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Rent Vs Buy Today

Posted by Howard Bell on December 29, 2010 at 2:10pm

NAR Existing Home Sales

Existing home sales which are completed transactions that include single-family, townhomes, condominiums and co-ops, rose 5.6% to a seasonally adjusted annual rate of 4.68 million in November, but are 27.9% below the cyclical peak of 6.49 million in November 2009, which was the initial deadline for the first-time buyer tax credit. Median existing single-family home prices rose year-over-year in 77 of 155 metropolitan areas and fell in 76 metro areas.

NAR Pending Sales

A forward-looking indicator, rose 10.4% based on contracts signed in October from in September. The index remains 20.5% below a surge to a cyclical peak in October 2009, which was the highest level since May 2006.

Rent Vs Buy

The argument for affordability has a few key components. Price, cost of money and a comparison to a similar property rental.

Price
Home prices are running about 22% less than five years ago. Its hard to know when price has reached a point where willing buyers step up, but pending sales clearly point to a slowing trend. The Commerce Dept. report showed that new home sales rose 5.5 percent to an annual rate of 290,000 in November from the revised October rate of 275,000.

Price will continue to decline and increase affordability. There are some that think a double dip is in progress and we will see continuede price declines through 2011 or 2012.

Cost of Money
Lower tax rates just extended for another two years may boost growth. Mortgage rates responded by increasing to a six month high with rates up more than half a point in just the past month. NAR President Vicki Golder, points out: A decade ago, mortgage rates were almost double what they are today, and they’re about 1.5% lower than the peak of the housing boom....So still historically low.

Rates remain low and are still well below where they began the year. Low mortgage rates are an important factor affordability, which in October was the highest on record

Rent Comps
Rents increased for the second quarter in a row. Asking and effective rents increased by 0.5% and 0.6% respectively in the third quarter and vacancy rates dropped from 7.8% to 7.1% nationally.To summarize, price is dropping but cost of money is rising and so are rents. Most areas havent reached a balance between the cost of renting and the cost of buyi ng, probably the main arguement for home prices continuing to descend to meet a willing buyer.

Rule of thumb: Homes are probably fairly valued at about 15 times a year's rent. So, for example, if you're paying $15,000 a year to rent a place, think twice about buying a home that costs more than $225,000. Fifteen times is the historic average.

Your home is not a growth stock. You should look to justify multiples higher than 15 to 20 by considering personal needs, proximity to schools and transportation, your own cash flow situation and job security.

It would also be advisable to get a sense of what the property would likely rent for and see how far that rent would go towards paying the mortgage should you have to move. Home sales are slowing and if you find yourself a reluctant landlord, be sure you can carry the mortgage.

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Why Is A Palo Alto Escrow Like a Teen Romance?

Posted by Marcy Moyer on November 23, 2010 at 11:00am

The beginning of a Palo Alto escrow is like the beginning of a teenage romance, everything is perfect. You have found your soul mate and all promises are meant to be kept. You never dream that your heart will ever be broken. It doesn't matter that one party is a jock and the other an intellectual, one is a Democrat and one a Republican, or one likes to party and the other is a vegan. And then reality sets in. I don't think I have to go into gory detail. Well, sometimes an escrow is like that but hopefully your escrow will have a better track record than a teenage romance.

One way to help things along is to not set yourself up for failure. If you are a buyer or buyer's agent do not expect to get a loan approval in 15 days if you do not have every document into the lender ahead of time. If you are a seller or seller's agent and accepted an FHA loan do not try to make the buyer get approval in 15 days. If the seller does not get inspections ahead of time do not tell the buyer they have 7 days for property contingencies and then start yelling because the property inspector says there is something wrong with the foundation and they need more time for an engineer to look at it.

Bottom line, do not set yourself up for failure by blowing a gasket over unrealistic time frames. Try to make them realistic to begin with so that the parties can succeed rather than fail.

Marcy Moyer

Keller Williams Realty

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

A Thank-you Goes a Long Way in a Sunnyvale REO

Posted by Marcy Moyer on November 20, 2010 at 4:26pm

It is not easy to close a transaction, and an REO is no exception. In my area we do not have a lot of bank owned properties for sale. Even in 2009, when San Jose had a good number, the northern part of Santa Clara County had very few foreclosed homes as a percentage of listings, and newer, nice homes were even harder to find. In 2010 the REO inventory has been few and far between, so when a 4 year old home in the western part of Sunnyvale came on the market I had a buyer who jumped on it right away, and managed to get his offer accepted in a multiple offer situation. The home was foreclosed by Chase, and they wanted a pre-approval from Chase, so the listing agent told everyone to go through Long Nguyen, a very nice and competent loan officer from Willow Glen. My client was very impressed with Long, and decided to use him to get the loan for the property, not just for the pre-approval. Well, nothing was particularly easy. The appraiser took 14 days to submit her report, and on a 17 day contingency that does not work out too well. The underwriter also declared the property a second home instead of a primary residence, so that took time to fix. Last week it was apparent that not only would we not meet the contingency removal deadline, but the closing date was also not going to be possible. Long tried to pull strings and got his wrist slapped, but kept persevering. My client was a little perplexed about how innefficient everything was, but did not blow a gasket. In the middle of a bad conversation about things not going right I stopped and thanked Long for doing so a great job and working so hard for us. He acted as if I had just handed him a million dollars. I guess a thank-you goes a long way, especially in these tense times.

The great news is that loan docs were finally drawn, my client signed today, and hopefully we close by Wed, only 2 days late. Chase gets their money and a new loan, my buyer gets a 4 year new home with great schools and only a little cosmetic damage, Long, the listing agent and I get our commission, and no one was yelled at, belittled, or made to feel like they were not wroking as hard as possible. It really makes for a more pleasant transaction if you just say a few thank-yous.

Brian's Fabulous Fall Home Maintenance List - On Bizarro World

Posted by Brian Roth on October 1, 2010 at 1:30am

It's fall here on earth and time to get the house ready for winter. For some of us the house needs to be ready for cold,and for others maybe only for cool-er or wetter ... Fortunately for us, it is spring on Bizarro World.You remember Bizarro World? From the Superman comics? On Bizarro World,the cubed planet Htrae (Earth backwards), everything is opposite or backwards of what it would be on earth. The people are grossly ugly, they try to break things, lose money in investments, wash with dry dirt - well you get it. And everything they do is considered the right thing to do.

Since it is spring, Bizarro Worlders are trying disrepair their houses in time for the cold weather. I publish their list, perhaps forthe first time in history:

CO Monitor - break the test button so it can never be pushed.
Pests - why bother? Let them run free.
Moss on the roof - perfect! Leave it alone.
Gutters and downspouts - keep them clogged!
Boilers - an unsafe safety-relief valve not tested is the best relief valve.
Furnace - never, ever oil anything.
What's an HVAC filter? Don't even check for one.
Caulk nothing, leave gaps, don't eliminate mold or muck.
Smoke detector - why have them anyway? But break that button too.
TPR valves - testing is always a bad thing.
Hose bib - leave on full power at the indoor valve so it freezes.
Water heater - it is illegal to hook up a hose and drain a little out.
Toilet - hopefully it rocks on the floor so badly it can't be tightened.
Septic system - it should be years and years of never pumping it out.
Private water system - never add pressure to the blue tank.
Smoke detector battery - remove now! Don't replace!
Foundation - slope toward the house and don't extend downspouts.
Wood-burning chimneys - let the creosote build. And build.
Kitchen inspection - grease should get thick on everything.
Refrigerator - sweep dirt under it and never vacuum the coils.
Garage door - should it work at all? Never oil anything.
Disposal - bones clean it really well. Baking soda and vinegar don't.
Fire extinguisher - don't bother checking the pressure dial!
GFI's - those buttons should be stuck and don't do anything anyway.

Well, what do you think of the list? Enjoy! Hopefully it helps. Read it carefully! Keep it in your pocket and pull it out as you walk around the house. It should come in handy. And, as to lists, we all use them and we all need them. And remember, old Preservation Contractors and home inspectors never die. The just grow listless...

Hope You Enjoyed

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Is That Property Covered Under Your Insurance

Posted by Brian Roth on September 28, 2010 at 1:30am

"Having an unoccupied home can create several insurance implications that typically are not covered under a standard homeowners policy."

Homeowner policies are meant to insure homes that are occupied, so theygenerally include exclusions for neglect or property abandonment on a home left vacant or unoccupied for a specified number of consecutive days.

In insurance terms, a vacant home is one the resident has moved out of and taken his/her belongings with him/her. An unoccupied home is one where the resident is not staying at the home, but the furniture and
other belongings remain.

Because vacant and unoccupied homes pose a higher risk for damage than occupied homes, insurance companies insure these properties differently and usually at a higher price.

These risks include break-ins, no emergency response and property liability. When a home has been unoccupied for awhile, it can show signs that nobody is around—unkempt lawn, full mailbox, no lights on tipping off burglars to an easy target.

Without anyone home to call 911 or respond to emergencies, a manageable problem—such as a small electrical fire—can turn into a much larger,more costly disaster.

There is no one present to preventothers from entering the property or to supervise activity, which could
increase the likeliness of an accident on the premises or property damage when the owner is not there.

The definition of vacancy and unoccupancy can vary from policy to policy. Some insurers may not pay claims if a home is vacant for 60 days or more. Some policies might automatically shift to a different amount of coverage
(e.g., liability insurance only) after a specific number of days unoccupied.

Many policies have a "vacancy clause" that can be triggered if the homeowner is gone for an extended period of time. If this happens, the homeowner could violate the terms of their contract and some or all of their coverage may not apply in the event of a loss.

"Before you decide to leave a home vacant or unoccupied for a long period of time, talk to your insurance agent or company to learn how they define vacancy and unoccupancy, and whether the company will pay claims if a house is unoccupied.

"Be honest about your situation, because while an extra policy might cost more, it could save you money down the road should there be an accident or damage to the home."

Many insurance companies offeran endorsement that will provide coverage for a dwelling that is unoccupied for an extended period of time. Vacancy policies can also be purchased for different term lengths to cover a few months to a year, depending on the need.

The cost of vacancy coverage depends onthe company and state in which the property is located, but costs
usually are higher than a typical homeowners policy due to the overall increase in risk.

FHA Reforms Shift The Game

Posted by Howard Bell on September 19, 2010 at 12:10pm

The coming FHA reforms will help stabilize FHA's financial viability. FHA will be allowed to raise premiums. The cap on the maximum annual FHA insurance premium increases from 0.5% to 1.5% and for loans with high loan To Value ratios, 0.55% to 1.55%. But the real importance is how the reforms will shift liquidity to rental property.

Multi Family
The bill also increases FHA's multifamily loan limits for elevator buildings and buildings in high cost areas, helping lenders finance the construction and rehab of rental housing.

Sales volume is up, debt and equity financing are more available and indexes for both sales volume and equity financing registered all-time highs. Apartment market conditions continue to improve across the spectrum said NMHC Chief Economist Mark Obrinsky.

The Politics Of Housing Shifts
Multi Family is a winner

Liquidity provided by Fannie and Freddie has enabled the apartment industry to build and maintain millions of units, including an overwhelming number of market-rate apartment properties needing no federal subsidies. With the Govt needing to repair its balance sheet, this is the better asset to back.

Rental Markets
Mark Zandi, chief economist at Moody's Analytics adds not everyone can or should have a single-family home. After the single family home market collapsed, many began looking at a major distortion in the markets...government support in the housing market is disproportionately larger for homeownership than rental units.

The Congressional Budget Office reported, the government in 2009, devoted nearly four times as much to support homeownership.$230 billion for homes and about $60 billion for multi family property.

Money always finds a home and opportunity follows. Given limited Government dollars, it stands to reason, going forward that liquidity and sales will shift to the rental property arena at the expense of single family homes.

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The Stock Market Looks At Real Estate

Posted by Howard Bell on August 25, 2010 at 1:39pm

Well, we all have heard the bad news, housing sales down again, hugely - 23% in the quarter. NAR reports that sales are at their lowest since the sales series launched in 1999, and single family sales are at the lowest level since May of 1995. And it doesnt look much better in the near term either. Pending sales, a forward indicator of market activity, dropped 30% based on contracts signed on May and is almost 16% the May 09 numbers.

These reports are always about today. The stock market, however, is considered a discount mechanism. It trys to look into the future...to look past a problem and try to determine value and opportunity. So I wanted to see what the stock market had to say about these dismal numbers.

Heres What the Stock Market Says About Real Estate

Its all About What You Focus On.

Its not without its losers, but the sector rallied on this news! In fact demand for homes sold has been relatively strong given real market conditions. see chart Even in the face of foreclosures, underwater borrowers and unemployment and the future of Fannie Mae and Freddie Mac. Why?

Affordability
Stock market investors are looking at whats next and they see affordability. Home prices have declined to levels beginning to look affordable. Certainly painful for millions, but its how markets cycle. When prices get silly, they have to rationalize before an intelligent buyer will enter.

Supply
The builders have not been putting up much new stock for quite a while and today I noticed the builder stocks were up. Lennar did a deal worth 3 billion with the FDIC to buy bank loans and Toll Brothers swings to profit today. All of this in spite of a huge inventory overhang, perhaps the largest on record. see chart

Cheap Money
The cost of many is also very low and part of the affordability issue. Average rates on 30-year fixed-rate mortgages are hovering around 5%.

Demographics
Investors are hoping demographics and population growth can also take up the slack.

Why the S&P Real Estate REIT index is up from a one year low of $73.85 to over $105 today. We have more to work through and the near and mid term are rocky but the economy is still expected to recover and homes still sell.

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Do You Want to Buy a New Car?

Posted by Marcy Moyer on July 16, 2010 at 1:30pm

OR: What Hurts More, A Short Sale or One Where There's Still Equity But You Have Lost A Lot

This morning my husband opened up an envelope with information about his stock options. He looked at me and said, “Do you want to buy a new car?”

My answer was of “Of course not.” He then explained we'd just lost $50,000 in value from his stock options.

My response? “Don’t be so greedy.”

We are both working, our mortgages are almost paid off on the house and rental properties, and the stock options are like dessert, nice but not essential. However, it was painful to him to lose that much money on paper.

It made me think of my latest clients. Some have lost all equity and if they have to sell it will be a short sale. By the time they get to me it is gone, and they do not seem to be concerned about the price as much as the process. Others who are losing equity when they sell seem to fall into 2 categories: those who are grateful to be able to sell and those who are fighting for every penny and do not seem to see the value in taking an offer to make a sale if it means losing a little more money.

If you are a buyer then your life will be much easier if you can find one of the former sellers. If you are working with a seller who is emotionally invested in every penny they are losing it will be a much more difficult sale.

If you are a seller it is important to clearly understand your goals when putting a home on the market. If you only want to sell at your price, then if your price is market value, you may get it. But if your price is above market, it won’t sell. Period.

The most difficult part once you understand your financial choices is overcoming the emotional ties to a particular number. If you want 1.5 million and you only get 1.4 million and life can go on, can you let go of your emotional attachment to to 1.5? If not, this may not be the best time for you to sell.

It is no different if you want 400K and you can only get 380K. If your life can go on with a lower price and you need to sell, you may have to eat the emotions. If you are just testing the market, don’t bother. In this environment you will fail. If you focus on your need and not your want you will get to your goal of selling a house much quicker and easier.

Marcy Moyer

Keller Williams

www.marcymoyer.com

marcy@marcymoyer.com

650-619-9285

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Federal HomeBuyers Tax Credit Extensions

Posted by Howard Bell on June 30, 2010 at 2:45pm

The U.S. House has passed a bill giving home buyers an extra three months to complete their purchases and still qualify for a generous tax credit.The Senate is working to reach an agreement with Republicans to pass the House-passed homebuyer tax credit closing date extension early as today.

Although the case shiller index came in suggesting a fragile recovery is waning, it didnt include the sales figures representing market behavior after the end of the homebuyers tax credit. It got worse. Home sales fell more than 30% since the expectation of the end of the homebuyers tax credit. No doubt this didnt go unnoticed in Congress.

Its clear that the Case Shiller numbers indicated a real estate market that was having trouble holding ground in the face of the end Govt support of real estate markets, that the stimulus was necessary and effective.

The 20-city index

15 out of 20 cities showed month over month declines, though the overall index increased 0.3, showing a 5% comeback in April 09. When the Obama Administration said it would pull support on housing markets, it did caution us that if necessary, they would return.

Real estate markets suffer from serious supply and demand problems. The foreclosure and the shadow market present a huge inventory overhang. And 30% decline screams loudly that we still need support. If the stimulus program gave us a market that moved and soaked up inventory, then its pretty clear that that normal market forces are still not able to float this boat.The pending stimulus extension wont cure the markets ills, but it created sales and that will go a long way towards preventing a double dip.

There are those who are opposed to market supports. That are afraid we are moving more and more towards a managed economy and want the chips to fall where they may. Thats the American way. Others argue that the markets or Capitalism was not the issue, its just that financial engineering and technology got ahead of the regulators and that all we need to do is regulate better. Personally, all that matters is that we dont look that rabbit hole in the face again. Let the chips fall where they may smacks of chaos and regulation may be necessary, but its slow and we all know its the regulators that influence and create the rules anyway. And so to my mind. if all it takes is $8000 a pop, to soak up supply and get out of this morass, one house at a time...then so be it. Pass that bill!

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Posted by Howard Bell on June 1, 2010 at 4:23pm

Existing-home sales, which are completed transactions that include single-family, townhomes, condominiums and co-ops, increased 7.6 percent to a seasonally adjusted annual rate of 5.77 million units in April from an upwardly revised 5.36 million in March, and are 22.8 percent higher than the 4.70 million-unit pace in April 2009. Monthly sales rose 7.0 percent in March.

The upswing in April existing-home sales was expected because of the tax credit inducement, and no doubt there will be some temporary fallback in the months immediately after it expires, but other factors also are supporting the market,” the chief economist for NAR, Lawrence Yun said. “For people who were on the sidelines, there’s been a return of buyer confidence with stabilizing home prices, an improving economy and mortgage interest rates that remain historically low.”

According to Freddie Mac, the national average commitment rate for a 30-year, conventional, fixed-rate mortgage rose to 5.10 percent in April from 4.97 percent in March; the rate was 4.91 percent in April 2009.

Total housing inventory at the end of April rose 11.5 percent to 4.04 million existing homes available for sale, which represents an 8.4-month supply2 at the current sales pace, up from an 8.1-month supply in March. Raw unsold inventory is 2.7 percent above a year ago, but remains 11.6 percent below the record of 4.58 million in July 2008. see chart

Regions

1. Northeast: Existing-home sales surged 21.1% and are 41.6% higher than a year ago.
2. Midwest: Existing-home sales rose 9.9% and are 29.1% above a year ago
3. The South: Existing-home sales increased 8.6%
4. The West: Existing-home sales fell 6.2% are 5.2 percent above a year ago.

In Stock Markets
Volume Precedes Price
This simply means that volume will indicate the end of an uptrend or a downtrend before the price changes indicate it. In the real estate markets price will not begin to firm until volume begins to decline. If this holds true the NAR study indicating increasing sales volume and continued price drops may be the early beginnings of a market bottom. The change in trend will begin in earnest when volume shrinks, until then we can expect prices to decline

Bouncing Along The Bottom
Whats it feel like

Well a lot like this. Its a place where asset price action is no longer declining as a long term trend. Price seems to go up and then back down. It simply means that not all the bad news is out of the markets and that healthier signs appear and are then clouded by another set of negative circumstances.

For example the EU crises precipitated by Greece caused money to flow out of the EU. This caused rates to drop in the US. It also raised the value of the dollar, making our exports more expensive to Europeans. Since four of our top ten trading partners are in Europe this is likely to impact job growth. So, cheaper mortgages might incentivize some people, but job uncertainty might disincentivize other people....not all the bad news has washed out.

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Case Shiller Price Observations

Posted by Howard Bell on May 28, 2010 at 3:41pm

The recent Case Shiller report shows price declines in front of the tax credit completion...The index gives us a slight 0.38% decline in the top ten market composite. Year over year the index is up 3.15% when compared to March 09. Recent strong price moves will come to a serious halt because the tax stimulus is behind us. The silver lining in this is that it proves demand is there, just waiting for the right price and for some of this historic uncertainty to settle. This chart Via Redfin shows the 2009 price spike . Price momentum is quite impressive and the recent downturn looks reasonable for at least San Francisco, San Diego LA, Washington and Boston.

These low rates will help to elevate home-buyer affordability and soften the effects of the sunset of the home-buyer tax credit,” said Frank Nothaft, Freddie Mac vice president and chief economist.

Beware the inventory surge
In our immediate future is a large wave of potential foreclosures as banks begin to off load inventory they have been holding back. Home owners also are placing their homes for sale at hefty pace. Many waiting for better times before listing are now beginning to do so. The supply surge increase the likelihood that will continue to see price declines as sales volume continues to increase. Most experts still agree that we are bouncing along the bottom, meaning we are no longer in a steep decline and that will have to do as the definition of price stabilization.

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Housing: Where Are We Now

Posted by Howard Bell on May 26, 2010 at 5:37pm

With house prices expected to slid and unemployment to rise substantially further, this third foreclosure wave will grow larger. If house prices fallanother 10% over the coming year,as Moody’s Economy.com currently forecasts, an estimated 18.6 million homeowners could be underwater.

More to Come
Even if the economy stabilizes in 2010 as expected, defaults will remain elevated long afterward. More large payment resets are due to hit so-called option ARMs. Most of these mortgages were designed on the 5-25 plan: five years of fixed payments and rates pegged to Libor after that. All the option ARMs issued at the peak of the housing bubble in 2005 and 2006 will thus reset for the first time in 2010 and 2011.

Case Shiller
Prices of single-family homes fell 0.5 percent from February, which is the sixth month-on-month drop, seems prices should have spiked from record low mortgage rates. Unless the crises in Europe remains huge, mortgage rates which are benefiting from a flight from the Euro, will rise sooner trather than later. This is a window of low cost money for buyers and refiers. Its a sale! And if this isnt causing a spike in prices then inventory and psychology and persistently the villains. Now that the tax incentives have ended, there seems to be no reason to expect prices to rise in 2010.

Moodys
Foreclosures are going to have a fairly negative impact on the housing market through the beginning of next year," she predicts, adding that housing prices could drop another 5 percent between now and the end of the year.

NAR
NAR says that total housing inventory soared 11.5 percent at the end of April from a month earlier. This means that it would take 8.4 months to sell all the properties, if sales continue at the current pace. High inventories are likely to prevent big price gains over the next year or two.

Long Term
the upside is in view.
The long-term recovery seems to be in place. see Moodys chart National prices were up 2.3 percent from last year. Some cities are sloging through their foreclosure mess, San Diego and San Francisco, up 1.5 percent each reduced their share of foreclosure inventory.

U.S. sales of new homes jumped nearly 15% in April to the highest level since May 2008 as homebuyers rushed to meet the deadline to qualify for tax credits. Sales jumped 14.8% in April to a seasonally adjusted annual rate of 504,000, the Commerce Department reported Wednesday. This follows an almost 30% gain in March. Everyone expects these numbers to crash next month, the tax incentives are gone. Mortgage Bankers Association already reports that reported that purchase applications plummeted. But it does point to a lot of buyer appetite out there.

Mark Zandi, Chief Economist for moodyseconomy.com says that this is the time to buy, even though prices may continue to drop. Now, Zandi says, is best time to buy in a quarter-century, thanks to low mortgage rates, low prices and a recovery in place.

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Rent Vs Buy Today

Posted by Howard Bell on May 2, 2010 at 10:40am

Mind The Gap

Marcus & Millichap just completed a study and found the gap between monthly rents and mortgage payments are at their lowest level in 20 years. Years of declining prices and mortgage rates have created a buyer's market. In 45 metro areas studied, Marcus & Millichap found the
difference between mortgage payment on a median-priced home and the rental option is down to $256. The smallest gap since 1993 as price to rent ratios come down to their historical mean, except in the priciest markets.

Rent Vs Buy Comparisons
The Real Deal

The rent vs. buy comparison is a lot like any financial planning, the outcome is a guess on the future direction of rents, equity growth and carrying costs. In other words, predicting multiple variables in an uncertain future. A rent or buy comparison can never secure the best financial move, but it can point the buyer to how future equity increases and cost cap assumptions work in tandem to cover the costs of owning: including the down payment, property taxes, insurance and maintenance.

The Rule Of Twenty
A simple way to look at the rent ratio is to take the purchase price and divide by the annual cost of renting a similar property. 20 is considered a useful rule of thumb. If you do the math, a ratio above 20 means you should at least consider renting. When the ratio is well below 20, the case for buying becomes a lot stronger. Of course, these are simplified tools to help you make a decision. you should never use the online buy Vs rent calculators to rest your decision on. Best to use them to understand what cost parameters and equity assumptions you need to make it work. Think of these financial variables as levers and toggle them to tease out an understanding of how your assumptions work impact the purchase decision.

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Posted by Howard Bell on April 28, 2010 at 9:36am

We Have One, But It Wont Feel Like it

Case-Shiller released their index of home prices in 20 cities and it rose 0.6 percent in February over last year. Existing home prices advanced 0.4%, as sales climbed for the first time in four months.

We’ve turned a corner with housing," said economist Karl Case, who with Robert Shiller created the index. "As long as mortgage rates don’t jump and employment continues to improve, we should see housing play a key role in preventing a double-dip recession. Via Seeking Alpha

Monetary Policy; The Fed kept monetary placed a hold stating that conditions requiring low rates were likely to remain for an extended period.

Inflation: The economy is in a sweet spot with solid growth and inflation is low. Why the Fed is keeping rates low, to put behind us several quarters of growth and stimulate job growth and consumer confidence.

Counter Trends

Jobs: The economy will still have to expand at a decent rate for several more quarters before we get decent job growth

Defaults: 13.6 million homeowners have no equity or negative equity and therefore have little incentive to continue to pay high monthly mortgage debt.

Steep Losses: It will take quite a while to dig out. Note: The chart above compares this very steep decline with the last bust in the 1990's. See chart courtesy of papereconomy.com

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Once in a Generation Opportunity!

Posted by Jan Baron, RDCPro, CSP, BPOR on April 12, 2010 at 4:18pm

This month only, California only, first time buyers can receive an$18,000 tax credit if they make an offer on a home and it is acceptedbefore April 30, 2010. The federal tax credit of $8,000 is set toexpire April 30, 2010. The California tax credit just began and will bein effect until July 31, 2011. So, for this month only, first timebuyers can benefit from an $18,000 combined credit.

I get asked bybuyers.."will they extend it?" The word I hear from D.C. is that theFeds are NOT going to offer the tax credit again because it didn'tencourage home buying by much.

In California, however it wasvery successful last year and funds alloted ran out quickly. It was sosuccessful that California is offering it again. For this small windowof opportunity, wouldn't it be great to take advantage of BOTH thesecredits, low interest rates, and low priced homes??

And, it's notjust for first time buyers. Current homeowners qualify for $16,500 incombined tax credits and they don't need to sell their current home!But for this month only.

The clock is ticking.....

Case Shiller in Context

Posted by Howard Bell on April 11, 2010 at 9:46am

Prices are now up almost 4 percent from the bottom in May 2009, but off 30 percent from May 2006, largely considered the peak of the housing boom. The 20-city index was off just 0.7 percent from this time last year. The smallest decline in almost three years.

Case Shiller index tells us we are in a bottoming process, where prices will continue to stabilize and attract buyers. However the paper economy chart, comparing the 1990s housing bust to the present makes two points vividly. First, the size of this decline and second, the 1990s bust took eight years to return to normalcy, measured from peak to peak

Fed says goodby to MBS
Interest Rates Going Up
The Fed has been the lender of last resort, buying up paper nobody wanted, providing liquidity to mortgage-backed securities and keeping the whole thing afloat. However, the Fed declares this a self sustaining recovery and financial markets stable and profitable. Private investors, willing to purchase government backed mortgages will requrie higher rates. Its not clear to anyone how much of this mortgage backed debt is viable. Investors will require higher rates for mortgage backed securities to look attractive. Mortgage Bankers association predicts 6% rate years and NAR looks to 6.5% in 2011

Fed says Goodby To Tax Credit
Sales Driver

The homebuyer tax credit that gives first time home buyers up to an $8000 tax credit and repeat buyers up to $6500 is set to expire the end of April. You must be under contract by April 30th and close by June 30th to qualify. In the short term the homebuyer tax credit and spring markets are bringing buyers to the table. MBA Purchase Applications index rose 6.8% for the week, confirming solid activity.

Fed Says Hello Sustainable Recovery

The economy remains in a transitional phase from a period that depended on support of public sector programs to a period of resumed growth based on private spending, aqccording to Dennis Lockhart President of the Atlanta Fed President. Read we are off the lifeline and looking to the markets to gradually act more normally.

We created jobs! First time in two years, True a total of 160,000 jobs (including temp jobs) is a far cry from the 8 million we have lost, but its solid proof that we are on the right road.

Rising home prices also could boost consumer optimism. with the tax credit program ending we will likley see lower home prices and higher sales volumn. Prices are reaching equilibrium in some parts of the country, according to moodys.com. Looking at the 1990s-era comparison, even after prices stabilized, housing had a long slog ahead. Our economy is driven by consumer spending, so high unemployment means less consumer spending.

Home prices and sales volume will be held hostage to the economic recovery and will begin in earnest when job creation does so. On a positive note, with big headwinds in front, we are at the beginning of a long term healing process.

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Green Home Trends: 2010

Posted by Howard Bell on February 16, 2010 at 4:34pm

The key to mainstreaming green homes is to make sure that consumers understand the value of green upgrades — how cost-effective energy efficiency can be in the long run. Consumers want homes that are environmentally friendly and home values should reflect the increased savings.

Better Homes and Gardens

Recent poll results of 2,342 people who plan to purchase or do a major home improvement in 2010 show (numbers have been rounded):

2% of consumers are planning to have high-efficiency heating and cooling in their next home
3% are planning to have high-efficiency appliances
3% will have geo-thermal heat
5% said energy-efficient heating and cooling will be more important to them
6% said Energy Star appliances will be more important

Appraising Green

Appraisals need to better reflect the value added to energy efficient green upgrades. Legislation is pending which will require the consideration of any renewable energy sources, or energy-efficiency or energy-conserving improvements. Appraisers will tell you they have been considering green improvements for 15 years, typically, double paned windows, insulation and solar hot water heaters. The value normally attributed is the installation cost. But that is just the beginning of the direct savings to the new owner. The ongoing savings of operating a greener home is not being reflected in the appraisal and yet it can be significant when compared to a home that isn’t energy efficient.

To reflect true value buyers need to recognize the increase savings when comparing homes. Appraisers will tell you that when the energy cost savings can be documented, home buyers are more willing to pay a premium. They understand the lower monthly cost of ownership and better resale value.

Green Marketing Incentives

Most state energy and public utilities offer incentives, rebates and tax breaks for energy efficient upgrades. Realtors should suggest that sellers take advantage of these incentives. Consumers clearly want greener homes and agencies offering rebates can document the projected savings. This can be a powerful sales incentive in a market where value
is king.

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What will 2010 Bring for Portland Oregon?

Posted by Vaughn Parry on January 14, 2010 at 5:00am

Okay kid’s here’s the skinny. 2010 What will it bring? If you are looking to make a move in Real Estate in the Portland Metro Market you are probably in what I would consider your perfect window. Price’s are going to continue to creep down as Seller’s compete against REO and Short Sales for Buyer’s.Interest Rates today are amazing. Under 5%, with good credit! Rates are probably as low as they are going to get because it wouldn’t be profitable to the lender’s to go any cheaper. Looking around I see the price of gas going up and we should be at $3 a gallon shortly. To me, that says inflation. Inflation says to the FED that they need to raise the Prime Rate in order to control it. It’s not their only tool but at some point lending at 1/4 % will end. Now, this is something that they do not want to do, but at some point in 2010 they will have to. Once this occurs and your rates go up, the buying power that is available today will decrease. There’s really only one reaction that can occur; prices will get pushed down again.I know that no one wants to hear that housing values are going to continue to fall, but unless people get pay raises in conjunction with the upcoming interest rate increases, the Buyer’s buying power will decrease. For example; if you can afford a $1,500 mortgage PITI, and the rates go up, you can’t afford more you just have to buy a cheaper house. For example at 5% interest $10,000 borrowed will cost you approximately 5.02. If interest rates are at 6% and now that $10,000 cost you $6.27. You still make what you make so your buying power is weakened. If you’re a Seller and the Buyer’s have been pushed out of your price range what are you going to do? Lower the price down to where the Buyer’s can again afford your home. So, I think that prices will continue to get pushed down some more. I just don’t see a different solution, but nothing would please me more than to be wrong.I’ve said a mouthful let's get some feedback and help us all have a better 2010. How hard could that be? ;0P

Housings Weak Recovery: Lets Follow The Money

Posted by Howard Bell on January 6, 2010 at 5:09pm

Quarterly reports are out. NAR, Case Shiller, Consumer Confidence reports all indicate that the housing recovery is faltering to flat. Much of the Govt supports will be slowly exiting as the Fed tests the normal functions of an economy replace Federal aid.ResidentialCase Shiller and NAR reports show continued weakness and everyone is wondering whether the recovery is waning. Case Shiller notes that the rate of decline in home prices slowed in October from the previous month, and prices remain flat after the spring and summer gains. Home price Indices of its its 10-city and 20-city composite indices declined 6.4% and 7.3%, putting home prices at 2003 levels. A flat report is not as bad as much of the last two years, but some Govt programs are being phased out see chartNAR site points out that on a month-to -month basis,only seven of the 20 cities showed improvement. NARs data for November showed prices down 4.3% year-over-year. Foreclosures continue to be the problem, making up 30% of the third quarter’s home purchase.Moodys points out that there are 3 million more homes in the pipe and that another 3 million are 30-60 days late. These homes are in a foreclosure pattern. New Home Sales: The government reported that sales of new homes dropped a sharp 11.3 percent, an indication that supply is still greater than demand.ApartmentsThe apartment market is showing signs of improvement, according to the National Multi Housing Council’s latest Quarterly Survey of Apartment Market Conditions. Although the survey still indicates higher vacancies and lower rents, we see increased sales activity and greater availability of debt and equity capital compared with three months ago. Apartments have long been considered the better investment, partly because there is financing available and they didnt participate in the building boom of single family homesFollow The MoneyThe American Recovery and Investment Act of 2009Will pump more economic stimulus money into federally subsidized apartment units, while HUD’s budget proposal for next year seeks another $1.8 billion for construction of rental housing.GreenHUD and the U.S. Department of Energy are working together to offer more financial incentives for owners to retrofit properties for energy efficiency. Another economic stimulus plan enacted earlier this year provided funds for green retrofits. Larger property owners of commercial buildings including apartment complexes whereconservation of energy had the greatest impact. Hopefully, some of this money will trickle down to smaller owners.Fannie and FreddieCongress had placed a cap on spending of $200 billion dollars on each. On Christmas eve, Obama lifted the cap through 2012, giving the two quasi public institutions a blank check. I think this points very clearly to the next big wave of foreclosure that will stem from the Alt A and commercial mortgage recasts that will be coming due between now and 2012. A blank check (read big money problems) is whats next.The Stock MarketREITSThe Dow Jones Equity All REIT Total Return Index is up 31% this year, reversing a 38% decline in 2008, beating the S&P 500 by 25%. Given all the flat to downright ugly news still coming out it seems counter intuitive that real estate funds would be doing so well.They have been raising money issuing new shares and selling property whenever they can. In short, they have been raising money for whats expected to be a generational opportunity in good properties coming on the market at great prices. The ishares industrial/office and retail REITS are up 10.7% and 11.2% respectively in November/December alone. Even mortgage REITS are up 3.8% for the same period. Heres what they are looking at...Real Estate RubbleBloomberg reports that commercial property prices have fallen by 30 percent to 50 percent wiping out the equity in most debt financed real estate deals since 2005. This equals as much as 54 percent of the $1.4 trillion in loans that will come due in four years, according to Randall Zisler, chief executive officer of Zisler Capital Partners LLC (via Bloomberg News).Mr. Zisler goes on to say that much of the debt is likely worth about 50 percent of par. Many banks will end up insolvent as they reduce the value of their holdings, he wrote, adding that regional and community lenders are especially vulnerable.Stock markets are forward looking mechanisms and the REITS are looking passed the problem to great future buying opportunities. If the banks are holding so much bad paper, then it will be taxpayer money (those blank checks) and private investment money (REITs) likely final owners of all this real estate rubble. I know that investors will cherry pick and to drive hard deals to profit. I wonder if that leaves us, the taxpayers, to buy whats left.... Its all in the oversightThanks for Readingwww.yourpropertypath.comRelated ArticlesNAR: Existing Home Sales Report Should You Stop Paying Your Mortgage Stock Market Views On The Housing Recovery The Coming Mortgage Debt Reduction Programs

Underwater but not drowning!

Posted by Linda Landry on January 3, 2010 at 5:50am

Yes it is true. I am one of the homeowners underwater. I recently disclosed that to a friend and her reply was 'I won't tell anyone'. Nice gesture on her part but totally not necessary. Within the last week I was approached by a financal adviser who volunteered to review my docs on the premise that his company has been able to negotiate through the Courts and prove that the current lien holder was unable to provide a deed to coincide with the loan thereby allowing the mortgagor to obtain the property free and clear from the current mortgagee. Although he qualified his statement by saying he could not give me legal advice he suggested, as a friend, that I stop making payments toward the mortgage as being in the foreclosure process would add a sense of urgency to the Court. The written contract requires a minimum $1500 non refundable fee and a promise to expunge negative credit bureau reports if/when the suit is won as well as other stipulations too detailed to enumerate. My point is this: Yes, I am underwater but I am not drowning. I cannot in good faith arbitrarily stop making my house payment. Not only does it go against my personal grain; I do think that a Court would see that I was intentionally attempting to pull one off on the lender. Despite the fact that the lender may deserve it since I have been negotiating, to no avail, with them for more than a year to modify my loan to a fixed rate at minimum. However, this seemingly rampant rush to jump overboard seems to be exacerbating the current dilemma in the housing market. Yes, I am underwater but still able to row the boat. If I loose my oars I will need to rethink. For the time being I will continue my trek to shore and my a diligent effort not to become a statistic for foreclosure.Linda Landry, REALTOR ® Exit Realty 1st Choice Tucson, AZ

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The key to mainstreaming green homes is to make sure that consumers understand the value of green upgrades — how cost-effective energy efficiency can be in the long run. Consumers want homes that are environmentally friendly and home values should reflect the increased savings.

What will 2010 Bring for Portland Oregon?

Housings Weak Recovery: Lets Follow The Money

Underwater but not drowning!

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