We have recently reported on the misconception that many buyers have regarding the down payment necessary to purchase a home. Multiple studies reveal that 40-50% of Americans believe you need between 15-20% of a down payment to be eligible to purchase a home. This misconception came about as the government just last year debated new guidelines for residential mortgages because of the housing collapse in 2007. Some were arguing that there should be a minimum of 20% or even 30% down payment on all mortgage loans. However, those standards were never implemented. To counter this misunderstanding, Christina Boyle, Freddie Mac’s VP and Head of Single-Family Sales & Relationship Management, in a recent Executive Perspectives explained that a person “can get a conforming, conventional mortgage with a down payment of as little as 5 percent”.

3% Down Payments Available Soon?

Just last week, Federal Housing Finance Agency Director Mel Watt announced that mortgages requiring only a three percent down payment may soon be available:

“To increase access for creditworthy but lower-wealth borrowers, FHFA is also working with the Enterprises to develop sensible and responsible guidelines for mortgages with loan-to-value ratios between 95 and 97 percent. Through these revised guidelines, we believe that the Enterprises will be able to responsibly serve a targeted segment of creditworthy borrowers with lower-down payment mortgages by taking into account “compensating factors.”

Bottom Line

If you are saving for either your first home or that perfect move-up dream house, make sure you know all your options. You may be pleasantly surprised.

Local Lender. Local Service.

We know that working with a local, competent home loan lender assures you the best home buying success. We recommend Jackie Murphy of Colbalt/Caliber Mortgage. Colbalt/Caliber Mortgage underwrites their loans locally, allowing for much faster service. Contact Jackie at 425-605-3122 or at jackie.murphy?@cobaltmortgage.com.

Washington State Natives

We know the Seattle-Everett-Eastside marketplaces and we understand why so many people call this area home. When you are ready to purchase your first or next home, give us a call, text or email and let these two native Washingtonians get to work for you!

-Steve and Sandra

Steve Hill and Sandra Brenner

SEATTLE-NORTHWEST

Windermere Real Estate

206-769-9577

stevehill@windermere.com


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There are some homeowners that have been waiting for months to get a price they hoped for when they originally listed their house for sale. The only thing they might want to consider is… If it hasn't sold yet this fall, maybe it's not priced properly.

After all 14,164 houses sold yesterday, 14,164 will sell today and 14,164 will sell tomorrow.

If you are considering a home sale, give us a call, text or email today. We are expert Seattle WA area marketers.

-Steve and Sandra

Steve Hill and Sandra Brenner

SEATTLE-NORTHWEST

Windermere Real Estate

206-769-9577

stevehill@windermere.com


BrennerHill.com

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Are you thinking of selling your house? Are you dreading having to deal with strangers walking through the house? Are you concerned about getting the paperwork correct? Hiring a professional real estate agent can take away most of the challenges of selling. A great agent is always worth more than the commission they charge just like a great doctor or great accountant.

You want to deal with one of the best agents in your marketplace. To do this, you must be able to distinguish the average agent from the great one.

Here are the top 5 demands to make of your Real Estate Agent when selling your house:

1. Tell the truth about the price

Too many agents just take the listing at any price and then try to the ‘work the seller’ for a price correction later. Demand that the agent prove to you that they have a belief in the price they are suggesting. Make them show you their plan to sell the house at that price – TWICE! Every house in today’s market must be sold two times – first to a buyer and then to the bank.The second sale may be more difficult than the first. The residential appraisal process has gotten tougher. A recent survey showed that there was a challenge with the appraisal on 24% of all residential real estate transactions. It has become more difficult to get the banks to agree on the contract price. A red flag should be raised if your agent is not discussing this with you at the time of the listing.

2. Understand the timetable with which your family is dealing

You will be moving your family to a new home. Whether the move revolves around the start of a new school year or the start of a new job, you will be trying to put the move to a plan.

This can be very emotionally draining. Demand from your agent an appreciation for the timetables you are setting. You agent cannot pick the exact date of your move, but they should exert any influence they can, to make it work.

3. Remove as many of the challenges as possible

It is imperative that your agent knows how to handle the challenges that will arise. An agent’s ability to negotiate is critical in this market.

Remember: If you have an agent who was weak negotiating with you on the parts of the listing contract that were most important to them and their family  (commission, length, etc.), don’t expect them to turn into Super hero when they are negotiating for you and your family with your buyer.

4. Help with the relocation

If you haven’t yet picked your new home, make sure the agent is capable and willing to help you. The coordination of the move is crucial. You don’t want to be without a roof over your head the night of the closing. Likewise, you don’t want to end up paying two housing expenses (whether it is rent or mortgage). You should, in most cases, be able to close on your current home and immediately move into your new residence.

5. Get the house SOLD!

There is a reason you are putting yourself and your family through the process of moving.

You are moving on with your life in some way. The reason is important or you wouldn’t be dealing with the headaches and challenges that come along with selling. Do not allow your agent to forget these motivations. Constantly remind them that selling the house is why you hired them. Make sure that they don’t worry about your feelings more than they worry about your family. If they discover something needs to be done to attain your goal (i.e. price correction, repair, removing clutter), insist they have the courage to inform you.

Good agents know how to deliver good news. Great agents know how to deliver tough news. In today’s market, you need great brokers like Steve and Sandra.

When you are ready to sell your home, give us a call, text or email today!

-Steve and Sandra

Steve Hill and Sandra Brenner

SEATTLE-NORTHWEST

Windermere Real Estate

206-769-9577

stevehill@windermere.com


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We have often talked about the difference between COST and PRICE. As a seller, you will be most concerned about ‘short term price’ – where home values are headed over the next six months. As either a first time or repeat buyer, you must not be concerned about price but instead about the ‘long term cost’ of the home.

Let us explain.

Recently, we reported that a nationwide panel of over one hundred economists, real estate experts and investment & market strategists projected that home values would appreciate by approximately 4% from now to the end of 2015. Additionally, Freddie Mac’s most recent Economic Commentary & Projections Table predicts that the 30 year fixed mortgage rate will be 5.0% by the end of next year.

What Does This Mean to a Buyer?

Here is a simple demonstration of what impact these projected changes would have on the mortgage payment of a home selling for approximately $250,000 today:

If you are considering a home purchase , let us put you in touch with a local, competent lender.

-Steve and Sandra

Steve Hill and Sandra Brenner

SEATTLE-NORTHWEST

Windermere Real Estate

206-769-9577

stevehill@windermere.com


BrennerHill.com

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• Purchasing a home is more affordable today than it was historically in 94 of the country’s 100 largest metro areas.

• But renting a home is less affordable today than it was historically in 88 of the country’s 100 largest markets.

• Affordability remains an issue in many California markets, where both rental and for-sale affordability are worse than they used to be.

Americans are always in search of affordable housing. But whether you’re looking to buy or rent, finding housing that is as affordable today as it has been in the past can be relatively easy in some areas and impossible in others, according to the Zillow Affordability Index.

In many areas, as long as you have saved for a 20 percent down payment, monthly payments on a mortgage for a typical home consume a smaller portion of a median household’s income than they did in the years leading up to the housing bubble. The share of income devoted to rent, on the other hand, is well above historic norms in most places.

In the second quarter of 2014, the typical U.S. household earning the national median income and purchasing a home would need to devote slightly more than 15 percent of their income to the mortgage payment (principle and interest, and assuming a 20 percent down payment) on a median-valued home. Between 1985 and 2000, the years prior to the start of last decade’s housing bubble, the average share of income devoted to mortgages was 22 percent. Nationally, it is very affordable to purchase a home.

But renters earning the national median income who signed a lease in the second quarter needed to spend 30 percent of their income on a rent payment, 5 percentage points higher than the 1985-2000 average of 25 percent. In other words, it is currently very unaffordable to rent a home.

The 2014 Q2 Affordability Index is calculated nationally and for 289 metro areas. In 277 out of the 289 metro areas covered, the percent of income devoted to mortgage payments remains below historic averages. Those areas where the difference between income currently devoted to mortgage payments and the share of income historically devoted to mortgage payments is largest include: Los Angeles (43 percent currently, compared to 35 percent historically); Santa Cruz, California (45 percent compared to 38 percent) and Santa Rosa, California (38 percent compared to 33 percent).

It should be noted that in most areas, one of the primary reasons for very low mortgage payments now compared to historic norms is because mortgage interest rates are so low. As rates rise, financing a home will become more expensive and will consume a larger share of income than currently. This is particularly worrisome in areas where the share of income needed to purchase a home is already above historic norms, as that share will only grow as rates rise.

The 2014 Q2 Rent Affordability Index covers 276 metro areas. In 222 of the 276 metro areas covered by the index, rent affordability is currently worse than the area’s historic average. Generally, a rule of thumb is that rent should not exceed 30 percent of income. But in 99 of the areas analyzed, renters should expect to pay 30 percent or more of their income to their landlord. Large areas with the most unaffordable rents include Los Angeles (48 percent of income), Miami (44 percent of income) and San Francisco (44 percent of income).

What makes the rent “too damn high”?

Since the year 2000, rents have grown 59 percent[i], yet median household income has only grown 26 percent. This discrepancy in growth rates has led rentals to become less affordable, moving the rent affordability index above average (meaning rents require a higher percentage of income) by the first quarter of 2003. Beginning in 2000, home values grew faster than historic rates, peaking in 2007, before declining rapidly from 2007 until early 2012. Because rents did not reset during the crisis, as home values did, rents continued to be more expensive compared to buying a home.

The following figure shows a scatterplot of mortgage versus rent affordability, with the color scale set as the metro area’s price to income ratio and a black 45 degree reference line showing where mortgage and rents represent equal shares of income. In 2000, the housing bubble hadn’t begun in full force, and metro areas were fairly evenly split between having mortgages (above the black line) or rent (below the black line) requiring a higher percentage of income. Throughout the three graphs, we see the same group of California metro areas at the top of the scale with respect to mortgage affordability, although their price to income ratios and mortgage affordability move over time, depending on the relationship between incomes, home values and mortgage rates.

In 2007 Q2, at the height of the housing bubble, metro areas remained split between mortgages requiring a greater percentage of income (above the black line) and rents requiring a higher percentage income (below the black line). The key differences between the 2000 and 2007 plots are that, compared to 2000 Q2, mortgages became less affordable in many areas. The price-to-income ratio in some metros was also very high, represented by the red color on the dots.

Comparing 2007 Q2 to 2014 Q2, we see a shift in the overall pattern of the dots in the scatterplot. All but one of the metro areas (San Jose) have shifted to the right of the reference line, signifying that rent affordability is higher (more expensive) than mortgage affordability. This trend is attributable to the fact that rents continued to increase even as home prices fell, and because income growth during this period was below average. Interestingly, the mortgage affordability index declined from 2007 Q2 to 2014 Q2, while price-to-income ratios remained in the same ranges (red). This shift in affordability is because of the historically low, yet slowly rising, interest rate environment experienced after home values bottomed.

Methodology

To calculate mortgage affordability, we first calculate the mortgage payment for the median-valued home in a metropolitan area by using the metro-level Zillow Home Value Index for a given quarter and the 30-year fixed mortgage rate during that time period, provided by the Freddie Mac Primary Mortgage Market Survey (based on a 20 percent down payment). Then, we consider what portion of the monthly median household income goes toward this monthly mortgage payment. Median household income is currently available through 2012. For years following 2012, we calculated the median household income by estimating it using the Bureau of Labor Statistics’ Employment Cost Index.

The affordability forecast is calculated similarly to the current affordability index but uses the one year Zillow Home Value Forecast instead of the current Zillow Home Value Index and a specified interest rate in lieu of PMMS. It also assumes a 20 percent down payment.

We calculate rent affordability similarly to mortgage affordability; however we use the Zillow Rent Index, which tracks the monthly median rent in particular geographical regions, to capture rental prices.

A recent study has concluded that 39% of buyers prefer to rent out their last residence rather than sell it when purchasing their next home.

The study cites that many homeowners were able to refinance and “locked in a very low mortgage rate in recent years. That low rate, combined with a strong rental market, means they can charge more in rent than they pay in mortgage each month… so they are going for it.”

This logic makes sense in some cases. Residential real estate is a great investment right now. However, if you have no desire to actually become an educated investor in this sector, you may be headed for more trouble than you were looking for. Are you ready to be a landlord? Before renting your home, you should answer the following questions to make sure this is the right course of action for you and your family.

10 Questions to ask BEFORE renting your home

1. How will you respond if your tenant says they can’t afford to pay the rent this month because of more pressing obligations? (This happens most often during holiday season and back-to-school time when families with children have extra expenses).
2. Because of the economy, many homeowners cannot make their mortgage payment. What percentage of tenants do you think cannot afford to pay their rent?
3. Have you interviewed experienced eviction attorneys in case a challenge does arise?
4. Have you talked to your insurance company about a possible increase in premiums as liability is greater in a non-owner occupied home?
5. Will you allow pets? Cats? Dogs? How big a dog?
6. How will you actually collect the rent? By mail? In person?
7. Repairs are part of being a landlord. Who will take tenant calls when necessary repairs come up?
8. Do you have a list of craftspeople readily available to handle these repairs?
9. How often will you do a physical inspection of the property?
10. Will you alert your current neighbors that you are renting the house?

Bottom Line

Again, renting out residential real estate historically is a great investment. However, it is not without its challenges. Make sure you have decided to rent the house because you want to be an investor, not because you are hoping to get a few extra dollars by postponing a sale.

In addition, check out the local landlord-tenant rights, Seattle has some of the most strict landlord-tenant laws in the country, speciifically designed to protect the tenant.

If you are deciding whether to rent or sell your home, give us a call, text or email. We can help you make an informed decision.

-Steve and Sandra

Steve Hill and Sandra Brenner

SEATTLE-NORTHWEST

Windermere Real Estate

206-769-9577

stevehill@windermere.com


BrennerHill.com

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