Real Estate Information

Low Inventories Indicate a Trend

Low inventory is a relative term depending on how you're comparing it.  Would the comparison be to total number of homes on the market last year, homes in a certain price range or homes in a certain area?  In some situations, it's a combination of all of those things.

In any given market, inventories will fluctuate based on area and price range.  The National Association of REALTORS® considers a balanced market to be six months' supply of homes.  If it takes longer than six months to sell, it is thought to be a buyer's market and less than six months, a seller's market.  Most buyers and sellers probably feel inventory equilibrium is more like three month's supply of homes.

Inventory has a direct impact on price.  During the housing bubble, demand decreased, supply ballooned to four million houses and prices dropped dramatically.  Increased inventories due to foreclosures, bank' revised lending practices and builder's lack of new housing starts each contributed to the dramatically lower prices.

As the market has recovered, economic conditions have improved, banks have loosened their requirements, interest rates have remained low, foreclosures have slowed and gradually, the inventory has been reduced to approximately two million houses.  When demand is constant but inventory is reduced, price tends to increase because the same number of people are trying to buy a smaller than normal number of homes.

Based on the low mortgage rates that have been inching up each week in 2013 and an improving consumer confidence level, most markets are experiencing some increase in demand.  With inventory decreasing, buyers in the marketplace can see that prices are increasing.

Just as signs of spring can be seen to be just around the corner, it should be recognized what direction prices will be moving.  Hindsight is 20/20 but we can't purchase or sell in the past.  We need to make decisions today on what we think will happen in the future.

If you're curious to know what inventory conditions are for your specific market, send me an email with the price range and area and I'll send you a report.  Mike@MikeParker.com

What's It Going to Take?

How much evidence is needed to make a decision to get out of the rent race and become a homeowner?

Compare your rent with a mortgage payment on a similar size property. If you want a larger home than your current one, use the rent that property would require instead of what you're currently paying. If it's considerably cheaper, you may not need any further encouragement.

By the time you consider the principal reduction, appreciation and tax savings, your monthly cost of housing could be much less than the rent you're paying.

The principal reduction included in each payment is like a forced savings account that increases as your mortgage balance decreases. Your equity in the property will also grow due to appreciation. The equity is part of your net worth and an investment in your family's future.

The income tax savings can be an additional financial consideration if the combined interest and property taxes exceed the allowable standard deduction.

Trends are showing that both tenants and homeowners are staying in their homes longer. It's been said that whether you rent or own, you're paying for the home. Do you really want to buy the home for your landlord? Check out your numbers on a Rent vs. Own.

As the market shifts from a buyer's market, it's good to know how to improve your chances to have the seller accept your offer.

Once you decide on a home, don't waste time; write an offer and submit it as soon as possible. Competing with another buyer happens more frequently than you'd expect. Multiple offers are a seller's advantage but here are some tips to level the playing field:

• Realistic offer - don't give the impression you're trying to "steal" the property. Submit comparable sales that justify your offer.
• Pre-approval letter - this satisfies seller's biggest concern that an unqualified buyer will unnecessarily take the home off the market and the seller will lose other opportunities.
• More earnest money - it shows you're serious and makes the seller feel like the contract will actually close.
• Minimize contingencies - from a seller's standpoint, each contingency is one more reason why the sale won't go through. They feel the home is "off the market" and they're in limbo.
• Shorten inspection period - your agent can help you set a reasonable date but let the seller know you're willing to close prior to that if possible.
• Write a personal letter to the seller telling them why you want their home - this can be the emotional connection to the seller that makes the difference in you getting the home.

Home prices have come down 20, 30, 40% or more in the last three years and mortgage rates are lower than they've been in 50 years and you still haven't bought a home. Really?

Housing affordability is over 180, an all-time high when 100 is considered good and you're still renting. Really? Are you waiting for it to get to 200? Do you think prices and rates are going to get lower? Really?

You know it's costing you more every month to rent than to own. Tax savings, appreciation and principal reduction lower the monthly cost of housing and yet you'd rather let your landlord benefit...Really? Have you heard that the average homeowner has 41 times greater net worth than a renter? Do you think it's a coincidence? Really?

And have you heard that most people want a place of their own; a place to raise their family; to share with their friends; to feel safe and secure. So, you'd rather go home after working hard all day to your landlord's home. You'd prefer to invite some friends over to your landlord's home for dinner next weekend. Really?

You haven't checked out whether you can actually take advantage of the best buyer's market ever. You haven't invested thirty minutes to find out the facts as they apply to you and your situation. Really? You're basing a decision on national news, chat rooms and Facebook. Really?

Every market is different. Every buyer is unique. If you want a home; if you have a down payment; if you have good credit, you owe it to yourself and your family to explore the possibilities...but with a real estate professional; someone who can really show you the reasons and really give you options.

FHA has announced a major change to its loan program which allows borrowers to cancel the mortgage insurance premium (MIP) when their unpaid balance reaches 78% of the original purchase price. While no specific date has been set for the change, sometime in 2013, new FHA loans will require the mortgage insurance for the life of the loan.

At existing rates, the monthly MIP on a $168,875 mortgage is $178.99 per month. Under the current rule with normal amortization, the MIP would no longer be required in 9 years and 9 months. However, under the new rule, it would last for the entire 30 year term.

They also announced that the annual MIP will also be increased from 1.25% to 1.35% at some point in the near future. HUD, the parent agency for FHA, is making the changes to restore the capital reserves of the program that are needed to fund failed loans.

People that can close a FHA loan before the change takes place will fall under the old rules for canceling MIP and the lower rates. Since no date was announced, it is not known exactly when the changes will take effect.

While this information will probably not make the evening news, it will have a big impact on borrowers planning to use an FHA loan. Please pass it on to anyone you know who might be considering purchasing or refinancing with a FHA loan.

This week finds us expressing gratitude to family and friends,
co-workers and colleagues, clients and customers.
However you choose to celebrate Thanksgiving,
The Mike Parker Team wishes you a joyful week of gratitude.

The new assessment scores for Kentucky's school districts have been released.  The Lexington Herald-Leader put together a nice search engine which allows you to check on individual school districts and individual schools - http://www.kentucky.com/2012/11/02/2392768/search-the-latest-test-scores.html.  

Here are the rankings for Northern Kentucky's school districts:

Beechwood School District – Ranks 2^nd out of 174 school districts

Ft. Thomas School District – Ranks 3^rd out of 174 school districts

Walton-Verona School District – Ranks 6^th out of 174 school districts

Boone County School District – Ranks 21^st out of 174 school districts

Campbell County School District – Ranks 25^th out of 174 school districts

Kenton County School District – Ranks 32^nd out of 174 school districts

Ludlow School District – Ranks 102^nd out of 174 school districts

Dayton School District – Ranks 126^th out of 174 school districts

Bellevue School District – Ranks 131^st out of 174 school districts

Southgate School District – Ranks 134^th out of 174 school districts

Erlanger-Elsmere School District – Ranks 138^th out of 174 school districts

Newport School District – Ranks 171^st out of 174 school districts

Silver Grove School District – Ranks 173^rd out of 174 school districts

Covington School District – Ranks 174^th out of 174 school districts

Ready for a Spooktacular Scare?  Check out the top areas to get your scare on in the Tri-State:

Here are some of the top haunted houses in the Tri-State, and when and where you can find them to get spooked:

1. The Land of Illusion- Thru Nov. 3
8762 Thomas Road, Middletown Ohio
Website: www.thelandofillusion.com
Phone: 513-423-9960 begin_of_the_skype_highlighting FREE 513-423-9960 end_of_the_skype_highlighting
Hours: Friday and Saturday
Times: 8 p.m. – 2 a.m.

2. The Dent School House - Thru Nov. 3
5963 Harrison Avenue, Cincinnati, Ohio
Website: www.frightsite.com
Phone: 513-598-4600 begin_of_the_skype_highlighting FREE 513-598-4600 end_of_the_skype_highlighting
Hours: Thursday – Sunday
Time: Thursday and Sunday: 7:30 p.m. – 10 p.m.
Friday and Saturday: 7:30 p.m. – 12 a.m.
Lights Out Tour – Nov 1 and 2 7:30 p.m. – 12 a.m.

3. Halloween Haunt at Kings Island – Thru Oct. 27
Kings Island Drive, Mason, Ohio
Website: haunt.visitkingsisland.com
Phone: 513-754-5700 begin_of_the_skype_highlighting FREE 513-754-5700 end_of_the_skype_highlighting
Hours: Friday and Saturday
Time: Fridays 6 p.m. – 1 a.m. and Saturdays 11 a.m. -1 a.m.

4. Haunted Hollow Ride– Thru Oct. 27
1261 Dalton Road., Wilmington, Ohio
Website: www.wilmingtonhauntedhollowride.com
Phone: 937-382-6147 begin_of_the_skype_highlighting FREE 937-382-6147 end_of_the_skype_highlighting
Hours: Friday and Saturday
Time: Last Bus leaves at 11:45 p.m.

5. Nightmare Penitentiary– Thru Oct. 27
1261 Dalton Road., Wilmington, Ohio
Website: www.wilmingtonhauntedhollowride.com
Phone: 937-382-6147 begin_of_the_skype_highlighting FREE 937-382-6147 end_of_the_skype_highlighting
Hours: Friday and Saturday
Time: Remains open until the last victim goes through

6. USS Nightmare - Thru Nov. 3
101 Riverboat Row, Newport, KY
Website: www.ussnightmare.com
Phone: 859-740-2293 begin_of_the_skype_highlighting FREE 859-740-2293 end_of_the_skype_highlighting
Hours: Wednesday - Sunday
Time: 7 p.m. – 1 a.m.

7. Dungeons of Delhi - Thru Oct. 28
362 Anderson Ferry Road, Cincinnati, Ohio
Website: http://www.dungeonsofdelhi.com
Hours: September 14-15: Open 7 p.m. - 1 a.m.
Friday and Saturday 7 p.m. - 11 p.m.
Sunday 7 p.m. - 9 p.m.
Sunday Lights on Tours Sunday October 21 and 28 from 4 p.m. - 6 p.m.

8. Mt. Healthy Haunted Hall- Thru Oct. 27
7700 Seward Avenue
Mt. Healthy Oh 45231
Website: http://www.hauntedhallinfo.com/
Hours: Friday and Saturday 8 p.m. - 11 p.m.
Sunday 7 p.m. - 9 p.m.

9. Scream Acres Ct.- Thru Oct. 27
5055 Glencrossing Way, Cincinnati
Website : http://www.cincyscreams.com/
“Spooky Laser Tag” runs from 7 p.m. until 9 p.m. and
“Haunted Laser Tag” runs from 9 p.m. until midnight.
Overnight haunted laser tag event on Oct. 26 from midnight until 7 a.m.
For more info, call (513)703-7384 begin_of_the_skype_highlighting FREE (513)703-7384 end_of_the_skype_highlighting or send an email contact@cincyscreams.com .

Rent or Buy?

The question plaguing every tenant who wants a home of their own is whether they should continue to rent or is it the right time to buy?

The combination of good prices and low mortgage rates make it considerably cheaper to own than rent in most markets. Assuming a person is qualified with a down payment and won't be moving for several years, there may not be a better time to buy a home.

In the example below, the total house payment is $1,281.01 compared to $1,500 to rent the same home. Before you consider any of the financial benefits attached to home ownership, it's cheaper to own than to rent.

The net cost of housing falls to $764 or just more than half the house payment when you consider the principal reduction due to normal amortization, a modest appreciation and the tax savings along with a reasonable maintenance expense that a tenant would not have to pay.

One of the biggest benefits is the growing equity. As the value goes up, the unpaid balance goes down. A favorable leverage causes their low down payment to grow to $40,609 in a short seven years based on a modest 1% appreciation.

There's an expression often heard in real estate circles: "Whether you rent or buy, you pay for the house you occupy." You're either buying it for yourself or you're helping the landlord buy it.

Check out a Rent vs. Own to see how your numbers will compare to this example or call me to do it for you.

FHA MIP Release

FHA loans require mortgage insurance premium to cover a possible loss to the lender if the property has to be foreclosed and sold. The premium is substantial and eliminating the MIP would reduce the payment considerably.

The MIP must remain in effect for five years but after that, when the balance is 78% of the original purchase price, FHA will release the requirement and your monthly payment will go down. Since amortization is affected by interest rates, the normal time to reach this 78% point could be from 9 to 12 years at today's interest rates.

In the example below, the MIP would be released in 9 years 6 months with normal payments. An extra $100 a month would allow the borrower to reach the release point in 7 years 1 month. To reach the release point in the minimum five years, the borrower would have to make an extra $268.04 per month principal contribution.

Releasing the MIP in this example would save the borrower $177.67 per month. The borrower would also save interest, build equity and shorten the term of their mortgage. Once the MIP is released, the borrower could continue the same payment schedule to further accelerate the debt reduction.

To make some projections on your mortgage, click here.