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New Home Sales by Financing: Falling FHA Share

RISMEDIA, Tuesday, January 28, 2014— The share of new single-family home sales purchased using conventional mortgage financing is rising, as the share of Federal Housing Administration (FHA) backed mortgages fell during 2013.

According to data from the Census Bureau’s Quarterly Sales by Price and Financing, the onset of the housing crisis in 2007 led to a decline in the share of new home sales due to conventional mortgage financing and increases in the shares due to mortgages backed by the FHA and the Department of Veteran’s Affairs (VA), as well as cash purchases.

For the fourth quarter of 2013, the share of cash purchases fell slightly to 6 percent from 7 percent during the prior quarter. The high point for cash purchases occurred in the third quarter of 2011 when the market share was almost 8 percent of sales. Thus, the cash share of new single-family home sales is down from post-recession peaks but remains elevated compared to more normal periods (e.g. approximately 4 percent share during 2002-2003).

In contrast, cash purchases constitute a considerably larger share of the existing home market – 32 percent of sales in December 2013 for example.

New home sales due to FHA-backed loans fell to 13 percent of the market during the final quarter of the year. This is down from 27.6 percent in the first quarter of 2010 but above the 10 percent 2002-2003 average. As the conventional mortgage financing share has risen, the share of new single-family home sales due to FHA-backed mortgages has declined. Falling FHA loan limits will likely place additional downward pressure on this share in 2014.

VA-backed loans were responsible for 7 percent of new home sales during the fourth quarter of 2013.

These sources of financing serve distinct market segments, which is revealed in part by the median new home price allocable to each. For the fourth quarter, the median new home price due to FHA financing was $212,400. The median price for VA-backed loans was similar: $205,100.

Conventional mortgage financing had a median price of $276,600.

Finally, the median price for cash purchases for the fourth quarter was $261,000.

View this original post on the NAHB Eye on Housing blog.

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Single-Family Growth to Fuel Housing in 2014

RISMEDIA, Monday, February 10, 2014— Led by a resurgence in single-family production, housing will continue its climb toward higher ground in 2014, but builders are still confronting several challenges, according to economists speaking at the National Association of Home Builders (NAHB) International Builders’ Show (IBS) in Las Vegas.

“My single-family forecast for 2014 is pretty aggressive—822,000 starts, which is likely 200,000 more than 2013,” says NAHB Chief Economist David Crowe. “There are five key points to the turnaround. Consumers are back, pent-up demand is emerging, there is a growing need for new construction, distressed sales are diminishing and builders see it.” Consumer confidence has returned to pre-recession levels and household balance sheets are on the mend. Year-over-year household formations are on the rise and now averaging 620,000 compared to just 500,000 during the housing downturn. At the height of the housing boom, the U.S. was producing 1.4 million additional households each year. Meanwhile, new-home sales are averaging just 8.7 percent of total home sales—barely half the historical average of 16.1 percent.

In the midst of the Great Recession, the cumulative lost number of existing home sales between 2007 and 2011 totaled more than 4 million, Crowe says. Moreover, the percentage of mortgages seriously delinquent has fallen and the decline has been larger in markets that had the highest rates.

In a sign that builders are well aware of the trend now under way, the NAHB/Wells Fargo Housing Market Index (HMI), which measures builder sentiment in the single-family housing market, has been above the 50 mark for the past eight months. Any reading above 50 means that more builders view sales conditions as good than poor.

However, Crowe cautioned that builders still face several headwinds, including rising building material prices, persistently tight mortgage credit conditions, difficulties in obtaining accurate appraisals and limited availability in labor and developed lots.

Moreover, gridlock and uncertainty in Washington threaten to harm consumer confidence and future housing demand.

NAHB forecast for 2014:
• 1.15 million total housing starts in 2014, up 24.5 percent from 2013’s 928,000 units.
• Single-family production projected to rise 32 percent to 822,000 units and surge an additional 41 percent to 1.16 million units in 2015.
• 333,000 multifamily starts, up 9 percent from 306,000 in 2013.
• Single-family home sales are projected to hit 584,000 this year, a 35.9 percent increase above last year’s 430,000 sales.
• Residential remodeling activity is expected to register a modest gain this year over 2013.
• A slow and steady housing recovery will bring nationwide housing starts to 71 percent of normal by fourth quarter 2014 and 93 percent of normal by the end of 2015, Crowe says.
• On a state level, the top 20 percent of states will be back to normal production levels by the end of 2015, compared to the bottom 20 percent, which will still be below 84 percent.

Mortgage rates up, but housing still affordable
As the economy strengthens and the Federal Reserve tapers its buy-back of mortgage-backed securities, there will be upward pressure on mortgage rates, but not enough to harm housing affordability, according to Frank Nothaft, vice president and chief economist at Freddie Mac.

“Regarding mortgage rates, we’ve gone from dirt cheap to cheap, and I think we will see a gradual rise of about a half a percentage point to 5 percent in 2014,” says Nothaft. But even then, he says, “most markets will remain quite affordable.”

Nationally, Nothaft expects that home sales and prices will each rise about 5 percent in 2014, and that housing starts will post a 20 percent gain.

“As we move into the 2014 home buying season, it will be a market dominated by home buying originations rather than refinance originations,” says Nothaft. “This will be the first time since 2000 that purchase originations will dominate the market.”

He says the reason for the change is because so many households looking to refinance have already done so, and as mortgage rates gradually rise, fewer homeowners will look to refinance. Further, purchase originations are expected to increase as the overall housing market strengthens.

Pent-up demand will fuel growth
In the aftermath of the Great Recession, there is a significant pent-up demand to form households and even to build homes, says David Berson, senior vice president and chief economist at Nationwide Insurance.

“At least 3 million fewer households formed over the past five years than would normally have been expected,” he says, noting that during this period many college graduates were forced to double-up or move in with their parents. Stronger job growth and a strengthening economy in 2014 should lead to a rise in household formations, which will be important to supplement housing demand.

“I think this will be a pretty good year for home construction,” says Berson. “There will be a big increase in single-family construction, but not as much for multifamily.”

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Home Upgrades with the Lowest ROI

By: Lisa Kaplan Gordon

Published: August 26, 2013

File these six upgrades under wish fulfillment, not value investment.

Life is a balancing act, and upgrading your home is no different. Some upgrades, like a kitchen remodel or an additional bathroom, typically add value to your home. Others, like putting in a pool, provide little dollar return on your investment.

Of course, home owning isn’t just about building wealth; it’s also about living well and making memories -- even if that means outclassing your neighborhood or turning off future buyers. So if any of these six upgrades is something you can’t be dissuaded from, enjoy! We won’t judge. But go in with your eyes wide open. Here’s why: 

1.  Outdoor Kitchen

The fantasy: You’re the man -- grilling steaks, blending margaritas, and washing highball glasses without ever leaving your pimped-out patio kitchen.

The reality: For what it costs -- on average $12,000-$15,000 -- are you really gonna use it? Despite our penchant for eating alfresco, families spend most leisure time in front of some screen and almost no leisure time outdoors, no matter how much they spend on amenities, according to UCLA’s Life At Home study. And the National Association of Home Builders' 2013 What Home Buyers Really Want report says 35% of mid-range buyers don’t want an outdoor kitchen.

The bottom-line: Instead, buy a tricked out gas grill, which will do just fine when you need to char something. If you’re dying for an outdoor upgrade, install exterior lighting -- only 1% of buyers don’t want that.

Related: How to Buy a Gas Grill

2.  In-Ground Swimming Pool

The fantasy: Floating aimlessly, sipping umbrella drinks, staying cool in the dog days of summer.

The reality: Pools are money pits that you’ll spend $17,000-$45,000-plus to install (concrete), and thousands more to insure, secure, and maintain. Plus, you won’t use them as much as you think, and when you’re ready to sell, buyers will call your pool a maintenance pain.

The bottom-line: If your idea of making it includes a backyard swimming pool, go for it. But, get real about:

  • How many days per year you’ll actually swim.
  • How much your energy bills will climb to heat the water ($760-$1,845 depending on location and temperature).
  • What you’ll pay to clean and chemically treat the pool ($20-$100/month in-season if you do it yourself; $75-$165/month for a pool service).
  • The fact that you'll likely need to invest in a pool fence. In fact, some insurance carriers require it.


Less expensive option: an above-ground pool

Lower maintenance option: natural pools

If you do put in a pool, you can save money by installing a solar heater.

3.  In-Ground Spa

The fantasy: Soothing aching muscles and sipping chardonnay with friends while being surrounded by warm water and bubbles.

The reality: In-ground spas are nearly as expensive ($15,000-$20,000) as pools and cost about $1 a day for electricity and chemicals. You’ll have to buy a cover ($50-$400) to keep children, pets, and leaves out. And, like in-ground pools, in-ground spas’ ROI depends solely on how much the next homeowner wants one.

The bottom-line: Unless you have a chronic condition that requires hydrotherapy, you probably won’t use your spa as much as you imagine. A portable hot tub will give you the same benefits for as little as $1,000-$2,500, and you can take it with you when you move.

Related: What You Need to Know About Installing a Spa

4.  Elevator

Your fantasy: No more climbing stairs for you or for your parents when they move in.

The reality: Elevators top the list of features buyers don’t want in the NAHB “What Buyers Really Want” report. They cost upwards of $25,000 to install, which requires sawing through floors, laying concrete, and crafting high-precision framing. And, at sales time, elevators can turn off some families, especially those with little kids who love to push buttons.

The bottom-line: If you truly need help climbing stairs, you can install a chair lift on a rail system ($1,000-$5,000). Best feature: It can be removed.

Related: 4 Easy-Living Tips for Aging in Place

5.  Backup Power Generator

Your fantasy: The power in your area goes kaput, but not for you. You were smart enough to install a backup power generator. While the neighbors eat cold hot dogs by a flashlight beam, you’re poaching salmon in your oven and pumping out Red Hot Chili Peppers tunes.

The reality: Power outages may seem to go on forever, but they don’t. Fifty dollars worth of batteries can power portable lights, radios, and TVs; a car adaptor will charge your cell phones and iPods; and some dry ice will keep freezer food cold for at least a couple of days.

The bottom-line: If you live in areas where power shortages are the rule, not the exception, spend the money for reliable backup power: Your still-frozen steaks, home office fax, and refrigerated medicine will thank you. But if the power goes out rarely, then installing a standby generator is overkill.

Nationwide, homeowners recouped 67.5% on their average $11,742 investment in a backup generator -- one of the lowest ROIs on the annual Cost vs. Value Report. If you need occasional emergency power, a gasoline-powered portable generator ($200-$650) probably will suffice.

Related: What I Learned About Portable Generators One Dark and Stormy Night

6.  New Windows

The fantasy: Brand new windows that don’t stick, and slash energy bills.

The reality: A $10,000 vinyl window replacement project will recoup about 70% of your investment at resale, and if they’re Energy Star-qualified, they can save you around $300 in energy bills per year.  So, plan to live in your house about another 10 years to recoup the cost of new windows.

The bottom-line: We get it -- new windows are sturdy, pretty energy savers. But unless old window frames are thoroughly rotten, most windows can be repaired for a fraction of replacement costs. And if you spend about $1,000 to update insulation, caulking, and weather-stripping, you’ll save 10%-20% on your energy bill.


Find and Seal Air Leaks in Your Home

Window Film: An Inexpensive Way to Save Energy

No judgments! What’s your home upgrade indulgence

Read more:
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Governor Quinn Announces $5 Million for Welcome Home Heroes Affordable Loan Program

Governor Quinn Announces $5 Million for Welcome Home Heroes Affordable Loan Program
Affordable Loans Fueled State’s Record Year of Homeownership to Help Families and Drive Economic Growth

7 Smart Strategies for Kitchen Remodeling

By: John Riha

Published: May 30, 2013

Follow these seven strategies to get the most financial gain on your kitchen remodel.

Homeowners spend more money on kitchen remodeling than on any other home improvement project. And with good reason: Kitchens are the hub of home life and a source of pride.

Related: Timeless Kitchens

A significant portion of kitchen remodeling costs may be recovered by the value the project brings to your home. Kitchen remodels in the $50,000 to $60,000 range recoup about 74% of the initial project cost at the home’s resale, according to recent data from Remodeling Magazine’s Cost vs. Value Report.

A minor kitchen remodel of about $19,000 does even better, returning more than 82% of your investment.

To maximize your return on investment, follow these seven strategies to keep you on budget and help you make smart choices.

1. Plan, Plan, Plan

Planning your kitchen remodel should take more time than the actual construction. If you plan well, the amount of time you’re inconvenienced by construction mayhem will be minimized. Plus, you’re more likely to stay on budget.

How much time should you spend planning? The National Kitchen and Bath Association recommends at least six months. That way, you won’t be tempted to change your mind during construction and create change orders, which will inflate construction costs and hurt your return on investment.

Some tips on planning:

Study your existing kitchen: How wide is the doorway into your kitchen? It’s a common mistake many homeowners make: Buying the extra-large fridge only to find they can’t get it in the doorway. To avoid mistakes like this, create a drawing of your kitchen with measurements for doorways, walkways, counters, etc. And don’t forget height, too.

Think about traffic patterns: Work aisles should be a minimum of 42 inches wide and at least 48 inches wide for households with multiple cooks.

Design with ergonomics in mind: Drawers or pull-out shelves in base cabinets; counter heights that can adjust up or down; a wall oven instead of a range: These are all features that make a kitchen accessible to everyone — and a pleasure to work in.

Related: Test Your Ergonomic Design Knowledge

Plan for the unforeseeable: Even if you’ve planned down to the number of nails you’ll need in your remodel, expect the unexpected. Build in a little leeway for completing the remodel. Want it done by Thanksgiving? Then plan to be done before Halloween.

Choose all your fixtures and materials before starting: Contractors will be able to make more accurate bids, and you’ll lessen the risk of delays because of back orders.

Don’t be afraid to seek help: A professional designer can simplify your kitchen remodel. Pros help make style decisions, foresee potential problems, and schedule contractors. Expect fees around $50 to $150 per hour, or 5% to 15% of the total cost of the project.

More tips on planning a kitchen remodel:

Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

2. Keep the Same Footprint

Nothing will drive up the cost of a remodel faster than changing the location of plumbing pipes and electrical outlets, and knocking down walls. This is usually where unforeseen problems occur.

So if possible, keep appliances, water fixtures, and walls in the same location. ??Not only will you save on demolition and reconstruction costs, you’ll cut the amount of dust and debris your project generates.

More tips on planning a kitchen remodel:

Plan, plan, plan
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

3. Get Real About Appliances

It’s easy to get carried away when planning your new kitchen. A six-burner commercial-grade range and luxury-brand refrigerator may make eye-catching centerpieces, but they may not fit your cooking needs or lifestyle.

Appliances are essentially tools used to cook and store food. Your kitchen remodel shouldn’t be about the tools, but the design and functionality of the entire kitchen.

So unless you’re an exceptional cook who cooks a lot, concentrate your dollars on long-term features that add value, such as cabinets and flooring.

Then choose appliances made by trusted brands that have high marks in online reviews and Consumer Reports.

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

4. Don’t Underestimate the Power of Lighting

Lighting can make a world of difference in a kitchen. It can make it look larger and brighter. And it will help you work safely and efficiently. You should have two different types of lighting in your kitchen:
Task Lighting: Under-cabinet lighting should be on your must-do list, since cabinets create such dark work areas. And since you’re remodeling, there won’t be a better time to hard-wire your lights. (Here’s more about under-cabinet lights.) Plan for at least two fixtures per task area to eliminate shadows. Pendant lights are good for islands and other counters without low cabinets. Recessed lights and track lights work well over sinks and general prep areas with no cabinets overhead.

Ambient lighting: Flush-mounted ceiling fixtures, wall sconces, and track lights create overall lighting in your kitchen. Include dimmer switches to control intensity and mood.

Related: How to Choose the Best Bulb for the Job

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Be quality-conscious
Add storage, not space
Communicate clearly with your remodelers

5. Be Quality-Conscious

Functionality and durability should be top priorities during kitchen remodeling. Resist low-quality bargains, and choose products that combine low maintenance with long warranty periods. Solid-surface countertops, for instance, may cost a little more, but with the proper care, they’ll look great for a long time.

And if you’re planning on moving soon, products with substantial warranties are a selling advantage.


Kitchen Remodeling Decisions You'll Never Regret

White: The Savvy and Chic Kitchen Color Choice

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Add storage, not space
Communicate clearly with your remodelers

6. Add Storage, Not Space

Storage will never go out of style, but if you’re sticking with the same footprint, here are a couple of ideas to add more:

Install cabinets that reach the ceiling: They may cost more — and you might need a stepladder — but you’ll gain valuable storage space for Christmas platters and other once-a-year items. In addition, you won’t have to dust cabinet tops.

Hang it up: Mount small shelving units on unused wall areas and inside cabinet doors; hang stock pots and large skillets on a ceiling-mounted rack; and add hooks to the backs of closet doors for aprons, brooms, and mops.

Related: Storage Options that Pack More Space in Your Kitchen

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Communicate clearly with your remodelers

7. Communicate Clearly With Your Remodelers

Establishing a good rapport with your project manager or construction team is essential for staying on budget. To keep the sweetness in your project:

Drop by the project during work hours: Your presence broadcasts your commitment to quality.

Establish a communication routine: Hang a message board on site where you and the project manager can leave daily communiqués. Give your email address and cell phone number to subs and team leaders.

Set house rules: Be clear about smoking, boom box noise levels, available bathrooms, and appropriate parking.

Be kind: Offer refreshments (a little hospitality can go a long way), give praise when warranted, and resist pestering them with conversation, jokes, and questions when they are working. They’ll work better when refreshed and allowed to concentrate on work.

More tips on planning a kitchen remodel:

Plan, plan, plan
Keep the same footprint
Get real about appliances
Don't underestimate the power of lighting
Be quality-conscious
Add storage, not space

Read more:
Follow us: @HouseLogic on Twitter | HouseLogic on Facebook


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