Real Estate Investing

Google may be entering the mortgage business.  This will give Zillow and other online mortgage giants a run for their money, but I still maintain my stand that it’s always better to find someone local who knows the area, knows the market, and knows the agent so they don’t dare add on unnecessary fees to close.

Check out the latest celebrity real estate activity here.

Realtor Jack from Evanston, Illinois commented on an article about short-sales messing up the housing market in Chicago.  His numbers didn’t add up the same as what’s apparently happening in the Windy City.  This bring us to the absolute truth that all real estate is local.  In one city on the outskirts of Nashville, short-sales, bank-owned, and HUD housing made up 30-35% of properties listed.  In other areas, less than 1% are distress sales.  The homeowners in the high foreclosure community have been hit really hard and are struggling simply to get showings, but other townships are still fairly healthy.  Remember, location location location when you buy!

Speaking of short sales, the Bloodhoundblog has a great post about investors buying these properties.

But the truth is, speculators are the garbage collectors of capitalism. They come in and clean up messes they did not create, returning productive value to underperforming assets.

It you’re looking for a villain in these stories, look to the borrower, to the lender or just to the vicissitudes of life. But it is the speculators who are going to bring the real estate market back to a viable state.

Finally, Shakhammer recently posted a video of the trials and tribulations a customer went through to buy and install his own water heater.  It IS a long video, but gives the Sears Company some strong, logical advice.  (I hope this link works today!)

[youtube=http://www.youtube.com/watch?v=YF4CqjvSCmA]

Photo from Huffington Post.

The news media is all over a story today from Fannie Mae reporting that homes are falling in value to 9 percent this year, 2 percent lower than the first-anticipated 7 percent freefall.

The bad news is perception is everything. When the news only reports that home values are plunging without balancing it with good news, the alarm the public feels is very real. However, mortgage rates are still incredibly low and there is an expectation that they’ll go lower, so not all is lost.

If you’re looking to sell your home in this market, it’s true that it’ll go for less than what it could’ve sold for this time last year. However - and this is important - if you’re looking to sell and buy another home, you’ll make up the difference in the home you buy. Plus, you will likely be paying a much lower interest rate to boot.

Why wouldn’t it be a good time to buy? Cost of living increases (a gallon of milk in Kauai, Hawaii goes for $10, while it’s only $8 p/gallon in Honolulu!!) sure have me wigged out so stepping into a big mortgage may be worrisome. Also, with gas prices rocketing faster than the Discovery space shuttle… we all worry.

However, it is still key to remember that this too shall pass and when it does, the growth in your home equity will be well-worth the leap of faith that our economy is solid enough to bounce back strongly in another year.

For the longest time, two words summed up a good home improvement strategy — “kitchen” and “bath.” However, with kitchen remodels in particular spiraling ever further out of control, it may be time to rethink conventional thinking. According to an article by Kathy McCleary on HGTV.com, money may be better spent on necessary improvements like furnaces, air conditioning units and gutters. While it may not be pretty and trendy with “designer colors,” wise home shoppers will understand the immense value in the words “new HVAC system.”

According to Remodeling magazine’s 2007 Cost vs. Value Report, new siding is the most rewarding home improvement, with a 79.7% to 88.1% return on investment. Their list cites fiber-cement siding as being a better investment than foam-backed vinyl siding, and a comprehensive list of all siding options can be found on About.com.

The highly-touted kitchen remodel, at a minor level of around $21,000, only recoups about 83% of cost at resell time. Cost recovery on both a minor kitchen remodel and replacement siding project has dropped significantly from three years ago, when McCleary wrote her article. Then, the projects would net a 92.9% and 92.8% cost recovery, respectively, according to the Cost vs. Value Report.

By 2007 numbers, a major kitchen remodel drops cost recovery down to only 78.1%. And bathrooms fared about the same or even worse, depending on the type of project. A bathroom addition of around $37,000 would net only 66% cost recovery and a remodel around $16,000 would net only 78%. Some other projects that yield big results on the market include the addition of about a $10,000 wood deck at 85.4% cost recovery and replacement windows in wood or upscale vinyl at 81% cost recovery.

It’s something to think about as spring kicks into gear and your inner handyman starts surfacing. Don’t be dismayed if the necessary home improvements are eating up the savings you had set aside for the more desirable home improvements. The financial reward may be more than you expected, regardless!