Monthly Archives: March 2016

Rent or Buy? Which Option Makes Sense for You

dfIf you are the individual who is weighing the option of buying or renting a house, you need to consider a few factors. Your financial situation has to be assessed for your long-term planning and that it is not that simple as well.

Understanding your house budget and expenses

It is wise to review your household budget in comparison to the expenses before you begin looking for a new house. You have to find out how much can you afford to pay for accommodation without putting a burden on the budget.

You simply cannot go for rent or mortgage payments if you are unable to pay them on time. Several factors are involved both for renting or buying that should be considered prior to making a decision.

What are the requirements while renting or buying a house?

Your credit history and credit score are crucial and that they will be looked upon by the rental agency or the landlords for the mortgage or rent. You will be checked whether you are can pay the bills on time and are not overdue with the loans or the credit card balances. You have to check your score and credit history before applying for the apartment or the mortgage.

Other factors that are important include your strong employment history, W-2 forms and current bank statements that have to depict a good picture. A few rental agencies require professional or personal references as well as background check and contact information from the previous landlord respectively.

When is renting a viable option?

If you have uncertain employment: According to Evelyn Zohlen (financial planner), if you are unsure about your living paycheck and job situation, it is best to save money for the future living expenses. This will help you to build an emergency fund for you as well.

Limited funds: Renting is the better alternative when you do not have enough money for making the down payment or for managing the additional costs of owning the house.

Short time frame: If you have an assignment that lasts two years or you plan to move abroad in a couple of years, then renting a house is a better option.

When is purchasing a house a feasible option?

Buying a house only makes sense when you have the ability to cover the additional costs for owning a house. It is vital that you pay the closing costs and the down payment before you buy a house. It is seen that many banks receive a 20 percent down payment. This means for a house that costs 250,000 dollars, at 20 percent the down payment will be 50,000 dollars. So, the total amount includes percent in commission and another one percent in closing cost as well.

 

The Next Real Estate Collapse

bAs daily commutes go, I have nothing to complain about when I point my car toward Sovereign HQ each morning. The traffic congestion on Interstate 95, South Florida’s main artery, is horrendous. So I take the scenic route, the coastal beach road known as A1A.

The views of the Atlantic Ocean are nice. But more recently, I enjoy the drive for a different reason. It’s a ringside seat to the extravagance of the now-deflating luxury housing bubble I warned about three months ago. Recent data point more ominously to a serious problem in this sector.

Each day, my drive on A1A takes me past what is the single most expensive new home for sale in the United States: Le Palais Royal, under construction for the last five years.

Situated on 4.4 acres of beachfront, the “spec mansion” features the Atlantic Ocean as its backyard. The front yard is a nearly 500-foot deep-water expanse of the Intracoastal Waterway – perfect for even the largest private super yacht.

The mansion’s soaring front gates, accented in 22-karat gold leaf, make it sort of hard to miss as you drive by. Just beyond the gates is a 60,000 square foot home with 11 bedrooms, 17 bathrooms, an 18-seat IMAX home theater (with its 50-foot-wide screen), and a 30-car subterranean garage. The building plans call for a second phase on the vacant beachfront lot next door. That’s where the ice-skating rink, go-cart track, bowling alley and private nightclub are supposed to go.

And it can all be yours for just $159 million.

But the tide of money fueling the purchase of luxury homes, big or small, is receding as we speak.

Luxury Homes: The Next Real Estate Collapse?

Largely ignored in the holiday rush was the news that luxury home prices fell 2.2% during the third quarter – the first such decline in nearly four years.

According to the Redfin real estate brokerage, wealthy clients are stepping back out of fear from stock market volatility, and are worrying about tying up too much of their wealth in non-liquid assets, especially if another real estate collapse appears.

The decline is even more notable because luxury homes serve as something of a bellwether for the rest of the “non-lux” real estate market (which still rose just under 4% for the same period).

The original housing-bubble stocks of a decade ago might offer a clue on the timing. Shares of Toll Brothers (NYSE: TOL), the nation’s largest builder of luxury homes, peaked in July of 2005 before starting their precipitous decline. But the stock prices of builders focused on the low- and mid-priced ends of the market stayed strong – at least at first. For instance, the shares of Lennar Brothers (NYSE: LEN), one of the biggest homebuilders in the country, didn’t crack until April of 2006.

Interestingly, Toll Brothers’ shares today are down nearly 25% from their post-recovery highs (to the lowest price in 13 months), while Lennar shares are just starting to break down.

California Dreamin’?

Chinese buyers have been key players in the run-up of America’s luxury home prices. And their influence is felt most strongly in California and the San Francisco Bay area, the hottest of America’s real estate markets this go-round.

Not coincidentally, it appears Chinese buyers may now be pulling back there as well, possibly ushering in the next real estate collapse. Home sales in California fell 20.5% in November – more than twice the monthly average (it’s traditionally a weak month prior to the end of year holidays). October’s home sales also fell a little over 5%, while dropping 1.5% in September.

For now, the real estate community appears to be dismissing the collapse of sales as the result of changes in new loan disclosure rules by the Consumer Financial Protection Bureau, and what is usually a softer seasonal period for home sales anyway.

I don’t blame them. As a media consultant once told me back in my reporting days, “Never let too many facts get in the way of a good story.”

But the “Chinese buyers” real estate gravy train is grinding to a halt fast. Last summer’s 40% decline in the Shanghai Composite Index should have been the first clue. The second was the relentlessly positive “it’s just temporary” narrative spun by so many brokers and property developers who don’t want the ride to end. The third clue may be upon us here at the start of 2016 as the Shanghai index lurches lower yet again.

So what’s it all mean to you?

As Jeff Opdyke has warned, don’t get comfortable with the Federal Reserve’s spin on things. As Chinese buyers retreat from American real estate, it kicks out yet another leg of support for the U.S. economy.

 

The Chill in US Real Estate

svYou know things are starting to get dicey out there when even a multimillion-dollar penthouse in Manhattan can’t sell.

It seems a developer in SoHo, having just recently finished primary construction for his high-rise condo tower, realized the project’s focal point – a $45 million, 8,400-square-foot penthouse – was just a bit too much.

“The air is very thin up there in that buyer pool,” was the way the builder, Kevin Maloney, put it to Bloomberg.

You’ll love the Solomon-esque solution Maloney came up with.

The penthouse has a wonderfully grandiose name: the Summit of SoHo.

Sure, it has its own indoor pool. And yes, it has 23-foot living room ceilings. Plus, it has not one but two private elevators. One goes to the lobby; the other is so you don’t have to take the stairs to the penthouse’s upper levels (for entertaining, a spa and a rooftop kitchen and grill).

But the stock market cracked hard at the start of the year, with the S&P 500 down 11% at its lowest point in 2016, while Hong Kong’s Hang Seng dropped roughly 17%. In recent months, Chinese real estate buyers pulled a disappearing act from realtor offices all around the U.S. And after years of ultra low interest rates and easy lending policies, there’s now an excess of iconic luxury living quarters on the island of Manhattan.

The developer’s solution? Chop his project’s expansive space into two smaller penthouses – an $11 million, 3,000-square-foot unit (though at that size, it hardly seems big enough for one’s collection of bespoke suits), and a second, 5,400-square-foot unit for a comparatively cheap $29.5 million.

I’ll keep an eye on it and let you know if either gets a sale or not.

Red Hot Real Estate No More

These days, even the bond rating agencies, ever late to calling the turns in any market, are jumping on board…

Fitch Ratings noted last month that home prices in San Francisco have “risen to a level unsupportable by area income.” According to Fitch, that makes the local market overvalued by around 16% – which probably means that you’d need to double that figure to estimate a true “fair value” for this once white-hot luxury market.

Just in the last few days, the National Association of Realtors noted weakening demand among foreign buyers, blaming a strong dollar and rising U.S. home prices for pushing U.S. real estate beyond the bounds of affordability even for rich foreigners.

The crash of China’s Shanghai Composite stock index (down nearly 22% just since the start of 2016 with nary a bounce) forced many of the country’s wealthy elites to pull back on their property purchases. You can see the impact in regional news headlines around the country:

In San Francisco: “At High End, SF’s Housing Market Finally Cooling Off.”

From The Boston Globe: “High-end housing market cooling off.”

In Fort Lauderdale: “South Florida condo market cooling off.”

Will it get worse for premium real estate? I think we’re still in the early innings.

Uncle Sam’s War on Cash (Property Buyers)

The story didn’t get much media play back in January, but that’s when the U.S. Treasury Department and its Financial Crimes Enforcement Network (FinCEN) announced the issuance of “Geographic Targeting Orders” for New York City and Miami.

The “GTOs,” according to FinCEN’s press release, require “certain U.S. title insurance companies to identify the natural persons behind companies used to pay ‘all cash’ for high-end residential real estate.”

Basically, the folks at the Treasury are worried whether corrupt foreign officials or “transnational criminals” might be laundering piles of dirty money through these multimillion-dollar property purchases.

Or is Uncle Sam just worried about the flood of Chinese cash into the American real estate market? “All cash” is practically a synonym for rich Chinese property buyers.

At least, that used to be the case. As we’ve seen in the “cooling off” headlines around the country, the absence of this class of real estate purchaser is starting to be felt in markets around the country.

An article in The New York Times late last year really brings the impact of Chinese property buyers into focus. When it comes to purchasing a home in America, they pay an average price of $831,000 – nearly double what international buyers from India ($460,000), Britain ($455,000) and Canada ($380,000) pay for their homes in the U.S.

In coming quarters, I believe the FinCEN “targeting orders” will likely spell the end of the property-speculation craze among Chinese buyers. The government action may only be limited to New York City and Miami, but it will have a deep chilling effect everywhere. After all, it only takes another press release from FinCEN to announce an expansion into other American cities of its inquiry into the identities of those big-money, anonymous all-cash property buyers.

The trend will take time, with the data trickling onto economists’ spreadsheets. But as Chinese elites continue to pull back from American real estate, well, get ready for a “Wile E. Coyote” moment in high-end luxury home prices – and more pressure on the Federal Reserve to reverse its stance on interest rates.

Should You Buy a Ready Possession Flat or Get a Home Constructed?

sLiving in your own flat or house provides you with the great feeling of security, independence and happiness. The ultimate dream of everyone is to own a place to live. When a person starts to earn, the first thing that comes into his mind is to own a house and starts to save a lot towards this purpose. When it comes to own a house, you have got two options, buy a ready possession flat for sale or buy your own land and build a house in it. Both these ideas have their own advantages and disadvantages. Let’s analyse some of them to decide between these two great options to own a living space for ourselves.

Building Your Own House

Every person has a dream to construct a house that suits to the needs and requirements of the family members. It gets fulfilled when you plan and construct a house for you. Here, your liking and preferences of interior decoration, a color of paint, types of tiles and marbles and a lot of other features of the house give preference. You can choose between costly and cheap materials of construction. You can supervise the laborers and technicians who work to construct your house. Meanwhile, you can save a lot of money. Again, you can construct your house part by part. It is not necessary for you to construct it at a stretch. You can complete the work as and when you have money. Hence, your house becomes a fulfillment of your wishes and dreams. At the same time, there are a lot of disadvantages too. Constructing a house by you takes away a lot of your time and energy. If your knowledge in the construction field is limited, you may make mistakes in choosing the right materials and laborers for the construction. These days labour is not easily available. In the case of a sudden financial crunch, your dream to construct your dream house may not get fulfilled.

Buy a Flat

When you buy ready possession flats for sale, you have a lot of advantages. The most appealing benefit of buying a flat is that you can move as soon as you complete the buying formalities. There are no worries and hurries of construction. You become the owner of a beautiful home overnight. Your confidence and self-esteem will shoot up and you will achieve the status of being the proud owner of a flat. When you choose a ready to possession flat for sale, you choose to live in a highly developed are in your society. The disadvantage of buying a flat is that you have to find a large amount of money to buy it. There are also options to meet these financial requirements. The quality of construction also may worry you a lot.

The Best of Milton Real Estate

vHow special it feels to be living or moving in to a place which is the fastest growing municipality in the Golden Horseshoe. Fastest growth means more development, better opportunities and modern architecture. You will be able to find various kind of flats, apartments and houses fulfilling all of your needs.

Whether you want compact apartments and houses for your single use or your small family, maybe you want a massive house built with wide rooms and bedrooms for your large family, or maybe you want to go for more luxurious villas… you will get well-built real estate of your choice in Milton.

Population

Milton is the fastest growing municipality according to the census conducted in 2006 and 2011. The census showed that Milton is experiencing approx. 71% rise in population from the year 2001 to 2006 and saw roughly a 56% surge in population from 2006 to 2011. The population of Milton, in 2014, is approximately 100,000, but as it is growing rapidly, its population in 2031 is forecasted to be approx. 220,000.

You will also have no problem communicating with the people in Milton as approximately 70% of the population are native English speakers, according to the census of 2011. The remaining 30% people can also communicate in English as their secondary language.

Residency and Growth

With population, the residential growth also saw a massive increase in Milton. This is also due to the successful completion of the project dubbed “the big pipe”, which was about making a piping structure which will deliver water from Lake Ontario to Milton.

By 2006, Milton had 7 new subdivisions, which included Hawthorne Village. Many new subdivisions from the list are developing, which means that there will be constant development – which is the secret of developed regions.

The council of Milton, in 2014, approved the making of more homes in Milton, which saw a surge of 25,000 residents. Moreover, there are vast numbers of home constructions at any given time in Milton, which is attracting more and more residents. In the numbers of residents, there is a fair amount of people coming from other areas of Ontario too.

Transportation

The town has an easy access to the highway 401 and 407 from Oakville and Hamilton. The town has its carriage railway lines for consignments. It has railway transportation service for passengers from Go transit and Via Rail.

If you take the highway 401, you are only 40 km far from the largest International airport (according to the passenger volume) Toronto Pearson. However, the town has a closer airport in the neighboring Burlington, the Burlington airport. The airport does provide passenger services but the services are not regular.

Why it is Becoming So Popular among New Residents?

1. Many people want to live in Toronto or near it. As Milton is 56 km away from Toronto, it is becoming a favorite choice of many.

2. As it is one of the developed towns out there in Ontario, people here can earn better and can improve their lifestyle.

3. As it is a town, it is getting much attraction from people who don’t like the city thing, but still want to live in an advanced but less ‘noisy’ place.

4. For retired and rich people, this place has its attraction as a suburb where they can live in peace and tranquility.

Looking At Seller’s Disclosure In Virginia

dsvUnlike other states, Virginia’s main disclosure statute requires sellers to disclose very little about their houses. Virginia law requires sellers to disclose the following information:

  • Whether the property is in an area where military air installation is located
  • If the house has a defective drywall
  • If the property has previously been used as a meth lab and hasn’t been cleaned according to the state guidelines
  • Whether the property has a septic system that needs to be repaired, but the owner has obtained a waiver from the Virginia board of health. The seller should let the buyer know whether the waiver will apply to the buyer
  • Sellers may choose to disclose whether the property is in a designated tourism activity zone.
  • In Virginia, newly constructed homes are usually exempted from statute disclosure rules.
  • In addition to the state disclosures, sellers must also meet the federal disclosure requirements. Sellers with houses constructed before 1978 are required with federal Title X disclosures. These are disclosures regarding lead-based paint and hazards.
  • As the seller you should give EPA-approved information pamphlet to buyers. These pamphlets should give information relating to lead in your home. It’s also required that you give buyers the option of conducting lead-based paint assessment.

A seller disclosure is of great importance to you as a buyer as it gives you more details about the home that you are looking to buy.

If you are looking to buy a house in Virginia, you need to do the donkey work by yourself. You should inspect the house or hire a professional to help you out. When doing your own inspection you need to focus on the following areas:

Grounds: inspect septic tank, drainage systems, driveway, sidewalk and fence.

Electrical system: it’s impossible to do this by yourself thus you have to hire a professional to do it for you. The professional should ensure that the electrical system is up to code and the system is working perfectly.

Structural elements: you should go through the house and ensure that the construction is well done and there is no evidence of bowing or sagging.

Exterior surfaces: ensure that there is correct clearance between siding material and ground.

Roof: you should inspect the condition of the shingles, chimney, vents and gutters. As rule of thumb ensure that everything is perfect.

Interior plumbing: hire a professional plumber to help you identify any damaged or leaking pipes. Ensure that the toilets, sinks, showers and bathtubs are fully functioning.

Prohibitions put in place

While the seller’s disclosure obligations are minimal, Virginia law has standards that the seller must follow. The law requires that the seller shouldn’t do or say anything that distracts the buyer from finding a problem. The seller also shouldn’t cover up a known defect.