The unrealized value of owning a Green High Performance home.

I wrote back in January about the behind the scenes inspections and testing that the green high performance homes get that many don’t know about or if they do, don’t appreciate the intensity of them.  Since we continue to hear about Buyers wanting the “Best Deal” or the “Best Value”, it occurred to me that the Value of these homes is also not being realized.

For instance, 100% of the homes we build here at Marnella Homes are built to the Earth Advantage/Energy Star “Gold” level.  Our homes are extremely well sealed and with blow-in insulation achieve a very low leakage rating.  Also, with our 95%+ HVAC systems, fully sealed ducting and all inside the home in conditioned space.  Our home owners save on average $40 – $50 a month in our 1400 – 1600 sqft homes over a similiar sized code built home.  

Home owners have been sold over the years all the features that builders put in and are told how great they are and sometimes even how many years the home owner will receive a payback from these features.  What so many times doesn’t get either explained or truly appreciated by the home owner or buyer is the value of these features.  We took on the venture of Green performance building with the “What’s in it for me” approach.  Thinking just selling features to someone who doesn’t know much about the industry will tend to make their eyes glaze over.  So, we have tried to show our home owners and buyers “what is in it for them”. 

In the case of a monthly savings, this is a direct savings over what they would be paying for utilities at any other new code built home.  Plus, even with many builders getting on the green built performance band wagon most are doing just the minimum to get their homes certified so, we are outperforming most builders in our area.  This is money that can be for that massage every month, the manicure, dinner, a movie with the family, a ski lift ticket in the winter, etc.  So, many things that these homes make easier to afford.  Because, isn’t the old saying, “a penny saved is a penny earned” more relevant today than ever before in our life time?

Now that I have addressed the actual savings, let’s look at the added value.  Using the $40 – $50 a month in savings, at today’s interest rates that is about $8,000 to $10,000 in additional value to the home. Of course, our lenders aren’t going to let you borrow more because we can show the energy savings, but wouldn’t it be great to know that you have built-in additional financial strength due to the lower monthly cost of home ownership?  I do believe that some lenders will eventually see this value and want to work with builders like us once this resonates with them. However, I am not holding my breath for this to happen anytime soon.

Lastly, now that real estate has moved back to a more traditional style of ownership, I feel that the long term value that these homes offer is also important.  Energy costs are going to continually rise so, in 5, 7, 10 years or so when we sell our homes doesn’t it seem that it will be a added value to your buyer that your home saves a considerable amount in monthly utility costs over the resale homes that will be on the market at the same time?  I think it should now and most assuredly then.

So, buying a home isn’t just the countertops, the carpet and appliances.  Sure those are the features that you can see, feel and touch, but don’t over look some of the most important features that truly create the “value” in your home.  You can always change your carpet, appliances and countertops, but it tends to be a little harder to retrofit a high performance HVAC system inside your home in the conditioned space if you are replacing a traditional system it’s not very easy to go back and effectively caulk and seal up a home that is already completed.

Please share your comments.  I would like to hear from you.

Marnella Homes offers their “Rest Assured Plan”

Marnella Homes has had many firsts for a home building company here in the northwest.  As we strive to improve our homes and the buying experience, we continue to look outside the box and create new programs to assist and benefit our home buyers and owners.  Some of the things that we have done to differentiate ourselves are:

 Our “Home Sellers Assistance Program”.  This program offers our home buyers the opportunity to list their current homes at a 3% total brokerage fee.  We bring in an interior designer to assist in getting their home ready to sell. We coordinate any necessary repairs and we credit back to our buyer the cost of these repairs towards their home purchase up to $5000. 

• We are the first production builder to build 100% of our homes over the Earth Advantage/Energy Star Gold level.  Which combined with our marketing efforts earned us the Energy Star award for large builder in Oregon.
• We also offer a buyer’s guide to our home buyers to use when shopping for a home. It helps to educate and inform them of what features they should look for that will provide them lasting value and comfort in their next home.
• Now, we offer the “Rest Assured Plan”. 

 Marnella Homes’ Rest Assured Plan provides security and reassurance in these uncertain times. At no cost to our buyers, our plan guarantees that in the event of a job loss within 24 months after closing, their mortgage will be paid for up to 6 months. We want to make sure that the fear of something that may not ever happen doesn’t keep someone from purchasing their next home.  We understand that there are economic challenges right now however, we hope that these concerns won’t prevent families from making a sound investment in their future. Now is a great time to buy a home. Prices and interest rates are at record lows and the U.S. government has created incentive programs and tax advantages for home buyers.  We have faith in the American Dream and we’re here to help families achieve it without losing sleep.

Our list won’t end here as complacency will never be acceptable.  With our home buyer’s needs ever changing in a market that is ever changing, it will be necessary to continually strive to improve our programs and our buying experience.

Performance rating for new homes

Performance rating for new homes is equivalent to the Miles Per Gallon (MPG) rating for a car.  Whether you chose your next car specifically because of it’s MPG rating or not, in most cases it at least makes up some part of the decision making process.  Especially, if you were buying a car last summer.  The building industry believes that energy efficiency, utility costs and environmental impact are factors to consider when buying or building a home.  They can affect the real and perceived value of a home.  The Energy Performance Score (EPS), developed by Energy Trust of Oregon, provides a clear and quantitative way to compare a home’s energy use and costs.  The lower the score, the more efficient the home is and the lower your estimated utility costs. 

A home energy rating involves an analysis of a home’s construction plans and onsite inspections. Based on the home’s plans, the Home Energy Rater uses an energy efficiency software package to perform an energy analysis of the home’s design. Upon completion of the plan review, the rater will work with the builder to identify the energy efficiency improvements needed to ensure the house will meet ENERGY STAR performance guidelines.  A home’s EPS is based on many factors such as the home’s size, level of insulation, air leakage, heating and cooling systems, major appliances, lighting and water heating.  The rater then conducts onsite inspections, typically including a blower door test (to test the leakiness of the house) and a duct test (to test the leakiness of the ducts). Results of these tests, along with inputs derived from the plan review, are used to generate the EPS for the home.

Marnella Homes, as an Energy Star and Earth Advantage Certified Master Builder, is using this rating system.  Our homes have an EPS of 42 which rates our homes as some of the most efficient new homes built in Oregon (as Compared to an average home score in Oregon of 81). Our homes have an estimated average monthly energy savings of $70.  Our home owners realize that choosing an energy-efficient home not only benefits the environment, but can also help you save money. 

We see this as a “separating the wheat from the chaff” on the over used “Energy Star Certified” claim that too many builders use.  We see many builders that state that they are building homes to Energy Star Certification.  A consumer doesn’t know whether they build 100% of their homes to this certification or 10%?  Do they just meet the bare minimums to achieve the certification or are they truly committed to Green Performance building and exceed the minimum.  As I have stated in an earlier post, whether a builder is doing just the minimum or much more, their homes usually have quality controls that are inherent to building to any level this certification.  Which makes a “Certified” home in most cases still a better value than any “Uncertified” home.  However, this rating system will clear away this confusion.  The score will tell a consumer, if educated on what it means, all they need to know.

So, whether a low EPS score is the deciding factor in the purchase of your next home or just “a” factor, it will be made available to you by participating home builders.  Our industry hopes that this rating system will be easy to understand and will be adopted by consumers much the same way as the MPG rating is in the auto industry.  As this becomes more main stream it will become one more tool that consumers can use to make informed decisions on their home purchases.

Great week for Housing news!!

Wow, what a week for housing news.  Whether this is a flash in the pan or it is truly a sign of more great things to come, we are encouraged by it either way.  Of course, our “glass half full” friends will discredit any of the many groups reporting this, but this shouldn’t be much of a surprise.  They will claim that this is just a normal seasonal increase.  It might be, but it is still an increase.  They will claim that the only reason for the increase in sales is due to the short sales, foreclosures and deep price reductions.  Doesn’t this still mean that people are buying again and lenders are still lending?  At the end of the day, sales are still up Month over Month.

 

There was a story from MarketWatch by Rex Nutting on Tuesday the 24^th.  Mr. Nutting reports,  ”U.S. Housing prices rose 1.7% in January compared to December, the Federal Housing Finance Agency reported on Tuesday. This was the first increase in a year.”  I feel this is big.  Bigger than an increase in sales.  Showing the possible signs that in some markets there is some bottoming being found.  Mr. Nutting goes on, “The “unexpected rise” in January was partially due to stronger sales in some markets, the FHFA said.”

 

For a viewing of the complete story, follow this link: http://tinyurl.com/de37e3

 

There was a MarketWatch news story by Stacey Delo on Wednesday the 25th.  She discusses with USC real estate economist Delores Conway this surprise in news in the Housing data.  Ms. Conway states that the reason for this increase is really a bit of both the lower prices and interest rates that have pushed sales up Month over Month.  Still acknowledging that sales are down compared to last year.  It noted that over half of the sales that have been reported are to first time home buyers.  This is due to the affordability being enhanced by historically low interest rates and lower prices.

 

To watch this entire story, please see the following link:  http://bit.ly/QSKf8

 

We had a CNN Money News report by Paul R. La Monica, on Wednesday the 25^th, that talked about how Wall Street and the Housing Sector was very encouraged by this weeks results. This story reported; “The Commerce Department reported Wednesday that new-home sales rose almost 5% last month after hitting their lowest point ever in January. Economists were expecting a decline of about 3%

This comes on the heels of two reports showing a better-than-expected gain in existing-home sales and the first increase in construction of new homes since June.”

 

John Buckingham, fund manager said, “Clearly there is interest in homes. Whether it’s in foreclosure or not, there’s still a buyer. That helps put in a floor on prices and could boost confidence.”

 

To read this complete story, please see the following link: http://tinyurl.com/c4cxxq

 

There was also a story in Reuters by Lucia Mutikani on Wednesday the 25^th.  Ms. Mutikani noted that in a Commerce Department report, ” Sales of newly built U.S. single-family homes rose at their fastest pace in 10 months in February, it said in another report.”

 

To read this complete story, please see the following link: http://tinyurl.com/cmsdpz

 

What is amazing is that these are just some of the reports out this week.  From many sources and from many perspectives, we are seeing some signs of improvement.  Most do feel that it is too early to tell if a recovery is process, but regardless of the reason, it is still good news and we will take it!

Only 20 days until tax day!

I wanted to post another entry about the Federal Tax Credit. When I first discussed this back in January, I mentioned the changes to the Federal Tax Credit that were being discussed at the time. Well, some of the changes did end up being made and with just 20 days until tax time, I felt I should visit this one more time.

If you are considering buying a home this year, take advantage of the Federal Housing Tax Credit. The Federal Tax credit is available to you for a purchase of your new home. The sooner you talk with a tax professional the sooner you can determine how much of the allowable $8000 is available to you. This amount was $7500 under the previous bill and had a requirement to be paid back within 15 years. In addition, the deadline was extended from June 30th, 2009 to September 1st, 2009. These changes were made through the last stimulus bill.

As I mentioned before, regardless of what form this Housing credit takes, the current form or modified with new changes, it is a great incentive to assist you in the purchase of your next home.

For more details and frequently asked questions about the Federal Tax Credit go to the following website: http://www.federalhousingtaxcredit.com

To put this in perspective, our town homes here at Volare in Happy Valley, start at $229,950. On a purchase, utilizing a FHA loan, the $8000 Tax Credit almost covers the $8048 necessary for the down payment. This would be almost like 100% financing with the government gifting you the $8000, with no requirement to pay it back.

Adding to this, at our meeting this week with our preferred lender from Wells Fargo, Matt stated that he was locking some buyers in at 4.5% and one of our own team just closed on a loan at 4.375%! These are mortgage rates that have never been seen before!

So, if you are considering buying a home, look into this as soon as possible. If you can purchase a home before you file your 2008 return you can claim this credit on your 2008 return. Just one of the many opportunities that exist in this housing market, right now!

For additional information on the current discussions about other tax credit changes, go to the following link: http://tinyurl.com/ddteb6

Portland is still on top!

 

I have read the naysayers comments about how far they estimate (hope) the Portland market will fall by comparing us to other hard hit metro areas around the county. They pine and lament over how the market has a lot farther to fall.  Encouraging their followers to continue to rent and join them on the sidelines to watch Rome burn. 

 

However, this “glass half empty” crowd refuses to acknowledge the demand that exists for our city.  Year after year, we remain in the top ranks for most livable, most bike-friendly, most walkable, most active, etc.  So, it is no surprise to read the two stories below that have Portland the 5^th most popular relocation city and 4^th best housing market. 

 

This isn’t to ignore what has happened to our market, it is struggling, but it does acknowledge why Portland is still a good investment.  This is why we continue to have a quality of life that helps create lasting value for our market.  As long as we continue to have a city in which people want to live, our stock will remain in demand.  I also, believe that our recovery will be sooner than some expect.

 

So, as a life long Portlander, I continue to believe in our town.  The high rankings that Portland maintains, are no surprise to me.  I love the northwest and all that it and Portland has to offer.  It would be great if our negative friends would believe in us as well.

 

Here are two recent links for your review:

 

http://tinyurl.com/aa6j6v

 

http://tinyurl.com/dmbjn4

Buy new or used? That is the question!

After reviewing both our recent New Home Trends report and the Local Market Action RMLS report, I realized that there really is two different views of the inventory.  We got some bad news that our Portland Metro area total home inventory increased to 19.2 months in January.  However, new home inventory is down by over 25% from where it was a year ago. 

 

In review of the RMLS Market Action report, new listings were up 123% from December!  How do we interpret this?  Are home Sellers more confident to enter into this years market more so than last years?  If so, are they really coming on the market at this current markets value?  It also noted that pending sales were up 52% from December.  This could be a sign of more realistic Sellers or the begining of our seasonal climb in sales.  Though I feel both are possibilities, the increase in inventory relates more to unrealistic Sellers.  The brokers that I talk to still complain that the sellers they are working with, will not lower their prices to this markets value.  They are still hung up on what their neighbor got for his house in ‘05/’06.  Of course, I always ask, “Then why are you listing the property?  Why would you continue to throw good marketing dollars away on a property that you know is over priced?”

 

I actually, did not think that over a year into this that we would still have Seller’s not getting it.  Although, hopefully, after this boom of refinances rolls through in a few months and the neighbors start talking about what the appraisals came in on their homes, this might change some realities.  Let’s hope.

 

Here in lies the point of all this.  While resale inventories are going up, new home inventories are going down.  Why?  Well for starters, by force or by choice, builders are not increasing their new inventories.  Their focus is on reducing them.  Builders are reducing their prices to sell.  For instance, here at Marnella Homes, our town homes for sale at Volare in Happy Valley, are selling for what condos and town homes sold for in late 2003 and 2004.  We had to reduce prices in order to start selling again.  Also, Builders usually have the ability to be more creative and offer incentives that a home owner can’t or isn’t willing to do.  We buy the mortgage rates down, as has been seen recently with the 3.875% 30 year fixed mortgage promotions.  Another example is we allow people to move into our homes early so they are able to deposit in escrow the funds that they would ordinarily be paying in rent.  In essence, living rent free in our homes up to the closing date and having the ability to apply 100% of the monthly deposit towards the funds necessary to close.  Not too many home owners would allow a buyer to do that.

 

Besides the obvious reasons to buy a new home; new construction, energy efficiency, updated style and interior finishes, etc., it is the motivation of the builders that are moving this inventory.  These builders are far more motivated and creative than most home owners.  Most importantly, they get it!  They understand what has happened in this market and what is needed to move their inventories.

 

So, before you go out and make a final decision on the purchase of a resale home, check out the builder’s inventories in your area and see what values they are offering.  I am confident you will find the reasons that the new home inventories are moving.

Wait or Buy?

I wanted to share these stories because they address multiple points of the housing market with great points in all the stories.

 

In the first story, “Five reasons to buy this year”, it discusses the affordability being the best since the index was created in 1970.  I completely support this.  I feel that we are seeing an affordability that we may never see in our life time again.

 

It also quotes, Duane Andrews CEO of Clear Capital, “You buy for a quality of life…don’t buy on speculation”.   He goes on to say, “I wouldn’t buy a home expecting the market to rebound quickly in the next 10 years.”  We have been telling people for some time that we are back in a traditional real estate market whereas you will be planning on living in your home for at least the next 5 -7 years.  So, buy something that you will truly be happy in, and enjoy in the years to come, not just a home that has a great price tag on it.  There is truly a difference in a great price and a great value.

 

To review the complete story and related stories see link below:

http://www.marketwatch.com/news/story/story.aspx?guid={01DA1B93-91D1-49E4-A1B1-0ACA9CE66FF4}

 

In the next story, “Five reasons not to buy a home this year”.  It refers to the concern over prices continuing to fall this year.  They might or will and in some markets there may still be more decline into late ’09 or early ’10.  However, anyone that actually thinks that they are going to time the bottom of this market is fooling themselves.  Plus, with only an increase of .5 percent in interest wiping out any savings a 10% decrease in value would realize.  I don’t see much value in fence sitting.  Especially, in the least hit areas like the Northwest, a home buyer will have more to loose than gain to wait out this market. 

 

It is quite possible that once we find the trough in this market, it probably isn’t going to be appreciating at a rapid pace.  However, rates can’t stay at the level they are for very long due to the threats of inflation.  So, even if we see modest gains in values, rates will go up and the affordability that we are realizing today will be gone.

 

I think these are all good points to consider in buying a home in the current market.  I think you need to look at all aspects of your own financial situation. Does your budget have the cushion to sustain surprises?  Do you feel comfortable with your job situation?  Any prudent competent person would consider these. 

 

This story quotes a renter that decided to rent because he wasn’t planning on staying in one place for more than 5 years. We discuss this with prospective home owners in our sales office on a regular basis.  Real estate is back to a long term traditional investment.

 

To review the complete story and related stories see link below:

http://www.marketwatch.com/news/story/story.aspx?guid={22185FBD-7F44-4A49-A604-A29D4225E122}

 

 All good points however, all come to the same conclusion, if you are considering buying a home that you will be in for longer than 5 years that is within your means, it is the time to buy.  I hope you will take the time to read these stories and come to your own conclusion.

Attention First time home Buyers!

Or anyone who has not owned a home in the last three years.  If you are considering buying a home this year, take advantage of the Federal Housing Tax Credit.  The Federal Tax credit is available to you for a purchase of your new home.  The sooner you talk with a tax professional the sooner you can determine how much of the allowable $7500 is available to you.  The great news is that there are possible revisions to the original Housing Stimulus measure of last year.  On Tuesday the House of Representatives passed H.R. 1 that removes the repayment requirement of the housing tax credit which currently has to be paid back within 15 years.  Also, on Tuesday the Senate Finance committee passed their version which eliminated the repayment requirement of the credit, but additionally extended the dead line from June 30th, 2009 to September 1^st, 2009.  These changes are exciting and hopefully soon we will see what the final outcome is.  Regardless of what form this Housing credit takes, the current form or modified with these new changes, it is a great incentive to assist you in the purchase of your next home. 

 

For more details and frequently asked questions about the Federal Tax Credit go to the following website: http://www.federalhousingtaxcredit.com

 

To put this in perspective, our town homes here at Volare in Happy Valley, start at $229,950.  On a purchase, utilizing a FHA loan, the $7500 Tax Credit almost covers the $8048 necessary for the down payment.  This would be almost like 100% financing except the $7500 is interest free, if the requirement to repay doesn’t get removed with new legislation.

 

So, if you are considering buying a home, look into this as soon as possible.  If you can purchase a home before you file your 2008 return you can claim this credit on your 2008 return.  Just one of the many opportunities that exist in this housing market.

 

For additional information on the current Stimulus package and other tax changes go to the link below:

http://www.marketwatch.com/News/Story/Story.aspx?guid=e513d57088144f24b74650d2dbd0b235&siteid=nwhpf&sguid=pEra3NiK_Ea0EyuFa0GCYA

More Buying power today than in 2004!

More great news out last week, “Mortgage rates fell below 5% for the first time ever!”.  In fact, borrowers are being locked into rates even below 4.75.  As I write this, rates have inched up a little, but these rates are still available under the right conditions.  This is what bank CD’s and Money Market accounts were paying.

 

See completed story: http://www.marketwatch.com/News/Story/Story.aspx?guid=%7b781E33BA-96DE-40EB-86A4-A48DBE686DA1%7d&siteid=nbih

 

To add to this, I was recently comparing recent sales of our town homes in our current new neighborhood in Happy Valley; Volare.  Our current sales are of similar prices to what attached homes were selling for here in 2004!  After reading this article from MarketWatch, I started looking at what the average 30 year mortgage rate was in 2004.  It was 5.96.

 

On a loan of $250,000 at today’s 4.75 that is a Principal and interest payment of $1,304.12.  If this were in 2004, with a property of the same value and loan amount at 5.96 the Principal and Interest payment would be $1,492.45.  To have the same monthly payment today as in 2004, a home buyer could afford a loan amount of about $285,000. This means that a home buyer can buy over 12% more home today than they could have bought in 2004.

 

As the article says, “Mortgage rates could remain low at least until the summer”.  We all know that these rates cannot stay this low for very long due to the concerns over inflation.  This just illustrates another great opportunity to buy into this market.  As was illustrated last February in the Time Magazine article, “Ignore the Headlines” that I discussed in August, with a 5% increase in rates a 10% drop in price is washed away.  All rates have to do is jump back over 5%, which they will, and what little drop in value we realize this year will be negated by the increase cost of money.

There will never be an opportunity to buy into real estate like we are seeing right now.  Like Warren Buffet says, “We simply attempt to be fearful when others are greedy and to be greedy only when others are fearful.”  This is a great time to be a consumer right now.  A consumer that is willing to buck the advice from the naysayers and the headlines.

 

Those that seize these opportunities will be all the wiser in the years to come.