Where should I stash my down payment savings?

Saving for a down payment can be a big undertaking and a major hurdle to buying a home. That's why you want to be sure to protect your hard-earned savings. Powered by SmartAsset.com SmartAsset.com With a plan of homeownership less than a year away, experts recommend keeping the funds in a savings account. The idea is to keep the money easily-accessible and safe. "While other investments may be able to provide a higher return in the long run, because of their short-term time horizon, it's most important that they ensure they have the money they need to buy the house when they want it," said Roger Ma, a certified financial planner and licensed real estate agent in New York City. While savers have been dogged by low interest rates on savings accounts, online savings accounts usually offer higher yield. For instance, Ally Bank is currently offering a 1.05% annual percentage yield (APY) on its online savings accounts, compared to an average .06% savings rate at big banks. Related: Here's how long it takes to save for a down payment Experts also suggested considering putting the money in a money market account or a certificate of deposit (more commonly known as a CD). CDs tend to pay higher interest than savings accounts, but your money is locked in for a certain time period. "A CD might be restrictive," said Eric Roberge, a CFP and founder of the firm Beyond Your Hammock. "Make sure the term is aligned with when you will need the money. Your first priority should be liquidity and the ability to access the money without fees." broke no more Send us your money questions for a chance to be featured in Broke no more! Ask us here. With any of these accounts, it's important to verify the bank is FDIC insured. If your plan is to buy a home in roughly three to five years, you have a little more wiggle room -- but not much. Longer-term CDs can have higher higher yields, and depending on your risk tolerance it could make sense to invest some of the funds. "If you wanted a little risk, you can consider investing 30-40% of the funds in equities and the remaining balance would be 60-70% in bonds," said Patrick Stark, director of financial planning for RS Crum. "But be careful with the bonds, make sure they are high-quality investment bonds." Once the time horizon becomes five years or longer until homeownership, wanna-be buyers have even more savings options. If buyers had a lump sum of money saved up already, Roberge might advise them to put it in the stock market in a conservative portfolio of either a 50-50 split between stocks and bonds or one that favors bonds. At the same time, buyers would continue to save more money in a savings account. "The idea is that in five years they will probably have enough in the savings account to just use that money for the down payment, and then the money in the stock market they can leave it in there," he said. While lenders like to see a 20% down payment, it's not always a requirement. There are other low-down-payment options, including a government-backed FHA loan that requires as little as 3.5% down. However, putting less than 20% down means you'll pay more every month since you'll be borrowing more money and likely be charged private mortgage insurance fees on top of your mortgage payments. Lastly, experts said signing a down payment check shouldn't clear out your bank account. Stark recommended keeping three to six months of living expenses in an emergency fund to cover any unexpected expenses. "No matter how well you plan things, there are always unexpected expenses when you own a home," he said. Send us your money questions for a chance to be featured in Broke no more! Ask us here. CNNMoney (New York) First published June 15, 2017: 9:59 AM ET

1031 Exchanges Under Threat?

Daily Real Estate News | Thursday, June 15, 2017 A major tax advantage for the commercial real estate industry may be one of the casualties in a sweeping federal tax reform expected this year, The Wall Street Journal reports. Read more: Lawmakers Need REALTORS® on Tax Reform We Could Lose 1031s. Here’s Why That Matters Some lawmakers are eyeing the 1031 exchange provision to get the tax-rate cut they seek. The provision allows sellers of real estate and other assets to defer capital gains taxes by reinvesting any profit in “like-kind” properties. The 1031 exchange applies to a range of assets, but real estate accounts for the largest portion of exchanges at 36 percent, according to Ernst & Young LLP data. The Joint Committee on Taxation estimated in 2014 that repealing like-kind exchanges could raise $40.6 billion in extra tax revenue over one decade. Several lawmakers consider the provision to be loophole that has limited economic benefit and, therefore, some are looking to put it on the chopping block in order to pay for lower tax rates. For example, Mark Mazur, the director of the Tax Policy Center, says 1031 exchanges “really have become just a way to defer tax liability.” However, real estate executives believe that any move to get rid of 1031 exchanges would be devastating to the economy and the industry. A recent report by Green Street Advisors says that like-kind exchanges are used in 10 percent to 20 percent of commercial real estate transactions. Any threat to 1031 exchanges “would cause a lot of transactions not to occur,” says Jeffrey DeBoer, chief executive of the Real Estate Roundtable. He adds that investors who purchase real estate through 1031 exchanges are more likely to invest in those properties than those who pay cash. “Therefore, you have capital you can now put into the newly acquired property.” The House Ways and Means Committee has yet to release a bill on the matter, although The Wall Street Journal reports that the chatter among lawmakers on such legislation is growing. Maintaining 1031 exchanges is a top priority for the National Association of REALTORS®. Earlier this year, NAR President William E. Brown said the association will meet any proposals to curb 1031 exchanges with strong resistance because the provision is a vital vehicle in driving commercial real estate development. “If that goes away, commercial real estate will be decimated,” Brown said earlier this year. “That’s something we’re being very clear about with Congress. This provision is to commercial real estate what [the mortgage interest deduction] is for residential real estate. We will fall on our sword for this.” Source: “1031 Exchanges, a Cherished Real Estate Tax Break, Faces Extinction,” The Wall Street Journal (June 14, 2017) [Log-in required.]

Homeowners and Appraisers Disagree on Home Values

Daily Real Estate News | Thursday, June 15, 2017 Homeowners feel like their homes are worth more than what appraisers say they are, and the gap between the two estimated values has grown for the sixth consecutive month, according to Quicken Loans’ National Home Price Perception Index. Read more: Owners, Appraisers Aren't Seeing Eye-to-Eye Appraised values were, on average, 1.93 percent lower than what homeowners expected, according to the index. Appraisals are drifting farther from owner estimates, even though their assessments continue to rise higher each month, the index shows. “It’s important for consumers to see the HPPI and not only think about the difference in perceptions, but the different perceptions across the country,” says Bill Banfield, Quicken Loans executive vice president of capital markets. “Home values, and home value changes, vary widely depending on the city you’re in. Homeowners, and those looking to buy a home, should keep a close eye on their local market to better understand home values in their area.” For example, in Denver and Dallas appraisals are nearly 3 percent higher than what homeowners expect. On the other hand, in Philadelphia and Baltimore appraised values are more than 3 percent lower than what owners estimate. Source: Quicken Loans

39 million households are paying more for housing than they can afford

Rising housing costs are putting a major squeeze on Americans. Nearly 39 million households can't afford their housing, according to the annual State of the Nation's Housing Report from Harvard's Joint Center for Housing Studies. Experts generally advise budgeting about 30% of monthly income for rent or mortgage costs. Powered by SmartAsset.com SmartAsset.com But millions of Americans are far exceeding that guideline. One-third of households in 2015 were "cost burdened," meaning they spend 30% or more of their incomes to cover housing costs. Of that group, nearly 19 million are paying more than 50% of their income to cover their housing needs. Related: Best cities for first-time homebuyers When so much of your paycheck is going toward keeping a roof over your head, it forces sacrifices in other budget areas, including food, health care and transportation. "It depends on household type: Families with kids ... they cut back pretty severely on food," said Jennifer Molinsky, a senior research associate at the center. "Older adults cut back a lot on health care." In 2015, there were almost 25 million children living in cost-burdened households. Low-income families with children that are paying more than half their incomes to cover housing cut back the most on food, according to the report. They spend less than $300 a month, compared to households with no cost burdens, which spend about $500. Related: Thinking of buying a house? Here's where to start "To make ends meet, these families often do not buy enough food for their households or they substitute cheaper but less nutritious foods, either of which can jeopardize their children's health and development," the report stated. Low-income households are also more likely to compromise on the quality of housing, including living in places with structural issues. Low housing inventory levels have helped push up home prices as many markets struggle with a supply and demand imbalance. Bidding wars are common in some places. Home prices fell off a cliff after the 2007 housing crash, but they have been rising and last year surpassed their pre-recession peak. That price appreciation has scared away many wanna-be buyers, who have been forced to rent. Demand for rental units has increased and pushed up prices. As a result, the report found, more than 11 million renter households pay more than half their income on housing -- a 3.7 million increase from 2001. Miami has the highest percentage of cost-burdened renters, at nearly 62%, followed by Los Angeles and Deltona-Daytona Beach, Florida at 57%. CNNMoney (New York) First published June 16, 2017: 1:28 PM ET

Wealthy Buyers Turn to Bank-Owned Homes

Daily Real Estate News | Friday, June 16, 2017 Wealthy home buyers are getting around the pervasive inventory crunch by snapping up bank-owned properties and making high-end renovations. Homes listed as REOs “used to be a huge anchor on the property, but now it propels it,” Danny Hertzberg, an agent with the Jills Group at Coldwell Banker in Miami Beach, Fla., told The Wall Street Journal. Hertzberg says luxury bank-owned properties in his market are discounted about 10 percent, much less than the 20 percent to 30 percent discount that was typical a few years ago. Hertzberg recently sold a 10,383-square-foot waterfront REO property with six bedrooms for $8.7 million, which was 6 percent below the list price. The home had been appraised for about $13 million. But the market for bank-owned homes is also getting tighter. In April, the number of properties nationwide in some stage of foreclosure was 734,996—down 66 percent from a peak of 2.2 million in 2010, according to data from ATTOM Data Solutions. In 2016, million-dollar homes made up 2.06 percent of all REO sales, the largest share in three years, says Daren Blomquist, senior vice president at ATTOM Data Solutions. Research firm Clear Capital analyzed 20 metro areas with the highest number of distressed properties listed for more than $750,000 and found the median sales price to be $932,500. That is 3.4 percent lower than the sales price of non-distressed homes in those markets. The largest discounts for luxury distressed properties were in Dallas, where they sold for a median of 13 percent below asking price. On the flip side, in San Jose, Calif., such properties sold for just 0.5 percent below the list price. Source: “Bank-Owned Homes Get a Fresh Look From Wealthy Buyers,” The Wall Street Journal (June 14, 2017)

Study: The income needed to buy a home in the Bay Area has doubled in five years

Study: The income needed to buy a home in the Bay Area has doubled in five years By Amy Graff, SFGATE Updated 9:32 pm, Tuesday, August 15, 2017 A home for sale in San Francisco where the median-price on a single-family home is $1.45 million.Keep clicking for the 20 least affordable places to live in the U.S., according to Forbes. Photo: Michael Noble Jr., The Chronicle Photo: Michael Noble Jr., The Chronicle A home for sale in San Francisco where the median-price on a single-family home is $1.45 million. Keep clicking for the 20 least affordable places to live in the U.S., according to Forbes. The most arresting data point in a new report from the California Association of Realtors reveals that the income needed to buy a median-priced single-family home in the Bay Area has nearly doubled in five years. Back in 2012, a minimum annual income of $90,370 was needed to purchase a Bay Area home at the median price of $447,970. Now, a home buyer needs to be bringing in $179,390 to afford a mean-priced house at $895,000, the report looking at second-quarter 2017 home sales data concludes. This reality of skyrocketing real estate prices might seem rather unfair to those of us who haven't seen our salaries shoot through the roof. If you're trying to save for a home, it can be difficult to keep up with the rising prices unless you're receiving significant raises at work. Before you house-hunt, you've got to answer two questions. How much house can you afford, and how much house should you actually buy? And even if you do achieve that golden salary of $179,390, don't expect it to get you anything within San Francisco city limits where the median-priced home costs a staggering $1.45 million and requires a salary of $290,630. In fact, according to the report, only 12 percent of buyers in the city can actually afford a median-priced single-family home. The outlook is also rather grim in San Mateo (14 percent ), Marin (17 percent), Santa Clara (17 percent) and Alameda (19 percent) counties, all among the least affordable spots in the Bay Area. Solano County was the most affordable with 44 percent of buyers being able to purchase a median-priced home of $412,000 with a salary of $82,580. Here 44 percent of buyers can afford a home. Sonoma and Napa ranked the second most affordable with 25 percent of home buyers able to buy a home.

Why buying a condo at 29 was a financial windfall

Four years ago, Sam Saslow purchased a condo in Denver at the urging of his parents. It turned out to be one of the best financial decisions he's ever made. At first he was nervous about the $164,000 purchase. A bidding war broke out and he ended up going slightly over his budget. "I was worried I was buying at the top of the market," he said. Powered by SmartAsset.com Turns out, his worries were unfounded. He just sold the condo for $285,000, $121,000 more than he originally paid. That's a nearly 74% price increase in just four years. "I'm laughing now," he said of his nerves as a first-time buyer. "I couldn't possibly have timed the market better." The windfall allowed him to upgrade from the 685-square-foot condo to a 2,700-square-foot home with a garage and basement that he and his wife recently purchased for $402,500. The profit from the condo sale allowed them to put 20% down and still have money available to furnish the home and cover renovations. Related: First-time buyer? Here's what you need to know "I don't think I will ever see an investment as good as that. It set me up for pretty major wealth creation long term." The Denver housing market is one of the hottest in the country, with 8.4% year-over-year price increases in March, according to the latest S&P CoreLogic Case-Shiller Index. sam saslow denver homebuyer Sam and his wife Jennifer were able to purchase a bigger home in Denver thanks to the condo sale. The rapid rise in home prices does give Saslow some hesitation with his new purchase. "We all saw what happened to the housing market and I lived in Florida and saw a lot of people get caught with their hand in the cookie jar." But he said the lack of buildable space and the steady inflow of new residents makes him feel the city would be "insulated" from a potential slowdown. Related: How much house can you afford? Saslow was 29 when he purchased the one-bedroom, one-bathroom condo in Congress Park. He put down 3%, and the purchase cost him $7,000 out of pocket. To outbid the other buyers, he had to raise his offer twice. "Rents were rising so quickly and I was still pay way less on the mortgage than the people renting the same units in my building." As a homeowner, Saslow watched as other units in his building sold at higher price points and saw his tax assessment steadily rise. When he decided it was time to put the condo on the market, he originally thought about pricing it in the $250,000-$255,000 range. But his agent wanted to go higher at $275,000. "I thought that was crazy," he said. "But we've worked together and I trusted her ... we went for the top of the market." They got four offers on the condo. The first offer came in within 48 hours of the listing hitting the market, and they didn't have to hold an open house. They got three offers on the condo that they considered. Every bid offered a 20% down payment and a personalized letter. The winning bid offered $285,000 with a guarantee of $280,000 if the condo didn't appraise. "There is no way I could have afforded that house if I hadn't gained equity and that condo hadn't appreciated that way."

How to Choose a Property Manager for Your Rental Home

Happy owners, happy tenants — it all starts with the right property manager. You would never turn your home over to a stranger, so choosing a property manager shouldn’t be any different — finding one you trust is vital. “You are entrusting probably one of the biggest investments you’ll make into the hands of someone else, so you want to make sure you feel confident that they’ll handle things the way you want them to,” says Grace Langham, CEO of Nest DC, an award-winning boutique property management firm in Washington, D.C. Dependability and trustworthiness are two key points all homeowners should keep in mind when assigning their home or condo to the loving care of a third party. But before handing over the keys, consider these six other factors to help you find the right property manager. Communication With so many players involved — owner, tenant, and manager — communication is critical. Some owners prefer lots of updates, while others want few. Regardless of your desired amount of communication, the quality of it is crucial. A property manager’s availability and response rate get to the very heart of their job. In your initial contact, look for clues about their speed, courtesy, and availability. “Once signed on, a good manager will do what it takes to keep you in the loop, whether you prefer emails, phone calls, or texts,” Langham says. Residents When it comes to renters, a property manager’s duty is twofold: Find quality residents, and ensure they are treated fairly. Happy renters often stay in a residence longer, and are more reasonable when things break. That said, finding good residents requires legwork. “Bad tenants can be one of the most costly things for an owner,” says Nathan Miller, president and founder of Rentec Direct, a property management software company. Evictions are expensive, especially when owners are forced to forgo several months’ rent, and damage can be costly. That’s why running a credit check and performing a background screening for criminal and eviction reports are musts, according to Miller. Fees Property management fees tend to be fairly standard, Miller says — usually between seven to 15 percent of a month’s rent, but most often around 10 percent. Sometimes, a condo may cost slightly less than a stand-alone house because there’s less home and yard to maintain. The owner is also on the hook for maintenance costs, and often pays a finder or leasing fee — up to a full month’s rent — when a new resident moves in Ask if you will still be charged, even if the unit stands empty. Some property managers also charge a lease renewal fee and sometimes tack on a project management fee when dealing with excessive bureaucracy or paperwork, such as insurance claims. Verify the fee structure and services provided before signing any contract. House visits and other specs When it comes to inspections, a property manager should be proactive. That means taking a peek at your property no less than once (and maybe even twice) a year to ensure that everything is in good shape. Such time-consuming tasks mean it’s important for a property manager to maintain a reasonable caseload. Miller says his ideal property manager oversees between 500 to 1,000 properties. “Once they get above that size and they’re managing many, many thousands of units, you’ll lose the personal touch,” he says. Finally, you want to find a property manager that specializes in a type of unit: single-family homes, apartment complexes, or high-end houses, for example. Earning potential To maximize a home’s earning potential, property managers should know how to deftly market a unit so that it doesn’t stay empty long. This includes everything from posting it on well-known rental websites to taking quality photos that make it pop. Miller says the property manager should also ensure a home is leased at market rent, and analyze that rate semiannually. You want to know you’re not being shorted income by charging too little. Technology Finally, the proper software can indicate that a management firm has what it takes to succeed. “We’re lucky to be a company that’s eight years old,” Langham says. “We started with all this technology that’s really friendly to the millennial generation, which is a lot of the renter base.” Collecting rent and submitting maintenance requests via an online interface makes interactions between all parties a breeze, meaning owners and tenants can move on with their busy lives. After all, at the end of the day, that’s what having a property manager is all about.

Roadshow: Cut apartment-dwellers some slack — they need to park, too

Roadshow: Cut apartment-dwellers some slack — they need to park, too By GARY RICHARDS | grichards@bayareanewsgroup.com | Bay Area News Group PUBLISHED: August 30, 2016 at 6:04 am | UPDATED: September 5, 2016 at 7:22 pm Q I realize that much of your readership is in the “get off my lawn” crowd, but why even bother to publish letters like that from Ken Davis about parking problems for homeowners who live near apartment complexes? Ken’s complaints seem to be that many current apartment residents were not fortunate enough to buy homes in the area 30 years ago, that apartment-dwellers have the audacity to own cars without owning a garage to park them in and that no one seems to be in a hurry to tow legally parked cars in order to give Ken a less-obstructed view out of his living room window. Where’s the logic here? Do homeowners think that people park their cars in an inconvenient place to purposefully annoy them? Where else are people supposed to park if they don’t have a private space? ADVERTISING Please understand that the forces that have brought thousands of apartment-dwellers into the neighborhood are the same ones that have sent property values skyrocketing over the past 30 years. If you aren’t willing to deal with the reality of an increasingly crowded area, there are lots of people who would be willing to purchase your house and the guaranteed parking spots that come with it. Bryce Warwick San Jose A That might beat paying $3,000 to $4,000 a month for rent — forcing many to cram five, six or seven people in a two-bedroom apartment — and the desperate searches for a place to park blocks away. There will be a couple of meetings later this month to consider a parking-permit program in West San Jose. They haven’t been scheduled yet; check San Jose City Councilman Chappie Jones’ website, sjdistrict1.com, for updates. Q Wait a minute, Mr. Roadshow. Why aren’t these apartment projects being forced to provide adequate parking for its residents? That is the issue! John Francis San Jose A A difficult issue, and perhaps an unsolvable one. Most apartment complexes are required to have one to 1.5 parking spaces per unit. To require more would eat up more pavement or lead to parking garages, which I am certain would not sit well with nearby homeowners. Q I’ve not visited Santa Cruz in maybe 20 years, but I used to go fairly often. Now? I’m not sure it’s worth the effort. Seems like every weekend traffic is backed up on Highway 17 to Camden Avenue or even to Hamilton Avenue, along with all side streets. If it’s noon and you’re stuck at 17 and Camden, what time can you reasonably expect to be in Santa Cruz? Aside from the obvious recommendation to get on the road early, might it be quicker to go south on Highway 101 and come up through Watsonville? Paul Rekieta San Jose A At noon, expect it to take as long as 90 minutes to get to Santa Cruz from San Jose on Highway 17. Your best bet is to be on south 17 before 9 a.m. or after 2 p.m. As for 101, it’s a longer trek but may be an easier one. Try using Waze on this route. Q I’m a former Midwesterner trying to adjust to driving in California. Is it OK to turn left on a red light? I see folks doing this so often that I’m wondering if it’s legal here. Scott Fosdick A It’s legal as long as it’s from a one-way street to another one-way street. You must stop at the red light first. Follow Gary Richards at Facebook.com/mr.roadshow or contact him at mrroadshow@bayareanewsgroup.com or 408-920-5335.