This was a quote from the Secretary at HUD (Housing and Urban Development).
I think it’s very unlikely that we see a significant further decline. I think the real question is when will we start to see sustainable increases? Some think it will be as early as the end of the summer or this fall, others think it will be next year. And I wish I had a crystal ball on that. My sense, though, is in the long run it’s a good time to buy, whether it’s five months away or a year away, to see sustainable increases.
–HUD Secretary Shaun Donovan, being interviewed by Candy Crowley, anchor at CNN. Crowley asked Donovan if he believes the market has “bottomed out.”
Its positive thinking and hopefully we will see a substantial upswing in home values. I have been reading quotes like these for a while and we have had a couple of up tics follow closely but a couple down tics in home vaules. Either way its nice to hear hear others being optimistic about our house market. For example…..
Ranked on a scale of 1-9, with 1 being “abysmal” and 9 being “excellent,” San Diego scored 5.63, compared with 5.04 in last year’s report.
Washington ranked first, but its 7.01 score in investment was still below “excellent.”
The top 10 markets and their scores on the 1-9 scale for 2011, ULI says, are:
Note that no matter the style of bungalow, they have one important feature in common – the bungalow porch. Because of the nature of design, the bungalow porch creates a sense of community.
You will find that most bungalows are built in specific sections of a town or city. Their owners would sit on the porch after a hard days work to rest and talk with neighbors and friends. Bungalows have great porches.
The American Craftsman bungalow typified the common styles of the American Arts and Crafts movement, with common features to include low-pitch roof lines on a gabled or hipped roof; deeply overhanging eaves; exposed rafters or decorative brackets under the eaves; and a front porch beneath an extension of the main roof.
Chicago Bungalows are typically built of brick and have one and a half stories. The primary difference between a Chicago bungalow and others is that the roof gables are parallel rather than perpendicular to the street. Chicago bungalows are relatively narrow, an average of only 20 feet wide.
The California Bungalow was a widely popular 1 1/2 story variation on the bungalow in America from 1910 to 1925.
California Bungalow
Milwaukee Bungalows: Many older houses in Milwaukee, Wisconsin, are bungalows similar to those of the Arts and Crafts style like Chicago’s, but usually with the roof gables perpendicular to the street. Milwaukee bungalows tend to have white stucco on the lower portion of the exterior.
Detroit Bungalows: Also built during the Arts and Crafts movement, Detroit bungalows were constructed using local building materials.
Types of Arts and Crafts Bungalow Designs
Ranch Bungalows: Ranch bungalows are designed with bedrooms on one side and the living areas on the other. The attached garage, if present, is located on the living area side.
Raised bungalows: Raised bungalows have a basement that is partially above ground allowing for natural lighting in the lower level. Foyers are usually located at ground level half-way between the floors. Garage entrances are normally at basement level.
Airplane Bungalows: Variations of craftsman style home plans include the “Airplane” bungalow which has a much smaller area on its second floor that appears to “pop out”. Centered on the structure with windows on all sides it has a view much like that of a cockpit of an airplane. An LA company introduced a Japanese-pagoda roof-line inspired style at one time and called it an “aeroplane bungalow.”
You might note that bungalows do not have attics. This allows for the distinctive roof line which is normally quite low. Natural materials like wooden shingles and clapboard are used for siding. Cobblestones and brick are normally used for the exterior walls, porch columns and chimneys.
A FHA insured loan is a Federal Housing Administration mortgage insurance backed mortgage loan which is provided by a FHA-approved lender. FHA insured loans are a type of federal assistance and have historically allowed lower income Americans to borrow money for the purchase of a home that they would not otherwise be able to afford. To obtain mortgage insurance from the Federal Housing Administration, a mortgage insurance premium (MIP) equal to a percentage of the loan amount at closing is required, and is normally financed by the lender and paid to FHA on the borrower’s behalf. Depending on the loan-to-value ratio, there may be a monthly premium as well.
The program originated during the Great Depression of the 1930s, when the rates of foreclosures and defaults rose sharply, and the program was intended to provide lenders with sufficient insurance. Some FHA programs were subsidized by the government, but the goal was to make it self-supporting, based on insurance premiums paid by borrowers. Over time, private mortgage insurance (PMI) companies came into play, and now FHA primarily serves people who cannot afford a conventional down payment or otherwise do not qualify for PMI.
The National Housing Act of 1934 created the Federal Housing Administration (FHA), which was established primarily to increase home construction, reduce unemployment, and operate various loan insurance programs.[1] The FHA makes no loans, nor does it plan or build houses. As in the Veterans Administration’s VA loan program, the applicant for the loan must make arrangements with a lending institution. This financial organization then may ask if the borrower wants FHA insurance on the loan or may insist that the borrower apply for it. The federal government, through the Federal Housing Administration, investigates the applicant and, having decided that the risk is favorable, insures the lending institution against loss of principal in case the borrower fails to meet the terms and conditions of the mortgage. The borrower, who pays an insurance premium of one half of 1 percent on declining balances for the lender’s protection, receives two benefits: a careful appraisal by an FHA inspector and a lower interest rate on the mortgage than the lender might have offered without the protection.
History
Until the latter half of the 1960s, the Federal Housing Administration served mainly as an insuring agency for loans made by private lenders. However, in recent years this role has been expanded as the agency became the administrator of interest rate subsidy and rent supplement programs. Important subsidy programs such as the Civil Rights Act of 1968 were established by the United States Department of Housing and Urban Development.
In 1974 the Housing and Community Development Act was passed. Its provisions significantly altered federal involvement in a wide range of housing and community development activities. The new law made a variety of changes in FHA activities, although it did not involve (as had been proposed) a complete rewriting and consolidation of the National Housing Act. It did, however, include provisions relating to the lending and investment powers of federal savings and loan associations, the real estate lending authority of national banks, and the lending and depositary authority of federal credit unions.
Further changes occurred in the 1977 Housing and Community Development Act, which raised ceilings on single-family loan amounts for savings and loan association lending, federal agency purchases, FHA insurance, and security for Federal Home Loan Bank advances. In 1980 the Housing and Community Development Act was passed; it permitted negotiated interest rates on certain FHA loans and created a new FHA rental subsidy program for middle-income families.
On August 31, 2007, the FHA added a new refinancing program called FHA-Secure to help borrowers hurt by the 2007 subprime mortgage financial crisis.
On March 6, 2008, the “FHA Forward” program was initiated. This is the part of the stimulus package that President George W. Bush had in place to raise the loan limits for FHA.
How to obtain an FHA loan
Second, the potential lender assesses the prospective home buyer for risk. The analysis of one’s debt to income ratio enables the buyer to know what type of home can be afforded based on monthly income and expenses and is one risk metric considered by the lender. Other factors, e.g. payment history on other debts, are considered and used to make decisions regarding eligibility and terms for a loan.FHA does not make loans. Rather, it insures loans made by private lenders. The first step in obtaining an FHA loan is to contact several lenders and/or mortgage brokers and ask them if they originate FHA loans. As each lender sets its own rates and terms, comparison shopping is important in this market.
Section 251 insures home purchase or refinancing loans with interest rates that may increase or decrease over time, which enables consumers to purchase or refinance their home at a lower initial interest rate.
FHA’s mortgage insurance programs help low- and moderate-income families become homeowners by lowering some of the costs of their mortgage loans. FHA mortgage insurance also encourages lenders to make loans to otherwise credit-worthy borrowers and projects that might not be able to meet conventional underwriting requirements, protecting the lender against loan default on mortgages for properties that meet certain minimum requirements, including manufactured homes, single and multifamily properties, and some health-related facilities. The basic FHA mortgage insurance program is Mortgage Insurance for One-to-Four-Family Homes.
FHA allows first time homebuyers to put down as little as 3.5% and receive up to 6% towards closing costs. Specific FHA lender overlays may be tighter. For example very few lenders will allow a seller to contribute more than 3% toward allowable closing costs. If little or no credit exists for the applicants, the FHA will allow a blood relative, such as a parent, to co-sign for the loan without requiring them to reside in home with first time homebuyer. This is called a Non-Owner-Occupied Co-Borrower. Depending on the state you reside in, you may receive a discount on your State Transfer Taxes at settlement. Again, the specific FHA lender’s underwriting guidelines will have their own standards. Very few lenders will fund FHA loans for buyers without a minimum 620 FICO score. For below 620 FICO scores, interest rates will be higher.
Down payment grants
Down payment assistance and community redevelopment programs offer affordable housing opportunities to first-time homebuyers, low- and moderate-income individuals, and families who wish to achieve homeownership. Grant types include seller funded programs, the Grant America Program and others, as well as programs that are funded by the federal government, such as the American Dream Down Payment Initiative, or local governments, often using mortgage revenue bond funds.
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On May 27, 2006, the IRS issued Revenue Ruling 2006-27, categorizing the non-profit seller funded down payment assistance programs (DPA programs) as “scams.”The IRS ruled that organizations such as AmeriDream and Partners in Charity are no longer eligible for non-profit status and are not acting as “charitable organizations” as defined by the IRS. This ruling was based largely on the circular nature of the cash flows, in which the seller pays the charity a “fee” after closing. Many believe that the “grant” is really being rolled into the price of the home. According to the Government Accountability Office, there are higher default and foreclosure rates for these mortgages.
On October 31, 2007, the Department of Housing and Urban Development adopted new regulations to ban so-called “seller-funded” down payment programs. The new regulations state that all organizations providing down payment assistance reimbursed by the property seller “before, during, or after” that sale must cease providing grants on FHA loans by October 30, 2007, with the exception of the Nehemiah Corporation. Nehemiah is the beneficiary of a lawsuit settlement with Department of Housing and Urban Development in April 1998. The terms of that settlement will allow Nehemiah to operate until April 1, 2008. Ameridream was granted an extension to the new regulations until February 29, 2008.
Several similarly operated government grant programs were introduced in response to the IRS Revenue Ruling in May 2006. Their governmental status made them exempt from the IRS Ruling, but they are still affected by the HUD Rule Change. One such organization was The Grant America Program, which was conducted by the Penobscot Indian Nation and had been available to all homebuyers in all fifty states.
Homeowners worry about the value of their home, especially if they are planning on selling their house in the near future. You may be considering adding a second bedroom, or finishing the basement to improve your enjoyment of the house—or maybe you are considering improvements purely for the purpose of getting the most out of your home when it is time to sell.
Overall Cost vs. Benefit
According to Lending Tree, even if a home renovation project does increase the value of your home and fetch you a higher dollar amount when you sell it, you likely will not recover 100 percent of the cost of the project. Of course, some renovation projects, like a bathroom or a deck addition, fetch a higher return on the investment. Renovations can help move a house faster, helping you to save on paying the mortgage month after month when you put it up for sale.
Kitchens
The kitchen can either spark home buyers’ attention or leave them packing for other options. Quicken Loans says you can expect to see between an 80 percent and 93 percent return on your investment from renovating a kitchen. Update old appliances with more energy efficient models, resurface or replace the cabinets, install new counter tops and flooring, or add a breakfast nook to increase the appeal of your kitchen.
Bathrooms
Contractor website Handyman.com claims that bathroom renovations can fetch a rate of return on the investment of 102 percent on average. Many modern home buyers look for upgrades in the bathroom like a jetted tub or a heated floor, so they do not have to walk on cold tile when they step out of the tub or shower. Buyers will zero in on anything that looks like mold or mildew, including aging grout between tiles, or the caulking around the bathtub or sink. Also, if there is space in the house, consider installing another bathroom. Handy American says adding a bathroom in a house with one or one and a half bathrooms provides up to a 169 percent return on your investment.
Landscaping
One of the first things a potential home buyer will see is the outside of the home, and this includes the landscaping. In the age of the Internet, the picture of the front of your house may be the only chance you have to get a potential buyer interested enough to click on the link. Handy American claims that modest landscaping improvements can net an average 100 percent return on your investment, making it a good renovation project to put on your list. Eliminate weeds in the yard, cut back overgrown trees or shrubs, plant attractive flowers and maintain the lawn to appeal to home buyers.
Bad Investments
Some homeowners dive into home renovation projects that normally provide little to no return on their investment. Quicken Loans says that adding a swimming pool is one such bad investment. In general, make home renovations that appeal to a broad range of potential home buyers, avoiding anything that is taste specific or too extravagant for the area where the home is located. If you go overboard with improvements, they may actually drive away potential buyers.
“The major fortunes in America have been made in land.” John D. Rockefeller made this statement, and he should know. You may not become a Rockefeller by investing in real estate, but if you do your homework and are patient and diligent, you are likely to make money. While short-term real estate appreciation trends can fluctuate, long-term trends have only gone in one direction: up.
Trends and Geography
Looking at national trends gives you the confidence to invest. Looking at short- and mid-term trends helps you identify where to invest. According to U.S. Census statistics, the median home price at the end of every decade was larger than the median price at the beginning of every decade between 1940 and 2000, despite ups and downs within some decades. Even when considering the notable declines between 2007 and 2010, as shown in real estate sales statistics, it is apparent the median national home price rose substantially from 2000 to 2010–from $119,600 to $173,400. In fact, the median price quadrupled from 1940 to early 2010. Real estate prices rise in tandem with population and job growth. According to “State Occupational Projections,” published by the U.S. Census Bureau, the most substantial job growth through 2016 will be in California, Texas, Florida and Illinois. California and Texas are projected to account for the largest share of new jobs–over 1,000,000 together. California and Texas also rank one and two in projected population growth. Together, these states are expected to add 26 million people by 2025.
There are some problems that just don’t pay to fix but will hurt you when it comes time to sell if you haven’t addressed them. Upgrading electrical systems, replacing foundations and plumbing systems, and reroofing are very big-ticket remodeling jobs that are only noticed when they are lacking. Look for buildings that don’t need any of these major fixes. Instead, invest in buildings that will benefit from quick, low-cost improvements, which bring a lot of bang for the buck. According to “Remodeling Magazine,” replacing a front door can represent a 130 percent return on investment. Interior and exterior painting are often the best improvements you can make for your money. Landscaping can turn the worst property on the block to the neighborhood’s crown jewel overnight.
Positive Cash Flow
If the property doesn’t pencil-out, don’t buy it. That is, it needs to generate at least as much rent as it costs to keep. While appreciation will occur over the long term, you don’t know how long that will be. In the meantime, you want to be able to make a profit, or at least not lose money every month. Before making an offer on any property, visit comparable rentals to verify you’ll be able to rent the building for at least its carrying cost. Account for maintenance and property management costs among your expenses, along with the mortgage, taxes, insurance and utility costs. Assume a vacancy rate that reflects area rates. Then try to get a fixed-rate loan so that when rates go up, your costs will stay relatively level. As rents rise, you’ll start to show a profit.
