What Homeowners Want To Know About Homeowners Insurance

 

Realtor.com asks home shoppers what they would like to know about homeowners insurance and their questions were answered by Allstate insurance experts. If you are in the market for a home, you should become familiar with homeowners insurance. It is important to get good homeowners insurance and understand your policy. Here are some questions and answers below.

1. I’m a first-time home buyer. What should I consider when choosing insurance? – Cynda from Florida

Just like the home you choose, your insurance policy will fit you and your needs. A musician will be interested in protecting their musical instruments while other homeowners might want protection on their garage because of their car collections.

An insurance expert can help you set up your policy with your unique coverage. You can get a personalized quote and make sure all your needs are covered.

“Your home is one of your most valuable assets,” say the experts at Allstate. “Make sure your homeowners insurance protects you and your family in many kinds of situations involving not only your home itself but also the things you own.”

2. What are the most common types of claims? What is the claims process like? – Emily from Colorado

Prepare for the unexpected, that is why homeowners insurance is so important. Many homes get damaged from wind, hail, plumbing failures, theft, and fire. When you do have to put a claim in for damage to your home, your insurance company will work with you and answer all your questions and concerns. Your agent will help you with the process by assessing the damage and helping you recover your losses.

3. How is condo insurance different from home insurance? How can I make sure my condo insurance has the coverage I need? – Maria from Virginia

Condo insurance is different because it only covers your unit and the belongings in the unit. Usually, the condo building is insured under your condo association's insurance policy which covers things like the boiler room, the roof, hallways and other shared spaces. Make sure to get your agent to explain what is covered. Some policies will cover the wall and floor in your specific unit.

4. Are there any surprising things that aren’t covered by a typical homeowners insurance policy? – Emily from Colorado

Surprisingly a flood and earthquake damage are not covered in a regular insurance policy. Both require a separate additional policy on top of your regular homeowners insurance. Make sure you have a clear understanding of what is covered. Things such as an outside sewer or drain might need additional coverage.

5. Does my homeowners insurance cover small damages, like a stolen bike? – Maria from Virginia

This would be under personal property coverage which usually covers theft. Make sure the stolen items are worth more than your deductible before you claim it on your insurance. If your deductible is not met your insurance will not pay for the claim. Make sure to review coverage limits with your agent who will customize your coverage to fit your needs. An agent can help you choose any additional coverage if you take note of the possessions such as sports equipment and riding lawn mowers that might need to be part of your policy.

6. What are some things homeowners can do to help lower the cost of their homeowners insurance? – Emily from Colorado

There are several things you can do to help reduce your rates. Increasing your deductible can reduce your premium payments. Bundling policies such as home and auto will give you a discount. Other ways you might get a discount are if you are a new homeowner, switch insurance providers without having a recent claim,
set up automatic payments to pay your insurance premium or are age 55+ and retired.

Remember when looking for homeowners insurance always seek a professional's advice. Even though a policy is cheaper than another, it might not cover everything you need. Shop around and talk to a couple of insurance agents in your area for the best fit and price for you.

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FEBRUARY 2021 SEES A GAIN IN SINGLE-FAMILY PERMITS

 

The first two months of 2021 not only saw a strong housing market but 164,901 single-family permits issued year-to-date (YTD). The report shows that there is a 16.6% increase over February 2020.

Permits for residential single-family and multi-family 12 months change February 2021 year-to-date is different throughout each U.S. region. Single-family permits and multi-family permits increased in all four regions in February. For single-family Midwest had an increase of 24%, in the Northeast a 20.1% increase, the South had a 16.2% increase and the West came in last with a 13.6% increase. Multi-family saw the biggest increase in the West at 22%, next the South with an 18.4% increase, Northeast at 17.5% and the Midwest saw the lowest at only a 5.4% increase.

The District of Columbia saw the biggest increase in single-family permits issued YTD from February 2020 to February 2021 at 308.3%. Vermont saw a decline in single-family permits of 17.7%. The ten states that issued the highest number of single-family permits accounted for 63.8% of the total. Forty-four states and the District of Columbia had an increase in single-family permits between February 2020 YTD and February 2021 YTD.

Multi-family permits issued across the country in February 2021 YTD reached 83,110 which was 17.7% more than the reported 70,635 in February 2020. Thirty-six states and the District of Columbia had an increase while 14 states had a decline. The highest increase was seen in New Mexico with a 714.3% increase and Nebraska saw a huge decline of 66.9%. The ten states that had the highest number issued accounted for 66.4% of the total.

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THERE ARE TONS OF FINANCIAL BENEFITS IN HOMEOWNERSHIP

According to a survey done by Fannie Mae, homeownership is highly rated by consumers. In fact, they continue to see homes as a safe, high potential investment.  The Fannie Mae Q4 2020 National Housing Survey reported that consumers believe it is just as safe to invest in a home as savings and money market accounts.

The survey found that consumers relayed that the top four financial benefits of homeownership were a better chance of saving for retirement, the best investment plan, the chance to be better off financially and the chance to build up wealth. Of these four benefits, 88% of consumers felt it gave a better chance of saving for retirement, 87% felt it was the best investment plan, 85% felt it gave them a chance to be better off financially and 85% believe homeownership presented them a chance to build up wealth.

Consumers’ opinions are right on the money so to speak. The Federal Reserve’s Survey of Consumer Finances revealed that owning a home is a “clear financial benefit.” In the survey, it was reported that those who owned a home vs renting had a forty times higher net worth. As the housing market grows stronger, the gap between renters’ and homeowners’ net worth grows farther apart. Corelogic reported that the equity in homeownership grew by $26,300 over the last year which widened this gap even further.

Keeping Current Matters released data showing the gap in the net worth in every income category between homeowners and renters. For a homeowner making under $26,000 their net worth is $103,000 but a renter’s net worth is only reported at 1,000, homeowner’s making $26,000 – $46,000 their net worth is $140,000 and a renter making the same income net worth is $6,000, homeowners making $46,000 – $74,000 have a net worth of $190,000 while renters only have $11,000, homeowners making $74,000 – $127,000 have a net worth of $261,000 and renters only $34,000, homeowners making $127,000 – $192,000 have a net worth of $433,000 while renters making the same income have a net worth of $117,000 and homeowners making over $192,000 have a net worth of $1.66M while renters only $705,000.

Homeownership is a solid financial investment opportunity but should you choose to purchase a home, the best thing to do is use a local real estate professional. A Realtor can help you take the next steps towards homeownership.

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STRONG BUYER DEMAND BUILDS UP BUILDER CONFIDENCE

 

The latest National Home Builders Association/Wells Fargo Housing Market Index (HMI) reported that builder confidence increased in April 2021. For newly-built single-family homes, builder confidence was at an 83 in April.

The NAHB/Wells Fargo HMI surveys builders’ views on how the current single-family home sales and sales expectations for the next six months. The builder's rate as good, fair or poor. When asked about the traffic seen of prospective buyers, they rate it as high to very high, average or low to very low. Once the data is collected,  scores for each component are then used to calculate a seasonally adjusted index where any number over 50 indicates that more builders view conditions as good than poor.

Today’s market is seeing an 88 for current sales conditions even with the high lumber prices and supply chain problems. For the traffic of prospective buyers, there was a three-point gain to 75. As for the different regions the Northeast was at 86 points, the South at 83 points, the West at 90 points and the Midwest came in at 78 points.

“Despite strong buyer traffic, builders continue to face challenges to add much-needed housing supply to the market,” said NAHB Chairman Chuck Fowke. “The supply chain for residential construction is tight, particularly regarding the cost and availability of lumber, appliances, and other building materials. Though builders are seeking to keep home prices affordable in a market in need of more inventory, policymakers must find ways to increase the supply of building materials as the economy runs hot in 2021.”

“While mortgage interest rates have trended higher since February and home prices continue to outstrip inflation, housing demand appears to be unwavering for now as buyer traffic reached its highest level since November,” said NAHB Chief Economist Robert Dietz. “NAHB’s forecast is for ongoing growth in single-family construction in 2021, albeit at a lower growth rate than realized in 2020.”

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NINETY PERCENT OF NEW HOME SALES IN Q1 2021 WERE BACKED BY CONVENTIONAL AND FHA MORTGAGES

The recent Quarterly Sales by Price and Financing, published by the U.S. Census Bureau, was analyzed by the National Association of Home Builders and found that conventional loans financed the largest share of new home sales since 2018.

Conventional loans in Q1 2021 were reported at 71.6%, FHA came in at 19.3%, VA loans at 5.3% and cash new home sales were 4.1%. As far as the percentage points increase from Q1 2020, conventional loans rose 2.1 percentage points and FHA-backed sales were up 1.6 percentage points. Unfortunately, VA loans decreased 2.1 percentage points and cash sales dipped 0.9 percentage points.

The four-quarter moving average (MA) of the share of new home sales backed by FHA has increased over the past two and a half years from 12.2% to 18.9%. Conventional loans however have seen a 4.4 percentage points decrease during the same period.
Even with a small increase, interest rates are still at historically low levels. The stock market returns topping 20% from Q1 2020 to Q1 2021 have played important roles in the large increase in the number conventional loan and cash purchases relative to sales financed through the FHA and VA.

Now is a great time to purchase a home with low interest rates and in turn a great time to also sell. The national median sales price for a new home reported was $347,500 and those homes sold back by financing were $386,600.
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High-Performance Home Appraisal Guide

Photo by John Tekeridis from Pexels

  

High-performance homes are becoming more and more popular, but is the market up to date with appraisals for these specialty homes? Builders, sales agents and homeowners can take several steps to ensure local appraisers, lenders and the general public about what makes your durable, energy-efficient, healthier home stand out from the competition.

Step 1:

Make sure to highlight the home's high-performance features when marketing the home. This can be done by advertising, educating, teaching, highlighting and displaying these high-performance features.

When advertising, make sure to include the features that make the home more comfortable, energy-efficient and water-efficient. Point out how these will help lower utility bills. For tips on verbiage to use or ideas on what to highlight, check out Home Performance Counts.

Educate and teach others about the results of an Energy Rating Index (ERI) which includes the Home Energy Rating System (HERS) score or Home Energy Score (HES). All sales agents and sales staff should know what an ERI, HERS and/or HES rating means and how to articulate the ratings to consumers and others in the industry.

Features such as independently verified green home certifications should be highlighted in the marketing materials. The National Green Building Standard is a great example that should be put on flyers and web pages. During open houses, display the ERI, HERS or HES ratings and an explanation of the potential energy savings. Also, display certification plaques that show the home is approved by the National Green Building Standard.

Step 2:

Buyers should choose a lender who is familiar with high-performance homes. Local mortgage lenders who have a separate appraisal panel of trained professionals with experience valuing high-performance homes are critical to get the value your above-code home deserves. It is important for a lender to choose an appraiser that is on the Appraisal Institute’s green registry. This way both the lender and appraiser will not be hesitant to appraise the home higher for its energy-efficient upgrades.

Step 3:

The sales contract for a high-performance home should include Residential Green and Energy Efficient Addendum. What this means is the high-performance features that are behind the walls and cannot be seen will be included. This documentation will help the appraiser fully understand the higher price when it comes to an above-code home.

Step 4:

Just like interviewing a sales agent, interview the appraiser before you choose them to appraise the home. Not only ask about their appraisal experience but also ask if they are familiar with ERI scores and HERS ratings. Find out what classes or courses they have taken on high-performance valuation.  The Federal Housing Administration, the U.S. Department of Veterans Affairs, Fannie Mae and Freddie Mac all require that the appraiser has requisite knowledge prior to accepting the assignment, and the only way to enforce that is to ask about their knowledge and experience upfront.

Including these steps in the appraisal process will ensure a high-performance home will be given the right amount the home is worth. Choosing a sales agent who is versed in energy-efficient homes will help buyers with the home buying process.

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Suburbs Are The Place To Be

 The National Association of Home Builders NAHB recently did a survey that revealed 25% of home buyers have changed their home buying preferences due to COVID-19. The survey found that home buyers are looking to the suburbs because of the health crisis. Thiry percent of buyers are seeking a home in the outlying suburbs. Before the pandemic, only 26% of home buyers wanted to purchase a home in the suburbs.

This does not bode for other locations. All of the other location points saw no change or small declines in buyer's preferences after the onset of COVID-19. Rural areas went from 24% down to 23%, downtown in a central city, dwindle from 12% to 11% and those who desired a home in the central city outside of downtown remained at 9%.

Buyers should enlist the help of a Realtor. A local sales agent will know the suburbs and can help you find the perfect home of your dreams. They will be able to help find a home in the perfect community for the perfect price.

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