Green-certified homes sell for 9% more, study in California finds,0,7849454.story
Original Post Date: July 22, 2012

By: Kenneth R. Harney

WASHINGTON — It has been a controversial question in the home real estate market for years: Is there extra green when you buy green? Do houses with lots of energy-saving and sustainability features sell for more than houses without them? If so, by how much?

Some studies have shown that consumers’ willingness to pay more for Energy Star and other green-rated homes tends to diminish during tough economic times. Others have found that green-certified houses sell for at least a modest premium over similar but less-efficient homes.

A new study involving an unusually large sample of homes sold in California between 2007 and early 2012 has documented that, holding all other variables constant, a green certification label on a house adds an average 9% to its selling value. Researchers also found something they dubbed the Prius effect: Buyers in areas where consumer sentiment in support of environmental conservation is relatively high — as measured by the percentage of hybrid auto registrations in local ZIP Codes — are more willing to pay premiums for green-certified houses than buyers in areas where hybrid registrations were lower.

The study found no significant correlations between local utility rates and consumers’ willingness to pay premium prices for green-labeled homes. But it did find that in warmer parts of California, especially in the Central Valley compared with neighborhoods closer to the coast, buyers are willing to pay more for the capitalized cost savings on energy that come with a green-rated property.

The research was conducted by professors Matthew E. Kahn of UCLA and Nils Kok of Maastricht University in the Netherlands, who was a visiting scholar at UC Berkeley. Out of the 1.6-million-home-transaction sample, Kahn and Kok identified 4,321 dwellings that sold with Energy Star, LEED or GreenPoint Rated labels. They then ran statistical analyses to determine how much green labeling contributed to the selling price — eliminating all other factors contained in the real estate records, such as locational effects, school districts, crime rates, time period of sale, swimming pools and views.

Energy Star is a rating system jointly sponsored by the U.S. Department of Energy and the Environmental Protection Agency that is widely used in new home construction. It rewards designs that sharply reduce operational costs in heating, cooling and water use, and improve indoor air quality.

The LEED certification was created by the private nonprofit U.S. Green Building Council and focuses on “sustainable building and development practices.”

The GreenPoint Rated designation was created by a nonprofit group called Build It Green, is similar to LEED and can be used on newly constructed as well as existing homes.

The 9% average price premium from green-rated homes is roughly in line with studies conducted in Europe, where energy-efficiency labeling on houses is far more commonplace. Homes rated “A” under the European Union’s system commanded a 10% average premium in one study, while dwellings with poor ratings sold for substantial discounts.

Labeling in the United States is a politically sensitive real estate issue. The National Assn. of Realtors has lobbied Congress and federal agencies to thwart adoption of any form of mandatory labeling of existing houses, arguing that an abrupt move to adopt such a system could have severely negative effects. A loss of value at resale because of labeling would be disastrous, the Realtors have argued, particularly coming out of a housing downturn in which owners across the country have lost trillions of dollars of equity since 2006.

The National Assn. of Home Builders, on the other hand, has enthusiastically embraced labeling as a selling advantage for newly constructed homes. New homes today are far more likely to be rated energy-efficient and environmentally friendly than those up for resale. But there can be an environmental downside to new homes as well: Many are in subdivisions on the periphery of metropolitan areas, and require higher fuel expenditures — and create more air pollution — because homeowners have longer commutes to work.

Kahn and Kok make no secret about where they stand on labeling: Disclosures about the green characteristics of homes make a lot of sense for buyers and sellers.

Posted in Uncategorized

Wanted: A 15-Year Home Loan
Original Post Date: July 22, 2012

By: Amy Hoak

Average rates on 15-year fixed-rate mortgages have been below 3% since May, leading more borrowers to consider swapping their current home loan for one with a 15-year term.

Not only are interest rates on the 15-year mortgage at record lows, but the difference between the 15-year and the 30-year mortgage is unusually wide, says Freddie Mac Chief Economist Frank Nothaft.

The rate on the 30-year mortgage averaged 3.53% in the week ending July 19, compared with 2.83% for the 15-year, a difference of 0.7 percentage point, according to Freddie Mac. In 2007, the spread was 0.31 percentage point.

“There’s no question, the interest-rate differential has been much higher over the past year than at any other time,” Mr. Nothaft says. (Freddie Mac’s records for the 15-year mortgage go back to 1991.)

Thank Federal Reserve policy for the low rates: “They have pushed short-term interest rates as close to zero as they can,” Mr. Nothaft says, and “that keeps other short-term lending rates fairly low.”

The yield on the 10-year Treasury is often the benchmark used to set rates on 30-year fixed-rate mortgages, while the five-year Treasury is the benchmark for 15-year fixed-rate mortgages. The spread between the 10- and five-year Treasury has been wider in recent years than at any other time dating back to 1962, says Mr. Nothaft.

Many see an opportunity for significant savings.

Thirty-one percent of those who refinanced during the first quarter paid off a 30-year fixed-rate mortgage and swapped it for a shorter-term loan, according to Freddie Mac’s most recent statistics.

Some people are seeking to pay off their mortgages before they retire; others are scarred from the financial crisis and want to chip away at debt as fast as they can, says Karen Mayfield, national sales manager for the mortgage-banking division of Bank of the West.

“We’ve all…watched the 401(k)s get killed, [home] equity get killed,” Ms. Mayfield says. “Debt is less sexy today.”

Not only do these borrowers get a lower rate, but when a mortgage is amortized over a shorter term the borrower pays less interest over the life of the loan. The trade-off is that your monthly mortgage payment likely will be higher since you’re paying off the same principal over a shorter period.

Say you have a mortgage of $300,000, and your financing options are a 30-year mortgage at 3.75% or a 15-year at 3%. The 15-year would cost you $683 more a month, Ms. Mayfield says, but in five years, you’d save $14,735 in interest and have $55,679 more in equity. By year 15, you’d have saved more than $68,000 in interest.

That doesn’t mean financing into a shorter-term loan is right for everyone.

First-time home buyers, for example, often don’t fully understand the costs involved in home maintenance and taxes, Ms. Mayfield says.
Those who have to stretch to make payments on a 15-year mortgage probably shouldn’t do it. Ditto for those who wouldn’t be able to keep up with payments if they lost their job or suffered a reduction in income, says Rich Arzaga, a certified financial planner and founder of Cornerstone Wealth Management in San Ramon, Calif.

Remember, it’s always possible to chip away at a 30-year mortgage by making an extra payment when you can.
Before deciding on a 15-year mortgage, crunch some numbers.

Pay attention not only to interest rates and monthly payments but also to where you are in the life-cycle of your current loan and how long you plan to keep the property, Mr. Arzaga says. Calculate how long it will take to recoup closing costs.

Consider whether forking over extra cash each month for a mortgage payment is the best use of your funds. If you have a mix of investments that can produce a 6% return, it might make more sense to put the extra cash toward that if you have a current mortgage rate of, say, 4%, Mr. Arzaga says

Still, an increasing number of people are listening to the voice in their head that tells them it’s better to own a home free and clear before retirement, says Len Hayduchok, president of Dedicated Senior Advisors, in Princeton, N.J.

People are tapping into their rainy-day funds to pay off part of their mortgages, even if there are more lucrative investments out there, Mr. Hayduchok says. “The trend is to reduce the time [to pay off the mortgage], more so than any time I’ve seen in the profession.”

Posted in Uncategorized

With Low Supply, Asking Prices Rise for Fifth Straight Month
Original Post Date: July 17, 2012

By: Nick Timiraos

Home sellers are staying on the sidelines this summer, which is helping to firm up prices in more U.S. housing markets.

The number of homes listed for sale rose by just 0.5% in June from May and was down 19.4% from one year ago, according to Slightly less than 1.89 million homes were listed for sale in June, which is lower than at any time in 2011 or 2010.

Listings are down in part because banks have been slower to move foreclosed properties onto the market and investors are buying up more of them at courthouse auction sales and renting them out. Meanwhile, traditional sellers are frequently unwilling to list their homes amid signs that prices are turning around in more markets. And in some of the markets with the biggest inventory drops, many owe more than their homes are worth and may be unable to sell without taking a big loss.

Compared with one year ago, listings were down in all but two of the 146 markets tracked by Inventory has fallen by nearly 58% in Oakland, Calif.; by 49% in Fresno, Calif.; by 47% in Bakersfield, Calif.; and by 43% in Seattle.

Big inventory drops are pushing up prices. Median asking prices rose for the fifth straight month and were 2.7% higher than one year ago, though they were up by just 0.05% for the month. By contrast, last year’s disappointing spring sales season prompted sellers to cut prices by 1% in June from May.

About two thirds of all markets saw median prices increase in June from one year ago, and about one third of all markets saw median prices rise by at least 5%. The biggest gainers were Phoenix, San Francisco, and Santa Barbara, Calif. Prices declined in just 19 markets, with the biggest declines reported in Allentown, Pa.; Peoria, Ill.; and Toledo, Ohio.

Another sign of the improvement this spring: The median age of inventory listed for sale fell by nearly 10% from one year ago. That means sellers are finding buyers more quickly for their homes.

Posted in Uncategorized

Already Low, Mortgage Rates Drop Again
Original Post Date: July 12, 2012

By: Victoria Stilwell and Dawn Wotapka

Mortgage rates continue falling, falling: The average mortgage rate slipped again during the past week as rates struck yet another new low, according to mortgage-finance company Freddie Mac.

For the week ended Thursday, the 30-year fixed-rate mortgage – a product that offers fixed payments and has been popular since the housing bust – averaged 3.56%, down from 3.62% the previous week and 4.51% a year earlier. Rates on 15-year fixed-rate mortgages averaged 2.86%, versus 2.89% a week earlier and 3.65% a year ago.

With 15-year rates so low, more consumers are opting for the shorter mortgage payment period. Low rates for all mortgages are also allowing more Americans to buy homes with a larger price tag — and still maintain a low payment. As we’ve written, consumers are taking advantage of low rates and buying bigger homes.

But while housing appears to be healing, some headwinds persist. While rates are low, many consumers are struggling to qualify for a mortgage amid tight lending standards. Unemployment is a concern and the foreclosure crisis, which appears to abating, is far from resolved.

Readers, do you think mortgage rates will fall to 3? If so, when?

Posted in Uncategorized