Massachusetts Home Buyer Guide

More On January's Sales Increase

The Boston Globe reported February 28, 2007 that the Massachusetts real estate market may be recovering from the recent downturn.

Read The Globe Article

New England Cable News (NECN) speaks with Globe reporter Kimberly Blanton about the latest real estate market data. You can watch the video.

You also read the Boston Herald's report.

'“Things may be stabilizing here, but it’s too early to call a turnaround,” said John Bitner, chief economist at Eastern Bank in Boston. “We’ve been expecting things to stabilize in the spring ... so it’s a little earlier than expected.”'

Read The Herald Article

Across the U.S. existing home sales were also up, according Reuters news service. The National Association of REALTORS said  sales were up 3 percent in January, the biggest increase since January 2005. Unlike Massachusetts, nationally inventory rose.

Read The Reuters Article

 

MA Homes Sales Increased In January

For the first time in more than a year, Massachusetts sales of single family homes rose on a year-over-year basis in January 2007. According to the Massachusetts Association of REALTORS® (MAR), single-family home sales spiked more than 12 percent last month.

The increase was the first double-digit sales increase since January 2005.

"While there was growth compared to last year, sales volume did decrease 13.3 percent from December 2006 (3,166 homes sold to 2,744 homes sold in January 2007).  However, this decrease is typical, as sales volume historically drops between the months of December and January.  In fact, this is the smallest decrease for any December to January time period on record, which typically experiences an average drop of 26 percent."

On February 27, 2007, The Boston Globe reported, "The median price of a single-family home fell to $340,000, a 2.4 percent drop compared to a year earlier but virtually unchanged for the past four months."

A combination of the lack of snow and more affordable homes are credited with the increase in sales.

Condominium sales also increased, the MAR reported.

"Sales of condominiums also rose in January compared to the same time last year with an increase of 5.3 percent (1,207 units sold in 2006 to 1,271 units sold in 2007).  On a month-to-month comparison, sales volume was down 17.7 percent (from 1,544 units sold in December 2006 to 1,271 units sold in January 2007).  Similar to the single-family home market, sales volume historically decreases from December to January. 

"Median selling prices for condominiums remained nearly unchanged as there was an identical drop of less than one percent (-0.7%) in both year-over-year and month-to-month benchmarks.  The median selling price for condominiums in both January 2006 and December 2006 was $270,000, with a median sales price of $268,000 in January 2007."

A significant statistic getting little play in the media so far in the decrease in inventory.

"The inventory of residential properties (single-family detached homes and condos) on the market decreased 16.2 percent in January 2007 compared to the same time last year (from 51,122 listings to 42,794 listings in 2007).  At the current sales pace this represents 10.7 months of supply, a decrease from 14.6 months of supply in January 2006.  It is considered a balanced market when there is between 7.5 and 8.5 months of available housing supply.  Residential properties did stay on the market an average of 142 days in January 2007 compared to an average of 104 days in January 2006."

The Warren Group, a provider or real estate data in New England, released its own statistics indicating Massachusetts single-family home sales rose 5.1 percent and prices fell 3.4 percent.

"'This rise in sales, while not yet a trend, could be a hopeful sign for the housing market ,' said Timothy Warren Jr., CEO of The Warren Group. 'When sales started to fall in 2005, it was almost a year before prices did the same. The opposite could be true now. If sales continue to climb, it could take several months for prices to increase again. It can take time for supply and demand to even out, and homebuyers need to see strong evidence of an increase in sales before they become more willing to compromise over what they will pay for a home.'"

The Warren Group said condo sales in the Commonwealth rose 2.8 percent in January 2007 compared to year-before numbers, from 1,821 in January 2006 to 1,871 in January 2007, and the median sale price remained flat at $267,500.

Potential home buyers hoping for even better deals in the spring or summer may be disappointed. Although I do not expect steady increases in prices before the fall or early 2008, the across-the-board sales declines seem to be over.

The decline in inventory will also impact the mindset of sellers and buyers. Sellers will feel less pressure to significantly lower their asking prices, and buyers will not feel as confident that something comparable will be available or come on market, if a seller isn't willing to accept a particular offer.

Massachusetts Foreclosure Filings Up In January

Massachusetts foreclosure filings in January reached levels not seen in at least two decades, The Boston Globe reported February 27, 2007.

"Last month, 2,207 foreclosure filings - or 110 every business day - were submitted in Massachusetts, more than double the number of a year ago; filings in January 2007 were up 105 percent from 1,076 filings in January 2006, according to ForeclosuresMass.com, a Framingham firm that provides on-line Massachusetts foreclosure data to investors, real estate agents, and lenders."

A foreclosure filing does not necessarily mean a borrower will lose his or her home. Lenders file a notice of intent to foreclose in Land Court when borrowers are at least 30 days behind on a mortgage payment. In many cases, borrowers are able to negotiate with the lender to catch up on payments or sell the house to pay off the loan. According to the article, generally, two-thirds of consumers who receive foreclosure notices are never actually foreclosed upon.

"Using both its own sources and court data, ForeclosuresMass.com has detailed information on foreclosure filings going back to 1986, a company spokesman said; no month since 1986 has had more filings than January 2007."

Read This Article

My 100th Post

Today I published my 100th post, so I thought this was a good time to ask readers how I was doing. What do think? Is this blog informative? Do I focus too much or too little on any particular topics?

Please leave a comment or send me an email. I'd really appreciate it. Thank you.

What's The Most Expensive Asking Price For A Home For Sale In The Greater Boston Area?

According to the MLS Property Information Network, a Victorian home on Beacon Hill in Boston has the most expensive asking price.

The 9,500 square-foot, 16-room home is presently listed at $16.5 million.

Click here for photographs and a link to a virtual tour of the home.

Where Can You Find Affordable Homes?

The Boston Globe has compiled a list of the Massachusetts communities with the highest percentage of affordable homes.

The cities and towns are ranked by share of owner-occupied housing units affordable to four-person households earning 80 percent of the Boston metropolitan area's median income.

There are a few affordable communities in the top thirty I would not have expected, such as Wilmington (2), Burlington (10) and Saugus (28).

The most affordable community is Avon, with more than 50 percent of the homes affordable to four-person households earning 80 percent of the Boston metropolitan area's median income.

The least affordable community according to the data is Brookline. There are zero, yes zero, affordable homes in Brookline using the above criteria.

What communities surprised you as being affordable? Leave a comment.

The data comes from MIT's Center for Real Estate.

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What Should I Offer?

Clients often ask me what they should consider when making an offer on a home. There are many factors to consider.

The circumstances surrounding every home are different.

• How long has the home been on the market?
• Has the price dropped already? How much and how many times?
• Is the property vacant?
• How many homes like it are on the market?
• How long is it taking for them to sell?
• What did the sellers pay for it?
• Can it be determined how much money the sellers owe on the property?
• How fast does the seller need to close and can the buyer accommodate that?

Besides all these factors, the single most important thing to consider is what similar properties have sold for over the past five or six months. The more recent the sale the more valuable the information. Asking prices are basically worthless data.

I also always suggest to buyers that we have a negotiation strategy that we have thought out before making an offer. Just making an offer and seeing what happens is not the best approach.

Making low-ball offers is not effective either. Some buyers think that it cannot hurt to make a ridiculously low offer and to see what happens. It's usually a bad move. The response from the sellers usually is to not make any counteroffer. If the buyers are actually interested in the home that forces the buyers to make another offer, effectively bidding against themselves and essentially tipping the sellers off that they're really interested.

A recent Boston Herald article discusses making offers for real estate.

"Find out what comparable nearby houses have been selling for, as well how rapidly they’re selling (assuming they’re selling at all).

"A good buyer’s agent can help you with this."

Read This Article

Consider Your Heating Options When Expanding

Many home buyers consider purchasing homes with an eye toward future expansion.

An informative Boston Globe article published February 23, 2007 discusses heating options in new space within a home.

Read This Article

PMI Tax Deduction Extremely Limited

The Telegraph, a Nashua, NH newspaper, reported February 13, 2007 that the recent law allowing home owners to deduct private mortgage insurance premiums has a narrow scope and short life span.

Mortgage insurance, commonly referred to as PMI, pays the lender, if a borrower defaults on a loan. Most lenders require borrowers to buy mortgage insurance when borrowers put down less than 20 percent of the purchase price of a home at the time of closing. Borrowers can cancel the insurance when their equity in the home reaches 20 percent.

"The federal tax deduction only applies to mortgages taken out since Jan. 1. It expires at the end of this year. Homeowners can’t claim the full deduction if they have more than $100,000 in household income and can’t claim it at all if their income exceeds $109,000. They must itemize deductions to claim it."

The cost of PMI varies depending on the particulars of the loan, but it typically averages 0.6 to 0.8 percent of the original loan amount per year.

Mortgage insurers welcome the law. The deduction will make mortgage insurance more competitive with what are referred to as piggyback loans, which have always been tax deductible.

"Piggyback loans are home equity loans or lines of credit that let buyers who don’t have 20 percent down avoid mortgage insurance. They borrow 80 percent of the home’s value with a first mortgage, then borrow whatever else they need with second, and in some cases third mortgages.

"These are also called 80-20 or 80-10-10 loans. The piggyback portion has a higher interest rate than the first mortgage.

"Piggybacks have taken a big bite out of the mortgage insurance market in the last five or six years."

During the real estate boom years mortgage insurance often was canceled in just a few years.

"By law, borrowers can ask their lenders to cancel mortgage insurance when the equity in their homes, based on the purchase price, reaches 20 percent. It can take many years to reach that point by making mortgage payments alone because, in the early years, payments are mostly interest, not principal.

"However, most lenders will let borrowers cancel their mortgage insurance if their loans are at least two years old and they get an appraisal showing that, thanks to appreciation, their equity now exceeds 20 percent."

Leave it to Congress to pass a tax break that begins and ends in the same year.

Read This Article

Mortgage Interest Rates Slide

MarketWatch reported February 22, 2007 that average U.S. 30-year, fixed-rate mortgages fell to 6.22 percent, down from 6.30 percent from the previous week.

Last year the 30-year rates averaged 6.26 percent.

Average rates for 15-year home loans stood at 5.97 percent, down from 6.03 percent the previous week.

Read This Article

Be Sure To Protect Your Massachusetts Home With a Declaration of Homestead

In Massachusetts, an estate of homestead, also referred to as the homestead act or a homestead deed, is an interest in real property designed to protect the possession and enjoyment of the owner and the owner's surviving spouse against the claims of creditors by protecting the property from execution and forced sale, as long as such person occupies or intends to occupy such property as his or her principal place of residence.

All homestead forms, or deeds, must be filed in the county in which the residence is located. The filing fee is $35. To acquire a claim of homestead in a manufactured home, the homestead declaration must be filed at the city or town clerk's office in the city or town the manufactured home is located.

An owner or owners of a home who occupy or intend to occupy said home as a principal residence may acquire an estate of homestead to the extent of five hundred thousand dollars ($500,000.00), and upon filing of a homestead shall be protected against attachment, levy on execution or sale to satisfy debt (except for certain cases that are specifically excluded by the statue); however, only one owner may acquire an estate of homestead in the home for the benefit of his or her family.

The statute defines owner to "include a sole owner, joint tenant, tenant by the entirety or tenant in common." It also defines family to "include either a parent and a child or children, a husband and wife and their children, if any, or a sole owner."

Should the spouse or parent who declares the homestead die, the law (Massachusetts General Law c. 188 §§ 1-10) protects the house until the youngest unmarried child reaches the age of eighteen (18) and until the surviving spouse dies or remarries.

An owner can declare a homestead on his or her principal residence only. A person can have more than one residence, but the statute only allows the protection of one's legal domicile. There apparently is not any legislative intent to allow the exemption to apply to a summer and a winter residence.

The estate of homestead is terminated upon the sale or transfer of the real property or mobile home during the declarant's lifetime, upon the death of the surviving declarant or by release of the homestead estate duly signed, sealed and acknowledged by the declarant and recorded in the Registry of Deeds, or when the property ceases to be your residence.

In some cases, a lending institution may require that your homestead be released when you refinance or take out a second mortgage. In such a case, once the mortgage is recorded or registered, you can record a new homestead.

Liens imposed as a result of the payment of Mass Health benefits are exempt from homestead protection. Upon the death of a recipient of Mass Health benefits, the Commonwealth may file a claim for reimbursement from the person's probate estate.

I draft a declaration of homestead free of charge for all my buyer clients.

DISCLAIMER: The above information, and all content within this blog and the pages linked to from it, is for informational purposes only. It is not, nor is it intended to be, legal advice. You should not rely on this information without consulting an attorney licensed in your state.

Mortgage Applications Fall

Reuters news service reported February 21, 2007 that home loan applications dropped more than 5 percent compared to the previous week.

The Mortgage Bankers Association, an industry trade group, compiled the data. The group's weekly survey covers about 50 percent of all U.S. retail residential loans. Respondents include mortgage banks, commercial banks and thrifts.

Read This Article

Home Ownership And Taxes, The Good News And The Bad News

Buying a home changes many aspects of your life. It's time for painting, yard work and, maybe, a little plumbing.

Buying a home also changes your taxes. The good news is that some of your home-related expenses may be tax deductible. The bad news is that your taxes are going to get more complicated.

BankRate.com has a guide to tax breaks for homeowners with a lot of useful information.

Read About Homeownership Tax Breaks

Beware Of Predatory Lenders

Mortgage scams and not-so-ethical lenders have been in the news a lot recently. Home buyers need to protect themselves from predatory lenders.

One of the keys to successfully purchasing a home and obtaining a good deal is getting an affordable home loan with fair terms and reasonable costs. Unfortunately, home buyers need to be aware that some loans are not in their best interest.  When loans hurt instead of help, those loans can quickly lead to devastating problems, such as foreclosure and even bankruptcy.

The Center for Responsible Lending provides consumers with the following warning signs that they are dealing with potentially predatory loan.

Sounds too easy. “Guaranteed approval” or “no income verification” regardless of borrower’s current employment, credit history, and assets. These claims indicate the lender doesn’t care about whether you can afford to make the payments over the long haul.

Excessive fees. Higher lender and/or mortgage broker fees than are typical in your market. Because these costs can be financed as part of the loan, they are easy to disguise or downplayed. On competitive loans, fees are negotiable. It is common for home buyers to pay only one percent of the loan amount for prime loans. By contrast, a typical predatory loan may cost five percent or more.

Large future costs. High-risk adjustable rate mortgages where the payment rises a lot after a short introductory period are seldom appropriate for families who already have had problems repaying other loans. Home buyers also should avoid a large single “balloon” payment (a lump sum due at the end of the loan’s term).

Closing delays. The lender deliberately delays closing so the commitment on a reasonably-priced loan expires.

Over-valued property. Inflated appraisals that allow excessive fees to be included in the loan and result in the borrower owing more to the bank than the home is worth.

Barriers to refinancing. Prepayment penalties that make it hard for a borrower to refinance in order to pay off a high-cost loan by taking advantage of a low-cost loan.

No down payment loans. These loans may be split into two mortgages, with one having a much higher cost. Home buyers should be sure they can afford the payments. [BLOGGER'S NOTE: No-money-down loans are increasingly popular and help a lot of first-time home buyers purchase a home. What's important is that you speak with a real estate broker you trust to make sure the lender isn't taking advantage of the situation.]

Unethical document management. An ethical lender or broker will always require you to sign key loan papers, and they will never ask you to sign a document dated before the date you sign it.

Although most predatory lending occurs in the sub-prime (loans for individuals with less than ideal credit histories) mortgage loan market, I see people with good jobs and good credit scores being quoted lousy interest rates and and excessive closing costs. I always encourage my clients to run whatever their mortgage broker tells them by me.

Find A Reputable Mortgage Consultant

The Federal Reserve provides information on looking for the best loan.

Massachusetts Predatory Loan Practices Act

Who Are Massachusetts Home Buyers?

The Massachusetts Association of REALTORS® provided the following data regarding home buyers in Massachusetts in 2006.

Characteristics of Home Buyers

• The median age of home buyers was 38 years old. Among first-time buyers, the median age was 32.
• The median household income of home buyers was $82,600 compared to $71,800 in the U.S.
• 65 percent of home buyers reported that there were no children under age 18 residing in the home.
• 60 percent of home buyers were married couples, 24 percent single females, 6 percent single males, and 8 percent were unmarried couples.
• First-time home buyers accounted for 45 percent of homes purchased in 2006.
• 66 percent of first-time home buyers were between 25 and 34 years old.
• The median income of first-time home buyers was $75,800 compared to $58,300 among all first-time buyers nationally.

Characteristics of Homes Purchased

• 65 percent of homes purchased were detached single family homes.
• The typical home buyer purchased a home 9 miles from their previous residence.
• The median price of homes purchased was $325,000 compared to $214,000 in the U.S.
• The typical buyer purchased a home that was 1,688 square feet in size.
• Recent home buyers plan to live in their home a median of 9 years.

The Home Search Process

• Recent home buyers searched for a home for a median 12 weeks and saw a median 9 homes.
• 89 percent of home buyers used a real estate professional during their home search.
• 71 percent of home buyers used the Internet frequently to search for homes.
• Among home buyers, the typical Internet searcher was 37 years old and visited a median 9 homes. The typical home buyer that did not use the Internet to search for homes was 53 years old and saw a median 7 homes.
• 29 percent of home buyers first learned about the home they purchased from a real estate professional; 39 percent first learned about the home they purchased through the Internet.
• 84 percent of buyers viewed the Internet as a very useful tool in their home search.
• 66 percent of buyers rated real estate agents as a very useful information source with an additional 28 percent rating them somewhat useful.

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