Living Large in Smaller Homes

The answer to affordable housing lies in less space and more peace of mind.

 Written by Shira Boss

Struggling with the high cost of housing? Want to be a homeowner but wondering how you can afford it? There’s a solution: think smaller.

A smaller home not only costs less in monthly payments, but costs less to maintain, to furnish, to decorate, to clean, and especially to heat and cool. With less space to look after, you can free up not only money but time.

“The reality is housing represents a huge debt that has become unsustainable for the average family,” said Susan Milewski, who worked as a realtor for 23 years and is now a proponent of affordable housing. “The rule of thumb for housing used to be between 25-29 percent of one’s paycheck to be applied toward housing. Now it's more like 75 percent and this leaves less disposable income for food, clothing and other essentials. Never mind a savings plan.”

Milewski advocates smaller homes with fewer amenities and for using solar, wind and geothermal energy.
The average size of a new home in 2012 topped 2,500 square feet, according to the US Census Bureau—that’s compared to 1,660 square feet in 1973. At that time, 23 percent of new homes had four or more bedrooms. Today, 41 percent have four or more bedrooms – and nearly a third have three or more baths. Cleaning a bathroom is onerous—why clean three (or more)?

In areas of the country, e.g. Florida, where a McMansion might seem affordable, do buyers consider how much it will cost to heat and cool?

The average single family home racks up $2,200 in energy bills each year, according to the US Environmental Protection Agency (46 percent of that for heating and cooling). Fewer rooms and smaller rooms = lower bills.

Have you ever shopped for window coverings, only to be shocked at how expensive they can be? It makes a big difference to need to dress up only a few windows vs. many. The same goes for furniture, decorations, repairs, and the time or cost to clean.

Another bonus of smaller-space living: less room for storage means thinking twice before shopping. That leaves both money and time for other pursuits.

“The more stuff we own, the more mental energy is held hostage by them,” wrote Joshua Becker, author of the book Simplify, in a blog post, “ 12 Reasons Why You’ll Be Happier in a Smaller Home.” “The same is absolutely true with our largest, most valuable asset. Buy small and free your mind.”

Bay Area Home Sales Slowdown Not Experienced in San Mateo County

San Mateo County was the sole Bay Area county that saw an increase in home sales, as volume increased by 18 percent. In addition, the median price rose to $750,000, a 25 percent increase.

January 15, 2014

La Jolla, CA.-----Last month’s Bay Area home sales were the slowest for a December in six years, the result of a constrained supply of homes for sale. Prices continued to rise on a year-over-year basis, although at a slower pace than earlier in 2013, a real estate information service reported.

San Mateo County was the sole Bay Area county that saw an increase in home sales from December 2012 to December 2013, as volume increased by 18 percent. In addition, the median price rose to $750,000 in one year, a 25 percent increase.

A total of 6,714 new and resale houses and condos sold in the nine-county Bay Area last month. That was the lowest for any December since 2007, when 5,065 homes sold. Last month’s sales were up 0.8 percent from 6,659 in November, and down 12.7 percent from 7,688 in December 2012, according to San Diego-based DataQuick.

Sales almost always increase from November to December, usually around 8 percent. Last month’s sales were 21.3 percent below the December average of 8,529 since 1988, when when DataQuick’s statistics begin. Bay Area sales haven’t been above average for any particular month in more than seven years. The most active December was in 2003 when 12,349 homes sold, while the least active was in 2007, when 5,065 sold.

The median price paid for a home in the Bay Area last month was $548,500. That was 0.3 percent lower than $550,000 in November, and 23.9 percent above $442,750 for December 2012. While the median has been at roughly the current level since last summer, it has increased year-over-year for 21 consecutive months.

The Bay Area median peaked at $665,000 in June and July 2007, then dropped to a low of $290,000 in March 2009. While much of the median's ups and downs in recent years can be attributed to shifts in the types of homes sold, it now appears most of the current year-over-year gain reflects a rise in home values.

For 14 consecutive months the Bay Area median has risen more than 20 percent on a year-over-year basis.

“If current trends hold, including year-over-year price appreciation of 20-plus percent, the typical home would be selling for $50,000 to $60,000 more by spring. Perhaps twice that at the upper end of the market. That could loosen up quite a bit of inventory. The question then is, how much of the pent-up demand that accumulated during the down years is still there? An additional issue is the fussy mortgage market, although things are moving in the right direction there, slowly,” said John Walsh, DataQuick president.

Adjustable-rate mortgages (ARMs), an important indicator of mortgage availability, accounted for 22.0 percent of the Bay Area’s home purchase loans in December. That was up from 20.0 percent in November, and up from 11.0 percent in December 2012. It was the highest since 25.4 percent in July 2008. ARMs hit a low of 3.0 percent of loans in January 2009. Since 2000, ARMs have accounted for 47.2 percent of all Bay Area purchase loans.

Jumbo loans, mortgages above the old conforming limit of $417,000, accounted for 49.2 percent of last month’s purchase lending, down slightly from a revised 49.8 percent in November, and up from 40.1 percent a year ago. Jumbo usage dropped to as low as 17.1 percent in January 2009. Before the credit crunch hit in August 2007, jumbos accounted for more than 60 percent of Bay Area purchase loans.

Government-insured FHA home purchase loans, a popular choice among first-time buyers, accounted for 11.3 percent of all Bay Area home purchase mortgages in December, up from 10.4 percent in November and down from 13.8 percent a year earlier. In recent months the FHA share has been the lowest since early 2008, mainly because of tighter FHA qualifying standards and the difficulties first-time buyers have competing with investors and cash buyers.

Last month the number of homes that sold for less than $500,000 dropped 28.9 percent year-over-year, while the number that sold for more increased 12.3 percent, DataQuick reported.

Distressed property sales – the combination of foreclosure resales and “short sales” – made up about 15.0 percent of the resale market last month. That was up from 13.2 percent the prior month and down from 35.7 percent a year earlier.

Foreclosure resales – homes that had been foreclosed on in the prior 12 months – accounted for 4.5 percent of resales in December, up from 3.7 percent the month before, and down from 12.1 percent a year ago. Foreclosure resales peaked at 52.0 percent in February 2009. The monthly average for foreclosure resales over the past 17 years is 10 percent.

Short sales – transactions where the sale price fell short of what was owed on the property – made up an estimated 10.5 percent of Bay Area resales last month. That was up from an estimated 9.5 percent in November and down from 23.6 percent a year earlier.

Last month absentee buyers – mostly investors – purchased 23.0 percent of all Bay Area homes. That was up from November’s revised 20.6 percent and down from 26.0 percent in December 2012. Absentee buyers paid a median $439,000 last month, up 35.1 percent from $325,000 a year earlier.

Buyers who appear to have paid all cash – meaning no sign of a corresponding purchase loan was found in the public record – accounted for 22.5 percent of sales in December, up from a revised 22.1 percent in November and down from 29.9 percent a year earlier. The monthly average going back to 1988 is 13.3 percent. Cash buyers paid a median $468,500 in December, up 48.3 percent from a year earlier.

In December, Bay Area home buyers put $1.72 billion of their own money on the table in the form of a down payment or as an outright cash purchase. That number hit an all-time high of $2.64 billion last May. They borrowed $2.56 billion last month in mortgage money from lenders.

The most active lenders to Bay Area home buyers in December were Wells Fargo with 13.0 percent of the purchase loan market, Bank of America with 4.5 percent and Stearns Lending with 3.8 percent.

San Diego-based DataQuick monitors real estate activity nationwide and provides information to consumers, educational institutions, public agencies, lending institutions, title companies and industry analysts. Because of late data availability, sales were estimated in Alameda, San Francisco and San Mateo counties.

The typical monthly mortgage payment that Bay Area buyers committed themselves to paying last month was $2,219. Adjusted for inflation, last month’s payment was 22.1 percent below the typical payment in spring 1989, the peak of the prior real estate cycle. It was 42.5 percent below the current cycle's peak in July 2007. It was 76.3 percent above the February 2012 bottom of the current cycle.

Indicators of market distress continue to decline. Foreclosure activity remains well below year-ago and far below peak levels. Financing with multiple mortgages is very low, and down payment sizes are stable, DataQuick reported.

5 Easy Home Improvements For Renters

According to a recent report released by Harvard’s Joint Center for Housing Studies, 43 million households in the United States were housed in rental homes by early 2013, the highest rate in a decade.

Renters often experience the conundrum of wanting to spruce up the pad, yet simultaneously feeling reluctant to sink loads of money into something they’ll ultimately walk away from. They may want a fresh new look but aren’t about to redo the cabinetry or remodel the porch.

If you find yourself similarly torn, here are 5 easy, inexpensive improvements that can help to rejuvenate your rental:

1) Lights: One of the brightest ideas I’ve ever had was to install dimmer switches in the dining room, living room, kitchen, and bedroom lights in my apartment. Good lighting is so important, yet not high on a landlord’s list. It’s easy, and you’ll notice an immediate upgrade in your quality of life. If you are feeling particularly ambitious, consider changing any ghastly fixtures that may have come with the rental. Again, lighting is key!

2) Doors: One simple way to dress up your house is to replace any old, tired looking doors. If that’s forbidden by the management, consider wallpapering a door or two. A little wallpaper can go a long way.

3) Tile: The experts at Apartment Therapy suggest using wall tiles, “like the FASTBO from IKEA” to cover unsightly kitchen tile. It can be applied for temporary wall use with sticky-backed velcro.

4) Hardware: Knobs, tie-back, handles: Go through your rental and determine if a hardware makeover is in order. Anthropologie has a great selection of charming accoutrements that may make you love your home anew.

5) Everywhere: It’s all in the details! You can a dd a little moulding to your walls or ceiling to give a bland rental some character. Millwork is a bit of a time investment, but it can be done. Watch this video for an idea of what you may be getting yourself into.

Of course, make sure to check your lease and clear any major changes with the landlord. You don’t want to lose that security deposit!

Americans Think This Purchase Is the Best Investment – Why They're Wrong

by  Melinda Carstensen

As a native Floridian who lives and works in New York City, the argument of renting vs. buying often pops up in conversation with friends from home. Blind to the allure of the city that all New Yorkers know, they just don’t get why I tolerate throwing away more than one-quarter of my cash flow on housing, the long-held standard ratio for income: rent.

While you've certainly got to be rolling in dough to own property in the Big Apple, I have never had a desire to own a home, a car or land. Those things have never been defining elements in my “American Dream.” For me, renting is a no-brainer.

Unsurprisingly, it appears that the majority of the U.S. disagrees. In  a Gallup poll released last week, about 30 percent of 1,026 American adults surveyed said they felt real estate was the best long-term investment. Gallup chose participants randomly and questioned them on the telephone. The margin of sampling error was  ±4 percentage points at the 95 percent confidence level, the report notes.

Business Insider’s Joe Weisenthal notes that multiple experts felt Americans’ qualms with homeownership would be forever tarnished in light of the housing crash. But nope, compared with last year, five percent more of Americans surveyed in the poll this year said real estate is a better investment than gold, stocks/mutual funds, savings accounts, and bonds.

Mathematically, buying makes more sense than renting, so I’ll give my friends that. Zillow’s Krishna Rao calls out the stark differences in affordability trends for rent and purchasing a home in a 2014 report. The report shows the percentage of income spent on rent has reached an average of 30 percent in the U.S., while the average spent on a mortgage has steadily fallen to about 17 percent.

“Nationally, the share of income that households must devote to rent has increased steadily and consistently since 2000, as the increase in rent has dramatically outpaced the growth in income over the same period,” Rao said in the report.

The Daily Beast even wrote this week about  an impending rent bubble burst.

However, when considering inflation, as an investment real estate doesn’t pull much weight. According to the  U.S. Census Bureau Survey of Construction, single-family real estate generated a .74 percent annual return over the last 30 years.

"And this doesn’t even account for many of the miscellaneous costs involved in real estate,” writes Cullen Roche, of  Pragmatic Capitalism.

“A house is basically a depreciating asset that comes with an appreciating piece of land. But that depreciating asset is extremely expensive over its lifetime. When you calculate the total costs that go into maintaining this asset the returns are very likely to be negative over long periods of time. So that 0.74 percent figure is probably higher than you should really expect.”

The homeownership rate for U.S. homes was 65.2 percent in the fourth quarter of 2013, or 0.2 percentage points lower than the fourth quarter of 2012, according to a  2014 U.S. Census Bureau report.

To rank U.S. housing markets in value, Fitch Ratings looked at its quarterly Sustainable Home Price model, which weighs pricing against factors like income growth, unemployment rates, population growth, inventory and the like.  A June 2013 Forbes article explained the system: "If home prices grow faster than the rest of the local economy, then housing is becoming overvalued; if homes are trading for prices lower than the local economy can sustain, then housing is undervalued.”

In the Patch communities around Atlanta, Detroit, Chicago, Las Vegas and Orlando, Fitch Ratings found properties were undervalued, while it found that near Washington D.C. and major cities in California like San Diego, San Jose, Los Angeles and San Francisco, properties were overvalued.

Those figures are interesting, but considering how fickle the housing market is (see: the housing crash), how useful is it to even analyze these values? Sure,  rent may be soaring across the U.S., but at least we renters know what we're getting for our money. I’ve never been one to enjoy gambling.

3 Reasons Fall is the Best Season to Buy or Sell a Home

Spring has long been considered the best time of year for real estate, but home purchases also pick up during fall, according to an ERA Real Estate Survey. The survey found that 40 percent of brokers and sales professionals attribute a new focus on real estate to the end of the vacation season. They also asked their brokers why:

1. Home for the Holidays: “As vacations wind down after Labor Day and people become more focused, the desire to be in a new home for the holidays is a historically strong driver of fall home sales,” said Charlie Young, president and CEO of ERA Real Estate.

2. Back-to-School Mentality: As Labor Day passes and kids go back to school, home buyers get down to business. The official end of summer also means the end of vacation season for many people, which means they’re refreshed and ready to refocus.

3. Tax Benefits: 10 percent of survey respondents found that their buyers want to have access to homeowner’s tax benefits before the new year. Homeowners can claim mortgage interest, residential energy efficiency and casualty losses, among other pay-backs.
Take advantage of the season by checking out Zillow’s listings and Open Houses near you.

Confidence is Key: Home Ownership Seems More Attainable

Country Financial, an insurance company from Bloomington, IL, found that 89 percent of Americans still think buying a home is essential to the American dream.

According to their COUNTRY Financial Security Index survey, more people believe home ownership is achievable. Only 41 percent of survey responders saw home ownership as attainable in 2013, while 64 percent now believe they could own a home.

Still, some people see more financial barriers than possibilities for home ownership. Fourteen percent of responders said their credit score was too low; 13 percent said they lacked the money for a down payment; and 12 percent were impeded by the price of homes in their area.

“Younger Americans are more likely to reject the idea of home ownership. Yet, the financial challenges of buying a home can affect those of any age,” said Joe Buhrmann, manager of financial security support at Country Financial.

However, Zillow found that 82 percent of Millennials felt confident that they’d be able to afford to buy a home someday.

7 Ways to Cut Home Heating Costs

October means the beginning of home heating season. Last season, which ended in March 2014, the U.S. saw an average cost of $4.18 per gallon for home heating fuel. Heating your home takes more energy than water heating, cooling, lighting or other appliances, so that $4.18 can really add up over the winter.

Here’s how to cut back on your heating costs – without having to put on an extra sweater.

1. Have the system inspected by a professional before (or at the beginning of) the heating season. A poorly maintained system loses heat.
2. Clean or replace the furnace filter, following the instructions on the manual.
3. Move furniture and curtains away from heat registers and air ducts.
4. Place a sheet of aluminum foil behind a radiator, especially if it’s against an outside wall. The foil will reflect heat back into the room, so you don’t lose it.
5. Use an extra blanket when sleeping.
6. Close your attic, basement, and garage doors to keep drafts out. Make sure exterior doors are closed as well.
7. Seal cracks in walls and floors, and weather strip your windows and doors.

Start Planning Now, San Carlos: USPS Releases 2014 Holiday Shipping Deadlines

With Christmas just two months away, the U.S. Postal Service is offering holiday shipping tips to help customers ship the 15.5 billion cards, letters and packages expected to be delivered in time for Christmas.

“The key to holiday shipping is being prepared and starting early,” advised San Diego District Manager Jim Olson. “This is our season and we are ready to deliver. The Postal Service’s knowledgeable employees are here to help customers ensure their holiday packages are packed, tracked and delivered with ease.”
In addition to offering 2014 holiday stamps, Post Offices nationwide will offer festive Priority Mail boxes and other packing items to provide customers with added convenience, including bubble mailers, mailing cartons, bubble wrap and packaging tape.

No time for a trip to the Post Office? No problem. By using Click-N-Ship on usps.com, on-the-go customers can ship their packages when it’s most convenient for them. As an added bonus, customers can receive savings off retail prices when they print their own labels with postage online.
Here are more holiday shipping tips to help customers prepare their holiday shipments for an on-time delivery:

• Enjoy convenience: Order free Priority Mail shipping supplies on usps.com and have them delivered to your door, free of charge.

• Be informed: Check usps.com to verify that your items can be shipped.

• Pack smart: Pick a strong and sturdy box, cushion contents with packing peanuts, newspaper or bubble wrap and tape it closed with strong packing tape.

• Save a trip: Visit usps.com to pay for postage and request free Package Pickup at your door.

• Track it: Sign up for text and email alerts through my.usps.com to track the delivery status of your packages.
• Gift options: Pick up a gift card from your local Post Office; they make great gifts for family and friends.

“We know how stressful the holiday season can be,” said Olson. “With a little help from the Postal Service, you can prepare your holiday shipments with ease so you can get back to enjoying this special time of year.”

USPS 2014 Christmas Shipping Deadlines:

To ensure that holiday mail and packages are delivered in time for Christmas, the Postal Service recommends the following mailing and shipping deadlines:

• Dec. 2 – First-Class Mail International
• Dec. 2 – Priority Mail International
• Dec. 10 – Priority Mail Express International
• Dec. 15 – Standard Post
• Dec. 17 – Global Express Guaranteed
• Dec. 20 – First-Class Mail
• Dec. 20 – Priority Mail
• Dec. 23 – Priority Mail Express*

The dates listed above are the earliest deadlines for international and military mail.
*Priority Mail Express postage refund eligibility is adjusted for shipments mailed Dec. 22–25.
For more shipping tips, visit usps.com.