Real Estate Information

Q.  What's the latest on the first-time homebuyer tax credit?

A.  The tax credit for qualified first-time homebuyers was extended to this spring.  Some of the original features are the same, including:
*  First-time Buyers can get a credit of as much as 10% of the purchase price, up to $8,000.  The home must be your principal residence for the next three consecutive years.
*  If you don't pay enough tax to offset the credit, you can get a tax refund. 
*  You can't purchase the home from your ancestors (parents, grandparents, etc.) or your lineal descendants (children, grandchildren, etc.).

New features include:
*  A buyer must have a contract before May 1, 2010 and the sale must close before July 1, 2010.
*  Income limits have been raised.  Check sites such as www.irs.gov or www.federalhousingtaxcredit.com for details.
*  If you buy after November 6, 2009, the credit is available if the home will be your principal residence and the price is less than or equal to $800,000.
*  Repeat Buyers who lived in one residence for five consecutive years of the last eight can qualify for a tax credit of as much as 10% of the purchase price, up to $6,500.
*  For purchases after November 6, 2009, you can't claim the credit if you buy the home from a spouse or spouse's family members.

Thanks for the question!

Existing Home Sales - Up 24% from last year

• Existing home sales recorded another strong gain in October with many Buyers rushing to beat the deadline for the first-time buyer tax credit scheduled to expire at the end of November. Sales surged 10.1 percent to 6.1 million units over September sales of 5.54 million and are 23.5 percent above the 4.94 million-unit level seen last year. Sales activity is at the highest level since February 2007 when it reached 6.55 million.

Median Home Price - Very favorable

• Low home prices are contributing to extremely favorable affordability conditions. Existing-home price was $173,100 in October, 5 percent higher from its low in January but still 7.1 percent below October 2008. Distressed properties, which accounted for 30 percent of all transactions in October, continue to hold down the median home price, as they typically sell for 15 to 20 percent less than traditional homes.

Inventory - Lowest level in more than 2.5 years

• “We are getting closer to a general balance between Buyers and Sellers,” according to Lawrence Yun, NAR chief economist. The supply of homes is now at the lowest level in more than two and a half years. Total housing inventory at the end of October fell 3.7 percent to 3.57 million existing homes available for sale, representing a seven-month supply at the current sales pace, down from September’s eight-month supply. Compared to a year ago, there are now 15 percent fewer homes on the market.

Mortgage Rates – Back at 4.78%

• Remaining at attractive levels for people looking to buy a home or refinance, historically low interest rates are boosting the market. Rates for 30-year fixed loans fell to 4.95 percent in October from 5.06 percent the month before. During the week ended November 25, rates again dropped to the low 4.78 percent reached in the spring. As the economy enters its recovery phase and concerns over inflation come back, mortgage rates are expected to go up.

Affordability – Best since 1970s

• Unprecedented interest rates, low home prices, as well as the first-time buyer tax credit are lifting the housing market. All these factors combined are “adding to the buying power of the typical family, with affordability conditions this year at the highest on record dating back to 1970,” according to Lawrence Yun, NAR chief economist. So far this year, the home price-to-income ratio has fallen well below the historical average of 25 percent. The ratio now stands at 15 percent.

  New Fannie Mae Policies

In many markets dominated by distressed properties, Buyers jumped off the fence in droves and as a result the number of homes for sale in the first tier of the market decreased significantly. When a new foreclosure becomes available for sale, it often is snapped up by investors with cash on hand, leaving the average home buyer looking for a place to live out of luck.       

Fannie Mae introduced a new “First Look” initiative to address this and aid in the stabilization of neighborhoods.

1. During the first 15 days a Fannie Mae REO is on the market, only Buyers who will live in the home and public entities committed to the best interests of the community may purchase it.
2. Buyers will have 45 days to close, up from 30 days.
3. Earnest money requirement may be reduced.

This will hopefully give the average home buyer a greater chance of purchasing foreclosures and provide support to hard-hit neighborhoods, because owner-occupants are more invested in the long-term vitality of a community whereas investors typically are more invested in their monetary return from the property.       

Increased Credit Scores

Fannie Mae is raising its minimum credit score from 580 to 620. This risk management measure will help protect Fannie Mae from future defaults and foreclosure by raising their standard and accepting less risky loans.              

While risk management is a sound and healthy approach for an entity that the economy depends on, this underscores the importance that potential home Buyers check their credit report early in the process, allowing more time to clear up any errors.         

Earlier this year, Experian, one of three major credit-reporting bureaus, began exclusively providing complete credit report information when purchased directly from Experian or obtained from the government annual credit report.

FHA Signals Efforts to Manage Risk

In an effort to secure its financial health, the Federal Housing Administration plans to require borrowers to have more “skin in the game” soon. Over the past three years, FHA’s market share has boomed from about 2 percent of all new loans to about 30 percent of all new loans this year and 20 percent of refinances. The escalading volume that the administration is currently handling calls for stricter requirements as evidenced by FHA’s capital ratios falling to nearly 0.5 percent well below the minimum of 2 percent.

The agency is still analyzing the levels and time frames it wishes to tighten its standards but they expect to:

1. Increase minimum down payments
2. Increase minimum credit scores
3. Increase insurance premiums
4. Lower the amount of seller concessions

As one of the major players in the mortgage market, the health of FHA is imperative to the housing market and flow of credit to home Buyers, as well as to the health of the overall economy. Taking measures to safeguard the agency from needing a government tax payer-funded bailout is a notable risk management measure.

According to a research study, the typical first-time buyer put down 3.5 percent this year. Those who want to take advantage of the tax credit before the April 30 contract, June 30 closing deadline may want to beef up their savings and check their credit report now in anticipation of any changes.

Q.  We are looking to buy a home soon.  What are some signs of overall quality that I should be looking for?

A.  It is always advisable to have a professional inspector look at a home before you purchase it, but you can do some of the legwork beforehand.  You will need to look at the overall structure, the basic systems, and for any signs of previous damage.  Here are some specifics to check:

• Walls - Be sure they are straight and show no signs of bowing.
• Sturdy Floor - Test for signs of improper flexing.
• Sound Roof - Does it appear to be relatively new and well maintained?
• Quality Fixtures - Pay particular attention to the baths and kitchen.
• Electrical System - Look for adequate outlets and in the main box for a minimum of 100 amps of service.
• Heating And Cooling System - Are all rooms connected, and is the system adequate?
• Insulation - Look for a minimum of R-19 in the roof.  The walls can be less, but they need to be well insulated.
• Quality Workmanship - Look at the fine details.  They will give you a lot of insight.
• Water Damage - Be sure water is draining properly outside, and that there are no signs of interior damage.

If these items look good to you and you are interested in the home, it is time to hire an inspector to take a more thorough look.  They can often find "hidden" problems you may have missed.  An inspector usually charges $300-$500.  You can call the American Society of Home Inspectors at 847-290-6012 for a registered inspector in your area.  It is also wise to ask friends, family, and your realty professional for inspectors they trust.  If you are in the market for a home and need caring competent representation, please call either Joy Setzer at 704-241-8831 or Chelci Setzer at 704-605-9546 today! 

Your "Charlotte Fine Homes" Team would like to celebrate the extension of the home buyer tax credit!  The bill extends the $8,000 first-time home buyer's tax credit that was set to expire at the end of November 2009.  The credit will apply to all house contracts entered into before April 30, 2010 and closed by June 30, 2010. 

It also creates a NEW $6,500 credit for existing property owners looking to sell their home and buy another during the same period of time.  This is available to those who have been in their current residence for a consecutive five-year period.  The new rule also raises the qualifying income to $125,000 for single taxpayers and $225,000 for joint taxpayers, from the current $75,000 and $150,000.  The maximum allowed home purchase is now $800,000.  Military personnel, deployed overseas for a minimum of 90 days in 2008 or 2009, would have until April 30, 2011 to claim the tax credit. 

This is excellent news...  Give your "Charlotte Fine Homes" Team a call if you have any questions regarding this extension, or you may visit www.FederalHousingTaxCredit.com for more information.

Q.  We're  planning to landscape the front and backyard of our home.  Do you have any suggestions?

A.  Landscaping can add an entirely new dimension to a house.  It can truly make it feel like an individualized home.  Three items you should consider when landscaping are usability, climate, and cost.

Usability encompasses the ideas of what you want from your yard.  If you enjoy dining outside, you may want to focus on a nice barbecue and dining area.  This can be accomplished at minimal expense by using bricks.  Water features are often popular landscaping additions.  They can provide a calm, refreshing atmosphere.  But they are often pricey.  Small fountains begin at $40 and can range upwards of $1,000 for a built-in waterfall.

Climate is important to consider when landscaping as well.  Container plants offer the flexibility of moving them in or out depending on the weather.  Remember to choose plants that can resist the winter cold and survive the summer heat.  It's best to use large, fiberglass, or plastic containers for your plants.  They will help you to maximize your water usage.  Clay and smaller containers allow alot of evaporation.  When planting in the ground, group compatible plants together leaving enough room for growth.  This allows you to isolate your watering needs.  Soaker hoses and drip irrigation systems are often better for your water bill than sprinklers.  For more information on plants, visit www.Scotts.com.

Some other low cost landscaping ideas include using small or large rocks, brick walkways, resting benches, and shade features such as a gazebo.  Landscaping is one of the most valuable investments you can make to your home.  Your "Charlotte Fine Homes" Team hopes that if you are thinking of buying or selling, and you are in need of caring, competent representation that you will give us a call!  Thanks for the question! 

Joy Setzer and Chelci Setzer 

Q.  We are preparing to build our own home and are wondering about using alternative "natural" building materials.  Do you have any suggestions?

A.  Your "Charlotte Fine Homes" Team is always on the "cutting edge" of Real Estate technology and education, and we would like for you to know that we just took a continuing education course on "Sustainable Housing And Building Green"!

Using "natural" resources to build energy efficient homes has become quite popular.  Most building codes now recognize alternative building materials as equal to or better than traditional materials.  These are also fully accepted by lending and insurance companies.  There are 3 popular alternative materials that have been used successfully in recent years; straw bale, tires, and rammed earth.

Straw bale homes offer exceptional energy efficiency.  They cost about the same as a conventional wood frame house to build, but the thick walls will yield substantial energy savings in the future.  In fact, these homes use half as much energy as a wood home.  Building with dry straw bales will help prevent any rot or pest infection.  Contrary to common belief, straw bale homes are not a fire hazard.  In fact, a plastered bale home is less combustible than a wood home. 

Instead of allowing old tires to fill up our landfills, some have chosen to build with them.  Tires make a sturdy building material because they don't disintegrate.  They are layered and packed with dirt and/or cans to produce a high insulation value.  The walls are usually stuccoed or mudded.  About 1,500 tires are needed to build a 2,700 square foot home.  The 30-inch thick walls of a tire home provide great insulation and low interior noise levels.

Rammed earth homes are reminiscent of the old adobe homes of years past.  They have an energy efficiency rating similar to brick homes and the walls are as strong as concrete.  To protect against water damage, the home should be built on at least one layer of fired bricks or block.  Unfortunately, these aesthetically beautiful homes are very labor intensive to build and are quite expensive. 

Hope this information helps!  And remember readers, feel free to add to the conversation with a comment....  We love hearing from you!

Q.  We're considering installing a pool and/or spa.  I am concerned about the resale value of this investment.  Can you help me make the best decision?

A.  The addition of a pool is not the best investment if you are only concerned about resale value.  Pools have notoriously low resale value.  In fact, pools only add about 33% of their cost to the value of the home.  So, if you spend $20,000 on a beautiful new pool, you will probably only recoup about $6,700 when you sell your home.

In addition, some Buyers view pools as safety hazards and maintenance burdens.  Many families with young children won't consider homes with pools because of highly publicized drowning dangers.  You also should consider the space constraints of your yard.  If the pool is going to take up the entire yard, it's probably a bad idea for resale alone.

If you've decided you want a pool, consider the cost an investment in your enjoyment, not just in the resale value of your home.  If you are going to be purchasing a home in the near future it's advisable to buy a home that already has a pool.  This eliminates the initial installation cost and resale risk, but gives you the enjoyment value.

A spa may be a better option if you are only concerned with resale values.  Spas cost much less, averaging about $5,000 to purchase.  Try looking at home improvement centers or wholesale stores to find the best bargains.  Most spas only cost about $10 a month in additional electricity to run (depending on usage), but repair costs seem to be their biggest downfall.  Including a nice deck or patio will increase the value even more.

And remember, if you are considering buying or selling and are in need of caring, competent representation, please contact us today!  Thanks for the question!