Home Price Reductions Level Off
The share of homes on the market with price reductions declined to an average of 21 percent as of Feb. 1, according to Trulia.com, which has been tracking the information since April 2009.
This is a significant decrease compared to November 2009, when 26 percent of homes had at least one price reduction
The total dollar amount cut from home prices dropped to $22.6 billion as of Feb. 1, down from $28.1 billion in November, a 19 percent decrease.
The average discount for price-reduced homes is holding steady at 11 percent off the original listing price.
Here are the cities with the largest decrease in listings with price reductions between last November and this month, according to Trulia.
* San Francisco, -46
* Oakland, Calif., -43
* Sacramento, -42
* San Jose, -40
* Indianapolis, -39
* Seattle, -37
* San Diego, -33
* New York, -33
Source: Trulia.com (02/16/2010)
What Will the Market’s New Normal Be?
In a new study, “Housing in America: The Next Decade,” Urban Land Institute senior resident fellow John McIlwain says the housing market will not return to what it was prior to the downturn but rather that a “new normal” will take its place.
He expects another 10 percent decrease in residential prices this year, a jump in the number of borrowers abandoning “underwater” mortgages, and a change in consumer perceptions of homeownership.
“The emotional impact on the children and parents and disillusion about the ‘joys’ of homeownership will be intense; new attitudes to homeownership and the American dream will emerge,” McIlwain writes.
He expects home price appreciation to hover around 1 percent or 2 percent per year after the market recovers and the national homeownership rate to drop from 67 percent currently to 62 percent by 2020.
In the coming decade, McIlwain expects the following:
* Older baby boomers to move to urban, mixed-use, mixed-age centers near family instead of retiring to Sun Belt communities;
* Immigrants to snub the suburbs in favor of more close-knit communities;
* Younger boomers to face the challenges of lost home equity and a smaller pool of move-up buyers;
* Generation Y to rent for long periods by choice or because they are paying off student loans or have stagnant incomes.
Source: Inman News (02/01/10)
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S&P Predicts Housing Prices Will Fall Further
The oversupply of homes on the market in many regions is likely to reduce home prices still further, rating agency Standard & Poor’s said in a statement Friday.
“While home prices have been trending up since spring 2009, existing, new and pending home sales are waning, which suggests that lower prices are on the horizon,” said S&P in the statement.
The S&P predicted that declining prices will increase the inventory of distressed U.S. housing further and prevent the market from stabilizing.
Source: Reuters News (01/29/2010)
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Home Prices May Still Be Too High
Adjusted for inflation, housing prices are still 15 percent to 20 percent higher than they were in the mid-1990s, calculates housing economist Dean Baker, co-director of the nonpartisan Center for Economic and Policy Research.
“There’s no plausible fundamental explanation for that,” he says.
Baker believes economic fundamentals translate to a weak recovery at best. “People who say this is a temporary story, there’s no real reason to believe anything like that,” he says. “If anything, I expect housing to be weaker than normal rather than stronger over the next decade.”
Baker is opposed to the housing tax credit.
“As a matter of policy I can’t see that we want people to buy a house in 2009 that’s 10-20 percent higher than it would sell for in 2011,” he says. “In so far as the FHA was encouraging people to buy homes in bubble markets that were not deflated, that’s not good for the FHA and you didn’t help the home owner. We didn’t do those people a favor.”
Source: Bloomberg News, Nick Timiraos (01/26/2010)
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A Decade of Dramatic Developments
At the beginning of the 21st century, most home buyers had never viewed a home online; the three top home sale marketing methods were yard signs, newspaper ads, and open houses; and nearly nine out of 10 buyers financed their purchase with a fixed-rate, 30-year mortgage.
What a difference a decade makes.
“The real estate industry has seen tremendous change and evolution over the past decade,” said NATIONAL ASSOCIATION OF REALTORS® President Vicki Cox Golder, owner of Vicki L. Cox & Associates in Tucson, Ariz. “As the first, best source for real estate information, REALTORS® have not only anticipated and adapted to the evolving needs of their clients and customers, but also have influenced industry trends and innovations that will carry us into the future.”
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Study: Homeownership Rate Likely to Drop
Federal Reserve Bank of New York economists predict a decline in the U.S. homeownership rate as Americans spend the next several years trying to rebuild their equity.
The worst recession since the Great Depression, punctuated by a foreclosure epidemic, drove house values down by an estimated $5.9 trillion since they crested in March 2006, according to Zillow.com.
The New York Fed researchers expect home owners who are upside down on their mortgages because of this lost equity “very likely will convert officially to renters” in the absence of a price turnaround in the foreseeable future.
The share of Americans owning their houses topped out at 69 percent in 2006 but has since retreated back to 67.3 percent, a level not seen since 2000, based on the New York Fed analysis.
Source: Washington Post (12/25/09)
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Census: Americans Stayed Put in 2009
Fewer Americans moved in 2009 than any other year this decade, the U.S. Census Bureau reported this month.
Population also grew less this year than any other year since the turn of the 21st Century. It reached 307 million on July 1, up less than 1 percent from a year earlier, the bureau says. About 850,000 people immigrated from other countries, down 15 percent compared to 2006.
The losers in this trend included Florida, which lost 31,000 people to other states, a first for the Sunshine State, which used to be No. 1 in attracting new residents. “The middle of the decade’s huge surge to the Sun Belt stopped on a dime,” says demographer William Frey of the Brookings Institution.
Demographers say real estate is one of the big reasons people are staying put. “People are trapped,” says Yi Zhao, senior forecasting coordinator for the Census Bureau in the State of Washington. “They can’t sell their house or they have a hard time getting credit for a new one.”
Source: USA Today, Dennis Cauchon and Paul Overberg (12/23/2009)
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Home Values Have Been Stabilizing
U.S. homes lost $489 billion in value during the first 11 months of 2009. That’s significantly less than the $3.6 trillion lost during 2008 and evidence that home values are stabilizing, says Zillow.com, online real estate research firm.
Properties in 48 of the 154 markets tracked by Zillow rose in value this year, but Zillow’s Chief Economist Stan Humphries believes prices could decline again in 2010.
“We believe that demand will come under downward pressure as mortgage rates creep back up after the first quarter and that housing supply will experience upward pressure as the volume of foreclosures continues to remain high. Both these factors will challenge the recent stabilization of home prices,” Humphries said in a statement.
Areas where home prices rose the most in 2009 were:
* Boston
* Providence
* Denver, Colo.
* Atlanta, Ga.
* Rochester, N.Y.
Areas where homes continued to lose the most value:
* Los Angeles
* Chicago
* New York
* Miami-Fort Lauderdale
* Phoenix
Source: Zillow.com (12/0920/09)
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Mortgage Applications Drop Again
Mortgage applications declined 2.5 percent last week on a seasonally adjusted basis compared to the previous week. On an unadjusted basis, they were down 3.3 percent, according to the weekly survey by the Mortgage Bankers Association.
Most of the decline was in purchases, which slipped 4.7 percent. The association’s purchase index has declined for six consecutive weeks and is at its lowest level since November 1997. On an unadjusted basis, the purchase index decreased 7.9 percent compared to the previous week and was down 14.7 percent from the same week a year ago.
Refinances represented 72.9 percent of total applications, the highest share since May 15, 2009.
Mortgage rates continued to decrease:
* 30-year fixed-rate mortgages decreased to 4.83 percent from 4.90 percent;
* 15-year fixed-rate mortgages decreased to 4.32 percent from 4.33 percent;
* 1-year ARMs decreased to 6.82 percent from 6.85 percent.
Source: Mortgage Bankers Association (11/18/2009)
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Real Estate Prices Could Climb Slowly
With the population aging and fewer young people to take the place of baby boomers, the demand for housing may slow for years to come, keeping home values from increasing as they have done since World War II, according to at least one well-known housing expert.
“We can no longer assume that housing will be as good an investment for the future as it has been,” said Robert Reich, public policy professor at the University of California-Berkeley and U.S. Labor Secretary in the Clinton administration.
Reich isn’t predicting that buying a home will no longer be a good financial strategy, just that the value of real estate won’t climb as rapidly.
“People in the middle class, although stressed, will still want homes, and homeownership will still be part of the American dream,” he said. “House prices will continue to rise, just more slowly than they did in the past 70 years.”
Source: Chicago Tribune, Peter Y. Hong
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New Interactive Map: Annual Sales Volume and Median Sales Price of Existing Single-Family Homes
View the Annual Sales Volume and Median Sales Price of Existing Single-Family Homes from 1968-2008 on this new tool from Research. The map shows the change in data over time – click the time bar at the bottom and drag to see how the numbers change in this 40-year period. To switch between data series, choose either Annual Sales Volume or Median Home Price on the left hand drop down menu. On the right hand navigation bar you can choose unique colors to differentiate between the regions. To view either as a bubble chart or a bar chart choose the icons at the top right of the chart window. You can also click and drag on the gridlines within the map to modify the scale of the chart.
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7 Tips for First-Time Home Buyers
A year after the financial collapse of 2008, the housing market is very different than it was before the foreclosure crisis.
Here are seven bits of wisdom from economists and financial planners for anyone contemplating a home purchase today:
* Old-fashioned basics are more important than ever. The safest way to purchase a home is to put down 20 percent on a fixed-rate, 30-year (or less) mortgage.
* Don’t become overconfident about income growth. Even though buyers in their 20s and 30s will likely see their incomes grow more quickly than previous generations, it is important to act sensibly when borrowing.
* Anyone contemplating adding children to the family should calculate whether they could live on one income because having both halves of a couple work may turn out to be impractical.
* Include a maintenance budget. Even new homes need upkeep and repairs.
* Buyers who can’t afford their dream home now should opt for a starter home where they can save money each month for what they really want.
* Consider a property that can be expanded and improved down the road when money is available.
* No two buyers are the same, but they should all feel confident with the loan they enter into, no matter the size of the mortgage.
Source: The New York Times, Ron Lieber
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New Home Sales Surge 9.6% in July
New U.S. home sales surged 9.6 percent in July, rising for the fourth straight month
and beating expectations as the housing market shows continuing signs of rebounding from its historic downturn.
The Commerce Department said Wednesday that sales rose to a seasonally adjusted annual rate of 433,000 from an upwardly revised
June rate of 395,000. Sales are now up 32 percent from the bottom in January, but off 69 percent from the frenzied peak four years ago.
Last month’s sales pace was the strongest since September and exceeded the forecasts of economists surveyed by Thomson Reuters, who
expected a pace of 390,000 units. The last time sales rose so dramatically was in February 2005.
The median sales price of $210,100, however, was still down 11.5 percent from $237,300 compared to the same time a year ago.
There were 271,000 new homes for sale at the end of July, down more than 3 percent from May. At the current sales
pace, that represents 7.5 months of supply, the lowest since April 2007. The decline means builders have scaled back on construction to the point where supply and demand are coming into balance.
Source: Associated Press, Alan Zibel (08/26/09)
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Study: Americans Still Want to Be Home Owners
Despite all of the bad news in the media about homeownership and mortgages, most Americans still believe buying a home is a great investment, according to a new study commissioned by Bankrate.com.
Among the findings from the study:
* 92 percent say that a home is a good investment for the future.
* 48 percent worry about losing or being unable to afford their homes.
“These results provide an interesting illustration of the public’s mindset in a difficult economy,” says Julie Bandy, editor in chief at Bankrate. “While nine out of 10 still believe in the American dream of homeownership, nearly half worry about losing their homes.”
Source: Bankrate.com (08/18/2009)
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Second Quarter Existing-Home Sales Rise
WASHINGTON – Existing-home sales in the second quarter showed healthy gains from the first quarter in the vast majority of states, and price declines have increased affordability in most metro areas, according to the latest survey by the National Association of REALTORS®.
Total state existing-home sales, including single-family and condo properties, rose 3.8 percent to a seasonally adjusted annual rate of 4.76 million units in the second quarter from 4.58 million units in the first quarter, but remain 2.9 percent below the 4.90 million-unit pace in the second quarter of 2008.
Thirty-nine states experienced sales increases from the first quarter, and nine states were higher than a year ago; the District of Columbia showed both quarterly and annual rises.
Gain Appears to Be Sustainable
“With low interest rates, lower home prices, and a first-time buyer tax credit, we’ve been seeing healthy increases in home sales, which are a hopeful sign for the economy,” said Lawrence Yun, NAR chief economist. “There have been sustained sales gains in Arizona, Nevada, and Florida, as well as diverse areas such as Maryland, the District of Columbia, and Nebraska. Full story….
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In Resilient Markets, Housing Values Rise
Despite the seemingly endless news about falling home values, there are cities across the country where home prices are on the upswing.
Using data from Zillow.com, BusinessWeek magazine identified the strongest housing markets by ranking cities based on the share of single-family homes in which values rose in the second quarter of 2009 compared to the same quarter in 2008.
Here are the top-10 winners and the share of homes with increasing values:
1. Boulder, Colo., 60 percent
2. Spartanburg, S.C., 56.81 percent
3. New Orleans, 53.62 percent
4. Binghamton, N.Y., 53.61 percent
5. Fayetteville, N.C., 52.23 percent
6. Pittsburgh, 48.80 percent
7. Little Rock, Ark., 46.96 percent
8. Gainesville, Ga., 46.63 percent
9. Burlington, N.C., 45.41 percent
10. Oklahoma City, 40.20 percent
Source: Business Week, Prashant Gopal (08/12/2009)
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Experts Say Now is the Time to Buy
Many investment experts advise it’s time to buy. With prices falling, it is a once-in-a-generation chance to load up on property, they say.
How much of an investment portfolio should be devoted to real estate? David Swensen, who manages Yale University’s endowment, says 20 percent is a smart number.
One possibility is real estate investment trusts (REITs), which, despite the fact that they are slashing dividends to conserve cash, are still paying average yields of 7.3 percent. That’s double the yield on Treasurys.
Should a home be part of the equation? Michael Kirby, founder of Green Street Advisors, says no.
“You should own a house to provide shelter,” says Kirby. “In a way, it’s not an investment, and it’s not part of your investment portfolio. It’s really just a living expense. By owning a house you are prepaying rent.”
Source: Forbes (08/03/2009)
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Lease-Purchases on the Rise
One way that buyers without enough money to get a mortgage can purchase a home is with a lease-purchase agreement.
Usually, the terms of the deal include a lease and an option to buy with part of the rent going toward the downpayment. The forced savings helps buyers amass enough to buy the house in the specified time frame, usually three to five years.
Cindy Walker, an associate with South Island Real Estate in Melbourne Beach, Fla., recently helped a young couple negotiate such a deal. She received a rental commission for the lease arrangement, and she will get a sales commission if the purchase option is executed.
Some real estate professionals find this arrangement unacceptable, but Walker says, “I look at it as money in the bank.”
She offers these tips for anyone contemplating using a lease-purchase option:
* Don’t be afraid to ask the seller if the owner would accept a lease-purchase agreement. Sellers might find it attractive once they understand it will generate regular rental income.
* Negotiate how much money will go toward the downpayment and whether the buyer or the seller or both will handle maintenance and repairs.
* Avoid prepayment penalties. No prepayment penalty increases the incentive to do the deal quickly. In most cases, that’s a good thing from both the buyer’s and the seller’s points of view.
Source: Florida Today, Anne Straub (07/19/2009)
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Report: New-Home Construction Increasing
Despite high unemployment and general concerns of too much existing inventory, new-home construction appears to be rising.
According to Friday’s report from the U.S. Commerce Department, construction of new homes rose 3.6 percent in June compared to May. Building permits climbed 8.7 percent, and single-family home starts jumped 14.4 percent to 470,000, after rising 5.9 percent in May.
In real numbers, ground was broken for an estimated 58,300 houses nationwide in June, and an estimated 58,400 building permits were issued.
Here’s a look at housing starts in different U.S. regions:
* Midwest: up 33.3 percent
* Northeast: up 28.6 percent
* South: down 1.4 percent
* West: down 14.8 percent
Source: The Wall Street Journal, Jeff Bater (07/17/2009)
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Pending Home Sales Record Fourth Straight Monthly Gain
Pending home sales show a sustained uptrend, rising for four consecutive months with very favorable housing affordability and a first-time buyer tax credit boosting activity, according to the latest survey. The Pending Home Sales Index increased 0.1 percent to 90.7 from an upwardly revised reading of 90.6 in April, and is 6.7 percent higher than May 2008 when it was 85.0. The last time there were four consecutive monthly gains was in October 2004. Lawrence Yun, NAR chief economist, cautions that there could be delays in the number of contracts that go to closing. “Closed existing-home sales have improved but are coming in lower than expected because some contracts are delayed or falling through from the application of new appraisal rules for many transactions,” he said. “Rises in contract activity show buyers are becoming more active even as they face much more stringent loan underwriting standards. Speedy clarification of the appraisal rules could smooth a housing market recovery and support the overall economy.”
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Are Today’s Homes Undervalued?
An over-correction on prices will delay economic recovery.
After dropping for three years, home prices appear to be stabilizing. The median national home price today is about $169,000, down almost 14 percent from a year ago and an estimated 30 percent from its peak. It’s safe to say we’ve reached the point where prices are justified by the fundamentals of the economy and may even represent an undervaluation.
Foreclosures and short sales comprise about 50 percent of transactions today, creating market distortions in otherwise stable neighborhoods. In determining valuations, we’re capturing only transaction prices, and prices of those properties might be 20 percent below values of other homes.
For that reason, it’s possible that widely cited projections that a third or more of home owners are underwater might be off the mark. The consequences of these missed projections are significant. Lenders are shying away from refinancing mortgages of otherwise creditworthy households on the basis that their homes are underwater. By not making these loans, lenders are exacerbating the financial hardship faced by these households.
Yet there are encouraging signs on the horizon. The First-Time Home Buyer Tax Credit, which Congress improved two months ago by eliminating the repayment requirement and increasing the benefit to $8,000, is working. That credit, coupled with all-time-high housing affordability and continuing low interest rates, is leading to solid inventory improvements in most markets. Yet when we look only at homes in high-cost areas requiring jumbo loans, the months’ supply is in the stratosphere: almost 45.
What’s clear is that the challenge today is getting credit moving again for everyone. Until then, markets will continue to be distorted by the disproportionate number of short-sale and foreclosed homes for sale.
Lawrence Yun is chief economist of the NATIONAL ASSOCIATION OF REALTORS®.
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Rethinking the Open House
RISMEDIA, July 14, 2009-It’s a familiar weekend scene in American neighborhoods, the ubiquitous Open House; three signs, a flag and one seriously bored agent watching Rachel Ray reruns in the family room.
It is apparent from the Open Houses I have visited that many agents don’t know why they are there. Many are newer to the [...]
Bargains Hard to Find In Attractive Areas
Potential buyers in areas that were hard hit by the housing downturn have read about bargains, but only find it disappointing when they go shopping.
“Every open house I’ve been to has been a zoo,” says first-time home buyer Sam Rivero, who has looked at 35 properties during the last three months. “If you follow what the media say, you’d think sellers are desperate to sell a house, but when you get there it’s totally the opposite.”
When the real estate bubble burst, it didn’t affect the mid-priced market, said real estate information firm MDA DataQuick. Instead, it created opportunities in troubled neighborhoods and slowed sales in the market of homes priced above $1 million. But in areas where most of the homes sell for $400,000 to $800,000, there are few discounts to be found.
Even the foreclosure market has slowed, says University of Southern California Professor of Real Estate Tracey Seslen. Seslen said lenders with foreclosures are supporting market stabilization and releasing only a few homes at a time to avoid flooding the markets.
“The biggest problem,” says Phyllis Harb, an associate with RE/Max Tri City in La Canada, Calif., “is that people are overreacting to housing statistics, thinking they can come in and make an offer 20 percent below price.”
Source: Los Angeles Times, Chip Jacobs (05/03/2009)
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Jumbo Loans
In recent months the availability of jumbo loans has decreased while the interest rate spread between jumbo rates and ten-year treasuries has widened. These developments are having a negative effect on the housing market.
With the increase in the lending limits for conforming loans, the mortgage market now has three major types of mortgage products: conforming loans, up to $417K; conforming jumbo loans, up to $729,750; and jumbo loans, loans over $729,750. Although the upward revision of the conforming loan limit is a positive development, overall the jumbo loan market has experienced problems of limited loan availability and higher than usual rates in recent months. First, increased credit standards required from borrowers coupled with the increasing reluctance of financial institutions to make jumbo loans have posed major problems at this end of the market. In addition, the interest rate spread between ten-year treasuries and jumbo loans has substantially increased—making jumbo loans much more costly than has previously been the case and significantly impacting the upper ends of the home market.
Jumbo loans have typically had a rate 1.34% points above ten-year treasuries in 2005, rising to 2.56% points as of March 2009. The increased spread does not appear warranted by increased risk.
Jumbo loans are a small part of the market today. For example, jumbos were approximately 5% of transactions in March of 2009, and super jumbos were less than 1% of transactions. However, these loans have been of significant important in high cost areas and states, such as California, New York, and Florida.
Adverse jumbo market impacts are believed to result in downward pressures on the rest of the housing market. Decreased jumbo loan availability appears to work its way down through the market, further depressing other home prices. Full Story.
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NAR: Pending Home Sales, Affordability Rise
Pending home sales rose with many first-time buyers taking advantage of historically good housing affordability conditions, according to the latest report by the NATIONAL ASSOCIATION OF REALTORS ®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in March, increased 3.2 percent to 84.6 from a level of 82 in February. It is 1.1 percent higher than March 2008 when it was 83.7.
Lawrence Yun, NAR chief economist, says it should take a few months for the market to gain momentum.
“This increase could be the leading edge of first-time buyers responding to very favorable affordability conditions and an $8,000 tax credit, which increases buying power even more in areas where special programs allow buyers to use it as a down payment,” he says. “We need several months of sustained growth to demonstrate a recovery in housing, which is necessary for the overall economy to turn around.”
By Region
Here is a breakdown of pending home sales by region:
* South: rose 8.5 percent to 93.2 in March and is 7.7 percent above a year ago.
* West: increased 3.9 percent to 93.1 and is 1.7 percent higher than March 2008.
* Northeast: fell 5.7 percent to 59.5 in March and is 24.1 percent below a year ago.
* Midwest: slipped 1 percent to 82.3 but is 8.2 percent higher than March 2008.
NAR: Affordability Remains High
Meanwhile, NAR’s Housing Affordability Index remained near record highs.
The affordability index was 166.7 in March – down from an upwardly revised record of 174.4 in February due to higher home prices in March. The index remains 30.8 percentage points higher than a year ago.
The HAI is a broad measure of housing affordability using consistent values and assumptions over time, which examines the relationship between home prices, mortgage interest rates and family income; tracking began in 1970.
NAR President Charles McMillan says the increase in buying power is quite remarkable.
“Compared to a year ago, the typical family can pay much less in mortgage costs for the same home, or buy a better home without necessarily increasing their monthly payment,” he says. “For buyers who’ve been on the sidelines and have good jobs, the market has never looked more favorable. Homeownership has always offered immediate benefits and long-term value, but the advantages in today’s market are unique.”
A median-income family, earning $61,100, could afford a home costing $291,600 in March with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest.
Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount. The affordable price was notably higher than the median existing single-family home price in March, which was $174,900.
Source: NAR
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Construction spending, pending home sales up!
WASHINGTON – Hopes that the recession is easing got a boost Monday from reports that construction spending and pending home sales both fared better than expected in March. The news pushed stock prices higher.
The Commerce Department said construction spending increased 0.3 percent in March, the best showing since a similar rise last September. Economists surveyed by Thomson Reuters had expected spending to drop 1.5 percent for a sixth straight monthly decline.
Meanwhile, the National Association of Realtors said its index of pending home sales rose 3.2 percent to 84.6 in March, the second monthly increase after it hit a record low in January. The pending sales index also is 1.1 percent above last year’s levels. Typically, there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future home sales.
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Economists called the new data faint glimmers of hope that construction activity may be stabilizing, although at very low levels.
“Things certainly look a bit less bad than in the dark days at the turn of the year,” Ian Shepherdson, chief U.S. economist at High Frequency Economics, wrote in a research note. Full Story.
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6 Reasons Why It’s Still a Good Time to Buy!
The housing market is looking healthier. Here are six reasons why now is the time to jump into the market.
1. Uncle Sam is willing to help. First-time buyers (defined as anyone who hasn’t owned a home in the last three years) are entitled to a maximum $8,000 tax credit; interest rates are at record lows; and the Federal Reserve is doing its best to make mortgage loans available. (Sign up for a Webinar to learn more about the home buyer tax credit)
2. People have to live somewhere. About 800,000 new households are formed each year in this country, ensuring that the housing market will tighten, even if the economy doesn’t soar.
3. Borrowers leverage their investment. If you put $10,000 into the stock market and it earns 10 percent, you’ve earned $1,000. If you put $10,000 down on a home and its values increases 10 percent, you’ve made $10,000.
4. When prices come back up, you’ll have instant equity. In parts of the country where foreclosures have driven down prices, better times will mean the price of the home you buy will rise rapidly.
5. Mortgage costs stay the same. If you get a fixed-rate mortgage, the monthly payment stays the same – while everything else, including rent, goes upward.
6. You own it. There is something comforting in the notion that your home is your own. You can paint it any color you want, let the dog run in the back yard and hang a swing for the kids in the front.
Source: The Wall Street Journal, June Fletcher (03/27/2009)
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Big Gains in Pending Home Sales, Affordability.
Increases in pending home sales suggest a possible upswing in sales activity in coming months, according to the National Association of REALTORS.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in February, rose 2.1 percent to 82.1 from a reading of 80.4 in January, but is 1.4 percent below February 2008, when it was 83.3.
Lawrence Yun, NAR chief economist, said the market is continuing to underperform.
“Pending home sales have a way to go for there to be a meaningful increase, but recent increases in shopping activity are hopeful indicators that we’ll see additional sales gains,” he says. “More buyers are getting into the market to take advantage of stimulus incentives and much improved housing affordability conditions, but it will take a few months before we could see this turn up in measurable sales contract activity.”
Additionally, NAR’s Housing Affordability Index rose to a new high in February.
The Regional Breakdown
The PHSI picture varied across U.S. regions, with increases everywhere except the West:
1. Northeast: rose 10.6 percent to 63.9 in February but is 11.2 percent below a year ago.
2. Midwest: jumped 14.5 percent to 83.1 and is 3.4 percent higher than February 2008.
3. South: rose 4.4 percent to 85.8 in February but is 0.1 percent below a year ago.
4. West: fell 13.5 percent to 89.6 and is 1.7 percent below February 2008.
NAR President Charles McMillan says home buyers are in an excellent position.
“The drop in mortgage interest rates and home prices mean the buying power of a typical family has never been better,” he explains. “If you have a good job and long-term plans, it’s unlikely that you’ll find a much better time to buy a home. This is especially true for first-time buyers who can qualify for an $8,000 tax credit this year, have a great selection of homes to choose from, and are in a favorable negotiating position.”
Affordability Improves
NAR’s Housing Affordability Index rose 0.9 percentage points to a record high of 173.5 in February from an upwardly revised index of 172.6 in January, and is 36.3 percentage points higher than a year ago. The HAI shows the relationship between home prices, mortgage interest rates and family income is the most favorable since tracking began in 1970.
A median-income family, earning $59,700, could afford a home costing $285,600 in February with a 20 percent down payment, assuming 25 percent of gross income is devoted to mortgage principal and interest. Affordability conditions for first-time buyers with the same income and small down payments are roughly 80 percent of that amount. The affordable price is considerably higher the median existing single-family home price in February, which was only $164,600.
“Obviously, potential home buyers need to be managing their existing debt effectively,” McMillan says. “A REALTOR can counsel you on what you may be able to afford given your personal financial situation. In some cases, buyers who want to build their future through homeownership may need to start reducing their debt and improving their credit score before entering the housing market.”
Last year at this time, the typical family could afford a home costing $265,600, which is $20,000 less than the current affordable price.
“Homes in many areas are now selling for less than replacement construction costs — clearly, this is an abnormal situation that will change once inventory is drawn down and supply and demand come closer into balance,” McMillan says.
Yun expects housing inventories to rise through early summer from a normal seasonal pattern of more sellers appearing in the spring.
“But with the positive housing stimulus incentives now in place, we expect home sales to gain momentum in the second half of the year with first-time buyers absorbing a lot of the excess inventory,” he says. “Under these conditions, we should see price stabilization in most markets by the end of the year.”
Source: NAR (04/01/2009)
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Home price drops set records in January.
By ALAN ZIBEL,Associated Press
WASHINGTON, D.C. — Home prices sank by the sharpest annual rate on record in January, and the pace continues to accelerate, but there were a handful battered metro areas where price declines slowed, according to data released Tuesday.
The Standard & Poor’s/Case-Shiller index of home prices in 20 major cities tumbled by a record 19 percent from January 2008. It was the largest decline since the index started in 2000. The 10-city index dropped 19.4 percent, also a new record.
All 20 cities in the report showed monthly and annual price declines, with 13 posting new annual records. Prices dropped by more than 10 percent in 14 cities.
“There are very few bright spots that one can see in the data,” David Blitzer, chairman of S&P’s index committee, said in a prepared statement. “Most of the nation appears to remain on a downward path.”
But in Cleveland, Los Angeles, Las Vegas and Washington D.C. — areas all ravaged by foreclosures — annual price declines eased.
Six cities, including Minneapolis, Charlotte, Seattle and New York, showed smaller price declines in January compared to December.
Faring the best were Dallas, Denver and Cleveland with annual price declines around 5 percent in January.
Last week, the National Association of Realtors said sales of previously occupied homes unexpectedly jumped in February by the largest amount in nearly six years as first-time buyers took advantage of deep discounts on foreclosures and other distressed properties, the National Association of Realtors said last week. Some economists say that could help moderate declines.
“We still think there is a good chance the rate of (price) decline will slow through the spring as existing home sales stabilize and perhaps pick up a bit, but foreclosures are weighing heavily on prices,” wrote Ian Shepherdson, chief U.S. economist at High Frequency Economics.
Prices in the 20-city index have plummeted 29 percent from their peak in summer 2006, while the 10-city index has fallen 30 percent. Prices have sunk back to levels not seen since late 2003.
To provide some relief, Congress in February passed a new $8,000 tax credit for first-time homebuyers and President Barack Obama is directing $75 billion to a new foreclosure prevention plan.
But the success of those efforts could well depend on how far the U.S. economy falls. While sales are showing some signs of stabilization, some economists expect prices to keep falling for the rest of this year — and maybe even longer.
“We continue to believe that it is unlikely that we are anywhere near a bottom in nationwide home prices,” wrote Joshua Shapiro, chief economist at MFR Inc.
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Survey: Households Say Now Good Time to Buy.
More than three-quarters (78 percent) of potential first-time home buyers say that now is a good time to buy a home, despite widespread concern about the economy.
Out of the 1,000 prospective U.S. first-time home buyers surveyed in early March for the CENTURY 21 First-Time Home Buyer Survey, 68 percent think now is a better time to buy than six months ago.
Prices are the driving motivation for potential first-time home buyers with more than eight of ten first-time home buyers (85 percent) saying they consider current home prices affordable and 73 percent citing that taking advantage of current prices is a major factor in their decision to buy.
Interestingly, potential first-time buyers are still split between “being willing to consider an offer now” (42 percent) and “waiting for prices to go down before they seriously consider making a purchase” (48 percent).
“Current pricing, rates and incentives, such as the First Time Homebuyer Tax Credit, provide tremendous opportunities for first-time home buyers to get into the market,” said Tom Kunz, Century 21 Real Estate president and CEO. “Our research shows that while consumers still have concerns about the future of the economy, many are actively considering their options as we move into the spring selling season.”
Among the survey’s other key findings:
* Bargains in the marketplace are providing additional options for buyers to consider. 56 percent of potential first-time home buyers are considering purchasing a foreclosed or short sale home, and 63 percent are open to purchasing either a “fixer-upper” or “as-is” home.
* When asked to rate the features that they look for when choosing a home, price is the primary consideration with 87 percent saying this feature is “very important,” followed closely by neighborhood safety (80 percent) and the condition of the home (71 percent).
* Having enough money for a down payment is a top concern of potential first-time home buyers as nearly half (46 percent) said they are “very worried” about the issue.
* Most respondents (86 percent) are in the market for single family homes.
Source: Century 21
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Stocks surge on bank plan, rise in home sales.
NEW YORK — Wall Street got the news it wanted on the economy’s biggest problems – banks and housing – and responded with a rally that hurtled the Dow Jones industrials up nearly 500 points.
Investors added rocket fuel Monday to a two-week-old advance, cheering the government’s plan to help banks remove bad assets from their books and also welcoming a report showing a surprising increase in home sales. Major stock indicators surged more than 6 percent, including the Dow.
The Treasury Department’s bad asset cleanup program would tap money from the government’s $700 billion financial rescue fund and involve help from the Federal Reserve, the Federal Deposit Insurance Corp. and the participation of private investors.
The government’s announcement was what the market had waited weeks to hear. Treasury Secretary Timothy Geithner had announced an outline of the program last month but provided few details then about how it would work, leading to a plunge on Wall Street that sliced 380 points from the Dow. More Details.
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One reason you can’t get a mortgage. Residential sales are cratering,
which is making it more difficult to appraise homes. And that is making mortgages more difficult to obtain.
NEW YORK (CNNMoney.com) — For real estate appraisers, determining what a house is worth has become increasingly difficult, which is making it even harder for buyers to purchase homes or for homeowners to refinance.
The main tool in the appraiser’s kit is the sale prices of homes in the area. If they can find similar houses nearby in similar condition that sold recently for, say, $300,000, they can assume that the home they are appraising is worth a comparable amount.
But with sales volume falling, there are fewer homes with which to compare. In fact, sales of new homes crashed in January to the lowest level in 45 years, and existing home sales fell to a 12-year low.
And even when there are recent sales figures, they often don’t hold up as a reliable baseline. Appraisals are estimates of market value at a given time, and with prices in free fall, values “age” quickly. Full Story.
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Housing starts unexpectedly surge!
Government report shows construction of new homes jumped 22% in February.
NEW YORK (CNNMoney.com) — Initial construction of U.S. homes unexpectedly surged in February, after falling for seven months, according to a government report released Tuesday.
Housing starts rose to a seasonally adjusted annual rate of 583,000 last month, up 22% from a revised 477,000 in January, according to the Commerce Department. It was the first time housing starts increased since June, when they rose 11%.
Economists were expecting housing starts to decline to 450,000, according to consensus estimates compiled by Briefing.com. Still, starts are down more than 47% from February 2008, when over 1.1 million new homes broke ground. More Details.
Homeowner Affordability and Stability Plan: Key Components.
1. The Home Affordable Refinance Program. Under this program, eligible borrowers may refinance loans that Fannie Mae or Freddie Mac (the government sponsored enterprises, or GSEs) own or guarantee. The program can help homeowner-occupants who are current in making loan payments and have loan-to-value ratios (LTVs) above 80 percent but not more than 105 percent. Cash out refinancings are not permitted. The program ends in June 2010.
2. The Home Affordable Modification Program. This is a $75 billion program with lender, servicer, investor, and borrower incentives to make it work. The program is limited to homeowner-occupants who are at risk of default or already in default and who have loans at or below the maximum GSE conforming loan limit of $729,750 (or higher for 2-, 3-, and 4-unit properties). Loan modifications under the program may be made until December 31, 2012.
Housing fix leans on troubled firms.
NEW YORK(CNNMoney.com) — Fannie Mae and Freddie Mac won’t be leaving the federal government’s nest anytime soon.
President Obama is leaning heavily on the teetering mortgage finance titans to help stabilize the housing market, even as it pumps hundreds of billions of dollars into them to keep them afloat.
As the housing crisis deepens, the question of the companies’ long-term future has been set aside.
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Obama’s foreclosure fix on the way.
The president is set Wednesday to unveil plans to stem foreclosures and stabilize housing. Loan modifications and help for those near default are expected.
NEW YORK (CNNMoney.com) — Obama administration officials are hammering out the details of a $50 billion foreclosure prevention program that the president is set to unveil Wednesday in Arizona, sources said.
Details remain scarce, but officials are looking to help homeowners who are in danger of defaulting on their mortgages, as well as those already behind, according to sources close to the discussions. Until now, most government and industry efforts have centered only on the delinquent. Full Story.
Zillow Report Shows Homeowners Facing Reality, Sort Of.
When it comes to real estate, more Americans are moving from denial to acceptance. Zillow.com, a Web site that provides housing-market information, says it found in a recent survey that 57% of participants believe their homes lost value during the past year. That was up from just 38% in a similar survey during last year’s second quarter.
Zillow estimates that values declined on 76% of all U.S. homes during 2008. Full Story
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Do You Have Buyer’s Paralysis? Many issues can be at root of indecision.
You’ve looked at dozens of homes. Your REALTOR® is about to tear her hair out with frustration. You are paralyzed, letting one great home after another pass you by. Why can’t you make a decision?
Buying a home can be an overwhelming process. There are so many decisions to make and any of them can mean serious financial consequences. A home, after all, is hardly a liquid asset. Nor is it a growth investment, according to Wall Street definitions. It’s your greatest financial debt, even while it puts a roof over your head. As it appreciates, it also needs repairs and maintenance. With all that weighing on you, no wonder you’ve got commitmentphobia. Full Story.
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Buyers, Get an Edge During The Busy Spring Season! Getting started early is key to success.
The spring and summer months are traditionally the busiest times of year for the residential real estate market. Weather is more cooperative and many families like to move while the kids are on their summer break.
But in recent years spring, for many regions, has meant more homes on the market, but also more buyers, fierce competition and an increase in prices.
If you’re in the market for a house this spring, there are a number of steps you can take to try to give you the advantage over other homebuyers…… Full Story.
Steps to take to prevent Forclosure!
One of their educator’s Cindy Tesch says there are some steps you should take if you fall behind on your mortgage – most importantly you need to devise a payment plan. But to do that Tesch says you have to confront your problem and that means confronting your mortgage company.
“Most consumers are scared or afraid because they don’t know what their mortgage company is going to tell them. So you want to stay in contact with the mortgage company,” Tesch said.
Tesch says mortgage companies are very willing to work with you. Something that’s really important to keep in mind — once your payment plan is set up you must make cuts to your budget because each month you will be paying your regular mortgage plus your back mortgage.
“If you really want to keep the home, look at the budget, see what is absolutely necessity and then cut out what isn’t. For just the time so you can get caught up on that mortgage,” Tesch said.
You may even consider selling certain assets — like a car if your family has two cars but can survive on one.
“If you really want to keep the home, look at the budget, see what is absolutely necessity and then cut out what isn’t. For just the time so you can get caught up on that mortgage,” Tesch said.
You may even consider selling certain assets — like a car if your family has two cars but can survive on one.
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Obama pledges mortgage help.
WASHINGTON (REUTERS) — U.S. President Barack Obama promised Saturday to help lower Americans’ mortgage costs with a new plan, coming soon, that would revive the financial system and “get credit flowing again.”
Obama, who has made fighting the country’s economic and financial crises the top priority of his young administration, called on the U.S. Senate to approve an economic stimulus bill that the House of Representatives passed this week. Full story.
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Questions to Ask Any Agent
1. How long have you been in residential real estate in our area? If they have not been in local real estate for several years, they have not been involved in the cyclical market that has defined our market to date. Along with this, ask how many transactions they average per year. One agent could have been in business 10 years and have only closed 30 transactions, while another agent could have been in business 5 years, yet closed 500 plus transactions. Experience is relative to the amount of business the agent does.
2. What is your procedure for assisting a buyer from beginning to closing? Make sure that the agent has a precise presentation for you that explains exactly how they work and how they represent only you and your best interests.
3. What is your experience with financing alternatives, and what might they be in my situation? Each buyer’s situation is different. We can literally put you in a much better financial situation with the same monthly payments simply by adjusting the financing. You might have many alternatives. Don’t depend solely on the lender. Your agent should lead the way.
4. How do you determine my qualifications and when? You would be shocked at how rare it is for an agent to complete your qualifications right away. Even so, it is important to have this done early in the process. This way you are ready to make a strong offer at a moment’s notice, increasing your chances for not only finding, but buying the home of your dreams.
5. How do you provide me with information on new homes for sale? Your agent should have a system that automatically updates you when new homes meeting your criteria come on the market.
6. What is your negotiating philosophy, and how do you apply it to me? This is important. Play close attention to how many transactions the agent does per year. More is better. The more transactions the agent closes, the more experience they have in negotiating just about every situation that could come up.
7. How do you find the best value for me? How do you make sure it is a good value? This is important because the agent should have some immediate and concise answers as to how they accomplish this for you. They should have systems in place and be able to explain them to you.
8. How do you protect me from the extensive costs that lenders, title companies, inspectors and others charge a home purchaser? The typical answer is that these charges are just normal. Make sure that the agent has relationships with companies that can offer you good service and some discounts. Also make sure that the agent has an immediate knowledge of what typical costs are.
9. Can you sell us a new, resale or foreclosed home? Most agents will answer affirmatively, but you should follow up with questions about specific builders and areas.
There are many more questions to ask, this is just a sampling. Do you have a specific question you would like answered? Let us know by clicking here!
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First time buyers could receive a $7,500 tax credit if they purchase soon.
NEW YORK (CNNMoney.com) — If you’re thinking of buying a home, there could be a big bonus for you in the economic stimulus bill that’s now before Congress.
Among its many provisions is a $7,500 tax credit for first time home buyers. The House passed the $819 billion stimulus plan, including this tax credit, in a vote late Wednesday. The Senate may vote on its version of the bill some time next week. Full Story.
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US home sales see surprise rise
© BBC MMIX
US home sales unexpectedly rose in December as buyers took advantage of much lower house prices, industry figures have showed.
Sales of existing homes rose 6.5% to an annual rate of 4.74 million, up from 4.45 million units in November, the National Association of Realtors said.
Analysts had been expecting December sales to total 4.4 million.
For 2008 as a whole, sales fell 13.1% to 4.91 million units, the worst year in a decade.
“It appears some buyers are taking advantage of much lower home prices,” said Lawrence Yun, the association’s chief economist.
“Buyers will continue to have an edge over sellers for the foreseeable future.”
The association said that existing home prices fell by 15.3% in December from the same period a year earlier, with 45% of transactions viewed as “distress sales”, where the seller was forced to sell at a discounted price.
2009 rebound?
The rise in home sales was also down to a fall in the number of unsold homes on the market.
However, analysts said that this trend could reverse, as sellers were likely to resume putting their homes up for sale in the spring.
“The bottom line is that existing home sales have weakened markedly following the credit market seizure in September,” said Paul Ashworth, senior economist at Capital Economics.
“The subsequent decline in mortgage rates may spur a rebound in 2009, but nothing is guaranteed,” he added.
New home construction has also been hit by the economic slowdown.
Housing starts in the US fell by 15.5% in December to hit an all-time low, official statistics released last week showed. The rate of new construction was down 45% from December 2007.
Story from BBC NEWS:
http://news.bbc.co.uk/go/pr/fr/-/1/hi/business/7852011.stm
Published: 2009/01/26 17:07:33 GMT
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Many Aiken homes top $1M
What makes a million dollar home in Aiken? According to Aiken Multiple Listing Service (MLS), there have been 60 transaction … READ MORE
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Foreclosures up a record 81% in 2008
Filings continued to soar through the end of the year – and there’s no relief in sight for 2009. more
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The 2009 economy and your wallet
The new president’s first job will be to repair a badly broken economy. Here’s how he’ll take on the four biggest challenges – and what that means for you.
By Janice Revell, Money Magazine senior writer
Last Updated: January 13, 2009: 8:52 AM ET
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Low rates not enough?
CNNMoney: Mortgage applications dip despite low rates
NEW YORK (Reuters) – Applications for U.S. residential mortgages slipped from lofty levels last week as homeowners slowed refinancings ahead of expected federal action to lower housing costs, an industry group said on Wednesday.
The real story.
CNNMoney: Credit 2008: Year of the freeze
If the story of 2008 was the government’s unprecedented multi-trillion dollar bailouts of the financial sector, then the credit market was the story behind the story.
The issue of credit moved to the forefront in the past year, as the typically benign market exploded into crisis-mode, and nervous investors bought up historical amounts of safe government debt. It was a year of violent changes in borrowing rates and lending behavior, guided by countless government programs aimed at easing credit for corporate America, banks and consumers.
The so-called credit crunch began after the subprime meltdown of late 2007. High-risk loans on banks’ balance sheets became almost worthless, and as banks were forced to take large writedowns on these so-called “toxic assets,” they became less likely to lend, unwilling to take on more risk.
For much of the year, financial institutions were in a quandary. They had difficulty acquiring loans and at the same time resisted issuing loans. The credit crunch made everything from financing payrolls to getting car, student and home loans difficult for businesses and borrowers.
Then, after the credit situation started to improve somewhat in the summer, Lehman Brothers’ epic collapse on Sept. 15 marked a stunning turning point in the financial markets from which Wall Street is still recovering.
Within two days, overnight Libor, a key interbank lending rate, soared to an 8-month high of 3.06%. Within a week, the market for commercial paper, a key form of business lending, had shrunk to a 2-1/2 year low of $1.7 trillion. And within 10-days, two key measures of risk sentiment – the Libor-OIS spread and the TED spread – were at all-time highs.
However, as the year comes to a close, there are signs that the credit environment has been slowly improving.
Borrowing rates fell from historical highs to all-time lows: the 3-month Libor has dropped from a 2008 high of 4.82% to 1.42% on Dec. 31. And the overnight Libor rate has plunged from an all-time high of 6.88% on Sept. 30 to 0.14% at the end of the year – just 0.03 percentage points higher than the all-time low set a week ago.
Meanwhile, the “TED spread,” a measure of banks’ willingness to lend, slipped to 1.34 percentage points Wednesday – below where the measure stood just before Lehman’s collapse.
But most economists believe it’s still a long road to recovery. Though many of the bailouts have reduced borrowing and costs, all the lending facilities and liquidity programs in the world won’t encourage private lending on their own. Many have said the Fed can only push on a string.
Alan Greenspan, the former Fed chief, has said that we will know the credit markets have returned to normal when the Libor-OIS spread returns to just a hair above the anticipated Fed funds rate. That will show that banks are confident about the market conditions and have resumed normal lending practices. Libor-OIS was less than 0.8 percentage points before Lehman collapsed. It reached a record high of 3.64 percentage points on Oct. 10, and sits at 1.24 today. So according to Greenspan, we’re a little more than halfway to recovery.
Could it happen to me??
CNNMoney: Protecting your home’s value
Foreclosures can affect the value of your property even if you’ve been paying your mortgage faithfully. Here are some ways you can protect your home’s worth if your area is hit hard by foreclosures.
Good news?
Real Estate News – Latest construction, mortgage & housing market …
More real estate news. Mortgage rates tumble to record low …. MSNBC.com’s editorial cartoonists weigh in on the subprime mortgage meltdown. more photos …
www.msnbc.msn.com/id/8874568/ – 67k –
Mortgages…now what??
Mortgage rates tumble to record low
Refinancing activity rises to highest level since boom year of 2003
 |
Rates on 30-year fixed-rate mortgages fell to a record low for the second straight week, causing refinancing applications to surge to the highest level in more than five years, a month after the Federal Reserve pledged to channel billions to prop up the sinking U.S. housing market. While homeowners around the country are taking advantage of historically low rates to refinance their loans, the opportunity isn’t available to those with poor credit or little equity in their homes, and foreclosures are still likely to surge. |
Existing home sales increase by largest amount in 5 years
Sales of existing homes rose by the largest amount in more than five years in September, a real estate trade group said Friday. The data is a possible glimmer of hope that the housing slump could be starting to bottom out.
The National Association of Realtors said Friday that sales of existing homes rose by 5.5 percent in September compared to August, the best showing since a 5.6 percent increase in July 2003, during the five-year housing boom.
More on this story at AikenStandard.com
