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Fournier Law Blog

Intelligent legal insight from our team of experienced attorneys.

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Studies reveal positive news for home buyers in 2019

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The spring real estate market is in full swing.  Sellers have begun the process of listing their homes with the hopes of a quick sale.  Buyers search listings, schedule showings and begin to decide on a home to purchase.  So far, in 2019, it appears home buyers are making the decision on which home to purchase faster than they were last year at this time.

In fact, a study completed by Redfin, revealed that in 2019 buyers’ time to close is three days less than in 2018.  According to an article published by the MReport, “Some of the factors responsible for home buyers being able to close on their homes faster in 2019 compared to previous years included, a rise in housing supply, a slower growth rate of home prices, and a less competitive market, according to Redfin.”

The fact that the supply of homes for sale has increased and there are more buyers than sellers often means that sellers will accept the first offer they receive.  Unfortunately, some sellers just have to wait longer to receive that offer while competing against a larger number of other sellers.  The article reports that homes are spending about two days more on the market compared to 2018.

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How Does Illinois State Tax Rates Compare to the Rest of the U.S?

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Its time to prepare to file taxes and as Illinois residents review the amount they pay in taxes, they may wonder if all Americans gasp at how much of their money goes to their state in taxes.  While many Americans feel their overall tax responsibility is more than they would like, Illinois residents may have one of the best reasons to complain about the amount they pay.

Wallethub.com recently compiled a list of all 50 states and the District of Colombia and ranked them in order of state and local tax rates.  Illinois ranked number 50 in that list.  Meaning, Illinois came second to only New Jersey in the states with the highest tax rates.  Taking into account real estate tax, vehicle property tax, income tax as well as sales tax, Illinois is the second highest in terms of state and local taxes.

In fact, according to an article published on abc7chicago.com, “…the Illinois tax rate is 38.51 percent higher than the national average of 10.76 percent.”   Read the entire article and view the other 50 state rankings here.

Photo Credit: Roman Boed

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Why is National Delinquency Rate is Important?

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The national delinquency rates on home is a number that may not be tracked diligently by real estate professionals.  It isn’t as widely tracked as mortgage interest rates, average days to close and housing price fluctuations, but it may offer insight to the health of the American economy.

The Mortgage Bankers Association released the most recent national delinquency rate and it is lower than it’s been in 18 years.  According to an article published by the Chicago Tribune, “That’s a big deal, because when large numbers of owners do the opposite – stop paying on their home loans for months at a time — the entire economy feels the effects. Spiking delinquencies in 2007-2008 ushered in the global financial crisis and spawned tidal waves of foreclosures that devastated borrowers and their communities.”    

It sounds like it is some great news, but what has caused the number of delinquencies to drop?  Perhaps, and most likely, we can thank the underwriting rules that were tightened up back in 2010.  Specifically, mortgage lenders are requiring a high FICO score to qualify, avoiding approving mortgages to high risk borrowers more likely to default.   These changes, coupled with continued low rates, a healthy economy and a drop in unemployment are helping ensure more home owners stay on track with their payments.

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Filing Taxes? What You Can and Can’t Deduct This Year

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As Americans begin to gather tax documents preparing to file taxes, many might notice things look different than they have in years past.  The tax reform bill that was passed at the end of 2017 may affect deductions and refunds for many Americans.  Specifically, the standardized deduction amount has changed and some of the costs associated with home ownership may or may not be tax deductible this year.

In an article published by House Logic, a detailed summary of the tax deductions as they relate to many of the common home buying and home ownership costs is provided.  For example, when it comes to the closing costs associated with purchasing a home, homeowners purchasing a home for less than $750,000 will find that closing costs, mortgage interest paid and some loan origination fees are tax deductible.  However, it might not be beneficial to itemize these costs if they don’t total more than the standard deduction.  Further, several home purchase expenses are not tax deductible, such as attorney fees, home inspections, and title fees to name a few.

Some other categories of home expenses covered in the article are home equity loan interest, which can only be deducted when the funds are used to improve the property and the total loan amount doesn’t exceed $750,000.  State and Local taxes, damage to home after a natural disaster, moving expenses, use of a home office and student loans are also covered. 

Homeowners and all American filing taxes this year should pay special attention to these changes and how they affect their tax return.  Read the entire article.

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Is the Recent Dip in Home Values Cause for Concern?

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The real estate market has, for the most part, been on a steady incline for the past 5-7 years, in terms of home values.  Homeowners have been comfortably seeing the value of their house increase at a fairly consistent rate, recovering from the major decreases in value they saw about 10 years ago.

However, according to data released by Black Knight, the upward trend may be coming to an end, or at least slowing down some.  According to an article published by Housing Wire, “Home values fell 0.2% in November, down $580 for the month and marking the first time the market has seen a consecutive three-month decline since early 2012. Now, the average home is down $1,361 in value since August 2018.”

Although the growth rate varies across the United States, overall home values are still higher than they were in 2017 in 99 of the 100 markets.  So, many homeowners may still be breathing easy knowing that, over a larger span of time, the value of their home is moving in the right direction.

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Zillow Expanding Zillow Offers Program

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Zillow has been expanding the services it offers to both home buyer and sellers.  In select markets, the company began a program called Zillow Offers.  In the Phoenix, Las Vegas, Atlanta, Charlotte and Denver areas, homeowners are able to “request a no-obligation cash offer from Zillow to buy their home. If they accept it, Zillow directly buys a seller’s house, prepares it for showings and quickly lists it for sale”, according to an article published on HousingWire.com.

The program was only launched nine months ago and according to the president of Zillow, Jeremy Wacksman, there has been a demand from homeowners to launch Zillow Offers in additional geographic markets.  Wacksman states, “It’s clear people want a convenient, stress-free way to sell their home, and real estate professionals are eager to work with us to leverage Zillow Offers as a way to build their local businesses.”  As a result, Zillow Offers will be expanding in 2019 to Miami, Minneapois, Nashville, Orlando and Portland.  Additionally, the service is going to be launching in even more cities by the fall of 2019. 

With this expansion, Zillow expects to not only work with local real estate agents and brokers, paying commission to local agents, but also promote Premier Agent, which helps connect sellers and listing agents when a seller has decided not to move forward with a Zillow Offer transaction.

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2019: What Do Real Estate Experts Think We Should Expect?

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Just few weeks into this new year and the U.S. already seen some pretty significant events that have, for some investors and consumers, created a lack of confidence in the stability of our economy.  An ongoing government shut down, global trade issues and some stock market dips: it should be no surprise potential home buyers may to take pause before jumping into a big investment.

Yet, many experts remain relatively optimistic about how 2019 will fare as far as the real estate and mortgage markets are concerned.  In an article published by the Washington Post, journalist Kathy Orton states, “In their forecasts for 2019, real estate experts anticipate the housing market slowing down, but not stalling, with prices and mortgage rates moderating.”

Orton reports the chief economist of NAR, Lawerence Yun believes, ““The forecast for home sales will be very boring — meaning stable.”  Although home prices are predicted to rise, it will be at a slower pace than home owners have seen in recent years.

Realtor.com expects mortgage rates to reach 5.5 by the end of 2019 and overall, expects to see just 2.2 percent growth in home prices.  Zillow echoes the other experts, with an expected 5.8 percent mortgage rate and a housing price increase of just 3.79.

The Mortgage Bankers Associations believes 2019 will perform better than other experts have predicted.  MBA economists Michael Fratantoni and Joel Kan stated, “Even with the anticipated cool down in economic growth, we expect that housing demand will remain strong, mortgage rates will stabilize, wage growth will increase and home price growth will moderate, providing favorable conditions for growth in the home purchase market.”

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A Drop in Mortgage Rates for the Start of 2019

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Throughout much of 2018 many experts were speculating, as they do each year, how mortgage rates would change heading into 2019.  As we saw rates continue to slowly climb throughout 2018, it was natural that many industry professionals assumed the trend would continue into the new year.  However, it doesn’t appear those predictions are holding true, at least not for the first few weeks of 2019.

In an article published by the Washington Post, author Kathy Orton states, “Stock market volatility, global trade worries and the government shutdown are pushing rates down to their lowest levels since August.”.  Recently the 30 year fixed rate dropped to about 4.51.  In fact, Lending Tree released a report showing about 70% of home purchasers secured a rate below 5 percent. 

Some in the industry believe that rates may drop further.  Many are speculating the effects the government shut down, treasury yield rates, as well as jobs report data on mortgage rates.  Nevertheless, the current drop in mortgage rates coupled with slowed home price growth should entice home buyers to take action.

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Has The Government Shutdown Affected Real Estate Industry?

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As our federal government shutdown enters its third week,the effects have been widely publicized in the media.     Effects big and small, local and far reaching are on the minds of all Americans as they wonder how long the shutdown will continue.  Real estate professionals and their clients are not immune to the disruption caused by the shutdown.  However, its debatable as to how much affect the shutdown has had so far on the real estate industry.

 According to an article published by National Mortgage Professional Magazine, written by Phil Hall, industry experts have different opinions on the impact of the federal government shutdown on the housing industry.  A survey completed by National Association of Realtors found only 75 of 2211 NAR members reporting the shutdown affected real estate transactions.  Less than 20percent of those surveyed reported negative impacts such as delays in closings or closing related processes such as income verification. 

 However, Zillow did issue a warning after determining “…that federal workers who are not being paid because of the shutdown will owe about$249 million in mortgage and about $189 million in rent payments for January.Approximately 800,000 workers are being furloughed or required to work without pay during the shutdown.”

Experts agree, however, the longer the shutdown continues, the impact will becoming more widespread and far reaching.

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Predictions on Interest Rates for 2019 May Disappoint Buyers

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When purchasing a home, there are a number of variables that may influence or even dictate which home the buyer can afford.  Obviously the price of the home, the property taxes for a specific home as well as how much money the buyer has to use as a down payment all are important factors for home buyers to consider when zeroing in on a home to purchase.   However, there is another variable that truly can vary and that is the mortgage interest rate.

For the past several years, buyers in the US have been spoiled by rates that hovered near record low interest rates.  Small upticks in the rates may have alarmed some home buyers that disappointed to see how it changed their monthly payment.  Obviously, as the interest rates for mortgages increase, the monthly payment also increases and it could be a deal breaker for some buyers.  This is why it is important for prospective home buyers to continue to be aware of interest rates fluctuations.

Unfortunately, based on an article published in Keeping Current Matters “Where are Interest Rates Headed in 2019?”, Freddie Mac is expecting rates to continue to increase throughout 2019.  Nevertheless, even if rates inch closer to 5.3 by the end of 2019,  a glance back at the history of rates in the US over the past 40 or so years may offer a bit of relief.  It is still nowhere near the 18% homeowners in the 1980s had to work with.

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