MONEY home improvement

This 1920s Home Was a Mess Before These Guys Got Hold of It

This Queen Anne home in Baltimore had a lot going for it: Proximity to universities, shopping and job hubs. Historic details. But it was, well, a hot mess. Here’s how this $110,900 renovation transformed the three-story home into a showplace. Story and photos from home improvement website Porch.com.

MONEY

Are Baby Boomers Downsizing Into Condos? Not So Fast.

Baby Boomers talk about downsizing but apparently don't do it. Trulia's economist says the long-term trend among older households shows downsizing getting rarer and happening later in life.

Throughout the recession and recovery, Millennials have hogged the attention: they suffered a particularly bad recession, which delayed their launch into the housing market, slowed overall household formation, and lowered first-time homeownership. But they’re hardly the only demographic that matters for housing. Baby Boomers will help determine the demand for different types of housing and the supply of homes for sale when – and if – they downsize.

This morning, Fannie Mae released a note on boomer downsizing, showing that the share of baby boomers in single-family detached homes has been roughly stable from 2006-2012 (rising slightly on a per-capita basis and falling slightly in the most recent years on a per-household basis). The big question is what happens longer term: are we about to hit a wave of baby boomers selling their single-family homes and moving into apartments and condos? It’s unlikely, for two reasons: baby boomers are still years away from the age of downsizing, and the long-term trend shows that older households today are less likely to downsize than older adults in the past.

Let’s start by looking at the age when older households move from single-family homes to multi-unit buildings. Based on the 2013 Current Population Survey’s Annual Social and Economic Supplement (CPS ASEC) – the most recent detailed demographic data available – baby boomers (born between 1946 and 1964, which means 50-68 years old in 2014) are less likely than almost any other age group to live in multi-unit buildings as opposed to single-family homes. The only age group less likely to live in multi-unit buildings is 70-74 year-olds, which is the age group that baby boomers will start to enter in the coming years.

In later years, the share of households in multi-unit buildings rises, but by less than you might guess. Just 25% of households headed by 80-84 year-olds live in multi-unit buildings – which is a lower share than 40-44 year-olds. Even among households headed by adults aged 85 and older, only one-third live in multi-unit buildings – and that’s only counting those who head their own household are not living with adult children or in institutions.

Therefore, as today’s baby boomers age, they’ll grow into age groups first with a lower likelihood of living in multi-unit buildings (70-74 year-olds). Multi-unit living starts rising slightly at age 75-79, and rises more notably only when heads of household reach their 80s.

But will baby boomers, who are in their 50s and 60s today, look like today’s 60- and 70-somethings ten years from now – or will they make different housing decision as they age? One clue is to look at the longer-term trend in multi-unit living among older age groups using CPS ASEC data back to 1979 (no data are available for 1988). The share of households headed by 50-69 year-olds – roughly the age of baby boomers today – living in multi-unit buildings rose to 21.3% in 2012 and 21.6% in 2013, after holding steady in the 19-21% range for decades. Therefore, baby boomers today are a bit more likely than their parents to live in multi-unit buildings instead of single-family homes. It’s too soon to tell whether that increase is a temporary effect of the recession or the beginning of a longer-term trend.

The clearer long-term trend, though, is the decline in multi-unit living at the ages that baby boomers are approaching. The share of age-70-plus households living in multi-unit buildings has been dropping for decades, from over 30% in 1980 to under 25% in recent years. That means that even if the recent uptick in multi-unit living among 50-69 year-olds persists, baby boomers are entering an age group that is less likely to live in multi-unit buildings than their own parents did two or three decades earlier. While the cyclical effect of the recession might hasten downsizing for some boomers, the long-term secular trend means boomers are reaching older adulthood in an era when downsizing is less common and comes later in life than it used to.

Note: the CPS ASEC data were downloaded from IPUMS, which requests to be cited as: Miriam King, Steven Ruggles, J. Trent Alexander, Sarah Flood, Katie Genadek, Matthew B. Schroeder, Brandon Trampe, and Rebecca Vick.Integrated Public Use Microdata Series, Current Population Survey: Version 3.0. [Machine-readable database]. Minneapolis: University of Minnesota, 2010.

See the complete article with charts on Trulia.

Jed Kolko is the chief economist of Trulia.

MONEY buying a home

Can Buying a Fixer-Upper Ruin Your Marriage?

That beautiful Victorian or mid-century modern home has its charms -- and headaches. (That remodel can even ruin a relationship.) Check out these pros and cons to help you evaluate whether an older home is for you.

Ah…the charm, the detail, the attention to architectural style that you’ll find in a ’20s Craftsman,’40s cottage,’50s postwar,’60s ranch style, ’70s split level, and my personal favorite, the midcentury modern. They each have their own unique elements that add to their charm, and they’re abundant across the United States. Older homes — which are defined as any home or condo that has been “lived in”—constitute the largest category of home sales in the United States.

There are many advantages to purchasing an older home. However, there are some potential hazards to consider before signing up for the house that will need some serious TLC, including the strain it can put on your relationship. In fact, according to a survey by Houzz, 12% of couples admitted to considering a separation or divorce mid-remodel.

But before you decide – let’s look at ALL the pros and cons.

The Pros

  • They’ve got more charm. The older a home is, the more likely it is to have architectural details and decorative elements that give it personality that you rarely find in new construction.
  • There’s more selection. There are more of these homes than in any of the other categories of homes. More to choose from means more opportunities to find what you want, and better bargaining power for the buyer!
  • They’re often less expensive than their new construction counterparts. More often than not, an existing home is more affordable. Some stats even suggest new homes are 20% more than an existing home – and that’s a big price to pay for brand spanking new. In Trulia’s latest survey, just 46% of the people who strongly prefer a new home are actually willing to pay the 20% premium that new homes typically cost.
  • They’re spacious. Many older homes have room for life to happen, since they’re a bit more spacious than today’s cookie-cutter new construction.
  • Some land of your own. An older home usually sits on a larger piece of land. Most new construction sits on a developed sub-division or new community, and often, there’s not much open space in the back or the front of the home.
  • Where everybody knows your name. An older home is usually located in a more developed and established community. I grew up, for example, in the small town of Collingswood, New Jersey. You could walk or ride your bike to the main street with lots of shops and stores.
  • Upgrade and add value. You have the opportunity to add value to your home with renovation.
  • Make it your own. Upgrades allow for a degree of personal satisfaction, and you can tailor the home to your specific taste.

The Cons

  • Press the brakes on that moving van. These homes may not always be move-in ready. Most have varying degrees of repairs, upgrades, and renovations that need to be completed prior to even moving in.
  • Show me the money. Older homes can sometimes require lots of renovations, which, of course, require lots of money.
  • Rather not DIY? To be fair to those of you who aren’t handy, willing to get your hands dirty, or face the demands of fixing up a property, this might not be your best option.
  • Down payment PLUS more. For first-time buyers, dishing out the down payment is enough to break the bank. Coming up with the extra cash to fix up the house to your standards can be extremely difficult.
  • Upkeep can bring you down. As opposed to new construction homes, you will be faced with more maintenance issues sooner than later. Older homes generally have older systems. Heating, air plumbing and electrical, and even the roof may need to be replaced at some point in the near future.
  • A messy predicament. Your house will be messy, and perhaps even unlivable for an uncertain amount of time.
  • What’s the real cost? You never really know how much it will all end up costing. My rule of renovation is that it will always cost you 20% more than you planned.
  • Shut out of an open floor plan. The desirable open floor plan is going to be harder to find, because that home design didn’t come into popularity until the ‘60s, so many older homes have more rooms and less open flow.
  • Going green is going to cost you more green! Older homes may not be as energy efficient as some of the new homes with new, more efferent building materials and appliances that cost less to operate on a monthly and yearly basis.

Thus, trying to navigate the move, significant repairs, renovations, your relationship, and the family, may be a lot to juggle all at once. However, the purchase price savings, the more established neighborhood, and all the wonderful charm of an older home may outweigh all the possible downsides. In the end, it’s up to you to decide!

More from Trulia:
What’s Your Home Buying IQ?
9 Sacrifices You Must Make to Find an Affordable Home
The 10 Most Costly Home Selling Mistakes – & How To Avoid Them

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 renting

Be a Successful Renter With These 3 Moves

For Rent sign
Zachary Zavislak

Whether you're renting an apartment or single-family home, taking these three steps will help you avoid costly blunders.

Whether you’re fresh out of college, or downsizing out of a suburban home, you may think renting a place is fairly risk-free. As long as you find a suitable unit you can swing each month, you need not worry about much else, right? Isn’t that one of the big advantages of renting over buying?

You don’t get off that easy! These three steps will secure both your home and your wallet.

Related: Avoid These Rookie Landlord Mistakes

1. Budget for upfront costs

Everyone knows this one, right? Renters will likely need to hand over at least their first month of rent plus a month as a security deposit before moving in. But consider this: If you’re moving from one rental to another, you’ll probably have to put down the cash before getting the security deposit back from the place you’re leaving.

This timeline is standard practice among landlords but continues to trip up unprepared renters, says Niccole Schreck, consumer insights and marketing manager for Rent.com. Rather than having to hit up mom and dad, or — horrors — start charging everyday expenses to conserve cash, begin saving a few months in advance. In fact, you should always have a few months of rent saved in case your landlord does not renew your lease. That could happen if, say, owners decide to sell the place.

And don’t underestimate the costs of boxes, tape, bubble wrap and other packing supplies. A moving kit for a three-bedroom home from Staples can run $400. Even ten 24” x 24” x 18” boxes for a studio can run $40, and that doesn’t include tape, wrapping paper, garment boxes, and other incidentals. Costs add up quickly.

Hiring professional help? Make sure you’re ready to go when the movers arrive. “If you aren’t organized and haven’t quite finished packing, it’ll take more time, and they generally charge by the hour,” says Schreck.

2. Read the lease. Really.

After an exhaustive search, it may feel like you can breathe easily once you’re approved for the rental. Not so fast. “Many people will just sign the lease without actually reading it,” says Schreck. A recent survey from Rent.com found that 26% of renters had lost their whole security deposit at some point. One culprit: not knowing the terms of the lease. “You can’t play by the rules if you don’t know them,” she says. For example, your lease may specify no painting, or have rules about putting holes in walls. Ask your landlord to include in the lease or as an attachment anything he verbally tells you, such as holes are fine or your cat won’t be an issue. Also double-check that utilities included in your monthly rent match what your landlord said.

3. Get renters insurance now.

Many renters assume if catastrophe strikes, such as a fire or break-in, the landlord’s homeowners insurance policy will cover their belongings. Wishful thinking. Landlord policies cover the structure of the home, and perhaps owner-provided extras such as appliances, but will not reimburse losses for the personal belongings of the tenant, says Paul Bruemmer, a landlord insurance expert at Farmers Insurance. Yet 60% of renters do not have renters insurance, a Rent.com survey found.

A typical policy runs between $15 and $30 a month, according to the National Association of Insurance Commissioners. (Unusually expensive items such as fine jewelry and art may need additional coverage.) So for the cost of, say, a fine pair of jeans, you can ensure the rest of your beloved belongings will be covered in the event of bad luck.

MONEY Ask the Expert

How Do I Get Rid of My High-Interest Second Mortgage?

140605_AskExpert_illo
Robert A. Di Ieso, Jr.

Q: I have a $23,000 second mortgage with a high interest rate—8.25%. Should I refinance both my mortgages into one to save money, and at what term? — Jim Davis, Weymouth, MA

A: One of the most important factors in deciding whether to refinance is how long you plan to stay in the home, says Shant Banosian, an executive at lender Guaranteed Rate. The longer you stay, the more you will benefit from any savings from a lower rate. You told us that you are hoping to sell your two-bedroom townhouse in about 18 months so you can move your family of four into a larger home.

You’d like to boost your home equity so you can walk away from your sale with enough money for a nice down payment. Given your time frame, Banosian says it would be a mistake to refinance into a shorter-term mortgage that would significantly raise the monthly payment. Instead, he says, open a home equity line of credit and use that to pay off the second mortgage. HELOC rates average 4.63%, according to Bankrate, and it costs very little to open one, Banosian says. “They’d cut their payment in half.” You could then apply those savings (about $130, you said) to your principal balance.

Related: Should I Refinance So I Can Stop Paying Mortgage Insurance?

 

MONEY house hunt

‘At 27, I’m the First of My Friends to Own a Home:’ A Buyer’s Story

Nathan Davenport's condo in the Buckhead neighborhood of Atlanta. Courtesy of Zillow

At 27, Nathan Davenport seems to have most of what he wants -- a steady job, a girlfriend and even his own home.

When Nathan Davenport moved from Birmingham to Atlanta three years ago, he was fairly certain he wanted to make Atlanta his home for at least a while. So the sales associate with AT&T recently closed on a condo in the Buckhead neighborhood of Atlanta, two blocks from a new mega-development bringing 80 high-end retailers to the area by the end of the year. Just shy of 27 and single, Davenport is the first among his friends to own a home. This is the story of his House Hunt.

He knew exactly what he wanted.

I knew that I am not going to change my job anytime soon. I knew that I wanted to be around people and have stuff to do. Buckhead seemed really attractive with all the stores coming for the first time. I wanted grocery stores and restaurants within walking distance, like in New York. And, I knew that I did not need a lot of space.

I figured property rates will go up, which also motivated me to buy a condo in the neighborhood. And the commute to work is an ideal 15 minutes.

Although he was looking at condos, he did not want to compromise on amenities.

I wanted hardwood floors and granite kitchen tops. And, this might sound weird coming from a guy — but a walk-in closet. I definitely wanted one. I did not like the modern open bedroom, loft-like apartments that I saw.

Once he found his ideal condo, he waited five months for the exact unit to become available.

I started looking at places in August last year and purchased the place in April this year. The unit with the floor plan I wanted had just sold out, and it took five months for another one to get on the market. As soon as it did, I put in my bid, even without actually looking at the unit.

He bid the asking price of $205,000. But then …

The appraisal valued it at $190,000. I changed my bid to $195,000 and closed the deal. I put down 5%, most of what I had saved and the rest is financed through a mortgage.

I wouldn’t say I want to live here long-term. When I get married, I might want to move out. I will rent out this place then. I might think of buying my next house in five to eight years. But I definitely want to stay in Atlanta, preferably in this neighborhood.

MONEY mortgages

Good Luck Getting a Mortgage on a Condo. Here’s What You Need to Know

There's a reason why most condo sales are in cash. It's harder to get a mortgage for a condo than a home. Even if you do, you'll pay more.

Home buyers are paying with cash more than ever. In the first quarter, 43% of home sales used cash, according to RealtyTrac, the highest level since the data firm began tracking this three years ago.

Single-family homes get most of the spotlight, perfectly appropriate given the role that well-funded investors converting foreclosed homes into rentals played in rescuing the housing market.

Related: When Wall Street Becomes a Landlord

But cash really rules when it comes to condos. More than half – 56% – of all condo sales were for cash in the first quarter versus 38% for homes, RealtyTrac says.

In Florida and Nevada, that percentage leaps to over 80%, according to analyst Thomas Vitlo of CoreLogic. Other states with high shares of condo cash sales, says CoreLogic:

State Condo Cash Sales
Florida 81.2%
Nevada 80.5%
New York 79.5%
Alabama 75.7%
Arizona 65.7%

 

Those high figures surely reflect investor interest in condos as good rental properties (and investors pay cash): Generally lower-priced than homes, they also require less maintenance. And, condos often are the home of choice for downsizing Baby Boomers who are able to pay cash out of the sale proceeds of their last home.

Related: I Have $1 Million and I Couldn’t Get a Mortgage

The biggest factor, though, is availability of credit. As Vitlo explains, before the recession getting a mortgage to buy a condo was not a problem. You can see that in the numbers: Between 2000 and 2007, the average percentage of condos bought with cash in Florida and Nevada was 22.9% and 35.4%.

Tighter lending standards have made getting a condo loan incredibly difficult and not just because fewer people make enough money to qualify. The condo development itself might not qualify, under Federal Housing Administration rules put in place after the recession.

For borrowers to obtain FHA mortgages, the community has to pass an approval process documenting healthy finances, insurance, among other things. As of late May, 10,020 condo developments had received approval – a fraction of the roughly 158,000 communities around the U.S.

Condos are a “special hell,” says Keith Gumbinger of HSH Mortgage, because the buyer isn’t the only person responsible for property’s future condition—so is the association and even other tenants.

Find out whether your condo is approved here.

FHA mortgages generally allow lower down payments than conventional loans (as low as 3.5%) with lower credit score requirements. So these rules are particularly problematic for first-time buyers, for whom condos provide a reasonably priced housing option, says Tim Lucas, editor of My Mortgage Insider.

What you need to know:

Cash, alas, is actually king. If you can cough up the cash, you may be able to negotiate a better deal because sellers don’t have to worry about financing falling through, either because you don’t qualify for the mortgage or the unit doesn’t appraise. Cash also means a faster closing time.

You’ll pay more. Because condos have historically higher default rates than homes, lenders will charge extra, Lucas says. That may be in the form of a fee – typically .75% of the loan amount – or a higher interest rate, say, 4.375% instead of 4.25%. You may avoid the charge if you can make a big down payment, above 25%.

Where you live matters too. No wonder everyone’s paying cash in Florida and Nevada. Many lenders charge extra for condos in those states. Plaza Home Mortgage, for example, charges a fee of 0.375% of the loan amount there; American Financial Resources charges 0.15% in nine states, including Georgia, Louisiana, Massachusetts, New Jersey and Utah.

There’s even more documents required. In addition to all that paperwork you have to fill out, the condo association will have to fill out a questionnaire asking for info such as “are there lawsuits pending?” The association also will have to supply a budget.

If you’re military, go VA. The Veterans Administration offers a zero down loan even on a condo. The condo developments also have to be approved in advance, though there’s a longer list than the FHA, Lucas says.

MONEY Housing Market

U.S. Foreclosures Lowest Since December ’06, But Some Cities See Increases

Foreclosures are down nationwide, but some cities are just starting to hurt.

Foreclosure filings around the country fell 26% in the last year to their lowest level since December 2006, according to RealtyTrac.

Four of the 20 largest metropolitan areas, however, saw foreclosures increase year-over-year. Filings in Boston’s metro area were up 44%, followed by regions centered around New York, NY (up 23%), Washington D.C. (up 8%), and Philadelphia (up 5%).

Metro Area YY Growth in Foreclosure Filings
Boston, Cambridge, Quincy, MA-NH 44%
New York, Northern New Jersey, Long Island, NY-NJ-PA 23%
Washington, Arlington, Alexandria, DC-VA-MD-WV 8.2%
Philadelphia, Camden, Wilmington, PA-NJ-DE-MD 5%
Chicago, Naperville, Joliet, IL-IN-WI -12.71%

 

RealtyTrac’s Daren Blomquist explained the foreclosure uptick in these areas as a the local market playing catch-up with the rest of the nation. In states like New York, creditors have to surmount relatively stringent procedural hurdles before being able to foreclose on a property. As a result, underwater homes in these regions are hitting the market long after other states have already dealt with much of their distressed property.

In the first quarter of 2014, the average foreclosure in New York took 1,103 days to reach completion; 706 days in Massachusetts; and 633 days in Pennsylvania. Average time for the entire United States: 572 days.

“It’s not surprising that some of the states with the longest foreclosure timelines are those with markets still dealing with increasing foreclosure activity even as the country as a whole continues to hit new lows,” said Blomquist. “On the other hand, the increase in bank repossessions in some states with shorter foreclosure timelines like California and Oregon demonstrates there is still some pent-up foreclosure activity in those states as well.”

State Foreclosure Timeline
New Jersey 1,103 days
New York 986 days
Florida 935 days
Hawaii 840 days
Illinois 830 days

 

For those worried about foreclosure, the lender can make as much difference as the state they live in. Rob O’Donnell, a Re/Max agent who handles distressed properties in Massachusetts, says some lenders are more aggressive than others when it comes to repossession.

Related: Why You Should Be House Hunting for Foreclosures Right Now

“Some mortgage companies and banks foreclose more quickly than others, and there are some banks that don’t foreclose,” says O’Donnell. In his experience, small lenders and private companies are quicker to pull the trigger. Larger mortgage firms are either simply slower or more reluctant to foreclose for fear they might run afoul of the law. Blomquist recounted one instance where a major Nevada lender reportedly went months without filing a foreclosure notice while the company familiarized itself with with new regulations.

In areas where foreclosures have increased, more properties are being gobbled up at auction by investors before they can hit the open market; something that could be bad news for regular buyers, who prefer multiple listings services over the courthouse steps to find their homes. Blomquist says auction purchases have gone up significantly since last year, driving up housing prices and fueling banks’ interest in more foreclosures.

“In some markets, there’s quite a bit of competition [for distressed real estate] because it’s selling for use as a rental,” says Blomquist. At auction, “banks can get more than they ever expected to recover on that loan.”

Major Metros With Highest Foreclosure Rate in May
Tampa, St. Petersburg, Clearwater, FL
Miami, Fort Lauderdale, Pompano Beach, FL
Chicago, Naperville, Joliet, IL-IN-WI
Riverside, San Bernardino, Ontario, CA
Baltimore, Towson, MD

 

Other foreclosure stats: The Tampa and Miami metros led the way in foreclosure rates, followed by Chicago, San Bernardino, and Baltimore. In May, one in every 1,199 housing units was the subject of a foreclosure filing, from initial notices of default to final bank repossessions.

TIME China

China’s Real Estate Downturn Spells Trouble for Global Economy

A sales assistant talks to visitors in front of models of apartments at a real estate exhibition in Shenyang
A sales assistant talks to visitors in front of models of apartments at a real estate exhibition in Shenyang, Liaoning province April 17, 2014. Sheng Li—Reuters

The world's largest trading nation's economic growth remains heavily dependent on property, meaning a sharp downturn in that sector would be felt across Asia and beyond

“Will the government save the market if housing prices fall?” That was the question being asked in China this week — not by stressed-out mortgage holders, but by the country’s most famous (and wealthy) property mogul, Pan Shiyi.

Pan, the chairman of giant real estate developer SOHO China, has made a series of pronouncements in recent weeks that reflect an increasingly bearish long-term outlook for China’s property sector.

At an industry forum in late May, Pan compared the nation’s real estate prospects to the Titanic. “It [the real estate industry] will soon hit the iceberg in front of it,” he declared.

Pan’s outlook may be bleak, but is borne out by statistics. According to Standard & Poor’s, residential housing prices in China will drop by 5% this year — a dramatic reversal from last year’s rise of 11.5%.

That’s bad news for China’s property holders, but potentially also a worrying sign for global investors. With Chinese economic growth heavily dependent on the real estate sector, which accounts for 20% of GDP by some estimates, a sharp slowdown in the property market would be felt far beyond China’s borders. (China is, after all, the world’s largest trading nation.)

After more than a decade of sizzling double-digit growth, the government is targeting 7% growth this year. But the potential for a real estate correction means that the actual number could be much lower.

There are already some signs that imports are being affected as consumer confidence weakens. The General Administration of Customs announced Sunday that imports in May declined 1.6% year on year — a drop that surprised industry analysts. That compared to an increase of 0.9% year on year in April.

With prices trending sharply downward, the president of the country’s largest residential real estate developer, Vanke, has declared that the “golden age” for property is over. “The period when everyone made money from property is gone,” Yu Liang was quoted as saying recently.

A conflagration of factors is driving the decrease in prices, not least repressive market policies that restrict the number of properties city dwellers can own. Markets in larger cities are also being flooded with knockdown properties being dumped by overextended investors or government officials looking to rid themselves of any undeclared assets in light of a recent and severe government crackdown on corruption.

Chinese media reported Monday that one coal-mining magnate was attempting to offload 100 apartments in a coveted location along Beijing’s Second Ring Road.

Little wonder, then, that the property mogul Pan is on the lookout for the visible hand of the government. But, for now at least, state intervention seems unlikely. In a report late last month, the Ministry of Housing and Urban-Rural Development declared that it would stay on the sidelines and “respect the adjustment role of the laws of the market in the real estate sector.”

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