Wednesday, June 29, 2011

Housing Market Casting a Smaller Shadow


by The KCM Crew on June 29, 2011

The inventory of future short sales and foreclosures which will be coming to the market is known as ‘shadow inventory’. Future real estate pricing will be determined by the number of these distressed properties which eventually reach the market.
These properties sell at major discounts:
  • short sales at a 10% discount
  • foreclosures at a 35% discount
CoreLogic just reported this inventory is declining as more Americans are staying current on their mortgage obligations. Here is a graph from their latest report:

Bottom Line

There still are a substantial number of distressed properties that must be cleared. They will cause prices to soften in many markets. However, it is comforting that this number is finally beginning to decline.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

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Tuesday, June 21, 2011

A Window of Opportunity for House Sellers


by The KCM Crew on June 21, 2011

There has been much confusion as to where housing prices are headed. We have actually blogged on the issue recently. Today, we want to give our opinion on this subject for the short term. We believe sellers have a window of opportunity for the next 90-120 days in which to sell their homes for maximum price. We believe there will be increased downward pressure on home prices later this year and the first half of 2012.

Why renewed downward pressure?

Any item’s price is determined by ‘supply and demand’. In many parts of the country existing housing inventory is already high and actually increasing. In addition, an inventory of distressed properties (foreclosures and short sales) will be coming to market later this year. This inventory has been delayed for the last several months because of faulty paperwork by the banks when they originally attempted foreclosure proceedings on these homes.
Celia Chen, of Moody’s Analytics explains:
“Foreclosures are weighing on the outlook for U.S. house prices, and the slow resolution of issues surrounding the so-called robo-signing scandal is keeping distressed homes off the market”.
The New York Times also recently reported on this issue. They looked at the delays in certain states. As an example, this is what they found in New York:
“Last September, before the documentation crisis, nearly 1,500 New Yorkers lost their houses as a result of foreclosure, according to LPS. The average over the last six months: 286. That is far lower than at any point since the recession began.”

Banks are now correcting these errors.

There is evidence that the banks are getting their documentation in order and about to again increase their foreclosure repossessions. Housing Wire reported:
“Since major lenders delayed foreclosures to fix a broken process late last year, the amount of filings declined, but in May signs emerged the effect might be wearing off.”
They went on to quote RealtyTrac CEO James Saccacio:
“…lenders are somewhat unevenly pushing batches of bad loans through foreclosure as they overhaul their paperwork and documentation procedures and as they determine that some local markets are able to absorb more foreclosure inventory… Foreclosure processing delays continue to mask the true face of the foreclosure situation, although there were some clues in the May numbers of what lies behind that mask.”

What will this mean to home prices?

As this inventory comes to market, it will impact prices in two ways:
  1. It will provide discounted competition for buyers
  2. It will impact the appraisal values of all homes in the area
Again, we quote Celia Chen:
“It is quite possible that house prices will pick up slightly in the second or third quarter of this year, as foreclosure sales remain depressed while nondistress sales pick up…By the fourth quarter of this year, however, the distress share will rise, sending the house price index back down…
House prices will founder until early next year and start rising in earnest at the end of 2012.”

Bottom Line

There is a window of opportunity currently which sellers should take advantage of. Waiting until later this year or until next year will not guarantee a higher sales price. If anything, it probably guarantees the exact opposite.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!
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Thursday, June 16, 2011

Is The Economy Worse Than We Think?


by Dean Hartman on June 16, 2011

We are presented with conflicting data almost daily about the “health” of the economy. And I am no economist, but I believe that I do possess some common sense.
So, here’s what I have been thinking.
It is obvious that millions of people are NOT paying their mortgage, rightly or wrongly, for their own reasons:
  1. They can’t because of a job loss, death, disability or something outside of their control.
  2. They won’t because it makes poor financial sense as their house is underwater.

My question is that with so many people NOT paying their mortgage, how can there be an economic recovery of any fashion? And then it hits me, people who used to spend thousands of dollars every month on their housing are spending that money now on food, clothing, vacations, gasoline, cars and alike. With the lag time between the moment of not making a mortgage payment to eviction being as long as two years, it seems logical to me that the reported economic numbers have to be inflated.
As foreclosures and short sales continue and people transition from non-paying homeowners to renters, millions of consumers will start having a housing expense again which will leave them less cash every month to buy other things. The result will be a slowing economy.
If you are a home seller, I think it means continued lower sales prices for at least the next 18 months. Price aggressively and get top dollar now!
If you are a home buyer, most of the recent data points to higher prices of everyday goods (largely because of higher energy prices), and that leads to inflation. Inflation is combated by the Federal Reserve with higher interest rates. So buy now, while the monthly carrying COST of a home is at near all time lows. Lower home prices sound good, but higher interest rates will nullify that benefit.
I have learned that “Common Sense Is Not Common Practice”. Today, I wanted to share some common sense conclusions, to push you to make it part of your practice.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

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Tuesday, June 14, 2011

Why They Are Saying to Buy A Home Now


by The KCM Crew on June 14, 2011

Despite what appears to be a non-stop wave of tough news regarding real estate, four major media players have come out this month with the same advice: It Is Time to Buy a Home! Here are the four articles and a breakdown as to why the advice makes sense.
The Wall Street Journal: Why It’s Time to Buy
CBS Money Watch: Why the Time to Buy is Now
Forbes Magazine: 9 Reasons to Buy a House Now
National Public Radio: For Many, It’s Still a Good Time to Buy a Home
With prices continuing to depreciate in most regions of the country, some may wonder why these four entities are suggesting to their readership that now is the time to buy. Each organization realizes that PRICE is not as important as COST. The cost of a home can go up even if prices continue to fall. Unless you are an all cash buyer, you must take into consideration the expense of mortgaging when calculating the full cost of a home. Here is some information to consider.

Interest Rates

Currently, interest rates sit at historic lows. However, Fannie Mae, Freddie Mac, PMI and the National Association of Realtors are all projecting approximately a 1% increase in mortgage rates over the next year. A one percent increase in rate negates a ten percent fall in prices.

Lending Standards

The government has proposed a tightening of lending standards called Quality Residential Mortgage (QRM). If accepted as proposed two things will happen:
  1. The qualification process for loans will become more difficult
  2. The cost of a loan will increase

Bottom Line

There is a reason more and more financial organizations are suggesting to their followers that now is the time to buy a home: because the cost of purchasing a home is about to increase (even if prices continue to fall).


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!
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Sunday, June 12, 2011

Foreclosure Alternative: The Short Sale



By: Gwen Moran
Published: July 8, 2010

A short sale is far from hassle-free, but it's a better alternative than foreclosure. And now you've got a little help from your friends in D.C. Here are the facts about short sales and how to get started.

Short sales get government incentives

Although short sales are not hassle-free, at least you've got the government backing you. The Home Affordable Foreclosure Alternatives (HAFA) program provides financial incentives for lenders and borrowers to avoid foreclosure through short sales or deeds in lieu of foreclosures.
Participation in the HAFA program requires adherence to guidelines--including a standard process and minimum timeframes--that speed the process, says Dallas-based REALTOR® Tom Branch, co-author of Avoiding Foreclosure: The Field Guide to Short Sales. The HAFA program is for homeowners who can't keep their homes with the help of a loan modification.

Advantages of a short sale

  • You can be a homeowner again more quickly with a short sale in your past than with a foreclosure. New Fannie Mae guidelines help you qualify for a new mortgage in as little as two years after a short sale, as opposed to up to seven years after a foreclosure.
  • You will have more time to make relocation plans and save money than with a deed in lieu. A short sale may take four to 12 months. A deed in lieu of foreclosure arrangement typically requires you vacate your home within 30 to 60 days of signing, according to real estate attorney Lance Churchill.
  • You can receive up to $3,000 from your lender for moving expenses at the time of closing of a HAFA short sale or a HAFA deed in lieu of foreclosure. Relocation funds are part of the incentives of HAFA, but not necessarily for other short sale or deed in lieu programs of the lenders.
  • You can help your community's home values. Because the lender often receives a higher amount of the remaining loan balance than it would from the sale of a home after a foreclosure, short sales help support home values in the surrounding community.

Disadvantages of a short sale

  • Your credit score will take a severe hit. But that would happen anyway with a foreclosure. Fair Isaac, creator of the FICO score, says foreclosure and short sales have virtually identical impacts on your credit score. VantageScore--a company that has created a credit score model for consumers--says a short sale will lead to only a marginally lighter hit when compared with foreclosure. 
  • You may owe additional taxes. In the past, if your outstanding mortgage was $100,000 and your lender accepted a short-sale purchase offer of $90,000, you were liable for income tax on the forgiven $10,000, says Harlan D. Platt, economist and professor of finance at Northeastern University in Boston. However, the Mortgage Forgiveness Debt Relief Act of 2007, which runs through 2012, generally allows taxpayers to exclude income from the discharge of debt on their principal residence in some circumstances. Full relief is available only if the amount of forgiven debt doesn't exceed the debt that was used to acquire, construct, or rehabilitate a principal residence. Consult a tax professional and an attorney to minimize or avoid this liability.
  • In some states, your lender may still be able to come after you for the difference between the short sale price and the amount needed to pay off the mortgage. Your actual agreement with your lender and state and local laws and regulations spell out the details. Consult a tax professional and an attorney to minimize or avoid this liability. 

How to proceed with a short sale

  • Find a qualified REALTOR® experienced in short sales. Short sales are tough to navigate, and they're further complicated by your loan type--FHA vs. Veterans Administration vs. conventional loans. Real estate agents who specialize in short sales will know the proper steps and order of the steps involved. They'll also be able to navigate the many parties involved in the process and over-burdened loss mitigation departments. Look especially for agents who have Short Sales and Foreclosure Resource (SFR) Certification, which requires specialized training.
  • Gather evidence to support your need for a short sale as opposed to a foreclosure. You'll need to prove that you have little or no equity in your home, you're behind on your payments, and you're no longer able to afford your home. You'll need to write a hardship letter to the lender describing your circumstances, such as a divorce, job loss, illness, death, or other event that has impacted your income.
A short sale can be a time-consuming process, but if you can avoid foreclosure, it's worth it in the long run.

Gwen Moran has been writing about business, finance, and real estate for more than a decade. Her work has been published by Entrepreneur, Newsweek.com, Financial Planning, Woman's Day, and The Residential Specialist. She bucks the cottage trend and lives in a Colonial near the Jersey Shore.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

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Saturday, June 11, 2011

Home Prices: Even More Confusion


by The KCM Crew on June 10, 2011

We attempt to keep you abreast of the housing market. When will demand for housing return to historic averages? What impact will foreclosures continue to have? Where are interest rates headed? There are no simple answers to any of these questions. However, the most difficult question to answer seems to be: Where are home prices headed? Yesterday, we read two vastly different opinions on this issue.
Clear Capital claims prices seem to be stabilizing in their most recent Home Data Index Market Report.
“The latest Market Report results through May suggest that home prices are starting to ease back from the heavy declines seen over the winter. We are still far away from the strong demand needed to fully turn things around for the housing market; however, it is clear from the initial spring sales data that prices are softening, suggesting stabilization in the market.”
At the same time, Housing Wire reported that Robert Shiller, the Yale University professor and co-founder of the S&P Case-Shiller Home Price Indices, believes home prices still have a major correction ahead.
“While other people expect home prices to bounce along the bottom for a while without going up much, Robert Shiller is inclined to be more pessimistic.
There is room for home prices to decline another 10% to 25% in real terms over the next five years, according to Shiller.”

Bottom Line

As we said before, there are no easy answers to the tough questions facing the current housing market. We will try our best to keep you abreast of what reputable sources are  reporting and at the same time try to explain the indicators they use to formulate their opinions.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

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Wednesday, June 8, 2011

What About the Cost of Delaying Your Dreams?



by Steve Harney on June 8, 2011

Whether a family is thinking of buying or selling a home, price seems to have become all important. I’m not sure why that has occurred. I realize, whenever anyone sells or buys anything, making sure you get a ‘good deal’ is a crucial part of the transaction. However, in real estate today, it now seems that price has become the ONLY THING!
Yet, appreciation or depreciation is not usually the first thing that matters when the average family decides to buy or sell a home.
People move for numerous reasons. Here are a few examples:
  • to create a better lifestyle for themselves and their children
  • to be closer to family in other regions of the country
  • to be closer to necessary healthcare
  • to take advantage of a promotion or a new job
  • to downsize and lower long term financial obligations
Most voluntary moves help families achieve their goals and/or dreams.

Bottom Line 

Which is more important: waiting to get a few more dollars for your home, sitting on the sideline hoping prices drop just a little bit lower before you buy or moving on with the rest of your life? Only you can decide.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

 

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Tuesday, June 7, 2011

Financial News Icons Say Now Is the Time to BUY!


by The KCM Crew on June 7, 2011

We received some tough news on housing last week. Prices are still softening. There was a lot of negativity surrounding these reports. The news caused more consumers to be concerned. However, the real question is what this means to you and your family. This could actually be great news if you are buying (either as a move-up buyer or a first-time buyer).
We don’t want you to take our word for this. Instead, here are excerpts from articles published last week by two of the country’s iconic financial publications: The Wall Street Journal and Forbes Magazine.

The Wall Street Journal: Why It’s Time to Buy 

“Despite all the gloom, there are growing indications that it is a good time to buy… The long-term benefits of homeownership remain very much intact. For now, at least, you can deduct the mortgage interest on your taxes—a big perk for people in higher tax brackets. You get to paint your walls any color you wish, without having to clear it with a landlord. And assuming you can buy a home for about the same price as you can rent one, buying will give you the ability one day to live rent-free. Come retirement time, a paid-off mortgage means your monthly expenses are significantly reduced, and you have a chunk of equity to play with.”

Forbes Magazine: 9 Reasons to Buy a House Now

“If you’re planning to buy a house right now, the next few months may be the best time to buy… With a convergence of the factors (mentioned in the article) all of which are favorable to the prospective home buyer, there may not be a better time to buy than right now. It’s a buyer’s market, but like everything else in life, the bargain deals won’t last.”

Bottom Line 

When the Wall Street Journal and Forbes have articles saying now is the time to buy, maybe it’s time to buy.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!
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Friday, June 3, 2011

What Impact Will QRM Have on Housing Demand?


by The KCM Crew on June 3, 2011

The federal government would like to dramatically decrease their role in the financing of residential real estate. To that goal, they have proposed the guidelines for a ‘Qualified Residential Mortgage’ (QRM). How would these proposed guidelines impact the demand for housing? Here is what three different entities are reporting:

CoreLogic

“Roughly 39% of homebuyers in 2010 made a downpayment of less than 20%, loans that may not have been made had the current risk-retention proposal been in place, according to data from CoreLogic.”

The National Foundation for Credit Counseling (NFCC)

The NFCC is the nation’s largest and longest-serving national nonprofit credit counseling network, with nearly 100 Member Agencies and more than 800 offices in communities throughout the United States and Puerto Rico. In a recent survey 50% claimed:
…they would never be able to save enough money for a down-payment.

The Federal Government Itself

According to the FHFA report, less than half the loans originated over the last 12 years would have qualified. Here are the percentages that would have qualified based on the year the loan was originated:
  • 1997 – 20.4%
  • 1998 – 23.3%
  • 1999 – 19.5%
  • 2000 – 16.4%
  • 2001 – 19.4%
  • 2002 – 22.4%
  • 2003 – 24.6%
  • 2004 – 17%
  • 2005 – 14.4%
  • 2006 – 11.5%
  • 2007 – 10.7%
  • 2008 – 17.4%
  • 2009 – 30.5%
We understand that the loans written during the years building up to the bubble were not scrutinized appropriately. However, it seems strange that only 20.4% of the loans issued in 1997 would meet the new criteria.

Bottom Line

QRM just doesn’t make sense.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!

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Thursday, June 2, 2011

The Evolving Role of Video in Real Estate



by Dean Hartman on June 2, 2011

I have heard it said that by 2013, 90% of new content posted to the web will be in the form of video…90%!!! What that says to me is that video is what our clients, customers, and prospects want.
They want it to educate themselves without reading. They want it to be stimulated more by sights and sounds than the written word. Quite frankly, as real estate and mortgage professionals, we need to aggressively get ahead of this paradigm shift.
Static print advertising is a waste of money for the vast portion of the population. If people want to buy something, they don’t look at the classifieds anymore, they scour the web. They go to eBay-like sites for consumer goods, and they go to Zillow, Trulia, and Realtor.com-type sites for homes. When they get there, they are quickly bored by still photos. They want video!

People want video about the home, for sure. But also, video about the neighborhood; and even, video about the agent who they might meet when they preview the home.
Now, I have seen some elaborate video productions that cost a lot of money, and in my experience, they are usually not worth it. The consumer is turned off by the “infomercial” because they feel they are being sold. There’s something that turns people off when something is too slick. People want to do business with real people in real situations, so a simple video that is imperfect works just fine.
Some video tips for agents and sellers to consider:
  1. Keep your videos under two minutes and thirty seconds…even shorter if you can. The US population has a short attention span. They want the information delivered succinctly….in small easily digestible portions.
  2. When videoing a home, don’t show everything! Show the best one or two features of the home. Everything else you show give people a reason not to see the house. Tease them to draw them in and ask for a showing or to come to the open house.
  3. Consider shooting a video of the seller talking about the memories they have of their home. Remember that a home purchase is, at least, as much an emotional one as it is financial. The seller can touch heartstrings that agents and spreadsheets never will.
  4. Lighting is very important. Choose the brightest rooms or even outdoors on a sunny day. The energy that good lighting brings to a video is huge.

Bottom Line

The public wants video. Agents can produce video without tremendous expense. Sellers can get involved in creating the content. Video is easy to market via Facebook, YouTube, attached to single property websites, burned onto DVDs, and so on. Embrace the video wave. Today, it is a differentiator. Be different!


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!
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Wednesday, June 1, 2011

Should You Rent or Buy in this Market?


by The KCM Crew on June 1, 2011

Families are trying to determine whether or not now is the time to buy a home. Some are advising these families to sit out the current real estate market and instead rent for the next year or two. We do not agree with this advice. Homeownership means a lot to a family. We also realize that the financial aspects of purchasing a home today can be a concern. The challenge is any advice given by someone in the real estate community is immediately dismissed as self-serving.
For this reason, we want to give you the advice of three entities not involved in real estate sales:

Citigroup

“When we examine the relationships between mortgage payments and income and mortgage payments and rent, we see that these relationships have also reverted back to or below equilibrium points. In some cases, particularly when mortgage payments are compared to the cost of renting, home prices actually appear cheap.”

JP Morgan

“JPMorgan analysts said ‘the continuation of falling rental vacancies and rising rental demand will make home buying increasingly attractive’, especially as rental prices increase.”

Business School professors Eli Beracha and Ken H. Johnson

“Fundamental drivers now appear to be in place that favor homeownership over renting in the near term future…
The second finding might seem unwise to many given the recent crash in the real estate markets around the country. However, rent-to-price ratios now seem to be in place along with other fundamental drivers that favor ownership over renting…
Conditions (historically low mortgage rates and relatively low rent-to-price ratios) now seem in place to favor future purchases.”

Bottom Line 

Is it better to rent or buy? According to those quoted above, it seems it may be becoming a no-brainer.


Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!
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Investors to Dominate Market for Next 2 Years



Investors are expected to outnumber traditional home buyers three to one in the next two years, according to a national survey by Move Inc.

These investors also are ready to compete with traditional first-time home buyers to snag the best deals. About two-thirds of investors say they expect the problems that first-time buyers are having with financing and getting mortgages will work in their favor in competing for properties. One in five investors say they plan to purchase properties using cash-only and 80.5 percent expect cash discounts on properties from sellers.

Some additional findings from the Move Investor survey about this growing segment of home buyers are:

--43.5 percent of investors expect it to get more difficult to find housing bargains in the coming months. Twenty-two percent expect prices to rise in the next six to 12 months, while 53 percent expect prices to stay relatively flat.

--Half of the real estate investors surveyed say they plan to hold their properties for five years or more. Only 11 percent expect to sell within 12 months of buying it.

--Nearly half of the investors surveyed expect a profit of 20 percent or more from their investment, 40 percent expect a profit of 10 percent, and 6.5 percent expect a 5 percent or less return on investment.

--Nearly half of investors say they plan to live in their investment property until it's sold or turned into a rental property.

--About 56 percent of investors plan to turn their investments into rental properties. Also, the survey found that 28 percent plan to purchase a vacation property and 30 percent reported an interest in buying retirement property as an investment.

--Nearly 60 percent of investors say they're new to real estate investing. About 33 percent are considering their first investment purchase and 8.5 percent are in the process of buying and selling their first investment property. Of those surveyed, only 36.5 percent had experience in more than one property transaction.  

"This data suggests today's climate is hot for investing and is attracting a lot of new people that don't fit the stereotypical deal-driven flippers that buy and sell properties quickly," says Steve Berkowitz, Move Inc. chief executive officer. "They're mostly entrepreneurial individuals that will make vital contributions to local communities by investing their own money and sweat equity to improve and maintain properties. These personal sacrifices made over the long run will help improve housing stocks, home values, property tax bases, and thousands of local communities."

Source: “New Survey Shows Local Real Estate Markets Heat Up With Investors,” Move.com (May 26, 2011)



Joe Naccarato, Broker, Realtor
Top Performer Award Recipient 
Allen Tate Realtors
Tel. 704.953.0183
Do you know someone buying or selling anywhere? I can help them! Please give them my phone number!
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