Sometime in my mid-20s, I decided I wanted to stay in the Maryland area and buy a home.
I could afford a mortgage around $1,500 per month based on my expenses—mostly student loan payments—and salary. If I found the perfect home, I could stretch to afford around $1,750 per month.
As I searched for my future home, I played a financial game with myself. I’d soon be saddled with a $1,500 mortgage, so why not spend like I had one already? Why not pay a “pretend mortgage” before my real one, so I had a better idea of what it would feel like?
When I was looking for a home, I was sharing a two-bedroom apartment with a friend and paying $600 a month, plus utilities. It was a steep jump to go from $600 to $1,500 a month, so playing this game was important.
At the time, I was budgeting using an app, so I knew I could handle the increase.
I could maintain one of my key money ratios, paying less than 30% of my salary to housing. But I still needed to know how it felt. It’s one thing to see it in an app and another to feel it.
How ‘playing house’ worked for me
Every month, I paid my $600 for rent and set aside $900 in savings. As you’d expect, I didn’t just transfer money from one account to the other, because who has $900 sitting around? If I did, I wouldn’t need to play house!
I had to make adjustments. I contacted my human resources representative to reduce my 401K contributions so I’d have more in my paycheck. I had to adjust my other savings goals as well because I wouldn’t be saving as aggressively.
I also started going out to dinner and bars less often. Instead of going out for drinks a few times a week, I limited myself to two nights, on the weekends.
Making those trade-offs became easier — and easier to explain to friends without having to deal with grumbling, because I was making a clear choice. I was cutting some social time because I wanted to buy a house. I wasn’t saving money for the sake of it. I had a very good reason: to buy a house.
The housing search took about 18 months, and I played house for only 12 of them, so I had an extra $10,000 or so saved up in my mortgage account. I took that money and put it toward the down payment.
The house ended up having a mortgage that was a little less than $1,500, and after living with the mortgage payment for a year and a half, I had no trouble adjusting to it.
If you’re thinking about buying a home or making a similar large purchase, consider playing house first.
Buyers are having an increasingly difficult time finding move-in-ready homes in metro Detroit, helping drive an increase in new homes being built.
But don’t expect the region to come close to the housing boom of the early and mid-2000s, which helped bring the national economy to its knees by 2008. Rather, the market for new construction is looking increasingly healthy for homebuilders.
More than 11,000 single-family building permits were issued every year, and nearly 87,000 in all, from 2000 to 2005 in the region, according to Southeast Michigan Council of Governments data. But with the region reeling from an economic uppercut, in 2009 there were just 1,331, the fewest this century.
And the number of homes available for sale has plummeted, according to Farmington Hills-based Realcomp Ltd. II, which tracks sales, median sale prices and how quickly homes are sold.
In January 2016, there were 18,194 listings. By last month, there were just 10,172, a 44.1 percent plunge. And this January’s numbers were not an aberration: In each of the last several months, year-over-year on-market listings have fallen by at least 38 percent.
“There is not a lot of really good used homes for sale, so we are seeing some slow growth,” said Randy Wertheimer, CEO of Farmington Hills-based builder Hunter Pasteur Homes.
For example, the company is building the Stonegate subdivision in Lake Orion near Squirrel and Dutton roads with 111 homes ranging from $350,000 to $450,000. More than half of those have been sold, Wertheimer said.
Sure enough, SEMCOG shows modest increases in building permits issued every year since 2009. Still, the 5,519 issued last year pale in comparison to the 16,471 issued in 2000.
Howard Fingeroot, managing partner of Bloomfield Hills-based Pinnacle Homes, says his homebuilding company’s sales last year were the highest they’ve been — even in December, traditionally a slow sales month.
“December was actually the strongest sales month of the year for new homes,” he said.
A report released last week by Realcomp Ltd. II said that home and condo sales fell 0.1 percent from 3,778 in January 2016 to 3,775 last month in Wayne, Oakland, Macomb and Livingston counties. That mirrors the 0.1 percent drop in year-over-year home sales from December.
Yet the median sales price rose 6.7 percent from $142,000 to $151,500 year-over-year in January and 7.2 percent from $149,200 to $159,900 year-over-year in December.
Much of that is being caused by the 44.1 percent inventory drop. That is also driving quicker sales as buyers look for move-in-ready homes: The average listing was on the market 46 days last month, down from 54 days in January 2016, a 14.8 percent drop. There was an 8.5 percent drop, from 47 to 43 days, year-over-year in December.
Market conditions like these and others — such as low interest rates — make builders optimistic, in spite of construction cost increases caused by hikes in labor and materials costs.
“This year, going into 2017, I see an uptick in new construction. I think we are going to see an uptick higher than what we’ve seen,” Fingeroot said.
This article written by: Kirk Pinho – Crains Detroit
- Experts warn homeowners to properly repair storm-damaged roofs with licensed contractors Wednesday, January 18, 2017
The windstorm that violently blew through the Pikes Peak region on Oct. 9 ripped shingles from more than 100 roofs, prompting a warning from area officials to be aware of shoddy repair work and ensuing problems.
Roger Lovell, with Pikes Peak Regional Building, and Colorado Springs Fire Department spokesman Capt. Steve Wilch warned anyone in need of a new roof to make sure the work comes with properly installed roof vents. They said hail-damaged or poorly mounted vents can lead to a backup of carbon monoxide in homes, making people sick or even causing deaths.
According to Lovell, more than 36,000 requests for reroof permits have come into Regional Building since July 2016 hailstorms that triggered more than $350 million in insurance claims.
Lovell said his office has received “a number of calls” recently, complaining about improper work done by unlicensed roofing contractors. Using contractors not licensed through regional building can lead to headaches for homeowners, and problems such as carbon monoxide poisoning or having to seek legal action themselves.
“Regional building does not have authority over unlicensed contractors,” Lovell said. “It becomes a civil matter between the homeowner and the contractor.”
Lovell and Wilch made their presentation standing in front of examples of damaged roof vent caps and an assortment of carbon monoxide detectors.
Wilch said all homes should have detectors near every sleeping area and on every floor. He said symptoms of carbon monoxide poisoning include headaches, dizziness, fatigue and nausea.
According to the Centers For Disease Control and Prevention, more than 400 Americans die from carbon monoxide poisoning each year. More than 20,000 go to emergency rooms with symptoms. And at least 4,000 people are hospitalized annually.
(c)2017 The Gazette (Colorado Springs, Colo.)
Distributed by Tribune Content Agency, LLC.
This article is written by Matt Steiner from The Gazette (Colorado Springs, Colo.) and was legally licensed via the Tribune Content Agency through the NewsCred publisher network
One huge question among home buyers who need a loan is this: when to lock in mortgage rates. Some panicky sorts might presume they should lock one in ASAP (because have you seen how rates are rising?), while others argue that the waiting game could pay off (in case rates fall). Who’s right?
A rate lock is important because mortgage interest rates fluctuate in response to market forces—much like the price of apples or homes—and even small fluctuations can cost you big-time.
A mortgage rate lock, as you might guess, locks in an interest rate for your loan for a certain period of time before you close the deal. Let’s say, for instance, you see that rates seem like they’ve hit rock bottom, like at 4%. Lock that in for 30 days, and even if rates shoot up to 5% by the time you close on your home three weeks later, your “lock” means you still get a loan at that sweet 4% interest rate.
But this knife can cut both ways. What if you lock in at 4%, but then those rates dip still further to 3%? That could mean you’re stuck paying more for your mortgage than had you refrained from locking in and kept your options open. As such, trying to figure out the perfect time to lock in mortgage rates can keep borrowers up all night.
There’s no crystal ball, of course, but there are some ways to figure out when a rate lock is a good bet for you.
Sign No. 1: You’ve made an offer and are in contract
Generally, it makes sense to lock in your rate after you’ve made an offer that’s been accepted and you’re in contract to own a home. This means you can expect to close within a few weeks—and most lenders will offer to lock in your rate for free for 30 days. That’s the perfect window of time to take you through to the finish line.
All that said, there are instances where you may want to lock in for longer. Let’s say, for instance, you agreed to give the sellers time to find a new home before they move out. Or if you’re self-employed, the lender may take longer to verify your income. In cases like this, consider requesting a lock lasting 90 days, 120 days, and even 150 days. You might have to pay for this privilege, but it may be well worth the money if you need the extra time, says Darren Ferlisi, a lender at Integrity Home Mortgage in Frederick, MD.
Sign No. 2: Interest rates are rising
If interest rates are generally trending upward, you should lock in sooner rather than later before rates spiral higher. And currently all signs point up.
After the Fed acted to boost a key interest rate in December, our chief economist, Jonathan Smoke, declared that “rates like we’ve seen for most of the past five years are indeed history.”
All in all, be sure to check the latest mortgage rates before you take the plunge.
Sign No. 3: Interest rates are volatile
Whether interest rates are going up or down is one thing, but if they’re vacillating both ways wildly, that’s another reason to crave the stability of a rate lock.
“Rates today are unusually volatile—they are making large moves up and down in short periods of time,” says Joe Parsons, a loan officer at Caliber Home Loans in Dublin, CA. “For this reason, prudent borrowers are locking their rates early in the process.”
Sign No. 4: You’re on the cusp of (not) qualifying for your loan
If you’re borrowing near the limits of what your financial profile will allow, locking in is smart because it could keep rate fluctuations from leading to a nasty surprise when you close.
Here’s why: Typically a house payment should be no greater than 28% of your gross monthly income—so, for instance, if you’re making $6,000 per month before taxes, that means a house payment of no more than $1,680. If a higher interest rate pushes that payment above that 28% threshold, then your lender may balk at loaning you the money, causing the whole deal to fall through.
“An early rate lock means there are no hidden surprise down the road,” says Mark Livingstone, president of Cornerstone First Financial, a mortgage lender in Washington, DC. Because after all, last-minute surprises are the last thing you want when you’ve put all this time and effort into buying a home.