Fixed Interest Rates Drop After a Weak Jobs Report

Fixed mortgage rates plummeted this week following the release of disappointing employment data for March.

According to Freddie Mac’s Primary Mortgage Market Survey, the 30-year fixed-rate mortgage ( FRM ) averaged 3.43 percent (0.8 point) for the week ending April 11, down from 3.54 percent last week. A year ago, the 30-year FRM was averaging 3.88 percent.

The 15-year FRM this week averaged 2.65 percent (0.7 point), down from 2.74 percent in the last survey.

Adjustable rates also fell, though not as drastically. The 5-year hybrid adjustable-rate mortgage ( ARM ) averaged 2.62 percent (0.5 point) this week from 2.65 percent last week, while the 1-year ARM average fell to 2.62 percent (0.3 point) from 2.63 percent previously.

The sharp drop follows last Friday’s lackluster unemployment report from the Bureau of Labor Statistics, which showed only 88,000 net new jobs added in March. While the unemployment rate declined to 7.6 percent, the drop was mostly due to the loss of nearly half a million people from the workforce.

Bankrate.com also reported significant declines in its weekly national survey. According to the site, the 30-year fixed averaged 3.64 percent (from 3.73 percent), while the 15-year fixed averaged 2.89 percent (from 2.95 percent).

The average rate on the 5/1 ARM , meanwhile, was 2.70 percent, down from 2.72 percent.

“Mortgage rates have now fallen four consecutive weeks,” Bankrate noted in a release. “The pullback started with the banking crisis in Cyprus, continued with a run of uninspiring U.S. economic data, and picked up speed with the weak jobs report. But as the sting of the lousy jobs report slowly wears off, we’ll likely see mortgage rates crawling back over the coming week.”

Two-thirds of panelists surveyed for Bankrate’s weekly Rate Trend Index agreed that rates won’t change significantly over the next week, while the remainder predicted an increase. No experts surveyed anticipate further declines in the coming week.

Foreclosure Activity Falls to Lowest Level Since 2007

Despite a monthly uptick in foreclosure starts, first quarter foreclosure activity fell to a six-year low, according to RealtyTrac’s foreclosure market report for the first quarter and March.

Data from RealtyTrac showed 442,117 properties received some type of foreclosure filing—default notices, scheduled auctions and bank repossessions-in Q1. The figure represents the lowest level since Q2 2007 and a quarterly and yearly decrease of 12 percent and 23 percent, respectively.

Meanwhile, foreclosure starts, which numbered 73,113 in March, moved higher for the second straight month and posted a 2 percent increase from February. Foreclosure starts, however, were down 28 percent from a year ago.

At the same time, RealtyTrac found bank repossessions (REOs) slumped to the lowest level since September 2007. In March, banks repossessed 43,597 properties, down 3 percent from February and down 21 percent from a year ago.

Even though foreclosure starts were down year-over-year, 12 states still experienced annual increases. States with the biggest annual increases were New York (+200 percent), Maryland (+194 percent), Washington (+154 percent), Arkansas (+101 percent), and Nevada (+88 percent).

Certain states also saw a surge in REO activity, including Arkansas (+121 percent) Maryland (+114 percent), Washington (+88 percent), Pennsylvania (+41 percent), and Ohio (+39 percent).

“Although the overall national foreclosure trend continues to head lower, late-blooming foreclosures are bolting higher in some local markets where aggressive foreclosure prevention efforts in previous years are wearing off,” explained Daren Blomquist, VP at RealtyTrac.

Florida continued to take the spotlight for its high levels of foreclosure activity. The state recorded the highest number of foreclosure filings—85,671—in Q1 and posted the highest foreclosure rate. In addition, out of the 10 metros with the highest foreclosure rate, seven were in Florida.

The Florida cities were Miami (No. 1), Orlando (No. 2), Ocala (No. 3), Tampa (No. 5), Jacksonville (No. 7), Palm Bay (No. 8), and Lakeland (No. 10).

5 Mistakes Home Sellers Can Make

Have you ever said something in the heat of the moment, then wished for weeks later you could reel those words back in? Truth is, all of us commit emotion-driven mistakes in some areas of our lives. But when it comes to selling your home - read: cashing out your most valuable asset - the stakes are simply too, too high to allow yourself and your transaction to fall prey to predictable emotional pitfalls.

Fortunately, when it comes to emotion, what’s predictable is avoidable if you’re willing to acknowledge and correct for your own feelings and how they can foul up your decision-making. This list will help you predict - and better yet, avoid - some common decision traps driven by emotions.

1. Price reduction paralysis. Wikipedia defines panic as “a sudden sensation of fear which is so strong as to dominate or prevent reason and logical thinking, replacing it with overwhelming feelings of anxiety and frantic agitation consistent with an animalistic fight-or-flight reaction.” But there’s a real estate-specific reaction to panic that the infinitely wise Wiki editors left out: freezing up entirely.

In cases of overpricing, the seller has most often started out as overconfident in their home’s prospects on the current market. But as the days on the market turn into weeks, or even months, that overconfidence morphs into panic: panic that the place will only get a lowball offer, panic that the place won’t ever sell, panic that the seller will be stuck in the property, panic that the seller’s future life or career plans will be ruined. This is a panic that snowballs into increasingly disastrous hypothetical scenarios, and fast.

Unfortunately, this panic is often accompanied by a fear that actually reducing the home’s list price will actually kick off the snowball effect. This couldn’t be further from the truth: when a home is dramatically overpriced, cutting the price is the only way to fix the scenario (besides pulling it off the market entirely) and render the home more compelling to buyers. Some sellers have actually found that reducing their price gets them to a sweet spot wherein their home receives multiple offers and sells somewhere between the reduced price and the original list price.

But sellers who cannot manage their fear and panic can end up paralyzed, unable to cut the list price. And this begins the snowball effect of more and more days on the market, which aggressive buyers watch until they believe the seller’s desperation will make them amenable to a lowball offer.

The best way to deactivate this panic is to put a plan in place before it ever arises. Work with your agent to understand how to use the data around how long most homes in your area take to sell as a guidepost for making price reductions, if and when the need arises.

2. Excessive attachment. Yes, this is the place your kid took her first steps, the place you carried your bride over the threshold, maybe even the place your parents built with their bare hands. But at the time you make a decision to sell it, it also becomes a property, an asset, that like any other good you would sell in the course of business, must be marketed and priced and transacted for.

Sellers who are excessively attached to a home are likely to:

overprice it
ignore market data, like the recent sales prices of comparable homes nearby
disregard their agent’s staging advice
improperly prepare their home for the market, failing to update or neutralize the decor
be irrational in negotiations around price or repairs
refuse to respond appropriately to market feedback, like no showings or offers even after it’s been on the market for weeks or months.

Buyers don’t know the emotional value your home holds for you. Nor do they care - and they certainly have no interest or intention to pay for it. If you want to stay attached to your home, keep it - no harm, no foul. But if you truly want to sell it, you must release yourself from your emotional attachment to it.

3. Ignoring the needs of your target audience. Again, by virtue of putting your home on the market for sale, you have become a de facto marketer. And every marketer knows that it’s essential to understand your target buyer’s wants, needs and lifestyle in order to get top dollar for your product (that’s your home). It’s up to you - working with your agent, of course - to figure out who the target market for your home is and to market it accordingly.

If your home is a 2 bedroom condo with a coffee shop on the ground floor and a subway station at the end of the block, your target buyer is likely to prioritize things like efficient storage spaces and room for entertaining. If your home is a rambling 3 story rancher on a half-acre, chances are good that pets and kids are likely to be high priorities on your home’s target buyers’ list.

Understanding your target market is one thing - marketing appropriately for them is another. Your condo’s buyer might be drawn in by mentions of built-in closet organizers, an espresso machine included in the sale and incentives like HOA dues paid a few months in advance. Also, make sure you mention just how close and convenient the place is to the subway station entrance (and mention the station by name) in the home’s marketing materials.

On the other hand, if young or growing families comprise the audience for your home, mentioning custom play structures, the organic vegetable garden, the proximity to quality schools and the built-in desks that are in each “kid’s” room, might be the way to help your home’s listing stand out from the rest.

4. Celebrating too soon. An old friend of mine who happened to be a former pro athlete would often shake his head when a team went wild over a mid-game rally. His mantra: “Don’t celebrate too soon.” In sports, some say that celebrating too soon can cause you to relax and play less aggressively or less defensively for the rest of the game, giving your opponent a chance to make a last minute comeback.

And the same is true in real estate. Multiple offers and above-asking sales prices happen frequently on today’s market, but it’s critical not to assume your home will be in that number until a deal is actually closed. Sellers who “celebrate too soon,” so to speak, can put themselves at a disadvantage in a number of ways, like:

Cheaping out on staging, failing to do all the items on their property prep list
Overpricing their homes, assuming the demand-supply imbalance will automatically swing in their favor
Getting sloppy in how they maintain their homes on a daily basis, while they are still on the market, and
Making large purchases or spending their house proceeds “in advance,” while the buyer’s loan and inspections are still pending.

Even on today’s market, deals sometimes fall out of escrow because a buyer has a change in their life, their job or their family, or because they simply turn out not to qualify for the loan they were pre-approved to receive. Smart sellers stay vigilant and keep their houses meticulous and their finances in good shape throughout the entire time frame from property preparation through close of escrow. Work with your agent and your mortgage broker around timing your purchase of your next home in a way that makes sense vis-a-vis your current home’s listing and sale.

5. Price confusion. Some sellers have a confused understanding of the mechanics of determining the fair market value of a home and setting a list price. This leaves them vulnerable to the trap of letting their financial self-interest and fantasies for the future get in the way of setting a smart list price.

See, a home’s fair market value is defined by what a qualified buyer will pay for it at a given moment in time. The best way to estimate or approximate that for a home before it is actually sold is to look at what qualified buyers have actually paid for very similar nearby homes, as recently as possible. This is what agents call looking at the comparables or “comps” - most listing agents will do a formal version of this process called a Comparative Market Analysis, and present that to a seller to consider in setting the list price for their own home.

If a home is more or less upgraded, spacious or well-located than the comps, or if the market has moved up or down since the time the comps were sold, it might warrant listing the property at a price higher or lower than the comps indicate. And if a seller is aggressively trying to get buyers into a property to create a bidding war, they might even go so far as to discount the list price a bit from what the comps, making the home seem like a great value in order to drive buyer traffic and interest (whether this strategy is appropriate for any given property is a subject for conversation between a seller and their agent).

All that said, some sellers are so emotional about their plans for the next stage of their life that they convince themselves to base the list price for their current home not on its fair market value or marketing considerations, but based on how much money they need to fund their next home purchase or their move to Malaysia. (I’ve been watching too much House Hunters International - don’t mind me.)

This is the quickest, most lethal route to pricing your home so high no one comes to see it and it lags on the market, a road which usually ends in no offers at all, or very low ones. Smart sellers can combat this tendency by staying fixated on the comparable sales data, and committing to being responsive to market feedback like low buyer traffic or having your home sit on the market for many days beyond the average in your area.

71% of bankers say home price increases are sustainable

Lenders are more bullish on the housing recovery now than they have been in the last several years, according to the results of FICO’s quarterly survey of bank risk professionals.

The survey, conducted for FICO by the Professional Risk Managers’ International Association ( PRMIA ), found that 71 percent of bankers polled believe home prices are “rising at a sustainable pace” in the context of mortgage lending risk.

In addition, the majority of bankers—59 percent—expect the supply of credit for residential mortgages to meet demand over the next six months; a slightly larger percentage (60 percent) expect the supply of credit for refinancing to meet demand.

On the credit health side, 39 percent of respondents expect mortgage delinquencies to fall over the next six months, while another 45 percent expect delinquencies to remain flat. Sixteen percent anticipate an increase in delinquencies, making this first-quarter survey the most optimistic since the surveys started.

“The latest survey results, combined with data that indicates the real estate market is improving in many regions, paint a positive picture for a sector of the economy that has been slow to join the recovery,” said Dr. Andrew Jennings, chief analytics officer at FICO and head of FICO Labs. “Mortgage lenders have been understandably guarded over the past five years. The improvement in their sentiment should be welcome news, and I wouldn’t be surprised to see lenders cautiously expanding their mortgage and home equity lending businesses.”

According to FICO , banker optimism extended beyond mortgage lending last quarter: Large majorities of survey respondents believe that consumer credit health is improving across most types of loans. Respondents were most confident in home equity lines of credit, with 81 percent expecting delinquencies to remain steady or decrease in the next six months.

The survey also asked respondents about the business priorities at their institutions for 2013. Two related topics took the top spot: utilizing Big Data analytics to gain greater insight into consumers and improving the customer experience. Both were named as the top priority by 35 percent of respondents. Also important: fraud prevention (20 percent of respondents) and utilization of mobile technology (9 percent).

Confidence in Housing Stays Strong, but Weakens for Economy

Consumer confidence in the economy is wavering, but confidence in the housing recovery remains high, according to Fannie Mae’s National Housing Survey for March.

“Despite an uptick in concern expressed about the direction of the economy, it appears consumers believe that the housing recovery will march on,” said Fannie Mae SVP and chief economist, Doug Duncan.
The percentage of people who say the economy is on the right track declined 3 percentage points in March to 35 percent. At the same time, 21 percent of people said they expect their personal financial situation to worsen over the next 12 months, a 4 percentage point rise from the previous month.
Despite this increase in pessimism, Fannie Mae found consumers continue to view the housing market with relative optimism. Forty-eight percent of survey respondents expect home prices to rise over the year, unchanged from February’s all-time high for the monthly survey, which started in June 2010.
In contrast, just 10 percent of survey respondents anticipate falling prices, an all-time low for the survey.
Another survey high was reached in response to the home-selling environment. Twenty-six percent of respondents say now is a good time to sell a home, a 1-percent increase from February.
Duncan pointed out that while consumers share a positive outlook on the housing market, they are “cautious.” In fact, their predicted price gains often lag the market.
March is the 17th consecutive month in which consumers have predicted yearly price gains. However, they have continued to predict price gains of less than three percent.
In March, consumers predicted a 2.7 percent price gain for the following year.
“By comparison, main measures of national home prices in early 2013 posted year-over-year gains of at least double or triple that figure,” Duncan said.
About 46 percent of survey respondents anticipate rising mortgage rates, while just 6 percent anticipate further declines in mortgage rates over the next 12 months.
Forty-three percent think mortgage rates will remain about the same.

Seller's Asking Prices Move Higher and Rent's are Stable

Asking prices on single-family homes rose in March, while high inventory flattened out rent prices, according to Trulia's Price and Rent Monitors.

Based on data on for-sale homes and rentals listed on Trulia, the monitors take into account changes in the mix of listed homes and reflect trends in prices and rents for similar homes and similar neighborhoods through the end of March.

With the spring house hunting season upon us, Trulia reported a 7.2 percent year-over-year increase in asking prices on the national level (8.0 percent excluding foreclosures). On a seasonally adjusted basis, prices rose 1.1 percent month-over-month (1.4 percent excluding foreclosures) and 3.5 percent quarter-over-quarter (4.0 percent excluding foreclosures.

Regionally, prices rose annually in 91 out of the 100 largest metros. Once again, the West made the biggest splash in terms of price growth, with Las Vegas, Phoenix, Oakland, Sacramento, and San Jose showing yearly improvements of higher than 20 percent.

On the other hand, rent price growth—for single-family homes, at least—showed signs of stagnancy in March. Nationally, rent for single-family homes increased 0.1 percent year-over-year.

“Why have rents stopped rising on single-family homes? More supply,” explained Jed Kolko, chief economist at Trulia. “Investors have purchased single-family homes—including many foreclosures—and are renting them out. In fact, the number of single-family rentals nationally has increased by almost one third since the housing market last peak: that’s nearly 4 million more single-family homes rented in 2012 than in 2005.”

On the apartment side, rents rose 2.9 percent year-over-year. Taken together, national rents were up 2.4 percent year-over-year in March.
While oversaturation has hindered single-family rent price growth, it may provide a boost in the purchase market very soon.

“Rising prices and flattening rents change the math for investors and renters,” Kolko said. “Some investors will decide to sell the units they’ve been renting out, which would create new desperately needed for-sale inventory. At the same time, some renters watching prices rise will rush to buy before prices rise further, but those who don’t will at least get some relief from stabilizing rents.”

3 Myths of Real Estate

As the real estate market significantly rebounds, some buyers and sellers are dipping their toes in the waters for the first time. Inevitably, they come into the market with assumptions about how it works.
Their assumptions may come from TV reality shows or watching their parents' house-hunting experiences. Maybe they've learned about real estate from a co-worker’s recent home buying or selling experience. The trouble is, the new buyer or seller’s assumptions are sometimes based on outdated or generalized "real estate myths." Here are three such myths that many less-seasoned home buyers and sellers assume are true.

Myth No. 1: Spring is the best time to sell a home
Historically, real estate seasons were tied to summer and the end of the school year. Families were the typical buyers or sellers, and they wanted to move during the summer so their kids could start anew in September. That’s how spring became the prime selling season. It’s true there are still more homes for sale in the spring, which means there’s a lot of activity and buzz. But spring isn't necessarily the best time to sell a home anymore.

The reality: The best time to sell is during the holidays and right after
Today, more than half of buyers aren't married, and their decisions aren't based upon school schedules. So spring isn't as relevant as it used to be. Instead, the best time to sell a home is in November, December and January.
It’s a supply-and-demand issue. Most sellers assume buyers aren't seriously looking during this prolonged holiday season. And yet, many buyers are looking at properties in person and online right up until Christmas Eve. If the right home goes on the market in mid-December, a serious buyer — and there will be a lot of them — will take note.
After New Year’s Eve, most buyers jump back into their routine with a resolve to get into the real estate market, even though many sellers wouldn't even consider listing in January. The net effect: Savvy sellers will face less competition for a still-strong pool of buyers during this period. And that makes November-January a great time to sell.

Myth No. 2: Always start with your lowest offer
There’s no generalized strategy for making an offer on a home anywhere, ever. A seller could have overpriced or underpriced the home on purpose. Some markets may be more competitive than others. But, somehow, in the back of the buyer’s head is good old Uncle Bob saying "never offer the full asking price." That strategy might work if you’re trying to buy a used computer on eBay. And it worked in some real estate markets years ago. But times have changed.

The reality: A low offer may get you nowhere fast
A buyer in a strong, tight inventory market today would be wasting their time making low offers right from the start. It’s likely a home that’s priced right and shows well can receive multiple offers, sometimes even over the asking price. In this environment, constantly throwing in low offers because that’s what your Uncle Bob advised you to do will likely lead to disappointment. Instead, work with a good local real estate agent o understand the market. You’ll quickly learn after a few weeks on the open house circuit (and maybe a disappointment or two) that starting low may not get you anywhere.

Myth No. 3: A cash offer trumps all
There’s an assumption that a seller, considering two different offers, will always go with the cash offer because there’s less risk. As a result, many buyers who hear they’re competing with a cash offer assume they won’t get the home. They may not even make a formal offer. At the same time, many cash buyers assume that because they’re paying cash, they can make an offer below the asking price, and it will likely be accepted.

The reality: A savvy seller may be more tempted by a solid financed offer
Consider a seller with a home priced at $399,000. The seller receives two offers: One is a cash offer of $375,000. The other is an offer for the full asking price, with 25 percent down, a bank pre-approval letter and swift contingency periods.
A good buyer’s agent, upon learning their client is competing with a cash offer, will arm the seller with lots of data supporting their client’s finances, such as a credit report and verification of income or assets. The agent might even arrange a call between the seller and the buyer’s lender.

Learn your market
When you become a buyer or seller, especially for the first time, the most important thing you can do is learn your market. Talk to a savvy local agent, and don’t make assumptions based on what you think you know. Real estate is local. Every market is different, with its own customs. If you believe there are general rules for real estate strategy that apply everywhere, anytime, you’ll likely be fooled — not only in April, but every other month of the year.

Surprising Real Estate Tax Consequences

It’s no surprise that owning a home automatically opts you into a new realm of tax advantages. In fact, in a recent survey of people who bought homes in 2012, 79 percent said the mortgage interest and property tax deductions were "extremely important" factors to their decision to become homeowners in the first place.  

But these two deductions are just the tip of the iceberg of all the real estate-related tax guidelines, advantages and disadvantages.  Because others get less press, it can be relatively easy for an individual American taxpayer to unwittingly trigger tax liabilities they might have been able to minimize or plan for, or to unwittingly trigger tax perks and fail to claim them.

This is why its essential to touch base with your tax pro before any and every real estate move you make, no matter how minor you think it might be. Sometimes planning and timing makes a major difference to the financial impact of a real estate-related tax; other times, just knowing the size and scope of the tax implications will impact the real estate decision you make. 

Here is a short list of real estate moves that trigger surprising tax issues, pro and con:

1.  Refinancing.  American homeowners have been on a refinancing spree this year, spurred by continually low interest rates and a new resurgence in home values and equity. When you refinance into a lower interest rate mortgage than you previously had, the focus tends to be on the fact that your monthly payment is lower or that you can pay your home loan off faster with the same payment every month.  

What many fail to calculate for is that the tax deduction based on your mortgage interest is the largest tax perk of home ownership. Most homeowners are eligible to deduct 100% of the interest they pay on a mortgage up to $1 million on their primary residence.  So, if you reduce the interest you pay, you also reduce your mortgage interest deduction.

Here’s some perspective on this.  Less than 30 percent of homeowners take their mortgage interest deduction every year. This is thought to be because at lower income and home price levels, the standard deduction is higher than the itemized deductions for which many homeowners would be eligible. That said, if you do itemize every year and/or you have a relatively high (or growing) adjusted gross income, you might be surprised at your tax bill the year after you refinance to a lower interest rate. 

The best practice is to loop your tax professional in so they can help you plan for this and adjust your withholdings, if necessary, to avoid big surprise tax bills post-refi.

2.  Becoming a landlord.  Smart real estate investors get up to speed on capital gains tax laws, as its no surprise that selling a rental property at a profit triggers taxes, unless you exchange it for another. What’s trickier is when you become a more or less “accidental landlord.”  It’s not obvious to people who are renting out a room for a few nights here or there, or who decide to rent out part or all of their own home for the longer term (e.g., deciding to hold onto your starter home when you move up, versus selling it) that there are tax implications for being a landlord that should be researched and respected.

For example, rental income is subject to all the regular income taxes, federal and state (if applicable).  As well, in some cities, you might also be required to obtain a business license and pay business taxes, as a landlord.  Additionally, some municipalities are cracking down and requiring people who rent their home or portions of it for very short time frames to pay hotel taxes, which might be a cost you can pass down to your short-stay tenants. 

3.  Remodeling. The conventional wisdom is that when you remodel your home, whatever you do, for the love of all that is sacred, save your receipts. And this is not a ‘save them until tax time’ recommendation, it’s a ‘save them until you sell the place’ mandate!  The money you invest into improving your home over time gets added to your purchase price, or cost basis, when you sell, bringing down the amount the IRS considers to be profit or gain and reducing your chances of incurring capital gains tax. (Single home owners can realize $250,000 of “gains” above the cost basis of their home tax-free; marrieds, $500,000.)

This is no surprise to most homeowners. 

Here’s where many of us do get surprised - many remodeling projects popular with homeowners these days trigger local and state tax credits. This is especially the case for home improvements that increase your home’s efficiency, from low-flow toilets and shower heads, to dual-paned windows and insulation - even solar systems and tankless water heaters. If you are remodeling and improving your home’s efficiency at the same time, visit your state, county and city websites to see what tax credits or other financial incentives you might qualify for.

And whether or not your remodeling projects are eco-friendly, if you use a home equity line to finance them, chances are good that you can deduct the interest from that loan (up to $100,000) on top of your home mortgage interest deduction.  Again, don’t forget to mention this to your tax professional.

4.  Renting. Here’s the thing - most of us just don’t think about renting as an intentional decision.  It’s something many people do until they can afford to buy a home, or know where their career will take them geographically speaking.  But there are people out there who have sufficient income, assets and stability to own a home, yet haven’t developed any sense of urgency around it, for various reasons.

I don’t believe in suggesting that someone who truly doesn’t want to own a home should do so, simply for tax reasons.  But if you’ve been ambivalent about it or have been thinking about it and procrastinating, you should at least be aware of the tax implications of your fence-sitting. Some personal finance experts estimate that the average American renter works through the end of April just to earn enough income to pay taxes, federal, state, local and sales.  As you move up the income ranks, consult with your tax professional about whether home ownership might get you some tax relief.

More and More Homeowners Say Now Is The Time To Sell

In Fannie Mae’s most recent housing survey, consumers maintained their optimism toward home prices, while the share of consumers who said now is a good time to sell reached a record high. However, consumers in the survey were less optimistic about the economy and their own financial situation.

Nearly half, or 48 percent, of respondents in the February survey said they expect home prices to rise in the next 12 months, up from 45 percent in January. On average, consumers expect prices to rise by 2.9 percent over a year, up from 2.4 percent the month before.

Seventy-three percent of respondents said now is a good time to buy, an increase from 69 percent the month before. At the same time, 25 percent also believe now is a good time to sell, the highest level since the survey’s June 2010 inception.

“Despite fiscal headwinds and political uncertainty, consumer sentiment toward housing is robust and continues to gather strength,” said Doug Duncan, SVP and chief economist at Fannie Mae. “We expect home prices to firm further amid a durable housing recovery, gradually reducing the population of underwater borrowers and helping to boost the share of consumers who say that now is a good time to sell.”

Along with the increase in prices, more consumers also think mortgage rates will go up, with 44 percent of respondents expressing this view last month compared to 41 percent in January. Only 7 percent believe rates will go down.

With the year-end HARP deadline looming ahead, Duncan explained rising rate expectations should prompt some borrowers to refinance soon to take advantage of more favorable mortgage terms. As a result, Duncan said this should “add to their disposable income, helping to offset ongoing fiscal drag.”

As for views on rent prices, 50 percent of consumer expects rent prices to go up in the next 12 months, unchanged from the month before and at the highest level since the survey began.

A large majority of respondents, 67 percent, said they would buy if they were to move rather than rent, up from 65 percent the month before.

When asked about the economy, 53 percent of respondents said the economy is on the wrong track, unchanged from January.

Consumers were more pessimistic about their personal financial situation, with 41 percent believing it will get better, down from 43 percent the month before. More respondents said they think their financial situation will stay the same, with 41 percent of consumers expressing this view, up from 37 percent.

The share of respondents who said their household income is significantly higher compared to a year ago decreased over the month to 21 percent from 23 percent. However, 31 percent said their expenses are significantly higher, down from 38 percent in January.

Fannie Mae’s survey polled a representative sample of over 1,000 respondents.

Five Tips From Sellers to Buyers

The conventional wisdom is that buyers and sellers go together like oil and water. That is to say, they don’t go together at all. Some say they are at odds simply by virtue of sitting across the bargaining table from one another, which - along with negotiation and legal issues that are par for the home buying course - create the presumption that they want totally different things.

The prime example of competing buyer and seller interests is this: the buyer wants to pay as little as possible, while the seller wants to get top dollar for the place. But there is another way to look at this entirely.  In fact, there’s a point of view from which the buyer and the seller want exactly the same thing:  the buyer wants to buy the place, and the seller wants to sell it to them!  And I’ve seen many buyers and sellers act cooperatively to achieve just that result.

Nevertheless, there are things that sellers can see from their side of the table that you cannot. Sellers have insights into their own mindsets that, if revealed, can be very powerful tools in helping buyers optimize their approach, offer and interactions with the seller to both buyer’s and seller’s benefit. So, in the interest of helping both buyers and sellers move closer to an outcome that helps them both achieve their mutual goal, here are a few of the insider secrets from the seller’s side of the bargaining table that they would tell buyers, if they could.

    1.    Trashing my house doesn’t make me want to sell it to you at a discount.  To a seller, their home is their castle. It’s the place where they’ve raised their children, and has been the backdrop for many of their memories. It’s the asset into which they’ve invested the lion’s share of their time and money, sometimes for years.  It’s an intensive expression of their personal tastes.  And it’s also the asset they must convert into as much money as possible to move forward with the next phase of their lives.

All that said, the average seller knows most things about their home that you can see with the naked eye.  So if you, as a buyer, think trash talking a home, pointing out obvious flaws or issues is a good strategy for getting the price down, rest assured that you are not telling the seller anything they didn’t already know when they set the list price. In fact, you might very well be doing your case more harm than good, as this “strategy” is highly likely to alienate and insult the seller whose cooperation you seek.  

If you feel strongly that something about a place makes it less valuable than the comparables the seller seems to have based the list price on, work with your agent on how best to communicate your offer price rationale to the listing agent in a way that is diplomatic and fact-based.

    2.    Knowing that you have cash makes me feel comfortable taking your offer.  With distressed properties, over-asking multiple offers, and the generally warm-to-hot seller’s market in many areas, it has become increasingly common for sellers to request proof of a buyer’s “cash to close.” (This usually takes the form of bank or other asset account statements, with the sensitive account number information blacked out for security purposes.)

Some buyers in competitive situations have begun to proactively offer such proof, even when it hasn’t been requested, and even for non-cash offers.

Other buyers, though, take offense. Why shouldn’t the mortgage pre-approval letter be enough?  Why should you have to jump through yet one more documentation hoop?  Is the seller just plain nosy? Why are they all in your business?

One word: comfort. Over the last few years, the number of home sale transactions that went into - and fell out of - escrow due to last minute loan problems of pre-approved buyers hit a record high. While this is awful for buyers to go through, it’s even more disruptive for sellers, who are relying on the transaction to close in the time frame the buyer provided to move forward with their own lives. It’s also a worst case scenario for a seller who had 5 offers on the table to choose one and then have it fall out of escrow later on.

And sellers’ agents know this - often, the issues which derail a buyer’s loan can be resolved with money, extra cash down, extra cash at closing, extra cash to put in escrow for post-closing repairs required by the lender or the city.  So, proving that you have more cash than you appear to need to close the deal doesn’t necessarily set you up for the seller to ask for more cash - but it might help them feel that you’re the buyer most likely to sidestep mortgage obstacles and seal the deal.

    3.    It’s all about the Benjamins - but close-ability is a close second.  Buyers be on notice - all the love letters, cute dog pics and cookies in the world will not make your offer win out over others that are offering significantly higher than yours, financially speaking.  Now, please don’t write in telling me about the case of your cousin’s dog groomer’s tarot card reader who got a home for less than 10 other offers because she helped the little old lady seller take her garbage cans to the curb - most little old ladies need cash to get through their later years.

There is always an exception to the rule, and it does sometimes happen that a seller will take a slightly lower offer than the highest for one reason or another.  But if you’re trying to create a plan that stacks the decks in your favor in a multiple offer situation, your first priority should be to offer as much as you can, without spending beyond what is affordable for you and beyond the home’s fair market value.

That said, sellers also care - a lot - about how likely the offer they accept is to close escrow.  And when multiple offers get so numerous and so frenzied that buyers seem to be throwing money at a home, smart sellers pay attention to the fact that their home might very well not appraise at a crazily high price and focus on offers that seem realistic and close-able, which can mean offers below the highest.

Approval letters, proof of cash to close, the professionalism with which the offer is prepared and presented (see below), and even things like your credit score, your choice of mortgage broker/professional - all these things contribute to or detract from a seller’s estimation of how close-able your offer is.  If you’re competing against other offers, you should be maxing out both your price and your offer’s close-ability, as evidenced by these characteristics.

    4.    Your agent represents you to the world of sellers.  Choose wisely.  See above. A buyer’s broker or agent has a lot of influence on whether the transaction closes, and how smooth or bumpy the ride is. If your agent’s level of professionalism is lacking, it will show - and listing agents might actually rank your offer below others, in terms of close-ability.  If your agent’s level of professionalism is stellar, the opposite can occur.

Before you choose an agent, ask around your circle of friends and do a little online searching or even calls to past clients to see what you can find out about their reputation for professionalism.

    5.    Ask nicely - the old “flies with honey” adage is true. The conventional narrative about buyers and sellers is that they are adversaries. But I’ve been around this block a few times, and I think the average buyer would be absolutely gobsmacked at the number of times sellers are actually ready, willing and able to agree to their requests throughout a transaction. This is especially the case where:

1. the buyers’ requests are reasonable and not nickel-and-dime nitpicks
2. the buyers phrase their requests nicely, and
3. the buyers have been living up to their end of the bargain throughout the course of the transaction.

Compare this with buyers who try to hold sellers hostage to their requests with the threat that they’ll kill the deal if the seller doesn’t do every single penny-ante thing the buyer wants.  

I’ve seen sellers agree to leave valuable personal property behind, have repairs made, give thousands of dollars in repair credits or price reductions after a concerning inspection report - despite a hot seller’s market - all because they were good people, could afford to, and the buyer’s approach was more sweet than it was sour.