Huge Disparity in Home Affordability Across the U.S.

SFHow can an annual salary of just over $19,000 be enough to buy you a home in Cleveland, Ohio, while you’ll need a princely income of $115,510 per year to buy a home in San Francisco, California? Let’s just say that home prices, mortgage rates, and other economic factors vary tremendously across the U.S., as evidenced by a recent study by HSH.

The HSH study put together data on mortgage rates and median home prices in 25 of the largest metropolitan areas in the U.S., and calculated how much salary you would therefore need in order to cover the mortgage payments on an average home there. (And that’s before you start worrying about other costs of living, like local private schools.)

The results should make any Californian who doesn’t already own a home want to flee to another state. Not only is San Francisco absurdly difficult to buy into, but prospective Los Angeles homebuyers will need, on average, an income of $72,127, and San Diego homebuyers will need $81,570.

Even New York City starts to look cheap by comparison: An income of $66,167 gives you a shot at buying a home there, woo-whoo! And we can blame the dot-com industry for driving up rates in San Francisco, but why is Seattle, the home of Microsoft and Amazon, still affordable for folks with an income of $59,130?

No wonder the other big story in the San Francisco Bay Area is that rental rates are the highest in the nation. But if you need to buy a house in an expensive area, you’ll find useful information in the “Affording a House” section of Nolo’s website.

 

 

 

Joining the Crowd of Newly Built Home Buyers? Do Your Homework

valentines houseA couple of years ago, finding a newly built home to buy was as hard as finding an open seat in a nice restaurant on Valentine’s Day. The builders weren’t building, knowing that the buyers weren’t looking.

But last month saw a sharp spike in sales of new homes, according to estimates by the Mortgage Bankers Association (MBA).

A whole new crop of homebuyers may, for the first time, be considering the possibility of investing in a home that, at the moment, exists only in the form of a drawing on a map. It’s an exciting process — new-home buyers can often customize the place to their own wishes, from the layout to the counter tops to various amenities.

It’s also a time for caution. First, there’s the matter of construction quality. The model house in the development, if there is one, probably looks shiny, new, and perfect. But not every builder is attentive to quality, and some are more attentive to speed and appearance than anything else — leading to horrible customer surprises down the line, as described in Nolo’s article, “Newly Built Houses: Pros and Cons of Buying.”

Then there’s the fact that many homes in development — particularly, but not always, if they’re condos or townhouses — require all owners to join a homeowners’ association (HOA). That offers many advantages, such as someone to maintain common areas and watch over community quality and uniformity.

But it also means ongoing monthly dues, the possibility of expensive special assessments, and a level of control over your life that not even a landlord could exert. (“Sorry, your dog’s too big, you can’t fly that flag, and you can’t hang your laundry outside.”) For more on that, see “Homeowners’ Associations (HOAs) and CC&Rs: Know What You’re Getting Into.”

And when you’re done with all that reading, don’t forget to make those Valentine’s Day reservations!

Now’s a Good Time for Some Homeowners to Refinance

castleMortgage rates (30-year fixed) are at around 4.25% today, according to Bankrate.com. And what with rising home values in many parts of the U.S., a whole new crop of homeowners may find that they have, at last, sufficient equity to consider refinancing.

But that doesn’t mean everyone with a mortgage rate higher than 4.25% should rush out and refinance. The upfront costs of arranging for a new mortgage can sometimes wipe out the savings to be gained.

Yes, figuring out whether a refi is right for you is going to involve some math. How nice, then, that Consumer Reports‘ January, 2014 issue offers (in its Money section) a handy guideline for today’s mortgage market. Quoting Michael Garry, a financial planner in Newtown, PA, it says, “Refinancing might be worthwhile if you’re paying more than 5 percent.”

So if you’re paying less than 5 percent on your home loan, you can probably save yourself running some numbers. If you’re paying more, however, don’t worry that you’ll have to dig out your slide rule. Some simple online calculators can help you, as described in Nolo’s article, “Make Sure You Won’t Lose Money When Refinancing.”

Good Laws Can Make for Good Fences

broke fenceI’ve heard of at least three fence disputes among friends and neighbors within the last several weeks — enough to have me rushing to the Nolo website to see what we’ve got on the matter. A lot, as it turns out (see “Neighbor Disputes“).

The various stories have been good reminders that the law covers more of our everyday lives than we sometimes realize — but also that you’ve sometimes got to do the tough work of talking matters through with a neighbor when the law seems inadequate to deal real life.

At the “That’s easy, the law has the answers” end of the spectrum, I know of a neighbor who watched a ten-foot-high fence being built on the property next to hers, right up against the sidewalk. She rightly suspected that city ordinances prohibited anything of such a height without a permit. Her first conversation with the owners (who were new to this country) produced a “Who cares?” response. But soon after she placed a call to the city,  she watched the neighbors’ workers saw the fence down by about seven feet.

Also in my neighborhood, a homeowner who shared a fence with a neighbor decided she didn’t like the fence aesthetically — even though it was in perfectly good shape — and asked the neighbor to pitch in on a new one. That neighbor was unhappy about seeing the old fence go, and refused to foot part of the bill. Indeed, there’s no law that requires neighbors to pay for a replacement fence when there’s nothing wrong with the first one. (If the fence were falling apart, it might be another matter, as described in Nolo’s FAQ, “The fence on the line between my land and my neighbor’s is in bad shape. Can I fix it or tear it down?“) But the unwilling neighbor did end up offering to help with the work, simply for the sake of maintaining neighbor relations.

In another situation, a new homeowner replaced an old, worn fence that surrounded her property — without consulting the neighbor on one side, believing that, since that neighbor had none of the same style of fencing on the remainder of his property, and the “pretty” side of the fence faced her way, it must be her fence, to do with as she would. Angry neighbor reaction ensued! In this case, the law seemed to favor the angry neighbor, since “Boundary fences are owned by both owners when both use the fence.” In any case, a batch of homemade cookies helped restore neighborly relations.

Maybe I should start offering recipes on this blog, along with law links!

Perk of Homeownership: You Can Get a Dog!

pup snowDog adoptions went up over the holidays, according to local shelters. Probably even more people would adopt if they didn’t live in rentals with “No Pets” policies. But if you’re buying a home, now may be your chance to bring a new member into the family!

Other than the basics of care, training, and feeding, there are some important things homeowners should know about dog ownership. Fortunately, Nolo’s website offers a wealth of information on such topics as:

For even more practical and legal information, see the Nolo book Every Dog’s Legal Guide, by Mary Randolph.

 

 

Putting Your House on a Clutter Diet for the New Year?

Garage_01Are you among the many people I know (or pretend to know, on Facebook) who spent a goodly part of New Year’s Day going through closets and basements, figuring out what stuff can be gotten rid of?  I’ve now got a trunkload of stuff waiting to go to the Salvation Army, and more boxes yet to be examined.

It seems that bigger homes don’t always lead to more living space — they sometimes just become bigger repositories in which to pile stuff up!

One of the best articles I’ve found online for tips on how to sell, donate, or otherwise get rid of stuff is this one, “Declutter Your Life,” from last May’s Kiplinger.

An important point not to skip over with regards to donating goods to charity is where the article says, “be sure to get a receipt.” In my experience, charities that take donated goods are very casual about this — I often have to ask for a receipt, and they don’t fill in the blanks to say what you’ve donated. (Do it yourself before you forget!) You won’t need to actually send these receipts with your tax returns, but you will need to show them to any IRS agent who might show up to audit you.

What to keep around the house is also an important consideration for homeowners. Here are some Nolo articles to help with this:

Nolo’s also got a helpful product: “Get It Together: Organize Your Records So Your Family Won’t Have To,” by Shae Irving, J.D., and Melanie Cullen. Happy New Year, and happy decluttering!

Underwater No More, for Over Three Million Homeowners

floodJournalist Ken Harney calls the gains in homeowner equity the “biggest story in American real estate in 2013,” and I’m inclined to agree. For the past several years now, millions of Americans have felt trapped by owing more on their mortgage than the house was worth — thus making it nigh on financially impossible to sell, refinance, take out home equity loans, and so on.

But over the past year, more than three million have pulled themselves up above the water line, or watched as their homes’ values rose along with the economy. They have, according to Harney, added a total of $2.2 trillion to their net equity (from late 2012 to late 2013).

Let’s hope that news provides a glimmer of light to the 6.4 million homeowners who remain underwater on their homes . . .

Need a Real Estate Theme in Your Holiday Movie Viewing?

holiday lightsLook no farther than White Reindeer.” An indie hit described as a “dark comedy,” the movie features a lonely, pretty real estate agent (“Suzanne”) grieving after the death of her husband. No ordinary death, this one — he was murdered in their home while she was out buying the Christmas tree, in a robbery gone awry, which as she likely knows, makes it a stigmatized property and hard to sell.

Suzanne is falling apart: Christmas was her favorite holiday, and she’s getting nothing but further grief from family and friends. She forms an unlikely connection with the stripper with whom her husband was having an affair. She takes up drinking, cocaine, excessive online shopping (to a degree that will make any home seller resent having paid their agent a 5% commission), and other practices that you hope your real estate agent stays far away from.

The important question is, of course, whether you will learn anything about real estate from this movie? Well, the fact that the agent is pretty is already a lesson — studies have shown that houses sell for more if the selling agent is physically attractive. Beyond that, I don’t know — I’ll have to see it. Or you can see it first and tell me about it.

There WILL Be “Yes” Answers on the Disclosure Form

iStock_000000433950XSmallHas an entirely clean seller’s disclosure form — free of reports of home defects, environmental hazards, local nuisances, and so on — ever been accurately presented in a real estate transaction?

Notice that I said, “accurately.” We’re not talking about how a few misguided sellers, filling out the standard form that is required in residential home sales transaction in most states in the U.S., may think, “This place will sell better if I pretend it’s perfect.” I don’t think anyone is keeping statistics on how often that happens.

According to a recent column by real estate agents Tarpoff and Talbert (who write for various California local papers), what happens in a normal transaction is that, “There are always ‘yes’ answers” to questions on the disclosure forms about whether the home has various issues or defects.

That’s not a surprise to anyone familiar with the real estate world. A home starts deteriorating the minute someone sets foot in it, or even without the presence of humans. A seller would have to be utterly oblivious to overlook the cracked window, the door that doesn’t close, the in-law unit that the previous seller didn’t pull a permit for, and so on. Any seller with any sense of responsibility, or who is working with a real estate agent who explains that transactions go better (and are less likely to lead to later lawsuits) if sellers are forthcoming with the truth, will come up with numerous items worthy of disclosure.

But to anyone new to the process of buying or selling a home, it’s worth reflecting on the importance of (if you’re a seller) filling out the disclosure form accurately and completely and (if you’re a buyer) reading the form carefully, asking follow-up questions, and not panicking when you see some of those inevitable “yes” answers.

The disclosure form is, after all, an outgrowth of a shift in various states’ laws away from the old doctrine of “caveat emptor,” or buyer beware. That doctrine put the onus on buyers to investigate the home’s condition, and not to come crying back to the seller if it turned out that the basement floods every winter. (Just as it had for the last 35 years.)

That doctrine may have offered seeming simplicity, but what a mess for buyers trying to accurately gauge the value of the home they were buying. Not to mention the fact that neither buyers and sellers could be sure they wouldn’t meet again in a courtroom, with buyers alleging that sellers had gone beyond the confines of the doctrine and committed outright fraud.

Today’s laws and forms requiring seller disclosures make for a far better chance that the home-sale transaction will wrap up with everyone feeling well-informed and relatively unworried about later disputes. And now’s a good time to mention that Nolo’s website has extensive online information about the seller disclosure laws in various U.S. states.

You’re Not on TV: Look at More Than Three Homes!

Family TVAccording to real estate agent Jason Crouch (of Austin Texas Homes, LLC), real-estate-related cable shows like “House Hunters” “My First House,” and so on have had a noticeable effect on his home-buying clients’ expectations.

Not that he’s entirely complaining — he wittily titles his blog post on the topic, “I Should Probably Send Thank-You Notes to HGTV and TLC.”

The reason? These shows have managed to convince some buyers that they should make a decision after visiting three, or at least a small handful, of homes. Says Crouch, “Needless to say, I appreciate the idea that we don’t have to visit a virtually endless number of homes to make a solid decision.”

Indeed, some home buyers — pre-HGTV at least — are known for driving their real estate agents crazy with their “This one’s too big,” “This one’s too small” syndrome. They never manage to find (or, if it’s a couple, agree on) a home that’s “Just right.”

But visiting only three homes? That’s got to be a sign that TV is rotting people’s brains.

After so small a number, you’re only just starting to get to know your local market; to get a sense of what’s available at what price. You’re only looking at a small slice of what might be available within your time window. Ask your real estate agent — he or she probably already knows of homes that will be coming onto the market within the next six or so weeks. You’re putting on blinders with regard to the biggest financial decision you might ever make.

So rest assured, the cameras aren’t rolling, and your real estate agent will happily visit more than three homes with you. (And by the way, how often have you watched “House Hunters” and thought, “Gee, I wouldn’t have wanted any of those homes!”)