by Lawrence Yun,
Chief Economist, NAR Research
The Wall Street Journal recently published an article raising questions about people's optimistic "outlook" on generating wealth from their homes. The Journal characterized that view as wishful thinking. While not intending to cast aspersions on the analytical acumen of that well-respected publication, I do have a different take on that issue. My attempt in this corresponding article is to lay out the same information the newspaper published — albeit in a different light.
Owning a Home Still a Good Long-Term Investment
The Journal article claims that those hoping for a quick rebound in home prices are likely to be disappointed. Yes, some economists predict home prices won't bottom out before the second half of 2009, and some don't see a bottom until 2011 or 2012. But market timing for home prices is even more difficult than trying to time rises in stock prices. Unlike stocks, real estate is local. In fact, the latest government data show only four states — Arizona, California, Florida, and Nevada — registering home price declines of double digits. This government data has narrow coverage on homes with subprime loans, so the data should be viewed as price trends in neighborhoods with little subprime loan exposure. That makes sense, as less than 10 percent of homes have subprime loans. Interestingly, these four states are the very ones showing recent notable sales increases as buyers have taken advantage of the lower prices. Anecdotal reports of multiple bids suggest prices may be bottoming out in these areas.
Home Prices
Experts say you should generally expect house prices to rise just a bit more than inflation and roughly in line with household income. OK - let's look at how that works in real life. If home prices rise (on average) at an inflation-adjusted rate of 2.5%-3% a year, then nominal home prices can be expected to increase about 4.5%-6% a year. In other words, if a household buys a $200,000 home today, then that home will be worth $310,000 in 10 years, $505,000 in 20 years, and $823,000 in 30 years, assuming a 5% home price growth. Given that most homeowners have 30-year mortgages, all the debt will have been paid off at the 30-year mark. At that point, the $823,000 is pure equity. If home price appreciation increases further — say at 6% — that home will be worth $1.08 million in 30 years. Given America's poor savings rate (that's a different issue altogether), any form of savings discipline such as a monthly mortgage payment helps Americans accumulate wealth.
Confidence in Rising Home Value
Even by the paper's own sources of data used to support its claims, owning a home is often still a better long-term investment than stocks. The Journal cites a poll of 2,000 adults conducted by real estate data provider Zillow.com that found 61% believed the value of their home would either remain level or rise over the next six months. Another survey of more than 1,000 homeowners, sponsored by real-estate-services firm Realogy Corp., found that 91% thought that owning a home was the best long-term investment they could make. And an online survey of 5,000 people commissioned by Citigroup found that just 32% believed it was a good time to invest in stocks — but 51% said it was a good time to buy a home. Well, who am I to argue with housing consumers!
Fundamentals Impacting Home Prices
Yes, as The Journal says, in the long term, house prices are driven by fundamentals that are hard to predict. Those fundamental drivers include immigration, birth rates, the size and nature of households, and incomes. The trick is to figure out where job and income growth will be strongest and where those households want to live.
Again I cite our mantra: All real estate is local. In fact, it can be really local. I remember a story in my local neighborhood paper several years ago about two homes that looked exactly alike. Both homes fetched roughly the same price at one point. But at the time of the Journal's recent story, one home was worth more than double the other - not because of any physical differences in the homes, but because of neighborhood characteristics.
Investors and the Academic Debate
Few homeowners have the time to follow academic debates about the details of home price measurements or the plethora of analyses on home prices published in economic or real estate academic journals, trade publications, or even The Wall Street Journal. But for those who choose to purchase properties as an investment only - that is, they're not actually living in the property — The Journal's story about a couple who, for lack of a better term, became "property managers" is telling. For nearly four decades, a married couple invested in rental properties in and near Stevens Point, WI. They thought real estate was a good way "to get rich slowly." Despite the housing downturn, they have gradually (emphasis added) built their net worth from zero to around $2.5 million through their rental properties. Yes, there were challenges — they have dealt with countless plumbing emergencies, evicted deadbeats and even once had to clean up after a suicide in one of their properties.
Well, I salute that couple. Property management is not for everyone. But some people are willing to face its challenges for the financial rewards — and ignore silly academic debates. Witness the couple's' accumulation of $2.5 million.
Final Thoughts
Buying a home is a serious decision with serious responsibilities. It should be done with care and be based on good information. Consumers should always be wary of any "how to profit from it" slogans but at the same time should not be discouraged by doom-sayers. Yes, those households who bought during the buying frenzy and at the peak a few years back have lost a lot - if they are trying to cash in NOW. But that does not mean that the new crop of buyers will face the same fate. Generally, homeowners do accumulate wealth over the long-term. If one of your clients is a consumer who is financially and emotionally ready, current conditions certainly favor buyers over sellers. The time will surely come again when sellers have the edge. Trying to market-time a purchase may result in remorse from buying "too high" or "selling too late."
Those home buyers willing to stay in the market for the long term will likely feel good and reap the benefits from their long-term investment.
Source: NAR's Real Estate Insights
December 2008
Monday, December 29, 2008
Amid Rate Drops, Mortgage Applications Soar
Daily Real Estate News December 24, 2008
With interest rates approaching reaching historic lows,the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous week, according to the Mortgage Bankers Association's weekly survey.
Application activity for the week ending December 19th was 124.6 percent over the same period a year ago,the Washington, D.C-based MBA said. The spike in applications coincided with another drop in mortgage rates, as the government's efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.
Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed for mortgages to buy homes increased a seasonally adjusted 10.6 percent. Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.
According to the MBA survey, interest rates fell across the board:
Rates on 30-year fixed-rate mortgages averaged 5.04 percent last week, their lowest level in more than five years. This was down from 5.18 percent the previous week.
Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent the week before.
One-year ARMs averaged 6.36 percent, down from 6.63 percent.
Source: Mortgage Bankers Association and MarketWatch (12/24/08)
With interest rates approaching reaching historic lows,the application volume for mortgages jumped a seasonally adjusted 48 percent last week compared with the previous week, according to the Mortgage Bankers Association's weekly survey.
Application activity for the week ending December 19th was 124.6 percent over the same period a year ago,the Washington, D.C-based MBA said. The spike in applications coincided with another drop in mortgage rates, as the government's efforts to unfreeze the residential-mortgage market show further signs of having the desired effect.
Applications to refinance existing mortgages increased 62.6 percent on a week-to-week basis, while applications filed for mortgages to buy homes increased a seasonally adjusted 10.6 percent. Refinancings made up 83.2 percent of all applications filed last week, up from 76.9 percent the previous week.
According to the MBA survey, interest rates fell across the board:
Rates on 30-year fixed-rate mortgages averaged 5.04 percent last week, their lowest level in more than five years. This was down from 5.18 percent the previous week.
Fifteen-year fixed-rate mortgages averaged 4.91 percent, down from 4.93 percent the week before.
One-year ARMs averaged 6.36 percent, down from 6.63 percent.
Source: Mortgage Bankers Association and MarketWatch (12/24/08)
Friday, December 19, 2008
Mortgage Rates Plunge to Record Lows
Daily Real Estate News December 19, 2008
In response to the Federal Reserve's cut in the federal funds rate to near zero, Freddie Mac reports that the 30-year fixed mortgage rate fell to 5.17 percent during the week ended Dec. 18—down from 5.47 percent last week and the lowest since the survey's inception in 1971.
Interest on 15-year fixed loans slipped to 4.92 percent from 5.20 percent. Meanwhile, the five-year hybrid adjustable mortgage rate dropped to 5.6 percent from 5.82 percent; and the one-year ARM dipped to 4.94 percent from 5.09 percent.
A year ago, the 30-year fixed rate stood at 6.14 percent, the 15-year fixed rate at 5.79 percent, the five-year hybrid ARM at 5.9 percent, and the one-year ARM at 5.51 percent.
Source: The Wall Street Journal, Steve Kerch (12/19/08)
In response to the Federal Reserve's cut in the federal funds rate to near zero, Freddie Mac reports that the 30-year fixed mortgage rate fell to 5.17 percent during the week ended Dec. 18—down from 5.47 percent last week and the lowest since the survey's inception in 1971.
Interest on 15-year fixed loans slipped to 4.92 percent from 5.20 percent. Meanwhile, the five-year hybrid adjustable mortgage rate dropped to 5.6 percent from 5.82 percent; and the one-year ARM dipped to 4.94 percent from 5.09 percent.
A year ago, the 30-year fixed rate stood at 6.14 percent, the 15-year fixed rate at 5.79 percent, the five-year hybrid ARM at 5.9 percent, and the one-year ARM at 5.51 percent.
Source: The Wall Street Journal, Steve Kerch (12/19/08)
Is Now a Good Time to Refinance?
Daily Real Estate News December 19, 2008
Refinancing now sounds appealing, but for lots of people, it isn’t all that easy. Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt. And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.
Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.
Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.
Source: Business Week, Lauren Young (12/22/08)
Refinancing now sounds appealing, but for lots of people, it isn’t all that easy. Applications for refinances tripled earlier this month after the Federal Reserve promised to buy up $600 billion of mortgage debt. And rates for 30-year fixed mortgages are falling below 5 percent – the lowest in 50 years – but many home owners will have trouble doing the deal.
Having at least 20 percent equity in a home is important. A credit score of at least 720 and a debt ratio that is less than 43 percent are both essential.
Jumbo mortgages are still expensive. A 5/1 adjustable-rate with an initial interest rate for five years and an annual reset is averaging 6.6 percent. Traditional 30-year fixed are at 7.49 percent. Home owners in this situation may have to just ride it out.
Source: Business Week, Lauren Young (12/22/08)
10 Real Estate Predictions for 2009
Daily Real Estate News December 17, 2008
2009 is likely to be a year of continuing adjustment to a changing real estate marketplace. Prepare yourself and your business with these predictions from HGTV’s FrontDoor.com Web site:
Sellers will continue to face falling home values in the new year because they’ll be competing with banks and builders who are slashing prices to sell off the still-huge inventory of foreclosures and new homes.
The Obama administration will act on its plan to crack down on abusive lending practices.
Mortgage holders in danger of losing their homes will receive more assistance from a variety of programs since the Senate's Joint Economic Committee has predicted two million foreclosures in 2009.
Banks' restructuring should bring increasing calm, making loan modifications and short sales easier to obtain. Eventually this will lead to a decrease in the number of bank-owned properties on the market.
Mortgage applications will continue to receive a comprehensive review, requiring borrowers to provide extensive income and debt documentation. Those with the best credit will get the best rates.
The foreclosure crisis has created wiser consumers, with a deeper understanding of real estate, mortgages, and credit enabling better decision-making going forward.
Green is good with increasing numbers of buyers opting for smaller homes that are within walking distance of school and work.
Buyers and sellers will be more and more tech savvy, relying on tools like video, webcasts, and mobile search. Consumers and practitioners will benefit from being ahead of the curve.
Prices will be low as will interest rates, creating great buying opportunities, and likely, inspiring reluctant buyers to make their move.
The recession will end and buyers will regain confidence in the market.
Source: Frontdoor.com (12/03/08)
Friday, December 12, 2008
Low Prices, Low Rates Mean Opportunity
Daily Real Estate News December 8, 2008
Housing prices have fallen dramatically all over the country and rates on 30-year fixed-rate mortgages are already close to 5.5 percent. Experts say it's possible, with government encouragement, that rates will fall as low as 4.5 percent.Now is the time for first-time buyers to step up. Here are some things to consider:
Prices have always softened in the winter. As temperatures fall, bargain hunters will have bigger then usual opportunities.
New homes are likely to become scarce. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, said he believes that a steep drop-off in inventory of new homes is coming soon, due to a rapid decrease in home builder activity.
Location, location, location. Buying the best-priced house in a really good neighborhood is still smart.
Will values go up? You may have to live in a house for 10 years, but over time, buyers will almost certainly make money.
Source: The New York Times, Ron Lieber (12/05/08)
Housing prices have fallen dramatically all over the country and rates on 30-year fixed-rate mortgages are already close to 5.5 percent. Experts say it's possible, with government encouragement, that rates will fall as low as 4.5 percent.Now is the time for first-time buyers to step up. Here are some things to consider:
Prices have always softened in the winter. As temperatures fall, bargain hunters will have bigger then usual opportunities.
New homes are likely to become scarce. Ian Shepherdson, chief United States economist for the research firm High Frequency Economics, said he believes that a steep drop-off in inventory of new homes is coming soon, due to a rapid decrease in home builder activity.
Location, location, location. Buying the best-priced house in a really good neighborhood is still smart.
Will values go up? You may have to live in a house for 10 years, but over time, buyers will almost certainly make money.
Source: The New York Times, Ron Lieber (12/05/08)
Are Some Owners Purposefully Falling Behind?
Daily Real Estate News December 12, 2008
Housing experts are growing increasingly alarmed that programs to bail out troubled home owners might have the unintended consequence of encouraging people to miss mortgage payments in order to qualify for easier loan terms.
Such initiatives typically require that borrowers be 60 to 90 days late on payments to get a mortgage reworked. In an attempt to prevent abuses, lenders are scrutinizing home owners' financial status—by poring over tax records, pay stubs, investment accounts, and bank statements—to determine if they really need a loan modification to avoid foreclosure.
Source: USA Today, Stephanie Armour (12/10/08)
Housing experts are growing increasingly alarmed that programs to bail out troubled home owners might have the unintended consequence of encouraging people to miss mortgage payments in order to qualify for easier loan terms.
Such initiatives typically require that borrowers be 60 to 90 days late on payments to get a mortgage reworked. In an attempt to prevent abuses, lenders are scrutinizing home owners' financial status—by poring over tax records, pay stubs, investment accounts, and bank statements—to determine if they really need a loan modification to avoid foreclosure.
Source: USA Today, Stephanie Armour (12/10/08)
NAR: Pending Home Sales Holding Steady
Daily Real Estate News December 9, 2008
Pending home sales eased against a deteriorating economic backdrop but remain in a stable range, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September. It is 1 percent below October 2007 when it was 89.8.
“Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” says Lawrence Yun, NAR chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”
Conditions remain uneven around the country, but some areas that are showing healthy gains in pending home sales from a year ago include many Florida and California markets; Providence, R.I.; Lansing, Mich.; Oklahoma City; and Las Vegas. By the RegionHere's what the PHSI showed across the country:
South: jumped 7.8 percent to 95.9 in October but remains 2.9 percent below a year ago.
Northeast: rose 0.6 percent to 68.1 but is 14.1 percent below October 2007.
Midwest: declined 4.3 percent to 79.7 in October and is 6.8 percent below a year ago.
West: fell 8.7 percent to 103.7 but is 17.4 percent higher than October 2007.
The Economic ForecastNew-home sales: for 2008 should total 486,000 this year, decline to 393,000 in 2009 and then grow to 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.Existing-home sales: looking at middle-ground assumptions, existing-home sales are forecast to total 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010.Home prices: “Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun says. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.” NAR’s housing affordability index is likely to remain quite favorable, averaging 138 in 2009.
Unemployment rate: is estimated at 7.2 percent in the first quarter, rising to 8.3 percent by the end of 2009. Inflation: as measured by the Consumer Price Index, is seen at 0.7 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.5 percent in 2009.GDP: Yun expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year – lifted by a home sales recovery. “Given the critical role of housing in an economic recovery, we’re confident sufficient stimulus will be offered to bring more buyers to the market,” he says.
Could a drop in interest rates help? The 30-year fixed-rate mortgage will probably decline to 5.6 percent in the first quarter, rise slowly to 6 percent by the end of 2009, and average 6.2 percent in 2010. NAR President Charles McMillan says he’s hopeful about considerations by the U.S. Treasury to help the housing market. “Efforts to bring down mortgage interest rates demonstrate a clear understanding of the role housing plays in stabilizing the economy,” McMillan says. “We’re very encouraged by all of the proposals getting serious consideration in Washington to help home buyers. More sales will stabilize home prices by bringing down inventory, and would lessen foreclosure pressure.”
Source: NAR
Pending home sales eased against a deteriorating economic backdrop but remain in a stable range, according to the National Association of Realtors®.
The Pending Home Sales Index, a forward-looking indicator based on contracts signed in October, slipped 0.7 percent to 88.9 from an upwardly revised reading of 89.5 in September. It is 1 percent below October 2007 when it was 89.8.
“Despite the turmoil in the economy, the overall level of pending home sales has been remarkably stable over the past year, holding in a generally narrow range,” says Lawrence Yun, NAR chief economist. “We did see a spike in August when mortgage conditions temporarily improved, which underscores two things – there is a pent-up demand, and access to safe, affordable mortgages will bring more buyers into the market.”
Conditions remain uneven around the country, but some areas that are showing healthy gains in pending home sales from a year ago include many Florida and California markets; Providence, R.I.; Lansing, Mich.; Oklahoma City; and Las Vegas. By the RegionHere's what the PHSI showed across the country:
South: jumped 7.8 percent to 95.9 in October but remains 2.9 percent below a year ago.
Northeast: rose 0.6 percent to 68.1 but is 14.1 percent below October 2007.
Midwest: declined 4.3 percent to 79.7 in October and is 6.8 percent below a year ago.
West: fell 8.7 percent to 103.7 but is 17.4 percent higher than October 2007.
The Economic ForecastNew-home sales: for 2008 should total 486,000 this year, decline to 393,000 in 2009 and then grow to 446,000 in 2010. Housing starts, including multifamily units, are projected at 934,000 units in 2008 and 731,000 next year before rising to 772,000 in 2010.Existing-home sales: looking at middle-ground assumptions, existing-home sales are forecast to total 4.96 million this year, and then increase to 5.19 million in 2009 and 5.55 million in 2010.Home prices: “Price projections are challenging in an environment with so many variables and divergent local conditions,” Yun says. “The home price correction to date has brought prices in line with fundamentals, but buyer pessimism could cause prices to overshoot downward, resulting in further economic deterioration.” NAR’s housing affordability index is likely to remain quite favorable, averaging 138 in 2009.
Unemployment rate: is estimated at 7.2 percent in the first quarter, rising to 8.3 percent by the end of 2009. Inflation: as measured by the Consumer Price Index, is seen at 0.7 percent in 2009. Inflation-adjusted disposable personal income is expected to grow 1.5 percent in 2009.GDP: Yun expects growth in the U.S. gross domestic product (GDP) to contract through the first half of 2009, then stabilize and expand in latter part of the year – lifted by a home sales recovery. “Given the critical role of housing in an economic recovery, we’re confident sufficient stimulus will be offered to bring more buyers to the market,” he says.
Could a drop in interest rates help? The 30-year fixed-rate mortgage will probably decline to 5.6 percent in the first quarter, rise slowly to 6 percent by the end of 2009, and average 6.2 percent in 2010. NAR President Charles McMillan says he’s hopeful about considerations by the U.S. Treasury to help the housing market. “Efforts to bring down mortgage interest rates demonstrate a clear understanding of the role housing plays in stabilizing the economy,” McMillan says. “We’re very encouraged by all of the proposals getting serious consideration in Washington to help home buyers. More sales will stabilize home prices by bringing down inventory, and would lessen foreclosure pressure.”
Source: NAR
Friday, December 5, 2008
Green condos under construction soon in Kimberton
A groundbreaking is tentatively scheduled this month for Kimberton Village Green, a residential and commercial condominium complex touted as Chester County’s first green development.
The 28 condominiums are designed to minimize the impact on the Earth through building techniques that reduce construction waste, a sustainable approach to managing storm water runoff, and the extensive use of nontoxic paints and building materials, making the air inside much healthier. Technology will let residents see how they’re using energy in their homes, and ports for plug-in hybrid cars will be available in the garage.
Pirello said Kimberton Village Green has received a platinum rating from the U.S. Green Building Council due to its Leadership in Energy and Environmental Design (LEED) practices.
Pirello said the prefabricated condos are being delivered in early spring.
Source; Daily Local; 12/1/08
The 28 condominiums are designed to minimize the impact on the Earth through building techniques that reduce construction waste, a sustainable approach to managing storm water runoff, and the extensive use of nontoxic paints and building materials, making the air inside much healthier. Technology will let residents see how they’re using energy in their homes, and ports for plug-in hybrid cars will be available in the garage.
Pirello said Kimberton Village Green has received a platinum rating from the U.S. Green Building Council due to its Leadership in Energy and Environmental Design (LEED) practices.
Pirello said the prefabricated condos are being delivered in early spring.
Source; Daily Local; 12/1/08
Ecovillage in West Grove a possibility
The future residents of Concord Ecovillage and their development partners, Aye Partners LLC, presented plans to build a solar-powered, LEED Platinum certified neighborhood in West Grove Borough at the November 5 council meeting.
The homes will be energy independent and carbon neutral. Residents will have no energy utility bills.
The partnership will unveil their plans to potential residents and the public at 5:30 p.m. on December 7 at the Kennett Friends Meeting.
Concord Ecovillage is also organizing a day-long tour of two ecovillages in the Washington D.C. area. Further details are listed at www.concordecovillage.org.
Source: Avon Grove Sun; 12/3/08
The homes will be energy independent and carbon neutral. Residents will have no energy utility bills.
The partnership will unveil their plans to potential residents and the public at 5:30 p.m. on December 7 at the Kennett Friends Meeting.
Concord Ecovillage is also organizing a day-long tour of two ecovillages in the Washington D.C. area. Further details are listed at www.concordecovillage.org.
Source: Avon Grove Sun; 12/3/08
Philadelphia-area Housing Market Poised to Begin Recovery Next Summer, Says NAR Economist
On Monday, the Suburban West REALTORS Association hosted Jed Smith, Managing Director of Quantitative Research for the National Association of REALTORS.
Presenting to the 2009 Association Liaisons, Smith commented on the current status of the Philadelphia-area housing market and made some favorable comparisons of our market to others across the U.S. Smith also commented on the forecast for the local market, saying, "We project that the Philadelphia housing market to begin to show recovery in July/August of 2009 which will mean a significant uptick in sales and values."
Smith added that it was possible that the market could improve sooner but that would mostly depend on an increase in consumer confidence in early 2009.
Courtesy: Suburban West REALTORS Association 12/08
Presenting to the 2009 Association Liaisons, Smith commented on the current status of the Philadelphia-area housing market and made some favorable comparisons of our market to others across the U.S. Smith also commented on the forecast for the local market, saying, "We project that the Philadelphia housing market to begin to show recovery in July/August of 2009 which will mean a significant uptick in sales and values."
Smith added that it was possible that the market could improve sooner but that would mostly depend on an increase in consumer confidence in early 2009.
Courtesy: Suburban West REALTORS Association 12/08
Mortgage applications surge by record
Reuters 12/3/08
Potential borrowers lured by enticing mortgage rates
NEW YORK - Mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 soared a record 112.1 percent to 857.7, the highest reading since the week ended March 21 when it reached 965.9.
Potential borrowers were lured by enticing mortgage rates, which dropped dramatically after the Federal Reserve unveiled a plan last week to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises, Fannie Mae , Freddie Mac , and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
"Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship," Orawin Velz, Associate Vice President of Economic Forecasting, said in a statement.
"When rates plummeted following the Fed's announcement that it would buy GSE debt and MBS, many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound," she said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.47 percent, down a whopping 0.52 percentage point from the previous week, the largest drop since 1990 when the MBA started conducting the weekly survey.
Interest rates are at their lowest level since the week ended June 24, 2005, when they reached the same level. Interest rates are sharply below the peak of 6.59 percent reached during the summer, but only slightly below the 2008 low of 5.49 percent in January, according to the trade group.
Interest rates were below year-ago levels of 5.82 percent.
Refinancing volume upThe MBA's seasonally adjusted purchase index rose 38.0 percent to 361.1, the largest rise since the week ended February 24, 1995. The index, however, came in well below its year-ago level of 464.3, a drop of 22.2 percent.
Overall mortgage applications last week were 8.3 percent above their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 29.7 percent.
Cameron Findlay, chief economist at LendingTree.com based in Charlotte, North Carolina, said they are seeing a positive uptick in refinancing volume due to the drop in interest rates.
"Consumers who were previously on the fence to refinance or purchase a home are in a position to take advantage of the decline in rates," said on Tuesday.
"Now it'll be a matter of qualification as lenders evaluate each borrower individually," he said.
The low interest rates can help many drop their monthly payments, and is especially good news for those who have adjustable- rate mortgages and are looking to lock in a secure fixed-rate mortgage, he said.
The group's seasonally adjusted index of refinancing applications jumped 203.3 percent to 3,802.8, the largest rise on record. The index was up 37.7 percent from its year-ago level of 2,761.3.
The refinance share of applications increased to 69.1 percent from 49.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 1.4 percent, down from 3.0 percent the previous week.
Fixed 15-year mortgage rates averaged 5.13 percent, down from 5.78 percent the previous week. Rates on one-year ARMs decreased to 6.61 percent from 6.87 percent.
The U.S. housing market is currently suffering the worst downturn since the Great Depression. A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.
While U.S. housing market indexes tend to be volatile, data from the MBA may help gauge how the hard-hit sector is faring.
Potential borrowers lured by enticing mortgage rates
NEW YORK - Mortgage applications surged by the largest amount on record last week as a new Federal Reserve program pushed interest rates down to their lowest level in more than 3 years, data from an industry group showed on Wednesday.
The Mortgage Bankers Association said its seasonally adjusted index of mortgage applications, which includes both purchase and refinance loans, for the week ended November 28 soared a record 112.1 percent to 857.7, the highest reading since the week ended March 21 when it reached 965.9.
Potential borrowers were lured by enticing mortgage rates, which dropped dramatically after the Federal Reserve unveiled a plan last week to buy up to $500 billion of mortgage securities backed by government-sponsored enterprises, Fannie Mae , Freddie Mac , and Ginnie Mae. The program also entails buying up to $100 billion of debt issued by Fannie Mae, Freddie Mac and the Federal Home Loan Banks.
"Many borrowers missed an opportunity to take advantage when rates dropped sharply for a brief period when the GSEs were placed under conservatorship," Orawin Velz, Associate Vice President of Economic Forecasting, said in a statement.
"When rates plummeted following the Fed's announcement that it would buy GSE debt and MBS, many of those on the sidelines decided to quickly jump in and take advantage of lower rates before they began to rebound," she said.
Borrowing costs on 30-year fixed-rate mortgages, excluding fees, averaged 5.47 percent, down a whopping 0.52 percentage point from the previous week, the largest drop since 1990 when the MBA started conducting the weekly survey.
Interest rates are at their lowest level since the week ended June 24, 2005, when they reached the same level. Interest rates are sharply below the peak of 6.59 percent reached during the summer, but only slightly below the 2008 low of 5.49 percent in January, according to the trade group.
Interest rates were below year-ago levels of 5.82 percent.
Refinancing volume upThe MBA's seasonally adjusted purchase index rose 38.0 percent to 361.1, the largest rise since the week ended February 24, 1995. The index, however, came in well below its year-ago level of 464.3, a drop of 22.2 percent.
Overall mortgage applications last week were 8.3 percent above their year-ago level. The four-week moving average of mortgage applications, which smooths the volatile weekly figures, was up 29.7 percent.
Cameron Findlay, chief economist at LendingTree.com based in Charlotte, North Carolina, said they are seeing a positive uptick in refinancing volume due to the drop in interest rates.
"Consumers who were previously on the fence to refinance or purchase a home are in a position to take advantage of the decline in rates," said on Tuesday.
"Now it'll be a matter of qualification as lenders evaluate each borrower individually," he said.
The low interest rates can help many drop their monthly payments, and is especially good news for those who have adjustable- rate mortgages and are looking to lock in a secure fixed-rate mortgage, he said.
The group's seasonally adjusted index of refinancing applications jumped 203.3 percent to 3,802.8, the largest rise on record. The index was up 37.7 percent from its year-ago level of 2,761.3.
The refinance share of applications increased to 69.1 percent from 49.3 percent the previous week. The adjustable-rate mortgage (ARM) share of activity decreased to 1.4 percent, down from 3.0 percent the previous week.
Fixed 15-year mortgage rates averaged 5.13 percent, down from 5.78 percent the previous week. Rates on one-year ARMs decreased to 6.61 percent from 6.87 percent.
The U.S. housing market is currently suffering the worst downturn since the Great Depression. A huge supply of unsold homes, tighter lending standards and record foreclosures have pushed down home prices, deflating a bubble from the early part of this decade.
While U.S. housing market indexes tend to be volatile, data from the MBA may help gauge how the hard-hit sector is faring.
Investors Not Happy With 4-Loan Limit
Daily Real Estate News December 5, 2008
Some real estate investors are up in arms over a new Fannie Mae-Freddie Mac policy that limits to four the number of real estate loans that can be held by a single person.
The rule, which took effect Dec. 1, prohibits an investor from obtaining even a fifth mortgage no matter how much money he puts down or how much income documentation he provides. It offers no exceptions for assets or history of success as a real estate investor.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, an Atlanta-area investor. “It’s going to keep qualified buyers out of the market.
”Some investors are trying to work around the rule by partnering with other investors to either buy in cash or use their eligibility to borrow.
Source: The Atlanta Journal-Constitution, D.L. Bennett (12/05/08)
Some real estate investors are up in arms over a new Fannie Mae-Freddie Mac policy that limits to four the number of real estate loans that can be held by a single person.
The rule, which took effect Dec. 1, prohibits an investor from obtaining even a fifth mortgage no matter how much money he puts down or how much income documentation he provides. It offers no exceptions for assets or history of success as a real estate investor.
“The four-house rule is going to keep us in a recession longer,” said Tom Hutchens, an Atlanta-area investor. “It’s going to keep qualified buyers out of the market.
”Some investors are trying to work around the rule by partnering with other investors to either buy in cash or use their eligibility to borrow.
Source: The Atlanta Journal-Constitution, D.L. Bennett (12/05/08)
NAR-Backed Rate Buydown Gains Traction
Daily Real Estate News December 4, 2008
An effort by the NATIONAL ASSOCIATION OF REALTORS® to spur home sales through a mortgage-interest rate buydown appears to be gaining traction.
Reports in major news media like the Washington Post and Wall Street Journal today quote sources familiar with a meeting between U.S. Treasury officials and NAR in November in which the buydown proposal was discussed.
"Treasury officials told the REALTORS® that the (buydown) plan could be a more effective way to help home owners than focusing solely on borrowers who are struggling to meet their monthly payments," the Washington Post story says. Under the Treasury plan, lenders would sell newly issued mortgage-backed securities to the government provided the interest-rate on the loans collateralizing the securities was no higher than 4.5 percent. Although NAR supports a buydown, it does not take a position on how low interest rates should go. To pay for the plan, Treasury would issue bonds at 3 percent, creating a 1.5-percent spread that it could use for buying the securities. Those securities would then be purchased by secondary mortgage market companies Fannie Mae and Freddie Mac, which are under federal conservatorship.
NAR has been calling for a buydown and other measures to help stimulate housing sales as part of a four-point plan it showcased at its annual meeting in Orlando last month. To date, tens of thousands of REALTORS® have sent letters to their members of Congress asking for quick action to help housing, which is widely considered a crucial first step to a broader economic recovery. Other parts of the four-point plan include making 2008 high-cost conforming loan limits, which are now $729,750, permanent, and improving the home buyer tax credit by expanding it to all buyers, not just first-timers, and eliminating the repayment requirement.Some analysts have calculated that an interest-rate buydown could help as many as 2.5 million households.
"We strongly encourage the Treasury to move quickly with its plan to lower interest rates to encourage current buyers to act rather than continue to wait," said NAR President Charles McMillan in a public statement on the Treasury's most recent action with the plan.
"We are pleased to see that the leadership of the Treasury Department is seriously considering the actions we discussed to lower interest rates. The result of such action will help the nation’s economic recovery and bring stability to the housing market."
Source: REALTOR® Magazine Online
An effort by the NATIONAL ASSOCIATION OF REALTORS® to spur home sales through a mortgage-interest rate buydown appears to be gaining traction.
Reports in major news media like the Washington Post and Wall Street Journal today quote sources familiar with a meeting between U.S. Treasury officials and NAR in November in which the buydown proposal was discussed.
"Treasury officials told the REALTORS® that the (buydown) plan could be a more effective way to help home owners than focusing solely on borrowers who are struggling to meet their monthly payments," the Washington Post story says. Under the Treasury plan, lenders would sell newly issued mortgage-backed securities to the government provided the interest-rate on the loans collateralizing the securities was no higher than 4.5 percent. Although NAR supports a buydown, it does not take a position on how low interest rates should go. To pay for the plan, Treasury would issue bonds at 3 percent, creating a 1.5-percent spread that it could use for buying the securities. Those securities would then be purchased by secondary mortgage market companies Fannie Mae and Freddie Mac, which are under federal conservatorship.
NAR has been calling for a buydown and other measures to help stimulate housing sales as part of a four-point plan it showcased at its annual meeting in Orlando last month. To date, tens of thousands of REALTORS® have sent letters to their members of Congress asking for quick action to help housing, which is widely considered a crucial first step to a broader economic recovery. Other parts of the four-point plan include making 2008 high-cost conforming loan limits, which are now $729,750, permanent, and improving the home buyer tax credit by expanding it to all buyers, not just first-timers, and eliminating the repayment requirement.Some analysts have calculated that an interest-rate buydown could help as many as 2.5 million households.
"We strongly encourage the Treasury to move quickly with its plan to lower interest rates to encourage current buyers to act rather than continue to wait," said NAR President Charles McMillan in a public statement on the Treasury's most recent action with the plan.
"We are pleased to see that the leadership of the Treasury Department is seriously considering the actions we discussed to lower interest rates. The result of such action will help the nation’s economic recovery and bring stability to the housing market."
Source: REALTOR® Magazine Online
Taking the First-Time Homebuyer Credit
Homebuyers could be eligible for a tax break, essentially an interest-free loan worth as much as $7,500, under The Housing Assistance Tax Act of 2008.
Known as the first-time homebuyer credit, the tax break is available if you purchase a home on or after April 9, 2008 and before July 1, 2009, and meet certain income and other requirements.
The credit is equal to 10 percent of the home purchase price, up to a limit of $7,500.
Unlike other tax credits, this one must be paid back to the government, over a 15-year period.
Who is considered a "first-time" homebuyer?
Any taxpayer who has never owned a home as a principal residence.
However, you could qualify if you’ve owned a home before, but not as your principal residence during the three years prior to the purchase.
Married couples cannot qualify for the credit unless both spouses meet the three-year rule.
What qualifies as a principal residence?
Your principal residence is where you live for most of the year. That can be a house, a condo, co-op, house trailer or houseboat, within the United States. Vacation and rental homes are not eligible.
What are the income limitations?
For single taxpayers, the credit decreases as modified adjusted gross income rises above $75,000, and it disappears altogether above $95,000. For example, if your income is $85,000, you could receive a credit worth no more than $3,750.
Modified adjusted gross income is your adjusted gross income, or AGI (your gross income minus certain deductions such as IRAs and alimony) with tax-free foreign income counted.
For married couples, the credit starts to decrease at modified adjusted gross of $150,000 and disappears after $170,000.
When would I get the money from the credit?
You get the money only after you claim the credit on either your 2008 or 2009 tax return, NOT when escrow closes on the home.
However, you can speed up the process if you buy a home in 2009, prior to July 1. Instead of waiting until you file your taxes in 2010, you can (after Dec. 31, 2008) treat the purchase as if it were completed in 2008. That means you can amend your 2008 return and get the credit in 2009.
How does the credit affect the taxes I owe and the refund I get?
The credit reduces your tax liability, that is, the amount of taxes you are required to pay. Depending on your tax withholdings, you could get a bigger refund or owe less in taxes when you file.
If, for example, your taxes owed for one year are $6,000, you’ve had $4,000 withheld from your wages, and you buy a home worth $100,000, the housing credit would entitle you to a refund, as shown below.
Tax liability $6,000
Minus housing credit -7,500
Minus withholding -4,000
Refund $5,500
But if, for example, your tax liability was $10,000, but you had paid no withholding, then the credit would reduce the taxes you owe, as ilustrated below.
Tax Liability $10,000
Minus housing credit - 7,500
Minus withholding 0
Taxes due $2,500
How do I repay the credit?
You start repaying the credit in the second year after the tax year that the home was purchased.
So if you took the credit on your 2008 tax return, you begin repayment when you file your 2010 tax return. Your payments are set at $500 per year for 15 years.
They are “paid” as part of your tax liability. Depending on your tax situation, you either get $500 less on your refund each year, or you owe $500 more in taxes.
You might need to increase your withholding or make quarterly estimated payments to cover for the repayment and ensure that you don't get penalized for under-withholding.
What if circumstances change?
If you sell the house before the end of 15 years, you will have to pay the balance remaining on the credit on the tax return for the year the house was sold.
If you no longer use the home as your principal residence (say you rent it out), you pay the remaining balance on the tax return for the year the use changed.
If you die before the 15 years, the balance does not need to be repaid.
If you get a divorce and the home is transferred to your spouse, your spouse will be responsible for future payments.
Other considerations
The credit is not available if:
You buy your home from a close relatives, such as your spouse, parents, grandparent, child or grandchild.
Your home financing comes from tax-exempt mortgage revenue bonds.
You are, or were, eligible for the District of Columbia first-time homebuyer credit for any year.
Known as the first-time homebuyer credit, the tax break is available if you purchase a home on or after April 9, 2008 and before July 1, 2009, and meet certain income and other requirements.
The credit is equal to 10 percent of the home purchase price, up to a limit of $7,500.
Unlike other tax credits, this one must be paid back to the government, over a 15-year period.
Who is considered a "first-time" homebuyer?
Any taxpayer who has never owned a home as a principal residence.
However, you could qualify if you’ve owned a home before, but not as your principal residence during the three years prior to the purchase.
Married couples cannot qualify for the credit unless both spouses meet the three-year rule.
What qualifies as a principal residence?
Your principal residence is where you live for most of the year. That can be a house, a condo, co-op, house trailer or houseboat, within the United States. Vacation and rental homes are not eligible.
What are the income limitations?
For single taxpayers, the credit decreases as modified adjusted gross income rises above $75,000, and it disappears altogether above $95,000. For example, if your income is $85,000, you could receive a credit worth no more than $3,750.
Modified adjusted gross income is your adjusted gross income, or AGI (your gross income minus certain deductions such as IRAs and alimony) with tax-free foreign income counted.
For married couples, the credit starts to decrease at modified adjusted gross of $150,000 and disappears after $170,000.
When would I get the money from the credit?
You get the money only after you claim the credit on either your 2008 or 2009 tax return, NOT when escrow closes on the home.
However, you can speed up the process if you buy a home in 2009, prior to July 1. Instead of waiting until you file your taxes in 2010, you can (after Dec. 31, 2008) treat the purchase as if it were completed in 2008. That means you can amend your 2008 return and get the credit in 2009.
How does the credit affect the taxes I owe and the refund I get?
The credit reduces your tax liability, that is, the amount of taxes you are required to pay. Depending on your tax withholdings, you could get a bigger refund or owe less in taxes when you file.
If, for example, your taxes owed for one year are $6,000, you’ve had $4,000 withheld from your wages, and you buy a home worth $100,000, the housing credit would entitle you to a refund, as shown below.
Tax liability $6,000
Minus housing credit -7,500
Minus withholding -4,000
Refund $5,500
But if, for example, your tax liability was $10,000, but you had paid no withholding, then the credit would reduce the taxes you owe, as ilustrated below.
Tax Liability $10,000
Minus housing credit - 7,500
Minus withholding 0
Taxes due $2,500
How do I repay the credit?
You start repaying the credit in the second year after the tax year that the home was purchased.
So if you took the credit on your 2008 tax return, you begin repayment when you file your 2010 tax return. Your payments are set at $500 per year for 15 years.
They are “paid” as part of your tax liability. Depending on your tax situation, you either get $500 less on your refund each year, or you owe $500 more in taxes.
You might need to increase your withholding or make quarterly estimated payments to cover for the repayment and ensure that you don't get penalized for under-withholding.
What if circumstances change?
If you sell the house before the end of 15 years, you will have to pay the balance remaining on the credit on the tax return for the year the house was sold.
If you no longer use the home as your principal residence (say you rent it out), you pay the remaining balance on the tax return for the year the use changed.
If you die before the 15 years, the balance does not need to be repaid.
If you get a divorce and the home is transferred to your spouse, your spouse will be responsible for future payments.
Other considerations
The credit is not available if:
You buy your home from a close relatives, such as your spouse, parents, grandparent, child or grandchild.
Your home financing comes from tax-exempt mortgage revenue bonds.
You are, or were, eligible for the District of Columbia first-time homebuyer credit for any year.
Mortgage Rates Take a Big Dip This Week
Daily Real Estate News December 5, 2008
For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January. The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period. Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
Source: Realty Times (12/05/08)
For the week ended Dec. 3, Freddie Mac reported the lowest interest on 30-year fixed home loans since late January. The rate came in at an average of 5.53 percent, down from 5.97 percent the previous week and 5.96 percent a year ago; while 15-year fixed mortgages settled at 5.33 percent compared to 5.74 percent last week and 5.65 percent in the year-earlier period. Borrowing costs for short-term loans also were lower, with one-year adjustable-rate mortgages dipping to 5.02 percent from 5.18 percent a week ago and 5.46 percent a year ago.
Five-year hybrid ARMs, meanwhile, fell to 5.77 percent from 5.86 percent last week and 5.75 percent during the same period of last year.
Source: Realty Times (12/05/08)
Friday, November 28, 2008
Philly Housing Market Escapes The Hammer
Posted on Wed, Nov. 12, 2008
Phila.-area housing market still outperforming
By Alan J. Heavens
INQUIRER REAL ESTATE WRITER
The region's real estate market continued to outperform many other areas of the country and the nation as a whole in the third quarter, according to study released today by Zillow.com, the real estate search engine.
The study, which covers Philadelphia, Camden and Wilmington as a single entity, said home values in the third quarter fell 5.5 percent from the same period of 2007 — slightly more than half that of the United States as a whole in the same time.
What's more, just 4.4 percent of area homes bought in the last five years were considered "under water" — meaning that more is owed on them then they could bring if they were sold today.
The national figure: 29.3 percent, reported Zillow, which is based in Seattle.
The Philadelphia area is showing more stability than most other markets, said Stan Humphries, Zillow's chief economist, even though "the area is undeniably in the midst of a correction."
With a market peak in 2007 — one full year after most of the nation's markets experienced theirs — "it could take Philadelphia longer to reach a bottom," Humphries said.
Indicators suggest that the area's value declines may stay relatively small, Humphries said. Negative equity is much lower than in the rest of the country. The area has a "healthy five-year annualized appreciation of 6 percent," compared with 3.4 percent nationally, he said.
While many experts question Zillow's home-value estimates, some believe they are in the right ballpark.
"These are very reasonable estimates for the area," said Mark Zandi, chief economist at Moody's Economy.com in West Chester.
Said TD Bank's chief economist Joel L. Naroff: "I am not sure how they figured this, since there are so many submarkets," but while "conditions are not great, the region hasn't been hit by major housing problems."
Over the last 12 months, 30.2 percent of homes sold in the United States were done so at a loss, up from 23.7 percent at the end of the second quarter, according to Zillow.
In this region, just 9.3 percent were sold for a loss.
In 17 markets — 14 of which are in California — more than half of homes sold in the last year were sold for a loss.
Major home price drops in those areas are being fueled by high foreclosure sales.
Foreclosures made up almost one in five, or 18.6 percent, of all transactions in the last 12 months nationally. Not surprisingly, areas with the highest foreclosure rates are the markets with some of the greatest home value declines.
In California's Central Valley, 57.6 percent of transactions in Merced were foreclosures, and in Stockton, foreclosures made up 56.4 percent of transactions.
Put another way, in Stockton, 1 in every 60 houses is in foreclosure; in Merced, 1 in every 88 is. By comparison, 1 in every 2,500 houses in Delaware County has a foreclosure filing in September.
There are no other comparable Zillow data available for this region, although Zandi said that, based on Equifax credit-file data, 0.87 percent of first-mortgage loans in the region were in default at the end of September, compared with 1.38 percent nationally.
With continued intervention by the state and the city, it can take a year or more for a default to go to foreclosure sale, so the number of sales, anecdotally, remain minimal.
A third-quarter study by Philadelphia economist Kevin Gillen for single-family homes in the city (condos are excluded) showed median prices down 6.8 percent.
In the same period, the composite price of houses in 10 cities tracked by Standard & Poor's Case-Shiller Index was down 20.8 percent — including Los Angeles, Las Vegas, Miami, and Washington.
Philadelphia prices are still overvalued by about 2 percent, according an IHP Global Insight/National City measurement — meaning that they have that much more to fall before they reach bottom.
Gillen points out, however, Philadelphia prices in the 1990s continued to fall for much of the decade after hitting bottom, so there are no guarantees.
Said Humphries: "It seems Philadelphia may escape the worst of the housing market woes affecting much of the rest of the country."
Phila.-area housing market still outperforming
By Alan J. Heavens
INQUIRER REAL ESTATE WRITER
The region's real estate market continued to outperform many other areas of the country and the nation as a whole in the third quarter, according to study released today by Zillow.com, the real estate search engine.
The study, which covers Philadelphia, Camden and Wilmington as a single entity, said home values in the third quarter fell 5.5 percent from the same period of 2007 — slightly more than half that of the United States as a whole in the same time.
What's more, just 4.4 percent of area homes bought in the last five years were considered "under water" — meaning that more is owed on them then they could bring if they were sold today.
The national figure: 29.3 percent, reported Zillow, which is based in Seattle.
The Philadelphia area is showing more stability than most other markets, said Stan Humphries, Zillow's chief economist, even though "the area is undeniably in the midst of a correction."
With a market peak in 2007 — one full year after most of the nation's markets experienced theirs — "it could take Philadelphia longer to reach a bottom," Humphries said.
Indicators suggest that the area's value declines may stay relatively small, Humphries said. Negative equity is much lower than in the rest of the country. The area has a "healthy five-year annualized appreciation of 6 percent," compared with 3.4 percent nationally, he said.
While many experts question Zillow's home-value estimates, some believe they are in the right ballpark.
"These are very reasonable estimates for the area," said Mark Zandi, chief economist at Moody's Economy.com in West Chester.
Said TD Bank's chief economist Joel L. Naroff: "I am not sure how they figured this, since there are so many submarkets," but while "conditions are not great, the region hasn't been hit by major housing problems."
Over the last 12 months, 30.2 percent of homes sold in the United States were done so at a loss, up from 23.7 percent at the end of the second quarter, according to Zillow.
In this region, just 9.3 percent were sold for a loss.
In 17 markets — 14 of which are in California — more than half of homes sold in the last year were sold for a loss.
Major home price drops in those areas are being fueled by high foreclosure sales.
Foreclosures made up almost one in five, or 18.6 percent, of all transactions in the last 12 months nationally. Not surprisingly, areas with the highest foreclosure rates are the markets with some of the greatest home value declines.
In California's Central Valley, 57.6 percent of transactions in Merced were foreclosures, and in Stockton, foreclosures made up 56.4 percent of transactions.
Put another way, in Stockton, 1 in every 60 houses is in foreclosure; in Merced, 1 in every 88 is. By comparison, 1 in every 2,500 houses in Delaware County has a foreclosure filing in September.
There are no other comparable Zillow data available for this region, although Zandi said that, based on Equifax credit-file data, 0.87 percent of first-mortgage loans in the region were in default at the end of September, compared with 1.38 percent nationally.
With continued intervention by the state and the city, it can take a year or more for a default to go to foreclosure sale, so the number of sales, anecdotally, remain minimal.
A third-quarter study by Philadelphia economist Kevin Gillen for single-family homes in the city (condos are excluded) showed median prices down 6.8 percent.
In the same period, the composite price of houses in 10 cities tracked by Standard & Poor's Case-Shiller Index was down 20.8 percent — including Los Angeles, Las Vegas, Miami, and Washington.
Philadelphia prices are still overvalued by about 2 percent, according an IHP Global Insight/National City measurement — meaning that they have that much more to fall before they reach bottom.
Gillen points out, however, Philadelphia prices in the 1990s continued to fall for much of the decade after hitting bottom, so there are no guarantees.
Said Humphries: "It seems Philadelphia may escape the worst of the housing market woes affecting much of the rest of the country."
Sunday, November 16, 2008
These Cities Are In Line for a Rebound
Have we reached bottom? In many cities, knowledgeable observers say yes.
In October 2005 at the peak of the boom, the median sales price for a U.S. home reached 7.3 times per capita income. By this May it was 5.7 times, just about the historical norm. Home inventories have flattened. The decline in sales has ended — and in some places sales have expedited."
The indicators are starting to look better," says Adam York, an economic analyst with Wachovia.Here are seven markets that Smart Money magazine says are in line for a rebound (implying that prices will begin to head back up again) :
Seattle
Raleigh
Des Moines
Philadelphia
Denver
Birmingham, Ala.
Salt Lake City Source: SmartMoney (11/01/08)
In October 2005 at the peak of the boom, the median sales price for a U.S. home reached 7.3 times per capita income. By this May it was 5.7 times, just about the historical norm. Home inventories have flattened. The decline in sales has ended — and in some places sales have expedited."
The indicators are starting to look better," says Adam York, an economic analyst with Wachovia.Here are seven markets that Smart Money magazine says are in line for a rebound (implying that prices will begin to head back up again) :
Seattle
Raleigh
Des Moines
Philadelphia
Denver
Birmingham, Ala.
Salt Lake City Source: SmartMoney (11/01/08)
Trademark Properties Lawsuit vs. A&E Proceeds
There are many valuable lessons to be learned in life and that includes business as well. Sometimes, business people, especially those holding high-ranking positions, tend to ignore minor issues involving their relationship with reputable partners. They feel they can get away with everything just by making verbal agreements. Take the case of A&E which was sued by Trademark Properties in July 2006 for failing to pay the latter of what should have been due them. Trademark Properties was the original producer of the popular TV show “Flip This House” aired over A&E. Flip This House is a real estate show focusing on property flipping projects. After the first successful season of the show, A&E failed to pay Trademark Properties its share of revenues prompting Trademark president Richard Davis to sue the TV network.
The trial of the controversial lawsuit filed by Trademark Properties against A&E in 2006 has already started. U.S. District Court Judge C. Weston Houck, during the July 11, 2007 trial, ruled that there is reasonable evidence suggesting that a verbal agreement was made between Trademark and A&E officials to equally share profits from the Flip This House television show. The judge, in his ruling, also denied a request by A&E to dismiss the case filed by Davis.
The TV network stressed it never made any verbal agreement with Davis to share the show’s profits. A&E’s lawyer Jeremy Feigelson argued that if no evidence exists that the two parties made an oral agreement for revenue sharing, then Richard Davis has no case at all. “The contract is not enforceable because of too many missing pieces,” he said. Meanwhile, the attorney of Richard Davis, Frank Cisa of Mount Pleasant, revealed the emails and other communications between Davis and A&E that referred several times to the supposed arrangement on the sharing of profits. Judge Houck, however, ruled that there’s sufficient proof about the oral agreement. He pointed out that an agreement does not need to be in writing to be enforceable. Richard Davis attended the hearing Wednesday but refused to comment on the case. A&E’s lawyers also avoided making a comment after the trial. It’s been a year since Davis filed a multi-million dollar lawsuit against cable network A&E and production firm Departure Films in the Court of Common Please in Charleston, South Carolina where his company Trademark Properties is based. Davis cited breach of contract, fraud and seven other counts in filing the case.
Davis claims that Flip This House is rightfully his, being the executive producer of the show, and that A&E has no right to continue the show over its network with a different cast. Davis, in his complaint, stressed that he created Flip This House in April 2004 and owns the rights equally with A&E based on a verbal agreement with a network executive. In his earlier statement, Davis said assured their devoted fans and viewers that they will not change for the sake of a network. “We are who we are, flaws and all, and don’t care to show you anything but who we really are, what we really do and how we really do it, successful or not.”Davis and his Trademark team returned on air in April 2007 via “The Real Deal” over Discovery’s TLC. The show, still on property flipping, has changed its name to “The Real Pros” which aptly describes the team members composed of real professionals in the real estate business.
UPDATE: November 12, 2008 - A jury awarded Richard C. Davis 4 Million Dollars in damages. “I’m very pleased with the verdict,” said Mount Pleasant attorney Frank M. Cisa, who represented Davis. “These cases are very tough to prove.”
The trial of the controversial lawsuit filed by Trademark Properties against A&E in 2006 has already started. U.S. District Court Judge C. Weston Houck, during the July 11, 2007 trial, ruled that there is reasonable evidence suggesting that a verbal agreement was made between Trademark and A&E officials to equally share profits from the Flip This House television show. The judge, in his ruling, also denied a request by A&E to dismiss the case filed by Davis.
The TV network stressed it never made any verbal agreement with Davis to share the show’s profits. A&E’s lawyer Jeremy Feigelson argued that if no evidence exists that the two parties made an oral agreement for revenue sharing, then Richard Davis has no case at all. “The contract is not enforceable because of too many missing pieces,” he said. Meanwhile, the attorney of Richard Davis, Frank Cisa of Mount Pleasant, revealed the emails and other communications between Davis and A&E that referred several times to the supposed arrangement on the sharing of profits. Judge Houck, however, ruled that there’s sufficient proof about the oral agreement. He pointed out that an agreement does not need to be in writing to be enforceable. Richard Davis attended the hearing Wednesday but refused to comment on the case. A&E’s lawyers also avoided making a comment after the trial. It’s been a year since Davis filed a multi-million dollar lawsuit against cable network A&E and production firm Departure Films in the Court of Common Please in Charleston, South Carolina where his company Trademark Properties is based. Davis cited breach of contract, fraud and seven other counts in filing the case.
Davis claims that Flip This House is rightfully his, being the executive producer of the show, and that A&E has no right to continue the show over its network with a different cast. Davis, in his complaint, stressed that he created Flip This House in April 2004 and owns the rights equally with A&E based on a verbal agreement with a network executive. In his earlier statement, Davis said assured their devoted fans and viewers that they will not change for the sake of a network. “We are who we are, flaws and all, and don’t care to show you anything but who we really are, what we really do and how we really do it, successful or not.”Davis and his Trademark team returned on air in April 2007 via “The Real Deal” over Discovery’s TLC. The show, still on property flipping, has changed its name to “The Real Pros” which aptly describes the team members composed of real professionals in the real estate business.
UPDATE: November 12, 2008 - A jury awarded Richard C. Davis 4 Million Dollars in damages. “I’m very pleased with the verdict,” said Mount Pleasant attorney Frank M. Cisa, who represented Davis. “These cases are very tough to prove.”
Wednesday, October 22, 2008
Philadelphia area at low risk of housing-price drops
Posted on Fri, Oct. 3, 2008
Philadelphia area at low risk of housing-price drops
By Alan J. Heavens
Inquirer Real Estate Writer
Philadelphia-area housing prices have a small risk of being lower in two years, according to a study by the PMI Mortgage Insurance Co. Using second-quarter data from the Office of Federal Housing Oversight, the Walnut Creek, Calif., company said Wednesday that the eight-county region has only a 2.1 percent chance of lower prices two years from now.
By comparison, the Fort Lauderdale, Fla., area has the greatest chance of further price drops of the 50 largest metro areas—99.5 percent.
The 16 metro areas with the greatest chance of continued falling prices are in California, Florida, Arizona and Nevada, all of which experienced major increases in housing prices during the housing boom.
PMI chief economist David Berson said increases in foreclosures and unemployment had significantly heightened the risk of future home-price declines in these areas.
As a further indicator of how the region is faring, July data from Radar Logic Inc., a New York firm that tracks real estate transactions, showed that the Philadelphia region's year-over-year price decline was just 3.2 percent from July 2007—another indication that, in the words of Philadelphia economist Kevin Gillen, "the downturn here is very mild compared to many other U.S. cities."
Radar Logic chief executive officer Michael Federer said, "What we are seeing now is a situation in which the [foreclosure process] is driving prices down in markets with relatively high concentrations" of distressed properties.
Various statistical measures show that housing prices in the eight-county Philadelphia area have declined just under 4 percent since what Gillen says was the region's peak: the 2007 second quarter.
City single-family home prices have fallen 6.6 percent since the peak, he said. Gillen's figures do not include Center City condo sales.
Prices in the suburban market have dropped 4.3 percent since the second quarter of 2007, Gillen said.
Intervention efforts by the city, Pennsylvania and New Jersey have kept foreclosure sales low even as filings have increased, though not in numbers seen elsewhere, according to RealtyTrac Inc., which tracks them.
Since Philadelphia began its pilot program for mortgage-foreclosure diversions in late spring, 42 percent of 552 properties have been saved from sheriff's sales, and the sales of an additional 36 percent have been postponed.
Delaware County officials had scheduled a meeting for last night with community leaders to discuss establishing a diversion program based on the Philadelphia model.
Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.
Philadelphia area at low risk of housing-price drops
By Alan J. Heavens
Inquirer Real Estate Writer
Philadelphia-area housing prices have a small risk of being lower in two years, according to a study by the PMI Mortgage Insurance Co. Using second-quarter data from the Office of Federal Housing Oversight, the Walnut Creek, Calif., company said Wednesday that the eight-county region has only a 2.1 percent chance of lower prices two years from now.
By comparison, the Fort Lauderdale, Fla., area has the greatest chance of further price drops of the 50 largest metro areas—99.5 percent.
The 16 metro areas with the greatest chance of continued falling prices are in California, Florida, Arizona and Nevada, all of which experienced major increases in housing prices during the housing boom.
PMI chief economist David Berson said increases in foreclosures and unemployment had significantly heightened the risk of future home-price declines in these areas.
As a further indicator of how the region is faring, July data from Radar Logic Inc., a New York firm that tracks real estate transactions, showed that the Philadelphia region's year-over-year price decline was just 3.2 percent from July 2007—another indication that, in the words of Philadelphia economist Kevin Gillen, "the downturn here is very mild compared to many other U.S. cities."
Radar Logic chief executive officer Michael Federer said, "What we are seeing now is a situation in which the [foreclosure process] is driving prices down in markets with relatively high concentrations" of distressed properties.
Various statistical measures show that housing prices in the eight-county Philadelphia area have declined just under 4 percent since what Gillen says was the region's peak: the 2007 second quarter.
City single-family home prices have fallen 6.6 percent since the peak, he said. Gillen's figures do not include Center City condo sales.
Prices in the suburban market have dropped 4.3 percent since the second quarter of 2007, Gillen said.
Intervention efforts by the city, Pennsylvania and New Jersey have kept foreclosure sales low even as filings have increased, though not in numbers seen elsewhere, according to RealtyTrac Inc., which tracks them.
Since Philadelphia began its pilot program for mortgage-foreclosure diversions in late spring, 42 percent of 552 properties have been saved from sheriff's sales, and the sales of an additional 36 percent have been postponed.
Delaware County officials had scheduled a meeting for last night with community leaders to discuss establishing a diversion program based on the Philadelphia model.
Contact real estate writer Alan J. Heavens at 215-854-2472 or aheavens@phillynews.com.
Friday, July 4, 2008
Celebrities Have Money Troubles, Too
Daily Real Estate News July 1, 2008
Celebrities Have Money Troubles, Too
The problems faced by entertainer Ed McMahon have been widely publicized, but other well-known people are in similar straits.
Boxer Evander Holyfield lost his $10 million estate in Atlanta in May to foreclosure. Baseball great Jose Canseco’s $2.5 million home in suburban Los Angeles is also in foreclosure, as is the home of former Tennessee Titan football player Adam “Pacman” Jones. Ex-NBA star Latrell Sprewell is in danger of losing his $405,000 Milwaukee home and his yacht has been repossessed.
Actor Dustin Diamond, who played Screech on "Saved by the Bell," saved his home by selling T-shirts on his Web site and asking fans for money on the Howard Stern Show.
Singer Michael Jackson cut a deal with casino owner Tom Barrack to get out from under loans on Neverland Ranch by appearing in Barrack’s establishments.
Source: Business Week, Chris Palmeri (06/27/08)
Got me....
Celebrities Have Money Troubles, Too
The problems faced by entertainer Ed McMahon have been widely publicized, but other well-known people are in similar straits.
Boxer Evander Holyfield lost his $10 million estate in Atlanta in May to foreclosure. Baseball great Jose Canseco’s $2.5 million home in suburban Los Angeles is also in foreclosure, as is the home of former Tennessee Titan football player Adam “Pacman” Jones. Ex-NBA star Latrell Sprewell is in danger of losing his $405,000 Milwaukee home and his yacht has been repossessed.
Actor Dustin Diamond, who played Screech on "Saved by the Bell," saved his home by selling T-shirts on his Web site and asking fans for money on the Howard Stern Show.
Singer Michael Jackson cut a deal with casino owner Tom Barrack to get out from under loans on Neverland Ranch by appearing in Barrack’s establishments.
Source: Business Week, Chris Palmeri (06/27/08)
Got me....
Summer 2008 Risk Index
PMI Summer 2008 Risk Index Indicates Risk Intensifying in Areas With Previous Rapid Home Price Growth
Housing Affordability Continues to Improve
WALNUT CREEK, Calif., July 1 /PRNewswire-FirstCall/ -- PMI Mortgage Insurance Co., the primary U.S. subsidiary of The PMI Group, Inc. (NYSE: PMI), today released its Summer 2008 U.S. Market Risk Index(SM), which ranks the nation's 50 largest metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years. The U.S. Market Risk Index shows risk further diverged along two distinctly different paths during the first quarter of 2008, continuing a trend that began in the fourth quarter of 2007. In general, risk continued to intensify in many of the MSAs where home price growth had significantly exceeded historical norms during the housing boom, but continued to decline in many other areas across the country.
A complete copy of the Summer 2008 PMI ERET report and an appendix that provides data for all 381 U.S. MSAs is available at: http://www.pmi-us.com/eret.
The highest risk of future price declines remains in Riverside-San Bernardino-Ontario, CA (95.5), followed by Fort Lauderdale-Pompano Beach-Deerfield Beach, FL (92.2), and West Palm Beach-Boca Raton-Boynton Beach, FL (91.9). The areas with the lowest risk of price declines are in Fort Worth-Arlington, TX, Dallas-Plano-Irving, TX, and Pittsburgh, PA, each at less than a 1 percent chance.
The risk of lower prices in two years declined in 35 of the nation's 50 largest MSAs, and among all 381 MSAs, 326 experienced a decline in risk. Among the top 50 MSAs, 16 ranked in the two highest risk categories, and among those, 15 were in California, Florida, Nevada, and Arizona. Risk of lower prices in two years is greater than 50 percent in all of these MSAs.
Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years. The Summer 2008 Risk Index is based on first-quarter Office of Federal Housing Enterprise Oversight (OFHEO) data.
Compared with a year earlier, there has been a significant increase in the number of existing single-family homes for sale relative to the number of buyers, even beyond the normal increase in the spring home sales season. April's ratio is the highest since 1985, said David Berson, PMI's Chief Economist and Strategist. Given the magnitude of the inventory overhang, we expect national home price declines to continue into at least 2009.
Housing affordability continued to improve during the first quarter, according to PMI's proprietary Affordability Index(SM), which measures how affordable homes are today in a given MSA relative to a baseline of 1995. An Affordability Index score exceeding 100 indicates that homes have become more affordable while a score below 100 means they are less affordable. Across the nation, 69.3 percent of the nation's 381 MSAs showed increased affordability; while 30.7 percent of all MSAs experienced declines in affordability. Affordability remains challenged in the 17 MSAs with risk scores in the two highest risk ranks. Home prices in these areas will need to fall further in order to move back in line with incomes before there will be meaningful reductions in risk scores.
In addition to the PMI U.S. Market Risk Index showing the risk of price declines, PMI's Summer 2008 Economic and Real Estate Trends(SM) (ERET) also examines the accelerated decline of national home prices in the first quarter of 2008.
PMI Summer 2008 PMI U.S. Market Risk Index
Rank MSA Score
1 Riverside-San Bernardino-Ontario; CA 95.5
1 Fort Lauderdale-Pompano Beach-Deerfield Beach; FL 92.2
1 West Palm Beach-Boca Raton-Boynton Beach; FL 91.9
1 Orlando-Kissimmee; FL 91.1
1 Las Vegas-Paradise; NV 88.1
1 Tampa-St. Petersburg-Clearwater; FL 86.6
1 Santa Ana-Anaheim-Irvine; CA 85.8
1 Los Angeles-Long Beach-Glendale; CA 85.7
1 Miami-Miami Beach-Kendall; FL 84.8
1 Sacramento-Arden-Arcade-Roseville; CA 82.2
1 Phoenix-Mesa-Scottsdale; AZ 79.6
1 San Diego-Carlsbad-San Marcos; CA 78.0
1 Jacksonville; FL 73.2
1 Oakland-Fremont-Hayward; CA 72.8
2 San Jose-Sunnyvale-Santa Clara; CA 51.3
2 Providence-New Bedford-Fall River; RI-MA 43.4
3 San Francisco-San Mateo-Redwood City; CA 35.7
3 Washington-Arlington-Alexandria; DC-VA-MD-WV 21.4
3 Nassau-Suffolk; NY 21.2
4 Edison-New Brunswick; NJ 16.2
4 Virginia Beach-Norfolk-Newport News; VA-NC 13.8
4 Boston-Quincy; MA 11.8
4 Detroit-Livonia-Dearborn; MI 11.1
5 Portland-Vancouver-Beaverton; OR-WA 8.7
5 Minneapolis-St. Paul-Bloomington; MN-WI 8.2
5 Newark-Union; NJ-PA 6.5
5 New York-White Plains-Wayne; NY-NJ 6.0
5 Baltimore-Towson; MD 5.5
5 Warren-Troy-Farmington Hills; MI 5.3
5 Cambridge-Newton-Framingham; MA 4.3
5 Atlanta-Sandy Springs-Marietta; GA 2.0
5 Seattle-Bellevue-Everett; WA 1.7
5 Chicago-Naperville-Joliet; IL 1.5
5 Philadelphia; PA 1.4
5 Nashville-Davidson--Murfreesboro--Franklin; TN 1.3
5 St. Louis; MO-IL 1.0
5 Milwaukee-Waukesha-West Allis; WI <1 href="http://www.pmi-us.com/">http://www.pmi-us.com.
Cautionary Statement: Statements in this press release that are not historical facts or that relate to future plans, events or performance are 'forward-looking' statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, PMI's U.S. Market Risk Index, Affordability Index, and any related discussion, and statements relating to future economic and housing market conditions. Forward-looking statements are subject to a number of risks and uncertainties including, but not limited to, the following factors: changes in economic conditions, economic recession or slowdowns, adverse changes in consumer confidence, declining housing values, higher unemployment, deteriorating borrower credit, changes in interest rates, or a combination of these factors. Readers are cautioned that any statements with respect to future economic and housing market conditions are based upon current economic conditions and, therefore, are inherently uncertain and highly subject to the changes in the factors enumerated above. Other risk and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including our report on Form 10-K for the year ended December 31, 2007 and our Form 10-Q for the quarter ended March 31, 2008.
SOURCE PMI Mortgage Insurance Co.
Housing Affordability Continues to Improve
WALNUT CREEK, Calif., July 1 /PRNewswire-FirstCall/ -- PMI Mortgage Insurance Co., the primary U.S. subsidiary of The PMI Group, Inc. (NYSE: PMI), today released its Summer 2008 U.S. Market Risk Index(SM), which ranks the nation's 50 largest metropolitan statistical areas (MSAs) according to the likelihood that home prices will be lower in two years. The U.S. Market Risk Index shows risk further diverged along two distinctly different paths during the first quarter of 2008, continuing a trend that began in the fourth quarter of 2007. In general, risk continued to intensify in many of the MSAs where home price growth had significantly exceeded historical norms during the housing boom, but continued to decline in many other areas across the country.
A complete copy of the Summer 2008 PMI ERET report and an appendix that provides data for all 381 U.S. MSAs is available at: http://www.pmi-us.com/eret.
The highest risk of future price declines remains in Riverside-San Bernardino-Ontario, CA (95.5), followed by Fort Lauderdale-Pompano Beach-Deerfield Beach, FL (92.2), and West Palm Beach-Boca Raton-Boynton Beach, FL (91.9). The areas with the lowest risk of price declines are in Fort Worth-Arlington, TX, Dallas-Plano-Irving, TX, and Pittsburgh, PA, each at less than a 1 percent chance.
The risk of lower prices in two years declined in 35 of the nation's 50 largest MSAs, and among all 381 MSAs, 326 experienced a decline in risk. Among the top 50 MSAs, 16 ranked in the two highest risk categories, and among those, 15 were in California, Florida, Nevada, and Arizona. Risk of lower prices in two years is greater than 50 percent in all of these MSAs.
Risk scores translate directly into an estimated percentage risk that home prices will be lower in two years. The Summer 2008 Risk Index is based on first-quarter Office of Federal Housing Enterprise Oversight (OFHEO) data.
Compared with a year earlier, there has been a significant increase in the number of existing single-family homes for sale relative to the number of buyers, even beyond the normal increase in the spring home sales season. April's ratio is the highest since 1985, said David Berson, PMI's Chief Economist and Strategist. Given the magnitude of the inventory overhang, we expect national home price declines to continue into at least 2009.
Housing affordability continued to improve during the first quarter, according to PMI's proprietary Affordability Index(SM), which measures how affordable homes are today in a given MSA relative to a baseline of 1995. An Affordability Index score exceeding 100 indicates that homes have become more affordable while a score below 100 means they are less affordable. Across the nation, 69.3 percent of the nation's 381 MSAs showed increased affordability; while 30.7 percent of all MSAs experienced declines in affordability. Affordability remains challenged in the 17 MSAs with risk scores in the two highest risk ranks. Home prices in these areas will need to fall further in order to move back in line with incomes before there will be meaningful reductions in risk scores.
In addition to the PMI U.S. Market Risk Index showing the risk of price declines, PMI's Summer 2008 Economic and Real Estate Trends(SM) (ERET) also examines the accelerated decline of national home prices in the first quarter of 2008.
PMI Summer 2008 PMI U.S. Market Risk Index
Rank MSA Score
1 Riverside-San Bernardino-Ontario; CA 95.5
1 Fort Lauderdale-Pompano Beach-Deerfield Beach; FL 92.2
1 West Palm Beach-Boca Raton-Boynton Beach; FL 91.9
1 Orlando-Kissimmee; FL 91.1
1 Las Vegas-Paradise; NV 88.1
1 Tampa-St. Petersburg-Clearwater; FL 86.6
1 Santa Ana-Anaheim-Irvine; CA 85.8
1 Los Angeles-Long Beach-Glendale; CA 85.7
1 Miami-Miami Beach-Kendall; FL 84.8
1 Sacramento-Arden-Arcade-Roseville; CA 82.2
1 Phoenix-Mesa-Scottsdale; AZ 79.6
1 San Diego-Carlsbad-San Marcos; CA 78.0
1 Jacksonville; FL 73.2
1 Oakland-Fremont-Hayward; CA 72.8
2 San Jose-Sunnyvale-Santa Clara; CA 51.3
2 Providence-New Bedford-Fall River; RI-MA 43.4
3 San Francisco-San Mateo-Redwood City; CA 35.7
3 Washington-Arlington-Alexandria; DC-VA-MD-WV 21.4
3 Nassau-Suffolk; NY 21.2
4 Edison-New Brunswick; NJ 16.2
4 Virginia Beach-Norfolk-Newport News; VA-NC 13.8
4 Boston-Quincy; MA 11.8
4 Detroit-Livonia-Dearborn; MI 11.1
5 Portland-Vancouver-Beaverton; OR-WA 8.7
5 Minneapolis-St. Paul-Bloomington; MN-WI 8.2
5 Newark-Union; NJ-PA 6.5
5 New York-White Plains-Wayne; NY-NJ 6.0
5 Baltimore-Towson; MD 5.5
5 Warren-Troy-Farmington Hills; MI 5.3
5 Cambridge-Newton-Framingham; MA 4.3
5 Atlanta-Sandy Springs-Marietta; GA 2.0
5 Seattle-Bellevue-Everett; WA 1.7
5 Chicago-Naperville-Joliet; IL 1.5
5 Philadelphia; PA 1.4
5 Nashville-Davidson--Murfreesboro--Franklin; TN 1.3
5 St. Louis; MO-IL 1.0
5 Milwaukee-Waukesha-West Allis; WI <1 href="http://www.pmi-us.com/">http://www.pmi-us.com.
Cautionary Statement: Statements in this press release that are not historical facts or that relate to future plans, events or performance are 'forward-looking' statements within the meaning of the Private Securities Litigation Reform Act of 1995. These forward-looking statements include, but are not limited to, PMI's U.S. Market Risk Index, Affordability Index, and any related discussion, and statements relating to future economic and housing market conditions. Forward-looking statements are subject to a number of risks and uncertainties including, but not limited to, the following factors: changes in economic conditions, economic recession or slowdowns, adverse changes in consumer confidence, declining housing values, higher unemployment, deteriorating borrower credit, changes in interest rates, or a combination of these factors. Readers are cautioned that any statements with respect to future economic and housing market conditions are based upon current economic conditions and, therefore, are inherently uncertain and highly subject to the changes in the factors enumerated above. Other risk and uncertainties are discussed in the Company's filings with the Securities and Exchange Commission, including our report on Form 10-K for the year ended December 31, 2007 and our Form 10-Q for the quarter ended March 31, 2008.
SOURCE PMI Mortgage Insurance Co.
Wednesday, June 18, 2008
The End of "Suburban Sprawl"?
Could it be that the meteoric rise of fuel prices has resulted in reversing a trend of exodus from big cities to the suburbs and is bringing people back in order to avoid long, expensive commutes?
The is the notion I just heard on the network news and it's an interesting topic to ponder.
Recently, it's been theorized that many snowbirds were tiring of the trek from north to south, and vice versa, with the seasons, and likewise, were tiring of trekking anywhere for entertainment, foods sports, name it, also resulting in a shift with older, empty nesters, if you will, looking for urban lifestyles and a home in the large, mostly northeastern cities.
Now, with oil prices and congestion in the 'burbs comes the theory that many younger, working types, will also start to look for homes closer to their place of work, presumably in or near cities. Hmmm.
In Pennsylvania there is talk of serious consideration being given to abolishing the statewide real estate school tax which is the lion's share of the real estate tax burden. This would result in dramatic reductions in real estate taxes (to be replaced by other tax adjustments presumably aimed at evening out the burden imposed for educating our young) especially in areas with high taxes such as Coatesville and Downingtown in Philly's western suburbs. While this would seem to foretell of a coming economic shift in some of that areas desirable communities, the previous two conversations present an interesting dynamic that is sure to paint a new, unexpected picture over the next 20- 40 years.
Surely you grasp how this is relevant to investors....
The is the notion I just heard on the network news and it's an interesting topic to ponder.
Recently, it's been theorized that many snowbirds were tiring of the trek from north to south, and vice versa, with the seasons, and likewise, were tiring of trekking anywhere for entertainment, foods sports, name it, also resulting in a shift with older, empty nesters, if you will, looking for urban lifestyles and a home in the large, mostly northeastern cities.
Now, with oil prices and congestion in the 'burbs comes the theory that many younger, working types, will also start to look for homes closer to their place of work, presumably in or near cities. Hmmm.
In Pennsylvania there is talk of serious consideration being given to abolishing the statewide real estate school tax which is the lion's share of the real estate tax burden. This would result in dramatic reductions in real estate taxes (to be replaced by other tax adjustments presumably aimed at evening out the burden imposed for educating our young) especially in areas with high taxes such as Coatesville and Downingtown in Philly's western suburbs. While this would seem to foretell of a coming economic shift in some of that areas desirable communities, the previous two conversations present an interesting dynamic that is sure to paint a new, unexpected picture over the next 20- 40 years.
Surely you grasp how this is relevant to investors....
Sunday, June 15, 2008
Best Time EVER, To Invest in Real Estate
Yessirree Bob that's what ALL of the self-proclaimed experts are and have been saying... Why hell, it's a buyer's market, interest rates are low, and gosh darnit (I prefer not to cuss you know) it's just the best darn time ever (to give me your money so I can show you how to get into this at this GREAT time!) Yes sir, THAT is the actual message being spewed about...
Why do I say that? I say that because, well it's true, it's nothing re than a come on to sell seminar seats. Let's face it, it is a pretty good time to buy depending on your financial position and what you plan to do with the properties. But the flip market is fairly soft in a lot of areas thus making rehabs a little risky ESPECIALLY if you're not apt to do higher end finishes in your rehabs or if the property won't support a higher end rehab. Additionally, strangely the rental market seems a bit soft, counter to the wisdom that assumes with tougher mortgage criteria more people should be looking to rent. Lastly, many would be, and also experienced investors are finding financing their purchases to be a challenge from a number of perspectives.
So, while there are still some good buys out there and even a number of portfolios being offered up, my humble opinion is that this is no better and no worse a time to invest in real estate than two years ago or 2010.
Why do I say that? I say that because, well it's true, it's nothing re than a come on to sell seminar seats. Let's face it, it is a pretty good time to buy depending on your financial position and what you plan to do with the properties. But the flip market is fairly soft in a lot of areas thus making rehabs a little risky ESPECIALLY if you're not apt to do higher end finishes in your rehabs or if the property won't support a higher end rehab. Additionally, strangely the rental market seems a bit soft, counter to the wisdom that assumes with tougher mortgage criteria more people should be looking to rent. Lastly, many would be, and also experienced investors are finding financing their purchases to be a challenge from a number of perspectives.
So, while there are still some good buys out there and even a number of portfolios being offered up, my humble opinion is that this is no better and no worse a time to invest in real estate than two years ago or 2010.
Friday, June 13, 2008
A Sad, Sad Subprime Story
Reprinted from somewhere I can't recall...
I'd like to think that there's nothing I could read or hear on stations like CNBC or print media anymore that would shock me. Of course, today was an exception.
I read an article from MSN (also known as TSIF – The Sky Is Falling) regarding homeowners who'd had enough of their payments, dealing with the bank, and fear of foreclosure so they left the keys on the kitchen counter or in the front door and walked away from the property.
Apparently the mortgage industry calls this "Jingle Mail" (the keys arrive in an envelope via mail most of the time).
There were three homeowners spotlighted in this article, but there's one gem that really blew me away.
Here's the facts first:
30+ mother of 3
$50,000/yr income
Married
Living in California
Purchase price of her home: $585,000
Down payment: $16,000
Lesson learned: Priceless
The article chose to focus on the fact that within 8 months of buying the house, the woman in question's marriage fell apart.
No one wanted to talk about the fact that she made FIFTY THOUSAND DOLLARS A YEAR AND PURCHASED A HOME WORTH OVER HALF A MILLION!!!
My favorite??? Her mortgage payment was $4,500 a month…Adjustable Rate…No taxes or insurance included.
…because we all know someone with an extra five grand laying around to burn each month with a 5-figure income!
It absolutely sickens me that the media has chosen to focus on the poor, pitiful homeowner in trouble rather than the joker who was sitting at the closing table, signing the paperwork, fully disclosed (in most instances) that their payments would adjust, the rates would go up, and that eventually…eventually…the great housing boom would come to an end.
And yet, in the microwave society we live in today, too many are focused more on getting what they want right now rather than waiting for the right time.
I'd like to think that there's nothing I could read or hear on stations like CNBC or print media anymore that would shock me. Of course, today was an exception.
I read an article from MSN (also known as TSIF – The Sky Is Falling) regarding homeowners who'd had enough of their payments, dealing with the bank, and fear of foreclosure so they left the keys on the kitchen counter or in the front door and walked away from the property.
Apparently the mortgage industry calls this "Jingle Mail" (the keys arrive in an envelope via mail most of the time).
There were three homeowners spotlighted in this article, but there's one gem that really blew me away.
Here's the facts first:
30+ mother of 3
$50,000/yr income
Married
Living in California
Purchase price of her home: $585,000
Down payment: $16,000
Lesson learned: Priceless
The article chose to focus on the fact that within 8 months of buying the house, the woman in question's marriage fell apart.
No one wanted to talk about the fact that she made FIFTY THOUSAND DOLLARS A YEAR AND PURCHASED A HOME WORTH OVER HALF A MILLION!!!
My favorite??? Her mortgage payment was $4,500 a month…Adjustable Rate…No taxes or insurance included.
…because we all know someone with an extra five grand laying around to burn each month with a 5-figure income!
It absolutely sickens me that the media has chosen to focus on the poor, pitiful homeowner in trouble rather than the joker who was sitting at the closing table, signing the paperwork, fully disclosed (in most instances) that their payments would adjust, the rates would go up, and that eventually…eventually…the great housing boom would come to an end.
And yet, in the microwave society we live in today, too many are focused more on getting what they want right now rather than waiting for the right time.
Monday, June 2, 2008
Missing Me?
I'm on hiatus along with Bill Maher. Stay tuned for more enlightened real estate jibber jabber while our Wilmington flip flounders in the apparent dead market that is Delaware.
Tuesday, May 20, 2008
Say HELLO To My Little Friend...
Love'em or hate'em, city (municipal) inspectors have a job to do. Some don't appreciate the way they do their job, or they way they're perceived to be doing their job, but if you intend to efficiently accomplish what you want in the world of real estate, you better learn to love'em, even when you think you probably hate'em....
Fact is, dealing with (building, plumbing, etc.) inspectors is a lose lose proposition unless you bite your lip and keep your mouth shut. In fact, making nice (kissing ass) is probably the best approach at ALL times. Unless you've never heard the phrase "you can't beat city hall" you know what I'm talking about. You CAN'T! You can holler and jump up and down all you want, if the man says you need 6" copper pipes to the toilet, he can make you do it! End of story! Unless you want to take the city to court. Yea right.
So, once again, my advice is to play VERY, VERY, VERY nice with the man....if you ever want to see that project get approved! Oh, and, make sure your contractors heed the same advice....or be there when it's meet-with-the-inspector time!
Fact is, dealing with (building, plumbing, etc.) inspectors is a lose lose proposition unless you bite your lip and keep your mouth shut. In fact, making nice (kissing ass) is probably the best approach at ALL times. Unless you've never heard the phrase "you can't beat city hall" you know what I'm talking about. You CAN'T! You can holler and jump up and down all you want, if the man says you need 6" copper pipes to the toilet, he can make you do it! End of story! Unless you want to take the city to court. Yea right.
So, once again, my advice is to play VERY, VERY, VERY nice with the man....if you ever want to see that project get approved! Oh, and, make sure your contractors heed the same advice....or be there when it's meet-with-the-inspector time!
Saturday, May 17, 2008
The Glamour of Real Estate
You'll be rich. You'll escape the rat race. You'll get off the merry go round. You can quit your job. You don't need any money. You can do what you want. You won't have to punch a clock. People will envy you. Did I mentioned you'll be rich?
All of the above and MORE are the promises of more than a dozen or so local real estate gurus just dying for you to give them $4,000, $5,000, $9,500 or more to show you how to instantly achieve all of the above AND more!
When you're there ask them about these unglamorous topics:
Uncooperative and/or deadbeat tenants; vacant properties and how to keep them secure, not to mention keeping squatters out; the ramifications of possession and stupid things like what happens if a tenant leaves and there are possessions left in YOUR property; Property Managers and their ilk; dealing with city-owned utilities like Philly's PGW and Philly water and the spectre of liens from tenants not paying their bills; mechanics liens (yea, that's a good one)... The list can go on and on and on. The point is not to scare you or even to dissuade you from investing, actually to the contrary. But get into it with your eyes WIDE open! And cut through the mountains of BS you're gonna hear on your way in!
All of the above and MORE are the promises of more than a dozen or so local real estate gurus just dying for you to give them $4,000, $5,000, $9,500 or more to show you how to instantly achieve all of the above AND more!
When you're there ask them about these unglamorous topics:
Uncooperative and/or deadbeat tenants; vacant properties and how to keep them secure, not to mention keeping squatters out; the ramifications of possession and stupid things like what happens if a tenant leaves and there are possessions left in YOUR property; Property Managers and their ilk; dealing with city-owned utilities like Philly's PGW and Philly water and the spectre of liens from tenants not paying their bills; mechanics liens (yea, that's a good one)... The list can go on and on and on. The point is not to scare you or even to dissuade you from investing, actually to the contrary. But get into it with your eyes WIDE open! And cut through the mountains of BS you're gonna hear on your way in!
Sunday, May 11, 2008
Go Ahead, Make My Point!
As I ranted about recently, the economy, and how it affects the populace, and in turn, how the people affect the economy, is largely about perception. Here is case-in-point. From the Chester County Daily Local's ViewPoint guest column in yesterday's edition comes this ditty from Joel L. Naroff, the chief economist for Commerce Bank. It is entitled Whatever You Call It, Economic Conditions Are Not Good. His first sentence is "The economy managed to eke out another quarter of growth during the first part of this year." Hmm, so far so good, or is that bad? His next sentence, "But that will not change how anyone feels: We are in a major slowdown and it is irrelevant whether we technically meet the criteria for a recession." Um, excuse me but, and I'm certainly no economist, but I thought the fundamental definition of recession... well, actually, here is the definition from investorwords.com: A period of general economic decline; specifically, a decline in GDP for two or more consecutive quarters. More from Mr. Naroff: "The economy actually managed to expand during the first three months of the year. Of course, a second consecutive 0.6% growth rate is hardly saying much."
Wow, talk about negative spin! In Philadelphia, where the perception of our sports fans is bad and worse, the term Negadelphia was coined by a local talk radio host. I now crown Mr. Naroff NegaEconomaniac!
Yes, just keep on spewing negativity whether the facts stand in the way or not. Now I'm not gonna try and say that 0.6% growth is something to stand up and cheer, but to me it represents an economy with underpinnings that are trying to maintain an even keel despite all the negative news and undercurrents wobbling consumer confidence. So, let me get the facts straight here. The economy grew by 0.6% EACH of the last two quarters. The definition of a recession is two straight quarters of decline. Hmmm, what exactly is the goal of mis-stating the facts here? Or is is just ignorance?
Anyway, whatever I call it, the economy is not in a recession. That's a fact.
Wow, talk about negative spin! In Philadelphia, where the perception of our sports fans is bad and worse, the term Negadelphia was coined by a local talk radio host. I now crown Mr. Naroff NegaEconomaniac!
Yes, just keep on spewing negativity whether the facts stand in the way or not. Now I'm not gonna try and say that 0.6% growth is something to stand up and cheer, but to me it represents an economy with underpinnings that are trying to maintain an even keel despite all the negative news and undercurrents wobbling consumer confidence. So, let me get the facts straight here. The economy grew by 0.6% EACH of the last two quarters. The definition of a recession is two straight quarters of decline. Hmmm, what exactly is the goal of mis-stating the facts here? Or is is just ignorance?
Anyway, whatever I call it, the economy is not in a recession. That's a fact.
Wilmington Done, Baby Done
Well, finally, the Wilmington project has drawn to a close and the sale sign is UP! Only a few final touches remain to truly be finished, hanging six more blinds and putting some window treatments on the barren front door, but those can wait. For now the focus is on getting some interested parties in to drool and make an offer! I'm acting like a seller for now, and not like a Realtor and am actually not taking our Delaware Realtor's advice on price, which also flies in the face of practical investor pricing practices, but we'll see how it goes.In a very short time I will post the numbers for this project for all to see!
Saturday, May 10, 2008
Yes, I'm a Sinner...
...go ahead and whip me, whip me good for I am a sinner! Yes, I'm a damn sinner! It's been over a week without a post and THAT is a sin in the world of BLOGS.
Interestingly (yes, I'm evading the subject) there was quite a controversy brewed up during that week regarding the world of the BLOG and the sports world and the responsibilities, or lack thereof regarding what is spewed in these BLOGs. Well, not THIS BLOG, but important ones about life and death stuff like baseball and football.
Um, last I heard the sport of BLOGging is all about personal commentary and I'm not sure exactly what responsibilities go along with having and writing ones own opinion. Oh, I'm sorry, I forgot we now live in the world of political correctness where no one is supposed to offend anyone else with an opposing opinion on anything....
So, anyway, yes, I've been lax for the last week keeping up with my BLOGsponsibilities. Well, it's because I've been busy, yea, that's it, I've been busy....
Interestingly (yes, I'm evading the subject) there was quite a controversy brewed up during that week regarding the world of the BLOG and the sports world and the responsibilities, or lack thereof regarding what is spewed in these BLOGs. Well, not THIS BLOG, but important ones about life and death stuff like baseball and football.
Um, last I heard the sport of BLOGging is all about personal commentary and I'm not sure exactly what responsibilities go along with having and writing ones own opinion. Oh, I'm sorry, I forgot we now live in the world of political correctness where no one is supposed to offend anyone else with an opposing opinion on anything....
So, anyway, yes, I've been lax for the last week keeping up with my BLOGsponsibilities. Well, it's because I've been busy, yea, that's it, I've been busy....
Saturday, May 3, 2008
The First $2-Billion Home Is Coming
The world’s largest and most expensive home will be completed in January.The 27-story skyscraper in downtown Mumbai, India, will be the residence of Mukesh Ambani and his wife Nita. Ambani, head of Mumbai-based petrochemical company Reliance Industries, is the fifth richest man in the world.The couple who have three children, are custom designing their $2 billion property with help from architecture firms Perkins + Will and Hirsch Bedner Assoc., based in Dallas and Los Angeles respectively.
The home will have 400,000 square feet of interior space, nine elevators, a ballroom and a section for security guards and assistants to relax.There will also be an ice room where residents and guests can escape the Mumbai heat and be dusted by man-made snow flurries.
Source: Forbes, Matt Woolsey (04/30/2008)
Okay, so like what exactly do five people need with 400,000 sq ft?
The home will have 400,000 square feet of interior space, nine elevators, a ballroom and a section for security guards and assistants to relax.There will also be an ice room where residents and guests can escape the Mumbai heat and be dusted by man-made snow flurries.
Source: Forbes, Matt Woolsey (04/30/2008)
Okay, so like what exactly do five people need with 400,000 sq ft?
And the Beat, Well, Keeps On Beating...
Of course the self-imposed Tuesday deadline for the GC to finish up in Wilmington came and went as expected. But on Friday things were pretty close to complete and the "final" cleaning was to have started. U&O inspection is scheduled for Monday, so keeping our toes crossed the house should be on the market the beginning of this week, only 10 weeks and $20k over budget.... But it is nice...
What Does THIS Mean To You?
The number of vacant homes for sale in the United States set a new record in the first quarter of 2008, the U.S. Census Bureau reported Monday.The Census Bureau reported that 2.9 percent of U.S. homes or 2.28 million properties, not including rentals, were vacant and for sale. It was the highest quarterly number as far back to 1956 when records of such vacancies were first kept.
The West had the biggest gain in vacancy rates among home owners, rising to 3.2 percent in the January-March period from 2.6 percent in the same quarter a year earlier. Vacancy rates inched up in the Northeast and remained steady in the Midwest and South.
Source: The Associated Press, Alan Zibel (04/28/08)
I suppose this reflects the uptick in foreclosures and other distressed situations. I also assume this implies that there are that many more motivated sellers. Unfortunately, it also implies that many more REO (bank-owned) properties are sitting there. And we know how difficult it can be to get some of those financial institutions to perk up and respond to an offer on those vacant properties rather than let them sit and decay...
The West had the biggest gain in vacancy rates among home owners, rising to 3.2 percent in the January-March period from 2.6 percent in the same quarter a year earlier. Vacancy rates inched up in the Northeast and remained steady in the Midwest and South.
Source: The Associated Press, Alan Zibel (04/28/08)
I suppose this reflects the uptick in foreclosures and other distressed situations. I also assume this implies that there are that many more motivated sellers. Unfortunately, it also implies that many more REO (bank-owned) properties are sitting there. And we know how difficult it can be to get some of those financial institutions to perk up and respond to an offer on those vacant properties rather than let them sit and decay...
Sunday, April 27, 2008
Great Website for Construction Projects
Was searching for some how-to help because I have never before grouted tile and I have two VERY small areas to do in my kitchen, and found this site to be VERY helpful and deep on a lot of topics. This is the HVAC area but on the left you will see many categories to choose from.
www.askthebuilder.com/HeatingDesign.shtml
www.askthebuilder.com/HeatingDesign.shtml
And the Beat Goes On...
Well, another three or four self-imposed deadlines have passed for GC at the Wilmington project. Now he says Tuesday... Which week?
The new local painter I hired to re-paint the outside areas that the original nightmare painter did the wrong color, caused some unrest at the site yesterday inflaming the next-door neighbor who had contracted him to paint her porch to match ours as well as the GC who he was pestering.... But when I arrived today he had done a pretty good job.
First pass for the Realtor on Friday blew him away. He couldn't stop raving about what we did to this house and said he found himself muttering the whole time he was there in astonishment. He was so blown away he considered the comps he had brought to not be valid. But today when we got together at the house he disappointed me with his number. My partner and I agreed to go higher than the Realtor is recommending and give it a week to ten days to see what the response is. While the first week of a listing is critical, and it's usually a mistake to price a house based on what you spent, this is clearly the nicest house around the area now and should command a premium, but it could be a risky experiment...
The house is still at least a couple days away from being wrapped up and is once again pretty dirty after already having been cleaned twice in the last couple weeks...
Stay tuned as we finally head for home on this project.
The new local painter I hired to re-paint the outside areas that the original nightmare painter did the wrong color, caused some unrest at the site yesterday inflaming the next-door neighbor who had contracted him to paint her porch to match ours as well as the GC who he was pestering.... But when I arrived today he had done a pretty good job.
First pass for the Realtor on Friday blew him away. He couldn't stop raving about what we did to this house and said he found himself muttering the whole time he was there in astonishment. He was so blown away he considered the comps he had brought to not be valid. But today when we got together at the house he disappointed me with his number. My partner and I agreed to go higher than the Realtor is recommending and give it a week to ten days to see what the response is. While the first week of a listing is critical, and it's usually a mistake to price a house based on what you spent, this is clearly the nicest house around the area now and should command a premium, but it could be a risky experiment...
The house is still at least a couple days away from being wrapped up and is once again pretty dirty after already having been cleaned twice in the last couple weeks...
Stay tuned as we finally head for home on this project.
Thursday, April 24, 2008
Interesting?
Oh yea, another interesting few days at the Wilmington flip-site...
Seems the GC hired a painter they had never used before, one with considerable baggage. Turns out his baggage cost us probably about $4,500 more than it should have and to put the cherry on top, they badly damaged the just-fixed porch roof... Had to hire a local to repaint some of the outside and the GC is gonna completely repaint the interior.
Our Delaware Realtor was supposed to do his initial walkthrough today but, alas, I never heard from him. Not a real shocker actually.
The locals are VERY excited about this house and at least two or three walk through gawking every day. Will be real interesting to see if any try to pony up in short order....
Some more encouraging local real estat e news today from our Suburban West Realtors Association:
Home Sales Continue to Show Growth Locally
While there continues to be flux with the national home sales statistics, there was continued growth in sales for Chester, Delaware and Montgomery counties in March. All three counties showed sales growth from February to March, although still down from March 2007. Additionally, prices continued to be steady, with minor increases from over last year.
Commenting on the statistics for an upcoming news release to local media outlets, Suburban West Chairman Jim Ryal said, "While sales may not be at the record levels they were two years ago, they are still strong. And as important, we are not seeing the significant price drops being experienced in other major markets."
Looking ahead, NAR posted its forecast earlier this month with Lawrence Yun, NAR Chief Economist, summing up the future prospects of the national market, "Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure," he said. "We're looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met."
Seems the GC hired a painter they had never used before, one with considerable baggage. Turns out his baggage cost us probably about $4,500 more than it should have and to put the cherry on top, they badly damaged the just-fixed porch roof... Had to hire a local to repaint some of the outside and the GC is gonna completely repaint the interior.
Our Delaware Realtor was supposed to do his initial walkthrough today but, alas, I never heard from him. Not a real shocker actually.
The locals are VERY excited about this house and at least two or three walk through gawking every day. Will be real interesting to see if any try to pony up in short order....
Some more encouraging local real estat e news today from our Suburban West Realtors Association:
Home Sales Continue to Show Growth Locally
While there continues to be flux with the national home sales statistics, there was continued growth in sales for Chester, Delaware and Montgomery counties in March. All three counties showed sales growth from February to March, although still down from March 2007. Additionally, prices continued to be steady, with minor increases from over last year.
Commenting on the statistics for an upcoming news release to local media outlets, Suburban West Chairman Jim Ryal said, "While sales may not be at the record levels they were two years ago, they are still strong. And as important, we are not seeing the significant price drops being experienced in other major markets."
Looking ahead, NAR posted its forecast earlier this month with Lawrence Yun, NAR Chief Economist, summing up the future prospects of the national market, "Existing home sales could start to show a sustained increase within a few months, unless there are some additional economic problems or excessive inflationary pressure," he said. "We're looking for essentially stable sales in the near term, before higher mortgage loan limits translate into more sales in high-cost markets. The wider access to affordable credit should increase sales activity notably this summer as pent-up demand begins to be met."
Tuesday, April 22, 2008
HAPCO Happenings
If you're unaware of what HAPCO is, it's the Homeowner's Association of Philadelphia and if you own rentals in Philly, you WILL, at some point, come to know HAPCO because they occupy the point in most evictions in the city.
You can find HAPCO at www.hapcoassoc.com and I suggest you do that, if for no other reason than to sign up and get their newsletter which is mighty interesting and pertinent to real estate investors of all ilks. Remember, this isn't a hobby, it's a business, and the more information and knowledge you possess the better armed you will be! The April edition included a feature article on the so-called housing slump and what it means to investors along with a sidebar article about "cash being king" in this market. There are pieces on the how tos of Sheriff's Sales, foreclosures, legislative news that may affect you and a lot of other interesting topics not necessarily focusing on Philly per se.
Our first eviction hearing is scheduled for April 29th.... ;-) No snickering allowed!
You can find HAPCO at www.hapcoassoc.com and I suggest you do that, if for no other reason than to sign up and get their newsletter which is mighty interesting and pertinent to real estate investors of all ilks. Remember, this isn't a hobby, it's a business, and the more information and knowledge you possess the better armed you will be! The April edition included a feature article on the so-called housing slump and what it means to investors along with a sidebar article about "cash being king" in this market. There are pieces on the how tos of Sheriff's Sales, foreclosures, legislative news that may affect you and a lot of other interesting topics not necessarily focusing on Philly per se.
Our first eviction hearing is scheduled for April 29th.... ;-) No snickering allowed!
Saturday, April 19, 2008
Time To Push The Button.....PART 3
Ah yes, the wholesaler. I've discussed this creature a little before but it's certainly a hot enough button to waste some more ether on it....
Seems to me that the fundamentals of investing for the small investor, seeking passive income opportunities, quality neighborhoods, cash flow, determining a suitable exit strategy, and much more, has all taken a back seat to the get rich quick notion of wholesaling, or doing contract assignments. Why is that I wonder....
Well, a good guess is that it's because largely that is what is being taught in the popular seminars. And it's what is being taught because my guess is that a pretty high percentage of people taking those courses have little to no cash and probably a somewhat lower but still substantial percentage have poor to mediocre credit. Thus, many of the attendees are looking for a vehicle to cash in without having to commit to taking title to properties, pay for rehabs and actually do something as unthinkable as BUY REAL ESTATE! Strange but true, the trend is seriously tilted towards wholesaling resulting in a number of problems for the loosely organized investor groups. Since there are now many, many newly minted "wholesalers", who is actually taking advantage of their "deals"? Other wholesalers? I think not. And of what quality are these "deals" being purveyed by newly minted wholesalers?
See, the idea of wholesaling as a venture was rooted in the idea that a good hunter (of real estate opportunities) would occasionally, if not regularly, encounter more deals than they themselves could or wanted to actually complete and so the surplus deals could be assigned (wholesaled) to other investors. Those deals were presumably evaluated in the same context as the first investor would use to evaluate deals for himself thus resulting in a reasonably sound opportunity for another investor to latch on to. At the same time the first investor could make five or ten percent for architecting the deal.
However, we're now into a phase of minting novice investors into full-fledged wholesalers. How good are the deals? From my perspective many are laughable. What is happening in many instances is the self-described wholesaler is simply packaging up everything he/she can find, reverse engineering the numbers to make them fit the learned formulas and then peddling the deals to other investors, many of them unsuspecting newbies anxious for a transaction. Sad but true.
If you disagree with my assessment, please fell free to comment... Seems to me many if not all seasoned investors now completely disregard wholesale deals unless they come from known, experienced, qualified sources, or, an entity fitting the original definition of a wholesaler...
Seems to me that the fundamentals of investing for the small investor, seeking passive income opportunities, quality neighborhoods, cash flow, determining a suitable exit strategy, and much more, has all taken a back seat to the get rich quick notion of wholesaling, or doing contract assignments. Why is that I wonder....
Well, a good guess is that it's because largely that is what is being taught in the popular seminars. And it's what is being taught because my guess is that a pretty high percentage of people taking those courses have little to no cash and probably a somewhat lower but still substantial percentage have poor to mediocre credit. Thus, many of the attendees are looking for a vehicle to cash in without having to commit to taking title to properties, pay for rehabs and actually do something as unthinkable as BUY REAL ESTATE! Strange but true, the trend is seriously tilted towards wholesaling resulting in a number of problems for the loosely organized investor groups. Since there are now many, many newly minted "wholesalers", who is actually taking advantage of their "deals"? Other wholesalers? I think not. And of what quality are these "deals" being purveyed by newly minted wholesalers?
See, the idea of wholesaling as a venture was rooted in the idea that a good hunter (of real estate opportunities) would occasionally, if not regularly, encounter more deals than they themselves could or wanted to actually complete and so the surplus deals could be assigned (wholesaled) to other investors. Those deals were presumably evaluated in the same context as the first investor would use to evaluate deals for himself thus resulting in a reasonably sound opportunity for another investor to latch on to. At the same time the first investor could make five or ten percent for architecting the deal.
However, we're now into a phase of minting novice investors into full-fledged wholesalers. How good are the deals? From my perspective many are laughable. What is happening in many instances is the self-described wholesaler is simply packaging up everything he/she can find, reverse engineering the numbers to make them fit the learned formulas and then peddling the deals to other investors, many of them unsuspecting newbies anxious for a transaction. Sad but true.
If you disagree with my assessment, please fell free to comment... Seems to me many if not all seasoned investors now completely disregard wholesale deals unless they come from known, experienced, qualified sources, or, an entity fitting the original definition of a wholesaler...
Consequences for 'Walk-Away' Borrowers
Daily Real Estate News April 14, 2008
Consequences for 'Walk-Away' Borrowers
The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender. Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.
Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.
Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven. Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.
Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)
Geez, seems legitimate investors are having more trouble getting financing than people with prior foreclosures!
Consequences for 'Walk-Away' Borrowers
The government and the lending industry are taking aim at “walk-away” home owners who stop making payments and months later send the house keys back to their lender. Such borrowers will not be able to get another mortgage through Fannie Mae for five years, unless there are “documented extenuating circumstances.” In that case, the prohibition is three years. Even after the prescribed time has elapsed, a borrower with a foreclosure in his file will have to make at least a 10 percent down payment and have a FICO credit score of at least 680 to qualify for a Fannie Mae loan.
Freddie Mac, which counts foreclosures as major credit black mark for seven years, is now aggressively pursuing walk-away borrowers where permitted under state law, a senior official said.
Federal legislation enacted last year allows home owners who negotiate loan modifications with lenders and have portions of their principal debt eliminated to escape income tax liability for the amount forgiven. Walk-away borrowers, by contrast, have nothing forgiven, and the Internal Revenue Service may demand taxes on the balance they never paid, the IRS says.
Source: Washington Post Writers Group, Kenneth R. Harney (04/12/2008)
Geez, seems legitimate investors are having more trouble getting financing than people with prior foreclosures!
Where Are We?
Second-home Buyers - A Significant Market Segment
by National Association of Realtors Research Staff
In spite of the downturn in home buying activity in 2007, the share of second-home sales was still significant. A new report from NAR Research — The 2008 NAR Investment and Vacation Home Buyers Survey* — shows that nearly a third of all homes purchased last year were bought as either vacation or investment homes.
Second-home Purchases
The combined total of vacation- and investment-home sales declined with the overall market in 2007, but still accounted for 33 percent of all existing- and new-home sales. That share is close to historic norms — the total share of second homes declined from 36 percent of transactions in 2006. The market share of homes purchased for investment in 2007 was 21 percent; another 12 percent were vacation homes. Vacation-home sales dropped 30.6 percent to 740,000 in 2007 from a record 1.07 million in 2006, while investment-home sales fell 18.1 percent to 1.35 million last year from 1.65 million in 2006. At the same time, primary residence sales declined 10.0 percent to 4.34 million in 2007 from 4.82 million in 2006.
Behind the Numbers
There were several reasons behind the decline in second-home purchases. Second homes are generally discretionary purchases. Consequently, in periods of economic uncertainty, the tendency is to “pull back” from buying big-ticket items. Another major factor: disruption in the mortgage market. In the wake of the subprime mortgage crisis, there was a significant tightening of credit during the second half of 2007. Some potential second-home buyers simply put their purchase decision on hold.
Characteristics of Second Homes
The majority of second-home buyers purchased an existing home; 65 percent of vacation home purchasers and 71 percent of investment home purchases bought existing homes, while the remainder purchased new homes. Fifty-nine percent of vacation homes purchased in 2007 were detached single-family homes29 percent condominiums, 7 percent townhouses or rowhouses, and 5 percent other. These results were noticeably different from those in 2006 when two thirds of vacation homes purchased were single-family homes (67 percent) and 21 percent were condominiums. There were no significant changes in the type of investment homes purchased compared with 2006 results. Sixty-one percent of investment homes purchased in 2007 were detached single-family homes, 20 percent condos, 11 percent townhouses or row houses, and 8 percent other. Twenty-eight percent of vacation-home buyers paid cash for their property, as did 35 percent of investment buyers. The median price of a vacation home was $195,000 in 2007, down 2.5 percent from $200,000 in 2006. The typical investment property cost $150,000 last year, unchanged from 2006.
Regionally, the South captured the largest share of second-home purchases. In 2007, 19 percent of vacation homes were purchased in the Northeast, 16 percent in the Midwest, 41 percent in the South and 24 percent in the West. In terms of location, 30 percent of vacation homes were purchased in rural areas, 20 percent in resorts, 20 percent in a suburb and 14 percent in an urban area or central city.
Second-home Buyers
Perhaps not surprising, second-home buyers are generally older than home buyers of primary residences and have higher incomes. The typical vacation-home buyer in 2007 was 46 years old, had a median household income of $99,100. Investment-home buyers had a median age of 42 and earned an income of $92,900. As is the case for home buyers in general, the majority of second-home buyers — 81 percent of vacation-home buyers and 76 percent of investment-home purchasers — were married-couple households. Motivation for Buying a Second HomeIn listing the reasons for purchasing a vacation home, 84 percent of buyers wanted to use the home for vacation or as a family retreat. Thirty percent planned to use the property as a primary residence in the future. More than a quarter (26 percent) of vacation-home buyers purchased their property to diversify investments; 25 percent to rent to others; 16 percent for the tax benefits; 14 percent for use by a family member, friend or relative; and 6 percent because they had extra money to spend.
When asked about the most important reasons for their purchase of an investment home, 51 percent of survey respondents indicated they made the purchase to provide rental income; 39 percent to diversify investments; 21 percent to use for vacations or as a family retreat; 16 percent for use by a family member, friend or relative; 11 percent for tax benefits; 10 percent to use as a primary residence in the future; and 4 percent because they had extra money to spend.
Future Plans
Vacation-home buyers plan to keep their property for a median of 10 years; 38 percent plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of four years, with 29 percent planning to keep for six years or more. However, 10 percent of investment buyers plan to sell in one year or less. Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59 percent of primary residence buyers. Forty-four percent of vacation-home buyers and 57 percent of investment buyers said they were likely to purchase another property within two years.
*- In March 2008, a random sample of households that had purchased any type of residential real estate during 2007 was surveyed. The survey sample was drawn from a representative panel of U.S. households monitored and maintained by an established survey research firm. A total of 1,965 qualified households responded to the survey accounting for 2,026 home purchases during 2007. Households were sampled to meet age and income quotas representative of all home buyers drawn from the 2007 NAR Profile of Home Buyers and Sellers.
by National Association of Realtors Research Staff
In spite of the downturn in home buying activity in 2007, the share of second-home sales was still significant. A new report from NAR Research — The 2008 NAR Investment and Vacation Home Buyers Survey* — shows that nearly a third of all homes purchased last year were bought as either vacation or investment homes.
Second-home Purchases
The combined total of vacation- and investment-home sales declined with the overall market in 2007, but still accounted for 33 percent of all existing- and new-home sales. That share is close to historic norms — the total share of second homes declined from 36 percent of transactions in 2006. The market share of homes purchased for investment in 2007 was 21 percent; another 12 percent were vacation homes. Vacation-home sales dropped 30.6 percent to 740,000 in 2007 from a record 1.07 million in 2006, while investment-home sales fell 18.1 percent to 1.35 million last year from 1.65 million in 2006. At the same time, primary residence sales declined 10.0 percent to 4.34 million in 2007 from 4.82 million in 2006.
Behind the Numbers
There were several reasons behind the decline in second-home purchases. Second homes are generally discretionary purchases. Consequently, in periods of economic uncertainty, the tendency is to “pull back” from buying big-ticket items. Another major factor: disruption in the mortgage market. In the wake of the subprime mortgage crisis, there was a significant tightening of credit during the second half of 2007. Some potential second-home buyers simply put their purchase decision on hold.
Characteristics of Second Homes
The majority of second-home buyers purchased an existing home; 65 percent of vacation home purchasers and 71 percent of investment home purchases bought existing homes, while the remainder purchased new homes. Fifty-nine percent of vacation homes purchased in 2007 were detached single-family homes29 percent condominiums, 7 percent townhouses or rowhouses, and 5 percent other. These results were noticeably different from those in 2006 when two thirds of vacation homes purchased were single-family homes (67 percent) and 21 percent were condominiums. There were no significant changes in the type of investment homes purchased compared with 2006 results. Sixty-one percent of investment homes purchased in 2007 were detached single-family homes, 20 percent condos, 11 percent townhouses or row houses, and 8 percent other. Twenty-eight percent of vacation-home buyers paid cash for their property, as did 35 percent of investment buyers. The median price of a vacation home was $195,000 in 2007, down 2.5 percent from $200,000 in 2006. The typical investment property cost $150,000 last year, unchanged from 2006.
Regionally, the South captured the largest share of second-home purchases. In 2007, 19 percent of vacation homes were purchased in the Northeast, 16 percent in the Midwest, 41 percent in the South and 24 percent in the West. In terms of location, 30 percent of vacation homes were purchased in rural areas, 20 percent in resorts, 20 percent in a suburb and 14 percent in an urban area or central city.
Second-home Buyers
Perhaps not surprising, second-home buyers are generally older than home buyers of primary residences and have higher incomes. The typical vacation-home buyer in 2007 was 46 years old, had a median household income of $99,100. Investment-home buyers had a median age of 42 and earned an income of $92,900. As is the case for home buyers in general, the majority of second-home buyers — 81 percent of vacation-home buyers and 76 percent of investment-home purchasers — were married-couple households. Motivation for Buying a Second HomeIn listing the reasons for purchasing a vacation home, 84 percent of buyers wanted to use the home for vacation or as a family retreat. Thirty percent planned to use the property as a primary residence in the future. More than a quarter (26 percent) of vacation-home buyers purchased their property to diversify investments; 25 percent to rent to others; 16 percent for the tax benefits; 14 percent for use by a family member, friend or relative; and 6 percent because they had extra money to spend.
When asked about the most important reasons for their purchase of an investment home, 51 percent of survey respondents indicated they made the purchase to provide rental income; 39 percent to diversify investments; 21 percent to use for vacations or as a family retreat; 16 percent for use by a family member, friend or relative; 11 percent for tax benefits; 10 percent to use as a primary residence in the future; and 4 percent because they had extra money to spend.
Future Plans
Vacation-home buyers plan to keep their property for a median of 10 years; 38 percent plan to keep their vacation home for 11 years or more. Investment buyers plan to hold their property for a median of four years, with 29 percent planning to keep for six years or more. However, 10 percent of investment buyers plan to sell in one year or less. Eight in 10 second-home buyers consider it a good time to invest in real estate, compared with 59 percent of primary residence buyers. Forty-four percent of vacation-home buyers and 57 percent of investment buyers said they were likely to purchase another property within two years.
*- In March 2008, a random sample of households that had purchased any type of residential real estate during 2007 was surveyed. The survey sample was drawn from a representative panel of U.S. households monitored and maintained by an established survey research firm. A total of 1,965 qualified households responded to the survey accounting for 2,026 home purchases during 2007. Households were sampled to meet age and income quotas representative of all home buyers drawn from the 2007 NAR Profile of Home Buyers and Sellers.
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