NAHB Addresses Congress on Vital Housing Market Issues

The National Association of Home Builders (NAHB) addressed Congress today with a laundry list of recommendations which will help spur and maintain growth in the now blossoming real estate industry.  One of the biggest fears for new home builders and all of the vendors and sub-contractors who are involved in the building and completion of new homes is that the fragile state of the economy will be derailed by legislation on the table which does not make sense for the home building industry.  Also, there are a couple of incentives which have spurred builder growth throughout the Recessions, which if not renewed, could slow down the momentum in the growing construction market.

One of the first topics addressed was the interest rate deductions for current homeowners.  NAHB’s chairman Rick Judson, a home builder and developer from Charlotte, N.C., in testimony before the House Energy and Commerce Committee’s Subcommittee on Commerce, Manufacturing and Trade strongly recommended leaving this program in place.  His platform echoed many presidential statements on the necessity of a strong middle class in America.  Judson contended that because the interest rate deduction program helped and affected many young homeowners, that they were more apt to buy new homes and use the deductions to reduce the amount of taxes paid.  Young home buyers were then able to build credit and equity in their home investment and therefore create more wealth both in the equity as well as the savings from the interest rate deductions.

Another issue that was addressed was that of the energy efficiency tax credits for both builders and homeowners which are set to expire soon.  Judson urged the Committee to renew these tax credits in order to make builder more energy efficient homes and do more energy efficient renovations more affordably.  Energy efficiency tax credits such as the Existing Home Retrofit Tax Credit (25C) that provides consumers a tax credit of up to $500 for the purchase of qualifying energy-efficient products and the New Energy Efficient Home Tax Credit (45L) available to builders who construct energy-efficient new homes are important policy tools to provide home owners and builders with incentives to perform energy efficiency upgrades on homes.  With the advent of energy efficient products, more people in general look to buy a home instead of rent a home because the monthly utility payments become more affordable, the more modern and “green built” a home is.

While the economy and the real estate market have taken an upturn, because of the Recession and inflation, the cost of building materials has skyrocketed over the past 6 years.  Judson urged the government to do all that it could to lower the increasing costs of building materials especially imported products.  Citing a shortage of materials especially for framing lumber, oriented strand board and gypsum, Judson explained that vendors have a hard time buying up what they need because of price and availability constraints.

Another issue addressed before the Committee was the lack of labor available for the building or remodeling of homes.  Because of the Recession, those who used to be in the construction industry had to find jobs elsewhere because work on new home construction and building was temporarily unavailable.  A recent survey of NAHB members shows that since June 2012, residential construction firms have been reporting an increasing number of labor shortages in all aspects of the industry – from carpenters, excavators, framers, roofers and plumbers, to bricklayers, HVAC, building maintenance managers and weatherization workers.

“With congressional attention shifting to immigration reform, I believe strongly that this debate provides an important opportunity for the country to implement a new market-based visa system that would allow more immigrants to legally enter the construction workforce each year,” said Martin. “This would complement our skills training efforts within the nation’s borders, and fill the labor gaps needed to meet the nation’s housing needs.”

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Considerations for Do It Yourself (DIY) Projects

With money tight for everyone in today’s economy, the temptation to start a Do It Yourself (DIY) project whether it is a repair or a renovation seems to be the first choice of most homeowners.  Especially with the advent of instruction videos on YouTube for every conceivable type of

project, DIY projects seem feasible and affordable.  If you work with your hands, have a lot of common sense when it comes to using power tools, and “know your way around” construction or electrical workings, you probably have a very good chance of being able to accomplish whatever task you may have in mind.  If you are just looking to save money and do something fast and affordable, below are some not so well known facts about the pitfalls of starting a DIY project.

1.  Cost: Most jobs are priced by contractors or remodelers by materials and labor.  So, you figure you are going to “save on the labor” by buying the materials and doing it yourself.  This seems like a good prospect until you get halfway through the project and realize that you have to buy a specialized tool or rent a piece of equipment in order to complete the job. Also, the price of materials that you will buy at your local Home Depot or Lowes is sometimes 3 times what a contractor will pay.  If you are stepping into unknown territory on the DIY project, you may not know how long to expect the project to take. The rule of thumb is that the longer a project takes, the more cost is accrued.  You may end up having to rent a piece of equipment over 3 weekends instead of just once to get the job done.

2.  Safety: This is perhaps the most important consideration when taking on a DIY project, especially if you are dealing with electricity or plumbing.  There is a reason why some projects require a licensed electrician or plumber.  If you are working on an older house, you may encounter older circuit breakers and wiring, and while your intentions are good in that you are trying to upgrade that same wiring or circuit box, one wrong move with a hot circuit could land you in the hospital.  When it comes to plumbing, there is not as much of a threat of ending up in the hospital, but messing with plumbing pipes can get messy for your home.  We’ve all seen the commercials of the large trucks scooping waste out of someone’s front yard because of a back-up in the septic system, the same threat of ending up with water or waste in your home is possible if you are not absolutely sure of your plumbing skills.

3.  Time and Timing: As a DIY, you don’t work on homes for a living, so you don’t want to spend every weekend day of your life working on your project (unless you enjoy doing it as a hobby).  Sometimes, you think that your project is “not going to take that long,” and a month later, you are still looking at part of your newly remodeled kitchen cabinets partially torn out or partially installed.  Unless you are an experienced DIY’er, you may underestimate the amount of time your project will take, leaving part of your home unusable until the project is complete. Also, the longer it takes to complete your project, the more it normally ends up costing you.

DIY projects can be fun, save you money, and “educate you” on taking care of and fixing your own home.  Only you know your own abilities and limitations, so taking into account the items mentioned above will help you decide whether you should do it yourself or hire a contractor to come in and do it for you.

 

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Reasons to Stay in Your New Home 5 Years

Whether you are buying your first home or your 4th home, the time you spend in your home before downsizing or upgrading makes a financial difference in your investment.  Most people start out in the real estate industry when they buy their first home.  Unless they come from a very wealthy family or have won the lottery, the home is priced modestly or on the low end and is built that way as well – smaller square footage, less bedrooms and baths, in an up and coming neighborhood.  First time home buyers can be single professionals who are successful, in a steady job, with an income that is rising each year, but most people who buy a home for the first time are couples looking to start a family. These couples eventually would like to move out and move up to provide more space for their growing family.  They are “getting their foot in the door” with their first home to establish credit and create equity opportunity to eventually sell and move up to something bigger.

The biggest question then, to ask is this – how long do you stay in your home in order to make sure you aren’t losing money and to build enough equity to become a “move-up buyer?”  The answer to this depends, but it is typically about 5 years.  Below are the reasons for this number:

1.  Closing Costs: Whether you are buying a new or previously owned home (resale) or refinancing your home, you are going to “run into” closing

costs.  Closing costs is the profit for loan originators, title companies, and the state in which you live (recording fees) which are charged during the loan process.  Every company needs to make money, and closing costs are how they make theirs.  Closing costs are, most of the time, added to the principle of your home, increasing your loan amount and shrinking your home’s equity.  Each time you make a real estate transaction, you are charged these costs.  Staying in your home approximately 5 years “pays off” these closing costs enough for there to be enough equity in your home (most of the time) to have money for a down payment when you move to your next “move-up” home.

2.  Interest: Even with the historically low interest rates in the market today, the mantra in real estate still stands, “The Bank Gets Paid First.”  When you are paying your monthly loan payments, you will notice on your mortgage statement that the amount of principle being paid on your home is significantly less than the amount of interest being paid.  You can also see this on your amortization schedule during your closing.  As your loan “ages,” the amount of interest balances the amount of principle and eventually ends up being less than the amount of principle during the last years of your loan.  If you only stay in your newly purchased home for a short period of time – say 3 years – the amount of principle you “pay off” will not be enough to merit a sale and move unless you are making extra principle payments each month.  The recommended period of time to stay in your home, reduce the amount of interest charged, and pay off as much principle as you can in order to gain equity during a sale is 5 years.

3.  New Vs. Used: The type of home you buy can also make a difference in how much time you spend in it before you upgrade to something bigger and better.  If you are buying a new home, it really doesn’t make that big of a financial difference in the time you spend in the home because typically, in a new house, you don’t end up with much maintenance on the home until about 4 – 5 years in.  On a previously-owned home, resale home purchase, however, there may be a significant amount of upgrade and upkeep that you will expend when you first move into the home.  Depending on the age of the home and the last time it was renovated, big system items, such as hot water heaters, condensers, garbage disposals, ductwork, roofing, etc. could end up needing to be repaired or replaced.  If you look at the amount of money you spent on renovating the home, the amount of interest you pay on your monthly mortgage payment, and the amount of closing costs you paid during the initial purchase; you may see that it would behoove you to stay in the house for about 5 years (or more) to get the equity out of the home to pay off your financial investment.

4.  Appreciation: The “golden days” of “instant appreciation” are fewer and farther in between when it comes to purchasing your first home in an “up and coming” area.  During the real estate boom of the early 2000’s, subdivisions were seeing appreciation in their homes from the beginning and build out of Phase I to the commencement of building Phase II.  You have probably seen the prices on the signs change from Phase I to Phase II where the exact same floorplan started selling $10,000 – $20,000 higher in Phase II than it did in Phase I.  Those days of instant appreciation are very rare, so when you purchase your home in an area you expect to experience residential and commercial growth, you, as a homeowner, may have to wait a little bit longer for that long-anticipated appreciation to come about.  Along with the other factors mentioned above, this is yet another reason to wait approximately 5 years before selling and moving to a bigger and better home.

Ron Lee Homes, a home builder in St. Tammany Parish, specializes in 2nd home (and above) move-up homes.  Whether you are looking to build a semi-custom or fully custom new home in Mandeville, Covington, Madisonville, or Abita Springs, Ron Lee Homes will work with you and provide base floorplan designs for your consideration.  Buying or building a new home can seem a little challenging, but working with the team at Ron Lee Homes will make your home buying / building experience a pleasant and satisfactory process.  To get started with the plans for the home of your dreams today, Contact Ron Lee Homes at 985-626-7619 or E-mail Info@RonLeeHomes.com.

 

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