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Spot Hidden Problems in Older Novi, MI Area Homes

by The Jamey Kramer Group

Real estate is a business rife with euphemisms. Usually, in general language, there at least a whiff of truth in stereotypes and cliches, and the same can be said for many of these sometimes hilarious and primarily sales-oriented descriptions. In reality, there is a fine line between antique and old; charming and weird; rustic and dilapidated; small and cozy; and so forth. Beauty, after all, is in the eye of the beholder.

In the majority of relatively older homes, the problems are not physically hidden, but rather mentally hidden. In other words, you might not see potential headaches and money pits if you don't know where to look. That's where we come in and, as real estate experts, help you know what to look for. Read on for five areas that deserve a close look.

1. Begin at the beginning: The Foundation

Once you find out how old a home is (10, 20, 50 years old or more), you can make a relatively safe assumption that its foundation is the same age, although in a small number of cases a new foundation may have been added later. A home's foundation really is its base, and not just in name only. If any part of the foundation is cracked or broken, or shows signs of mold, it could foreshadow costly repairs in the very near future.

2. Plumbing

A large number of old homes will likely still have cast-iron pipes. Cast-iron pipes collect minerals over time, which can lead to corrosion, which in turn can lead to constriction and leaks, which can then mean you having to repair or replace your entire plumbing system. Ouch. 

3. Determine the age of the electric wiring

If the home is old enough, it might still use the outdated knob-and-tube wiring system. These can spell not only incredibly expensive rewiring projects, but also pose a serious fire hazard. Check with an electrician because, even if the wiring is not ancient, it may still be advisable to update parts of it for safety or to bear the load of modern usage.

4. Up on the roof

Most contractors worth their salt will tell you that replacing a home's roof is one of the costliest repair projects of them all. Be sure you know what you’re dealing with – in other words, how long do you have until the roof needs to be replaced? It pays to know.

5. Ensure insulation is up to date

Remember when asbestos wasn't akin to a swear word in our lexicon? It actually used to be a good thing, providing a heat-resistant, fireproof insulating material for pipes, brake linings and electrical systems. Now that we know its health-related shortcomings, asbestos has all but disappeared from the earth. The point here is that home insulation is impacted a great deal by changes in technology. And in Michigan, where extremes in temps are actually the norm, you need to know the age, type and efficiency of your home's insulation. You may want to upgrade or modernize your insulation (or at least plan for the expense of doing so) in order to reduce your power bills. It’s also possible, especially under a home, that insulation has been water-damaged and may not be working properly. In fact, insulation could be trapping water against wood and creating damage.

So, if you are living in or considering the purchase of an older home in Novi, it can really pay to look for problems in areas that you don’t normally see every day. Paying a trained professional can really pay off when it comes to your foundation, plumbing, wiring, roofing and insulation.

Fannie Mae Releases Good News/Bad News GDP Estimate

by The Jamey Kramer Group

In July, the Federal National Mortgage Association, better known by its pseudonym Fannie Mae, scaled back its formerly optimistic prediction for the United States gross national product (GDP) in 2012. In its official announcement, Fannie Mae cited the unstable employment market and the seemingly interrelated factor of relatively anemic consumer spending for its abrupt backpedaling away from its original prognostication of a 2.2 percent growth in the GDP. The revised estimate was scaled down to a modest 2 percent increase.

The economists employed by Fannie Mae to calculate and subsequently disseminate this kind of data describe their findings over the recent months as a good indication of a downward skewing or decelerating growth in the United States economy as a whole.

The news coming out of Fannie Mae was not all negative, however. The association's Chief Economist, Doug Duncan, provided a silver lining by pointing out that the housing market has managed to sustain its upwardly mobile direction, even in the nation's currently impossible-to-predict economy, referring to it as a bright spot that is providing a “rare upside boost.”

During the same time frame in 2011, the mortgage and finance company reported that home sales jumped up by 9 percent, with “single-family housing starts” showing a 20 percent increase. Once again, Fannie Mae was careful to place this data into its proper perspective by providing the caveat that levels remain consistently below what it considers a healthy norm.

Fannie Mae also offered mixed reviews concerning the overall state of residential investment, saying that this area will very likely show positive growth by the end of the year, even though it is starting from a comparatively low base. Additionally, it expects this market to deliver a positive contribution to the nation's economy, which it has not been able to do since 2005.

Consumers who took part in Fannie Mae's National Housing Survey in June provided an indication that their overall confidence in the housing market is improving for two reasons: low interest rates and the belief that home prices had likely dropped about as low as they are going.

Supply and Demand: The Inescapable Conundrum of Doing Business

by The Jamey Kramer Group

A central tenet of business looms large over the housing market in Michigan: supply and demand. Across America -- and in parts of Michigan -- as the U.S. economy slowly continues to improve, it is providing people with comparatively more money than they've had for several years. One noticeable result is that, in a growing number of places, there are more people who want to buy a home (a.k.a demand) against the supply of homes available to buy (a.k.a supply). This tends to drive home prices upwards. But each specific housing market is unique, and this is certainly true in Michigan. Fortunately, things are looking up in the  Metro Detroit area

Supply and Demand In a Nutshell… and What It Means in Michigan

When broken down to its bare essentials, the economic concept of supply and demand is an easy one: When demand goes up, prices rise, and if supplies are scarce, items are more expensive. Of course, this is the laboratory version of things, and things like housing markets are highly complex.

In product manufacturing, for suppliers of goods, creating goods is fairly straightforward. For example, if you are a manufacturer, you agree with suppliers on prices for the raw materials or components you need, you build the product and then attach a price to finished goods.

But demand is tricky to gauge. Sellers try to determine the number of buyers they expect for their product. They must make educated guesses because the variables on the buyer’s side are numerous and buyers can be fickle. When it comes to real estate there are simply many factors beyond the seller’s control, from tax policies to interest rates to the ever-fluctuating American economy as a whole. It's a moving target, and a lot of factors have to be considered. What's more, the past may not be the key to setting home price points -- after all, we live in challenging times.

When there is strong demand for housing, there is a tendency for the most attractive, move-in-ready properties to receive a disproportionately large number of bids compared to properties that are considered less attractive. This potentially drives up the prices of these high-demand homes, while the homes in lower demand often remain in indefinite limbo. According to data released by Realcomp, a Farmington Hills MLS and quoted in the Detroit Free Press, The inventory of homes for sale in metro Detroit dropped 16.7% in June to 19,433, contrasted with 23,315 in June 2011. Nearly half, or 45%, of sales in July were cash sales, and homes sold on average nine days faster, with 81 days on the market.

It appears that the upward trend is due to several interconnected factors including low interest rates, relatively lower prices on homes and American consumers' gradually increasing confidence in their local economy.
 
For evidence of the upturn in Michigan's real estate market, consider information from Farmington Hills multiple listing service, Realcomp. They reported that home sales rose more than 5 percent in metro Detroit compared to the same time frame a year ago. In fact, each of the counties in the Detroit metropolitan area – Macomb, Livingston, Oakland and Wayne – reported increased home sales in June 2012:
 
Macomb: 12.6% 
Livingston: 11%
Oakland: 0.8%
Wayne: 0.5%
 
This is good news and while the economy and the housing market face challenges, the data are showing improvement.
 
Still, in some parts of Michigan those with property for sale are still feeling the pinch even while demand creeps upwards. This is because, overall, home prices in the state have taken a big hit since 2000. For some sellers, home prices are still low enough that selling property without incurring a major financial loss is incredibly difficult. In short, supply and demand are exerting their influence, but the market is still recovering from a decade of tough times.

Overall, if the economy continues to improve, increasing demand will drive prices higher. Total recovery won’t come overnight, but the housing market continues to strengthen.

Some Homeowners Face New Tax Hit on Forgiven Mortgage Debt

by The Jamey Kramer Group

There is an old cliché that states, no situation is so bad that it can't get worse. Chances are pretty good that if you are a homeowner who may have to lean (or already are leaning) on a short-sale solution, or if you are facing foreclosure, your finances are not in tip-top shape. Now comes the news that unless Congress swoops in to save the day, you will incur a federal income tax charge on any part of your loan that was previously forgiven.

To figure out how this whole situation came about, you need to travel back in time to the year 2007. It was then that the United States Congress passed the Mortgage Debt Relief Act. What this meant for the countless number of homeowners who needed to transact a short sale, reconfigure their mortgage, or deal with a foreclosure was that they were able to have a portion of the principal balance forgiven without having to pay income tax on it.

Now, after five years of providing coverage to those folks, the Mortgage Debt Relief Act has one metaphorical foot in the metaphorical grave, with the other foot poised to fall at the end of the year, when the act will expire.

In order to give you an example of this works, let's create a hypothetical scenario. Let's say that the act is allowed to expire at the end of this year. It is now 2013 and you are a homeowner who decides to transact a short sale on your home for $120,000, and your home has an appraised value of $150,000. Upon completion of this short-sale transaction, you will receive a bill from the federal government in the form of income tax owed on the phantom $30,000 worth of forgiven debt. This is because without the Mortgage Debt Relief Act, the federal government now considers that $30,000 income and it is therefore taxable. 

Hope is on the horizon, however, for those who want the act to remain in place. One of the loudest voices proclaiming its benefits and shouting, as it were, for it to be maintained is the National Association of Realtors (NAR). Their team of lobbyists is endeavoring to convince Congress to extend the Mortgage Debt Relief Act beyond the 2012 expiration date. Apparently their efforts, and no doubt the efforts of other like-minded people, are doing some good because a number of legislators in both the Senate and House of Representatives have already introduced bills that would extend the tax relief. It’s certainly something to keep an eye on for those involved in short-selling their properties.

Economy Stinks, but Housing Remains Sweet

by The Jamey Kramer Group

The housing market's fate is intrinsically dependent upon the overall fate of the economy of the United States as a whole. Makes logical sense, right? You could probably say the same thing about the retail market and the vehicle market and, really, about any market in which money is exchanged for goods and services. This doesn't necessarily mean, however, that these individual markets' fate will always mirror that of the overall U.S. market.

As we all know, America is in the midst of a multi-year economic slog. The reasons, justifications and rationalizations for the steep and sudden downturn are complex and confusing – so much so that even the country's professional economic brain wizards disagree on many of the finer points. When it comes to the real estate market, let’s just acknowledge that there was and likely still is an economic recession and look at the housing market's situation.

Some economic experts indicate that it was the inherent volatility of the housing market that played, if not the biggest, then certainly one of the biggest roles in creating the recession in the first place. Others say that the housing market's crash was collateral damage sustained by virtually every individual market that make up the nation's economy as a whole. The arguments will undoubtedly go on for years.

Whatever brought on the recession is essentially water under the bridge now, other than as a learning tool for what not to do. Regarding the future, economists are analyzing today's data and making educated, if cautious, predictions about the future of the nation's economy and its various markets. The reports of their findings are guardedly positive in some areas, including those coming from housing market analysts.

As the larger economy continues to struggle, the housing data is showing that the worst may be over. Data from July 17th underscore this view as home builders’ confidence showed the largest monthly increase in almost a decade.

The National Association of Home Builders indicated that its housing market index increased to 35 in July – the best since March of 2007. This also represented a rise of six points over June 2012. According to Cooper Howes of Barclays, “2012 is expected to be the first year since 2005 in which residential investment will provide a positive contribution to GDP growth.” 

Could it be that the U.S. housing market could be changing from a drag on the economy to a source of strength? Time will tell, and it’s unclear considering the overall struggles that continue in the economy, but it’s great to see housing trending positively.

Displaying blog entries 1-5 of 5