Sell or Stay Put? 11 Crucial Considerations for Today's Market, According to Real Estate Experts

With the volatility in the housing market over the last few years, many sellers are wondering if now is the right time to sell their house. The rise of home prices has made the market favorable for sellers, but those looking to move for more space or other reasons are struggling to find homes within their budget. Between high interest rates and low inventory keeping prices high, a new home purchase could leave homeowners stuck with a new mortgage payment that’s unsustainable.

Here are 10 key considerations homeowners need to take into account when debating if they should sell or stay put in today’s real estate market.

1. It’s still a seller’s market.

There’s no doubt the current market is working in favor of sellers, making it a much easier decision for those considering downsizing. Rachel Moussa, a Realtor based in Flower Mound, Texas, says low inventory combined with slightly lower interest rates compared to late 2023 has increased buyer demand again, making it a great time to be a seller.

If you have no strong reason to sell right away, Moussa says sellers willing to take a risk may want to wait to list until the summer in case buyer demand skyrockets. “If interest rates decrease as expected, sellers will likely net more in the summer than early spring,” Moussa says.

2. High interest rates mean less competition for buyers.

Interest rates have fallen slightly since fall 2023, but they still remain high enough to discourage many buyers. However, Moussa says these high interest rates are making the current market much easier for buyers to secure the home they want with protective measures like appraisals and inspections since there’s less demand.

If rates fall later in 2024, she says, buyers will see a more competitive market and need to forgo protective measures and compete with higher bids. “If you buy now, you can largely avoid that, and then refinance if and when rates go down.”

3. Don’t buy if you can’t find what you’re looking for.

Buyers may have less competition now, but Moussa discourages buyers from buying now for the sake of lower prices if they’re unable to find the home they’re looking for. Less inventory means fewer options with the features buyers want, so it may be prudent to wait until inventory levels are higher so buyers can find the right home for their family.

4. You can invest in smart home improvements.

If you’re looking to sell your home soon, a few savvy home improvements can drive up the value of your home, netting you a higher return. “The three best returns on investment are fresh neutral paint, flooring, and things to improve curb appeal,” Moussa says.

Michael Belfor, a mortgage banker in California, says homeowners can also increase their home’s value through kitchen and bathroom renovations, or even smaller upgrades like replacing appliances.

Before undergoing any renovation or home improvement project, Moussa recommends working with a local real estate agent to see the low-, mid-, and high-end of neighborhood sales so you don’t overdo it and spend more than what the project will increase in your home’s value.

5. Budget beyond a monthly payment.

Homeowners looking for a new home need to think and budget beyond the sale price and mortgage payments to know if they can afford to move, says Joe Thweatt, a Texas-based loan originator.

“Budget considerations should not only include the monthly payment, but also consider down payment, closing costs, moving costs, and maintenance costs moving forward,” Thweatt says. “Just because you can technically qualify for a loan does not necessarily always mean you should [take out the maximum amount].”

As a budget starting point, Thweatt says homeowners’ overall debt should be at 43 percent or less of their gross income. For example, a household with a monthly income of $10,000 should have no more than $4,300 in total debt payments, including a mortgage, credit cards, or any other debts.

6. You could rent out your home.

To build up funds for your next down payment, Moussa says renting out your current home can be an option. “If homeowners have a low interest rate, they may be surprised at the delta between what they can rent it for and their mortgage payment,” she says.

However, the key to this solution is moving into lower cost housing temporarily until enough savings are established, either by renting or downsizing into a smaller home. This solution is heavily dependent on the local rental market, and Moussa says homeowners should consult with a real estate agent to see if this is a viable financial option.

7. Consider finding a co-signer.

Homeowners with mid to low credit scores, like below 650, may think today’s high interest rates make securing a new mortgage loan impossible. However, if you need to move in the near future without time to work on improving your credit score, Belfor recommends finding a co-signer for the loan. “Having a co-signer with better credit or a joint application with a spouse or family member with stronger finances may help secure a better interest rate,” he says.

8. Establish at least 10 percent equity in your current home.

Homeowners also need to take a look at how much equity they have in their current home before jumping into a new purchase. Experts recommend sellers have at least 10 to 15 percent equity in order to have enough funds to pay off the loan and closing costs. Otherwise, sellers may take a financial loss by selling the home.

9. Be open to more affordable locations.

Homeowners wanting lower housing expenses or more space for the same cost should look into more affordable areas for a new home, says Moussa. “If you need more space, or you need less expense at a time when interest rates are higher than the rate you currently have, you have to ask yourself what you are willing to give up,” Moussa says.

Typically, home prices in suburbs decrease the further you go from the city. Or, buyers with more flexibility can look at homes in different states where the cost of living is more affordable.

10. Explore alternative financing options.

The best thing homeowners can do if they’re struggling to qualify for a good interest rate but need to move is to talk with their lender, Thweatt says. “Rate is certainly important, but it is not more important than the proper loan structure on the proper home. [Your loan adviser] knowing your real, short-, or long-term goals are for the property is paramount,” he says.

Some lenders even specialize in working with borrowers who may not qualify for traditional mortgages. Based on the homebuyer’s goals and financial needs, lenders may suggest different loan structures or alternative financing options, such as a lease-to-own agreement. There are also government loan programs, such as VA or FHA loans, that homebuyers can take advantage of if they meet the qualifications for a mortgage with better terms.

11. It’s best to be patient.

Above all, real estate experts say patience is key to navigate the current market. “I would always recommend giving yourself enough time when buying or selling a home,” Thweatt says. “When you are in too big of a hurry the tendency is to over pay or to settle on a property you do not fully love.”

Delaying the search for even 6 months can be beneficial, whether it’s to work on raising a credit score for a better loan or waiting to avoid a more competitive spring and summer market.

BY: Emily Benda Gaylord

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Are There Tax Advantages of Buying a Home?

 

If you’re thinking about becoming a homeowner any time soon, there are tax benefits to buying. In particular, tax deductions are one way to reduce your tax bill and income. Tax deductions are different from credits. Credits are money that gets taken off a tax bill. You can think of them somewhat like a coupon. A tax deduction reduces your adjusted gross income or AGI, reducing your tax liability.

The following are key tax benefits and things to know for homebuyers or possible homebuyers.

Mortgage Interest Deduction

Homeowners can deduct  interest on their home mortgage for the first $750,000 of mortgage debt. That limit is $375,000 if you’re married and filing separately. If you bought your home prior to December 16, 2017, an old limit of $1 million applies, and $500,000 if you’re married but filing separately.

In January, at the tax year’s end, a lender sends you Form 1098. This details the interest you paid over the previous year. You should include the interest you paid as part of the closing too.

Your lender includes interest for the partial initial month of your mortgage as part of your closing. You can locate this on your settlement sheet. If it’s not included on the 1098, add it to your total mortgage interest.

Mortgage Points Deduction

If you paid mortgage points to a lender as part of your loan or refinancing, then each point you buy will generally cost 1% of the total loan. They lower your interest rate by 0.25% each. If you paid, let’s say, $300,000 for your home, every point equals $3,000. If your interest rate is 4% in this example, the one point will lower your rate to 3.75% for the rest of your loan. You would get a deduction if you gave your lender money for your discount points.

If you refinanced your loan or took out a home equity line of credit, you are eligible for a deduction for points for your loan’s life.

Every time you’re making a payment on your mortgage, a smaller percentage of the points is built into your loan, and you can deduct that amount for every month you make payments. Again, your lender sends Form 1098, which details what you paid in interest on your mortgage and mortgage points.

You can claim the deduction based on that information on Schedule A of your Form 1040 or 1040-SR.

Private Mortgage Insurance (PMI)

If you have private mortgage insurance, which lenders usually charge to borrowers who put down less than 20% on a conventional loan, you may be able to deduct your payments. PMI usually costs anywhere from $30 to $70 monthly for every $100,000 borrowed. As with other types of mortgage insurance, PMI protects a lender if you don’t make your mortgage payments.

Whether or not you can deduct PMI payments can depend on when you bought your home and your income.

The IRS says that homeowners can treat what you pay for PMI as interest on a home mortgage. If your adjusted gross income is under $100,000 or $50,000 if married, filing separately, you’re eligible for the full deduction here.

If you’re above that threshold, the deduction is phased out. If your AGI is above $109,000 or $54,500 to file separately as a married person, you aren’t eligible to take the deduction.

State and Local Tax Deduction

The state and local tax deduction, also known as SALT, lets you deduct some taxes you pay to the state or local government, but you have to itemize on your federal return.

Under the Tax Cuts and Jobs Act, there was a cap on previously unlimited deductions. The cap is $10,000 per year in combined property taxes and either state income or sales taxes. The cap applies whether you’re single or married filing jointly. It goes down to $5,000 if you’re married and filing separately.

Home Sale Exclusion

If you profit after selling your home, you may not have to pay taxes. If you’ve owned and then lived in the home for at least two of the five years before the sale, you won’t pay taxes on the initial $250,000 of your profit. This profit is your capital gain. If you're married, filing jointly, that number goes up to $500,000.

However, at least one of the spouses has to meet an ownership requirement. Both spouses must meet a residency requirement, meaning they have lived in the home for two of the past five years.

Tax Credits

Finally, you could qualify for a mortgage credit if you received a mortgage credit certificate or MCC from a state or local government agency under a qualified mortgage credit certification program. You can also see if your state offers rebates, tax credits, or incentives for making improvements to your home to make it more energy efficient.

WRITTEN BY ASHLEY SUTPHIN

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Buying a Home? Don’t Forget to Ask These Questions!

 

Buying a home comes with a lot of responsibilities and liabilities. When you buy a home, you are stuck with it until after you sell it successfully. Because of this, you must take extra precaution and try to ask as many important questions as possible before you close a deal with the seller or broker. Below are the questions you shouldn’t forget to ask when buying a home.

Can You Have a Copy of the Home’s Sales History?

It is important to know about how many times the home has changed hands over the years as well as for much the home sold for each time. This will let you know about your prospective property’s value fluctuations which can help you sell the home and negotiate fairly in the future.

What is the Cost of Monthly and Annual Utility and Maintenance?

No one wants a home that racks up utility bills as though the owners are made of money. The water, power, and gas bills should be disclosed as well as annual maintenance cost for you to gauge if you can truly afford the home.

How Much is the Property Tax?

Although the home’s value is the primary determinant of the property tax, knowing how much the current owners are paying is a good way to determine future expenses on the property.

Does the House Have an Unusual History or Has It Been Involved in Any Crime?

Any history of suicide, murder, or death should be disclosed by the broker or seller. Unusual history like appearing in a magazine, commercial, or movie should be disclosed as well. A home appearing in public media may mean a future privacy breach and a negative history can make a home difficult to sell in the future.

When was the Roof Last Fixed or Replaced?

A roof replacement can cost upwards of $10,000. The future homeowner should know when a huge expense like this may be due.

Does the Area Around the Property Come with Parking Restrictions?

Whether or not the home has a garage, it is possible that future visitors may need to park outside of the property. When this happens, the last thing you want is for your guests’ vehicles to get towed away.

Are There On-Going Warranties for the Kitchen Appliances, Garage Door, the HVAC System, and More?

Replacing any of the above can easily cost thousands of dollars. Having the warranties can save a lot of money down the road.

Are There Renovations or Additions Made by Past and Current Owners?

Upgrades can cost a lot. It is best to know which contractors worked in the house before and what they did more so if planning future additions or renovations.

Are There Any Issues with Sewage or Broken Pipes?

Although you can hire a home inspector, it is best to know these issues beforehand more so that the cost of repairs for issues like this can be equivalent to a sizable amount.

Are There Past or Current Pest Infestations?

Getting rid of rodent or insect infestation can incur a lot of time and money. Something like this needs to be disclosed rather than find out when it is too late.

WRITTEN BY MICHAEL PORTER

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Why Are People Buying Houses with Their Friends?

When we think about buying a home, we think about the traditional situations. You might buy a starter home on your own, or you could get married or start a family and then buy a home.

We tend to view homeownership as something we do alone or with a significant other, but there’s a new trend becoming increasingly popular, which is buying a house with your friends.

Millennials are the primary demographic starting mortgages with friends, and they’re often putting off getting married or having kids.

Co-buying houses with friends isn’t necessarily a positive reflection of the state of the housing market, though. Buying a house is increasingly unaffordable, even when it would have been much more attainable a few decades ago.

Why Co-Buying?

There is undoubtedly a housing crisis going on right now, and there is a significant shortage of inventory which isn’t showing signs of getting resolved any time soon. When people try to buy a home, they’re often priced out or beat out in bidding wars.

Millennials creatively solve the economic hurdles that might otherwise block them from homeownership with co-buying.

According to the National Association of Realtors (NAR), the number of buyers purchasing as unmarried couples has been rising throughout the pandemic. During the pandemic, a lot of people re-evaluated their living situation. Renters wanted more space, so they thought rather than getting a roommate and continuing to rent, why not buy.

Even before the pandemic, millennial homebuyers were in a tough situation. Saving for a down payment is difficult, particularly with student loan debt and rising living costs. Then, as soon as millennials got to that peak point where they’d normally be buying a home in 2020, a boom began that led to a historic inventory crisis.

Home prices have reached record highs, and starter homes were the biggest victim in the shortage of properties.

Alternatives to the Traditional Lifestyle

The millennial generation has cultivated a new normal, including waiting to get married and have kids. Marriage and birth rates continue to decline, and this generation isn’t settling down as early or in the way that previous generations did.

Still, homeownership remains important to millennials.

Buying a home on your own isn’t always possible with a single income, and around 40% of adults who aren’t in a couple make less money than their peers.

The solution?

Teaming up with a friend or a roommate to cut the price of a home by half. You can potentially buy a home even when you have less money saved.

You may also be able to cut costs in other ways if you take on a communal living model where you’re sharing household utilities and other living expenses.

The Logistics

If someone is considering co-buying with friends or roommates, economists say you should have a formal agreement that will outline the terms for various scenarios. These scenarios include buying out someone who wants to leave the situation or ending the arrangement altogether.

There are also downsides to buying with a friend or roommate. For example, if one of you has a lower credit score than the other, that will negatively affect your mortgage rates. Your friend can affect your credit score too. For example, if they fall behind on their payments, you’re going to be financially impacted.

There are a lot of details that you’re going to need to talk to a professional about, like inheritance issues and how shares are divided. You may not be comfortable having these conversations with a friend or someone who isn’t a family member or significant other.

Overall, it’s an interesting approach to homeownership at a time when it could otherwise feel unattainable but co-buying also isn’t without pitfalls.

WRITTEN BY ASHLEY SUTPHIN

Original Post

Getting Wall Street out of our houses

 

The Street is a major buyer of single-family housing — driving up prices. Here’s a way to get our houses back.

Friends,

Ask average Americans why they’re grumpy — why, for example, they don’t credit Joe Biden with a good economy — and lack of affordable housing comes high on the list.

An important but little understood reason home prices and rents have skyrocketed across America — causing so many young people, in particular, to feel frustrated with the economy — is Wall Street’s takeover of a growing segment of the housing market.

The biggest reason home prices and rents have soared in the U.S. is the lack of housing. Supply isn’t nearly meeting demand.

But here’s the thing: Americans aren’t just bidding against other Americans for houses. They’re also bidding against Wall Street investors — who account for a large and growing share of home sales.

Democrats in Congress are finally beginning to give this trend the attention it deserves.

Let me explain.

The Street’s appetite for housing began after the 2008 financial crisis, when many homes were in foreclosure — homeowners found they owed more on them than the homes were worth. As you recall, Wall Street created that crisis with excessive and risky lending, too often in the form of mortgages to people unable to pay them when they became due.

When the crisis pushed the economy into deep recession and millions of Americans lost their jobs, many additional homeowners were unable to pay up. They, too, discovered that they owed more on their homes than their homes were then worth.

The Street became a double predator — first causing a housing bubble, which burst. Then buying up many of the remains at fire-sale prices, and selling or renting them for fat profits.

The predation continues. America’s soaring demand for housing has made houses terrific investments — if you’ve got deep enough pockets to buy them.

Partly as a result, homeownership — a cornerstone of generational wealth in the United States, and a big part of the American dream — is increasingly out of reach of a large and growing number of Americans, especially young people.

All over America, hedge funds (in the form of corporations, partnerships, and real estate investment trusts that manage funds pooled from investors) have bought up modestly priced houses, frequently in neighborhoods with large Black and Latino populations, and converted the properties to rentals.

In one neighborhood in east Charlotte, North Carolina, Wall Street-backed investors bought half of the homes that sold in 2021 and 2022. On one block, all but one of the homes sold during these years went for cash to an investor that then rented it out.

By last March (the most recent data available), hedge funds accounted for 27 percent of all single-family home purchases in the United States.

Now for some good news.

Democrats have introduced a bill in both houses of Congress to ban hedge funds from buying and owning single-family homes in the United States.

It would require that these funds sell off all the single-family homes they own over a 10-year period and would eventually bar them from owning any single-family homes at all.

During the decade-long phaseout, the bill would impose stiff tax penalties, with the proceeds reserved for down-payment assistance for individuals and families looking to buy homes from corporate owners.

If signed into law, the legislation could potentially increase the supply of single-family homes available to individual buyers — thereby making housing more affordable.

I have no delusions that the bill will become law anytime soon. But along with many other pieces of legislation Democrats have introduced in this Congress, the bill provides a roadmap of where the country could be heading under the right leadership.

So many Americans I meet these days are cynical about the country. I understand their cynicism. But cynicism can be a self-fulfilling prophesy if it means giving up the fight for a more equitable society.

The captains of American industry and Wall Street would like nothing better than for the rest of us to give up that fight, so they can take it all.

I say we keep fighting. This bill is one reason.

BY: ROBERT REICH

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9 Federal Income Tax Breaks for Homeowners

Some of these deductions and credits are available to a wide swath of homeowners.

Buying and maintaining a home is expensive — and the cost just keeps climbing. Fortunately, Uncle Sam offers several tax breaks that can put more money back in a homeowner’s pocket.

Some of these deductions and credits can only be used by a small slice of homeowners nationwide. But others are available to a wider swath of folks.

Following are federal income tax breaks for homeowners that can ease the sting of homeownership costs.

1. Energy-efficient home improvement credit

If you have made specific energy-efficient improvements to your home, you might qualify for this tax credit. Qualifying expenses can include:

• Qualified energy efficiency improvements installed during the year
• Residential energy property expenses (such as new central air conditioners; natural gas, propane or oil water heaters; and natural gas, propane or oil furnaces and hot water boilers)
• Home energy audits

Through 2032, this credit is worth 30% of the cost of eligible property.

Most of the items we list in this story are tax deductions or exclusions, but this and the next one are tax credits. Credits are better than deductions because, while deductions reduce taxable income, tax credits reduce your tax bill dollar for dollar.

2. Residential clean energy credit

This tax credit is for homeowners who invest in renewable energy. Qualifying expenses can include:

• Solar electric panels
• Solar water heaters
• Wind turbines
• Geothermal heat pumps
• Fuel cells
• Battery storage technology

The residential clean energy credit is available now through 2032 and is worth 30% of the cost of qualifying new clean-energy property.

3. Capital gains exclusion when selling your home

Selling your home opens the door to one of the most generous breaks in the entire U.S. tax code.

Single homeowners who sell and enjoy a capital gain — that is, profit earned from the sale — may qualify to exclude up to $250,000 of that gain from their income. That means they won’t owe federal income taxes on that profit.

If you are married and file a joint return with your spouse, the exclusion jumps to $500,000.

There are some rules you must follow to get this break. According to the IRS:

“You’re eligible for the exclusion if you have owned and used your home as your main home for a period aggregating at least two years out of the five years prior to its date of sale.”

Other rules apply — such as that you generally are ineligible if you excluded the gain from the sale of another home during the two-year period prior to the sale of your current home.

For more, check out this page on the IRS website: IRS Topic No. 701, Sale of Your Home.

4. Net investment income exclusion when selling your home

The net investment income tax, which started in 2013, is a 3.8% tax that generally applies to income such as interest, dividends, capital gains, rental and royalty income, and non-qualified annuities.

Not everyone pays it, though; your income needs to be above a certain threshold, which is currently set at $250,000 for married couples filing jointly.

However, even for those who owe the tax, there is an exception for gains on the sale of a personal home. If such a gain is excluded from your gross income for regular income tax purposes, it also is excluded from your net investment income for the purpose of the 3.8% tax.

5. Exclusion for canceled mortgage debt

Debt forgiveness is a rose that often comes with a thorn — in the form of taxes you owe on the debt that has been canceled. This is because the IRS often considers a canceled debt to be taxable income.

However, passage of the Mortgage Forgiveness Debt Relief Act of 2007 “generally allows taxpayers to exclude income from the discharge of debt on their principal residence,” according to the IRS.

This relief applies to debt reduced through mortgage restructuring and mortgage debt forgiven in connection with a foreclosure. The provision was extended through 2025, and it allows up to $750,000 in forgiven debt to be excluded.

6. Deduction for mortgage interest

This tax break allows you to deduct from your taxes the interest you pay on a mortgage loan.

This break — and all that follow on this list — are what the IRS calls itemized deductions. That means you can take advantage of them only if you itemize your deductions as opposed to taking the standard deduction.

If you took out your loan on or before Dec. 15, 2017, you can deduct interest on a debt of up to $1 million. For homes purchased after that date, only interest applied to loan amounts of up to $750,000 can be deducted.

This deduction applies to interest on mortgages for first and second homes and refinanced mortgages. The IRS defines “home” pretty broadly — it even includes a boat house.

7. Deduction for home equity loan interest

Just as you can deduct the interest from a mortgage loan, if you itemize, you also can deduct the interest on a home equity loan or home equity line of credit.

However, for the interest to be deductible, the loan must be used to “buy, build or substantially improve your home that secures the loan,” according to the IRS.

So, you’re out of luck if you use a home equity loan to cover living expenses or pay off debts, for example.

8. Deduction for real estate property taxes

Those who itemize generally can deduct up to $10,000 of their state and local taxes, including real estate property taxes.

9. Medical expense deduction for home improvements

One last tax break for those who itemize: Some home improvements can be deducted as medical expenses if they meet certain criteria. According to the IRS:

“You can include in medical expenses amounts you pay for special equipment installed in a home, or for improvements, if their main purpose is medical care for you, your spouse, or your dependent.”

Just note that this deduction only applies to the part of your medical and dental expenses that is more than 7.5% of your adjusted gross income. So, even if you itemize, you cannot deduct the full value of your medical expenses.

You can find more details in IRS Publication 502, Medical and Dental Expenses.

BY: Chris Kissell 

Original Post

 

Rates Right in Line With Long-Term Lows, But That Could Change on Friday

"Long-term" is a subjective measurement, but in this case, it refers to the the past 7 or 8 months.  Today's mortgage rates dropped to levels that--until 2 other recent days in late December--haven't been seen since May, 2023. In other words, we're effectively at 8 month lows today, even if those lows aren't very different from the lows in late December.

This week's precipitous drop came courtesy of factors other than the slate of economic data.  That's interesting because we'd been eagerly anticipating this week's econ data as a potential source of volatility.  Instead, it was a friendly update from the U.S. Treasury on its borrowing plans (something that can have a big, indirect impact on mortgage rates by altering the supply/demand equation in the Treasury market which then spills over into the mortgage market).

All of the above means that Friday morning's jobs report is our first significant opportunity to see a big move in rates that's driven by economic data.  As is always the case ahead of this report, the reaction could easily take rates quite a bit higher or lower.  It can also thread the needle and keep things fairly flat.  

The market is expecting the job count to drop to 180k from last month's 216k.  A lower number would likely keep low rates intact, and a much lower number would allow for new longer-term lows.  Conversely, a number over 200k would be more likely to put upward pressure on rates.  It's not uncommon for the actual number to come in roughly 100k away from the forecast level.  The farther from forecast, the likely we are to see the big reaction.

By: Matthew Graham

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