Searching for Homes During the Polar Vortex

When winter strikes, home searches rise. For every ten-degree drop in temperature, searches increase by 2.6% nationally, 4.4% for homes in warm regions, and 5.5% for homes in warm vacation areas.

Brrr. It’s cold outside – still. Winter has been rough for much of the United States, with temperatures plummeting far below normal. We analyzed search traffic on Trulia between December 1, 2013, and January 21, 2014, to see how daily temperature fluctuations affected home-search patterns (see note below). It’s clear as a bone-chilling winter morning: when the cold wind blows, home searches increase – especially for homes in warmer parts of the country.

Searching for Warmth When the Mercury Drops
Nationally, home searches increased by 2.6% overall for every 10 degrees Fahrenheit the temperature dropped. Why? In part because cold weather keeps people inside where they do more indoor activities, including searching for real estate online. But cold weather doesn't simply cause people to do more of everything to an equal degree. When temperatures plummet, searches for homes within the searcher’s own metro rise 2.2%, while searches for homes outside the searcher’s own metro rise 2.9%.

And the colder it gets, the better warm looks. For every 10-degree temperature drop that occurs where a house hunter resides, we see a 4.4% increase in searches for homes in warm regions, which is bigger than the increase in searches overall. While some of this searching might reflect the desire to move to a warmer place and leave winter behind permanently, the increase in searches for homes in sunny vacation spots is even higher: a 5.5% jump for every 10-degree temperature decline. In other words, searches for homes in warm vacation destinations increase more than twice as much as home searches overall. 

National Search Patterns When the Temperature Drops
Searches for homes in:	Increase in searches for each 10-degree drop where the searcher is
U.S. overall	2.6%
Within searcher’s own metro	2.2%
Outside searcher’s own metro	2.9%
Outside searcher’s own metro, warm regions only	4.4%
Outside searcher’s own metro, warm vacation areas only	5.5%
Based on searches by people in the colder regions of the country.

Honey, I’m Freezing. Let’s Move to Miami.
Breaking these search patterns down further, we can see which metro’s homes get the biggest search boost when winter weather strike, Miami benefits most, with a 7.3% climb in searches for every 10-degree temperature drop in wintry regions, followed by Phoenix and Jacksonville. And among the 10 metros that get the biggest rise in searches when temperatures plunge, only one – Dayton, OH – is outside the South and West. 

Metros Where Searches Rise the Most When Winter Strikes
#	U.S. Metro of homes searched	Increase in searches for each 10-degree drop where the searcher is
1	Miami, FL	7.3%
2	Phoenix, AZ	6.9%
3	Jacksonville, FL	6.4%
4	Orange County, CA	6.4%
5	Richmond, VA	6.4%
6	Lakeland-Winter Haven, FL	6.3%
7	Sacramento, CA	6.2%
8	New Orleans, LA	6.2%
9	Dayton, OH	6.1%
10	Fort Lauderdale, FL	6.1%
Among 100 largest metros. Based on searches by people in the colder regions of the country. Excludes within-metro searches.

On Second Thought, I Do Love the Summer at Home. Let’s Be Snowbirds.
The table above showed that, in cold weather, searches to warm vacation areas jumped even more than searches to warm places in general. But you don’t need to move to Florida to avoid winter – you just need a second home there. For our analysis of vacation areas, we identified ZIP codes where vacation homes account for at least 25% of the housing stock, according to the Census, and grouped them together within each county to define vacation areas. (Vacation areas where search traffic jumped most include several beach towns in Florida. But when winter hits hard, the number one vacation spot where searches increased was Deschutes County, OR, near Bend; searches for homes there jumped 9.1% for every 10-degree drop in temperature elsewhere. 

Vacation Areas Where Searches Rise the Most When Winter Strikes
#	County	Main vacation towns or areas	Increase in searches for each 10-degree drop where the searcher is
1	Deschutes, OR	Sunriver, Black Butte Ranch, Bend	9.1%
2	Brunswick, NC	Oak Island, Holden Beach	7.9%
3	Placer, CA	Lake Tahoe, Tahoe City	7.2%
4	Pinellas, FL	St Pete Beach, Madeira Beach, Clearwater Beach	7.2%
5	Osceola, FL	Celebration, Kissimmee	7.1%
6	Bay, FL	Panama City Beach	7.0%
7	Watauga, NC	Boone, Banner Elk	6.9%
8	Ocean, NJ	Harvey Cedars, Seaside Heights	6.7%
9	Broward, FL	Hollywood Beach, Pompano Beach, Deerfield Beach	6.6%
10	Collier, FL	Marco Island	6.4%
Among top 50 counties with the most vacation homes. Based on searches by people in the colder regions of the country. Excludes within-metro searches.

As January comes to an end, temperatures are once again dropping in much of the country. Try to stay warm: bundle up, sip hot chocolate, and look at homes in Miami and Phoenix.

Note: this post is based on web searches on Trulia between December 1, 2013, and January 21, 2014. Data on daily high temperatures come from the National Climatic Data Center. We excluded searches by people in regions with warm winter climates, which include much of the South, Southwest, and California. This is based on regression analysis of daily searches by people in a metro to homes in regions, metros, or counties, and the explanatory variable is daily high temperature in the searcher’s metro; we included fixed effects for the searcher’s metro and for the day of week, as well as a quadratic time trend. All of the reported percentages are statistically significant at the 5% level.

by Jed Kolko, Chief Economist – Trulia.com

Do you want to buy a home, or refinance the one you own, but are worried that you don't have the financial status to qualify for a mortgage?

Well, here's some news that might raise your spirits: Mortgages might be easier to get now, according to a report from Ellie Mae, a national mortgage tracking firm.

Specifically, Ellie Mae's September 2013 "Origin Insight Report" found that for closed loans, average credit scores and down payments are coming down, while at the same time, allowable debt limits are rising.

"Although it's not loosening rapidly, we are seeing a consistent loosening that has happened over the last 12 months and in particular since the beginning of the year, in underwriting criteria," says Jonathan Corr, Ellie Mae's president.

Wondering why mortgages might be just a little easier to get? Keep reading to see what we found out.

Credit Score Standards Have Loosened

You might be more than just a number in a computer somewhere, but one number - your credit score - is massively important to lenders when it comes time to throw the thumbs up - or down - on your mortgage application.

So if you're planning to refinance or buy a home anytime soon, it may come as good news that according to Ellie Mae, the average FICO credit score for closed loans came in at 732, down from 750 the year before. The FICO score, which ranges from 300 to 850, is the one mortgage lenders use most, says Corr.

And while the lower average qualifying score is good news, another stat excites Corr even more. According to the study, the percentage of folks with credit scores under 700 who qualified for loans jumped from 17 percent in 2012, to 32 percent in September of 2013.

Why is that significant? "People see a 732 average score and they get worried that they can't qualify if they don't have it. But actually, what we're seeing is the number of folks who have [a credit score of] under 700 and have closed loans jumped quite a bit. That shows a loosening of qualifying standards and gives more people a chance," says Corr.

Higher Debt-to-Income Ratios Are Allowed by Lenders

It may come as no surprise that lenders who are about to loan you a large sum of money worry about whether you have, or are taking on, too much debt to be able to make your monthly mortgage payment.

So, one of the key things they calculate is your debt-to-income ratios (DTI), says Corr. There are two. The first ratio, says Corr, is your "front-end" DTI. This is the percentage of your gross monthly income your mortgage will take up. The second ratio is your "back-end" DTI, or the percentage of your gross monthly income that your mortgage, plus other debt obligations such as credit card payments, car loan payments, personal loans, and other such debts, will claim.

As an example, say your household gross monthly income was $6,000, your mortgage was $1,500, and all your credit card and auto loan monthly payments came to $600. In that case, your front-end DTI would be 25 percent, and your back-end DTI would be 35 percent.

Now here's the good news: The average percent of DTI is going up, says Corr. That is, for a variety of reasons - such as a strengthening economy and housing market - Corr says lenders are becoming more lenient about how much debt they see as acceptable for borrowers to take on.

"[The average DTIs] were about 23 percent and 34 percent, and we've seen them come up a bit to 25 percent and 37 percent. So while it's not massive, you are seeing some loosening, which is a positive sign for borrowers," says Corr.

It's also important to remember that these are averages, not limits. So if your DTI is a bit higher, Corr says that doesn't necessarily mean you can't qualify for a mortgage.

Loan-to-Value Requirements Are Lower

In case you aren't sure what exactly a loan-to-value is, think in terms of your down payment. The loan-to-value simply refers to the amount you are borrowing (your mortgage) compared to the appraised value of the home you are buying or refinancing. The remainder is the down payment.

As an example, if the home is $300,000 and you pony up a 20 percent down payment of $60,000, the loan-to-value would be 80 percent.

"Not long ago, many lenders weren't even doing loans with less than a 20 percent down payment [80 percent loan-to-value] because they were taking a risk-adverse approach," says Corr. "Now, we're seeing the average come down, from 22 percent to 19 percent."

On a $300,000 home, that's a $9,000 difference in the amount you have to come up with. And again, remember that these are averages, says Corr. So if you don't have 19 percent to put down on your home, that doesn't mean you can't qualify. Lenders take many other factors into consideration.

There Are More Competitive Insurance Options

When buying a home, if your down payment is less than 20 percent of the appraised value of the home, you'll most likely have to get private mortgage insurance (PMI), says Corr. The same goes for people who refinance, but don't have 20 percent equity in their home.

PMI is insurance that covers the lender against any losses in case your home declines in value and you default on your mortgage. In that case, the lender might not be able to sell the house for an amount that would recoup their mortgage principal. If you can't get insurance, you won't get the mortgage, says Corr.

And when home values were declining, mainly from 2008 to 2010, PMI was hard to get in many places, says Corr. It got so bad, he says, that many insurers went bankrupt, and many borrowers were turned away because of a lack of ability to get PMI.

"Now we're seeing that the insurers who are still here have strength again, and we've also seen new [insurers] enter the market, so you have a greater supply of insurers. That combination has made it more competitive and made it more likely for folks to get mortgage insurance," he says.

The bottom line, says Corr, is that across the spectrum, the strict requirements for qualifying for a mortgage have loosened as the housing market has strengthened. And that's good for everyone.

Please call us at 412-243-0218 if you have any questions or would like to see if you can qualify. 

Smart Tax Moves Before Year's End

1. Pre-pay your property taxes
In California, where property taxes are due twice a year, it may make sense to pre-pay next year’s first installment. This is especially the case for people who expect their income to go down next year. “Check with your CPA about what the rules are in your state,” Eisenberg advises.

2. Accelerate mortgage payments
For similar reasons, people expecting their incomes to go up may want to push their January mortgage payment into December. “If you’re going to make that payment in the next 30 to 90 days anyway, it’s almost silly not to accelerate and get the deduction,” says Amin. “Especially if your income is going to change.”

3. Make energy efficiency improvements
The IRS tax credit for making improvements to a home for energy efficiency–insulation, air conditioning or heating units, windows, among other items–they can qualify for a tax credit of 10% of the cost, up to a lifetime maximum of $500. Note that this is not a deduction, but a credit–a straight subtraction from taxes owed. “This thing may be expiring at the end of the year,” Eisenberg says. So do those energy efficiency projects now.

4. Finalize your foreclosure sale
Before the financial crisis, people who lost their homes to foreclosure and had the remainder of the balance on their mortgages forgiven had to report that cancelled debt as income and pay taxes on it. But in the midst of the recession, with people losing houses left and right, Congress had a heart and stopped taxing the first $2 million in forgiveness of mortgage debt. Well, that nice perk is coming to an end at the end of the month. So if you have a home in the midst of a short sale or foreclosure proceeding, put the pressure on everyone involved to get the deal done before the year is over.

“This is so important that people know,” Eisenberg says. “If they have $500,000 or $600,000 or $700,000 in debt cancelled,” on a sale that closes after the end of a year, “then not only have they lost their house, they’re also going to end up paying taxes on the debt forgiveness as income. Not a good outcome.”

In addition to the above steps you might want to take before the year is over, here are some items that you can’t do anything to change, but would be wise to keep in mind for 2013 taxes:

1.                          Deductibility of points
For new loans on home purchases for this year, points are deductible. This is true for any acquisition. However, for points on a refinance loan for anything other than improvements on the home, the points are deductible over the life of the loan. On 2013 sales of homes with a refinanced loan that has points, the unused portion of the points are deductible for this year’s taxes.

2.                         Deductibility of PMI ending
The tax deduction for principal mortgage insurance (PMI) is set to expire at the end of this month, but Eisenberg does not recommend pre-paying, as the IRS may not look fondly on that.

3.                         Exclusions on gains from sales
Home sales in 2013 qualify for an exclusion on the net sales gain (the selling price minus the purchase price plus any improvements) of up to $250,000 for an individual, $500,000 for a couple. The caveat: this only applies to a home that was used as a personal residence for two out of five years. If you’ve moved out of a personal residence and then moved back in, you have to live in it for five years before you can take this exclusion. Consult a tax accountant to see if you qualify for a partial exclusion.

4. Home office deduction
Both homeowners and renters can take advantage of a simplified rule for the home office deduction. Under new rules for 2013, the formula is a $3 per square foot deduction, up to 500 square feet. The office has to be used consistently and regularly, though.

5. Clean out and give away
Another thing that homeowners-—or anyone—-can do is go through their homes and get rid of extra possessions by making donations to charity. Taxpayers who itemize can include charitable deductions in their 2013 taxes. “Just make sure you’re donating it to an IRS-designated 501c3 organization,” Amin says.

- Erin Carlyle - Forbes Magazine