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Homebuyers, Sellers Stuck in Neutral — This is Yuuuge!

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Homebuyers and sellers are confident in the housing market, but there are few sales to show for it, according to recently released findings from a survey by the National Association of REALTORS®.Homebuyers, Sellers Stuck in Neutral -- This is Yuuuge!

The report reveals homebuyers and sellers are stuck in neutral, despite a record 80 percent of homeowners surveyed for the report believing now is a good time to sell and 62 percent of renters believing now is a good time to buy. Low inventory is behind the stall, says NAR Chief Economist Lawrence Yun.

“The housing market has been in a funk since early spring because of the ongoing scarcity of new and existing homes for sale,” Yun says. “The pace of new-home construction has not meaningfully broken out this year, and not enough homeowners at this point have followed through with their belief that now is a good time to sell. As a result, home shoppers have seen limited options, stiff competition and weakening affordability conditions. Buyer demand is robust this fall, but the disappointing reality is that sales will continue to undershoot their full potential until supply levels significantly improve.”
Buying a home is already a pipe dream for many renters—and pushed even further out of reach by rising rents, the report shows. Fifty-one percent of renters expect their rent to increase in the next year, but 42 percent would renew their lease, rather than buy a home, if their rent did go up. (Only 15 percent would buy a home.)

“Even though the typical down payment of a first-time buyer has been 6 percent for three straight years, two-thirds of respondents indicated that saving for one is difficult right now,” says Yun. “Rents and home prices have outpaced incomes in the past few years, and this is undoubtedly impacting their ability to put aside savings for a home purchase, even if they increasingly believe it’s a good time to buy. Heading into next year, higher home prices and limited inventory in the affordable price range will likely continue to hold back a share of renters who would prefer to be homeowners.”
More of those surveyed (57 percent) believe the economy is improving, however—optimism that could potentially translate into more earnings, and, by extension, more housing opportunities. The survey’s Personal Financial Outlook Index, which gauges respondents’ sentiment on their financial situation over the next six months, leapt up to 62.0 in September.

“Jobs are plentiful, wage growth is finally showing signs of life, home values are up considerably in the past five years and the stock market is at record highs,” Yun says. “The economy is not perfect, and growth overall is still sluggish, but the financial health of the typical household looks as healthy as it has since the recession.”

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www.SantaMonicaCAListings.com

Fixer Upper vs. Fixer Downer…Which House to Buy

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Trying to decide whether to buy a fixer-upper house? Follow these seven steps, and you’ll know how much you can afford, how much to offer, and whether a fixer-upper house is right for you. 

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1. Decide what you can do yourself. 
TV remodeling shows make home improvement work look like a snap. In the real world, attempting a difficult remodeling job that you don’t know how to do will take longer than you think and can lead to less-than-professional results that won’t increase the value of your fixer-upper house.

  • Do you really have the skills to do it? Some tasks, like stripping wallpaper and painting, are relatively easy. Others, like electrical work, can be dangerous when done by amateurs.
  • Do you really have the time and desire to do it? Can you take time off work to renovate your fixer-upper house? If not, will you be stressed out by living in a work zone for months while you complete projects on the weekends?

2. Price the cost of repairs and remodeling before you make an offer.

  • Get your contractor into the house to do a walk-through, so he can give you a written cost estimate on the tasks he’s going to do. If you’re doing the work yourself, price the supplies.
  • Either way, tack on 10% to 20% to cover unforeseen problems that often arise with a fixer-upper house.

3. Check permit costs.

  • Ask local officials if the work you’re going to do requires a permit and how much that permit costs. Doing work without a permit may save money, but it’ll cause problems when you resell your home.
  • Decide if you want to get the permits yourself or have the contractor arrange for them. Getting permits can be time-consuming and frustrating. Inspectors may force you to do additional work, or change the way you want to do a project, before they give you the permit.
  • Factor the time and aggravation of permits into your plans.

4. Doublecheck pricing on structural work.
If your fixer-upper home needs major structural work, hire a structural engineer for $500 to $700 to inspect the home before you put in an offer so you can be confident you’ve uncovered and conservatively budgeted for the full extent of the problems.
Get written estimates for repairs before you commit to buying a home with structural issues.
Don’t purchase a home that needs major structural work unless:

  • You’re getting it at a steep discount
  • You’re sure you’ve uncovered the extent of the problem
  • You know the problem can be fixed
  • You have a binding written estimate for the repairs

5. Check the cost of financing.
Be sure you have enough money for a downpayment, closing costs, and repairs without draining your savings.
If you’re planning to fund the repairs with a home equity or home improvement loan:

  • Get yourself pre-approved for both loans before you make an offer.
  • Make the deal contingent on getting both the purchase money loan and the renovation money loan, so you’re not forced to close the sale when you have no loan to fix the house.
  • Consider the Federal Housing Administration which is designed to help home owners who are purchasing or refinancing a home that needs rehabilitation. The program wraps the purchase/refinance and rehabilitation costs into a single mortgage. To qualify for the loan, the total value of the property must fall within the FHA mortgage limit for your area, as with other FHA loans. A streamlined 203(k) program provides an additional amount for rehabilitation, up to $35,000, on top of an existing mortgage. It’s a simpler process than obtaining the standard 203(k).

6. Calculate your fair purchase offer.
Take the fair market value of the property (what it would be worth if it were in good condition and remodeled to current tastes) and subtract the upgrade and repair costs.
For example: Your target fixer-upper house has a 1960s kitchen, metallic wallpaper, shag carpet, and high levels of radon in the basement.
Your comparison house, in the same subdivision, sold last month for $200,000. That house had a newer kitchen, no wallpaper, was recently recarpeted, and has a radon mitigation system in its basement.
The cost to remodel the kitchen, remove the wallpaper, carpet the house, and put in a radon mitigation system is $40,000. Your bid for the house should be $160,000.
Ask your real estate agent if it’s a good idea to share your cost estimates with the sellers, to prove your offer is fair.
7. Include inspection contingencies in your offer.
Don’t rely on your friends or your contractor to eyeball your fixer-upper house. Hire pros to do common inspections like:

  • Home inspection. This is key in a fixer-upper assessment. The home inspector will uncover hidden issues in need of replacement or repair. You may know you want to replace those 1970s kitchen cabinets, but the home inspector has a meter that will detect the water leak behind them.
  • Radon, mold, lead-based paint
  • Septic and well
  • Pest

Most home inspection contingencies let you go back to the sellers and ask them to do the repairs, or give you cash at closing to pay for the repairs. The seller can also opt to simply back out of the deal, as can you, if the inspection turns up something you don’t want to deal with.

If that happens, this isn’t the right fixer-upper house for you. Go back to the top of this list and start again.

Market Conditions in Los Angeles for Selling Your Home

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Deciding To Sell Your Los Angeles Home?

You’ve probably already considered your personal reasons for selling. Now you need to take into
account the other factors involved, such as market conditions, your property’s value and tax
implications. Unless you’re locked into selling your home (e.g., you’ve already accepted a job o er
in another city), it’s a good idea to look at the whole picture before deciding to sell.

Assessing Market ConditionsMarket Conditions in Los Angeles for Selling Your Home

There’s a rule of thumb to keep in mind when deciding to sell your home: Your home is only worth
what a qualified buyer is willing to pay at the time it’s on the market. The current real estate
market fluctuates based on supply and demand, interest rates, general economic conditions, and
other factors. The same house may sell for more or less under a different economy.
I can inform you of the going price for homes in your area at the current time; this data
is included in a comparative market analysis I do…
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Tax Implications of Selling
There are many dynamics that can affect your tax liability upon selling your home. These issues
include whether you purchased the home or inherited it, if you used your home for business or
rental purposes, costs associated with selling your home, and any home improvements and
additions that you’ve undertaken.
The Federal Taxpayer Relief Act of 1997 provides capital gains tax exclusions of up to $500,000 for
married taxpayers ling jointly and $250,000 for single taxpayers or married taxpayers ling
separately. Current capitol gains rates are 20 percent for those in upper tax brackets and 10
percent for those in lower tax brackets. Overall capital gains rates have been lowered even further
— to 18 percent and 8 percent respectively — for assets acquired after December 31, 2000, and
held five years or more.
To qualify for this tax break, you must have used the home as your primary residence for at least
two of the prior five years; these two years don’t have to be consecutive. If you relocate for your
job but don’t meet the requirement, you may be allowed to take a capital gains exclusion
proportionate to your circumstances. This exclusion is not a one-time benefit; you may take
advantage of it once every two years as long as you meet the qualifications.
The tax rules differ when you sell a home that you’ve inherited. If you sell the inherited home for a
profit, you’re required to pay federal and state taxes on the gain. If you keep the house as a
second residence and/or eventually move into it after renting it to tenants, you may take the
$250,000/$500,000 capital gains tax exclusion if you meet the requirements. When you’re deciding
what to do with inherited property, you should consider the current estate tax laws and basis
practices.
Beyond these general rules, it’s wise to discuss your home’s sale with a tax professional who can
advise you on tax benefits in more detail.
Timing Your Decision to Sell
Because most sellers finance a new home purchase with the sale of their present home, they
usually put their homes on the market before they begin their search for a new home. Learning
the price you can expect from the sale often sets the pricing parameters for your new home
search.
Obviously, it’s not wise to wait until the sale on your property closes completely before beginning
to look for your new home. Timing your search properly with the buyers’ transaction can make the
difference between having the available funds to buy a new home and cutting down on the interim
period between homes.

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