Coronavirus: Pending Home Sales

The nation's pending home sales jumped a record 44.3% in May, according to the National Association of Realtors. It's the highest one-month gain in the history of the index, which began in January 2001.

I joined CBS This Morning to explain how the pandemic is impacting the housing market and why home prices remain high despite record low mortgage rates.

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"Jill on Money" theme music is by Joel Goodman, www.joelgoodman.com.

CFP® Pro Tip of the Week - April 20, 2018: Real Estate

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#360: Human Capital and the Making of Millennials

This week we're starting the show with Campbell in South Carolina who's wondering when it's time to start thinking about a home purchase. Keep in mind that Campbell is only in his 20s.

Next up was Allen from Dallas who wanted to run his 529 plan strategy by us.

Our final call of the hour was from Lisa in Washington. Lisa and her husband essentially gave up their lives to care for Lisa's parents, who have both since passed away, and are now wondering how to get their financial lives back on track. Great call that required two segments.

Hour two this week is all about the millennials as we're joined by Malcolm Harris, whose recent book, Kids These Days: Human Capital and the Making of Millennials, does an excellent job of detailing the struggles facing the younger generation.

Millennials have been stereotyped as lazy, entitled, narcissistic, and immature.

But according to Harris, there are quite a few traits that really unite millennials, including:

• Being the most educated and hard-working generation in American history
• Pouring historic and insane amounts of time and money into preparing ourselves for the 21st century labor market
• Millennials consider working for free (homework, internships) a privilege for their own benefit
• Millennials are poorer, more medicated, and more precariously employed than their parents, grandparents, even great grandparents, with less of a social safety net to boot

One way or another, we're all connected to a millennial, so spread the word about this episode!

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#267 How to Sell Your House

It's spring real estate season and if you're preparing to sell your house, don't miss this episode! Our guest Denise Rothberg, a realtor at Julie B. Fee/Sotheby's International Reality in New York discusses how to transform the emotional process of selling a home into a business transaction.

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As you start the process of listing your home, you need to choose the right realtor, who has experience with your neighborhood and price range. During the realtor interview process (you should talk to three agents), determine who has leapt into the digital age with a variety of ways to reach potential buyers.

Once you have your realtor, Denise says setting the right price is essential. The first three weeks of a home’s entrance on the market are the most critical for creating interest and attracting buyers. She also said that buyers often dismiss a listing that is “old and stale”, which means that the longer the home stays on the market, chances are the selling price will be lower, both in absolute dollars and as a percentage of list price. The corollary to overpricing is not recognizing when you need to reduce the price. Generally speaking, if there hasn’t been a bite for three to four weeks, it’s probably time for a price cut.

Additionally, first impressions matter, so identify the important home improvements that must occur before the open house. If you haven’t done so in a while, you will probably have to paint the house, replace the broken windows, clean or replace old carpets, cut the lawn, plant the flowers and tend to the garden. Even the small stuff counts, so make sure all light bulbs in the house are working, remove all clutter from closets and surface areas, fix leaky faucets, re-caulk the showers and tubs. If all of this prep sounds like too much work, you can hire someone to “stage” your home, which takes the process to a more professional level. Some sellers, especially those with older homes are choosing to schedule a pre-inspection for their own benefit. While this increases the costs associated with the sale, it may identify a potential problem earlier in the process.

If you are fortunate enough to get a bid, lean on your realtor to skillfully and calmly handle the negotiations. Your reactive or emotional responses can impede the process or worse, kill a deal.

Thanks to everyone who participated this week, especially Mark, the Best Producer/Music Curator in the World. Mark is back in the US and makes another appearance on the show. Here's how to contact us:

• Call 855-411-JILL and we'll schedule time to get you on the show LIVE 

• Send an email: askjill@jillonmoney.com 

• Tweet us: @jillonmoney and @MTalercio

Housing Set for Summer Sizzler

“The housing market is coming back and it looks like it will be with a vengeance,” according to economist Joel Naroff. He offered this commentary after a report showed that building permits, an indicator of future activity, soared to the highest pace in nearly eight years. Surging permit requests along with a jump in builder confidence, an increase in activity and a drop in mortgaged residential properties with negative equity could make the summer a strong one for the real estate market. That’s great news for patient homeowners, who have been waiting a long time for the tide to turn. As of March, the S&P/Case-Shiller U.S. National Home Price Index is up 24.7 percent from the post-bubble low set in December 2011, but still remains 7.6 percent below the peak. (In many parts of the country, like the Bay area and portions of New York, prices are above the previous peak.)

But economists are hopeful that activity and prices will continue to perk up, due to a number of factors. The most important catalyst for housing is the improving economy and employment landscape. As Americans feel more confident about the economy and more secure in their jobs, they will be more willing to take the big step of home ownership.

Additionally, mortgage rates remain low and banks are finally loosening credit conditions, both of which has drawn more buyers into the market, including a group called “Boomerang Buyers.” These are homeowners who lost their homes during the housing recession and are ready to jump back into the market.

According to real estate information company RealtyTrac, from 2007 to 2014 some 7.3 million Americans lost their homes to foreclosures or to short sales. Because both of these events can remain on your credit report for up to seven years, this year will see the first wave of return buyers to the market. RealtyTrac projects 250,000-500,000 Boomerang Buyers will come back into the market this year, and then more than a million in the subsequent few years. Presuming that there are no other major credit issues lingering, these people have a good opportunity to come out of the financial doghouse and qualify for a mortgage.

Those markets likely to see the largest influx of Boomerang Buyers materialize are those where there were a high percentage of housing units lost to foreclosure and where current home prices are still affordable for median income earners, like Phoenix, AZ, Merced and Stockton, CA and Cape Coral/Ft Myers, FL.

One last group that could help boost the market is Millennials (those aged 18 to 34). Sure, many of them are spooked by home ownership, because they watched their parents navigate the Great Recession and they are graduating college with a hefty chunk of student loans. But they may find that a fixed rate mortgage is the perfect antidote to rising rents. When they do come to that realization, the nation’s homeownership rate, which at 63.8 percent in the first quarter of 2015 is the lowest level since 1989, will reverse course.

If you are entering the market as a buyer, run the numbers and be crystal clear about what you can afford. If you are planning to get a mortgage, go to AnnualCreditReport.com and correct any errors on the report before you start the process, which will make it easier to get pre-approved.

If you are a seller, price your house reasonably. According to realtors, the first three weeks of a home’s entrance on the market are the most critical for creating interest and attracting buyers. If your initial price is too high, it may sit idly on the market. The corollary to overpricing the house is a reluctance to reduce the price. If there’s no action for three to four weeks, it’s time for a price cut.

Home Buying 101: Mistakes to Avoid

After a number of fits and starts over the past 18 months, the housing market is poised to show improvement this spring. The combination of underlying strength in the labor market, affordable mortgage rates and the reduction in FHA borrowing requirements and costs is expected to bring more first time homebuyers into the market. Additionally, many buyers who went through foreclosures, bankruptcies or short sales during the downturn now have repaired their credit enough to qualify to buy a home again. RealtyTrac predicts that about half of the 7.3 million who lost their homes to foreclosure or short sales from 2007 through the end of 2014, will return to the market and buy a house. In this year alone, there could be at least 250,000 of these so-called “Boomerang Buyers”, followed by another million or so in the subsequent seven years.

If you are ready to jump into the market, take care to avoid these common home buying mistakes:

1. Not running the numbers: It’s important to understand how much home you can afford to buy and whether home ownership might preclude you from addressing other important financial issues in your life. Use this great rent vs. buy calculator from the New York Times — renting might still be the better deal in your area. And don’t forget to add in a line item for ongoing upkeep. A good rule of thumb is to include one percent of your purchase price as an annual budget amount for repair and maintenance.

2. Not correcting credit report mistakes: If you have not done so in a while, go to AnnualCreditReport.com and request your free copy. It’s important to correct any errors on the report before you start the mortgage process.

3. Waiting too long to get pre-approved for a mortgage: The mortgage process requires plenty of time (up to 90 days in some cases), patience and follow-through. Start early, compare apples to apples and ask the broker to itemize the total costs that you should expect to pay.

4. Going it alone: As much as everyone complains about realtors, it’s tough to go through the home buying process alone. In some markets, buyers’ brokers are available, but the most important qualities in brokers are: honesty, experience, good connections with other agents; and good referrals from buyers like you. Remember that most agents represent the seller, not the buyer.

5. Getting too attached to a property: As my mother, a realtor, likes to say: “A house is like a man…there’s more than one for you in the world!” Some buyers get so attached to a particular home, that they end up blowing their budget or becoming disheartened if they lose the property. Buck up—there are lots of properties out there!

6. Failing to include a contingency clause in the contract/having too many contingencies. One of the most common contingency clauses is one that is related to securing a mortgage. The clause protects you if the loan falls through or the appraisal price comes in much higher than the purchase price. Should one of these events occur, the seller would refund your down payment. Without the clause, you can lose that money and still be obligated to buy the house. On the other hand, if your offer is loaded up with contingencies, you may spook the seller.

7. Not hiring a real estate attorney: This is a major transaction, so don’t cheap out when it comes to legal fees. Even if your mortgage company provides a lawyer, hire your own to draft all of the necessary documents and to ensure that your interests are being represented at every step of the process.

8. Blowing off the home inspection: Think you’ve found your dream house? Maybe, but unless you have an engineer walk through the premises with you, you might be buying a new roof in a couple of years. Don’t get freaked out if a problem arises during the inspection–remember that it can often be solved with a simple adjustment in price.

9. Assuming foreclosures are great deals: The pace of foreclosure sales is slowing down, but in case you run across what you think is a gem, remember that the property likely has been unoccupied for a while and could need major repairs.

10. Buying a home based on a “The Best/Worst Places to Retire” list: These compilations provide great headlines and may even help guide you, but they can’t possibly take into account the details of your personal situation.

10 Home Buying Mistakes

After that nasty weather in the first quarter of the year, the much hoped for housing recovery never quite took hold during the normally vibrant spring buying/selling season. Despite the Polar Vortex, there were other factors that kept a lid on housing buyers, including the fact that tentative buyers were spooked by rising prices, especially in certain hot housing markets. But after a weaker than expected first half of the year, homebuyers may want to enter the market before the action heats up again. If you are ready to jump into the market, take care to avoid these common home buying mistakes:

1. Not running the numbers: It’s important to understand how much home you can afford to buy and whether home ownership might preclude you from addressing other important financial issues in your life. Use this great rent vs. buy calculator from the New York Times — renting might still be the better deal in your area. And don’t forget to add in a line item for ongoing upkeep. A good rule of thumb is to include one percent of your purchase price as an annual budget amount for repair and maintenance.

2. Not correcting credit report mistakes: If you have not done so in a while, go to AnnualCreditReport.com and request your free copy. It’s important to correct any errors on the report before you start the mortgage process.

3. Waiting too long to get pre-approved for a mortgage: The mortgage process requires plenty of time (up to 90 days in some cases), patience and follow-through. Start early, compare apples to apples and ask the broker to itemize the total costs that you should expect to pay.

4. Going it alone: As much as everyone complains about realtors, it’s tough to go through the home buying process alone. In some markets, buyers’ brokers are available, but the most important qualities in brokers are: honesty, experience, good connections with other agents; and good referrals from buyers like you. Remember that most agents represent the seller, not the buyer.

5. Getting too attached to a property: As my mother, a realtor, likes to say: “A house is like a man…there’s more than one for you in the world!” Some buyers get so attached to a particular home, that they end up blowing their budget or becoming disheartened if they lose the property. Buck up—there are lots of properties out there!

6. Failing to include a contingency clause in the contract/having too many contingencies. One of the most common contingency clauses is one that is related to securing a mortgage. The clause protects you if the loan falls through or the appraisal price comes in much higher than the purchase price. Should one of these events occur, the seller would refund your down payment. Without the clause, you can lose that money and still be obligated to buy the house. On the other hand, if your offer is loaded up with contingencies, you may spook the seller.

7. Not hiring a real estate attorney: This is a major transaction, so don’t cheap out when it comes to legal fees. Even if your mortgage company provides a lawyer, hire your own to draft all of the necessary documents and to ensure that your interests are being represented at every step of the process.

8. Blowing off the home inspection: Think you’ve found your dream house? Maybe, but unless you have an engineer walk through the premises with you, you might be buying a new roof in a couple of years. Don’t get freaked out if a problem arises during the inspection–remember that it can often be solved with a simple adjustment in price.

9. Assuming foreclosures are great deals: The pace of foreclosure sales is slowing down, but in case you run across what you think is a gem, remember that the property likely has been unoccupied for a while and could need major repairs.

10. Buying a home based on a “The Best/Worst Places to Retire” list: These compilations provide great headlines and may even help guide you, but they can’t possibly take into account the details of your personal situation.

6 Home buying mistakes to avoid

The spring real estate season is shaping up to be a good one. Prices are up and new and existing home sales have shown great improvement from a year ago. If you are ready to jump into the market, take care to avoid these common mistakes. 1. Not running the numbers! Conduct a financial plan to determine whether you can really afford to buy. It’s important to understand how much home you can afford to buy and whether home ownership might preclude you from addressing other important financial issues in your life. Use this great rent vs. buy calculator from the New York Times -- renting might still be the better deal in your area.

2. Not clearing up credit report mistakes: If you have done so in a while, go to AnnualCreditReport.com and request your free copy. It's important that you correct any errors on the report before you start the mortgage process.

3. Waiting too long to get pre-approved for a mortgage: The mortgage process requires plenty of time (up to 90 days in some cases), patience and follow-through. Best to start early, make sure to compare apples to apples and to ask the broker the total costs to you at closing. This process is also is a good gut check on your price range.

4. Going it alone: As much as everyone complains about realtors, I still think that it's tough to go through the home buying process alone. In some markets, buyers’ brokers are available, but the most important qualities in brokers are: honesty, experience, good connections with other agents; and good referrals from buyers like you. Remember that most agents represent the seller, not the buyer.

5. Not hiring a real estate attorney: This is a major transaction in your life, so don't try to save money when it comes to legal fees. Even if your mortgage company provides a lawyer, hire your own to help draft all of the necessary documents and to ensure that your interests are being represented at every step of the process.

6. Blowing off the home inspection: Think you've found your dream house? Maybe, but unless you have an engineer walk through the premises with you, you might be buying a new roof in a couple of years. Don't get freaked out if a problem arises during the inspection--remember that it can often be solved with a simple adjustment in price. It's imperative to protect yourself so don't blow off this important step.