The forecast for the coming months is lower temperatures—and a cooler real estate market, if only by a few degrees.

By Clare Trapasso

The housing market is expected to shift to something closer to normal this fall, real estate experts say. They anticipate more homes will go up for sale, helping to slow down the unparalleled price increases and bidding wars of the past year.

But the market is likely to remain highly competitive, as there will still be many more buyers than homes to go around.

“We’re going to exhaust the pool of buyers who are still sitting on a lot of cash looking to buy their next home,” says Realtor.com® Senior Economist George Ratiu. “The market does not have a magical way of sustaining this pace [of price growth], because you’re going to run out of people who can afford it.”

However, that doesn’t mean that home prices, whose national median hit an all-time high of $385,000 in the week ending Aug. 14, will fall. In fact, prices increased 8.6% year over year that week. But that’s significantly less than the 17.2% annual rise in April. Going into the end of the year, prices may rise a more modest 5% to 6%, says Ratiu.

“The shift in the housing market will make shopping for a home a lot more tolerable than it has been, because consumers will actually have time to properly think through their decision and won’t be in as fierce of bidding wars,” says Ali Wolf, chief economist of building consultancy Zonda. “Going into fall, buyers may not need to pull out all the stops to win a house, like removing the inspection contingency or waiving the appraisal contingency.”

More homes are expected to go up for sale in the second half of the year. The influx won’t be nearly enough to put a dent in the dire housing shortage that’s the main reason for the record prices, but it may help curb the wild price growth.

“It’s still going to be a very strong housing market. Demand is still going to be well in excess of supply,” says Greg McBride, chief financial analyst at Bankrate.com. “It just won’t be as frenetic as what had been experienced earlier in the year.”

In June, there were 2.6 months of housing inventory for sale, according to the National Association of Realtors®. That’s an improvement from 1.9 months in January. However, a balanced real estate market has between 5.5 months and six months of homes for sale.

“We’re seeing the gap narrowing between demand and supply,” says NAR’s director of housing and commercial research, Gay Cororaton. But it isn’t going to even out anytime soon. “There’s still a huge, huge gap.”

The fall homebuying season is likely to be busier than usual

One thing that won’t return to usual is the pace of sales. Usually, the market begins slowing down and prices even dip in the fall; families typically prefer to get settled before the school year begins. But this year, the COVID-19 pandemic threw off the normal timing, and activity is expected to stay brisk after summer’s end.

“I expect an unusually busy fall season,” says Ratiu. After all, more homeowners are vaccinated and feel comfortable holding open houses, although the delta variant of the coronavirus could change this, or they just can’t delay their move. “Sellers are putting homes on the market. Normally this activity happens early in the spring.”

Demand is likely to stay strong as well—even though many buyers are frustrated or simply priced out. More millennials are hitting their prime homebuying years, and builders have been unable to ramp up construction to keep up with the growing population. With rental prices also hitting new heights, many people are seeing that it’s cheaper to buy than to continue to lease a home.

Plus, mortgage interest rates are still hovering around record lows. The fear of missing out on what could be a once-in-a-lifetime deal will likely entice additional buyers. (Rates averaged 2.87% for 30-year fixed-rate mortgages in the week ending Aug. 12, according to Freddie Mac data.)

And not every home will be affected by a slowdown.

“Don’t expect deals in the fall if you are house hunting in the most desirable part of a market or competing for a particularly nice house,” says Zonda’s Wolf. “Homes that stand out for one reason or another are still flying off the shelf.”

But overall, most buyers may not be as willing to pay top dollar and waive inspections and contingencies for less-than-spectacular homes that would have sold for $100,000 less just a year ago. There aren’t many regular people (as opposed to investors) who can pay all cash for a home. And there likely aren’t as many remote workers fleeing expensive cities and heading for cheaper parts of the country at this point in the pandemic as there were in the beginning.

“We are definitely shifting from an extreme excess of demand to a more moderate excess of demand,” says Ken Rosen, chair of the Fisher Center for Real Estate and Urban Economics at the University of California, Berkeley. But “it’s still going to be a seller’s market.”

In addition, many first-time buyers can’t afford to pay over the list price of a home if it doesn’t appraise for that much, says mortgage broker Rocke Andrews, of Lending Arizona in Tucson. They don’t have the extra cash to make up the difference.

The emergence of the delta variant is also spooking some buyers who worry about the stability of their jobs.

This could help to explain why the number of purchase mortgages (which don’t include refinances) dropped 18.7% year over year in the week ending Aug. 13, according to the most recent Mortgage Bankers Association data.

The market “will be nothing like the panic we saw” going into the fall, says Rosen. “It already is more orderly in many, many markets.”

Foreclosures likely won’t play a big part in the cooling market

Many folks have been anticipating a wave of foreclosures to sweep the country as moratoriums to protect struggling homeowners expire. However, it’s not expected to be nearly as severe as what happened during the Great Recession, or lead to an influx of homes going on the market.

Homeowners who haven’t made mortgage payments during the pandemic make up just a fraction of the housing stock—just 3.26% of mortgages were in forbearance as of Aug. 8, according to the most recent data from the Mortgage Bankers Association. Many of these folks will resume payments or work something out with their lenders. But at least some of these 1.6 million homes will hit the market.

Those homeowners who can’t resume their monthly payments and have enough equity in their properties can avoid foreclosure by putting their homes on the market. With prices at these levels, they may even walk away with a profit, and it won’t damage their credit.

“The middle-class and the upper-income groups won’t even notice the wave of foreclosures because it won’t be in their neighborhoods,” says Norm Miller, a real estate economics professor at the University of San Diego.

Lower-income homeowners who lost their jobs during the pandemic and don’t have much equity will likely be the ones who go into foreclosure. Their homes are expected to be in the lower-third price tier.

The number of foreclosures and how quickly they go up for sale are expected to vary from state to state. Some states have protections in place for homeowners that can delay proceedings significantly.

Some first-time buyers will scoop up these properties as the previous owners are forced back into the rental market. But the bulk are expected to go to investors, says Miller.

Investors are expected to keep home prices strong. During the pandemic, more institutional investors, such as pension funds and financial firms, have bought up single-family homes to turn them into rentals. Many can buy in bulk and pay in cash. That’s likely to continue.

“This is going to lower the homeownership rate a little as [these residences] become rental units,” says Miller.

Clare Trapasso is the deputy news editor of Realtor.com. 

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Learn how to convert an underused area of your home into a customized space that best suits your needs.

By Jessica Bennett 

As lifestyles shifted due to the coronavirus pandemic, our homes had to adapt to new activities and routines. Dining rooms and closets became home offices, kids' bedrooms served as homeschool spaces, and guest rooms were outfitted with workout equipment. These multi-purpose rooms were born out of necessity, but even as we look toward a post-pandemic future, homeowners are increasingly using "flex spaces" as a versatile solution for previously underused areas. "The trend has found staying power as people realize they can more efficiently use their spaces in sustainable ways," says Cameron Johnson, founder and CEO of Nickson, an apartment-furnishing service.

Flex spaces are intended to help your home better accommodate your day-to-day life. Guest bedrooms, for example, can often be reimagined for more frequent and flexible use. "People are realizing that an entire room in their home dedicated to an occasional houseguest may not be the best use of space—a commodity that has become decidedly more precious over the past year," says Los Angeles designer Stefani Stein. To maximize function within your home's existing floorplan, follow these tips for creating a flex space that works with your lifestyle.

CREDIT: EDMUND BARR

1. Think outside a room's assigned function. 

Consider your home's least-used spaces, such as a formal dining room, breakfast nook, sitting room, or extra closet, and how they could be put to better use. Your home's builder might have intended the room for a specific purpose, but feel free to readjust if that doesn't align with your everyday priorities. "Nothing is off-limits for reimagining how a space can be used," says interior designer Shaolin Low of the Honolulu-based Studio Shaolin. 

A flex space should be designed around the activities that will take place there, such as working, exercising, doing homework, and more. "People are surprised by how cohesive they can make a space if they start from 'What should the space facilitate?' versus 'What is supposed to be in this room?'" Johnson says.

CREDIT: NATHAN SCHRODER

2. Consider your long-term needs. 

As you configure your flex space, consider how your needs might change as time goes on and plan for flexibility, Low suggests. "If you have young children at home, think about how it will be utilized as they grow up. If you will host a lot of family or guests in the future, think about how you'll accommodate," she says. Opt for lightweight, easy-to-move furniture to help ensure your setup can be rearranged as needed. "When it comes to exercise, consider alternatives to large and bulky equipment such as tension bands," says Tiffany Piotrowski of Tiffany Leigh Design. "These can be kept in a decorative bin or basket and still provide a full-body workout."

3. Plan for storage. 

Incorporate plenty of storage into your flex room to manage clutter and maximize space. "Add storage that can be closed off—cabinets with doors to hide messes and contain all the items necessary for whatever activities will be taking place in the room," says Austin-based interior designer Killy Scheer. Choose furniture or containers that can stylishly and efficiently accommodate your storage needs, whether that's for workout gear, office supplies, toys, or other items.

CREDIT: DANA GALLAGHER

4. Compartmentalize the flex space. 

If your flex space will serve multiple functions, section off areas of the room for each need, suggests Pramiti Bhargava of BlueGrape, a San Diego staging company. For example, designate one corner for a home office and use the other side of the room as a workout space. Room dividers or shelving units can serve as physical barriers that separate the space and offer added privacy. For a visual cue, lay down rugs or paint an accent wall to specify different sections.

5. Use flexible furniture. 

"If you want to have a multi-purpose space, you need to have multi-purpose furniture," Low says. Outfit your room with pieces that can transform to suit different needs or activities. Look for nesting furniture that can be stacked or separated, tables with extendable leaves or fold-down mechanisms, and armoires that can open up to reveal a workspace, suggests Scheer. Just be sure to measure the room carefully before purchasing furniture.

6. Reflect your personality. 

Customize your flex space to suit your style. Use it as an opportunity to go bold with a dramatic paint color or patterned wallpaper. Or tailor it to a certain hobby or interest. "There are so many creative ways to utilize extra space, so take it as an opportunity to showcase your personality and passions," Bhargava says.

 

Jessica Bennett, Assistant Home Editor — Better Homes and Gardens

Paint is the ultimate material for updating your home quickly and inexpensively. While solid-colored walls are one way to refresh a room, these wall painting ideas make a statement with bold patterns, contrasting colors, and interesting textures. With a few simple techniques, you can turn an ordinary wall into a spectacular work of art.

By Jessica Bennett

Wall Painting Prep

Before trying one of these DIY paint projects, brush up on your wall-painting technique to ensure you get the best finish. Always clean your walls, lay down drop cloths, and cover baseboards, trim, and the ceiling with painters tape before you begin. Then grab your brushes, rollers, and a few cans of paint.

Easy Patterned Wall

This freehand wall painting idea is easier than it looks. Start by sketching out a pattern of dashes, dots, and zigzags, or find one online to re-create. Dip a 1-inch angle brush into a small amount of paint and begin applying the pattern, working from an upper corner across and down the wall. A slightly imperfect pattern is the goal, so don't worry about uneven spacing or varying brushstrokes.

Painted Arch Idea

 to create a sense of depth and architectural character. Go with a single arch shape or string a few together for a scalloped design. To achieve a perfectly rounded top, secure a piece of string to the wall and pull it taut as you trace a semi-circular shape with a pencil. Extend the lines straight down the wall and mark off with painters tape. Use a small brush around the edges and fill in the middle with a roller.

Buffalo Check Wall Painting Idea

For this DIY paint technique, you'll need three coordinating colors. To form a buffalo check pattern, use a ruler and level to mark vertical and horizontal lines spaced 4 inches apart. Then outline the stripes with painters tape and paint horizontal lines in your lightest color. Use your medium-tone color to paint vertical lines, then fill in the squares where vertical and horizontal lines intersect with the darkest paint color.

Geometric Mountain Design

Dress up the walls of a kid's bedroom with this easy geometric wall painting idea. Form mountain-like triangles by marking off lines with painters tape and filling in with color. Choose bright, high-energy hues (such as orange and yellow) that will stand out well against your base wall color.

Two-Tone Painted Wall

Create the illusion of architectural details with this wall painting idea. Two-tone walls add dimension and contrast to a room, and this technique is much easier to achieve than installing molding or trim. Simply mark your paint line using painters tape and a level, and paint the area below to achieve a color-blocked look.

DIY Mounted Wall Treatment

This wall painting idea uses a wool pad to create a marbleized look with paint. Start with a few different colors of paint in several shades ranging from dark to light. Paint heavy diagonal lines in alternating colors across the wall. Prime the wool pad with a small amount of each color, then tap the pad along the diagonal lines to blend the colors together. To create the look of veining, dip a feather in equal parts white paint and water and drag it across the wall.

Sunset-Inspired Wall Paint Idea

Blend shades of coral and blue for this wall painting idea inspired by a sunset. First, gather six paint colorsthat are similar enough in tone and saturation to blend together and divide the wall into six horizontal bands. Paint the darkest color on the lowest part of the wall and use a brush to feather out the top while the paint is still wet. Working quickly, paint the band above in your next shade and use long, sweeping strokes to blend the colors together. Repeat with the remaining colors to form a layered look.

Painted Wall Stripes

This wall painting idea works well in kids' bedrooms or playrooms. To paint a striped wall, use painters tape and a level to mark off equally spaced horizontal lines (be sure to apply the tape inside the edges of the traced lines). Paint inside the taped sections and remove the tape when dry. If necessary, touch up any uneven spots with a small paintbrush.

DIY Ombre Wall

Paint your walls with a gorgeous gradient technique in just a few steps. Start with paint in dark, medium, and light colors. To create in-between shades, mix equal parts of your dark and medium paint; repeat with your light and medium colors. Paint your darkest color at the bottom and the medium shade above, leaving a gap in between. While the paint is still wet, brush medium-dark paint in the space between, using vertical strokes to blend the colors together. Moving up the wall, repeat this with your lighter colors to achieve an ombre effect.

 

By Jessica Bennett, Better Home & Gardens

The Construction Conundrum: Buyers frustrated with low inventory are turning to Plan B: building new. Yet, they'll face difficulty there, too, as land and labor shortages lead to long delays and supply chain struggles lingering. Below are some construction options to consider.

©Rentfrow Design/The Plan Collection

By Barbara Ballinger

As the pandemic housing boom continues, many buyers are still losing out on homes as they go up against higher bids. Some are now seeking out land and new construction to get the home they want.

But this strategy has its own set of peccadillos, including a shortage of buildable sites, which associate real estate broker Kim Cantine, with Halter Associates Realty in Bearsville, N.Y., says is not brand-new. “My area is experiencing its fifth year of low land inventory,” she says.

Land prices have also climbed and are experiencing bidding wars, Cantine says. To cope, some home buyers look to the popular 1980s alternative of tearing down a house to build a new one, says Ben Brittingham, vice president of marketing and sales with MN Custom Homes in the Seattle area.

©MN Custom Homes

However, that’s not a solution either since builders, architects, and contractors are swamped with requests, and building materials and appliances are priced higher and are frequently out of stock. Those performing the work can charge more or take only jobs they prefer.

What’s a frustrated buyer to do? Real estate agents and brokers can enable them to explore all options and find a big dose of patience.

Buy a Stock Building Plan

One way to shorten the new construction process and pare costs is to go with an existing house plan, a process like buying off the shelf rather than developing a custom plan. Tim Bakke, director of publishing at The Plan Collection, a 30-year-old company that now has more than 22,000 plans in its inventory and continues to design new ones, says a predesigned plan can shave a few months off the process and cut the design cost by at least $7,000 to $8,000, depending on the complexity and cost of labor.

Though the design won’t be custom, choices are sufficiently varied in number of bedrooms and bathrooms, style of layout, number of levels, amount of outdoor space, and many other features. The exteriors are also diverse, from the popular modern farmhouse look to more traditional Tudors and Colonials. One drawback, Bakke says, is that substantial changes, such as structural walls being moved, can’t be made without incurring added costs. But if a buyer thinks they may want more space, Bakke suggests starting with a larger footprint to have square footage to manipulate.

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©The Plan Collection

Build Custom

Hiring an architect or builder to design a house from the ground up is a major undertaking that requires making countless decisions, such as the size of the kitchen, height of ceilings and windows, number of bedrooms and bathrooms, type of doorknob, and even width of hallways. The advantage of this route is it gives homeowners more of what they want for their budget. “They can put solar panels on the roof to lower costs and make it passive and environmentally friendly, for example,” says Los Angeles–based attorney Robin Finch, a real estate partner at Greenberg Glusker.

The downside to building custom is that the process takes typically three to six months for the design, time to secure permits and approvals, and, depending on the size of the project, 12 to 16 months for building under normal non-pandemic conditions, says architect Victor Body-Lawson of Body Lawson Associates in New York City. Costs are also generally higher: The architect often charges a design fee (4% to 10% of construction costs) and a 10% contingency fee. On top of this, materials and appliances have jumped by as much as 20% per month in the current frenzied climate, he says.

Go With a Spec Home

Buyers have another possibility—selecting a house that a builder is constructing or has finished as a stand-alone residence or perhaps as part of a development. Depending on when clients buy affects how many choices they get to make, says Brittingham. If the house is finished, they buy what the builder has selected. But if framing has just begun, they may be able to make choices in such categories as tiles, countertops, vanities, flooring, cabinets, lighting, and more. Some builders offer choices at different price levels, such as laminate at a certain cost or pricier marble at a higher cost.

One distinct advantage is that the price point may be 10% to 20% less than a custom home because of economies of scale—though this is not guaranteed due to COVID-19, says Brittingham, whose homes average $2 million to $6 million. 

Think Prefab

Prefabricated home options have increased, with more companies building houses in a factory, says Sheri Koones, author of several books, including Prefabulous and Sustainable. Many of these companies are seeing great demand, including for houses to help house those experiencing homeless, she says.

Because of the building boom, the supply chain for this sector has been disrupted, too, says John Colucci of Westchester Modular Homes in Wingdale, N.Y. “We are not only paying top dollar for materials, but the lead times have created a slowdown. That being said, modular is still faster than stick building since we managed to keep our labor. We are all so busy, but some would-be customers are sitting on the sidelines,” he says.

©Westchester Modular Homes

Factors Home Buyers Should Weigh Before Proceeding

How much will a house cost? Buyers must be realistic—they should budget 15% to 20% more than they expect the house to cost, especially as COVID-19 has increased costs of materials, appliances, and labor, Bakke says. When a mortgage is needed, Bakke says, it’s wise to remind buyers to consider the rule of not spending more than 28% of their monthly gross income. Others think the percentage should be based on overall life goals, which is why consulting a financial planner is wise. New construction requires a construction or bridge loan that converts to a traditional mortgage when the house is completed.

©Duo Dickinson Architects

How much square footage is needed? Figuring out size can be tough in the abstract. Some 2,500-square-foot homes, for example, seem larger than others, which often depends on the amount of hallway space, height of ceilings, windows, and light. It’s best for buyers to walk through existing homes to get an idea and list which rooms they want and dimensions. Architect and author Sarah Susanka started her “not-so-big house” movement decades ago to emphasize the importance of having every inch count and spaces do double duty, which may help cut costs.

Homeowners should also bear in mind that square footage is the single biggest driver in determining building costs, says Bakke. The cost varies widely in different arts of the country. According to 2019 U.S. Census Bureau data, the median price per square foot for a contractor-built single-family home was $114, but these days many cite higher prices of $300 to $400, and in certain cities like San Francisco and Boston they may rise to $600, says Madison, Conn.–based architect Duo Dickinson. Finishes also affect pricing.

How much detailing is included in a plan? After interviewing two or three architects or builders to design the house, home buyers should check references (like from a local American Institute of Architects list), licenses, insurance, and referrals and decide—or go with a design from a plan company. It’s critical to read the plan to be sure everything is included and in the right place, including windows, electrical outlets, roofing trusses, stairs, doors, and plumbing. A bank may need detailed construction drawings and a site plan, according to Bakke. If a buyer doesn’t understand how to read a plan, suggest they learn from sites such as The Basics: How to Read Architectural Plans.

Why is the site key? The spec house builder will have vetted the land choice, but a custom house requires a buyer find a suitable lot. Not all lots—even those that are the same size—meet that criterion. Some require trees to be removed, septic systems and power lines to be added, and soil to be tested, says Dickinson. Body-Lawson says the geological makeup should be studied because it may cost more to excavate a rocky or wetlands site, if allowed. Information about the area’s broadband capability is important, particularly as many people work from home.

A professional on the team also needs to check town rules about land records to be certain there are no outstanding liens and to know the setback limits. These days, some information can be gleaned from aerial photographs and mapping systems that a building department usually has, says Dickinson.

To curtail costs, Body-Lawson recommends that homeowners try to buy undervalued land, which may mean a site farther from town or with fewer features on buyers’ wish lists—such as a chance of forgoing mountain views. They should also avoid overbuilding for their area, since prices may not continue to rise.

Why secure multiple bids? For the actual design, the buyer should secure three bids that compare apples with apples. Bakke says any contractor or builder hired should have experience in the homeowner’s area, so they understand the topography and local building codes. Sometimes, a bank may ask a builder to complete a review application to be sure the person is licensed and insured and has a history of successfully completing projects, Bakke says.

Take Time to Draft a Detailed Contract 

With so many details to consider, and so many different work crews involved in the process—including subcontractors and landscapers—it’s critical that a homeowner have contracts with all those involved, which a real estate attorney should review. Los Angeles–based attorney Robin Finch of Greenberg Glusker suggests bringing in an attorney early in the process, even before land is bought.

The contract should specify the amount of the down payment, how much to pay at specified time periods, how to handle change orders, the amount to hold back until everything on the punch list is completed satisfactorily, for what reasons a contract can be cancelled, and for how long a warranty guarantees work such as a house settling, says Ann O'Connell, an attorney and legal editor at Nolo, a legal publisher of books and software based in Berkeley, Calif.

At the same time, these tough COVID-19 times require flexibility, says architect Katy Flammia, design director of the Hudson, N.Y., office of New York City–based Spacesmith, an architecture and interior design firm. “We’re finding with construction that it’s almost impossible now to establish construction costs, which we used to keep the design within our client’s budget. What our clients could buy a year ago is different than what it costs now, and we’re seeing almost weekly price increases,” she says. Furthermore, she cautions clients to be flexible. “They may want to have a list of alternates in materials and scope, and even construction method alternates such as prefab components,” she says.

Some of the former ways that homeowners could protect themselves in their contract may no longer be included. Because of COVID-19 work delays, shutdowns, and price increases, it may be impossible to convince an architect and general contractor to agree to include financial penalties, known as liquidated or punitive damages, if someone gets sick and is off the job for a while or if prices rise higher than they expected, Finch says. So much is market driven, she adds. To resolve any potential problems on either side, it’s best if mediation can be stipulated as a recourse rather than litigation, due to lawyer and court costs and time, says O’Connell.

©Shannon Greer - Spacesmith

What About Those Rising Lumber Prices?

Lumber prices—plywood, hardwood, and softwood—have soared across the board. In fact, costs are up 130% since the start of the COVID-19 pandemic more than a year ago, adding $30,000 to the price of a new home, according to the National Association of Home Builders.

Because of the prices, as well as significant shortages, many architects, builders, and home buyers are asking two key questions: How long will the surge continue and why did it happen in the first place? Tony Uphoff, president and CEO of Thomas, which provides analysis and tools that reflect the buying process, says his company data shows a steady surge in sourcing activity for lumber over the last year.

“The situation,” he says, “has been long in the making. As a country, we have relied on Canadian forest lumber whose supply has diminished in recent years.” Part of the problem is also due to tariffs going up, which resulted in further withering demand in the U.S. due to the increased prices. As a result, Canadian mills began to shut down locations to protect themselves against lost revenue, he says, adding, “This initial step was magnified as we entered the early stage of the pandemic. Then, with many working from home, they began to evaluate their living quarters. Some sought more space, which drove a spike in residential housing prices and new construction. And many already owning a home spent more time and took on more projects.” The upshot, he explains, was “exacerbated demand on an already fragile lumber supply chain, which drove prices to an all-time high.”

And there’s more, he says. “The continued result is that some builders are pausing their work on new construction projects due to the high lumber prices. Other construction companies report that even at high prices, they are having difficulty sourcing supply through their established supply chains.”

But some good news has been emerging for several weeks. Sawmills have increased output over the last year and another increase is expected, according to Alex Hickey in her “Morning Brew” report. Most recently, prices started to fall, though what will happen over the long term is anybody’s guess. Homeowners and the professionals working on their homes are wise to keep an eye on prices and anticipate a possible seesaw effect, especially as COVID-19 numbers ramp back up.

3 Takeaways:

• Material and labor shortages require longer wait times.

• Prefab, spec, and pre-designed plans can help curtail long time frames.

• Building codes and the property’s topography should be thoroughly assessed to avoid setbacks.

 

Barbara Ballinger is a freelance writer and the author of several books on real estate, architecture, and remodeling, including The Kitchen Bible: Designing the Perfect Culinary Space (Images Publishing, 2014).

Find out how to choose the right contractor for your project and set terms that keep both of you accountable and happy.

By Bill LaHay and Jessica Bennett

Renovating your home is a big project, whether you're tackling just one room or embarking on a more extensive makeover. If you're only updating a few fixtures or surfaces, you might be able to do most of the work yourself or bring in specific pros for tasks like tiling or installing cabinetry. But if the project involves a complete overhaul of the room, hiring a general contractor might be worth the extra cost. As experts in building and remodeling projects, contractors can manage all the necessary permits, inspections, labor, equipment, and materials to ensure your remodel goes off without a hitch. The key is to find a reputable contractor that can correctly and efficiently meet the needs of your project. Make your remodel a success with these tips on how to find the right contractor.

PHOTO CREDIT: PETER MOLICK

1. Know what you want before hiring a contractor. 

As the client, you are the one driving the process. Before speaking with contractors, spend time thinking about your goals for the project, such as what it might look like, the amenities you want, and so on. If you don't know how to translate your goals into specific features or products, hire a design consultant or a design-build firm that can offer that service.

2. Get estimates from several contractors. 

Plan to gather at least three estimates from various contractors before you make a decision. More quotes (say five or six) will give you a clearer picture of how these companies stack up against each other. Not only will you get more perspective on appropriate costs, but also you'll get an idea of the caliber of work that each contractor will provide. For example, one contractor might offer a bargain rate and marginal work; another's high bid could indicate quality.

3. Do background checks. 

Even if a friend or relative has recommended a contractor they have used before, you should establish some minimum credentials. Get the full company name and address, and make sure that the firm has a current state license and adequate insurance coverage. (Typically, this means at least a million dollars in liability and worker's compensation coverage.) Obtain license and policy numbers, then verify that they are current. Determine whether any formal complaints or legal actions have occurred in the past or are pending.

4. Investigate a contractor's work history and work habits. 

Some contractors are specialists while others are generalists, so make sure their abilities are appropriate to your project. Take time to see their work firsthand, and look for three things: some similarity to your project, quality materials and workmanship, and consistent client satisfaction. Also, track small indicators that signal professionalism or a lack thereof. Are your phone calls returned in a timely manner? Are appointments and meeting times kept? Do the company's vehicles or dress code reflect pride and cleanliness? Carelessness in these small matters might not bode well for the quality of work.

PHOTO CREDIT: ADAM ALBRIGHT

5. Set boundaries for the job site. 

Let the company know you expect routine precautions, such as employee background checks for anyone who will have access to your home. Also, establish some ground rules about parking, bathroom use, smoking, and other issues that might concern you during the project.

6. Know what you'll be paying for. 

Some companies offer free estimates, but if the project cost will exceed several thousand dollars, contractors likely will prepare (and charge for) a "scope of work proposal." Typically, this proposal will break down the job budget into line-item costs for labor, materials, fees, and so on, or at least will offer specifics about the tasks the contractor will perform (such as demolition, installation, and cleanup) and what products will be used. The proposal fee often is paid upfront and applied toward the project cost if the bid is accepted. Contractors will often give you a fixed bid, but some work on a "cost-plus" basis, charging you for materials, time/labor, and an administrative or overhead fee. This is sometimes a legitimate alternative, but it should have a cap or some provision to contain cost overruns.

Beware of any contractor who asks you to pay in cash or pay for the entire project upfront. Secure a comprehensive written contract before the work begins and before making any payments.

7. Have a strategy for how you will resolve differences. 

Any contractor you hire will become part of your life for at least the duration of the project. Make sure you pick someone with whom you can communicate, and trust your gut if first impressions leave you feeling uneasy. Reputable professionals will insist on clear written agreements in order to protect both parties. During initial meetings, ask how unexpected issues or differences might be handled. This can include change orders (these should always be in writing, with cost issues directly noted) or more serious disputes, such as unintended damage or a failure to meet legal or reasonable standards.

8. Be aware of contract details. 

A contract should include start and completion dates, information on applicable building permits and fees (typically handled by the contractor, but legally your responsibility), a description of what products and services are to be provided by the contractor, payment terms, subcontractor issues (such as license and insurance verification and warranty of workmanship), and the consequences of default by either party. Default can include a contractor's failure to pay subcontractors; the contract should exclude you from liability in the event that occurs.

Courtesy of Bill LaHay and Jessica Bennett, Better Homes & Gardens

You want your home to feel cozy, comfortable, and inviting, but it's easy to go overboard on decorating and end up with a messy, cluttered space. Here are six things to avoid to pull off a polished look.

PHOTO CREDIT: ERIN KUNKEL

By Heather Luckhurst

You work hard to keep your home clean on a daily basis, so the last thing you want is for your decorating choices to contribute to a messy-looking room. Although clearing out clutter is the first step to a polished, orderly look, the way you furnish and decorate the room is also hugely important to its overall neatness. Sometimes simple decorating mistakes can make the design appear awkward, disheveled, or downright chaotic. When something isn't quite right, it can detract from the design and interfere with the overall mood of the room. Luckily, these decorating problems are often easily fixable with just a few tweaks. Simply swapping out accessories or rearranging furnishings can help bring order to the room and maximize your tidying efforts.

To help you create a space that looks clean and organized, we've compiled a list of decorating mistakes that could be making your home appear messy. By steering clear of these common issues, it's easier to maintain order and achieve an immaculate look.

1. Relying Too Much on Open Storage 

Open shelves are a great place to store books and display collectibles or art, but this type of storage works best when it's not overcrowded. When decorating a bookcase  or built-in shelves, don't pack every inch of space with books and accessories. To achieve a cleaner look, edit down the arrangement so you can leave some open space between items. You should also avoid using open storage to manage electronics and cables or to hold games, movies, and toys. These items are best stashed away inside cabinets, boxes, or baskets for a less cluttered effect.

PHOTO CREDIT: JAY WILDE

2. Using Too Many Colors

Decorating with too many colors is guaranteed to make a home look cluttered. Use one or two hues combined with neutral colors to give your home a cohesive, relaxed look. This living room features various shades of blue to create a gorgeous, cohesive space. The neutral rug, window coverings, and furnishings allow the room to breathe while making it appear more spacious and open.

PHOTO CREDIT: MARTY BALDWIN

3. Adding Too Many Accent Pillows 

Avoid a haphazard and untidy look by limiting the number of accent pillows on a sofa or bed. This living room looks pulled together and well-decorated because the sofa isn't laden with piles of decorative pillows. Two or three accent pillows on each end of the sofa are typically the perfect amount to decorate a room with beautiful color and pattern.

PHOTO CREDIT: EDMUND BARR

4. Pushing Furniture Against Walls 

Arranging all of your furniture up against the walls will make the space look cluttered and messy. The solution? Pull the furniture away from the walls and toward the center of the room as in this living room seating arrangement. This grouping of four chairs around a coffee table creates the perfect conversation area. Ground the furniture with an area rug to tie the arrangement together.

PHOTO CREDIT: DAVID TSAY

5. Placing Too Much Decor on Tables 

Too many decorative accents on the surface of a table will make a room look cluttered. Instead, edit the number of accessories, then decorate the table with one or two groupings of items. First, pare down what you already have on the tabletop. Only display what you love and what is functional (for example, a small dish for storing car keys and sunglasses) and remove the rest. Group many small objects in a jar or bowl. Elevate small objects on a stack of two or three books to give it a purposeful look.

PHOTO CREDIT: ADAM ALBRIGHT

6. Hanging Pictures Randomly 

Pictures and wall art hung in haphazard fashion across a wall creates a chaotic look that can overwhelm the space. Instead, group pictures in a gallery wall arrangement to instantly make the room appear more organized and balanced. The art hung above this bed, for example, demonstrates how several pieces can be hung to create a visually pleasing and curated look.

 

Courtesy Heather Luckhurst, Better Homes & Gardens

Here's how to make a renovation project budget, including factoring in project materials and preparing for contingencies, plus what not to forget when planning.

By Mia Taylor

Creating a budget for a home improvement project can be daunting if not downright overwhelming, particularly for first-time homeowners or those embarking on their first renovation project. What costs should be included in this type of budget? What sort of contingencies should be planned for? Is it important to build a cushion into the budget for overages? 

To help sort through these questions, we asked renovation industry experts to share guidance on how to create a home improvement project budget.

 

PHOTO CREDIT: HELEN NORMAN

Research, ask questions, and plan, plan, plan. 

The more time and energy you put into researching and planning your improvement project at the outset, the less likely you are to face unexpected costs that were left out. The extra bit of effort you expend early on can also help avert any project hold-ups. 

"In the planning process, be sure to ask as many questions as possible. No question is too small or too simple," says Baily Carson, home expert for Angi, a home service booking company.

One of the critical steps during the research phase of budget-building is investigating permits needed for your project (if any) and the associated cost. Permits can start as low as $100 for smaller projects and exceed $5,000 for very large projects, says Justin Goldman, CEO of RenoFi, which provides renovation loans for home remodeling projects.

"The national average permitting cost for installing a new water heater ranges from $20 to $85, while the average for kitchen remodels ranges from $500 to $1,500," explains Goldman. "It's important to account for permitting in your cost estimate early on."

Another factor to consider during budget development is your proposed project timeline, which can also impact overall project costs. 

"If your timeline is flexible, consider planning the project for the off-season," explains Carson, who says seasonal supply and demand can potentially drive up your expenses. "Try buying materials when they're on sale and booking pros when they have more availability."

Factor in labor costs. 

Materials will make up about two-thirds of your budget for a home improvement project, but that doesn't mean the other one-third—labor costs—aren't important. The price you pay for labor can vary by area, season, and availability. "This is one area where you don't want to have to cut costs; a high-quality pro will be worth the price tag," says Carson. 

A reliable professional will provide more than just the service, but also be a consultant on design choices and selection of the right materials for your home and climate. A variety of home improvement sites can provide labor costs estimates including HomeAdvisor.

Obtain multiple estimates. 

Another important early step when developing a renovation budget is obtaining estimates from professionals and well-respected home renovation websites, which can help you establish a clearer, more specific picture of the project's projected price tag. 

"Look at online cost estimates, ratings, and reviews, and talk to a handful of pros before deciding on the right one for you," advises Carson. "Depending on the project, consider having at least three pros come to your home in order to obtain a more accurate estimate."

Get budget-building done during design. 

Getting all of the specifics of your project finalized during design (in other words, before you actually start construction) is a significant part of creating a sound and thorough budget, says Goldman.

This should include proper estimates for all of the materials that will be involved, including things such as flooring, cabinets, tiles, and more, says Goldman. Material prices can vary based on market conditions, so you'll want to obtain accurate estimates.

Your design costs should also cover any new furniture that might be required for the renovated space, as well as window coverings, which are often overlooked when creating a budget. "These kinds of items can cost anywhere from $10,000 to $100,000 or more depending on taste, quality, and size of the home," says David Steckel, home expert for Thumbtack, a home improvement resource that matches you with local pros.

Additional costs that can be forgotten when calculating a project budget include light fixtures and bathroom accessories. Your builder will ask about these sorts of features at some point, so be sure to include them in your cost estimates. 

"Pot lights [also known as recessed or can lights] are not considered light fixtures, but your wall sconces or pendants over your island in the kitchen are," says Steckel. "Bathroom accessories are the toilet paper dispenser, mirrors, and towel racks. It would be safe to budget between $150 to $500 per fixture and $250 per bathroom."

Don't forget to include a budget contingency. 

Homeowners often wonder: How much should I factor into my budget for unexpected costs? The answer to that question can vary somewhat, but RenoFi recommends including an extra 5% to 10% of the overall renovation budget.

"While most cases run in the 5% range, Murphy's Law reminds us that anything that can go wrong will go wrong, so to sleep easy at night, plan on budgeting in 10% for unexpected costs," says Goldman.

These unexpected project costs might even be triggered by you, the homeowner, says Steckel. 

"In most projects, a homeowner will typically change their mind about a product after shopping around and starting to see the wide range of options available," explains Steckel. "They might fall in love with dolomite marble counters and choose to forgo the original Caesarstone that was quoted, so it's important to allow some room for making aesthetic changes to add a little extra joy to your budget. I recommend making sure you have at least 5% allocated for these upgrades."

Factor ROI into budget-building. 

Taking the return on investment (ROI) into account with home improvement projects can also help with developing a project budget. Here's why: If a project is likely to increase the value of your home, then you might want to splurge a bit on costs and materials. However, if the project is not likely to have any impact at all on your home's value, and is more about making you happy, you might want to find ways to be frugal to accomplish your goals.

"For example, a kitchen remodel can get expensive but can also offer ROI of up to 72%," says Carson. "Try not to exceed 10 to 15% of your home value on a kitchen renovation, but assuming you stay under that range, much of the investment will pay for itself in the long run."

Additional high-ROI projects include garage door replacements, window replacements, new siding, and bathroom remodels.

You might need accommodations. 

If you're planning a major remodel, such as a kitchen renovation or the addition of a new floor, you might need to spend some time bunking elsewhere while work is being done. The cost of alternative accommodations and associated costs should also be included in your project budget.

"This might mean staying somewhere else for a few weeks, or a lot of take-out food," explains Goldman. "While this may seem small in comparison to the overall renovation, this kind of thing can add up."

There will also be cleanup costs. 

Homeowners often forget to include a final site cleaning in their project budget when tackling a significant renovation. Here's why this particular line item is important: A post-construction clean is very different than your regular bi-weekly house cleaning, says Steckel.

"A post-construction clean requires special tools and a truck to haul away all the protection used to cover floors, counters, and more," explains Steckel. "For a full home remodel, the post-construction clean can cost $2,000 or more, so it's important to bake the cost into the budget when planning ahead."

You might want builder's risk insurance. 

In some states, if you're embarking upon a large-scale home renovation, you'll also be required to obtain builder's risk insurance, another item to factor into your project budget.

"Your homeowners' insurance policy specifically precludes construction, and the builder usually only has liability insurance," says Steckel. "This type of insurance typically costs between $500 to $2,000 depending on your project."

Consider financing options. 

Home improvement projects can come with high price tags, but there are a variety of financing options available to help you get the job done without having to cut corners. Do your research on home equity loans, cash-out refinancing, and other funding options, says Carson. 

"There are also company-specific financing options, like pay-over-time financing available on Angi through our partnership with Affirm," says Carson. 

Don't get attached to renovation budget templates. 

Every renovation project is very different, so it can be hard to find a one-size-fits-all budget template to be used tracking your home renovation. The good news? Often, a builder or contractor will help put pricing together for total spending on the scope of work, says Steckel. 

"But make sure you discuss your project with your contractor to really determine what's required and what unexpected costs could arise along the way," says Steckel.

 

Mia Taylor is an award-winning journalist who's passionate about making personal finance coverage accessible and engaging. News organizations she has worked for as a staff member or contributor include The Atlanta Journal-Constitution, the San Diego Union-Tribune, The Boston Globe, TheStreet, Bankrate, MSN, and Cheapism. In 2011, she was a member of a team of KPBS reporters who received a Walter Cronkite Award for Excellence in Journalism. Follow her coverage on Twitter and Instagram.

 

The pandemic ignited a surge in home buying that we haven’t seen since 2006. A rise in remote work opportunities, a desire to relocate to less densely populated areas, and a large percentage of the population entering retirement are just some of the reasons people are on the move.

by David Blue

In a recent survey conducted by Blue Moon Estate Sales of more than 700 people over the age of 55, 19% reported they plan to relocate by 2023. And with houses selling in a flash, homeowners are often left asking, “What do I do with all my stuff?!” Selling everything in a home is no simple task, and just the thought can leave folks feeling completely overwhelmed.

Twenty-six percent of respondents to the survey plan to engage with an estate sale company to help with downsizing. The advantages of using an estate sales company are a compressed sale timeline, expert pricing and analysis, and a large network of buyers following estate sales on a regular basis. A good estate sale company will be able to stage and price the items in a home in one to four days depending on the size of the crew and the number of pieces in the home.

Here’s how homeowners can prep for a successful estate sale.

1. Decide What Stays and What Goes

What can be sold at an estate sale? Almost everything. Estate sales professionals can help clients sell everything from kitchenware to fine china, utilitarian furniture to fine antiques, bicycles to cars, and costume jewelry to gold and silver.

 
Homeowners should have a general idea about what they would like to keep. They should treasure hunt in their own home prior to an estate sale consultation. This includes everything in attics and crawl spaces. Homeowners can run into problems when the consultants begin to clear out these spaces and they didn’t realize what was in the attic boxes and want to keep items. If they have any storage units, safety deposit boxes, or things laying around at a relative or friend’s garage, let the estate sale representative know what they will be adding to the sale as well.

2. Plan Moveouts Prior to Sale

Homeowners should move out of their property before the estate sale team sets up. They can take the items they want, and leave everything else for the sale. A buffer day is strongly recommended to tie up any loose ends.

Also, homeowners should have their movers relocate any oversized items to the first floor. Large pieces tend to sell better when they’re easily removed, including:

• Entertainment centers

• Large desks

• Sleeper sofas

• Treadmills/exercise equipment

• Pianos

2. Provide Extra Information About Items Around the Home

It’s not required, but it can be extremely useful to have any and all information about specialty or designer items. Providing information about what they originally paid for something as well as any paperwork or knowledge on designer and brand name items such as jewelry, clothing, rugs, furniture, or artwork are all helpful in determining fair market value and the promotion of the sale. Items that have been signed by or belonged to someone well known always need authentication of provenance.

3. Remove Any Personal Items

Everyone has personal documents and items floating around. Homeowners should gather up anything that has personally identifiable information on it, such as social security cards, military documents, medical bills, family photos, birth certificates, passports, licenses, pay stubs, prescription drugs, and any other items that may feature sensitive information and remove them from the home.

4. Point Out Potential Hazards

In the process of preparing the house for sale, if the homeowner points out some potential hazards, such as a loose stair or a low doorway, it’s important to share this information to help keep both team members and customers safe in the home. Even better, make those maintenance fixes prior to the estate sale.

5. Clear Out

In the same way that it’s difficult for a real estate agent to sell a home with the owner present, it’s a challenge to run a successful estate sale if the owner is hanging around. It’s best if everyone leaves the house and lets the professionals sell.

It’s important to point out that a professional estate sale isn’t the right call for all homes. In fact, a reputable estate sale company should not accept all clients. Homeowners should bring in an estate sale professional for a free consultation. They will quickly be able to assess whether the items will cause shoppers to form a line down the street or if alternative solutions need to be presented.

 

David Blue is from Raleigh, N.C. He graduated from the University of Wisconsin-Whitewater in 2011. In 2013, he co-founded Blue Moon Estate Sales USA. Blue Moon liquidates all forms of personal property. The burgeoning number of baby boomers has created an enormous demand for his services. To bring the business to new markets, David franchised his systems and operations to help families in need across the country.

Remember when it could take years to sell a home? Multiple listing service listings were flooded with distressed properties. In Miami, it was up to six years, according to news accounts in the wake of the 2008 financial crisis.

by Lawrence Yun

Today, of course, it’s the opposite story. It’s generally taking just a couple of weeks, and sometimes days, to find a buyer. From listing to contract, homes typically sold in 17 days in April, the fastest rate ever. In most markets, home buyers can’t risk leisurely weighing several listings before committing to likely the most expensive purchase of their life. Rushed decisions can easily lead to buyer misgivings—about overspending for the home, its size, or having insufficient reserves for upkeep. Still, most buyers come to see they made the right decision in these competitive times. Seeing prices, and hence their wealth, rising helps.

Could it all crash as happened from 2008 to 2010? Not likely. The current housing cycle is fundamentally different. We thankfully don’t have risky subprime mortgages that overstretched buyers’ budgets. The gatekeepers at banks, mortgage brokers, and government regulators demand that loan-to- value ratios, debt-to-income ratios, and income documentation meet guidelines before a mortgage is approved. To be sure, even with soundly written mortgages, we know some defaults can occur.

A second major difference is supply. Leading up to the housing bubble heyday, builders overbuilt. By my calculations, America had 2.1 million surplus housing units by 2006. Following the crash, underproduction steadily chipped away at the surplus, such that inventory normalized by 2011. Continuing underpro- duction led to the housing shortage. By 2015, the shortfall was 2 million homes. By the end of 2020, it totaled 4.8 million homes. The lack of inventory is why home prices are in no danger of falling sharply.

Homebuilding activity in 2021 will be slightly above historical norms. But it will take at least a few years to correct the massive shortage. In the meantime, we expect the national median home price to rise 9% this year and another 3% in 2022. Hyperspeed homebuying should taper off by year’s end as supply improves and affordability challenges persist.

Months’ Supply Continues at Record Lows

Sales slowed as listing shortages persisted in April. The low 2.4 months’ supply of inventory was the highest so far in 2021, though 40% down from a year earlier.

 

 

Lawrence Yun, Chief Economist and Senior Vice President of Research at the National Association of REALTORS®.  MAGAZINE.REALTOR

Homeowners who want to expand their livable space are finding ways to use the garage for more than parking.

by Melissa Dittmann Tracey

Since the pandemic began, homeowners have had to figure out how to make every square inch of their properties usable. Lately, they’re looking to the garage, adding functionality to the space besides just for parking. The garage also could serve as a gym, play area, or home office.

Aaron Cash, cofounder of home improvement firm Garage Living, says homeowners are taking a particular interest in renovating the garage because it’s often the largest open area in their home. Cash says the most common requests he receives from customers involve making the garage more functional and multipurpose, adding storage or a hobby area.

In 2020, Garage Living completed 5,200 garage makeovers, up from 3,800 in 2019. The company is on track this year to complete 7,500 projects.

The garage—which buyers named as one of their top five home features in a realtor.com® survey earlier this year—also can be used as a place to host open-air events.

Cash recommends two common ways to renovate a garage without a complete overhaul:

• Refinish the typically cold flooring in the garage to make it feel more livable. For example, Garage Living offers Floortex, which is a five-step coating process to dress up the floor.

• Add cabinetry, wire shelving, or wall-mounted organizers to reduce clutter, which commonly builds in garages. Cash advises using the extra storage for everything from sporting equipment to seasonal decorations.

View some of these garage transformations from Garage Living.

Photo courtesy Garage Living

Photo courtesy Garage Living

Photo courtesy Garage Living

Photo courtesy Garage Living

Photo courtesy Garage Living

 

Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine

©gorodenkoff - Getty Images

One in three consumers believes their dream home is financially attainable one day, according to a new survey from Buildworld, an international company that offers building materials. Millennials are the most optimistic, with about 38% believing they’ll one day buy their dream home, while Gen Z is the least optimistic at about 19%.

What makes a dream home? Buildworld recently surveyed 1,000 consumers in the U.S. and United Kingdom to find out.

Here are some highlights from the study.

Exteriors and Interior Home Preferences

Modern farmhouse exterior styles and a rustic modern interior were among the most popular.

One in five consumers called the modern farmhouse their “dream home.” A modern farmhouse combines contemporary style with a farmhouse aesthetic.

Inside, rustic modern was the most popular interior style. It includes modern furniture with preserved and natural architectural features, an open floor, and lots of light, Buildworld notes.

Age groups tended to show slightly different preferences for interiors and exteriors.

Most Desired Amenities

Outdoor home features have gotten more priority since the pandemic, such as gardens, patios, and porch spaces.

Overall, the must-have home features among U.S. respondents for a dream home were: a garden, garage, patio or porch, natural light, and a primary suite with a bathroom.

Buildworld’s survey revealed the following amenities created a dream home for most respondents.

 

 

Courtesy: Realtor Magazine

 

Housing affordability continues to decline as the hot real estate market fuels skyrocketing prices. Incomes aren’t keeping pace with the higher prices.

© malerapaso - iStock/Getty Images Plus

The median family income rose by 1.2% in May while the monthly mortgage payment jumped by 20%, according to the National Association of REALTORS®’ Housing Affordability Index.

Even as mortgage rates are down compared to a year ago—which has helped buyers save on borrowing costs—the median existing-home price has jumped 24.4% compared to the same period.

Monthly mortgage payments increased to $1,204 in May, a 20% jump compared to a year earlier. NAR’s analysis notes the annual mortgage payment—as a percentage of income—increased to 16.5% over the past year due to higher home prices and a decline in median family incomes.

Homeowners in the West have the highest mortgage payments to income share at 22.1% of income. Home prices in the West have climbed to a record high of $513,700.

The most affordable region of the U.S. in housing continues to be the Midwest, in which the median family income is $86,440. NAR’s index calculates a qualifying income as the income required to afford a mortgage so that payments are no more than 25% of a family’s income. The Midwest had a qualifying income of $44,016.

 

Source: “Housing Affordability Falls in May as Home Prices Rise Faster Than Income,” National Association of REALTORS® Economists’ Outlook blog (July 9, 2021)

Understanding key financing issues affecting homebuyers in their purchasing decision.

by Melissa Dittmann Tracey

Buyers have fueled a red-hot housing market over the last year as they rushed to secure record-low mortgage rates. But shifts are underway, which may affect borrowers planning for their next home.

1. Rising rates. “Interest rates below 3% on a 30-year fixed-rate mortgage aren’t likely to be around long,” says Lawrence Yun, chief economist of the National Association of REALTORS®. Rising inflation and a strengthening economy are expected to push rates up. Yun predicts that by as early as year’s end—but likely by next spring—30-year fixed-rate loans will average 3.5%. Higher rates and home prices could push some would-be buyers out of the market.

2. Strict qualifications. Lending standards tightened during the COVID-19 pandemic as lenders looked to avert risk, notes Tendayi Kapfidze, chief economist at LendingTree. Standards could ease a bit as the economy keeps improving and refinancings become a smaller share of total mortgage lending, says Guy Cecala, publisher of Inside Mortgage Finance. Still, the most favorable rates will go to borrowers with stellar credit histories—scores of 750 and above—and large down payments. Lending criteria in the hot vacation and second-home market could be a different story. Due to tightened underwriting criteria, second-home buyers could face steeper rates.

3. Larger mortgages. Higher home prices are leading to larger loan amounts. In March, the average mortgage taken out on a new-home purchase reached a record-setting $374,000, up from about $332,000, two years earlier, according to the Mortgage Bankers Association. As more people upsized their space in the pandemic, sales in upper price brackets outpaced those at lower price points. Applications for mortgages larger than $766,000 jumped 55% year over year in February, the largest jump in any price range, according to the Mortgage Bankers Association. By contrast, mortgages in the $150,000–$300,000 range decreased by 2%.

4. More nonbank lending. Borrowers have more options as nonbank lenders gain market share. “Nonbanks are competing more on rates and underwriting than banks have been, and that’s particularly been true over the past year,” Cecala says. “That likely will continue. As of now, banks appear to be content competing from the sidelines.” The top five U.S. banks—Wells Fargo, Bank of America, JPMorgan Chase, US Bancorp, and Citigroup—comprised only 21% of total mortgage originations last year, a decline from their 50% combined market share in 2011, according to Business Insider Intelligence’s Online Mortgage Lending Report. Alternative lenders are offering traditional financial products often at lower costs, with more relaxed eligibility criteria, and expanded digital options in loan processing. Quicken Loans (now known as Rocket Mortgage) issued the highest dollar amount of single-family loans in 2020, according to an analysis of 2020 Home Mortgage Disclosure Act data.

5. Rate lock-in effect. Some owners aren’t selling because they don’t want to give up their existing ultra-low interest rate, thus squeezing supply and placing upward pressure on home pricing, Kapfidze says, adding “this could be a challenge to the housing market going forward.” But Yun offers a broader view, noting that mortgage rates aren’t the only factor potential sellers consider. Some seek more space or the new flexibility to work remotely and live anywhere.

 

Melissa Dittmann Tracey is a contributing editor for REALTOR® Magazine. 

Artists provide creative methods for hanging your masterpieces that won't ruin your walls. 

CREDIT: D3SIGN / GETTY IMAGES

By Brigitt Earley,

If you're starting to build a collection of art, chances are you want to display your investments proudly. Otherwise, maybe you simply want to show off your favorite family photos. Whether photos or paintings, wall hangings have the profound ability to pull a space together in an instant. But what if you rent your place and have to keep the drywall intact or have intricate millwork that you don't want to mar with nail holes? You aren't relegated to a world with drab white walls. There are plenty of ways to hang artwork without making a single hole in the wall. 

The most common way to hang artwork without nails is by using Command Strips. You simply plan how you want to arrange your picture, then apply one half of the hook and latch strip to the wall and the other to the frame. Then, you stick them together to secure the picture or painting to the wall. When you go to remove them, they don't cause any damage to paint or drywall.

To go beyond this common hack for hanging artwork, we asked the pros—artists, DIY experts, and interior designers—for other creative solutions. Here's what they had to say.

Magnetic Paint 

To design a gallery wall that can be rearranged on a whim, use Rust-Oleum Magnetic Paint and adhesive-backed magnets to the back of lightweight prints or photo frames, says Audrey Van de Castle, manager of Stanley Black & Decker's Maker Initiatives. You can even try painting the magnetic paint in fun accent shapes around the artwork.

Display Easel 

Try showing off larger paintings on a display easel, says artist Corey Paige. "No matter what the piece you're displaying is, it automatically adds a unique touch to your space," she explains. "You don't typically expect to walk into someone's home and see art displayed on an easel—it's always a conversation starter, since it highlights the art."

String and Clothespins 

Another option? Use tape or mounting putty to string a piece of twine across your wall, then use decorative clips or clothespins to display prints along the line, says Van de Castle.

Suspended from the Ceiling 

If you have tricky wainscot or tiled walls, drive hooks into the ceiling instead, says Lindsay Pumpa, owner of L Pumpa Designs. Then, you can use rope, leather, or chains to suspend the framed artwork.

Wire Grid 

If you're looking to occupy more vertical space, a wire grid is another method that's perfect for your desk area, says Paige. Simply use clothespins to attach your favorite prints or photos.

Ladder Shelves 

Framed prints look great displayed on a ladder shelf, since leaning art is a great way to add dimension to a room, says Paige. Simply frame your artwork and prop it on the shelf. If your ladder shelf leans against a wall, you can display a larger framed print on the top shelf.

Room Divider 

Another fun way to arrange small works of art into a sort of gallery wall? On a folding screen or room divider, says Pumpa. This serves as an excellent way to divide a studio apartment into multiple "rooms," while also creating a cool focal point.

 

Brigitt Earley is a freelance writer and editor based in New Jersey. Her work has been published in a wide range of women's lifestyle magazines, including Martha Stewart, Real Simple and Oprah.

Remote work and mobility are expected to have the most significant impact on real estate over the next year, according to The Counselors of Real Estate’s list. The group identified current and emerging issues expected to have an influence over real estate in the 2021-2022 cycle. Remote work and mobility and its influence over commercial buildings globally was named as the top issue, followed by technology and ESG (Environment, Social, and Governance).

“The pandemic was a stress test, revealing vulnerabilities, appetites, and new and increased risks,” says Michel Couillard, global chair of The Counselors of Real Estate. “These themes present themselves in the 2021-2022 Top Ten Issues, which are highly interconnected and indicative of a newly changed and further evolving real estate environment. We have been awakened to some familiar but nascent areas of importance, namely cybersecurity, supply chain, and price instability. None of these are new concepts, but in a span of months or even just weeks, we saw high profile hacks, shortages of resources like microchips, lumber and labor, and rising prices across the board.”

Here’s a closer look at the top 10 issues on CRE’s list for 2021-2022:

1. Remote work and mobility

The pandemic greatly disrupted the workplace as many employees began to work remotely—and still are more than a year later. Commercial properties may need to be repositioned as the workplace adapts to more flexible and even shareable spaces.

“As we emerge from COVID-19 into a new world replete with local and global disruptions alike, our industry has been forced to recognize that adaptability and resiliency are paramount in real estate markets,” says Couillard. “It is undeniable that the pandemic’s disruption significantly impacted human behavior in how and where people have chosen to work. Now, with an escalating return to ‘business as usual,’ and workers beginning to return to offices, landlords, and companies nevertheless are facing repositioning of the workspace and the benefit of easily adaptable and shareable spaces. …. Property owners and managers should be flexible in order to accommodate these demand-driven changes in the desired use and location of space."

2. Technology acceleration and innovation

The Counselors of Real Estate also ranked the acceleration and adoption of technology as having the second greatest impact on the real estate industry. “The stressors were not about new tech, but about the acceptance of it,” Coulliard says. “Lockdown-driven changes in our work, the economy, in social structures, and in our personal behavior forced the industry to put any earlier reluctance aside.” Growing technology themes include artificial intelligence, machine learning, the Internet of Things, and cybersecurity, the report notes.

3. ESG at a tipping point

Environmental, social, and governance (ESG) initiatives are growing. In 2020, ESG funds more than doubled net new money intakes. “The growth in recent years is fueled by multiple drivers, including consumer shifts, regulatory requirements, trillions of dollars of wealth transferring to generation Z and millennials committed to philanthropic living, a blurring of work and societal expectations, and a full sprint to attract and retain top talent,” the report notes.

4. Logistics

“Whether it’s a port, rail line, pipeline … manufacturing facility, warehouse, farm, ranch, or grocery store, all these real estate assets are a critical segment in the supply-chain funnel that is logistics,” the report notes. “How logistics is functioning impacts the utilization of commercial real estate. Redundancy and the ability to process disruption are two key elements required to support the fast-moving, high-volume requirements of modern-day logistics in the ‘shop-online-and-deliver-to-me’ era in which we find ourselves.”

5. Infrastructure

The Civil Engineers estimates the U.S. infrastructure funding gap in 2021 to be $2.6 trillion, a 24% increase compared to 2017. “The COVID-19 pandemic, climate change, and heightened societal interest in social and economic equity have redefined infrastructure imperatives beyond the significant ongoing necessity for improved roads, bridges, airports, ports, mass transit, and other traditional infrastructure needs,” the report notes. A proposal on Capitol Hill sets out to allocate $110 billion in new spending to bridges and roads, $65 billion to expanding access to broadband, and $48.5 billion to public transit, and more.

6. Housing supply and affordability

The National Association of REALTORS® and the Rosen Consulting Group released a report last week calling for a “once-in-a-generation” response to address decades of underinvestment and underbuilding in the housing market. The nation has faced a shortfall of 5.5 million to 6.8 million housing units since 2001, according to the report. Housing groups are calling on lawmakers to expand access to resources, remove barriers to incentivize new development, and more. 

7. Political polarization

“Political friction is holding back America’s economic productivity,” the report notes. “We are squandering resources as we try to address problems that arise from the partisan divide rather than problems confronting us as common issues …. And the real estate industry’s well-being is a function of our economic growth.”

8. Economic structural change

Economic growth is mostly an unknown. As the report notes, how do we assess the real potential of the economy for sustainable growth? What numbers indicate a true trend and which are merely adjustments from the low bottom of the second quarter of 2020? Which behavioral changes made by U.S. households in the pandemic will persist? The ability for businesses to anticipate what’s next is met with challenges. For example, “even though real estate investors may reasonably expect an uptick in demand in the coming year, the ability to anticipate when occupancy and rent will rise frustrates underwriting,” the report notes. “We are observing many investors increasing their focus on property management aimed at retaining tenants and defending cash flow, while selectively seeking ‘value-add’ properties amenable to active asset management. The thinking is ‘focus on what you can control’ during this period where macro-level uncertainty is the governing headwind at the policy level in terms of the structural problems in this economy.”

9. Adaptive Reuse 2.0

The term is not new but the focus is getting bigger. CRE refers to Adaptive Reuse 2.0 as “The Neighborhood Approach.” It aims to address the challenges of what to do with defunct suburban malls and thousands of empty big-box retail stores that are surrounded by desirable and affordable neighborhoods. It requires a re-examination of suburban communities in repositioning and transforming areas that could be at risk for blight. A number of projects have been completed or are underway to help reconnect communities, prevent blight, and restore green space.

10. Bifurcation of capital markets

Debt capital markets have been volatile since the pandemic, namely public markets like commercial mortgage-backed securities, mortgage REITs, and agencies such as Freddie Mac and Fannie Mae. “Mortgage REITs took a significant hit early in the pandemic, with some recent recovery driven by restructuring credit lines and paying down credit facilities that experienced margin calls,” the report notes. Still, the “market continues to be flush with debt capital liquidity, despite property type and market uncertainty. Looking out to the remainder of 2021 and into 2022, performance will dictate the amount of distress and losses, and risk management should dictate markets, property types, leverage, loan structure, and pricing for mortgage debt. The next year should also tell us if commercial real estate debt was too rich and whether perceived risk underestimated where pricing should have been.”

 

Source: The Counselors of Real Estate

 

Independence Day (colloquially the Fourth of July or           July 4) is a federal holiday in the United States.  It commemorates the Declaration of Independence of the United States, on July 4, 1776.

The Continental Congress declared that the thirteen American colonies were no longer subject (and subordinate) to the monarch of Britain, King George III, and were now united, free, and independent states. The Congress had voted to declare independence two days earlier, on July 2, but it was not declared until July 4.

  

Wolfeboro Independence Day Parade

   

• Sunday, July 4, 2021

• 1:00 PM  4:00 PM

Location: Main Street, Wolfeboro, NH
Sponsor: American Legion Post #18

 

For the first time in 10 weeks, mortgage rates inched above 3%—and the era of 2% rates may be over. “As the economy progresses and inflation remains elevated, we expect that rates will continue to gradually rise in the second half of the year,” said Sam Khater, Freddie Mac’s chief economist. “For those homeowners who have not yet refinanced—and there remain many borrowers who could benefit from doing so—now is the time.”

© ATU Images - The Image Bank/Getty Images

The National Association of REALTORS® has predicted that mortgage rates will average 3.2% by the end of the year.

Freddie Mac reports the following national averages with mortgage rates for the week ending June 24:

• 30-year fixed-rate mortgages: averaged 3.02%, with an average 0.7 point, rising from last week’s 2.93% average. A year ago, 30-year rates averaged 3.13%.

• 15-year fixed-rate mortgages: averaged 2.34%, with an average 0.7 point, increasing from last week’s 2.24% average. A year ago, 15-year rates averaged 2.59%.

• 5-year hybrid adjustable-rate mortgages: averaged 2.53%, with an average 0.3 point, up slightly from last week’s 2.52% average. Last year at this time, 5-year ARMs averaged 3.08%.

Freddie Mac reports average commitment rates along with points to better reflect the total upfront cost of obtaining a mortgage.

Source: Freddie Mac

 

The housing market is red-hot right now, but if you're waiting for a massive market correction, don't count on it. Real estate industry experts weigh in with predictions for home buying and selling trends.

CREDIT: SAUL LOEB/AFP/GETTY IMAGES

By Mia Taylor

It's hardly a secret that real estate prices across the country have been skyrocketing. Recent data from Redfin, a real estate brokerage, shows that median home prices are up 20% year-over-year. At the same time, many properties are under contract for purchase within a mere one to two weeks of hitting the market and it's not unusual for prospective buyers to offer 10% or even 20% over the asking price. In fact, Redfin reports that 46% of homes sold for more than their list price. As if that's not enough, many buyers are paying cash for homes. Yes, cash. You read that right.

"We are in a record-breaking housing market with asking prices at an all-time high ($357,200), median sale prices at an all-time high ($347,500), the share of homes selling over list price at an all-time high (46%), and homes selling faster than ever before: 58% under contract within two weeks of listing and 46% within one week of listing," says Redfin Chief Economist Daryl Fairweather. "Ask just about any real estate agent, and they'll tell you they've never seen a market this hot."

All of which has left many watchers and potential buyers scratching their heads and wondering if we're due for a market crash similar to the housing market burst that brought on the Great Recession in 2007. The short answer to that question? No, a similar crash is not likely. And there are many reasons for that. 

Here's a closer look at some of the most obvious factors contributing to widespread confidence that there will be no real estate market crash in 2021 (or anytime soon), as well as insight into what real estate and industry experts do see happening in the market over the coming months—and what it all means for potential buyers.

Factors Contributing to the Overheated Housing Market 

First, it's important to understand that there are numerous elements driving the current housing market and they differ from what was taking place before the Great Recession.

"Those of us who experienced the housing crash really don't want to go back to the days of underwater sellers and houses sitting on the market for months at a time without a single offer. The good news is that this isn't 2008 and 2021 has a few things going for it that the sub-prime market could only dream about back when 'short sale' became a household word," explains Debra Remington, managing broker for Texas-based Remington Team Realty.

1. Lack of Inventory 

One of the biggest contributors to the current red-hot market and sky-high prices is a dearth of inventory. This is an explanation you'll hear from experts far and wide. 

The shortage of inventory is caused by a few factors, including owners not wanting strangers (potential buyers) traipsing through their living quarters amid a global pandemic, thus far fewer homes being put on the market for sale.

The second issue is the pace of new construction, which has been slower than normal. Years of sluggish new construction in the United States has finally caught up, and many builders went under during the Great Recession.

"Not enough people are listing their homes for sale, and new construction isn't keeping pace with demand," says Fairweather. "America built fewer homes in the 2010s compared to any decade going back to the 1960s."

In other words, one of the primary drivers behind the current overheated housing market is very different than what set the stage for the 2007 crash. Today's boom is not due to loose lending practices flooding the market with unqualified buyers.

"What caused the market to crash was related to real estate and the lending practices that were happening. People were buying homes that shouldn't have been buying homes," says Dave Nations, founder of The Nations Network. "They couldn't actually afford the house they were buying but the loan product allowed them to at least get in the house short-term."

Experts predict that the current record low inventory will keep demand at record levels. But in the run-up to the Great Recession, the market was characterized by limiteddemand and too much inventory, says Remington.

2. Historic Low Interest Rates 

Historic low interest rates are also contributing to current conditions, encouraging a steady stream of buyers to enter the market. The Federal Reserve repeatedly lowered interest rates amid the economic downturn caused by the COVID-19 pandemic. And it doesn't appear that those rock-bottom rates will disappear anytime soon, yet another reason buyer demand is likely to remain strong and thus no market crash.

"The Federal Reserve has no immediate plans to change interest rate strategy. If they stay low, buyers will continue to purchase as even if they are paying a premium, they are locking in really great rates for the next 30 years," says San Francisco-based realtor Julie Upton. 

3. Millennial Buyers Entering the Market 

Millennials are also entering the market like never before, which is playing a role in market conditions. According to the 2021 NAR Buyer and Seller Report, the median age of first-time homebuyers is now 33, which is coincidentally also the average age Millennials turn this year.

"Millennials buying homes have already significantly impacted the market," says Grace Keister of California-based First Team Real Estate. "At First Team, we've seen a big uptick in Millennial clients. I've personally referred two friends in the last year to buyers' agents; [I] know about two other friends who are casually searching, and another couple who just purchased after six months of searching. We also had a new agent who closed 15 transactions in her first year, all buyers that she met through her TikTok presence."

4. Lending Practices Tightened 

Perhaps one of the most meaningful indicators that a real estate market crash is unlikely in 2021 can be found in today's lending environment, which is far stricter than it was prior to 2007. As Upton likes to say, the days of NINJA loans (no income, no job, no assets) are long gone. 

"These risky loans were common prior to the market crash," explains Upton. "These days, lenders are very strict when qualifying buyers, and changes to appraisal laws have also tightened up the appraisal practices. Taken together, there are fewer risky mortgages in the financial system."

Why a 2021 Market Crash is Unlikely 

Market crashes generally take place when there's a serious breakdown somewhere in the system. But as outlined by so many experts, that's not currently a problem.  

"Absent a catastrophe in the financial markets or in the political arena, we fully expect demand for housing to remain strong," says Michael Shapot, a New York based real estate broker with The Shapot Team.

Upton supports Shapot's assessment. "While anything can happen that might impact the housing market, there are no key indicators right now to suggest that there will be a crash in 2021," she says.  

Bankrate Chief Financial Analyst Greg McBride says that while the recent pace of home price appreciation isn't sustainable over the long-run, that doesn't mean prices are at risk of some sort of sharp drop or correction. It would likely take a return to the questionable lending practices of the early 2000s to trigger such a collapse.

"If lending standards loosen and we go back to the wild, wild west days of 2004 to 2006, then that is a whole different animal," McBride explains. "If we start to see prices being bid up by the artificial buying power of loose lending standards, that's when we worry about a crash."

What Is Likely to Happen with the Housing Market? 

As the vaccine rate of Americans continues to increase and more homeowners feel comfortable listing properties and having strangers walk through their homes, market conditions will likely become more balanced. There will be more supply and prices should adjust somewhat.

"The gradual increase in inventory will begin to slowly alleviate the demand created by the inventory shortage," says Colby Hager of Texas-based Capstone Homebuyers. "This rather gradual return to normal will create a larger pool of options for buyers which will lead to more days on market for houses. The bidding wars seen today that are a big factor of price increases will begin to die out because buyers will have more housing options to choose from and there will be a drop in competition between buyers for any one house."

Indeed, Zillow data supports the projections of Hager and other industry professionals; while the early weeks of 2021 were marked by a scarcity of new home listings as sellers stayed on the sidelines in the face of an uptick in COVID-19 cases, data indicates sellers are starting to come back. New listings nationwide rose by 30% in the four weeks between late February and late March.

What Does It All Mean? 

So what do all of these insights and predictions add up to? Is it good news for homebuyers? In many ways, that depends on your buying timeline.

"Homebuyers who have the ability to wait for the bidding wars to disappear, prices to stagnate, and listings to stay on the market longer will get more house for their dollar," says Hager. "Homebuyers who can afford to sit on the sidelines during this overheated housing market will definitely be rewarded."

And if you're in the market to buy right now and can't wait it out? "Remain patient. Exercise caution. Don't ever pay more than you can comfortably afford," says Shapot. "Consider other options, perhaps in different neighborhoods or off market properties that haven't yet been listed. Look at properties that have been on the market a while and appear overpriced; there is less likelihood that there will be a bidding war and perhaps the homeowner will be sensible and consider reasonable offers."

 

Mia Taylor is an award-winning journalist who's passionate about making personal finance coverage accessible and engaging. News organizations she has worked for as a staff member or contributor include The Atlanta Journal-Constitution, the San Diego Union-Tribune, The Boston Globe, TheStreet, Bankrate, MSN, and Cheapism. In 2011, she was a member of a team of KPBS reporters who received a Walter Cronkite Award for Excellence in Journalism. Follow her coverage on Twitter and Instagram.

Lumber prices are falling quickly from record highs, and that may be happening at the right time for the new-home market.

Photo Credit: Nathalie Dupont - Getty Images

By REALTOR Magazine

Home builder sentiment sank to its lowest level since August 2020, with builders blaming increasing material supply challenges for their outlook, according to a newly released report from the National Association of Home Builders. Builders said that declining availability for softwood lumber and other building materials is pushing builder sentiment down in June, at a time when buyer demand is surging.

Lumber prices have been increasing for months, prompting builders to raise their prices and, in some cases, to stop taking new orders due to the difficulty of pricing projects accurately during the course of construction.

But wood prices are coming down—and they’re falling fast. For example, futures for July delivery of lumber were $1,009.90 per thousand board feet, a 41% drop from the record of $1,711.20 reached in early May, The Wall Street Journal reports.

“The rapid decline suggests a bubble that has burst and the question is how low lumber prices will fall,” The Wall Street Journalreports. “Even after tumbling, lumber futures remain nearly three times what is typical for this time of year. Lumber producers and traders expect that prices will remain relatively high due to the strong housing market, but that the supply bottlenecks and frenzied buying that characterized the economy’s reopening and sent prices to multiples of the old all-time highs are winding down.”

During the run-up in lumber prices, some builders began hoarding lumber to shield themselves from any future gains and to ensure they didn’t run out of it during construction. Housing analysts predict the new-home market will see greater “shadow inventory” as businesses begin to sell their own stockpiles.

“I don’t think $1,000 lumber prices are the new normal,” Devin Stockfish, chief executive of Weyerhaeuser Co., a lumber producer, told investors last week at a conference. “But that being said, when you think about the amount of housing that we’re going to have to build in the U.S. over the next three, five, 10 years, that’s just a significant amount of demand for wood products.”

Source: “Lumber Prices Are Falling Fast, Turning Hoarders Into Sellers,” The Wall Street Journal (June 15, 2021) [Log-in required.] and “Rising Material Challenges, Declining Builder Sentiment,” National Association of Home Builders (June 15, 2021)