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BALANCE SHEETS ARE IMPROVING FOR MANY HOMEOWNERS

by Stone Realty Services®
 

Topic Summary: A report released this week by the Federal Reserve indicated rising home values are improving the overall net worth of many Americans. (See below on how to get a snapshot of your home's value)

The Federal Reserve is out with their 2ndquarter analysis of household net worth. The Reserve states that as home values rise, many groups in the economy are doing better than previous quarters, including Homeowners. U.S. households' net worth - the value of homes, stocks and other investments minus debts and other liabilities - rose 1.8% to $74.82 trillion in 2ndquarter of this year, according to the report. That is the highest level since records began in 1945.

Caution is advised here for those that do not feel this "increased wealth". A large percentage of the growth is in the form of investments as the stock market has been doing well in recent quarters.

For most, the home represents their largest social and economic investment. A high tide, however, does not help all homeowners. In the 2nd quarter of this year, the value of residential real estate owned by households increased about $525 billion. There are approximately 12.2 million homeowners who still owe more than their homes are currently worth. The tone of the report, FOUND HERE, appears to be that things are getting better for homeowners because higher home values mean more home equity. The national median existing single-family home price was $203,500 in the second quarter, up 12.2 percent from $181,300 in the second quarter of 2012. (Source Nat. Association of Realtors)

 


How to arrive at a rough estimate of your Home Equity.

 Even though Home Values have risen in most all parts of the country, they are still not back to the levels found in 2006 and 2007 before the housing crash. There are only two values you need to arrive at your home equity: What your home is worth and what you owe on it. Your recent mortgage statement will tell you what you owe as a first mortgage, then add in any home equity loans or 2ndmortgages. Subtract this figure from what the fair market value for your home is. You can get a quick analysis done by the real estate professional that enrolled you in HomeActions. On the left you can click their email link or call your Realtor.

 

When it comes to households that are underwater, Core Logic's latest Equity Report indicated that 2.5 million homes have "returned to positive equity". This is good news for the real estate market because it means more homeowners may be willing to sell their home for a profit and fewer homes will get foreclosed on.

Negative equity is when the value of your home is less than the outstanding balance of the mortgage. The amount of homes that remain in negative equity is only 14.5% for the second quarter of the year. This fairs very well when compared to CoreLogic's  last report showing 19.8% underwater households in the first quarter of 2013. In the last year, the number of negative equity households dropped 33%.

Equity Dynamics

by Stone Realty Services®

Equity is the difference in what your home is worth and what you owe. Ideally, as the value goes up and the unpaid balance goes down with each amortized payment made, the equity grows from two directions.

Equity small.png

This dynamic leads to increasing a person’s net worth much faster than many other investments.

A homeowner has minimal control over value. It is necessary to maintain the property to avoid depreciation and make good decisions on capital improvements. After that, appreciation is generally controlled by supply and demand and the economy.

Mortgage management is something that the homeowner does have control. Making the decision to select a shorter term mortgage at a lower interest rate can have an impact on equity build-up. Lower interest rates amortize faster than higher interest rates which will also affect equity growth. Currently, it is possible to get a 1% lower rate on a 15 year mortgage than a 30 year mortgage.

Compare two alternatives of a 30-year and a 15-year mortgage. The payments will definitely be higher on the shorter term because it pays off quicker. However, if a person can afford the higher payments of $362.53 more per month in this example, the equity will be greater. Even after you take into consideration the higher payments, the increased equity is $17,236 at the end of the seven year holding period.

Equity dynamics.png

 

 

 

 

 

 

 

 

Another decision that can affect equity build-up is making additional principal contributions along with the regular payments. Whether you’re making an occasional lump sum payment toward principal or regular monthly contributions, it will save interest, build equity and shorten the term on a fixed rate mortgage. Estimate your personal savings with this Equity Accelerator.

Mayor Cancels 2013 DC Tax Lien Sales

by Stone Realty Services®

Mayor Vincent Gray has initiated a few more actions in response to the Washington Post’s recent exposé which revealed a predatory tax lien sale system that resulted in city homeowners losing their houses over minor tax debts.

Late Friday, Gray ordered the cancellation of this year’s tax lien sales for owner-occupied homes that were not in foreclosure proceedings, and will be establishing a Real Property Tax Ombudsman to counsel residents who need assistance paying their debts and navigating the system.

Additionally, some city staffers have been directed to take a close look at all the pending foreclosures that are resulting from tax debts, and the mayor will be introducing legislation to make the process more fair. Among other things, the legislation will cap the legal fees that tax sale purchasers can collect at $2,200 and mandate greater outreach and introduce programs like payment plans to those whose properties are at risk of foreclosure due to unpaid tax bills.

From the press release:

“Last Sunday, when I first learned from a Washington Post article about the problem of vulnerable District homeowners losing their homes through tax-lien sales, I was appalled by the injustices cited and immediately began pursuing potential remedies,” Mayor Gray said. “The actions that Dr. Gandhi and I have taken today will ensure that, from this point forward, no District residents whose property has been sold at a tax-lien sale will be at risk of losing their homes through this process if they have extraordinary circumstances that warrant a re-examination of their cases.”

Canceling the sales will mean that the city will pay certain fees to the tax lien buyers,reported the Post, and the homeowners will still be required to pay their debts.

The Mayor’s office is now searching for an Ombudsman, and will introduce legislation when the Council session begins on Tuesday.

Who is my agent?

by Stone Realty Services®

Secret agent 150.jpgMore often than you’d expect, homeowners refer to the person they bought their insurance from as their agent. It sounds reasonable but it’s definitely not accurate. That person is the agent of the insurance company and they legally represent the company, not the customer. Even an independent agent who can place a policy with different companies is still an agent of the company.

A mortgage officer, in most cases is an employee and represents the company. And the same is true for a title or escrow officer. It’s important to understand the actual relationship to know what you can expect from them.

Any business person who wants to stay in business must treat their customers fairly and with a high degree of service. As a customer, you should be able to reasonably expect honesty and accountability. The difference is that employees owe their loyalty to their employer and agents owe their loyalty to their principal.

An agent owes more than just honesty and accountability. The principal can expect complete disclosure, obedience, loyalty, reasonable skill and care and confidentiality from their agent.

This advocacy is very beneficial during the buying or selling process to coordinate all aspects of the transaction. The agent can bring valuable experience to your side of the transaction to provide confidence that your best interests are being represented from start to finish.

Most states have a recognized procedure for the real estate professional to create a formal relationship between themselves and a buyer or seller. This requires a fiduciary/statutory responsibility that places the principals’ interests above the agent’s own personal interests.

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Contact Information

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Stone Wood Team
EXP Realty
2165 Jamieson Avenue
Alexandria VA 22314
Office: (703) 739-4663
Office: (703) 739-HOME
Fax: 703-683-9692