Daily Real Estate News | April 26, 2011 | Share
Is This Really a Buyer's Market?
With falling home prices and higher inventories, most of the public views real estate as a “buyer’s market,” in which buyers hold more of the control and sellers will more eagerly accept lower offers just to sell.
Not so fast, say buyers and sellers. More buyers are finding the sellers in the driver’s seat.
Buyer Young Hammack gave up looking for homes for a while after being outbid on three properties in California. "It's a false buyer's market," Hammack says. "If you think prices are cheap, wait until you start putting offers in."
Many sellers may be unable or unwilling to lower their home prices — mostly because they may be underwater on their mortgage — so buyers are increasingly finding lower offers than list price denied. Buyers, on the other hand, may be reluctant to agree to a deal if they don’t feel like they are getting it at a deep discount, industry insiders say.
Traditional buyers also are finding even buying a foreclosure can be difficult as they’re increasingly outbid by investors who are willing to pay cash.
"There's a shortage of attractive inventory," says Glenn Kelman, chief executive of Redfin Corp. "Customers just keep getting outbid on the houses that they want."
Real estate professional Steve Capen with Keller Williams Realty in St. Petersburg, Fla., says that the homes most in demand among buyers often don’t require much repair work and are located in good school districts and choice neighborhoods near transit hubs.
"What's selling is the cream of the crop, and they sell fast," Capen says. "If it's not cream of the crop, it's getting hammered."
Source: “Buyers' Market? Stressed Sellers Say Not So Fast,” The Wall Street Journal online (April 25, 2011)
26 April 2011
22 April 2011
Foreclosures: Bringing Clarity to the Confusion
Headlines created by the numerous foreclosure reports often contradict each other. One headline announces foreclosures are rising while the next talks about the decrease in foreclosure numbers. This has led to tremendous confusion regarding the issue. Let’s bring some clarity to the data. There are five individual stages of the foreclosure process that are reported:
1.) 90+ Day Delinquencies
Once a homeowner falls three months behind on their payments, most financial institutions count them in their foreclosure numbers. Why? Less than 2% of those who fall that far behind ever catch up in their payments. The other 98% will end up as a distressed property (foreclosure or short sale). Homeowners in this category don’t always receive a foreclosure notice immediately. In some cases, homeowners who have not paid their mortgage in 12 months have not yet received a notice of foreclosure.
2.) Homes in the foreclosure process
These homes have received a formal notice which officially starts the foreclosure process. In different states, because of court procedures, it takes varying time frames to complete this process.
3.) Homes repossessed by the bank
These homes have finished the foreclosure process and are now owned by the bank. These homes are known as REOs (Real Estate Owned).
4.) REOs placed on the market
These are the REOs that banks bring to market. Many come to market quickly. Others must be refurbished before being put up for sale.
5.) REOs Sold
Obviously, these are the REOs that actually sell.
This seems very straight forward. Why is there so much confusion?
Here’s an example. Just a few weeks ago the major daily newspaper on Long Island, NY had a headline that announced delinquencies were up to over 10% of all homes. One-in-ten homes on Long Island were 90+ days delinquent. That was a major increase from the year before. Exactly seven days later, the same newspaper headlined a story that foreclosures on Long Island were down dramatically. That seems a contradiction. Though both headlines were accurate, they led to confusion.
Let’s dig a little deeper into the data. Yes, the percentage of homes being foreclosed on has decreased. Why? The court systems in NY are now taking almost a year to process a foreclosure. There are not less homes eligible for foreclosure. They are just caught in a slow moving pipeline. Likewise, there are not a growing number of delinquencies. These homes are just not working their way through the process. The delinquency numbers would be much lower if there wasn’t a logjam in the court systems.
Bottom Line
To truly understand the distressed property situation in your market and what impact it may have on prices, contact a local real estate professional. They should be able to simply and effectively explain with the use of strong visuals (charts & graphs) what is happening in your area and how it impacts you.
Foreclosures: Bringing Clarity to the Confusion
1.) 90+ Day Delinquencies
Once a homeowner falls three months behind on their payments, most financial institutions count them in their foreclosure numbers. Why? Less than 2% of those who fall that far behind ever catch up in their payments. The other 98% will end up as a distressed property (foreclosure or short sale). Homeowners in this category don’t always receive a foreclosure notice immediately. In some cases, homeowners who have not paid their mortgage in 12 months have not yet received a notice of foreclosure.
2.) Homes in the foreclosure process
These homes have received a formal notice which officially starts the foreclosure process. In different states, because of court procedures, it takes varying time frames to complete this process.
3.) Homes repossessed by the bank
These homes have finished the foreclosure process and are now owned by the bank. These homes are known as REOs (Real Estate Owned).
4.) REOs placed on the market
These are the REOs that banks bring to market. Many come to market quickly. Others must be refurbished before being put up for sale.
5.) REOs Sold
Obviously, these are the REOs that actually sell.
This seems very straight forward. Why is there so much confusion?
Here’s an example. Just a few weeks ago the major daily newspaper on Long Island, NY had a headline that announced delinquencies were up to over 10% of all homes. One-in-ten homes on Long Island were 90+ days delinquent. That was a major increase from the year before. Exactly seven days later, the same newspaper headlined a story that foreclosures on Long Island were down dramatically. That seems a contradiction. Though both headlines were accurate, they led to confusion.
Let’s dig a little deeper into the data. Yes, the percentage of homes being foreclosed on has decreased. Why? The court systems in NY are now taking almost a year to process a foreclosure. There are not less homes eligible for foreclosure. They are just caught in a slow moving pipeline. Likewise, there are not a growing number of delinquencies. These homes are just not working their way through the process. The delinquency numbers would be much lower if there wasn’t a logjam in the court systems.
Bottom Line
To truly understand the distressed property situation in your market and what impact it may have on prices, contact a local real estate professional. They should be able to simply and effectively explain with the use of strong visuals (charts & graphs) what is happening in your area and how it impacts you.
Foreclosures: Bringing Clarity to the Confusion
12 April 2011
4 Financial Reasons to Buy Now
4 Financial Reasons to Buy Now
by THE KCM CREW on APRIL 12, 2011 ·
As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.
Interest Rates Are Increasing
Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.
The 30-Year Mortgage May Disappear
There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?
QRM Requirements Could Be Much More Stringent
Here are proposed changes to the requirements for a ‘qualified residential mortgage’:
Certain mortgage types would be eliminated
You would need to put a minimum of 20% down
You would need a minimum 690 FICO score
The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)
There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).
Rents Are Expected to Increase
The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:
“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”
Bottom Line
You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.
4 Financial Reasons to Buy Now
by THE KCM CREW on APRIL 12, 2011 ·
As Dean Hartman said last week, the purchase of a home is a personal decision. However, we want to give everyone four great financial reasons why you should not wait before taking the plunge into homeownership.
Interest Rates Are Increasing
Interest rates have increased almost 3/4 of a point in the last six months. Most experts expect rates to continue to increase through the year. Interest rates along with price determine the overall cost of a home. Even with prices softening, if interest rates rise, it may be less expensive to buy now rather than wait.
The 30-Year Mortgage May Disappear
There has been much debate regarding government’s role in providing support for homeownership. There are several experts who believe If Fannie Mae and Freddie Mac’s roles are eliminated, or even limited, it may be the end to the 30-year mortgage. This concern is addressed in MSN Real Estate’s Is it curtains for the 30-year mortgage?
QRM Requirements Could Be Much More Stringent
Here are proposed changes to the requirements for a ‘qualified residential mortgage’:
Certain mortgage types would be eliminated
You would need to put a minimum of 20% down
You would need a minimum 690 FICO score
The ratios of income to both the mortgage payment and overall debt would become much more conservative (28% and 36%)
There would be loans available to purchasers who don’t qualify under the new rules. However, they will probably be more expensive to the buyer (both in rate and costs).
Rents Are Expected to Increase
The supply of available rentals is decreasing and the demand is increasing. That will lead to an increase in rental costs throughout the year. The Wall Street Journal this week quoted a report by Reis, Inc:
“Expect vacancies to continue declining, and rents rising through the rest of 2011 at an even faster pace.”
Bottom Line
You may be waiting on the sidelines to see if prices will continue to depreciate before you purchase a home. The mortgage expense is a major piece in the overall financial picture of homeownership. Make sure you consider it when timing your decision.
4 Financial Reasons to Buy Now
06 April 2011
05 April 2011
OK. You Win. Stop Listening to Real Estate Agents!
OK. You Win. Stop Listening to Real Estate Agents!
by THE KCM CREW on APRIL 5, 2011 ·
Each day we attempt to give truthful insight on the current housing market. If we report what is perceived as negative news, some in the real estate community come down on us hard. However, when we explain that we think now is a great time to buy, we get an avalanche of feedback from the general public attacking us for being nothing more than puppets for real estate agents across the country. Today, we don’t want you to listen to what we think about the opportunities that exist for buyers in this market. Instead, we want to report on what some members of the investment community are saying.
The Wall Street Journal
Jim Woods wrote an article earlier this year for Market Watch, part of the Wall Street Journal’s digital network. Its title: Why your best investment is a house. Mr. Woods compared the investment potential of real estate against other asset classes such as stocks and precious metals. Here was his conclusion.
One reason your best investment right now could be a home has to do with the relative upside of getting in on an asset class while it’s at the bottom versus buying into other asset classes that could be near a top. Consider for a moment the tremendous upside we’ve seen in stocks, precious metals and agricultural commodities over the past 12 months…
If you’re a long-term investor looking to put money to work, now is not really the best time to get into any of these three asset classes. However, with home sales starting to improve, and with prices now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today…
Mr. Woods went on to talk about the financing portion of the purchase:
Yes, mortgage rates still are near historical lows, but if we see these rates rise, then the cost of a new home could climb significantly. So, now could really be the best time to pull the trigger on that home purchase — and it could also be your best investment right now.
Fortune Magazine
Shawn Tully, senior editor at large for Fortune penned an article last week which was titled: Real estate: It’s time to buy again. In the article, Mr. Tully explained:
Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
Let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction … The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Bottom Line
Neither of the two media sources mentioned above has ever been accused of cuddling up to the National Association of Realtors. However, both have come to the same conclusion. It’s time to buy real estate. Perhaps we should listen to them.
by THE KCM CREW on APRIL 5, 2011 ·
Each day we attempt to give truthful insight on the current housing market. If we report what is perceived as negative news, some in the real estate community come down on us hard. However, when we explain that we think now is a great time to buy, we get an avalanche of feedback from the general public attacking us for being nothing more than puppets for real estate agents across the country. Today, we don’t want you to listen to what we think about the opportunities that exist for buyers in this market. Instead, we want to report on what some members of the investment community are saying.
The Wall Street Journal
Jim Woods wrote an article earlier this year for Market Watch, part of the Wall Street Journal’s digital network. Its title: Why your best investment is a house. Mr. Woods compared the investment potential of real estate against other asset classes such as stocks and precious metals. Here was his conclusion.
One reason your best investment right now could be a home has to do with the relative upside of getting in on an asset class while it’s at the bottom versus buying into other asset classes that could be near a top. Consider for a moment the tremendous upside we’ve seen in stocks, precious metals and agricultural commodities over the past 12 months…
If you’re a long-term investor looking to put money to work, now is not really the best time to get into any of these three asset classes. However, with home sales starting to improve, and with prices now possibly forming a bottom, real estate could well be the asset class that represents the best low-risk buying opportunity out there today…
Mr. Woods went on to talk about the financing portion of the purchase:
Yes, mortgage rates still are near historical lows, but if we see these rates rise, then the cost of a new home could climb significantly. So, now could really be the best time to pull the trigger on that home purchase — and it could also be your best investment right now.
Fortune Magazine
Shawn Tully, senior editor at large for Fortune penned an article last week which was titled: Real estate: It’s time to buy again. In the article, Mr. Tully explained:
Forget stocks. Don’t bet on gold. After four years of plunging home prices, the most attractive asset class in America is housing.
Let’s state it simply and forcibly: Housing is back. Two basic factors are laying the foundation for dramatic recovery in residential real estate. The first is the historic drop in new construction … The second is a steep decline in prices, on the order of 30% nationwide since 2006, and as much as 55% in the hardest-hit markets. The story of this downturn has been an astonishing flight from the traditional American approach of buying new houses to an embrace of renting. But the new affordability will gradually lure Americans back to buying homes. And the return of the homeowner will start raising prices in many markets this year.
Bottom Line
Neither of the two media sources mentioned above has ever been accused of cuddling up to the National Association of Realtors. However, both have come to the same conclusion. It’s time to buy real estate. Perhaps we should listen to them.
01 April 2011
Home buying more than an investment question - Chicago Sun-Times
Q. Home prices keep falling and we’ve been waiting to buy our first home. We’ve saved up enough for about a 15 percent down payment. But now we’re beginning to wonder if we should buy at all — or keep renting.
A. Well, you’re right about home prices. The most recent Case-Shiller Home Price Index shows that prices fell 3.1 percent, year over year, compared with January 2010. The 20-city composite index, as of January, has fallen 31.8 percent from its peak in July 2006.
In fact, there’s talk of a “double-dip” housing recession, which would be defined by the Case-Shiller 20-city price index hitting a new low — even lower than the bottom made in April 2009. As of January, the 20-city index was only 1.1 percent above that low point.
The decline in home prices, combined with previous lenient lending standards, has resulted in nearly 25 percent of homeowners having a mortgage that is larger than the current market value of the home. (Keep in mind that nearly one-third of the homes in America are owned free and clear, without a mortgage.)
You don’t need to be an economist to realize that homes have not been a great investment for the past eight years. And you don’t have to have a crystal ball to predict that this situation could continue for quite a while, since there are so many foreclosed homes on the market, along with desperate sellers, all combining to push prices down.
But the real question is: Why were you thinking of buying a home? If you ask your grandparents, if they’re still around, they would probably never mention “price appreciation” as one of the significant reasons they bought a home 50 or 60 years ago.
They probably would have said something about wanting something that was all their own, that they could “fix up” the way they wanted it (unlike rental housing in those days). They planted trees and expected to be around to see them mature, along with their children.
Your grandparents would have talked about “raising a family” in this home, and about the memories they would build — not the equity. In fact, their goal was to have the mortgage paid off before they retired, so they could live in this home for most of their lives without the burden of a monthly payment in retirement.
That was the American dream of home ownership. If you share that dream, to any extent, then there’s no reason not to buy a home right now. You said you have the down payment money, and, I presume, the good credit to qualify for a mortgage.
Mortgage rates are low, and so are prices. And if you’re pretty sure you’ll be living in the same area for at least five years, and pretty sure that the home will fit your growing family, then this is a wonderful time to buy a home.
But if your question is whether buying a home now is a good investment — well, that depends. It depends on the price you pay, and on your time horizon, and on the rest of the economy. The price of a home reflects more than supply and demand; it reflects the availability of financing and the mood of the public as it evaluates whether future inflation will make assets, including houses, more valuable.
Right now Congress is deeply in the mode of “locking the barn door after the horse is out.” After years of pushing for credit availability for low-income home buyers (Rep. Barney Frank) and easy mortgage standards so banks could profit by making loans (Sen. Chris Dodd), the game has changed.
Now the Dodd-Frank banking reform bill named after these two Washington insiders has reversed the playing field. New “standards” are likely to make it more difficult for first-time home buyers. A 20 percent down payment will be required to get the lowest rates. A more limited financing market could impact the demand for homes, and the prices sellers can expect to receive.
I think this is a good time to buy a home for both financial and lifestyle reasons. No one ever picks a “bottom” — but despite (or because of) all the negativity, we could be close. And I do believe in the American dream of home ownership as a place to raise a family and build a community.
But just in case I’m wrong about that evaluation, there’s one other good thing about buying a home: This is the one investment you can live in , if you happen to make a mistake in your timing. And that’s The Savage Truth.
Terry Savage is a registered investment adviser.
Home buying more than an investment question - Chicago Sun-Times
A. Well, you’re right about home prices. The most recent Case-Shiller Home Price Index shows that prices fell 3.1 percent, year over year, compared with January 2010. The 20-city composite index, as of January, has fallen 31.8 percent from its peak in July 2006.
In fact, there’s talk of a “double-dip” housing recession, which would be defined by the Case-Shiller 20-city price index hitting a new low — even lower than the bottom made in April 2009. As of January, the 20-city index was only 1.1 percent above that low point.
The decline in home prices, combined with previous lenient lending standards, has resulted in nearly 25 percent of homeowners having a mortgage that is larger than the current market value of the home. (Keep in mind that nearly one-third of the homes in America are owned free and clear, without a mortgage.)
You don’t need to be an economist to realize that homes have not been a great investment for the past eight years. And you don’t have to have a crystal ball to predict that this situation could continue for quite a while, since there are so many foreclosed homes on the market, along with desperate sellers, all combining to push prices down.
But the real question is: Why were you thinking of buying a home? If you ask your grandparents, if they’re still around, they would probably never mention “price appreciation” as one of the significant reasons they bought a home 50 or 60 years ago.
They probably would have said something about wanting something that was all their own, that they could “fix up” the way they wanted it (unlike rental housing in those days). They planted trees and expected to be around to see them mature, along with their children.
Your grandparents would have talked about “raising a family” in this home, and about the memories they would build — not the equity. In fact, their goal was to have the mortgage paid off before they retired, so they could live in this home for most of their lives without the burden of a monthly payment in retirement.
That was the American dream of home ownership. If you share that dream, to any extent, then there’s no reason not to buy a home right now. You said you have the down payment money, and, I presume, the good credit to qualify for a mortgage.
Mortgage rates are low, and so are prices. And if you’re pretty sure you’ll be living in the same area for at least five years, and pretty sure that the home will fit your growing family, then this is a wonderful time to buy a home.
But if your question is whether buying a home now is a good investment — well, that depends. It depends on the price you pay, and on your time horizon, and on the rest of the economy. The price of a home reflects more than supply and demand; it reflects the availability of financing and the mood of the public as it evaluates whether future inflation will make assets, including houses, more valuable.
Right now Congress is deeply in the mode of “locking the barn door after the horse is out.” After years of pushing for credit availability for low-income home buyers (Rep. Barney Frank) and easy mortgage standards so banks could profit by making loans (Sen. Chris Dodd), the game has changed.
Now the Dodd-Frank banking reform bill named after these two Washington insiders has reversed the playing field. New “standards” are likely to make it more difficult for first-time home buyers. A 20 percent down payment will be required to get the lowest rates. A more limited financing market could impact the demand for homes, and the prices sellers can expect to receive.
I think this is a good time to buy a home for both financial and lifestyle reasons. No one ever picks a “bottom” — but despite (or because of) all the negativity, we could be close. And I do believe in the American dream of home ownership as a place to raise a family and build a community.
But just in case I’m wrong about that evaluation, there’s one other good thing about buying a home: This is the one investment you can live in , if you happen to make a mistake in your timing. And that’s The Savage Truth.
Terry Savage is a registered investment adviser.
Home buying more than an investment question - Chicago Sun-Times
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