Prediction: More Pain for Homeowners

A glut of vacant homes suggests that the U.S. housing market has not yet stabilized and may be poised for another downturn. "Now that oil prices and mortgage rates have stopped falling, we will be back lamenting the downturn in the housing market and its spreading effects on the economy in the second quarter, much as we were in the summer and fall 2006," Merrill Lynch economist David Rosenberg wrote. "Looking at the inventory backlog and still-stretched affordability levels, this story is far from over."

The Federal Reserve's policy-setting Federal Open Market Committee cited "tentative signs of stabilization" in the housing market when it voted unanimously to keep interest rates on hold recently.

Pending home sales jumped a stronger-than-expected 4.9 percent in December, the biggest gain since March 2004, supporting ideas that the worst was over and the housing slowdown would not tank the broader economy.  

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 Modular Homes: What Are They and Do You Want One?

Understanding the differences between housing options when you are searching for a home to purchase is very important. In your search for your dream home, you will encounter housing terms such as stick built, modular, and manufactured (mobile home). Each type of dwelling has their benefits and drawbacks, both temporary and long term. Primarily though, confusion exists about modular home manufacturing.  Also, many are unaware of the benefits of owning one.

The overall production of modular homes is a unique process. However, design begins (as with most floor plans) with an architectural engineer using a CAD (Computer Aided Design) program, and is approved by structural engineers for durability and safety. There are benefits to having your home constructed in the fashion of a modular home. The construction of the modular home sections begins on an enclosed factory floor. Quality control is strictly adhered too for each section of the house. Your home during the building phase is never subjected to inclement weather conditions, and usually the home can be ordered and delivered on site with in two weeks. Also, during this phase your contractor can set a pre - made foundation, and ensure that all necessary permits and grading work is completed in time for your modular home delivery. Finishing work such as crown molding, carpeting and appliance installation is completed once the home is joined and all utilities are hooked up. During this phase you can begin to pack and schedule your date for move in. Note worthy too is the fact that many modular homes can be special ordered from any standard house design on the market.

In a comparison between modular and manufactured homes the differences are quite clear. When comparing them, the potential home owner must think in terms of the long run. It's true manufactured housing does have short term benefits, but over the long haul it might be wise to invest a little more money into a modular home.

• Modular homes appreciate in value, manufactured homes depreciate.
• Modular homes are set on a permanent home foundation, manufactured homes set on a block pier making financing harder if not impossible to obtain.
• Modular homes meet state and local building requirements and are inspected, manufactured homes do not, and structural reliability can be faulty.
• Modular homes meet federal, state and local regulations, while manufactured housing must meet only HUD (Housing and Urban Development) requirements.
• Modular homes are accepted into most communities of stick built homes, but restrictive covenants exist on where a manufactured house may be placed.
• Modular homes are, in comparison, just as energy saving in heating and cooling as any stick built home.

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Home Warranties:  Do You Really Need One?

A home warranty is not much different from a warranty you might have on your car, your computer or your home entertainment center.  A warranty on your home usually covers all of your home’s major mechanical systems, including hot tubs, pools, wells, septic tanks and all of your appliances.  Some policies even cover the roof of your home and almost anything else you’d like to include, as long as it’s specified in the policy. 

Home warranties are obtainable for most any dwelling, including mobile homes, condominiums, town houses and manufactured homes.  They can be purchased by either the buyer or the seller; some sellers will include a home warranty policy to make purchasing their home more attractive.  Including a home warranty with the sale is an excellent idea, especially if the home is older and the systems and appliances are aging.  Since the policy can be purchased at closing, the seller doesn’t have to come up with the premium out of pocket.  Further, the cost of the policy can be split between the buyer and the seller, depending on the terms of the sale.

Home warranty policies are generally effective for one year and are renewable.  However, you can expect to pay a little more for coverage each year, as the items covered continue to age.  This is reasonable. Policy costs vary according to the list of things covered, but an average cost would be between $350 and $500 per year.  Obviously, when obtaining a policy it is important to be specific about coverage.  You can expect to pay a small co-payment when the repair person responds to make a repair.  This is an industry standard.  Your payment will range from $35 to $55 per visit.

According to a Gallup poll, 79% of buyers and sellers surveyed rated home warranties as one of the most important aspects of buying a home.  These policies are not like hazard insurance, which covers losses due to fires, storms and accidents; home warranties cover normal wear and tear breakdowns.  A new home and its major systems are usually warranted by the builder for at least one year; thereafter, your home warranty policy coverage will take effect.  Be sure to understand the limitations and intent of your home warranty.  As an example, should your microwave oven catch fire and damage your kitchen cabinets, your home warranty would cover the cost of the microwave; your home owners insurance would pay to fix the cabinets.

Before buying your home warranty policy, you should shop around and find the best and most cost-effective provider.  Get recommendations from your mortgage company, your builder, your friends, and from the Better Business Bureau.  Obviously, some companies are better and more reliable than others.  Ask specific questions:  Do they subcontract their work?  What is their normal response time?  If your freezer stops running you need someone to respond quickly. 

When trying to decide whether or not you need a home warranty, the rule of thumb is: the older your home, the more you will benefit from a home warranty policy.  Most systems and appliances covered under a home warranty can be expected to last at least 5 years.  Therefore, during the early years of your new home, the home warranty policy may not be necessary.  As the components of your home age, the need for a home warranty policy becomes more critical.  It is obviously more attractive to pay $400 or $500 in policy premiums than shell out several thousand dollars for a new furnace or even several hundred for a new refrigerator.  The policy will easily pay for itself if a major home system has to be repaired or even one major appliance has to be replaced.

If you’re the owner of rental property, you should definitely consider a home warranty policy.  Unlike the appliances and systems in your own home, you have little, if any, control over the frequency and manner in which these things are used by your tenants.  Odds are that you will have to replace or repair items and systems more frequently in your rental property than in your own home.  As a landlord, your home warranty policy may very well save you money, but just as importantly, it can buy you peace of mind.

Do you have any experience, pro or con, regarding home warranties or home warranty companies?  We'd love to hear your comments either way. 

10 Ways to Come Up With a Down Payment  

You've found the perfect house. Interest rates are still low. There's just one thing standing between you and your dream home: a down payment.

Don't abandon your homeownership quest just yet. There are few ways to come up with the cash for your new castle:

Use special programs. There are many programs for home buyers in down-payment distress. Borrowers in a wide range of incomes, locales and professional groups may have access to aid from Fannie Mae and Freddie Mac, the government-sponsored offices that buy mortgages and package them as investments. Various nonprofit and community groups also lend a hand to buyers struggling to put money down on a home. And don't forget about assistance from state agencies.  

Tap your IRA. If you're looking to buy your first home, let the Internal Revenue Service help. Tax laws allow you to use up to $10,000 in IRA funds as a down payment if you've never owned a house. If you're married and you both are first-time buyers, you each can pull from your retirement accounts, meaning a potential $20,000 down payment. Even better is the IRS definition of first-time home buyer. Technically, you don't have to be purchasing your very first abode. You qualify under the tax rules as long as you (or your spouse) did not own a principal residence at any time during the two years prior to the purchase of the new home. In these instances, Uncle Sam waives the penalty for early withdrawal, but you may owe tax on the money depending on the type of IRA. Many cash-strapped home buyers, however, find the long-term return of investing in residential real estate is worth the short-term tax bill.

Find out about other ways that may help you to come up with a down payment…  

Have any other (legal) suggestions for coming up with a down payment? Leave us your comment by clicking the comment link below.

Real Estate: Who's Buying Now?

Changing American demographics and social norms are altering the real estate landscape: the average home buyer is very different compared with buyers of generations past.  

The biggest group of home buyers by far is still married couples, accounting for 61 percent of all homes bought, according to the National Association of Realtors.  But single women now purchase 22 percent of all homes. Single men accounted for only 9 percent of purchases.   According to Pat Vredevoogd Combs, the president of the National Association of Realtors, that shows real change. "Thirty-five years ago, when I started out as a realtor, a single woman couldn't even get a mortgage," she says.   Part of the reason why women have become such a big buying bloc is that more women are single than ever before. The New York Times recently concluded, after an analysis of Census Bureau data, that 51 percent of all American adult women now live without a spouse.  

Read more about the average home buyer now…

What do you think about the average home buyer as presented in the article? Perhaps you have observed the similar tendencies considering the real estate market nowadays.  Share your experiences by clicking the comment link below.