MONEY buying a home

Dear Zillow, Please Don’t Kill Trulia’s Best Feature

Trulia's heat maps are a huge competitive advantage. Courtesy of Trulia

Zillow is said to be interested in buying its competitor, Trulia.com. If so, let's hope they don't ruin what makes Trulia so great.

In case you haven’t heard, rumors are swirling that real estate giant Zillow.com plans to purchase real estate slightly-less-giant Trulia.com. Both companies’ stock have shot up on the news, and if the deal succeeds in going through, the new company (Trillow? Zulia?) will have almost 90% of the online listings market.

That’s good for shareholders. What about for consumers? When two businesses decide to tie the knot, you never know what aspects of your favorite company will make it through to the other side. And in the case of Trulia, it would be a tragedy if a ZillowTrulia mashup killed its best feature: Trulia’s amazing visualization of local data.

Sure, Zillow has local data too. And it’s not bad. There’s the average and median sales price, stats on specific neighborhoods (demographics, education, home prices over time), and even a nice little map showing the quality of schools in your chosen area. But Trulia takes all this to another level. Here’s a Zillow data visualization on schools:

ZillowExample
Courtesy of Zillow

Trulia has pretty much the same thing. But it also has these.

Heat maps of crime rates:

TruliaExample
Courtesy of Trulia

Commute times:

TruliaCommute
Courtesy of Trulia

Local listing price heat maps:

TriliaPrice
Courtesy of Trulia

There’s even a national home price heat map:

TruliaNational
Courtesy of Trulia

And that’s not even all of the data maps Trulia offers (I just assumed you might be tired of scrolling). The site also has similar visualizations for hazards (like flood zones), demographics, and amenities.

It’s hard to overstate how useful all of this is. When you’re looking for a house in a large area, getting the big picture is absolutely essential in making the right decision. How far am I from work if I live here? How much cheaper are home prices if I move a few blocks that way? Which areas are safe enough to live in, and what kind of stuff is there do in this neighborhood? These are all questions every buyer asks, and Trulia makes it very, very, easy to get the answers. Its amazing maps have long been cited as a competitive advantage.

So Zillow, if you do end up buying Trulia, you’re getting a pretty amazing product. Just please don’t screw it up.

MONEY buying a home

7 Ways to Get Your Kid Out of Your Basement

College students slacking off and living in parents' basement
Adam Crowley—Getty Images

If your child is one of the 14% of millennials who have moved back in with their parents, here are some tips to nudge him (or her) out the door.

For most of us, leaving the nest was a rite of passage. We went to college, and then proudly headed out into the world to make our own way, while our parents turned our old room into another guest bedroom.

However, for a significant percentage of young adults, that rite of passage is now all about returning to the roost rather than flying solo. According to Gallup research, 14% of millennials (24-to-34-year-olds) have moved back in with their parents. The homeownership rate for those under age 35 was 36.2% in the first quarter of 2014, down from a historical high of 43.1% at the end of 2005, according to Census data. According to numerous economic reports on millennials, this is attributed to a weak job market, high cost of living, significant college debt, and other factors.

These kids, as well as any adult children who have decided to move back in with mom and pop are lovingly referred to as “boomerang kids.” Clearly the analogy is obvious.

For Mom and Dad, who would love to have the ‘kids across the hall’ become the ‘kids across town,’ here are seven pointers you might want to consider:

Start Charging Rent

Cut off the free ride. Yes, it sounds harsh, but you may be doing both you and your kid a favor. Managing money and a monthly budget is something that is not learned in school, and it is certainly not learned hanging out in your parent’s converted attic for free. Give your boomerang kids a real estate reality check. If the free ride comes to a screeching halt and they are paying rent, they will probably want to do it in their own apartment, closer to (or with) their friends, near downtown or a closer drive to their office. Charge rent and enforce it. Once they start getting that first-of-the-month monetary wake up call, it might shock their system enough to have them consider alternative arrangements. If they’re going to have a landlord no matter what, they’re likely to consider a new, more independent situation.

Collect Monthly Payments

Here’s another way to give them a foot out the door – but still a leg up. Start charging them monthly payments now. Let them know that they will have to come up with the monthly equivalent to local rents each month for the next six months. At the end of the six months, you will give them back all the money when they move out. That does three things: You teach them budgeting skills, you incentivize them to move, and you give them a financial helping hand on move-out day.

Be A Strict Landlord

No parties, no loud music, no guests after 10:00 pm. Keep the house rules strict. At some point, your kid is going to want to have a little independence, and some fun too. Living with a strict landlord may just be the incentive he or she needs to find a place of their own.

Set A Deadline…and Stick To It

If you can sense that your boomerang kid is riding out his or her free meal ticket under your roof as long as they can, help them visualize when that ride will end. Create a deadline for them to move out and stick to it, no matter what. It’s likely you never intended to have kids under your roof for more than two decades, so your children need to respect that…and they need to get on with their own lives. Even in a world where millennials are underemployed compared to their Gen X, Y and Baby Boomer counterparts, there are still plenty of ways for them to make a living that enables them to live with a roommate or two or three…elsewhere.

Help Them Get Organized and Overcome The Mental Hurdle

After all the financial aspects are considered, one of the biggest hurdles to making a big move is mental: it just feels overwhelming. So many things to do, buy and organize before it can actually happen. Your child may just need the expertise of someone who’s moved multiple times in their lives to talk them down off the “I’m too overwhelmed and can’t do this” ledge. Map out all the necessities and then make a list of the “nice to haves down the road” so they can see what’s an immediate need, and what can be done over the coming weeks and months.

Gift or Loan Them The Down Payment

Trulia’s latest survey showed that 50% of millennials surveyed plan go to their parents for help with the hefty down payment that’s required to purchase a home in today’s housing market. If you want your adult child up and out of your basement, consider giving them the financial head start now they need to form their own household and be independent.

Buy A Multi-Unit Investment Property

I am a huge proponent of purchasing multiunit properties, such as a duplex or triplex, because they are great investments. In the case of your “failure to launch” millennial, slot them into one of the units of your new property and rent out the others. The rental income is likely to cover much of the costs of ownership, and you’ll have a built-in property manager in the building to keep an eye on things. Plus, your boomerang kid is learning valuable management skills at the same time. It can be an investment property for you, and solve the “son or daughter is still in my basement” problem, all at the same time.

 

More on Financial Independence

4 Ways to Lighten Your Kid’s Debt Load

Is Living with Mom and Dad Starting to Cramp Your Style? Take These Steps to Independence

Taking Five Years to Earn a B.A. is Common—And Costly. Here’s How To Get Out in Four

MONEY Ask the Expert

Should I Pay Off Loans or Save for a Down Payment?

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Robert A. Di Ieso, Jr.

Q: Should I use savings to pay off car loans or make a down payment? — Carmella F., Pittsburgh

A: The first line of business is to make sure you have enough savings for an emergency fund, a minimum of four months if both spouses are working, six months if one isn’t, says Pittsburgh financial planner Diane Pearson.

Paying off the $30,000 in two car loans you told us you have would deplete your savings. Not only does that leave you vulnerable to unforeseen expenses, plowing money into assets that only lose value as they age doesn’t make sense, says Pearson. When applying for a mortgage, banks would prefer to see $30,000 in savings plus car loans over no savings and vehicles owned free and clear.

MONEY mortgages

30-year Mortgage Rates Edge Down For Second Straight Week

Mortgage rates declined slightly over the past week.

Average rates notched down slightly to 4.14% with an average of 0.5 points, down from last week’s 4.17%, according to Freddie Mac. A year ago, rates on 30-year mortgages were 4.46%.

The rate on an average 15-year mortgage was 3.22% with 0.5 points, down from 3.50% a year ago. For adjustable rate mortgages, a five-year ARM this week averaged 2.98% with 0.3 points and a one-year ARM averaged 2.40% with 0.4 points.

image (4)
Source: Freddie Mac survey.

 

MONEY buying a home

5 Reasons the Highest Offer Won’t Always Get You the House

140626_REA_5reasons_1
iStock—iStock

Conventional home buying wisdom says that whomever throws the most money at the seller will snag the house. That’s not always true! Here's why.

When it comes to buying a house, the highest priced offer gets the house…right? Not always! Sure, a hefty sum on an offer is the first thing that every seller wants to see, but any good real estate agent will advise their seller that each offer is a sum of its parts.

Here are five reasons why you may just beat that higher offer:

  1. Cash Is King

    If you can buy with all cash, you will likely win out over a higher-priced offer. According to RealtyTrac’s latest data, 43% of all home sales in 2014 have been all-cash deals. Savvy sellers know the benefits of an all-cash buyer: there is no issue involving mortgages and lenders, the escrow closes faster, and there is no appraisal to worry about.

  2. The Next Best Thing: A Pre-Approval Letter

    A pre-approval letter is the confirmation from your mortgage broker or bank that you’re ready to buy in a set price range and have been pre-approved for the loan. In essence, the pre-approval letter turns you into a virtual cash buyer, as mortgages are harder to come by these days. Someone may be offering to pay more, but if they are not pre-approved, you will have the leg up, even at a slightly lower price.

  3. Timeline Flexibility

    Closing is generally 30, 45, 60, or 90 days. Customizing the length to suit the seller’s needs can often seal the deal over a higher priced offer. A seller generally wants a fast closing. If you have all your ducks in a row, you may be able to pull off 30 days. But what if the house they are moving to won’t be ready for 60 days? They’ll need more time. Find out what they need, and then give it to them. I’ve seen many lower offers win using this tactic.

  4. The “Please Let Me Buy Your House” Letter

    I know, I know, you are thinking this is soooo cheesy. However, a friend of mine had three similar offers on the table when he was selling his house. Two of the offers came with very heartfelt letters.

    Related: Wanna Win a Bidding War? Write a Letter That’ll Crush the Competition

    He was actually put off by the buyer who didn’t send a letter because the others did and it made a huge impact—and he sold to one of the letter-writers, even though it was a slightly lower-priced offer than the non-letter writer. Writing a letter may not get you the deal, but if you are the one offer that doesn’t put pen to paper, it could lose it.

  5. Don’t Overload On Contingencies

    Contingencies are negotiating tools that give you an opportunity to walk away without consequence. The most common: the inspection, the financing, and the appraisal. However, every contingency you add makes your offer weaker, because it makes it that much harder to close the deal. Make sure you really need them before building them into your offer.

Here are’s some more details on specific contingencies and how to handle each:

    • Contingent Upon Inspection – I have heard other experts give you the “tip” to forgo the inspection contingency to make your offer more attractive. Here’s my advice: NEVER give up this one. After your inspection, you give the seller your list of problems, current and potential, along with the opportunity to fix them, adjust the price, or give you a credit back. If the seller does not agree to any of your requests, you can walk. You take a huge risk if you waive this. A much better option: offer to do the inspection in the first few days after opening escrow and to give a response to the inspection results within a few days.
    • Contingent Upon Financing – Don’t omit this one either, unless of course you are paying all cash. With most 30-to-45 day closings, you will usually have 17-to-21 days to get your mortgage approval. Having that pre-approval letter will make this finance contingency less of an issue for your seller.
    • Contingent Upon Appraisal – It’s very possible that the house may not appraise for what you have offered to pay. However, if you have done your homework, analyzed the comps of the neighborhood, and are comfortable with the price you have offered, then consider waiving this one. The risk is that you will have to come up with any difference between the appraised value and the negotiated sales price. Waiving this contingency really gives you a leg up over the competition, especially in a hot market where the seller is trying to get top dollar.

More from Trulia:
Style Your Vacation Home With Tips from Homepolish
8 Ways to Screw Up Your Home Sale
International House Hunters Shift to Urban Neighborhoods

Michael Corbett is Trulia‘s real estate and lifestyle expert. He hosts NBC’s EXTRA’s Mansions and Millionaires and has authored three books on real estate, including Before You Buy!

MONEY Housing Market

The Housing Market Won’t Be Undervalued Much Longer

Trulia's latest analysis shows homes in three-fourths of major U.S. cities are still undervalued, while seven are more than 10% overvalued (most in California). Even there, prices are no where near boom frothiness.

Trulia’s Bubble Watch reveals whether home prices are overvalued or undervalued relative to their fundamental value by comparing prices today with historical prices, incomes, and rents. The more prices are overvalued relative to fundamentals, the closer we are to a housing bubble – and the bigger the risk of a future price crash.

Sharply rising prices aren’t necessarily a sign of a bubble; a bubble is when prices look high relative to fundamentals. Bubble watching is as much an art as it is a science because there’s no definitive measure of fundamental value. To try to put numbers on it, we look at the price-to-income ratio, the price-to-rent ratio, and prices relative to their long-term trends using multiple data sources, including the Trulia Price Monitor as a leading indicator of where home prices are heading. We then combine these various measures of fundamental value rather than relying on a single factor, because no one measure is perfect. Trulia’s first Bubble Watch report, from May 2013, explains our methodology in detail. Here’s what we found.

Home Prices are 3% Undervalued Nationally We estimate that home prices nationally are 3% undervalued in the second quarter of 2014 (2014 Q2), which is far from bubble territory. During last decade’s housing bubble, home prices soared to a level that was 39% overvalued in 2006 Q1, then dropped to being 15% undervalued in 2011 Q4. One quarter ago (2014 Q1), prices looked 5% undervalued, and one year ago (2013 Q2) prices looked 8% undervalued. This chart shows how far current prices are from a bubble:

At this pace, home prices nationally should be in line with long-term fundamentals – i.e., neither over- or undervalued – by the last quarter of 2014 or the first quarter of 2015. The good news for bubblephobes is that price gains are now slowing down while prices still look (slightly) undervalued. We’d be at greater risk of heading toward a bubble if price gains were still accelerating, but they’re not.

Even in the Bubbliest Markets, It’s Not 2006 All Over Again Eight of the 10 most overvalued housing markets are in California, with Orange County, Los Angeles, and Riverside-San Bernardino in the top four. However, they are not seeing the return of last decade’s bubble. These California markets are much less overvalued than they were at the height of the bubble. Orange County, today’s frothiest market, is just 17% overvalued now versus being 71% overvalued in 2006 Q1. Among the most overvalued markets today, only Austin looks more overvalued now (13%) than in 2006 Q1 (8%) – and that’s because Austin (and Texas generally) avoided the worst of last decade’s bubble and bust.

Top 10 Metros Where Home Prices Are Most Overvalued
# U.S. Metro Home prices relative to fundamentals, 2014 Q2 Home prices relative to fundamentals, 2006 Q1 Year-over-year change in asking prices, May 2014
1 Orange County, CA +17% +71% 9.6%
2 Honolulu, HI +15% +41% 5.3%
3 Los Angeles, CA +15% +79% 12.7%
4 Riverside-San Bernardino, CA +13% +92% 18.8%
5 Austin, TX +13% +8% 9.7%
6 San Jose, CA +11% +58% 10.4%
7 Oakland, CA +10% +72% 14.8%
8 Ventura County, CA +9% +73% 12.6%
9 San Diego, CA +7% +69% 11.2%
10 San Francisco, CA +6% +51% 11.6%
Note: positive numbers indicate overvalued prices; negative numbers indicate undervalued, among the 100 largest metros. Click here to see the price valuation for all 100 metros: Excel or PDF.

 

Only in Akron and Cleveland are prices undervalued by more than 20%. Furthermore, in those two markets, home prices are rising below the national average of 8.0%. But in several of the most undervalued markets, including Detroit and Chicago, prices are now rising year-over-year in the double digits. But those markets are unlikely to stay on the most-undervalued list for many more quarters.

Top 10 Metros Where Home Prices Are Most Undervalued
# U.S. Metro Home prices relative to fundamentals, 2014 Q2 Home prices relative to fundamentals, 2006 Q1 Year-over-year change in asking prices, May 2014
1 Akron, OH -21% +18% 4.7%
2 Cleveland, OH -21% +18% 6.3%
3 Detroit, MI -19% +38% 15.2%
4 Dayton, OH -16% +13% 12.1%
5 Worcester, MA -15% +43% 4.4%
6 Memphis, TN-MS-AR -14% +11% 3.2%
7 Toledo, OH -14% +22% 10.0%
8 Chicago, IL -14% +36% 13.5%
9 Lakeland-Winter Haven, FL -14% +54% 3.8%
10 Providence, RI-MA -14% +52% 2.9%
Note: positive numbers indicate overvalued prices; negative numbers indicate undervalued, among the 100 largest metros. Click here to see the price valuation for all 100 metros: Excel or PDF.

 

Three-Fourths of Markets Still Undervalued Of the 100 largest metros, home prices in 76 of them look undervalued. But the number of overvalued markets – 24 – has climbed up from 19 last quarter (2014 Q1) and just 5 last year (2013 Q2). Most of the 24 overvalued markets are overvalued just a bit, with 17 overvalued by less than 10% and 7 overvalued by more than 10%. While the number of overvalued markets is rising, there remains little reason to worry about a new, widespread bubble forming. The last two years of strong price gains have been from a relatively low level and still haven’t pushed home prices nationally above our best guess of their long-term fundamental value.

See the original article with complete charts here.

Jed Kolko is the chief economist of Trulia.

MONEY Housing Market

Why Median Home Prices Are Rising: It’s More Than Just the Values

Home prices keep rising, but not just because they're worth more. Sales of higher-end homes are skewing that median home price figure upward.

The median home price rose 5.1% to $213,400 from a year ago, the National Association of Realtors announced yesterday.

RealtyTrac’s numbers out today, which include foreclosures sales not covered by the NAR report, have median prices up 13% year-over-year.

So does that mean your home value rose 13%?

Of course not, and not just because those figures cover the entire United States. Clearly home values vary widely based on the characteristics of your local market – employment growth, the pace of new construction, incomes, type of home, all sorts of things.

The median home price is shaped by other factors having nothing to do with any particular home or market but, rather, the specific mix of homes sold in that month.

One of the trends we’ve been seeing for a while now is that more higher-priced homes are selling than lower-priced homes. That’s for two reasons:

First, the volume of bargain-priced foreclosures continues to shrink. RealtyTrac’s report says foreclosures and short sales accounted for 14.3% of home sales in May, down from 15.9% a year ago. Consider that the median price of distressed homes was $120,000 versus $190,000 for non-distressed and you can see how simply having fewer troubled properties in the mix would be a powerful pricing boost.

Second, move-up buyers, the ones buying the $500,000-plus homes, are in better financial shape. They have the credit scores to qualify for a mortgage. They also have, more than likely, equity in their current home they can use for a new down payment as well as investments.

See what’s happening at RealtyTrac’s chart of home sales by price tier:

Price Range Share of Sales YoY Change
$50k-$100k 13% -22%
$100k-$200k 33% -5%
$200k-$300k 20% 6%
$300k-$400k 12% 11%
$400k-$500k 7% 17%
$500k-$750k 7% 15%
$750k-$1M 2% 23%
$1M-$2M 2% 24%

Other highlights from RealtyTrac’s report:

Metropolitan areas with sales declines from a year ago include Boston (-23%), Fresno (-22%), Orlando (-18%), Los Angeles (-16%) and Phoenix (-13%).

Areas with the highest share of foreclosures and short sales were Las Vegas (27%), Lakeland, Fla. (33%), Modesto, Calif. (32%), Jacksonville, Fla. (32%) and the Riverside region of southern California (29%).

MONEY buying a home

Single and Thinking of Buying a Home? Here’s Some Advice

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Shutterstock

Fewer singles are buying, thanks to crimped finances and tougher lending standards. Before you take the plunge, consider whether you'll be able to handle the costs on your own.

The transition from renter to homeowner proved more complicated than expected for 26-year-old Kimberly Watson. As a single buyer with imperfect credit and without a long job history, she faced several hurdles throughout the lending process before eventually finding and closing on a condo in Hollywood, Fla.

Buying a home is hardly simple for anyone, but navigating the process can be particularly challenging for single buyers, who have only their own income to rely on to pay the bills. Tightened lending standards help explain why the percentage of single buyers declined slightly between 2010 and 2013: 16% of homebuyers were single females and 9% were single males in 2013, according to the National Association of Realtors, compared to 20% and 12% respectively in 2010. A weak job market and debt burdens also explain why singles have stayed away from the housing market, says NAR economist Ken Fears.

Banks are not allowed to discriminate based on marital status, but tighter lending standards can potentially pose a challenge to single buyers because they only have their own income to qualify for a loan.

Some of the tips below can make the process more manageable:

Ask, can you really afford to buy?
Scrutinize your finances carefully and evaluate whether buying a home is even feasible. You won’t have help from a partner to pay the bills, and you don’t want to be “house poor.” Review your credit record, clean up any mistakes, and pay down debt.

Money 101: Get Your Finances In Order Before Buying a Home

Be sure to consider all the recurring expenses associated with homeownership beyond the purchase price and mortgage closing costs. From association fees and property taxes to utilities and lawn care, the bills add up. Take into account maintenance and insurance when setting a budget.

“You’ve got a nice house, but now you’re eaten alive in expenses,” says Doug Lebda, CEO of LendingTree. “Factor in the total cost of homeownership.”

Think long term, says Emma Johnson, creator of WealthySingleMommy.com. You want to be able to afford and keep your home — so it’s wise to have a bigger savings account than you would if you were buying as a couple.

Watson found that to be true after moving in to her condo. She discovered a bad case of mold in her bathroom, and had to spend $10,000 on a gut remodel.

“I thought I would move in, and everything would be as is, and it would be fine,” she says. “Definitely have some extra money on hand.” Our advice: Total the estimated monthly household costs and set aside the difference between that amount and your current rent, or payment. If you’re struggling to make budget, you probably need to wait longer before buying.

Money 101: Should I Rent or Buy a Home?

Save on mortgage costs with special programs
Singles getting a mortgage with only one income should look at FHA loans, which offer lower interest rates and require lower credit scores to qualify. First-time buyers, which includes those who haven’t owned a home for three years, can make a down payment as low as 3.5% of the purchase price. FHA loans require more underwriting and more documentation, Lebda says, so lenders may not offer the program at first; be sure to ask.

If you do go the FHA route, the Homeowners Armed with Knowledge (HAWK) program will cut you a break on mortgage insurance costs if you go through housing counseling.

Not a first-time buyer? You may still be able to save even with conventional loans. TD Bank’s Right Step program, for example, offers a 3% down-payment option without private mortgage insurance (PMI), which is usually required for loans with less than 20% down, says Malcolm Hollensteiner, the bank’s director of retail lending products & services. The program also requires a housing education class.

On any loan, compare costs carefully, and not just rates. A lower rate may mean a higher lender’s fee, said Dean Vlamis, vice president of mortgage lending at Guaranteed Rate.

Money 101: How Much Will Closing Costs Be?

Don’t house hunt alone
Buying a home is an exciting milestone. It’s also a major investment, so don’t let emotions cloud your decisions.

Keep one or two trustworthy people involved in the process as a sounding board. “It’s important to have some sort of voice of reason,” says Jessica Edwards, a Coldwell Banker agent based in North Carolina.

Plan for the future
As you search for homes, consider what happens if you find a partner, or have to relocate for a job. Edwards says she’s seen many singles have to move sooner than they expected because their life circumstances changed. Think about that possibility as you’re searching: “There are a lot more single buyers that are looking at it as a primary residence that they can later turn into an investment,” she said.

Homeownership is a big investment and a lifestyle change — so it’s crucial to make sure you’re financially prepared and have done your homework. It’s better to wait than to find yourself over-stretched after committing to the major purchase. “We’re so inundated with the message that we need to own a house,” says Johnson. “It’s a wonderful thing, but it’s not right for everyone at every point in their life.”

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