NAR looks at the monthly mortgage payment (principal & interest) which is determined by the median sales price and mortgage interest rate at the time. With that information, NAR calculates the income necessary for a family to qualify for that mortgage amount (based on a 25% qualifying ratio for monthly housing expense to gross monthly income and a 20% down payment).
Here is a graph of the income needed to buy a median priced home in the country over the last several years:
And the income requirement has accelerated even more dramatically this year as prices have risen:
Bottom Line
Some buyers may be waiting to save up a larger down payment. Others may be waiting for a promotion and more money. Just realize that, while you are waiting, the requirements are also changing.
Original Post from www.keepingcurrentmatters.com
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• August 24, 2015: -588.47
• August 21, 2015: -530.94
• August 8, 2011: -634.76
• Six more 600 points or larger drops since 2000.
Yes, if you just bought and held for 15 years, you would have done well in stocks. Unfortunately, many people can’t simply drop a major chunk of change into stocks and just let it ride for that long. And, depending on when you buy, having to sell after a drop like these can be devastating to your savings and retirement.
So, that said, I’m not saying dump all of your stocks and buy real estate … particularly not now. However, the next time your stock broker advises you to “diversify,” don’t just do it with stocks. Let’s look at some of the points referenced in the linked article.
Actually, the article wasn’t really that positive about the advantages of investing in real estate. Things like the ease of placing stock trades and low cost of transactions were mentioned. Property taxes were mentioned as a negative, and they are to a point. The article’s title really wasn’t in my opinion supported very strongly by the content. So, let’s take a look at some differences between stocks and real estate as an investment asset class.
Inflation Hedge
Stocks are susceptible to inflation risk. Your return is whatever it is, including dividends. When inflation gets rowdy, it can take away major chunks of your investment gains in stocks. That’s not to say that real estate is inflation proof, but there are some logical reasons why it may be better.
Let’s think about what inflation really is. It is an increase in the cost of goods and services. So, what do you expect to happen to home prices when wood, tile, wiring, plumbing and other materials and labor costs increase? If it costs more to build, usually within a reasonable period of time it will cost more to buy. Your owned property value can actually increase during inflationary periods.
Interest Rate Increases
When interest rates rise, stocks and definitely bonds usually suffer. It costs companies more to borrow to expand and finance operations, so their profits are reduced. Bonds carry a fixed rate of return, so their value drops when interest rates increase.
If you own rental real estate with a fixed mortgage rate, interest rate increases don’t really bother you. In fact, they can help. If mortgage rates rise, more people must rent than buy. Rental demand increases and rents rise.
Taxes
Sure, you must pay property taxes if you own real estate. However, if you’re doing your job, you factor those into your purchase of rental property and the positive cash flow you project to receive. Sure, they can go up, but you may be able to offset that with rent increases.
One major difference is in using the IRS 1031 Exchange rule for growing your real estate portfolio. While the stock market investor will pay capital gains taxes in the year they sell a stock at a profit, real estate investors get a major break. Using this IRS rule, you can sell and roll the profits into another investment and forego paying capital gains. It’s complicated and the rules are strict, so an accountant needs to be involved.
I’m not trying to push anyone into real estate who is afraid of it or not suited for a landlord’s duties. But, there definitely are reasons for real estate as a diversification strategy.
Article Written by Dean Graziosi on Twitter: www.twitter.com/deangraziosi
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Burlesque star and onetime Playboy cover girl Dita Von Teese – Heather Sweet when she was growing up in Irvine – has bought a Tudor Revival-style house in Los Feliz for $2.83 million.
Built in 1927, the 3,200-square-foot retreat boasts a round castle turret, Gothic arches and center medallions encircling feudal fixtures. The property, on a third of an acre in a “Sherwood Forest” setting, includes a “secret garden,” according to listing agent Peter Reyes of Keller Williams Realty in Los Feliz, near Hollywood.
The four-bedroom house has slate and hardwood floors. A dark-bottom swimming pool and detached pool house with a wet bar and dry sauna fill out the grounds.
Real estate website Trulia recently broke news of the sale, which closed in late July. The home was listed in May at $2.99 million.
Von Teese, 42, whose family moved from Michigan to Irvine when she was 12 years old, also lived in Costa Mesa and Huntington Beach. She left Orange County in 2001, became a Playboy cover girl the following year and went on to marry and divorce heavy metal rocker Marilyn Manson.
Her recent, over-the-top “Burlesque: Strip Strip Hooray!” national tour showcased routines inspired by old-fashioned glamour, a bathtub-sized martini glass with 250,000 Swarovski crystals, a blinged-out mechanical bull, her hallmark corsets and custom stilettos by Christian Louboutin.
She also teamed up with the designer to release a line of lingerie.
—–
Source:
Image – Dita Von Teese, a burlesque star who grew up in Orange County, has bought a 3,700-square-foot, Tudor Revival-style house in Los Feliz.
COMPOSITE BY MARILYN KALFUS; INSET: DANIELLE BEDICS; TRULIA
Leslie Sargent Eskildsen is an OC real estate agent. leslieeskildsen.com. http://www.ocregister.com/lansner/irvine-679168-teese-house.html
Marylin Kalfus OC Journal Staff Writer
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HOW RENTERS INSURANCE WILL HELP COVER YOUR VALUABLES
Imagine a moment you’ve just returned home from a long day at work to find there’s been a fire. Everything you owned has been destroyed: your flat-screen TV, computer, furniture, books, game consoles, CDs, jewelry, collectibles and clothing. Where will you stay until your home is renovated? Who will pay to replace all your belongings? Not your landlord.
A Renters insurance policy can be the answer. It provides coverage to help you to replace your lost or damage items. If you suffer a covered loss, we’ll reimburse you for your lost or damaged items. And if the loss makes your home uninhabitable, we’ll also pay for the additional living costs for hotel, meals and related expenses.
Renters policies are affordable, generally ranging from $15-$25 each month. For less than a dollar a day, you can have valuable insurance coverage!
BENEFITS
– Personal property coverage
– Personal liability coverage
– Additional living expenses
OPTIONAL COVERAGES
– Personal articles floater
– Jewelry, furs, fine arts
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For some, now is a great time to buy real estate, especially Las Vegas real estate. Home
values are poised perfectly for an upswing in appreciation. There is a demographic of people
who can really score in this market. According to Yahoo:
“Dual-income customers should definitely buy a home now,” says George Kaiser, vice president
of banking operations for Northbrook Bank and Trust and West America Mortgage Co., its
sister company. “People with assets in reserve and a credit score of at least 680 should buy
as well. Anyone with a credit score less than that will have to verify their income.”
For others it is also a great time to get involved. For some it’s not. If you need help
determining whether or not the Las Vegas real estate market is right for you now get in
contact with your Las Vegas Realtor at www.RedRockManagementlv.com.
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An article in CNN this morning was very intriguing and will likely spark some political
skirmish. As mentioned in the article:
“Under the House plan, the Department of Housing and Urban Development would dole out the
loans and grants based on the number of foreclosures and home prices in an area. Cities
could use the money to buy foreclosed homes, renovate the homes to make them compliant with
housing codes, and resell or rent them.”
The goal is to help keep neighborhoods and the city as a whole in good shape since there are
so many vacant homes on the market. They tend to be run down.
In Las Vegas we’re seeing a significant number of homes that are vacant. There has been
issues with dilapitated homes and associated values. Some Las Vegas real estate agents are
wrapped up in these properties and are able to get good deals on them. However, if buyers
aren’t available it takes some technique to sell these properties. We’ll keep an eye out to
see if the bill passes.
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The Realtor® Magazine published an article in March about real estate purchaser preference.
They claim that although incentives are attractive, lower home prices draw more interest.
Many Las Vegas real estate agents don’t oppose incentives and have found success with them.
However, one major factor that affects buyer interest is that fact that buyers who work with
Realtors® typically use the MLS home search. There is no search criteria for “incentives” or
similar terms. Potential buyers have to stumble upon incentives as they peruse and the odds
of being found are lower. However, most buyers do use price as a criteria and if a seller’s
house priced better than its competition it will draw more views. The important thing in a
tough selling market is to get as much attention as possible.
According to the article:
“The single thing that’ll drive buyers and salespeople to a property is that it must be
priced at today’s market value. If that happens, you’ll get buyers at the property, and
you’ll get practitioners there, too, because they believe buyers will buy.”
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Recent interest rates cuts have motivated many to attempt to refinance their property.
However, many may be unable to do it successfully. Mortgage lenders are looking for
considerable qualifications. The house must have equity, the borrower must have good credit
and work history, and the house needs to appraise well in the real estate market they live
in.
Many have tried to lock in better rates and a better term for their home but are unable to
because of the previous loan they acquired. To find out if you qualify contact your lender
or your real estate agent who can refer you.
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The real estate market is improving in many parts of the country. So if you’re thinking about investing in real estate, now might be the time to get your feet wet.
Real estate investing can be quite profitable. Some investors make a comfortable living buying and flipping properties — putting tens of thousands of dollars in their pockets in only a few weeks. Meanwhile, other investors take a different approach and move into a home they’re fixing up with plans to sell for a profit in two or three years.
No matter the approach you take, investing in real estate generates cash that can go toward the purchase of your new residence, or you can use this money to build your savings account or prepare for retirement. It doesn’t take special skills to start investing in real estate, but there are several factors to consider before making your first purchase.
1. What are your plans for the property?
Determine your plans for the property before investing in real estate. Will you live in the home, fix up the property and sell a few years later? Will you get tenants and make the home a rental property? Then again, maybe you’re more interested in buying and flipping real estate for a quick profit.
There are different ways to proceed with investing your money, time and energy into a property. Weigh the pros and cons of different types of real estate investments and choose the one that best fits your situation.
2. Which mortgage option is right for you?
Real estate investors can choose from different types of mortgages depending on their plans for a property. For example, an adjustable-rate mortgage might work if you’re buying and flipping real estate, or if you plan on living in an investment property short-term.
Adjustable-rate mortgages have an initial fixed-rate period up to five years followed by annual rate adjustments. A rate adjustment means the mortgage interest rate increases or decreases based on the market.
Typically, adjustable-rate mortgages start out with a rate lower than most fixed-rate mortgages. If you’re keeping an investment property for a short span of time, there’s the option of getting an adjustable-rate mortgage and selling the property before your first rate adjustment.
On the other hand, if you’re keeping an investment property long-term, consider a fixed-rate mortgage so your interest rate and monthly payment will remain the same for the duration of the term.
3. How much cash do you need to fix up the place?
Investing in real estate can require sizable cash, especially since properties you purchase might need renovations or improvements. If you’re buying a foreclosure that will be your primary residence and a future investment property, you might qualify for the FHA 203(k) loan.
This loan provides funds to purchase the property, plus funds to improve the condition of the property. On the other hand, if you’re buying and flipping a property, the bank can help with investment property loans.
Make sure you schedule a home inspection before buying real estate so you’ll know what to expect cost-wise with fixing up the property.
4. Is the property is an ideal location?
You can have a lovely property, but if it’s located in an undesirable part of town, it might take longer to find a buyer or tenant. Location matters in real estate. Some people only look for properties in good school districts, and others prefer buying or renting homes near an interstate or major highway for easier access to work.
When looking for properties to buy, pay attention to school ratings, nearby amenities, and consider whether the property’s in a safe, quiet neighborhood.
Real estate investing can be profitable, but you shouldn’t jump into investing without doing your homework. Buying and financing properties is easier when you know what to expect, and when you can build a relationship with a knowledgeable mortgage officer and realtor.
Source: Evan Potter – Total Mortgage
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This Holiday season, think about decking the halls of a new investment property! As the economy continues to improve, many people will feel more confident about their finances and prospects for the future. Real Estate can be a good addition to your investment portfolios as you build wealth for the future.
Investors need to think about all aspects of real estate investment, including rental income, expenses, home price, appreciation and taxes. At Red Rock Management we have written about the top markets for rental cash flow and trends in single family rental investment by the largest institutuions.
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