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Connie Yoshimura

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Displaying blog entries 211-219 of 219

Interest Rate Increase is More Than a Baby Bump

by Connie Yoshimura

     The big news in the housing market came from Washington, D.C. this week. According to the Federal Housing Finance Agency, interest rates jumped up almost half a percentage point from approximately 3.5 to 4.0 percent for a 30-year fixed rate mortgage, creating a scramble to buy up existing inventory before rates rise even further. The almost half point bump, the largest bump on record within a three-week period, has created significant fears of continued rate increases, propelling buyers who have previously been sitting on the fence to make a purchase now. The .5 point rise diminishes home buying power. For example, a $300,000 mortgage at 3.5 % has a monthly principal and interest payment of $1,347.13 while a 4% rate increases the monthly payment by $85.11 which means that a buyer needs to make an additional four times that amount, or $340, to qualify for the same $300,000 home. If rates increase from 3.5% to 4.5%, the payment will increase by $172.92 which diminishes buying power even more.

     We've known for quite some time that historic low interest rates, the lowest being 3.35% six months ago, can't last forever. Smart buyers buy when prices and rates are low. Unfortunately, most of us never know when the bottom of the market occurs. We only know that in hindsight and so that time has already passed and for those of us who missed it, we can let out a big groan. The lowest 30-year interest rate occurred in December 2012 when the rate was 3.35 and the average sales price in Anchorage was $331,997 for single family homes. The average sales price for April 2013 was $338,065, another creep upward.

     But the price of a home is much less important than the interest rate paid over 30 years. Interest on a fully amortized 30-year loan for $300,000 at 3.5% is $184,968.26. An increase of 0.5% annual interest rate would be an additional $30,640.26 over the lifetime of a loan. That's why it is ridiculous for buyers to quibble over a $1,000 counteroffer or even $10,000. Offers from buyers that fall apart over a few thousand dollars in a seller's counter aren't receiving good advice from their selling realtors and buyers aren't seeing the forest for the trees. An interest rate bump of 1% costs a lot more than a loss of $5,000 in closing costs paid by the seller or a slightly higher sales price. In the long run, a lower rate of interest rules over purchase price every time.

     In the coming months, it might be well worth it to pay to lock or buy down your interest rate, particularly if you're purchasing a new construction home which might be four to six months before completion.

Purchase Price 3.5% 4.0% 4.5% 5.0% Payment Increase
$200,000 $898.09 $954.83 $1,013.37 $1,073.64 $175.55
$300,000 $1,347.13 $1,432.25 $1,520.06 $1,610.46 $263.33
$400,000 $1,796.18 $1,909.66 $2,026.74 $2,147.29 $351.11
$500,000 $2,245.22 $2,387.08 $2,533.43 $2,684.11 $438.88
$600,000 $2,694.27 $2,864.49 $3,040.11 $3,220.93 $526.66

The Added Value of Landscaping

by Connie Yoshimura

     If you're not opening up a cabin or camping somewhere in Alaska this Memorial Day weekend, you're most likely spending the weekend working in your yard or whatever is left of it after our record breaking long winter. Homeowners know all too well that materials and installation of landscaping in Alaska is expensive. And maintenance and replacement can be even more expensive. There's our harsh winters and moose eating shrubs and trees. Yet, after it's all planted, sprinkled, pruned and the sunshine comes out, landscaping adds value to our homes, commercial buildings and streetscapes. All those downtown hanging begonia and geranium baskets sprinkled with lobelia says something very positive to the thousands of tourists who walk our streets about how Alaskans feel about their community.

     Unfortunately, not all our landscaping looks as colorful and healthy as those hanging baskets. Federal, state and local designs for new roads require a landscaping plan. However, after the landscaping is installed, there are no requirements, funding or bonding for its maintenance and replacement. The same is true for commercial buildings. A lot of commercial and government-installed landscaping in this community is abandoned after its initial planting. Drive down A Street and you can see for yourself which businesses maintain their landscaping and which do not. Locally owned businesses have a much better pride of ownership than do international companies who don't care about a dead tree or shrub in their parking lot, even though 24,000 cars a day may drive by.

     Some new residential subdivisions have plat notes which require the developer to install individual lot landscaping which may include up to four to six inches of topsoil and hydro seeding in both the front and back yards as well as planting a certain number of trees and shrubs in the front yard. This requirement is a future homeowner cost savings of up to $5,000 or $10,000 and adds value to the lot and the new community.

     Other developers pass on the landscaping requirements to the builder who may in turn pass it on to the new homeowner. Read your covenants, codes and restrictions to find out who is responsible for landscaping and when it must be installed.

     A tree can cost more than ten times the cost of a shrub and a shrub can cost more than ten times a flat of flowers. However, the tree can last for a hundred years (assuming moose guard or an evergreen) and a shrub can last ten or twenty years. Flowers bloom and die within 60 days unless they are perennials like peonies, iris, tulips. Consider your annual flowers like a piece of jewelry. It adds color and interest to your wardrobe, but the real added value of landscaping is in the trees and shrubs you plant, water and maintain.

     Potential home buyers decide within ten seconds whether or not they want to look inside a home. Landscaping plays a significant role in those ten seconds. A well-placed twelve-foot clump birch tree surrounded by five cotoneasters with a sprinkling of bark and a nice hanging basket at the front door may make the difference as to whether or not you have a showing. A well-maintained yard also speaks volume as to the home sellers maintenance inside the home.

Negotiating the Sale of Your Home

by Connie Yoshimura

    In today’s market, negotiating the sale of your home is never complete until the closing documents have been signed and recorded at the recorder’s office the following business day. The entire process can take as little as 30 days or as long as six months, depending upon the condition of the property and the abilities of all the parties involved, including realtors, appraisers, home inspectors, mortgage originators, mortgage underwriters, mortgage insurance underwriters, escrow closing officers, FHA/VA/AHFC project and subdivision approvals. That’s a multi-step process and anywhere along the way, things can get delayed, lost, miscommunicated or just plain derailed.

    Negotiating an agreed upon purchase price is only the first step. Even in today’s fast-paced market, most offers require one or two counters. These counteroffers need to be in writing and signed by all involved parties. If two people are in title to the property, it requires both seller’s signatures. Buyers are still asking sellers to pay additional closing costs and these costs must be identified not by type but by maximum amount. Closing dates are important to sellers, particularly for builders who have interest carrying charges.

    Once price, closing costs and time for performance are agreed upon, the next step is the approval of the home inspection report. Buyers are encouraged to get a home inspection (paid for by them) and their offer will be contingent upon their approval of the inspection report. Home inspections vary widely, depending upon the qualifications and thoroughness of the inspectors. The best home inspectors are licensed, bonded, insured and a professional engineer. Both buyers and sellers have the right as identified in the MLS purchase and sale agreement to renegotiate the purchase price based upon the home inspection report. In today’s market, if the buyer requests items beyond health and safety repairs, the purchase price is often frequently increased or the transaction is terminated.

    The final negotiation has to do with the appraised value of the home. If, for some reason, the appraisal does not meet the agreed upon purchase price, the seller is in for another round of negotiations. In a fast paced market where we have had an 8% increase in values in some market segments during the first quarter of 2013, it is difficult for an appraiser to keep up due to their required reliance upon closed sales data. Appraisals are now ordered through third party entities on a rotation basis and it is no longer possible for mortgage originators or realtors to request their favorite appraiser. This has good and bad implications. The good is that there can never be the appearance of collusion or price fixing. The bad is that in the past appraisers frequently were able to specialize in an area of the market which gave them in-depth knowledge of subdivisions, builders, price ranges and locations. Now, appraisers are generalists and as generalists their knowledge is not going to have the market depth of a specialist.

    When an appraisal does not meet or exceed the agreed upon sales price, it is usually the resale seller who takes the hit. On the other hand, if the appraisal exceeds the purchase price, buyers think they got a good deal. Buyers of new homes are adding a lot of extras on to their purchase price but they can’t expect appraisers to always add the full cost of their add-ons in which case they must pay out of pocket for their ‘have-to- have’ upgrades.

    By the time this three step process is finished and buyer and seller are at their separate closing tables, the negotiations are hopefully over, assuming the title report and the HUD statement do not have any surprises.

Negotiating the New Home Sale

by Connie Yoshimura

    You are negotiating for a new home to be built.  The builder seems unreasonable.  You can’t understand why he won’t pay for the Kohler Bowl you’ve picked out for the powder room. It’s only $350 above your plumbing allowance and is miniscule in comparison to the $400,000 you’re paying for your new home which doesn’t even exist yet.  You also want to upgrade to Brazilian hardwood cherry flooring rather than the Evoke laminate that is part of your allowances.  Oh, and you also want knobs and pulls on your cabinet doors.  They only cost $2.75 a piece and there are only 24 of them and the builder is telling you they cost at least $3.00 each to install.    

    There are literally hundreds of parts and pieces to a home that could be negotiated but let’s stop here.  You and your builder are on the wrong track.  Buyers need to understand that home building is a business and profit margins are slim and sometimes even non-existent due to weather and time delays.  National statistics place pre-tax profits at 6 to 7% on new homes so although all the items listed above don’t seem like much when compared to the sales price, they dig pretty deep into the builder’s pre-tax profit of $24,000.  In our real estate industry there is a significant misconception that the bottom line buyers and realtors see on HUD  settlement closing statements is the builder’s profit.  That bottom line is before the end of the month bills have come and doesn’t take into consideration ongoing expenses like rent, payroll, bank fees and interest.

    Builders are entrepreneurs.  They are general contractors with a residential endorsement that requires on-going continuing education courses.  They have more education and testing restrictions on them than general contractors. It takes fewer qualifications to build the De’Naina Convention center than a new single family home.   The builders who stay in business the longest are those that run a tight back room and know how much it costs to install those knobs you’ve picked out.

    New buyers should not receive more concessions from their builder than their neighbor.  That’s the golden rule every builder should follow.   It is inevitable that buyers will talk to one another.  If a builder pays $3,000 in closing costs for one buyer, he should expect to pay it for each and every buyer coming in his door for the same plan in the same location for the next three months.  Markets do change and smart builders make adjustments based upon the time of year, inventory, et cetera.  However, the bottom line for a builder is to treat every buyer equally within a reasonable time frame.  Even family and friends should not be exempt from this golden rule because ‘special deals’ lower value for all buyers due to appraisal comparisons.

    Buyers do not really care about the cost of a winter build or the pending increase in price of lumber.  What they care about is how their house looks to their family and friends and whether or not it reflects their personal lifestyle and taste.  Builders need to save room in their pricing for a few items that are cosmetically important to the buyer and will make their home look custom.  These small items mean a lot to a buyer who’s making the largest financial investment in their lifetime.   

    Finally, there can be no ‘nibbling’ on either the builder or the buyer’s part.  Once the offer to purchase is signed by all parties, that should complete the financial arrangements for the home purchase.  Everything should be in writing down to the knobs on the cabinet.  Anything else is an extra and needs to be in writing with a change order.   

The Return of the Condo

by Connie Yoshimura

    The Anchorage real estate market turned on a spring day last May and has been growing stronger every month as a result of pent-up demand from the prior four years of recession.  And with this turn-around the Anchorage condo market has sprung to life once again.  For the first two months of this year compared to last year the number of condos sold jumped 42% and the days on the market decreased 46%.  What a change from the sale of only 36 condos in January 2012.  Plus, this February the average condo sold for $205,558 compared $170,889 just a year ago. 

    The condo hot spot is between $224,999 and $249,999 where there are only 15 condos for sale within the Municipality of Anchorage and where over 10 sell per month, putting the supply of condos in this price range at less than one and a half months.  So, if you’re in the market for a condo, you had better hurry before summer starts jump the prices up 7%.    

     But, whether you’re an experienced home buyer getting ready to make the down-size move or a first time homebuyer, the purchase of a condominium requires some extra care and reading. Condominiums are part of a common ownership community and they come in all sizes and shapes.  There is no easy way to physically recognize a condo. A condo can be a single family home, half of a duplex or an apartment style unit with common hallways.  They can be stacked, side by side or totally detached and in any price range. 

    To find out what you’re purchasing you must read the public offering statement which is a required condition of approval for every purchase. A public offering statement is issued for every new condo.  A resale certificate is issued for one that is being resold. Either one will describe the physical limitations of the property you are purchasing.  Particular attention should be paid to the budget.  Is the association self-managed or is it professionally managed?  How are the cost for water and sewer allocated per unit?  I once had a realtor make an offer on behalf of a buyer who wanted to snow plow his own driveway to reduce his dues.  Dues are fixed costs and are never negotiated as part of a purchase and sale agreement.  Dues are reviewed and established on an annual basis by the board and property management company.     

    Older condo developments may have future assessments for roof repair, asphalt, exterior painting, landscaping.  Unless they are already a pending assessment, they will not be identified in the budget so a buyer should read the prior twelve months of the board minutes where these items will be discussed prior to assessment.  Reading the minutes of the board will tell you whether or not there is conflict within the association and what additional costs may be levied in future months or years.

    One final note about resale certificates and public offering statements.  Make sure that they are current with all amendments.  The most reliable resale certificates are prepared by either a professional property management company or an attorney. The cost of a resale certificate or public offering statement is between $250 and $350 per issuance.  It is well worth the cost paid by the seller to insure that it is current and up to date with all the appropriate information, including a budget, all amendments and current phasing plan. 

Alaskan Real Estate News March 2013

by Connie Yoshimura

    The Dow Jones Home Construction Index, which tracks seven publicly traded builders, is up 178% since it hit a two year low in August 2011.  Alaska doesn’t have any publicly traded builders but our local building permit activity indicates similar gains in new home construction.  Through February, there were 37 single family permits vs. 28 a year ago and 18 duplex permits vs. 4.  Although our numbers may be small, they’re a far improvement from the past few years. At this rate, single family permits should hit 400 by the end of 2013, almost double from two years ago.

    But it’s not all good news.  Second quarter lumber prices are due for a substantial price increase.   The Wall Street Journal reports prices have climbed yearly 40% since late September.  Three of the main factors are Chinese buying, recovery of the U.S. housing market and the limitation of supply.  Alaskans may be geographically isolated but what happens in other parts of the lower 48 and the world has a dramatic impact on our housing.

    So, too, when it comes to mortgage financing.  FHA recently increased their mortgage insurance rates by 7.5% and the popular HUD 184 program is now temporarily out of funds.  Historically low interest rates are fluctuating almost daily but the trend is clear for a slow creep upward as are the prerequisite credit scores for home mortgage buyers.  If you bought a brand new home last year, or have one under contract with lumber still in the yard, give yourself kudos, for committing at the bottom of the market.

    The resale market tells the same story.  Multiple offers on single family homes under $400,000, particularly if they were built after 1990 when Anchorage’s building codes began having major structural and energy saving updates.  Last year home values increased 4% and this year, without some major economic downturn, that increase should be  6 to 7 percent.  That’s good news for home sellers who’ve waded through the trough of sluggish home prices the past four years.  It’s not such good news for home buyers trying to enter the market for the first time who are caught between rising rents and increased costs for both resale and new construction homes.  New three bedroom apartment rentals are going for as much as $2,150 per month + utilities and renters are lucky to find one.

    There are a lot of small investors currently in the market for duplexes, triplexes and four-plexes, either as investor property or as owner-occupant.  This is what I’m hearing from buyers:  “We qualify for more but we don’t want to live just for our house payment.  I need to provide an apartment for my parents. I want them close (but not too close). Why not live in a four-plex and let tenants help with the mortgage?”  There’s been a change in the mindset of the Alaskan consumer.   Yes, there is still the buyer who wants the big house, the trophy room, literally and figuratively.  But this past recession, and all economic indications are we can put ‘past’ in front of the noun, has changed the way we think about how we’re going to live in the future.

    

The ‘Heart’ of the Home

by Connie Yoshimura

     The International Builder’s Show in Las Vegas was brimming full of ideas for new designs and amenities. How much of that can be incorporated into Alaska home building is an open question, but there are some trends that just won’t go away that local builders should pay attention to. Let’s start with the “heart” of every home: the kitchen. It’s  not shoved into the back corner of the house any more. Instead, it’s wide open to other living areas. And an island is essential. They’re  no longer just a place to drop the groceries, but are the primary in- home dining location. Bi-level islands minimize the dirty dish view and add architectural interest. And pantries. Everyone wants one whether it’s an over-sized cupboard in the corner or a walk-in.

     Formal living rooms are dead — at least according to the interior designers at the home show. Instead, formal and informal living combine in a great room setting which offer a central social zone for activity and interconnection. In other words, when you come home from work, everyone gathers in the kitchen while mom or dad cooks at the island and everyone else gathers round the flat screen or slumps in a chair with their ipad in the open family room.

     Windows.  There are lots of them, and corner glass. Two windows joined at forty-five degree angles make smaller spaces feel larger and bring the outdoors in. I’m not sure about this trend in Alaska but in warmer climates, there’s lots of discussion about outdoor living as a way to add extra living space with courtyards, patios, decks, porches, even outdoor kitchens without a lot of added expense. One local builder has begun to cover his decks in higher price points which has received positive comments.

     Here’s my favorite trend: master bathrooms as spas. That means five fixtures (two vanities, shower, tub, toilet) all designed around lots of tile in cool colors. If the master bedroom is an ideal 14 by 18 feet, the master bath has become half that size. Here in Alaska, large five to six-foot showers with double heads and built-in bench is a growing trend. And if space allows, sitting areas and retreats are nice add-ons, even converting an adjacent bedroom for that particular use. Of special interest for families is grouping the secondary bedrooms away from the master by locating a bath in-between.

     The magic word at the Home Show was “flex” space whether it’s an extra bedroom/den/formal dining/home center. In fact, that almost obsolete dining room has become the perfect spot for “flex”. The move-up model home of a generation ago had three eating areas —  kitchen nook, island and formal dining room. Take your choice. One of those is now gone. New homes are now being designed for multiple uses in one space. Call the room a home center or a den, it’s  usually visually adjacent to the kitchen, the heart of the home. Regardless of whether you’re a novice chef or an expert on where to get the best take-out, you want that home center and big kitchen. And it’s wide open spaces where home buyers can define rooms by lighting, half walls, furniture, area rugs and ceilings. Look up, Alaskans, ceilings are becoming the “in” feature. Whether they’re painted an accent color, highlighted with sheetrocked beams, coffered or 12 feet high, they are “it”.

     But first and foremost, it’s all about the exterior look. Paint colors are more subdued — no highly contrasting trim or three color exteriors. Instead, they’ve become more monochromatic with simple changes in hue. Dark gray to light gray. Light beige to medium to dark to highlight the architectural details of the home. Home buyers shop with their eyes. If they don’t like the exterior elevation of a home, they don’t come inside to see how attractive the interior may be. Smart builders in Alaska already know this. Others have yet to learn it.

     It takes several months to build a home. It takes only ten seconds for a buyer to reject it in a “deadly” drive-by.

Should I Buy a Home Now?

by Connie Yoshimura

    I'm often asked if this is a good time to buy a home. Some clients are concerned that home prices may fall further than they have already. They are assuming that the best course of action is to wait for the bottom in the market and then buy. The problem with this approach is that you don't know where the bottom is until you see it in the rear view mirror, meaning until you've missed it!

    Home prices are one factor in determining your cost of ownership, but so are interest rates and financing availability. Even though interest rates have gone up in the last six months, they are still near historic lows. Since your monthly mortgage payment is a combination of paying down your principal and paying the interest owed, if home prices come down a little further but interest rates go up, it could cost you even more to service a mortgage on an identical home!

    While a home is a major investment, it is also the center of your personal life. It's important to live in a home that reflects your taste and values, yet is within your financial "comfort zone." To that end, it may be more important to lock in today's relatively low interest rates and low home prices, rather than to hope for a further break in prices in the future.

    Please give me a call if I can be of any assistance in determining how much home you can afford in today's market.

Insider Column on Alaskan Real Estate – Tips for Selling Your Home

by Connie Yoshimura

    Welcome to my ‘insider’ column on real estate where I’m going to share my thoughts and ideas with you in hopefully what will be an informative and frank discussion about real estate in Alaska. So how come it is that two homes with the same floor plan and square footage on the same street in the same neighborhood can have substantially different values? How can one home be worth $20,000 more than the other?
It’s the identical shingles on the roof, the same foundation, even the same builder. Well, the truth of the matter is that buyers buy with their eyes and if they don’t like the paint color on the walls, that spectacular chandelier that you spent an extra $500 over the builder’s lighting allowance for or your grey carpet, you may have just missed a sale and lowered the value of your home.

    The over customization of a home whether it’s a remodel or a brand new home is a big negative when it comes to resale. If you’re going to let your teenage son paint his wall three different shades of green then be prepared to paint it out before you put your home on the market. Ditto for the purple dining room wall and red kitchen tile. But, you say, I’m paying for all this and I want it to be ‘my’ home. Statistically speaking, Alaskans like to move around. We’ve had a very stable housing market compared to the lower 48 and chances are you’re only going to live in your home for five or seven years before you get the urge to change your nest. So be careful when it comes to your selections because it can have a very negative impact on resale. Neutral colors are best and that means boring beige. Add your favorite color to your furnishings and accessories but always create a neutral backdrop. Use color for accents, not permanent and costly items to replace like carpet, tile and countertops. Buy a red kitchen aid mixer at Costco but don’t put red on the floor or countertops—that’s too expensive to change out. Don’t put purple carpeting in the living room. Recover your sofa in a purple fabric instead.

    If you insist upon customizing your home, then be prepared to take a reduction in price. Trends change on an annual basis. There’s even an organization called Pantone that announces the ‘color of the year’. Last year it was orange. Remember all those orange jackets, shirts and blouses everyone was wearing? Last year, I insisted a builder paint an orange wall in a new condo. It sold but we were prepared to spend the $150 to paint it out if necessary. But, an orange countertop, or even backslash, would have cost two to four times that amount.

    Homes on the market get a certain reputation. Even though there are over 1,100 realtors in the Anchorage area, there are only about 750 that are actively engaged in selling real estate. And guess what? We all talk to one another, send emails, flyers of properties. Properties are like people, they get a certain reputation whether justified or not. An over customized home can actually end up having fewer showings. Buyers who walk into a home and are hit with a barrage of color become overwhelmed. The vast majority are just too busy to remodel because they’re working two to three jobs so that they can qualify for a mortgage. Sellers who make it easy for them by creating a neutral palette will get more showings and a higher price. Homes owned by relocation companies generally get it right. Before putting a home on the market, they not only go in and give it a professional cleaning but frequently replace carpet, paint and even countertops to create a neutral palette. If they don’t, they give it a substantial discount, 5 to 10%, to move it out of the market. Over the years, I’ve seen some lovely, well-built homes in premium neighborhoods that have been over customized and have sat on the market for a very long time and then sold for less than a comparable property down the street. And, unfortunately, that lowered sales can statistically follow that home for several years.

    It’s hard to say no to yourself and hold your personal preferences in check when remodeling or buying a new home. But just be aware you may end up paying twice for that favorite orange tile you just ordered for your kitchen backsplash.

Displaying blog entries 211-219 of 219

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