I’m here to help my clients every step of the way!

3 Big Predictions for Real Estate

A few major predictions came out of the panel discussion that kicked off Inman's Real Estate Connect event yesterday morning in San Francisco. The session, moderated by Inman News founder Brad Inman, featured experts from the worlds of real estate and finance. Here were some of the most important forecasts for the real estate industry:
1. Rates will remain low for at least another year.
Amy Brandt, CEO of Vantium Capital, offered the most conservative prediction: that rates would probably start to rise significantly by the summer of next year. Bill Emmons, assistant vice president and economist of the Federal Reserve Bank of St. Louis, said he expects the Fed to do whatever it can to hold rates down until the end of 2014.
2. No matter what happens, the government will continue to play a major role in mortgage financing.
Brandt pointed out that more than 90 percent of mortgages are somehow supported today by the federal government. It will probably stay that way for a couple of reasons, the first being that investors want it that way, said Joel Singer, CEO of the California Association of REALTORS®. But another issue is that no private entity or group is big enough to fill that role right now. However, it's unclear whether the FHA or a reconstituted Fannie Mae and Freddie Mac would take the lead.
3. Hard assets such as oil, gold, and real estate will probably be on the rise for some time to come.
All of the panelists agreed, with some minor exceptions, that real estate is a good investment right now. And like other tangible assets, it will likely grow in value over the next few years.
They also all agreed that it will take some time before the economy returns to stable, long-lasting growth. The reason? The downturn was driven by major problems in the financial sector, and the broken system will have to be retooled before the economy can truly flourish, said Patrick Stone, president and CEO of the Williston Financial Group.?@
That rebuilding could take some time, Singer added. "This transition is going to take a while," he said. "The failure of institutions to grasp the problem and come up with solutions is what's caused this to last so long."
Emmons said the extreme aversion to risk among business right now -- causing capital to flow into low-risk, low-return assets -- should improve soon, but added that unprecedented levels of public and private debt could hold back growth. "There's still a lot of debt to work through," he explained. "In some respects, we look like Japan. Rather than take the 18 months of hell to get through that, we're just kicking it down the road."
However, the panel was generally optimistic about the long-term prospects of the economy.
"We train and educate the innovators of tomorrow," Stone said. "And no country is better at connecting capital and innovation."
Brandt also expressed confidence in the ability of most real estate professionals to adapt to any major economic shifts, just as they did with the advent of the Internet. "I think this is an innovative group that can come up with solutions," she said, but added that practitioners should raise their awareness of and involvement in the mortgage financing part of the transaction.
"If I were running a real estate company, I would try to be more tightly integrated with the financial side," she said.
- Brian Summerfield, REALTOR Magazine http://realtormag.realtor.org/daily-news/2012/08/02/3-big-predictions-for-real-estate