Wednesday, March 30, 2011

Real Estate: GOLDen Opportunity of This Decade


by Steve Harney on March 30, 2011

Everyone wants to comment on the current real estate market. They want to talk about how now is not the time to buy a home. Some even argue owning a house has never been a great investment. Most say it will be a long time before real estate again begins to appreciate. It all sounds so familiar to me. It was just a decade ago that many made the same arguments about gold as an investment.
Gold had dropped from over $400 an ounce to $250 an ounce (a 40% decline) from February 1996 to August 1999. People ran from gold as though it was a plague.
Lord William Rees-Mogg, the current Chairman of The Zurich Club, in 1997 said:
“No investment has been so thoroughly exploded as gold; most people think that there will no more be another gold boom than there will be another boom in tulip futures in The Netherlands.”
Two years later in 1999, Don Wolanchuk author of the Wolanchuk Report explained:
“Everybody hates gold. You can’t have a bottom until everybody is out. And everybody is out of the gold sector.”
Everyone knows what happened next. The proclamation of gold’s death was rather premature. Gold rose from $250 an ounce to over $1,400 an ounce in the next twelve years. I see the same situation with real estate today. I am not predicting that real estate will see the same levels of appreciation. I do believe however that the market will rebound strongly.
Those who continued to believe in gold as an investment were rewarded. Those who continue to believe in real estate as a sound investment will also be rewarded.
Here is what Adam Hamilton wrote in October 2000 in an essay titled Is Gold Dead?
The road for gold investors has been long and parched in the last five years.  They have wandered through a seemingly endless desert, occasionally tempted by what proves to be an illusory mirage.  Many have fallen beside the sun-cracked path, their white bones picked clean by buzzards and gleaming in the sun.  Nevertheless, a brave contrarian core continues to march forward.  They have studied history, currency, gold, investments, economics, and finance.  They understand the timeless value of gold, the cyclical nature of the markets, and the vagaries of human psychology.  They realize it is darkest before the dawn, and the journey most difficult right before the homestretch is reached.  Gold is in an INCREDIBLE position, and it will have its day.  Nothing goes up in price forever, and nothing goes down in price forever.  Investments are cyclical.  Gold is NOT dead, it is simply biding its time, waiting for its next earth-shattering mega-rally.  The spoils that go to the few remaining gold investors when that day inevitably arrives will be fantastic.  The stunning victory will quickly blot out the painful memories of the long struggle…
You could replace the word ‘gold’ with the words ‘real estate’ throughout this essay and it would apply today.

Saturday, March 26, 2011

Discounts Expected in Spring Housing Market .


Sales of previously owned homes fell sharply in February, setting the stage for steep discounting in the spring market.
The National Association of Realtors reported Monday that existing home sales dropped 9.6%, and the median price, $156,100, was the lowest since February 2002.
The silver lining, say economists, is that bargain prices, coupled with low interest rates, might finally spur some buyers off the fence as the real-estate industry prepares for its busiest season. Even without the $8,000 federal tax credit that stoked sales last spring, industry watchers predict a larger number of transactions this year.
"The job market is getting better and that will make people feel more confident about their income-earning prospects," said David Berson of the PMI Group. "You need that confidence to buy a house. Household formations are also very important. ... Kids may have moved back in with their parents, or two people may have moved in together, because of job concerns. Now they can move into their own place."
Still, Monday's data painted a picture of pain and price declines that have spared no region.
"The housing market is still clearly years away from staging any meaningful recovery," Toronto-based Capital Economics wrote in a note to clients.
February sales data due Wednesday are expected to show that the market for new homes is just as lackluster as that for existing dwellings.
Some builders of new homes are increasing discounts on residences and boosting commissions to brokers.
"They don't do that if things are going well," said Alex Barron, a home-builder analyst with the Housing Research Center, an independent sell-side research firm. "The level of desperation in the builders is just going to increase substantially in the next two months, which is the heart of the spring selling season."
Overall, February's weakness could have been driven by bad weather, deals canceled over lowball appraisals and a higher number of distress sales, according to the National Association of Realtors.
A third of transactions were all-cash sales, and investors accounted for 19% of February sales activity, down from 23% in January. Low prices in many markets also reflect a new reality as sellers finally give in and reduce the asking prices on their homes in hopes of a fast deal.
"After three years of the housing downturn, people are becoming much more realistic in terms of valuing their homes," said Lawrence Yun, the National Association of Realtors' chief economist.
In Atlanta's upscale Buckhead neighborhood, Natasha Swann put her family's five-bedroom colonial on the market about six weeks ago. The $1.6 million asking price won't recoup the roughly $200,000 that Ms. Swann spent on renovations such as finishing the basement and adding a bedroom. Still, the 41-year-old mother of three is eager to sell because she is building a bigger house nearby.
After six showings, she is optimistic the home is priced competitively. "We had to be kind of aggressive" about making the price attractive, she says. "We don't know where the market's going, and I'm not going to wait a long time in an uncertain market."
Economists say the number of distressed sales will continue to rise, and put pressure on prices. But mortgage rates, which were trending upward during the fall and winter months, have been falling in recent weeks amid global turmoil over the crises in Japan. Rates for 30-year loans were well below 5% last week.
"Few think mortgage rates are going lower," said Moody's Analytics chief economist Mark Zandi. "It's more likely they will be 6% than 4% next spring. This lights a fire under buyers."
Write to Dawn Wotapka at dawn.wotapka@dowjones.com

Friday, March 25, 2011

Distressed Properties: Discounts and Difficulties



by The KCM Crew on March 25, 2011

Most buyers want to make sure they get a ‘good deal’ when they purchase something. Purchasers of real estate are no different. That is why many decide to buy a distressed property (a foreclosure or a short sale). The National Association of Realtors (NAR) last week reported foreclosures, on average, sell at a 22% discount and short sales at a 17% discount. It sounds like a pretty good decision to buy a property at those levels of discount.
However, the purchaser must realize that there are added obstacles in these type of transactions. Many foreclosures are left in less than pristine condition by the previous owner and some have title issues that must be corrected before they can change hands. Many short sales have multiple loans that must be negotiated before an offer is accepted by all parties to the transaction. This can take months in many cases. Purchasing a non-distressed property will probably have a lot fewer pitfalls.

Patience Equity

Does that mean that you shouldn’t consider a distressed property? Not necessarily. Just understand that there is an additional cost to purchasing a foreclosure or a short sale: the cost of time. For some, the 17 or 22 percent discount is well worth the extra time they must spend on the transaction. We like to call that savings your ‘patience equity’. Patience equity will require you to be patient however. Realize going into the deal that there will be obstacles to overcome and make sure you give your real estate professional time to overcome these challenges. Again, patience equity will require your patience.

Bottom Line

Buying a distressed property could make sense for you as long as you realize you will need to be VERY patient with your real estate agent throughout the process. If you are, you will own a home that has considerable equity the day you move in.

Tuesday, March 22, 2011

New homes are becoming a bad deal in weak markets


 

New homes are becoming a bad deal in some areas as foreclosures make older homes cheaper

, On Tuesday March 22, 2011, 6:45 pm EDT
WASHINGTON (AP) -- A new home, the dream of many would-be buyers, makes less and less financial sense in many places.
A wave of foreclosures has driven down the cost of previously occupied homes and made them even more of a comparative bargain. By contrast, new homes have become more expensive.
The median price of a new home in the United States is now 48 percent higher than that of a home being resold, more than three times the gap in a healthy housing market.
Such a disparity can be a drag on the economy. New homes represent a small fraction of sales, but they cause economic ripples, bringing business to construction and other industries. Sluggish new-home sales deprive the economy of strength.
"A lot of people are saying, 'If I can get a great deal on a home already on the market, why go through the headaches of getting a new home?'" says Mark Vitner, a senior economist with Wells Fargo. "There's a relatively small group of people who have the credit, have the down payment and are secure in their jobs that can go out and buy new."
The gap is widening because prices of previously occupied homes are falling fast, pulled down by waves of foreclosures and short sales. A short sale occurs when a lender lets a homeowner sell for less than is owed on the mortgage. New homes aren't directly affected by such sales.
The median price of a new home -- the price at which half the homes sell for more and half sell for less -- has risen almost 6 percent in the past year to $230,600, even though last year was the worst for sales in nearly a half-century.
Slowed by those higher prices, new-home sales have plummeted over the past year to the lowest level since records began being kept in 1963. The government provides fresh data on new-home sales Wednesday.
By contrast, sales of previously occupied homes have fallen almost 3 percent in the past year. Prices have dropped more than 5 percent. In February, the median price for a resale was $156,100, according to the National Association of Realtors.
That adds up to a price difference of $74,500, or 48 percent, the highest markup in at least a decade. In healthier markets, a new home typically runs about 15 percent more, according to government data.
Home prices and sales still vary sharply among metro areas. Cities with more foreclosures tend to have more resale homes that have languished on the market and are priced at a bargain. That makes new homes in those areas comparatively expensive.
In Atlanta, for instance, where foreclosures accounted for one in every 23 homes sold last year, the median price of a previously occupied single-family home was $109,900, about 12 percent lower than a year ago, according to the Georgia data firm Smart Numbers. The median price of a new home was more than twice that.
"That's as much of a difference as we've ever seen," said Steve Palm, president of Smart Numbers. "New homes can't compete, and that means jobs."
An average of three jobs and $90,000 in taxes are created for each home built, according to the National Association of Home Builders.
In some areas, older homes were more expensive before the housing market bust. That was especially true in urban neighborhoods with little or no room left to build on. But now, buyers get their pick even in some of the trendiest places.
That's what Robert Rost is finding in central Phoenix. Rost doesn't want to commute far to his job. He's been looking for a home for about five months but can't find new properties in the neighborhoods where he wants to live.
"I don't want to commute 45 minutes to an hour a day one-way," the 38-year-old computer engineer says.
Homebuilders have taken notice. Residential construction has all but come to a halt. Builders broke ground last month on the fewest homes in nearly two years. And building permits, a gauge of future construction, sank to their lowest in more than 50 years.
Many builders are waiting for new-home sales to pick up and for the glut of foreclosures and other distressed properties to be reduced. But with 3 million foreclosures forecast this year nationwide, a turnaround isn't expected for at least three years.
Don Eyler, who has owned E and R Construction in Terre Haute, Ind., for three decades, blames the banks. He says people are still interested in having a custom-built home but can't finance the purchase. Tighter credit has made it harder to get larger loans.
Eyler typically built eight homes a year before the housing boom and bust. Now, he's averaging just about five. And he's making less profit on each.
"We hope we can stay in business until it gets better, but the turning point is this year," Eyler says. "If it doesn't change, we'll have to do something different."
Contributing to higher new-home prices is the rising cost of building materials.
Fewer new homes sold means fewer jobs added to an economy struggling with 8.9 percent unemployment. About 2.2 million overall construction jobs have disappeared since the housing boom went bust. That's nearly a third of the people the industry employed in January 2007.
Workers in residential construction have fared even worse than other construction employees. Homebuilders cut nearly 1.3 million jobs in that time, or 39 percent of total payrolls.
Besides generating jobs in construction and other fields, new-home purchases tend to help the economy because buyers are more likely to buy new furniture, appliances and other amenities.
There's also the psychological factor. In good times, most homes rise in value. But new homes historically have risen faster -- by an additional 1.5 percent a year, according to Realtors and census data.
When homes appreciate in value, people feel they have more money. So they spend more.
"When you have more net worth, especially in your home, you feel richer," says Chris G. Christopher Jr., senior principal economist at IHS Global Insight.

AP Business Writers Christopher S. Rugaber in Washington and Alex Veiga in Los Angeles contributed to this report.

Monday, March 21, 2011

How to Improve the Odds of an Offer




1. Price it right. Set a price at the lower end of your property’s realistic price range.

2. Prepare for visitors.
Get your house market ready at least two weeks before you begin showing it.

3. Be flexible about showings.
It’s often disruptive to have a house ready to show at the spur of the moment. But the more amenable you can be about letting people see your home, the sooner you’ll find a buyer.

4. Anticipate the offers.
Decide in advance what price and terms you’ll find acceptable.

5. Don’t refuse to drop the price.
If your home has been on the market for more than 30 days without an offer, you should be prepared to at least consider lowering your asking price.

Sunday, March 20, 2011

Japan Crisis Causes Drop in U.S. Mortgage Rates


The 9.0 earthquake and subsequent tsunami that devastated Japan last week sent a ripple through the U.S. mortgage markets causing interest rates to lower this week.

"With the crisis in Japan, investors rushed to buy the security of U.S. Treasury bonds, which lowered its yields and other interest rates as well,” says Frank Nothaft, Freddie Mac’s chief economist. “This allowed fixed mortgage rates to drift lower this week.”


The 15-year fixed-rate mortgage dropped below 4 percent this week, reaching its lowest level since December 2010. The 15-year mortgage rate averaged 3.97 percent this week, compared to last week’s 4.15 percent, according to Freddie Mac’s weekly mortgage rate survey.

The 30-year fixed-rate mortgage also dropped this week, averaging 4.76 percent compared to last week’s 4.88 percent. Last year at this time, 30-year mortgages averaged 4.96 percent.

The 5-year adjustable-rate mortgage also inched downward, averaging 3.57 percent compared to last week’s 3.73 percent.

Source: “30-Year Fixed-Rate Mortgage Drops Amid Japan Crisis,” Freddie Mac (March 17, 2011)

Friday, March 18, 2011

Once-in-a-Lifetime Opportunity for Buyers?



by The KCM Crew on March 18, 2011

Business Insider’s Money Game interviewed real estate expert Barbara Corcoran earlier this week. This is what she said about buying in this market:
“We have a regular real estate miracle happening right now. We not only have record low prices, but we also have cheap money.”
A second real estate icon, Donald Trump,  just a few weeks ago said:
“This is a great time to go out and buy a house. And if you do, in 10 years you’re going to look back and say, ‘You know, I‘m glad I listened to Donald Trump’.”
Maybe it’s time to start listening to the people who have made fortunes buying and selling real estate. They may know best!!

Thursday, March 17, 2011

5 Tips to Prepare Your Home for Sale



By: G. M. Filisko
Published: February 10, 2010

Working to get your home ship-shape for showings will increase its value and shorten your sales time.

1. Have a home inspection

Be proactive by arranging for a pre-sale home inspection. For $250 to $400, an inspector will warn you about troubles that could make potential buyers balk. Make repairs before putting your home on the market. In some states, you may have to disclose what the inspection turns up.

2. Get replacement estimates

If your home inspection uncovers necessary repairs you can’t fund, get estimates for the work. The figures will help buyers determine if they can afford the home and the repairs. Also hunt down warranties, guarantees, and user manuals for your furnace, washer and dryer, dishwasher, and any other items you expect to remain with the house.

3. Make minor repairs

Not every repair costs a bundle. Fix as many small problems—sticky doors, torn screens, cracked caulking, dripping faucets—as you can. These may seem trivial, but they’ll give buyers the impression your house isn’t well maintained.

4. Clear the clutter

Clear your kitchen counters of just about everything. Clean your closets by packing up little-used items like out-of-season clothes and old toys. Install closet organizers to maximize space. Put at least one-third of your furniture in storage, especially large pieces, such as entertainment centers and big televisions. Pack up family photos, knickknacks, and wall hangings to depersonalize your home. Store the items you’ve packed offsite or in boxes neatly arranged in your garage or basement.

5. Do a thorough cleaning

A clean house makes a strong first impression that your home has been well cared for. If you can afford it, consider hiring a cleaning service.
If not, wash windows and leave them open to air out your rooms. Clean carpeting and drapes to eliminate cooking odors, smoke, and pet smells. Wash light fixtures and baseboards, mop and wax floors, and give your stove and refrigerator a thorough once-over.
Pay attention to details, too. Wash fingerprints from light switch plates, clean inside the cabinets, and polish doorknobs. Don’t forget to clean your garage, too.

Wednesday, March 16, 2011

What Buyers Want in Homes Today



Buyers have a long list of what they want when home shopping, but one of their biggest desires: A good deal.

"And no matter where a seller prices their property, they're looking to negotiate," says Patricia Szot, president of the MetroTex Association of REALTORS®.


But that’s not all they want. Bankrate.com recently asked real estate professionals to chime in on the top desires of their buyers when home shopping. Here are four things that made the list of top home buyer preferences:

1. Homes that are in good condition. "There's not a lot of flexibility in that," says Ron Phipps, president of the National Association of REALTORS®. Many buyers now take the attitude: "I'd rather spend the money getting into the house" and not have to spend more money later, Phipps says. One of the major reasons is that "buyers have limited amounts of cash," he adds. "Even if they want to do a fixer-upper, they don't have the money to do it."

2. A bargain with incentives. Buyers are looking for a good deal, even when considering bank-owned properties, says Joan Pratt, real estate broker with RE/MAX Professionals in Castle Pines, Colo. "They want the short sales and the foreclosures and they want them to look like they're owner-occupied," she says. "They don't want to paint. They don't want to put carpet in. They don't want to clean."

And they aren’t only asking for a low price but they also want incentives to buy too. As such, sellers are offering everything from gift cards for new furniture to paint to financial assistance at closing.

3. Outdoor living areas. Homes with screen porches, outdoor kitchens, two-way fireplaces are becoming increasingly competitive in the marketplace as more buyers say they want more outdoor living space.

4. Open kitchens. "The wall between the kitchen and the family room is evaporating," Phipps says. "The kitchen is becoming part of the gathering space.” (See Buyers Want Cozy, Connected Kitchens)

Source: “9 Items Homebuyers Desire in 2011,” Bankrate.com (March 2011)

Tuesday, March 15, 2011

What Homeownership Truly Means

by Steve Harney on March 15, 2011

Last week, my son and I were flying home after spending a week at The LeadingRE Conference in Las Vegas. He said he couldn’t wait to sleep ‘in my own house’ again. That made me think of this blog post I wrote last year. – Steve
My son, Bill and his fiance, Charlotte

My Son, His New Home, and What It Means

Every week we try to help you put an accurate value on housing in today’s real estate market. We give you all the charts, report on all the surveys, and quote every housing expert willing to talk on the subject. And we are still not 100% sure what prices should be. At best, we can only tell you what we think.
This week was different. I was able to personally FEEL the true value of a home. My older son closed on his first home yesterday. I have the great fortune to work with him at our company. I get to see him a lot when I am not traveling. This week I was home and got to spend every day with him.
I saw how nervous he was as he got all the last minute paperwork together. I heard the relief in his voice when he found out that he had overestimated his costs and would need to bring a little less money to the closing. I could feel how proud he was when he hugged me as he left the office the night before the closing.
He should be proud. He just purchased his own home. He just took a major step toward accomplishing the American Dream. He now owns a piece of this country. He now has a community he can call his own. He has a place to go ‘home’ to every night, a place where he can work in the yard, a place he can invite friends and showoff his ‘castle’, a place where he will someday raise his family.
Owning a home makes things different. You can’t necessarily explain it logically. But you can feel it. That feeling is the real value of a home AND IT IS PRICELESS.
My son slept in his own home last night. I am happy for him.

Monday, March 14, 2011

If Prices Are Falling, Why Are the Rich Buying?


by The KCM Crew on March 14, 2011

There is an interesting phenomenon taking place in the real estate market. While house prices are falling, the rich are starting to purchase. DataQuick Information Systems reported last week that sales on homes $1 million or more rose 18.6% last year after four consecutive years of decline. This is at the same time that sales outside of this price point actually fell 2.8%.
And even more amazing is that homes over $5 million have also increased substantially. Housing Wire reported that:
In 2010, 975 homes sold in this bracket, up nearly 14% from the year prior.
Why would the wealthy be starting to purchase especially when everyone is predicting that prices will soften? The people of wealth understand finances. They realize that the COST of real estate is a much more important than its PRICE. With the government attempting to make massive changes to the residential lending business, the wealthy know financing  a home may never be better. They realize it is time to buy. They can purchase a million dollar+ home for a rate lower than at almost any time in history.
Rates are at historic lows and the spread for jumbo loans has shrunk dramatically. As CNN Money explained:
Normally buyers have to take out a jumbo loan to finance any mortgage beyond the $417,000 threshold ($729,000 in high-cost cities such as New York). These loans have higher interest rates because they are considered non-conforming — or higher risk — and are not backed Fannie Mae or Freddie Mac.
In 2009 buyers of high-end homes paid 1.8 percentage points more in interest than the average buyer. But in 2010, that spread had shrunk to just 0.6 points more.
They can also fix that rate for 30 years. The 30-year-fixed-rate-mortgage may be a victim of the new lending reforms. Mark Zandi, chief economist of Moody’s Economics addressing the administration’s recent report on reform:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages.”

Bottom Line

Let’s assume the rich aren’t just lucky. Let’s assume they built their wealth by making good financial decisions. What have they decided about real estate? It’s time to buy.

Saturday, March 12, 2011

Mortgage Interest Deduction Vital to Housing Market


NATIONAL ASSOCIATION OF REALTORS®

By: Dona DeZube
Published: October 29, 2010

The home mortgage interest deduction saves the average home owner thousands of dollars at tax time, supports home values at the community level, and helps American home buyers get into their first house.

How the deduction works

In general, any home owners who pay U.S. taxes and who itemize their taxes can deduct mortgage interest attributable to primary residence and second-home debt totaling $1 million, and interest paid on home equity debt of as much as $100,000.

Mortgage interest deduction threatened

In recent years, the mortgage interest deduction has come under attack. Among the suggestions for cutting it back to deal with the deficit:
  • Reduce the mortgage interest deduction for upper-income taxpayers—they’d only receive 28 cents on the dollar, even if they’re in a 33% or 35% tax bracket and can now deduct 33 or 35 cents on the dollar. 
  
  • Reduce the $1 million cap by $100,000 a year.
  • Change the mortgage interest deduction to a 15% tax credit.
In the past, members of Congress have suggested other mechanisms for eliminating or limiting the mortgage interest deduction. None of those has ever gained traction.

Arguments against mortgage interest deduction

Arguments against the mortgage interest deduction center on who benefits and whether the government should support home ownership. They say:
  • It primarily helps the wealthy, since high-income taxpayers are more likely to itemize their deductions and to own homes. About 90% of taxpayers earning more than $100,000 itemize, while only 18% of those earning less than $50,000 follow suit, the Tax Foundation estimates.
  • Taxpayers who don’t itemize deductions get to use the “standard deduction.” They do that because it gives them a bigger tax break than itemizing to use the mortgage interest deduction.
  • Ending or reducing the mortgage interest deduction would create a deep source of money for reducing the budget deficit.
  • In the aftermath of the mortgage crisis, the U.S. needs to rethink its favored tax treatment of home ownership.

Arguments for mortgage interest deduction

Those who favor keeping the mortgage interest deduction say it helps middle-income families, who already pay nearly all U.S. income taxes. Plus, getting rid of the mortgage interest deduction would hurt home prices.
  • More than 60% of the families who claim the mortgage interest deduction have household incomes between $60,000 and $200,000, estimates the NATIONAL ASSOCIATION OF REALTORS®.
  • A disproportionate number of those high-income taxpayers live in areas where housing is especially expensive, such as California and New York. In high-cost housing markets, lowering the $1 million cap would add a tax burden on families who already must pay high prices for homes.
  • Home owners already pay 80% to 90% of the income tax in our country, and among those who claim the mortgage interest deduction, almost two-thirds are middle-income earners, says NAR Chief Economist Lawrence Yun. So home owners, who are the pillars of federal income tax revenue, would have to shoulder a bigger tax burden.
  • Home values could fall 15%, says Yun, as buyers discount the value of the mortgage interest deduction in their purchase offers.
  • It’s faulty to link the mortgage meltdown to the country’s support for home ownership. The meltdown is rooted in lax underwriting and faulty ratings by credit rating agencies of the securities backed by the mortgage, says Yun.
Protecting the deduction promotes housing. In supporting the mortgage interest deduction, you help ensure that tomorrow’s families can follow the same path to home ownership that so many of us have already traveled.
Dona DeZube, HouseLogic’s News Editor, has been writing about real estate for over two decades. She lives in a suburban Baltimore 1970s rancher on a 3-acre lot shared with possums, raccoons, foxes, a herd of deer, and her blue-tick hound.

Friday, March 11, 2011

Will I Get More Money If I Wait?

by The KCM Crew on March 11, 2011

Sellers in any real estate market are looking to get the best possible price. If you are looking to sell in the next year, today’s price may well be the best price. Home values stabilized somewhat in 2010. Many hoped that was a sign that values had bottomed out and we would see price appreciation in 2011. Studies released this week have painted a different picture.
If we look at CoreLogics January Home Price Index (HPI), we see that prices are again beginning to decline:
National home prices, including distressed sales, declined by 5.7 percent in January 2011 compared to January 2010
Mark Fleming, chief economist with CoreLogic, said, “A number of factors continue to dampen any recovery in the housing market. Negative equity, which limits the mobility of homeowners, weak demand and the overhang of shadow inventory all continue to exert downward pressure on housing prices. We are looking out for renewed demand in the coming months as the spring buying season gets underway to hopefully reduce the downward pressure.”
They are not talking about the spring market increasing or even stabilizing prices. They hope it will “reduce” the pressure to drive prices lower.
Radar Logic’s RPX Composite Price comes to virtually the same conclusion:
Radar Logic believes the RPX Composite price will continue to exhibit year-on-year declines throughout 2011 due to a growing supply of homes for sale and in the inventories of financial institutions, and weakening demand due to the reduction of government incentives for home buyers. Moreover, banks are facing uncertainty over whether they will be forced by regulators to expand mortgage modifications, and may reduce lending and tighten standards as a result.
“No matter what you call it, a ‘double dip’ or the continuation of a long process of deterioration, the current trend in home prices is evidence that housing markets are continuing to languish,” said Quinn Eddins, Director of Research at Radar Logic. “We expect the negative trend to continue under a severe supply overhang that includes a large and growing ‘shadow inventory’ of homes in default or foreclosure.”

Bottom Line

It seems that prices have again begun to fall nationally. With the overhang of existing and shadow inventory, prices will probably continue to decline throughout most of 2011. If you’re thinking of selling, now might be the best time. Check with a local real estate professional to see how this might impact your area.

Thursday, March 10, 2011

Foreclose Deal Near, State Officials Say



Click on the link below to read the full article:

http://www.nytimes.com/2011/03/08/business/08mortgage.html?_r=1&ref=business

Judging An Agent’s Listing Presentation


by Dean Hartman on March 10, 2011

I brainstorm with dozens of real estate agents every month. I have sat down with literally hundreds of them over the years. And one of the primary questions I ask them is “Why would I list my home with you?”. I am constantly amazed that over 90% of them give the same exact basic answers.
They discuss the 50 websites they have access to, brag about their (or their company’s) market share, and present a standard marketing plan sprinkled with print media and open houses. Shockingly, these agents are puzzled when home sellers choose the agent with the lowest commission or the one who promises a higher sales price. When every offer is basically the same, wouldn’t you pick the one that puts the most money in your pocket?
In today’s world, where only 10% of the available inventory is going to sell this month, you need more than a listing agent…you need a LEADER. As far as I am concerned, there are three components to leadership:

1. Expertise


An agent must prove themselves as well versed in many areas in order to ask someone to follow them. Market trends like those discussed in this blog daily, interest rate movements, the changing mortgage landscape, knowledge of your competition (the other homes for sale that are also trying to lure any potential buyers), and being a raving fan of the community are some of the components that make an expert. Additionally, experts have others in their sphere of influence who are experts in other disciplines- mortgage, taxation, estate planning and more

2. Listening Skills

How can anyone help anyone if they don’t take the time to LISTEN? They need to understand your needs. What’s more important…price or timing? Why are you moving? Where are you going to begin the next chapter of your life? What are the reasons you bought your home (because it might give a clue to your eventual purchaser)? Great agents ask a lot of questions. If you find yourself asking more questions than the agent, you have not found a leader. Leaders listen so they can help their followers get the result that the followers desire. It’s called Servant Leadership.

3. Creativity

Once you are comfortable that an agent knows their stuff and that they care more about your result than their pay check, you need an agent who has unique solutions to the problem. Simply stated: How can they get your house to stand out with all this inventory? An agent’s marketing plan is what ultimatelyattracts potential buyers and, if your agent is just putting you in with all the clutter of the big websites on the Internet, you are doomed for disappointment. Single property websites, text messaging, QR codes as well as geographic, cultural and employment marketing strategies are crucial. Unique Open Houses that incorporate potential repairs, renovations or upgrades with the FHA’s 203K loan could be important as well. Or, you can also try anything else that’s “outside the box”.

As a consumer, it’s okay to follow when you find a true leader- one who is a creative, serving expert. Take it from me…they are rare.  However, when you find one, they are worth their weight in gold.

Wednesday, March 9, 2011

Hire a Smart Duck

by Steve Harney on March 9, 2011



You can learn so much just by observing nature. Last week, I was staying at a fabulous hotel in southern California. My wife and I were having lunch at an outside table at the hotel restaurant. It was impossible not to notice the ducks that gathered around the tables at the restaurant looking for food. The birds would wait for the people to leave and then they would flock to the tables looking for crumbs that were dropped to the floor. There were dozens of birds fighting over the scraps left behind. Every duck did the same thing; except for one.
This duck was different. Instead of waiting for the couples to leave, this duck would wait only until the food was originally delivered. At the moment the staff delivered the food, the duck would race to the table and look up at the people who were about to eat. Surprisingly, every person immediately took something from their plate and feed it to this duck. They fed the duck BEFORE they began to eat.
This duck didn’t settle for scraps and leftovers. He ate the best food off the plate. This duck didn’t fight with dozens of others. He was alone when the customers fed him.
It was truly amazing.
It made me think about the difference in real estate agents. Some will list a house, put it on MLS and hope for the best. Others will represent a buyer by simply checking the MLS to see if a suitable house is available for sale. They are like many agents in the marketplace. They are waiting for something to happen. Just like all those other ducks.
Then there are agents who will take it upon themselves to make something happen. They will diligently search for the buyer of their new listing. They will knock door-to-door looking for the perfect house for their new client who is dreaming of a new home for their family. They are like that special duck. They are not waiting for the leftovers.

Bottom Line

In all of nature, some wait for things to happen and others make things happen. When hiring a real estate agent, look for the later. Don’t settle for scraps.

Tuesday, March 8, 2011

Homeownership: What Americans Think


by The KCM Crew on March 8, 2011

There is a growing number of people debating whether the government should continue its level of support for homeownership. Mortgage assistance is being pulled back and even the mortgage-tax-deduction is now up for debate. We want to look at how the people of this country view owning a home and the reasons they buy. Last week, Fannie Mae released the National Housing Survey. Here are the survey’s more interesting findings.

Belief in Homeownership

  • 96% of all homeowners said homeownership has been a positive experience.
  • 84% of Americans still believe that owning a home makes more sense than renting. Even 68% of renters believe owning makes more sense.
  • 64% consider buying a home as a safe investment. Buying a home was considered safer than buying stocks by over three times the number of people (64% vs 17%).
  • 2 in 3 Americans believe that lifestyle benefits of homeownership (65%) are superior to the financial benefits (32%).

Top Non-Financial Reasons to Buy a Home

Lifestyle Benefits: The broader security and lifestyle benefits of homeownership, such as providing a good and secure place for your family and children, where you have the control to make renovations and updates if you want, and in a place that’s in a community and location that you prefer.
  1. It means having a good place to raise children and provide a good education
  2. You have a physical structure where you and your family feel safe
  3. It allows you to have more space for your family
  4. It gives you control over what you do with your living space (renovations & updates)
  5. It allows you to live in a nicer home
  6. It allows you to live in a location that is closer to work, family, or friends

Top Financial Reasons to Buy a Home

Financial Benefits: The financial benefits of homeownership: its value as an investment (especially compared to paying rent), its value as a way to build up wealth for retirement or to pass on to your family, and the tax benefit.
  1. Paying rent is not a good investment
  2. Buying a home provides a good financial opportunity
  3. Owning a home is a good way to build up wealth and pass it along to my family
  4. It is a good retirement investment
  5. Owning a home provides tax benefits
  6. Owning a home gives me something I can borrow against if I need it

Bottom Line

The people of this country have always seen great value in owning their own home. They still do. We believe we should never underestimate the importance of homeownership as a crucial piece of the American Dream.

Friday, March 4, 2011

Mortgage Rates Drop Again This Week



For the third straight week, long-term mortgage rates inched down, according to Freddie Mac’s weekly mortgage survey.

The 30-year fixed rate mortgage averaged 4.87 percent for the week, down from last week’s 4.95 percent. The rate was 4.97 percent at this time last year.


The 15-year mortgage rate also dipped for the week, averaging 4.15 percent, down from last week’s 4.22 percent.

The 5-year adjustable-rate mortgage averaged 3.72 percent, which is a drop from last week’s 3.8 percent average.

"Mortgage rates saw an overall improvement this week,” says Frank Nothaft, Freddie Mac’s chief economist. “Interest rates for 30-year fixed mortgages were almost 0.2 percentage points below this year's high set just three weeks ago.” This means that home buyers can now expect to pay $263 less per year on a $200,000 loan, Nothaft adds.

Source: “30-Year Fixed-Rate Mortgage Drops for Third Consecutive Week,” Freddie Mac (March 3, 2011)

4 Red Flags That Send Buyers Running



How you present a listing online and the words you choose to describe it may be turning off some buyers. Bankrate.com recently asked real estate professionals to weigh in on what listing red flags are turning off their buyers.

1. No photos. "One red flag in many buyers' eyes is the lack of photos for a listing," says Don Tepper with Long & Foster in Burke, Va. "There can be some legitimate reasons for few (or no) photos in a listing: The sellers want privacy, or they have valuables they don't want in the photos. But many would-be buyers--rightly or wrongly--assume that there's something wrong." Tepper recommends about a dozen photos for listings and photos that match the home’s description and showcases its best features.


2. Outlandish claims. Referring to the listing as the best property on the market might not be a good idea, says Ziad Najm, a broker at Cedar Real Estate in Mission Viejo, Calif. "Some buyers may be turned off to begin with and some will inevitably be disappointed if the claim doesn't live up to their expectations,” Najm says. Instead, Najm recommends focusing on adjectives that are flattering to the property but leave some room for interpretation.

3. Priced too low. You want to price the property competitively but pricing too low may make some buyers suspicious or attract unqualified buyers. "Typically, multiple buyers will be attracted to the low asking price and eventually the sales price will climb close to market value as competing offers bid up the price," Najm says. "However, the strategy is not without risk in that some buyers will be alienated by a potential bidding war."

4. Listing a property “as is” in the description. That’s not a deal breaker but when you see “as is” in a listing, buyers might be cautious, says Diane Conaway, a San Diego broker with RE/MAX United. Some buyers take the “as is” phrase as the "previous owners stole everything including the kitchen and bathrooms," Conaway says. "Our contract states 'as is' anyway, but some agents restate that in the listing, which is a disservice to their sellers."

Source: “Red flags: How to spoil a home description,” Bankrate.com (February 2011)

Thursday, March 3, 2011

It Takes A TEAM

by Dean Hartman on March 3, 2011

Today, people say: “It takes a village to raise a child”. The realities of today’s life (two family incomes and such) have extended a family to lean on others (neighbors, relatives, teachers, etc.) to protect and teach our young people about culture, history and acceptable behaviors. Teams, because of their ability to provide specialized solutions to problems, have often proved to be more efficient deliverers of information.
In real estate today (maybe more than ever), it also takes a team. As with a basketball team, each member needs certain skill sets and proper coaching on how to weave the different skills into a cohesive unit to achieve the desired outcome.  The evolution of how things work has created a necessity of excellent communication between all the players. The needs of buyers and sellers have developed an even broader need for new members of a great team.

A great working relationship between an agent and a loan officer is an obvious connection. Changing mortgage guidelines, appraisal challenges and qualification standards requires everyone working together. But, there are so many others whose expertise may be needed to properly advise today’s clients.

An accountant

One of the reasons people buy a home is that they hear of the tax advantages. What really are they?  How will the purchase affect my monthly cash flow? Should we adjust our exemptions with our employer? What about home repairs and depreciation?  What about parents who gift money to their kids….is there a smart way to do it?
And for sellers, especially people who may not be buying a new home, what are the consequences of their sale? Capital Gains Tax? Can/should they consider “gifting” proceeds to relatives? Long term health care? Life Insurance? That leads to …

A financial planner

How does buying or selling real estate impact cash flow and long term savings and planning?

Attorneys

Divorce attorneys, estate attorneys, elder care attorneys and even bankruptcy attorneys have a role in many transactions these days. Choices made without their counsel can have very damaging repercussions.

Home Inspectors, Termite Companies and Home Improvement Contractors

These professionals protect customers from nightmares, or explain the costs associated with preventing or curing problems.
Making a decision to buy or sell a home has far reaching effects. To think your real estate agent or loan officer is an expert in everything is not prudent. However, aligning yourself with a professional who surrounds themselves with other professionals is extremely wise. Make sure the people you work with have a network of related experts that you can tap into. You need to be represented by a TEAM!
---------------------------
The Allen Tate Family of Companies Has That Team!! 






 Call Me! 704-953-0183
Joe Naccarato, Broker, Realtor, Trusted Advisor




Wednesday, March 2, 2011

For Buyers:The Financial Opportunity of a Lifetime?

by The KCM Crew on March 2, 2011

We often point out that a buyer should be more concerned about the COST of a home rather than the PRICE. Price obviously is a component of cost. However, unless you buy all-cash, you must also be concerned about the financing of the purchase. The price and the financing together determine the cost of a home. Today, we want to look at only the financing piece.
An opportunity exists today because of recent government involvement; an opportunity that may never again be available in our lifetimes. There has been much discussion about what role the federal government should have in supporting homeownership. We will leave our opinions on the debate for another time. However, we want to alert you to two advantages available to a purchaser today that may disappear in the future:
  • Historically low interest rates
  • The ability to lock in these rates for thirty years

Interest Rates

Because of the financial crisis, the government stepped in and instituted a series of programs which pushed mortgage interest rates to historic lows. If we look at 30 year mortgage interest rates before and after government intervention we see the impact these programs had (see chart below).
According to Freddie Mac, from 2006 to the start of the financial crisis (the fall of 2008), the average rate was 6.29%. Since then, the average rate has been 4.92%.
A purchaser can still get a 30 year-fixed-rate-mortgage at approximately 5%. However, interest rates this low may soon disappear. The government has questioned its role in supporting homeownership. In the administration’s REFORMING AMERICA’S HOUSING FINANCE MARKET: A REPORT TO CONGRESS, they are very strong in voicing their thoughts on this issue:
…our plan also dramatically transforms the role of government in the housing market. In the past, the government’s financial and tax policies encouraged housing purchases and real estate investment over other sectors of our economy, and ultimately left taxpayers responsible for much of the risk incurred by a poorly supervised housing finance market.
Going forward, the government’s primary role should be limited to robust oversight and consumer protection, targeted assistance for low- and moderate-income homeowners and renters, and carefully designed support for market stability and crisis response…
Under our plan, private markets … will be the primary source of mortgage credit and bear the burden for losses.
What are the probable results of this decision?
The Royal Bank of Scotland:
“The (government) currently provides 95% of housing finance in the U.S.; any reductions of their involvement in supporting mortgages mean interest rates will have to go up to induce private lending.”
AnnaMaria Andriotis, writer for SmartMoney:
“In the proposals were changes that will mean more expensive mortgages, with higher fees and, probably, higher interest rates, larger down payments and, in the near term, fewer lenders to choose from.”
The day of a 5% rate seem to be coming to an end.

Locking in a rate for thirty years

We must also realize that having the ability to lock-in a rate for 30 years may soon be a thing of the past.
There are a growing number of people who think that our mortgage industry should imitate those of other industrial countries around the world. If we do start limiting government support for the mortgage process, the 30-year-fixed-rate mortgage may disappear. Other countries, like Canada, only allow a purchaser to lock in a rate for a five year term. After that, the borrower must renegotiate a new mortgage at current rates. Could that happen here?
Mark Zandi, Chief Economist of Moody’s Economics.com addressing the administration’s recent report:
“A private system would likely mean the end of the 30-year fixed-rate mortgage as a mainstay of U.S. housing finance. A privatized U.S. market would come to resemble overseas markets, primarily offering adjustable-rate mortgages. Based on the experience overseas, the fixed-rate share in the U.S. would decline to an average of between 10% and 20% of the mortgage market compared with a historical average of closer to 75%.”

Bottom Line

The COST of a home is dramatically impacted by the mortgage component. Today, we can get a 5% mortgage and lock it in at 5% for the next thirty years!! Both of these opportunities may disappear in the future. You should take this into consideration if you’re looking to purchase a home.

Tuesday, March 1, 2011

If Your Goal Is to Buy Low, Buy Now!

by The KCM Crew on March 1, 2011

There is a very famous saying which asserts “Sell High, Buy Low”. It is obviously great advice no matter what the investment. Below is a graph showing the cycle of investments. It shows the points of maximum risk and maximum opportunity when purchasing. We want to sell high (point of maximum risk) and buy low (point of maximum opportunity).
The challenge is how to determine when we have hit bottom if you are a purchaser. The only time you can guarantee a bottom is after you pass it.
However, there is more and more evidence that the COST of a home has in fact hit bottom. Notice we have used the word COST. Unless you are an all cash buyer, you must take into consideration the expense of financing a property to determine the true cost of purchasing the home. Interest rates have increased over the last quarter; and the rise in rates has counteracted any fall in prices.
Let’s look at an example:
Let’s say you were going to take out a $200,000 30-year-fixed-rate mortgage in November of 2010. At that time, interest rates were 4.17% (as per Freddie Mac). Your principle and interest payment would have come to $974.54. According to the most recent report from Case Shiller house prices fell 3.9% in the 4th quarter of 2010. The most recent report from the Federal Housing Finance Agency shows a 0.8% fall in prices. Let’s use the larger percentage decrease: 3.9%.
For the sake of keeping the math simple, we will now say you can get the same house with a $192,000 mortgage (4% discount from November price). Interest rates are now 4.95% (as per Freddie Mac).
Your principle and interest payment would now be $1,024.84.
By waiting to pay less for the PRICE of the house, the COST increased over $50 a month. That adds up to more than $600 a year and over $18,000 over the life of the loan.
We realize that there are other things to consider (ex. the mortgage tax deduction, etc.). This example is just a simple way to show that there is a difference between COST and PRICE.

Bottom Line

If you want to buy low, buy now. It appears COST has hit its lowest point.

Yes, Homes Are Still Selling!!


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