Saving Enough for Remodeling?

Eighty-two percent of consumers believe the home they own is a financial asset, the study says. As such, they want to tackle home improvement project to increase the value of their home even more. More than half—52 percent—of consumers say they plan to take on a home improvement project in the next year. Kitchen and bathroom remodels lead in projects. (Read more: Design TV Shows Are Inspiring Optimistic Home Renovators)

But many consumers have failed to save enough. Sixty-four percent of consumers say their home improvement project will cost under $15,000. Bathroom remodels can cost anywhere from $19,000 upwards to $61,000; significant kitchen remodels can cost upwards to $125,000, according to the study from Discover Home Equity Loans.

Biggest Rate Drop in a Decade

“The Federal Reserve’s concern about the prospects for slowing economic growth caused investor jitters to drive down mortgage rates by the largest amount in over ten years,” says Sam Khater, with Freddie Mac. “Despite negative outlooks by some, the economy continues to churn out jobs, which is great for housing demand. We have recently seen home sales start to recover and with this week’s rate drop, we expect a continued rise in purchase demand.”

Freddie Mac reports the following mortgage rates for the week ending March 28:

  • 30-year fixed-rate mortgages: averaged 4.06 percent, with an average 0.5 point, falling from last week’s 4.28 percent average. Last year at this time, 30-year rates averaged 4.40 percent.
  • 15-year fixed-rate mortgages: averaged 3.57 percent, with an average 0.4 point, dropping from last week’s 3.71 percent average. A year ago, 15-year rates averaged 3.90 percent.

Survey: Spring Real Estate Market

A growing number of Americans believe now is a good time to purchase a home as the real estate market heads into what is traditionally its busiest season of the year. In the first quarter of 2019, 37 percent of consumers said they “strongly believe” that now is a good time to buy, up from 34 percent in the last quarter of 2018, according to the National Association of REALTORS®’ latest Housing Opportunities and Market Experience Survey.

Why are Americans more upbeat? Lower mortgage rates and greater inventory may be driving more home shoppers this spring. “Inventory has been rising, so those buyers interested in making a purchase will not be limited in choices,” says NAR Chief Economist Lawrence Yun. “Additionally, more stable home price trends are leading to more foot traffic at various open house gatherings.”

Source: “Q1 2019 Housing Opportunities and Market Experience (HOME) Survey,” National Association of REALTORS® (March 20, 2019)

Home Remodel ‘Without Permits’

Some homeowners bypass the permit process when they remodel their home. They may find the process too expensive or cumbersome. Permitting fees can sometimes cost hundreds of dollars or more. Some homeowners may do a kitchen or bath remodel without a permit thinking they’ll likely never get caught.

But failing to get a permit could be troublesome when they go to sell the home. Most states require homeowners to fill out a disclosure statement when they go to sell. In that form, sellers are usually asked if they completed work to the home without a required permit. Lying about it can also backfire—the sellers could be sued later by the new homeowner for making false statements.

Source: “Should You Buy a House Remodeled Without Permits?” RISMedia’s Housecall (Feb. 25, 2019)

Report: ‘Homeowners 8% Richer’ Over the Past Year!

The average homeowner has gained $9,700 in home equity between the fourth quarter of 2017 and the fourth quarter of 2018, the report showed. Western states saw the most significant gains.

“As home prices rise, significantly more people are choosing to remodel, repair or upgrade their existing homes,” said Frank Martell, president and CEO of CoreLogic. “The increase in home equity over the past several years provides homeowners with the means to finance home remodels and repairs. With rates still ultra-low by historical standards, home-equity loans provide a low-cost method to finance home-improvement spending. These expenditures are expected to rise 5 percent in 2019.”

Source: “Homeowner Equity Report: Fourth Quarter of 2018,” CoreLogic (3/7/2019)

‘Bank of Mom and Dad’ for Loans?

Parents and grandparents are increasingly helping their adult children buy their first home. A new study suggests that if families were considered a financial institution, the “Bank of Mom and Dad” would be the seventh largest mortgage lender in the country.

One in five of buyers received gifts or interest-free loans from family members, the study shows. The average amount buyers received from them was $39,000. The Pacific region saw the greatest share of young adults receiving financial help in buying.   Source: Legal & General Group

“For many, perhaps most,young adults, buying a house without help is an increasingly unattainable goal,” says Nigel Wilson, chief executive at Legal & General Group.

The Bank of Mom and Dad “reflects, first and foremost, a housing market where significant problems remain in matching the supply and demand of different types of housing, most notably starter homes and affordable housing of all kinds,” Wilson says.

California’s solar mandate cost?

Recently, California became the first state in the nation to make solar mandatory for new houses. Beginning in 2020, newly constructed homes must have solar panels, which could be costly for homeowners: According to California’s Energy Commission (CEC),that mandate will add between $8,000 and $10,000 per home.

CEC estimates suggest that the solar addition will increase the average monthly mortgage payment by $40, but new homeowners will save an average of $80 a month on their heating, cooling and lighting bills.

Source: cnbc.com/2019/02/15/california-solar-panel-mandate

Homeowners ‘Tax Snags’ Update

Tax season is here, and many homeowners may have questions about what they can and can’t write off under the new tax code.

One big change: Homeowners who used to write off property taxes and interest paid on their mortgage may no longer be able to entirely. But that doesn’t necessarily mean they’ll pay higher taxes. HouseLogic, the National Association of REALTORS®’ consumer-facing website, offers guidance and worksheets on the changes for homeowners.

Under the new law, the standard deduction every tax filer gets has nearly doubled ($24,000 for married couples who file jointly and $12,000 for single filers). Most people likely will be better off taking the standard deduction than itemizing their write-offs.

Other interesting information at: “Tax Deductions for Homeowners: How the New Tax Law Affects Mortgage Interest,” HouseLogic.com (2019) and “Are Closing Costs Tax Deductible Under the New Tax Law?” HouseLogic.com (2019)

Young Adults Living With Parents’

More young adults are still living with their parents and not branching out on their own, and that could have a long-term, negative impact to their finances, according to a new study from the Urban Institute. Researchers found there is no long-term advantage financially for young adults who live with their parents.

The share of young adults aged 25 to 34 who live with their parents rose from nearly 12 percent in 2000 to 22 percent in 2017. Young adults who stayed in their parents’ home longer did not end up buying more expensive homes or have lower mortgage debts later on than those young adults who moved out earlier, the study showed. Researchers say this suggests that “living with parents does not better position young adults for home ownership, a critical source of future wealth, and may have negative long-term consequences for independent household formation.”

Source: “Young Adults Living in Parents’ Basements,” Urban Institute (January 2019)

Fed Puts Brakes on Rates

The Federal Reserve voted to leave interest rates unchanged last Wednesday and signaled that it’s not in any hurry to resume raising rates in 2019. Fed Chairman Jerome Powell used words like “patient” to describe the Fed’s latest approach to increases. His change in tone follows four rate hikes last year. The Fed’s benchmark rate is not directly tied to mortgage rates but does often influence them.

“In light of global economic and financial developments and muted inflation pressures, the committee will be patient as it determines what future adjustments to the target range for the federal funds rate may be appropriate,” a statement from the Federal Reserve read. The Fed said that economic activity has been “rising at a solid rate” and it does expect continued growth, but noted several political uncertainties—such as fallout from the government shutdown—and a slowdown in foreign economies as reason for a more cautionary approach.

Source: Freddie Mac and “Federal Reserve leaves rates unchanged, stresses patience,” HousingWire (Jan. 30, 2019)