Archive for September, 2010

Downsizing, Rightsizing, & Possibilities for Savings

Monday, September 27th, 2010

We’ve talked before at Texas Lending Today about whether downsizing—building or moving into a smaller, less financially straining home—could be a possible smart solution for many Dallas-area homeowners’ woes. Apparently, it’s becoming a trend.

According to the Dallas Morning News :

Thanks to the recession, a housing bust and worries about overspending, new research shows that more homebuyers are passing up big houses in favor of something that’s more affordable to buy and maintain.

[...] More than 60 percent of the potential buyers Trulia surveyed said they wanted houses that were 2,600 square feet or less. Only 9 percent said their dream house would have 3,200 square feet or more. Builders are responding. Nationwide, new home size peaked in 2007 at 2,521 square feet and has fallen slightly since then.

Baron doesn’t need a survey to tell him that smaller houses are in demand. "This fall I have five new homes sold under 3,000 square feet," he said. "This is where I’m carving out my niche – small and green."

Baron’s houses are designed to mimic historic homes in the neighborhood but with the latest energy-saving features. He anticipates that the single-story house he’s building on Willis Avenue – with just over 2,000 square feet – will have electric bills under $100 a month.

In other words, smaller isn’t just smarter for many people—it’s better.

So let’s say you’ve either lost a house due to foreclosure or were forced to sell for less than you had hoped, and have found yourself struggling to get back in the market. And let’s say the kids have moved out, or the recession has helped you make some tough choices about what you do and do not need in a home. Downsizing might be right for you.

Let’s review a few of the (expanded) benefits:

Lower Bills

One of the unintended consequences of buying that huge dream home is the massive utility bills that come with them. In other words, if a house’s HVAC system resembles what’s found behind Cowboys Stadium, that dream could quickly become a nightmare. Since many people in the recent housing bubble were already stretched to the limit just to buy their homes, sky-high bills were enough to push them over.

Furthermore, many new, smaller homes come filled with earth-friendly innovations—technologies like energy-efficient lighting systems and water heaters. These are good for both the world and your wallet.

Every little bit of cash helps in a recovery. Don’t overlook these potential savings.

Freedom. Glorious Freedom.

Simply put, downsizing gives you wonderful flexibility: Freedom to move closer to family and friends. Freedom to cut your daily work commute in half. Freedom to explore living in a new part of town. Freedom from yard work (if you move into a condo). Freedom from “dead weight”—extra space you’re paying for but not really using.

Embrace these new opportunities, and they’ll make moving much less painful.

Lower Mortgage Payments

With lower mortgage payments what will you do with that extra cash still there at the end of each month? Rebuild those decimated savings? Invest in some income property? Climb out of debt? Cherish these increased possibilities.

If you’re starting over, start on a solid foundation with a house you need (rather than the one you don’t). We can help—contact us for more information.

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Texas Ripe for Home Construction Recovery

Monday, September 13th, 2010

Despite all the local housing frustration, conditions across Texas remain ripe for a more rapid housing construction recovery than in other parts of the country.

At least, that is, according to a recent study compiled by Reed Construction Data :

“Houston’s 24,099 housing permits in the twelve months through July keep it the top housing market in the US. Houston and Austin are issuing permits per 1,000 population at more than four times the national average. San Antonio and Dallas are issuing permits at about three times the national average per 1,000 population. 15 of the 18 smaller Texas Metro areas are also issuing permits per 1000 population at a higher pace than the national average. Texas has a relatively mild recession. Only New England and the Northern Plains weathered the recession better than Texas. But, more importantly, Texas avoided soaring home prices before the recession and has relatively fewer households with underwater mortgages.”

In other words, Texas was in better shape before the recession, and thus has weathered it relatively well. And since the housing bubble was such a core part of the economic collapse across the nation, Texas’ relatively mild bubble made recovery a much more simple affair. But Texas cities also boasts an abundance of available land, suburb-friendly infrastructure, and a plethora of recession-proof industries that keep the jobs coming and keep homebuilding as an attractive option. Other regions with emerging markets, stable industries, or permanent attractive qualities like beaches are recovering similarly well.

But to better understand why all housing markets are still struggling to at least limited degrees—and why Texas is doing better than most—let’s take a look at some of the elements in play that can drag a new construction market down.

  • Cities with the largest decline in housing permits compared to the height of the housing bubble are essentially still “paying back” all the overbuilding that happened during all the boom. What the study calls “phantom sales”—houses sold to families who couldn’t really afford them, even before the massive job losses began in 2008—are also being paid back as cities try to sell off the massive surplus of available homes.
  • A large percentage of the empty homes are lodged firmly in a “shadow inventory”—basically unlisted investor- or bank-owned homes being held off the market until home prices return to more normal levels. In other words, the surplus isn’t going anywhere anytime soon.
  • Each of these cities are stuck with a large glut of existing homes listed at or below what it would cost for a homebuilder to construct a new home, depressing incentive to do so.

Even in a down market, a large market means opportunities for bargains abound — if you know where to look, and if you have the right kind of help. Contact us , and we’ll give you all the information you need to start either the Dallas homebuying or homebuilding process.

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Homeowners Insurance and Katrina: What We Can Learn

Thursday, September 2nd, 2010

Five years later, tens of thousands of New Orleanians are still displaced from their homes, and many have simply moved on and re-settled in other cities. Nearly 1,000 families in New Orleans itself still lack permanent housing. And as all the TV coverage of the five-year anniversary reminds us, people all over both the private and public sectors were caught flat-footed by the immense scale of the disaster.

Now it’s true that here in Dallas, we’re not surrounded by crumbling levees. We’re nowhere near as vulnerable as New Orleans was at the time of Katrina. But we are located in tornado alley, and the Trinity River is prone to flooding, and there’s no real way to natural calamity-proof our entire city.

So, in honor of those still suffering from Katrina’s impact, let’s talk about one truly important means of preparing for a natural disaster—homeowners insurance.

Here are three things to know:

It’s a Good Idea

While it’s a good bet a flurry of post-disaster government relief initiatives would be launched, the massive scale of something like Katrina would almost inevitably overwhelm their capabilities and leave homeowners in a frustrating, intractable bureaucratic mess.

And while in many ways the private industry didn’t respond much better to Katrina, it’s a good idea to be covered on as many fronts as possible. Be patient, plan ahead with solid coverage, cover yourself from all angles , and you’ll find the help you need.

Floods Might Not Be Covered

One common problem we saw repeatedly in the wake of Katrina was the widespread lack of flood insurance. Many people don’t realize that standard homeowners insurance policies don’t cover flood claims. So hurricane victims are often left scrambling to prove that the damage to their homes was more wind-related than flood-related. They often only get partial compensation, if any at all. (Here’s a nifty list of calamities your homeowners insurance policy might not cover ).

Even without the threat of hurricanes, floods are a real possibility for many homeowners in the Dallas-Ft. Worth area. A severe flash flood can do in minutes what the slow drowning of New Orleans did over two weeks.

Check out the flood maps of your area to gauge your home’s flood vulnerability, and whether or not your area is eligible for coverage. And, if so, make sure that you’re covered—either in your homeowners insurance policy, or via a separate flood insurance plan.

Cover Everything

It’s a good idea to insure your house for the entirety of what it would cost to rebuild the whole thing. If you don’t, you could end up in long, drawn-out struggles with the insurance company about what qualifies for coverage and what doesn’t. There are multiple ways to structure your coverage — read here for more specifics — but make sure you consider all the hidden costs of a natural disaster (valuables in the home, temporary dislocation costs, rising re-building costs) when planning for the possibility of a big one.

Check out our homeowners insurance resources section for more information, including 12 tips for how to save on homeowners insurance . Or contact our Dallas mortgage experts for more information.

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