Chattanooga Real Estate January 2015

Mtn Shadows Chattanooga Real EstateI’ve been doing Chattanooga real estate market reports for a lot of years now (ignore that long hiatus I took!). I got my real estate license the same month that Countrywide Mortgage essentially went bust. I think all of the blood drained from my brain when I heard that. My point is that, from the agent’s side, I’ve never experienced a really booming market. But that might be changing…

The thing that strikes me in comparing the stats for the Chattanooga real estate market from January 2014 to January 2015 is that the number of sales is almost identical. I don’t think you could make it closer if you tried. And then you look at the total dollar volume, average sales price & median sales price and the jumps are pretty huge: 14.4%, 13.9% & 9.7% respectively.

Does that mean that your home’s value went up 10% last year? Probably not. While I do think there have been some pretty big gains in value over the last 2-3 years, 10% in one year is a stretch. It’s more likely that it just happened to be some higher dollar homes that sold.

During the worst years of 2008-2010, you still had fairly strong sales in the first-time-buyer sort of price range. New buyers were taking advantage of low prices to get into the market. You practically couldn’t give away more expensive homes. Those are the ones that you’ll usually buy as your 2nd or 3rd home. And if you couldn’t sell the house you already had for a decent price, you weren’t going out and buying a bigger more expensive one. You were kinda stuck.

But no more! Anecdotally, you really can’t find those rock bottom homes anymore. The under $100,000 market is practically non-existent unless you’re willing to do a LOT of work. Investors snatch those up pretty quickly, fix ’em, then put them back on the market either as rentals or sales in the $120-140k range. The market for the $120-140k homes is strong so those sellers can move up to a $150-200k home, which means that the $150-200k sellers can move up to a $225-275k home…you get the idea.

Check out the image gallery to see the ghost of Januaries past, including the fact that dollar volume for 2015 is up, wait for it……98% (almost double!) from 2009. That’s pretty incredible.

 

Credit where credit is due

One of my favorite Chattanooga mortgage lenders turned me on to a new resource the other day. I’m looking to re-finance a mortgage on one of my houses here in Chattanooga myself and Richard recommended that I sign up for CreditKarma.com so that I could check my credit and get a score without an inquiry showing up on my file. It’s similar to MyFICO.com except that it’s freeeeeeee!

St. Elmo Chattanooga Real EstateThere was a time when you had to shell out big bucks to get your credit score (where big bucks=about $20) but you’ve got some options now. Some credit card companies offer you scores but the ones I’ve seen only give you a score from one bureau. Credit Karma gives you two. There can be huge discrepancies from one bureau to another so it’s nice to have a couple to look at, compare and contrast.

Before you start the process of buying a home in Chattanooga, you’ll want to start checking your credit and getting rid of errors. Credit Karma can even give you some recommendations but since they don’t necessarily know what you’re going for, I’d take those with a grain of salt. Once you’ve cleared up any actual mistakes in your credit file, I’d talk to a lender for ideas on how to strengthen your credit rating in preparation for buying a house.

There is no such thing as a free lunch. It looks like Credit Karma makes its money by selling you on credit cards and other financial products. For straight up credit histories without scores, I’d still go with AnnualCreditReport.com, the official site to get your free report annually – as the name implies. I have to say, though, that Credit Karma does a great job of being clear and user friendly. And of course, if you want to see your scores, you’ll either need to pony up some cash or bite the bullet and give away a little information to a company like Credit Karma.

I’m paying for WHAT? A new homeowner’s guide to budgeting

Chattanooga real estate - costs of homeownership

Many new potential homeowners look at their monthly payment and think ‘Hey! That’s less than I’m paying for my apartment.’ What they don’t always consider is the added cost of having your own place. So what should you consider when you are making out your newly-house-proud budget? What are the other costs of homeownership?

The obvious: Principle and Interest

You can figure this out by checking out my handy dandy loan calculator which should be right over there —->.

Your interest rate is going to be a huge factor here. That’s why now is a Fab. U. Lous. time to buy even if you think prices are going to decline slightly in the future. There’s nowhere to go but up with interest rates.

The less obvious, but still included in your basic monthly payment: Taxes and Insurance

You’re going to have to pay property taxes & ‘hazard’ or ‘homeowner’s’ insurance.. Maybe even flood insurance. These items will be paid out of your escrow account and added into your monthly payment. They will be considered by your lender in deciding how much you can afford.

Still less obvious: Utilities

Sure, maybe you pay your own electric or gas bills at your apartment but how much do you think the size of that new McMansion matters? Not to mention that in your apartment you may be ‘insulated’ by the other units around you. A 1500 sq ft single family home is going to be a lot more expensive to heat and cool than your 800 sq ft apartment. And the gas bill for that gorgeous 1915 Craftsman with the original single-paned windows…well, you probably don’t even want to know.  And then there’s the other stuff you may not think about that are sometimes included in your monthly rent: water, sewer, cable, phone, gutter cleaning, lawn mowing, garbage pick up… you get the idea. Now, in most areas of Chattanooga you won’t be paying for garbage pick up but if you opt to move out to the sticks of Signal Mountain or Sale Creek, you might find yourself either paying for it or with a back seat full of junk every week.

The thing no one wants to talk about: Repairs

Yep, that beautiful little brand new construction home o’ yours is going to need repairs. Sooner or later. Whether it’s a toilet handle that needs jiggling or a new roof, you’re going to have to fix something, sometime. And don’t even think about just letting it go. That only makes it worse and costs more in the long run.

You don't want to have to leave it this way
You don’t want to have to leave it this way

The fun stuff: Improvements and decor

Maybe you’ve never lived anywhere that you were allowed to paint, put up curtains, change out the tile, add on a new bathroom…you see where I’m going with this. Now that you have that spiffy new place, you’re going to want to invite friends and family over for Thanksgiving. And that means you need a shiny new dining room table twice as big as any you’ve ever had. You don’t want to get to the end of the month and not have anything left over for that gallon of flat enamel that will make your den Absolutely. Perfect.

The moral of the story:

When you are working out the budget for your new house, make sure you consider ALL of the costs of homeownership. Don’t just take the word of your lender who says you can afford a $1,500 mortgage payment. Think it through and consider stepping back just a little so you can not only make your payment, but also buy the groceries to go in that lovely new stainless steel side by side.

Trust me, I’m a Realtor

I’ve been updating my website (do you love it?!) and my new one has a spot for a slogan and a tagline. Not being much of one for such things, I googled “real estate taglines” and started perusing some options. For Pete’s sake! They were uniformly awful or terribly cliched. Some were so bad they made me laugh out loud. So I started thinking about what I would do to make them a little more, ahem, truthful. This is the first one I came up with.

Trust me, I'm a Realtor

No offense to used car salesmen, but I mean, really, the Realtor’s Code of Ethics notwithstanding, most people don’t think of maximum trustworthiness when they hear the word Realtor, do they? There’s just something about commission sales that brings out the worst in people.

My dad was a broker back in the 80s & 90s so he’s always asking me about showings and such. Our conversations often go like this:
Dad – Did they like the house you showed them?

Me – They liked it at first but I think I talked them out of it.

Dad – Um, really? Why do you do that? If you were working for me I’d fire you.

Me – It looked like it might have a water problem and I pointed out that the outlets aren’t grounded and the floors are wonky.

So yeah, I frustrate my dad a lot. And if you still want the place after I’ve point out all the things wrong with a house, then I’ll do my darnedest to get it for you at a price that will let you to spend some money rewiring and leveling floors and regrading. But I’m never going to stand there hoping you don’t notice. So I guess what I’m saying is that you really can trust me, but it isn’t because I’m a Realtor.

Looking for something in particular?

A lot of people start out looking at homes for sale on Zillow or Trulia. Both of those sites give me the twitches. They’re fine if you’re just browsing, but horrible once you get a little more serious. They rely on syndication from the local MLS (Multiple Listing Service, i.e. where Realtors enter homes for sale in Chattanooga) boards. Unfortunately, it takes a few days for the listings to show up. And it can take weeks or months for them to disappear once the house goes under contract or closes. There’s nothing worse (well, there are much worse things, but you see my point) than Chattanooga Homes for Salegetting your heart set on something you see on Zillow, only to find out that the status information isn’t correct and you just can’t have it. Cue sad trombone.

Luckily, there’s a cure for the syndication blues. Let’s say you want to see North Chattanooga homes for sale built before 1940 with more than three bedrooms. Or maybe you’re interested in Ooltewah homes for sale under $350,000 in communities with a golf course. Perhaps you think that you should be looking at Signal Mountain homes for sale zoned for Thrasher Elementary which have at least 2,500 square feet. I can do that. I have the technology.

And I can deliver it right into your inbox every day. If an agent enters a listing on a Tuesday, you’ll have it around midnight that night and we could be looking at it on Wednesday, making an offer on Thursday and be under contract by Friday. About the time that it shows up on Zillow.

All you need to do is contact me and let me know what you’re looking for, bedrooms, bathrooms, areas, acreage, schools, schools, pools or lack thereof, you get the idea. Give me your email address and voilà! Easy peasy.

PMI – Private Mortgage Insurance

Lots of acronyms get thrown around when you’re talking to a lender. Everything from DTI’s and LTV’s to PITI and UFMIP. PMI (AKA, MIP) is just one of an alphabet soup of terms that you should know.

What is PMI?

It stands for private mortgage insurance. You’ll also sometimes hear of it as MIP or mortgage insurance premium. They’re basically the same thing. It’s insurance that insures that you, the buyer, will actually pay back the loan. It pays out if you don’t.

Who pays for private mortgage insurance?

Short answer: you do (of course!). The long answer is that there may be a portion added onto your mortgage when it’s first taken out. It goes that way with FHA loans. That portion is referred to as UFMIP (up-front mortgage insurance premium). There will also be a part that is added onto your payment each month.

PMI, Chattanooga real estateWho benefits from the MIP?

Downer alert: Sadly, not you. Having insurance in the name sounds like you might get something out of it if tragedy strikes and you can’t pay your mortgage. In this case, you’re paying for insurance that helps out the mortgage company if they end up having to foreclose on the property. It won’t in any way keep them from taking your house away.

Is there any way to get out of paying a mortgage insurance premium?

Yes! Buy a house using conventional financing and put at least 20% down. Unfortunately, most first time buyers don’t have the cash for that but if you’re selling another house and plan to plunk down the proceeds you get from that, you might be able to swing it.  If you can’t do that at the time of purchase, you can make extra payments toward the principle and once it’s paid down to a 78- 80% LTV (more acronyms! this one means loan to value ratio) you can request that the PMI be cancelled. If values are going up in your area or you’ve made significant improvements and you think your house has appreciated to the point that your mortgage balance is 80% or less of your home’s new value, you can talk to your mortgage holder and request a new appraisal (which you’ll pay for). The bad news for FHA buyers is that this doesn’t apply. Some recent rule changes at FHA mean that you’re stuck paying the MIP for the life of the loan, up to 30 years.

 

So when you’re thinking about monthly payments and what you can afford to spend on your new house, be sure to include not just the principle, interest, taxes and homeowner’s insurance (that’s the PITI I mentioned up there at the top) but also the PMI. If you have any questions about this or any part of buying a house in Chattanooga, contact me and I’ll be happy to help!