The Vero Beach home improvement market is dynamic. While mortgage interest rates have remained at comparatively low levels for the past few years, it's tempting to assume more people are buying new homes than are renovating or remodeling their existing homes. However, remember this: Because interest rates are so low, home equity loans and complete refinances continue to be popular ways for home owners to pull money out of their properties to make improvements. This article will examine that trend and what it means to the real estate marketplace.
Vero Beach Home Improvement is Popular
No doubt you've heard and read about the relatively low housing inventory in the current real estate economy. Because of the scarcity of affordable available housing in many markets throughout the country, prices have risen consistently in the past year or two. New home construction is underway in a number of regional markets, but new home sales prices have also spiked as builders and developers have to pay increasingly more for land, labor and materials.
Many home owners across the U.S. have enjoyed equity growth in their homes. This growth, coupled with the short supply and rising costs of new and/or larger homes, have caused these homeowners to put off – at least temporarily – the idea of moving into a new neighborhood or "trading up." Instead, a growing number of American home owners are opting to renovate or remodel their existing homes. If you're thinking of entering the Vero Beach home improvement market, you're not alone.
Recently, home improvement giant Home Depot – the largest home improvement retailer in the world – reported their sales for the first quarter of this year. Not surprisingly, their sales of $22.8 billion represented a 9% increase over the same period last year. In addition, the chain's online sales also increased more than 20% boosting the store's net earnings to just over $1.8 billion, exceeding last year's totals by 14%.
To what does Home Depot attribute their recent increases?
Craig Menear, Home Depot CEO, says some of the success is due in part to the sluggishness of the new-home purchase market. Armed with recent housing data showing lower than expected building permits issued and housing starts provided by the Department of Commerce, Menear said, "Housing data indicates continued tailwinds for our business," indicating at least a short-term forecast of much of the same for Home Depot.
So what does Home Depot know that we don't? Probably plenty.
A deeper analysis of the recently reported numbers will likely show an anticipated strategy for both Home Depot and home owners contemplating taking on Vero Beach home improvement projects.
Building permits in April reflected a seasonally adjusted annual number of 1.12 million. While that figure represents an increase of 3.6% above the revised March rate of 1.08 million permits, it's still more than 5.3% below that total from April a year ago.
April housing starts were at a seasonally adjusted annual rate of 1.17 million, which is 6.6% more than the revised March projection, but it's 1.7% below April 2015's annual rate of 1.19 million housing starts.
The bottom line: The pace of new housing compared to last year has slowed.
While some economists continue to be optimistic, saying the overall housing demand – including pent-up demand from first-time home buyers who've seen their rents increase steadily each year – will rise gradually. In addition, say these economists, home builders are becoming increasingly confident about their sales forecasts.
Others feel homeowners who may be reluctant to sell for fear of not having a suitable, affordable place to move to will be content to stay put and consider renovations or home additions until the market changes. After all, they've seen their properties increase in value, and with the right Vero Beach home improvement choices for their home, there's no reason to think the value won't continue to go up.
It appear's Home Depot is banking on the same strategy – in a big way. Their earnings reflect a feeling that home owners will remain in their current houses at a high enough rate to sustain their continued growth expectations.
From the first quarter of 2015 through the same period in 2016, Home Depot's total assets grew more than 6%. Experts point out that for a home improvement retailer that's a significant increase because it includes merchandise and materials in inventory, in addition to property and equipment. Simply put, analysts say, Home Depot is stocking up.
In another potentially telling move, the Economic & Strategic Research Group of the Federal National Mortgage Association (Fannie Mae) readjusted their 2016 economic growth forecast to 1.7% growth, a decrease from their prior forecast of 1.9% growth and the 2.2% level predicted at the beginning of the year. However, Fannie Mae feels the slowdown will be temporary and short-lived.
Fannie Mae 's chief economist Doug Duncan said, “Home sales are expected to pick up with the spring and summer seasons in full swing, amid the backdrop of declining mortgage rates, rising pending home sales and purchase mortgage applications, and continued easing of lending standards on residential mortgage loans. “Meanwhile, the homeownership rate showed signs of stabilizing during the first quarter of this year, as the relatively high homeownership rates among Baby Boomers have helped offset low homeownership rates among Millennials, many of whom remain on the sidelines due to ongoing affordability issues,” he added.
In the meantime, home owners will probably do what Home Depot thinks they will do – improve their existing home until the market can give them something more attractive and more affordable to move into.
You can find more articles pertaining to home improvements in the Vero Beach Home Improvements section of our site below Vero Beach Real Estate Categories in the column to your right.
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The Vero Beach mortgage market probably contains a number of borrowers and prospective borrowers who would be considered affluent. As such, one would assume people who have lots of money, large assets and high net worth would almost automatically qualify them for a jumbo mortgage. If you assumed that, you'd be wrong at least some of the time. Some affluent borrowers still face considerable challenges when it comes to their credit scores. Let's look at how low credit scores can affect even the rich in meeting the qualifications for a mortgage.
Vero Beach Mortgage Market – Credit Affects Us All
The well-known credit reporting agency, Experian, recently released a survey showing that 40% of respondents who earn $100,000 or more still worry their credit score will adversely affect their ability to buy a home this year. In addition, 29% of those surveyed reported they were in the process of improving their credit scores to qualify for better terms on a home mortgage loan. The Experian survey was based on data collected back in February from 500 affluent borrowers or would-be borrowers who recently bought a home or were planning to buy within the next year.
While the average American may find it hard to believe that affluent borrowers – or anybody that earns $100,000 or more annually – could ever have credit problems, credit issues can affect anybody.
Vero Beach mortgage market lenders say the minimum credit score is 720 to get the best jumbo rates and loan terms. Jumbo borrowers with credit scores below 680 are among those who begin facing serious qualification challenges. Some lending institutions may choose to qualify a borrower with a slightly lower credit score under two major conditions. First, the borrower must have income and assets that help offset the lower credit score and, second, if the lender is able to keep the jumbo loan in its in-house lending portfolio. Jumbo mortgages are loans in excess of $417,000 in most markets and $625,500 in select high-priced markets – the limits for the government-backed mortgages.
Ironically, wealthy borrowers often don't even realize they have credit challenges. For example, many affluent borrowers assume their credit scores will remain high if they pay off high balances each month. However, credit reporting agencies also judge the credit management practices of borrowers to ensure they are able to handle credit accounts without becoming financially overwhelmed. In addition, despite their wealth some affluent people just don't worry enough about their credit accounts. While it's a great feeling to know you have credit balances that can probably be paid in full anytime, by not paying attention to payment due dates or late fees, any borrower – regardless of their income or net worth – can run into credit problems that may follow them forever.
An Experian credit specialist said, “It doesn’t matter how much money you have, it really is about how you manage your credit. For the best score, people should limit usage to less than 25% of each entire credit line."
Another problem that often affects affluent borrowers is shared credit obligations. A spouse, for example, who has credit issues that remain unresolved – and unconfessed – can be a proverbial curve ball that can threaten approval of a loan application, not only in the Vero Beach mortgage market, but nationwide as well. If unpaid bills create a problem, that problem can normally be solved by paying the bills in full and using a "rapid re-score" service. Mortgage lenders must request the re-score, which typically costs around $25 per account and can take place in 4-5 days.
New credit-reporting rules that go into affect this summer may also benefit affluent borrowers. The government-sponsored Federal National Mortgage Association (Fannie Mae) buys loans from mortgage lenders and sells them as mortgage-backed securities. They have recently added "trended credit-data reports" as part of their automated underwriting system, to be released into the Vero Beach mortgage market June 25.
Existing credit reports only show the outstanding balances of each account. Therefore, on mortgages, car loans or credit cards the credit report shows what's owed and whether the account holder has made payments on time or late. Under the new system, credit reports using trended data will give the lender more information. While the scoring method itself remains unchanged, the lender is provided with additional data such as the scheduled payment and actual payment amounts over time to better enable lenders to rate how borrowers use credit cards. For example, does the borrower pay the balances in full each month or does he make only the minimum payment?
While the new credit reports from providers TransUnion and Equifax will apply to government-backed mortgage loans, jumbo lenders will probably use them, too. Credit experts say this will give affluent borrowers with high net worths to show their ability to pay despite having high account balances.
You can find more articles pertaining to the Vero Beach mortgage market in the Vero Beach Mortgage Info section of our site below Vero Beach Real Estate Categories in the column to your right.
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Vero Beach home inspections are an integral part of the real estate buying process. While inspections are not always required, most experts agree they are important. A thorough home inspection provides a home buyer with the peace of mind that there aren't major issues with the house they're considering buying. In some cases, an inspection may reveal problems that need to be addressed before the sale of the home can be consummated. Here are six home inspection issues likely to kill a real estate deal.
Vero Beach Home Inspections – The Bad News
A qualified home inspector is trained to look at and document everything in the home inspection ranging from a blown fuse to a cracked foundation. Some issues are, of course, worse than others. If you're contemplating buying a home being inspected, it's imperative you concentrate on issues discovered that pose a structural or home systems threat. They could cost thousands of dollars in repairs.
Those issues will ultimately affect the likelihood the sale will go through as planned. Naturally, everything is negotiable in a home sale, but home inspection problems need to be resolved before the seller and the buyer are satisfied.
Let's look at Vero Beach home inspections issues that may derail a home sale.
Public awareness of asbestos has been raised substantially since the early days when this cancer-causing material was used as artificial snow in stage and movie productions. The poppy field scene in the movie, "The Wizard of Oz," is one example. Homes built before 1975 could contain asbestos in the felt material used in roofing or the roof penetration sealant. In addition, the tape used to seal ventilation and heating ducts, cement board siding and older tiles may also contain harmful asbestos.
One home inspector points says the presence of asbestos isn't a major issue unless it's disturbed or removed during remodeling. Usually, the asbestos can be covered with other materials to protect it from damage. However, deteriorating asbestos insulation found around pipes can be a serious health issue. It's important a qualified asbestos abatement contractor remove it prior to the home closing.
Radon is a naturally occurring, carcinogenic and radioactive gas. It is often found in the crawl spaces or basements of older homes. The problem with radon is it can filter up through the entire home's structure. While most homes are free of radon gas, if an inspector discovers radon in the course of his Vero Beach home inspections, it should be remedied. Cost estimates range between $1,500 and $2,500.
Buried Oil Tank
Homes built between 1930 and the 1990s often have oil tanks buried on the property. If an inspection discovers the tank is leaking or deteriorating, it must be dug up and removed. An intact tank with no leakage can cost more than $5,000 to dig up and dispose of. If the tank is leaking, the cost could more than double – especially if the groundwater has been adversely affected. A tank that was buried properly, shows no signs or leaking or deteriorating, and was professionally decommissioned can remain on the property – but the home buyer assume's the risk and responsibility of removing the tank in the future if a problem occurs. It's best to address buried oil tank issues in advance.
Exposed wiring can present a safety hazard. Do-it-yourselfers who haven't been properly trained are often responsible for exposed wiring issues. In addition, the knob-and-tube wiring common in homes built prior to 1930 rarely lasts and should be updated by a qualified electrical contractor.
Vero Beach home inspections that include black mold in their reports are often deal breakers. They can stop a mortgage financing commitment dead in its tracks. If you have a spouse or family member with respiratory conditions it's probably a good idea to move on to another property. At a minimum, have the seller hire a professional remediation company to get rid of the black mold. And, be sure to have the home re-tested after the work is completed.
A home inspection that reveals termite damage will be difficult to sell. Fixing the damage is usually expensive and time-consuming. In addition, a home with termite damage requires an additional inspection by a structural engineering expert to examine the integrity of the home's framing to see if additional support is required. Home buyers who elect to buy a house with termite damage should do so only after they receive documentation from a termite company stating the house is covered by a termite warranty.
A Final Word on Vero Beach Home Inspections
If you're selling your home, major issues revealed by a home inspection scare away potential buyers. But before you panic and rush out to try and fix the issue yourself or pay someone to do so, consider negotiating with the buyer. If the buyer likes the home enough, they may be willing to offer a little less and have the work performed once they become the new owners. However, buyers should be aware of this: know how much the proposed repairs will cost, and how much you're willing to spend. In the long run that will save you money, time and headaches.
You can find more articles pertaining to Vero Beach home inspections in the Vero Beach Home Inspections section of our site below Vero Beach Real Estate Categories in the column to your right.
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Vero Beach homes for sale always include a certain number of properties that have been recently renovated. While there are often benefits in purchasing a home that's been remodeled or substantially improved, there are important distinctions that need to be considered. First and foremost is, a newly renovated home isn't the same product as a newly built home. This article will examine what to look for when you're contemplating buying a flip – a property purchased by an investor for the sole purpose of performing a renovation or remodeling project in anticipation of selling it for a profit.
Vero Beach Homes for Sale – The Flip Side
Another consideration regarding a newly-renovated home is the perception that the remodeled home is move-in ready, hassle-free and well worth the asking price. While a freshly improved home can often command top dollar, there are recommendations to consider before you fall in love with a flip house and sign the sales contract.
House-flipping "reality shows" on cable television usually portray the buying, renovating and re-selling process as a fast, easy and profitable investment venture – complete with "happily ever after" endings. Rarely are there follow-up features to see how the newly-renovated house withstands daily use and wear and tear. Even more rare is a story about the purchasers of the flipped houses to see what their experiences have been and if they are satisfied with their purchase.
As is the case with most buy and sell investment opportunities, in the home-flipping business time is money. As a result, some flippers and remodeling contractors are anxious to move on to the next project – sometimes before the first one is completely finished. Such a practice inevitably leads to shoddy workmanship caused by cutting corners or rushing to take on another job. In addition, there are often unexpected expenses that threaten to wreck the budget and diminish anticipated profits.
If you're contemplating looking at Vero Beach homes for sale and have an interest in a flipped house, these tips may help you avoid disappointing surprises after you buy it and move in.
Have an Eye for Detail
Try to disassociate yourself from the newness the house features. The shiny new appliances, polished brass hardware, marble baths or ceramic tile all appear very nice. They can add beauty and value to the house, but they can also be used superficially to distract your attention or even cover up hidden problems in the house. By paying attention to the details you'll be able to get a better picture of the quality of workmanship performed during the renovation.Look for obvious signs of shoddy or careless work. Consider the following:
- Outlet plates or light switch plates that aren't flush with the wall or are crooked
- Crown molding or wainscoting that doesn't meet properly at the mitered corners
- Noticeable gaps between the countertops and the wall
- Gaps or unfinished grout in the bathroom tile
- Doors, drawers and cabinets that don't close properly or are crooked
A handful of cosmetic blemishes or noticeable mistakes could mean there are other issues that aren't readily seen. While we've all heard not to judge the proverbial book by its cover, in this case if you see shoddy work on the surface, who knows what may lie behind the walls, under the floors or above the ceiling? The electrical, HVAC and plumbing systems could also be substandard.
Have the Home Inspected
Just because some Vero Beach homes for sale may have been newly-renovated, as mentioned earlier, that doesn't mean they are in like-new condition. Don't assume, therefore, the flipped house doesn't need to be inspected. On the contrary, it's more reason to make sure the home is inspected – by a qualified inspector.
A licensed, experienced home inspector will check the renovation contractor's work, and he might see issues most buyers would probably miss. The inspector is infinitely more familiar with local building codes and can tell if the work was performed properly. He can also check the house for shoddy workmanship done to cut corners or save time. While it's true the renovation was probably inspected and approved by the local building inspector, typically such a review is performed only for health and safety reasons. A home inspection will be much more thorough and can save a homeowner thousands of dollars in the long run.
Use Extra Due Diligence
If you're contemplating purchasing a flipped home, exercise more due diligence than ever. Ensure the contractor had the proper permits for the renovation. Make sure they were all approved, signed and completed. If the permits aren't readily available or you don't receive copies, look them up online or visit the local building department. They will have a file on the construction improvement project, and the permits are a matter of public record. Don't finalize the contract or close on the sale without ensuring all the required permits were officially approved and completed. Failure to do so could mean you, as the new homeowner, could find yourself responsible for shoddy workmanship that doesn't meet the required standards.
Know the Flipper
Be an investigative reporter when it comes to finding out all you can about the flipper from whom you're buying the house. If the owner is the contractor, does he know what he's doing? What are his qualifications? Is he licensed builder? As real estate agent – specializing in Vero Beach homes for sale – we can assist in this effort.
Usually, the better and more successful investors have been flipping houses for years. A flipper with a strong track record, good references and a valued reputation will likely be more open and honest in answering questions, providing requested documentation and other paperwork like contracts and warranties. Remember, a successful investor/flipper is like any other good business person – he or she wants satisfied customers.
Just beware of the marked increase in the number of homes that have been bought in the past year or two with the sole purpose of being remodeled and added back to the inventory of Vero Beach homes for sale. As the volume of these flipped homes increases, so does the possibility of shoddy workmanship, inattention to detail and outright deception – all in an effort to maximize profit.
See more articles pertaining to Vero Beach homes for sale in the two sections of articles on Vero Beach Real Estate and Vero Beach Homes for Sale just below Vero Beach Real Estate Categories in the column to your right.
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