2005 was a very good year for homeowners
Real Estate Forum.BY ALLISON SIMSON AND JOYCE NENNINGERQuestion: Allison, do you have any information on how much home prices increased last year?Answer: Home prices rose an average of 13 percent last year, according to a report released by the Office of Federal Housing Enterprise Oversight (OFHEO), the agency that manages mortgage giants Fannie Mae and Freddie Mac.The report pointed out that home prices grew far more rapidly last year than the prices of other goods and services included in the Consumer Price Index (12.95 percent versus 4.3 percent, respectively).It also noted:
– Home prices grew by record levels during the fourth-quarter yearly span in 26 metropolitan areas around the U.S.- Growth in home prices in Arizona continues to accelerate, with a one-year rate of increase of 39.7 percent in the Phoenix-Mesa-Scottsdale area – the largest of any metropolitan area.- The mountain states became the area with the fastest-growing home prices, edging out the Pacific region. The slowest growth in prices continues to occur in Illinois, Indiana, Michigan, Ohio and Wisconsin.- Home prices in the East Coast states from Maryland to Florida showed their fastest growth rate since 1975, when the OFHEO survey began. Prices in the region jumped by 17.8 percent from the fourth quarter of 2004 to the same period last year.”Despite recent indications that a slowdown may be forthcoming, house-price appreciation during 2005 continued to hover at near-record levels,” says OFHEO’s chief economist Patrick Lawler.”While deceleration continues in some areas, appreciation generally is still extremely strong,” Lawler says. “Mortgage rates climbed significantly during the second half of last year, but the effect of that increase on price appreciation so far appears to be limited.”
Question: Joyce, I am curious, do homeowners in general maintain some equity in their homes or are they pretty much fully financed?Answer: Contrary to what some critics say, U.S. homeowners have plenty of equity – 57 percent stakes on average as of the third quarter of 2005, according to research from both the Federal Reserve and First American Corp., one of the nation’s largest title companies.Not surprisingly, households’ equity positions vary by the age of their mortgages. Eight of 10 people who took out their mortgages in 1985 have equity stakes of 75 percent to 80 percent, thanks to pay downs of principal and price inflation. Sixty-five percent of borrowers whose loans date to 1990 now have 50 percent to 55 percent equity positions. Roughly half of 2001 buyers and refinancers have seen their equity stakes grow to 25 percent to 30 percent.Those who are thin on equity tend to be recent borrowers, according to the study. Nearly 30 percent of 2005’s borrowers have zero to -5 percent equity positions. Nearly one of 10 was in a zero or negative-equity position as of September 2005. Five percent were in negative territory by more than 10 percent. That is, their combined mortgage debts exceeded their home values by more than 10 percent.Question: Allison, I read an article about condominium hotels. Do you have any information about this type of condo ownership?
Answer: Condominium hotels are gaining popularity among vacation-home buyers, who get to use their units more often than they do timeshares.Smith Travel Research reports that 11 percent of the 113,170 hotel rooms in the works in the U.S. as of December were condo-hotel units. Owners of the units can earn rental income, while developers benefit in the form of lower maintenance and utility costs.However, experts say these units should not be purchased solely as an investment, as owners must cover taxes, mortgage payments, and monthly maintenance fees but earn income only when their space is rented. Additionally, there is no data available on the resale value of such units, and buyers must keep in mind that the hotel industry can be hit hard by economic downturns or bad weather.Moreover, those interested primarily in generating the maximum rental income will be unable to use the units themselves during the peak vacation season. All of these factors have led Ernst & Young lodging analyst Mark Lunt to classify condo-hotels as “a complicated and risk-filled asset class.” To increase their chances of making a profitable investment, buyers are urged to select a condo hotel in a prime location that is operated by a hotel company with a proven track record.For answers to your real estate questions, call JOYCE NENNINGER or ALLISON SIMSON at (970) 468-6800 or 1 (800) 262-8442. E-mail Info@SummitRealEstate.com or visit their website at http://www.SummitRealEstate.com. Allison and Joyce are both longtime locals in Summit County. Summit Real Estate – The Nenninger/Simson Team is located in the Dillon Ridge Marketplace. Their longtime residency and years of real estate experience can help you make the most of any buying or selling situation. Both are Certified Residential Specialists (CRS), the highest designation awarded to a Realtor in the residential sales field. Their philosophy is simple, whether buying or selling, they understand that the most important real estate transaction is yours.
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