Reasons to Stay in Your New Home 5 Years

Whether you are buying your first home or your 4th home, the time you spend in your home before downsizing or upgrading makes a financial difference in your investment.  Most people start out in the real estate industry when they buy their first home.  Unless they come from a very wealthy family or have won the lottery, the home is priced modestly or on the low end and is built that way as well – smaller square footage, less bedrooms and baths, in an up and coming neighborhood.  First time

home buyers can be single professionals who are successful, in a steady job, with an income that is rising each year, but most people who buy a home for the first time are couples looking to start a family. These couples eventually would like to move out and move up to provide more space for their growing family.  They are “getting their foot in the door” with their first home to establish credit and create equity opportunity to eventually sell and move up to something bigger.

The biggest question then, to ask is this – how long do you stay in your home in order to make sure you aren’t losing money and to build enough equity to become a “move-up buyer?”  The answer to this depends, but it is typically about 5 years.  Below are the reasons for this number:

1.  Closing Costs: Whether you are buying a new or previously owned home (resale) or refinancing your home, you are going to “run into” closing costs.  Closing costs is the profit for loan originators, title companies, and the state in which you live (recording fees) which are charged during the loan process.  Every company needs to make money, and closing costs are how they make theirs.  Closing costs are, most of the time, added to the principle of your home, increasing your loan amount and shrinking your home’s equity.  Each time you make a real estate transaction, you are charged these costs.  Staying in your home approximately 5 years “pays off” these closing costs enough for there to be enough equity in your home (most of the time) to have money for a down payment when you move to your next “move-up” home.

2.  Interest: Even with the historically low interest rates in the market today, the mantra in real estate still stands, “The Bank Gets Paid First.”  When you are paying your monthly loan payments, you will notice on your mortgage statement that the amount of principle being paid on your home is significantly less than the amount of interest being paid.  You can also see this on your amortization schedule during your closing.  As your loan “ages,” the amount of interest balances the amount of principle and eventually ends up being less than the amount of principle during the last years of your loan.  If you only stay in your newly purchased home for a short period of time – say 3 years – the amount of principle you “pay off” will not be enough to merit a sale and move unless you are making extra principle payments each month.  The recommended period of time to stay in your home, reduce the amount of interest charged, and pay off as much principle as you can in order to gain equity during a sale is 5 years.

3.  New Vs. Used: The type of home you buy can also make a difference in how much time you spend in it before you upgrade to something bigger and better.  If you are buying a new home, it really doesn’t make that big of a financial difference in the time you spend in the home because typically, in a new house, you don’t end up with much maintenance on the home until about 4 – 5 years in.  On a previously-owned home, resale home purchase, however, there may be a significant amount of upgrade and upkeep that you will expend when you first move into the home.  Depending on the age of the home and the last time it was renovated, big system items, such as hot water heaters, condensers, garbage disposals, ductwork, roofing, etc. could end up needing to be repaired or replaced.  If you look at the amount of money you spent on renovating the home, the amount of interest you pay on your monthly mortgage payment, and the amount of closing costs you paid during the initial purchase; you may see that it would behoove you to stay in the house for about 5 years (or more) to get the equity out of the home to pay off your financial investment.

4.  Appreciation: The “golden days” of “instant appreciation” are fewer and farther in between when it comes to purchasing your first home in an “up and coming” area.  During the real estate boom of the early 2000’s, subdivisions were seeing appreciation in their homes from the beginning and build out of Phase I to the commencement of building Phase II.  You have probably seen the prices on the signs change from Phase I to Phase II where the exact same floorplan started selling $10,000 – $20,000 higher in Phase II than it did in Phase I.  Those days of instant appreciation are very rare, so when you purchase your home in an area you expect to experience residential and commercial growth, you, as a homeowner, may have to wait a little bit longer for that long-anticipated

appreciation to come about.  Along with the other factors mentioned above, this is yet another reason to wait approximately 5 years before selling and moving to a bigger and better home.

Ron Lee Homes, a home builder in St. Tammany Parish, specializes in 2nd home (and above) move-up homes.  Whether you are looking to build a semi-custom or fully custom new home in Mandeville, Covington, Madisonville, or Abita Springs, Ron Lee Homes will work with you and provide base floorplan designs for your consideration.  Buying or building a new home can seem a little challenging, but working with the team at Ron Lee Homes will make your home buying / building experience a pleasant and satisfactory process.  To get started with the plans for the home of your dreams today, Contact Ron Lee Homes at 985-626-7619 or E-mail Info@RonLeeHomes.com.


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St. Tammany Parish Homeowners & Businesses Receive Financial Relief

Good news for St. Tammany Parish homeowners and business owners is that they won’t have to “jump through hoops” in order to get their repair and renovation construction off the ground following the historic flood that hit Covington, Louisiana, inundating the city with water from 3

different river sources and shutting down roads and businesses for several days.  The City of Covington has waived the requirement for building permit fees under an ordinance approved by the City Council.

Mayor Mike Cooper said most of the floodwaters had receded by Tuesday and residents were in clean up mode.
“Things are moving,” Cooper said. “The city is doing what it can to help.”

With 100 total structures and counting being reported with flood damage, not only would the fees and requirements be cost prohibitive to the city, but they would hold up the restoration of people’s homes and businesses which would only cause the city to suffer because of the lack of production.

In order to assist homeowners with their repairs, the city is also requiring any contractor or builder working on a flood damaged home who applies for a permit to be a state licensed contractor.  This

should reduce the amount of fraud that happens when huge storms cause damage in the Greater New Orleans area.  Because state licensing requires proof of general liability insurance, homeowners can also breathe easy while the contractor or builder is working on their home.

The main culprits of the flooding were the Bogue Falaya and Little Tchefuncte Rivers in northern Covington.  One of the storm’s casualties was the Bogue Falaya Park in downtown Covington, which will be closed until further notice until the repairs to the wooden pavilion and playground equipment can be done.  St. Tammany Parish is applying for disaster relief for the storm that brought so much damage and it is the mayor of Covington’s hope that this funding will be made available to Covington’s residents who need it.  Parish-wide, so far it has been counted that 615 structures received flood damage in St. Tammany Parish.


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Pace of New Home Sales and New Home Inventory on the Rise

Both the pace of new home sales and new home inventory are up according to the numbers reported for February, 2016.  New home sales went up by 2% bringing the seasonally adjusted amount to 502,000.  Standing new home inventory also moved upward slightly to a 5.6-month’s supply of homes meaning it would take this amount of time to sell off all of the standing supply of new homes for sale nationwide.  New home inventory has struggled to rebound because of three factors: lots,

construction workers and sub-contractors, and lending standards.

Lots available for building have actually been a problem for builders in pockets around the country as builders are ready to “get back to work” and build new homes for sale.  The lack of supply of ready lots have them searching more rural locations or building completely different floorplans to accommodate certain lot plats.

Construction employment demand has skyrocketed as opportunities begin to be more and more prevalent because of the surge in new construction.  Employees and sub-contractors seem to be now flooded with work, which leaves builders waiting on certain subs’ industries to come out to work on their new homes under construction.

Lenders have found ways to ease the home buyer’s woes by offering better standards of down payments with new FHA loan packages and rural development loans.  However, the kink in the industry came in late October and the beginning of November, 2015, when the new Closing Disclosure was implemented for real estate closings.  Banks, lenders, mortgage companies, and even title companies are on a fast learning curve to master the new system and get home buyers into their new homes fast.

In reality, it is better that the real estate industry is undergoing these types of struggles rather than a complete lack of demand and over 1.5 year’s inventory on the ground like it felt during the Recession.  The lack of all of the items mentioned above are actually a good problem for new home builders to have.  If you are interested in building a new, custom home in St. Tammany Parish, Contact Ron Lee Homes today to set up a meeting regarding new home plans and construction.  Call 985-626-7619 or E-mail Info@RonLeeHomes.com to set up your appointment.


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Construction Spending Shows a Year-Over-Year Increase

The National Association of Home Builders monitors the construction industry so it can be the first to report both positive and negative news to the real estate industry and if necessary, to Congress.  Since the housing industry is one of the leaders in economic growth and development in the United States, and the national economy depends on real estate for a good portion of the GDP, the health of the real estate industry if of prime importance to those vendors, contractors, and builders who are involved in its day-to-day production.

To that end, construction spending was reported by the National Association of Home Builders (NAHB) to have grown in November, 2015.  Private residential construction which includes homeowner improvements, DIY remodeling and renovations, and other types of repairs saw an increase in construction spending of 5.9% from November, 2014.  Single-family construction spending was up 9% over the same period and multi-family construction spending was up 12%.
From November, 2015, to December, 2015, private residential construction spending increased by .12%.  Single-family home construction spending increased to $231 billion which is a 1% increase from November.  Multi-family spending increased to $53 billion – a 2.66% increase.  Interestingly, if multi-family spending levels off to a steadier pace, which it is predicted to do in 2016, the trend in real estate suggests that single-family home construction will begin to increase.

In the commercial sector, an increase of 45% in the manufacturing-related construction from December, 2014, to December, 2015, drove an overall increase of 8% year-over-year in commercial construction spending.

Since the Great Recession, the real estate industry has been on a continuous climb of recovery once the housing market started to turn around.  The numbers at the end of 2015 reflect this slow but steady progress for builders, contractors, remodelers, and renovators, as well as all of the construction employees involved in projects nationwide.

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Open Floorplans Are Popular in Today’s Real Estate Industry

The buzz word in the real estate industry today for new homes being built and existing home remodeling is an open floorplan.  What exactly does that mean?  The open floorplan refers mainly to the entire living area and possibly even the sunroom, screened-in porch, or patio area on the bottom or single floor of the home.  Open floorplans typically include the Family Room / Living Room, Dining Room, Kitchen, Sunroom, Keeping Room, Breakfast Room, and/or Porch / Patio.

Open floorplans discourage compartmentalization by encouraging each room or area to flow into the next.  Kitchens in an open floorplan can be expansive with a full working island in the middle as well as an additional breakfast bar that can have extra space for family social gatherings.  The kitchen island may have an additional sink, icemaker, dishwasher, trash compactor, or even a wine cooler. The island can also include cabinet space and drawers for additional kitchen storage of utensils, dishes and appliances.

Most of the time, the kitchen will overlook the Family Room with a view of the floor to ceiling fireplace for a vaulted ceiling floorplan and the television, letting the cook enjoy shows and games while have to cook, clean, and entertain.  The kitchen may have additional bench seating against the wall of what typically would be a Breakfast Room or Keeping Room in order to create a place for people to talk if they are not watching television.

Family Room space flows into what would have been the formal Dining Room, so homeowners have the option of buying a bigger living room set or adding built-in bookshelves, an informal office, or even a kids play area.  If there is enough room in the open floorplan, a screened-in or glassed-in porch may be easily accessible from the Family Room, or custom home buyers may choose to insulate a sunroom for a greenhouse effect for those that are plant lovers.

The obvious point here is that the days of separating out the “Formal Dining Room, Formal Living Room, Family Room, and Kitchen” are pretty much over – much like the disappearance of the “Parlor” in the ’50’s.  Home buyers and homeowners love their sprawl and space and having access to everything in the main living area of their home.

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Trends That Are Showing Up in Remodeled or Newly Built New Homes

Whatever type of home construction you are planning – a new, custom home or a complete remodel / renovation of your existing home – you will want to pay attention to the trends that are showing up in remodeled or newly built new homes.  Below are several trends that are popular among contractors, builders, and homeowners.

1. Luxurious garden tubs or jetted garden tubs have held steady in home construction for years, but for 2016, the trend is shower stalls or walk-around showers with shelving and seating.  There are some really unique shower designs that include multiple shower heads and even massage sprays.

2. For your backsplash, trim, or even walls and floors, ceramic tile is not as popular now among renovators and builders as glass tile.  The glass tile comes in many different colors as well as designs with multiple colors, so choose your matching design and go crazy!

3.  When stepping up to the gourmet kitchen or luxurious master bath, granite countertops used to be the ultimate material that reflected the type of construction of your new home or remodel.  There is a new material that is called engineered quartz that is not only tougher than granite and lasts longer, but it has the same timeless, classic, and upscale design for your custom counter work.

4.  Toilets naturally came in lower to the floor sizes for decades, but now there are choices of toilet heights that are available to new home buyers, and buyers are choosing height over flow.  The new, higher toilets are also more water efficient and modern, saving some homeowners on utility bills.

5.  Along with ornate, custom-built, real wood cabinetry; home buyers and remodelers now have a choice of painted, stained, and dark wood cabinetry vs. the traditional oak cabinets that were standard for new home construction projects.  Choose and contrast these colors as well with a two-toned look in the kitchen or bathroom.

6.  Even though, we as a custom home builder still encourage you to buy reliable appliances throughout your home, the industry has caught up with technology, so some home buyers and home renovators are now going with a mid-range level of appliance vs. a high-end appliance package.  The appliances themselves seem to have the same duration of service, and you can also purchase upper end looking fixtures, such as stainless steel to achieve the look you want without all of the cost.

7.  Back to the basics – homeowner and savvy new home buyers know to renovate and build their homes with real wood flooring such as solid oak or pine instead of engineered flooring.  While the look and cost of an engineered floor is great for the first few years, the results after many years of wear and tear don’t stand the test of time, weather, and constant use.  Homeowners and new home buyers will be looking to find affordable real wood choices for their flooring.

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Home Buyers Seeing Upward Trends in Real Estate

During the first month of the year 2016, home buyers have a lot to be excited about when considering buying a new home for sale.  Home pricing, consumer confidence, and home construction starts and permits are all up!  The housing market has been seeing a steady incline since it bottomed out between 2009 and 2011.  With sharp, record-breaking price increases in 2012 and 2013, the housing market almost seemed to be expanding too fast for consumer demand, consumer affordability, and consumer credit.  However, home pricing trends have “flattened” in 2014 and 2015 creating stability in the real estate market.
During the month of October, 2015, home prices rose at 6% and 11% depending on which report buyers were seeing.  The Case Shiller (CS) National Home Price Index released by S&P Dow Jones Indices showed an 11% increase in October while the more conservative Home Price Index from the Federal Housing Finance Agency (FHFA) rose 6%.  Either way, home pricing has stabilized and is on the upswing which is good for both buyers (a smart investment) and sellers.

Meanwhile, the vote of confidence from consumers showed an increase of approximately 4 points in December after 2 months of declining numbers.  The Consumer Confidence Index by the Conference Board rose from 92.6 to 96.5 from November to December.  The index shows that consumer confidence is growing back to pre-Recession levels.

Finally, construction housing starts and permits for 2015 were up 10.8% year-over-year to equal to 1.11 million.  Single-family home starts were up 10.4% and multi-family housing starts were up 11.4%.  The single-family home starts numbers came to 715,300.  Increases were seen in all 4 reported regions of the United States for single-family homes.  Housing permits were also up compared to 2014 by 12% with a total of 1.18 million.  Single-family home permits were up by 7.9%, and multi-family home permits were up by 11.4%.  In December, single-family home permit numbers were up by 1.8% compared to November as well.

All signs point to a solidly recovering housing market nationwide, and here in St. Tammany Parish, the custom home business is thriving with many new exciting projects for 2016.  If you are interested in building or buying a new, custom home, Contact Us at 985-626-7619 or E-mail Info@RonLeeHomes.com.

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