In the News

Retail sales rose 1.1% to $412.9 billion in September. This follows an upwardly revised 1.2% increase in August. Compared to September 2011, retail sales have increased 5.4%.

Consumer prices rose 0.6% in September, following an identical 0.6% increase in August. Compared to September 2011, consumer prices have risen 2%. Consumer prices at the core rate — excluding volatile food and energy prices — were up 0.1% in September.

The National Association of Home Builders/Wells Fargo monthly housing market index rose one point in October to 41, the highest level since June 2006. This marks the sixth consecutive monthly gain. An index reading below 50 indicates negative sentiment about the housing market.

The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending October 12 fell 4.2%. Refinancing applications decreased 5%. Purchase volume rose 1%.

The combined construction of new single-family homes and apartments in September rose 15% to a seasonally adjusted annual rate of 872,000 units. Single-family starts increased 11%. Volatile multifamily starts rose 25.1%. Compared to a year ago, housing starts were up 34.8% in September. Applications for new building permits, seen as an indicator of future activity, rose 11.6% to an annual rate of 894,000 units.

Existing home sales fell 1.7% in September to a seasonally adjusted annual rate of 4.75 million units from 4.83 million units in August. Compared to a year ago, existing home sales were up 11% in September. The inventory of unsold homes on the market fell 3.3% to 2.32 million in September, a 5.9-month supply at the current sales pace, down from a 6.1-month supply in August.

Initial claims for unemployment benefits for the week ending October 13 rose by 46,000 to 388,000. Continuing claims for the week ending October 6 fell by 29,000 to 3.25 million.

from Prospect Mortgage Economic Update

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3 common home purchase roadblocks

Buyers who find a home they’d like to buy soon after they start their home search often pass on it because they feel they haven’t seen enough listings. Months later, when they haven’t found anything to compare to the first home they really liked, they can regret that they didn’t seize a great opportunity when they had a chance.

It takes a leap of faith and complete trust in your real estate agent to make a quick move in a market that’s new to you. You’ll feel more confident when you’ve done your homework and know the reasons why some listings sell for more than others. This is a process that takes time and is time well spent.

A characteristic of the current home-sale market, particularly in or near areas where job growth has improved significantly, is that there are not a lot of good homes for sale. In these niche markets, there tend to be more buyers looking than there are homes to satisfy the demand.

The housing market is bifurcated. Unlike the high-demand enclaves inspired by a pickup in employment, there are many more areas where there are far too many unsold homes and with too few buyers. This tends to have a dampening effect on home prices.

How long it takes you to find a home will depend in part on whether what you’re looking for is readily available. It will also depend on how many buyers are looking for the same kind of home you’d like to buy. If there’s competition for a scarce commodity, you might make offers on several homes before you are able to convince a seller to accept your offer.

HOUSE HUNTING TIP: Investors snap up foreclosure listings quickly, but they aren’t going to call these places home. It’s rare for buyers to find a home they want to occupy as their primary residence quickly, either due to specialized housing needs or lack of inventory. Put the time you spend waiting to good use by learning more about the community in which you want to live. Patience should be your motto.

Patience is also needed to carry you through the contract negotiation and closing. Although each home-sale transaction is unique, it’s not uncommon for a glitch to come up at some point. Some homes don’t appraise for the price you’ve agreed to pay. If you don’t have any additional cash to add to the deal, and the seller won’t renegotiate the price, you’ll be back at square one, looking for a home to buy.

The glitch could occur before your offer is accepted if the sellers are stubbornly unrealistic about the price they’re asking. Recently, buyers were encouraged to make an offer on an overpriced listing that had been on the market for months. The buyers reluctantly made an offer for the top price they could pay for the house. The sellers flatly turned the buyers down and said they would never sell for that price.

Three months and one price reduction later, the house still hadn’t sold. The buyers were again encouraged to make an offer. They made an offer for the same price they did the first time, but the terms were more agreeable to the sellers. It was accepted.

Many unrealistic sellers never come around. Don’t waste your time on sellers who don’t have a strong motivation for selling. There’s a big difference between sellers who want to sell only if they can get an unrealistic price, and sellers who have purchased another home and have no need for the current one.

THE CLOSING: Until you have an accepted offer, keep your eye on the market; don’t miss a listing that will work for you and is reasonably priced.

By Dian Hymer, Monday, April 2, 2012.

Inman News®

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

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Economists don’t agree on real estate recovery

It wasn’t long ago that some economic forecasters anticipated a turnaround in the home-sale market by 2012. When the economic recovery stalled and the housing market showed no sign of turning around quickly, projections for a housing recovery were pushed out two, three and even seven years.

Ken Rosen, chairman of the Fisher Center for Real Estate & Urban Economics at the University of California, Berkeley, believes that home prices have bottomed and are increasing in areas powered by strong job growth. However, even in places where prices are rising, they are not rebounding.

Not all economists agree that home prices have hit bottom; many anticipate another 5 percent price decline over the next two years.

Rosen gives a 65 percent probability that the recovery will be choppy. He forecasts a 5 percent chance of a strong recovery and a 30 percent chance of a double-dip recession. Factors holding a recovery back: a general sense of uncertainty that undermines consumer confidence; millions of unsold foreclosure properties; high unemployment; cutbacks in services; and tight credit conditions.

In some urban areas of the country, like Atlanta, Chicago, Miami and Phoenix, it may be more advantageous to buy than to rent. Apartment rents have been rising due to increased demand for rentals from people who have lost their homes in foreclosure, empty nesters trading down, people with jobs who have decided not to buy, and people who would like to buy but who can’t qualify.

The same lenders who gave risky mortgages to buyers who couldn’t afford them in 2005 and 2006 are now making it difficult for qualified buyers to get financing. It used to take a credit score of 620 or more to qualify for a conventional mortgage. In those days, loans to buyers with 5 to 10 percent cash down were readily available.

Today’s buyers need a credit score of 760. Some conventional lenders require a 20 percent cash down payment. If the buyers are self-employed it can be more difficult to qualify. It’s a great time to trade up, but most buyers can’t qualify to buy the new home without first selling their current home.

One of the best things that could happen to the housing market at this point would be an easing of credit-qualifying standards — not to the ridiculously low level of several years ago, but to a level that would enable more creditworthy buyers to take advantage of today’s low interest rates and relatively low home prices.

Good news lately bodes well for the future, but you should anticipate continued volatility. The jobless rate dropped to 8.6 percent nationally in November, the lowest level in 2 1/2 years. The consumer confidence index rose 15 points in November, to 56. Although encouraging, if the economy were on solid ground we would expect a reading of 90.

HOUSE HUNTING TIP: It’s a good time to buy a home in many areas of the country. However, it’s only a good time if you buy for the long term and you have realistic expectations about what buying a home will entail. It will require maintenance, which costs money and takes time.

Your home is unlikely to be the cash cow that most buyers expected — and many achieved — during the bubble years. According to Robert Shiller, Yale University economist, home prices track, on average, with the inflation rate over long periods.

Renters with good incomes and good credit who are tired of moving could benefit from buying a home now. Just be aware that if we go into a double-dip recession, prices could drop another 10 percent in some areas. That’s why you don’t want to buy for the short run.

THE CLOSING: Buyers having trouble amassing 20 percent for a down payment should check with independent banks that have more flexibility in their qualifying criteria.

By Dian Hymer, Monday, January 9, 2012.

Inman News®

Dian Hymer, a real estate broker with more than 30 years’ experience, is a nationally syndicated real estate columnist and author of “House Hunting: The Take-Along Workbook for Home Buyers” and “Starting Out, The Complete Home Buyer’s Guide.”

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4 real estate lessons from the 1%

While reading this article about the aggressive — and ostensibly legal — tax reduction strategies of Ronald S. Lauder (son of Estée), I was struck by this quote from University of Colorado law professor Victor Fleischer: “There’s real truth to the idea that the tax code for the 1 percent is different from the tax code for the 99 percent.”

The connotation? The super-rich have not only cash, but also elite access to loopholes and other advantages to which the 99 percent might aspire, but will never attain.

While the Occupy movement is on a mission to illuminate and shatter power imbalances between the 99 percent and the 1 percent, there’s another angle to take on the issue: Let’s call it the “If you can’t beat ’em, learn from ’em” school of thought.

Along those lines, here are four real estate lessons all of us can take from the 1 percent:

1. Take advantage of government programs/assistance. When the big banks — whose execs certainly belong to the 1 percent — began to experience the fallout of the subprime mortgage meltdown, they threw up their hands, pleaded their case, enrolled governmental advocates and got the bailouts we now know as the $700 billion Troubled Assets Relief Program, or TARP.

Yet many an individual American, whose personal finances have too much at stake to fail — at least as far as their household and local communities are concerned — struggle silently to make their monthly mortgage payment.

More than 20 million American households are upside down on their mortgages. The Obama administration‘s foreclosure avoidance program, Home Affordable Refinance Program (HARP), was designed to help 5 million homeowners refinance into lower interest rates and payments.

At last count, earlier this fall, HARP had actually helped only 62,500 seriously underwater homeowners, and fewer than 900,000 homeowners total — a number so low Congressional Republicans sought to wind the program down. The Obama administration revised the program in hopes of helping more homeowners. (In 2009, the administration projected 4 million HARP refinances by fall 2011.)

The Main Street bailout is here and, whether you think it’s sufficient or not, it seems indisputable that it is vastly underutilized.

In an effort to get more help to the homeowners who need it, the Obama administration loosened up qualifying criteria; the revised guidelines just kicked in on Dec. 1, 2011. The 1 percent looks to the government when they are down on their luck; so should you.

2. Take full advantage of the tax code. Many members of the 99 percent have decried the complexity of the tax code and its loopholes that favor the rich. Lauder’s son, for example, has reportedly deferred or avoided tens of millions in federal taxes by donating art to his own foundations, deducting of property taxes on an extensive real estate portfolio, making massive charitable donations, and derivative stock transfers — deductions accessible only to those rich enough to own such assets in the first place!

Besides the better-known federal mortgage interest and property tax write-offs, there are numerous, less well-known deductions of which “99 percent-ers” should take full advantage.

Some areas allow renters to take a property tax credit. Similarly, homeowners who switch to solar or installing a tankless water heater can get the federal government to help pay via tax credits, some of which expire soon, others of which will be longer lived. It won’t line your pocket with millions, but every little bit helps.

3. Pay for professional advice when it counts. You’d be amazed at the number of buyers, sellers and homeowners I’ve heard reference real estate advice they received from their parents, their mechanic and the other moms at day care — and that doesn’t even begin to count the folks who try to distill insights just from a headline in the national nightly news or from a story they overheard at the hairdresser about the amazing deal they were able to negotiate (and, by the by, everyone exaggerates at the hairdresser!).

I assure you, Mr. Lauder pays a virtual army of attorneys and accountants a pretty penny for his tax advice. And the rest of us should make the appropriate investment in obtaining experienced, local, professional advice when it comes to making potentially life-changing real estate, mortgage and tax decisions.

4. Don’t let emotion cloud your decisions. Members of the 99 percent often stay emotionally committed to a home or a list price despite the fact that it is absolutely a losing battle, the data completely contradicts our commitment, or that the living situation no longer works for the people who live in the household.

The 1 percent, on the other hand, will divest of a home or slash even millions of dollars off the list price of their home in a New York minute, if it makes business sense.

Obviously, it’s a bit easier to be detached from an asset when it’s not the only asset you have. As well, sometimes the 1 percent is a little too hasty to detach from all sorts of relationships that most of us in the 99 percent hold dear — from homeownership to marriage and beyond.

But we 99 percent-ers might do well to take a page from the 1 percent playbook when it comes to holding onto assets that have become toxic. Sometimes, it makes sense to short-sell the house, divest of it via a deed-in-lieu of foreclosure, or simply slash the list price, in the service of the household’s greater, long-term financial good.

By Tara-Nicholle Nelson, Tuesday, December 20, 2011.

Inman News®

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Ask her a real estate question online or visit her website,

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3 myths of conventional real estate wisdom

Whether you’ve rented your whole life or own a portfolio of properties, you’ve undoubtedly heard the real estate saying, “Location, location, location,” which simply means that a home‘s value is highly dependent upon, well, its location!

The timeless truth of this saying is beyond dispute, even in tough times like these for the housing market. The recessionary fates and foreclosure rates of an individual housing market are highly dependent upon the economic and employment prospects of that market, and even the desirability of an individual neighborhood or lot.

However, there are some other age-old pieces of real estate wisdom that haven’t stood the test of time as well as the location adage. Here are three pieces of conventional real estate wisdom that are due for a refresh.

1. Paying off your mortgage is bad. At the top of the market, many an infomercial pusher espoused borrowing against your home to buy more homes, creating an empire. While that worked for some, for awhile, you can see how that turned out.

But even now, traditional and conservative financial advisers still say that paying off your mortgage is not the best use of cash, as your mortgage interest is tax deductible, and the better use of the funds is to invest them for growth.

For folks who can and are inclined to pay their homes off, though, this rule is off-target. Paying off your home is less about making the most assertive financial move possible, and more about creating security, fixing a low set of living expenses, and hedging against economic and job market uncertainty.

The best practice in today’s economy is to make money moves that create maximum sustainability and minimum stress; if that means paying your mortgage off, then do it.

2. Don’t upgrade your house beyond the level of neighboring homes. Real estate insiders have long observed that buyers are hesitant to pay a premium to buy the best house on an otherwise modest block. And I’ve seen this in full effect, especially when the so-called best house is a three-story castle that has been expanded all the way to the fences, complete with turrets, spotlights and cherub statuary, on a street of one-story ranchers.

Customizing a home with bizarre features, beyond all reason, does make it harder to sell later. But adding features and upgrades that make your life in your home mirror your dream life, or create the comfort and lifestyle your family craves? If you can afford it without draining your home of equity or going into consumer debt, go for it, especially if you plan to be in the property over the long term.

It’s your home, not just another financial asset, and one of the major advantages of ownership is your ability to create a comfortable, personalized habitat for your life.

Don’t necessarily expect to get back your investment in upgrades dollar for dollar, and do avoid making bizarre customizations (hot tub in the living room, anyone?) unless you’re OK with reversing them when you do list the place for sale, but don’t hold back on creating a custom home experience for your family and your lifestyle because you heard it’s a bad investment.

3. The bigger the agent’s car/diamond/hair, the more successful she must be. The real estate industry is a-changing. More than 90 percent of homebuyers start their house hunt on the Internet. And that makes it much harder to tell at a glance who has the stuff to be successful at the endeavor of helping you buy or sell a home.

An agent who drives a Toyota and lacks Kardashian-style bling might even be more likely to have the technology skills it takes to market and sell your home in the Web-centric home marketplace, and to communicate with you via email, text and Facebook message — pick your poison — than the flashiest agent in town. Also, the agents who can hang in there and persevere on tough or small deals on today’s market are often the ones who have manageable expenses of their own.

When picking an agent, disregard your agent’s car, shoes and accoutrements (except maybe their tech tools: laptops, tablets and phones are important tools for them to have and use, prolifically).

So what does matter? Her track record of helping buyers or sellers similarly situated to you (e.g., her list-to-sale-price ratio or history of success at getting bank approval on short sales, if you’re selling a home, or her ability to close deals on bank-owned properties, if you’re buying).

Check prospective agents out by getting referrals from people you know that rave about their agent, checking online real estate forums to see if the agent is participating in online conversations about homes in your area, and asking for references from recent clients who can vouch for the agent’s skills.

By Tara-Nicholle Nelson, Wednesday, October 5, 2011.

Inman News™

Tara-Nicholle Nelson is author of “The Savvy Woman’s Homebuying Handbook” and “Trillion Dollar Women: Use Your Power to Make Buying and Remodeling Decisions.” Tara is also the Consumer Ambassador and Educator for real estate listings search site Ask her a real estate question online or visit her website,

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American Dream Still Alive

In spite of the gyrations of the housing market in recent years, an overwhelming number of Americans still view owning a home as a key to their happiness and security.

According to a 2011 poll of likely voters, commissioned by the National Association of Realtors, 75% of respondents said they believed owning a home is worth the risk of potential market fluctuations.  Of those respondents who already owned a home, an even higher number, 95%, stated they were happy with their decision to purchase their home.

The good feelings towards home-ownership extend to potential buyers as well.  73% of those who do not currently own a home view the purchase of a home as a goal for the future.  Most respondents also agree that their home is their best  investment, adding that they would advise a friend or family memeber to buy a home.  One of the reasons cited for the lack of first-time buyers entering  the housing market:  difficult saving up for a down payment and closing.  Combined, these costs are seen as the biggest barrier to home ownership today.

A 2008 book by authors Gary Smith, Pomona’s Fletcher Jones Professor of Economics, and wife Paula, a business economist from Harvard, reflects similiar sentiments.  According to their research, as reported in “Homeconomics:  Why Owning a Home Is Still a Great Investment,” buying a home offers as many benefits today as it always has.  These benefits include providing shelter and a place to live, as well as providing the “fun” and enjoyment of home ownership.  The economists are quick to note the financial benefits as well, labeling them as the home dividend.  The dividend is described by the authors in the following manner.

A “home dividend” is the owners’ rent savings for a comparable house in the same neighborhood, plus mortgage interest and property tax deductions, minus the mortgage payment, property tax and attendant insurance and maintenance costs.

Rents are often higher than mortgage payments, since rents increase over time, while mortgages with fixed rates stay flat.  When  the  two amounts are subtracted, the difference between them is the amount of the monthly dividend.  This extra money can be  saved an invested in the stock market, bonds,  business opportunities or educational opportunities for family members.  If the dividend earns even a modest rate of return, it can generate an additional source of wealth for the homeowner.

This inherent dividend explains why the average homeowner has a net worth of $200,000, while the average renters worth is closer to $5,000, according to the two economists. 

In addition to the financial benefits of homeownership, however, people also report a strong emotional connection to their home.  It is viewed as a place for rest, relaxation and enjoying the company of family and friends.  Seen from this perspective, owning a home is reported as an important core value for many families.

Far from giving up on the American Dream, many people still embrace it,  and view the purchase of a home as a way to save for retirement, as well as a place to hang their hat well into the future.

from Teck Inspections August 2011 newsletter

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Economic Update – News from Last Week

The National Association of Home Builders/Wells Fargo monthly housing market index was unchanged in May at 16. An index reading below 50 indicates negative sentiment about the housing market.

The combined construction of new single-family homes and apartments in April fell 10.6% to a seasonally adjusted annual rate of 523,000 units. Single-family starts decreased 5.1%. Multifamily starts fell 24.1%. Applications for new building permits, seen as an indicator of future activity, fell 4% to an annual rate of 551,000 units.

Industrial production at the nation’s factories, mines and utilities was unchanged in April, following a revised 0.7% increase in March. Compared to a year ago, industrial production is up 5%. Capacity utilization was 76.9% in April.

The Mortgage Bankers Association said its seasonally adjusted composite index of mortgage applications for the week ending May 13 rose 7.8%. Refinancing applications increased 13.2%. Purchase volume fell 3.2%.

Existing home sales fell 0.8% in April to a seasonally adjusted annual rate of 5.05 million units from a revised 5.1 million units in March. The inventory of unsold homes on the market increased 9.9% to 3.87 million, a 9.2-month supply at the current sales pace, up from an 8.3-month supply in March.

The index of leading economic indicators — designed to forecast economic activity in the next three to six months — fell 0.3% in April, following a revised 0.7% increase in March.

Initial claims for unemployment benefits fell by 29,000 to 409,000 for the week ending May 14. Continuing claims for the week ending May 7 fell by 81,000 to 3.7 million.

-Posted from Prospect Mortgage Economic Update

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