Rising Rent May Boost Housing Market

The floundering housing market, which included mass foreclosures and tightened lending policies changed the landscape of owners and renters. Suddenly hundreds of thousands of people were pushed out of their homes and found themselves in the world of rentals. Many young people, disillusioned by the housing crisis, simply opted for renting, believing that purchasing a home was too risky and did not offer enough incentives. Unfortunately, as more people flooded the rental market, lease rates began to climb. In 2011 alone, the total number of rental households grew by one million. Vacancy rates have also been plummeting, leaving fewer options available for renters.

Across the United States, marked increases have been noted in rental rates. According to a recent article on MSNBC, rental inflation has been experienced in every region of the country. The highest increase occured in the Northeast with a collective surge of 6.5 percent. San Franciso saw the highest jump with an increase of 11% in 2011.

These changes, combined with falling mortgage rates, significantly lower home prices and a recovering market outlook has led many people back to the buyers table. When you're spending several thousand per month on rent, purchasing begins to look significantly more appealing. The upsurge in buyers has also been noted with many Realtors observing homes selling within days of listing, multiple offers on properties and a growing shadow housing market. The number of available homes listed has also seen decreases with 20% fewer or 1.88 million homes less last month than the same month last year.

Investors might also recognize the value of purchasing during a time when the rental market is satiated. Owning rental property is quickly becoming a lucrative business again as rental rates rise and tenants become easier to find.

In East Lansing, we rarely see a draught in the rental market due to popular Michigan State University. From students to incoming faculty, East Lansing rental properties are valuable assets and I generally recommend any investors interested in owning income property in this area to begin with East Lansing. If you;'e thinking about purchasing a new home, investment property or selling the home that you currently own, contact me at MyRealtorRob.

Mortgage Rates Drop and Short Term Loans Rise

The housing market has seen a recent influx of buyers and with continually decreasing mortgage rates, it's easy to see why. Freddie Mac's most recent mortgage survey reveals a 30-year fixed rate loan carries an average mortgage rate of 3.75 percent, down from 3.78 percent the previous week, reaching the fifth straight week of record lows. These rates are appealing to most buyers, but even more appealing is the average mortgage rate for a fifteen-year fixed loan, which came in at 2.97 percent, down from last week's 3.04 percent rate. This is the first time during the 21 years that Freddie Mac has tracked the rates that the 15-year loan came in below 3 percent (RisMedia).

These record lows are drawing more people to the faster pay-off loans; however, the majority of individuals taking advantage of the fifteen-year loans are refinanciers. One drawback to the shorter term mortgage is that they do carry a significantly higher monthly payment. These can range from several hundred dollars to a thousand or more monthly. Another incentive to choose the fifteen-year mortgage is Obama's Home Affordable Refinance Program, which reduces fees for new borrowers if they opt for loans that are shorter than 30 years.

One of the major perks to choosing a fifteen-year mortgage over the thirty-year is the sheer amount of money that you save in interest over the life of the loan. However, these types of mortgages are generally only recommended for homeowners who are secure financially. According to Bob Walters, chief economist at online lender Quicken Loans, people should only choose these short term loans if they have at least a year's living expenses in liquid assets and a debt to income ratio below 35% (Yahoo Finance). His reasoning behind this is quite simple, the high monthly payment can quickly spiral out of control if the homeowner loses their job or experiences an illness or other emergency.

Benefits to a 15-Year Fixed Rate Mortgage

• Lower mortgage rate
• Faster payoff time
• Less interest paid over life of the loan
• Forced savings plan

Potential Issues with a 15-Year Fixed Rate Mortgage

• High monthly payments can become unaffordable
• Less money to invest elsewhere

If you would like more information about mortgage loan options or you want to get pre-approved for a home mortgage in the East Lansing or Greater Lansing area, please contact me at MyRealtorRob. As an East Lansing realtor, I can help you buy or sell investment or residential property.

It's Getting Cheaper to Buy than Rent

For the last several years, renting has been the primary choice for many U.S. residents. Between the volatile housing market and challenges getting financing, many people turned to renting homes or apartments. However, a recent CNN Money article cites rising rental costs while housing prices remain steady.

According to the article, rents have risen approximately 5% while housing prices have declined .7% in the last 12 months. In fact, Trulia economist Jed Kolko says that buying has now become more affordable then renting in nearly every part of the U.S. The cities that have seen the largest rent increases include Sarasota, FL; Miami, FL; San Francisco, CA; Middlesex County, MA; and Edison, NJ. The average home rented for $1285 monthly one year ago and these days costs nearly $100 more at $1350 a month. Some areas have seen nearly double digit rent increases such as Indianapolis where rents rose 9.7% and Columbus, Ohio where they increased 9.3%.

Fortunately, federally-backed programs, record low interest rates and a housing market flooded with motivated sellers offers buyers an ideal opportunity to segue into home ownership. In the Lansing area alone, we have witnessed a noteworthy bounce-back as houses sell faster than we can list them. In the past week, I have twice contacted real estate agents for showings only to discover that the homes were already under contract.

I was so curious about these perceived increases that I asked a fellow Tomie Raines staff member to run a report  comparing our sales in March 2012 to 2011. Sure enough the market activity in the Greater Lansing area reveals a 3.2 increase in sales and a whopping 17% increase in average home sale price for 2012.

I personally am working with a lot of current buyers who are searching for everything from homes with acreage to modern condominiums. If you're thinking about selling and would information about your home's market value or the sales activity in your area, please contact me at MyRealtorRob or through email.

Will the Housing Crisis End in 2012?

According to a recent article on DSnews.com, there are several reasons to believe that 2012 may signal the end of the housing crisis. This conjecture mainly stems from a report released by Capital Economics citing that loosening bank standards will allow more people to borrow money for housing purchases.

A variety of other market indicators are also contributing to this conclusion. For instance, lenders are now offering loans to borrowers that are 3.5 times their earnings, which is an increase from the low of 3.2 times borrower earnings during the crisis. Additionally, many banks are becoming more flexible with their LTVs or Loan to Value ratios, up to 82% from the low of 74% reached in 2010.

While the loosening bank standards are a huge benefit for anyone searching for a home, other factors may also contribute to an improved housing market. Many housing prices have moved into more acceptable (i.e. affordable) ranges compared to home prices during the height of the housing bubble. Homes simply cost less now, which is a great incentive for anyone looking to buy. Furthermore, a lot of homeowners have begun to offer creative financing alternatives like land contracts and rent-to-own options to reach buyers who can't qualify for conventional mortgages.

As an East Lansing, MI realtor, I can offer first hand experience of the housing market and from where I'm standing, the outlook is good. People who have been renting during the crisis are beginning to purchase homes because the prices are often less than the cost of rent. The growing rental population has also motivated a lot of real estate investors to purchase rental properties, especially in East Lansing where Michigan State University always provides a thriving rental community. If you would like more information about buying or selling a home in East Lansing or the Greater Lansing area, please contact me at MyRealtorRob.

If you think hiring a professional is expensive, wait till you hire an amateur - Red Adair

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Home Buyer's Guide

The Perfect Home: That elusive enigma that haunts your dreams and waking life, taunting you to make difficult decisions like three car garage versus a big backyard. When you're house shopping, you're basically life shopping. We spend a lot of time in our homes and choosing the right one is akin to following the sunny path filled with flowers or the shadowy path thick with brambles. Thus, it's unbelievably important to follow some basic rules when it's time to buy a new home.

1.  Finger off the Trigger: What does this seemingly irrelevant tip mean? It means slow down, be patient; this is a time consuming process that generally takes months and sometimes years, so know ahead of time that perseverance pays off. Waiting means you have time to find what you want, secure optimal financing, get the proper inspections and make it to closing with all of your hair intact.

2.  Create a Method for the Madness: This is also known as your game plan. Start with your finances. What is your credit score? Your debt to income ratio? Your monthly expenses versus monthly income? Drive around and discover which areas you might like to live in and which ones are a "no way." Decide which amenities you have to have and which ones can be relegated to the slush pile. Talk with your spouse and your family and find out exactly what everyone needs and wants in their new home.

3.  Call in Reinforcements: This is your Realtor. He or she is the person who knows locations, demographics, financing options, sellers, market values and all of those really important details that you don't want to spend the time and energy learning yourself. Ask your friends and family for referrals if they've worked with a great buyer's agent. Most sellers have a real estate agent, so secure a buyer's agent to protect your interests.

4.  Pull out Your Fine Tooth Comb: Once you've started going to open houses and visiting homes with your Realtor, it's time to narrow down what you want exactly. Look at each house closely and factor in everything, not just whether the yard is nicely landscaped. Are there enough bathrooms? Is the driveway too steep? Is the price $50,000 higher than every other house on the block? You can't ask enough questions when it's time to buy a home. You will probably be staying a while, so shake the skeletons out of the closet early.

5.  Start Talking Money: You have discovered the ideal home, now it's time to make an offer. Your Realtor is very important here because they deal with all of that pesky paperwork. You simply stop by their office and sign the appropriate forms after discussing how much you want to offer. They present the offer to the seller or the seller's agent and you wait for a counter or accepted offer - pretty simple.

6.  Beg the Banks: Well hopefully there is no begging involved, but this is the part where you secure your financing. This involves contacting a variety of lenders to find out which mortgages they offer and what they charge for interest rates and closing costs. Once you find the most suitable option you begin the application process. There are other options here including buying the home with cash or on a land contract if the seller offers creative financing.

7.  Close the Deal: Again, your Realtor is the go-to guy here. He or she will prepare you for the closing, draw up the necessary paperwork and ensure that everything is in order for a successful closing.

8.  Make the Move: Hire a moving company, throw your stuff into trash bags, whatever your personal moving style happens to be. Hopefully you've already started packing and have a garage stacked with tidy cardboard boxes labeled delicate and house wares. If not, don't worry, moving is exhausting, but it's not life threatening. Again your realtor can come in handy here. They know good moving companies and can pass along recommendations.

If you're thinking of buying a home in East Lansing or Greater Lansing, please get in touch with me at MyRealtorRob. In addition to helping you find the perfect home, I am more than happy to recommend lenders, moving companies and a variety of other experts who can assist you in the home purchasing process.