2016 end of the year real estate review - By Matt Trudel

This was a very promising year for real estate. It was a year of growth as the number of houses sold this year compared to last year is almost eight percent higher. The median sale price for homes in Maine also rose 5 to 7 percent, and in Cumberland County for June, July, and August the median price was up almost 10 percent over the same period in 2015. New construction also took off this year and is showing no signs of slowing down over the winter.

Buyer's confidence in the real estate market's continued growth coming out of 2015 played a big part in the overall success that the market had throughout the year. Low interest rates and slightly lighter restrictions from lenders also played a large role. Buyer's had more purchasing power, especially with programs like the Maine State Housing First Time Homebuyer Program with interest rates at 2.9 percent at times.

Right now inventory is low for single family homes and the pool of buyers out there is still growing. If you pulled your house off the market because you think not many buyers want to purchase property in the winter, one could argue you are mistaken. People who are not serious about buying stop looking, but the buyers who are serious and need to purchase a home are out there no matter how deep the snow gets. So you may want to reconsider if you were one of the many who took your house off the market.

2017 looks to be another promising year of market growth and rise in pricing. We certainly have not gained back what we lost in 2007 and 2008, but we have gained some and will continue to do so over the upcoming years. A slight rise in interest rate will affect some buyer's purchasing power, but it won't slow the rise in home values very much. The demand is there and lenders will likely expand the debt to income ratio slightly with buyers who have exceptionally good credit.

Thinking of buying a home but not sure if you should wait till spring to start looking? Now is the time to get in the game as prices will continue to rise throughout the next few years. There is less competition from other buyers right now, so you hopefully won't get into a bidding war. Also, sellers who have their homes on the market are serious about selling their homes and are generally open to reasonable negotiations. This means that if you make a reasonable offer you will likely have a deal.

Need another reason to buy now and not later, how about the likelihood of another interest rate hike. Many strategists feel that it is inevitable that another rate increase by the Federal Reserve is going to happen, and more than likely to happen sooner than later. The tax benefits of home ownership are another reason to get in the game now. Most all home improvements are tax deductible and the interest is also a great deduction. One more great reason to buy is that it is probably still cheaper than renting since rental rates have also climbed over the last few years.

Either way, buying or selling, I highly recommend you contact a local real estate professional that has experience and knowledge. Interview several Realtors, find one that you feel comfortable with and that listens to your needs and desires. They are going to be working both for you and with you, and looking out for your best interests. Having a professional with knowledge, experience, and creative negotiating skills will make the whole process smoother and get you to your goals quicker. 

Five Star Realty wishes you all a Happy and Safe New Year! ~ Article by Matthew Trudel, Owner Five Star Realty, Windham

Rising rates - what now? - Rick Yost

On December 14th the Federal Reserve, citing concerns about rising inflation, raised bank to bank lending rates by .25 percent. While these rates are for short term lending, they do have an impact on 30-year mortgage rates. Mortgage rates since the election have risen about .5 percent. Those 3.5 rates are now 4.1 rates and will most likely climb higher in the new year, albeit at a slower pace. The Federal Reserve expects inflation and inflation drives up interest rates -including mortgage rates.

For home buyers, higher mortgage rates means they can buy less home for the same amount of dollars they could a month ago. Lenders use debt to income (DTI) ratios to calculate how much home borrowers qualify for. Lenders get a DTI by dividing a borrower's housing debt and non- housing related debt by a borrower's total income. On mortgage loans in Maine up to $424,000, a borrowers DTI cannot exceed 43 percent of income as a general rule. Rising interest rates push a borrower's DTI higher, pushing the total home price that the borrower qualifies for lower. Rates have risen a little over a half of a percent since the election. This adds about one percent to a borrower's DTI. This is an amount that can be made up relatively easily by paying down credit cards and other consumer debt if the borrower has any. Borrowers that were prequalified by a comfortable margin in DTI aspect of financing should be fine. Borrowers that were bordering on a 43 percent DTI should renew their pre-approval to make sure they still qualify for the amount they want to borrow.

For home sellers, the lack of inventory and buyer demand should overcome the ill effects of rising interest rates for 2017. A roughly $60 per month payment increase on a $250,000 home with 20 percent down should not derail a purchase. The most likely to suffer will be entry level homes in the $100,000 to $150,000 rate. Those buyers tend to the most vulnerable to rate increases. They are typically first time home buyers with high DTI. Even a slight rate increase negatively impacts their purchasing ability. The least impacted will be the second home and leisure sellers. The buyers of these homes tend to be more affluent and less effected by rate increases. The same inflationary fears due to a growing economy that drive borrowing rates up tend to drive up the stock market, bond yields and savings rates. All good things for those capable of purchasing a second home.

For homeowners with a typical home equity lines (HELOC) tied to the prime rate,

now might be the time to re-fi into a single mortgage. At prime plus two percent, current typical HELOCs will be about 5.75 percent and keep rising as the Federal Reserve continues to raise rates thru 2017. Switching to a fixed rate mortgage today, will help the wallet later.

All that being said, it is time to look at current mortgage strategies. Whether you are buying, using home equity or considering selling. A changing market in interest rates means a new game plan may be appropriate. I advise meeting with a mortgage professional to create the best options possible. 

Wishing you a happy and prosperous new year!

Rick is a realtor, real estate author, and long time Windham resident. You can reach Rick with all your real estate questions and needs at rickyost63@gmail.com.

How to save enough for a down payment on a house

A home is the most costly thing many people will ever buy. The process of buying a home can be both exciting and nerve-wracking. One way to make the process of buying a home go more smoothly is to save enough money to put down a substantial down payment.

Saving for a down payment on a home is similar to saving for other items, only on a far grander scale. Many financial planners and real estate professionals recommend prospective home buyers put down no less than 20 percent of the total cost of the home they’re buying. Down payments short of 20 percent will require private mortgage insurance, or PMI. The cost of PMI depends on a host of variables, but is generally between 0.3 and 1.5 percent of the original loan amount. While plenty of homeowners pay PMI, buyers who can afford to put down 20 percent can save themselves a considerable amount of money by doing so.

Down payments on a home tend to be substantial, but the following are a few strategies prospective home buyers can employ to grow their savings with an eye toward making a down payment on their next home.

- Decide when you want to buy. The first step to buying a home begins when buyers save their first dollar for a down payment. Deciding when to buy can help buyers develop a saving strategy. If buyers decide they want to buy in five years away, they will have more time to build their savings. If buyers want to buy within a year, they will need to save more each month, and those whose existing savings fall far short of the 20 percent threshold may have to accept paying PMI.

 - Prequalify for a mortgage. Before buyers even look for their new homes, they should first sit down with a mortgage lender to determine how much a mortgage they will qualify for. Prequalifying for a mortgage can make the home buying process a lot easier, and it also can give first-time buyers an idea of how much they can spend. Once lenders prequalify prospective buyers, the buyers can then do the simple math to determine how much they will need to put down. For example, preapproval for a $300,000 loan means buyers will have to put down $60,000 to meet the 20 percent down payment threshold. In that example, buyers can put down less than $60,000, but they will then have to pay PMI. It’s important for buyers to understand that a down payment is not the only costs they will have to come up with when buying a home. Closing costs and other fees will also need to be paid by the buyers.

- Examine monthly expenses. Once buyers learn how much mortgage they will qualify for, they will then see how close they are to buying a home. But prospective buyers of all means can save more each month by examining their monthly expenses and looking for ways to save. Buyers can begin by looking over their recent spending habits and then seeing where they can spend less. Cutting back on luxuries and other unnecessary spending can help buyers get closer to buying their next home.

- Avoid risky investments. Sometimes it’s great to take risks when investing, but risk should be avoided when saving for a down payment on a home. Traditional vehicles like certificates of deposit, and savings accounts can ensure the money buyers are saving for their homes is protected and not subject to market fluctuations. 

Saving enough to make a down payment on a home can be accomplished if buyers stay disciplined with regard to saving and make sound financial decisions.

Is your real estate broker a REALTOR or licensee? By Katie Kinney

Have you asked yourself and your real estate broker this question? It may not seem like there is a difference, but there actually is a big difference regarding the service you will receive using a REALTOR® verse a licensee. The National Association of Realtors was formed in 1908 and forming the first ever business ethical code in 1913.  The main objectives of the NAR include service to the public and commitment to professionalism.

The Code of Ethics imposes social responsibility and a patriotic duty beyond a normal licensee. REALTOR® should maintain and strive to become and remain informed on issues effecting real estate and its professionals. REALTORS® also promote the best interest of those who utilize their services, urging exclusive representation, refrain from making unsolicited comments and uninfluenced by any personal motivation/gain.

The Code of Ethics must be reasonably and consistently construed with the law. It also restates certain fundamental legal principals such as contract, agency and fair housing.  A section of the Code is Pathways to Professionalism, which is a list of service criteria for the industry and professional courtesies to enhance REALTOR® professional conduct – Respect for the public, respect for property and respect for peers. Few examples of these are: Communicate with all parties in a timely fashion, be aware of cultural differences, be considerate of a seller’s property and real estate is a reputation business. What you do today may affect your reputation and business for years to come.

What does this mean to you as the client? Using a REALTOR® will provide you will the best possible service and experience during your home buying or selling process. REALTOR® are held to a higher standard and recognize the interests of the nation and its citizen’s requiring the highest and best use of the land and largest land ownership. REALTOR® promotes competency, fairness and high integrity. Above all else REALTORS® embody the Golden Rule; Treat others how you would like to be treated.  I think we can all agree that when using someone’s service we would like them to treat us how we would treat them!

As we have said before, please call a local REALTOR® for all your real estate needs no matter how big or small.  We are trained professionals here to make your life easier. It's best to surround yourself with the right team of professionals that can continuously give you the right advice for all your circumstances. 

Katie Kinney is an associate broker. She and the company represent buyers and sellers in the Greater Portland area. For all your real estate needs contact katie@landinghomesmaine.com.

Why should you use a realtor to buy a home? - By Carrie Colby

Buying a home for the first time can be overwhelming. While it may be tempting to avoid realtor fees and handle things on your own, having a professional by your side can make the process go more smoothly and provide valuable insight into what’s likely one of the biggest purchases of your life.

There are numerous reasons to use a Realtor to buy a home:

1. Access to every home that’s on the market via MLS (Multiple Listing Service) and all other sources, including ones that may not be listed publicly. Some agents have what are called “pocket“ listings that they know are going to come on the market soon or ones where the seller would be willing to sell but aren’t in a rush and don’t want the hassle of listing their home. Giving you the inside track to the deals before they event hit the market.

2. The ability to combine your Dream House Checklist with your price range. A good real estate agent is one who understands your wants and needs without going over your price range. An ethical agent won’t steer you to homes that are out of your reach.

3. Knowledge of recent comps (comparables) — what similar properties have sold recently and for how much, which will help you once you are ready to make an offer. Your Realtor has the ability and expertise to negotiate on your behalf,

4. You should hire a Realtor that is knowledgeable about the area you are looking in. For instance they should be knowledgeable about the schools, neighborhood and zoning issues.

5. Your Realtor should also have a good working relationship with the other area real estate agents. There have been cases where I have contacted other agents about possible listings they might have coming on the market that might fit the needs of my buyers. Also when it comes to the negotiating it is good for your Realtor to be on good terms with the listing agent.

6. Your Realtor should have the expertise to negotiate and close the deal. They should have a list of referrals for inspectors, mortgage brokers and even tradesman for repairs and renovations you might want to do at a later date. Your Realtor must have the muscle to get a deal through the escrow or “under contract” period. They should have a good track record of getting buyers to the closing table and buying their dream home.

Buying a home is one of the most important decisions of your life. Don’t leave it up to someone who is not an expert in their field.

Carrie Colby is the broker/owner of Premier Properties in Raymond.