Rose Real Estate News
Colorado Springs Real Estate Market Statistics - 2011
01/04/2011: January 1st through December 31, 2011. Includes all sales from El Paso County included in the Pikes Peak Multiple Listing Service. Information deemed reliable but not guaranteed.
Pending Home Sales Jump in October
Novemeber, 2011: Pending home sales rose strongly in October and remain above year-ago levels, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, surged 10.4 percent to 93.3 in October from 84.5 in September and is 9.2 percent above October 2010, when it stood at 85.5. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said improved contract activity is a hopeful sign. “Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows, and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions,” he said.
“Many consumers are recognizing that home buyers in the past two years have had one of the lowest default rates in history. Moreover, continued inventory declines are another healthy sign for the housing market,” Yun added.
The PHSI in the Northeast surged 17.7 percent to 71.3 in October and is 3.4 percent above October 2010. In the Midwest, the index jumped 24.1 percent to 88.7 in October and remains 13.2 percent above a year ago. Pending home sales in the South rose 8.6 percent in October to an index of 99.5 and are 9.7 percent higher than October 2010. In the West the index slipped 0.3 percent to 105.5 in October but is 8.1 percent above a year ago.
“Although contract signings are up, not all contracts lead to closings. Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,” Yun said. “Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close to the margins of qualifying, or they might get a loan but with less favorable terms.”
NAR encourages consumers to be aware of their credit score and actions which could hurt or enhance it. HouseLogic.com, the association’s consumer Web site devoted to all aspects of home ownership, offers tips for improving credit scores at http://buyandsell.houselogic.com/articles/7-tips-improving-your-credit/.
REALTOR® Magazine
Market Statistics:
The following links report listing, sales and pricing statistics for the greater Colorado Springs area, otherwise known as the Pikes Peak region. There's average and median sales price information as well as charts and graphs to help identify market trends:
Listing and Sales Summary
PPAR Statistical Highlights
Some News Bits (or Bytes):
August, 2011: Foreclosures Reach Lowest Level Since 2007 - Foreclosure filings dropped again in July, marking the 10th straight month for year-over-year declines and reaching their lowest level since November 2007, RealtyTrac reports. But analysts are still mostly attributing the drop to banks’ processing delays as they take more time to take action against delinquent home owners.
Home-Installed Tech to Grow in Importance - A survey of 1,793 members of the National Association of REALTORS® by the Consumer Electronics Association (CEA) reveals that more than 50 percent are excited about homes with new technologies, and nearly 67 percent say that their clients are as well. During the last two years, 90 percent of REALTORS® have aided in the purchase, sale, or showing of a home with advanced technologies.
Weak Appraisals Hamper Home Sales, Experts Say - Weak appraisals are “driving down the real estate market” and “borders on buffoonery,” says William Maxwell, an expert in finance and professor at Southern Methodist University's business school, who has seen his own Dallas property fluctuate in appraised value by $60,000 in just a year. While the sluggish economy has pushed home values down the last few years, some real estate professionals and economists say that low-ball appraisals are pushing values down even more and undermining a housing recovery, The Wall Street Journal reports.
Do QR Codes Work?
July, 2011: Over the past several months, QR Codes — those funny looking square bar codes — have become all the rage. They started popping up in retail stores, magazines and every real estate tradeshow in this hemisphere. Real estate agents were anxious to use them and vendors were anxious to incorporate them as part of their product (Why not? They’re free.) as “added value.”
The problem this created is that very few took the time to truly understand QR codes and introduced them in fundamentally flawed ways; linking QR codes to traditional websites, for example. Fast forward six months to today and what you hear is frustration when it comes to QR codes. Statements such as “I tried them and they don’t work,” or “people aren’t really using them,” are common place.
QR Codes are a phenomenal emerging (in this country at least) technology that when used correctly can work to your advantage. However, they are not the end-all-be-all and there must be a strategy in place when utilizing them; best practice is to have them accompany your mobile web strategy.
As mentioned, QR should drive traffic to the company’s mobile website, where consumers can have an experience tailored specifically to them as a mobile user and get quick and efficient access to the real estate information they are looking for. More importantly, these scanners will now recognize that site as a reliable mobile destination for real estate information that they can return to over and over again.
The strategy employed is simple and effective and can garner clear and measurable results. QR Codes, if implemented correctly, can work in real estate for real estate consumers. Don’t give up on them just yet!
Seth Kaplan, RISMedia
Colorado Springs one of 10 Top Turnaround Towns
June, 2011: The housing market in this metro area at the base of the Rockies is facing some headwinds. For one thing, the unemployment rate is high, at 10.1% in March. Colorado Springs is also a foreclosure hot spot, with one of every 157 housing units receiving some kind of foreclosure filing in the first three months of 2001.
Move.com is forecasting a turnaround, however, on the strength of the area's asking prices, which rose nearly 2% in March compared with a month earlier. Population also keeps expanding; about 10,000 people were added to Census rolls last year. That should pressure prices upward.
Another good gauge of demand is that homes have been selling quickly, staying on the market a median of 113 days, far below the national median of 160 days.
CNNMoney
10 Tips for Surviving the Housing Market
The economy is starting to improve but the housing market has yet to show any significant signs of recovery, which has homeowners nervous. Home prices are hovering near their recession lows, hit in April 2009, according to the latest Case-Shiller home-price report. It’s a buyer's market and by many projections, it won’t shift to a seller’s market for a good year or more.
So, how do homeowners, who have most of their equity in depressed real estate, slog through until it becomes a seller’s market? Here are 10 tips from real-estate moguls who have survived several housing-market downturns.
1. Homeowners should be very encouraged by the fact that home buyer sentiment has improved.
“The mood has definitely changed … Buyers are feeling more positive,” said Barbara Corcoran, the founder and former president of the Corcoran Group and a real-estate pro who has survived four housing-market slumps. “The activity level has jumped considerably in the last 60 days … over and above the typical spring market,” she said. Rents have been soaring and it’s now cheaper to buy than rent pretty much anywhere you go, Corcoran pointed out, which will only add fuel to home-buyer desire.
2. Builders aren’t building many new homes, which means less competition.
Housing starts have been flat for the past year, according to data from the Commerce Department, which means that homeowners won’t really have to worry about competing with new construction when they go to sell their homes. “You’re seeing a lot less inventory on the market while at the same time, there are more buyers in the market,” said R. Donahue Peebles, chairman and CEO of the Peebles Corporation, which has a $4 billion portfolio that includes properties in Miami, Las Vegas and Washington, D.C.
3. In about 40 percent of major metropolitan cities, home prices are going up, according to the National Association of Realtors.
Low interest rates have been tough on savers, since saved money isn’t making as much interest, but they help drive up housing prices, Corcoran noted.
4. Remember: Your house may be worth less on paper, but you won’t lose any money unless you sell.
This is one thing homeowners often forget when they get caught up in the latest headlines about home prices or checking on the value of their own home: If you don’t need to sell right now — don’t. Corcoran said she owns a country house that she’s not living in, but she plans to hang onto it until the market recovers. “I can’t bear to let it go for 50 percent of what I could have five years ago.”
5. Slumps feel like they go on forever, but the recoveries can happen quickly.
“Prices are always slow to unwind. And the time feels much longer than it actually is,” Corcoran said. “But when they recover, they recover like gangbusters — and you can make up a lot of appreciation in a short amount of time,” she said. No one is suggesting this will be a "gangbusters" recovery, Corcoran clarified, but it will probably happen more quickly than most people think. “I think people are grossly overestimating how long it’s going to take,” Corcoran said. Previous price recoveries have happened in quadruple- or triple-time, she said. “Maybe now it’s double,” she added.
6. While you’re waiting, do some renovations.
There are two big financial benefits to home improvements such as upgrading a kitchen or adding "curb appeal" (visual appeal for potential buyers before they even enter the house) during a housing-market slump: First, you’ll get a better bang for your buck when the market recovers and you sell your house. Second, you’ll save money on the labor. It’s basic supply-and-demand: When times are good and the work is flowing, contractors can charge more, and when the work is slow, they’re more willing to bargain on the price. “Contractors are much more hungry for work right now,” Peebles said. “Architects and consultants are also hungry for work,” he added. Not only will renovations help you command a better price when you go to sell the house but upgrades will help you sell the house more quickly in a competitive market. Given how many homes are on the market, “buyers don’t have to tolerate things they don’t want,” Corcoran said. For example: hardwood floors. “I don’t care how pretty you think your carpet is, you rip it up and refinish the floors,” Corcoran said. “Nobody wants to move into your carpet.” And, she said, it’s more important now than ever to have curb appeal. “Home buyers shop online nowadays and if the façade of the house doesn’t grab them in the first few seconds, they’ll click onto the next one,” Corcoran said. However, she cautions, you have to be smart with your renovations and make sure you spend the least for the biggest payoff. So, maybe you don’t replace all of the kitchen cabinets, but you put on new doors or new hardware. Or, you replace the countertop. Change out the kitchen floor. Fix the doorbell. Repoint the driveway. Formica and and broken doorbells may have been acceptable during the boom, but in this market, they can kill the deal. Plus, as an added bonus, you’ll get to enjoy the upgrades until the market recovers!
7. Don’t date yourself.
There are certain things that will date a home as soon as you walk into it. Would you believe that one of the things that can date a home in today’s market is a granite countertop? “Granite is out, I hate to tell you!” Corcoran said. That’s right — it used to be that formica and linoleum dated a house, but in this market, high-end materials like granite can date a house. The new thing is man-made materials such as Caesarstone (which is 93 percent quartz) or DuPont’s [DD 56.71 -0.08 (-0.14%) ] Corian, which are cheaper, more durable and come in hundreds of colors. Stainless steel sinks are also on the way out — ceramic is back, Corcoran said. Farmhouse sinks are still safe, though: they've withstood the test of time, she said. Her advice is to go shopping in a new, high-end development to see what all the latest materials and gadgets are, and then choose your renovations wisely to stay competitive.
8. Don’t let yourself get stuck. If you want to trade up — trade up.
“If you wish you had a better street, a nicer town, a better school district or a better backyard view — whatever you’re dreaming about, there’s no better time to trade up,” Corcoran said. “Even if you have to take 30-percent less on your house, you’ll get a better home and save 30 percent [on the trade-up], so you’re ahead of the game,” she said. So even though it may seem counterintuitive to buy more real estate when you're feeling trapped in the home you already own, real estate pros say a downturn like this is the best time to buy. “The biggest mistake I ever made in any downturn was not buying my first apartment during a downturn … I was too scared,” she said. “I still regret it.” After missing that opportunity in her first downturn, she said, it took her five years to get up enough money to get into the market.
9. Consider buying a vacation home.
Not only is now a great time to trade up, it's an even better time to buy a vacation home, given that some of the most depressed real estate in America is in sunny destinations such as Florida, California and Las Vegas. It's not just because of the depressed home values, but also for the super-low interest rates. When Peebles started in real estate in 1979, he said, interest rates were at nearly 20 percent. Today, they remain under 5 percent. It's not easy to go against the tide but that's how you make money in real estate. “I saw great fortunes that were made in the early '90s. I saw great fortunes made back in the early '80s,” Peebles said. “I’m a big believer in the fact that you buy when fewer people are buying … It’s stressful, but you get rewarded for it. It’s called risk-taking.”
10. Be a smart seller.
When you are ready to sell, resist the urge to go with the real-estate agent who gives you the highest value on your house. “Always go with the lowest — that guy is truthful!” Corcoran said. “The best broker is the one who will tell you what your house is really worth.” It can be nauseating to watch the value of your home drop but the bottom line, the pros say, is not to get bogged down in the slump — but focus on the recovery. Corcoran recommends ignoring all the negative housing news, and kicking back and toasting some marshmallows or firing up the grill. “All that time you’d spend being worried, you could be enjoying your house!” Corcoran said. “I believe that people who hold on will be rewarded,” Peebles said. “I think we will look back at this time period as one of the best buying opportunities in the nation’s history.”
“The biggest lesson I’ve learned is that it always comes back,” he said. “And if you believe in the USA, then you have to believe in the housing market of the USA.”
By: Cindy Perman, CNBC.com
A Potential Housing Shortage
The focus of the U.S. real-estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don’t start focusing on building new houses, the market will have a much bigger problem on its hands.
“We need one and a half million houses per year just to keep up with population growth,” Wesbury said in an interview with Steve Forbes. “And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we’re down to about six and a half, seven months’ inventory whether you look at new homes or existing homes.”
Some people might shrug these statistics off, considering the number of foreclosures on the market. “Yes there’s foreclosures coming into the market, but we’re only starting right now,” Wesbury says. “... We’re starting one-third of the houses we need just to keep up with population growth, and that can’t last.”
There's still the issue of foreclosures. Jason Thomas, chief investment officer for Aspiriant, a California wealth-management firm, says he doesn’t see the foreclosure situation getting better until the labor market picks up. “So many people are getting to a point where they just can’t hold on anymore, and we may see another wave of that if we don’t see a pretty robust turnaround in the labor market,” he says.
Although there may a greater level of foreclosures and owner-occupied homes may not be as robust, people still need a place to live. There is demand from companies that are scooping up whole floors or housing developments because they have the cash on hand, Roseman says. And for those people who can get a mortgage, rates are very low and homes are very affordable.
By Alexandra Zendrian, Forbes
Alternative Real Estate Investments
When most people think of investing in real estate, they think of buying a single family home and renting it out. Recently, there has been a trend of those who refer to fix and flips or lease/options as real estate investing, but in my opinion, that's more of a real estate job than an investment. On the same buy and rent tone, an individual can buy and hold duplexes, tri-plexes and four unit homes.
The same can be said of commercial properties. Direct investments can be made in office buildings, warehouses, or even vacant land. All of the various types of real property can be purchase individually or with an investment group. Either way, the investor tends to have a more active role.
Another means of investing in real property is indirectly through limited partnerships, funds or real estate investment trusts (REIT). This is an excellent way of taking advantage of the available returns in real estate, without some of the hassles and time commitments of active and direct investments. Of course, your returns tend to be lower and sometimes the management fees are quite high, thus resulting in a lower net return on investment.
There is another way to invest in real estate that tends not to be discussed as much and that's by investing in companies that are involved in the development of land or building of homes and commercial buildings. Although there are some cases where the company is privately held, these investments are typically made in publicly traded companies listed on the various stock exchanges. One of the downsides to making this type of an investment is that sometimes the value of the stock degrades not because of the performance of the company, but due to other outside, overall stock market factors.
This brings me to another option that's available to you and is something I'm offering right now. I call it a hybrid fund investment. In this particular case it's essentially a fund that invests in home building (I've identified a market niche that's being underserved). The approach is unique in that the investment isn't directly in a home building company and the investment obligation isn't long-term (only 12-15 months). The returns are non-leveraged, secured and pay at an expected rate of 14%. (Due to current banking conditions, leverage isn't an option. At some point in the future, I'll be able to apply partial leverage and provide even greater returns).
If you or anyone you know are interested in making better than average returns on investment that are secured, predictable, with someone you know and trust, please give me a call. I'll provide you with more specifics, an overview of the project, the expected time frame, and all of the relevant information for you to make an informed investment decision.
By the way, did you know that you could use funds from an IRA for this investment. Of course, I'm not a CPA or a Tax Attorney, so please do consult the appropriate professionals as needed. My approach isn't to lock you into a long-term investment where your money never sees the light of day. I'm confident that you'll be so pleased with how this goes, you'll want to participate in the next round. I look forward to hearing from you.
Tony T. Rose, M.B.A., 719-330-2452 (please leave a message)
Cost vs. Value: Home Improvements
Sometimes when preparing a home for sale, you consider making improvements. Proceed with caution. Unless there's a specific deferred maintenance issue that needs to addressed, or simply increasing curb appeal, it may not be a good financial investment. Below are a few projects along with the expected cost recoup:
Basement Remodel: 70%
Siding Replacement: 72%
Window Replacement: 72%
Deck Addition (wood): 72%
Minor Kitchen Remodel: 72%
Major Kitchen Remodel: 68%
Garage Door Replacement: 83%
Entry Door Replacement (steel): 102%
Remember, this is not a return on investment rather a return of investment. The numbers reported are national averages. You can find a more extensive list with regional results at remodeling.hw.net.
Colorado Springs Real Estate Market Statistics - 2010
01/04/2011: January 1st through December 31, 2010. Includes all sales from El Paso County included in the Pikes Peak Multiple Listing Service. Information deemed reliable but not guaranteed.
Real Estate IRAs
12/01/10: The stock market is bouncing around with little or no consistency or reasonable trend predictability. Individual stocks for companies that are performing well are moving negatively with the mass-market trends. There are rumors and allegations that the individual investor can no longer compete with hedge funds or institutional investors. So, what are you to do?
Of course, you could put all your money into low risk, but also very low yielding certificate of deposit. Long term, you wont lose any capital, but you won't make any real gains. Another option is to use your IRA funds to invest in Real Estate.
Yes, I hear the initial response that real estate isn't doing much better. Yes and no. For the most part, major corrections on a broad market perspective have already occurred. The downside risk is low and the investment is secured by something tangible. There are some great buys to be had and the long-term return expectations are high.
There are a couple of different strategies, such as buy and hold, or rehab and turnover. I find great deals for both strategies quite frequently. There are properties you can buy individually and others you may invest with others.
As an additional protection for you, and unlike many others, I don't have you invest directly into one of my entities, I structure deals so you still have control over your investments. Not that I'd ever do anything unethical or illegal, but it's always good to have everything structured in a way that you're best protected.
The process is fairly easy and straight-forward. If you have some funds under-performing and you'd like the opportunity to earn higher, more consistent and more predictable returns, please make contact today.
Tony T. Rose, MBA
How Historically Low Mortgage Rates Can Work for You
11/03/10: Rates on 30-year fixed-rate mortgages (excluding jumbos) hit an average of 4.3% in September, the lowest level since 1953, according to Freddie Mac, and are still hovering below 4.5%. Fifteen-year rates are even more mouthwatering: 3.8%. Mind you, those are averages. The most creditworthy borrowers can do even better, snagging rates perhaps a quarter of a percentage point lower.
So what's in this for you? A lot, potentially. If you have a credit score of 720 or higher and at least 20% equity in your home, you might use these crazy-low rates to shorten your mortgage term, free up cash, or even add to your real estate holdings, for example. Whatever you decide, don't wait too long.
"The consensus is that rates will gradually move up in the new year," says Frank Nothaft, chief economist for Freddie Mac. Freddie projects that the average 30-year fixed will hit 5% by the end of 2011. It's easy to see why more than a quarter of borrowers today are choosing a 15-year mortgage, according to analytics firm Core-Logic, up from about 9% in 2007. A 15-year lets you save in two ways: You get a rate that's about half a percentage point lower than that of a standard 30-year, plus you can save tens of thousands by retiring the loan in half the time.
What if you can't manage the bigger monthly bite? Refi to another 30-year and simply pay more in months when you're able to, assuming you're disciplined enough to actually follow through with that plan. Given that few new mortgages carry prepayment penalties anymore, kicking in extra money shouldn't be a problem, says Keith Gumbinger, vice president of mortgage data tracker HSH Associates. Caveat: If you have only a few years left on your current mortgage, or you plan to move soon, a refi may not pay off. Calculate how long it will take to break even on your closing costs, up to three years is typical.
Freeing up cash may be your biggest priority right now. Maybe you're trying to replenish your emergency fund after being out of work, or you have lots of high-interest credit card debt to pay off. Maybe your twins got into Harvard, and you need to cover some of the tuition out of current income. Or maybe you see enough investment opportunities around that you want to lower your monthly payment and invest the difference. True, you won't save nearly as much in interest as you would with a 15-year. But that's not so bad, says Matthew Keeling, a certified financial planner in Mashpee, Mass., as long as you do something smart with the extra $319 a month you'll save.
Double down on real estate: Do your retirement plans call for moving to a house near the beach or a cabin in the mountains? If you can afford another mortgage payment, you may want to start your search now, while rates are in your favor and prices are depressed. Ditto if you've been wanting to buy a second home or an investment property, says Jonathan Bergman, vice president of Palisades Hudson Financial Group in Scarsdale, N.Y.
Assuming you're buying the place as a true second home, lenders generally charge the same rate they would for a primary residence. But if you intend to rent the place out, even if just for a few years until you retire and you need rental income to qualify for the mortgage, it's considered an investment property. And mortgage rates on investment properties are running about a half to a full percentage point higher. Still, the numbers are "pretty compelling," says Justin Krane, a certified financial planner in Los Angeles.
By Sarah Max, CNNMoney.com
What to Make of Recent News Headlines
10/04/2010: Some of the recent real estate news headlines: Pending U.S. Sales of Existing Homes up 4.3% in August, Bank of America Halts Foreclosures in 23 States, Mortgage Rates Drop to 4.32%, U.S. Home Sales Show Glimmers of Recovery. So what do you do with it all? The short answer is research, analysis and to be non-reactive. There is good and bad in every market and with each of the headlines above there is good news for some.
For instance, with pending sales up and mortgage rates low, that's good for the overall market as it helps to keep homes affordable to buyers and it would appear people are in fact still actively buying. As far as BofA and possibly other institutions being more detailed in the process, yes, this will slow down the absorption of foreclosure inventory, but this does create a bit of an immediate shortage. This can be good for home sellers; less competition in the market. At least for now. As mentioned before, every market, every property and every situation is different. Don't base your decisions on headlines. Dig deeper and get some professional advice as you might be pleasantly surprised.
Colorado Springs Market Statistics
09/06/2010: January 1st through August 31, 2010. Includes all sales from El Paso County included in the Pikes Peak Multiple Listing Service. Information deemed reliable but not guaranteed.
Record Lows for Mortgage Rates, However...
08/02/10: The 30-year fixed mortgage rate fell to a new low of 4.54 percent this week from 4.56 percent last week and an average of 5.25 percent a year ago. The 15-year fixed loan rate also hit a record low of 4 percent, down from 4.03 percent a week ago and 4.69 percent last year.
However, the lending landscape has changed quite drastically over the past few years. Practices, approvals and standards that were once widely accepted have either vanished or transformed beyond the point of recognition. Many banks, which were once extremely careless with their loan underwriting techniques and approvals, have dug themselves into a significant hole that will take many years to climb out of.
Today, banks are making sure they don’t make the same mistakes again, so loan underwriting standards have become more stringent than ever before. According to a recent Federal Reserve survey, it was found that about 75% of the banks surveyed indicated they had tightened their lending standards for prime, subprime and commercial mortgages. That was up from about 60% in the previous survey. With this sharp increase in lending standards, borrowers are being turned down for real estate loans at an alarming rate.
Some of the top reasons for loans being denied are poor credit, insufficient liquidity, lack of income, debt ratios, employment history and self-employment. Although all of these have always been taken into consideration, they are now looked at even more stringently.
Obviously some of these newly structured standards are for the betterment of the industry, and our overall economy, but at the same time, home buyers across the country are realizing quickly that reputable credit and stable income aren’t always enough in qualifying for a loan. For example, you may have great credit and a stable work history, and even have enough cash for a sizeable down payment. You could be denied because you won't end up with enough cash in reserves after closing.
RISMedia, The Wall Street Journal
Important Real Estate Legislation Passes
07/02/10: The President signed into law two important pieces of legislation of great importance for the real estate market; the National Flood Insurance Program Extension Act of 2010 and Homebuyers Assistance and Improvement Act of 2010.
H.R. 5623, passed by the Senate on June 30, extended the closing deadline for the Homebuyer Tax Credit. The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010.
There will be no gap between June 30 and the date the President signs the bill into law. The National Association of Realtors (NAR) worked closely with Congressional leaders on both sides of the aisle to enact this important legislation. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.
Also on June 30, the Senate passed the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), an extension of the National Flood Insurance Program until September 30, 2010. This will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date of enactment of the extension. NAR members sent more than 250,000 letters to Members of Congress encouraging them to extend the program.
National Association of Realtors, Realtor Action Center
Mortgage Rates Might Not Be Low for Long
06/01/10: The near-record low mortgage rates seen during the past few weeks may not be around much longer. Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.
The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.
In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months. “If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC.
Bloomberg, Bob Willis and Anthony Feld
Mortgage Rates Close in on Record Lows
06/01/10: Home buyers unable to tap into a federal tax credit before it expired on April 30 are finding a consolation prize in mortgage rates, which dropped again this week to near-record lows.
According to Freddie Mac, interest on 30-year fixed loans averaged 4.78 percent compared to 4.84 percent last week, while the 15-year rate slipped to a new low of 4.21 percent from 4.24 percent.
The favorable borrowing costs will improve affordability and soften the impact of the tax credit program ending, says Freddie Mac chief economist Frank Nothaft.
Investor's Business Daily
Fannie Mae tightens lending standards
05/03/2010: Battered by a tidal wave of loan defaults, mortgage finance company Fannie Mae is tightening standards for the adjustable-rate and interest-only loans that fed the housing boom and contributed to the bust. The company said Friday it will require mortgage lenders to consider how high a borrower's mortgage payments might rise after teaser rates expire.
Fannie Mae also will enact tighter standards for "interest only" loans that allow borrowers to avoid making principal payments for several years. To get those loans, borrowers taking out new mortgages must have a down payment of at least 30 percent and enough assets for two months of living expenses.
Washington-based Fannie and sibling company Freddie Mac buy mortgages from lenders and sell them to investors with a guarantee against default. They have effectively been owned by the government since they nearly collapsed in September 2008.
Freddie Mac has already enacted similar policies for adjustable rate mortgages and no longer purchases interest-only loans, a spokesman said. Many consumers did not understand the terms of mortgages they took out during the housing boom. When their teaser rates expired and higher interest rates kicked in, a flood of loan defaults commenced and the housing bubble burst more than three years ago.
Fannie Mae's new rules, which go into effect in September, affect loans that adjust in five years or less. Those mortgages commonly reset based on the yield investors receive for U.S. Treasury debt or the London Interbank Offered Rate, also known as Libor.
Fannie Mae said lenders that make adjustable-rate mortgages are required to evaluate whether borrowers can make payments after the loan resets. They must calculate whatever is greater: two percentage points above the current index level, or the current index level plus an extra margin charged by the bank.
"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term," Marianne Sullivan, Fannie Mae's senior vice president of single family credit policy and risk management, said in a statement. The new standards, however, do not take into account the possibility that rates could jump dramatically. Borrowers would be qualified based on current levels for interest rates, which have been extraordinarily low.
The Federal Reserve has held its target range for its bank lending rate between zero and 0.25 percent, where it's remained since December 2008. Fed Chairman Ben Bernanke and his colleagues said they have leeway to hold rates at record lows because inflation is likely to stay subdued because of "slack" in the economy.
Alan Zibel, Associated Press
Home Buyer Tax Credit Expiring
04/01/2010: This is not April fools. Attention shoppers: You have barely a month left before the homebuyer tax credit expires. First-time homebuyers may qualify for up to $8,000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.
And this is absolutely, positively your last chance to claim the credit. (Probably.) So don't wait, thinking the credit will be extended for a third time. There is little sentiment for continuing this program, especially because many consider the latest iteration's results to be disappointing. Even the Senate's biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.
"He has no plans to introduce legislation to extend the credit," said Isakson's spokeswoman. "Part of the benefit of the tax credit was the urgency its sun-setting generated." That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped over the winter and early spring.
That may be because some people believed that Congress would just keep adding time to the game clock, according to Nicolas Retsinas, director of Harvard's Joint Center for Housing Study. That could have kept them home by the fireside instead of out house hunting.
"The credit's influence and impact has waned considerably," said Retsinas. "You got a lot more bang for the buck on the first go round," added Mike Larson, a real estate analyst with Weiss Research. "Most people acted on the presumption that the credit was going away." Should you rush? Any house hunter considering whether to hurry a purchase to take advantage of the credit should consider where they live.
Not every buyer qualifies for the credit. There's a prohibition on claiming the first-time homebuyer credit if either member of a couple owned a home within the three-year period. They can claim the existing homebuyer credit. Homebuyers who are under 18 or are listed as dependents on the tax returns of others don't qualify. The home must be kept at least three years.
The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return. Note that buyers get the full amount of the credit they're due even if that exceeds the amount of taxes they owe. If you're a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000.
CNNMoney.com
Current Real Estate Market Conditions
03/01/2010: Here are a few of the recent headlines regarding current real estate market conditions: "Existing Home Sales Drop", "Mortgage Interest Rates Hover Around 5%", "Home Construction Rises", "Lowe's Profit Rises 27%", "Home Buyer Credit Not Jolting Housing Market", and "Home Prices Gain for Seventh Straight Month."
It's all very conflicting. So how does anyone make sense of it? I'm frequently asked "How's the market?" That's a question that can't be answered directly. The question I have to ask in return is "What is it that you have in mind?" There's a saying that "real estate is local." That's become increasingly true and even more focused.
Not only is real estate now local to the point of specific property types in specific subdivisions, but it also varies according to each individual's situation. If you're selling your home in a desireable subdivision with median pricing below the average and you still have equity and you have a stable job and are moving up to a home in an equally desireable subdivision but with pricing that's significantly above the median and has experienced significant negative price pressure, then to you, the market is good.
On the other hand, if you've just lost your job and you have that desireable home in that desireable subdivision with higher than median pricing, experiencing negative price pressure and you have no, or negative equity, then to you, the market is bad.
The best thing for you to do, if you're considering buying or selling real estate, is to consult a real estate professional and get a detailed analysis of your situation. You may be pleasantly surprised.
Rose Real Estate LLC
Things to Consider when Considering Real Estate
02/01/2010: Don't buy if you can't stay put. If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.
On the financial side, it may make more sense to rent. One key question is whether it costs more, on average, to rent or own in your area. The rule of thumb is that if you pay 35 percent less in rent than you would for owning - including the monthly mortgage, property taxes, and any homeowner's fees - then it may be better to continue renting.
Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
Before house hunting, get pre-approved. Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
Get professional help. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Hire a buyer agent to represent you. He/she will have your interests at heart and can help you with strategies during the bidding, contingency and closing process.
CNNMoney.com
Mortgage Interest Rates on the Rise
01/04/2010: Mortgage interest rates crept up for the fourth week in a row Thursday, a troubling sign for borrowers hoping that home finance will remain near historic lows during the new year.
The rate on a 30-year fixed loan rose to 5.14 percent, from recent lows below 5 percent, the Mortgage-industry giant Freddie Mac reported. The cost of adjustable-rate home loans also edged up in the report, the final weekly survey of the year.
"Mortgages still remain affordable by historical standards,” said Frank Nothaft, Freddie Mac vice president and chief economist. But some analysts worry that uptick in recent weeks may portend a continued rise toward 6 percent in the new year. While that still would not be high by historical standards, that would dampen the buying power of home shoppers at a time when the housing market is still struggling to recover.
Where mortgage rates head from here, by affecting the health of the housing market, will also affect the tone of economic recovery in 2010. Even higher rates ahead? In recent months, demand for homes has strengthened and recession-linked declines in home prices have stopped. Government tax incentives for first-time buyers have helped fuel housing demand, and the Federal Reserve has helped to keep interest rates low by buying up mortgage-securities. (The Fed's demand for mortgage-based bonds is essentially pumping money into the market for housing finance, making it easier for lenders to provide credit.)
Both those forces appear set to retreat during 2010. The tax breaks are slated to end by midyear. And “in a move that's potentially important for interest rates“ the Fed has said it will stop buying mortgage bonds within about three months. The lower interest rates remain, the more buyers can afford to spend when they commit to spending perhaps 30 percent of their income to buy a house. If interest rates rise, it could put downward pressure on home prices, unless the interest-rate rise is offset by rising incomes.
In releasing the numbers Thursday, Mr. Nothaft gave an example of how low rates have been helping home buyers this year. “Based on today's median loan amount of $138,000, monthly principal and interest payments for a 30-year fixed-rate mortgage are close to one-third less than a decade ago when rates peaked at 8.6 percent in May 2000." The rate on a 30-year loan ends the year not far from where it stood a year ago, at 5.10 percent.
Along with official interest rates, another key barometer of the housing market will whether bank lending standards get looser or not. A good interest rate only helps if borrowers can get a loan approval, and lending conditions now are tight. It's a delicate balancing act.
By Mark Trumbull
Extended Home Buyer Tax Credit
12/01/09: Here is more information about the Extended Home Buyer Tax Credit, who qualifies, which properties and how much is available.
Pending Homes Sales hit 3-Year High
11/04/09: The volume of signed contracts to buy previously occupied U.S. homes rose for the eighth straight month in September as buyers scrambled to take advantage of a tax credit for first-time owners that expires at the end of this month.
The National Association of Realtors said Monday its seasonally adjusted index of sales agreements rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists surveyed by Thomson Reuters expected the index would be level at 103.8.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a good barometer of future sales.
MSNBC
Remodeling Costs Decrease
10/29/09: Remodeling costs are down an average of 5 percent to 10 percent nationwide with some areas down 20 percent, the remodeling industry reports.
In the 12 months that ended in March 2009, the most recent data available, $118.2 billion was spent on home-improvement projects, down from $146 billion in the 12 months ending in March 2007 – the national peak of remodeling activity – according to a report from the Harvard Joint Center for Housing Studies.
One of the reasons for the price decline is competition. Most home buyers spend the most on remodeling within the first two years after purchasing a home. Not only are there fewer home sales, but also strapped home builders are seeking remodeling work, confirms David Crowe, chief economist for the National Association of Home Builders.
The Wall Street Journal
New Support for State Housing Agencies
09/28/09: The U.S. Treasury is contemplating a new program that would provide as much as $15 billion to purchase tax-exempt mortgage bonds issued by states over the next three years.
The program would be beneficial for low-income home buyers who have long depended on state programs for low-interest mortgages. States have been unable to offer these mortgages in the last year because they haven’t been able to sell mortgage bonds. This program would solve that, according to the National Council of State Housing Agencies.
Source: Bloomberg, Dawn Kopecki
Pending Home Sales Climb
08/03/09: The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.
"The pronounced increase in April does indicate that actual existing home sales are poised to rise in the coming month or two," wrote Joshua Shapiro, chief U.S. economist with MFR Inc.
The index was 3.2 percent above last year's levels and has risen for three straight months after hitting a record low in January. A nearly 33 percent sales increase in the Northeast and a 9.8 percent jump in the Midwest led the overall surge. Sales contracts rose 1.8 percent in April from a month earlier in the West, but fell 0.2 percent in the South.
The big boost likely reflects the impact of a new $8,000 tax credit for first-time homebuyers that was included in the economic stimulus bill signed by President Barack Obama in February. Since buyers need to finish their purchases by Nov. 30 to claim the credit, "we expect greater activity in the months ahead," Lawrence Yun, the Realtors' chief economist, said in a statement.
The Associated Press
01/04/2011: January 1st through December 31, 2011. Includes all sales from El Paso County included in the Pikes Peak Multiple Listing Service. Information deemed reliable but not guaranteed.
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Single Family Total Sales: 8276 Avg List: $223,652 Avg Sale: $216,908 Avg DOM: 93 Sale % of List: 97 |
Patio, Condo, TH Total Sales: 1063 Avg List: $166,488 Avg Sale: $158,728 Avg DOM: 107 Sale % of List: 95 |
2px, 3px, 4px Total Sales: 113 Avg List: $164,671 Avg Sale: $152,133 Avg DOM: 103 Sale % of List: 93 |
Pending Home Sales Jump in October
Novemeber, 2011: Pending home sales rose strongly in October and remain above year-ago levels, according to the National Association of REALTORS®. The Pending Home Sales Index, a forward-looking indicator based on contract signings, surged 10.4 percent to 93.3 in October from 84.5 in September and is 9.2 percent above October 2010, when it stood at 85.5. The data reflects contracts but not closings.
Lawrence Yun, NAR chief economist, said improved contract activity is a hopeful sign. “Home sales have been plodding along at a sub-par level while interest rates are hovering at record lows, and there is a pent-up demand from buyers who normally would have entered the market in recent years. We hope this is indicates more buyers are taking advantage of the excellent affordability conditions,” he said.
“Many consumers are recognizing that home buyers in the past two years have had one of the lowest default rates in history. Moreover, continued inventory declines are another healthy sign for the housing market,” Yun added.
The PHSI in the Northeast surged 17.7 percent to 71.3 in October and is 3.4 percent above October 2010. In the Midwest, the index jumped 24.1 percent to 88.7 in October and remains 13.2 percent above a year ago. Pending home sales in the South rose 8.6 percent in October to an index of 99.5 and are 9.7 percent higher than October 2010. In the West the index slipped 0.3 percent to 105.5 in October but is 8.1 percent above a year ago.
“Although contract signings are up, not all contracts lead to closings. Many potential home buyers inadvertently hurt their credit scores and chances of getting a mortgage through easily averted actions, such as cancelling an old credit line while taking on a new one,” Yun said. “Such actions could unwittingly prevent buyers from obtaining a mortgage if their credit score is close to the margins of qualifying, or they might get a loan but with less favorable terms.”
NAR encourages consumers to be aware of their credit score and actions which could hurt or enhance it. HouseLogic.com, the association’s consumer Web site devoted to all aspects of home ownership, offers tips for improving credit scores at http://buyandsell.houselogic.com/articles/7-tips-improving-your-credit/.
REALTOR® Magazine
Market Statistics:
The following links report listing, sales and pricing statistics for the greater Colorado Springs area, otherwise known as the Pikes Peak region. There's average and median sales price information as well as charts and graphs to help identify market trends:
Listing and Sales Summary
PPAR Statistical Highlights
Some News Bits (or Bytes):
August, 2011: Foreclosures Reach Lowest Level Since 2007 - Foreclosure filings dropped again in July, marking the 10th straight month for year-over-year declines and reaching their lowest level since November 2007, RealtyTrac reports. But analysts are still mostly attributing the drop to banks’ processing delays as they take more time to take action against delinquent home owners.
Home-Installed Tech to Grow in Importance - A survey of 1,793 members of the National Association of REALTORS® by the Consumer Electronics Association (CEA) reveals that more than 50 percent are excited about homes with new technologies, and nearly 67 percent say that their clients are as well. During the last two years, 90 percent of REALTORS® have aided in the purchase, sale, or showing of a home with advanced technologies.
Weak Appraisals Hamper Home Sales, Experts Say - Weak appraisals are “driving down the real estate market” and “borders on buffoonery,” says William Maxwell, an expert in finance and professor at Southern Methodist University's business school, who has seen his own Dallas property fluctuate in appraised value by $60,000 in just a year. While the sluggish economy has pushed home values down the last few years, some real estate professionals and economists say that low-ball appraisals are pushing values down even more and undermining a housing recovery, The Wall Street Journal reports.
Do QR Codes Work?
July, 2011: Over the past several months, QR Codes — those funny looking square bar codes — have become all the rage. They started popping up in retail stores, magazines and every real estate tradeshow in this hemisphere. Real estate agents were anxious to use them and vendors were anxious to incorporate them as part of their product (Why not? They’re free.) as “added value.”
The problem this created is that very few took the time to truly understand QR codes and introduced them in fundamentally flawed ways; linking QR codes to traditional websites, for example. Fast forward six months to today and what you hear is frustration when it comes to QR codes. Statements such as “I tried them and they don’t work,” or “people aren’t really using them,” are common place.
QR Codes are a phenomenal emerging (in this country at least) technology that when used correctly can work to your advantage. However, they are not the end-all-be-all and there must be a strategy in place when utilizing them; best practice is to have them accompany your mobile web strategy.
As mentioned, QR should drive traffic to the company’s mobile website, where consumers can have an experience tailored specifically to them as a mobile user and get quick and efficient access to the real estate information they are looking for. More importantly, these scanners will now recognize that site as a reliable mobile destination for real estate information that they can return to over and over again.
The strategy employed is simple and effective and can garner clear and measurable results. QR Codes, if implemented correctly, can work in real estate for real estate consumers. Don’t give up on them just yet!
Seth Kaplan, RISMedia
Colorado Springs one of 10 Top Turnaround Towns
June, 2011: The housing market in this metro area at the base of the Rockies is facing some headwinds. For one thing, the unemployment rate is high, at 10.1% in March. Colorado Springs is also a foreclosure hot spot, with one of every 157 housing units receiving some kind of foreclosure filing in the first three months of 2001.
Move.com is forecasting a turnaround, however, on the strength of the area's asking prices, which rose nearly 2% in March compared with a month earlier. Population also keeps expanding; about 10,000 people were added to Census rolls last year. That should pressure prices upward.
Another good gauge of demand is that homes have been selling quickly, staying on the market a median of 113 days, far below the national median of 160 days.
CNNMoney
10 Tips for Surviving the Housing Market
The economy is starting to improve but the housing market has yet to show any significant signs of recovery, which has homeowners nervous. Home prices are hovering near their recession lows, hit in April 2009, according to the latest Case-Shiller home-price report. It’s a buyer's market and by many projections, it won’t shift to a seller’s market for a good year or more.
So, how do homeowners, who have most of their equity in depressed real estate, slog through until it becomes a seller’s market? Here are 10 tips from real-estate moguls who have survived several housing-market downturns.
1. Homeowners should be very encouraged by the fact that home buyer sentiment has improved.
“The mood has definitely changed … Buyers are feeling more positive,” said Barbara Corcoran, the founder and former president of the Corcoran Group and a real-estate pro who has survived four housing-market slumps. “The activity level has jumped considerably in the last 60 days … over and above the typical spring market,” she said. Rents have been soaring and it’s now cheaper to buy than rent pretty much anywhere you go, Corcoran pointed out, which will only add fuel to home-buyer desire.
2. Builders aren’t building many new homes, which means less competition.
Housing starts have been flat for the past year, according to data from the Commerce Department, which means that homeowners won’t really have to worry about competing with new construction when they go to sell their homes. “You’re seeing a lot less inventory on the market while at the same time, there are more buyers in the market,” said R. Donahue Peebles, chairman and CEO of the Peebles Corporation, which has a $4 billion portfolio that includes properties in Miami, Las Vegas and Washington, D.C.
3. In about 40 percent of major metropolitan cities, home prices are going up, according to the National Association of Realtors.
Low interest rates have been tough on savers, since saved money isn’t making as much interest, but they help drive up housing prices, Corcoran noted.
4. Remember: Your house may be worth less on paper, but you won’t lose any money unless you sell.
This is one thing homeowners often forget when they get caught up in the latest headlines about home prices or checking on the value of their own home: If you don’t need to sell right now — don’t. Corcoran said she owns a country house that she’s not living in, but she plans to hang onto it until the market recovers. “I can’t bear to let it go for 50 percent of what I could have five years ago.”
5. Slumps feel like they go on forever, but the recoveries can happen quickly.
“Prices are always slow to unwind. And the time feels much longer than it actually is,” Corcoran said. “But when they recover, they recover like gangbusters — and you can make up a lot of appreciation in a short amount of time,” she said. No one is suggesting this will be a "gangbusters" recovery, Corcoran clarified, but it will probably happen more quickly than most people think. “I think people are grossly overestimating how long it’s going to take,” Corcoran said. Previous price recoveries have happened in quadruple- or triple-time, she said. “Maybe now it’s double,” she added.
6. While you’re waiting, do some renovations.
There are two big financial benefits to home improvements such as upgrading a kitchen or adding "curb appeal" (visual appeal for potential buyers before they even enter the house) during a housing-market slump: First, you’ll get a better bang for your buck when the market recovers and you sell your house. Second, you’ll save money on the labor. It’s basic supply-and-demand: When times are good and the work is flowing, contractors can charge more, and when the work is slow, they’re more willing to bargain on the price. “Contractors are much more hungry for work right now,” Peebles said. “Architects and consultants are also hungry for work,” he added. Not only will renovations help you command a better price when you go to sell the house but upgrades will help you sell the house more quickly in a competitive market. Given how many homes are on the market, “buyers don’t have to tolerate things they don’t want,” Corcoran said. For example: hardwood floors. “I don’t care how pretty you think your carpet is, you rip it up and refinish the floors,” Corcoran said. “Nobody wants to move into your carpet.” And, she said, it’s more important now than ever to have curb appeal. “Home buyers shop online nowadays and if the façade of the house doesn’t grab them in the first few seconds, they’ll click onto the next one,” Corcoran said. However, she cautions, you have to be smart with your renovations and make sure you spend the least for the biggest payoff. So, maybe you don’t replace all of the kitchen cabinets, but you put on new doors or new hardware. Or, you replace the countertop. Change out the kitchen floor. Fix the doorbell. Repoint the driveway. Formica and and broken doorbells may have been acceptable during the boom, but in this market, they can kill the deal. Plus, as an added bonus, you’ll get to enjoy the upgrades until the market recovers!
7. Don’t date yourself.
There are certain things that will date a home as soon as you walk into it. Would you believe that one of the things that can date a home in today’s market is a granite countertop? “Granite is out, I hate to tell you!” Corcoran said. That’s right — it used to be that formica and linoleum dated a house, but in this market, high-end materials like granite can date a house. The new thing is man-made materials such as Caesarstone (which is 93 percent quartz) or DuPont’s [DD 56.71 -0.08 (-0.14%) ] Corian, which are cheaper, more durable and come in hundreds of colors. Stainless steel sinks are also on the way out — ceramic is back, Corcoran said. Farmhouse sinks are still safe, though: they've withstood the test of time, she said. Her advice is to go shopping in a new, high-end development to see what all the latest materials and gadgets are, and then choose your renovations wisely to stay competitive.
8. Don’t let yourself get stuck. If you want to trade up — trade up.
“If you wish you had a better street, a nicer town, a better school district or a better backyard view — whatever you’re dreaming about, there’s no better time to trade up,” Corcoran said. “Even if you have to take 30-percent less on your house, you’ll get a better home and save 30 percent [on the trade-up], so you’re ahead of the game,” she said. So even though it may seem counterintuitive to buy more real estate when you're feeling trapped in the home you already own, real estate pros say a downturn like this is the best time to buy. “The biggest mistake I ever made in any downturn was not buying my first apartment during a downturn … I was too scared,” she said. “I still regret it.” After missing that opportunity in her first downturn, she said, it took her five years to get up enough money to get into the market.
9. Consider buying a vacation home.
Not only is now a great time to trade up, it's an even better time to buy a vacation home, given that some of the most depressed real estate in America is in sunny destinations such as Florida, California and Las Vegas. It's not just because of the depressed home values, but also for the super-low interest rates. When Peebles started in real estate in 1979, he said, interest rates were at nearly 20 percent. Today, they remain under 5 percent. It's not easy to go against the tide but that's how you make money in real estate. “I saw great fortunes that were made in the early '90s. I saw great fortunes made back in the early '80s,” Peebles said. “I’m a big believer in the fact that you buy when fewer people are buying … It’s stressful, but you get rewarded for it. It’s called risk-taking.”
10. Be a smart seller.
When you are ready to sell, resist the urge to go with the real-estate agent who gives you the highest value on your house. “Always go with the lowest — that guy is truthful!” Corcoran said. “The best broker is the one who will tell you what your house is really worth.” It can be nauseating to watch the value of your home drop but the bottom line, the pros say, is not to get bogged down in the slump — but focus on the recovery. Corcoran recommends ignoring all the negative housing news, and kicking back and toasting some marshmallows or firing up the grill. “All that time you’d spend being worried, you could be enjoying your house!” Corcoran said. “I believe that people who hold on will be rewarded,” Peebles said. “I think we will look back at this time period as one of the best buying opportunities in the nation’s history.”
“The biggest lesson I’ve learned is that it always comes back,” he said. “And if you believe in the USA, then you have to believe in the housing market of the USA.”
By: Cindy Perman, CNBC.com
A Potential Housing Shortage
The focus of the U.S. real-estate market lately has been the number of foreclosures and people trying to purchase cheap housing. But Brian Wesbury, chief economist at First Trust Advisors, says that if Americans don’t start focusing on building new houses, the market will have a much bigger problem on its hands.
“We need one and a half million houses per year just to keep up with population growth,” Wesbury said in an interview with Steve Forbes. “And then if you throw in, you know, fires and tear-downs and just worn-out properties, we need 1.6 million or more per year. Right now, we’re down to about six and a half, seven months’ inventory whether you look at new homes or existing homes.”
Some people might shrug these statistics off, considering the number of foreclosures on the market. “Yes there’s foreclosures coming into the market, but we’re only starting right now,” Wesbury says. “... We’re starting one-third of the houses we need just to keep up with population growth, and that can’t last.”
There's still the issue of foreclosures. Jason Thomas, chief investment officer for Aspiriant, a California wealth-management firm, says he doesn’t see the foreclosure situation getting better until the labor market picks up. “So many people are getting to a point where they just can’t hold on anymore, and we may see another wave of that if we don’t see a pretty robust turnaround in the labor market,” he says.
Although there may a greater level of foreclosures and owner-occupied homes may not be as robust, people still need a place to live. There is demand from companies that are scooping up whole floors or housing developments because they have the cash on hand, Roseman says. And for those people who can get a mortgage, rates are very low and homes are very affordable.
By Alexandra Zendrian, Forbes
Alternative Real Estate Investments
When most people think of investing in real estate, they think of buying a single family home and renting it out. Recently, there has been a trend of those who refer to fix and flips or lease/options as real estate investing, but in my opinion, that's more of a real estate job than an investment. On the same buy and rent tone, an individual can buy and hold duplexes, tri-plexes and four unit homes.
The same can be said of commercial properties. Direct investments can be made in office buildings, warehouses, or even vacant land. All of the various types of real property can be purchase individually or with an investment group. Either way, the investor tends to have a more active role.
Another means of investing in real property is indirectly through limited partnerships, funds or real estate investment trusts (REIT). This is an excellent way of taking advantage of the available returns in real estate, without some of the hassles and time commitments of active and direct investments. Of course, your returns tend to be lower and sometimes the management fees are quite high, thus resulting in a lower net return on investment.
There is another way to invest in real estate that tends not to be discussed as much and that's by investing in companies that are involved in the development of land or building of homes and commercial buildings. Although there are some cases where the company is privately held, these investments are typically made in publicly traded companies listed on the various stock exchanges. One of the downsides to making this type of an investment is that sometimes the value of the stock degrades not because of the performance of the company, but due to other outside, overall stock market factors.
This brings me to another option that's available to you and is something I'm offering right now. I call it a hybrid fund investment. In this particular case it's essentially a fund that invests in home building (I've identified a market niche that's being underserved). The approach is unique in that the investment isn't directly in a home building company and the investment obligation isn't long-term (only 12-15 months). The returns are non-leveraged, secured and pay at an expected rate of 14%. (Due to current banking conditions, leverage isn't an option. At some point in the future, I'll be able to apply partial leverage and provide even greater returns).
If you or anyone you know are interested in making better than average returns on investment that are secured, predictable, with someone you know and trust, please give me a call. I'll provide you with more specifics, an overview of the project, the expected time frame, and all of the relevant information for you to make an informed investment decision.
By the way, did you know that you could use funds from an IRA for this investment. Of course, I'm not a CPA or a Tax Attorney, so please do consult the appropriate professionals as needed. My approach isn't to lock you into a long-term investment where your money never sees the light of day. I'm confident that you'll be so pleased with how this goes, you'll want to participate in the next round. I look forward to hearing from you.
Tony T. Rose, M.B.A., 719-330-2452 (please leave a message)
Cost vs. Value: Home Improvements
Sometimes when preparing a home for sale, you consider making improvements. Proceed with caution. Unless there's a specific deferred maintenance issue that needs to addressed, or simply increasing curb appeal, it may not be a good financial investment. Below are a few projects along with the expected cost recoup:
Basement Remodel: 70%
Siding Replacement: 72%
Window Replacement: 72%
Deck Addition (wood): 72%
Minor Kitchen Remodel: 72%
Major Kitchen Remodel: 68%
Garage Door Replacement: 83%
Entry Door Replacement (steel): 102%
Remember, this is not a return on investment rather a return of investment. The numbers reported are national averages. You can find a more extensive list with regional results at remodeling.hw.net.
Colorado Springs Real Estate Market Statistics - 2010
01/04/2011: January 1st through December 31, 2010. Includes all sales from El Paso County included in the Pikes Peak Multiple Listing Service. Information deemed reliable but not guaranteed.
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Single Family Total Sales: 7254 Avg List: $236,315 Avg Sale: $230,471 Avg DOM: 101 Sale % of List: 97.5 |
Patio, Condo, TH Total Sales: 1224 Avg List: $160,894 Avg Sale: $155,784 Avg DOM: 116 Sale % of List: 96.8 |
2px, 3px, 4px Total Sales: 121 Avg List: $153,616 Avg Sale: $146,436 Avg DOM: 100 Sale % of List: 95.3 |
Real Estate IRAs
12/01/10: The stock market is bouncing around with little or no consistency or reasonable trend predictability. Individual stocks for companies that are performing well are moving negatively with the mass-market trends. There are rumors and allegations that the individual investor can no longer compete with hedge funds or institutional investors. So, what are you to do?
Of course, you could put all your money into low risk, but also very low yielding certificate of deposit. Long term, you wont lose any capital, but you won't make any real gains. Another option is to use your IRA funds to invest in Real Estate.
Yes, I hear the initial response that real estate isn't doing much better. Yes and no. For the most part, major corrections on a broad market perspective have already occurred. The downside risk is low and the investment is secured by something tangible. There are some great buys to be had and the long-term return expectations are high.
There are a couple of different strategies, such as buy and hold, or rehab and turnover. I find great deals for both strategies quite frequently. There are properties you can buy individually and others you may invest with others.
As an additional protection for you, and unlike many others, I don't have you invest directly into one of my entities, I structure deals so you still have control over your investments. Not that I'd ever do anything unethical or illegal, but it's always good to have everything structured in a way that you're best protected.
The process is fairly easy and straight-forward. If you have some funds under-performing and you'd like the opportunity to earn higher, more consistent and more predictable returns, please make contact today.
Tony T. Rose, MBA
How Historically Low Mortgage Rates Can Work for You
11/03/10: Rates on 30-year fixed-rate mortgages (excluding jumbos) hit an average of 4.3% in September, the lowest level since 1953, according to Freddie Mac, and are still hovering below 4.5%. Fifteen-year rates are even more mouthwatering: 3.8%. Mind you, those are averages. The most creditworthy borrowers can do even better, snagging rates perhaps a quarter of a percentage point lower.
So what's in this for you? A lot, potentially. If you have a credit score of 720 or higher and at least 20% equity in your home, you might use these crazy-low rates to shorten your mortgage term, free up cash, or even add to your real estate holdings, for example. Whatever you decide, don't wait too long.
"The consensus is that rates will gradually move up in the new year," says Frank Nothaft, chief economist for Freddie Mac. Freddie projects that the average 30-year fixed will hit 5% by the end of 2011. It's easy to see why more than a quarter of borrowers today are choosing a 15-year mortgage, according to analytics firm Core-Logic, up from about 9% in 2007. A 15-year lets you save in two ways: You get a rate that's about half a percentage point lower than that of a standard 30-year, plus you can save tens of thousands by retiring the loan in half the time.
What if you can't manage the bigger monthly bite? Refi to another 30-year and simply pay more in months when you're able to, assuming you're disciplined enough to actually follow through with that plan. Given that few new mortgages carry prepayment penalties anymore, kicking in extra money shouldn't be a problem, says Keith Gumbinger, vice president of mortgage data tracker HSH Associates. Caveat: If you have only a few years left on your current mortgage, or you plan to move soon, a refi may not pay off. Calculate how long it will take to break even on your closing costs, up to three years is typical.
Freeing up cash may be your biggest priority right now. Maybe you're trying to replenish your emergency fund after being out of work, or you have lots of high-interest credit card debt to pay off. Maybe your twins got into Harvard, and you need to cover some of the tuition out of current income. Or maybe you see enough investment opportunities around that you want to lower your monthly payment and invest the difference. True, you won't save nearly as much in interest as you would with a 15-year. But that's not so bad, says Matthew Keeling, a certified financial planner in Mashpee, Mass., as long as you do something smart with the extra $319 a month you'll save.
Double down on real estate: Do your retirement plans call for moving to a house near the beach or a cabin in the mountains? If you can afford another mortgage payment, you may want to start your search now, while rates are in your favor and prices are depressed. Ditto if you've been wanting to buy a second home or an investment property, says Jonathan Bergman, vice president of Palisades Hudson Financial Group in Scarsdale, N.Y.
Assuming you're buying the place as a true second home, lenders generally charge the same rate they would for a primary residence. But if you intend to rent the place out, even if just for a few years until you retire and you need rental income to qualify for the mortgage, it's considered an investment property. And mortgage rates on investment properties are running about a half to a full percentage point higher. Still, the numbers are "pretty compelling," says Justin Krane, a certified financial planner in Los Angeles.
By Sarah Max, CNNMoney.com
What to Make of Recent News Headlines
10/04/2010: Some of the recent real estate news headlines: Pending U.S. Sales of Existing Homes up 4.3% in August, Bank of America Halts Foreclosures in 23 States, Mortgage Rates Drop to 4.32%, U.S. Home Sales Show Glimmers of Recovery. So what do you do with it all? The short answer is research, analysis and to be non-reactive. There is good and bad in every market and with each of the headlines above there is good news for some.
For instance, with pending sales up and mortgage rates low, that's good for the overall market as it helps to keep homes affordable to buyers and it would appear people are in fact still actively buying. As far as BofA and possibly other institutions being more detailed in the process, yes, this will slow down the absorption of foreclosure inventory, but this does create a bit of an immediate shortage. This can be good for home sellers; less competition in the market. At least for now. As mentioned before, every market, every property and every situation is different. Don't base your decisions on headlines. Dig deeper and get some professional advice as you might be pleasantly surprised.
Colorado Springs Market Statistics
09/06/2010: January 1st through August 31, 2010. Includes all sales from El Paso County included in the Pikes Peak Multiple Listing Service. Information deemed reliable but not guaranteed.
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Single Family Total Sales: 5130 Avg List: $235,493 Avg Sale: $229,622 Avg DOM: 96 Sale % of List: 97.5 |
Patio, Condo, TH Total Sales: 852 Avg List: $162,133 Avg Sale: $157,354 Avg DOM: 113 Sale % of List: 97.0 |
2px, 3px, 4px Total Sales: 85 Avg List: $155,469 Avg Sale: $147,686 Avg DOM: 95 Sale % of List: 94.9 |
Record Lows for Mortgage Rates, However...
08/02/10: The 30-year fixed mortgage rate fell to a new low of 4.54 percent this week from 4.56 percent last week and an average of 5.25 percent a year ago. The 15-year fixed loan rate also hit a record low of 4 percent, down from 4.03 percent a week ago and 4.69 percent last year.
However, the lending landscape has changed quite drastically over the past few years. Practices, approvals and standards that were once widely accepted have either vanished or transformed beyond the point of recognition. Many banks, which were once extremely careless with their loan underwriting techniques and approvals, have dug themselves into a significant hole that will take many years to climb out of.
Today, banks are making sure they don’t make the same mistakes again, so loan underwriting standards have become more stringent than ever before. According to a recent Federal Reserve survey, it was found that about 75% of the banks surveyed indicated they had tightened their lending standards for prime, subprime and commercial mortgages. That was up from about 60% in the previous survey. With this sharp increase in lending standards, borrowers are being turned down for real estate loans at an alarming rate.
Some of the top reasons for loans being denied are poor credit, insufficient liquidity, lack of income, debt ratios, employment history and self-employment. Although all of these have always been taken into consideration, they are now looked at even more stringently.
Obviously some of these newly structured standards are for the betterment of the industry, and our overall economy, but at the same time, home buyers across the country are realizing quickly that reputable credit and stable income aren’t always enough in qualifying for a loan. For example, you may have great credit and a stable work history, and even have enough cash for a sizeable down payment. You could be denied because you won't end up with enough cash in reserves after closing.
RISMedia, The Wall Street Journal
Important Real Estate Legislation Passes
07/02/10: The President signed into law two important pieces of legislation of great importance for the real estate market; the National Flood Insurance Program Extension Act of 2010 and Homebuyers Assistance and Improvement Act of 2010.
H.R. 5623, passed by the Senate on June 30, extended the closing deadline for the Homebuyer Tax Credit. The extension applies only to transactions that have ratified contracts in place as of April 30, 2010, that have not yet closed. The legislation is designed to create a seamless extension; the new closing deadline for eligible transactions is now September 30, 2010.
There will be no gap between June 30 and the date the President signs the bill into law. The National Association of Realtors (NAR) worked closely with Congressional leaders on both sides of the aisle to enact this important legislation. Extending the tax credit closing deadline will help provide additional stability to real estate markets across the nation.
Also on June 30, the Senate passed the National Flood Insurance Program Extension Act of 2010 (H.R. 5569), an extension of the National Flood Insurance Program until September 30, 2010. This will allow transactions to move forward. The bill is retroactive and covers the lapse period from June 1, 2010, to the date of enactment of the extension. NAR members sent more than 250,000 letters to Members of Congress encouraging them to extend the program.
National Association of Realtors, Realtor Action Center
Mortgage Rates Might Not Be Low for Long
06/01/10: The near-record low mortgage rates seen during the past few weeks may not be around much longer. Signs of improving economic conditions could lead Federal Reserve Chair Ben Bernanke to raise key interest rates, driving up mortgage rates, says Stephen Stanley, chief economist at Pierpont Securities LLC.
The evidence includes more consumers are paying their bills on time. Past-due accounts at American Express declined 34 percent compared to a year ago, and Target Corp. reported its lowest delinquency rate in two years during the second quarter.
In another sign of economic improvement, fewer banks reported tightening lending standards this month, one reason consumer borrowing rose for the second time in three months. “If lending standards start to stabilize, that’ll be another reason to remove the emergency measures, including the zero rate,” says Jay Bryson, a senior global economist at Wells Fargo Securities LLC.
Bloomberg, Bob Willis and Anthony Feld
Mortgage Rates Close in on Record Lows
06/01/10: Home buyers unable to tap into a federal tax credit before it expired on April 30 are finding a consolation prize in mortgage rates, which dropped again this week to near-record lows.
According to Freddie Mac, interest on 30-year fixed loans averaged 4.78 percent compared to 4.84 percent last week, while the 15-year rate slipped to a new low of 4.21 percent from 4.24 percent.
The favorable borrowing costs will improve affordability and soften the impact of the tax credit program ending, says Freddie Mac chief economist Frank Nothaft.
Investor's Business Daily
Fannie Mae tightens lending standards
05/03/2010: Battered by a tidal wave of loan defaults, mortgage finance company Fannie Mae is tightening standards for the adjustable-rate and interest-only loans that fed the housing boom and contributed to the bust. The company said Friday it will require mortgage lenders to consider how high a borrower's mortgage payments might rise after teaser rates expire.
Fannie Mae also will enact tighter standards for "interest only" loans that allow borrowers to avoid making principal payments for several years. To get those loans, borrowers taking out new mortgages must have a down payment of at least 30 percent and enough assets for two months of living expenses.
Washington-based Fannie and sibling company Freddie Mac buy mortgages from lenders and sell them to investors with a guarantee against default. They have effectively been owned by the government since they nearly collapsed in September 2008.
Freddie Mac has already enacted similar policies for adjustable rate mortgages and no longer purchases interest-only loans, a spokesman said. Many consumers did not understand the terms of mortgages they took out during the housing boom. When their teaser rates expired and higher interest rates kicked in, a flood of loan defaults commenced and the housing bubble burst more than three years ago.
Fannie Mae's new rules, which go into effect in September, affect loans that adjust in five years or less. Those mortgages commonly reset based on the yield investors receive for U.S. Treasury debt or the London Interbank Offered Rate, also known as Libor.
Fannie Mae said lenders that make adjustable-rate mortgages are required to evaluate whether borrowers can make payments after the loan resets. They must calculate whatever is greater: two percentage points above the current index level, or the current index level plus an extra margin charged by the bank.
"Our goal is to make sure consumers can sustain their mortgages and remain in their homes over the long term," Marianne Sullivan, Fannie Mae's senior vice president of single family credit policy and risk management, said in a statement. The new standards, however, do not take into account the possibility that rates could jump dramatically. Borrowers would be qualified based on current levels for interest rates, which have been extraordinarily low.
The Federal Reserve has held its target range for its bank lending rate between zero and 0.25 percent, where it's remained since December 2008. Fed Chairman Ben Bernanke and his colleagues said they have leeway to hold rates at record lows because inflation is likely to stay subdued because of "slack" in the economy.
Alan Zibel, Associated Press
Home Buyer Tax Credit Expiring
04/01/2010: This is not April fools. Attention shoppers: You have barely a month left before the homebuyer tax credit expires. First-time homebuyers may qualify for up to $8,000, while those who are trading up could get as much as $6,500. But either way, buyers have to ink sales contracts by the end of April and close before July 1 to see the refund.
And this is absolutely, positively your last chance to claim the credit. (Probably.) So don't wait, thinking the credit will be extended for a third time. There is little sentiment for continuing this program, especially because many consider the latest iteration's results to be disappointing. Even the Senate's biggest proponent of the homebuyer tax credit, Johnny Isakson, R-Ga., is ready to let it end.
"He has no plans to introduce legislation to extend the credit," said Isakson's spokeswoman. "Part of the benefit of the tax credit was the urgency its sun-setting generated." That urgency was less pronounced after the latest extension, which was enacted last fall. While the first version, which just covered first-time homebuyers, netted huge sales jumps, the real estate market slumped over the winter and early spring.
That may be because some people believed that Congress would just keep adding time to the game clock, according to Nicolas Retsinas, director of Harvard's Joint Center for Housing Study. That could have kept them home by the fireside instead of out house hunting.
"The credit's influence and impact has waned considerably," said Retsinas. "You got a lot more bang for the buck on the first go round," added Mike Larson, a real estate analyst with Weiss Research. "Most people acted on the presumption that the credit was going away." Should you rush? Any house hunter considering whether to hurry a purchase to take advantage of the credit should consider where they live.
Not every buyer qualifies for the credit. There's a prohibition on claiming the first-time homebuyer credit if either member of a couple owned a home within the three-year period. They can claim the existing homebuyer credit. Homebuyers who are under 18 or are listed as dependents on the tax returns of others don't qualify. The home must be kept at least three years.
The credit may be claimed on 2009 taxes, even if the return was already filed. Just submit an amended return. Note that buyers get the full amount of the credit they're due even if that exceeds the amount of taxes they owe. If you're a first-time buyer and your total tax bill for the year is $6,000, you get all that back plus another $2,000.
CNNMoney.com
Current Real Estate Market Conditions
03/01/2010: Here are a few of the recent headlines regarding current real estate market conditions: "Existing Home Sales Drop", "Mortgage Interest Rates Hover Around 5%", "Home Construction Rises", "Lowe's Profit Rises 27%", "Home Buyer Credit Not Jolting Housing Market", and "Home Prices Gain for Seventh Straight Month."
It's all very conflicting. So how does anyone make sense of it? I'm frequently asked "How's the market?" That's a question that can't be answered directly. The question I have to ask in return is "What is it that you have in mind?" There's a saying that "real estate is local." That's become increasingly true and even more focused.
Not only is real estate now local to the point of specific property types in specific subdivisions, but it also varies according to each individual's situation. If you're selling your home in a desireable subdivision with median pricing below the average and you still have equity and you have a stable job and are moving up to a home in an equally desireable subdivision but with pricing that's significantly above the median and has experienced significant negative price pressure, then to you, the market is good.
On the other hand, if you've just lost your job and you have that desireable home in that desireable subdivision with higher than median pricing, experiencing negative price pressure and you have no, or negative equity, then to you, the market is bad.
The best thing for you to do, if you're considering buying or selling real estate, is to consult a real estate professional and get a detailed analysis of your situation. You may be pleasantly surprised.
Rose Real Estate LLC
Things to Consider when Considering Real Estate
02/01/2010: Don't buy if you can't stay put. If you can't commit to remaining in one place for at least a few years, then owning is probably not for you, at least not yet. With the transaction costs of buying and selling a home, you may end up losing money if you sell any sooner - even in a rising market. When prices are falling, it's an even worse proposition.
On the financial side, it may make more sense to rent. One key question is whether it costs more, on average, to rent or own in your area. The rule of thumb is that if you pay 35 percent less in rent than you would for owning - including the monthly mortgage, property taxes, and any homeowner's fees - then it may be better to continue renting.
Start by shoring up your credit. Since you most likely will need to get a mortgage to buy a house, you must make sure your credit history is as clean as possible. A few months before you start house hunting, get copies of your credit report. Make sure the facts are correct, and fix any problems you discover.
If you can't put down the usual 20 percent, you may still qualify for a loan. There are a variety of public and private lenders who, if you qualify, offer low-interest mortgages that require a down payment as small as 3 percent of the purchase price.
Before house hunting, get pre-approved. Getting pre-approved will you save yourself the grief of looking at houses you can't afford and put you in a better position to make a serious offer when you do find the right house. Not to be confused with pre-qualification, which is based on a cursory review of your finances, pre-approval from a lender is based on your actual income, debt and credit history.
Get professional help. Even though the Internet gives buyers unprecedented access to home listings, most new buyers (and many more experienced ones) are better off using a professional agent. Hire a buyer agent to represent you. He/she will have your interests at heart and can help you with strategies during the bidding, contingency and closing process.
CNNMoney.com
Mortgage Interest Rates on the Rise
01/04/2010: Mortgage interest rates crept up for the fourth week in a row Thursday, a troubling sign for borrowers hoping that home finance will remain near historic lows during the new year.
The rate on a 30-year fixed loan rose to 5.14 percent, from recent lows below 5 percent, the Mortgage-industry giant Freddie Mac reported. The cost of adjustable-rate home loans also edged up in the report, the final weekly survey of the year.
"Mortgages still remain affordable by historical standards,” said Frank Nothaft, Freddie Mac vice president and chief economist. But some analysts worry that uptick in recent weeks may portend a continued rise toward 6 percent in the new year. While that still would not be high by historical standards, that would dampen the buying power of home shoppers at a time when the housing market is still struggling to recover.
Where mortgage rates head from here, by affecting the health of the housing market, will also affect the tone of economic recovery in 2010. Even higher rates ahead? In recent months, demand for homes has strengthened and recession-linked declines in home prices have stopped. Government tax incentives for first-time buyers have helped fuel housing demand, and the Federal Reserve has helped to keep interest rates low by buying up mortgage-securities. (The Fed's demand for mortgage-based bonds is essentially pumping money into the market for housing finance, making it easier for lenders to provide credit.)
Both those forces appear set to retreat during 2010. The tax breaks are slated to end by midyear. And “in a move that's potentially important for interest rates“ the Fed has said it will stop buying mortgage bonds within about three months. The lower interest rates remain, the more buyers can afford to spend when they commit to spending perhaps 30 percent of their income to buy a house. If interest rates rise, it could put downward pressure on home prices, unless the interest-rate rise is offset by rising incomes.
In releasing the numbers Thursday, Mr. Nothaft gave an example of how low rates have been helping home buyers this year. “Based on today's median loan amount of $138,000, monthly principal and interest payments for a 30-year fixed-rate mortgage are close to one-third less than a decade ago when rates peaked at 8.6 percent in May 2000." The rate on a 30-year loan ends the year not far from where it stood a year ago, at 5.10 percent.
Along with official interest rates, another key barometer of the housing market will whether bank lending standards get looser or not. A good interest rate only helps if borrowers can get a loan approval, and lending conditions now are tight. It's a delicate balancing act.
By Mark Trumbull
Extended Home Buyer Tax Credit
12/01/09: Here is more information about the Extended Home Buyer Tax Credit, who qualifies, which properties and how much is available.
- Extends the First-Time Home Buyer Tax Credit of up to $8,000 to first-time home buyers until April 30, 2010.
- Expands the credit to grant up to $6,500 credit to current home owners purchasing a new or existing home between November 7, 2009 and April 30, 2010.
- First-time home buyers who purchase homes between November 7, 2009 and April 30, 2010. To qualify as a “first-time home buyer” the purchaser or his/her spouse may not have owned a residence during the three years prior to the purchase.
- Current home owners purchasing a home between November 7, 2009 and April 30, 2010, who have used the home being sold or vacated as a principal residence for five consecutive years within the last eight.
- The Extended Home Buyer Tax Credit may be applied to primary residences, including: single-family homes, condos, townhomes, and co-ops.
- The maximum allowable credit for first-time home buyers is $8,000. The maximum allowable credit for current homeowners is $6,500. Each tax credit is determined by the price of the home and the buyer's income.
- Under the Extended Home Buyer Tax Credit, which is effective on November 7, 2009, single buyers with incomes up to $125,000 and married couples with incomes up to $225,000—may receive the maximum tax credit.
- Under the Extended Home Buyer Tax Credit, as long as a written binding contract to purchase is in effect on April 30, 2010, the purchaser will have until July 1, 2010 to close.
- The buyer does not need to repay the tax credit, if he/she occupies the home for three years or more. However, if the property is sold during this three-year period, the full amount of the credit will be recouped on the sale.
Pending Homes Sales hit 3-Year High
11/04/09: The volume of signed contracts to buy previously occupied U.S. homes rose for the eighth straight month in September as buyers scrambled to take advantage of a tax credit for first-time owners that expires at the end of this month.
The National Association of Realtors said Monday its seasonally adjusted index of sales agreements rose 6.1 percent from August to 110.1. It was the highest reading since December 2006 and more than 21 percent above a year ago. Economists surveyed by Thomson Reuters expected the index would be level at 103.8.
Typically there is a one- to two-month lag between a contract and a done deal, so the index is a good barometer of future sales.
MSNBC
Remodeling Costs Decrease
10/29/09: Remodeling costs are down an average of 5 percent to 10 percent nationwide with some areas down 20 percent, the remodeling industry reports.
In the 12 months that ended in March 2009, the most recent data available, $118.2 billion was spent on home-improvement projects, down from $146 billion in the 12 months ending in March 2007 – the national peak of remodeling activity – according to a report from the Harvard Joint Center for Housing Studies.
One of the reasons for the price decline is competition. Most home buyers spend the most on remodeling within the first two years after purchasing a home. Not only are there fewer home sales, but also strapped home builders are seeking remodeling work, confirms David Crowe, chief economist for the National Association of Home Builders.
The Wall Street Journal
New Support for State Housing Agencies
09/28/09: The U.S. Treasury is contemplating a new program that would provide as much as $15 billion to purchase tax-exempt mortgage bonds issued by states over the next three years.
The program would be beneficial for low-income home buyers who have long depended on state programs for low-interest mortgages. States have been unable to offer these mortgages in the last year because they haven’t been able to sell mortgage bonds. This program would solve that, according to the National Council of State Housing Agencies.
Source: Bloomberg, Dawn Kopecki
Pending Home Sales Climb
08/03/09: The number of U.S. homebuyers who agreed to purchase a previously occupied home in April posted the largest monthly jump in nearly eight years, a sign that sales are finally coming to life after a long and painful slump.
The National Association of Realtors said Tuesday its seasonally adjusted index of sales contracts signed in April surged 6.7 percent to 90.3, far exceeding analysts' forecasts. It was the biggest monthly jump since October 2001, when pending sales rose 9.2 percent.
"This is yet another positive indication that the bottoming process is forming," Jennifer Lee, an economist at BMO Capital Markets, wrote in a note to clients. "Now if only prices would stabilize."
Economists surveyed by Thomson Reuters expected the index would edge up to 85 from a reading of 84.6 in March. Typically there is a one- to two-month lag between a contract and a done deal, so the index is a barometer for future existing home sales.
"The pronounced increase in April does indicate that actual existing home sales are poised to rise in the coming month or two," wrote Joshua Shapiro, chief U.S. economist with MFR Inc.
The index was 3.2 percent above last year's levels and has risen for three straight months after hitting a record low in January. A nearly 33 percent sales increase in the Northeast and a 9.8 percent jump in the Midwest led the overall surge. Sales contracts rose 1.8 percent in April from a month earlier in the West, but fell 0.2 percent in the South.
The big boost likely reflects the impact of a new $8,000 tax credit for first-time homebuyers that was included in the economic stimulus bill signed by President Barack Obama in February. Since buyers need to finish their purchases by Nov. 30 to claim the credit, "we expect greater activity in the months ahead," Lawrence Yun, the Realtors' chief economist, said in a statement.
The Associated Press
