5 Recession-Resistant Renovations

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Recession-Resistant Renovations

by Jon Nunan

Upgrade Siding
When your siding has seen better days, upgrading it just might be one of the best investments you can make for your home, no matter what the economic climate. Since siding functions as a shield for the materials it covers, the better siding you have, the longer those materials are likely to last. Remodeling Magazine’s Cost vs. Value report revealed that installing fiber-cement siding generally recovers over 87% of construction costs in added resale value. This makes upgrading from vinyl or aluminum to fiber-cement the best investment nationwide when it comes to recouping your costs!

Bathroom Enhancements
Though often the smallest rooms in the house, your bathroom can have a dramatic impact on your day-to-day life. Bathrooms also pack quite a punch when it comes time to put your property on the market, and remodeling your bathroom can mean the difference between a home that’s sold quickly and one that stays on the market for years.

The average cost of a bathroom remodel over the last quarter was around $10,200. Out of a pool of 3,000 homeowners who found their bathroom contractors through SM, 9 out of 10 were not only pleased with their project, but would recommend it to others. When you think of the money and resources that get wasted by leaky pipes, dripping faucets, inefficient shower heads and obsolete toilets and, add the hassle of waiting for mirrors to clear up, waiting for hot water (or running out too soon) and dealing with water pressure problems it’s easy to see why so many folks are so happy with their new bathrooms!

Inspections
While not technically a renovation, an inspection is a sound enough investment in shaky economic times that we had to include it in this list. The beauty of an inspection lies not in what it does for your property, but what it prevents. For instance, a chimney cleaning will often cost around $310, where a chimney fire can cost you thousands in property damage. Inspections are available for many of your home’s systems (roofing, foundation, waterproofing, etc.) and can either identify small problems before they become large or give you peace of mind that your home is in good shape!

Enhance Flooring
Few things can make a room shine like good flooring. Fortunately, flooring upgrades are also an excellent investment in just about any home. One of the nice things about replacing a floor with a more durable material is that you can really get your money’s worth. For instance, while carpet remains the least costly flooring material, the National Home Builder’s Association puts its life expectancy at 8 to 10 years “with appropriate maintenance and normal foot traffic.” Though definitely more costly, natural hardwood’s life expectancy is “100 years or more.” So, by upgrading, you might be spending a little more in the short term, but you can rest easy knowing that you (or even the next owners of your property) won’t have to bear the expense of flooring replacement!

Small Kitchen Remodels
In much the same way as bringing a bathroom up to par is almost always a good investment, minor kitchen improvements are generally a safe bet. Unfortunately, going overboard during a kitchen remodel is common, and many folks end up spending way more than they planned before the job is finished. To keep your investment budget-friendly, focus on the things that really need attention, and leave the elements of the room that are functioning just fine intact.

General Guidelines for Recession-Proof Remodeling
During uncertain economic times, the adage “If it’s not broken, don’t fix it” is certainly appropriate in many cases. However, to be completely accurate, you may want to add something to the effect of “If it’s slightly broken, fix it now.” “If it’s working fine, but it’s costing you plenty to operate, get a better model” might be another good phrase to live by. Basically, any remodeling project runs the risk of being more trouble than it is worth, but, in a nutshell, hard times call for projects that will not only make your property look better, but will help it function more efficiently for years to come!

Jon Nunan is a freelance writer who draws on his experience in construction, ranging from landscaping to log home building, for his articles on home improvement.

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After Throwing Us a Curveball, Where Will Mortgage Rates Go?

By
Jonathan Smoke

financial-rollercoaster2

So far, 2016 has held an endless series of shockers for observers of the presidential election (Jeb out! Donald on top! Bernie whomps Hillary in Michigan! Trump Steaks are delicious even though they’ve been long discontinued by The Sharper Image!) … and mortgage rates. Most economists, myself included, had expected mortgage rates to be higher than they are today. Instead, rates are near three-year lows for a 30-year conforming fixed-rate loan.

In 2015, 86% of buyers financed their home purchase with a mortgage. So mortgage rates—where they are now and where they’re going—have a vast impact on what buyers will do and the stress they will experience throughout the buying process. The extension of low rates has been positive for most buyers, who benefit from increased buying power.

But what happens next?

Rate roller coaster

This year hasn’t just seen rates go down. Yes, in six of the first nine weeks of the year, rates declined. But the most recent two weeks have seen rates go up. The daily volatility is even more extreme: 23 down days, 17 up days, and five flat days. This is head-spinning stuff. The average daily change in the average 30-year fixed-rate mortgage so far this year is 3 basis points. (Remember, one basis point is 0.01 percentage points. For example, if a rate falls from 3.5% to 3.47%, it’s declined three basis points, or 0.03 percentage points.)

As we enter the peak spring buying season, it’ll be even more critical to follow the movements of mortgage rates. Buyers who think those rates aren’t moving might have a rude awakening when they realize the recent trend upward. Since Feb. 11, the average 30-year fixed rate has increased almost 20 basis points. That translates into a reduction of buying power by over 2%.

For potential buyers, these rate movements can be nerve-wracking. A 10 basis–point difference in a rate on a mortgage, with all other factors remaining the same, will produce a 1.2% difference on the monthly payment. Of course that affects not just your monthly budget, but also your debt-to-income ratio, which is a critical factor in qualifying for a mortgage.

If you are keeping score, that means the mortgage market gave buyers about 6% more buying power as rates fell, but since then the market has taken back nearly 2% in buying power. Buyers are still up, but there is a lot of time left on the clock for this year’s buying season.

Tapping the best predictions for rates

OK, so let’s get it out of the way right now: There’s no clear consensus on where mortgage rates will go from here.

I’ve surveyed a range of recent forecasts from the Mortgage Bankers Association, Freddie Mac, Fannie Mae, and the National Association of Realtors®, as well as from highly respected macro economists, and I found quite a bit of divergence on expectations for rates for the rest of 2016 and into 2017.

Three scenarios emerge:

The first path sees the economy as hobbled by global economic weakness and the decline in the price of oil. As oil declined in January and early February, the stock market followed, and global money sought refuge in the dollar and U.S. Treasury bonds. As demand for bonds goes up, so does their price, and mortgage rates move in the opposite direction.

This more negative view of the economy sets a low expectation for mortgage rates, especially for this year. In this scenario, the global economy doesn’t improve but also doesn’t get worse, so mortgage rates remain about where they are now (around 3.8%) for the rest of the year. However, as the first nine weeks of the year show, rates are likely to see quite a bit of daily and weekly movement based on economic data releases and Federal Reserve meetings.

According to the second scenario, rates and financial markets have overreacted to the global economic concerns, but the global weakness will limit the growth we can see in 2016. This moderate view of growth would see the average 30-year fixed rate get back above 4% by the third quarter and reach 4.2% by year-end.

The final scenario also assumes that the financial markets overreacted to negative news at the beginning of the year. But this storyline also sees inflation heating up faster than expected, causing the Fed to act more aggressively on short-term rates. This view would see rates reach at least 4.5% by the end of 2016 and potentially even 5.5% in 2017.

These aren’t the only possible scenarios, but at this point I think they represent the most probable outcomes. Economists—including myself—have been consistently wrong about mortgage rates for several years, as they are influenced by many economic forces that are hard to measure and model. But by looking across these different perspectives, you can see a logical range that very likely includes what rates will do.

Sobering implications of rate forecasts

If you want a single forecast, take the average of these scenarios. This view would see the 30-year fixed conforming rate reaching 4.22% by the end of this year. That would be almost 50 basis points above where we are today, giving credence to moving fast and exploring options like rate locks along the way.

If we do reach 4.22%, the mortgage market will have taken back all of the buying power handed out at the beginning of the year and would remove an additional 1.5% of buying power.

Then taking an early look at 2017 using the average of these scenarios, the 30-year fixed conforming rate would likely reach 4.89%.

Adding the impact of home price appreciation to these expected mortgage rate increases leaves the sobering perspective that it will cost 20% more by the end of 2017 to buy a typical home in the U.S. with a mortgage, compared with the incredible bargains today.

And yes, I knew that as soon as I wrote this, it’s now bound to be wrong. But I promise to keep abreast of what actual rates are doing and what the experts predict for the road ahead, so you can plan accordingly.

Selling Your House During The Holidays

This time of year, a lot of clients who need to sell their home decide to “wait until spring” . Is that a good idea or not? Every situation is unique however, selling this time of year can be a great idea. Let me explain. You have all heard of the law of supply and demand…right? Well during the winter there are typically less homes on the market so inventory is lower meaning supply is down. The other truth is that there are usually fewer buyer’s looking to purchase a home in the winter BUT (yes Bill Pipes if your reading this I said but…inside joke) the buyer’s who are taking their time to look now are very serious and qualified buyers. Lower supply and more interested buyers can result in a faster sale at a better price. If you are selling your home during this time of year here are a few tips whether you are working with an agent or are a FSBO seller (For Sale By Owner).

1. Showings, by appointment. As we get closer to Christmas decide on some times that work best and ask your agent to arrange showings of your home by appointment during these times. This will allow you to plan better and and make sure all the wrapping paper, toys-r-us flyer’s with checkmarks by every toy and baking ingredients are all put away nicely. You can drive around looking at lights or get some last minute shopping done knowing your home is clean and ready to show.

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