By: Gavin Mathis

Published: January 6, 2012

What do you do when your family outgrows your house, or when the quirks you once

found charming about the place just aren’t livable anymore? A few years ago, the  answers were easy. With house values climbing an average of 50% from 2001 to 2005 and lenders handing out big checks to nearly anyone who asked, you could quickly unload a too-small house and use the profits to help pay for a larger one. Or you could borrow against that growing equity to fund a big home-improvement project, with the full expectation of making your investment back someday when you sold. Flash forward a few years, and the rules of real estate have changed.
In this marketplace, with home equity shrinking and banks reluctant to lend, is it smarter to move or improve? Here’s some advice to help you decide.
Moving has gotten harder
With median housing prices down 25% since their peak in 2006, some 15 million homeowners—almost one in four—owe more on their mortgages than they could get from a buyer, according to Celia Chen, senior director of Moody’s Economy.com. And even folks who bought before the big run-up and can afford to sell at today’s lower prices still face steep odds trying to unload their homes with the glut of inventory on the market (36% more lawns wear For Sale signs now than a few years ago).
There was an uptick in units sold in early 2009, leading some economists to predict that the market has begun to rebound, but selling a house is likely going to remain difficult for a while.
Still, there can be an advantage to trading up now: If your house has curb appeal and a good kitchen—and you price it right—offers will come. You may not turn a big profit, but once you sell, you become a buyer in this buyer’s market. That means you’ll find what you’re looking for and pay less for it than a few years ago.
To analyze your trade-up options, check local listings to ballpark the price you could realistically get for your home and what you’d have to pay for the next place. Then contact a bank to see if, based on those figures and your financial situation, you’re likely to qualify for the new mortgage. Or do your research online: Investigate home values at online real estate sites and how much of a mortgage you’d qualify for at bankrate.com.
Improving has gotten easier
The economic slump has actually made renovating the home you already own a bit easier. The construction-industry slowdown has lowered the cost of some building materials: Plywood is down 46%, for example, framing lumber is down 42%, and drywall is down 25%, according to Bernard Markstein, senior economist for the National Association of Home Builders. Many contractors are also charging less for labor, to compete for the smaller pool of available jobs. What’s more, you won’t have to wait months for a contractor to show up—chances are he’ll be able to start in a matter of days.
Of course, you’ll still need to come up with cash to pay for the project. And the news is good there, too: As a general rule, improving costs less than trading up. Figure somewhere between $100 and $200 per square foot for new construction or a major remodel, depending on the scope of the project and labor costs in your area. (For help with budgeting and financing, see “Budgeting for a Remodel”) A two-story addition with a family room, bedroom, and bathroom costs a national average of $165,796, according to Remodeling Magazine’s 2010-11 Cost vs. Value Report.
Now more than ever, though, you need to make sure that you invest your money wisely. In other words, will your $75,000 kitchen remodel increase your home value by $75,000—or by anything close? For guidelines, check out the Cost vs. Value Report, which gives national average cost and payback figures for 35 popular remodeling projects.
To assess what’s right for your particular house, let your neighborhood be your guide. If there’s any chance that you’ll move within the next 10 years (and in this economy, who can be sure?) keep your improvements in line with those of other houses on your block, or you risk losing the money when you sell.
The most important considerations haven’t changed
Your house isn’t just your largest investment, of course, it’s also the place where your family lives. Financial considerations aside, the question of whether to move or improve should be decided by the things you cannot change about your current home: the school district, the amount of traffic on your street, the size and layout of your yard, your commute, the ease of access to markets and malls, and your neighborhood quality of life. If you love the spot, improving makes sense. But if a different location would be an improvement in its own right, then trading up could be the way to go.

By: Gavin Mathis

Published: December 9, 2011

By: Matt Dornic

Published: November 9, 2011

Candidates be warned: Voters may make housing the make-or-break issue of the 2012 presidential election.

Without a widely supported federal plan to address the nation’s housing crisis, U.S. home owners, builders, and the hundreds of thousands of Americans employed in real estate-reliant industries should keep a close eye on GOP hopefuls and President Obama as the 2012 election cycle moves into full swing. Consistently ranked among top concerns for voters, housing may just be the issue to make or break a candidate’s White House run.

With less than a year remaining before Americans elect the nation’s next president, the housing slump has become a hot source of political ammunition between opponents. But not one has unveiled a real plan to address the ailing market. This could be for one of two reasons: Either prospective Republican nominees have failed to develop their housing platform or because, like Mitt Romney, they don’t intend to intervene.

Either way, housing-related criticism is being lobbed not just at the Obama administration and its imperfect programs, but also at the GOP candidates.

Case in point is a new ad campaign, created by the Democratic National Committee and targeting frontrunner Mitt Romney. Using audio of the former governor saying, “Don’t try and stop the foreclosure process — let it run its course and hit the bottom,” the commercial highlights one piece of a quote from an interview Romney gave to the Las Vegas Review-Journal’s editorial board last month.

Although some might argue that Romney’s quote was taken out of context, his “Believe in America Plan for Jobs and Economic Growth” barely touches on housing and instead focuses on tax cuts, less business regulation, and new energy initiatives.

But as foreclosures continue to plague the nation and with approximately 23% of mortgage-holding home owners underwater (as of second quarter 2011), surely some of the presidential hopefuls are addressing the housing sector, right? Here’s what we know about the candidates:

AP reports that Gov. Rick Perry’s fix for housing is to emphasize job creation. A spokesman for the governor said the “immediate remedy for housing is to get America working again. Creating jobs will address the housing concerns that are impacting communities throughout America.”

Like Romney, it seems that Herman Cain’s answer is passive. “We need to get government out of the way,” he said at last month’s debate in Las Vegas.

So far the most thoughtful position came from Newt Gingrich. The former Speaker of the House told Fox News’ Greta Van Susteren that small banks and removal of needless regulations may be the answer to the mortgage crisis.

”You have to repeal the Dodd-Frank bill because … it dramatically regulates the banks,” Gingrich said. “It sends a signal to the regulators to tell them not to make the loans, not to roll over the money — and in effect, it encourages foreclosures and encourages the bank actually seizing the property.”

“The minute you do that — literally, the minute you do that — it’s going to be easier for people to work their way out. You’ll have a dramatic decline in foreclosures,” he added.

Rep. Michele Bachmann has contributed virtually no plan to address the issue. Her strategy has been one of deflection, saying only that “[the White House] has failed you on this issue of housing and foreclosures. I will not fail you on this issue,” during the same debate.

But now, less than a year from the 2012 elections, a passive or low-profile approach to housing woes won’t sit well with voters. Candidate positions on housing will be important considerations to nearly seven of 10 Americans (69.6%) in the 2012 presidential and congressional elections, according to a national survey on housing from Move, Inc.

Look for housing to take center stage as the race for presidency really heats up in the next few months. And don’t be surprised if the first candidate to the finish line is the one who takes housing head on.

How important are housing issues for you in the 2012 presidential election?

By: Dona DeZube

Published: October 14, 2011

If you’ve been wondering if you should be renting rather than owning, consider this expert’s view.

If the constant media drum beat of negativity toward home ownership has you wondering if you’re crazy for buying a home instead of renting, you’ll feel better after reading Liz Davidson’s Forbes Magazine blog, The Next Mortgage Crisis.

Davidson, the CEO of financial education company Financial Finesse, argues that renters set themselves up for financial failure in retirement:

“Today, there’s another mortgage crisis in the works — that is, NOT having one — choosing to rent when you can afford to buy; choosing to forgo building equity in a home as a major source of retirement security — something that may be more necessary now than ever before with a soft stock market and low interest rates.”

Her cautionary tale compares the consumer who buys a $300,000 home and has a $1,500 monthly mortgage payment with the consumer who rents.

If rents rise at the pace of current inflation (3.2% a year) the renter will pay $900,000 for housing over 30 years, while the home owner will pay $540,000 because his payment continues to be $1,500 a month.

If his house appreciates 1% a year, the home owner heads into retirement with $100,000 in equity in addition to the $300,000 he paid for his house. The home owner does have to keep paying housing expenses like property taxes and insurance, but the monthly mortgage is paid off.

Meanwhile, the renter has paid nearly twice as much to keep a roof over his head for 30 years, has given up $400,000 in retirement assets, and has to continue paying rent during retirement.

Becoming a nation of renters will bring on a future financial crisis, Davidson predicts:

“If Americans don’t recover soon from their pessimism around home ownership, we predict another fallout from the financial crisis will surface many years from now when a nation of renters tries to retire. They won’t have equity in their homes. Their paychecks will be stretched to the limit, not leaving room for saving and investing for retirement and other financial goals such as college funding. Instead of their expenses reducing through retirement, they will look straight down the barrel of increased rent payments for the rest of their lives.”

I know everyone isn’t suited for home ownership. But for me, home ownership is a ticket to an affordable retirement and the reason I can tell my high schooler she can go to college anywhere that will take her, and why I can look forward to a last pit stop at a really nice nursing home on my way out of this world. I can’t imagine trading that security for the short-term freedom of a rental home.

Are you sorry or happy you choose to buy your home? Could you see yourself going back to renting?

By: Gavin Mathis

Published: October 7, 2011

Got 5 minutes? Here’s your weekly summary of the housing issues affecting you.

It was another crazy week for home owners: The U.S. House of Representatives voted to renew the National Flood Insurance Program — so far only through Nov. 18 — and housing experts testified to Senate members about the importance of mortgage interest deduction. Here are key home ownership headlines and highlights of the week:

MSN Money: Whew! Flood Insurance Still Available
It was yet another punt by Congress: Elected officials in Washington, D.C., failed to pass a bill reforming the National Flood Insurance Program this week. However, they extended the program until Nov. 18, giving them time to close a deal that reportedly has support from both parties.

Wall Street Journal: We Can’t Ignore Housing Anymore
There’s the foreclosure mess, the underwater mortgage mess, the tight mortgage lending standards and all the rest. There’s displaced construction workers. There’s consumers unwilling to spend as their perceived real estate wealth evaporates. There’s housing, traditionally the leader out of recession, still generally in decline, and harder to ignore.

Houselogic: 9 Ways to Solve the Housing Crisis
Industry experts and lawmakers met in Washington this week to share ideas for kick-starting the housing market.

USA Today: More Parents Finance Their Kids’ Mortgages
If financing a family mortgage was a savvy strategy in 1991, the logic is even more compelling now. Returns from the types of low-risk investments favored by retirees are tiny. Mortgage rates also are at record lows, but tight lending standards have made it impossible for many young home buyers to take advantage of them. For Baby Boomers who are unwilling to risk their money in the stock market, financing a child’s mortgage “is an opportunity to create a win-win.”

Charleston Post & Courier: Federal Action Key to Real Estate crisis, Recovery
From the mortgage interest deduction to lending regulations and flood insurance, Washington holds the reins right now and the next 100 days could be a critical time for getting the housing market back on track.