Home ownership fell across all age groups in the first quarter of the year, but declines were greatest not among younger Americans under 35 who have been having problems getting financing and finding homes to buy but among middle aged households over 45, which traditionally register the highest home ownership rates but suddenly registered significant decreases.
According to the latest Census Bureau data, the national homeownership rate fell by .4 percent in the first quarter to 65 percent, its lowest since 1995, and a surprise to many observers in light of the recovering housing economy. Even more surprising was the steep decline among middle aged householders who traditionally score the highest homeownership rates of all age groups.
Homeownership fell more among those age 45 to 54 than any other age group, declining .8 points from 72.1 to 71.3 percent, the first quarterly decline since 2011. The new rate for the age group is lower than it has been at any time during the housing recession. Householders age 55 to 64 saw their homeownership rate fall .6 percent, from 76.7 to 77 percent. By contrast, those under 35 lost only .3 percent on their homeownership rate.
“The number has gone down for middle-aged people because they’re the ones who lost their homes to foreclosure,” Brad Hunter, chief economist for Metrostudy, told the Wall Street Journal. “The uptick among young people is what we can describe as the allure of newly rising prices and low interest rates.”
However, the numbers of bank repossessions due to foreclosure have been generally declining over the past year. Bank repossessions did increase 9 percent in the fourth quarter of 2012 over the third quarter, yet they were still down 14 percent from the fourth quarter of 2011. During the first quarter of this year, repossessions have declined. Lenders repossessed 43,597 properties nationwide in March, the lowest since September 2007. U.S. bank repossessions in March decreased 3 percent from February and were down 21 percent from a year ago, according to RealtyTrac.
Short sales may have more to do with turning middle aged homeowners into renters than foreclosures. Short sales now account for virtually the same volume as foreclosures. RealtyTrac reported short sales accounted for 22 percent of all homes sold last year. REO and pre-foreclosure sales accounted for only 21 percent of all sales.
Short sales of properties not in foreclosure accounted for an estimated 22 percent of all U.S. residential sales in 2012 and increased 4 percent from 2011. Non-foreclosure short sales nationwide accelerated throughout the year, increasing from the previous quarter in each quarter. Fourth quarter non-foreclosure short sales increased 2 percent from the third quarter and were up 17 percent from the fourth quarter of 2011, reaching a seven-quarter high.
How long has it been since you heard the words “sold at a premium over list price?” For the past six years, sales prices ended up somewhere south list prices by at least five percent. Now, in the markets where the recovery is hottest, sellers are increasingly experiencing multiple bid scenarios and buyers are pre-empting the competition with offers over list price that stir up memories of the boom years.
Last month 13 percent of all Realtors participating in the National Association of Realtors’ Realtors’ Confidence Index reported they had at least one sale above the asking price in the previous month. The percentage rose slightly from December, the first month that NAR asked its members about sales at a premium above asking price. Realtors reported some 12 percent reported sales with prices above list price.
According to Pro-Teck Valuation Service’s Home Value Forecast, median sales prices have overtaken list prices in at least one market, San Francisco, and are close to doing so in Sacramento and Seattle.
Reports from Realtors across the country confirm that sales at a premium over asking price are still very unusual and limited to hottest markets.
“This is pretty normal in the San Francisco Bay Area. The shortage of inventory and the fact that there are so many potential buyers leads to multiple offers. I wrote one last week where there were 14 offers on a home. The seller would not consider any offers until the home had been on the market for 5 days. We came in third on that one, where we wrote just $20,000 above list price,” reports a Bay area local broker.
Offers over list price can backfire, according to Elizabeth Weintraub of Sacramento. “An overpriced offer is especially a huge problem on a Sacramento short sale. Let me illustrate for you. Say, a home is listed at $200,000, and the comparable sales over the past 3 months justify a price of $195,000. With the way the seller’s market is moving in Sacramento, $200,000 is a reasonable price 60 to 90 days later when the approval is likely to be received. Along comes Mary Home Buyer who offers $220,000. If the seller accepts that offer, it’s a long shot that it will appraise by Mary’s lender.
“So, down the road, we get the approval letter from the bank at $220,000. Mary’s lender’s appraiser comes in at $200,000. We then go back to the bank, and maybe there are two lenders so now we have to ask 2 banks to adjust their approval letter. The primary lender refuses. Nope, that bank wants $220,000. The bank might feel we can put it back on the market and find a cash buyer for $220,000, some cash buyer who won’t rely on an appraisal. The deal blows up.,” she said.
DEAR BENNY: Could you advise me of the appropriate (and legal) way to compensate the buyer’s agent we used for our unsuccessful house hunt?
After a stressful summer spent engaged in multiple bidding wars and a short sale that fell through due to a surprise judgment, we’re taking a break. We are happy with our agent’s performance, and we plan to utilize her services in the future.
Should I offer a simple thank-you note and reassurance that we will recommend her to family and friends, or do we owe her cash for real estate services rendered? Does she or her brokerage keep the money we placed in escrow for the short sale? –Lisa
DEAR LISA: Yours is an interesting question. I know a lot of real estate agents and brokers read my column so I welcome input from out there.
Did you sign an agreement with the agent? Presumably you did, because to my knowledge most states require agents and brokers to enter into a written agreement with a potential client before any actual work is done. Read that agreement carefully; it may obligate you to pay, even if you did not buy a house.
I would ask the agent directly: “We are very pleased and will use your services when we resume our search. We would like to give you a little gift; do you have to share it with your brokerage firm?”
One suggestion: Give her a gift card for a dinner for two at a nice restaurant or at an upscale clothing store. I think such a gesture plus a nice thank-you card would be appreciated and appropriate.
Since the agent did actually do work on your behalf, I am not concerned about anyone claiming this will be a “kickback” in violation of the Real Estate Settlement Procedures Act (RESPA). It is only when money is given for no services that RESPA can kick in.
I welcome any and all suggestions on this question.
DEAR BENNY: I refinanced in January (3.85 percent) and a friend advised me to inquire about a “direct reduction loan schedule.” He tells me it is a method to pay down principal significantly faster than overpaying the monthly installment. I have asked my mortgage banker about this, but so far no response. Can you clarify if there is such a thing and explain how it works? –Jim
DEAR JIM: Many lenders (but apparently not all) have a biweekly payment arrangement, whereby you make two payments a month instead of just one. The net result is that your principal balance is reduced every two weeks, thereby requiring you to pay less mortgage interest in the long run as well as paying off the loan faster.
My understanding is that lenders have to create a new computer program payment schedule, and not all lenders are prepared, or even willing, to do this.
Of course, you could add a little extra to your monthly payment and basically pay off the loan early. If you do this, however, make sure that each check you send in (and the coupon that accompanies the payment) specifically states “extra principal in the amount of $XXX.” If you are making a direct, automatic bank payment, make sure your lender understands this and properly credits the additional payment to principal.
DEAR BENNY: My husband and I are separated, but we own a condo together. I live in the condo and have paid all the costs, mortgage, taxes, upkeep and homeowners association (HOA) fees. Our incomes are separate. I want to pay off the condo, thus owing only taxes and HOA fees. My income is very low and the lower I can keep my monthly costs the better.
I’m 65 and eligible for a tax break on the condo, but I will get only half the amount because it is jointly owned. I was unable to purchase on my own because of my small income. I want the full tax break, so do I pay off the condo, thus clearing the deed? At that point, how can the property be in my name only so I can have only my name on the relevant documents and then apply for the full tax break? –Sally
DEAR SALLY: You are facing a dilemma that many divorced couples encounter: how to take title in your name. Unfortunately, in my experience, the only way is to refinance the existing loan, but in your name only. That means that you will have to have sufficient credit to qualify for the new loan.
Do you have any relatives or friends who can assist you? Your ex can (should he decide to be agreeable) convey his interest in the property to you, but he will still be legally obligated on the existing mortgage.
There may be some state or local government programs in your area that will assist low-income homeowners obtain a mortgage. You should contact your local state representative or senator for additional information. They have been elected by you and should be responsive.
DEAR BENNY: I inherited a house from a friend who passed away six months ago. I have not yet taken title to the property and will not until the estate’s trustee finishes settling the estate, which will be in about a month. The mortgage is currently being paid from the interest generated in a CD account.
Once the trustee finishes her duties, the trust provides that the money remaining in this account be used to pay down the mortgage. Once the title is transferred to me, can I take over the home’s mortgage until I can get refinancing with a different lender?
I know that if I were a relative, I would have protection, but because I am not, I am worried that the mortgage company will call in the loan.
The loan has a prepayment penalty, which the mortgage company says it will waive for a short period of time (for the paydown), although it has not put this in writing. The prepayment penalty expires in six to seven months and would have been applicable, prior to expiration, even if the house was sold, although there were no stipulations regarding death of the borrower.
Ideally, I’d like to have the paydown and the refinancing happen at the same time; however, I have heard from a lender that my name must be on the title for six months before I can seek to refinance. Any suggestions on how to proceed? –Donna
DEAR DONNA: While state law will differ, my experience is that typically in probate situations, the personal representative is required to pay off all outstanding debts of the deceased, including the mortgage.
However, since you want the house, you will have to pay off the mortgage with your own funds over and above what is available from the trust.
I did not know the answer to your financing question so I discussed it with a friend who is in the mortgage business. He advised me that it is his understanding (perhaps misunderstanding) that the six months refers only to situations where a borrower wants cash out from the financing.
So I recommend that you consider shopping around for another lender who makes it clear that his bank really wants to lend money.